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843d23a07c4e04bc6950beabbae4490b	Tax treatment of renovation costs and mortgage interest on a second house	[ { "docid": "2b325654181d951f0e841dc9a11bba72", "text": "Should I treat this house as a second home or a rental property on my 2015 taxes? If it was not rented out or available for rent then you could treat it as your second home. But if it was available for rent (i.e.: you started advertising, you hired a property manager, or made any other step towards renting it out), but you just didn't happen to find a tenant yet - then you cannot. So it depends on the facts and circumstances. I've read that if I treat this house as a rental property, then the renovation cost is a capital expenditure that I can claim on my taxes by depreciating it over 28 years. That is correct. 27.5 years, to be exact. I've also read that if I treat this house as a personal second home, then I cannot do that because the renovation costs are considered non-deductible personal expenses. That is not correct. In fact, in both cases the treatment is the same. Renovation costs are added to your basis. In case of rental, you get to depreciate the house. Since renovations are considered part of the house, you get to depreciate them too. In case of a personal use property, you cannot depreciate. But the renovation costs still get added to the basis. These are not expenses. But does mortgage interest get deducted against my total income or only my rental income? If it is a personal use second home - you get to deduct the mortgage interest up to a limit on your Schedule A. Depending on your other deductions, you may or may not have a tax benefit. If it is a rental - the interest is deducted from the rental income only on your Schedule E. However, there's no limit (although some may be deferred if the deduction is more than the income) if you're renting at fair market value. Any guidance would be much appreciated! Here's the guidance: if it is a rental - treat it as a rental. Otherwise - don't.", "title": "" } ]	[ { "docid": "71146df668f12b055a8d5912ca96a59b", "text": "It depends on the relative rates and relative risk. Ignore the deduction. You want to compare the rates of the investment and the mortgage, either both after-tax or both before-tax. Your mortgage costs you 5% (a bit less after-tax), and prepayments effectively yield a guaranteed 5% return. If you can earn more than that in your IRA with a risk-free investment, invest. If you can earn more than that in your IRA while taking on a degree of risk that you are comfortable with, invest. If not, pay down your mortgage. See this article: Mortgage Prepayment as Investment: For example, the borrower with a 6% mortgage who has excess cash flow would do well to use it to pay down the mortgage balance if the alternative is investment in assets that yield 2%. But if two years down the road the same assets yield 7%, the borrower can stop allocating excess cash flow to the mortgage and start accumulating financial assets. Note that he's not comparing the relative risk of the investments. Paying down your mortgage has a guaranteed return. You're talking about CDs, which are low risk, so your comparison is simple. If your alternative investment is stocks, then there's an element of risk that it won't earn enough to outpace the mortgage cost. Update: hopefully this example makes it clearer: For example, lets compare investing $100,000 in repayment of a 6% mortgage with investing it in a fund that pays 5% before-tax, and taxes are deferred for 10 years. For the mortgage, we enter 10 years for the period, 3.6% (if that is the applicable rate) for the after tax return, $100,000 as the present value, and we obtain a future value of $142,429. For the alternative investment, we do the same except we enter 5% as the return, and we get a future value of $162,889. However, taxes are now due on the $62,889 of interest, which reduces the future value to $137,734. The mortgage repayment does a little better. So if your marginal tax rate is 30%, you have $10k extra cash to do something with right now, mortgage rate is 5%, IRA CD APY is 1%, and assuming retirement in 30 years: If you want to plug it into a spreadsheet, the formula to use is (substitute your own values): (Note the minus sign before the cash amount.) Make sure you use after tax rates for both so that you're comparing apples to apples. Then multiply your IRA amount by (1-taxrate) to get the value after you pay future taxes on IRA withdrawals.", "title": "" }, { "docid": "ee130539baebd437a80d1acf6b6fc3e5", "text": "The reason for borrowing instead of paying cash for major renovations should be the same for the decision about whether to borrow or pay cash for the home itself. Over history, borrowing using low, tax-deductible interest while increasing your retirement contributions has always yielded higher returns than paying off mortgage principal over the long term. You should first determine how much you need to save for retirement, factor that into your budget, then borrow as much as needed (and can afford) to live at whatever level of home you decide is important to you. Using this same logic, if interest rates are low enough, it would behoove you to refinance with cash out leveraging the cash to use as additional retirement savings.", "title": "" }, { "docid": "6d70f2cae68608a83cef66fb85788404", "text": "@Pete B.'s answer is good, but there's an important note to consider for tax purposes. It's too large for a comment, so I'm adding it as an answer. And that is: you cannot claim the property as a rental property under certain conditions. This affects things like claiming mortgage interest (which you don't have), and depreciation in value (which a rental is allowed). See IRS topic 415 for details, but I've included an important excerpt below with emphasis added: If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for more than the greater of: ... A day of personal use of a dwelling unit is any day that it's used by: Talk to a tax accountant to better understand the ramifications of this, but it's worth noting that you can't just rent it to her for a paltry sum and be able to take tax advantages from this arrangement.", "title": "" }, { "docid": "8394b41dc5e16d17c616139c687e014c", "text": "If it is US, you need to take tax implications into account. Profit taken from sale of your home is taxable. One approach would be to take the tax hit, pay down the student loans, rent, and focus any extra that you can on paying off the student loans quickly. The tax is on realized gains when you sell the property. I think that any equity under the original purchase price is taxed at a lower rate (or zero). Consult a tax pro in your area. Do not blindly assume buying is better than renting. Run the numbers. Rent Vs buy is not a question with a single answer. It depends greatly on the real estate market where you are, and to a lesser extent on your personal situation. Be sure to include maintenance and HOA fees, if any, on the ownership side. Breakeven time on a new roof or a new HVAC unit or an HOA assessment can be years, tipping the scales towards renting. Include the opportunity cost by including the rate of return on the 100k on the renting side (or subtracting it on the ownership side). Be sure to include the tax implications on the ownership side, especially taxes on any profits from the sale. If the numbers say ownership in your area is better, then try for as small of a mortgage as you can get in a growing area. Assuming that the numbers add up to buying: buy small and live frugally, focus on increasing discretionary spending, and using it to pay down debt and then build wealth. If they add up to renting, same thing but rent small.", "title": "" }, { "docid": "fff2035f2cc2849e6eba49a486a61c8c", "text": "\"Not sure what you are talking about. The house isn't part of a business so neither of you can deduct half of normal maintenance and repairs. It is just the cost of having a house. The only time this would be untrue is if the thing that you are buying for the house is part of a special deduction or rebate for that tax year. For instance the US has been running rebates and deductions on certain household items that reduce energy - namely insulation, windows, doors, and heating/cooling systems (much more but those are the normal things). And in actuality if your brother is using the entire house as a living quarters you should be charging him some sort of rent. The rent could be up to the current monthly market price of the home minus 50%. If it were my family I would probably charge them what I would pay for a 3% loan on the house minus 50%. Going back to the repairs... Really if these repairs are upgrades and not things caused by using the house and \"\"breaking\"\" or \"\"wearing\"\" things you should be paying half of this, as anything that contributes to the increased property value should be paid for equally if you both are expecting to take home 50% a piece once you sell it.\"", "title": "" }, { "docid": "18709a398b2b7066a205463a07181a42", "text": "There's a couple issues to consider: When you sell your primary home, the IRS gives you a $500k exemption (married, filing jointly) on gain. If you decide not to sell your current house now, and you subsequently fall outside the ownership/use tests, then you may owe taxes on any gains when you sell the house. Rather than being concerned about your net debt, you should be concerned about your monthly debt payments. Generally speaking, you cannot have debt payments of more than 36% of your monthly income. If you can secure a renter for your current property, then you may be able to reach this ratio for your next (third) property. Also, only 75% of your expected monthly rental income is considered for calculating your 36% number. (This is not an exhaustive list of risks you expose yourself to). The largest risk is if you or your spouse find yourself without income (e.g. lost job, accident/injury, no renter), then you may be hurting to make your monthly debt payments. You will need to be confident that you can pay all your debts. A good rule that I hear is having the ability to pay 6 months worth of debt. This may not necessarily mean having 6 months worth of cash on hand, but access to that money through personal lines of credit, borrowing against assets, selling stocks/investments, etc. You also want to make sure that your insurance policies fully cover you in the event that a tenant sues you, damages property, etc. You also don't want to face a situation where you are sued because of discrimination. Hiring a property management company to take care of these things may be a good peace-of-mind.", "title": "" }, { "docid": "9994e2dfd9591eb155d1807eb02cb4d1", "text": "If there was no question of improvements to the property, the problem would be simple. Each person invests whatever amount. Calculate the percentage of each person's investment out of the entire investment, and that's what share each one owns. Like: A puts in $10,000 for the deposit and pays $5,000 toward the mortgage over the next however many years. B puts in $5,000 toward the deposit but pays $7,000 of the mortgage. C puts in $15,000 but pays only $1,000 of the mortgage payments. So total investments: A - $15,000, B - $12,000, C - $16,000. Total - $43,000. So A's share of the house is 15,000/43,000 = 34.9%. Etc. If you then sell it you pay off any outstanding debt, and then everybody gets their share of what's left. But once you start making improvements, there is no simple formula. Suppose you put down new flooring in the dining room. You pay $500 for materials and put in 20 hours of labor. Presumably you have now added something more than $500 to your share, but how much more? How much are the hours worth? What if someone damages the house -- puts a hole in the all or something -- and then fixes it. Does the time and effort they put into fixing it add to their investment, or did that just cancel out the damage they did? What if one person does a lot to keep the house in generally good condition in small snippets of time, like cleaning furnace filters and polishing the floors, while another does nothing and lets their share get run down and dirty? It gets very complicated. Theoretically you could come up with a rate at which you value your work -- like say every hour spent maintaining the house is worth $10 or $20 or whatever. But who's going to keep track of it over the course of potentially many years? And what if one person does a small number of big, easily quantifiable jobs, while another does many small, hard-to-count jobs? Like if A mops the floor every week for 2 years, is that worth more or less than B installing 3 ceiling fans, a door, and 2 windows? You could go around and around on this sort of thing.", "title": "" }, { "docid": "884ddfb3e4e3765cfb75b301ff9dd45a", "text": "If you're repairing an existing appliance - its an expense. If you're replacing an existing appliance with a new one - that's disposing of one capital asset and putting in service another. You depreciate the new one and you dispose of the old one (if not fully depreciated - talk to your tax adviser how to handle the remaining value). The additional costs of the fixes that are not related to the installation of the new appliance are regular maintenance expenses, so you have to get an itemized invoice from the plumber to know what to expense and what to capitalize.", "title": "" }, { "docid": "6470741c89540d9d5adea1af37740f9b", "text": "\"I don't follow the numbers in your example, but the fundamental question you're asking is, \"\"If I can borrow money for a low cost, and if I think I can invest it and receive returns greater than that cost, should I do it?\"\" It doesn't matter where that money comes from, a mortgage that's bigger than it needs to be, a credit card teaser rate, or a margin line from your stock broker. The answer is \"\"maybe\"\" - depending on the certainty you have about the returns you'd receive on your investments and your tolerance for risk. Only you can answer that question for yourself. If you make less than your mortgage rates on the investments, you'll wish you hadn't! As an aside, I don't know anything about Belgian tax law, but in US tax law, your deductions can be limited to the actual value of the home. Your law may be similar and thus increase the effective mortgage interest rate.\"", "title": "" }, { "docid": "74a8f28c7eb659da142b94cda4f6a897", "text": "Isn't that a deduction mostly used by the top 1%? There seem to be mostly 2 types of people, those who own many homes, And those that rent them... I always thought the mortgage interest deduction was used substantially more by the wealthy than the middle class... (Luxury homes also offer higher deductions right?)", "title": "" }, { "docid": "8f10d7be113a5e78e3f8ea82a4fff4d8", "text": "My basic rule of thumb is that if the the bill come from a government office of taxation, and that if you fail to pay the amount they can put a tax lien on the property it is a tax. for you the complication is in Pub530: Assessments for local benefits. You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Local benefits include the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property. You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge. If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct. I have never seen a tax bill that said this amount is for new streets, and the rest i for things the IRS says you can deduct. The issue is that if the Center City tax bill is a separate line or a separate bill then does it count. I would go back to the first line of the quote from Pub 530: You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Then I would look at the quote from the CCD web site: The Center City District (CCD) is a business improvement district. Our mission is to keep Philadelphia's downtown, called Center City, clean, safe, beautiful and fun. We provide security, cleaning and promotional services that supplement, but do not replace, basic services provided by the City of Philadelphia and the fundamental responsibilities of property owners. CCD also makes physical improvements to the downtown, installing and maintaining lighting, > signs, banners, trees and landscape elements. and later on the same page: CCD directly bills and collects mandatory payments from properties in the district. CCD also receives voluntary contributions from the owners of tax-exempt properties that benefit from our services. The issues is that it is a business improvement district (BID), and you aren't a business: I did find this document from the city of Philadelphia explain how to establish a BID: If the nature of the BID is such that organizers wish to include residential properties within the district and make these properties subject to the assessment, it may make sense to assess these properties at a lower level than a commercial property, both because BID services and benefits are business-focused, and because owner-occupants often cannot treat NID assessments as tax-deductible business expenses, like commercial owners do. Care must be taken to ensure that the difference in commercial and residential assessment rates is equitable, and complies with the requirements of the CEIA. from the same document: Funds for BID programs and services are generated from a special assessment paid by the benefited property owners directly to the organization that manages the BID’s activities. (Note: many leases have a clause that allows property owners to pass the BID assessment on to their tenants.) Because they are authorized by the City of Philadelphia, the assessment levied by the BID becomes a legal obligation of the property owner and failure to pay can result in the filing of a lien. I have seen discussion that some BIDS can accept tax deductible donations. This means if a person itemizes they can deduct the donation. I would then feel comfortable deducting the tax because: If you can't deduct it that would mean the only people who can't deduct it are home owners. So deduct it. (keep in mind I am not a tax professional)", "title": "" }, { "docid": "691f379e386fc1183176cdae0adf3072", "text": "This will be a complex issue and you will need to sit down with a professional to work through the issues: When the house was put up for rent the initial year tax forms should have required that the value of the house/property be calculated. This number was then used for depreciation of the house. This was made more complex based on any capital improvements. If the house wasn't the first he owned, then capital gains might have been rolled over from previous houses which adds a layer of complexity. Any capital improvements while the house was a rental will also have to be resolved because those were also depreciated since they were placed in service. The deprecation will be recaptured and will be a part of the calculation. You have nowhere near enough info to make a calculation at this time.", "title": "" }, { "docid": "ec08981f658f0561603e0da625d3dc8f", "text": "You need to determine for the taxing jurisdiction when the next tax appraisal will be done. In some cases the appraisal is done every year, or two, or three. In other cases it is also done when the property is sold. The county tax office website should contain this information. They will also have information on how to appeal. Most jurisdictions do have a way of looking up not only the rates but the value of the property in question. You will also be interested in determining if the tax value of the property is lower due to local/state laws that limit the growth in value from one assessment to another. A sale of the property could trigger a catchup for the value. It is possible that the degraded value of the home has already been factored into the assessment. It is also possible that it hasn't. Keep in mind that taxes in some jurisdictions can be more complicated because there is also a town/city/county component, and some places that also breakout other items on the tax bill like storm water management, schools, pest spraying. These other items can be based on value, square footage of the lot, or a flat amount. You should get a local opinion on the likelihood of a successful appeal, and how much adjustment you would be able to get. Depending on the sale date and the due date for the taxes, you may be forced to pay the higher tax rate for a while until either the next re-appraisal or the next appeal window. Note: the fact that it is being auctioned may mean that what you pay for the house may be immaterial because the tax authorities could determine that the motivation to sell quickly could have depressed the value. This type of sale will not impact the value of other houses and can't be used as a basis for determining the value of other properties.", "title": "" }, { "docid": "c631614d19b6880eef1e66e950b7b172", "text": "Loans are not taxable events. The equity you took out is not income. It's a loan, and you pay it back with interest. You pay taxes on the capital gain of the home when you sell it. The tax does not take into account any mortgages, HELOCs, or other loans secured by the house. Instead the tax is calculated based on the price you sold it for, minus the price you bought it for, which is known as the capital gain. You can exclude $250k of that gain for a single person, $500k for a married couple. (There are a few other wrikles as well.) That would be true regardless of the loan balance at the time.", "title": "" }, { "docid": "f7a99bd88d7c6d97b91a2863f3988886", "text": "I am not going to argue the merits of investing in real estate (I am a fan I think it is a great idea when done right). I will assume you have done your due diligence and your numbers are correct, so let's go through your questions point by point. What would be the type of taxes I should expect? NONE. You are a real estate investor and the US government loves you. Everything is tax deductible and odds are your investment properties will actually manage to shelter some of your W2(day job) income and you will pay less taxes on that too. Obviously I am exaggerating slightly find a CPA (certified public accountant) that is familiar with real estate, but here are a few examples. I am not a tax professional but hopefully this gives you an idea of what sort of tax benifits you can expect. How is Insurance cost calculated? Best advice I have call a few insurance firms and ask them. You will need landlord insurance make sure you are covered if a tenant gets hurt or burns down your property. You can expect to pay 15%-20% more for landlord insurance than regular insurance (100$/month is not a bad number to just plug in when running numbers its probably high). Also your lease should require tenants to have renters insurance to help protect you. Have a liability conversation with a lawyer and think about LLCs. How is the house price increase going to act as another source of income? Appreciation can be another source of income but it is not really that useful in your scenario. It is not liquid you will not realize it until you sell the property and then you have to pay capital gains and depreciation recapture on it. There are methods to get access to the gains on the property without paying taxes. This is done by leveraging the property, you get the equity but it is not counted as capital gains since you have to pay it back a mortgage or home equity lines of credit (HELOC) are examples of this. I am not recommending these just making sure you are aware of your options. Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed) I would say you estimated profit is on the high side. Not being involved in your market it will be a wild guess but I would expect you to realize cash-flow per house per year of closer to $7,000. Maybe even lower given your inexperience. Some Costs you need to remember to account for: Taxes, Insurance, Vacancy, Repairs, CapEx, Property Management, Utilities, Lawn Care, Snow Removal, HOA Fees. All-in-all expect 50% or your rental income to be spent on the property. If you do well you can be pleasantly surprised.", "title": "" } ]	fiqa
cfef19f0a6ac0d52fb389a307988571e	Rent or buy with 0 down	[ { "docid": "749960a13c58456820dd69d8e93bd7c4", "text": "\"Whether or not you choose to buy is a complicated question. I will answer as \"\"what you should consider/think about\"\" as I don't think \"\"What should I do\"\" is on topic. First off, renting tends to look expensive compared to mortgages until you factor in the other costs that are included in your rent. Property taxes. These are a few grand a year even in the worst areas, and tend to be more. Find out what the taxes are ahead of time. Even though you can often deduct them (and your interest), you're giving up your standard deduction to do so - and with the low interest regime currently, unless your taxes are high you may not end up being better off deducting them. Home insurance. This depends on home and area, but is at least hundreds of dollars per year, and could easily run a thousand. So another hundred a month on your bill (and it's more than renter's insurance by quite a lot). Upkeep costs for the property. You've got a lot of up-front costs (buy a lawnmower, etc. types of things) plus a lot of ongoing costs (general repair, plumbing breaks, electrical breaks, whatnot). Sales commission, as Scott notes in comments. When you sell, you're paying about 6% commission; so you won't be above water, if housing prices stay flat, until you've paid off 6% of your loan value (plus closing costs, another couple of percent). You hit the 90% point on a 15 year about year 2, but on a 30 year you don't hit it until about year 5, so you might not be above water when you want to sell. Risk of decrease in value. Whenever you buy property, you take on the risk of losing value as well as the potential of gaining value. Don't assume that because prices are going up they will continue to; remember that a lot of investors are well aware of possible profits from rising prices and will be buying (and driving prices up) themselves. 2008 was a shock to a lot of people, even in areas where it seemed like prices should've still gone up; you never know what's going to happen. If you buy a house for 20% or so down, you have a bit of a safety net (if it drops 10-20% in value, you're still above water, though you do of course lose money), while if you buy it for 0% down and it drops 20% in value, you won't be able to sell (at all) for years. All that together means you should really take a hard look at the costs and benefits, make a realistic calculation including all actual costs, and then make a decision. I would not buy simply because it seems like a good idea to not pay rent. If you're unable to make any down payment, then you're also unable to deal with the risks in home ownership - not just decrease in value, but when your pipe bursts and ruins your basement, or when the roof needs a replacement because a tree falls on it. Yes, home insurance helps, but not always, and the deductible will still get you. Just to have some numbers: For my area, we pay about $8000 a year in property taxes on a $280k house ($200k mortgage), $1k a year in home insurance, so our escrow payment is about $750 a month. A 15 year for $200k is about $1400 a month, so $2200 or so total cost. We do live in a high property tax area, so someone in lower tax regimes would pay less - say 1800-1900 - but not that cheap. A 30 year would save you 500 or so a month, but you're still not all that much lower than rent.\"", "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": "274e7e8e774901f2561452edd25f8aca", "text": "\"In Orange County (southern California), one agent has blogged pretty extensively about using rental parity to determine when it is time to rent or buy. Rental parity is achieved when the cost of renting is equal to the cost of owning; in theory, if you buy when a home is selling above rental parity, you're overpaying, and you'd be better off renting. He has many posts on the subject; a few you might care to read would be this one, and this other one. You might get a better sense of how to calculate rental parity by looking at an example or two. There is also the NY Times calculator mentioned in other responses, and the Patrick.net calculator. Be aware, the calculators are garbage in, garbage out. In other words, you have to consider the input carefully. In particular, I found the defaults on the Patrick.net calculator were not realistic. So far as I am aware, the agent at OCHousingNews does not make his calculations public (though I have never actually asked). He's using a spreadsheet which I have never seen. That is another option, if you care to do this kind of analysis yourself. Search around, you can find a spreadsheet that someone has posted here and there. But keeping something like that updated is not trivial. In my experience, in practice, it's difficult to be totally rational and mathematical when it comes to many decisions, and as other respondents have noted, where you live is one of those decisions. Too, saying \"\"buy when rental parity is achieved\"\" is sort of like saying \"\"buy low, sell high,\"\" as though it were perfectly clear when stocks are at a bottom and/or a peak. In our case, we bought a house about 12 years ago, before rental parity was being discussed in the blogsphere. Looking back, we supposedly bought at the wrong time, according to that agent's rating system, but it turned out fine for us. Our house has appreciated, whereas the S&P 500 is basically where it was 12 years ago. Had we been thinking in terms of rental parity, we might not have bought at that time. Of course, your mileage may vary, and hindsight is always 20/20. I think the most helpful advice I can offer was something I got from a real estate agent around the time we were looking. He told me \"\"when you're looking at houses, be sure you like the floor plan and the location, because those two things are not easily changed.\"\" That advice really helped us to see things more clearly.\"", "title": "" }, { "docid": "6db08e9c57536d8c60ef7bb2883c6aff", "text": "\"It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord \"\"carries the note\"\". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can \"\"carry\"\" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: \"\"Here's the house back, and all that money I paid you? Keep it!\"\" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that)\"", "title": "" }, { "docid": "f4781c6ce55d9e33213722d099d2ca3e", "text": "Down payment: Emphatically avoid PMI if at all possible; it's pouring money down the drain. Do 20% down if you can, or pay off enough to bring you above 20% and ask for PMI to be removed as soon as you can. Beyond that it's a matter of how much risk you want to accept and how long you'll own the place, and you'll have to run the numbers for the various alternatives -- allowing for uncertainty in your investments -- to guide your decision. Do not assume you will be able to make a profit when you sell the house; that's the mistake which left many people under water and/or foreclosed on. Do not assume that you will be able to sell it quickly; it can take a year of more. Do not assume immediate or 100% occupancy it you rent it out; see many other answers here for more realistic numbers.... and remember that running a rental is a business and has ongoing costs and hassles. (You can contract those out, but then you lose a good percentage of the rent income.) Double mortgage is another great way to dig yourself into a financial hole; it can be a bigger cost than the PMI it tries to dodge and is definitely a bigger risk. Don't.", "title": "" }, { "docid": "122d68290fbabfe0f17c8406271bf9f1", "text": "Based on what you've said I think buying a rental is risky for you. It looks like you heard that renting a house is profitable and Zillow supported that idea. Vague advice + a website designed for selling + large amounts of money = risky at the very least. That doesn't mean that rental property is super risky it just means that you haven't invested any time into learning the risks and how you can manage them. Once you learn that your risk reduces dramatically. In general though I feel that rental property has a good risk/reward ratio. If you're willing to put in the time and energy to learn the business then I'd encourage you to buy property. If you're not willing to do that then rentals will always be a crap shoot. One thing about investing in rental property is you have the ability to have more impact on your investment than you do dropping money in the stock market which is good and bad.", "title": "" }, { "docid": "a92073afad23a27fb936bf7bdc9d0f55", "text": "Whenever you put less than 20% down, you are usually required to pay private mortgage insurance (PMI) to protect the lender in case you default on your loan. You pay this until you reach 20% equity in your home. Check out an amortization calculator to see how long that would take you. Most schedules have you paying more interest at the start of your loan and less principal. PMI gets you nothing - no interest or principal paid - it's throwing money away in a very real sense (more in this answer). Still, if you want to do it, make sure to add PMI to the cost per month. It is also possible to get two mortgages, one for your 20% down payment and one for the 80%, and avoid PMI. Lenders are fairly cautious about doing that right now given the housing crash, but you may be able to find one who will let you do the two mortgages. This will raise your monthly payment in its own way, of course. Also remember to factor in the costs of home ownership into your calculations. Check the county or city website to figure out the property tax on that home, divide by twelve, and add that number to your payment. Estimate your homeowners insurance (of course you get to drop renters insurance, so make sure to calculate that on the renting side of the costs) and divide the yearly cost by 12 and add that in. Most importantly, add 1-2% of the value of the house yearly for maintenance and repair costs to your budget. All those costs are going to eat away at your 3-400 a little bit. So you've got to save about $70 a month towards repairs, etc. for the case of every 10-50 years when you need a new roof and so on. Many experts suggest having the maintenance money in savings on top of your emergency fund from day one of ownership in case your water heater suddenly dies or your roof starts leaking. Make sure you've also estimated closing costs on this house, or that the seller will pay your costs. Otherwise you loose part of that from your down payment or other savings. Once you add up all those numbers you can figure out if buying is a good proposition. With the plan to stay put for five years, it sounds like it truly might be. I'm not arguing against it, just laying out all the factors for you. The NYT Rent Versus Buy calculator lays out most of these items in terms of renting or buying, and might help you make that decision. EDIT: As Tim noted in the comments below, real monthly cost should take into account deductions from mortgage interest and property tax paid. This calculator can help you figure that out. This question will be one to watch for answers on how to calculate cost and return on home buying, with the answer by mbhunter being an important qualification", "title": "" }, { "docid": "e4bec4b0c95ec95619b283d75b8bdf3e", "text": "Your reasoning is backwards. As others have pointed out, you cannot just decide how much you charge irrespective of the market. Let me paraphrase a little economics 101 to underline why you also should not think like this: You can see a rental property like your house (the same reasoning is usually explained with the example of hotel rooms) as a series of perishable goods. Your house represents the potential sale of the January rent (which perishes once January is over), plus the February rent etc. Your approach was to compute the total costs (all fixed and variable costs of owning that house as well as costs associated to renting specifically) and average them over the time period so that you know how much to ask at least. Assuming that you are only looking to rent it out, not sell it or let a family member live there, you can't think like this. Most of those costs that you averaged are what economists call sunk costs. You have already incurred the mortgage costs and they are not affected by your decision to rent or not to rent. These costs are irrelevant to your decision making process. You only need to think about marginal costs: those additional costs that you have when you rent but not when you don't. Look at the market prices for renting similar properties in that region and compare them with your marginal costs. As long as they are higher than your marginal costs, rent it out. This does not mean that you are sure to make profits, but it means that you are sure to make less losses than in your only alternative of not renting.", "title": "" }, { "docid": "83b19dd70fbd33a81587c3ac2e2adc32", "text": "\"So either scenario has about $10K upfront costs (either realtor/selling expenses or fixing up for rental). Furthermore, I'm sure that the buyers would want you to fix all these things anyway, or reduce the price accordingly, but let's ignore this. Let's also ignore the remaining mortgage, since it looks like you can comfortably pay it off. Assuming 10% property management and 10% average vacancy (check your market), and rental price at $1000 - you end up with these numbers: I took very conservative estimates both on the rent (lower than you expect) and the maintenance expense (although on average over the years ,since you need to have some reserves, this is probably quite reasonable). You end up with 2.7% ROI, which is not a lot for a rental. The rule of thumb your wife mentioned (1% of cash equity) is indeed usually for ROI of leveraged rental purchase. However, if rental prices in your area are rising, as it sounds like they are, you may end up there quite soon anyway. The downside is that the money is locked in. If you're confident in your ability to rent and are not loosing the tax benefit of selling since it sounds like you've not appreciated, you may take out some cash through a cash-out refi. To keep cash-flow near-0, you need to cash out so that the payments would be at or less than the $3200/year (i.e.: $266/month). That would make about $50K at 30/yr fixed 5% loan. What's best is up to you to decide, of course. Check whether \"\"you can always sell\"\" holds for you. I.e.: how stable is the market, what happens if one or two large employers disappear, etc.\"", "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": "c187c9eb1865e397ec3c9a3faf4956e7", "text": "Between now and October, your $3,000 will earn $30 in your savings account. If you are late on a payment for your 0% loan, your interest rate will skyrocket. In my opinion, the risk is just not worth the tiny gain you are trying to achieve in the savings account. If it was me, I would pay off the loan today. A few more thoughts: There is a reason that businesses offer 0% consumer loans. They are designed to trick you into thinking that you are getting a better deal than you are. Businesses don't lose money on these loans. The price of the loan is built into the cost of the purchase, whether you are buying expensive furniture, or a car. Typically with a car, you forfeit a rebate by taking the 0% loan, essentially paying all the interest up-front. Now that you have the loan, you might be ahead a few dollars by waiting to pay it off, but only because you've already paid the interest. Don't make the mistake of thinking that you can come out ahead by buying things at 0%. It's really not free money. In the comments, @JoeTaxpayer mentioned that fear of mistakes can lead to missed rewards. I understand that; however, these 0% loans are full of small print designed to trip you up. A single mistake can negate years and years of these small gains. You don't want to be penny wise and pound foolish.", "title": "" }, { "docid": "65cbf22276b93cd7390a5cf62b6ac436", "text": "As everyone is saying, this depends on a lot of variables. However... I had my dad help me with the downpayment on my house. In my case, the cost of mortgage payment and all maintenance expenses is still lower than paying rent. If I sell my house and walk away from the closing office with just $1 then I've still come out ahead compared to renting. The New York Times has a fantastic tool figure out if it's a good idea to buy vs. rent. http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 It's asks all the relevant questions, and then it tells you how cheap rent would have to be make it the better option.", "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": "2afc463c2de196296f20f632d9d0fe12", "text": "If you're getting 0% on the financing, it's not costing you anything to borrow that money. So its basically free money. If you are comfortable with the monthly payments, consider going with no downpayment at all. Keep that money aside for a rainy day, or invest it somewhere so that you get some return on it. If you need to lower the payments later you can always use that money to pay down part of the loan later (check with the dealer that it is an open loan). If you're not comfortable with the payments at 0 down, put enough down to bring the monthly payment to a level where you are comfortable.", "title": "" }, { "docid": "240a38f10d26caaa7f75a553d7af061f", "text": "Ultimately the question is more about your personality and level of discipline than about money. The rational thing to do is hang on to your cash, invest it somewhere else, and pay off the 0% loan as late as possible without incurring penalties or interest. Logically it's a no-brainer. Problem is, we're humans, so there's a risk you'll slip up somewhere along the way and not pay off the loan in time. How much do you trust yourself?", "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": "4b4f9539a0ce475ef2340aa59fc3d7e6", "text": "Whether it is better to buy or to rent depends on several factors. Most of them are fairly uncertain, but calculations can be made to see how they play out in the long-term for insight into their impact. The results below are made on the basis that both the buyer and the tenant spend the same amount, in this case $1,480.03 per month. The buyer pays his mortgage and when it's all paid for he switches to investing $1,480.03 per month at the fund deposit rate. Meanwhile the tenant pays rent and invests whatever remains from $1,480.03 per month at the fund deposit rate. The amount $1,480.03 is set by the mortgage case and used by buyer and tenant for equal comparison. Taking some hopefully not too unrealistic rate estimates, these are the calculation inputs:- (All percentages are expressed as effective annual rates) Plot of buyer's and tenant's accumulated assets over time The simulation extends for twice the term of the mortgage. If the investment fund can return 7% and a $900 rental is comparable to a $300,000 house then there isn't much of a compelling case either way. Lowering the expected fund return shows a different picture. Sticking with the 5.0% fund return, lowering the rent brings the tenant's asset accumulation closer to the buyer's. If there is a particular set of inputs you would like to see plotted I'm sure I could add another example to this post. There is also an interactive version of the calculation which you can find via this page. However, unlike the examples above which include a deposit and grant, it just explores the simple case of a 100% mortgage. The aim is just to see how rate variations affect asset value over time.", "title": "" } ]	fiqa
8f4ca521056060549adc9a7f2233c9a5	Stocks and bonds have yields, but what is a yield?	[ { "docid": "564005dc162c72c98e107c637b036256", "text": "For bonds bought at par (the face value of the bond, like buying a CD for $1000) the payment it makes is the same as yield. You pay $1000 and get say, $40 per year or 4%. If you buy it for more or less than that $1000, say $900, there's some math (not for me, I use a finance calculator) to tell you your return taking the growth to maturity into account, i.e. the extra $100 you get when you get the full $1000 back. Obviously, for bonds, you care about whether the comp[any or municipality will pay you back at all, and then you care about how much you'll make when then do. In that order. For stocks, the picture is abit different as some companies give no dividend but reinvest all profits, think Berkshire Hathaway. On the other hand, many people believe that the dividend is important, and choose to buy stocks that start with a nice yield, a $30 stock with a $1/yr dividend is 3.3% yield. Sounds like not much, but over time you expect the company to grow, increase in value and increase its dividend. 10 years hence you may have a $40 stock and the dividend has risen to $1.33. Now it's 4.4% of the original investment, and you sit on that gain as well.", "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": "0c6d9c87fc60a8c5f72ee0140b593d35", "text": "\"A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the \"\"future value\"\" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the \"\"present value\"\" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the \"\"end\"\", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest.\"", "title": "" }, { "docid": "00a21e3fbbce434ea8b663a7461818a9", "text": "Who sets the required yield? Required yield by definition something that the investors want. Is It achieved through negotiation or is it more of “I am willing to loan out X at a interest rate of Z per year or X/2 semiannual rate”", "title": "" }, { "docid": "4049129d009f1eb1582c6b32f2e0fb45", "text": "\"If you mean, If I invest, say, $1000 in a stock that is growing at 5% per year, versus investing $1000 in an account that pays compound interest of 5% per year, how does the amount I have after 5 years compare? Then the answer is, They would be exactly the same. As Kent Anderson says, \"\"compound interest\"\" simply means that as you accumulate interest, that for the next interest cycle, the amount that they pay interest on is based on the previous cycle balance PLUS the interest. For example, suppose you invest $1000 at 5% interest compounded annually. After one year you get 5% of $1000, or $50. You now have $1050. At the end of the second year, you get 5% of $1050 -- not 5% of the original $1000 -- or $52.50, so you now have $1102.50. Etc. Stocks tend to grow in the same way. But here's the big difference: If you get an interest-bearing account, the bank or investment company guarantees the interest rate. Unless they go bankrupt, you WILL get that percentage interest. But there is absolutely no guarantee when you buy stock. It may go up 5% this year, up 4% next year, and down 3% the year after. The company makes no promises about how much growth the stock will show. It may show a loss. It all depends on how well the company does.\"", "title": "" }, { "docid": "b692f4e4eeeb8f983144d9d77026b05b", "text": "\"Like all financial investments, the value of a bond is the present value of expected future cash flows. The Yield to Maturity is the annualized return you get on your initial investment, which is equivalent to the discount rate you'd use to discount future cash flows. So if you discount all future cashflows at 6% annually, you can calculate the price of the bond: So the price of a $1,000 bond (which is how bond prices are typically quoted) would be $1,097.12. The current yield is just the current coupon payment divided by the current price, which is 70/1,097.12 or 6.38% Question 3 makes no sense, since the yield to maturity would be the same if you bought the bond at market price Question 4 talks about a \"\"sale\"\" date which makes me think that it assumes you sold the bond on the coupon date, but you'd have to know the sale price to calculate the rate of return.\"", "title": "" }, { "docid": "138dffcbb14d51c140e77c76bd629783", "text": "The 1 month and 1 year columns show the percentage change over that period. Coupon (coupon rate) is the amount of interest paid on the bond each period (as specified on the coupon itself. Price is the normalised price of the bond; the price of taking a position of $100 worth of the principal in the bond. Yield is the interest rate that you would receive by buying at that price (this is the inverse of the price). The time is the time of the quote presented.", "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": "e1153acc2c4b339189bdcf1f88d1b7e5", "text": "When you buy a bond - you're giving a loan to the issuer. The interest rate on the bond is the interest rate on the loan. Usually (and this is also the case with the treasury bonds), the rate is fixed for the term of the loan. Thus, if the market rate for similar loans a year later is higher, the rate for the loan you gave - remains the same.", "title": "" }, { "docid": "d5d4da8a355958c565267ad5a2005aa7", "text": "\"Sure, stocks don't pay interest. I just looked up the word \"\"compound\"\" in a couple of dictionaries and the relevant definition in all of them just mentioned interest and not growth in the value of stock. So it may be technically inaccurate to talk about \"\"compound growth\"\" of a stock. I'll yield to someone more knowledgeable about the technical language of finance to answer that part. But regardless of whether the word strictly applies, the concept certainly does. Suppose you put $1000 into a mutual fund and the fund grows by 10%. You now have $1100. The next year the fund grows by 15%. So you gain 15% of what? Of your original $1000? No, of your present balance, $1100. The effect is the same as compound interest. There is the fundamental difference that interest is normally a fixed rate: you get such-and-such percent a year as spelled out in a contract. But change in the value of a stock depends on many factors, none of them guaranteed.\"", "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": "96cec02c99cd390afdf4af6154c169c1", "text": "\"So after you've learned about bonds, you might find yourself learning about interest rates. You might, in fact, discover that there's no such thing as a \"\"correct\"\" interest rate, or even a true \"\"market\"\" interest rate. PS We already had the housing bubble. It has come, and gone. What new* bubble are you referring to?\"", "title": "" }, { "docid": "fb13206ea224b7582cf0d78ef5c3c875", "text": "That's not what he's saying at all. Basically most of his argument (4 of 6 points) is the connection between bond prices and equity prices. It's not particularly interesting but it definitely doesn't always apply either. If bond yields fall, then so too should equity earnings yields if spreads remain relatively constant, i.e. higher equity prices. Additionally, if bond yields are low, then any future equity growth gets capitalized at a much higher value because discount rates are much lower. Again, not particularly insightful. The two interesting comments were about oil and cash as a % of assets at financial institutions. Both of these are likely linked to falling or low rates above, because banks can't invest profitably at low rates and hence hold cash and equivalents instead, and oil prices are more likely to fall in a low or falling inflation environment (implied by the low rates or Fed tightening). Really, I think hes's saying something more obvious but not necessarily trivial, which is if one asset class goes up, so too is another related one.", "title": "" }, { "docid": "bff253c2835df67c70228c10c88ea019", "text": "\"It is important to distinguish between cause and effect as well as the supply (saving) versus demand (borrowing) side of money to understand the relationship between interest rates, bond yields, and inflation. What is mean by \"\"interest rates\"\" is usually based on the officially published rates determined by the central bank and is referenced to the overnight lending rate for meeting reserve requirements. In practice, what the means is, (for example) in the United States the Federal Reserve will have periodic meetings to determine whether to leave this rate alone or to raise or lower the rate. The new rate is generally determined by their assessment of current and forecast national and global economic conditions and factors in the votes of the various Regional Federal Reserve Presidents. If the Fed anticipates economic weakness they will tend to lower and keep rates lower, while when the economy seems to be overheated the tendency will be to raise rates. Bond yields are also based on the expectation of future economic conditions, but as determined by market participants. At times the market will actually \"\"lead\"\" the Fed in bidding bond prices up or down, while at other times it will react after the Fed does. However, ignoring the varying time lag the two generally will track each other because they are really the same thing. The only difference is the participants which are collectively determining what the rates/yields are. The inverse relationship between interest rates and inflation is the main reason for fluctuating rates in the first place. The Fed will tend to raise rates to try to slow inflation, and lower rates when it feels inflation is too low and economic growth should be stimulated. Likewise, when the economy is doing poorly there is both little inflationary pressure (driving interest rates down both in terms of what savers can accept to keep ahead of inflation and at) and depressed levels of borrowing (reduced demand for money, driving down rates to try to balance supply and demand), and the opposite is true when the economy is booming. Bond yields are thus positively correlated to inflation because during periods of high inflation savers won't want to invest in bonds that don't provide them with an acceptable inflation adjusted yield. But high interest rates tend to have the effect or reining in inflation because it gets more costly for borrowers and thus puts a damper on new economic activity. So to summarize,\"", "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": "2674e3dbb422406c13629b52b2e65c27", "text": "This is a very common misconception. I've been studying equities and credits for a while now, and the simplest way to explain the difference is this: - Credit is about stable cash flows. Your investment in a bond has almost (read: almost) nothing to do with growth rate. It has everything to do with how stable the cash flows are and interest coverage. - Equity is about growth. No wonder companies with highly irregular cash flows (e.g., every single young tech company in the history of tech companies) can have the most in-demand equity while few bond investors would touch them with a ten foot pole.", "title": "" }, { "docid": "dc90066c325b79cf36693a24a8c901bf", "text": "Dividend prices are per share, so the amount that you get for a dividend is determined by the number of shares that you own and the amount of the dividend per share. That's all. People like to look at dividend yield because it lets them compare different investments; that's done by dividing the dividend by the value of the stock, however determined. That's the percentage that the question mentions. A dividend of $1 per share when the share price is $10 gives a 10% dividend yield. A dividend of $2 per share when the share price is $40 gives a 5% dividend yield. If you're choosing an investment, the dividend yield gives you more information than the amount of the dividend.", "title": "" } ]	fiqa
479dec4885868bcafe099a43823842f9	Transfer from credit to debit	[ { "docid": "83b10f0d7090aca06e4991a092758afa", "text": "I've called both BofA and Amex Customer Support, and they couldn't help. That's because you cannot. Debit card is tied to your checking account, so you can do a cash advance from your AMEX and deposit it to your BOA checking account. It will then be available to use with your debit card.", "title": "" }, { "docid": "ea4890b3e7eff99fd2658e853e07baca", "text": "\"The new information helps a little, but you're still stuck as far as doing exactly what you asked. The question that you really should be asking is \"\"How do I deposit money into my BofA checking account from Italy?\"\" If you can figure that out, then the whole part about your father's AmEx card really becomes irrelevant. He might get that money from a cash advance on his AmEx card or he might get it from somewhere else. I think there's some small chance that if you call BofA and ask the right question, they may give you an answer that will let you make this deposit. I tend to doubt it, but this would at least give you a chance. Other than that, you should probably look into some options based in Italy. For example, get the cash from your father and open a bank account in Italy. Maybe you can buy a pre-paid Visa card with the cash to use while you're there. Maybe use traveler's checks for the rest of your trip. Etc. What is available and what makes sense will still depend on a lot of details that we don't have (like how long you're staying and what type of entry visa you got when you entered Italy).\"", "title": "" }, { "docid": "68d73dd0d7e954f93bb1139520e02c42", "text": "As other answers and comments suggest you are trying to do something... odd to say the least. No one wants to use a credit card to finance a checking/current account because you are creating a debt on that credit card (unless you are in the odd situation where the card is in credit) that will immediately start accruing interest at a rate probably in excess of 10% per annum. That is not a clever thing to do. What you really need to do is find an account that one of you owns that has a positive balance and use an internet banking service to transfer part of that positive balance onto the debit card. The other solution is not to use the debit card at all but use the credit card to complete the purchases you are trying to manage with the debit card. The reason that BofA and AmEx customer support can't help you is that no one would ever do what you want to do; they would either move existing money from another account or ask for a bank loan.", "title": "" }, { "docid": "c469d482a6f2df8c89044b9399f26eba", "text": "As revised, the answer is still that you're asking the wrong question. If your father wants to make money available on your debit card, all he has to do is deposit the money into your checking account. Where he gets that money from -- as an AmEx casH advance, by selling your bicycle for you, or simply out of one of his own bank accounts -- is irrelevant.", "title": "" } ]	[ { "docid": "aa479a9380cd682cdd5aa8d183713cf6", "text": "If you have quoted an incorrect number, and the transfer has happened, it cannot be reversed. The funds are already with the individual and bank cannot debit the individual without his authorization. The best course for you is to try get the details of the individual and see if the funds can be moved to the correct account.", "title": "" }, { "docid": "8f641c267bde00c27d0e625200e270b6", "text": "\"The short answer is: it depends. The longer answer is that balance transfers are tricky, and often a bait-and-switch; they'll offer 0% interest, but charge a 3-4% \"\"fee\"\" (which isn't interest and is perfectly legal) on the amount transferred. If you transfer $5000, you now owe the new card company $5,200. Now, that could be fine with you; at an 18-20% APR on your old card you may have been charged that much in just one or two months, and by capitalizing this fee up front you lock in 0% for a year. However, there are other possible machinations behind the scenes. For instance, you may incur retroactive interest on the full balance if not paid off in the year (at 20% APR on $5000, that's an extra grand you will owe if there's even one dollar of the original transferred balance left in the account). Paying off the balance and thus avoiding these penalties has actually been made harder by the CARD Act, which required creditors to apply any payment made to the highest-interest portion of the balance first. As balance transfers are 0% they are the last on the list, so if you transfer a balance and then carry an additional balance you are setting yourself up for failure. You MUST have a zero-dollar balance for one month sometime during the year in order to be sure the balance transfer is paid off and no penalties will be incurred. That can be hard, because 5 grand is a lot to pay off. To pay off a $5000 balance in 12 months requires payments of $417. Miss one and you'll have to make it up over the remaining months. If you transferred a balance, you probably didn't have $420/mo to pay to the card in the first place. In summary, balance transfers can work, but you have to understand all of the terms and conditions, and what will happen should you violate any of them. If you don't understand what you're getting into, you could very well end up worse than you started.\"", "title": "" }, { "docid": "d6c537c39eadda8419c171c2a36521a2", "text": "\"Circa 2002-2005, I was able to successfully \"\"transfer\"\" a balance from a debit card linked to a bank account to a Bank of America Visa credit card. As an example, I could say do a balance transfer from the card XXXX-XXXX-XXXX-XXXX (which was a valid debit card number) to the credit card, and the funds would appear in the checking account within a few days, and also the balance on the credit card would go up the amount plus any balance transfer fee. I think they've sealed off that loophole years ago.\"", "title": "" }, { "docid": "fcad8e8e16fb8e86b9784b90ea346cf7", "text": "The GnuCash manual has a page with examples of opening new accounts. The tl;dr is: use the Equity:Opening Balance to offset your original amounts. The further explanation from the GnuCash page is: As shown earlier with the Assets:Checking account, the starting balances in an account are typically assigned to a special account called Equity:Opening Balance. To start filling in this chart of account, begin by setting the starting balances for the accounts. Assume that there is $1000 in the savings account and $500 charged on the credit card. Open the Assets:Savings account register. Select View from the menu and check to make sure you are in Basic Ledger style. You will view your transactions in the other modes later, but for now let’s enter a basic transaction using the basic default style. From the Assets:Savings account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. Remember, basic transactions transfer money from a source account to a destination account. Record the transaction (press the Enter key, or click on the Enter icon). From the Assets:Checking account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred from Equity:Opening Balance. From the Liabilities:Visa account register window, enter a basic 2 account transaction to set your starting balance to $500, transferred from Equity:Opening Balance. This is done by entering the $500 as a charge in the Visa account (or decrease in the Opening Balance account), since it is money you borrowed. Record the transaction (press the Enter key, or click on the Enter icon). You should now have 3 accounts with opening balances set. Assets:Checking, Assets:Savings, and Liabilities:Visa.", "title": "" }, { "docid": "6363b711e06040fa32ced06dc51c3e9f", "text": "\"The danger of overdrawing the account via the use of a debit card, and the exorbitant fees that can result make me hesitant to use a debit card. The ability to cover all the transactions with one payment is why I use a credit card for these \"\"debit\"\" transactions. Yes there is a risk of a late payment, but that can be easily avoided within the three week grace period. The ability to electronically transfer the money to pay off the card makes this even easier.\"", "title": "" }, { "docid": "6d6fd8a1bd9b62ad2c1565c630d38dc3", "text": "Hi, This is treated as a electronic balance transfer. There may be a fee for performing this. Cash advance interest will apply on the EBT. You may get a teaser rate for a limited amount of time. After it expires, the normal cash advance interest rate for the credit card will kick in. Check your credit card statement. Somewhere, you'll see a section listing the interest rates. One for retail purchases, one for cash transactions. Do not do this. If you need to borrow money to pay off a large debt, do one of the following: 1) Switch to the lowest interest rate card your bank offers 2) Apply for a credit card with another bank that is offering a great teaser rate, transfer the balance, cut your living expenses and send every penny to paying off the balance before the teaser rate expires 3) If you cannot get access new credit or switch credit cards, seek advice from a professional credit counsellor on your options and the best one to choose Sorry to ramble. I've seen far too many people fall into the debt trap. You don't want to go there. Source: I work for a bank which offers credit card products.", "title": "" }, { "docid": "301088bb910fa653719b6b302d15f778", "text": "\"In this context, we're talking about terms of art in accounting, specifically double-entry book-keeping. In accounting lingo, an \"\"asset\"\" account represents an actual asset and it's value. So if you buy a car with a loan for $10,000, you apply a $10,000 debit to the asset account and a $10,000 credit to the loan. Debits and credits are confusing when you first start learning about accounting.\"", "title": "" }, { "docid": "50d3743b8b859bb20811fa12872a20af", "text": "\"A few points Yes, as a rule, it is better to pay down high interest accounts first, as this will yield lower cost in the long run. Credit card balance transfers usually come at a cost (typically something like \"\"3% or $50, whichever is higher\"\"). So instead of transferring the debt, maybe try purchasing items with your card instead of cash, and using the cash to pay down the debt. This has the added benefit of giving you points or cash back on the card (typically you won't get these for a balance transfer). Caveat: Only do this if you are very disciplined! It is very easy to run up high CC balances and forget to save the cash. You should leave a bit of unused credit line on your credit cards in case of emergencies. I'm doubting you can use your high interest loans in the same way.\"", "title": "" }, { "docid": "ecbe98b0950e055597afff6cfc1b05e7", "text": "The question Can I use balance transfer to buy car? is going to give you the same answer. It depends on the exact terms of that offer. Your offer may allow you you write yourself a check, to the checking account tied to your debit card. Or it may specifically request you identify an existing debt to repay. Read the terms.", "title": "" }, { "docid": "d5982a14db1374b7b7bd1a61436c9343", "text": "\"Your first and second paragraphs are two different cases. Moving money between a checking account and a savings account will credit Cash and debit Cash, making a GL transaction unnecessary, unless the amounts in the two bank accounts are tracked as two separate GL accounts. You might have account 1001 (Cash-Checking) and account 1002 (Cash-Savings). In that case, a movement of money between these two accounts should be tracked by a transaction between the GL accounts; credit checking, debit savings. It won't affect your balance sheet, but depending on your definition of liquidity of assets it might affect working capital on your statement of cash flows (if you consider the savings account \"\"illiquid\"\" then money moved to it is a decrease in working capital). Basically, what you are creating with your \"\"store credit\"\" accounts for each client is an \"\"unearned revenue\"\" account. When clients pay you cash for work you haven't done yet, or you refund money for a return as \"\"store credit\"\" instead of cash, the credit is a liability account, balancing an increase in cash, inventory, or an expense (if you're giving credit for free, perhaps due to a mistake on your part, you would debit a \"\"Store Credit Expense\"\" account). This can be split out client-by-client in the GL if you wish, avoiding the need for a holding account. The way you want to do it, you'd have a \"\"Client Holding\"\" account. It must be unique in the GL and to the client, and yes, it is a liability account. To transfer to holding, you simply debit Unearned Revenue and credit Client Holding, logging the transaction as \"\"transfer of client store credit\"\" or similar (moving liability to liability; balance sheet doesn't change). Then, as you sell goods or services to the client, you debit Accounts Receivable and credit Revenue, then to record the payment you credit AR and debit Client Holding (up to its current credit balance, after which the client pays you Cash and you debit that, or the client still owes you). To zero out a remaining balance on the Holding account, debit Client Holding and credit Unearned Revenue. I don't think the Holding account, the way you want to use it, is a good idea. If you want to track each customer's store credit balance with a GL account, then create specialized Unearned Revenue accounts for each client who gets a store credit, named for the client and containing their balance (zero or otherwise). If you don't care about it at the GL level, then pool it in one Unearned Revenue account (have one Store Credit account if you must), and track individual amounts off the books.\"", "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": "0a73b83ef85d6ca73218ea60b4779a1a", "text": "\"The OP does not explain \"\"what we pay for processing the transaction (cost of debiting the customer)\"\". Who exactly do you pay? Someone else, or your own employees/contractors? I will assume that $0.10 is paid to your own employees. Dr $10cash from money people give you Cr $10 liability to them because it is their money in your accounts. Dr $0.10 cash payment of paycheques or supplier invoices Cr $0.10 income statement Operating Eexpense Dr 0.20 liability to depositors for fees they pay, resulting in $9.80 remaining liability for their money you still have. Cr 0.20 income statement Fee Revenues\"", "title": "" }, { "docid": "b5295c9c4c242d39e0504e525c95bdbf", "text": "\"The credit and debit terms here is, talking from bank's point of view (shouldn't be a surprise, banks are never known to look at things from the customers' POV ;)). In accounting, a liability (loans, owners capital etc) is a credit balance and asset (cash, buildings and such) is a debit balance. Your account is a liability to the bank (in accounting parlance that is because they owe you every single penny that is there in your account, btw, in literal parlance too if you really make their life harder ;)) So when the bank accepts money from you, they need to increase their asset (cash) which they will debit (higher debit balance for asset means more assets), and at the same time they also have to account for the added liability by \"\"crediting\"\" the deposited money into your account. So when bank says they have credited your account, it means you have more money in your account. Now, if you transfer money from your account to another, or make a payment through your account, your account will be debited and the beneficiary account will be credited(bank's liability towards you reduces) More or less what everyone else said here... but hey, I could also take a swipe at banks ;))\"", "title": "" }, { "docid": "ae5cafdad1b246acddbc8c9896276c3a", "text": "Three reasons I prefer not to use direct debit:", "title": "" }, { "docid": "64074a801b0f088a5d1880b455f1d083", "text": "There are reward points that you have already mentioned. Some banks also give reward points for netbanking transfer, although very few and less than debit card. On a fraudulent site, debit card adds a layer, if compromised, easy to change. i.e just hot list the card, get a new card issued. Netbanking quite a few banks have incorrect implementation and difficult to change the login ID / User ID. The dispute resolution mechanism is well established as there is master or visa network involved. The ease of doing transaction is with netbanking as for card one has to remember 16 digits, expiry, cvv. The entire process of card usage is multiparty, on slow connection if something goes wrong, it takes 3 days to figure out. In netbanking it is instantaneous. You just login to bank and see if the debit has gone through.", "title": "" } ]	fiqa
97faf92b03428905960f188f9792a60f	Is it better to buy a computer on my credit card, or on credit from the computer store?	[ { "docid": "9b409376a73e9e3452cdb3b6f3e7c365", "text": "Using your credit card: Applying for a store credit card: In general it is far better to not buy bigger items like a computer until you can pay cash, or pay for it on credit card (to get reward points) and then pay off the card the next month so you don't pay interest.", "title": "" }, { "docid": "bef9a87a2cad5697bebe8d73103413c4", "text": "Since you have a credit card, I recommend you use it for the purchase. It gets you two things at the very least: Gets the purchases reported as credit utilization. If you handle that correctly, you can improve your score Most card vendors give free extended warranty and return policies that a retailer or manufacturer does not without extra fees. I buy all my electronics using my cards and not only does that optimize my scores but I have been able to enjoy painless/better RMAs for defective products just because my AmEx card would have refunded me the money anyways and the retailers knew it (AmEx would have recovered it from them in the end so it was in their interest to resolve the matter within 30 days)", "title": "" }, { "docid": "909d382506509f6ead6e6db4fcfa8ad2", "text": "As far as the money goes, it all comes down to the terms. What is going to cost you the least? Look for hidden fees and costs with the store credit. You will need to read the fine print of the credit agreement some automatically sign you up for a service that will cost you extra money every month. Compare what the costs are going to be over the term you will pay it off. A good calculator to help you figure this out is http://www.amortization-calc.com/ It is designed with larger loans but works for smaller loans too. Realize that you will have to add fees and finance charges into the total loan amount to get a good comparison. ** Unless you NEED a computer you should wait until you can afford to pay for it. Charging these types of expenses tends to lead down to a pit of debt that is hard to get out of. Wanting a computer really bad is not the same as a need.", "title": "" }, { "docid": "2ec0dd28833b3d04d044505de8b2f709", "text": "\"The downside of the store card is that the \"\"deal\"\" for using the card is typically 6-12 months of \"\"no payments\"\" or \"\"no interest\"\". In reality, the \"\"deal\"\" is deferred payments/interest. The problem is, if you miss any payment, or fail to pay the computer off in full, you'll have to pay for the accrued interest -- at a rate typically 25% or higher. That means if you buy your computer for $1,000, and pay $999 at the end of 12 months, you may have to pay $250 in accrued interest. These cards can be great deals, just be really careful!\"", "title": "" }, { "docid": "b6e0300830e19caf1b13f8bd9eb5c947", "text": "In my experience dealing with credit cards and store cards, you may find that the store card is much more flexible than the credit card in terms of the enforcement of the card agreement. For instance, I've missed payments on credit cards and only been 1 day late and saw a rate increase, but on a store card when the same thing happened, it was like they didn't even notice. Granted, this was a 100% store card with no VISA/MC logo on it, and it was through their bank. This may not be true of all store cards and your experience may differ, but I felt like the store card was more of a tool for acquiring the merchandise and helping the store make a sale than it was for some big bank to make money off of my interest. With credit cards, you are the product, and the bank makes money purely from interest. The store, on the other hand, makes money from selling the product, and credit helps increase sales. My suggestion is to avoid credit altogether as all debt is risk, but if you must use credit, you may have a better experience with the store card. Of course, don't forget to consider the interest rates, payment plan, and other fees that may apply as they may affect your decision in terms of which to go with.", "title": "" }, { "docid": "35e08bab6f5c3db276dbd8f6eba4b921", "text": "you should pay cash. always pay cash or debit card. never use credits unless absolutely required. if you so poor that you need credit card you must reduce your costs! don't buy anything except food, start making money, then you will buy everything! and you should buy cheapest food now", "title": "" } ]	[ { "docid": "5fee4c2ada624f9f9dfd3cf43e073b65", "text": "There are different ways of credit card purchase authorizations. if some choose less secure method it's their problem. Merchants are charged back if a stolen card is used.", "title": "" }, { "docid": "f09e5df95d050feae1e745fb0c66f9bd", "text": "Debit is them taking the money, in your case electronically. Credit is somebody vouching for you and saying you will pay later. They are alternate ways to pay for a product. As a merchant, if you take a credit card you are agreeing that a the issuer of the credit card is going to pay you right away. The issuer of the credit will worry about collecting the money from me. There are a ton of details with regards to why you would use one over another, where the costs in each method are and who pays what for each. The main different is the source of the funds.", "title": "" }, { "docid": "403294d631b330a34ef94f13a824f49d", "text": "\"My knee-jerk reaction was \"\"no, they are not worth it\"\", but I took a little time to look up what some of the trusted names in consumer electronics reviews had to say about extended warranties/service contracts. A cnet writer said that your decision should consider the price of the service contract relative to the price of the item you're buying, as well as the amount of hassle you're willing to endure, should something go wrong. Consumer Reports believes that the warranties that come with your products are almost always enough, and they say that electronics and appliances are so well-built nowadays, the likelihood of you needing extra service before you upgrade are slim-to-none. And the folks over at epinions.com offer the same maybe-yes-maybe-no advice as the cnet guys: depends on your appetite for risk and the options available to you. So I would suggest that the answer be \"\"no\"\" most of the time, but consider it anyway.\"", "title": "" }, { "docid": "5c22e61a7595820510bba71d13b4e43b", "text": "\"I was just reading Consumer Reports' December 2009 issue. The issue's focus is electronics, and there was a small section on extended warranties in the \"\"Best electronics\"\" article. Here's what they said: Extended warranties still aren't worth buying Seven in 10 respondents to our survey on buying major electronics reported they were pitched an extended warrranty. However hard they're sold, extended warranties are generally bad investments. Most electronics products won't need a repair, especially if you choose brands that have fared better than others in the reliability ratings we include in this section. In the unlikely event they break, other Consumer Reports survey data has shown, the average repair bill is often comparable with the cost of a warranty. However, buying a plan that includes accidental damage might be worth considering for a laptop or netbook that you'll use a lot on the go. And buying a computer warranty that extends tech support, too, might make sense if you or a gift recipient could use a lot of hand-holding. [...] Paying with your credit card might automatically double the manufacturers' warranty and offer other benefits at no extra cost [...] Seven in 10 respondents to our survey on buying major electronics reported they were pitched an extended warrranty. However hard they're sold, extended warranties are generally bad investments. Most electronics products won't need a repair, especially if you choose brands that have fared better than others in the reliability ratings we include in this section. In the unlikely event they break, other Consumer Reports survey data has shown, the average repair bill is often comparable with the cost of a warranty. However, buying a plan that includes accidental damage might be worth considering for a laptop or netbook that you'll use a lot on the go. And buying a computer warranty that extends tech support, too, might make sense if you or a gift recipient could use a lot of hand-holding. [...] Paying with your credit card might automatically double the manufacturers' warranty and offer other benefits at no extra cost [...] BTW, I like Consumer Reports and I am a long-time subscriber. Check them out if you haven't before.\"", "title": "" }, { "docid": "b5e5660cdda0618c895977cd907ad526", "text": "I'm aware of how credit cards work, in fact I basically said the same thing in my original comment. >because you get this nifty smartphone pluggable credit card swiper, you end up paying more than the alternate options. Granted I am in no way knowledgeable of the alternates (as in, mobile credit card machines?), but I assume they aren't as easy to set up. -Square costs more -Other options aren't easy I guess my inquiry should be more targeted towards how regular credit card transactions are processed in the mobile space. Honestly I have no idea, and I assume that's why Square is popular. I still see some places at the farmers market with the carbon copy slider thing, but then I also see some rocking what seems to be a regular credit card swiping gizmo. Making 0% on a nonsale vs 90% on a square sale obviously makes sense, but I'm wondering if there's a less convenient, although more profitable sale (regular 97% Visa/MC) that people simply aren't aware of.", "title": "" }, { "docid": "fc2ade6041922447eedfb53677d9184a", "text": "\"Here's another rational reason: Discount. This typically works only in smaller stores, where you're talking directly to the owners, but it is sometimes possible to negotiate a few percent off the price when paying by check, since otherwise they'd have to give a few percent to the credit card company. (Occasionally the sales reps at larger stores have the authority to cut this deal, but it's far less common.) Not worth worrying about on small items, but if you're making a large purchase (a bedroom suite, for example) it can pay for lunch. And sometimes the store's willing to give you more discount than that, simply because with checks they don't have to worry about chargebacks or some of the other weirdnesses that can occur in credit card processing. Another reason: Nobody's very likely to steal you check number and try to write themselves a second check or otherwise use it without authorization. It's just too easy to steal credit card info these days to make printing checks worth the effort. But, in the end, the real answer is that there's no rational reason not to use checks. So it takes you a few seconds more to complete the transaction. What were you going to do with those seconds that makes them valuable? Especially if they're seconds that the store is spending bagging your purchase, so there's no lost time... and the effort really isn't all that different from signing the credit card authorization. Quoting Dean Inge: \"\"There are two kinds of fool. One says 'this is old, and therefore good.' The other says 'this is new, and therefore better.'\"\"\"", "title": "" }, { "docid": "a171253b625c7d87549f463f0d5316ce", "text": "A few years ago, I had the rare opportunity to take advantage of a credit card offer. Specifically, a 10% cash back deal on purchases at drug stores or supermarkets. The offer was limited to 90 days, so during that time, I bought 100 cash gift cards at my local CVS. Over the next year to use them all, when they dropped to a balance under $5 or so, I signed in to my cable TV account and charged the remaining balance there. No bothering a supermarket clerk, or store owner.", "title": "" }, { "docid": "37378016117cfe55477c3a200d8e8c6c", "text": "I've had positive experiences and negative ones. One key is to be sure you have followed ALL of the instructions. Once I forgot a small piece of information and lost out on $40. I was not happy. A few weeks ago I got a rebate for $50 from Staples, and it couldn't have been simpler. Stick with big companies and make sure you do everything on time. Companies use rebates because they know some people will forget, mess up, or not use the rebate. They make a ton of money off of unused rebates.", "title": "" }, { "docid": "c9a85b57f55b37b6283f502632d9ee1d", "text": "One more thing to favor the card. Extended warranty, or damage coverage. An iPad, if dropped on a hard surface, stands a good chance of breaking. Apple isn't going to cover that, as it's not a defect. Many credit cards offer free coverage for breakage of this type as well as doubling the warranty up to a year. This second year of coverage is worth about 10% of the item cost. To be clear, I'm talking about running the expense through a card and paying in full, some call it credit no different than those who carry a balance month to month and pay 18% interest. I believe if I have the money to spend on an item, and use the card to get that coverage along with the benefits others posted, it's a convenience, nothing more. Some people who use certain budgeting methods like to set up a payment each week so the bill comes in close to zero. Whatever works.", "title": "" }, { "docid": "0fa57073146e6e11461601c5ccd90fba", "text": "I work in the retail software industry, and can confirm this is a major problem right now. There are several very popular point of sale packages that hackers have written RAM scrapers for. Yes, there is (a lot) of credit card fraud traced back to these hacks.", "title": "" }, { "docid": "5b341f79c0872469203a249e72a7f18f", "text": "\"These are two different ways of processing payments. They go through different systems many times, and are treated differently by the banks, credit card issuers and the stores. Merchants pay different fees on transactions paid by debit cards and by credit cards. Debit transactions require PIN, and are deducted from your bank account directly. In order to achieve that, the transaction has to reach the bank in real time, otherwise it will be declined. This means, that the merchant has to have a line of communications open to the relevant processor, that in turn has to be able to connect to the bank and get the authorization - all that while on-line. The bank verifies the PIN, authorizes the transaction, and deducts the amount from your account, while you're still at the counter. Many times these transactions cannot be reversed, and the fraud protections and warranties are different from credit transactions. Credit transactions don't have to go to your card issuer at all. The merchant can accept credit payment without calling anyone, and without getting prior authorizations. Even if the merchant sends the transaction for authorization with its processor, if the processor cannot reach the issuing bank - they can still approve the transaction under certain conditions. This is, however, never true with debit cards (even if used as \"\"credit\"\"). They're not deducted from your bank account, but accumulated on your credit card account. They're posted there when the actual transaction reaches the card issuer, which may be many days (and even many months) after the transaction took place. Credit transactions can be reversed (in some cases very easily), and enjoy from a higher level of fraud protection. In some countries (and most, if not all, of the EU) fraudulent credit transactions are never the consumer's problem, always the bank's. Not so with debit transactions. Banks may be encouraging you to use debit for several reasons: Merchants will probably prefer credit because: Consumers will probably be better off with credit because:\"", "title": "" }, { "docid": "bf3ad180ec76b658c385425a3fb820a0", "text": "Typically, businesses always charge their 'home' currency, so if the shop is in Canada, you will pay Canadian Dollars. Normally you don't have any choices either. Your credit card company will convert it to your currency, using the current international currency exchange rate (pretty good), plus a potential fee between 0 and 5% - depending on your credit card (not so good). If it is a significant amount, or you plan to do that more than once, and if you have multiple credit cards, check first to see which one has the lowest international fee; 0% is not uncommon, but neither is 3 or 4%. If it's a 10$ thingy, it's probably not worth the time; but 4% of 1000 is already 40$... As of right now, the currency exchange rate is 1.33, so you would pay ~75 USD; plus the potential fee, 0$ - 4$. Understand that this exchange rate is floating continuously; it probably won't change much, but it will change.", "title": "" }, { "docid": "d29207bab15c1a4dd87966e319f5296a", "text": "Possibly not relevant to the original asker, but in the UK another advantage of using a credit card is that when making a purchase over £100 and paying by credit card you get additional protection on the purchase which you wouldn't get when paying by debit card. E.g. if you buy something costing £100 and the company goes bust before it's delivered, you can claim the money back from the credit card company. Whereas if you paid by debit card, you would potentially lose out. This protection is a legal requirement under Section 75 of the Consumer Credit Act 1974.", "title": "" }, { "docid": "f59c2644669e158fcd62eead224b5bb6", "text": "\"Yeh sure! You will drive your car, hope the store will have what you look for, in the right size and color, and pay more. Rather than buy on-line. What's next? You will say \"\"it's the fault of the consumer\"\" that they chose to drive cars instead of horses with buggies? Brick and mortar retail can not be the same if you can shop and have huge selection on-line from anywhere were you live.\"", "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": "" } ]	fiqa
7f845c8174332ac6ce99d9ab097ba9a4	Split buying a house 3 ways. How do I approach this?	[ { "docid": "95256edb22555049c2e5d130e88e5287", "text": "\"Get everything in writing. That includes ownership %, money in, money out, who is allowed to use the place, how much they need to pay the other partners, who pays for repairs, whether to provide 'friends and family' discounts, who is allowed to sell, what happens if someone dies, how is the mortgage set up, what to do if one of you becomes delinquent, etc. etc. etc. Money and friends don't mix. And that's mostly because people have different ideas in their head about what 'fair' means. Anything you don't have in writing, if it comes up in a disagreement, could cause a friendship-ending fight. Even if you are able to agree on every term and condition under the sun, there's still a problem - what if 5 years from now, someone decides that a certain clause isn't fair? Imagine one of you needs to move into the condo because your primary residence was pulled out from under you. They crash at the condo because they have no where else to go. You try to demand payment, but they lost their job. The agreement might say \"\"you must pay the partnership if you use the condo personally, at the standard monthly rate * # of days\"\". But what is the penalty clause - is everything under penalty of eviction, and forced sale of the condo and distribution of profits? Following through on such a penalty means the friendship would be over. You would feel guilty about doing it, and also about not doing it [at the same time, your other partner loses their job, and can't make 1/3rd of the mortgage payments anymore! They need the rent or the bank will foreclose on their house!] etc etc etc Even things like maintenance - are the 3 of you going to do it yourselves? Labour distributed how? Will anyone get a management fee? What about a referral fee for a new renter? Once you've thought of all possible circumstances and rules, and drafted it in writing, go talk to a lawyer, and maybe an accountant. There will be many things you won't have considered yet, and paying a few grand today will save you money and friends in the future.\"", "title": "" }, { "docid": "2f12b3ad22e5472415d13b933fe63d3f", "text": "I would second the advice to not do this. Real estate ownership is complex to begin with, involving a constant stream of maintenance, financing, and other decisions. It is difficult enough to do for a single individual or a family as a unit (a couple), but at least spouses are forced to compromise. Friends are not, and you can end up with long-running conflicts and impasses. Financial transactions of any kind impose tensions on relationships, and friendships are no exception. If you want your friendship to survivie, do not sacrifice it to the financial arrangement which seems like a good idea at the moment. My advice would be to steer clear, no matter how attractive on the surface the deal might look. Focus on your own individual finances and use discipline and patience to save the amount needed for acquiring a separate investment property. But it will be 100% yours, and will save tons of headache. Since you are still considering this deal, it's a great time to politely change your mind and walk away - believe me, a few minutes of inconvenience will save you years of frustration. Good luck!", "title": "" } ]	[ { "docid": "66d4014d0285f1fadf49f9f506d8c5c3", "text": "Did he say why he wants double your asking price? Did you explain to him how you came up with the offer you made? Sometimes exploring interests (why people make their decisions) is more helpful than bargaining over positions. If you understand why he wants double your offer (and he understands why you're offering a lower price) you might get closer to an agreement. Another option is to defer to a disinterested third-party who will pick a valuation for the company, and you can agree to abide by their decision (and pick a payout schedule if necessary) Think about what you'll do if you can't come to an agreement: is walking away from the business an option and going out on your own? What would happen to him if you simply walk away? It might be in his best interest to negotiate. Or will you reluctantly pay his asking price? Or can you sell the business to him? One option when partners need to split up is to have one of them set a value for the company, and the other decides if he wants to be the buyer or seller. (It's like the trick with kids where one cuts the cake and the other selects which slice he wants.) Maybe you can come up with a fair way of valuing the company. A lawyer will be needed to draw it all up, but you can agree on the framework of the deal ahead of time and save some money and stress. Last thought: when a win-win agreement isn't possible, sometimes the next best compromise is where everyone feels like he got equally screwed. That's ok, too.", "title": "" }, { "docid": "d1fe91bd871e5aa41bb2604ae5b2023e", "text": "\"Trying to determine what the best investment option is when buying a home is like predicting the stock market. Not likely to work out. Forget about the \"\"investment\"\" part of buying a home and look at the quality of life, monthly/annual financial burden, and what your goals are. Buy a home that you'll be happy living in and in an area you like. Buy a home with the plan being to remain in that home for at least 6 years. If you're planning on having kids, then buy a home that will accommodate that. If you're not planning on living in the same place at least 6 years, then buying might not be the best idea, and certainly might not be the best \"\"investment\"\". You're buying a home that will end up having emotional value to you. This isn't like buying a rental property or commercial real estate. Chances are you won't lose money in the long run, unless the market crashes again, but in that case everyone pretty much gets screwed so don't worry about it. We're not in a housing market like what existed in decades past. The idea of buying a home so that you'll make money off it when you sell it isn't really as reliable a practice as it once was. Take advantage of the ridiculously low interest rates, but note that if you wait, they're not likely to go up by an amount that will make a huge difference in the grand scheme of things. My family and I went through the exact same thought process you're going through right now. We close on our new house tomorrow. We battled over renting somewhere - we don't have a good rental market compared to buying here, buying something older for less money and fixing it up - we're HGTV junkies but we realized we just don't have the time or emotional capacity to deal with that scenario, or buying new/like new. There are benefits and drawbacks to all 3 options, and we spent a long time weighing them and eventually came to a conclusion that was best for us. Go talk to a realtor in your area. You're under no obligation to use them, but you can get a better feel for your options and what might best suit you by talking to a professional. For what it's worth, our realtor is a big fan of Pulte Homes in our area because of their home designs and quality. We know some people who have bought in that neighborhood and they're very happy. There are horror stories too, same as with any product you might buy.\"", "title": "" }, { "docid": "59962070028d867ee4b2d9d919702dd7", "text": "Shop lots of houses. Find at least three you want and start by offering a low price and working your way up. Your risk is that houses you would have liked get bought by someone else while you are negotiating, that is how you discover how much you actually have to pay to get a house. Brokers only get paid if a deal closes. That is their incentive to get you a better price. If they know you will buy a different house unless the one they are selling gets your business, then they will work to make that happen.", "title": "" }, { "docid": "26756dc751c14860d859dbceebb51ea4", "text": "\"Living in one unit of a multi-family while renting out the others, although not without its risks, can be a viable (if gradual) way to build wealth. It's been rebranded recently as \"\"house hacking\"\", but the underlying mechanics have been around for many years (many cities in the Northeast in particular remain chock full of neighborhoods of 3-family homes built and used for exactly that purpose for decades, though now frequently sub-divided into condos). It's true you'd need to borrow money, but there are a number of reasons why it's certainly at least worth exploring (which is what you seem to be asking -- should you bother doing the homework -- tl;dr: yes): And yes, you would be relying on tenants to meet your monthly expenses, including a mortgage bill that will arrive whether the other units are vacant or not. But in most markets, rental prices are far less volatile than home prices (from the San Francisco Federal Reserve): The main result from this decomposition is that the behavior of the price-rent ratio for housing mirrors that of the price-dividend ratio for stocks. The majority of the movement of the price-rent ratio comes from future returns, not rental growth rates. (Emphasis added) It's also important to remember that rental income must do more than just cover your mortgage -- there's lots of other expenses associated with a rental property, including insurance, taxes, maintenance, vacancy (an allowance for the periods when the property will be empty in between tenants), reserves for capital improvements, and more. As with any investment, it's all about whether the numbers work. (You mentioned not being interested in the \"\"upkeep work\"\", so that's another 8-10% off the top to pay for a property manager.) If you can find a property at an attractive price, secure financing on attractive terms, and can be reasonably confident that it will rent in the ballpark of 1.5-2% of the purchase price, then it might be a fine choice for you, assuming you are willing and able to handle the work of being a landlord -- something worth at least as much of your research time as the investment itself. It sounds like you're still a ways away from having enough for even an FHA down payment, which gives you a great opportunity to find and talk with some local folks who already manage rental properties in your area (for example, you might look for a local chapter of the national Real Estate Investment Association), to get a sense of what's really involved.\"", "title": "" }, { "docid": "a9ebe78161a536d7558dd48aea39b3d0", "text": "\"If you and your parents both put up money to buy a house or anything else, what share each of you owns would be a subject for negotiation and agreement between you. To the best of my knowledge, there is no law that says \"\"if person X pays the down payment and person Y pays the monthly payments, than X owns 40% and Y owns 60%\"\" or any other specific numbers. Parents often give their children money to help with a down payment on a house or a car with the understanding that this is a gift and the child still owns 100% of the item. Other times they are unwilling or unable to just give the money and want some stake in exchange. In the case of a house or a car, there's a title that identifies the owner, and legally the owner is the person or people named on the title. I'd suggest that if you want to have split ownership, like if your parents are saying that they'll help with the down payment but they want to get that money back when you sell or some such, that you come up with a written agreement saying who owns what percentage and you both sign it. If there was a dispute -- if you never had an agreement about what share each owned and now you're selling the house and you're arguing over how much of the money each of you should get, or your parents want you to sell the house so they can get their money back but you don't want to sell, or whatever -- ultimately a court would decide. Presumably the judge would consider how much you had each paid in, but he might also consider who's been paying property taxes, how much work each has done to maintain the place, etc. It's better to have a written and signed agreement, something that everyone involved is satisfied with and where you all know exactly what you're agreeing to, rather than having a nasty surprise when a judge says no, you're not getting what you were assuming you were getting.\"", "title": "" }, { "docid": "f844bc2e005a7a9e65887aa5f7ce63e9", "text": "I think what you have here is actually TWO agreements with your sister, and explicitly splitting it into two agreements will bring some clarity. The first is ownership of and responsibility for the building. The second is each of your personal use of a unit. Here's what you do: Treat ownership as if you're not living there. Split the down payment, the monthly mortgage, taxes and insurance, responsibility for cost of maintenance, etc. as well as the ownership and benefit of the building 70%/30%. Put all that in a contract. Treat it like a business. Second, lease those units to yourselves as if you were tenants. And yes, I means even with leases. This clarifies your responsibilities in a tenant capacity. More to the point, each of you pays rent at the going rate for the unit you occupy. If rent from all three units equals the monthly expenses, nothing more needs to be done. If they're more than the monthly expenses, then each of you receives that as business income on that 70%/30% breakdown. If those three rents are less than the monthly expenses, then each of you are required to make up the difference, again at 70%/30%. Note: if any of those expenses are utilities, then they should be apportioned via the rent -- just as you would if you'd rented out the whole building to strangers. 2nd note: all that can be done with ledger entries, rather than moving money around, first as rent, then as expense payments, then as payouts. But, I think it will benefit all of you to explicitly pay rent at first, to really clarify your dual relationship as joint owners and as tenants. Final note: I think this is a stickier situation than you may think it is. Familial relationships have been destroyed both by going into business together, and by renting to family members. You're doing both, and mixing the two to boot. I'm not saying it will destroy your relationship, but that there's a solid risk there. Relationship destruction comes from assumptions and vague verbal agreements. Therefor, for the sake of all of you, put everything in writing. A clear contract for the business side, and clear leases for the tenant side. It's not about trust -- it's about understood communication and positive agreement on all important points.", "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": "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": "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": "dd3b478a6bdb1e7a8d291a965d3ca2fc", "text": "Others have already made good points, so I'll just add a few more: You say that if you bought it, your mortgage, insurance, and taxes minus the rental income from the bottom floor would leave you with costs of 1/4 of your current rent. That means you're getting a fantastic deal on the purchase price. I suspect you may be underestimating some of those costs. So, get exact figures on the mortgage, insurance and taxes and do the math. If it is that good, go for it, just make sure to get that home inspection (in case there's major problems and they're trying to get out while the gettin's good) Also, some advice: Be prepared to cover that entire monthly cost for a few months. Units can stand empty for a while. Also, you may want to rent out slowly - a good tenent found after a couple months is much better than a bad tenent found quickly. Also, have some money set aside for maintenence. As a renter, you've never really had to think about that before, but as a homeowner you do. As a landlord, it's even more important - you can not fix something in your own home for a while if you needed to wait, but in a tenent unit, you have to fix it immediately. Finally, taxes: You do get to deduct interest, and so on, but it'll work a little differently than you think. You'll have to split it in half (if the units are the same size) and deduct half the interest as a normal homeowner deduction, the other half as a business expense. Same for PMI, insurance, and property taxes. If you do maintenance that effects both units, like fixing the roof, half will be deductible, the other half not. However, maintenance that only affects the tenant unit is fully deductible. You can claim depreciation, but only for half. So, your starting amount you can depreciate would be (purchase price - land value)/2. Same thing here - half is your home, the other half is a business. Note that some things you'd think of as maintenance costs actually can't be deducted, only depreciated over time. Take that leaky roof, for example. If you replaced it instead of repairing it, you could not deduct your replacement costs. It counts as an improvement, and gets added to your cost-basis, where you depreciate it along with (half!) the house. If your tenant's refrigerator went out, and you replaced it, you couldn't deduct that either. However you can depreciate all of it on another schedule (seperate from home depreciation). If you repaired it instead, you can deduct all of it immediately. Taxes suck.", "title": "" }, { "docid": "b09536c018ae55f2e49ef12bf93dd070", "text": "\"Both names are on the deed, so the property is jointly owned. You're going to need the second person's signature to be able to sell the property. Ideally the way to know \"\"what happens now\"\" is to consult the written agreement you made before you purchased the house together. The formula for dividing up assets when dissolving your partnership is whatever you agreed to up front. (Your up-front agreement could have said \"\"if you move out, you forfeit any claim to the property\"\".) It sounds like you don't have that, so you'll have to come to some (written) agreement with your partner before you proceed. If you can't come to an agreement, then you'll end up in court, a judge will split up the assets, and the only winners there are the lawyers...\"", "title": "" }, { "docid": "b7978e0382f7ec74eeb2ff9356352751", "text": "I'd talk to a solicitor and see if you can structure the purchase in a way that breaks the property into three pieces. One would be the freehold of the whole building, one would be a long lease on the downstairs part (on which you would get a residential mortgage) and one would be a long lease on the upstairs flat (on which you would get a buy-to-let mortgage). Since there's essentially no price premium for freehold as opposed to long lease, you should be able to raise enough money from the two mortgages to fund the purchase.", "title": "" }, { "docid": "2c8b73d5026f1e9bb5aa37158a80c2bf", "text": "\"You are asking about a common, simple practice of holding the mortgage when selling a house you own outright. Typically called seller financing. Say I am 70 and wish to downsize. The money I sell my house for will likely be in the bank at today's awful rates. Now, a buyer likes my house, and has 20% down, but due to some medical bills for his deceased wife, he and his new wife are struggling to get financing. I offer to let them pay me as if I were the bank. We agree on the rate, I have a lien on the house just as a bank would, and my mortgage with them requires the usual fire, theft, vandalism insurance. When I die, my heirs will get the income, or the buyer can pay in full after I'm gone. In response to comment \"\"how do you do that? What's the paperwork?\"\" Fellow member @littleadv has often posted \"\"You need to hire a professional.\"\" Not because the top members here can't offer great, accurate advice. But because a small mistake on the part of the DIY attempt can be far more costly than the relative cost of a pro. In real estate (where I am an agent) you can skip the agent to hook up buyer/seller, but always use the pro for legal work, in this case a real estate attorney. I'd personally avoid the general family lawyer, going with the specialist here.\"", "title": "" }, { "docid": "da98a43ea060fc567e309d611f5d70a3", "text": "I pulled it off. I did my own searching and so took a lot of load off my agent. As a result my agent agreed to work for 1% commission instead of the normal 3%. Got seller's agent to agree to take 4% instead of 6% and pay my agent the 1%. Seller and I pocketed the difference (I forget how exactly the split went). As it happened, my agent only had to process offers on two houses (one I got outbid on and one I got to buy).", "title": "" }, { "docid": "812decada0ce722f70af249736022a63", "text": "If it was me, I would consider selling both properties. Unless of course your renters from the first house are very, very good; and you have a good handy man in the area. Managing real estate from a distance is tricky, and $400 per month is not a lot of wiggle room. You would be taking on a lot of risk with only 40K in the bank, a 200K salary, three mortgages (one likely a jumbo) and a student loan. Yea, if it was me I would sell both.", "title": "" } ]	fiqa
f4c16a75d746d075f29f898bf3a2aa09	Is it a good idea to get a mortgage when buying a house, for credit reasons?	[ { "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": "" }, { "docid": "8919623b107116db7360d77a2de13089", "text": "I would go with the family route if I was you. And i think many other people would if they were fortunate to have such a great option. This will allow you to move faster when your trying to buy a new house because you can easily get a mortage if you see a stellar deal. Also you can establish credit in much cheaper ways than paying the 4% or so on a mortgage. finance a car that you have the money to buy because the interest rates are much lower .9% and you build the credit while paying less interest. Or even better, try and make most of your purchases on a 0 fee credit card and every 6-8 months get a new credit card to have multiple lines of ongoing credit. to use the mortage to establish credit isnt worth the 4% hit in wealth that it offers. now mind you if your options were to buy the house with your own money outright or get a mortgage i would say get the mortgage because the added leverage would help your investments beat the market most years . figure if you get 6% an average portfolio each year and you can write off the taxes on your mortgage you will be ahead by more than 2%", "title": "" } ]	[ { "docid": "4a129fd83fd9f7f640ff960c34b2d2a2", "text": "is it really so important to have good credit with so much collateral Yes it is important to have good credit, the bank may not lend or may charge higher for bad credit. If you were to default the bank will get all that equity so You are missing the fundamental. Bank cannot take more than what they are owed. When they take possession of house, they auction it. Take what was due from the sale and return any surplus to the owner. This entire process takes time and hence bank wants to avoid giving loan to someone who they feel is risky. Edit: There are different aspects of risk that the bank factors.", "title": "" }, { "docid": "3f6fd8de83b35661dd1ec3881b92ad1f", "text": "Yes, but should you be even trying to get a mortgage if you can't aford at least a 5% deposit? Prove you do want the house by doing without a new car for a few years...", "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": "dc3b63c81f1b304d930f8b0957c62695", "text": "In planning to buy a house, and sort out how to handle the costs of some initial renovations, I've been considering using Lowes and Home Depot credit cards (hopefully this will count differently than the typical credit cards I think you're referring to): http://www.homedepot.com/webapp/wcs/stores/servlet/ContentView?pn=Credit_Center&langId=-1&storeId=10051&catalogId=10053 http://www.lowes.com/cd_Credit+Card+Accounts+from+Lowes_781778798_ You should definitely read the fine print first, as the interest rates can shoot up after the first 6 months if you don't pay the balance in full on some of them. Also, Lowes has a project card that gives you the 6 month no interest (only a minimum payment), and you don't have to pay off the full balance at the end. This one even has more reasonable rates, so this could be a good way to go.", "title": "" }, { "docid": "757f07686cc03e3eb9ce39fad86bef4b", "text": "\"The worth of a credit score (CS) is variable. If you buy your stuff outright with 100% down then your CS is worthless. If you take a loan to buy stuff then it is worth exactly what you save in interest versus a poor score. But there is also the \"\"access\"\" benefit of CS where loans will no longer be available to you, forcing you to rent. If you consider rent as money down teh tiolet then this could factor in. The formula for CS worth is different for everyone. Bill Gates CS is worth zero to him. Walking away from a mortage is not the same as walking away from a loan. A mortage has collateral. There are 2 objects: the money, and the house. If you walk away the bank gets the house as a fair trade. They keep all money you put against the house to boot! Sometimes the bank PROFITS when you walk away. So in a good market you could consider walking away to be the Moral Michael thing to do. :)\"", "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": "8bba82847005e0638501d794ffa3685d", "text": "\"0% furniture loans can hurt your credit rating. I was told by a bank mortgage officer (sorry I can't cite a document) that credit rating algorithms consider \"\"consumer\"\" loans like 0% appliance loans and certain store-specific credit cards as a negative factor, lowering your overall score. The rationalization given was that that taking that type of credit is an indicator that you have zero cash reserves. The actual algorithms are proprietary, so I don't know how you could verify this. If true, it runs counter to the conventional wisdom that getting credit and then paying it off builds your credit score.\"", "title": "" }, { "docid": "ec89d1010ef32b5a6fa92d330b732adc", "text": "Why don't you just put your down payment on one of your credit cards? (Note: I'm not actually suggesting that you do this. Please read on.) There are a few reasons why you wouldn't (or couldn't) do this: The interest rates on the cards you have is very high. You don't have enough of a credit limit on any one of your cards for the down payment. These two reasons highlight the answer to your question. Credit card companies charge very high interest rates. These high rates allow them to make money even when some of their customers default. They know that not everyone will pay them back, so they make sure to make a hefty profit on those who do. Secondly, credit card limits are often much lower than the amounts of car and home loans. This limits the risk to the credit card company. Sure, you have $100,000 in total credit limit, but this is split among nine different companies. When a bank offers a traditional loan for a large sum of money at relatively low interest, they need to be able to limit their risk somehow. They do this by ensuring that their customers actually have the ability to pay them back.", "title": "" }, { "docid": "8f7b37b3ab5986dbffeac01e38736a33", "text": "Don't buy the new car. Buy a $15k car with $5k down and a 3 year loan and save up the rest for your car. A $500/mo car payment is nuts unless you're making alot of money. I've been there, and it was probably the dumbest decision that I have ever made. When you buy a house, you end up with all sorts of unexpected expenses. When you buy a house AND are stuck in a $500/mo payment, that means that those unexpected expenses end up on a credit card.", "title": "" }, { "docid": "2548412c71407b02dd63b488ad8538f5", "text": "No, don't open a credit card. Get used to paying cash for everything from the beginning. The best situation you can be in is not to have any credit. When it comes time to buy a house, put down %30 percent and your 0 credit score won't matter. This will keep you within your means, and, with governments gathering more and more data, help preserve your anonimity.", "title": "" }, { "docid": "479c8b6628202b3947d4a2c9b7c84bbf", "text": "\"Buying now with a mortgage gets you: Waiting to buy with all cash gets you: These are also some of the pros or cons for the rent or buy dilemma that Paul mentioned in comments to the OP. This is a very complex, multi-faceted question, that would not respond well to being put into any equation or financial model. Most people answer the question with \"\"buy the home now with a mortgage\"\" if they can pay for the down payment. This is why the mortgage industry exists. The people who would want to finance now rather than buy with all cash later would not only be analyzing the question in terms of financial health but also in terms of general well being. They might consider the tremendous pride that comes with home ownership and living under a roof of one's own. Who can say that those people are wrong?\"", "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": "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": "6767c66274c2315423cadd3711bfb23c", "text": "I would say generally, the answer is No. There might be some short term relief to people in certain situations, but generally speaking you sign a contract to borrow money and you are responsible to pay. This is why home loans offer better terms then auto loans, and auto loans better than credit cards or things like furniture. The better terms offer less risk to the lender because there are assets that can be repossessed. Homes retain values better than autos, autos better than furniture, and credit cards are not secured at all. People are not as helpless as your question suggests. Sure a person might lose their high paying job, but could they still make a mortgage payment if they worked really hard at it? This might mean taking several part time jobs. Now if a person buys a home that has a very large mortgage payment this might not be possible. However, wise people don't buy every bit of house they can afford. People should also be wise about the kinds of mortgages they use to buy a home. Many people lost their homes due to missing a payment on their interest only loan. Penalty rates and fees jacked up their payment, that was way beyond their means. If they had a fixed rate loan the chance to catch up would have not been impossible. Perhaps an injury might prevent a person from working. This is why long term disability insurance is a must for most people. You can buy quite a bit of coverage for not very much money. Typical US households have quite a bit of debt. Car payments, phone payments, and either a mortgage or rent, and of course credit cards. If income is drastically reduced making all of those payments becomes next to impossible. Which one gets paid first. Just this last week, I attempted to help a client in just this situation. They foolishly chose to pay the credit card first, and were going to pay the house payment last (if there was anything left over). There wasn't, and they are risking eviction (renters). People finding themselves in crisis, generally do a poor job of paying the most important things first. Basic food first, housing and utilities second, etc... Let the credit card slip if need be no matter how often one is threatened by creditors. They do this to maintain their credit score, how foolish. I feel like you have a sense of bondage associated with debt. It is there and real despite many people noticing it. There is also the fact that compounding interest is working against you and with your labor you are enriching the bank. This is a great reason to have the goal of living a debt free life. I can tell you it is quite liberating.", "title": "" }, { "docid": "b57efd697ad139150942a068d308ba34", "text": "I am not a financial expert, but I'm pretty sure that it DOES matter. When you take out a mortgage on a home, you are using the home itself as collateral. If you fail to make payments on that home, and go into foreclosure, the bank takes possession of your home. With that understanding, imagine you borrow $500K for a purchase of a home. If the cost of the home was $1M, the bank will have more confidence they can recover the money they lent you (by selling the home should it go into foreclosure) than they would if the house was only worth $700K. In effect, the larger your down payment, the easier it would be for the bank to recover their money should you go into foreclosure early on. As far as 50% overcoming a low credit score... that's a very open-ended question. There are just too many factors at play to give a simple yes or no answer to that.", "title": "" } ]	fiqa
aaa2ff8d0971ec5d825a181f139ff5cf	Discount Rate vs. IRR	[ { "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": "a6d6c2dfacbe46f6f752dfa6d719a695", "text": "\"401(k) doesn't have a \"\"return rate\"\", because 401(k) is not a type of investment -- it is a vehicle for investment, with certain tax treatments. Just like your money that's not in a 401(k), you can invest it in either the bank, a CD, stocks, mutual funds, bonds, etc., you can similarly (depending on the options given to you by your 401(k) plan) invest the money in the 401(k) in a cash account, buy stocks, mutual funds, etc. Your return is dependent on how you invest your money, not whether it's in a 401(k) or not. Whether it's in a (Roth or Traditional) 401(k) simply affects when and how it gets taxed. (It is true that most 401(k) plans offer little variety in types of investments you can choose; however, this is not a big deal, as chances are that in a few years, you will leave your company, at which point you are able to rollover the 401(k) into an IRA, at which point you will have many, many options for how to invest it.) To make a valid comparison, you should be comparing the same type of investment in both cases. That means, you should assume the same return for both the money outside the 401(k), and the money inside the 401(k), and only consider the taxes and penalties (if you plan to withdraw early).\"", "title": "" }, { "docid": "938e0934aa2d179ba7d19a376b146a29", "text": "the difference would be taxes... Lets say you have two lots, one with a 10 dollar gain, and one with a 20 dollar gain. And lets say you decide to sell one lot this year, and the other lot in 10 years. AND, lets say that it turns out the stock price is exactly the same in ten years as it is when you sell the first lot. In all likelyhood, you'll have more income, and therefore you are likely to be in a different marginal tax rate. If you believe that you're more likely to pay more taxes in 10 years, then sell the lot with the higher gain now. If you believe you're more likely to pay more taxes now, then sell the lot with the lower gain now.", "title": "" }, { "docid": "436e606993adfe059428fade9b30bcb4", "text": "it depends on you, thats just the point, how risk averse you are determines how wide your risk premium needs to be to as you feel adequately compensate you for the risk you are taking. If I have some money i inherited from grandad and I want to make 15% on it then my required rate is 15% on top of the risk free rate. Thats what I require. Alternatively you could use a historic market rate to to determine the markets required return since on average that should be correct allowing you to sell your asset later to the average market participant. Thats easy for the equity investment. Because you have two different asset classes for your investments you could use different discount rates using the historic market risk premium in each asset's market or you can use the same discount rate for both which makes it easier to compare. In the second case I would discount using the equity required return since the equity investment you are not making is the opportunity cost of your real estate investment. At the end of the day its a value judgment in my opinion and there isn't a right. Your understanding of the economics and from that what is important will inform what you use as a discount rate and that value judgment is kindha where an analyst adds value.", "title": "" }, { "docid": "fdb6ac862a66bbb445259d15855dd771", "text": "Usually I've seen people treat the dividend like a separate cash flow, which is discounted if the company doesn't have a well-established dividend history. I've never really seen dividends rolled into a total return chart (except in the context of an article), probably because dividend reinvestment is a nightmare of record-keeping in a taxable account, and most folks don't do it. One of my brokers (TD Ameritrade) does allow you to plot dividend yield historically on their charts.", "title": "" }, { "docid": "75a0733bd9cb8aa9b7ca1bc98780f9f2", "text": "\"Here's a link to an online calculator employing the Discounted Cash Flow method: Discounted Cash Flows Calculator. Description: This calculator finds the fair value of a stock investment the theoretically correct way, as the present value of future earnings. You can find company earnings via the box below. [...] They also provide a link to the following relevant article: Investment Valuation: A Little Theory. Excerpt: A company is valuable to stockholders for the same reason that a bond is valuable to bondholders: both are expected to generate cash for years into the future. Company profits are more volatile than bond coupons, but as an investor your task is the same in both cases: make a reasonable prediction about future earnings, and then \"\"discount\"\" them by calculating how much they are worth today. (And then you don't buy unless you can get a purchase price that's less than the sum of these present values, to make sure ownership will be worth the headache.) [...]\"", "title": "" }, { "docid": "8dd4c25ae22b5388801ba235a5b19a8a", "text": "Since you are trying to compare corporate bonds that have a defined coupon over the specified time of the bond. Why not use a simple Net Present Value (NPV) calculation. Refer: Net Present Value (NPV) You could use the discounting factor as the current repo rate of your central bank. As I said, this would be a simple fast measure (not considering risk rating of the bonds, inflation and other considerations). Take a notional 1000 as invetment in each instrument and calculate the NPV, higher it is better the investment. Another method, in terms of percentage return would be Internal rate of Return (IRR). Though the calcualtionis a bit more complicated, it would give you a percentage figure. Note, the above 2 measures are used when the cashflow over the time period is known. It will not work for instruments where the cashflow/value over different time are not known. Like stocks.", "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": "1de019cd6cceea000d667a6014036f01", "text": "Series I Savings Bonds would be another option that have part of their return indexed to inflation though currently they are yielding 1.64% through April 30, 2016 though some may question how well is that 3% you quote as an inflation rate. From the first link: Series I savings bonds are a low-risk savings product. While you own them they earn interest and protect you from inflation. You may purchase electronic I bonds via TreasuryDirect or paper I bonds with your IRS tax refund. As a TreasuryDirect account holder, you can purchase, manage, and redeem I bonds directly from your web browser. TIPS vs I Bonds if you want to compare these products that are rather safe in terms of avoiding a nominal loss. This would be where a portion of the funds could go, not all of them at once.", "title": "" }, { "docid": "d9ce05ddb40dc946e759da0253008cb9", "text": "The short answer is you'd be much better off paying up front in this case. The present value of $2,500 plus 12 $500 monthly payments is $8,128 at a 12% discount rate, which is much higher then the $6,000 you could pay now. The long answer is how you get that present value. How can I use time value of money to find the present value of money if I choose to go with option A? First of all, I'd question your discount rate. A 12% discount rate means that you can safely reinvest the money that you're not spending today at a 12% annual (1% monthly) rate, which seems very high. Normally for short-term spending decisions you'd use a risk-free rate, which would be closer to 1%-2%. However, to discount at 1% monthly you'd just divide each monthly payment by 1 plus the discount rate raised to the power of the number of periods until each payment. So the total is which is $8,127.54 You could also use the NPV function in Excel. It seems like to get an accurate answer the calculation of the interest rate should take into account compounding period as well? Correct, and in the example above the compounding is assumed to be monthly since that's the periodicity of the cash flows. You could calculate it with a different compounding period but it gets much more complicated and probably wouldn't make a significant difference. The discount rate does take compounding into effect, meaning if you saved the $5,628 (the PV of $8,128 minus the $2,500 initial payment), you'd earn 1% interest on $5,628 the first month, $5,128 plus that interest the second month, etc.", "title": "" }, { "docid": "5fef389da72a3933fc59fbc4e3eb5879", "text": "I concur that you should probably go with option 1. And that is coming from a guy that refinanced all three of his properties with down to 20% equity 3 years ago to lock in either 4% 30 year fixed or 2.75% 15 year mortgage. And I will not pay them off early because I do think I can do better than that in the market even if inflation is 0% for the next 30 years. Just imagine when the fed stops manipulating tax rates. I could be making more than 4% just in a checking account.", "title": "" }, { "docid": "9c5f3fa9c403ed07a04f73d4794e2a74", "text": "\"You are thinking about it this way: \"\"The longer I wait to exericse, the more knowledge and information I'll have, thus the more confidence I can have that I'll be able to sell at a profit, minimizing risk. If I exercise early and still have to wait, there may never be a chance I can sell at a profit, and I'll have lost the money I paid to exercise and any tax I had to pay when I exercised.\"\" All of that is true. But if you exercise early: The fair market value of the stock will probably be lower, so you may pay less income tax when you exercise. (This depends on your tax situation. Currently, ISO exercises affect your AMT.) If the company goes through a phase where the value is unusually high, you'll be able to sell and still get the tax benefits because you exercised earlier. You avoid the nightmare scenario where you leave the company (voluntarily or not) and can't afford to exercise your options because of the tax implications. In many realistic cases, exercising earlier means less risk. Imagine if you're working at a company that is privately held and you expect to be there for another year or so. You are very optimistic about the company, but not sure when it will IPO or get acquired and that may be several years off. The fair market value of the stock is low now, but may be much higher in a year. In this case, it makes a lot of sense to exercise now. The cost is low because the fair market value is low so it won't result in a huge tax bill. And then when you leave in a year, you won't have to choose between forfeiting your options or borrowing money to pay the much higher taxes due to exercise them then.\"", "title": "" }, { "docid": "ce5d619eaed53c079cb9c16c785f478a", "text": "Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly.", "title": "" }, { "docid": "99b27b57ce3a120c0ec6eba6980fe7a2", "text": "Does it make sense to calculate the IRR based on the outstanding value of the project, or just use the cash flows paid out? Let's assume I invest x amount every year for 49 years, and the investment grows at a constant rate, but I do not get dividends before (which will be constant) 50 years later. I assume that the value of the investment will decline as it pays dividend, and will be worth 0 when the dividends stop. Do I calculate the IRR as the negative streams of outflows for the first 49 years and then positive cash inflows from 50 year in the future? If I apply this method, the IRR will be very low, almost equal to the annual expected return. Or based on the current value of the project for each year combined with cash outflows for the first 49 years and dividends from year 50? If I apply this method, the IRR will be a lot higher than the first method.", "title": "" }, { "docid": "c976275b07f08beafa961ce161e4872b", "text": "NRE is better. It's a tax free account, exempt from income tax. NRE account is freely repatriable (Principal and interest earned) while the NRO account has restricted repatriability", "title": "" }, { "docid": "58986463fbf12cdd78a18aa57e6414b2", "text": "No that is your implicit return if you hold it to maturity per year. That yield is quoted per annum. You will receive semi-annual payments base on the coupon of whatever off the run 10yr you buy. If your coupon is 2% then you will receive $10 bi-yearly. Mind you, buying a 10 year in this environment will yield a negative real return, meaning after inflation over 10 years you will have your entire principal back, but inflation adjusted it will have less purchasing power than today, meaning there isn't enough yield to make the purchase worth it. Also about your upward slope question, yes the 30 will yield more than the 2,5,7,10. This is because longer time means more risk. Will in the future the USA be perceived as near riskless? There is also interest rate risk, and liquidity risk.", "title": "" } ]	fiqa
3727fe13cb14bdfcc4e1dc3e9976afcb	Are 'no interest if paid in in x months' credit cards worth it?	[ { "docid": "a8298ac9a03ded3f770751520aaeebae", "text": "You can't buy it outright. You can't take the time to save up. if the remaining choice is between a card that charges from day one, and a card with this kind of grace period, the grace card is the better choice. Plan wisely, pay it in full before that rate starts to be charged. One additional note - There are two groups of people, the pay-in-fullers and the balance carriers. I believe that one should pay in full, and never pay interest. A zero rate offer can be used by the balance carrier to feel great for 12 months, but have even more debt after the rate kicks in. As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage, and planned a refinance to 3.5% just as it ended. a $750 savings (after the tax effect) well worth the bit of effort. The fees should be in the fine print. My zero rate had a transfer fee, $50 max, which was nothing in comparison to the savings.", "title": "" }, { "docid": "f34ae6731ec7e2a6fc4ab50ff0ac7e1e", "text": "\"It has been reported in consumer media (for example Clark Howard's radio program) that the \"\"no interest for 12 months\"\" contracts could trick you with the terms and the dates on the contract. Just as an example: You borrow $1000 on 12/1/2013, same as cash for 12 months. The contract will state the due date very clearly as 12/1/2014. BUT they statements you get will take payment on the 15th of each month. So you will dutifully pay your statements as they come in, but when you pay the final statement on 12/15/2014, you are actually 14 days late, have violated the terms, and you now owe all the interest that accumulated (and it wasn't a favorable rate). That doesn't happen all the time. Not all contracts are written that way. But you better read your agreement. Some companies use the same as cash deal because they want to move product. Some do it because they want to trick you with financing. Bottom line is, you better read the contract.\"", "title": "" }, { "docid": "8d496f9c067c99654f535358fd6df3ad", "text": "\"I too am a full-monthly-statement-balance payer and I received a balance transfer offer from my credit-card company. This one was quite different from many others that I have read about on this forum. I could do a balance transfer for any amount up to $X from another credit card, or use the enclosed \"\"checks\"\" to pay some other (non-credit-card) bills, and I would not have to pay any interest for 12 months on the amount thus borrowed. But, There would be a 2% service charge on the amount I was borrowing. This amount would be billed on the next monthly statement, and it would have to be paid in full by the due date of that month's payment, that is, within the 25-day grace period allowed for payment of monthly statements. Else, interest would start being charged on the unpaid part of the service charge at the usual humongous rate of H% per month. If I had not paid the previous month's balance in full, I would be charged interest at H% per month on the service charge starting from Day One; no free ride till the due date of the next month's statement. Of course, the balance carried over from last month would also be charged interest at H%. If I had paid last month's bill in full, but there were any other charges (purchases) during the current month, then unless the entire amount due, this month's purchases plus service charge and that \"\"interest-free-for-twelve-months loan\"\" balance was paid off within the 25-day grace period, my purchases would be deemed unpaid and would start being charged interest. In short, the only way to avoid paying interest on the amount borrowed was to start with a card showing a $0 balance due on the previous month's statement, not make any charges on that card for a whole year, and pay off that 2% service charge within the grace period. It might also have required that one-twelfth of that interest-free loan be repaid each month, but I had stopped reading the offer at this point and filed it in the round circular file. In short, while @JoeTaxpayer's tale of how \"\"As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage\"\" is undoubtedly how things worked once, it is not at all clear that they still work that way. At least, they don't work that way for me. Heck, once upon a time, for a period of about 3 months, you could earn 1.5% interest per month from the credit card company by overpaying your credit card bill considerably. Their computers then just \"\"added on\"\" 1.5% interest by multiplying your credit balance -$X by 1.015 and so you got 1.5% per month interest from the credit card company. The credit card agreements (and the software!) got changed in a hurry, and nowdays all credit-card agreements state in the fine print that if you overpay your bill, you don't earn any interest on the overpayment.\"", "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": "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": "c90f2d1813c8419a415b3cfaf3100007", "text": "If you are very sure, say 90%, that you'll pay the zero percent card off before paying interest, that would be my choice. Less certainty than that, I think the 6.8% over a longer term is less of a cash flow issue, and you can still pay it in full upon getting the job bonus.", "title": "" }, { "docid": "7321466081f8fd7cb69eaf1c53d7983e", "text": "The effect on your credit score would be a positive one. If you have plenty of money now then pay off the balance each month. If you are very disciplined and can pay off the balance each month you could stop using your debit card to make daily purchases and use your credit card instead. That way you can keep your money in an interest bearing account all month and pay the bill in full when it comes due.", "title": "" }, { "docid": "e8ff59ea2c23ffa7b310d9932d2fd828", "text": "\"I also feel it's important to NOT get a credit card. I'm in my mid 30's and have had credit cards since I was 20, as has everyone I know. Every single one of those people, with the exception of my dad, is currently carrying some amount of credit card debt - almost always in the thousands of dollars. Here is the essential problem with credit cards. Everyone sets out with good intentions, to use the credit card like a debit card, and pay charges off before interest accrues. However, almost no-one has the discipline to remember to do this, and a balance quickly builds up on the card. Also, it's extremely easy to prioritize other bill payments before credit card payments, resulting in a balance building up on the card. It's almost magical how quickly a balance will build up on a credit card. Ultimately, they are simply too convenient, too tempting for most human beings. The world, and especially the North American world, is in a massive debt crisis. It is very easy to borrow money these days, and our culture is at the point where \"\"buy now pay later\"\" is an accepted practice. Now that I have young children, I will be teaching them the golden rule of \"\"don't buy something until you have cash to pay for it in full!\"\" It sounds like an over simplification but this one rule will save you an incredible amount of financial grief over time.\"", "title": "" }, { "docid": "31c61107cbb1960483b060f69ec90c1f", "text": "\"As far as I agree to everyone saying that \"\"you should stop borrowing\"\" & etc, I see a lot of sense of getting balance transfer cards if you are actually paying it off. Considering a scenario, you have a CC with balance of $5000 on each at roughly ~24% interest which results in ~$1200 interest per year. Your minimum due is ~$110, where you are paying $100 / mo for only interest and ~$10 / mo to cover your balance. If minimum is all you can pay with your current cash flow - yes, pleease do a balance transfer. Assuming your transfer cost is 3% and 0% interest for 21 months ( as many CCs do now ) your cost will be $150, but paying off $110 / month for 21 months you will pay off roughly $2000 off your balance, instead of ~$210 if you were paying only your minimum due. After 21 months - you'll have a balance of ~$3000 ( instead of $4800 ) and then you can repeat. If your cash flow gets better - please make as many more / bigger payments any time you can to reduce the balance and you'll pay off sooner.\"", "title": "" }, { "docid": "ba5b7274a04a768d3faedd8fe82590a8", "text": "I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use.", "title": "" }, { "docid": "f444e19e15905a907e5f45af7cec3f3a", "text": "If you wait to pay it off until you are required to in order to avoid interest (the end of the 'grace period'), then you are receiving what's known as a 'float' - basically, you have some money earlier than you would otherwise. Banks and other companies profit substantially from floats (such as when banks take your deposited check and put a seven day hold on it) by investing that money in money-making activities and not allowing you to use it until later. As an individual, particularly if you're not a frequent investor, you typically benefit less than a bank would from a float, since you have less options for investing that money with a short turnaround. Technically speaking it's sort of like you're getting a constant advance on your paycheck 21-40 days; so in that sense, you benefit because you get to have that stuff (television, food, whatever you're buying on credit) a month or so before you have to pay for it, and you get a month or so's benefit from it. So, yes, you get a small benefit from paying your bill when it's due and not prepaying. Whether that benefit is worth the potential downsides (forgetting to pay and accruing interest) depends on your habits.", "title": "" }, { "docid": "8b9620a800b6f6147c6c93aeefef92c5", "text": "If you pay your statement balance in full before the due date you will never pay a cent in interest no matter what your interest rate is.* In fact, I don't even know what my interest rates are. Credit card companies offer this sort of thing in the hopes you will spend more than you can afford to pay completely in those first 15 months. * Unless you use a cash advance, with those you will accrue interest immediately upon receiving the cash sometimes with an additional fee on top.", "title": "" }, { "docid": "1c2485755553e2d7562b46a3cd00e78a", "text": "As Joe mentioned, you can carry a balance on your credit card for some grace period (typically 1 month). You will not be charged any interest if you pay your balance at the end of the grace period. I think of it as a way to get liquid immidieately for making purchases. For example, you want to make a large purchase but your funds are in some investment account which might take ~1 week to get to you. You can use the credit card to make the purchase and use that grace period to move your money from investments to checking account and pay for your purchase (without paying anything extra). This helps you keep your money invested and not having to keep large amounts in checking/savings account, which does not generate any returns.", "title": "" }, { "docid": "edaf7f5ba0af5216a5e0d0c00617abf5", "text": "One factor you may be missing is that, even if you pay your balance in full each month, the utilization probably won't be zero, since the reporting period isn't usually lined up perfectly with the due date on your payment. In short: Your utilization is not the same thing as how much balance you carry over. My advice would be: don't try carry a balance just to get a minuscule benefit on your credit score (if there is one at all). It is certainly not worth the interest charges you will pay to do so. I think the advice you quoted is a mangled explanation of something that can benefit your credit. Specifically, don't let your cards go unused for long periods of time, which would make your utilization show as zero. At least a few times a year you should actually use those cards, even just a small amount, to make the accounts show that you are utilizing your credit.", "title": "" }, { "docid": "bfced950704f4900a5c9c7de9bbf87f5", "text": "I struggle with 0% interest things in my personal life. A responsible me that thinks logically says continue to pay it on time and take advantage of the benefit of the interest free loan you got. It will keep your funds liquid in the case of an emergency, build your credit and teach you self control. Paying it off now has little to no benefit. It does however tie up $3,000 worth of capital you could be using for building interest or leveraging against other purchases.", "title": "" }, { "docid": "9fecda5c09eae6f09dcb6d8253125323", "text": "If you have the money and the determination to pay off all the cards in six months, then the order will make little difference to your credit score, and to your finances. If you had less money available (say you could pay off $500 a month in total), then it would be good for financial reasons to pay off the credit card with the highest interest rate first, so you pay less interest. It would be good for psychological reasons to pay the card with the smallest amount first (so you feel successful quickly, and some people need that feeling of success to continue paying off, just psychological). And if these things contradict each other, figure out what is more important. And whatever you do, paying back your debt is better than not paying it back. So if you can't make up your mind, then you pay #1, then #2, then #3, then #4, then #5.", "title": "" }, { "docid": "5aaec0e08ae6e11cf53611b8828df2d5", "text": "No credit card company would ever give a card with either no credit limit or that was not in credit (for prepaid cards) because they would earn no money from it. The company's income is entirely derived from fees that they charge you for balances and interest on those balances so a 0 limit card would be worthless to them. Getting a prepaid card and letting the balance hit 0 might be a way around this but the fees that you will be charged , and will become a debt in your name, when the billing system tries to take the first paid month's cost from the card and fails will be exorbitant. They may go so far as dwarfing the actual cost but the one thing that they will certainly do is lower your credit rating so this is not a good idea.", "title": "" }, { "docid": "7891742e951e44da311b3790f34793ac", "text": "\"You should look at the opportunity cost for your money (i.e. what kind of return it could generate otherwise). We took advantage of these types of offer (zero interest for x months) in the past with the goal to redirect the money to the mortgage (it was 7.5% back then) and we made sure we don't get hosed by the surprisingly high interest rate by having a big reminder in the bulletin board in the kitchen to make sure we pay off the money before the interest rate kicks in. So we basically reduced our interest on the mortgage during that period. Oh - we use an all-in-one account (Manulife One) so that was real nice. I would stay away from those \"\"interest-deferred\"\" offers - it's totally not worth it.\"", "title": "" }, { "docid": "4fc4c11640af8db441ea8a5b46d91749", "text": "am I allowed to transfer into NRE account from paypal? Credits into NRE accounts are restricted. It has to be established that the funds being credited are income outside of India. In case of paypal, paypal uses local clearing to credit funds into Bank Accounts. So essentially one cannot credit NRE account by domestic clearing network like NEFT. It is best that you withdraw the funds into Bank Account outside India and use SWIFT or remittance service to credit your NRE account. I do not want to transfer to an NRO account since the money credited into it will become taxable. This is not the right assumption. Credits into NRO are not taxable by default; if you establish that the funds are from outside India, there is no tax on the income money transferred from abroad into the NRO account. However, the interest that will be paid by the bank on the balance of the NRO account is taxable income in India and is subject to TDS. In contrast, interest paid on the balance in an NRE account is not taxable in India and is not subject to TDS as long as you maintain NRI status. However it does make sense to keep accounts segregated, i.e. income generated in India, credit the NRO account and income generated outside India credit to NRE.", "title": "" } ]	fiqa
422fb63ba1b9d42c0fe90ee0560b0f32	What are the usual terms of a “rent with an option to buy” situation?	[ { "docid": "309c10f2a6884e26bd4a929c0c333744", "text": "\"Things I would specifically draw your attention to: the contract typically allows for an \"\"option\"\" to purchase; it does not typically compel purchase, although this is seen the purchase price is negotiated before anything gets signed the option to buy is typically available to the renter for the period of the lease contract (ie., if it's a 12 month contract the renter can opt to buy at any time in that 12 months) the amount of rent paid over time that will be applied to the purchase price is negotiated up-front before anything gets signed rent is paid at a slight premium (as Joe notes, if the rent should be $1000 per month, expect to pay $1200 per month) if the renter walks away they walk away empty handed; they do not get back the premium Having said all that - it's a contract negotiated between renter and seller and all of this is negotiable. See also, ehow for a good overview.\"", "title": "" }, { "docid": "54586d646c58ca462fe5b9b1041724b9", "text": "In most cases an rent with option to buy is structured as follows: The renter/buyer will place a deposit/premium (not the same as a security deposit) that purchases the option( the right ) to buy the home at a future date at a specific price. The renter / buyer will often pay extra rent in addition to market rent. Many times this additional rent is contracted to be applied to the purchase price of the home. The risks to the renter/buyer are as follows: Also, something to note: Many people will recommend that you use the additional rents to be applied specifically towards the downpayment. Be wary of this. There are no institutional lenders available today that will allow the additional rent money to be applied towards your downpayment. That means you must come up with the downpayment in cash before closing. The additional rent payments can be used towards the price. Hope that helps. Good luck!", "title": "" }, { "docid": "f8bae7d907047e8744d8b00d228cc51c", "text": "The typical deal would be a premium to the normal rent, say $1200 instead of $1000, in return he has the option to buy the house at a fixed price by the end of the agreement term.", "title": "" }, { "docid": "3a8097db1373ca2d6f846d54852bfdfe", "text": "\"While the other people have tried to answer your question as thoroughly as possible, I fear they are entirely incorrect in answering your question itself as it stands. The answer is that there are no usual terms. There are a handful of different options coming out now for this exact scheme. Examples include the UK Governments \"\"Help To Buy\"\" scheme. Accomodation is offered at a normal rate, and a small portion of the rent is set aside each month. At the end of a fixed period, that money becomes a deposit which the letter hands over to a mortgage provider who accepts it as a deposit. This might well be a terminology thing, since the other scenario which people described falls into the same name you've used. That scenario is where the investor who owns the property is considering sale of the property, and is happy to negotiate a price up front for the next year. Usually the rent and price is higher than the market rate because if the market goes well over the next year they could end up out of pocket. Putting that into perspective, over that year they are gaining their $1,000 a month or so, but having $100,000 invested means a return of 12%. If the property value is over $250,000 which I believe to be more likely, they are achieving a return of (I think) 4.8%. That's not a bad rate, by any means, but realistically they are losing a bit more for maintenance, and they could be making more from their money. If the market were to go up in that time by more than 4.8% (my house, for instance, increased in value by over 15% in the last 12 months), they are making a substantial loss since you are getting a house at 15% below the market rate. The total works out to a 10.2% loss for them. Note that I don't know the US housing market at all, I'm speaking mostly from my experience of the market here in the UK. This is what I hear, what I see, and what I've played. To summarise a bit: Make sure you check your terms before signing anything.\"", "title": "" } ]	[ { "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": "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": "95256edb22555049c2e5d130e88e5287", "text": "\"Get everything in writing. That includes ownership %, money in, money out, who is allowed to use the place, how much they need to pay the other partners, who pays for repairs, whether to provide 'friends and family' discounts, who is allowed to sell, what happens if someone dies, how is the mortgage set up, what to do if one of you becomes delinquent, etc. etc. etc. Money and friends don't mix. And that's mostly because people have different ideas in their head about what 'fair' means. Anything you don't have in writing, if it comes up in a disagreement, could cause a friendship-ending fight. Even if you are able to agree on every term and condition under the sun, there's still a problem - what if 5 years from now, someone decides that a certain clause isn't fair? Imagine one of you needs to move into the condo because your primary residence was pulled out from under you. They crash at the condo because they have no where else to go. You try to demand payment, but they lost their job. The agreement might say \"\"you must pay the partnership if you use the condo personally, at the standard monthly rate * # of days\"\". But what is the penalty clause - is everything under penalty of eviction, and forced sale of the condo and distribution of profits? Following through on such a penalty means the friendship would be over. You would feel guilty about doing it, and also about not doing it [at the same time, your other partner loses their job, and can't make 1/3rd of the mortgage payments anymore! They need the rent or the bank will foreclose on their house!] etc etc etc Even things like maintenance - are the 3 of you going to do it yourselves? Labour distributed how? Will anyone get a management fee? What about a referral fee for a new renter? Once you've thought of all possible circumstances and rules, and drafted it in writing, go talk to a lawyer, and maybe an accountant. There will be many things you won't have considered yet, and paying a few grand today will save you money and friends in the future.\"", "title": "" }, { "docid": "cc952689a665f740665146ab357152c9", "text": "Advantages of buying: With every mortgage payment you build equity, while with rent, once you sign the check the money is gone. Eventually you will own the house and can live there for free. You can redecorate or remodel to your own liking, rather than being stuck with what the landlord decides is attractive, cost-effective, etc. Here in the U.S. there are tax breaks for homeowners. I'm not sure if that's true in U.K. Advantages of renting: If you decide to move, you may be stuck paying out a lease, but the financial penalty is small. With a house, you may find it difficult to sell. You may be stuck accepting a big loss or having to pay a mortgage on the empty house while you are also paying for your new place. When there are maintenance issues, you call the landlord and it's up to him to fix it. You don't have to come up with the money to pay for repairs. You usually have less maintenance work to do: with a house you have to mow the lawn, clear snow from the driveway, etc. With a rental, usually the landlord does that for you. (Not always, depends on type of rental, but.) You can often buy a house for less than it would cost to rent an equivalent property, but this can be misleading. When you buy, you have to pay property taxes and pay for maintenance; when you rent, these things are included in the rent. How expensive a house you can afford to buy is not a question that can be answered objectively. Banks have formulas that limit how much they will loan you, but in my experience that's always been a rather high upper bound, much more than I would actually be comfortable borrowing. The biggest issue really is, How important is it to you to have a nice house? If your life-long dream is to have a big, luxurious, expensive house, then maybe it's worth it to you to pour every spare penny you have into the mortgage. Other people might prefer to spend less on their house so that they have spare cash for a nice car, concert tickets, video games, cocaine, whatever. Bear in mind that if you get a mortgage that you can just barely afford, what do you do if something goes wrong and you can't afford it any more? What if you lose your job and have to take a lower-paying job? What if some disaster strikes and you have some other huge expense? Etc. On the flip side, the burden of a mortgage usually goes down over time. Most people find that their incomes go up over time, between inflation and growing experience. But the amount of a mortgage is fixed, or if it varies it varies with interest rates, probably bouncing up and down rather than going steadily up like inflation. So it's likely -- not at all certain, but likely -- that if you can just barely afford the payment now, that in 5 or 10 years it won't be as big a burden.", "title": "" }, { "docid": "83ce1b5e977862952bf765e2bcea55ad", "text": "\"In general there are two types of futures contract, a put and call. Both contract types have both common sides of a transaction, a buyer and a seller. You can sell a put contract, or sell a call contract also; you're just taking the other side of the agreement. If you're selling it would commonly be called a \"\"sell to open\"\" meaning you're opening your position by selling a contract which is different from simply selling an option that you currently own to close your position. A put contract gives the buyer the right to sell shares (or some asset/commodity) for a specified price on a specified date; the buyer of the contract gets to put the shares on someone else. A call contract gives the buyer the right to buy shares (or some asset/commodity) for a specified price on a specified date; the buyer of the contract gets to call on someone for shares. \"\"American\"\" options contracts allow the buyer can exercise their rights under the contract on or before the expiration date; while \"\"European\"\" type contracts can only be exercised on the expiration date. To address your example. Typically for stock an option contract involves 100 shares of a stock. The value of these contracts fluctuates the same way other assets do. Typically retail investors don't actually exercise their contracts, they just close a profitable position before the exercise deadline, and let unprofitable positions expire worthless. If you were to buy a single call contract with an exercise price of $100 with a maturity date of August 1 for $1 per share, the contract will have cost you $100. Let's say on August 1 the underlying shares are now available for $110 per share. You have two options: Option 1: On August 1, you can exercise your contract to buy 100 shares for $100 per share. You would exercise for $10,000 ($100 times 100 shares), then sell the shares for $10 profit per share; less the cost of the contract and transaction costs. Option 2: Your contract is now worth something closer to $10 per share, up from $1 per share when you bought it. You can just sell your contract without ever exercising it to someone with an account large enough to exercise and/or an actual desire to receive the asset or commodity.\"", "title": "" }, { "docid": "83b19dd70fbd33a81587c3ac2e2adc32", "text": "\"So either scenario has about $10K upfront costs (either realtor/selling expenses or fixing up for rental). Furthermore, I'm sure that the buyers would want you to fix all these things anyway, or reduce the price accordingly, but let's ignore this. Let's also ignore the remaining mortgage, since it looks like you can comfortably pay it off. Assuming 10% property management and 10% average vacancy (check your market), and rental price at $1000 - you end up with these numbers: I took very conservative estimates both on the rent (lower than you expect) and the maintenance expense (although on average over the years ,since you need to have some reserves, this is probably quite reasonable). You end up with 2.7% ROI, which is not a lot for a rental. The rule of thumb your wife mentioned (1% of cash equity) is indeed usually for ROI of leveraged rental purchase. However, if rental prices in your area are rising, as it sounds like they are, you may end up there quite soon anyway. The downside is that the money is locked in. If you're confident in your ability to rent and are not loosing the tax benefit of selling since it sounds like you've not appreciated, you may take out some cash through a cash-out refi. To keep cash-flow near-0, you need to cash out so that the payments would be at or less than the $3200/year (i.e.: $266/month). That would make about $50K at 30/yr fixed 5% loan. What's best is up to you to decide, of course. Check whether \"\"you can always sell\"\" holds for you. I.e.: how stable is the market, what happens if one or two large employers disappear, etc.\"", "title": "" }, { "docid": "a5d1d152614dde74cea6e8431471e43b", "text": "\"You can make a contingent offer: \"\"I will buy this house if I sell my own.\"\" In a highly competitive environment, contingent offers tend to be ignored. (Another commentator described such a contingency clause as synonymous with \"\"Please Reject Me\"\".) You can get a bridge loan: you borrow money for a short term, at punishingly high interest. If your house doesn't sell, you're fscked. You pay for two mortgages (or even buy the other house for cash). If you can afford this, congratulations on, you know, being super-rich. Or you can do what I am doing: selling one house and then living at my mom's until I buy another one. (You will have to stay at your own mom's house; my mom's house will be full, of course.) Edit: A commentator with the disturbingly Kafkaesque name of \"\"R.\"\" made the not-unreasonable suggestion that you buy both and rent out one or the other. Consider this possibility, but remember: On the other hand, if the stars align, you might not want to extricate yourself. If the tenant is paying the mortgage and a little more, you have an appreciating asset, and one you can borrow against. With a little work and a little judicious use of leverage, doing this over and over, you can accumulate a string of income-producing rental properties.\"", "title": "" }, { "docid": "983de4d284b10120ef321f3cfd394987", "text": "There is (almost) always money involved somewhere, but it doesn't have to come from you. It can be investors, credit cards, or even seller-financing (I've done all 3). Examples: If you can find partners with the money to make the deals happen, then your job is to put the deal together. Find the properties, negotiate the price, even get the property under contract (all without any obligation or cost on your part... yes it absolutely can be done). Then your partners will fund the deal if it's good enough and their terms are met, etc. In some areas you can put a property on a credit card. If you find a house say for $25,000 that will rent for $300/month, and you can put it on a credit card (especially at zero percent for a year or something similar), then you can generate cashflow as a landlord without putting up any cash of your own on the purchase. Of course there are many risks associated with landlording and i could tell you horror stories... but we're not addressing that here. You can negotiate a sale with an owner who agrees to finance the entire purchase for you. I once purchased 3 properties at once this way from a seller who financed the entire sale, all closing costs, everything, this way. Of course they needed a lot of repair and such so I had to fund that another way, but at least the purchase itself cost me no money out of pocket. So these infomercials/courses are not inherently scams in the sense that what they are teaching is (usually... I'm sure there are exceptions) true. However they generally give you enough information to get into trouble, and not out. But that's what true learning is... it's getting into trouble and finding a way out that doesn't kill you. =) That's called experience, and you can't buy that for any price.", "title": "" }, { "docid": "7cfb64bbf0a388ad9bda6cea06cdc2ce", "text": "\"There's many concrete answers, but there's something circular about your question. The only thing I can think of is that phone service providers ask for credit report when you want to start a new account but I am sure that could be worked around if you just put down a cash deposit in some cases. So now the situation is flipped - you are relying on your phone company's credit! Who is to say they don't just walk away from their end of the deal now that you have paid in full? The amount of credit in this situation is conserved. You just have to eat the risk and rely on their credit, because you have no credit. It doesn't matter how much money you have - $10 or $10000 can be extorted out of you equally well if you must always pay for future goods up front. You also can't use that money month-by-month now, even in low-risk investments. Although, they will do exactly that and keep the interest. And I challenge your assumption that you will never default. You are not a seraphic being. You live on planet earth. Ever had to pay $125,000 for a chemo treatment because you got a rare form of cancer? Well, you won't be able to default on your phone plan and pay for your drug (or food, if you bankrupt yourself on the drug) because your money is already gone. I know you asked a simpler question but I can't write a good answer without pointing out that \"\"no default\"\" is a bad model, it's like doing math without a zero element. By the way, this is realistic. It applies to renting in, say, New York City. It's better to be a tenant with credit who can withhold rent in issue of neglected maintenance or gross unfair treatment, than a tenant who has already paid full rent and has left the landlord with little market incentive to do their part.\"", "title": "" }, { "docid": "a5458761578243e99a8d1fbc443fda66", "text": "\"If I understand you situation correctly, then the accepted answer is extremely misleading and incorrect. Your arrangement with your parents is definitely unreasonable. It is definitely not \"\"similar to an interest-only loan\"\". In an interest-only loan, like you can get from a bank, you will loan a sum of money, which you are expected to pay back at a certain time in the future, or when you sell the condo. But you pay back the original sum, not the value of property at selling time. For the access to the money you pay an interest to the bank. The bank gets their profits from the interest. The property only serves as collateral in case you are not able to make your interest payments. Another way to view it, is that your parent bought (a share of) your condo for investment reasons. In that case, they would expect to get their profits from the increase of the value of the property over time. That looks most like your situation. Granted, that is more risky for them, but that is what they choose to sign up for. But in that case it is not reasonable to charge your for interest as well, because that would mean they would get double profits. So how does the $500 monthly payment fit in? If it is interest, then it would work out to a yearly interest of about 5.2%. Where I live, that would nowadays be extremely high even for an interest-only mortgage from a bank. But I don't live in the USA, so don't know whether that is true there. I think in your situation, the $500 can only be seen as rent. Whether that is reasonable for your situation I cannot judge from here. It should be 75% of a reasonable rent for a condo like that. But in that case, your parents should also stand for 75% of the maintenance costs of the property, which you don't mention, and most of the property taxes and insurance fees. In short, no it is not a reasonable arrangement. You would be better of trying to get a morgage from the bank, and buy out your parents with it.\"", "title": "" }, { "docid": "146939b11f6b5588c7c46d9512c63c47", "text": "what I should think about. If you decide to do this - get everything in writing. Get lease agreements to enforce the business side of the relationship. If they are not comfortable with that much formality, it's probably best not to do it, I'm not saying that you should not do this - but that you need to think about these type of scenarios before committing to a house purchase.", "title": "" }, { "docid": "f000814393145523bb955e8c305cd035", "text": "\"I've never heard of rent quoted per week. Are you in the US? In general, after the down payment, one would hope to take the rent, and be able to pay the mortgage, tax, insurance, and then have enough left each year to at least have a bit of emergency money for repairs. If one can start by actually pocketing more than this each year, that's ideal, but to start with a rental, and only make money \"\"after taxes\"\" is cutting it too close in my opinion. The 19 to 1 \"\"P/E\"\" appears too high, when I followed such things I recall 12 or under being the target. Of course rates were higher, and that number rises with very low rates. In your example, a $320K mortgage at 4% is $1527/mo. $400/wk does not cut it.\"", "title": "" }, { "docid": "e5d0aae8c372fa841d206c133d72eb68", "text": "The cleanest way to accomplish this is to make the purchase of your new house contingent on the sale of your old one. Your offer should include that contingency and a date by which your house needs to sell to settle the contract. There will also likely be a clause that lets the seller cancel the contract within a period of time (like 24-48 hours) if another offer is received. This gives you (the buyer) at least an opportunity to either sell the house or come up with financing to complete the deal. For example, suppose you make an offer to buy a house for $300,000 contingent on the sale of your house, which the seller accepts. In the meantime, the seller gets an offer of $275,000 in cash (no contingency). The seller has to notify you of the offer and give you some time to make good on your offer, either by selling your house or obtaining $300,000 in financing. If you cannot, the seller can accept the cash offer. This is just a hypothetical example; the offer can have whatever clauses you agree to, but since sale contingencies benefit the buyer, the seller will generally want some compensation for that benefit, e.g. a larger offer or some other clause that benefits them. Or do I find a house to buy first, set a closing date far out and then use that time to sell my current one? Most sellers will not want to set a closing date very far out. Contingency clauses are far more common. In short, yes it's possible, and any competent realtor should be able to handle it. It also may mean that you have to either make a higher offer to compensate for the contingency and to dissuade the seller from entertaining other offers, or sell your home for less than you'd like to get the cash sooner. You can weigh those costs against the cost of financing the new house until yours sells.", "title": "" }, { "docid": "01635b6951f65cf58c7a8e5248d06fbc", "text": "Keep up with market news. Macroeconomics, policies, interest rates, major movements, etc. If there's anything you don't know you'll learn on the job, they wouldn't hire you if they expected you to know stuff you didn't. Not sure what you're worried about. If you're an analyst you'll have several months of training anyway.", "title": "" }, { "docid": "cb432f447b9e6ebce7ed6a1b84ce6379", "text": "Two companies I worked for in the DC area also did WageWorks. The commuting money could be used for the Subway, Bus, and commuter rail. A separate pot of money was used for parking. We had to estimate the amount of money that would be used the next month. We had to decide by mid-June how much we would spend in July. The money was automatically added to the metro fare card on the first business day of the month. When I first started they put the money on a special debit/credit card that could only be used at commuter system. It would be rejected at the department store. If parking couldn't be paid using a special card, there was a way to claim the money with or without receipts. If the company, like the US Government does for their employees, paid the commuting expenses any excess funds at the end of the month were pulled back from the card. They were just starting to do this in 2012 for employee pre-tax funds. They were supposed to add it to your next paycheck any excess at the end of the month. There was also a way to use post tax funds from your paycheck so that all your commuting expenses could be on one card. Of course any post-tax funds would be left on the card. There was no real way for them to audit this because the system would never know if you were going to work or going to the dentist. I ended up using two cards, one for work and one for non-work usage.", "title": "" } ]	fiqa
247ed60af2b878d4638b37f433be302c	Harmony Gold Mining Company is listed on the NYSE and JSE at different prices?	[ { "docid": "71ec30d3609296f94f979a175af9cd19", "text": "The quotes on JSE are for 100 share lots. The quotes on NYSE are for single shares. That still leaves some price difference, but much less than you calculated. (EDIT: Equivalently, the price is quoted in 1/100th of a Rand. The Reuter's listing makes this explicit since the price is listed as ZAc rather than ZAR. http://www.reuters.com/finance/stocks/overview?symbol=HARJ.J) As noted in the other answer currently up, NYSE is quoting American Depositary Receipts (ADRs) for this company, which is not directly its stock. The ADR in this case, if you check the prospectus, is currently 1 share of the ADR = 1 share of the stock on its home market. A US institution (in this case it looks like BNY Mellon) is holding shares of stock to back each ADR. Arbitrage is possible and does happen. It's not perfect though, because there are a variety of other cost and risk factors that need to be considered. There's a good review here: Report by JP Morgan Some summary points:", "title": "" }, { "docid": "4aca16b8c90d88a5a94d287aa50dfd6f", "text": "On NYSE it isn't the equity which is listed but is an ADR(American Depositary Receipt). Source A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction. Else people would make a killing on the arbitrage opportunity. Frankly speaking arbitrage opportunities are more or less non existent. They occur for maybe seconds or milliseconds and the HFT firms and banks trade on it to remove the arbitrage.", "title": "" } ]	[ { "docid": "e1cd963949bd42e4b4be6eb2f69e4fef", "text": "Depending on what currency the price is quoted in and is originally sold, currency fluctuation can also carry over onto the price in your currency. An example for that would be bitcoin prices which sometimes show heavy ups and downs in one currency, but seem totally stable in another and can be tracked back to changed exchange rates between currencies. Also like others have said, prices on stocks are not actually fixed. You can offer to buy or sell at any price. Only if 2 people want to buy or sell for the same price there will actually be a transaction.", "title": "" }, { "docid": "f6525fabe5b4facfd715c4d176e28d7c", "text": "They could have different quotes as there are more than a few pieces here. Are you talking a Real Time Level II quote or just a delayed quote? Delayed quotes could vary as different companies would be using different time points in their data. You aren't specifying exactly what kind of quote from which system are you using here. The key to this question is how much of a pinpoint answer do you want and how prepared are you to pay for that kind of access to the automated trades happening? Remember that there could well be more than a few trades happening each millisecond and thus latency is something to be very careful here, regardless of the exchange as long as we are talking about first-world stock exchanges where there are various automated systems being used for trading. Different market makers is just a possible piece of the equation here. One could have the same market maker but if the timings are different,e.g. if one quote is at 2:30:30 and the other is at 2:30:29 there could be a difference given all the trades processed within that second, thus the question is how well can you get that split second total view of bids and asks for a stock. You want to get all the outstanding orders which could be a non-trivial task.", "title": "" }, { "docid": "cc8a049a4a54207f729b90de2e243f5c", "text": "NUGT and DUST are opposites - DUST is a 'bear' (tracks 3x the inverse) and NUGT is a 'bull' (tracks 3x the actual). So if NUGT is much higher, sounds like people are betting on Gold (or specifically, on the NYSEARCA Gold Miners Index). When this Investopedia article was written in July 2016, the volumes were reversed: DUST traded ~18m and NUGT traded ~7m. Just differences in stock market activity.", "title": "" }, { "docid": "2649f29b989d8e7f895fca5b3d7d7194", "text": "\"At the bottom of Yahoo! Finance's S & P 500 quote Quotes are real-time for NASDAQ, NYSE, and NYSE MKT. See also delay times for other exchanges. All information provided \"\"as is\"\" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein. Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Orderbook quotes are provided by BATS Exchange. US Financials data provided by Edgar Online and all other Financials provided by Capital IQ. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. Thus, yes there is a DB being accessed that there is likely an agreement between Yahoo! and the providers.\"", "title": "" }, { "docid": "1b2dae65dd374866d9f3920425b49b6e", "text": "I'm not familiar with QQQ, but I'm guessing this is something like IShares Ftse 100 (see description here)", "title": "" }, { "docid": "867938426d19347fb40cde94e4d03fc8", "text": "Many exchanges trade the same securities. An order may be posted to a secondary exchange, but if the National Best Bid and Offer data provider malfunctions, only those with data feeds from that exchange will see it. Only the data provider for the primary exchange where a stock is listed provides the NBBO. Missing orders are very common with the NBBO data providers. NASDAQ's order consolidator has had many failures over the past few years, and the data provider's top executive has recently resigned. Brokers have no control over this system. A broker may be alerted to a malfunction by an accountholder, but a broker may only inform the relevant exchange and the relevant data provider.", "title": "" }, { "docid": "d7c498aeb47a6ff89bd62f0388e5f896", "text": "Academic research into ADRs seems to suggest that pairs-trading ADRs and their underlying shares reveals that there certainly are arbitrage opportunities, but that in most (but not all cases) such opportunities are quickly taken care of by the market. (See this article for the mexican case, the introduction has a list of other articles you could read on the subject). In some cases parity doesn't seem to be reached, which may have to do with transaction costs, the risk of transacting in a foreign market, as well as administrative & legal concerns that can affect the direct holder of a foreign share but don't impact the ADR holder (since those risks and costs are borne by the institution, which presumably has a better idea of how to manage such risks and costs). It's also worth pointing out that there are almost always arbitrage opportunities that get snapped up quickly: the law of one price doesn't apply for very short time-frames, just that if you're not an expert in that particular domain of the market, it might as well be a law since you won't see the arbitrage opportunities fast enough. That is to say, there are always opportunities for arbitrage with ADRs but chances are YOU won't be able to take advantage of it (In the Mexican case, the price divergence seems to have an average half-life of ~3 days). Some price divergence might be expected: ADR holders shouldn't be expected to know as much about the foreign market as the typical foreign share holder, and that uncertainty may also cause some divergence. There does seem to be some opportunity for arbitrage doing what you suggest in markets where it is not legally possible to short shares, but that likely is the value added from being able to short a share that belongs to a market where you can't do that.", "title": "" }, { "docid": "fd7d02335ff582044ff4b31a60e1cadd", "text": "Dear Sir/madam We are Local Village Gold Miners from Rep. of Guinea, In West African. I am a Member of the Said Community and in charge of Marketing, Advertising, communication and sourcing potential diamond and gold dust buyers, agents/brokers or partners for our mined gold dust AU./DIAMONDS. Prior To The Latest Privilege Accorded Local Gold and Diamond Miners in Guinea Conakry Since April 2007 to Market and Sell Diamond and Gold Dust AU themselves, Thus my offer to AU Gold Dust and Diamond UNCUT Dust prospective buyers, Brokers, representatives, agents, intermediaries and partners willing To Establish Meaningful Business transaction that is Viable and Durable with us. Hence, I'm offering you a Fresh Gold Dust. AU for sale with the following specifications and details. COMMODITY.......................................AURUM UTALIUM (AU) Form................................Gold Dust/nugget Powder. Quantity..........................123kg - 500kgs and more. Quality/Purity.................. 22 carat or better. Finesse..........................92% OR Better. Location.......................... Conakry Origin............................. Guinea . Price per kg......................$35,000 USD/KG AS FOR THE DIAMOND THAT IS UNCUT, WE ARE IN POSITIONS OF OVER 4850 Carats OF GAMS STONE OF FDGH AND LM GRADES. We are looking forward to your response if our product does interest you. Accept our warm hearted Regards: NB : this is my alternative CONTACT US CAN SPEAK ENGLISH ,FRENCH AND CHINESE Tel:+22467118646 webs www.africalocalgoldminers.webs.com E-mail: africalocalgoldminers@yahoo.com Rue DI 519 Conakry Republique de Guinee Best Regard Mr john dabo", "title": "" }, { "docid": "fa2aae462316eb64f23cb448a361783e", "text": "I found the answer. It was the Stock Ticker that I was looking for. So, if I understand correctly the price at certain moment is the price of the latest sale and can be used to get a global picture of what certain stock is worth at that certain instant.", "title": "" }, { "docid": "6b0fa8c314404e4ce8dd329fb6961701", "text": "Assuming the data you're referring to is this line: the difference might be related to the different exchanges on which the stock trades. FINRA could be listing the reported volume from one exchange, while the NASDAQ data might be listing the volume on all exchanges. This is an important distinction because AAV is a Canadian company that is listed on the Toronto Stock Exchange and the NYSE. The Q at the end of the line stands for NASDAQ, according to FINRA's codebook for those data. My guess is that the FINRA data is only reporting the volume for the NASDAQ exchange and not the total volume for all exchanges (Toronto, NASDAQ, NYSE, etc.) while the data straight from NASDAQ, oddly enough, is reporting the total volume. However, FINRA could also face reporting discrepancies, since it's a regulatory body and therefore might not have the most up-to-date volume data that the various exchanges can access. I don't know if it's related or not, but looking at the NASDAQ historical data, it looks like the volume on March 6, the day you're asking about, was much lower than the volume in most of the days immediately before or after it. For all I know, something might have happened that day concerning that particular stock or the market as a whole. I don't remember anything in particular, but you never know.", "title": "" }, { "docid": "02ecc79bbe98859380636df1e95a5c82", "text": "Yes, the ADR will trade on a separate exchange from the underlying one, and can (and does) see fluctuations in price that do not match the (exchange corrected) fluctuations that occur in the original market. You are probably exposing yourself to additional risk that is related to:", "title": "" }, { "docid": "d55d842e506aca1a0bab26aac7e5778a", "text": "Cross-listing shouldn't be an issue, as the sole reason stocks would behave differently on different exchanges would be due to exchange rates (sure, noise and time differences, but weekly data should take care most of that). If you're using MSCI World index figures in USD, you either have to convert stocks denominated in other currencies to USD at their historical fx rates, or just save a lot of time and use data from stocks listed in the US, when available.", "title": "" }, { "docid": "14556b7424799161a61983bc30edf827", "text": "They don't have to track each other, it could just be listed on more than one exchange. The price on one exchange does not have to match or track the price on the other exchange. This is actually quite common, as many companies are listed on two or more exchanges around the world.", "title": "" }, { "docid": "728e392d990ee0646c3ba5fc4c399afe", "text": "\"You might consider learning how the \"\"matching\"\" or \"\"pairing\"\" system in the market operates. The actual exchange only happens when both a buyer and a seller overlap their respect quotes. Sometimes orders \"\"go to market\"\" for a particular volume. Eg get me 10,000 Microsoft shares now. which means that the price starts at the current lowest seller, and works up the price list until the volume is met. Like all market it trades, it has it's advantages, and it's dangers. If you are confident Microsoft is going to bull, you want those shares now, confident you'll recoup the cost. Where if you put in a priced order, you might get only none or some shares. Same as when you sell. If you see the price (which is the price of the last completed \"\"successful\"\" trade. and think \"\"I'm going to sell 1000 shares\"\". then you give the order to the market (or broker), and then the same as what happened as before. the highest bidder gets as much as they asked for, if there's still shares left over, they go to the next bidder, and so on down the price... and the last completed \"\"successful\"\" trade is when your last sale is made at the lowest price of your batch. If you're selling, and selling 100,000 shares. And the highest bidder wants 1,000,000 shares you'll only see the price drop to that guys bid. Why will it drop (off the quoted price?). Because the quoted price is the LAST sale, clearly if there's someone still with an open bid on the market...then either he wants more shares than were available (the price stays same), or his bid wasn't as high as the last bid (so when you sale goes through, it will be at the price he's offering). Which is why being able to see the price queues is important on large traders. It is also why it can be important put stops and limits on your trades, een through you can still get gapped if you're unlucky. However putting prices (\"\"Open Orders\"\" vs \"\"(at)Market Orders\"\") can mean that you're sitting there waiting for a bounce/spike while the action is all going on without you). safer but not as much gain (maybe ;) ) that's the excitement of the market, for every option there's advantages...and risks... (eg missing out) There are also issues with stock movement, shadowing, and stop hunting, which can influence the price. But the stuff in the long paragraphs is the technical reasons.\"", "title": "" }, { "docid": "0d0fb6a1a06313f56e37e7e8b8c1b1f3", "text": "http://mobile.nytimes.com/blogs/economix/2014/04/02/the-many-classes-of-google-stock/ Are you counting both class A and other share classes?", "title": "" } ]	fiqa
ff038c47e32628d38db5d9a728e407ed	I have made all the payments on a car I cosigned. Do I have to fight for possession of the vehicle?	[ { "docid": "93b4633bc4b31002b95efa381173b0bd", "text": "Ordinarily a cosigner does not appear on the car's title (thus, no ownership at all in the vehicle), but they are guaranteeing payment of the loan if the primary borrower does not make the payment. You have essentially two options: Stop making payments for him. If he does not make them, the car will be repossessed and the default will appear on both his and your credit. You will have a credit ding to live with, but he will to and he won't have the car. Continue to make payments if he does not, to preserve your credit, and sue him for the money you have paid. In your suit you could request repayment of the money or have him sign over the title (ownership) to you, if you would be happy with either option. I suspect that he will object to both, so the judge is going to have to decide if he finds your case has merit. If you go with option 1 and he picks up the payments so the car isn't repossessed, you can then still take option 2 to recover the money you have paid. Be prepared to provide documentation to the court of the payments you have made (bank statements showing the out-go, or other form of evidence you made the payment - the finance company's statements aren't going to show who made them).", "title": "" } ]	[ { "docid": "36b5b8cfc4acd6355d85c5f38d45a7ff", "text": "He wasn't wrong that a mortgage would help your credit score, assuming that this was a perfect world and everyone held up their end of the bargain. However, now that he hasn't, you are still legally obligated to pay the loan amount (including his portion of it). As for a lawsuit, it would be hard to prove what he said verbally, however, it doesn't hurt to call a lawyer for a free consultation.", "title": "" }, { "docid": "9a838469fa155163c0b924eaa6f44b0e", "text": "\"Cosigning is explicitly a promise that you will make the payments if the primary signer can not. Don't do it unless you are able to handle the cost and trust the other party will \"\"make you whole\"\" when they can... which means don't do it for anyone you would not lend your money to, since it comes out to about the same level of risk. Having agreed, you're sorta stuck with your ex-friend's problem. I recommend talking to a lawyer about the safest way get out of this. It isn't clear you can even sue the ex-friend at this point.\"", "title": "" }, { "docid": "7ba1aa8230b37c2401e3c92abe036ee2", "text": "\"Your arrangements with the bank are irrelevant. Whoever is named on the title of the vehicle owns it. If she is the \"\"primary\"\", then I assume her name is on the title, therefore she owns the car. If you drive off with the car and it is titled in her name, she can report it stolen and have you arrested for grand theft auto unless you have a dated and signed permission in writing from her to use the car. Point #2: If a car loan was involved, then you didn't \"\"purchase\"\" the car, the bank did. If you want to gain ownership of the car, then you need to have her name removed from the title and have yours put in its place. Since the bank has possession of the title, this will require the cooperation of both your girlfriend and the bank.\"", "title": "" }, { "docid": "40a99919f28a3c7d056d902e9656174f", "text": "\"I want to first state that I'm not an attorney and this is not a response that would be considered legal advice. I'm going to assume this was a loan was made in the USA. The OP didnt specify. A typical auto loan has a borrower and a co-borrower or \"\"cosigner\"\". The first signer on the contract is considered the \"\"primary\"\". As to your question about a primary being a co-borrower my answer would be no. Primary simply means first signer and you can't be a first signer and a co-borrower. Both borrower and co-borrower, unless the contract specifies different, are equally responsible for the auto loan regardless if you're a borrower or a co-borrower (primary or not primary). I'm not sure if there was a situation not specified that prompted the question. Just remember that when you add a co-borrower their positive and negative financials are handled equally as the borrower. So in some cases a co-borrower can make the loan not qualify. (I worked for an auto finance company for 16 years)\"", "title": "" }, { "docid": "6654e2df896eda68dbf3c8da9c17bbfb", "text": "I've done this, though with a loan company rather than a bank. We agreed on price, drove to the loan company's office (the seller having notified them in advance), I gave them the money, got the title, and they gave the balance to the seller. Important point is that you get the signed-off title from the lienholder.", "title": "" }, { "docid": "3e48ff78f0a9989139b2a2c1115f7dac", "text": "I would steer well clear of this. The risk is that they take your money but don't pay the bank. This wouldn't require dishonesty - what if they run into financial trouble? Any money of yours that they have that hasn't gone on to the bank yet might end up paying off other debts instead of yours. It's not clear if the idea is that you are paying them all the money up front or will be making payments over time, but either way if they don't clear the lien with the bank then the bank can come after the car no matter who is in physical possession of it. That would leave you without either the money or the car. In theory you'd have a legal claim against the seller, but in reality you'd probably find it hard to collect.", "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": "8f4879752fac50097965f48da3b171f2", "text": "Once a debt has gone to a debt collector, you have to work with the debt collector to settle your debt. Essentially, the department store sold your debt to the debt collector so they don't have to deal with it anymore. You have rights when contacted by debt collectors. You can negotiate a deal so that the amount you actually pay is lower than what you owe. It is illegal for them to quote you for a higher amount than what you actually owe! Also, they can't threaten you or pretend to be a credit bureau. Your best bet is to work with them and negotiate a better payment. Don't give up. Collectors often times purchase the debt for a very low amount, so even if you pay less than what you actually owe, the collector will still make a profit. https://www.credit.com/debt/collections-crash-course/", "title": "" }, { "docid": "a53ede8e34ef2dfe0235c51a616f4410", "text": "Co-signing is not the same as owning. If your elderly lady didn't make any payments on the loan, and isn't on the ownership of the car, and there was no agreement that you would pay her anything, then you do not owe either her or her daughter any money. Also the loan is not affecting the daughter's credit, and the mother's credit is irrelevant (since she is dead). However you should be aware that the finance company will want to know about the demise of the mother, since they can no longer make a claim against her if you default. I would start by approaching the loan company, telling them about the mother's death, and asking to refinance in your name only. If you've really been keeping up the payments well this could be OK with them. If not I would find someone else who is prepared to co-sign a new loan with you, and still refinance. Then just tell the daughter that the loan her mother co-signed for has been discharged, and there is nothing for her to worry about.", "title": "" }, { "docid": "0b039e3016ed2148944b6cd912d5ae2d", "text": "Your best bet would be to add your name to the title through the bank or have her sell it to you for the amount she owes then you get a loan for that amount like they said before. If you guys split up at this point she'll legally get to keep the car you've been paying for. You could apply for a new loan and have her cosign but it'll make your monthly payments higher. Have her sell you the car for the amount owed them you get a loan for that amount. Since you are together and you've been paying for it you won't lose any money and your monthly payments won't be expensive if you don't owe that much on the car. Pretty much having her sell it to you would be the smartest idea cause keeping Her name on the title will allow Her to legally drive away in your car if you split and you don't want that lol", "title": "" }, { "docid": "ba6929a4a4e8abb0a27ea589b2c2fd20", "text": "If this is because he wants to avoid paying taxes, will I get in trouble if I agree to have him work on my vehicle? You should check your state and local sales tax laws to be certain, but in my state you have no liability if he does not pay his taxes. That's his problem, not yours. The biggest risk for you is if something goes wrong, you have no proof that the work was ever done, so it's possible he could deny that any transaction ever took place and refuse to correct it or refund your money. So at worst you're out what you paid for the service, plus what it would cost you to fix it if you needed to and chose to do so. If you don't want to take that risk, then insist on a receipt or take you business elsewhere, but there's no criminal liability for you if he chooses not to report the income. EDIT Be aware, though that state tax is levied at the state and local level, so the laws of your individual state or city may be different.", "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": "9f36797606cd3c5a1d9b22a6c654c87d", "text": "\"In the US, \"\"title\"\" is the document that shows ownership of the car. It is a nicely printed document you get from the DMV, that includes the information about the car and about you. You \"\"sign off the title\"\" when you sell the car - part of the title is a form on which the owner of the title can assign it to someone else. With your signature on the title, the new owner goes to the DMV which exchanges it to a new title in the new owner's name. Never sign on the title unless you got the payment for the car from the buyer. Usually, when the car is bought with a loan, the lender holds the title. Since you need to sign off the title to pass the ownership if you sell the car - lender holding on to it will prevent you from selling the car until the lender gives you the title back (when you pay off the loan). Your boss, acting as a lender, wants the title to hold on to it to prevent you from selling the car that secures your debt to him. He wants that (usually pink) piece of paper. Here's an article explaining about the title and showing a sample. Lenders holding the title will usually also add an endorsement at the DMV, so that you can't go and claim that you lost it.\"", "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": "0a2e54e542bab264da2cf0c2dc3f09b7", "text": "There are different options here. Either way, ensure that you have a paper trail of all your payments. When in doubt, speak to a lawyer, there are many who offer free consultations.", "title": "" } ]	fiqa
8aad481a7ad96e8e7f3956af8901fa49	Do there exist any wikipedia type sites for evaluating financial service providers?	[ { "docid": "aa633c55864342608d7168ccac2dfe53", "text": "It is always a good idea if you are worried about customer service and hidden gotchas to visit http://getsatisfaction.com - they operate as an independent complaint board for many companies. http://getsatisfaction.com/bankofamerica for example alerts you to many problems with using BofA. In addition, googling for common complaint terms is a great idea. It's easy to learn why bank of america sucks and to see that not too many people think bank of america rocks.", "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": "ffb51ec6e667a0e05d682b5d8b706b67", "text": "I am very familiar with the Bloomberg terminal service and agree that their info on securities & markets, especially fixed income, is unparalleled. However, their news and editorial departments espouse the viewpoints of Michael Bloomberg such as being permabullish in the face of data, pro gun control, pro immigration (legal+illegal), pro Israel, and pro Sunni monarchies (Saudi et al).", "title": "" }, { "docid": "f11640691744f1a407485119559763a3", "text": "Good thing I'm not at Freddie anymore. Not sure what I would have picked (They don't use quite the same analyst/VP/Director framework, VP there is like MD elsewhere). Not sure what someone at the Fed or Treasury would put either, or the rating agencies, or Reuters or Bloomberg. Before Freddie, I was working for a financial software provider. Gonna be hard to be inclusive with that list. And frankly, VP - IB doesn't even tell you much. I'd much rather know what sector everyone worked.", "title": "" }, { "docid": "cedbdc99a922a2cb2d174e2739d79074", "text": "The Khan Academy has a huge series on finance (Sal Khan used to work at a hedge fund before he started his magnum opus): http://www.khanacademy.org/#core-finance Some are pretty basic stuff, but he does have some interesting commentary and snippets of more interesting topics. They're all very low-commitment and bite-sized.", "title": "" }, { "docid": "f0e9db69eef27c1bdf95c462af1dc428", "text": "Bloomberg Professional seems to be very popular. It provides any kind of data you can imagine. Analysis is a subjective interpretation of the data.", "title": "" }, { "docid": "e5757b6e4e418452ae0693563db8b0ec", "text": "GnuCash—Great for the meticulous who want to know every detail of their finances. Pros: Cons:", "title": "" }, { "docid": "812a21841968b8016fe9dddda33b9b22", "text": "Is there one out there that doesn't suffer from massive survivorship bias? Most that I've looked at gather their data from discretionary reporting from the manager themselves, and many stop reporting after bad months when they aren't going to be raising capital anyway.", "title": "" }, { "docid": "dde75a1e21f7b47ec49b3adab2452970", "text": "Mint.com—Easy solution to provide insight into finances. Pros: Cons:", "title": "" }, { "docid": "a9ccfdba20ef447dbf563a6f495244da", "text": "I've got a small position at Lending Club and it's doing really well. It's been easy to use, good (not excellent) interface, easy to track the loans you've made & does a good job with notifications. Not much there for doing anything advanced with the portfolio math--I've used a separate spreadsheet to track things as well as use their reporting. The one catch with them I find is that when you put an order in you have to wait longer than you might expect for the process to complete--that is, even after the loan is funded, it still has to be reviewed, so the lead time before your money begins earning interest might be 2 weeks + 1 week of review time.", "title": "" }, { "docid": "b2d27d9aa0824213fa71520c93956ae6", "text": "I'm not familiar enough with finance in any capacity to know what the difference is between financial services or a finance department (beyond what you said); my familiarity of the industry extends to trading, rating, and financial law enforcement. But at a glance on mobile, that looks like pretty much exactly what I was looking for. I have no connect to the industry, but habe been on a Wall St media binge lately, and like to understand powerful/influencial sectors of society anyways. Thanks.", "title": "" }, { "docid": "0ef268dc015520b43687afb038fb8c2c", "text": "You should check out existing resources like Investopedia for definitions, and ask questions if there is something you do not understand, instead of asking folks to spit out definitions. A good book for you to read might be Wall Street Words", "title": "" }, { "docid": "8f273f70f6f09dc36714382c6fe6fa2f", "text": "Morningstar has that 10 history at http://financials.morningstar.com/ratios/r.html?t=JNJ&region=usa&culture=en-US", "title": "" }, { "docid": "77ecf212f4efc907eee18d547f3912ca", "text": "No career advice or homework help (unless your homework is some kind of big project and you need an explanation on a concept). I want to see financial news, legislation concerning the markets and regulation, self posts about financial concepts, opinion articles about finance from reputable sources, etc.", "title": "" }, { "docid": "cccc3b578e26b8a40415ddcb570733a4", "text": "They are almost always behind paywalls. The analysts that write these reports need to get paid somehow. I'd search for reports on google by specific topic and see what you find, but no where is there a treasure trove of free information", "title": "" }, { "docid": "52b2074638c47895005ab9914d5e82dd", "text": "Here is a list of threads in other subreddits about the same content: * [IMF:Debt Sustainability Analyses for Low-Income Countries: An Assessment of Projection Performance(PDF)](https://www.reddit.com/r/Economics/comments/79qemw/imfdebt_sustainability_analyses_for_lowincome/) on /r/Economics with 7 karma (created at 2017-10-31 04:16:16 by /u/mberre) ---- ^^I ^^am ^^a ^^bot ^^[FAQ](https://www.reddit.com/r/DuplicatesBot/wiki/index)-[Code](https://github.com/PokestarFan/DuplicateBot)-[Bugs](https://www.reddit.com/r/DuplicatesBot/comments/6ypgmx/bugs_and_problems/)-[Suggestions](https://www.reddit.com/r/DuplicatesBot/comments/6ypg85/suggestion_for_duplicatesbot/)-[Block](https://www.reddit.com/r/DuplicatesBot/wiki/index#wiki_block_bot_from_tagging_on_your_posts) ^^Now ^^you ^^can ^^remove ^^the ^^comment ^^by ^^replying ^^delete!", "title": "" }, { "docid": "81c016998574efc6dbf2244659066d3b", "text": "\"Strategy would be my top factor. While this may be implied, I do think it helps to have an idea of what is causing the buy and sell signals in speculating as I'd rather follow a strategy than try to figure things out completely from scratch that doesn't quite make sense to me. There are generally a couple of different schools of analysis that may be worth passing along: Fundamental Analysis:Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Technical Analysis:In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable. There are tools like \"\"Stock Screeners\"\" that will let you filter based on various criteria to use each analysis in a mix. There are various strategies one could use. Wikipedia under Stock Speculator lists: \"\"Several different types of stock trading strategies or approaches exist including day trading, trend following, market making, scalping (trading), momentum trading, trading the news, and arbitrage.\"\" Thus, I'd advise research what approach are you wanting to use as the \"\"Make it up as we go along losing real money all the way\"\" wouldn't be my suggested approach. There is something to be said for there being numerous columnists and newsletter peddlers if you want other ideas but I would suggest having a strategy before putting one's toe in the water.\"", "title": "" } ]	fiqa
8b1de61864374df5b604d2d5a088049e	What does the average log-return value of a stock mean?	[ { "docid": "0be66ae4d5867a95e9bfae09448c360a", "text": "\"Probably the best way to investigate this is to look at an example. First, as the commenters above have already said, the log-return from one period is log(price at time t/price at time t-1) which is approximately equal to the percentage change in the price from time t-1 to time t, provided that this percentage change is not big compared to the size of the price. (Note that you have to use the natural log, ie. log to the base e -- ln button on a calculator -- here.) The main use of the log-return is that is a proxy for the percentage change in the price, which turns out to be mathematically convenient, for various reasons which have mostly already been mentioned in the comments. But you already know this; your actual question is about the average log-return over a period of time. What does this indicate about the stock? The answer is: if the stock price is not changing very much, then the average log-return is about equal to the average percentage change in the price, and is very easy and quick to calculate. But if the stock price is very volatile, then the average log-return can be wildly different to the average percentage change in the price. Here is an example: the closing prices for Pitchfork Oil from last week's trading are: 10, 5, 12, 5, 10, 2, 15. The percentage changes are: -0.5, 1.4, -0.58, 1, -0.8, 6.5 (where -0.5 means -50%, etc.) The average percentage change is 1.17, or 117%. On the other hand, the log-returns for the same period are -0.69, 0.88, -0.88, 0.69, -1.6, 2, and the average log-return is about 0.068. If we used this as a proxy for the average percentage change in the price over the whole seven days, we would get 6.8% instead of 117%, which is wildly wrong. The reason why it is wrong is because the price fluctuated so much. On the other hand, the closing prices for United Marshmallow over the same period are 10, 11, 12, 11, 12, 13, 15. The average percentage change from day to day is 0.073, and the average log-return is 0.068, so in this case the log-return is very close to the percentage change. And it has the advantage of being computable from just the first and last prices, because the properties of logarithms imply that it simplifies to (log(15)-log(10))/6. Notice that this is exactly the same as for Pitchfork Oil. So one reason why you might be interested in the average log-return is that it gives a very quick way to estimate the average return, if the stock price is not changing very much. Another, more subtle reason, is that it actually behaves better than the percentage return. When the price of Pitchfork jumps from 5 to 12 and then crashes back to 5 again, the percentage changes are +140% and -58%, for an average of +82%. That sounds good, but if you had bought it at 5, and then sold it at 5, you would actually have made 0% on your money. The log-returns for the same period do not have this disturbing property, because they do add up to 0%. What's the real difference in this example? Well, if you had bought $1 worth of Pitchfork on Tuesday, when it was 5, and sold it on Wednesday, when it was 12, you would have made a profit of $1.40. If you had then bought another $1 on Wednesday and sold it on Thursday, you would have made a loss of $0.58. Overall, your profit would have been $0.82. This is what the average percentage return is calculating. On the other hand, if you had been a long-term investor who had bought on Tuesday and hung on until Thursday, then quoting an \"\"average return\"\" of 82% is highly misleading, because it in no way corresponds to the return of 0% which you actually got! The moral is that it may be better to look at the log-returns if you are a buy-and-hold type of investor, because log-returns cancel out when prices fluctuate, whereas percentage changes in price do not. But the flip-side of this is that your average log-return over a period of time does not give you much information about what the prices have been doing, since it is just (log(final price) - log(initial price))/number of periods. Since it is so easy to calculate from the initial and final prices themselves, you commonly won't see it in the financial pages, as far as I know. Finally, to answer your question: \"\"Does knowing this single piece of information indicate something about the stock?\"\", I would say: not really. From the point of view of this one indicator, Pitchfork Oil and United Marshmallow look like identical investments, when they are clearly not. Knowing the average log-return is exactly the same as knowing the ratio between the final and initial prices.\"", "title": "" }, { "docid": "2d9d061301932cab6ddb2a60cf75d941", "text": "Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own.", "title": "" }, { "docid": "4438f79a3119722391e3a5c7f96ded91", "text": "Knowing the log return is useful - the log return can help you to work out the annual return over the period it was estimated - and this should be comparable between stocks. One should just be careful with the calculation so that allowance for dividends is made sensibly.", "title": "" } ]	[ { "docid": "9825521e8c224412f832211f9404e01c", "text": "> The stock market measures individual companies' ups and downs, right? Not precisely, no. If anything it measures... 1. Information 2. Risk and Riskiness 3. Market Sentiment > Perhaps it could even gain over my life. One would assume that this would be a relatively flat graph, with little if any trend, and occasional spikes upwards and downwards. It'd also be subject to caps and floors, unlike the market which is only floored (at 0). > I don't know if anyone could come up with a kind of standardised measurement we could use to do this. It'd be impossible. Happiness is subjective and relative. Getting a million bucks might make me happy, but Bill Gates bored. Having a child can be conflicting intensely. The death of a loved one could be both sad and a relief.", "title": "" }, { "docid": "68eb08f84bf9bb435c3a622500d4f932", "text": "The net return reported to you (as a percentage) by a mutual fund is the gross return minus the expense ratio. So, if the gross return is X% and the expense ratio is Y%, your account will show a return of (X-Y)%. Be aware that X could be negative too. So, with Y = 1, If X = 10 (as you might get from a stock fund if you believe historical averages will continue), then the net return is 9% and you have lost (Y/X) times 100% = 10% of the gross return. If X = 8 (as you might get from a bond fund if you believe historical averages will continue), then the net return is 7% and you have lost (Y/X) times 100% = 12.5% of the gross return. and so on and so forth. The numbers used are merely examples of the returns that have been obtained historically, though it is worth emphasizing that 10% is an average return, averaged over many decades, from investments in stocks, and to believe that one will get a 10% return year after year is to mislead oneself very badly. I think the point of the illustrations is that expense ratios are important, and should matter a lot to you, but that their impact is proportionately somewhat less if the gross return is high, but very significant if the gross return is low, as in money-market funds. In fact, some money market funds which found that X < Y have even foregone charging the expense ratio fee so as to maintain a fixed $1 per share price. Personally, I would need a lot of persuading to invest in even a stock fund with 1% expense ratio.", "title": "" }, { "docid": "9a0db602af711368a0219b1c7845726c", "text": "\"Stock price is set to the price with the highest transaction volume at any given time. The stock price you cited was only valid in the last transaction on a specific stock exchange. As such it is more of an \"\"historic\"\" value. Next trade will be done with the next biggest volume. Depending on the incoming bids and asks this could be higher or lower, but you can assume it will not be too far off if there is no crash underway. Simple example stock exchange:\"", "title": "" }, { "docid": "053fc9bcde5b00d378e822f216f521bb", "text": "Let's use an example: You buy 10 machines for 100k, and those machines produce products sold for a total of 10k/year in profit (ignoring labor/electricity/sales costs etc). If the typical investor requires a rate of return of 10% on this business, your company would be worth 100k. In investing terms, you would have a PE ratio of 10. The immediately-required return will be lower if substantially greater returns are expected in the future (expected growth), and the immediately required return will be higher if your business is expected to shrink. If at the end of the year you take your 10k and purchase another machine, your valuation will rise to 110k, because you can now produce 11k in earnings per year. If your business has issued 10,000 shares, your share price will rise from $10 to $11. Note that you did not just put cash in the bank, and that you now have a higher share price. At the end of year 2, with 11 machines, lets imagine that customer demand has fallen and you are forced to cut prices. You somehow produce only 10k in profit, instead of the anticipated 11k. Investors believe this 10k in annual profit will continue into the forseable future. The investor who requires 10% return would then only value your company at 100k, and your share price would fall back from $11 to $10. If your earnings had fallen even further to 9k, they might value you at 90k (9k/0.1=$90k). You still have the same machines, but the market has changed in a way that make those machines less valuable. If you've gone from earning 10k in year one with 10 machines to 9k in year two with 11 machines, an investor might assume you'll make even less in year three, potentially only 8k, so the value of your company might even fall to 80k or lower. Once it is assumed that your earnings will continue to shrink, an investor might value your business based on a higher required rate of return (e.g. maybe 20% instead of 10%), which would cause your share price to fall even further.", "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": "7260e33a94f0592cc40cc223803db899", "text": "There are books on the subject of valuing stocks. P/E ratio has nothing directly to do with the value of a company. It may be an indication that the stock is undervalued or overvalued, but does not indicate the value itself. The direct value of company is what it would fetch if it was liquidated. For example, if you bought a dry cleaner and sold all of the equipment and receivables, how much would you get? To value a living company, you can treat it like a bond. For example, assume the company generates $1 million in profit every year and has a liquidation value of $2 million. Given the risk profile of the business, let's say we would like to make 8% on average per year, then the value of the business is approximately $1/0.08 + $2 = $14.5 million to us. To someone who expects to make more or less the value might be different. If the company has growth potential, you can adjust this figure by estimating the estimated income at different percentage chances of growth and decline, a growth curve so to speak. The value is then the net area under this curve. Of course, if you do this for NYSE and most NASDAQ stocks you will find that they have a capitalization way over these amounts. That is because they are being used as a store of wealth. People are buying the stocks just as a way to store money, not necessarily make a profit. It's kind of like buying land. Even though the land may never give you a penny of profit, you know you can always sell it and get your money back. Because of this, it is difficult to value high-profile equities. You are dealing with human psychology, not pennies and dollars.", "title": "" }, { "docid": "bbc49c2f1936608bbed3759d5fdec2dd", "text": "Don't know the name but it means you're long with conviction :P Unlimited gains, maximum loss of 95$ + (8-6) = 97$. Basically You are long @ 107 - -2 from 105 to 95. You would have to be ULTRA bullish to initiate this strategy.", "title": "" }, { "docid": "1adf6bf3b115f70cb8d77a0be6e30f97", "text": "\"Yes - this is exactly what it means. No losses (negative earnings). With today's accounting methods, you might want to determine whether you view earnings including or excluding extraordinary items. For example, a company might take a once-off charge to its earnings when revising the value of a major asset. This would show in the \"\"including\"\" but not in the \"\"excluding\"\" figure. The book actually has a nice discussion in Chapter 12 \"\"Things to Consider About Per-Share Earnings\"\" which considers several additional variables to consider here too. Note that this earnings metric is different from \"\"Stock Selection for the Defensive Investor\"\" which requires 10 years. PS - My edition (4th edition hardback) doesn't have 386 pages so your reference isn't correct for that edition. I found it on page 209 in Chapter 15 \"\"Stock Selection for the Enterprising Investor\"\".\"", "title": "" }, { "docid": "b731769f380d1dbc187594d1070e9701", "text": "I was thinking that the value of the stock is the value of the stock...the actual number of shares really doesn't matter, but I'm not sure. You're correct. Share price is meaningless. Google is $700 per share, Apple is $100 per share, that doesn't say anything about either company and/or whether or not one is a better investment over the other. You should not evaluate an investment decision on price of a share. Look at the books decide if the company is worth owning, then decide if it's worth owning at it's current price.", "title": "" }, { "docid": "383bfdf35f12d112a32fdbf97349887d", "text": "None of the above. The fair value is a term used to describe an analytical result of projecting the company's future dividends and profits into a present value. Such estimates are published by the likes of Morningstar, S&P and Value Line. It is quite common for a stock to trade well above or below such estimated fair values.", "title": "" }, { "docid": "0633a8f9a7f64459ddcbb18125935018", "text": "\"I think that \"\"memoryless\"\" in this context of a given stock's performance is not a term of art. IMO, it's an anecdotal concept or cliche used to make a point about holding a stock. Sometimes people get stuck... they buy a stock or fund at 50, it goes down to 30, then hold onto it so they can \"\"get back to even\"\". By holding the loser stock for emotional reasons, the person potentially misses out on gains elsewhere.\"", "title": "" }, { "docid": "7cb572d01dd79467c9271c69d43c1380", "text": "I didn't mean to imply that the perceived value of a company on the stock market somehow proved that the companies had not lost capital or value. But it sure is a clear datapoint to juxtapose against all of the other hard facts in play. Often, the stock market isn't wrong... even if it may lag. If these companies have all this loss, is that baked into the current price? But again I was just merely grasping for the details from the plethora of sources given. I surely missed the real meat of the data.", "title": "" }, { "docid": "9dc79b3de3b14ea3a532ab4c581eab0e", "text": "How I understand it is: supply/demand affect price of stock negatively/positively, respectively. Correct. Volume is the amount of buying/selling activity in these stocks (more volume = more fluctuation, right?). Sort of. Higher volume means higher liquidity. That is, a stock that is traded more is easier to trade. It doesn't necessarily mean more fluctuation and in the real world, it often means that these are well-understood stocks with a high amount of analyst coverage. This tends towards these stocks not being as volatile as smaller stocks with less liquidity. Company revenue (and profit) will help an investor predict company growth. That is one factor in a stock price. There are certain stocks that you would buy without them making a profit because their future revenue looks potentially explosive. However, these stocks are very risky and are bubble-prone. If you're starting out in the share market, it's generally a good idea to invest in index funds (I am not a broker, my advice should not be taken as financial advice). These funds aggregate risk by holding a lot of different companies. Also, statistics have shown that over time, buying and holding index funds long term tends to dramatically outperform other investment strategies, particularly for people with low amounts of capital.", "title": "" }, { "docid": "20c519ac894f3d5169e5b4f96ba93eb3", "text": "The information on GOOG or other sites is the average price of the stock and is indicative of the price at with the stock would be available. The actual trades happen at different values throught the day ... So the prices are good for most purposes and if you need the exact prices, you can thne decided to log into you trading terminal and get the actual quotes This is similar to FX quotes or any other such quotes and give you a general sense", "title": "" }, { "docid": "024f190b764183dc722c34c4360e0f90", "text": "The mortgage and title of the house would be under both your names equally. When I applied for a mortgage with my girlfriend, I was the primary applicant because of my credit score and she was the secondary because of her income (she makes more). When all was said and done, it was explained to us that the mortgage was ours equally and so was the house, and that I didn't hold more ownership than her over either. We were approved quickly and hassle free. This is our first house too. This is in Florida.", "title": "" } ]	fiqa
d5eb140b58d2f84f9b2e2ec7fcb1cd7e	What to do with $50,000?	[ { "docid": "3546d674628d675d54ccf4a127512ef0", "text": "Here is some good advice, read your UCO prospectus. It seems to hold 20% of it's value ($600MM out of $3B) via 13800 of the Apr 21st 2015 contracts. (expiring in 30 days) Those will be rolled very quickly into the May contracts at a significant loss of NAV. (based on current oil futures chains) Meaning if crude oil stays exactly the same price, you'd still lose 1% (5% spread loss * .20% the percentage of NAV based off futures contracts) on the roll each month. Their other $2.4Billion is held in swaptions or cash, unsure how to rate that exposure. All I know is those 13,800 contracts are in contango danger during roll week for the next few months (IMO). I wonder if there is a website that tracks inflows and outflows to see if they match up with before and after the roll periods. http://www.proshares.com/funds/uco_daily_holdings.html How Oil ETFs Work Many oil ETFs invest in oil futures contracts. An oil futures contract is a commitment to buy a given amount of crude oil at a given price on a particular date in the future. Since the purpose of oil ETFs is only to serve as an investment vehicle to track the price of oil, the creators of the fund have no interest in stockpiling actual oil. Therefore, oil ETFs such as USO periodically “roll over” their futures contracts by selling the contracts that are approaching expiration and buying contracts that expire farther into the future. The Contango Problem While this process of continually rolling over futures contracts may seem like a great way to track the price of crude oil, there’s a practical problem with the method: contango. The rollover method would work perfectly if oil funds could sell their expiring contracts for the exact same price that they pay for the futures contracts they buy each month. However, in reality, it’s often true that oil futures contracts get more expensive the farther their expiration date is in the future. That means that every time the oil ETFs roll over their contracts, they lose the difference in value between the contracts they sell and the contracts they buy. That’s why funds like USO, which invests only in WTI light, sweet crude oil futures contracts, don’t directly track the performance of the WTI crude oil spot price. http://www.etftrends.com/2015/01/positioning-for-an-oil-etf-rebound-watch-for-contango/ Due to these reasons, I'd deem UCO for swing trading, not for 'investing' (buy-and-hold). Maybe later I'll remember why one shouldn't buy and hold leveraged vehicles (leverage slippage/decay). Do you have an exit price in mind ? or are you buy and hold ?", "title": "" }, { "docid": "86272c93bc6326f6228681ce58d2a4ac", "text": "Considered a down payment on a house? Some illiquid assets? Otherwise you are doing 'responsible' get rich slow (read: get rich old) type things. And this question only invites opinion based answer. You tried futures and don't want to take that kind of risk again with your $50,000, so thats that", "title": "" }, { "docid": "3ebe67949afdb8947a5ca342f55c2393", "text": "Before anything else, pay down any debt at higher interest rates. Best guaranteed return on investment you can get. What do you plan to use the money for, when, with how much advance planning? How risk-tolerant are you, and how patient are you ? Would you see a dip in an asset's value as lost money or a buying opportunity? A good financial advisor -- and I mean one who is ONLY an advisor and not trying to sell you anything but their services -- can take answers of that sort and recommend a mix of investment types that will suit your needs. Knowing that balance, you can the pick specific investments to suit. (I remain a fan of low-fee index funds as a painless way to get good diversification, with some small percentage for more active trading if you really want to invest the effort and are convinced you can beat the odds.) Other answers here on the personal finance discussion go into this in detail, so I don't think it's worth repeating here unless there's something really unusual about your situation.", "title": "" } ]	[ { "docid": "2bf9265a495665f7f97313f95b46b42f", "text": "\"Investing the money is only wise if the return on the investment outpaces your highest interest debt. Otherwise, you are making less than is going out. Given that you are in your late 50's, High risk investments are probably a poor idea. If you're truly worried about having enough to retire, I would take 15% of that money and put it toward your emergency fund. Then the rest I would use to pay down your highest interest credit line. You are short on funds right now so I would avoid using the HELOC. Your HELOC is available now, but if times get tight, the bank can decide to freeze your credit line. Instead, if you need a line of credit, look into a personal line of credit. The interest rate wont be as good as your HELOC but it's more stable. If you haven't already, I would pickup \"\"The Richest Man in Babylon\"\". Read the lessons in it and see if you can use the tools it provides to tighten your situation up. The lessons mostly apply to people in the first half of life, but they are fundamentals regardless. Good Luck! (Information on the HELOC was stolen from Jasper's answer here... HELOC with no first mortgage (for liquidity--no plans to spend it) )\"", "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": "ccdfb95bba9a39dd154f1bfddbefe85b", "text": "How much money do you have in your money market fund and what in your mind is the purpose of this money? If it is your six-months-of-living-expenses emergency fund, then you might want to consider bank CDs in addition to bond funds as an alternative to your money-market fund investment. Most (though not necessarily all, so be sure to check) bank CDs can be cashed in at any time with a penalty of three months of interest, and so unless you anticipate being laid off very soon, you might get a slightly better rate of interest, FDIC insurance (which mutual funds do not have), and with any luck you may never have to break a CD and lose the interest. Building a ladder of CDs with one maturing each month might be another way to reduce the risk of loss. On the other hand, bond mutual funds are a risky bet now because your investment will lose value if interest rate go up, and as JohnFx points out, interest rates have nowhere to go but up. Finally, the amount of the investment is something that you might want to consider before making changes. If you have $50K put away as your six-month fund, you are talking of $500 versus $350 per annum in changing to a riskier investment with a 1% yield from a safer investment with a 0.7% yield. Whether bragging rights at neighborhood parties are worth the trouble is something for you to decide.", "title": "" }, { "docid": "27a5a5296e910059e806233cc78595fd", "text": "We need more info to give a better answer, but in short: if you assume you will make $0 in other employment income next year, there is a HUGE tax benefit in deferring 50k until next year. Total tax savings would probably be something like $15k [rough estimate]. If you took the RRSP deduction this year, you would save something like 20k this year, but then you would be taxed on it next year if you withdraw it, probably paying another 5k the year after. ie: you would get about the same net tax savings in both years, if you contributed to your RRSP and withdrew next year, vs deferring it to next year. On a non-tax basis, you would benefit by having the cash today, so you could earn investment income on your RRSP, but you would want to go low-risk as you need the money next year, so the most you could earn would be something like 1.5k @ 3%. The real benefit to the RRSP contribution is if you defer your withdrawal into your retirement, because you can further defer your taxes into the future, earning investment income in the meantime. But if you need to withdraw next year, you won't get that opportunity.", "title": "" }, { "docid": "9a98fba0c27c7f053d2da01a8f1a8a7a", "text": "I would put this money to a high-interest savings account. It will not earn you too much, but it will save it from inflation.", "title": "" }, { "docid": "d4204f26bc88bab658ce2be226976e79", "text": "\"Since I, personally, agree with the investment thesis of Peter Schiff, I would take that sum and put it with him in a managed account, and leave it there. I'm not sure how to find a firm that you like the investment strategy of. I think that it's too complicated to do as a side thing. Someone needs to be spending a lot of time researching various instruments and figuring out what is undervalued or what is exposed to changing market trends or whatever. I basically just want to give my money to someone and say \"\"I agree with your investment philosophy, let me pay you to manage my money, too.\"\" No one knows who is right, of course. I think Schiff is right, so that's where I would put the amount of money you're talking about. If you disagree with his investment philosophy, this doesn't really make any sense to do. For that amount of money, though, I think firms would be willing to sit down with you and sell you their services. You could ask them how they would diversify this money given the goals that you have for it, and pick one that you agree with the most.\"", "title": "" }, { "docid": "a86eca50032bb7a18ff6eb8b2a5941a0", "text": "What's your basis? If you have just made a 50% gain, maybe you should cash out a portion and hold the rest. Don't be greedy, but don't pass up an opportunity either.", "title": "" }, { "docid": "40965c0ba17523dcab20b0d0a7b79a96", "text": "\"(Since you used the dollar sign without any qualification, I assume you're in the United States and talking about US dollars.) You have a few options here. I won't make a specific recommendation, but will present some options and hopefully useful information. Here's the short story: To buy individual stocks, you need to go through a broker. These brokers charge a fee for every transaction, usually in the neighborhood of $7. Since you probably won't want to just buy and hold a single stock for 15 years, the fees are probably unreasonable for you. If you want the educational experience of picking stocks and managing a portfolio, I suggest not using real money. Most mutual funds have minimum investments on the order of a few thousand dollars. If you shop around, there are mutual funds that may work for you. In general, look for a fund that: An example of a fund that meets these requirements is SWPPX from Charles Schwabb, which tracks the S&P 500. Buy the product directly from the mutual fund company: if you go through a broker or financial manager they'll try to rip you off. The main advantage of such a mutual fund is that it will probably make your daughter significantly more money over the next 15 years than the safer options. The tradeoff is that you have to be prepared to accept the volatility of the stock market and the possibility that your daughter might lose money. Your daughter can buy savings bonds through the US Treasury's TreasuryDirect website. There are two relevant varieties: You and your daughter seem to be the intended customers of these products: they are available in low denominations and they guarantee a rate for up to 30 years. The Series I bonds are the only product I know of that's guaranteed to keep pace with inflation until redeemed at an unknown time many years in the future. It is probably not a big concern for your daughter in these amounts, but the interest on these bonds is exempt from state taxes in all cases, and is exempt from Federal taxes if you use them for education expenses. The main weakness of these bonds is probably that they're too safe. You can get better returns by taking some risk, and some risk is probably acceptable in your situation. Savings accounts, including so-called \"\"money market accounts\"\" from banks are a possibility. They are very convenient, but you might have to shop around for one that: I don't have any particular insight into whether these are likely to outperform or be outperformed by treasury bonds. Remember, however, that the interest rates are not guaranteed over the long run, and that money lost to inflation is significant over 15 years. Certificates of deposit are what a bank wants you to do in your situation: you hand your money to the bank, and they guarantee a rate for some number of months or years. You pay a penalty if you want the money sooner. The longest terms I've typically seen are 5 years, but there may be longer terms available if you shop around. You can probably get better rates on CDs than you can through a savings account. The rates are not guaranteed in the long run, since the terms won't last 15 years and you'll have to get new CDs as your old ones mature. Again, I don't have any particular insight on whether these are likely to keep up with inflation or how performance will compare to treasury bonds. Watch out for the same things that affect savings accounts, in particular fees and reduced rates for balances of your size.\"", "title": "" }, { "docid": "3bb6162ba093499fdf62d7ca8942e860", "text": "Where you can put the money really depends on your risk tolerance. You could take $50k and put it into a good share class municipal and government bond fund that would likely be tax exempt. In a few years span I don't think you're likely to lose much in a tax-managed bond fund but it's certainly possible! Here is a link for Vanguard tax-exempt bond funds by state of residency: https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bond&taxeff=xmpt These funds have returns well exceeding CD's or standard savings accounts. Risk of loss is real, but returns are possible.", "title": "" }, { "docid": "bc8ad4c00944d348b3b0d66ea8f9e6fe", "text": "The $50k is subject to the appropriate income taxes, which may include FICA taxes including the employer share if you are self employed. The after tax money can then be invested with the amount invested being the cost basis (I.e., if you invest $40k you will have a cost basis of $40k). In future years you will have taxes due if any of those investments pay dividends (or capital gain distributions). Once you sell you will have a capital gain or loss that you will pay taxes on (or take a deduction if a loss). Now you can improve this picture if you are able to put some of your money into a retirement account (either a tax deductible or a ROTH). With retirement accounts you do not pay tax on the capital gains or dividends. If you use a tax deferred account your tax is higher but that is because you were also investing Uncle Sam's portion of your pay check.", "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": "9603a0a9d4512d6fff36ef5f330d02a4", "text": "It seems very risky have all of your net worth in this one home. If I were to buy the house, I'm not sure I would put that much down, consider 20% and keep cash on hand, in retirement assets, etc. I would look at how much a mortgage, plus interest, taxes, insurance, etc. would cost with 50% down and with 20% down and see how that impacts your cash flow. Renting may make more sense, it's hard to tell without more specifics (NYTimes Rent/Buy calculator is a nice tool), but regardless, I would not want to have so much net worth tied into one asset and so would opt for less money down if I were to buy. Focus on rebuilding some retirement assets.", "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": "2505d9200f286dc989cf64ef4e3ce9f0", "text": "May I suggest putting it in a Roth IRA ($5,500 per year. Right now you can contribute to both 2015 and 2016 so that's $11K.)? Based on your description it sounds like your tax rate is very low, so it is awesome to put it away now and avoid taxes later on any gains you make on it. You can use Roth IRA money to pay for college, a home, or retirement. Within your Roth IRA, any of the investment options mentioned here will work. For example, CD's or money market accounts if you just want it to grow in a pretty much savings-account-like manner. You could also buy diversified mutual funds or have some fun buying individual stocks with some of it. I'm sorry to say that in the current market conditions you are not going to find a completely safe, cash-like investment or account that makes your money grow substantially. To do that you have to bear risk by buying risky stuff like stocks.", "title": "" }, { "docid": "a53943674802a7f24468cb4093badfa3", "text": "\"At that sum, it essentially doesn't matter what you do, unless you just want to outright gamble the money. Let's look at some options: \"\"High\"\" interest guaranteed savings. A five year CD returns a sad 2% right now. That means if you invest all $1,000 into a CD, by 2016 you will have earned $105.08 in interest. Think about that: About a hundred bucks over the next five years. Of course, with 3% inflation, that $105.08 will be worth about $90.57. In fact, the total amount will be worth $953.25. Your \"\"doing something with your money\"\" did nothing. Stocks can return significantly more interest, but there is no guarantee. Even if you made 20% year on year, you would only make maybe $1,500 in returns or so in the next 5 years, and 20% every year is like Warren Buffet territory--totally unrealistic. That's also not taking into account inflation. And neither of these is taking into account taxes! However, if you go to a casino and gamble the $1,000, it is possible you could turn it into significantly more. It's very much unlikely, and I do not advise it at all, but it's possible. The point is, you need money to make money, and, in some sense, $1,000 is not money at all. I recommend you work on your skills, knowledge, and preparation for making money in the future, and by 25 or so you can really be cooking with gas. Don't waste your efforts trying to find a brilliant way to make a few hundred bucks over the next half decade. Save the money and find ways to try to double it by earning money on small projects. Then challenge yourself to double it again, and keep honing your skills.\"", "title": "" } ]	fiqa
cb5a9c98a5bc1f58c7956446369d6bd0	Credit rating in Germany	[ { "docid": "b4cef42ee675d667be6dc81c75455b27", "text": "The SCHUFA in Germany works a bit different from the FICO score in the US. My background: I am a German currently living in the US. The information others want to see from the SCHUFA are a bit different. If you want to example rent a house or an apartment, the landlord often wants to see a SCHUFA statement which only shows that there are no negative entries. This statement you can get easily from online and they don't mention your credit score there. If you apply for a real credit or want to lease a car, they want to look deeper in your SCHUFA profile. However, very important is: They need signed permission to do this. Every participating company can submit entries to your profile where the score is calculated from. For example mobile phone plans, leasing a car, applying for a loan. Some lenders decide on the score itself, some on the overall profile and some also take your income into account. Since there is no hire & fire in Germany you are often asked to show your last 3 paychecks. This, in combination with your SCHUFA score is used for determination if you are eligible for a loan or not. However, they check through every entry which is made there and as long as it is reasonable and fits to your income (car for 800 EUR/month with a 1000 EUR salary does not!) you should not have a problem establishing a good score. The, in my eyes, unfair part about Schufa is that they take your zip code and your neighborhood into account when calculating their score. Also moving often affects the score negatively. To finally answer your question: Credit history is also built by mobile phone plans etc. in Germany. As long as you pay everything on time you should be fine. A bad score can definitely hurt you, but it is not as important to have a score as it is in the US because the banks also determine your creditworthiness based on your monthly income and your spending behavior.", "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": "132e687702aa3c1ab0f5f97c9facfc6f", "text": "If you are interested in this stuff, S&P produce a sovereign rating methodolgy, in which they will tell you exactly what factors they look at. Once you read this, you can obtain their latest rating report on India and Spain to understand how they applied said methodology in each case. (Not sure if this is free)", "title": "" }, { "docid": "f0b07b64c082a6a9a6aad727d821d2a4", "text": "For instance and to give a comparison to the US - in Austria, almost everybody gets a credit card (without a credit history (e.g. a young person) / with a bad credit history & with a good credit history). The credit history is in the USA much more important than in Austria. In future, the way to assess a credit history will change due to analysis of social networks for instance. This can be considered in addition to traditional scoring procedures. Is your credit history/score like a criminal record? Nope. I mean is it always with you? Not really cause a criminal record will be retained on a central storage (to state it abstract) and a credit history can be calculated by private companies. Also, are there other ways to get credit cards besides with a bank? That depends on the country. In Austria, yes.", "title": "" }, { "docid": "a2a32154f490a055c0eca5d48cf5c266", "text": "In six months, there is little you can do that will significantly affect your future credit rating other than trying to avoid paying for something by leaving the country. As we keep telling people, the best things you can do for your credit rating are to have a good income and Don't Be Stupid about misusing credit.", "title": "" }, { "docid": "3a3d14531b68486b10dd13d0e195dd6c", "text": "Surely there's more to the picture than this. Breaking the borrowing limit by going to 3.5% multiple times is surely no where near as bad as going to 18% once. On top of this there was a fundamental difference in the use of capital. Borrowing to invest (as Germany did) has been ridiculously beneficial for them.", "title": "" }, { "docid": "20699ddd02b61af4bdf4d3704421330d", "text": "You borrow on the international makets. [Moody's predicts Scotland would get an 'A' credit rating](http://www.bbc.co.uk/news/uk-scotland-scotland-politics-27247870) [Standard & Poors - Independent Scotland could be AAA rated](http://www.businessforscotland.co.uk/independent-scotland-could-be-aaa-rated-standard-poors) [Credit Suisse report independent Scotland would be ranked four places higher than the rUK.](http://www.newsnetscotland.com/index.php/scottish-news/9637-scotland-ahead-of-ruk-even-without-oil-says-credit-suisse-report) [An independent Scotland would be a wealthy and financially viable country like New Zealand, but could suffer initial growing pains, according to credit ratings agency Standard & Poor's.](http://www.theguardian.com/politics/2014/feb/27/independent-scottish-economy-viable-slow-first-standard-poors)", "title": "" }, { "docid": "7a3b5dba9f57e8cd65d2b20b9781823e", "text": "\"Frequently selling and buying properties is generally not advisable in Germany due to the high cost for property purchase tax (\"\"Grunderwerbssteuer\"\") and land registration fees (\"\"Grundbucheintrag\"\"). You can generally assume that ever time you trade homes, you pay about 10% extra. So it is likely a good idea to keep your property and rent it out while you don't need it so you can use the rent to pay for your new room. That's especially true if you expect the property to increase in value. Also, due to the low interest rate right now, real estate is practically the only good capital investment. A 85k asset which makes you 4.8k each year is a return of investment of 5.6%. Any financial asset promising you that kind of dividend at the moment is likely equivalent to gambling. yes, I ignored maintenance costs, but it's still a really good deal. If you want to rent out your flat as stress-free as possible, give it to a property management company (\"\"Hausverwalter\"\"). In exchange for a percentage of the monthly rent they will take care of all the small stuff (like hiring handymen to fix broken toilets). You might still have to pay for really expensive investments, though (like replacing a leaking roof). But when something like that happens, you should have no issue to finance it with a loan because you have a real estate as a security. However, keep in mind that the German tenancy law might make it difficult (but not impossible) to get rid of the tenant in case you want to move back into the apartment. Google \"\"Mietrecht Eigenbedarf\"\" for more details. Should you decide after your study that you don't want to move back, you can always sell the flat with the tenant. But rented properties usually get far lower prices on the real estate market than empty ones. Regarding covering your cost of living besides rent during your studies: If you are eligible for BAföG (state-sponsored student loan), you should take it, because it's an offer simply too good to refuse. It's literally free money. But unfortunately you are not, because you own too much real estate wealth you are not living in. But you should ask your bank for a loan backed by said property. That way you will likely pay far less interest than with a regular private student loan which isn't backed by anything except the hope for a relevant degree.\"", "title": "" }, { "docid": "681f7184bde61e9ceafddbd27414387a", "text": "You really can't. Credit rating is determined by financial history, and until your kids are old enough to legally sign a contract they have essentially no financial history. Interesting out-of-the-box thought, but not workable.", "title": "" }, { "docid": "6d807445b9349bc0ed11734145071c16", "text": "There are some out there making the argument that negative yields on the German Schatz (2-year note) are the result of speculators betting on a break-up of the euro area and its common currency. Specifically that assets held in euros, i.e. German bonds, would be re-denominated into a new Deutschmark that would appreciate in value against other European currencies.", "title": "" }, { "docid": "e26ea1f2b9b22dc57da81c581cb160f5", "text": "In Germany you can register a Einzelunternehmen and receive payments into your personal bank account with a German bank. Apple will certainly be able to transfer to accounts in Germany as payments go via the European SEPA standard. Tax wise if you are living in Germany you will need to pay tax in Germany, so this is really the easiest way of doing it.", "title": "" }, { "docid": "1a0e51701482c336d49b0c70ff30b860", "text": "Credit agency sovereign ratings take into account the amount of external support the government is likely to get during a time of stress. The whole EU just came to Spain's rescue, but who would come to India's rescue so as to be sufficient to prevent default? See, the fact that Spain was able to get a bailout is most of the reason Spain's credit rating is higher than India's.", "title": "" }, { "docid": "6d7bab4567aa0a0f416f516020c77da9", "text": "\"That's definitely a good point; thanks for noting that. Leverage was definitely an issue. Re: the ratings agencies, I just wanted to clarify that I was talking about something a bit different than the problem of \"\"ratings shopping\"\" (I assume this is what you meant what you mentioned the ratings agencies \"\"capitulating\"\"). \"\"Ratings shopping\"\" is essentially the tendency for a \"\"race to the bottom\"\" in ratings when banks pay for ratings. That has always been an issue for the ratings agencies since the 1970s (I think?) when they started having the rated entities pay for their ratings. What I was talking about is more unique to the structured products industry in the mid-2000s -- i.e. how the ratings agencies gave banks an opportunity for essentially risk-less profit by merely repackaging MBSs into CDOs. So banks would buy up MBSs, repackage them into CDOs, sell shares of the CDOs to investors, and then hedge all of the residual risk away by writing a CDS contract with a monoline insurer like AIG. This has more to do with the relationship between ratings for different products, and not the absolute \"\"level\"\" of the ratings for any given product. Sorry if that sounds nit-picky, but I think it's an extremely important detail that is generally lost upon -- as you pointed out -- economists who are pushing the \"\"ratings shopping\"\" theory. I would guess this is because moral hazard is a story they are already familiar with.\"", "title": "" }, { "docid": "631d4d992cf098959782b7118bfdbffb", "text": "Say there are 5 people took loan of $100000 each. Those 5 people work in different jobs and have different capacity to payoff loan. Someone earning $40000 a year has higher risk to default on their payment then someone making $250000 a year. As Bank wants to sell this CDO to investor but how would investor know what the risk factor for this CDO is. This is where rating agency comes in picture. They apparently look at the underlying asset and assign rating to this CDO say AAA, B, AA etc which give investor idea of underlying risk. Problem here is rating agency gets paid by Bank to rate their CDO. So if a rating agency starts rating their CDO to higher risk Bank will go to next agency round the corner to get better rating and agency will lose commission. You can see the problem here. Now if people start struggling to pay loan, bank will not get money and it cannot pay CDO holders. If house that was worth $100000 when CDO was created is devalued to say $50000 today the underlying asset is not worth as much when CDO was sold. That is what happened when market crashed in 2008 and GFC hit.", "title": "" }, { "docid": "d6d7f1a65634009ecfd05aca99690e15", "text": "\"Credit Scores / Rates are based on sometimes simple and sometimes quite complex Statistical Models (Generalised Linear Models, Neural Networks, Regression and Classification Trees, Mixture Models, etc).This depends on whether it is something more general like FICO or what large banks develop in-house. In any case, there are many legislation-dependent factors (Qualitative such as education, occupation security, sex, etc, payment history; or Quantitative such as age, liquidity and leverage ratios, etc). Now, most model that are used today are propriety and closely held trade secrets. The most important reason for this is actually because of the databases that feed the models. More better quality data is what makes the real difference ... although at the cutting-edge, the mathematicians/statisticians/computer scientists that design the algorithms will make a huge difference. Now, back to the main thing: The Credit Score/Rate is meant to be used only as an indicator for representing the Probability of Default (\"\"How likely you are to default on your obligation towards me?\"\" is what it means and that is largely based upon \"\"Has company/he/she honoured his financial obligations?\"\") of a certain consumer. In more sophisticated models, they may also use your industry sector or occupational and financial security to predict the future behaviour. However, this \"\"Credit Score\"\" has meaning only in relation to a \"\"Credit Limit\"\" (\"\"Can you pay back my $X?\"\"). The credit limit on the other hand is defined by your income level, debt/asset, etc). As a credit risk analyst, whether we are dealing with large corporate loans, mortgages, personal loans, etc), the principles are the same: One thing to consider is that factors considered in determining a credit score usually do not have a simple linear relationship. Consumer Profile types such as utilisation rate are a lot more about EFFECT than CAUSE: The most important thing is to honour your obligations, whether you pay before or after you spend makes little difference, so long as you pay in full and prior to maturity, your rate/score will improve with time. Financial Institutions have many ways to make money of everyone. Some, such as interest rates and fees are directly charged to you and some are charged to your goods-and-services providers. That has no bearing on your score. Sometimes it even makes sense to take on customers with rock-bottom ratings, lend them lots of money, and charge them to dirt. As you may well know, the recent financial crisis - with ongoing after-shocks and tremors - was the result of such practices.\"", "title": "" }, { "docid": "b346ac30ad1dc6e6710e573670fca002", "text": "Gundlach shared a chart that showed how investors in European “junk” bonds are willing to accept the same no-default return as they are for U.S. Treasury bonds. In other words, the yield on European “junk” bonds is about the same—between 2 percent and 3 percent—as the yield on U.S. Treasuries, even though the risk profile of the two could not be more different. Sounds like a strong indicator to me. How might this play out in the US?", "title": "" }, { "docid": "791a284b641dc2d848f1556503700ffe", "text": "I don't know of any books, but there are a lot of good white papers on the subject if you take the time to look for them. For example, Moody's has a white paper on their LGD model (LossCalc) that explains their calibration methodology. Searching for academic papers on the subject is really the only way to go, because credit risk is a field that really is just being explored. Really only since 2006 have banks started to actively try to use a risk rating model that incorporates PD and LGD. This is because of data insufficiency - banks just didn't keep active and centralized loan level data that is required to calibrate the models. tl;dr: Use the internet - it is your friend.", "title": "" } ]	fiqa
71f6c5c727ae0b53f8c387a34e55d623	Is dividend included in EPS	[ { "docid": "ffcfbbbf77acfc7817be2bc3cc848775", "text": "\"EPS is often earnings/diluted shares. That is counting shares as if all convertible securities (employee stock options for example) were converted. Looking at page 3 of Q4 2015 Reissued Earnings Press Release we find both basic ($1.13) and diluted EPS ($1.11). Dividends are not paid on diluted shares, but only actual shares. If we pull put this chart @ Yahoo finance, and hovering our mouse over the blue diamond with a \"\"D\"\", we find that Pfizer paid dividends of $0.28, $0.28, $0.28, $0.30 in 2015. Or $1.14 per share. Very close to the $1.13, non-diluted EPS. A wrinkle is that one can think of the dividend payment as being from last quarter, so the first one in 2015 is from 2014. Leaving us with $0.28, $0.28, $0.30, and unknown. Returning to page three of Q4 2015 Reissued Earnings Press Release, Pfizer last $0.03 per share. So they paid more in dividends that quarter than they made. And from the other view, the $0.30 cents they paid came from the prior quarter, then if they pay Q1 2016 from Q4 2015, then they are paying more in that view also.\"", "title": "" }, { "docid": "420682ca10f90e896ec85db9f666cf3a", "text": "Not quite. The EPS is noted as ttm, which means trailing twelve months --- so the earnings are taken from known values over the previous year. The number you quote as the dividend is actually the Forward Annual Dividend Rate, which is an estimate of the future year's dividends. This means that PFE is paying out more in the coming year (per share) than it made in the previous year (per share).", "title": "" }, { "docid": "c8a432fd7f79bf4b261ed5115cd9b48f", "text": "No, dividends are not included in earnings. Companies with no earnings sometimes choose to pay dividends. Paying the dividend does not decrease earnings. It does of course decrease cash and shows up on the balance sheet. Many companies choose to keep the dividend at a fixed rate even while the business goes through cycles of increased and decreased earnings.", "title": "" } ]	[ { "docid": "82299a4415bac48fb7fee972fa61914a", "text": "Well, if the short seller has to pay the dividend out of their pocket, what happens to the dividend the company paid out ?? Sounds like there are 2 divdends floating around, the short's, and the company's, but only 1 share of stock.", "title": "" }, { "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": "6c9b901dcb208842722dfa2933ce510e", "text": "Stocks aren't just paper -- they're ownership of a company. Getting cash from a stock that doesn't pay dividends basically means reducing your stake in the company. If the stock pays dividends, on the other hand, you still have the same shares, but now you have cash too. You can choose to buy more of the company...or, more importantly, to use it elsewhere if that's what you want to do.", "title": "" }, { "docid": "4731dfb1db064ae942c8e2fd7c36e757", "text": "\"Dividends are declared by the board of directors of a corporation on date A, to stock holders of record on date B (a later date). These stockholders then receive the declared dividend on date C, the so-called payment date. All of these dates are announced on the first (declaration) date. If there is no announcement, no dividend will be paid. The stock typically goes down in price by approximately the amount of the dividend on the date it \"\"goes ex,\"\" but then moves in price to reflect other developments, including the possibility of another declaration/payment, three months hence. Dividends are important to some investors, especially those who live on the income. They are less important to investors who are out for capital gains (and who may prefer that the company reinvest its money to seek such gains instead of paying dividends). In actual fact, dividends are one component of \"\"total\"\" or overall return. The other component is capital gains, and the sum of the two represents your return.\"", "title": "" }, { "docid": "2f950e48b5b647f608e84a5e1e387e60", "text": "Yes, as long as you own the shares before the ex-dividend date you will get the dividends. Depending on your instructions to your broker, you can receive cash dividends or you can have the dividends reinvested in more shares of the company. There are specific Dividend ReInvestment Plans (or DRIPs) if you are after stock growth rather than income from dividend payments.", "title": "" }, { "docid": "43a8a0bd9f7e3a02c41380568ddbd89c", "text": "\"Preferred dividends and common dividends are completely separate transactions. There's not a single \"\"dividend\"\" payment that is split between preferred and common shares. Dividends on preferred shares are generally MUCH higher than common dividends, and are generally required by the terms of the preferred shares, again unlike common dividends, which are discretionary.\"", "title": "" }, { "docid": "13264e24e496419687e087bd348bef42", "text": "I believe this depends on the broker's policies. For example, here is Vanguard's policy (from https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokeragedividendprogram): Does selling shares affect a distribution? If you sell the entire position two days or more before the dividend-payable date, your distribution will be paid in cash. If, however, you sell an entire position within the two day time frame of the security's payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash. If you want to guarantee you receive no fractional shares, I'd call your broker and ask whether selling stock ABC on a particular date will result in the dividend being paid in shares.", "title": "" }, { "docid": "71e70c6c3d426e2f03e616d2b9f7092d", "text": "\"Let me provide a general answer, that might be helpful to others, without addressing those specific stocks. Dividends are simply corporate payouts made to the shareholders of the company. A company often decides to pay dividends because they have excess cash on hand and choose to return it to shareholders by quarterly payouts instead of stock buy backs or using the money to invest in new projects. I'm not exactly sure what you mean by \"\"dividend yield traps.\"\" If a company has declared an dividend for the upcoming quarter they will almost always pay. There are exceptions, like what happened with BP, but these exceptions are rare. Just because a company promises to pay a dividend in the approaching quarter does not mean that it will continue to pay a dividend in the future. If the company continues to pay a dividend in the future, it may be at a (significantly) different amount. Some companies are structured where nearly all of there corporate profits flow through to shareholders via dividends. These companies may have \"\"unusually\"\" high dividends, but this is simply a result of the corporate structure. Let me provide a quick example: Certain ETFs that track bonds pay a dividend as a way to pass through interest payments from the underlying bonds back to the shareholder of the ETF. There is no company that will continue to pay their dividend at the present rate with 100% certainty. Even large companies like General Electric slashed its dividend during the most recent financial crisis. So, to evaluate whether a company will keep paying a dividend you should look at the following: Update: In regards to one the first stock you mentioned, this sentence from the companies of Yahoo! finance explains the \"\"unusually\"\" dividend: The company has elected to be treated as a REIT for federal income tax purposes and would not be subject to income tax, if it distributes at least 90% of its REIT taxable income to its share holders.\"", "title": "" }, { "docid": "c225f0d51cc196dd2a9a93844144f5cb", "text": "All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset.", "title": "" }, { "docid": "8b9bfb10de69c54f7c139930dad20943", "text": ".INX (the S&P 500 index itself) does not include reinvested dividens. You can figure total return by going to Yahoo finance, historical data. Choose the start year, and end year. You should find that data for SPY (going back to 1993) will show an adjusted close, and takes dividends into account. This isn't perfect as SPY has a .09% expense ratio, but it's better than just the S&P index. One of the more popular Dow ETF is DIA, this will let you similarly track the Dow while accounting for dividends.", "title": "" }, { "docid": "f62a9c3ee1993096a454a0ac9195c842", "text": "\"Different stocks balance dividend versus growth differently. Some have relatively flat value but pay a strong dividend -- utility stocks used to be examples of that model, and bonds are in some sense an extreme version of this. Some, especially startups, pay virtually no dividends and aim for growth in the value of the stock. And you can probably find a stock that hits any point between these. This is the \"\"growth versus income\"\" spectrum you may have heard mentioned. In the past, investors took more of their return on investment as dividends -- conceptually, a share of the company's net profits for the year reflecting the share's status as partial ownership. If you wanted to do so, you could use the dividend to purchase more shares (via a dividend reinvestment plan or not), but that was up to you. These days, with growth having been strongly hyped, many companies have shifted much more to the growth model and dividends are often relatively wimpy. Essentially, this assumes that everyone wants the money reinvested and will take their profit by having that increase the value of their shares. Of course that's partly because some percentage of stockholders have been demanding growth at all costs, not always realistically. To address your specific case: No, you probably aren't buying Microsoft because you like its dividend rate; you're buying it in the hope it continues to grow in stock value. But the dividend is a bit of additional return on your investment. And with other companies the tradeoff will be different. That's one of the things, along with how much you believe in the company, that would affect your decision when buying shares in specific companies. (Personally I mostly ignore the whole issue, since I'm in index funds rather than individual stocks. Picking the fund sets my overall preference in terms of growth versus income; after that it's their problem to maintain that balance.)\"", "title": "" }, { "docid": "a516485ed7c3d59a621a0758d557a508", "text": "I believe that tax will be withheld (at 30%?) on dividends paid to non-residents. You can claim it back if your country has a tax treaty with the USA, but you will need to file. You probably also need to file a W-series withholding form (eg a W9-BEN). Interesting question. I would like to hear a more definitive answer.", "title": "" }, { "docid": "c82725f2c339667dd6c65fc2bae50c3e", "text": "I'm trying to think it out, but I feel like it would be hard to justify using potential profit sources as material for dividends. Especially your example of wine. Wouldn't it be counterintuitive to take a hit to sales, while still having the cost of production?", "title": "" }, { "docid": "fdb6ac862a66bbb445259d15855dd771", "text": "Usually I've seen people treat the dividend like a separate cash flow, which is discounted if the company doesn't have a well-established dividend history. I've never really seen dividends rolled into a total return chart (except in the context of an article), probably because dividend reinvestment is a nightmare of record-keeping in a taxable account, and most folks don't do it. One of my brokers (TD Ameritrade) does allow you to plot dividend yield historically on their charts.", "title": "" }, { "docid": "f5be35d73911a8e4bb1ee71beffac30b", "text": "I'm not a seller, but I see this as good for those who are selling bad items, but also a big opportunity for scammers. I wonder what is the limits on it, I hope they have an abuse system in place.", "title": "" } ]	fiqa
2e48fbceb06f3e807d9ec7233017e27c	How much more than my mortgage should I charge for rent?	[ { "docid": "e5f4ab2a01fac462e9288e0ff4883245", "text": "I am sorry to say, you are asking the wrong question. If I own a rental that I bought with cash, I have zero mortgage. The guy I sell it to uses a hard money lender (charging a high rate) and finances 100%. All of this means nothing to the prospective tenant. In general, one would look at the rent to buy ratio in the area, and decide whether homes are selling for a price that makes it profitable to buy and then rent out. In your situation, I understand you are looking to decide on a rent based on your costs. That ship has sailed. You own already. You need to look in the area and find out what your house will rent for. And that number will tell you whether you can afford to treat it as a rental or would be better off selling. Keep in mind - you don't list a country, but if you are in US, part of a rental property is that you 'must' depreciate it each year. This is a tax thing. You reduce your cost basis each year and that amount is a loss against income from the rental or might be used against your ordinary income. But, when you sell, your basis is lower by this amount and you will be taxed on the difference from your basis to the sale price. Edit: After reading OP's updated question, let me answer this way. There are experts who suggest that a rental property should have a high enough rent so that 50% of rent covers expenses. This doesn't include the mortgage. e.g. $1500 rent, $750 goes to taxes, insurance, maintenance, repairs, etc. the remaining $750 can be applied to the mortgage, and what remains is cash profit. No one can give you more than a vague idea of what to look for, because you haven't shared the numbers. What are your taxes? Insurance? Annual costs for landscaping/snow plowing? Then take every item that has a limited life, and divide the cost by its lifetime. e.g. $12,000 roof over 20 years is $600. Do this for painting, and every appliance. Then allow a 10% vacancy rate. If you cover all of this and the mortgage, it may be worth keeping. Since you have zero equity, time is on your side, the price may rise, and hopefully, the monthly payments chip away at the loan.", "title": "" }, { "docid": "2cccca030cc96b7911b60c0c88ca9027", "text": "The rent will be determined by: the rent being charged on similar houses near you. Your mortgage and other costs (very unfortunately!) have no bearing, at all, on the price you will get.", "title": "" }, { "docid": "3334227abf9c8af22039391d71c17d55", "text": "\"As others have pointed out, you can't just pick a favorable number and rent for that amount. If you want to rent out your house, you must rent it for a value that a renter would agree to. For example there is a house on my street that has been looking for renters for 3 years. They want $2,500 a month. This covers their mortgage, and a little bit more for taxes and repairs. It has never been rented once. Other homes in my neighborhood rent for around $1,000 a month. There is no value to a renter in renting a house that is $1,500 more then a similar house 2 doors down. Now what you can look at is cost mitigation. So I am using data from my area. Houses in my part of Florida must have A/C running in the wet months to keep the moisture from ruining the house. This can easily be $100 a month (usually more). The city requires you to have water service, even when not occupied, though the cost is very small. Same with waste, which is a flat fee: $20 a month. Yard watering is a must during the dry months (if you want to keep grass). Let's say that comes out to $50 a month, year round. Pest control is a must, especially if your house has wooden parts (like floors or a roof). Even modest pest control is $25 a month. Property taxes around $240 a month. Let's say your mortgage is around $1,000 a month. That means to sit empty your house would cost $1,435. Now if you were to rent the house, a lot of those costs could \"\"go away\"\" by becoming the tenants' responsibility. Your cost of the house sitting full would be $1,240. Let's pad that with 10% for repairs and go with $1,364. Now let's assume you can rent for $1,000 a month. Keep in mind all these rates are about right for my area but will change based on size and amenities. Your choices are let the house sit empty for $1,435 a month or fill it and only \"\"lose\"\" $240 a month. Keep in mind that in both cases you will be gaining equity. So what a lot of people do around here is rent out their houses and pay the $240 as an investment. For every $240 they pay, they get $1,000 in equity (well, interest and fees aside, but you get the point). It's not a money maker for them right now, but as they get older two things happen. That $240 a month \"\"payment\"\" pays off their mortgage, so they end up owning the house outright. Then that $240 a month payment turns to extra income. And at some point, their rental can be sold for (let's guess) $400,000. SO they paid $86,400 and got back $400,000. All the while they are building equity in their rental and in the home they are living in. The important take away from this, is that it's not a source of income for the landlord as much as it is an investment. You will likely not be able to rent a house for more then a mortgage + costs + taxes, but it does make a good investment vehicle.\"", "title": "" }, { "docid": "6b95bf9ec54705eb291b0ccd33365836", "text": "\"While JoeTaxpayer gave a very insightful answer, and clearly the best answer, let me break it down really simple for you. Talk with a good to great property management company. Given that you will be out of state, you will need one anyway. A good one is worth their cost, a great one even better. They will tell you what the \"\"market will bear\"\" on renting your place and the expected costs. From there you can make an intelligent decision. Have you had any experience in running rental properties? I am going to assume not, and as such you should have professionals as part of your team. More than likely you will have to put money in to sustain this property as a rental. It is just how the numbers tend to work out.\"", "title": "" }, { "docid": "eae5196212863adcafc2e7e4646f6cf8", "text": "first, let me reiterate what everyone else is saying about rental rates having nothing to do with your expenses. you should charge market rates. slightly higher if you want better tenants and slightly lower if you want to avoid prolonged vacancy. you can determine market rates by finding similar properties in your area and seeing what they are asking for rent. you will need to adjust for location, square footage, number of bathrooms, etc. now that that is out of the way, here is a quick checklist of expenses that you will need to calculate and/or estimate for your specific property in order to decide if you should rent or sell: if you add up all of the above expenses and it's more than the market rates for rent, you should sell. if the above expenses are below the market rates, then you need to consider if the profit margin is enough to justify the hassle and the risk.", "title": "" }, { "docid": "94c395ca34857ffc3bbd9d17f8bc8c7d", "text": "I think you are trying to figure out what will be a break-even rental rate for you, so that then you can decide whether renting at current market rates is worth it for you. This is tricky to determine because future valuations are uncertain. You can make rough estimates though. The most uncertain component is likely to be capital appreciation or depreciation (increase or decrease in the value of your property). This is usually a relatively large number (significant to the calculation). The value is uncertain because it depends on predictions of the housing market. Future interest rates or economic conditions will likely play a major role in dictating the future value of your home. Obviously there are numerous other costs to consider such as maintenance, tax and insurance some of which may be via escrow and included in your mortgage payment. Largest uncertainty in terms of income are the level of rent and occupancy rate. The former is reasonably predictable, the latter less so. Would advise you make a spreadsheet and list them all out with margins of error to get some idea. The absolute amount you are paying on the mortgage is a red herring similar to when car dealers ask you what payment you can afford. That's not what's relevant. What's relevant is the Net Present Value of ALL the payments in relation to what you are getting in return. Note that one issue with assessing your cost of capital is, what's your opportunity cost. ie. if you didn't have the money tied up in real estate, what could you be earning with it elsewhere? This is not really part of the cost of capital, but it's something to consider. Also note that the total monthly payment for the mortgage is not useful to your calculations because a significant chunk of the payment will likely be to pay down principal and as such represents no real cost to you (its really just a transfer - reducing your bank balance but increasing your equity in the home). The interest portion is a real cost to you.", "title": "" }, { "docid": "ce37deb1b4b12f1c4a2d3fed25722ad9", "text": "I just wanted to add one factor to the other answers. The cost of maintenance etc. is not a fraction of the cost of financing - it is more likely a fraction of the value of the house, and a function of its age. If you say you need to replace a roof every 25 years, and that costs $10,000 (depends on the size of the house, obviously), then you need to set aside $400 a year for roof repair. Other costs (painting, flooring, kitchen, bathrooms, water heaters, heating, AC, yard upkeep etc) can be roughly estimated in the same way. A rule of thumb is 1% of the value of the house per year to cover all big-ticket maintenance. If you pay 4% mortgage, that would increase the reserve by 25%; but if interest rates rise, the fraction may be smaller (I remember paying over 10% mortgage...). In general, whether keeping a property for long term rental income (with the potential for appreciation - but prices can go up and down) is a good idea will largely depend on your ability to predict future costs and value. If you have a variable mortgage, that will be harder to do.", "title": "" }, { "docid": "e4bec4b0c95ec95619b283d75b8bdf3e", "text": "Your reasoning is backwards. As others have pointed out, you cannot just decide how much you charge irrespective of the market. Let me paraphrase a little economics 101 to underline why you also should not think like this: You can see a rental property like your house (the same reasoning is usually explained with the example of hotel rooms) as a series of perishable goods. Your house represents the potential sale of the January rent (which perishes once January is over), plus the February rent etc. Your approach was to compute the total costs (all fixed and variable costs of owning that house as well as costs associated to renting specifically) and average them over the time period so that you know how much to ask at least. Assuming that you are only looking to rent it out, not sell it or let a family member live there, you can't think like this. Most of those costs that you averaged are what economists call sunk costs. You have already incurred the mortgage costs and they are not affected by your decision to rent or not to rent. These costs are irrelevant to your decision making process. You only need to think about marginal costs: those additional costs that you have when you rent but not when you don't. Look at the market prices for renting similar properties in that region and compare them with your marginal costs. As long as they are higher than your marginal costs, rent it out. This does not mean that you are sure to make profits, but it means that you are sure to make less losses than in your only alternative of not renting.", "title": "" }, { "docid": "c975e3f55e8d4d9aef80ca7a7f6552e9", "text": "Agree with the previous posts the question is poorly worded. -but- Clark Howard does say you really need to be getting 90% back in the mortgage payment. Remember that what ever your paying in principle a month is adding to your net worth and every month that gets you a little more money than the last payment. Also this is a good hedge on inflation and at some point within a few years you will be at break even.", "title": "" }, { "docid": "b7a99fb4e7e160c92758517895de125b", "text": "I think the mortgage must not be in the equation at all in order to determine how much to charge. Of course you want to cover your mortgage but the renting price is determined only by how much the renter is willing to pay (offer and demand) and not your mortgage (some people don't even have a mortgage). In other words I think you should be charging a price based on similar rented houses.", "title": "" }, { "docid": "75afbb044a044305e7c497e1093aa9a4", "text": "In order to arrive at a decision you need the numbers: I suggest a spreadsheet. List the monthly and annual costs (see other responses). Then determine what the market rate for rental. Once you have the numbers it will be clear from a numbers standpoint. One has consider the hassle of owning property from a distance, which is not factored into the spreadsheet", "title": "" }, { "docid": "b7f7c1fbef977c0d46b993528f994601", "text": "so if we rent it out we don't want to just charge what we're paying on our mortgage - we'd definitely be losing money if we did that. I think you're overlooking one thing: your profit/loss is not monthly. Your profit is the property that's left after the mortgage ends. Even if you have to add extra $100 every month because you rent lower than the mortgage + maintenance + taxes, after 30 years you're left with property worth ie.$200k while you've paid for it ie. 30 years * 12 months * $100 = $36k. You can rent it lower than your costs and still make a profit in the long run.", "title": "" } ]	[ { "docid": "e725542c1d026fca1da7d80aedc71bca", "text": "I plotted your figures in my Buy or Rent app. It compares the equity of buying or renting by calculating what your mortgage payment would be and comparing the alternative case if you rented and invested an equivalent amount. Clearly for the amounts you specified it is better to buy, but if you change the amounts and interest or property appreciation you can see the equity effects.", "title": "" }, { "docid": "2d918de5487dc487d2778b3f08eaca73", "text": "\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \"\"etc\"\" above) that could put a rental to be \"\"cheaper\"\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \"\"come out ahead\"\" and while you are doing your research (and paying your rent), you want to invest your \"\"savings\"\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \"\"made better\"\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\"", "title": "" }, { "docid": "4052d02b9a2b396dffce36705c050f28", "text": "\"Basically, you have purchased 25% of the condo for $40,000, and your parents bought 75% of the condo for another $115,000. We imagine for a moment that it wasn't you who lived in the condo, but some unrelated person paying rent. You are paying $7,500 a year for tax and fees, plus $6,000 a year, so there is $13,500 leaving your wallet. If $15,500 a year was a reasonable rent, then the tax and fee would be paid out of that, there would be $8,000 left, of which you would get 25% = $2,000. If you were officially \"\"renting\"\" it, you would pay $15,500 a year, and get $2,000 back, again $13,500 leaving your wallet. So you are in exact the same situation financially as you would be if you paid $15,500 rent. Question: Is $15,500 a year or $1,290 a month an appropriate rent for your condo? If a neighbour is renting his condo, is he or she paying $1,290 or more or less? Could you rent the same place for the same money? If $1,290 is the correct rent then you are fine. If the rent should be lower, then you are overpaying. If the rent should be higher, then you are making money. Keep in mind that you will also be winning if rents go up in the future.\"", "title": "" }, { "docid": "d4ac983d6ee94356118fbf13209c0313", "text": "\"Your lack of numbers makes the question a difficult read. What I'm hearing is \"\"I want a house requiring a mortgage 8X my income.\"\" This alone is enough to suggest it's a bad deal. On a personal note, when my wife and I bought our house, it was 2.5X our income. 20% down, so the mortgage was exactly 2X income. And my wife was convinced we were in over our heads. The use of a partner who will take a portion of the profit is interesting, but doesn't change the fact that you are proposing to live in a house that costs far too much for you. If you are determined to buy such a house, I'd suggest you do it with the plan to rent out a room or two to roommates. If you are living in an area where the cost of buying is so high, the demand for rentals is likely high as well. Absent a plan to bring ion more income, I see no good coming from this. Heed the warnings posted in the other two answers as well.\"", "title": "" }, { "docid": "364ad8ee0dbbf454c05d0adeea090961", "text": "\"Not to state the obvious, but you realize this can only be done in hindsight? Sure, you can project out to get a range of expected return, but the tax laws can change every year, your own income changes so your marginal rate will change. You may have started with a 7% mortgage, and refinanced now to 4.5%, so you are far better off than the original plan. I'll repeat what others mentioned, for your own home, the rent you are \"\"not\"\" paying is most of your return. A $100K home may appreciate at whatever rate 3-5%, say. But the $800/mo rent you don't have to pay is $9600/yr, nearly 10%. So when you imply that a house merely rising with inflation is a zero real return, I'd suggest that's far from accurate, all other expenses taken into account of course.\"", "title": "" }, { "docid": "5eac825aebabb072caecfe162adb3f10", "text": "A good way to find the rates of rental prices is to look what other landlords are charging for similar properties in your area. The proper investigation of property rental market should be make by using property listing platforms. The other method is online rent calculator. There are a bunch of them on the Web. Briefly speaking, the rent calculator uses industry data to look at the typical rent you might expect from a property in a post code. Remember that the rent you charge has to be at least equal to the cost of your monthly mortgage bill. When you’re deciding what to charge, don’t forget to factor in an estimate of repair costs, taxes, homeowners association fees and insurance.", "title": "" }, { "docid": "6db08e9c57536d8c60ef7bb2883c6aff", "text": "\"It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord \"\"carries the note\"\". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can \"\"carry\"\" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: \"\"Here's the house back, and all that money I paid you? Keep it!\"\" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that)\"", "title": "" }, { "docid": "aa38f9dfb54dcfd48e1d74961a7312ef", "text": "You can get the number you want pretty easily by plugging some numbers in to a mortgage calculator like this one. Set the PMI and property tax to 0 and set your term to the duration you need. Then plug in numbers until your payment amount equals your monthly budget. Think of yourself as the bank in this process. I started at 1mil over 25 years and that was over my budget so went down to 800k which was under just a bit, and found that you need about 850k based on your numbers.", "title": "" }, { "docid": "111f2cea2838b7e7938d9cf6d03b3316", "text": "Check out the property websites to get an idea of how much, the property in question, could yield as rent. Most give a range and you can get a good idea of it. Just one example from zoopla. Likewise you can refer mouseprice or rightmove and get yourself an idea. Property websites do a lot of data crunching to do an update, but their figure is only a guide.", "title": "" }, { "docid": "2260fcfb380a1bb0ce1cce4004fd7a70", "text": "The prices reflect what the market will bear. People have more money, things will likely cost more. Think of it in terms of percentages and you can start to justify the higher housing costs. My father likes to tell me that his first mortgage cost him $75 a month, and he had no idea how he was going to pay it each month. He also earned $3/hr at his job. So his housing costs were 15% of his gross income. My dear father almost passed out when he learned that my mortgage was $1000 a month, but since I earn $4000/month gross, I am really only paying 25% of my salary. (Numbers made up) So if he complains I pay 10% more, so be it, but complaining I pay $925 more isn't worrying to me because of my increased salary. So if your complaint is the amounts, you must take ratios, percentages and relative comparisons. However if you are baffled by people having money and wasting it on silly or foolish purchases, I am with you. I still don't understand why people will use the closest ATM and just pay the $2 fee. Do right by yourself and don't mind what others are up to.", "title": "" }, { "docid": "dbd2e54664eee4c21ecf47902bbe8fe1", "text": "Assuming a good credit score with no issues like bankruptcy they look at 2 ratios: housing related debts and non-housing debts. For you the housing debts are: principal and interest ($1986/month), property taxes ($490/month), Home Insurance ($120/month) and HOA fee ($120/month). Add these up ($2716/month). You want this to be below 28% of your gross, though some lenders use 33%. For you 109K/year is 9083/month or 29.9%. The 20% down payment saves you the PMI payments. Note that the deductions for interest and taxes already hidden in the ratio limits, so don't try to reduce the monthly impact by a expected deduction. Many lenders will require you to give them the money from taxes and insurance each month, they will forward the funds to the government of insurance policy when the bills are due. The 2nd ratio is for the non-housing debts, which you claim to be zero. That should be less than 10%. If they insist on keeping you below 28% you might need a lower rate or bigger down payment. Your current income and budget have allowed you to accumulate significant savings, though you retirement balances seem low. The savings and CD balances show that you could increase your spending each month without severely impacting your financial health. Should you buy, can't be answered because that is an individual choice. Keep in mind that home ownership also includes additional responsibilities that a renter can ask a landlord to fix and pay for. That is the stuff that is impossible to predict.", "title": "" }, { "docid": "d0a8dfb3b7af002ee8840658871d052e", "text": "I suggest that you first decide on what %'s of the home value you each have a legal claim to. Then split the mortgage using the same %'s. Then, if someone feels their % is slightly higher, they are compensated because they 'own' a correspondingly higher share of the house. Use the same %'s for downpayments (which may mean that an 'adjustment' payment might be required to bring your initial cash outlay from 70/30 into the %'s that you agree to). Tenant income gets split the same way. Utilities are a bit more difficult - as heating depends more on square feet, but water and hydro depend more on how many people are there. You can try to be really precise about working out the %'s, or just keep it simple by using the same %'s as the mortgage.", "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": "cd40fec317928dc6104dc709adb7b007", "text": "On $4K/mo gross about $1000/mo can go to the mortgage, and at today's rates, that's about $200K of mortgage the bank might lend you. Income is qualified based on gross, not net, so if $48,000/yr is wrong, please scale my guesstimate down a bit. In the end, today's rates allow a mortgage of nearly 4X one's gross income. This is too high, in my opinion. I'm answering what the bank would approve you at, not what I think is wise. Wise, in my opinion is 2.5-3X one's income, tops.", "title": "" }, { "docid": "d4b7468c13377d6426ec88fbe8010119", "text": "How much can I save? Depends on inflation and what other investment opportunities you have. It could end up costing you millions. Can I pay $12,000 extra once a year or $1000 every month - which option is better? It depends on how risk adverse you are. The first option does sound better, but for a 30 year mortgage, is it that significant? How much of your time is it going to cost you to do it every month? What is keeping you from doing it every day? How much is your time worth to you. Giving the bank its money sooner is always better than giving it it's money from a saving interest perspective. When is the best time to pay? See above.", "title": "" } ]	fiqa
a63988584509ebe5c51db9fc8ca874c8	Issuing bonds at discount - computing effective interest rate	[ { "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": "d6b8944581bb291c1e2b63f38afbdb03", "text": "\"Yes, the \"\"effective\"\" and \"\"market\"\" rates are interchangeable. The present value formula will help make it possible to determine the effective interest rate. Since the bond's par value, duration, and par interest rate is known, the coupon payment can be extracted. Now, knowing the price the bond sold in the market, the duration, and the coupon payment, the effective market interest rate can be extracted. This involves solving large polynomials. A less accurate way of determining the interest rate is using a yield shorthand. To extract the market interest rate with good precision and acceptable accuracy, the annual coupon derived can be divided by the market price of the bond.\"", "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": "1c5f7796e8581ad364cb3aa2a495ea88", "text": "\"Taking the last case first, this works out exactly. (Note the Bank of England interest rate has nothing to do with the calculation.) The standard loan formula for an ordinary annuity can be used (as described by BobbyScon), but the periodic interest rate has to be calculated from an effective APR, not a nominal rate. For details, see APR in the EU and UK, where the definition is only valid for effective APR, as shown below. 2003 BMW 325i £7477 TYPICAL APR 12.9% 60 monthly payments £167.05 How does this work? See the section Calculating the Present Value of an Ordinary Annuity. The payment formula is derived from the sum of the payments, each discounted to present value. I.e. The example relates to the EU APR definition like so. Next, the second case doesn't make much sense (unless there is a downpayment). 2004 HONDA CIVIC 1.6 i-VTEC SE 5 door Hatchback £6,999 £113.15 per month \"\"At APR 9.9% [as quoted in advert], 58 monthly payments\"\" 58 monthly payments at 9.9% only amount to £5248.75 which is £1750.25 less than the price of the car. Finally, the first case is approximate. 2005 TOYOTA COROLLA 1.4 VVTi 5 door hatchback £7195 From £38 per week \"\"16.1% APR typical, a 60 month payment, 260 weekly payments\"\" A weekly payment of £38 would imply an APR of 14.3%.\"", "title": "" }, { "docid": "a44357a6b5943b6df883337c72a62eb3", "text": "Basically you need to use a time-value-of-money equation to discount the cashflows back to today. The Wikipedia formula will likely work fine for you, then you just need to pick an effective interest rate to use in the calculation. Run each of your amounts and dates though the formula (there are various on-line calculators to pick from, and sum up the values. You did not mention your location or jurisdiction, but a useful proxy for the interest rate would be the average between the same duration mortgage rate and fixed-deposit rate at your bank; it should be close enough for your purposes - although if an actual lawsuit is involved and the sums high enough to have lawyers, it might be worth engaging an accountant as well to defend the veracity of both the calculation and the interest rates chosen.", "title": "" }, { "docid": "735cdacb94f03923d7db3c732b06db0f", "text": "\"These rates are so low because the cost of money is so low. Specifically, two rates are near zero. The Federal Reserve discount rate, which is \"\"the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window.\"\" The effective federal funds rate, which is the rate banks pay when they trade balances with each other through the Federal Reserve. Banks want to profit on the loans they make, like mortgage loans. To do so, they try to maximize the difference between the rates they charge on mortgages and other loans (revenue), and the rates they pay savings account holders, the Federal Reserve or other banks to obtain funds (expenses). This means that the rates they offer to pay are as close to these rates as possible. As the charts shows, both rates have been cut significantly since the start of the recession, either through open market operations (the federal funds rate) or directly (the discount rate). The discount rate is set directly by the regional Federal Reserve banks every 14 days. In most cases, the federal funds rate is lower than the discount rate, in order to encourage banks to lend money to each other instead of borrowing it from the Fed. In the past, however, there have been rare instances where the federal funds rate has exceeded the discount rate, and it's been cheaper for banks to borrow money directly from the Fed than from each other.\"", "title": "" }, { "docid": "b4ae774d48fa6d2cae21d71ed5c702bf", "text": "\"A (very) simplified bond-pricing equation goes thus: Fair_Price: {Face_Value * (1 + Interest - Expected_Market_Return) ^ (Years_To_Maturity)} * P(Company_Will_Default_Before_Maturity) To reiterate, that is a very simplified model. But it allows us to demonstrate the 3 key factors that drive \"\"Fair\"\" Value: The interest relative to the current market rate. If your AAA bond yields 1%, but an equally-good AAA bond currently sells at 3% in the market, then the \"\"Equivalent\"\" value is the face value minus 2% (1% - 3%) for every year to maturity. Years to maturity. Because 1) is multiplied for every year to maturity, longer-dated bonds are more sensitive to changes in market rates. If your bond yields 2% less than market but matures in a year, then it's worth $98, but if it matures in 56 years, then it's only worth 0.98^56 = $32. Conversely, if your bond yields more than the market rate, then its' price will be greater than face value. The company might default on the debt. If a Bond has a \"\"Fair\"\" Value of $100, but you think there's a 50% chance that the company will default, then it's only worth $50. In fact, it can be worth even less because getting paid on a defaulted bond can often take time and/or money and/or lawyers. In your case, because your bond matures in 56 years but yields ~5% (well above the current market rate), for it to be below Face value implies a strong probability of default, or a strong belief that market returns will be above 5% over the next 56 years.\"", "title": "" }, { "docid": "ba304fbf8b1580d1a4cef5833694200f", "text": "You've got the right idea, except that the stated interest rate is normalized for a 1-year investment. Hence if you buy a 4-week bill, you're getting something closer to 4/52 of what you've computed in your question. More precisely, the Treasury uses a 360 day year for these calculations, so you multiply the stated rate by (number of days until maturity)/360 to get the actual rate of return.", "title": "" }, { "docid": "13ad0143a8523b975c7b299bed7ecf3c", "text": "\"The rate of the bond is fixed. But there is a risk known as \"\"interest rate risk\"\". Basically, if you have a 2 percent bond and market rates are 4 percent, you'll have to offer your bond at a discount or nobody would buy it. So if you ever needed to sell it, you'd lose a bit of money.\"", "title": "" }, { "docid": "e1153acc2c4b339189bdcf1f88d1b7e5", "text": "When you buy a bond - you're giving a loan to the issuer. The interest rate on the bond is the interest rate on the loan. Usually (and this is also the case with the treasury bonds), the rate is fixed for the term of the loan. Thus, if the market rate for similar loans a year later is higher, the rate for the loan you gave - remains the same.", "title": "" }, { "docid": "78015aab391f1e140edca5a2b2e7ccb6", "text": "\"The name of the Gilt states the redemption date, but not the original issue date. A gilt with 8.75% yield and close to its redemption date may have been issued at a time when interest rates were indeed close to 8.75%. For example in the early 1990s, the UK inflation rate was about 8%. One reason for preferring high or low coupon gilts is the trade off between capital gains and income, and the different taxation rules for each. If you buy a gilt and hold it to its maturity date, you know in advance the exact price that it will be redeemed for (i.e. £100). You may prefer to take a high level of income now, knowing you will make a capital loss in future (which might offset some other predictable capital gain for tax purposes) or you may prefer not to take income that you don't need right now, and instead get a guaranteed capital gain in future (for example, when you plan to retire from work). Also, you can use the change in the market value of gilts as a gamble or a hedge against your expectation of interest rate changes in future, with the \"\"government guaranteed\"\" fallback position that if your predictions are wrong, you know exactly what return you will get if you hold the gilts to maturity. The same idea applies to other bond investments - but without the government guarantee, of course.\"", "title": "" }, { "docid": "f70c8c562e977d956ae841fdb3c441b5", "text": "Your calc is spot on, the output is small because it's just 5 days worth of interest, and at today's low rates that's practically 0. Also the rate you would want to use is money market rates as that's typically where companies will park cash to earn interest since its a highly liquid market.", "title": "" }, { "docid": "0a69573b10bc69c804febd5912f716dc", "text": "\"There is no formula that can be applied to most variations of the problem you pose. The reason is that there is no simple, fixed relationship between the two time periods involved: the time interval for successive payments, and the time period for successive interest compounding. Suppose you have daily compounding and you want to make weekly payments (A case that can be handled). Say the quoted rate is 4.2% per year, compounded daily Then the rate per day is 4.2/365, or 0.0115068 % So, in one week, a debt would grow through seven compoundings. A debt of $1 would grow to 1 * (1+.000225068)^7, or 1.000805754 So, the equivalent interest rate for weekly compounding is 0.0805754% Now you have weekly compounding, and weekly payments, so the standard annuity formulas apply. The problem lies in that number \"\"7\"\", the number of days in a week. But if you were trying to handle daily / monthly, or weekly / quarterly, what value would you use? In such cases, the most practical method is to convert any compounding rate to a daily compounding rate, and use a spreadsheet to handle the irregularly spaced payments.\"", "title": "" }, { "docid": "82ea0d1ce78d1bcdea1963a057b8a119", "text": "I wrote one to check against the N3 to N6 bonds: http://capitalmind.in/2011/03/sbi-bond-yield-calculator/ Things to note:", "title": "" }, { "docid": "1b79b7b99ed5009f4f2901d4a3c970d8", "text": "I'm not too familiar with the Bank of England's objectives, but it seems similar to the FED's QE program. The interest rate the BOE sets, similar to the FED rate, affects mainly the short term (the left side) of the [interest rate curve](http://www.bankofengland.co.uk/statistics/pages/yieldcurve/default.aspx). However, in order to bring down intermediate and long term rates, central banks will buy intermediate and long dated government and corporate bonds. The government's added demand will drive those bond prices up, which will drive yields down. But like I said, I'm not too familiar with the BOE's bond purchasing program, so I could be way off base here.", "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": "b6750598140bf9aaf3175d376b470278", "text": "How would you compute the earnings for governments that are some of the main issuers of bonds and debt? When governments run deficits they would have a negative earnings ratio that makes the calculation quite hard to evaluate.", "title": "" }, { "docid": "c3c977ec4a6f2ce7f1d3adc224bc472f", "text": "\"Usually... I think that's overstating the case. You CAN get a bargain (especially if the place is in not-so-great condition), but not every foreclosure will be a good deal even if it is priced well below its most recently appraised value. As the buyer it's your responsibility to determine whether it's priced well or not, and to decide whether you're willing and able to repair its deficiencies after you buy it. The same's true when purchasing any house; foreclosures just make it more likely that there are problems and (hopefully) wind up being priced to allow for them. I don't know of a single website which lists all foreclosures. Some of the home listing websites do have a \"\"show me foreclosure listings\"\" filter, and I'm sure that the better tools available to real estate agents can select these. But if that's the direction you're interested in going, you should be looking at distressed properties generally, NOT just foreclosures; you may get a better deal, in the long run, by going for the one that has been mechanically maintained but is just plain ugly rather than the one with a pretty skin whose heating system hasn't been serviced for the last decade. Do your homework, shop around, don't fall in love with any one house... all the same rules apply at this end of the spectrum just as strongly as they do in the mid or upper ranges. Perhaps more so. Happy hunting!\"", "title": "" } ]	fiqa
0d5af6f3ba414298974a6a82eab68868	Do financial advisers in Canada who work at the bank, make investing decisions not in your best interest?	[ { "docid": "1d983d0990780aed6e30220bbab12b25", "text": "The way this works, as I understand it, is that financial advisers come in two kinds. Some are free to recommend you any financial products they think fit, but many are restricted in what they can recommend. Most advisers who work for finance companies are the second kind, and will only offer you products that their company sells. I believe they should tell you up front if they are the second kind. They should certainly tell you that if you ask. So in essence, your Scotiabank advisor is not necessarily making bad decisions for you - but they are restricted in what they will offer, and will not tell you if there is a better product for you that Scotiabank doesn't sell. In most cases, 'management fees' means something you pay to the actual managers of the fund you buy, not to the person who sells you the fund. You can compare the funds you are invested in yourself, both for performance and for the fees charged. Making frequent unnecessary changes of investment is another way that an advisor can milk you for money, but that is not necessarily restricted to bank-employed advisors. if you think that is happening to you, ask question, and change advisors if you are not happy.", "title": "" } ]	[ { "docid": "35ed04b2dace3b1397574bc03dc60917", "text": "\"As for the letting the \"\"wise\"\" people only make the decisions, I guess that would be a bit odd in the long run. Especially when you get more experienced or when you don't agree with their decision. What you could do, is make an agreement that always 3/4 (+/-) of the partners must agree with an investment. This promotes your involvement in the investments and it will also make the debate about where to invest more alive, fun and educational). As for the taxes I can't give you any good advice as I don't know how tax / business stuff works in the US. Here in The Netherlands we have several business forms that each have their own tax savings. The savings mostly depend on the amount of money that is involved. Some forms are better for small earnings (80k or less), other forms only get interesting with large amounts of money (100k or more). Apart from the tax savings, there could also be some legal / technical reasons to choose a specific form. Again, I don't know the situation in your country, so maybe some other folks can help. A final tip if your also doing this for fun, try to use this investment company to learn from. This might come in handy later.\"", "title": "" }, { "docid": "9ddbb2ab2f56ca83404d5538de734baa", "text": "I had an RRSP account with a managed services account at a major Cdn bank that increased its fees to $125 a year per account. Because I could not trade any of my funds living in the US, it made no sense to throw away $500 a year for nothing (two accounts for me and two accounts for my wife - regular RRSP and locked in RRSP). I was able to move all my accounts to TD discount brokerage without any issue. I did this two years ago.", "title": "" }, { "docid": "5cde95f048469e5ab47d7001901e2aa9", "text": "I heard some financial institution ask for $25 withdrawal fees on TFSA. Watch out for it. TD told me. I will doublecheck. RBC do not charge withdrawal fees. I will check that too.", "title": "" }, { "docid": "0bce2a4b42da3308b91bc62b75237674", "text": "Yes, you can put assets in Canadian banks. Will it protect your wealth to a greater extent than the FDIC protection provided by the US Government? Probably not. If you do business or spend significant time in Canada, then having at least some money in Canada makes sense. Otherwise, you're trying to protect yourself against some outlying risk of a US banking collapse, while subjecting yourself to a very real currency exchange risk.", "title": "" }, { "docid": "67cbe9429df7739550de8c0cf95a68ba", "text": "\"Do I need an Investment Adviser? No, but you may want to explore the idea of having one. Is he going to tell me anything that my accountant can't? Probably. How much expertise are you expecting from your accountant here? Do you think your accountant knows everything within the realms of money from taxes, insurance products, investments and all your choices and what would work or wouldn't? Seems like it could be a tall order to my mind. My accountant did say to come to him for advice on investment/business issues. So, he is willing, but is he able? Not asking about his competence, but rather \"\"is there something that only an Investment Adviser can provide, by law, that an accountant can't\"\"? Not that I know though don't forget how much expertise are you expecting here from one person. Is this person intended to answer all your money questions? But isn't that something that my accountant could/should do? Perhaps though how well are you expecting one person to be aware of so much stuff? I want you to know all the tax law so I can minimize taxes, maximize my investment returns, cover me with adequate insurance, and protect my savings seems like a bit much to put on one entity. Do I need either of them? Won't the Internet and sites like this one suffice? Need no. However, how much time are you prepared to spend learning the basics of strategies that work for you? How much money are you prepared to put into things to learn what works and doesn't? While it is your decision, consider how to what extent do you diagnose your medical issues through the internet versus going to see a doctor? Be careful of how much of a do it yourself approach you want to go here and recognize that there are multiple approaches that may work. The question is which trade-offs are OK for you.\"", "title": "" }, { "docid": "3df74b1e4403aecc1a7f0ac1bc084481", "text": "I read about the 90-90-90 rule aka 90% of the people lose 90% of the money in 90 days. Anything that happens in 90 days or less is speculation (effectively gambling), not investment. And the 90-90-90 thing sounds around right for inexperienced amateurs going up against professionals in that space. I don't know anyone who actually made significant amount money by investing in stocks or other financial products except those appearing in TVs. Lots and lots and lots of people do. I heard that people who actually encourage common people to invest in stocks are stock brokers and fund managers who actually gain by the fact that more people invest. No. It's true that lots of people will give you advice to by specific stocks or financial instruments that will earn them comission or fees, but the basic idea of investing in the stock market is very sound; ultimately, it's based on the ability of companies to create value and pay dividends. Could you please give some valid reasons to invest in stocks or other financial market. Thank you. Well, what else can you do with your money? Put it in an interest-bearing bank account? Effectively, you'll still be investing in the stock market, the bank is just taking most of the returns in exchange for guaranteeing that you'll never lose money even temporarily.", "title": "" }, { "docid": "750ac12a6b41230be09d1b31bceb0f1c", "text": "Again, you are asking people to trust you with their life savings so you can take your 1% and the best you can do is google? You don't have a lawyer or anything? Plenty of advisory shops allow you to set up your own business within their infrastructure.", "title": "" }, { "docid": "65c9218e52f0c5c8777470e6eef5cebe", "text": "If your investment returns are the main variable you use to determine if your advisor is doing a good job you are using his or her services incorrectly Also, if you are using a good advisor, he or she needs to know how your investments are doing, not you. However, my thoughts are based on the idea that you can't go it alone. If you are not among the people concerned about the market, waiting for the market to go down 'so you can find a better buying opportunity', or making one of many other novice mistakes, I'm not speaking directly to you with my comments.", "title": "" }, { "docid": "9b138a5fa6a06ef00012efc7b4a477e3", "text": "I don't know, maybe saving for 30+ years you'd want to see how your investments are doing to plan for retirement? Or should I just use an interest calc on google and expect that average market return on my deposits will be there in 2045. Looking at the statements builds trust with the advisor. What makes them trusted?", "title": "" }, { "docid": "c9a3c0c2284554ce69d0c8db28dcfdcc", "text": "\"Remember that risk should correlate with returns, in an investment. This means that the more risk you take on, the more return you should be receiving, in an efficient marketplace. That's why putting your money in a savings account might earn you <1% interest right now, but putting money in the stock market averages ~7% returns over time. You should be very careful not to use the word 'interest' when you mean 'returns'. In your post, you are calling capital gains (the increase in value of owned property) 'interest'. This may be understating in your head the level of risk associated with property ownership. In the case of the bank, they are not in the business of home construction. Rather than take that risk themselves, they would rather finance many projects being done by construction companies that know the business. The bank has a high degree of certainty of getting its money back, because its mortgages are protected by the value of the property. Part of the benefit of an efficient marketplace is that risk gets 'bought' by individuals who want it. This means that people with a low-risk tolerance (such as banks, people on fixed incomes, seniors, etc.) can avoid risk, and people with a high risk tolerance (stock investors, young people with high income, etc.) can take on that risk for higher average returns. The bank's reasoning should remind you of the risk associated with property ownership: increases in value are not a sure thing. If you do not understand the risk of your investment, you cannot be certain that you are being well compensated for that risk. Note also that most countries place regulations on their banks that limit the amount of their funds that can be placed in 'higher risk' asset classes. Typically, this something along the lines of \"\"If someone places a deposit with your bank, you can only invest that deposit in a low-risk debt-based asset [ie: you can take money deposited by customer A and use it to finance a mortgage for customer B]\"\". This is done in an attempt to prevent collapse of the financial sector, if risky investments start failing.\"", "title": "" }, { "docid": "8f08d6c1787b0d0596cfff5c0642ddfa", "text": "It has to do with return. I don't know if Canada has a matching feature on retirement accounts, but in the US many companies will match the first X% you put in. So for me, my first $5000 or so is matched 100%. I'll take that match over paying down any debt. Beyond that, of course it's a simple matter of rate of return. Why save in the bank at 2% when you owe at 10-18%? One can make this as simple or convoluted as they like. My mortgage is a tax deduction so my 5% mortgage costs me 3.6%. I've continued to invest rather than pay the mortgage too early, as my retirement account is with pre-tax dollars. So $72 will put $100 in that account. Even in this last decade, bad as it was, I got more than 3.6% return.", "title": "" }, { "docid": "2a0647d77fef4096af105b3852b291cd", "text": "\"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an \"\"in-kind\"\" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed. Normally when you sell a stock that has lost value, you can actually get a \"\"capital loss\"\" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said \"\"TFSA for a family member\"\", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!\"", "title": "" }, { "docid": "7c08b825fd49af4408560809e33a42a6", "text": "\"I know I replied in another section of this tread as well, but are you looking at MS/Smith Barney, trowe advisory planning, or directly within their mutual fund equity research? The reason I ask is because often there is a misunderstanding between Financial Advisory (FA) work and working directly within a fund doing equity research (Equity Analyst). People often think FA's do a lot of research, and they do, but you'll effectively blackball yourself from ever entering research because there's a \"\"sales-person\"\" stigma attached to being an FA.\"", "title": "" }, { "docid": "876682d0505995629baef04108b13e64", "text": "\"Though @mehassee mentioned it in a comment, I would like to emphasize the point that the financial planner (CFP) you talked to said that he was a fiduciary. A fiduciary has an obligation to act in your best interests. According to uslegal.com, \"\"When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter\"\". So, any of these Stack Exchange community members may or may not have your best interest at heart, but the financial advisor you talked to is obligated to. You have to decide for yourself, is it worth 1% of your investment to have someone legally obligated to have your best financial interest in mind, versus, for example, someone who might steer you to an overpriced insurance product in the guise of an investment, just so they can make a buck off of you? Or versus wandering the internet trying to make sense of conflicting advice? In my opinion, a fiduciary (registered CFP) is probably the best person to answer your questions.\"", "title": "" }, { "docid": "d8acae8105d6ee691fce8478b0b14e99", "text": "It wasn't that long ago that Tim Horton's was owned by Wendy's, another American fast food chain. The only reason Investment Canada would have to block a foreign takeover would be if it would risk Canadian jobs (which this one wouldn't) or risks putting an important Canadian resource in foreign hands (which this takeover also wouldn't). Investment Canada has only blocked two foreign acquisitions of Canadian companies in the past 25 years.", "title": "" } ]	fiqa
26f51beb89f4377d09b46f84bb7603d3	Which is the better strategy for buying stocks monthly?	[ { "docid": "a3a113c0cd742cb216d9b5d5517d7205", "text": "\"You will invest 1000£ each month and the transaction fee is 10£ per trade, so buying a bunch of stocks each month would not be wise. If you buy 5 stocks, then transaction costs will eat up 5% of your investment. So if you insist on taking this approach, you should probably only buy one or two stocks a month. It sounds like you're interested in active investing & would like a diversified portfolio, so maybe the best approach for you is Core & Satellite Portfolio Management. Start by creating a well diversified portfolio \"\"core\"\" with index funds. Once you have a solid core, make some active investment decisions with the \"\"satellite\"\" portion of the portfolio. You can dollar cost average into the core and make active bets when the opportunity arises, so you're not killed by transaction fees.\"", "title": "" }, { "docid": "097c542b9284b893d4a4c0129c39d780", "text": "To optimize your return on investment, you need to buy low and sell high. If you knew that one stock had hit rock bottom, and the others had not, buying the low stock would be the best. However, unless you can predict the future, you don't know if any individual stock has hit the bottom, or if it will continue to drop. If you decide to spend the same amount of money each month on stock purchases, then when the price is low, you will automatically buy more shares, and when the price is high, you will buy fewer shares. This strategy is sometimes called dollar cost averaging. It eliminates the need to predict the future to optimize your buying. All that having been said, I agree with @Powers that at the investment amount that you are talking about and the per transaction fee you listed, a monthly investment in several stocks will cause you to lose quite a bit to transaction fees. It sounds like you need a different strategy.", "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": "3e4a63b5cbaaf029862030b85c714f22", "text": "It would seem that you are in a position where you are able to save money and you hope to have your money work for you. From your statement above, it is implied that you are a professional with a steady income not related to the finance field. With that said, it is better to diversify your portfolio and have your money work for you through passive investments rather than an active one, where you actively search for companies that are below market price. That research takes time and much more experience in order to properly execute. Now, if your overall goal is to trade actively, then maybe researching individual companies might be the best way to get your feet wet. But, if your goal is to create a diversified portfolio and make your money work for you, then passive is the way to go. Two passive financial Vehicles: Mutual funds and ETFs. Depending on what you are hoping to accomplish in the future, an ETF or a mutual fund will likely suite your situation. I would encourage you to do your due diligence and find out the weakness and strength of each. From there you are able to make an informed decision.", "title": "" } ]	[ { "docid": "82563d9338f0325f339f1d01260121ea", "text": "There's no best strategy. Options are just pieces of paper, and if the stock price goes below the strike price - they're worthless. Stocks are actual ownership share, whatever the price is - that's what they're worth. So unless you expect the company stock prices to sky-rocket soon, RSU will probably provide better value. You need to do some math and decide whether in your opinion the stock growth in the next few years justifies betting on ESOP. You didn't say what country you're from, but keep in mind that stock options and RSUs are taxed differently and that can affect your end result as well.", "title": "" }, { "docid": "0ecb2a725e650028ba832f98801a01b8", "text": "I'd recommend looking at fundamental analysis as well -- technical analysis seems to be good for buy and sell points, but not for picking what to buy. You can get better outperformance by buying the right stuff, and it can be surprisingly easy to create a formula that works. I'd check out Morningstar, AAII, or Equities Lab (fairly complicated but it lets you do technical and fundamental analysis together). Also read Benjamin Graham, and/or Ken Fisher (they are wildly different, which is why I recommend them both).", "title": "" }, { "docid": "8c0a103b711ecf32e3c82c69669e9b6f", "text": "I'm not sure it is the best idea, but you can buy only 4 stocks generally. As you alluded to, you should take notice of the fees. Also note that many stocks trade at significantly lower prices than Apple's per shares, so you might want to factor that into your decision. You could probably get a better feel for transactions if you bought say 50 shares of a $30 stock; then it might be easier to see what it's like to sell some, etc. Note that specific trading sites might have various limits in place that would pose as barriers to this sort of behavior though.", "title": "" }, { "docid": "58d36651cc5f1d4b3e8327bc4833378a", "text": "\"If you're investing for the long term your best strategy is going to be a buy-and-hold strategy, or even just buying a few index funds in several major asset classes and forgetting about it. Following \"\"market conditions\"\" is about as useful to the long term trader as checking the weather in Anchorage, Alaska every day (assuming that you don't live in Anchorage, Alaska). Let me suggest treating yourself to a subscription to The Economist and read it once a week. You'll learn a lot more about investing, economics, and world trends, and you won't be completely in the dark if there are major structural changes in the world (like gigantic housing bubbles) that you might want to know about.\"", "title": "" }, { "docid": "fbd7141c4bc604e0757f190f9e0f26c9", "text": "\"I assume by that you mean gradually buying the same mix of funds over time. If that's the case, there is no rational reason to do this. Dollar-cost averaging is an artifact of the way most people fund their 401(k). I would not consider it a viable \"\"strategy\"\". (Neither does Wikipedia) Let's say you have $100,000 that you add $10,000 at a time. When you add money, one of three things can happen: Since you can't predict the future, there's no mathematical justification for buying in segments. There's just as much chance that your funds will be worth more or less, so on average it should make little to no difference. In fact, given the time value of money there is a slight advantage to investing it all now so you can capture any future returns. You can always rebalance later to capture gains on some funds and purchase funds that are down to (hopefully) catch them on a rebound.\"", "title": "" }, { "docid": "57b5f0d983c7a065b61c11d2854ade30", "text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"", "title": "" }, { "docid": "3ca2a36926c308393a021d671a4ad8ff", "text": "\"You mentioned three concepts: (1) trading (2) diversification (3) buy and hold. Trading with any frequency is for people who want to manage their investments as a hobby or profession. You do not seem to be in that category. Diversification is a critical element of any investment strategy. No matter what you do, you should be diversified. All the way would be best (this means owning at least some of every asset out there). The usual way to do this is to own a mutual or index fund. Or several. These funds own hundreds or thousands of stocks, so that buying the fund instantly diversifies you. Buy and hold is the only reasonable approach to a portfolio for someone who is not interested in spending a lot of time managing it. There's no reason to think a buy-and-hold portfolio will underperform a typical traded portfolio, nor that the gains will come later. It's the assets in the portfolio that determine how aggressive/risky it is, not the frequency with which it is traded. This isn't really a site for specific recommendations, but I'll provide a quick idea: Buy a couple of index funds that cover the whole universe of investments. Index funds have low expenses and are the cheapest/easiest way to diversify. Buy a \"\"total stock market\"\" fund and a \"\"total bond fund\"\" in a ratio that you like. If you want, also buy an \"\"international fund.\"\" If you want specific tickers and ratios, another forum would be better(or just ask your broker or 401(k) provider). The bogleheads forum is one that I respect where people are very happy to give and debate specific recommendations. At the end of the day, responsibly managing your investment portfolio is not rocket science and shouldn't occupy a lot of time or worry. Just choose a few funds with low expenses that cover all the assets you are really interested in, put your money in them in a reasonable-ish ratio (no one knows that the best ratio is) and then forget about it.\"", "title": "" }, { "docid": "d76148a24e5fe75e50c2a979fd8b7cd9", "text": "\"You said your strategy was to put it into a index fund. But then you asked about setting stock limits. I'm confused. Funds usually trade at their price at the end of the day, so you shouldn't try to time this at all. Just place your order. If you are buying ETFs, there is going to be so much volume on the market that your small trade is going to have no impact on the price. You should just place a market order. A market order is an order to buy or sell a stock at the current market price. A limit order is an order to buy or sell a security at a specific price. In the US, when you place a trade with any broker, you can either place a limit order or a market order. A market order just fills your order with the next best sellers in line. If you place an order for 100 shares, the sellers willing to sell 100 shares at the lowest price will be matched with your order (sometimes you may get 50 shares at one price and 50 shares at a slightly different price). If your stock has a lot of volatility and you place a market order for a small amount of shares, you will get the best price. If you place a limit order, you specify the price at which you want to buy shares. Your order will then only be filled with sellers willing to sell at that price or lower (i.e. they must be at least as good as you specified). This means you could place an order at a limit that does not get filled (the stock could move in a direction away from your limit price). If you really want to own the stock, you shouldn't use a limit order. You shouldn't only use a limit order if you want to tell your broker \"\"I will only buy this stock at this price or better.\"\" p.s. Every day that passes is NOT a waste. It's just a day that you've decided investing in cash is safer than investing in the market.\"", "title": "" }, { "docid": "71edadf0bf5e87a03ff97820bd72cee1", "text": "50 (dollars, Euros?) is a very small amount to invest. The first time I ever bought stock I picked a winner. It went up by about 40% in the first few months. I sold it and lost money. How? I only bought 10 shares at $7.50 each. The profit was less than the two commissions for buying and selling (about $17 a piece). If you are thinking of buying individual stocks, You simply need to save up more money before it will be practical. If you are not trying to beat the market, which is probably not something an amateur like you or I should attempt, then you should consider low cost index funds. I have money in mutual funds, some of which, have as low as a $100 minimum investment. I have moved entirely away from picking stocks. It was a good experience and I could afford to lose the money, but as a long term strategy, it just was not working for me. Note: This is coming from an American. If this somehow does not apply in Europe...", "title": "" }, { "docid": "8eb8b13cb5868d958540fa1c6e20c557", "text": "\"My theory is that for every stock you buy, you should have an exit strategy and follow it. It is too hard to let emotions rule if you let your default strategy be \"\"let's see what happens.\"\" and emotional investing will almost never serve you well. So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell. At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy.\"", "title": "" }, { "docid": "3c367ad374da420b8a8c5cb6d2191b80", "text": "Your strategy of longing company(a) and shorting company(b) is flawed as the prices of company(a) and company(b) can both increase and though you are right , you will lose money due to the shorting strategy. You should not engage in pair trading , which is normally used for arbitrage purposes You should just buy company(a) since you believed its a better company compared to company(b) , its as simple as that", "title": "" }, { "docid": "eb57e35cac0725642c3b934b87608ad1", "text": "\"I saw that an answer hasn't been accepted for this yet: Being bearish is a good hedging strategy. But being hedged is a better hedging strategy. The point being that not everything in investments is so binary (up, and down). A lot of effective hedges can have many more variables than simply \"\"stock go up, stock go down\"\" As such, there are many ways to be bearish and profit from a decline in market values without subjecting yourself to the unlimited risk of short selling. Buying puts against your long equity position is one example. Being long an ETF that is based on short positions is another example.\"", "title": "" }, { "docid": "7e6f4f331cde178e6cbfb007797db5f9", "text": "The risk of the particular share moving up or down is same for both. however in terms of mitigating the risk, Investor A is conservative on upside, ie will exit if he gets 10%, while is ready to take unlimited downside ... his belief is that things will not go worse .. While Investor B is wants to make at least 10% less than peak value and in general is less risk averse as he will sell his position the moment the price hits 10% less than max [peak value] So it more like how do you mitigate a risk, as to which one is wise depends on your belief and the loss appetite", "title": "" }, { "docid": "3610bca0f2f0662da44ba3a89619cd30", "text": "\"But I don't see how it's any different than buying a stock at a low price and holding on to it for some months. Based on your question, I would say the difference is time. Day trading by its nature is a 6-hour endeavor. If you buy low and are planning to sell high, then you only have a few hours to make this happen. As a previous poster mentioned, there is a lot of \"\"white noise\"\" that occurs on a weekly/daily/hourly/min basis. Long-term investors have the time to wait it out. Although, as a side note, if you were a buy-and-hold investor from the 1960s-early 1980s, then buy and hold was not very good. Is it just the psychological/addictive aspect of it? This is the biggest reason. Day trading is stressful and stress can cause financially destructive decisions such as over-leveraging, over-trading, etc. Why is day trading stressful? Because you are managing hundreds to thousands of trades a year. When combined with the lack of time in a day to make moves, it becomes stressful. Also, many day traders do it full time. Which adds to the pressure to be correct and to be incredible at money managment. A lot of buy-and-hold investors have full time jobs and may only check their positions every month or so.\"", "title": "" }, { "docid": "99a35d8a21693b605106176989414fed", "text": "This is Rob Bennett, the fellow who developed the Valuation-Informed Indexing strategy and the fellow who is discussed in the comment above. The facts stated in that comment are accurate -- I went to a zero stock allocation in the Summer of 1996 because of my belief in Robert Shiller's research showing that valuations affect long-term returns. The conclusion stated, that I have said that I do not myself follow the strategy, is of course silly. If I believe in it, why wouldn't I follow it? It's true that this is a long-term strategy. That's by design. I see that as a benefit, not a bad thing. It's certainly true that VII presumes that the Efficient Market Theory is invalid. If I thought that the market were efficient, I would endorse Buy-and-Hold. All of the conventional investing advice of recent decades follows logically from a belief in the Efficient Market Theory. The only problem I have with that advice is that Shiller's research discredits the Efficient Market Theory. There is no one stock allocation that everyone following a VII strategy should adopt any more than there is any one stock allocation that everyone following a Buy-and-Hold strategy should adopt. My personal circumstances have called for a zero stock allocation. But I generally recommend that the typical middle-class investor go with a 20 percent stock allocation even at times when stock prices are insanely high. You have to make adjustments for your personal financial circumstances. It is certainly fair to say that it is strange that stock prices have remained insanely high for so long. What people are missing is that we have never before had claims that Buy-and-Hold strategies are supported by academic research. Those claims caused the biggest bull market in history and it will take some time for the widespread belief in such claims to diminish. We are in the process of seeing that happen today. The good news is that, once there is a consensus that Buy-and-Hold can never work, we will likely have the greatest period of economic growth in U.S. history. The power of academic research has been used to support Buy-and-Hold for decades now because of the widespread belief that the market is efficient. Turn that around and investors will possess a stronger belief in the need to practice long-term market timing than they have ever possessed before. In that sort of environment, both bull markets and bear markets become logical impossibilities. Emotional extremes in one direction beget emotional extremes in the other direction. The stock market has been more emotional in the past 16 years than it has ever been in any earlier time (this is evidenced by the wild P/E10 numbers that have applied for that entire time-period). Now that we are seeing the losses that follow from investing in highly emotional ways, we may see rational strategies becoming exceptionally popular for an exceptionally long period of time. I certainly hope so! The comment above that this will not work for individual stocks is correct. This works only for those investing in indexes. The academic research shows that there has never yet in 140 years of data been a time when Valuation-Informed Indexing has not provided far higher long-term returns at greatly diminished risk. But VII is not a strategy designed for stock pickers. There is no reason to believe that it would work for stock pickers. Thanks much for giving this new investing strategy some thought and consideration and for inviting comments that help investors to understand both points of view about it. Rob", "title": "" } ]	fiqa
7636c9e976891b171727927c528272b2	Why REIT prices are not going down while bonds are being hammered?	[ { "docid": "ebcdd8cb3811a53f87160c874a6ec5a7", "text": "\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \"\"cash-on-cash\"\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\"", "title": "" }, { "docid": "447ebb07484f3b7068acaeb2d880b27e", "text": "I don't like REITs because they are more closely correlated to the movement of the stock market. They don't really do the job of diversifying a portfolio because of that correlation. When the stock market dropped in 2008, REITs were hammered as well because the housing bubble burst. Bonds went up, and if you rebalanced (sold the bonds to buy more stock) then you came out much further ahead when the stock market recovered. The point of adding bonds for diversification is that they move in the opposite direction of equities; blunting the major drops (and providing buying opportunities). REITs don't fit that bill. REITs are not undergoing a correction like bonds because the price of real estate is a function of housing supply and buyer demand. Rising interest rates only make it a little harder for buyers to buy, so the effect of rising interest rates on real estate prices is muted. The other effects on real estate prices (more wealth in the economy for buyers) pushes in the opposite direction of the rising interest rates.", "title": "" } ]	[ { "docid": "dae84622294f488ae7fff5c11d07754a", "text": "That looks like a portfolio designed to protect against inflation, given the big international presence, the REIT presence and TIPS bonds. Not a bad strategy, but there are a few things that I'd want to look at closely before pulling the trigger.", "title": "" }, { "docid": "01e86788dc145726cf15fbeaa56990d3", "text": "Well put and, honestly, seemingly unavoidable. It will be crazy if it truly does come to fruition if they (Fed/Treasury/Gummit) realize that they cannot inflate their way out of this by printing more money and all of the nay-sayers of massive deflation get proven wrong. So, the better question is this: we believe/know it's coming, so how do we prepare and strategically place ourselves to survive/profit/prosper from the coming collapse? As I see it, RE is a crap investment for the foreseeable future as oversupply and oversize are not absorbed. People have to live, so rentals will be key; but, they have already bloomed quite a bit. Stocks will likely trade sideways for awhile before likely tanking as the forced/willing withdrawals start happening from the Boomers. So, keeping it in stocks doesn't sound overly positive, unless a fairly aggressive put strategy is enforced. Bonds are paying crap and, after taxes, barely pacing inflation. For me personally and selfishly, I have 20 years minimum for retirement, so I'm fine qith the market trending sideways or down. It means that I'm getting more bang for my DCA buck and, 20+ years from now, I will be well positioned when the market eventually cycles back up. But, for now, where do we put our investments to protect and, hopefully, grow them as the mid term passes?", "title": "" }, { "docid": "1956eda0d10bf584cee552b2658f379d", "text": "Historically when short term treasuries (maturity less than 5 years) have a higher yield than long term treasuries (10+ years) a recession has followed within a year or so. Don't quote me on the bond maturities and how quickly a recession occurs but it's basically accurate. Edit: we are not there right now but that seems to be the trending direction.", "title": "" }, { "docid": "aaf2f42c69d1a1d80b68a0ebd347b608", "text": "The reason the market value is low is because the market does not believe that the company or country will pay. Another reason for it to go down is lack of liquidity in the market. However if you believe that the conditions would improve by the time bond matures, and you don't need money right now, then you can wait for maturity and get the maturity value.", "title": "" }, { "docid": "cb2e4bffc7f11cbfca1c1e9fa37bde29", "text": "Actually, bond prices are technically high right now, so if and when rates theoretically go up in the future, bond prices will fall. The past 25 years for bonds have been great with falling interest rates, but it's not likely going to continue with rates not able to go any lower.", "title": "" }, { "docid": "fb13206ea224b7582cf0d78ef5c3c875", "text": "That's not what he's saying at all. Basically most of his argument (4 of 6 points) is the connection between bond prices and equity prices. It's not particularly interesting but it definitely doesn't always apply either. If bond yields fall, then so too should equity earnings yields if spreads remain relatively constant, i.e. higher equity prices. Additionally, if bond yields are low, then any future equity growth gets capitalized at a much higher value because discount rates are much lower. Again, not particularly insightful. The two interesting comments were about oil and cash as a % of assets at financial institutions. Both of these are likely linked to falling or low rates above, because banks can't invest profitably at low rates and hence hold cash and equivalents instead, and oil prices are more likely to fall in a low or falling inflation environment (implied by the low rates or Fed tightening). Really, I think hes's saying something more obvious but not necessarily trivial, which is if one asset class goes up, so too is another related one.", "title": "" }, { "docid": "3e9716a7dae9d0ef47a03d0a17927d78", "text": "Notes and Bonds sell at par (1.0). When rates go up, their value goes down. When rates go down, their value goes up. As an individual investor, you really don't have any business buying individual bonds unless you are holding them to maturity. Buy a short-duration bond fund or ETF.", "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": "e768a08c0ab799ca0b2022ed60642360", "text": "But it also can't be 1.46%, because that would imply that a 30Y US Treasury bond only yields 2.78%, which is nonsensically low. The rates are displayed as of Today. As the footnote suggests these are to be read with Maturities. A Treasury with 1 year Maturity is at 1.162% and a Treasury with 30Y Maturity is at 2.78%. Generally Bonds with longer maturity terms give better yields than bonds of shorter duration. This indicates the belief that in long term the outlook is positive.", "title": "" }, { "docid": "028f0077a16460f918c8515dff3fc444", "text": "I know that assets like bonds have prices that have an inverse relationship with interest rates, but what other assets do as well? I'm a bit new to finance and all that so I'm trying to learn. Would real estate prices be high as well? If so, why?", "title": "" }, { "docid": "88b56182fbd320688d54f52c8491c84a", "text": "\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/news/articles/2017-08-22/wall-street-banks-warn-winter-is-coming-as-business-cycle-peaks) reduced by 87%. (I'm a bot) *** > HSBC Holdings Plc, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle. > Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. > Citigroup analysts also say markets are on the cusp of entering a late-cycle peak before a recession that pushes stocks and bonds into a bear market. * [Extended Summary*](http://np.reddit.com/r/autotldr/comments/6vkwv3/the_next_recession_is_nigh_how_are_you_lads/) \| [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~197088 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: market^#1 stock^#2 investors^#3 equity^#4 U.S.^#5\"", "title": "" }, { "docid": "2aaca1bc531b6eef0e29db9a819bcf72", "text": "Bonds can increase in price, if the demand is high and offer solid yield if the demand is low. For instance, Russian bond prices a year ago contracted big in price (ie: fell), but were paying 18% and made a solid buy. Now that the demand has risen, the price is up with the yield for those early investors the same, though newer investors are receiving less yield (about 9ish percent) and paying higher prices. I've rarely seen banks pay more variable interest than short term treasuries and the same holds true for long term CDs and long term treasuries. This isn't to say it's impossible, just rare. Also variable is different than a set term; if you buy a 10 year treasury at 18%, that means you get 18% for 10 years, even if interest rates fall four years later. Think about the people buying 30 year US treasuries during 1980-1985. Yowza. So if you have a very large amount of money you will store it in bonds as its much less likely that the US treasury will go bankrupt than your bank. Less likely? I don't know about your bank, but my bank doesn't owe $19 trillion.", "title": "" }, { "docid": "ca9ff7c27a27a446f5031e35247d5294", "text": "Asset prices are inversely related to interest rates. If you're valuing a business or a bond, if you use a lower interest rate you get a higher valuation. Historic equity returns benefit from a falling interest rate environment which won't be repeated as interest rates can only go so low. edit: typo", "title": "" }, { "docid": "78bcb03dd265259fb20c14f4e05e8ea1", "text": "IMHO bonds are not a good investment at this present time, nor generally. Appreciate for a moment that the yield of an investment is DIRECTLY related to the face/trading value. If a thing (bond/stock) trades for $100 and yields 3%, it pays $3. In the case of a bond, the bond doesn't pay a % amount, it pays a $ amount. Meaning it pays $3. SO, for the yield to rise, what has to happen to the trading price? It has to decrease. As of 2013/14 bonds are trading at historically LOW yields. The logical implication of this is if a bond pays a fixed $ amount, the trading price of the bond has to have increased. So if you buy bonds now, you will see a decrease in its face value over the long term. You may find the first tool I built at Simple Stock Search useful as you research potential investments.", "title": "" }, { "docid": "5eb94df80246aae2b4d230cca77cd1f7", "text": "It is supported by inflation and historical values. if you look at real estate as well as the stock market they have consistently increased over a long period of history even with short term drops. It is also based on inflation and the fact that the price of land and building material has increased over time.", "title": "" } ]	fiqa
7032ae40ebbe98836c13221b4aaf2baf	Dad paid cash for house and we want to put it in my name	[ { "docid": "819223feb56623ba4f24ab077a6b6f40", "text": "\"If your parents are not on the deed then I am not sure how it could be their house. It seems like the sale was done unofficially. If your parents or aunt pass away this could be a real mess. Make this official ASAP. It might be possible for your aunt to gift you the house. This may have tax implication but the article below suggests that it may not be an issue. http://www.bankrate.com/finance/real-estate/aunt-be-taxed-for-bargain-price-on-house.aspx As you're probably aware, owning a house is expensive. Make sure you can afford taxes, bills, and maintenance. Things add up fast. I should have address the \"\"rent to own\"\" plan. If you plan on transferring the house from your aunt to you by renting with $0 monthly payment and then claiming it is all paid off, then I think this would be considered a gifting of the house from your aunt to you. It sounds like fraud to claim you paid something that you didn't. In the end, it is either a gift from your parents or from your aunt. The sooner you get the house in your name the better\"", "title": "" } ]	[ { "docid": "233b7834ac5a15ab9d4b9fb522d80bd0", "text": "He doesn't have to follow through on this, but he could tell this sister that he will stop making mortgage payments, which will result in foreclosure and sale at lower price than might be realized by a voluntary sale. Translation: the house will sold, sis. Do you want to maximize your share of the proceeds? And, as I said in a comment above: I hope that he is keeping careful records of mortgage an utility payments, as he might (should) be entitled to a refund from the proceeds of an eventual sale (possibly adjusted by the fair rent value of the time which he spent living there)", "title": "" }, { "docid": "5a21e3aa54056999d14431ab45ffa93f", "text": "\"Seems pretty shady. From what I could guess, your dad \"\"hid\"\" or \"\"lost\"\" the money, so as to not pay capital gains on it. Even though he'd use the money to build houses or whatever, he'd have to pay taxes on it (as income). To get out of paying said taxes, the money would essentially have to disappear. This isn't super common, but it sort of is possible to move funds to other places around the world, or to keep cash that no one knows about (watch the Swiss bank part of Wolf of Wall Street or just read up about illegal money laundering, like gangs and such do). So possibly, your dad could launder the money over the next several years. If I were you, I'd just stay quiet and mind my own business.\"", "title": "" }, { "docid": "4b9d593b1a04755bdf0903d4018edc79", "text": "Presumably this house is a great deal for you for some reason if you are willing to go to great lengths such as these to acquire it. I suggest you have your father purchase the house with cash, then you purchase the house from him. You might want to discuss this with the title company, it's possible that there are some fees that they will waive if you close both sales through them in a short period of time. If the home will appraise for a higher amount than purchase, then you may be able to get a mortgage without a significant down-payment. If not, then you will need to owe your father at least the amount of the down-payment at closing time.", "title": "" }, { "docid": "de362739cbb538c101bd2ebf4825a915", "text": "tldr; Is the purpose of doing this to ultimately avoid any sort of capital gains paid by someone in your family? Your plan accomplishes this if your dad is single and you are married, but if your dad is married this is probably unnecessary. One side effect of this plan is both you and your dad are unnecessarily giving up a portion of your lifetime gift tax exclusion. Your dad is giving up somewhere between 97-56= $41K of his exclusion (if both you and he are married) and 97-14= $85K (if neither you or your dad is married) and when you give the $430K back you are giving up to that amount minus somewhere between 14-56K. If your dad is married and you were to simply purchase the home from your dad for $430K you would both avoid dipping into your lifetime max, and your dad wouldn't realize any capital gains. If he isn't married, but you are, then your plan works in avoiding any capital gains paid by anyone in your family, unless you end up selling the home in the future for more than $597K. The plan also hinges on:", "title": "" }, { "docid": "f0ba380c8c3f1cc18d53f8033ee3a993", "text": "Why would you even accept 75K in cash? If anything is going to trigger an audit, this will be it. 75K in cash deposited will look like money laundring, so you better have a paper trail ready to prove this is legal or this won't end well.", "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": "b3d0df6a5c0e03d978175ab3b73b0c5a", "text": "You can be a co-borrower on the property that your father owns. Some Banks require that you also be part owner of the property, some banks do not require this. You can take a home loan for a new property, normally Banks will ask you of all your current loans [auto/other home/personal/ etc] to determine the amount they will be ready to lend. Edit: The first loan I believe your father already has a property in his name ... your father can apply for Loan against property ... if he does not have sufficient income, then you can guarantee the loan [ie co-sign on the loan, some banks allow this ... however there is no tax benefit on this loan] . The second is the Home Loan for the balance amount that you would get it … Both the loans can be taken from the same Bank, there would be a overall cap as to the amount of loan a Bank would give depending on your income, further the finance for this house will only be to the extent of 80% of the value.", "title": "" }, { "docid": "5b7004ec040ee8fba64f99d4f90af7cf", "text": "\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \"\"find property management company Philadelphia\"\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\"", "title": "" }, { "docid": "88b36b264f597acad982578c3083fc01", "text": "\"This is more of a long comment but may answer user's situation too. I have dealt with joint mortgages before in 3 states in the US. Basically in all three states if one party wants to sell, the home goes up for sale. This can be voluntary or it can go up via auction (not a great choice). In 2 of the 3 states the first person to respond to the court about the property, the other party pays all legal fees. Yes you read this right. In one case I had an ex who was on my mortgage, she had no money invested in the house ($0 down and still in college with no job). [If she wasn't on the mortgage I wouldn't have gotten loan - old days of dumb rules] When we split her lawyer was using the house as a way to extort other money from me. Knowing the state's laws I already filed a petition for the property but put it on hold with the clerk. Meaning that no one else could file but if someone tried mine would no longer be on hold. My ex literally spent thousands of dollars on this attorney and they wanted to sell the house and get half the money from the house. So sale price minus loan amount divided between us. This is the law in almost every state if there is no formal contract. I was laughing because she wanted what would be maybe 50-75K for paying no rent, no money down, and me paying for her college. Finally I broke her attorney down (I didn't lawyer up but had many friends who were lawyers advising). After I told her lawyer she wasn't getting anything - might have said it in not a nice way - her lawyer gave me her break down. To paraphrase she said, \"\"We are going to file now. My assistant is in the court clerk's office. You can tell the court whatever you want. Maybe they will give you a greater percentage since you put the money down and paid for everything but you are taking that chance. But you will pay for your lawyer and you will need one. And you will pay for me the entire time. And this will be a lengthy process. You would be better served to pay my client half now.\"\" Her office was about 2 blocks from court. I laughed at her and simply told her to have her assistant do whatever she wanted. I then left to go to clerk's office to take the hold off. She had beat me to the office (I moved my car out of her garage). By the time I got there she was outside yelling at her assistant, throwing a hissy fit, and papers were flying everywhere. We \"\"settled\"\" the next day. She got nothing other than the things she had already stolen from me. If I wouldn't have known about this loophole my ex would have gotten or cost me through attorney's fees around 40-50K for basically hiring a lawyer. My ex didn't really have any money so I am pretty sure lawyer was getting a percent. Moral of the story: In any contract like this you always want to be the one bringing in the least amount of money. There are no laws that I know of in any country where the person with the least amount on a contract will come out worse (%-wise). Like I said in the US the best case scenario that I know of for joint property is that the court pays out the stakeholder all of their contributions then it splits things 50/50. This is given no formal contract that the court upholds. Don't even get me started with hiring attorneys because I have seen the courts throw out so many property contracts it isn't even funny. One piece of advice on a contract if you do one. Make it open and about percentages. Party A contributes 50K, Party B 10K, Party A will pay this % of mortgage and maintenance and will get this % when home is sold. I have found the more specific things are the more loopholes for getting out of them. There are goofy ass laws everywhere that make no sense. Why would the person first filing get their lawyers paid for??? The court systems in almost all countries can have their comical corners. You will never be able to write a contract that covers everything. If the shower handle breaks, who pays for it? There is just too many one-off things with a house. You are in essence getting in a relationship with this person. I hear others say it is a business transaction. NO. You are living with this person. There is no way to make it purely business. For you to be happy with this outcome both of you must remain somewhat friends and at the very least civil with each other. To add on to the previous point, the biggest risk is this other person's character and state of mind. They are putting in the most money so you don't exactly have a huge money risk. You do have a time and a time-cost risk. Your time or the money you do have in this may be tied up in trying to get your money out or house sold. A jerk could basically say that you get nothing, and make you traverse the court system for a couple years to get a few thousand back. And that isn't the worst case scenario. Always know your worst case scenario. Yours is this dude is in love with you. When he figures out 2-3 years later after making you feel uncomfortable the entire time that you are not in love with him, he starts going nuts. So he systematically destroys your house. Your house worth plummets, you want out, you can't sell the house for price of loan, lenders foreclose or look to sue you, you pay \"\"double rent\"\" because you can't live with the guy, and you have to push a scooter to get to work. That is just the worst case scenario. Would I do this if I were 25 and had no family? Yea, why not if I trusted the other person and was friends with them? If it were just a co-worker? That is really iffy with me. Edit: Author said he will not be living with the person. So wording can be changed to say \"\"potentially\"\" in front of living with him in my examples.\"", "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": "" }, { "docid": "51fb633f62e19dd495c87a1636237e4e", "text": "\"To put a positive spin on the whole thing, maybe it's a small family shop, and having the check made out to \"\"cash\"\" means that your barber can hand it to someone else without the need to countersign. Or maybe his last name is \"\"Cash\"\" - there was a pretty famous singer who fit that description. Either way, it's not your place to nanny his finances.\"", "title": "" }, { "docid": "b80cd12b199c52298cec99dc26f6ee26", "text": "\"That ain't nothing. It's really easy to get \"\"whipped up\"\" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To \"\"get bootstrapped\"\" he can put it up on AirBnB or other services. Or do \"\"housemate shares\"\". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an \"\"in-law unit\"\" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. \"\"Owning it on paper\"\" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a \"\"Winter's bone\"\" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt.\"", "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": "f0c395884f356a9dbf7e2bb8583a555c", "text": "\"First, when a debt collector says, \"\"It's to your advantage to give me money now\"\", I'd take that with a grain of salt. My ex-wife declared bankruptcy and when debt collectors couldn't find her, they somehow tracked me down and told me that I should tell her that it would be to her advantage to pay off this debt before the bankruptcy went through. That was total nonsense of course. The whole point of bankruptcy is to not have to pay the debt. Why would you pay it just before it was wiped off the books? (Now that I think of it, I'm surprised that they didn't tell me that I should pay her debts.) As others have noted, this would be controlled by state law. But in general, when someone dies any debts are payed from the assets of the estate, and then whatever is left goes to the heirs. If nothing is left or the debts exceed the assets, then the heirs get nothing, but they don't have to pay somebody else's debts. I don't see how you could \"\"put the house under your name\"\". If he left the house to you in his will, then after any debts are settled in accordance with state law, the house would transfer to you. But you can't just decide to put the house in your name outside of the legal inheritance process. If you could, then people could undermine a will at any time by just deciding to take an asset left to someone else and \"\"put it in their name\"\". Or as in this case, people could undermine the rights of creditors by transferring all assets to themselves before debts were paid. Even if there's some provision in your state for changing the name on a deed prior to probate to facilitate getting mortgages and taxes paid or whatever, I would be quite surprised if this allowed you to shelter assets from legitimate creditors. It would be a gaping loophole in inheritance law. Frankly, if your father's debts are more than the value of his assets, including the value of the house, I suspect you will not be able to keep the house. It will be sold to pay off the creditors. I would certainly talk to a lawyer about this as there might be some provision in the law that you can take advantage of. I'll gladly yield on this point to anyone with specific knowledge of New Jersey inheritance law.\"", "title": "" }, { "docid": "7780704a13eb837ae46fdd1c94eb9c2b", "text": "Of course you can transfer it, and it will be legal. There's no taxes on transferring your own money. There's income tax on gains you realized by selling the property, but that is money you already owe, it doesn't matter where the proceeds are. It also doesn't matter how you acquired the property (except for figuring out your basis). What matters is that you had gains, and these gains are taxable in the US. You need to figure out the value of the property when your father bought it, and that is your basis. The difference between what you sold it for and that basis is your taxable gain, and you already owe taxes on that gain.", "title": "" } ]	fiqa
08899d8be56e013134b6614e4e737575	Typical discount for cash purchase on $1+ million homes?	[ { "docid": "4233aa691f572dbcec35bf13ceea9be0", "text": "First, I assume you understand that 'Cash Offer' doesn't mean you really show up with cash (in a duffel bag...), but is an expression that designates that you don't need a mortgage approval, but have the money in your accounts. The advantages for the seller are With both cases depending on the seller's situation, there can't be a generic answer, and the 'discount' will be all over the place between zero and several percent.", "title": "" }, { "docid": "6df9282dbf866387ec766e5cdbf9b750", "text": "I don't have a solid data-backed answer, but this is too lengthy for a comment. I've read that on average, about 1-2% is what you can get as a cash discount on a home purchase, all else being equal, but no hard data to back that. In certain situations it makes sense for a cash discount to be much greater than that, for instance, if the seller is in a hurry to close and your cash offer has no inspection clause. Similarly, if a house has been re-listed after a sale fell through you might get a greater cash-discount, or if an owner just over-values the advantages of a cash-offer. Anecdotally, I had a neighbor take a cash offer 5% below asking and they had multiple offers at asking, they took the cash offer so they could close faster (15 days). Also, I've lost out to a cash offer, also at 5% below asking, and they also had a short-closing period and no-inspection, my offer was over asking on that one, so total cash discount > 5%. There can be more volatility in the luxury home market, but I wouldn't guess that changes the cash vs financed evaluation much. Would love to see if anyone finds a good source, but even if they do, an average is only so helpful.", "title": "" } ]	[ { "docid": "b2bbed915d44426de310febe8fe1942d", "text": "\"If you mortgage after the fact you will usually pay an extra .25% higher on the interest rate because a \"\"cash out\"\" refinance is treated as riskier than a new home purchase mortgage. You might save enough on the purchase price of the home with a cash offer to make that higher interest rate worth it, but in most cases, if you are planning to hold the loan for a long time, it's best to get that mortgage at the time of purchase. You might be able to get the same deal with an offer that says you will pay cash if there are any problems getting the loan approved.\"", "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": "bc51b36b9bf082a42f9d53d5552018d3", "text": "They're probably talking about flipping houses. The conventional wisdom when flipping is to purchase the property with a mortgage or other loan on day-0. Do the work to rehabilitate it. Get it listed for re-sale promptly (this step has varying strategies) with a profitable price but one that will make it move. Have the house sold on or before the first payment would be due. This is anywhere from 30 to 60 days. The flipper then never has to make a payment on the mortgage or loan, the costs of rehabilitating the home are recovered promptly (potentially before any loan, credit card payments, or invoices are due), and there is a profit. This also assumes that either a 100% loan or some other mechanism is used to address closing costs and fees. This model fits the premise of the infomercial in that you make money investing in real estate but never have to tie up any of your own money in the process.", "title": "" }, { "docid": "b20dde4b533b9447acdebeffe1611f43", "text": "According to the article this is not actually a fine, they are just buying back the mortgages they sold in the first place. One has to wonder if they are buying them back at the same price that they sold them or if it's a discount. E.g. They sold you a lemon for $1000, offer to buy it back for $10? Other questions: If they are buying them back then are they now going to start foreclosing like criminals like BoA did?", "title": "" }, { "docid": "08735a3e09b704995ed935887b845a0f", "text": "I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree.", "title": "" }, { "docid": "b174397e769644cf9b5fe820748fef34", "text": "Using cash to purchase a home allows you access to certain deals that mortgage buyers cannot take advantage of. These are typically distressed properties and need to be moved off the books quickly. Think of things like foreclosures and auctions. This does not mean that it gives you an advantage with every house on the market. While you may be able to close quickly, with cash, some buyers may choose to wait for the (presumably) higher offers of mortgage buyers. There are complications to purchasing in cash then mortgaging to replace that cash. Namely, how was that cash invested? If one were in mutual funds or stocks, with the money, one will have to pay capital gains tax on any profit. If those investments increase in value, during the time the money is tied up, what do you do then? Do you buy at the higher value or hold it back and dollar cost average it in?", "title": "" }, { "docid": "37ed914eade031022145bd219bbcf1e4", "text": "I think you need to go to a local bank and ask. The key thing is paper trail. For any mortgage I've gotten on a new purchase, the bank needs to see where the down payment came from and how it got to the seller. In this case, it can go either way. If the value is truly 100% to the 80% you are looking to finance, and the paper trail is legit, this may work just fine. The issue others seem to have is that simply buying at a 20% discount is not a legit way to finance the 80%. Here, it appears to me that the 20% came from you in installments, via the rent.", "title": "" }, { "docid": "c956cd96a41c6cc45b9a750211d740ac", "text": "Part 2 = 12% -5000/0.12 (1 - 1/(1.12^2 ) = -8450.26 Then subtract year 0s 5000 payment if you havent = -13450.26 and then compare to option 2 -2000/0.12 (1 - 1/(1.12^10) = -11300.46 and subtract 20000 -31300.46 As you can see both values are substantially smaller compared to a 4% discount rate.", "title": "" }, { "docid": "f71e16876c49a2516f62da64a0d1f7c0", "text": "\"It's worth pointing out that most \"\"cash\"\" deals are actually debt financed, at least in part. A quick review of the 8K tells us they plan on debt financing the entire transaction with some senior notes and not use any of the 15B on their BS. This is fairly typical these days because debt is cheaper then the foregone interest on cash.\"", "title": "" }, { "docid": "2a86d62eaf806b5b98010b5228daba84", "text": "You're saying that medallions aren't profitable but that they're selling for $1 Million because they're liquid*!? OK you might need to go read about discounted cash flows or something because you do not know what drives the value of a business Because that's what Medallions are - they aren't a cost of doing business, they're the price of buying a business. Which is high because the business is profitable If you're not seeing the profits then you have the city to blame for that: they're going to the medallion owners", "title": "" }, { "docid": "04bc38af33a77e553afb790380e0d30b", "text": "You seem to underestimate the risk of this deal for the inverstors. A person purchasing a residence is happy to pay $70K instead of $150K now, and the only risk they take is that the construction company fails to build the condo. Whatever happens on the estate market in two years, they still saved the price difference between the price of complete apartments and to-be-build apartments (which by the way may be less than $150K-$70K, since that $150K is the price on a hot market in two years). However, an investor aiming to earn money counts on that the property will actually cost $150K in two years, so he's additionally taking the risk that the estate market may drop. Should that happen, their return on investment will be considerably lower, and it's entirely possible they will make a loss instead of a profit. At this point, this becomes yet another high risk investment option, like financing a startup.", "title": "" }, { "docid": "aea82a840a26f319e88b143f6fc65bac", "text": "Very wealthy people usually have an investment manager who is constantly moving money between investments and accounts. They hold cash (or cash equivalent) accounts for use in a near-term buying opportunity, for example if they believe certain stocks will go down in price soon. This amount can vary from under 1% (for a money manager with no intention of any short-term trading) to over 20% (for a market pessimist who expects a huge price reduction shortly). In rare cases they will also hold significant cash because of a planned large purchase, but there's almost never a reason for that to exceed 1% of their net worth.", "title": "" }, { "docid": "17e78480112a308574692e1fc00fecfe", "text": "\"While you would probably not use your ATM card to buy a $1M worth mansion, I've heard urban legends about people who bought a house on a credit card. While can't say its reliable, I wouldn't be surprised that some have actual factual basis. I myself had put a car down-payment on my credit card, and had I paid the sticker price, the dealer would definitely have no problem with putting the whole car on the credit card (and my limits would allow it, even for a luxury brand). The instruments are the same. There's nothing special you need to have to pay a million dollars. You just write a lot of zeroes on your check, but you don't need a special check for that. Large amounts of money are transferred electronically (wire-transfers), which is also something that \"\"regular\"\" people do once or twice in their lives. What might be different is the way these purchases are financed. Rich people are not necessarily rich with cash. Most likely, they're rich with equity: own something that's worth a lot. In this case, instead of a mortgage secured by the house, they can take a loan secured by the stocks they own. This way, they don't actually cash out of the investment, yet get cash from its value. It is similarly to what we, regular mortals, do with our equity in primary residence and HELOCs. So it is not at all uncommon that a billionaire will in fact have tons of money owed in loans. Why? Because the billions owned are owned through stock valuation, and the cash used is basically a loan secured by these stocks. It might happen that the stocks securing the loans become worthless, and that will definitely be a problem both to the (now ex-)billionaire and the bank. But until then, they can get cash from their investment without cashing out and without paying taxes. And if they're lucky enough to die before they need to repay the loans - they saved tons on money on taxes.\"", "title": "" }, { "docid": "4c341364afeab9a693ed255b3f300d17", "text": "\"This is the meat of your potato question. The rephrasing of the question to a lending/real estate executive such as myself, I'd ask, what's the scenario? \"\"I would say you're looking for an Owner Occupied, Super Jumbo Loan with 20% Down or $360K down on the purchase price, $1.8 mil purchase price, Loan Amount is ~$1.45 mil. Fico is strong (assumption). If this is your scenario, please see image. Yellow is important, more debt increases your backend-DTI which is not good for the deal. As long as it's less than 35%, you're okay. Can someone do this loan, the short answer is yes. It's smart that you want to keep more cash on hand. Which is understandable, if the price of the property declines, you've lost your shirt and your down payment, then it will take close to 10 years to recover your down. Consider that you are buying at a peak in real estate prices. Prices can't go up more than they are now. Consider that properties peaked in 2006, cooled in 2007, and crashed in 2008. Properties declined for more than 25-45% in 2008; regardless of your reasons of not wanting to come to the full 40% down, it's a bit smarter to hold on to cash for other investments purposes. Just incase a recession does hit. In the end, if you do the deal-You'll pay more in points, a higher rate compared to the 40% down scenario, the origination fee would increase slightly but you'll keep your money on hand to invest elsewhere, perhaps some units that can help with the cashflow of your home. I've highlighted in yellow what the most important factors that will be affected on a lower down payment. If your debt is low or zero, and income is as high as the scenario, with a fico score of at least 680, you can do the deal all day long. These deals are not uncommon in today's market. Rate will vary. Don't pay attention to the rate, the rate will fluctuate based on many variables, but it's a high figure to give you an idea on total cost and monthly payment for qualification purposes, also to look at the DTI requirement for cash/debt. See Image below:\"", "title": "" }, { "docid": "f8d5c327ce6e719e6a82fda9724475de", "text": "While I agree with the existing bulk of comments and answers that you can't tell the lender the $7k is a gift, I do think you might have luck finding a mortgage broker who can help you get a loan as a group. (You might consider as an LLC or other form of corporation if no one will take you otherwise.) That is, each of you will be an owner of the house and appear on the mortgage. IIRC, as long as the downpayment only comes from the collective group, and the income-to-debt ratio of the group as a whole is acceptable, and the strongest credit rating of the group is good, you should be able to find a loan. (You may need a formal ownership agreement to get this accepted by the lender.) That said, I don't know if your income will trump your brother's situation (presumably high debt ratio or lower than 100% multiplier on his income dues to its source), but it will certainly help. As to how to structure the deal for fairness, I think whatever the two of you agree to and put down in writing is fine. If you each think you're helping the other, than a 50/50 split on profits at the sale of the property seems reasonable to me. I'd recommend that you actually include in your write up a defined maximum period for ownership (e.g. 5yr, or 10yr, etc,) and explain how things will be resolved if one side doesn't want to sell at that point but the other side does. Just remember that whatever percentages you agree to as ownership won't effect the lender's view of payment requirements. The lender will consider each member of the group fully and independently responsible for the loan. That is, if something happens to your brother, or he just flakes out on you, you will be on the hook for 100% of the loan. And vice-versa. Your write up ought to document what happens if one of you flakes out on paying agreed upon amounts, but still expects there ownership share at the time of sale. That said, if you're trying to be mathematically fair about apportioning ownership, you could do something like the below to try and factor in the various issues into the money flow: The above has the benefit that you can start with a different ownership split (34/66, 25/75, etc.) if one of you wants to own more of the property.", "title": "" } ]	fiqa
872b35da62e22d367c79f2c96d480546	Consolidate my debt? Higher APR, but what does that actually mean?	[ { "docid": "af1d3cfb1e1f06493e0d3358116d4882", "text": "\"There's a cliche, \"\"out of the frying pan and into the fire\"\". I've never had the occasion to use it till now. I understand some people find they have a dozen cards and struggle to keep organized. An extra percent or two seems worth the feeling of just one payment to make. In your case, 3 checks (or online payments) per month shouldn't push you to a bad decision. Twice the interest? No thanks. Just make the minimum payments on the two lower rate cards, and pay all you can to the highest rate. Do all you can to cut expenses. The only way out of this is to change your habits avoiding what got you here in the first place.\"", "title": "" }, { "docid": "bb1e8ce3c6cba1a3590952b384e950f2", "text": "does that mean that 30% of my monthly payment goes to interest? No, it's much worse then that. The APR is the annual percentage rate. An APR of 30% on $23,000 in debt that means you'll be charged $6,900 in interest for the year. You'll actually owe slightly less since you are reducing your principal slightly over the course of the year. If your monthly payment is $800, $575 of that will be going to interest. That means that over 70% of your monthly payment is going just to interest. This deal makes no sense at all! You'd be better off simply transferring all of your balances on to the credit card with the highest interest rate. You'd be paying almost $200 a month for the 'convenience' of writing one check rather than three.", "title": "" }, { "docid": "f469de3a87578e7a61a6c7eb70775a2b", "text": "No, it means that each year (Annual Payment Rate) you are accruing interest at 29.8%. If your principal is $10,000, that means you are gaining $3,000 of debt per year in addition to this, excluding payments you make/interest on interest.", "title": "" }, { "docid": "9717654e0d93091df54cca67144ad4df", "text": "Your question indicates you really don't have a good grasp on personal finance. you might want to read a book or two. I'd recommend attending Financial Peace University, but my buddy Joe Taxpayer would throw an egg at me for that. Please take some sort of class. In the mean time, here is your plan: Pay this off do not borrow more.", "title": "" }, { "docid": "d1dcb2257dda7f37eb2929dba47371bf", "text": "No. It means each month the total amount you owe goes up by a factor of (1+0.298/12). So if you owed $23K at the beginning of the month, at the end you owe a total of 23K*1.0248=$23,571. Then subtract the $804 you are paying. If you want to think of it in terms of interest and principal, you are paying $571 a month in interest and 233 toward principle, I guess. Paying off debt with a lower interest rate using debt with a higher interest rate is throwing a lot of money away and impoverishing yourself needlessly. Psychology can't get around that. If you want a psychological aid, decide how much you are going to pay toward these debts and have it automatically deducted from your paycheck so you never see it. Make the minimum payment on every debt you have except the one with the highest interest rate. Pay the very most you can toward that. Then when it is paid off, move to the next highest. Do all your spending out of the lowest rate card, or avoid using these credit cards until your financial discipline and resources allow you to pay all credit cards off completely at the end of each month.", "title": "" } ]	[ { "docid": "a5b92a33a768b2c9518af6780efc58ef", "text": "\"I had to apply for an American Express card, which was also rejected. Then I had searched for a Marbles Credit Card Stop applying for credit cards/loans. Doing so is just making your credit rating worse. Credit agencies will downgrade your credit rating if they see lots of signs of credit checking. It's a sign you're desperately looking for credit, which you are...! 44.9% APR This is very expensive credit. You can get personal loans on the high street for 3-4%. 44.9% is really bad value. You're simply going to make the situation worse. Am I taking off a loan from website as amingos loans to help me build up my credit rating Again this is 44% interest! You also need a guarantor. So you're not only going to get yourself in trouble but a family member too: don't do this! This will only help your credit rating if you pay it back successfully, which given your situation seems like a risk. Contact the Money Advice Service or the National Debt Line. Explain your situation in detail to them. They are a government-backed service designed for people in your situation. They will offer practical advice and can even help negotiate with your creditors, etc. Here's some general advice about getting out of debt from Money Saving Expert Traditional debt help says 'never borrow your way out of a debt problem'. But this ignores the varying cost of different debts. The MoneySaving approach is: \"\"Never borrow more to get out of a debt problem.\"\"\"", "title": "" }, { "docid": "83e94f38bf252c7a20aba2e10fc22b10", "text": "That's really high for short term debt. Do some research, short term is lower risk generally so rates are low. I'm not gonna waste my time but it would have to be real junk to pay close to that high.", "title": "" }, { "docid": "1c01d04b4898393b0ca7d236b6be9cbc", "text": "Sounds like you are drowning in debt. Why not just stop paying? It will ruin your credit, but eventually you might be able to settle for much less than you owe and a reasonable interest rate. You will then have a long road to recover you credit, but IMHO this road is much longer and stressful. Hey, you are paying a high interest rate because you are EXPECTED to default. If you were expected to pay back your rates would be lower!", "title": "" }, { "docid": "8a1f39931d478f146422f20709cd9041", "text": "\"Ditto other answers, but I'd add there's a lot of psychology going on in a sale. If you're paying cash, you presumably have a pretty fixed upper limit on what you can spend. But if you're getting a loan, a large increase in the price of the car may sound like just a small addition to the monthly payment. Also, these days dealers often try to roll \"\"extended warranties\"\" into the loan payment. Most people can't calculate loan amortizations in their heads -- I'm pretty good at math, and I need a calculator to work it out, assuming I remember or wrote down the formula -- a dealer can often stick a piece of paper in front of you saying \"\"Loan payment: $X per month\"\" with fine print that says that includes $50 for the extended warranty, and most people would just say, \"\"oh, okay\"\".\"", "title": "" }, { "docid": "3dfba7595dbb91e360d60b0b825f095b", "text": "This was my exact thought when I first heard. It just sounds like inflation to me & I don't understand the logic. If everyone on average gets say...a ~3% boost on their score, why wouldn't banks just adjust their standards by 3%?", "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": "4a5d9fd18704adeef6278900266fbf8d", "text": "\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \"\"credit representation\"\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\"", "title": "" }, { "docid": "8d4b58afaadd9a66f918ccf05b751546", "text": "As usual it depends, but fundamentally, an interest rate is just a function of a party's creditworthiness and the length of time the money is being lent out for. So, no, if your credit entitles you to a 3% APR on a 60 month term, then it should entitle you to a better interest rate over a 30 month term. Perhaps not double, but better.", "title": "" }, { "docid": "7c968fca500d16aa2342cde86daa689b", "text": "Finding a way to pay down credit debt is important, because you're probably paying in the high teens in APR. 401k should be last resort. Have you researched other options? E.g loan consolidation If you don't mind me asking, how did you get that far in debt?", "title": "" }, { "docid": "0b48baf42307cd1e28e47faa2d310556", "text": "Your utilization ratio history is irrelevant to its impact on your credit score. If you run up 80% of your utilization In January, then pay it back to 10% in March, your score in March will reflect the new reduced ratio with no memory of the 80% utilization last month. With that said, don't go around overspending just because you have 0% apr for a little bit. Spend what you would spend with cash.", "title": "" }, { "docid": "073b3eb0dee6ddfc8dd179b6ad9294c0", "text": "This can mean a few things to me. Some of which has been mentioned already. It can mean one (or all) of the following to me: You take out a new credit card and transfer ALL other credit balances to it. (Only good if you destroy the others, this is a 0% offer, AND you plan on paying this card off furiously.) You do the loan thing mentioned earlier. You go to a credit consolidation service who will handle your paying your payments and you send them one payment each month. (Highly discourage using them. A majority of them are shady, and won't get do what they say they will do. Check Better Business Bureau if you find yourself considering them as an option.) In the first two cases, you are just reducing the number of hands reaching into your bank account. But keep in mind, doing this is not the same as paying off debt. You can't borrow your way out. You can do this as part of your plan, but do so CAREFULLY.", "title": "" }, { "docid": "5fb7c86c1640590eceb4aff8ad47c4e1", "text": "So, in general, pay to the higher interest rate. Some contrived reasons you would want to pay your auto loan more could be:", "title": "" }, { "docid": "4ab66ae14d7dfa451a0cbb49a4f38289", "text": "This is more an /r/personalfinance question, but I'll give my 2 cents. No matter what, the fund you invest in is going to be subject to risk, so you could end up losing money. It would definitely be a gamble. If you have other debt at higher APR than the loan, it could be beneficial to pay that off using extra loan proceeds.", "title": "" }, { "docid": "8d2165cf9b5f612c3205f2a984a49d0d", "text": "You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.", "title": "" }, { "docid": "cb01b43af8a14be26c06ee2123239bbd", "text": "I'm surprised no one has picked up on this, but the student loan is an exception to the rule. It's inflation bound (for now), you only have to pay it back as a percentage of your salary if you earn over £15k (11% on any amount over that I believe), you don't have to pay it if you lose your job, and it doesn't affect your ability to get credit (except that your repayments will be taken into account). My advice, which is slightly different to the above, is: if you have any shares that have lost more than 10% since you bought them and aren't currently recovering, sell them and pay off your debts with those. The rest is down to you - are they making more than 10% a year? If they are, don't sell them. If your dividends are covering your payments, carry on as you are. Otherwise it's down to you.", "title": "" } ]	fiqa
b69a971071d24fafd2d836a19018db56	How can I help my friend change his saving habits?	[ { "docid": "2078749ac7c8ba76f3c1a366ffdb40d3", "text": "\"If he's not used to cooking, recipes might not be enough. Maybe he needs cooking lessons. I used to think if you could read, you could cook -- but I grew up \"\"helping\"\" my mom in the kitchen and in the process learning what all the instructions in cookbooks meant. But it also might just be force of habit, in which case about all you could do would be to go over and cook for (or with) him. Maybe if you helped him get into a good habit, he would be more likely to continue with it. Otherwise, I don't see that there's much of anything you can do. If he isn't motivated to change his habits to save for his trip, you can't make him be.\"", "title": "" }, { "docid": "f9b1b712e547c0f15af98f56495f9ab7", "text": "\"Budgeting is the key. Saying that you need to eat out less and cook more is good, but ultimately difficult for some people, because it is very difficult to measure. How much eating out is too much? Instead, help him set up a monthly budget. Luckily, he's already got some built-in motivation: He's got a saving goal (trip) with a deadline. When you set up the budget, start here, figuring out how much per month he needs to save to meet his goal. After you've put the saving goal and the fixed monthly bills into the budget, address what he has left. Put a small amount of money into a \"\"fast food\"\" category, and a larger amount into a \"\"grocery\"\" category. If he spends everything in his fast food budget and still has the desire to go out, he'll need to raid his grocery budget. And if that is depleted, he'll need to raid his vacation budget. By doing this, it will be made very clear to him that he must choose between going out and taking the trip. In my opinion, using budgeting software makes the whole budgeting process easier. See this answer and this answer for more detailed recommendations on using software for budgeting.\"", "title": "" }, { "docid": "7f862bf3a7ed5e486e1b3c1e880bdf03", "text": "\"Get him the book \"\"Total Money Makeover\"\" (http://www.amazon.com/Total-Money-Makeover-Classic-Financial/dp/1595555277/ref=sr_1_1?ie=UTF8&qid=1448904191&sr=8-1&keywords=total+money+makeover) and tell him to follow the baby steps. If he comes to you again or doesn't follow your advice, remind him to follow the baby steps. Repeat as needed.\"", "title": "" }, { "docid": "b131c244e5b41d0188aca3f0f93a143c", "text": "\"In the end, this is really not a finance question. It's about changing one's habits. (One step removed, however, since you are helping a friend and not seeking advice for yourself). I've learned a simple cause & effect question - Does someone who wants (goal here) do (this current bad habit)? For example, someone with weight to lose is about to grab the chips to sit and watch TV. They should quickly ask themselves \"\"Does a healthy, energetic person sit in front of the TV eating chips?\"\" The friend needs to make a connection between the expense he'd like to save up for and his current actions. There's a conscious decision in making the takeout purchase, he'd rather spend the money on that meal than to save .5% (or whatever percent) of the trip's cost. If he is clueless in the kitchen, that opens another discussion, one in which I'd remark that on the short list of things parents should teach their kids, cooking is up there. My wife is clueless in the kitchen, I taught our daughter how to be comfortable enough to make her own meals when she wants or when she's off on her own. If this is truly your friend's issue, you might need to be a cooking spirit guide to be successful.\"", "title": "" } ]	[ { "docid": "e43f9d61bad87cff37e8eca0c342c31e", "text": "I find that when I have to justify why I want something to someone else, I eliminate impulse buys because I have to think about it enough to explain to someone else why it is desirable. Simply going through that process in my own head in advance of a conversation to justify it I talk myself out of a lot of purchases. I'm married, so I have these conversations with my wife. She is very supportive of me buying things that I want if they will bring value. If I wasn't married and couldn't control my spending, I'd find a good friend or relative that I trust, and I would create a trust with me as the primary beneficiary, and I would appoint a trustee who was willing to sign off on any purchase that I wanted to make after justifying it to them. If I had no friends or relatives that I trusted in that role, I'd hire a financial adviser to fill the same role. Contractually I would want to be able to terminate the arrangement if it was not working, but that would mean sacrificing the legal fees to alter the trust and appoint a new trustee.", "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": "0361a67b5826775b908255bc14234275", "text": "\"There are several tactics you might employ to help the situation. You have two options, one is to increase your income, the other is to reduce your expenditure. Paying off debt will also help but that may not apply to you. Most people find it easier to reduce expenditure, so I will explain that first of all. Then make sure you track your actual expenditure agains the budget, check it daily and make sure it is accurate, if you spend some money you didn't budget for then mark that down and make sure you budget for it going forward. Most people are surprised at how much they are actually spending, especially on trivial things like coffee, lunch at work etc. You will then find you can start to reduce this expenditure, maybe by bringing lunch to work, skipping coffee every other day etc. By doing a budget you can reduce your expenditure and hopefully have some money left over to save - put a line in your budget marked savings (ideally on the day you get paid so you don't spend it)! If you ned to save $x by Y date then work out how much that works out in a month and put that into your budget, if you haven't got enough spare to do that then onto stage 2 With regards to increasing income, the obvious way is to do some overtime at work - can you do that? Alternatively you can get a part-time job, maybe a hobby that pays money? I personally enjoy building web-sites as a hobby and I get about $20 a month from advertising on those, it's not much but it adds up over time. Finally how to actually save, what methods are there? Lots of options here, personally I buy shares with my savings, making sure I pick stocks that are currently cheap - this is quite risky and may not suit you but it works for me as I don't sell the shares until I actually need the money. Other options are regular savings accounts that pay a bonus after you've had the money in for (usually) 12 months etc. They tend to pay a bonus at the end so you are incentivised to not touch your cash but you can get it out if you really need it. You can also work out how much \"\"spare\"\" cash you have monthly and then give yourself an \"\"allowance\"\" each month that you can spend on impulse items, but make sure you stick to that. Good luck!\"", "title": "" }, { "docid": "0bc1ec1dffc69de084d9bb843f03b221", "text": "\"So here's the sad truth. He might actually be making a return on his investment. Not because it's right or because the system works, but in all these schemes there are a range of people that actually do make money. In addition to that, there is that fact that he \"\"believes\"\" that he is doing a good thing, and is unwilling to discuss it. So, if he is making, even a tiny return, and really believes that he is making a large return, or that that large return is just around the bend, your never going to convince him otherwise. You have two real options; If he will listen, go though and look at money in v.s. money out. If money out is larger then money in, your screwed. Make sure to point out that he should look at real money in (left a bank account) and real money out (deposited to a bank account). Again be prepared for the fact that he is actually making money. Some people in the pyramid will make money, it's just never as much, or as many people as they make it out to be. Don't attack the system, attack other aspects. Try and argue liquidity, or FDIC insurance. Again not trying to show why the system is bad, but why a investment in foo instead may be better. If nothing else, go with diversify. Never put all your money in one spot, even if it's a really good spot. At least in that case he will have some money left over in the end. That said, your friend may not go for it. May just put on blinders, and may just stick finger in ears. Move to option two. Respect his wishes, and set boundaries. \"\"Ok, I hear you, you like system X, I won't bring it up again. Do me a favor, don't you bring it up again either. Let's just leave this with religion and politics.\"\" If he continues to bring it up, then when he does, just point out you agreed not to discuss the issue, and if he continues to push it, rethink your friendship. If you both respect one another, you should be able to respect each others' decisions. If you can't then, sadly, you may need to stop spending time with one another.\"", "title": "" }, { "docid": "a7164feb9ee4f3426bd83df83e9784f9", "text": "I believe the only thing you haven't mentioned to him is the possibility that his activity is criminally fraudulent. I would sit him down, and say something substantially similar to the following: We've talked about your investment before, and I know you believe it's fine. I just want to make sure you understand that this is very likely fraudulent activity. I know you believe in it, but you've said you don't understand how or why it works. The problem with that is that if it is a fraud you can't protect yourself from criminal prosecution because you didn't understand what you were doing. The prosecutor will ask you if you asked others to give you or the organization money, and then they will convict you based on trying to defraud others. It doesn't matter whether you did it on purpose, or just because you believed the people you are investing in. So I very strongly advise you to understand exactly what the system is, and how it works, and then make sure with a lawyer that it's legal. If it is, then hey, you've learned something valuable. But if it's not, then you will save yourself a whole lot of trouble and anguish down the road if you step away before someone you attract to the investment decides to talk to their accountant or lawyer. A civil lawsuit may be bad, but if you're criminally prosecuted it will be so much worse. Now that I've said my piece, I won't talk to you about it anymore or bother you about it. I wish you luck, and hope that things work out fine. I wouldn't talk to the police or suggest that I'd do anything of that nature, without proof then there's no real way to start an investigation anyway, and unfortunately scams like this are incredibly hard to investigate, so the police often spend little to no time on them without a high level insider giving up evidence and associates. Chances are good nothing would happen to your friend - one day the organization will disappear and he won't recover any more money - but there's a distinct possibility that when that happens, the people below him will come for him, and he won't be able to look further up the chain for help. Perhaps the threat of illegal activity will be enough to prevent him from defrauding others, but if not I think at least you can let it go, and know that you've done everything for him that might work.", "title": "" }, { "docid": "4f90fcf8c3bab693c51c6dbe1ed7a141", "text": "\"First and foremost you must remember that they are people (something I don't think you have trouble with, but others might). When dealing with increasingly desperate financial struggles, it's not uncommon to allow financial trouble to define you, or for others to see you only as \"\"poor\"\". Money is a human creation. It's not real, like fire or water, and \"\"money problems\"\" is a misnomer. Whatever problems they have, money is only one symptom. Often, dealing with those deeper human problems, such as lack of confidence, depression, fear or behavioral issues, is the key to correcting \"\"downstream\"\" problems like poor money management. Not that learning how to manage money isn't important, but it doesn't sound like that is the primary issue in this case. Westerners tend to view money trouble as distinct from other problems. The answer to money troubles is often understood to be \"\"more money\"\" or \"\"smarter money\"\" - earn more or spend better. It helps to step back and look beyond finances. What's going in their lives? How does that make them feel? Do they feel unimportant or valueless? How's their family life? Do they have good emotional support, or are they running \"\"on empty\"\", trying to fill the emptiness with other things (like games, for example). (Simply telling them to stop purchasing games, for example, without finding a better replacement just perpetuates the feelings of shame, valuelessness and emptiness.) Discovering the deeper elements of your friends' situation is much more complicated than giving them money or paying for a financial counselor (neither of which are bad things), but it may make a tremendous difference not just in your friends' bank account, but in their lives as well. My wife and I have experienced all of this first-hand, so I know the predicament you are in. We've even had people in tough financial situations live in our home with us. In all the situations in which we've been close enough to understand context, money wasn't the primary issue. It's always been something else, more often than not family, but not always. I've found the book When Helping Hurts helpful for gaining some perspective, though it's not a perfect match (since it deals more with poverty on a grand scale). You may still find it helpful in terms of general principles, but, ultimately, each situation is going to be unique and no one-size-fits-all strategy exists to solve all problems. In the end, building a deeper relationship is the best path toward finding a long-term solution.\"", "title": "" }, { "docid": "1cbb06328a871c3e1d8c77ce2996a65a", "text": "\"You seem to have all your financial bases covered, and others have given you good financial advice, so I will try to give you some non-financial ideas. The first and most important thing is that you are investing with a long time friend, so the dynamics are a lot different that if you had recently met a stranger with an \"\"interesting\"\" new idea. The first thing you need to ask yourself is if your friendship will survive if this thing doesn't go well? You've already said you can afford to lose the money so that's not a worry, but will there be any \"\"recriminations?\"\" The flip side is also true; if the venture succeeds, you should be able to go further with it because he's your friend. You know your friend better (back to grade school) than almost anyone else, so here are some things to ask yourself: What does your friend have that will give him a chance to succeed; tech savvy, a winning personality, a huge rolodex, general business savvy, something else? If your guardian angel had told you that one of your friends was planning to embark on an internet/advertising venture, is this the one you would have guessed? Conversely, knowing that your friend was planning to do a start up, is this the kind of venture you would have guessed? How does \"\"internet\"\" and \"\"advertising\"\" fit in with what you are doing? If this venture succeeds, could it be used to help your professional development and career, maybe as a supplier or customer? Can you see yourself leaving your current job and joining your friend's (now established) company as a vice president or acting as a member of its board of directors, the latter perhaps while pursuing your current career path? Are your other mutual friends investing? Are some of them more tech savvy than you and better able to judge the company's prospects of success? To a certain extent, there is \"\"safety in numbers\"\" and even if there isn't, \"\"misery loves company.\"\" On the upside, would you feel left out if everyone in your crowd caught \"\"the next Microsoft\"\" except you?\"", "title": "" }, { "docid": "97ec84ecff7b22fecfb6849e1dc8fa5a", "text": "\"There is a saying in business: what gets measured gets done. Track every expense you make. Later, look over what you have learned. If 5% of your total budget is going to something frivolous, maybe you could halve it? If 1% or 0.1% is going to that frivolous expense, there's not much to be gained even by eliminating it. If you spend $200/mo on coffees, dropping those will help. If you spend $10/mo on coffees, you need to look elsewhere for your big savings. Have a target: I want to put $X into savings each month. Therefore I can only spend $Y. What do you have to change about last month's spending patterns to get down to $Y? Where are the easy targets for you? They will be different than the easy targets for me. What absolutely cannot change for you? Once you know the costs of what you're doing, you will know where it's possible to save, and where it's \"\"worth it\"\" to economize.\"", "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": "3e1626a8841ae03410334dd28d884510", "text": "\"If one takes a slightly more expansive view of the word \"\"saving\"\" to include most forms of durable asset accumulation, I think the reason some do and most don't is a matter of a few factors, I will include the three that seem obvious to me: Education Most schools in the US where I live do not offer personal finance courses, and even when they do, there is no opportunity for a student to practice good financial habits in that classroom setting. I think a simple assignment that required students to track every penny that they spend over the period of a few months would help them open their eyes to how much money is spent on trivial things that they don't need. Perhaps this would be more effective in a university setting where the students are usually away from home and therefore more responsible for the spending that occurs on their own behalf. Beyond simple education about personal finances, most people have no clue how the various financial markets work. If they understood, they would not allow inflation to eat away at their savings, but that's a separate topic from why people do not save. Culture Since much of the education above isn't happening, children get their primary financial education from their parents. This means that those who are wealthy teach their children how to be wealthy, and those who are poor pass on their habits to children who often also end up poor. Erroneous ideas about consumption vs. investment and its economic effects also causes some bad policy encouraging people to live beyond their means and use credit unwisely, but if you live in a country where the average person expects to eat out regularly and trade in their automobiles as soon as they experienced their highest rate of depreciation, it can be hard to recognize bad financial behavior for what it is. Collective savings rates reflect a lot of individuals who are emulating each other's bad behavior. Discipline Even when someone is educated about finances, they may not establish good habits of budgeting regularly, tracking spending, and setting financial goals. For me, it helps to be married to someone who has similar financial goals, because we budget monthly and any major purchases (over $100 or so) must be agreed upon at the beginning of the month (with obvious exceptions for emergencies). This eliminates any impulsive spending, which is probably 90% of the battle for me. Some people do not need to account to someone else in order to spend wisely, but everyone should find a system that works for them and helps them to maintain some financial discipline.\"", "title": "" }, { "docid": "71b21fd13403926ec1a6b658feec315f", "text": "Talk about opportunity cost. Show a rope, and put a tag with him on the end of it. Explain that since he has max out his credit, he can no longer get more. Without more credit here are the things he can't have The key to illustrate is that all the money he makes, for the next several years is obligated to the people he has already borrowed it from. Try to have him imagine giving his entire paycheck to a bank, and then doing that for the next five years. To drive it home, point out that there are 5 super bowls, 5 college championship games, 5 final fours, 5 annual concerts he likes, 5 model years of cars, 5 or more iPhone versions in those five years. Or whatever he is into. 5 years of laptops, 5 years of fishing trips. These things are not affordable to him right now. He has already spent his money for the next 5 years, and those are the things he cannot have because he is, in fact, out of cash. Furthermore, if he continues, the credit will dry up completely and his 5 year horizon could easily become ten. To illustrate how long 5 or 10 years is, have him remember that 10 years ago he might have been in college or the military. That 5 years ago Facebook was no big thing. That 5 years ago the Razr was an awesome phone. That 5 years ago we had a different president.", "title": "" }, { "docid": "dc7a9ca4ef430454530cd472cd38ccca", "text": "\"I agree with JoeTaxpayer's answer. The question you should be asking is not \"\"how do I spend more\"\" but \"\"how do I become happier\"\". From what you say, it may be that you could increase your happiness simply by cutting back on these aggressive attempts to save a few bucks here and there. At the same time, if you do this, on some level your personality is probably not the type that would allow to simply \"\"forget it\"\". I think many frugal people are somewhat as you describe: they don't like wasting money. In such cases, often what matters is not so much the actual saving money as the feeling of saving money. Therefore, I'd suggest that you take a look at which of the \"\"money-losing\"\" activities you mention are really worth it. The easiest ones to drop would be things like the home-improvement project, which even you acknowledge does not save you money. If you like saving money, give yourself a pat on the back when you hire the contractor. If you want, run the numbers so you can \"\"prove\"\" to yourself how much money you are saving by not doing the work. For some of the other things, it may be that spending time to save a small amount can \"\"gamify\"\" an everyday experience and make it more interesting. For instance, comparing products to save a few bucks is not necessarily bad unless you actually don't like doing it. If spending a few hours comparing two toaster ovens on Amazon or whatever makes you feel good, go for it; it's no worse than spending a few hours watching TV. By acknowledging that you get something out of it --- the feeling of getting a bargain --- and savoring that, you can feel better about, and also potentially \"\"get it out of your system\"\" so that you won't feel the need to do it for every little thing. We all have our little pet obsessions, and it's possible to acknowledge that they're irrational, while still accepting them as part of your personality, and finding a way to satisfy them in a controlled manner that doesn't stress you out too much.\"", "title": "" }, { "docid": "3a43fd02236810d0cff0fa9231398b1d", "text": "Let's suppose your friend gave your $100 and you invested all of it (plus your own money, $500) into one stock. Therefore, the total investment becomes $100 + $500 = $600. After few months, when you want to sell the stock or give back the money to your friend, check the percentage of profit/loss. So, let's assume you get 10% return on total investment of $600. Now, you have two choices. Either you exit the stock entirely, OR you just sell his portion. If you want to exit, sell everything and go home with $600 + 10% of 600 = $660. Out of $660, give you friend his initial capital + 10% of initial capital. Therefore, your friend will get $100 + 10% of $100 = $110. If you choose the later, to sell his portion, then you'll need to work everything opposite. Take his initial capital and add 10% of initial capital to it; which is $100 + 10% of $100 = $110. Sell the stocks that would be worth equivalent to that money and that's it. Similarly, you can apply the same logic if you broke his $100 into parts. Do the maths.", "title": "" }, { "docid": "ee5d74ade1c2a82fccc4e20ef2c6c286", "text": "Consolidation makes sense, if your friend has his act together and isn't going to run up more debt. Finding a lender will be tough. I'd suggest trying local credit unions, making sure first that there has been NO late or missed payments for 6-9 months. You need to talk to a human at a local lender who will give you informal guidance about what you need to approve, so you don't end up getting lots of declinations. If its more than $10k, it will be hard to get a loan like this from anyone. In that case, you need to focus on the smallest debts first, because your friend's cash flow is going to be pinched by making payments to multiple creditors. It's critical to pay all creditors on time for at least the minimum amount due. The problem is, once you start paying things down, the creditors will start ratcheting down credit limits. When that happens, you're at greater risk for getting nabbed with fees and higher minimum payments, which may be considered a universal default by other lenders. There isn't alot of detail here, but depending on income and the amount of debt, your friend should be prepared to file for Chapter 13 bankruptcy.", "title": "" }, { "docid": "3b756983b590de33a66abf890947706d", "text": "As a 20 year old who has just started earning enough to save, I suggest showing them the different types of lifestyles they could live in the future if they started saving now versus what their life would be like if they didn't save at all. Try showing them actual dollar values as well so it's not just an arbitrary idea.", "title": "" } ]	fiqa
e5c70ad5ed2160b352f269bd7f82846b	Understanding differences between S&P500 index-tracking ETFs	[ { "docid": "d238ec6fd530336220b4cc773858845b", "text": "\"Regarding SPY: \"\"One SPDR unit is valued at approximately 1/10 of the value of the S&P 500. Dividends are distributed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust.\"\" (source) These are depository receipts, not the actual stocks. Regarding IVV: \"\"The component stocks are weighted according to the total float-adjusted market value of their outstanding shares. The Fund invests in sectors, such as energy, information technology, industrials, financials, consumer staples, healthcare, telecom services, consumer discretionary and materials.\"\" (more here) VOO is the Vanguard S&P 500 ETF. The tracking error seems pretty small to me. I went to Google Finance and plotted the percent change for all four on one chart. They lie pretty much on top of one another. The actual dollar value of each one doesn't matter nearly as much as the fact that they move up and down almost in lock-step. There may be a larger difference going farther out, but for three separate financial products, the agreement is still remarkably good.\"", "title": "" }, { "docid": "5f4a5b3c153b0ee7c0d8c166d89883c0", "text": "\"Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, doesn't do it for free. He skims a little bit of money off the top. This is the \"\"fee\"\". The major S&P ETFs all have tiny fees, in the percents of a percent. If you're buying the index, you're probably looking at gains (or losses) to the tune of 5, 10, 20% - unless you're doing something really silly, you wouldn't even notice the fee. As often happens, when one guy starts doing something and making money, there will immediately be copycats. So now we have competing ETFs all providing the same service. You are technically a competitor as well, since you could compete with all these funds by just buying a basket of shares yourself, thereby running your own private fund for yourself. The reason this stuff even started was that people said, \"\"well why bother with mutual funds when they charge such huge fees and still don't beat the index anyway\"\", so the index ETFs are supposed to be a low cost alternative to mutual funds. Thus one thing ETFs compete on is fees: You can see how VOO has lower fees than SPY and IVV, in keeping with Vanguard's philosophy of minimal management (and management fees). Incidentally, if you buy the shares directly, you wouldn't charge yourself fees, but you would have to pay commissions on each stock and it would destroy you - another benefit of the ETFs. Moreover, these ETFs claim they track the index, but of course there is no real way to peg an asset to another. So they ensure tracking by keeping a carefully curated portfolio. Of course nobody is perfect, and there's tracking error. You can in theory compare the ETFs in this respect and buy the one with the least tracking error. However they all basically track very closely, again the error is fractions of the percent, if it is a legitimate concern in your books then you're not doing index investing right. The actual prices of each fund may vary, but the price hardly matters - the key metric is does it go up 20% when the index goes up 20%? And they all do. So what do you compare them on? Well, typically companies offer people perks to attract them to their own product. If you are a Fidelity customer, and you buy IVV, they will waive your commission if you hold it for a month. I believe Vanguard will also sell VOO for free. But for instance Fidelity will take commission from VOO trades and vice versa. So, this would be your main factor. Though, then again, you can just make an account on Robinhood and they're all commission free. A second factor is reliability of the operator. Frankly, I doubt any of these operators are at all untrustworthy, and you'd be buying your own broker's ETF anyway, and presumably you already went with the most trustworthy broker. Besides that, like I said, there's trivial matters like fees and tracking error, but you might as well just flip a coin. It doesn't really matter.\"", "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": "214445bd7aa7f6195f71f07ccf8b2df9", "text": "that's just it, though - they are splitting up the 1%! and in most cases, especially vanguard, they are splitting up far less. ETFs don't have 12b-1 fees. explaining why you're experiencing different returns for ETFs will almost certainly involve something other than their expense. again, this is especially true for vanguard. they have the cheapest ETFs around (though i think schwab beats them on a few now). i can only guess at the full compensation structure. betterment likely earns money on cash reserves and securities hypothecation (i guess?). they also charge a small fee from what i understand. finance is very slim these days. i guess i'm wondering what your ultimate question is. if it's the inter corporate compensation structure, above is my best guess. if it's about performance, then we need to compare the ETFs you are looking at. if it's about the fees on funds, i think we covered that! as an advisor, it's my experience that very specific inquiries about fees have a deeper concern. people hear a lot about being overcharged so cost is a very standard place for clients to initially look when trying to compare performance of portfolios or securities.", "title": "" }, { "docid": "4fa345328cc8d114885c2f61dce4428a", "text": "\"Buy the ETF with ticker \"\"SPY\"\". This will give you exposure to exactly the S&P 500 stocks, This is similar to the mutual fund suggestion by Ben Miller, except that the ETF has several advantages over mutual funds, especially as regards taxes. You can find information on the difference between ETF and mutual fund in other questions on this site or by searching the web.\"", "title": "" }, { "docid": "2defed52ca4aaa726ad0c553ef8bde99", "text": "The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere.", "title": "" }, { "docid": "37fe0e231579670b8da116d8a164aff4", "text": "great example of levered tracking error is any 2x/3x VIX etf. during periods of high volatility (like last week) you will be able to realize much higher returns on the underlying index as the levered and inverse ETFs are unable to replicate their intended performance using market securities. it is not uncommon to see the VIX up ~30% with levered ETFs only netting ~10-12% as opposed to the intended 60 or 90%, for example", "title": "" }, { "docid": "6b7485e54f14bda079a021ac233b0c0d", "text": "I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads..", "title": "" }, { "docid": "ddebe31d71f26aa6b26955c1a29cd63a", "text": "One difference is the bid/ask spread will cost you more in a lower cost stock than a higher cost one. Say you have two highly liquid stocks with tiny spreads: If you wanted to buy say $2,000 of stock: Now imagine these are almost identical ETFs tracking the S&P 500 index and extrapolate this to a trade of $2,000,000 and you can see there's some cost savings in the higher priced stock. As a practical example, recently a popular S&P 500 ETF (Vanguard's VOO) did a reverse split to help investors minimize this oft-missed cost.", "title": "" }, { "docid": "97d2304c009c366add62833f7a2fd500", "text": "You can check the website for the company that manages the fund. For example, take the iShares Nasdaq Biotechnology ETF (IBB). iShares publishes the complete list of the fund's holdings on their website. This information isn't always easy to find or available, but it's a place to start. For some index funds, you should just be able to look up the index the fund is trying to match. This won't be perfect (take Vanguard's S&P 500 ETF (VOO); the fund holds 503 stocks, while the S&P 500 index is comprised of exactly 500), but once again, it's a place to start. A few more points to keep in mind. Remember that many ETF's, including equity ETF's, will hold a small portion of their assets in cash or cash-equivalent instruments to assist with rebalancing. For index funds, this may not be reflected in the index itself, and it may not show up in the list of holdings. VOO is an example of this. However, that information is usually available in the fund's prospectus or the fund's site. Also, I doubt that many stock ETF's, at least index funds, change their asset allocations all that frequently. The amounts may change slightly, but depending on the size of their holdings in a given stock, it's unlikely that the fund's manager would drop it entirely.", "title": "" }, { "docid": "f104aaaa262a368acdac8f46ddc2c436", "text": "Index funds: Some of the funds listed by US SIF are index funds. ETFs: ETFdb has a list, though it's pretty short at the moment.", "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": "119a6b3a616e6ba5f32ab33c55c6b746", "text": "So, why or why should I not invest in the cheaper index fund? They are both same, one is not cheaper than other. You get something that is worth $1000. To give a simple illustration; There is an item for $100, Vanguard creates 10 Units out of this so price per unit is $10. Schwab creates 25 units out of this, so the per unit price is $4. Now if you are looking at investing $20; with Vanguard you would get 2 units, with Schwab you would get 5 units. This does not mean one is cheaper than other. Both are at the same value of $20. The Factors you need to consider are; Related question What differentiates index funds and ETFs?", "title": "" }, { "docid": "3623cb3175230cdde8f3cf5abed78175", "text": "\"Following comments to your question here, you posted a separate question about why SPY, SPX, and the options contract don't move perfectly together. That's here Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? I provided an answer to that question and will build on it to answer what I think you're asking on this question. Specifically, I explained what it means that these are \"\"all based on the S&P.\"\" Each is a different entity, and different market forces keep them aligned. I think talking about \"\"technicals\"\" on options contracts is going to be too confusing since they are really a very different beast based on forward pricing models, so, for this question, I'll focus on only SPY and SPX. As in my other answer, it's only through specific market forces (the creation / redemption mechanism that I described in my other answer), that they track at all. There's nothing automatic about this and it has nothing to do with some issuer of SPY actually holding stock in the companies that comprise the SPX index. (That's not to say that the company does or doesn't hold, just that this doesn't drive the prices.) What ever technical signals you're tracking, will reflect all of the market forces at play. For SPX (the index), that means some aggregate behavior of the component companies, computed in a \"\"mathematically pure\"\" way. For SPY (the ETF), that means (a) the behavior of SPX and (b) the behavior of the ETF as it trades on the market, and (c) the action of the authorized participants. These are simply different things. Which one is \"\"right\"\"? That depends on what you want to do. In theory you might be able to do some analysis of technical signals on SPY and SPX and, for example, use that to make money on the way that they fail to track each other. If you figure out how to do that, though, don't post it here. Send it to me directly. :)\"", "title": "" }, { "docid": "2649f29b989d8e7f895fca5b3d7d7194", "text": "\"At the bottom of Yahoo! Finance's S & P 500 quote Quotes are real-time for NASDAQ, NYSE, and NYSE MKT. See also delay times for other exchanges. All information provided \"\"as is\"\" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein. Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Orderbook quotes are provided by BATS Exchange. US Financials data provided by Edgar Online and all other Financials provided by Capital IQ. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. Thus, yes there is a DB being accessed that there is likely an agreement between Yahoo! and the providers.\"", "title": "" }, { "docid": "a6ee4e5de0eaac8cd605fe3bd7730482", "text": "\"You seem to be assuming that ETFs must all work like the more traditional closed-end funds, where the market price per share tends—based on supply and demand—to significantly deviate from the underlying net asset value per share. The assumption is simplistic. What are traditionally referred to as closed-end funds (CEFs), where unit creation and redemption are very tightly controlled, have been around for a long time, and yes, they do often trade at a premium or discount to NAV because the quantity is inflexible. Yet, what is generally meant when the label \"\"ETF\"\" is used (despite CEFs also being both \"\"exchange-traded\"\" and \"\"funds\"\") are those securities which are not just exchange-traded, and funds, but also typically have two specific characteristics: (a) that they are based on some published index, and (b) that a mechanism exists for shares to be created or redeemed by large market participants. These characteristics facilitate efficient pricing through arbitrage. Essentially, when large market participants notice the price of an ETF diverging from the value of the shares held by the fund, new units of the ETF can get created or redeemed in bulk. The divergence quickly narrows as these participants buy or sell ETF units to capture the difference. So, the persistent premium (sometimes dear) or discount (sometimes deep) one can easily witness in the CEF universe tend not to occur with the typical ETF. Much of the time, prices for ETFs will tend to be very close to their net asset value. However, it isn't always the case, so proceed with some caution anyway. Both CEF and ETF providers generally publish information about their funds online. You will want to find out what is the underlying Net Asset Value (NAV) per share, and then you can determine if the market price trades at a premium or a discount to NAV. Assuming little difference in an ETF's price vs. its NAV, the more interesting question to ask about an ETF then becomes whether the NAV itself is a bargain, or not. That means you'll need to be more concerned with what stocks are in the index the fund tracks, and whether those stocks are a bargain, or not, at their current prices. i.e. The ETF is a basket, so look at each thing in the basket. Of course, most people buy ETFs because they don't want to do this kind of analysis and are happy with market average returns. Even so, sector-based ETFs are often used by traders to buy (or sell) entire sectors that may be undervalued (or overvalued).\"", "title": "" }, { "docid": "162d2a7ad9d5eafea67b74c1c5ec389c", "text": "If you just want to track an index, then ETFs are, generally speaking, the better way.", "title": "" } ]	fiqa
b48561c72426b133957093899081eca0	I've tracked my spending and have created a budget, now what do I do with it?	[ { "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": "16ee4513724d6b52193893884b7ffea9", "text": "Having been in exactly this position (not in a debt hole, built a budget to get a better view of what spending is), I can say what the greatest gift it brings is: it's a decision tool. When you are spending out of only one account, you often make decisions based on the total money in the account. “Should we go out for dinner? Can I make this impulse purchase?” This is terrible, because many, if not all, of those dollars are already intended for certain future expenses like groceries, bills, etc. You can't see how many of those dollars are discretionary. A budget is like having many accounts. Instead of looking at your real account(s) to make spending decisions, you look at your budget lines. You to want impulse buy a gadget — do you have money remaining in a relevant budget line? If yes, the decision is yours, if no, the budget is telling you that you don't have dollars for that.* Similarly for more prosaic purchases — you want to splurge on some non-staple groceries to make a fancy dinner or try out a new recipe, and the budget line for Groceries will tell you if you can do that. Instead of looking at (e.g.) $6000 in a chequing account, you're looking at $600 (assigned) − $146.86 (spend) = $453.14 (available) in a monthly groceries budget line. Just like you can now see where your money has been going, by maintaining and using your budget lines, and having every single dollar you spend go through the budget (to show your totally assigned, total spent, and total remaining), you can continue to see where your money is going in near real-time. You're no longer looking at bills and statements to figure out what's going on and plan, you're looking at money flows and future intentions, as you should be. This approach to budgeting has completely changed our finances. So that's what a budget is for: real-time spending decision-making control over your money, which for us has translated into a lovely mix of painless austerity in spending categories where austerity is smart, and guilt-free spending in more indulgent categories because we have already determined exactly how much we can afford and wish to spend. * A budget line with insufficient funds doesn't actually take the decision entirely away from you though. If a budget line doesn't have funds to spare for a given purchase, you can still make the purchase — but now you're also making the decision to go and revise your budget, taking dollars away from other budget lines to adjust the line you've overspent, to keep the budget accurate.", "title": "" }, { "docid": "a49be175234581b26996b6098e6cfe73", "text": "I think the answers you're going to receive are all going to be a bit subjective. Looking at it from a high-level point of view, having this budget nailed down lets you analyze: Now you've got your budget, stick to it! This is really the most important part. You've done your homework, now make sure you don't exceed it without a good reason. If you're under budget in any given month, have a plan on what to do with the excess funds. If you go over budget on a certain area, you can react accordingly. I, personally, recommend hiring a financial planner. Ours has been a huge help with looking further down the line than we had been originally. If you show up to your first meeting with an FP and have this budgetary breakdown ready to go, you'll probably get a high-five. Well done, you!", "title": "" }, { "docid": "a2a7a4cc7c7100e5b989cfc2ae21b692", "text": "\"Whether you use a professional financial planner or not, the basic steps are the same. It seems like you have done some detailed work on step 1, perhaps less detail (but not necessarily insufficient detail) on step 2, and concluded that you don't need to change anything in step 3. That's fine - if you concluded that you don't need to change anything, then you don't need to change anything! What you need to do from now on is There is nothing complicated or difficult about any of this. To paraphrase Charles Dickens, \"\"Income greater than expenditure - result, happiness. Income less than expenditure - result misery.\"\" Talking to a financial planner might encourage you to spend less (though of course you just acquired a new expense, \"\"buying financial planning advice\"\"), just like joining to Weight Watchers might encourage you to eat less or exercise more. But in the end, it's you who have to take the action - other people can't do it for you.\"", "title": "" }, { "docid": "4212b0339f7fe317e16e428659c08334", "text": "\"Use the budget to drive down spending so you can save (for retirement, for college, for expenses) and so you can pay off your mortgage early. Some, (Dave Ramsey, for example) advocate for an \"\"Envelope system\"\"... If your budget says 100 a month for restaurants, then at the beginning of the month, you put 100 into that envelope. Once you've spent that much on restaurants that month, you're done for the month. On the other hand, if you don't spend the 100, then you have two choices: either you can adjust the budget downward and put the money somewhere else (like your Mortgage) or you can build up cash in that account so you can afford a really expensive restaurant in a few months.\"", "title": "" } ]	[ { "docid": "ee510b366ce1f9f90801a38b00b1aefc", "text": "A budget is a plan for spending money in the future. Tracking spending is only looking at what happened in the past. Many people only track their spending, a proper budget can be key to achieving financial goals. You might earn enough and not spend frivolously enough that you aren't hamstrung by lack of a budget, but if you have specific financial goals, odds are you'll be more successful at achieving them by budgeting rather than only tracking spending. I'm a fan of zero-sum budgets, where every dollar is allocated to a specific bucket ahead of time. Here's a good write-up on zero-sum budgets: How and Why to Use a Zero-Sum Budget", "title": "" }, { "docid": "e398e303fb3180307362ca764a3a80b9", "text": "\"As your financial situation becomes more complex, it becomes increasingly more difficult to keep track of everything with a simple spreadsheet. It is much easier to work with software that is specifically designed for personal finances. A good program will allow you to keep track of as many accounts as you want. A great program will completely separate the different account balances (location of the money) from the budget category balances (purpose of the money). Let me explain: When you set up the software, you will enter in all of your different bank accounts with their balances. Perhaps you have three savings accounts and two checking accounts. It doesn't matter. When you are done entering those, the software will total them up, and the next job you have is assigning this money into different budget categories: your spending plan. For example, you might put some of it into a grocery category, some into an entertainment category, some will be assigned to pay your next car insurance bill, and some will be an emergency fund. (These categories are completely customizable, and your budget can be as broad or as detailed as you wish.) When you deposit your paycheck, you assign that new income into budget categories as well. It doesn't matter at this point which accounts your money are located in; the only thing that matters is that you own this money and you have access to it. Now, you might want to use a certain account for a certain budget category, but you are not required to do so. (For example, your grocery category money will probably be in your checking account, since you will be spending from it regularly. Your emergency fund will hopefully be in an account that earns a little higher interest.) Once you take this approach, you might find you don't need as many bank accounts as you thought you did, because the software does the job of separating your money into different \"\"accounts\"\" for different purposes. I've written before about the different categories of personal finance software. YNAB, Mvelopes, and EveryDollar are three examples of software that will take this approach of separating the concepts of the bank account and the budget category.\"", "title": "" }, { "docid": "a8eb6f1b403c5bdc542f7288b4ed7b86", "text": "Is your credit card spending on things outside the categories listed in your question? I generally don't put credit card expenditures in their own category of spending because I'm buying things like gas and groceries, etc. I track all spending whether from my checking account (bill autopay) or credit card account as spending in budget categories, and I just transfer money from my checking account to my credit card account to cover anything that was spent there during the previous month.", "title": "" }, { "docid": "4b65a7bc2e4502b2f706e84c5fc12f04", "text": "\"As THEAO suggested, tracking spending is a great start. But how about this - Figure out the payment needed to get to zero debt in a reasonable time, 24 months, perhaps. If that's more than 15% of your income, maybe stretch a tiny bit to 30 months. If it's much less, send 15% to debt until it's paid, then flip the money to savings. From what's left, first budget the \"\"needs,\"\" rent, utilities, etc. Whatever you spend on food, try to cut back 10%. There is no budget for entertainment or clothes. The whole point is one must either live beneath their means, or increase their income. You've seen what can happen when the debt snowballs. In reality, with no debt to service and the savings growing, you'll find a way to prioritize spending. Some months you'll have to choose, dinner out, or a show. I agree with Keith's food bill, $300-$400/mo for 3 of us. Months with a holiday and large guest list throws that off, of course.\"", "title": "" }, { "docid": "ccd5231b27144cc325ae0292bc69d661", "text": "\"I started storing and summing all my receipts, bills, etc. It has the advantage of letting me separate expenses by category, but it's messy and it takes a long time. It sounds from this like you are making your summaries far too detailed. Don't. Instead, start by painting with broad strokes. For example, if you spent $65.17 at the grocery store, don't bother splitting that amount into categories like toiletries, hygiene products, food, and snacks: just categorize it as \"\"grocery spending\"\" and move on to the next line on your account statement. Similarly, unless your finances are heavily reliant on cash, don't worry about categorizing each cash expense; rather, just categorize the withdrawal of cash as miscellaneous and don't spend time trying to figure out exactly where the money went after that. Because honestly, you probably spent it on something other than savings. Because really, when you are just starting out getting a handle on your spending, you don't need all the nitty-gritty details. What you need, rather, is an idea of where your money is going. Figure out half a dozen or so categories which make sense for you to categorize your spending into (you probably have some idea of where your money is going). These could be loans, cost of living (mortgage/rent, utilities, housing, home insurance, ...), groceries, transportation (car payments, fuel, vehicle taxes, ...), savings, and so on -- whatever fits your situation. Add a miscellaneous category for anything that doesn't neatly fit into one of the categories you thought of. Go back something like 3-4 months among your account statements, do a quick categorization for each line on your account statements into one of these categories, and then sum them up per category and per month. Calculate the monthly average for each category. That's your starting point: the budget you've been living by (intentionally or not). After that, you can decide how you want to allocate the money, and perhaps dig a bit more deeply into some specific category. Turns out you are spending a lot of money on transportation which you didn't expect? Look more closely at those line items and see if there's something you can cut. Are you spending more money at the grocery store than you thought? Then look more closely at that. And so on. Once you know where you are and where you want to be (such as for example bumping the savings category by $200 per month), you can adjust your budget to take you closer to your goals. Chances are you won't realistically be able to do an about-face turn on the spot, but you can try to reduce some discretionary category by, say, 10% each month, and transfer that into savings instead. That way, in 6-7 months, you have cut that category in half.\"", "title": "" }, { "docid": "f69a7f2f8a1c722e5a19a4cc9862faeb", "text": "You can fairly simply make a spreadsheet in your favorite spreadsheet application (or in Google Docs if you want portability). I like to make an overview page that shows how much I take in per month and what fixed bills come out of that, then break the remaining total into four to get a weekly budget. Then, I make one page per month with four columns (one per week), with each row being a category. Sum the categories at the bottom, and subtract from your weekly total: voila, a quick reference of how much you can spend that week without going over budget. I then make a page for each month that lists what I bought and how much I spent on it, so I can trace where my money's gone; the category total is just a summation of the items from that page that belong in that category. Once you have a system, stop checking your bank balance except to ensure your paycheck is going in alright. Use the spreadsheet to determine how much you can spend at any time. Then make sure you pay off everything on the card before the end of the month so you don't incur interest.", "title": "" }, { "docid": "f7c21c567f8858dae9181f8fb9ab5db7", "text": "My wife and I do this. We have one account for income and one for expenditures (and around 7 others for dedicated savings.) Doing this we are forcing ourselves to keep track of all expenditures as we have to manually transfer funds from one to the other, we try to do this periodically (every Wednesday) and then keep the expenditures within what is actually on the account. It is a really good way to keep track of everything. Bear in mind that our bank provides a fast handy smartphone app where we both can check our account as well as transfer funds in less than 10 seconds. (Fingerprint authentication, instant funds transfer as well as zero fees for transfers.) Right now we have a credit card each attached to the expenditures account, but earlier we only had a debit card each and no credit cards. Meaning that when the weekly funds ran out we where simply not able to pay. We did this to mimic living only on cash and when the cash runs out you simply have to stop buying stuff. And at the same time we could accrue quite a bit of savings. I would definitely recommend this if you have problems with over expenditures.", "title": "" }, { "docid": "8f5459f1cebd7e7c8731886b20bd6197", "text": "\"I see you have posted other questions regarding household budgets. This is a huge first step. Once you see what is coming in, then list everything that goes out regularly...and then try to break down what is leftover into spending, household maintenance, gifts, haircuts, whatever...it becomes very obvious if you have x to spend and you spend 3x. I budget a certain amount of discretionary money for both my husband and myself to spend each month. All of our basic expenses are covered under other categories, but I found out long ago that we each need some money to blow on Starbucks, DVD's, books, etc without having to defend or explain it. If we spend too much, it digs into the next month's amount, or if we are careful, we get to carry it over. I can impulse shop guilt free because it's budgeted in. Long story short, if you set up a budget and have an amount budgeted for most reasonable expenses, and see what is left over...it becomes harder to \"\"unwittingly\"\" overspend. When you are paying attention to your money, and start looking carefully at how you are spending it, you'll notice.\"", "title": "" }, { "docid": "43bcbeaea5441f622674e2cede1d0b6b", "text": "With your windfall, you've been given a second chance. You've become debt free again, and get to start over. Here is what I would recommend from this point on: Decide that you want to remain debt free. It sounds like you've already done this, since you are asking this question. Commit to never borrowing money again. It sounds overly simplistic, but if you stop using your credit cards to spend money you don't have and you don't take out any loans, you won't be in debt. Learn to budget. Here is what is going to make being debt free possible. At the beginning of each month, you are going to write down your income for the month. Then write down your expenses for the month. Make sure you include everything. You'll have fixed monthly expenses, like rent, and variable monthly expenses, like electricity and phone. You'll also have ongoing expenses, like food, transportation, and entertainment. You'll have some expenses, like tuition, which doesn't come up every month, but is predictable and needs to be paid. (For these, you'll can set aside part of the money for the expense each month, and when the bill comes, you'll have the funds to pay it ready to go.) Using budgeting software, such as YNAB (which I recommend) will make this whole process much easier. You are allowed to change your plan if you need to at any time, but do not allow yourself to spend any money that is not in the plan. Take action to address any issues that become apparent from your budget. As you do your budget, you will probably struggle, at first. You will find that you don't have enough income to cover your expenses. Fortunately, you are now armed with data to be able to tackle this problem. There are two causes: either your expenses are too high, or your income is too low. Cut your expenses, if necessary. Before you had a written budget, it was hard to know where your money went each month. Now that you have a budget, it might be apparent that you are spending too much on food, or that you are spending too much on entertainment, or even that a roommate is stealing money. Do what you need to do to cut back the expenses that need cutting. Increase your income, if necessary. You might find from your budget that your expenses aren't out of line. You live in as cheap a place as possible, you eat inexpensively, you don't go out to eat, etc. In this case, the problem isn't your spending, it is your income. In order to stay out of debt, you'll need to increase your income (get a job). I know that you said that this will slow your studies, but because you are now budgeting, you have an advantage you didn't have before: you now know how short you are each month. You can take a part time job that will earn you just enough income to remain debt free while maximizing your study time. Build up a small emergency fund. Emergencies that you didn't plan for in your budget happen. To remain debt free, you should have some money set aside to cover something like this, so you don't have to borrow when it comes up. The general rule of thumb is 3 to 6 months of expenses, but as a college kid with low expenses and no family to take care of, you won't need a huge fund. $500 to $1000 extra in the bank to cover an unexpected emergency expense could be all it takes to keep you debt free.", "title": "" }, { "docid": "498db99de29e752203935a5442bc5447", "text": "You have to track your spending for a month, down to the cent. Without those records, the person trying to help you has no real data. Even a week would be a start. Heck, try just doing this today. See if it works for you. Throughout each day: Each evening: At the end of a month (or week, or whatever period you want): Each day you do it successfully it will get easier. Let us know how it works out! Best wishes!", "title": "" }, { "docid": "0f7e29383446f4f67dd080e3f8938a28", "text": "\"As others have said, doing a monthly budget is a great idea. I tried the tracking expenses method for years and it got me nowhere, I think for these reasons: If budgeting isn't your cup of tea, try the \"\"pay yourself first\"\" method. Here, as soon as you get a paycheck take some substantial portion immediately and use it to pay down debt, or put it in savings (if you have no debt). Doing this will force you to spend less money on impulse items, and force you to really watch your spending. If you take this option, be absolutely sure you don't have any open credit accounts, or you'll just use them to make up the difference when you find yourself broke in the middle of the month. The overall key here is to get yourself into a long term mind set. Always ask yourself things like \"\"Am I going to care that I didn't have this in 10 years? 5 years? 2 months? 2 days even? And ask yourself things like \"\"Would I perfer this now, or this later plus being 100% debt free, and not having to worry if I have a steady paycheck\"\". I think what finally kicked my butt and made me realize I needed a long term mind set was reading The Millionaire Next Door by Tom Stanley. It made me realize that the rich get rich by constantly thinking in the long term, and therefore being more frugal, not by \"\"leveraging\"\" debt on real estate or something like 90% of the other books out there tell you.\"", "title": "" }, { "docid": "9bd0d9b20ae218aed0f289bcf2344589", "text": "My wife and I meet in the first few days of each month to create a budget for the coming month. During that meeting we reconcile any spending for the previous month and make sure the amount money in our accounts matches the amount of money in our budget record to the penny. (We use an excel spreadsheet, how you track it matters less than the need to track it and see how much you spent in each category during the previous month.) After we have have reviewed the previous month's spending, we allocate money we made during that previous month to each of the categories. What categories you track and how granular you are is less important than regularly seeing how much you spend so that you can evaluate whether your spending is really matching your priorities. We keep a running total for each category so if we go over on groceries one month, then the following month we have to add more to bring the category back to black as well as enough for our anticipated needs in the coming month. If there is one category that we are consistently underestimating (or overestimating) we talk about why. If there are large purchases that we are planning in the coming month, or even in a few months, we talk about them, why we want them, and we talk about how much we're planning to spend. If we want a new TV or to go on a trip, we may start adding money to the category with no plans to spend in the coming month. The biggest benefit to this process has been that we don't make a lot of impulse purchases, or if we do, they are for small dollar amounts. The simple need to explain what I want and why means I have to put the thought into it myself, and I talk myself out of a lot of purchases during that train of thought. The time spent regularly evaluating what we get for our money has cut waste that wasn't really bringing much happiness. We still buy what we want, but we agree that we want it first.", "title": "" }, { "docid": "d7f3055a6ea408d66f24c5675bb13b15", "text": "\"BLUF: Your question is subjective and as such, the answer varies from person to person. The rent you \"\"should be\"\" paying is the tricky part. Minimum is whatever is the least you can find. Maximum is the most you can afford. To be financially responsible, you would live as close to that minimum as you can bear. However, this can cause stress if you are trying to subsist on lower than you can actually bear. You have certain expenses that are required to survive. Housing, clothing, food. These are your needs. Everything else is convenience or luxury. Best way to develop a budget is to list the categories of everything you have spent over several months. Figure out a monthly amount for each one. Divide them up into groups of things you need, things that make life bearable, and things you can do without. Then start with your income and figure out how much you bring home each pay period. When you get paid, allocate the money to your needs until they're all covered. If there's anything left, fund the second group, then on to the third. Continue tracking your spending and adjust where you allocate the money. After 2-3 months, you'll start having a decent idea on how much you actually spend on each category. You'll probably find areas where you're spending a lot more than you realize. The method I've just described is the one advised by \"\"You Need a Budget\"\" software, but you don't need the software to use the method. Though it does help. Also, if there's any debt, that goes in with the 'needs' because we all need to pay our bills.\"", "title": "" }, { "docid": "704b2bcb28d2999847a056b205a74490", "text": "Do you plan a monthly budget at the beginning of each month? This might seem counter-intuitive, but hear me out. Doing a budget is, of course, critically important for those who struggle with having enough money to last the month. Having this written spending plan allows people struggling with finances to control their spending and funnel money into debt reduction or saving goals. However, budgeting can also help those with the opposite problem. There are some, like you perhaps, that have enough income and live frugally enough that they don't have to budget. Their money comes in, and they spend so little that the bank account grows automatically. It sounds like a good problem to have, but your finances are still out of control, just in a different way. Perhaps you are underspending simply because you don't know if you will have enough money to last or not. By making a spending plan, you set aside money each month for various categories in three broad areas: Since you have plenty of money coming in, generously fund these spending categories. As long as you have money in the categories when you go to the store, you can feel comfortable splurging a little, because you know that your other categories are funded and the money is there to pay those other bills. Create other categories, such as technology or home improvement, and when you need an app or have a home improvement project, you can confidently spend this money, as it has already been allocated for those purposes. If you are new to budgeting, software such as YNAB can make it much easier.", "title": "" }, { "docid": "1d2e532cb2e72389086f1be14335fde0", "text": "Yes. So? Are you saying that OP was just unlucky because he didn't realize that forex wasn't covered under SIPC? I would agree with that, but then, had he read the terms and conditions and considerable paperwork that he was required to sign, he would've known.", "title": "" } ]	fiqa
d7c5033793bf8ebfb9b94823ac2a045c	What's the catch with biweekly mortgage payments?	[ { "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": "c81c62b53c37a1d56b8be95b51b757ae", "text": "So the principle is true. Assuming that you get paid bi-weekly, you end up getting three paychecks two months during the year. Typically that is in January and July/August. So if things were different, and your mortgage was setup so you paid half a monthly payment each paycheck, then you would wind up making one full extra payment per year. Making that extra payment, most often, reduces the mortgage by 7 years on a 30 year note. While true, many of these companies charge exorbitant fees for the right for you to do so, so the principal reduction is not commensurate with what you are paying. You can simply do this yourself without paying fees. On those extra pay days, pay half a payment to principal only, and no fee, no fuss. This is pretty easy to do with most mortgage companies as they have online payments and it is just a matter of filling out a web form. For me this does not even cost a stamp as they pull from my checking account at another bank.", "title": "" }, { "docid": "6da16e402bf9c3b83f7e5d828925194f", "text": "\"Pete and Noah addressed the math, showing how this is, in effect, converting a 30yr to a ~23yr mortgage, at a cost, plus payment about 8% higher (1 extra payment per year). No magic there. The real issue, as I see it, is whether this is the best use of the money. Keep in mind, once you pay extra principal, which in effect is exactly what this is, it's not easy to get it back. As long as you have any mortgage at all, you have the need for liquidity, enough to pay your mortgage, tax, utilities, etc, if you find yourself between jobs or to get through any short term crisis. I've seen people choose the \"\"sure thing\"\" prepayment VS the \"\"risky\"\" 401(k) deposit. Ignoring a match is passing up a 50% or 100% return in most cases. Too good to pass up. 2 points to add - I avoided the further tangent of the tax benefit of IRA/401(k) deposits. It's too long a discussion, today's rate for the money saved, vs the rate on withdrawal. Worth considering, but not part of my answer. The other discussion I avoid is Nicholas' thoughts on the long term market return of 10% vs today's ~4% mortgage rate. This has been debated elsewhere and morphs into a \"\"pre-pay vs invest\"\" question.\"", "title": "" }, { "docid": "3c5a9302dc720a0ce0b07887b5d7b754", "text": "\"Making extra principal payments will reduce the term of your loan. I wouldn't sign up for a biweekly schedule, just do it yourself so you have more flexibility. A simple spreadsheet will allow you to play \"\"What if?\"\" and make it clear that extra principal payments are most effective early in the term of the loan. My wife and I paid off our home in less than 10 years with this approach. Some will say that the opportunity costs of not using that money for something else outweighs the gains. I would say that not having a mortgage has a positive impact on your cash flow and your assets (you own the home), which combine to create more opportunity, not less. That being said, It should be obvious that paying off higher interest debt first is the priority, (Paying off a zero percent interest car loan early is just foolish)\"", "title": "" }, { "docid": "ba0cd51c908d585d41f246ec408aa78a", "text": "Another thing to consider is that paying extra principal (either via one of these services, or by including something extra with your normal mortgage payment and designating that it go to principal rather than be held to reduce next month's payment, or just sending an additional payment to the bank and designating it as reducing the principal) shortens the term of your loan. Is this good? Maybe. Consider that banks lend with a variety of terms. Usually the 15-year fixed rate mortgage has a lower interest rate than the 30-year fixed-rate mortgage, and the 5-year home-equity-loan has an even lower rate. When you prepay your loan, your interest rate stays the same, but the bank gets its money back sooner. This makes more profit for the bank as it can then invest the money in other things. That profit could have been yours if you had made that investment instead of prepaying your mortgage.", "title": "" }, { "docid": "252746493a0e4309e5f8a4c89e7e6467", "text": "I'll preface this with saying that I'm not a finance or real estate professional, this is just how I understand the situation and what I'm doing: We just got a 30year/FHA mortgage, there's no prepayment penalty, and no fees associated with paying it biweekly. In fact (Wells Fargo), while the payments get withdrawn biweekly, they don't actually post to the mortgage until there's enough for a full payment. So essentially here are the benefits I'm realizing:", "title": "" }, { "docid": "865c8a688c3e9c8733ae2b8200948601", "text": "Interest is a fee that you pay in order to use someone else's money. Once you've made the deal, pretty much anything you do that reduces the total interest that you pay does so by reducing the time for which you get to use their money. As an extreme example, consider a thirty-year interest-only loan, with a balloon payment at the end. If you pay it off after fifteen years you pay half as much interest because you had the use of the money for half as long. The same thing happens when you make biweekly payments: you reduce the total interest that you pay by giving up the use of some of the borrowed money sooner. That's not necessarily bad, but it's also not automatically good.", "title": "" }, { "docid": "77c9635ad1324e547c59fc9eeb3af439", "text": "Depending on who you have the loan through and how they figure the interest charges (whether daily, monthly, bi-monthly, etc. normally monthly I would assume), your interest is probably figured either daily or once a month. Let's assume that it is figured daily, otherwise it wouldn't make sense to make bi-weekly payments. At 4% Annual Interest on a $150,000 home loan the interested added each day is about $16.44, but it doesn't stop there because it is compounding interest daily so the next day it becomes 4% of 150,0016.44 (which is negligibly larger amount) and they will tack on another $16.44. So what will happen is that the amount of interest you owe grows rather quickly, especially if you miss a monthly payment. Everyone knows that the faster you pay something off the less interest you pay, but not everyone knows the formula for compounding interest. a quick Google search rendered this site with a simple explanation Compound Interest Formula unfortunately this formula doesn't take into account the payments being made. The big thing with making your payments bi-weekly rather than a bigger payment once a month is that you pay off some of that principle right away and it won't collect interest for 14 more days. if the interest is only calculated once a month, make your full payment before the interest is calculated, the same goes for your credit cards.", "title": "" } ]	[ { "docid": "f000814393145523bb955e8c305cd035", "text": "\"I've never heard of rent quoted per week. Are you in the US? In general, after the down payment, one would hope to take the rent, and be able to pay the mortgage, tax, insurance, and then have enough left each year to at least have a bit of emergency money for repairs. If one can start by actually pocketing more than this each year, that's ideal, but to start with a rental, and only make money \"\"after taxes\"\" is cutting it too close in my opinion. The 19 to 1 \"\"P/E\"\" appears too high, when I followed such things I recall 12 or under being the target. Of course rates were higher, and that number rises with very low rates. In your example, a $320K mortgage at 4% is $1527/mo. $400/wk does not cut it.\"", "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": "1ae81134d1a18c42ceb97a55d7f2f8cf", "text": "our mortgage has been sold to a secondary market player. There are multiple ways in which the deal is struck. At times the risk of default is with Original FI [with recourse], at times it is with secondary FI [without recourse]. The rate can be discounted. So the Original FI collects the EMI as per 3.75 and pays to the secondary FI at 3.25. Or it can also be one time fixed amount. How could this possibly be financially beneficial for the original loan holder? As indicated, there are multiple ways the Original FI makes money, either one time or over the period, depending on how the deal is struck. Are they truly making enough money from the mortgage fees and first payment's interest to to warrant their need to clear up their credit line for new mortgages? Are mortgages always sold for less than the remaining principal? No broadly speaking the mortgage fees cover the cost for initiating the loan. There may be a very small amount banks may make. This is incidental. The actual money is made in the interest that is collected every month. If a Bank as say 5 loans for 100K each. It is very reputed brand and 10 people need 100K loans. Then it makes sense for the First FI to give loan to 5 people for 100K each, and sell this at profit to secondary FI. Take the 100K * 5 and give it off to new 5 people. Effectively making more money on the original 500K the bank had.", "title": "" }, { "docid": "2c751bc2bae47eaa538903251c897a69", "text": "\"It really depends on the answers to two questions: 1) How tight is your budget going to be if you have to make that $530 payment every month? Obviously, you'd still be better off than you are now, since that's still $30 cheaper. But, if you're living essentially paycheck to paycheck, then the extra flexibility of the $400/month option can make the difference if something unforeseen happens. 2) How disciplined (financially) have you proven you can be? The \"\"I'll make extra payments every month\"\" sounds real nice, but many people end up not doing it. I should know, I'm one of them. I'm still paying on my student loans because of it. If you know (by having done it before), that you can make that extra $130 go out each and every month and not talk yourself into using it on all sorts of \"\"more important needs\"\", then hey, go for it. Financial flexibility is a great thing, and having that monthly nut (all your minimum living expenses combined) as low as possible contributes greatly to that flexibility. Update: Another thing to consider Another thing to consider is what they do with your extra payment. Will they apply it to the principal, or will they treat it as a prepayment? If they apply it to principal, it'll be just like if you had that shorter term. Your principal goes down additionally by that extra amount, and the next month, you owe another $400. On the other hand, if they treat it as a prepayment, then that extra $130 will be applied to the next month's bill. Principal stays the same, and the next month you'll be billed $270. There are two practical differences for you: 1) With prepayment, you'll pay slightly more interest over that 60 months paying it off. Because it's not amortized into the loan, the principal balance doesn't go down faster while the loan exists. And since interest is calculated on the remaining principal balance, end result is more interest than you otherwise would have paid. That sucks, but: 2) with the prepayment, consider that at the end of year 2, you'd have over 7 months of payments prepaid. So, if some emergency does come up, you don't have to send them any money at all for 7 months. There's that flexibility again. :-) Honestly, while this is something you should find out about the loan, it's really still a wash. I haven't done the math, but with the interest rate, amount of the loan and time frame, I think the extra interest would be pretty minor.\"", "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": "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": "b2ca60e1f757516b41e9fd67b5707998", "text": "At time = 0, no interest has accrued. That's normal. And the first payment is due after a month, when there's a month's interest and a bit of principal due. Note - I missed weekly payments. You'd have to account for this manually, add a month's interest, then calculate based on weekly payments.", "title": "" }, { "docid": "ebadaee85f439ee26fd00453824ae25f", "text": "\"Tricky question. Many car leasing companies like to quote payments by the week or twice a month to make the car sound cheaper to carry. If the lease or loan is calculated such that interest accrues monthly \"\"not in advance\"\" then any payments made prior to the date on which the interest is calculated will reduce the balance and therefore the interest. However, many loans and leases are calculated at the beginning for the whole life of the agreement. In that case, splitting each payment in half doesn't do anything to reduce the interest built in to the payments because the interest is calculated \"\"in advance\"\"\"", "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": "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": "b266b5b1531c97bf669ad11172c24e73", "text": "\"It all has to do with risk and reward. The risk is that interest rates will rise. To entice you to go with the variable, they make it so it is cheaper if interest rates never rise. Your job is to guess whether interest rates are likely to go up or not. In a first approximation, you should go fixed. The bank employs very smart people whose entire job is to know whether interest rates will go up or not. Those people chose the price difference between the two, and it's sure to favour the bank. That is, the risk of extra payments you'll make on the variable is probably more than the enticement. But, some people can't sleep at night if their payments (or more realistically, the interest part of their payments) might double. If that's you, go fixed. If that's not you, understand that the enticement actually has to be turned up a bit, to get more people to go variable, because of the sleeping-at-night feature. Think long and hard about your budget and what would happen if your payment jumped. If you could handle it, variable might be the better choice. Personally, I have been taking \"\"variable\"\" on my mortgage for decades (and now I don't have one) and never once regretted it. I also counselled my oldest child to take variable on her mortgage. Over this century so far, if rates ticked up, they didn't tick up to the level the fixed was offered at. Mostly they have sat flat. But if ever there was a world in which \"\"past performance does not predict future results\"\" it would be interest rate trends. Do your own research.\"", "title": "" }, { "docid": "c8ced5ef0976741c68a65d54e9169b35", "text": "Second mortgages were also a popular way for home buyers without a down payment to borrow 100% of the money, but avoid certain extra fees if they borrowed all the money from a single lender. For example, to borrow $100,000 on a house would incur something called PMI (private mortgage insurance). So to borrow $100,000 to buy my house, my payment might be $800/month, but I would have an additional $100/month of PMI to pay. (These numbers are totally made up and not based in math in any way) So instead of that, borrows might get a first mortgage for $80,000 so they don't have to pay the PMI and get a second mortgage for the difference. This can be beneficial if the second mortgage payment is less than the PMI for borrowing 100%. As far as I know they aren't as easy to get these days, like any loan you need to be qualified and I think 100% financing is probably harder to come by. The negative connotation is no worse than any other loan. I am personally against borrowing money, but if you had big medical expenses, major home repairs or some other emergency I could see it justified. Probably not for a big vacation or for new car though.", "title": "" }, { "docid": "07fdc7b5970696df79b88b33158237ba", "text": "\"I recently requested an off-schedule escrow analysis. We refinanced a house in August and the servicer got confused about when the home owner's insurance was due (in October). They refunded the \"\"insurance\"\" money to us in September. That combined with the fact that the insurance amount was different than what they expected, made me request the escrow analysis. That way I can decide whether to pay up the escrow account now or do it over the next year. The servicer agent just said that the monthly payment amounts might change again in January when they do the usual analysis. If you like to set up automatic payments, that would be a downside. I haven't done that yet, so not a problem for me.\"", "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": "e1918b002c43b86b150e482ed8f9baf1", "text": "\"In England, currently and for most of the last fifty years, the standard length of the mortgage term is 25 years. A mortgage can be either a capital-and-interest mortgage, or interest-only. In the former, you pay off part of the original loan each month, plus the interest on the amount borrowed. In the latter, you only pay interest each month, and the original amount borrowed never reduces: you pay premiums on a life insurance policy, additionally, which is designed to pay off the original sum borrowed at the end of the 25 years. No one in England thinks that a 25 year loan has any drawbacks. The main point to appreciate is that the longer the period of the loan, the less you need to pay each month, because you are repaying the original loan - the capital - over a longer period of time. Thus, in principle, a mortgage is easier to repay the longer the term is, because the monthly payment is less. If you have a 12 year mortgage, you must pay back the original amount borrowed in half the time: the capital element in your payment each month is double what it would be if repaid over 25 years - i.e. if repaid over a period twice as long. Only if the borrower is less than 25 years away from retirement is a 25 years mortgage seen as a bad idea, by the lender - because, obviously, the lender relies on the borrower having an income sufficient to keep up the repayments. There are many complicating factors: an interest-only mortgage, where you pay back the original amount borrowed from the maturity proceeds from a life policy, puts you in a situation where the original capital sum never reduces, so you always pay the same each month. But on a straight repayment mortgage, the traditional type, you pay less and less each month as time goes by, for you are reducing the capital outstanding each month, and because that is reducing so is the amount of interest you pay each month (as this is calculated on the outstanding capital amount). There are snags to avoid, if you can. For example, some mortgage contracts impose penalties if the borrower repays more than the due monthly amount, hence in effect the borrower faces a - possibly heavy - financial penalty for early repayment of the loan. But not all mortgages include such a condition. If house prices are on a rising trend, the market value of the property will soon be worth considerably more than the amount owed on the mortgage, especially where the mortgage debt is reducing every month, as each repayment is made; so the bank or other lender will not be worried about lending over a 25 year term, because if it forecloses there should normally be no difficulty in recovering the outstanding amount from the sale proceeds. If the borrower falls behind on the repayments, or house prices fall, he may soon get into difficulties; but this could happen to anyone - it is not a particular problem of a 25 year term. Where a default in repayment occurs, the bank will often suggest lengthening the mortgage term, from 25 years to 30 years, in order to reduce the amount of the monthly repayment, as a means of helping the borrower. So longer terms than 25 years are in fact a positive solution in a case of financial difficulty. Of course, the longer the term the greater the amount that the borrower will pay in total. But the longer the term, the less he will pay each month - at least on a traditional capital-and-interest mortgage. So it is a question of balancing those two competing factors. As long as you do not have a mortgage condition that penalises the borrower for paying off the loan more quickly, it can make sense to have as long a term as possible, to begin with, which can be shortened by increasing the monthly repayment as fast as circumstances allow. In England, we used to have tax relief on mortgage payments, and so in times gone by it did make sense to let the mortgage run the full 25 years, in order to get maximum tax relief - the rules were very complex, but it tended to maximise your tax relief by paying over the longest possible period. But today, with no income tax relief given on mortgage payments, that is no longer a consideration in this country. The practical position is, of course, that you can never tell how long it might take you to pay off a mortgage. It is a gamble as to whether your income will rise in future years, and whether your job will last until your mortgage is paid off. You might fall ill, you might be made redundant, you might be demoted. Mortgage interest rates might rise. It is never possible to say that you \"\"can\"\" pay off the loan in a short time. If you hope to do so, the only matters that actually fall within your control are the conditions of the mortgage contract itself. Get a good lawyer. Tell him to watch out for early-redemption penalties. Get a good financial adviser. Tell him to work out what you will need to pay in additional premiums on your life policy if you are considering taking an interest-only mortgage. Try to fix your mortgage rate in the first few years, for as long as possible, so that in your most vulnerable period, with the greatest amount owing, you are insulated against unexpected interest rate fluctuations. Only the initial conditions can be controlled, so it might be prudent to take as long a term as possible, even though a prudent borrower will leave himself room to reduce that term, and a prudent lender will leave room to extend it, in case of unpredictable changes in the financial circumstances. In England, most lenders are, in my experience, reluctant to grant mortgages for less than 25 years. That is simply a policy. Rightly or wrongly, the borrower usually has no choice about the length of the mortgbage term. Hence, in the UK it can be difficult to find a choice of interest rates based on differing mortgage terms. I am aware that the situation in the USA is rather different, but if I personally were faced with the choice I would be uncomfortable about taking on a short term mortgage, because of the factors I have outlined above.\"", "title": "" } ]	fiqa
ae19e33fc2d171f82345f215c3161811	Name first on car loan can you also be the cosigner	[ { "docid": "40a99919f28a3c7d056d902e9656174f", "text": "\"I want to first state that I'm not an attorney and this is not a response that would be considered legal advice. I'm going to assume this was a loan was made in the USA. The OP didnt specify. A typical auto loan has a borrower and a co-borrower or \"\"cosigner\"\". The first signer on the contract is considered the \"\"primary\"\". As to your question about a primary being a co-borrower my answer would be no. Primary simply means first signer and you can't be a first signer and a co-borrower. Both borrower and co-borrower, unless the contract specifies different, are equally responsible for the auto loan regardless if you're a borrower or a co-borrower (primary or not primary). I'm not sure if there was a situation not specified that prompted the question. Just remember that when you add a co-borrower their positive and negative financials are handled equally as the borrower. So in some cases a co-borrower can make the loan not qualify. (I worked for an auto finance company for 16 years)\"", "title": "" } ]	[ { "docid": "a657ebfb18ae322601582d68caf28d63", "text": "If you've been paying on the car for three years, it's possible that your credit is in a place where you don't need a co-signer any more. See if your bank will re-fi with you as the sole debtor. If they won't do it, find another institution who will. The re-fi will take your grandpa off the loan, and whichever institution that does the re-fi will still have a lien on the title until you pay it off. Then, if you can do this soon enough, figure out if grandpa can sign you off the title.", "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": "ff12be5906a793d7ffd3c7388982d586", "text": "Your question is a bit confusing, you may wish to edit it to clarify the meaning. If we broke up or he stops paying, can I take the car back again? No. Just as if you sold me or the guy down the street your car you cannot just simply take it back. Being someone's boyfriend does not grant special privileges to you or him. Don't do this if you have not done so. If you have try and get it undone. It is unlikely that this is allowable as the bank will not simply allow you to transfer ownership if you have a loan. In the future, use cash (not loans) to buy your cars.", "title": "" }, { "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": "3eec08f53ddb437a4e142b74fbd3492f", "text": "Is your name on the title at all? You may have (slightly) more leverage in that case, but co-signing any loans is not a good idea, even for a friend or relative. As this article notes: Generally, co-signing refers to financing, not ownership. If the primary accountholder fails to make payments on the loan or the retail installment sales contract (a type of auto financing dealers sell), the co-signer is responsible for those payments, or their credit will suffer. Even if the co-signer makes the payments, they’re still not the owner if their name isn’t on the title. The Consumer Finance Protection Bureau (CFPB) notes: If you co-sign a loan, you are legally obligated to repay the loan in full. Co-signing a loan does not mean serving as a character reference for someone else. When you co-sign, you promise to pay the loan yourself. It means that you risk having to repay any missed payments immediately. If the borrower defaults on the loan, the creditor can use the same collection methods against you that can be used against the borrower such as demanding that you repay the entire loan yourself, suing you, and garnishing your wages or bank accounts after a judgment. Your credit score(s) may be impacted by any late payments or defaults. Co-signing an auto loan does not mean you have any right to the vehicle, it just means that you have agreed to become obligated to repay the amount of the loan. So make sure you can afford to pay this debt if the borrower cannot. Per this article and this loan.com article, options to remove your name from co-signing include: If you're name isn't on the title, you'll have to convince your ex-boyfriend and the bank to have you removed as the co-signer, but from your brief description above, it doesn't seem that your ex is going to be cooperative. Unfortunately, as the co-signer and guarantor of the loan, you're legally responsible for making the payments if he doesn't. Not making the payments could ruin your credit as well. One final option to consider is bankruptcy. Bankruptcy is a drastic option, and you'll have to weigh whether the disruption to your credit and financial life will be worth it versus repaying the balance of that auto loan. Per this post: Another not so pretty option is bankruptcy. This is an extreme route, and in some instances may not even guarantee a name-removal from the loan. Your best bet is to contact a lawyer or other source of legal help to review your options on how to proceed with this issue.", "title": "" }, { "docid": "277d4423be680399e5c346d4177ce244", "text": "In the UK at least, dealers definitely want you to take finance. They get benefits from the bank (which are not insubstantial) for doing this; these benefits translate directly to increased commission and internal rewards for the individual salesman. It's conceivable that the salesman will be less inclined to put himself out for you in any way by sweetening your deal as much as you'd like, if he's not going to get incentives out of it. Indeed, since he's taking a hit on his commission from you paying in cash, it's in his best interests to perhaps be firmer with you during price negotiation. So, will the salesman be frustrated with you if you choose to pay in cash? Yes, absolutely, though this may manifest in different ways. In some cases the dealer will offer to pay off the finance for you allowing you to pay directly in cash while the dealer still gets the bank referral reward, so that everyone wins. This is a behind-the-scenes secret in the industry which is not made public for obvious reasons (it's arguably verging on fraud). If the salesman likes you and trusts you then you may be able to get such an arrangement. If this does not seem likely to occur, I would not go out of my way to disclose that I am planning to pay with cash. That being said, you'll usually be asked very early on whether you are seeking to pay cash or credit (the salesman wants to know for the reasons outlined above) and there is little use lying about it when you're shortly going to have to come clean anyway.", "title": "" }, { "docid": "b1b626a6a93f933925f5e3d6ad2d08dd", "text": "\"I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. \"\"99% of buyers take the financing\"\" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.) In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned \"\"mom and pop\"\" shop might. The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less.\"", "title": "" }, { "docid": "5a40eee5445e687b0de14606db987a66", "text": "Well, it sounds like you have two options: 1) Continue to jointly own the house. 2) Compensate her for her equity and get the title transferred. I hate to tell you this, but she is entitled to half of the equity regardless of how much she paid into it. That said, she is still on the hook equally for the loan amount, but it won't do you any good if she is not willing to pay. Also, option 2 probably isn't a good deal for your co-signer as she would still be liable for the entire loan loan (just as you are) regardless of the title.", "title": "" }, { "docid": "8c68d17b243300bf223d276fc6c364f4", "text": "Yes, there are times when co-signing is the right choice. One is when you know more about the person than the loan issuer does. Consider a young person who has just started working in a volatile field, the kind of job where you can be told on Friday that you only get one shift next week but things might pick up the week after, and who makes maybe $12 an hour in that job. You've done the math and with 40 hour weeks they can easily afford the loan. Furthermore, you know this person well and you know that after a few weeks of not enough shifts, they've got the gumption to go out and find a second job or a different job that will give them 40 hours or more a week. And you know that they have some savings they could use to ensure that no payments will be missed even on low-wage weeks. You can cosign for this person, say for a car loan to get them a car they can drive to that job, knowing that they aren't going to walk away and just stop making the payments. The loan issuer doesn't know any of that. Or consider a young person with poor credit but good income who has recently decided to get smart about money, has written out a budget and a plan to rehabilitate their credit, and who you know will work passionately to make every payment and get the credit score up to a place where they can buy a house or whatever their goal is. Again, you can cosign for this person to make that happen, because you know something the lender doesn't. Or consider a middle aged person who's had some very hard knocks: laid off in a plant closing perhaps, marriage failure, lost all their house equity when the market collapsed, that sort of thing. They have a chance to start over again somewhere else and you have a chance to help. Again you know this isn't someone who is going to mismanage their money and walk away from the payments and leave you holding the bag. If you would give the person the money anyway (say, a car for your newly graduated child) then cosigning instead gives them more of a sense of accomplishment, since they paid for it, and gives them a great credit rating too. If you would not give the person the entire loan amount, but would make their payments for many months or even a year (say, your brother's mortgage for the house where he lives with a sick wife and 3 small children), then cosigning is only making official what you would have done anyway. Arrange with the borrower that if they can't make their payments any more, you will backstop them AND the item (car, house, whatever) is going up for sale to cover your losses. If you don't think you could enforce that just from the strength of the relationship, reconsider co-signing. Then sign what you need to sign and step away from it. It's their loan, not yours. You want them to pay it and to manage it and to leave you out of it until it's all paid off and they thank you for your help. If things go south, you will have to pay, and it may take a while for you to sell the item or otherwise stop the paying, so you do need to be very confident that the borrower is going to make every single payment on time. My point is just that you can have that confidence, based on personal knowledge of character, employment situation, savings and other resources, in a way that a lender really cannot.", "title": "" }, { "docid": "f3dd78e6bce8c60aef62179c00fa8a76", "text": "I'm a little confused by your question to be honest. It sounds like you haven't sold it to him, but you have a verbal arrangement for him to use the car like it's his. I'm going to assume that's the case for this answer. This is incredibly risky. If you've got the car on credit and he stops paying, or you guys break up... you will be liable for continuing to make payments! If the loan is in your name, it's your responsibility. Edited. The credit is yours. If he decides to stop paying, you're a little stuck.", "title": "" }, { "docid": "393ee932bbcbbe5f9751ffa34a64af45", "text": "\"It sounds like you're basing your understanding of your options regarding financing (and even if you need a car) on what the car salesman told you. It's important to remember that a car salesman will do anything and say anything to get you to buy a car. Saying something as simple as, \"\"You have a low credit score, but we can still help you.\"\" can encourage someone who does not realize that the car salesman is not a financial advisor to make the purchase. In conclusion,\"", "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": "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": "b994b0f50c6b08e9548da99ccc0e2b00", "text": "I don't think that they ask you for your citizenship status when you apply in a dealership. At least I don't remember being asked. I know of at least 3 people from my closest circle of friends who are in various immigration statuses (including one on F1) and got an auto loan from a dealership without a problem and with good rates. They have to ask for your immigration status on online applications because of the post-9/11 law changes. Edit to allow Dilip to retract his unjustified downvote: Chase and Wells Fargo have a reliable track of extending auto loans to non-permanent residents.", "title": "" }, { "docid": "024f190b764183dc722c34c4360e0f90", "text": "The mortgage and title of the house would be under both your names equally. When I applied for a mortgage with my girlfriend, I was the primary applicant because of my credit score and she was the secondary because of her income (she makes more). When all was said and done, it was explained to us that the mortgage was ours equally and so was the house, and that I didn't hold more ownership than her over either. We were approved quickly and hassle free. This is our first house too. This is in Florida.", "title": "" } ]	fiqa
c975f4cf6b26d9c9638369c303b493ac	Rejecting a second hand car from a dealer under UK Consumer Rights Act	[ { "docid": "c2aca31aee9480b820d042d7aafb6474", "text": "Dumb Coder has already given you a link to a website that explains your rights. The only thing that remains is how to execute the return without getting more grief from the dealer. Though the legal aspects are different, I believe the principle is the same. I had a case where I had to rescind the sale of a vehicle in the US. I was within my legal rights to do so, but I knew that when I returned to the dealership they would not be pleased with my decision. I executed my plan by writing a letter announcing my intention to return the vehicle siting the relevant laws involved with a space at the bottom of the letter for the sales person to acknowledge receipt of the letter and indicate that there was no visible damage to the car when the vehicle was returned. I printed two copies of the letter, one for them to keep, and one for me to keep with the signed acknowledgement of receipt. As expected, they asked me to meet with the finance manager who told me that I wouldn't be able to return the car. I thanked him for meeting with me and told him that I would be happy to meet in court if I didn't receive a check within 7 days. (That was his obligation under the local laws that applied.)", "title": "" } ]	[ { "docid": "4cf731e00f31def72d93bc1bbdc3cf11", "text": "I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly", "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": "5c7bcbcad56ca8d6bf751bb0c689da17", "text": "It might be possible to sue you successfully if someone brought evidence that your brother was absolutely totally unsuitable to drive a car because of some character flaw, and without your financial help he wouldn't have been able to afford a car. So helping a brother to buy a car, if that brother is a drinking alcoholic, or has only a faked driver's license and you know it, that could get you into trouble. A not unsimilar situation: A rental car company could probably be sued successfully if they rented a car to someone who they knew (or maybe should have known) was disqualified from driving and that person caused an accident.", "title": "" }, { "docid": "f6c22668b820ea9ba4100f9cce51fa2f", "text": "I've been told by staff in my local car hire agency that they get such big discounts that they actually make money selling the cars, so they replace all their cars every six months (in the UK the number plate indicates when the car was registered, in six month periods). This suits the manufacturers, because it means they can offer a lower-cost product to price sensitive customers, while charging more to people who want something brand new. For example, you could buy a brand new Fiesta for £14,000 or a 6 month old version of the same car with a few thousand miles on the clock for £12,000. This means if you only have £12,000 then you can afford to buy a nearly new Fiesta, but if you can afford a bit more then Ford will happily take that off you for a brand new Fiesta. Ford sell an extra car, and if the car hire company only paid £11,000 then they make some profit too.", "title": "" }, { "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": "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": "103910ac8dd3b76e41e68a79b1d5874f", "text": "My grandmother passed away earlier this year. When I got my car 3 years ago, I did not have good enough credit to do it on my own or have her as a co-signer. We had arranged so that my grandmother was buying the car and I was co-signing. A similar situation was happening and I went to my bank and took out a re-finance loan prior to her passing. I explained to them that my grandmother was sick and on her death bed. They never once requested a power of attorney or required her signature. I am now the sole owner of the vehicle.", "title": "" }, { "docid": "a453b102c970df29de645d3513f34325", "text": "\"Care to elaborate? It is my understanding that any asset can be rehypothecated at least in theory. By saying these car loans \"\"aren't\"\" rehypo'd, do you mean this is not the practice, or that there is a law/regulation prohibiting it?\"", "title": "" }, { "docid": "da9bc8b786e7314a869004e0ffd56ad0", "text": "\"So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a \"\"kickback\"\" or charge a \"\"fee\"\" based on the customer's credit score. So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit. Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem.\"", "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": "fea3ea7f147f19c235bfbfaee7241797", "text": "They'll refund your money (though maybe with a small service charge). I'm sure they regularly deal with new car sales gone wrong.", "title": "" }, { "docid": "c05c869e4935166e9ed6d58d4660102f", "text": "\"I looked this up on Wikipedia, and was hoping the answer would be \"\"no - stores cannot refuse legal tender\"\", but unfortunately, it's not the case! If the retailer wants to go to the lengths of refusing certain denominations to protect themselves from counterfeit currency, they are fully within their rights to do so. The \"\"Legal Tender\"\" page on Wikipedia says this about Canadian bills: [...] Retailers in Canada may refuse bank notes without breaking the law. According to legal guidelines, the method of payment has to be mutually agreed upon by the parties involved with the transactions. For example, convenience stores may refuse $100 bank notes if they feel that would put them at risk of being counterfeit victims [...] What is interesting about what I found out, is that legal tender cannot be refused if it is in repayment of an existing debt (i.e. not a store transaction for which there existed no previous debt). So you could offload your $100 bills when repaying your Sears credit card account (or pay in pennies if you wanted to!) and they couldn't refuse you!\"", "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": "" }, { "docid": "5fa642b6d1699325bda825d5440788e0", "text": "Make sure I am reading this correctly. You signed the car over to you BF, he took a loan against it and gave you the money? If so, you sold him the car and any use you have had of it since was at his consent. Outside of a written contract saying otherwise (and possibly even with one) it is now his car to do with as he pleases. It sucks that things are not working out in the manner you intended at the time, but that is the reality of the situation.", "title": "" }, { "docid": "959c31f1f6eace157e8da8387ce98b3e", "text": "\"Ok, then I was not clear enough. I will preface my explanation with some ethos sounding pathos: I don't know much about cars in general, and less so about SAABs. I was interested in following the thread and what you wrote, but there was a contradiction so I couldn't. I listed the contradicting terms - including the possibility that the error was in my understanding of them (\"\"Or am I missing something - am I wrong?\"\"), and I addressed you since you through your husband has expertise in the matter and you are willing to share it here (thanks for that). Simply put, the premises were: From you: Your car is well maintained. Assumed by me: Your (spouse's) expertise means that you won't buy a car that is known to fail despite maintenance. You bought a SAAB. So it should follow that you own a well maintained, non-failing SAAB. But you also state: Your SAAB is failing. (I'm a bit insulted to be called a prick for asking about that. Regardless, if you can be more specific I can perhaps offer help on how to maintain electrical systems. I have a vaguely related degree and work/life experience, however it depends very much on the type of system, its circumstances and your circumstances. Unless you were \"\"trolling\"\".) The solution to the contradiction seems to be as given by redditor CC440, that I was wrong in my assumed premise, that you would and did buy a car known to fail. However, CC440 insinuated that your husband is an idiot, I did the opposite. It's the opposite of idiotic to take a good deal. (Apologies for before-the-fact labelling \"\"$1500 with heated leather seats\"\" as \"\"cheap funkiness\"\", it was unintentional, and I don't know if it is offensive.)\"", "title": "" } ]	fiqa
8c19d99842d5623614b91dc7373c112b	How to find a good third-party, 401k management/advice service?	[ { "docid": "bb1c5beb344c55d09f33176d446f927c", "text": "Any fee based financial adviser should be able to help you. I don't think you need to worry about finding a 401K specific adviser. I'm not even sure that's a thing. A good place to start is the National Association of Personal Financial Advisors. The reason I specifically mentioned a fee based adviser is that the free ones are working on sales commissions, which may influence them to give advice that is in their own best interest more than yours.", "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": "551e04ec2baa8f1a64f61ef6cd41daff", "text": "The vanilla advice is investing your age in bonds and the rest in stocks (index funds, of course). So if you're 25, have 75% in stock index fund and 25% in bond index. Of course, your 401k is tax sheltered, so you want keep bonds there, assuming you have taxable investments. When comparing specific funds, you need to pay attention to expense ratios. For example, Vanguard's SP 500 index has an expense ratio of .17%. Many mutual funds charge around 1.5%. That means every year, 1.5% of the fund total goes to the fund manager(s). And that is regardless of up or down market. Since you're young, I would start studying up on personal finance as much as possible. Everyone has their favorite books and websites. For sane, no-nonsense investment advise I would start at bogleheads.org. I also recommend two books - This is assuming you want to set up a strategy and not fuss with it daily/weekly/monthly. The problem with so many financial strategies is they 1) don't work, i.e. try to time the market or 2) are so overly complex the gains are not worth the effort. I've gotten a LOT of help at the boglehead forums in terms of asset allocation and investment strategy. Good luck!", "title": "" } ]	[ { "docid": "27190f396673fa1761500386491ffe9a", "text": "My former accountant, used to provide this service as part of him doing my taxes. During the off season, he would provide a planning session and he would review strategies that I might look into. Since he did not make any money off of providing investments, he was about as unbiased as one could be. However, something like that might not be enough for you guys. You could go with someone online, Scottrade is going into the business of providing advice, as well as Charles Schwab or Fidelity, but you might need someone more personal. In that case, I would use my network. Talk to people, ask who they use, like, and respect. I would say it is very easy to find mediocre investment advisers, the good ones are hard. I would look for one that teaches. It is very easy to tell someone what to do, much harder to teach them what is the right thing. One thing that is easy about your situation: Planning to buy a home. Put money for a down payment in a high interest savings account. What I mean by high interest, is they still pay almost nothing. You can't really make a mistake. If you find one with .5% instead of .85%, what is the real difference after 5 years? About $180?", "title": "" }, { "docid": "a11258e0201b95e662802459335f1f8d", "text": "What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton.", "title": "" }, { "docid": "02652a2907593af155500446726db5b3", "text": "Usually your best bet for this sort of thing is to look for referrals from people you trust. If you have a lawyer or other trusted advisor, ask them.", "title": "" }, { "docid": "a9cf8e5f5697bedcbe661ed6bd92ffa3", "text": "I was in a similar situation and my method was this: since I already had a fidelity 401k account it was pretty easy to open a individual account through the website. From there you can just put the money into a general market mutual fund or exchange traded fund. I prefer low expense ratio funds like passive indexed funds since studies show that there isn't much benefit to actively traded funds. So I just put my money into the popular, low fee fund SPY which tracks to the S&P 500. I plan on leaving the money there for at least a year, if not several years, so I can pay the lower capital gains tax rate on any gains and avoid paying the commissions too many times. In your situation you might want to consider using the extra cash to max out you and your wife's 401k this year, since you aren't already taking full advantage of that. Often people recommend saving 10% or 15% of gross income throughout their career for retirement, so you're on the low side and maybe have a small bit of catch up to do. Finally you could also start a 529 education saving plan to save for kid's future college cost.", "title": "" }, { "docid": "1a179f846cd675420143bd596b5d26a9", "text": "Can't tell you where to go for a good policy, but I can tell you that most brokers make a hefty commission out of your payments for at least a year before you even start funding the tax sheltered investment account that you're trying to buy under the umbrella of life insurance. You'll have to do a lot of homework to hunt down a reputable discount broker or a direct policy purchase from the insurance company. Life insurance requires insurable need. The description is vague enough, that you can probably still get the account despite being a single male with no apparent heirs to benefit, but it raises the question of why you are buying the insurance. Whole life policies require you to maintain a certain ratio of investment to premium payment and you will likely never be able access all of the money in the account for your own personal usage. Compare several policies from several brokers and companies. Read all the critical sources you can about the pitfalls and dangers of commissions, fees and taxes eating the benefits of your account. Verify that the insurance company you buy the policy from is financially stable after the market crash. You are paying a commission to pool your money into their investment fund, and if your insurer goes under, you'll have to get a portion of your money (possibly only the principle) back from the state insurance commissioner. Some companies sold pretty generous policies during the bubble and have cut their offerings way down without fixing their marketing literature and rosy promises. Finally, let us know what you find. It never hurts to see hard numbers and to run multiple eyes over the legalese in these contracts.", "title": "" }, { "docid": "3752027275a54f8d477ceff2be25b5e8", "text": "\"Technically, anyone who advises how you should spend or proportion your money is a financial adviser. A person that does it for money is a Financial Advisor (difference in spelling). Financial Advisors are people that basically build, manage, or advise on your portfolio. They have a little more institutional knowledge on how/where to invest, given your goals, since they do it on a daily basis. They may know a little more than you since, they deal with many different assets: stocks, ETFs, mutual funds, bonds, insurances (home/health/life), REITs, options, futures, LEAPS, etc. There is risk in everything you do, which is why what they propose is generally according to the risk-level you want to assume. Since you're younger, your risk level could be a little higher, as you approach retirement, your risk level will be lower. Risk level should be associated with how likely you're able to reacquire your assets if you lose it all as well as, your likelihood to enjoy the fruits from your investments. Financial Advisors are great, however, be careful about them. Some are payed on commissions, which are given money for investing in packages that they support. Basically, they could get paid $$ for putting you in a losing situation. Also be careful because some announce that they are fee-based - these advisers often receive fees as well as commissions. Basically, associate the term \"\"commission\"\" with \"\"conflict-of-interest\"\", so you want a fee-only Advisor, which isn't persuaded to steer you wrong. Another thing worth noting is that some trading companies (like e*trade) has financial services that may be free, depending how much money you have with them. Generally, $50K is on the lower end to get a Financial Advisors. There has been corruption in the past, where Financial Advisors are only given a limited number of accounts to manage, that means they took the lower-valued ones and basically ran them into the ground, so they could get newer ones from the lot that were hopefully worth more - the larger their portfolio, the more $$ they could make (higher fees or more commissions) and subjectively less work (less accounts to have to deal with), that's subjective, since the spread of the wealth was accross many markets.\"", "title": "" }, { "docid": "b4932c3b586345161e4b3ad94313b6f0", "text": "Instead of saying which one is better, which is too subjective, I think it is more important to understand what these institutions are. They are kind of different animals. Edward Jones pretty much a full service wealth manager. They meet with you in person, advise you on what retirement and savings accounts to get, they talk to you to evaluate your risk preferences. They will talk to you about planning for your kids' college and about your insurance situation. They will probably attend your kids' bar mitzvahs and stuff too. Of course, this isn't free. With Edward Jones you will pay a fixed percentage of your managed wealth to them every year. And they will likely put your money in expensive mutual funds. And those mutual funds will charge a special 12b-1 fee, which is a kickback to the wealth manager. Plan on giving 2% or so of your total wealth to the manager per year, plus whatever the mutual funds charge. I don't have experience with Betterment, but they appear to be a robo advisor. Robo advisors attempt to do the same kinds of things as wealth managers, but rely on computer algorithms and web pages to give you advice whenever possible. This makes some sense because most people aren't actually that special in terms of their financial situation. I don't know their cost structure, but presumably it will be significantly cheaper than Edward Jones. They will almost certainly put you in cheaper funds (index funds and ETF's). Think of it as a cost-conscious alternative to Edward Jones. Vanguard is a discount broker and a mutual fund family. Their funds are among the biggest and cheapest in the world. Fees on many of these funds will be a fraction of the equivalent funds Edward Jones will put you in. They will charge you nothing at all to manage your money. They will give you some assistance and advice if you call them but don't expect any house calls. They aren't particularly in the business of giving advice. If you know what you want to invest in, this is the cheapest way to do it by far. Basically you won't have to pay anything at all except the actual cost of the assets you are investing in. Which is the best? Depends on your own preferences and ability. If you do not want to learn about personal finance and don't particularly care about whether you are getting the best return--if you don't mind paying for a personal touch--Edward Jones might be a good choice. For most people who are comfortable asking this type of question online and interested in learning about finance even a little bit, I'd expect that Betterment or Vanguard will be a better choice. For people who are willing to learn a bit of finance and manage their own affairs, using Vanguard (or a close competitor, like Fidelity) will ultimately result in the most wealth generated (the least given away to the financial industry).", "title": "" }, { "docid": "c8dee8604abe737c83388711bbc7a2cc", "text": "Don’t do anything that causes taxes or penalties, beyond that it’s entirely personal choice and other posters have already done a great job enumerating then. I recently switched jobs in June and rolled over a 401k from my old company to new company and the third party managing the account at the new company was much more professional and walked me through all the required steps and paperwork.", "title": "" }, { "docid": "2268cd97ad96813139a7a735fb5a81c3", "text": "Unfortunately, that's a call only you can make and whichever route you choose comes with advantages and disadvantages. If you manage your money directly, you may significantly reduce costs (assuming that you don't frequently trade index funds or you use a brokerage like RobinHood) and take advantage of market returns if the indexes perform well. On the other hand, if the market experiences some bad years, a professional might (and this is a huge might) have more self-discipline and prevent a panic sell, or know how to allocate accordingly both before and after a rise or fall (keep in mind, investors often get too greedy for their own good, like they tend to panic at the wrong time). As an example of why this might is important: one family member of mine trusted a professional to do this and they failed; they bought in a rising market and sold in a falling market. To avoid the above example, if you do go with the professional service, the best course of action is to look at their track record; if they're new, you might be better on your own. Since I assume this one or more professionals at the company, testing to see what they've recommended over the years might help you evaluate if they're offering you a good choice. Finally, depending on how much money you have, you could always do what Scott Adams did: he took a portion of his own money and managed it himself and tested how well he did vs. how well his professional team did (if I recall, I believe he came out ahead of his professional team). With two decades left, that may help guide you the rest of the way, even through retirement.", "title": "" }, { "docid": "1c89e9a5530170e982dfbeca5e1dd434", "text": "\"Fred is correct ... MOST financial advisors (but not all) are paid either for managing your assets or for selling you financial products. But success at anything, especially building wealth, is all about PROCESS, not products. I applaud your desire to find a financial advisor to help you because this is not something that most people have the education, experience or capacity to do themselves (it is impossible to get the perspective you need to make the best choices). Start with a CERTIFIED FINANCIAL PLANNER professional - they have an ethical duty to do what is in your best interests ahead of their own (the \"\"fiduciary standard\"\"). You might interview two or three. Work with the one who is transparent about how they are paid and whose process is focused on helping you achieve your goals ... not following any rule of thumb or standard boilerplate. Your goals are different. Your financial life is different. Find someone who can help YOU follow YOUR agenda ... not their own.\"", "title": "" }, { "docid": "2106c31d84b4c18a5fd0a1c91430e2b5", "text": "Paying off the high-interest debt is a good first start. Paying interest, or compound interest on debt is like paying somebody to make you poor. As for your 401k, you want to contribute enough to get the full match from your employer. You might also consider checking out the fees associated with your 401k with an online fee analyzer. If it turns out you're getting reamed with fees, you can reduce them by fiddling with your investments. Checking your investment options is always a good idea since jobs frequently change them. Opening an IRA is a good call. If you're eligible for both Roth and Traditional IRAs, consider the following: Most financial institutions (brokers or banks) can help you open an IRA in a matter of minutes. If you shop around, you will find very cheap or even no fee options. Many brokers might try to get your business by giving away something for ‘free.' Just make sure you read the fine print so you understand the conditions of their promotional offer. Whichever IRA you choose, you want to make sure that it's managed properly. Some people might say, ‘go for it, do it yourself’ but I strongly disagree with that approach. Stock picking is a waste of time and market timing rarely works. I'd look into flat fee financial advisors. You have lots of options. Just make sure they hear you out, and can design/execute an investment plan specific to your needs At a minimum, they should: Hope this is helpful.", "title": "" }, { "docid": "b26bcc40706eb82029e20bc392a9ae57", "text": "Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement. They're a bit higher expense usually than a basic stock market fund, but they're often not too bad. (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.) Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees. Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two. Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns).", "title": "" }, { "docid": "abedfb33f3b34c86677e9bbbec5b8e35", "text": "\"Open an investment account on your own and have them roll the old 401K accounts into either a ROTH or traditional IRA. Do not leave them in old 401k accounts and definitely don't roll them into your new employer's 401K. Why? Well, as great as 401K accounts are, there is one thing that employers rarely mention and the 401K companies actively try to hide: Most 401K plans are loaded with HUGE fees. You won't see them on your statements, they are often hidden very cleverly with accounting tricks. For example, in several plans I have participated in, the mutual fund symbols may LOOK like the ones you see on the stock tickers, but if you read the fine print they only \"\"approximate\"\" the underlying mutual fund they are named for. That is, if you multiply the number of shares by the market price you will arrive at a number higher than the one printed on your statement. The \"\"spread\"\" between those numbers is the fee charged by the 401K management company, and since employees don't pick that company and can't easily fire them, they aren't very competitive unless your company is really large and has a tough negotiator in HR. If you work for a small company, you are probably getting slammed by these fees. Also, they often charge fees for the \"\"automatic rebalancing\"\" service they offer to do annually to your account to keep your allocation in line with your current contribution allocations. I have no idea why it is legal for them not to disclose these fees on the statements, but they don't. I had to do some serious digging to find this out on my own and when I did it was downright scary. In one case they were siphoning off over 3% annually from the account using this standard practice. HOWEVER, that is not to say that you shouldn't participate in these plans, especially if there is an employer match. There are fees with any investment account and the \"\"free money\"\" your employer is kicking in almost always offsets these fees. My point here is just that you shouldn't keep the money in the 401K after you leave the company when you have an option to move it to an account with much cheaper fees.\"", "title": "" }, { "docid": "baeda48ad38b88a95a6cbfd626419096", "text": "I've looked into Thinkorswim; my father uses it. Although better than eTrade, it wasn't quite what I was looking for. Interactive Brokers is a name I had heard a long time ago but forgotten. Thank you for that, it seems to be just what I need.", "title": "" }, { "docid": "a4d6cf9cbb5e6ad44af28c621493e016", "text": "\"I'm hopeful that opinion based answers are acceptable in this context. I've been using YNAB classic for some years. I've tried to keep all possible options open in the manner of individual items for budget allocation. There does seem to be a number of \"\"emergency\"\" situations for which one would prefer to not dig into regular scheduled expenses. Having a large number of smaller funds give you flexibility in terms of categorizing your past emergencies. This gives you a better view of future allocation of your funds, perhaps freeing up money you might not have otherwise identified. If you are using a program such as YNAB (classic, I'm not familiar with the current version), you can easily transfer funds from one category to another as needed. After all, it's merely numbers in a file, not \"\"real money\"\" that would be otherwise inaccessible. To summarize, I think the smaller fund concept provides a better picture. The big picture of the small stuff means greater flexibility and forecasting. Prior to the world of personal computers, I had a piece of paper in my wallet. It had every category I could devise, representing every penny in my checking account. Pencils and erasers eventually grew into YNAB, but the concept remained the same all these decades.\"", "title": "" } ]	fiqa
8e8f44621aa40e332c8b95606ce99593	Can the U.S. government retroactively tax gains made earlier in the fiscal year?	[ { "docid": "beeb13e4fad464b199373e02a5d674ad", "text": "\"You're certainly referring to \"\"Ex Post Facto\"\" laws, and while the US is constitutionally prohibited from passing criminal laws that are retroactive, the US Supreme Court has upheld many tax laws that apply tax code changes retroactively. You might ask a similar question on Law.SE for a more thorough treatment of the legalities of congress passing those laws, but I will stick to the personal finance portion of the question. What this means is that you can't expect that the current tax laws will be in force in the future, and your investment/retirement plans should be as flexible as possible. You may wish to have some money in both Roth and traditional 401(k) accounts. You might not want to have millions of dollars in Roth accounts, because if congress does act to limit the tax benefits of those accounts, it will probably be targeting the larger balances. If you are valuing tax deductions, you should put slightly more weight on deductions that you can take today than deductions that would apply in the future. If you do find yourself in trouble because of a retroactive change, be sure to consult a tax lawyer that specializes in dealing with the IRS to possibly negotiate a settlement for a lower amount than the full tax bill that results from the changes.\"", "title": "" } ]	[ { "docid": "8f710fd6dbc5785f5ee8dd817323e99c", "text": "Yes, you would have to report the gain. It is not relevant that you traded the stock previously, you still made a profit on the trade-at-hand. Imagine if for some reason this type of trade were exempt. Investors could follow the short term swings of volatile stocks completely tax-free.", "title": "" }, { "docid": "4c74688428cd21ef6eac74e3f0eefdf5", "text": "No, you can not cheat the IRS. This question is also based on the assumption that the stock will return to $1 which isn't always a safe assumption and that it will continue to cycle like that repeatedly which is also likely a false assumption.", "title": "" }, { "docid": "fe3a3f0caea8db6ae5875eb22f1bf99d", "text": "Assuming you bought the stocks with after-tax money, you only pay tax on the difference. Had you bought he shares in a pretax retirement account, such as an IRA or 401(k), the taxation waits until you withdraw, at which point, it's all taxed as ordinary income.", "title": "" }, { "docid": "e7e18992948f103e302b59bfe41d5930", "text": "Does my prior answer here to a slightly different question help at all? Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country?", "title": "" }, { "docid": "1d6dce7e75babce4387d2c27b5804c2d", "text": "\"No, not really. This depends on the situation and the taxing jurisdiction. Different countries have different laws, and some countries have different laws for different situations. For example, in the US, some investments will be taxed as you described, others will be taxed as \"\"mark to market\"\", i.e.: based on the FMV difference between the end of the year and the beginning of the year, and without you actually making any transactions. Depends on the situation.\"", "title": "" }, { "docid": "81ab7c9d49e66e287f971b92d3c14a58", "text": "?? Edit: that's what I thought. Unless there is some specific tax code that I don't know about, there's no way to pass through money to the next year. But if someone on Reddit is saying something and quoting a tax law, I'd at least like to see it.", "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": "31594816af776ae31246dff47b57b5a2", "text": "Your 1&2 are the end of that chapter. You can't convert for that year again, and must wait 30 days to convert in the new tax year. For example, each year for over a decade, I've helped my mother in law with this. In May, we convert a chunk of money/stock to Roth. In April, I'll recharacterize just enough so she tops off her 15% bracket but doesn't hit 25%. 30 days later, the new conversion happens. All the Roth money is money now taxed at 15%, which, in an emergency, a need for a lot of cash, will avoid the potential of 25% or higher, tax. You see, your 3 never really happens.", "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": "dc36a99ffea70f0b1e78475c3ad6fcb7", "text": "Yes. You incur income tax on the RSU on they date they vest. At this point you own the actual shares and you can decide to sell them or to hold them. If you hold them for the required period, and sell them later, the difference between your price at vesting and the sales price would be taxed as long term capital gains. Caution: if you decide to hold, you are still liable to pay income tax in the year they vest. You have to pay taxes on income that you haven't made yet. This is fairly dangerous: if the stock goes down, you may lose a lot of this tax payment. Technically you could recover some of this through claiming capital losses, but that this is severely restricted: the IRS makes it much easier to increase taxes through gains than reducing taxes through losses.", "title": "" }, { "docid": "1c02d9edf84b46abfcdefc0a836a5505", "text": "\"Property sold at profit is taxed at capital gains rate (if you held it for more than a year, which you have based on your previous question). Thus deferring salary won't change the taxable amount or the tax rate on the property. It may save you the 3% difference on the salary, but I don't know how significant can that be. The 25% depreciation recapture rate (or whatever the current percentage is) is preset by your depreciation and cannot be changed, so you'll have to pay that first. Whatever is left above it is capital gains and will be taxed at discounted rates (20% IIRC). You need to make sure that you deduct everything, and capitalize everything else (all the non-deductible expenses and losses with regards to the property). For example, if you remodeled - its added to your basis (reduces the gains). If you did significant improvements and changes - the same. If you installed new appliances and carpets - they're depreciated faster (you can appropriate part of the sale proceeds to these and thus reduce the actual property related gain). Also, you need to see what gain you have on the land - the land cannot be depreciated, so all the gain on it is capital gain. Your CPA will help you investigating these, and maybe other ways to reduce your tax bill. Do make sure to have proper documentation and proofs for all your claims, don't make things up and don't allow your CPA \"\"cut corners\"\". It may cost you dearly on audit.\"", "title": "" }, { "docid": "569126cd4af4932b7a88ef978e388436", "text": "The safe harbor provision is based on the tax you or the prior year. So in 2016 this helped you as your tax was substantially increased from 2015. However, by the same token in 2017 your safe harbor amount is going to be very high. Therefore if 2017 is similar you will owe penalties. The solution here is to make estimated tax payments in the quarters that you realize large gains. This is exactly what the estimated tax payments are for. Your estimate tax payments do not have to be the same. In fact if you have a sudden boost in earnings in quarter 3, then the IRS expects that quarter 3 estimated tax payment to be boosted.", "title": "" }, { "docid": "2eb5e5bdd4912cf03a38d7a6987476bd", "text": "\"Your real question, \"\"why is this not discussed more?\"\" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet. You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works. I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket. For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions. The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people. Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks. The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains. (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below.\"", "title": "" }, { "docid": "29072a5d38bc60ace3fc0fbba2e862b9", "text": "You're asking whether the shares you sold while being a US tax resident are taxable in the US. The answer is yes, they are. How you acquired them or what were the circumstances of the sale is irrelevant. When you acquired them is relevant to the determination of the tax treatment - short or long term capital gains. You report this transaction on your Schedule D, follow the instructions. Make sure you can substantiate the cost basis properly based on how much you paid for the shares you sold (the taxable income recognized to you at vest).", "title": "" }, { "docid": "2c1b9a33fd7245abb4e859e9da10396b", "text": "You're partially correct, at least in my understanding of this. Yes, the tax credit can be carried forward to future years, but since it is non-refundable it will reduce your tax liability solely. Depending on your tax situation this may result in a bigger refund or it may not. In an example, If you've had $3K withheld from your paycheck toward your income tax and this is also an accurate reflection if your tax liability then taking the NRTC would reduce your tax liability enabling you to be eligible for a refund (due to having already pre-paid more tax than you're liable for).", "title": "" } ]	fiqa
7fedce5378b167eae69b54a02266f731	How to spend more? (AKA, how to avoid being a miser)	[ { "docid": "f1d2295d32b48161d6f25fb7ba05e92e", "text": "\"I spend hours researching two comparable products to try to save $3. Me too! I have also argued for hours with customer support to get $5/month off a bill (that's $60/year!), and I feel guilty every time I eat out or do something remotely luxurious, like getting fries with my $1 McChicken. Geez, even when I play video games, I hate spending the in-game currency. For me, it's obsessive-compulsive traits that cause it, but please note that I'm not claiming @Eddie has them. Just speaking for myself here, but I hope it helps. I still struggle with my miserliness, but I can share what works for me and what doesn't. I don't think I'm valuing my time nearly as much as I should. Me neither, but knowing that doesn't help; it makes it worse. For me, putting a dollar amount on how much I value my time does not work because that just complicates the problem and amplifies how much time I spend solving that multi-variable optimization problem. Consider trying to convince Monk not to avoid germs in order to build antibodies; it just makes him think more about germs, raising anxiety and making easy decisions (use a handkerchief to touch doorknobs) into a hard decision (should I touch it or should I not?). It also amplifies the regret whenever you finally make a certain choice (\"\"what if I did the calculation wrong?\"\" or \"\"what if I'm going to get sick tomorrow because I touched that doorknob?\"\"). Making the problem more complicated isn't the solution. So how to make it simpler? Make the decision ahead of time! For me, budgets are the key to reducing the anxiety associated with financial decision making. Every six months or so, my wife and I spend hours deciding how much to spend per month on things. We can really take our time analyzing it because we only have to do it occasionally. Once we set $50/month for restaurants, I no longer have to feel like a loser every time we eat out -- similarly for discretionary spending and everything else. TBH, I'm not sure exactly why it works -- why I don't regret the dollar amounts we put on every budget -- but it really does help. I join my coworkers for lunch on Fridays because I already decided that was okay. At that point, I can focus my OC-tendencies on eating every last gram of organic matter on my plate. Without directly touching the ketchup bottle, of course. :) Again, just speaking for myself, but having budgets has done wonders for my stress level with respect to finances. For me, budgets are less about restricting my spending and more about permitting me to spend! It's not perfect, but it helps. (Not that it's relevant, but I reworded this answer about 20 times and only hit 'Post' with great effort to suppress the need to keep editing it! I'll be refreshing every 30 seconds for updates.)\"", "title": "" }, { "docid": "f1940207b9d487c29859fb32ca17e83d", "text": "The key question is this - What brings you happiness? How much is this behavior actually making you miserable? It's possible, and important, to find balance between frugality and as you say, being a miser. It's also important to understand the diminishing return, and to value not just your hour of time but your happiness-hour. By this I mean there's a distinction between an hour arguing with a customer service rep and spending an hour on a project yourself. There are countless people who push a lawn mower around every Saturday even though they have the money to hire a mowing company. Fresh air, exercise, quiet time, for them it makes sense. We pick and choose. The happy mower is in a good place. The miserable mower who hates doing it and just won't spend the money, not so much. Frugal simply means not wasteful, but it can be misunderstood to mean cheap. When our brand of TP is on sale, I'll use coupons, and stock up. Unless you visited and peeked into a cabinet, all seems normal. A visit to a friend's summer home taught us the value of packing a few rolls for a weekend visit into the unknown. Her cheap brand was like sandpaper and every item in her house was a strange brand I'd never heard of, including food items well beyond expiration. She took cheap to a new level. In the end, this question is less about finance than about psychology.", "title": "" }, { "docid": "92fd2c253236db4d8fd3fa81d5a83dc3", "text": "\"Unless your stinginess has reach truly compulsive levels, it should be enough to consciously remind yourself of the value of your time when you make purchase decisions or find yourself chasing minor savings. Another way might be to deliberately give yourself a monthly or weekly budget that you're allowed to \"\"waste\"\" on luxuries and conveniences without worrying.\"", "title": "" }, { "docid": "0f51942b94ba5b0697aad3dd292cdba5", "text": "There was a study last year -- it was all over the news -- that concluded that experiences, not stuff, is what makes people happy. The satisfaction from going on vacation lasts even after the holiday is long over. That new gadget only gives fleeting satisfaction. To that end, I recommend splurging on the affordable luxuries that give you a better experience. For example, I'm a big believer in paying the skycap a few dollars to check my bags at the curb rather than wait in line at the airport because I HATE airports. Valet parking is another affordable luxury when the alternative is circling a busy parking lot for 15 minutes. Pay for the better seats at the show. Get a room at the nicer hotel. Eat out a bit more often. I can't imagine willingly spending hours with customer support, though. They can have my $5.", "title": "" }, { "docid": "dc7a9ca4ef430454530cd472cd38ccca", "text": "\"I agree with JoeTaxpayer's answer. The question you should be asking is not \"\"how do I spend more\"\" but \"\"how do I become happier\"\". From what you say, it may be that you could increase your happiness simply by cutting back on these aggressive attempts to save a few bucks here and there. At the same time, if you do this, on some level your personality is probably not the type that would allow to simply \"\"forget it\"\". I think many frugal people are somewhat as you describe: they don't like wasting money. In such cases, often what matters is not so much the actual saving money as the feeling of saving money. Therefore, I'd suggest that you take a look at which of the \"\"money-losing\"\" activities you mention are really worth it. The easiest ones to drop would be things like the home-improvement project, which even you acknowledge does not save you money. If you like saving money, give yourself a pat on the back when you hire the contractor. If you want, run the numbers so you can \"\"prove\"\" to yourself how much money you are saving by not doing the work. For some of the other things, it may be that spending time to save a small amount can \"\"gamify\"\" an everyday experience and make it more interesting. For instance, comparing products to save a few bucks is not necessarily bad unless you actually don't like doing it. If spending a few hours comparing two toaster ovens on Amazon or whatever makes you feel good, go for it; it's no worse than spending a few hours watching TV. By acknowledging that you get something out of it --- the feeling of getting a bargain --- and savoring that, you can feel better about, and also potentially \"\"get it out of your system\"\" so that you won't feel the need to do it for every little thing. We all have our little pet obsessions, and it's possible to acknowledge that they're irrational, while still accepting them as part of your personality, and finding a way to satisfy them in a controlled manner that doesn't stress you out too much.\"", "title": "" }, { "docid": "704b2bcb28d2999847a056b205a74490", "text": "Do you plan a monthly budget at the beginning of each month? This might seem counter-intuitive, but hear me out. Doing a budget is, of course, critically important for those who struggle with having enough money to last the month. Having this written spending plan allows people struggling with finances to control their spending and funnel money into debt reduction or saving goals. However, budgeting can also help those with the opposite problem. There are some, like you perhaps, that have enough income and live frugally enough that they don't have to budget. Their money comes in, and they spend so little that the bank account grows automatically. It sounds like a good problem to have, but your finances are still out of control, just in a different way. Perhaps you are underspending simply because you don't know if you will have enough money to last or not. By making a spending plan, you set aside money each month for various categories in three broad areas: Since you have plenty of money coming in, generously fund these spending categories. As long as you have money in the categories when you go to the store, you can feel comfortable splurging a little, because you know that your other categories are funded and the money is there to pay those other bills. Create other categories, such as technology or home improvement, and when you need an app or have a home improvement project, you can confidently spend this money, as it has already been allocated for those purposes. If you are new to budgeting, software such as YNAB can make it much easier.", "title": "" }, { "docid": "4cae8238f6e26c4d379e57e9b1da0a6c", "text": "How much is your time worth This has been useful for me, judging things based on how much their time value is worth to me, weighted more heavily than their actual worth. For instance, there was a time when I used to work on the weekends and pay to have my laundry done. Doing the laundry myself would have cost 25 cents, but taken two hours at least. Since I was making $45 an hour, I would have lost $90 dollars by doing my laundry, instead of paying specialists $28 to do it for me, much better than I would. Your own capital should begin growing at a rate that makes many MANY things worth less than the time it takes for you to entertain it. So in your cable bill example, you shouldn't have argued for a $5 credit for two hours, unless you make $2.25 an hour, after tax. This is simplistic, as you would extrapolate how much this would cost you over a year or two, but such cost benefit analysis' become easy with this simple concept. This can also be used to rationalize your lavish expenditures. Such as not really comparing the costs for a flight, because its a 2 hour flight for $400 and you've found yourself making at least $200 an hour with your $416,000 annual earnings and capital gains. This will cure your frugality while retaining safe guards on your spending.", "title": "" }, { "docid": "8b0b1662223cd3d9bf0a33e0ed7541c2", "text": "\"It took me a very longtime to learn that I no longer need to live like a starving student... and even now I live like a well-off student. And that's OK -- my needs and tastes are mostly simple. There's no reason to spend just for the sake of spending... but if you want something, and really can afford it after setting aside savings for retirement and emergency funds and basic operating capital, go for it. It may help to pick out a specific thing you want, or want to replace. My \"\"rules\"\" used to say that i was always allowed to spend money on books, music, and needed tools. Then i convinced myself that shelves are tools for storing other things. And that furniture is shelving for people. And that art, if it really speaks to me, is akin to books. And that a decent instrument is a tool. And that my time has value, so sometimes it's less expensive in real term to throw money at a problem rather than scheduling my life around it. One step at a time, with all the steps making sense. I will still spend entirely too long agonizing over minor purchases, at times -- but that's about convincing myself that I like the choice I'm making, not about the price per se. Meanwhile, saving means you can buy things later without having to borrow. The semi-student routine , and waiting until i was ready to buy,is why i had the value of a house in my investments when i was ready to buy one. And is why I'm almost at my target number for retirement well before my planned retirement date. One other thought: if you're comfortable buying gifts for others but don't tend to spend on yourself, you aren't a miser -- just frugal.\"", "title": "" }, { "docid": "b5b718c8aa9240615207dfbafc883209", "text": "\"@pyb is right - you should put an hourly dollar value on your time. Calculate a realistic number and keep it in the back of your mind. Then when you're looking for a discount or a saving, estimate the maximum amount that you'd be able to save. This should be a realistic proportion of the value of the item. From those figures you can get the maximum amount of time that you should spend on looking for that discount. Spend any more than that amount of time and you lose money even if you get the discount. So then you can end up with a few rules-of-thumb like \"\"don't spend more than x minutes of time per dollar of possible savings\"\". Then you can spend the spare time you've created on looking for savings on big-ticket items where the time is more efficiently used... or on studying to upgrade your earning potential... or on taking some time out to enjoy the world and sniff the flowers. :)\"", "title": "" }, { "docid": "7aecd12e2a8444b2412e51189811e120", "text": "here is what I have learned with multiple close encounters with bankruptcies: ask yourself.. what if I save vs what if I spend? say you like a new shirt.. ask yourself what can you do saving $40 vs rewarding yourself/your well wishers right away? you will end up spending. just like you the other person needs money. he/she is doing a work. ask yourself what if you are in his/her situation. you would obviously want others to be happy. so spend. I think these two should be good. I must add that you should NOT be wasteful. Eg.. buying a handmade shoes vs corporation made shoes? choose handmade one because it fits above two. buying a corporate one would be more polluting and less rewarding because you just gave your money to someone who already has lots and cares least about you. in what way are you saying mortgage is good? I see that as a waste. you can pay back your mortgage only when someone takes even bigger mortgage (check with some maths before refuting)... in other words you have taken part in ponzi scheme.! I would suggest making a house vs buying one is better spending. finally spending is a best saving.. don't forget that you are getting money only because someone is spending wisely. stop feeding your money to corporates and interests and everyone will have plenty to spend.", "title": "" }, { "docid": "788e18ecb887a339b6a0a0762d831ea6", "text": "\"People who choose \"\"good enough\"\" (satisficers) tend to be happier than people who choose \"\"the best\"\" (maximizers), see link. So decide you want to be a satisficer for most decisions, and then work at it: deliberately limit the amount of time you spend on a small decision, and celebrate a non-optimal decision. Decide to be good to yourself, and say it out loud. Practice the skill.\"", "title": "" }, { "docid": "8fb6e3debf2ba6d6256e111b8ef715e8", "text": "Hehe, I feel your pain.. well, 'pain' isn't really the feeling though is it. I was unemployed for several years when I was younger, and I loved it. It taught me 2 things: you need to be careful with your money, and you don't need money to be happy. I loved the freedom, the carefree attitude I had to the world, the ability to do many things not constrained by having to spend all day in an office, to be with my mates a lot. If your problem is that you are being too miserly ($3 researching better product... we all do that, though not for $3 except on ebay sometimes) then put a cost on your time. If it took you 3 hours to research the $3 saving, and your time is worth even just $10 an hour to you, then you've not saved anything. You've wasted 'money'. If, on the other hand, you're more worried about hoarding money and being unproductive and a bad social citizen, get involved in investing it instead. Let someone else put it to good use, whilst giving you some return.", "title": "" }, { "docid": "6dab7f6b4d91e503bbe9c02fa010cb66", "text": "\"Ultimately, money derives its value from being spend on a good or service. Investing it is an act of denying your present-self a good or service so that your future-self can obtain (hopefully more) goods or services. Investing is a sensible and responsible default position, but you clearly have passed the point at which the opportunity cost of the dollar not spent today is greater than its benefit in the future. Not all dollars are the same. Remember that money is a temporary store of value but you have to spend it to realize that value. In your search, learn about the \"\"psychology of money.\"\" What are you saving it for? How much do you want left over when you die? If you die tomorrow, will you regret not having spend a little more? I'm sorry to get morbid on you, but saving for the future requires answering the question \"\"How long?\"\" and it's never forever. This may be tangential but it shaped my behaviour towards money nonetheless: Frank Zimbardo on The Psychology of Time. I would hazard a guess and say that you land in the future-oriented camp.\"", "title": "" }, { "docid": "cff924bf336b0d314c3779c3ee756c30", "text": "Time is money. If those hours spent researching to save $3 made you a better profit than you would have otherwise had buying the more expensive product and using the rest of the time to make more than $3, then you came out on top. If you consider this general premise in every spending decision you make, you should always feel that you made the right choice.", "title": "" }, { "docid": "e98e750e46a00a99b67ba8e983c4bb3d", "text": "Maybe minimalism is an option for you. Make your self clear what you really want You only buy what you really need and for that you spend the money. Then there is no point of saving money, i.e. I for example like to invite friends and cook them some fancy diner with expensive products, but the value I get from that exceeds any money I spend. On the other hand most present are the opposite, they have less value to recipient than what they originally have costs.", "title": "" } ]	[ { "docid": "5a709748c1e96a752fe134116569609c", "text": "\"In these situations, one solution is to use the \"\"I was just about to ask you the same thing...\"\" response. This is kind of a famous way to deal with people asking you for money, whether it's someone asking to borrow \"\"$10 at lunch time\"\" or \"\"$3000 for a car\"\" or the like. So: Person X asks you for money, say $2000. Your reply: Ah, that's bad luck, I was just about to ask you the same thing... Follow this immediately - just keep talking - by launching in to a really incredibly detailed discussion of why you need to borrow money (pick a slightly larger amount, slet's ay $3500). Just \"\"keep talking\"\" and don't let the other person get a word in. Go in to great detail about just what you need the $3500 for and why. It's a good trick.\"", "title": "" }, { "docid": "7601e04f3bc71c067101f24687e82a63", "text": "Track your expenses. Find out where your money is going, and target areas where you can reduce expenses. Some examples: I was spending a lot on food, buying too much packaged food, and eating out too much. So I started cooking from scratch more and eating out less. Now, even though I buy expensive organic produce, imported cheese, and grass-fed beef, I'm spending half of what I used to spend on food. It could be better. I could cut back on meat and eat out even less. I'm working on it. I was buying a ton of books and random impulsive crap off of Amazon. So I no longer let myself buy things right away. I put stuff on my wish list if I want it, and every couple of months I go on there and buy myself a couple of things off my wishlist. I usually end up realizing that some of the stuff on there isn't something I want that badly after all, so I just delete it from my wishlist. I replaced my 11-year-old Jeep SUV with an 11-year-old Saturn sedan that gets twice the gas mileage. That saves me almost $200/month in gasoline costs alone. I had cable internet through Comcast, even though I don't have a TV. So I went from a $70/month cable bill to a $35/month DSL bill, which cut my internet costs in half. I have an iPhone and my bill for that is $85/month. That's insane, with how little I talk on the phone and send text messages. Once it goes out of contract, I plan to replace it with a cheap phone, possibly a pre-paid. That should cut my phone expenses in half, or even less. I'll keep my iPhone, and just use it when wifi is available (which is almost everywhere these days).", "title": "" }, { "docid": "51f990657b459bb34ba495a7383ccfe3", "text": "To me the key is a budget. Each month, before it begins, decide on what to spend on each dollar that you earn. Money should be allotted for normal expenses such as housing, food, transportation, and utilities. If you have any consumer debt that should be a priority. Extra money should go to eliminate that debt. There should be money allotted to savings goals (such as retirement, home down payment, or vacation home). Also there should be money set aside for clothing and giving. Giving is an important part and often overlooked part of wealth creation. Somewhere in there you should also give yourself a bit of free money. For example one of the things I spend my free money on is coffee. I buy freshly ground coffee from a really good supplier. It is a bit expensive, but that is okay as it does not preclude me from meeting other goals. If you still have money left after all of that increase your giving some, your savings some, and your free money some. You can then spend that money without guilt. If your budget includes $100 of free money per month, and you want something that costs $1000, save up the $1,000 and then buy it. Do not borrow to buy free money stuff! Doing those sorts of things will make you weigh purchasing decisions very carefully. If you find that you cannot stick to a budget, you should enlist a friend to be your accountability partner. They have to be very good with money.", "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": "3d4199c0128572c50ece971a7a9078e1", "text": "\"If you're looking for an analogy or exercise, I saw a personal finance show that had people climb stairs, with the debt as weight. Every flight of stairs more \"\"interest\"\" and loans to cover income gaps have to be added to the total debt they carry up the stairs. Can't find the video online though. But I think you need to ask your brother what he thinks his problem is, that will be solved with more loans. It's likely that your brother's problem can't be solved with advice. Since he's not spending rationally, rational arguments have no sway. I suspect he'll tell you his problem is one or two angry creditors, perhaps even ones you don't know about, rather than a fundamental imbalance between income and expenses. Robbing Peter to pay Paul, or moving weights from one backpack compartment to another, doesn't solve the underlying problems. Whatever you do, another loan from you should be off the table. He's an adult now, with problems the size of which you can't help with. We both know how his story ends: all creditors cut him off, and he's in court over garnished wages and creditors fighting over his assets. Reality is the only argument that will have any sway. He's far too personally invested in his scheme to admit defeat, which is why neither words not images nor moving pictures will help him with this learning disability.\"", "title": "" }, { "docid": "125affbda803ce37568e01e5254d56ba", "text": "\"Its really, really good of you to admit your short comings with a desire to improve them. It takes courage. Keep in mind that most of us that answer questions here are really \"\"good at money\"\" so we have a hard time relating. Would you want people that are bad with money answering questions on a personal finance site? While it is intimidating you will need a budget. A budget is simply a plan for how to spend your money. Your budget, based on your new pay frequency, will likely also need some cash flow planning as a single paycheck is unlikely to cover your largest expenses. For example your rent/mortgage might be less than a single paycheck so you will have to save money from the previous paycheck to have enough money to pay it. Your best bet is to have a friend or relative that is good with money help you setup a budget. Do you have one? If not you might inquire about a church or organization that offers Financial Peace University. The teachers of the class often help people setup a budget and might be willing to do so for you. You could also take the class which will improve your money management skills. For $100 you'll have a lifetime pass to the class. If it helps you avoid three late charges/bounce checks then the class is well worth it. Now as far as spending too much money. I would recommend cash, but you have to do it the right way. Here is the process that you have to follow to be successful with cash: Doing cash will give you a more concrete example of what spending means. It won't work if you continue to hit the ATM \"\"for just $20 more\"\". It will take you a bit to get used to it, but you will be surprised how quickly you improve at managing money.\"", "title": "" }, { "docid": "a816d89279fc582023e15c450eb92628", "text": "\"There's plenty of advice out there about how to set up a budget or track your expenses or \"\"pay yourself first\"\". This is all great advice but sometimes the hardest part is just getting in the right frugal mindset. Here's a couple tricks on how I did it. Put yourself through a \"\"budget fire drill\"\" If you've never set a budget for yourself, you don't necessarily need to do that here... just live as though you had lost your job and savings through some imaginary catastrophe and live on the bare minimum for at least a month. Treat every dollar as though you only had a few left. Clip coupons, stop dining out, eat rice and beans, bike or car pool to work... whatever means possible to cut costs. If you're really into it, you can cancel your cable/Netflix/wine of the month bills and see how much you really miss them. This exercise will get you used to resisting impulse buys and train you to live through an actual financial disaster. There's also a bit of a game element here in that you can shoot for a \"\"high score\"\"... the difference between the monthly expenditures for your fire drill and the previous month. Understand the power of compound interest. Sit down with Excel and run some numbers for how your net worth will change long term if you saved more and paid down debt sooner. It will give you some realistic sense of the power of compound interest in terms that relate to your specific situation. Start simple... pick your top 10 recent non-essential purchases and calculate how much that would be worth if you had invested that money in the stock market earning 8% over the next thirty years. Then visualize your present self sneaking up to your future self and stealing that much money right out of your own wallet. When I did that, it really resonated with me and made me think about how every dollar I spent on something non-essential was a kick to the crotch of poor old future me.\"", "title": "" }, { "docid": "2fc79b65310eb6cba590a08089bf4016", "text": "Try the Envelope Budgeting System. It is a pretty good system for managing your discretionary outflows. Also, be sure to pay yourself first. That means treat savings like an expense (mortgage, utilities, etc.) not an account you put money in when you have some left over. The problem is you NEVER seem to have anything leftover because most people's lifestyle adjusts to fit their income. The best way to do this is have the money automatically drafted each month without any action required on your part. An employer sponsored 401K is a great way to do this.", "title": "" }, { "docid": "f95098e67fcd7635e3e6cf608ddf168c", "text": "\"First of all, I have to recognize up front that my \"\"spending personality\"\" is frugal. I don't recreational shop, and I save a lot of my total income. Building a budget and sticking to it is difficult, especially for people who are closer to living paycheck to paycheck than I. Theoretically, it should be easy to stick to a budget by overestimating expenses, but for many people planning to spend more than necessary isn't a luxury available. That said, I have a system that works for me, maybe it can work for you. This system lets me see how much I have to spend, and close to optimally arranges assets. As you can see, this system relies on some pretty strong upfront planning and adherence to the plan. And what you might not realize is that you can deviate from the plan in two ways: by spending variations and by timing variations. Credit should really help with a lot of the timing variations; it takes a series of expenses and translates them into one lump payment every month. As for spending variations, like spending 20 dollars for lunch when you only budgeted 5, it turns out this technique helps a lot. Some academic work suggests that spending with plastic is more likely to blow your budget than cash, unless you make detailed plans. But it sounds like your main problem is knowing whether you can afford to splurge. And the future minimum balance of your checking account can be your splurge number.\"", "title": "" }, { "docid": "8aae546b5470c00e9891756d61c392a0", "text": "\"Great question. There are two ways to increase the amount of money you have: It's difficult to decrease your expenses past a certain point, and your question is focused on the first aspect anyway. But it's worth noting that controlling spending is a significant part of accumulating wealth. You need to make more money, and there's no trick to it. Ask for a raise, sure, that can't hurt. But also think about what you need to do to get a higher-paying job. There's a lot to think about: Does you current job have growth potential? Are you doing everything you can do to maximize that potential? If you're just phoning it in and collecting your paycheck, that's not going to make you much more money. But if you're working hard, learning new skills, and have an opportunity to grow into more responsibilities and more money, that's a good start. In my experience, the biggest paycheck increases have come from looking for new opportunities and switching jobs. (BTW, I'm not suggesting quitting your job. You need to always have the new job locked up before quitting the old job!) The wealthiest people I know are self-employed, and they worked hard to build up their companies. Do you work in an industry where you can build your skills to a point where you can go out on your own? Does entrepreneurship interest you? Either way, focus on your job, skills, and maximizing your income potential. Be your own advocate. Make sure your boss knows what a good job you're doing. If you need to start looking for other options, take your time and start looking. The often-quoted line, \"\"the harder I work, the luckier I get\"\" is appropriate.\"", "title": "" }, { "docid": "5c857568e16c52860e638a12be35abfa", "text": "\"Keep track of everything you buy. Write it down and be accountable. Try not to buy anything on credit cards, if the money is not in your account now then you can't afford it. Ask yourself whether what you're buying is a \"\"need\"\" or a \"\"want\"\". If you find that you are buying things because you are bored and you like shopping then try taking up a (cheap) hobby that fills that void and is something you enjoy doing.\"", "title": "" }, { "docid": "3d05671fdb3c36883abcde29fd83fabc", "text": "I make it a habit at the end of every day to think about how much money I spent in total that day, being mindful of what was essential and wasn't. I know that I might have spent $20 on a haircut (essential), $40 on groceries (essential) and $30 on eating out (not essential). Then I realize that I could have just spent $60 instead of $90. This habit, combined with the general attitude that it's better to have not spent some mone than to have spent some money, has been pretty effective for me to bring down my monthly spending. I guess this requires more motivation than the other more-involved techniques given here. You have to really want to reduce your spending. I found motivation easy to come by because I was spending a lot and I'm still looking for a job, so I have no sources of income. But it's worked really well so far.", "title": "" }, { "docid": "9f74e0f2510e2c556ac7aaa5dbe9e819", "text": "\"If you are just barely scraping by on your current income, then you shouldn't be thinking about buying a car or house unless you can present (at least to yourself) clear evidence that doing so will actually lower your monthly expenses. Yes, there are times when even buying depreciating assets such as a car can lower your expenses, but you need to think hard about whether that is the case or if it is just something you want to get because you feel you \"\"should\"\". Remember the old adage that rich people buy themselves income streams (investments that either earn money or reduce expenses), while poor people buy expenses. If you are in the situation of barely scraping by on your current income, then the first step in my mind is to find out exactly what you are spending your money on (do this for a month or two, and then try to include non-regular or rarely-occuring bills such as subscriptions, insurance, perhaps utilities, and so on). Once you know where your money is going right now, outline that in a budget. At this point, you aren't judging your spending, but rather simply looking at the facts. Once you have a decent idea of where your money is going, only then try to think about what you can cut back on. Some things will be easier than others to change (it's much easier to cancel a premium TV channels package than to move to cheaper living quarters, for example, although in some cases simply picking the low-hanging fruit alone won't help you). Make a revised budget for the next month based on the new numbers, and try to live by it. Keep writing down what you actually spend your money on, then rinse and repeat. (Of course, you can make a budget for whatever period of time works for you; if you get paid every two weeks, budgeting per two weeks might be easier than budgeting per month.) The bottom line is that a budget is useless without a follow-up process to see how well your spending actually matches the budgeted amounts, so you need to spend some time following up on it and making adjustments. No budget will ever match reality exactly; think of the budget as a map, not a footstep-by-footstep guide for getting from A to B. When you find some wiggle room in your budget (for example, let's say you decide to cancel the premium TV channels package you got some time ago because it turns out you aren't watching much TV anyway), don't put that money into a \"\"discretionary spending\"\" category. There is an old rule in personal finance that says pay yourself first. If you are able to find $5/month of wiggle room, put it into savings of some kind. If you are unsure what kind of savings vehicle you should use, I'd suggest starting off with a simple savings account; it certainly won't earn you a great return (you'll be lucky if you can keep up with inflation), but it will get you into the habit of saving which at this point is a lot more important. And make that savings transfer as soon as the money hits your account. If you can, get the depositor to put a portion of your income directly into the savings account; if you cannot, make the transfer yourself immediately afterwards. And try to force yourself to live with the money that's left, not touching the savings account. Ideally, you should save a decent fraction of your income - I've seen figures everywhere from 10% to 25% of your after-tax income recommended by various people - and start out by budgeting that to savings and then working with whatever is left. In practice, saving anything and putting the money anywhere is much better than saving nothing. Just make sure that the savings are liquid (easy to convert to cash and withdraw without a penalty, should the need arise), set up a regular bank transfer for whatever amount you can find in that budget, and try to forget about it until you get the bank statement for the savings account and get that warm, fuzzy feeling for actually having a decent amount of money set aside should something ever happen making you need it. Then, later, you can decide whether to use the money to buy a car, start a company, take early retirement, or something entirely different. Having the money will give you the options, and you can decide what is more important to you yourself. Just keep on saving.\"", "title": "" }, { "docid": "a6fed25c052bb6f17e2cefe0c453afae", "text": "\"Make a list of all your expenses. I use an Excel spreadsheet but you can do it on the back of a napkin if you prefer. List fixed expenses, like rent, loan payments, insurance, etc. I include giving to church and charity as fixed expenses, but of course that's up to you. List regular but not fixed expenses, like food, heat and electricity, gas, etc. Come up with reasonable average or typical values for these. Keep records for at least a few months so you're not just guessing. (Though remember that some will vary with the season: presumably you spend a lot more on heat in the winter than in the summer, etc.) You should budget to put something into savings and retirement. If you're young and just starting out, it's easy to decide to postpone retirement savings. But the sooner you start, the more the money will add up. Even if you can't put away a lot, try to put away SOMETHING. And if you budget for it, you should just get used to not having this money to play with. Then total all this up and compare to your income. If the total is more than your income, you have a problem! You need to find a way to cut some expenses. I won't go any further with that thought -- that's another subject. Hopefully you have some money left over after paying all the regular expenses. That's what you have to play with for entertainment and other non-essentials. Make a schedule for paying your bills. I get paid twice a month, and so I pay most of my bills when I get a paycheck. I have some bills that I allocate to the first check of the month and some to the second, for others, whatever bills came in since my last check, I pay with the current check. I have it arranged so each check is big enough to pay all the bills that come from that check. If you can't do that, if you'll have a surplus from one check and a shortage from the next, then be sure to put money aside from the surplus check to cover the bills you'll pay at the next pay period. Always pay your bills before you spend money on entertainment. Always have a plan to pay your bills. Don't say, \"\"oh, I'll come up with the money somehow\"\". If you have debt -- student loans, car loans, etc -- have a plan to pay it off. One of the most common traps people fall into is saying, \"\"I really need to get out of debt. And I'm going to start paying off my debt. Next month, because this month I really want to buy this way cool toy.\"\" They put off getting out of debt until they have frittered away huge amounts of money on interest. Or worse, they keep accumulating new debt until they can't even pay the interest.\"", "title": "" }, { "docid": "948a4f5649ea7e6eff5c881e7c1a1db5", "text": "\"I think the real problem here is dealing with the variable income. The envelope solution suggests the problem is that your brother doesn't have the discipline to avoid spending all his money immediately, but maybe that's not it. Maybe he could regulate his expenses just fine, but with such a variable income, he can't settle into a \"\"normal\"\" spending pattern. Without any savings, any budget would have to be based on the worst possible income for a month. This isn't a great: it means a poor quality of life. And what do you do with the extra money in the better-than-worst months? While it's easy to say \"\"plan for the worst, then when it's better, save that money\"\", that's just not going to happen. No one will want to live at their worst-case standard of living all the time. Someone would have to be a real miser to have the discipline to not use that extra money for something. You can say to save it for emergencies or unexpected events, but there's always a way to rationalize spending it. \"\"I'm a musician, so this new guitar is a necessary business expense!\"\" Or maybe the car is broken. Surely this is a necessary expense! But, do you buy a $1000 car or a $20000 car? There's always a way to rationalize what's necessary, but it doesn't change financial reality. With a highly variable income, he will need some cash saved up to fill in the bad months, which is replenished in the good months. For success, you need a reasonable plan for making that happen: one that includes provisions for spending it other than \"\"please try not to spend it\"\". I would suggest tracking income accurately for several months. Then you will have a real number (not a guess) of what an average month is. Then, you can budget on that. You will also have real numbers that allow you to calculate how long the bad stretches are, and thus determine how much cash reserve is necessary to make the odds of going broke in a bad period unlikely. Having that, you can make a budget based on average income, which should have some allowance for enjoying life. Of course initially the cash reserve doesn't exist, but knowing exactly what will happen when it does provides a good motivation for building the reserve rather than spending it today. Knowing that the budget includes rules for spending the reserves reduces the incentive to cheat. Of course, the eventual budget should also include provisions for long term savings for retirement, medical expenses, car maintenance, etc. You can do the envelope thing if that's helpful. The point here is to solve the problem of the variable income, so you can have an average income that doesn't result in a budget that delivers a soul crushing decrease in quality of living.\"", "title": "" } ]	fiqa
1b49845dfd70a363e85a9f5e00408f41	How Does A Special Memorandum Account Work	[ { "docid": "8f7c63a15087bfc02f175c57fcca0e29", "text": "Here is another explanation of an SMA. SMA refers to the Special Memorandum Account which represents neither equity nor cash but rather a line of credit created when the market value of securities in a Reg. T margin account increase in value. For example, assume the market value of securities purchased at a cost of $10,000 on margin (at 50%) increase in value to $12,000. This $2,000 increase in market value would create SMA of $1,000, which provides the account holder the ability to either: 1) buy additional securities valued at $2,000 (assuming a 50% margin rate) without depositing up additional funds; or 2) withdraw $2,000 in cash, which may be financed by increasing the debit balance if the account holds no cash. It should be noted that while an increase in market value over original cost creates SMA, a subsequent decline in market value has no effect on SMA. SMA will only decline if used to purchase securities or withdraw cash and the only restriction with respect to its use is that the additional purchases or withdrawals do not bring the account below the maintenance margin requirement. SMA will also increase on a dollar for dollar basis in the event of cash deposits or dividends. More details at http://ibkb.interactivebrokers.com/article/66", "title": "" }, { "docid": "eeb25ea7287379faa5d9910b4341b927", "text": "The Margin Account holds the funds that are MUST for any margin trades. Any funds excess of the MUST for margin trades are kept in the SMA account. These funds can be used for further Margin trades in new securities [funds get transfered into the Margin Account]. They cannot be used to met the Shortfall due to margin calls on existing trades. New funds need to be arranged. More at http://en.wikipedia.org/wiki/Special_memorandum_account", "title": "" } ]	[ { "docid": "9a2f36176458673c1befe588ea650e77", "text": "\"What exactly would the financial institution need to see to make them comfortable with these regulations The LLC Operating Agreement. The OA should specify the member's allocation of equity, assets, income and loss, and of course - managerial powers and signature authorities. In your case - it should say that the LLC is single-member entity and the single member has all the managerial powers and authorities - what is called \"\"member-managed\"\". Every LLC is required to have an operating agreement, although you don't necessarily have to file it with the State or record it. If you don't have your own OA, default rules will apply, depending on your State law. However, the bank will probably not take you as a customer without an explicit OA.\"", "title": "" }, { "docid": "16e013dd52ed1d3c03a5c5567b83da8c", "text": "\"I'm guessing since I don't know the term, but it sounds like you're asking about the technique whereby a loan is used to gather multiple years' gift allowance into a single up-front transfer. For the subsequent N years, the giver pays the installments on the loan for the recipient, at a yearly amount small enough to avoid triggering Gift Tax. You still have to pay income tax on the interest received (even though you're giving them the money to pay you), and you must charge a certain minimum interest (or more accurately, if you charge less than that they tax you as if the loan was earning that minimum). Historically this was used by relatively wealthy folks, since the cost of lawyers and filing the paperwork and bookkeeping was high enough that most folks never found out this workaround existed, and few were moving enough money to make those costs worthwhile. But between the \"\"Great Recession\"\" and the internet, this has become much more widely known, and there are services which will draw up standard paperwork, have a lawyer sanity-check it for your local laws, file the official mortgage lien (not actually needed unless you want the recipient to also be able to write off the interest on their taxes), and provide a payments-processing service if you do expect part or all of the loan to be paid by the recipient. Or whatever subset of those services you need. I've done this. In my case it cost me a bit under $1000 to set up the paperwork so I could loan a friend a sizable chunk of cash and have it clearly on record as a loan, not a gift. The amount in question was large enough, and the interpersonal issues tricky enough, that this was a good deal for us. Obviously, run the numbers. Websearching \"\"family loan\"\" will find much more detail about how this works and what it can and can't do, along with services specializing in these transactions. NOTE: If you are actually selling something, such as your share of a house, this dance may or may not make sense. Again, run the numbers, and if in doubt get expert advice rather than trusting strangers on the web. (Go not to the Internet for legal advice, for it shall say both mu and ni.)\"", "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": "d87252e194065137eb7e8a9f4772b530", "text": "The victim never actually receives the money, so that is not an option. The scammer generates the transaction using a fraudulent check. Once the check is found to be fraudulent the chain of involved banks claw the money back (which is the bank's money, not the scammer's). So, what happens is the victim sees a deposit in their account, but it is not real, it is a conditional deposit by the bank made on the assumption that the payment is good (which it is not). When the victim endorses a check, they are guaranteeing to the bank that they consider the check good and vouching for the check. That is why the bank credits the victim's account, because the victim has vouched for the check. When the check later turns out to be fraudulent, the victim owes the bank money. In theory, people who endorse a fraudulent check could be criminally prosecuted, but that does not happen normally.", "title": "" }, { "docid": "eb1508ea931882b83665fb6c454f4549", "text": "For an individual its not automatic. One needs to ask the Bank, return the check. For Corporate Customer depending on how big the relationship is, many a times this is given as a service and there is an automatic return", "title": "" }, { "docid": "e839db0645e3db4d93c14566aa75db6d", "text": "I believe different banks have slightly different experiences. My wife and I have both joint and individual accounts. When I sign in, I see Joint, Mortgage and Joe. When She logs in, she sees Joint, Mortgage, and Jane. It happens that the Mortgage and Joint accounts have her Social Security number attached. Aside from that, I don't feel like I am an afterthought.", "title": "" }, { "docid": "820c8b08df031ebe78733f3f4e104713", "text": "In a nutshell, as long as they (Sparkasse) choose to. I work with banks where it happens the moment I submit the transaction (so the next screen already shows the new totals), and I work with banks that make it take 3 days. In the past, Sparkasse and Raifeissenkassen were especially famous to take a looong time ('Wir nehmen mehr als Geld und Zinsen...' - they supposedly work with the money inbetween, as it is gone from the source account but not arrived in the target account yet); that might have changed (or not). Probably Sparkasse has a statement in their fineprint on how long they make it take. I would expect one business day in today's environment, but I didn't look it up.", "title": "" }, { "docid": "c27b0051ac85e22b49fa005196d2d05b", "text": "You still owe the money because there is a high probability that some other organization bough the account and assets of the failed creditor. That means they will have bought your debt. I have to assume there is language in your note that explains that they might sell your debt. But what should one do if they don't know who bought the entity? You can't pay a non-existent entity, but if you don't have an address, how can you pay the new owner of the debt? First step, is to assume there will be a new owner. A government, a company, an individual; somebody will buy that debt. Read the news and see if you can't figure out what other entity owns your note. You might have to contact them to enquire about where to send payment. Keep records of any such contact. If you put in an honest effort, but just cannot figure out who owns your note, I'd suggest continuing to make regular on-time payments. But put your payments into a new bank account that you open just for this purpose. So when the new owner of the debt does come calling, you'll have reasonable proof you were attempting to pay. You simply settle up from the special account. Any reasonable company will just take the money, and if anybody gets unreasonable and you have to appear in court, you have a paper trail indicating your attempts to honour the debt. You'd have to consult a lawyer if nobody comes asking for the money. There are probably statutes of limitation, but I wouldn't count on that ever happening.", "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": "65cf9a90015e47167757486425ce4587", "text": "\"Oftentimes, the lender (the owner of the security) is not explicitly involved in the lending transaction. Let's say the broker is holding a long-term position of 1MM shares from Client A. It is common for Client A's agreement with Broker A to include a clause that allows the broker to lend out the 1MM shares for its own profit (\"\"rehypothecation\"\"). Client A may be compensated for this in some form (e.g. baked into their financing rates), but they do not receive any compensation that is directly tied to lending activities. You also have securities lending agents that lend securities for an explicit fee. For example, the borrower's broker may not have sufficient inventory, in which case they would need to find a third-party lending agent. This happens both on-demand as well as for a fixed-terms (typically a large basket of securities). SLB (securities lending and borrowing) is a business in its own right. I'm not sure I follow your follow-up question but oftentimes there is no restriction that prevents the broker from lending out shares \"\"for a very short time\"\". Unless there is a transaction-based fee though, the number of times you lend shares does not affect \"\"pocketing the interest\"\" since interest accrues as a function of time.\"", "title": "" }, { "docid": "803d7c76518537f98cceee4def5f663f", "text": "Yes a minor can have a checking account, or a savings account. They can even get a debit card. The money in that bank account belongs to the minor. The account can be established as soon as the are assigned their social security number. If they are a newborn the account is generally set up as a joint account with a parent to facilitate transferring money into the account. For us the money was birthday gifts from relatives. The IRS allows minors to receive small amounts of interest, or other unearned income, tax free. In 2015 that is up to $1,050, if they have no earned income. When bank rates were higher some parent's wanted to put all their saving under their child's name, of course in the eyes of the law the money belonged to the child and was only to be spent for items that benefited the child. Credit cards are another matter because the CARD act in 2009 required lenders to only give credit to those under 21 who had proof of sufficient income, unless there was a co-signer. You do have to be careful when talking about owning a house as minor. They generally can't sign a contract. You could gift the house to the minor, but if it was time to sell it the courts would insist on appointing a legal guardian to represent the interest of the child. That could add significant time to the transaction.", "title": "" }, { "docid": "fd0bb20077a932bc52f28e8f88679e29", "text": "\"I'm not sure I understand your question, but I'll try to answer what I think you're asking. I think you're asking this: \"\"A US bank receives a wire transfer from a Chinese bank. How does the US bank ensure there's any money in fact arriving before crediting the destination account?\"\" Well, the way wire transfers work is that the US bank would debit the senders' account with that US bank. So the US bank in fact transfers the money between two internal accounts: debit to the Chinese bank's account with that US bank and credit the destination customer account. If the Chinese bank doesn't have an account with the destination US bank - a third party intermediary is used that both banks have accounts with. Such third party will charge an additional fee (hence sometimes the wire transfer fees are slightly higher than you initially know when sending the money, the third party would debit from the transfer amount). \"\"Regular\"\" IBAN/ACH transfers work through regulatory channels that ensure integrity and essentially use a regulatory bank as that third party. But because they're done in batches and not on-line, they're much cheaper, and the accounting is for the whole batch and not each transfer separately. But batch processing means it will take a day or two of processing, while wire transfer takes hours at most.\"", "title": "" }, { "docid": "37e38b00009688a5f953c84a8685cce1", "text": "My wife and I have two Schwab brokerage accounts, one for retirement and one for non-retirement investments. The latter also has a checking/savings account which we use as our main account. Schwab is very happy with us, as we are cheapskates and save a lot of money. The checking account, which seems to act like any ordinary checking account, gives us all the things listed above. They pay the ATM fees, which is not a lot of money, but seems like a nice thing to me. We can also do cash deposits and we can go to any Schwab branch to talk to someone face to face. We've only had to do the latter once in 10 or so years, and the former maybe once or twice.", "title": "" }, { "docid": "2931ed836111fe94d3fdb3cbf23826a0", "text": "Do you have signature authority or interest in the account? Then yes. Interest in the account means that you wire $25K to your dad, but the money still belongs to you (I.e.: if you ask for it your dad will give it back to you).", "title": "" }, { "docid": "0e4dd0800c43b069a301a33451519f63", "text": "\"I'd start with a Google search for \"\"best backtesting tools.\"\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\"", "title": "" } ]	fiqa
f4c67b739447402d4d02974ecff8b479	I can make a budget, but how can I get myself to consistently follow my budget?	[ { "docid": "ea110e3330ecf1ddb56cd735fa77b2e7", "text": "It's simple, really: Practice. Fiscal responsibility is not a trick you can learn look up on Google, or a service you can buy from your accountant. Being responsible with your money is a skill that is learned over a lifetime. The only way to get better at it is to practice, and not get discouraged when you make mistakes.", "title": "" }, { "docid": "fc26d4a800bea172012b60ec4364dd83", "text": "Do a monthly budget, unique to each month, before the month begins, spend all of your money on paper. Use envelopes to help you keep track of how much you have left for things you buy throughout the month. Have separate envelopes for things like groceries, restaurants, clothing, entertainment. Put the amount of money for each category in cash in the envelope. Only spend the money out of the correct envelope and don't mix and mingle between envelopes. Pay in cash, with real money. Don't use credit or debit cards, it's proven you spend more when you are not paying with cash.", "title": "" }, { "docid": "b0d57edd6481ac8cd3517bceeb8db84f", "text": "Switch to cash for a few months. No debit. No credit. This will help for two reasons: Once you've broken the bad habits, you should be able to go back to cards for the convenience factor.", "title": "" }, { "docid": "01c34c67ef1e385edd7fdbd7e386c68b", "text": "To me, this question is really about setting and meeting goals. The process is the same, whether it's about exercising regularly, or saving, or whatever. You need to have clear, personally-relevant reasons for doing something. Write down: Exactly why you want to save. It may seem trivial, but if you can't visualize the prize it's hard to stay motivated. How much can you afford to save? Use something like Mint.com to find out your real monthly expenses, as opposed to what you think you're spending. Also, don't get overzealous... leave yourself some money for small luxuries and unexpected expenses so you don't feel like a miser. Saving should be a joy, not torture. Automate the saving process. Set up an automatic transfer to move the amount you figured out in step 2 to your savings account on the same date you get paid. This is very important. By saving early you ensure there will be enough money to save. If you wait until the end of the month, there will usually not be anything left. Don't you dare touch your savings! (Except in a real emergency) If you must dip into your savings, immediately create a plan to put it back as soon as possible. Also, get into the habit of reading personal finance books, blogs, sites, etc. I recommend authors like Robert Kiyosaki, and Suze Orman. Good luck!", "title": "" }, { "docid": "c668d3a4429681f812c7848d87460a9f", "text": "And remember, there's nobody but you that can do it - so the most important tool here is your determination and persistence.", "title": "" }, { "docid": "2875ee4dbff21e3450c8336481610906", "text": "Try a tool like mint.com that will send you text messages regarding how you budget is going. If you use mint, set up your budget to send you reminders before you hit your budget. Example: if my budget for dining out is $100, I tell mint.com it is $50 and I get nagging text messages after $50 to remind me to keep a lid on my spending.", "title": "" }, { "docid": "a53ee48d84bb304083c4430f06ee1fd4", "text": "Assuming what is taking you over budget are not essential costs such as fuel bills, food, mortgage etc. you could do the following. Work out your monthly disposable income after all essential base costs have been sutracted. Then simply keep a book of any additional spending. It will be very easy to see if you're at risk of overspending. In fact, even when one has no need to budget it's still an excellent idea to keep a book of all your spending. It's surprising how useful it can be. It's a great reference for dues dates, sizes of past bills and provides an excellent cross check of your bank statement. It's not often that you find an error on your bank statement (at least it shouldn't be!), but my books have helped me locate three such errors over the past 25 years, which I'm sure would have gone unnoticed by most people. So my advice is, keep a book of your spending.", "title": "" }, { "docid": "a43e5d9780dcffd4e67f0f7a5daccd3c", "text": "Plan all your needs and put priority based on need & urgency. New Habit: Rethink. Rethink. Rethink. whenever your going to buy something. rethink before going to buy. remember what is your priority one than that and will this affect on your plans. if that affect, than dont buy. Lets leave it to that habit, that will take care of your budget yar.............", "title": "" }, { "docid": "088580c45a50a56416efa893fd9b5a5d", "text": "Give all your money as well as your budget requirements to someone you really trust. Tell them to give you ONLY what your budget allows. As long as both of you take this seriously, this method will be very effective.", "title": "" }, { "docid": "8077fb104b14e35396cc6e7f9480d700", "text": "Lazy man's budget. Four separate accounts for timing of expenses: short (monthly; utilities etc.), medium (quarterly+; property taxes), long (yearly+; house improvements) and retirement. Set target levels for each account, to cover 1 full cycle. The short target is smallest; it should comfortably cover a month. For me each target is about 10x larger than the last. (Cycles & targets for a homeowner w/ family; YMMV). All income goes in short term. When an account gets above target level, the excess gets swept up to the next longer term account. That's all I keep firm track of; takes just a few minutes a month. Watching the account balances vs. their targets (and how short some of them are of target) keeps me focused on spending, and thinking about how much I can sweep (or can't) next paycheck.", "title": "" } ]	[ { "docid": "6d51479ea79b40327b9583dc739fd24e", "text": "Personal finances are not intuitive for everyone, and it can be a challenge to know what to do when you haven't been taught. Congratulations on recognizing that you need to make a change. The first step that I would recommend is what you've already done: Assemble your bank statements so you can get an accurate picture of what money you currently have. Keep organized folders so you can find your bank statements when you need them. In addition to the bank statements for your checking and savings accounts, you also need to assess any debt that you have. Have you taken out any loans that need to be paid back? Do you have any credit card debt? Make a list of all your debts, and make sure that you have folders for these statements as well. Hopefully, you don't have any debts. But if you are like most people, you owe money to someone, and you may even owe more money than you currently have in your bank accounts. If you have debts, fixing this problem will be one of your goals. No matter what your debt is, you need to make sure that from now on, you don't spend more money than you take in as income. To do this, you need to make a budget. A budget is a plan for spending your money. To get started with a budget, make a list of all the income you will receive this month. Add it up, and write that amount at the top of a page. Next, you want to make a list of all the expenses you will have this month. Some of these expenses are more or less fixed: rent, utility bills, etc. Write those down first. Some of the expenses you have more control over, such as food and entertainment. Give yourself some money to spend on each of these. You may also have some larger expenses that will happen in the future, such as a tuition or insurance payment. Allocate some money to those, so that by the time that payment comes around, you will have saved enough to pay for those expenses. If you find that you don't have enough income to cover all of your expenses in a month, you need to either reduce your expenses somewhere or increase your income until your budget is at a point where you have money left over at the end of each month. After you've gotten to this point, the next step is figuring out what to do with that extra money left over. This is where your goals come into play. If you have debt, I recommend that one of your first goals is to eliminate that debt as fast as possible. If you have no money saved, you should make one of your goals saving some money as an emergency fund. See the question Oversimplify it for me: the correct order of investing for some ideas on what order you should place your goals. Doing the budget and tracking all of your spending on paper is possible, but many people find that using the right software to help you do this is much easier. I have written before on choosing budgeting software. All of the budgeting software packages I mentioned in that post are from the U.S., but many of them can successfully be used in Europe. YNAB, the program I use, even has an unofficial German users community that you might find useful. One of the things that budgeting software will help you with is the process of reconciling your bank statements. This is where you go through the bank statement each month and compare it to your own record of spending transactions in your budget. If there are any transactions that appear in the statement that you don't have recorded, you need to figure out why. Either it is an expense that you forgot to record, or it is a charge that you did not make. Record it if it is legitimate, or dispute the expense if it is fraudulent. For more information, look around at some of the questions tagged budget. I also recommend the book The Total Money Makeover by Dave Ramsey, which will provide more help in making a budget and getting out of debt.", "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": "f84fc57412f24d3e53079925b3255f9d", "text": "There are a lot of good answers above, all of them will probably work for you in some way or another. One point to note (from the procrastination theme) is that you could invest your free money that you have currently in some investment instrument which would require you to do some paperwork etc. to get out, this way the immediate cash flow is decreased and also invested. Now from each montly budget save a small amount for the things that you would like to buy. Give this small savings some months to accumulate so that you can afford only one of the items that you want to buy or target an item that you want to buy. After the money is accumulated, if you still want to buy the item, then you probably should. One point of note is that budgeting is also important on a monthly basis, Pete has provided excellent suggestion in this regard.", "title": "" }, { "docid": "746c288007882dc4c832371ee62667c6", "text": "If you are happy, really honestly happy, there is no need to change because you read it somewhere. While I believe that budgeting in some fun is smart so you don't go crazy, I am really speaking for myself. I personally have to work at not spending more than I make, so I need to blow off some steam. I also think that you will find in the future something you want to do that costs money, and you would be glad to have it now. The same rules apply for you as they apply to everybody", "title": "" }, { "docid": "125affbda803ce37568e01e5254d56ba", "text": "\"Its really, really good of you to admit your short comings with a desire to improve them. It takes courage. Keep in mind that most of us that answer questions here are really \"\"good at money\"\" so we have a hard time relating. Would you want people that are bad with money answering questions on a personal finance site? While it is intimidating you will need a budget. A budget is simply a plan for how to spend your money. Your budget, based on your new pay frequency, will likely also need some cash flow planning as a single paycheck is unlikely to cover your largest expenses. For example your rent/mortgage might be less than a single paycheck so you will have to save money from the previous paycheck to have enough money to pay it. Your best bet is to have a friend or relative that is good with money help you setup a budget. Do you have one? If not you might inquire about a church or organization that offers Financial Peace University. The teachers of the class often help people setup a budget and might be willing to do so for you. You could also take the class which will improve your money management skills. For $100 you'll have a lifetime pass to the class. If it helps you avoid three late charges/bounce checks then the class is well worth it. Now as far as spending too much money. I would recommend cash, but you have to do it the right way. Here is the process that you have to follow to be successful with cash: Doing cash will give you a more concrete example of what spending means. It won't work if you continue to hit the ATM \"\"for just $20 more\"\". It will take you a bit to get used to it, but you will be surprised how quickly you improve at managing money.\"", "title": "" }, { "docid": "c6fa632a4fe912a3d78b7a6592e82079", "text": "\"I wrote a little program one time to try to do this. I think I wrote it in Python or something. The idea was to have a list of \"\"projected expenses\"\" where each one would have things like the amount, the date of the next transaction, the frequency of the transaction, and so on. The program would then simulate time, determining when the next transaction would be, updating balances, and so on. You can actually do a very similar thing with a spreadsheet where you basically have a list of expenses that you manually paste in for each month in advance. Simply keep a running balance of each row, and make sure you don't forget any transactions that should be happening. This works great for fixed expenses, or expenses that you know how much they are going to be for the next month. If you don't know, you can estimate, for instance you can make an educated guess at how much your electric bill will be the next month (if you haven't gotten the bill yet) and you can estimate how much you will spend on fuel based on reviewing previous months and some idea of whether your usage will differ in the next month. For variable expenses I would always err on the side of a larger amount than I expected to spend. It isn't going to be possible to budget to the exact penny unless you lead a very simple life, but the extra you allocate is important to cushion unexpected and unavoidable overruns. Once you have this done for expenses against your bank account, you can see what your \"\"low water mark\"\" is for the month, or whatever time period you project out to. If this is above your minimum, then you can see how much you can safely allocate to, e.g. paying off debt. Throwing a credit card into the mix can make things a bit more predictable in the current month, especially for unpredictable amounts, but it is a bit more complicated as now you have a second account that you have to track that has to get deducted from your first account when it becomes due in the following month. I am assuming a typical card where you have something like a 25 day grace period to pay without interest along with up to 30 days after the expense before the grace period starts, depending on the relationship between your cut-off date and when the actual expense occurs.\"", "title": "" }, { "docid": "e0a620436e35d216e35a782796cfbe11", "text": "\"The key to this is budgeting. Without a budget, you don't know what you are spending your money on. Let's say you would like to go to a movie with a friend. Can you afford it? Without a budget, it is difficult to answer this question. Yes, you have enough money in your wallet, but if you don't go to the movies, you could be saving that money for a house. \"\"But,\"\" you might say to yourself, \"\"surely one movie with my friend won't prevent me from saving my $10k for my house.\"\" And you might be right, but when you add up all the movies, coffees, and other discretionary spending up, it very well could. At this point, you might be discouraged. \"\"Do I seriously need to give up every single extravagance to make this work? I don't have that kind of willpower!\"\" Luckily, here is where budgeting comes to the rescue. Budgeting is simply a plan for your money. You have some monthly expenses that are more or less fixed: your rent, your utility bills, etc. You have other expenses that are not exactly fixed, but are still necessary: groceries, fuel for your car, etc. You also have longer-range expenses, such as insurance premiums that you only pay once or twice a year, but need to be accounted for. List all of these expenses, and figure out how much that comes to each month. What you have left over is available to you for other things. Next, you need to figure out how fast you want to save for this house, and balance that with the other things you might want to spend money on, such as entertainment. If you start from $0 and want to save $10k, you could do it by saving $100 a month: in a little over 8 years, you'll have your $10k. If you can increase this to $300 a month, you'll be there in less than 3 years. Now that you have a plan and everything is accounted for, very little willpower is needed. You don't need to feel guilty every time you buy coffee; if the money is there in your coffee/snacks budget, go for it. If you've got extra money for the month in your entertainment budget, take a date to the movies. Your budget allows you to spend on those things, because you have a plan in place, and are not in danger of spending your rent money or your home savings. This can all be done on paper, in Excel, or even by placing cash in different envelopes. However, it is easier to use budgeting software, such as YNAB, Mvelopes, or EveryDollar.\"", "title": "" }, { "docid": "e05f9fb1d45a1fba06e958b27c614ebd", "text": "As asked previous in the week, there is a big difference between budgeting and expense tracking. Using software, like GNUCash, allows one to track their spending. A budget is a plan, the tracking is what actually happened. I do not track expenses, although I do budget. For me, hitting financial goals is good enough of a track, without investing the time and energy into tracking every penny. One could easily criticize my method, as how can you have a good plan without continuous feedback? For me it is an example of the 80/20 principle. If I put in 20% effort into making and sticking to a budget, I will obtain 80% of the financial success that a person who devotes 100% effort into budgeting and tracking. A person with the same income and life events, who budgets and tracks, will likely be more successful that I, however, not overwhelmingly so. For me time is better spent on other endeavors. You seem to have this attitude as well, but those that do track have it as part of their path to financial success and probably view us as somewhat foolish. This is another example how personal finance is more about behavior than math.", "title": "" }, { "docid": "1406719d95ff278f1cb5ba03b6d36915", "text": "\"What you are doing is neither one. You are simply watching to make sure you don't overdraw, which itself suggests you might be living hand to mouth and not saving. Keeping track of your money and budgeting are useful tools which help people get on top of their money. Which tends to have the effect of allowing you to save. How much did you spend on groceries last month? Eating out? Gas? If you were \"\"keeping track of your money\"\", you could say immediately what you spent, and whether that is above or below average, and why. How much do you plan to spend in the next 3 months on gas, groceries, eating out? If you knew the answer to that question, then you would have a \"\"budget\"\". And if those months go by, and your budget proves to have been accurate, or educates you as to what went wrong so you can learn and fix it... then your budget is a functioning document that is helping you master your money. Certainly the more powerful of the two is the \"\"keeping track\"\", or accounting of what has happened to you so far. It's important that you keep track of every penny without letting stuff \"\"slip through the cracks\"\". Here you can use proper accounting techniques and maybe accounting software, just like businesses do where they reconcile their accounting against their bank statements and wallet cash. I shortcut that a little. I buy gift cards for McDonalds, Panera, Starbucks, etc. and buy my meals with those. That way, I only have one transaction to log, $40 - McDonalds gift card instead of a dozen little meals. It works perfectly fine since I know all that money went to fast food. A little more dangerous is that I treat wallet cash the same way, logging say two monthly entries of $100 to cash rather than 50 little transactions of left $1 tip at restaurant. This only works because cash is a tiny part of my overall expenditures - not worth accounting. If it added up to a significant part, I'd want accounting on that.\"", "title": "" }, { "docid": "a816d89279fc582023e15c450eb92628", "text": "\"There's plenty of advice out there about how to set up a budget or track your expenses or \"\"pay yourself first\"\". This is all great advice but sometimes the hardest part is just getting in the right frugal mindset. Here's a couple tricks on how I did it. Put yourself through a \"\"budget fire drill\"\" If you've never set a budget for yourself, you don't necessarily need to do that here... just live as though you had lost your job and savings through some imaginary catastrophe and live on the bare minimum for at least a month. Treat every dollar as though you only had a few left. Clip coupons, stop dining out, eat rice and beans, bike or car pool to work... whatever means possible to cut costs. If you're really into it, you can cancel your cable/Netflix/wine of the month bills and see how much you really miss them. This exercise will get you used to resisting impulse buys and train you to live through an actual financial disaster. There's also a bit of a game element here in that you can shoot for a \"\"high score\"\"... the difference between the monthly expenditures for your fire drill and the previous month. Understand the power of compound interest. Sit down with Excel and run some numbers for how your net worth will change long term if you saved more and paid down debt sooner. It will give you some realistic sense of the power of compound interest in terms that relate to your specific situation. Start simple... pick your top 10 recent non-essential purchases and calculate how much that would be worth if you had invested that money in the stock market earning 8% over the next thirty years. Then visualize your present self sneaking up to your future self and stealing that much money right out of your own wallet. When I did that, it really resonated with me and made me think about how every dollar I spent on something non-essential was a kick to the crotch of poor old future me.\"", "title": "" }, { "docid": "a5ffad73cd2b4b8a5ba47181b82e005c", "text": "\"How about the new Mastercard \"\"In Control\"\" card http://www.pivotalpayments.com/ca/industry-news/mastercard-introduces-in-control-program-to-help-consumers-budget-800077802/ You can set budgets at your bank and go between getting alerts when you go over, or completely declined if you are out of money. There are going to be obvious loop holes and slack in the system, but this system seems like a pretty neat start. Combine this with a bank account that does bill pay and you might have something to work with.\"", "title": "" }, { "docid": "ec13e0b91f191cd39a8984f1b9cf65aa", "text": "Get on a written budget at the BEGINNING of the month. If you dont write down where your money goes BEFORE you spend it, you have no way of keeping track of it. I couldn't do a thing until I got on a written budget but now that I am, I've paid off $10,000 in 7 months.", "title": "" }, { "docid": "a6fed25c052bb6f17e2cefe0c453afae", "text": "\"Make a list of all your expenses. I use an Excel spreadsheet but you can do it on the back of a napkin if you prefer. List fixed expenses, like rent, loan payments, insurance, etc. I include giving to church and charity as fixed expenses, but of course that's up to you. List regular but not fixed expenses, like food, heat and electricity, gas, etc. Come up with reasonable average or typical values for these. Keep records for at least a few months so you're not just guessing. (Though remember that some will vary with the season: presumably you spend a lot more on heat in the winter than in the summer, etc.) You should budget to put something into savings and retirement. If you're young and just starting out, it's easy to decide to postpone retirement savings. But the sooner you start, the more the money will add up. Even if you can't put away a lot, try to put away SOMETHING. And if you budget for it, you should just get used to not having this money to play with. Then total all this up and compare to your income. If the total is more than your income, you have a problem! You need to find a way to cut some expenses. I won't go any further with that thought -- that's another subject. Hopefully you have some money left over after paying all the regular expenses. That's what you have to play with for entertainment and other non-essentials. Make a schedule for paying your bills. I get paid twice a month, and so I pay most of my bills when I get a paycheck. I have some bills that I allocate to the first check of the month and some to the second, for others, whatever bills came in since my last check, I pay with the current check. I have it arranged so each check is big enough to pay all the bills that come from that check. If you can't do that, if you'll have a surplus from one check and a shortage from the next, then be sure to put money aside from the surplus check to cover the bills you'll pay at the next pay period. Always pay your bills before you spend money on entertainment. Always have a plan to pay your bills. Don't say, \"\"oh, I'll come up with the money somehow\"\". If you have debt -- student loans, car loans, etc -- have a plan to pay it off. One of the most common traps people fall into is saying, \"\"I really need to get out of debt. And I'm going to start paying off my debt. Next month, because this month I really want to buy this way cool toy.\"\" They put off getting out of debt until they have frittered away huge amounts of money on interest. Or worse, they keep accumulating new debt until they can't even pay the interest.\"", "title": "" }, { "docid": "3990625113d4d472df79a83f6d924025", "text": "I agree with the first poster- the first step is to measure your spending and put it down into raw numbers. Once you have the raw numbers, you will feel a natural inclination to improve on those numbers. Set yourself a daily target for cash / incidental expenses. It doesnt have to be a crazy target - just something you can achieve easily. Mark a 'tick' mark next to every day on the calendar that you meet that target (or spend less than the target). Gradually the momentum from the past few 'ticks' will automatically compel you to want to tick off the next day. At the end of each week, lower the target a little. You'll find that when you start measuring your expenditure, you become more aware of how you might be wasting money. All too often we just go out and buy stuff we don't need without really thinking about it.", "title": "" }, { "docid": "43d013fef9929ac7a88224abd9e987c9", "text": "Some companies like Royal Dutch Shell have multiple share classes to suit the tax regimes in Holland and the UK the A shares have dutch withholding tax applied and the B shares dont. Also some split capital investment trusts have multiple share classes http://www.trustnet.com/Education/Split.aspx?ms=1", "title": "" } ]	fiqa
1d91ceafcc4a0a6a33c5b3b863985162	Will I, as a CS student, be allowed to take loans for paying the fees of Ivy Leagues?	[ { "docid": "f57b932cf5be03951308a463839bd799", "text": "This article gives the very good advice to simply contact one of the schools in question and ask how to apply for financial aid as an international applicant. Most Ivy League schools admit so many international students that they will have answers to any financial question you can imagine. They may even already explain the financial aid process online.", "title": "" }, { "docid": "e41502ddaa414a3b7489fe0c4064fca9", "text": "I would be surprised if a bank cared about an undergraduate major. Usually, such things are only important if it is a professional degree, like a law degree or medical degree. The big issue is that if you are not a US citizen, a US bank would be unlikely to make an unsecured loan because you could just return to your country and renege on the loan and they would have no way to collect. Therefore, a bank in your own country might be more logical. If you get accepted by a top Ivy school, they all have financial policies that will allow you to attend regardless of how rich or poor you are, so if you are applying to a top school (Harvard, Princeton, MIT, Stanford, Yale) and get accepted, they will fully finance your attendance. The only exception is if (A) they find out you lied about something, or (B) your parents/family are wealthy and they refuse to pay anything. As long as neither of these two things is true, all of the schools listed GUARANTEE they will provide sufficient financial aid. Princeton even has a no-loan policy, which means not only will they fund your attendance, they will do so without you having to take on any loans.", "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": "aecd446de2f3b43229db2f93e5ca3553", "text": "It depends what area of finance, but an ivy league education is not required. A good school, probably, but the best thing you can do for yourself is go through the internship program at a bank or financial institution (usually after junior year, but you find the occasional sophomore). There are often many job offers to those that complete it well, and if not, you apply to other firms with your internship as your backing. It would help to know what Gyroisabot asked and know what area and what school you went to.", "title": "" }, { "docid": "6a55c7ba07da4507160395e58be83b72", "text": "\"Here are the risks involved with student loans: So - what happens if you decide (or are forced) not to finish school (50% of students don't)? You have no degree to boost income, but still have the debt. What happens when you graduate and want to use that saved cash buy a house, car, etc., and treat the student loans as a monthly bill? The next thing you know you're loan-poor and are struggling to make your monthly payments just like most other \"\"normal\"\" people. You aren't going to earn significant interest on your cash while you're in college (and it will not outpace inflation), and there's significant risk of your college savings losing money if they're not in risk-free investments, so it would NOT be wise to take out student loans when you have the means to cash-flow it. Also, student loans generally charge a roughly 1% fee, so that actually negates the interest you earn in your savings account. Plus you already have money in a 529 plan that is meant for college expenses (and cannot be used to pay student loans) - use that money for what it's for.\"", "title": "" }, { "docid": "b724fe17e40238122234fe11a8818be5", "text": "\"Such a flawed, grasping-at-straws article. Do both ivy league institutions and schools like Hartwick (example used in article) have students that transfer out of STEM programs? Absolutely. But I can say with absolute confidence that engineering programs (e.g.) are considerably more difficult at the former. In reference to math SAT scores for Hartwick, >\"\"The top, middle, and bottom third of students averaged 569, 472, and 417, respectively.\"\" Sorry, but the bottom ivy students' scores are above your top performers by a substantial margin. Are there kids at ivy schools that got the silver spoon treatment their whole lives and perform well because of this? Yup. Characters of all types at all learning institutions. But don't demean the achievement of those who worked their asses off to get somewhere. Hi, I am bbqbot, and my jimmies are rustled.\"", "title": "" }, { "docid": "83045d9a218cfdfe1e721a351c3f6f2e", "text": "I'm currently a senior finance student in Pittsburgh graduating in May. I get pretty good grades (3.2) and have had a few internships. I've recently decided I want to go to grad school as soon as possible, but am unsure of the next steps in my process. Could someone point me in the right direction?", "title": "" }, { "docid": "e300818f1361eb2b58b1cf65c97d6a3f", "text": "\"I think the answer to this question depends on how much you trust yourself. Most people are wonderful at deceiving themselves. I'd personally not trust myself; I'll use Liam's points for the pitfalls some people get into. You can pay off your loans with summer internships and retain the initial cash you had for additional activities that make college enjoyable, i.e - Fraternity/ Sorority, clubs, dinners, and social nights. This is actually the risk I've seen many people do. They'll blow their money in one semester under the assumption that 'they'll just earn more in Summer and keep it for expenses or the future.\"\" Another benefit to taking these loans would assist in building credit, No Credit (in the USA) is actually a good standing. Many sensible banks or credit unions will happily give people with No Credit a loan. This makes intuitive sense if you think about it. Imagine two people with the same income. One owes money regularly to multiple sources and the other has no debt obligations. Which one are you loaning money to? Simplifying things a lot: Great Credit is best, followed by No Credit, then Good Credit, and then Bad Credit. The advantage of Great Credit over No Credit is simply that some institutions in some sectors don't have the policies in place to process No Credit people (No Credit people plan to not apply for credit often, for self-explanatory reasons, so this is a mote point).\"", "title": "" }, { "docid": "e5d08e321efc507002eba796822e1af0", "text": "\"Is there any way through this? Yes, but you're not going to like it. If your friend has guaranteed the loans, then it's your friend's obligation to pay them when the brother-in-law is not cooperating. That's what it means to guarantee a loan. (Obligatory: \"\"Before lending your friends or family money, ask yourself which you need more.\"\")\"", "title": "" }, { "docid": "afa2a46111ab8a4238a54a7e9f7db62f", "text": "[A level grades are less than 35% of the grading distribution at Princeton](https://odoc.princeton.edu/faculty-staff/grading-princeton). And, [0.4% of people attending college attend an Ivy league school](https://www.usnews.com/education/blogs/the-college-solution/2011/09/06/20-surprising-higher-education-facts). We'll round that up to 1% to take into account schools like Stanford, Duke, etc. that are close to Ivy League level but aren't called Ivy League. So, 35% of 1% is 0.35%. Goldman is recruiting from literally the top 1%. There's nothing special about making a 3.5. There is something special about being in the top third of a university that accepts the top 1% of applicants. To suggest otherwise is to bleed ignorance.", "title": "" }, { "docid": "0a650c6cb599a5da5b1517644cefd71c", "text": "It's not a question with a single right answer. Other answers have addressed some aspects, my case may provide some guidance as to one way of looking at some of the issues. When I had student loans, the interest rate was RPI¹ and I could get more than that as the return on a savings account. At the time I could get a whole year's worth of loan at the start of the year, save it, and draw from the savings, partly because I had a little working capital saved already. Importantly in my case, the loans were use-it-or-lose-it: if I didn't take the loan out by about halfway through each academic year, it was no longer available to me. The difference in interest rates was probably similar to what you can get with a careful choice of savings account and 0% on the loan (I did this in the 90s when interest rates were higher). Over a four year degree the interest I earned this way added up to no more than about £100, which went someway towards offsetting the fact I would be paying interest after graduation. If you can clear the loan before you pay any interest it would give you a return, but a small one that could easily be eroded by rate changes or errors on your part (like not keeping on top of the paperwork). It still may be beneficial to take out the loans depending on your capital needs -- in my case it made buying a house after graduating much easier, as we still had money for the deposit (downpayment) and student loan rates were much lower than mortgage rates (100% mortgages were also available then, but expensive). ¹ RPI stands for retail price index, a measure of inflation.", "title": "" }, { "docid": "b3d0d88450f4b4c6e9b9ff492aefca89", "text": "So what if someone gets approved for a larger credit card balance and gambles it away? There's nothing tangible left except for maybe some norepinephrine left in your system... Honestly if the student loan system dried up for anything in like Liberal Arts, universities would scramble to fill positions in their schools and maybe tuitions would come down to an affordable level. Right now it's a joke. People are willing to pay for school and living on res when they get qualified for 100k in student loans. If the student loans weren't there perhaps they'd live with their parents and work to support their education. Tuitions should fall to affordable levels if that were the case.", "title": "" }, { "docid": "78ab9aba895609270936e9fa23a1b938", "text": "\"You sound like you're well educated, well spoken, and resourceful, so I'm going to assume that you are somewhere in the neighborhood of top 5% material. That means you can pretty much do anything you want to if you put enough effort into it. There are two types of people in this world: those who run the world and those who live comfortably in it (and, of course, everyone else, but they are irrelevant to the discussion). Who do you want to be? I've been around a lot of wildly successful people, and they have two consistent traits: connections and freedom. First, everyone always told me that \"\"it's not what you know, it's who you know\"\", but I never appreciated it until after college. The world runs on connections. The more connections you have, and the more successful they are, the more successful you will be. Second, the more freedom you have, the more opportunity you will have to take chances, which is how you become wildly successful. Freedom comes from not being in debt (first) and having money (second). Why do you think Harvard grads are the guys that end up having so much money and power? It's probably because they grew up in a rich family which provided them money (freedom) and a wide social circle of rich people (connections). So you're not rich. What to do? Well, the easiest way to get into that group is to go to college with them. And that means you need to get into Harvard or another Ivy League. Stanford if you want to be an engineer. College will be where you will make your most intense and long-lasting friendships. That roommate at Harvard that you went on the crazy four-day road trip with may someday be CEO of a company... and when he needs a CIO, you can be damn sure you'll be at the top of the list if you're qualified. But Harvard costs a lot of money...which means you'll be in debt, a lot, when you get out of college. You'll have lots of rich, important friends(connections), but you'll be deeply in debt (no freedom). Most of these type of people end up becoming consultants at big firms because they pay well. You'll live a comfortable life and pay off your student loans in five or 10 years. Then you'll continue to live comfortably, but at that point you'll be too old to take huge chances and too comfortable to change things (or perhaps you'll have a big mortgage = no freedom). With a heavy debt load, it's almost impossible to, say, join an early stage startup and really be able to take huge chances. You can do it, maybe. Or, as an alternate option, you can do what I did. Go to a cheap state school and graduate with no debt. That puts you on the other side of the fence: freedom, but no connections. Then, in order to be successful, you have to figure out how to get connections. Goldman Sachs won't hire you, and everyone you meet is going to automatically assume you're mediocre because of where you went to college. At this point, your only option is to take big chances. Move to New York or San Francisco, offer to work for free as an intern somewhere or something. It can be done, and it's really not too hard, you just have to have lots of spending restraint because the little money you have has to go a long way. So what are the other options? Well, some people are recommending that you think about not going to college at all. That will certainly save you money and give you a four year head start on whatever you decide to do (freedom), but you'll forever be branded as that guy without a college degree. Think my second option above but just two or three times worse. You won't even get that free internship, and you'll be that weird guy at dinner parties who can\"\"t answer the first question \"\"So, where did you go to college?\"\". It doesn't matter if you're self-taught; life isn't a meritocracy. If you're very good, you'll end up getting a nice cushy job pushing ones and zeros. A nice cushy golden handcuff job. Well, you could go to community college. They're certainly cheap. You can spend very little money so you'll end up with fairly good freedom. I might add, though, that community colleges teach trades, and not high-level things like management and complex architecture. You'll be behind technically, but not as bad as if you didn't go at all. How about connections? Your fellow students will probably lack ambition, money, and connections. They'll be candidates for entry-level wage slave jobs at Fortune 500 companies after they graduate. If they get lucky, they'll work up to middle management. There's no alumni association, and there's certainly no \"\"DeVry Club\"\" in downtown Boston. At New York and Silicon Valley dinner parties, having a community college degree is almost as bad as having nothing at all. Indeed, the entire value of the community college degree will be what you learn, and you'll be learning at the speed and level of your classmates. My advice? If you get into an Ivy League school, go and hope you get some grants to help you out. The debt will suck, but you'll be well positioned for the future. Otherwise, go to a cheap second-tier school where you can get a large scholarship. There are also lots of third-party scholarships that are out there on the Internet you can get. I got a couple from local organizations. Don't work during college. Focus on expanding your network instead; the future value of a minimum wage job while you're trying to go through school is practically zero.\"", "title": "" }, { "docid": "0f5b2d1f782e4cd0c68c483116f7f71f", "text": "Is this a joke? Equity research and investment banking jobs have historically been handed out to top Ivy grads who know nothing about finance and learn it on the job. It's changing now because of the competiveness but that statement is just ridiculous.", "title": "" }, { "docid": "9bb46b693a157d048f8549f3ba7ec1da", "text": "I think he meant Oxford University in the UK, but he's wrong. You can still pursue a career in Investment Banking even if you do not go to the aforementioned Ivy Leagues. As long as the university you are at is well-respected and you have few summer internships and leadership activities under your belt, it is possible but harder to break into!", "title": "" }, { "docid": "6f8fb1a8452f51c19e2605b3dba6cfce", "text": "Once again. You're taking your finance experience and cross applying it. Very technical degrees like CS often require less gen Ed classes. UIC only allows for 50 gen Ed in their CS program compared to 60 in finance. Stop thinking the degree requirements and paths are the same. They're not.", "title": "" }, { "docid": "8976474706da54817a7fb61df42fac65", "text": "The informational goal about the ratings is an objective opinion about the companies ability to repay the money owed. Debt rating agencies even provide tables where grades correspond to a range of default probabilities. The argument I am making is they do not go about their business of giving accurate probabilities of default.", "title": "" } ]	fiqa
c7164c4485092f525788ac2fbd1e1454	Why can't a US state default, but a EU state can?	[ { "docid": "61bbfe419b10a8b75e647ebabeaa7088", "text": "\"But do you know about a US state risking to go default now or in the past? In 1847 four states - Mississippi, Arkansas, Michigan, and Florida - failed to pay all or some of their debts. All of these states had issued debt to invest in banks. From the detailed source listed below: \"\"...it should be remembered that all cases of state debt repudiation, as contrasted with mere default, involved banks.\"\" Jackson had killed the federal central bank 10 years earlier and the states were trying to create their own inflationary central banks. Six other states delayed debt payments from three to six years (source, page 103, this source has more details). This is the only case I know of where US states defaulted. US cities default more frequently. I'm very confused do US single states like IOWA have debt and emits obligations on their own like Italy does in EU? Yes. Individual states can issue their own bonds. Oh, and just another little thing I would like to know, is Dollar a fiat currency too like the Euro? Yes, the US dollar is a fiat currency. I think the better question is: \"\"Is there any currency that is not a fiat currency?\"\"\"", "title": "" }, { "docid": "c0d0368bdda605c51b53c580867697f1", "text": "US or EU states are sovereigns which cannot go bankrupt. US states have defaulted in the 1840's, but in most of those cases creditors were eventually repaid in full. (I'm not 100% sure, but I believe that Indiana was an exception with regard to costs incurred building a canal system) The best modern example of a true near-default was New York City in the late 1970's. Although New York City isn't a state, the size and scope of its finances is greater than many US states. What happened then in a nutshell: Basically, a default of a major state or a city like NYC where creditors took major losses would rock the financial markets and make it difficult for all states to obtain both short and long term financing at reasonable rates. That's why these entities get bailed out -- if Greece or California really collapse, it will likely create a domino effect that will have wide reaching effects.", "title": "" }, { "docid": "85cc61ce4cae47e915371baf9aea5ef4", "text": "\"But do you know about a US state risking to go default now or in the past? Ultimately, a US state could go into default. However, I doubt that such a scenario would be allowed to transpire. This seems to happen to California with some regularity. That is, risking default. What would happen is not quite well known: \"\"There is no provision for a state to go bankrupt,\"\" Kyser said. \"\"I don't think anyone really knows what will happen or even if the state will go into receivership if it does default. I can tell you this, officials are looking at all the (current) laws.\"\" (source) I believe that the answer to your question is that it could happen, but likely would not be allowed to occur. The nature of the EU and US are quite different. The individual states forming the US are not separate nations. For better or for worse, the US is a stronger federation than the EU. (Something that is lamented at times when the Feds mess with the purview of the locals.)\"", "title": "" } ]	[ { "docid": "1e5936595150d32c4c51e53c0bffc161", "text": "Have seen analysis that at least one state won't be able to repay their obligations using reasonable assumptions, I'm sure it applies to more. A lot of greed went into securitizing those payments the way they did.", "title": "" }, { "docid": "d0639d406a8990b39b5ae168d9ebf638", "text": "There no legal framework that allows states like the US or countries in Europe to default on their debt. Should congress pass a law to default the US supreme court is likely to nullify the law.", "title": "" }, { "docid": "bc4e575ac33da3618e4a5bc3d3820746", "text": "What? Our currency isn't backed by debt currently. It's a fiat currency. Now, if you're asking whether we could back the value of our currency against some type of debt, sure we could, but it would be an incredibly poor decision. The Constitution doesn't specify the type of currency the U.S. has. It gives Congress that power to either delegate that decision, as in the case of the Federal Reserve or pass their own laws.", "title": "" }, { "docid": "dea8171566d9141f05c3d4f716818442", "text": "Oh, you mean converting your money to that of a country whose public debt is [103% of GDP, instead of the 108% of your own?](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt) That seems hardly an advancement, even more so considering that the public debt of the Eurozone as a whole is 82.5% of GDP. Greece is just 2% of the European economy, its default would not mean the collapse of the Euro.", "title": "" }, { "docid": "1b5d19c84907af1282291361ec88cd5c", "text": "\"Any clearing/ legal experts out there? Is this possible- and if so, is it that big of a deal? Here are my thoughts: 1. The EU is right to request euros to be cleared on \"\"home soil\"\" for sovereignty reasons since 2/3s of euro currency is cleared in London. 2. Moving euro clearing back to the eurozone... would just mirror US regulations. Whats the big deal?\"", "title": "" }, { "docid": "39430e9e2b7e42a65b94a9ad0d7d55bf", "text": "\"Correct! But this is only true when a central bank is involved. So if there's a single institution that has a territorial monopoly on the production of money (and competing currencies aren't allowed via \"\"legal tender laws\"\"), then the debt-based money system OP describes isn't actually the system being used. That's the problem with his post: he's trying to make it seem like our current system of fiat currencies is somehow natural or emergent. It's not. What we have now is the result of a legal monopoly.\"", "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": "ecbce6fb051a2cb6791038ba17979cbf", "text": "There is no situation one can imagine in which the US defaults (beyond a day or three) on its obligations. The treasury can print money, and while it would be disastrous, 'monetizing' the debt would simply eliminate all outstanding debt at the risk of devaluing the dollar to hyperinflation levels.", "title": "" }, { "docid": "23dcb346982a8bdcf2ec460e8c272c4c", "text": "There are many different things that can happen, all or some. Taking Russia and Argentina as precedence - you may not be able to withdraw funds from your bank for some period of time. Not because your accounts will be drained, but because the cash supply will be restricted. Similar thing has also happened recently in Cyprus. However, the fact that the governments of Russia and Argentina limited the use of cash for a period of time doesn't mean that the US government will have to do the same, it my choose some other means of restraint. What's for sure is that nothing good will happen. Nothing will probably happen to your balance in the bank (Although Cyprus has shown that that is not a given either). But I'm not so sure about FDIC maintaining it's insurance if the bank fails (meaning if the bank defaults as a result of the chain effect - you may lose your money). If the government is defaulting, it might not have enough cash to take over the bank deposits. After the default the currency value will probably drop sharply (devaluation) which will lead to inflation. Meaning your same balance will be worth much less than it is now. So there's something to worry about for everyone.", "title": "" }, { "docid": "53a265388afd1f3bb9d2e8b6440301ff", "text": "As do other states. The state and national debts are created by big government politicians. Such as bloated civil services, pension funds, more borrowing instead of fiscally responsible. The USA federal gov keeps trillions of shadow debt off its books and downplays the actual unemployment rate.", "title": "" }, { "docid": "5916d0641665dba5b9bd44c1ea6d82c8", "text": "It's all about risk. In 1990, expressing the idea of the US defaulting on debt payments would result in you being labelled as a crank. Yet in 2011, the President and Speaker of the House played chicken with the credit of the United States, and have a date to do it again in December 2011.", "title": "" }, { "docid": "955eded50460f4e3770185808e6b9088", "text": "> Europe is a temporary problem. Lol.. The better question for this thread is how is the European economy not utterly doomed? I see no way at all of the Euro surviving. Greece has already technically defaulted by saying it's not going to pay back all of it's debt. They will officially default when Germany stops bailing them out. Spain is in the exact same situation, just about a year behind. They haven't technically defaulted yet, but they will. They're receiving bailout after bailout and the Greece situation only makes their interest rates worse. Italy is just barely behind Spain, the Greek default followed by the Spanish defualt will send Italian interest rates through the roof dooming them to the same fate. This will eventually effect the US, but our borrowing rates are held artificially low due to the Fed just printing up more fake money and letting the US borrow as much as it wants. If you don't see this scheme crumbling and collapsing, I'm just curious what you actually think will happen?", "title": "" }, { "docid": "102709659e6804bc3eaebde899eb282a", "text": "\"Your question is expressed as a run-on sentence, which I'm having trouble parsing. Maybe you could restate. I'm just pointing out the stupidity of the statist canard that [the debt is not a problem because] \"\"we owe it to ourselves\"\". Collectivists like to think we're all in this together, but that's not reality. Some people are taking from others by force of law. The debt is owed to BANKS, and they want to keep this system going. Wouldn't you like to have a legal monopoly on the supply of currency? Institutions which are funded by loose credit (government, academia, military contractors, crony corporations) likewise benefit from this system. Those who invest in US dollars, and those who are farthest from the central planning spigot are the losers in this scheme. But there is more debt than currency, so it can't ever be repaid. So that is a moot point - it can't even hypothetically be considered. There are however a number of other ways that this system could unwind, when it inevitably does. The banks could be left to fail, and their assets would be bid on by others through the bankruptcy process. Or the Fed could keep issuing currency to keep the banks solvent, eventually inflating the whole system into irrelevance.\"", "title": "" }, { "docid": "da65d37e11ced3265657280ccf9478aa", "text": "\"For political reasons, almost all governments (including the US) spend more money than they get from taxes etc. There are a number of things a government can do to cover the difference: Most governments opt for selling bonds. The \"\"National Debt\"\" of a country can be thought of as being the sum of all the \"\"Bonds\"\" that are still paying interest, and that the Government hasn't Redeemed. It can all go horribly wrong. If the Government gets into a situation where it cannot pay the interest, or it cannot Redeem the Bonds it has promised to, then it may have to break its promise (\"\"Default\"\" on its payments). This makes the owners of the Bonds unhappy and means potential buyers of future Bond sales are less likely to want to buy the Governments new Bonds - effectively meaning the Government has to promise to pay more interest in the future. Recent examples of this include Argentina; and may include Greece soon. The US is in the fortunate position that not many people believe it will Default. Therefore the new Bonds it sells (which it does on a regular basis) are still in demand, even though its interest payments, and promises to Redeem Bonds are huge.\"", "title": "" }, { "docid": "856f1f7783b7124bfef17de4e11454f0", "text": "Don't you need ironclad sovereign debt that will never default type of trust to be a global currency? US is the closest we have at this point? If Europe wasn't on the Euro maybe you can say Germany but who else?", "title": "" } ]	fiqa
b7c6f1787ee86ae7e3299ab943180c11	$200k in an IRA, unallocated. What's the safest investment?	[ { "docid": "c395143ec93c2b6c76b048c512204561", "text": "\"Note that long term you need to plan for possible inflation, so \"\"a little bit of return\"\" generally wants to be at least high enough to offset that plus \"\"a little bit\"\". Which is why just shoving it in a bank, while extremely safe, isn't usually the best choice. You need to make some decisions about how you trade off risk versus return, whether you will comfortable riding out a downturn while waiting for recovery, and so on. My standard advice, as someone else who knows how little he knows: It's worth spending a few hundred of those dollars to talk to a real financial planner. (NOT someone who has any interest in selling you particular products, like a broker or agent!) They can help you ask yourself the right questions about comfort and goals and timeframe to pick a strategy which suits your needs. It won't be \"\"exciting\"\", but it sounds luke you agree with me that this shouldn't be exciting and \"\"market rate of return\"\" (about 8% annually, long term) is generally good enough, with more conservative positions as you approach the point of needing that money.\"", "title": "" }, { "docid": "c7a7414980706b09d841d7c47ad28a7f", "text": "if you don't intent to touch the money for 10 years or longer, then dumping 100% into a low-expense-ratio index fund seems like a perfectly reasonable thing to do. it is simple, low maintenance and fairly mindless. just remember to reinvest the dividends occasionally (e.g. every 6 months). however, if you are the kind of person who is going to lose their nerve when the market goes down 30%, then putting some of your money into a bond index fund or even a treasury note fund would be better than selling stock in a down market. just figure out how much of your portfolio you are comfortable losing, and put that in stocks. then put the rest in some stable value fund and watch it's value get slowly washed away by inflation while your stock investments rise through violent swings.", "title": "" }, { "docid": "40ded5eaf1e822f9c6f32a36d2678a0f", "text": "The safest investment is probably a money market fund [originally I said a TIPS fund but they appear to be riskier than I had thought]. But you might not want to invest everything there because the returns are not going to be great. High returns come with high risk. The best portfolio has some percentage (which may be 0) of your money in a safe asset like a money market and some in a risky portfolio (this percentage may also be zero for some people). You should consult your own risk aversion and decide how much money to put in each. If you are super risk-averse, put almost all of it in the money market. If you want a little more return, put more of it in the risky portfolio. This is a fundamental result of finance theory. What's the risky asset? A fully diversified portfolio of bonds and stocks. People don't agree on exactly what the weights should be. The rule of thumb back in the day was 60% stock and 40% bonds. These days lots of financial planners recommend 120 minus your age in stock and the rest in bonds. But no one really knows what the perfect weights in the risky portfolio should be (the rules of thumb I just gave have little or no theoretical foundation) so you have to choose for yourself what you think makes sense.", "title": "" }, { "docid": "b1c9ef7aafb6e1573e3a19c0d9922727", "text": "\"Define \"\"risk-sensitive\"\": The point is, define Your risk, and your choices will narrow. Some investors worry more about what next months statement will show & lose sleep over it; some investors do not want to miss the average historical rates of return for equities (stocks) and are willing to tolerate fluctuations in monthly statements.\"", "title": "" }, { "docid": "ab078a1426cf4d4ad2c20cf55fc1744c", "text": "\"Your funds are in a retirement account. Withdrawals from your IRA will be penalized if you withdraw before you turn 59.5 years old, and you appear to be decades away from that age. The general advice I would give you is to pick a \"\"target year fund\"\" that targets the year you turn 59.5. The stock market is more volatile, but its average gains will protect you from inflation just eating your funds. Bonds are in counterpoint to your stocks - more stable, and protecting you from the chance that stocks dip right before you want to withdraw. Target year funds start with higher amounts of stock, and gradually rebalance towards bonds over time. Thus, you take your market risks earlier while you can benefit from the market's gains, and then have stability when you actually would want to retire and depend on the savings.\"", "title": "" } ]	[ { "docid": "405fe681a015cca133b45b266fe76b01", "text": "\"Is it unwise to not have any kind of retirement account? etc. Yes. :) Why? Because they allow tax-free growth, and that's always good. and placed it in an online bank's checking account with 0.76% APY. If nothing else, move some of it into an online bank's savings account at 1.2% and the rest into a set of \"\"laddered\"\" CDs at about 1.5%. Do that to your \"\"six months emergency fund\"\" money, and whatever money you plan on using for a condo DP. Invest the rest.\"", "title": "" }, { "docid": "394bb6647586be1013b72bbe7b8f1858", "text": "Wells Fargo. They have an account called PMA, an umbrella account for checking, savings, mortgage, and brokerage accounts. It would cost $30/month, but I never had to pay because I have a rollover retirement account that is enough to waive the fees. They count all accounts, including mortgage, which I used to have. Oh, and no restrictions. An added advantage is there are no fees for any of the accounts, nor for some other things, like bank checks, outside ATM fees, etc. I'm in California, so I don't know if the same deal exists in other states. But if you qualify for the free account, it's pretty good. Actually, most of my investments are Vanguard funds. And I have another rollover account with Vanguard, and never pay fees, but I only buy or sell from one Vanguard fund to another, and rarely since I have targeted retirement funds that are designed to be no maintenance. For some reason, I trust Vanguard more than most other funds; maybe because I like their philosophy on low-cost funds, which they started but are now getting more popular.", "title": "" }, { "docid": "274f148b0a145f15618ebf92b4b0a936", "text": "\"You most definitely can invest such an amount profitably, but it makes it even more important to avoid fees, um, at all costs, because fees tend to have a fixed component that will be much worse for you than for someone investing €200k. So: Edit: The above assumes that you actually want to invest in the long run, for modest but relatively certain gains (maybe 5% above inflation) while accepting temporary downswings of up to 30%. If those €2000 are \"\"funny money\"\" that you don't mind losing but would be really excited about maybe getting 100% return in less than 5 years, well, feel free to put them into an individual stock of an obscure small company, but be aware that you'd be gambling, not investing, and you can probably get better quotes playing Roulette.\"", "title": "" }, { "docid": "323903dca6b8cb1eab5455c1f54b2fd3", "text": "First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with. Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you. You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks, mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash.", "title": "" }, { "docid": "5980be7c0d9e69f125b921f78cbe28a5", "text": "Distributions from an inherited IRA will be taxed as ordinary income and there are required minimum distributions for the inherited account. Assuming you were 55 at the time of your mother's death, your life expectancy according to the IRS is 29.6 years. Your required yearly distributions on $200,000 would be roughly $6800. For each year that you didn't withdraw that, you would owe a 50% penalty of the distribution amount (~$3400). That's probably better than the tax hit you would take if you pulled it all in as income in a 5 year window (ie. all right now since you're at the end of the window).", "title": "" }, { "docid": "52240b1b1ddd4e13e6d3fab812b0d397", "text": "Oh, ok. You have $3.8m cash to work with in creating a low-risk investment portfolio. All you need to do is pick investment options that stick to the three objectives of the fund. You may assume all the capital is available for immediate investment ($200k out of the $4m is set aside for scholarships so it must stay liquid).", "title": "" }, { "docid": "c3ad742e1267bbc34a7d060d900beae9", "text": "\"True, absolutely safe are only death and taxes. Apparently [US treasuries](https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield) yield far less than 3,5-4%, but I guess that's as \"\"100% safe\"\" as it gets. However, best I could find while talking to various banks was a reverse convertible bond that yields 3,5% per year, tax excluded. Worst case scenario: 1) I got all my money back and gained 3,5% for one year. 2) after a few years, I find myself with pretty valuable shares and still cashed in the yearly 3,5%. I was wondering if I got lucky with that, or if there are better things out there and if yes, where I should look. Honestly, in the age of negative interests, I'm more than happy to get enough interest to counter inflation.\"", "title": "" }, { "docid": "5768adeca0219e72d67ccb5dbb924ded", "text": "Immediately move your Roth IRA out of Edward Jones and into a discount broker like Scottrade, Ameritrade, Fidelity, Vanguard, Schwab, or E-Trade. Edward Jones will be charging you a large fraction of your money (probably at least 1% explicitly and maybe another 1% in hidden-ish fees like the 12b-1). Don't give away several percent of your savings every year when you can have an account for free. Places like Edward Jones are appropriate only for people who are unwilling to learn about personal finance and happy to pay dearly as a result. Move your money by contacting the new broker, then requesting that they get your money out of Edward Jones. They will be happy to do so the right way. Don't try and get the money out yourself. Continue to contribute to your Roth as long as your tax bracket is low. Saving on taxes is a critically important part of being financially wise. You can spend your contributions (not gains) out of your Roth for any reason without penalty if you want/need to. When your tax bracket is higher, look at traditional IRA's instead to minimize your current tax burden. For more accessible ways of saving, open a regular (non-tax-advantaged) brokerage account. Invest in diversified and low-cost funds. Look at the expense ratios and minimize your portfolio's total expense. Higher fee funds generally do not earn the money they take from you. Avoid all funds that have a nonzero 12b-1 fee. Generally speaking your best bet is buying index funds from Fidelity, Vanguard, Schwab, or their close competitors. Or buying cheap ETF's. Any discount brokerage will allow you to do this in both your Roth and regular accounts. Remember, the reason you buy funds is to get instant diversification, not because you are willing to gamble that your mutual funds will outperform the market. Head to the bogleheads forum for more specific advice about 3 fund portfolios and similar suggested investment strategies like the lazy portfolios. The folks in the forums there like to give specific advice that's not appropriate here. If you use a non-tax-advantaged account for investing, buy and sell in a tax-smart way. At the end of the year, sell your poor performing stocks or funds and use the loss as a tax write-off. Then rebalance back to a good portfolio. Or if your tax bracket is very low, sell the winners and lock in the gains at low tax rates. Try to hold things more than a year so you are taxed at the long-term capital gains rate, rather than the short-term. Only when you have several million dollars, then look at making individual investments, rather than funds. In a non-tax-advantaged account owning the assets directly will help you write off losses against your taxes. But either way, it takes several million dollars to make the transactions costs of maintaining a portfolio lower than the fees a cheap mutual/index fund will charge.", "title": "" }, { "docid": "4ad9de9c22565df9c3a2f565e531a525", "text": "\"First, two preliminaries, to address good points people made in comments. As AbraCadaver noted, before you move your $30k to something that might lose money, make sure you have enough cash to serve as an emergency fund in case you lose your income. Especially remember that big stock market crashes often go hand-in-hand with widespread layoffs. Also, you mentioned that you're maxed out in a 401k. As JoeTaxpayer hinted, this could very well already be invested in stocks, and, if it isn't, probably a big part of it should be. Regarding your $30k, you don't need to pay anybody. In general, fees and expenses can form a big drag on your investments, and it's good to avoid them as much as possible. In particular, especially with \"\"only\"\" $30k, it's unlikely that advisers can save you more than they cost. Also, all financial advisers have a cost: the \"\"free\"\" ones usually push you into investing in expensive funds that make them money at your expense. In that regard, keep in mind that, unlike a lawyer or a doctor, a financial adviser is not required by law to give advice that's in your best interest. When investing, there is a pretty short list of important considerations that you should keep in mind: (If anyone has any other points they think are similarly important, feel free to suggest an edit.) Practically speaking, I'd suggest investing in index funds. These are mutual funds that invest very broadly, in a \"\"passive\"\" way that doesn't spend a lot of effort (and money) trying to pick individual high-performing stocks or anything like that. Index funds provide a lot of diversification and tend to have low expense ratios. (Other, \"\"actively managed\"\" funds tend to be more expensive and often don't outperform index funds anyway.) If you're saving for retirement, there are even target date funds that are themselves composed of a small number of index funds (often domestic and international stocks and bonds), and will increase the proportion invested in bonds (safer) as they get closer to a target retirement date. See, for example the Vanguard Target Retirement 2045 fund. A fund like that one might be all you need if you are saving for retirement. Finally, you can invest online without paying any advisers. Not all companies are created equal, however; do your research. I personally highly recommend Vanguard, since they have a wide variety of no-load index funds and tend to have very low expense ratios. (No-load means you don't have to pay a fee to buy and sell.) Part of why they are inexpensive is that, unlike most financial companies, they are actually a cooperative owned by those who invest in their funds, so they don't need to try and milk a profit out of you. (Don't let that suggest that they're some \"\"small-potatoes hippie firm\"\", though: they're actually one of the largest.) I hope I helped. Keep posting if you have more questions!\"", "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": "ec29e9f3446d7fbc121a80fbf555f43b", "text": "\"You could put in in a Money Market Fund. These are designed to always be $1 per share, and not lose money. Of course, it still, very rarely, happens and is called \"\"breaking the buck\"\" when they do. Sounds like the high yield savings is the way to go. The rates will be the same as what you can get from a Money Market Fund, but you also have the added advantage that the account is FDIC insured. BTW, using a Roth as an emergency fund is a terrible idea. It is true that, since you already paid taxes on your contributions, you can withdraw those contributions without incurring penalties. However, you have to file paperwork to do it, and since it's not common, the IRA custodian is likely to screw it up. Plus, you have to keep track of what were contributions, and what was investment returns, to not run afoul of the penalties. And it will take time to do it, which you may not have in an emergency. Considering you're only looking at getting 1% interest anyway, there's no reason to use a Roth account as an emergency fund. You can set those same automatic deposits into a savings account.\"", "title": "" }, { "docid": "c5dd8cdb1892363bbaa7e0b9547ae431", "text": "Without making specific recommendations, it is worthwhile to point out the differing tax treatments for a Roth IRA: investments in a Roth IRA will not be taxed when you withdraw them during retirement (unless they change the law on that or something crazy). So if you are thinking about investing in some areas with high risk and high potential reward (e.g. emerging market stocks) then the Roth IRA might be the place to do it. That way, if the investment works out, you have more money in the account that won't ever be taxed. We can talk about the possible risks of certain kinds of investments, but this is not an appropriate forum to recommend for or against them specifically. Healthcare stocks are subject to political risk in the current regulatory climate. BRICs are subject to political risks regarding the political and business climate in the relevant nations, and the growth of their economies need not correspond with growth in the companies you hold in your portfolio. Energy stocks are subject to the world economic climate and demand for oil, unless you're talking alternative-energy stocks, which are subject to political risk regarding their subsidies and technological risk regarding whether or not their technologies pan out. It is worth pointing out that any ETF you invest in will have a prospectus, and that prospectus will contain a section discussing the risks which could affect your investment. Read it before investing! :)", "title": "" }, { "docid": "638e5dffc189949a5b4ba471ef3f81ab", "text": "First thing to know about investing is that you make money by taking risks. That means the possibility of losing money as well as making it. There are low risk investments that pretty much always pay out but they don't earn much. Making $200 a month on $10,000 is about 26% per year. That's vastly more than you are going to earn on low risk assets. If you want that kind of return, you can invest in a diversified portfolio of equities through an equity index fund. Some years you may make 26% or more. Other years you may make nothing or lose that much or more. On average you may earn maybe 7%-10% hopefully. Overall, investing is a game of making money over long horizons. It's very useful for putting away your $10k now and having hopefully more than that when it comes time to buy a house or retire or something some years into the future. You have to accept that you might also end up with less than $10K in the end, but you are more likely to make money than to use it. What you describe doesn't seem like a possible situation. In developed markets, you can't reliably expect anything close to the return you desire from assets that are unlikely to lose you money. It might be time to re-evaluate your financial goals. Do you want spending money now, or do you want to invest for use down the road?", "title": "" }, { "docid": "bebad083a6e66d5ba199fd1e63a0f15b", "text": "With $800/month extra? Do both. (I am ethnocentric enough to assume you live in the same country as me) First, figure out what your emergency fund should look like. Put this money in a high yield checking or savings account. Add to it monthly until you reach your goal. It should be 3 to 6 months of your total monthly expenses. It will be a lot more than $2k I suspect. You will earn bubkis in interest, but the point of the emergency fund is a highly liquid asset for emergencies so you can choose cheaper car insurance and not buy warranties on stuff. With your $800/month, split it up this way: $416/month into a Roth IRA account at Vanguard (or Schwab or Fidelity) in the Star Fund (or similar low cost, diversified fund). The star is $1000 to open, pretty diversified. $416 is a lazy number that comes close to the $5000 annual limit for a Roth IRA in the US. Contribute like clockwork, directly from your paycheck if you can. This will make it easy to do and get you the benefit of dollar cost averaging. $200 or $300 into your savings account until you reach your emergency fund goal. $85 - $100. Live a little. Speculate in stocks with your vanguard account. Or rent fancy cars. Or taken a vacation or go party. If you are saving $800/month in your early 20 be proud of yourself, but have a little fun too so you can let off steam. It isn't much but you know you can play with it. Once you reach your emergency fund, save up for your future house or car or plane tickets to Paris. Ask another question for how to save up for these kinds of goals.", "title": "" }, { "docid": "a5797d874e38e3192b00a936376f037f", "text": "There have been studies which show that Dollar Cost Averaging (DCA) underperforms Lump Sum Investing (LSI). Vanguard, in particular, has published one such study. Of course, reading about advice in a study is one thing; acting on that advice can be something else entirely. We rolled over my wife's 401(k) to an IRA back in early 2007 and just did it as a lump sum. You know what happened after that. But our horizon was 25+ years at that time, so we didn't lose too much sleep over it (we haven't sold or gone to cash, either).", "title": "" } ]	fiqa
a8aeb969101237981d8148e245204112	Basic Info On Construction Loans	[ { "docid": "3110b4b6766a0e1dac9a4b4944d29138", "text": "\"Construction loans are typically short term that then get rolled into conventional mortgages at the end of the construction period. Since the actual construction loan is short term, you cannot combine it with a long-term land loan as well. You could do the two separate loans up front to buy the land and finance the construction, then at the end roll both into a conventional mortgage to close out the land and construction loans. This option will only work if you do all three through the same lender. Trying to engage various lenders will require a whole new refinance process, which I very much doubt you would want to go through. These are sometimes called combo loans, since they aggregate several different loan products in one \"\"transaction.\"\" Not a lot of places do land loans, so I would suggest first find a lender that will give you a land loan and set an appoint with a loan representative. Explain what you are trying to do and see what they can offer you. You might have better luck with credit unions as well instead of traditional banks.\"", "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": "77d9180f70d0802c2ce787ee20f2097e", "text": "\"In a domestic setting, Letters of Credit are often used to build public works needed to support a development. So if you're bulldozing a few 3 story buildings to build a 50 story tower, the municipality will build appropriate water/sewer/gas/road infrastructure, and draw from the developer's letter of credit to fund it. The 'catch' to the developer is that these things usually aren't revokable -- once the city/town/etc starts work, the developer cannot cut-off the funding, even if the project is cancelled. A letter of credit definitely isn't a consumer financing vehicle. The closest equivalent is a \"\"line of credit\"\" tied to an asset like a home.\"", "title": "" }, { "docid": "83b726abb06b3facfd6be7b430d842bc", "text": "Good! The article says it was some kind of collateral protection insurance that customers were signed up for despite it being unrequired for the loan. The accusations is that WF racketeered about 800,000 loans by bundling in this bunk insurance cost as part of the loan structure. I'm glad you're not caught up in it.", "title": "" }, { "docid": "fb23853645f6035f0341f842728bc718", "text": "Hmm well the methods used differ depending on the asset class. I've worked with a REIT and PE on a few different types of commercial projects. For a general overview though I would say look up courses at a local community college and purchase the text books on the syllabus. Some asset classes also have free industry updates which can give you an broad overview. Feel free to PM me if you want to talk specifics.", "title": "" }, { "docid": "19b4d2108fdfe04446fa062cd311a388", "text": "So if it's a bridge loan they need a lot of money now to keep the trains running but expect to get the actual loan they need in the future at which point they pay off the bridge loan ideally after not having to make too many coupon payments. That's what it sounds like to me. Scenario: I am building a large development, my main funding source is kaput for whatever reason, I need money now to make payroll, buy fuel, pay for that shipment of supplies etc, I don't have time to secure the huge loan I need in the future for the rest of the project so I get a loan to cover me until I secure that deal and put my building site as collateral against it, I get the full funding, pay off the bond in full and move on with the project.", "title": "" }, { "docid": "1d63f6ae6bae90732a16246a96f07bac", "text": "You would probably be best off checking through your loan documents to see if anything is listed in it in regards to tearing down the existing house. Likely it is not allowed. Thinking about it logically, the house is collateral for the mortgage, and you are wanting to destroy the collateral. I would expect the bank would not be pleased. Semi related question (answers have some good info) - Construction loan for new house replacing existing mortgaged house?", "title": "" }, { "docid": "3091eda9cb4abbce57a1fd1559c2da15", "text": "This is all answered in the prospectus. The money not yet invested (available/committed to a note but not yet funded) is held in pooled trust account insured by FDIC. Money funded is delivered to the borrower. Lending Club service their notes themselves. Read also my reviews on Lending Club.", "title": "" }, { "docid": "5ff51bb08b4aeeae40dc724aa5bd53bf", "text": "If you go traditional financing there is a chance it'd be syndicated amongst a bank group. That is going to add a little depth to your credit agreement id imagine. You thinking a term loan with a 7-10 amortization? I've never seen a LOC more than 5 years out.", "title": "" }, { "docid": "d2e8aa4caff5531411d25c10c83ca508", "text": "Basically isn't this like if they loaned a bank 400b with 401b due tomorrow, and then the bank took the same loan the next day? Gross exaggeration I know, but I just want to make sure that is the way this works.", "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": "8143e59701da827051bb11538170aa2e", "text": "Hi guys, have a question from my uni finance course but I’m unsure how to treat the initial loan (as a bond, or a bill or other, and what the face value of the loan is). I’ll post the question below, any help is appreciated. “Hi guys, I have a difficult university finance question that’s really been stressing me out.... “The amount borrowed is $300 million and the term of the debt credit facility is six years from today The facility requires minimum loan repayments of $9 million in each financial year except for the first year. The nominal rate for this form of debt is 5%. This intestest rate is compounded monthly and is fixed from the date the facility was initiated. Assume that a debt repayment of $10 million is payed on 31 August 2018 and $9million on April 30 2019. Following on monthly repayments of $9 million at the end of each month from May 31 2019 to June 30 2021. Given this information determine the outstanding value of the debt credit facility on the maturity date.” Can anyone help me out with the answer? I’ve been wracking my brain trying to decide if I treat it as a bond or a bill.” Thanks in advance,", "title": "" }, { "docid": "ffffed3d8a58994285be96defc1b39dc", "text": "\"From the Op's comment below re: the \"\"audit\"\" http://www.gao.gov/new.items/d11696.pdf, the first paragraph states that loans outstanding peaked at just over 1 trillion in 2008. So you'd look at the Fed's balance sheet of loans outstanding over time, and perhaps subtract amounts reported as more normal operations.\"", "title": "" }, { "docid": "d33b179bbefc97278231c0d1b7069b84", "text": "RMA Journal is good. You should search for more in depth articles if you really want a good handle on all of the recent regulations. Dodd-Frank, CFPB regs, Basel II and the new capital reserve requirements and how that's affecting the industry. The irony about much of the new regs is that they are driving smaller lenders into selling their company because it is simply too costly to carry the staff necessary to ensure compliance; thus making the too big to fails even bigger.", "title": "" }, { "docid": "3303ff7feab704409a282dcd626fac88", "text": "Presumably, the inverse of the advantages? You are guaranteed the interest rate that is written on your mortgage commitment as long as the first draw happens before the rate hold expiry date (typically 120 days from application date). In most cases, it takes at least 6 months or more to build a home from the ground up. That means that you are taking a chance at what the interest rates and qualifying criteria will be several months down the road. You can normally only lock in 120 days prior to possession with a 'Completion Mortgage'. Lenders are constantly changing their guidelines and rates are predicted to increase over the coming months. That means you are much better to obtain draw mortgage financing to avoid any of these uncertainties. You will know that you have your financing in place right away before construction even starts. This is a huge peace of mind so you can relax and get ready for the big move. So thus, if interest rates are lower 6 months or a year from now, that'd be the disadvantage -- a longer lock-in period.", "title": "" }, { "docid": "f07714b5631bbd2a81f26cbd7e5f6a41", "text": "\"The most succinct answer is \"\"Banks are in the Money business\"\". Not construction, not real estate, not any of the other things they may find find themselves sometimes being dragged (foreclosure) or tempted (construction) into. \"\"Money\"\" is their core competence, and as good business people they recognize that straying outside that just dilutes their focus.\"", "title": "" }, { "docid": "899ee181459f01fd2b3de956e0f38782", "text": "\"Hi, I'm not sure what you're looking for, but I'll assume you are just looking for some distinguishing characteristics of an infra deal. Infra deals are typically: - Project financed meaning that a Special Purpose Company (SPC) is established to build and operate the asset. Project finance means that the SPC is quarantined from any party and is backed by the cashflows of the project and not by the balance sheet of some parent entity - The SPC's cashflows are backed by a lengthy concession agreement (e.g. a government body provides a concession to a private party to operate the infrastructure asset for say 30 years). The concession agreement can best be thought of as a form of guarantee provided by the government body. The exact terms of the agreement will vary but something like \"\"you can operate this toll road for 30 years and charge $x per vehicle, indexed at y% p.a.\"\" should give you the idea of what a concession agreement is. - Because the concession agreement acts a bit like a guarantee over the cashflows of the SPC it makes longer term and higher leveraged financing more plausible. Imagine a national tollroad asset where the AAA-credit rated government body guaranteed 20m cars a year for 30 years with a $5 toll charge. Your tollroad SPC now has $100m of cashflow every year for 30 years which is AAA-credit rated. This should enable you to get competitively priced long term capital and to gear the SPC at much higher rates than non-infra deals. - At the end of the concession period the SPC hands the asset back to the government completely unencumbered (debt-free) So in a nutshell, a government body grants a concession to a SPC that guarantees its cashflows over a long term. The SPC is then financed based purely on this guarantee. The SPC then Builds the asset, Operates it and then at the end of the concession period Transfers it back to the government (google Build-Operate-Transfer or BOT for more detail if curious). There are plenty of other distinguishing characteristics and a truck-load of detail that I have completely skipped/ignored so others may want to jump-in/ridicule me. Good luck with your interview. edit: formatting\"", "title": "" } ]	fiqa
9215c3c8199eb551293160a555f3e27f	Digital money pots?	[ { "docid": "977c491090bccd98c5020fd2ef786445", "text": "If you can live with managing the individual category amounts yourself, this is trivial. Just set up a spreadsheet listing each category (and a column for the total amount of money in the account), adding or subtracting as you deposit or withdraw money to the account. To the bank it will be just one (physical) account, but to you, it can be any number of (accounting asset) accounts. You can choose to keep a history, or not. It's all up to how complex you want to make it. It doesn't even have to be a spreadsheet - you can just as well do this on paper if you prefer that. But the computer makes it easier. I imagine most personal finance software will help you, too; I know GnuCash can be coaxed into doing this with only a bit of creativity, and it almost certainly isn't the only one. I do this myself and it works very well. I don't know but imagine that companies do it all the time: there is no reason why there must be a one-to-one relationship between bank accounts and accounting asset accounts, and in fact, doing so would probably quickly become impractical.", "title": "" }, { "docid": "bb5469222c16ac4039cbea26d8475e07", "text": "I guess it depends on your bank. My bank (Rabobank) recently did introduce this feature. You don't get a card per category, though. Instead you set up rules to match each expenditure to one of the existing pots.", "title": "" } ]	[ { "docid": "518804c68cb84104740402d5c0394688", "text": "\"No, but it's serving the same purpose, which is to hide the original origin of a sum of money. Both examples involve moving money from one source to another, when both the source and the sink are in actuality the same entity managed and run by the same people. Both involve doing it in order to hide the money from those who would otherwise have a right to a portion of it. In this case, it is those with a right on the \"\"net\"\". In Starbucks UK, it's the UK government.\"", "title": "" }, { "docid": "a0e4d0c60380c959dadeea5d3d968ccb", "text": "You will find money in less than an hour! Today is the day to smile or at least experience a bright spot in your day. Take a few minutes from reading, writing, working or whatever it is that drew you into cyberspace today. Lets find some cash, money, dinero, lout, fat wallet, bulging pocketbook! Maybe by the end of the day you will be shopping , driving a new car, calling a friend with some good news, or at best case scenario negotiating the bottom dollar for the mansion of your dreams. http://angelabrummer.hubpages.com/hub/Money-for-FREE-in-minutes", "title": "" }, { "docid": "0fcdba0856699d55e25ac1188f0d2b4a", "text": "Bitcoin could work fairly well. Each site can just give you a wallet to dump money into. Can also do micro-payments where you could pay per-article. With a shared private key on a wallet you keep topped up, they could remove the money as you browse. I can imagine businesses that sell you hard-drive space based on the amount you use rather than a cap, calculate the cost of transmitting each packet of data. You can have one program to manage all the wallets for all your sites. But it would need more penetration before that happens.", "title": "" }, { "docid": "52e161aec330831a69433a984d0b89ae", "text": "You can try SplashMoney. It works on many platforms, including iPhone, iPod and Mac, but also Palm OS, Android, Blackberry and windows. I've been using it —since more than two years now— with my old Palm OS PDA and it works great. As I work mainly with Linux, I've tested very few times its synchronization with its desktop companion running on windows.", "title": "" }, { "docid": "7e95f69874e9a0f237cfc6c92eed154e", "text": "Debit card, no. Prepaid card, probably; some charities do use that approach to make monthly support payments, including to the homeless. You might want to find and talk to one of those groups to find out how they did it.", "title": "" }, { "docid": "00de82c29af68d86c8cb0534db11653f", "text": "I can see a long-term existence for it. I doubt it will replace national currencies but I also think there is some value. Gold is purely speculative as well but it's thrived for a very long time. I see this as basically a digital version of gold.", "title": "" }, { "docid": "d7d4ec3f4b46b3085ba58507580e1240", "text": "If I needed a safe-ish way to bank a lot of cash in vegas I'd exchange for high value chips at the local gambling establishments. I have to imagine that's being done already for other less than legal enterprises.", "title": "" }, { "docid": "1455bbcecbe56de5592edbf1106a085e", "text": "Aha, perhaps...also, perhaps someone like Louis with a product such as this, to the (reasonably) technically literate while pushed through a next-generation service that isn't rapacious when it comes to something as simple as digitally moving money...perhaps it's time. Shake our fists to the heavens, and all.", "title": "" }, { "docid": "685f5af46c704157e62049b3b1eace69", "text": "I don't know much about paypal or bitcoin, but I can provide a little information on BTC(Paypal I thought was just a service for moving real currency). BTC has an exchange, in which the price of a bitcoin goes up and down. You can invest in to it much like you would invest in the stock market. You can also invest in equipment to mine bitcoins, if you feel like that is worthwhile. It takes quite a bit of research and quite a bit of knowledge. If you are looking to provide loans with interest, I would look into P2P lending. Depending on where you live, you can buy portions of loans, and receive monthly payments with the similiar risk that credit card companies take on(Unsecured debt that can be cleared in bankruptcy). I've thrown a small investment into P2P lending and it has had average returns, although I don't feel like my investment strategy was optimal(took on too many high risk notes, a large portion of which defaulted). I've been doing it for about 8 months, and I've seen an APY of roughly 9%, which again I think is sub-optimal. I think with better investment strategy you could see closer to 12-15%, which could swing heavily with economic downturn. It's hard to say.", "title": "" }, { "docid": "c13054d90c07f1bf0da2a577f1309eb6", "text": "\"Cash is a pain to deal with. You have to have change ready for that dick in seat 1A who doesn't have anything smaller than a $20, then by the time you get to seat 39F, you've got hundreds (if not thousands) of dollars. This means that the flight's turnaround time now includes counting, securing, and transporting money, not to mention dealing [with the inevitable problems that an increase in money will bring](http://graphjam.files.wordpress.com/2008/03/image003.jpg). The alternative is having a little handheld machine that, for under $1 per transaction, reduces turnaround workload to \"\"push the 'sync' button.\"\" It makes complete sense in that context, I believe. (Also, if you're flying, I'd say the odds are very good you have some sort of credit-card-like instrument on your person. This might just be my own perspective, though. I've accidentally fucked over taxi drivers by forgetting that mobile credit card terminals are not ubiquitous.)\"", "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": "6a9ba9d1b4bcc1164a90d43eebcb8187", "text": "\"I don't know if those machines work this way in the UK too, but here in the US you can often avoid the coin-counting fee if you opt to convert the money into a gift certificate instead of cash. I routinely convert my coins to Amazon gift certificate money with no charge. Individual machines differ in which particular gift cards they use, but at the least, almost all of them offer the option for a no-fee conversion to a voucher/gift certificate to the store where the machine is. So it's likely you'd be able to use the machine to convert the cash to \"\"money\"\" you can use to buy groceries.\"", "title": "" }, { "docid": "a75fbc7bcb0805d16c2cea6c1186a8e7", "text": "You do. They're in your digital wallet which can be on your phone, computer, thumb drive, on cloud storage or wherever you want to keep it. Multiple backups. There are many videos on Youtube that will explain how it all works.", "title": "" }, { "docid": "b8118a2a42ce71b5da832a00656bc4d6", "text": "The problem is, I don't understand, how such sites work. Is that scam or not? Some of my friends told me that they've actually received the revenue after they deposited a bit of money to similar sites, and I don't have any evidence not to trust them. Yes there are scam. Stay away. Quite likely people got real money back into Bank Account. Or more likely it shows that there is more [notional] money in the sites account. If such sites really 'work', then how and why? These sites work, because there are quite a few people who believe in free / easy money. The site could be classic pyramid / Ponzi scheme. They could also be involved in some kind of Money Laundering. Why would anyone trust them so much to give them money for absolutely no reason? Okay, I'm not so clever, but they can't make profit only because of stupid people, can they? The same way you did, at times just for fun to experiment. At times because they believe there is easy get rich way. There is a reward that works so that if you see 120 you start believing in it. If you try and withdraw, there will be quite a few obstacles; under the pretext of holding period, withdrawal fees etc... but mostly they will encourage you to keep depositing small amounts and see it grow. This of it this way; if one can make 20% day on day ... one does not need someone else's money. The power of compounding would mean very quickly $ 100 would become 88 BILLION in 120 days!", "title": "" }, { "docid": "5e7e75cacb7d4a8796673232198e2982", "text": "\"I don't think there is a law against it. For example comdirect offers multi banking so you can access your accounts from other banks through the comdirect website. My guess would be: Germans are very conservative when it comes to their money (preferring cash above cards, using \"\"safe\"\" low interest saving accounts instead of stocks) so there just might be no market for such a tool. There are desktop apps with bank syncing that offer different levels of personal finance management. Some I know are MoneyMoney, outbank, numbrs, GNUCash and StarMoney.\"", "title": "" } ]	fiqa
b35f763b1f376e17d0bd7e59d3a20aa4	Given a certain yearly savings, how much can I spend on a capital improvement? NPV of future cash flow	[ { "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": "9a569aa1c64b6688f4f27726484078a5", "text": "For this, the internal rate of return is preferred. In short, all cash flows need to be discounted to the present and set equal to 0 so that an implied rate of return can be calculated. You could try to work this out by hand, but it's practically hopeless because of solving for roots of the implied rate of return which are most likely complex. It's better to use a spreadsheet with this capability such as OpenOffice's Calc. The average return on equity is 9%, so anything higher than that is a rational choice. Example Using this simple tool, the formula variables can easily be input. For instance, the first year has a presumed cash inflow of $2,460 because the insurance has a 30% discount from $8,200 that is assumed to be otherwise paid, a cash inflow of $40,000 to finance the sprinklers, a cash outflow of $40,000 to fund the sprinklers, a $400 outflow for inspection, and an outflow in the amount of the first year's interest on the loan. This should be repeated for each year. They can be input undiscounted, as they are, for each year, and the calculator will do the rest.", "title": "" }, { "docid": "11fdb9cf51cdcb86c5b993bc0d90627b", "text": "The question states :- Our insurance company is offering a 30% discount on an $8200/year commercial policy, if we install sprinklers. The insurance is paid in two installments. ... This appears to mean six-monthly payments, so I'll make some comparison calculations using six-monthly loan repayments to keep things simple. Without the loan or sprinklers the insurance costs $4100 every six months. Using this loan payment formula, the calculation below shows, with the 30% discounted insurance, sprinkler maintenance and loan repayment, you would be paying $4655.28 every six months. The discount required to break even is 43.5%. I.e. rearranging the equation :- Alternatively, with the discount of 30% you would break even if the six-monthly repayment amount was $1030. Solving the payment equation for s gives an equation for the loan :- So with the 30% discount you would break even if the loan required was $25989. Checking by back-calculating the periodic payment amount, a :- Likewise we can keep the loan at $40000 and solve for t to find the break-even loan term :- (Note, in this formula Log denotes the natural logarithm.) Now we can set some values :- So with break-even payments the $40000 loan is paid off in just under 65.5 years. I.e. checking :- This just beats the $4100 cost of proceeding without the sprinklers. Notes If your loan repayment was monthly it would reduce the cost of the loan slightly. The periodic interest rate is calculated from the APR according to the method used in the EU and in some cases in US. The calculations above were run using Mathematica.", "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": "2278504170f25f5ade3ffef9c2df34fb", "text": "The value does change from 12.61% to 13.48%. The difference between re-investing cashflows at 14% vs 12% is not big enough to change the rounded value. Edit: The initial cashflow is discounted at t0, meaning it's already equal to its present value and the finance rate doesn't have an effect. It does impact future outgoing cashflows, as you've noted.", "title": "" }, { "docid": "cdc14fda39e15aa5537599cf56abf0e0", "text": "i cannot directly tell from the provided information if it is already included in Net A/R but if there is a balance sheet you can check yourself if the Total Cash Flow matches the difference between cash position year 0&1 and see if it is net or still to be included.", "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": "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": "deb953fcf7100653cf7a8ae876250bf7", "text": "The bank I work with would be more inclined to expand an existing HELOC rather than write a new one. I think that would be your best bet if you decide to continue borrowing against your home. Consider that your own income would have to support the repayment of these larger homes. If it is, why didn't you buy a larger home to begin with? As far as increasing the appraisal, you don't usually get one dollar of increased appraisal for each dollar you spend on improvements unless you have a rundown house in a nice neighborhood; part of the appraisal comes from a comparison with the appraisals of the other homes nearby. Eventually you get close enough to par with the other houses that anyone looking for something more expensive will often choose a different neighborhood entirely. Update: To your edit that mentions the original lender will cap the amount you can borrow, you can take additional secondary mortgages/HELOCs, but the interest rate is usually higher because it is not the first mortgage. I don't generally recommend it, but the option is there.", "title": "" }, { "docid": "4cbc08ca586bb6481b02839029c3f7d0", "text": "What you are looking here is the cost of capital, because that is what you are effectively giving up in order to invest in those loans. In a discounted cash-flow, it would be the i in the denominator (1+i). For instance, instead of purchasing those loans you could have lent your money at the risk-free rate (not 100% true, but typical assumption), and therefore you are taking a slight risk in those loans for a higher return. There are several ways to compute that number, the one most often used would be the rate if the bank were to lend that money. In this way, it would be the Fed Funds rate plus some additional risk premium.", "title": "" }, { "docid": "e042485852dc24651d7e8ebc3a6289e4", "text": "\"Yes, a HELOC is great for that. I just had my roof done last month (~$15K, \"\"ugh\"\") and pretty much every major contractor in my area had a 0% same-as-cash for at least 12 months. So that helps - any balance that I don't bank by 11/15/2015 will be on the HELOC.\"", "title": "" }, { "docid": "948a4f5649ea7e6eff5c881e7c1a1db5", "text": "\"I think the real problem here is dealing with the variable income. The envelope solution suggests the problem is that your brother doesn't have the discipline to avoid spending all his money immediately, but maybe that's not it. Maybe he could regulate his expenses just fine, but with such a variable income, he can't settle into a \"\"normal\"\" spending pattern. Without any savings, any budget would have to be based on the worst possible income for a month. This isn't a great: it means a poor quality of life. And what do you do with the extra money in the better-than-worst months? While it's easy to say \"\"plan for the worst, then when it's better, save that money\"\", that's just not going to happen. No one will want to live at their worst-case standard of living all the time. Someone would have to be a real miser to have the discipline to not use that extra money for something. You can say to save it for emergencies or unexpected events, but there's always a way to rationalize spending it. \"\"I'm a musician, so this new guitar is a necessary business expense!\"\" Or maybe the car is broken. Surely this is a necessary expense! But, do you buy a $1000 car or a $20000 car? There's always a way to rationalize what's necessary, but it doesn't change financial reality. With a highly variable income, he will need some cash saved up to fill in the bad months, which is replenished in the good months. For success, you need a reasonable plan for making that happen: one that includes provisions for spending it other than \"\"please try not to spend it\"\". I would suggest tracking income accurately for several months. Then you will have a real number (not a guess) of what an average month is. Then, you can budget on that. You will also have real numbers that allow you to calculate how long the bad stretches are, and thus determine how much cash reserve is necessary to make the odds of going broke in a bad period unlikely. Having that, you can make a budget based on average income, which should have some allowance for enjoying life. Of course initially the cash reserve doesn't exist, but knowing exactly what will happen when it does provides a good motivation for building the reserve rather than spending it today. Knowing that the budget includes rules for spending the reserves reduces the incentive to cheat. Of course, the eventual budget should also include provisions for long term savings for retirement, medical expenses, car maintenance, etc. You can do the envelope thing if that's helpful. The point here is to solve the problem of the variable income, so you can have an average income that doesn't result in a budget that delivers a soul crushing decrease in quality of living.\"", "title": "" }, { "docid": "289270da721e0e136ede814135c932bf", "text": "\"Re. question 2 If I buy 20 shares every year, how do I get proper IRR? ... (I would have multiple purchase dates) Use the money-weighted return calculation: http://en.wikipedia.org/wiki/Rate_of_return#Internal_rate_of_return where t is the fraction of the time period and Ct is the cash flow at that time period. For the treatment of dividends, if they are reinvested then there should not be an external cash flow for the dividend. They are included in the final value and the return is termed \"\"total return\"\". If the dividends are taken in cash, the return based on the final value is \"\"net return\"\". The money-weighted return for question 2, with reinvested dividends, can be found by solving for r, the rate for the whole 431 day period, in the NPV summation. Now annualising And in Excel\"", "title": "" }, { "docid": "4a6861c5a6ac2146025b8a13d9207d3c", "text": "That's pretty typical for introductory problems. It's leading you into an NPV question. They're keeping the cash flows the same to illustrate the time value of money to show you that even though the free cash flow is the same in year 1 and year 4 or whatever when you discount it to present value today's stream is worth more than tomorrow's", "title": "" }, { "docid": "3d5a8298c41dbfe1d3ded257f82ae06b", "text": "The Finance functions in spreadsheet software will calculate this for you. The basic functions are for Rate, Payment, PV (present value), FV (Future value), and NPER, the number of periods. The single calculation faces a couple issues, dealing with inflation, and with a changing deposit. If you plan to save for 30 years, and today are saving $500/mo, for example, in ten years I hope the deposits have risen as well. I suggest you use a spreadsheet, a full sheet, to let you adjust for this. Last, there's a strange effect that happens. Precision without accuracy. See the results for 30-40 years of compounding today's deposit given a return of 6%, 7%, up to 10% or so. Your forecast will be as weak as the variable with the greatest range. And there's more than one, return, inflation, percent you'll increase deposits, all unknown, and really unknowable. The best advice I can offer is to save till it hurts, plan for the return to be at the lower end of the range, and every so often, re-evaluate where you stand. Better to turn 40, and see you are on track to retire early, than to plan on too high a return, and at 60 realize you missed it, badly. As far as the spreadsheet goes, this is for the Google Sheets - Type this into a cell =nper(0.01,-100,0,1000,0) It represents 1% interest per month, a payment (deposit) of $100, a starting value of $0, a goal of $1000, and interest added at month end. For whatever reason, a starting balance must be entered as a negative number, for example - =nper(0.01,-100,-500,1000,0) Will return 4.675, the number of months to get you from $500 to $1000 with a $100/mo deposit and 1%/mo return. Someone smarter than I (Chris Degnen comes to mind) can explain why the starting balance needs to be entered this way. But it does show the correct result. As confirmed by my TI BA-35 financial calculator, which doesn't need $500 to be negative.", "title": "" }, { "docid": "d4353455c9427673584dcd07f89a0691", "text": "\"Value averaging has you shift the balance of your portfolio over time, not the amount of contributions. So you can only do it if you have a portfolio holding both risky assets (shares etc) and some cash. You start out by making a plan about how much you will contribute every month and at what rate you expect the share part of the portfolio to grow. Perhaps based on 20th century data you think an 8% growth rate is reasonable. Or alternatively if you know your desired final amount obviously you can work backwards to a desired rate from that. If in any month the share part is falling below its expected growth path, you would put more money into it: possibly your whole paycheck contribution plus some from the savings cash account. On the other hand if the share component is growing \"\"too fast\"\" you would put all your additional savings into cash. So if your investments are doing well, you're not supposed to spend the excess money, but rather to put it aside into a dedicated cash account to top up your share component when prices fall. In theory, this has the auto-levelling benefit of Dollar Cost Averaging, but even better: when prices are high, you'll automatically buy fewer shares, or even sell some; conversely when prices are low you'll buy extra shares from your reserve account. If it turns out your estimate was unreasonably optimistic, and over your lifetime shares only ever average 3%, you'll end up with an entirely share portfolio, and a bumpier ride than you might have liked. If you have horrible luck and over your entire investing life shares return less than cash (which has happened, though not yet in the USA), then this will be worse than a standard balanced portfolio. The original book Value Averaging by Edelson has a pretty good explanation of various cases, though I would say some of the examples are worked in excessive detail. I have not implemented this myself, one reason being that the amount I'm able to save from year to year varies, as it probably does for you, and so predicting a path is not quite so simple as he assumes. You could still do it I suppose. I think you could get a very crude approximation to this by simply directing your savings into cash when the share market's rate of growth over the last several years is above what you think is the long term average.\"", "title": "" }, { "docid": "b9d7a0be34f0bd2647e9851eab9b0752", "text": "someone is paid a certain sum each month, and wants to spend only a certain amount each month, can he spend more and then take it out of next month's payment? Using the example 100 month 1, 60 first month. Save 40 Second Month, 100 salary, spend 70. Save 30. Overall Savings 70 Third month, 100 salary, spend 50. Save 50. Overall Savings 120 So in short term or once a while doing this is fine. However if [and this depends on individuals] it goes beyond control, i.e. you keep spending say 90 every month, you would have to save for quite a few months to get back to normal. A better way would be to reverse this. Using the example 100 month 1, 60 first month. Save 40 Second Month, 100 salary, spend 50. Save 50. Overall Savings 90 Third month, 100 salary, spend 70. Save 30. Overall Savings 120 i.e. save more first and then spend, rather than spending now and saying you will save in future. Generally this is the trap quite a few fall into specially when saving for retirement, they keep putting it to future and very soon realize that they can't get back to the goal.", "title": "" }, { "docid": "0abf18cc25a8320ef87516be5b2300af", "text": "I would not claim to be a personal expert in rental property. I do have friends and family and acquaintances who run rental units for additional income and/or make a full time living at the rental business. As JoeTaxpayer points out, rentals are a cash-eating business. You need to have enough liquid funds to endure uncertainty with maintenance and vacancy costs. Often a leveraged rental will show high ROI or CAGR, but that must be balanced by your overall risk and liquidity position. I have been told that a good rule-of-thumb is to buy in cash with a target ROI of 10%. Of course, YMMV and might not be realistic for your market. It may require you to do some serious bargain hunting, which seems reasonable based on the stagnant market you described. Some examples: The main point here is assessing the risk associated with financing real estate. The ROI (or CAGR) of a financed property looks great, but consider the Net Income. A few expensive maintenance events or vacancies will quickly get you to a negative cash flow. Multiply this by a few rentals and your risk exposure is multiplied too! Note that i did not factor in appreciation based on OP information. Cash Purchase with some very rough estimates based on OP example Net Income = (RENT - TAX - MAINT) = $17200 per year Finance Purchase rough estimate with 20% down Net Income = (RENT - MORT - TAX - MAINT) = $7500 per year", "title": "" } ]	fiqa
2c55d342c818c23b5b139165bfe38e79	Can I deduct child's charitable deduction from my taxes?	[ { "docid": "10b155919975daf0ede1fe6b519d89c4", "text": "No, you may not deduct the charitable contributions of your children. The Nest covers this in detail: The IRS only allows you to deduct charitable contributions that you personally funded, whether the contribution was made in your name or in someone else's. If your child or dependent makes a donation to a charity, you are not allowed to claim it as a tax deduction. This is true even if your dependent does not claim the contribution on his own tax return because he opts for the standard deduction rather than itemizing or claims exemption. Now, had you constructed the transaction differently, it's possible you could've made the contribution in your child's name and thus claimed the deduction. Allowance is technically a gift, and if she agrees to forgo allowance in exchange for you making a contribution, well, the IRS can't really complain (though they might try if it were a large amount!). Contributions in the name of someone else, but funded by yourself, are deductible: [Y]ou can deduct contributions you make in someone else’s name. So if you donated a certain amount of money to XYZ charity in your child’s name, for example, you would be able to deduct this amount on your taxes, as long as the deduction requirements are met. You will need to keep accurate records of the payment along with the receipt from the organization to prove you financed the donation.", "title": "" } ]	[ { "docid": "258c76938c7fe7a967057eda50b957c9", "text": "A rather good IRS paper on the topic states that a donation of a business' in-kind inventory would be Under IRC 170(e)(1), however, the fair market value must be reduced by the amount of gain that would not be long-term capital gain if the property had been sold by the donor at the property's fair market value (determined at the time of the contribution). Under this rule, deductions for donated inventory are limited to the property's basis (generally its cost), where the fair market value exceeds the basis. There are references to IRC regulations in a narrative context you may find helpful: This paper goes on for 16 pages describing detailed exceptions and the political reasons for the exceptions (most of which are concerned with encouraging the donation of prepared food from restaurants/caterers to hunger charities by guaranteeing a value for something that would otherwise be trashed valueless); and a worked out example of fur coats that had a cost of goods of $200 and a market value of $1000.", "title": "" }, { "docid": "51196b357a69d61315d2cd411b36e763", "text": "\"When you give a gift to another person or receive a gift from another person there is no impact on your taxes. You do not have to report certain amounts in your income, including the following: ... -most gifts and inheritances; http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/nttxd-eng.html If you give a gift to a charity or similar organization you can reduce your taxes. It is my recollection that when a family member gives a large amount of money to a child, tax on the income that money earns (typically interest) should be paid by the giver, not the child, but I can't find any publications to that effect on the CRA Site. There is a bit of language about \"\"Gifts\"\" from an employer that are really employment income: Gifts and other voluntary payments 1.3 The term gift is not defined in the Act. In common law jurisdictions, the courts have said that a bona fide gift exists when: •There is a voluntary transfer of property, •A donor freely disposes of his or her property to a donee, and •The donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor. 1.4 Whether a transfer of property has been made voluntarily is a question of fact. In order for a transfer to be considered voluntary, there must be no obligation to make such a transfer. Amounts received as gifts, that is, voluntary transfers without consideration and which cannot be attributed to an income-earning source, are not subject to tax in the hands of the recipient. 1.5 However, sometimes individuals receive a voluntary payment or other valuable transfer or benefit by virtue of an office or employment from an employer, or from some other person. In such cases, the amount of the payment or the value of the transfer or benefit is generally included in employment income pursuant to subsection 5(1) or paragraph 6(1)(a). (See also Guide T4130, Employers’ Guide - Taxable Benefits and Allowances.) Similarly, voluntary payments (or other transfers or benefits) received by virtue of a profession or in the course of carrying on a business are taxable receipts. http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s3/f9/s3-f9-c1-eng.html#N10244 If the people in question are adults who are not related to each other and don't have a business or employment relationship, then you should find that regardless of the amount of the gift, neither giver nor recipient will have a tax consequence.\"", "title": "" }, { "docid": "c11d1781a910fe53b160db6f0ac43cb5", "text": "The IRS Guidance pertaining to the subject. In general the best I can say is your business expense may be deductible. But it depends on the circumstances and what it is you want to deduct. Travel Taxpayers who travel away from home on business may deduct related expenses, including the cost of reaching their destination, the cost of lodging and meals and other ordinary and necessary expenses. Taxpayers are considered “traveling away from home” if their duties require them to be away from home substantially longer than an ordinary day’s work and they need to sleep or rest to meet the demands of their work. The actual cost of meals and incidental expenses may be deducted or the taxpayer may use a standard meal allowance and reduced record keeping requirements. Regardless of the method used, meal deductions are generally limited to 50 percent as stated earlier. Only actual costs for lodging may be claimed as an expense and receipts must be kept for documentation. Expenses must be reasonable and appropriate; deductions for extravagant expenses are not allowable. More information is available in Publication 463, Travel, Entertainment, Gift, and Car Expenses. Entertainment Expenses for entertaining clients, customers or employees may be deducted if they are both ordinary and necessary and meet one of the following tests: Directly-related test: The main purpose of the entertainment activity is the conduct of business, business was actually conducted during the activity and the taxpayer had more than a general expectation of getting income or some other specific business benefit at some future time. Associated test: The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly before or after a substantial business discussion. Publication 463 provides more extensive explanation of these tests as well as other limitations and requirements for deducting entertainment expenses. Gifts Taxpayers may deduct some or all of the cost of gifts given in the course of their trade or business. In general, the deduction is limited to $25 for gifts given directly or indirectly to any one person during the tax year. More discussion of the rules and limitations can be found in Publication 463. If your LLC reimburses you for expenses outside of this guidance it should be treated as Income for tax purposes. Edit for Meal Expenses: Amount of standard meal allowance. The standard meal allowance is the federal M&IE rate. For travel in 2010, the rate for most small localities in the United States is $46 a day. Source IRS P463 Alternately you could reimburse at a per diem rate", "title": "" }, { "docid": "8d3fe6c49420e3f4d09df38f747e79c2", "text": "Are you being willfully obtuse? Of course you can do both. However, had you never been taxed you'd have that same money to spend as you see fit, such as giving it to charity. Mind blowing right? Oh so you know how to spend that money better huh? Maybe I say I know how to spend your money better than you. Fuck your charity for down syndrome. People with prostate cancer need it more. Here's your tax bill :)", "title": "" }, { "docid": "985428520785513a47db82e09ae42b42", "text": "In addition to changing the beneficiary of the account, you can withdraw excess funds without penalty if the child dies or is disabled, or if the child gets a scholarship. Also remember that the tax and penalty is on earnings, not principal.", "title": "" }, { "docid": "0c9742fdc9f1838021e9391b7022be4c", "text": "My first question to you is if you itemize? If not the charitable contributions will not do any good. Along these lines, donating unused items to Goodwill or similar can help boost your charitable giving. The bottom line is that the 401K is one of the few real deductions high earners have. If you anticipate earning similarly next year, you could both contribute the max. You still have some time before the end of the year, can you get more in your wife's account? Does your state have income tax? You might be able to deduct sales tax for larger purchases if you made any. However, I would not justify a large purchase just to write off the sales tax. Conventional wisdom will tell you that you should have a large mortgage in order to deduct the interests. However, it does not make sense to pay the bank 10K so you can get 3K back from the government. That seems pretty dumb. If you did not do additional withholding, you probably will have to pay a significant amount plus penalty if you owe more than $1000. You still have time to make one more quarterly payment, so you may want to do so by January 15th. For next year I would recommend the following: The funny thing about giving is that it rarely helps the recipient, it does so much more for the giver. It helps you build wealth. For myself I like to give to charities that have a bent to helping people out of poverty or homelessness. We have two excellent ones here in Orlando, FL: Orlando Rescue Mission and Christian Help. Both have significant job training and budgeting programs.", "title": "" }, { "docid": "7694b18cc0563e2f9cc766ff3d4127be", "text": "\"A direct gift to a person is never deductible. The kind relative was confusing this with a charitable gift. Which if to a qualified charity can be deducted as part of your itemized deductions. But there, the $14K doesn't enter the equation. But, if your wife is a dog lover, you can donate to the ASPCA, and give her a note saying \"\"in your honor I donated $14K to the ASPCA.\"\" That's a deduction.\"", "title": "" }, { "docid": "abe8b5b68a0c31cf7d1413d9103a608d", "text": "\"The relevant IRS publication is 526, Charitable Contributions. The section titled \"\"Contributions you cannot deduct\"\" begins on page 6; item 4 reads: \"\"The value of your time or services.\"\" I read that to mean that, if the website you built were a product, you could deduct its value. I don't understand the legal distinction between goods and services I originally said that I believe that a website is considered a service. Whether a website is a service or a product appears to be much more controversial that I originally thought. I cannot find a clear answer. I'm told that the IRS has a phone number you can call for rulings on this type of question. I've never had to use it, so I don't know how helpful it is. The best I can come up with is the Instructions for Form 1120s, the table titled \"\"Principal Business Activity Codes,\"\" starting on page 39. That table suggests to me that the IRS defines things based on what type of business you are in. Everything I can find in that table that a website could plausibly fall under has the word \"\"service\"\" in its name. I don't really feel like that's a definitive answer, though. Almost as an afterthought, if you were able to deduct the value of the website, you would have to subtract off whatever the value of the advertisement is. You said that it's not much, but there's probably a simple way of estimating that.\"", "title": "" }, { "docid": "bc0c40ef937a99bee06ad17089508024", "text": "\"The 529 plan does outline your scenarios. There are stipulations for providing the funds should the child get the scholarship. If the child decides not to go into further education (vocational and community schools count), the money can be withdrawn with a 10% penalty and taxes paid on interest earnings. Taxes wouldn't have to be paid for contributions as taxes were already paid on that money by the gift giver. The 529 could also be transferred to another child in the family (including grandchildren). Here's an excerpt from www.savingforcollege.com: You'll never lose all of your savings. A 529 plan offers tax-free earnings and tax-free withdrawals as long as the money is used to pay for college. If you end up taking a non-qualified withdrawal, you'll incur income tax as well as a 10% penalty - but only on the earnings portion of the withdrawal. Since your contributions were made with after-tax money, they will never be taxed or penalized. You can avoid the penalty if you get a scholarship. There are a few special exceptions to the 10% penalty rule, including when the beneficiary becomes incapacitated, attends a U.S. Military Academy or gets a scholarship. In the case of a scholarship, non-qualified withdrawals up to the amount of the tax-free scholarship can be taken out penalty-free, but you'll have to pay income tax on the earnings. As Savingforcollege.com founder Joe Hurley likes to say, \"\"the scholarships have turned your tax-free 529 investment into a tax-deferred 529 investment\"\". Note, a 529 is ideal for the sum of money you are looking at. A proper trust, set up by a lawyer, will cost as much as $2000 to set up, and would require an annual tax return, both unnecessary burdens. To make matters worse, the trust counts as the child's asset where financial aid is concerned. The 529 counts, but to a much lesser extent.\"", "title": "" }, { "docid": "c4d26b2fb860a8494b39c4bb01b53476", "text": "No. You should only donate appreciated stock. If you own a stock at a loss, you can only deduct the FMV (fair market value) when you donate. Instead, you should sell it, take the loss on your taxes, and donate the cash.", "title": "" }, { "docid": "0e0ba6762afa1117cf022ee0d9323dfe", "text": "Putting Chris's comment as an answer: It's your income, not your spouse's income. You can give her the money, but you'll still be paying tax on it To elaborate more - the general principle of income taxation is that income is taxed when received, and specific expenditures can be deducted. If you giving the money to your spouse is not one of this specific deductibles - then it is not deductible. Your income, nevertheless, is still taxed to you - as you're the one to receive it.", "title": "" }, { "docid": "8378244dc29df4226efa9ea00b22aaf4", "text": "Yes, you do. Unless you actually donate it, the loan will be repaid and as such - is an asset for you. On your taxes you report the interest you got paid for the loan. You can claim the interest as a charitable deduction, if you don't effectively charge any (IRS dictates minimum statutory interests for arm-length loan transactions).", "title": "" }, { "docid": "159ebc98bb6fd24aa4857ed919b18228", "text": "Do I report it as income? Is it subject to just the same amount of taxes (~30%) as regular income? Are there any restrictions on how it can be used? It is income. You can deduct the costs of maintaining the web page and producing the software from it (have an accountant do that for you, there are strict rules on how to do that, and you can only deduct up to the income if its a hobby and not a for-profit business), but otherwise it's earned income like any other self employment income. It is reported on your schedule C or on line 21 of your 1040 (miscellaneous income), and you're also liable for self-employment taxes on this income. There are no restrictions, it's your money. Technically, who is the donation even being made to? Me, just because I own the webpage? Yes. This is for the United States, but is there any difference if the donations come from overseas? No, unless you paid foreign taxes on the money (in which case you should fill form 1116 and ask for credit). If you create an official 501(c) organization to which the donations are given, instead of you getting it directly, the tax treatment will be different. But of course, you have to have a real charitable organization for that. To avoid confusion - I'm not a licensed tax professional and this is not a tax advice. If in doubt - talk to a EA/CPA licensed in your State.", "title": "" }, { "docid": "4b239353cfdc455d5b2bc50df36c11c4", "text": "\"Are you working for a company that offers a Dependent Care Account? You may be able to withhold up to $5000/yr pre tax for care for you child. If you cover more than half her expenses, she is your dependent. You can't \"\"double dip.\"\" If she is your dependent, she cannot be the care provider for purposes of the DCAS, see Pub 503 top of p7 \"\"Payments to Relatives or Dependents.\"\" How do you think a business would change your situation? The DCA is a small tax break, if you have no business now, this break isn't something that should drive this.\"", "title": "" }, { "docid": "0697788dca2daa7c13f290a79f500893", "text": "I would like to bring up some slightly different points than the ones raised in the excellent answers from JoeTaxpayer and littleadv. The estate can be the beneficiary of an IRA -- indeed, as has been pointed out, this is the default beneficiary if the owner does not specify a beneficiary -- but a testamentary trust cannot be the designated beneficiary of an IRA. A testamentary trust that meets the requirements laid out on page 36 of Publication 590 is essentially a pass-through entity that takes distributions from the IRA and passes them on to the beneficiaries. For the case being considered here of minor beneficiaries, the distributions from the IRA that pass through the trust must be sent to the legal guardians (or other custodians) of the minors' UTMA accounts, and said guardians must invest these sums for the benefit of the minors and hand the monies over when the minors reach adulthood. Minors are not responsible for their support, and so these monies cannot be used by the legal guardian for oaying the minors' living expenses except as provided for in the UTMA regulations. When the minors become adults, they get all the accumulated value on their UTMA accounts, and can start taking the RMDs personally after that, and blowing them on motorcycles if they wish. Thus, the advantage of the testamentary trust is essentially that it lets the trustee of the trust to decide how much money (over and above the RMD) gets distributed each year. The minors and soon-to-be young adults cannot take the entire IRA in a lump sum etc but must abide by the testamentary trustee's ideas of whether extra money (over and above the RMD) should be taken out in any given year. How much discretion is allowed to the trustee is also something to be thought through carefully. But at least the RMD must be taken from the IRA and distributed to the minors' UTMA accounts (or to the persons as they reach adulthood) each year. Regardless of whether the Traditional IRA goes to beneficiaries directly or through a testamentary trust, its value (as of the date of death) is still included in the estate, and estate tax might be due. However, beneficiaries can deduct the portion of estate tax paid by the estate from the income tax that they have to pay on the IRA withdrawals. Estate planning is very tricky business, and even lawyers very competent in estate and trust issues fall far short in their understanding of tax law, especially income tax law.", "title": "" } ]	fiqa
552dfb1e7dff6e928a70fe2b22b0de04	Looking for advice on rental property	[ { "docid": "c120d5c1f21ce200453dfa0f17972c1d", "text": "I think the first step is to be thankful that your relationship with this person has not degenerated into lawsuits and bickering. That would greatly affect your cash flow and valuations! It also seems that this person is open to a variety of solutions. This truly is a gift. I see two options without taking a mortgage or fronting cash: The key here is if the 65% property already has a mortgage. Does it have enough equity to provide 15% cash out, and cover the existing mortgage? What is the interest rate? Can you get a lower rate that will reduce the impact of a higher mortgage payment will have on your income? Can you have your partner finance the 15%? In the end there really isn't a way to divest this company without impacting your income.", "title": "" }, { "docid": "4de70d581061d6bf240c21767d96b9f8", "text": "You say that one property is 65% of the value of the two properties and the other is 35%. But how much of that do the two of you actually own? If you have co-signed mortgages on both properties, then your equity is going to be lower. If you sold both properties, then your take away would be just half of that equity. And while the 35% property may be less valuable, if you bought it first, it may actually have more equity. It's the equity that matters here, not the value of the property. With a mortgage, the bank is more of an owner than you are until you've paid down most of the loan. You may find that the bank won't agree to a single-owner refinance. A co-signed mortgage is a lot easier for them to collect, as they can hold either of you responsible for the entire loan. If you sell the 65% property, then you can pay off any mortgage on that property and use the equity payout from that to buy out your relative on the 35% property. If you currently have no mortgage, you'd even have cash back. This is your fewest strings option. Let's say that you have no mortgage now. So this mortgage would be the only mortgage on the property. It's not so much, as 15:65 is 3:13 or 18.75% of the value of the property. That's more of a home equity loan than a mortgage. You should be able to get a good rate. It might reduce your short term profit, but it should be survivable if you have other income. If you don't have other income, then seriously consider selling the 65% property and diversifying the payout into something else. E.g. stocks and bonds. Perhaps your relative would be willing to float you the loan. That would save you bank fees and closing costs. Write up a contract and agree to take assignment of the title at payoff. You'll need to pay a lawyer to write up the contract (paying a modest amount now to cover the various future possibilities), but that should still be cheaper. There's a certain amount of trust required on both sides, but this gives you some separation. And of course it takes your relative out of the day-to-day management entirely. Perhaps the steady flow of cash would provide what they need. If your relative is willing to remain that involved, that can work. Note that they may not want to do this, so don't get too attached to the idea. Be prepared for a no. This would be a great option for you, as you pretty much get everything you have now. They get back the time meeting with you to make decisions, but they also give up control over those decisions. Some people would not like that tradeoff. The one time I was involved with a professional managing a property for me, the fee was around 7% of the rent. If that fits your area, you might reasonably charge 5%. That gives a discount for family and not being a professional. There's a relatively easy way to find out what fits your area. Look around and see what companies offer multiple listings. Call until you find a couple that will do management for you. Get quotes for managing your properties. Now you'll know the amounts. The big failing though is that this may not describe the issue that your relative has. If the real problem is that the two of you have different approaches to property management, then making you the only decision maker may be the wrong direction. This is certainly financially feasible, but it still may not be the right solution for your relationship. If you get a no on this, I'd recommend moving on to other solutions immediately. This may simply be too favorable to you.", "title": "" } ]	[ { "docid": "0b946e8bec1ff86977fd5659852d9af4", "text": "I assume having real estate in a good popular city is much more secure way of keeping money than having it in a bank account Not at all! Many things can go wrong with rental property. Renters can be late on rent, they can cause damage to property, you can have unexpected repairs. I'm not saying that you should just let it sit, but rental property is not risk-free my any means. Are you prepared to be a landlord as a part time job (for 500/mo?). Rental property is not passive income - it takes work to maintain. You can outsource this to a property manager, but that eats into the 500/mo that you are estimating). I want to stay flexible and have a possibility to change my location whenever I want. That's a perfectly reasonable reason not to buy a home, but what will you do with the rental when you move? It will still need maintenance, you'll still need to interact with renters, etc. I'm not saying you shouldn't do this, but I get the feeling that you are not fully aware of the risks involved in rental properties.", "title": "" }, { "docid": "b7978e0382f7ec74eeb2ff9356352751", "text": "I'd talk to a solicitor and see if you can structure the purchase in a way that breaks the property into three pieces. One would be the freehold of the whole building, one would be a long lease on the downstairs part (on which you would get a residential mortgage) and one would be a long lease on the upstairs flat (on which you would get a buy-to-let mortgage). Since there's essentially no price premium for freehold as opposed to long lease, you should be able to raise enough money from the two mortgages to fund the purchase.", "title": "" }, { "docid": "f20fdb3b3ea6780e82c610fcb1950bd8", "text": "Your post seems to read as if you want to invest only in real estate rental properties as a start because they will be a reliable investment guaranteed to generate profits that you will be plowing back into buying even more rental properties, but you are willing to consider (possibly in later years) other forms of investment (in real estate) that will not require active participation in the management of the rental properties. While many participants here do own rental real estate and even manage it entirely, for most people, that is only a small part of their investment portfolio, and I suspect that hardly any will recommend real estate as the only investment the way you seem to want to do. Also, you might want to look more closely at the realities of rental real estate operations before jumping in. Things are not necessarily as rosy as they appear to you now. Not all your units will be rented all the time, and the rental income might not always be enough to cover the mortgage payments and the property taxes and the insurance payments and the repairs and maintenance and ... Depreciation of the property is another matter that you might not have thought about. That being said, you can invest in real estate through real estate investment trusts (REITs) or through limited partnerships where you have only a passive role. There are even mutual funds that invest in REITs or in REIT indexes.", "title": "" }, { "docid": "094cc46edbd8fa8d912fa6cb2f6da5dc", "text": "I know of no generic formula for determining if an investment property is a good investment, besides the trivial formula. Make sure your income is greater than your expenses, and hope the value of the property doesn't drop. Some people will tell you to expect the monthly rent to be a fixed percentage of the purchase price, but that is a goal not a certainty. It is also impossible to estimate the difficulty renting the property, or how long the roof will last. Taxes can't be predicted, as the value of the house increase, so do the property taxes, but you might not be able to increase the rent. You can't even predict the quality of the tenant. Will they damage the property? Or skip out early? You will need somebody who knows the local market to estimate the local conditions, and help you determine the estimated costs and income based on the actual property involved.", "title": "" }, { "docid": "68642bb5b333c7a9d73475cbedecadc0", "text": "You could be in a bit of a bind. I wouldn't push it any more until you read your loan papers very carefully. Going back to the lender for a refinance after you converted it to a rental (presumably without their knowledge) is risky. I doubt they'd let you refinance anyway, as the house is underwater. If the loan is performing then I wouldn't think they'd look too hard for reasons to upset the flow of checks by calling the loan due, but if you brazenly advertise the change of property use to them they may reconsider. Read your loan papers carefully to see what they can do before you lean on them too much. As for managing the finances on that property, I'd build up a cushion to deal with the fact that your payment is going to shoot up considerably in year 8. Also consider building up a side business to get another income stream going to compensate as well. You have a little time before it shoots up.", "title": "" }, { "docid": "ab1b986aceb22af56dd4d63f241e7f25", "text": "\"Based on the information you gave, there are dozens if not hundreds of possible theories one could spin about the rental market. Sure, it's possible that there are no listings because rental units on this street are quickly snapped up. On the other hand, it's also possible that there are no listings because almost all the buildings on the street have been abandoned and, aside from this one property that someone is tying to sell you, the rest of the street is inhabited only by wild dogs and/or drug dealers. Or maybe the street is mostly owner-occupied, i.e. the properties are not being rented to anyone. Or maybe it's a commercial district. Or maybe craigslist isn't popular with people who own property on this street for whatever reason. Maybe Syracuse has a city ordinance that says property must be advertised in the newspaper and not on websites, for all I know. Or maybe you missed it because nobody in Syracuse calls it \"\"housing for rent\"\", they all call it \"\"apartments for rent\"\" or \"\"houses for rent\"\" or some local phrase. Or ... or ... or. Before I bought a property, I'd do more research than one search on one web site. Have you visited the property? I don't know how much you're preparing to invest, I have no idea what property prices are in Syracuse, but I'd guess it's at least tens of thousands of dollars. Surely worth making the drive to Syracuse to check it out before buying.\"", "title": "" }, { "docid": "e59d231ab74cf650e600dc45be110e7f", "text": "What are the most important facts to keep in mind as I consider this? IMHO, the most important consideration to keep in mind is - do you really want to be in the landlord business, and if so, how much experience do you have in this business?", "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": "289ffa029d75f9233a18c3ccc3b0671f", "text": "\"I recommend reading What's the catch in investing in real estate for rent? and making a list of expenses. You have a known expense, the rent, and the assumption that it will rise a bit each year. If not each year, eventually the landlord will bump it, and on average, the rent should track inflation. The buy side is the complete unknown, especially to us here. The mortgage and taxes are just the beginning. My ongoing issue in the buy/rent debate is that it's easy to buy \"\"too big\"\" or at least far bigger that what you are renting. One extreme - a couple moves from their one bedroom apartment into their purchased 3BR home with far more space than they ever use. No need to paint the full picture of numbers, the house is a money pit, and they live for the house. Other end - Couple already renting a nice sized home, and they buy a similar one. They rent out the two spare bedrooms for 5 years until they have kids and want their privacy back. They bought smart, for less than market price, and from day one, the mortgage was lower than the rent they paid. By year 5, having sent the extra income to pay down the mortgage, they've paid down half the loan. As the kids come along, they refi to a new 30 yr fixed at 3.5%, and the payment is tiny compared to the rest of their budget. Simply put, the ratio of house price to rent for that same house is not a constant. When the ratio is high, it's time to rent. When it swings very low, it's worth considering a purchase. But the decision is never clear until every detail is known. The time may be perfect, and the day after you close, you lose your job, or in a good scenario, get a raise and are relocated. Just because you bought low yesterday, doesn't mean the market will pay you a good price today, it takes time for out-of-whack pricing to come back to normal. A simple question? Maybe. But we first need a lot of details to help you understand what you are considering.\"", "title": "" }, { "docid": "eea57f32a51434ede1e87cd547ae5d43", "text": "When it comes to property investing, there are indeed a couple of important things to consider. Even property professionals must know some significant info in order to ensure that they will get the right property for a certain investor. Thank you for sharing this site. I definitely learned more info regarding property investments.", "title": "" }, { "docid": "e5f4ab2a01fac462e9288e0ff4883245", "text": "I am sorry to say, you are asking the wrong question. If I own a rental that I bought with cash, I have zero mortgage. The guy I sell it to uses a hard money lender (charging a high rate) and finances 100%. All of this means nothing to the prospective tenant. In general, one would look at the rent to buy ratio in the area, and decide whether homes are selling for a price that makes it profitable to buy and then rent out. In your situation, I understand you are looking to decide on a rent based on your costs. That ship has sailed. You own already. You need to look in the area and find out what your house will rent for. And that number will tell you whether you can afford to treat it as a rental or would be better off selling. Keep in mind - you don't list a country, but if you are in US, part of a rental property is that you 'must' depreciate it each year. This is a tax thing. You reduce your cost basis each year and that amount is a loss against income from the rental or might be used against your ordinary income. But, when you sell, your basis is lower by this amount and you will be taxed on the difference from your basis to the sale price. Edit: After reading OP's updated question, let me answer this way. There are experts who suggest that a rental property should have a high enough rent so that 50% of rent covers expenses. This doesn't include the mortgage. e.g. $1500 rent, $750 goes to taxes, insurance, maintenance, repairs, etc. the remaining $750 can be applied to the mortgage, and what remains is cash profit. No one can give you more than a vague idea of what to look for, because you haven't shared the numbers. What are your taxes? Insurance? Annual costs for landscaping/snow plowing? Then take every item that has a limited life, and divide the cost by its lifetime. e.g. $12,000 roof over 20 years is $600. Do this for painting, and every appliance. Then allow a 10% vacancy rate. If you cover all of this and the mortgage, it may be worth keeping. Since you have zero equity, time is on your side, the price may rise, and hopefully, the monthly payments chip away at the loan.", "title": "" }, { "docid": "49e3d2116918cb73a179cc14a2c0f669", "text": "The best analysis I know of Kiyosaki and his advice somes from a genuine property expert who gives plenty of good advice. If you are really interested then check out [John T Reed on Robert T Kiyosaki](http://www.johntreed.com/Kiyosaki.html).", "title": "" }, { "docid": "186632702891b096cb961029a47ca4d5", "text": "Of course, I know nothing about real estate or owning a home. I would love to hear people's thoughts on why this would or would not be a good idea. Are there any costs I am neglecting? I want the house to be primarily an investment. Is there any reason that it would be a poor investment? I live and work in a college town, but not your college town. You, like many students convinced to buy, are missing a great many costs. There are benefits of course. There's a healthy supply of renters, and you get to live right next to campus. But the stuff next to campus tends to be the oldest, and therefore most repair prone, property around, which is where the 'bad neighborhood' vibe comes from. Futhermore, a lot of the value of your property would be riding on government policy. Defunding unis could involve drastic cuts to their size in the near future, and student loan reform could backfire and become even less available. Even city politics comes into play: when property developers lobby city council to rezone your neighborhood for apartments, you could end up either surrounded with cheaper units or possibly eminent domain'd. I've seen both happen in my college town. If you refuse to sell you could find yourself facing an oddly high number of rental inspections, for example. So on to the general advice: Firstly, real estate in general doesn't reliably increase in value, at best it tends to track inflation. Most of the 'flipping' and such you saw over the past decade was a prolonged bubble, which is slowly and reliably tanking. Beyond that, property taxes, insurance, PMI and repairs need to be factored in, as well as income tax from your renters. And, if you leave the home and continue to rent it out, it's not a owner-occupied property anymore, which is part of the agreement you sign and determines your interest rate. There's also risks. If one of your buddies loses their job, wrecks their car, or loses financial aid, you may find yourself having to eat the loss or evict a good friend. Or if they injure themselves (just for an example: alcohol poisoning), it could land on your homeowners insurance. Or maybe the plumbing breaks and you're out an expensive repair. Finally, there are significant costs to transacting in real estate. You can expect to pay like 5-6 percent of the price of the home to the agents, and various fees to inspections. It will be exceedingly difficult to recoup the cost of that transaction before you graduate. You'll also be anchored into managing this asset when you could be pursuing career opportunities elsewhere in the nation. Take a quick look at three houses you would consider buying and see how long they've been on the market. That's months of your life dealing with this house in a bad neighborhood.", "title": "" }, { "docid": "2ff18fce91f9e00ae614b18af671a83a", "text": "More possible considerations: Comparability with other properties. Maybe properties that rent for $972 have more amenities than this one (parking, laundry, yard, etc) or are in better repair. Or maybe the $972 property is a block closer to campus and thus commands 30% higher rent (that can happen). Condition of property. You know nothing about this until you see it. It could be in such bad shape that you can't legally rent it until you spend a lot of money fixing it. Or it may just be run down or outdated: still inhabitable but not as attractive to renters, leading to lower rent and/or longer vacancy periods. Do you accept that, or spend a lot of money to renovate? Collecting the rent. Tenants don't necessarily always pay their rent on time, or at all. If a tenant quits paying, you incur significant expenses to evict them and then find a new tenant, and all the while, you collect no rent. There could be a tenant in place paying a much lower rent. Rent control or a long lease may prevent you from raising it. If you are able to raise it, and the tenant doesn't want to pay, see above. Maintenance and more maintenance. College students could be hard on the property; one good kegger could easily cause more damage than their security deposits will cover. Being near a university doesn't guarantee you an easy time renting it. It suggests the demand is high, but maybe the supply is even higher. Renting to college students has additional issues. They are less likely to have incomes large enough to satisfy you that they can pay the rent. Are you willing to deal with cosigners? If a student quits paying, are you willing to try to collect from their cosigning parents in another state? And you'll probably have many tenants (roommates) living in the house. They will come and go separately and unexpectedly, complicating your leasing arrangements. And you may well get drawn in to disputes between them.", "title": "" }, { "docid": "111f2cea2838b7e7938d9cf6d03b3316", "text": "Check out the property websites to get an idea of how much, the property in question, could yield as rent. Most give a range and you can get a good idea of it. Just one example from zoopla. Likewise you can refer mouseprice or rightmove and get yourself an idea. Property websites do a lot of data crunching to do an update, but their figure is only a guide.", "title": "" } ]	fiqa
961c4d7df94a1da689ea114e9e046b43	What is the best source of funding to pay off debt?	[ { "docid": "05eafe419e50fbf63ec7bbd92c9472d9", "text": "\"Thirty thousand in credit card debt is a \"\"big elephant to eat\"\" so to speak. But you do it by taking a bite at a time. One positive is that you do not want to borrow from your 401K. Doing so is a horrible idea. The first question you have to ask yourself and understand, is how you accumulated 30K in credit card debt in the first place? Most people get there by running up a relatively small amount, say 5K, and playing the zero transfer game a few times. Then add in a late payment, and a negative event or two (like the car breaking down or a trip to the emergency room) and poof a large amount of credit card debt. Obviously, I have no idea if this is how you got there, and providing some insight might help. Also, your age, approximate income, and other debts might also help provide more insight. I assume you are still working and under age 59.5 as you are talking about borrowing from your 401K. Where I come from is that my wife (then girlfriend) found ourselves under stifling debt a few years ago. When we married, we became very intentional and focused on ridding ourselves of debt and now sit completely debt free (including the house). During our debt payoff time, we lived off of less than 25% of our salary. We both took extra jobs when we were able. Intensity was our key. If I were you, I would not refi the house. There are costs associated with this and why would you put more debt on your home? I might cash out the annuity provided that there are no negative tax consequences and depending on how much you can get for it. Numbers are the key here. However, I feel like doing so will not retire this debt. The first thing you need to do is get on a written budget. A game plan for spending and stick to it. If you are married, your spouse has to be part of this process. The budget has to be fresh each month, and each month you and your wife should meet. To deviate from the budget, you will also need to have a meeting. My wife and I still do this despite being debt free and enjoying very healthy incomes. Secondly, it is about cutting expenses. Cable: off. No eating out or vacations. Cut back on cell phone plans, only basic clothing. Gift giving is of the $5 variety and only for those very close to you. Forget lattes, etc. Depending on your income I would cut 401K contributions to zero or only up to the company match (if your household income is above 150K/year). Third, it is about earning more. Ebay, deliver pizzas, cut grass, overtime, whatever. All extra dollars go to credit card balance reduction. At a minimum, you should find an extra $1000/month; however, I would shoot for 2K. If you can find 2K, you will be done with this in 13 months. I know the math doesn't work out for that, but once you get momentum, you find more. How good will it feel to be out from under this oppression next March? I know you can do this without cashing in the annuity or refinancing. Do you believe it?\"", "title": "" }, { "docid": "fcfd8f7a32848022d5089dd35173acee", "text": "You can take a out loan against your 401k, which means you won't be penalized for the withdrawal. You will have to pay that amount back though, but it can help since the interest will be lower than a lot of credit card rates. You could refinance your home if you can get a reasonable interest rate. You could also get a 0% APR balance transfer credit card and transfer the balance and pay it off that way. There are a lot of options. I would contact a Credit Counselor and explore further options. The main objective is to get you out of debt, not put you more in debt - whether that is refinancing your mortgage, cashing in an annuity, etc.", "title": "" }, { "docid": "f551e53748295c6ad4d75ae14a954b7a", "text": "First of all a big thumbs up for Ben's answer. A few small things you can do to help you on your way. Hopefully you are not more in debt that 6 months of salary in debt because that is a really tough road. first thing you need to do is get some professional help. The National Foundation for Credit Counseling (NFCC) offers free or low-cost debt counseling to help you through the process. Visit them at NFCC.org or call 1-800-388-2227 to find a local affiliate office near you. You might want to only use cash for a while. If not and you have a credit card with no balance always use that card because it will be interest free. Remember if you use credit cards as a payment system and not credit, you actually get free interest. If you roll even a penny over into the next statement you are paying interest day one of each purchase. Pay credit cards with highest interest rate first an pay minimums to others This one I like the best. As you get money pay your credit card. You interest is being compounded daily. Pay your cards when you have money, not when they are due. Have a mindset that reminds how much something is really going to cost you If you plan on taking 3 years to get out of debt and you buy something for $100 that is really costs you $156.08 Three years of compound 16% interest. 5b. Conversely if you sell something for $100 on eBay that is like selling something for $156.08.", "title": "" }, { "docid": "47159602579961792fc1d47d4eaa0d10", "text": "Please take a look a Dave Ramsey's Baby Step plan. It has all the details that you need to clean up your personal finance situation. None of your options are good. As some of the other answers mentioned, behavior modification is the key. Any idea will be worthless if you just wind up in debt again. Many, many people, including me, have made the change using Dave's plan. You can too. With regard to helping your son with tuition, are there better or cheaper options? It does not make sense to put yourself in financial peril in order to cover college expenses. I understand that is a tough decision but he is a man now and needs to be part of the real world solution. Following the Baby Steps: The biggest factor is a belief that you can fix the mess. 30k is not really that much, with a good plan and focus, you can clean it up. Good luck.", "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": "" }, { "docid": "eef4b7f2d2e5b7f1b43e72f45e7f1298", "text": "\"Welcome to Money.SE. Your question is similar to a number of others. The \"\"How do I pay my debt down?\"\" and \"\"How do I invest extra money?\"\" is a bit of a continuum since there's no consensus than one should pay off the last cent of debt before investing. Oversimplify it for me: the correct order of investing offers a good look at this. You see, Pete's answer on your question is perfectly fine, but, since you make no mention of, say, a matched 401(k), I'd suggest that any answer to a question like yours should first take a step back and evaluate the bigger picture. A dollar for dollar matched 401(k) beats paying off even an 18% credit card. Absent any tangents, any thought of investing, saving for anything else, etc, my answer is simple, line up the debt, highest interest rate to lowest. Keep in mind the post-tax rate, i.e. a 6% student loan you can deduct, is an effective 4.5% if you are in the 25% bracket.\"", "title": "" }, { "docid": "e9772ce3b39dea82f5f7821f4cbe8efd", "text": "This is a case where human nature and arithmetic lead to different results. Depending on the your income, the effective interest rate on the mortgage is probably right around 2.5%. So purely by arithmetic, the absolute cheapest way to go is to put the $11k to the bigger car loan, then pay off the mortgage, then the smaller car loan. The Debt Snowball is more effective however, because it works better for people. Progress is demonstrated quickly, which maintains (and often enhances) motivation to continue. I can say as a case in point, having tried both methods, that if does indeed work. So, I am with you ... pay off the car loan first, and roll that payment into the bigger car loan. If you add no extra dollars, you should get the small loan paid off in 6 to 8 months and the bigger car loan in another 16 to 18 months. It sounds like from your message that you have another $1500 or so a month. If that is the case ... small loan paid off in two months, bigger loan paid off in another year. If you stick with the Ramsay program, you then build an emergency fund and start investing. Good luck!", "title": "" }, { "docid": "e0b4d0abf230c210ffabb1e20426bf84", "text": "Two different questions: Is it better to be in debt or to pay off the debt? And: Is it better to have student debt than other debt? Any debt needs to be paid off eventually, and any debt makes you less flexible. So if you have the choice between spending/wasting your money and paying off debt, I would recommend paying off the debt. The other question is whether having student debt is better than having other debt. You need to look at the terms of your student debt. Pay off the debt with the worst conditions first. Loan sharks (in Britain: pay-day loans) must be paid first. Credit cards debt must go next. Then general loans. Depending on your situation, you may want some savings as well. In case you lose your job, for example. So if you have $8,000 saved and an $8,000 student loan, you might consider waiting a bit before you pay back the loan. No job + $8,000 student loan + $8,000 in the bank is better than no job + no debt + no money in the bank.", "title": "" }, { "docid": "40e63eabd78c2e65995082762ec7900d", "text": "\"There are a great number of financial obligations that should be considered more urgent than student loan debt. I'll go ahead and assume that the ones that can land people in jail aren't an issue (unpaid fines, back taxes, etc.). I cannot stress this enough, so I'll say it again: setting money aside for emergencies is so much more important than paying off student loans. I've seen people refer to saving as \"\"paying yourself\"\" if that helps justify it in your mind. My wife and I chose to aggressively pay down debt we had stupidly accrued during college, and I got completely blindsided by a layoff during the downturn. Guess what happened to all those credit cards we'd paid off and almost paid off? Guess what happened to my 401k? If all we had left were student loans, then I still wouldn't prioritize paying those off. There are income limits to Roth IRAs, so if you're in a field where you'll eventually make too much to contribute, then you'll lose that opportunity forever. If you're young and you don't feel like learning too much about investing, plop 100% of your contributions into the low-fee S&P 500 index fund and forget it until you get closer to retirement. Don't get suckered into their high-fee \"\"Retirement 20XX\"\" managed funds. Anyway, sure, if you have at least three months of income replacement in savings, have maximized your employer 401k match, have maximized your Roth IRA contributions for the year, and have no other higher interest debt, then go ahead and knock out those student loans.\"", "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": "c2846df3bdea0ffd348b6b139b908bfe", "text": "True, not everyone becomes a debt-slave, especially if you choose your major wisely. I like it when people like you tell those debt-slave holders to put it in their pipe and smoke it! Actually, they probably would, with a brandy.", "title": "" }, { "docid": "3bf2007efcb1606b85d40d03de6b5b05", "text": "I think about debt as a good option for capital investments that offer a return. In my opinion, a house and clothes you need for that new job are good things to borrow for. School is ok, depending on the amount. Car is ok, if it's a 3 year loan. The rest is not good. You should try to carry as little debt as possible, but don't let it dominate your life. If faced between the choice of paying ahead on your student loan and blowing $300 on an XBox, you should pay the loan. If the choice is between taking your kid to the zoo and paying the loan, have fun at the zoo.", "title": "" }, { "docid": "d090dd085d2a07d824cdcc6e0db439e3", "text": "No. Unless you are ten Bill Gates rolled into one man, you can not possibly hope to make a dent in the 14 trillion debt. Even if you were and paid off whole debt in one payment, budget deficits would restore it to old glory in a short time. If you have some extra money, I'd advise to either choose a charity and donate to somebody who needs your help directly or if you are so inclined, support a campaign of a financially conservative politician (only if you are sure he is a financial conservative and doesn't just tell this to get elected - I have no idea how you could do it :).", "title": "" }, { "docid": "0094fbb946b03bcaaa95bac03b2c69af", "text": "\"Pay off the highest rate debt. Interest on both are charged on the balance owed, nothing more complicated than that. There are those who would call a mortgage \"\"front loaded\"\" but that's nonsense. Of course most of the payment is interest at the beginning because the debt is higher and you start with a 30 year term. The fastest way to pay off multiple debts is always from highest rate first and then the next and so on.\"", "title": "" }, { "docid": "ca285c080f0cfbf760d644dbff0775e2", "text": "What is best for everyone is maximizing the effectiveness of the resources at hand. We are most certainly not doing that, as there is just so much capacity sitting idle right now. Demand is what we are lacking. Stimulus creates demand. Demand puts people to work, it builds companies, it brings ideas to fruition. Effective limiters can be used to avoid consequences of an overheating economy when that time comes, but we are far away from that point. Imposing these silly superstitions that somehow someday the U.S. is going to get to a point where we can't pay back our debt is making us lose focus on the fact that real people are suffering today, and that we can do something about it. Without artificial constraints like congress putting a limit on the debt, it is impossible for the U.S. government to default.", "title": "" }, { "docid": "d39986d50b0e63031806e14e0e0c04a4", "text": "\"Wow, you guys get really cheap finance. here a mortage is 5.5 - 9% and car loans about 15 - 20%. Anyway back to the question. The rule is reduce the largest interest rate first (\"\"the most expensive money\"\"). For 0% loans, you should try to never pay it off, it's literally \"\"free money\"\" so just pay only the absolute minimum on 0% loans. Pass it to your estate, and try to get your kids to do the same. In fact if you have 11,000 and a $20,000 @ 0% loan and you have the option, you're better to put the 11,000 into a safe investment system that returns > 0% and just use the interest to pay off the $20k. The method of paying off the numerically smallest debt first, called \"\"snowballing\"\", is generally aimed at the general public, and for when you can't make much progress wekk to week. Thus it is best to get the lowest hanging fruit that shows progress, than to try and have years worth of hard discipline just to make a tiny progress. It's called snowballing, because after paying off that first debt, you keep your lifestyle the same and put the freed up money on as extra payments to the next target. Generally this is only worth while if (1) you have poor discipline, (2) the interest gap isn't too disparate (eg 5% and 25%, it is far better to pay off the 25%, (3) you don't go out and immediately renew the lower debt. Also as mentioned, snowballing is aimed at small regular payments. You can do it with a lump sum, but honestly for a lump sum you can get better return taking it off the most expensive interest rate first (as the discipline issue doesn't apply). Another consideration is put it off the most renewable finance. Paying off your car... so your car's paid off. If you have an emergency, redrawing on that asset means a new loan. But if you put it off the house (conditional on interest rates not being to dissimilar) it means you can often redraw some or all of the money if you have an emergency. This can often be better than paying down the car, and then having to pay application fees to get a new unsecured loan. Many modern banks actually use \"\"mortgage offsetting\"\" which allows them to do this - you can keep your lump sum in a standard (or even fixed term) and the value of it is deducted \"\"as if\"\" you'd paid it off your mortgage. So you get the benefit without the commitment. The bank is contracted for the length of the mortgage to a third party financier, so they really don't want you to change your end of the arrangement. And there is the hope you might spend it to ;) giving them a few more dollars. But this can be very helpful arragement, especially if you're financing stuff, because it keeps the mortgage costs down, but makes you look liquid for your investment borrowing.\"", "title": "" }, { "docid": "55dc1bbd3528ca485ea549a23d352fa9", "text": "In the United Kingdom, there is a leading company that has been offering Progressive business funding solutions to the businesses for the last 120 years. Their service areas are South Africa, New Zealand, Ireland, Canada, Australia, USA, etc.", "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": "b55b16808a311dbb4b161a3edf5e098b", "text": "\"The answer is stimulus, but more specifically direct spending. The kind of \"\"stimulus\"\" where we simply fill in giant gaping holes of bank balance sheets is not \"\"stimulus\"\" at all, and those who criticize \"\"keynesian economics\"\" because the bailouts \"\"failed\"\" don't understand what they are saying. Bailouts are not stimulus. Creating middle class jobs, that is stimulus. I will put it to you this way. Almost every single company in existence uses some kind of debt to leverage its operations. Almost every company that is listed on the stock exchange either sells bonds or issues commercial paper or both. This can also be a useful position for the government, especially since their cost of borrowing is lower than that of any company. Essentially, the government can borrow at 1%, put people to work, and collect 25% in taxes. Its cash flow positive in the short term, and in the long term as well, as long as it is effective and the economy gets better. A growing economy will bring in more than enough tax revenue to offset any costs of jump starting the economy. If instead you wanted austerity, you would be calling for austerity on the largest economy in the world, who's bonds are still rated AAA, and who's borrowing costs are 1%. If you are calling for austerity on that, then nobody on earth is credit worthy. It is a non-sensical position.\"", "title": "" } ]	fiqa
18e14781798341b54d610d48c658ed30	Does it make sense to buy an index ETF (e.g. S&P 500) when the index is at an all-time high?	[ { "docid": "d1fc1f1c7247e547214cbb7d0c3bc653", "text": "\"Here is, from Yahoo Finance, the S&P 500 over the last ~60 years (logarithmic scale): The behavior since ~2000 has been weird, by historical standards. And it's very easy, looking at that graph, to say \"\"yes! I would have made so much money had I invested in March '09!\"\". Of course, back in March '09, it wasn't so clear that was the bottom. But, yes, over the last 10 years or so, you could have made more money by adopting a rule that you'll accumulate cash in a FDIC (or similar) insured savings account, and dump it into an S&P index fund/ETF when the index is n% off its high. Of course, if you look at the rest of the chart, that strategy looks a lot less promising. Start in the early 80's, and you'd have held cash until the crash in 2000. Except for the recent weirdness, the general trend in the S&P 500 (and stock markets in general) has been upward. In other words, to a first-order approximation, the S&P 500 is always at an all-time high. That's just the general trend.\"", "title": "" }, { "docid": "280e9c718456d4f541a6e70b35dece76", "text": "In other words, to a first-order approximation, the S&P 500 is always at an all-time high. I'm going to run with this observation a bit. The crash of '87 was remarkable. It was a drop of 1/3 in a short time, yet, when one looked at the year, the Dow was up nearly 5% with dividends included. A one-year Rip Van Winkler would have woken up thinking it an unremarkable year. I actually recall a conversation I had on Aug 25th 1987. I was discussing the market with a colleague over lunch, and while I didn't call the top that day, I remarked that it didn't matter much, that 5-10 years later just staying in the market would have been the right thing. Compare this 87-95 chart to the longer term chart derobert shows. In his chart, this is all but a blip. In my chart you can see it took about 3-1/2 years to be in the black, as the market then shot up from there. A dollar cost averager would not have bought at that short term high, well not more than a tiny bit. The best I can do to conclude is to say I'd never just buy in all at once. You buy in over time, X% of your income each month, and if you have a chunk to invest, smooth it out over a few years.", "title": "" }, { "docid": "77862c3b1df606b2af50d21584a716cf", "text": "In 1929 the Dow Jones Industrial Average peaked at roughly 390 just prior to the Great Depression. It did not return to that level again until 25 years later in 1954. 25 years is a long time to go without any returns, especially if you are a retiree. There is no easy answer with investing. Trying to time the tops and bottoms is widely regarded as a foolhardy endeavor, but whenever you invest you expose yourself to the possibility of this scenario. The only thing I highly recommend is not to base your decision on the historical returns from 1975 to 2000 that the other answers have presented. These returns can be explained by policy changes that many are coming to understand are unsustainable. The growth of our debt, income inequality, and monetary manipulation by central banks are all reasons to be skeptical of future returns.", "title": "" }, { "docid": "5fe88507bbc13e2adef09b375816123b", "text": "\"Being long the S&P Index ETF you can expect to make money. The index itself will never \"\"crash\"\" because the individual stocks in it are simply removed when they begin performing badly. This is not to say that the S&P Index won't lose 80% of its value in an instant (or over a few trading sessions if circuit breakers are considered), but even in the 2008 correction, the S&P still traded far above book value. With this in mind, you have to realize, that despite common sentiment, the indexes are hardly representative of \"\"the market\"\". They are just a derivative, and as you might be aware, derivatives can enable financial tricks far removed from reality. Regarding index funds, if a small group of people decide that 401k's are performing badly, then they will simply rebalance the components of the indexes with companies that are doing well. The headline will be \"\"S&P makes ANOTHER record high today\"\" So although panic selling can disrupt the order book, especially during periods of illiquidity, with the current structure \"\"the stock market\"\" being based off of three composite indexes, can never crash, because there will always exist a company that is not exposed to broad market fluctuations and will be performing better by fundamentals and share price. Similarly, you collect dividends from the index ETFs. You can also sell covered calls on your holdings. The CBOE has a chart through the 2008 crisis showing your theoretical profit and loss if you sold calls 2 standard deviations out of the money, at every monthly interval. If you are going to be holding an index ETF for a long time, then you shouldn't be concerned about its share price at all, since the returns would be pretty abysmal either way, but it should suffice for hedging inflation.\"", "title": "" }, { "docid": "3db1c15642d90d3b1ac7fb9f3495ad07", "text": "\"The simple answer is: Where 'think' stands for \"\"after your calculations, and guts/intuitions, and analysis\"\", of course.\"", "title": "" } ]	[ { "docid": "348d5c009aaf87cb2c2f7769d92c96f2", "text": "No one knows if the market is high right now. To know that you would need to compare it to the future, not the past. If you put all your money in right now, you run the risk of putting it in at what turns out to be a bad time. If you spread it out, you will for sure put some of it in at a bad time (either the stuff you put in now, or the stuff you put in later). The strategy that, on average, will make you the most money is to put everything in now. If your risk tolerance allows that (it sounds like it does) then I think going all in makes sense. There really aren't significant downsides to buying a ton at once. You aren't going to move the needle on a big Vanguard fund with that amount and there isn't a tax consequence or anything to buying. Of course, when you sell, you will need to pay capital gains tax on any gains, but that's a later chapter. The bigger consideration is to be smart right now about avoiding taxes. If your income is low, max out your Roth IRAs. If you need to you can later use that money for a house or you can pull the contribution part out at any time if you want without a penalty. Is a $50K buffer too much? Normally I would say yes, it's excessive. I have 5 rather expensive kids and I keep $20K in cash, which seems high, if anything. However, if you are unemployed or your income isn't covering your expenses, then keeping a larger pot in cash makes good sense until your cash flow firms up. Setting $50K or something close to that aside sounds a lot like something I would do in your shoes. BTW where are you finding a savings account that pays 2%?", "title": "" }, { "docid": "3d58f98963f60b0132ca92e895b7293a", "text": "\"Wouldn't this be part of your investing strategy to know what price is considered a \"\"good\"\" price for the stock? If you are going to invest in company ABC, shouldn't you have some idea of whether the stock price of $30, $60, or $100 is the bargain price you want? I'd consider this part of the due diligence if you are picking individual stocks. Mutual funds can be a bit different in automatically doing fractional shares and not quite as easy to analyze as a company's financials in a sense. I'm more concerned with the fact that you don't seem to have a good idea of what the price is that you are willing to buy the stock so that you take advantage of the volatility of the market. ETFs would be similar to mutual funds in some ways though I'd probably consider the question that may be worth considering here is how much do you want to optimize the price you pay versus adding $x to your position each time. I'd probably consider estimating a ballpark and then setting the limit price somewhere within that. I wouldn't necessarily set it to the maximum price you'd be willing to pay unless you are trying to ride a \"\"hot\"\" ETF using some kind of momentum strategy. The downside of a momentum strategy is that it can take a while to work out the kinks and I don't use one though I do remember a columnist from MSN Money that did that kind of trading regularly.\"", "title": "" }, { "docid": "663374eb1366efd15357a239d1becb56", "text": "Thanks for the advice. I will look into index funds. The only reason I was interested in this stock in particular is that I used to work for the company, and always kept an eye on the stock price. I saw that their stock prices recently went down by quite a bit but I feel like I've seen this happen to them a few times over the past few years and I think they have a strong catalogue of products coming out soon that will cause their stock to rise over the next few years. After not being able to really understand the steps needed to purchase it though, I think I've learned that I really don't know enough about the stock system in general to make any kind of informed decisions about it and should probably stick to something lower-risk or at least do some research before making any ill-informed decisions.", "title": "" }, { "docid": "57f46a4c79475699b691a077e4921089", "text": "The one thing we know for certain is that holding large amounts of cash isn't ideal - inflation will eat away at your wealth. It's understandable that you're hesitant to put all your wealth in common stock. The S&P 500's price/earnings is 18.7 right now - a little high by historical standards. But consider that the S&P 500 has given a CAGR of approximately 10% (not inflation-adjusted) since 1970. If you don't time the market correctly, you could miss out on considerable gains. So it's probably best to invest at least a portion of your wealth in common stocks, and just accept the risk of short-term losses. You'll likely come out ahead in the long run, compared to an investor who tries to time the market and ends up holding cash positions for too long. If you really think US stocks are overpriced, you could look at other markets, but you'll find similar P/Es in Europe and Japan. You could try an emerging market fund like VEMAX if you have the risk tolerance. Let's say you're not convinced, and don't want to invest heavily in stocks right now. In the current market, safe cash alternatives like Treasury bills offer very low yields - not enough to offset inflation tax. So I would invest in a diversified portfolio of long-term bonds, real estate, maybe precious metals, and whatever amount of stock you're comfortable with.", "title": "" }, { "docid": "b093899a640d476dc32d6a2ae1785f4a", "text": "\"In practice, most (maybe all) stock indices are constructed by taking a weighted average of stock prices denominated in a single currency, and so the index implicitly does have that currency - as you suggest, US dollars for the S&P 500. In principle you can buy one \"\"unit\"\" of the S&P 500 for $2,132.98 or whatever by buying an appropriate quantity of each of its constituent stocks. Also, in a more realistic scenario where you buy an index via a tracker fund, you would typically need to buy using the underlying currency of the index and your returns will be relative to that currency - if the index goes up by 10%, your original investment in dollars is up by 10%.\"", "title": "" }, { "docid": "61a3236acf34529cae6bfa96e07ccccb", "text": "\"As Dheer pointed out, the top ten mega-cap corporations account for a huge part (20%) of your \"\"S&P 500\"\" portfolio when weighted proportionally. This is one of the reasons why I have personally avoided the index-fund/etf craze -- I don't really need another mechanism to buy ExxonMobil, IBM and Wal-Mart on my behalf. I like the equal-weight concept -- if I'm investing in a broad sector (Large Cap companies), I want diversification across the entire sector and avoid concentration. The downside to this approach is that there will be more portfolio turnover (and expense), since you're holding more shares of the lower tranches of the index where companies are more apt to churn. (ie. #500 on the index gets replaced by an up and comer). So you're likely to have a higher expense ratio, which matters to many folks.\"", "title": "" }, { "docid": "b37494ebbb49714b3dd33e1f3513eb9b", "text": "With a long enough time horizon, no matter when you buy, equities almost always outperform cash and bonds. There's an article here with some info: http://www.fool.co.uk/investing-basics/how-when-and-where-to-invest/ Holding period where shares have beaten cash There was a similar study done which showed if you picked any day in the last 100 years, no matter if the market was at a high or low, after 1 year your probability of being in profit was only 0.5, but after 10-20 years it was almost certainly 1.0. Equities compound dividends too, and the best place to invest is in diversified stock indices such as the S&P500, FTSE100, DOW30 or indices/funds which pay dividends. The best way to capture returns is to dollar cost average (e.g. place a lump sum, then add $x every month), to re-invest dividends, and oh, to forget about it in an IRA or SIPP (Self invested pension) or other vehicle which discourages tampering with your investment. Yes, values rise and fall but we humans are so short sighted, if we had bought the S&P in 2007 and sold in 2009 in fear, we would have missed out on the 25% gain (excluding dividends) from 2007-2014. That's about 3% a year gain even if you bought the 2007 high -beating cash or bonds even after the financial crisis. Now imagine had you dollar cost averaged the entire period from 2007-2014 where your gain would be. Your equity curve would have the same shape as the S&P (with its drastic dip in 2009) but an accelerated growth after. There are studies if you dig that demonstrate the above. From experience I can tell you timing the market is nigh impossible and most fund managers are unable to beat the indices. Far better to DCA and re-invest dividends and not care about market gyrations! ..", "title": "" }, { "docid": "32f8ed7f56090d35f8e7317aa23eaf3f", "text": "\"Bit hesitant to put this in an answer as I don't know if specific investment advice is appropriate, but this has grown way too long for a comment. The typical answer given for people who don't have the time, experience, knowledge or inclination to pick specific stocks to hold should instead invest in ETFs (exchange-traded index funds.) What these basically do is attempt to simulate a particular market or stock exchange. An S&P 500 index fund will (generally) attempt to hold shares in the stocks that make up that index. They only have to follow an index, not try to beat it so are called \"\"passively\"\" managed. They have very low expense ratios (far below 1%) and are considered a good choice for investors who want to hold stock without significant effort or expense and who's main goal is time in the market. It's a contentious topic but on average an index (and therefore an index fund) will go even with or outperform most actively managed funds. With a sufficiently long investment horizon, which you have, these may be ideal for you. Trading in ETFs is also typically cheap because they are traded like stock. There are plenty of low-fee online brokers and virtually all will allow trading in ETFs. My broker even has a list of several hundred popular ETFs that can be traded for free. The golden rule in investing is that you should never buy into something you don't understand. Don't buy individual stock with little information: it's often little more than gambling. The same goes for trading platforms like Loyal3. Don't use them unless you know their business model and what they stand to gain from your custom. As mentioned I can trade certain funds for free with my broker, but I know why they can offer that and how they're still making money.\"", "title": "" }, { "docid": "94307b9b712f8bbbbda71d1a4df93e87", "text": "\"If I invest in index funds or other long term stocks that pay dividend which I reinvest, they don't need to be worth more per share for me to make a profit, right? That is, if I sell part of the stocks, it's GOOD if they're worth more than I bought them at, but the real money comes from the QUANTITY of stocks that you get by reinvesting your dividends, right? I would say it is more the other way around. It is nice to get dividends and reinvest them, but overall the main gain comes from the stocks going up in value. The idea with index funds, however, is that you don't rely on any particular stock going up in value; instead you just rely on the aggregate of all the funds in the index going up. By buying lots of stocks bundled in an index fund, you avoid being too reliant on any one company's performance. Can I invest \"\"small amounts\"\" (part of paycheck) into index funds on a monthly basis, like €500, without taking major \"\"transaction fees\"\"? (Likely to be index fund specific... general answers or specific answers using popular stocks welcomed). Yes, you can. At least in the US, whether you can do this automatically from your paycheck depends on whether you employer has that set up. I don't know that work in the Netherlands. However, at the least, you can almost certainly set up an auto-invest program that takes $X out of your bank account every month and buys shares of some index fund(s). Is this plan market-crash proof? My parents keep saying that \"\"Look at 2008 and think about what such a thing would do to your plan\"\", and I just see that it will be a setback, but ultimately irrelevant, unless it happens when I need the money. And even then I'm wondering whether I'll really need ALL of my money in one go. Doesn't the index fund go back up eventually? Does a crash even matter if you plan on holding stocks for 10 or more years? Crashes always matter, because as you say, there's always the possibility that the crash will occur at a time you need the money. In general, it is historically true that the market recovers after crashes, so yes, if you have the financial and psychological fortitude to not pull your money out during the crash, and to ride it out, your net worth will probably go back up after a rough interlude. No one can predict the future, so it's possible for some unprecedented crisis to cause an unprecedented crash. However, the interconnectedness of stock markets and financial systems around the world is now so great that, were such a no-return crash to occur, it would probably be accompanied by the total collapse of the whole economic system. In other words, if the stock market dies suddenly once and for all, the entire way of life of \"\"developed countries\"\" will probably die with it. As long as you live in such a society, you can't really avoid \"\"gambling\"\" that it will continue to exist, so gambling on there not being a cataclysmic market crash isn't much more of a gamble. Does what I'm planning have similarities with some financial concept or product (to allow me to research better by looking at the risks of that concept/product)? Maybe like a mortgage investment plan without the bank eating your money in between? I'm not sure what you mean by \"\"what you're planning\"\". The main financial products relevant to what you're describing are index funds (which you already mentioned) and index ETFs (which are basically similar with regard to the questions you're asking here). As far as concepts, the philosophy of buying low-fee index funds, holding them for a long time, and not selling during crashes, is essentially that espoused by Jack Bogle (not quite the inventor of the index fund, but more or less its spiritual father) and the community of \"\"Bogleheads\"\" that has formed around his ideas. There is a Bogleheads wiki with lots of information about the details of this approach to investing. If this strategy appeals to you, you may find it useful to read through some of the pages on that site.\"", "title": "" }, { "docid": "4215d59595db6fef019e68352fc63517", "text": "\"This is a really bad idea. You are asking to be forced to pay for something at a time when you most likely NOT want to buy it. Why? There is no stability (much less any degree of predictability) to give up the right to control when and for how much you would be willing to own the S&P500. Just don't do it.....\"\"generate stable income\"\" and \"\"selling puts\"\" is an oxymoron. ===retired investment advisor\"", "title": "" }, { "docid": "f4e45e12a95727c57c7caf4417b24c1e", "text": "\"Though it seems unintuitive, you should rationally ignore the past performance of this stock (including the fact that it's at its 52-week high) and focus exclusively on factors that you believe should affect it moving forward. If you think it's going to go up even further, more than the return on your other options for where to put the money, keep the stock. If you think it's peaked and will be going down, now's a good time to sell. To put it another way: if you didn't already have this stock, would you buy it today? Your choice is just about the same: you can choose between a sum of cash equal to the present market value of the shares, OR the shares. Which do you think is worth more? You also mentioned that you only have 10 stocks in the portfolio. Some are probably a larger percentage than others, and this distribution may be different than what you want in your portfolio. It may be time to do some rebalancing, which could involve selling some shares where your position is too large (as a % of your portfolio) and using the proceeds toward one or more categories you're not as invested in as you would like to be. This might be a good opportunity to increase the diversity in your portfolio. If part of your reward and motivation for trading is emotional, not purely financial, you could sell now, mark it as a \"\"win,\"\" and move on to another opportunity. Trading based on emotions is not likely to optimize your future balance, but not everybody is into trading or money for money's sake. What's going to help you sleep better at night and help boost your quality of life? If holding the stock will make you stress and regret a missed opportunity if it goes down, and selling it will make you feel happy and confident even if it still goes up more (e.g. you interpret that as further confirming that you made a good pick in the first place), you might decide that the risk of suboptimal financial returns (from emotion-based trading) is acceptable. As CQM points out, you could also set a trailing sell order to activate only when the stock is a certain percentage or dollar amount below whatever it peaks at between the time you set the order and the time it fires/expires; the activation price will rise with the stock and hold as it falls.\"", "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": "6e4f01017045a7b9ef74ebae91eacf5a", "text": "\"I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically \"\"the best\"\" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, \"\"passive index investing\"\" is almost an oxymoron. The most obvious part of this is that if index funds were \"\"the best\"\" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for \"\"passive index investing\"\" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid \"\"How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me.\"", "title": "" }, { "docid": "d76148a24e5fe75e50c2a979fd8b7cd9", "text": "\"You said your strategy was to put it into a index fund. But then you asked about setting stock limits. I'm confused. Funds usually trade at their price at the end of the day, so you shouldn't try to time this at all. Just place your order. If you are buying ETFs, there is going to be so much volume on the market that your small trade is going to have no impact on the price. You should just place a market order. A market order is an order to buy or sell a stock at the current market price. A limit order is an order to buy or sell a security at a specific price. In the US, when you place a trade with any broker, you can either place a limit order or a market order. A market order just fills your order with the next best sellers in line. If you place an order for 100 shares, the sellers willing to sell 100 shares at the lowest price will be matched with your order (sometimes you may get 50 shares at one price and 50 shares at a slightly different price). If your stock has a lot of volatility and you place a market order for a small amount of shares, you will get the best price. If you place a limit order, you specify the price at which you want to buy shares. Your order will then only be filled with sellers willing to sell at that price or lower (i.e. they must be at least as good as you specified). This means you could place an order at a limit that does not get filled (the stock could move in a direction away from your limit price). If you really want to own the stock, you shouldn't use a limit order. You shouldn't only use a limit order if you want to tell your broker \"\"I will only buy this stock at this price or better.\"\" p.s. Every day that passes is NOT a waste. It's just a day that you've decided investing in cash is safer than investing in the market.\"", "title": "" }, { "docid": "8fc31bee29fcccd98b7ffc46d880a225", "text": "How to start is pretty simple. With your next pay check set aside an amount and open a separate savings account. Since this is an emergency fund - you want it someplace where you can get to the money quickly (so a CD or mutual fund is not good), but you want it in a separate account so that you don't accidentally use it. Once the account is opened I'd recommend setting up an automatic transfer, or make it part of the direct deposit if you do that, so that you put in some money regularly (every pay check). By adding to it regularly and not using it, you'll more quickly achieve your goal. I'd recommend stopping, or slowing any retirement savings or other investing, until you get the emergency fund in place. If you have an emergency, the money in the retirement fund isn't going to do you much good as it costs too much to do an early withdrawal. The whole point of the emergency fund is to have liquidity when you need it so that you don't incur the costs of unplugging your longer term investments. Also don't worry overly much about making money on this money. This isn't an investment it is there for emergencies.", "title": "" } ]	fiqa
5b131710e98c74ae2000c01419b0b413	Why index funds have different prices?	[ { "docid": "85f152040d50f0973d1afa6b3af5da2d", "text": "Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units.", "title": "" }, { "docid": "19f06ae3fb5539ce2720a61d47286e51", "text": "\"Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the \"\"compare\"\" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing.\"", "title": "" }, { "docid": "f2ec640fa7f7a0b70da50dfc98da4ee5", "text": "\"To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some \"\"natural\"\" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point.\"", "title": "" } ]	[ { "docid": "03d41dcf56859ae93fbc012bda231e5a", "text": "As has been pointed out, one isn't cheaper than the other. One may have a lower price per share than the other, but that's not the same thing. Let's pretend that the total market valuation of all the stocks within the index was $10,000,000. (Look, I said let's pretend.) You want to invest $1,000. For the time being, let's also pretend that your purchasing 0.01% of all the stock won't affect prices anywhere. One company splits the index into 10,000 parts worth $1,000 each. The other splits the same index into 10,000,000 parts worth $1 each. Both track the underlying index perfectly. If you invest $1,000 with the first company, you get one part; if you invest $1,000 with the second, you get 1,000 parts. Ignoring spreads, transaction fees and the like, immediately after the purchase, both are worth exactly $1,000 to you. Now, suppose the index goes up 2%. The first company's shares of the index (of which you would have exactly one) are now worth $1,020 each, and the second company's shares of the index (of which you would have exactly 1,000) are worth $1.02 each. In each case, you now have index shares valued at $1,020 for a 2% increase ($1,020 / $1,000 = 1.02 = 102% of your original investment). As you can see, there is no reason to look at the price per share unless you have to buy in terms of whole shares, which is common in the stock market but not necessarily common at all in mutual funds. Because in this case, both funds track the same underlying index, there is no real reason to purchase one rather than the other because you believe they will perform differently. In an ideal world, the two will perform exactly equally. The way to compare the price of mutual funds is to look at the expense ratio. The lower the expense ratio is, the cheaper the fund is, and the less of your money is being eroded every day in fees. Unless you have some very good reason to do differently, that is how you should compare the price of any investment vehicles that track the same underlying commodity (in this case, the S&P 500).", "title": "" }, { "docid": "bc8f593c174368c4c817cd8ea5e13e90", "text": "Picking yourself is just what all the fund managers are trying to do, and history shows that the majority of them fails the majority of the time to beat the index fund. That is the core reason of the current run after index funds. What that means is that although it doesn’t sound so hard, it is not easy at all to beat an index consistently. Of course you can assume that you are better than all those high-paid specialists, but I would have some doubt. You might be luckier, but then you might be not.", "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": "5f4a5b3c153b0ee7c0d8c166d89883c0", "text": "\"Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, doesn't do it for free. He skims a little bit of money off the top. This is the \"\"fee\"\". The major S&P ETFs all have tiny fees, in the percents of a percent. If you're buying the index, you're probably looking at gains (or losses) to the tune of 5, 10, 20% - unless you're doing something really silly, you wouldn't even notice the fee. As often happens, when one guy starts doing something and making money, there will immediately be copycats. So now we have competing ETFs all providing the same service. You are technically a competitor as well, since you could compete with all these funds by just buying a basket of shares yourself, thereby running your own private fund for yourself. The reason this stuff even started was that people said, \"\"well why bother with mutual funds when they charge such huge fees and still don't beat the index anyway\"\", so the index ETFs are supposed to be a low cost alternative to mutual funds. Thus one thing ETFs compete on is fees: You can see how VOO has lower fees than SPY and IVV, in keeping with Vanguard's philosophy of minimal management (and management fees). Incidentally, if you buy the shares directly, you wouldn't charge yourself fees, but you would have to pay commissions on each stock and it would destroy you - another benefit of the ETFs. Moreover, these ETFs claim they track the index, but of course there is no real way to peg an asset to another. So they ensure tracking by keeping a carefully curated portfolio. Of course nobody is perfect, and there's tracking error. You can in theory compare the ETFs in this respect and buy the one with the least tracking error. However they all basically track very closely, again the error is fractions of the percent, if it is a legitimate concern in your books then you're not doing index investing right. The actual prices of each fund may vary, but the price hardly matters - the key metric is does it go up 20% when the index goes up 20%? And they all do. So what do you compare them on? Well, typically companies offer people perks to attract them to their own product. If you are a Fidelity customer, and you buy IVV, they will waive your commission if you hold it for a month. I believe Vanguard will also sell VOO for free. But for instance Fidelity will take commission from VOO trades and vice versa. So, this would be your main factor. Though, then again, you can just make an account on Robinhood and they're all commission free. A second factor is reliability of the operator. Frankly, I doubt any of these operators are at all untrustworthy, and you'd be buying your own broker's ETF anyway, and presumably you already went with the most trustworthy broker. Besides that, like I said, there's trivial matters like fees and tracking error, but you might as well just flip a coin. It doesn't really matter.\"", "title": "" }, { "docid": "a6ee4e5de0eaac8cd605fe3bd7730482", "text": "\"You seem to be assuming that ETFs must all work like the more traditional closed-end funds, where the market price per share tends—based on supply and demand—to significantly deviate from the underlying net asset value per share. The assumption is simplistic. What are traditionally referred to as closed-end funds (CEFs), where unit creation and redemption are very tightly controlled, have been around for a long time, and yes, they do often trade at a premium or discount to NAV because the quantity is inflexible. Yet, what is generally meant when the label \"\"ETF\"\" is used (despite CEFs also being both \"\"exchange-traded\"\" and \"\"funds\"\") are those securities which are not just exchange-traded, and funds, but also typically have two specific characteristics: (a) that they are based on some published index, and (b) that a mechanism exists for shares to be created or redeemed by large market participants. These characteristics facilitate efficient pricing through arbitrage. Essentially, when large market participants notice the price of an ETF diverging from the value of the shares held by the fund, new units of the ETF can get created or redeemed in bulk. The divergence quickly narrows as these participants buy or sell ETF units to capture the difference. So, the persistent premium (sometimes dear) or discount (sometimes deep) one can easily witness in the CEF universe tend not to occur with the typical ETF. Much of the time, prices for ETFs will tend to be very close to their net asset value. However, it isn't always the case, so proceed with some caution anyway. Both CEF and ETF providers generally publish information about their funds online. You will want to find out what is the underlying Net Asset Value (NAV) per share, and then you can determine if the market price trades at a premium or a discount to NAV. Assuming little difference in an ETF's price vs. its NAV, the more interesting question to ask about an ETF then becomes whether the NAV itself is a bargain, or not. That means you'll need to be more concerned with what stocks are in the index the fund tracks, and whether those stocks are a bargain, or not, at their current prices. i.e. The ETF is a basket, so look at each thing in the basket. Of course, most people buy ETFs because they don't want to do this kind of analysis and are happy with market average returns. Even so, sector-based ETFs are often used by traders to buy (or sell) entire sectors that may be undervalued (or overvalued).\"", "title": "" }, { "docid": "617a7517cb417ed7ce90bb074959be08", "text": "On the US markets, most index options are European style. Most stock and ETF options are, as you noted, American style.", "title": "" }, { "docid": "b7bbbba72cb8dc5b8dcf6cba5fd65700", "text": "The S&P 500 is a market index. The P/E data you're finding for the S&P 500 is data based on the constituent list of that market index and isn't necessarily the P/E ratio of a given fund, even one that aims to track the performance of the S&P 500. I'm sure similar metrics exist for other market indexes, but unless Vanguard is publishing it's specific holdings in it's target date funds there's no market index to look at.", "title": "" }, { "docid": "7c0d3a1bc064540d90e0849afb6be205", "text": "With regard to commodity futures, a paper released in January 2010 by Aulerich, Irwin, and Garcia, concluded that index funds have essentially no impact on commodity futures. Looking at stocks, a stock that gets included in a major index does increase in price. It increases its turnover by 27% and increases its price by between 2.7% and 5.5%, according to information cited by Kula in this paper, though it looks like the price increase tends to happen in the lead up to the stock being included. Interestingly, I have read an article but cannot now locate it, which states that there's a measurable, albeit fairly small, price bubble on stocks included in common indexes, on Monday mornings, Friday afternoons, and at the start and end of the month. That is, the times when mutual funds are most likely to rebalance their holdings. This almost certainly applies to a lesser extent to other stocks, too. My understanding is that the price difference was very small, however. Generally speaking, stocks which make part of well-known indexes will tend to be in higher demand than stocks which do not. It remains the case that almost all actively-managed mutual funds are unable to consistently beat the indexes, even with this taken into account.", "title": "" }, { "docid": "1ca4aa43255f1b1f575ff0e602651839", "text": "\"Remember that in most news outlets journalists do not get to pick the titles of their articles. That's up to the editor. So even though the article was primarily about ETFs, the reporter made the mistake of including some tangential references to mutual funds. The editor then saw that the article talked about ETFs and mutual funds and -- knowing even less about the subject matter than the reporter, but recognizing that more readers' eyeballs would be attracted to a headline about mutual funds than to a headline about ETFs -- went with the \"\"shocking\"\" headline about the former. In any case, as you already pointed out, ETFs need to know their value throughout the day, as do the investors in that ETF. Even momentary outages of price sources can be disastrous. Although mutual funds do not generally make transactions throughout the day, and fund investors are not typically interested in the fund's NAV more than once per day, the fund managers don't just sit around all day doing nothing and then press a couple buttons before the market closes. They do watch their NAV very closely during the day and think very carefully about which buttons to press at the end of the day. If their source of stock price data goes offline, then they're impacted almost as severely as -- if less visibly than -- an ETF. Asking Yahoo for prices seems straightforward, but (1) you get what you pay for, and (2) these fund companies are built on massive automated infrastructures that expect to receive their data from a certain source in a certain way at a certain time. (And they pay a lot of money in order to be able to expect that.) It would be quite difficult to just feed in manual data, although in the end I suspect some of these companies did just that. Either they fell back to a secondary data supplier, or they manually constructed datasets for their programs to consume.\"", "title": "" }, { "docid": "8d589182b01015240f2be382c8bbf3cf", "text": "\"This is a misconception. One of the explanations is that if you buy at the ask price and want to sell it right away, you can only sell at the bid price. This is incorrect. There are no two separate bid and ask prices. The price you buy (your \"\"bid\"\") is the same price someone else sells (their \"\"sell\"\"). The same goes when you sell - the price you sell at is the price someone else buys. There's no spread with stocks. Emphasized it on purpose, because many people (especially those who gamble on stock exchange without knowing what they're doing) don't understand how the stock market works. On the stock exchange, the transaction price is the match between the bid price and the ask price. Thus, on any given transaction, bid always equals ask. There's no spread. There is spread with commodities (if you buy it directly, especially), contracts, mutual funds and other kinds of brokered transactions that go through a third party. The difference (spread) is that third party's fee for assuming part of the risk in the transaction, and is indeed added to your cost (indirectly, in the way you described). These transactions don't go directly between a seller and a buyer. For example, there's no buyer when you redeem some of your mutual fund - the fund pays you money. So the fund assumes certain risk, which is why there's a spread in the prices to invest and to redeem. Similarly with commodities: when you buy a gold bar - you buy it from a dealer, who needs to keep a stock. Thus, the dealer will not buy from you at the same price: there's a premium on sale and a discount on buy, which is a spread, to compensate the dealer for the risk of keeping a stock.\"", "title": "" }, { "docid": "7129104fb2ab770f186c5882f2e6074c", "text": "\"when the index is altered to include new players/exclude old ones, the fund also adjusts The largest and (I would say) most important index funds are whole-market funds, like \"\"all-world-ex-US\"\", or VT \"\"Total World Stock\"\", or \"\"All Japan\"\". (And similarly for bonds, REITS, etc.) So companies don't leave or enter these indexes very often, and when they do (by an initial offering or bankruptcy) it is often at a pretty small value. Some older indices like the DJIA are a bit more arbitrary but these are generally not things that index funds would try to match. More narrow sector or country indices can have more of this effect, and I believe some investors have made a living from index arbitrage. However well run index funds don't need to just blindly play along with this. You need to remember that an index fund doesn't need to hold precisely every company in the index, they just need to sample such that they will perform very similarly to the index. The 500th-largest company in the S&P 500 is not likely to have all that much of an effect on the overall performance of the index, and it's likely to be fairly correlated to other companies in similar sectors, which are also covered by the index. So if there is a bit of churn around the bottom of the index, it doesn't necessarily mean the fund needs to be buying and selling on each transition. If I recall correctly it's been shown that holding about 250 stocks gives you a very good match with the entire US stock market.\"", "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": "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": "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": "227e307c1c3960f56285b5867e472f06", "text": "You lose your agent services. When my wife wrecked our car 3 years ago our agent took care of everything. He got us a rental car, made the arrangements to get it fixed, checked in to see how we were doing, and even helped us set up a second opinion on my wifes wrist surgery. The accident was ruled the fault of the uninsured driver who decided to take off through the red light. But our insurance was the one that covered it all total expenses over 80k. We would have had to eat most of those with out full coverage. Most everything was set up (our rental car, estimates on repair, even her inital consutation with the surgeon) before the investigator had filed her report. Our agents first question was is everyone ok. His second was what can i do to help? He never asked us what happened and was always ahead of our needs in dealing with it. If these things are not important to you, you can probably save quite a bit of money self insuring. But if you are in an accident and unable to do them yourself, do you have someone to do it for you? Do you trust them to handle your business and are you willing to saddle them with the responsibility of dealing with it? To me insurance is less about me and more about my family. It was nice that my agent did all of that for me. I would have been willing to do it myself though. But I am glad to know he is there for my wife if something happens to me.", "title": "" } ]	fiqa
ced2c75e7bbe83d40a7c03d45209608e	Credit Card Purchase - 'it is the bank's money no[t] yours' ?	[ { "docid": "ed92a26567b09642092447d525ece178", "text": "Yes, they're referring to the credit card dispute (chargeback) process. In the case of dispute, credit card company will refund/freeze your charge so you don't have to pay until the dispute is resolved (or at all, if resolved in your favor). If the dispute is resolved in your favor, your credit card company will charge back the merchant's service provider which in turn will charge back (if it can) the merchant itself. So the one taking the most risk in this scenario is the merchant provider, this is why merchants that are high risk pay significantly higher fees or get dropped.", "title": "" }, { "docid": "229dcdc4c02910101ea85c81c214c263", "text": "\"The statement is (in laymans terms - if not in real terms) correct. Most credit cards (I know this to be true for VISA and Mastercard) have dispute processes and will do a chargeback on the merchant - ie take the money back from the supplier in cases where you don't receive the goods or other fraud - Particularly if they can't produce a signature and (for transactions which are not face-to-face) a tracking number. Your exact rights will vary by bank, but mostly they need to follow the guidelines set by the Credit Card company - and you do need to be a bit careful - if you received goods which were fake or a dispute arises you may be up for shipping the goods back to the merchant - and you have a limited - but reasonable time - in which to make the dispute. (The statement \"\"the money is the banks\"\" is not technically true, there is no money involved until you pay it, only credit [ they are very different, but almost no-one knows that, I communicated with a Minister of Finance on the topic], but this is quite technical and as a layman not something you need to worry about here)\"", "title": "" } ]	[ { "docid": "d14c40b363e424d58fc717cbba618d85", "text": "\"Great, I wonder how I the customer will be paying for this. I don't know exactly when it happened or the specifics but BOA lost 500 million in some bad loan or something a while back and a month later started taking on fees to what used to be free services. They started charging 5 dollars for a replacement debit card and other stuff like that. Their explantation for it was \"\"we have the right to make a profit\"\" when really it just seems they were covering their asses. Instead of cutting costs internally like an ethical/responsible company would, they make their customers pay for it. As soon as my credit card account goes up for renewal I am done with that bank.\"", "title": "" }, { "docid": "6f04c572febf901d91fa7fbf164c5f1f", "text": "Your chief problem seems to be that you're mixing Visa (credit cards) and Step2 (a European Automated Clearing House). Credit cards are primarily an American concept, but do work worldwide especially in travel&tourism industry. The Credit Card companies are financial institutions themselves and operate similar to international banks They're typically acting as intermediaries between the customer's bank and the retailer's bank, so this works even if those two banks have no existing agreements. This is expensive, though. Step2 is a cheaper European system which eliminates the middle man. It allows the consumer's bank to directly pay the retailer's bank. VISA is not a member of Step2.", "title": "" }, { "docid": "f7a54ca9b45f248ad3c03b5eb173e2a2", "text": "There are three parties involved here: there's the store that issued you the card, then they have some bank that's actually handling the account, and there is some network (VISA, MasterCard, etc.) that the transactions go through. So one avenue to consider is seeing whether all three are aware of you canceling the card.", "title": "" }, { "docid": "a682f2cbbdf005cda229bd17b4176713", "text": "Etiquette doesn't really come into the picture here. The business offers a service and I choose to accept it. Personally, I use my debit card as much as possible. For every transaction, I record it in my checkbook. Then, when I do reconciling, I know exactly how much I paid for various categories of stuff. Good for budgeting. Most often my purchases are over $10 but when they aren't, I have no qualms about using the card.", "title": "" }, { "docid": "93a0c77bd96dcc00649728b679847af7", "text": "Credit cards are often more fool proof, against over-drawing. Consider Bill has solid cash flow, but most of their money is in his high interest savings account (earning interest) -- an account that doesn't have a card, but is accessible via online banking. Bill keeps enough in the debit (transactions) account for regular spending, much of which comes out automatically (E.g. rent, utilities), some of which he spends as needed eg shopping, lunch. On top of the day to day money Bill keeps an overhead amount, so if something happens he doesn't overdraw the account -- which would incur significant fees. Now oneday Bill sees that the giant flatscreen TV he has been saving for is on clearence sale -- half price!, and there is just one left. It costs more than he would normally spend in a week -- much more. But Bill knows that his pay should have just gone in, and his rent not yet come out. Plus the overhead he keep in the account . So there is money in his debit account. When he gets home he can open up online banking and transfer from his savings (After all the TV is what he was saving for) What Bill forgets is that there was a public holiday last week in the state where payroll is operated, and that his pay is going to go in a day late. So now he might have over drawn the account buying the TV, or maybe that was fine, but paying the rent over draws the account. Now he has a overdraft fee, probably on the order of $50. Most banks (at least where I am), will happily allow you to overdraw you account. Giving you a loan, at high interest and with an immediate overdraft fee. (They do this cos the fee is so high that they can tolerate the risk of the non-assessed loan.) Sometimes (if you ask) they don't let you do it with your own transcations (eg buying the TV), but they do let you do it on automated payements (eg the Rent). On the other hand banks will not let you over draw a credit card. They know exactly how much loan and risk they were going to take. If Bill had most of his transactions going on his credit card, then it would have just bounced at the cash register, and Bill would have remembered what was going on and then transferred the money. There are many ways you can accidentally overdraw your account. Particularly if it is a shared account.", "title": "" }, { "docid": "ffd1a93e5ba8df50304b578f7aee6402", "text": "As far as I can see, this is an issue of the bank's policy rather than some legal regulation. That means that you'll need to work it out with the bank. To give you a couple of ideas to work with when you talk with them, maybe something from this list will work: Good luck!", "title": "" }, { "docid": "6499f32fd053b9d2f1d298fbc677af4f", "text": "\"I found the study \"\"The irrationality of payment behaviour\"\" accidentally while searching on the term \"\"DNB Study\"\" instead of \"\"D&B Study\"\". This study, which, when I followed the link, went to the web site dnb.nl (Dutch National Bank), instead of dnb.com (Dun & Bradstreet). It mentions all the salient points that I hear Dave Ramsey and others mention when they talk about studies on this subject of credit vs cash. Also, it cross references to many other studies by various researchers, banks, and universities. Is this the \"\"missing mythical DNB study?\"\" I'll let you decide. Relevant \"\"coincidental\"\" points from the study: To be fair and complete, I should mention that clearly the relevant parts of this DNB study are talking about discretionary spending. Auto-paying your mortgage with a card is clearly not going to cost you more (unless you somehow forget to pay off the card or some other silliness).\"", "title": "" }, { "docid": "b5d49eeba6439306dafda1540ce9d30c", "text": "Exactly. Or if you prefer, they were not acting as banks when doing so. (Well, at least by the definition I gave, obviously. If you prefer a different definition, you get a different answer. Although I'm not sure there really is a useful definition of banking that would cover the behaviour you described.)", "title": "" }, { "docid": "b427ead79d6bc0ca641b104f8705fd3c", "text": "I would presume this goes entirely through the credit card network rather than the banking network. I am guessing that it's essentially the same operation as if you had returned something purchased on a card to the store for credit, but I'm not sure whether it really looks like a vendor credit to the network or if it is marked as a different type of transaction.", "title": "" }, { "docid": "fc17bf0c8d9eecdcd412998741cfc8f4", "text": "Short answer: No. Some of those 'automatic' payments you've agreed to (presumably by signing a PAD form) are initiated in batch by the company whom you're buying from (phone company, cable company etc). So no, the bank has no indication from one day to the next what is coming through. And the request goes from say, your cable company to THEIR merchant bank to YOUR bank. Typically you have a monthly bill date which is fixed, and they should have terms established when it is due. If a payment comes back NSF they can retry once - but only for the same amount and I believe it is 14 days from the initial payment attempt. It makes it predictable, and you'd figure banks would clue in and start to predict for you when things may come out - but strictly speaking your bank doesn't know when or how much.", "title": "" }, { "docid": "fdde16f02a47c59d0ba7b213478cdd88", "text": "Oh yes, it is absolutely the problem of the consumers. After all how is the bank to know how it should be doing business unless the customer explains it to them? Please read the other comments about how the customer has verified receipt of some critical document and then they claim that they don't have it. Sure they are very nice on the phone, but that doesn't help when I have to take time out of my work day to call them repeatedly.", "title": "" }, { "docid": "50b54ee0f2d50fba4547d1c2c497b452", "text": "A debit card takes the funds right from your account. There's no 'credit' issued along the way. The credit card facilitates a short term loan. If you are a pay-in-full customer, as I am, there's a cost to lend the money, but we're not paying it. It's part of the fee charged to the merchant. Thus the higher transaction cost.", "title": "" }, { "docid": "7e5fe8aaa425cd08ca576a07c27c3f16", "text": "You'd have to consult a lawyer in the state that the transaction took place to get a definitive answer. And also provide the details of the contract or settlement agreement. That said, if you clearly presented the check as payment (verbally or otherwise) and they accepted and cashed the check, and it cleared, you should have good legal standing to force them to finalize the payment. While they had every right to refuse the payment, and also every right to place a hold on the credit until the transaction cleared their bank, they don't have the right to simply claim the payment as a gift just because it came in a different form than they specified in the contract. Obviously this is a lesson learned on reading the fine print though. And, to be frank, it sounds like someone wants to make life difficult for you for whatever reason. And if that is the case I would refer back to my initial comment about contacting a lawyer in that state.", "title": "" }, { "docid": "01a391a21426165ab94de05466668be1", "text": "\"> Or just remember how much you spent. The purpose of my comment was to say the online balance isn't a true balance, not that I had trouble balancing a book. Except that you rather obviously don't comprehend what the meaning of \"\"true balance\"\" is. The balance the bank shows on it's online system (or it's statements) is very much a \"\"true balance\"\" of the transactions the BANK is aware of (i.e. the ones that have been processed). That you think the bank should somehow be \"\"magically aware\"\" of the fact that you just signed a credit card transaction -- or that you wrote a check and mailed it off to someone -- demonstrate that you lack a fundamental comprehension of the system. And the \"\"just remember how much you spent\"\" as an excuse for not properly (independently) recording (and mathematically subtracting) what you have spent... Is demonstrative of both ignorance AND laziness.\"", "title": "" }, { "docid": "9195bb2a2faa4f1aa9f86cdf0eb07809", "text": "If your gut told you to buy during the depths of '09, your gut might be well-calibrated. The problem is stock market declines during recessions are frequently not that large relative to the average long run return of 9%: A better strategy might be hold a percentage in equities based upon a probability distribution of historical returns. This becomes problematic because of changes in the definition of earnings and the recent inflation stability which has encouraged high valuations: Cash flow has not been as corrupted as earnings now, and might be a better indicator: This obviously isn't perfect either, but returns can be improved. Since there is no formulaic way yet conventionally available, the optimal primary strategy is still buy & hold which has made the most successful investor frequently one of the richest people on the planet for decades, but this could still be used as an auxiliary for cash management reserves during recessions once retired.", "title": "" } ]	fiqa
eecbd0e25927705ef2a93231663274d3	How does a no-limit charge card affect your credit score?	[ { "docid": "8d9c3a008d3b59f6749d8538c2abda64", "text": "Apparently it is up to the credit card company on how they want to report your available balance. Another disadvantage to the no-limit credit card may not be apparent to most people, but it is something noted by organizations like The Motley Fool, which is expert in many issues of finance and investment. Part of your credit score, about 30%, considers the amount of money you have borrowed, and the limit on your present credit cards. A no-limit credit card company may report your limit as $0 if you have not used the card, or they may report a maximum limit available to you. They may not, nor are they obligated, to report times when you put tons of expenses on a credit card and then paid them off. While some companies will report your timely payments and paid off amounts, others simply report an extremely low limit. For instance if you spent $100 US Dollars (USD), your limit might be considered $100 USD, or it may merely be reported as zero. You’ll need to check with a credit card company on how they report payments and limits on a no-limit credit card before you obtain one. Some people who are scrupulous are paying off their cards at the end of each month suffer major losses to their credit score, without even realizing it, if their spending ability is rated at zero, or their payments don’t count toward showing credit worthiness. Source", "title": "" } ]	[ { "docid": "a1d1be500848552ce452b75771c8a430", "text": "Well, you might take a minor hit to your credit score. This is snapshot of my credit utilization written for an article on my site. The point there was that zero card use actually dinged the score, but for you, going over the 20% level is the risk. It's not too large a hit, depending how high the utilization goes. I'd not lose sleep over it. Kind of you to help.", "title": "" }, { "docid": "80cf25b1ba15930ca2b8aa57dbb8796c", "text": "Your credit score is based on your use of Debt. From wikipedia: Opening and closing bank accounts, buying or selling cars without debt, or even buying or selling houses without debt won't affect your credit score.", "title": "" }, { "docid": "88fde363be152b7f7dd7406505cf9fb2", "text": "FICO score tracks credit, not checking or savings. Unless there was a credit line attached, no impact at all.", "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": "59e5ecb0fe258452782762d4a7e06459", "text": "Even if you can get a credit card with a $0 limit, that doesn't necessarily mean that the charges won't succeed. Some of my credit cards have gone over limit by a significant amount (e.g. 140% of limit) without any transactions being declined. The limit just means that the bank is allowed to decline the transaction, but they are also allowed to approve it anyway. So basically what you would have is a credit card where any transaction can always be declined or approved.", "title": "" }, { "docid": "0c587adcca6e0ffcf1c18020848b9298", "text": "There is only a catch if you swallow the hook. The hook is that the bank hopes you will use the increased credit limit to buy more stuff, and not pay what you owe before the interest-free period expires. This will allow them to charge their high interest rate on the outstanding balance. Now if you don't increase your spending, and keep paying your balance in full, nothing happens.", "title": "" }, { "docid": "e0f298e784249ed9b824b177253cf6ca", "text": "After doing some investigating, my employers contract with the credit card company has a clause that basically specifies that despite my name being on the credit card, and bills being sent to me, all liability is on the company. Additionally, the employer reserves the right to garnish wages in the event of a balance on the card. So it looks like it won't affect my credit score. I appreciate all of the advice.", "title": "" }, { "docid": "1a495a945460a40e2af146c24b9cb52f", "text": "Credit scoring has changed since the time of this question (July 2017) and it is now possible that having a high available credit balance can negatively affect your credit score. ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source", "title": "" }, { "docid": "021ab4e60a9013fa5bf1683fee77c014", "text": "\"If you look around online and read about credit scores, you'll find all kinds of information about what you should do to maximize your credit score. However, in my opinion, it just isn't worth rearranging your life just to try to achieve some arbitrary score. If you pay your bills on time and are regularly using a credit card, your score will take care of itself. Yes, you can cut up the card you don't like and keep the credit card account open. The bank may close your account at some point in the future because of a lack of activity, but if they do, don't worry about it. You have other accounts that you are using. Personally, I don't like having open credit accounts that I'm not using; I close accounts when I'm done with them. I realize that it goes against everything that you will read, but my score is very high and my oldest open credit card account is 2 years old. Don't let them scare you into credit activity that you don't want just to try to \"\"win\"\" at the credit score.\"", "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": "141d091e91accc8eb555bedf199fb2ff", "text": "I agree with JoeTaxpayer that you will be better off in the end if you can just not use your card you are better off in the long run. That said if you are determined to get a card you can control go to a credit union or local bank. Most of them will give you the credit limit you want. This may provide you with a card that you can make use of but know that you can not go wild. The down side is most of these will not be reward cards but my local credit union gave me a 7% card where my Chase card is at 18%(was 5% before the changes to credit card regulations).", "title": "" }, { "docid": "3c586acc7130c1efd832fbf1d1d35042", "text": "Closing the card will be fine. The consequences are related to your available credit and actual/potential utilization. If you have less total credit, any credit you actually use will be a greater percentage of your total credit, manipulating your score downwards more greatly. The next consequence will be related to the age of your credit history, which is an average of your credit lines. This seems negligible and also beneficial for you, since your credit history is so young to begin with.", "title": "" }, { "docid": "244dd81190d927e0ad3615b21d179ebe", "text": "The first thing I assess when looking at new credit cards is whether it has no annual fee, the second thing I look at is how long the interest free period is. I always pay my credit card off in full just before the due date. Any rewards program is a bonus. My main credit card is with CBA, I have a credit limit of $20K and pay no annual fee. I get a bonus point for every $ I spend on it, for which I exchange for store gift cards to help with my everyday spending. Approximately 3500 point would get me a $25 gift card. But my main reward with the card is the interest I save by keeping my own money in a Home Loan Offset account whilst I spend with the Bank's money. Then I pay the full amount off by the due date so I do not pay any interest on the credit card. I only use my credit cards for purchases I would usually make anyway and to pay bills, so my spending would be the same with or without a credit card. I can usually save over $500 each year off my Home Loan interest and get about $350 worth of gift cards each year. If I didn't have any Home Loans then I would keep my money in a high interest depost account so I would be increasing my interest payments each year. Sure you can probably get credit cards with more generous rewards programs, but how much are you paying each year in annual fees, and if you don't have an interest free period and you don't pay off all the amount due each month how much are you paying in interest on the card? This is what you need to way up when looking at rewards programs on offer. Nothing is for free, well almost nothing !", "title": "" }, { "docid": "01264d3bf1b37ab9fb671b8d57b01293", "text": "I've read multiple times that the way to rebuild the credit score is to get a credit card and then have some minor charges on it every month and have them paid in full every month. Old negative events age and this disciplined activity rebuild the score to some not to horrible levels. Now it's true that it's hard to get reasonably good credit cards when your credit score is poor. Yet it's not necessary to have a good credit card for this case - such things as large credit limit are not needed. All that's needed is a long grace period so that there's no interest between the moment a charge is done and a moment the bill is paid in full at the end of the month. Yes, the card may have rather high interest and rather low credit limit, but it doesn't really matter. I've read once on MSN Money that people are offered credit even while they're in the middle of bankruptcy, so it's not impossible to get a credit card in the described situation. Goes without saying that a lot of discipline will be needed to have all this implemented.", "title": "" }, { "docid": "23b0dfdbfbf5dd51940969b729167d69", "text": "non-resident aliens to the US do not pay capital gains on US products. You pay tax in your home country if you have done a taxable event in your country. http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp#axzz1mQDut9Ru but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though.", "title": "" } ]	fiqa
49ff9ebde3610aafdffce6200eb36b37	(Theoretical) Paying credit cards with other credit cards	[ { "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": "49b743482fb6c3ce7ded4219b2149524", "text": "Three things prevent you from doing this: Credit cards generally don't accept other credit cards as payment. You could do this with a cash advance or balance transfer, but Cash advances and balance transfers usually have fees associated with them, negating any reward you might earn. Your card might have a no-fee balance transfer promotion going, but Cash advances and balance transfers generally aren't eligible for rewards.", "title": "" }, { "docid": "394d3185971fd3b7cb4f7f7da47d51fc", "text": "\"A \"\"balance transfer\"\" is paying one credit card with another. You probably get offers in the mail to do this all of the time. As other posters have noted, however, this usually comes with finance fees rather than the rewards that you get for normal purchases because it's written into your credit card agreement as a different class of transaction with different rules. I'm not sure if it's urban legend or true, but I have heard stories that suggest there were some \"\"loop holes\"\" in the earliest credit card reward plans that allowed for something like what you want. I doubt that any plan ever allowed exactly what you've written, but I've heard stories about people buying gift cards from merchants and then using the gift cards to pay their bill. This loop hole (if it ever existed) is closed now, but it would have allowed for essentially infinite generation of rewards at no cost to the cardholder. The banks and credit card companies have a lot of years of experience at this sort of thing now, so the threshold for you finding something that works and conforms with the cardholder agreement is pretty small.\"", "title": "" } ]	[ { "docid": "d1dcb2257dda7f37eb2929dba47371bf", "text": "No. It means each month the total amount you owe goes up by a factor of (1+0.298/12). So if you owed $23K at the beginning of the month, at the end you owe a total of 23K*1.0248=$23,571. Then subtract the $804 you are paying. If you want to think of it in terms of interest and principal, you are paying $571 a month in interest and 233 toward principle, I guess. Paying off debt with a lower interest rate using debt with a higher interest rate is throwing a lot of money away and impoverishing yourself needlessly. Psychology can't get around that. If you want a psychological aid, decide how much you are going to pay toward these debts and have it automatically deducted from your paycheck so you never see it. Make the minimum payment on every debt you have except the one with the highest interest rate. Pay the very most you can toward that. Then when it is paid off, move to the next highest. Do all your spending out of the lowest rate card, or avoid using these credit cards until your financial discipline and resources allow you to pay all credit cards off completely at the end of each month.", "title": "" }, { "docid": "79d2333883311c3f95c3dc99d8619d1d", "text": "Not sure if this is possible... It is possible! It is called a balance transfer card and most of the major credit card companies offer them. It is possible to save a significant amount on interest during the grace period. However... Is this a viable option? Not really. Any card will charge you an upfront fee of 3% to 5% of the balance you are transferring. This really only buys you some time in case you are about to fall behind on payments. For many people it's just a way to shuffle around debt, digging themselves a little deeper into consumer debt with each transfer.", "title": "" }, { "docid": "2f1ba347564bf022cb2ff4282dfce309", "text": "As long as you can be trusted with a Credit Card i find that if you have a setup that uses three accounts: 1. your Credit Card, 2. 2. a high interest internet account (most of these accounts don’t have fees), 3. a savings account. The Method that works for me is: 1st i calculate my fixed monthly bills i.e Rent and utilities and then transfer it into my high interest account. for the month whenever i make a purchase i transfer the money into the high interest account ( this way I can keep a running balance of what money I have left to spend in the month. Then when the Credit Card bill comes I transfer the money out of the high interest account across to pay off the Credit Card ( this way you generate interest on the money which you would have spent throughout the month and still maintain $0 of interest from the Credit Card) over a year you can generate at least enough money in interest to go out for dinner on one of free flights!", "title": "" }, { "docid": "fea990d65f8be890630604a5a90a96da", "text": "JohnFx is more experienced than I am but I have paid off friends cards before. It was as simple as asking them the routing number of the bank that gave them the card and setting up an ACH with their card number. I guess this might be against some banks T&C but the CU I used to carry out the ACH gave me the go ahead as long as I did not dispute the payment later.", "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": "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": "55b3495a0dcadf7185b657e7903d6ca0", "text": "Sure of course you can do balance transfers like this but you are way late to the party and it has gotten to be pretty challenging finding new cards to transfer balances to. Before the current financial crisis in the US you could get enormous amounts of credit (2-5 times a person's annual income) and transfer balances to your bank account to collect interest . There were a bunch of ways to the transfer everything from direct deposit to your bank account to a balance transfer check payable to yourself to overpaying another credit card and requesting a refund. Over paying another account sets off a lot of red flags now days but other methods still work. The financial atmosphere has changed a lot and there are very few available cards with no balance transfer fees or capped fees and the interest rates are a lot lower now so it really isn't worth doing.", "title": "" }, { "docid": "489b2ce0a09363c0ffe52fd41cc93bb1", "text": "\"The best thing to do is to completely pay off one credit card, then apply the left over to the highest interest card. After that, ALL of your expenses that can be put on a credit card, should be put on the one that you just paid off. At the end of the month, pay off a different credit card and the highest interest, and move all your purchasing to that card. Keep going around the circle until you are able to pay them all off. Doing this will be good for your credit score as the debt on the cards will now be \"\"new\"\". If you're really desperate to increase your credit score (e.g. refinancing a house) you can use balance transfers to temporarily make it appear that you have zero debt but it will cost you some money, typically balance transfers cost something like $35 + 2%.\"", "title": "" }, { "docid": "b8487464f8491edcf0108c95c093c548", "text": "You'll have to call your credit card issuer and ask them. Generally, credit cards don't do bank transfers, since its not a bank account per se. But it may be in some cases that there's an underlying bank account over which your credit card is managed, and then they might be able to do something like that. But we won't know, only your card issuer will.", "title": "" }, { "docid": "248a67266daf806c6b4ac027188129d7", "text": "There is almost no reason to get a second credit card - this is a very good arrangement for your creditor but not for you. Credit cards have high rates of interest which you have to pay unless you pay the credit off every month. Therefore, increasing your total credit capacity should not be your concern. Since internet technology lets you pay off your balance in minutes online, there is no reason to have multiple cards in order to avoid running out of a balance. If, on the other hand, you do not pay your existing card off every month, than getting another card can be even more dangerous, since you're increasing the amount of debt you take on. I'd say at most it would make sense for you to grab a basic VISA, since most places do not accept AMEX. I would also considering cancelling the AMEX if you get the VISA, for reasons above.", "title": "" }, { "docid": "f6e28aca217b83085a5143051ab9e18f", "text": "The best solution I've been able to find for this is MoneyWiz, where both are logged into the same sync account.", "title": "" }, { "docid": "736f2a7677a9a8907418e85a8c117afe", "text": "At least in the US, many credit card companies offer statements that categorize your spending on that card and break it down by different categories depending on the merchant category code. Having different cards for each budget category can be a good idea if different cards have different rewards bonuses depending on categories: e.g. this card gives a high percentage back at gas stations, that one at grocery stores, another at restaurants, etc.", "title": "" }, { "docid": "8f725677e51e7edbcb2e94868aebd0b7", "text": "\"Could the individual [directly] use the credit cards for the down-payment? No, not directly. Indirectly, either via Cash Advance or \"\"Balance Transfer\"\" to a bank account with a promotional rate could work, however you may have to show the money sitting in a bank account and ready to go before the loan will be approved, which means the money you took out on the credit cards will show up when they pull your credit (unless you somehow timed it perfectly, and even if you did that you'd be breaking the law by lying on the disclosure statement about your current debts.) If he could, are there any negative consequences from doing so (other than probable high monthly payments on the cards)? Definitely. Let's assume we're talking about the indirect method of cash advance or balance transfer, since that is actually possible. There are 3 things to compare: Final thought: Most of the time the rate you pay on a non-mortgage loan will be higher than that of the mortgage, and furthermore mortgage interest is oftentimes tax deductible, so it would rarely ever make sense to shift would-be mortgage debt into another type of loan, down payment or otherwise.\"", "title": "" }, { "docid": "e286a4b4698d26d497f4deb62bf8b825", "text": "The implied intent is that balance transfers are for your balances, not someone else's. However, I bet it would be not only allowed but also encouraged. Why? Because the goal of a teaser rate is to get you to borrow. Typically there is a balance transfer fee that allows the offering company to break even. In the unlikely event that a person does pay off the balance in the specified time frame the account and is then closed, then nothing really lost. Its hard to find past articles I've read as all the search engines are trying to get me to enroll in a balance transfer. However, about 75% of 0% balance xfers result in converting to a interest being accrued. If you are familiar with the amount of household credit card debt we carry, as a nation, that figure is very believable. To answer your question, I would assume they would allow it. However I would call and check and get their answer in writing. Why? Because if they change their mind or the representative tells you incorrectly, and they find out, they will convert your 0% credit card to an 18% or higher interest rate for violating the terms. Same as if a payment was missed. From the credit card company's perspective they would be really smart to allow you to do this. The likelihood that your family member will pay the bill beyond two months is close to zero. The likelihood that a payment will be missed or late allowing them to convert to a higher rate is very high. This then might lead to you being overextended which would mean just more interest rates and fees. Credit card company wins! I would not be surprised if they beg you to follow through on your plan. From your perspective it would be a really dumb idea, but as you said you knew that. Faced with the same situation I would just pay off one or more of the debts for the family member if I thought it would actually help them. I would also require them to have some financial accountability. Its funny that once you require financial accountability for handouts, most of those seeking a donation go elsewhere.", "title": "" }, { "docid": "bc7685ecec082bcae6aa5d12e0fb7397", "text": "Wow, I had never heard of this before but I looked into it a bit and Mikey was spot on. It seems that if you don't pay attention to the fine print when making credit card purchases (as most of us tend to skip) many companies have stipulations that allow continued charges if they are recurring fees (monthly, yearly, etc.) even after you have cancelled the card.", "title": "" } ]	fiqa
d0e83a3c9478b1316fb24d4a620608fb	collateralized mortgage obligations	[ { "docid": "b5ba4f5f01013f603d2a624e628e7142", "text": "I think the definition of overcollateralization on investopedia will answer this question for you. Namely this part: For example, in the case of a mortgage backed security, the principal amount of an issue may be $100 million while the principal value of the mortgages underlying the issue may be equal to $120 million. The bond is packed with more mortgages than the face value indicates. It's effectively sold at a discount to underlying value.", "title": "" }, { "docid": "631d4d992cf098959782b7118bfdbffb", "text": "Say there are 5 people took loan of $100000 each. Those 5 people work in different jobs and have different capacity to payoff loan. Someone earning $40000 a year has higher risk to default on their payment then someone making $250000 a year. As Bank wants to sell this CDO to investor but how would investor know what the risk factor for this CDO is. This is where rating agency comes in picture. They apparently look at the underlying asset and assign rating to this CDO say AAA, B, AA etc which give investor idea of underlying risk. Problem here is rating agency gets paid by Bank to rate their CDO. So if a rating agency starts rating their CDO to higher risk Bank will go to next agency round the corner to get better rating and agency will lose commission. You can see the problem here. Now if people start struggling to pay loan, bank will not get money and it cannot pay CDO holders. If house that was worth $100000 when CDO was created is devalued to say $50000 today the underlying asset is not worth as much when CDO was sold. That is what happened when market crashed in 2008 and GFC hit.", "title": "" }, { "docid": "4b7f47bdc14e36e7029400f4aa22011d", "text": "Actually, you're missing the key feature of CDOs. Most CDOs use (much to our economic misery, ultimately) a system call tranching. To simplify this idea, I'll make a two tranch example. Suppose I buy mortgages covering a face value of $120,000,000. Because they are subprime, if I just put them in a pool and finance them with bonds, the rating will be lousy and most investors will shun them (at least investors who are safety oriented). What I do is divide them into two tranches. One bond issue is for $100,000,000 and another for $20,000,000. The idea is that any defaulting mortgage comes out of the latter bond issue. I'll probably keep these bonds (the lower tranch). Thus buyers of the first issue are safe unless defaults exceed $20,000,000. Then the rating agencies rate the first issue AAA and it gets snapped up by investors. In a strict sense it is overcollateralized, basically the entire $120,000,000 backs up the first bond issue. In reality, many CDOs had multiple tranches, with the lowest tranch being retained by the underwriters and the other tranches sold as bonds of various ratings.", "title": "" } ]	[ { "docid": "9d7889c564e13973982ade3a7679300e", "text": "What about the debt attached to more recently purchased properties, purchased at the price before the market gets flooded with baby-boomer homes? I'm not an expert in real estate finance, but it sounds like if that downward pressure on prices isn't slight, financial institutions will be taking that risk for anyone who defaults on a mortgage after their property loses a substantial amount of its value. It seems like immigration could play an important role in offsetting this and keeping the prices stable, but that's a politically unpredictable issue to say the least.", "title": "" }, { "docid": "2d4a88aa0a707c1178cbf33bc273c87a", "text": "In the case of regulated, exchange-traded options, the writer of an options contract is obliged to maintain a margin with their broker, and the broker is obliged to maintain a margin with the clearing house. (Institutional writers of options will deal directly with the clearing house.) In the event that the writer is unable to make a daily margin call, the broker (or clearing house) may automatically close out (all of) their positions using existing margin held. If there was a shortfall, the broker (or clearing house) would be left to persue the client (writer) to make good on their obligations. None of this effects the position of the original buyer of the options contract. Effectively, the buyer's counterparty is their broker's clearing house account.", "title": "" }, { "docid": "47e0690aa437e34e2bb0b32aa1e8c5e7", "text": "You're not missing any concepts! It sounds like you are contributing a piece of collateral to the business, and you want to know a fair way to value how much this contribution of collateral is worth. Technically the economic answer would be the difference in interest between a secured loan and an unsecured loan. So for example suppose that the business could get a loan at 17% without the collateral (maybe just on a credit card) but with the duplex as collateral it is able to get the loan at 10.5%. In principle, the value of this collateral is (17% - 10.5%) or 6.5%, because it has allowed the business to pay 6.5% less interest on its loan.", "title": "" }, { "docid": "c6b369eb3203921bb4621f9398674518", "text": "While the issuer of the security such as a stock or bond not the short is responsible for the credit risk, the issuer and the short of a derivative is one. In all cases, it is more than likely that a trader is owed securities by an agent such as a broker or exchange or clearinghouse. Legally, only the Options Clearing Corporation clears openly traded options. With stocks and bonds, brokerages can clear with each other if approved. While a trader is expected to fund margin, the legal responsibility is shared by all in the agent chain. Clearinghouses are liable to exchanges. Exchanges are liable to members. Traders are liable to brokerages. Both ways and so on. Clearinghouses are usually ultimately liable for counterparty risk to the long counterparty, and the short counterparty is ultimately liable to the clearinghouse. Clearinghouses are not responsible for the credit risk of stocks and bonds because the issuers are not short those securities on the exchange, thus no margin is required. Credit risk for stocks and bonds is mitigated away from the clearing process.", "title": "" }, { "docid": "7c3c9107673fd5927e3e38d0ef07c60d", "text": "It was both. CDOs also contributed. Unfortunately, when the bankers kept packing up their loans they lost track of the risk as did the financial institutions offering instruments to deleverage that risk. So when the subprime borrowers began to fail the institutions started getting hit with risk that they hadn't prepared for. Flippers and home owners who used their homes as ATMs then saw their home values crash and it all fell apart. We are seeing some of this again with owners getting more HELOCs but the real concern is with car loans, credit card and student loan debt.", "title": "" }, { "docid": "b04c80d97401129de8b9e30fef4b7a69", "text": ">And how did this cause the MBS to get wiped out, was it a written clause or did they just collapse from the value dropping so hard? It was written into the debt instruments. MBS and CDOs are broken down into tranches with descending priority of claims to the collateral pool. When it comes time for payment, the top tranche gets paid out 100% before the one below it is entitled to a single cent, and so on and so forth. Here's an example of how one might be organized: Foo \| Bar \| text ---\|---\|---- Tranche \| Size \| Credit Rating Class A \| 750MM \| AAA Class B \| 100MM \| AA Class C \| 60MM \| A Class D \| 50MM \| BBB Class E \| 40MM \| Not Rated In this example, lets say that 5% of the loans defaulted, meaning that of the $1B, only $950MM was available to get paid out (assuming no over-collateralization, which most had, but that's besides the point here). The Class A would get the full 750 they're due, the Class B would get the full 100, and the Class C would get the full 60. At this point there is only 40MM left, so the Class D would get 40 of the 50 due (a 20% write-down), and Class E would get nothing, getting completely wiped out. >I dont know what subordination level means Subordination level basically just means how much debt it below it on the capital structure--how much needs to get completely wiped out before any particular tranche starts sharing in the losses. > Did defaults reaching 8% meaning that 8% of loan takers defaulted? Yeah more or less. Technically I think it's that 8% of the value of the mortgages defaulted, but I believe they were set up to be relatively the same size within each instrument, so there's not really much distinction between 8% of the loan takers and 8% of the aggregate value.", "title": "" }, { "docid": "a2c62a6f95a19d4d305afd7ae5426f82", "text": "First, many banks do not keep the loan. Even if they send you a payment notice and process the monthly payment, there's still a good chance the loan itself was packed up and sold to investors. Collateralizing mortgages, in and of itself, is not inherently dangerous. But the loan definitely needs a house behind it. If you found a bank that keeps its loans, it would be a tough sell. You'd be asking them to trust that you've chosen the right number to match up with the house you intend to buy. And then they'd need to have another round of processing to turn this into a loan with normal collateral (i.e. put a lien on the house and tie them together.)", "title": "" }, { "docid": "13b2a8802ba6665a9c292cdf441ffed6", "text": "The reason I don't know of any banks who would offer this to you (even if you held the investment account with their bank) is that there is no upside to the bank. It is a good idea for you, but what would they have to gain from this arrangement? The reason banks require a down payment is underwriting quality. If you can afford a significant down payment, they know that there is a significantly lower chance that you will default. However, if you were to provide an investment account as collateral, you would receive all the upside, and any downside would reduce their collateral as a percent of the amount loaned. This sort of idea could potentially work along the lines of a margin call (ie you have to provide additional capital if your asset value drops), but this would have the effective of leveraging the bank's risk, when their objective is to lower their risk through requiring a down payment. I don't see a reason why the bank would take on the risk that you would need to provide additional capital down the road with no upside for them. Additionally, many banks have backed away from the kinds of zero-down-payment and negative-amortization-ARM loans that got them (or the people they sold them to) in trouble over the last few years in an effort to reduce how much risk they take on. I think that in theory, you'd have to offer a lot more benefit to the bank, and that in practice it's probably a non-starter right now.", "title": "" }, { "docid": "10bc3540ae3ca68042d92856ce19fd30", "text": "What can you give them as security? 1. A fixed/floating charge over assets 2. Negative covenants/Non-subordination agreements 3. Real Mortgage 4. Chattel Mortgage 5. Personal or inter-business Guarantees Essentially a bond is just a debt agreement, it is when you sell standardised bonds over a market that regulation comes into it. Now I am from Australia, so I can't comment on US policies etc...", "title": "" }, { "docid": "b1e85d77351e39748acab3932a4c949f", "text": "I wish this was the case in Canada. I lost about 60k on my home in one year and have to sell now to move for work. In the US I could simply default and the bank takes the loss. In Canada if I default, CMHC pays the bank, then I'm sued by CMHC and stuck with the bad debt. Simply put - here the onus of repayment is on the lender, not the lending institution. It sounds good until you are the one looking at losing your shirt.", "title": "" }, { "docid": "393fe3161714ab5897fec44c4c53f2bb", "text": "The eligibilty of the deduction is based on what the borrowed money is used to purchase and NOT what asset is used as collateral. So at the beginning of your mortgage, 10% of the interest is deductible because the entire loan was used to purchase the condo. But when you withdraw money from the account the additional interest is usually not deductible. It can get confusing with all the withdrawals and payments that will be coming in and out of the account if you happen to use it a lot like a chequing account. An easy example would be if you only paid the interest on the loan... Say you had a $100 000 loan at 5% APY (for simplicity's sake). After one year, you would have paid $5000 interest. $500 of the would be deductible given that your office is 10% of the condo. Then you buy a $1000 couch and continue to only pay interest for the next year. You would have paid $5100 interest... $5000 on money borrowed to buy the condo, and $100 on money borrowed to buy the couch. So you can still only deduct $500. What happens when you pay back $500 against the line of credit? Could you designate that 100% of the money should be applied to the non-deductible interest? Or does it have to applied proportionally? I don't know. I think it'd would be wise to separate the loans somehow. Manulife may even have some tools to facilitate that. However, I wouldn't recommend the Manulife One product. I looked into when I was buying my house two years ago, and at that time it was too expensive. The rate was the same that other banks were charging for a home equity line of credit (which was prime at the time). You can replicate the Manulife One in a cheaper way using a traditional mortgage and a home equity line of credit... The majority of the loan will be the traditional mortgage at (hopefully) a cheap rate. Then you can use your line of credit as the chequing account.", "title": "" }, { "docid": "db66fcbc02aaeae3f5d45af4edbf187c", "text": "\"MBS is a fairly general term \"\"Mortgage Backed Securities\"\" which simply means that the bond is collateralized with mortgages. Pass throughs are a type of MBS that is untranched: all bond holders of the deal are receiving the same interest and principal payments, there is no senior or subordinate class of bonds. Agency passthroughs bond holders receive any principal and interest payments paid by the loans in the pool, minus a slice of the interest payment that pays billing and insurance fees (servicing and guarantee fees, usually a .5% slice of the mortgage interest rate). On agency product (including Ginnies), if a loan defaults it will be bought out of the pool, with the bondholder receiving all of the expected principal and any interest due on the loan. Agency deals with different classes of bonds are usually called REMICs. Passthrough may also be split into principal-only (PO) and interest-only (IO) pieces. There is also a huge forward market in soon-to-be-issued passthroughs called the TBA market. Ginnie Mae has two slightly different programs referred to as Ginnie I and Ginnie II. Ginnie also has commercial and construction loan financial products. Freddie and Fannie have the same type of financial products as Ginnie, but there are differences in the sort of loans that Ginnie has vs the other agencies, as well as subtle minor differences between the contract terms of the securities. Ginnie is also more explicitly guaranteed by the federal government. You may want to look at: http://www.ginniemae.gov/index.asp (especially the \"\"For Investors\"\" and \"\"For Issuers\"\" sections.) Wikipedia's MBS may be more clear than my description: http://en.wikipedia.org/wiki/Mortgage-backed_security#Types\"", "title": "" }, { "docid": "aa249c4470ffeaff144f449eab787ff1", "text": "As per my comments, I think this is up to you and how much work you want to put forth. I do not feel it is trivial to provide documentation even with 90% of it will be the same among lenders. See this question: First answer, third and fourth paragraphs. You need to go as far as understanding the total cost of the loan, you probably need a good faith estimate. I would also compare a minimum of three lenders.", "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": "7d4ba7208ee4504c419e95dd85ca7fd8", "text": "\"There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold. The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.] [or] [We do not service mortgage loans of the type for which you applied. We intend to assign, sell, or transfer the servicing of your mortgage loan before the first payment is due.] [or] [The loan for which you have applied will be serviced at this financial institution and we do not intend to sell, transfer, or assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert the date and select the appropriate language under \"\"Servicing Transfer Information.\"\" The model format may be annotated with further information that clarifies or enhances the model language.]\"", "title": "" } ]	fiqa
b9e2a958fa245c94c2af718905fe273b	In Australia, how to battle credit card debt?	[ { "docid": "7acbec991c7dad132413d88814d45747", "text": "To confirm: you say you have credit card debt of $18,000 with min. repayment of $466.06, plus on top of this you are also paying off a car loan and another personal loan. From my calculations if your monthly interest on your credit card is $237, the interest on your credit card should be about 15.8% p.a. Is this correct? Balance Transfer If you did a balance transfer of your $18,000 to a new credit card with 0% for 14 months and keep your repayments the same ($466) you would have saved yourself a bit over $3020 in interest over those 14 months. Your credit card balance after 14 months would be about $11,471 (instead of $14,476 with your current situation). If your interest after the 14 months went back to 15.8% you would be able to pay the remaining $11,471 in 2.5 more years (keeping repayments at $466), saving 10 months off your repayments and a total of $4,781 in interest over 3 years and 8 months. The main emphasis here is that you are able to keep your repayments at least the same so you are able to pay off the debt quicker, and that your interest rate on the new credit card after the 14 months interest free is not more than your current interest rate of 15.8%. Things you should be careful about if you take this path: Debt Consolidation In regards to a Debt Consolidation for your personal loan and credit card (and possibly your car loan) into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. As you already have you credit card and personal loan with CBA talk to them to see what kind of deal they can give you. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians.", "title": "" }, { "docid": "50cf006c613b501efd048b5b2c44065e", "text": "\"Victor addressed the card issue with an excellent answer, I'd like to take a stab at the budget and income side. Your question clearly stated \"\"I am left with no extra money\"\" each month. Whenever I read such an assertion, I ask the person, \"\"but surely, X% of people in your country get by on a salary that's 95% of yours.\"\" In other words, there's the juggling of the debt itself, which as Victor's math shows, is one piece of the puzzle. The next piece is to sift through your budget and find $100/mo you spend that could be better spent reducing your debt. Turn down the temperature in the winter, up in the summer, etc. Take lunch to work. No Lattes. Really look at the budget and do something. On the income side. There are countless ways to earn a bit of extra money. I knew a blogger who started a site called \"\"Deliver away Debt.\"\" He told a story of delivering pizza every Friday and Saturday night. The guy had a great day job, in high tech, but it didn't lend itself to overtime, and he had the time available those two evenings to make money to kill off the debt he and his wife had. Our minimum wage is currently just over $7, but I happened to see a sign in a pizza shop window offering this exact position. $10/hr plus gas money. They wanted about 8 hours a weekend and said in general, tips pushed the rate to well over $15/hr. (They assumed I was asking for the job, and I said I was asking for a friend). This is just one idea. Next, and last. I knew a gal with a three bedroom small house. Tight budget. I suggested she find a roommate. She got so many responses, she took in two people, and the rents paid her mortgage bill in full. Out of debt in just over a year, instead of 4+. And in her case, no extra hours at all. There are sites with literally 100's of ideas. It takes one to match your time, interest, and skill. When you are at $0 extra, even finding $250/mo will change your life.\"", "title": "" }, { "docid": "af3641f3d25e8358a94c985426f5a8d3", "text": "JoeTaxpayer mentioned a budget. Staying on top of your spending will be the result of getting out from under this debt. You may have Excel on your PC now, if not Open Office is free which has a program that handles finance applications. There is budgeting software for free out there. Youneedabudget.com is a lot better but cost a little. It keeps me from spending money I don't necessarily have as I can see a result month to month from having outflow of cash. As Joe mentioned - no more lattes in the near future which will help you pay off this debt which will be a bigger relief than a fashion statement. Having used budgeting software and attempted to stay in budget has been useful. I still over spend a little on food and can see the ramifications immediately. In short, try creating and sticking to a budget no matter the urge. As far as insolvency is concerned I'd struggle with paying it down before I do that. The thought passed my mind but I bit the bullet. DO NOT walk away from the debt however. That isn't a good idea Either. Budget and bite.", "title": "" }, { "docid": "e3e14562a61fcaed88af1212ad4326d7", "text": "Short-term, getting a balance transfer will help. It'll reduce the interest you pay. You can also reduce the interest you pay on your cars if you are able to consolidate your debt into a personal loan. To your question about debt consolidation companies, as far as I know, that's all they do. However, long-term, there's only two ways to stay on top of debt: increase your income, or reduce your spending. Basically, if you can't or won't get a raise or a job that pays more (or a second job), you need to cut back on your spending. You might need to do something radical, like move somewhere with cheaper rent (as long as increased travel costs doesn't offset the saving). But you'll be much better off in the long run if you step back and take a look at your situation now, and make adjustments accordingly.", "title": "" } ]	[ { "docid": "2f8ccf2ef79c578fee2b40d561ed7dd4", "text": "I've kind of been there myself. I stretched my finances for the deposit on a house, and lived off my credit card for a few months to build up what I was short on the deposit. Add some unexpected car repairs, and I ended up with £10k on the card. The problem I had then was that interest on the card ran at around 20%, and although I could meet the interest payments I couldn't clear the £10k. I simply went and talked to my bank. In the UK there are some clear rules about banks giving customers a chance to restructure their debts. That's the BANK doing it, not some shady loan-shark. We went through my finances and established that in principle it was repayable. So I got a 2-year unsecured loan at around 5%, cleared the card, and spent the next 2 years paying off a loan that I could afford. My credit score is still aces. Forget the loan-sharks. Talk to your bank. If they're crap, talk to another bank. If no bank is going to help you, consider bankrupcy as per advice above. Debt restructuring companies are ALWAYS a con, no exceptions.", "title": "" }, { "docid": "efd7058dab828ad584a679eedb75a821", "text": "\"You will definitely want to look into odd jobs, if possible. I'm sure this sounds patronizing, but the biggest problem you have right now is your credit card debt, most likely at very high interest rates. You said you have enough to \"\"make your payments\"\", but you didnt specify what that meant. Are you making the minimum payments only? If you're only making the minimum payments, you'll want to really find SOME way to scrounge even an extra $50 together each month (odd jobs specifically. You might also want to try mturk, where you get paid to fill out surveys). You see, by making only the minimum payment, you are actually probably only putting a few dollars at all to principal. Most of the rest went to last month's interest charges. The best thing to do is lay out each card and what the interest rate is. You have 9 of them, so this seems like a bit of a task. The first step is to identify which card has the HIGHEST interest rate. There are two things you can do then. You either throw every extra penny you have at that specific card, OR, you find some way to move that balance to your LOWEST interest rate card. In all cases, your goal is to move debt from the high-interest rate cards to the low interest rate cards. Once you can't move debt around anymore, your goal then is to pay only the minimums on all the low-interest rate cards, and put EVERY SINGLE SPARE PENNY you have towards the higher ones. If you don't mind me asking, can you outline all 9 cards and how much you owe on each, adn what each's interest rate is? It's possible you don't know, and that's problem one. If you don't know the interest rate of each card, then you don't even really know which card you should be paying off first. Edit: How miuch do you spend on food a month? If you were really really determined to get over this, you'd basically just eat rice and beans, or buy nearly-bad bananas and eggs. These are the cheapest foodstuffs you can find.\"", "title": "" }, { "docid": "c08b8d8c7c8e00e387c0743a7a55121f", "text": "You can complain to the Financial Ombudsman Service in Australia. I've never used them in particular but generally organizations will respond much faster once you get the ombudsman involved. However, since you say they've now kept their promises, the ombudsman is unlikely to do much more than listen sympathetically.", "title": "" }, { "docid": "c8d531ed5a57438f7f1ae3c5ea45717b", "text": "You have made the most important first step by starting to think about your money, well done. Firstly pay of all credit cards as quickly as you can and start to live within your means. Until you have paid of your credits cards don’t spend any money of unnecessary items, e.g. Once your credit cards are paid off you can start living a more normal life. Each time you spend money you need to ask yourself: Is this worth more to be then being able to buy a new house in a few years time? You should be able to save at least half the amount you were paying of the credit card each mouth and still leave a reasonable life, so setup a standing order at the start of the month to your saving account. Given your age you are like to get promoted and hence have increased pay or get increments for each year of service. Therefore Every time your pay goes up, set up a standing order to transfer at least half of the pay increases to a saving account. You did not have this money before, so you will not miss it when you save it. In the long term, you should be able to keep your car until it is about 15 years old, so will not have the cost of buying another car. Therefore once the car loan is over, you can save that money as well.", "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": "e5488cb152533b6023509b909b183eec", "text": "If you're interested in slower scale changes, one option is to use indexes that value a common commodity in different currencies such as the Big Mac Index. If a Big Mac costs more in AUD but stays the same in USD, then AUD have gone up.", "title": "" }, { "docid": "5bf12bcfb70c606a3519467ff450d9e2", "text": "\"In the UK there is a non-profit called the Citizen's Advice Bureau which provides free advice to people on a wide range of subjects, but including debt and budgeting. Consumer Credit Counselling Service provides explicit help but again, in the UK. A search for \"\"volunteer debt counsellor\"\" reveals a whole host of organizations that do that, but almost all based in the UK or Canada or Australia. The US seems not to be well provided with such organizations. This page advises people to volunteer as a debt counsellor, but gives no specifics of organizations, just \"\"Volunteer at local county community centers, churches and agencies. Your local faith-based organization might be a good place to start, even if you are not a member. Regrettably a search for \"\"free debt counselling\"\" produced a similar list of non-profits in UK and Canada, but mainly companies peddling consolidation loans in the US.\"", "title": "" }, { "docid": "4a5e939bbdb2af0a83c4b7ba97595017", "text": "Unfortunately not. Even if the credit card balance is positive (i.e. customer has overpaid the credit card account), you cannot withdraw cash (for free) - as any cash withdrawal is subject to 12.9% interest - even if repaid in full at the end of the month! The clarity credit card is one of the best cards for overseas spending, as its load free (no fees for purchases abroad) and it gives near perfect exchange rates. If your balance is positive, you start at £0, then fund that credit card account from your bank account £500. You can then spend on your credit card, and when your next bill is due at the end of the month - they will use that extra £500 sitting in your account first, and ask for the remainder from you. i.e. scenario1: scenario 2: It is better in my opinion, to set up a direct debit to always clear out the full amount on your credit card. That way, you have cash in your bank account for emergencies (getting £500 back from a credit card will take a few days to process as opposed to having the ability to withdraw cash from the cashpoint 24/7). And once the direct debit is paid automatically at the end of the month, there are no fees - voila your credit card is almost like a debit card, spend on it when you like, it gets paid automatically, no hassle, no worries. This approach does take a careful mindset though, as you need to know your credit limits and also you need to ensure your bank account has enough to pay off the direct debit at the end of the month. Otherwise those darn fees will get you (and hurt your credit rating). For cash spending, you will want to either take cash with you (check online here for best rates & get the money well in advance to avoid fees). Also in some countries the exchange rate is better there, than in the UK, google will help you here. If you dont like the idea of carrying large sums of cash with you can use a prepaid card like CaxtonFX, which is one of the better ones out there. The other well known ones are FairFX and Travelex Cash Passport.", "title": "" }, { "docid": "a78df6a58431f69c67fe4578460e0b4d", "text": "In a perfect the world, the most ideal solution would be to find a way to pay back all of your debt so that your credit will not be affected any further. Unfortunately, it does not work this way most of the time. Debt settlement is where you work with a creditor to settle your a credit card debt for less than the full amount owed. This could be a very viable solution for you instead of filing for bankruptcy. However, there are many scams out there when it applies to debt settlement so you must tread carefully. Debt settlement can only occur when you're behind on your payments. If you are currently paying off your payments successfully, the creditor has no obligation to settle when they think you should be able to pay it fully back.", "title": "" }, { "docid": "5c268fcbe2a1e81abbd9f972e63cda43", "text": "You can do this if you merge Credit Cards with personal loans. You will have to pay 1 upfront fee but you can bounce a balance between 4 CCs almost indefinitely if you do it right. You have to have good credit though.", "title": "" }, { "docid": "1dcb51eea28cb87232abb8c4bf7876e2", "text": "\"My advice: IMO, all things being somewhat equal, you should always try to retire debts as quickly as possible in most cases, so start with the small cases. The method of calculating credit card interest is written on the statement. Usually it is \"\"average daily balance method\"\". Don't sweat the details. Just pay the things off.\"", "title": "" }, { "docid": "7eed84ad4b80fec1858f73bf62327c7e", "text": "\"It can be difficult when all your disposable income is spoken for. Your options depend on how good your credit is and how flexible your expenses are. I don't have all the answers without more details (possibly not then). However, couple of points of advice: Paying off that credit card debt (and not adding any more to it) is your #1 priority. You should make minimum payments to every other debt until you have done that because the interest on it will kill you in the mean time. It is always optimal to pay the maximum to your highest interest debt and minimum to all other debts. 11% doesn't sound very good on your house loan. You may want to consider refinancing. That is, if you can get a lower rate. You may also want to get a longer term loan (if you have enough discipline to use the extra income to actually pay off your credit card and then the put it toward the house when the cards are paid off). Look at options to increase your income, at least temporarily. Second jobs and such. When your finances are more in order, you can back off. The debt \"\"trap\"\" is behavioral. We humans tend to increase our spending until we can't any more. But the reason we can't spend any more is that we have increased our debt until we have no flexible income. Then we are stuck for a long time and have few options. The only way out (long term) is to change our habits so that we don't increase spending each time we pay down a debt or get an increase to our income. Financial discipline is the only way to have financial security. Almost always the first step is to pay off credit cards and stop maintaining a balance (always pay off every card at the end of each month). Then start paying off other debts from highest interest rate to lowest. This is a hard challenge and one most of us face at some point in our lives. Good luck!\"", "title": "" }, { "docid": "3ade3fe075a328cb9ac02c1c950bfead", "text": "Credit scores in the U.S. are entirely based on information contained in your credit report. The details of your credit card transactions, such as where your individual purchases are from, the amount of individual purchases, refunds, chargebacks (successful or failed), etc. do not appear on your credit report. Therefore, they can have no impact on your credit score. According to creditsavvy.com.au, credit scores in Australia are based on similar information: the information in your credit history, credit profile, and credit applications. I don't see anything that would suggest that the details of your transactions would affect your credit score.", "title": "" }, { "docid": "e044e38a50bd0167f31b7cc9d61a5946", "text": "Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year. Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit cards, you should consider paying off as much of it as possible. In your case you may want to keep only some small amount (maybe $500, maybe $1000, maybe $100) in cash for emergencies. Paying off your high interest debt should be a top priority for you. You may want to look on this site for help with budgeting, also. Typically, being in debt to credit card companies is a sign of living beyond your means. It costs you a lot of money in the long run.", "title": "" }, { "docid": "c6c5cceac93492de6f289f5f98110cd9", "text": "The first thing you should do, and should have been doing all this time if you weren't, is to take the money you would've paid in the payment plan and set it aside in a separate savings account. If your plan was 2 years, $65 a month, then set that aside, now. That will allow you to be in a better negotiating position when this is finally resolved. It's also possible this takes two years to be resolved - in which case you'll be in position to pay the debt off in full at that point! It's also possible at some point in the future you'll be offered to settle for half or something like that, at which point if you've saved several months of payments that might be more practical to do. As far as what to do about the charges being removed, unless you have a specific reason for believing they're invalid, that's probably impossible. You could go to the Public Service Commission (outlined in this article about making complaints about overcharges from ConEd); it seems like it's probably too late for that, honestly, but who knows. If you'd made more of an effort at the time, it's possible you could've disputed them back then with PSC. And, as far as what to do with requiring written payment plans: absolutely, 100%. I would try to find out why you're not getting the plans. Do they have the wrong address, perhaps? Or is your mail sometimes poorly delivered? Ask them to send it via certified mail (you may be charged a few dollars for this), or ask them to e-mail you a copy while you're on the phone with them (my preferred option). Bill collectors like getting their money, so they ought to help you out with this.", "title": "" } ]	fiqa
bf9fe8456c96b18747e811aa2fa1a999	Cash or Bonds (UK)	[ { "docid": "8bcb299542d5b53e6cf270068befe62c", "text": "The 'appropriate' amount of cash/bonds to hold will be largely a matter of opinion, but here are the general reasons why having at least some is a good idea: Cash is very liquid, and bonds are often mostly liquid. This means you can access them very quickly, without taking on losses. To get the most liquidity out of your bonds, you can do what is called 'laddering'. This means that you take out different bond amounts with different maturity dates, and periodically renew them on a schedule, so that you always have some bonds maturing, which you can access without paying an interest penalty. You can look this term up online for more details. Cash and bonds are low risk. If you have absolutely no low-risk assets, then in the event of, say, a market crash, you may have no savings to fall back on. By owning some bonds, and some equities, you are able to earn a modest return, without being too risky. However, note that some bonds are just as risky as equities - any bond which pays an abnormally high interest rate does so because the entity backing the repayment (government, company, whomever) is thought to not be guaranteed to be able to do so. The 25% figure given by your author is his opinion on the appropriate mix of cash/bonds to equities, but there are many views on the matter. Consider that any 'rule of thumb' in personal finance should be for general consideration only.", "title": "" } ]	[ { "docid": "fc1f250f0736f98b454bf637e14291e7", "text": "As average house prices continue to rise, almost 40% of homes in the UK are purchased with cash. Stage 1 – Finding a property you can afford Stage 2 – Making an offer Stage 3 – Organise a solicitor and surveyor Stage 4 – Finalising the offer and mortgage (in your case, cash with proof of funds, balance due at closing) Stage 5 – Exchanging contracts Stage 6 – Completion and final steps You don't need to prove where the money came from but, as you have said that you are a cash buyer, you do need to be able to prove that you have the cash to buy the house. So, assuming you have the money in an account with a bank or building society, you should be able to satisfy your solicitors by showing them a recent bank statement or passbook which clearly shows that you have whatever amount it is in cash.", "title": "" }, { "docid": "ac9204147d2b0e164575c241e0977988", "text": "In order to compare the two, you need to compare your entire portfolio, which is not just how much money you have, but how much stock. In both scenarios, you start with (at least, but let's assume) £20 and 0 stock. In your scenario, you buy 10 shares, leaving you with £0 and 10 shares. You then sell it at £1.50/share to cut your losses, leaving you with £15 and 0 shares. That concludes the first transaction with a net loss of £5. In a second transaction, you then buy 10 shares again at £1/share, leaving you with £5 and 10 shares. You are still down £15 from the start, but you also still have 10 shares. Any further profit or loss depends on what you can get for those 10 shares in the future. In a short sale, you borrow 10 shares and sell them, leaving you with £40 (your initial £20 plus what you just made on the short sale) and -10 shares of stock. At the end of the contract, you must buy 10 shares to return them; you are able to do so at £1.50/share, leaving you with £25 and 0 shares. At this point, your exposure to the stock is complete, and you have a net gain of £5.", "title": "" }, { "docid": "e92639dfe3b96ba834caa1456ea2c9d2", "text": "Cash would be the better alternative assuming both stocks take a major hit in ALL categories AND the Fed raise rates at the same time for some reason. Money market funds that may have relatively low yields at the moment would likely be one of the few securities not to be repriced downward as interest rates rising would decrease bond values which could be another crash as I could somewhat question how broad of a crash are you talking here. There are more than a few different market segments so that while some parts may get hit really hard in a crash, would you really want to claim everything goes down? Blackrock's graphic shows in 2008 how bonds did the best and only it and cash had positive returns in that year but there is something to be said for how big is a crash: 20%, 50%, 90%?", "title": "" }, { "docid": "21d0c3dcd64ed588f9aa8af50c2612a9", "text": "An ISA is a much simpler thing than I suspect you think it is. It is a wrapper or envelope, and the point of it is that HMRC does not care what happens inside the envelope, or even about extractions of funds from the envelope; they only care about insertions of funds into the envelope. It is these insertions that are limited to £15k in a tax year; what happens to the funds once they're inside the envelope is your own business. Some diagrams: Initial investment of £10k. This is an insertion into the envelope and so counts against your £15k/tax year limit. +---------ISA-------+ ----- £10k ---------> \| +-------------------+ So now you have this: +---------ISA-------+ \| £10k of cash \| +-------------------+ Buy fund: +---------ISA-------+ \| £10k of ABC \| +-------------------+ Fund appreciates. This happens inside the envelope; HMRC don't care: +---------ISA-------+ \| £12k of ABC \| +-------------------+ Sell fund. This happens inside the envelope; HMRC don't care: +---------ISA-------+ \| £12k of cash \| +-------------------+ Buy another fund. This happens inside the envelope; HMRC don't care: +---------ISA-----------------+ \| £10k of JKL & £2k of cash \| +-----------------------------+ Fund appreciates. This happens inside the envelope; HMRC don't care: +---------ISA-----------------+ \| £11k of JKL & £2k of cash \| +-----------------------------+ Sell fund. This happens inside the envelope; HMRC don't care: +---------ISA-------+ \| £13k of cash \| +-------------------+ Withdraw funds. This is an extraction from the envelope; HMRC don't care. +---------ISA-------+ <---- £13k --------- \| +-------------------+ No capital gains liability, you don't even have to put this on your tax return (if applicable) - your £10k became £13k inside an ISA envelope, so HMRC don't care. Note however that for the rest of that tax year, the most you can insert into an ISA would now be £5k: +---------ISA-------+ ----- £5k ---------> \| +-------------------+ even though the ISA is empty. This is because the limit is to the total inserted during the year.", "title": "" }, { "docid": "6ea1a50c2be082b1898f0ac78a08715d", "text": "In the US, you would probably look at a certificate of deposit (CD). I imagine there is a similar financial product in the UK, but don't know first hand. I think it is wise to be risk averse in this situation, but be aware that your interest rate will be dismal for guaranteed returns.", "title": "" }, { "docid": "aca4fb3b0682042c936dbfe844e5052f", "text": "Well you have three main options in my opinion. For cash, or any assets you can convert to cash, you could purchase bonds with a maturity date close to what you are looking to lock your funds up for. While you could sell these on a secondary market, admittedly - however you have a justification you can provide to yourself as to why you cannot sell them. Fixed term deposits often have poor interest rates, but if you ask to withdraw your money early you often forfeit all of the interest you would have gained. While your money would not be locked up, it keeps it further out of your reach, just like bonds. Every step further away from your bank account the funds get, the less likely you are to surrender to giving away money that is rightfully yours. It comes with the added advantage of typically high-returns. Trust funds can be set up with anyone as the beneficiary, and provide legal barriers so long as the beneficiary isn't also the executor. While it can be expensive to do so, you could hire a lawyer who specialises in estate law to set up a trust fund you are the beneficiary of, which has stipulations as to how and when assets can be released. I didn't include this as one of the main three, because it doesn't allow you to specify exactly when funds are released to you, but in many countries (including the US) you have special tax advantaged retirement accounts, where funds are locked away until you retire. However, it is unfortunate you even need to think about this. Another thing to consider is that if people start pressuring you for money, you should cut them out of your life.", "title": "" }, { "docid": "52a51f7367d454bf22824007f02cd520", "text": "The main difference is that the ISA account like a Cash ISA shelters you from TAX - you don't have to worry about Capital Gains TAX. The other account is normal taxable account. With only £500 to invest you will be paying a high % in charges so... To start out I would look at some of the Investment Trust savings schemes where you can save a small amount monthly very cost-effectively - save £50 a month for a year to see how you get on. Some Trusts to look at include Wittan, City Of London and Lowland", "title": "" }, { "docid": "84e47b81c35727ec73c7b526568e29b0", "text": "Buy a fund of bonds, there are plenty and are registered on your stockbroker account as 'funds' rather than shares. Otherwise, to the individual investor, they can be considered as the same thing. Funds (of bonds, rather than funds that contain property or shares or other investments) are often high yield, low volatility. You buy the fund, and let the manager work it for you. He buys bonds in accordance to the specification of the fund (ie some funds will say 'European only', or 'global high yield' etc) and he will buy and sell the bonds regularly. You never hold to maturity as this is handled for you - in many cases, the manager will be buying and selling bonds all the time in order to give you a stable fund that returns you a dividend. Private investors can buy bonds directly, but its not common. Should you do it? Up to you. Bonds return, the company issuing a corporate bond will do so at a fixed price with a fixed yield. At the end of the term, they return the principal. So a 20-year bond with a 5% yield will return someone who invests £10k, £500 a year and at the end of the 20 years will return the £10k. The corporate doesn't care who holds the bond, so you can happily sell it to someone else, probably for £10km give or take. People say to invest in bonds because they do not move much in value. In financially difficult times, this means bonds are more attractive to investors as they are a safe place to hold money while stocks drop, but in good times the opposite applies, no-one wants a fund returning 5% when they think they can get 20% growth from a stock.", "title": "" }, { "docid": "f4bd63cfd882adcf0dc880fd46b13a69", "text": "Depending what your timeframe preferences are, here are a couple of options: Stock indexes: as per Fool's investing guide, historically this had the highest return / risk ratio. On a 5-year horizont, with no extra work, this seems the best option. Premium bonds, similar to most cash ISAs currently available, have a rather rubbish ROI ATM (~3-5% AER at max) Invest it into yourself, in the form of personal development, classes & courses, or starting a business. Disadvantage: this also will carry an opportunity cost in the form of your time. On a longer timeline, however, if this improves your market value only by 1%, that pays extreme dividends over the rest of your carrier. With a single grand at hand, I'd definitely recommend going for option 3 -considering yourself as an investing vehicle, and ask yourself: how can you best improve stakeholder value? You'd be surprised at the kind of results a single grand can make.", "title": "" }, { "docid": "2b1a8a2a609b0f853660a8786305f123", "text": "just pick a good bond and invest all your money there (since they're fairly low risk) No. That is basically throwing away your money and why would you do that. And who told you they are low risk. That is a very wrong premise. What factors should I consider in picking a bond and how would they weigh against each other? Quite a number of them to say, assuming these aren't government bonds(US, UK etc) How safe is the institution issuing the bond. Their income, business they are in, their past performance business wise and the bonds issued by them, if any. Check for the bond ratings issued by the rating agencies. Read the prospectus and check for any specific conditions i.e. bonds are callable, bonds can be retired under certain conditions, what happens if they default and what order will you be reimbursed(senior debt take priority). Where are interest rates heading, which will decide the price you are paying for the bond. And also the yield you will derive from the bond. How do you intend to invest the income, coupon, you will derive from the bonds. What is your time horizon to invest in bonds and similarly the bond's life. I have invested in stocks previously but realized that it isn't for me Bonds are much more difficult than equities. Stick to government bonds if you can, but they don't generate much income, considering the low interest rates environment. Now that QE is over you might expect interest rates to rise, but you can only wait. Or go for bonds from stable companies i.e. GE, Walmart. And no I am not saying you buy their bonds in any imaginable way.", "title": "" }, { "docid": "77d1da841dba32993180a71e1fdc9e29", "text": "\"20-year Treasury Bonds are not equivalent to cash, not even close. Even though the bonds are backed by the full faith and credit of the U.S. Government, they are long-term debt and therefore their principal value will fluctuate considerably as market interest rates change. When interest rates rise, the market value of 20-year bonds will drop, and drop more than shorter-term bonds would. Your principal is not protected in the short term. Principal is only guaranteed returned at the 20-year maturity of those bonds. But, oops, there is no maturity on the 20-year bond ETFs because every year the ETF rolls the 19-year positions into new 20-year positions! ;-) For an \"\"equivalent to cash\"\" piece of a portfolio, I'd want my principal to be intact over the short term, and continually reinvested at the higher short-term rates as rates are rising. Reinvesting at short-term rates can be an inflation-hedge. But, money locked in for 20-years is a sitting duck for inflation. Still, inflation aside, why do we want our \"\"equivalent to cash\"\" position to be relatively liquid and principal-protected? When it comes time to rebalance your portfolio after disastrous equity and/or bond returns, you've got in your cash component some excess weighting since it was unaffected by the disastrous performance. That excess cash is ready to be deployed to purchase equities and/or bonds at the lower current prices. Rebalancing from cash can add a bonus to your returns and smooth volatility. If you have no cash component and only equities and bonds, you have no money to deploy when both equities and bonds are depressed. You didn't keep any powder dry. And, BTW, I would personally keep a bit more than 3% of my powder dry. Consider a short-term cash deposit or good money-market fund for your \"\"equivalent to cash\"\" position.\"", "title": "" }, { "docid": "b7228ac919920c2b403555de25be31a4", "text": "If you are really worried your best bet is to move all your cash from Sterling into a foreign currency that you think will be resilient should Brexit occur. I would avoid the Euro! You could look at the US Dollar perhaps, make sure you are aware of the charges for moving the money over and back again, as you will at some stage probably want to get back into Sterling once it settles down, if it does indeed fall. Based on my experience on the stock markets (I am not a currency trader) I would expect the pound to fall fairly sharply on a vote for Brexit and the Euro to do the same. Both would probably rebound quite quickly too as even if there is a Brexit vote it doesn't mean the UK Government will honour the outcome or take the steps quickly. I AM NOT A FINANCIAL ADVISOR AND HAVE NO QUALIFICATIONS AS SUCH ", "title": "" }, { "docid": "2dae3046106ad0fb5fd19585130bbb51", "text": "cost of carry is a confusing term to use but this is what i was given to work with then again, once you factor in interest rate risk and default risk (if you do), what is a better term? it's not just cost of capital at that pt", "title": "" }, { "docid": "589b41b03144ba911cc102a2020e1f09", "text": "Just to add to @duffbeer703 comment, additionally, the cash value is NOT part of the death benefit. The policy is intended to grow the cash value to the point where it matches the death benefit and then it 'matures' and you get the cash. My point being, is that since they don't give you both, you are really transferring the reponsiblity from them to you over time, your savings (that you lose) becomes part of the death benefit and they supliment it with less and less over the years so that it would equal the death benefit. @duffbeer703 nailed it right on the head, buy term and invest the difference and once you've got your savings built, really the need for insurance isn't there any longer (if you've got 1/2 million saved, do you really need insurance?)", "title": "" }, { "docid": "747be3bebcd79dbf81948b93a3a6ae4b", "text": "\"One possibility you may consider is to keep all of your funds in the stocks and shares ISA while investing that proportion you wish to keep in cash into a tradeable \"\"Money Market\"\" ETF. A Money Market ETF will give you rates comparable to interest rates on cash and at the same time it will give you \"\"instant access\"\" subject to normal 3 day settlement of equities. This is not exactly a perfect solution. Most Money Market ETFs will pay monthly dividends, so depending on your timing, you may have to give up some interest. In the worst case, if you were to sell the day before going ex-dividend, then you would be giving up a months interest. In the best case, if you were to sell on the day of going ex-dividend, you would be giving up no interest.\"", "title": "" } ]	fiqa
6731ec21966b93b1b25ca4a43c9fa08d	car purchase loan versus car collateral loan	[ { "docid": "c80690c383f8d27b8c6dca8f9e944273", "text": "Generally speaking personal loans have higher rates than car loans. During fairly recent times, the market for car loans has become very competitive. A local credit union offers loans as low as 1.99% which is about half the prevailing mortgage rate. In comparison personal loans are typically in the 10-14% range. Even if it made mathematical sense to do so, I doubt any bank would give you a personal loan secured by a car rather than car loan. Either the brain would not work that way; or, it would simply be against company policy. These questions always interest me, why the desire to maximize credit score? There is no correlation between credit score and wealth. There is no reward for anything beyond a sufficiently high score to obtain the lowest rates which is attained by simply paying one's bills on time. One will always be limited by income when the amount able to borrow is calculated regardless of score. I can understand wanting to maximize different aspects of personal finance such as income or investment return percentage, etc.. By why credit score? This is further complicated by a evolving algorithm. Attempts to game the score today, may not work in the future.", "title": "" } ]	[ { "docid": "67c1f9a423ceb1f692cfb733a892d559", "text": "From personal experience (I financed a new car from the dealer/manufacturer within weeks of graduating, still on an F1-OPT):", "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": "9aa425c9c92adc20f4795526b3aebf2a", "text": "Very good answers as to how 0% loans are typically done. In addition, many are either tied to a specific large item purchase, or credit cards with a no interest period. On credit card transactions the bank is getting a fee from the retailer, who in turn is giving you a hidden charge to cover that fee. In the case of a large purchase item like a car, the retailer is again quite likely paying a fee to cover what would be that interest, something they are willing to do to make the sale. They will typically be less prone to deal as low a price in negotiation if you were not making that deal, or at times they may offer either a rebate or special low to zero finance rates, but you don't get both.", "title": "" }, { "docid": "9e814218015e61c473d66135a4cfd495", "text": "I agree with the deposit part. But if you are buying a new car, the loan term should meet the warranty term. Assuming you know you won't exceed the mileage limits, it's a car with only maintainence costs and the repayment cost at that point.", "title": "" }, { "docid": "14fbd60f61528b74f681f6033acfc003", "text": "The risk besides the extra interest is that you might be upside down on the loan. Because the car loses value the moment you drive off the lot, the slower you pay it off the longer it takes to get the loan balance below the resale value. Of course if you have a significant down payment, the risk of being upside down is not as great. Even buying a used car doesn't help because if you try to sell it back to the dealer the next week they wont give you the full price you paid. Some people try and split the difference, get the longer term loan, but then pay it off as quickly as the shorter term loan. Yes the interest rate is higher but if you need to drop the payment back to the required level you can do so.", "title": "" }, { "docid": "c6a6d74cd53d39bcc7907a768865a60e", "text": "Go to your local bank or credit union before talking to a dealership. Ask them if putting both names on the loan makes a difference regarding rates and maximum loan you qualify for. Ask them to run the loan application both ways. Having both names on the loan helps build the credit of the spouse that has a lower score. You may find that both incomes are needed for a car loan if the couple has a mortgage or other joint obligations. The lender will treat the entire mortgage payment or rent payment as a liability against the person applying for the loan, they won't split the housing payment in half if only one name will be on the car loan. Therefore sometimes the 2nd persons income is needed even if their credit is not as good. That additional income without a significant increase in liabilities can make a huge difference regarding the loan they can qualify for. Once the car is in your possession, it doesn't matter who drives it. In general the insurance company will put both spouses as authorized drivers. Note: it is almost always better to ask your bank or credit union about a car loan before going to the dealership. That gives you a solid data point regarding a loan, and removes a major complexity to the negotiations at the dealership.", "title": "" }, { "docid": "6d864190cdecc0a7b03e663b49b5604b", "text": "It's my understand that leasing is never the better overall deal, with the possible exception of a person who would otherwise buy a brand new car every 2 or 3 years, and does not drive a lot of miles. Note: in the case of a company car, Canadian taxes let you deduct the entire lease payment (which clearly has some principal in it) if you lease, while if you buy you can only deduct the interest, and must depreciate the car according to their schedule. This can make leasing more attractive to those buying a car through a corporation. I don't know if this applies in the US. The numbers you ran through in class presumably involved calculating the interest paid over the term of the loan. Can you not just redo the calculation using actual interest and lease numbers from a randomly chosen current car ad? I suspect if you do, you will discover leasing is still not the right choice.", "title": "" }, { "docid": "b2a2594b75ac36caa7ddca5ccd0290ae", "text": "\"A car loan might be considered \"\"good\"\" debt, if the following circumstances apply: If, on the other hand, you only qualify for a subprime loan, or you're borrowing to buy a needlessly expensive car, that's probably not a good idea.\"", "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": "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": "a453b102c970df29de645d3513f34325", "text": "\"Care to elaborate? It is my understanding that any asset can be rehypothecated at least in theory. By saying these car loans \"\"aren't\"\" rehypo'd, do you mean this is not the practice, or that there is a law/regulation prohibiting it?\"", "title": "" }, { "docid": "f8a3b86208adcc243e3092e47447862d", "text": "It seems like there are a few different things going on here because there are multiple parties involved with different interests. The car loan almost surely has the car itself as collateral, so, if you stop paying, the bank can claim the car to cover their costs. Since your car is now totaled, however, that collateral is essentially gone and your loan is probably effectively dead already. The bank isn't going let you keep the money against a totaled car. I suspect this is what the adjuster meant when he said you cannot keep the car because of the loan. The insurance company sounds like they're going to pay the claim, but once they pay on a totaled car, they own it. They have some plan for how they recover partial costs from the wreck. That may or may not allow you (or anyone else) to buy it from them. For example, they might have some bulk sale deal with a salvage company that doesn't allow them to sell back to you, they may have liability issues with selling a wrecked car, etc. Whatever is going on here should be separate from your loan and related to the business model of your insurance company. If you do have an option to buy the car back, it will almost surely be viewed as a new purchase by the insurances company and your lender, as if you bought a different car in similar condition.", "title": "" }, { "docid": "298a3f25846f5a776770998f3b63329e", "text": "Don't let the tail of credit score wag the dog of prudent financial planning. If you have a sufficient emergency fund in addition to the car cost, then buying the car for cash is to my mind a better plan. But if the car purchase would deplete your emergency fund, then I'd go for the loan. Cash in hand gives you optionality that can be very valuable when things go wrong. And credit will be withdrawn at exactly the most painful moment.", "title": "" }, { "docid": "ede0311d87e2bff0e8d2762637c840e7", "text": "this would make sense assuming debt payments incl. interest to the market for the debt assumed to purchase said boat/yacht is less than the lease payments over the life of both terms. If your lease payments are lower than term loan pmts incl. interest (or a similar debt instrument) then OP would still be right. TVM is irrespective of a competitors (or lessor in this case) Kc. Although, this goes completely out the window if it's a bond-like debt vehicle since those cash flows are distributed in a completely different manner.", "title": "" }, { "docid": "2d46e4f9ed7e9e8d566747dd6c2d59a8", "text": "This is called imputed income, which is generally not taxed in the US.", "title": "" } ]	fiqa
a59179715536bdf601cdb3dc9a77c3f8	How to approach building credit without a credit card	[ { "docid": "6db3089f91d39270c2273289148ff738", "text": "Ways to build credit without applying for credit cards: It takes some time for these types of actions to positively affect you. I'd say at the very least 6 months. You won't get the full benefit for several years. However, the earlier you get started, the better.", "title": "" }, { "docid": "6b851bd583388e8c77f603f437faa641", "text": "Apply for a secured credit card (several financial institutions provide these, including most banks. WalletHub gives you a way to search/filter for these cards quite easily). You will need to deposit funds to cover your credit limit. Deposit as much as they allow, I believe it is 500.00. Pay for EVERYTHING with the card. Monitor your balance due and keep paying it off, to bring the balance due down so you can continue using your card. I know you mentioned your area requires you to be 19, not sure if that still applies if you are applying online, in another state. Also, there's no real reason to get a card with an annual fee in this case. The main reason for an annual fee would be a lower interest charge - simply don't get charged interest, and you'll be better off with not having to pay for a card annually. Good luck.", "title": "" }, { "docid": "d9607f1a9dfa1b6ea84d973cf69918dd", "text": "Keep in mind that credit takes time to build. Your best short-term solution is to save enough cash to put enough of a down-payment that the lower loan-to-value ratio outweighs the lack of credit history. If there's enough equity to ensure that the bank will get their money back if they have to foreclose, you will have a better chance of securing financing. In addition, the stability and consistency of your employment may also be a factor that makes it difficult for you to get a loan without a substantial down-payment. Finally, don't ignore the risk present in resting a property that you have a loan on. Make sure you have a plan in place to pay your payments if the other half goes unrented for several months, or you risk losing the entire property. My advice is to rent somewhere else for enough time that you can save up a lot of cash to purchase a duplex rather than getting in a rush and doing something unwise (like apply for a bunch of credit cards you don't need).", "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": "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": "f61e2fa0b51e154e19ee6efdffc99751", "text": "\"No you do not need a credit card. They are convenient to have sometimes. But you do not \"\"need\"\" one. I know people who only have one for use when they travel for work and get reimbursed later. But most companies have other ways to pay for your travel if you tell them you do not have a credit card.\"", "title": "" }, { "docid": "429300aac743c8e517657e31c1bcb4e7", "text": "I can't answer the question if you should or shouldn't get a credit card; after all, you seem to manage fine without one (which is good). I started using credit cards when I lived in the UK as the consumer protection you get from a credit card there tends to be better than from a debit card. I'd also treat it as a debit or charge card, ie pay it off in full every month. That way, because you're not carrying a balance the high interest rate doesn't matter and you avoid the trap of digging yourself deeper into the hole each month. Cashback or other perks offered by a credit card can be worth it, but (a) make sure that they're worth more than the yearly fee and (b) that they're perks you're actually using. For that reason, cashback tends to work best. I'd get a VISA or Mastercard, they seem to be the ones that pretty much everybody accepts. Amex can have better perks but tends to be more expensive and isn't accepted everywhere, especially not outside the US. But in the end, do you really need one if you're managing fine without one?", "title": "" }, { "docid": "57df0258a0afb33df7402a40ec2fc121", "text": "In general, minors cannot enter into legally binding contracts -- which is what credit accounts are -- so an individually held card is probably not an option for you right now. You will not be approved for a credit card because you are minor. The only option credit card wise for you is for your parents to add you on as an authorized user onto their accounts. The upside is that you and your parents can work out a monthly payment for the amount you spend on your equipment, the downside is that if your parents don't pay their credit card bill, your credit score/report can be negatively affected. (This also depends on the bank, however, all the banks I bank with report monthly payment activities on authorized users' credit reports as well. There might be a bank that doesn't.) In terms of credit cards, there is nothing you can do. What you could do as the comments have suggested is either save up money for the equipment you want, or buy something cheaper.", "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": "22950e777b1e19bc74ba9f13cd706984", "text": "\"There are services that deal specifically with these situations, boostcredit101.com is one I've personally had a good experience with though there are plenty out there. What they do is add you as an authorized user to a credit card with a high limit, low balance, and perfect payment history. This \"\"boosts\"\" for about 30 days while you remain listed as a user on that account, which allows you to qualify for your own card or other kind of loan in that time and helps you start rebuilding your credit. I've even heard of people doing this to qualify for a home loan, though the home loan industry is typically aware of this \"\"trick\"\".\"", "title": "" }, { "docid": "7fe7e49dc349ba94c9b49b1f71dfecdc", "text": "Really basic Revolving credit for individuals. Use a credit card to pay for a purchase. You pay the card off completely before you pay interest and get 30 days free money. Your cash balance is for that 30 days doing you some good instead.", "title": "" }, { "docid": "c7afccda4f53df1e4510720d6f68014f", "text": "\"I want to recommend an exercise: Find all the people nearby who you can talk to in less than 24 hours about credit cards: Your family, whoever lives with you, and friends. Now, ask each of them \"\"what's the worst situation you've gotten yourself into with a credit card?\"\" Personally, the ratio of people who I asked who had credit cards to the ratio of people with horror stories about how credit cards screwed up their credit was nearly 1:1. Pretty much, only one of them had managed to avoid the trap that credit cards created (that sole exception had worked for the government at a high paying job and was now retired with adult children and a lucrative pension). Because it's trivially easy over-extend yourself, as a result of how credit cards work (if you had the cash at any second, you would have no need for the credit). But do your own straw poll, and then see what the experience of people around you has been. And if there's a lot more bad than good out there, then ask yourself \"\"am I somehow more fiscally responsible than all of these people?\"\".\"", "title": "" }, { "docid": "a47cc29f2e01747714734a1f3a1113ca", "text": "Eventually you are going to need some sort of real credit history. It is possible that you will be able to evade this if you never buy a house, or if you pay cash for any house/condo/car/boat/etc that you buy. Even employers check credit history these days. I wouldn't be surprised if some medical professionals such as surgeons check it also. Obviously if you have a mortgage and car loan this doesn't apply, but I'd be curious how you acquired those unless you have substantial income and/or assets. Combine this with the fact that certain things like renting a car essentially require a credit card (because they need to put a hold on more money than they are actually going to take out of your card, so they can take that money if you don't bring the car back), and I think you should have a credit card unless you and your wife are individuals with zero impulse control, which sounds highly improbable. If your concern is the financial liability of the credit line, just keep the credit line low.", "title": "" }, { "docid": "b0d57edd6481ac8cd3517bceeb8db84f", "text": "Switch to cash for a few months. No debit. No credit. This will help for two reasons: Once you've broken the bad habits, you should be able to go back to cards for the convenience factor.", "title": "" }, { "docid": "30896bb83843311d354c67952e993188", "text": "This is a good idea, but it will barely affect your credit score at all. Credit cards, while a good tool to use for giving a minor boost to your credit score and for purchasing things while also building up rewards with those purchases, aren't very good for building credit. This is because when banks calculate your credit report, they look at your long-term credit history, and weigh larger, longer-term debt much higher than short-term debt that you pay off right away. While having your credit card is better than nothing, it's a relatively small drop in the pond when it comes to credit. I would still recommend getting a credit card though - it will, if you haven't already started paying off a debt like a student or car loan, give you a credit identity and rewards depending on the credit card you choose. But if you do, do not ever let yourself fall into delinquency. Failing to pay off loans will damage your credit score. So if you do plan to get a credit card, it is much better to do as you've said and pay it all off as soon as possible. Edit: In addition to the above, using a credit card has the added benefit of having greater security over Debit cards, and ensures that your own money won't be stolen (though you will still have to report a fraudulent charge).", "title": "" }, { "docid": "1bf43b55a55057cebd95e74979301a9a", "text": "To get a credit history you need to use credit from someone that reports to the major credit agencies. I don't suppose you have to BUY anything. You could just get a cash loan and hold it for a long time, but it seems silly to pay interest only for the purpose of building credit. The student loan should help you build credit. Also, I'm assuming you buy things all the time like gas, groceries, etc. Why not put those on a credit card and pay the balance off every month? That way you aren't buying anything specifically to get credit. Also there are numerous other benefits: Another suggestion: Set up your cards so the full balance is drafted from your bank automatically on the due date. That will ensure that you always pay on time (helping your credit) and also make you think twice about putting things on the card that you can't afford with the cash you have in the bank.", "title": "" }, { "docid": "07b710be19ecd9d427a1c15c598c99b9", "text": "Congratulations on seeing your situation clearly! That's half the battle. To prevent yourself from going back into debt, you should get rid of any credit cards you have and close the accounts. Just use your debit card. Your post indicates you're not the type to splurge and get stuff just because you want it, so saving for a larger purchase and paying cash for it is probably something you're willing to do. Contrary to popular belief, you can live just fine without a credit card and without a credit score. If you're never going back into debt, you don't need a credit score. Buying a house is possible without one, but is admittedly more work for you and for the underwriters because they can't just ask the FICO god to bless you -- they have to actually see your finances, and you have to actually have some. (I realize many folks will hate this advice, but I am actually living it, and life is pretty good.) If you're in school, look at how much you spend on food while on campus. $5-$10/day for lunch adds up to $100-$200 over a month (M-F, four weeks). Buy groceries and pack a lunch if you can. If your expenses cannot be reduced anymore, you're going to have to get a job. There is nothing wrong with slowing down your studies and working a job to get your income up above your expenses. It stinks being a poor student, but it stinks even more to be a poor student with a mountain of debt. You'll find that working a job doesn't slow you down all that much. Tons of students work their way through school and graduate in plenty of time to get a good job. Good luck to you! You can do it.", "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": "fc57a8846bf46b3532091bea6df36a6c", "text": "I would look for these features in the credit card: If there is some kind of reward option like cash back or points, you obviously deduct these from the total costs. Chances are the total costs are higher than the rewards, because generally people don't give you money for free. The reward has to be financed somehow. I would adivse against building up credit card debt. It typically has a high interest rate. So, use the credit card only as a method of payment and pay back the debt so quickly that the interest doesn't start to accumulate.", "title": "" } ]	fiqa
23ebef59d9a4e4adcfa87aed499e58da	End-of-season car sales?	[ { "docid": "38b36f33da369c77f661bbc7f6a2e6ce", "text": "\"Manufacturers sometimes give incentives to car dealers to ensure that the prior year models are sold out before the year is up. However, dealers are usually pretty smart on only ordering the cars they know they can sell before this happens. Also, manufacturers are usually pretty good about only producing enough vehicles to cover demand. Honestly, you aren't likely to see these incentives materialize unless the manufacturer really screwed up. If that happens then three things occur. First is that manufacturers give a hidden incentive to the dealers. Dealers won't publicize this, even internally. If the cars are still not moving after a month, then the dealers will tell the salespeople that those cars have a specific \"\"bonus\"\" on them. If those cars still don't sell, then the bonus inflates quite a bit and dealers begin advertising that car at a deep discount on the radio. It's pretty much guaranteed to sell at that point. Barring those circumstances, the deal you get on a brand new car, late in the model year, is likely to be the same you could have gotten early in the model year. Honestly, if you want the best deal possible, look at the date of the inspection sticker on the car. If it is close to the 3 month mark then the dealer will bend over backwards to sell the car as the finance costs are racking up on it. They'll often sell that one at heavy discounts.\"", "title": "" }, { "docid": "c9682a5edbb653b5f92b70e4d8124f67", "text": "It completely varies by manufacturer, dealer, and time of year, but in general yes, you can get a (sometimes significant) discount on brand new last year models. In general though, it comes down to supply and demand. As an example, in April 2016 I was looking at a brand new 2016 in which the 2017 model had come out that week (I thought April was a little early for next year's model but sometimes that's a marketing tool). The sticker price of the 2017 was only $100 more than the 2016, but the 2016 was selling for $3K under MSRP, and the 2017 was selling at exactly MSRP since they only had 2 in stock.", "title": "" } ]	[ { "docid": "c96f11b2c154045edf20bad8d9f979a4", "text": "\"This is the best tl;dr I could make, [original](https://about.bnef.com/blog/electric-vehicles-accelerate-54-new-car-sales-2040/) reduced by 92%. (I'm a bot) *** > London and New York, 6 July 2017 - Electric vehicles will make up the majority of new car sales worldwide by 2040, and account for 33% of all the light-duty vehicles on the road, according to new research published today. > The team now estimates that EVs will account for 54% of all new light-duty vehicle sales globally by 2040, not the 35% share it forecast previously. > BNEF sees them accounting for nearly 67% of new car sales in Europe by 2040, and for 58% in of sales in the U.S. and 51% in China by the same date. * [Extended Summary*](http://np.reddit.com/r/autotldr/comments/6p1zel/electric_vehicles_to_accelerate_to_54_of_new_car/) \| [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~173744 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: New^#1 vehicle^#2 BNEF^#3 Energy^#4 Bloomberg^#5\"", "title": "" }, { "docid": "17dfa59993195de54404027dba17edff", "text": "Negative. I'm selecting all available historical data... to only focus on this last year is not relevant to which American car company has sold the most electric cars in the US. It doesn't mean it will last forever, but those are currently the numbers.", "title": "" }, { "docid": "72cd07fa8e867a993dd7207fac92735f", "text": "So 2015 is still well before the Model 3 is coming out, so they will still be dealing solely in Model S and Model X, which both carry an average transaction price approaching six figures. Mercedes and BMW both produce around 60,000 of their similarly priced level vehicles (S class and 7 series respectively) per year. Audi produces around 35,000 8 series vehicles. The point here is that if Tesla is planning on selling 100,000 vehicles in a market that is around 200k cars per year, that would represent a HUGE chunk out of the near-six-figure luxury vehicle market, and would require a non-insubstantial percentage of people to switch away from long-entrenched marques. It will be highly impressive if they pull it off.", "title": "" }, { "docid": "b7e967806e56b0f422195404e5d748cb", "text": "The goal wasn't to provide dealers with a heap of money, but rather ensure that new car sales kept up during the recession helping keeping the manufacturers afloat. The program achieved this goal - as per the opening paragraph, new car sales increased for the policy.", "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": "742133d583b237c209e3e151a9afde1f", "text": "\"If there's one reasonably close to you, you could go to a no-haggle dealership. Instead of making you haggle the price downward, they just give a theoretically fixed price that's roughly what the average customer could negotiate down to at a conventional dealer. Then just do your best broken record impression if they still try to sell you dubious addons: \"\"No. No. No. No. No...\"\" The last time I bought a new car (06), a no haggle dealer offered the second best deal I got out of 4 dealerships visited. The one I ended up buying with made an exceptional offer on my trade (comparable to 3rd party sale bluebook value). - My guess is they had a potential customer looking for something like my old car and were hoping to resell it directly instead of flipping it via auction.\"", "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": "1289f467fc40a3ccce210513caae1c4e", "text": "The best time to start holiday shopping is just after the holidays, when stores are selling off their remaining overstock. Outside of that, there's no one answer.", "title": "" }, { "docid": "bd397206a1286febf43cd37d785666c5", "text": "I had a 2000 Chevy Cavalier until late 2011. It worked well, but was very definitely at the end of its life. This was a low-end car, certainly, but I dispute your claim that cars last 20 - 25 years. Consumer Reports apparently says the average life expectancy of a new vehicle is around 8 years or 150,000 miles. When it came time to replace my Cavalier, I was significantly concerned about car safety and about the ability to handle Canadian winters (-40 temperatures, lots of snow). I chose a Subaru Forester as a good match for me. I could have bought one second-hand, but I wasn't willing to get one as old as five years. Car manufacturers constantly improve safety and features over that time period. The Forester is massively more capable of handling Canadian winters than the Cavalier was. If I was buying a Forester now, I'd want the EyeSight Driver Assist System which Subaru added a couple of years after my model year. The newer models score slightly higher in crash tests, too. That would limit me to 2014 or later models, and I'd be concerned someone selling a 2014 or 2015 knew something I didn't, knew they had purchased a lemon. I didn't need financing for my vehicle. On the other hand, I could have invested the money I saved, so if all I wanted was something to get me from point A to point B, my choice does not make much financial sense. But Canadian winters are brutal and car safety is massively important to me. I'm well aware that I paid considerably for this, and I'm comfortable with my decision.", "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": "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": "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": "acd55a470f0821002f4fa85d7e292065", "text": "Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them. Rental cars are typically driven by people over 25, these are typically people with some financial means (air travel, credit card). Additionally, rental cars are subject to frequent inspection and likely to be on tighter maintenance schedules than many owners would keep. So while some people may drive a rental harder than they would their own car, it's not typical, and not likely to result in some hidden damage that makes a rental less desirable (all else being equal) on the used-car market. Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser? Rental companies buy at incredible volumes, as such, some manufacturers have programs where they will buy back used cars from the rental company at a set price and/or time. Other incentives are guaranteed depreciation, wherein the manufacturer will make up the difference if the used vehicle doesn't sell for a set percentage of it's purchase price after a set amount of time. Outside of these incentive programs, rental companies also get substantial volume discounts, and they typically are buying base models which hold value better than their higher-trim counterparts (according to KBB market analyst). So the conventional wisdom about depreciation doesn't really apply. The timing of their sales is primarily based on their purchasing arrangements and their desire to keep an up to date fleet, not on projected maintenance/repair costs. The best you can do with any used-car purchase is to test-drive, get a pre-purchase inspection, and review whatever history is available.", "title": "" }, { "docid": "f0ef260b001f517c16365e6e6cec234a", "text": "Other than being reduced to clear as others have suggested quite a few get sold to large motor stores. You can often go in and find last years model with around delivery mileage at a very knocked down rate because most people would prefer the latest model direct from the dealer. Doing this allows dealers to clear old stock incredibly quickly so they can promote the newest model exclusively.", "title": "" }, { "docid": "a531ae13f8165cbc32348746da7983e3", "text": "\"Yes you tell them. I can say that I pay cash for all my cars and always get cars for lower than the TrueCar low-end. There are basically two steps: go test drive, negotiate fully, leave (unless you are given a mind-blowing offer). This may take you one to many dealerships. It depends on how well you know what car you want and how much a dealership will negotiate. you pick a night that another dealership that specifically has the car you want (or multiple - even better) is open and you go in 30-45 mins before they close. Paying cash is key for this to work. By the time you get to numbers they will be almost closed. Their finance guy might be gone so you will get your salesman and a manager. I will use my last car as an example. Toyota Highlander 2015 with MSRB 32,995. TrueCar at 29,795 with a good deal at 29,400. I simply talked to my sales guy said I would like to walk out with the car tonight. I have already talked to XYZ dealership and they offered me 28,500 - which is already below TrueCar low price. I asked for $27,900. Boom 10 minutes later car bought at 28,100. Cash is king. The sales guy and manager will bite the bullet on profit for ease of sale. Going in late is the key to using the cash. You don't have the finance guys jumping in and you have less people to move through. Also they know they have limited time to deal and if you walk off the lot there is less than 10% chance of you coming back - they want to close. They are making minimal profit but doing minimal work. With cash your sales guy is on your side because you are basically throwing him a couple hundred dollars at the end of a shift (where most would just be sitting around watching TV). Some other tips: be fair. If they would have said 28,300 is our lowest that we can go and that's it. I probably would have still got the car. Dealerships will tell you their lowest price if you are close and you are still below it. since they didn't show me their lowest price I didn't budge much but still budged a bit to show good sport. They brought their invoice number out to show that at 28,100 that they were going to lose $1500 on the car. I made the manager laugh because my response was to bring up KBB and show the used car price for the car, which was minus $2000. So I just said, \"\"Well you lost $1500 but I lose $2000 driving this off the lot.\"\" I then went back to $27,850 to meet in the middle of \"\"losing\"\" money. This actually closed the deal. Anyway don't ever believe any piece of paper they show you with numbers. These dealerships get monthly bonuses on sales and that is a lot of their profit past selling your trade-in. If you actually value your money you would never be trading in a car to a dealer so if you are paying cash, sell your own car or at least take it to a place like CarMax which I don't endorse but better than dealer.\"", "title": "" } ]	fiqa
90d902884e98b515ec0351942853e544	Will having a secondary signee with bad credit on a mortgage raise or lower interest?	[ { "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": "944043c4c9d8348c585222be3451c1ef", "text": "Generally speaking the lower credit score trumps. In the case you cite, the lower credit score will prevail. However, you may need to do exactly that in order to qualify for the loan income wise. There are two factors when obtaining a mortgage, really all loans, but more so with a mortgage: the likeliness to repay (credit score), and your ability to service the debt. This last one is a combination of income and debt-to-income ratio. If you don't have enough income to qualify for the loan or fail to meet the debt to income ration, you may have to use your GF's income to qualify despite her poor credit. You might want to see past posts about buying property with non-spouses. It could work, but generally it requires a lot of legal work before closing on the deal. Avoiding this will lead to tales of woe.", "title": "" } ]	[ { "docid": "271d50999a71a5a43299095b7e9d0717", "text": "\"Usually not the total interest, but all interest accrued and unpaid to date. This is called the \"\"Loan Payoff Amount\"\", and repays the bank their principal plus the \"\"true\"\" cost of capital on that principal since your last amortized payment (which is probably never, since you just signed the loan papers). There may also be a \"\"prepayment penalty\"\". This is something that should have been disclosed to you if it exists, but it's fairly rare in U.S. mortgages anymore. The theory is, the bank got the money they paid you at the start of the loan by selling a bond package backed by your mortgage and others of similar credit history and/or about the same time (a \"\"mortgage-backed security\"\"). By turning around and paying early, you meet your obligation, but the bank is now stuck with at least 10 years of quarterly coupon payments on that bond, which they were expecting to pay using your mortgage interest. For their trouble, you would pay an additional amount that either covers their \"\"call price\"\" on the portion of the bonds used for your principal, or simply buys them the time to re-issue a new mortgage using your repaid principal to back the bond again. In the modern housing market, such a prepayment penalty is very rare, because so many lenders are willing to give you a mortgage without one, and so many buyers balk at the thought of having to pay more if they pay early; the whole point is to pay less by paying early. Just something to look up in your mortgage documentation.\"", "title": "" }, { "docid": "429d032007dcb3fc973f02149c9d81d6", "text": "Banks in New Zealand tend to take a lien that is higher than the amount of the loan, so that your only option for a second mortgage is with them. ASB wanted 50% more than the value of the loan when I had my mortgage with them. Of course, with house price inflation the way it's been in NZ, the value of your house may have outstripped the lien anyway, and you can mortgage the rest of it with anyone you like. I suspect your lawyer will need to inform the other lienholder, but you don't need their permission.", "title": "" }, { "docid": "512d7c4e1f8831007a9b824440f78073", "text": "Only if (or to put it even more bluntly, when) they default. If your friend / brother / daughter / whoever needs a cosigner on a loan, it means that people whose job it is to figure out whether or not that loan is a good idea have decided that it isn't. By co-signing, you're saying that you think you know better than the professionals. If / when the borrower defaults, the lender won't pursue them for the loan if you can pay it. You're just as responsible for the loan payments as the original borrower, and given that you were a useful co-signer, probably much more likely to be able to come up with the money. The lender has no reason to go after the original borrower, and won't. If you can't pay, the lender comes after both of you. To put it another way: Don't think of cosigning as helping them get a loan. Think of it as taking out a loan and re-loaning it to them.", "title": "" }, { "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": "c2cbdeaba89cdcfdfdb6a2a852cf51ba", "text": "\"Based on your information... The house is $130,000 all in (this might not be the case) Your payment term is 30 years. Your interest rate is about 7.35%. Your payments are about $895.66 Your total payments will total $322,438.95 That's not a very good interest rate for a mortgage, but this might be due to poor credit or limited credit history, too low income, or too much home value being financed (or a combination of the above and other factors). Northern Alabama may not specifically be higher interest rate: it might, honestly, just be you. The reason that you're paying $320,000 is that you're taking $130,000 from a bank and promising to pay it back with interest. Keep in mind, that's over thirty years. That's a LONG time. And the bank needs to earn enough interest to combat inflation (roughly 2% annually, generally). During that time, the bank can't invest that money elsewhere, return it to depositors, etc. A good rule to keep in mind is the \"\"rule of 72.\"\" It's a simple trick to determine, based on an interest rate, how quickly the value of something will double (in this case, the value of your loan payments). If your interest rate was exactly 7.2%, this method would calculate 10 years until doubling. In your case, 72 / 7.35 = 9.7959 years. Now, you're paying off your loan simultaneously, which lowers your interest over time, so your payments total 2.48x of loan value at origination. That still sucks, but remember, it's over a loooooooooooooooooooooooooooooooooong time.\"", "title": "" }, { "docid": "c5c182f9a317adac4162135e9842a282", "text": "i would recommend that you establish a landlord/tenant relationship instead of joint ownership (ie 100% ownership stake for one of you vs 0% for the other). it is much cleaner and simpler. basically, one of you can propose a monthly rent amount and the other one can chose to be either renter or landlord. alternatively, you can both write down a secret rental price offer assuming you are the landlord, then pick the landlord who wrote down the smaller rental price. if neither of you can afford the down payment, then you can consider the renter's contribution an unsecured loan (at an agreed interest rate and payment schedule). if you must have both names on the financing, then i would recommend you sell the property (or refinance under a single name) as quickly as possible when the relationship ends (if not before), pay the renter back any remaining balance on the loan and leave the landlord with the resulting equity (or debt). in any case, if you expect the unsecured loan to outlive your relationship, then you are either buying a house you can't afford, or partnering on it with someone you shouldn't.", "title": "" }, { "docid": "213f18ac19a519aadc9ab2415ad7cc9e", "text": "I wouldn't like to say either way what you should do, not being an financial advisor or lawyer, but I did find an interesting article on nytimes.com: Walk Away From Your Mortgage! that you might also find helpful to frame your decision. It has some interesting information on defaults, it says this: Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them. In some states, lenders also have recourse to the borrowers’ unmortgaged assets, like their car and savings accounts. A study by the Federal Reserve Bank of Richmond found that defaults are lower in such states, apparently because lenders threaten the borrowers with judgments against their assets. But actual lawsuits are rare. And given that nearly a quarter of mortgages are underwater, and that 10 percent of mortgages are delinquent, White, of the University of Arizona, is surprised that more people haven’t walked. He thinks the desire to avoid shame is a factor, as are overblown fears of harm to credit ratings. Probably, homeowners also labor under a delusion that their homes will quickly return to value. White has argued that the government should stop perpetuating default “scare stories” and, indeed, should encourage borrowers to default when it’s in their economic interest. This would correct a prevailing imbalance: homeowners operate under a “powerful moral constraint” while lenders are busily trying to maximize profits. More important, it might get the system unstuck. If lenders feared an avalanche of strategic defaults, they would have an incentive to renegotiate loan terms. In theory, this could produce a wave of loan modifications — the very goal the Treasury has been pursuing to end the crisis.", "title": "" }, { "docid": "e2afadb028d4d5d23a772479a3d008b2", "text": "\"You owe $20,000 to a loanshark, 1% per week interest. I'm happy to get 1% per month, and trust you to pay it back, so I lend you the $20,000. The first lender got his money, and now you are paying less interest as you pay the loan back. This is how a refi works, only the first bank won't try to break the legs of the second bank for moving into their business. This line \"\"reinvested the money into the mortgage to lower his monthly payments\"\" implies he also paid it down a bit, maybr the new mortgage is less principal than the one before.\"", "title": "" }, { "docid": "24ce5118de0a6de657638a8502dbeda9", "text": "It appears that co-signing does impact your debt-to-income ratio, at least in the US. An article on Kiplinger says: An article on Forbes agrees saying: There is a similar question here.", "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": "03c1690b83249edd54f7e6a09e48bd72", "text": "\"That \"\"something\"\" you are signing means you are liable for the mortgage payments - yes, all of them - if he can't or won't pay at any point. The limit on what the bank will lend him based on his salary is there for a reason - they don't expect him to be able to keep up repayments if they lend him more (or more precisely, there's a big risk that he won't). Don't forget that even if he swears up and down to you that he can afford them, interest rates can rise; this is a 25 or 30 year commitment you would be making. Interest rates are at a historic low and the only way from here is up; in my living memory rates have been 12% or even 15%. As a very rough rule of thumb, for every £100k borrowed, every additional 1% on the interest rates costs an additional £100 on your monthly payment. Also, the \"\"Transitional Arrangement\"\" is not without its own fees and the bank won't let him simply take you off the mortgage unless they are convinced he can keep up the repayments on his own, which they clearly aren't. Also thanks to @Kat for the additional good point that being on the hook for your friend's mortgage will prevent you from being able to get a mortgage yourself while the liability still exists, or at least severely limit your options. No matter how many times you protest \"\"but I'm not paying any money for that!\"\" - it won't help. Another point: there are various schemes available to help first time buyers. By signing up for this, you would exclude yourself from any of those schemes in the future.\"", "title": "" }, { "docid": "a12d8076c8f121fd8555d860d0e17859", "text": "A second mortgage is a loan taken out on your house while you still have another mortgage secured by your house. They are a secured loan as they use the borrower’s home as security. Some advantages of Second Mortgages: Some important points to consider when you take a second mortgage If you stop making payments, your lender will be able to take your home through foreclosure, which can cause serious problems for you and your family. Second mortgages can be expensive. You’ll need to pay numerous costs for things like credit checks, appraisals, origination fees, and more. The mortgage rates are typically lower than credit card interest rates, but they’re often slightly higher than your first loan’s rate.", "title": "" }, { "docid": "8c68d17b243300bf223d276fc6c364f4", "text": "Yes, there are times when co-signing is the right choice. One is when you know more about the person than the loan issuer does. Consider a young person who has just started working in a volatile field, the kind of job where you can be told on Friday that you only get one shift next week but things might pick up the week after, and who makes maybe $12 an hour in that job. You've done the math and with 40 hour weeks they can easily afford the loan. Furthermore, you know this person well and you know that after a few weeks of not enough shifts, they've got the gumption to go out and find a second job or a different job that will give them 40 hours or more a week. And you know that they have some savings they could use to ensure that no payments will be missed even on low-wage weeks. You can cosign for this person, say for a car loan to get them a car they can drive to that job, knowing that they aren't going to walk away and just stop making the payments. The loan issuer doesn't know any of that. Or consider a young person with poor credit but good income who has recently decided to get smart about money, has written out a budget and a plan to rehabilitate their credit, and who you know will work passionately to make every payment and get the credit score up to a place where they can buy a house or whatever their goal is. Again, you can cosign for this person to make that happen, because you know something the lender doesn't. Or consider a middle aged person who's had some very hard knocks: laid off in a plant closing perhaps, marriage failure, lost all their house equity when the market collapsed, that sort of thing. They have a chance to start over again somewhere else and you have a chance to help. Again you know this isn't someone who is going to mismanage their money and walk away from the payments and leave you holding the bag. If you would give the person the money anyway (say, a car for your newly graduated child) then cosigning instead gives them more of a sense of accomplishment, since they paid for it, and gives them a great credit rating too. If you would not give the person the entire loan amount, but would make their payments for many months or even a year (say, your brother's mortgage for the house where he lives with a sick wife and 3 small children), then cosigning is only making official what you would have done anyway. Arrange with the borrower that if they can't make their payments any more, you will backstop them AND the item (car, house, whatever) is going up for sale to cover your losses. If you don't think you could enforce that just from the strength of the relationship, reconsider co-signing. Then sign what you need to sign and step away from it. It's their loan, not yours. You want them to pay it and to manage it and to leave you out of it until it's all paid off and they thank you for your help. If things go south, you will have to pay, and it may take a while for you to sell the item or otherwise stop the paying, so you do need to be very confident that the borrower is going to make every single payment on time. My point is just that you can have that confidence, based on personal knowledge of character, employment situation, savings and other resources, in a way that a lender really cannot.", "title": "" }, { "docid": "5a40eee5445e687b0de14606db987a66", "text": "Well, it sounds like you have two options: 1) Continue to jointly own the house. 2) Compensate her for her equity and get the title transferred. I hate to tell you this, but she is entitled to half of the equity regardless of how much she paid into it. That said, she is still on the hook equally for the loan amount, but it won't do you any good if she is not willing to pay. Also, option 2 probably isn't a good deal for your co-signer as she would still be liable for the entire loan loan (just as you are) regardless of the title.", "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": "" } ]	fiqa
1e59b32fc57b54555bb80e9ed6b0dca9	Should I participate in a 401k if there is no company match?	[ { "docid": "194bc6ba5c4129ec87feafec8cf788d9", "text": "With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA)", "title": "" }, { "docid": "fb5df2a06d67ee66755cb6d8d65d8c2e", "text": "Another consideration that is not in the hard numbers. Many people, myself included, find it hard to have the discipline to save for something that is so far off. The 401K plan at work has the benefit of pulling the money out before you see it, so you learn to live on what is left more easily. Also, depending on the type of 401K it attaches penalties to using the money early disincentive you to pull it out for minor emergencies.", "title": "" }, { "docid": "0e8002a8483e94f44f69a314c387ea4a", "text": "I believe @Dilip addressed your question alread, I am going to focus on your second question: What are the criteria one should use for estimating the worth of the situation? The criteria are: I hope this helps.", "title": "" } ]	[ { "docid": "8e3db5c45ccaa6589d0bcc62baed7712", "text": "\"Your question has a built in faulty premise. \"\"ASSUMING a person knows how to use and invest their money wisely\"\" I'd ask if you were wise enough to beat the investments offered in your 401(k) after expenses, and with respect to the potential tax savings. Then, since I'm a proponent of \"\"deposit to the match, even if you have to eat rice and beans to find the cash to do\"\" I'll extend the question to ask if you can beat the choices taking the match into account. 401(k) - Your $1000 starts as $1500 and has a tax due on withdrawal years later. AeroAccount - You start with $750 (after the tax) and might spend a decade before hitting $1500. Start your own company? That might be another story. But to invest in the market and still beat the matched 401(k) takes a bit more wisdom than I'd claim to have.\"", "title": "" }, { "docid": "b6d77235a21a853831a355be838e8dc5", "text": "It depends on the vesting schedule and the likelihood you'll be there long enough to get any vesting. A typical 6 year schedule gets you 20% after 2 years. You already know you'll be there 1 year, so now you need to decide if you'll last 2 years. Unless you know for sure you won't last 2 years, you should take the match on the 4%. Suppose your retirement plan earns 10%. If you leave before 2 years, compared with your 18% you're only behind by 8% return. But if you last 2 years, you'd be making a 32% return on that same amount. After 3 years you'd make 54%, and up it goes from there until you hit a 120% return after 6 years. I'd take the match simply because you have a lot more to gain than you have to lose if you leave early.", "title": "" }, { "docid": "ae6624165f7fd30a880665a79b3ea4e5", "text": "I have worked for companies that have done this. One did have a match and the other did not. When they figured their profit at the end of the year a portion was given to the employees as a 401K deposit. retirement-topics-401k-and-profit-sharing-plan-contribution-limits Total annual contributions (annual additions) to all of your accounts in plans maintained by one employer (and any related employer) are limited. The limit applies to the total of: elective deferrals employer matching contributions employer nonelective contributions allocations of forfeitures The annual additions paid to a participant’s account cannot exceed the lesser of: 100% of the participant's compensation, or $54,000 ($60,000 including catch-up contributions) for 2017; $53,000 ($59,000 including catch-up contributions) for 2016. So as long as everything stays below that $54,000 limit you are good. In one case the decision was made by the company for the employee, the other company gave us the option of bonus check or 401K. I heard that most of the employees wanted the money in the 401K.", "title": "" }, { "docid": "6913c3128a087e10f462defd06dd3ae5", "text": "\"Great. 10% of the pre-tax 450 you'd make in a week of 40 hours' work means you could buy about 2 shares a month. I assume they pay bi-weekly, so you can qualify to buy a share. 25% 401k contribution off less than 30k annual salary is peanuts to the company, and peanuts to the employee by retirement. Competitively speaking, thats actually a rather bare-bones retirement package, isn't it? I hope that health care waves covers deductables 100% - otherwise a yearly checkup will be 10% of your takehome that week in addition to the hours you take off work and get \"\"points\"\" under their draconian \"\"no days off ever\"\" policy.\"", "title": "" }, { "docid": "8418b64bc7a531370f7aca1b38f565ab", "text": "The fact that you are planning to move abroad does not affect the decision to contribute to a 401(k). The reason for this is that after you leave your employer, you can roll all the money over from your 401(k) into a self-directed traditional IRA. That money can stay invested until retirement, and it doesn't matter where you are living before or after retirement age. So, when deciding whether or not to use a 401(k), you need to look at the details of your employer's plan: Does your employer offer a match? If so, you should definitely take advantage of it. Are there good investments available inside the 401(k)? Some plans offer very limited options. If you can't find anything good to invest in, you don't want to contribute anything beyond the match; instead, contribute to an IRA, where you can invest in a fund that you like. The other reason to use a 401(k) is that the contribution limits can be higher. If you want to invest more than you are allowed to in an IRA, the 401(k) might allow that. In your case, since there is no match, it is up to you whether you want to participate or not. An IRA will allow more flexibility in investing options. If you need to invest more than your IRA limit, the 401(k) might allow that. When you leave your employer, you should probably roll any 401(k) money into an IRA.", "title": "" }, { "docid": "f06abec4321d22e0e37aab2bef6014d2", "text": "\"Congratulations on the job offer! That type of matching sounds good if you plan to stay at a company for more than a year. My experience has been that 401k matching can range from 2% up to 8% for your typical starting job, so a total of 6% is good. You would definitely want to contribute at least 5% to take advantage of the \"\"Free\"\" money. Loan provision could mean that loans from 401k are allowed. I did some research and found that not all company 401ks allow for you to take a loan out of your 401k. Typically this is bad practice since you are robbing your 401k of it's major advantage - tax free compound interest. Source\"", "title": "" }, { "docid": "e11c9c90c90bba96f6ec210626a47404", "text": "Does you job offer a retirement plan? (401k, SIMPLE, etc) Does your employer offer a match on contributions? Typically an employer will match what you put in, up to a certain percentage (e.g. 3%). So, say you contribute 3% of your paycheck into your retirement plan. If your employer mathes that, you've effectively contributed 6%. You've just doubled your money! The best thing a young professional can do is to contribute to your employer-matched retirement plan, up to the maximum amount they will match. You should do it immediately. If not, you are leaving money on the table.", "title": "" }, { "docid": "4f4f98562b7c49dae14902f85ba0a423", "text": "I think better advice would be always max out your 401K at least to the level that the company provides a match. For example, my company will match 50% up to 10% of your salary. Good luck finding another investment with a guaranteed immediate 50% return. Beyond the company match, it is probably good advice to put as much in the 401K as you can afford if you aren't disciplined enough to invest that money on your own. Otherwise it depends on a number of factors as to whether it is better to invest on your own or in the company plan.", "title": "" }, { "docid": "20ddf4f306f99576150c1324d2593419", "text": "If they're not matching, and their profit-sharing has nothing to do with how much you invest, then I'd say don't bother with the company 401k at all. If you need to at least have an account open to get the profit sharing, then contribute the bare minimum. Having your retirement account through your company forces you to follow their standards, choose from their funds, use their broker, etc. It also means that when you leave the company, you either have to move your money anyway, or else have an account through a company you don't work for, which I wouldn't feel all that comfortable doing anyway. If you open a retirement account through your bank or a private financial planner, then it's yours, and you can contribute what you want, when you want, and buy the securities that you want. Your account executive is there to service you, not your company.", "title": "" }, { "docid": "0231a1ed438596a093df5865378641ef", "text": "To expand on mhoran's answer - Once you mention the 401(k), we're compelled to ask (a) what is the match, if any, and (b) what are the expenses within the funds offered. Depositing to get the full match is going to get you the biggest return on your money. It's common to get a dollar for dollar match on the first 5 or 6% of your income. If the fees are high, you stop at the match, and move to an IRA for the next money you wish to save. At 22, I'd probably focus on the Roth. If you have access to a Roth 401(k), that's great, the match will be pre tax dollars and you'll get started with a decent tax status mix. These accounts can form the core of your investing. Most people have little left over once their retirement accounts are fully funded. And yes, reading to understand stocks is great, but also to understand why stock indexing is the best choice for most investors.", "title": "" }, { "docid": "7a54240da4b431d36b9d5df63fdc615d", "text": "I would definitely recommend contributing to an IRA. You don't know for sure you'll get hired full-time and be eligible for the 401(k) with match, so you should save for retirement on your own. I would recommend Roth over Traditional IRA in your situation, because let's say you do get hired full-time. Since the company offers a retirement plan, your 2015 Traditional IRA contribution would no longer be deductible at your income level (assuming you're single), and non-deductible Traditional IRAs aren't a very good deal (see here and here). If there's a decent chance you would get hired, this factor would override the pre-tax versus post-tax debate for me. At your income level you could go either way on that anyway. A Solo 401(k) would be worth looking into if you wanted to increase your contribution limit beyond what IRAs offer, but given that it sounds like you're just starting out saving for retirement, and you may be eligible for a 401(k) soon, it's probably overkill at this point.", "title": "" }, { "docid": "d9c9611ed64b343dabdd3cfb8db0ad91", "text": "There are a couple of cases where I'd argue in favor of the 401k: Employer matching - If the employer matches your contributions, then it makes sense to get these additional investments which if you are in a low bracket may exist as highly-compensated employees may want those in the lower brackets to contribute as much as they can. Investment options - If the employer has enough assets in the plan, there could be access to institutional versions of those funds. For example, compare Vanguard Institutional Index Instl Pl (VIIIX) with Vanguard 500 Index Inv (VFINX), where the expense ratio in the former is just .02% while the latter is .17%. Granted this is a minor difference in expenses, there is something to be said for how much a .15% drag year over year could add up.", "title": "" }, { "docid": "6b109a70decdde42f25cf90204e3864d", "text": "Does the 401(k) get any match? Whatever you do, don't lose the match. Without more detail, it's tough. Will you lose more sleep for the debt rising, or for the retire account not? It seems your debt is well managed, a year to zero? A student loan wouldn't scare me.", "title": "" }, { "docid": "8ace9946466b87271df2a7f72ae6ec40", "text": "Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better.", "title": "" }, { "docid": "a407b9ca8e3a270d4914338e474147df", "text": "A 50% company match on your 401(k) is a huge amount of free money. You'd have to absolutely crush the professional money managers to justify turning it down. If you can do that, you should quit your job and do it full-time.", "title": "" } ]	fiqa
c3ab09d011e509f42c1f017e49a1e06c	Most common types of financial scams an individual investor should beware of?	[ { "docid": "d70b75c413a0cb0e84d3edffcee85ddc", "text": "\"Affinity fraud. You see, Madoff really didn't have to sell himself, people recommended him to their friends. In a similar way, it's easy once a scammer reels in one sucker to keep him on the hook long enough to get 10 friends to invest as well. I've written about Mortgage Acceleration scams, and the common thread is that they are first sold to friends, relatives, neighbors. People tell their fellow church goer about it and pretty soon people's belief just takes over as they want it to work. Edit - the scam I referenced above was the \"\"Money Merge Account\"\" and its reincarnated \"\"Wealth Unlimited.\"\" It claimed to use sophisticated software to enable one to pay their mortgage in less than half the time while not changing their budget. The sellers of the product weren't able to explain how it was supposed to work, since it was nonsense anyway. You were supposed to be able to borrow against a HELOC at a rate higher than your mortgage, yet come out ahead, enough to cut the time in half or less. The link I posted above leads to a spreadsheet I wrote in a weekend, which was better at the math than their software and free. It also linked to 66 pages of accumulated writing I did over a number of months starting in 2008. In the end, I never saw any prosecution over this scam, I suppose people were too embarrassed once they realized they wasted $3500. How can I get scammed buying S&P ETFs through Schwab? Easy, I can't.\"", "title": "" }, { "docid": "4450ca2120b86f8877849104b8b47c8b", "text": "\"If an offer \"\"is only valid right now\"\" and \"\"if you don't act immediately, it will expire\"\" that is almost always a scam.\"", "title": "" }, { "docid": "b86e24022f172c2b6a6d0cd4b4287f16", "text": "In the case of an investment strategy, if you don't retain custodianship over your funds, or at least determine who is the custodian, then walk away. You should be able to get accurate account statements from a trustworthy third party at all times.", "title": "" }, { "docid": "75467dd3e6862529f6534b9ab8a13fdd", "text": "If anyone offers you guaranteed better than average returns, run. They are either lying to you or to themselves. (Claiming that they will try to beat the market is more credible, but that becomes a matter of whether there is any reason to believe that they'll succeed.) If anyone sends you an unsolicited stock tip, run. They wouldn't be doing so if it wasn't an attempt to manipulate you or the market or both. Most likely its a pump-and-dump attempt.", "title": "" }, { "docid": "63b921517ad5513d18082e989ad94171", "text": "\"Investing in a business can be daunting and risky, so it is not for everyone. The most common pitfalls are mentioned here: Beyond that: It all sounds a bit like \"\"Don't trust anyone\"\" and sadly, this is true when there's a lot of money involved. So be prepared and do your homework, this sometimes will save you more money than you gain with your investments :) Good luck!\"", "title": "" }, { "docid": "d58edbe1b8cec9415cb072790255878d", "text": "Anything where the initial step of someone trying to get you into anything financial is to send you an e-mail. There are valid situations in which e-mails may be used to introduce you to a financial product or offer, such as if you have signed up for an electronic newsletter that includes such information. But in that particular case, the e-mail isn't the first step; rather, whatever caused you to sign up for the newsletter was. Even in a valid, legitimate scenario, you should obviously still perform due diligence and research the offer before committing any of your money. But the odds that someone is contacting you out of the blue via e-mail with a legitimate financial offer are tiny. The odds that a lawyer, a banker or someone similar in a remote country would initially contact you via e-mail are yet smaller; I'd call those odds infinitesimal. Non-zero, but unlikely enough that it is probably more likely that you would win the grand prize in the state lottery four times in a row. Keep in mind that responding in any way to spam e-mails will simply confirm to the sender that your e-mail address is valid and is being read. That is likely to cause you to receive more spam, not less, no matter the content of your response. Hence, it is better to flag the e-mail as spam or junk if your e-mail provider offers that feature, or just delete it if they don't. The same general principles as above also apply to social media messaging and similar venues, but the exact details are highly likely to differ somewhat.", "title": "" }, { "docid": "d3cb5752c88387ee2f3b89b678d01d94", "text": "Cosigning on a loan. More broadly any exchange of value between family members or friends. Despite good intentions, these often go awry.", "title": "" }, { "docid": "226ce7d892c6c571a2662e8febd50f3d", "text": "If some one ever offers High returns and low risk they are either extremely stupid or scamming you. If they did find a high return low risk investment a smart person would buy it then repackage it as a low return low risk investment and then sell it to you. People would still buy and they would make a ton. Either they are lying (scam) or a fool(about as bad)", "title": "" }, { "docid": "e140d380056159ca9372631f6b481ed7", "text": "Pretty much any financial transaction where they start by calling you on the phone is a scam. They aren't doing it for your benefit and the caller is on commission.", "title": "" } ]	[ { "docid": "8f913c481b6e6bedab9ea544c959e216", "text": "You're going to have a hard time finding a legit investment planner that is willing to do things like take short-term positions in shorts, etc for a small investor. Doing so would put them at risk of getting sued by you for mismanagement and losing their license or affiliation with industry associations.", "title": "" }, { "docid": "ddf5fd3f79c3328ebe63da7b040a6570", "text": "Lending of securities is done by institutional investors and mutual funds. The costs of dealing with thousands of individual investors, small share blocks and the various screw-ups and drama associated with each individual are too high. Like many exotic financial transactions, if you have to ask about it, you're probably not qualified to do it.", "title": "" }, { "docid": "c8d5564a970929110c227022086015bc", "text": "Is there any truth to this, or is this another niche scam that's been brewing the last few years? While it may not be an outright scam, such schemes do tend to be on borderline of scams. Technically most of what is being said claimed can be true, however in reality such windfall gains never happen to the investors. Whatever gains are there will be cornered by the growers, trades, other entities in supply chain leaving very little to the investors. It is best to stay away from such investments.", "title": "" }, { "docid": "f6e7a6a6cd8d34129e8d86c385ff0517", "text": "GIC perhaps? These would be quite similar to Certificates of Deposit where one is agreeing to lock up their money for a term and be paid a percentage for doing so. There are various kinds as some may be linked to market returns in some cases and others are just simple interest.", "title": "" }, { "docid": "7b93e0783a91335c0418e313471690db", "text": "\"Mostly ditto to @grade'eh'bacon, but let me add a couple of comments: Before I did anything, I'd find out more about what's going on. Anytime someone tells me that there's a problem with \"\"security codes or something\"\", I get cautious. Think about what the possibilities are here. Your relative is being scammed. In that case, helping him to transfer his money to the scammer is not the kind of help you really want to give. Despite your firm belief in your relative's integrity, he may have been seduced by the dark side. If he's doing something illegal, I'd be very careful about getting involved. My friends and relatives don't ask me to commit crimes for them, especially not in a way that leaves me holding the bag if things go wrong. Assuming that what is going on here is all legal and ethical, still there is the possibility that you could be making yourself liable for taxes, fees, whatever. At the very least I'd want to know what those are up front. As @Grade'eh'bacon, if he really has a problem with a lost password or expired account, by all means help him fix that problem. But become someone else's financial intermediary has many possible pitfalls.\"", "title": "" }, { "docid": "138650c4890cb9a76d2737a5d6ab1288", "text": "\"I will disagree with some of the other answers here. In my view, the most important dimension of the situation is not your friend's potential loss but the potential losses of the people he may convince by using his position as youth group leader, etc., to draw more them into the scam. Exactly how to handle this depends on many factors that aren't mentioned in your question (and probably rightly so, as this aspect of the situation moves beyond personal finance). For instance, if your friend is a \"\"pillar of the community\"\" who is widely trusted, and you are not, there may be little you can do, since people will believe him and not you. If you have some influence over the groups he is trying to recruit, you can attempt to provide a counterweight to his recruitment activities. Again, how to do this depends on other factors, such as how he is recruiting them. If he is just privately contacting individuals and inviting them to these meetings, you may have to just keep your eyes peeled for anyone who seems tempted and try to dissuade them before they suffer the \"\"brainwashing\"\". If he actually tries to do some sort of public recruitment (e.g., holding a meeting himself), you could try to inject doubt by, e.g., attending and asking probing questions to expose the dangers. If you think the danger is widespread, you could consider taking some more public action, like writing a column in a local paper about this organization. Of course, another major factor is how much you think people stand to lose by this. However, in your question you indicated that your friend has invested \"\"multiple month or years of income\"\". If he intends to pressure others to invest similar amounts, this sounds to me like enough danger to warrant some preventive action. Few people can afford to lose months or years of income, and sadly those most vulnerable to a scammer's siren song are often those who can least afford it. It doesn't sound like a situation where you'd have to devote your life to the cause of stopping it, but if I knew that dozens of people in my community stood to lose years of income, I'd want to make at least a small effort to stop them, rather than just keep my mouth shut. In doing this, you may lose your friendship. However, you stated that your goal is to resolve the situation in a way that is \"\"best with lowest loss of money for everybody\"\". If you really take this utilitarian view, it is likely that you may have to give up on the friendship to prevent other people from losing more money.\"", "title": "" }, { "docid": "fe0594e196adef4e582cb8dc2d250db5", "text": "\"They're not at all the same. A Ponzi scheme is a fraudulent investment method that pays off early investors with deposits from later ones. Fractional reserve banking is the practice of keeping only a fraction of a bank's demand deposits on reserve, while lending out the rest. The reserve requirement is how central banks limit the amount of money that can float around in commercial banks. In the latter case, there is no \"\"later investor\"\" somewhere down near the bottom of a money food chain. Every dollar, regardless of whether it was created fresh from one of the federal reserve banks or created via several chained loans, is worth the same. If the dollars depreciate for whatever reason, they do so for everyone. Now, if you want a good example of a Ponzi scheme that is actually legal, look at Social Security. Edit: A \"\"debt-based society\"\" is separate from fractional-reserve banking. If the Fed creates $1,000,000, the total amount of money that can float around is still capped based on whatever the reserve requirement is. (For a 10% reserve requirement, it's something like $10,000,000.) We have unsustainable debt increases because of lack of self-control on the part of our leaders. The fractional-reserve process helps it along, but it's not the culprit. It's an enabler.\"", "title": "" }, { "docid": "3cb9b1c0db7e81406028ca63aa929817", "text": "If anyone could reliably pick winners, they could make more money by investing in those winners than by selling their advice. Generally, when someone sends you unsolicited hype about stocks, that's because they're trying to pump the price up so they can dump their own shares before it collapses again. Also note that, these days, it's remarkably easy to run the scam where you sell half your customers buy advice and the other half sell advice on the same stock. Each time, some of the customers drop out in disgust (half, minus whoever decides to give you another chance) and the rest pay you for the next iteration. You can make a lot of money before you run out of suckers. That, all by itself, is good reason to be skeptical about anyone who doesn't publish their full history so it can be audited for such shenanigans.", "title": "" }, { "docid": "2981c6213a53646f8d4185fd4cd78b66", "text": "A pattern of high level people buying or selling is a sign, positive or negative. An individual, not so much. He can be selling to diversify, trying to keep his investments from being all in the company. He can be selling to pay his large bills. Same reasons any of us might be selling an investment to have cash to use.", "title": "" }, { "docid": "c95b01fcfd47ce1346fbba3a8e90cf64", "text": "\"Careful with the \"\"stock stolen from your account\"\" thing. SIPC protects investors against broker/dealer insolvency. Don't think they provide protection against theft.\"", "title": "" }, { "docid": "cfab0ae02e21c2f28edb96c96f33fb60", "text": "Yep! And /u/msattam, if you're just getting started with learning this stuff... > So the company, acting in the investors' best interest... ... while u/S4ndals is correct here in an academic sense, to expand on his point, you'll soon find the mileage to vary quite a bit on this issue in the real world. The vast majority of companies rarely act in the investors' best interest as a whole. It's uhhh, it's complicated.", "title": "" }, { "docid": "a7164feb9ee4f3426bd83df83e9784f9", "text": "I believe the only thing you haven't mentioned to him is the possibility that his activity is criminally fraudulent. I would sit him down, and say something substantially similar to the following: We've talked about your investment before, and I know you believe it's fine. I just want to make sure you understand that this is very likely fraudulent activity. I know you believe in it, but you've said you don't understand how or why it works. The problem with that is that if it is a fraud you can't protect yourself from criminal prosecution because you didn't understand what you were doing. The prosecutor will ask you if you asked others to give you or the organization money, and then they will convict you based on trying to defraud others. It doesn't matter whether you did it on purpose, or just because you believed the people you are investing in. So I very strongly advise you to understand exactly what the system is, and how it works, and then make sure with a lawyer that it's legal. If it is, then hey, you've learned something valuable. But if it's not, then you will save yourself a whole lot of trouble and anguish down the road if you step away before someone you attract to the investment decides to talk to their accountant or lawyer. A civil lawsuit may be bad, but if you're criminally prosecuted it will be so much worse. Now that I've said my piece, I won't talk to you about it anymore or bother you about it. I wish you luck, and hope that things work out fine. I wouldn't talk to the police or suggest that I'd do anything of that nature, without proof then there's no real way to start an investigation anyway, and unfortunately scams like this are incredibly hard to investigate, so the police often spend little to no time on them without a high level insider giving up evidence and associates. Chances are good nothing would happen to your friend - one day the organization will disappear and he won't recover any more money - but there's a distinct possibility that when that happens, the people below him will come for him, and he won't be able to look further up the chain for help. Perhaps the threat of illegal activity will be enough to prevent him from defrauding others, but if not I think at least you can let it go, and know that you've done everything for him that might work.", "title": "" }, { "docid": "ae84dbd0c02ad1dcfe27cacc2d54e658", "text": "Taking all your assumptions: With Roth, you take $6112 from work, (let's call you tax rate 10%) pay $612 in taxes, and contribute $5500 (the max if you are younger than 50). This $5500 will grow to $21,283 in 20 years at 7% annual growth ($5500*(1.07^20)), and you will pay no additional taxes on it. With the traditional IRA, you take $6112 from work, pay $612 in taxes, and contribute $5500. You will receive a tax deduction at tax time of $612 for the contribution. This money will also grow to $21,283. This will be taxed at your ordinary income rate (which we're calling 10%), costing you $2123 at the time of withdrawal. You will have $19,155 left over. EDIT: If you invest your tax savings from every contribution to the Traditional IRA, then the numbers wash out. Perhaps a pivotal question is whether you believe you will have greater taxable earnings from your investments in retirement than you have in taxable earnings today -- affecting the rate at which you are taxed.", "title": "" }, { "docid": "a55fabf6e687d84b22721d68d42c5daf", "text": "You might want to consider how much effort mitigating this risk is worth. For example, having homeowner's insurance and sufficient documentation of your valuables is probably enough to satisfy your fears if they are based on simply losing your property. In the end is there really any benefit in living like you don't have money in an effort to keep people stealing it from you? That said, One piece of good advice I have heard for how to avoid encouraging robbers is to avoid putting boxes for expensive items (e.g. electronics) out by the trash until the morning they pick it up. No need to advertise that you just bought a super expensive home-theater system.", "title": "" } ]	fiqa
18470b42de473d82ff3f096f172fcda0	Why do so many NFL (pro football) players have charities?	[ { "docid": "c38043605aa2dd604ad0576098e4d1b9", "text": "\"In addition to tax-related benefits, one answer may be that it helps them avoid being inundated with requests to support other foundations. Most charities have access to public records that indicate potential donors based on income and demographic. They can use that info to solicit for donations. \"\"Hey NFL Player, you have lots of money, and we have cute starving emus that really need your help!\"\" Here's a blurb from Foundation Source about some of the benefits to starting your own foundation. Get an Immediate Tax Deduction, but Give Later: You get the tax deduction when the foundation is funded, then make your charitable gifts over time. Leave a Lasting Legacy: Foundations set up in perpetuity can burnish your name far beyond your lifetime. Because gifts are made from an endowment that generates investment revenue, the total gifts made by the foundation can far surpass the actual funding. Be Taken More Seriously as a Philanthropist: A foundation imparts a gravitas that causes people to take your philanthropy more seriously, due to the structured, organized approach you employ for your giving. Sidestep Unsolicited Requests: When you focus your foundation on specific giving areas, your mission statement can be used to politely turn down off-target funding requests. Deepen and Focus Your Philanthropy: Whereas individual donors often spread their giving among as many causes as possible, the formalized structure of a foundation often encourages donors to narrow their focus to specific causes. Build a Better Family: As family members take on philanthropic research, present their findings to the board, participate in the decision-making process, and track results, they hone skills that will serve them for years to come. Tax-Deductible Grants to Individuals in Need: A private foundation allows you to provide emergency assistance directly to individuals using dollars for which you’ve already received a tax deduction. Run Charitable Programs Without Setting Up a Separate Nonprofit: Direct charitable activities are IRS-approved programs that permit foundations to directly fund and carry out their own projects. Pay Charitable Expenses: All legitimate and reasonable expenses incurred in carrying out the foundation’s charitable mission can be paid by the foundation and will count toward the annual minimum distribution requirement. Provide Loans Instead of Grants: When used to support a charitable purpose, private foundations can employ loans, loan guarantees, and even equity investments, which are paid back (potentially with interest), so you can recycle your philanthropic capital for other charitable causes. https://www.foundationsource.com/resources/library/top-10-advantages-of-a-private-foundation/ There's a similar list here on the website for an attorney that specializes in philanthropy and non-profits. I won't copy/paste that list as it's similar, but I wanted to provide an additional source confirming the above benefits. This link contains some disadvantages as well. http://www.hurwitassociates.com/l_start_pros.php\"", "title": "" }, { "docid": "e67e598dd13f66a0c548992c1a911f47", "text": "\"BobbyScon's answer really covers this, but perhaps isn't sufficiently explicit. Reason 1 of the quotation is the largest, by far: Get an Immediate Tax Deduction, but Give Later: You get the tax deduction when the foundation is funded, then make your charitable gifts over time. Having a \"\"personal\"\" foundation means that you make donations whenever it is appropriate from a personal finance point of view, but then actually perform the charitable giving in a time that is convenient. So you fund the foundation on Dec. 31, say; that gets the money out of your hands, and out of your taxable income, for the prior tax year. Then you're not required to do anything else with that money until a time and place where it's convenient to you. In many cases, they set it up not as a foundation but as a Donor Advised Fund. These are of late becoming extremely popular among the wealthy, largely the ease of setting them up and the above. The other major advantage of a Donor Advised Fund is simplicity in tax season: you have exactly one charitable donation recipient, with one receipt (or one set of them if you donate over time).\"", "title": "" } ]	[ { "docid": "4cc335f36132c24051d2c46342198c59", "text": "Considering I know people who don't give a rats ass about football but watch the Super Bowl for the halftime show, the commercials and the score, the NFL should be shelling out a big piece of those tickets to the performers and give away free ad time.", "title": "" }, { "docid": "d3a07db7134b4aabb36326eddcc577d8", "text": "\"I'd suggest you to separate \"\"doing good\"\" from \"\"earning profit\"\". Look at the guys like Warren Buffett and Bill Gates (or Carnegie and Ford for that matters). They understand that you can't reconcile the two goals, so they donate for free what they earned for profit. If you want to make a social impact with your money, you can check the charity programs that have a confirmed record of a positive impact on people's lives. Non-profits that studied such programs publish their results extensively: AidGrade compiles this research and suggests direct donations to the programs that demonstrated best outcomes per dollar invested:\"", "title": "" }, { "docid": "573d1dd0b2c5c0fb9398b4a1d101a5ef", "text": "Because salaries aren't high enough. If the salaries were higher more people would pursue that field. I'm not going to begrudge anyone making billions, but Microsoft is raking in cash, and it's obvious that they'd rather horde it than spend it on talent. Well, ask a professional sports team about that equation. Just because salaries are in the 100s of thousands doesn't mean that they're too high. Especially when you look at these companies financial filings.", "title": "" }, { "docid": "c498d47cda8499cefa5cdcd535997fdc", "text": "If I donate $10,000 to charity then I can deduct that $10,000 from my income and not pay income taxes on it. So if I make $50,000 a year then I will only pay income taxes on $40,000 instead of $50,000 since I donated $10,000 to charity. This is what is meant when charity contributions are said to be tax deductible. Don't feel like you have to donate to charity. You owe no one anything. You do more for others by working (assuming you work in the private sector). If you know of someone personally that is in need of aid then you could give them some help directly. I find this more effective then blindly dumping money in a bureaucratic, inefficient charity. I also find there are very few people in need of charity. Personally, I think charity donations are a way for people to feel good about themselves. They rarely care if their donations are effective.", "title": "" }, { "docid": "a27283e0fed03bc3d03490f3ac515641", "text": "Yes. Donating to name-brand charities or politicians will result in you geting solicitied for more donations -- charities sell your info and donation habits.", "title": "" }, { "docid": "13a1c9911416ddb3d6e8c40927886778", "text": "If you don't have much money, and more important, don't itemize, donations are strictly between you and your karma. If you itemize (from a combination of mortgage interest, property tax, and state tax), by donating used goods, you can get some return on your taxes, and feel good about yourself. When I donate at charity time (December for me) I don't look at every $1000 check as a $250 benefit back to me, although that's the effect. I care deeply about the charity's cause and have personally visited each of them. You want to drop $50 to some huge agency that's funding cancer research? No objection. But when I visit a Veteran's Center or School for the Blind, I can see the good work my money is doing.", "title": "" }, { "docid": "fe5167bac9cafefbf51d6b2b56d5510e", "text": "Generally this is simply a matter of the business paying taxes on the sale (income), balanced by a credit (charitable deduction), which eventually adds up to their not paying taxes on money they collected in order to pass it along to the charity. Note that because the business is taking the deduction on that donation, you can't take a deduction on the charitable portion of your purchase.", "title": "" }, { "docid": "3491f61b38a6415470586610f3170495", "text": "\"One reason is because car insurance is mandated. Mandated insurance means the government is forcing people to purchase it, which also means that everyone must have the opportunity to purchase it at a reasonable cost, even if the insurer would normally not choose to insure them. In mandated industries, risk pools are formed which means that as a whole, lower risk members partially subsidize higher risk members. In mandated industries that have a large risk variance, the insurance system would break down if everyone was charged their \"\"fair share\"\" because high risk members would be unable to afford a policy. (This is even more prominent with health insurance than car insurance because the difference in risk is vastly greater.) On a positive note, perhaps you may get a warm and fuzzy feeling knowing that you are helping out others \"\"in need\"\".\"", "title": "" }, { "docid": "bfc26e9f5a92aec93619af2006865fbd", "text": "The chronically ill should be seeking out charities not insurance companes. Since companies are into making profit and paying thier employees. While someone who is already fucked is a hugely bad bet for a new client. I'ts nothing personal just the way things are. Your rights end where someone else's rights begin. Meaning you can't force other people to pay your way through life. As much as being able to breath is an achievement for some it does't entitle people to a free ride at someone else's expense.", "title": "" }, { "docid": "88f205dee53d8d91a7135f95234d8a78", "text": "An interesting look that ties in quite a few of my interests on the commonality of being data-driven gambling. You know it's funny because watching MoneyBall, my first reaction is that Peter Brand's (after Jonah Hill) data analysis was something many are already doing in fantasy. But fantasy sports is a hobby for most of us :P Though in bigger money leagues, this could be debatable haha. *As a side note, I'm particularly surprised that the NBA betting profits outpaced NFL profits in 2011 (48.8M vs. 44.2M), but I'm curious to see if that trend holds through the 2012 season.", "title": "" }, { "docid": "a59b47296b44e76628dfc4c7e943030e", "text": "The good news is that your parent organization is tax exempt and your local organization might be. The national organization even has guidelines and even more details. Regarding donations they have this to say: Please note: The law requires charities to furnish disclosure statements to donors for such quid pro quo donations in excess of $75.00. A quid pro quo contribution is a payment made partly as a contribution and partly for goods or services provided to the donor by the charity. An example of a quid pro quo contribution is when the donor gives a charity $100.00 in consideration for a concert ticket valued at $40.00. In this example, $60.00 would be deductible because the donor’s payment (quid pro quo contribution) exceeds $75.00. The disclosure statement must be furnished even though the deductible amount does not exceed $75.00. Regarding taxes: Leagues included under our group exemption number are responsible for their own tax filings with the I.R.S. Leagues must file Form 990 EZ with Schedule A if gross receipts are in excess of $50,000 but less than $200,000. Similar rules also apply to other youth organizations such as scouts, swim teams, or other youth sports.", "title": "" }, { "docid": "27e7471e79644c929d488aae81cdb97d", "text": "1. People love free and don't hate ads all that much. 2. There are plenty of sites that have a donate or subscribe button in lieu of advertising. But it only really works where the fan base is passionate.", "title": "" }, { "docid": "1dad805a62a75ffa9dc85b5cd979d323", "text": "So... we should continue to give money to an industry that essentially shakes down sick people because we have always given money to this industry. I kinda think we should go back and look at the ridiculous earnings of some of the top executives and enact a special tax to take it back and use it to actually fund healthcare.", "title": "" }, { "docid": "7656f373c9e4cfffccc92e080131a065", "text": "If the charity accepts stock, you can avoid the tax on the long term cap gain when you donate it. e.g. I donate $10,000 in value of Apple. I write off $10,000 on my taxes, and benefit with a $2500 refund. If I sold it, I'd have nearly a $1500 tax bill (bought long enough ago, the basis is sub $100). Any trading along the way, and it's on you. Gains long or short are taxed on you. It's only the final donation that matters here. Edit - to address Anthony's comment on other answer - I sell my Apple, with a near $10,000 gain (it's really just $9900) and I am taxed $1500. Now I have $8500 cash I donate and get $2125 back in a tax refund. By donating the stock I am ahead nearly $375, and the charity, $1500.", "title": "" }, { "docid": "b31ab47e0f946ed8a68cdd38d8533e12", "text": "\"Fighting poverty is akin to \"\"fighting drug use\"\". No matter how much money is raised via taxation there will always be a bottom percentile of individuals who are not \"\"wealthy\"\" in relation to others above them in society and especially Bill Gates. If he really wants to make a difference then he should support rational and reasonable economic propositions which raises the standard of living and lowers the cost of living, but I suspect that would not bring him any sort of feel good press as his \"\"Tax the rich, give to the poor\"\" proposals.\"", "title": "" } ]	fiqa
bc10c022fc2d9c514efdccf4883a59ac	23 and on my own, what should I be doing?	[ { "docid": "1be62a1bbc7695255cb471e43e3333d2", "text": "\"Congratulations on earning a great income. However, you have a lot of debt and very high living expenses. This will eat all of your income if you don't get a hold of it now. I have a few recommendations for you. At the beginning of each month, write down your income, and write down all your expenses for the month. Include everything: rent, food, utilities, entertainment, transportation, loan payments, etc. After you've made this plan for the month, don't spend any money that's not in the plan. You are allowed to change the plan, but you can't spend more than your income. Budgeting software, such as YNAB, will make this easier. You are $51,000 in debt. That is a lot. A large portion of your monthly budget is loan payments. I recommend that you knock those out as fast as possible. The interest on these loans makes the debt continue to grow the longer you hold them, which means that if you take your time paying these off, you'll be spending much more than $51k on your debt. Minimize that number and get rid of them as fast as possible. Because you want to get rid of the debt emergency as fast as possible, you should reduce your spending as much as you can and pay as much as you can toward the debt. Pay off that furniture first (the interest rate on that \"\"free money\"\" is going to skyrocket the first time you are late with a payment), then attack the student loans. Stay home and cook your own meals as much as possible. You may want to consider moving someplace cheaper. The rent you are paying is not out of line with your income, but New York is a very expensive place to live in general. Moving might help you reduce your expenses. I hope you realize at this point that it was pretty silly of you to borrow $4k for a new bedroom set while you were $47k in debt. You referred to your low-interest loans as \"\"free money,\"\" but they really aren't. They all need to be paid back. Ask yourself: If you had forced yourself to save up $4k before buying the furniture, would you still have purchased the furniture, or would you have instead bought a used set on Craigslist for $200? This is the reason that furniture stores offer 0% interest loans. They got you to buy something that you couldn't afford. Don't take the bait again. You didn't mention credit cards, so I hope that means that you don't owe any money on credit cards. If you do, then you need to start thinking of that as debt, and add that to your debt emergency. If you do use a credit card, commit to only charging what you already have in the bank and paying off the card in full every month. YNAB can make this easier. $50/hr and $90k per year are fairly close to each other when you factor in vacation and holidays. That is not including other benefits, so any other benefits put the salaried position ahead. You said that you have a few more years on your parents' health coverage, but there is no need to wait until the last minute to get your own coverage. Health insurance is a huge benefit. Also, in general, I would say that salaried positions have better job security. (This is no guarantee, of course. Anyone can get laid off. But, as a contractor, they could tell you not to come in tomorrow, and you'd be done. Salaried employees are usually given notice, severance pay, etc.) if I were you, I would take the salaried position. Investing is important, but so is eliminating this debt emergency. If you take the salaried position, one of your new benefits will be a retirement program. You can take advantage of that, especially if the company is kicking in some money. (This actually is \"\"free money.\"\") But in my opinion, if you treat the debt as an emergency and commit to eliminating it as fast as possible, you should minimize your investing at this point, if it helps you get out of debt faster. After you get out of debt, investing should be one of your major goals. Now, while you are young and have few commitments, is the best time to learn to live on a budget and eliminate your debt. This will set you up for success in the future.\"", "title": "" }, { "docid": "3ad260835a0873e58ea782221470c88e", "text": "\"Assuming the numbers in your comments are accurate, you have $2400/month \"\"extra\"\" after paying your expenses. I assume this includes loan payments. You said you have $3k in savings and a $2900 \"\"monthly nut\"\", so only one month of living expenses in savings. In my opinion, your first goal should be to put 100% of your extra money towards savings each month, until you have six months of living expenses saved. That's $2,900 * 6 or $17,400. Since you have $3K already that means you need $14,400 more, which is exactly six months @ $2,400/month. Next I would pay off your $4K for the bedroom furniture. I don't know the terms you got, but usually if you are not completely paid off when it comes time to pay interest, the rate is very high and you have to pay interest not just going forward, but from the inception of the loan (YMMV--check your loan terms). You may want to look into consolidating your high interest loans into a single loan at a lower rate. Barring that, I would put 100% of my extra monthly income toward your 10% loan until its paid off, and then your 9.25% loan until that's paid off. I would not consider investing in any non-tax-advantaged vehicle until those two loans (at minimum) were paid off. 9.25% is a very good guaranteed return on your money. After that I would continue the strategy of aggressively paying the maximum per month toward your highest interest loans until they are all paid off (with the possible exception of the very low rate Sallie Mae loans). However, I'm probably more conservative than your average investor, and I have a major aversion to paying interest. :)\"", "title": "" }, { "docid": "32b9862ba6ef761b95140b24e1a39990", "text": "You are asking all the right questions. I predict a bright future! In addition to the excellent advice from Phil, I would add that NOW is the time to think about investing. If you have not yet started a retirement account, open up a Roth IRA and max it out ($5.5k in 2014) every year. The time value of money is strong and you will be thanking yourself in 40 years for starting now. Yes, paying down debt is important, and you should do that, too. It's a balance. If you get converted to a full-time employee, take part in any retirement plan they offer, and max out any matching because it's free money.", "title": "" }, { "docid": "ca00ece5bb83becad714db3906e0a75d", "text": "Okay, since you work hourly there are two substantial changes you can make: 1) Move out of Astoria and closer to Jersey City, such as, to Jersey City. Move out of NYC into Jersey!? Heresy! But that ship sailed when you started working there. 2) Work more hours now that you aren't spending 2 hours and 30 minutes of your life commuting. You can make an extra $125 per day, in theory. Since this is $625 more a week, and $2500 a month, it is a substantial change you can make. Presupposing that your current contract has more hours to work.", "title": "" }, { "docid": "9c70ada0fb9fa73631df94b4b4ed6a3f", "text": "\"You are doing Great! But you might want to read a couple of books and do some studying on budgeting and personal finance - education yourself now and you will avoid pain in the future. I learned a lot from reading Dave Ramsey's Total Money Makeover, and I have found some great advice from the simple budgeting guidelines on LearnVest. Budget in these three categories with these percentages, You may find that your \"\"essentials\"\" lower than 50%, because you are sharing room and utilities. You want to put as much into \"\"financial\"\" as you can for the first 1-2 years, to reduce (or eliminate) your student loan debt. Many folks will recommend you save six months (salary/expenses) for emergencies and unexpected situations. But understand that you are in debt now, and you have a unique opportunity to pay off your debt before your living expenses creep up (as they so often do). Since you are a contractor, put aside 2 months expenses (twice what I would normally advise), and then attack paying off your debts with passion. Since you have a mix of student loans, focus on paying them off by picking one at a time, paying the minimum against the others while you pay off the one you picked, then proceed to the next. Dave Ramsey advises a Debt Snowball, paying the smallest one first (psychological advantage, early wins), while others advise paying the highest interest off first. Since you have over $2400/month available to pay down debt, you could plan on reducing your student loan debt substantially in a year. But avoid accumulating other debt along the way. Save for larger purchases. Your bedroom purchase may have been premature, but you needed some basics. But check your contract. Since many 0% furniture loan deals retroactively charge interest if you don't pay them off in full - you might want to make regular payments, and pay the debt off a month early (avoid any 'gotcha's). You might want to open a retirement account - many folks recommend a Roth account for folks your age - it is after tax, but you don't pay tax when you withdraw money. Roth is better when you have lots of deductions (think mortgage, kids). But some retirement account would be great to get started. Open a credit union account (if you can), that will make getting a credit card or personal loan (installment) easier. You want to build a credit file, but you don't want credit card debt (seems contradictory), so opening 2 credit cards over the next year will help your credit. You want a good credit mix (student loans, revolving, installment, and mortgage - wait on that one).\"", "title": "" }, { "docid": "af4c4656175187a75c39d3eddf6c605b", "text": "I also had a student loan and glad you are taking a good look on interest rate as it really makes a huge difference. One of the strategies I followed was since my credit improved as I stepped out of school. I took advantage of a good 0 percent credit card. I applied for discover and got a decent credit limit. There are 2 particular things you are looking for in a credit card in this situation Usually the initial $0 transaction charge is only for a couple of months so ensure you take advantage of that. What is the benefit: Imagine being able to pay off that higher interest rate balance with 0% and not have to worry about it immediately. That way you save on the interest you would be paying and stress as well Watch out for: Although you have to ensure that you do payoff the money you paid through the 0 percent credit card ( which may have been put off for a year or even 15 months or so) other wise you may have to pay it all at once as the offer is expiring. Note: for credit cards ensure to note when the 0% is expiring as that is usually not mentioned on the statement and you may have to call the customer service. I was in a similar situation and was able to pay it all off fairly quickly. I am sure you will as well.", "title": "" } ]	[ { "docid": "532e53a0fb994835777206b028413f9e", "text": "\"You should certainly look into investments. If you don't expect to need the money until retirement, then I'd put it in an IRA so you get the tax advantages. It makes sense to keep some money handy \"\"just in case\"\", but $23k is a very large amount of money for an emergency fund. Of course much depends on your life situation, but I'm hard pressed to think of an unexpected emergency that would come up that would require $23k. If you're seriously planning to go back to school, then you might want to put the money in a non-retirement fund investment. As I write this -- September 2015 -- the stock market is falling, so if you expect to need the money within the next few months, putting it in the stock market may be a mistake. But long term, the stock market has always gone up, so it will almost certainly recover sooner or later. The question is just when. Investing versus paying off debts is a difficult decision. What is the interest rate on the debt? If it's more than you're likely to make on an investment, then you should pay off the debt first. (My broker recently told me that over the last few decades, the stock market has averaged 7% annual growth, so I'm using that as my working number.) If the interest rate is low, some people still prefer to pay off the debt because the interest is certain while the return on an investment is uncertain, and they're unwilling to take the risk.\"", "title": "" }, { "docid": "03bd51af0037dd95496e5d212684437d", "text": "\"You are your own worst enemy when it comes to investing. You might think that you can handle a lot of risk but when the market plummets you don't know exactly how you'll react. Many people panic and sell at the worst possible time, and that kills their returns. Will that be you? It's impossible to tell until it happens. Don't just invest in stocks. Put some of your money in bonds. For example TIPS, which are inflation adjusted treasury bonds (very safe, and the return is tied to the rate of inflation). That way, when the stock market falls, you'll have a back-stop and you'll be less likely to sell at the wrong time. A 50/50 stock/bond mix is probably reasonable. Some recommend your age in bonds, which for you means 20% or so. Personally I think 50/50 is better even at your young age. Invest in broad market indexes, such as the S&P 500. Steer clear of individual stocks except for maybe 5-10% of your total. Individual stocks carry the risk of going out of business, such as Enron. Follow Warren Buffet's two rules of investing: a) Don't lose money b) See rule a). Ignore the \"\"investment porn\"\" that is all around you in the form of TV shows and ads. Don't chase hot companies, sectors or countries. Try to estimate what you'll need for retirement (if that's what your investing for) and don't take more risk than you need to. Try to maintain a very simple portfolio that you'll be able to sleep well with. For example, check into the coffeehouse investor Pay a visit to the Bogleheads Forum - you can ask for advice there and the advice will be excellent. Avoid investments with high fees. Get advice from a good fee-only investment advisor if needed. Don't forget to enjoy some of your money now as well. You might not make it to retirement. Read, read, read about investing and retirement. There are many excellent books out there, many of which you can pick up used (cheap) through amazon.com.\"", "title": "" }, { "docid": "9f359e430e3e8e2f14b3d2d65a4f203e", "text": "Congrats on making it this far debt free. It is rare, but nice to be in the situation that you are in. The important thing here is that you want to remain debt free. That's really what the emergency fund is all about: it keeps you from needing to go into debt should something unexpected happen. You've got 1.5 months worth of expenses saved up, and that's great. If you don't have a family or other responsibilities, that might be enough, but think about this: how are you paying for school, and what would happen if those funds stopped coming in? If you are paying for school out of your own income, what happens if you lose your job? If someone else, perhaps your parents, is paying for school, what happens if they are suddenly no longer able to do so? While you have extra cash, you want to be saving it up for situations like this. If I were you, I would build up that emergency fund until it got to the point where it could pay all your expenses and tuition until graduation. Hopefully, you won't need to touch it, but it will be there if you need it. Since you need to be able to access your money quickly, it is generally recommended to park this money in a savings account, where it is very safe. Mutual funds are a great way to invest, but they are not safe in the short term. Don't stress out about not being able to start retirement investing just yet. Making sure you can finish school debt free is the best investment you can make right now. After you graduate and land a job, you can start investing aggressively.", "title": "" }, { "docid": "5eaf13d58580e29741ebef787603f7c5", "text": "The compound interest argument is a good one. While you are young, it is important to save, since time is on your side for compounding of interest. I think the 401K is a good idea, but not for all of your savings. Think about saving a percentage of your income, but put it in a couple places. Your Roth is also a great thing, since you'll be able to remove money without paying tax again. The 401k (tax deferred) is a good idea if your company matches any of it (FREE MONEY!), and because it lowers your taxable income now, and it's taken out of your check before you see it, so you don't miss it. It's still important to save other money that you can have for ready cash (unexpected dead car, for example, or medical bills, or what have you.) I find that I don't want to be managing my investments from minute to minute, or doing my own trades (I'd rather do other things), so I have a mix (Roth, 401k, cash savings) of automated contributions for savings, and I think hard before buying new stuff. The point is to save, and if possible, try to save at least 10% of your income.", "title": "" }, { "docid": "d003b07bc1b303441f2b89575c367b78", "text": "\"It all depends on what your financial goals are when you are ready. You sound like you could be ready today if you wanted to be. The steps that I would take are. Create a monthly draft budget. This doesn't have to be something hard and fast, just a gague of what your living expenses would be compared to your after-tax salary. Make sure there would be room for \"\"fun\"\" money. a. Consider adding a new car fund line item to this budget, and deducting that amount from your paycheck starting now so that you can save for the car. Based on the most realistic estimate that you can make, you'll get a good idea if you want to spend the money it takes to move out alone now or later. You'll also see the price for various levels of rentals in your area (renting a single family home, townhouse, condo, apartment, living in a rented room or basement, sharing a place with friends, etc) and know some of the costs of setting up for yourself. Since you're looking at the real estate market, you may want to do a cost comparison of renting versus buying. I've found the New York Times interactive graphic on this is excellent. If you are looking to buy, make sure to research the hidden costs of buying thoroughly before taking this step. To answer your last question, if you have the cash you should consider upping your 401K investment (or using Roth or regular IRA). Make sure you are investing enough to get your full employer match, if your employer offers one, and then get as close as you can to government maximum contribution limits. Compound interest is a big deal when you are 23.\"", "title": "" }, { "docid": "91298b02ff1d1cb542057e55f27c6248", "text": "\"Your goals are excellent. I really admire your thoughts and plans, and I hold you in high esteem. Good credit is indeed an important thing to have, and starting young is THE smart idea with respect to this. I see that you have as a goal the purchase of a home. Indeed, another fine ambition. (Wow, you are a different breed from what I normally encounter on the internet; that's for sure !) Since this won't happen overnight, I would encourage you to think about another option. At this point in your life you have what few people have: options, and you have lots of them. The option I would like to suggest you consider is the debt free life. This does NOT mean life without a credit card, nor does it mean living with ones parents all their days. In its simplest form, it means that you don't owe anybody anything today. An adapted form of that; with the reality of leases and so on, is that you have more immediate cash in the bank than you have contractual responsibilities to pay others. e.g., if the rent on a place is X, and the lease is 12 months, then you don't sign until you have 12X in the bank. That's the idea. If there is anything good that these past 10 years of recession and financial disasters have provided us as a nation, it is a clear picture presented to our young people that a house is not a guaranteed way to riches. Indeed, I just learned this week of another couple, forced out by foreclosure again. Yes, in the 1970s and 1980s the formula which anyone could follow was to take a mortgage on a single family house; just about any house in any community; and ten years later double your money, while (during those ten years) paying about the same (and in a few years, actually less) amount of money as you would for an apartment with about half the space. Those days were then, not now, and I seriously doubt that I will ever see them again in my lifetime. You might, at your age, one day. In the mean time, I would like to suggest that you think about that word options again; something that you have that I don't. If your mind is made up for certain that a house is the one and only thing you want, okay; this does not apply. During this time of building your credit (we're talking more than a year) I would like to encourage you to look at some of the other options that are out there waiting for you; such as... I also encourage you to take a calculator and a spreadsheet (I would be surprised if there is no freeware out there to do this with a few clicks) and compare the past 30 years of various investments. For example... It is especially educational if you can see line charts, with the ups and downs along the way. One last thing; about the stock market, you have an option (I love that word when people your age are actually thinking) called \"\"dollar cost averaging\"\". If you are not aware of this concept, just ask and I will edit this post (although I'm confident it has been explained by others far better than myself on this very site). Hit just about any solid stock market investment (plain old mutual fund, even with a load, and it will still work) and I believe you'll see what I'm trying to get across. Still, yes, you need a roof, and a young person should clearly plan on leaving parents in a healthy and happy way; so again, if the house is the one and only goal, then go for it kid (uhm, \"\"kid\"\", if you're still under 18). All the best. Do remember that you will be fixing the pipes, not the maintenance guy.\"", "title": "" }, { "docid": "59001b744c03bd891f700de8949fd673", "text": "\"First of all, kudos for thinking about budgeting at 21 years old. So many people don't plan with their money, and years later wonder where it all went. You are doing a lot of things right with your budget. You've got saving goals, namely your next car and a down payment on a house. You are saving almost 20% of your income for retirement, which is amazing. I like the luxury fund, too. It is good to put some money aside that you can spend on whatever you want, guilt free, because you know that everything important is already planned for. When it comes to budgeting, one thing to remember is that your budget does not have to be perfect, and it is not set in stone. If you find that your amount for \"\"living costs\"\" (which I'm assuming includes things like food, utilities, and rent) is too low, you can allocate more money to it and reduce something else. There is no need to feel bad if you end up having to change some things around in the budget. Congratulations on being debt free! I would encourage you to stay out of debt. Keep the credit cards paid in full each month, and save up for your next car so you can pay cash for that, too. Another saving goal that I would recommend adding to your budget would be an emergency fund. This is basically a pile of cash that is available to you in case something unexpected and urgent comes up that you haven't planned for. By having the emergency fund in place, you won't be forced to go into debt due to an emergency. The amount recommended is usually 3 to 6 months' worth of your expenses.\"", "title": "" }, { "docid": "0c3222f7e7299fa077a176bf2df9e034", "text": "\"Excellent questions! Asking such questions indicates something special about yourself. The desire to learn and adjust your beliefs will increase your chance of success in your life. I would use a wide variety of authors to increase your education. Myself I prefer Dave Ramsey to Clark Howard, but I think Clark is very good. The first thing you should focus on is learning how to do and live by a budget. Often times, adults will assume that you are on a budget because you are broke. It happens with my friends and my youngest child is older than you. Nothing could be further from the truth. A budget is simply a plan on how you will spend your income so you don't run out of money before you run out of month. Along with budgeting I would also focus on goal setting. This is the type of \"\"investing\"\" you should be doing at your age. For example if your primary goal was to become an engineer, my recommendation is to hold off buying stocks/mutual funds and using your current income to get through school with little or no student loans. Another example might be to open your own HVAC business. Your best bet might be to learn the trade, working for someone else, and take night classes for business management. Most 18 year olds have very little earning power. Your focus at this point should be increasing your income and learning how to manage the income you have. Please keep in mind that most debt is bad. It robs you of your income which is your greatest wealth building tool. Car loans and credit card debt is just plain stupid. Often times a business case can be made for reasonable student loans. However, why not challenge yourself to take none. How much further ahead could you be if you graduate, with a degree, when your peers are strapped with a 40K loan? Keep up the good work and keep asking questions.\"", "title": "" }, { "docid": "9bda4d0109e8e1b2b372413376670038", "text": "Try to cash flow as much as you can. You can work and go to school, if you replace playing beer pong with a job you'll be in a lot better off at graduation, grade wise and debt wise. Make a budget, for each month and for each semester, plan cut cost accordingly. Used books, sometimes even the next to recent version. Read this book for more info Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents", "title": "" }, { "docid": "386012d7a169a7a93134e2d19a2b8b62", "text": "You have great intentions, and a great future. As far as investing goes, you're a bit early. Unless your parents or other benefactor is going to pay every dime of your expenses, you'll have costs you need to address. $1000 is the start of a nice emergency fund, but not yet enough to consider investing for the long term. If you continue to work, it's not tough to burn through $200/wk especially when you are in college and have more financial responsibility.", "title": "" }, { "docid": "3f4d2782016a99449f0364ecead401b2", "text": "https://www.google.ca/amp/s/amp.businessinsider.com/most-important-finance-books-2017-1 Bloomberg, finacial times, chat with traders, calculated risk, reuters, wsj, cnbc(sucks), bnn (if canadian) Audio books on youtube helped me read a lot of finance books in a short amount of time, listen while working out. One thing that helped me stand out at my student terms (4th year here) was learning outside of the classroom and joining an investment club. Learning programming can help if thats a strength, but its really not needed and it can waste time if yoi wont reach a point to build tools. Other than that at 18 you have more direction than i did, good luck!", "title": "" }, { "docid": "4d6ca65bf7f74220ce1b72848ffb44d5", "text": "You are kicking butt and taking names, especially compared to most people in your age bracket. I wish I'd had the opportunity (and the sense) to live rent-free and max out my 401(k) when I was 23. Keep doing what you're doing and you'll be able to pull off a Mr. Money Mustache style retirement. I think you might have misunderstood the question and answer nature of this site. Typically, questions aren't laden with answers, explanations, and suggestions; it should just be the question! You can always ask the question and answer it yourself down below, as some SEers do. To answer your questions towards the end of the post: Good luck, and again, keep doing what you're doing!", "title": "" }, { "docid": "4577731b949a0dece0a8ed46a0bc96d8", "text": "\"I recently moved out from my parents place, after having built up sufficient funds, and gone through these questions myself. I live near Louisville, KY which has a significant effect on my income, cost of living, and cost of housing. Factor that into your decisions. To answer your questions in order: When do I know that I'm financially stable to move out? When you have enough money set aside for all projected expenses for 3-6 months and an emergency fund of 4-10K, depending on how large a safety net you want or need. Note that part of the reason for the emergency fund is as a buffer for the things you won't realize you need until you move out, such as pots or chairs. It also covers things being more expensive than anticipated. Should I wait until both my emergency fund is at least 6 months of pay and my loans in my parents' names is paid off (to free up money)? 6 months of pay is not a good measuring stick. Use months of expenses instead. In general, student loans are a small enough cost per month that you just need to factor them into your costs. When should I factor in the newer car investment? How much should I have set aside for the car? Do the car while you are living at home. This allows you to put more than the minimum payment down each month, and you can get ahead. That looks good on your credit, and allows refinancing later for a lower minimum payment when you move out. Finally, it gives you a \"\"sense\"\" of the monthly cost while you still have leeway to adjust things. Depending on new/used status of the car, set aside around 3-5K for a down payment. That gives you a decent rate, without too much haggling trouble. Should I get an apartment for a couple years before looking for my own house? Not unless you want the flexibility of an apartment. In general, living at home is cheaper. If you intend to eventually buy property in the same area, an apartment is throwing money away. If you want to move every few years, an apartment can, depending on the lease, give you that. How much should I set aside for either investment (apartment vs house)? 10-20K for a down payment, if you live around Louisville, KY. Be very choosy about the price of your house and this gives you the best of everything. The biggest mistake you can make is trying to get into a place too \"\"early\"\". Banks pay attention to the down payment for a good reason. It indicates commitment, care, and an ability to go the distance. In general, a mortgage is 30 years. You won't pay it off for a long time, so plan for that. Is there anything else I should be doing/taking advantage of with my money during this \"\"living at home\"\" period before I finally leave the nest? If there is something you want, now's the time to get it. You can make snap purchases on furniture/motorcycles/games and not hurt yourself. Take vacations, since there is room in the budget. If you've thought about moving to a different state for work, travel there for a weekend/week and see if you even like the place. Look for deals on things you'll need when you move out. Utensils, towels, brooms, furniture, and so forth can be bought cheaply, and you can get quality, but it takes time to find these deals. Pick up activities with monthly expenses. Boxing, dancing, gym memberships, hackerspaces and so forth become much more difficult to fit into the budget later. They also give you a better credit rating for a recurring expense, and allow you to get a \"\"feel\"\" for how things like a monthly utility bill will work. Finally, get involved in various investments. A 401k is only the start, so look at penny stocks, indexed funds, ETFs or other things to diversify with. Check out local businesses, or start something on the side. Experiment, and have fun.\"", "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": "11dcf80853e6cc8352b704244904d8cc", "text": "Then: (do these in whatever order) 35 is not mid-life. You're on the tail end of the age to get started on retirement planning. Being single, relatively young, and a great income level, you are ideally situated to consider FIRE'ing yourself. (Financial Independent, Retire Early). The basic idea is to invest a large chunk of your income and establish your comfort level balancing frugality and comfort. There's a table on one of the FIRE websites that shows a graph between % of income saved and the number of years it takes to save enough to be financially independent. If you can go over 50% savings, you can get down to about 10 years. In this case, financially independent is where you can live on a safe percentage of withdrawal from your savings without depleting the savings. At that point, you no longer need to work for a paycheck. You would only do so to extend the savings, increase the safe withdraw rate, or because you want to do something that makes you feel productive.", "title": "" } ]	fiqa
6d62fdc0f4438e1ddad2191c889a3828	Advantages of paying more of your mortgage while you know you won't continue to live there your whole life	[ { "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": "7b0240ad03795210f7aad19e6c12f9f1", "text": "\"I will add one thought on to this thread. This is a financial concept called \"\"Net Present Value\"\". In plain English, it means \"\"What's the best use for your money right now?\"\" So, let's say you have an extra €300/month which is not being spent on living expenses. If you leave that money under your pillow (or spend it on beer or fancy electronics!) instead of paying off your startersloan early, that is costing you 300(0.04/12) per month, every month. So €1/month, or €12/year. This is cumulative for the life of your loan. So not paying €300 this month will ultimately cost you €120 assuming you keep the loan open for 10 years. If you're saying \"\"pay my debts or spend the money on a snappy smartphone?\"\" the answer is that you should pay your debts. Now, here's the important part. Let's suppose you have a better use for the money than beer or electronics. Let's suppose you have a mutual fund which will reliably provide you with a return of 10% a year. If you put that €300/month into a high-yield fund, and if the returns are consistent, you are STILL paying that €12/year (because you invested elsewhere and didn't pay your debts), but you are realizing profits of 300(0.1/12)=€2.5/month on the invested money. €2.5-1=€1.5/month, which is a net gain. So, in some cases, paying off your debt may not be the best use of your money. There are a number of other questions involved which are related to your exposure to capital gains taxes, incentives or disincentives for holding debt, &c. &c. These are generally country specific. A poster above who seems to be familiar with Netherlands law did a good explanation of some of those incentives. I'm in the US, and our incentive and disincentive system is different. TL;DR: It depends.\"", "title": "" }, { "docid": "3c639cf1916f109804cc1765ad1e9988", "text": "It's pretty simple - the less money you owe the less interest you pay. Paying down debt gives a guaranteed return of the interest rate of the debt. So paying off your starter loan is equivalent to a 4% return. That's not a bad return in the current environment so it makes sense to do it unless you can find an investment which you think is likely to pay significantly better. (Note this is a general answer, not Netherlands-specific. There may be other considerations, around tax for example, which have to be factored into the calculation).", "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": "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": "503c9d22cb5c17aa015fbb1f7011b1bd", "text": "The main factors you have to consider are: Could you get a better return on that money by investing it somewhere? The investment rate should basically be more than the mortgage rate. If you find yourself suddenly in need of money (eg, loss of job) do you have enough savings to ride that out? If not, investing the extra money in an instant access investment, even at a lower rate, may make sense as it gives you future flexibility. Do you have any other debts that are at a higher rate? If so, pay those off first as you will get more bang for your buck.", "title": "" } ]	[ { "docid": "b214c21bfffcc07a9824cab573471df1", "text": "That is a decision you need to make, but some of the pros and cons you could consider to help your decision making include: Pros: If bought at the right time in the property cycle and in a good growth area, it can help you grow your net worth much quicker than having money in the bank earning near zero interest. You would be replacing rent payments with mortgage payments and if your mortage payments are less than your current rent you will have additional money to pay for any expenses on the property and have a similar cashflow as you do now. You will be able to deduct your interest payments on the mortgage against your income if you are in the USA, thus reducing the tax you pay. You will have the security of your own house and not have to worry about moving if the landlord wants you out after your lease expires. Cons: If bought in a bad area and at the top of the property cycle you may never make any capital gains on the property and in fact may lose money on it long term. If the mortgage payments are more than your current rent you may be paying more especially at the start of your mortgage. If you buy a house you are generally stuck in one spot, it will be harder to move to different areas or states as it can cost a lot of money and time to sell and buy elsewhere, if renting you can generally just give notice and find a new place to rent. Property maintenance costs and taxes could be a drain on your finances, especially if the mortgage repayments are more than your current rent. If your mortgage payments and property expenses are way more than your current rent, it may reduce what you could be investing in other areas to help increase your net worth.", "title": "" }, { "docid": "527dc07cc1b99bcf5b9582e706aad4b0", "text": "My take is that there are many factors to consider when deciding whether to accelerate payment of a debt beyond the require minimum. Ideally you would want to be debt-free with a home owned outright, a pension big enough to lead a nice life for the rest of your days and plenty of savings to cover any unexpected expenses. Being debt-free is not a bad thing but it should not come at the expense of your overall financial health.", "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": "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": "4349f07e50115f9f140855eb1f0c47a1", "text": "The advantage of having a mortgage rather than borrowing money in other ways is that it is cheaper because the loan is secured against the value of the property. If you stop paying then the bank take the house and can sell it keeping what they are owed and returning any excess. If you have enough money to pay it off then you do not need the mortgage. They normally run for 25 years. It is a lovely day when finally you realise that you own the whole house and no longer owe anything to the bank and the charge against the house is removed and the record of it removed from the land registry. When you sell a house with a mortgage the buyer has to check that the bank has been paid off before they accept the property.", "title": "" }, { "docid": "4bf65001c063594bdc70a9d5a0562c5b", "text": "\"that would deprive me of the rental income from the property. Yes, but you'd gain by not paying the interest on your other mortgage. So your net loss (or gain) is the rental income minus the interest you're paying on your home. From a cash flow perspective, you'd gain the difference between the rental income and your total payment. Any excess proceeds from selling the flat and paying off the mortgage could be saved and use later to buy another rental for \"\"retirement income\"\". Or just invest in a retirement account and leave it alone. Selling the flat also gets rid of any extra time spent managing the property. If you keep the flat, you'll need a mortgage of 105K to 150K plus closing costs depending on the cost of the house you buy, so your mortgage payment will increase by 25%-100%. My fist choice would be to sell the flat and buy your new house debt-free (or with a very small mortgage). You're only making 6% on it, and your mortgage payment is going to be higher since you'll need to borrow about 160k if you want to keep the flat and buy a $450K house, so you're no longer cash-flow neutral. Then start saving like mad for a different rental property, or in non-real estate retirement investments.\"", "title": "" }, { "docid": "7e6110b72db7be0364dfa70f0f2309bf", "text": "\"Condensed to the essence: if you can reliably get more income from investing the cost of the house than the mortgage is costing you, this is the safest leveraged investment you'll ever make. There's some risk, of course, but there is risk in any financial decision. Taking the mortgage also leaves you with far greater flexibility than if you become \"\"house- rich but cash-poor\"\". (Note that you probably shouldn't be buying at all if you may need geographic flexibility in the next five years or so; that's another part of the liquidity issue.) Also, it doesn't have to be either/or. I borrowed half and paid the rest in cash, though I could have taken either extreme, because that was the balance of certainty vs.risk that I was comfortable with. I also took a shorter mortgage than I might have, again trading off risk and return; I decided I would rather have the house paid off at about the same time that I retire.\"", "title": "" }, { "docid": "ba0cd51c908d585d41f246ec408aa78a", "text": "Another thing to consider is that paying extra principal (either via one of these services, or by including something extra with your normal mortgage payment and designating that it go to principal rather than be held to reduce next month's payment, or just sending an additional payment to the bank and designating it as reducing the principal) shortens the term of your loan. Is this good? Maybe. Consider that banks lend with a variety of terms. Usually the 15-year fixed rate mortgage has a lower interest rate than the 30-year fixed-rate mortgage, and the 5-year home-equity-loan has an even lower rate. When you prepay your loan, your interest rate stays the same, but the bank gets its money back sooner. This makes more profit for the bank as it can then invest the money in other things. That profit could have been yours if you had made that investment instead of prepaying your mortgage.", "title": "" }, { "docid": "3d389cb4b83d2bff38b4d4220683af49", "text": "If you are not planning on living in your condo for at least 10 years don't do it. For about 5 years your mortgage will be more then rent, after 5 years you start to break even and may start paying less. On the other hand, if you plan to be there for 10 years or more it might be a great savings tool,", "title": "" }, { "docid": "fd45428a5440e0c854325bd463132338", "text": "Altough this may vary a lot depending on where you live and your actual finance, here what convinced me buying a home instead of renting : Other benefits :", "title": "" }, { "docid": "1d230a2d06ba1335477e38e1e5697000", "text": "Banks consider investment mortgages (and any mortgage where you don't live in the property), as a riskier investment than an owner occupied, home collateral mortgage. The sources of increased risk range from concerns that you will screw up as a landlord, your tenants will destroy the place, you won't have tenants and can't afford to pay the bank, and/or you'll take out several other investment mortgages and over extend yourself. All of these risks are compounded by the fact that it is harder for the bank to convince you to pay when they can't put you out on the street if you default. Banks lend and invest in money, not real estate, so they would much rather have a paying loan than a foreclosed house, especially with the modern foreclosure glut. The increased risk means the bank will charge higher interest for the loan, may require a higher downpayment, and will require higher lending standards before issuing the loan. A new housing investor can get around these higher prices by living in the home for a few years before renting it out (though your lender could possibly require you to renegotiate the loan if you move out too soon).", "title": "" }, { "docid": "7f3147f6adedde8e9a6bfd15489cca35", "text": "And then there is the issue of people who actually don't intend to reduce the size of their loan. They only want to pay the interest, so their debt with the bank remains constant. If you are upside down, it means you will not have the financial means to remove the debt. If, for some reason, you are no longer able to pay the bank, you might lose the house. After that you will have no house, but you still have a debt with the bank.", "title": "" }, { "docid": "4247fc4bd8436e1a1c0b69754b86c1ff", "text": "One big factor that no one has mentioned yet is whether you believe in a deflationary or inflationary future. Right now, we are leaning towards a deflationary environment so it makes sense to pay off more of the debt. (If you make just one extra payment a year, you will have paid off your house 7 years early). However, should this change (depending on government and central bank policy) you may be better off putting down the very minimum. In a year or three from now, you should have a clearer picture. In the meanwhile, here is a recent Business Week article discussing both sides of the argument. http://www.businessweek.com/magazine/content/10_28/b4186004424615.htm", "title": "" }, { "docid": "8f4606f0cbe94dc032f33ef20acd4ed1", "text": "Since then I wanted to move out of this house because the property taxes are so high and the mortgage payment is a killer. As I understand this is a property jointly owned by your parents and you. As they are not living staying in the house, you have taken over the mortgage payments for this house along with any other maintenance. If you move out of this house; the rent is expected to cover the cost of maintenance and mortgage payments. Are we better of staying in Jersey where our family and friends are? This is an individual decision. It is not just family and friends, but also schooling of kids, penitentially if you change jobs would it also entail changing residence as the workplace would be more near from current home than the new home. I want to convince my wife to make this move because it will save us at least 800 month, but she fails to see how buying a second home is financially sound because we have to lose our savings and we have to pay interest on our second home. There are quite a few posts on first-time-home-buyer Some question like this one and this one and this one are good reads. There are historically times when the Mortgage EMI becomes equal or less than Rent paid. In such times it is good to buy home, than pay rent. Otherwise quite a few invest advisor's mention that fools buy house and wise live in it. There are advantages to buying as well advantages to renting. There is no simple answer and it depends on multitude of factors.", "title": "" }, { "docid": "8604c06699e97cc1cb620fd3f660efac", "text": "I don't know any clever way to do what you're describing. And, in a sense, you can see why there might not be one. A mortgage isn't just a magical way to reduce your housing expenses; it's a tradeoff in which you agree to a long-term commitment in exchange for fixed costs (or at least costs with a prearranged structure) over that long term. If you're unwilling to accept the obligation of paying for and maintaining the property over a long period, you can't really expect to reap the benefits of lowered costs. Part of the reason people say buying is better is because people often do live in the same place for a long time, in which case, if they rent, they might miss out on savings they could have had if they bought instead. If you're not going to live in the same place for a long time, buying may not actually be better for you.", "title": "" } ]	fiqa
40075c96415b68f39496af4d7191d087	How to prepare to purchase a house? (Germany)	[ { "docid": "11b99a483d5d5978312e8c54093a0d5f", "text": "\"Figure out how much money you earn, what you spend it on, and how that will change when you have kids (will one of you stay at home? if not, how much will daycare cost and how do you finance the first few month when your child is still too young for daycare?) You will usually plan to spend your current Kaltmiete (rent without utilities) on your mortgage (the Darlehen that is secured by your house) - keep in mind though that a house usually has a higher utility cost than an appartment. When you've figured out what you can save/pay towards a house now and how that will change when you have kids, you can go on to the next step. If you don't want to buy now but want to commit to saving up for a house and also want to secure today's really low interest rates, consider getting a \"\"Bausparvertrag\"\". I didn't find a good translation for Bausparvertrag, so here is a short example of how it works: You take a building saving sum (Bausparsumme) of 150000€ with a savings goal (Sparziel) of 50000€ (the savings goal is usually between 20% and 50% of the sum) and then you make monthly payments into the Bausparvertrag until you reach the savings goal at which point you can take out your savings and a loan of 100000 € (or whatever your difference between the Bausparsumme and Sparziel is). If you're living in an expenisve area, you're likely to need more than 150000 but this is just an example. Upsides: Downsides: If you decide to buy sooner, you can also use your Bausparvertrag to refinance later. If you have a decent income and a permanent job, then ask your bank if they would consider financing your house now. To get a sense of what you'll be able to afford, google \"\"wie viel Haus kann ich mir leisten\"\" and use a few of the many online calculators. Remember that these websites want to sell you on the idea of buying a house instead of paying rent, so they'll usually overestimate the raise in rents - repeat the calculation with rent raise set to 0% to get a feeling for how much you'll be able to afford in today's money. Also, don't forget that you're planning to get children, so do the calculation with only one income, not two, and add the cost of raising the kids to your calculation. Once you've decided on a property, shop around a bit at different banks to get the best financing. If you decide to buy now (or soon), start looking at houses now - go to model homes (Musterhäuser) to find out what style of house you like - this is useful whether you want to buy an existing house or build a new one. If buying an existing house is an option for you, start visiting houses that are on sale in your area in order to practice what to ask and what to look for. You should have a couple of visits under your belt before you really start looking for the one you want to buy. Once you're getting closer to buying or making a contract with a construction company, consider getting an expert \"\"Bausachverständiger\"\". When buying an existing house they can help you estimate the price and also estimate the renovation cost you'll have to factor in for a certain house (new heating, better insulation, ...). When building a new house they can advise you on the contract with the construction company and also examine the construction company's work at each major step (Zwischenabnahme). Source: Own experience.\"", "title": "" } ]	[ { "docid": "c2c46a382eef8995be98cb6552d1f628", "text": "\"I just wanted to give you a different perspective, as I own a house (purchased with a mortgage), with my girlfriend. I think it can be done safely and fairly, but you do need to involve legal help to do it right. There really is nothing to be terrified about, the extra cost to set this up was almost irrelevant in the bigger picture of legal costs around purchasing and the documents describing the ownership scheme are quite straightforward. Maybe it's a UK thing, but it seems rather commonplace here. We've chosen to hold this as \"\"tenants in common\"\" and use a trust deed for this when we purchased. We had a solicitor write the trust deed and it clearly states what percentage of the house is owned by either party and exactly what the steps would be taken, should we decide to end the trust (e.g. in case of a split-up). This includes things like the right to buy out the other person before selling on the market etc. We also had to make wills separately to indicate what should happen with our percentage of the property in case one of us died as with this type of ownership it doesn't automatically go to the other person. Finally we're both on the mortgage, which I guess is the main difference versus your situation. But again, you could get legal advice as to how this should best be handled.\"", "title": "" }, { "docid": "f1ce77cace7085d6fd06cd494c162242", "text": "Let me add a few thoughts that have not been mentioned so far in the other answers. Note that for the decision of buying vs. renting a home i.e. for personal use, not for renting out there's a rule of thumb that if the price for buying is more than 20 year's (cold) rents it is considered rather expensive. I don't know how localized this rule of thumb is, but I know it for Germany which is apparently the OP's country, too. There are obviously differences between buying a house/flat for yourself and in order to rent it out. As others have said, maintenance is a major factor for house owners - and here a lot depends on how much of that you do yourself (i.e. do you have the possibility to trade working hours for costs - which is closely related to financial risk exposure, e.g. increasing income by cutting costs as you do maintenance work yourself if you loose your day-time job?). This plays a crucial role for landlords I know (they're all small-scale landlords, and most of them do put in substantial work themselves): I know quite a number of people who rent out flats in the house where they actually live. Some of the houses were built with flats and the owner lives in one of the flats, another rather typical setup is that people built their house in the way that a smaller flat can easily be separated and let once the kids moved out (note also that the legal situation for the landlord is easier in that special case). I also know someone who owns a house several 100 km away from where they live and they say they intentionally ask a rent somewhat below the market price for that (nice) kind of flat so that they have lots of applicants at the same time and tenants don't move out as finding a new tenant is lots of work and costly because of the distance. My personal conclusion from those points is that as an investment (i.e. not for immediate or future personal use) I'd say that the exact circumstances are very important: if you are (stably) based in a region where the buying-to-rental-price ratio is favorable, you have the necessary time and are able to do maintenance work yourself and there is a chance to buy a suitable house closeby then why not. If this is not the case, some other form of investing in real estate may be better. On the other hand, investing in further real estate closeby where you live in your own house means increased lump risk - you miss diversification into regions where the value of real estate may develop very differently. There is one important psychological point that may play a role with the observed relation between being rich and being landlord. First of all, remember that the median wealth (without pensions) for Germany is about 51 k€, and someone owning a morgage-free 150 k€ flat and nothing else is somewhere in the 7th decile of wealth. To put it the other way round: the question whether to invest 150 k€ into becoming a landlord is of practical relevance only for rich (in terms of wealth) people. Also, asking this question is typically only relevant for people who already own the home they live in as buying for personal use will typically have a better return than buying in order to rent. But already people who buy for personal use are on average wealthier (or at least on the track to become more wealthy in case of fresh home owners) than people who rent. This is attributed to personal characteristics and the fact that the downpayment of the mortgage enforces saving behaviour (which is typically kept up once the house is paid, and is anyways found to be more pronounced than for non-house-owners). In contrast, many people who decide never to buy a home fall short of their initial savings/investment plans (e.g. putting the 150 k€ into an ETF for the next 21 years) and in the end spend considerably more money - and this group of people rarely invests into directly becoming a landlord. Assuming that you can read German, here's a relevant newspaper article and a related press release.", "title": "" }, { "docid": "4e22f6e1009285612eebc28166d5956d", "text": "As observed, there is no answer that will fit all, but below are some considerations: Your monthly requirement is 5000, so you have 3000 left to pay the monthly instalments (EMI). However, if you do pay 3000, you will have no money left for any other activities (holidays etc.) till your EMI is finished Set off a sum, let us say 500-1000, per month (you shall have to decide), for other expenses The rest of the money, in this case 2000-2500, you can pay as monthly EMI If you indicate that your monthly EMI to the bank, they will be able to tell you how much of loan you are eligible for and for how long the EMI would last. This is your benchmark If this loan amount is 750,000 or more, you do not need to put in your own money. So the decision then becomes how fast you want to pay off your loan and as accordingly you shall utilize your 500,000 However, if the EMI will not cover a loan of 750,000 (more likely case), you have options between the following: a. Max out on your loan that 2000-2500 EMI/month (in terms of years as well as amount) can get you and put the rest from 500,000. b. Min your loan in terms of amount and time and put your entire 500,000 c. The middle ground is to balance between the loan and your own money, which is the best approach, there is no figure here that works for all, you have to take the decision based on your circumstances. However, in general, the shorter the loan term (in years) better it is as in aggregate you pay less money to the bank. If you are 1-2 months away from buying the house, one exercise you could do is to keep the EMI money in a separate bank account and see how you fare with the residual cash, this would give you a good reality check. Hope this helps, thanks", "title": "" }, { "docid": "c57aed130745f7340909eab64d045c58", "text": "\"My suggestion would be to do the math. That is the best advice you can get when considering any investment. There are other factors you haven't considered, too... like the fact that interest rates are at extremely low levels right now, so borrowing money is relatively cheap. If you're outside the US though, that may be less of a consideration as the mortgage lending institutions in Europe only tend to give 5-year locks on loan rates without requiring a premium. You may be somewhere else in the world. You will probably struggle to do the actual math about the probability of the market going down or up, but what you can do is this: Figure out what it would cost you to cash out the investments. You say your balance is $53,000 in various items. (Congrats! That's a nice chunk of money.) But with commissions and taxes and etc., it may reduce the value of your investments by 10% - 25% when you try to cash out those investments. Paying $3,000 to get that money out of the investments is one thing... but if you're sending $10,000 to the tax man when you sell this all off, that changes the economics of your investments a LOT. In that case you might be better off seeing what happens if the markets correct by 10%... you'd still have more than if you sold out and paid major taxes. Once you know your down payment, calculate the amount of property you could afford. You know your down payment could be somewhere around $50,000 after taxes and other items... At an 80:20 loan-to-value ratio that's about $250,000 of a property that you can qualify for, assuming you could obtain the loan for $200,000. What could you buy for that? Do some shopping and figure out what your options are... Once you have two or three potential properties, figure out the answer to \"\"What would the property give you?\"\" Is it going to be rented out? Are you going to live there? Both? If you're living in it, then you come out ahead if the costs for the mortgage debt and the ongoing maintenance and repairs are less than what you currently pay in rent. Figure out what you pay right now to put a roof over your head. Will the place you could buy need repairs? Will you pay more on a mortgage for $200,000 USD (in your local currency) than what you currently do for housing? Don't even factor in the possible appreciation of a house you inhabit when you're making this kind of investment decision... it could just as easily burn down as go up in value. If you would rent it, what kind of rental would that be? Long-term rental? Expect to pay for other people to break your stuff. Short-term rental? You can collect more money per tenant per day, but you'll end up with higher vacancy rates. And people still break your stuff. But do the math and see if you could collect enough in rent from a tenant (person or business or whatever the properties are you could buy) to cover the amount you are paying in debt, plus what you would pay in taxes (rent is income), plus what you would need for maintenance, plus insurance. IF the numbers make sense, then real estate can be a phenomenally lucrative investment. I own some investment properties myself. It is a great hedge against inflation (you can raise rents when contracts lapse... usually) and it is an excellent way to own a tangible item. But if you don't know the numbers and exactly how it would make you better off than sitting and hoping that the markets go up, because they generally do over time, then don't take the jump.\"", "title": "" }, { "docid": "c497a5200152a0325eb3346af2076f21", "text": "The typical case would be - as you expected - that the interest goes down equally dramatically, and you would pay much less interest. Note that that does not remove your obligation to pay the full 1000 every month - even though you could argue that you are 90 months ahead in paying, you still need to deliver 1000 a month, until it is fully paid. Some mortgages are made differently - they do not allow that. Basically, if you pay a large amount at once, it is considered a 'pre-payment' for the next x month. As a result, you are now x months ahead (and could stop paying for that much time), but your interest stays high. The latter type 'protects' the bank against 'losing' the interest income they already planned for. As a balance, those type of mortgages are typically slightly cheaper (because the bank is in a better position). You did not specify a country; in Germany, typically all mortgages are of the second type; but - you can get 1.35% mortgages... In the US, most are the first. You need to check which type you have, best before you pay a large amount. In the latter case, it is better to invest that money and use it to pay off as soon as you reach the threshold; in the first case, any extra payoff is to your advantage.", "title": "" }, { "docid": "cf78976a18395e57a7dca605637a6e0c", "text": "\"Not sure why the downvote - seems like a fair question to me. Who owns a house and in what proportions can be totally separate from who is named on the mortgage. There are two ways to do this - one way would be for you loan them the money first under a separate contract, which you should have a solicitor draw up; then they buy the house themselves. The contract would state the terms for repayment of the loan, which could be e.g. no repayment due until the sale of the house at which point the original amount is returned plus interest equivalent to the growth in value of the house between purchase and sale (or whatever). You'd need to be clear about what happened if the house lost value or they ended up in a negative equity situation. The other option is where you are directly a party to the purchase of the house and are named as part owners on the deeds. Again the solicitor who is handling the house purchase for them would help with the paperwork. In either case you would need to clear this arrangement with the mortgage company to make sure they were OK with it. To answer your specific questions in order: - Yes, they would still be eligible for the Help To Buy ISAs (assuming that is what you are referring to) even though you would not be - I'm not sure what \"\"penalty\"\" you are referring to. You'd have to pay tax on any income or capital gain you made from the deal. - No-one can say whether this is a good deal for you without knowing a great deal more about your individual circumstances (and even then, any such advice you would get on here is worth as much as you pay for it.... if in doubt, consult an IFA.)\"", "title": "" }, { "docid": "4d9f05f39288a85e40d0d2571f7e15c5", "text": "\"You are in your mid 30's and have 250,000 to put aside for investments- that is a fantastic position to be in. First, let's evaluate all the options you listed. Option 1 I could buy two studio apartments in the center of a European capital city and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals). To say \"\"European capital city\"\" is such a massive generalization, I would disregard this point based on that alone. Athens is a European capital city and so is Berlin but they have very different economies at this point. Let's put that aside for now. You have to beware of the following costs when using property as an investment (this list is non-exhaustive): The positive: you have someone paying the mortgage or allowing you to recoup what you paid for the apartment. But can you guarantee an ROI of 10-15% ? Far from it. If investing in real estate yielded guaranteed results, everyone would do it. This is where we go back to my initial point about \"\"European capital city\"\" being a massive generalization. Option 2 Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month. If your life plan is taking you down the path of having a family and needed the larger space for your family, then you need the space to live in and you shouldn't be looking at it as an investment that will give you at least 10% returns. Buying property you intend to live in is as much a life choice as it is an investment. You will treat the property much different from the way something you rent out gets treated. It means you'll be in a better position when you decide to sell but don't go in to this because you think a return is guaranteed. Do it if you think it is what you need to achieve your life goals. Option 3 Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money? Let's say you are 35 years old. The general rule is that 100 minus your age is what you should put in to equities and the rest in something more conservative. Consider this: This strategy is long term and the finer details are beyond the scope of an answer like this. You have quite some money to invest so you would get preferential treatment at many financial institutions. I want to address your point of having a goal of 10-15% return. Since you mentioned Europe, take a look at this chart for FTSE 100 (one of the more prominent indexes in Europe). You can do the math- the return is no where close to your goals. My objective in mentioning this: your goals might warrant going to much riskier markets (emerging markets). Again, it is beyond the scope of this answer.\"", "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": "3d352dd687331678cf1e9b26bddfc96b", "text": "\"1) Don't buy a house as an investment. Buy a house because you've reached the point in your life where you don't expect to move in the next five years and you'd prefer to own a house (with its advantages/disadvantages) than to rent (with its advantages/disadvantages). Thinking of houses primarily as investments is what caused the housing bubble, crash, and Great Recession. 2) Before buying a house for cash, look at the available mortgage interest rates versus market rate of return. Owning the house outright is slightly lower stress, but using the house as the basis for a \"\"leveraged investment\"\" may be financially wiser. (I compromised; I paid 50% down and took a mortgage for the other 50%.) 3) 1 year is short-term. Your money doesn't belong in the market if you're going to need it in the short term. If you really intend to pull it back out that soon, I'd stick with CD/money-market kinds of instruments. 4) Remember that while a house is illiquid, it is possible to take out home equity loans... so money you put into a house isn't completely inaccessible. You just can't move elsewhere as easily.\"", "title": "" }, { "docid": "af738cb9cc41c09d0b1ad2e8d0738a76", "text": "I started this off as a comment to Joe's answer, but it got rather messy in that form so I'll just post it as a separate answer instead. I suggest that you read Joe's answer first. I believe you are overthinking this. First, you really should be discussing the matter with your girlfriend. We can provide suggestions, but only the two of you can decide what feels right for the two of you. Strangers on the Internet can never have as complete a picture of your financial situations, your plans, and your personalities, as the two of you together. That said, here's a starting point that I would use as input to such a discussion: As you can see, a common theme to all of this is transparency and communication. There is a reason for this: a marriage without proper communication can never work out well in the long term. I don't know about Germany specifically, but disagreements about money tends to be a major reason in couples splitting up. By setting your lives up for transparency in money matters from the beginning, you significantly reduce the risk of this happening to you. Scott Hanselman discusses a very similar way of doing things, but phrases it differently, in Relationship Hacks: An Allowance System for Adults.", "title": "" }, { "docid": "bc51b36b9bf082a42f9d53d5552018d3", "text": "They're probably talking about flipping houses. The conventional wisdom when flipping is to purchase the property with a mortgage or other loan on day-0. Do the work to rehabilitate it. Get it listed for re-sale promptly (this step has varying strategies) with a profitable price but one that will make it move. Have the house sold on or before the first payment would be due. This is anywhere from 30 to 60 days. The flipper then never has to make a payment on the mortgage or loan, the costs of rehabilitating the home are recovered promptly (potentially before any loan, credit card payments, or invoices are due), and there is a profit. This also assumes that either a 100% loan or some other mechanism is used to address closing costs and fees. This model fits the premise of the infomercial in that you make money investing in real estate but never have to tie up any of your own money in the process.", "title": "" }, { "docid": "33d099c8da7f15157ff66e6ab94e8a96", "text": "My in-laws are pressuring me to buy a home. I don't really have much financial experience. In fact, I'm a nightmare with finances. I almost have my student loans payed off from school. My in-laws and husband are great with finances and with real-estate. My husband has a good job and $200k in savings. I have a good job too, and still have some debt from school. (approx $60k left of 180k). They say the house will be available in Jan or February for purchase, and that we should really try to buy it (prob $2-3 mil). My guess is they want to make it available to us off the market (which is a huge benefit in this area, there are really no houses available lately) . The problem is: I am uncomfortable because I don't have all of my loans payed off, I could divert money away from paying off the loans in order to save for a larger downpayment. I just got a bonus of $35k (after taxes) I don't think I'll have all of my loans payed off by January. Should I save my money for the downpayment or focus on my loans, should I go for the house? I don't know how to weigh these options against each other with such little experience.", "title": "" }, { "docid": "95f6f1ef4ca819dafd3029e8a868cdfa", "text": "\"What about getting the saving account - \"\"Bausparen\"\" (~100EUR/month) which you can later use for credit to get better mortgage deal and to buy a flat for renting to others (Anlegerwohnung)?\"", "title": "" }, { "docid": "97fd99a51984de3474ad8e5da3acae09", "text": "Buying a house may save you money compared with renting, depending on the area and specifics of the transaction (including the purchase price, interest rates, comparable rent, etc.). In addition, buying a house may provide you with intangibles that fit your lifestyle goals (permanence in a community, ability to renovate, pride of ownership, etc.). These factors have been discussed in other answers here and in other questions. However there is one other way I think potential home buyers should consider the financial impact of home ownership: Buying a house provides you with a natural 'hedge' against possible future changes in your cost of living. Assume the following: If these two items are true, then buying a home allows you to guarantee today that your monthly living expenses will be mostly* fixed, as long as you live in that community. In 2 years, if there is an explosion of new residents in your community and housing costs skyrocket - doesn't affect you, your mortgage payment [or if you paid cash, the lack of mortgage payment] is fixed. In 3 years, if there are 20 new apartment buildings built beside you and housing costs plummet - doesn't affect you, your mortgage payment is fixed. If you know that you want to live in a particular place 20 years from now, then buying a house in that area today may be a way of ensuring that you can afford to live there in the future. *Remember that while your mortgage payment will be fixed, other costs of home ownership will be variable. See below. You may or may not save money compared with rent over the period you live in your house, but by putting your money into a house, you have protected yourself against catastrophic rent increases. What is the cost of hedging yourself against this risk? (A) The known costs of ownership [closing costs on purchase, mortgage interest, property tax, condo fees, home insurance, etc.]; (B) The unknown costs of ownership [annual and periodic maintenance, closing costs on a future sale, etc.]; (C) The potential earnings lost on your down payment / mortgage principal payments [whether it is low-risk interest or higher risk equity]; (D) You may have reduced savings for a long period of time which would limit your ability to cover emergencies (such as medical costs, unexpected unemployment, etc.) (E) You may have a reduced ability to look for a better job based on being locked into a particular location (though I have assumed above that you want to live in a particular community for an extended period of time, that desire may change); and (F) You can't reap the benefits of a rental market that decreases in real dollars, if that happens in your market over time. In short, purchasing a home should be a lifestyle-motivated decision. It financially reduces some the fluctuation in your long-term living costs, with the trade-off of committed principal dollars and additional ownership risks including limited mobility.", "title": "" }, { "docid": "1f5747cf4bc4955f3b1a7492034f2a17", "text": "\"With permanent contract in Germany you shouldn't have any problem getting a loan. It's even more important than how much do you earn. Generally, you should ask for a house mortgage (Baufinanzierungsdarlehen) with annuity as a type of credit to save on interest. Besides, you usually get a better conditions with a saving bank (Sparkasse) or a popular bank (Volksbank) situated in the area where your house is situated. You also shouldn't combine your credit with extra products (the simpler is the product, the better is for you), maybe I'll write later an extra piece on the common pitfalls in this regard. Probably, you could find a bank that would give you such a loan, but it would be very expensive. You should save at least 40%, because then the bank can refinance your loan cheaply and in return offer you a low interest. Taxes depend heavily on the place where you buy a house. When you buy it, you pay a tax between 3.5% and 6% (look up here). Then you pay a property tax (Grundsteuer), it depends on community how much do you pay, the leverage is called Hebesatz (here's example). Notary would cost ca. 1.5% of the house price. All and all, you should calculate with 10% A country-independent advice: if you want to save on interest in the long run, you should take an annuity loan with the shortest maturity. Pay attention to effective interest rate. Now to Germany specifics. Don't forget to ask about \"\"Sondertilgung\"\" (extra amortization) - an option to amortize additionaly. Usually, banks offer 5% Sondertilgung p.a. The interest-rate is usually fixed for 8 years (however, ask about it), this period is called Zinsbindung. It sound ridiculous, but in southern lands (Bayern, Baden-Württemberg) you usually get better conditions as in Berlin or Bremen. The gap could be as big as 0.5% p.a. of effective interest rate! In Germany they often use so-called \"\"anfängliche Tilgung\"\" (initial rate of amortizazion) as a parameter.\"", "title": "" } ]	fiqa
dc5af631cee8c640b3ae597957ae95f7	Car Loan upside down--refinance before selling?	[ { "docid": "4441b69379c10474e71ccbef0a200708", "text": "Carmax will be interested in setting a price that allows them to make money on the reselling of the vehicle. They won't offer you more than that. The determination of the value compared to the BlueBook value is based on condition and miles. The refinancing of the auto loan could lower your monthly payment, but may not save you any money in the short term. The new lender will also want an evaluation of the vehicle, and if it is less than the payoff amount of the current loan they will ask you to make a lump sum payment. This is addition to the cost of getting the new loan setup. If you can pay the delta between the value of the car and loan then do so, when you sell the car. Don't refinance unless you plan on keeping the car for many months, or you are just adding paperwork to the transaction.", "title": "" }, { "docid": "8d8e2e72905068e2d95e805edefdab87", "text": "\"Having just gone through selling a car, I can tell you that CarMax will most likely not be the best solution. I recently sold my '09 Pontiac Vibe which had a KBB and Edmonds value (private party sale) of around $6k. Trade-in value was around $4,800. I took it to the local CarMax for a quote, and they came back with $3,500. Refinancing is tricky. Banks have a set limit on how old a car they will finance. Many won't even offer financing if the vehicle has over 100k miles. We looked at refinancing our other car, and even getting the APR down over a point we would only have saved $15/mo or so. Banks typically offer much higher interest rates for used non-dealership cars and refinancing than they do for new cars, or even used cars purchased from a dealership. Assuming you have 2-3 years left on your loan, I don't think that refinancing would save you enough to be worth considering. CarMax sells cars in 1 of 2 ways. They are also up front with you about the process. They do not reference KBB or Edmonds or any other valuation tool other than their own internal system. They either take the car, spruce it up a bit, then resell it on their lot, or they sell it at auction. If they determine your car will be sold at auction, then they will offer you a rock bottom price. The determining factors that come into play include age of the car, mileage, and of course overall condition. If you Mini is still in good shape and doesn't have a lot of miles, then they may try to resell it on their lot, for which they could offer you closer to personal-sale price than trade-in. How many 2007's are for sale in your area? How much are they selling for? I did sell them a truck back in 2005 and received $200 more than KBB valued it for, but it was in great shape, only a couple of years old, relatively low mileage, and it was in high demand. God bless the South and their love for trucks! I ended up selling my Pontiac to another local car dealership. They offered me $5,300 (after negotiating, leaving the dealership, then negotiating more over the phone). It took me a day and a half and really very little effort. I have several friends that have gone through the same thing with selling cars, and all have had similar luck going to other dealerships, where prices can be negotiated, rather than CarMax. CarMax has no incentive to \"\"settle\"\" or forgive your loan. If you really want to pay it off, save up what you believe the difference will be, then shop your car around the local dealerships and get prices for your Mini. Remember that dealers have to turn a profit, so be reasonable with your negotiation. If you can find comparable vehicles in your area listed for $X,000 then knock $1,500 off that price and tell the dealerships that's what you want.\"", "title": "" }, { "docid": "ff0b15f9cbb3b8000b376045467a9566", "text": "As for refinancing: Many institutions charge up-front fees when doing any type of vehicle loan. Typically this is in the neighborhood of 1% the value of the loan, with a floor of $100 (although this may vary by lender). However, for the loan the be secured by the vehicle, the principle value must be less than the collateral value. In your case, this means there is a collateral shortfall of $4,000. When working with a traditional bank, you would have two options: pay the difference up front (reducing the principle value of the loan), or obtaining a separate loan for the difference. This separate loan would often have a higher interest rate unless you have some other form of collateral to secure it with. I doubt CarMax would do a separate loan. All that being said, if you plan on selling the vehicle within the next twelves months, don't bother refinancing. It won't be worth the hassle.", "title": "" } ]	[ { "docid": "14fbd60f61528b74f681f6033acfc003", "text": "The risk besides the extra interest is that you might be upside down on the loan. Because the car loses value the moment you drive off the lot, the slower you pay it off the longer it takes to get the loan balance below the resale value. Of course if you have a significant down payment, the risk of being upside down is not as great. Even buying a used car doesn't help because if you try to sell it back to the dealer the next week they wont give you the full price you paid. Some people try and split the difference, get the longer term loan, but then pay it off as quickly as the shorter term loan. Yes the interest rate is higher but if you need to drop the payment back to the required level you can do so.", "title": "" }, { "docid": "a3d8fefc639c7cb5e3c2ba260f5dd1fd", "text": "\"I'm going to ignore your numbers to avoid spending the time to understand them. I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value. I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value. You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000. Mr. Banker wires over $10,000 and you drive home in your car. Say in a year you want a different car. This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you. They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000. You've made 12 payments of $188.71. Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car. They'll send the $7,000 they agreed to pay for your car. Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value). Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for. All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is \"\"loss\"\" is an extremely vague number to derive primarily because your utility of the car has a value. But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost.\"", "title": "" }, { "docid": "adeb62f3873388115cae70ccf26f77c7", "text": "Used car dealers will sometimes deliberately issue high-interest-rate subprime loans to folks who have poor credit. But taking that kind of risk on a mortgage, when you aren't also taking profit out of the sale, really isn't of interest to anyone who cares about making a profit. There might be a nonprofit our there which does so, but I don't know of one. Fix your credit before trying to borrow.", "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": "1466443fbfb06e3d1f6080caa767b77e", "text": "Some places banks/Credit Unions will allow you to refinance a auto loan. My credit Union only does this if the original loan was with another lender. They will send the money to the old lender, then give you a loan under the new terms. They are trying to get your business, not necessarily looking for a way make less money for themselves. You will have to see how much you will save. Which will be based on the delta of the length of the loan or the change in interest rate, or both. My Credit Union has a calculator to show you the numbers based on keeping the size of the payments the same, or keeping the number of payments the same. Make sure you understand any limitations regarding the refinance based on the age of the car, and if you are underwater.", "title": "" }, { "docid": "d5bd49da7dc83886ed33c5b5d84943b4", "text": "\"I would actually disagree with MrChrister on this. You can afford yourself the car in this price range paid cash. I don't know how exactly you spend your income, but from my experience, in expensive California, saving $20K a year from $70K income with $800/mo rent is feasible. Having a loan on your credit report which is paid on time and in full will definitely help you rebuilding your credit. Your calculations re the costs of the loan are based on the assumption that you're going to keep the loan for the whole period. Don't do that. See #1 - you can repay this loan much quicker than the 3 years it should originally have been. 6 months of the loan which is then paid off will do marvels to your credit report and credit score. Yes, it is going to cost you some, but in your particular case I would argue that its worth it. You're an adult now, you need credit cards, you'll need a mortgage at some point, you need to rent a place to live - all these require a good credit report. Just waiting, as MrChrister suggests, will help, but much much slower. Having said that, a seller that \"\"cannot discuss the terms over the phone\"\" is most likely a dishonest person. Once you're there and in front of him it is harder for you to verify information, resist signing papers, and negotiating.\"", "title": "" }, { "docid": "1add9a666c8b481d0ddcca7928f6e38c", "text": "\"Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign: You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that \"\"cheap\"\" 1.4% loan and pay $20,000 for the car. So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.\"", "title": "" }, { "docid": "45d2b43b6cff2e21050c2ac05f87d5f9", "text": "You're not going to like this answer. You might be able to get out of the car. You probably won't be able to get out of the loan. Option #1 - Sell the car privately (you'll get more in a private sale) and get a private loan for the difference between the sale price and what you owe. Option #2 - If you go to a dealership that advertises that they will take any trade no matter how much you owe, they will roll your balance, less your trade in value, into your new loan. So for example, Let's say you buy a car for and borrow $20,000. The dealership gives you $6,000 for your trade because that's what they do that leaves $9,000 on your loan and you will end up borrowing $29,000 to buy a $20,000 car. Dealerships can be surprisingly accommodating but a lot of car buyers don't understand the terms of what they're getting into. I actually knew someone a few years ago who left a dealership with a new car and couldn't tell you anything about the deal beyond her monthly payment. Option #3 - Hang on to the car and throw every extra penny at it to get the balance down on the loan until you can get it to the point where you can sell it, trade it in or refi it without putting out a big one time cash payment.", "title": "" }, { "docid": "61afca1ab51dceb80e7ed827b9f2c474", "text": "For a $350 monthly payment, she is currently paying $200 monthly in interest. You say that no bank will refinance her, but that is not true, I'm sure many banks are happy to refinance her to the value of the car. She should start that process. You'll find that your suggestion to pay $5000 down on the current loan is pretty similar to what she would need to bring to a bank to refinance (maybe as much as $7000 to refinance). After that she would be paying a much lower amount in interest, and she could still retire the loan a year or two (but she would be paying even less in interest). The advantage to borrowing from her emergency fund is that she retires the loan 14 months earlier. The problem is that you are prioritizing the least amount paid, and she is prioritizing an emergency fund. Emergency funds are also very important. You might have better success if you prioritize paying back the emergency fund in your plan. If she puts $7000 down to refinance, assume a 3 year loan at 4.5% with a $150 monthly payment. Instead of paying down the remaining $5000 quickly what if she put the extra $200/month toward paying back her emergency fund? It would take the same 3 years to fully pay it back without impacting the rest of her budget at all. If she has extra room in her budget, she could pay back that emergency fund even faster. Many of us who prioritize minimizing interest paid and maximizing interest earned already have a robust emergency fund. Your girlfriend isn't wrong to value that. Unexpected emergencies can cause much more interest to be paid if there is no way to deal with them. (That's how paycheck and title lenders capture their customers.) Talk to her about what emergencies she might need the money for, and make a plan to replenish the fund, and you're much more likely to have her buy in.", "title": "" }, { "docid": "bc39ebc96f26ede3ea62f4829612c593", "text": "\"Generally it is not recommended that you do anything potentially short-term deleterious to your credit during the process of seeking a mortgage loan - such as opening a new account, closing old accounts, running up balances, or otherwise applying for any kind of loan (people often get carried away and apply for loans to cover furniture and appliances for the new home they haven't bought yet). You are usually OK to do things that have at least a short-term positive effect, like paying down debt. But refinancing - which would require applying for a non-home loan - is exactly the sort of hard-pull that can drop your credit rating. It is not generally advised. The exception to this is would be if you have an especially unusual situation with an existing loan (like your car), that is causing a deal-breaking situation with your home loan. This would for example be having a car payment so high that it violates maximum Debt-to-Income ratios (DTI). If your monthly debt payments are more than 43% of your monthly income, for instance, you will generally be unable to obtain a \"\"qualified mortgage\"\", and over 28-36% will disqualify you from some lenders and low-cost mortgage options. The reason this is unusual is that you would have to have a bizarrely terrible existing loan, which could somehow be refinanced without increasing your debt while simultaneously providing a monthly savings so dramatic that it would shift your DTI from \"\"unacceptable\"\" to \"\"acceptable\"\". It's possible, but most simple consumer loan refis just don't give that kind of savings. In most cases you should just \"\"sit tight\"\" and avoid any new loans or refinances while you seek a home purchase. If you want to be sure, you'll need to figure out your DTI ratio (which I recommend anyway) and see where you would be before and after a car refinance. If this would produce a big swing, maybe talk with some mortgage loan professionals who are familiar with lending criteria and ask for their opinion as to whether the change would be worth it. 9 times out of 10, you should wait until after your loan is closed and the home is yours before you try to refinance your car. However I would only warn you that if you think your house + car payment is too much for you to comfortably afford, I'd strongly recommend you seriously reconsider your budget, current car ownership, and house purchasing plans. You might find that after the house purchase the car refi isn't available either, or fine print means it wouldn't provide the savings you thought it would. Don't buy now hoping an uncertain cost-saving measure will work out later.\"", "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": "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": "b31d9b98a4891e6facb0202448d55049", "text": "\"New car loans, used car loans, and refinances have different rates because they have different risks associated with them, different levels of ability to recoup losses if there is a default, and different customer profiles. (I'm assuming third party lender for all of these questions, not financing the dealer arranges, as that has other considerations built into it.) A new car loan is both safer to some extent (as the car is a \"\"known\"\" risk, having no risk of damage/etc. prior to purchase), but also harder to recoup losses (because new cars immediately devalue significantly, while used cars keep more of their value). Thus the APRs are a little different; in general for the same amount a new car will be a bit lower APR, but of course used car loans are typically lower amounts. Refinance is also different; customer profile wise, the customer who is refinancing in these times is likely someone who is a higher risk (as why are they asking for a loan when they're mostly paid off their car?). Otherwise it's fairly similar to a used car, though probably a bit newer than the average used car.\"", "title": "" }, { "docid": "64fb7a323214f50afbc01fecc4753d61", "text": "Your first step is to talk to the current lender and ask about refinancing in the other person's name. The lender is free to say no, and if they think the other person is unlikely to pay it back, they won't refinance. If you're in this situation because the other person didn't qualify for a loan in the first place, the lender probably won't change their mind, but it's still worth asking. From the lender's point of view, you'll be selling the other person the car. If they qualify for a loan, it's as simple as getting the loan from a bank, then doing whatever is required by your state to sell a car between either private parties or between relatives (depending on who the other person is). The bank might help you with this, or your state's DMV website. Here are a few options that don't involve changing who is on the loan: Taking out a loan for another person is always a big risk. Banks have entire departments devoted to determining who is a good credit risk, and who isn't, so if a person can't get a loan from a bank, it's usually for a good reason. One good thing about your situation: you actually bought the car, and are the listed owner. Had you co-signed on a loan in the other person's name, you'd owe the money, but wouldn't even have the car's value to fall back on when they stopped paying.", "title": "" }, { "docid": "7f3147f6adedde8e9a6bfd15489cca35", "text": "And then there is the issue of people who actually don't intend to reduce the size of their loan. They only want to pay the interest, so their debt with the bank remains constant. If you are upside down, it means you will not have the financial means to remove the debt. If, for some reason, you are no longer able to pay the bank, you might lose the house. After that you will have no house, but you still have a debt with the bank.", "title": "" } ]	fiqa
c4c81976c674e1e829ac3610f2185b5e	How to get the lowest mortgage rate on a new purchase?	[ { "docid": "de136f29d9892b752067d59d4b2f60b1", "text": "Purchase loans tend to be more challenging to get the best possible rate, because you have to balance closing the loan and getting the contract. So there isn't as much time to shop around as when you do a refinance. I disagree with the sentiment to go with your local bank. Nothing wrong with asking at your local bank and using their numbers as a baseline, but chances are they won't be competitive. There are many reputable online mortgage originators that will show accurate fees and rates upfront assuming you provide accurate information. In the past there were a lot of issue with Good Faith Estimates being pretty much worthless. There were a fair number of horror stories about people showing up to closing and finding out fee or rates had increased dramatically. There was a law passed after the housing debacle that severely limits the shenanigans that lenders can do at closing and so there is less risk when going with a lesser known lender. In fact I would say the only real risk with a lender now days is choosing one that happens to be overloaded and or just has poor customer service in general. Personally I have found the most competitive rates from Zillow's mortgage service and the now defunct Google mortgage. The lenders tend to be smaller, but highly efficient. They are very much dependent on their online reputations. I have heard good things about a number of larger online lenders, but I don't have personal experience so I will leave them off. I personally wouldn't worry much about whether the loan is sold or not. Outside of refinancing I don't think I have ever talked to the bank servicing my mortgage about my mortgage. There just isn't much need to talk to them.", "title": "" }, { "docid": "e27990571d0ade28b27f9bfc3a3bac6d", "text": "Start with the bank where you have your checking and savings account. They can streamline some of the paperwork, because they can see how much you make, and have access to several years worth of bank statement. Legitimate mortgage companies do publish their rates. But there is no guarantee that you will qualify for the best rate without them knowing your credit score, salary, and down payment information. There is no way to know that you have the best rate because of the time lag involved. You will pick the best one you can work with, but the rates can change every day. Even when you lock in the rates, other companies can drift lower. Once you have started down the application process you will reach a point where switching companies will cost you time and money. Once you decide to purchase a house, the contract usually only gives you a few weeks to prove that you have financing in place. Therefore you will have to start the process before deciding on the house. Some advance work is needed to give you an idea of the maximum monthly payment you can afford, which will then based on the rate and down payment determine the maximum house you can buy. I have had good luck with my credit union, but there is no guarantee that yours will be competitive. Keep in mind that while rates are very important, some people also value customer service, and also like that the mortgage won't be sold to out of town investors.", "title": "" } ]	[ { "docid": "4c341364afeab9a693ed255b3f300d17", "text": "\"This is the meat of your potato question. The rephrasing of the question to a lending/real estate executive such as myself, I'd ask, what's the scenario? \"\"I would say you're looking for an Owner Occupied, Super Jumbo Loan with 20% Down or $360K down on the purchase price, $1.8 mil purchase price, Loan Amount is ~$1.45 mil. Fico is strong (assumption). If this is your scenario, please see image. Yellow is important, more debt increases your backend-DTI which is not good for the deal. As long as it's less than 35%, you're okay. Can someone do this loan, the short answer is yes. It's smart that you want to keep more cash on hand. Which is understandable, if the price of the property declines, you've lost your shirt and your down payment, then it will take close to 10 years to recover your down. Consider that you are buying at a peak in real estate prices. Prices can't go up more than they are now. Consider that properties peaked in 2006, cooled in 2007, and crashed in 2008. Properties declined for more than 25-45% in 2008; regardless of your reasons of not wanting to come to the full 40% down, it's a bit smarter to hold on to cash for other investments purposes. Just incase a recession does hit. In the end, if you do the deal-You'll pay more in points, a higher rate compared to the 40% down scenario, the origination fee would increase slightly but you'll keep your money on hand to invest elsewhere, perhaps some units that can help with the cashflow of your home. I've highlighted in yellow what the most important factors that will be affected on a lower down payment. If your debt is low or zero, and income is as high as the scenario, with a fico score of at least 680, you can do the deal all day long. These deals are not uncommon in today's market. Rate will vary. Don't pay attention to the rate, the rate will fluctuate based on many variables, but it's a high figure to give you an idea on total cost and monthly payment for qualification purposes, also to look at the DTI requirement for cash/debt. See Image below:\"", "title": "" }, { "docid": "c616c83c92d8a682a7fd0f2424c8ecb8", "text": "If you are a subprime borrower, that may not be an unreasonable rate given the risk they are accepting. In any case, it's what you agreed to. As others have said, you could/should have shopped elsewhere for the loan. In fact, you can still shop elsewhere for a loan to refinance that vehicle and thus lower the rate, unless the existing loan has equally obnoxious rules about that.", "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": "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": "cfaa0623509847dbfeb78d6499835351", "text": "\"From the comments, it sounds like you have a technical background. So I'm going to suggest you think of this as a technical problem: it's an optimization problem, where the variable you're trying to optimize for is total interest paid over the lifetime of the loans. Step 1 is making sure you're using the credit available to you most efficiently. If there's room in the credit limit for card #1 to move more of your debt there, then definitely move your balances from the higher-interest cards. However, be careful; some cards will have different interest rates for balance transfers or cash advances. And definitely don't move any principal from Card #3 until the 0% interest rate expires. Pursuing a bank loan as part of step 1 is valid as well. You could start with the bank you use for your checking account today. Credit unions can be a good source of lower-interest loans as well. Ensure that you fully understand the terms and interest rates, particularly if they change. Just be careful about applying for them; too many rejections can affect your credit rating negatively. You also mention in the comments that you're paying \"\"her\"\" mortgage. I don't know how the ownership is set up there, but either refinancing or taking out a home equity loan can be a way to consolidate debt. The interest rate on a home loan will almost assuredly be less than on your higher rate cards, especially taking the tax deduction into account. Step 2 is paying down the debt efficiently. The rule here is simple: Pay the minimum payment on all cards except for the one with the highest interest rate; any money you have above the minimum payments should go into paying down the principal on that one. In your case, that's Card #2. Good luck!\"", "title": "" }, { "docid": "c4142872216d91d5acbe45068cf97c5c", "text": "\"We’re buying the home right over $200,000 so that means he will only need to put down (as a ‘gift’) roughly $7000. I'm with the others, don't call this a gift unless it is a gift. I'd have him check with the bank that previously refused him a mortgage if putting both of you on a mortgage would allay their concerns. Your cash flow would be paying the mortgage payment and if you failed to do so, then they could fall back on his. That may make more sense to them, even if they would deny each of you a loan on your own. This works for them because either of you is responsible for the whole loan. It works for him because he was already willing to be responsible for the whole loan. And your alternative plan makes you responsible for the whole loan, so this is just as good for you. At what percentage would you suggest splitting ownership and future expenses? Typically a cash/financing partnership would be 50/50, but since it’s only a 3.5% down-payment instead of 20% is that still fair? Surprisingly enough, a 3.5% down-payment that accumulates is about half the equity of a 20% down-payment. So your suggestion of a 25%-75% split makes sense if 20% would give a 50%-50% split. I expected it to be considerably lower. The way that I calculated it was to have his share increase by his equity share of the \"\"rent\"\" which I set to the principal plus interest payment for a thirty year loan. With a 20% down-payment, this would give him 84% equity. With 3.5%, about 40% equity. I'm not sure why 84% equity should be the equivalent of a 50% share, but it may be a side effect of other expenses. Perhaps taking property taxes out would reduce the equity share. Note that if you increase the down-payment to 20%, your mortgage payment will drop substantially. The difference in interest between 3.5% and 20% equity is a couple hundred dollars. Also, you'll be able to eliminate any PMI payment at 20%. It could be argued that if he pays a third of the monthly mortgage payment, that that would give him the same 50% equity stake on a 3.5% down-payment as he would get with a 20% down-payment. The problem there is that then he is effectively subsidizing your monthly payment. If he were to stop doing that for some reason, you'd have what is effectively a 50% increase in your rent. It would be safer for you to handle the monthly payment while he handles the down-payment. If you couldn't pay the mortgage, it sounds like he is in a position to buy out your equity, rent the property, and take over the mortgage payment. If he stopped being able to pay his third of the mortgage, it's not evident that you'd be able to pick up the slack from him much less buy him out. And it's unlikely that you'd find someone else willing to replace him under those terms. But your brother could construct things such that in the face of tragedy, you'd inherit his equity in the house. If you're making the entire mortgage payment, that's a stable situation. He's not at risk because he could take over the mortgage if necessary. You're not at risk because you inherit his equity share and can afford the monthly payment. So even in the face of tragedy, things can go on. And that's important, as otherwise you could lose your equity in the house.\"", "title": "" }, { "docid": "b2bbed915d44426de310febe8fe1942d", "text": "\"If you mortgage after the fact you will usually pay an extra .25% higher on the interest rate because a \"\"cash out\"\" refinance is treated as riskier than a new home purchase mortgage. You might save enough on the purchase price of the home with a cash offer to make that higher interest rate worth it, but in most cases, if you are planning to hold the loan for a long time, it's best to get that mortgage at the time of purchase. You might be able to get the same deal with an offer that says you will pay cash if there are any problems getting the loan approved.\"", "title": "" }, { "docid": "849865233681cf162c72b2fb2ed4fc5a", "text": "\"Do you now own your new home, or are you renting? This is a classic case of a mortgage ready to blow up. These 7/1 interest only would have a low rate, say 3%. So on $200K, the payment is $500/mo, but no principal paydown. Even if the rate were still 3% (it won't be) the 23 yr amortization means a payment of $1004 after the 7 years end. At 4%, it's $1109. 5%, $1221. I would take this all into account as you decide what to do. If you now own a new house, you should consider the morally questionable walk-away. I believe you were sold an unethical product. mb wrote \"\"shoot up considerably.\"\" This is still an understatement. A product whose payment is certain to double in a fixed time is 'bad.' 'Bad' in the biblical sense. You have no obligation to keep any deal with the devil, which is exactly what you have. There are some banks offering FHA products that might help you. I just received an offer from the bank holding a mortgage on my rental property. It's 4.5% for a refinance up to 125% of current value. There's a cost of $1800, but I owe so little, and am paying it off faster than the time left, I'm not bothering. You may benefit from such a program, but I'd still question if you can make a go of a house that even 2% underwater. Do some math, and see if you started now with a 30 year loan how the numbers work out. (Forgive my soapbox stance on this. There are those who criticize the strategic defaulters. I think you fall into a group of innocent victims who were sold a product that was nothing less than a financial time bomb. I am very curious to know the original \"\"interest only\"\" rate, and the index/margin for the rate upon adjustment. If you include the original balance, I can tell you the exact payments based on the new rates pretty easily.)\"", "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": "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": "bee4d2ec69a0fd1cb331ff5ed33ed0ef", "text": "\"Any sensible lender will require a lean lien against your formerly-free-and-clear property, and will likely require an appraisal of the property. The lender is free to reject the deal if the house is in any way not fitting their underwriting requirements; examples of such situations would be if the house is in a flood/emergency zone, in a declining area, an unusual property (and therefore hard to compare to other properties), not in salable condition (so even if they foreclose on it they'd have a questionable ability to get their money back), and so forth. Some lenders won't accept mobile homes (manufactured housing) as collateral, for instance, and also if the lender agrees they may also require insurance on the property to be maintained so they can ensure that a terrible fate doesn't befall both properties at one time (as happens occasionally). On the downside, in my experience (in the US) lenders will often require a lower loan percentage than a comparable cash down deal. An example I encountered was that the lender would happily provide 90% loan-to-value if a cash down payment was provided, but would not go above 75% LTV if real estate was provided instead. These sort of deals are especially common in cases of new construction, where people often own the land outright and want to use it as collateral for the building of a home on that same land, but it's not uncommon in any case (just less common than cash down deals). Depending on where you live and where you want to buy vs where the property you already own is located, I'd suggest just directly talking to where you want to first consider getting a quote for financing. This is not an especially exotic transaction, so the loan officer should be able to direct you if they accept such deals and what their conditions are for such arrangements. On the upside, many lenders still treat the LTV% to calculate their rate quote the same no matter where the \"\"down payment\"\" is coming from, with the lower the LTV the lower the interest rate they'll be willing to quote. Some lenders might not, and some might require extra closing fees - you may need to shop around. You might also want to get a comparative quote on getting a direct mortgage on the old property and putting the cash as down payment on the new property, thus keeping the two properties legally separate and giving you some \"\"walk away\"\" options that aren't possible otherwise. I'd advise you to talk with your lenders directly and shop around a few places and see how the two alternatives compare. They might be similar, or one might be a hugely better deal! Underwriting requirements can change quickly and can vary even within individual regions, so it's not really possible to say once-and-for-all which is the better way to go.\"", "title": "" }, { "docid": "c124b0a7949c26904fa381882841a086", "text": "You are correct that 20% has an impact on your interest rate, although it is not always hugely significant. You would have to do your own shopping around to find that information out. However 20% has an impact that I consider to be far more important than your monthly payment, and that is in your equity. If the DC market tanks, which I know it has not really done like much of the country but none of us have crystal balls to know if it will or not, then you will be more easily underwater the less you put down. Conversely putting 20% or more down makes you an easy sell to lenders [i]and[/i] means that you don't have to worry nearly so much about having to do a short sale in the future. I would never buy a house with less than 20% down personally and have lived well below my means to get there, but I am not you. With regards to mortgages, the cheapskate way that I found information that I needed was to get books from the library that explained the mortgage process to me. When it came time to select an actual broker I used my realtor's recommendation (because I trusted my realtor to actually have my interests at heart because he was an old family friend - you can't usually do that so I don't recommend it) and that of others I knew who had bought recently. I compared four lenders and competed them against each other to get the best terms. They will give you estimate sheets that help you weigh not only rates but costs of different fees such as the origination fee and discount points. Make sure to know what fees the lender controls and what fees (s)he doesn't so that you know which lines to actually compare. Beyond a lender make sure that before closing you have found a title company that you think is a good choice (your realtor or lender will try to pick one for you because that's the way the business is played but it is a racket - pick one who will give you the best deal on title), a settlment company (may be title company, lender, or other) that won't charge you an excessive amount, a survey company that you like if required in DC for your title insurance, and homeowner's insurance coverage that you think is a good deal. The time between contract and closing is short and nobody tells you to research all the closing costs that on a $500,000 place run to in excess of $10,000, but you should. Also know that your closing costs will be about 2% of the purchase price and plan accordingly. In general take some time to educate yourself on homebuying as well as neighborhoods and price ranges. Don't rush into this process or you will lose a lot of money fast.", "title": "" }, { "docid": "6fb7e5d95d676f6213927f5f83c36fef", "text": "With the calculator in hand (Excel :) you should follow this advise and save a bundle. 1) Calculate how much you are willing to spend per month. 2) Take the longest (in years) mortgage you can find and cheepest (Euribor+0,2% is better than Euribor+1%). 3) Save the amount you are not spending on your mortgage. Whenever the mortgage cost changes (once a year), calculate whether you get more interests on your savings or on a down payment (look at the total cost). Then decide if you make a down payment or keep on saving. My 0,02€ We took a 20 year mortgage and blindly payed every time we'd have 3K€. We payed our house in 6 years. The total cost of the mortgage was way down this way. However, the above theory has a better yield overall.", "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": "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": "" } ]	fiqa
36cf477317e4b6d827e738ec1f358864	How should I distribute my savings?	[ { "docid": "eb3edd01ffe10ab7f4564f86141ff5e3", "text": "\"You need to track all of your expenses first, inventarize all of your assets and liabilities, and set financial goals. For example, you need to know your average monthly expenses and exactly what percentages interest each loan charges, and you need to know what to save for (your children, retirement, large purchases, etc). Then you create an emergency fund: keep between 4 to 6 months worth of your monthly expenses in a savings account that you can readily access. Base the size of your emergency fund on your expenses rather than your salary. This also means its size changes over time, for example, it must increase once you have children. You then pay off your loans, starting with the loan charging the highest interest. You do this because e.g. paying off $X of a 7% loan is equivalent to investing $X and getting a guaranteed 7% return. The stock market does generally does not provide guarantees. Starting with the highest interest first is mathematically the most rewarding strategy in the long run. It is not a priori clear whether you should pay off all loans as fast as possible, particularly those with low interest rates, and the mortgage. You need to read up on the subject in order to make an informed decision, this would be too personal advice for us to give. After you've created that emergency fund, and paid of all high interest loans, you can consider investing in vessels that achieve your set financial goals. For example, since you are thinking of having children within five years, you might wish to save for college education. That implies immediately that you should pick an investment vessels that is available after 20 year or so and does not carry too much risk (e.g. perhaps bonds or deposits). These are a few basic advices, and I would recommend to look further on the internet and perhaps read a book on the topic of \"\"personal finance\"\".\"", "title": "" } ]	[ { "docid": "6d34a84c720f48c3f5affaf68c7209c3", "text": "\"This is only a partial answer to your question #1. If you have a conservative approach to savings (and, actually, even if you don't), you should not invest all of your money in any single industry or product. If you want to invest some money in oil, okay, but don't overdo it. If your larger goal is to invest the money in a manner that is less risky but still more lucrative than a savings account, you should read up on personal finance and investing to get a sense of what options are available. A commonly-recommended option is to invest in low-cost index funds that mirror the performance of the stock market as a whole. The question of \"\"how should I invest\"\" is very broad, but you can find lots of starting points in other questions on this site, by googling, or by visiting your local library.\"", "title": "" }, { "docid": "e3b8c01d4d603b00d5f2bd95c795955a", "text": "\"You'd want the money to be \"\"liquid\"\" and ready for you to use when tax time comes around. You also don't want to lose \"\"principal\"\", i.e. if you put it into stocks and have the value of what you put in be less than what you invested—which is possible—when you need the money, again, at tax time. That doesn't leave you with many good choices or an amazingly good way to profit from investing your savings that you put aside for taxes. CDs are steady but will not give you much interest and they have a definite deposit timeframe 6 months, 1 yr, 2 yrs and you can't touch it. So, the only reasonable choice you have left is an interest bearing checking or savings account with up to 1% interest (APR)—as of this writing Ally Bank offers 1% interest in an online interest savings acct.—which will give you some extra money on your deposits. This is what I do.\"", "title": "" }, { "docid": "6b804ef09f486798a3503be8d5ce1a1e", "text": "You seem to have a grasp of the basic principles involved, but your estimation of the risk you are taking seems a bit low. Your non-investment reserves are unlikely to cover your expenses for more than a month, so the chance that you would need to sell investments to cover additional expenses is high. You mention that I am flexible with the 'cash on hand' amount. For instance, for about three months I put a very tight spending/investing freeze on my life because I knew I'd be leaving jobs and moving (I already had the other job lined up). Those savings presumably went toward moving expenses, as your usual savings were insufficient. In the event that you are laid off suddenly, you might find yourself in the same position again, with added unplanned expenses like fees for breaking a lease. Your current plan involves selling investments to cover the gap. Based on your age you have probably only invested in a predominantly positive market, so the chance that you might need to sell investments for cash seems like a reasonable trade-off for the added potential gains. Your perception might change if the markets go south and you are forced to sell into a down market, possibly at a significant loss. You also don't indicate if your investments are currently sufficient to cover an extended period of unemployment. You are taking on a lot of risk under your current plan. Essentially you are trading possible investment gains for flexibility and time. By making small changes like saving at least enough to move as you did previously, you can give yourself time to react to job loss or other unexpected financial need. Rather than give the traditional emergency funds advice, I suggest you look at the broader picture. The total amount of savings/risk is up to you, but you should consider your current savings as insufficient to rely on as a safety net.", "title": "" }, { "docid": "7ba5c8e77be27b5bbb0c9e0ac99adff3", "text": "\"@MrChrister - Savings is a great idea. Coudl also give them 1/2 the difference, rather than the whole difference, as then you both get to benefit... Also, a friend of mine had the Bank of Dad, where he'd keep his savings, and Dad would pay him 100% interest every year. Clearly, this would be unsustainable after a while, but something like 10% per month would be a great way to teach the value of compounding returns over a shorter time period. I also think that it's critical how you respond to things like \"\"I want that computer/car/horse/bike/toy\"\". Just helping them to make a plan on how to get there, considering their income (and ways to increase it), savings, spending and so on. Help them see that it's possible, and you'll teach them a worthwhile lesson.\"", "title": "" }, { "docid": "deefce8e1b71ab35ffa0f37d3583e233", "text": "\"Goodness, I wish I could put away half my paycheck. Not to rain on your parade, but a 6-month emergency fund is not quite \"\"very good.\"\" It is the typical starting time frame. Personally, I would feel more comfortable with a 2+ year fund. That is a bit extreme, but only because many of us can barely seem to make it around to a 6-month fund. So, we focus on the more attainable goal. I say you do all three. Make saving money your priority, but do enjoy some of it; in moderation. Do not plan on making any big purchases with it, but know that you will eventually be able able to do so. Money not spent is worthless Idle money is worthless. Make some -- hopefully -- prudent investments with some of your money. A small portion of that investment portfolio can/should be in speculative investments. Maybe even as much as 20% of your investment portfolio, since you are young. Consider that money gone and you will hopefully be surprised by one of those speculative investments. That is the crucial point: earmark a small portion of your investment portfolio which you are willing to lose. However, do not gamble with it. Research the hot emerging technologies, for example, and find a way to make an investment. So, in summary: You may have more money that you know what do with, right now. However, that does not mean you need to go out and spend it all. Trust me, as you get older you will think of plenty of good uses for that money.\"", "title": "" }, { "docid": "d4204f26bc88bab658ce2be226976e79", "text": "\"Since I, personally, agree with the investment thesis of Peter Schiff, I would take that sum and put it with him in a managed account, and leave it there. I'm not sure how to find a firm that you like the investment strategy of. I think that it's too complicated to do as a side thing. Someone needs to be spending a lot of time researching various instruments and figuring out what is undervalued or what is exposed to changing market trends or whatever. I basically just want to give my money to someone and say \"\"I agree with your investment philosophy, let me pay you to manage my money, too.\"\" No one knows who is right, of course. I think Schiff is right, so that's where I would put the amount of money you're talking about. If you disagree with his investment philosophy, this doesn't really make any sense to do. For that amount of money, though, I think firms would be willing to sit down with you and sell you their services. You could ask them how they would diversify this money given the goals that you have for it, and pick one that you agree with the most.\"", "title": "" }, { "docid": "770b55a96711bfa89c581bb4fd39eeae", "text": "You don't. My budget for the year takes my gross income and nets out tax, spending, etc to account for every dollar. My assets (and the target of the savings during the year) are a balance sheet item. The sum already there isn't part of each year's budget.", "title": "" }, { "docid": "129bdb80fca89317d965a8135a162d36", "text": "\"Congrats on saving the money but unfortunately, you're looking for a 24% annual rate of return and that's not \"\"reasonable\"\" to expect. $200 per month, is $2,400 per year. $2,400/$10,000 is 24%. In a 1% savings account with spending of $200 per month spending you'll have about $7,882 at the end of the year. You'll earn about $90 of interest over the course of the year. I'm sure other people will have more specific opinions about the best way to deploy that money. I'd open a brokerage account (not an IRA, just a regular plain vanilla brokerage account), break off $5,000 and put it in to a low fee no commission S&P index fund; which CAN lose value. Put the rest in a savings account/checking account and just spend wisely.\"", "title": "" }, { "docid": "4565bdd52fc78c636b1dfe90b193e54a", "text": "Start as soon as you can and make your saving routine. Start with whatever you feel comfortable with and be consistent. Increase that amount with raises, income gains, and whenever you want.", "title": "" }, { "docid": "62abbfebf8183ab8e25ec57ff97499ed", "text": "You have to balance several concerns here. The primary problem is that if you go to the effort of saving your money you want to also be sure that your savings will not lose too much of its value to inflation. Ukraine had a terrible inflation spike in 2015 for obvious reasons. Even as inflation has settled down in 2016, it is stabilizing around 12% which is very high Exchange rates are your next concern. If you lose a large percentage of the value of your money just in the process of exchanging it, that also eats away at the value of your money. If you accept the US Federal Reserve target of 2% inflation, then you should only exchange money that you will hold long enough that both exchange fees will outweigh the 10% inflation advantage. Even in cases where you have placed your money in a foreign currency, there's a chance that your government could freeze accounts denominated in foreign currencies, so there's always the political risk that you have to factor in. For that reason keeping foreign currency in cash also has some appeal because it cannot be confiscated as easily. You could still certainly be robbed, so keeping all of your savings in cash isn't a great solution either. All in all, you are diversifying your savings if you use the strategy of balancing all three methods. Splitting it evenly to 5% for each method isn't the most important. I would suggest taking advantage of good exchange rates (as they appear) to time when you buy foreign currency.", "title": "" }, { "docid": "cf1ea72c231c421ef324015bd601661b", "text": "\"If I had to take sides, I'd think that it would be better to be able to divide up the entirety of your savings into big \"\"buckets,\"\" as others are saying in their answers -- if not in physically accounts, then at least conceptually. Let's say you're 45 years old and have $350,000 in various accounts. I would argue that you should at the very least know this level of detail: So, if you get in a really, really bad snowmobile accident that costs $100,000, you know, at least conceptually, that: Now, you're in a better position to revise your goals. Maybe you decide that real estate isn't \"\"all that\"\" and you allocate the entire shortfall to that item, and reallocate it to start the first Snowmobile Safety Program in the country. So now it looks like this: But had you not compartmentalized the funds to begin with, you wouldn't have known where you stood.\"", "title": "" }, { "docid": "8d50c2156d049c162fca11446aa0de00", "text": "If held in one savings account, how can I easily manage what percentage is planned for which purpose? I used a spreadsheet for some years, but found it clumsy for everyday use. Thus I wrote some software which my wife and I use for our short-term as well as long-term planning, available at http://budgeter.sourceforge.net. It specifically helps with splitting the money in one or several accounts into logical categories. (The software is not the most user-friendly ever, so there may be better suggestions that follow, but it works well for us. Please feel free to suggest improvements to it as well.)", "title": "" }, { "docid": "bde532eae5c6c8cbb1770a4bfd7c4d55", "text": "\"For what it's worth, the distribution I'm currently using is roughly ... with about 2/3 of the money sitting in my 401(k). I should note that this is actually considered a moderately aggressive position. I need to phone my advisor (NOT a broker, so they aren't biased toward things which are more profitable for them) and check whether I've gotten close enough to retirement that I should readjust those numbers. Could I do better? Maybe, at higher risk and higher fees that would be likely to eat most of the improved returns. Or by spending far more time micromanaging my money than I have any interest in. I've validated this distribution using the various stochastic models and it seems to work well enough that I'm generally content with it. (As I noted in a comment elsewhere, many of us will want to get up into this range before we retire -- I figure that if I hit $1.8M I can probably sustain my lifestyle solely on the income, despite expected inflation, and thus be safely covered for life -- so this isn't all that huge a chunk of cash by today's standards. Cue Daffy Duck: \"\"I'm rich! I'm wealthy! I'm comfortably well off!\"\" -- $2M, these days, is \"\"comfortably well off.\"\")\"", "title": "" }, { "docid": "dfc2f3c33075335b08c50365125d6639", "text": "Congrats on saving aggressively when you're young. I'm not a huge fan of tax-advantaged accounts because the rules can change on them, and there's already a penalty for you to take out that money for most purposes until you've almost tripled your age. Free money (a match) overcomes this reservation for me, but I'm not contributing anything beyond that. I'm paying my taxes on the rest and am done with them. Watching your money grow tax-free for another 37 1/2 years only to see your (and everyone else's) marginal tax rate rise isn't much fun. I'm not saying that will happen, but it certainly could.", "title": "" }, { "docid": "b85a9a30cf0dbf72c89680e510ae5fc5", "text": "Consider also setting up a CD ladder. CD rates are often better than savings account rates. You have a 12-month CD that you purchase in January with a twelfth of your money, then another small one in February, then another in March.... then, when January comes around again, you a little more money to the first CD, and the ladder is complete. The idea is that you have more access to your money than one big CD, since you'll always have a CD maturing next month that you can get to in case of an emergency, and you can get better rates on a 1-year CD than on something else (with less risk of being locked into a bad interest rate). And you'll be less tempted to tap it all at once to buy some fancy car or what-not because you can't get at it all at once (without a penalty). And in a major emergency, losing a few percent of your interest for early withdrawals is likely the least of your problems.", "title": "" } ]	fiqa
55e110e10d4e2207f783d5af7fe27817	Why ADP does not accurately withhold state and federal income tax (even if W4 is correct)?	[ { "docid": "c8afd7222d68da2274599759df354008", "text": "ADP does not know your full tax situation and while the standard exemption system (actually designed by the IRS not ADP) works fairly well for most people it is an approximation. This system is designed so most people will end up with a small refund while some people will end up owing small amounts. So, while it is possible that ADP has messed up the calculations it is unlikely this is the cause. The most likely cause is that approximation ends ups making you pay less tax during the year than you actually owe. A few people like your friend may end up owing large amounts due to various circumstances. It is always your responsibility to make sure you pay enough tax throughout the year. While this technically means that you need to do your taxes every quarter during the year to make sure you pay the correct tax during the year, for most people this ends up being unnecessary as the approximation works fine. It is possible the exemption system failed your friend, but much more commonly people owe penalties because they put the wrong number of exemptions or had other side income. On a related note, most people in finance would argue that your situation where you owe some money at tax time, but not so much that you have to pay a penalty, is actually the best way to go. Getting a tax refund actually means you paid more tax than you needed to. This is similar to giving an interest-free loan to the government.", "title": "" }, { "docid": "fb13d1c6094c3762d392804652b1b26a", "text": "I see several interesting statement in your question. A. my only income is from my Employer B. I also receive employer stock (ESPP, RSU, NSO). However, employer withholds taxes for these stock transactions through my broker (I see them broken down on my W2). C. I have been subject to Alternative Minimum Tax. A implies a simple tax return. B and C tell the opposite story. In fact if B is not done correctly The amount withheld due to payroll may be perfect but the under withholding could be due to the ESPP's, RSUs and NSOs. The AMT can throw everything else out the window. If a person has a very simple tax situation: Income doesn't change a lot from paycheck to paycheck; they take the standard deduction; the number of exemptions equals the number of people in the family. Then the withholding is very close to perfect. The role of the exemptions on the W-4 is to compensate for situations that go above the standard deduction. The role of extra withholding is when the situation requires more withholding due to situations that will bring in extra income or if the AMT is involved.", "title": "" } ]	[ { "docid": "484ba9dcfc97d92782ff077f49821d12", "text": "\"Yep. You're single, you're possibly still a dependent on your parent's taxes (in lieu of rent), and you're finally bringing home bacon instead of bacon bits. Welcome to the working world. Let's say your gross salary is the U.S. median of $50,000. With bi-weekly checks (26 a year; common practice) you're getting $1923.08 per paycheck. In the 2013 \"\"Percentage Method\"\" tax tables, here's how your federal withholding is calculated as a single person paid biweekly: Federal taxes are computed piecewise; the amount up to A is taxed at X%, then the amount between A and B is taxed at Y%, so if you make $C, between A and B, the tax is (AX) + (C-A)Y. The amount AX is included in the \"\"base amount\"\" for ease of calculation. Back to our example; let's say you're getting $1923.08 gross wages per check. That puts you in the 25% marginal bracket. You pay the sum of all lesser brackets (which is the \"\"base amount\"\" of the 25% bracket), plus the 25% marginal rate on every dollar that falls within the bracket. That's 191.95 + (1923.08 - 1479) .25 = 191.95 + (444.08 * .25) = 191.95 + 111.02 = $302.97 per paycheck. The \"\"effective\"\" tax rate on the total amount, as if you were being charged a flat tax, is 15.75%, and this is just for the federal income tax. Add to this MA state income taxes (5.25% flat tax), FICA (aka Medicare; 1.45% flat) and SECA (aka Social Security; 6.2% up to a \"\"wage base\"\" that $50k doesn't even approach), and your effective tax rate on each dollar you earn is 15.75% + 5.25% + 1.45% + 6.2% = 28.65%. This doesn't include any state unemployment taxes that may be withheld separately, but as the rate I come up with is pretty darn close to what you've figured (meaning I slightly overestimated your gross income and thus your effective tax rate), my bet is that SUTA's either employer-paid in MA, or it's just part of MA state income tax. It gets better, at least at the federal level: The amount of your state income taxes is tax-deductible at the federal level if you itemize your deductions. That may not be a factor for you as you'd have to come up with more than $6,100 of other tax-deductible expenses to make itemizing the better option than taking the standard deduction (big-ticket items are mortgage expenses other than principal payments, hospital stays such as for childbirth or major accident, and state and local taxes such as sales, property and income). If you can claim yourself as a dependent (meaning your parents can't), then $150 of each check ($3,900 of your annual salary) is no longer taxed for federal withholding, lowering the amount of money taxed at the 25% marginal rate. You effectively save $37.50 biweekly ($975 annually) in taxes. Get married and file jointly, and your spouse, her personal exemption, and an extra standard deduction amount (if you don't itemize) go on your taxes. The tax rates for married couples filing jointly are also lower; they're currently calculated (or were in 2012) to be the same as if two equal earners were to file separately, so if your spouse doesn't work, your taxes on the single income are calculated at the rates you'd get if you earned half as much. It doesn't work out to half the taxes, but it is a significant \"\"marriage advantage\"\". Have kids, and each one is another little $3,900 tax write-off. It's nowhere near the cost of having or raising the child, but it helps, and having kids isn't about the money. Owning a home, making charitable deductions, having medical expenses, etc are a toss-up. The magic number in 2013 is $12,200 for a married couple, $6,100 for a single person. If your mortgage interest, insurance premiums, property taxes, medical expenditures, charitable donations, any contributions from your take-home pay to a tax-deferred savings account (typically these accounts are paid into by your employer as a \"\"pre-tax deduction\"\" and never show up as taxable income, but you could just as easily move money from your take-home pay into tax-deferred savings) and any other tax-deductible payments add up to more than 12 large, then itemize. If not, take your standard deduction. As a single taxpayer just starting out in life, you probably don't have any of these types of expenditures, certainly not enough to give up the SD. I did the math on my own taxes in 2012, and was surprised at how little the government actually gets of my paycheck when all's said and done. Remember back in the summer of 2012 when everyone was mad at Romney for making millions and only paying an effective income tax rate of 14%, which was compared to the middle class's marginal rate of 25-28%? Well, my family of 3, living on a little more than the median income from one earner (me), taking the married standard deduction, three personal exemptions, and a little extra for student loan interest, paid an effective federal income tax rate of something like 3.5%. Of course, the FICA and SS taxes don't allow any deductions (not even for retirement savings), so add in the 4.2% SS (in 2012) and 1.45% FICA and the full federal gimme was more like 9-10%.\"", "title": "" }, { "docid": "5b287fe3e5c18c67590e241a102689ff", "text": "\"1 - in most cases, the difference between filing joint or married filing single is close to zero. When there is a difference you're better off filing joint. 2 - The way the W4 works is based on how many allowances you claim. Unfortunately, even in the day of computers, it does not allow for a simple \"\"well my deduction are $xxx, don't tax that money.\"\" Each allowance is equal to one exemption, same as you get for being you, same as the wife gets, same as each kid. 3 people X $3800 = $11,400 you are telling the employer to take off the top before calculating your tax. She does this by using Circular E and is able to calculate your tax as you request. If one is in the 15% bracket, one more exemption changes the tax withheld by $570. So if you were going to owe $400 in April, one few exemption will have you overpay $170. i.e. in this 15% bracket, each exemption changes annual withholding by that $570. For most people, running the W4 numbers will get them very close, and only if they are getting back or owing over $500, will they even think of adjusting. 3 - My recently published Last Minute Tax Moves offers a number of interesting ideas to address this. The concept of grouping deductions in odd years is worth noting. 4 - I'm not sure what this means, 2 accounts each worth $5000 should grow at the same rate if invested the same. The time it makes sense to load one person's account first is if they have better matching. You say you are not sure what percent your wife's company matches. You need to change this. For both of your retirement plans you need to know every detail, exact way to maximize matching, expense ratios for the investments you choose, any other fees, etc. Knowledge is power, and all that. In What is an appropriate level of 401k fees or expenses in a typical plan? I go on to preach about how fees can wipe out any tax benefit over time. For any new investor, my first warning is always to understand what you are getting into. If you can't explain it to a friend, you shouldn't be in it. Edit - you first need to understand what choices are within the accounts. The 4% and 6% are in hindsight, right? These are not fixed returns. You should look at the choices and more heavily fund the account with the better selection. Deposit to her account at least to grab the match. As far as the longer term goals, see how the house purchase goes. Life has a way of sending you two kids and forcing you to tighten the budget. You may have other ideas in three years. (I have no P2P lending experience, by the way.) Last - many advise that separate finances are a bad path for a couple. It depends. Jane and I have separate check books, and every paycheck just keep enough to write small checks without worry, most of the money goes to the house account. Whatever works for you is what you should do. We've been happily married for most of the 17 years we've been married.\"", "title": "" }, { "docid": "aaf55388098ee9706be2ee72abf82d98", "text": "Your question begins with a misunderstanding. When you prepare your tax return (Form 1040/1040A/1040EZ) you always try to minimize your total tax bill. When you fill out form W4 you trying to estimate how much tax will be shown on next years tax return. The penalty for having too much tax withheld is not having the use of the money until you get a tax refund. At the moment interest rates are very low and your economic loss is the temporary loss of access to the money. One exception would be if you are carrying credit card debt. In that case you are, in effect, paying 20-30% interest to borrow money you lending to the US Treasury for 0% interest. The penalty for having too little tax withheld is having to make a large payment with your tax return. If your pre-payments aren't at least as much as your total income tax from last year there may also be modest underpayment penalty based on the difference between your pre-payments and your total income tax from last year or this year whichever is less. A large underpayment will trigger a different larger underpayemnt penalty. The W4 combined with the withholding rates tends to over-withhold income tax for most, but not all, taxpayers. Most people don't have enough savings to pay a large tax due, which leads to more penalties and an even larger bill. Over-witholding protects the overall tax system from the consequences of those events. People tend to be very unhappy, not quietly. On balance your greatest economic benefit depends on whether or not you have high interest debt. If you do, then accurate and even slightly under-withholding will probably work to your advantage as long as you can pay next 4/15. If not, avoiding the chance of having any unexpected balance due next year may be more important.", "title": "" }, { "docid": "f5bb48681b5df3512b1d651714b729d6", "text": "When you itemize your deductions, you get to deduct all the state income tax that was taken out of your paycheck last year (not how much was owed, but how much was withheld). If you deducted this last year, then you need to add in any amount that you received in state income tax refunds last year to your taxes this year, to make up for the fact that you ended up deducting more state income tax than was really due to the state. If you took the standard deduction last year instead of itemizing, then you didn't deduct your state income tax withholding last year and you don't need to claim your refund as income this year. Also, if you itemized, but chose to take the state sales tax deduction instead of the state income tax deduction, you also don't need to add in the refund as income. For whatever reason, Illinois decided that you don't get a 1099-G. It might be that the amount of the refund was too small to warrant the paperwork. It might be that they screwed up. But if you deducted your state income tax withholding on last year's tax return, then you need to add the state tax refund you got last year on line 10 of this year's 1040, whether or not the state issued you a form or not. Take a look at the Line 10 instructions starting on page 22 of the 1040 instructions to see if you have any unusual situations covered there that you didn't mention here. (For example, if you received a refund check for multiple years last year.) Then check your tax return from last year to verify that you deducted your state income tax withholding on Schedule A. If you did, then this year add the refund you got from the state to line 10 of this year's 1040.", "title": "" }, { "docid": "4a89404183a0ad268890174c0623c23d", "text": "This question came up again (Living in Florida working remotely - NY employer withholds NYS taxes - Correct or Incorrect?) and the poster on the new version didn't find the existing answers to be adequate, so I'm adding a new answer. NYS will tax this income if the arrangement is for the convenience of the employee. If the arrangement is necessary to complete the work, then you should have no NYS tax. New York state taxes all New York-source salary and wage income of nonresident employees when the arrangement is for convenience rather than by necessity (Laws of New York, § 601(e), 20 NYCRR 132.18). Source: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html Similar text can also be found here: http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/ The NYS tax document governing this situation seems to be TSB-M-06(5)I. I looked at this page from NYS that was mentioned in the answer by @littleadv. That language does at first glance seem to lead to a different answer, but the ruling in the tax memo seems to say that if you're out of state only for your convenience then the services were performed in NYS for NYS tax purpose. From the memo: However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of- state duties in the service of his employer.", "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": "4867627f8a0ac6019c5a4cb6e87e0422", "text": "Unfortunately, the tax system in the U.S. is probably more complicated than it looks to you right now. First, you need to understand that there will be taxes withheld from your paycheck, but the amount that they withhold is simply a guess. You might pay too much or too little tax during the year. After the year is over, you'll send in a tax return form that calculates the correct tax amount. If you have paid too little over the year, you'll have to send in the rest, but if you've paid too much, you'll get a refund. There are complicated formulas on how much tax the employer withholds from your paycheck, but in general, if you don't have extra income elsewhere that you need to pay tax on, you'll probably be close to breaking even at tax time. When you get your paycheck, the first thing that will be taken off is FICA, also called Social Security, Medicare, or the Payroll tax. This is a fixed 7.65% that is taken off the gross salary. It is not refundable and is not affected by any allowances or deductions, and does not come in to play at all on your tax return form. There are optional employee benefits that you might need to pay a portion of if you are going to take advantage of them, such as health insurance or retirement savings. Some of these deductions are paid with before-tax money, and some are paid with after tax money. The employer will calculate how much money they are supposed to withhold for federal and state taxes (yes, California has an income tax), and the rest is yours. At tax time, the employer will give you a form W-2, which shows you the amount of your gross income after all the before-tax deductions are taken out (which is what you use to calculate your tax). The form also shows you how much tax you have paid during the year. Form 1040 is the tax return that you use to calculate your correct tax for the year. You start with the gross income amount from the W-2, and the first thing you do is add in any income that you didn't get a W-2 for (such as interest or investment income) and subtract any deductions that you might have that are not taxable, but were not paid through your paycheck (such as moving expenses, student loan interest, tuition, etc.) The result is called your adjusted gross income. Next, you take off the deductions not covered in the above section (property tax, home mortgage interest, charitable giving, etc.). You can either take the standard deduction ($6,300 if you are single), or if you have more deductions in this category than that, you can itemize your deductions and declare the correct amount. After that, you subtract more for exemptions. You can claim yourself as an exemption unless you are considered a dependent of someone else and they are claiming you as a dependent. If you claim yourself, you take off another $4,000 from your income. What you are left with is your taxable income for the year. This is the amount you would use to calculate your tax based on the bracket table you found. California has an income tax, and just like the federal tax, some state taxes will be deducted from your paycheck, and you'll need to fill out a state tax return form after the year is over to calculate the correct state tax and either request a refund or pay the remainder of the tax. I don't have any experience with the California income tax, but there are details on the rates on this page from the State of California.", "title": "" }, { "docid": "28ca8044728004376da120c7f572a56f", "text": "\"It doesn't generally matter, and I'm not sure if it is in fact in use by the IRS other than for general statistics (like \"\"this year 20% of MFJ returns were with one spouse being a 'homemaker'\"\"). They may be able to try and match the occupation and the general levels and types of income, but for self-employed there's a more precise and reliable field on Schedule C and for employees they don't really need to do this since everything is reported on W2 anyway. So I don't think they even bother or give a lot of value to such a metric. So yes, I'm joining the non-authoritative \"\"doesn't matter\"\" crowd.\"", "title": "" }, { "docid": "65783e7cedfca85f8a5147c9863f6575", "text": "\"I have an indirect answer for you. It is not a numeric answer but it is a procedure. The challenge with paying taxes for an employee besides their share of Social security and Medicare is that you have no idea what their state and Federal taxes are. Are they married, single, head of household? Is this their entire families income, or is it extra money to make ends meet? What about state taxes? It looks like you will need a W-4 from them. As you know the IRS Tax topic 756 has all the info you need. Federal Income Tax Withholding You are not required to withhold federal income tax from wages you pay to a household employee. However, if your employee asks you to withhold federal income tax and you agree, you will need a completed Form W-4 (PDF), Employee's Withholding Allowance Certificate from your employee. See Publication 15, (Circular E), Employer's Tax Guide, which has tax withholding tables that are updated each year. Form W-2, Wage and Tax Statement If you must withhold and pay Social Security and Medicare taxes, or if you withhold federal income tax, you will need to complete Form W-2 (PDF), Wage and Tax Statement, for each employee. You will also need a Form W-3 (PDF), Transmittal of Wage and Tax Statement. See \"\"What Forms Must You File?\"\" in Publication 926 (PDF) for information on when and where to furnish and file these forms. To complete Form W-2 you will need an employer identification number (EIN) and your employees' Social Security numbers. If you do not already have an EIN, you can apply for one using the online EIN application available on IRS.gov. This service is available Monday through Friday, 7 a.m. to 10 p.m. Eastern time. You can also apply for an EIN by mailing or faxing a completed Form SS-4 (PDF), Application for Employer Identification Number. International applicants may apply by calling 267-941-1099 (not a toll-free number) Monday through Friday, 6 a.m. to 11 p.m. Eastern time to obtain their EIN. Refer to Topics 752 and 755 for further information. Don't forget Federal Unemployment Tax. Pub 15 will have tables so you can determine how much you should have been withholding if you had gone that route. It will be easiest to use a spreadsheet to do the calculations so that what you gave them in their checks is their net pay not their gross. The tables are constructed under the assumption you know their gross pay.\"", "title": "" }, { "docid": "b293a75aa6a5ccb721f4fe72a5f50768", "text": "The W4 specifies withholding for income taxes, FICA taxes are not impacted. The tax withholding is do that you do not need to make estimated tax payments. Failing to make sufficient quarterly estimated tax payments or withholding a sufficient amount could result in you being hit with under payment penalties but nothing more. The under payment penalties will be figured out as part of you income tax return. What you should have done when you discovered this was use the extra withholding line on the W4 to further increase your withholding. The nice thing about withholding is that you back load it and the IRS does not care. The company has no liability here. It is your responsibility to update them when your personal circumstances change. You will be fully responsible for the tax bill. There is no company paid portion of your income tax so they are not impacted. The company only pays an employer share of FICA and that is not impacted by how you fill out the W4. First thing to do is figure out how much you owe the IRS. Then determine if you can pay it or if you need to investigate an installment option. In any case make sure to file your return on time.", "title": "" }, { "docid": "6ac871a44f02d05727d0da370515bfe2", "text": "\"In general, following the W-4 instructions should result in withholdings that are fairly close to the amount of taxes that you will owe for the year, particularly if your situation is relatively uncomplicated. Claiming less withholdings than the form suggests can help ensure that you end up saving money in your \"\"interest-free IRS savings account\"\" and get a refund at the end of the year, which some people prefer so they don't need to budget separately for a tax payment. I'm guessing that the HR employee either prefers doing so himself or has on occasion received complaints from other employees that they \"\"didn't take enough out\"\". Personally, I'd prefer to claim as many withholdings as I can, and be sure to have some money aside in case it turns out that I have to owe a little bit, since it means I get more take-home pay throughout the year. It's good to keep in mind that a W-4 isn't written in stone. If it turns out that too much or too little is being taken out, you can always change it. You can also try playing around with the IRS withholding calculator to try some scenarios.\"", "title": "" }, { "docid": "e4a93aa71ea93cf43c6833fd969880cb", "text": "If you make 100K in the U.S., you are most definitely NOT paying 25.7% tax federally. Only money that you made over 37.5K is even charged at 25% AND you didn't even factor in that you get deductions which decrease your effective tax rate. Where are you pulling your numbers?", "title": "" }, { "docid": "2000c00b0ece2e565896854fd2dd26fe", "text": "Everyone pays their personal income tax with funds from their employer; some of it through withholding, and the rest through the balance due at the time of filing. All that is happening here is that the company is calculating your personal tax return for you, and fiddling retroactively with the gross salary to yield a specific after-tax salary. One problem is that there is a lot of information I put in my return to earn deductions, that I would not care to tell my employer. The system would also appear to be contrary to public policy. Governments create tax deductions to give a larger income to those with socially acceptable expenses: health care, dependents, etc. The system you describe would give employees with such deductions a lower gross salary.", "title": "" }, { "docid": "6df8cd70429f5684a7e83090776d634f", "text": "This is the point of the article. Somehow a company which is so successful has, for tax purposes, such a razor thin margin. So their taxation clearly isn't in keeping with its actual ability to pay, passing along the burden to other businesses and individuals.", "title": "" }, { "docid": "0c14ed6048d8aed861da5f2c0afb60c0", "text": "Are you saying that you did not tell your employer, more specifically, your payroll department, that you got married, via a W4? The W4 does not say '25%' bracket, but it asks for how many withholding allowances you plan to take. In effect, you are withholding at the single rate, but are married now. When you do your taxes for 2013, you'll see the full effect of what the W4 has on your withholding. I suggest you use this time to update the W4, and not lend money to Uncle Sam. Here's the current tax table from FairMark Publishing. 2013 gives a single a combined $10K in standard deduction and exemption, with a couple getting $20K. For a simple return, this is the info you need to figure out what you'll get back, and conversely, how much to pay next year. e.g. a gross of $50,000 - for single the tax is on $40,000. $5929. For a couple, $30K taxable is a tax of $3608. On a side note - I strongly recommend Roth accounts when in the 15% bracket and shift to Pre-Tax accounts as you get into the 25% bracket.", "title": "" } ]	fiqa
d16456607f2c1dc51b8e47568816c162	Comparison between buying a stock and selling a naked put	[ { "docid": "8d85cbd49a26fad0d5e4d4c03fe7a962", "text": "I sell a put for a strike price at the market. The stock rises $50 over the next couple months. I've gotten the premium, but lost the rest of the potential gain, yet had the downside risk the whole time. There's no free lunch. Edit - you can use a BS (Black-Scholes) calculator to create your own back testing. The calculator shows a 1% interest rate, 2% yield, and 15% volatility produce a put price almost identical to the pricing I see for S&P (the SPY ETF, specifically) $205 put. No answer here, including mine, gave any reference to a study. If one exists, it will almost certainly be on an index, not individual stocks. Note that Jack's answer referencing PUTX does exactly that. The SPY ETF and it put options. My suggestion here would, in theory, let you analyze this strategy for individual stock options as well. For SPY - With SPY at 204.40, this is the Put you'd look at - 12 times the premium is $33.36 or 16% the current price. The next part of the exercise is to see how the monthly ups and downs impact this return. A drop to $201 wipes out that month's premium. It happens that it now March 18th, and despite a bad start to the year, we are at break-even YTD. A peek back shows In Dec you picked up $2.87 premium, (1.4% the current price then) but in Jan, it closed for a loss of $12. Ouch. Now, if you started in January, you'd have picked up 2 month's premiums and today or Monday sell the 3rd. You'd have 2.8% profit so far, vs the S&P break even. Last, for now, when selling a naked put, you have to put up margin money. Not sure how much, but I use percent of the value of underlying stock to calculate returns. That choice is debatable, it just keeps percents clean. Else you put up no money and have infinite return.", "title": "" }, { "docid": "15c5d78ccb8d6d61e0703f8875d028f5", "text": "\"Yes, of course there have been studies on this. This is no more than a question about whether the options are properly priced. (If properly priced, then your strategy will not make money on average before transaction costs and will lose once transaction costs are included. If you could make money using your strategy, on average, then the market should - and generally will - make an adjustment in the option price to compensate.) The most famous studies on this were conducted by Black and Scholes and then by Merton. This work won the Nobel Prize in 1995. Although the Black-Scholes (or Black-Scholes-Merton) equation is so well known now that people may forget it, they didn't just sit down one day and write and equation that they thought was cool. They actually derived the equation based on market factors. Beyond this \"\"pioneering\"\" work, you've got at least two branches of study. Academics have continued to study option pricing, including but not limited to revisions to the original Black-Scholes model, and hedge funds / large trading house have \"\"quants\"\" looking at this stuff all of the time. The former, you could look up if you want. The latter will never see the light of day because it's proprietary. If you want specific references, I think that any textbook for a quantitative finance class would be a fine place to start. I wouldn't be surprised if you actually find your strategy as part of a homework problem. This is not to say, by the way, that I don't think you can make money with this type of trade, but your strategy will need to include more information than you've outlined here. Choosing which information and getting your hands on it in a timely manner will be the key.\"", "title": "" }, { "docid": "23a367cc4cc26f7b38defa6fc30ff439", "text": "Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW.", "title": "" }, { "docid": "93d2fe2b1e20f6d125c903df36baa9ca", "text": "Option prices are computed by determining the cost of obtaining the option returns using a strategy that trades the underlying asset continuously. It sounds like what you are describing is rapidly trading the option in order to obtain returns similar to those of the stock. The equality goes both ways. If the option is appropriately priced, then a strategy that replicates stock returns using the option will cost the same as buying the stock. Because you can't trade continuously, you won't actually be able to replicate the stock return, and it may seem like you are making arbitrage profit (puts may seem abnormally expensive), but you do so by bearing tail risk (i.e., selling puts loses more money than owning the associated stock if an unusually bad event occurs).", "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": "c57ae3b0b5c883e5b77529702c8817c0", "text": "To add to @Victor 's answer; if you are entering a market order, and not a limit order (where you set the price you want to buy or sell at), then the Ask price is what you can expect to pay to purchase shares of stock in a long position and the Bid price is what you can expect to receive when you sell stock you own in a long position.", "title": "" }, { "docid": "f17641cdf736100a78e0521fc4b00a67", "text": "\"I think the question, as worded, has some incorrect assumptions built into it, but let me try to hit the key answers that I think might help: Your broker can't really do anything here. Your broker doesn't own the calls you sold, and can't elect to exercise someone else's calls. Your broker can take action to liquidate positions when you are in margin calls, but the scenario you describe wouldn't generate them: If you are long stock, and short calls, the calls are covered, and have no margin requirement. The stock is the only collateral you need, and you can have the position on in a cash (non-margin) account. So, assuming you haven't bought other things on margin that have gone south and are generating calls, your broker has no right to do anything to you. If you're wondering about the \"\"other guy\"\", meaning the person who is long the calls that you are short, they are the one who can impact you, by exercising their right to buy the stock from you. In that scenario, you make $21, your maximum possible return (since you bought the stock at $100, collected $1 premium, and sold it for $120. But they usually won't do that before expiration, and they pretty definitely won't here. The reason they usually won't is that most options trade above their intrinsic value (the amount that they're in the money). In your example, the options aren't in the money at all. The stock is trading at 120, and the option gives the owner the right to buy at 120.* Put another way, exercising the option lets the owner buy the stock for the exact same price anyone with no options can in the market. So, if the call has any value whatsoever, exercising it is irrational; the owner would be better off selling the call and buying the stock in the market.\"", "title": "" }, { "docid": "1248a3abfba9745922e9e97dc76f27ee", "text": "Today SPY (The S&P ETF) trades at $128. The option to buy at $140 (this is a Jan '13 call) trades for $5. I buy the call, for $500 as they trade in 100 lots. The S&P skyrockets to 1500 and SPY to $150. The call trades for $11, as it still has a month or two before expiring, so I sell it, and get $1100. The S&P rose 17%, but I doubled my money. If it 'only' rose 9%, to less than $140, I'd lose my investment. No, I don't need to buy the SPY I can sell the call any time before expiration. In fact, most options are not exercised, they are sold between purchase and expiration date.", "title": "" }, { "docid": "91e13572f4af39783a97352f0aec9248", "text": "The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward. The above changes a bit if you hold the stock for 2 years after the beginning of the purchase period. If sold between your purchase price and fair market the day you bought, the gain is only the difference, no gain to fair market + loss. Pretty convoluted. Your company should have provided you with a brief FAQ / Q&A to explain this. My friends at Fairmark have an article that explains the ESPP process clearly, Tax Reporting for Qualifying Dispositions of ESPP Shares.", "title": "" }, { "docid": "5f505ea025ad3b724d57c8c6297ce71a", "text": "When you buy a stock, the worst case scenario is that it drops to 0. Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go. If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment. Therefore shorting stocks is riskier than buying stocks, since you can lose more than 100% of your investment when shorting. because the price might go up, but it will never be as big of a change as a regular price drop i suppose... That is not true. Stocks can sometimes go up significantly (50-100% or more) in a very short amount of time on a positive news release (such as an earnings or a buyout announcement). A famous example occurred in 2008, when Volkswagen stock quintupled (went up 400%) in less than 2 days on some corporate news: Porsche, for some reason, wants to control Volkswagen, and by building up its stake has driven up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short. Then last weekend, Porsche disclosed that it owned 42.6 percent of the stock and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent. The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about €200, or about $265, to above €1,000.", "title": "" }, { "docid": "9fff01263a13d8dcb07ae921e2bba43b", "text": "Here's a simple example for a put, from both sides. Assume XYZ stock trades at $200 right now. Let's say John writes a $190 out of the money put on XYZ stock and sells this put to Abby for the premium, which is say $5. Assume the strike date, or date of settlement, is 6 months from now. Thus Abby is long one put option and John is short one put option (the writer of the option is short the option). On settlement date, let's assume two different scenarios: (1) If the price of the stock decreases by $50, then the put that Abby bought is 'in the money'. Abby's profit can be calculated as being strike price 190 - current stock price 150 - premium paid 5 = $35 So not including any transaction fees, that is a $35 dollar return on a $5 investment. (2) If the price of the stock increases by $50, then the put that Abby bought is worthless and her loss was 100%, or her entire $5 premium. For John, he made $5 in 6 months (in reality you need collateral and good credit to be able to write sizable option positions).", "title": "" }, { "docid": "ac9204147d2b0e164575c241e0977988", "text": "In order to compare the two, you need to compare your entire portfolio, which is not just how much money you have, but how much stock. In both scenarios, you start with (at least, but let's assume) £20 and 0 stock. In your scenario, you buy 10 shares, leaving you with £0 and 10 shares. You then sell it at £1.50/share to cut your losses, leaving you with £15 and 0 shares. That concludes the first transaction with a net loss of £5. In a second transaction, you then buy 10 shares again at £1/share, leaving you with £5 and 10 shares. You are still down £15 from the start, but you also still have 10 shares. Any further profit or loss depends on what you can get for those 10 shares in the future. In a short sale, you borrow 10 shares and sell them, leaving you with £40 (your initial £20 plus what you just made on the short sale) and -10 shares of stock. At the end of the contract, you must buy 10 shares to return them; you are able to do so at £1.50/share, leaving you with £25 and 0 shares. At this point, your exposure to the stock is complete, and you have a net gain of £5.", "title": "" }, { "docid": "f5bc73aa50634a8e28447a7f2f5f2eb9", "text": "My instinct says that there should be no difference. Your instincts are right. Your understanding of math is not so much. You sold $100K at the current price of 7500000RUB, but ended up buying at 3500000, you earned 3500000RUB. That's 100% in USD (50% in RUB). You bought 7500000RUB for the current price of $100K, but sold later for $200K. You earned $100K (100% in USD), which at that time was equal 3500000RUB. You earned 3500000RUB. That's 50% in RUB. So, as your instincts were saying - no difference. The reason percentages are different is because you're coming from different angles. For the first case your currency is RUB, for the second case your currency is USD, and in both cases you earned 100%. If you use the same currency for your calculations, percentages change, but the bottom line - is the same.", "title": "" }, { "docid": "df41c539018f1fb6adcf160c270d71fe", "text": "Many of the Bitcoin exchanges mimic stock exchanges, though they're much more rudimentary offering only simple buy/sell/cancel orders. It's fairly normal for retail stock brokerage accounts to allow other sorts of more complex orders, where once a certain criteria is met, (the price falls below some $ threshold, or has a movement greater than some %) then your order is executed. The space between the current buy order and the current sell order is the bid/ask spread, it's not really about timing. Person X will buy at $100, person Y will sell at $102. If both had a price set at $101, they would just transact. Both parties think they can do a little bit better than the current offer. The width of the bid/ask spread is not universal by any means. The current highest buy order and the current lowest sell order, are both the current price. The current quoted market price is generally the price of the last transaction, whether it's buy or sell.", "title": "" }, { "docid": "2d57b94528708b873e6c4f0334140a20", "text": "\"SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT 1) we are talking about options, these are a derivative product whose price is based on 6 variables. 2) options allow you to create risk out of thin air, and those risks come with shapes, and the only limit is your imagination (and how much your margin/borrowing costs are). Whereas a simple asset like the shares for $IYR only has a linear risk profile. stock goes up, you make money, stock goes down, you lose money, and that risk graph looks linear. a \"\"vertical\"\" has a nonlinear risk profile 3) a vertical is a type of \"\"spread\"\" that requires holding options that expire at the same time, but at different strike prices. 3b) This particular KIND of vertical is called a bear call spread (BCS). Since you are bearish (this makes money if the stock goes down, or stays in a very specific range) but are using calls which are a bullish options product. 4) -10 means you are selling the vertical. +10 means you are buying the vertical. A \"\"long\"\" vertical is initiated by buying an option closer to the money, and selling an option at a higher strike price. This would be +X A \"\"short\"\" vertical is initiated by selling an option closer to the money and buying an option at a higher strike price. The quantity would be -X 5) 32/34 stands for the strike prices. so you would be selling 10 call options at the 32 strike price, and buying 10 call options at the 34 strike price, both options expire in August 6) LMT stands for limit order, and $.80 is the limit order price that is desired. OPENING a vertical spread requires knowledge of options as well as how to send orders. MANAGING a vertical requires even more finesse, as you can \"\"leg-in\"\" and \"\"leg-out\"\" of spreads, without sending the entire order to the exchange floor at once. There is much to learn.\"", "title": "" }, { "docid": "01bc163dafeb74461141b9a95710d206", "text": "\"A covered call risks the disparity between the purchase price and the potential forced or \"\"called\"\" sale price less the premium received. So buy a stock for $10.00 believing it will drop you or not rise above $14.00 for a given period of days. You sell a call for a $1.00 agreeing to sell your stock for $14.00 and your wrong...the stock rises and at 14.00 or above during the option period the person who paid you the $1.00 premium gets the stock for a net effective price of $15.00. You have a gain of 5$. Your hypothecated loss is unlimited in that the stock could go to $1mil a share. That loss is an opportunity loss you still had a modest profit in actual $. The naked call is a different beast. you get the 1.00 in commission to sell a stock you don't own but must pay for that right. so lets say you net .75 in commission per share after your sell the option. as long as the stock trades below $14.00 during the period of the option you sold your golden. It rises above the strike price you must now buy that stock at market to fill the order when the counter party choses to exercise the option which results in a REAL loss of 100% of the stocks market price less the .75 a share you made. in the scenarios a 1000 shares that for up $30.00 a share over the strike price make you $5,000 in a covered call and lose you $29,250 in a naked call.Naked calls are speculative. Covered calls are strategic.\"", "title": "" }, { "docid": "8cb8c260e0aa71f1a449689c970c47d6", "text": "\"Investors are \"\"forever\"\" comparing the prices of stocks to other stocks. As others have pointed out, this is done faster and more frequently nowadays with high-speed computer programs. There may be no \"\"fresh\"\" news on stock A, but if there is fresh news on stock B (as there usually is), the news on B affects the COMPARISON with stock A. That could be what causes trading in stock A that has \"\"no news.\"\"\"", "title": "" }, { "docid": "34496eab57952e94977ad49daae7fb34", "text": "I doubt that this exists, but it could theoretically. After all, a share is kind of an option to a company's future success, and so a call is already a second level on indirection. The better approach would be to 'create your own Put-Puts', by investing less money (A) in the Put you wanted to invest into, and put the smaller rest (B) in the share itself or a Call. That way, if the original Put is successful, at max (B) is lost, and if it is unsuccessful, the loss on (A) is covered by a gain on (B). Potentially, if you do the math, you can reach a mathematical equivalent situation to a Put-Put by buying the right amount and kind of Calls. However, we know already that buying a Put and a Call is a poor strategy, so that would mean a Put-Put would also be a poor strategy.", "title": "" }, { "docid": "8cde1f27c0432fe1c2c56d9cb5231181", "text": "If you're into math, do this thought experiment: Consider the outcome X of a random walk process (a stock doesn't behave this way, but for understanding the question you asked, this is useful): On the first day, X=some integer X1. On each subsequent day, X goes up or down by 1 with probability 1/2. Let's think of buying a call option on X. A European option with a strike price of S that expires on day N, if held until that day and then exercised if profitable, would yield a value Y = min(X[N]-S, 0). This has an expected value E[Y] that you could actually calculate. (should be related to the binomial distribution, but my probability & statistics hat isn't working too well today) The market value V[k] of that option on day #k, where 1 < k < N, should be V[k] = E[Y]\|X[k], which you can also actually calculate. On day #N, V[N] = Y. (the value is known) An American option, if held until day #k and then exercised if profitable, would yield a value Y[k] = min(X[k]-S, 0). For the moment, forget about selling the option on the market. (so, the choices are either exercise it on some day #k, or letting it expire) Let's say it's day k=N-1. If X[N-1] >= S+1 (in the money), then you have two choices: exercise today, or exercise tomorrow if profitable. The expected value is the same. (Both are equal to X[N-1]-S). So you might as well exercise it and make use of your money elsewhere. If X[N-1] <= S-1 (out of the money), the expected value is 0, whether you exercise today, when you know it's worthless, or if you wait until tomorrow, when the best case is if X[N-1]=S-1 and X[N] goes up to S, so the option is still worthless. But if X[N-1] = S (at the money), here's where it gets interesting. If you exercise today, it's worth 0. If wait until tomorrow, there's a 1/2 chance it's worth 0 (X[N]=S-1), and a 1/2 chance it's worth 1 (X[N]=S+1). Aha! So the expected value is 1/2. Therefore you should wait until tomorrow. Now let's say it's day k=N-2. Similar situation, but more choices: If X[N-2] >= S+2, you can either sell it today, in which case you know the value = X[N-2]-S, or you can wait until tomorrow, when the expected value is also X[N-2]-S. Again, you might as well exercise it now. If X[N-2] <= S-2, you know the option is worthless. If X[N-2] = S-1, it's worth 0 today, whereas if you wait until tomorrow, it's either worth an expected value of 1/2 if it goes up (X[N-1]=S), or 0 if it goes down, for a net expected value of 1/4, so you should wait. If X[N-2] = S, it's worth 0 today, whereas tomorrow it's either worth an expected value of 1 if it goes up, or 0 if it goes down -> net expected value of 1/2, so you should wait. If X[N-2] = S+1, it's worth 1 today, whereas tomorrow it's either worth an expected value of 2 if it goes up, or 1/2 if it goes down (X[N-1]=S) -> net expected value of 1.25, so you should wait. If it's day k=N-3, and X[N-3] >= S+3 then E[Y] = X[N-3]-S and you should exercise it now; or if X[N-3] <= S-3 then E[Y]=0. But if X[N-3] = S+2 then there's an expected value E[Y] of (3+1.25)/2 = 2.125 if you wait until tomorrow, vs. exercising it now with a value of 2; if X[N-3] = S+1 then E[Y] = (2+0.5)/2 = 1.25, vs. exercise value of 1; if X[N-3] = S then E[Y] = (1+0.5)/2 = 0.75 vs. exercise value of 0; if X[N-3] = S-1 then E[Y] = (0.5 + 0)/2 = 0.25, vs. exercise value of 0; if X[N-3] = S-2 then E[Y] = (0.25 + 0)/2 = 0.125, vs. exercise value of 0. (In all 5 cases, wait until tomorrow.) You can keep this up; the recursion formula is E[Y]\|X[k]=S+d = {(E[Y]\|X[k+1]=S+d+1)/2 + (E[Y]\|X[k+1]=S+d-1) for N-k > d > -(N-k), when you should wait and see} or {0 for d <= -(N-k), when it doesn't matter and the option is worthless} or {d for d >= N-k, when you should exercise the option now}. The market value of the option on day #k should be the same as the expected value to someone who can either exercise it or wait. It should be possible to show that the expected value of an American option on X is greater than the expected value of a European option on X. The intuitive reason is that if the option is in the money by a large enough amount that it is not possible to be out of the money, the option should be exercised early (or sold), something a European option doesn't allow, whereas if it is nearly at the money, the option should be held, whereas if it is out of the money by a large enough amount that it is not possible to be in the money, the option is definitely worthless. As far as real securities go, they're not random walks (or at least, the probabilities are time-varying and more complex), but there should be analogous situations. And if there's ever a high probability a stock will go down, it's time to exercise/sell an in-the-money American option, whereas you can't do that with a European option. edit: ...what do you know: the computation I gave above for the random walk isn't too different conceptually from the Binomial options pricing model.", "title": "" } ]	fiqa
70ed49c17478687796255385f61615ca	How to improve credit score and borrow money	[ { "docid": "c138391e73776ca0eda4e01fa2c3c5ac", "text": "\"No you should not borrow money at 44.9%. I would recommend not borrowing money except for a home with a healthy deposit (called down payment outside UK). in December 2016, i had financial crisis So that was like 12 days ago. You make it sound like the crisis was a total random event, that you did nothing to cause it. Financial crises are rarely without fault. Common causes are failure to understand risk, borrowing too much, insuring too little, improper maintenance, improper reserves, improper planning, etc... Taking a good step or two back and really understanding the cause of your financial crisis and how it could be avoided in the future is very useful. Talk to someone who is actually wealthy about how you could have behaved differently to avoid the \"\"crisis\"\". There are some small set of crises that are no fault of your own. However in those cases the recipe to recovery is patience. Attempting to recover in 12 days is a recipe for further disaster. Your willingness to consider borrowing at 44% suggests this crisis was self-inflicted. It also indicates you need a whole lot more education in personal finance. This is reinforced by your insatiable desire for a high credit score. Credit score is no indication of wealth, and is meaningless until you desire to borrow money. From what I read, you should not be borrowing money. When the time comes for you to buy a home with a mortgage, its fairly easy to have a high enough credit score to borrow at a good rate. You get there by paying your bills on time and having a sufficient deposit. Don't chase a high credit score at the expense of building real wealth.\"", "title": "" }, { "docid": "a5b92a33a768b2c9518af6780efc58ef", "text": "\"I had to apply for an American Express card, which was also rejected. Then I had searched for a Marbles Credit Card Stop applying for credit cards/loans. Doing so is just making your credit rating worse. Credit agencies will downgrade your credit rating if they see lots of signs of credit checking. It's a sign you're desperately looking for credit, which you are...! 44.9% APR This is very expensive credit. You can get personal loans on the high street for 3-4%. 44.9% is really bad value. You're simply going to make the situation worse. Am I taking off a loan from website as amingos loans to help me build up my credit rating Again this is 44% interest! You also need a guarantor. So you're not only going to get yourself in trouble but a family member too: don't do this! This will only help your credit rating if you pay it back successfully, which given your situation seems like a risk. Contact the Money Advice Service or the National Debt Line. Explain your situation in detail to them. They are a government-backed service designed for people in your situation. They will offer practical advice and can even help negotiate with your creditors, etc. Here's some general advice about getting out of debt from Money Saving Expert Traditional debt help says 'never borrow your way out of a debt problem'. But this ignores the varying cost of different debts. The MoneySaving approach is: \"\"Never borrow more to get out of a debt problem.\"\"\"", "title": "" } ]	[ { "docid": "1c6f4d4d60e2d0ab33a4dc222df18be3", "text": "It sort of sounds like you want to contradictory things: (1) to fix your credit so you will be able to get loans and (2) to have more money available to spend now. It sounds like the latter is probably not possible. Not without getting into a worse situation than you are currently in (based on what you have written the next step is payday loans and the like, which is basically financial suicide). Fixing your credit is simple. It's just not fun. Cut your spending. Cut it way, way, way down. You will certainly have to change your lifestyle. I'd suggest taking a second job. Make the minimum payment on everything, then put all your extra money toward the most pressing things: I would focus on the former. As you pay down your debt your utilization will go down, and this will raise your score automatically. When you pay off your highest interest rate debt, don't change your spending. Instead put everything you were putting to that to the next highest debt you have. Continue until your highest interest rate loan is at or below the mortgage rate. When you get to this point you will notice that your credit score is vastly better and you are no longer spending all your money on interest. You will probably be in a position to buy a home. And you will have the satisfaction of knowing you did it yourself, rather than having a bankruptcy judge force you to change your lifestyle. A note on the items in collections: make sure they are all legit. If any are wrong, it is pretty straightforward to contest them with the credit bureaus and get them taken off. Things in collections will drop your score severely.", "title": "" }, { "docid": "6de2264a0a9d82015be6c5d897c27ebd", "text": "I have a car loan paid in full and even paid off early, and 2 personal loans paid in full from my credit union that don't seem to reflect in a positive way and all 3 were in good standing. But you also My credit card utilization is 95%. I have a total of 4 store credit cards, a car loan, 2 personal loans. So assuming no overlap, you've paid off three of your ten loans (30%). And you still have 95% utilization. What would you do if you were laid off for six months? Regardless of payment history, you would most likely stop making payments on your loans. This is why your credit score is bad. You are in fact a credit risk. Not due to payment history. If your payment history was bad, you'd likely rank worse. But simple fiscal reality is that you are an adverse event away from serious fiscal problems. For that matter, the very point that you are considering bankruptcy says that they are right to give you a poor score. Bankruptcy has adverse effects on you, but for your creditors it means that many of them will never get paid or get paid less than what they loaned. The hard advice that we can give is to reduce your expenses. Stop going to restaurants. Prepare breakfast and supper from scratch and bag your lunch. Don't put new expenses on your credit cards unless you can pay them this month. Cut up your store cards and don't shop for anything but necessities. Whatever durables (furniture, appliances, clothes, shoes, etc.) you have now should be enough for the next year or so. Cut your expenses. Have premium channels on your cable or the extra fast internet? Drop back to the minimum instead. Turn the heat down and the A/C temperature up (so it cools less). Turn off the lights if you aren't using them. If you move, move to a cheaper apartment. Nothing to do? Get a second job. That will not only keep you from being bored, it will help with your financial issues. Bankruptcy will not itself fix the problems you describe. You are living beyond your means. Bankruptcy might make you stop living beyond your means. But it won't fix the problem that you make less money than you want to spend. Only you can do that. Better to stop the spending now rather than waiting until bankruptcy makes your credit even worse and forces you to cut spending. If you have extra money at the end of the month, pick the worst loan and pay as much of it as you can. By worst, I mean the one with the worst terms going forward. Highest interest rate, etc. If two loans have the same rate, pay the smaller one first. Once you pay off that loan, it will increase the amount of money you have left to pay off your other loans. This is called the debt snowball (snowball effect). After you finish paying off your debt, save up six months worth of expenses or income. These will be your emergency savings. Once you have your emergency fund, write out a budget and stick to it. You can buy anything you want, so long as it fits in your budget. Avoid borrowing unless absolutely necessary. Instead, save your money for bigger purchases. With savings, you not only avoid paying interest, you may actually get paid interest. Even if it's a low rate, paid to you is better than paying someone else. One of the largest effects of bankruptcy is that it forces you to act like this. They offer you even less credit at worse terms. You won't be able to shop on credit anymore. No new car loan. No mortgage. No nice clothes on credit. So why declare bankruptcy? Take charge of your spending now rather than waiting until you can't do anything else.", "title": "" }, { "docid": "941588d47aacbc1883e1d105c11e0b4b", "text": "\"Credit is like dignity - it takes a long time to build but a short time to lose. Your credit history is mostly made up of your prior activity for several years. There's no \"\"quick fix\"\" to raise your credit score in a short period. Paying your student loans on time will help, but it will take quite some time for that activity to make a big difference in your credit. If you can't get approved for a car loan of $15k, then perhaps it's time to either reset your expectations or save up enough to make a large down payment on a more expensive car. Instead of prepaying your student loans that are not due, save up that money for a down payment. You can get an incredibly reliable car for much less than $15,000. Also, make sure that you will be able to afford the car payment when your student loans do become due (based on your current salary, not some hypothetical future salary) Another plan: drive your car for another year, pay off your student loans in that time, and then you might have enough credit history to get a better loan.\"", "title": "" }, { "docid": "884869eb776691173df3f901fce8830c", "text": "\"In the sole interest of improving your credit score, the thing you should focus on is lowering your overall utilization. The best thing you could do for this would be to get a loan to reconsolidate your credit card debts into a single, long term loan. The impact of this is that your credit card utilization, assuming the loan covers 100% of your balances, will suddenly drop to 0%, as you'll no longer have a balance on the cards. Additionally, at this point, with a consolidation loan, you'll be building loan history by making steady, fixed payments on the loan. The loan will also, ideally, have a significantly lower interest rate than the cards, and thus will save you money that you'd otherwise be spending on interest. A lot of others here will feed you some additonal, irrelevant advice - \"\"Pay off X credit card first!\"\"; Ideally, you need to eliminate this debt. But to directly address the question of how you could improve your credit score, based on your utilization, I believe the best option would be for you to reconsolidate your credit card debt into a single loan, to reduce your utilization on the cards.\"", "title": "" }, { "docid": "8b45f60932598a0048bdf60b0586a8de", "text": "An activity which can help improve your credit score and actually make you money is stoozing. It's a little complicated but can be beneficial to do. Using either a credit card which allows fee free money withdrawals from cashpoints or building up debt using your credit card gives you access to your credit amount. You then use a long term 0% balance transfer card to transfer the debt which you pay off at the minimum rate. It's 0% so no costs are associated except for the initial fee paid for the balance transfer amount. The money that would have been used to pay off the credit amount (or money withdrawn from a cashpoint) can then be deposited in a savings account so you are now earning interest on the credit balance. Continuing to make monthly minimum payments via direct debit will help improve your credit rating and the savings money will earn interest. (it is also available if you suddenly need to pay off the 0% card)", "title": "" }, { "docid": "c3fcbad362ce5138359e0b7103fc7650", "text": "\"The comments section to Dilip's reply is overflowing. First - the OP (Graphth) is correct in that credit scoring has become a game. A series of data points that predicts default probability, but of course, offers little chance to explain why you applied for 3 loans (all refinancing to save money on home or rentals) got new credit cards (to get better rewards) and have your average time with accounts drop like a rock (well, I canceled the old cards). The data doesn't dig that deep. To discuss the \"\"Spend More With Plastic?\"\" phenomenon - I have no skin in the game, I don't sell credit card services. So if the answer is yes, you spend more with cards, I'll accept that. Here's my issue - The studies are all contrived. Give college students $10 cash and $10 gift cards and send them into the cafeteria. Cute, but it produces no meaningful data. I can tell you that when I give my 13yr old $20 cash, it gets spent very wisely. A $20 Starbucks card, and she's treating friends and family to lattes. No study needed, the result is immediate and obvious. Any study worth looking at would first separate the population into two groups, those who pay in full each month and those who carry a balance. Then these two groups would need to be subdivided to study their behavior if they went all cash. Not a simply survey, and not cheap to get a study of the number of people you need for meaningful data. I've read quotes where The David claimed that card users spend 10% more than cash users. While I accept that Graphth's concern is valid, that he may spend more with cards than cash, there is no study (that I can find) which correlates to a percentage result as all studies appear to be contrived with small amounts to spend. As far as playing the game goes - I can charge gas, my cable bill, and a few other things whose dollar amounts can't change regardless. (Unless you're convinced I'll gas up and go joy-riding) Last - I'd love to see any link in the comments to a meaningful study. Quotes where conclusions are stated but no data or methodology don't add much to the discussion. Edit - Do You Spend More with Cash or Credit? is an article by a fellow Personal Finance Blogger. His conclusion is subjective of course, but along the same path that I'm on with this analysis.\"", "title": "" }, { "docid": "b1622d00b8e5930ff7cf8b02cd26ee96", "text": "the best thing to do is file bankrupt. your credit will be shot for 7 to 10 years. however usually 3 years after the bankrupt people will give you small lines of credit. then you rebuild on the small credit lines. and never get into a bad loan again you learn from mistakes. there is no shame in a mistake if you learned from it. I rebuilt my credit by using fingerhut. small credit limit on a cap 1 credit card 300 dollars unsecured card. personal loan of 1500 dollars to buy a old clunk for a car as I did not want to have five years of car payments. you can also get a secured credit card. and build credit with that. the bank will explain how to build credit using your own money. also you should know a lot of banks like your bankrupt stat. because they no you cant file for several more years. meaning if you don't pay your loan they can garnish you and you cant file bankrupt. you can get a new car loan with good interest rate. by taking 5000 dollars of your 15000 dollars savings down on the new loan. making your new car loan have better payments cheaper and better interest. and get a secured credit card of 2000 to build towards a unsecured credit card. keep all your new credit tabs small and pay on time.i would not use all your nest egg savings. that is not smart. get a lawyer and file. stay in school you will have a fresh start and you learned about upside down loans. don't listen to people trying to tell you bankruptsy is bad. it in a lot of ways gives you the upper hand in a no win debt or debts.", "title": "" }, { "docid": "607d3d93fe01a67524bee2141178e60a", "text": "The short answer is, with limited credit, your best bet might be an FHA loan for first time buyers. They only require 3.5% down (if I recall the number right), and you can qualify for their loan programs with a credit score as low as 580. The problem is that even if you were to add new credit lines (such as signing up for new credit cards, etc.), they still take time to have a positive effect on your credit. First, your score takes a bit of a hit with each new hard inquiry by a prospective creditor, then your score will dip slightly when a new credit account is first added. While your credit score will improve somewhat within a few months of adding new credit and you begin to show payment history on those accounts, your average age of accounts needs to be two years or older for the best effect, assuming you're making all of the payments on time. A good happy medium is to have between 7 and 10 credit lines on your credit history, and to make sure it's a mix of account types, such as store cards, installment loans, and credit cards, to show that you can handle various types of credit. Be careful not to add TOO much credit, because it affects your debt-to-income ratio, and that will have a negative effect on your ability to obtain mortgage financing. I really suggest that you look at some of the sites which offer free credit scores, because some of them provide great advice and tips on how to achieve what you're trying to do. They also offer credit score simulators, which can help you understand how your score might change if, for instance, you add new credit cards, pay off existing cards, or take on installment loans. It's well worth checking out. I hope this helps. Good luck!", "title": "" }, { "docid": "47e4a136a1b1019b45bf9b0a82416088", "text": "this article talks about tips you can use to improve your chances of qualifying for a credit card, even if you have poor credit standing. please help us promote it by telling your friends to drop by our site and share the articles posted there to their friends.", "title": "" }, { "docid": "4e95987a92f63bdf095dc2a39b0c1dd9", "text": "I do this all the time, my credit rating over time plotted on a graph looks like saw blades going upward on a slope I use a credit alert service to get my credit reports quarterly, and I know when the credit agencies update their files (every three months), so I never have a high balance at those particular times Basically, I use the negative hard pulls to propel my credit score upwards with a the consequentially lowered credit utilization ratio, and the credit history. So here is how it works for me, but I am not an impulse buyer and I wouldn't recommend it for most people as I have seen spending habits: Month 1: charge cards, pay minimum balance (raises score multiple points) Month 2: PAY OFF ALL CREDIT CARDS, massive deleveraging using actual money I already have (raises score multiple points) Month 3: get credit report showing low balance, charge cards, pay minimum balance ask for extensions of credit, AND followup on new credit line offers (lowers score several points per credit inquiry) Month 4: charge cards, pay minimum balance, discretionally approving hard pulls - always have room for one or two random hard pulls, such as for a new cell phone contract, or renting a car, or employment, etc Month 5: PAY OFF CREDIT CARDS using actual money you have. (the trick is to NEVER really go above a 15% credit utilization ratio, and to never overleverage. Tricky because very quickly you will get enough credit to go bankrupt) Month 6: get credit report showing low balances, a slight dip in score from last quarter, but still high continue.", "title": "" }, { "docid": "002995b7cc43d484b4ddabdab7b323a7", "text": "I wouldn't worry about his credit score. The hit from a credit inquiry is not that big and it's absolutely worth it in the long run. I suggest you sign him up for a free budgeting app (just google budgeting app) that will help him not only take control of his spending but also help him with his loans. Transferring debt comes with a few caveats: His credit score is bad so I don't know if he'll be able to get 0% loan, but even if he gets 6% - 8% that will save him money; just don't forget about the transfer fee. If he has checking/savings account it's worth talking to that bank first - they might be able to give him a better deal for being their customer. Also if he tells them his story and credit score they might be able to give him an idea what they can offer him without doing a credit check. Another option is to become a member of a local credit union - they have great rates on loans / credit cards. Credit card or personal loan doesn't matter much, whatever he can get. With his credit score I doubt he'll be able to get a good rate at Chase or one of the other big credit card companies. Good luck.", "title": "" }, { "docid": "9cc74c0c1cae2db291c3e93b4ee0c806", "text": "If you give me $216k to trash my credit report, I'll take it every time. People place too much value on the ability to borrow rather than having cash up front. I never pay interest (I do use a credit card and pay it off every month). Why would you need to borrow money if you effectively got handed $200k? Of course, if your networth went from -$200k to 0, you are still broke. But considering that you were in that situation in the first place, the inability to borrow money may be a good thing.", "title": "" }, { "docid": "125affbda803ce37568e01e5254d56ba", "text": "\"Its really, really good of you to admit your short comings with a desire to improve them. It takes courage. Keep in mind that most of us that answer questions here are really \"\"good at money\"\" so we have a hard time relating. Would you want people that are bad with money answering questions on a personal finance site? While it is intimidating you will need a budget. A budget is simply a plan for how to spend your money. Your budget, based on your new pay frequency, will likely also need some cash flow planning as a single paycheck is unlikely to cover your largest expenses. For example your rent/mortgage might be less than a single paycheck so you will have to save money from the previous paycheck to have enough money to pay it. Your best bet is to have a friend or relative that is good with money help you setup a budget. Do you have one? If not you might inquire about a church or organization that offers Financial Peace University. The teachers of the class often help people setup a budget and might be willing to do so for you. You could also take the class which will improve your money management skills. For $100 you'll have a lifetime pass to the class. If it helps you avoid three late charges/bounce checks then the class is well worth it. Now as far as spending too much money. I would recommend cash, but you have to do it the right way. Here is the process that you have to follow to be successful with cash: Doing cash will give you a more concrete example of what spending means. It won't work if you continue to hit the ATM \"\"for just $20 more\"\". It will take you a bit to get used to it, but you will be surprised how quickly you improve at managing money.\"", "title": "" }, { "docid": "3d25d5067eaead3d30118b819d8e4d94", "text": "Yes you can do this yourself. I cannot speak for all the credit repair companies, but generally they are not reputable. Even if they are trustworthy, they cannot do anything you cannot do yourself. Freeze your credit. Lock it down and prevent any new activity. This is for safety and I want you to do it so you know where you stand. Get a copy of your free copies of the three credit reports from https://www.annualcreditreport.com/ (this is the only free, official place to get your reports) Sign up for a free credit score estimation site like http://www.CreditKarma.com or http://www.CreditSesame.com (These sites make money by selling affiliate offers, but you can easily ignore them) You can't get your exact FICO score, but they letter grades they provide help you understand where you stand. Dispute anything that is not accurate. Get wrong items corrected with the credit agency. Ignore collectors who are not showing up on your report. If they aren't reporting you, so what? Let your own moral compass be your guide if you pay those debts or not. Negotiate a payment amount with the debtors you owe. If you are dealing with a debt collector, there isn't any point in paying the full amount. You owed the money to somebody else, and they sold it to the debt collector, therefore in my mind they are as whole as they feel like being. It is up to you how much you pay, but you are already going to suffer (and have suffered) the credit ramifications. No sense in wasting money when they will very likely settle for dimes on the dollar. Don't let them bully you around. I suggest understand your rights and protections as offered by the Fair Debt Collection Practices Act Before you pay anybody anything, get it IN WRITING Wait and follow up. Make sure they report it correctly. I would probably tackle them in order of age, newest first. Don't bother with debts that are more than, or nearly seven years old. Anything that old is or will fall off of the credit report soon, and your score will start to rise. Paying on those debts will refresh them and they will harm you longer. We can debate the ethics of that advice in the comments, but if you want your score to raise, I suggest just waiting about anything over six years old while you tackle the newer ones. This is a SLOW process. Your credit score will still take a couple years to heal once you fix your report. But that is the point of the score after all. It is a history of how you handle money and debt.", "title": "" }, { "docid": "a83f2509dd446926c5835164c3ac2c89", "text": "\"First, you've learned a very good lesson that quite a few people miss out on: notice how easy it is to get out of debt when you get a windfall of money? The trouble is that if a person doesn't have the behavior to maintain their position, they will end up in the same place. Many lottery winners end up being poor in the long run because their behavior is the problem, not their finances. If you feel that you're going to end up in debt again, this means simply that somewhere in your finances, your expenses exceed your income. Simply put, there's only two fundamental things that can be done: You can do one or the other, or both. Over budgeting, I prefer automation - automate your bills and spending by setting up a bill and spending account and when the money's gone, it's gone (you can tell yourself at that point, \"\"I have to find another source of income before I spend more\"\"). This not only helps you show where your money is going now, it also puts a constraint on your spending, which sounds like most of the problem currently. Many of my friends and I make our saved/invested money VERY HARD to access, so that we can't get it immediately (like putting it in an account that will require three or four days to get to). The purpose of this is to shape your behavior into actions of either increasing your income, decreasing your spending, or both.\"", "title": "" } ]	fiqa
d1c8445cf0b126684f2e6f851f9facb9	Should I get a car loan before shopping for a car?	[ { "docid": "fe53fc578ef231eb4f000c990378512f", "text": "You have a good start (estimated max amount you will pay, estimated max down payment, and term) Now go to your bank/credit union and apply for the loan. Get a commitment. They will give you a letter, you may have to ask for it. The letter will say the maximum amount you can pay for the car. This max includes their money and your down payment. The dealer doesn't have to know how much is loan. You also know from the loan commitment exactly how much your monthly payment will be in the worst case. If you have a car you want to trade in, get an written estimate that is good for a week or so. This lets you know how much you can get from selling the car. Now visit the dealer and tell them you don't need a loan, and won't be trading in a car. Don't show them the letter. After all the details of the purchase are concluded, including any rebates and specials, then bring up financing and trade-in. If they can't beat the deal from your bank and the written estimate for the car you are selling, then the deal is done. Now show them the letter and discuss how much down they need today. Then go to the bank for the rest of the money. If they do have a better loan deal or trade in then go with the dealer offer, and keep the letter in your pocket. If you go to the dealer first they will confuse you because they will see the price, interest rate, length of loan, and trade in as one big ball of mud. They will pick the settings that make you happy enough, yet still make them the most money.", "title": "" }, { "docid": "a7b084a4ffebac53bd5ddbb862991b22", "text": "Yes, you are correct to go to the credit union first. Get approved for a loan first. Often, upon approval, the credit union will give you a blank check good for any amount up to the limit of the loan. When you buy the car, make it payable to the dealer, write in the amount and sign it. Enjoy the new car!", "title": "" } ]	[ { "docid": "a464db56677e917c855023850fd8eae6", "text": "\"I guess I don't understand how you figure that taking out a car loan for $20k will result in adding $20k in equity. A car loan is a liability, not an asset like your $100k in cash. Besides, you don't get a dollar-for-dollar consideration when figuring a car's value against the loan it is encumbered by. In other words, the car is only worth what someone's willing to pay for it, not what your loan amount on it is. Remember that taking on a loan will increase your debt-to-income ratio, which is always a factor when trying to obtain a mortgage. At the same time, taking on new debt just prior to shopping for a mortgage could make it more difficult to find a lender. Every time a credit report (hard inquiry) is run on you, it temporarily impacts your credit score. The only exception to this rule is when it comes to mortgages. In the U.S., the way it works is that once you start shopping for a mortgage with lenders, for the next 30 days, additional inquiries into your credit report for purposes of mortgage funding do not count against your credit score, so it's a \"\"freebie\"\" in a way. You can't use this to shop for any other kind of credit, but the purpose is to allow you a chance to shop for the best mortgage rate you can get without adversely impacting your credit. In the end, my advice is to stop looking at how much house you can buy, and instead focus on a house with payments you can live with and afford. Trying to buy the most house based on what someone's willing to lend you leaves no room in the near-term for being able to borrow if the property has some repair needs, you want to furnish/upgrade it, or for any other unanticipated need which may arise that requires credit. Don't paint yourself into a corner. Just because you can borrow big doesn't mean you should borrow big. I hope this helps. Good luck!\"", "title": "" }, { "docid": "2b5ce47533be35a241aa99f1f4f8fec9", "text": "No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate.", "title": "" }, { "docid": "391c13f6e7ed4eae2efb564718fe3d25", "text": "Buy a car. Vehicle loans, like mortgages, are installment loans. Credit cards are revolving lines of credit. In the US, your credit score factors in the different types of credit you have. Note that there are several methods for calculating credit scores, including multiple types of FICO scores. You could buy a car and drive for Uber to help cash flow the car payments and/or save for your next purchase. As others have suggested, you should be very careful with debt and ask critical questions before taking it on. Swiping a credit card is more about your behavior and self-control than it is logic and math. And if you ever want to start a business or make multi-million dollar purchases (e.g. real estate), or do a lot of other things, you'll need good credit.", "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": "aac943752d99f999810f476a2afd3b00", "text": "If you need / want the car, I would get the car. Without car payments you can save your money again to get the house. Moreover, I wouldn't want to be saddled with payments to the mortgage and car loan at the same time. Lastly, a car is a more temporary possession (10 years) vs a house (30+) years so shopping around for the house longer while you save money is a good thing. I know you want to buy while prices are low, but I personally think it is more important to get a house that you want to live in later than settle for a cheap one you get a deal on now.", "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": "3c3a3a2c410b0bc2b7d76f010a3fe0a2", "text": "$3,500 isn't usually enough to make a difference when calculating credit for a car loan. The other factors that you didn't mention are the important factors. How much money do you make? What is your credit score? Do you have balances on credit cards? The only way you can know is to look at your credit score and/or apply. I would generally recommend you buy a 3-4 year old car rather than a new car. With the lower purchase price you can pay it off quickly.", "title": "" }, { "docid": "fc597918ea889cc9c47e943265abc7d3", "text": "I suggest you buy a more reasonably priced car and keep saving to have the full amount for the car you really want in the future. If you can avoid getting loans it helps a lot in you financial situation.", "title": "" }, { "docid": "d1f1aa4fd1d65fa135ec33d4155d334c", "text": "\"You are correct to be wary. Car dealerships make money selling cars, and use many tactics and advertisements to entice you to come into their showroom. \"\"We are in desperate need of [insert your make, model, year and color]! We have several people who want that exact car you have! Come in and sell it to us and buy a new car at a great price! We'll give you so much money on your trade in!\"\" In reality, they play a shell game and have you focus on your monthly payment. By extending the loan to 4 or 5 years (or longer), they can make your monthly payment lower, sure, but the total amount paid is much higher. You're right: it's not in your best interest. Buy a car and drive it into the ground. Being free of car payments is a luxury!\"", "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": "4a114c5d7d6bb11e7b8bd57b1e4ac961", "text": "\"This is a very complicated thing to try to do. There are many variables, and some will come down to personal taste and buying habits. First you need to look at each of the loans and find out two very important things. Some times you pay a huge penalty for paying off a loan early. Usually this is on larger loans (like your mortgage) but it's not on heard of in car loans. If there is a penalty for early re-payment, then just pay off on the schedule, or at least take that penalty into consideration. Another dirty trick that some banks do is force you to pay \"\"the interest first\"\" when making a early payment. Essentially this is a penalty that ensures you pay the \"\"full price\"\" of the loan and not a lessor amount because you borrowed for less time. The way it really works is complicated, but it's not usually to your benefit to pay these off early either. These usually show up on smaller loans, but better look for it anyway. Next up on the list you need to look at your long term goals and buying habits. When are you going to re-model your kitchen. You can get another loan on the equity of the house, it's much harder to get a loan on the equity of a car (even once the car is paid off). So, depending on your goals you may do better to pay extra into your mortgage, then paying off your other loans early. Also consider your credit score. A big part of it is amount of money remaining on credit lines/total credit lines. Paying of a loan will reduce your credit score (short term). It will also give you the ability to take out another loan (long term). Finally, consider simplification of debtors. If something goes wrong it's much easier to work with a single debtor, then three separate debtors. This could mean moving your car loans into your mortgage, even if it's at a higher interest rate, should the need arise. Should you need to do that you will need the equity in your home. Bonus Points: As others have stated, there are tax breaks for people with mortgages in some circumstances. You should consider those as well. Car loans usually require a different level of insurance. Make sure to count that as well. Taking these points into consideration, I would suggest, paying off the 2.54% car loan first, then putting the extra $419.61 into your mortgage to build up more equity, and leaving the 0% loan to run it's full course. You all ready \"\"paid for\"\" that loan, so might as well use it. Side note: If you can find a savings account or other investment platform with a decent enough interest rate, you would be better served putting the $419.61 there. A decent rate ROTH-IRA would work very nicely for this, as you would get tax deferment on that as well. Sadly it may be hard to find an account with a high enough interest rate to make it a more attractive option the paying off the mortgage early.\"", "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": "82177fa2a3f39219cfffa3912a10a53f", "text": "A loan from a bank with no real purpose could be a bad idea and end up costing you more money than it needs to. As someone with a loan and credit card debts accrued over university, I would say avoid it if at all possible. Certainly don't sign up to a large loan if you have no current plans for the money (car, house repair, etc). It sounds as though you're fairly careful with your money, but just want a bit of extra security in case a purchase you didn't account for slips by. If this is the case and you're set on obtaining a source of credit, I'd suggest getting an overdraft if you haven't already. Overdrafts are a lot more flexible, and are better for short term debt that you plan to pay off immediately, such as unexpected charges coming in at the end of the month. It's worth mentioning that this is from the perspective of a UK banking customer. Overdraft conditions will vary depending on the country.", "title": "" }, { "docid": "cb45e2dbfb4bf22b69de6dcb3fdde61f", "text": "Since no one else answered this part of your question yet: Checking your own credit score or report will not affect it in any way. It only hurts you when someone looks it up to run a credit check at your request for the purpose of possibly getting a loan, for example a car dealership. This only hurts it a tiny bit, and is not worth worrying about unless you are going to 20 different car dealerships who each do a check. However, it is a good idea not to let them run your credit until you are seriously ready to buy a car. In fact, it is better to just get financing somewhere else and not let them run it at all.", "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": "" } ]	fiqa
663405f563912e77b1f1bf32bfe82a7c	How do I Fundamentally Analyze this Stock so I may see if the Company is Running Well?	[ { "docid": "e57000db4a48e0c6eb6ebb6c74266973", "text": "a) Nothing would support this company going back to $.50 per share b) Fundamentally the market for this sectors has been obliterated and the fundamentals don't look like they will improve. Similar companies experience what this one is and will be going through, they borrow the hilt and hope they can pump enough oil and sell the oil at a high price. Oil goes below, WAYYY below the price they can sell it at and even break even, so they are burning cash until they declare bankruptcy. This company is not an exception. So here is what to look at on their balance sheet: assets and liabilities. Liabilities are debt. Their debt is over 50% of their assets, that debt has interest and there is NO WAY they are making a profit. Their website's last financial statement is from September 30th.. LOL, so they haven't even released a quarterly financial statement in two quarters straight, so have they released anything? Given what we know about the dire state of the entire oil drilling industry, lets see if these guys are the exception to the rule (spoiler; they aren't) February 15th, 2015 http://www.marketwatch.com/story/strategic-oil-gas-ltd-provides-operations-update-2015-02-19-16173591 The Company prudently elected to stop the winter Muskeg drilling program in order to preserve capital. So now they aren't even getting new assets to resale, they aren't making any money from that operation, their debt still has interest payments though. Approximately 700 Boe/d of production has been shut-in by suspending operations at Bistcho, Cameron Hills and Larne, which are not economic at current commodity prices. Predictable. Also, you should notice from their actual financial statements (from 6 months ago, lol) (when the price of oil was over 100% higher than it is today, lol), this company already wasn't a good performer. They have been financing themselves by doing private placements, by issuing shares to investors that are not you, and diluting the share value of ALL OTHER SHAREHOLDERS. Dead in the water. I got this from skimming their financial report, without even being familiar with how canadian companies report. Its just bad news. You shouldn't be married to this investment.", "title": "" } ]	[ { "docid": "a3d0faea96982b5a5ffaa1971f1df44c", "text": "No. The information you are describing is technical data about a stock's market price and trading volume, only. There is nothing implied in that data about a company's financial fundamentals (earnings/profitability, outstanding shares, market capitalization, dividends, balance sheet assets and liabilities, etc.) All you can infer is positive or negative momentum in the trading of the stock. If you want to understand if a company is performing well, then you need fundamental data about the company such as you would get from a company's annual and quarterly reports.", "title": "" }, { "docid": "0d2f9602637702fafbaab647b023f8cb", "text": "Company that solves no problem whatsoever, just a middle man sucking a % of the value chain. It's Netflix, without the contents, but with the ads. https://twitter.com/idontg1veafu/status/913395877250785280 The streaming service is minimal (90M revenue), while the hardware selling (which btw is non-recurring, a là gopro) is trending lower. Avoid. Watch it for a short if your broker has the shares available and it rips higher and can't make new highs. At $35 within a week, I'd probably initiate a short position", "title": "" }, { "docid": "ed8ac5cafaa4a0d9cf5ad7b74ff04938", "text": "\"As other people have posted starting with \"\"fictional money\"\" is the best way to test a strategy, learn about the platform you are using, etc. That being said I would about how Fundamental Analysis works . Fundamental Analysis is the very basis of learning about an assets true value is priced. However in my humble opinion, I personally just stick with Index funds. In layman's terms Index Funds are essentially computer programs that buy or sell the underlying assets based on the Index they are associated with in the portion of the underlying index. Therefore you will usually be doing as good or as bad as the market. I personally have the background, education, and skillsets to build very complex models to do fundamental analysis but even I invest primarily in index funds because a well made and well researched stock model could take 8 hours or more and Modern Portfolio Theory would suggest that most investors will inevitably have a regression to the mean and have gains equal to the market rate or return over time. Which is what an index fund already does but without the hours of work and transaction cost.\"", "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": "3b6d8cc249e33d07ba0caa1431a81429", "text": "Rather than take anyone's word for it (including and especially mine) you need to do think very carefully about your company; you know it far better than almost anyone else. Do you feel that the company values its employees? If it values you and your immediate colleagues then its likely that it not only values its other employees but also its customers which is a sign that it will do well. Does the company have a good relationship with its customers? Since you are a software engineer using a web stack I assume that it is either a web consultancy or has an e-commerce side to it so you will have some exposure to what the customers complain about, either in terms of bugs or UX difficulties. You probably even get bug reports that tell you what customer pain points are. Are customers' concerns valid, serious and damaging? If they are then you should think twice about taking up the offer, if not then you may well be fine. Also bear in mind how much profit is made on each item of product and how many you can possibly sell - you need to be able to sell items that have been produced. Those factors indicate how the future of the company looks currently, next you need to think about why the IPO is needed. IPOs and other share offerings are generally done to raise capital for the firm so is your company raising money to invest for the future or to cover losses and cashflow shortfalls? Are you being paid on time and without issues? Do you get all of the equipment and hiring positions that you want or is money always a limiting factor? As an insider you have a better chance to analyse these things than outsiders as they effect your day-to-day work. Remember that anything in the prospectus is just marketing spiel; expecting a 4.5 - 5.3% div yield is not the same as actually paying it or guaranteeing it. Do you think that they could afford to pay it? The company is trying to sell these shares for the maximum price they can get, don't fall for the hyped up sales pitch. If you feel that all of these factors are positive then you should buy as much as you can, hopefully far more than the minimum, as it seems like the company is a strong, growing concern. If you have any concerns from thinking about these factors then you probably shouldn't buy any (unless you are getting a discount but that's a different set of considerations) as your money would be better utilized elsewhere.", "title": "" }, { "docid": "3877c57cc08994391fb855b9a0d73018", "text": "Lets pretend that TELSA decided to split its stock 10 shares for 1. Now the stock is $35 dollars- would that make you happy? You dont have any idea how companies are valued. Berkshire Hathaway Inc. Class A NYSE: BRK.A - Oct 31, 12:58 PM EDT 280,210.00 USD", "title": "" }, { "docid": "eaf8fbb6297344fa58d97ad8831b11ca", "text": "Having all of the numbers you posted is a start. It's what you need to perform the calculation. The final word, however, comes from the company itself, who are required to issue a determination on how the spin-off is valued. Say a company is split into two. Instead of some number of shares of each new company, imagine for this example it's one for one. i.e. One share of company A becomes a share each in company B and company C. This tell us nothing about relative valuation, right? Was B worth 1/2 of the original company A, or some other fraction? Say it is exactly a 50/50 split. Company A releases a statement that B and C each should have 1/2 the cost basis of your original A shares. Now, B and C may very well trade ahead of the stock splitting, as 'when issued' shares. At no point in time will B and C necessarily trade at exactly the same price, and the day that B and C are officially trading, with no more A shares, they may have already diverged in price. That is, there's nothing you can pull from the trading data to identify that the basis should have been assigned as 50% to each new share. This is my very long-winded was of explaining that the company must issue a notice through your broker, and on their investor section of their web site, to spell out the way you should assign your basis to each new stock.", "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": "61de25b75f779fd3addc7f1515b344a4", "text": "\"Though you're looking to repeat this review with multiple securities and events at different times, I've taken liberty in assuming you are not looking to conduct backtests with hundreds of events. I've answered below assuming it's an ad hoc review for a single event pertaining to one security. Had the event occurred more recently, your full-service broker could often get it for you for free. Even some discount brokers will offer it so. If the stock and its options were actively traded, you can request \"\"time and sales,\"\" or \"\"TNS,\"\" data for the dates you have in mind. If not active, then request \"\"time and quotes,\"\" or \"\"TNQ\"\" data. If the event happened long ago, as seems to be the case, then your choices become much more limited and possibly costly. Below are some suggestions: Wall Street Journal and Investors' Business Daily print copies have daily stock options trading data. They are best for trading data on actively traded options. Since the event sounds like it was a major one for the company, it may have been actively traded that day and hence reported in the papers' listings. Some of the print pages have been digitized; otherwise you'll need to review the archived printed copies. Bloomberg has these data and access to them will depend on whether the account you use has that particular subscription. I've used it to get detailed equity trading data on defunct and delisted companies on specific dates and times and for and futures trading data. If you don't have personal access to Bloomberg, as many do not, you can try to request access from a public, commercial or business school library. The stock options exchanges sell their data; some strictly to resellers and others to anyone willing to pay. If you know which exchange(s) the options traded on, you can contact the exchange's market data services department and request TNS and / or TNQ data and a list of resellers, as the resellers may be cheaper for single queries.\"", "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": "3e29cffd92873ce7bd0d57d81102cb04", "text": "You need to do a few things to analyze your results. First, look at the timing of the deposits, and try to confirm the return you state. If it's still as high as you think, can you attribute it to one lucky stock purchase? I have an account that's up 863% from 1998 till 2013. Am I a genius? Hardly. That account, one of many, happened to have stocks that really outperformed, Apple among them. If you are that good, a career change may be in order. Few are that good. Joe", "title": "" }, { "docid": "6ccdf4de95322365d42b60b0d8817169", "text": "\"The following is only an overview and does not contain all of the in-depth reasons why you should look more deeply. When you look at a stock's financials in depth you are looking for warning signs. These may warn of many things but one important thing to look for is ratio and growth rate manipulation. Using several different accounting methods it is possible to make a final report reflect a PE ratio (or any other ratio) that is inconsistent with the realities of the company's position. Earnings manipulation (in the way that Enron in particular manipulated them) is more widespread than you might think as \"\"earnings smoothing\"\" is a common way of keeping earnings in line (or smooth) in a recession or a boom. The reason that PE ratio looks so good could well be because professional investors have avoided the stock as there appear to be \"\"interesting\"\" (but legal) accounting decisions that are of concern. Another issue that you don't consider is growth. earnings may look good in the current reporting period but may have been stagnant or falling when considered over multiple periods. The low price may indicate falling revenues, earnings and market share that you would not be aware of when taking only your criteria into account. Understanding a firm will also give you an insight into how future news might affect the company. If the company has a lot of debt and market interest rates rise or fall how will that effect their debt, if another company brings out a competing product next week how will it effect the company? How will it effect their bottom line? How much do they rely on a single product line? How likely is it that their flagship product will become obsolete? How would that effect the company? Looking deeply into a company's financial statements will allow you to see any issues in their accounting practices and give you a feel for how they are preforming over time, it will also let you look into their cost of capital and investment decisions. Looking deeply into their products, company structure and how news will effect them will give you an understanding of potential issues that could threaten your investment before they occur. When looking for value you shouldn't just look at part of the value of the company; you wouldn't just look at sales of a single T-shirt range at Wallmart when deciding whether to invest in them. It is exactly the same argument for why you should look at the whole of the company's state when choosing to invest rather than a few small metrics.\"", "title": "" }, { "docid": "7cfb787181731c3db190ce83e73934f7", "text": "You can't. If there was a reliable way to identify an undervalued stock, then people would immediately buy it, its price would rise and it wouldn't be undervalued any more.", "title": "" }, { "docid": "c373a9ff29b5f16a5563824d77021583", "text": "\"Yes, in my humble opinion, it can be \"\"safe\"\" to assume that — but not in the sense that your assumption is necessarily or likely correct. Rather, it can be \"\"safe\"\" in the respect that assuming the worst — even if wrong! — could save you from a likely painful and unsuccessful speculation in the highly volatile stock of a tiny company with no revenue, no profits, next to no assets, and continued challenges to its existence: \"\"There is material uncertainty about whether the Company will be able to obtain the required financing. This material uncertainty casts significant doubt about the Company’s ability to continue as a going concern.\"\" As a penny stock, they are in good company. Still, there are a variety of other reasons why such a stock might have gone up, or down, and no one [here] can say for sure. Even if there was a news item, any price reaction to news could just amount to speculation on the part of others having enough money to move the stock. There are better investments out there, and cheaper thrills, than most penny stocks.\"", "title": "" }, { "docid": "78b19eb243043dbe16e8163ab328b6ff", "text": "Really not sure with this one and I don't want to cheat and look up an answer. I'd say you could find the high/low points of the stock over the last year or two and see how large the spread is between those values and the average price of the stock over the same time period.", "title": "" } ]	fiqa
abd4bdc4e06951bd73737282723f3ecd	Should I pay off my mortgage, begin retirement savings, or build my emergency fund?	[ { "docid": "b67ca26d9154ba129f82b54cdb8410ad", "text": "\"Welcome to Money.SE. I will say upfront, Personal Finance is just that, personal, and you are likely to get multiple, perhaps conflicting, answers. Are you sure the PMI will drop off after 2 years? The rules are specific, and for PMI, when prepayments put you at that 78/80% LTV, your bank can require an appraisal, not automatically drop it. Talk to the banks, get confirmation, and depending what they say, keep hacking away at the mortgage. After this, I suggest jumping on Roth IRAs. You are in the 15% bracket, and the Roth will let you deposit $5500 for each you and your wife. A great way to kickstart a higher level of retirement savings. After this, I'm not comfortable with the emergency savings level. If you lose your job tomorrow (Funny story, my wife and I lost our's on the same day 3 years ago) and don't have enough savings (Our retirement accounts were good to just retire that day) you can easily run out of money and be late on the mortgage. It's great to prepay the mortgage to get rid of that PMI, but once there, I'd do the Roth and then focus on savings. 6 months expenses minimum. We have a great Q&A here titled Oversimplify it for me: the correct order of investing in which I go in to more detail, as do 4 other members. I am not getting on the \"\"investments will return more than your mortgage cost\"\" soapbox. A well-funded emergency fund is a very conservative bit of advice. With no matched 401(k), I suggest a balance of the Roth savings and prepayments. From another great post, Ideal net worth by age X? Need comparison references you should have nearly 1 year's salary (90K) saved toward retirement. Any question on my advice, add a comment and I will edit in more details.\"", "title": "" } ]	[ { "docid": "71146df668f12b055a8d5912ca96a59b", "text": "It depends on the relative rates and relative risk. Ignore the deduction. You want to compare the rates of the investment and the mortgage, either both after-tax or both before-tax. Your mortgage costs you 5% (a bit less after-tax), and prepayments effectively yield a guaranteed 5% return. If you can earn more than that in your IRA with a risk-free investment, invest. If you can earn more than that in your IRA while taking on a degree of risk that you are comfortable with, invest. If not, pay down your mortgage. See this article: Mortgage Prepayment as Investment: For example, the borrower with a 6% mortgage who has excess cash flow would do well to use it to pay down the mortgage balance if the alternative is investment in assets that yield 2%. But if two years down the road the same assets yield 7%, the borrower can stop allocating excess cash flow to the mortgage and start accumulating financial assets. Note that he's not comparing the relative risk of the investments. Paying down your mortgage has a guaranteed return. You're talking about CDs, which are low risk, so your comparison is simple. If your alternative investment is stocks, then there's an element of risk that it won't earn enough to outpace the mortgage cost. Update: hopefully this example makes it clearer: For example, lets compare investing $100,000 in repayment of a 6% mortgage with investing it in a fund that pays 5% before-tax, and taxes are deferred for 10 years. For the mortgage, we enter 10 years for the period, 3.6% (if that is the applicable rate) for the after tax return, $100,000 as the present value, and we obtain a future value of $142,429. For the alternative investment, we do the same except we enter 5% as the return, and we get a future value of $162,889. However, taxes are now due on the $62,889 of interest, which reduces the future value to $137,734. The mortgage repayment does a little better. So if your marginal tax rate is 30%, you have $10k extra cash to do something with right now, mortgage rate is 5%, IRA CD APY is 1%, and assuming retirement in 30 years: If you want to plug it into a spreadsheet, the formula to use is (substitute your own values): (Note the minus sign before the cash amount.) Make sure you use after tax rates for both so that you're comparing apples to apples. Then multiply your IRA amount by (1-taxrate) to get the value after you pay future taxes on IRA withdrawals.", "title": "" }, { "docid": "0a9e5e503ff2d51c31561721478e15c2", "text": "You can't max out your retirement savings. There are vehicles that aren't tax-advantaged that you can fund after you've exhausted the tax-advantaged ones. Consider how much you want to put into these vehicles. There are disadvantages as well as advantages. The rules on these can change at any time and can make it harder for you to get your money out. How's your liquid (cash) emergency fund? It sounds like you're in a position to amass a good one. Don't miss this opportunity. Save like crazy while you can. Kids make this harder. Paying down your mortgage will save you interest, of course, but make sure you're not cash-poor as a result. If something happens to your income(s), the bank will still foreclose on you even if you only owe $15,000. A cash cushion buys you time.", "title": "" }, { "docid": "5c31fd2ca20d45cccad3bed1bf0859cf", "text": "\"Well.... If you have alllll your money invested, and then there's a financial crisis, and there's a personal crisis at the same time (e.g. you lose your job) then you're in big trouble. You might not have enough money to cover your bills while you find a new job. You could lose your house, ruin your credit, or something icky like that. Think 2008. Even if there's not a financial crisis, if the money is in a tax-sheltered retirement account then withdrawing it will incur ugly penalities. Now, after you've got an emergency fund established, things are different. If you could probably ride out six to twelve months with your general-purpose savings, then with the money you are investing for the long term (retirement) there's no reason you shouldn't invest 100% of the money in stocks. The difference is that you're not going to come back for that money in 6 months, you're going to come back for it in 40 years. As for retirement savings over the long term, though, I don't think it's a good idea to think of your money in those terms. If you ever lose 100% of your money on the stock market while you've invested in diversified instruments like S&P500 index funds, you're probably screwed one way or another because that represents the core industrial base of the US economy, and you'll have better things to worry about, like looking for a used shotgun. Myself, I prefer to give the suggestion \"\"don't invest any money in stocks if you're going to need to take it out in the next 5 years or so\"\" because you generally shouldn't be worried about a 100% loss of all the money in stocks your retirement accounts nearly so much as you should be worried about weathering large, medium-term setbacks, like the dot-com bubble crash and the 2008 financial crisis. I save the \"\"don't invest money unless you can afford to lose it all\"\" advice for highly speculative instruments like gold futures or social-media IPOs. Remember also that while you might lose a lot of your money on the stock market, your savings accounts and bonds will earn you pathetic amounts by comparison, which you will slowly lose to inflation. If you've had your money invested for decades then even during a crash you may still be coming out ahead relative to bonds.\"", "title": "" }, { "docid": "3086eab018f276f09b815f40e15f4828", "text": "The main reason for paying your mortgage off quickly is to reduce risk should a crisis happen. If you don't have a house payment, you have much higher cash flow every month, and your day-to-day living expenses are much lower, so if an illness or job loss happens, you'll be in a much better position to handle it. You should have a good emergency fund in place before throwing extra money at the mortgage so that you can cover the bigger surprises that come along. There is the argument that paying off your mortgage ties up cash that could be used for other things, but you need to be honest with yourself: would you really invest that money at a high enough rate of return to make up your mortgage interest rate after taxes? Or would you spend it on other things? If you do invest it, how certain are you of that rate of return? Paying off the mortgage saves you your mortgage interest rate guaranteed. Finally, there is the more intangible aspect of what it feels like to be completely debt free with no payments whatsoever. That feeling can be a game-changer for people, and it can free you up to do things that you could never do when you're saddled with a mortgage payment every month.", "title": "" }, { "docid": "5d263c58e06cdef68f6e70bdde5012eb", "text": "I'm assuming you're in Germany or Europe based on your question, but here's an American's perspective that should pertain you you as well: Once you have a steady income and an emergency fund large enough to keep you from going bankrupt, then start learning about retirement and investment options.", "title": "" }, { "docid": "c89bda2bf674c8cdbb86ae67c568f3e8", "text": "I'd suggest you put only 20% down if you qualify for the 80% amount of the mortgage. Live in the house a year and see what expenses really are. Then if your non-Ret accounts are still being funded to your liking, start prepaying the mortgage if you wish. It's great to start with a house that's only 50% mortgaged, but if any life change happens to you, it may be tough to borrow it back. Far easier to just take your time and not make a decision you may regret. You don't give much detail about your retirement savings, but I'd suggest that I'd rather have a large mortgage and fund my retirement accounts to the maximum than to have a paid house and start the retirement account at age 35. Some choose that option.", "title": "" }, { "docid": "3ac82cef39504e31fc75cbc2415306bc", "text": "I would apply extra cash left over at the end of the month as follows, in order of priority: Realize, though, that this is my take on priority. My experience has been that a liquidity crisis is much more stressful than having a mortgage or other debt -- illiquid wealth is almost useless when you need cash. So if you still have strong feelings about retiring that debt after considering the liquidity issue, go ahead and swap #3 and #4 above. Make plans to pay off the mortgage over the next 10 years. Find a mortgage payoff calculator and make extra monthly payments that keep you on a 10 year schedule. I'd strongly suggest making sure your retirement savings are on track, though. Time is on your side here, and your required monthly contribution will be low now while you're still in your 20s.", "title": "" }, { "docid": "92cf2a5b6ac5bd821fb15796a37bf18d", "text": "Here is something that should help your decision: Currently you are 57, suppose that means that you will still work for 10 years, and then be retired for another 20 before you sell the house. Your retirement account is nearly flat, so you will have to support yourself with your own income. If there are no surprises, you and your wife could expect to earn 1.16 million over the next 10 years. There will be interest on your savings, but also inflation, so to simplify I will ignore both. That means you will have an average of 40k (gross?) per year available to live from during the next 30 years. If you get a mortgage where you only pay nett 3% interest (no payback of the loan), that would cost you 6k per year on interest (based on 350k-150k), if you also want to pay back the 200k difference within 30 years, it would totally be close to 13k in annual interest+payback. Now consider whether you would rather live on 40k per year in your current place, or on a lower amount in a bigger place. Personally I would not choose to make a 200k investment at this point, perhaps after trying to live on a budget for a while. (This has the additional benefit that you can even build some cash reserve before buying anything.)", "title": "" }, { "docid": "363fd94950f22e0134aa2f2d5c7b54b6", "text": "So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one. That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account. If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans. There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ... My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life? How liberating will it be when you get that off your back? How much investing are you missing out on because of student loan payments? What happens if you get lose your license? What if you become disabled? Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan. They are worse than credit card debt in that sense. You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years? Yes, however the temptation to just pay it off over 30 years is still there. How often will you decide that a bigger car payment, or a vacation, or something else is more important? With a 15-year note you lock in a plan and stick to it. Some other options:", "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": "" }, { "docid": "b80c6e6280015f1dd52b1e5f806bf886", "text": "Here's what I'd do. Show these figures to your bank, and ask if they can offer you some type of account with a small overdraft, say up to $2000. Typically this won't pay the same kind of interest as your savings account, but it doesn't matter. If such an account is available, then yes, dump most of your savings into the student loan, and keep a few hundred in your new account. The overdraft on this account is your emergency fund. This means that in the more likely scenario (no emergencies) you're saving yourself 6% interest on something like $4000 to $4500. In the case of an emergency, you're still covered; but you'll be paying a larger amount of interest. Let's say you have an emergency cost and need to dip into the overdraft for $1000. If the interest is 15%, then you've cost yourself an extra 9% on that $1000 over leaving that debt in the student loan. This seems to me like a really good gamble - more likely to gain 6% of $4000, less likely to lose 9% of $1000. If your bank won't give you a low-interest account with a small overdraft, then use your credit card as your emergency fund. The same kind of logic applies; but since credit card interest rates are typically higher than overdraft interest rates, you'll want to keep slightly more in your savings account. About $1200 to $1500 feels right to me; and move the remaining $3500 to $3800 to your student loan. So yes, pay off the student loan. That 6% interest really is worth having, even if you'd be taking a small gamble. Edit - Alexander Kosubek has suggested that I should compare this to matched retirement plans. The 100% gain in a matched retirement plan isn't 100% per annum; it's 100% divided across the length of time you have to wait until you can get your hands on that money. Suppose the money is accessible when you turn 60 - a matched plan is a good deal if you're in your 50's, but not so good if you're in your 20's. The 100% matching is equivalent to 6% interest per annum compounded over slightly under 12 years. So if you're less than 12 years away from retiring, go for the matched plan. Otherwise, pay off your student loan first.", "title": "" }, { "docid": "18a7b697b50732170d3166df744f616c", "text": "You've got a great emergency fund built up and no credit card debt. That's something to be proud of. If you didn't already have those two things taken care of, that would be your first priority. If I were in your situation, I would pay off the student loan. Yes, it's a low interest rate, but you've got the opportunity to pay it off completely and eliminate a monthly payment from your life. Take it. I don't know if you've already contributed to your Roth IRA for this year or not, but I would set aside $11,000 to cover the max contribution to your Roth IRA for this year and next year. That leaves about $10,000 left. Do you have any money set aside for your next car? If not, allocate most of this money toward your next car. When you need to buy another car, you will be able to pay cash and avoid a car loan.", "title": "" }, { "docid": "3684ea4ef21ab33cb696a5619b47dcbc", "text": "Do you have an emergency fund? If so, one idea is to put money into a Roth IRA, and invest it conservatively (short term government bonds, or a IRA savings account). Since you can withdraw your contributions from a Roth at any time, this could serve as most of your emergency fund, which means you could then use your existing non-tax-sheltered emergency fund to pay down the loans. This way if an emergency does come up, you have access to the money. And if an emergency doesn't come up, you have some tax-sheltered funds that you would not otherwise have.", "title": "" }, { "docid": "ccbded8e947dc60198be6d55fec7d18c", "text": "Let's look at some of your options: In a savings account, your $40,000 might be earning maybe 0.5%, if you are lucky. In a year, you'll have earned $200. On the plus side, you'll have your $40,000 easily accessible to you to pay for moving, closing costs on your new house, etc. If you apply it to your mortgage, you are effectively saving the interest on the amount for the life of the loan. Let's say that the interest rate on your mortgage is 4%. If you were staying in the house long-term, this interest would be compounded, but since you are only going to be there for 1 year, this move will save you $1600 in interest this year, which means that when you sell the house and pay off this mortgage, you'll have $1600 extra in your pocket. You said that you don't like to dabble in stocks. I wouldn't recommend investing in individual stocks anyway. A stock mutual fund, however, is a great option for investing, but only as a long-term investment. You should be able to beat your 4% mortgage, but only over the long term. If you want to have the $40,000 available to you in a year, don't invest in a mutual fund now. I would lean toward option #2, applying the money to the mortgage. However, there are some other considerations: Do you have any other debts, maybe a car loan, student loan, or a credit card balance? If so, I would forget everything else and put everything toward one or more of these loans first. Do you have an emergency fund in place, or is this $40,000 all of the cash that you have available to you? One rule of thumb is that you have 3 to 6 months of expenses set aside in a safe, easily accessible account ready to go if something comes up. Are you saving for retirement? If you don't already have retirement savings in place and are adding to it regularly, some of this cash would be a great start to a Roth IRA or something like that, invested in a stock mutual fund. If you are already debt free except for this mortgage, you might want to do some of each: Keep $10,000 in a savings account for an emergency fund (if you don't already have an emergency fund), put $5,000 in a Roth IRA (if you aren't already contributing a satisfactory amount to a retirement account), and apply the rest toward your mortgage.", "title": "" }, { "docid": "4eb4d0424b8d3561823673942e2bd1d0", "text": "First, i think you're doing awesomely for your age. Here's what i'd do in your situation (disclaimer: These are just my personal opinions from experience with my own finances.): I'd do all those things and partition the money so that i ensure i do them all. That may mean not dollar cost averaging monthly but rather quarterly to keep fees-percentages down, but i think that's reasonable for your age. Something i don't think you should overlook with regard to your mortgage is the freedom afforded you by paying off a home. It provides you with the freedom to be out of work, between work, or take an extended leave without the fear of how to pay your bills, the mortgage tending to be a significant percentage of the monthly bills. If that's not something you've considered, not a concern, or not something you care about, then paying off your home probably isn't a priority so I'd drop that step and put more money into investments.", "title": "" } ]	fiqa
128c9e3245b6f864501bf872006da9d1	Is it legal if I'm managing my family's entire wealth?	[ { "docid": "05585c2b30750ac051d36e53534a43c2", "text": "I am not going to discuss legality, because with family members you are able to give a lot of guidance and assistance without running into legal issues. The biggest problem is that when they transfer the funds to you and you invest the money, all the tax rates and tax limits are determined by your situation; plus you have more investments than you should have so you hit those limits and brackets quicker. For example: In the United states a person can put $5,500 or $6,500 into a IRA or Roth IRA each year. If you combine the funds for three with your funds then you are giving up three quarters of the amount that you can invest in that type of account. The decision regarding Roth or not depends on age and income level. But now their decision is related to what is best based on your situation. The ability to even deduct IRA deposits would be based on your situation. Of course for taxable accounts the tax rate is determined by your income, not theirs. If they want you to have the ability to make investment decisions for them, then power of attorney is the way to go. The money is deposited in their name, and all the rules and tax rates are determined by their situation. You make sure they have all the information they need to login and review the accounts, but you make the all the moves within and between accounts.", "title": "" }, { "docid": "f95c453a4c6f86cf44211f7041719aab", "text": "\"You are opening up a large can of worms with how you are doing this. In very positive years, you'll have taxes based on your income, potential Alternative Minimum Tax (AMT), etc. Each of the family members may be in a lower bracket, perhaps even needing to pay zero on capital gains. Even if you are 100% honest, if you are subject to a lawsuit, these funds are all in your name, and you'd be in a tough situation explaining to a court that these assets aren't \"\"really\"\" yours, but belong to family. And last, the movement of large chunks of money needs to be accounted for, and can easily run afoul of gifting rules. As mhoran stated, a Power of Attorney (POA) avoids this. When my father-in-law passed, I took over my mother-in-law's finances, via POA. I sign in to my brokerage account, and her accounts are there. I can trade, deal with her Individual Retirement Account (IRA) Required Minimum Distributions (RMDs) each year, and issue checks to her long term care facility. It's all under her social security number - our money isn't intermingled.\"", "title": "" }, { "docid": "847eb2cd235ec35642c78d998e77b581", "text": "\"I agree that this is a \"\"bad idea\"\" but I want to add in one more reason. Let's pretend your family and you are ok with all the tax ramifications and legal issues. This is still a horrid idea. You have to deal with the What Ifs. What if you get in an accident with your car, and then a law suit comes around and they decide to seize your assets? Again the reason isn't important—what is important is your ability to pay a critical \"\"thing\"\" is going to be based off accounts and money that are not yours. So you goof up on child support and they \"\"freeze\"\" your accounts. Guess what? Now your family members lose access to their money, because on paper it's your money. Keep in mind it doesn't have to be an irresponsible action that causes the issue. ID theft, for example, often results in a temporary account freeze while things are sorted out. So now your mom can't eat because \"\"your money\"\" is pending review. In this situation you might even turn to your mother or father or brother for help while your accounts are frozen for 2-3 months and everything is sorted out. But now you can't because their money is tied up too. Lastly lets assume the ID theft issue. That ID thief now has access to a big pool of money. They walk off with everyone's nest eggs—not just yours.\"", "title": "" }, { "docid": "730426820d883cc22c2fb9d03728ceba", "text": "\"This is the biggest blunder I see in money handling. \"\"Oh I'm a good person and everyone knows my intentions are good. And they're really happy with me right now, so it'll stay that way forever, right? So I can just do anything and they'll trust me.\"\" And then in hindsight 10 years later, the person realizes \"\"wow, I was really stubborn and selfish to just assume that. No wonder it blew up.\"\" Anyway, to that end, your requirement that all the money be in one account and \"\"this will simplify taxes\"\" is horsepuckey. No one will believe a legitimate financial advisor needs that, but it's exactly what a swindler would do. And that's the problem. If anything goes wrong, their trust in you will be forgotten, some will say you intended to scam all along, and the structure will be the first thing to convict you. Money makes everyone mistrusting. Ironically, the concept is called a \"\"trust\"\", and there's a wide body of law and practice for Person X responsibly handling the money of Person Y. The classic example is Person Y is a corporation (say, a charity) and Person X is on the Board of Directors. It's the same basic thing. The doctrine is:\"", "title": "" }, { "docid": "9a0fb227580f6297fca125fd4753dab0", "text": "If you go through the web pages of some online brokers, you will find out that some of them allow you to manage friends/relatives accounts from your account as a trusteer. That should really solve your underlying problem, you will need only one login, etc. (Example: https://www.interactivebrokers.com/ff/en/main.php) If I understand it right it will even allow you to make one trade splitting the cost and returns among the other accounts, but you would have to verify that. Anyways, that will save you a lot of trouble and your broker can probably help you with the legal necessities.", "title": "" }, { "docid": "242976e10f1c91effed1986a9c75b8b6", "text": "\"All the other answers posted thus far discuss matters from the perspective of US tax laws and are unanimous in declaring that what the OP wants to do is indeed a very bad idea. I fully agree: it is a bad idea from the perspective of US tax laws, and is likely a bad idea from the perspective of Indian tax laws too, but what the OP wants to do is (or used to be) common practice in India. In more recent times, India has created a Permanent Account Number (\"\"PAN number\"\") for each taxpayer for income tax purposes, and each bank account or investment must have the owner's (or first-named owner's, in case of a joint account) PAN number associated with it. This most likely has decreased the popularity of such arrangements, or has led to new twists being used. The OP has not indicated the residence and citizenship of his family (or his own status for that matter), but if they are all Indian citizens resident in India and are Hindus, then there might be one mechanism for doing what the OP wants to do: apply for a PAN number in the name of the Hindu Undivided Family and use this number to carry out the investments in the name of the Hindu Undivided Family. (There presumably are similar statuses for undivided families for other religions, but I am not familiar with them). There are lots of matters here which are more legal questions than personal finance questions: e.g. if the OP is a US tax resident, then the family presumably will not be able to claim Hindu Undivided Family status since the OP has been divided from the family for tax purposes (or so I think). Even if HUF status is available, the OP might not be able to act as the pater familias while his father is alive, and so on. Consultation with tax lawyers, not just chartered accountants, in India is certainly advisable.\"", "title": "" }, { "docid": "b2900df1181e816dcb72af503a1d14a6", "text": "Assuming you and your family always get along and everyone is happy with the situation... Should you become ill, die, or go on government benefits for some catastrophe, the government will look at all those funds as YOURS, and now your wonderful family is hurt by the estate tax and/or expectations of how much of the bill you handle before support kicks in. Additionally, should you ever reach a point where you are married and then facing divorce (even if no fault of your own), all that investment is now up for grabs in equitable distribution. So your family's entire investment fund is at risk.", "title": "" }, { "docid": "a04a2460032d58b91cec4215efa7c3c6", "text": "\"There are two issues. The first is that you can manage all of your family's money. The second issue arises if you now \"\"own\"\" all of your family's money. As far as entities go, it is best to keep money or assets in as many different hands as possible. Right now, if someone sued you and won, they could take away not only your money, but your parents' and brother's money, under your name. Also, there are gift, estate and inheritance tax consequences to your parents and brother handing all their money to you. You should have three or four separate \"\"piles\"\" of money, one for yourself, one for your brother and one for each of your parents, or at least both of them as a couple. If someone sued one parent, the other parent, your brother and you are protected. You can have all these piles of money under your management. That is, your parents and brother should each maintain separate brokerage accounts from yours, and then give you the authorization to trade (but not withdraw from) their accounts. This could all be at the same brokerage house, to make the reporting and other logistics relatively easy.\"", "title": "" }, { "docid": "302f54d4efdee0b6be1f690de6e9e8e4", "text": "You can perfectly well manage their wealth without transferring their money into your account first. Just make them open their own account on their name then ask them for credentials and then manage their money from within their own account. That way everyone will be taxed according to their wealth (which is probably advantageous but you probably have to help them with the paperwork) and it is clear at every time what belongs to whom and your relatives can at every time access their wealth. These are big advantages (for them). This keeps you at the role of an adviser (a very active one though) which should have almost zero legal ramifications for you unless you try to deceive your relatives. You may want to shift wealth between accounts to minimize tax burdens, but that comes at the risk that should the family relations get worse this might result in anger. You could open up a registered society, all members getting shares and voting rights, making you the CEO, but that should be a lot of paperwork and maybe only a good idea for large amounts of money. If you decide to transfer money between accounts of different persons this is like a gift. It might invoke a gift tax in your area. All in all, I strongly advise you to make them all open up their own accounts and then just operate the accounts and manage their wealth in their name. Sell it to them as the solution that retains them maximum ownership.", "title": "" }, { "docid": "ca3869dabd29a013aa9458ceadfec2c0", "text": "My answer is with respect to the United States. I have no idea about India's regulatory environment. You are opening yourself up to massive liabilities and problems if you deposit their money in your account. I managed investment accounts as a private investment advisor for years (those with less than 15 clients were not required to register) until Dodd-Frank changed the rules. Thus you would have to register as an advisor, probably needing to take the series 65 exam (or qualifying some other way, e.g. getting your CFP/CFA/etc...). I used a discount broker/dealer (Scottrade) as the custodian. Here's how it works: Each client's account was their own account, and I had a master account that allowed me to bill their accounts and manage them. They signed paperwork making me the advisor on their account. I had very little accounting to handle (aside from tracking basis for taxed accounts). If you take custody of the money, you'll have regulatory obligations. There are always lots of stories in the financial advisor trade publications about advisors who go to jail for screwing their clients. The most common factor: they took custody of the assets. I understand why you want a single account - you want to ensure that each client gets the same results, right? Does each client want the same results? Certainly the tax situation for each is different, yes? Perhaps one has gains and wants to take losses in one year, and the other doesn't. If their accounts are managed separately, one can take losses while the other realizes gains to offset other losses. Financial advisors offer these kinds of accounts as Separately Managed Accounts (SMAs). The advisors on these kinds of accounts are mutual funds managers, and they try to match a target portfolio, but they can do things like realize gains or losses for clients if their tax situation would prefer it. You certainly can't let them put retirement accounts into your single account unless the IRS has you on their list of acceptable custodians. I suggest that you familiarize yourself thoroughly with the regulatory environment that you want to operate under. Then, after examining the pros and cons, you should decide which route you want to take. I think the most direct and feasible route is to pass the Series 65, register as an investment advisor, and find a custodian who will let you manage the assets as the advisor on the account. Real estate is another matter, you should talk to an attorney, not some random guy on the internet (even if he has an MBA and a BS in Real Estate, which I do). This is very much a state law thing.", "title": "" }, { "docid": "9f5ea3293efbf96f1c81666d56f4562a", "text": "\"I transfer all their funds to my bank account Are they paying tax on that transfer? Gifts under $14,000 are excluded from taxation in the US, but they're going going to have a hard time arguing that it is a gift (since they expect it back). The taxes are almost certainly going to exceed the amount you can make from your investments in the short term, and if they aren't paid then your \"\"clients\"\" are going to be in hot water with the IRS. You need to have something set up that establishes you as merely managing the funds, and not receiving them personally as a transfer. The other answers have good suggestions.\"", "title": "" }, { "docid": "0f9a5c766cf336055d28b255bdfe8e1e", "text": "Aside from the fact that there are massive problems with taxes, liability, fiduciary responsibility, and (assuming you're accepting any sort of compensation at all) licensing. The mere fact that you're asking this question indicates that you're probably not suitably qualified to handle this for others. Why not have someone qualified handle this?", "title": "" } ]	[ { "docid": "7780704a13eb837ae46fdd1c94eb9c2b", "text": "Of course you can transfer it, and it will be legal. There's no taxes on transferring your own money. There's income tax on gains you realized by selling the property, but that is money you already owe, it doesn't matter where the proceeds are. It also doesn't matter how you acquired the property (except for figuring out your basis). What matters is that you had gains, and these gains are taxable in the US. You need to figure out the value of the property when your father bought it, and that is your basis. The difference between what you sold it for and that basis is your taxable gain, and you already owe taxes on that gain.", "title": "" }, { "docid": "8b8368327fda05412d5233df705b7f72", "text": "Anyone considering this approach needs to talk to a lawyer before going ahead; certainly, you don't want to trust anything I say as legal advice as I have no legal training. This is not a gift. All the CRA has to show is that there was a reasonable expectation that the property would be sold and the money returned to the parent. That's obviously the case here; in your timeline, the evidence is in the two bank accounts after approximately six months. As to whether you'd get away with tax fraud of this nature, that depends on how careful the CRA is willing to investigate. There's another risk, too. Canada's at risk of a market correction on real-estate prices, where prices might drop 20-40%, or worse if you are pessimistic. That's speculation, of course, but such corrections are common-place over the long-term. If you buy a house today with the expectation of improving it and flipping it in six months, you run a very real risk of not recovering your initial investment, let alone the time and materials invested. Heck, you might not be able to sell the house at all. And from the parent's point of view, there's nothing to be done. They can't claim this was a gift, and now claim any sort of obligation whatsoever. The child isn't obligated to sell at a loss, and may not be able to sell in any case.", "title": "" }, { "docid": "d6d9b9d9394524e7112df5fd6b09f008", "text": "You should talk to a lawyer. One solution I can think of is using a trust. Keep in mind that that may complicate things (non-revocable trusts are taxed on income not distributed, and revocable trust means you effectively keep the owenership of the stock). If you don't mind paying taxes on the dividends and keep the stocks in a living trust - that would be, IMHO, the simplest solution. That would, however, invoke the gift/estate tax at the value of the stock when the ownership actually passes to the intended receipient (i.e.: you die/gift the stock to the child). It would be very hard to pay the gift tax now and avoid getting the childs SSN and opening an account for the child with it.", "title": "" }, { "docid": "5b7004ec040ee8fba64f99d4f90af7cf", "text": "\"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on \"\"find property management company Philadelphia\"\" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity.\"", "title": "" }, { "docid": "d64fccb218aa1e292f71b6e3c843f606", "text": "\"Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot? When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate. This is a holder for the person's assets until they can be dispositioned finally. The estate is managed by a living person, sometimes a company (law firm), called an Executor. Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own). For instance he can't decide, in his capacity as executor, to give all the estate's money to himself. He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone. You can't just decide \"\"la la la, I'm going to live in their house now\"\", that is squatting. The house is an asset and someone inherited that, as dictated by will, trust or state law. That has to be worked out legally. Once they inherit the house, you have to negotiate with them about living there. If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later. The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law. Did you know corporations are considered a \"\"person\"\"? (that's what Citizens United was all about.) So are estates - both are fictitious persons. The executor can act like a person in that sense. If you have unsecured debt, how can a creditor motivate you to pay? They can annoy and harass you. They can burn your credit rating. Or they can sue you and try to take your assets - but suing is also expensive for them. This is not widely understood, but anyone at any time can go to their creditors and say \"\"Hey creditor, I'm not gonna pay you $10,000. Tough buffaloes. You can sue me, good luck with that. Or, I'll make you a deal. I'll offer you $2000 to settle this debt. What say you? And you'll get one of two answers. Either \"\"OK\"\" or \"\"Nice try, let's try $7000.\"\" If the latter, you start into the cycle of haggling, \"\"3000.\"\" \"\"6000.\"\" \"\"4000.\"\" \"\"5000. \"\"Split the difference, $4500.\"\" \"\"OK.\"\" This is always a one-time, lump sum, one-shot payoff, never partial payments. Creditors will try to convince you to make partial payments. Don't do it. Anyone can do that at any time. Why don't living people do this every day? How about an Estate? Estates are fictitious persons, they don't have a \"\"morality\"\", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least. So I argue it's unethical to fail to haggle down this debt. If an executor is \"\"not a haggler\"\" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank. Like I say, the job is not for everyone. The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death? Is the debt time-barred? Can they really prove it's valid? Etc. It's not personal, it's business. The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement. Is it secured debt? Let them take the asset. (unless an heir really wants it). When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around. The estate must sell off assets to raise the cash to settle with the creditors. Now here's where things get ugly with the house. ** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best interest to pay off that debt. Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs. The mortgage lender would have to be on-board with all of this. Then, the heirs would owe the mortgage. Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house. Banks love those.\"", "title": "" }, { "docid": "caa37ce8bf0d3565f7b7a877958d16fb", "text": "ASSUMING THIS IS A QUESTION OF U.S. SECURITIES LAWS You didn't explain whether you're related to the mother and son, but I'll assume you are. If that's the case, this really wouldn't qualify as a solicited sale. It wasn't advertised publicly for sale, and there is already (I assume) a long-standing relationship between the parties. In such a case, this would be a perfectly legal and normal type of transaction, so I can't see any reason for concern. That being said, you would be wise to contact the state securities regulation agency where you live to ensure you're on firm ground. The law pertaining to the solicited sale of securities normally targets instances where people are trying to do private stock offerings and are seeking investors, in which case there are a number of different state and federal agencies and regulations that come into play. The situation you've described does not fall under these types of scenarios. Good luck!", "title": "" }, { "docid": "16a0641d140641aa679109946d6d6e96", "text": "If this was going on in the UK, I would try to get a mental capacity assessment done on the father. There are laws that stop you taking advantage of people that don’t understand what is going on; these laws could be used against the manager, but only if you can clearly prove that the father does not understand that the “business” is losing money. If the father does understand what is going on, then there is nothing you can do, as he has every right to waste his money, and anyone that may inherit what is left has no rights until he is dead.", "title": "" }, { "docid": "a9ebe78161a536d7558dd48aea39b3d0", "text": "\"If you and your parents both put up money to buy a house or anything else, what share each of you owns would be a subject for negotiation and agreement between you. To the best of my knowledge, there is no law that says \"\"if person X pays the down payment and person Y pays the monthly payments, than X owns 40% and Y owns 60%\"\" or any other specific numbers. Parents often give their children money to help with a down payment on a house or a car with the understanding that this is a gift and the child still owns 100% of the item. Other times they are unwilling or unable to just give the money and want some stake in exchange. In the case of a house or a car, there's a title that identifies the owner, and legally the owner is the person or people named on the title. I'd suggest that if you want to have split ownership, like if your parents are saying that they'll help with the down payment but they want to get that money back when you sell or some such, that you come up with a written agreement saying who owns what percentage and you both sign it. If there was a dispute -- if you never had an agreement about what share each owned and now you're selling the house and you're arguing over how much of the money each of you should get, or your parents want you to sell the house so they can get their money back but you don't want to sell, or whatever -- ultimately a court would decide. Presumably the judge would consider how much you had each paid in, but he might also consider who's been paying property taxes, how much work each has done to maintain the place, etc. It's better to have a written and signed agreement, something that everyone involved is satisfied with and where you all know exactly what you're agreeing to, rather than having a nasty surprise when a judge says no, you're not getting what you were assuming you were getting.\"", "title": "" }, { "docid": "e62d81815d5a6b3240776ab2b65a0b6e", "text": "So, there's no way to do both? I look out for my family, but I also try to be honest, live up to my word, and admit my mistakes rather than trying to find a villain or excuse for them. Looking out for myself and my family includes being careful with my money, especially large sums that I don't want to lose.", "title": "" }, { "docid": "83bcfd9f7e47e783ee4a4e77f866f9dd", "text": "I agree with the comments so far. Access doesn't equal ownership. There are also different levels of access. E.g. your financial advisor can have access to your retirement account via power of attorney, but only ability to add or change things, not withdraw. Another consideration is when a creditor tries to garnish wages / bank accounts, it needs to find the accounts first. This could be done by running a credit report via SSN. My guess is an account with access-only rights won't show up on such a report. I suppose the court could subpoena bank information. But I'm not an attorney so please check with a professional.", "title": "" }, { "docid": "fbacf6bd25a179c1b243714071d5297c", "text": "Honestly, I think you are falling for a myth. Family business can also decide to go for short term maximum profit at the expense of long term. And shareholders can decide to look long term, just go to shareholder meetings and you will see everything. Its not so black and white. For the rest I agree, except for anti-monopolly laws. In general, anti-monopolly laws only help create olligopollies/monopollies not removing them.", "title": "" }, { "docid": "be602c0697c53175e949a5b962a5ab3c", "text": "I agree with everyone who has simply told you 'Dont' and 'You can't' and add a few more considerations that you don't want to deal with: What you want to do is admirable but very complicated from a financial and legal perspective. If this is really a route that you want to go down you should give up on the 'simple' and consider hiring a lawyer.", "title": "" }, { "docid": "281f491cbf5e2ac5bbf72d0cbceea9cc", "text": "@RonJohn's answer for pallet of $20's is right for the specific case. For the general case of all income, it depends on whether or not the the source of the income was potentially criminal. https://www.forbes.com/sites/timtodd/2015/11/16/a-win-for-the-5th-amendment-at-the-tax-court/ I am not a lawyer, but reading that article, one needs to provide the total amount, but not the source if there's a risk of self-incrimination.", "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": "f788ea32d519c84f38d354dad6476fe4", "text": "\"Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here. I remember hearing of this rule when I worked in the US and can understand why it exists. A key quote from the article: You wouldn't think the prospect of getting money from an employer would be nerve-wracking. But those jittery co-workers are highly compensated employees (HCEs) concerned that they will receive a refund of excess 401k contributions because their plan failed its discrimination test. A refund means they will owe more income tax for the current tax year. Geersk (a pseudonym), who is also an HCE, is in information services and manages the computers that process his firm's 401k plan. 401(k) - Wikipedia reference on this: To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's \"\"highly compensated\"\" employees, based on the average deferral by the company's non-highly compensated employees. If the less compensated employees are allowed to save more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via \"\"non-discrimination testing\"\". Non-discrimination testing takes the deferral rates of \"\"highly compensated employees\"\" (HCEs) and compares them to non-highly compensated employees (NHCEs). An HCE in 2008 is defined as an employee with compensation of greater than $100,000 in 2007 or an employee that owned more than 5% of the business at any time during the year or the preceding year.[13] In addition to the $100,000 limit for determining HCEs, employers can elect to limit the top-paid group of employees to the top 20% of employees ranked by compensation.[13] That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be no more than 2 percentage points greater (or 125% of, whichever is more) than the NHCEs, as a group. This is known as the ADP test. When a plan fails the ADP test, it essentially has two options to come into compliance. It can have a return of excess done to the HCEs to bring their ADP to a lower, passing, level. Or it can process a \"\"qualified non-elective contribution\"\" (QNEC) to some or all of the NHCEs to raise their ADP to a passing level. The return of excess requires the plan to send a taxable distribution to the HCEs (or reclassify regular contributions as catch-up contributions subject to the annual catch-up limit for those HCEs over 50) by March 15 of the year following the failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed but also includes employer matching and employee after-tax contributions. ACPs do not use the simple 2% threshold, and include other provisions which can allow the plan to \"\"shift\"\" excess passing rates from the ADP over to the ACP. A failed ACP test is likewise addressed through return of excess, or a QNEC or qualified match (QMAC). There are a number of \"\"safe harbor\"\" provisions that can allow a company to be exempted from the ADP test. This includes making a \"\"safe harbor\"\" employer contribution to employees' accounts. Safe harbor contributions can take the form of a match (generally totaling 4% of pay) or a non-elective profit sharing (totaling 3% of pay). Safe harbor 401(k) contributions must be 100% vested at all times with immediate eligibility for employees. There are other administrative requirements within the safe harbor, such as requiring the employer to notify all eligible employees of the opportunity to participate in the plan, and restricting the employer from suspending participants for any reason other than due to a hardship withdrawal.\"", "title": "" } ]	fiqa
e0b6913fc50355c516d812c096818209	Shared groceries expenses between roommates to be divided as per specific consumption ratio and attendance	[ { "docid": "4864753b99d7a96b7700b749d5cb8693", "text": "The solution to this problem is somewhat like grading on a curve. Use the consumption ratio multiplied by the attendance (which is also a ratio, out of 100 days) to calculate how much each person owes. This will leave you short. Then add together all of the shares in a category, determine the % increase required to get to the actual cost of that category, and increase all the shares by that %.", "title": "" }, { "docid": "a3809349303c40ac4957d1925bf846e8", "text": "Bren's comment is right on the mark. The typical solution is to divide all bills by 5, and for special items, the person buying it just marks his name that it's not community food. Your attempt at a granularity level this detailed is admirable, but produces false results. What happens when I claim to be a zero percent milk drinker but when someone gives me cookies, I have a glass of milk? The effort to get true accuracy will cost far more in time spent than the results are worth.", "title": "" }, { "docid": "fd60b550030f7f8980fa50a6a6cb4e1e", "text": "\"For a personal finance forum, this is too complicated for sustained use and you should find a simpler solution. For a mathematical exercise, you are missing information required to do the split fairly. You have to know who overlaps and when to know how to do the splits. For an extreme example, take your dates given: Considering 100 days of calculation period, If Roommate D was the only person present for the last 10 days, they should pay 100% of the grocery bill as they are the only one eating. From your initial data set, you can't know who should be splitting the tab for any given day. To do this mathematically, you'd need: But don't forget \"\"In Theory, Theory works. In Practice, Practice works.\"\" Good theory would say make a large, complicated spreadsheet as described above. Good practice would be to split up the costs in a much, much simpler way.\"", "title": "" }, { "docid": "056b163de63958e5ed104d70f365b5ce", "text": "When I was in grad school (at an engineering school) my apartment-mates and I came up with this formula: Worked marvelously.", "title": "" }, { "docid": "b70694bff1fabf04277c65f9e26cf866", "text": "\"So your whole approach, and the attempt to scale this is flawed. You will alienate roomates, provoke arguments, and make everyone's life more difficult. There are too many variables and unforeseen possibilities. For instance: \"\"Why should I have to pay for Joe to go buy the expensive organic milk when I'm fine with the cheap stuff?\"\" \"\"I planned on being here for 20 days, but was gone that long weekend, recalculate everything please.\"\" \"\"I already paid for this month, but now you're asking for more because James wanted to recalculate for a long weekend?\"\" The right way to do this is to set up loose, reasonable agreement among the participants and treat that as a contract, but with some flexibility/mercy on small dollar amount items. For instance: There are 5 of us, so everyone provides food (and shops/cooks) one night a week. We're solo on Friday and Saturday (people eat out more then anyway), and everyone puts in $10/week (or whatever) for breakfast cereal, snacks, etc. If you can't be here on your night, work out to trade with someone. If you miss out on a meal... oh well. As long as people feel like they have a say in the discussion generating this and it's not dictated to them, then most of the time this is far superior. If people need this level of detail, then perhaps those people should live alone or move in with Sheldon Cooper from \"\"The Big Bang Theory\"\".\"", "title": "" }, { "docid": "46ab8a616a0f8e6f29f2abad090a6da5", "text": "I asked how often grocery purchases are made in a comment, but I'm going to assume weekly for simplicity. If a roommate is present during the week following a grocery purchase, then they owe a share according to their preferences as you outlined them above. You will have to track the grocery cost by category for that week and calculate the balance owed by the person for that week. If there is a partial week where most expect to leave for a holiday or otherwise, then fewer groceries should be purchased for that week, and the cost of shares will decrease accordingly. One need only indicate preferences once, and weekly attendance thereafter. The only issue remaining is to determine how to record shares. If a normal person consumes 3 shares of milk, and .5 shares of butter, and so on, you simply add up all of the milk shares for the week and divide the milk bill by those shares. Same with the butter. The downside of this method is that you have to predict consumption in advance, so you may instead calculate by consumption after the fact with a deposit paid by all to create the initial grocery supply which will be refunded when that person leaves the grocery purchase co-op, and shares are calculated by who participated in the week prior to the grocery purchase. This also allows for a mid-week refresh if any commodity incurs higher than expected consumption, with the mid-week bill being added to the end of week refresh trip.", "title": "" } ]	[ { "docid": "d1ff3cee0decc25182c465a797af4a69", "text": "\"If you are living together 'casually' (no formal partnership agreement) then my option would be to ask her politely to as she has offered make a contribution by buying the groceries or some such which you share. A 'voluntary contribution' not an enforceable one. Just as between flat mates where only one is the actual tenant of the flat but the tenancy allows 'sharing' . Check your tenancy allows you to share lodgings. PS An old Scots saying is \"\"never do business with close family\"\". I.e do not charge your wife or living in partner rent. It mixes emotional domestic life with a formal business life which can set feuds going in case of a break up or dispute. If you enter into child bearing relationship or parent hood or formal partnership or marriage then all this changes at some time in the future.\"", "title": "" }, { "docid": "396cf4f9e48af1691a4698047bf15b23", "text": "\"Seriously. I can't tell you how many times I hear this scenario: Kid graduates college; kid runs out and signs lease on apartment \"\"because that's what you do\"\"; kid complains that he's in financial trouble and can't make ends meet. Housemate sharing is most famously displayed in hit shows like Big Bang Theory or New Girl. They get a much nicer place with better furnishings for way less money. (However don't hook up with close neighbors or friends of other housemates, they do it for awkward laughs but it really results in awkward departure.) It's more financially responsible. It means the rest of your financial life will have more slack. And when you move, obviously, it's no big deal, you just give all the notice you can, and go to the next town and find another housemate share. I suspect a very significant factor is bringing home dates. Well, there's nothing sexy about taking your date to McDonalds because you can't afford anything more. See those shows... it works fine, you just have to be sensible about housemate choices. Pick housemates who view things the same way, and who themselves are invested in making the shared space attractive, and aren't going to mind some ...activities... once in awhile.\"", "title": "" }, { "docid": "dce2e7d55d8aed2b088a1fd27ce27f39", "text": "\"People who rent an apartment will typically pay by check. Probably 90% of the checks I have written are for rent. To some extent this falls under the previously mentioned \"\"payments to another person\"\" rule.\"", "title": "" }, { "docid": "60d2f89864dea202441e15f68ffccdda", "text": "That's not really the point. A small percentage of the 70% of the US population living within 150 miles will have disposable income to throw at marked up groceries. Until someone can explain how this reduces overhead and lowers prices I'm just real skeptical. Whole thing reeks of Webvan 2.0. Walmart and Marc Lore are at least bringing creative ideas to the table. The associate delivery for last leg is an interesting approach.", "title": "" }, { "docid": "1d0da17444fef08144e0662aff677489", "text": "I want to encourage diversity in means of producing goods so I organised subcategories by the means necessary to produce said goods, I organised categories by the same types of items that are all in a similar price range than each other, the randomiser will pick an item of the same category but of a different subcategory. (yogurt and cheese are in the same category, and same subcategory because the means of production is the same, so price change of one won't affect the economy as much)", "title": "" }, { "docid": "6d7b6bb090df4748ab7fa0ddccdc38a7", "text": "For example: Dinner together: DR Food 50 DR Spouse 50 CR Credit Card 100", "title": "" }, { "docid": "0ef9dc334f917decc414dc8ad59a434a", "text": "For less than that you can get wings and nachos at a place on a college campus (so it isn't even cheap) and it will be more food than two people can possibly eat _and_ be really fucking good. Now I want to go get nachos...", "title": "" }, { "docid": "75499f0a26a8cd8961d79b389d1190d3", "text": "My brother's wife does some pretty intense couponing. She recently posted on facebook when she bought about $300 worth of items for $30. It was almost all toiletries and food that her family uses regularly, though there were some items they've now got 3 months supply of. She told me that it is a pain to track and exploit all of the different coupons/discounts but the savings help to offset the cost of homeschooling 4 children.", "title": "" }, { "docid": "9e8ab7bad2338f1701bb254dfdb8835e", "text": "\"Nobel laureate economist, Paul Krugman, wrote a piece many moons ago about economic expansion and money supply. As an illustration of how money supply affects the economy, he used the example of a baby-sitting co-op. While simplistic, it provides an easy to grasp notion of how printing money and restricting it (e.g. by pegging the currency to gold reserves) can affect the economy. Here is an excerpt from his webpage ( http://web.mit.edu/krugman/www/howfast.html ): \"\"With the decline of the traditional extended family, in which relatives were available to take care of children at need, many parents in the United States have sought alternative arrangements. A popular scheme is the baby-sitting coop, in which a group of parents agree to help each other out on a reciprocal basis, with each parent serving both as baby-sitter and baby-sittee. Any such coop requires rules that ensure that all members do their fair share. One natural answer, at least to people accustomed to a market economy, is to use some kind of token or marker system: parents \"\"earn\"\" tokens by babysitting, then in turn hand over these tokens when their own children are minded by others. For example, a recently formed coop in Western Massachusetts uses Popsicle sticks, each representing one hour of babysitting. When a new parent enters the coop, he or she receives an initial allocation of ten sticks. This system is self-regulating, in the sense that it automatically ensures that over any length of time a parent will put in more or less the same amount of time that he or she receives. It turns out, however, that establishing such a token system is not enough to make a coop work properly. It is also necessary to get the number of tokens per member more or less right. To see why, suppose that there were very few tokens in circulation. Parents will want on average to hold some reserve of tokens - enough to deal with the possibility that they may want to go out a few times before they have a chance to babysit themselves and earn more tokens. Any individual parent can, of course, try to accumulate more tokens by babysitting more and going out less. But what happens if almost everyone is trying to accumulate tokens - as they will be if there are very few in circulation? One parent's decision to go out is another's opportunity to babysit. So if everyone in the coop is trying to add to his or her reserve of tokens, there will be very few opportunities to babysit. This in turn will make people even more reluctant to go out, and use up their precious token reserves; and the level of activity in the coop may decline to a disappointingly low level. The solution to this problem is, of course, simply to issue more Popsicle sticks. But not too many - because an excess of popsicle sticks can pose an equally severe problem. Suppose that almost everyone in the coop has more sticks than they need; then they will be eager to go out, but reluctant to babysit. It will therefore become hard to find babysitters - and since opportunities to use popsicle sticks will become rare, people will become even less willing to spend time and effort earning them. Too many tokens in circulation, then, can be just as destructive as too few.\"\" -- Paul Krugman, 1997 (accessed webpage 2010).\"", "title": "" }, { "docid": "2ff486ed7898d24d0f4abea2a936f1c3", "text": "\"One trick is to make all purchases end in a particular number of your choosing, say \"\"3\"\". From now on, all restaurant meals,gas purchases, and anything in your control, end them in 3. When you glance at the bill, you can skip these charges, and look carefully at the rest. It's not 100%, as you couldn't easily impact supermarket charges and many others, but it's half of my routine charges.\"", "title": "" }, { "docid": "1bf596ba9d705edf1b67f8b8c92e8b49", "text": "I do online grocery shopping directly with my local supermarket. Its great. I keep a basic list of recipes/supplies I use pretty dependably every week. I add them all at once. Then I quickly pick through them to fine-tune and bam, done. 15 minutes while drinking mai tais in my underwear. Schedule pickup for the next day on my way home from work.", "title": "" }, { "docid": "1163264fd0713664d91ece48242a3a2d", "text": "Agreed. I travel 8-10 weeks a year and usually my option for a private room in a shared home on airbnb is the same as a room at a mid-tier hotel. Whole house on airbnb is equivalent to a room at a higher tier hotel. I'll take the hotel 9 times out of 10 to get the points and because I know what I'm getting each time.", "title": "" }, { "docid": "6ec9ed07eed727fa6ea5c2ba8cd7ad1f", "text": "My wife and I set up a shared bank account. We knew the monthly costs of the mortgage and estimated the cost of utilities. Each month, we transferred enough to cover these, plus about 20% so we could make an extra mortgage payment each year and build up an emergency fund, and did so using automatic transactions. Other shared expenses such as groceries, we handled on an ad-hoc basis, settling up every month or three. We initially just split everything 50-50 because we both earned roughly the same income. When that changed, we ended up going with a 60-40 split. We maintained our separate bank accounts, though this may have changed in the future. A system like this may work for you, or may at least provide a starting point for a discussion. And I do strongly advise having a frank and open discussion on these points. Dealing with money can be tricky in the bounds of a marriage.", "title": "" }, { "docid": "bcb422c4ffcc892325385f9205b4d82a", "text": "\"If you or they feel uneasy about you simply paying more rent than them for equal usage, you can work out an agreement where they \"\"pay\"\" in other ways. For example, I once lived with someone that made about double what I did, and so he paid more rent than I did. In exchange, I was responsible for cleaning the kitchen. If your roommates hate cleaning then you could substitute something like running errands, cooking, or looking after plants/landscaping. If they have some specialized skills then they might be able to provide those instead (car maintenance, financial management, etc.). Of course you'll want to agree ahead of time on what the conditions of satisfaction for the task are, such as how often the kitchen will have to be cleaned and what the definition of \"\"clean\"\" is. You also can't be a jerk and make their job extra hard, such as by completely trashing the kitchen every night. Obviously it will depend on the temperament of your roommates whether or not they'll be happy with this or feel insulted being \"\"the help\"\". It worked for us because it was a task he hated and one I didn't mind, and it kept me from feeling like I was mooching off him. I would feel them out when you propose a possible rent and utilities split. If they feel like it's an unfair burden on you, but they can't afford more, then you could suggest this as a way for everyone to contribute equally. Whatever you decide to do, don't hold it over their heads that you pay more. Agree on something that everyone feels is fair, whatever that is. If you want a concession due to paying more (such as you get the garage, get to pick the art on the walls, whatever), then agree to that up front. Then accept that you've made a fair deal and they don't owe you anything beyond what you've all agreed to. It's awful to feel like you live in someone else's home and that you are getting into ever deeper debt with a close friend or significant other, and it will breed resentment. If you can't do that, then don't share an apartment with them at all. The most important thing is that everyone feels it's fair, regardless of the numbers. If you cannot get to that agreement through dollars alone, you can have them contribute to the home in other ways, such as cleaning, cooking, or performing maintenance. Just make sure that everyone truly does feel it's fair and that you are all equals.\"", "title": "" }, { "docid": "085e66370274aa1b61b09d21ff717302", "text": "\"Completely linear? We don't do that. Our daughter has a fixed allowance, and we expect a certain amount of help around the house as being part of the family. We don't make any explicit ties between the two, and we don't seem to have any problems. We bought an eBay lot of Polly Pockets and divided them up into $5 bags. (This is a better deal that what we could get in the store new.) Her allowance isn't enough that she can \"\"buy\"\" one every week. After sensing her frustration we gave her the opportunity to earn some more money by doing extra work. It happened to be cleaning up after our dogs in the back yard, a chore we had neglected for quite a while. She stuck with the job, and truly earned that money. (She'll be six in January.) What's more, it was a good deal for me. It needed to be done, and I didn't really want to do it. :) So, for now this seems like a fair balance. It prevents her from getting the idea that she won't work unless she gets paid, but she also knows that working harder does have its rewards. We still have time to teach her the idea of working smarter. (This isn't a formal study. It's just my experience.)\"", "title": "" } ]	fiqa
cb7e69d7164362b6852e8c2e5edc13aa	Possible to use balance transfers to avoid interest with major credit cards?	[ { "docid": "1bbb46ca6d873264a720c19000d4d692", "text": "In theory, yes. In practice: So it can be gamed, but the odds are not on your side :)", "title": "" }, { "docid": "2a6910506b92201dcd967b469391ca89", "text": "I have done this for years and have been quite successful at it. Two reason I even need to do this - desire to pay for engagement ring and pay for 150 person wedding without using my nest-egg/savings. You need to keep a document that details when the free APRs run out, and you need to setup automatic payments of the minimum balance from your checking account so you ensure you do not miss a payment. You need to understand when you are going to need to make big purchases of homes/apartments/cars so that you can ensure you aren't doing this right before your credit score is being checked (Need to leave 12 months without opening new accounts before doing this). I have been able to finance about $60,000 worth of unsecured debt paying between 3-5% interest per year. We have an unsecured credit line with Citibank that charges 14% and is capped at $10,000, and Discover Personal Loans charge around 14% as well (in pre-paid interest!). I would say, all things considering, that this is a great deal if you don't have a secured line of credit with a low interest rate. It is something, however, that if you aren't diligent can get away from you. From my experience I would rather pay a small amount of interest while allowing my savings and retirement to grow interest (hopefully greater than 3-5%) than pay the huge expense and start from zero. But if you miss a single payment on a 0 APR balance transfer they charge you all back interest concessions plus charge you a penalty rate. Like many of the other posts, you need discipline to make this work.", "title": "" }, { "docid": "c4862f39349d59b582a7acd00439d674", "text": "IMO, it's a good deal. Pre-paying 3% interest is better than accruing it at 1-2% per month. The other nice thing about it is that all of your payments hit the principal.", "title": "" }, { "docid": "55b3495a0dcadf7185b657e7903d6ca0", "text": "Sure of course you can do balance transfers like this but you are way late to the party and it has gotten to be pretty challenging finding new cards to transfer balances to. Before the current financial crisis in the US you could get enormous amounts of credit (2-5 times a person's annual income) and transfer balances to your bank account to collect interest . There were a bunch of ways to the transfer everything from direct deposit to your bank account to a balance transfer check payable to yourself to overpaying another credit card and requesting a refund. Over paying another account sets off a lot of red flags now days but other methods still work. The financial atmosphere has changed a lot and there are very few available cards with no balance transfer fees or capped fees and the interest rates are a lot lower now so it really isn't worth doing.", "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": "6904306c85387acaee0b30433944e2a0", "text": "Look for offers for 0% (or low) APR on balance transfers. It is more likely to get a promotional APR on balance transfer, than to lower the APR you already have. Of course, try to pay off the balance as long as you're in the period of the promotion, because otherwise you'll end up paying the high rate again. If you cannot get such an offer (low credit etc) - then just try to pay off ASAP and start rebuilding your credit, not much workarounds there. BTW: When you consider the balance transfer promotions - look at 3 things: The promotion period - when it ends, so that you'd know how much time you have to pay it off. The balance transfer fee - usually the balance transfer itself is not free, and you pay 3-5% on the transfer. If you have 0% APR for 12 months, it makes it effectively 5% APR (for the 5% fee), if the period is lesser - the APR is higher. Take that into the account. The APR after the promotion, in case you can't pay off in that time frame.", "title": "" }, { "docid": "0a370c3a336e48f29bfcbc69fc83b868", "text": "\"Sometimes you need to do more than ask to have your rating reduced. You need to make it in their best interest (no pun intended) to do it. Find the lowest rate card and then tell the others you want to transfer your balance to that card and close the account (don't do it, it is an empty threat). I guarantee they will transfer you to a retention agent who will give you a better deal. From their perspective your current offer is getting 19% interest instead of 22%, why would they do that without some motivation? With the approach described above their options are get 19% interest instead of 0% interest. It is all about negotiation and the \"\"Retention agents\"\" have the most leverage to do so.\"", "title": "" }, { "docid": "7bd94109d91d5ecb78070da581680621", "text": "This is brilliant for AmEx; they make a cut off of every transaction you do, so even if you pay it off before you ever pay interest, they still may take some. Balance transfers, on the other hand, generally have a transfer fee that locks in a percent, depending on the offer. For your own sake, it can be a good deal if you Considering that they make some money, it makes sense why they offer people this - merchants, as you'll read from Nerd Wallet, are paying extra to use credit cards.", "title": "" }, { "docid": "44af6e62a7fd75f9cf9513658df55b90", "text": "Trick question dude. Can't be done. Sorry to tell you. I've been hit with this. Credit card companies do not make money on these customers. Why does Amex have an annual fee on all cards and an abnormally large transaction fee for merchants? Because they don't allow you to carry a balance (On traditional cards). Meaning they don't make money on interest, like the customers in question here.", "title": "" }, { "docid": "ef4ca974efeceed7a18e5432039f3b5f", "text": "Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank.", "title": "" }, { "docid": "013e7bbdcf2f60f8c14ed6aeb7d90a95", "text": "\"This is most likely protecting Square's relationship with Visa/Mastercard/AMEX/etc. Credit card companies typically charge their customers a much higher interest rate with no grace period on cash advances (withdrawals made from an ATM using a credit card). If you use Square to generate something that looks like a \"\"merchandise transaction\"\" but instead just hand over a wad of banknotes, you're forcing the credit card company to apply their cheaper \"\"purchases\"\" interest rate on the transaction, plus award any applicable cashback offers†, etc. Square would absolutely profit off of this, but since it would result in less revenue for the partner credit card companies, that would quickly sour the relationship and could even result in them terminating their agreements with Square altogether. † This is the kind of activity they are trying to prevent: 1. Bill yourself $5,000 for \"\"merchandise\"\", but instead give yourself cash. 2. Earn 1.5% cashback ($75). 3. Use $4,925 of the cash and a $75 statement credit to pay your credit card statement. 4. Pocket the difference. 5. Repeat. Note, the fees involved probably negate any potential gain shown in this example, but I'm sure with enough creative thinking someone would figure out a way to game the system if it wasn't expressly forbidden in the terms of service\"", "title": "" }, { "docid": "4eaf0a4393b2bcfe45e6f66c8a6ad726", "text": "My concern is that just moving the balance will make you feel like you've accomplished something, when you really haven't. Sure you'll save on interest but that just reduces the rate at which you're bleeding and doesn't heal the wound. It's entirely likely that you'll feel freed by the reduced balance on the original card, ignore the transferred balance since you aren't paying any interest on it, and soon you'll have two cards that are maxed out. I would instead look at getting your expenses under control. Make sure you have the start of an emergency fund - 1-2k depending on your family situation. If you are single start with 1k; if you have kids bump it up to 2k or maybe a little more just to avoid charging any expenses. Get on a written budget, and don't spend any money in the next month that is not accounted for. Then you can figure out how much you can afford to put towards the credit card. That will also tell you how much interest you're going to pay. The only way I would recommend the balance transfer is if the interest savings (after the balance transfer fee) reduced the time it takes to pay off the card by two or more months (since one month isn't going to make a big difference interest-wise), and you immediately cancelled the original card, and cut up both cards (including the new one), making payments by mail or online. Other than that, the interest saved after the balance transfer fee probably isn't worth the risk of being in a worse situation on the other side.", "title": "" }, { "docid": "b29a5ba138c2b030a07cc5734f63ee53", "text": "First and foremost you should do more research on credit cards and what everything means. As expressed by others the balance transfer fee is not what you think it is. Credit cards can be great, they can also quickly erode your credit score and your standing. So understanding the basics is VERY important. The credit card that is right for you should have the following criteria. The first two points should be straight forward, you should not have to pay a CC company for the privilege to use their card. They should pay you through perks and rewards. It should also be a CC that can be used for what you need it for. If you travel internationally a lot and the CC you choose only works within the US then what good is it? The third point is where you need to ask yourself what you do a lot and if a CC can offer rewards through travel miles, or cash back or other bonuses based on your lifestyle. The transfer fee is not what you think it is, people who already are carrying debt on another credit card and would like to transfer that debt to another credit card would be interested in finding a fee or a low %. People do this to get a batter rate or to get away from a bad credit card. If one charges 28% and another charges 13%, well it makes sense to transfer existing debt over to the 13% provided they don't crush you on fees. Since you have no credit card debt (assumption based on the fact you want to build your credit), you should ask yourself for what purpose and how often do you plan to use the credit card. Would this card be just for emergencies, and wont be used on daily purchases then a credit card that offers 3% cash back on gasoline purchases is not for you. If you however love to travel and plan to use your credit card for a lot of purchases OR have a few large purchases (insurance, tuition etc.) then get a credit card that provides rewards like miles. It really comes down to you and your situation. There are numerous websites dedicated to the best credit card for any situation. The final thing I will say is what I mentioned at the beginning, its important, CC's can be a tool to establish and improve your credit worthiness, they can also be a tool to destroy your credit worthiness, so be careful and make smart choices on what you use your card for. A credit score is like a mountain, it requires a slow and steady discipline to reach the top, but one misstep and that credit score can tumble quickly.", "title": "" }, { "docid": "79d2333883311c3f95c3dc99d8619d1d", "text": "Not sure if this is possible... It is possible! It is called a balance transfer card and most of the major credit card companies offer them. It is possible to save a significant amount on interest during the grace period. However... Is this a viable option? Not really. Any card will charge you an upfront fee of 3% to 5% of the balance you are transferring. This really only buys you some time in case you are about to fall behind on payments. For many people it's just a way to shuffle around debt, digging themselves a little deeper into consumer debt with each transfer.", "title": "" }, { "docid": "cb85de0b7686d07f00729fa1f49c9002", "text": "The U.S. bankruptcy laws no longer make it simple to discharge credit card debt, so you can't simply run up a massive tab on credit cards and then just walk away from them anymore. That used to be the case, but that particular loophole no longer exists the way it once did. Further, you could face fraud charges if it can be proven you acted deliberately with the intent to commit fraud. Finally, you won't be able to rack up a ton of new cards as quickly as you might think, so your ability to amass enough to make your plan worth the risk is not as great as you seem to believe. As a closing note, don't do it. All you do is make it more expensive for the rest of us to carry credit cards. After all, the banks aren't going to eat the losses. They'll just pass them along in the form of higher fees and rates to the rest of us.", "title": "" }, { "docid": "eea446cbb3ebab34ec08cdc4dd791dde", "text": "That would have been a good idea. They don't charge interest on a $0 balance, but if you payoff your account after the cycle date, there is a hidden balance and that balance will accrue interest. It is only a few cents a day. I just don't think it is legal for them to refuse to provide you a payoff quote mid cycle. I'm almost certain. When I worked for Discover it was a key point in training to not give the wrong amount and to make sure to use the calculator in the system to quote a daily balance, how much it goes up per day, and how much they should send if they were mailing the payment, giving consideration for the time it takes to receive/process the payment.", "title": "" }, { "docid": "d4bad8b443e8f4992518d4ee53d3a81b", "text": "If it's feasible, try to get one card down to zero balance, and preferably one of your cash-back cards. Then keep that at zero every month (pay it off in full), and use it for your purchases as you describe above. The idea would be to get it so that you are not paying interest on your month to month purchases. This not only reduces the 20% or whatever that you're paying on that balance, but also the 20% or whatever you're paying on those purchases - remember, a card you carry a balance on charges you interest on those purchases from the current month. If this isn't feasible (if these are all very high balance cards), then I suppose the way you're currently doing it would be okay, though I think you're overthinking things to some extent - but with 80% interest, if that's a significant pile of money, you may need to as clearly that needs to be tackled first. I think it's mostly better for you to pay your day to day stuff out of pocket and not use your cards the way you are suggesting, but with the 80% loan(s) you may need to. The reason I say it's better not to use your card the way you suggest is that it is difficult to do properly and never get it wrong (i.e., never go over a balance), and it's also leaving you in the habit of using credit. It doesn't help you budget necessarily, either. Instead, set up a fully developed budget that includes all of those minimum payments and pay them. Certainly once you have the > 50% debt handled, I would switch to this method (not using credit cards at all).", "title": "" }, { "docid": "e15014b08ba4abe3f2756ff8658de847", "text": "If you want to ensure that you stop paying interest, the best thing to do is to not use the card for a full billing cycle. Calculating credit card interest with precision ahead of time is difficult, as how you use the card both in terms of how much and when is critical.", "title": "" }, { "docid": "686113d3d16706ed6ffe900f4d461adf", "text": "\"If your financial needs aren't complex, and mostly limited to portfolio management, consider looking into the newish thing called robo-advisers (proper term is \"\"Automated investing services\"\"). The difference is that robo-advisers use software to manage portfolios on a large scale, generating big economy of scale and therefore offering a much cheaper services than personal advisor would - and unless your financial needs are extremely complex, the state of the art of scaled up portfolio management is at the point that a human advisor really doesn't give you any value-add (and - as other answers noted - human advisor can easily bring in downsides such as conflict of interest and lack of fiduciary responsibility). disclaimer: I indirectly derive my living from a company which derives a very small part of their income from a robo-adviser, therefore there's a possible small conflict of interest in my answer\"", "title": "" } ]	fiqa
75c63d1ef86f11434aa6e67aeb27d147	Is it possible to make quarterly returns in hedge funds?	[ { "docid": "78376c71017ce85c9868e6f3729b6df2", "text": "Your edit indicates that you may not yet be ready to get heavily involved in investing. I say this because it seems you are not very familiar with foundational finance/investing concepts. The returns that you are seeing as 'yearly' are just the reported earnings every 12 months, which all public companies must publish. Those 'returns' are not the same as the earnings of individual investors (which will be on the basis of dividends paid by the company [which are often annual, sometimes semi-annual, and sometimes quarterly], and by selling shares purchased previously. Note that over 3 months time, investing in interest-earning investments [like bank deposits] will earn you something like 0.5%. Investing in the stock market will earn you something like 2% (but with generally higher risk than investing in something earning interest). If you expect to earn significant amounts of money in only 3 months, you will not be able to without taking on extreme levels of risk [risk as high as going to a casino]. Safe investing takes time - years. In the short term, the best thing you can do to earn money is by earning more [through a better job, or a second part-time job], or spending less [budget, pay down high interest debt, and spend less than you earn]. I highly recommend you look through this site for more budgeting questions on how to get control of your finances. If you feel that doesn't apply to you, I encourage you to do a lot more research on investing before you send your money somewhere - you could be taking on more risk than you realize, if you are not properly informed.", "title": "" } ]	[ { "docid": "79c74193e3f658eabe0d1305f88f8f74", "text": "Well, you're obviously wrong. Anyone can start a hedge fund if they go through the proper ropes and get certified. I had my paperwork done through a company called Hedge Fund Dynamics, which I would never, ever recommend because they didn't deliver anything on time and I ended up starting at about the worst possible time. Other than that, all you need is a prime broker, and an outside accountant to do your taxes and reporting.", "title": "" }, { "docid": "78655e8f9f3aebf43b475b08a8aa4e42", "text": "First, I suggest that the route gives you the discount. You work the block with goldman and they say that if you work 20 blocks with them you get 50bps back, regardless of the issue. Also, as a hedge fund you have a very different model than an ETF or MF. That said, how exactly would that this be disclosed to the investor? Is there a standard in place for that?", "title": "" }, { "docid": "c2071f544cb210bcd86f115eb46929cc", "text": "There is no margin call. Inverse ETFs use derivatives that would lose value in the case you describe though this doesn't force a margin call as you may be misunderstanding how these funds are constructed.", "title": "" }, { "docid": "48145a232fa675d357bd2ef09fe54701", "text": "This was the day traders dilemma. You can, on paper, make money doing such trades. But because you do not hold the security for at least a year, the earnings are subject to short term capital gains tax unless these trades are done inside a sheltered account like a traditional IRA. There are other considerations as well: wash sale rules and number of days to settle. In short, the glory days of rags to riches by day trading are long gone, if they were ever here in the first place. Edit: the site will not allow me to add a comment, so I am putting my response here: Possibly, yes. One big 'gotcha' is that your broker reports the proceeds from your sales, but does not report your outflows from your buys. Then there is the risk you take by the broker refusing to sell the security until the transaction settles. Not to mention wash sale rules. You are trying to win at the 'buy low, sell high' game. But you have a 25% chance, at best, of winning at that game. Can you pick the low? Maybe, but you have a 50% chance of being right. Then you have to pick the high. And again you have a 50% chance of doing that. 50% times 50% is 25%. Warren Buffet did not get rich that way. Buffet buys and holds. Don't be a speculator, be a 'buy and hold' investor. Buy securities, inside a sheltered account like a traditional IRA, that pay dividends then reinvest those dividends into the security you bought. Scottrade has a Flexible Reinvestment Program that lets you do this with no commission fees.", "title": "" }, { "docid": "dfca697bdc900ed9568f9ebb0b06581a", "text": "It's actually quite simple. You're actually confusing two concept. Which are taking a short position and short selling itself. Basically when taking a short position is by believing that the stock is going to drop and you sell it. You can or not buy it back later depending on the believe it grows again or not. So basically you didn't make any profit with the drop in the price's value but you didn't lose money either. Ok but what if you believe the market or specific company is going to drop and you want to profit on it while it's dropping. You can't do this by buying stock because you would be going long right? So back to the basics. To obtain any type of profit I need to buy low and sell high, right? This is natural for use in long positions. Well, now knowing that you can sell high at the current moment and buy low in the future what do you do? You can't sell what you don't have. So acquire it. Ask someone to lend it to you for some time and sell it. So selling high, check. Now buying low? You promised the person you would return him his stock, as it's intangible he won't even notice it's a different unit, so you buy low and return the lender his stock. Thus you bought low and sold high, meaning having a profit. So technically short selling is a type of short position. If you have multiple portfolios and lend yourself (i.e. maintaining a long-term long position while making some money with a short term short-term strategy) you're actually short selling with your own stock. This happens often in hedge funds where multiple strategies are used and to optimise the transaction costs and borrowing fees, they have algorithms that clear (match) long and short coming in from different traders, algorithms, etc. Keep in mind that you while have a opportunities risk associated. So basically, yes, you need to always 'borrow' a product to be able to short sell it. What can happen is that you lend yourself but this only makes sense if:", "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": "e4d57b940f6bcc3cb7b72f3bb209aefc", "text": "This isn't totally wrong- there are hedge funds that are long 150% of AUM and short 50%. However, Rentech has said that holding a position for 8 seconds is long for them, so that's not what they're doing. I'd assume the 4X leverage most just refers to option positions that have delta 4 on average. They also may be borrowing money, which they can probably do extremely cheaply since they have a 35 year track record showing they're essentially risk-free.", "title": "" }, { "docid": "09e980bf943b6eeb7b8dbbbff9bf7cc0", "text": "\"Hmm, this would seem to be impossible by definition. The definition of an \"\"index fund\"\" is that it includes exactly the stocks that make up the index. Once you say \"\"... except for ...\"\" then what you want is not an index fund but something else. It's like asking, \"\"Can I be a vegetarian but still eat beef?\"\" Umm, no. There might be someone offering a mutual fund that has the particular combination of stocks that you want, resembling the stocks making up the index except with these exclusions. That wouldn't be an index fund at that point, but, etc. There are lots of funds out there with various ideological criteria. I don't know of one that matches your criteria. I'd say, search for the closest approximation you can find. You could always buy individual stocks yourself and create your own pseudo-index fund. Depending on how many stock are in the index you are trying to match and how much money you have to invest, it may not be possible to exactly match it mathematically, if you would have to buy fractions of shares. If the number of shares you had to buy was very small you might get killed on broker fees. And I'll upvote @user662852's answer for being a pretty close approximation to what you want.\"", "title": "" }, { "docid": "afd314079500c322854e071fa51d4fb8", "text": "I am not aware of any hedge funds that measure themselves using the sharpe ratio. The sharpe ratio measures risk relative to the risk free rate, and I don't believe there are any huge funds that consider themselves risk free. Hedge funds or CTAs will use information ratio using excess return compared to a relevant benchmark.", "title": "" }, { "docid": "ce4221079abce3405a8b34b151d4a4d5", "text": "The Sharpe ratio is, perhaps, the method you are looking for. That said, not really sure beta is a meaningful metric, as there are plenty of safe bets to be made on volatile stocks (and, conversely, unsafe bets to be made on non-volatile ones).", "title": "" }, { "docid": "15f79601c8bf5c9e69c36745719e3ce7", "text": "\"So it's not always what degree of risk you want be exposed to, but what type of risk. So let's say you were happy with the S&P 500 ETF but you wanted to avoid oil stocks, so you combine that ETF with some derivatives that profit if oil goes down and you will outperform the S&P 500 on a net basis. Hedge funds can be very crafty with what exposure they want. They include a LOT of different strategies, so it's kind of incorrect to group them into one \"\"asset class\"\" per se. As for the question if hedge funds are worth it? Well if the market tanks, you might find your hedge fund's performance to be very positive (ex: Kyle Bass made big money with the crisis).\"", "title": "" }, { "docid": "538c2ac971b5ec53159b1ee4331a123a", "text": "This. Everyone knows it is impossible for more than a handful of VERY well-funded hedge funds to actually run computerized trading operations that actually outperform the market significantly, and then that advantage is very difficult to defend. Any hedge fund that just depends on traders that outperforms consistently is very likely to be cheating.", "title": "" }, { "docid": "abb81eca56e64bedd7d51ec7bcc3fd7f", "text": "The 2 and 20 rule is a premium arrangement that hedge funds offer and venture capital funds offer, and they also offer different variations of it. The 2 is the management fee as percent of assets under management, the 20 is the profit cut, which they only get if they are profitable. There are 0/20, 1/15, and many variations. You're assuming that nobody offers this arrangement because it isn't offered to you, but that's because nobody offers it to people that aren't wealthy enough to legally qualify for their fund. When you park 6 or 7 figure amounts in bank accounts, they'll send your information out to the funds that operate the way you wish they operated.", "title": "" }, { "docid": "a8fd71693aac8f9ea6e32cdc77b700b7", "text": "Leveraged ETFs are prone to volatility decay, also known as leverage decay: http://blog.quantumfading.com/2009/07/12/measuring-leveraged-etf-decay/ You can increase your chances by using a non-leveraged short ETF like TBF or simply shorting the long ETF. Beware: shorting bonds ETFs will result in you having the pay the dividends, which can be substantial. Edit: SBND has recently appeared on the market. It is leveraged 3x monthly. In theory, monthly leverage should be less destructive than daily leverage.", "title": "" }, { "docid": "f9fc41103a1d03cb7e5841103a6bc8f8", "text": "A hedge fund is such a broad term as to not mean anything in practice. What do you find interesting in finance? Research that, understand that. Then go find the guys who are doing that and ask for a job and take it regardless of how much money it offers. The money is the yardstick, not the goal", "title": "" } ]	fiqa
ec068fec8bc17bbf8aa660e121df98bb	How should we prioritize retirement savings, paying down debt, and saving for a house?	[ { "docid": "1313281ff8064d868e5ab7c3094bc434", "text": "It all depends on your priorities, but if it were me I'd work to get rid of that debt as your first priority based on a few factors: I might shift towards the house if you think you can save enough to avoid PMI, as the total savings would probably be more in aggregate if you plan on buying a house anyway with less than 20% down. Of course, all this is lower priority than funding your retirement at least up to the tax advantaged and/or employer matched maximums, but it sounds like you have that covered.", "title": "" }, { "docid": "a680a9f0d4f37de93b4c4e4fec815b22", "text": "\"The advice to pay off near-7% debt is tough to argue against. That said, I'd project out a few years to understand the home purchase. Will you plan for the 20% down John recommends? The Crazy Truth about PMI can't be ignored. The way the math works, if you put 15% down, the PMI costs you so much, it's nearly like paying 20% interest on that missing 5%. If your answer is that you intend to save for the full downpayment, 20%, and can still knock off the student loan, by all means, go for it. I have to question the validity of \"\"we will definitely be in a higher tax bracket when we retire.\"\" By definition, pretax deposits save tax at the marginal rate. i.e. If you are in the 25% bracket, a $1000 deposit saves you $250 in tax that year. But, withdrawals come at your average rate, i.e. your tax bill divided by gross income. There's the deductions for itemized deductions or the standard. Then 2 exemptions if you are married. Then the 10% bracket, etc. Today, a couple grossing $100K may be in the 25% bracket, but their average rate is 12%. I read this Q&A again and would add one more observation - Student Loans and Your First Mortgage is an article I wrote in response to a friend's similar question. With the OP having plan to buy a house, paying off the loan may be more costly in the long run. It may keep him from qualifying for the size mortgage he needs, or from having enough money to put 20% down, as I noted earlier. With finance, there are very few issues that are simply black and white. It's important to understand all aspects of one's finances to make any decision. Even if thee faster payoff is the right thing, it's not a slam-dunk, the other points should be considered.\"", "title": "" }, { "docid": "ee10db3ab7421f5f45ef236bbcbc1dfd", "text": "Pay the debt down. Any kind of debt equals risk. No debt equals no risk and a better chance to have that money earn you income down the road once it's invested. That and you will sleep so much better knowing you have ZERO debt. You 6 month emergency fund is probably good. Remember to keep it at 6 months living expenses (restaurants don't count as living expenses).", "title": "" } ]	[ { "docid": "bb3354b81bc79cefbe6827a25a4df682", "text": "\"Unquestionably I think the priority should be funding retirement through ROTH/IRA/401K over HSA extra. Obviously you need to fund your HSA for reasonable and expected medical expenses. Also there is some floor to your more traditional retirement funding. Beyond that what does one do with excess dollars? Given the lack of flexibility and fees, it seems clear to do ROTH IRA and 401K. Beyond that what then? You may want to decide to \"\"take some money home\"\" and pay taxes on it. Do you have a desire to own rental property or start/purchase a business? Upgrade your home? etc... If all those things are taken care of, only then would I put money into an HSA. YMMV but most people, maxing a ROTH IRA alone, will have plenty of money for retirement given a reasonable rate of return.\"", "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": "af0b1df1287ed9403409abff8d5d9e1c", "text": "Wow! First, congratulations! You are both making great money. You should be able to reach your goals. Are we on the right track ? Are we doing any mistakes which we could have avoided ? Please advice if there is something that we should focus more into ! I would prioritize as follows: Get on the same page. My first red flag is that you are listing your assets separately. You and your wife own property together and are raising your daughter together. The first thing is to both be on the same page with your combined income and assets. This is critical. Set specific goals for the future. Dreaming and big-picture life planning will be the foundation for building a detailed plan for reaching your goals. You will see more progress with more sacrifice. If you both are not equally excited about the goals, you will not both be equally willing to sacrifice lifestyle now. You have the income now to be able to set yourselves up to do whatever you want in 10 years, if you can agree on what you want. Hire a financial planner you trust. Interview people, ask someone who is where you want to be in 10 years. You need someone with experience that can guide you through these questions and understands how to manage your income stream. Start saving for retirement in tax-advantaged accounts. This should be as much as 10%-15% of your income combined, so $30k-$45k per year. You need to start diversifying your investments. Real estate is great, but I would never recommend it as this large a percentage of net worth. Start saving for your child's education. Hard to say what you need here, since I don't know your goals. A financial planner should assist you with this. Get rid of your debt. Out of your $2.1M of rental real estate and land, you have $1.4M of debt. It will be difficult to start a business with that much additional debt. It will also put stress on your retirement that you don't need. You are taking on lots of risk here. I would sell all but maybe one of the properties and let it cash flow. This will free up cash to start investing for retirement or future business too. Buy more rental in the future with cash only. You have plenty of income to do it this way, and you will be setting yourself up for a great future. At this point you can continue to pile funds into any/all your investments, with the goal of using the funds to start a business or to live on. If all your investments are tied up in real estate, you wont have anything to draw on if needed for a business opportunity. You need to weigh this out in your goal and planning. What should we do to prepare for a comfortable retirement and safety You cannot plan for or see all scenarios. However, good planning will give you more options and more choices. Investing driven by fear will set you up for failure. Spend less than you make. Be patient. Be generous. Cheers!", "title": "" }, { "docid": "1dd669d41dae2b13de2963af30ee98d2", "text": "\"First, I would recommend getting rid of this ridiculous debt, or remember this day and this answer, \"\"you will be living this way for many years to come and maybe worse, no/not enough retirement\"\". Hold off on any retirement savings right now so that the money can be used to crush this debt. Without knowing all of your specifics (health insurance deductions, etc.) and without any retirement contribution, given $190,000 you should probably be taking home around $12,000 per month total. Assuming a $2,000 mortgage payment (30 year term), that is $10,000 left per month. If you were serious about paying this off, you could easily live off of $3,000 per month (probably less) and have $7,000 left to throw at the student loan debt. This assumes that you haven't financed automobiles, especially expensive ones or have other significant debt payments. That's around 3 years until the entire $300,000 is paid! I have personally used and endorse the snowball method (pay off smallest to largest regardless of interest rate), though I did adjust it slightly to pay off some debts first that had a very high monthly payment so that I would then have this large payment to throw at the next debt. After the debt is gone, you now have the extra $7,000 per month (probably more if you get raises, bonuses etc.) to enjoy and start saving for retirement and kid's college. You may have 20-25 years to save for retirement; at $4,000 per month that's $1 million in just savings, not including the growth (with moderate growth this could easily double or more). You'll also have about 14 years to save for college for this one kid; at $1,500 per month that's $250,000 (not including investment growth). This is probably overkill for one kid, so adjust accordingly. Then there's at least $1,500 per month left to pay off the mortgage in less than half the time of the original term! So in this scenario, conservatively you might have: Obviously I don't know your financials or circumstances, so build a good budget and play with the numbers. If you sacrifice for a short time you'll be way better off, trust me from experience. As a side note: Assuming the loan debt is 50/50 you and your husband, you made a good investment and he made a poor one. Unless he is a public defender or charity attorney, why is he making $60,000 when you are both attorneys and both have huge student loan debt? If it were me, I would consider a job change. At least until the debt was cleaned up. If he can make $100,000 to $130,000 or more, then your debt may be gone in under 2 years! Then he can go back to the charity gig.\"", "title": "" }, { "docid": "7acbbba0cc389b3945e19b7f9eba5385", "text": "As @mbhunter says, make sure you pay off any debt you have first. Then, it's a good idea to keep some or all of your savings as an emergency fund. If you use every last dime to pay for a house, you'll have no cushion available when something breaks down. The most common recommendation I've seen is to have 3-6 months worth of expenses as an emergency fund. Once you have that, then you can start saving for your down payment. As @Victor says, try to find the best interest rate you can for that money, but I wouldn't invest it in any kind of stock or bond product, because your need for it is too short term. Safety is more important than growth given your time frame. When you're ready to invest, make sure you learn all you can. You don't want to invest in something you don't understand, because that's how you get ripped off. You can be reading and talking to people while you're saving for your house so that, when the time comes, you'll have a pretty good idea of what you want to do for investments.", "title": "" }, { "docid": "1112b5f5bd959c156ff76598295e31ec", "text": "Debt will ruin any plans. I guess that the interest on the credit cards is about $450 a month or about $5,500 per year and the school loans is about $6,000 a year. Get a an Excel spread sheet going and start tracking your expensed. Learn to make a amortization spread sheet for all debts, and any future debts that you are thinking about. If you want a family soon plan on one income for a period of time. If you buy a house plan on paying it off while you are working. Then the house payment becomes spendable money during retirement. A cheaper house can be upgraded in the right neighborhood with an excellent appreciation in value. Money put into excellent collectibles and kept for 20 years or more is private and off the radar income no taxes when sold. STUDY STUDY LEARN LEARN", "title": "" }, { "docid": "8d5621331f74f236d8df4739c497937e", "text": "Answers to this your question break down along a few lines regarding opportunity costs of tying up a significant chunk of your salary and assets in one piece of property, as opposed to other things you'd like to do with your life. The 30 year standard mortgage was invented in the 30's as part of FDR's new deal to make housing affordable to more people, while relieving the strain on the market of foreclosed homes from ~10 year interest only balloon mortgages (sound familiar?). The 30 year term tends to follow the career of the average American of that era, allowing them to pay the house off and live out the remainder of their lives there at a lower cost. Houses are depreciating assets because they wear out over time. Their greatest investment value is a place to live. The appreciation on a home comes from the real estate it sits on and the community the property is located in. Value is determined by desirability of the house and community in their current state, and the supply of property in the area. This value can only be extracted when you sell the home. This partially answers your last question noting that you shouldn't buy a really expensive building for investment value. We've learned in recent years that there are no long term guarantees of property value either, because land and communities can decrease in value due to unemployment, over supply, crime, pollution, etc. Only buy as much home as you will need in the next decade or so, in a place that you will like living over that time period, and don't consider it much of an investment. I will tell you to get a fifteen year fixed rate mortgage since it's readily available at lower rates and has a significantly lower total purchase price than the standard 30 years. The monthly payment difference isn't that great, and anyone who looks at the monthly payment as opposed to the total costs, your priorities and the opportunity costs shouldn't be trusted for financial advice. I don't like debt. There are psychological benefits to being free from the bondage and drain of a long term mortgage on your finances. The biggest argument for paying off your home quickly is freedom to pursue other desires with all of your salary and the assets you have available to you. Some financial advisers will tell you to keep your mortgage costs under 25% of your income, so that you can actually live off the money you make. I would also recommend paying at least enough into your 401k to get the company match and fully funding your Roth IRA. I'd also have an emergency fund to cover at least 6 months of expenses, including this mortgage in case you lose your job. A 15 or 20 year mortgage will give you breathing room to take care of these other priorities, and you can overpay on almost any mortgage to decrease the principal and finish in a shorter time period (make sure to get a mortgage that allows prepayment) . More financially savvy people may tell you to take the 30 year mortgage and invest the difference. Especially with mortgage rates around 4%, this is a very cheap way to increase your purchasing power and total assets. Most people lack the investment prowess and self discipline to make this plan pay off. There are even fewer guarantees regarding markets and investments than property. This also is a way of diversifying your total assets to protect against loss of value in your home. This approach has backfired for thousands of people who are underwater on their homes. This problem is often compounded by job loss forcing you to move, or increasing your commute, making your home less desirable for you. Some people will tell you to maintain the mortgage for the tax credit. This fails a basic math test since you only get about a quarter of the money (depending on your tax rate) that you are paying in interest back from the government. The rest of the money goes to bank at no gain to you. This approach is basically a taxpayer subsidized decrease of your 4% interest payment to a 3% interest payment (assuming you have ~ $5000 in other deductions), and only pays off if you can successfully invest the money at a rate somewhat greater than 3%.", "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": "40b175d270c74eeb9e2496161fcc45ec", "text": "\"In my opinion, you should pay off the student loans as soon as possible, before you start saving for the house downpayment. $26k is a big number, but you have a great salary. (Nice!) Up until now, you have been a poor college student, accustomed to a relatively low standard of living. Your $800 per month plan would have you pay off the loan in 3 years, but I would challenge you to pay off this entire student loan in 1 year or less. A monthly loan payment of $2226 will pay off your loan in 12 months. After that is done, if you take the same amount you had been paying toward your student loans and save it for your condo, in less than two years you'll have a 10% down payment saved ($50k). The whole thing will take less than three years. There are three reasons why I recommend paying off the loan first before saving for the condo: one is practical and two are philosophical. Practical: You will save money on interest. Paying off the loan in 1 year vs. 3 years will save you $1343. You won't find a short-term safe investment that will beat 5% in interest. Philosophical: The loan is something current and concrete that you can focus on. Your condo is a dream at this point, and there is lots of time to change your mind. If the $2k+ per month amount is at all a sacrifice for you, then in a few months, you might be tempted to say to yourself, \"\"This month I really want a vacation, so I'll just skip this month of saving.\"\" For the loan, however, if you establish a concrete goal of 12 months to pay off the loan, it will hopefully help motivate you to allocate this money and stick to your plan. Philosophical: Getting used to borrowing money, making payments to a bank, and paying interest is not a great way to live. It is better, in my opinion, to eliminate your debt as fast as possible and start getting accustomed to saving cash for what you want. Clean up your debt, and resolve not to borrow any more money except for a reasonably-sized mortgage on your home.\"", "title": "" }, { "docid": "4247fc4bd8436e1a1c0b69754b86c1ff", "text": "One big factor that no one has mentioned yet is whether you believe in a deflationary or inflationary future. Right now, we are leaning towards a deflationary environment so it makes sense to pay off more of the debt. (If you make just one extra payment a year, you will have paid off your house 7 years early). However, should this change (depending on government and central bank policy) you may be better off putting down the very minimum. In a year or three from now, you should have a clearer picture. In the meanwhile, here is a recent Business Week article discussing both sides of the argument. http://www.businessweek.com/magazine/content/10_28/b4186004424615.htm", "title": "" }, { "docid": "1b64a9f85765c40910ce7fa1ede9fb4d", "text": "The fact that you want to look for a home within the next 2 years (and the lack of 401(k) match) leads me to suggest saving for the house as top priority. A VA loan for that purchase. The VA loan has a very low up front fee, but a new home is always going to come with expenses that can add up. Better to have as much liquidity as you can. If you have a lot of cash after the move in and furnishings, it won't be tough to choose a high savings rate to jump start the retirement plan. Thank you for your service.", "title": "" }, { "docid": "0d876f197307f19a332997d142724829", "text": "You say A #1 priority, that implies multiple #1 priorities. Long term or medium term my goal is to pay off the mortgage. But short term paying off the mortgage isn't a concern. Some people are comfortable with a mortgage during retirement, others aren't. When I was younger the mortgage concern was not being overextended. I didn't want to be in a situation that dictated my financial decisions because I needed to make a big house payment. Being overextended is no longer a concern for me. Now I am looking in more detail about how my retirement will actually play out. How to handle my actual retirement income sources. For me, not having a mortgage simplifies my planning.", "title": "" }, { "docid": "3d53b38ba7630a757116be108950c63a", "text": "I would definitely pay down the debt first. If it is going to take 15 years to do so, you probably need to allocate more money to paying down debt. Cut expenses by going out to eat less, and keeping spending to the bare necessities. You might even consider getting a second job, just for paying down the debt. If that isn't enough, consider selling off some assets. You should be able to come up with a plan to be debt free (excluding maybe a regular mortgage) within 3-5 years. Once the only debt you have is a home mortgage, then its time to look at putting money towards retirement again. Note, you should not take money out of a 401k or IRA to pay off debt. The costs for doing so are nearly always too great.", "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": "e4ad5de991424ab48e01a72ac5cbd3ac", "text": "\"I'll assume you live in the US for the start of my answer - Do you maximize your retirement savings at work, at least getting your employer's match in full, if they do this. Do you have any other debt that's at a higher rate? Is your emergency account funded to your satisfaction? If you lost your job and tenant on the same day, how long before you were in trouble? The \"\"pay early\"\" question seems to hit an emotional nerve with most people. While I start with the above and then segue to \"\"would you be happy with a long term 5% return?\"\" there's one major point not to miss - money paid to either mortgage isn't liquid. The idea of owing out no money at all is great, but paying anything less than \"\"paid in full\"\" leaves you still owing that monthly payment. You can send $400K against your $500K mortgage, and still owe $3K per month until paid. And if you lose your job, you may not so easily refinance the remaining $100K to a lower payment so easily. If your goal is to continue with real estate, you don't prepay, you save cash for the next deal. Don't know if that was your intent at some point. Disclosure - my situation - Maxing out retirement accounts was my priority, then saving for college. Over the years, I had multiple refinances, each of which was a no-cost deal. The first refi saved with a lower rate. The second, was in early 2000s when back interest was so low I took a chunk of cash, paid principal down and went to a 20yr from the original 30. The kid starts college, and we target retirement in 6 years. I am paying the mortgage (now 2 years into a 10yr) to be done the month before the kid flies out. If I were younger, I'd be at the start of a new 30 yr at the recent 4.5% bottom. I think that a cost of near 3% after tax, and inflation soon to near/exceed 3% makes borrowing free, and I can invest conservatively in stocks that will have a dividend yield above this. Jane and I discussed the plan, and agree to retire mortgage free.\"", "title": "" } ]	fiqa
d7642b22dba6f3f153424e15edcaed3b	Did basically all mutual funds have a significant crash in 2008?	[ { "docid": "bda2c842f221be11e113bf7d9f4e44c7", "text": "In 2008, the S&P was down 37%. I love charts that show sector performance by year, as it helps show that 2008 wasn't like the crash of 2000-01 which was more tech-centric. Funds that were more geared towards bonds would have been up as the 10 year Treasury was up 20%. I understand you have a low risk tolerance. Over the long term, this will cost you. The CAGR for the S&P from 1928-2011 was 9.23%, for treasuries, 5.14%. This difference adds up dramatically over time. These rates double your stock investments every 8 years on average vs nearly 14 years for bonds. See the MoneyChimp site to tinker with start/finish years to understand long term returns.", "title": "" }, { "docid": "155e0bbfc86158ee56b244c544cba650", "text": "\"I will solely address your fear because from what I read you fear investing in something that could possibly go down in the future. This is almost identical to market timing, so let's use the SPY as an example. Look at the SPY on Yahoo Finance, specifically in 2011. The market experienced a little bit of a pull back during the year, and some \"\"analysts\"\" claimed that it would fall below 600 (read this). In fact, a co-worker of mine said that he feared buying the S&P 500 in 2011 (as well as in 2010), so he bought gold (compare the two from 2011 to now - to put it bluntly he experienced 50% less gain than I did). Did the S&P 500 ever fall below 600 in that timeframe, or according to the linked analyst (there were plenty of similar predictions then)? No. If you avoid doing something because you're afraid it could drop, technically, you should be just as afraid of it rising (Fear of Losing Everything, FOLE, vs. Fear of Missing Out, FOMO - both are real). That's not to say invest out of fear, but that fear cuts both ways, and generally, we only look at it from one side. Retirement investing should be a boring, automated process where, ideally, we don't try and time the market (though some will try, and like in 2011, fail). If you can't help your fear, you can always approach retirement investing with automated re-balancing where you hold some money in \"\"less risky\"\" forms and others in \"\"higher risk\"\" forms and automate a rebalance every month or quarter.\"", "title": "" }, { "docid": "26e7b7fc325f90088aafee5f6383817d", "text": "The literal answer to your question is that a number of different types of mutual funds did not have significant downturns in 2008. Money Market Funds are intended to always preserve capital. VMMXX made 2.77% in 2008. It was a major scandal broke the buck, that its holders took a 3% loss. Inverse funds, which go up when the market goes down, obviously did well that year (RYARX), but if you have a low risk tolerance, that's obviously not what you're looking for. (and they have other problems as well when held long-term) But you're a 24-year-old talking about your retirement funds, you should have a much longer time horizon, at least 30 years. Over a period that long, stocks have never had negative real (inflation-adjusted) returns, dating back at least to the civil war. If you look at the charts here or here, you can see that despite the risk in any individual year, as the period grows longer, the average return for the period gets tighter and tighter. If you look at the second graph here, you see that 2011 was the first time since the civil war that the trailing 30-year return on t-bills exceeded that for stocks, and 1981-2011 was period that saw bond yields drop almost continuously, leading to steady rise in bond prices. Although past performance is no guarantee of future results, everything we've seen historically suggests that the risk of a broad stock-market portfolio held for 30 years is not that large, and it should make up the bulk of your holdings. For example, Vanguard's Target retirement 2055 fund is 90% in stocks (US + international), and only 10% in bonds.", "title": "" } ]	[ { "docid": "db7f7ccaae24a08021b89e82815d4c6e", "text": "Yes, but that wasnt the real issue. Lehman brothers didnt bring the recession, they were just a symptom of it. The real issue was the commodization of private loans provided by banks which weren't properly vetted or secured and were sold as AAA investments. So when a run on those investments occured, their value plummeted leaving many investment institutions with a gaping hole in their accounts that quickly grew in scope.", "title": "" }, { "docid": "c0c0d39f8df8c4b635315554a55d549e", "text": "\"Sure, it doesn't, but realistically they can't/shouldn't do anything about it in their index funds, because then they're just another stock picker, trying to gauge which companies are going to do best. Their funds not all being indexes is what I was getting at with my original question. How much leeway do they have in their definitions of other funds? IE, if they had a dividend fund that included all large cap dividend paying stocks above 3% yield, they couldn't take out Shell just because of climate risk without fundamentally changing what the fund is. But if it's just \"\"income fund\"\" then they can do whatever in that space.\"", "title": "" }, { "docid": "45856bc2be034a008457fdc32d73a8dc", "text": "A strategy of rebalancing assumes that the business cycle will continue, that all bull and bear markets end eventually. Imagine that you maintained a 50% split between a US Treasury bond mutual fund (VUSTX) and an S&P 500 stock mutual fund (VFINX) beginning with a $10,000 investment in each on January 1, 2008, then on the first of each year you rebalanced your portfolio on the first of January (we can pretend the markets are open that day). The following table illustrates the values in each of those funds with the rebalancing transactions: This second table shows what that same money would look like without any rebalancing over those years: Obviously this is cherry-picking for the biggest drop we've recently experienced, but even if you skipped 2008 and 2009, the increase for a rebalanced portfolio from 2010-2017 is 85% verses 54% for the portfolio that is not being rebalanced in the same period. This is also a plenty conservative portfolio. You can see that a 100% stock portfolio dropped 40% in 2008, but the combined portfolio only dropped 18%. A 100% stock portfolio has gained 175% since 2009, compared to 105% for the balanced portfolio, but it's common to trade gains for safety as you get closer to retirement. You didn't ask about a 100% stock portfolio in your initial question. These results would be repeated in many other portfolio allocations because some asset classes outperform others one year, then underperform the next. You sell after the years it outperforms, then you buy after years that it underperforms.", "title": "" }, { "docid": "6be9ede1c3f854caa8cfd3b0e63ec2b6", "text": "\"A brief review of the financial collapses in the last 30 years will show that the following events take place in a fairly typical cycle: Overuse of that innovation (resulting in inadequate supply to meet demand, in most cases) Inadequate capacity in regulatory oversight for the new volume of demand, resulting in significant unregulated activity, and non-observance of regulations to a greater extent than normal Confusion regarding shifting standards and regulations, leading to inadequate regulatory reviews and/or lenient sanctions for infractions, in turn resulting in a more aggressive industry \"\"Gaming\"\" of investment vehicles, markets and/or buyers to generate additional demand once the market is saturated \"\"Chickens coming home to roost\"\" - A breakdown in financial stability, operational accuracy, or legality of the actions of one or more significant players in the market, leading to one or more investigations A reduction in demand due to the tarnished reputation of the instrument and/or market players, leading to an anticipation of a glut of excess product in the market \"\"Cold feet\"\" - Existing customers seeking to dump assets, and refusing to buy additional product in the pipeline, resulting in a glut of excess product \"\"Wasteland\"\" - Illiquid markets of product at collapsed prices, cratering of associated portfolio values, retirees living below subsistence incomes Such investment bubbles are not limited to the last 30 years, of course; there was a bubble in silver prices (a 700% increase through one year, 1979) when the Hunt brothers attempted to corner the market, followed by a collapse on Silver Thursday in 1980. The \"\"poster child\"\" of investment bubbles is the Tulip Mania that gripped the Netherlands in the early 1600's, in which a single tulip bulb was reported to command a price 16 times the annual salary of a skilled worker. The same cycle of events took place in each of these bubbles as well. Templeton's caution is intended to alert new (especially younger) players in the market that these patterns are doomed to repeat, and that market cycles cannot be prevented or eradicated; they are an intrinsic effect of the cycles of supply and demand that are not in synch, and in which one or both are being influenced by intermediaries. Such influences have beneficial effects on short-term profits for the players, but adverse effects on the long-term viability of the market's profitability for investors who are ill-equipped to shed the investments before the trouble starts.\"", "title": "" }, { "docid": "45cb7cf4614aefd46ee494c2599bd244", "text": "\"I think practically, although we most surely will have real estate \"\"bubbles\"\", nothing will hit 2008 style panic for a long time, as the banks are now not nearly as leveraged as they were back then. All large banks passed the feds \"\"stress test\"\" this year for the first time. Housing prices may drop a bit, and that correction may dip the market (or vice versa), but there will be much less damage to the economy.\"", "title": "" }, { "docid": "3d2de7f5015216cc451c67d2790bf0a9", "text": "No, there's nothing special in mutual funds or ETFs. Wash sale rules apply to any asset.", "title": "" }, { "docid": "adc75bf53b97b75a3085e35ceb845c0a", "text": "The real folly is in believing that somehow 'regulators' are going to be able to prevent crashes, or even if this is desirable. Usually the idea that regulators can prevent crashes relies on regulators being issued a retroactive time machine. Crashes. Happen. If regulators had more power and more authority prior to 2008, the housing market crash would have been worse and more severe than it actually was, because regulators were like everyone else - they believed house prices would never go down, and were focussing their efforts on regulating banks to lend more money to riskier borrowers.", "title": "" }, { "docid": "e73661e3b17aa7ca2d29a1cf8d4133db", "text": "From a mathematical point of view the stats do not change depending on past performance. Just because a fund is lucky one year doesn't mean that it will be unlucky the next. Consider tossing a coin, the chance of heads is 50%. If you have just thrown 3 heads, the chance of heads is still 50%. It doesn't go down. If you throw 10 heads in a row the chance of a heads is still 50%, in fact you many suspect there is something odd about the coin, if it was an unfair coin then the chance of a heads would be higher than 50%. It could be the fund is better run, but there could be other reasons, including random chance. Some funds will randomly do better and some will randomly do worse What you do know is that if they did better than average other funds have done worse, at least for last year.", "title": "" }, { "docid": "4d3205801de3c35d85c8301a61274f73", "text": "For your base question, yes. (Barring some major collapse-of-civilization event, but in that case you're screwed anyway :-)) On the individual points: 1) Depends on whether you choose to invest in index-type funds (where profit is mainly expected from price appreciation), or more value-based investing. But either or a mix of the two (my own choice) should show returns above inflation, over the long term. 2) Yes, in the US anyway. You can invest a few hundred dollars at a time, and (with good companies like Vanguard & T. Rowe Price) there are no transaction fees, either for investing or for redeeming. 3) Long-term, it's crash-proof IF you have the self-discipline not to panic-sell at market lows. In my case, my total fund valuation dropped around 40% in '08. I didn't sell anything (and in fact tried to cut spending and invest more), and now I have nearly double what I had before the crash. Bottom line is that it has worked for me. After ~30 years of investing this way without being fanatic about it, I have enough that I could live moderately without working for the rest of my life. Not - and this is where I part company with MMM and most of the FIRE community - that I'd ever want to actually retire. But my modest financial independence gives me the freedom to work at things I like, rather than because I'm worrying about paying bills.", "title": "" }, { "docid": "77e3b89127f83c9de24b0f431df4cc89", "text": "This is why I am amazed that people are saying this time the market is different; it will only correct itself; we won't see another crash like '08. When in reality, all of the data is pointing to a bubble that is about to burst worst than '08.", "title": "" }, { "docid": "77709d67eb01b6301a7a4f77c3b801a8", "text": "\"I went to Morningstar's \"\"Performance\"\" page for FUSEX (Fideltiy's S&P 500 index fund) and used the \"\"compare\"\" tool to compare it with FOSFX and FWWFX, as well as FEMKX (Fidelity Emerging Markets fund). According to the data there, FOSFX outperformed FUSEX in 2012, FEMKX outperformed FUSED in 2010, and FWWFX outperformed FUSEX in both 2010 and 2012. When looking at 10- and 15-year trailing returns, both FEMKX and FWWFX outperformed FUSEX. What does this mean? It means it matters what time period you're looking at. US stocks have been on an almost unbroken increase since early 2009. It's not surprising that if you look at recent returns, international markets will not stack up well. If you go back further, though, you can find periods where international funds outperformed the US; and even within recent years, there have been individual years where international funds won. As for correlation, I guess it depends what you mean by \"\"low\"\". According to this calculator, for instance, FOSFX and FUSEX had a correlation of about 0.84 over the last 15 years. That may seem high, but it's still lower than, say, the 0.91 correlation between FUSEX and FSLCX (Fideltiy Small Cap). It's difficult to find truly low correlations among equity funds, since the interconnectedness of the global economy means that bull and bear markets tend to spread from one country to another. To get lower correlations you need to look at different asset classes (e.g., bonds). So the answer is basically that some of the funds you were already looking at may be the ones you were looking for. The trick is that no category will outperform any other over all periods. That's exactly what volatility means --- it means the same category that overperforms in some periods will underperform in others. If international funds always outperformed, no one would ever buy US funds. Ultimately, if you're trying to decide on investments for yourself, you need to take all this information into account and combine it with your own personal preferences, risk tolerance, etc. Anecdotally, I recently did some simulation-based analyses of Vanguard funds using data from the past 15 years. Over this period, Vanguard's emerging markets fund (VEIEX) comes out far ahead of US funds, and is also the least-correlated with the S&P 500. But, again, this analysis is based only on a particular slice of time.\"", "title": "" }, { "docid": "7e16bf72b7e84e7aac3a2eb57a804450", "text": "\"This falls under value investing, and value investing has only recently picked up study by academia, say, at the turn of the millennium; therefore, there isn't much rigorous on value investing in academia, but it has started. However, we can describe valuations: In short, valuations are randomly distributed in a log-Variance Gamma fashion with some reason & nonsense mixed in. You can check for yourself on finviz. You can basically download the entire US market and then some, with many financial and technical characteristics all in one spreadsheet. Re Fisher: He was tied for the best monetary economist of the 20th century and created the best price index, but as for stocks, he said this famous quote 12 days before the 1929 crash: \"\"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.\"\" - Irving Fisher, Ph.D. in economics, Oct. 17, 1929 EDIT Value investing has almost always been ignored by academia. Irving Fisher and other proponents of it before it was codified by Graham in the mid 20th century certainly didn't help with comments like the above. It was almost always believed that it was a sucker's game, \"\"the bigger sucker\"\" game to be more precise because value investors get destroyed during recession/collapses. So even though a recessionless economy would allow value investors and everyone never to suffer spontaneous collapses, value investors are looked down upon by academia because of the inevitable yet nearly always transitory collapse. This expresses that sentiment perfectly. It didn't help that Benjamin Graham didn't care about money so never reached the heights of Buffett who frequently alternates with Bill Gates as the richest person on the planet. Buffett has given much credibility, and academia finally caught on around in 2000 or so after he was proven right about a pending tech collapse that nearly no one believed would happen; at least, that's where I begin seeing papers being published delving into value concepts. If one looks harder, academia's even taken the torch and discovered some very useful tools. Yes, investment firms and fellow value investors kept up the information publishing, but they are not academics. The days of professors throwing darts at the stock listings and beating active managers despite most active managers losing to the market anyways really held back this side of academia until Buffett entered the fray and embarrassed them all with his club's performance, culminating in the Superinvestors article which is still relatively ignored. Before that, it was the obsession with beta, the ratio of a security's variance to its covariance to the market, a now abandoned theory because it has been utterly discredited; the popularizers of beta have humorously embraced the P/B, not giving the satisfaction to Buffet by spurning the P/E. Tiny technology firms receive ridiculous valuations because a long-surviving tiny tech firm usually doesn't stay small for long thus will grow at huge rates. This is why any solvent and many insolvent tech firms receive large valuations: risk-adjusted, they should pay out huge on average. Still, most fall by the wayside dead, and those 100 P/S valuations quickly crumble. Valuations are influenced by growth. One can see this expressed more easily with a growing perpetuity: Where P is price, i is income, r is the rate of return, and g is the growth rate of i. Rearranging, r looks like: Here, one can see that a higher P relative to i will dull the expected rate of return while a higher g will boost it. It's fun for us value investor/traders to say that the market is totally inefficient. That's a stretch. It's not perfectly inefficient, but it's efficient. Valuations are clustered very tightly around the median, but there are mistakes that even us little guys can exploit and teach the smart money a lesson or two. If one were to look at a distribution of rs, one'd see that they're even more tightly packed. So while it looks like P/Es are all over the place industry to industry, rs are much more well clustered. Tech, finance, and discretionaries frequently have higher growth rates so higher P/Es yet average rs. Utilities and non-discretionaries have lower growth rates so lower P/Es yet average rs.\"", "title": "" }, { "docid": "8d9810fb83e7253b932c4b16a16d9e55", "text": "\"Yes, many hedge funds (for example) did not survive 2008-2009. But hedge funds were failing both before and after that period, and other hedge funds thrived. Those types of funds are particularly risky because they depend so much on leverage (i.e. on money that isn't actually theirs). More publically-visible funds (like those of the big-name index fund companies) tended not to close because they are not leveraged. You say that \"\"a great many companies\"\" failed during the recession, but that's not actually true. I can't think of more than a handful of publically-traded companies that went bankrupt. So, since the vast majority of publically-traded companies stayed in business, their stocks kept some/most of their value, and the funds that owned those stocks stayed afloat. I personally did not see a single index fund that went out of business due to the recession.\"", "title": "" }, { "docid": "b0d6167a19d4ea85bd2890867de5a6ac", "text": "This is not hypothetical, this is an accurate story. I am a long-term investor. I have a bunch of money that I'd like to invest and I plan on spreading it out over five or six mutual funds and ETFs, roughly according to the Canadian Couch Potato model portfolio (that is, passive mutual funds and ETFs rather than specific stocks). I am concerned that if I invest the full amount and the stock market crashes 30% next month, I will have paid more than I had to. As I am investing for the long term, I expect to more than regain my investment, but I still wouldn't be thrilled with paying 30% more than I had to. Instead, I am investing my money in three stages. I invested the first third earlier this month. I'll invest the next third in a few months, and the final third a few months after that. If the stock market climbs, as I expect is more likely the case, I will have lost out on some potential upside. However, if the stock market crashes next month, I will end up paying a lower average cost as two of my three purchases will occur after the crash. On average, as a long-term investor, I expect the stock market to go up. In the short term, I expect much more fluctuation. Statistically speaking, I'd do better to invest all the money at once as most of the time, the trend is upward. However, I am willing to trade some potential upside for a somewhat reduced risk of downside over the course of the next few months. If we were talking a price difference of 1% as mentioned in the question, I wouldn't care. I expect to see average annual returns far above this. But stock market crashes can cause the loss of 20 to 30% or more, and those are numbers I care about. I'd much rather buy in at 30% less than the current price, after all.", "title": "" }, { "docid": "2af89fe14e34eb8e5c2a27ab13b14984", "text": "From mid 2007 to early 2009 the DJI went down about 50 %. This market setback won't happen on a single day or even a few weeks. Emergency funds should be in cash only. Markets could be closed for an unknown period of time. Markets where closed September 11 until September 17 in 2001.", "title": "" } ]	fiqa
4786d9a522595bec1ebabddb3e2f53d8	What are the disadvantages to borrowing money for energy conservation measures / solar panels?	[ { "docid": "6675f588bf751d03cb54e692c18ee1c6", "text": "\"If you sell the property before the ten years are up, the panels might have declined in value more than the amount you owe declined. In the original post's situation, this is a negligible risk. Suppose (for the sake of argument) that each year's panels are 10% better than the previous year's panels. Even if the panels lasted forever, and even if the price you could sell the power for stayed the same, then the value of your panels should decline 9% per year. If the panels are financed at a 4.5% APR for 10 years, your principal should decline by 8.1% in the first year. A second risk is that the solar panels might be ugly, or might go out of fashion. When selling a home, \"\"curb appeal\"\" matters. If potential buyers do not like how your home looks with the solar panels, you might not be able to get as much money for the house if you have to sell it. A third risk is that the loan might harm your credit rating, or otherwise restrict your ability to borrow. Even though this deal does not impinge on your disposable income, a bank might think that it raises your debt-service-to-income (DTI) ratio. This could theoretically prevent you from refinancing your home, or raise the interest rates on potential loans you might want to take out. A fourth risk is that the installation process might damage your home in a way that causes expensive damage. Water leakage and electrical fires can potentially destroy homes. You need to have the solar system competently installed. A fifth risk is that the solar power system might make it harder to maintain or replace your roof. Will your roof need to be replaced during the life of the solar power system? If so, consider options that do not force you to throw away the solar power system prematurely.\"", "title": "" }, { "docid": "822085f0f59f912b48e76f0de318f28e", "text": "\"Depending on the details of your solar panel setup, the monthly savings may change depending on changes in the law or utility company policy. This could change how long it will take for the solar panels to \"\"pay for themselves\"\". So your bullet point about the \"\"payback period\"\"/\"\"break even point\"\" is not fixed at the moment you buy the solar panels; it depends on costs you will incur over many years, and those costs could turn out to be different from what you originally thought. At least in the US, home solar installations typically work by selling excess power back to the power company. The power company can change the amount that it pays you for that power. There is also typically a minimum charge for being connected to the grid, and the power company can raise that charge. (This article mentions one such possible change.) The power companies want to keep making money, and as more people start adding solar panels, the power companies may change their rate structure to make that less financially feasible. You can avoid many of these issues if your solar panels are not connected to the public electricity grid, and you, for instance, store power with your own battery. However (at least in the US) this is very uncommon because it is more complex and expensive.\"", "title": "" } ]	[ { "docid": "2f0d259305893efee065306911adb1f5", "text": "\"A quick online search for \"\"disadvantages of defence housing australia investment properties\"\" turns up a several articles that list a few possible disadvantages. I can't vouch for these personally because I'm not familiar with the Australian rental market, but they may all be things to keep in mind. I quote verbatim where indicated.\"", "title": "" }, { "docid": "37b539cdc7658eb937155edbfcaaed17", "text": "\"Would the net effect really be worse, though? If everyone stopped paying back loans, and banks stopped lending, people would have to live within their means. Prices would fall, and nobody would be in debt slavery for the rest of their lives. As for allocating capital to new businesses, there would still be the option of a Kickstarter-like model, plus both private and public equity (and the rules could be changed so there could be more than 500 investors without being forced public). A lot of options currently on the table would disappear, sure, but on balance, would it actually be worse? As both government and Wall Street say it's bad, that seems to automatically suggest the opposite. There has been a push to make it a crime to walk away from a mortgage, even though banks get the house back! The fact that they desperately tried to paint it as \"\"morally wrong\"\" to walk away from a mortgage is a big red flag. In any case, this is all going to be reshuffled in the near future, because of automation. There won't be a need to borrow when your material needs are automatically met; and there won't be much of a point to promising your labor when machines are doing the jobs already. The transition to a post-scarcity economy over the next 20 years is going to be interesting.\"", "title": "" }, { "docid": "b117ffc4be3b40ef6e57f576be646797", "text": "\"It may seem like you cannot live without this trip, but borrowing money is a bad habit to get into. Especially for things like vacations. Your best bet is to save up money and only ever pay cash for things that will decrease in value. Please note that while it is a bad idea to borrow money for things that decrease in value, the \"\"opposite\"\" is not necessarily true. That is, it is not necessarily a good idea to borrow money for things that will increase in value; or, will earn you income. False assumptions can cloud our judgement. The housing bubble and the stock market crash of 1929 are two examples, but there are many others.\"", "title": "" }, { "docid": "1707eff13331b8829d1bc61c3caea456", "text": "Personally, I'd use my emergency fund first. It is unlikely (though possible, of course) that I will entirely lose my income at the same time I need to replace my roof or my furnace. I'd rather pay my emergency fund back with installment payments than pay off a HELOC to my bank. The lost interest on my emergency fund, which, after all, should be in cash, is much less than the cost of the loan. I could even set up an amortization schedule in a spreadsheet and charge myself interest when paying back into the emergency fund. That said, if I didn't have the cash in my emergency fund, I'd rather borrow against the house than finance with a contractor. If they'd even do that, which is unlikely--I've never dealt with a roofer or heating contractor that required anything but full payment at time of service. Home equity borrowing is generally the cheapest kind. I'm firmly in the camp of those who look at home ownership as a consumption decision rather than an investment. If the value goes up, great, but I just build in about 1% of the cost of building a new house (excluding the land price) into the housing budget each year, right along with mortgage interest, property taxes and basic utilities. Usually, that's enough to cover the major wear-and-tear related repairs (averaged over 3-5 year periods, anyway).", "title": "" }, { "docid": "bc718afd9f8edd15151243165c6c5c33", "text": "Banks should be risk averse by default. They make loans to people and businesses after measuring their ability to repay. After they approve a big project loan like an apartment building, they don't give all the money to the builders upfront. They give money as progress is made and they make sure the funds are not being used inappropriately. There's no reason they couldn't do all this while owning the project, but that would also open them to lawsuits later on if anything wasn't built to code. By keeping the project at arm's length, they avoid future liability.", "title": "" }, { "docid": "69437d0f05d34c29918ed319ada9ba1f", "text": "First, your references are only tangentially related to your claim. > If you have twice the generation capacity in renewables (wind/solar) and can store 20% of your yearly consumption, then you are fine. Right. If you do that, you're fine to run your hospital off-grid with no backup generators without significant risk of the life support systems going offline. The requirements for a grid-connected single family home are much lower. Generating 100% of your power needs and having one powerwall (for half a day of storage) will drastically reduce your electricity demand. Home solar doesn't need to completely replace grid power - a 70% reduction in demand would be sufficient to reduce generation requirements to only existing hydro / wind / nuclear plants.", "title": "" }, { "docid": "6efee72aa9efb5b8c840e990b1fa5f0f", "text": "Firstly, the banks are far less risky than the people they lend to. Most of the interest banks charge borrowers covers defaults, but banks rarely default to the fed, especially those able to borrow from the Fed. Secondly, most banks borrowing is in the form of overnight loans to cover short term reserve fluctuations; they are not borrowing dollars to lend to you. Thirdly, if govt does it's job of keeping some competition in the banking sector, then the rates offered you and me should be near the actual cost to service such loans, so are the true value of those loans. Since there are a significant number of banks that I can borrow from with a multitude of options in how to borrow, there is likely still decent competition for my business. Finally, the Fed funds rate is not currently 0%, so the banks are not getting interest free money.", "title": "" }, { "docid": "e4f81507bb8ede8f25eea21a1ed98337", "text": "I would use student loans and avoid credit card debt if debt is your only option. Here are the advantages I see: Disadvantages:", "title": "" }, { "docid": "4a0f940061f3490ab45ff439aff5cbe1", "text": "In the short term, this question is pretty simple: Are occasional use grid-scale natural gas plants economically viable compared to distributed gas generators? Home solar is an amazingly good deal now. Economically, the question isn't whether it'll take over most home power generation, it's how fast that will happen. Currently - at least where I live - the grid is still a good deal for backup power. If that changes, then people will stop using it. You can get a gas generator to cover a normal sized home installed for ~$4000. In places with piped gas, the price for running the generator looks comparable to grid power per kWh. So no, I wouldn't pay triple the price for grid power or buy a ton of extra storage. I'd get a natural gas generator and handle solar downtime locally.", "title": "" }, { "docid": "68237dfaf197d46813f94d6e48c994de", "text": "It's good that you can still use the area solar panels are placed because the space requirements will be extremely large compared to nuclear. Recycling solar panels makes a lot of sense though. Not saying they are a bad idea. Energy storage is a tough problem to crack though.", "title": "" }, { "docid": "4b4ac6d21b3e809e741841ba81cd1cf1", "text": "This article is 100% incorrect. The governments main concern is to PREVENT depositors and tax payers from losing funds in the case of bank default. How? By having debt holders being forced to converted into equity to create a capital buffer to keep a bank solvent which will help protect depositors and prevent tax payers from having to bail the banks out. Please ask me more questions on this as I have done a lot of work on this topic as of late.", "title": "" }, { "docid": "47b97a3b10add61924eca7c618d61e4e", "text": "No Drawbacks. One day, the bank might decide to kick you out. Typically, they send you a letter and warn that they will close it if it stays unused, and then you have to decide if you move some money into it or have it cancelled.", "title": "" }, { "docid": "75fe4e68887941daac5a00d26e9a3c06", "text": "Assumptions 1 & 2 are correct. Plus you will improve on credit score. The only disadvantage is if you get lax about it and overspend beyond your limit ... Plus a small risk of fraud of card transactions ...", "title": "" }, { "docid": "0407d8458260aeb4c5267d019b121156", "text": "In some places. Solars challenge will always be the scaling to a national grid. It can be cheap as chips and still present insurmountable technical obstacles in large scale. I would be all for it as a supplement to a robust nuclear program.", "title": "" }, { "docid": "84eb661ad5e87c2c1813d26e8f203a7e", "text": "They're trying to, but ratepayers and state governments are fighting back, especially in progressive states. The big issue is the degree to which you can bank your summer power surplus to offset your winter deficit. You'd think that since you're generating power for the grid in summer you'd get equal credit for that to use in winter when the sun shines less, but power companies do their best to prevent this, so state governments have to mandate it.", "title": "" } ]	fiqa
a41b0cc119bb90733c76b65a10a48615	Optimal down payment amount	[ { "docid": "0f91a9b488625fc14dbb4fe82bc2da20", "text": "\"The optimal down payment is 100%. The only way you would do anything else when you have the cash to buy it outright is to invest the remaining money to get a better return. When you compare investments, you need to take risk into account as well. When you make loan payments, you are getting a risk free return. You can't find a risk-free investment that pays as much as your car loan will be. If you think you can \"\"game the system\"\" by taking a 0% loan, then you will end up paying more for the car, since the financing is baked into the sales [price in those cases (there is no such thing as free money). If you pay cash, you have much more bargaining power. Buy the car outright (negotiating as hard as you can), start saving what you would have been making as a car payment as an emergency fund, and you'll be ahead of the game. For the inflation hedge - you need to find investments that act as an inflation hedge - taking a loan does not \"\"hedge\"\" against inflation since you'll still be paying interest regardless of the inflation rate. The fact that you'll be paying slightly less interest (in \"\"real\"\" terms) does not make it a hedge. To answer the actual question, if your \"\"reinvestment rate\"\" (the return you can get from investing the \"\"borrowed\"\" cash) is less than the interest rate, then the more you put down, the greater your present value (PV). If your reinvestment rate is less than the interest rate, then the less you put down the better (not including risk). When you incorporate risk, though, the additional return is probably not worth the risk. So there is no \"\"optimal\"\" down payment in between those mathematically - it will depend on how much liquid cash you need (knowing that every dollar that you borrow is costing you interest).\"", "title": "" }, { "docid": "927daf0565187ad69e532a058862b42f", "text": "The optimal down payment is 0% IF your interest rate is also 0%. As the interest rate increases, so does the likelihood of the better option being to pay for the car outright. Note that this is probably a binary choice. In other words, depending on the rate you will pay, you should either put 0% down, or 100% down. The interesting question is what formula should you use to determine which way to go? Obviously if you can invest at a higher return than the rate you pay on the car, you would still want to put 0% down. The same goes for inflation, and you can add these two numbers together. For example, if you estimate 2% inflation plus 1% guaranteed investment, then as long as the rate on your car is less than 3%, you would want to minimize the amount you put down. The key here is you must actually invest it. Other possible reasons to minimize the down payment would be if you have other loans with higher rates- then obviously use that money to pay down those loans before the car loan. All that being said, some dealers will give you cash back if you pay for the car outright. If you have this option, do the math and see where it lands. Most likely taking the cash back is going to be more attractive so you don't even have to hedge inflation at all. Tip: Make sure to negotiate the price of the car before you tell them how you are going to pay for it. (And during this process you can hint that you'll pay cash for it.)", "title": "" } ]	[ { "docid": "c124b0a7949c26904fa381882841a086", "text": "You are correct that 20% has an impact on your interest rate, although it is not always hugely significant. You would have to do your own shopping around to find that information out. However 20% has an impact that I consider to be far more important than your monthly payment, and that is in your equity. If the DC market tanks, which I know it has not really done like much of the country but none of us have crystal balls to know if it will or not, then you will be more easily underwater the less you put down. Conversely putting 20% or more down makes you an easy sell to lenders [i]and[/i] means that you don't have to worry nearly so much about having to do a short sale in the future. I would never buy a house with less than 20% down personally and have lived well below my means to get there, but I am not you. With regards to mortgages, the cheapskate way that I found information that I needed was to get books from the library that explained the mortgage process to me. When it came time to select an actual broker I used my realtor's recommendation (because I trusted my realtor to actually have my interests at heart because he was an old family friend - you can't usually do that so I don't recommend it) and that of others I knew who had bought recently. I compared four lenders and competed them against each other to get the best terms. They will give you estimate sheets that help you weigh not only rates but costs of different fees such as the origination fee and discount points. Make sure to know what fees the lender controls and what fees (s)he doesn't so that you know which lines to actually compare. Beyond a lender make sure that before closing you have found a title company that you think is a good choice (your realtor or lender will try to pick one for you because that's the way the business is played but it is a racket - pick one who will give you the best deal on title), a settlment company (may be title company, lender, or other) that won't charge you an excessive amount, a survey company that you like if required in DC for your title insurance, and homeowner's insurance coverage that you think is a good deal. The time between contract and closing is short and nobody tells you to research all the closing costs that on a $500,000 place run to in excess of $10,000, but you should. Also know that your closing costs will be about 2% of the purchase price and plan accordingly. In general take some time to educate yourself on homebuying as well as neighborhoods and price ranges. Don't rush into this process or you will lose a lot of money fast.", "title": "" }, { "docid": "9bd0f3fe069b9d41b6a0d7cbd12c89bf", "text": "I am currently in the process of purchasing a house. I am only putting 5% down. I see that some are saying that the traditional 20% down is the way to go. I am a first time homebuyer, and unfortunately we no longer live in the world where 20% down is mandatory, which is part of the reason why housing prices are so high. I feel it is more important that you are comfortable with what your monthly payments are as well as being informed on how interest rates can change how much you owe each month. Right now interest rates are pretty low, and it would almost be silly to put 20% down on your home. It might make more sense to put money in different vehicle right now, if you have extra, as the global economy will likely pick up and until it does, interest rates will likely stay low. Just my 2 cents worth. EDIT: I thought it would not be responsible of me not to mention that you should always have extra's saved for closing costs. They can be pricey, and if you are not informed of what they are, they can creep up on you.", "title": "" }, { "docid": "1c8be22845f9a82bb3b4eba4039e5b34", "text": "The relationship is not linear, and depends on a lot of factors. The term you're looking for is efficient frontier, the optimal rate of return for a given level of risk. The goal is to be on the efficient frontier, meaning that for the given level of risk, you're receiving the greatest possible rate of return (reward). http://www.investopedia.com/terms/e/efficientfrontier.asp", "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": "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": "55bd433a38d2333dc733ebaacf1980d3", "text": "Your best bet is to talk with a banker about your specific plans. One of the causes of the housing crash was an 80/20 loan. There you would get a first for 80% of the value of a home and 20% on a HELOC for the rest. This would help the buyer avoid PMI. Editorially, the reason this was popular was because the buyer could not afford the home with the PMI and did not have a down payment. They were simply cutting things too close. Could you find a banker willing to do something like this, I bet you could. In your case it seems like you are attempting to increase the value of your home by using money to do an improvement so the situation is better. However, sizable improvements rarely return 100% or more on investments. Typically, I would think, the bank would want you to have some money invested too. So if you wanted to put in a pool, a smart banker would have you put in about 60% of the costs as pools typically have a 40% ROI. However, I bet you can find a banker that would loan you 100%. You don't seem to be looking for advice on making a smart money decision, and it is difficult to render a verdict as very little detail is supplied about your specific situation. However, while certain decisions might look very profitable on paper, they rarely take into consideration risk.", "title": "" }, { "docid": "c841acd1c29310d633242b8d2bf418ca", "text": "For a short term loan, the interest is closer to straight line, e.g. A $10K loan at 10% for 3 years will have approximately $1500 in interest. (The exact number is $1616, not too far off). You will save 2.41% on the rate, so you'll the extra payment you'll send to the mortgage will save you about 1000035(2.41/12)/2 or about $350 over the 3 year period.", "title": "" }, { "docid": "027b35341fe9921666c3bc278cf757d9", "text": "\"TL;DR; There is no silver bullet. You have to decide how much to invest and when on your own. Averaging down definition: DEFINITION of 'Average Down' The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down. BREAKING DOWN 'Average Down' Sometimes this is a good strategy, other times it's better to sell off a beaten down stock rather than buying more shares. So let us tackle your questions: At what percentage drop of the stock price should I buy more shares. (Ex: should I wait for the price to fall by 5% or 10% to buy more.) It depends on the behaviour of the security and the issuer. Is it near its historical minimum? How healthy is the issuer? There is no set percentage. You can maximize your gains or your losses if the security does not rebound. Investopedia: The strategy is often favored by investors who have a long-term investment horizon and a contrarian approach to investing. A contrarian approach refers to a style of investing that is against, or contrary, to the prevailing investment trend. (...) On the other side of the coin are the investors and traders who generally have shorter-term investment horizons and view a stock decline as a portent of things to come. These investors are also likely to espouse trading in the direction of the prevailing trend, rather than against it. They may view buying into a stock decline as akin to trying to \"\"catch a falling knife.\"\" Your second question: How many additional shares should I buy. (Ex: Initially I bought 10 shares, should I buy 5,10 or 20.) That depends on your portfolio allocation before and after averaging down and your investor profile (risk apettite). Take care when putting more money on a falling security, if your portfolio allocation shifts too much. That may expose you to risks you shouldn't be taking. You are assuming a risk for example, if the market bears down like 2008: Averaging down or doubling up works well when the stock eventually rebounds because it has the effect of magnifying gains, but if the stock continues to decline, losses are also magnified. In such cases, the investor may rue the decision to average down rather than either exiting the position or failing to add to the initial holding. One of the pitfalls of averaging down is when the security does not rebound, and you become too attached to be able to cut your losses and move on. Also if you are bullish on a position, be careful not to slip the I down and add a T on said position. Invest with your head, not your heart.\"", "title": "" }, { "docid": "0a24007fb7192568e13253a4fa0933d2", "text": "\"There are times that the simplest explanation (or analysis) is best. You show that, for a time, the PMI is $1812/yr. And it's the cost you will incur by sending $15,000 to the student loan instead of using it as a downpayment. 1812/15000 is 12%. The loan is already costing you 4% (I know, 3.899, a rounding error), so in effect, that $15,000 is costing 16%. I doubt the student loan is even double digits. Use the $15,000 toward the downpayment. Take the $1812 plus the $859 per year saved on the mortgage payment, and throw the $2671 towards the student loan. This is the simple solution. (Note: $15000 at 4% for 30 years is a payment of $71.61 or $859/yr.) Part of the PMI issue is that PMI gets removed when you hit 80% due to natural amortization. i.e. the timeframe due to normal payments. If you make extra payments, and hit 80% a year after you close, that's nice, but the bank will drag its feet, and the appraisal (at your cost) may come back low. Then what? Last, without the S/L interest rate and term, I can't calculate the numbers the way your example showed, but don't mix up term and cash flow with actual cost. Say I owed my mom $50000, at zero interest, and $500/mo payment. Sending $50K would \"\"free up\"\" that $500/mo, but there are better uses for that money, such as high interest debt. You propose to create 16% debt in your scenario.\"", "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": "76b0bc30e0178a8627847743ff0ae369", "text": "\"Say you're buying a 400K house. Your relative finances 120K (30%). Say I'm optimistic, but the real-estate market recovers, and your house is worth 600K in 5-6 years (can happen, with the inflation and all). The gain is 200K. Your relative gets 100K. You repay him 220K on 120K loan for 5 years. Roughly, 16% APR. Quite an expensive loan. I'm of course optimistic, it seems to me that so is your relative. The question is: if the house loses value in that term, does your relative take 50% of the losses? Make calculations based on several expected returns (optimistic, \"\"realistic\"\", loss case, etc), and for each calculate how much in fact will that loan cost. It will help you to decide if you want it. Otherwise your relationships with your relative might go very bad in a few years. BTW: Suggestion: it's a bad idea to mix business and friend/family you don't want to lose.\"", "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": "cf5a0b627cb0a5e11a1dadec1b43be54", "text": "I'm of the belief that you should always put 20% down. The lower interest rate will save you thousands over the life of the loan. Also PMI is no different then burning that much cash in the fireplace every month. From Wikipedia Lenders Mortgage Insurance (LMI), also known as Private mortgage insurance (PMI) in the US, is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. You are basically paying money each month for the bank to be insured against you not paying your mortgage. But in actuality the asset of the condo should be that insurance. Only you can decide if you are comfortable with having $50k in liquidity or not. It sounds like a good cushion to me but I don't know the rest of your expenses.", "title": "" }, { "docid": "097c542b9284b893d4a4c0129c39d780", "text": "To optimize your return on investment, you need to buy low and sell high. If you knew that one stock had hit rock bottom, and the others had not, buying the low stock would be the best. However, unless you can predict the future, you don't know if any individual stock has hit the bottom, or if it will continue to drop. If you decide to spend the same amount of money each month on stock purchases, then when the price is low, you will automatically buy more shares, and when the price is high, you will buy fewer shares. This strategy is sometimes called dollar cost averaging. It eliminates the need to predict the future to optimize your buying. All that having been said, I agree with @Powers that at the investment amount that you are talking about and the per transaction fee you listed, a monthly investment in several stocks will cause you to lose quite a bit to transaction fees. It sounds like you need a different strategy.", "title": "" }, { "docid": "bce104a3950b808c1fd2966dfbe848ea", "text": "The answer depends on how much you spend every month. The DTI is calculated using the minimum payment on the balance owed on your card. Credit card minimum payments are ridiculous, often being only $50 for balances of a couple thousand dollars. In any case, when you get preapproved, the lender will tell you (based on your DTI) the maximum amount they will approve you for. If your minimum payment is $50, that's another $50 that could go towards your mortgage, which could mean an additional $10,000 financed. It's up to you to decide if $10,000 will make enough of a difference in the houses you look at.", "title": "" } ]	fiqa
44488ba1b52d0f86597573aa62ba99ed	Disputing Items to Improve Credit Report	[ { "docid": "c2450a67c4c8bb535c58af429aeeb4da", "text": "Disputing the remark seems unlikely to move your score, since it is just that -- a remark. It's hard to say whether the scoring models can/do read the remarks and incorporate them (somehow) into the scoring metric itself. Disputing the revolving account that should be reported as closed is a different matter. The question there would be what the status of that account is/was. In other words, is it showing as an open collection or some other status which would indicate the creditor still has a pending claim? If so, disputing it might have some effect, although nobody would be able to tell you for certain or even how much your score might be affected. If, as you say, that account should have been part of the bankruptcy package then getting that corrected could be important enough to achieve what you're looking for. You can try it and see, but even if the effect is minor, you still want your credit report to be a true reflection of the facts. I hope this helps. Good luck!", "title": "" }, { "docid": "2a2e632d1a1fe51ea8b374d323d981d1", "text": "\"A few points: The reason your lender is asking you to be above 580 is because that is the magic number for an FHA loan where your down payment would be only 3.5% (the US Government effectively subsidizes the rest of your down pmt). If you had a score lower than that (but still above 500), you will need to put 10% down which is still less than the typical 20% down pmt that many of us make. It's not that you can't get a loan with a score < 580. It's that you don't qualify for the \"\"maximum financing\"\" thru FHA. You should do some research and decide if you even want an FHA loan. And keep in mind, you will throw away some money every month towards PMI (mortgage insurance) if you do FHA. Many insist on 20% down pmt to avoid that. How exactly these two items will effect your score is another question. It's possible that having accounts added back as revolving accounts could negatively / not positively effect it. It will likely effect it in some way and I'm not 100% which way or if it would be very significant. You may want to dispute both of those items regardless if you can't afford anything but an FHA loan. If that's the case, then you may have nothing to lose. You might also want to shop around for mortgage lenders. And look for a \"\"portfolio lender.\"\" These type of lenders general have more flexibility in who they can lend to and the type of loans.\"", "title": "" } ]	[ { "docid": "faf24c20508fc14ee7b7220428afd0ce", "text": "It costs money to pull credit information, and there's a record of who requested the info. And hard pulls are only a temporary, short-term ding on your score. Basically, if someone wants to make trouble, there are better ways to do so.", "title": "" }, { "docid": "4d6937810c10c24969fcd83f1852c5c1", "text": "No credit bureau wants incorrect data, for obvious reasons, but it happens. That's one reason why they let you get access to your credit score, to check it the data is correct and make the 'product' (data about you) better. Nope, that's not why you can get free access to your credit report. The Fair Credit Reporting Act (FCRA) is why. FCRA requires any credit reporting agency to provide you a free report upon request every 12 months. Prior to this law, credit agencies made you pay to see your report including if you wanted it to dispute errors. They only care about the dollars they get from having this data. FCRA removed one of their revenue streams. If free locking moves forward, that will remove another. So expect them to fight it.", "title": "" }, { "docid": "ac6c8b4a19615ff7b2de20577028940c", "text": "A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras.", "title": "" }, { "docid": "66b35acf56e4b858179a6a2252a75163", "text": "\"I was I a similar position as you, and sometimes credit bureaus might be difficult to deal with, especially when high amounts of money are involved. To make the long story short, someone opened a store credit card under my name and made a charge of around 3k. After reporting this to the bureaus, they did not want to remove the account from my credit report citing that the claim was \"\"frivolous\"\". After filing a police report, the police officer gave me the phone number for the fraud department of this store credit card, and after they investigated, they removed the account from my credit. I would suggest to do the following: Communicating with Creditors and Debt Collectors You have the right to: Stop creditors and debt collectors from reporting fraudulent accounts. After you give them a copy of a valid identity theft report, they may not report fraudulent accounts to the credit reporting companies. Get copies of documents related to the theft of your identity, like transaction records or applications for new accounts. Write to the company that has the documents, and include a copy of your identity theft report. You also can tell the company to give the documents to a specific law enforcement agency. Stop a debt collector from contacting you. In most cases, debt collectors must stop contacting you after you send them a letter telling them to stop. Get written information from a debt collector about a debt, including the name of the creditor and the amount you supposedly owe. If a debt collector contacts you about a debt, request this information in writing. I know that you said that the main problem was that your credit account was combined with another. But there might be a chance that identity theft was involved. If this is the case, and you can prove it, then you might have access to more tools to help you. For example, you can file a report with the FTC, and along with a police report, this can be a powerful tool in stopping these charges. Feel free to go to the identitytheft.gov website for more information.\"", "title": "" }, { "docid": "e073c71ae7a33cf89cf9a3a58ca8da94", "text": "This is more of a legal question than a monetary one. You can try to negotiate with the debt owner as Pete B. suggests. Alternatively, you can ignore them and see what happens. They might sue you for the 400 plus costs, or maybe not. That is a pretty small amount for a lawyer to show up in a court of law. If you go to court, you can win by testifying that you returned the box and the charge is invalid. If you testify in court that you did not return the box, then you will lose. Sometimes a debt collector will just file a credit complaint against you and you would have to go to court to get that complaint removed from your record with the credit agency. The loan owner has no idea whether you returned the box at all. All they have is a debt security which simply says who owes the money and how much it is. In a court room they have zero evidence against you (unless you said something to them and they wrote it down or recorded it).", "title": "" }, { "docid": "7a4c992ed6dc741496581a54d8651f19", "text": "\"http://annualcreditreport.com gives you free access to your 3 credit bureau records. (Annual, not \"\"free\"\". The \"\"free\"\" guys will try to sell you something.)\"", "title": "" }, { "docid": "6f5d5938b69abf99b4c65d4e08c8b232", "text": "\"My sister had a similar problem and went to an actual lawyer, not a \"\"credit repair agency\"\". The lawyers settled her debt for a lot less than she owed, and she also got a bonus: one of the creditors called her repeatedly, even after her lawyers had told them not to. The lawyers ended up getting her an extra $40,000. Combined with the debt settlement, she actually came out ahead. Of course, her credit score went down, but it recovered in a couple of years.\"", "title": "" }, { "docid": "9798257382abe1279226130c288f7543", "text": "You could make an entry for the disputed charge as if you were going to lose the dispute, and a second entry that reverses the charge as if you were going to win the dispute. You could then reconcile the account by including the first charge in the reconciliation and excluding the reversal until the issue has been resolved.", "title": "" }, { "docid": "f865594d30bf48499c9c5fd1f2175d4d", "text": "The best we can do in the Equifax case is freeze (not lock) our credit files at the credit bureaus and use the free annual credit reports via FTC.GOV. Unfreezing is an extra step one would have to go through before opening a new credit line, renting a new place, getting utilities hooked up, etc. But the freeze (versus the lock) essentially makes one’s data worthless to the credit reporting agencies.", "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": "7f98231a9dd5399b44298bd3ba912d2a", "text": "\"you can relate everything on a credit report, and how things are calculated, to life scenarios. thats a 100% fact, and thats what people need to go by when designing their credit dicipline/diet. utilization: any kind of resource in life. water, food, energy, and etc. who would you want to live with more, the guy that just eats way too much, uses way too much energy than they need, and wastes way more water than they need? assuming there was no water cycle. payment history: speaks for itself derogatory remarks: s* happens. thats what makes life life, but when given chances to fix your mistakes and own up to them, like i and every other responsible adult have done, and you dont, thats living up to the exact definition of derogatory. disrespecting and not caring. who wants to lend to someone who doesnt care? so if youre not gonna care, we will just put this special little remark in the derogatory section and show that you dont care about when you make mistakes. f* it right? lol. well, thats what that section is for. showing you wont try to fix things when they go sour. if i had a guy who was fixing my roof, and did a bad job, but did everything he could to fix it, i wouldnt give him a bad rep at all. if a guy messed up my roof, and just said cya thanks for your money, hes getting a derogatory remark. credit age: just like life. showing the ability to maintain EVERY other aspect of a report for X amount of time. its like getting old as a person. after X amount of years, a lot of people will be able to say more about you as a person. whether youre a real male reproductive organ or an amazing guy. total accounts: is like taking on jobs as a self employed person or any business. if you have a lot of jobs, people must want you to do their work. it shows how people \"\"like you.\"\" hard inquiries: this is the one category of them all i dont fully agree on, can go either way, and i hate it. i really cant think of a life scenario to relate it to, so i kind of think its a prevention mechanism/keep a person in check kind of thing. like to save them from themself and save the lenders. for example, if a guy has great utilization, and just goes insane applying for credit cards, hell get everyone of them because hes showing almost no utilization. then said guy goes and looses his job, but since he racked up 50 cards at 1k each, now he can destroy 50k in credit. thats just my take, but thats EXACTLY how i look at it from TU/EX/EQs point of view.\"", "title": "" }, { "docid": "40866fb8a8243cc76e2a790a33cab482", "text": "Some aspects of your general financial lifestyle make a big difference in your score. Always pay late; declare bankruptcy; have bills go to collection, these will hurt your overall score. Some aspects of your life start with a low score and rise over time: the number of years you have had credit. Some only have short term and transient impacts: what is your utilization rate today; when was your last hard pull. Any agonizing you do over the transient aspects during a period of time when your score doesn't matter, is a waste of energy. If you are looking for a new mortgage, or a another type of loan, then act in a way that will improve your score. But If you see no immediate need then don't sweat the details. If your credit limit is too low for your lifestyle, then ask for it to be increased. Just don't ask for the increase a few days before you put in the auto loan application.", "title": "" }, { "docid": "69c0b762b3bcc88cf243d2bc0f4f0195", "text": "What I would prefer is top open a new category charges under dispute and park the amount there. It can be made as an account as well in place of a income or expenses category. This way your account will reconcile and also you will be able to track the disputes.", "title": "" }, { "docid": "7404c2113917ce9a79bc2c3c0fa77e01", "text": "I notice that a lot happened four months ago. You were denied credit twice. Your income went up from $20k to $60k. I'm wondering if you were denied credit based on your $20k income. Since you couldn't provide proof of your income I wonder if they used $0 for your income. Debt to income ratio is one significant factor included in the credit score calculation. You may not have a lot of debt, but if you don't have any income even a few hundred dollars on a credit card would throw your debt to income ratio into a panic. I'm assuming that your change from $20k to $60k income involved a change of jobs. Perhaps now you can provide proof of income. You would certainly need to do that before being approved for a mortgage. Well that's my two cents about what may (or may not) have gone wrong last time. As for what to do next I would agree that the most helpful thing you could do is check your credit score and fix any errors that might negatively impact your credit score. (There might also be non-errors that need addressed such as open credit accounts that you thought you had closed.) When building credit history, time is on your side. If you just go on living your life and paying your bills promptly, your credit will slowly climb to an acceptable level. Unfortunately in the time frame you mentioned (~1 year) there isn't really enough time to build it significantly. You bring up a valid point about credit applications reducing your credit score. Of course, that effect is somewhat minimal and temporary (2 yrs according to the thread linked to above). But again 1 year is not enough to recover. If you're considering applying for additional credit as a means to improve your credit score it may be too late to reap the benefits before your mortgage application. Of course if you could pay off any debts, that would help your debt to income ratio. But it would also reduce any house down payment you could save up and thereby increase the amount of your mortgage. Better just save those pennies (or preferably Washingtons and Benjamins) to put toward a down payment.", "title": "" }, { "docid": "1d6a0684c5d2fd9d65960fd64b8dac44", "text": "It appears all you have to do is submit a form. It might be better if she submitted it herself instead of you doing it on her behalf. All natural persons (individuals) and non-natural persons (businesses) are entitled to access and inspect the data held on record about them in the Central Credit Information System (KHR).", "title": "" } ]	fiqa
b7832a2f7f904e2ba7e4c1e18685ca9d	What are the advantages of doing accounting on your personal finances?	[ { "docid": "820156b363f6ac3f4ed5d387e6b4a19f", "text": "In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances. In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan. For many people, it is tempting to ignore the details of their finances and not worry about it. After all, the bank knows how much money I have, right? I get a statement from them each month that shows what I have spent, and I can always go to the bank's website and find out how much money I have, right? Unfortunately, this type of thinking can lead to several different problems. Overspending. In olden days, it was difficult to spend more money than you had. Most purchases were made in cash, so if your wallet had cash in it, you could spend it, and when your wallet was empty, you were required to stop spending. In this age of credit and electronic transactions, this is no longer the case. It is extremely easy to spend money that you don't yet have, and find yourself in debt. Debt, of course, leads to interest charges and future burdens. Unpreparedness for the future. Without a plan, it is difficult to know if you have saved up enough for large future expenses. Will you have enough money to pay the water bill that only shows up once every three months or the property tax bill that only shows up once a year? Will you have enough money to pay to fix your car when it breaks? Will you have enough money to replace your car when it is time? How about helping out your kids with college tuition, or funding your retirement? Without a plan, all of these are very difficult to manage without proper accounting. Anxiety. Not having a clear picture of your finances can lead to anxiety. This can happen whether or not you are actually overspending, and whether or not you have enough saved up to cover future expenses, because you simply don't know if you have adequately covered your situation or not. Making a plan and doing the accounting necessary to ensure you are following your plan can take the worry out of your finances. Fear of spending. There was an interesting question from a user last year who was not at all in trouble with his finances, yet was always afraid to spend any money, because he didn't have a budget/spending plan in place. If you spend money on a vacation, are you putting your property tax bill in jeopardy? With a good budget in place, you can know for sure whether or not you will have enough money to pay your future expenses and can spend on something else today. This can all be done with or without the aid of software, but like many things, a computer makes the job easier. A good personal finance program will do two things: Keeps track of your spending and balances, apart from your bank. The bank can only show you things that have cleared the bank. If you set up future payments (outside of the bank), or you write a check that has not been cashed yet, or you spend money on a credit card and have not paid the bill yet, these will not be reflected in your bank balance online. However, if you manually enter these things into your own personal finance program, you can see how much money you actually have available to spend. Lets you plan for future spending. The spending plan, or budget, lets you assign a job to every dollar that you own. By doing this, you won't spend rent money at the bar, and you won't spend the car insurance money on a vacation. I've written before about the details on how some of these software packages work. To answer your question about double-entry accounting: Some software packages do use true double-entry accounting (GnuCash, Ledger) and some do not (YNAB, EveryDollar, Mvelopes). In my opinion, double-entry accounting is an unnecessary complication for personal finances. If you don't already know what double-entry accounting is, stick with one of the simpler solutions.", "title": "" }, { "docid": "b9a7845f4f417c58773fcc99550a135e", "text": "Everyone should keep track of what they spend. When you see how much you are spending on each category of expense, you can make good decisions about how much your life is improved by something vs. how much you spend on that thing. Everyone makes better decisions when they are informed by accurate information about those decisions. There's no reason why personal finances are different from any other decision you make in life. This remains true whether you make very little or very much. Some people define rich as being able to live on less money than you earn.", "title": "" }, { "docid": "1ee3149b12c0eb37a8beb933962a0205", "text": "I recently made the switch to keeping track of my finance (Because I found an app that does almost everything for me). Before, my situation was fairly simple: I was unable to come up with a clear picture of how much I was spending vs saving (altho I had a rough idea). Now I here is what it changes: What I can do now: Is it useful ? Since I don't actually need to save more than I do (I am already saving 60-75% of my income), 1) isn't important. Since I don't have any visibility on my personal situation within a few years, 2) and 3) are not important. Conclusion: Since I don't actually spend any time building theses informations I am happy to use this app. It's kind of fun. If I did'nt had that tool... It would be a waste of time for me. Depends on your situation ? Nb: the app is Moneytree. Works only in Japan.", "title": "" } ]	[ { "docid": "bfb3bb9c58961c4994b6fef8d7252358", "text": "I heard that a C-Corp being a one person shop (no other employees but the owner) can pay for the full amount 100% of personal rent if the residence is being used as a home office. Sure. Especially if you don't mind being audited. Technically, it doesn't matter how the money gets where it goes as long as the income tax filings accurately describe the tax situation. But the IRS hates it when you make personal expenses from a business account, even if you've paid the required personal income tax (because their computers simply aren't smart enough to keep up with that level of chaos). Also, on a non-tax level, commingling of business and personal funds can reduce the effectiveness of your company's liability protection and you could more easily become personally liable if the company goes bankrupt. From what I understand the 30% would be the expense, and the 70% profit distribution. I recommend you just pay yourself and pay the rent from your personal account and claim the allowed deductions properly like everyone else. Why & when it would make sense to do this? Are there any tax benefits? Never, because, no. You would still have to pay personal income tax on your 70% share of the rent (the 30% you may be able to get deductions for but the rules are quite complicated and you should never just estimate). The only way to get money out of a corporation without paying personal income tax is by having a qualified dividend. That's quite complicated - your accounting has to be clear that the money being issued as a qualified dividend came from an economic profit, not from a paper profit resulting from the fact that you worked hard without paying yourself market value.", "title": "" }, { "docid": "903986e473afa1d2cf0724f01ff21999", "text": "Most of us know that accounting is an important business activity. But, how many of you know that it is more crucial to maintain personal finance accounts? Yes, it is rather essential to plan for a successful future. How could this be referred so?", "title": "" }, { "docid": "e4f3e150048fcbe3c225deaf069e60db", "text": "\"Fund a way to make mistakes with someone else's money. It is the best business advice I got as a young person. You learn so much more by failure and f'up than you do by success and if you do it with others money then it doesn't really hurt you. The other thing I wish I had understood earlier was basic book keeping and financial analysis. At 33 I'm just now figuring out basic thinga like how a P&L and Balance sheet work together and how to do a cash forecast. As my mentor said: \"\"Double entry accounting has been used in business since Jesus. There's a reason. \"\"\"", "title": "" }, { "docid": "a5a8f00d13d6121c63e2703247e507dc", "text": "\"Bookkeeping and double-entry accounting is really designed for tracking the finances of a single entity. It sounds like you're trying to use it to keep multiple entities' information, which may somewhat work but isn't really going to be the easiest to understand. Here's a few approaches: In this approach, the books are entirely from your perspective. So, if you're holding onto money that \"\"really\"\" belongs to your kids, then what you've done is you're taking a loan from them. This means that you should record it as a liability on your books. If you received $300, of which $100 was actually yours, $100 belongs to Kid #1 (and thus is a loan from him), and $100 belongs to Kid #2 (and thus is a loan from her), you'd record it just that way. Note that you only received $100 of income, since that's the only money that's \"\"yours\"\", and the other $200 you're only holding on behalf of your kids. When you give the money to your kids or spend it on their behalf, then you debit the liability accordingly and credit the Petty Cash or other account you spent it from. If you wanted to do this in excruciating detail, then your kids could each have their own set of books, in which they would see a transfer from their own Income:Garage Sale account into their Assets:Held by Parents account. For this, you just apportion each of your asset accounts into subaccounts tracking how much money each of you has in it. This lets you treat the whole family as one single entity, sharing in the income, expenses, etc. It lets you see the whole pool of money as being the family's, but also lets you track internally some value of assets for each person. Whenever you spend money you need to record which subaccount it came from, and it could be more challenging if you actually need to record income or expenses separately per person (for some sort of tax reasons, say) unless you also break up each Income and Expense account per person as well. (In which case, it may be easier just to have each person keep their entirely separate set of books.) I don't see a whole lot of advantages, but I'll mention it because you suggested using equity accounts. Equity is designed for tracking how much \"\"capital\"\" each \"\"investor\"\" contributes to the entity, and for tracking a household it can be hard for that to make a lot of sense, though I suppose it can be done. From a math perspective, Equity is treated exactly like Liabilities in the accounting equation, so you could end up using it a lot like in my Approach #1, where Equity represents how much you owe each of the kids. But in that case, I'd find it simpler to just go ahead and treat them as Liabilities. But if it makes you feel better to just use the word Equity rather than Liability, to represent that the kids are \"\"investing\"\" in the household or the like, go right ahead. If you're going to look at the books from your perspective and the kids as investing in it, the transaction would look like this: And it's really all handled in the same way an Approach #1. If on the other hand, you really want the books to represent \"\"the family\"\", then you'd need to have the family's books really look more like a partnership. This is getting a bit out of my league, but I'd imagine it'd be something like this: That is to say, the family make the sale, and has the money, and the \"\"shareholders\"\" could see it as such, but don't have any obvious direct claim to the money since there hasn't been a distribution to them yet. Any assets would just be assumed to be split three ways, if it's an equal partnership. Then, when being spent, the entity would have an Expense transaction of \"\"Dividend\"\" or the like, where it distributes the money to the shareholders so that they could do something with it. Alternatively, you'd just have the capital be contributed, And then any \"\"income\"\" would have to be handled on the individual books of the \"\"investors\"\" involved, as it would represent that they make the money, and then contributed it to the \"\"family books\"\". This approach seems much more complicated than I'd want to do myself, though.\"", "title": "" }, { "docid": "8f65e96af1e26f3449880727069e817d", "text": "\"No, there are neither advantages nor disadvantages. I'll take on this question from an accounting standpoint. Financial statements, the tools at which the market determines (amongst other things) the value of a stock, are converted at year end to the home currency (see 1.1.3).If Company A has revenue of 100,000 USD and the conversion to EUR is .89, revenue in the European market will be reported as 89,000 EUR. These valuations, along with ratios, analysis, and \"\"expert\"\" opinions determine if a person should own shares in Company A. Now, if we're talking about comparing markets this is a entirely different question. Example: Should I buy stock of Company A, who is in the American market (as an European)? Should I buy stock of Company B, who is in the European market (as an American)? I would recommend this as additional level of diversification of your portfolio to inlcude possible large inflation of either the currency. The possible gains of this foreign exchange may be greater if one or the other currency becomes weak.\"", "title": "" }, { "docid": "3a83ec84c94acbe5dd9a6949766590da", "text": "It gives you a strong fundamental understanding of the operations of a business and can be leveraged into various areas within a business. It also gives you a wide range of opportunities from auditing, investment banking, consulting, and finance based on your drive and interests. It also has strong future job growth and good career progression.", "title": "" }, { "docid": "6cf3d98f83f8d22c5222e2e9560689cd", "text": "To be confident in your solution, and get the best solution for you, consult a local accountant, preferably one who is specialized in taxes for businesses. Or muddle through the code and figure it out for yourself. The primary advantage in consulting with an accountant is that you can ask them to point out ways you can restructure your expenses, debts and income in order to minimize your tax burden. They can help you run the numbers for the various options and choose the one that is right, numerically.", "title": "" }, { "docid": "0dbbb1b166003f7c3c8ec4e3dfc80c2b", "text": "\"Thirtyfive years ago, when buying checks through one's bank was the sole option, if you got a \"\"business\"\" account with a bank, you had to buy \"\"business\"\" checks. One difference between a \"\"business\"\" account and a personal account was that on the business account, the incorporated or unincorporated company (say Simply Wonderful Apps) had the option of changing from John Doe to Richard Roe as the Treasurer of Simply Wonderful Apps and the person signing the checks, whereas a personal account in John Doe's name could not be changed to allow Richard Roe signature authority over the account. For a self-employed person doing business as Simply Wonderful Apps, a personal checking account would do just as well, since the need to change the person responsible for signing checks might never arise. It was, of course, important to have a separate checking account for the business because it made book-keeping simpler and also separated business expenses deductible on Schedule C from personal expenses. But it was not necessary to have a business account or business checks to run a small business. In addition to the various advantages described in other answers, one advantage that I found for larger checks is that various money management programs could do things like print an address below the name on (computer-printable) checks so that after folding, the check could be put into a window envelope and mailed directly. For the one check to a page format, the programs could print additional information on the blank area below the check (e.g. explanations about the check, company logo etc. So, it was convenient if one had to write several checks each month. But if outgoing checks are infrequent and extra security is not much of an issue, there is less reason to spend a lot extra on business style checks rather than the personal style checks.\"", "title": "" }, { "docid": "d4b1183f1d3b66ff43bccc63bd214d7e", "text": "\"Ditto Nate Eldredge in many ways, but let me add some other thoughts. BTW there are not four types of account, but five. You're forgetting equity, also called capital. Would it be possible to design an accounting system that does not have 5 types of accounts, maybe is simpler in other ways, and is internally consistent and logical? I'm sure it is. But what's the advantage? As Nate points out, the existing system has been in use for hundreds of years. Lots of people know how it works and understand it. I'd add: People have long since worked out how to deal with all the common situations and 99% of the odd cases you're likely to hit. If you invent your own system, you're starting from scratch. You'd have to come up with conventions to handle all sorts of situations. How do I record buying a consumable with cash? How do I record buying a capital asset with credit? How do I record paying off debts? How do I record depreciation? Etc etc. If you worked at it long and hard enough and you're a reasonably bright guy, maybe you could come up with solutions to all the problems. But why? If you were approaching this saying, \"\"I see these flaws in the way accounting is done today. I have an idea for a new, better way to do accounting\"\", I'd say good luck, you have a lot of work ahead of you working out all the details to make a fully functioning system, and then persuading others to use it, but if you really do have a better idea, maybe you can revolutionize the world of accounting. But, \"\"The present system is too much trouble and I don't want to bother to learn it\"\" ... I think that's a mistake. The work involved in inventing your own system is going to end up being way more than what it would take to learn the existing system. As to, Aren't liabilities a lot like assets? Well, in a sense I suppose. A credit card is like a checking account in that you can use it to pay for things. But they're very different, too. From an accounting point of view, with a checking account you buy something and then the money is gone, so there's one transaction: reduce cash and increase office supplies or whatever. But with a credit card there has to be a second transaction, when you pay off the charge: So, step 1, increase debt and increase office supplies; step 2, decrease debt and decrease cash. Credit cards charge interest, well you don't pay interest to use your own cash. Etc. One of the beauties of double-entry book-keeping is that every transaction involves a debit and a credit of equal amounts (or a set of debits and credits where the total of the debits equals the total of the credits). If you combine assets and liabilities into, whatever you call it, \"\"balance accounts\"\" say, then some transactions would involve a matching debit and credit while others would involve a positive debit and a matching negative debit and no credit. I'm sure you could make such a system work, but one of the neat built-in protections against error is lost. There's a very logical distinction between things that you have or that others owe you, and things that you owe to others. It makes a lot of sense to want to list them separately and manage them separately. I think you'd pretty quickly find yourself saying, \"\"well, we have two types of balance accounts, those that represent things we have and which normally have positive balances, which we list on chart A, and those that represent things we owe and which normally have negative balances, which we list on chart B\"\". And before you know it you've just reinvented assets and liabilities.\"", "title": "" }, { "docid": "2227a351ed40c57f447a08a9c43166a7", "text": "Yes, it's a good idea to have a separate business account for your business because it makes accounting and bookkeeping that much easier. You can open a business checking account and there will be various options for types of accounts and fees. You may or may not want an overdraft account, for example, or a separate business credit card just so you can more easily separate those expenses from your personal cards. When I started my business, I opened a business checking account and met with my banker every year just to show them how the business was doing and to keep the relationship going. Eventually, when I wanted to establish a business line of credit, it was easier to set up because I they were already familiar with my business, its revenue, and needs for a line of credit. You can set up a solo 401k with your bank, too, and they'll be very happy to do so, but I recommend shopping around for options. I've found that the dedicated investment firms (Schwab, Fidelity, etc.) tend to have better options, fees, and features for investment accounts. Just because a specific bank handles your checking account doesn't mean you need to use that bank for everything. Lastly, I use completely different banks for my personal life and for my business. Maybe I'm paranoid, but I just don't want all my finances in the same place for both privacy reasons and to avoid having all my eggs in the same basket. Just something to consider -- I don't really have a completely sane reason for using completely different banks, but it helps me sleep.", "title": "" }, { "docid": "8c8165116cc6ac89115f28ca9c924eeb", "text": "It's for the benefit of the bank, certainly. You might consider it a convenience to write one check, but it comes at a cost. Your cost of money is the interest you pay on the most costly loan you carry. But the escrow account will usually get a low rate of interest, 1% or so today. Also, as I describe in an article titled Fun With Schedule A there's a strategy for those who straddle the line between itemizing and taking the standard deduction. Paying your own tax allows you to pay as much as 6 quarters of property tax in one year and then just two quarters in the next. This opens up a biannual itemizing and a savings on your tax return.", "title": "" }, { "docid": "ee602225d2e10325a5f42a0183339c07", "text": "Use software that calculates your net worth and track it over time. I track my personal finances in Mint, and I love checking my net worth every week. It's turned into a kind of competition with myself... It's like keeping track of how fast you run a 5k, or how many pounds of weight you've lost. It helps you determine if you are making progress, and if you, it's positive reinforcement that you are doing the right things.", "title": "" }, { "docid": "d7b4f03d1e0956ca87f51146a917da16", "text": "I like Quicken for personal use, and they have a small business edition if you don't want to move into QuickBooks.", "title": "" }, { "docid": "4a9478eb389207bfb7d974ef114821da", "text": "Note: I am in the UK. I don't know specifically about australia but I expect the general principles will be much the same everywhere. What banks want is to be reasonablly confident that you have a steady income stream that will continue to pay the mortgate until it completes. In general employed are fairly easy to assess. Most employed people will have a steady basic pay that increases through their career. Payslips will usually seperate-out basic pay, overtime and bonuses. There is little opertunity to cook the books. The self-employed are harder to assess. Income can be bursty and there are far more opertunities for cooking the books to make it look like you are earning more than you really are. So banks are likely to be far more careful about lending to the self-employed, they will likely want to see multiple years of buisness records so that any bursts, whether natural due to the ebbs and flows of buisness or deliberatly created to cook the books average out and they can see the overall pattern. A large deposit will help because it reduces the risk to the bank in the event of a default. Similarly not being anywhere near your limit of affordability will help.", "title": "" }, { "docid": "3c18936134dd50e460e05e862adfbb23", "text": "This should not be taken to be financial advice or guidance. My opinions are my own and do not represent professional advice or consultation on my part or that my employer. Now that we have that clear... Your idea is a very good one. I'm not sure about the benefits of a EBITDA for personal financial planning (or for financial analysis, for that matter, but we will that matter to the side). If you have a moderate (>$40,000) income, then taxes should be one the largest, if not the largest chunk of your paycheck out the door. I personally track my cash flow on a day-by-day basis. That is to say, I break out the actual cash payments (paychecks) that I receive and break them apart into the 14 day increments (paycheck/14). I then take my expenses and do the same. If you organize your expenses into categories, you will receive some meaningful numbers about your daily liquidity (i.e: cash flow before taxes, after taxes, cash flow after house expenses, ect) This serves two purposes. One, you will understand how much you can actually spend on a day-to-day basis. Second, once you realize your flexibility on a day-to-day basis, it is easy to plan and forecast your expenses.", "title": "" } ]	fiqa
38fa7ea791b1f52f7ca2ab330c5a996c	In the stock market, why is the “open” price value never the same as previous day's “close”?	[ { "docid": "2c91dbcb174171eab32c85abaddec8f3", "text": "\"What most of these answers here seem to be missing is that a stock \"\"price\"\" is not exactly what we typically expect a price to be--for example, when we go in to the supermarket and see that the price of a gallon of milk is $2.00, we know that when we go to the cash register that is exactly how much we will pay. This is not, however, the case for stocks. For stocks, when most people talk about the price or quote, they are really referring to the last price at which that stock traded--which unlike for a gallon of milk at the supermarket, is no guarantee of what the next stock price will be. Relatively speaking, most stocks are extremely liquid, so they will react to any information which the \"\"market\"\" believes has a bearing on the value of their underlying asset almost (if not) immediately. As an extreme example, if allegations of accounting fraud for a particular company whose stock is trading at $40 come out mid-session, there will not be a gradual decline in the price ($40 -> $39.99 -> $39.97, etc.)-- instead, the price will jump from $40 to say, $20. In the time between the the $40 trade and the $20 trade, even though we may say the price of the stock was $40, that quote was actually a terrible estimate of the stock's current (post-fraud announcement) price. Considering that the \"\"price\"\" of a stock typically does not remain constant even in the span of a few seconds to a few minutes, it should not be hard to believe that this price will not remain constant over the 17.5 hour period from the previous day's close to the current day's open. Don't forget that as Americans go to bed, the Asian markets are just opening, and by the time US markets have opened, it is already past 2PM in London. In addition to the information (and therefore new knowledge) gained from these foreign markets' movements, macro factors can also play an important part in a security's price-- perhaps the ECB makes a morning statement that is interpreted as negative news for the markets or a foreign government before the US markets open. Stock prices on the NYSE, NASDAQ, etc. won't be able to react until 9:30, but the $40 price of the last trade of a broad market ETF at 4PM yesterday probably isn't looking so hot at 6:30 this morning... don't forget either that most individual stocks are correlated with the movement of the broader market, so even news that is not specific to a given security will in all likelihood still have an impact on that security's price. The above are only a few of many examples of things that can impact a stock's valuation between close and open: all sorts of geopolitical events, announcements from large, multi-national companies, macroeconomic stats such as unemployment rates, etc. announced in foreign countries can all play a role in affecting a security's price overnight. As an aside, one of the answers mentioned after hours trading as a reason--in actuality this typically has very little (if any) impact on the next day's prices and is often referred to as \"\"amateur hour\"\", due to the fact that trading during this time typically consists of small-time investors. Prices in AH are very poor predictors of a stock's price at open.\"", "title": "" }, { "docid": "86184956d348cee88e326d16bfb79a22", "text": "Quoted from money.howstuffworks.com: NASDAQ has come up with an auction approach called the opening cross. Here's how it works. In the morning, a computer program looks at all the orders that have come in overnight in each different stock. Based on those orders, the program picks a price level that would be the best opening price. However, it also looks to see if there's a trade imbalance. For example, if a company announced bad news after the market closed, there might be 10 times more sell orders than buy orders. NASDAQ then broadcasts the price and imbalance information to its network of dealers with the goal of offsetting the imbalance. It then lets dealers place orders. This all happens very quickly, in a time window of two minutes or so, right before the market opens. Dealers can place orders, and those orders are factored into the opening price. Further reading here: Opening Price calculation", "title": "" }, { "docid": "6b0353eb5873769de175d7620734fdfe", "text": "A stock's price does not move in a completely continuous fashion. It moves in discrete steps depending on who is buying/selling at given prices. I'm guessing that by opening bell the price for buying/selling a particular stock has changed based on information obtained overnight. A company's stock closes at $40. Overnight, news breaks that the company's top selling product has a massive defect. The next morning the market opens. Are there any buyers of the stock at $40? Probably not. The first trade of the stock takes place at $30 and is thus, not the same as the previous day's close.", "title": "" }, { "docid": "fd25863c896820977eca451e4ac7e6ae", "text": "It's done by Opening Auction (http://www.advfn.com/Help/the-opening-auction-68.html): The Opening Auction Between 07.50 and a random time between 08.00 and 08.00.30, there will be called an auction period during which time, limit and market orders are entered and deleted on the order book. No order execution takes place during this period so it is possible that the order book will become crossed. This means that some buy and sell orders may be at the same price and some buy orders may be at higher prices than some sell orders. At the end of the random start period, the order book is frozen temporarily and an order matching algorithm is run. This calculates the price at which the maximum volume of shares in each security can be traded. All orders that can be executed at this price will be filled automatically, subject to price and priorities. No additional orders can be added or deleted until the auction matching process has been completed. The opening price for each stock will be either a 'UT' price or, in the event that there are no transactions resulting form the auction, then the first 'AT' trade will be used.", "title": "" }, { "docid": "2c21cc679fb0b33d2b2937fcfe369bbd", "text": "The simple answer: The opening price is the price of the first trade of the day and the closing price is the price of the last trade of the day. And since the stock price change from trade to trade they are usually different.", "title": "" }, { "docid": "b991029e2677b48b8aee1e18bc92fbaf", "text": "The two answers so far are right, but there's a third factor - for many stocks, there's after hours trading. So the official 4PM close is not what the stock's last trade was when they open again. Regardless, even that after hour price is not the starting point as Muro points out.", "title": "" }, { "docid": "7b42364f8eb819cf045e88bb58afbaca", "text": "Besides overnight news events and auction mechanisms there is a more fundamental reason the price of a stock is always moving. Theoretically the stock price will move slightly even in the unlikely scenario that absolutely nothing of interest happens during the entire night. Let me go into that in some more detail: Stock valuation using Discounted Cash FLow One of the fundamental reasons that stock value is constantly changing is because underneath every stock there is a company that expects to make some kind of profit or loss in the future. We have to go into the fundamentals of stock value to understand why this is important: One popular way to determine the value of a stock is by looking into the future and summing up all the earnings (or cashflows) it has yet to produce. You have to reduce each amount by a certain factor that gets larger for payments that are farther into the future. Think of it this way: a dollar in hand now is better than a dollar that you get tomorrow. This method of valuation is called Discounted Cash Flow (abbr. DCF; see the wikipedia article on DCF) Time's effect on stock value Now take the Close price C, and the open price O. Let's assume that since there has been no news, the expectations for future earnings are the same for C and O. Remember that the discounting factor for these earnings is dependent on the time until the cashflow occurs? For O, this time is slightly shorter than for C, and therefore the value will be slightly higher (or lower, when the company is expected to incur losses). So now you can see that even without all the external forces that continuously push and pull on the stock price, a stock still changes in value over time. Hope this helps.", "title": "" }, { "docid": "5c68b5223a359c9908d4d7c0eefb1553", "text": "\"It's almost like why don't you wake up in the morning feeling exactly like you slept the earlier night? yeah, once in a while that'll happen, but it's not designed to be that way. Stuff happens. The close of the stock is what happened at 4 PM (for US stocks). The \"\"open\"\" is simply the first price ever, or an open price auction like NimChimpsky said. Most things that trade have an open/close cycle, even what seemingly trades all the time (some markets trade 23 hours). Forex trades in different exchanges which have overlapping timing but each market will have an open, high, low and close for each day - for what is the same underlying currency. Also, it's not exactly true that close<>open. Take the GS chart, Oct 1 2010 and Oct 4 2010 (there was a weekend in between). The Oct 1 close was the same as the Oct 4 open. Note that Oct 4 was a down day so it's in red - the open is the upper end of the body (not including the wick), and Oct 1 was an up day so its close was the upper end too. (Candles are drawn so that the open ends of the wicks are the High and Low of the period respectively, and the lower end of the body is the open if it was an up-day, meaning the stock closed higher than it opened, and the body in coloured green below. If the stock went down that day from the open, the body's in red and the lower end is the close. Vice-versa for the other end) The way to get to this: Go to yahoo finance, choose a stock, go to historical prices, click download data (you should have about 10 years of data), paste into excel, insert a formula to check if prev day's close = current day's open, and I'm sure you'll see at least one instance per stock.\"", "title": "" }, { "docid": "d21510e020a4614e78e632825b4328fa", "text": "It does sometimes open one day the same as it closed the previous day. Take a look at ESCA, it closed October 29th at 4.50, at opened November 1st at 4.50. It's more likely to change prices overnight than it is between two successive ticks during the day, because a lot more time passes, in which news can come out, and in which people can reevaluate the stock.", "title": "" }, { "docid": "0c8ebeab922a88a6568179e1480ad73d", "text": "\"Prices reflect all available information. (Efficient markets hypothesis) A lot can happen between the time a stock closes on one day and opens on another. Particularly in a heavily traded stock such as IBM. Basically, you have a different \"\"information set\"\" the following day, which implies a different price. The instances where you are most likely to have a stock where the price opens at the same price is at the previous close is a thinly traded stock on which you have little information, meaning that the \"\"information set\"\" changes less from day to day.\"", "title": "" }, { "docid": "e62eb8056bd1d8bfc666a98e2fbf0919", "text": "\"Nobody has mentioned the futures market yet. Although the stock market closes at 4pm, the futures market continues trading 24 hours a day and 5.5 days a week. Amongst the products that trade in the future market are stock index futures. That includes the Dow Jones, the S&P 500. These are weighted averages of stocks and their sectors. You would think that the price of the underlying stock dictates the price of the average, but in this day and age, the derivative actually changes the value of the underlying stock due to a very complex combination of hedging practices. (this isn't meant to be vague and mysterious, it is \"\"delta hedging\"\") So normal market fluctuations coupled with macroeconomic events affect the futures market, which can ripple down to individual stocks. Very popular stocks with large market caps will most certainly be affected by futures market trading. But it is also worth mentioning that futures can function completely independently of a \"\"spot\"\" price. This is where things start to get complicated and long winded. The futures market factor is worth mentioning because it extends even outside of the aftermarket and pre-market hours of stock trading.\"", "title": "" }, { "docid": "ede6a47dd7289c2b8990c723b09625da", "text": "A stock is only worth what someone is willing to pay for it. If it trades different values on different days, that means someone was willing to pay a higher price OR someone was willing to sell at a lower price. There is no rule to prevent a stock from trading at $10 and then $100 the very next trade... or $1 the very next trade. (Though exchanges or regulators may halt trading, cancel trades, or impose limits on large price movements as they deem necessary, but this is beside the point I'm trying to illustrate). Asking what happens from the close of one day to the open of the next is like asking what happens from one trade to the next trade... someone simply decided to sell or pay a different price. Nothing needs to have happened in between.", "title": "" } ]	[ { "docid": "96085ed5e9764b4c6311102d80047902", "text": "Ideally, stock price reflects the value of the company, the dividends it is expected to pay, and what people expect the future value of the company to be. Only one of those (maybe one and a half) is related to current sales, and not always directly. Short-term motion of a stock is even less directly linked, since it also reflects previous expectations. A company can announce disappointing sales and see its stock go up, if the previous price was based on expecting worse news.", "title": "" }, { "docid": "f1dae4b69e97c78b54205f926d8983c4", "text": "I'd add, this is actually the way any stock opens every day, i.e. the closing price of the prior day is what it is, but the opening price will reflect whatever news there was prior to the day's open. If you watch the business news, you'll often see that some stock has an order imbalance and has not opened yet, at the normal time. So, as Geo stated, those who were sold shares at the IPO price paid $38, but then the stock could open at whatever price was the point where bid and ask balanced. I snapped a screen capture of this chart on the first day of trading, the daily charts aren't archived where I can find them. This is from Yahoo Finance. You can see the $42 open from those who simply wanted in but couldn't wait, the willingness of sellers to grab their profit right back to what they paid, and then another wave of buying, but then a sell-off. It closed virtually unchanged from the IPO price.", "title": "" }, { "docid": "9823767759e3d43146cfab231ab5ed36", "text": "The first moment of trading usually occurs even later than that. It may take a few hours to balance the current buy/sell orders and open the stock. Watch CNBC when a hot IPO is about to open and you'll see the process in real time. If you miss it, look at a one day Yahoo chart to see when the open occurred.", "title": "" }, { "docid": "79761ea709f02e044c94985e3211cab4", "text": "\"The fallacy in your question is in this statement: \"\"The formulas must exist, because prices can be followed real time.\"\" What you see are snapshots of the current status of the stock, what was the last price a stock was traded at, what is the volume, is the price going up or down. People who buy and hold their stock look at the status every few days or even every few months. Day traders look at the status every second of the trading day. The math/formula comes in when people try to predict where the stock is going based on the squiggles in the line. These squiggles move based on how other people react to the squiggles. The big movements occur when big pieces of news make large movements in the price. Company X announces the release of the key product will be delayed by a year; the founder is stepping down; the government just doubled the order for a new weapon system; the insiders are selling all the shares they can. There are no formulas to determine the correct price, only formulas that try to predict where the price may go.\"", "title": "" }, { "docid": "f34458f083eae68c8949828e68620000", "text": "A stock market is just that, a market place where buyers and sellers come together to buy and sell shares in companies listed on that stock market. There is no global stock price, the price relates to the last price a stock was traded at on a particular stock market. However, a company can be listed on more than one stock exchange. For example, some Australian companies are listed both on the Australian Stock Exchange (ASX) and the NYSE, and they usually trade at different prices on the different exchanges. Also, there is no formula to determine a stock price. In your example where C wants to buy at 110 and B wants to sell at 120, there will be no sale until one or both of them decides to change their bid or offer to match the opposite, or until new buyers and/or sellers come into the market closing the gap between the buy and sell prices and creating more liquidity. It is all to do with supply and demand and peoples' emotions.", "title": "" }, { "docid": "bcc2a70daed4014de388c1cd026b754a", "text": "\"Trading at the start of a session is by far higher than at any other time of the day. This is mostly due to markets incorporating news into the prices of stocks. In other words, there are a lot of factors that can affect a stock, 24 hours a day, but the market trades for only 6.5 hours a day. So, a lot of news accumulates during the time when people cannot trade on that news. Then when markets finally open, people are able to finally trade on that news, and there is a lot of \"\"price discovery\"\" going on between market participants. In the last minutes of trading, volumes increase as well. This can often be attributed to certain kinds of traders closing out their position before the end of the day. For example, if you don't want to take the risk a large price movement at the start of the next day affecting you, you would need to completely close your position.\"", "title": "" }, { "docid": "a094c5a11277c21d3ef4c7708548e105", "text": "\"Take the case where a stock has just two owners, A and B, both at $10. One of them sells his shares to C, at $11. Now B has made $1 in profit but is no longer an owner of the stock. A hasn't sold anything but his shares are worth 10% more due to the last traded price printed. C has bought shares at $11 and the price is $11, so technically he hasn't lost any money. In a larger market, there are winners and losers every day on a single stock, but they may not remain owners of a stock. There could be days in which those that remain owners are all winners - say when a stock goes up to an all time high and all those that are currently owners have an average buy price lower than the last traded price. And the reverse applies too. It is of course more complicated. Say you own a stock and let someone else \"\"borrow\"\" it for a short-selling opportunity (he sells it in the market). For each uptick in price, you win, the short seller loses, and the guy he sold it to also wins. A person that has a covered call on a stock is not a winner beyond a point. And so on.\"", "title": "" }, { "docid": "2370ce29b34e888e4953cbc89dbead98", "text": "\"Some technical indicators (e.g. Williams %R) indicate whether the market is overbought or oversold. ... Every time a stock or commodity is bought, it is also sold. And vice versa. So how can anything ever be over-bought or over-sold? But I'm sure I'm missing something. What is it? You're thinking of this as a normal purchase, but that's not really how equity markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers, who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for Market Makers to accumulate a large number of shares, without end-investors being involved on both sides of the transaction. This is one example of how instruments can be over-bought or over-sold. Since Williams %R creates over-bought and over-sold signals based on historical averages of open / close prices, perhaps it's better to think of these terms as \"\"over-valued\"\" and \"\"under-valued\"\". Of course, there could be good reason for instruments to open or close outside their expected ranges, so Williams %R is just a tool to give you clues... not a real evaluation of the instrument's true value.\"", "title": "" }, { "docid": "e780f8fe3a75a5098b5bff95d2abd3c3", "text": "The next day the market opens trading at 10.50, You haven't specified whether you limit order for $10.10 is to buy or sell. When the trading opens next day, it follows the same process of matching the orders. So if you have put a limit order to buy at $10.10 and there is no sell order at that price, your trade will not go through. If you have placed a limit sell order at $10.10 and there is a buyer at or higher price, it would go through. The Open price is the price of the first trade of the day.", "title": "" }, { "docid": "cb0cac0d208e135a6d883966e28ae2a1", "text": "Because the stock still has the same value as the money paid for it - you are just exchanging one asset for another (of course the stock value starts to change immediately, but for the accounting the fictional value is the buying price). For the accounting, it is similar to changing a 100$ bill in five 20$ bills - same value, still assets.", "title": "" }, { "docid": "1eb7cc400f45f63142875802f3ff7dcc", "text": "Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf", "title": "" }, { "docid": "1952d2b085cf270d970a76ae8fbcbdaa", "text": "\"No one can claim markets are perfectly efficient. The Grossman-Stiglitz paradox explains one reason why it is impossible for the market to be perfectly effecient, and there are plenty of investors that show it is practically possible to consistently beat the market (e.g. \"\"The Superinvestors of Graham-and-Doddsville\"\" or RenTec's Medallion Fund). However, even if you accept as true that prices behave strangely around round numbers, that isn't a refutation of the efficient market hypothesis. The efficient market hypothesis says that price reflect all available information, so the expected price tomorrow is just the price today (not taking into account the time value of money). The efficient market hypothesis says nothing about how prices are distributed. Historically, a random walk has been used, but that is neither a consequence of the EMH nor a required assumption. You could say that prices are more volatile the nearer they are to a round number or new high, but that doesn't necessarily give you an edge in making money off the stock.\"", "title": "" }, { "docid": "87111ad5079b801b29090cb55023ea74", "text": "\"It reminds me of the Efficient Market Hypothesis, except that just states in its weakest form that the current market price accounts for all information embedded in previous market prices. In other words, people buying today at 42 know it was selling for 40 yesterday, and the patterns and such. To say that stock is memoryless strikes me as not quite right -- to the extent that stocks are valued based on earnings, much of what we infer about future earnings relies on past and present earnings. One obvious counterexample to this \"\"memoryless\"\" claim is bankruptcy. If a stock files bankruptcy, and there isn't enough money to pay senior debt, your shares are worth 0 in perpetuity.\"", "title": "" }, { "docid": "2a7804bb59b40d13a2aad5382f5c06dd", "text": "Never. Isn't that the whole idea of the limit order. You want a bargain, not the price the seller wants. And when the market opens it is volatile at the most, just an observation mayn't be correct. Let it stabilize a bit. The other thing is you might miss the opportunity. But as an investor you should stick to your guns and say I wouldn't buy any higher than this or sell any lower than this. As you are going long, buying at the right price is essential. You aren't going to run away tomorrow, so be smart. Probably this is what Warren Buffet said, it is important to buy a good stock at the right price rather than buying a good stock at the wrong price. There is no fixed answer to your question. It can be anything. You can check what analysts, someone with reputation of predicting correctly(not always), say would be the increase/decrease in the price of a stock in the projected future. They do quite a lot of data crunching to reach a price. Don't take their values as sacrosanct but collate from a number of sources and take an average or some sorts of it. You can then take an educated guess of how much you would be willing to pay depending the gain or loss predicted. Else if you don't believe the analysts(almost all don't have a stellar reputation) you can do all the data crunching yourself if you have the time and right tools.", "title": "" }, { "docid": "ac7c06f974f47305b96191c629a5ffa5", "text": "Here's an example (US, not Canada) that shows up to a 30% increase for first 6 months after a >30 day lapse, but the best data will come from actual quotes from insurers. If you can do without driving for 2 years it's almost certainly worth dropping coverage and a car for that duration and paying an increased insurance rate for a spell after the lapse. I'm not sure how it works in Canada, but when living with my parents they could not exclude me from their insurance once I was a licensed driver. The insurance company considered me to have access to all vehicles, so my presence increased insurance rates. If you live with your mother, you'll have to check with your insurer to see how that works.", "title": "" } ]	fiqa
d377d3a82fa4a76b779ce391d2150296	How should I pay off my private student loans that have a lot of restrictions?	[ { "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": "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": "1ee79f89d2eccdf0d137f986fd276ece", "text": "It doesn't make a whole lot of sense to save up and wait to make a payment on any of these loans. Any dollar you pay today works better than saving it and waiting months to pay it, no matter which loan it will be applied to. Since your lender won't let you choose which loan your payment is being applied to, don't worry about it. Just make as big a payment as you can each month, and try to get the whole thing out of your life as soon as possible. The result of this will be that the smaller balance loans will be paid off first, and the bigger balance loans later. It is unfortunate that the higher interest rate loans will be paid later, but it sounds like you don't have a choice, so it is not worth worrying about. Instead of thinking of it as 5 loans of different amounts, think of it as one loan with a balance of $74,000, and make payments as quickly and as often as possible. For example, let's say that you have $1000 a month extra to throw at the loans. You would be better off paying $1000 each month than waiting until you have $4000 in the bank and paying it all at once toward one loan. How the lender divides up your payment is less significant than when the lender gets the payment.", "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": "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": "8eb48b183e54b5a8cfb5551f1dbcf242", "text": "Are there any (monthly) administrative fees on those loans that are charged separately? If not, you should just pay as much as you can as quick as you can to get the loan amount down on those loans with the highest interest rate. If there are no separate fees on the loans, then it's just a lump of money with some interest rate. The smaller loans will eventually drop away one by one, have a celebration to remark the occasion when that happens. I assume the payment is split evenly between the loans? Restructure if you get a better deal from someplace. Delay buying new stuff until you get the loan amount down. Pay as much as you can as quickly as you can, but keep enough money in your pocket to survive a month or two, so that you don't need to get any more loans in case something unexpected happens.", "title": "" }, { "docid": "f0938f9cb1ddcfe644e0c4bc217a2a3b", "text": "Not that I doubted everyone's assumption but I wanted to see the math so I did some spreadsheet hacking. I assumed a monthly payments for 30 years which left us with total payments of 483.89. I then assumed we'd pay an extra $200/month in one of two scenarios. Scenario 1 we just paid that $200 directly to the lender. In scenario 2 we set the extra $200 aside every month until we were able to pay off the $10k at 7%. I assumed that the minimum payments were allocated proportionately and the overpayments were allocated evenly. That meant we paid off loan 5 at about month 77, loan 4 in month 88, loan 3 in month 120, loan 2 in month 165, and loan 1 in month 170. Getting over to scenario 2 where we pay $483.89 to lender and save $200 separately. In month 48 we've saved $9600 relative to the principle remaining in loan 3 of $9547. We pay that off and we're left with loan 1,2,4,5 with a combined principle of about $60930. At this point we are now going to make payments of 683.89 instead of saving towards principle. Now our weighted average interest rate is 6.800% instead of 6.824%. We can calculate the number of payments left given a principle of 60930, interest of 6.8%, and payment of 683.89 to be 124.4 months left for a total of 172.4 months Conclusion: Scenario 1 pays off the debt 3 months sooner with the same monthly expenditure as scenario 2.", "title": "" } ]	[ { "docid": "ac229dd060b9828d15a3f414b30a5cff", "text": "\"If I had to guess (since you provided little information about your loan repayment), I'd guess that you're on the \"\"Extended\"\" repayment plan for your $72k loan, and the \"\"Standard\"\" plan for your $30k loan. In general, there are 4 main kinds of student loan repayment plans This holds true for federal loans (Direct/Stafford/PLUS). Private loans may not have all of these options, or they may have more. Running your numbers, I get 300 payments of $500/mo at 6.8% interest for a $72,000 loan, and 120 payments of $345/mo at 6.8% interest for a $30,000 loan. Now, to address your issue of interest vs principal, you should notice that each month you pay, the interest payment is slightly lower, and the principal slightly higher. And if you make bi-weekly payments, you'll see that change a LITTLE bit more quickly (slightly smaller balance accruing interest for 14 days of the month) and you'll also pay slightly less over time.\"", "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": "5be063c33bc17804eef1d4fe20d5f9c7", "text": "\"Two things you should consider about paying off student loans ahead of the 10 year amortization schedule: What interest rate are you paying on your loans? What are you earning on your investments in a balanced mutual fund? When you pay off your student loans you are essentially guaranteed a return of the interest rate on your loan (future interest you would have had to pay). However if you are investing well and getting a good return on your investments you will get a greater return. Ex. Half of my student loans are at 6.8%, thr other half are at 2.5%. I make the minimum payments on the loans at 2.5% and invest my money in tax sheltered retirement accounts. The return on these funds has been 8% and that is on per-tax dollars so really closer to 11%. Now there is also downside risk when you invest in the market, but 2.5% guaranteed I will forgoe for 11% in low risk return. However my loans at 6.8% I repay in excess of the minimums because 6.8% guaranteed return is pretty good! So this decision is based on your confidence in your investments and your own risk tolerance. Once you pay your bank on your student loans that money is gone, out of your control. If you need it in the future you may need to pay higher interest on an unsecured loan, or you may not be able to borrow it. When you want to make large purchases (a car, house) that money you per-paid on your loans isn't available to you as a down payment. Banks should want you to have some of your own \"\"skin in the game\"\" on these purchases and the lending standards keep getting tougher. You are better off if you have money saved in your name rather than against the balance on your loan. Yes you can't bankrupt these loans, but the money you repay on them doesn't go toward housing you or paying your bills on a rainy day. I went through the same feeling when I completed my MBA with $50k in debt, you want to pay it off as soon as possible. But you need to step away and realize that it was an investment in your future and your future is long, you need time to make a financial foundation for it. And you will feel a lot more empowered when you have money saved and you can make the decision for how you want to deploy it to work for you. (Ex. I could pay down my student loans with the balance I have in the bank, but I am going to use it to invest in myself and open my own business).\"", "title": "" }, { "docid": "ad5a08fcdf9d3d33c9c3968767b43b31", "text": "\"You're in good shape as long as your income stays. Your only variable-rate debt now is your private student loan. I think you'd be wise to pay that down first, and you sense that already. Worst-case, in the event of a bankruptcy, student loans usually cannot be discharged, so that isn't a way out. Once that loan is gone, apply what you were paying to your other student loan to knock that out. You might investigate refinancing your home (to another 30-year fixed). You may be able to shave a half-percent off if your credit is stellar. Given the size of the mortgage, this could be several thousand out of pocket, so consider that when figuring out potential payback time. Consider using any \"\"free time\"\" to starting up a side business (I'm assuming you both have day jobs but that may not be a correct assumption). Start with what you know well. You and your wife are experts in something, and have passion about something. Go with that. Use the extra income from that to either pay down your debts faster, or just reinvest in the business so that you can offset the income on your taxes. Again, you're in good shape. Just do what you can to protect and grow your income streams.\"", "title": "" }, { "docid": "c4b02dc1399ac958d79cd4f2b20e5a4c", "text": "Considering I'm in a nearly identical situation, I'll speak to my personal strategy and maybe there's some value for you as well. You have ~$22k in loans, which you say you could pay off today. So, what I read is that you're sitting there with a $22k investment and want to know which investment to make: pay down debt, invest in yourself/start up, or some variation between those options. Any investor worth his salt will ask a couple of questions: what is my risk, and what is my gain? Paying off your student loans offers no financial risk at the cost of opportunity risk, and gains you returns of 3.4%, 6.8%, 3.4%, 4.5%, and 6.8%. Those percentage gains are guaranteed and the opportunity risk is unknown. Investing in a startup is inherently risky, with the potential for big payoffs. But with this investment, you are accepting a lot of risk for potentially some gain (it could be the next Apple, it could also fail). So, with your situation (like mine), I'd say it's best to accept the easy investment for now and fully vet out your tech start up idea in the meantime.", "title": "" }, { "docid": "5841080e5f9aba6ff7e24e94ad1e718b", "text": "\"This sounds like an accounting nightmare to be 100% precise. With each payment you're going to have to track: If you can account for those, then the fair thing to do is for one person to stop paying after they have paid the amount of principal they had at the beginning of the process, or possibly after they have paid an amount equivalent to the total principal and accrued interest they would have paid if they paid their loans individually. The problem is, one of you is likely going to pay more interest than you would have under the individual plan. In the example you gave, if your brother pays off any of your loans, he is going to be paying more in interest than if he paid on his 5% loans. If you pay the highest rate loans first, whoever has the lower total balance is going to pay more interest since they'll be paying on the higher rates until they've paid their \"\"fair share\"\". I don't see a clean way for you to divvy up the interest savings appropriately unless you trueup at the very end of the process. Math aside, these types of agreements can be dangerous to relationships. What if one of you decides that they don't want to participate anymore? What if one of you gets all of their loans paid off much earlier - they get the joy of being debt free while the other still has all of the debt left? What if they then don't feel obligates to pay the other's remaining debt? Are you both equally committed to cutting lifestyle in order to attack these debts? In my opinion, the complexity and risk to the relationship don't justify the interest savings.\"", "title": "" }, { "docid": "49e9a01c74b4a5f021796aee71d6cfc4", "text": "Actually, a few lenders now will offer a consolidation loan that will consolidate both Federal and private student loans. One example is Cedar Ed, http://cedaredlending.com/PrivateConsolidationLoan.htm", "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": "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": "e634ebc5b8d5a558812184dc3afaf7cd", "text": "One way to reduce the monthly payment due each month is to do everything to eliminate one of the loans. Make the minimum payment to the others, but put everything into eliminating one of the loans. Of course this assumes that you have separate loans for each year of school. Make sure that in trying to get aggressive on the loan repayment that you don't neglect the saving for a down payment. Each dollar you can put down will save you money on the mortgage. It might also allow you to reduce the mortgage insurance payments. If you pay one student loan back aggressively but can't eliminate it you might be worse off because you spent your savings but it didn't help you qualify for the mortgage. One way to maximize the impact is to not make the extra payments until you are ready to apply for the mortgage. Ask the lender if you qualify with all the student loans, or if you need to eliminate one. If you don't need to eliminate a loan, then apply the extra funds to a larger down payment or pay points to reduce the interest rate.", "title": "" }, { "docid": "40e63eabd78c2e65995082762ec7900d", "text": "\"There are a great number of financial obligations that should be considered more urgent than student loan debt. I'll go ahead and assume that the ones that can land people in jail aren't an issue (unpaid fines, back taxes, etc.). I cannot stress this enough, so I'll say it again: setting money aside for emergencies is so much more important than paying off student loans. I've seen people refer to saving as \"\"paying yourself\"\" if that helps justify it in your mind. My wife and I chose to aggressively pay down debt we had stupidly accrued during college, and I got completely blindsided by a layoff during the downturn. Guess what happened to all those credit cards we'd paid off and almost paid off? Guess what happened to my 401k? If all we had left were student loans, then I still wouldn't prioritize paying those off. There are income limits to Roth IRAs, so if you're in a field where you'll eventually make too much to contribute, then you'll lose that opportunity forever. If you're young and you don't feel like learning too much about investing, plop 100% of your contributions into the low-fee S&P 500 index fund and forget it until you get closer to retirement. Don't get suckered into their high-fee \"\"Retirement 20XX\"\" managed funds. Anyway, sure, if you have at least three months of income replacement in savings, have maximized your employer 401k match, have maximized your Roth IRA contributions for the year, and have no other higher interest debt, then go ahead and knock out those student loans.\"", "title": "" }, { "docid": "2e92dac5806716153cdccea6b4a15c79", "text": "I would consult a tax professional for specific help. On my own research, I believe that you could. I know that when I made payments when I was in school for my undergraduate, I made payments on the interest. I believe that I was even told by my financial aid office that I could deduct the interest that I paid. I made not much money so I wasn't anywhere close to the MAGI >75k, but I believe you still could. Not only that but one other thing to consider is that if you have an unsubisidized loan, the interest still accrues when you are in school. In that case, it might be better to make at least some payments. It would save you from the total loan amount ballooning so much while you are in school.", "title": "" }, { "docid": "976599fd71c2e4a449888f1f62112bab", "text": "\"There are two solutions. One is financially better, the other is psychologically better. Financially better: You should pay off loans in the order of interest rate, so the 9% first, then the six percent, then the 3-4%. If you pay back $1000, the first one saves you $90 a year in interest, the second saves you $60, the third $30-$40 a year. Every year until everything is paid back. Psychologically better: Some people have psychological problems paying back debt, and it is better for them to pay back small loans first. If you feel better having two loans instead of three, and feeling better makes you able to save money and pay back the other loans, while having three loans would make you depressed and unable to make savings - pay back the smaller loan. If you don't have that kind of problem, use the \"\"financially better\"\" method.\"", "title": "" }, { "docid": "c5bc0711405ab432376e6341472b7be2", "text": "\"I would pay off the student loans first because they are unsecured. Mortgage debt is against an appreciating asset and is therefore \"\"better\"\" than unsecured debt. I recommend you pay both off, but start with the unsecured student loans.\"", "title": "" }, { "docid": "87c67815a720af85f70f07a3783f1f6d", "text": "Paying off your student loan is an investment, and a completely risk-free one. Every payment of your loan is a purchase of debt at the interest rate of the loan. It would be extremely unusual to be able to find a CD, bond or other low-risk play at a better rate. Any investment in a risky asset such as stocks is just leveraging up your personal balance sheet, which is strictly a personal decision based on your risk appetite, but would nearly universally be regarded as a mistake by a financial advisor. (The only exception I can think of here would be taking out a home mortgage, and even that would be debatable.) Unless your loan interest rate is in the range of corporate or government bonds -- and I'm sure it isn't -- don't think twice about paying them off with any free cash you have.", "title": "" } ]	fiqa
b5c40a7263d3c573af062c8f6ee77a56	Lease vs buy car with cash?	[ { "docid": "819a29260e55e72603e797d859ed1996", "text": "If you are talking straight dollars then leasing is always a losing proposition when compared with purchasing. The financial workings of leasing are so confusing that people don’t realize that leasing invariably costs more than an equivalent loan. And even if they did, the extra cost is difficult to calculate. Still, many people can’t afford the higher payments of a typical loan, at least not without putting a substantial amount down. If payments are an issue, consider buying a lower-cost vehicle or a reliable used car. http://www.consumerreports.org/cro/2012/12/buying-vs-leasing-basics/index.htm If you are talking about convenience, lifestyle, ability to purchase a car you could not pay for outright, then you will have to evaluate that.", "title": "" }, { "docid": "a53d039df4a55a0bd546570e4d0f657b", "text": "\"A lease is a rental plain and simple. You borrow money to finance the expected depreciation over the course of the lease term. This arrangement will almost always cost more over time of your \"\"ownership.\"\" That does not mean that a lease is always a worse \"\"deal.\"\" Cars are almost always a losing proposition; save for the oddball Porsche or Ferrari that is too scarce relative to demand. You accept ownership of a car and it starts to lose value. New cars lose value faster than used cars. Typically, if you were to purchase the car, then sell it after 3 years, the total cost over those three years will work out to less total money than the equivalent 36 month lease. But, you will have to come up with a lot more money down, or a higher monthly payment, and/or sell the car after 36 months (assuming the pretty standard 36 month lease). With this in mind, some cars lease better than others because the projected depreciation is more favorable than other brands or models. Personally, I bought a slightly used car certified pre-owned with a agreeable factory warranty extension. My next car I may lease. Late model cars are getting so unbelievably expensive to maintain that more and more I feel like a long term rental has merit. Just understand that for the convenience, for the freeing up of your cash flow, for the unlikelihood of maintenance, to not bother with resale or trading the car in, a lease will cost a premium over a purchase over the same time frame.\"", "title": "" } ]	[ { "docid": "086a9ad3b409d1498b7d28307f1f69f3", "text": "If you have the money to pay cash for the car. Then 0 months will save you the most money. There are of course several caveats. The money for the car has to be in a relatively liquid form. Selling stocks which would trigger taxes may make the pay cash option non-optimal. Paying cash for the car shouldn't leave you car rich but cash poor. Taking all your savings to pay cash would not be a good idea. Note: paying cash doesn't involve taking a wheelbarrow full of bills to the dealer; You can use a a check. If cash is not an option then the longest time period balanced by the rates available is best. If the bank says x percent for 12-23 months, y percent for 24-47 months, Z percent for 48 to... It may be best to take the 47 month loan, because it keeps the middle rate for a long time. You want to lock in the lowest rate you can, for the longest period they allow. The longer period keeps the required minimum monthly payment as low as possible. The lower rate saves you on interest. Remember you generally can pay the loan off sooner by making extra or larger payments. Leasing. Never lease unless you are writing off the monthly lease payment as a business expense. If the choice is monthly lease payments or depreciation for tax purposes the lease can make the most sense. If business taxes aren't involved then leasing only means that you have a complex deal where you finance the most expensive part of the ownership period, you have to watch the mileage for several years, and you may have to pay a large amount at the end of the period for damages and excess miles. Plus many times you don't end up with the car at the end of the lease. In the United States one way to get a good deal if you have to get a loan: take the rebate from the dealer; and the loan from a bank/credit Union. The interest rate at banking institution is a better range of rates and length. Plus you get the dealer cash. Many times the dealer will only give you the 0% interest rate if you pay in 12 months and skip the rebate; where the interest paid to the bank will be less than the rebate.", "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": "464cbae1aff1457fc0fc804fb43863e4", "text": "I have coworker who reported that he leased a Nissan Leaf from 2013-2016 and was offered $4000 off the contracted purchase price at the end of the lease due to a glut of other lessees turning in for a lease on the newest model with greater range. It's not clear that this experience will be repeated by others three years from now, but there is enough uncertainty in the future electric car market that it's quite possible to have faster depreciation on a new vehicle than you might otherwise expect based on experience with conventional internal combustion powered vehicles. Leasing will remove that uncertainty. Purchasing a lease-return can also offer great value. I looked at the price for a lease return + a new battery with the extended range, and it was still significantly cheaper than buying a completely new vehicle.", "title": "" }, { "docid": "da9bc8b786e7314a869004e0ffd56ad0", "text": "\"So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a \"\"kickback\"\" or charge a \"\"fee\"\" based on the customer's credit score. So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit. Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem.\"", "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": "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": "79b11649d690b24c7378ff5f0ec8ef65", "text": "There are some who argue that you should lease an electric car. These factors are in addition to all the normal pros and cons of leasing vs. buying. The technology is still new and is advancing rapidly. In 2-3 years, the newer model may have significantly improved features, range, and efficiency, as well as lower prices. If you are the type of person to upgrade regularly to the latest and greatest, leasing can make it a smoother transition. It is hard to predict the depreciation of the vehicles. This is both because of the above factors, but also because these kinds of cars are newer and so the statistical models used to predict their future values are less refined. The models for predicting gas car prices have been honed for decades. EV Manufacturers have in the past made some mistakes in their residual value estimations. When you lease a car, you get essentially an option to buy the car at the future predicted residual value. If, at the end of the lease, the market value of the car is higher than the residual value, you can purchase the car at the predetermined price, making yourself some extra money. If the value is lower than the residual, you can return the car or renegotiate. I know a relatively large number of electric vehicle owners. Most or all of the ones who got the vehicle new leased it. The rest bought used vehicles coming off lease, which can also be a good deal.", "title": "" }, { "docid": "a5b7a01c6f647e9a59ef22f7f031ff54", "text": "If you are looking to build wealth, leasing is a bad idea. But so is buying a new car. All cars lose value once you buy them. New cars lose anywhere between 30-60% of their value in the first 4 years of ownership. Buying a good quality, used car is the way to go if you are looking to build wealth. And keeping the car for a while is also desirable. Re-leasing every three years is no way to build wealth. The American Car Payment is probably the biggest factor holding many people back from building wealth. Don't fall into the trap - buy a used car and drive it for as long as you can until the maintenance gets too pricey. Then upgrade to a better used car, etc. If you cannot buy a car outright with cash, you cannot afford it. Period.", "title": "" }, { "docid": "ba37f8fbac914f2ec53278db02793614", "text": "Dealer financing should be ignored until AFTER you have agreed on the price of the car, since otherwise they tack the costs of it back onto the car's purchase price. They aren't offering you a $2500 cash incentive, but adding a $2500 surcharge if you take their financing package -- which means you're actually paying significantly more than 0.9% for that loan! Remember that you can borrow from folks other than the dealer. If you do that, you still get the cash price, since the dealer is getting cash. Check your other options, and calculate the REAL cost of each, before making your decisions. And remember to watch out for introductory/variable rates on loans! Leasing is generally a bad deal unless you intend to sell the car within three years or so.", "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": "b90152e12b9beda4523a34625545dbca", "text": "\"Your son is in the right. But he broke the \"\"unwritten\"\" rules, which is why the car dealer is upset. Basically, cars are sold in the United States at a breakeven price. The car company makes ALL its money on the financing. If everyone bought \"\"all cash,\"\" the car companies would not be profitable. No one expected anyone, least of all your son, a \"\"young person,\"\" to pay \"\"all cash.\"\" When he did, they lost all the profit on the deal. On the other hand, they signed a contract, your son met all the FORMAL requirements, and if there was an \"\"understanding\"\" (an assumption, actually), that the car was supposed to be financed, your son was not part of it. Good for him. And if necessary, you should be prepared to back him up on court.\"", "title": "" }, { "docid": "6dc205d75952b5f81215d237971e9943", "text": "\"This question has been asked and answered before. Financially, owning a car will be more economical than leasing one in most cases. The reason for this is that leasing arrangements are designed to make a profit for the leasing company over and above the value of the car. A leasing company that does not profit off their customers will not be in business for long. This is a zero-sum game and the leasing customer is the loser. The lion's share of the customer losses are in maintenance and in the event of an accident or other damage. In both cases, leasing arrangements are designed to make a large profit for the owner. The average customer assumes they will never get into an accident and they underestimate the losses they will take on the maintenance. For example, if both oxygen sensors need to be replaced and it would have cost you $800 to replace them yourself, but the leasing company charges you $1200, then BOOM! you just lost $400. If the car is totaled, the customer will lose many thousands of dollars. Leasing contracts are designed to make money for the owner, not the customer. Another way leasing agents make money is on \"\"required maintenance\"\". Most leasing contracts require the leasor to perform \"\"required\"\" maintenance, oil changes, tire rotations, etc. Also, with newer cars manufacturers recalls are common. Those are required as well. Nearly nobody does this maintenance correctly. This gives the agent the excuse to charge the customer thousands of dollars when the vehicle is returned. Bills of $4000 to $6000 on a 3 year lease for failure to perform required maintenance are common. Its items like this that allow the leasing agent to get a profit on what looks like a \"\"good deal\"\" when the customer walked in the door 3 years previously. The advantage of leasing is that it costs less up front and it is more convenient to switch to a different car because you don't have to sell the car.\"", "title": "" }, { "docid": "64cf0d2338f6ae238a4a3a8d17dd71a9", "text": "\"Any one of your three options is viable and has its advantages and disadvantages. Personally, I would go for the used option, but I am can-do kind of person. If you don't like micro-managing a car, you may prefer leasing. A new car is sort of the middle of the road option. Leasing will be most expensive and most liability. If you have an accident, the leasing arrangements are designed to extract money from you... heavily. Even a minor accident can require you to pay for expensive repairs, usually much more expensive than if you had your own car fixed. So, not only will you pay more per month, but your accident liability will be a lot higher. With your own car, you will need to sell it (or bring it back to the UK) obviously. A used car will be the cheapest option. A non-descript used car from the local area can also make you \"\"blend in\"\" and be less like to be targeted by a criminal as an outsider. As long as you stay away from dealers and buy the car from a private person of good reputation, you have an odds-on chance of getting a decent car. Make sure you check out the person and make sure they are \"\"real\"\". Some dealers, called \"\"curbstoners\"\", try to pretend to be original owners. You can always spot such frauds because the title will be new. Make sure the same owner has had the car for at least 3-4 years and that it says that on the title. Also, try to buy from somebody who is financially well off--they have less reason to try to screw you. Students, people under 30 and working class are bad people to buy from. Married professionals over age 35 are the right kind of person to buy from.\"", "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": "9ac3b585e1aba3033687d8d3489308d3", "text": "Leasing is never a good idea. A car is a depreciating asset -- it loses money over time. Pay cash for your car and buy used ones until your net worth reaches at least $1M.", "title": "" } ]	fiqa
c5d1430836d27c09f71bb06802525117	P/E multiples for privately held companies?	[ { "docid": "41dce61a9e2d1757dfcf183f6671a9f8", "text": "You're indeed right, this cannot be answered affirmatively. I will try, without going too deep in details, to brush a shallow portrait In its simplest form, a going concern company could be valued by the present value of a growing perpetuity (Cash Flow/(Required return - growth)), assuming compounding perpetual growth. That's a massive assumption for a yet to turn a dime company. That's why comparable transactions are usually used as benchmark. In this case, your PE can be thought as the inverse of a growing perpetuity, and it's size will be determined by the difference between return and growth. So when you're pre-revenue, you're basically trying to value a moonshot with everything to prove, no matter how genius the idea. Considering the high levels of financial risks due to failure, VCs will require biblical levels of returns (50% to 90% is not unheard of). Hence why they usually leave with a good chunk of the company in seed rounds. When you've had a few sales, you got to know your customer and you've tested the markets, your direction gets clearer and your prospects improve. Risks moves down a notch and the next round of financing will be at much lower rates. Your growth rate, still high but nowhere as crazy as before, can be estimated with relatively more precision. Companies turning a recurrent level of profits are the easiest to value (all else being equal). The financial mathematics are more appropriate now, and their value will be derived by current market conditions as well as comparable transactions. With unlimited resources and perfect markets, the value of the company will be the same wether the founder is at the helm or the VCs are in the place. But considering many founders need the VCs' resources to extract the value of their company and markets are imperfect, the value of the company can change significantly depending on the decisions. Hope that helps!", "title": "" } ]	[ { "docid": "042f9a1692281b7268716120e19011d8", "text": "There is no magic bullet here. If you want professional management, because you think they know more about entry and exit points for short positions, have more time to monitor a position, etc... (but they might not) try a mutual fund or exchange traded fund that specializes in shorts. Note: a lot of these may not have done so well, your mileage may vary", "title": "" }, { "docid": "90ed32b56190138860378694d266d676", "text": "\"Finance is ALL about obscure theoretical points. This one actually isn't even that obscure, kind of like a big gaping whole that nobody addresses. So to address your \"\"minimum cash\"\" level point. That's what I'm working towards. Check this: So if you are selling your company, and all of the potential buyers are public companies, you would adjust your working capital balances in your model to match the public company market benchmark (ie: days payable outstanding, days receivable outstanding). This would be some sort of \"\"added value\"\" that a public company would bring to the mix. You should do the same for cash. You would benchmark what level of cash the comparable public companies hold (possibly as a % of revenue?), and apply that as the level of operating cash. You're counter argument would be that some firms may choose to hold on to excess levels of cash for a period of time (Apple), skewing \"\"minimum cash levels\"\" upward. That's true, but over a period of time, investors would either (1). demand the excess cash back or (2) investors would sell shares because the company is not earning a sufficient return on equity. My second point is half baked and not fully thought through but it goes along with the idea that a company will dividend out excess cash if it cannot reach the hurdle rate demanded by investors. Thank you for continuing the conversation with me, I think you're the only one that gets it.\"", "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": "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": "7ce961b6cfac8676162a167d62aa2949", "text": "Is the parent company's common stock public? If not, then there will be absolutely no pressure from everyone liquidating at the same time. If so, consider the average daily volume of transactions in the parent company's stock. Is it much greater than the volume your 10k co-workers will have to liquidate? If so, I wouldn't expect much of an impact from all liquidating at once. Any other situation, you are probably right to be a bit worried about simultaneous liquidation. If this was my case, I'd probably submit a limit sell order so as to try and pick out a high for the timing of my liquidation, and lower my limit vs fair value as it got closer to the expiration of your ability to hold the parent company stock.", "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": "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": "40e08223ac41fd50cdae1dcf1e7cebc1", "text": "The reason for such differences is that there's no source to get this information. The companies do not (and cannot) report who are their shareholders except for large shareholders and stakes of interest. These, in the case of GoPro, were identified during the IPO (you can look the filings up on EDGAR). You can get information from this or that publicly traded mutual fund about their larger holdings from their reports, but private investors don't provide even that. Institutional (public) investors buy and sell shares all the time and only report large investments. So there's no reliable way to get a snapshot picture you're looking for.", "title": "" }, { "docid": "e0654e7730a0c6596f36a97d8f2e0cc7", "text": "You actually have a few options. First, you can do a share split and then sell an equal number of shares from both you and your wife to maintain parity. Second, you can have the company issue additional shares/convert shares and then have the company sell the appropriate percentage to the third party while the rest is distributed to you and your wife. Third, you can have the company issue a separate class of stock. For example there are companies that have voting stock and non-voting stock. Depending on your goal, you could just issue non-voting stock and sell that. Best bet is to contact a lawyer who specializes in this type of work and have them recommend a course of action. One caveat that has not been mentioned is that what/how you do this will also depend on the type of corporation that you have created.", "title": "" }, { "docid": "a8121c431651f7b2b2fdc9de6f5f909e", "text": "Try to find the P/E ratio of the Company and then Multiply it with last E.P.S, this calculation gives the Fundamental Value of the share, anything higher than this Value is not acceptable and Vice versa.", "title": "" }, { "docid": "f3fc9d28d9777475580836ac0f283f3f", "text": "I already know of this method. I was creating a peer group and found 4-5 very similar companies, however one of them is a foreign public company with a subsidiary competing directly with a company I am trying to find the beta for. I guess I have to omit this company because it's strictly foreign? Also, what do I do if I can't find any public companies that are similar to the company I am trying to value?", "title": "" }, { "docid": "7fb2ffdbc44f0f39716c4966623450b3", "text": "\"First, you mentioned your brother-in-law has \"\"$100,000 in stock options (fully vested)\"\". Do you mean his exercise cost would be $100,000, i.e. what he'd need to pay to buy the shares? If so, then what might be the estimated value of the shares acquired? Options having vested doesn't necessarily mean they possess value, merely that they may be exercised. Or did you mean the estimated intrinsic value of those options (estimated value less exercise cost) is $100,000? Speaking from my own experience, I'd like to address just the first part of your question: Have you treated this as you would a serious investment in any other company? That is, have you or your brother-in-law reviewed the company's financial statements for the last few years? Other than hearing from people with a vested interest (quite literally!) to pump up the stock with talk around the office, how do you know the company is: BTW, as an option holder only, your brother-in-law's rights to financial information may be limited. Will the company share these details anyway? Or, if he exercised at least one option to become a bona-fide shareholder, I believe he'd have rights to request the financial statements – but company bylaws vary, and different jurisdictions say different things about what can be restricted. Beyond the financial statements, here are some more things to consider: The worst-case risk you'd need to accept is zero liquidity and complete loss: If there's no eventual buy-out or IPO, the shares may (effectively) be worthless. Even if there is a private market, willing buyers may quickly dry up if company fortunes decline. Contrast this to public stock markets, where there's usually an opportunity to witness deterioration, exit at a loss, and preserve some capital. Of course, with great risk may come great reward. Do your own due diligence and convince yourself through a rigorous analysis — not hopes & dreams — that the investment might be worth the risk.\"", "title": "" }, { "docid": "3ed36d63a9b925c315ab217b16467959", "text": "Have you looked at what is in that book value? Are the assets easily liquidated to get that value or could there be trouble getting the fair market value as some assets may not be as easy to sell as you may think. The Motley Fool a few weeks ago noted a book value of $10 per share. I could wonder what is behind that which could be mispriced as some things may have fallen in value that aren't in updated financials yet. Another point from that link: After suffering through the last few months of constant cries from naysayers about the company’s impending bankruptcy, shareholders of Penn West Petroleum Ltd. (TSX:PWT)(NYSE:PWE) can finally look toward the future with a little optimism. Thus, I'd be inclined to double check what is on the company books.", "title": "" }, { "docid": "e7586dc4b0b2e7053a50e9deabdc4059", "text": "I think you're looking for the public float: Public float or the unqualified term may also refer to the number of outstanding shares in the hands of public investors as opposed to company officers, directors, or controlling-interest investors. Assuming the insider held shares are not traded, these shares are the publicly traded ones. The float is calculated by subtracting restricted shares from outstanding shares. As mentioned, Treasury stock is probably the most narrow definition of restricted stock (not publicly traded), but shares held by corporate officers or majority investors are often included in the definition as well. In any case, the balance sheet is indeed a good place to start.", "title": "" }, { "docid": "178f9a83ca3b2854e8b1798af08e3cf4", "text": "\"As long as the IRS treats bitcoin as property, then whenever you use bitcoin to buy anything you are supposed to consider the capital gain or capital loss. There is no \"\"until it's converted to fiat\"\". You are paying local sales tax and capital gains, or paying local sales tax and reporting capital loss. As long as you are consistent, you can use either the total cost basis, or individual lot purchases. The same as other property like stocks (except without stock specific regulations like wash-sale rules :D ). There are a lot of perks or unintentional loopholes for speculators, with the property designation. There are a lot of disadvantages for consumers trying to use it like a currency. Someone mixing investment and spending funds across addresses is going to have complicated tax issues, but fortunately the exchanges have records of purchase times and prices, which you can compare with the addresses you control. Do note, after that IRS guideline, another federal agency designated Bitcoin as a commodity, which is a subset of \"\"property\"\" with its own more favorable but different tax guidelines.\"", "title": "" } ]	fiqa
96ea433a4f62b90fe9ee388f58234fc7	How do brokers make money from margin accounts?	[ { "docid": "f5135a272a85115fd8dc1016cd7fe317", "text": "They will make money from brokerage as usual and also from the interest they charge you for lending you the money for you to buy your shares on margin. In other words you will be paying interest on the $30,000 you borrowed from your broker. Also, as per Chris's comment, if you are shorting securities through your margin account, your broker would charge you a fee for lending you the securities to short.", "title": "" }, { "docid": "e09675eb1b11e2d356c5e98f69dfd519", "text": "\"Your broker will charge you commissions and debit interest on your \"\"overdraft\"\" of $30,000. However it is very likely that your contract with the broker also contains a rehypothecation clause which allows your broker to use your assets. Typically, with a debt of $30,000, they would probably be entitled to use $45-60,000 of your stocks. In short, that means that they would be allowed to \"\"borrow\"\" the stocks you just bought from your account and either lend them to other clients or pledge them as collateral with a bank and receive interest. In both cases they will make money with your stocks. See for example clause #14 of this typical broker's client agreement. Applied to your example: In other words they will make $60 + $450 + $1,800 = $2,310 the first year. If the stock is expensive to borrow and they manage to lend it, they will make a lot more. There are by the way a few important consequences:\"", "title": "" }, { "docid": "d41d8cd98f00b204e9800998ecf8427e", "text": "", "title": "" } ]	[ { "docid": "150b659334d280ebad2c703db5e3618f", "text": "At this point the cost of borrowing money is very low. For the sake of argument, say it is 1% per year for a large institution. I can either go out and find a client to invest 100,000$ and split profit and loss with them. Or, I could borrow 50,000$, pay 500$/year in interest, and get the same return and loss, while moving the market half as much (which would let me double my position!) In both cases the company is responsible for covering all fixed costs, like paying for traders, trades, office space, branding, management, regulatory compliance, etc. For your system to work, the cost to gather clients and interact with them has to be significantly less than 1% of the capital they provide you per year. At the 50% level, that might actually be worth it for the company in question. Except at the 50% level you'd have really horrible returns even when the market went up. So suppose a more reasonable level is the client keeps 75% of the returns (which compares to existing companies which offer larger investors an 80% cut on profits, but no coverage on losses). Now the cost to gather and interact with clients has to be lower than 2500$ per million dollars provided to beat out a simple loan arrangement. A single sales employee with 100% overhead (office, all marketing, support, benefits) earning 40,000$/year has to bring in 32 million dollar-years worth of investment every year to break even. Cash is cheap. Investment houses sell cash management, and charge for it. They don't sell shared investment risk (at least not to retail investors), because it would take a lot of cash for it to be worth their bother. More explicitly, for this to be viable, they'd basically have to constantly arrange large hedges against the market going down to cover any losses. That is the kind of thing that some margin loans may require. That would all by itself lower their profits significantly, and they would be exposed to counter-party risk on top of that. It is much harder to come up with a pile of cash when the markets go down significantly. If you are large enough to be worthwhile, finding a safe counterparty may be nearly impossible.", "title": "" }, { "docid": "ccda9ff7d29469ea162262ae51d604a9", "text": "A CFD broker will let you open a trade on margin as long as your account balance is more than the margin required on all your open trades. If the required margin increases within a certain percentage of your account balance, you will get a margin call. If you then don't deposit more funds or close losing trades out, the broker will close all your trades. Note: Your account balance is the remaining funds you have left to open new trades with. I always use stop loss orders with all my open trades, and because of this my broker reduces the amount of margin required on each trade. This allows me to have more open trades at the one time without increasing my funds. Effects of a Losing Trade on Margin Say I have an account balance of $2,000 and open a long trade in a share CFD of 1,000 CFDs with a share price of $10 and margin of 10%. The face value of the shares would be $10,000, but my initial margin would be $1,000 (10% of $10,000). If I don't place a stop loss and the price falls to $9, I would have lost $1,000 and my remaining margin would now be $900 (10% of $9,000). So I would have $100 balance remaining in my account. I would probably receive a margin call to deposit more funds in or close out my trade. If I don't respond the broker will close out my position before my balance gets to $0. If instead I placed a stop loss at say $9.50, my initial margin might be reduced to $500. As the price drops to $9.60 I would have lost $400 and my remaining margin would now only be $100, with my account balance at $1,500. When the price drops to $9.50 I will get stopped out, my trade will be closed and I would have lost $500, with my account balance still at $1,500. Effects of a Winning Trade on Margin Say I have the same account balance as before and open the same trade but this time the price moves up. If I don't place a stop loss and the price goes up to $11, I would have made a $1,000 profit and my remaining margin will now be $1,100 (10% of $11,000). So my account balance would now be $2,000 + $1,000 - $1,100 = $1,900. If I had placed a stop loss at say $9.50 again and the price moves up to $10.50, I would have made a profit of $500 and my margin would now be $1,000. My account balance would be $2,000 + $500 - $1,000 = $1,500. However, if after the price went up to $10.50 I also moved my stop loss up to $10, then I would have $500 profit and only $500 margin. So my balance in this case would be $2,000 + $500 - $500 = $2,000. So by using stop losses as part of your risk management you can reduce the margin used from your balance which will allow you to open more trades without any extra funds deposited into your account.", "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": "8e59a5631dd56e3ef6ee6e5ed64fb044", "text": "There are several ways that the issuers profit from CFDs. If the broker has trades on both sides (buy and sell) they can net the volumes off against each other and profit off the spread whilst using the posted margins to cover p&l from both sides. Because settlement for most securities is not on the same day that the order is placed they can also buy the security with no intention of taking delivery and simply sell it off at the end of day to pass delivery on to someone else. Here again they profit from the spread and that their volumes give them really low commissions so their costs are much lower than the value of the spread. If they have to do this rather than netting the position out the spreads will be wider. Sometimes that may be forced to buy the security outright but that is rare and the spreads will be even wider so that they can make a decent profit.", "title": "" }, { "docid": "1e9cebde4465fbb20cb434e8b71958d4", "text": "First, a margin account is required to trade options. If you buy a put, you have the right to deliver 100 shares at a fixed price, 50 can be yours, 50, you'll buy at the market. If you sell a put, you are obligated to buy the shares if put to you. All options are for 100 shares, I am unaware of any partial contract for fewer shares. Not sure what you mean by leveraging the position, can you spell it out more clearly?", "title": "" }, { "docid": "37af8230459f9fd082a3253c53f9a72d", "text": "To calculate any daily return, all one need do is divide the final value by the initial value, subtract 1, and multiply by 100%: This can be applied to either the futures alone, the investments used as margin collateral alone, or all together. Margin collateral as a factor of a derivative's return Collateral can take many forms. Many suggest that cost and revenue for a derivative trade should also take into account margin requirements. This can become problematic. If a futures position moved against the trader, yet the margin was secured with equities at the maximum, and the equities moved with the trader, the futures trade could be interpreted as less of a loss because the collateral, which is probably totally disassociated with the futures position, increased in value. Then again, if a futures position moved with the trader, yet the margin collateral moved against the trader then taken together, the futures trade would look less profitable. Furthermore, most likely the result of a futures position and its collateral would never produce the same result, so extrapolation would become ever more difficult. For ease of analysis, a position's cost and revenue should be segmented from another unless if those positions are meant to hedge each other. Margin is not a cost, but it is a liability, so margin will affect the balance sheet of a futures trade but not its income statement, again unless if the collateral is also used to hedge such futures position.", "title": "" }, { "docid": "f1001e5e487558fbab42ce5422ceda4a", "text": "Assuming a USA taxable account: Withdrawing funds from a brokerage account has nothing to do with taxes. Taxes are owed on the profit when you sell a stock, no matter what you do with the funds. Taxes are owed on any dividends the stock produces, no matter what you do with the dividend. The brokerage sends you a form 1099 each year that shows the amounts of dividends and profits. You have to figure out the taxes from that.", "title": "" }, { "docid": "eeb25ea7287379faa5d9910b4341b927", "text": "The Margin Account holds the funds that are MUST for any margin trades. Any funds excess of the MUST for margin trades are kept in the SMA account. These funds can be used for further Margin trades in new securities [funds get transfered into the Margin Account]. They cannot be used to met the Shortfall due to margin calls on existing trades. New funds need to be arranged. More at http://en.wikipedia.org/wiki/Special_memorandum_account", "title": "" }, { "docid": "dc7555754acdc44099d4e3b5c47bde52", "text": "\"All discount brokers offer a commission structure that is based on the average kind of order that their target audience will make. Different brokers advertise to different target audiences. They could all have a lot lower commissions than they do. The maximum commission price for the order ticket is set at $99 by the industry securities regulators. When discount brokers came along and started offering $2 - $9.99 trades, it was simply because these new companies could be competitive in a place where incumbents were overcharging. The same exists with Robinhood. The market landscape and costs have changed over the last decade with regulation NMS, and other brokerage firms never needed to update drastically because they could continue making a lot on commissions with nobody questioning it. The conclusion being that other brokers can also charge a lot less, despite their other overhead costs. Robinhood, like other brokerage firms (and anyone else trading directly with the exchanges), are paid by the exchanges for adding liquidity. Not only are many trades placed with no commission for the broker, they actually earn money for placing the trade. If Robinhood was doing you any favors, they would be paying you. But nobody questions free commissions so they don't. Robinhood, like other brokerage firms, sells your trading data to the highest bidder. This is called \"\"payment for order flow\"\", these subscribers see your order on the internet in route to the exhange, and before your order gets to the exchange, the subscriber sends a different order to the exchange so they either get filled before you do (analogous to front running, but different enough to not be illegal) or they alter the price of the thing you wanted to buy or sell so that you have to get a worse price. These subscribers have faster computers and faster internet access than other market participants, so are able to do this so quickly. They are also burning a lot of venture capital like all startups. You shouldn't place too much faith in the idea they are making [enough] money. They also have plans to earn interest off of balances in a variety of ways and offer more options at a price (like margin accounts).\"", "title": "" }, { "docid": "f4b63602a7e10e49bc26cd8007252f9f", "text": "\"Margin trades let you post a margin of a certain proportion of the value of the trade as collateral against the price of a trade and pay off the difference between the current price and the price that you bought at. Any losses incurred are taken from the margin so the margin has to be maintained as prices change. In practice this means that when the price moves significantly from the buying price a \"\"margin call\"\" is triggered and the buyer has to increase their posted margin. The vast majority of the foreign exchange trades done every day are margin trades as (effectively) are all spread bets. Margins get reset overnight whether or not a call has occurred.\"", "title": "" }, { "docid": "f48f2f7e7684e11a35af00f9f7ed2509", "text": "\"Lending of shares happens in the background. Those who have lent them out are not aware that they have been lent out, nor when they are returned. The borrowers have to pay any dividends to the lenders and in the end the borrowers get their stock back. If you read the fine print on the account agreement for a margin account, you will see that you have given the brokerage the permission to silently loan your stocks out. Since the lending has no financial impact on your portfolio, there's no particular reason to know and no particular protection required. Actually, brokers typically don't bother going through the work of finding an actual stock to borrow. As long as lots of their customers have stocks to lend and not that many people have sold short, they just assume there is no problem and keep track of how many are long and short without designating which stocks are borrowed from whom. When a stock becomes hard to borrow because of liquidity issues or because many people are shorting it, the brokerage will actually start locating individual shares to borrow, which is a more time-consuming and costly procedure. Usually this involves the short seller actually talking to the broker on the phone rather than just clicking \"\"sell.\"\"\"", "title": "" }, { "docid": "ef05b1d48b952443d224558d3703b678", "text": "If you enter a futures contract, it costs nothing. So every time prices move against you, there is a margin call and you must put up some new money. Inverse ETF's use a variety of similar strategies to get their returns. Many of these strategies may indeed require a margin call to the ETF issuer if prices move against you. But remember the ETF did not cost nothing. Investors contributed money in order to purchase each share of the ETF. Therefore the ETF issuer has a big pot of money available for use as margin. That's why the margin call never comes through to you. In a sense, you posted a ton of margin up front, so you won't have to make any additional margin contributions. The money that will be used for margin calls is being kept in treasuries and money market securities by the ETF issuer until it's needed. If prices move against you badly enough that it looks like the ETF is at risk to not be able to post margin, the ETF would liquidate and you'd get whatever pittance was left after they exit all those positions.", "title": "" }, { "docid": "ec7d2ef1dff37af96aaffcddc92c658b", "text": "They make money off you by increasing the spread you buy and sell your stocks through them. So for example, if the normal spread for a stock was $10.00 for a buy and $10.02 for a sell, they might have a spread of $9.98 for the buy and $10.02 for the sell. So for an order of 1000 shares (approx. $10000) they would make $0.02 per share which would equal $20.00.", "title": "" }, { "docid": "a2d9898b05ac15bce7d63602f87d62aa", "text": "What I did not understand when I first called is that margin able account means the ability to borrow margin, but not the necessity of borrowing. Like I was saying, it is something I am going to do a lot of due diligence on before I plunge in. I have a general vague idea of futures, and thus why I was asking for info on the matter.", "title": "" }, { "docid": "de1c3721708671a47ab4ef8409f51c16", "text": "If the underlying is currently moving as aggressively as stated, the broker would immediately forcibly close positions to maintain margin. What securities are in fact closed depends upon the internal algorithms. If the equity in the account remains negative after closing all positions if necessary, the owner of the account shall owe the broker the balance. The broker will close the account and commence collections if the owner of the account does not pay the balance quickly. Sometimes, brokers will impose higher margin requirements than mandated to prevent the above eventuality. Brokers frequently close positions that violate internal or external margin requirements as soon as they are breached.", "title": "" } ]	fiqa
31874f7831070a50b8e733cd6fdbeffb	Selling a car with a lien	[ { "docid": "893f4647c49ce9b1a99d36fda912461e", "text": "You could have the buyer go to the bank with you so that he can get evidence that the loan will be paid in full and that the lien will be lifted. The bank won't sign over the title (and lift the lien) until the loan is paid back in full. DMV.org has a pretty good section about this. (Note: not affiliated with the actual DMV) Selling to a Private Party Though more effort will be required on your part, selling a car with a lien privately could net you a higher profit. Here are a few things you'll need to consider to make the process easier: Include the details of the lien in your listing. You'll list an advertisement for your car just as you would any other vehicle, with the addition of the lien information that buyers will need so as to avoid confusion. Sell in the location of the lienholder, if possible. If the bank or financial institution holding the lien is located in the area you're trying to sell, this will make the transaction much easier. Once you make an agreement with the buyer, you can go directly to the lender to pay off the existing lien. Ownership can then be transferred in person from the financial institution to the buyer. Consider an escrow service. If the financial institution isn't in your area, an escrow service can help to ensure a secure transaction. An escrow service will assume responsibility for receiving payments from the buyer and will hold the title until the purchase is complete. Advantages of an escrow service include: Payoff services, which will do most of the work with the financing institution for you. Title transfer services, which can help to ensure a safe and legitimate transaction and provide the necessary paperwork once the sale is complete.", "title": "" } ]	[ { "docid": "4df213786d0460d57a29a7a1b27d1624", "text": "The other person has to decide that they want to be wholly responsible for the loan, and they have to be able to qualify for the loan. They are in essence purchasing the car from you with the sale price being the remaining balance of the loan. You will then use the processed from the new loan to pay the old loan off completely. They will then take the bill of sale to the state DMV/MVA to register the car in their name. You should have them start with their bank for a new car loan.", "title": "" }, { "docid": "1cee712904c22253683819c081aae7fc", "text": "I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot.", "title": "" }, { "docid": "61c84c0c060ff124671df330fe85ec54", "text": "I'd not do business under these terms. A bill of sale needs a signature, right? Your signature is your word, and your word is your bond. I wouldn't participate in such a fraud, nor would I accept this sum of cash, who knows its origins?", "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": "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": "64fb7a323214f50afbc01fecc4753d61", "text": "Your first step is to talk to the current lender and ask about refinancing in the other person's name. The lender is free to say no, and if they think the other person is unlikely to pay it back, they won't refinance. If you're in this situation because the other person didn't qualify for a loan in the first place, the lender probably won't change their mind, but it's still worth asking. From the lender's point of view, you'll be selling the other person the car. If they qualify for a loan, it's as simple as getting the loan from a bank, then doing whatever is required by your state to sell a car between either private parties or between relatives (depending on who the other person is). The bank might help you with this, or your state's DMV website. Here are a few options that don't involve changing who is on the loan: Taking out a loan for another person is always a big risk. Banks have entire departments devoted to determining who is a good credit risk, and who isn't, so if a person can't get a loan from a bank, it's usually for a good reason. One good thing about your situation: you actually bought the car, and are the listed owner. Had you co-signed on a loan in the other person's name, you'd owe the money, but wouldn't even have the car's value to fall back on when they stopped paying.", "title": "" }, { "docid": "f8a3b86208adcc243e3092e47447862d", "text": "It seems like there are a few different things going on here because there are multiple parties involved with different interests. The car loan almost surely has the car itself as collateral, so, if you stop paying, the bank can claim the car to cover their costs. Since your car is now totaled, however, that collateral is essentially gone and your loan is probably effectively dead already. The bank isn't going let you keep the money against a totaled car. I suspect this is what the adjuster meant when he said you cannot keep the car because of the loan. The insurance company sounds like they're going to pay the claim, but once they pay on a totaled car, they own it. They have some plan for how they recover partial costs from the wreck. That may or may not allow you (or anyone else) to buy it from them. For example, they might have some bulk sale deal with a salvage company that doesn't allow them to sell back to you, they may have liability issues with selling a wrecked car, etc. Whatever is going on here should be separate from your loan and related to the business model of your insurance company. If you do have an option to buy the car back, it will almost surely be viewed as a new purchase by the insurances company and your lender, as if you bought a different car in similar condition.", "title": "" }, { "docid": "f3dd78e6bce8c60aef62179c00fa8a76", "text": "I'm a little confused by your question to be honest. It sounds like you haven't sold it to him, but you have a verbal arrangement for him to use the car like it's his. I'm going to assume that's the case for this answer. This is incredibly risky. If you've got the car on credit and he stops paying, or you guys break up... you will be liable for continuing to make payments! If the loan is in your name, it's your responsibility. Edited. The credit is yours. If he decides to stop paying, you're a little stuck.", "title": "" }, { "docid": "b51589201c2d2e7f27a9572b11c42113", "text": "The Nebraska DMV web site has a neat page about this. It seems to be fairly simple, and not costly to record a lien and later release it. Just go there with the title and the sales agreement that details the terms, and pay the $7 fee.", "title": "" }, { "docid": "9ad9769a769d69359409fab55b1fd611", "text": "Check the employee-friends-and-family sales contract, which your friend should be able to get quite easily. There is almost always a minimum holding period before resale clause, specifically to prevent this kind of scenario. Without that clause, the dealers tend to riot... Also, remember that a car loses a huge percentage of its value the moment it leaves the lot. Odds are that you'd be doing well to find someone willing to buy it from you at the discounted price. If you don't want this car, ask your friend not to buy it and get one you do want. Seriously.", "title": "" }, { "docid": "d2230d1d67aebbf0cbe938d31de014c5", "text": "\"Imagine that, a car dealership lied to someone trusting. Who would have thought. A big question is how well do you get along with your \"\"ex\"\"? Can you be in the same room without fighting? Can you agree on things that are mutually beneficial? The car will have to be paid off, and taken out of his name. The mechanics on how to do this is a bit tricky and you may want to see a lawyer about it. Having you being the sole owner of the car benefits him because he is no longer a cosigner on a loan. This will help him get additional loans if he chooses, or cosign on his next gf's car. And of course this benefits you as you \"\"own\"\" the car instead of both of you. You will probably have to refinance the car in your name only. Do you have sufficient credit? Once this happens can you pay off the car in like a year or so? If you search this site a similar questions is asked about once per month. Car loans are pretty terrible, in the future you should avoid them. Cosigning is even worse and you should never again participate in such a thing. Another option is to just sell the car and start over with your own car hopefully paid for in cash.\"", "title": "" }, { "docid": "d4acc1a9edb2c7a9f30e843af3b6bbcf", "text": "I wouldn't say this is a lie. Person 2 just made themselves the offer of 38k. If it sells then they were outbid. If it doesn't sell then they're stuck with the asset as if they had bid themselves. They're paying themselves, or they're representing a party that is paying themselves. That balances out to a $0 profit/loss + ownership of the asset. I think something like this would be unethical: Person 1: I'll buy your car for 30k Person 2: Okay Person 3:That's my car!", "title": "" }, { "docid": "0b039e3016ed2148944b6cd912d5ae2d", "text": "Your best bet would be to add your name to the title through the bank or have her sell it to you for the amount she owes then you get a loan for that amount like they said before. If you guys split up at this point she'll legally get to keep the car you've been paying for. You could apply for a new loan and have her cosign but it'll make your monthly payments higher. Have her sell you the car for the amount owed them you get a loan for that amount. Since you are together and you've been paying for it you won't lose any money and your monthly payments won't be expensive if you don't owe that much on the car. Pretty much having her sell it to you would be the smartest idea cause keeping Her name on the title will allow Her to legally drive away in your car if you split and you don't want that lol", "title": "" }, { "docid": "7ff50eb0bb700ed695317739654c1ac4", "text": "In some states there are significantly higher automobile insurance costs and higher coverage requirements for vehicles that have a lien on them. I suspect this is not your scenario, or you probably would not be considering holding the loan open. But it is something to consider. If you live in a state where insurance coverage and costs depend on a clear title, I would certainly recommend closing the loan as soon as possible.", "title": "" }, { "docid": "55cb5b9ae06e3904e268112a5940bf42", "text": "\"My take on this is that with any short-selling contract you are engaging in, at a specified time in the future you will need to transfer ownership of the item(s) you sold to the buyer. Whether you own the item(s) or in your case you will buy your friend's used car in the meantime (or dig enough gold out of the ground - in the case of hedging a commodity exposure) is a matter of \"\"trust\"\". Hence there is normally some form of margin or credit-line involved to cover for you failing to deliver on expiry.\"", "title": "" } ]	fiqa
cd007db48c97f0c6a760cf69d2ceaefc	Is there an online service that provides public company information through a public API?	[ { "docid": "06b31c6a2e973cc2679cd67547f3934c", "text": "I don't know of any free API's for these data, but I'll provide what information I can. Compiling all of this information from the EDGAR system and exposing an interface to it requires a fair amount of work and maintenance, so it's usually market data companies that have the motivation and resources to provide such interfaces. I know of a few options that may or may not be close to what you're looking for. The SEC provides FTP access to the EDGAR system. You could download and parse the text files they provide. Yahoo Finance provides summary files of financial statements (e.g., GOOG) as well as links to the full statements in the EDGAR system. Once again, parsing may be your only option for these data. Xignite, a proprietary market data provider, provides a financial statement API. If you need these data for a commercial application, you could contact them and work something out. (Frankly, if you need these data for a commercial application, you're probably better off paying for the data) The Center for Research into Security Prices provides data from financial statements. I believe it's also exposed through several of their API's. As with most financial data, CRSP is sort of a gold standard, although I haven't personally used their API to fetch data from financial statements, so I can't speak for it specifically. This answer on StackOverflow mentions the quantmod R package and mergent. I can't vouch for either of those options personally. Unfortunately, you'll probably have to do some parsing unless you can find a paid data provider that's already compiled this information in a machine-readable format.", "title": "" } ]	[ { "docid": "6db30f454c040ad0bfefaf7151447a71", "text": "Good day! Did a little research by using oldest public company (Dutch East India Company, VOC, traded in Amsterdam Stock Exchange) as search criteria and found this lovely graph from http://www.businessinsider.com/rise-and-fall-of-united-east-india-2013-11?IR=T : Why it is relevant? Below the image I found the source of data - Global Financial Data. I guess the answer to your question would be to go there: https://www.globalfinancialdata.com/index.html Hope this helps and good luck in your search!", "title": "" }, { "docid": "14db1fac0614f6591f771f0bf4e8793d", "text": "\"Here are some approaches you may value: Wolfram Alpha This is a search engine with a difference. It literally is connected to thousands of searchable databases, including financial databases. http://www.wolframalpha.com/input/?i=list+of+public+companies+ Just keep clicking the \"\"more\"\" button until you have them all.You can also get great company specific information there: http://www.wolframalpha.com/input/?i=NYSE%3ADIS&lk=1&a=ClashPrefs_*Financial.NYSE%3ADIS- Just keep clicking the \"\"more\"\" button until you have them all.Then the company it'self will have great information for investors too: [http://thewaltdisneycompany.com/investors][3] (Just keep clicking the \"\"more\"\" button until you have them all.) Regards, Stephen\"", "title": "" }, { "docid": "5fd2d162f642ff8472e70dd04df379bd", "text": "I don't think any open source trading project is going to offer trial or demo accounts. In fact, I'm not clear on what you mean by this. Are you looking for some example data sets so you can see how your algorithm would perform historically? If you contact whatever specific brokers that you'd like to interface with, they can provide things like connection tests, etc., but no one is going to let you do live trades on a trial or demo basis. For more information about setting this sort of thing up at home, here's a good link: < http://www.stat.cmu.edu/~abrock/algotrading/index.html >. It's not Python specific, but should give you a good idea of what to do.", "title": "" }, { "docid": "16b3af99339f2f92b430b82684535adb", "text": "\"Such data is typically only available from paid sources due to the amount of research involved in determining the identity of delisted securities, surviving entities in merger scenarios, company name changes, symbol changes, listing venue changes, research of all capital events such as splits, and to ensure that the data coverage is complete. Many stocks that are delisted from a major exchange due to financial difficulties are still publicly tradeable companies with their continuing to trade as \"\"OTC\"\" shares. Some large companies even have periods where they traded for a period of their history as OTC. This happened to NYSE:NAV (Navistar) from Feb 2007 to July 2008, where they were delisted due to accounting statement inaccuracies and auditor difficulties. In the case of Macromedia, it was listed on NASDAQ 13 Dec 1993 and had its final day of trading on 2 Dec 2005. It had one stock split (2:1) with ex-date of 16 Oct 1995 and no dividends were ever paid. Other companies are harder to find. For example, the bankrupt General Motors (was NYSE:GM) became Motoros Liquidation Corp (OTC:MTLQQ) and traded that way for almost 21 months before finally delisting. In mergers, there are in two (or more) entities - one surviving entity and one (or more) delisted entity. In demergers/spinoffs there are two (or more) entities - one that continues the capital structure of the original company and the other newly formed spun-off entity. Just using the names of the companies is no indication of its history. For example, due to monopoly considerations, AT&T were forced to spinoff multiple companies in 1984 and effectively became 75% smaller. One of the companies they spunoff was Southwestern Bell Corporation, which became SBC Communications in 1995. In 2005 SBC took over its former parent company and immediately changed its name to AT&T. So now we have two AT&Ts - one that was delisted in 2005 and another that exists to this day. Disclosure: I am a co-owner of Norgate Data (Premium Data), a data vendor in this area.\"", "title": "" }, { "docid": "0f8ff70696e06a1a1df44938f4de14eb", "text": "If you have access, factset and bloomberg have this. However, these aren't standardized due to non-existent reporting regulations, therefore each company may choose to categorize regions differently. This makes it difficult to work with a large universe, and you'll probably end up doing a large portion manually anyways.", "title": "" }, { "docid": "3e1635a637bbb1a5c4363476bdfa51e1", "text": "\"For US equities, Edgar Online is where companies post their government filings to the SEC. On Google Finance, you would look at the \"\"SEC filings\"\" link on the page, and then find their 10K and 10Q documents, where that information is listed and already calculated. Many companies also have these same documents posted on their Investor Relations web pages.\"", "title": "" }, { "docid": "9f5a172bfd2cf8beccadbe49b2bfc359", "text": "You can access financial statements contained within 10K and 10Q filings using Last10K.com's mobile app: Last10K.com/mobile Disclosure: I work for Last10K.com", "title": "" }, { "docid": "dc2b1071dc0a591bb00427ba3c3f5688", "text": "If it is Texas company, you can try doing a taxable entity search on the Texas Comptroller website.", "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": "4aed3075c497077d08f6a1db8c7a9b20", "text": "\"Edgar Online has this information for companies under SEC regulations and they are reported in \"\"Form 4\"\" so that should help guide your search\"", "title": "" }, { "docid": "ea53f26fcd0dbb82c5c79e8ebe2c3638", "text": "I think Infochimps has what you are looking for: NYSE and NASDAQ.", "title": "" }, { "docid": "99386fa9b260421fb0738fe172b98ebb", "text": "As another answer started, this information comes straight from an exchange and generally costs a fortune . . . However things change: IEX, a new exchange, recently opened and they are offering real time bid/ask data for free. Here's the API description: https://www.iextrading.com/developer/ This data should be good for active securities, but for securities less actively traded the numbers might be stale.", "title": "" }, { "docid": "0498d551c7e0a4ad4de52bfab30b7d3e", "text": "How can I get quarterly information about private companies? Ask the owner(s). Unelss you have a relationship and they're interested in helping you, they will likely tell you no as there's no compelling reason for them to do so. It's a huge benefit of not taking a company public.", "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": "" }, { "docid": "53552812408e5317cdfaa66b3d22b403", "text": "Credit cards have two revenue streams: So yes, the are making money from your daily use of the card.", "title": "" } ]	fiqa
6037d6167cd96ab0203742f18f67c55e	At what point should I go into credit card debt?	[ { "docid": "d7039264aba6afa280d4041ac72743ad", "text": "Financially, it simply doesn't make sense to go into debt here. It may be that living on credit cards for a while gives you a chance to recover psychologically, but financially, it doesn't make sense. But, let's consider the larger picture here. You are unmotivated and directionless, and may be suffering from depression. That sucks; very many of us have been there. I'd write in great detail, except this site is about finance, so let's limit the scope a little. You've had therapy. It hasn't produced meaningful change. Stop with that therapy; it's not cost-effective. Financially speaking, your goal should be to get back on your feet. You should only be willing to take on credit card debt if it is very, very directly helping you accomplish this. Maybe that means a different therapist. Maybe that means paying for medication, which can often be breathtakingly effective. Heck, maybe that's a suit, something you put on each morning for a couple of hours to focus on getting a job. Maybe that means some other approach. But you should only be willing to take on debt that directly helps you get back on your feet. Should you be willing to continue as you are now, taking on credit card debt for your living expenses? No, definitely not. Credit cards charge obscene amounts of interest, and the evidence is that your current approach is not working. Going into debt in this case makes as much sense as it did for me to continue working for an employer who wasn't paying me. That is, none at all (financially). All that said, I strongly encourage you to get whatever help will work for you. Your finances are important, but they aren't everything.", "title": "" }, { "docid": "1f147418058507892588f9c4350ca402", "text": "\"Credit cards are a reasonable if relatively expensive tool to gain liquidity. If you have $50k in liquid cash, you don't have a liquidity problem for credit to help you solve. You have 100 months of expenses in cash. I suppose you could see a balance as a motivational tool, but it's all stick and no carrot. Take the next part half seriously in the spirit of \"\"what if\"\" talking therapy: If you feel you need to be motivated to get back to work by the true risk of running out of cash, and take such advice from strangers on the internet, the traditional midlife crisis purchase is a sports car. At least have some fun in a (depreciating but resellable) asset instead of paying a financier's bonus in evaporated interest! If there is a luxury car tariff in your country, you may even be able to exploit a personal exemption if you drove in from the U.S. I suppose this advice could possibly get you booted from the family house as it'll probably come across as a seriously \"\"ugly American\"\" move though...\"", "title": "" }, { "docid": "cec9d5214aaf21e98c6b7660bcb7af58", "text": "You're situation is actually pretty solid except for the job part. I definitely understand the existential meltdown in your 30s. Luckily you're in web design and have an in-demand job. Maybe go to a code school/design immersive to add some new skills and reinvigorate yourself. If mental health needs to be addressed above all, then definitely make that a priority. Avoid credit card debt like the plague. If you think you're stressed now, just wait.", "title": "" }, { "docid": "066a9793f7c1955c077f15284aa3e7d1", "text": "Borrowing money to pay living expenses will not last long. Also, banks and credit card agencies are very expert at detecting people who try to live off of debt (as you might expect) and they will cut you off completely as soon as they figure out what you are doing. As a general rule, if you go six months without paying a credit card or bank loan, you will be totally cut off from all sources of borrowing for at least 10 years and all your debt will be sold to collection agencies that will then start harassing you. Some collectors will sue you in a court of law and try to seize any assets you have, like a car. It is critical you find a source of income immediately.", "title": "" } ]	[ { "docid": "4553349fecda42e7d3fb6c6f864dbef3", "text": "\"When I look at debt I try to think of myself as a corporation. In life, you have a series of projects that you can undertake which may yield a positive net present value (for simplicity, let's define positive net present value as a project that yields more benefit than its cost). Let's say that one of the projects that you have is to build a factory to make clothing. The factory will cost 1 million dollars and will generate revenue of 1.5 million dollars over the next year, afterwhich it wears out. Although you have the knowledge to build this wonderful factory, you don't have a million bucks laying around, so instead, you go borrow it from the bank. The bank charges you 10% interest on the loan, which means that at the end of the year, the project has yielded a return of 400k. This is an extremely simplified example of what you call \"\"good\"\" debt. It is good if you are taking the debt and purchasing something with a positive value. In reality, this should be how people should approach all purchases, even if they are with cash. Everything that you buy is an investment in yourself - even entertainment and luxury items all could be seen as an investment in your happiness and relaxation. If more people approached their finances in this way, people would have much more money to spend, William\"", "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": "88138fd784fcf787ae1df34c7dc8d23d", "text": "Mathwise, I absolutely agree with the other answers. No contest, you should keep getting the match. But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit. If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once. Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense. (This is essentially what Dave Ramsey teaches, BTW.)", "title": "" }, { "docid": "db1d25136b1a5627b3cca03271cc50d5", "text": "\"100% debt free is an objective. Being there is good, but as long as you have a plan to get there, are sticking to it and it's moving you towards it at a reasonable rate (e.g. \"\"I will be debt free by the end of 2011.\"\"), you should be in good shape. It's when you don't ever expect to be debt free that you have a problem. Going into debt is one question and a very situation dependent one. Getting back out is another and a very easy one: pay off all debts as a fast as you reasonably can, starting with the highest interest ones. OTOH this doesn't imply that you should forgo every optional expense (including things like savings and entertainment) to pay off debts, that would be unreasonable, but just that paying down debts should always be considered when thinking about what to do with money.\"", "title": "" }, { "docid": "a5a1055554174a3a49e1319ac76ef8e6", "text": "My opinion is to hold off. I don't see housing market rising anytime soon, possibly even going lower, so you don't have to worry about getting in before it rises. Pay off the credit card debt, maybe even earlier if possible, then that flexibility will be there, the divorce proceedings may have an end in sight, and therefore you'll know more about any outcomes from that. The economy is still shaky, the flexibility of renting may come in real handy.", "title": "" }, { "docid": "7005cfd9b4897d745e7d713225a96596", "text": "\"First, pay off the highest interest first. If you have 80%, pay it first. Paying off a card/loan with a lower rate, but a lower payment or a lower balance can help your mental capacity by having fewer things to pay. But, this should be a decision where things are similar, such as 20-25%, not 20-80%. What about any actual loans? Any loans with a fixed payment and a fixed amount? If you must continue to use CC while paying them off, use the one with the lowest interest rate. Call all of your debtors and ask for reduction in interest rate. This is not the option to take first... This is a strategic possibility and will cause credit score issues... If you are considering bankruptcy or not paying back some, then you have even more negotiation power. Consider calling them all and telling them that you only have a little bit of money and would like to negotiate a settlement with them. \"\"I have only a limited amount of money, and lots of debt. I will pay back whomever gives me the best deal.\"\" See what they say. They may not negotiate until you stop paying them for a few months... It is not uncommon to get them to reduce interest (even to 0%) and/or take a reduction in the amount due - up to 25 cents on the dollar. To do this, you might need to pay the amount all at once, so look into loans from sources like retirement, home equity, life insurance, family... Also, cut out all expenses. Cut them hard; cut until it hurts. Cut out the cell phone (get a pre-paid plan and/or budget $10-20/month), cut out all things like alcohol, tobacco, firearms, lottery, tattoos, cable tv, steak, eating out. Some people would suggest that you consider pets and finding them a new home. No games, no trips, no movies, no new clothes... Cut out soft drinks, candy, and junk food. Take precautions to stay healthy - don't wear shoes in the house, brush your teeth, take a multi vitamin, get exercise, eat healthy (this is not expensive, organic stuff, just regular groceries). Consider other ways to save, like moving in with family or friends. Having family or friends live with you and pay rent. Analyze costs like daycare vs. job income. Apply for assistance - there are lots of levels, and some don't rely on others, such as daycare. Consider making more money - new job, 2nd job, overtime, new career. Consider commute - walk, bike, take the bus. Work 4/10's. Telework. Make a list of every expense and prioritize them. Only keep things which are really necessary. Good Luck.\"", "title": "" }, { "docid": "6a9dd6bae4dd9b0df552ce4ddd556727", "text": "You need to pay off the entire balance of 7450 as soon as possible. This should be your primary financial goal at this point above anything else. A basic structure that you can follow is this: Is the £1500 balance with the 39.9% interest rate the obvious starting point here? Yes, that is fine. But all the cards and overdraft debts need to be treated with the same urgency! What are the prospects for improving my credit score in say the next 6-12 months enough to get a 0% balance transfer or loan for consolidation? This should not be a primary concern of yours if you want to move on with your financial life. Debt consolidation will not help you achieve the goals you have described (home ownership, financial stability). If you follow the advice here, by the time you get to the point of being eligible, you may not see enough savings in interest to make it worth the hassle. Focus on the hard stuff and pay off the balances. Is that realistic, or am I looking at a longer term struggle? You are looking at a significant struggle. If it was easy you would not be asking this question! The length of time will be determined by your choices: how aggressively you will cut your lifestyle, take on extra jobs, and place additional payments on your debt. By being that extreme, you will actually start to see progress, which will be encouraging. If you go in half-committed, your progress will show as much and it will be demotivating. Much of your success will hinge on your mental and emotional toughness to push through the hard work of delaying pleasure and paying off these balances. That is just my personal experience, so you can take it or leave it. :) The credit score will take care of itself if you follow this method, so don't worry about it. Good Luck!", "title": "" }, { "docid": "1dcb51eea28cb87232abb8c4bf7876e2", "text": "\"My advice: IMO, all things being somewhat equal, you should always try to retire debts as quickly as possible in most cases, so start with the small cases. The method of calculating credit card interest is written on the statement. Usually it is \"\"average daily balance method\"\". Don't sweat the details. Just pay the things off.\"", "title": "" }, { "docid": "98d6e62dd97ab59c8997ed685e746fa1", "text": "It's very simple: The whole purpose of a credit card for the credit card company is that you borrow money and then pay them extortionate interest for the rest of your life. The way you describe yourself, you are the perfect victim. So the obvious thing for you to do is to not touch credit cards with a barge pole. IF you decide to use a credit card, then what you should really, really do is to pay back the maximum amount possible all the time. Best is to pay off the credit card in full if at all possible. Consider this: If you owe them money, the interest rate is so high that with the minimum payment, your debt will be growing all the time. Spend $1,000, pay $10 a month, and next year you owe $1,100 without having used the credit card at all. If you pay $32 a month as you mentioned, your $1,000 purchase is actually a multi-year loan. If you need a multi-year loan for a $1,000 purchase, an ordinary loan from your bank will be much, much cheaper.", "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": "22bc07702a3ba5e7d7fc61ddff925a0d", "text": "You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk.", "title": "" }, { "docid": "d6f78267cd3d3b5aa74f5aaf89973fbf", "text": "Does the average debt of over $5000 per person count debt that is less than say 6 weeks old? I set my card to auto pay in full each month but I always have a few thousand that I owe since it's not due for a few weeks. I funnel all my spending through cards to take advantage of points.", "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": "a4d4d17abf7f4bb3f36468d46080dd2e", "text": "You should check out Dave Ramsey's Baby Steps. He has an great and well organized plan for getting out of debt and building wealth. My wife and I have followed the plan and will be paying off our home this year :) His advice on debt payments is to pay off the smallest balance first. This helps motivate you and your husband to push harder on your debts. Once the first pay is paid the money that would have gone to that debt is applied to the next smallest debt and so on. This is called a 'debt snowball' since by the end you will have plenty of money to pay that last few debts. While working on the smallest debt, making minimum payments on the others. Stop using the credit cards entirely! Don't use gimmicks to avoid facing the reality of the debt. Close your accounts and commit to never borrowing money again. This is a huge physiological shift. I used credit cards all the time for decades, that is a thing of the past for us, we pay cash or don't buy it. In your case, paying the 80% interest loan off is likely to be priority. I didn't even realize that was legal. Hopefully that is also the smallest balance. Start making a monthly budget and sticking to it. Check out Dave's 'irregular income' budget form, it is meant for couples in your situation. The first steps will be to pay food, rent, utilities and transportation. After that, list your debts in priority order and pay them as your husbands income comes in during the month. Don't despair, you two can get your financial life cleaned up! You just need a good plan and a lot of focus.", "title": "" }, { "docid": "585f805eb52017a01668c8f337d46eb9", "text": "Remember that if you make charges as the starting of your billing cycle, then you are receiving a free ~60-day loan. For those that are able to receive high interest rates on their, this means a greater opportunity to earn on their money. For example: Your billing statement ends on Jan 5th. On Jan 6th, you max out your credit card. Your billing statement ends on Feb 5th. Depending on your credit card, your grace period can be anywhere from 20 to 30 days. If your bill is due Mar 7th, you just gave yourself a free 60 day loan. If you have multiple credit cards with different due dates and long grace periods, you can rotate which cards you max out to optimize the money you keep in savings.", "title": "" } ]	fiqa
8b84e02583a689c02da6e97f8da4ad7a	To sell or to rent the house?	[ { "docid": "83b19dd70fbd33a81587c3ac2e2adc32", "text": "\"So either scenario has about $10K upfront costs (either realtor/selling expenses or fixing up for rental). Furthermore, I'm sure that the buyers would want you to fix all these things anyway, or reduce the price accordingly, but let's ignore this. Let's also ignore the remaining mortgage, since it looks like you can comfortably pay it off. Assuming 10% property management and 10% average vacancy (check your market), and rental price at $1000 - you end up with these numbers: I took very conservative estimates both on the rent (lower than you expect) and the maintenance expense (although on average over the years ,since you need to have some reserves, this is probably quite reasonable). You end up with 2.7% ROI, which is not a lot for a rental. The rule of thumb your wife mentioned (1% of cash equity) is indeed usually for ROI of leveraged rental purchase. However, if rental prices in your area are rising, as it sounds like they are, you may end up there quite soon anyway. The downside is that the money is locked in. If you're confident in your ability to rent and are not loosing the tax benefit of selling since it sounds like you've not appreciated, you may take out some cash through a cash-out refi. To keep cash-flow near-0, you need to cash out so that the payments would be at or less than the $3200/year (i.e.: $266/month). That would make about $50K at 30/yr fixed 5% loan. What's best is up to you to decide, of course. Check whether \"\"you can always sell\"\" holds for you. I.e.: how stable is the market, what happens if one or two large employers disappear, etc.\"", "title": "" } ]	[ { "docid": "cc952689a665f740665146ab357152c9", "text": "Advantages of buying: With every mortgage payment you build equity, while with rent, once you sign the check the money is gone. Eventually you will own the house and can live there for free. You can redecorate or remodel to your own liking, rather than being stuck with what the landlord decides is attractive, cost-effective, etc. Here in the U.S. there are tax breaks for homeowners. I'm not sure if that's true in U.K. Advantages of renting: If you decide to move, you may be stuck paying out a lease, but the financial penalty is small. With a house, you may find it difficult to sell. You may be stuck accepting a big loss or having to pay a mortgage on the empty house while you are also paying for your new place. When there are maintenance issues, you call the landlord and it's up to him to fix it. You don't have to come up with the money to pay for repairs. You usually have less maintenance work to do: with a house you have to mow the lawn, clear snow from the driveway, etc. With a rental, usually the landlord does that for you. (Not always, depends on type of rental, but.) You can often buy a house for less than it would cost to rent an equivalent property, but this can be misleading. When you buy, you have to pay property taxes and pay for maintenance; when you rent, these things are included in the rent. How expensive a house you can afford to buy is not a question that can be answered objectively. Banks have formulas that limit how much they will loan you, but in my experience that's always been a rather high upper bound, much more than I would actually be comfortable borrowing. The biggest issue really is, How important is it to you to have a nice house? If your life-long dream is to have a big, luxurious, expensive house, then maybe it's worth it to you to pour every spare penny you have into the mortgage. Other people might prefer to spend less on their house so that they have spare cash for a nice car, concert tickets, video games, cocaine, whatever. Bear in mind that if you get a mortgage that you can just barely afford, what do you do if something goes wrong and you can't afford it any more? What if you lose your job and have to take a lower-paying job? What if some disaster strikes and you have some other huge expense? Etc. On the flip side, the burden of a mortgage usually goes down over time. Most people find that their incomes go up over time, between inflation and growing experience. But the amount of a mortgage is fixed, or if it varies it varies with interest rates, probably bouncing up and down rather than going steadily up like inflation. So it's likely -- not at all certain, but likely -- that if you can just barely afford the payment now, that in 5 or 10 years it won't be as big a burden.", "title": "" }, { "docid": "7c96d53ed284f013d5eed2041d7b470e", "text": "Consider contracting with a property management company to lease and maintain the house until it can be sold. Rent on the property should cover the mortgage, property taxes, etc. The property management company can handle maintenance and the tenant would be responsible for utilities.", "title": "" }, { "docid": "9627263f23bbb0b74445f31afdf6fe8c", "text": "While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days), you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange", "title": "" }, { "docid": "a5d1d152614dde74cea6e8431471e43b", "text": "\"You can make a contingent offer: \"\"I will buy this house if I sell my own.\"\" In a highly competitive environment, contingent offers tend to be ignored. (Another commentator described such a contingency clause as synonymous with \"\"Please Reject Me\"\".) You can get a bridge loan: you borrow money for a short term, at punishingly high interest. If your house doesn't sell, you're fscked. You pay for two mortgages (or even buy the other house for cash). If you can afford this, congratulations on, you know, being super-rich. Or you can do what I am doing: selling one house and then living at my mom's until I buy another one. (You will have to stay at your own mom's house; my mom's house will be full, of course.) Edit: A commentator with the disturbingly Kafkaesque name of \"\"R.\"\" made the not-unreasonable suggestion that you buy both and rent out one or the other. Consider this possibility, but remember: On the other hand, if the stars align, you might not want to extricate yourself. If the tenant is paying the mortgage and a little more, you have an appreciating asset, and one you can borrow against. With a little work and a little judicious use of leverage, doing this over and over, you can accumulate a string of income-producing rental properties.\"", "title": "" }, { "docid": "8394b41dc5e16d17c616139c687e014c", "text": "If it is US, you need to take tax implications into account. Profit taken from sale of your home is taxable. One approach would be to take the tax hit, pay down the student loans, rent, and focus any extra that you can on paying off the student loans quickly. The tax is on realized gains when you sell the property. I think that any equity under the original purchase price is taxed at a lower rate (or zero). Consult a tax pro in your area. Do not blindly assume buying is better than renting. Run the numbers. Rent Vs buy is not a question with a single answer. It depends greatly on the real estate market where you are, and to a lesser extent on your personal situation. Be sure to include maintenance and HOA fees, if any, on the ownership side. Breakeven time on a new roof or a new HVAC unit or an HOA assessment can be years, tipping the scales towards renting. Include the opportunity cost by including the rate of return on the 100k on the renting side (or subtracting it on the ownership side). Be sure to include the tax implications on the ownership side, especially taxes on any profits from the sale. If the numbers say ownership in your area is better, then try for as small of a mortgage as you can get in a growing area. Assuming that the numbers add up to buying: buy small and live frugally, focus on increasing discretionary spending, and using it to pay down debt and then build wealth. If they add up to renting, same thing but rent small.", "title": "" }, { "docid": "133154f62f8331a8df866bfc4aab2f0b", "text": "\"The trade-off seems to be quite simple: \"\"How much are you going to get if you sell it\"\" against \"\"How much are you going to get if you rent it out\"\". Several people already hinted that the rental revenue may be optimistic, I don't have anything to add to this, but keep in mind that if someone pays 45k for your apartment, the net gains for you will likely be lower as well. Another consideration would be that the value of your apartment can change, if you expect it to rise steadily you may want to think twice before selling. Now, assuming you have calculated your numbers properly, and a near 0% opportunity cost: 45,000 right now 3,200 per year The given numbers imply a return on investment of 14 years, or 7.1%. Personal conclusion: I would be surprised if you can actually get a 3.2k expected net profit for an apartment that rents out at 6k per year, but if you are confident the reward seems to be quite nice.\"", "title": "" }, { "docid": "75afbb044a044305e7c497e1093aa9a4", "text": "In order to arrive at a decision you need the numbers: I suggest a spreadsheet. List the monthly and annual costs (see other responses). Then determine what the market rate for rental. Once you have the numbers it will be clear from a numbers standpoint. One has consider the hassle of owning property from a distance, which is not factored into the spreadsheet", "title": "" }, { "docid": "1996cb63df62a460f6fbd2a182ca33f5", "text": "Also you would need to consider any taxation issues. As he will be paying you rent you will need to include this as income, plus any capital gains tax on the re-sale of the property may need to be paid.", "title": "" }, { "docid": "02b99f974bdb129c782c603e1cf44129", "text": "Gonna have to think about this one yourself. How much is the old house worth if you sell it? How much can you rent it out for? If you can sell it for a decent amount, you might be able to pay off the current house completely, save yourself nearly 200k in interest, and maybe end up with a bit more cash. If you can rent it for a high amount, it might be worth doing that and you could possibly use that and get more money than what the interest is. Just gotta weigh up your options, find out what you can get for the house if you rent or sell.", "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": "a4dd10f15f9081bfd2123bee0dc06b18", "text": "Sell the house, in the scenario you describe he is using the property as an investment with a $250 per month buy-in. This investment doesn't make a return right now and when you add in the cost of dealing with the tenant (even if he doesn't have those cost now, he will when they move out)he is out of more than $250 a month and he has no direct knowledge that the value will definitely increase. He would be better spent selling the house and putting the funds into an investment, even a risky investment. It will have less maintenance cost associated with the risky investment than the rental property. Besides sitting on the property for 10-15 years would cost him 30-45k plus the cost of re-renting the house when empty.Not to mention the inevitable increases in taxes over that time which will either increase his deficit or eat up the rent increase he is able to charge. Don't take the loss on the sale, just short sale it and take the money and invest! One last thought... An alternative is to creatively finance a sale (take payments from a buyer until they can buy outright) that will cover the FULL mortgage and get him the price he needs. You can look up owner financing to find out more on how to do this. Hope this helps!", "title": "" }, { "docid": "b7f7c1fbef977c0d46b993528f994601", "text": "so if we rent it out we don't want to just charge what we're paying on our mortgage - we'd definitely be losing money if we did that. I think you're overlooking one thing: your profit/loss is not monthly. Your profit is the property that's left after the mortgage ends. Even if you have to add extra $100 every month because you rent lower than the mortgage + maintenance + taxes, after 30 years you're left with property worth ie.$200k while you've paid for it ie. 30 years * 12 months * $100 = $36k. You can rent it lower than your costs and still make a profit in the long run.", "title": "" }, { "docid": "e4bec4b0c95ec95619b283d75b8bdf3e", "text": "Your reasoning is backwards. As others have pointed out, you cannot just decide how much you charge irrespective of the market. Let me paraphrase a little economics 101 to underline why you also should not think like this: You can see a rental property like your house (the same reasoning is usually explained with the example of hotel rooms) as a series of perishable goods. Your house represents the potential sale of the January rent (which perishes once January is over), plus the February rent etc. Your approach was to compute the total costs (all fixed and variable costs of owning that house as well as costs associated to renting specifically) and average them over the time period so that you know how much to ask at least. Assuming that you are only looking to rent it out, not sell it or let a family member live there, you can't think like this. Most of those costs that you averaged are what economists call sunk costs. You have already incurred the mortgage costs and they are not affected by your decision to rent or not to rent. These costs are irrelevant to your decision making process. You only need to think about marginal costs: those additional costs that you have when you rent but not when you don't. Look at the market prices for renting similar properties in that region and compare them with your marginal costs. As long as they are higher than your marginal costs, rent it out. This does not mean that you are sure to make profits, but it means that you are sure to make less losses than in your only alternative of not renting.", "title": "" }, { "docid": "5a7975f7b904e476239cf8f0dc1eb4de", "text": "\"If I buy property when the market is in a downtrend the property loses value, but I would lose money on rent anyway. So, as long I'm viewing the property as housing expense I would be ok. This is a bit too rough an analysis. It all depends on the numbers you plug in. Let's say you live in the Boston area, and you buy a house during a downtrend at $550k. Two years later, you need to sell it, and the best you can get is $480k. You are down $70k and you are also out two years' of property taxes, maintenance, insurance, mortgage interest maybe, etc. Say that's another $10k a year, so you are down $70k + $20k = $90k. It's probably more than that, but let's go with it... In those same two years, you could have been living in a fairly nice apartment for $2,000/mo. In that scenario, you are out $2k * 24 months = $48k--and that's it. It's a difference of $90k - $48k = $42k in two years. That's sizable. If I wanted to sell and upgrade to a larger property, the larger property would also be cheaper in the downtrend. Yes, the general rule is: if you have to spend your money on a purchase, it's best to buy when things are low, so you maximize your value. However, if the market is in an uptrend, selling the property would gain me more than what I paid, but larger houses would also have increased in price. But it may not scale. When you jump to a much larger (more expensive) house, you can think of it as buying 1.5 houses. That extra 0.5 of a house is a new purchase, and if you buy when prices are high (relative to other economic indicators, like salaries and rents), you are not doing as well as when you buy when they are low. Do both of these scenarios negate the pro/cons of buying in either market? I don't think so. I think, in general, buying \"\"more house\"\" (either going from an apartment to a house or from a small house to a bigger house) when housing is cheaper is favorable. Houses are goods like anything else, and when supply is high (after overproduction of them) and demand is low (during bad economic times), deals can be found relative to other times when the opposite applies, or during housing bubbles. The other point is, as with any trend, you only know the future of the trend...after it passes. You don't know if you are buying at anything close to the bottom of a trend, though you can certainly see it is lower than it once was. In terms of practical matters, if you are going to buy when it's up, you hope you sell when it's up, too. This graph of historical inflation-adjusted housing prices is helpful to that point: let me just say that if I bought in the latest boom, I sure hope I sold during that boom, too!\"", "title": "" }, { "docid": "fdd3dd91ff757451b0a2770a6cf70218", "text": "Based on my personal experience with that particular offer, I can say that it's not really a scam. I signed up for an Amazon Credit Card to get $70 off a purchase, but then never used the card. In fact, I never even called to activate it! After a few months, I then called to cancel it. I did not see a significant hit to my credit. However if you do shop frequently at Amazon it may be in your best interest to use their card, because it has other discounts associated with it.", "title": "" } ]	fiqa
55442ccdef2671d9f6197df550b4836c	HELOC vs. Parental Student Loans vs. Second Mortgage?	[ { "docid": "bc18c3a95b8204077e22822c3017ac1a", "text": "\"Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked. It must have been a truly trying time in your lives. That situation is an important template in personal finance. Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated. Per your post this was complicated by lost income due to economic situations. What is to say that this does not happen again in the future? While we can all hope that our child does not get sick, there are other events that could also fit into this template. Because of this I hate all options you present. Per your post, you are pretty thin with free cash flow and have high income, and yet you are looking to borrow more. That is a recipe for disaster with it being made worse as you are considering putting your home at risk. The 20K per year per kid sounds like a live at the university state school; or, a close by private school. Your finances do not support either option. There are times when the word \"\"No\"\" is in order when answering questions. Doing a live at home community college to university will cost you a total of about 30K per kid rather than the 80K you are proposing. Doing this alone will greatly reduce the risk you are attempting to assume. Doing that and having your child work some, you could cash flow college. That is what I would recommend. Given that you are so thin, you will also have to put constraints on college attendance. No changing major three times, only majors with an employable skills, and studying before partying. It may be worth it to wait a year of two before attending if a decision cannot be made. I was in a similar situation when my son started college. High income, but broke. He worked and went to a community college and was able to pay for the bulk of it himself. From there he obtained a job with a healthy salary and completed his degree at the University. It took him a little longer, but he is debt free and has a fantastic work ethic.\"", "title": "" }, { "docid": "8ddf37e74216c6c1bc579683b1faa7f9", "text": "I'd like to propose a 4th option: Let your kid(s) take out their own student loans, and then you can make payments directly to help them pay them down. Some advantages to this method: Note the many similarities to the HELOC, which would probably be my second choice.", "title": "" }, { "docid": "787ed768b2077e8cfaa2f0122df8b11b", "text": "Debt is no fun. Getting out of debt to replace it with more debt is no fun. In both cases, you are making an investment in your child's future. That's laudable, but there might be other ways to economize on the education costs. I prefer HELOC debt because I can deduct the interest (as you pointed out) and it usually allows re-borrowing if other cash-flow problems crop up. The downside of borrowing against your house is that your house could be foreclosed if you become insolvent, and you will lose your buffer if you max out the equity now. The same problem exists with a 2nd mortgage. The fact that you would still have a mortgage either way does make the option more attractive though (or less unattractive anyway).", "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": "5efec3496958e96ff0dcca8086e3bb24", "text": "It's an issue of how much of a safety net you want, and part of that is going to be how much of a safety net you have in other areas. You should take into account what regular expenses you have, what emergency expenses you might have, what insurance policies you have, what deductibles those policies have, and what sources of money you have. As Alex B says, a HELOC isn't a guaranteed source of money, but it is one contingency. If you have a large amount of equity and your local real estate market is stable, your bank could cancel your HELOC, but they would have no financial incentive to do so. Other possible safety nets to consider would be friends and family, credit cards, and loans backed by retirement funds. Obviously you shouldn't rely on the last two for everyday expenses, but it's reasonable to consider them as contingencies in true emergencies. Also, if you have a significant net worth, home equity and savings account should not be the only places you're storing your wealth. Look into stocks, bonds, and money market accounts. Your expected returns in the stock market should be higher than the interest you're paying on the HELOC. Stocks are more risky and obviously you shouldn't put all your savings there, but it is one more basket to put your eggs in, and unlike a savings account your money isn't just sitting there.", "title": "" }, { "docid": "d1bddb921a5215528c109be80cf7c46b", "text": "Timo's concern may be accurate, but talking to the bank is the next step. If I am the banker, I'm happier that (a) there's 25% down, and (b) it's not an additional loan as some might get from a parent. It's not that your parents have a lien for the 25% as a lender would, the structure is ownership, they own 25%. An important, if not obvious, distinction. Timo is right that as an asset of the parents, the ownership stake is at risk if their finances run into issues. Other than that, so long as all is done above board, your proposal can work. The bank will want your parents to sign the note of course, you can't mortgage property you don't fully own.", "title": "" }, { "docid": "6f5dd68de3ec919add46bf5c947d97fd", "text": "First, don't borrow any more money. You're probably bankrupt right now at that income level. 2k/month is poverty level income, especially in some of the higher cost of living areas of California. At $2k per month of income, and $1300 of rent and utilities, you've only got 700 a month for food. The student loans are probably in deferment while your husband is in school. If so, keep them that way and deal with them when he lands a career track goal after grad school. The car loan is more than you can afford. Seriously consider selling the car to get rid of the note. Then use the cash flow that was going to the car loan to pay off the 'other' debt. A car is usually a luxury, but if it is necessary, be sure it is one that doesn't include a loan. Budget all of your income (consider using YNAB or something like it). Include a budget item to build an emergency fund. Live within your means and look for ways to supplement your income. With three of your own, you'd probably make an excellent baby sitter. As for the inheritance, find a low risk, liquid investment, such as 12 month CDs or savings bonds. Something that you can liquidate without penalty if an emergency arises. Save the money for if you get into a situation where there is no other way out. Hopefully you can have your emergency fund built up so that you don't need to draw on the inheritance. Set a date, grad school + landing + 90 days. If you reach that date and haven't had to use the inheritance, and you have a good emergency fund, put the inheritance in a retirement fund and forget about it. Why retirement fund and not a college fund for the kids? The best gift you can give them is to remain financially independent throughout your life. If you get to the point where you are fully funding your tax advantaged retirement savings, and you are ready to start wealth-building, that is the time to take part of that cash flow and set it aside for college funds.", "title": "" }, { "docid": "fc667cc46903d9bf2c8fd48ffd853d9e", "text": "\"I'll start by focussing on the numbers. I highly recommend you get comfortable with spreadsheets to do these calculations on your own. I assume a $200K loan, the mortgage for a $250K house. Scale this up or down as appropriate. For the rate, I used the current US average for the 30 and 15 year fixed loans. You can see 2 things. First, even with that lower rate to go 15 years, the payment required is 51% higher than with the 30. I'll get back to that. Second, to pay the 30 at 15 years, you'd need an extra $73. Because now you are paying at a 15 year pace, but with a 30 year rate. This is $876/yr to keep that flexibility. These are the numbers. There are 2 camps in viewing the longer term debt. There are those who view debt as evil, the $900/mo payment would keep them up at night until it's gone, and they would prefer to have zero debt regardless of the lifestyle choices they'd need to make or the alternative uses of that money. To them, it's not your house as long as you have a mortgage. (But they're ok with the local tax assessor having a statutory lien and his hand out every quarter.) The flip side are those who will say this is the cheapest money you'll ever see, and you should have as large a mortgage as you can, for as long as you can. Treat the interest like rent, and invest your money. My own view is more in the middle. Look at your situation. I'd prioritize In my opinion, it makes little sense to focus on the mortgage unless and until the first 5 items above are in place. The extra $459 to go to 15? If it's not stealing from those other items or making your cash flow tight, go for it. Keep one subtle point in mind, risk is like matter and energy, it's not created or destroyed but just moved around. Those who offer the cliche \"\"debt creates risk\"\" are correct, but the risk is not yours, it's the lender's. Looking at your own finances, liquidity is important. You can take the 15 year mortgage, and 10 years in, lose your job. The bank still wants its payments every month. Even if you had no mortgage, the tax collector is still there. To keep your risk low, you want a safety net that will cover you between jobs, illness, new babies being born, etc. I've gone head to head with people insisting on prioritizing the mortgage payoff ahead of the matched 401(k) deposit. Funny, they'd prefer to owe $75K less, while that $75K could have been deposited pretax (so $100K, for those in the 25% bracket) and matched, to $200K. Don't make that mistake.\"", "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": "697aa1e67d729aa80962e421ebe99b24", "text": "I am a real estate agent. I know you are in Canada, but will let you know that in the US, agents are not to supposed to offer this kind of advice. They can refer you to a bank or mortgage broker, but should not be giving this type of financial advice. That said, it's a HELOC, it would be rare for your bank to be willing to just add to your mortgage at the current low rate. Still, ask the bank holding your loan. Is the second home to rent out or a vacation/summer home for you to live in?", "title": "" }, { "docid": "e4ad5de991424ab48e01a72ac5cbd3ac", "text": "\"I'll assume you live in the US for the start of my answer - Do you maximize your retirement savings at work, at least getting your employer's match in full, if they do this. Do you have any other debt that's at a higher rate? Is your emergency account funded to your satisfaction? If you lost your job and tenant on the same day, how long before you were in trouble? The \"\"pay early\"\" question seems to hit an emotional nerve with most people. While I start with the above and then segue to \"\"would you be happy with a long term 5% return?\"\" there's one major point not to miss - money paid to either mortgage isn't liquid. The idea of owing out no money at all is great, but paying anything less than \"\"paid in full\"\" leaves you still owing that monthly payment. You can send $400K against your $500K mortgage, and still owe $3K per month until paid. And if you lose your job, you may not so easily refinance the remaining $100K to a lower payment so easily. If your goal is to continue with real estate, you don't prepay, you save cash for the next deal. Don't know if that was your intent at some point. Disclosure - my situation - Maxing out retirement accounts was my priority, then saving for college. Over the years, I had multiple refinances, each of which was a no-cost deal. The first refi saved with a lower rate. The second, was in early 2000s when back interest was so low I took a chunk of cash, paid principal down and went to a 20yr from the original 30. The kid starts college, and we target retirement in 6 years. I am paying the mortgage (now 2 years into a 10yr) to be done the month before the kid flies out. If I were younger, I'd be at the start of a new 30 yr at the recent 4.5% bottom. I think that a cost of near 3% after tax, and inflation soon to near/exceed 3% makes borrowing free, and I can invest conservatively in stocks that will have a dividend yield above this. Jane and I discussed the plan, and agree to retire mortgage free.\"", "title": "" }, { "docid": "fe641ec5ad4250f5b01cdca09248e555", "text": "What you haven't mentioned is the purchase risk. You say that she will buy but then say you will be on the loan. If you are on the loan, essentially you will be purchasing a rental property and renting to your mother. So that is the analysis you need to consider. You need to be financially able to take on this purchase and be willing to be a landlord. The ten year timeline looks good on paper. This may not be realistic, especially with an aging parent. What if after 4 years, she can't stay in that condo? What renting buys is flexibility. If she needs money for any reason, it is not tied up in an asset and unavailable. She is able it move if necessary. If she won't need the money, she should buy in cash. That, by far, gives her the best deal.", "title": "" }, { "docid": "04e75850e4483364cea159dc4e7a85ee", "text": "The biggest issue I can see is that in order to have your parents protected properly, they'll have to register an interest in the property (ie, the 25%). I can't see the mortgage lender being too happy to have a second lienholder on the house for a total of 100% of the purchase price. Usually their conditions state that they'll need to be informed of other debts secured on the house and might actually have a say in that. Another way of accomplishing this is putting your parents on the house's deeds but that might also complicate matters with the lender and cause additional problems when it comes to selling the property. Not to mention that if anything bad happens to your parents, their stake in your property would be counted as one of their assets and you might find yourself in the situation where you have to come up with 25% of the property value right now or you might find that you have to sell the property to the first bidder simply because you do need the money as quickly as possible. Personally I wouldn't do it (especially without legal advice), the legal structure can be a nightmare and you'll just end up painted into a corner.", "title": "" }, { "docid": "c88555d43ab1551de25728acbc573e73", "text": "Have you looked at conventional financing rather than VA? VA loans are not a great deal. Conventional tends to be the best, and FHA being better than VA. While your rate looks very competitive, it looks like there will be a .5% fee for a refinance on top of other closing costs. If I have the numbers correct, you are looking to finance about 120K, and the house is worth about 140K. Given your salary and equity, you should have no problem getting a conventional loan assuming good enough credit. While the 30 year is tempting, the thing I hate about it is that you will be 78 when the home is paid off. Are you intending on working that long? Also you are restarting the clock on your mortgage. Presumably you have paid on it for a number of years, and now you will start that long journey over. If you were to take the 15 year how much would go to retirement? You claim that the $320 in savings will go toward retirement if you take the 30 year, but could you save any if you took the 15 year? All in all I would rate your plan a B-. It is a plan that will allow you to retire with dignity, and is not based on crazy assumptions. Your success comes in the execution. Will you actually put the $320 into retirement, or will the needs of the kids come before that? A strict budget is really a key component with a stay at home spouse. The A+ plan would be to get the 15 year, and put about $650 toward retirement each month. Its tough to do, but what sacrifices can you make to get there? Can you move your plan a bit closer to the ideal plan? One thing you have not addressed is how you will handle college for the kids. While in the process of long term planning, you might want to get on the same page with your wife on what you will offer the kids for help with college. A viable plan is to pay their room and board, have them work, and for them to pay their own tuition to community college. They are responsible for their own spending money and transportation. Thank you for your service.", "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": "bdfd5ce66cf0f7d8c16d6afe9271b032", "text": "Sounds like baloney to me. HELOCs are variable rate, so you are paying down the principal of a fixed rate loan with a variable rate loan. If you want to pay the mortgage down faster, make two half payments per month, and/or add a little extra to each payment (make sure with the bank that any extra will automatically go to principal).", "title": "" }, { "docid": "533546a8bd52ff06c852c9289bb0573c", "text": "\"Banks are currently a lot less open to 'creative financing' than they were a few years ago, but you may still be able to take advantage of the tactic of splitting the loan into two parts, a smaller 'second mortgage' sometimes called a 'purchase money second' at a slightly higher interest rate for around 15-20% of the value, and the remaining in a conventional mortgage. Since this tactic has been around for a long time, it's not quite in the category of the shenanegans they were pulling a few years back, so has a lot more potential to still be an option. I did this in for my first house in '93 and again in '99 when I moved to a larger home after getting married. It allowed me to get into both houses with less than 20% down and not pay PMI. This way neither loan is above 80% so you don't have to pay PMI. The interest on the second loan will be higher, but usually only a few percent, and is thus usually a fraction of what you were paying for the PMI. (and it's deductible from your taxes) If you've been making your payments on time and have a good credit rating, then you might be able to find someone who would offer you such a deal. You might even be able to get a rate for your primary that is down in the low 4's depending on where rates are today and what your credit rating is like. If you can get the main loan low enough, even if the other is like say 7%, your blended rate may still be right around 5% If you can find a deal like this, it's also great material to use to negotiate with your current lender \"\"either help me get the PMI off this loan or I'm going to refinance.\"\" Then you can compare what they will offer you with what you can get in a refinance and decide what makes the most sense for you. On word of warning, when refinancing, do NOT get sucked into an adjustable rate mortgage. If you are finding life 'tight' right now with house payments and all, the an ARM could be highly seductive since they often offer a very low initial rate.. however then invariably adjust upwards, and you could suddenly find yourself with a monster payment far larger than what you have now. With low rates where they are, getting a conventional fixed rate loan (or loans in the case of the tactic being discussed here) is the way to go.\"", "title": "" }, { "docid": "dcc3acd371bdd4deaee29dc8a8fd546a", "text": "Yes, one is certainly better than the other. Which one depends on your priorities and the interest and tax rates on your student loan, your savings, and your (future) mortgage plus how much you can afford to save and still enjoy the lifestyle you want as well as how soon you want to move out. Basically, you havn't given enough information.", "title": "" }, { "docid": "07cc6e02b5e2adaa710b7e947bd93f5b", "text": "A home equity loan (not a HELOC home equity line of credit) typically comes with far lower fees, but a slightly higher rate. As rates fell over the last decade, I saw a choice of the Equity Loan with no cost at all, or a refinance with a few thousand in closing costs. We refinanced 3 times with the home equity loan, the last one was 5%. As the 15 year regular mortgage hit 3.5%, it seemed worth the costs, about $1800, to get the low rate, and expecting that rates would go lower. The 1.5% savings on the balance put our breakeven at fewer than 6 months. If you truly meant HELOC, the variable aspect is the risk, as rates how little room down from here, but much room to rise.", "title": "" } ]	fiqa
582e4458baf876e7c8456ba39e229246	What is the equation for an inflation adjusted annuity held in perpetuity?	[ { "docid": "79b730bea961def6987f5d292bed6251", "text": "Let P denote the amount of the investment, R the rate of return and I the rate of inflation. For simplicity, assume that the payment p is made annually right after the return has been earned. Thus, at the end if the year, the investment P has increased to P(1+R) and p is returned as the annuity payment. If I = 0, the entire return can be paid out as the payment, and thus p = PR. That is, at the end of the year, when the dust settles after the return PR has been collected and paid out as the annuity payment, P is again available at the beginning of the next year to earn return at rate R. We have P(1+R) - p = P If I > 0, then at the end of the year, after the dust settles, we cannot afford to have only P available as the investment for next year. Next year's payment must be p(1+I) and so we need a larger investment since the rate of return is fixed. How much larger? Well, if the investment at the beginning of next year is P(1+I), it will earn exactly enough additional money to pay out the increased payment for next year, and have enough left over to help towards future increases in payments. (Note that we are assuming that R > I. If R < I, a perpetuity cannot be created.) Thus, suppose that we choose p such that P(1+R) - p = P(1+I) Multiplying this equation by (1+I), we have [P(1+I)](1+R) - [p(1+I)] = P(1+I)^2 In words, at the start of next year, the investment is P(1+I) and the return less the increased payout of p(1+I) leaves an investment of P(1+I)^2 for the following year. Each year, the payment and the amount to be invested for the following year increase by a factor of (1+I). Solving P(1+R) - p = P(1+I) for p, we get p = P(R-I) as the initial perpetuity payment and the payment increases by a factor (1+I) each year. The initial investment is P and it also increases by a factor of (1+I) each year. In later years, the investment is P(1+I)^n at the start of the year, the payment is p(1+I)^n and the amount invested for the next year is P(1+I)^{n+1}. This is the same result as obtained by the OP but written in terms that I can understand, that is, without the financial jargon about discount rates, gradients, PV, FV and the like.", "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": "bee1b08bfad94bfa962c90eff9c6f1bc", "text": "The question lacks specificity, i.e. when does the initial investment occur, now or one period from now? If now then it is a perpetuity due. I will consider under 2 scenarios, A and B, relating to the size of the initial investment. A. Assuming that the initial investment (C_0) occurs now and each payment thereafter has the relationship (1+g) with this investment then the relevant base equation is that for the present value of a growing perpetuity due, expressed in terms of C_0, i.e. PVGPD= [C_0(1+g)(1+i)]/(i-g). Now, to suit the question asked, we can see that i=fixed rate of return (f) and g = expected inflation rate (e) such that we can rewrite the equation as PVGPD = [C_0(1+e)(1+i)]/(i-e]. We know that f = is a fixed nominal rate and must be adjusted for e to calculate the real rate (r) according to the equation f=(1+r)(1+e)-1. Therefore PVGPD = [C_0(1+e)(1+(1+r)(1+e)-1)]/((1+r)(1+e)-1-e] Tidying up PVGPD = {C_0(1+r)(1+e)^2}/[r(1+e)] PVGPD = [C_0(1+r)(1+e)]/r B. Assuming that the initial investment (X) is not equal to each subsequent perpetual payment (C_1) then the relevant base equation is that for the the initial investment plus the present value of a growing perpetuity, i.e. PVGP= X + [C_1/(i-g)] Rewriting PVGP = X + [C_1/(f-e)] Substituting PVGPD = X + {C_1/[(1+r)(1+e)-1-e]} Tidying up PVGPD = X + C_1/[r(1+e)]", "title": "" } ]	[ { "docid": "a62f9bf9ee7bf19558203d8ca777ccf5", "text": "\"Can you give the context? A bond usually only has one \"\"tenor,\"\" so weighted average tenor could apply to all the bonds that a single firm owes? Or an industry or the market or a specific bond rating or whatever. But we usually use duration as it's more useful\"", "title": "" }, { "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": "df0fd975face50095720f6f1b6546ee8", "text": "\"This is really two questions about yield and contents. Content As others have noted, an annuity is a contractual obligation, not a portfolio contained within an investment product per se. The primary difference between whether an annuity is fixed or variable is what the issuer is guaranteeing and how much risk/reward you are sharing in. Generally speaking, the holdings of an issuer are influenced by the average \"\"duration\"\" of the payments. However, you can ascertain the assets that \"\"back\"\" that promise by looking at, for example, the holdings of a large insurance or securities firm. That is why issuers are generally rated as to their financial strength and ability to meet their obligations. A number of the market failures you mentioned were in part caused by the failure of these ratings to represent the true financial strength of the firm. Yield As to the second question of how they can offer a competitive rate, there are at least several reasons (I am assuming an immediate annuity) : 1) Return/Depletion of Principal The 7% you are being quoted is the percent of your principal that will be returned to you each year, not the rate of return being earned by the issuer. If you invest $100 in the market personally and get a 5% return, you have $105. However, the annuity's issuer is also returning part of your principal to you each year in your payment, as they don't return your principal when you eventually die. Because of this, they can offer you more each year than they really make in the market. What makes a Ponzi scheme different is that they are also paying out your principal (usually to others), but lie to you by telling you it's still in your account. :) 2) The Time Value of Money A promise to pay you $500 tomorrow costs less than $500 today A fixed annuity promises to pay you a certain amount of money each year. This can be represented as a rate of return calculated based on how much you have to pay to get that annual payment, but it is important to remember that the first payment will be worth substantially more in real purchasing power than the last payment you get. The longer you live, the less your fixed payment is worth in real terms due to inflation! In short, the rate of return has to be discounted for inflation, it is not a \"\"real\"\" rate of return. In other words, if you give me $500 today and I promise to pay you $100 for the next 5 years, I am making money not only because I can invest the money between now and then, but also because $100 will be worth less five years from now than it is today. With annuities, if you want your payment to rise in step with inflation, you have to pay more for that (a LOT more!). These are the two main reasons - here are a few smaller ones: 3) A very long Time Horizon If the stock market or another asset class is performing well/poorly, the issuer can often afford to wait much longer to buy or sell than an individual, and can take better advantage of historical highs and lows over the long term. 4) \"\"Big Boy\"\" investing A large, financially sound issuer can afford to take risks that an individual cannot, such as in very large or illiquid assets, such as a private company (a la Warren Buffet). 5) Efficiencies of scale Institutional investors have a number of legal advantages over individuals, which I won't discuss in detail here. However, they exist. Large issuers are also often in related business (insurance, mutual funds) such that they can deal in large volumes and form an internal clearinghouse (i.e. if I want to buy Facebook and you want to sell it, they can just move the stock around without doing any trading), with the result that their costs of trading are lower than those of an individual. Hope that helps!\"", "title": "" }, { "docid": "09848b9331b52609b3aa51f93f586f3a", "text": "There is always some fine print, read it. I doubt there is any product out there that can guarantee an 8% return. As a counter example - a 70 yr old can get 6% in a fixed immediate annuity. On death, the original premium is retained by the insurance company. Whenever I read the prospectus of a VA, I find the actual math betrays a salesman who misrepresented the product. I'd be really curious to read the details for this one.", "title": "" }, { "docid": "0a476021c07a157a45dea1b455012954", "text": "Beware of surrender charges also Surrender Charges Many annuities will impose a surrender charge if the annuity is cashed in before a specific period of time. That period may run anywhere from 1 to 12 years. A typical surrender charge is one that starts at 7% in the first year of the contract, and declines by 1% per year thereafter until it reaches zero. The charge is made against the value of the investment when the annuity is surrendered, and its purpose (other than simply to make money for the insurance company) is to discourage a short-term investment by the purchaser. For that reason, an annuity should always be considered a long-term investment. In the typical fixed annuity, though, this charge will not apply provided no more than 10% of the investment is withdrawn per year. source: http://www.fool.com/retirement/annuities/annuities02.htm If you've held it for 10 years as you claim, you may not owe any or much in surrender charges, but you definitely want to know what the situation is before you make a move.", "title": "" }, { "docid": "e08777a31b5b1789c6b236753f6e9b77", "text": "The example from the following website: Investopedia - Calculating The Present And Future Value Of Annuities specifically the section 'Calculating the Present Value of an Annuity Due' shows how the calculation is made. Using their figures, if five payments of $1000 are made over five years and depreciation (inflation) is 5%, the present value is $4545.95 There is also a formula for this summation, (ref. finance formulas)", "title": "" }, { "docid": "8bc279563293599f6a7ccf87b98342bd", "text": "I came up with a real way. I saw once the market be so dumb as to allow this to work. Inflation rate = 2.5%. Home interest rate = 3%. Tax deduction = 1%. Money spent on inflation-adjusted I bonds (at the time these paid 0% net, that is 2.5% gross). Result, .5% profit after accounting for inflation. The kicker: Uncle Sam's I bonds are tax free. Sure it's not possible today, but the rates occasionally drop low enough.", "title": "" }, { "docid": "359d3c194143a1f84f2c482a5df6ebdc", "text": "\"There is no formula to answer the question. You have to balance return on investment with risk. There's also the question of whether you have any children or other heirs that you would like to leave money to. The mortgage is presumably a guaranteed thing: you know exactly how much the payments will be for the rest of the loan. I think most annuities have a fixed rate of return, but they terminate when you both die. There are annuities with a variable return, but usually with a guaranteed minimum. So if you got an annuity with a fixed 3.85% return, and you lived exactly 18 more years, then (ignoring tax implications), there'd be no practical difference between the two choices. If you lived longer than 18 years, the annuity would be better. If less, paying off the mortgage would be better. Another option to consider is doing neither, but keeping the money in the 401k or some other investment. This will usually give better than 3.85% return, and the principal will be available to leave to your heirs. The big drawback to this is risk: investments in the stock market and the like usually do better than 3 or 4%, but not always, and sometimes they lose money. Earlier I said \"\"ignoring tax implications\"\". Of course that can be a significant factor. Mortgages get special tax treatment, so the effective interest rate on a mortgage is less than the nominal rate. 401ks also get special tax treatment. So this complicates up calculations trying to compare. I can't give definitive numbers without knowing the returns you might get on an annuity and your tax situation.\"", "title": "" }, { "docid": "abdd072491ef76018f5ae6da88ba5c38", "text": "The solution is x = 8.92. This assumes that Chuck's six years of deposits start from today, so that the first deposit accumulates 10 years of gain, i.e. 20(1 + 0.1)^10. The second deposit gains nine years' interest: 20(1 + 0.1)^9 and so on ... If you want to do this calculation using the formula for an annuity due, i.e. http://www.financeformulas.net/Future-Value-of-Annuity-Due.html where (formula by induction) you have to bear in mind this is for the whole time span (k = 1 to n), so for just the first six years you need to calculate for all ten years then subtract another annuity calculation for the last four years. So the full calculation is: As you can see it's not very neat, because the standard formula is for a whole time span. You could make it a little tidier by using a formula for k = m to n instead, i.e. So the calculation becomes which can be done with simple arithmetic (and doesn't actually need a solver).", "title": "" }, { "docid": "dc539983c9ff636b470eecc738be2ecb", "text": "You need to solve the money-weighted return equation. It cannot be expressed as a formula for the interest, but it can be solved numerically as shown here. Using the OP's figures, with monthly withdrawals of $100,000. The summation for the withdrawals can be replaced with the standard annuity formula. The resulting monthly return is converted to a nominal annual return compounded monthly. Money-weighted return equation with start and end balances s0 and s1 The interest is 2.63282 % per annum, nominal compounded monthly. Selectable equation", "title": "" }, { "docid": "43d91d123b12ab2a842cb27998906545", "text": "Dealhoud, You are on the right path but this is actually an Equivalent annual cost problem. You have to take it a step further and divide the NPV by the Annuity factor. You need to calculate the annuity factor and divide the investment by that amount. Annuity Factor = (1-(1/(1+r)^n )) /r We know the annual cost of the the current forklift = $5K. We need to figure out the Equivalent annual cost of the new forklift. Investment / Annuity Factor + annual Cost = EAC. Therefore $20K / (1 - (1/(1.04^10 )) / 0.04 = $2,465.82 + annual Maintenance = $4,465.82 therefore it makes sense to replace the old machine.", "title": "" }, { "docid": "d14fb27da79fc6cbf91391e62d5f4610", "text": "Ok so I used Excel solver for this but it's on the right track. Latest price = $77.19 Latest div = $1.50 3-yr div growth = 28% g = ??? rs = 14% So we'll grow out the dividend 3 years @ 28%, and then capitalize them into perpetuity using a cap rate of [rs - g], and take the NPV using the rs of 14%. We can set it up and then solve g assuming an NPV of the current share price of $77.19. So it should be: NPV = $77.19 = [$1.50 / (1+0.14)^0 ] + [$1.50 x (1+0.28)^1 / (1+0.14)^1 ] + ... + [$1.50 x (1+0.28)^3 / (1+0.14)^3 ] + [$1.50 x (1+0.28)^3 x (1+g) / (0.14-g) / (1+0.14)^4 ] Which gives an implied g of a little under 9%. Let me know if this makes sense, and definitely check the work...", "title": "" }, { "docid": "1df8591be32d4babf6b7a50426ebacda", "text": "Yes - it's called the rate of inflation. The rate of return over the rate of inflation is called the real rate of return. So if a currency experiences a 2% rate of inflation, and your investment makes a 3% rate of return, your real rate of return is only 1%. One problem is that inflation is always backwards-looking, while investment returns are always forward-looking. There are ways to calculate an expected rate of inflation from foreign exchange futures and other market instruments, though. That said, when comparing investments, typically all investments are in the same currency, so the effect of inflation is the same, and inflation makes no difference in a comparative analysis. When comparing investments in different currencies, then the rate of inflation may become important.", "title": "" }, { "docid": "0b412db2f9e730b019a3093a7661e7ac", "text": "The formula for determining the number of payments (months) you'll need to make on your loan is: where i=monthly interest rate (annual rate / 12), A=loan amount (principal), and P=monthly payment. To determine the total interest that you will pay, you can use the following formula: where P=monthly payment, N=number of payments (from above formula), and A=loan amount (principal). A quick example: using the numbers in the screenshot above ($10,000 loan, $500 monthly payment, 10% APR), the number of payments ends up to be 21.97 (which means that payment number 22 is slightly less than the rest). In the second formula, you take that number times your $500 payment and determine that you have paid $10,984.81 over the course of the entire loan period. Subtracting the principal, you have paid $984.81 in total interest. On your spreadsheet, the function you are looking for is NPER: NPER(rate, payment_amount, present_value, [future_value, end_or_beginning]) rate - The interest rate. (This should be the monthly rate, or the annual rate divided by 12.) payment_amount - The amount of each payment made. (For a loan payment, this should be a negative number.) present_value - The current value of the annuity. (The initial principal of the loan) future_value - [ OPTIONAL ] - The future value remaining after the final payment has been made. (This should be 0, the default if omitted.) end_or_beginning - [ OPTIONAL - 0 by default ] - Whether payments are due at the end (0) or beginning (1) of each period.", "title": "" }, { "docid": "85000bed497e6334aa780dbb0d8bbd83", "text": "Annuities, like life insurance, are sold rather than bought. Once upon a time, IRAs inherited from a non-spouse required the beneficiary to (a) take all the money out within 5 years, or (b) choose to receive the value of the IRA at the time of the IRA owner's death in equal installments over the expected lifetime of the beneficiary. If the latter option was chosen, the IRA custodian issued the fixed-term annuity in return for the IRA assets. If the IRA was invested in (say) 15000 shares of IBM stock, that stock would then belong to the IRA custodian who was obligated to pay $x per year to the beneficiary for the next 23 years (say). There was no investment any more that could be transferred to another broker, or be sold and the proceeds invested in Facebook stock (say). Nor was the custodian under any obligation to do anything except pay $x per year to the beneficiary for the 23 years. Financial planners loved to get at this money under the old IRA rules by suggesting that if all the IRA money were taken out and invested in stocks or mutual funds through their company, the company would pay a guaranteed $y per year, would pay more than $y in each year that the investments did well, would continue payment until the beneficiary died (or till the death of the beneficiary or beneficiary's spouse - whoever died later), and would return the entire sum invested (less payouts already made, of course) in case of premature death. $y typically would be a little larger than $x too, because it factored in some earnings of the investment over the years. So what was not to like? Of course, the commissions earned by the planner and the lousy mutual funds and the huge surrender charges were always glossed over.", "title": "" } ]	fiqa
965f2ef138161eacdd116797cf2e1adc	To use a line of credit or withdraw from savings	[ { "docid": "e094f5823f5d2382b7888935e1f1c3e6", "text": "\"No one can really answer this for you. It is a matter of personal preference and the details of your situation. There are some really smart people on here, when placed in your exact situation, would do completely different things. Personal finance is overall, personal. If it was me, I'd never borrow money in retirement. If I had the cash, I'd use it to help fund the purchase. If I didn't, I simply wouldn't. For me wealth retention (in your case) is surprisingly more about behavior than math (even though I am a math guy). You are simply creating a great deal of risk at a season in your life with a diminished ability to recover from negative events. In my opinion you are inviting \"\"tales of woe\"\" to be part of your future if you borrow. Others would disagree with me. They would point to the math and show how you would be much better off on borrowing instead of pulling out of investments provided a sufficient return on your nest egg. They may even have a case as you might have to pay taxes on money pulled out magnifying the difference in net income on borrowing versus pulling out in a lump sum. Here in the US, the money you pulled out would be taxed at the highest marginal rate. To help with a down payment of 50K, you might have to pull out 66,500 to pay the taxes and have enough for the down payment. The third option is to not help with a down payment or to help them in a different way. Perhaps giving them a few hundred per month for two years to help with their mortgage payment. Maybe watch their kids some to reduce day care costs or help with home improvements so they can buy a lower price home. Those are all viable options. Perhaps the child is not ready to buy a home. Having said all that it really depends on your situation. Say your sitting on 5 million in investments, your pensions is sufficient to have some disposable income, and they are asking for a relatively small amount. Then pull the money out and don't be concerned. You nest egg will quickly recover the money.\"", "title": "" } ]	[ { "docid": "c4b3c2dbcefd00d11c49874dc9ace1cc", "text": "High-interest checking / savings accounts are often a better choice than CDs today for three reasons. At the time this question was asked, CDs were probably a better answer as rates were much higher. Since CD rates have plummeted in recent years, and because a CD is only semi-liquid, i.e., even if you ladder CDs, an early withdrawal fee often means foregoing the interest on that particular CD which you withdrew. 1.) On the other hand, high-interest checking and/or savings accounts are very viable options these days. There are several options available that earn ~1%+ APY. It's not quite that simple, and there are a few gotchas: If you run into the balance cap problem, of course nothing is stopping you from having multiple accounts across different banks. 2.) The high-interest bank accounts are fully liquid able to be liquidated at anytime (without foregoing interest). 3.) A minor benefit is that the high-yield savings account is low maintenance whereas CD laddering is pretty hands on and may require physical trips to your bank. (If you know of a way to automate the process more, please comment or edit.)", "title": "" }, { "docid": "b319c2663b9151bcb3c77ae09e3ac82c", "text": "You need to know that the loan will cost you additional money every month. You need to know how you are going to pay that overhead in addition to what you're already paying. The best answer is to reduce your spending to build up a reserve you feel comfortable with, and then NOT spend that reserve except in emergencies. If you need a short-term answer, I'd suggest borrowing from relatives. Failing that, I'd suggest talking to a bank about establishing a line of credit but NOT drawing upon it until and unless you have Absolutely No Other Choice. That gives you a preapproved option when you need it at (usually) a much, much better rate than credit cards... without costing you anything until and unless you actually do need the money, and (if you don't have it set up to kick in automatically on overdrafts) without making it so easy to get to that you're tempted to use it before you must.", "title": "" }, { "docid": "3dfae77394018b4ded73741d3303cda0", "text": "\"Or here's a better idea: don't have a credit card at all. They offer no real benefits and plenty of dangers. Don't take my word for it, though: \"\"I tell every student class I get, high school students, university students, you know, they'd be better off if they never used credit cards\"\" - Warren Buffet (Net worth: $44 billion) Before anyone says anything about using credit cards \"\"wisely\"\" and getting the rewards points, I can save 15% on many kinds of large purchases ($100+) using cash. You won't find a reward system offering that level of incentive. Two recent examples of cash discounts: After I bought my house I needed a lawnmower and a my wife wanted a new vacuum cleaner. Went to Lowe's and found the ones we wanted. They were $600 combined. Found the manager, stuck five $100 bills in his hand and said \"\"this is what I have, and that is what I need.\"\" 16.6% saved. Bought my daugher a bed recently. Queen box spring and mattress were on sale for $300 but it didn't come with the rails, which they wanted $50 extra for. Went to the bank and got $320 in cash from the bank, walked in, set it in his hand and said, \"\"I need the bed box spring and rails, tax included.\"\" He replied, \"\"Sorry man, I can't. I'm already taking a loss on...\"\" Then he stopped mid sentence, looked down at the cash again and said \"\"Hold on. Let me ask my manager.\"\" Manager walks over, guy explains what I said, manager looks at the cash and says \"\"Make it happen\"\" 14.3 % saved. As for purchasing a home, it is a myth that you need a credit score to obtain a mortgage for a home. Lending institutions can do manual underwriting instead of just relying on your credit score. It is a little tougher to do and banks usually have stricter requirements, but based on the information the OP has given in this and other questions, I think he can easily meet them.\"", "title": "" }, { "docid": "99cc8912af7bb550771b1a511771da1d", "text": "The way I usually make this decision is to answer the following question: Do I think that I can earn a better return on my savings than the interest rate I would get on the loan? Yes= Get a loan No= Use the savings If you have your savings in a fixed income investment like a CD or bond, then it is just simple math to answer the question, for more volatile investments like stocks you just have to make an educated guess based on the direction of the markets and past performance.", "title": "" }, { "docid": "e1337eba2501bb9d1e4225611619863d", "text": "Thanks for the link to the Financial Consumer Agency of Canada, @ChrisW.Rea. It explained in clear terms that I can withdraw money from and transfer money to the line of credit any time I want. The only monthly payment needed is the minimum payment. And yes, it may have a term after which all remaining principal + interest must be paid back in full. Similar to a credit card, as you pay off your line of credit, you can draw on it again, up to the limit you are allowed. However, a key difference between a line of credit and a credit card is that with a line of credit there is no interest-free grace period. You will have to pay interest on the amount you borrow from the day you take the money out. You will receive a monthly statement that shows the amount that you owe on your line of credit. You must make at least a minimum payment on that balance every month. (n.b. Specific terms and conditions for lines of credit vary from institution to institution.)", "title": "" }, { "docid": "377cac873084e349792849a9b7b8c278", "text": "Some already mentioned that you could pay with your savings and use the credit card as an emergency buffer. However, if you think there is a reasonable chance that your creditcard gets revoked and that you need cash quickly, here is a simple alternative:", "title": "" }, { "docid": "b95e7286d3620036ce1d7a554eb8d328", "text": "Well, it really doesn't make sense to pay for either in cash. For these purchases, unless you're super wealthy, you won't be paying it in full. If you were to pay in full, then I don't see any practical point to withdraw that money in cash.", "title": "" }, { "docid": "3414a9831fe266b28d86c9ca5e4cadd5", "text": "I've read the answers and respect the thought behind them. I'd like to focus on (a) the magnitude of the emergency, and (b) the saving rate of the people affected. 3-6 months is interesting. It's enough not just to fix the car, repair the A/C, etc, but more than enough to lose one's job and recover. (Let's avoid the debate of how long it take to find a job, no amount of 'emergency savings' can solve that.) If one is spending below their means, any unexpected expense that can paid off within, say 3 months, doesn't really need to tap emergency funds (EF). And, at some level of income and retirement savings, one can more easily run a much lower EF. My own situation - I had 9mo worth of expenses saved as EF. We were living well beneath our means, and I was looking at the difference between our mortgage (6%+) vs bank interest (near 0%). I used the funds to pay down principal, refinanced to a lower rate, and at the same closing got a HELOC. The psychology of this is tough, it then appears that for simple expenses, I'd be borrowing from my HELOC. On the other hand, the choice was between a known cost, the $5K/year the money was costing by sitting there plus the lower rate by going to a non-jumbo loan at the time, vs the risk of using 3% money from the HELOC. In the end, the HELOC was never tapped for more than a small portion of its line, and I never regretted the decision. Ironically, it's the person who isn't saving much that need the EF most. If you are a saver, you need to judge how long it would take to replace the funds. I offer the above not as a recommendation, but as devil's advocate to the other excellent advice here. All cash flows are a choice, $100 going here, can't go there. I'd slip in a warning that one should capture matching 401(k) contributions, if offered, before funding the EF. And pay down any high interest debt. After that, the decision of how liquid to be is a personal choice, what worked for my wife and me may not be for everyone.", "title": "" }, { "docid": "8488ea9ff8079c25fe41b97703b2ccc6", "text": "this post offers excellent pointers that can help you choose a suitable line of credit you can use for financing your day-to-day expenses. please help up promote it to all your friends especially to those who are planning to apply for and get secured and prepaid credit cards!", "title": "" }, { "docid": "1279c055dc6a2e7145425d6b25103af9", "text": "There are two or three issues here. One is, how quickly can you get cash out of your investments? If you had an unexpected expense, if you suddenly needed more cash than you have on hand, how long would it take to get money out of your Scott Trade account or wherever it is? I have a TD Ameritrade account which is pretty similar, and it just takes a couple of days to get money out. I'm hard pressed to think of a time when I literally needed a bunch of cash TODAY with no advance warning. What sudden bills is one likely to have? A medical bill, perhaps. But hey, just a few weeks ago I had to go to the emergency room with a medical problem, and it's not like they demanded cash on the table before they'd help me. I just got the bill, maybe 3 weeks after the event. I've never decided to move and then actually moved 2 days later. These things take SOME planning. Etc. Second, how much risk are you willing to tolerate? If you have your money in the stock market, the market could go down just as you need the cash. That's not even a worst case scenario, extreme scenario. After all, if the economy gets bad, the stock market could go down, and the same fact could result in your employer laying you off. That said, you could reduce this risk by keeping some of your money in a low-risk investment, like some high-quality bonds. Third, you want to have cash to cover the more modest, routine expenses. Like make sure you always have enough cash on hand to pay the rent or mortgage, buy food, and so on. And fourth, you want to keep a cushion against bookkeeping mistakes. I've had twice in my life that I've overdrawn a checking account, not because I was broke, but because I messed up my records and thought I had more money in the account than I really did. It's impossible to give exact numbers without knowing a lot about your income and expenses. But for myself: I keep a cushion of $1,000 to $1,5000 in my checking account, on top of all regular bills that I know I'll have to pay in the next month, to cover modest unexpected expenses and mistakes. I pay most of my bills by credit card for convenience --and pay the balance in full when I get the bill so I don't pay interest -- so I don't need a lot of cushion. I used to keep 2 to 3 months pay in an account invested in bonds and very safe stocks, something that wouldn't lose much value even in bad times. Since my daughter started college I've run this down to less than 1 months pay, and instead of replacing that money I'm instead putting my spare money into more general stocks, which is admittedly riskier. So between the two accounts I have a little over 2 months pay, which I think is low, but as I say, I'm trying to get my kids through college so I've run down my savings some. I think if I had more than 6 months pay in easily-liquidated assets, then unless I expected to need a bunch of cash for something, buying a new house or some such, I'd be transferring that to a retirement account with tax advantages.", "title": "" }, { "docid": "102958f9f7eb224d49a0ecd63eb3d7da", "text": "I see three ways to do this. Note that I kept saying interest. I assumed for this answer you were only considering money being saved in a savings account. Money that is to be invested for the long term (college fund, retirement) have much different rules for contributions, use, deductibility, age rules: that they would tend not to be mixed within the same account.", "title": "" }, { "docid": "a3ad45a1751e575d896ca799157ad0be", "text": "\"Many of my friends turn to me for financial advice, and here's what I always tell them because it's super effective for me... 1) I opened an online bank account with Scottrade for which I did not request a card or checks. I set up direct deposit straight to that account. It would be a complicated pain to take money out of that savings. The only time I did so was to buy my house (which was the purpose of the savings) and it involved a wire-transfer and printing of the form to fill out and faxing it in, etc. I have continued to use the account to save for my second house. I basically completely forget that the account is even there or that I am \"\"missing\"\" a large chunk of my money. 2) It is VERY important to actually budget for spending money to continue to spend on impulse items. Basically allow yourself to spend money on yourself but in a controlled way. Decide a specific amount that you want to put in a separate account that is just for you to spend to your hearts content and have it direct deposit. I find, (and Dave Ramsey also encourages this) that when I know how much money I am going to blow, I feel much more in control and it causes me to not get carried away and blow more than I realized. Take this a step further... Decide specifically what you want to buy for yourself, and label the account accordingly. For example, I decided back in March that I wanted to buy an Xbox One for when Star Wars Battlefront comes out this November. I calculated exactly how much money I would need at that time, figured how many paychecks I would receive until then, and did the math to determine exactly how much I need to direct deposit into an account JUST for saving to buy the Xbox and game. I use CapFed, and I can actually rename the account as it is displayed, so I called it \"\"Xbox fund\"\". Seeing that title, a reminder of what I really want\"\" encourages me to not touch it. What is your goal behind wanting to save money better? What are you saving for? Label your account accordingly so you don't just see it as money, but as progress.\"", "title": "" }, { "docid": "197364053b421d9c72e6cc61016eb472", "text": "\"Generally speaking, yes, you can withdraw cash from an ATM using your credit card. However, this is usually a terrible deal: Also, keep in mind that on top of the limit set by the ATM of the amount of cash you can withdraw, the credit card company also has its own \"\"cash advance credit limit\"\" that is usually lower than your regular credit limit for purchases.\"", "title": "" }, { "docid": "c6ddb84841ba35ab5fc8c50d1d484257", "text": "If his credit union participates in the national Co-Op, then he will be able to withdraw money at any participating credit union. He could just bring cash a check out in his name, just like he would at home.", "title": "" }, { "docid": "04a7e10e48f97a1ba437863c1848ee4f", "text": "Withdrawing from your 401(k) may include a 10% withdrawal penalty. There are ways to avoid the withdrawal penalty for early disbursements. The idea is to reduce your interest expense by leveraging free loans (0% APR purchases). This will help you pay down your debt more. If you have 0% APR on purchases, you can make purchases on things you already buy. Then use that money towards other debt, while making monthly payments on the 0% APR card. This way, you pay off the credit card before the 0% APR changes. You can then rinse and repeat on another 0% APR card offer. If your credit score is 800, you can do this multiple times. Citi Simplicity gives you 18 months 0% APR. Chase Slate and Chase Freedom gives you 15 months 0% APR. Others typically give you 12 months or less.", "title": "" } ]	fiqa
5d6e2fea5acbc6cc395dbd67f2193995	Should the poor consider investing as a means to becoming rich?	[ { "docid": "ca4a22521a8be869fa3e083cc803a2ff", "text": "\"Definitions are in order: These definitions are important. Someone making 1,000,000 a year who spends all of it is poor. Someone who makes 500K, spends 450K a year and has three million in stocks and a paid-for million dollar home may be rich but they can't retire. They need another seven to eight million to retire. Someone with a million dollars in assets who makes 40K a year through their job, can be Financially Independent and retire. This last example is important. In The Millionaire Next Door the authors share their discovery that the average millionaire accumulated their wealth with just a working income of around 50K (the book is a bit dated so the number should be elevated if you adjust for inflation). Finance Independent is a strange thing to wrap your head around and people with high incomes often fall victim to misunderstanding it. When figuring out how much a person needs to accumulate for their \"\"nest egg\"\", their working income is not a direct variable. Their spending and savings rate are. A doctor making 500K, who spends 450K needs to work for 51 years if they are planning to keep spending 450K/year (adjusted for inflation) forever. Someone making 60K starting at age 21 who saves 18K (30%), could retire at 49. Someone with a truly low income and poor, say 30K and under and living in a old developed nation, investing will help them a bit. Say they save 10% of their income, by the time they reach 65 (the typical age federal retirement pensions begin), they'll have enough money to live off of in perpetuity and in comfort. They'll actually have a higher retirement income than income while they were working. But, it is challenging at those levels to save 10% of your net income. Events like your car randomly deciding to break down one day can destroy an entire year's saving.\"", "title": "" }, { "docid": "2a91dada3a578174b74b5ac32d61e915", "text": "\"Given that a poor person probably has much less to invest, how can odds be in their favor? To add to Lan's great answer, if one is \"\"poor\"\" because they don't have enough income to build wealth (invest), then there are only two ways to change the situation - earn more or spend less. Neither are easy but both are usually possible. One can take on side jobs, look for a better-paying career, etc. Cutting spending can also be hard but is generally easier than adding income. In general, wealth building is more about what you do with your income than about how much you make. Obviously the more you make, the easier it is, but just about anyone can build wealth if they spend less than they make. Once your NET income is high enough that you have investible income, THEN you can start building wealth. Unfortunately many people have piles of debts to clean up before they are able to get to that point. What could a small guy with $100 do to make himself not poor anymore, right? Just having $100 is not going to make you \"\"rich\"\". There is a practical limit to how much return you can make short of high-risk activities like gambling, lottery tickets, etc. (I have actually seen this as a justification for playing the lottery, which I disagree with but is an interesting point). If you just invest $100 at 25% per year (for illustration - traditional investments typically only make 10-12% on average), in 10 years you'll have about $931. If instead you invest $100 per month at 12% annualized, in 10 years you'll have over $23,000. Not that $23,000 makes you rich - the point is that regularly saving money is much more powerful than having money to start with.\"", "title": "" }, { "docid": "0b22e23fac6f27900f195011905db3fa", "text": "\"What could a small guy with $100 do to make himself not poor? The first priority is an emergency fund. One of the largest expenses of poor people are short-term loans for emergencies. Being able to avoid those will likely be more lucrative than an S&P investment. Remember, just like a loan, if you use your emergency fund, you'll need to refill it. Be smart, and pay yourself 10% interest when you do. It's still less than you'd pay for a payday loan, and yet it means that after every emergency you're better prepared for the next event. To get an idea for how much you'd need: you probably own a car. How much would you spend, if you suddenly had to replace it? That should be money you have available. If you think \"\"must\"\" buy a new car, better have that much available. If you can live with a clunker, you're still going to need a few K. Having said that, the next goal after the emergency fund should be savings for the infrequent large purchases. The emergency fund if for the case where your car unexpectedly gets totaled; the saving is for the regular replacement. Again, the point here is to avoid an expensive loan. Paying down a mortgage is not that important. Mortgage loans are cheaper than car loans, and much cheaper than payday loans. Still, it would be nice if your house is paid when you retire. But here chances are that stocks are a better investment than real estate, even if it's the real estate you live in.\"", "title": "" }, { "docid": "4211fc1afd54373a20f75de5b335e1da", "text": "Yes, you can indeed become rich by investing even small amounts over time. Let's say that you begin with nothing invested, and you start investing $100 per week. Suppose you choose to put your money in an S&P 500 index mutual fund. The CAGR (Compound Annual Growth Rate) of the S&P 500 over the last 35 years has been about 11%. (That 35 years includes at least two fairly serious crashes.) You may get more or less than that number in the future, but let's guess that you'll average 9%. 35 years from now, you would be a millionaire ($1.2 Million, actually). This math works out for anyone, no matter who your parents are, where you are from, where you went to school, etc. Yes, you have a better chance of becoming wealthy the more you invest, the longer you have to stay invested, and the better choices you make in your investments. By starting early, you will maximize your time invested, which allows you the flexibility to be more conservative in your investments and to invest smaller amounts. But for those with a shorter time to invest, it is still doable for most people. Get your financial life under control by eliminating your debt, setting a household budget, and investing for the future.", "title": "" }, { "docid": "af1e7f772ced48852837068b40ff5770", "text": "Investments earn income relative to the principal amounts invested. If you do not have much to invest, then the only way to 'get rich' by investing is to take gambles. And those gambles are more likely to fail than succeed. The simplest way for someone without a high amount of 'capital' [funds available to invest] to build wealth, is to work more, and invest in yourself. Go to school, but only for proven career paths. Take self-study courses. Learn and expand your career opportunities. Only once you are stable financially, have minimal debt [or, understand and respect the debt you plan to pay down slowly, which some people choose to do with school and house debt], and are able to begin contributing regularly to investment plans, can you put your financial focus on investing. Until then, any investment gains would pale in comparison to gains from building your career.", "title": "" }, { "docid": "4f0d832f5d7b871a5be90f876c28da0d", "text": "A cautionary tale: About 25 years ago I decided that I should try my hand at investing in some technology companies. I was in the computer biz but decided that I might suffer from myopia there, so I researched some medical startups. And I did some reasonably good research, given the available resources (the Internet was quite primitive). I narrowed things down to 4-5 companies, studying their technology plans, then researched their business plans and their personnel. In the end I picked a drug company. Not only did it have a promising business plan, but it had as it's CEO a hotshot from some other company, and the BOD was populated buy big names from tech companies and the like. AND the company had like $2 of cash for every $1 of outstanding share value, following their recent IPO. So I sold a bit of stock I had in my employer and bought like $3000 worth of this company. Then, taking the advice I'd seen several places, I forgot about it for about 6 months. When I went back to look their stock value had dropped a little, and the cash reserves were down about 20%. I wasn't too worried. 6 months later the cash was down 50%. Worrying a little. After I'd had the stock for about 2 years the stock price was about 10% of what I'd paid. Hardly worth selling, so I hung on for awhile longer. The company was eventually sold to some other company and I got maybe $50 in stock in the new company.", "title": "" }, { "docid": "f27a6c6c9dcf94808d2a9ebbab865880", "text": "What could a small guy with $100 do to make himself not poor To answer the question directly, not much. Short of investing in something at the exact moment before it goes bananas, then reinvesting into a bigger stock and bigger etc, it's super high risk. A better way is to sacrifice some small things, less coffee, less smokes, less going out partying so that instead of having $100, you have $100 a week. This puts you into a situation where you can save enough to become a deposit on an appreciating asset (choose your own asset class, property in AU for me). Take out a loan for as much as you can for your $100 a week payment and make it interest only with an offset against it, distributions from shares can either be reinvested or put into the offset or in the case of property, rent can be put against the offset, pretty soon you end up with a scenario where you have cash offsetting a loan down to nothing but you still have access to the cash, invest into another place and revalue your asset, you can take out any equity that has grown and put that also into your offset. Keep pulling equity and using the money from the offset as deposits on other assets (it kind of works really well on property) and within 15 years you can build an empire with a passive income to retire on. The biggest thing the rich guys get that the poor guys don't is that debt is GOOD, use someone else's money to buy an appreciating asset then when you pay it back eventually, you own the growth. Use debt to buy more debt for exponential growth. Of course, you need to also invest your time to research what you are investing in, you need to know when you make the decision to buy that it will appreciate, it's no good just buying off a tip, you may as well drop your money on the horses if you want to play it like that. Fortunately, one thing we all have in common regardless of our money is time, we have time which we can invest.", "title": "" } ]	[ { "docid": "2b55cb9e78c31050015cd70d9138888c", "text": "This is certainly possible. There are lots of strategies that involve taking out loans to invest. However, they are all high risk strategies. There's a school district for a major US city that was able to get incredibly favorable loan terms because their repayment was assured by law. They borrowed a bunch of money and put it into a variety of sure things insured by reliable companies like Lehman Brothers. You can figure out the rest.", "title": "" }, { "docid": "298e494e9db9f6e09526f92efc543b46", "text": "\"These people used the money they received to invest in their business enterprises. As we all know, investments of the wealthy \"\"trickle down\"\" to the poor. If that money had actually gone to poor people they would have spent it on drink and gambling. These people should be commended, not punished.\"", "title": "" }, { "docid": "48c7686df6d9e8717883ccc9746a4972", "text": "\"> The long-run goal is to eliminate poverty through wealth creation. If that makes for some weird new social interactions, I'd say that's a reasonable cost. Yes, I agree but there's a problem if we \"\"allow\"\" income inequality to become so rampant it causes macro-geopolitical issues. I'm not sure how that would be solved, it seems almost inherent in a captalistic model. I suppose mitigating rent seeking in favour of actual wealth creation and spreading meritocracy in proportion rather than exponentiality might be a start. The current wave of green energy, climate change and focus on health might be an indirect mitigating factor to this. Perhaps the limitation of land is the real issue. Space colonization would be an interesting scenario but there's likely a lot of time before that happens. > I mention comparing to earlier periods simply as a measure of progress to determine whether or not there is a problem that needs correction, such as a specific group in society experiencing real wage stagnation, or truly anemic growth rates relative to earlier periods. It's the slope of the trend line for each group that I'd be worried about, where linear or exponential is good, and logarithmic should indicate a potential crisis. That actually makes sense. > Ultimately, I believe that it's not a persons absolute circumstances that matter, but the rate at which those circumstances are improving throughout their lives that most strongly affects their subjective well-being (but that's just my theory). I have not read enough in both economics or human psychology to really have an opinion on this but so far, I would lean towards an agreement. > As for real estate costs, you're absolutely correct that this is a problem, but it's as easily explainable problem. Supply is artificially constrained in most of the US due to the need for explicit government permission (in the form of building permits and zoning laws) in order to build new units. Basic economics says that when supply is artificially restricted, prices will rise. I'm on the fence on this issue because real estate is based on rent seeking and promotion of debt slavery. While I won't argue against the principle of government restriction -> higher prices, what exactly keeps private interests from raising living cost as high as it can? Even in the developed world people spend as much as half of their income on rent / mortgage alone. Other than competition of course but in a high competitive area the incentive is to eat up market share. The laws of accumulation would then argue that in the end a few, large institutions would own the majority of residential homes and living apartments. They can now set their own prices and that will, in effect, be as bad as government regulation.\"", "title": "" }, { "docid": "89027dae39e2b8fc85a969a574124174", "text": "And most wealth is squandered by the third generation. Someone has to become independently wealthy for the cycle to start over. Many will read this headline and use it as an excuse for their own lack of will to succeed. Someone had to succeed independently at some point, to earn the original wealth.", "title": "" }, { "docid": "c62a9ef6ddf8a9f66d4ec1c669245f41", "text": "\"Basically, unless you are an investment professional, you should not be investing in a venture in a developing country shown to you by someone else. The only time you should be investing in a developing country is if a \"\"lightbulb\"\" goes off in your head and you say to yourself, \"\"With my engineering background, I can develop this machine/process/concept that will work better in this country than anywhere else in the world.\"\" And then run it yourself. (That's what Michael Dell, a computer repairman, did for \"\"made to order\"\" computers in the United States, and \"\"the rest is history.\"\") E.g. if you want to invest in \"\"real estate\"\" in a developing country, you might design a \"\"modular home\"\" out of local materials, tailored to local tastes, and selling for less than local equivalents, based on a formula that you know better than anyone else in the world. And then team up with a local who can sell it for you. Whatever you do, don't \"\"invest\"\" and revisit it in 10-15 years. It will be gone.\"", "title": "" }, { "docid": "978c0dd4a602d6f7794dd738427dd574", "text": "\"Following these rules will help a poor person have a better chance to climb out of poverty or avoid poverty. Not finishing high school isn't going to help them find a good job. Having children as a teenager isn't going to put a poor person into the middle class. Having children without being married and having a full time job isn't going to solve poverty, but make it worse. You call these rules \"\"middle class values\"\" as if it is a bad thing, and speak of them as an imposition. Well, breaking these rules is pretty much a ticket to generational poverty.\"", "title": "" }, { "docid": "e6fa5a426d04b3a740e11df187ede9c6", "text": "Indeed. And why should we incentivize careers that contribute to the good of mankind as opposed to careers that prey on mankind. I'm with you. If you want to help people, fuck you, be a poor. If you don't want to be a poor, start a hedge fund and destroy the economy.", "title": "" }, { "docid": "ab0a3f05dcbf817372389423130d9638", "text": "\"It's an interesting point that leaves me conflicted. In some sense being poor also means you are not going to get the same education, or the same value from education made available to you. On the other hand, education seems to be universally empowering, and therefore we try to make it universally available. If the same is true of various enhancements, should we not make them also universally available? For me the \"\"if\"\" is still too big.\"", "title": "" }, { "docid": "810598d503a4143d26ca148267fdc063", "text": "The average inflation rate in the US over the last 17 years is 2.17% per year. source So he has $30,000 now. If another 3 years go by and he doesnt invest it in anything whatsoever, he would have 30,000/(1.0217^3) = $28,128 equivalent buying power 3 years from now. I would not focus on how much money he is losing per year, but instead focus on the religious constraint of not gaining interest. What was the intent of the religious prophet or person who was discussing this issue? If he invested the money with a 1% interest rate, and split the profit down the middle, half of it for his savings and half of it given to a charity of his choice, would that be something that would be likely to change his behavior? Consider this approach if you're trying to help someone to understand the ramifications of a financial.", "title": "" }, { "docid": "3920dc7fad00ba1d6cb961f24716c96a", "text": "Yes, because you cannot have an exponential growth rate that is faster than the rate at which the economy grows on the long term. 100% growth is much more than the few percent at which the economy grows, so your share in the World economy would approximately double every year. Today the value of all the assets in the World economy is about $200 trillion. If you start with an investment of just $1000 and this doubles every year, then you'll own all the World's assets in 37.5 years, assuming this doesn't grow. You can, of course, take into account that it does grow, this will yield a slightly larger time before you own the entire World.", "title": "" }, { "docid": "94e274d66650337c888a371d404e2d7b", "text": "People just love becoming more well-off than they currently are, and one of the ways they do it is with leverage. Leverage requires credit. That desire is not exclusive to people who are not already well-off. For a well-off person who wants to become more well-off by expanding their real estate ventures, paying cash for property is a terrible way to go about it. The same goes for other types of business or market investment. Credit benefits the well-off even more greatly than it benefits the poor or the middle-class.", "title": "" }, { "docid": "3a424b24c9f21bbd6cced1d51b841b70", "text": "buying real estate is for people with sufficient financial resources to cover market downturns. Please read about the 2008 real estate market. Investing in real estate when you are a poor college student is a sure way to become a bankrupt college student. A single word answer to your question: No. Not reasonable. Your best investment is completing college with as little debt as possible and the most practical experience in the market area you are interested in entering.", "title": "" }, { "docid": "e2900a922d243bb2b0282f4fcec6579b", "text": "\"no way -- he suggests that if you don't have an edge, no one needs to play the game. He doesn't like the idea of a \"\"lesser bad\"\" way to invest (MPT). If you do decide to get involved in investing, then it's about absolute performance, not relative. He believes that the whole relative performance thing -- beating some arbitrary benchmark -- is just an artificial construct.\"", "title": "" }, { "docid": "4c63bf814d5fbb4cc00f26a93771acf2", "text": "You add the wash sale loss to your cost basis for the other transaction so you would have two entries in your schedule d reporting 1.) Listing the $2000 loss as a wash 2.) The cost basis for your second transaction is thus $1000+$2000 = $3000 so when it was sold for $2000 you now have a reportable loss of $1000. For more information see here.... http://www.ehow.com/how_5313540_calculate-wash-sale.html", "title": "" }, { "docid": "054ecd42afa51caf2182f0869bccc846", "text": "Ok thanks for this. I am curious, how would they know its facebook that is directing these increased sales. If it's TV or radio, you can tell by increased revenues from increased spots. But for a facebook ad or a google ad, unless this is the only form of marketing, how are you sure (unless again you can ask, did you hear from us by google or fb) its from one of these websites. My thinking was for a physical product when i made this comment.", "title": "" } ]	fiqa
09b5a784571ba6a0ab98832b4d72cc7b	How does compounding of annual interest work?	[ { "docid": "481708893828cf324c2970066f90a2ed", "text": "The general concept is that your money will grow at an accelerating rate because you start getting interest paid on your returns in addition to the original investment. As a simple example, assume you invest $100 and get 10% interest per year paid annually. -At the end of the first year you have your $100 + $10 interest for a total of $110. -So you start the second year with $110 and so 10% would be $11 for a total of $121. -The third year you start with $121 so 10% would be $12.10 for a total of $133.10 See how the amount it goes up each year increases? If we were talking a higher initial amount or a larger number of years that can really add up. That is essence is compound interest. Most of the complicated looking formulas you see out there for compound interest are just shortcuts so you don't have to iteratively go through the above exercise a bunch of times to find out how much you would have after some number of years. This formula tells you how much you would have(A) after a certain number of years(t) at a given interest rate(r) assuming they pay interest n times per year, for example you would use 12 for n if it paid interest monthly instead of yearly. P represents the amount you started out with. If you keep investing monthly (as shown in your example) instead of just depositing it and letting it sit, you have to use a more complicated formula. Finance people refer to this as calculating the future value of an annuity. That formula looks like this: A = PMT [((1 + r)N - 1) / r] x (1+r) A : Is the amount you would have at the end of the time period. N : The number of compounding periods (months if you get interest calculated monthly) PMT : The total amount you are putting in each period (N) r: Just like before, the interest rate you are getting paid. Be sure to adjust this to a monthly number if N represents months (divide APR by 12)* Most interest rates are quoted as APR, which is the annualized interest rate not counting compounding. Don't confuse this with APY, which has compounding built into it and is not appropriate for use in this formula. Inserting your example: r (monthly interest rate) = 15% APR / 12 = .0125 n = 30 years 12 months/year = 360 months A = $150 x [((1 + .0125)360 - 1) / .0125] x (1+.0125) A = $1,051,473.09 (rounded)", "title": "" }, { "docid": "93ff171447e94d9552f117611a7bcb19", "text": "Here's how I have worked it out. Different answer to the one expected. Pretty sure it's right though.", "title": "" } ]	[ { "docid": "262372682997023c76573fcb5ffb66e6", "text": "Firstly, it should be noted that the period of the investment is all of the years 2007 to 2017 inclusive. This totals (temporarily removing one shoe and sock to extend counting range) 11 years! Not the 9 of the OP and the accepted answer... Secondly, there are various definitions of average rate of return. One would be : What constant annual rate of return, compounded annually, will yield the same result as the given investment? Unfortunately, this results in an equation that cannot be solved by ordinary algebraic methods. If r is the desired annual rate, then the equation is: (1+r)^11 * 10000 = 14567 Using logarithms: log(1 + r) = log(1.4567)/11 r = 3.4789%", "title": "" }, { "docid": "2bd9006e9a20a0e1dc3f3c9a12f58033", "text": "Could someone please explain to me how interest rates work? I like to think of interest rates as the price of money. It is specified as a percentage paid per unit of time (for example, 3%/year). To figure out how much interest money you get (or have to pay) for a given amount and time, multiply the amount with the interest rate and then divide by the time divided by the interest rate's specified time. That sounds awfully complicated, so let's look at a simple example instead. You deposit $1,000 at a fixed interest rate of 2% per year, for two and a half years, where the interest is paid at the end of the term. This means that you earn $1,000 * 2% = $20 per year in interest. Multiply this by [2.5 years] / [year] = 2.5, and you will have received $20 * 2.5 = $50 in interest over 2.5 years. If the interest is paid yearly, this gets slightly more complicated, but the principle is the same. Now imagine that you deposit $5,000 at a fixed 3% per year, for half a year. Again, the interest is paid at the end of the term. You now earn $5,000 * 3% [per year] * [[0.5 years] / [year]] = $75 in interest over six months. Variable interest rates makes this a little more complicated, but it is exactly the same thing in principle: calculate the interest paid for each period (taking any compounding into account), then add up all periods to get the total amount of interest paid over time. It also works the same way if you take out a loan rather than depositing money. Tax effects (capitals gains taxes or interest expense deductions) may make the actual amount paid or received different, but that does not change the fundamental aspect of how to calculate interest. Do CD's make more money with higher interest rates, or is it the other way around? Usually fixed interest rate instruments such as certificates of deposit, or loans with fixed rates, pay a higher interest rate for longer terms. This is because it is harder to judge credit risk in a longer term, so whoever gives the loan usually wants a premium for the additional risk. So a 6-month CD will normally pay a smaller percentage interest per year than a five-year CD. Note that this is not always the case; the technical term for when this does not hold is inverted yield curve. Interest rates are almost always formally specified in terms of percent per year, which makes it easy to compare rates. If you buy a $100 6-month CD paying 1% (I told you these were only examples :)) and then reinvest the money at the end of the term in another 6-month CD also paying 1%, the total amount paid will be ($100 * 1 + (1% * 6/12)) = $100.50 for the first term, then ($100.50 * 1 + (1% * 6/12)) = $101.0025 at the end of the second term. As you can see, the compounding of the interest makes this return slightly more than a single $100 12-month CD ($100 * 1 + 1% = $101), but unless you are dealing with large amounts of money, the difference is small enough to be negligible. If you were to put $100 in a 2% one-year CD, you'd get back $102 at the end of the year. Put the same amount in a 5% one-year CD, and you get back $105. So yes, higher interest rates means more interest money paid, for loans as well as deposits. Keep in mind that loans and deposits really are essentially the same thing, and interest calculations work the same way for both. The interest rate of a normal certificate of deposit does not change if the variable interest rates change, but rather is locked in when the money is deposited (or the CD is bought, whichever way you prefer to look at it).", "title": "" }, { "docid": "26821c66dd72cf208a64336d6b63caa5", "text": "I've found the systems that seem to work. Firstly, you need to find how much money is required to pay for the withdrawals after retirement, while still accruing interest. I couldn't seem to do this with an equation, but this bit of javascript worked: yearsToLast: Number of years of yearly withdrawals yearlyWithdrawal: Amount to withdraw each year interest: Decimal form of yearly compounding interest Now that we have how much is required at the beginning of the retirement, to figure out how much to add yearly to hit this mark, you'd use: amount: Previously found required amount to reach interest: Decimal form of yearly compounding interest yearsSaving: Number of years saving till amount needs to be hit I hope this helps some other poor soul, because I could find squat on how to do this. Max", "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": "296356403e77d9534a168df6feeb8fe9", "text": "\"APY stands for Annual Percentage Yield, a calculation done by the financial institution to make simple comparisons of account value after 1 year between competing accounts. The APY includes the effects of compound interest regardless of the rate of interest, so the simple answer is: no, your return is only your principle multiplied by the APY after a year. Credit Unions are more member participatory than a bank, so the name \"\"share\"\" implies that you own a share of the credit union and it's future. It's possible that the CU could elect to pay a dividend on top of your interest rate. Since you have the option to credit the dividend to the share certificate account or another place, it seems that interest would be paid on the dividends left in the SC on the compounding schedule at the contracted rate. You would have to look at the terms of the account to verify precisely when the dividend is payed, whether it's a value above and beyond the interest, and how it is compounded into our account.\"", "title": "" }, { "docid": "1dce5eef63be75b3c823856ea9c21139", "text": "At what point does my investment benefit from compounded interest? Monthly? Quarter? Yearly? Does it even benefit? I think you are mixing things. There is no concept of interest or compounding in Mutual Funds. When you buy a mutual fund, it either appreciates in value or depreciates in value; both can happen depending on the time period you compare. Now, let's assume at the end of the year I have a 5% return. My $10,000 is now $10,500. The way you need to look at this is Given you started with $10,000 and its now $10,500 the return is 5%. Now if you want to calculate simple return or compounded return, you would have to calculate accordingly. You may potentially want to find a compounded return for ease of comparison with say a Bank FD interest rate or some other reason. So if $10,000 become $10,500 after one year and $11,000 after 2 year. The absolute return is 10%, the simple yearly return is 5%. Or the Simple rate of return for first year is 5% and for second year is 4.9%. Or the Average Year on Year return is 4.775%.", "title": "" }, { "docid": "4e5b323e00d0f3483c4b8e7f58baee9d", "text": "Perhaps there is no single formula that accounts for all the time intervals, but there is a method to get formulas for each compound interest period. You deposit money monthly but there is interest applied weekly. Let's assume the month has 4 weeks. So you added x in the end of the first month, when the new month starts, you have x money in your account. After one week, you have x + bx money. After the second week, you have x + b(x + bx) and so on. Always taking the previous ammount of money and multiplying it by the interest (b) you have. This gives you for the end of the second month: This looks complicated, but it's easy for computers. Call it f(0), that is: It is a function that gives you the ammount of money you would obtain by the end of the second month. Do you see that the future money inputs are given with relation to the previous ones? Then we can do the following, for n>1 (notice the x is the end of the formula, it's the deposit of money in the end of the month, I'm assuming it'll pass through the compound interest only in the first week of the next month): And then write: There is something in mathematics called recurrence relation in which we can use these two formulas to produce a simplified one for arbitrary b and n. Doing it by hand would be a bit complicated, but fortunately CASes are able to do it easily. I used Wolfram Mathematica commands: And it gave me the following formula: All the work you actually have to do is to figure out what will be f(0) and then write the f(n) for n>0 in terms of f(n-1). Notice that I used the command FullSimplify in my code, Mathematica comes with algorithms for simplyfing formulas so if it didn't find something simpler, you probably won't find it by yourself! If the code looks ugly, it's because of Mathematica clipboard formatting, in the software, it looks like this: Notice that I wrote the entire formula for f(0), but as it's also a recurrence relation, it can be written as: That is: f(0)=g(4). This should give you much simpler formulas to apply in this method.", "title": "" }, { "docid": "d5d4da8a355958c565267ad5a2005aa7", "text": "\"Sure, stocks don't pay interest. I just looked up the word \"\"compound\"\" in a couple of dictionaries and the relevant definition in all of them just mentioned interest and not growth in the value of stock. So it may be technically inaccurate to talk about \"\"compound growth\"\" of a stock. I'll yield to someone more knowledgeable about the technical language of finance to answer that part. But regardless of whether the word strictly applies, the concept certainly does. Suppose you put $1000 into a mutual fund and the fund grows by 10%. You now have $1100. The next year the fund grows by 15%. So you gain 15% of what? Of your original $1000? No, of your present balance, $1100. The effect is the same as compound interest. There is the fundamental difference that interest is normally a fixed rate: you get such-and-such percent a year as spelled out in a contract. But change in the value of a stock depends on many factors, none of them guaranteed.\"", "title": "" }, { "docid": "00df1661bbb7f46e4761ef8d1b612ca9", "text": "I don't understand the logic of converting a cost of funds of 4% to a monthly % and then subtracting that number from an annual one (the 1.5%). Unfortunately without seeing the case I really can't help you...there was likely much you have left out from above.", "title": "" }, { "docid": "79b730bea961def6987f5d292bed6251", "text": "Let P denote the amount of the investment, R the rate of return and I the rate of inflation. For simplicity, assume that the payment p is made annually right after the return has been earned. Thus, at the end if the year, the investment P has increased to P(1+R) and p is returned as the annuity payment. If I = 0, the entire return can be paid out as the payment, and thus p = PR. That is, at the end of the year, when the dust settles after the return PR has been collected and paid out as the annuity payment, P is again available at the beginning of the next year to earn return at rate R. We have P(1+R) - p = P If I > 0, then at the end of the year, after the dust settles, we cannot afford to have only P available as the investment for next year. Next year's payment must be p(1+I) and so we need a larger investment since the rate of return is fixed. How much larger? Well, if the investment at the beginning of next year is P(1+I), it will earn exactly enough additional money to pay out the increased payment for next year, and have enough left over to help towards future increases in payments. (Note that we are assuming that R > I. If R < I, a perpetuity cannot be created.) Thus, suppose that we choose p such that P(1+R) - p = P(1+I) Multiplying this equation by (1+I), we have [P(1+I)](1+R) - [p(1+I)] = P(1+I)^2 In words, at the start of next year, the investment is P(1+I) and the return less the increased payout of p(1+I) leaves an investment of P(1+I)^2 for the following year. Each year, the payment and the amount to be invested for the following year increase by a factor of (1+I). Solving P(1+R) - p = P(1+I) for p, we get p = P(R-I) as the initial perpetuity payment and the payment increases by a factor (1+I) each year. The initial investment is P and it also increases by a factor of (1+I) each year. In later years, the investment is P(1+I)^n at the start of the year, the payment is p(1+I)^n and the amount invested for the next year is P(1+I)^{n+1}. This is the same result as obtained by the OP but written in terms that I can understand, that is, without the financial jargon about discount rates, gradients, PV, FV and the like.", "title": "" }, { "docid": "98f243b08477754a4db0a21dd740ad38", "text": "The really simple answer is that compound interest is compound not linear. Money invested for longer earns more interest, and the sooner you start investing, the longer it has to earn interest. These ideas come out of pension investment where 65 is the usual retirement age and what you invest in the 1st ten years of your pension (or any other compound interest fund) accounts for over 50% of what you will get out. 25 to 65 is forty years and $100 invested at 7% for 40 years is $1400. $100 invested every year for 40 years the pot would be worth just under $20,000. At 30 years, it would be worth under $10,000, and at 20 years it would be worth only $4099. If you double your investment amount every 10 years you would have invested $15700, and the pot would be worth $45,457. Do exactly the same but starting at 35 instead of 25 and your pot would only be worth $14,200.", "title": "" }, { "docid": "452f27da8e2c009b017c0b881ec4cf77", "text": "I have answered your question in detail here https://stackoverflow.com/questions/12396422/apr-calculation-formula The annuity formula in FDIC document is at first finding PVIFAD present value annuity due factor and multiplying it with annuity payment and then dividing it by an interest factor of (1+i) to reduce the annuity to an ordinary annuity with end of period payments They could have simply used PVIFA and multiplying it with annuity payment to find the present value of an ordinary annuity In any case, you should not follow the directions in FDIC document to find interest rate at which the present value of annuity equals the loan amount. The method they are employing is commonly used by Finance Professors to teach their students how to find internal rate of return. The method is prone to lengthy trial and error attempts without having any way of knowing what rate to use as an initial guess to kick off the interest rate calculations So this is what I would suggest if you are not short on time and would like to get yourself familiar with numerical methods or iterative techniques to find internal rate of return There are way too many methods at disposal when it comes to finding interest rates some of which include All of the above methods use a seed value as a guess rate to start the iterative calculations and if results from successive calculations tend to converge within a certain absolute Error bound, we assume that one of the rates have been found as there may be as many rates as the order of the polynomial in this case 36 There are however some other methods that help find all rates by making use of Eigenvalues, but for this you would need a lengthy discourse of Linear Algebra One of the methods that I have come across which was published in the US in 1969 (the year I was born :) ) is called the Jenkins Traub method named after the two individuals who worked jointly on finding a solution to all roots of a polynomial discarding any previous work on the same subject I been trying to go over the Jenkins Traub algorithm but am having difficulty understanding the complex nature of the calculations required to find all roots of the polynomial In summary you would be better of reading up on this site about the Newton Raphson method to find IRR", "title": "" }, { "docid": "cbb136b3509e9c1c76c28c48ce3eba60", "text": "\"This answer is better served as a comment but I don't have enough rep. It is not guaranteed that they 'do not accrue interest while you are a full time student'. Some student loans can capitalize the interest - before pursuing leveraged investing, be sure that your student loan is not capitalizing. https://www.salliemae.com/student-loans/manage-your-private-student-loan/understand-student-loan-payments/learn-about-interest-and-capitalization/ Capitalized interest Capitalized interest is a second reason your loan may end up costing more than the amount you originally borrowed. Interest starts to accrue (grow) from the day your loan is disbursed (sent to you or your school). At certain points in time—when your separation or grace period ends, or at the end of forbearance or deferment—your Unpaid Interest may capitalize. That means it is added to your loan’s Current Principal. From that point, your interest will now be calculated on this new amount. That’s capitalized interest.\"\" https://www.navient.com/loan-customers/interest-and-taxes/how-student-loan-interest-works/ Capitalized Interest If you accrue interest while you are in school – as with Direct Unsubsidized, FFELP Unsubsidized, Direct and FFELP PLUS Loans, and Private Loans – you will have capitalized interest if it is unpaid. Unpaid accrued interest is added to the principal amount of your loan after you leave school and finish any applicable grace period. Simply put, there will be interest to be paid on both the principal of the loan and on the interest that has already accumulated. To minimize the effects of the capitalized interest on the amount you will pay overall, you can pay the interest during college instead of waiting until after graduation. That way, you start with the original principal balance (minus any fees) when you begin repayment.\"", "title": "" }, { "docid": "6f559fa60e775b9ba47eced6e74218b4", "text": "\"Typically mutual funds will report an annualized return. It's probably an average of 8% per year from the date of inception of the fund. That at least gives some basis of comparison if you're looking at funds of different ages (they will also often report annualized 1-, 3-, 5-, and 10- year returns, which are probably better basis of comparison since they will have experience the same market booms and busts...). So yes, generally that 8% gets compounded yearly, on average. At that rate, you'd get your investment doubled in roughly 9 years... on average... Of course, \"\"past performance can't guarantee future results\"\" and all that, and variation is often significant with returns that high. Might be 15% one year, -2% the next, etc., hence my emphasis on specifying \"\"on average\"\". EDIT: Based on the Fund given in the comments: So in your fund, the times less than a year (1 Mo, 3 Mo, 6 Mo, 1 Yr) is the actual relative change that of fund in that time period. Anything greater is averaged using CAGR approach. For example. The most recent 3 year period (probably ending end of last month) had a 6.19% averaged return. 2014, 2015, and 2016 had individual returns of 8.05%, 2.47%, and 9.27%. Thus that total return over that three year period was 1.08051.02471.0927=1.21 = 21% return over three years. This is the same total growth that would be achieved if each year saw consistent 6.5% growth (1.065^3 = 1.21). Not exactly the 6.19%, but remember we're looking at a slightly different time window. But it's pretty close and hopefully helps clarify how the calculation is done.\"", "title": "" }, { "docid": "dbd62be03bb002ae46dc41aa9b2276eb", "text": "I've been hearing storied from Germans that this is happening in Germany, too, but at the bank level. All anecdotal, people I've met telling me their personal stories, but they follow the same pattern. Go to the bank, try to take out a few grand for a vacation or large purchase, bank tells them they can't have that much and that they just have to do with less, even if the account balance covers the withdrawal.", "title": "" } ]	fiqa
73773e4c4093e44bf837cc372a99218c	Can zero-coupon bonds go down in price?	[ { "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": "" }, { "docid": "56d7c92b9925e7c7aa27486ec83d0f9a", "text": "Certainly, yes, a zero coupon bond can go down in price. If interest rates rise before your bond matures, the price of the bond will go down – and the longer to maturity, the more it will tend to drop. Depending on when you bought and how much interest rates rise, you can incur a capital loss. The bond is guaranteed to be worth a certain amount at maturity as long as the issuer hasn't defaulted, but before maturity the market price of the bond will fluctuate, primarily based on interest rate movements. In fact, zero coupon bonds are even more interest-rate-sensitive than regular bonds (which have periodic coupon interest payments.)", "title": "" }, { "docid": "fa30e29f8506005c072899b81da89854", "text": "Let's say today you buy the bond issued by StateX at 18$. Let's say tommorow morning the TV says that StateX is going towards default (if it happens it won't give you back not even the 18$ you invested). You (and others that bought the same bond like you) will get scared and try to sell the bond, but a potential buyer won't buy it for 18$ anymore they will risk maximum couple of bucks, therefor the price of your bond tomorrow is worth 2$ and not 18 anymore. Bond prices (even zero coupon ones) do fluctuate like shares, but with less turbolence (i.e. on the same period of time, ups and downs are smaller in percentage compared to shares) EDIT: Geo asked in the comment below what happens to the bond the FED rises the interest. It' very similar to what I explained above. Let's say today you buy the bond just issued by US treasury at 50$. Today the FED rewards money at 2%, and the bond you bought promised you a reward of 2% per year for 10 years (even if it's zero coupon, it will give you almost the same reward of one with coupons, the only difference is that it will give you all the money back at once, that is when the bond expires). Let's say tommorow morning the TV says that FED decided to rise the interest rates, and now on it lends money rewarding a wonderful 4% to investors. US treasury will also have to issue bonds at 4%. You can obviously keep your bond until expiration (and unless US goes default you will get back all your money until the last cent), but if you decide to sell your bond, you will find out that people won't be willing to pay 50$ anymore because on the market they can now buy the same type of bond (for the same period of time, 10 years) that give them 4% per year and not a poor 2% like yours. So people will be willing to pay maximum 40$ for your bond or less.", "title": "" } ]	[ { "docid": "1e538c046c14ab86ba88dc26048ac046", "text": "\"What could happen to bonds such as these because of Detroit filing for bankruptcy? Depending on how the courts process Detroit's situation, there could be that some bonds become worthless since they are so low and the city can't pay anything on those low priority debts. Others may get pennies on the dollar. There could also be the case that some bailout comes along that makes the bonds good though I'd say that is a long shot at this point. Are these bonds done for, or will bondholders receive interest payments and eventual payment? I wouldn't suspect that they are done for in the sense of being completely worthless though at the same time, I'd be very careful about buying any of them given that they are likely to be changed a great deal. Could these bonds tend to rise over time after the bankruptcy? Yes, it is possible. If there was some kind of federal or state bailout that is done, the bonds could rise. However, that is one heck of an \"\"if\"\" as you'd need to have someone come to guarantee the bonds in a sense. What similar situations from the past might support this idea? Not that many as this is the biggest municipal bankruptcy ever, but here are a few links that may be useful as a starting point, though keep in mind Detroit's scale is part of the story as it is such a big amount being defaulted:\"", "title": "" }, { "docid": "4d029f09d556c5214bb4458699d3a32e", "text": "Possibly you could use it as a hedging instrument if it's correlated in some way with another asset you're holding. Even though it seems you're losing money with such a bond, that loss might be less than the hedging costs associated with other instruments.", "title": "" }, { "docid": "1415a0c965f8ce3abe3d63f5d79c2040", "text": "0% bonds are desirable for some individuals. It depends on your situation. 0% bonds are usually sold well below par value (eg a 100$ face value bond for 2020 might sell for 90$ today) Hence, your gains will be CAPITAL GAINS. A similar investment paying interest would be taxed as INCOME, and smaller portion of capital gains. In many countries (US, Canada) Capital gains are taxed at a more favourable rate then income. This is especially true when holding these investments in corporations.", "title": "" }, { "docid": "c75190c836c5e7d290322e732ade4dad", "text": "\"No... that's just what I'm owed for letting them use my principal. If I wanted to enjoy the opportunity cost of 0% interest for 13 plus years, I'd just keep the money in my \"\"savings\"\" account (where the 8th wonder of world, miracle of compound interest no longer exists). The bigger question posited by my snark was if/when the bond market will stop trading them as legitimate paper.\"", "title": "" }, { "docid": "e7a66aad95b9c6b7ab472878f1956f3d", "text": "This is pretty basic question, but my head is confused :( If you buy a $1000 bond with 5% interest rate, so it would be $1050 at maturity what does it mean? * you will be paid the interest in coupons (paid in coupons until it totals $50) and at maturity paid $1000 (in one large single payment) * you get paid the full value in coupons ($1050 split by multiple coupons) Any other explanations of how a bond works are welcome, most of the stuff I could find was about what yield is, not how the bond actually works.", "title": "" }, { "docid": "ecfa6bb9c8b37781cfa02cab7521ce22", "text": "Negative coupons are not the same as a negative yield. A $1000 bond that you purchase, at a premium, for $2100 that produces 10 annual coupons of $100 and a redemption of $1000 has a real, positive coupon ($100). The holder of the bond gets this coupon, and the maturity value However, you get back less than your initial investment. There is no growth; the original investment shrinks, or has a negative growth rate. Most mortgage or bond calculators choke on this situation...", "title": "" }, { "docid": "3e9716a7dae9d0ef47a03d0a17927d78", "text": "Notes and Bonds sell at par (1.0). When rates go up, their value goes down. When rates go down, their value goes up. As an individual investor, you really don't have any business buying individual bonds unless you are holding them to maturity. Buy a short-duration bond fund or ETF.", "title": "" }, { "docid": "e3597d5686151e5780cf14fe1fd20ac7", "text": "Perfect super clear, thank you /u/xlct2 So it is like you buy a bond for $X, start getting interest, sell bond for $X :) I was thinking there could be a possibility of a bond working like a loan from a bank, that you going paying as time goes by :D", "title": "" }, { "docid": "f27db9be9f670568435ea70473cb7ef7", "text": "Well, people have been saying interest rates have to go up for years now and have been wrong so far. Also there is an opportunity cost in waiting to buy - if another five years passes with nothing happen, you earn 0% on checking accounts, but at least earn 1.65% per year or so on your 10y bond.", "title": "" }, { "docid": "a80bad42e8dcf8daf1466af64bbdc1e3", "text": "I dont think they have much of a choice if they want to deleverage. If they do that, short and long term rates are going up whether the economy is ready for it or not. If they wait until the next recession, they'll have to buy even more bonds. They could just be moving the target up to accommodate for what they (a pro deleveraged fed) considers inevitable rate increases sure to come anyway.", "title": "" }, { "docid": "238b8ff8728c9bc18c819b8167faf591", "text": "\"TL;DR: If your currently held bond's bid yield is smaller than another bonds' ask yield. You can swap your bond for bigger returns. Let's imagine you buy a long bond for $12000 (face value of $10000) and it has 6% coupon. The cash flows will have an internal return rate of 4.37%, this is the published \"\"ask yield\"\" in 2014 of the bond. After six years, prices have fallen, inflation and yields went up. So you can sell it for only $10000. If you would do it, the IRR will be only 2.55%, so there will be less return, than if you keep it. But if you would \"\"undo\"\" the transaction, then the future cash flows would yield 6.38%. This is the \"\"bid yield\"\" in 2020 of the bond. If you can find an offer that yields more than 6.38%, you have better returns if you sell your bond and invest that $10000 in the other bond. But as other answers pointed it out, you rarely have this opportunity as the market is very effective. (Assuming everything else is equal.)\"", "title": "" }, { "docid": "d8db041479ed865d53a72254769d9b90", "text": "As the fed liquidates their fiat, the stock market will go down to zero and bonds will evaporate as their denominated in worthless paper. [The government is going to come for people's gold and seize assets](http://www.zerohedge.com/news/mark-faber-i-am-convinced-whole-derivatives-market-will-cease-exist-and-will-go-zero) Guns and canned goods are the only safe investments from here forward.", "title": "" }, { "docid": "700a832d0b1b821f98fd193c3ede2463", "text": "On first glance it sounds to good to be true. From what I understand bridge loans are for people waiting on other loans. In this case I would presume a housing developer would take this loan if something were to go wrong and their first choice of funding went wrong. Not anything wrong with that in and of itself but the coupon is way, way too big not to draw attention. Examine the financial statements of the credit institutions and the companies they're giving credit to would be the only solution. The terms of the bond should be dictated by all information available, therefore if the return is this lucrative then there must be a large degree of risk associated with it.", "title": "" }, { "docid": "cba82135c4def9b57bde82806051cac8", "text": "Next year, the Fed plans on unwinding the Bonds and MBS. They'll ramp up to $50 billion a month. At the same time we'll be selling Bonds on the market to finance the debt at a rate of $70 billion a month. I wonder who's going to have the cash to buy the Toxic MBS and the low yield Bonds they'll be unloading on top of the usual Bonds for future debt. Those Bonds will have to pay double digit rates before anyone will buy them. Future generations will just get even more screwed the way the Fed has it planned.", "title": "" }, { "docid": "f1ec0ea7df028b05d375bd3ee26928e6", "text": "Most reflationary policies are talking about stopping, so hopefully in 2018 the CBs will stopping buying so much. BOJ is rethinking their policy of buying treasuries when our US yields start to rise (to shrink them and protect their currency). So hopefully once we get past global QE, things can get back to a more “normal” status. As far as advice on finding value...err...good luck? [Growth of Monetary Base and M2 chart in article](https://www.google.com/amp/s/seekingalpha.com/amp/article/4113280-federal-reserve-never-printed-money-part) Also look at how the money multiplier is shrinking.", "title": "" } ]	fiqa
53a4f953d7b2f736133a70216e1a1e92	Opening 5 credit cards at once with no history to ruin, is it a good idea?	[ { "docid": "5e84ad1a155299c3cc4cad8018e600cf", "text": "\"I would not call this a \"\"good\"\" idea. But I wouldn't necessarily call it a bad idea either. Before you even consider it, you need to do a little bit of soul searching. If there is ANY chance that having multiple credit cards could entice you to spend more than you otherwise would, then this is definitely a bad idea. Avoiding temptation is the key to preventing regrettable actions (in all aspects of life). Psychoanalysis aside, let's take a mathematical approach to the question. I believe your conclusion is correct if you add some qualifiers to it: A few years from now, then your credit score will probably be higher than if you just had 1 credit card. Here are some other things to consider: And, saving the best for last: As for the hard inquiries, they should only have an effect on your credit score for 1 year (though they can be seen on your report for 2 years). Final thought: if you decide to do this (and I personally don't recommend it), I would keep the number of applications smaller (3-5 instead of 10-15). I also would only choose cards that have no annual fee. Try to choose 1 card that has 1-2% cash back and make that your regular card.\"", "title": "" }, { "docid": "aad16be384b6db3f82f18855c2068719", "text": "Yes, this is definitely possible. You can optimize your credit worthiness within 18 months, you would first start with a secured credit card just to establish a little bit of credit history and then use that as a jumping point 6 months later to do several unsecured credit card applications. As a student, your primary limiting factor will be your truthful income when you apply for the cards, resulting in low limits, where using less than 30% of those limits is not a useful amount of money. Your credit scores can be looked at as a spendable balance. New inquiries spend some of that balance, low utilization earns you more of the balance. They will trend upwards with the right approach, and you can use the balance at their highs to time more inquiries. Note: My answers typically differ in that I narrowly tailor my answers to the question asked, and don't masquerade or acknowledge the idea of advice. Impulsive spenders with credit have bad credit, I can live with that.", "title": "" } ]	[ { "docid": "f226011def59447bb6d6e392fde76909", "text": "If your accounts have an overdraft facility, then every open account is classed as available credit which has a negative effect on your credit score. It's not normally a major concern but it is a factor. (nb. this definitely applies to the UK, maybe not where you are)", "title": "" }, { "docid": "9db5f2bb069cd14d9733940060d165ac", "text": "\"The biggest (but still temporary) ding you'll see on your credit score from opening a new account is from the low average (and low minimum) account age. This will have a stronger effect than the hard pull of the credit report, which is still a factor (but not much of one if you only have 1-2 pulls in the past couple years). Having a lower average account age increases your risk to lenders. Your average will go up by one month per month, and each time you open an account it will suffer a drop proportional to the number of accounts you already had open before. So if you want to have a more \"\"solid\"\" credit score that stays strong in the face of new accounts in the future, it's better to open a few more accounts now (assuming you can ride out the temporary drop in score and aren't planning to go e.g. mortgage-shopping in the very near future). Having an additional line of credit will also likely cause your credit card utilization (total balance / total credit limit, expressed as a percentage) to decrease, which would tend to increase your credit score, counteracting the age factor, unless your utilization is already extremely low (which it probably is given your monthly account payoffs). There are various credit score simulators out there, from places that show you your credit score, and you can put in a hypothetical new card account to see the immediate likely impact for your particular situation. You identified other costs, such as risk of fraud and fees. You should check your statements once in a while even if you're not using the card, just to make sure no one else is. The bit of additional time required for this is a nonzero cost of having an open credit card account. So is the additional hassle of dealing with having the card stolen etc. if you carry it in your wallet and your wallet's stolen. If you have an account with zero activity for some number of years, the bank may close it automatically and that can reflect negatively on a credit report (as a bank closure of the account, the reason is often obscured). Check your terms and conditions and/or have some activity every so often to prevent this from happening. Some of the otherwise most attractive credit cards have monthly or annual fees, which will cost you, and you won't want to close those because it would then reduce your credit score (e.g. by reducing the total available credit and increasing your utilization percentage) - so the solution is don't apply for credit cards that have monthly/annual fees. There are plenty of good cards without those fees. With a credit score that high, you can get cards that have some very good benefits and rewards programs, as well as some with great introductory offers. Though I'm not familiar with details of Amazon's offer, $80 cash up-front with nothing else seems unlikely to be among your best options. I would think that for at least some of the fee-free cards available to you, the benefits exceed the costs, and you could \"\"cash in\"\" some of the benefits of your good credit record to get those benefits (i.e. this is one of those things you work hard to build good credit for), while also building your long-term reputation for repayment reliability. Also be aware as you shop around for cards that credit card companies pay fairly high referral fees to websites that send customers their way, so if you want you can think about who you're supporting when you click the link that takes you to an application you complete, and choose to support a site you think is providing a useful consumer-focused service. As factors affecting your credit score in addition to payment history (i.e. making regular payments as agreed on the new account will help you), Equifax lists:\"", "title": "" }, { "docid": "9fecda5c09eae6f09dcb6d8253125323", "text": "If you have the money and the determination to pay off all the cards in six months, then the order will make little difference to your credit score, and to your finances. If you had less money available (say you could pay off $500 a month in total), then it would be good for financial reasons to pay off the credit card with the highest interest rate first, so you pay less interest. It would be good for psychological reasons to pay the card with the smallest amount first (so you feel successful quickly, and some people need that feeling of success to continue paying off, just psychological). And if these things contradict each other, figure out what is more important. And whatever you do, paying back your debt is better than not paying it back. So if you can't make up your mind, then you pay #1, then #2, then #3, then #4, then #5.", "title": "" }, { "docid": "cb85de0b7686d07f00729fa1f49c9002", "text": "The U.S. bankruptcy laws no longer make it simple to discharge credit card debt, so you can't simply run up a massive tab on credit cards and then just walk away from them anymore. That used to be the case, but that particular loophole no longer exists the way it once did. Further, you could face fraud charges if it can be proven you acted deliberately with the intent to commit fraud. Finally, you won't be able to rack up a ton of new cards as quickly as you might think, so your ability to amass enough to make your plan worth the risk is not as great as you seem to believe. As a closing note, don't do it. All you do is make it more expensive for the rest of us to carry credit cards. After all, the banks aren't going to eat the losses. They'll just pass them along in the form of higher fees and rates to the rest of us.", "title": "" }, { "docid": "5fc083d123368ec99df5ecda0132fdf5", "text": "If you are planning to get new cards, it is probably best to open the accounts as soon as possible to start establishing a history of good credit use. You might also wish to open multiple accounts so that future lines will have less of an impact on your average age of open credit lines. Since you will probably have higher interest rates it is also advisable never to carry a balance on any of your newly acquired cards. This will prevent a recurrence of the problems you are now trying to recover from.", "title": "" }, { "docid": "4e12985a2b089ca2dbf9acd99f2efcad", "text": "Your plan will work to increase your total credit capacity (good for your credit score) and reduce your utilization (also good). As mentioned, you will need to be careful to use these cards periodically or they will get closed, but it will work. The question is whether this will help you or not. In addition to credit capacity and utilization, your credit score looks at things like These factors may hurt you as you continue to open accounts. You can easily get to the stage where your score is not benefitting much from increased capacity and it is getting hurt a lot by pulls and low average age. BTW you are correct that closing accounts generally hurts your score. It probably reduces average age, may reduce maximum age, reduces your capacity, and increases your utilization.", "title": "" }, { "docid": "4abf089392937ac6b206358fd01f1bd8", "text": "Closing a credit card decreases your total available balance, which can have a small negative effect if that credit card is a significant portion of your available credit. If it is not, then it likely will have little impact on your credit in that department. However, the case you explained - get a card, use it for a short while, then dump it - won't have much long-term impact to your available credit, since you will end up with the same amount as you started. The second factor will be the average age of accounts. This will affect you both in the short and long term, if you've had accounts open for a fairly long time, but won't impact you much if your credit history is fairly short. Even closed accounts affect the Average Age of Accounts for FICO scores (but not for some other scoring methods such as VantageScore). If you have only one other account, and it was 10 years old, then opening and closing this decreases your average age of accounts from 10 to 5 years - a significant hit which will not go away for years (10+ years in some cases, though usually 7 years). This will lower your score some. If you have had a lot of accounts, though (including things like mortgage, student loan, etc.), this won't have as significant of an impact, and if you had a short history in the first place, it won't hurt you much either. The third factor will be the hard credit pull. That will have a small negative impact for around six months; so don't do this just before getting a mortgage, but mostly this won't be a significant impactor for you.", "title": "" }, { "docid": "9be0004f5f7cefe478ac7e9dc888bd62", "text": "\"The short answer is no, it's probably not ok. The longer answer is, it might be, if you are very disciplined. You need to make sure that you have enough money to pay off the card after a year, and that you pay the card on time, every month, without exception. There may also be balance transfer or other fees that only make it worth while if the interest rate or balance on the other loan is high. The problem is most of these offers will raise your rates to very high levels (think 20% or more) if you are even one day late with one payment. Some of them also will back charge you interest starting from day one, although I have only seen this on store credit \"\"one year, same as cash\"\" type offers. In the end you need to balance the possible payoff against how much it will cost you if you do it wrong. Remember, the banks are not in the business of lending out free money. They wouldn't do this unless enough people didn't pay it back in one year for them to make a profit.\"", "title": "" }, { "docid": "ffcd05e21d93a82f19cefb9df06b032f", "text": "\"I'd say close them if they have fees, if you're worried about fraud or if you're going to be tempted to use them. It may have an affect on your credit rating, but it shouldn't hurt you seriously. Having too many cards gives you the \"\"opportunity\"\" to overspend, which obviously isn't good.\"", "title": "" }, { "docid": "81d114ea295197e18a5c001af09566f2", "text": "I should apply for everything I can on the same day, get approved for as many as I can First it may not sound as easy. You may hardly get 2-3 cards and not dozens. Even if you submit the applications the same day; If you still plan this and somehow get too many cards, and draw huge debt, then the Banks can take this seriously and file court case. If Banks are able to establish the intent; this can get constituted as fraud and liable for criminal proceedings. So in short if someone has the money and don't want to pay; the court can attach the wage or other assets and make the person pay. If the intent was fraud one can even be sent to jail.", "title": "" }, { "docid": "d4b1183f1d3b66ff43bccc63bd214d7e", "text": "\"Ditto Nate Eldredge in many ways, but let me add some other thoughts. BTW there are not four types of account, but five. You're forgetting equity, also called capital. Would it be possible to design an accounting system that does not have 5 types of accounts, maybe is simpler in other ways, and is internally consistent and logical? I'm sure it is. But what's the advantage? As Nate points out, the existing system has been in use for hundreds of years. Lots of people know how it works and understand it. I'd add: People have long since worked out how to deal with all the common situations and 99% of the odd cases you're likely to hit. If you invent your own system, you're starting from scratch. You'd have to come up with conventions to handle all sorts of situations. How do I record buying a consumable with cash? How do I record buying a capital asset with credit? How do I record paying off debts? How do I record depreciation? Etc etc. If you worked at it long and hard enough and you're a reasonably bright guy, maybe you could come up with solutions to all the problems. But why? If you were approaching this saying, \"\"I see these flaws in the way accounting is done today. I have an idea for a new, better way to do accounting\"\", I'd say good luck, you have a lot of work ahead of you working out all the details to make a fully functioning system, and then persuading others to use it, but if you really do have a better idea, maybe you can revolutionize the world of accounting. But, \"\"The present system is too much trouble and I don't want to bother to learn it\"\" ... I think that's a mistake. The work involved in inventing your own system is going to end up being way more than what it would take to learn the existing system. As to, Aren't liabilities a lot like assets? Well, in a sense I suppose. A credit card is like a checking account in that you can use it to pay for things. But they're very different, too. From an accounting point of view, with a checking account you buy something and then the money is gone, so there's one transaction: reduce cash and increase office supplies or whatever. But with a credit card there has to be a second transaction, when you pay off the charge: So, step 1, increase debt and increase office supplies; step 2, decrease debt and decrease cash. Credit cards charge interest, well you don't pay interest to use your own cash. Etc. One of the beauties of double-entry book-keeping is that every transaction involves a debit and a credit of equal amounts (or a set of debits and credits where the total of the debits equals the total of the credits). If you combine assets and liabilities into, whatever you call it, \"\"balance accounts\"\" say, then some transactions would involve a matching debit and credit while others would involve a positive debit and a matching negative debit and no credit. I'm sure you could make such a system work, but one of the neat built-in protections against error is lost. There's a very logical distinction between things that you have or that others owe you, and things that you owe to others. It makes a lot of sense to want to list them separately and manage them separately. I think you'd pretty quickly find yourself saying, \"\"well, we have two types of balance accounts, those that represent things we have and which normally have positive balances, which we list on chart A, and those that represent things we owe and which normally have negative balances, which we list on chart B\"\". And before you know it you've just reinvented assets and liabilities.\"", "title": "" }, { "docid": "33017be05955f80f7df293a5ded9155c", "text": "\"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always \"\"paid on-time\"\" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee.\"", "title": "" }, { "docid": "39f6c48c7af1810a0a19a134191176db", "text": "I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense.", "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": "8d2165cf9b5f612c3205f2a984a49d0d", "text": "You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them. Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.", "title": "" } ]	fiqa
32ffd168ee3213b81f2e010a8019d367	First time homeowner and getting a mortgage?	[ { "docid": "85b29fb9f21e2f7238927cc9b7d31b6e", "text": "If you have good credit, you already know the rate -- the bank has it posted in the window. If you don't have good credit, tell the loan officer your score. Don't have them run your credit until you know that you're interested in that bank. Running an application or prequal kicks off the sales process, which gets very annoying very quickly if you are dealing with multiple banks. A few pointers: You're looking for a plain vanilla 30 year loan, so avoid mortgage brokers -- they are just another middleman who is tacking on a cost. Brokers are great when you need more exotic loans. Always, always stay away from mortgage brokers (or inspectors or especially lawyers) recommended by realtors.", "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": "bd28cbf9d3e43fb4904a41b6e0d9ae7e", "text": "Check with you local bank where you have an account. Sometimes they can offer a discount that results in a good rate. I just refinanced a month ago with Bank Of America and their rates were very competitive. What set them aside from the rest was their low closing fees. Otherwise I would shop around on bankrate.com and it will show you results of both local and online mortgage brokers. It will list the rates and expected fees. The also list an average national rate so you can compare the rate you are considering and see if there could be a better deal elsewhere.", "title": "" }, { "docid": "2ab53e43975b4fa2a9b46afa695c6079", "text": "Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider.", "title": "" }, { "docid": "ec20896f13125ca01405125cbd24a8e7", "text": "I second the suggestions for your local credit union and asking co-workers who might also be in the process of a home purchase. Additionally, you want to educate yourself as much as possible so that you can ask questions about the calculations responsible for the differences. I got different values starting from the various online automatic quotes all the way through to the GFE and it was not obvious to me. You can also sign-up for free workshops for first time home buyers, though most of the material will be a breeze it helps you get worksheets going and lists going for documentation that you need to gather. You might want to start at the HUD site and explore. Especially the Borrower's Rights. The cost booklet was very helpful for me to interpret the GFE, but honestly I didn't appreciate it the first time it was handed to me. Finally, you might meet qualifications to take advantage of FHA programs; the waitlists discourage everyone including the loan brokers, but you want to at least be aware of programs that can help.", "title": "" } ]	[ { "docid": "4224baa1404950971eeb2d436c65719a", "text": "\"The first issue you'll find is that if you aren't going to immediately live in the house as a primary residence, this property counts as a \"\"second home\"\" or \"\"investment property\"\". You'll generally pay a higher interest rate, have a larger down payment, and qualify for less government-backed programs/incentives/subsidies than you would otherwise. The lending criteria on such properties is always more strict - and generally more costly - than an equivalent primary residence. Lenders won't really care that in 10 years you or your parents plan to move in - you can't be held to that, so they'll generally ignore that plan entirely. On a related note, you should be aware that insurance for the property will also generally cost more, but you'd need to get quotes to determine if that is at all significant in your situation. You'll need to talk with a few potential lenders, but from a first read it sounds like it would be best \"\"storied\"\" like so: you and your parents want to buy a 2nd home or vacation home, which you'll share the use of (vacations, etc, and being converted to a primary residence later). It'll need to be clear what plan to use the property for - if you intend to rent out the home in the interim years then instead make that clear and state it will be an investment home; if it is what you are planning it might make it easier, as expected rent for the property will be considered. Saying you want a mortgage for a home no one will live in for a decade probably isn't a good idea, as a general plan anyway. Either way, this can be called a \"\"joint mortgage\"\". When I was a loan officer we didn't use that term, but it's basically just a mortgage application with multiple people on it, all of whom are combined together to qualify for the loan. Everyone's income, debts, assets, and credit get included, which can work or one person's situation can cause the whole thing to collapse. From your description I think this could work for you, and one option is to set it up where only one of the parents is on the application if the other parent has problematic credit situation. Note that his possibility is often restricted by local law, so it may not be an option for you in your jurisdiction, but worth being aware of. An alternative is you just buy the property and the parents gift you the down payment, and you list them as beneficiaries in will/trust in case something happens to you before they retire, but I don't know if that would make any sense in your situation. This is a single applicant mortgage, and it means only you are considered as buying it, which sometimes is the only option depending on your parents current financial situation. It's usually something you try if the other option doesn't work, but it's a fallback plan. Some lenders will allow guarantors (co-signers in US parlance), but this will vary by lender and locale - often what they actually want is a joint mortgage, not really a guarantor/cosigner. Finally, you'll need to plan for what happens if things don't go as planned, regardless of what happens. What if your income changes, if either of your parents become deceased in advance of retirement, if they get a divorced from each other, or if either/both become ill or disabled and need assisted care? Planning for such unpleasant possibilities (even if they seem crazy and not going to happen in your mind right now) can save you all a tremendous amount of heart ache later on when the unexpected (including things I didn't mention) pops up.\"", "title": "" }, { "docid": "a2e62c61818c55d0ee087218fe5a7e92", "text": "Unless you think it's likely that you'll move back soon, this is probably not the best way to get experience as a landlord. You might want to talk to a property management company and look at the fees they would charge to do your job as landlord. You should also consider that your mortgage may require you to occupy the house for a certain amount of time. Mortgages for non-owner-occupied properties usually have a higher interest rate and vetting criteria are more strict.", "title": "" }, { "docid": "830023386cce5d5933accccde88f990d", "text": "Honestly I would look for a house you can afford and one that is below the maximum amount of what they are willing to lend you. The reason is owning a house is not a quick loan that you can pay off in a year or two (unless you're rich then I would question why are you even bothering with a loan). This is a long term commitment; can you honestly say your job will provide the money for the mortgage, the upkeep and remodeling of the house (even if it's the perfect house you will want to change something, make the bathroom bigger, put in a pool table etc.. etc..), living expenses and any hiccups life throws at you? Like most of us, that answer will be no. Always have money and supplies for that rainy day, for those lean days. For that mortgage payment. And if nothing happens you can always use the money to pay the mortgage off faster or take a vacation.", "title": "" }, { "docid": "f000814393145523bb955e8c305cd035", "text": "\"I've never heard of rent quoted per week. Are you in the US? In general, after the down payment, one would hope to take the rent, and be able to pay the mortgage, tax, insurance, and then have enough left each year to at least have a bit of emergency money for repairs. If one can start by actually pocketing more than this each year, that's ideal, but to start with a rental, and only make money \"\"after taxes\"\" is cutting it too close in my opinion. The 19 to 1 \"\"P/E\"\" appears too high, when I followed such things I recall 12 or under being the target. Of course rates were higher, and that number rises with very low rates. In your example, a $320K mortgage at 4% is $1527/mo. $400/wk does not cut it.\"", "title": "" }, { "docid": "34b90f582d0325e1d5a143df06626128", "text": "\"I went through the process so I'll add my experience for posterity. On the morning of the day I was ready to pay, I went to my mortgage company's web site and got an instant payoff statement dated for the same day. This had the final payoff amount as well as addresses to send checks and information about wiring. I printed this statement out and took it to my bank the same day and told them that I wanted to wire money. They referred to the printout and sent the money to the mortgage company. The next day, the mortgage company web site indicated that the loan was paid in full. Although sending a check (and the payoff statement indicated that cashier's checks were \"\"preferred\"\"), wiring the money was an easy process and helped me to overcome my concerns about situations that might arise if mail had been used (i.e. I did not want to deal with the complexity of day-late/day-early fees/credits, and I did not want to worry about the complexity of potentially losing a cashier's check in the mail).\"", "title": "" }, { "docid": "15b8790c8e70783945c7ac626dfa0e19", "text": "You can choose to pay your mortgage instead of another bill, or vice versa. Your net will change from month to month while your gross is relatively static. I can make a bunch of promises to my load officer about my expenses, but it is very difficult to verify. Moreover, it is pretty hard to give your net income and plan for emergencies. So for the sake of reliability, verifiability, and general ease a lender will look at your gross. YOU should definitely look at your net when deciding if you can afford a loan.", "title": "" }, { "docid": "2c42f2eb5810f7b396be829f8e997dfd", "text": "\"Outside of broadly hedging interest rate risk as I mentioned in my other answer, there may be a way that you could do what you are asking more directly: You may be able to commit to purchasing a house/condo in a pre-construction phase, where your bank may be willing to lock in a mortgage for you at today's rates. The mortgage wouldn't actually be required until you take ownership from the builder, but the rates would be set in advance. Some caveats for this approach: (1) You would need to know the house/condo you want to move into in advance, and you would be committing to that move today. (2) The bank may not be willing to commit to rates that far in advance. (3) Construction would likely take far less than 5 years, unless you are buying a condo (which is the reason I mention condos specifically). (4) You are also committing to the price you are paying for your property. This hedges you somewhat against price fluctuation in your future area, but because you currently own property, you are already somewhat hedged against property price fluctuation, meaning this is taking on additional risk. The 'savings' associated with this plan as they relate to your original question (which are really just hedging against interest rate fluctuations) are far outweighed by the external pros and cons associated with buying property in advance like this. By that I mean - if it was something else you were already considering, this might be a (small) tick in the \"\"Pro\"\" column, but otherwise is far too committal / complex to be considered for interest rate hedging on its own.\"", "title": "" }, { "docid": "4d2dca01d9cfa77aa73046505321e972", "text": "\"I see two important things missing from your ongoing costs: maintenance and equipment. I also don't see the one-time costs of buying and moving. Maintenance involves doing some boring math like \"\"roofs go every 20 years or so and a new roof would cost $20k, so I need $1000 a year in the roof fund. Furnaces go every 20 years and cost $5k, so I need $250 a year in the furnace fund.\"\" etc etc. Use your own local numbers for both how long things last and how much they cost to replace. One rule of thumb is a percentage of the house (not house and land) price each year keeping in mind that while roof, furnace, carpet, stove, toilets etc all need to get replaced eventually, not everything does - the walls for example cost a lot to build but don't wear out - and not all at a 20 year pace. Some is more often, some is less often. I've heard 5% but think that's too high. Try 3% maybe? So if you paid $200,000 for a $100,000 house sitting on $100,000 of land, you put $3000 a year or about $250 a month into a repair fund. Then ignore it until something needs to be repaired. When that happens, fund the repair from the savings. If you're lucky, there will always be enough in there. If the house is kind of old and on its last legs, you might need to start with a 10 or 20k infusion into that repair fund. Equipment means a lawnmower and trimmer, a snow shovel, tools for fixing things (screwdriver, hammer, glue, pliers, that sort of thing.) Maybe tools for gardening or other hobbies that house-owners are likely to have. You might need to prune back some trees or bushes if nothing else. Eventually you get tools for your tools such as a doo-dad for sharpening your lawnmower. Well, lots of doo-dads for sharpening lots of things. One time expenses include moving, new curtains, appliances if they don't come with the house, possibly new furniture if you would otherwise have a lot of empty rooms, paint and painting equipment, and your housewarming party. There are also closing costs associated with buying a house, and you might need to give deposits for some of your utilities, or pay to have something (eg internet) installed. Be sure to research these since you have to pay them right when you have the least money, as you move in.\"", "title": "" }, { "docid": "039cc579a85a6ad914607b922112d2e7", "text": "A point that hasn't been mentioned is whether paying down the mortgage sooner will get you out of unnecessary additional costs, such as PMI or a lender's requirement that you carry flood insurance on the outstanding mortgage balance, rather than the actual value/replacement cost of the structures. (My personal bugbear: house worth about $100K, while the bare land could be sold for about twice that, so I'm paying about 50% extra for flood insurance.) May not apply to your loan-from-parents situation, but in the general case it should be considered. FWIW, in your situation I'd probably invest the money.", "title": "" }, { "docid": "37eefec0f97bf0090dbd8ec66afcbf52", "text": "\"A bank may not like loaning money to you for this. That is one snag. You listed 500,000-600,000$ for a monster of a house (3000 sqft is over three times the average size of homes a hundred years ago). Add in the price of the land at 60K (600K divided ten ways). Where I live, there is a 15% VAT tax on new homes. I can't find out if California imposes a VAT tax on new homes. Anyway, returning back to the topic, because of the risk of loaning you 660K for a piece of land and construction, the bank may only let you borrow half or less of the final expected cost (not value). Another huge snag is that you say in a comment to quid \"\"I came up with this conclusion after talking to someone who had his property built in early 2000s in bay area for that average price\"\". Let's apply 3% inflation over 15 years to that number of 200$/sqft. That brings the range for construction costs to 780K-930K. Even at 2% inflation 670K-810K. Edit: OP later expanded the question making it an inquiry on why people don't collaborate to buy a plot of land and build their homes. \"\"Back in the day\"\" this wasn't all that atypical! For example, my pastor's parents did just this when he was a young lad. Apart from the individual issues mentioned above, there are sociological challenges that arrive. Examples: These are the easy questions.\"", "title": "" }, { "docid": "f322b9b5a08727925d15bfeaf3f74e1d", "text": "I think the consensus is that you can't afford a home now and need to build more of a down payment (20% is benchmark, you may also need to pay mortgage insurance if you are below that) and all considered, it takes up too much of your monthly budget. You didn't do anything wrong but as mentioned by Ben, you are missing some monthly and yearly costs with home ownership. I suggest visiting a bank or somewhere like coldwell banker to discuss accurate costs and regulations in your area. I know the feeling of considering paying more now for the very attractive thought of owning a home... in 30 years. After interest, you need to consider that you are paying almost double the initial principle so don't rush for something you can do a year or two down the line as a major commitment. One major point that isn't emphasized in the current answers. You have a large family: Two children, a dog, and a cat. I don't know the kid's ages but given you are in your early twenties and your estimated monthly costs, they are probably very young before the point they really put any stress financially but you need to budget them in exponentially. Some quick figures from experience. Closing costs including inspections, mortgage origination fee, lawyer fees, checking the history of the home for liens, etc, which will set you back minimum 5% depending on the type of purchase (short sales, foreclosures are more expensive because they take longer) Insurance (home and flood) will depend on your zoning but you can expect anywhere between $100-300 a month. For many zones it is mandatory. Also depending on if it's a coop ($800+), condo($500+) or a townhouse-type you will need to pay different levels of monthly maintenance for the groundskeeping as a cooperative fee. at an estimate of a 250K home, all your savings will not be able to cover your closing costs and all 250k will need to be part of your base mortgage. so your base monthly mortgage payment at around 4% will be $1,200 a month. it's too tight. If it was a friend, I would highly suggest against buying in this case to preserve financial flexibility and sanity at such a young age.", "title": "" }, { "docid": "5de97a1bc0bbdec7f2e311fbfba9d0bd", "text": "\"Be careful that pride is not getting in the way of making a good decision. As it stands now what difference does it make to have 200K worth of debt and a 200K house or 225K of debt and a 250K house? Sure you would have a 25K higher net worth, but is that really important? Some may even argue that such an increase is not real as equity in primary residence might not be a good indication of wealth. While there is nothing wrong with sitting down with a banker, most are likely to see your scheme as dubious. Home improvements rarely have a 100% ROI and almost never have a 200% ROI, I'd say you'd be pretty lucky to get a 65% ROI. That is not to say they will deny you. The banks are in the business of lending money, and have the goal of taking as much of your hard earned paycheck as possible. They are always looking to \"\"sheer the sheep\"\". Why not take a more systematic approach to improving your home? Save up and pay cash as these don't seem to cause significant discomfort. With that size budget and some elbow grease you can probably get these all done in three years. So in three years you'll have about 192K in debt and a home worth 250K or more.\"", "title": "" }, { "docid": "4dcd512d72c0534795299c5d977528a9", "text": "Are you trolling right now? If you knew what you were doing when you made that bet, you might consider reinvesting that money. 24yr olds don't buy first-time houses anymore. Houses today are meant for existing landowners and wealthy foreign investors willing to pay cash.", "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": "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": "" } ]	fiqa
f8519f5510c3dc8f8edb0eeece581aea	Why don't people generally save more of their income?	[ { "docid": "3e1626a8841ae03410334dd28d884510", "text": "\"If one takes a slightly more expansive view of the word \"\"saving\"\" to include most forms of durable asset accumulation, I think the reason some do and most don't is a matter of a few factors, I will include the three that seem obvious to me: Education Most schools in the US where I live do not offer personal finance courses, and even when they do, there is no opportunity for a student to practice good financial habits in that classroom setting. I think a simple assignment that required students to track every penny that they spend over the period of a few months would help them open their eyes to how much money is spent on trivial things that they don't need. Perhaps this would be more effective in a university setting where the students are usually away from home and therefore more responsible for the spending that occurs on their own behalf. Beyond simple education about personal finances, most people have no clue how the various financial markets work. If they understood, they would not allow inflation to eat away at their savings, but that's a separate topic from why people do not save. Culture Since much of the education above isn't happening, children get their primary financial education from their parents. This means that those who are wealthy teach their children how to be wealthy, and those who are poor pass on their habits to children who often also end up poor. Erroneous ideas about consumption vs. investment and its economic effects also causes some bad policy encouraging people to live beyond their means and use credit unwisely, but if you live in a country where the average person expects to eat out regularly and trade in their automobiles as soon as they experienced their highest rate of depreciation, it can be hard to recognize bad financial behavior for what it is. Collective savings rates reflect a lot of individuals who are emulating each other's bad behavior. Discipline Even when someone is educated about finances, they may not establish good habits of budgeting regularly, tracking spending, and setting financial goals. For me, it helps to be married to someone who has similar financial goals, because we budget monthly and any major purchases (over $100 or so) must be agreed upon at the beginning of the month (with obvious exceptions for emergencies). This eliminates any impulsive spending, which is probably 90% of the battle for me. Some people do not need to account to someone else in order to spend wisely, but everyone should find a system that works for them and helps them to maintain some financial discipline.\"", "title": "" }, { "docid": "996b732e38a70f90a62d98cbc95f0edd", "text": "A person who always saves and appropriately invests 20% of their income can expect to have a secure retirement. If you start early enough, you don't need anything close to 20%. Now, there are many good reasons to save for things other than just retirement, of course. You say that you can save 80% of your income, and you expect most people could save at least 50% without problems. That's just unrealistic for most people. Taxes, rent (or mortgage payments), utilities, food, and other such mandatory expenses take far more than 50% of your income. Most people simply don't have the ability to save (or invest) 50% of their income. Or even 25% of their income.", "title": "" }, { "docid": "bc2a6b19f5982a16f98ead1fe326ba63", "text": "This question is likely to be voted closed as opinion-based. That said - In general people have become accustomed to instant gratification. They also have the media showing them luxury and are enticed every day to buy things they don't need. In the US, the savings rate is awfully low, but it's not just the lower 50%, it's 75% of people who aren't saving what they should. see http://web.stanford.edu/group/scspi/_media/working_papers/pfeffer-danziger-schoeni_wealth-levels.pdf for an interesting article on the topic of accumulated wealth.", "title": "" } ]	[ { "docid": "d389903a219374870c0416667881ba18", "text": "But if increasing demand is brought about by increasing spending, and wide-ranging increased spending appears when many people have money to spend - why not just give everyone some money to spend? Why tie it to the hourly rate at a job, thereby making tons of positions too expensive for employers to justify? Seems like a simple allocation of money to everyone, no strings attached, would stimulate demand nicely.", "title": "" }, { "docid": "590410dbf3bc7cecced45bb305aba857", "text": "I was also going to mention people going through savings during unemployment. And given the unemployment figures, 28% having no emergency savings even seems low. Purely anecdotal but I cleared through my savings a few years ago during seven months of unemployment and have several friends who did the same and/or racked up thousands in debt.", "title": "" }, { "docid": "0943efcc83439fa03b5ee014a3ce8fbf", "text": "In a business environment, this phenomenon could be easily explained by 'operational leverage'. Operational leverage is the principle that increasing revenues by a small amount can have a disproportionately large impact on net income. Consider this example: you run a business that rents out a factory and produces goods to sell to consumers. The rent costs you $10k / month, and all of your other costs depend on how many goods you produce. Assume each good gives you $10 in profit, after factoring your variable costs. If you sell 1,000 units, you break-even, because your variable profit will pay for your rent. If you sell 1,100 units, you make $1,000 net profit. If you sell 1,200 units, you double your overall profit, making $2,000 for the month. Operational leverage is the principle that adding incremental revenue will have a greater impact than the revenue already received, because your fixed costs are already 'paid for'. Similarly in personal finance, consider these scenarios: You have $1,000 in monthly expenses, and make $1,000 - your monthly savings (and therefore your wealth) will be zero. You have $1,000 in monthly expenses, and make $1,100 - your monthly savings will be $100 per month. You have $1,000 in monthly expenses, and make $1,200 - increasing your income by ~10% has allowed your monthly savings double, at $200 per month. You have $1,000 in monthly expenses, and make $2,000 - your monthly savings are 5 times higher, when your income only increased by ~80%. Now in the real world, when someone makes more money, they will increase their expenses. This is because spending money can increase one's quality of life. So the incline does not happen quite so quickly - as pointed out by @Pete & @quid, there comes a point where increased spending provides someone with less increase in quality of life - at that point, savings really would quickly ramp up as income increases incrementally. But assuming you live the same making $2,000 / month as $1,000 / month, you can save, every month, a full month's worth of living expenses. This doesn't even factor in the impact of earning investment income on those savings. As to why the wealth exceeds income at that specific point, I couldn't say, but what I've outlined above should show how it is quite reasonable that the data is as-reported.", "title": "" }, { "docid": "5c7c78e743f7419c20c522f8c4caaa2b", "text": "\"It's called disposable income for a reason. It's what's left after obligations, whatever bills you have, and saving. Saving half one's income is pretty much at one end of the spectrum, very few can afford this. The combination of high savings and low actual spending will enable you to retire very early if you wish. Saving 'only' 15% might actually be out of your comfort zone, maybe 25% will keep you happy. What remains is yours to spend on what you wish, whatever makes you happy. There was a time I joked \"\"I spent most of my money on women and beer. The rest, I wasted.\"\" Now, I don't mind travel, but it's not my passion. If traveling the world is yours, do it. Enjoy every minute of it.\"", "title": "" }, { "docid": "96a4b99862acfe64c5569d0a0f648dad", "text": "\"The few individuals who create the corporations that take advantage of the sharing economy, making it broadly accepted and utilized, make billions. Those who actually do the work of \"\"sharing\"\", not so much, unless they are able to do so out of excess of funds rather than through borrowing. Those who utilize the sharing economy save some money because they aren't making the investments in infrastructure (cars, housing, whatever) and so aren't paying interest or expending use value. They can invest that money in sharing economy corporations, gaining value. So the losers in the sharing economy are those who borrowing in order to \"\"share.\"\"\"", "title": "" }, { "docid": "6a79cda350d7160731ebebf084b0ff5c", "text": "\"I believe that an understanding of the taxation system can help to understand our place in it, and how that impacts each of our personal finances. I will try to remain unbiased here but this is a somewhat subjective question, so please bear with me if you disagree on any point. Some of these tax savings are well-advertised, and can be used by many people, such as tax credits for mass-transit passes which exists in some countries. But some of these tax savings are things you never heard of before, until it winds up on the news. Why do some people seem to get tax savings that you and I cannot get, and why do those people always seem to have so much more money than us? A simplistic answer can show this in three parts: (1) The source of one's income; (2) Transaction costs; and (3) \"\"tax loopholes\"\". Tax savings occur proportionately to one's income, and if the savings apply to investment income, they occur proportionately to one's wealth. If someone living paycheck to paycheck with a minimal amount in a bank account \"\"saves tax on investment income\"\", they might reduce their taxable interest from $50 to $0. That's because they simply don't have any other investment income to reduce. All of their income comes in the form of employment, which is typically very hard to save taxes on. Most governments have a very firm grasp on the taxation of employment income, because it is a huge proportion of income in the country (and therefore has the largest amount of tax associated), and because it is very straightforward (work for someone = employment income). A more cynical person than I might point out that investment income is earned by the very wealthy, who can afford to lobby for politicians to pass favourable investment income laws. Even very straightforward tax saving opportunities may cost money to enable. The simplest example would be: if a tax saving opportunity is so complicated that an average person can't understand it themselves, then an accountant, lawyer, or banker will need to be the one to explain it. And that can cost you money. If your tax isn't so much to begin with, then the transaction costs to achieve the tax savings could be higher than the tax savings themselves. For example, most countries have tax savings / deferrals if you start a corporation. These rules typically exist to promote investment in the local economy. But someone who earns $10k in a side-business might not be able to afford the $3k in incorporation costs just to save $2k in taxes. The more income and wealth you have, the more these transaction costs become worthwhile. I'm going to generally define \"\"tax loopholes\"\" for the purposes of this answer as something where a somewhat arbitrary situation allows for taxes that a layman would consider unfair or unexpected. This often occurs with good intentions but poor legislation - the government tries to provide a benefit to a deserving group or to promote an activity, but ends up allowing another group to take advantage. For example in Canada, there existed until a few years ago tax saving rules about passing on wealth to children at lower tax rates, only when a close family member is near-death [setting up a 'testamentary trust' between a grandparent and a grandchild could in some circumstances allow that trust to be created with additional 'tax brackets', meaning more income would be taxed at a less-than top tax rate before being distributed to the grandchildren]. The rules were put in place with the idea that \"\"oh gee, a family member has died, and the dang ol' family is grieving so hard they can't distribute the wealth to the next generation for a few months on account of all the crying. We should make it so that the estate is taxed like a person, and if they earn only a little income, they have a low tax rate, and they only get taxed at the full rate if they have a lot of income\"\". Seems reasonable enough, but if a family is ready to pass on wealth at the same time as someone is nudging the bucket with their foot, a morbid discussion with your lawyer and accountant could set your children up for life with forever reduced taxes on massive inheritances. In the case of the Panama / Paradise leaks, tax savings are due to all 3 of the above: Those who have massive wealth (and therefore earn the majority of their income from investments instead of employment) can afford the transaction costs associated with taking advantage of specific \"\"tax loopholes\"\". The simplest example of which is just that income earned in a foreign country might have a lower tax rate than income earned domestically. This is often a result of \"\"cracks\"\" in the foreign tax treaties between countries, which exist generally to promote business between countries and prevent double-taxing individuals who need activity in both countries for whatever reason. Take for example the \"\"Apple loophole\"\". Apple has operations around the world. Some activity occurs in low-tax jurisdictions. Apple reports a high percentage of the value of R&D as being associated with those jurisdictions. Those branches in low-tax jurisdictions charge the high-tax branches (such as the US) with fees for use of their valuable research. So much of Apple's income is reported in those foreign jurisdictions. It won't be taxed in the US until Apple \"\"repatriates\"\" the cash back to the US. Until then, the cash sits in the foreign jurisdiction, accruing less tax. This and similar rules can be used by individuals wealthy enough to hold corporations in foreign jurisdictions with low tax rates. How each particular rule / \"\"loophole\"\" works will depend on the nature of a specific case - tax law is complex, and the rules between countries are even more so. These foreign tax loopholes are closing every year. It is getting harder and harder to hide money offshore, and it is getting less and less likely that you will be able to find a country with juuuust the right loopholes for your own offshore wealth. These types of news leaks will only help to expedite those changes.\"", "title": "" }, { "docid": "0f3bf3bf914ef07a3f31eaca4d1b712b", "text": "Developing self-discipline in his spending habits is a prerequisite for dealing with a (sometimes low) variable income. While it might feel like a roller coaster ride going from boom to bust, develop steady frugal spending habits will ease a lot of that pressure.", "title": "" }, { "docid": "2c356e8420a2c5d92c5e00162076e09d", "text": "\"It doesn't really make sense to worry about the details of \"\"what counts as saving\"\" unless you also move beyond a simplistic rule of thumb like \"\"save 10% of your income\"\". That said, most of the sources I see pushing rules of thumb like that are talking about saving for retirement. That is, you need to sock that money away so you will be able to spend it after you retire. (This CNN page is one example.) On that theory, it only \"\"counts\"\" if you put it away and don't touch it until you retire, so things like car and computer funds would not count as saving. Another thing you'll see some people say (e.g., this Nerdwallet article) is to use 20% of your income for \"\"financial priorities\"\". This would include retirement saving, but also things like paying off debt and saving for a down payment on a house. Saving for a small purchase in the near future would not usually be considered \"\"saving\"\" at all, since you're not going to keep the money. If you put $5 in your wallet tonight so you can buy a hamburger for lunch tomorrow, you wouldn't call that saving; likewise setting aside a few hundred dollars for a new computer wouldn't \"\"count\"\" as saving under most definitions. (Some people might \"\"count\"\" saving for something like a house, since that is a long-term plan and the house, unlike a computer, may rise in value after you buy it. But you wouldn't want to fully count the house as part of your retirement savings unless you're willing to sell it and live off the proceeds.) However, none of these rules will help that much if your goal is, as you say at the end of your question, to \"\"know if I need to save more than what I actually am saving currently\"\". Saving 10% of your income won't magically ensure that you're saving \"\"enough\"\". To assess whether you personally are saving \"\"enough\"\", you need to actually start running some numbers on how much money you personally will need in retirement. This will depend on any number of factors, including where you live, what sources of retirement income you might have besides savings (e.g., pensions), etc. In short, to know if you're saving enough, you can't listen to the generic stuff that \"\"everyone says\"\"; you need to consider your own situation in a deliberate, focused way.\"", "title": "" }, { "docid": "d30c0147f919cf5c08be1262d4241d74", "text": "I think the key here is 'at any age'. Yes it's not surprising that for demographics who have been in the workforce for a while, $100k won't get you near the top (i.e. Ages 30+). However, what can be surprising is that even at age 25, $100k isn't enough to get you in the top 1%. So what more of the masses that don't earn anywhere near that number?", "title": "" }, { "docid": "250afd2895a58f4c7786cce309a9c0f2", "text": "\"Social security and pensions make up a big part of it. You may want to look at the source of the data. If a person, has 5K at Vanguard, 5K at Fidelity and 100K at the bank; Fidelity will report on that person as having only 5K. Vanguard will do the same. The opening pitch of a life insurance salesman sometimes includes the \"\"100 man story\"\". Before retirement age: 26% of people will die, 54% will be broke, 5% will work, 4% will be secure, and 1% will be wealthy. Then they sell you life insurance which is a horrible product for retirement savings. If you further dig into this subject you will find a great disparity between the mean and median retirement savings. That is because many Americans have none, and those that do skew the average upward and have no where near mean or average. Its like this with other things in personal finance. For example those with actual credit card debt have much higher than the average. As those with none, or even no credit cards skew the average downward. In my opinion it is like this because of behavior. If one saved half of the average car payment over their working life in a growth stock mutual fund, they would make it to that 4% category. If they also had a good salary, kept debt to a minimum, and saved a healthy amount they would make it to that 1% category. It was a daily choice that was made many years prior to retirement.\"", "title": "" }, { "docid": "20f1eb0b7b0447afe91dcda52c1035e0", "text": "By not saving some of your income you put yourself at risk of the following: If you are comfortable taking on those risks, then continue what you are doing (I'm not being sarcastic here...some people are perfectly comfortable taking on these risks). I plan on working until I die so I am not as concerned with saving for retirement but I do save some money for temporary job loss situations. Saving money presents its own set of issues (e.g. Where should I put the money?, Should I invest the money?, What type of investments?). If you have no interest in researching answers to these type of questions then I would suggest what others have already suggested: have part of your paycheck automatically siphoned into an account that can only be accessed by a trusted family member.", "title": "" }, { "docid": "ddaec831da2ea04d33237c7a9d7a2a9b", "text": "Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are:", "title": "" }, { "docid": "a7488ffae9bfb38dfaaab221d587b163", "text": "Not entirely practicle advise. What about healthcare and all those other essential needs? When it comes down to it if the economy is rockin and rollin like back in the mid-1990's people can easily jump boat to another company. But in todays more sluggish enviroment that option is not their for most workers. I think the honest fact is no good solutions are apparent. You give some ideas but if saving money was that easy for most people then ... well you know ... why would anyone complain, right?", "title": "" }, { "docid": "623b155c3b57528fe658759499e326c5", "text": "We are FAR FAR better off than the majority. That is COMPLETELY true. But the point is that this does not made 300k$ easily, despite being far far far ahead of most. That's the crazy part -- the income disparity. (P.s., where we live 400k$ gets you the shittiest house in town. You could get a tiny condo for 250k$ too)", "title": "" }, { "docid": "0764678cf23cceb94ee9743004b917fb", "text": "Not lies. I worked with punkgeek at some of those startups. One we founded together and it was a colossal failure. Two later ones had IPOs in the $700M market-cap range. If you hang around the valley a while (and get lucky) it gets a good bit easier to sniff out the likely successes.", "title": "" } ]	fiqa

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