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What to do with an expensive, upside-down car loan? | If you can't sell it, refinance the bugger. Even if you can knock the interest rate down to 8% and take out a 3-year loan, you'll save about $100 per month. Or really kill the payment (but pay more interest) by taking out another 6-year. A 6-year at 9% on $12k is only $215/month. My credit union routinely advertises specials on car loans. It shouldn't be difficult to get out of the usurious loan you have now. As for others' advice about getting another job, having been a PhD student I hesiate to suggest that you get another one, because your job is probably your life right now. But can your wife (or even you) start a blog on a subject that interests you? A few posts a week add up over time, and pretty soon you have a real asset that can be another basket to put your eggs in. |
I spend too much money. How can I get on the path to a frugal lifestyle? | As others have said, doing a monthly budget is a great idea. I tried the tracking expenses method for years and it got me nowhere, I think for these reasons: If budgeting isn't your cup of tea, try the "pay yourself first" method. Here, as soon as you get a paycheck take some substantial portion immediately and use it to pay down debt, or put it in savings (if you have no debt). Doing this will force you to spend less money on impulse items, and force you to really watch your spending. If you take this option, be absolutely sure you don't have any open credit accounts, or you'll just use them to make up the difference when you find yourself broke in the middle of the month. The overall key here is to get yourself into a long term mind set. Always ask yourself things like "Am I going to care that I didn't have this in 10 years? 5 years? 2 months? 2 days even? And ask yourself things like "Would I perfer this now, or this later plus being 100% debt free, and not having to worry if I have a steady paycheck". I think what finally kicked my butt and made me realize I needed a long term mind set was reading The Millionaire Next Door by Tom Stanley. It made me realize that the rich get rich by constantly thinking in the long term, and therefore being more frugal, not by "leveraging" debt on real estate or something like 90% of the other books out there tell you. |
Are these really bond yields? | that would imply that a 30Y US Treasury bond only yields 2.78%, which is nonsensically low. Those are annualized yields. It would be more precise to say that "a 30Y US Treasury bond yields 2.78% per year (annualized) over 30 years", but that terminology is implied in bond markets. So if you invest $1,000 in a 30-year T-bond, you will earn roughly 2.78% in interest per year. Also note that yield is calculated as if it compounded, meaning that investing in a 30-year T-bind will give you a return that is equivalent to putting it in a savings account that earns 1.39% interest (half of 2.78%) every 6 months and compounds, meaning you earn interest on top of interest. The trade-off for these low yields is you have virtually no default risk. Unlike a company that could go bankrupt and not pay back the bond, the US Government is virtually certain to pay off these bonds because it can print or borrow more money to pay off the debts. In addition, bonds in general (and especially treasuries) have very low market risk, meaning that their value fluctuates much less that equities, even indicies. S&P 500 indices may move anywhere between -40% and 50% in any given year, while T-bonds' range of movement is much lower, between -10% and 30% historically). |
Understanding stock market terminology | One of the most useful ways to depict Open, High, Low, Close, and Volume is with a Candlestick Chart. I like to use the following options from Stockcharts.com: http://stockcharts.com/h-sc/ui?s=SPY&p=D&yr=0&mn=3&dy=0&id=p57211761385 |
incorrect printed information on check stock | Even where national law might allow such a practice, the law in an individual province or state (either for issuing or receiving bank) might not; or if that does then the receiving bank may have its own regulations or compliance practice which may not permit them to accept an altered cheque. In any case, printed numbers are usually machine-readable, and a corrected cheque would not be. The question needs a specific answer which addresses the specific circumstances involved (which are not stated, at the time of writing this), but for the general question “Should I alter a printed cheque?” the answer must be no. Cheque numbers are used for identification of the cheque. In many cases, there is no verification of uniqueness and it would be perfectly acceptable simply to use cheques with duplicate numbers: a cheque is merely an order to the bank to make a payment. But you would not be able to identify a particular payment on your statement, and neither would the issuing bank if you wanted one stopped. Where the number is verified as unique, then clearing the payment may be refused or at best delayed in order to be queried. Making an obvious amendment to a cheque’s details is likely to raise a red flag. The receiving bank would not be able to tell if you did it, or the payee; they would not know why. They may suspect that it was done in order to render the cheque unidentifiable [even though the opposite is in fact the case] and refuse to accept it. They may refuse to accept it because it could not be read automatically. Any refusal would sour your relationship with your payees. Presumably your printing house (or your bank, if they printed them) has made the error: raise it with them and have them reprint the batch. Ask your bank what to do with the incorrect cheques: they may want them returned to the bank, or they may be happy for you to keep (and even use) them. If the latter, I suggest you shred them. |
Who performs the blocking on a Visa card? | There are, in fact, two balances kept for your account by most banks that have to comply with common convenience banking laws. The first is your actual balance; it is simply the sum total of all deposits and withdrawals that have cleared the account; that is, both your bank and the bank from which the deposit came or to which the payment will go have exchanged necessary proof of authorization from the payor, and have confirmed with each other that the money has actually been debited from the account of the payor, transferred between the banks and credited to the account of the payee. The second balance is the "available balance". This is the actual balance, plus any amount that the bank is "floating" you while a deposit clears, minus any amount that the bank has received notice of that you may have just authorized, but for which either full proof of authorization or the definite amount (or both) have not been confirmed. This is what's happening here. Your bank received notice that you intended to pay the train company $X. They put an "authorization hold" on that $X, deducting it from your available balance but not your actual balance. The bank then, for whatever reason, declined to process the actual transaction (insufficient funds, suspicion of theft/fraud), but kept the hold in place in case the transaction was re-attempted. Holds for debit purchases usually expire between 1 and 5 days after being placed if the hold is not subsequently "settled" by the merchant providing definite proof of amount and authorization before that time. The expiration time mainly depends on the policy of the bank holding your account. Holds can remain in place as long as thirty days for certain accounts or types of payment, again depending on bank policy. In certain circumstances, the bank can remove a hold on request. But it is the bank, and not the merchant, that you must contact to remove a hold or even inquire about one. |
Should I Purchase Health Insurance Through My S-Corp | The answer seems to depend on where you live. Perhaps you already found this, but the summary from the IRS is: The insurance laws in some states do not allow a corporation to purchase group health insurance when the corporation only has one employee. Therefore, if the shareholder was the sole corporate employee, the shareholder had to purchase his health insurance in his own name. The IRS issued Notice 2008-1, which ruled that under certain situations the shareholder would be allowed an above-the-line deduction even if the health insurance policy was purchased in the name of the shareholder. Notice 2008-1 provided four examples, including three examples in which the shareholder purchased the health insurance and one in which the S corporation purchased the health insurance. Notice 2008-1 states that if the shareholder purchased the health insurance in his own name and paid for it with his own funds, the shareholder would not be allowed an above-the-line deduction. On the other hand, if the shareholder purchased the health insurance in his own name but the S corporation either directly paid for the health insurance or reimbursed the shareholder for the health insurance and also included the premium payment in the shareholder’s W-2, the shareholder would be allowed an above-the-line deduction. The bottom line is that in order for a shareholder to claim an above-the-line deduction, the health insurance premiums must ultimately be paid by the S corporation and must be reported as taxable compensation in the shareholder’s W-2. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporation-Compensation-and-Medical-Insurance-Issues I understand this to mean that you can only get the deduction in your case (having purchased it in your own name) if your state does not allow your S-Corp to purchase a group health plan because you only have one employee. (I don't know specifically if Illinois fits that description or not.) In addition, there are rules about reporting health insurance premiums for taxes for S-Corp share members that you should also check. Personally, I think that it's complicated enough that advice from a CPA or other tax advisor specific to your situation would be worth the cost. |
What is a “retail revolving account,” and does it improve my credit score? | In the other question, the OP had posted a screenshot (circa 2010) from Transunion with suggestions on how to improve the OP's credit score. One of these suggestions was to obtain "retail revolving accounts." By this, they are referring to credit accounts from a particular retail store. Stores have been offering credit accounts for many years, and today, this usually takes the form of a store credit card. The credit card does not have the Visa or MasterCard logo on it, and is only valid at that particular store. (For example, Target has their own credit card that only works at Target stores.) The "revolving" part simply means that it is an open account that you can continue to make new charges and pay off, as opposed to a fixed retail financing loan (such as you might get at a high-end furniture store, where you obtain a loan for a single piece of furniture, and when it is paid off, the account is closed). The formula for credit scores are proprietary secrets. However, I haven't read anything that indicates that a store credit card helps your credit score more than a standard credit card. I suspect that Transunion was offering this tip in an attempt to give the consumer more ideas of how to add credit cards to their account that the consumer might not have thought of. But it is possible that buried deep in the credit score formula, there is something in there that gives you a higher score if you have a store credit card. As an aside, the OP in the other question had a credit score of 766 and was trying to make it higher. In my opinion, this is pointless. Remember that the financial services industry has an incentive to sell you as much debt as possible, and so all of their advice will point to you getting more credit accounts and getting more in debt. |
How to process IRS check as a non-resident? | I suspect @SpehroPefhany is correct and that your bank will cash a check from the US Department of the Treasury. Especially since they're the same ones who guarantee the U.S. Dollar. They may hold the funds until the check clears, but I think you'll have good luck going through your bank. Of course, fees and exchange rate are a factor. Consider browsing the IRS and US Treasury Department websites for suggestions/FAQs. I suggest you line up a way to cash it, and make sure there's enough left after fees and exchange rate and postage to get the check that the whole process is worth it, all before you ask it to be shipped to you. If there's no way to do it through your bank, through a money exchange business (those at the airport come to mind) or through your government (postal bank?), and the check is enough that you're willing to go through some trouble, then you should look into assigning power of attorney for this purpose. I don't know if it is possible, but it might be worth looking into. Look for US based banks in your area. |
Professional investment planning for small net-worth individual in bearish market | You're going to have a hard time finding a legit investment planner that is willing to do things like take short-term positions in shorts, etc for a small investor. Doing so would put them at risk of getting sued by you for mismanagement and losing their license or affiliation with industry associations. |
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere? | The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks). |
Why is the bid-ask spread considered a cost? | As an aside, on most securities with a spread of the minimum tick, there would be no bid ask spread if so-called "locked markets", where the price of the best bid on one exchange is equal to the price of the best ask on another, were permitted. It is currently forbidden for a security to have posted orders having the same price for both bid and ask even though they're on different exchanges. Option spreads would narrow as well as a result. |
Faster degree with debt or slower degree with no debt? | Basically do some math on the 2 schools. Let's say you know it will take 4 years if you go the cheaper route, at $8k/yr, plus the $300/month, total cost: $46,400. If you (for these purposes) do not have to pay back new loans until school is completed, (and depending on the rate of those loans), you would need approx $6k/yr in loans, plus the same costs ($300/month + $8k/yr to cover the other part of tuition). Let's say the expensive school takes 3 years to complete, which means you're out of pocket $34,800 and in debt an additional $18,000, totaling $52,800. This means that to make the 2nd school worth it (assuming your rates don't kill you, etc) you should have an increased earning potential of at least $6,400/yr after you get your degree. If you can finish in 2 years, your costs are: $23,200 + $12k, and you don't even have to change your earning potential to come out ahead. Other factors to consider are: If you aren't following any of the math, or want to post more information, just comment back to me, and I'll try to explain further. Best of luck! |
Looking to buy a property that's 12-14x my income. How can it be done? | You need a cosigner. Someone prepared to repay the mortgager if you should fail to. Needless to say this is going to have to be someone who knows you and trusts you very much. One way is to find someone prepared to share a house with you. Buy a bigger house than you would otherwise need. You would own half each, and the sharing agreement would specify that if one of you defaulted on their payments the other would get a larger share according to how much extra they end up paying. The other way is to find a silent partner, who doesn't live there. They put up no money unless you actually default. They would almost certainly have to be part owners, but you can structure the agreement so that you end up with the whole house if you succeed in paying off the mortgage, or miss no payments until you sell. Parents sometimes do this for their kids. |
What gives non-dividend stocks value to purchasers? [duplicate] | Yes, I agree with you. Saying that the value of the stock will grow as the company grows and acquires more assets ... I don't see why. Okay, I'm a nice guy and I want to see other people do well, but what do I care how much money they're making if they're not giving any of it to ME? Frankly I think it's like people who buy commemorative plates or beanie babies or other "collectibles" as an investment. As long as others are also buying them as an investment, and buying and reselling at a profit, the value will continue to go up. But one day people say, Wait, is this little stuffed toy really worth $10,000? and the balloon bursts. Confer Dutch tulips: http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/ As I see it, what gives a non-dividend-paying stock value is mostly the expectation that at some time in the future it will pay dividends. This is especially true of new start-up companies. As you mentioned, there's also the possibility of a takeover. It wouldn't have to be a hostile takeover, any takeover would do. At that point the buying company either buys the stock or exchanges it for shares of their own. In the first case you now have cash for your investment and in the second case you now have stock in a dividend-paying company -- or in another non-dividend-paying company and you start the cycle over. |
Where can I find historical ratios of international stock indexes? | I found a possible data source. It offers fundamentals i.e. the accounting ratios you listed (P/E, dividend yield, price/book) for international stock indexes. International equity indices based on EAFE definitions are maintained by Professor French of French-Fama fame, at Dartmouth's Tuck Business School website. Specifics of methodology, and countries covered is available here. MSCI is the data source. Historical time interval for most countries is from 1975 onward. (Singapore was one of the countries included). Obtaining historical ratios for international stock indices is not easily found for free. Your question didn't specify free though. If that is not a constraint, you may wish to check the MSCI Barra international stock indices also. |
How to fill the IRS Offer In Compromise with an underwater asset? | You're supposed to be filling form 433-A. Vehicles are on line 18. You will fill there the current fair value of the car and the current balance on the loans. The last column is "equity", which in your case will indeed be a negative number. The "value" is what the car is worth. The "equity" is what the car is worth to you. IRS uses the "equity" value to calculate your solvency. Any time you fill a form to the IRS - read the instructions carefully, for each line and line. If in doubt - talk to a professional licensed in your state. I'm not a professional, and this is not a tax advice. |
Are there index tracking funds that avoid the “buy high - sell low” problem? | In a cap-weighted fund, the fund itself isn't buying or selling at all (except to support redemptions or purchases of the fund). As the value of a stock in the index goes up, then its value in the fund goes up naturally. This is the advantage of a cap-weighted fund, that it doesn't have to trade (buy and sell), it just sits on the stocks. That makes a cap-weighted fund inexpensive (low trading costs) and tax-efficient (doesn't trigger capital gains due to sales). The buying high and selling low referred to by "fundamental indexation" advocates like Wisdom Tree is buying high and selling low on the part of the investor. That is, when you purchase the market-cap-weighted fund, at that time that you purchase, you will spend more on the higher-priced stocks, just because they account for more of the value of the fund, and less money goes to the cheaper stocks which account for less of the value of the fund. In the prospectus for a fund they should tell you which index they use, and if the prospectus doesn't describe the weighting of the index, you could do a web search for the index name and find out how that index is constructed. A market-cap-weighted fund is the standard kind of weighting which is what you get if you buy the stocks in the index and then hold them without buying or selling. Most of the famous indexes (e.g. S&P500) are cap-weighted, with the notable exception of the Dow Jones Industrial Average which is "price-weighted" http://en.wikipedia.org/wiki/Price-weighted_index. Price-weighting is just an archaic tradition, not something one would use for a new index design today. A fund weighted by "fundamentals" or equal-weighted, rather than cap-weighted, is effectively doing a kind of rebalancing, selling what's gone up to buy more of what's gone down. Rather than buying an exotic fund, you could get a similar effect by buying a balanced fund (one that mixes stocks and bonds). Then when stocks go up, your fund would sell them and buy bonds, and the fund would sell the most of the highest-market-cap stocks that make up more of the index. And vice versa of course. But the fundamental-weighted funds are fine, the more important considerations include your stocks vs. bonds percentages (asset allocation) and whether you make irrational trades instead of sticking to a plan. |
How decreasing the prime interest rate helps to offset decreasing oil prices | You may be missing how countries like Canada may have oil be more of the GDP than countries like the US. In Canada, the lower oil prices may mean more of an economic slowdown with oil companies laying off staff, canceling projects and some companies probably going under as some provinces like Alberta are highly dependent on oil prices to drive most of the economy. In contrast, the US isn't quite as rich in Energy sources and thus may not have the same issues would be my guess. Context matters here. If the rate change helps everybody, doesn't that include the oil producing companies? I'd like to think so using basic logic. What if the main reason for lowering rates was the economic fallout of the decrease in oil prices? Consider that the there would be the question of, "Why do this now?" that has to be answered and the only main change is lower oil prices on a macroeconomic level. |
First Time Home Buyers - Down Payment, PMI and Points | 1 - For FHA loans PMI is required for mortages where there is not at least 20% equity. Bank Financed Non-FHA loans may have other standards. If you are getting an FHA loan ,if possible put down 20% so that you do not have to pay PMI. That said your PMI costs should be reduced by the size of your down payment since the PMI covers the difference between your equity value (Based on the appraisal at time of purchase) and 20% equity value of the home. So if you buy a home for 425k(assuming 100% appraisal price) 20% equity would be 85k. So if you put 10% down you would be paying PMI until you accrue an addition 42500 in equity. And you will be paying PMI on that for about 12 years(typical on 30 year mortgage) or until you refinance(having home appraised at higher value than purchase price where you would have 20% equity). There are ways to get out of PMI early but few banks are willing to help you through the hoops unless you refinance(and pay more closing costs). 2 - Different banks offer better rates or other benefits for paying points. We paid $300 for a 1.5% reduction in our interest rate (less than 1%) but it was called a point. We were offered a few other points (.25% for 2500 and an one time on demand interest rate adjustment for ~3k) but declined but they may make more sense on a 425k home than our more modest one. You can talk to a banker about this now, get preapproved(which helps with getting offers accepted sometimes), and find out more details about the mortgage they will offer you. This meeting should be free(I would say will but some bank would charge just to prove me wrong) and help answer your questions more authoritatively than anyone here can. 3 - The costs will come out of your down payment. So if you put down 42.5k down your costs will come out of that. So you will probably end up with 30~35k being applied towards your purchase price with the rest going for costs. You can tell the banker you want to put 10% towards the price and the banker will give you a down payment probably around 50k to cover costs etc. (My figures are hopefully intentionally high better to find out that it will cost less than my guesstimate than get your hopes up just to find out the costs are higher than expected.) |
Beginning investment | The advice I have is short and sweet. Be an investor, not a speculator. Adopt the philosophy of Warren Buffet which is the 'buy and hold' philosophy. Avoid individual stocks and buy mutual funds or ETFs. Pick something that pays dividends and reinvest those dividends. Don't become a speculator, meaning avoid the 'buy low, sell high' philosophy. EDIT:For some reason I cannot add a comment, so I am putting my response here. @jad The 'buy low, sell high' approach makes money for the stock broker, not necessarily you. As we learn in the movie Trading Places, each buy or sell creates a commission for the broker. It is those commission expenses that eat away at your nestegg. Just don't sell. If a security is trading at $10 a share and pays $0.25 a share each quarter then you are getting 10% ROI if you buy that security (and if it continues to pay $0.25 a share each quarter). If the price goes up then the ROI for new buyers will go down, but your ROI will still be the same. You will continue to get 10% for as long as you hold that security. A mutual fund buys the individual stocks for you. The value of the fund is only calculated at the end of the day. An ETF is like a mutual fund but the value of the ETF is calculated moment by moment. |
Should I cancel an existing credit card so I can open another that has rewards? | You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth. |
How can the Samsung Upgrade Programme offer 0% APR? | The financing is built into the price. I do not have hard facts, but I strongly suspect that very few people buy brand-new smartphones at full price upfront. Most pay a monthly installment to the carrier or retailer equal to 1/24 of the full price, which in effect is "0% financing for 2 years". Samsung might be able to advertise a lower retail price and then offer financing at some rate of interest, but from a marketing standpoint, offering "0%" financing makes it feel like you're getting "free money", when in fact it's built into the overall price. Which sounds better, buying an $840 phone with 0% financing for two years or buying an $800 phone at 4.85% APR for two years (both have a $35 monthly payment)? |
What does it mean if “IPOs - normally are sold with an `underwriting discount` (a built in commission)” | When an IPO happens, the buyers pay some price (let's say $20 per share) and the seller (the company) receives a different price ($18.60). Who paid the commission? Well, the commission caused a spread between buyer and seller. It doesn't matter who technically pays the commission because it costs both parties. In an IPO, the company technically pays the commission, but they use buyers' money to do it and the buyer must pay more than he/she would if there was no commission. The same thing happens when you buy a home. Technically the seller pays both realtors' commissions but it came from money the buyer gave the seller and the commissions pushed up the price, so didn't the buyer pay the commission? They both did. The second paragraph suggests that if the investment bankers act as a simple broker, buying public securities instead of newly issued shares for their clients, then the commissions will be much lower. Obviously. I wonder if this is really the right interpretation, though, as no broker charges 4% to a large client for this service. I would need more context to be sure that's what's meant. The gyst is that IPOs generate a lot of money for the investment bankers who act as intermediaries. If you are participating in the transaction, that money is in some way coming out of your pocket, even if it doesn't show up as a "brokerage fee" on your statement. |
Negative interest rates and search for yield | Can it be so that these low-interest rates cause investors to take greater risk to get a decent return? With interest rates being as low as they are, there is little to no risk in banking; especially after Dodd-Frank. "Risk" is just a fancy word for "Will I make money in the near/ long future." No one knows what the actual risk is (unless you can see into the future.) But there are ways to mitigate it. So, arguably, the best way to make money is the stock market, not in banking. There is a great misallocation of resources which at some point will show itself and cause tremendous losses, even maybe cause a new financial crisis? A financial crisis is backed on a believed-to-be strong investment that goes belly-up. "Tremendous Losses" is a rather grand term with no merit. Banks are not purposely keeping interest rates low to cause a financial crisis. As the central banks have kept interest rates extremely low for a decade, even negative, this affects how much we save and borrow. The biggest point here is to know one thing: bonds. Bonds affect all things from municipalities, construction, to pensions. If interest rates increased currently, the current rate of bonds would drop vastly and actually cause a financial crisis (in the U.S.) due to millions of older persons relying on bonds as sources of income. |
What happens to people without any retirement savings? | This is a good question and you seemed troubled by this and this person's choices in life. And that is the rub, they are choices. They know how to make them, they know the consequences, and they know how to work around them. Its a skill you probably don't have (and don't want to have). In the end they will survive. If you go to a fast food store in a popular retirement location you will see plenty of elderly people working. They might live in low income housing, receive some financial assistance, and utilize other charities such a food banks. They might depend on family and friends. There is also the ugly, it is not a fairy tale that some supplement their diets with pet food. There is of course social security. The amount is very low for most workers, but the amount is almost inconsequential. They would spend it all anyway and still be short despite the predictability of the income and a time frame with predictable expenses. Budgeting is a skill. So I have a friend that deals with this himself, and is helping an elder relation. He and his wife provide some help, but when it started there was a endless stream of requests. His policy now is: No more help unless he works out a budget with the person requesting help. I've used his ideas myself, and by using this it becomes clear on who is in actual need and who is just looking for the next handout. You can feel good about yourself for helping an actual needy person or guiltless say no. |
What happens if I get approved for financing, but don't make the purchase? | Nothing will happen. It will not affect your credit score. You are not in trouble. :) Assuming that you didn't already agree to a purchase contract, you are not obligated to purchase simply because you had a pre-approval credit check done. However, even if you did, since they aren't shipping yet, you could probably cancel. If you are in doubt, talk to customer service to ensure that they aren't planning on shipping one to you. They did check your credit report (known as a hard pull), and this does temporarily affect your credit score. However, it affects it the same whether you complete the purchase or not. If you have another credit check done with another seller, it will result in another hard pull, affecting your credit score a little more. But I wouldn't worry about a few hard pulls if you need to do some shopping. Just don't go overboard, and you'll be fine. |
Sell or keep rental Property? | How is the current mortgage payment broken out? I have a mortgage on a rental property with a payment of $775, but $600 is principal. If I were at breakeven on a sale or a bit underwater, I'd be better off just holding still, the tenant paying the loan down over $7000/year. You question is a good one, but a good answer would require more details. A bank may not agree to a short sale on an investment property, especially since there's a second property to go after. I'm not making a judgement, just saying, it's not a slam-dunk to just short sell it. |
Is leveraging notoriety to raise stock prices illegal in the US? | There are obviously lots of complexities here, and there are rules against price or market manipulation that are somewhat interpretive due to the rules' inclusion of the manipulator's intent, but: Generally speaking, you can publicly promote the value of a company whose stock you own provided that you: Now, if you extol the value of a company publicly, and sell it immediately thereafter, "pump and dump," the regulators might suggest that your actions imply that you didn't believe it was so wonderful, and were misleading the public to move the price. That said, a fair retort might be that you loved it for all the reasons you said at [lower price], but thought it had run its course once it got to [higher price]. Again, if it can be demonstrated that your reason for praising it was to push the price higher, your intent may land you in hot water. This isn't legal advice or a full analysis, but if Fitty essentially declared his honest reasons for loving a stock in which he is invested, and discloses that investment, letting others know he is biased, he's probably ok, especially if he intends to hold it long term. |
Can a company control its stock through contracts with stockholders? | Your first scenario, involving shareholders in a private corp being limited by a contractual agreement, is common in practice. Frequent clauses include methods of valuing the shares if someone wants to sell, first right of refusal [you have to attempt to sell to the other shareholders, before you can sell to a 3rd party], and many others. These clauses are governed by contract law [ie: some clauses may be illegal in contract law, and therefore couldn't be applied here]. A Universal Shareholders' Agreement is just the same as the above, but applied to more people. You would never get an already public company to convert to a universal shareholders' agreement - because even 1 share voting 'no' would block it [due to corporate law limiting the power of a corporation from abusing minority shareholder value]. In practice, these agreements universally exist at the start of incorporation, or at least at the first moment shares become available. An example is the Canadian mega-construction company PCL*, which is employee-owned. When the original owner transferred the corporation to his employees, there was a USA in place which still today governs how the corporation operates. In theory you could have a 'public company' where most shares are already owned by the founders, and 100% of remaining shares are owned by a specific group of individuals, in which case you may be able to get a USA signed. But it wouldn't really happen in practice. *[Note that while PCL is broadly owned by a large group of employees, it is not a 'public company' because any random schmuck can't simply buy a share on the Toronto Stock Exchange. I assume most exchanges would prevent corporations from being listed if they had ownership restrictions like this]. |
Pay down on second mortage when underwater? | You're welcome to throw in the towel and stop paying any time you want. You'll just suffer the consequences of doing so. It sounds like you're concerned about losing your job "in the next few years." What are you doing to stem this off? Are you building up a side income? Are you building up portable skills -- ones that can be used anywhere? If you think you have a few years left, use them. Build something up. You may be able to recover more quickly, or last longer until you find a new job. Some of my blogging friends have been at it about as long as I have, and they're in high-five, low-six figures now. For blogging. Some did it even faster. All it takes is time. Your expenses for starting a blog are $10/month plus cutting out two hours of TV / drinking / anything else consumer-ish to learn more about your favorite interest, write about it, and interact with the online community. That's just one idea. Season to taste or choose a different meal altogether. Are you frugal? Are you looking for ways to cut expenses? If you can find extra money to save a little bit more and knock out just one of those debts (say, the car), you'll be able to throw that payment at the student loan. Then they'll both be gone, and you can save up a cushion for yourself faster. I just think it's a little weak to give up when you're not really in trouble yet. You're tight, but you can get through that. |
Paying restaurants in cash instead of credit card - how signficant is this? | The biggest advantage to small business owners paid in cash is not that it might save the 2 or 3 percent that would go to the credit card company. The biggest advantage is that they have the opportunity to keep the transaction entirely off the books and pocket the cash without paying income tax or sales tax, especially when no receipt is given, or when it's a service instead of a product being sold, or when it's an approximately-tracked inventory unit going out the door. Although it's illegal, it's widely done, and it's also often a temptation for employees to try and get away with doing it too. |
ISA - intra year profits and switching process | An ISA is a much simpler thing than I suspect you think it is. It is a wrapper or envelope, and the point of it is that HMRC does not care what happens inside the envelope, or even about extractions of funds from the envelope; they only care about insertions of funds into the envelope. It is these insertions that are limited to £15k in a tax year; what happens to the funds once they're inside the envelope is your own business. Some diagrams: Initial investment of £10k. This is an insertion into the envelope and so counts against your £15k/tax year limit. +---------ISA-------+ ----- £10k ---------> | +-------------------+ So now you have this: +---------ISA-------+ | £10k of cash | +-------------------+ Buy fund: +---------ISA-------+ | £10k of ABC | +-------------------+ Fund appreciates. This happens inside the envelope; HMRC don't care: +---------ISA-------+ | £12k of ABC | +-------------------+ Sell fund. This happens inside the envelope; HMRC don't care: +---------ISA-------+ | £12k of cash | +-------------------+ Buy another fund. This happens inside the envelope; HMRC don't care: +---------ISA-----------------+ | £10k of JKL & £2k of cash | +-----------------------------+ Fund appreciates. This happens inside the envelope; HMRC don't care: +---------ISA-----------------+ | £11k of JKL & £2k of cash | +-----------------------------+ Sell fund. This happens inside the envelope; HMRC don't care: +---------ISA-------+ | £13k of cash | +-------------------+ Withdraw funds. This is an extraction from the envelope; HMRC don't care. +---------ISA-------+ <---- £13k --------- | +-------------------+ No capital gains liability, you don't even have to put this on your tax return (if applicable) - your £10k became £13k inside an ISA envelope, so HMRC don't care. Note however that for the rest of that tax year, the most you can insert into an ISA would now be £5k: +---------ISA-------+ ----- £5k ---------> | +-------------------+ even though the ISA is empty. This is because the limit is to the total inserted during the year. |
Can another tax loss be used to offset capital gains taxes? How does it work? | Capital gains and losses offset each other first, then your net gain is taxed at the applicable rate. If you have a net loss, you can offset your other income by up to $3,000. In your example, you have no net-gain or loss, so no tax implications from your activity. |
How can I import customers and invoices from a previous year's Gnucash file? | There does not appear to be a way to export the customers and invoices nor a way to import them into another data file if you could export them. However, as said in the comments to your question, your question seems predicated upon the notion that it is 'best practice' to create a new data file each year. This is not considered necessary It should be noted that GnuCash reports should be able to provide accurate year-end data for accounting purposes without zeroing transactions, so book-closing may not be necessary. Leaving books unclosed does mean that account balances in the Chart of Accounts will not show Year-To-Date amounts. - Closing Books GnuCash Wiki The above linked wiki page has several methods to 'close the books' if that is what you want to do - but it is not necessary. There is even a description on how to create a new file for the new year which only talks about setting up the new accounts and transactions - nothing about customers, invoices etc. Note that you can 'close the books' without creating a new data file. In summary: you cannot do it; but you don't need to create a new file for the new year so you don't need to do it. |
Tax consequences of changing state residency? | It also depends on where you work. If you move your home and your job then the date you establish residency in the new state is the key date. All income before that date is considered income for state 1, and all income on or after that date is income for state 2. If there is a big difference in income you will want to clearly establish residency because it impacts your wallet. If they had the same rates moving wouldn't impact your wallet, but it would impact each state. So make sure when going from high tax state to low tax state that you register your vehicles, register to vote, get a new drivers license... It becomes more complex if you move your home but not your job. In that case where you work might be the deciding factor. Same states have agreed that where you live is the deciding factor; in other cases it is not. For Virginia, Maryland, and DC you pay based on where you live if the two states involved are DC, MD, VA. But if you Live in Delaware and work in Virginia Virginia wants a cut of your income tax. So before you move you need to research reciprocity for the two states. From Massachusetts information for Nonresident and Part-Year Resident Income, Exemptions, Deductions and Credits Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: a few questions later: Massachusetts residents and part-year residents are allowed a credit for taxes due to any other jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return. Nonresidents may not claim the taxes paid to other jurisdiction credit on their Massachusetts Form 1-NR/PY. The credit is allowed for income taxes paid to: The credit is not allowed for: taxes paid to the U.S. government or a foreign country other than Canada; city or local tax; and interest and penalty paid to another jurisdiction. The computation is based on comparing the Massachusetts income tax on income reported to the other jurisdiction to the actual tax paid to the other jurisdiction; the credit is limited to the smaller of these two numbers. The other jurisdiction credit is a line item on the tax form but you must calculate it on the worksheet in the instruction booklet and also enter the credit information on the Schedule OJC. So if you move your house to New Hampshire, but continue to work in Massachusetts you will owe income tax to Massachusetts for that income even after you move and establish residency in New Hampshire. |
Investments beyond RRSP and TFSA, in non-registered accounts? | I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail. |
Good book-keeping software? | Xero and WaveAccounting can make things easy, but they also have their limitations. I've used both for short periods of time but found both of them to be lacking. While the "ease" is appealing, the ability to drill into the details and get good reports is the downfall of both of these accounting systems. QuickBooks may seem like the easy answer here, but it really is the best for getting the power you want without getting too complicated. |
What's the best application, software or tool that can be used to track time? | Surprised nobody has mentioned Freshbooks yet. It's lightweight, easy to use, and free for low-end use (scaling up price-wise as you scale up). |
NYSE vs. Nasdaq - can I tell what exchange a ticker traded on, based solely on the ticker? | You cannot determine this solely by the ticker length. However, there are some conventions that may help steer you there. Nasdaq has 2-4 base letters BATS has 4 base letters NYSE equity securities have 1-4 base letters. NYSE Mkt (formerly Amex) have 1-4 base letters. NYSE Arca has 4 base letters OTC has 4 base letters. Security types other than equities may have additional letters added, and each exchange (and data vendors) have different conventions for how this is handled. So if you see "T" for a US-listed security it would be only be either NASDAQ, NYSE or NYSE Mkt. If you see "ANET" then you cannot tell which exchange it is listed on. (In this case, ANET Arista Networks is actually a NYSE stock). For some non-equity security types, such as hybrids, and debt instruments, some exchanges add "P" to the end for "preferreds" (Nasdaq and OTC) and NYSE/NYSE Mkt have a variety of methods (including not adding anything) to the ticker. Examples include NYSE:TFG, NYSEMkt:IPB, Nasdaaq: AGNCP, Nasdaq:OXLCN. It all becomes rather confusing given the changes in conventions over the years. Essentially, you require data that provides you with ticker, listing location and security type. The exchanges allocate security tickers in conjunction with the SEC so there are no overlaps. eg. The same ticker cannot represent two different securities. However, tickers can be re-used. For example, the ticker AB has been used by the following companies: |
Where can I find a good online fundamental data provider for Hong Kong stocks? | Check out WorldCap.org. They provide fundamental data for Hong Kong stocks in combination with an iPad app. Disclosure: I am affiliated with WorldCap. |
Do people tend to spend less when using cash than credit cards? | Psychology Today had an interesting article from July 11, 2016, in which they go through the psychological aspects of using cash vs. a credit card. This article cites a 2008 paper in the Journal of Experimental Psychology: Applied that found: “the more transparent the payment outflow, the greater the aversion to spending or higher the ‘pain of paying’ …leading to less transparent payment modes such as credit cards and gift cards (vs. cash) being more easily spent or treated as play or ‘monopoly money.’” The article cites a number of other studies that are of interest on this topic as well. |
Can you short a stock before the ex-div. date to make a profit? | I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me! |
Is a currency “hedged” ETF actually a more speculative instrument than an unhedged version? | I will just try to come up with a totally made up example, that should explain the dynamics of the hedge. Consider this (completely made up) relationship between USD, EUR and Gold: Now lets say you are a european wanting to by 20 grams of Gold with EUR. Equally lets say some american by 20 grams of Gold with USD. Their investment will have the following values: See how the europeans return is -15.0% while the american only has a -9.4% return? Now lets consider that the european are aware that his currency may be against him with this investment, so he decides to hedge his currency. He now enters a currency-swap contract with another person who has the opposite view, locking in his EUR/USD at t2 to be the same as at t0. He now goes ahead and buys gold in USD, knowing that he needs to convert it to EUR in the end - but he has fixed his interestrate, so that doesn't worry him. Now let's take a look at the investment: See how the european now suddenly has the same return as the American of -9.4% instead of -15.0% ? It is hard in real life to create a perfect hedge, therefore you will most often see that the are not totally the same, as per Victors answer - but they do come rather close. |
Valuing a small business to invest in | It should be pretty obvious that without knowing what sort of assets the company owns, and what sort of net earnings are being generated it's impossible to say what a $20k equity investment should get you in terms of ownership percentage. With that said, you want to look at a few to several years of books, look for trends. Some things to understand that might be subtle red flags: It's extremely common for early stage investors to essentially make loans rather than strictly buying shares. In the worst case scenario creditors get to participate in liquidation proceedings before shareholders do. You may be better off investing in this business via a loan that's convertible to equity at your discretion. Single owner service companies are difficult because all of the net earnings go to the proprietor and that person maintains all of the relationships. So taking something like 5 years of net earnings as the value of the company doesn't make much sense because you (or someone else) couldn't just step in and replace the owner. Granted, you aren't contemplating taking over the business, but it negates using an X years of net earnings valuation method. When you read about valuation there is a sort of overriding assumption that no single person could topple the operation which couldn't be farther from the truth in single employee service companies. Additionally, understand that your investment in a single owner company hinges completely on one person's ability and willingness to work. It's really vital to understand the purpose of the funds. Someone will be hired? $20,000 couldn't be even six months of wages... Put things in to perspective with a pad, pen and calculator. Don't invest in the pipe dream of a friend of yours, and DEFINITELY don't hand this person the downpayment for their new house. The first rule of investing is "don't lose money," this isn't emotional, this is a dollars and cents pragmatic process. Why does the business need this money? How will you be paid back? Personally, I think it would be more gratifying to put $20k in a blender and watch it blend, this is probably a horrible investment. The risk should just be left to credit card companies. |
Are capitalization rate and net profit margin the same thing? | Both of these terms do refer to your profit; they're just different ways of evaluating it. First, your definition of capitalization rate is flipped. As explained here, it should be: On the other hand, as explained here: So cap rate is like a reverse unit cost approach to comparing two investments. If house A costs $1M and you'll make $50K (profit) from it yearly, and house B costs $1.33M and you'll make $65K (profit) from it yearly, then you can compute cap rates to see that A is a more efficient investment from the point of view of income vs. amount-of-money-you-have-stuck-in-this-investment-and-unavailable-for-use-elsewhere. Profit margin, on the other hand, cares more about your ongoing expenses than about your total investment. If it costs less to maintain property B than it does to maintain property A, then you could have something like: So B is a more efficient investment from the point of view of the fraction of your revenue you actually get to keep each year. Certainly you could think of the property's value as an opportunity cost and factor that into the net profit margin equation to get a more robust estimate of exactly how efficient your investment is. You can keep piling more factors into the equation until you've accounted for every possible facet of your investment. This is what accountants and economists spend their days doing. :-) |
I have $10,000 sitting in an account making around $1 per month interest, what are some better options? | What is your risk tolerance? Personally I invest about $5k in digital currency as an experiment. A lot of people told me I am stupid, which I agree at some point. I plan to let the money sit for 5~10 years. I can tell you there is a lot of emotion in the digital currency though. |
Is it legal if I'm managing my family's entire wealth? | This is the biggest blunder I see in money handling. "Oh I'm a good person and everyone knows my intentions are good. And they're really happy with me right now, so it'll stay that way forever, right? So I can just do anything and they'll trust me." And then in hindsight 10 years later, the person realizes "wow, I was really stubborn and selfish to just assume that. No wonder it blew up." Anyway, to that end, your requirement that all the money be in one account and "this will simplify taxes" is horsepuckey. No one will believe a legitimate financial advisor needs that, but it's exactly what a swindler would do. And that's the problem. If anything goes wrong, their trust in you will be forgotten, some will say you intended to scam all along, and the structure will be the first thing to convict you. Money makes everyone mistrusting. Ironically, the concept is called a "trust", and there's a wide body of law and practice for Person X responsibly handling the money of Person Y. The classic example is Person Y is a corporation (say, a charity) and Person X is on the Board of Directors. It's the same basic thing. The doctrine is: |
Are there any disadvantages of Progress Draw Mortgage? | Presumably, the inverse of the advantages? You are guaranteed the interest rate that is written on your mortgage commitment as long as the first draw happens before the rate hold expiry date (typically 120 days from application date). In most cases, it takes at least 6 months or more to build a home from the ground up. That means that you are taking a chance at what the interest rates and qualifying criteria will be several months down the road. You can normally only lock in 120 days prior to possession with a 'Completion Mortgage'. Lenders are constantly changing their guidelines and rates are predicted to increase over the coming months. That means you are much better to obtain draw mortgage financing to avoid any of these uncertainties. You will know that you have your financing in place right away before construction even starts. This is a huge peace of mind so you can relax and get ready for the big move. So thus, if interest rates are lower 6 months or a year from now, that'd be the disadvantage -- a longer lock-in period. |
Can I make my savings keep in check with or beat inflation over a long time period via index funds? | If I invest in index funds or other long term stocks that pay dividend which I reinvest, they don't need to be worth more per share for me to make a profit, right? That is, if I sell part of the stocks, it's GOOD if they're worth more than I bought them at, but the real money comes from the QUANTITY of stocks that you get by reinvesting your dividends, right? I would say it is more the other way around. It is nice to get dividends and reinvest them, but overall the main gain comes from the stocks going up in value. The idea with index funds, however, is that you don't rely on any particular stock going up in value; instead you just rely on the aggregate of all the funds in the index going up. By buying lots of stocks bundled in an index fund, you avoid being too reliant on any one company's performance. Can I invest "small amounts" (part of paycheck) into index funds on a monthly basis, like €500, without taking major "transaction fees"? (Likely to be index fund specific... general answers or specific answers using popular stocks welcomed). Yes, you can. At least in the US, whether you can do this automatically from your paycheck depends on whether you employer has that set up. I don't know that work in the Netherlands. However, at the least, you can almost certainly set up an auto-invest program that takes $X out of your bank account every month and buys shares of some index fund(s). Is this plan market-crash proof? My parents keep saying that "Look at 2008 and think about what such a thing would do to your plan", and I just see that it will be a setback, but ultimately irrelevant, unless it happens when I need the money. And even then I'm wondering whether I'll really need ALL of my money in one go. Doesn't the index fund go back up eventually? Does a crash even matter if you plan on holding stocks for 10 or more years? Crashes always matter, because as you say, there's always the possibility that the crash will occur at a time you need the money. In general, it is historically true that the market recovers after crashes, so yes, if you have the financial and psychological fortitude to not pull your money out during the crash, and to ride it out, your net worth will probably go back up after a rough interlude. No one can predict the future, so it's possible for some unprecedented crisis to cause an unprecedented crash. However, the interconnectedness of stock markets and financial systems around the world is now so great that, were such a no-return crash to occur, it would probably be accompanied by the total collapse of the whole economic system. In other words, if the stock market dies suddenly once and for all, the entire way of life of "developed countries" will probably die with it. As long as you live in such a society, you can't really avoid "gambling" that it will continue to exist, so gambling on there not being a cataclysmic market crash isn't much more of a gamble. Does what I'm planning have similarities with some financial concept or product (to allow me to research better by looking at the risks of that concept/product)? Maybe like a mortgage investment plan without the bank eating your money in between? I'm not sure what you mean by "what you're planning". The main financial products relevant to what you're describing are index funds (which you already mentioned) and index ETFs (which are basically similar with regard to the questions you're asking here). As far as concepts, the philosophy of buying low-fee index funds, holding them for a long time, and not selling during crashes, is essentially that espoused by Jack Bogle (not quite the inventor of the index fund, but more or less its spiritual father) and the community of "Bogleheads" that has formed around his ideas. There is a Bogleheads wiki with lots of information about the details of this approach to investing. If this strategy appeals to you, you may find it useful to read through some of the pages on that site. |
What are my options for paying off the large balance of my federal, high interest student loans? | As someone with a lot of student loan debt, I can relate - the first thing you should do is read the promissory note on your current loans - there might be information there you can use. For govt loans (stafford, etc) made after July 1, 2006 the interest rate is going to be fixed and even a federal direct consolidation is not going to lower the rates themselves. If anything, consolidation will just increase the repayment period, which means you'll end up paying more in the long run. Most private Loans usually offer variable interest rates, which today are quite low. But unless your financial situation is very comfortable and stable, consolidating out of federally guaranteed loans into private loans might not be the best path. You might lose options like deferment, forbearance, and maybe even things like a death benefit (if you die, your loans die with you). related - if you have a co-signer you don't get that death benefit! But refinancing into a variable rate private loan is going to push a lot of risk to you in terms of interest rate inflation, etc. Most financial professionals will agree that interest rates can only go up in the long run. Keep in mind, student loans are completely unsecured - meaning lenders are taking a fairly large risk in loaning money (and probably why the fed govt has to guarantee most of them). I've heard of people borrowing against their home equity to pay down student loan debt - but I can't think of a reason you'd want to substitute secured for unsecured debt and possibly lose the loan interest tax deduction. The bottom line is you're unlikely to find an alternative lending source at a lower interest rate for an unsecured student loan. Another option may be the income based repayment plan. If you qualify, it caps student loan monthly payments at 15% of your discretionary income (discretionary is your income minus whatever the poverty threshold income amount is). And if that 15% doesn't even cover the interest on the loans, the govt picks up the tab for the difference (for up to 3 years). You have to re-qualify every year by sending in all sorts of documentation, but if you somehow stay on IBR for 25 years, your loans are then forgiven. Obviously the downside here is that you are probably paying little to no principal, but if you do the math and determine that your IBR payment would be next to nothing, and your current situation is barely paying interest-only... well, maybe IBR isn't a bad thing for a couple of years (or 25 if you think you will never have a larger income). Personally, I went through all these options as well and decided that my best option was to just earn more money... a 2nd job or side project here and there helps me pay down the debt faster, and with less risk, than moving to private variable rate loans. |
The difference between Islamic Banks and Western Banks | One of the principles of Sharia Banking is (Wikipedia): Shariah prohibits what is called "Maysir" and "Gharar". Maysir is involved in contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future whereas Gharar describes speculative transactions. Both concepts involve excessive risk and are supposed to foster uncertainty and fraudlent behaviour. In other words risky investments are prohibited in Sharia Banking. |
What intrinsic, non-monetary value does gold have as a commodity? | The answer is that other than a small number of applications (the approx. 10% of gold production that goes to 'industrial uses') gold does not have intrinsic value beyond being pretty and rare (and useful for making jewelry.) There are a number of 'industrial' applications and uses for gold (see other answers for a list) but the volume consumed this way is fairly small, especially relative to the capacity to mine new gold and reclaim existing gold. If you removed investment, and jewelry usage (especially culturally driven jewelry usage) then there's no way the remaining uses for industry and dentistry could sustain the price levels we currently see for gold. Furthermore, and perhaps more importantly, the best data I can find for this shows the total number of tons consumed for industrial uses has been shrinking for several years now, and that was prior to recent price increases, so it is difficult to tie that reduced demand to increasing prices. And one might postulate in a 'collapsed society' you seem to be referring to in your question, that a lot of the recent industrial demand (e.g. the '50 cents of gold in each cellphone') could quite possibly disappear entirely. The argument many people use for gold having value is usually 'been used as money for thousands of years'. But this confuses gold having a value of its own with the reasons why something makes a useful currency. Gold has a large number of characteristics that make it an ideal currency, and of all the elements available it is perhaps the best physical element to serve as a currency. BUT just as with a dollar bill, just because it is a good currency, does NOT give it an intrinsic value. Any currency is only worth what someone will trade you for it. The value is set by the economy etc., not the medium used as a currency. So yes, people will probably always use gold as money, but that doesn't make the money worth anything, it's just a medium of exchange. Incidentally two other things should be noted. The first is that you have a problem when the medium itself used for a currency becomes worth more than the face value. Hence why we stopped using silver in coins, and there were concerns over pennies due to the price of copper. This leads to the second point, which is that currently, gold is TOO RARE to suffice as a world currency, hence why all countries went off the gold standard years ago. The size of national and global economies was growing faster than the supply of gold, and hence it was becoming impossible to have enough gold to back all the currencies (inflation concerns aside). |
Benefits of Purchasing Company Stock at a Discount | If your purchases are done at year end, but the money withheld over that 12 month period, the 17% return is for an average time of 6 months, and the return annualizes to 38% or so. All due respect to Alex B, the return would be 100/85 as he states, if the investment were funded in January and sold in December. But this isn't the case on ESPP, the average time you are out that money is 6 months. I will warn you. Don't let the tax tail wag your investing dog. It's easy to wait for long term gains to kick in and then ignore the stock. You then find yourself overloaded on one stock and risk some bad losses. I enjoyed my 15% discount all the way to the stock crashing by 60%+. If you must wait and hold some, be religious about selling the long term shares like clockwork. The 15% is virtually risk free (unless the shares crash between purchase and hitting your account.) |
What are some good ways to control costs for groceries? | Also make a menu and make a shopping list from that. It will help you control how much you buy, and help to enforce only buying what you need. You don't need to limit your menu, but buying what you need in appropriate quantities will help. Don't forget to add snacking and desserts to your menu. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | Short answer: don't do it. Unless you know something that the bank doesn't, it's safe to assume that banks are a lot better at assessing risk than you are. If they think he can't afford it, odds are he can't afford it regardless of what he might say to the contrary. In this case, the best answer may be "sorry for your luck;" you could recommend that he comes up with a larger down payment to reduce his monthly payment (or that he find a way to get some extra income) rather than getting you to cosign. Please also see this article by Dave Ramsey on why you should never cosign loans. |
How can small children contribute to the “family economy”? | There is also babysitting, dog walking and house sitting. Depending on their age of course. You should also investigate what is required to get them the ability to setup their own Roth IRA. I know one of the requirements is you can't put more into the Roth then was earned in income in the year. They might also have to file an income tax return (not sure about that one). Just think of how far ahead of the game they will be if they can get a couple of grand or more in a Roth account while in their early teens. |
Should I give to charity by check or credit card? | As someone that has run a nonprofit, my 2 cents: First: thank you for giving and for being conscientious about wanting to make things as easy as possible. The best method is the one you'll actually do. If there is a chance that you will end up not donating by check because you don't have a stamp, you forget, etc. go ahead and do it online. A donation with a fee is better than an intention without one. We had one case where a potential donor decided to give, but was so worried about the processing fee that they wanted to write a check. We followed up 3 times on the pledge, spent time following up with the pledge's connection that wanted to see if it came through, and in the end they never sent the check. Their pledge wound up costing us staff time and money as we tried to make their giving easy. If you are as likely to give, size matters. My rule of thumb is that if you are giving $1 up to about a hundred dollars, the fee (which most nonprofits can get to about 3% or 3.5%) is about the same as the added staff time opening the check, adding an extra to the deposit slip, etc. But as soon as you are giving a couple hundred dollars and especially if you are giving in the thousands, it is definitely better to do it by check. Most banks don't charge an extra deposit fee at the scale of most nonprofits, and we probably have some run to the bank happening in the next day or two. Really your thank you note should be the same whether online or by check (even though you'll get the auto-thank you online), so that time difference shouldn't really play into it. The donation will be appreciated either way. While I cringe a bit if I see a $1,500 donation come through online knowing that the check would be cheaper, that is far outweighed by the thankfulness that someone thought of us and made it happen. |
If a company I bought stock in was de-listed but is now listed again under a new symbol, what happened to my shares? | If the company went bankrupt, the issued public shares that were outstanding at the time most likely were voided, in which case your shares are most definitely gone. The company might have done a new stock issuance coming out of bankruptcy with a different symbol, and while it could be substantially the same company, it doesn't mean much for you. It's unfortunate this may be the case, but it is one of the risks of investing. |
Why invest in becoming a landlord? | There are at least three important aspectss missing from your equation. However they come with some uncertainty as one typically cannot tell the future performance. Appreciation of the rental units value. When comparing to the gain of any alternative investment an increasing value of the flat is a gain too. Increase of rent. Rents are typically adjusted either on a regular basis or at least when changing tennants. Calulation with a flat rent over 20 years is therefore way off. Tax deductions due to capital expenditures (i.e. mortgages), expenses for the upkeep and maintenance of the property, conserving and management, and so on. Obviously those are depending on your local legislation. There are multiple other issues to consider of course, e.g. inadvertant vacancy, which would not act in your favour. |
End of financial year: closing transactions | I'm not sure there's a good reason to do a "closing the books" ceremony for personal finance accounting. (And you're not only wanting to do that, but have a fiscal year that's different from the calendar year? Yikes!) My understanding is that usually this process is done for businesses to be able to account for what their "Retained Earnings" and such are for investors and tax purposes; generally individuals wouldn't think of their finances in those terms. It's certainly not impossible, though. Gnucash, for example, implements a "Closing Books" feature, which is designed to create transactions for each Income and Expenses account into an end-of-year Equity Retained Earnings account. It doesn't do any sort of closing out of Assets or Liabilities, however. (And I'm not sure how that would make any sense, as you'd transfer it from your Asset to the End-of-year closing account, and then transfer it back as an Opening Balance for the next year?) If you want to keep each year completely separate, the page about Closing Books in the Gnucash Wiki mentions that one can create a separate Gnucash file per year by exporting the account tree from your existing file, then importing that tree and the balances into a new file. I expect that it makes it much more challenging to run reports across multiple years of data, though. While your question doesn't seem to be specific to Gnucash (I just mention it because it's the accounting tool I'm most familiar with), I'd expect that any accounting program would have similar functionality. I would, however, like to point out this section from the Gnucash manual: Note that closing the books in GnuCash is unnecessary. You do not need to zero out your income and expense accounts at the end of each financial period. GnuCash’s built-in reports automatically handle concepts like retained earnings between two different financial periods. In fact, closing the books reduces the usefulness of the standard reports because the reports don’t currently understand closing transactions. So from their point of view it simply looks like the net income or expense in each account for a given period was simply zero. And that's largely why I'm just not sure what your goals are. If you want to look at your transactions for a certain time, to "just focus on the range of years I'm interested in for any given purpose" as you say, then just go ahead and run the report you care about with those years as the dates. The idea of "closing books" comes from a time when you'd want to take your pile of paper ledgers and go put them in storage once you didn't need to refer to them regularly. Computers now have no challenges storing "every account from the beginning of time" at all, and you can filter out that data to focus on whatever you're looking for easily. If you don't want to look at the old data, just don't include them in your reports. I'm pretty sure that's the "better way to keep the books manageable". |
What's the best application, software or tool that can be used to track time? | There are tonnes, and tonnes of things out there, but you have to be careful what you search for. Be specific about what you want. If you search for "time sheet" for example, you'll just get a bucket of stuff having to do with stylesheets, because there's more of that around. The most common type of small tool for tracking time is usually a timer-type thing that runs as a widget, gadget, or System Tray tool. You have to click it on, then off again, and the nice ones produce a usable output file. CSV, or XLS, or some such. There are tools that track what documents you have open, when you opened them, and when you closed them, and you can sort it out from there. They're a bit resource-heavy, so be careful if you have a low power system. Quickbooks has a little utility that will make file which can be imported into your accounting. Quickbooks is NOT for the average business person. You almost have to be a bookkeeper to get the most out of it. On the other hand, you can have a bookkeeper set it up for you, and at the end of the year your taxes are a one button affair. For Windows software I like to use the site snapfiles.com. It's always been reliable, the rating systems are pretty accurate, they mostly maintain their own copies of the software, they test for viruses, and the let you specify a "freeware only" search ;-) For Mac software I like versiontracker.com. If you're a massive freeware user, like me, sign up for an account, so you can receive alerts regarding updates, and such. Currently I do most of my computer-based organization on a Mac with piece of software by CircusPonies.com called NoteBook. There's a command to insert the time, date, or both, and I just use that when I have a need to record elapsed time. I have even run across (and I forget the name) a piece of software for tracking time on Windows, which had multiple timers which you could set so either they were allowed to run concurrently (lawyers), or only one would run at a time. Anyway… Personally I think freeware is fun, but be careful. It's still the wild frickin west out there. If you don't trust the site you're downloading from, scan it with your anti-virus software before you install it, create a Restore Point, do a full, offsite backup of all your hard drives, unplug your computer from the Internet, send your wife to her mother's, lock the kids in the basement, cross your fingers, and phone the local bishop for a dispensation (http://en.wikipedia.org/wiki/Dispensation_(Catholic_Church)). |
Can my broker lock my cash account if I try to use the money from a stock sale during the three-day settlement period? | Here's how this works in the United States. There's no law regarding your behavior in this matter and you haven't broken any laws. But your broker-dealer has a law that they must follow. It's documented here: The issue is if you buy stock before your sell has settled (before you've received cash) then you're creating money where before none existed (even though it is just for a day or two). The government fears that this excess will cause undue speculation in the security markets. The SEC calls this practice freeriding, because you're spending money you have not yet received. In summary: your broker is not allowed to loan money to an account than is not set-up for loans; it must be a margin account. People with margin account are able to day-trade because they have the ability to use margin (borrow money). Margin Accounts are subject to Pattern Daytrading Rules. The Rules are set forth by FINRA (The Financial Industry Reporting Authority) and are here: |
Why can't you just have someone invest for you and split the profits (and losses) with him? | For one thing fund managers, even fund management companies, own less money than their clients put together. On the whole they simply cannot underwrite 50% of the potential losses of the funds they manage, and an offer to do so would be completely unsecured. Warren Buffet owns about 1/3 of Berkshire Hathaway, so I suppose maybe he could do it if he wanted to, and I won't guess why he prefers his own business model (investing in the fund he manages, or used to manage) over the one you propose for him (keeping his money in something so secure he could use it to cover arbitrary losses on B-H). Buffett and his investors have always felt that he has sufficient incentive to see B-H do well, and it's not clear that your scheme would provide him any useful further incentive. You say that the details are immaterial. Supposing instead of 50% it was 0.0001%, one part in a million. Then it would be completely plausible for a fund manager to offer this: "invest 50 million, lose it all, and I'll buy dinner to apologise". But would you be as attracted to it as you would be to 50%? Then the details are material. Actually a fund manager could do it by taking your money, putting 50% into the fund and 50% into a cash account. If you make money on the fund, you only make half as much as if you'd been fully invested, so half your profit has been "taken" when you get back the fund value + cash. If you lose money on the fund, pay you back 50% of your losses using the cash. Worst case scenario[*], the fund is completely wiped out but you still get back 50% of your initial investment. The combined fund+cash investment vehicle has covered exactly half your losses and it subtracts exactly half your profit. The manager has offered the terms you asked for (-50% leverage) but still doesn't have skin the game. Your proposed terms do not provide the incentive you expect. Why don't fund managers offer this? Because with a few exceptions 50% is an absurd amount for an investment fund to keep in cash, and nobody would buy it. If you want to use cash for that level of inverse leverage you call the bank, open an account, and keep the interest for yourself. You don't expect your managed fund to do it. Furthermore, supposing the manager did invest 100% of your subscription in the fund and cover the risk with their own capital, that means the only place they actually make any profit is the return on a risk that they take with their capital on the fund's wins/losses. You've given them no incentive to invest your money as well as their own: they might as well just put their capital in the fund and let you keep your money. They're better off without you since there's less paperwork, and they can invest whatever they like instead of carefully matching whatever money you send them. If you think they can make better picks than you, and you want them to do so on your behalf, then you need to pay them for the privilege. Riding their coattails for free is not a service they have any reason to offer you. It turns out that you cannot force someone to expose themselves to a particular risk other than by agreeing that they will expose themselves to that risk and then closely monitoring their investment portfolio. Otherwise they can find ways to insure/hedge the risk they're required to take on. If it's on their books but cancelled by something else then they aren't really exposed. So to provide incentive what we normally want is what Buffett does, which is for the fund manager to be invested in the fund to keep them keen, and to draw a salary in return for letting you in[**]. Their investment cannot precisely match yours because the fund manager's capital doesn't precisely match your capital. It doesn't cover your losses because it's in the same fund, so if your money vanishes the fund manager loses too and has nothing to cover you with. But it does provide the incentive. [*] All right, I admit it, worst case scenario there's a total banking collapse, end of civilization as we know it, and the cash account defaults. But then even in your proposed scheme it's possible that whatever assets the fund manager was using as security could fail to materialise. [**] So why, you might ask, do individual fund managers get bonuses in return for meeting fixed targets instead of only being part-paid in shares in their own fund whose value they can then maximise? I honestly don't know, but I suspect "lots of reasons". Probably the psychology of rewarding them for performance in a way that compares with other executive posts or professions they might take up instead of fund management. Probably the benefit to the fund itself, which wants to attract more clients, of beating certain benchmarks. Probably other things including, frankly, human error in setting their compensation packages. |
What does “100% stock dividend” mean? | A 100% stock dividend means that you get one share of the "stock dividend" for every share you own. For example, Google did this in 2014 when they gave all of their Class A shareholders one class C share for every Class A that they owned. If the 100% stock dividend is for the exactly the same stock, it is basically the same as a 2-for-1 stock split. If, however, the 100% stock dividend is to give you a different stock, then this is typically due to a corporate reorganization or demerger/spinoff event. Some countries have different tax treatments for the events - for example, with demergers in Australia, Class Rulings need to be obtained from the Australian Taxation Office to declare demergers as tax free. A recent demerger was in Australia as South32, demerged from BHP Billiton. References: http://economix.blogs.nytimes.com/2014/04/02/the-many-classes-of-google-stock/ http://www.bhpbilliton.com/investors/shareholderinfo/demerger-taxation-information |
Under specific conditions can I write off Spotify or other streaming audio services? | Nice try. No. If you were in the music industry, you might have a case. Depending on the exact job, certain things related to music would be a business expense. I don't see how this would pass an audit as it really is unrelated to the work you do. |
Is there any way to buy a new car directly from Toyota without going through a dealership? | Any car manufacturer that undercuts their own dealer network would have that network fall apart quickly. Tesla is using a dealer-free distribution model from the start, so they don't have that problem. Toyota doesn't work that way, though. GM imposed a uniform no-haggling policy with their Saturn brand, but that policy was coupled with local monopolies for dealers to make it work. Lexus has also experimented with no-haggling and online ordering (with delivery still taking place at a dealership). The rest of Toyota doesn't work that way, though. Some car manufacturers, such as BMW and Audi, allow you to take delivery of your new car at the factory for a discount. But even then, the transaction still takes place through a dealer. Toyota doesn't work that way, though. For one thing, they work at a different scale. If you buy a Camry in the US, it might be produced in Kentucky, Indiana, or Aichi, depending on business conditions. You say that you want to cut out the middleman, but the fact is that you do require someone to deliver a Toyota to you, like it or not. If you're interested in saving money, consider trying various well documented tips, such as negotiating by e-mail before showing up, pitting dealerships against each other. If you don't want to negotiate, you might be able to take advantage of pre-negotiated dealer prices through Costco. You mentioned that the dealership offered you a 7.99% interest rate for your 710 FICO score. That sounds insanely high — I'd expect deals more like 2% advertised by buyatoyota.com. (Remember, Toyota Motor Credit Corporation exists to help Toyota Motor Corporation sell more cars cheaply.) You can also seek alternate financing online (example) or through your own bank. |
Can I resubmit W8-BEN with W9 form? | Since you're a US citizen, submitting W8-BEN was wrong. If you read the form carefully, when you signed it you certified that you are not a US citizen, which is a lie and you knew it. W9 and W8 are mutually exclusive. You're either a US person for tax purposes or you're not, you cannot be both. As a US citizen - you are a US person for tax purposes, whether you have any other citizenship or not, and whether you live in (or have ever been to) the US or not. You do need to file tax returns just like any other US citizen. If you have an aggregate of $10K or more on your bank accounts outside of the US at any given day - you need to file FBAR. FATCA forms may also be applicable, depending on your balances. From foreign banks' perspective you're a US person, with regard to their FATCA obligations. Whether or not you'll be punished is hard to tell. Whether or not you could be punished is easy to tell: you could. You knowingly broke the law by certifying that you're not a US citizen when you were. That is in addition to un-filed tax returns, FBAR, etc etc. The fact that you were born outside of the US and have never lived there is technically irrelevant. Not knowing the law is not a reasonable cause for breaking it. Get a US-licensed tax adviser (EA/CPA licensed in the US) to help you sort it out. |
Setting up auto-pay. Should I use my bank that holds mortage or my personal bank? | One factor to consider is timing. If you set up the automatic payments through the bank that holds the mortgage (I'll call them the "receiving" bank), they will typically record the transactions as occurring on the actual dates you've set up the automatic payments to occur on, which generally eliminates e.g. the risk of having late payments. By contrast, setting up auto-pay through your personal bank (the "sending" bank) usually amounts to, on the date you specify, your bank deducts the amount from your account and sends a check to the receiving bank (and many banks actually send this check by mail), which may result in the transaction not being credited to your mortgage until several business days later. A second consideration (and this may not be as likely to occur on a loan payment as with a utility or service) is the amount of the payment. When you set up your auto-pay through the sending bank, you explicitly instruct your bank as to the amount to send (also, if you don't have enough in your account, your bank may wait to send the bill payment until you do). This can be good if finances are tight, or if you just like having absolute control of the payment. The risk, though, is that if some circumstance increases the amount that you need to pay one month, you'll have to proactively adjust your auto-pay setting before it fires off. Whereas, if you've set the auto-pay up through the receiving bank, they would most likely submit the transaction to your bank for the higher amount automatically. I'll give an example based on something I saw fairly often when I worked for Dish Network on recovery (customers in early disconnect, the goal being to take a payment and restore service). If you had set up auto-pay through your bank based on your package price, and then the price increased by $2/month, you might not notice at first (your service stays on, and your bill doesn't have any red stamps on it), but the difference will slowly add up until it exceeds a full month's payment, at which point a late fee starts being assessed. From there, it quickly snowballs until the service is turned off. Whereas if you had set that auto-pay up through the provider, when the rate increased, they would simply submit an EFT for the new, higher amount to your bank. On the opposite side of the spectrum: if you've set up the auto-pay through the sending bank, and you're not paying close enough attention when you finally pay off the mortgage, you might accidentally overpay by either making an extra payment or because the final payment is smaller than the rest. Then you'd have to wait a few days (or weeks?) for the receiving bank to issue a refund, leaving those funds unavailable to you in the interim. For these reasons, I personally prefer to always set up automatic payments through the receiving bank, rather than the sending bank. |
Does longterm investment in index funds still make sense in a reality of massive algotrading? | What the automation mostly does is make short-term trading that much more difficult. Day trading is a zero-sum game, so if they win more, everyone else wins less. Long term trading (years to decades) is a positive-sum game; the market as a whole tends to move upward for fairly obvious reasons (at its basis it's still investing, which in turn is based on lending, and as long as folks make fairly rational decisions about how much return they demand for their investment and the companies are mostly producing profits there will be a share of the profit coming back to the investors as dividends or increased share value or both. Day-to-day churn in individual stocks gets averaged out by diversification and time, and by the assumption that if you've waited that long you can wait a bit longer if necessary for jitters to settle out. Time periods between those will partake of some mix of the two. |
Bed and Breakfast, Same Day Capital Gains UK | The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End. |
Are services provided to Google employees taxed as income or in any way? | These services and other employee perks are referred to as fringe benefits. An employee "fringe benefit" is a form of pay other than money for the performance of services by employees. Any fringe benefit provided to an employee is taxable income for that person unless the tax law specifically excludes it from taxation. One example of taxable fringe benefit is award/prize money (to prevent someone from "winning" most of their salary tax-free.) Cash awards are taxable unless given to charity. Non-cash awards are taxable unless nominal in value or given to charity. A less intuitive example is clothing. Clothing given to employees that is suitable for street wear is a taxable fringe benefit. Your example possibly fits under de minims (low-cost) fringe benefits such as low-value birthday or holiday gifts, event tickets, traditional awards (such as a retirement gift), other special occasion gifts, and coffee and soft drinks working condition fringe benefits--that is, property and services provided to an employee so that the employee can perform his or her job. Note that "cafeteria plans" in the source don't refer to cafeteria but allow employee choice between benefit options available. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | Other people have already demonstrated the effect of compound interest to the question. I'd like to add a totally different perspective. Note that the article says if you can follow this simple recipe throughout your working career, you will almost certainly beat out most professional investors [...] you'll likely accumulate enough savings to retire comfortably. (the latter point may be the more practical mark than the somewhat arbitrary million (rupees? dollars?) My point here is that the group of people who do put away a substantial fraction of their (lower) early wages and keep them invested for decades show (at least) two traits that will make a very substantial difference to the average (western) person. They may be correlated, though: people who are not tempted or able to resist the temptation to spend (almost) their whole income may be more likely to not touch their savings or investments. (In my country, people like to see themselves as "world champions in savings", but if you talk to people you find that many people talk about saving for the next holidays [as opposed to saving for retirement].) Also, if you get going this way long before you are able to retire you reach a relative level of independence that can give you a much better position in wage negotiations as you do not need to take the first badly paid job that comes along in order to survive but can afford to wait and look and negotiate for a better job. Psychologically, it also seems to be easier to consistently keep the increase in your spending below the increase of your income than to reduce spending once you overspent. There are studies around that find homeowners on average substantially more wealthy than people who keep living in rental appartments (I'm mostly talking Germany, were renting is normal and does not imply poverty - but similar findings have also been described for the US) even though someone who'd take the additional money the homeowner put into their home over the rent and invested in other ways would have yielded more value than the home. The difference is largely attributed to the fact that buying and downpaying a home enforces low spending and saving, and it is found that after some decades of downpayment homeowners often go on to spend less than their socio-economic peers who rent. The group that is described in this question is one that does not even need the mental help of enforcing the savings. In addition, if this is not about the fixed million but about reaching a level of wealth that allows you to retire: people who have practised moderate spending habits as adults for decades are typically also much better able to get along with less in retirement than others who did went with a high consumption lifestyle instead (e.g. the homeowners again). My estimate is that these effects compound in a way that is much more important than the "usual" compounding effect of interest - and even more if you look at interest vs. inflation, i.e. the buying power of your investment for everyday life. Note that they also cause the group in question to be more resilient in case of a market crash than the average person with about no savings (note that market crashes lead to increased risk of job loss). Slightly off topic: I do not know enough how difficult saving 50 USD out of 50 USD in Pakistan is - and thus cannot comment whether the savings effort called for in the paper is equivalent/higher/lower than what you achieve. I find that trying to keep to student life (i.e. spending that is within the means of a student) for the first professional years can help kick-starting a nest egg (European experience - again, not sure whether applicable in Pakistan). |
Wisest option to pay for second career education | Your first step should be to visit with the financial aid office of the university that you are considering attending, perhaps even before filling out the FAFSA. You may be eligible for grants, scholarships, and subsidized loans, as well as unsubsidized loans. You should pursue the first two options first, and then when you know how much remains to be financed, we can evaluate which of your investments you might liquidate if further financing is needed. There are a range of views on debt on this board. I take a very cautious approach to going in to debt. I worked full-time and took night classes to finish my degree without debt, but depending on your program that might not be an option. It seems that you also have a healthy relationship with debt considering the shape of your savings and finances as outlined above. Apart from the above information about how much money could be obtained and at what interest rates, the other missing information is your current salary, and your expected salary range after completing the program. With all of that information I could make specific recommendations, but at this point, my only recommendation is to avoid liquidating any retirement accounts in your effort to invest in yourself if at all possible. |
How do rich people guarantee the safety of their money, when savings exceed the FDIC limit? | The FDIC has been pretty good at recovery lost money from failed banks. The problem is the temporary loss from immediate needs. The best thing for anyone to do is diversify in investments and banks with adequate covered insurance for all accounts. Immediate access to available cash is always a priority that should be governed by the money manager in this case yourself. |
Is it legal for a landlord to report a large payment to a tenant using Form 1099? | I believe it's not only legal, but correct and required. A 1099 is how a business reports payments to others, and they're required by the IRS to send them for payments of $600 or more (for miscalleneous payments like this). The payment is an expense to the landlord and income to you, and the 1099 is how that's documented (although note that if they don't send you a 1099, it's still income to you and you still need to report it as such). It's similar to getting a 1099-INT for interest payments or a 1099-DIV for dividend payments. You'll get a 1099-MISC for a miscellaneous payment. If you were an employee they'd send you a W-2, not a 1099. |
Principal 401(k) managed fund fees, wow. What can I do? | In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth. |
What are support and resistance of a stock? | You should check out existing resources like Investopedia for definitions, and ask questions if there is something you do not understand, instead of asking folks to spit out definitions. A good book for you to read might be Wall Street Words |
Going long vs short, mechanisms involved | My instinct says that there should be no difference. Your instincts are right. Your understanding of math is not so much. You sold $100K at the current price of 7500000RUB, but ended up buying at 3500000, you earned 3500000RUB. That's 100% in USD (50% in RUB). You bought 7500000RUB for the current price of $100K, but sold later for $200K. You earned $100K (100% in USD), which at that time was equal 3500000RUB. You earned 3500000RUB. That's 50% in RUB. So, as your instincts were saying - no difference. The reason percentages are different is because you're coming from different angles. For the first case your currency is RUB, for the second case your currency is USD, and in both cases you earned 100%. If you use the same currency for your calculations, percentages change, but the bottom line - is the same. |
Is there any US bank that does not charge for incoming wire transfers? | Being into Business since years and having clients worldwide I receive a lot of payments via wire transfers. Some in business and some in personal checking accounts. I have never been charged by my bank for any incoming wire. And by the way I bank with HSBC and BoA in the US. Actually the charges on the account depends on the type of account you are opening/holding with the bank. With a tight competition in the finance and banking industry you can always demand the bank for the services you want and the pricing you want. The best thing to do is ask your bank if they can wave those incoming wire charges for you and if not you have a whole bunch of options. |
The Intelligent Investor: Northern Pacific Railway example | The company was paying "only" $1 a share in dividends, compared to $10 a share in earnings. That is a so-called payout ratio of 10%, which is low. A more normal payout ratio would be 40%, something like $4 a share. If a $13 stock had a $4 dividend, the dividend yield would be about 30%, which would be "too high," meaning that the price would go up to drive down the resulting yield. Even $1 a share on a $13 stock is a high dividend of about 7%, allowing for appreciation to say, the $20-$25 range. Graham was a great believer in the theory that management should pay out "most" of its earnings in dividends. He believed that by holding dividends so far below earnings, the company was either being "stingy," or signalling that the $10 a share of earnings was unsustainable. Either of these would be bad for the stock. For instance, if $1 a share in dividends actually represented a 40% payout ratio, it would signal management's belief that they could normally earn only $2.50 a year instead of $10. |
Is it advisable to go for an auto loan if I can make the full payment for a new car? | Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other factor to consider is what return your cash is giving. If this more than auto-loan interest rate post taxes, you should opt for loan. For example if auto-loan is 10% and you are getting a return of 15% after taxes on investment then loan is better. Company Car lease depends on terms. More often you get break on taxes on the EMI component. But you have to buy at the end of lease period and re-register the car in your name, so there is additional cost. Some companies give lease at very favourable rates. Plus if you leave the job lease has to be broken and it becomes more expensive. |
What does inflation mean to me? | Inflation data is a general barometer for inflation that a typical consumer would experience. Generally when calculating inflation for yourself you would only include items that you use and in percentages of your budget. Personal inflation is much more useful when attempting to calculate safe withdrawal rates or projections into the future. |
Fringe Benefits (Lodging) for single member S-Corp | If you use "a room or other separately identifiable space" within your apartment exclusively for your business, then you might be able to recoup a fraction of your rent for that. Check the rules for home office at the IRS and adopt a consistent and well-documented approach. (I would pay your full rent out of your personal account, and then do an "expense report" for the portion that's legitimately business related, but that's not a unique approach.) Other than that, I agree with the answer by litteadv - You cannot reduce your tax by the full amount of your rent just by having the S Corp pay, and trying to do so is probably playing with fire. Generally speaking, don't comingle business and personal expenses like that. |
No-line-of-credit debit card? | Having worked at a financial institution, this is a somewhat simple, two-part solution. 1) The lendor/vendor/financial institution simply turns off the overdraft protection in all its forms. If no funds are available at a pin-presented transaction, the payment is simply declined. No fee, no overdraft, no mess. 2) This sticking point for a recurring transaction, is that merchants such as Netflix, Gold's Gym etc, CHOOSE to allow payments like this, BECAUSE they are assured they are going to get paid by the financial institution. It prevents them from having issues. Only a gift card will not cost you more money than you put in, BUT I know of several institutions, that too many non-payment periods can cause them to cease doing business with you in the future. TL:DR/IMO If you don't want to pay more than you have, gift cards are the way to go. You can re-charge them whenever you choose, and should you run into a problem, simply buy a new card and start over. |
“Infinite Banking” or “Be Your Own Bank” via Whole Life Insurance…where to start? | Why would you give them the money and borrow it back? If you didn't give it to them in the first place you wouldn't need to borrow! It makes no sense at all. It USED to have a different use--as a tax dodge. You would buy "life insurance" for a low amount of coverage and way overfund it. Let the money grow and in your later years you would "borrow" against the extra value you had built up in the policy. Since this was a loan rather than a payout it wasn't income. When you died the tax liability went poof. Thus so long as what you had to pay in life insurance + the inefficiency of the insurance company was less than the tax rate it was a good deal. Congress closed this loophole a long time ago by prohibiting too great overfunding. |
What does “check payable to” mean? | They are basically asking for the name of the legal entity that they should write on the check. You, as a person, are a legal entity, and so you can have them pay you directly, by name. This is in effect a "sole proprietorship" arrangement and it is the situation of most independent contractors; you're working for yourself, and you get all the money, but you also have all the responsibility. You can also set up a legal alias, or a "Doing Business As" (DBA) name. The only thing that changes versus using your own name is... well... that you aren't using your own name, to be honest. You pay some trivial fee for the paperwork to the county clerk or other office of record, and you're now not only John Doe, you're "Zolani Enterprises", and your business checks can be written out to that name and the bank (who will want a copy of the DBA paperwork to file when you set the name up as a payable entity on the account) will cash them for you. An LLC, since it was mentioned, is a "Limited Liability Company". It is a legal entity, incorporeal, that is your "avatar" in the business world. It, not you, is the entity that primarily faces anyone else in that world. You become, for legal purposes, an agent of that company, authorized to make decisions on its behalf. You can do all the same things, make all the same money, but if things go pear-shaped, the company is the one liable, not you. Sounds great, right? Well, there's a downside, and that's taxes and the increased complexity thereof. Depending on the exact structure of the company, the IRS will treat the LLC either as a corporation, a partnership, or as a "disregarded entity". Most one-man LLCs are typically "disregarded", meaning that for tax purposes, all the money the company makes is treated as if it were made by you as a sole proprietor, as in the above cases (and with the associated increased FICA and lack of tax deductions that an "employee" would get). Nothing can be "retained" by the company, because as far as the IRS is concerned it doesn't exist, so whether the money from the profits of the company actually made it into your personal checking account or not, it has to be reported by you on the Schedule C. You can elect, if you wish, to have the LLC treated as a corporation; this allows the corporation to retain earnings (and thus to "own" liquid assets like cash, as opposed to only fixed assets like land, cars etc). It also allows you to be an "employee" of your own company, and pay yourself a true "salary", with all the applicable tax rules including pre-tax healthcare, employer-paid FICA, etc. However, the downside here is that some money is subject to double taxation; any monies "retained" by the company, or paid out to members as "dividends", is "profit" of the company for which the company is taxed at the corporate rate. Then, the money from that dividend you receive from the company is taxed again at the capital gains rate on your own 1040 return. This also means that you have to file taxes twice; once for the corporation, once for you as the individual. You can't, of course, have it both ways with an LLC; you can't pay yourself a true "salary" and get the associated tax breaks, then receive leftover profits as a "distribution" and avoid double taxation. It takes multiple "members" (owners) to have the LLC treated like a partnership, and there are specific types of LLCs set up to handle investments, where some of what I've said above doesn't apply. I won't get into that because the question inferred a single-owner situation, but the tax rules in these additional situations are again different. |
Steps to buying a home | Pre-edit, Pete mentioned that he feels real estate agents would (a) like you to buy as much house as you afford, and (b) would love to show you three houses and have you choose one. As a real estate agent myself, I believe his warnings were understated. As with any industry, there are good and bad people. Agents are paid to move houses. If the median US home is under $200K, and commissions average say 5%, the $10,000 to be gained is split between the buyer brokerage and selling agent. The $5000 to each is then shared with 'the house.' So, this sale would net me $2500, gross. Move one a week, and the income is great, one per month, not so much. Tire kickers will waste an agent's time for a potential decision to wait another year and continue renting. Their obligation is to tell you the truth, but not to offer financial advice. Remember the mortgage crisis? It seems the banks and brokers aren't watching out for you either. They will tell you what they'll lend you, but not what you can afford. These numbers are worlds apart. I strongly recommend a 20% downpayment. The FHA PMI calculator shows that a 90% LTV (i.e. a 10% downpayment) for a $100K house will cost you $1200/yr in PMI. Think about this. For the $10,000 that you didn't put down, you are paying an extra $1200 each year. This is on top of the interest, so even at 5%, that last $10,000 is costing nearly 17%. If you can't raise that $10K (or whatever 10% is on that house) in cheaper funds, you should hold off. Using the 401(k) loan for this purpose is appropriate, yet emotionally charged. As if suck loans are written by the devil himself. "Buy the biggest house you can"? No. I have a better idea. Buy the smallest place you can tolerate. I have a living room (in addition to family room) that has been used 3 times in 20 years. A dining room we actually use. Twice per year. When your house is 50% too big, you pay 50% more property tax, more utility bills, and more maintenance. Closing costs, commission, etc, isn't cheap, but the lifetime cost of living in a too-big house is a money pit. |
Do I have to pay a capital gains tax if I rebuy the same stock within 30 days? | Yes. Wash rules are only for losses. |
How to open a Mega Money Market account without an ssn? | According to the IRS: Aliens who are not eligible to apply for a U.S. social security number, or who do not meet the Social Security Administration's evidence requirements for an SSN, may apply for an Individual Taxpayer Identification Numbers (ITIN) from the Internal Revenue Service if they have a valid tax reason for needing an ITIN, as explained in the Form W-7 instructions. Seeing as you don't have a valid tax reason for an ITIN, your request will probably be denied by the IRS. |
May 6, 2010 stock market decline/plunge: Why did it drop 9% in a few minutes? | No one is quite sure what happened (yet). Speculation includes: The interesting thing is that Procter & Gamble stock got hammered, as did Accenture. Both of which are fairly stable companies, that didn't make any major announcements, and aren't really connected to the current financial instability in Greece. So, there is no reason for there stock prices to have gone crazy like that. This points to some kind of screw up, and not a regular market force. Apparently, the trades involved in this event are going to be canceled. Edit #1: One thing that can contribute to an event like this is automatic selling triggered by stop loss orders. Say someone at Citi makes a mistake and sells too much of a stock. That drives the stock price below a certain threshold. Computers that were pre-programmed to sell at that point start doing their job. Now the price goes even lower. More stop-loss orders get triggered. Things start to snowball. Since it's all done by computer these days something like this can happen in seconds. All the humans are left scratching their heads. (No idea if that's what actually happened.) Edit #2: IEEE Spectrum has a pretty concise article on the topic. It also includes some links to follow. Edit #3 (05/14/2010): Reuters is now reporting that a trader at Waddell & Reed triggered all of this, but not through any wrongdoing. Edit #4 (05/18/2010): Waddell & Reed claims they didn't do it. The House Financial Services Subcommittee investigated, but they couldn't find a "smoking gun". I think at this point, people have pretty much given up trying to figure out what happened. Edit #5 (07/14/2010): The SEC still has no idea. I'm giving up. :-) |
Bollinger Bands and TRENDING market | If upper and bollinger bands either converge (both bands are getting more and more close together) or diverge (both bands are getting more and more away from each other), does that mean the market is TRENDING? The answer is no. The divergence or convergence of BB-upper & lower band does not indicate if the market is trending or not. It only indicated if volatility is increasing or decreasing. Or is market trending only in case if both bands, upper and lower, are parallel and at the same time NOT horizontal? The answer is yes. To understand the reason consider that BB is constructed from a central Moving Average along with standard deviation. Upper Band=MA+2*SD, Lower Band=MA-2*SD. A moving average is a trend following indicator and volatility has nothing to do with trend (as SD only measures the price movement around the mean). Which essentially means BB has trend following qualities. The upper and lower bands remain more or less parallel in between band contraction and expansion. Refer below: You shall see distinctly phases when BB bands are not parallel and are parallel and not horizontal. As mentioned above, when BB bands are expanding or contracting they do not give indication of the trend direction. When they are parallel, close or apart and not horizontal, they provide a good directional bias through the general slope. Though a more effective method to determine trend and its direction is the central MA of BB. Again, refer below: Here you can see that some portion of the bands are parallel and more or less horizontal. The price action would tell you that the stock is now range-bound as opposed to trending. The primary use of the BB bands are to gauge volatility as @misantroop stated. The primary trend direction is usually derived from the central MA. |
Are bonds really a recession proof investment? | Yes. Bonds perform very well in a recession. In fact the safer the bond, the better it would do in a recession. Think of markets having four seasons: High growth and low inflation - "growing economy" High growth and high inflation - "overheating economy" Low growth and high inflation - "stagflation" Low growth and low inflation - "recession" Bonds are the best investment in a recession. qplum's flagship strategy had a very high allocation to bonds in the financial crisis. That's why in backtest it shows much better returns. |
How much should a new graduate with new job put towards a car? | In a very similar situation as yours, I bought a used motorcycle for $3000. It was still reasonably new, very reliable, and with California weather, you can use it year-round. It reduced my time in traffic, and it had very low fuel and maintenance costs. The biggest expense was tires. The biggest pitfall in buying a motorcycle is auto-insurance. Do your research and ask for quotes from your broker before even considering a particular model of bike. When I decided that my finances justified a new motorcycle, I was surprised that full collision coverage cost about $3000/year on a lower powered bike that had a bad accident record because it appealed to new riders. I got a much more powerful bike that appealed to more experienced riders and the premium was only $500/year. Is this answer not what you were looking for? Spend as little as you can on a 4-6 year old car. Drive it until you can save enough cash to buy the one you really want. I'm currently driving a 2007 Corolla, and I'm waiting until I can get a new civic turbo with a manual transmission to replace it. (They currently only offer them with a CVT, but next fall they'll have them with the MT, so I'm probably 2 1/2 years out from buying one used.) |
Renting from self during out of area remodel project - deductible? | There are certain situations where you could legally pay yourself rent, but it'd be in the context of multiple business entities interacting, never in the context of an individual renting their own property. Even if you could, any rent paid to yourself would count as rental income, so there'd be no benefit. Edit: I was hunting for examples where it might be acceptable, and didn't, but I found a good explanation as to why it is not acceptable from Brandon Hall on a BiggerPockets post: To get technical, you will be going up against the Economic Substance Doctrine which states that a transaction has economic substance if: (1) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position; and (2) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction. By transferring your primary residence into a LLC, you would not be changing your economic position. Further, you do not have a substantial purpose for entering into such transaction other than to simply avoid paying federal income taxes. So it might make sense if multiple people owned the LLC that owned the property you wanted to rent, and there are instances where company X owns holding company Y that owns an office building that company X rents space in. But if you're the sole player in the LLC's then it sounds like a no-go. |
Can stock brokerage firms fail? | Yes, the entire financial system is based on trust. As we have seen repeatedly, even the ratings agencies can be wrong and in collusion. You need to understand what products have any insurance/contingency/recourse if things don't go as planned. A lot of people were surprised when they found out SIPC didn't ensure futures when MF Global declared bankruptcy last fall. |
How does the spread on an orderbook affect shorting? | It this a real situation or is it a made up example? Because for a stock that has a last traded priced of $5 or $6 and volume traded over $4M (i.e. it seems to be quite liquid), it is hardly likely that the difference from bid to ask would be as large as $1 (maybe for a stock that has volume of 4 to 5 thousand, but not for one having volume of 4 to 5 million). In regards to your question, if you were short selling the order would go in exactly the same as if you were selling a stock you owned. So your order would be on the ask side and would need to be matched up with a price on the bid side for there to be a trade. |
Is engaging in stocks without researching unwise? | If you don't want to do the deep research on each individual company, you might want to look at index funds and similar "whole market" investments. |
If I put a large down payment (over 50%) towards a car loan, can I reduce my interest rate and is it smart to even put that much down? | I had a strange experience buying a new car. They were offering a deal of 0.9% interest on the loan but only if the loan was above a certain amount. Below that amount, the interest rate was something like 3%. Given the amount I was willing to put down, it was cheaper to put less down and get the lower interest rate. So, once you agree to the purchase price, you need to discuss what finance options they offer. You might also check in advance with other loan providers (e.g. your bank) to see what offers they have. |
Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? | In the first case, if you wish to own the stock, you just exercise the option, and buy it for the strike price. Else, you can sell the option just before expiration, it will be priced very close to its in-the-money value. |
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