Emotional Debt Issues Can Cause Financial Ruin

Many people base their financial decisions on their emotions. This can be dangerous.

In fact, one of the main causes of debt is self-esteem issues. Often, debt can’t be eliminated by only fixing the financial. The emotional must be addressed as well.

And it isn’t easy.

The first thing you have to learn is that you must use credit wisely. You might be using it to boost your self esteem, but it often works the other way. Instead of helping you emotionally, it will drain you. P.T. Barnum said that debt robs a man of his self-respect.

Just think about how you feel when the credit card bill comes in. Think how you feel seconds after signing the receipt for a truly frivolous purchase. Your spirits might be temporarily lifted, but then the regret and shame sets in.

You can avoid this by simply not turning to your credit cards. Start learning how to live within your means.

When families become stressed by financial difficulties, they tend to fall apart. There can be yelling, fighting and stress between partners. Credit cards can lead to lying about shopping, lying about usage and lying about what bills are and aren’t paid on time.

When you are in debt, your whole life can begin to feel as if it is falling apart. Taking steps to get out of it will help you get not only your finances in order, but your family as well.

You will also find that there is more pleasure in seeing a large amount of savings than there is in seeing a large spending bill. Start a consistent savings plan. Watch it grow. The more it grows, the more you will want to contribute.

The greatest lesson to learn from debt is in learning from your mistakes. Experience is a great teacher. Make it your mantra not to repeat your financial mistakes. But you should also take the time to invest a little in educating yourself. Read articles, go to counseling and talk with your friends about their experiences.

It will take time, hard work and sacrifice. But the emotional rewards are far better than the material.

Start with sitting down with your partner and discussing the situation, both emotional and financial. If you become heated in the discussion, walk away for a time. Don’t try to hash it all out at once, do it only one hour at a time. This keeps you fresher and less emotional.

Separate your spending from your feelings of worth. Ask yourself why you spend. I know that I overspend frequently partly because I’m afraid I won’t have the things I need. I grew up without much money and am afraid of returning there. I didn’t see that the spending was putting me in that situation, not removing me from it.

It isn’t complicated. Usually the emotional reasons are just below the surface. You need to bring them up, get rid of them and move on. Your finances depend on it.

Why You Need to Secure Your Own Financial Future

When our parents and grandparents were young, planning for the financial future was largely unnecessary. Many people in these earlier generations were able to go to school, get an education and work for a single employer for their entire working lives. After those 20 or 30 years were up, there was a secure retirement and a solid financial future to look forward to in retirement.

Anyone who has been paying attention to the financial landscape knows just how radically things have changed. These days, the secure defined benefit pension is very much an exception to the rule, and most employees find themselves being asked to take charge of their own financial future by investing their own money in a 401(k), 403(b) or IRA plan. While this do it yourself financial approach can have a number of advantages, it can be a daunting task as well. This approach to financial matters provides a greater level of control than does a traditional pension plan, but it also introduces an element of risk to the equation.

To make matters worse, most employers will not provide financial advice to their 401(k) or 403(b) plan participants because they are worried about liability issues should the financial investment not work out favorably. It is up to each plan participant, therefore, to take control of his or her own financial future and to learn as much about financial matters as possible.

There are many places to seek out financial advice, including relatives, friends and professional financial advisors. Many people prefer to start locally, seeking out advice from their more financially successful friends and relatives. Professional financial advisors can also be a good choice, but it is important to study their track record carefully to make sure they are really qualified to hand out that financial advice.

Taking charge of your financial future may not be easy, but it is important. It I important to start planning for a secure financial future as soon as possible, since the power of time can help your money grow and make your financial future much more secure. There are many ways to save and invest for a more secure future, from Individual Retirement Accounts (IRAs) and 401(k) plans to mutual funds, stock market investments and bond funds. How you invest, how much you invest and how early you get started will have a significant impact on your future happiness and security, so it makes sense to get started as quickly as possible.

Different Investment Baskets Can Make You Less Of A Basketcase

The roots of asset allocation may be traced to the 1950s when a University of Chicago graduate student in economics was in search of a dissertation topic. The student, Harry Markowitz (we’re not making them up, folks), ran into a stockbroker (no injuries were reported) who suggested to Harry that he study the stock market.

Markowitz took that advice and developed the theory that became a foundation for financial economics. Harry later earned, along with William Sharpe and Merton Miller, the 1990 Nobel Prize in Economics, following work by the two of them that pioneered the Modern Portfolio Theory.

Today, Modern Portfolio Theory is called asset allocation. Read on to find out how this concept could help pad your portfolio, if not win you the Nobel Prize. Here are a few of the highlights of asset allocation:

  1. Asset allocation is essentially the notion that you can minimize your overall investment risk and increase your potential for gain by spreading your investment dollars across various types of investments.
  2. Carefully consider what you hope to achieve through investing before you choose the make-up of your portfolio.
  3. Are you a thrill seeker, or a nervous Ned or Nancy? Gauge your emotional tolerances for risk before you invest.
  4. As you shop for investments, consider how an investment is classified, its performance history and what the experts are predicting about its performance.
  5. Things in life constantly change. Keep on top of your portfolio’s contents — and shake things up once in a while.

Annuities – Another Tool For Your Retirement Tool Shed

The word “annuity” doesn’t exactly roll off the tongue, does it. Why do financial terms have to be so bizarre? That’s an excellent question–one we can’t answer without first teaching you a secret handshake. Despite the strange term, annuities are a popular retirement tools today. You may want to gain a better understanding of how you could use them in your overall retirement plan.

Think of an annuity as one of the tools in the retirement shed. It may not be the sharpest tool in the shed, and you can get by without it–if you’ve got other tools that serve a similar purpose. An annuity has many features, but it’s generally not the first tool you show off when bragging about your tool shed. And you probably won’t use the annuity tool for awhile, but when the time comes you’ll be glad you have it.

OK, enough with this metaphor. Is there such a thing as a genuine tool shed anymore? Maybe everyone gets one when they retire. There we go again.

Annuities may be just the tool for you because:

  • They can supplement monthly retirement income from IRAs and 401(k) plans or other employer-sponsored retirement plans. Annuities can be a good way to arrange for a monthly income during retirement (or you can collect a lump sum). Some annuities will even guarantee a monthly pay-out for as long as you live, no matter how long you live.
  • You don’t pay income taxes on the accrued interest until you withdraw money from the annuity. However, the contributions themselves–your non-qualified annuity premiums–are not deductible at the time of contribution.
  • Pay-outs can begin immediately after you open the annuity or can be deferred until a later time when you need income.
  • With some annuities, you can pass on death benefits to your beneficiaries.

Budgeting: Not An Easy Task But A Worthy Cause

Whether you chalk it up to human nature or some freakish financial force, it seems that inertia, phobia, disgust, denial, confusion or simple neglect keep us from the two things that are at the root of all good financial planning:

1) knowing what we’re currently spending; and 2) having a spending plan we can live with.

Ignorance is truly bliss when it comes to spending. It’s a pretty neat trick to never know what your bank balance is. When that is the case, you don’t have to face the reality of not having enough moola to buy a candy bar, much less the fancy dinner you fooled yourself into popping for last night on your credit card. But ultimately, you reach a point where you say enough is enough. Your chronic avoidance of budgeting and sensible spending is wreaking havoc on your life in ways that go beyond just money. You’re wasting time, increasing your anxiety and giving yourself little to no chance of reaching goals that are important to your happiness.

Well, you’ve come to the right place because we’re going to help you overcome those hurdles. The key will be to keep your plan simple and your expectations realistic. And just like a financial plan, budgeting is not something you do once and then forget about it. As your life circumstances change, so must your spending plan change to keep you from falling back into bad habits or falling behind on your goals.

And if the thought of a budget has left you feeling a little queasy, we’ll give you some “Budget Tips,” which allows you to skip the whole budgetary process while still making some progress with your spending habits.

Bonds: Why You Might Want Them In Your Portfolio

Most of us have been in the position where we have had to ask someone for money. It’s not a fun feeling. Well, how about being on the other side of the coin? Bonds are a form of investing that can generate earnings through what basically amounts to you loaning money to a company or government agency. One of the oldest ways to invest, a bond certifies that the issuer has borrowed a specific sum of money and needs to repay the principal and interest to the bondholder by a certain date.

So What’s The Attraction?
Bonds tend to be more predictable than other securities because many of the financial variables associated with them are known at the time they are issued. Many investors include bonds in their portfolios, therefore, to provide diversification and balance. The main attraction of bonds is that they can provide a source of fixed income for a defined period of time (assuming a bond is not “called,” or paid off by the issuer).

Certain types of bonds may offer less risk than many stocks. Of course, that generally means they offer lower rates of return. Then again, there are also types of bonds — junk bonds, for example–that are more risky than many stocks. If you want to add balance to a portfolio full of stocks, diversify your investments, or you like the idea of being a moneylender, you may want to consider what bonds can do for you. Learn as much as you can, because bonds are not that simple at face value (no pun intended).

Money & The Single Parent

Some days you may feel alone, but you aren’t. There are literally millions more single parents like you.  That’s not exactly comforting information, but it’s evidence that there are other people like you–probably just down the street.

Still, we realize that your situation is unique. You may be divorced, separated or widowed, or you simply may have chosen not to marry. You may be just starting out in life or you may be well on your way to retirement. You may have lots of financial resources or you may have few, if any. The circumstances differ widely, but you all have one thing in common: You have yourself to rely on financially.

It’s not always easy – sometimes it can be pretty hard – especially if you’ve been recently widowed or divorced. The first piece of advice we’ll offer is to give yourself time to get past the tidal wave of emotions you may be feeling now like grief, shock, sadness, anger, guilt, denial and depression. You may be feeling none of these emotions, but it’s likely that you’re feeling some. Be very cautious about making dramatic financial decisions in the heat of the moment. Give time a chance to work in your favor.

This is not to say you should ignore necessary decisions. Keep paying your bills and be sure your insurance policies are up to date. If you haven’t done so already, you’ll also want to close your joint bank and credit card accounts and open new ones in your name only. For some, staying busy is therapeutic.

If you have a large sum of money to deal with (an insurance settlement, for example), don’t be too hasty. Consider investing it in an account where your money will earn interest but also be available if you want or need it, such as a Treasury bill or a short-term CD. When you’re ready, you can make other plans for your money with the certainty that you’re thinking straight.

What You Should And Shouldn’t Discuss With Your Kids
You say you have money problems? So do lots of people. What should you tell your kids when they ask about those problems? Tell them the truth. Not down to dollars and cents. They don’t want to know those kinds of details, and they won’t understand them. Communicating with your kids honestly about your money can be a good way to start teaching them about money.

One thing kids often wonder about is their (and your) financial future. They may have a deep-seated fear of what will happen if you’re gone. Talk to them in detail about the way you’ve planned for the future – your insurance, your will, your investments. This kind of information is reassuring, and it teaches your kids that planning for the future is essential. Of course, it’s hard to explain coulda, shoulda and woulda, so you’ll need to act on what you learn here.

Ten Tax Saving Tips You Can Use Now

Too many Americans prolong their tax agony by waiting until April 15 to settle up with the IRS. Experts advise, instead, that you take responsible steps all year long to keep the bite and anxiety of taxes to a minimum. Here are ten ways to increase your tax savvy:

  1. Take advantage of generous retirement plan tax breaks. Make the maximum contribution to your IRA and 401(k), 403(b), 457 or Keogh plan to substantially lower your taxable income. Moreover, the earnings grow tax-deferred until you retire.
  2. Make full use of allowable business-related deductions. If you must move more than 50 miles due to a job change, you can deduct transportation expenses. A deduction of 30 cents per mile is allowed for business-related auto travel. If you’re self employed, you can deduct 30% of health insurance expenses. Credit card interest on equipment purchases is also deductible.
  3. Select the most advantageous filing status. Many taxpayers, notably newlyweds, overpay substantially because they don’t know whether to file jointly or separately. Consult an accountant or tax preparer for advice.
  4. Itemize, itemize, itemize! It requires painstaking recordkeeping, but itemizing can often reduce tax liability measurably. Medical expenses, including travel to and from medical facilities, are deductible if they surpass 7.5% of your Average Gross Income (AGI).
  5. Develop a tax-planning strategy. Estimate how much income you expect to receive during the coming year. Whether you expect to earn more, less or roughly the same amount as in the current year will determine whether you defer income (for example, by making investments that won’t mature until the following year), or increase your deductions (for example, by making charitable contributions before year’s end).
  6. Save by giving to your children. Youngsters are generally taxed at a lower rate than parents, so putting funds in a child’s name can result in big savings. The exemption for children under the age of 14 was raised by $100 to $1,300 for 1995. You can also reduce the tax burden on your heirs. Under current law, you and your spouse are permitted to give up to $10,000 a year to as many recipients as you wish without gift tax consequences.
  7. “Shelter” lump sums from higher tax bites. What happens if you are fortunate enough to come into a large sum of money, such as a pension fund distribution or inheritance? Rolling over such funds into a retirement plan, such as an IRA or Keogh plan, is the single best way to keep a major chunk of your windfall out of the hands of the tax man.
  8. Adjust withholding to reflect your salary. If you’ve been bumped to a higher tax bracket, don’t forget to adjust your withholding so you won’t be hit with an underpayment penalty. Conversely, if you’ve moved down a bracket or two, adjust withholding so you won’t be paying Uncle Sam too much.
  9. Get your “nanny tax” refund. You have to withhold Social Security and Medicare taxes for domestic help if you pay them more than $1,000 a year. The old standard required withholding and payment to the federal government for anyone being paid more than $50 per quarter. The new provision is retroactive to 1994, so you may be entitled to a refund for any domestic help paid less than $1,000 that year and for whom you withheld and remitted Social Security and Medicare taxes.
  10. Be generous! Your charitable deductions remain fully deductible if you itemize. But there’s one catch: new tax rules require written documentation for all donations of $250 or more.

ETFs: Your free guide to exchange-traded funds

An exchange-traded fund (ETF) is a security that tracks a particular index or basket of assets. This could be the FTSE 100 or a selection of shares of companies involved in alternative energy.

ETFs are traded on the stock market, just like ordinary shares. So they can be bought and sold whenever the market is open, at a regularly updated price. By contrast, passive unit trusts – a rival tracking product – can only be dealt with once a day and only through the issuing manager.

Even though ETFs trade like ordinary shares, they don’t attract stamp duty when they’re purchased.

Diversification and cost benefits

ETFs offer exposure to an entire index, usually at relatively low cost. They are not actively managed, which means there is no need to pay fat salaries to a fund manager. As a result, annual expenses paid by the ETF investor are relatively low, typically between 0.2 and 0.75 percent of funds invested.

What’s more, ETFs are not subject to an initial charge or set-up fee, as is the case with unit trusts. The only costs when dealing are the standard brokerage commission and the spread – the difference between the prices at which you can buy and sell.

What’s on offer?

Today, the range of ETFs on offer is wider than ever before, covering an ever-expanding array of national indices, industrial sectors, commodities, futures, bonds, and other asset classes.

Consequently, it is now much easier for private investors to gain exposure to a range of previously inaccessible markets. There are also opportunities to achieve double or treble returns, as well as to sell short.

Index and specialist ETFs

Besides mainstream ETFs that track the world’s top indices such as the FTSE 100 or the Dow Jones, you can also buy or short sell individual industries such as mining or financial services. So, if you were bullish on the stock market in general but bearish about miners, you could buy an index ETF while short selling a mining ETF.

As well as national stock markets such as China or Brazil, ETFs cover segments of the market, such as mid-sized or small companies, and also entire geographic regions such as Europe or Asia.

Away from equities, there are ETFs that track commodity indices, government and company debt, real estate, private equity, and currencies.

Profit when markets fall

Whereas unit trusts generally only benefit when the markets they track go up, there is a type of ETF that gains in value when their underlying market falls. Short ETFs provide a mirror image of whatever the price of the underlying asset does. So if oil falls, they rise.

However, in terms of the equity-linked indexes, these types of ETFs are only really suitable for sophisticated traders. This is because the price of the benchmark index is re-set daily, and the returns are compounded – so, even if the index is down over an extended period, an investor who held on through volatile trading conditions could still conceivably lose money even if he was right in his prediction of a fall in the underlying.

Exchange-traded commodities

Originally, the large size of commodity futures contracts prevented small investors from getting direct exposure to commodities. With the advent of exchange-traded commodities (ETCs), the minimum financial outlay has been markedly reduced, thereby easing the way for private investors.

ETCs track the performance of individual commodities such as copper, petroleum or wheat, or even total return indices based on a single commodity. For example, many investors have recently gained exposure to physical gold for the first time through the use of ETCs such as ETFS Physical Gold (code: PHAU), which has been designed to provide a return equivalent to movements in the gold spot price. Currently, around 70 percent of private investment is allocated to precious metals, while 15 percent is given over to energy ETCs.

If, however, you want to spread your risk, you could always opt for an ETF that invests in a more diversified basket of commodities, such as the ETFs All Commodities ETF (AIGC). This has been structured to track the DJ-AIG Commodity index.

Government and corporate bonds

ETFs have also made it much easier for private investors seeking to buy into the government and corporate bond market. As ETFs are traded on the stock exchange, both historic and real-time pricing must be made readily available. Such price transparency was once the preserve of institutional investors, so ETFs have done much to open up this market.

As most bonds are held till maturity, the main problem facing those structuring a bond ETF is ensuring that it is comprised of enough liquid bonds to track a particular index. (This is more of a problem for corporate as opposed to government bonds). For this reason, representative sampling is often employed, which involves reducing coverage of an ETF to the most liquid of the bonds, and is a feature of ETFs such as the iShares Euro Corporate Bond (IBCX), which offers exposure to a range of euro-denominated investment-grade corporate bonds.

Tracking issues

Tracking errors pertaining to the bulk of ETFs and ETNs currently in issue remain relatively small, according to recent research from Morgan Stanley. Despite extreme market volatility, these instruments demonstrated close alignment to most indexes. Last year, the weighted average tracking error for all US ETFs was just 0.39 percent.

This is not to say, however, that negative tracking errors do not occur. Some specialist ETFs, or those subject to diversification requirements, haven’t always fared well, and the process of representative sampling (referred to above) is another factor that can lead to tracking errors.

The Vanguard Telecom Services ETF (VOX) and the iShares FTSE NAREIT Mortgage REITs (REM) both fell short of their tracking indexes last year. Additionally, investors need to remember that ETFs with larger expense ratios tend to have higher tracking errors simply because fees come directly out of investors’ returns.

Interest and distribution payments

Bond ETFs pay out interest through a monthly distribution, while any capital gains are paid out on an annual basis, fewer fees, and expenses. Holders of share-backed ETFs are also eligible to receive payments in the form of a pro-rata share of dividends payable on the portfolio of stocks comprising a given ETF.

It may be possible in some instances to reinvest your dividend payments. Dividends paid out of an ETF’s net investment income or net short-term capital gains – if any – are both taxable as ordinary income. Distributions of net long-term capital gains, in excess of any net short-term capital losses, are taxable as long-term capital gains.

Real Estate Investing

Real estate investing is not in any list of school choice. You can not get a degree accredited in the real estate investment. You will not find in high school or college guidance of a consultant, WHO recommends a career in real estate investment (in the case of guidance Counselor understand real estate investments, he or she probably will not be a leadership consultant!)

In the system of public schools and educational programs in the United States is only a weak attempt to prepare students to simply “get a job. ” Unfortunately, there is no class in “Making Money 101. ” You do not have the opportunity to take in the class “How to become financially independent. ” The teacher had never taught a class in “How to succeed if others can not. ” I never knew anything about succeeding as an entrepreneur or becoming wealthy during my 10 years in the university classroom. I just became a multi-millionaire when I learned the skills of real estate investments, and I paid out of pocket and out of the classroom for learning. I learned these skills in OLE University hard blows through trial and error.

Never disparage the cost of training. There is no free lunch. You need to get this know-how, outside of class, as well as learn how to make money will cost you. But if you think spending on education is expensive, you should calculate the cost of ignorance!

Nevertheless, learning real estate investment will not cost you in the arm and leg. Yes, I know real estate investing TV infomercials and the real estate investing seminars held around the country charge big bucks for those 3 day seminars and week-long camp. But this is pocket change compared to the cost they want to collect from you later. Catch this fact: all real estate investing infomercials and seminars target you as a candidate for the “Real Estate investing coaching. ” That’s where they charge you up to $ 25,000 and more than $ 50,000 a year for “coaching. ” And often you have assigned to some kid “still wet for the ears” to call you every week or month to hold your hand and whisper in your ear what common sense and persistent drive should already tell you! I am not exaggerating the real estate investing educational system, because I know that inside and outside. I personally know many of the so-called “gurus. ” I was close to him for 25 years. My opinion is that the charges are excessive, because the promoters have found deep pockets in the market.

When I began real estate investing career many years ago, real estate investing TV infomercials known real estate investment seminars and have been extremely rare. Then Mark Haroldsen followed a trend started in Al Lowry and Nick Nickerson holding occasional real estate investing seminars across the country. Later Robert Allen expanded the industry. Robert Allen promoted real estate investing conventions in major U. S. cities; he found a market for costly real estate investing information packages with tapes and note books. Potential real estate investments today aspirants who want more than an inadequate salary from employment in Dullsville often conclude that they must “pay through the nose for real estate investing know-how.

However, a diligent search of those wanna-bees often finds that this education in real estate investing more readily available from other sources than they previously imagined.

Real estate investment is probably one of the most easily learned skills never taught in school. Real estate investment is probably one of the most prolific careers on the planet Earth. Of the families who now live in houses instead of caves, houses, you can fix it everywhere. And probably nothing contributes to upgrading deplorable housing conditions across America comparable to real estate investment to repair the properties.

The entrepreneur-minded aspirant who discovers the real estate investing industry often catches a vision of life for their work. Books and online courses offer an alternative to expensive seminars and coaching.