An emergency fund is critical to your well being

cash-stashIt’s amazing how many people have boats, nice cars, big 42 inch flat screen TV’s, or other frivolous items yet they have no emergency funds in case of a layoff or some sort of medical emergency or other financial disaster. This is especially concerning when they have children who depend on them. They simply rest assured knowing they have credit cards to fall back on. That’s not a smart idea, as you’re setting yourself up for failure if something bad was to happen. Not to mention, credit card companies are now limiting and restricting or closing accounts for even the best cardholders. What would you do if they shut off your cards and you were out of a job or had some other financial disaster?  Below, we will look at why you should consider starting an emergency fund, and how much you will need to have in order to have true peace of mind in knowing if something bad happens, you will be able to whether the storm without accumulating massive debt or worse forcing you into bankruptcy.

Less than half of Americans have an emergency fund, and those that have been sensible still might not have enough.  If something bad were to happen (and don’t be tricked into thinking this recession is over as companies and banks are still failing and unemployment is still on the rise) and your credit card company decided to terminate your account, would you be able to even meet your monthly needs? How well would unemployment cover your needs for the essentials like housing, food, etc.? How much money would you need to fill the gap and for how long?

A good rule of thumb is to expect it to take around one month per $10,000 you earn to find a job. So say you make $100,000 per year, you could expect it to take up to 10 months to find a comparable job. 10 months is along time without income, and could destroy your financial position that you’ve potentially accumulated over a lifetime. In Missouri, unemployment pays at most $313 per week (without taxes taken out), that amounts to between $1250- $1565 per month. Not much at all for someone trying to maintain a lifestyle they’ve become accustomed to. Not to mention ,this is unemployment for only the top earners, people who make less, will get less, much less in many circumstances.

In calculating your emergency funds needs, you must first figure out how much money you will need to fill your gap if you were laid off as it relates to finding another job and meeting your current obligations. In addition, it makes sense to stash away side money on top of that amount for other emergencies like car repairs, leaky roofs, replacing a hot water heater or A/C, or some other inevitable issue. Unemployment typically only lasts 6 months to boot.

So for our example above, a $100,000 earner with monthly bills of $3500, would want to have an emergency fund of ((3500-1200=2300)*(6=$13,800) + (3,500*4 =$14,000) + ($5000) = $32,800 if being conservative, or at minimum * (3500-1500=2000)*6=$12,000 + 3,500*4= $14,000)+$2,000 or $28,000) if considering the minimum. In essence, calculate your monthly bills, determine how long it will take you to find a job, subtract out unemployment proceeds for 6 months, add an extra fund for other emergencies that may occur in the meantime, so if something does happen your not forced to take from your other emergency (lay off) funds and figure out how much you’ll need. Open a savings account where you can earn interest on your money – and begin adding funds as fast as possible. It may take you a while, but it’s better to start now than never and you can finally get that peace of mind you’re hoping for.

Fall tips to save money – Live green and save cash

yard wasteIt’s that time of the year again, and the leaves are falling. Below, we have compiled a list of things you can do to help save some money as you begin to prepare for winter, not to mention – ways to live greener.

Many people have very large trees that dump massive amounts of leaves and so they go to the store and purchase multiple paper yard waste bags to fill and dump.

  • Instead of buying paper yard waste bags (at $2-3 per 5-bag pack), use an old trash can (make certain it’s clean of trash before filling).
  • Before going back to the stores to buy more pants or winter shirts, do a fall recount – reorganize and re-evaluate all your current clothes. Too often people waste money on things they already have because they’ve forgotten about them. Why buy another pair of blue slacks when you already have some in the box in the basement?
  • Start planning your Thanksgiving meal plans now, and clip coupons ahead of time. Planning for this occasion now can help you prevent from over spending when you get to the store and help you find some great deals that will save you money.
  • It’s not too early to watch out for Christmas deals either. Start your list of people you need to buy for, and watch out for great deals. Maybe you’re looking for something unique for a child or someone special this year – instead of piling on to the toys they already have or jewelry or sweaters – consider setting them up a HSBC Direct Online Savings Account. No fees and no minimums. or a custodial investment account- ( – but it ends this month). Now that’s a gift they will be reminded of for a long time.

Buying and selling annuities for beginners

annuitiesLet’s talk about annuities.

Annuities are financial assets. Individuals buy them from insurance companies for lump sums of cash. The insurance company then invests that money to provide agreed regular payouts for an agreed period of time. Annuities are best described as life insurance policies in reverse. With a term life insurance policy your benefactors receive the payout in the event of your death. With annuities you receive the payouts in the event of your extended life and to the end of your life. The size of the payouts and the term over which they are paid are the two key parts of an annuity contract. Annuities are a gamble, where you win if you exceed your life expectancy and lose if you die earlier than your expected life span. The tax due on any investment earnings in your annuity are deferred until the payouts are made and this gives them the potential to become higher growth investments, versus having tax taken out before your money is invested.

Annuities can be had with a fixed interest rate on earnings or a variable one. You can buy a single-premium annuity, where the investment is made in a lump sum. The minimum investment is normally $5,000 or $10,000. With a flexible-premium annuity it is funded with a series of payments. The first payment can be relatively small. Immediate annuities begin paying out as soon as the annuity is funded.

On the plus side annuities can be a good source of income in retirement because they grow more quickly with tax deferred earnings but on the downside you pay for them out of income that has already been taxed. They are good if you want to save money more rapidly for some known future spending or if you want a planned guaranteed income stream when you stop working.

One drawback with an annuity is that if you withdraw your money during the contract period you will incur taxes and early withdrawal penalties. The IRS puts a 10% premature-withdrawal penalty on any cash you take out of your annuity before age 59 and half years. Insurance companies also charge penalties on withdrawals made before the term of the annuity is up. These penalties are called “surrender charges” and they usually apply for the first seven years of the annuity contract. Because of these drawbacks annuities are not the best way to invest your money for growth.

You can trade your annuity as with any other financial asset. The usual way is to find a company that has experience and available cash to buy your annuity. You will not get anywhere near the full face value of your annuity. An alternate way to sell is directly to another individual. The contract is complex but possible and expensive with legal fees attached. Annuities can be transferred to other beneficiaries.

How do you make a family budget? What are some good places to find information about this?

Type “family budget” into Google, you will find sites such as These sites are full of good family budget advice but they tend to assume that you already have the basics in place. If you don’t have a basic family budget here are 6 steps to get you started.

1. Get a calendar with generous writing space for each day, a pencil, an eraser and 2 highlighter pens one green one red.
2. Turn to today’s date in your calendar and write at the top how much cash you have in hand and in your bank account.
3. Go forward to each day in turn and write down how much you expect or know will come in the family budget on that day. Obviously your payday and salary after tax and deductions will be the big amounts.
4. Then look at each day in turn and write down how much you expect or know you will spend on that day. Obviously automatic payments for mortgage and utilities will be the big amounts. But don’t forget to add in the money you spend on your credit cards and how much you pay off your balance each month.
5. Do the math. On any given day you can have up to 4 figures on your calendar budget. Top figure is your cash figure (including bank balance) brought forward from yesterday. Second figure down is any income due that day. Third figure down is any spending that day. Add the top 2 figures, subtract the third figure and write the new cash figure at the bottom of the column. Carry this figure forward to the next day.
6. Do this for the next 12 months. Remember to include any quarterly, six monthly or annual payments or income. Where you don’t know the exact figures use your best estimate.

If you struggle to keep your spending within your income then now is the time to look again at every expense. Ask yourself; ‘did I use too low an estimate when I budgeted for utility expenses’? If you found it hard to budget because these bills vary from month to month, now is a good time to think about a budget payment plan. With this you pay a set amount each month. Some months you pay for more than your usage, but over a year things will balance out while you have better control over your budget.

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How To Buy bonds, Treasury bills, And Or Municipal Bonds?

When you buy bonds you are acting like a bank. You are buying the debts of an organization because a bond is like an ‘I Owe You’. A bond is a piece of paper explaining the size and conditions of the debt, the time period the interest rate etc. When you buy a municipal or ‘muni’ bond, you are lending money to a city or municipality. When you buy a treasury or ‘T’ bill you are lending money to the government.

On the payback side the city or government that issues the bond is promising to pay a stated rate of interest for the term of the bond and to payback the money value of the bond at the end of the term. It is the way the government raises money to do all the things it need to do such as build and runs schools or hospitals.

How to buy bonds? The majority of bonds are traded in what is called the over-the-counter (OTC) market. Some corporate bonds are also traded on the NY Stock Exchange as well. The OTC market is made up of hundreds of companies that deal in securities and banks that trade bonds. It isn’t done hand to hand but usually by phone or Internet. Some companies keep a stock of bonds and trade them as their own business while others act as middlemen in trading with other dealers on behalf of other clients.

Bonds are one of the safest forms of investment but that is not to say that there is no risk involved. Even governments and cities can go bankrupt. If you wish to take advantage of a new bond issue, you should seek out a professional independent advisor who will give you guidance on the offering statement or prospectus for the bond in question. The offering statement is the official terms and conditions of the bonds. It will also layout the risks that investors must take into account before investing.

There is also a secondary market in bonds. You can buy these bonds in the same place and in the same way as new bonds but they are what you might call ‘second hand’. People and organizations hold bonds for a while and for whatever reason want cash for them, even though they have been previously issued.

Bonds traded over-the-counter market are generally in $5,000 denominations while the secondary market bond prices are broken down into in $100 lots. So for example a bond offered for say 95 refers to one that is priced at $98 for a $100 lot, or at a 5% discount. Bond prices will always reflect the dealer’s costs and profit margin.

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Investing in futures and or commodities

Futures/Commodities… How do you invest in these?

Commodity and futures trading is a rather specialized way of trading and you will need to know how the futures market works.

A futures market was started in the United States in the early 1800s in an attempt to insulate traders of agricultural commodities, for example wheat or rice, against the huge swings in price caused by gluts and shortages of those commodities which were being traded.

In 1972 the International Monetary Market was created to enable futures trading in foreign currencies such as the British pound, Canadian dollar and Japanese Yen amongst others.

The futures markets today, are very different from the original commodities and futures markets, and play a considerable part in the global financial system. In 2006 the first transcontinental Futures and Options Exchange was formed between the United States and Europe. It is expected that eventually all futures and commodities trading will be done electronically.

The futures market is a place where negotiation of futures contracts for commodities or currency takes place. Investment in the futures markets is possibly one of the most risky of investments.

A futures contract is made between a buyer and seller of a commodity, currency or stock where an agreement is negotiated for delivery of the goods at a fixed date in the future for a set price. Futures contracts are binding and all details bar the price are standardized. The details of the contract are what the commodity is, the quality of the commodity, quantity and the date of delivery. The contract will also detail how the contract can be settled, whether in goods or money.

As for all trading you would be advised to learn as much as you can about commodity and futures trading. Then look for an experienced broker who has a proven track record. Obviously the more experienced full-service broker will charge more commissions but when you are just starting out the guidance an experienced broker can give is very useful, especially in commodity and futures trading. The advice of a good broker can help you avoid making some costly errors. On-line brokers do not normally give out much advice. The commissions’ on-line brokers charge is less than that of full-service brokers and because of this they like to keep their costs down. All trading is done through a broker. Some brokers specialize in futures trading. You can find lists of brokers: full-service, on-line and managed futures & options brokers on the Internet.

Once you have opened your trading account with your chosen broker and financially met your broker’s requirements you will then be in a position to start commodities and futures trading.

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Buying and Selling Stock

Thinking of trying your hand at being an investor on the stock market? If you want to stick your toe in the hot waters of the stock market be sensible and learn how stocks are bought and sold before you ever invest any money. There are a number of books for beginners on the market to help you learn all about investment buying.

After reading as many books as you possibly can about how the stock market works and the best way to trade etc., you will be eager to try out all your newfound knowledge. However, the next step should be for you to research thoroughly the investments you are interested in and to open a virtual account with one of the free, on-line trading platforms. With a virtual account it will feel like the real thing but even if you lose on your trade you won’t be at risk of losing your hard-earned money.

When you are confident that you have done all your homework and are ready to trade in the real world you will have to open a “trading account” with either an on-line broker or a full-service broker. All trades are done through a “trading account”. On-line brokers are not as expensive as full-service brokers are so most individuals use on-line brokers.

Check the Internet for brokers who will be able to offer you the facility to invest in stock on-line. You will find that there are a number of lists available, which will give you help in finding an on-line broker. However, although these lists are useful the tests they apply to create their broker rankings may not always be appropriate for your situation.

Another point to think about is that while a broker may be good at trading in one type of stock they may not be so good in another. Depending where your interests lie you may think it worthwhile opening a trading account with two different brokers enabling you to use the different strengths each broker offers.

Check out the brokers thoroughly. There are plenty of user comments on the Internet, which will help you to decide if a broker is suitable for your investment buying and selling. For example, if you wish to close a trading account with a broker and transfer your holdings some brokers will charge for this while others will be free.

Once you have opened your trading account you will need to place funds into the account. You can do this either by mailing a check in or sending funds by electronic transfer. These funds will be credited to your account and you will then be able to place your order to buy or sell stock by telephone or on-line or even in person if your broker has a local office.

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Buy gold or silver? Now is the time to hedge your investments by buying gold and silver

You’re interested in buying gold or silver; How can I buy gold or silver is a really big question that begs many other questions. Like how to buy gold at best prices? What is the spot price of gold? Why do you have to pay more than the spot price? What form will the gold be in and the big one; where can I buy gold?

The actual price you pay for the gold or silver you buy will depend upon the form of the gold or silver, coins, bullion etc. It will also depend on the mark up of the seller and most of all you will always buy gold for more than the current value of the gold at the point in time when you buy it.

The people and places to go to in order to buy gold or silver are other gold collectors, mints, precious metal dealers, auction houses, post offices and even shops. The money you hand over when you buy gold or silver can vary considerably and it pays to shop around first.

The aim of course is to buy gold at the ‘best’ price i.e. the lowest possible and this means the best time to buy gold or silver is NOW! You see gold seems to be on a steadily increasing price curve. So if you buy today it will have gone up in value next week and will continue to rise in value steadily.

Some top tips when you buy gold or silver.

  • Ask yourself ‘what am I getting for the mark up over the spot price’? When you buy small gold coins with little gold content but lots of fancy presentation packaging you may not be getting best value.
  • When you buy solid gold coins and bars you are getting get more gold per dollar. The mark up on bullion is generally less than on coins.
  • Buying in bulk is generally better value. Because you most likely want the gold as a safe haven investment the less you can buy gold for the more you will increase your return.
  • The closer to the source of the gold the better the value. Buy gold bars direct from the mint and you avoid paying the margins at every stage of gold marketing. This means no transportation costs, no middlemen mark ups and less security and insurance costs.

In these troubled economic times the price of gold tends to rise more rapidly than in good times. This is simply because more people want to buy gold and silver. It will never let you down in the way of banks and stocks.

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Buying gold to hedge your 401k is a smart bet

With the way the economy is going, you have to look at your options when it comes to hedging your investments, and gold is a great option. Not only does it hedge against a volatile stock market, it hedges against currency fluctuations as it relates to the dollar or your local currency. Since the US Federal Reserve no longer has the requirement to back the dollar with any collateral, and the dollar is fiat money, it is a good idea to make that investment in gold. You may have noticed the price of Gold has skyrocketed to unprecedented levels in the past few recent months, as investors flocked for the safety in Gold. Other types of hedging may include Oil and various other commodities.

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