Time to Make New Year's Financial Resolutions

Do you remember any of the New Year's resolutions you made for 2005? If you don't, it may not be such a tragedy. After all, you still may have had a good quality of life even if you didn't get to the gym three times a week, learn a new language or take that gourmet cooking class. On the other hand, you can make a big difference in your future if you make - and keep - financial resolutions for the coming year.

Of course, like all resolutions, the financial ones are easier to keep if they don't force you to radically change your lifestyle. So, with that in mind, here are a few achievable financial resolutions you may want to consider for 2006:


- Increase your 401(k) contributions. If your salary goes up this year, increase the percentage of your earnings that you defer into your 401(k). With tax-deferred growth, pre-tax contributions and a variety of investment choices, your 401(k) is one of the best retirement-savings vehicles around. Plus, since the money is taken out before it even reaches your check, you won't really "miss" your increased contribution.





- "Max out" on your IRA. In 2006, you can put in up to $4,000 to a traditional or Roth IRA, or $5,000 if you are 50 or older. If you cannot come up with the maximum amount at once, try dividing your IRA contributions into 12 equal monthly payments - and have the money taken automatically from a checking or savings account.





- Pay down your credit card debt. As you may know, the Federal Reserve raised short-term interest rates 12 straight times from June 2004 through November 2005. Sooner or later - and probably sooner - these rate increases will affect interest rates charged by credit card providers. So, if you are paying a variable rate on your credit cards, be prepared to pay more in interest. These interest payments do you no good, as you can't deduct them from your taxes; consequently, you'll want to pay down this debt as quickly as you can.





Review your investment portfolio. It's a good idea to review your investment portfolio at least once a year. Over the course of 12 months, your life can change in many ways; e.g., new spouse, new house, new child, new job, etc. And if your life changes significantly, your investment goals may also change. But even if your circumstances haven't changed much in a year, you should review your holdings to make sure they are properly diversified in a way that reflects your individual risk tolerance, time horizon and long-term objectives. A financial professional can help you review your investments to make sure you are still on track.


Avoid last year's mistakes. Everyone makes investment mistakes - but the smartest investors only make them once. So, try to identify any errors you made in 2005. Did you chase after "hot stocks" only to find they had already cooled off by the time you purchased them? Did you incur a large tax bill by constantly buying and selling investments? These are the types of mistakes you should seek to avoid in 2006.




So, there you have them: some New Year's financial resolutions that, if followed carefully, can provide you with benefits long after 2006 is over.

Avoid Car Financing Pitfalls

If you are considering the purchase of your first car or even your next vehicle if you’re not a first time car buyer, you may be concerned about the prospect of financing your vehicle. This concern is not totally unfounded. There are numerous pitfalls that can occur when financing a new vehicle, especially if you plan to use dealership financing. In order to avoid running into these problems, and possibly stalling your purchase read the tips below.




First, understand exactly how important your credit score is to your auto loan application. Even when working with a dealership loan department, be aware that your credit history will be run and your credit score will have a major impact on your ability to obtain an auto loan as well as the terms you are offered. Ideally, it is best to stay on top of things and get an idea of the condition of your credit history yourself before you even step foot into the dealership. Look to make sure there are no errors on there that could be dragging down your score. If your credit score is not in great condition and it is not due to errors, consider delaying the purchase of a vehicle until you can clean it up by paying down some other debts and improving your bill payment schedule; both of which will help to raise your credit score. Remember, a low credit score can prevent you from getting a better interest rate as well as the loan itself.




Many people make a list before they go shopping to ensure they won’t spend more than they intended. A similar technique can help to ensure you won’t spend more than you can afford while car shopping. Make a list of what you’re looking for in a vehicle, the features that are important to you and set a price range you can afford to spend. Keep in mind that you should not plan to spend more than 20% of your monthly income.




Take the time to do your research and understand current interest rates as well as the price range for the features you have determined are important to you. This will help you to be better educated and less likely to be taken advantage of when it comes time to discuss terms of the loan.




Be aware of your options. Find out whether any rebates or special offers are available for the cars that interest you.




Never, ever sign anything unless you have gone over the purchase contract with a fine tooth comb. Far too often, extraneous charges will be tacked on that may not be really necessary. If you’re not sure of the reason for a charge, ask before you agree to pay it.




Don’t allow yourself to be pressured into anything. If you need more time to think, take it. Walk out of the dealership, think about it and make your decision on your own time. Salesmen are excellent at driving up the pressure and creating an inflated sense of ‘time is of the essence’ but that doesn’t mean you have to fall for it.




By doing your research ahead of time, knowing what you want and what you can afford to pay for it while maintaining a cool head you will be in a better position to purchase the car you want without running into any pitfalls that could cost you big in the long run.

Become a Financial Planner

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To become a financial planner, you first must know what their job profile is. Financial planners help in determining the financial resources required to meet the company’s operating program. They also help in forecasting the extent to which these requirements will be met by the internal generation of funds, and the extent to which they will be met from external sources. It’s the job of financial planners to develop the best plans to obtain the required external funds. They also help in establishing and maintaining a system of financial control governing the allocation and use of funds. Financial planners formulate programs to provide the most effective cost-volume-profit relationship. It’s the job of financial planners to analyze the financial results of operations, report the facts to the top management and make recommendations on future operations of the firm.






Keywords:


Financial Planners, Certified Financial Planners, Fee Only Financial Planners, Become A Financial Planner






Article Body:


To become a financial planner, you first must know what their job profile is. Financial planners help in determining the financial resources required to meet the company’s operating program. They also help in forecasting the extent to which these requirements will be met by the internal generation of funds, and the extent to which they will be met from external sources. It’s the job of financial planners to develop the best plans to obtain the required external funds. They also help in establishing and maintaining a system of financial control governing the allocation and use of funds. Financial planners formulate programs to provide the most effective cost-volume-profit relationship. It’s the job of financial planners to analyze the financial results of operations, report the facts to the top management and make recommendations on future operations of the firm.




To do all these functions efficiently, financial planners first need to establish the financial objectives of the enterprise. Both long-term and short-term objectives should be established for the effective utilization of the financial resources. Then comes the next step of formulating policies. Policies are broad guidelines. Financial policies relate to procurement, administration and distribution of business funds. The next step financial planners have to do is to formulate procedures. Procedures are the specific order of doing things. They are formed for ensuring consistency of actions. In financial procedures, the financial executives decide about the control system, develop standards of performance and evaluate the performance. Lastly, they have to forecast the future. In order to take proper action to achieve the objectives established, it is necessary to know the future positions. This is facilitated by forecasting the future.




While doing these activities, financial planners must take into perspective the cost of finance and nature of business. In any assessment of the financial needs of the firm, the cost of finance is the basic criterion. This is so because only projects with net positive cash flow can be selected.

Financial Planning For Retirement: For Worry-Free Retirement

be a tedious activity especially if you are planning for retirement. Many people realize how advantageous financial planning for retirement can be while others find it mysterious.

In fact, most experts say that for people who are only making enough money to make due payments in each month, then it means that they should start contemplating on how they can still make money even if they are already retired.




Surveys show that almost 75% of the American populat...






Keywords:


retirement, investment, 401k financial, stocks






Article Body:


Planning can be a tedious activity especially if you are planning for retirement. Many people realize how advantageous financial planning for retirement can be while others find it mysterious.




In fact, most experts say that for people who are only making enough money to make due payments in each month, then it means that they should start contemplating on how they can still make money even if they are already retired.




Surveys show that almost 75% of the American population is earning enough money to pay their monthly bills. This means that they do not have any extra money to put in a bank or in any financial institution that could provide them enough profit after their retirement.




What's more Social Security is not enough guaranteed income for retired people to live on. Actually, it is still a big question if one’s Social Security will still exist when the retirement day comes.




Hence, it is extremely important to generate some methods that will provide an individual a reasonable amount of money in the future. This should be done regardless of how much an individual earns, the important thing is to start saving today.




1. Visualize and calculate




It is important for a person to visualize his or her own situation after retirement. Then, you can calculate how much money is needed to live on after retirement. Furthermore, people need earnings that compensate 75% of the present amount that he or she is expected to take home.




2. It is important to seek the help of a financial planner or any person competent in financial planning.




By asking for advice from the experts, you will be able to gain more knowledge know how to proceed for you situation. These people are proficient and knowledgeable in all kinds of financial planning and they can provide the most feasible and workable approach for your individual needs.




3. Get rid of loans, debts, and other financial obligations in as little time as possible.




By simply paying off all debts, loans, and other financial obligations in a shorter period of time, you can realize a substantial amount to invest for that retirement. A good financial planner will know exactly how to direct you so you can meet your retirement goals.

Basic Financial Information Tips (Part I)

Savings. Pay yourself first. Start now stashing 10% of your income in an “Emergency” savings. Don’t use it for anything but real emergencies. Keep a “For Sure” savings account for yearly expenses you know are coming and you can estimate (e.g. Christmas, insurance, taxes, etc.). Also have a “Buy Stuff” account. If you do, you’ll be able to avoid many financial disasters which will face you, and you can avoid borrowing money from high-rate lenders.




Borrowing. Don’t borrow money unless you are willing and able to pay it back. Failure to pay debts – on time – causes severe financial, emotional, and family problems. Experts recommend you don’t borrow for wants, only for needs, or for things that increase in value. Many lenders will loan you money you can’t afford to pay back, especially high-rate lenders.




Co-signing. Don’t co-sign on a loan unless you are willing and able to pay it back. Often, co-signers end up paying off loans they are unprepared for, and financial hardships follow. Numerous co-signors now have negative credit ratings because a primary borrower paid late. Many lenders do not notify the co-signor before reporting delinquencies or repossessions to the credit bureau.




Compare. Before you decide who to borrow from, compare! Find out who is offering the best deal at that time – look for the loan with the lowest rate (APR).




APR. The Annual Percentage Rate (APR). It is the standard rate, so we may compare the cost of borrowing. It is the cost of credit expressed as a yearly rate. When you borrow, always beat 13% APR (consider “13” to be unlucky when it comes to borrowing). Some have been illegally stating other rates such as weekly or monthly rates. Compare APR to APR. If you pay your bills on time, and you aren’t over-extended, you can nearly always find loans or financing arrangements at rates lower than 13%. Beware though, because beating 13% does not always mean you are getting a good deal. For instance: the difference in total interest paid on an 11% versus an 8% 30-year, $100,000 mortgage loan is $64,283 (assuming all payments are made as agreed).




Consolidation Loans. A consolidation loan can result in great savings to borrowers if the new interest rate is significantly lower, and if you don’t run-up debt similar to what was just consolidated. But beware, because consolidation loans usually result in substantially more money out of your pocket into the lenders’. For instance, mortgage loans usually involve closing costs. They increase the total debt. Many refinances involve reducing the monthly payment, but increasing the length of payback, which substantially increases the total interest paid. Borrowers, who refinance unsecured debt (e.g. credit cards) into a home mortgage, also increase their risk of losing their homes. Also, remember to keep all of your payments current until the old debt is paid off. Too many people have damaged credit ratings, and are in bad financial condition because they counted on money which didn’t come when they expected it. Expect delays when applying for loans, especially consolidation loans. Don’t spend money before you




Desperation. Don’t get desperate for money. The more desperate you are, the less likely you are to get a good loan.




Auto insurance. Keep your auto insurance current. If you fail to keep your insurance up-to-date, you could end up making loan payments for years after your car has been totaled.




Establish good credit. To avoid bad credit, don't borrow too much, and do pay your bills on time. Inexpensive ways to establish good credit: (1) Obtain a good credit card. When you charge things, pay off the balance each month – on time – and pay no interest. (2) Establish a revolving line of credit (an empty loan) as an overdraft protection against bounced checks, and don’t use it as a loan. (3) Get a loan to buy a car, or furniture, or etc.) and pay it off within a few months.




Late fees. To avoid late fees (which multiply the cost of borrowing), pay early, or at least on time.




Repossessions. To avoid repossessions and associated fees, pay early or on time, and keep your insurance current.




Extra principal ® less interest. To pay less interest on loans, pay more than the minimum required payment. Even small amounts of extra principal, can significantly reduce the total amount of interest you would otherwise pay over the life of the loan. Before doing this, however, make sure your lender accepts extra principal payments, and find out what particular procedure you need to follow to ensure your extra principal is properly applied.




Bi-weekly payments. If you get paid weekly, or every other week, paying bi-weekly is a very convenient (almost painless) way to reduce your loan term and interest. For instance, if you make ½ of your required monthly payment every 14 days (a bi-weekly period), you pay the equivalent of 13.052 payments in an average year. If you don’t get paid bi-weekly, or if your lender doesn’t like biweekly payments, you can pay the equivalent amount in monthly installments. If you pay 1/12 of the sum of 13.05 payments each month, you will match the bi-weekly advantage (minor rounding differences).




Contrary to popular belief, the frequency of paying ½ payments bi-weekly doesn’t accomplish much, the real advantage is paying the extra principal (13.05 payments, or more, each year) which reduces the term and the interest paid. If you are considering signing up for a bi-weekly program, pay close attention to the cost. Some servicers have large set-up fees and transaction fees. Also consider the credibility of any company handling your money, some have diverted payments into their own pockets, leaving borrowers to make payments twice (once to a corrupt servicer, and a second time directly to the lender).

Financial Terminology: Jargon Buster A - E

1. Account holder


The person who has a personal loan account.




2. Advance


The mortgage loan itself is called the advance.




3. APR (Annual Percentage Rate)


An interest rate designed to show you the total annual cost of getting credit. It should include all the interest and charges payable by you as a condition of taking the loan. Where taking Payment Protection Insurance is a condition of taking the loan, this should also be included in the APR. The typical APR is the APR that 66% of customers applying for the providers credit card can expect to get.




4. Applicant


You become an applicant when you complete and submit an application form for a personal loan.




5. Applied or nominal interest rate


The rate used to calculate the interest due on your mortgage.




6. Arrangement fee


The fee payable to the loan provider by you (the applicant) to open the account.




7. Arrears


Mortgage payments which have not been paid and are overdue.






B




1. Bank of England base rate


The Bank of England sets or reviews their interest rate on a monthly basis and this is the main factor influencing interest rates charged by mortgage and other lenders.




2. Buildings insurance


Covers your actual building(bricks and mortar) and is usually required as soon as you exchange contracts on your house.






C




1. Capital


The amount you owe excluding costs and any interest outstanding.




2. Capital and interest mortgage


This is when your monthly payments go to pay off the outstanding mortgage in addition to the interest on the mortgage. At the end of the term you will have no more to pay. Also called a repayment mortgage.




3. Capped rate


This is a mortgage where a maximum interest rate is agreed which the rate cannot go above. This deal lasts for a set period of months or years. Should the variable rate go below the maximum, the pay rate falls with it.




4. Cashback


An amount, either fixed or a percentage of a mortgage, which you can opt to receive when you complete your mortgage. The lender will likely claw back this money through a higher interest rate.




5. Charge-off


The removal of an account from a loan provider's books. When an account is charged off, the loan provider absorbs the outstanding balance as a loss. Charge-off is also referred to as Write-off.




6. Closing administration charge


A final charge made by the lender to cover their administration costs when a mortgage is fully repaid.




7. Completion


This is end of the mortgage process, when the contracts are signed, all questions have been answered and the keys are handed over and the funds transferred. Happy moving!




8. Consumer Credit Act (CCA)


The Act which defines how personal loans may be advertised, and what rules need to be followed by loan providers in the presentation of loan features such as the interest rate and typical APR that are applicable. The Act also covers the information that needs to be available to the consumer such as product terms and conditions.




9. Contents insurance


Insurance that covers your personal belongings




10. Contract


A contract is a binding agreement between two and more parties. In the context of house buying, a contract is signed by both the buyer and the seller and then 'exchanged' between the respective solicitors, at which point the house sale is binding on both sides.




11. Conveyancing


The legal work involved in the sale or purchase of land.




12. Credit Reference Agency (CRA)


An agency that gathers and maintains information on the debts and repayment records of individuals and businesses. CRAs prepare reports that are used by personal loan providers to view an applicant's credit history. There are two such agencies for consumer credit in the UK - Experian and Equifax.




13. Credit scoring


The process by which your credit worthiness is checked. Weights or 'scores' are associated with your personal attributes, such as your income and the time spent at your current address. These 'scores' are added to give a total credit score. Each total credit score is associated with a prediction of how likely a person with that score is to default. The loan provider then checks this score against the minimum required to be accepted for their loan, determining whether they accept you or not.






D




1. Debt consolidation


The process of combining all outstanding debts in one loan account. For example, you may have an existing loan with a balance of £2,500, a credit card balance of £1,000 and a store card balance of £500. These could all be consolidated into one loan of £4,000. The purpose is usually to lower monthly repayments, through either lower interest rates on the new loan, or lower repayments from an extended repayment term, or both.




2. Default


Non-payment of an account according to the terms of the loan agreement. If you are declared in default, your account may be subject to higher interest rate and other charges. Failure to keep up with repayments may result in the fact being registered at the two main consumer credit agencies in the UK- Experian and Equifax. This may reduce your chances of obtaining credit in the future. If the loan is secured against your home, your home may also be at risk.




3. Deferred payment


Delayed payment. Also referred to as a deferred start, this facility allows you to delay the date on which the first repayment is due. The deferred period could be from one to three months, meaning a loan opened on the 1st January may not require repayments to start until 1st April.




4. Deposit


The deposit paid towards the total price of the property, normally payable at exchange of contracts.




5. Direct debit


Apre-authorized debit on the payer's account initiated by the payee. Most loan providers would require you to set up a direct debit to make the monthly repayments on the loan.




6. Discounted rate


This is where the lender makes a guaranteed reduction off the standard variable rate for an agreed period of time. After the period ends, the borrower will go onto the Standard variable rate. often used by loan providers as an added incentive to apply for a loan.




7. Drawdown date


The date when the contracts have been completed and the mortgage starts.






E




1. Early repayment charge (ERC) / Early settlement penalty


The charge payable to some loan providers should the loan be repaid in full before the full term of the loan has expired. For example, an arranged loan over 36 months may incur an ERC if it is repaid after 24 months, or any point before the 36 months has been reached. The average ERC can amount to the equivalent of 2 months interest.




2. Early redemption charges


Redemption is when the borrower pays off the capital and the interest on the mortgage and thus has full rights to the property. Early redemption fees are the charges incurred for paying off the mortgage early, either to buy the house outright or when you re-mortgage. Always ask about these before you take out a mortgage.




3. Endowment


Endowments are life assurance policies with an investment element designed to pay off the outstanding capital on an interest-only mortgage. There are a few types of endowments, such as 'with profits', 'unitised with profits' and 'unit-linked'. in the 1980s, these were sold to customers by salesman who promised that they would be guaranteed to pay off the mortgage at the end of the term. This is not the case, and many endowment holders are having to bump up their premiums.




4. Equity


In housing terminology, equity is the difference between the value of the property and the money owed on the property. So if the property is valued at £200,000 and you owe £150,000 on the mortgage, you have equity of £50,000. If you sold at that moment, you would receive £50,000. Should the value of the home be less than the mortgage outstanding then you are in negative equity. Not to be confused with the stock market use of the word "equity", which is completely different.




5. Exchange of contracts


In England and Wales (not Scotland), the point when both buyer and seller are legally bound to the transaction.

How to Have Financial Peace

One of the biggest contributors toward personal peace is financial peace. Sometimes it is assumed that financial peace is only for those with endless amounts of money. In actuality, you can be financially secure at almost any income level. Avoiding common financial mistakes is the first step. This article discusses some mistakes that many of us make and how to avoid them.




I'm Too Young to Settle Down




Not investing in a home or buying one too late in life is a mistake that more and more people are making. The reason it is a financial mistake is illustrated in the following example. Let's say Brittany makes $60,000 a year, is single and rents a home for $2000 dollars a month. When tax time comes, she has little or nothing in the way of deductions. In 2005 she would have had to pay $11,665 in federal taxes alone. If she had put that same rent payment toward a mortgage payment instead and purchased a $315,000 home with a 30 year fixed rate of 6.5%, her mortgage interest deduction would have been $20,236, saving her $5,059 in taxes in 2005.




Tax savings isn't the only reason to buy a home. Another reason is the investment it represents. Let's say Brittany did buy a $315,000 home in January of 2005 and its value increased 5% in one year. The 5% increase in value would give her $15,750 in equity by 2006 and she would have paid $3,657 toward principle as well. Let's add it up. Rent money saved, $24,000 + taxes saved, $5,059 + equity earned, $15,750 + principle purchased, $3,657 - interest paid, $20,236 = $28,230, or $2,352 per month saved by purchasing a home. Even if she put $1,000 into that home each month in the way of maintenance, she still would have saved over $1,300 per month in 2005 by buying a home.




But It Was On Sale!




Accumulating debt instead of savings is the next financial error to avoid. Unless debt can almost guarantee you a future return, such as investing in a business, education or your home, it is best to avoid altogether. Even purchasing automobiles with cash is better financially in the long run. As an example, let's look at a household that has a credit card balance of $10,000. Assuming a 15% interest rate, if they pay $150.00 per month on the card and don't put anything else on it, their total interest and principle paid to that card is $21,635 before it gets paid off. It will take them over 12 years to pay it off at this rate. They are paying $80 in interest a month for the "privilege" of having credit card debt.




There is even more to the debt picture, however. Debt is not just one sided, there are opportunity costs associated with debt. If they weren't putting $150 a month toward their credit card, they could instead be putting it into a savings account. Putting $150 a month into a savings account with a 4% rate of return compounded monthly for 12 years would grow to almost $28,000, which is $21,600 in principle and $6,400 in interest earned. So now the real cost of a credit card is the interest paid, $11,635 + the foregone interest from the savings account, $6,400 = $18,035 in 12 years or $125 per month of lost money.




Do You Accept VISA for my Mortgage Payment?




Not having any liquid savings is another area that can end up hurting you financially. The minimum amount to be saved is 3-6 months of living expenses. This will help to cover loss of income or medical emergencies that may arise. This money should only be tapped for major emergencies and not for things like vacations or weddings, which should be saved for in other accounts once the liquid savings has been established. When no short-term savings is available, the risk of bankruptcy increases. With the new bankruptcy laws it is becoming increasingly difficult to erase debt.




Liquid savings is especially important when you have a large income that is not standard across the industry, or when there is not a high demand for the type of work you do. In these situations, finding a new job with the same income may be difficult. This can leave you vulnerable to rushed decisions that can damage you financially for years to come. As an example, I have a friend who had made good money at a software company for 20 years. His income was quite high because he had been with the company for a long time. The company was eventually purchased and he was laid off. He and his family had just finished building and furnishing their dream home when it happened. While they didn't have massive amounts of debt, they didn't have any liquid savings either. In order to get out from under their house payment, they sold their home for much less than it was worth, they also emptied their 401(k) and both had to take low paying jobs just to make ends meet. Now, eight years later, they are just starting to crawl o




Natural Disaster...Here?




Little or no insurance is a mistake that many people make hoping they won't be hit by a natural disaster. Insurance is your best defense against financial ruin in such a situation. Sitting down and talking with an insurance agent is the first step. Make sure that the policy covers those things you are worried about. Set aside the money needed for the deductible on the policy if a disaster does occur. Other things to prepare for in a disaster is the possibility of being out of work for several weeks or months, high medical bills or being left without an automobile if it is also destroyed in the disaster. Liquid savings is the answer to these problems. Remember, just because the home or vehicle no longer exist doesn't mean that their payments have gone away.




I Have Plenty of Time to Save




Not saving for retirement is a mistake that is made all too often. If you do save, there is a good possibility it is not enough to retire on. The findings of the 2006 Retirement Confidence Survey put out by the Employee Benefit Research Institute suggested that many American workers are not prepared for retirement and will have to work far longer than they expect. As an example let's look at Jane who is 55 years old and currently makes $60,000. She hopes to retire at age 65 and has already put away $250,000. By the time she retires, her home will be paid for and she assumes she can live off 70% of her current income or $42,000. If she lives to 90, she will need to have income for 25 years. Let's assume her $250,000 grows at a rate of 7% until retirement and 6% once she starts taking the money out. We need to also account for inflation which averages about 3% per year. In order to have $42,000 per year for 25 years she will need $1,151,243 in her retirement account by age 65. That means she will have to start




This is a start on the road to financial peace, steering clear of financial mistakes. Learning more about the different ways investment mistakes can hurt you in the long run is the first step in avoiding future problems. Next is to not make or stop making those mistakes. It may take some time to change your habits and actions, but it will pay well in the long run if you do.