Eight Valuable Personal Finance Tips for Beginners

The amount you earn has to be spent as living expenses exist. The desire to grow wealthy beyond your means also exists. Savings is the weapon to achieve it, and careful planning is most important. Please find below ways of accomplishing this as personal finance tips for beginners.

• Begin Early:

Everything in life is about early starts. Saving money is no exception to this rule. Irrespective of the amount you can save, the habit and attitude to saving are essentially combined with an early start.

A plan of action does not require a big plan, but the early kick-off matters. It may be in trickles first, but the savings compound into a more considerable value with time passing by, and it is the result that matters in the long run. Delays in such matters would never help, and procrastination would result in lesser savings only and is the best personal finance tip for beginners.

• Prioritize Saving before Spending:

As a growing child, your parents must have taught you the value of money. Moreover, they would have inculcated inside you the thought that to spend money which you have with you. Nowadays, credit cards are available to you, which can reverse your policy of saving. The idea to purchase on credit cards is good provided you pay up the purchase amount before a month or the date the bank starts levying interest.

Just imagine you purchased a Television set and you are paying interest every month! The Television becomes a costlier investment, and there would be excess cash outflow.

The cardinal rule is to allocate the savings and reduce that with your income. It's a bad idea to spend first and save whatever is leftover.

• Be Your Own Financial Advisor:

Saving money is only a part of the deal. The other part lies in managing it wisely. There are many ways to lose those savings, as others become aware of your wealth. They may advise you to invest in profitable ventures, but their end-interest is only the commission they earn through it. As a personal finance tip for beginners it is best to do your research and analysis by acquiring knowledge through the internet or direct investigation and then decide.

On the same note, it's advisable to keep more than an eye on your bank accounts. You can trust Banks to a large extent, but even they may charge you arbitrarily. In such cases, if your account is debited, you can approach the bank and have it reversed. Thus, you become the Finance manager of your savings.

• Budgets:

You may not be in the habit of noting down your cash inflows and outflows. You would be shocked to see that your savings are going down at the month-end even though you have been cautious in spending money.

The only solution is to budget your expenses initially and keep checking on them, not exceeding them. All expenses have to be meticulously noted down, and you would soon know the excessive expenses. When precautions are taken, you can achieve your goal of savings.

• Health Insurance:

You cannot be confident that you will stay in good health always. Neither can your family parents. You may feel that an expense like a Health insurance premium would pull your savings down, but you're mistaken. In case of a sudden accident, a visit to the hospital is bound to cost you an enormous amount.

You may have health insurance through your office; never hesitate to take a few insurance policies on your family, including ageing parents. The prevention you would realize is better than cure.

• Saving for Different Purposes:

You may be a salaried person and well equipped to meet all your expenses, resulting in savings. Savings generally protect you with financial health once you retire or slip into old age. But wait! There are other purposes apart from that. You may desire to go on a vacation or perhaps buy a farmhouse etc. This cannot be met with your available savings but create a special fund to meet those planned schedules in the future.

It is best to deposit these extra savings in an account with a high yield so that money value is not eroded due to inflation. Even a deposit for a short time in deposit schemes like ' CD' (certificate of deposit) is a good idea.

• Be a Knowledgeable Taxpayer:

If you are a salaried person, you ought to know the tax bracket you would fit into. Tax is deducted at source when you work in a reputable organization and your ' Take- home ' is lesser to that extent.

There are many sites on the internet which has tax calculators. All you have to do is punch in your salary, and the tax calculator would let you know your net salary.

• Debit cards Vs Credit Cards:

Debit cards are helpful as you need not carry the money in your bank account. You can only spend within that limit or balance in the secure account.

Credit cards allow you to buy anything or spend money that is not yours. If you can meet that commitment without rolling it over, your savings will not be affected. If you cannot pay that, it will attract a very high rate of interest which will erode your savings. Moreover, if you do not meet the bare minimum charge notified to you by the bank, it would attract late/delayed fees. The tip is to spend when you can meet it within the deadline.

Conclusion:

Financial awareness wins the day and not how high you earn. Tax structures keep changing every year, and money value keep depreciating year after year. It's best practice to know which account to open in the bank or elsewhere to mitigate inflation. If you follow this entire personal finance tip for beginners you will continue to live comfortably after retirement.

Personal Finance Management Key Aspects

Personal Finance Management is all about managing expenses monthly or daily and saving a reasonable amount for the future. Every single person should do this management for healthy and quality living. To effectively organize your money for future needs, consider some of the significant components of your finances.

In this personal finance blog post, we are going to discuss five significant vital aspects of personal finance. So, read the post till the end to draw a better picture of your finances. 

 Components of Personal Finance

These are the five key components of personal finance:

• Insurance for emergency 
• Tax Planning 
• Expense Management 
• Savings are essential 
• Investment

Let's dig in deeper and study these major aspects thoroughly:

#1 Insurance for Emergency

One can do financial protection via insurance to get over hard times. But people don't appreciate this option. Many people don't believe in health insurance or basic insurance. Insurance is an essential element to sail you and your family from difficult times or events. These are the insurances which we all need, these are:

• Term Insurance 
• Property Insurance 
• Health Insurance 
• Personal Accidental Insurance etc.

#2 Tax Planning

Tax planning is another factor that needs to be considered, as some take it for granted. With the right approach, we can minimize our taxes. Pay attention to how much you are spending, over expenses, etc. To grow your money, you can put money in tax-advantaged investment accounts and reduce your unnecessary expenses. One can easily reduce taxable income via tax deductions and exceptions. The most popular sections related to it are Section 80C and Section 80D.

#3 Expense Management

We should track our expenses, whether day-to-day expenses or unforeseen ones. One can fix and keep aside some amount for these unexpected expenses. You can even create funds for vacation, travel, etc. By keeping a track record of all your expenses, you can maintain a decent balance in life. 

 #4 Savings are Essential

Saving is the left money after allocating money for our monthly or essential expenses. It is well said that no matter how small your income is, one must save some portion from it. Make it a habit, and it will benefit you in hard times or for long-term investments. Do savings, and in this way, you can build a safe and secure future.

#5 Investing

Many people think investing and saving are similar, but that's not correct. Saving and investing are different components. Investing is like getting money, i.e., stock, mutual funds, etc., to make your money increase. Investing is generating money from money. One of the best investing options is mutual funds. And some other options are fixed deposits, real estate, stocks, etc.

Final Verdict

To build a safe and robust future, all these aspects are must to consider. With these, one can draw a perfect picture of a financial future. Do personal finance now to make better plans and decisions for the future. A correct balance between expense, income, saving, and investment is necessary to optimize a person's financial management.

How to Manage Money? Money Market Blog

The moment you start earning is the time you have to start managing your money. Many simply don’t or don’t know how. Getting money matters in order is the first thing you should learn. In this post we’ll be taking you through some tried and tested ways in which you can manage your money. Once you start earning you’ll start having bank accounts, insurance, places to save your money, credit cards and so much more, keeping all this in track is key to good management. So without further ado let’s look at how to manage money the easy way.

Getting things right with setting a Budget: 

Start off with a budget. Believe me this is essential. Knowing how much is coming in and how much you need to spend with an emphasis on the word need, is key to learning how to manage money. By having a budget you know just how much you can spend and you stick to it no matter what. This stops you from going into a never ending cycle of debt. Not only that knowing what you have coming in and how much you have left over will help you save.

Saving is essential when it comes to planning your retirement and other necessary unforeseen expenditures.

How to Manage Money- Know your Expenses: 

Maintain a list of all your expenses you incur in a month. This is something a lot of folk don’t do. Ask them how much they spend in a month and they don’t know. If you’re one of these people, here’s the chance to start maintaining accounts. Plus it’s easy to do. For a month start making a list of all your expenses. Remember to take into account all the cash as well as credit card payments too. Once this is done you will get a fair idea of all you have spent. You can then tally this up with your income to see how much if any you have left over. This step in how to manage money is great too when it comes to avoiding any unnecessary expenses. Believe me we all have some of those.

How to Manage Money- Knowing your Income: 

In this step you’ll know all you have coming in. whether it be from bank interest or salary or any other place. Many people already know how much they make in a month. This is an important step when it comes to managing finances. It’s only once you know what you have can you then know how much to spend.

As mentioned in the earlier step take all your monthly expenses and subtract it from your income. If you’re left over with a negative figure, it’s time to take stock and start cutting your expenses ASAP.

Alternatively if you have a positive figure, this is great. You can either pay off some debts and maybe start saving something.

How to Manage Money Better- Get your Debt Together: 

Many people who want to learn how to manage money, have debts they need paying off. In this step you need to figure out all that needs paying. In many cases there is even an option where you can get all your unsecured debt together and make one payment. The advantage of this is that you don’t have to pay things individually and you won’t lose track of what all you have to pay.

Personal Finance Tips to Get Your Money Grow

When it comes to managing money things don’t have to be complicated. Nor do you require to be an accounting genius to know how to manage your finances. All you do need is money to manage and a strict approach to managing, that you stick to no matter what. In this post we’ll be looking at some personal finance tips to know to better managing your money. With these tips in mind you’ll well be on your road to recovering from any money related problems. Yes it won’t be easy nor is it going to be fast. But it’s going to be the first step in getting out of your money problems. So without wasting anymore time let’s look at these personal finance tips shall we?

Personal Finance Tips-Spending less than you earn: 

This may sound as an easy one but you can’t overemphasize the importance of this personal finance tip. If you keep spending more than you earn you’ll always be in debt. It’s as simple as that. The point is easy on paper than actual practice. However if you want to avoid living hand to mouth then you have to put this tip into practice.

To spend less than you earn its’ a simple case of knowing how much you spend. You can do this by starting to trace where you spend your money. Take the trouble of checking your expenditures and start avoid paying for anything unnecessary. You should be able to justify any cost you incur. I mean really justify.

Another easy yet important one- Budgeting: 

This is another no brainier. When it comes to managing finance, budgeting isn’t far behind. Any blog, any personal finance tips will all deal with budgeting. This does not mean that you have to shy away from it thinking it’s well out of your league. It’s actually quite simple to do.

Budgeting is a simple matter of knowing what you earn less what you spend. What you spend is what is necessary. By doing this you know just what to spend your money on and you stick to it. In the end you may be leftover with something to actually pay off some debts or maybe even save.

When it comes to budgeting a rule of thumb is the 50/20/30 rule. This rule states that you get to spend 50% on your necessities, 20% goes into savings and the rest 30% is yours for the pickings. But of course this depends person to person and paycheck to paycheck. But it is still a rule to strive for achieving.

Personal Finance Tips- Know your Incomes and Expenses: 

This personal finance tip is part and parcel of budgeting. To budget you need to know your incomes and expenses. Many of us already know our incomes but expenses is another matter altogether. To know your expenses you can always check what you spent in the last month. Take out all your bills including the ones you paid by card and ask yourself whether all those expenses were really necessary.

At the end of this draw out a plan and follow it.

Some Common Mistakes People Make When Planning for Retirement

Focus on Dreams of Retirement 

Retirement could be some several years ahead but how you handle your finances would determine how efficiently you could manage your post-retirement life. Focusing on dreams of retirement could be the initial step, where planning and working towards your dream goals could eventually lead you there. Often there seems to be some errors which can be avoid in reaching your goal.

Refraining from creating a retirement road map

A retirement road map needs to be done in order to know what the person may want to do, how much is needed to save and how one would intend achieving their goals. The best way to map the retirement plan is to envisage what the retired years ahead would look like, which will provide an idea on how to be prepared for the same.

No knowledge on how much is needed at the time of retirement 

An individual at the age of 55 has plans of retiring at 60 and has saved around 50 lakhs for his retirement. But in order to maintain his present lifestyle for the future, he needs to have a saving of at least Rs 3 crores. Having just five years to retire with shortage of Rs 2.5 crores, he may face difficulties in the future.

Not investing early 

Mr A and Mr B had followed a disciplined process of investing and both had invested Rs 10,000 each year. But Mr B had started investing at the age of 25 and had stopped at the age of 35 while Mr A had started investing at the age of 35 and had continued till the age of 65. When both of them retired at 65, Mr B would have as much as 2.5 times the amount as Mr A inspite of him investing for only 10 years in comparison to Mr A who had invested for 30 years. This is known as the power of compounding. The effect of compounding is appreciated when adequate time is given for the money to grow. The sooner one starts saving, the earlier you can retire.

Not including the possibilities like health care expenses in retirement plan 

Medical expenses during retirement are the most common possibility which is needed to be taken in consideration. A single medical bill could drain out the savings in one go. One should ensure that some emergency funds are assigned to handle the health care expenses in old age. Post retirement, ensure on the factors of the costs of medical insurance and health care expenses and plan for retirement corpus.

Avoiding in making intelligent investment decisions 

Mr A had invested in a bank FD which offered a 9% return and though it seemed to match inflation rate, he did not check into account the impact of taxes on his returns. Being in the 30% tax bracket, his net return fell a bit over 6% less than the inflation rate. Investments can be done in company shares or equity mutual funds which would give the inflation a beating return in the long term that will help in hastening up the retirement corpus growth as well as get started with lower monthly savings. While planning for retirement, it is essential to apprehend where one would want to be, to know what one needs to do to reach their goal.

Perks That Might Be Hiding in Your Credit Cards

Credit cards tend to have its advantage as well as disadvantage if not used rightly. At times even the most responsible people could meet up with problems if they are faced with a dismissalor in a situation of an expensive treatment. If all tends to go well and the user is well aware of what they are doing, credit cards could save them with a lot of money. One need to know their credit card well because if not, they may be unaware of the various perks which some of the credit cards tend to offer and hence will not be able to take advantage of them resulting in losing money. The fine prints should be checked since there are some of the hidden perks, which an individual may be entitled to, while utilising the credit card

Rental insurance 

Spokesman for Clear Point Credit Counselling solutions, Thomas Nitzsche, headquartered in Atlanta, had been faced with a problem when on renting a car to drive from Missouri to Georgia had to street-park it for three days while staying in Atlanta. He had noticed that it had been hit on the rear bumper and the cost to fix it amounted to $800. Though he had not bought the expensive rental insurance, the rental company offered help.Nitzsche’s credit card, VISA Signature comprised of rental insurance and the entire bill was paid after he had submitted the paperwork with proof that the car had been rented by him and was being asked to pay a claim.He informed that Visa was capable of reducing the $800 by around $50 and they probably had some negotiating power.

Airline incidentals 

Matthew Coan running the financial comparison website, Casavvy.com informed that he was overwhelmed with a recent perk provided by the American Express Premier Rewards Gold Card, a $100 annual credit for covering airline incidental fees. According to him, these fees comprised of checked bags, flight refreshments, airport lounge passes and much more. A few things need to be kept in mind in order to utilise the perk wherein for the reimbursement of any of these fees, the same has to be paid separately from the airline ticket and can only obtain the fees reversed for one airline for the calendar year.

Dispute resolution 

If the individual feels that they have been overcharged for something, they could contact their credit card and get help. If the dispute resolution service is offered with the card, you stand a chance of getting the charge reduced.

Trip cancellation insurance 

According to Jared Blank, chief marketing officer of the retail website DealNews.com, states that with Chase Ink Plus card, they offer this facility of trip cancellation insurance. He narrates that his parents had booked a cruise and a non-refundable flight for a holiday and had paid with the Chase Ink Plus card. His mother had been ill and the trip had to be cancelled. The airfare and the cruise cancellation fee were reimbursed by Chase that was done without any difficulty.

Extended warranties 

At the time of purchase of a computer or any expensive product, one would often be asked if they would prefer purchasing an extended warranty. They would then get engaged with their associate on, whether the offer would be worthwhile. Four of the major credit card networks, namely MasterCard, Visa, American Express and Discover tend to offer extended warranties on several, though not all of their credit cards.

7 Common Money Traps Even Smart People Fall Into

Important Aspect - Cash Flow Management

Handling cash flow is very important aspect since all work hard for money and tends to make the most of our income. In order to avoid spending mistakes and help to stretch the cash for a longer time the following tips could be helpful –

1. Buying things on sale

Buying things on sale tends to be a mistake and can actually be a huge money waster. Whatever the price or bargain may be, if one purchases something which would not be used, it would be like throwing away your money. Before indulging in the sale purchase, one need to ask oneself whether the said product would had been purchased if not put up for sale and will be used after purchase. One should indulge in sensible
purchase and not go on a shopping spree for anything on sale.

2. Buying stupid products

Sometimes one tends to indulge in purchasing useless things and then repent for having done so. Prior to purchasing any of these unwanted commodities, one could hold onto to purchases for a later date if essential. It is best to limit them by having certain standards for the purchases especially big purchases.

3. Spending money on problems one cannot solve with money

Stop to think if by going shopping or indulging in some purchases, would help in resolving certain issues in life. There could be other options which could be more beneficial than in shopping and wasting money.

4. Refraining from spending when one has the opportunity

Your hard earned money needs to be spent on what could add great value to your life. It would be pointless if one cannot spend the money earned on important things in life and miss out on opportunities that come your way.

5. Not maximizing rewards and points 

Reward credit cards are of various shapes and sizes enabling the user to collect points on purchases like merchandise, gift cards, airline miles or cash back which could be utilised at the appropriate time when needed. One could opt for a card which offers points while shopping for basic like the grocery which when accumulated could be used for gas fuel or if travelling, an airline miles reward card which could be beneficial in the long run and take advantage of the points or cash back.

6. Not setting up automatic savings outside your 401(k) 

One should discipline oneself in setting up an automatic investment plan to come up after the pay check comes to your bank account every month. We often tend to pay the bills and other non-essential things leaving our savings till the last, if there is anything left after all. This needs to be avoided if keen on a good future.

As the saying goes -Money Saved is Money Earned. You could check with an investment company to set it up which would be very beneficial over a period of time. Automate your savings and investing inside as well as outside of your 401 (k) and set a direct deposit from pay check to bank account and monthly automatic transfer to your investment account.

7. Not spending enough

Sometimes we tend to compromise on our purchases by not buying the essentials when the need arises. We look out for other options which at times could be dissatisfying on purchasing. If one can afford it, go in for the best quality which will satisfy your requirements even if you have to delay the purchase.

8 Bad Money Habits and How to Break Them

Handling Finances – Money Habits

Managing your funds is often related to the habit one may cultivate and money habits could decide how a person handles their finances. The following could help in comprehending some of the money habits which one may not be aware of, but which would be draining away your finances

1. Spending more than the earnings

This is could be the most awful habit which could hurt the well-being of your finances when one tends to continuously spend beyond their means and when the expenses exceeds the income coming in, towards the end of the month one realises that they have overspent. The remedy is that one should monitor the spending habits and keep a tab on overspending.

This could be done by checking on the expenses and segregating them into `need base’ and `want base’ opting on what is essential and refraining from unwanted purchases. A budget could be prepared to keep the spending activity under control. If the need base on essentials tend to make you spend more than the earnings, one would need to focus on increasing their income either through loans or credit card debt. However this too should be taken into consideration with regards to repayment.

2. Postponing financial decisions for tomorrow which may never come

Often we tend to put off investment plans for a later date which never turns up or it tends to get pushed off every month since no savings have been done. And postponing financial decisions is worse than making bad choices. Since the earnings saved tend to generate additional income by way of interest earned, the sooner the investment is made, better are the chances of increasing your savings. The right opportunity of investing should be done when one tends to have the funds. Delaying in investments could lower your ultimate corpus.

3. Falling into debts for wants instead of needs

We live in a competitive world and very often we tend to get carried away with lifestyle based purchases and indulge in purchases which may not be needed, leading us into unnecessary debt. If the much needed purchases tend to constantly run you into debts, it is a habit which needs to be kept under control to save from future distress. Debt is for the vital and planned purchases which could be indulging in manageable debt for the purchase of a home or a child’s education though it would not be appropriate to fund for luxury items.

4.Gambling instead of investing

Several people indulge in experimenting in the stock market without really comprehending its concept which could be dangerous and as the saying goes `little knowledge could be dangerous’, this could be applied here. Often a person may get a tip on some particular stock which may be a good bet or someone may inform that Options are a good way of making money.

If one intends putting saving into investments without any knowledge about it or the risk involved and just speculating, it could be one form of gambling and not investing. Several people have been indulging in this unknowledgeable move and have repented in doing so. The best remedy is to place your investments on your goals. Ensure to refrain from investment option which may seem too good to be true. There are no shortcuts to investment and prudent disciplined investment tends to work in growing wealth.

5. Refraining from saving regularly

Most of the people do not save regularly which is common while indulging in spend first and save later. Organising your expenses before saving makes your saving an unreliable matter. Hence adopt a habit on how much one can save regularly keeping aside the saving as soon as the income comes in. This would be helpful in saving habit instead of spending.

6. Being risk averse

One may consider not taking risks could be good and would make you cautious of bad investments. But if risk aversion prevents you from investing in some risky though essential investments it could be nothing a bad habit. Risk aversion seems natural though it should not hold anyone back. Not taking risk is not like understanding risk and several investors understand risk instead of avoiding it. If one intends to beat inflation and increase wealth, then risk taking seems to be essential. Here again what matters is the risk profile of investment goals instead of your own risk profile wherein one could invest in safe options such as Bank FD though could expect lower than inflation returns.

7. Paying dues after the due date

If one tends to constantly make late payments against credit card bills or utility bill you would be incurring additional expenses by way of interest which could probably lead you to being broke paying up the hefty interest rates charged against late payment. Payment of bills needs to be made on time to avoid late payment charges.

8. Indulging in habits which are financially taxing

Smoking, dining out too often or drinking spree could lead to a substantial financial burden and though these habits could be considered as small expenses but over a period of time could add up to weighty amounts. This needs to be stopped to avoid further tension on health and money.

Easy Ways to Simplify Your Finances

Trim Spending If Possible

In the present scenario, prices on commodities have been escalating and at times one may find it difficult to cope up with the expenses wherein it tends to get more than the income. No matter how hard one may try to simplify life there seems to be no way to mentally track every financial deal in the current busy world.

Keeping track on the budget of what comes in and goes out, is very much essential which could help in understanding where one tends to spend more and where you spend it, so that you could trim spending wherever possible. The aim is to understand and trim the budget categories which would otherwise lead to stress and several sleepless nights or probably financial adversity. Creating a personal budget could be helpful since it provides a deep vision on the finances, on its expenses and savings. It is essential to first list out –

•  Fixed expenses which are those that do not tend to change for instance the homeowner insurance, mortgage etc. 
•  Variable expenses are those expenses which may differ monthly such as the electric bill, water bill, grocery bill etc. 
•  Check which major categories each bills may fall in, such as home expenses, phone expenses, car expenses, utility expenses etc. 
•  List out each major category, detail each expense under the categories and sum up each category which will then indicate on the accurate expenses incurred in each category. The individual will get a better insight on the expenses done and where one could draw the line in curtailing the expenses.

Personal Budget

You could follow the steps by starting on making a list of necessities which needs to be paideach month by creating a personal budget. These could be the expenses which cannot be avoided and is incurred every month as mentioned earlier like the groceries and all the payments of utilities.

Then we have the personal expense ladder which may include things which provide security and peace of mind like health insurance, life insurance etc. If the expenses tend to exceed the income slab, one may need to reconsider on the expenses involved which could be the internet usage, cable or satellite television, phone etc. and find out means of curbing on the expenses which would not be much of a strain at the time of making payment.

The amazing thing about personal budget is that it is an eye openeron where you can cut down in some areas to save on some cash.

IRA – Individual Retirement Account

Individuals could evaluate their net income or loss by considering the income and subtracting the expenses and you tend to meet up with a positive number. Then there seems to be a balance left after meeting all the expenses.

The extra money could be then put into a IRA which is an individual retirement account, offering a valuable future tax break, a tax-free income during retirement. The benefit of a Roth IRA is based on the beholder’s tax bracket, both now and when they tend to retire.

 IRA is an ideal saving for young lower income workers, who will not miss the upfront tax deduction and will benefit for years of tax free compounded growth. Cutting down on unwanted expense could also help while making purchases which could benefit tremendously in managing the income within its limits and be able to cut back for some free cash.

Asset Allocation - Don't Put All Eggs in One Basket

Asset Allocation – Portfolio Distribution of Various Investments

Asset allocation is a term on how the portfolio is distributed with the various investments. As such there does not seem to be any simple formula which could define the right asset allocation for a single investor. It is one of the most major decisions which investor could make, according to a certified financial planner and the founder of the Delancey Wealth Management, Ivory Johnson.

A simple expanded portfolio could comprise of many investment classifications like stocks, cash and bond and the allocation to each of these groups should be based on the investment goals, risk tolerance as well as the time horizon needed for the utilisation of the funds.

However the agreement among several financial professions is that asset allocation seems to be one of the most major decisions which investors should make. Selection of individual securities is secondary to the way one allocate the investments in stocks, bonds and cash as well as equivalents which would be the main factors of one’s investment consequences.

Extension of Financial Plan

In brief, asset allocation should be an extension of a financial plan. Three main sections of asset being equities, fixed income and cash and equivalents, tend to have various levels of risk and return. Hence each will behave differently over a period of time. The benefits of using an expanded asset allocation are that the combination of several various investments could have varied patterns of returns according to Johnson. He adds that this would mean that the goal of portfolio variation would be to generate the maximum possible return for a specified level of risk.

For instance, if a portfolio of a small company stocks could cause greater returns than an exp

anded portfolio of stock then it is unlikely to achieve that result without considerable more risk or volatility. The outcome would be that in the process of determining an appropriate asset allocation, the combination of assets to hold in your portfolio would be a very personal one. Asset allocation which would work best at any given point of time would depend mainly on the time horizon as well as the ability to handle the risk factor.

Life-Cycle/Target-Date Funds

Known as life-cycle, or target-date funds, asset allocation mutual funds are an effort in providing investors with a portfolio structures which would address an investor’s age, risk factor as well as investment objectives with an adequate allotment of asset classes.Nevertheless, critics of this approach indicate that coming to a standardized explanation for allocating portfolio assets, can be challenging due to individual investors would need individual solutions.

By including asset groups with one’s investment returns which tend to move up and down under various conditions in the market within a portfolio, investor get the opportunity of protecting themselves from substantial losses. Generally, the returns of the three main asset groups have not moved up and down at the same time and the market condition which tends to cause one asset group to do well often causes another asset group to have an average or poor returns.

The investor here on investing in more than one asset category tends to reduce the risk of losing money and his portfolio’s overall investment returns will not suffer losses. Should one asset group’s investment return tend to fall; the investor would be in a position to counteract the losses in that particular group with a better option in investment returns in another asset group.

How Much Cash is Too Much for Your Portfolio?

Cash Position – 6% - 30% Based on Age/Risk Appetite

As per Charles Schwab Corpn’s – SCHW robo-advisor, Schwab Intelligent Portfolios, the cash position of an investor should be between 6 and 30 percent based on age and risk appetite. If one would be looking for a precise percentage, advice from financial experts will inform the individual to focus on capital allocation of 60 percent stock, 30 percent bonds and 10 percent in cash.

Investors though who are more likely to take risk are the younger generations who don’t necessarily need a stable income and could have more capital allocated to stocks. Cash is king as well as trash and nowhere is cash said to be more controversial than using it by way of investment, where too much of it is considered to be a risk but how much could be `too much’?

The debate came up when Charles Schwab had launched Intelligent Portfolios which is an algorithm based platform that automatically builds and rebalances portfolios like the asset-management services of robo-advisors and his treatment of cash in platform had many eyebrows raised, leading to criticism of allocation to cash, depending on the investor’s risk profile.

How Much Cash an Investor Should Hold …?

Charles Schwab replied that there seems to be no right or wrong answer as to how much cash an investor should be holding as an investment and that it is a strategic decision. He further added saying that it is easy to question cash in the 6th year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but they did not invest based on the last six years.

Investment was based on what can be expected in the future. Bull market end and interest rates increase and when they do, a little cash will feel pretty good’.The question raised was, how much should one hold in their brokerage account to which both sides seemed to agree and there was not a single answer that fits all circumstance. When people tend to discuss their investing portfolios they usually refer to the stocks, commodities, bonds and real estate that they own. Regarding cash and how much to hold in a portfolio is based on who you are and how you are investing as well as your investment perspective.

Cash Not As Asset Class – Call Option Which Can Be Priced

When Warren Edward Buffett an American business magnate, investor and philanthropist and the most successful investor of the 20th century had patiently held around $20 billion in cash, he thought of cash not as an asset class which is returning next to nothing but as `a call option which can be priced, relative to ability of cash to buy assets.’ He put in good use at the time of the financial crisis gathering deeply discounted bargains. Most of the investors, lack the discipline of Buffet.

When the market is rallying, cash in the portfolio tends to drag on performance, returning to around zero. The debate for cash in the portfolio is that it does not go down at the time of market crashes but enables the purchases of cheap assets like Buffett, at smart prices. However, investors rarely tend to buy when markets are crashing and are simple apprehensive, to take the plunge. Those who avoided the 2008 crash were stuck with too much cash in their portfolios as the markets recovered.

New Pensions Crisis as Thousands Can’t Get At Their Own Money

Pension Crisis – Problems at Financial Firm

Problems at the financial firms have left people intending in getting access to their retirement cash under new rules which has become effective in April, blocked by companies’ lack of readiness for the this change. Investigation published in recent Daily Mail conveyed that people have been charged for withdrawals or for changing to rival companies.

To add further to the problem they are also made to wait longer for their pay-outs, in some cases to around three months. Some others state that they have been forced to pay for financial advice up to £1,000 if they say they want their own money. Pension companies in the first month of the alterations, had to handle unprecedented 1.13 million phone calls from individuals intending to take advantage of the new freedom which was an 80% increase in the usual activity leaving several with the inability in coping with the demand.

Besides this, many were caught by the speed of the introduction of the improved rules together with the uncertainties on various aspects of the freedoms leaving them unprepared in dealing with the requests.

New Rule – Individuals Aged 55 Onwards – Distinct Contribution Pension Withdrawal

The head of pension research at Hargreaves, Lansdown, Tom McPhail commented that `given the speed with which the reforms were introduced, it was always likely that some companies would struggle to be ready in time. Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way’.

He further stated that it would be unacceptable for some of the firms in charging people or put barriers to stop them in making use of the new freedoms. He said, `insisting that investors pay hefty exit penalties, use a financial adviser that some may not need or jump through bureaucratic hoops is simply not reasonable or fair’.

The new rule enables individuals aged 55 and above, with a distinct contribution pension for withdrawal if they intend to, though there are massive tax implication if they intend taking it in one go, in other words it is wise for people to get advice before rushing to get hold of their cash. FCA spokeswoman informed that they were monitoring how the firms would be implementing the changes and how it would impact consumers.

Reform Purpose – More Control on Money

Most of the people have been capable of taking advantage of the new rules without much problem thought they were talking to those firms where the problems have come up as the reforms bed in. It is in the interest of everyone to make a note that consumers utilise the new options available to them with confidence. Recently David Cameron indicated that he would be keeping a `careful eye’, on the treatment of companies to pension savers, on receiving rising complaints that the customers have been denied the new freedoms.

He informed that the purpose of the reforms was to give people more control on their money and not to have a new way to charge them and that the need for great transparency in pensions industry is essential. Pensions giant Friends Life, which is now part of Aviva, was forced to apologise recently, to around 1,300 savers who had asked to withdraw an amount of their cash and had informed them that it could not offer them this choice. On the contrary, the savers were told that they could cash in the whole amount which would leave them with a huge tax bill and use the fund to buy an annuity or transfer their money to another company. Friends Life had stated that they would be offering partial withdrawals in due time

When is the Best Time to Buy Foreign Currency

Being Smart Essential – Buy Foreign Currency

Bob Atkinson of TravelSupermarket advises that one could save a tenner for every £100 one tends to spend abroad, by being smart. He states a traveller should `plan what one is going to do and how they are going to spend overseas though not any plastic. Look for credit and debit card which are designed for usage overseas.

The market-leading deals like the Halifax Clarity credit card and Norwich & Peterborough debit card, have no hidden currency loading fees or transaction fees. If one tends to spent for instance 600 euros on one of these cards they tend to actually spend about £470 based on the prevailing rates.

On comparing it to the worst option which is to rock up at an airport and actually buy euros without pre-ordering, they endup spending about £515 on the present day’s rate at some place like Heathrow’. He further adds `that’s a difference of around 10% which means it’s effectively like throwing away £10 for every £100 spent on holiday’.While purchasing holiday cash, most of the people leave it till the last moment and tend to completely ignore it at times till they arrive at the airport.

Commodity loaded with Poor Exchange Rate/High Transaction Fees

Several travellers generally pay more than the going rate for their holiday cash hence some advance planning could help them in avoiding poor exchange rates or exorbitant transaction fees. Most of them tend to leave this job at the last minute resulting in paying extra pounds or more.

Just as one would check for the best deals on hotels and flights, they should also do the same when it comes to purchasing foreign currency which is a commodity that is often loaded with poor exchange rate combined with high transaction fees. Individuals should avoid buying the holiday cash at the airport since it is the most expensive place to purchase the spending money and the rates are extremely bad since the providers have a captive audience.

The main issue is `time’ and one should be wise in thinking about currency much in advance prior to leaving for the holiday. The first step to be taken is to look at the exchange rates which would help in maximising how much local currency one would get from the exchange.

Euro, the single currency, till recently has maintained its strength and customers are recommended to purchase their euros when the pound could make gains against the single currency. In the meantime, sterling has performed more positively against the single currency and holidaymakers need not rush and buy euros now.

Knowledge on Value of Currencies

On the contrary, if one is heading out to the United States, one could be wise in purchasing dollars sooner instead of later since at the moment the pound tends to perform well against the dollar though the same is not expected to last. Gaining knowledge on the value of currencies one could be looking to purchase, could save them of money in the long run.

The only way to know if one is getting the best exchange rate is to be knowledgeable on what the currency rate is. Prior to the trip, one needs to check on currency converter to have an idea of what exchange rate to expect. If undertaking a prolonged trip, check on the rate periodically to remain updated of any major changes.

According to Alistair Cotton, corporate dealer at currenciesdirect.com states that `now is a very good time to be buying US dollars. We are still on multi-year highs and businesses and people travelling abroad this year should be taking advantage at these levels’.

Fastest/Simplest Method - Online

Lucy Lillicrap of AFEX comments `current levels provide an excellent opportunity to buy the dollar at rates rarely seen since before the financial crisis’. Jeremy Cook, chief economist at worldfirst.com on the other hand states that he `thinks that the US dollar will progress through the year as one of the best performing currencies in the G10 space as the economy continues to rebound.

The Federal Reserve is much like the Bank of England, trying to remain vague on when interest rate rises will come but a stronger economy, fuelled by strong domestic industry and receding fiscal drag will increase the pressure on Federal Reserve chair Janet Yellen to normalise policy sooner rather than later’.

According to Josh Ferry Woodard of TorFX, he states that `in the light of Fed chair Janet Yellen’s suggestion earlier that the interest rates could be raised in the USA by April next year, it is possible that the US dollar is the one currency that the pound may struggle to stay afloat against.

For this reason, it is a very good time to buy US dollars; the pound-to-dollar exchange rate may not reach levels this high for a long time’. The fastest and the simplest method to buy currency is online, on the internet where it would be easy to compare rates and one could also get a much better deal.

How to Maximize Credit Card Rewards

Credit Card Rewards – Perks of Rewards Program

According to a 2011 research from Colloquy and Swift Exchange, the average household active in rewards program do not redeem a third of the rewards they tend to earn every year which could include credit card rewards. John Ulzheimer, president of consumer education at Smart Credit.com comments that `there are a slew of people out there that has cards with points on all of them and they don’t even realize it’.

 The idea of receiving rewards credit card is to give the person the perks of the rewards program and the best way to ensure that one gets the most out of the rewards credit card is to use the right one and make sure it is paid off each month.

It could be used to the greatest advantage while also being aware of the possible pitfalls like leaving points on the table. The first problem is to ensure that the credit card and rewards program chosen matches the individual’s financial lifestyle.

 If the person travels a lot during free time, then a hotel or airline card could suit the individual while a gas credit card could be best for a road warrior. Those who would prefer an uncomplicated reward system could opt for cash-back credit cards, according to vice-president, Amy Lenander, of rewards programs at Capital One.

Cash Rewards Easy & Straightforward

She states that `cash rewards tend to be easy and straightforward as rewards can develop. Customers who prefer miles and points could save up for a big reward and dream up the possibility, whereas the cash-back customers tend to be more practical’.

Besides this, several cash back cards are provided with various ways of redeeming rewards like in the form of cheques, statement credits, charity donation or gift cards while others tend to automatically deposit the rewards directly in the bank account. It is essential to read the terms and conditions since not all cards are created equal even if they offer a similar form of reward program.

There are various forms of credit cards wherein some may require spending threshold prior to earning rewards while others cap the amount of rewards that is earned. Users should also be aware of blackout dates in redeeming travel rewards or the expiration date on points. Linda Sherry, director of national priorities at watchdog group Consumer Action also informs that these rewards programs are subject to change at any point of time.

Some Advanced Planning

Cash back cards could also involve some advanced planning and while most cards provide one percent to two percent cash back there could also be certain restrictions or requirements. These could include caps on spending in various categories or more rewards on purchases on gas, groceries or dining. Other cash back rewards programs could be even more difficult, with rotating categories needing quarterly registrations.

According to Bill McCracken, CEO of Synergistics Research in Atlanta, states that in some cases, consumers tend to pick the spending category and receive the rewards or the rewards are given to the highest spending category. This could mean more observing by the consumer in taking full advantage of their credit card.

Consumers should be alert for opportunities to double or triple their reward earning power. Lisa Hronek, senior analyst at Mintel Comperemedia informs that several issuers tend to offer an increased cash back return rate each quarter for certain categories usually the ones that go according to the season.

Equity Systematic Investment Plan - SIP

Stocks with good fundamentals are known to be some of the best ways of investment plans and investment in equity stocks has reaped phenomenal returns amongst various other assets if the same has been done in an organized manner with long time horizon. It is very important to select stocks and the right decision of the right price to enter in equity investment where most of the investors often tend to commit errors.

Equity Systematic Investment Plan or SIP is an instrument that tends to help an individual in avoiding the risk of timing the markets and enable wealth development in an organised or disciplined manner by averaging the cost of investments. Saving which tend to be small could create the big corpus in the long run. SIP enables the individual in building a portfolio on a longer time basis with small investment that are done at regular intervals thus reducing the danger of market volatility.

Individuals have the option of choosing between Quantity based and Amount based SIPs, in Mutual Funds, Stocks, ETFs as well as Gold. Quantity based SIP is a type where a fixed amount of quantity of shares of a desired company is purchased at a predefined frequency while Amount based SIP is a fixed amount which can be decided by the individual intending to invest in selected share at predefined frequency.

Disciplined & Long Term Time Horizon

The formula for calculating Quantity is SIP Amount/Market price of the said share. Fractional value is ignored and the order is placed for the remaining quantity. In the case of Quantity based SIP the quantity which is to be purchased is specified by the individual and is fixed at the time of placement of order according to the desired frequency.

The order value is then calculated depending on the usual market price of the scrip while execution of the order. In order to have a long term wealth development through the equity market, it is essential to have a disciplined and long term time horizon that have integral features of SIP. The following features would make an appropriate choice for equity market –

• Disciplined and simple approach to investment
• Based on concept of Rupee Cost Averaging
• Investment possible with small sum of money invested recurrently to mount up wealth
• Flexible intervals like Daily/Weekly/Fortnightly/Monthly basis
• Flexibility with regards to Amount or Quantity based SIP

Avoid Majorly in Aggressive Funds

While investing in equity funds through SIP, though one will gain the rupee cost averaging benefits at the time of the volatile market phase, one should also avoid investing majorly in aggressive funds such as sector, thematic and mid-cap funds. One cannot guarantee better returns in excessive aggression.

On the contrary it could make your portfolio risky and probably disrupting the life stage with regards to investment goals. However, with mid-caps as a section of the portfolio, majority of it could comprise on large cap funds. Individuals often tend to start SIPs without a second thought on the amount they intend to invest comfortably. Often they try to make up for the lost time and then find it difficult to continue with their SIPs after a period of time.

This results in a stop of their investment and their long term life stage goals. Hence with systematic investment plans one should start conventionally and increase their investment amount gradually over a period of time ensuring stability.

Credit Cards

Credit Card – A form of Borrowing

Credit card is one form of borrowing which involves some charges and its terms and condition could affect the overall cost. It is advisable to do some research on the terms and the fees before any agreement to open a credit or a charge card account.

 Being unaware of the terms and their charges could leave the user disappointed when faced with the overall cost they may encounter. At times shopping with the credit card could save you money on interest and fees. Issuers of credit card tend to have wide scope in charging interest though they should brief the customers on the interest rate. It is also essential for the customer to read the fine print in the original credit card agreement as well as in any supplemental copy.

As per the federal law, interest rate tends to increase on existing balances under some conditions like when a promotional rate may end and there is a variable rate or when the cardholder tends to make a late payment. The interest rate on new transaction may also increase but after the first year. If the customer is faced with an issue regarding the credit card, they should first try resolving the same directly with store or the credit card company or the financial institution.

Consumer Financial Protection Bureau

If the matter is not resolved, they could file a complaint with the Consumer Financial Protection Bureau – CFPB which presently accepts complaints with regards to credit card issues and take them up either through phone or through their site at https://help.consumerfinance.gov/app/ask_cc_complaint. For any guidance regarding credit card debt, fees and high interest rates, customers could contact a credit counselling service or debt Management Company who can render the necessary guidance and support. They could also provide practical as well as legal financial advice with regards to the use of credit. Beside this, they could also make attempts on renegotiate the terms of the credit agreements and make arrangement to pay off the debts. One needs to check on the debt management company though all arenot the legitimate ones.

Credit Card Eligibility Calculator

Some of the following credit card eligibility calculator could be helpful to individuals such as:


• Bad Credit – For bad credit scorers- Those who apply for credit card and have been rejected need not go in for the same. They should check on cards that would fit their profile and try to rebuild credit rating by using the top `bad credit’ credit card and ensure to pay in a timely manner
• Interest free spending- 0% Spending – If the need to borrow for a purchase arises, the right choice needs to be taken, credit cards are far cheaper than loans though if misused it could add debts which may be difficult to pay off
• Balance transfers – Cut existing debt costs – Shifting the prevailing credit card or store card debts to new balance transfer card could save much wherein the balance transfers when a credit card could pay off debts on other credit or store cards. Thus one owes the new card though at a lower rate which means they can be debt free much quicker.
• Travel Money – Several cards add 3% cost than the banks to the exchange rates which can be avoided by a specialist card that does not add this percentage and you get a good exchange rate. This could be used for overseas spending though one should bear in mind to repay in full to avoid the additional burden of interest.
• Balance transfers and spending – All-rounders - Most of the banks offer introduction deals to attract new customers with cards that could be either good balance transfer deals or low rates on new spending. All-rounder cards offer cheap intro rates for balance transfers as well as purchases and if a person needs to move debts from an existing expensive card as well as need to use a card for purchase, they could be checked since they cannot damage the credit score with additional applications.
• Cash back – pays when spend – The cash-back credit card tends to pay you each time you make a purchase where top cards tend to pay around 5% introductory cash-back while other offer 3% on fuel and transport spending. Besides these, there is also other good fee free; cash reward cards which are like cash-back cards offered.
• 0% Cash in Bank account – Money Transfer – The money transfer credit card enables the customer to pay money from their new credit card in the current account with a small fee wherein they get a long interest free period in repaying the debt. Should the customer fail to repay the same within the given time period, they are charged with a high interest rate.
• Get Air miles while spending – Airline credit cards are an addition of regular flyer programs and one could earn points or miles on spending as well as earn bonus for signing up. The miles earned from spending could be added with those earned from flying or by other credit card reward schemes like converting Tesco Clubcard points.

Three Ways To Optimize Your Personal Finance In 2015

These days, more and more people are interested in getting their personal finances in order so that they can lead lives of economic freedom. If this is your agenda, you should note that there are numerous techniques you can implement to accomplish your objective of attaining financial freedom. Here are three simple ways to get started immediately:

1. Learn More About Trading. 

One of the great ways to optimize your personal finances in 2015 is to learn more about trading. As many financial experts know, trading is an incredibly effective way to build some substantive wealth. Unfortunately, many people are intimidated by the thought of trading because they don't have any substantive experience in this sector. If this is a challenge for you, you should note that organizations like the Online Trading Academy can help. This organization was specifically designed to provide education and assistance that will help traders obtain tangible results and improve their skill set within this sector.

2. Develop (And Stick To) A Budget.

Another strategy you should definitely consider implementing in order to optimize your personal finance in 2015 is to develop and stick to a budget. Budgets are critically important because they give you the opportunity to see how much money you're earning as well as how much you're spending on things like bills, clothes, entertainment, food, etc. Unfortunately, many people overlook the importance of developing a budget and therefore have only a vague understanding of what they're making and spending. Don't make this mistake. Instead, sit down and devise a budget that will provide you with a clear understanding of your current financial state. You can then use this information as a springboard to cultivate the type of strong financial future you desire.

3. Eat Out Less. 

As many financial experts know, many people tend to spend a substantive amount of money on eating out. If you're interested in cutting back a bit to really strengthen your personal finances in 2015, it's a good idea to consider eating out less. Instead of going out to expensive restaurants, consider the value of learning how to prepare your favorite meals for yourself. If you enjoy eating out for the social experience, be sure to invite friends over to partake in your great meals!

Conclusion 

If you're looking forward to optimizing your personal finances in 2015, you can get started right now. By using some or all of the financial tips and tricks discussed here, you will likely find yourself attaining the level of economic stability and freedom you've always wanted. Good luck!

Dedicated Card and Payment Crime Unit

DCPCU – Protect Security of Card Payment

The function of UK Cards Association is to protect the security of card payments system with focus on tackling organised criminal activity. In order to accomplish this, the UK Cards Association, funds a specialist policing team known as the Dedicated Card and Payment Crime Unit – DCPCU to identify organised payments fraud. The Dedicated Card and Payment Crime Unit, a special police unit comprises of police officers who have been appointed from the City of London Police as well as the Metropolitan Police Services who operate together with industry fraud investigators.

Their focus lies in identifying and targeting the organised criminal gangs which are responsible in attacking the payment industry. The Unit was established in April 2002 and is fully sponsored by the card and retail banking industries which was created due to the rising growth in payment card crime during 1999 and 2001. From the time of its establishment, the banking industry has been put in an investment of around £4 million per year for the operation of the Unit.

Experts have attributed to the growing incidents of organised crime in the area and the lack of dedicated police investigatory. The main purpose of the DCPCU is to identify, check and seek appropriate prosecution of offenders who have been responsible for organised cheque and payment card crimes.

Organised Criminal Gangs - Targeted

It is headed by a Detective Chief Inspector who brings together the officers as well as civilian staff from the City of London Police and Metropolitan Police forces. Moreover, expertise and payments industry knowledge is also given by industry secondees. Though it is a London based unit, investigations are nationwidewhere the organised criminal gangs responsible for payment related fraud are targeted. Some of its achievement since its formation is –

• Achievement of £450 million in the form of saving from reduce fraud activity equating to £800,000 weekly
• Recovery of around 700,000 counterfeit card
• Recovery of 346,000 compromised card numbers
• Secured 346 convictions on matters related to fraud, which is an average of more than one successful prosecution per fortnight over the past decade.

Areas of Priority 

The impact on a wider perspective is the link to organised and serious crimes. The Unit’s investigation has established that a significant proportion of fraud has been committed by these criminal gangs, having strong links to other kinds of serious crimes, which also includes people, drugs, and trafficking as well as violent crimes. The Unit has also been responsible in providing key fraud prevention messages to the people such as with the help of television and radio work as well as through direct meeting with groups that represent consumers who could be at high risk. The Unit’s priority areas are:

• Project Sandpiper – The Unit secured European Commission funding in 2013 which was funded by UK Cards Association and PFF in order to finance the project focused in tackling Romanian criminality that affected the UK payment industry. This involved connecting with the UK payments industry as well as law enforcement individuals in Romania in tackling its organised criminal groups.
• Staff Insider – Work with banks that sponsored to reduce harm caused by dishonest staff and targeting organised criminal groups.
• Social Engineering – Telephone – To locate criminal groups responsible in fast rising fraud cases who are aiming vulnerable individuals as well as businesses causing great harm to the UK payment industry.

Right of Rescission/Right to Cancel

Image credit:Homeowner today.com

Right to Rescission – A Known Power/Law

A person has the privilege by law, with the right to cancel a mortgage refinance or home equity loan if they tend to act quickly and adhere to the rules. A known power or the law known as the `right to rescission provides the borrower with the ability in some situations, the right to cancel their loan deals within a period of three days with no questions asked and be free.

 In other words it could mean as another way of saying `right to rescind’ or `cancel’a given contract without losing any money. Within a period of 20 days, the lender then has to give up its claim to the property as collateral and should refund the fees which may have been paid by the borrower. According to Margot Saunders, counsel or the National Consumer Law Centre, states that it has been designed with a view to provide lenders with accurate disclosures and that consumers do not sign up for loans which are different than what could have been described to them.

This right is intended to safeguard the consumer from the risk of using family home or the equity in order to secure a loan and is not applicable in situations where the mortgage is made to buy the house itself. Nessa Feddis, Vice President and Senior Counsel to American Bankers Association, states that it is not to protect the (home) purchaser but to protect the person having equity in the home.

Covers Mortgages – Companies/Banks Etc.

Categories where the right of rescission are applicable are – home equity loan which is often known as second mortgage, mortgage refinance – if the new loan does not come from the same lender which had financed the original home purchase loan, home equity line of credit, cash-out refinance – irrespective of whether it is a new loan that comes from the same lender who had made the original home purchase loan though only the new money is covered by the right of rescission. According to Saunders, it does not matter what kind of lenders the money is borrowed from and the right of rescission covers loans from mortgage companies, banks as well as other lenders.

No exclamation is essential in the case of cancellation of the transaction within a three days’ time, as per Carole Reynolds, Senior Attorney with the Federal Trade Commission and the fact that the said loan is not needed is sufficient enough for an exclamation.

The Truth in Lending Act

The law - `The Truth in Lending Act’ was for the purpose of shielding borrowers from unscrupulous lenders with the right of rescission and was intended to oppose smooth talking lenders intending to fleece borrowers out of their money and their homes. Some of the borrowers may be under the wrong impression that there is a right of rescission with all types of mortgages which is not so.

Since state and local statutes differ, the federal right of rescission is specific which is mentioned in the Truth in Lending Act. Saunders state that there is no right of rescission for the purchase money mortgages and some of these categories with regards to the right of rescission which is not applicable are –loans made to purchase a house, any loans either 1st or 2nd mortgages, refinancing mortgages, etc., which involve properties which are not the primary residence and business loans.

How to Save Hundreds of Dollars with Tax Credits

Awareness of Tax Credit

Being unaware of tax credit is like losing on a pay check and sad to say, several individuals are not aware of it. Each dollar of credit is equal to a dollar in tax savings, for instance in a federal income tax bracket of 28% and getting a buck’s worth of additional write-off could save one with 28 cents. Individuals tend to miss out on tax credits mainly due to the fact that they seem to be in a hurry when the dreaded tax filing deadline is near. Credits tend to fall through these cracks since they panic resulting in making complicated calculation or filling out additional forms. Setting aside more time on your return could help you to net several hundred dollars or could be more. For example –

Foreign Tax Credit - If a person has worked in a foreign country or would be having substantial income outside U.S, they must be well aware about the foreign tax credit which is intended to save you from being taxed by the two different countries on the same income. If the person tends to invest in some international mutual funds they could collect credit due to the fact that it is likely you paid foreign taxes the previous year – knowingly or not. A closer look at the statement on the fund summary of the previous year will provide you with some calculations in order to know the exact amount of foreign taxes which should show up on Forms 1099-DIV and 1099-INT. Presuming that the foreign taxes are from these sources totalling to or less than $300, one can claim the credit on Form 1040, Line 48 and have around $600 of foreign taxes and continue to follow the easy procedure if filed jointly. In other cases, one could file Form 1116 to claim your credit, though it could be a bit nasty.

Dependent Care Credit - When a person is paid to take care of an under-age child of 13 while the parents are out at work, one could be eligible for the dependent care credit where the credit percentage could range from 20% to 35% based on qualifying expenses and depending on adjusted gross income – AGI. Maximum credit possible for a child could range from $600 to $1,050 and for two or more the range would be $1,200 to $2,100. One should also be eligible if expenses were incurred in taking care of any other dependent that could be physically or mentally incapable of taking care of themselves, a disabled person. For high income taxpayers, the credits have not been phased out though lower dollar limits mentioned could be applicable. Form 2441 – Child and Dependent Care Expenses could be filled and credits claimed on Form 1040, Line 49 on furnishing the name as well as the Social Security number of the care provider failing which the IRS would disallow the credit with recomputed tax and would either reduce the claimed refund or sent a bill for the difference.

Moreover the Form 2441 also informs the IRS if one owes the Nanny Tax if they have an in-home care provider. One needs to be careful in taking credit if they have also contributed to a pre-tax dependent care flexible spending account – FSA the previous year through their employer. The pre-tax FSA is usually a process since it could reduce the taxable salary cutting federal as well as state income taxes together with Social Security and Medicare taxes as well. The tax saving rate could exceed the 20% effective tax savings rate which could apply to several people claiming the dependent care credit.

Elderly/disabled Credit – is applicable to individuals who have reached the age of 65 at the end of a particular year or one who has retired on permanent and total disability. Strict income limits are applicable and the credit is not available to most of them. Credits could be claimed on Form 1040, Line 54.

Adoption Credit - is when an underage of 18 years in adopted, you could qualify for a 2014 tax credit up to $13,190 for the adoption expenses and if married, a joint return to qualify could be filed. Phase-out rule, for 2014 could cause the credit to vaporize between AGI of $197,880 and $237,880. On qualifying for the same, credit could be claimed by furnishing details on Form 8839 – Qualified Adoption Expenses, with one’s 1040 with the credit amount on Line 54.

Credit for Overpaid Social Security Taxes – is where there has been more than one employer in 2014 and the earnings have crossed over $117,000 with combined salary, one has withheld too much Social Security tax. Recovery of the excess can be done by reporting the overpaid amount on Form 1040 Line 72 which is treated as a tax repayment and the effect on the tax bill is that of a credit.