So, Do You Need Financial Planning?

:


Well do you need Financial Planning? In this article, I will show you how you can answer this question.




Immediately after we complete our college education, we automatically participate in a race call rat race.




Everyone started the race with a cart. In this cart, we have personal bills, loans and our allowance. As we are single, everything is good and manageable. We can spend what we earn without worry.




Then we meet our partners and get married. Thus we begin our next chapter in life. Our cart becomes heavier and we now worry about our spouse's bills and loans and kids allowance. Some of us must support our parents too. We may even need to bring our family to vocation. As we grow older, our carts get heavier and heavier. Do you have enough savings to meet these expenses?




As we know, life is never a straight and smooth path. We will encounter obstacles. Some of these obstacles may set us back in terms of our financial standing .If we do encounter a big obstacle (e.g. critical illness, operation, surgery, business failure) and need a huge sum of money to recover, Do you have enough money to meet this expense? What if the big obstacle results in us being permanently bed-ridden or out of work for a long time, what is going to happen to our cart? Do you have enough money to support yourself and family if that happens?




Many may say, well we have friends and relatives to turn to for help. But our friends and family have their own carts to pull too. If they help push our cart, who is going to push theirs?




We will all retire from work eventually. From then on till we all rest in peace, we do not have regular income but our life must still go on. We still need to pay our bills and we still need to eat. Do you have enough money to support yourself during retirement?




At old age, our body is no longer working as well as they used to. Our health conditions deteriorate, as we get older. We will need to seek medical help frequently. We may even need to employ a person to take good care of us. Do you have enough money to spend on these medical expenses?




So do you need Financial Planning? If you answer ‘Yes’ to all the above questions, then you are safe and need not worry about Financial Planning. Otherwise, I suggest you start thinking about it.

Top Financial Mistakes Made by College Students

1. Blowing your school loan money!


Instead of using your financial aid for books, tuition, room & board, many students will choose to finance their extravagant lifestyle of partying, clothes, gadgets, and eating out. These school loans you've worked so hard to get should be paying for your education, not you social life...so use the money wisely. You'll be paying them off for many years to come.




2. Credit Card Debt!


Even responsible adults can rack up some hefty credit card debt, but students, who have no viable income besides their school loan money, and what cash mom & dad give them, have no business getting multiple credit cards. This is a recipe for credit disaster, because now students will not only have their school loans to repay when they graduate, but large credit card balances. Nellie May, the largest student loan maker, says that most graduate students have an average of $5800 in credit card debt.




3. Not Paying Your Bills on Time!


Racking up huge credit debt and not paying your bills on time is a good way to ensure that you can't purchase a car, rent an apartment or even get a cell phone after you graduate. Keep the credit cards to a minimum, and pay your bills on time to keep your good credit rating. You'll thank yourself in a few years.




4. Bad Budgeting!


Being a college student generally means living on a fixed income. Weather it be your financial aid money or money from a part-time job, or even money from Mom & Dad, the cash is usually limited and setting up a budget is important. A monthly budget doesn't mean you can't do the things you want to do, but simply a plan so you know the "must-pays" actually get paid. Figure out exactly what bills and expenses you have every month and plan for those first. Any money after that you can budget for social / recreational items like CD's and kegs.




5. Going to a College that's too Pricey!


Instead of going to your local community college for your pre-req classes and spending $25 a unit, many students feel they have to go to the 4 year university straight out of high school. Many end up returning home and going to a C.C. anyway, but attending a local school first is a good way to save money, and get those required classes out of the way cheap. After you've completed these courses, transfer to a 4 year school to complete your undergraduate degree. This will save thousands upon thousands of dollars that you would have racked up on student loans, and been paying off well into your 30's.




So many of the bad financial decisions students make is a result of poor financial education. Students haven't been taught by their parents or high school teachers the importance of maintaining a good credit score, paying bills on time, and budgeting income. Wise spending during the college years will ensure that the money you make after graduating will be spent on things you want, not credit card payments, collection companies and school loans.

Financial Security through Structured Settlements

Structured settlements have become a natural part of personal injury and worker’s compensation claims in the United States, according to the National Structured Settlements Trade Association (NSSTA). In 2001, life insurance members of NSSTA wrote more than $6.05 billion of issued annuities as settlement for physical injury claims. This represents a 19 percent increase over 2000.




A structured settlement is the dispersement of money for a legal claim where all or part of the arrangement calls for future periodic payments. The money is paid in regular installments—annually, semi-annually or quarterly—either for a fixed period or for the lifetime of the claimant. Depending on the needs of the individual involved, the structure may also include some immediate payment to cover special damages. The payment is usually made through the purchase of an annuity from a Life Insurance Company.




A structured settlement structure can provide long-term financial security to injury victims and their families through a stream of tax-free payments tailored to their needs. Historically, they were first utilized in Canada and the United States during the 1970s as an alternative to lump-sum payments for injured parties. A structured settlement can also be used in situations involving lottery winnings and other substantial funds.




How a Structured Settlement Works When a plaintiff settles a case for a large sum of money, the defendant, the plaintiff's attorney, or a financial planner may propose paying the settlement in installments over time rather than in a single lump sum.




A structured settlement is actually a tradeoff. The individuals who were injured and/or their parents or guardians work with their lawyer and an outside broker to determine future medical and living needs. This includes all upcoming operations, therapy, medical devices and other health care needs. Then, an annuity is purchased and held by an independent third party that makes payments to the person who has been injured. Unlike stock dividends or bank interest, these structured settlement payments are completely tax-free. What’s more, the individual’s annuity grows tax-free.




Pros and Cons




As with anything, there’s a positive and negative side to structure settlements. One significant advantage is tax avoidance. When appropriately set up, a structured settlement may significantly reduce the plaintiff's tax obligations (as a result of the settlement). Another benefit is that a structured settlement can help ensure a plaintiff has the funds to pay for future care or needs. In other words, a structured settlement can help protect a plaintiff from himself.




Let’s face it: Some people have a hard time managing money, or saying no to friends and family wanting to "share the wealth.” Receiving money in installment can make it last longer.




A downside to structure settlements is the built-in structure (no pun intended). Some people may feel restricted by periodic payments. For example, they may want to buy a new home or other expensive item, yet lack the funds to do so. They can't borrow against future payments under their settlement, so they’re stuck until their next installment payment arrives. And from an investment perspective, a structured settlement may not make the most sense for everyone. Many standard investments can provide a greater long-term return than the annuities used in structured settlements. So some people may be better off accepting a lump sum settlement and then investing it for themselves.




Here are some other important points to keep in mind about structured settlements: An injured person with long-term special needs may benefit from having periodic lump sums to purchase medical equipment. Minors may benefit from a structured settlement that provides for certain costs when they’re young—such as educational expenses—instead of during adulthood.




Special Considerations




- Injured parties should be wary of potential exploitation or hazards related to structured settlements. They should carefully consider:




- High Commissions - Annuities can be highly profitable for insurance companies, and they often carry very large commissions. It is important to ensure that the commissions charged in setting up a structured settlement don't eat up too much of its principal.




- Inflated Value - Sometimes, the defense will overstate the value of a negotiated structured settlement. As a result, the plaintiff winds up with much less than was agreed upon. Plaintiffs should compare the fees and commissions charged for similar settlement packages by a variety of insurance companies to make sure that they’re getting full value.




- Conflict of Interest – There have been situations where the plaintiff's attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing he would receive a referral fee. In other cases, the plaintiff's lawyer has set up a structured settlement on behalf of a client without revealing the annuities are being purchased from his own insurance business. Plaintiffs should know what financial interest their lawyer may have in relation to any financial services being provided or recommended.




- Using Multiple Insurance Companies – It’s advisable to purchase annuities for a structured settlement from several different companies. This offers protection in the event a company that issued annuities for a settlement package goes into bankruptcy and defaults.




Benefits of Selling A Settlement




A structured settlement is specifically designed to meet the needs of the plaintiff at the time it’s created. But what happens if the installment arrangement no longer works for the individual? If you need cash for a large purchase or other expenses, consider selling your structured settlement. Many companies can purchase all or part of your remaining periodic settlement payments for one lump sum. This can boost your cash flow by providing funds you can use immediately to buy a home, pay college tuition, invest in a business or pay off debt.




If you’re considering cashing out your structured settlement, contact your attorney first. Depending on the state you live in, you may have to go to court to get approval for the buyout. About two thirds of states have laws that limit the sale of structured settlements, according to the NSSTA. Tax-free structured settlements are also subject to federal restrictions on their sale to a third party, and some insurance companies won’t assign or transfer annuities to third parties.




When selling your structure settlement, check with multiple companies to make sure that you get the highest payoff. Also, be sure the company buying your settlement is reputable and well-established. And keep in mind that if the deal sounds too good to be true, it probably is.

Pros and Cons of Refinancing

Refinancing can be considered a means with which a person replaces his/her current loan with a new loan in order to save money. The loan can be of any type. It can be any consumer debt or a credit card debt or a mortgage.


Many people shelter to refinancing nowadays because it has many pros:




As it helps people to reduce interests, risk, and periodic payment obligations by either lowering the interest rate owed on the loan or extending the period of loan. Also everyone looks for refinancing in order to be able to achieve equity faster.


There are too many individuals who are "house rich and cash poor." What value is it if your house is paid off in full, but you do not have any liquid cash to support? Keep in mind that your house will no doubt appreciate over the next few years. It will do so whether or not you have a large or a small mortgage. The more equity you have in your house will put more money in your pocket when you sell it, but while you are living in the house it is only "dead equity."


In essence refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.


refinancing an adjustable-rate mortgage into a fixed-rate one, ensures a steady interest rate over time, by removing the risk that interest rate might increase terribly.




As no one is perfect, also there is not good thing without some risks and cons:




Lenders sometimes offer no-cost refinancing, charging you zero points for your mortgage loan. Generally, you will pay a higher interest rate than on an otherwise comparable mortgage with points, and you'll still have to pay the other costs associated with the loan. there are also closing and transaction fees typically associated with refinancing a loan or mortgage. In some cases, these fees may outweigh any savings generated through refinancing the loan itself.


Some sub prime lenders charge excessively high fees, but you can screen these out by comparing mortgage rates.




All you need is to determine the goal behind seeking a refinancing, collecting information about several lenders options and then work on your refinancing.




Finally it became aparent that refinancing, as hasing lots of advantages it also has disadvantages and risks. You should pay great attention that some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt.




So you have to be carefull and Calculate the up-front, ongoing, and potentially variable costs of refinancing while making a decision on whether or not to refinance and you have to Check your mortgage agreement to see whether it contains a prepayment penalty, and try to avoid prepayment penalties in any refinanced mortgages.