Monthly Archives: February 2017

Tips for Young Married Couples When Buying a House

Young married couples have already started a new life and they are excited about settling down and having a family. Buying a house is the biggest dream of any young couple because they will always need a place they can call home. However, when they actually get down to buying a home, they find it an extremely challenging and stressful task. They have to take care of several things like credit score, eligibility criteria, down payments, taxation and on top of that go in search of a property that suits their budget and needs.

Buying a home can be a daunting task because it is a major decision that a young couple takes after getting married and both need to be on the same page to ensure an appropriate choice. Here are some quick tips that will make their task less-challenging and fun:

  • Check your credit score: Credit score plays a vital role in deciding whether you are eligible for a housing loan or not. Banks follow a very strict procedure when it comes to approving loans and the first thing they consider while making a decision is your credit score. You can’t expect to get a housing loan if your credit score is in shambles. Thus, You will have to check your credit report for unpaid accounts or collection accounts or mistakes and rectify anything that can adversely affect your credit score. If you have a damaged credit score then you will have to invest some money and time to get it rectified.
  • Check the property before applying for a loan: Your new house will be your only place for the rest of your life, so be very careful in choosing one. Young couples often tend to disagree on several things but when it’s their house, they need to be on the same page. Finalize a property when you both find it appealing.
  • Get the Documents right: You will need to furnish several documents to the bank before they approve your loans, so you will have to be ready with those when the time comes. You will be asked to provide your bank statements. Pay slips, tax documents etc.
  • You’re in it for love: In all the hustle-bustle of buying a house, you may often forget that your house is the symbol of your love. Do not lose faith on each other because of petty differences. Keep in mind – you’re in it for love.

To Invest to Stocks or Not to Invest: What’s Your Final Verdict?

Why should you invest to stocks and why shouldn’t?

Whenever people heard about investing in stocks, they automatically think individuals making millions of dollars in the stock market. Stocks are considered to be as one of the traditional forms in raising a capital for businesses. Aside from that, it can open your door to greater opportunities in making a lot of money if you invest successfully. You have to be wise in picking the right stock at the right for this can result in bigger stocks while the stock value is tremendously increasing.

The biggest challenge for you in investing to stocks is to pick the good stocks during their lowest price then, sell them during its highest value. Well, this might require a lot of knowledge as well as experience to do so.  Investing in the stock market is all about right timing when to buy and sell stock.

The truth is your investment to stocks can actually benefit you a lot in making money at the same time; it can introduce you to high risks. If you do not have enough knowledge or experience in the world of stock market, you have to consult a financial adviser to gain a better understanding of the right strategy and timing. But, if you are just in the state of deciding whether you have to invest or not, the following advantages and disadvantages in investing to stocks:

Advantages of Investing in Stocks

  • A variety of Choices. With so much trade companies available, you can easily assemble portfolios that will meet whatever objectives you wanted to obtain. Also, this wide range of mutual funds will allow you to expand across industries or any company size coming from small to large cap.
  • Long term growth. Compounding your returns and dividends greatly create wealth over the long term. Your long term investment gives you easier plan where the rate of your return increases.
  • Risk tolerance. In investing in stocks, you have the freedom in selecting risk tolerance. If you prefer to have a low risk, investing in an established company is a great idea while if you wanted low more risk, you can consider riskier companies.

 

Disadvantages of Investing in Stocks

  • Lately, markets have become been quite volatile. As the market is in the panic mode, people tend to choose emotions instead of the fundamentals of logical economy creating amazing bargains.
  • Time-consuming. Though you choose a mutual fund and you belong to a small business, you are still you may face challenges of which one you should buy. To do so, you need to conduct a substantial research which is time-consuming.
  • Never be risk-free. Investing in stocks will never free you from risks since the value of your investments can go up and can go down. All form of business involves risk, but if you know how to handle it, you have the opportunity to succeed.

As mentioned above, the answer to whether to invest to stocks or not will always depend on to the right choice of stock and time, so you need to be wise. Also, it is much easier for you to succeed in investing to stocks if you have knowledge and experience.

Is Renting a Car More Pocket Friendly Than Buying

The straight and simple answer to this extremely tricky question is a big YES!

Renting a car is always more cost effective than buying a new one because you are able to save on the huge investment that you actually make on buying an asset that depreciates with time. If we are to talk in a strictly financial language then it is never wise to buy assets that depreciate in value; however, it is always good to buy assets like property and shares that increase in value.

It is really hard to not fall prey to the temptation of buying your own car, especially when you are unable to hail a taxi during the rush hours. If you are able to actually count the number of days in a year when you felt the need of a car real badly then you will be surprised to find that it is not more than 10 to 15 days in a year. Do you really need to buy a car that you will need only 15 days in a year? No logic behind buying a car exists unless you have a lot of extra money to waste on assets that depreciates in value over time.

According to the statistics, a new car depreciates by 40% of its list price in the very first year itself. By the end of the third year, the value drops by 60% of the list price and this keeps falling till your car is valued not more than junk iron sheets. Why do you want to waste your money investing on something that really does not add any value to your life?

Buying a car is probably the dumbest idea and an absolute waste of money when you have many other options. Renting a car can save you hundreds of dollars a month and you can go step further to even get a car on lease. Both these make a lot of sense than just blindly buying a car. Lease is a long term rental deal that lets you drive a car for a fixed monthly price. In the US, people are more into driving around in the latest models than actually buying them. Now, there isn’t a better deal than renting the car and driving to wherever they wish.

Renting or leasing a car does not make you the owner of the car but you definitely save hundreds of dollars while driving some of the latest models on the road.

Would Refinancing My House Improve My Credit Score

Refinancing has often been used by many to avail lower rate of interest and pay off their housing loans without spending a fortune. However, what leaves most people confused is the impact of refinancing of house loans on their credit score. There’s no point in trying to understand credit score vis-à-vis the refinancing as that involves many complex metrics and calculations. Broadly saying, credit score does get affected but it definitely is impacted by every refinance or loan modification.

Your FICO score is bound to be affected by any loan modifications or refinancing moves you make. However, the quantum of impact depends on how the refinancing gets reported to the credit bureaus. Your refinancing can be reported as the same loan with just a few modifications or it can be reported as a completely new loan.

If the refinancing is reported as the same loan with just a few modifications then changes in loan balance, credit enquiry and any changes in loan terms will have an impact on your credit score. Even if this happens, changes to the FICO score will not be anything substantial.

On the other hand, if the loan is reported as a completely new loan then your credit score still gets affected by then changes in loan balance, credit inquiry and any changes in loan terms. However, another new piece of information affects the FICO score and that’s new “open date”, which indicates that the credit obligation is new. This will have a greater impact on your credit score than what would have been in the case of simple changes in terms of an existing or old loan.

Refinancing your mortgage will certainly have an impact on your FICO credit score but it’s not going to improve it in any way. The impact will be small as well as short-lived. Refinancing might have a greater impact on your credit score if it’s done too frequently or putting in new credits associated to your mortgage. FICO often penalizes if you are not able to honor the terms of the credit or receiving too many inquiries pertaining to your credit report.

Irrespective of what your refinancing terms or needs, your credit score will definitely take a beating, even if it’s for a short term. Thus, you should research a bit before taking the refinancing path and it’s always advisable to weigh your options before you refinance your housing loan.

Home And Real Estate: How Will You Be Able to Buy a House

Are you dreaming of having your own house? Do you also ask yourself the question, “Will I ever be able to buy a house?” Well, sooner or later, you will be ready to buy one. But if you still do not know how and you are still wondering if you could really buy a house, there are many ways of how you can get help.

house

Home and real estate are already one of the most competitive industries today and it is surely not easy to find the best home and real estate today. Below is a guide that you can follow before buying and how to can check if you can afford to buy the house you want.

Where to Start

  • Get a deposit together – Normally, you should save up in deposits before buying a home but it will not be hard for you if you seek help from your family to make depositing faster. Mortgages cover percentage of the value of your home which is the Loan to Value (LTV). The deposit is the remaining purchase price that you pay.
  • Check affordability – Look at the cost of homes. Go for the home that you can afford best so that there will be no problems for you when monthly payments come.
  • Check your credit report – It is an off for lenders if they see on your credit report that you have excessive debts  or you always miss your payments. But you can still get a mortgage out of your bad credit. However, it would be better if you get to improve your credit history to increase your chances of getting approved of normal mortgage. You should also understand mortgages first.
  • Find help – Get some help from your family or purchase a home with somebody else who is more likely to be accepted for a mortgage. A joint mortgage can save more deposit and it has an affordable mortgage payment.

How long will you be staying in your home?

Buying a home can incur expensive closing costs. If you are going to stay in that home for many years, these costs may spread over time. But if you are going to sell it after 3 years, the costs may be higher than your rent. In simpler terms, your period of stay has an impact if you should buy the home or just rent.

If you are asking if you will ever be able to buy a house, the answer is yes. You always have the opportunity in home and real estate. All you need to do is be wise and consider the above mentioned factors to go through the process with no hassle.

Normally, what you need to do first is do the math. Scribble the calculations and decide if you are already ready to step into your new home. However, this is easier said than done because numbers are too large when it comes to home and real estate. But with the right approach, you can do this well.

 

Emergency Savings Saves the Day During Financial Crisis

Savings in any form is good and better if you have an emergency fund stashed away to be used only during dire emergencies. Not many of us understand the importance of emergency savings till we actually encounter a crisis. Your personal finances can be shambles if you don’t have savings to fall back on during financial emergencies like a car breakdown, critical health problem of a family member, sudden death in the family etc. You will need to do some financial planning to allow yourself the wriggle room during crisis situations.

emergency savings

 

What does one need to do to enjoy financial freedom even during emergencies? Well, nothing much apart from creating a fund that can take care of unforeseen expenses. You can’t borrow from friends or family members – no one actually saves for friends or extended family members! You can’t even avail payday loans as they will drill a bigger hole in your pocket because of the insane interest rates. Financial planning is the only proper way of dealing with unplanned or unforeseen expenses.

 

All financial experts or market gurus harp on the need for robust financial planning in order to lead a tension-free life. No one wants to see their family members or friends struggling for money during an emergency. What’s the harm in planning ahead and creating an emergency fund that you can use when the need arises?

 

You can keep away some amount every month towards your emergency fund. This can be either in the form of a simple savings account or you can keep the cash at home only. Either way you will be able to make a substantial savings to take care of unplanned expenses. Medical emergencies, house repair, unplanned travels etc. can eat into your earnings if you don’t have an emergency fund to deal with such expenses.

 

If you are an impulsive buyer or a shopaholic then you might find it extremely difficult to save money at the end of the month. Start preparing early and make it a habit to set aside funds at the beginning of the month so that you spend only from the money you are left after saving. Emergency savings can be the best way to deal with the financial crisis and it is an important part of a robust financial plan. In order to enjoy total financial freedom, plan early and create an emergency fund to which you contribute on a regular basis.

10 Awesome Tips to Save Money on Groceries

We often don’t realize that we are spending a larger chunk of our income on groceries and end up stocking our refrigerators with unnecessary items. Before your food and grocery spending burn irreparable holes in your pocket, it is time to save some on your groceries.

save money on groceries

 

Here is a list of 10 awesome tips to save money on groceries:

  1. Prepare a menu – Planning what you want to eat before running to your nearest store might sound a drab activity but is extremely important if you want to save money on your groceries. Why do you want to end up buying items that you are not going to eat? Prepare a detailed menu so that you know the items you will have to buy.
  2. List standard items – Besides preparing a menu, there are some standard items that you will always require to rustle up a quick meal, breakfast, lunch and dinner. You will never forget the items that are a part of almost all meals or common to several dishes.
  3. Look for sales – There is no better way to save money than buying grocery items during sales. Often the stores put up items for sale and you can get your daily food items at discounted rates.
  4. Buy in-season fruits and vegetables – For staying healthy, we all need to eat fresh vegetables and fruits. However, these are expensive items, especially if you are buying fruits or vegetables that are usually not the season’s produce. Buy only in-season produce as that’s the best way to get your regular dose of fruits and vegetables while not spending a lot of money.
  5. Collect Coupons – There are several online resources to get the best deals on grocery items; you can always collect the coupons to save a lot of money on your grocery purchases. Alternatively, you can also collect the coupons available with magazines and newspapers.
  6. Learn the store policies – Not all stores accept competitor coupons, so you will have to learn about the store policy where you usually purchase your grocery items.
  7. Cut down on the number of monthly store visits – This actually helps you to collect your coupons and visit the store during sales, so you will be able to make a killing. However, you can’t expect such outings more than once or twice in a month, so you will have to cut down on the number of monthly store visits.
  8. Choose your store wisely – Choose the store that offers maximum sales and discounts; a surefire way to save a lot of money on your groceries.
  9. Buy only necessary items – You should always buy the items that you need and nothing more than that. Even though you will be tempted but try to restrict yourselves to the necessary items only.
  10. Don’t take your kids to the store – They are not going to help you in shopping and instead compel you to buy a few items more; leave the kids at home while visiting a store and you will be able to save a few more dollars.

Never Too Young to Start an IRA

You are never too young for an IRA and the earlier you start preparing for retirement, the better it is for your financial freedom. Investing for retirement should never be put in the backburner till you turn 25 or 30 or settle down with a permanent job. IRAs are a great option to start investing your money as they are really easy to open and operate while requiring small investment only.

There’s no point fence-sitting till everything falls into perfect alignment because even a $400 dollar annual contribution towards your IRA account is enough to start with. Young investors focused on long term gains have numerous choices in front of them but the most preferred among them is Roth IRA.

Roth IRA – Perfect choice for young investors

Roth IRA makes perfect sense for young investors as it is one of the most straightforward investments that anyone can think of. You will be taxed on the money you contribute towards your Roth IRA and as long as you adhere to the guidelines, you will never be taxed on your withdrawals after you retire. Younger individuals can benefit for Roths by investing on the businesses that offer long term gains through capitalization on the market’s movement. Leveraging the market to make good gains while not having to pay any tax on withdrawals is simply awesome.

3 Stellar Advantages offered by Roth IRA

  • Simplicity

It is really simple to avail tax free withdrawals after retirement instead of just calculating what you will need after the taxes and sending off the estimated payments to IRS.

  • Easy Withdrawal

You will be able to withdraw your contributions at any time from your Roth without paying any penalty. Even the early-withdrawal penalty of 10% can be avoided if you are buying a home for the first time or you are disabled. This benefit is available in case of deaths as well.

  • Lower Tax Rates

The federal income tax rates are extremely low. Your present tax might be higher than what you will be paying at 59 ½, so that’s a much easier option.

The maximum permissible limit of investing in a Roth is $5500 every year and for people above the age of 60 can deposit $6000. You can walk into your nearest bank any day of the week and open your IRA certificate of deposit. The primary aim of IRA is to encourage investment, so invest whatever you can, even when you are in your early 20s.

Is It Practical to Use Zero Based Budgeting

Business owners and top-level managers invest a lot of time budgeting and in bigger organizations, the process itself incurs huge costing. In traditional methods of budgeting, the managers are required to review the previous year’s budget and then make amendments based on the performance expectations. However, in Zero Based Budgeting (ZBB), a completely reverse approach to planning and budgeting is applied.

Zero Based Budgeting doesn’t take into account the previous year’s budget and is instead begins at Zero. The managers need to justify all the budgetary expenses and not limit themselves to the previous year’s budget. Everything starts at zero and the planning and decision making is done on the basis of budgeting. One of the prerequisites of this budgeting is that the mangers need to be ready for detailed documentation and budgeting. The managers also have to identify and even justify the expected expenditures and arrange the activities in accordance to their relevance and costs.

Zero Based Budgeting paves the way for the high level management to make decisions as well as budgetary curtailments based on the documents during any time of the financial year. There is no provision of pre-financing as is in the case of traditional budgeting. This is a big reason why this type of budgeting is followed in the non-profit sectors and government. However, Zero Based Budgeting has to undergo frequent reviews, usually every year, as it is a costly and time-consuming process.

People favoring the Zero Based Budgeting usually point to the following advantages:

  • Resources are allocated vis-à-vis requirements and benefits, which is extremely efficient
  • Managers are compelled to find cost-effective methods for improving activities
  • Inflated budgets can be easily detected
  • Service departments find this to be extremely efficient because often it’s difficult to identify criteria

 

Naysayers point to these disadvantages of Zero Based Budgeting:

  • It’s time consuming because defining expenditures is often challenging for the managers
  • Zero Based Budgeting needs too many support staff and managers to prepare
  • Managers have to be given prior training on this method of budgeting before they can actually begin the process, which again is time-consuming
  • Everyone has to be aware of the details as huge volume of data as well as forms are needed for effective Zero Based Budgeting

 

Zero Based Budgeting is considered to be an honest approach to budgeting but when it is not too practical for private organizations and larger businesses to follow. They are bound to face capital and manpower shortage while trying to implement Zero Based Budgeting.