There are situations in life when you badly need a loan – these loans can be of various types. Below I will be citing some of them -
To buy a property – You may raise some funds to buy property in auction. Also this property might be available at bargain. The funding for this kind of loans can be done such a way that will enable you to arrange an alternative mortgage like buy to let mortgage.
To fund a project – If you have framed a project in your mind that needs huge amount of money, then also you need loan. Actually this demands extra capital so you can opt for funding on the basis of interest only. In this case you are required pay back the full amount in one year or twelve months. This has an advantage since you may enjoy the benefit of maintaaining your existing mortgage.
You must have heard about a saying – there are only two certain things in life, which are taxes and death. This actually indicates the behaviour of people who pay taxes considering it to be unavoidable. And you should accept that truth and know some basic terms about taxes.
With the use of the word "tax", we actually mean to say Income Taxes. These taxes should be paid by an individual for his or her annual earnings. More often than not tax day comes once in every one year. For a regular taxpayer he has to file for taxes.
For paying the taxes you have some deadlines. These deadlines may vary for different entities – like for individuals the deadline is one, for corporate bodies it might be other. The papers which need to be submitted for calculating your taxes are called tax returns. So you should always pay taxes and be a responsible citizen of the country.
Do you have portfolio in properties or do you like to have one in future! If you have not yet given it a thought, it's time you should think over it. You need to start now and try to improve the portfolio. Your success lies in the fact that how well you can manage this portfolio. First of all you have to make some remunerative and wise decisions regarding property investment.
In the current economic scenario many people are submerged in mortgage and also the foreclosures for home is very high. But you might be lucky to be penny wise and so have some playable cash. For a first time investor like you the charge of interest might be some percent higher than you will be getting for your own house. Actually investment property loans are fantastic way of making affirmative cash flow. You should always go for conventional financing whereby you can avail low rate of interest. The lesser you are paying for the interest rate, the more you can gain from your property investment.
Credit counseling can help you to get out of debt and handle your credit responsibly. However, before you can opt for a counseling agency, you need to check out if the agency is an authentic one. There are many credit counseling agencies who take advantage of the situation.
What you should look for -
Check whether or not the company is a non-profit organization, and is a member of National Foundation for Credit Counseling
Check if there are any complaints in the name of this company with the Better Business Bureau
Check whether or not the company is accredited by Council on Accreditation (COA) or the International Standards Organization (ISO)
The counseling agency must be in this business at least for 10 years
Before opting for any counseling agency, you should visit the office of that agency to discuss the matter with them. In addition, to opt for the best agency you need to visit not one, but a couple of companies at the same time.
If you are doing a business it is obvious that you have to examine its cash flow first. May be the size of your business is not very big, but still to grow a successful business, you need to manage its cash flow efficiently.
Here are some basic steps to do that -
Evaluate the cash flow - You need to first determine how much money you have now. Then you should add the amount you might pick up from any other sources. Then outline the amount you need to spend.
Manage money effectively - You should not keep extra balance in your bank account. It can be used for some other purposes like better investment or for paying off your debts. That way the excess amount kept can be managed effectively.
Don't pay out fast - To run a successful business, experts say that, you should collect the payments early but you should never pay before the scheduled date. This makes your cash management really sound.
Festivals are not yet over, but still you might have plans to buy a new car in this festive season. If you have already taken another loan, that may stop you from getting low monthly payments or fair rate of interest. So financing a car is not that easy.
Loans for owning a new car is of huge demand. And also there are many companies or banks who offer auto loans. Instead of going directly to them, you should first gather some more information about it through Internet.
These dealers have a tendency of gaining more profits from you by advertising online. Actually by this way you will be analyzing who is giving what and then choose the best one. When you have bad credit history, the dealer might transact with a direct lender. The rates of interest deviate from banks to banks, dealers to dealers. And the fact is that you will get a higher rate of interest if you opt for a used car which is not very old.
I have discussed some general kind of finance topics till recently. Today I feel that I should focus on some of my personal experiences. It is going to be something on cost of education these days.
My brother is doing graduation in Business Management, last week his classes began from a short vacation. He will be preparing for his last semester next January. Along with the tuition fee, his private tuition session also climbed up unexpectedly. I realize how my father manages the huge expenses towards his studies. He has been offering him the best he can afford for his bright future. Not only the core education or studies related expenditure, but he also has to outlay for additional expenses like notebook, broadband Internet connection etc.
The major things that have changed since we graduated is that, now students need even loans to finish their studies. The reason behind this is the rising cost of education these days. Keeping this in mind, you too should start saving money for your child's education to offer them a lovely prospect.
Have you ever thought of growing your children with some money saving tips that can make them money smart! If not, you should give it a try with the following tips, those can bring some financial literacy for them -
If you are familiar with saving money in an organized way, you should also teach your children to build up this idea in the same manner
They should have basic knowledge of loans and credit
They should know what is the difference between "need" and "want"
You should discuss with them about how magical compound interest is. This way they can appreciate it much
Also you can focus on value of work which can yield money for them
Offer them some pocket money so that they can grow habit of spending and also build the spending plan of their own
If they can adapt even some of the above steps you might be on the way of bringing up very well-equipped and financially prudent children
Did you ever ask your employer for a pay rise. You should now ask if you are in great difficulty of short of cash. It might be also that you are very far from your next payment. So asking for a pay rise often is the easiest and fastest way to get rid of this kind of situations. Your organization may come up with its helping hand stretched.
But before stretching their helping hand, they might go through some homework of their own. The following steps will help you to get started -
Have you updated yourself with some new skills or courses since your last pay was reviewed, that is counted for your pay rise
Have you taken up new responsibilities in the recent past, this is very important to show how you performed with your new responsibilities
You should never threat your employer since that does not help anyway
You should pull together some market data and you may come up with the other businesses those pay for your position
The worst can happen is that your boss simply says no. On the other way you might be overwhelmed with a fantastic pay hike if they find you worth it.
These days it is known that the the Chinese are in total control of the Economy and also of their financial markets. They are not doing anything unlawful rather they exactly do what actually benefit themselves. The following things are happening with the Chinese Dollar -
They are more inclined to buy Euros since it helps them to beef up the currency. And there is no doubt that this basically keeps the trade weighted to the value of the Yuan.
It is also that they are buying Dollars to decelerate the fortifying movement and also buying other currencies in the region. They try to keep the trade competitive with their peers. This makes the Euro to be the biggest benefactor of all this.
So the foreign exchange market is really crowded there making the Euro roll over. This is recommended that you should short Dollar positions and look for selling in the rally of Dollar.
You must be aware of that there are numerous companies who arrange consolidating debt for people, but there are few companies with professional staff who can reckon your Christian belief. You might be finding it difficult to pay off debts for high interest rates and fees, then you should seek help from stellar debt consolidation companies. In this kind of consolidation program also they focus on freeing you from onus of debt.
But it is somewhat different than the usual debt consolidation program. In this case the services provided by the companies is mainly focused on religious interest. That is in simple terms, these programs are designed keeping in view of the Christian clients particularly. They actually combine the problems of their clients' debts with their religion. When you have chosen the right company for you, the company will send its consolidator to you and he will analyze your financial health.
The significance of education in building up the career of a particular individual has led to the introduction of several loan schemes for the students. The aspiring candidates who desire to pursue their higher studies can opt for these finances offered by multiple financial institutions. The loan programs give the learners an opportunity to continue their learning process independently without borrowing the funds required for it from their parents. Defaulted student loans is a condition where a borrower might fail to make the payments on time.
The intention of the career seekers towards applying for the student loans is definitely positive, but still sometimes, due to some or the other reasons, they might be declared as defaulters. To know clearly about the conditions for defaulted student loans, the applicants must properly go through the terms and conditions specified by the lenders or financial institutions.
One of the simple ways of avoiding the defaulted student loans condition is to pay off the amount within the specified range of time. After some of the missed payments, the financial institution will send you a warning notice. You must pay your installment as soon as you receive it. Once you fail to repay the specific amount for about 270 days, you will be declared as a defaulter.
Student life is just the beginning and hence, with the gradual growth and development, you might need to apply for other forms of loans to properties like home, cars, etc. In case, you have a stained credit record in the initial stage of life, it will really be very difficult for you to get your other loans instantly approved. Thus, you must try to maintain a stainless credit record for obtaining finances easily as and when required.
There are some phases in your life when you might become financially weak or need to consolidate your debts and then comes the need of personal loans. And some questions may also come up in your mind like where to get a personal loans from. In the recent past it has been found that people are suffering from financial inadequacy. In the period of recession in 2009 many people lost their jobs and hence they were in scarcity of money resources.
The easy way out for them was to opt for credit card loans and in turn it became popular among people to meet their financial expenses. These days people are searching for personal loans with debt consolidation, even you may find some non profit debt consolidation. In the last case the rate of interest is low which makes the monthly installment too. In normal case the service providing company first confer with the debt companies then accordingly adjust the debts.
You must know that there are various options available for debt relief – and due to such large number of options it is very hard for thousands of people with credit card debt to pick out the best which would efficiently work out for their problems and lead a totally liability free life. Actually these options are designed specifically for debtors. They are supported and launched by federal government for relief of credit card holders who face acute financial problems.
The condition here is that your unsecured loan amount should be equal to ten thousand dollars or more than it. Then you will be eligible for such kind of debt relief assistance. Among the all options available there are mainly two which might be beneficial for you. One is debt settlement and the other is credit counseling. In the credit counseling method the credit counseling company revises your installment amount and interest rates.
You must have seen the horribly bad days of mortgage in the United States. Though it is still possible to purchase a new house for people with bad credit history. Actually in that situation you must be aware that you are not in a position to buy a new house – but still you do not have to give up your hope. There are lenders who have designed programs to meet such conditions. Not that you are day-dreaming, but it is made possible through bad credit new home mortgage.
There are some options from which you can choose -
Mortgage zero down – They still exist in the market. In this case you do not need to use your cash for down payment. If you are lucky enough you can even find a lender who might offer 107% loan amount including the closing cost.
Down payment – One may also get a chance of bad credit new home mortgage by placing a down payment. In this case the rule of thumb is more is the amount of your down payment better is the scope of getting approved.
Do you find budgets are really boring for you and also feel it can be better managed by your parents! Till recently the idea has changed. This is actually to keep track of your finances and also to handle it efficiently. So budgeting can be interesting too. You need to find the process that basically suits you. So here we discuss how to manage your budgeting portfolio.
The first thing you should do is to think of creating a budget plan for you. For this, you don't have to be very repressive but there should be a balance between your income and expenses. Then your next task is to compare your income on a month-on-month basis. This will eventually show you how much or less you might save for each of the months. Here comes the need of realizing that you have to reduce your expenses much better to gain control of your budget. Which claims some small sacrifices from you like giving up some luxury or going out with friends.
First you need to know what actually equity is. The value of outstanding mortgage which is subtracted from the value of your home becomes your equity. This value when made into cash is considered as the equity release program. One actually then is just free to use this cash according to his or her necessities.
Then comes the tax part towards this kind of cash received by you. Since you own the equity, it is pretty sure that you are exempted from paying any taxes whatsoever. On top of that there will be no repayments to be made. The hottest form of this kind of equity release is lifetime mortgage – where actually you are assured of owning your home all through.
To be eligible for this you need to attain the age of 55 first. The most remarkable benefit of releasing your equity is the tax benefit as discussed earlier. Moreover, this may actually lead you through a fantastic retirement.
You might already know relation between your business life and personal life with respect to money, obviously because you run a small business. In order to succeed in your business, you have to give preference to your personal finances. Far and foremost you should be completely out of debt before venture into any business.
May be you are going through financial hardship and it's you and only you who can feel the bad days. More than often the problem is manifolded when you already run a business. The good part is that you can always try to make more money in the future. The point here is to learn to keep yourself living exactly on what you have.
Some of the practical approaches that you can follow are -
You should spend less than you earn
You should avoid using credit card
You should always pay yourself first even if it is a small amount
There might be cases when you face situations of getting denied for a funding even after you have signed the agreement papers. The investment banker concerned here may discover some new findings after the approval has been made – so the latest credit report is made after verification that there is no unusual activities incurred by the borrower. This takes time to create these kind of reports and this makes the whole approval process longer and longer. Generally the borrowers can expect this report to be generated after 60 days or more.
Here are some points to follow -
You should regularly make payments towards rent or mortgage
You should not go for any substantial purchase like automobile in between the process
Don't apply for a new credit card
Keep all your accounts updated
You should not redeem your collections
You should also avoid buying any new furniture
The above points should be remembered for easy funding process and commendation of mortgage
Not everyone in this earth owns a house, so not everyone is proud of having owned a house for a long time. In the recent days this is considered one of the most ideal investments ie. building your own house. This actually becomes perfect for the people who are having a family or will be starting a family in the near future. But before committing the investment, you need to be very careful so that the deal remains fruitful to you from all angles.
You can browse the Internet for searching the ideal house for you and that suits your budget. The advice here is to make no hurry or search haphazardly, so please be patient. And more patience should be kept for the first time home buyers. For this you might seek help from the experts in the field to hire the efficient house makers. The basic step is to go through the brochures and testimonials, the terms and conditions they are imposing.
It is known that credit counseling can help you to get rid of debt and handle your credit efficiently. But before choosing any of these agencies, you should know some common facts. The first step is to check if the agency is authentic or not. There are some fraud kind of agencies who might take advantage of your situations if you are not properly equipped with these facts. Actually their task is to guide you through proper way so that credit can be managed properly – but instead of doing that they might simply take money from you.
You need to check if the agency is accredited by International Standards Organization (ISO)
Also you need to check if there is any complaints lodged against this agency with the Better Business Bureau
Please ensure that you are not paying any money whatsoever before getting proper services
The agency should have been in the business for last 10 years
They should have certified counselors to advise
You should ask for a written document of their Terms & conditions and also Policies
This is something which is not often heard of. This kind of insurance is calculated for credit cards and done somewhat differently. It is assumed that initially there is no sum which might be outstanding. Actually the process involves using credit facility of the card and if the balance is not paid for a particular month, then the customer needs to be charged one percent of his / her credit card balance for that month and this is considered as the premium for the insurance. These are facts those should be known before dealing with protection insurance.
If both the parties involved match the criteria, then it wraps up with nominal refund against overdraft or loan. When this type of criteria is met, one can start searching some other ways to pay off the debt. In this process the period covered for insurance is typically long since the type of insurance is completely different than any other insurance say home insurance or auto insurance.
Often it is said that it is very difficult to get a cash out refinance. The case might be that you have good credit history or striking equity base and also do a very good job for years – still the bank might be baffled to decide upon whether to approve your application for refinance or not. Moreover the truth lies in taxpayers' payments which the banks receive in huge amount, say billions of dollars, they still keep back on giving the credit to the worthy homeowners. This is really shameful and disturbing on their part.
This in turn makes the needy homeowners frustrated – these people are deserted when they have requirements at the most. Some homeowners are really eligible to get cash out refinance on the basis of their accumulated equities. The process of getting cash out refinance was not so difficult some two or three years back even. Banks also have become helpless when the recession started in 2007 and tightened the norms.
You must be aware of that when you are refinancing a mortgage, there are lot of things that should be taken care of – this actually assures that you get the most proficient program of mortgage refinancing. It is seen that most of the people who own a home, does not have cue about how this process actually works out. And at the end they find themselves paying more than what is needed. Here we have revealed one of the secrets only -
The term that is going to be discussed is "yield spread premium", which most of the homeowners might not have heard of. It is nothing but a kind of bonus or commission designed for the bank or lender who helped you. This premium is summed up to your loans cost. And this eventually increases your interest payments. So before you go for mortgage refinance, you should always inquire about this premium to tackle the problem.
It is seen that every year thousands of investors make real estate investments, though all of these are not in right manner. This actually happens due to their inexperience. They are drawn to this market for hefty money which the foreclosures market promises. This is true that huge profits can be made through this market. But one should not make mistake about it.
Following are some common mistakes which you should avoid so that it does not cost you badly :
Do not allow your seller to remain in the property after when it is already bought. People actually become sympathetic about it, so insist on vacating the property as early as possible
You should not put large amount of money into the deal. It is always advised to wait till the seller leaves the property
There might be some unexpected happenings at a later stage like wrongdoing by the seller – protect yourself from this before hand
It is more complicated to people to understand chapter 7 bankruptcy. This actually makes a little information on this topic to go a long way. It is seen in the recent past that the economy is running quite tough. Known for its goodness as one of the best solutions to get rid off you debts, after filing for bankruptcy is successful. But before that you have to keep in mind that going for any harsh decision needs expertise consultation with a bankruptcy lawyer.
It is considered one of the ways of getting rid off unconquerable debts, with this the property in question is subject to liquidation. Actually these properties are sold to repay creditors. And then residual of the debts is wiped off. The good part is that, under this kind of bankruptcy, debtors don't need to refund their creditors in any repayment plan. The simplicity is that the liquidation stage actually takes care of all this.
Sometimes in your life you have to face alarming situations regarding your financial stability. Credit card debt might be as dangerous as this. In the recession time it was seen that uses of credit card increased since people forced to operate them instead of cash. It is not very difficult to learn some of the tips given here.
First you need to fasten some of your debts, for this you have to analyze how bad debt you have. If you get the reason how it occurred, then you might have a picture how to control it. Actually when you can resist yourself from spending unnecessarily, the first step to credit card debt recovery you are in. Another nice idea is – please don't be perplexed to compensate a small portion of your credit level. The more we can compensate, say for a given month, the better it will be in the long run.
Being wealthy takes time to achieve, it's not a one day process. It is always advisable that you grow and set up your mind for making money. The beginning starts from foreseeing the process of making money and then following it through later. Not for everyone it is possible to figure out the picture easily, it depends upon the line of work you are in. Two major qualities you should grow is to take quick decisions and manage time effectively. So is the saying "Time is money".
Rich people actually make another effort of making relationships. They realize that they don't have everything. So they try to interact with more people to achieve what they need. You should be thrilled about what you do for making wealth and when other persons see that fervor, they wish to be part of it. The philosophy behind this remains in the fact that everybody wants to participate in something which creates joy and pleasure to their hearts.
Portfolio of your assets might be a long one, which eventually includes your living place too. But if you have taken a loan for that house and regularly you have to make monthly payments for it, then not only it becomes an asset, it may also be considered as a liability. So if you apply some intelligence to make some additional penny think something like this which in turn might diversify your investment portfolio.
Is not it a great idea if you consider taking out a second mortgage with the objective of financing your investments! Taking mortgage for your existing house can give you a chance to use up the money to buy another real estate property. This actually be bought for renting out purposes with a regular monthly fee or even for selling at a later stage in a very higher cost. And this would be just wonderful if you can manage to rent it out with a higher fee than the interest rate payable for your mortgage. You also have an option to utilize it for other business opportunities.
In some situations, it is difficult to decide whether you should file for bankruptcy or not. Basically for this, you need to understand what bankruptcy can and cannot do for you. You first need to note down the options available to you - like pay for other debts or selling the home or any other options that can help you pay off the debt. After all these, you need to talk to the creditors.
It is always advisable to pay the debts than to go for filing bankruptcy since you will be in a more comfortable situations, when you are free from debts. Moreover for expelling debts, bankruptcy is not the best solution whatsoever. An instance of non-expelling debt is student loans. Here even the government would help to change the plan of the payment. Also it is to be considered what will be your credit score and you have to spend considerable amount of effort and time to rebuild that score.
It has become harder these days to successfully qualify for a car loan – both for used and new ones. People are not that financially sound to make this happen. But in the present busy schedule everyone should have his or her own car. Being able to suffice for a car loan is crucial this way.
You have to first assess your credit if you opt for getting used car loan with bad credit. If you have pretty good credit, it will be easier to get that loan. You need to get a credit report certified by some reputed authority. There are many such reporting agencies. You may get one free report per year. Beware of mistakes that appear in these reports since mistakes can affect your credit score badly. Get some back up documents ready as supporting material – like proof of your regular income, savings bank accounts details etc.
Finally you have to calculate the total interest payable before choosing the tenure of your loan. You are advised to keep the tenure below five years.
Every here and there, on advertising, you see and hear about this – which one will suit better to you; fixed rate mortgage or variable rate! Selecting the right one can make your worries over – say for next 10 years. But the decision should not be taken hastily.
Actually a lender would offer different rates for different types of mortgages. This is basically picked out on financial risk to the company and you. When the client is willing to take the risk, the rate of interest will be lowered as a special offer. On the other way round, that is when the lender takes the risk more, the rate automatically becomes bit higher. When the period is longer, the risk will be higher too for the company.
Variable rate mortgage is better suited to persons who might tolerate higher risk and have a flexible budget. On the other hand, fixed-rate mortgages are best for first time buyers with low risk tolerance.
When you are in huge debt either you have to file bankruptcy or you can go for some debt management programs. On some extreme cases there might be no other way than filing for bankruptcy. Everyone wants to be free from debt. But it is difficult to avoid it completely. People should not lose their hope or give up when they are facing difficulties to meet their financial obligations. In that case some good efficient debt management company can save you from this bad situation by handling it effectively.
Debt reduction actually gives you some space to breath when you are drowned in debt. So that they can pay off comfortably. People who have piled up in debt might gain from this option. In the actual case the debt management plan that suits you best, must be approved by the creditors. Once it is approved the debtor has to pay accordingly to the repayment term.
Till recently I did not know what an endowment plan is. And before my father’s retirement, I had to gather some knowledge on it. These are basically normal savings plans which has the life policy included in it. This is a blend of a life insurance policy and a retirement annuity. Here a policy holder is eligible to get a lump sum amount at the time of maturity or the same is paid to the policy holder if he deceases.
It is definite that this has a benefit of chance – in the event of your surviving you can reinvest the amount or can use it in your retirement. This eventually introduced the term “living benefit policy”. If you want to retire comfortably, there are many options of investments for you to choose from – stocks, fixed deposits, retirement annuities and endowment plans. If you are perplexed, please consult with an investment broker for better guidance.
Mortgage brokers might be helpful; they might not be so if they don’t know the market. They have to be experts in their domain. Since there is a criteria to know the lenders thoroughly in order to know who these lenders may borrow and who they don’t borrow.
There are many countries in this world where these people can be held responsible for giving poor suggestion. Or they can even work for serving their own needs. This actually helped the system to keep clean.
Now eventually the question arises, why should you go for a mortgage broker’s advice at all ! There are many reasons, I am citing here some –
• The mortgage market is difficult to understand, so an expert broker can give you unbiased advice
• They understand better what the lenders prefer
• If they have a good network of client base, they can even offer deals that are not generally available directly through property agents or banks.
These days more and more people are keen to buy an individual health insurance plan for them. This varies person to person that is customized, according to an individual’s needs. It is not that easy task to choose from so many offerings available in the market. One has not only to select the right coverage but also to opt for the right price.
The first step starts with researching or analyzing the best suited plan for you. There are several factors to look for- like health need, age or risk tolerance. Along with this you must also take into account your present health care status and any future health hazards. Because the last one demands medical expenses in the near future which can’t be avoided. Then there comes the monthly premiums. Everyone seeks the lowest premium with an affordable rate. Some private companies might also offer you incentives on being fit and healthy. For this you have to give up your smoking habit and regulate your diabetes level.
When you run a business, you actually have to acquire credit facilities. These can be from bank or other financing institutions. This is the way for the people who have limited capital and still want to start a venture. And if it runs well, then they can consolidate the loans taken. This is true that at the end you have to repay the loan. There are numerous cases where we find people starting small with some loan taken. Later they may really make it a big one.
Some people might go a bit forward and even think of keeping their assets as mortgage. This way they raise some more capital and flourish their venture. In the period of recession, people found it very difficult to get suitable loans. Now the situation has changed to somewhat better. At least the banks concerned, raise less questions to a credit worthy entrepreneurs now.
What we actually mean by “mortgage refinancing” is to replace your current home loan with another loan which offers a lower interest rate. In this case the property is kept as collateral. This is given consideration when someone is unable to make his payments on time or the interest itself is high in nature.
The benefits of refinancing are as follows –
► To liquidate your high interest loan
It is known that the rate of interest of refinance loans is generally lower than other mortgage loans available. In this way you can get your high interest home loan paid off and also fall into a lower interest rate regime.
► To eliminate your PMI
PMI stands for Private Mortgage Insurance which is actually required when the borrower is able to pay 20% or low as down payments. The borrower might take the advantage of this by paying only 5% or even 3% as down payment.
There might be phases in your life when you pile up with immense debts. Then you seek professional help to resolve the problem. You should learn how to manage your debts more efficiently and be within your budget accordingly. If you are not sure how to manage it properly and systematically, then comes the requirement of an expert counselor. They would suggest when you have missed the payments or you are giving bankruptcy a thought. Looking into your case minutely, these people may even give you view for unforeseen future hardships.
They actually then start negotiating with the creditors within their reach and help you for personal budgeting. You can be able to control your debt well enough and have a better grip over it this way. And there is another process of bringing the interest down charged by the creditors. This also is handled by these counselors efficiently. Your counselor will fix a repayment plan after examining your debts and send it to the creditors for acceptance. When it is accepted, you can start paying your debt as accordingly in the plan.
The message for investors is on disciplined approach to investment
► Do not fall prey to short term and cheap ideas which pose a risk to your capital instead
► Go for planned investment approach with proper risk measurement and planning return on surplus funds – arrive at balanced approach while allocating funds to equity for growth , MF for regular income growth and Insurance for life and health risk
► Impulsive and knee jerk reaction on investing MUST be avoided – maintain discipline in creating wealth to enjoy the life objectives
► Equity offers dynamic returns, should you define your risk taking ability and plan investing after measuring it
► Professional counseling for investment decision making is worth investing – Most investors are seen bargaining price with service providers, instead demand most from them on quality services. Pay price to avail quality service to bring growth in capital and peace of mind to your family.
► Think and plan wealth creation for building future of your family and your next generation
We are living in an era where equity investments could create significant wealth given the favorable tax regime. Hence, concentrate on making sound investments, take informed decisions by referring to quality research and counseling.
To generate greater returns with risk management take professional help and make the best of your finances through a disciplined and long term approach.
The term refers to the trading that occurs outside of general market regulations, commonly through computers or telephones after the official exchanges have closed.
Circuit Breaker
Circuit breaker refers to any of the measures that are used by stock exchanges during large sell-offs to avert panic selling. It is sometimes called a “collar”.
GARP Investing
The GARP (Growth at reasonable Price) strategy is a combination of both value and growth investing.
Herd Instinct
A mentality characterized by a lack of individuality, causing people to think and act like the general population. Herding instinct is when you tend to follow the group and react in the same manner as they react.
Speculator
A speculator is a fellow who trades bonds, commodities, derivatives, or equities with a higher risk appetite, in return for a substantial profit potential. Speculators anticipate large price movements in either direction.
Top Line
Towline is the slang which refers sales or revenue.
Window Dressing
Window dressing is the strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. In other words, it refers to showing the better position than the actual.
Bottom LineBottom line is the slang which is used for net income or profit.
Bottom Up InvestingAn investment approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual stock.
Bull & BearA bull refers to an investor who thinks the market, a specific security, or an industry will rise. While, a bear is an investor who thinks the market, a specific security, or an industry will fall.
DividendsDividends refer to the cash payment from profits of the company that is announced by the Company’s Boards of Directors to be distributed among the stockholders.
Panic BuyingThe term refers to high volume buying brought about by sharp price increases. This happens mainly due to some news which is spread in the market.
Panic SellingThe term refers to high volume selling brought about by sharp price decline. It happens when the market collides.
In order to plan for his taxes it is important that Mr. Smith should be aware of the tax implications of the various investment avenues. Before discussing the tax implications, itt is important to understand the all pervading standard section of the income tax act, which provides a deduction under that section, upto Rs. 1,00,000/-. The earlier rebate under section 88 has been replaced with section 80C. Mr. Smith should understand the following aspects while planning for his taxes:
► Tuition fees paid for his child is eligible for a deduction under section 80C
► Premium paid on insurance policies
► Contribution towards national savings certificate and public provident funds are also eligible for a deduction
Conclusion
Normally any personal financial planning is a highly comprehensive exercise involving close interaction with the clients. It covers a number of dimensions and involves studying the needs and requirements of the client closely. This case just touched the tip of the ice berg and aimed at bringing light on the basic elements of financial planning when planning for the children’s expenses.
Now he has a 5 year old child. The insurance policy that he has taken will mature by the time his son is 18 years when bonus will be payable to Mr. Smith. From a standard insurance company, the average yearly bonus payable is Rs.48 per thousand sum assured. Hence, for a sum assured of Rs. 2,00,000/- Mr. Smith can expect a bonus of Rs. 9,600/- per annum which may amount to nearly 2 lakhs. ( However, this bonus is not guaranteed ). This bonus is in addition to the frequent inflows of Rs. 50,000/- (25%) on sum assured that will be paid on the 5th, 10th and 15th policy year.
In order to generate a substantial corpus for his son, Mr. Smith should invest the regular inflows from the insurance plan in an equity diversified scheme. The investment can be made either as a lump sum or through the systematic investment plan route. The investment can also be made in child funds.
His residential house and jewellery will not be considered as investment because they will not generate income. He needs to invest further to achieve a corpus of nearly 45 lakhs. His present savings are nearly rupees two lakh per annum and he is left with a cash of one lakh after meeting all the cash outflows. In totality, his present savings per annum are three lakhs. He will have additional savings that will become handy after the car loan is repaid (after two years). His savings will increase to Rs. 6 lakhs per annum after the repayment of loan. His housing loan will be met out of his income while he is earning as it matures at the end of nine years.
He can invest in a mix of equity and debt in such a manner that his exposure to equities is between 40% and 50% of the portfolio. He should consider safer avenues such as post office schemes that offer guaranteed returns than other avenues available.
His current outstanding liabilities amount to nearly Rs. 18,00,000/-. His annual contribution towards these EMIs constitutes nearly 45% of his monthly income.
This means that almost half of his monthly income is consumed in meeting these loan EMIs. One of the options that can be considered is the prepayment of car loan. However, it comes at a cost of penalty and therefore may not prove to be a very feasible preposition. Also, since his car loan will be repayable in the next two years it will reduce such payables and will lead to higher savings (Rs. 3,00,000/-). Once these loans are repaid, the client will be left with sufficient money to be invested.
Mr. Smith requires a corpus of nearly 20 lakhs after 20 years for his son. He also needs to build his retirement corpus or Rs. 30 lakhs in the next 10 year. He is having investments in stocks and shares, FPF/ PPF and bank FDs worth Rs. 5 lakhs.
Insurance needs should be constantly reviewed and monitored from time to time. If this is not done, then the investor falls prey to the risk of under insurance. This is exactly the case with Mr. Smith. He had taken a 25-year money back plan when he was 30 years for Rs, 2,00,000/-.
In addition to the money back plan, it is recommended that Mr. Smith take a term insurance plan. He can take up a cover for Rs, 30,00,000/- for a 20-year period. This amount of Rs. 30,00,000/- will not only help his family in meeting his outstanding liabilities but also in meeting expenses to some extent. The annual premium comes to Rs. 16,346/-. A suitable term plan that can be recommended is the Priceless Being. A term plan becomes important primarily because of the highly leveraged position of Mr. Smith. In case of his unfortunate death, his liabilities should not become a burden for his wife and child. Secondly, this plan can be used as a suitable supplement to the existing insurance cover. Due to its low premiums, such a plan will not cause any additional financial burden for Mr. Smith. He can also invest the proceeds from the money back plan in mutual funds, the returns from mutual fund can be used to pay the premiums for this plan.
The previous post highlighted the position of Mr. Smith. His main stated goals are planning for his child’s future and creating a suitable corpus for his own retirement. Considering his goals and his current financial position, it is necessary to prepare a comprehensive financial plan so that he is in a position to realize his financial goals.
Managing short-term liquidity and contingency requirements
Mr. Smith has a bank balance of only Rs. 1,00,000/-. This figure is certainly not adequate for meeting any short term contingency.
Apart from monthly EMIs totaling Rs. 60,000/-, he also needs to meet other mandatory monthly expense* of Rs. 46,671/- ( Rs.5,60,059 / 12). This position is particularly alarming because his EMI obligation and majority of investment in long-term assets. Therefore, he needs to build some short-term asset which can be accessed by him in case of any eventuality. For this purpose, he must have savings at least equivalent to his three months’ mandatory expenses, which is nearly Rs. 3,20,000/- [3*{Rs. 46,671+(Rs. 7,20,000/12)}]. He already has Rs. 1 lakh in his bank account, so he needs to increase this reserve by Rs. 2,20,000/-. He should have at least Rs. 3,20,000/- in near cash avenues such as in savings account and short-term liquid deposits.
Though the returns offered by bank deposits are very low, parking a calculated amount in such avenues is unavoidable to circumvent any unforeseen emergency.
*Other mandatory monthly expenses include insurance premium, house maintenance and water tax, food and grocery, transportation, clothing / personal care, medical care, utilities and miscellaneous expenses.
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