Category Archives: Finance 101
Things like spending less and earning more are extremely important, which is why those of us who write about this stuff spend so much time focusing on the topics. We want you to create an excess every month that you can then invest for the benefit of your future self. Because I have that ability, I’ve gone to the future and asked your older self about this, and they agree with me. I am the lamest time traveler ever.
Once you’ve got some savings, it’s time to invest it. Unfortunately, most people don’t know the first thing about investing. The stock market is a big scary place, and sometimes stocks go down a lot. How are you supposed to know which stocks or mutual funds to pick? Sure, you could learn about it, but that takes time, and there’s a lot on TV.
So you do what most people do – you find a financial advisor and entrust them with investing your money. Okay, but how do you find a good one? I can’t guarantee you’ll find one that will lead you to crazy riches, but here are a few tips on how to pick a good one.
You’ve seen me write a few times about borrowing from my 401K account to purchase investment property. Based on some of the comments on those posts, I realized that many of you mistake a 401K loan for a 401K withdrawal. While they may appear to be similar they are two totally different things with completely difference repercussions. For one, there are major consequences to taking a withdrawal from your 401K.
First, I have to be responsible and tell you that you shouldn’t take a either kind of distribution from your 401K if you don’t have to. I considered the potential for a lifetime of earnings both before and after retirement before I took loans of out my 401K. You should do the same if you even plan on investing your 401K dollars into something else. Now, on to the differences.
When buying a home most of us do not take our time in researching and determining the best options for a mortgage. For the majority of us, our home is the most important and expensive purchase we will ever make! Right now my student loans far surpass that, but that’s beside the point. We invest quite a bit of time and effort in finding the perfect property in the best neighborhood, but when it comes to finding the best deal for a mortgage, we usually take whatever is offered rather than research and secure the best mortgage for our particular situation.
Consider this: the average homeowner will pay more in interest over the life of their mortgage than the house originally cost (you can use the a mortgage calculator to see that for yourself). You can see why you getting the best deal for a mortgage now could potentially save you tens of thousands of dollars in interest over the 20 to 30 years that it will typically take to pay off your mortgage.
In life, when you are hitting an unseen obstacle as you try to reach your goals, it can be a very frustrating feeling. After all, life’s challenges are much easier to take on when you fully understand what you are up against.
That is why people who have been rejected time and again for a new checking account can start to feel a bit helpless. Many falsely believe that their credit (FICO) score is to blame, and they do not understand that the most likely reason for their rejection is due to something called ChexSystems.
It’s no secret that the American banking industry has undergone major challenges and transformations over the past two years. Institutions have closed ranks and have reduced the amount of money available to borrowers. This includes everything from declining to offer certain types of consumer loans to reducing the credit limits of millions of borrowers. According to a recent Wall Street Journal article, the total lending funds available to consumers fell to $433 billion in 2010, “down 51% from $887 billion in 2007″. Borrowers that make up the low end of the credit community have virtually been left with no recourse for fulfilling their short term lending needs. In stepped cash advance and payday loan establishments.
Until the collapse of the mortgage industry under the weight of fraud, real estate had traditionally been viewed as a safe investment vehicle. Skyrocketing prices at the height of the real estate bubble brought many buyers into real estate that were enticed by the idea that they could make money from their investments. While property prices have fallen nationwide, some savvy investors are holding on to their property and renting to tenants.
Dealing with tenants if you are not a real estate professional can be very difficult as I have documented with my tenant from hell stories. The easiest way to lose your investment in real estate is to be a lax landlord and let bad tenants run roughshod over you. Hopefully, with this handy guide, you won’t have too much trouble when you run into a bad tenant.
All of my life I’ve heard about diversifying your assets by having stocks and bonds. I kind of know what a stock is but the other day I wondered, just what’s a bond, and why would I want one? If you have the same questions then stay tuned for the latest installment of my basic finance course: Finance 101.
I actually own some bonds as part of my investment strategy. My last employer offered employees the ability to purchase bonds automatically through a direct payroll deduction on a monthly basis. I figured, hey, why not and allocated $100 each month for about 6 months towards bonds. They were mailed directly to my mom, and I promptly forgot about them until I bumped into an old pay stub last week. I began to wonder, just what the heck did I purchase anyway? Let’s begin with definitions. According to About.com, a bond is “simply an ‘IOU’ in which an investor agrees to loan money to a company or government in exchange for a predetermined interest rate.” Great! So who’s the investor? Well, in this case that would be me or whoever purchased bonds. Sweet! I’m an investor. Now, how do I make money from this? This is where it gets interesting. It all depends on what types on bonds you’ve purchased.
Hey there! If you’re following along this is part three in my Finance 101 series.
If you’re still employed and your employer hasn’t dropped your healthcare program then your open enrollment period is about to begin. There is where you get to change your healthcare options. If your company offers a flexible savings account or an FSA this is also the time for you to select how much money you would like to contribute to that account for the next year. Last year I realized that many people didn’t understand how the whole flexible spending account thing worked and how it can benefit you. You won’t be a part of that group after this post. If you want the short, short version then it’s simple: money for healthcare expenses is deducted on a pre-tax basis thereby reducing your taxable income. Now you may go. For those who want to understand how it works, read on.
This is part two in my Finance 101 series and it’s a long one. This time we’re learning about peer-to-peer, person-to-person, social, P2P or sometimes micro lending. The concept has many names but it’s basically the same thing – you are getting a loan from a private individual instead of a bank. That’s the short, short version for those without the time to stick around for the article. The rest of this post is directed to those who are completely clueless about the process. Read on.
Let’s begin with the most basic. According to Wikipedia, this is a type of lending or borrowing “which occurs directly between individuals (‘peers’) without the intermediation/participation of a traditional financial institution.” I like my definition better. You’re thinking, well how does this work? Let’s look at two scenarios.