The Baby Steps of Investing

A lot of people are afraid of investing. They fear that there is a stock market bubble (and that it will burst). They worry about another crash, like the one we experienced in 2008 where lots of peoples’ retirement accounts were cut in half. The truth is, as you already know, that if you want to ever retire you cannot count on Social Security to keep you afloat. You have to invest and you have to invest wisely.

That’s an intimidating prospect. There are so many stocks and bonds and dividends and investment opportunities out there. Choosing between them feels like a Herculean task. Here’s a little tidbit of good news that most investment advisors don’t want you to know: you do not have to have a perfect portfolio from the beginning. In fact, it is better to start small and build your portfolio over time. This way you can learn about the investing process. You can figure out what works for you and what doesn’t.

Here is how you get started.

Step One: Make Sure You Can Afford It

A lot of people believe that investing is something that they can only do after they have paid off all of their debts. This is absolutely not true! While you might not be able to invest as much or as widely if you’re drowning in debt, you can still invest. At this stage of the game, you are simply investing in yourself.

This doesn’t mean, though, that you should put off paying your debt in favor of investing. It is imperative, if you want to become a successful investor, that you get your financial house in order. For some this might simply mean making a budget and setting up automatic payments. For others professional help might be required.

If you decide to hire someone to help you clean up your credit and get your finances back on track, it is important that you hire the right someone. There are a lot of scam artists out there. One of the best ways to tell the difference, according to the Lexington Law reviews page on Lawyers.com, is the value the professional places on transparency. In some cases, transparency is even more important than the rates they choose (especially if you’re thinking of hiring a non-profit).

Step Two: Start With Yourself

As we’ve already mentioned, it is absolutely possible to fix your credit, get your finances in order and build an investment portfolio at the same time. You simply have to start building that portfolio by investing in yourself. Building an emergency fund and having a savings account that can keep you afloat for at least a year (it used to be six months, but given the economy a year seems more practical) are your first goals.

Step Three: Baby Investments

As soon as you have that year’s worth of savings built up you can start contributing to your investment fund. You can create this fund by setting up a separate account with your bank. In fact, that separate account–if you make it a money market account–can be your first real investment.

After your money market account, you should buy a few CDs. CDs are basically high-powered savings accounts that you can’t touch for a predetermined period of time. “High powered” in this case means higher interest rates than your standard savings or money market accounts.

Step Four: Build Momentum

What a lot of people do is open a couple of CDs and, when they have matured, take the interest they’ve earned; after reinvesting their original CD deposit into new (and hopefully even higher interest rated) CDs use that to start buying small but more “high profile” investments. They might, for example, buy a few shares of stock in a company. They might buy into a small mutual fund.

If you have multiple CDs you might consider, after one of them has reached maturity, cashing it out so that you can invest even more into “high profile” investments.

Step Five: Diversifying

By the time you’ve reached this point you will have likely built up at least a passing knowledge of what the major types of investments are and how they work. This is knowledge that you can use to start diversifying your portfolio. For example, if you’ve been concentrating primarily in straight forward stock purchases, you can start exploring our preferred type of investment: dividends (which are actually just a different type of stock, so it shouldn’t feel like a big stretch to explore this area).

Some people do so well with their investments that they start to branch out into things like angel investing and non-profit building (which carry their own tax benefits). The point is to diversify as much as possible so that you don’t have all of your eggs in one basket.

Hiring Someone to Help You

It is totally possible, especially if you have the knowledge and the know how, to manage your portfolio yourself. It is better, though, to hire someone to take care of your portfolio for you. This doesn’t mean that you give that person completely control over your investments. On the contrary! A financial or investment manager might advise you and encourage you to make certain investments, but they cannot actually buy into anything without your express permission.

Make sure that you choose your financial planner with the same level of care that you used to hire your personal finance advisor or credit repair professional. While the person will require your permission to do anything with your money, it is important that you hire someone whose advice you will trust. Just like in other areas of financial management, there are a lot of amateurs and scam artists who are just trying to make a quick buck. (you’ve seen Wall Street, right?)

The point is this: you can invest. You should invest. You should start laying the groundwork for building your portfolio now so that later you can enjoy your retirement!

How Does Cash Advance Work?

A cash advance is very similar to a payday loan, except the terms are generally a bit longer. For those with poor credit, this is often a better option when emergency funds are needed. Cash advances are not legal in all 50 states, so it is important to make sure they are legal in your state before obtaining one. This is an alternative to a traditional loan and is generally for an emergent purpose.

Loan by Check

Some lending facilities for cash advances do not give actual cash; some provide a check that is made out to you for deposit into your bank account. In return, you must furnish a post-dated check to them for repayment of the loan or authorize a direct withdrawal from your personal bank account on the specified repayment date.

Advance from Credit Card

Some credit cards allow for cash advances. Not only are you charged an interest rate with the credit card company but the lender also charges a fee. In some cases, you can go to ATM for a cash withdrawal, but when you need a larger sum of money, you must visit either a bank or financial loan institution for the advance.

Varying Terms

There are varying terms by location and facility. The average cash advance interest rate is 15-percent. This fee is attached to the loan amount and must be paid in full at the time of repayment. Other fees can include administrative fees, processing fees or local taxes imposed by a specific municipality.

It is important to review the terms for the facility you wish to work with prior to accepting any funds or signing any paperwork. Always read the fine print as this can include disclosures for hidden or any additional funds that may be required.

View the repayment terms as these do also vary.

Short Terms

Most cash advances are scheduled for repayment within 14 days. Terms vary by location as some will extend out to 21 to 30 days. Most cash advance lenders require you to leave a check with them that can be deposited into your bank account for collection on the scheduled repayment date. Other lenders will require you to come to the office and make the payment in person. If a credit card advance was issued, repayment may be requested in cash form. Always ask about the terms of repayment before accepting the advance.

In a sticky situation or one where you have limited resources, this is an option to consider. This is better than a payday advance since the interest rate is much lower. Your credit does play a factor in the amount that you can advance. Your income is the biggest deciding factor as a lender cannot advance you what they don’t see you bringing in as far as income is concerned. Your other bills are not taken into account in this situation as it is a short term loan that is to be paid back in one single payment. In this situation, it is best to only ask for exactly what you need and not extra.

The Importance of Company Credit Checking

Understanding how your company, potential business partners and new customers that you choose to deal with can be affected by credit reports is vital. Here we explain what credit checks are and look the importance of company credit checks.

CR

 What are company credit check reports?

This type of report gives an up-to-date true and fair view of how a company manages its financial obligations. The report usually includes company background such as director details and shareholders, accounts receivable information, current and historical credit score, and public information such as records filed with a government agency.

 Why are they important?

 

While it’s important to increase your customer base as your business grows, late and non-payment of bills can cause major cash flow problems for your company. Before entering into business with new customers or new business partnership, it’s essential to conduct checks to ensure they’re creditworthy. Remember that the size of a company is not a guarantee that they’ve a healthy level of cash flow. Company credit checks enable you to have a good financial understanding of potential business partners and customers. Assessing the risk will save you time and money in the long term.

Credit histories are often affected by debts, loans, and credit score. Checking the company’s credit will let you know whether they have previous form in defaulting, the ability to pay the debt, and whether they take on loans which they cannot afford. A company that has an average or poor credit score means they’re less consistent in repaying their debts.

It’s a good idea to look at your own company’s credit check report to find out how it appears to your suppliers and customers. Moreover, comparing your company credit report with your competitors’ will enable you to benchmark your performance against them. It can help you to identify opportunities and threats by exploiting your competitors’ weaknesses.

If you’re seeking finance for your business, it’s likely that your company credit history will be checked. Your company credit score may go up and down depending on the financial activity. Hence, it’s a good habit to check your company’s credit profile regularly to ensure the information is accurate and up to date. Regular checks will enable you to identify discrepancies and prevent any fraudulent transactions on your accounts. Make sure your company address history is correct as you may be penalized for debts incurred by others. Credit reports provide valuable information that allows you to rebuild a previously damaged credit rating to boost your chances of obtaining finance for your business.
How can you carry out credit checks?

You can ask for references from existing suppliers of your new customers and potential partners. Another reliable way to check on the financial situation of a company would be to approach a credit checking agency that specializes in supplying creditworthiness reports.

Company credit check reports provide valuable information to make smarter business decisions. Obtaining a copy of your company’s credit report is the first step towards protecting your credit rating. It’s important to undertake checks of your potential customers and business partners to make sure they are credible. Benchmarking your company’s financial status with your competitors will ultimately help to understand how your competitors are operating.

 

Image by Simon Cunningham,

 

Is Staying Home to Raise the Kids Costing you More than you Think?

Not long ago we wrote a blog about how the number of stay-at-home moms in America is on the rise. As a matter fact, in 2012 nearly 30% of all US mothers stayed home to raise their kids, up 23% from 1999. Take a trip to any park on most weekdays and you’ll even see dads there also, having swapped their desk chair for a high chair.

Of course some of these parents are at home because of the lack of jobs but many are there by choice, saying that there’s no way to put a price on time spent with children before they grow up. While that might be true, it’s also true that anyone considering staying home to raise their children should look at the costs involved in swapping out a career in the working world for a career taking care of the kids.

The simple fact is that any retirement nest egg can be quite devastated by a lapse in retirement savings. For example, 50% of a 25-year-old’s retirement income can be replaced if they’re earning $40,000 a year and start saving 13% of their salary at the age of 25, including any employer matching that they can get their hands on.

If you deduct three years from that however, that 50% replacement rate falls to 43% and, after five years, it falls even further to 39%. That extrapolates to needing to save 15% of your salary if you miss three years in the working world or 17% after missing five.

Financial experts will tell you that, even if you decide to take time off, you should still continue to put savings into a spousal IRA. Yes, this will need to be funded by the working spouse but, since it’s in the non-working partner’s name, it should be fine. If you’re married and file a joint return you can also open a traditional or Roth IRA. In some cases the lower income that you have because you’re not working will make you eligible for a Roth and you may want to consider converting a traditional IRA into a Roth as well.

Taking time to raise the kids will also impact your Social Security benefits once retirement comes. The 40 credits that you need usually require at least 10 years of paying into Social Security and, if you’re close, you might consider working a bit longer. Also keep in mind that the 35 years when you earned the most money are what the Social Security Administration considers when they figure benefits, so any years that you earned nothing will cost you. If you’re a stay-at-home parent and you don’t qualify for benefits, you may be entitled to up to 50% of the benefits that your working spouse will receive.

Since it’s highly unlikely that anyone will take over raising your kids for free, having adequate life insurance on the stay-at-home parent is a must. The breadwinner in the family should have adequate life and disability insurance as well.

Finally, in any situation where one spouse ops to stay home and raise the kids, budgeting and downscaling is absolutely necessary. Putting together a bigger emergency fund is also vitally important, especially if the breadwinner suddenly becomes unemployed and unable to work.

A good suggestion is to try living on only one income before deciding to take the stay-at-home plunge. That information should help to make the decision much easier whether pro or con.