Before You Invest

Guaranteed Acceptance Life Insurance

BYI — Mon, 05 Jul 2010 20:37:20 +0000

What Is Guaranteed Acceptance Life Insurance?

As the name implies, guaranteed life insurance is life insurance that is guaranteed no matter how old you are, what bad habits (smoking) you have or what medical history you have… everyone is accepted in to the plan.

Guaranteed life coverage is intriguing for someone who is older or for those who are in a high risk group such as those with a pre-existing health condition like cancer or diabetes, those who smoke or have some other health condition that would prevent them from getting affordable life insurance coverage.

Cons of Guaranteed Acceptance Life Insurance

As you might expect, there are a few downsides to guaranteed life insurance coverage. This is to be expected because accepting everyone in to the plans significantly increases the risk that the company is taking on and therefore they need to make up for this risk somewhere else.

Because of this risk, many companies will only let you buy so much insurance at a time… usually around $20,000 but it varies depending on the company. Many people are looking for more coverage than this so buying policies from a few different companies is an option here.

Another potential issue with guaranteed insurance coverage is that there are usually limitations that may not be worth the premium you are paying. Since many of the potential customers who buy this type of policy are in poor health or are close to death, there are usually restrictions to prevent someone who doesn’t have long to live to cash in quickly. Many companies will not guarantee full payouts until a set number of years have passed, paying out only part of the policy should the insured pass away quickly.

Possibly the biggest downside is that the terms and conditions of the insurance plans can be very confusing. I recently read a Marketwatch article that reviewed Colonial Penn life insurance policy and in it they revealed that instead of dollars the insurance was sold in “units” without much clarification of what a “unit” is. Since many of the potential customers are older and could be confused by “units” this struck me as intentionally shady… at least in my opinion.

Is It Worth The Money?

Is guaranteed life insurance worth the money? Yes and no. I would highly recommend shopping for regular life insurance coverage, with standard terms before resorting to guaranteed coverage. Much like guaranteed credit cards take advantage of people with bad credit, guaranteed life insurance doesn’t give normal insurance value to its customers because they are in a tough spot in terms of age and/or health. If you have applied to other companies and have been rejected then yes, guaranteed acceptance life insurance coverage is better than no coverage at all.

How To Settle Debt By Yourself

BYI — Sat, 03 Jul 2010 22:53:20 +0000

Debt is a frustrating thing, and these days it seems like everyone has some kind of debt whether it’s credit cards, a mortgage that is too high or maybe you racked up debt trying to be a day trader. However you got there, there comes a time when debt just rules your finances and you have no choice but to settle it and see what you can get. You can work with companies or lawyers that do this but if you want to try to settle debt yourself rather than pay someone else to do it.

1. Call the company directly and let them know that you are interested paying back your debt but you need them to make you a settlement offer to do so. When you make the call be polite and most of all be specific. If you can only afford one payment let them know what that is. If you are ambiguous with your request you won’t be doing anyone any favors and both you and the representative may get frustrated with the negotiation.

2. If you don’t like the answer the representative gives you ask to speak with a manager or their debt settlement department. There is a good chance that the operator you are talking to isn’t able to make debt settlement offers so arguing with them may not get you anywhere. Most companies have specific departments to deal with these types of issues and you are better off dealing with them if possible.

3. Don’t settle for any old settlement. When you negotiate you never start out by offering top dollar right? Well credit card companies are no different and they aren’t going to give you the best deal possible right away, so you may have to play a little hardball with them to get the best deal for you. Many times you can save 40% or more on your debt so anything less than that you should politely decline and see what they come back with. Even if you cant get a deal worked out on the initial call they will likely make you an offer down the line should you continue to miss payments.

4. Take very complete notes whenever you are dealing with someone. Many of these companies are very large so it is important to note who you spoke with, what they said and better yet get a case number. You should definitely try to get something in writing either via email, fax or regular mail because people can say things but there is really no way to prove it happened if the situation goes to dispute.

5. Lastly, and this is perhaps the most important point we can make here, make sure you understand the entire debt settlement agreement before signing your name on the dotted line. You need to consider things like late fees, interest charges and other fees that can really put you back in the same debt position you were in before the negotiation. Don’t just sign an agreement until you have read it and understand it. If you don’t understand ask questions of the company or better yet … someone you trust.

Should You Buy Annuities?

BYI — Thu, 01 Jul 2010 01:00:54 +0000

We’ve talked about annuities a few times on the site but a few people have asked me recently about where to buy annuities. Always looking to keep our readers happy, we found company that provides free annuity quotes so you could get the process started and also provide some background on annuities.

Click Here For a Free Annuity Quote (or read more about annuities below)

If you would like to know more about annuities before you get a free quote, let’s discuss them a little. For those of you who don’t know annuities are an investment contract between you and an insurance company that provides you investment income for life. They are especially attractive to investors these days because fixed annuities provide a guaranteed rate of return and guaranteed monthly income throughout retirement.

So how do annuities work exactly?

When you buy an annuity you begin by making payments to the annuity provider. You can do this either all at once or over a period of time with regular payments, this is known as the pay-in phase. Once you complete your payments the annuity company will begin paying you back monthly with a specified rate of return included.

There are two types of returns with annuities, fixed and variable. Fixed annuities are appropriately named as they have a fixed rate, say 7% on your money that will be paid to you. Variable annuities on the other hand are tied to another investment like stocks, bonds or mutual funds and go up and down depending on their performance. The advantage here is taking advantage of a strong market, but these days fixed rate annuities are certainly more popular.

The major advantage of annuities is that they are tax deferred, meaning that you don’t pay taxes on your investment until you begin receiving payments. Of that payment amount only the return on your investment is taxed (at least at the time of this writing) so your initial investment doesn’t count there. It is also important to note that unlike other investments annuities are taxed at a regular investment rate, as opposed to a capital gains rate.

All in all, annuities are a very attractive investment option for people looking for tax advantages and security. Regular payments for life are a really good thing these days with the downfall of social security looming down the horizon and regular secure income is something very attractive.

To get more information on how to buy an annuity click here.

How Does ING Direct Work?

BYI — Sat, 19 Jun 2010 22:57:35 +0000

You may have heard of ING Direct, from their commercials about the company sounding like the end of a sentence to their ads featuring a big orange ball, ING Direct is one of the best online banks going these days. There are many reasons to sign up with everything from cash back bonuses to the convenience of using 35,000 nationwide ATM’s for free, the benefits are many, but one of the questions people keep asking me is “How does ING Direct work?” so here goes…

ING Direct is an online bank, with no physical locations. Unlike most banks where you can walk in and sign up for an account, ING Direct is done all online. What this does is saves them money on things like rent, electricity and property taxes and they can then pass it on to you with interest rates higher than your local bank, even on checking accounts.

You should also know that ING isn’t just checking and saving accounts. In fact ING offers a variety of banking products, their most common being savings accounts and checking accounts, but they also offer home loans and mortgages, online investing, IRA accounts (including Roth IRAs), and a suite of business checking and saving options as well. Essentially it’s one stop shopping for anything that has to do with money.

Ok, I got off on a little tangent there… back to how ING works. When most people ask me that question they are usually referring to checking and saving accounts so I’m going to focus on them for now, but perhaps I will get in to the mortgages, investing and business stuff in a later post if I have time.

When you sign up for a checking or saving account though ING you use your current bank like a pass through. Many of you have sent e-checks or made payments online, well transferring money to your ING account works very much like that.

Once you have signed up for an account ING will make two small deposits in your current bank account, something like 3 and 7 cents. They do this for verification so you can prove to them that the account is in fact yours. Once you verify your account you do a transfer from your current account to the ING account. The process usually takes a couple of business days, but is really no harder than making an online payment.

Once the money is in your account you can either have it gain interest in a savings account, or use your checking account like you normally would with checks and an ING direct debit card (through Mastercard). At the time that I am writing this ING is offering a $50 bonus if you sign up, make a deposit and use your debit card 3 times in the first 45 days. If you do these three steps they will transfer $50 to your account on the 50th day…how cool is that?

Anyway, ING direct is a very simple service to use and really works no differently than a regular bank account except for the physical interaction with the tellers. For most of us with jobs we know that “bankers hours” never let us get to the branches anyway and ING is open 24/7 for customer service. I just signed up today and I’m very happy to have my checking account earn interest for a change!

Click Here To Learn More About ING Direct

How to Calculate Your Net Worth

BYI — Tue, 25 May 2010 13:29:24 +0000

The calculation of your net worth is a relatively easy concept and process if you have relevant information readily accessible. Calculating your net worth will help you in determining whether or not you should make a large purchase. Let’s first discuss what net worth is.

Simply put, your net worth is the sum of all of your current assets less your current liabilities. Many individuals calculate their net worth on a yearly basis so they can see how they (hopefully) improve on a yearly basis.

Now, in order to calculate your net worth, you just need to have some fiscal information concerning the possessions that you own as well as the arrears that you currently owe. Once you have this information ready, you are ready to begin calculating your net worth.

Follow the list below to calculate your net worth.

1. First, you should make a list of your major assets. Your largest assets would include your home, your vehicle(s), etc. You will want to ensure that your information is accurate. Estimate the current price these assets.

2. Next, you will want to make a list of your liquid assets. Liquid assests would include checking accounts, savings accounts, CD’s, retirement income, and any other type of investment account.

3. The next type of asset you should make a list of is personal items such as jewelry, home furnishings, coin collection, etc. Only make a list of things that are worth more than about $500 rather than making a list of every single thing within your home.

4. Take the above assets from all three categories and add them all together. The number that you get is the number that symbolizes your total assets.

5. The next thing you should do is determine your liabilities. As with your assets, make a list of your largest liabilities first such as car loans and mortgage balances.

6. Next, you will make a list of more individual liabilities such as student loans, credit cards, as well as any additional debt that you owe.

7. To achieve the total that ultimately symbolizes your liabilities, add the two categories together.

8. Now, you are ready to deduct the full amount you came up with for you liabilities from the total you came up with for your assets. Once completed, the number that you see is your total net worth.

Now, this is something that you should do each year to see how you are progressing. It is okay if when you did the calculation that it was in the negative or even a small number, this is just a foundation for you. Doing this each year will allow you to see how you are improving or worsening your financial situation.

What is an Educational IRA (ESA)?

BYI — Mon, 24 May 2010 15:09:45 +0000

Did you know that an IRA can be used for something more than just retirement? That’s right – it sure can! There is a retirement account that is known as an educational IRA, which is better known now as an ESA – Educational Savings Account. An ESA allows for you to set aside money that can be used in the future for education expenses for your children. An ESA works very similar to a Roth IRA, so if you are familiar with the process of that type of retirement account then you will have a pretty good understanding of an educational IRA.

One of the best things about an educational IRA is that funds can be withdrawn at any time for your children’s expenses for their education and when you withdraw these funds, it is completely tax-free and free from any penalty. However, there is a penalty if you withdraw from the ESA early. Tax deductions cannot be taken from an educational IRA by you nor is the child the account for permitted to do so. This of course is based off the fact that the money is being used for educational expenses.

Now there are some restrictions when it comes to an educational IRA including income restrictions. Your modified adjusted gross income cannot exceed certain predetermined limits. In addition, in order to open an ESA, your child may not have received any type of contribution within that same year for a prepaid state tuition program.

The educational IRA cannot accept funding for the beneficiary after they reach the age of 18 per tax law; therefore, you can fund the ESA for your child up to the day prior to his or her 18th birthday. Moreover, if the funds are not withdrawn by the age of 30 of the beneficiary, certain tax penalties may apply.

Since 2002 when changes to the ESA were made, qualified educational expenses no longer only included college expenses but also included educational expenses related to grades K-12.

There is no limitation on the amount of children that you open an ESA for; however, only the maximum allowable funding is allowed for each child per year, which is $2,000. (Please check into the allowable amount as the amount could change with time.)

The amount specified above may change after 2010, as will some other benefits of the ESA unless the Congress votes to keep the current ESA benefits and requirements. Otherwise, the contribution amount will drop $1,500 to $500 and expenses from grades K-12 will no longer be qualified expenses.

Remember, before opening an educational IRA, or ESA, be sure to read all the terms first. There are requirements that have to be met on a yearly basis when making contributions as well as the year that the beneficiary of the account plans to withdraw the funds that have been contributed.

As always, before deciding with any kind of plan, do thorough research first. Make sure you know what you are getting into and that you won’t regret it later. Educational IRA’s are a great thing for your children’s educational expenses.

The Pros and Cons Bankruptcy

BYI — Sun, 23 May 2010 20:56:00 +0000

There’s still a serious stigma attached to personal bankruptcy. People view it as a sign that you’ve failed, that you’ve been reckless with your money and that you’re now trying to take the easy way out.

But filing for bankruptcy is hardly a free pass. It comes with serious consequences, ones that can negatively impact your life for a full decade. Before you file for bankruptcy protection, then, make sure that you’ve considered all of your other options. There is nothing easy about bankruptcy.

If your debt is too high, if they’re keeping you awake at night or if they’re negatively impacting your personal life, bankruptcy may be an option. But remember, it should only be a last option. Only if you can’t pay down your debt through personal loans, home equity loans or with the help of family members should you seek bankruptcy protection.

There’s a reason for this: A chapter 7 bankruptcy, in which your creditors forgive your debt, remains on your record for 10 years. That’s a long time. During this time, you won’t be able to qualify for many loans. And when you do find a lender willing to lend you money, you’ll pay high interest rates for the privilege. This holds whether you need to borrow money for a car, house or to return to school. In chapter 7, you might also lose your most important possessions, including your car and home.

Chapter 13 bankruptcy is a less severe form of bankruptcy. In it, you agree to a payment plan set up by a judge that allows you to pay back your creditors on a timetable that you can afford. However, even this less severe form of bankruptcy comes with huge negatives. Chapter 13 stays on your credit report for seven years. During this time, again, you’ll struggle to take out loans that don’t come with exorbitant interest rates or fees. You’ll also struggle to qualify for even the least attractive of credit cards. Having a chapter 13 bankruptcy on your record is hardly an ideal situation, either.

Sometimes, though, there is no other option. In these cases, don’t feel guilty or feel like a failure. Bankruptcy protection is there for a reason: to offer some assistance to consumers who are down on their financial luck. In today’s challenging economy, the number of bankruptcy filings is rising quickly. There’s not shame today in admitting that you’ve suffered serious financial hardships.

Dividend Reinvestment (DRIP) Plans Explained

BYI — Sun, 16 May 2010 19:03:55 +0000

A dividend investment program, also known as DRIP, is a program that allows investors to use their cash dividends as a reinvestment into more shares or fractional shares on the payment date of the dividend. Simply put, you are able to invest into large companies for a low price. Let’s look at a further explanation…

You can purchase shares from a choice company directly without the need of a stockbroker. Your investment of the shares then expand and grow as the dividends are reinvested into the choice company, which then enhances the amount of shares that are owned.

DRIPS are a great way for an investor to increase their investment value. Many of these programs allow investors to purchase shares at a commission free base. Sometimes, you can find shares at a lower cost than the current share price. In addition, investments can be on a regular basis and can range anywhere from as small as $10 to $500,000 at any given time. You can make the investments on a weekly basis, quarterly basis, etc. How frequently you make the investments are ultimately up to you as the investor.

Now that you know how DRIP programs work, let’s take a look at the benefits of dividend investment programs so that you know why you should invest in such a program.

DRIP programs allow you to invest into just one share of a company to begin with. The reason for this is that you must own a share within the choice company in order to qualify for the dividend investment program.

Now, all investments into DRIP programs are commission free due to the fact that a stockbroker is not required to make the trade possible. This is excellent for average or below average investors as most of the time, these investors don’t have the money to spend on the cost of a broker.

Most DRIP programs allow the optional cash purchase of supplementary shares from the company directly at a discounted rate (anywhere from about 1% to 10%) with no fine print fees.

Since dividend investment programs are so flexible, investors are able to change the amount that they invest based off of their current financial situation. That means if you can afford $100 one month, but $500 the next month, then that’s fine. As stated above, you can make investments as small as $10 as large as half a million dollars.

In addition, some DRIP programs will allow investors to purchase stock at a discounted rate from the current stock market price. The discount can range anywhere from as little as 1% to as much as 10%. If an investor outside of a dividend investment program purchased shares, the investor would be looking at a significantly higher price since the shares wouldn’t be commission free and without the discount.

Finally, DRIP programs also utilize a concept known as dollar-cost averaging. This is when the price is averaged out so that you never purchase stock when it is at its low nor when it is at its peak and it averages out over long periods. Ultimately, you’ll purchase more stocks when the price is near its low and less when its near its high; however, in the end, it averages out to be somewhere in the middle of all that.

Types of Mutual Funds

BYI — Fri, 14 May 2010 00:33:10 +0000

If you’ve looked in to investing at all in the last ten years, I’m willing to bet you have considered a mutual fund at one point or another. Mutual funds are a very popular investment option, especially in these tough financial times when diversifying your portfolio is not just a luxury but a must.

While there are a lot of excellent benefits to investing in mutual funds the trickiest part can be trying to figure out what funds are available so I thought I would take this opportunity to talk about some of the basic types of mutual funds that there are out there.

Essentially there are three types of mutual funds, and literally thousands of individual funds within each. These three types of funds are equity or stock funds, bond funds and money market funds. Each have their own pros and cons so let’s take a look at each in a little more depth.

Equity Mutual Funds

Equity mutual funds are the most common type of funds that invest primarily in stock investments. There are literally as many types of stock funds as there are stocks (probably more if you count all the combinations you could put together). Because stocks are riskier than bonds and money markets, equity funds are naturally more risky than bond funds and money market funds.

Within the equity funds category there are many different sub-categories of funds. Growth stock mutual funds focus on the stocks of large companies with an eye toward long term capital gains while income funds focus more on short term income and consist of stocks that pay regular dividends. You can also find more specific funds that focus on an entire sector, one type of company or even more specialized types of funds that invest exclusively in socially responsible and/or environmentally friendly companies. As you can tell the options with equity funds are pretty much endless.

Bond Funds

Bond funds focus in, well… bonds! I’m sure you figured that out by the title but if not I’m here to help. There are a lot of different types of bonds from government issued treasury or agency bonds, local government municipal bonds and corporate bonds issued by individual companies. Within each type of bond there are different risk levels, obviously the government bonds are safest and bonds issued by risky corporations (also known as junk bonds) amongst the riskiest.

Money Market Funds

Money market mutual funds are the safest of the three primary types of funds. They consist of low risk investments like treasury bills, CD’s, commercial paper and other forms if extremely low risk investments. As you can imagine the lower the risk the lower the return on investment so you won’t make a lot of money on this type of investment but you would have a tough time losing your investment as well. This isn’t to say you can’t lose your investment though as ALL investments have risk.

Investing Basics: The Stock Market for Dummies

BYI — Thu, 13 May 2010 18:20:09 +0000

Even though the proud among us may not admit to it, the stock market is a challenging place to be as an investor whether you are a new to its ins and outs or not. The stock market can be quite complex if the investor has no background or idea as to what is going on. Moreover, superficial knowledge in this area does not make one an expert. The stock market can be approached from several angles. In an attempt to produce some guidelines for those with no background in trading stocks, the first most basic option that anyone has with regards to investing in stocks is to go to a broker, give him your hard earned cash and hope he invests it wisely.

The second option would be to invest on the advice of a friend that seems to be doing well in the field. While the third option would be to learn about the stock market on your own and then start investing in it. The book, The Stock Market for Dummies falls under the third category and is a good place for the would-be investor to begin. This book contains great information and is the first in a series where the author gives a run down on how to navigate this world that is the stock exchange. From the onset, the main agenda of the book is to teach the newbie the ins and outs of the stock market. This would make it a great starting point for all those that may not be interested in all the jargon associated with the stock exchange.

The introduction of this book is a good place to begin in order to get all the basic information you need on the stock market. The Stock Market for Dummies deals with how to invest in the market starting with picking the right broker all the way to buying the different stocks available on the market. The more one knows about the basics of the stock market the better they will be at investing in it.

This book also teaches the new stock market investor how and when to buy and sell stocks as well as when to hold on to them. Another advantage to this book is that the reader learns what to do in the different situations that present themselves during their tenure on the stock market. The Stock Market for Dummies is an excellent gift to give anyone that is considering investing in stocks for the first time. The book has enough information to keep both investor and anyone considering being a stock broker as a career in the loop with regards to the stock market.

For anyone that is interested in the stock market but has no background in its workings, this book is the place to start your education. The Stock Market for Dummies, is for all those that are interested in the stock market and all that pertains to it.