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How to invest in gold at market value, i.e. without paying a markup? | ETF's are great products for investing in GOLD. Depending on where you are there are also leveraged products such as CFD's (Contracts For Difference) which may be more suitable for your budget. I would stick with the big CFD providers as they offer very liquid products with tight spreads. Some CFD providers are MarketMakers whilst others provide DMA products. Futures contracts are great leveraged products but can be very volatile and like any leveraged product (such as some ETF's and most CFD's), you must be aware of the risks involved in controlling such a large position for such a small outlay. There also ETN's (Exchange Traded Notes) which are debt products issued by banks (or an underwriter), but these are subject to fees when the note matures. You will also find pooled (unallocated to physical bullion) certificates sold through many gold institutions although you will often pay a small premium for their services (some are very attractive, others have a markup worse than the example of your gold coin). (Note from JoeT - CFDs are not authorized for trading in the US) |
What does it mean for a company to have its market cap larger than the market size? | A company's valuation includes its assets, in addition to projected earnings. Aside from the obvious issue that "projected earnings" can be wildly inaccurate or speculative (as in the case of startups and fast-moving industries like technology), a company's assets are not necessarily tied to the market the company is in. For the sake of illustration, say the government were to ban fast food tomorrow, and the market for that were to go all the way to zero. McDonald's would still have almost 30 billion dollars worth of real estate holdings that would surely make the company worth something, even though it would have to stop selling its products. Similarly, Apple is sitting on approximately $200 billion dollars in cash and securities in overseas subsidiaries. Even if they never make another cent selling iPhones and such, the company is still worth a lot because of those holdings. "Corporate raiders" back in the 70's and 80's made massive personal fortunes exploiting this disconnect in undervalued companies that had more assets than their market cap, by getting enough ownership to liquidate the company's assets. Oliver Stone even made a movie about the phenomenon. So yes, it's certainly possible for a company to be worth more than the size of the market for its products. |
Transfer from credit to debit | I've called both BofA and Amex Customer Support, and they couldn't help. That's because you cannot. Debit card is tied to your checking account, so you can do a cash advance from your AMEX and deposit it to your BOA checking account. It will then be available to use with your debit card. |
What are good games to play to teach young children about saving money? | We play Cash Flow and Cashflow for Kids by Robert Kiyosaki. Our kids love it. |
In the UK, can authors split a single advance on a book over multiple tax returns? | HMRC calls it: Averaging for creators of literary or artistic works, and it is the averaging of your profits for 2 successive years. It's helpful in situations like you describe, where income can fluctuate wildly from year to year, the linked article has the full detail, but some of the requirements are: You can use averaging if: you’re self-employed or in a partnership, and the business started before 6 April 2014 and didn’t end in the 2015 to 2016 tax year your profits are wholly or mainly from literary, dramatic, musical or artistic works or from designs you or your business partner (if you’re in a partnership) created the works personally. Additionally: Check that your profit for the poorer year, minus any adjusted amounts, is less than 75% of the figure for your better year. If it is, you can use averaging. Then, check if the difference between your profits for the 2 years is more than 30% of your profit for the better year. If it is, work out the average by adding together the profits for the 2 years, and divide the total by 2. |
Any tips for asset allocation across multiple retirement accounts? | I have a similar plan and a similar number of accounts. I think seeking a target asset allocation mix across all investment accounts is an excellent idea. I use excel to track where I am and then use it to adjust to get closer (but not exactly) to my target percentages. Until you have some larger balances, it may be prudent to use less categories or realize that you can't come exactly to your percentages, but can get close. I also simplify by primarily investing in various index funds. That means that in my portfolio, each category has 1 or 2 funds, not 10 or 20. |
US Citizen Buying Rental Property in Canada | You've asked a number of questions. I can answer a few. I've quoted your question before each answer. What are the ins and outs of a foreigner like myself buying rental property in Canada? This is a pretty broad question which can address location, finances, basic suggestions etc. Here's some things to consider: Provincial considerations: Some ins and outs will depend on what province you are considering and what area in that Province. If you plan on owning in Montreal, for example, that's in the province of Quebec and that means you (or someone) will need to be able to operate in the French language. There are other things that might be different from province to province. See stat info below. Canadian vs. US Dollar: Now might be a great time to buy property in Canada since the Canada dollar is weak right now. To give you an idea, at a non-cash rate of 1.2846, a little over $76,000 US will get you over $100k Canadian. That's using the currency converter at rbcroyalbank.com. Taxes for non-resident rental property owners: According to the T4144 Income Tax Guide for Electing Under Section 216 – 2015: "When you receive rental income from real or immovable property in Canada, the payer, such as the tenant or a property manager, has to withhold non-resident tax at the rate of 25% on the gross rental income paid or credited to you. The payer has to pay us the tax on or before the 15th day of the month following the month the rental income is paid or credited to you." If you prefer to send a separate Canadian tax return, you can choose to elect under section 216 of the Income Tax Act. A benefit of this way is that "electing under section 216 allows you to pay tax on your net Canadian-source rental income instead of on the gross amount. If the non-resident tax withheld by the payer is more than the amount of tax payable calculated on your section 216 return, [they] will refund the excess to you." You can find this guide at Canada Revenue's site: http://www.cra-arc.gc.ca/E/pub/tg/t4144/README.html Stats: A good place for stats is the Canada Mortgage and Housing Corporation (CMHC). So, if you are interesting in vacancy rates for example, you can see a table that will show you that the vacancy rate in Ontario is 2.3% and in British Columbia it's 1.5%. However, in New Brunswick it's 8%. The rate for metropolitan areas across Canada is 2.8%. If you want to see or download this table showing the vacancy rates by province and also by metropolitan areas, go to the Canada Mortgage and Housing Corporation site http://www.cmhc.ca/housingmarketinformation/. You can get all sorts of housing information, reports and market information there. I've done well with Condos/Town-homes and would be interested in the same thing over there. Is it pretty much all the same? See the stat site mentioned above to get market info about condos, etc. What are the down payment requirements? For non-owner occupied properties, the down payment is at least 20%. Update in response to comments about being double taxed: Regarding being taxed on income received from the property, if you claim the foreign tax credit you will not be double taxed. According to the IRS, "The foreign tax credit intends to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived." (from IRS Topic 856 - Foreign Tax Credit) About property taxes: From my understanding, these would not be claimed for the foreign tax credit but can be deducted as business expenses. There are various exceptions and stipulations based on your circumstance, so you need to read Publication 856 - Foreign Tax Credit for Individuals. Here's an excerpt: "In most cases, only foreign income taxes qualify for the foreign tax credit. Other taxes, such as foreign real and personal property taxes, do not qualify. But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040)." Disclaimers: Sources: IRS Topic 514 Foreign Tax Credit and Publication 856 Foreign Tax Credit for Individuals |
Diagnostic Questions to Determine if Renter intends to pay | Assuming the renter was properly vetted, the only question worth asking is "what has changed in your life?" Perhaps one of the earners has lost a job, or has moved out because a couple has broken up. If nothing has changed but they just don't feel like paying you, start the eviction process. If something has changed and you assess that it's temporary (I lent my brother money and he didn't pay me back - I'll be behind for a few months but I will catch up; my employer went out of business and didn't pay me for the last two weeks - I have a new job already and am waiting for my first paycheque) then perhaps you are willing to wait. If something has changed and it seems pretty permanent then you might reluctantly start the process. Depending on how long it takes where you live, the renter might get things under control before you finish. |
What can I replace Microsoft Money with, now that MS has abandoned it? | How complicated is your budget? We have a fairly in depth excel spreadsheet that does the trick for us. Lots of formulas and whatnot for calculating income, outgo, expected and actual expenses, expenses budgeted over time (i.e. planned expenses that are semi-annual or annual) as well as the necessary emergency funds based on expenses. Took me a few hours to initially create and many tweaks over months to get just right but it's reliable and we know we'll never lose support for it. I'd be willing to share it if desired, I'll just have to remove our personal finance figures from it first. |
Sell a stock and buy a new one | It depends on the broker. The one I use (Fidelity) will allow me to buy then sell or sell then buy within 3 days even though the cash isn't settled from the first transaction. But they won't let me buy then sell then buy again with unsettled cash. Of course not waiting for cash to settle makes you vulnerable to a good faith violation. |
Buy home and leverage roommates, or split rent? | what I should think about. If you decide to do this - get everything in writing. Get lease agreements to enforce the business side of the relationship. If they are not comfortable with that much formality, it's probably best not to do it, I'm not saying that you should not do this - but that you need to think about these type of scenarios before committing to a house purchase. |
How does Vanguard determine the optimal asset allocation for their Target Retirement Funds? | While the Vanguard paper is good, it doesn't do a very good job of explaining precisely why each level of stocks or bonds was optimal. If you'd like to read a transparent and quantitative explanation of when and why a a glide path is optimal, I'd suggest the following paper: https://www.betterment.com/resources/how-we-construct-portfolio-allocation-advice/ (Full disclosure - I'm the author). The answer is that the optimal risk level for any given holding period depends upon a combination of: Using these two factors, you construct a risk-averse decision model which chooses the risk level with the best expected average outcome, where it looks only at the median and lower percentile outcomes. This produces an average which is specifically robust to downside risk. The result will look something like this: The exact results will depend on the expected risk and return of the portfolio, and the degree of risk aversion specified. The result is specifically valid for the case where you liquidate all of the portfolio at a specific point in time. For retirement, the glide path needs to be extended to take into account the fact that the portfolio will be liquidated gradually over time, and dynamically take into account the longevity risk of the individual. I can't say precisely why Vanguard's path is how it is. |
Withdrawing cash from investment: take money from underperforming fund? | It looks like the advice the rep is giving is based primarily on the sunk cost fallacy; advice based on a fallacy is poor advice. Bob has recognised this trap and is explicitly avoiding it. It is possible that the advice that the rep is trying to give is that Fund #1 is presently undervalued but, if so, that is a good investment irrespective if Bob has lost money there before or even if he has ever had funds in it. |
How can put options be used to buy shares at a lower price? | If you are looking for a simple formula or buying order / strategy to guarantee a lower buying price, unfortunately this does not exist. Otherwise, all investors would employ this strategy and the financial markets would no longer have an validity (aka arbitrage). Buying any investment contains a certain level of risk (other than US treasuries of course). Having said that, there are many option buying strategies that can employed to help increase your ROR or hedge an existing position. Most of these strategies are based a predicted future direction of a stock on the investor's part. For example, you hold the Ford stock and feel they are releasing their earnings report next week. You feel that they will not meet investors' expectations. You don't want to sell your shares but what you can do is buy put options. If the stock does indeed go down then you make money on your put options. Here is a document on options. It is moderately technical but very good if you want a good introduction on the subject. The strategy that I described above is on pg 33. http://www.m-x.ca/f_publications_en/en.guide.options.pdf |
Is there a legal deadline for when your bank/brokerage has to send your tax forms to you? | I got notice from Charles Schwab that the forms weren't being mailed out until the middle of February because, for some reason, the forms were likely to change and rather than mail them out twice, they mailed them out once. Perhaps some state tax laws took effect (such as two Oregon bills regarding tax rates for higher incomes) and they waited on that. While I haven't gotten my forms mailed to me yet, I did go online and get the electronic copies that allowed me to finish my taxes already. |
Sell a stock and buy a new one | You have to wait for three (business) days. That's the time it takes for the settlement to complete and for the money to get to your account. If you don't wait - brokers will still allow you to buy a new stock, but may limit your ability to sell it until the previous sale is settled. Here's a FAQ from Schwab on the issue. |
How does Robinhood stock broker make money? | Robinhood seems interesting. Some say it's a gimmicky site with a nice UI not an investing or trading platform. From investopedia: 1. For now, the app stays afloat for mainly two reasons. First, the business itself is extremely lean: no physical locations, a small staff, no massive public relations campaigns and only one operating system platform to maintain. Robinhood also generates interest off of unused cash deposits from user accounts according to the Federal Funds rate. 2. Second, venture capitalists such as Index Ventures, Ribbit Capital, Google Ventures, Andreessen Horowitz, Social Leverage,and “many others” have invested more than $16 million in the app. 3. According to Barron’s, Robinhood plans to implement margin trading in 2015, eventually charging 3.5% interest for the service. E*Trade charges 8.44% for accounts under $25,000. Phone assisted trading will also be available at $10 per trade in the future. 4. Originally, Robinhood planned to make money off of order flows – a common tactic used by discount brokerages in the 1990s to generate revenue. According to the company's FAQ, Robinhood backpedaled on the idea because it executes orders through a clearing partner and, as a result, receives little to no payment for order flow. The company is willing to return to its original plan in the future if it receives order flows directly or begins to generate a lot of revenue from them. |
What should I do with my $10K windfall, given these options? | I've been listening to Dave Ramsey a lot lately, and he encourages (encourage might be too light of a word for him) this priority list for budgeting: I would strongly advise you to tackle this list before you start to think about any sizable "fun" spending. If you don't have #1, set that aside first. The options you mentioned: New roof: You should ask yourself "what is the potential cost of not getting a new roof?" If you can save up for it a little at a time, while putting most of the rest of your money to paying off debt, that's what I would do. Unless, of course, there is damage or risk of damage to your house by not doing it now. Then, you need to do the same measurement (of doing the roof now) against the goal of saving three to six months of expenses. Especially in your case, with your mortgage underwater, you want to be sure you are prepared should anything happen (for example, losing a job, and potentially being forced to move for a new job). Cars/student loan: (Refer to #3 above — in other words, yes). |
What would be the signs of a bubble in silver? | The problem with commodities is that they don't produce income. With a stock or bond, even if you never sold it to anyone or it wasn't publicly traded, you know you can collect the money the company makes or collect interest. That's a quantifiable income from the security. By computing the present value of that income (cf. http://blog.ometer.com/2007/08/26/money-math/) you can have at least a rough sense of the value of the stock or bond investment. Commodities, on the other hand, eat income (insurance and storage). Their value comes from their practical uses e.g. in manufacturing (which eventually results in income for someone); and from psychological factors. The psychological factors are inherently unpredictable. Demand due to practical uses should keep up with inflation, since in principle the prices on whatever products you make from the commodity would keep up with inflation. But even here there's a danger, because it may be that over time some popular uses for a given commodity become obsolete. For example this commodity used to be a bigger deal than now, I guess: http://en.wikipedia.org/wiki/Frankincense. The reverse is also possible, that new uses for a commodity drive up demand and prices. To the extent that metals such as silver and gold bounce around wildly (much more so than inflation), I find it hard to believe the bouncing is mostly due to changes in uses of the metals. It seems far more likely that it's due to psychological factors and momentum traders. To me this makes metals a speculative investment, and identifying a bubble in metals is even harder than identifying one in income-producing assets that can more easily be valued. To identify a bubble you have to figure out what will go on in the minds of a horde of other people, and when. It seems safest for individual investors to just assume commodities are always in a bubble and stay away. The one arguable reason to own commodities is to treat them as a random bouncing number, which may enhance returns (as long as you rebalance) even if on average commodities don't make money over inflation. This is what people are saying when they suggest owning a small slice of commodities as part of an asset allocation. If you do this you have to be careful not to expect to make money on the commodities themselves, i.e. they are just something to sell some of (rebalance out of) whenever they've happened to go up a lot. |
Why would you elect to apply a refund to next year's tax bill? | It is a bad deal. It saves the government from processing your refund as a check or an ACH deposit, and lets them keep your money -- money that they overwithheld! -- interest-free for another year. Get it back. :) |
Full-time work + running small side business: Best business structure for taxes? | You should look into an LLC. Its a fairly simple process, and the income simply flows through to your individual return. It will allow you to deduct supplies and other expenses from that income. It should also protect you if someone sues you for doing shoddy work (even if the work was fine), although you would need to consult a lawyer to be sure. For last year, it sounds like your taxes were done wrong. There are very, very few ways that you can end up adding more income and earning less after taxes. I'm tempted to say none, but our tax laws are so complex that I'm sure you can do it somehow. |
How would IRS treat reimbursement in a later year of moving expenses? | I believe moving reimbursement has to be counted as income no matter when you get it. I'd just put it under miscellaneous income with an explanation. |
Is it worth investing in Index Fund, Bond Index Fund and Gold at the same time? | I'd say neither. Index Funds mimic whatever index. Some stocks that are in the index are good investment opportunities, others not so much. I'm guessing the Bond Index Funds do the same. As for Gold... did you notice how much gold has risen lately? Do you think it will keep on rising like that? For which period? (Hint: if your timespan is less than 10 years, you really shouldn't invest). Investing is about buying low, and selling high. Gold is high, don't touch it. If you want to invest in funds, look at 4 or 5 star Morningstar rated funds. My advisors suggest Threadneedle (Lux) US Equities DU - LU0096364046 with a 4 star rating as the best American fund at this time. However, they are not favoring American stocks at this moment... so maybe you should stay away from the US for now. Have you looked at the BRIC (Brazil, Russia, India, China) countries? |
Why do car rental companies prefer/require credit over debit cards? | I am not sure if this is the actual reason or not, but all of the major credit cards (Visa, Mastercard, Amex, Discover) provide damage insurance coverage on car rentals. Debit cards do not usually provide this coverage. So, if you use a credit card, the car company knows it will be able to recover the cost of any damage to the car. Of course, this doesn't explain some of the odd debit card policies out there. For example, Alamo will not let you use a debit card unless you provide proof of round trip travel (like a plane or cruise ticket). But you can use a credit card without having a travel ticket. I'm not sure how having a travel ticket makes debit card users less of a risk, but apparently it does somehow. |
15 year mortgage vs 30 year paid off in 15 | Other people have belabored the point that you will get a better rate on a 15 year mortgage, typically around 1.25 % lower. The lower rate makes the 15 year mortgage financially wiser than paying a 30 year mortgage off in 15 years. So go with the 15 year if your income is stable, you will never lose your job, your appliances never break, your vehicles never need major repairs, the pipes in your house never burst, you and your spouse never get sick, and you have no kids. Or if you do have kids, they happen to have good eyesight, straight teeth, they have no aspirations for college, don't play any expensive sports, and they will never ask for help paying the rent when they get older and move out. But if any of those things are likely possibilities, the 30 year mortgage would give you some flexibility to cover short term cash shortages by reverting to your normal 30 year payment for a month or two. Now, the financially wise may balk at this because you are supposed to have enough cash in reserves to cover stuff like this, and that is good advice. But how many people struggle to maintain those reserves when they buy a new house? Consider putting together spreadsheet and calculating the interest cost difference between the two strategies. How much more will the 30 year mortgage cost you in interest if you pay it off in 15 years? That amount equates to the cost of an insurance policy for dealing with an occasional cash shortage. Do you want to pay thousands in extra interest for that insurance? (it is pretty pricey insurance) One strategy would be to go with the 30 year now, make the extra principal payments to keep you on a 15 year schedule, see how life goes, and refinance to a 15 year mortgage after a couple years if everything goes well and your cash reserves are strong. Unfortunately, rates are likely to rise over the next couple years, which makes this strategy less attractive. If at all possible, go with the 15 year so you lock in these near historic low rates. Consider buying less house or dropping back to the 30 year if you are worried that your cash reserves won't be able to handle life's little surprises. |
If I were to get into a life situation where I would not be able to make regular payments, do lenders typically provide options other than default? | The answer is generally yes. Depending on your circumstances and where you live, you may be able to get help through a federal, state, or lender program that: |
Is giving my girlfriend money for her mortgage closing costs and down payment considered fraud? | you have 2 concerns: the lender and the irs. either way you should be fine the lender just wants to know that you have no legal claim to the property or other compensation. simply signing a gift declaration should clear that up, making this a "gift" from their perspective. they probably have some standard form you can sign. otherwise, just a simple note that says "i, so-and-so, gave whats-er-name x$ on the y of june, 20## as a gift, with no expectation of repayment". then, only way you could get charged with "fraud" is if you seek compensation for this "gift" in the future. even then, the bank would probably have to find out about the compensation and complain pretty strongly to get a prosecutor interested in a small dollar misrepresentation case with little or no provable intent. a bigger concern is the bank being uncomfortable with the future renter also giving a gift. that just "smells weird". and bankers hate anything weird. it probably won't prevent the mortgage from getting approved, but it might delay the underwriters a few days while the wring their hands about it. the irs is a bit more complicated. they tend to be the "heads we win, tails you lose" types. assuming they consider this a gift, then you are fine, since it is under the annual gift exclusion (~14k$ these days); you don't even have to tell them about it. however, if she gives you a large financial gift in the near future, they may decide to interpret those two events as a single transaction turning this into a no interest loan. even then, you should be fine since the irs generally doesn't care about loans under 100k$ with "missing" interest under 1k$/yr. since this is a small loan and interest rates are so low, you have no worries. further irs reading on gift loans: https://www.law.cornell.edu/uscode/text/26/7872 |
Is per diem taxable? | Per-diem is not taxable, if all the conditions are met. Conditions include: You can find this and more in this IRS FAQ document re the per-diem. |
Simple loan with a mortage as collateral | Assuming United States; answer may be different elsewhere. The best instructions I have seen for this were on the webpage of one of the law firms making an organized business out of intra-family loans, but any lawyer who can deal with normal bank loans should be able to help you set this up and get it filed with the appropriate authorities to make it a legally binding mortgage. Shouldn't cost you much in legal time to do it. You will have to charge interest; your lawyer can tell you what the minimum and maximimum interest rates would be where you are. Your interest income will be taxable. The borrower may or may not be able to deduct the interest paid from their taxes. Of course if the borrower has any sense they'll want to get their own lawyer to review the terms of the agreement, and to tell them whether they can deduct it from taxes or not. |
Why is day trading considered riskier than long-term trading? | Short-term, the game is supply/demand and how the various participants react to it at various prices. On longer term, prices start to better reflect the fundamentals. Within something like week to some month or two, if there has not been any unique value affecting news, then interest, options, market maker(s), swing traders and such play bigger part. With intraday, the effects of available liquidity become very pronounced. The market makers have algos that try to guess what type of client they have and they prefer to give high price to large buyer and low price to small buyer. As intraday trader has spreads and commissions big part of their expenses and leverage magnifies those, instead of being able to take advantage of the lower prices, they prefer to stop out after small move against them. In practise this means that when they buy low, that low will soon be the midpoint of the day and tomorrows high etc if they are still holding on. Buy and sell are similar to long call or long put options position. And options are like insurance, they cost you. Also the longer the position is held the more likely it is to end up with someone with ability to test your margin if you're highly leveraged and constantly making your wins from the same source. Risk management is also issue. The leveraged pros trade through a company. Not sure if they're able to open another such company and still open accounts after the inevitable. |
Why is there so much variability on interest rate accounts | I spent some time comparing banks' interest rates until I realized that it didn't actually matter (to me). The only money I keep in checking and savings accounts is money that I'm going to spend shortly or is part of an emergency fund, and in both those cases convenience of liquidity is far more important than small differences in interest (I want to be able to go to a nearby branch, even if traveling, and pull out large sums of money). The majority of our money goes into investment accounts, where it's earning much more than even the best savings account. Most of your 100k would be much better served in a stock/bonds mix. Are standard taxable investment accounts one of those things you can't open? What about if you opened one in your home country? |
Should I use a TSP loan? | I don't have experience with TSP in particular, but they look to be roughly the same as 401(k) loans. If the "G Fund rate" is equal to the yield of government bonds, then your main risk is the risk that yields increase, which means the interest you're paying is less than what you would have earned on the investments. Here are some other things to consider: For any car loan, I would borrow as little as possible with as short a term as possible. To me, the interest savings and additional risks from borrowing from your retirement isn't worth it. |
How do I log a Canadian NR4 form to my income taxes | Income code 09 is dividends, so yes - it is the same as line 1 of the US form 1099-DIV. 1a or 1b however depends on whether the requirements for qualified dividends are met. If they're met - its 1b, if not - 1a. These are treated and taxed differently. See here on what are the qualification requirements. Note that Canada has a tax treaty with the US making Canadian corporations "qualified foreign corporations". |
Optimal way for withdrawing vested company match from my 401k? | Why would you want to withdraw only the company match, and presumably leave your personal contributions sitting in your ex-company's 401k plan? Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over part (or all) of your 401k assets into an IRA, and withdraw the rest for personal expenses. If your personal contributions are in a Roth 401k, roll them over to a Roth IRA, but, as I remember it, company contributions are not part of the Roth 401k and must be rolled over into a Traditional IRA. Perhaps this is why you want to take those in cash to pay for your personal purchase? Also, what is this 30% hit you are talking about? You will owe income tax on the money withdrawn from the 401k (and custodians traditionally withhold 20% and send it to the IRS on your behalf) plus penalty for early withdrawal (which the custodian may also withhold if you ask them), but the tax that you will pay on the money withdrawn will depend on your tax bracket, which may be lower if you are laid off and do not immediately take on a new job. That is, the 30% hit may be on the cash flow, but you may get some of it back as a refund when you file your income tax return. |
Should I scale down my 401k? | IMHO your thinking is spot on. More than likely, you are years away from retirement, like 22 if you retire somewhat early. Until you get close keep it in aggressive growth. Contribute as much as you can and you probably end up with 3 million in today's dollars. Okay so what if you were retiring in a year or two from now, and you have 3M, and have managed your debt well. You have no loans including no mortgage and an nice emergency fund. How much would you need to live? 60 or 70K year would provide roughly the equivalent of 100K salary (no social security tax, no commute, and no need to save for retirement) and you would not have a mortgage. So what you decide to do is move 250K and move it to bonds so you have enough to live off of for the next 3.5 years or so. That is less than 10% of your nest egg. You have 3.5 years to go through some roller coaster time of the market and you can always cherry pick when to replenish the bond fund. Having a 50% allocation for bonds is not very wise. The 80% probably good for people who have little or no savings like less than 250k and retired. I think you are a very bright individual and have some really good money sense. |
Does a restaurant have to pay tax on a discount? | In almost any jurisdiction, the restaurant will pay tax on the amount after the discount. Discounting is just a selective way to reduce prices for particular clients and thus achieve some degree of price discrimination. It's no different in principle to cutting prices for everyone or having a sale or similar. It would be very strange for a tax jurisdiction to work any other way, because businesses would end up being taxed on money they never actually got. While tax systems often have that kind of anomaly in rare cases at the edge of the system, discounting via vouchers is extremely common. For example, here are the rules in the UK. |
How do share dilution scams make money? | For this to work, those who control the dilution must also control their salaries because the only way for them to be paid off when it's the corporation itself selling is to gain access to the proceeds. When a corporation sells newly issued equity, the corporation itself owns the money. To at least have the appearance of propriety, the scammers must be paid those proceeds. Both actions imply that the board is captured by the scammers. There are many corporations that seem to do this even with persistently large market capitalizations. The key difference between this and pump-and-dump is that its a fraudulent group of investors selling in this case instead of the corporation itself. A detailed simple example Corporations are mandated by law to be little oligarchies; although, "republic" is now becoming more appropriate with all of the new shareholder rights. A corporation is controlled at root by the board of directors who are elected by the shareholders. The board has no direct operational control, as that is left to the "king", the CEO; however, the board does control what everyone wants access to: the money. Board members have all sorts of legal qualitative mandates on how to behave, and they've functioned fairly decently efficiently over the long run, but there are definitely some bad apples. Boards are somewhat intransigent since it's difficult to hold board elections, and usually only specific board members are put up for election by a shareholder vote, so a bad one has the potential to really get stuck in there. Once a bad one is in there, they don't care because they know it will be tough to get them out, so they run roughshod over the company's purse. Only the board can take action on major funding such as the CEO's operating budget, board compensation, financing, investment, etc, some with shareholder approval, some without. The corporation itself owns all of those assets, but the board controls them. In this example, they scheme with most likely the top executive, but a rubber stamp top executive could allow a lower rung to scheme with the board, but the board is always constant until the law is changed. Because there's no honor amongst thieves, the board votes which can require some combination of executive and shareholder approval are taken very close together: sell shares, increase salaries to key executive schemers, increase board compensation. The trusting shareholders believe this is in the best interests of the company at large so go along. So the money flows from existing & new shareholders to the corporation now controlled by a malicious board and then finally to the necessary malicious executive and the vital malicious board. |
Short-term robots and long-term investors in the stock market | Consider the price history to be the sum of short term movements and long term movements. If you hold a stock for a long time you will benefit (or lose) from its long term movement. If a sufficiently large and very good short term trader existed he would tend to reduce short term volatility, eventually to nearly zero. At that point, the price would rise gently over the course of the day in line with the long term variation in price. Presumably robot traders will increase the time horizon of their trades when they have exhausted the gains they can make from short term trades. |
How to make money from a downward European market? | Not a day goes by that someone isn't forecasting a collapse or meteoric rise. Have you read Ravi Batra's The Great Depression of 1990? The '90s went on to return an amazing 18.3%/yr compound growth rate for the decade. (The book sells for just over $3 with free Amazon shipping.) In 1987, Elaine Garzarelli predicted the crash. But went years after to produce unremarkable results. Me? I saw that 1987 was up 5% or so year on year (in hindsight , of course), and by just staying invested, I added deposits throughout the year, and saw that 5% return. What crash? Looking back now, it was a tiny blip. You need to be diversified in a way that one segment of the market falling won't ruin you. If you think the world is ending, you should make peace with your loved ones and your God, no investment advice will be of any value. (Nor will gold for that matter.) |
Why do volatility stocks/ETFs (TVIX, VXX, UVXY) trend down in the long-term? | In an attempt to express this complicated fact in lay terms I shall focus exclusively on the most influential factor effecting the seemingly bizarre outcome you have noted, where the price chart of VIX ETFs indicates upwards of a 99% decrease since inception. Other factors include transaction costs and management fees. Some VIX ETFs also provide leveraged returns, describing themselves as "two times VIX" or "three times VIX", etc. Regarding the claim that volatility averages out over time, this is supported by your own chart of the spot VIX index. EDIT It should be noted that (almost) nobody holds VIX ETFs for anything more than a day or two. This will miminise the effects described above. Typical daily volumes of VIX ETFs are in excess of 100% of shares outstanding. In very volatile markets, daily volumes will often exceed 400% of shares outstanding indicating an overwhelming amount of day trading. |
Should I use an NRE or NRO account to transfer money from India to the US? Any reports needed? | Deposits into NRE account can only be done from funds outside India. So your brother cannot deposit into your NRE account. He can deposit in NRO account or directly wire transfer the funds. Both these require some paper work depending on the amount. |
Is it common in the US not to pay medical bills? | While it is not common, it is also not "uncommon." A subtle distinction. If you are poor, you almost certainly get some kind of government assistance (not even talking about Obamacare or Trumpcare, but just general assistance.) If you are middle class or rich, that is where you get hit the most. They seem to realize you "can't get blood from a stone" and don't try to get payment out of poor people. But middle class and rich people, yes it just takes longer but they do hang in there with billing. My own experience is that years and years ago (way before Obamacare) I had a time in the hospital with a lot of tests, but I was poor and sleeping on a relatives floor at the time. I got all the tests I needed, and they took great care of me, and the hospital wrote it off as "charity care." |
Who should pay taxes in my typical case? | Once you turn 18 you should open an account in your own name and transfer the assets there. Currently your mom is the one responsible as far as the IRS cares with respect to taxes as it is her name on the account. The taxes due will be based on your mom's tax rate. As a good child you can reimburse your mom for the taxes that she has to on your behalf. Also legally that money currently belongs to her. Any legal judgement against your mom can claim that money and it is not available for using as an asset by you on credit applications and such. A better solution would have been for your mom to open a custodial account in your name. This way the money is still yours (you just don't have control of it until you turn 18). While probably not an issue here, the transferring of money between you and your mom (and then back) is considered a gift by the IRS. If the account was very well funded then you could run into having to deal with the annual gift limit and lifetime gift exclusion. Based on the clarification that the question is in reference to India: while I don't know the particulars of the law in India my advice of transferring the assets when you turn 18 still remains. The main difference that I would see been India and the US would be the gift tax / exclusions. Unless someone else knows otherwise I would still expect the law in India to see the current account as being the property of the mother. |
APR for a Loan Paid Off Monthly | If your APR is quoted as nominal rate compounded monthly, the APR is 108.6 %. Here is the calculation, (done in Mathematica ). The sum of the discounted future payments (p) are set equal to the present value (pv) of the loan, and solved for the periodic interest rate (r). Details of the effective interest rate calculation can be found here. http://en.wikipedia.org/wiki/Effective_interest_rate#Calculation |
Why would a company like Apple be buying back its own shares? | A Breakdown of Stock Buy Backs has this bottom line on it: Are share buybacks good or bad? As is so often the case in finance, the question may not have a definitive answer. If a stock is undervalued and a buyback truly represents the best possible investment for a company, the buyback - and its effects - can be viewed as a positive sign for shareholders. Watch out, however, if a company is merely using buybacks to prop up ratios, provide short-term relief to an ailing stock price or to get out from under excessive dilution. Read more: http://www.investopedia.com/articles/02/041702.asp#ixzz3ZHdOf2dJ What is the reason that a company like AAPL is buying back its own shares? Offsetting dilution would be my main thought here as many employees may exercise options putting more stock out there that the company buys back stock to balance things. Does it have too much cash and it doesn't know what to do with it? No as it could do dividends if it wanted to give it back to investors. So it is returning the cash back to investors? Not quite. While some investors may get cash from Apple, I'd suspect most shareholders aren't likely to see cash unless they are selling their shares so I wouldn't say yes to this without qualification. At the same time, the treasury shares Apple has can be used to give options to employees or be used in acquisitions for a couple of other purposes. |
Super-generic mutual fund type | You can also create a CD ladder (say 1/3 in a 6 month CD, 1/3 in a 1 year CD, 1/3 in a 2 year CD) with half of your emergency fund money. You always want to leave some of it in a liquid account so you can get at it immediately without any interest penalty. CD's provide higher interest than a savings account. By staggering the lengths of the CD's, you give yourself more options, and can roll them over into CD's with higher rates (since interest rates are soooo low right now) as the CD's mature. |
Why are daily rebalanced inverse/leveraged ETFs bad for long term investing? | Fund rebalancing typically refers to changing the investment mix to stay within the guidelines of the mutual fund objective. For example, lets say a fund is supposed to have at least 20% in bonds. Because of a dramatic increase in stock price and decrease in bond values it finds itself with only 19.9% in bonds at the end of the trading day. The fund manager would sell sufficient equities to reduce its equity holdings and buy more bonds. Rebalancing is not always preferential because it could cause capital gain distribution, typically once per year, without selling the fund. And really any trading within the fun could do the same. In the case you cite the verbiage is confusing. Often times I wonder if the author knows less then the reader. It might also be a bit of a rush to get the article out, and the author did not write correctly. I agree that the ETFs cited are suitable for short term traders. However, that is because, traditionaly, the market has increased in value over the long term. If you bet it will go down over the long term, you are almost certain to lose money. Like you, I cannot figure out how rebalancing makes this suitable only for short term traders. If the ETFs distribute capital gains events much more frequently then once per year, that is worth mentioning, but does not provide a case for short versus long term traders. Secondly, I don't think these funds are doing true rebalancing. They might change investments daily for the most likely profitable outcome, but that really isn't rebalancing. It seems the author is confused. |
Are buyouts always for higher than the market value of a stock? | Can a company not bargain with a dying company for example and buy a falling stock at lower than market value? Of course. If the shareholders agree to it. But why would they, if the market value is higher, agree to sell to someone who offers less? If there's a compelling reason - it can happen. It might happen during a hostile takeover, for example. In the case of buying the company for more than market value, are the stocks bought for significantly more, or slightly more than the current market value? Again, depends on how valuable the shareholders think the company is. If the shareholders think that the company has a potential which has not yet affected the stock price, they'll want a higher premium (and they'd think that, otherwise why would they hold the stock?). How much higher? Depends on the bargaining abilities of the sides. |
How to calculate my real earnings from hourly temp-to-hire moving to salaried employee? | Here's an alternative. There are hundreds, maybe thousands, of contract engineering firms ("job shops") in the United States, probably hundreds in California alone. They are in the business of doing what your "employer" wants you to do, they know how to do it, they have been doing it for decades, working with the biggest, most-established companies in the country. They have forgotten more about providing engineering services to clients, and paying the engineers, than you can learn in a lifetime. Call a few of them. Set up meetings. Budget a few hours for it. You want to talk with the most experienced recruiter in the office, the Old Guy Who Has Been There And Done That. Explain your situation, and tell them that, rather than go through all of the headaches yourself, you want to investigate the possibility of THEM handling all the headaches, for their usual markup of course. (You can probably word this better than I can, but you get the idea.) The shop may or may not be willing to talk about their markup. My personal opinion is that this is perfectly OK. What they make off of you, after your rate is paid, is THEIR business. Also, talk about what you do, and your recommended rate. It would not surprise me to learn that you are currently grossly underpaid. AND, mention that, if the client declines, you're going to be available immediately, and you'd certainly be open to working with them. (You will see this again.) In fact, if they have any current leads that you fit, you would certainly be interested in hearing about them. (They may already have a req from another client, for which you fit, for which the client is willing to pay much more than your current "employer".) If it were me, personally, I'd start with Yoh, Belcan, and maybe TAD Technical. These are three of the oldest and best. I'd also hit up CE Weekly, get a subscription, and find some other shops with offices in your area. Once you have a shop lined up, then ask your "employer" if, rather than you setting up a personal corporation, they'd be willing to work with an established Contract Engineering firm, who does this kind of thing for a living, who does this every day, who has been doing this for decades. Doing this is simpler for everyone, and, by going through an established firm, they avoid having to teach you how to do business with them. They also avoid the risk of having you reclassified by IRS as an employee, which exposes them to all kinds of legal and financial liability. If they say "No", WALK AWAY FROM THEM. Immediately. They've just thrown up a HUGE red flag. This is where the other discussions with the shop come into play. |
Buying a multi-family home to rent part and live in the rest | You are a "strategic" investor, which is to say that you are in the best position to evaluate the deal because you already live there. Others don't have this advantage going in, which is why they might not be inclined to do what you're doing. Your biggest advantage is that you know at least one tenant. In essence, you are your own "tenant" for the top floor You also presumably have a pretty good idea of the neighborhood. These are arguments for owning your own home, although it does get a bit trickier with a second tenant, whom you may not know. Do check credit and references, etc. You might ask the landlord why he wants to sell. Presumably it's because he wants to retire or move, and not a problem with the property. But it does no harm to ask. |
I can make a budget, but how can I get myself to consistently follow my budget? | And remember, there's nobody but you that can do it - so the most important tool here is your determination and persistence. |
Do I have to pay a capital gains tax if I rebuy different stocks? | Yes. As long as the stock is in a taxable account (i.e. not a tax deferred retirement account) you'll pay gain on the profit regardless of subsequent purchases. If the sale is a loss, however, you'll risk delaying the claim for the loss if you repurchase identical shares within 30 days of that sale. This is called a wash sale. |
How can I find out what percentage the publicly traded shares (float) are of the total company? | I think you're looking for the public float: Public float or the unqualified term may also refer to the number of outstanding shares in the hands of public investors as opposed to company officers, directors, or controlling-interest investors. Assuming the insider held shares are not traded, these shares are the publicly traded ones. The float is calculated by subtracting restricted shares from outstanding shares. As mentioned, Treasury stock is probably the most narrow definition of restricted stock (not publicly traded), but shares held by corporate officers or majority investors are often included in the definition as well. In any case, the balance sheet is indeed a good place to start. |
Buy US ETF as foreigner — a bad idea? | A quick update for people finding this thread through Google. With the help of a few awesome Bogleheads, I compiled all the relevant research done into two Wiki articles: This includes comparing US to Irish domiciled ETFs, how to calculate tax withholding leakage and estate tax concerns. Hope you find this useful. |
When are payroll taxes due in the US? | It depends on the size of the payroll, not on the number of employees. Probably you need to file Form 941 quarterly under this scenario. You may or may not need to deposit taxes more frequently. If you must deposit, then you need to do it electronically. I excerpted this from the instructions for Form 941: If your total taxes (line 10) are less than $2,500 for the current quarter or the preceding quarter, and you did not incur a $100,000 next-day deposit obligation during the current quarter. You do not have to make a deposit. To avoid a penalty, you must pay the amount in full with a timely filed return or you must deposit the amount timely. ... If you are not sure your total tax liability for the current quarter will be less than $2,500 (and your liability for the preceding quarter was not less than $2,500), make deposits using the semiweekly or monthly rules so you won't be subject to failure to deposit penalties. If your total taxes (line 10) are $2,500 or more for the current quarter and the preceding quarter. You must make deposits according to your deposit schedule. See section 11 of Pub. 15 (Circular E) for information and rules about federal tax deposits. I would say that probably for two employees, you need to deposit by the 15th of each month for the prior month, but you really need to check the limits above and the deposit schedule in Pub 15 (as referenced above) based on your actual payroll size. Note that if you have a requirement to deposit, that must be done either through EFTPS or by wire-transfer. The former is free but requires registration in advance of your first payment (they snail-mail you a PIN that you need to log-in) and it requires that you get your payment in by the night before. The latter does not incur a charge from the IRS, but your bank will likely charge you a fee. You can do the wire-transfer on the due date, however, so it's handy if don't get into ETFPS in time. This is all for federal. You may also need to deposit for your state, and then you'll need to check the state's rules. |
Does a US LLC owned by a non-resident alien have to pay US taxes if it operates exclusively online? | Since as you say, an LLC is a pass-through entity, you will be making income in the U.S. when you sell to U.S. customers. And so you will need to file the appropriate personal tax forms in the US. As well as potentially in one or more States. The US government does not register LLCs. The various States do. So you'll be dealing with Oregon, Wisconsin, Wyoming, one of those for the LLC registration. You will also need to have a registered agent in the State. That is a big deal since the entire point of forming an LLC is to add a liability shield. You would lose the liability shield by not maintaining the business formalities. Generally nations aim to tax income made in their nation, and many decline to tax income that you've already paid taxes on in another nation. A key exception: If money is taxed by the U.S. it may also be taxed by one of the States. Two States won't tax the same dollar. Registering an LLC in one State does not mean you'll pay state taxes there. Generally States tax income made in their State. It's common to have a Wyoming LLC that never pays a penny of tax in Wyoming. Officially, an LLC doing business in a State it did not form in, must register in that State as a "foreign LLC" even though it's still in the USA. The fee is usually the same as for a domestic LLC. "Doing business" means something more than incidental sales, it means having a presence specifically in the State somehow. It gets complicated quick. If you are thinking of working in someone's app ecosystem like the Apple Store, Google Play, Steam etc. Obviously they want their developers coding, not wrestling with legalities, so some of them make a priority out of clearing and simplifying legal nuisances for you. Find out what they do for you. |
How many days does Bank of America need to clear a bill pay check | This just happened to me with a Wells Fargo Bill Pay check. WF put a stop payment on the check. The money was taken out of my account immediately yet it is going to take 3-5 days to reappear in the account. I question these banking practices. Georgia Bank and Trust Company of GA does not do this. The Bill Pay check is processed just like a hand written check; when the check clears the bank your account is debited. If it is an Electronic Funds Transfer (EFT) then the money does come out of your account immediately, of course. These are acceptable banking practices to me. I will be closing the Wells Fargo account. |
Is a fixed-price natural gas or electricity contract likely to save money? | I have some numbers to share that may help. I've been tracking my home's natural gas consumption in a spreadsheet for years. Much of that time I'd only been interested in the quantity used – to measure my home's efficiency after certain upgrades – but in 2006 I also started tracking the "Gas Supply Charge" costs from my local utility, Enbridge, in Ontario, Canada. My numbers are for the gas commodity only (i.e. excluding delivery and customer charges.) I've never been on a fixed-price contract, so the numbers are supposed to be reflective of market rates. However, the numbers do differ from real "spot prices" because Enbridge estimates gas costs up-front and then applies a "gas cost adjustment" at later dates if their estimate was wrong. Natural gas cost per cubic meter for Chris's home http://img686.imageshack.us/img686/6406/naturalgascosts3priorye.png Since 2006, natural gas prices have been generally falling. The last cost I have on file, from my November 2009 bill, is 12.9 cents per cubic meter – being ~20 cents gas supply rate, less gas cost adjustment of ~7 cents. My average cost over that nearly 4 year period, January 2006 through November 2009, was 38.4 cents per cubic meter. Considering the current 5-year fixed rate I found is about 29 cents per cubic meter, there is a substantial premium to locking in when compared to current market rates. However, one can see that during the last 4 years, market prices did substantially exceed that rate for quite some time. Furthermore, when I last looked at those 5-year fixed rates perhaps a year or more ago, I couldn't find a company charging less than 39 cents per cubic meter. So, contract rates have fallen as well. Consequently, if we are at a natural gas price low and the economy is to recover, I tend to agree with Cart's answer and suggest it could be a good time to consider a fixed-rate contract. But, do your own due diligence and read the fine print if you go for it. UPDATE: In the interest of full disclosure, shortly after I did my own research above, I signed up for my first ever fixed-rate natural gas contract. :-) |
Buy tires and keep car for 12-36 months, or replace car now? | It depends how detailed you want to get in your calculation, but fundamentally, 1K < 25K. On a very basic level, divide the cost (less what you sell it for) by the time you'll have the car for. If you junk it, $1K/12 month = $83/month to buy tires to have a car for a year. If you sell it for $1K, then it become $0/month. (Plus other maintenance, etc..., obviously). If you pay 25K and keep the new car for ten years and sell it for nothing, it becomes roughly $208/month (plus maintenance). If you want to get more accurate, there are a lot of variables you can take into account--time cost of money, financing, maintenance costs of different vehicle types, etc... |
If I believe a stock is going to fall, what options do I have to invest on this? | There are three ways to do this. So far the answers posted have only mentioned two. The three ways are: Selling short means that you borrow stock from your broker and sell it with the intent of buying it back later to repay the loan. As others have noted, this has unlimited potential losses and limited potential gains. Your profit or loss will go $1:$1 with the movement of the price of the stock. Buying a put option gives you the right to sell the stock at a later date on a price that you choose now. You pay a premium to have this right, and if the stock moves against you, you won't exercise your option and will lose the premium. Options move non-linearly with the price of the stock, especially when the expiration is far in the future. They probably are not for a beginner, although they can be powerful if used properly. The third option is a synthetic short position. You form this by simultaneously buying a put option and selling short a call option, both at the same strike price. This has a risk profile that is very much like the selling the stock short, but you can accomplish it entirely with stock options. Because you're both buying an selling, in theory you might even collect a small net premium when you open. You might ask why you'd do this given that you could just sell the stock short, which certainly seems simpler. One reason is that it is not always possible to sell the stock short. Recall that you have to borrow shares from your broker to sell short. When many people want to short the stock, brokers will run out of shares to loan. The stock is then said to be "hard to borrow," which effectively prevents further short selling of the stock. In this case the synthetic short is still potentially possible. |
Typical discount for cash purchase on $1+ million homes? | I don't have a solid data-backed answer, but this is too lengthy for a comment. I've read that on average, about 1-2% is what you can get as a cash discount on a home purchase, all else being equal, but no hard data to back that. In certain situations it makes sense for a cash discount to be much greater than that, for instance, if the seller is in a hurry to close and your cash offer has no inspection clause. Similarly, if a house has been re-listed after a sale fell through you might get a greater cash-discount, or if an owner just over-values the advantages of a cash-offer. Anecdotally, I had a neighbor take a cash offer 5% below asking and they had multiple offers at asking, they took the cash offer so they could close faster (15 days). Also, I've lost out to a cash offer, also at 5% below asking, and they also had a short-closing period and no-inspection, my offer was over asking on that one, so total cash discount > 5%. There can be more volatility in the luxury home market, but I wouldn't guess that changes the cash vs financed evaluation much. Would love to see if anyone finds a good source, but even if they do, an average is only so helpful. |
What does “points” mean in such contexts (stock exchange, I believe)? | What does "points" mean In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out. A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is "X". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily. S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes. |
Can a credit card company raise my rates for making a large payment? | No. That's pretty unlikely. Card issuers typically base your rate on your credit score. Paying down debt reduces your percent of available credit used, and improves your score until you are in the 1-20% range. That's optimum. To this issuer, you are one of a million customers, there's no emotion in this, just numbers to them. For what it's worth, if a card issuer raises your rate, you are permitted to "not accept" the rate, stop using the card for new charges, and pay at the current rate. Of course this doesn't apply to zero interest deals, only to increases to your regular rate. |
Is paying off your mortage a #1 personal finance priority? | Generally, paying down your mortgage is a bad idea. Mortgages have very low interest rates and the interest is tax deductable. If you have a high interest mortgage, or PMI, you might consider it, but otherwise, your money is better off in some sort of index fund. On the other hand, if your choices are paying down a mortgage or blowing your money on hookers and booze, by all means do the mortgage. Typical priorities are: Dave Ramsey has a more detailed plan. |
Is there a good forum where I can discuss individual US stocks? | I've used Wikinvest before and think that's close to what you're looking for - but in Wiki-style rather than forums. Otherwise, I agree with CrimsonX that The Motley Fool is a good place to check out. |
Are PINs always needed for paying with card? | For the first part of your question; Refer to related question Why do some online stores not ask for the 3-digit code on the back of my credit card? The other case of Airport ticket machines, requires the physical presence of card. The assumption is that if you had the card before and after the transaction, it was you who used it for transaction. As the amounts are small its really easy by anyone [merchant, Banks] to write this off. The only way to misuse would be if you lost the card and someone used it. Also these ticket machines would have built in feature where by you cannot buy more than "X" tickets for the day. Ensuring max loss on a stolen card is limited to a small amount. |
How do you translate a per year salary into a part-time per hour job? | There is no fixed formulae, its more of how much you can negotiate Vs how many others are willing to work at a lower cost. Typically in software industry the rates for part time work would be roughly in the range of 1.5 to 2 times that of the full time work for the same job. With the above premise roughly the company would be willing to pay $100,000 for 2000 hrs of Part time work(1), translating into around $50 per hour. How much you actually get would depend on if there is someone else who can work for less say at $30 at hour. (1) The company does not have 2000 hrs of work and hence its engaging part time worker instead of full time at lesser cost. |
Pensions, annuities, and “retirement” | Pension in this instance seems to mean pension income (as opposed to pension pot). This money would be determined by whatever assets are being invested in. It may be fixed, it may be variable. Completely dependant on the underlying investments. An annuity is a product. In simple terms, you hnd over a lump sum of cash and receive an agreed annual income until you die. The underlying investment required to reach that income level is not your concern, it's the provider's worry. So there is a hige mount of security to the retiree in having an annuity. The downside of annuities is that the level of income may be too low for your liking. For instance, £400/£10,000 would mean £400 for every £10,000 given to the provider. That's 4% and would take 25 years to break even (ignoring inflation, opportunity cost of investing yourself). Therefore, the gamble is whether you 'outlive' the deal. You could hand over £50,000 to a provider and drop dead a year later. Your £50k got you, say, £2k and then you popped your clogs. Provider wins. Or you could like 40 years after retiring and then you end up costing the provider £80k. You win. Best way to think of an annuity is a route to guaranteed, agreed income. To secure that guarantee, there's a price to pay - and that is, a lower income rate than you might like. Hope that was the kind of reply you were hoping for. If not, edit your OP and ask again. Chris. PS. The explanation on the link you provided is pretty dire. Very confusing use of the term 'pension' and even if that were better, the explanation is still bad due to vagueness. THis is much better: http://www.bbc.co.uk/news/business-26186361 |
What is a good investment vehicle for introducing kids to investing? | For "real" investing I would usually recommend mutual funds. But if you are trying to teach a kid about investing, I would recommend they choose individual stocks. That will give them a great opportunity to follow the companies they bought in the news. It also gives you an opportunity to sit down with them periodically and discuss their companies performance, economic news, etc. and how those things play into stock prices. |
Pay off car or use money for down payment | Option 2. Selling the car yourself will give you the best value, especially if you can get its full value. This will cost you time, but will return much better return for your money. Also, I would strongly recommend buying a used car from a private owner (not a dealer), rather than buying a new car. For $14,000 in cash you can probably get a car like a 2013 Ford Fusion that has excellent all-wheel drive and winter handling. A new Fusion, loaded, will cost at least $25,000 from a dealer. If you buy a 2013 car outright from a private owner, you will have NO PAYMENTS and can spend that money on investments and build your wealth. |
Are COBRA premiums deductible when self-employed? | http://www.ehow.com/about_4625753_cobra-as-selfemployed-health-insurance.html This link makes it clear... it has to be itemized, and is subject to the > than 7.5% AGI rule. |
collateralized mortgage obligations | I think the definition of overcollateralization on investopedia will answer this question for you. Namely this part: For example, in the case of a mortgage backed security, the principal amount of an issue may be $100 million while the principal value of the mortgages underlying the issue may be equal to $120 million. The bond is packed with more mortgages than the face value indicates. It's effectively sold at a discount to underlying value. |
What is the maximum I can have stored in a traditional 401(k) and a Roth 401(k)? | I've never seen anything in any IRS publication that placed limits on the balance of a 401K, only on what you can contribute (and defer from taxes) each year. The way the IRS 'gets theirs' as it were is on the taxes you have to pay (for a traditional IRA anyway) which would not be insubstantial when you start to figure out the required minimum distribution if the balance was 14Mill.. You're required to take out enough to in theory run the thing out of money by your life expectancy.. The IRS has tables for this stuff to give you the exact numbers, but for the sake of a simple example, their number for someone age 70 (single or with a spouse who is not more than 10 years younger) is 27.4.. If we round that to 28 to make the math nice, then you would be forced to withdraw and pay taxes on around $500,000 per year. (So there would be a hefty amount of taxes to be paid out for sure). So a lot of that $500K a year going to pay taxes on your distributions, but then, considering you only contributed 660,000 pre-tax dollars in the first place, what a wonderful problem to have to deal with. Oh don't throw me in THAT briar patch mr fox! |
How much should I be contributing to my 401k given my employer's contribution? | JoeTapayer has good advice here. I would like to add my notes. If they give a 50% match that means you are getting a 50% return on investment(ROI) immediately. I do not know of a way to get a better guaranteed ROI. Next, when investing you need to determine what kind of investor you are. I would suggest you make yourself more literate in investments, as I suggest to anyone, but there are basic things you want to look for. If your primary worry is loss of your prinicipal, go for Conservative investments. This means that you are willing to accept a reduced expected ROI in exchange for lower volatility(risk of loss of principal). This does not mean you have a 100% safe investment as the last market issues have shown, but in general you are better protected. The fidelity investments should give you some information as to volatility or if they deem the investments conservative. Conservative investments are normally made up of trading bonds, which have the lowest ROI in general but are the most secure. You can also invest in blue chip companies, although stock is inherently riskier. It is pointed out in comments that stocks always outperform bonds in the long term, and this has been true over the last 100 years. I am just suggesting ways you can protect yourself against market downturns. When the market is doing very well bonds will not give you the return your friends are seeing. I am just trying to give you a basic idea of what to look for when you pick your investments, nothing can replace a solid investment adviser and taking the time to educate yourself. |
My investment account is increasingly and significantly underperforming vs. the S&P 500. What should I do? | Around Oct 03 2010 the SPY closed at 113. Today it is trading at 130. After four months, that means that the S&P is up 15% over that particular 4 month period. You said you need something pretty low maintenance, and you are comparing your returns to the S&P 500 (which as @duffbeer703 points out is a good thing to compare against because of its diversification). To kill two birds with one stone, I would sell your fund that you have and take the proceeds and purchase the ETF SPY. SPY trades like a stock but mirrors the S&P 500's performance. It has extremely low fees (as opposed to what I suspect your BlackRock fund has). You can own it in an Etrade or Fidelity or other low cost broker account. Then you will be extremely low maintenance, fully diversified (among stocks) and you don't have to compare your performance against the S&P :) |
Emptying a Roth IRA account | nan |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I'm guessing that you've reached the value limit of a payment that can be made without linking your account to a bank account. While you want privacy, PayPal wants to not be a money launderer. You may need to seek an alternative way to pay for this if you're trying to be private about it. |
What is a “Junk Bond”? | A junk bond is, broadly, a bond with a non-negligible risk of default. ("Bond" ought to be defined elsewhere, but broadly it's a financial instrument you buy from a company or government, where they promise to pay you back the principal and some interest over time, on a particular schedule.) The name "junk" is a bit exaggerated: many of them are issued by respectable and reasonably stable businesses. junk bonds were required to do large leveraged buyouts. This means: the company issued fairly risky, fairly high-yield debt, to buy out equity holders. They have to pay a high rate on the debt because the company's now fairly highly geared (ie has a lot of debt relative to its value) and it may have to pay out a large fraction of its earnings as interest. What is a junk bond and how does it differ from a regular bond? It's only a matter of degree and nomenclature. A bond that has a credit rating below a particular level (eg S&P BBB-) is called junk, or more politely "non-investment grade" or "speculative". It's possible for an existing bond to be reclassified from one side to another, or for a single issuer to have different series some of which are more risky than others. The higher the perceived risk, the more interest the bond must pay offer in order to attract lenders. Why is there higher risk/chance of default? Well, why would a company be considered at higher risk of failing to repay its debt? Basically it comes down to doubt about the company's future earnings being sufficient to repay its debt, which could be for example: |
How smart is it to really be 100% debt free? | The day I paid my last student loan payment and my last car payment was (January 4, 2000) a very happy day for me, being then 100% debt free. It is a very good feeling, especially since I was saving cash as well. It's a great thing to know that no-one "owns" you. Many others here have provided useful information about debt, and I know that paying off your existing loans will improve your credit rating, in case you want to go back into debt (which I did later in 2000, by buying a house). For most people, borrowing money to invest it is complicated (make sure you're not paying more on your borrowed $ than you make on your investment) due to the fact that most investments have risk involved. I would say that being debt-free is a very good goal, and there's a level of freedom it gives you. Just make sure you have your "rainy day" fund building while you're on your way to getting there. |
How much would it cost me to buy one gold futures contract on Comex? | In order to understand how much you might gain or lose from participating in the futures markets, it is important to first understand the different ways in which the slope of the futures markets can be described. In many of the futures markets there is a possibility of somebody buying a commodity at the spot price and selling a futures contract on it. In order to do this they need to hold the commodity in storage. Most commodities cost money to hold in storage, so the futures price will tend to be above the spot price for these commodities. In the case of stock index futures, the holder receives a potential benefit from holding the stocks in an index. If the futures market is upward sloping compared to the spot price, then it can be called normal. If the futures market is usually downward sloping compared to the spot price then it can be called inverted. If the futures market is high enough above the spot price so that more of the commodity gets stored for the future, then the market can be called in contango. If the futures market is below the point where the commodity can be profitably stored for the future, and the market can be called in backwardation. In many of these cases, there is an implicit cost that the buyer of a future pays in order to hold the contract for certainly time. Your question is how much money you make if the price of gold goes up by a specific amount, or how much money you lose if the price of gold goes down by the same specific amount. The problem is, you do not say whether it is the spot price or the futures price which goes up or down. In most cases it is assumed that the change in the futures price will be similar to the change in the spot price of gold. If the spot price of gold goes up by a small amount, then the futures price of gold will go up by a small amount as well. If the futures price of gold goes up by a small amount, this will also drive the spot price of gold up. Even for these small price changes, the expected futures price change in expected spot price change will not be exactly the same. For larger price changes, there will be more of a difference between the expected spot price change in expected future price change. If the price eventually goes up, then the cost of holding the contract will be subtracted from any future gains. If the price eventually goes down, then this holding cost should be added to the losses. If you bought the contract when it was above the spot price, the price will slowly drift toward the spot price, causing you this holding cost. If the price of gold does not change any from the current spot price, then all you are left with is this holding cost. |
First concrete steps for retirement planning when one partner is resistant | I can understand your nervousness being 40 and no retirement savings. Its understandable especially given your parents. Before going further, I would really recommend the books and seminars on Love and Respect. The subject matter is Christian based, but it based upon a lot of secular research from the University of Washington and some other colleges. It sounds like to me, this is more of a relationship issue than a money issue. For the first step I would focus on the positive. The biggest benefit you have is: Your husband is willing to work! Was he lazy, there would be a whole different set of issues. You should thank him for this. More positives are that you don't have any credit card debt, you only have one car payment (not two), and that you are paying additional payments on each. I'd prefer that you had no car payment. But your situation is not horrible. So how do you improve your situation? In my opinion getting your husband on board would be the first priority. Ask him if he would like to get the car paid off as fast as possible, or, building an emergency fund? Pick one of those to focus on, and do it together. Having an emergency fund of 3 to 6 months of expense is a necessary precursor to investing, anyway so you from the limited info in your post you are not ready to pour money into your 401K. Have you ever asked what his vision is for his family financially? Something like: "Honey you care for us so wonderfully, what is your vision for me and our children? Where do you see us in 5, 10 and 20 years?" I cannot stress enough how this is a relationship issue, not a math issue. While the problems manifests themselves in your balance sheet they are only a symptom. Attempting to cure the symptom will likely result in resentment for both of you. There is only one financial author that focuses on relationships and their effect on finances: Dave Ramsey. Pick up a copy of The Total Money Makeover, do something nice for him, and then ask him to read it. If he does, do something else nice for him and then ask him what he thinks. |
What is the equation for an inflation adjusted annuity held in perpetuity? | EDIT: After reading one of the comments on the original question, I realized that there is a much more intuitive way to think about this. If you look at it as a standard PV calculation and hold each of the cashflows constant. Really what's happening is that because of inflation the discount rate isn't the full value of the interest rate. Really the discount rate is only the portion of the interest rate above the inflation rate. Hence in the standard perpetuity PV equation PV = A / r r becomes the interest rate less the inflation rate which gives you PV = A / (i - g). That seems like a much better way to get to the answer than all the machinations I was originally trying. Original Answer: I think I finally figured this out. The general term for this type of system in which the payments increase over time is a gradient series annuity. In this specific example since the payment is increasing by a percentage each period (not a constant rate) this would be considered a geometric gradient series. According to this link the formula for the present value of a geometric gradient series of payments is: Where P is the present value of this series of cashflows. A_1 is the initial payment for period 1 (i.e. the amount you want to withdraw adjusted for inflation). g is the gradient or growth rate of the periodic payment (in this case this is the inflation rate) i is the interest rate n is the number of payments This is almost exactly what I was looking for in my original question. The only problem is this is for a fixed amount of time (i.e. n periods). In order to figure out the formula for a perpetuity we need to find the limit of the right side of this equation as the number of periods (n) approaches infinity. Luckily in this equation n is already well isolated to a single term: (1 + g)^n/(1 + i)^-n}. And since we know that the interest rate, i, has to be greater than the inflation rate, g, the limit of that factor is 0. So after replacing that term with 0 our equation simplifies to the following: Note: I don't do this stuff for a living and honestly don't have a fantastic finance IQ. It's been a while since I've done any calculus or even this much algebra so I may have made an error in the math. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | A lot of these answers are really weak. The expected value is pretty much the answer. You have to also though, especially as many many millions of tickets are purchased--make part of the valuation the odds of the jackpot being split x ways. So about 1 in 290--> the jackpot needs to be a take-home pot of $580 million for the $2 ticket. Assume the average # of winners is about 1.5 so half the time you're going to split the pot, bringing the valuation needed for the same jackpot to be $870 million. It's actually somewhat not common to have split jackpots because the odds are very bad + many people pick 'favourite numbers'. |
Does a US LLC need to file taxes if owned by a foreign citizen? | First, yes, your LLC has to file annual taxes to the US government. All US companies do, regardless of where their owners live. Second, you will also probably be liable to personally file a return in the US and unless the US has a tax treaty with India (which I don't believe it does) you may end up paying taxes on your same income to both countries. Finally, opening a US bank account as a foreign citizen can be very tricky. You need to talk to a US accountant who is familiar with Indian & US laws. |
How can I stop a merchant from charging a credit card processing fee? | You can report the violation to the payment network (i.e., Mastercard or Visa). For instance here is a report form for Visa and here is one for MasterCard. I just found those by googling; there are no doubt other ways of contacting the companies. Needless to say, you shouldn't expect that this will result in an immediate hammer of justice being brought down on the merchant. Given the presence of large-scale fraud schemes, it's unlikely Visa is going to come after every little corner store owner who charges a naughty 50-cent surcharge. It is also unlikely that threatening to do this will scare the merchant enough to get them to drop the fee on your individual transaction. (Many times the cashier will be someone who has no idea how the process actually works, and won't even understand the threat.) However, this is the real solution in that it allows the payment networks to track these violations, and (at least in theory) they could come after the merchant if they notice a lot of violations. |
Is paying off your mortage a #1 personal finance priority? | If you can make enough ROI from the capital you retain by not paying off your mortgage, then why not? I do, I could pay off a significant chunk of mortgage if I wanted but whilst interest rates are low there's little incentive. As for another crash... Well, there's no reason to expect a crash would result in high interest rates, more the opposite, but you should consider what you would or could do if interest rates did jump to 15% for whatever reason. As long as your investments aren't too risky or difficult to liquidate, etc, you could always consider paying off a big chunk then, when it makes sense. |
How to send money across borders physically and inexpensively, but not via cash? | Traveller's cheques. That's exactly what they were intended for. Their usage has dropped a lot since everyone can use ATMs in foreign countries, but they still exist. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | The way you ask this is interesting, it implies (quite correctly) that for many, an annual bill for house insurance, property tax, etc, can turn into an emergency. My answer to the true emergency is a breakage that can't be foreseen (although you have to know the furnace isn't going to last forever) or a medical bill that's not covered (our dental is limited and the Mrs root canal can be $1000 out of pocket) |
Is dividend taxation priced in derivatives? | No. Black Scholes includes a number of variables to calculate the value of the derivative but taxation isn't one of them. Whether you are trading options or futures, the dividend itelf may be part of the equation, but not the tax on said dividend. |
How much time should be spent on Penny Stocks Trading a day? | How long is a piece of string? This will depend on many variables. How many trades will you make in a day? What income would you be expecting to make? What expectancy do you need to achieve? Which markets you will choose to trade? Your first step should be to develop a Trading Plan, then develop your trading rules and your risk management. Then you should back test your strategy and then use a virtual account to practice losing on. Because one thing you will get is many losses. You have to learn to take a loss when the market moves against you. And you need to let your profits run and keep your losses small. A good book to start with is Trade Your Way to Financial Freedom by Van Tharp. It will teach you about Expectancy, Money Management, Risk Management and the Phycology of Trading. Two thing I can recommend are: 1) to look into position and trend trading and other types of short term trading instead of day trading. You would usually place your trades after market close together with your stops and avoid being in front of the screen all day trying to chase the market. You need to take your emotion out of your trading if you want to succeed; 2) don't trade penny stocks, trade commodities, FX or standard stocks, but keep away from penny stocks. Just because you can buy them for a penny does not mean they are cheap. |
Payroll question | That $200 extra that your employer withheld may already have been sent on to the IRS. Depending on the size of the employer, withholdings from payroll taxes (plus employer's share of Social Security and Medicare taxes) might be deposited in the US Treasury within days of being withheld. So, asking the employer to reimburse you, "out of petty cash" so to speak, might not work at all. As JoeTaxpayer says, you could ask that $200 less be withheld as income tax from your pay for the next pay period (is your Federal income tax withholding at least $200 per pay period?), and one way of "forcing" the employer to withhold less is to file a new W-4 form with Human Resources/Payroll, increasing the number of exemptions to more than you are entitled to, and then filing a new W-4 changing your exemptions back to what they are right now once when you have had $200 less withheld. But be careful. Claims for more exemptions than you are entitled to can be problematic, and the IRS might come looking if you suddenly "discover" several extra children for whom you are entitled to claim exemptions. |
Money market account for emergency savings | So long as you have complete, virtually instant access to funds through checks, debit card, or ATM transaction, then yes it would be a better option than a "vanilla" savings account. If it's in a brokerage account that you would need to process a transfer and potentially wait a few days for everything to settle, then I would just keep it in savings. The amount earned in interest isn't worth the extra hassle. A compromise might be to keep a few thousand in a savings account and the rest in a money market. That way you earn some interest and still have instant access to enough funds to cover most emergencies. |
What are the common income tax deductions used by “rich” salaried households? | The $250K and up are not one homogeneous group. The lower end of this group benefits from normal Schedule A itemized deductions, e.g. mortgage interest, property tax, state income tax, and charitable donations. As you mention, 401(k) ($17k employee contribution limit this year), but also things like the dependent care account ($5k limit) and flexible spending account, limited usually up to $2500 in '14. The 529 deposits are limited to the gifting limit, $14K in 2014, but one can gift up to five years' deposits up front. This isn't a tax deduction, but does pull money out of one's estate and lets it grow tax free similar to a Roth IRA. The savings from such accounts is probably in the $15k - $20K range given the 20 or so year lifetime of the account and limited deposits. At the higher end, the folks making the news are those whose income is all considered capital gains. This applies both to hedge fund managers as well as CEOs whose compensation included large blocks of stock. This isn't a tax deduction, but it's how our system works, the taxation of capital gains vs. ordinary income. |
Formula that predicts whether one is better off investing or paying down debt | The formula you are looking for is pretty complicated. It's given here: http://itl.nist.gov/div898/handbook/eda/section3/eda3661.htm You might prefer to let somebody else do the grunt work for you. This page will calculate the probability for you: http://stattrek.com/online-calculator/normal.aspx. In your case, you'd enter mean=.114, standard deviation=.132, and "standard score"= ... oh, you didn't say what you're paying on your debt. Let's say it's 6%, i.e. .06. Note that this page will give you the probability that the actual number will be less than or equal to the "standard score". Enter all that and click the magic button and the probability that the investment will produce less than 6% is ... .34124, or 34%. The handy rule of thumb is that the probability is about 68% that the actual number will be within 1 standard deviation of the mean, 95% that it will be within 2 standard deviations, and 99.7% that it will be within 3. Which isn't exactly what you want because you don't want "within" but "less than". But you could get that by just adding half the difference from 100% for each of the above, i.e. instead of 68-95-99.7 it would be 84-98-99.9. Oh, I missed that in a follow-up comment you say you are paying 4% on a mortgage which you are adjusting to 3% because of tax implications. Probability based on mean and SD you gave of getting less than 3% is 26%. I didn't read the article you cite. I assume the standard deviation given is for the rate of return for one year. If you stretch that over many years, the SD goes down, as many factors tend to even out. So while the probability that money in a given, say, mutual fund will grow by less than 3% in one year is fairly high -- the 25 - 35% we're talking here sounds plausible to me -- the probability that it will grow by an average of less than 3% over a period of 10 or 15 or 20 years is much less. Further Thought There is, of course, no provably-true formula for what makes a reasonable risk. Suppose I offered you an investment that had a 99% chance of showing a $5,000 profit and a 1% chance of a $495,000 loss. Would you take it? I wouldn't. Even though the chance of a loss is small, if it happened, I'd lose everything I have. Is it worth that risk for the modest potential profit? I'd say no. Of course to someone who has a billion dollars, this might be a very reasonable risk. If it fails, oh well, that could really cut in to what he can spend on lunch tomorrow. |
What types of receipts do I need to keep for itemized tax deductions? | I would say to only bother keeping the ones you know you'll use for itemized deductions. This includes any unreimbursed business expenses and vehicle licensing fees. There are a lot of other itemized tax deductions possible, but those are two common ones. Also, keep track of your business mileage (mileage before and after the trip, and commuting doesn't count as "business mileage"). You may also want to keep receipts of all out-of-state purchases if your state is one of those that tries to collect state tax on out-of-state purchases. Ensure your supported charities are 501(c)(3), and they'll give you a receipt at the end of the year. Don't bother keeping fast food or gas receipts (unless they're business expenses). |
Should I accept shares as payment? | For one, the startup doesn't exist yet, so until March I will get nothing on hand, though I have enough reserves to bridge that time. I would not take this deal unless the start-up exists in some form. If it's just not yet profitable, then there's a risk/reward to consider. If it doesn't exist at all, then it cannot make a legal obligation to you and it's not worth taking the deal yet. If everything else is an acceptable risk to you, then you should be asking the other party to create the company and formalize the agreement with you. As regards reserves, if you're really getting paid in shares instead of cash, then you may need them later. Shares in a start-up likely are not easy to sell (if you're allowed to sell them at all), so it may be a while before a paycheck given what you've described. For a second, who pays the tax? This is my first non-university job so I don't exactly know, but usually the employer has to/does pay my taxes and some other stuff from my brutto-income (that's what I understood). If brutto=netto, where is the tax? This I cannot answer for Germany. In the U.S. it would depend in part on how the company is organized. It's likely that some or all of the tax will be deferred until you monetize your shares, but you should get some professional advice on that before you move forward. As an example, it's likely that you'd get taxed (in part or in whole) on what we'd call capital gains (maybe Abgeltungsteuer in German?) that would only be assessed when you sell the shares. For third, shares are a risk. If I or any other in the startup screw really, my pay might be a lot less than expected. Of course, if it works out I'm rich(er). This is the inherent risk of a start-up, so there's no getting around the fact that there's a chance that the business may fail and your shares become worthless. Up to you if you think the risk is acceptable. Where you can mitigate risk is in ensuring that there's a well-written and enforceable set of documents that define what rights go with the shares, who controls the company, how profits will be distributed, etc. Don't do this by spoken agreement only. Get it all written down, and then get it checked by a lawyer representing your interests. |
Calculating required rate of return for an income-generating savings account | Line one shows your 1M, a return with a given rate, and year end withdrawal starting at 25,000. So Line 2 starts with that balance, applies the rate again, and shows the higher withdrawal, by 3%/yr. In Column one, I show the cumulative effect of the 3% inflation, and the last number in this column is the final balance (903K) but divided by the cumulative inflation. To summarize - if you simply get the return of inflation, and start by spending just that amount, you'll find that after 20 years, you have half your real value. The 1.029 is a trial and error method, as I don't know how a finance calculator would handle such a payment flow. I can load the sheet somewhere if you'd like. Note: This is not exactly what the OP was looking for. If the concept is useful, I'll let it stand. If not, downvotes are welcome and I'll delete. |
Risk to Reward Ratio Calculation | If you plan to take profit at $1.00 then your profit will be $40. Then, if you set your stop at $0.88 then your loss if you get stopped will be $20. So your Reward : Risk = 2:1. Note, that this does not take into account brokerage in and out and any slippage from the price gapping past your stop loss. |
Why is the fractional-reserve banking not a Ponzi scheme? | You are forgetting one crucial point regarding the money supply. The US Federal Reserve increases the money supply, meaning some of the money is not really loaned, it just appears out of nowhere. At first glance this seems even worse: over the short term, the Fed changes the money supply to help the economy in whatever way it sees fit. But over the long term, the money supply increases to reflect economic growth. As new technology is introduced, more can be accomplished with the same labor and resources, and thus the money supply needs to be increased. Money is really just a convenient replacement for the barter system, so if there are more things to barter "for" (goods and services) then there should also be more things to barter "with" (money). Also keep in mind inflation. The cost of goods and services goes up over time due to the inflation of currency, and so the money supply must also be increased so that those goods and services do not artificially increase in value, which would be very bad. |
How should I handle taxes for Minecraft server donations? | Technically, this is considered "income" for you, and is actually not considered a "donation" for your donors, but is instead a "gift" (not tax-deductible for your donors). So, you are technically required to report it, and there is a pretty significant audit trail that can be followed to prove you made that money. I don't know if PayPal is required to file 1099s for payments received, but if you've ever received such a document, so has the IRS, and they'll match it to the income you claimed and see a discrepancy, triggering an audit. Depending on the amount that it affects your taxes (it can be significant; if you have a $50k/yr day job, you'd owe the government 25 cents on every dollar donated), they can let it slide, they may simply dock your next return, or they may come after you for interest and penalties or even charge you with criminal tax fraud if they could prove you maliciously attempted to conceal this revenue. Now, if you already itemize using a Schedule A, then you can erase this income by deducting the costs of the server, not to exceed the amount of the donations. The best you can do is offset it; you cannot use this deduction to reduce taxable income from other sources. Also, you must itemize; you can't take your standard deduction, and with a maximum possible deduction of the actual costs of running the server ($1500, IF you receive enough donations to fully pay for it) compared to one person's standard deduction ($5800), you'll want to take the standard deduction if you don't have other significant deductions (medical expenses, mortgage interest/property taxes, etc). If you were charging users a monthly fee for use of the server, then you've basically created a de facto sole proprietorship, and you would still have to count the fees as income, but could then deduct the full cost of running the server. You'd fill out a Schedule C listing the revenue and expenses, and back them up with statements from your ISP/hosting company and from PayPal. Now, this would apply if you were running the server with the primary goal of making a regular profit; Schedule C cannot be used for income from a "hobby", undertaken primarily for enjoyment and where a few bucks in revenue is gravy. Whether you think you can get away with that in your current situation is your prerogative; I don't think you would, given that the donations are solicited and optional, and thus there is no expectation of ever turning a profit on this game server. |
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