Cracking Finance » Finance

3 Key Reasons Why You Should Get an ISA This Year

admin — Thu, 19 Apr 2012 03:09:44 +0000

Most people are aware of the two primary benefits of getting an ISA: they’re tax free. This might not sound like the most enthralling reason given how the market has been performing for the last few years, but there are still a number of daily benefits to setting up an ISA this year, regardless of the generally quite low interest rates. Here are 3 key reasons why you would be well advised to get an ISA this year.

1. Tax shelters shield you from the next inflation jump – You don’t know what the banks are going to do, but most financial analysts think we’re poised for another inflation jump. It’s true that asset values will likely go up in the process, but taxes will need to be rendered sooner rather than later if they do. And rising assets are a red flag for unpaid taxes.
Why take the risk? It’s better to have the government approve your tax shelter instead of trying to hide your profits somewhere shady. You might not see the benefits of having your profits in fixed rate cash ISAs at the moment, but if the world changes and inflation takes hold, you’ll want your tax shields up to protect you.

2. You don’t know what the future holds – This is reason enough to invest in an ISA. The majority of people invest in shares in order to profit from the capital gains; here lies the drive in our investment decisions. Although the current market may not look like a place for profits, the stock market has a tendency of moving in either direction in a hurry. As the saying goes, when it rains, it pours. And once the gains start coming in the stock market, you won’t have the time left to start planning your taxes.
It happens to just about everyone who doesn’t do this for a living. All of a sudden you start gaining on your stocks and you pass the threshold for capital gains before you know it. Naturally, it’s possible to hold on to the shares you’ve got that are doing well; there’s no rule that says you’ve got to take out your capital gains and sell them.
However, what goes up doesn’t always stay up. A classic example of this situation was the dotcom bubble bust. A number of investors kept their stocks in the market even though they probably had a feeling that things were about to turn south. They did so because they didn’t want to have to pay taxes on those massive earnings and their judgment became suspect as a result.
It’s true that the stock market now isn’t nearly what it was like back in those days, but this adds to the point that you can’t predict the future. Plan your taxes ahead of time because no one can tell what’s going to happen next. Make sure your capital gains are protected in a tax free bubble. It can save you thousands in comparison to your eventual tax bill, and it’ll put you in a good position when things next take a turn for the better.

3. Safety comes in distributed investments – Banks are collapsing and national economies are going under. If you’ve got more money in one institution than the FSCS will guarantee, you should move the extra to another institution just in case things turn sour. An ISA is a smart place to put that extra pot of money.

Now is the Time to Refinance

admin — Thu, 19 Apr 2012 03:08:51 +0000

As an American consumer it can be very beneficial to keep tabs on what the Fed is doing regarding interest rates. The Federal Reserve announces its short-term interest rate target on a monthly basis. And as the Fed raises and lowers that interest rate, banks and lending institutions raise and lower the interest at which consumers are able to borrow for a new car or home.

When the bottom fell out of the U.S. economy in 2008, the Fed immediately stepped in and lowered interest rates to historically low levels in order to stem the Global Credit Crisis that threatened to bring on the end of the economic world as we know it. Today, over three years after the eruption of the Crisis, interest rates are still sitting at historically low levels, and, in fact, the Fed announced in early March that interest rates will stay at record lows through 2014. Refinancing your home or auto loan has never been more cost effective. Currently auto and mortgage loan rates are going for as low as 3%. By locking in an interest rate just 1 point lower than a current interest rate can save hundreds if not thousands of dollars over the life of your loan if you refinance. Locking in a lower interest rate will save a substantial amount of money over the life of the loan.

Economists are saying that America is currently in the midst of a “deleveraging” cycle. This means that people are unwinding debts, rather than accumulating new debts. While this process has caused the American economy to suffer through a very slow economic recovery, it means that personal household balance sheets are getting stronger as people pay off their bad debts and build up savings.

The most practical way to deleverage is to refinance an existing loan and lock in these historic, low interest rates. Currently, the Federal Reserve has set the short term interest rate target at 0.25%. This extremely low interest rate has caused auto loans to drop to as low as 3% on a 36 month new car loan at some lenders.

Loans taken out a few years ago have a higher interest rate than what is currently available on the market. Refinancing an auto loan is basically re-applying for a new loan. This new loan pays off the old loan and the terms of the new loan will most likely have a lower interest rate. If both your credit and your income have improved since you bought your car or home and received your loan, then you could be in store for massive savings.

Auto refinance rates are at historic lows and these rates are likely not to be this low again for a long time. With record low interest rates available for lenders, there is no better time to refinance an auto or home loan than right now.

10 New Ways to Save Money in 2012

admin — Thu, 19 Apr 2012 03:06:52 +0000

New methods and techniques are developed each year to help you reduce expenses and save money. From the latest online applications and services to fun and creative ways to shop, your budget will never look the same when you take advantage of these different money-saving strategies! Here’s a look at 10 different ways you can save money in 2012.

1. Track and Budget Your Money

Tracking your daily, weekly, and monthly expenses is one of the best ways to save money and see where it’s being spent. There’s a new array of services and applications for your computer and mobile device that allow you to track your budget. The most popular websites include Mint.com, Buxfer.com, PearBudget.com, and BudgetTracker.com. Each of these services have different features, such as timely spending updates, secure linking with your bank account, and real-time recording of all your purchases. A detailed summary of your account will help you visualise your money and allow you to easily determine where you need to reduce expenses.

2. Carpool, Bike, or Ride a Bus

The costs of fuelling your car can add up quick and drain your bank account without you realising it. Carpooling is a wonderful way to save money, especially if you commute daily to work or school and have neighbours that want to carpool as well. You can find other people to carpool with through Zimride.com, PickupPal.com, and eRideShare.com. If you live in a city with plenty of bike routes, then riding a bike will also lower your gas expenses. You can use MapMyRide.com to find the most ideal bike route to your destination. Some places have an organised, cost-effective bus system that you can ride; you can track local bus routes with online navigational devices and bus schedules. You’ll be amazed at how lower your monthly budget is with a decreased gas expense.

3. Cook at Home

The cost of takeouts, orders, and dine-outs puts an enormous dent in your budget that is easily avoidable. Cooking at home is not only cheaper, but also healthier. Imagine hand-picking your own fresh ingredients compared to processed, frozen, or pre-packaged food items that could contain harmful preservatives. Instead of ordering out, choose healthy mouth-watering recipes with wholesome ingredients for a more delicious, less expensive meal. You can also plan your meals with the latest apps and services, such as AllRecipes.com’s Menu Planner, FoodOnTheTable.com, and BigOven.com.

4. Cancel Your Cable TV

The Internet now features services that allow you watch your favourite shows online for free. Some of the most popular websites are Hulu.com, XfinityTV.com, and SideReel.com. If you only watch specific TV show, you may consider investing in a device like the Apple TV. All of these methods will give you the option to cut your cable costs, and you’ll still be able to catch your favourite programs and shows.

5. Replace Your Home Phone

Having a cell phone with a Wi-Fi connection lets you take full advantage of some of the most versatile apps available on the market. Download programs like Skype and Fring to talk to your family, friends, and colleagues without paying monthly bills for a home phone. These apps are especially useful when you need to make long-distance or international calls, which are too expensive on average phone plans. You can also consider a home phone replacement like MagicJack to reduce your expenses.

6. Invest in Water Filtration

If you drink bottled water and cannot fathom the idea of drinking tap water, then there are some great water filtration devices available on the market. Fill up your portable water bottle with the filtered water before leaving home so that you never have to buy bottled water. Keep portable filtration systems with you when on the road to further cut costs. You may also consider purchasing a water bottle that is also a filter, such as the Lifesaver Bottle from LifesaverSystems.com.

7. Purchase in Bulk

Keep your eyes open for deals on items you purchase often, and buy in bulk if there are coupons or other deals. Bulk buying will save you money and time; you won’t have to worry about shopping every other day for common household items and you reduce gas costs. Imagine buying your favourite sauce that costs $5, but when purchased in a six pack it is only $4.50; you end up saving $7.50 — now that’s a deal! Also, plan your meals ahead and make a grocery list so you are not buying unnecessary items that will sit in your pantry and eventually go stale or expire.

8. Shop Online

Not all shopping has to be done in person at the store; you can also consider shopping online, especially if there’s free shipping available. Online shopping in 2012 is more consumer-oriented than ever before, with newer offers popping up all the time. Use websites like RetailMeNot.com, FatWallet.com, and CouponCodes.com to find the latest deals. Seasonal shopping is also a good idea — save money by buying items only when they are on sale.

9. Save Energy

Go green and install energy efficient lighting. Changing your bulbs and light fixtures will reduce your electricity bill and increase your overall savings. Using solar energy to charge some of your devices at home is another fantastic option. If heating and cooling bills are taking a toll on you, install a thermostat to save energy and minimise the charges.

10. Shop at Thrift Stores

Not all fashionable and trendy purchases have to be new. Thrift stores are great places to find hidden treasures for less than half the price of regular clothes. Use websites like TheThriftShopper.com and ResaleShopping.com to discover new thrift shops in your locality.
Start with one or two of these ways to immediately begin saving money today! Once you have established a couple of methods as a regular practice in your daily life, select a few more and make them consistent as well. When you implement these different methods in a progressive, habitual manner, you will be more likely to permanently reduce your expenses.

Even More Ways to Save

99 Essential Money Saving Tips – MoneyChoices.com.au
12 Money Saving Tips for The Year 2012 – InvestInternals.com
Money-saving tips for 2012 – Guardian.co.uk

How to Repay Your Mortgage, Fast!

admin — Sun, 08 Apr 2012 04:17:15 +0000

Taking out a mortgage allows you to buy the house that you’ve always wanted, but it also comes with a large amount of financial responsibility. In fact, it is probably your largest financial obligation each month. Getting rid of your mortgage would free up a lot of money that you can use for other things every month. If you are interested in paying off your mortgage quickly, there are a number of tricks that you can use to get the job done. Then you can start enjoying life to a greater degree with all of your extra money.
Refinance at a Lower Rate
When you get a mortgage, you may be surprised to find out that the vast majority of your monthly payment goes toward interest in the first few years of the loan. If you can put more of the money that you pay every month toward the principal balance and less towards interest, you will pay off your mortgage faster. Because of this, if you can refinance your mortgage at a lower interest rate, you will be able to pay less on interest and pay off the loan quicker. Compare mortgage rates, refinance your mortgage and pay off the existing one. Keep making the same payment that you were used to with your first mortgage. The excess payment will go toward the principal balance and you will make a big dent in your mortgage balance.
Make Payments More Often
There are a number of repayment options that you can use to make payments more frequently than once a month. For example, if you make a payment every two weeks or once a week, you can pay down the mortgage balance quicker. When you make a payment, it will pay down the principal balance faster and make the interest charges smaller. If you make half of your mortgage payment every two weeks, you will also essentially be making an extra payment each year. By making an extra payment, you will pay off your mortgage years faster than you would ordinarily.
Overpay Each Month
If you don’t want to make frequent payments, another option is to simply pay little bit more every month.. Any money that you pay over your schedule mortgage payment each month will be applied to the principal balance. As the principal balance is paid down, the interest charges will also be reduced. This means that more of each payment will go toward paying down the principal. By sending only a few extra dollars each month, you could cut months or years off of the repayment period of your mortgage. One strategy that you can use is to get an amortisation schedule for your mortgage and always pay the principal balance listed for the next month. If you do this every month, you’ll pay off your mortgage in half the time it would normally take.
Refinance to Shorter Term
Another way to pay down a mortgage quicker is to refinance your loan into a shorter term mortgage. If you currently have a 30 year or 40 year mortgage, you can refinance it into a 15 year mortgage instead. By doing this, the loan will be recalculated on a term of 15 years and at a new interest rate. Your payment will be a bit higher than what you’re used to with the longer mortgage, but the loan will be paid off much quicker. If you refinance from a 30 year to a 15 year mortgage, you’ll be cutting your loan term in half. Shop around and make sure that you’re getting the best interest rate in the industry as well when you do.

A Guide to Financial Jargon

admin — Sat, 24 Mar 2012 22:01:03 +0000

Understanding articles and books dealing with financial matters can be frustrating because of all the jargon used that goes over most people’s heads. Here is a list of commonly used financial jargon terminology to help make reading this type of writing easier.

Credit Cards

Credit scoring – The method used to determine whether you qualify for a credit card and, if you qualify, the amount of your credit limit. Credit scoring uses your financial history and especially your history in repaying loans to assess how much risk you pose to the company as a credit customer.
Balance transfer – Some credit card companies allow you to transfer your balance from another card account when you open a new account. If you find a card that offers low introductory rates, this is one way of lowering interest on your credit card debt.
Annual Percentage Rate (APR) – The interest rate on your credit card debt calculated on an annual basis.
Cash advance rate – The interest rate that applies when you use your credit cards to withdraw cash at an ATM or bank.
Minimum payment – The smallest amount that you must pay to your credit card company each month. Usually calculated as a percentage of your current credit card balance.

Loans

Acceleration – A term that describes the lender’s option of requiring immediate payment in full of the loan balance when the borrower defaults.
Amortisation – A process of gradual reduction of the borrower’s debt generally using a schedule of instalment payments.
Cash-out – A refinancing loan that provides the homeowner with extra money borrowed against the property.
Equity – The amount of money that the homeowner has invested into the property. This amount represents the dollar amount of the borrower’s ownership.
Origination fee – Borrowers must pay this fee to compensate the lender for loan processing including credit history checks, document preparation, underwriting and property inspection.
Mortgagee – The lender who owns the security for a loan.
Mortgagor – The borrower or homeowner who gives the property as security for the loan.
Prime Rate – The best interest rate for borrowers that is available to consumers with the highest credit scores. The prime rate helps determine other rates including variable interest rates.

Savings Accounts

Authorized signer – A person who is able to conduct transactions on an account but who does not have ownership of the account funds.
Beneficiary – The person or entity who you assign to receive your assets in a bank account should you die.
Certificate of Deposit – A savings account that matures at a specified date and that entails a penalty if you withdraw funds before maturity. The interest rate is fixed.
Money market deposit account – A type of savings account that allows you to earn interest while still having limited check-writing privileges.
Overdraft – If you are able to write checks against your savings account or to transfer money from that account to third parties, an overdraft represents a negative balance in the account.

Investments (Stock Trading)

At-or-better – An instruction to a broker to complete a stock transaction at a specified price or higher. The order expires if the broker does not meet the target price.
Book – All the positions or stock investments that the trader currently holds. The record contains all long and short positions.
Extended trading – Trading that continues after normal trading hours through electronic stock exchanges. Pre-market trading in the United States usually runs from 8am to 9:30am EST, and after-market trading from 4pm to 6:30pm EST.
Fast market – A term that refers to a highly volatile market in which the prices of stocks or other investments moves sharply in one or both directions.
Sell signal – A factor that alerts investors that a specific investment may decline in value and that they should immediately dispose of that stock.
Buy signal – A factor that alerts investors to immediately purchase a particular type of stock in anticipation of that stock increasing in value.

Further Glossaries

Credit card glossary – everything you ever wanted to know about credit card jargon.
Loans glossary – detailed guide to the financial terms often used in loan agreements.
Savings account glossary – Wells fargo’s guide to the language used in most savings account products.
Investments glossary – Investopedia’s excellent searchable guide to stock market jargon.

Gaining a Personal Loan When You Are Unemployed

admin — Sun, 05 Feb 2012 01:32:19 +0000

When you are unemployed, it can seem like everything is an uphill battle. You may feel discouraged because there are few reasonable options for you and your family. One thing you may be considering is a personal loan to get you through this tough time. The obstacle here is finding a lender willing to give a loan to someone who has no steady source of income. However, hope is not lost. It is possible for you to get a personal loan in your financial state. It may not have the best terms, but it will be far better than trying to get a payday loan or title loan.

Exhaust All Other Options First
It should be said that just because you are out of work does not mean that you should be borrowing money to get you buy. Anyone who is employed or has the means to make an emergency fund with at least six months’ worth of expenses should do so before they are put into the position of needing to borrow money should they become unemployed. I realize that this may not be an option for many, and emergencies do arise whether you are employed or not.
Before you even consider taking out a loan, you should make sure you have exhausted all of your other options. If you won’t be able to pay back the loan, you could end up in a lot more trouble than you are already in, and you should want to make sure you don’t build up so much debt that you won’t be able to pay it off later. From here on, I will assume that anyone looking to take out a loan during difficult financial times has already used their credit cards, asked for loans from friends and family, and done everything else possible to get by. There are many other options in these situations, so you should look into all of them before you make your decision.

Look Into Different Loan Possibilities
Trying one of the following types of loans could be a solution to your problem in the short term.

Make a large down payment. If you are able to make a down payment of about 30% of the loan, there will be many more lenders willing to give you a loan even if you are unemployed. While this may not be an option for many, it will help the lender feel more comfortable giving a loan to someone with no steady source of income.
Get a home equity line of credit. This type of loan is similar to having a credit card with a revolving balance. You can use any home that you won as collateral for the loan, and the credit can be available again as long as you have paid off the loan. Proof of employment is not necessary, but if you default on the loan, you run the risk of losing your home.
Consolidate your debt with a debt consolidation loan. These loans will help you pay off your existing debt, but they won’t provide you with additional cash that might be necessary for you to get by during this tough financial time. You can pay back all the creditors who have given you money in the past, and you might even be able to get a lower rate than you had before.
Use a pawnbroker or pawnshop to get a secured loan. If you have something very valuable, you can give them to the pawnbroker or pawnshop as collateral for a loan that is a percentage of what the item is worth. You will then have a specific amount of time to repay the business, at which point you will get your expensive item back. Again, you will run the risk of losing that item if you aren’t able to repay the loan, so think twice before you decide to take out this type of loan.

Don’t Lose Hope
Being unemployed can put a lot of stress on a person and their family. Just because you have to make this difficult decision now doesn’t mean that all hope is lost. Keep looking for a job and find one as soon as possible, even if it is temporary or you have to settle for something less than you had before. Any job is better than no job, and with a little hard work and dedication you can work your way to the top again in no time.

Vanessa Lang is an author who writes guest posts on the topics of business, marketing, credit cards, and personal finance. Additionally, she works for a website that focuses on educating readers about payday advance loans.

Payday Loans Companies Set to Rise With Economic Ups and Downs

admin — Fri, 18 Nov 2011 02:52:07 +0000

Is it possible for an industry to be both cyclical and counter-cyclical? Companies offering online payday loans might just emerge from the recession just as strong, possibly stronger, than they fared in the downturn.

The popular perception of payday loans companies is they do well when factors of personal finance are down. That’s easy to imagine – when people make less money they have to borrow more frequently. Particularly when credit is tight and traditional forms of lending (e.g., credit cards) are less available to people, borrowing via paycheck loans is a natural default for millions of the still-employed (payday loans, as the name makes clear, are available only to those who have jobs).

And that has happened in spades during the current recession. Payday loans companies have become a very solid part of the economy. Formerly two-earner households, taken down to one paycheck while one partner is laid off, run up against emergency expenses that require a quick infusion of cash because they’ve either maxed out their lines of credit or have none in the first place. Hence, the role of the payday loan in a recession.

Online payday loans transformed the industry

However, in an emerging recovery, as employment rebuilds, payday loans are expected to continue their ascent. Why? It’s simple: online payday loans are different from bricks-and-mortar cash advance stores.

In the old days (pre-2005, or thereabouts), most payday loans required a trip to a retail store. Most were located in certain neighborhoods with lower income demographics. It was a barrier to a large part of a now-expanded market comprised of middle and even upper-middle income salaried employees. After all, they still find themselves short on quid from time to time. Now, with online payday loans there are no geographical barriers that would cause income-level barriers.

Also, because payday loans are employment based, individuals who are working but whose credit scores aren’t yet fully recovered from recessionary circumstances will still need this type of cushion. People who are turned down for other lines of credit due to credit ratings usually still qualify for payday loans .

Groupon goes public, sees 40% increase

admin — Sun, 06 Nov 2011 23:10:47 +0000

The week that just passed finally saw Groupon go public after some intense build up. The coupon company that is now valued at $12.1 billion (insane, right?) saw its stocks jump in value on the very first day.

The shares jumped over 40% to $28.30. While it may seem surprising to many, such fluctuations are commonly noticed and were expected by the analysts.

Groupon was expected to price its shares somewhere between $16 to $18. Instead, on Thursday, it priced its shares at $20. After the jump in share price, Groupon is now worth approximately $20 billion.

Groupon’s shares are still very much volatile and pose high risk. Thus, analysts are warning buyers to carefully invest their money. It will be interesting to see if the bubble will finally pop for internet based companies with Groupon or will it keep on growing.

Why should we worry about US’s AAA rating downgrade?

admin — Sun, 07 Aug 2011 15:12:58 +0000

As you might be fully aware by now, United States of America has, for the first time in history, lost it’s AAA rating. US has held this rating since 1917. Standard and Poor (S&P) reduced US’s rating from AAA to AA+. This move was made by S&P due to concerns about US’s growing budget deficit.

Now a common man like you might wonder what this has to do with you. How will your lives be affected? Basically, this rating is meant for investors who want to invest their money in US. AA+ rating means that they need to do some thinking before investing in US. This rating downgrade affects the investors’ confidence in the US economy. Lets not forget that these investors are the ones who fuel the market.

For a common man like you and me, this downgrade will impact us by making loans and mortgages more expensive. Wanted to get that new house? Forget about it. Due to this, people stop spending more and start saving (which is a good thing for you personally because you should always be saving for bad times) but that hurts the economy and it starts to shrink. If the economy continues to shrink that it may lead to depression which means job cuts.

In fact, a lot of experts are currently discussing whether US is heading for another recession. US had started to make recoveries from the 2008 recession but recent debt issues have brought up the issue once again.

Investments left you in debt? Consider an IVA

admin — Wed, 11 May 2011 13:56:13 +0000

One option for people struggling with unaffordable unsecured debts may be an IVA (Individual Voluntary Arrangement). This is a formal, legally binding debt solution designed to help you repay as much of your unsecured debt as possible, before the rest is written off.

This may sound like an ideal way out of debt, but there are downsides, and you will only be able to enter into an IVA if you can show your lenders that you really need it and that’s it the best way for you to tackle your debts. If you do qualify, though, it could be an excellent way to tackle your unsecured debts without having to go down the route of bankruptcy.

How an IVA could help

An IVA will reduce the amount you pay towards your unsecured debts each month, but you’ll still have to pay as much as you can. Your monthly payments will be based on what you can afford once your other essential costs, such as your utility bills and mortgage/rent payments, have been taken into consideration.

A typical IVA will involve making monthly payments for five years – although the repayment terms can vary. As long as you keep up with your payments you will be protected against action regarding your debts, meaning your lenders won’t be able to try and make you bankrupt.

Then, once your IVA comes to a successful conclusion, the rest of your unsecured debt will be written off.

How do I know if it’s the right option for me?

Even if you think you qualify, an IVA may not necessarily be your best option. You should always discuss your situation and your options with a debt adviser before you decide on any one approach to your debts. They’ll help you find the approach that best meets your needs.

In some cases, bankruptcy can be a better option than an IVA. It has some advantages, such as a shorter timespan (it’s usually over after a year), and it can be suitable for people who can’t commit to regular monthly payments.

Even if it turns out an IVA is right for you, remember that there will be an impact on your credit rating for six years. Also keep in mind that if you’re a homeowner, your IVA may require you to release equity from your home in the final year.

Further information on alternative solutions:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/PlanYourWayOutOfDebt/index.htm