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Pay off credit cards in one lump sum, or spread over a few months? | Pay them off immediately. But, as I note in my article Too Little Debt?, a zero utilization is actually a negative hit. So you want to just use the cards to get over 1%. i.e. if the lines add to $38K, just charge say, gas and some groceries, $100/wk. Pay in full every month. It's the amount on the statement that counts, not the amount carried month to month accruing interest, which, I hope is zero for you from now on. |
Do ETF dividends make up for fees? | It depends. Dividends and fees are usually unrelated. If the ETF holds a lot of stocks which pay significant dividends (e.g. an S&P500 index fund) these will probably cover the cost of the fees pretty readily. If the ETF holds a lot of stocks which do not pay significant dividends (e.g. growth stocks) there may not be any dividends - though hopefully there will be capital appreciation. Some ETFs don't contain stocks at all, but rather some other instruments (e.g. commodity-trust ETFs which hold precious metals like gold and silver, or daily-leveraged ETFs which hold options). In those cases there will never be any dividends. And depending on the performance of the market, the capital appreciation may or may not cover the expenses of the fund, either. If you look up QQQ's financials, you'll find it most recently paid out a dividend at an annualized rate of 0.71%. Its expense ratio is 0.20%. So the dividends more than cover its expense ratio. You could also ask "why would I care?" because unless you're doing some pretty-darned-specific tax-related modeling, it doesn't matter much whether the ETF covers its expense ratio via dividends or whether it comes out of capital gains. You should probably be more concerned with overall returns (for QQQ in the most recent year, 8.50% - which easily eclipses the dividends.) |
Didn't apply for credit card but got an application denied letter? | This question has the [united kingdom] tag, so the information about USA or other law and procedures is probably only of tangential use. Except for understanding that no, this is not something to ignore. It may well indicate someone trying to use your id fraudulently, or some other sort of data-processing foul-up that may adversely impact your credit rating. The first thing I would do is phone the credit card company that sent the letter to inform them that I did not make his application, and ask firmly but politely to speak to their fraud team. I would hope that they would be helpful. It's in their interests as well as yours. (Added later) By the way, do not trust anything written on the letter. It may be a fake letter trying to lure or panic you into some other sort of scam, such as closing your "compromised" bank account and transferring the money in it to the "fraud team" for "safety". (Yes, it sounds stupid, but con-men are experts at what they do, and even finance industry professionals have fallen victim to such scams) So find a telephone number for that credit card company independently, for example Google, and then call that number. If it's the wrong department they'll be able to transfer you internally. If the card company is unhelpful, you have certain legal rights that do not cost much if anything. This credit company is obliged to tell you as an absolute minimum, which credit reference agencies they used when deciding to decline "your" application. Yes, you did not make it, but it was in your name and affected your credit rating. There are three main credit rating agencies, and whether or not the bank used them, I would spend the statutory £2 fee (if necessary) with each of them to obtain your statutory credit report, which basically is all data that they hold about you. They are obliged to correct anything which is inaccurate, and you have an absolute right to attach a note to your file explaining, for example, that you allege entries x,y, and z were fraudulently caused by an unknown third party trying to steal your ID. (They may be factually correct, e.g. "Credit search on ", so it's possible that you cannot have them removed, and it may not be in your interests to have them removed, but you certainly want them flagged as unauthorized). If you think the fraudster may be known to you, you can also use the Data Protection Act on the company which write to you, requiring them to send you a copy of all data allegedly concerning yourself which it holds. AFAIR this costs £10. In particular you will require sight of the application and signature, if it was made on paper, and the IP address details, if it was made electronically, as well as all the data content and subsequent communications. You may recognise the handwriting, but even if not, you then have documentary evidence that it is not yours. As for the IP address, you can deduce the internet service provider and then use the Data Protection act on them. They may decline to give any details if the fraudster used his own credentials, in which case again you have documentary evidence that it was not you ... and something to give the police and bank fraud investigators if they get interested. I suspect they won't be very interested, if all you uncover is fraudulent applications that were declined. However, you may uncover a successful fraud, i.e. a live card in your name being used by a criminal, or a store or phone credit agreement. In which case obviously get in touch with that company a.s.a.p. to get it shut down and to get the authorities involved in dealing with the crime. In general, write down everything you are told, including phone contact names, and keep it. Confirm anything that you have agreed in writing, and keep copies of the letters you write and of course, the replies you receive. You shouldn't need any lawyer. The UK credit law puts the onus very much on the credit card company to prove that you owe it money, and if a random stranger has stolen your id, it won't be able to do that. In fact, it's most unlikely that it will even try, unless you have a criminal record or a record of financial delinquency. But it may be an awful lot of aggravation for years to come, if somebody has successfully stolen your ID. So even if the first lot of credit reference agency print-outs look "clean", check again in about six weeks time and yet again in maybe 3 months. Finally there is a scheme that you can join if you have been a victim of ID theft. I've forgotten its name but you will probably be told about it. Baically, your credit reference files will be tagged at your request with a requirement for extra precautions to be taken. This should not affect your credit rating but might make obtaining credit more hassle (for example, requests for additional ID before your account is opened after the approval process). Oh, and post a letter to yourself pdq. It's not unknown for fraudsters to persuade the Post Office to redirect all your mail to their address! |
Investment for beginners in the United Kingdom | I'm in the US as well, but some basic things are still the same. You need to trade through a broker, but the need for a full service broker is no longer necessary. You may be able to get by with a web based brokerage that charges less fees. If you are nervous, look for a big name, and avoid a fly by night company. Stick with non-exotic investments. don't do options, or futures or Forex. You may even want to skip shares all together and see if UK offers something akin to an index fund which tracks broad markets (like the whole of the FTSE 100 or the S&P 500) as a whole. |
Clarification on 529 fund | Yes, maybe. The 529 is pretty cool in that you can open an account for yourself, and change the beneficiary as you wish, or not. In theory, one can start a 529 for children or grandchildren yet unborn. Back to you - a 529 is not deductible on your federal return. It grows tax deferred, and tax free if used for approved education. Some states offer deductions depending on the state. There is a list of states that offer such a deduction. |
Student loan payments and opportunity costs | I'll use similar logic to Dave Ramsey to answer this question because this is a popular question when we're talking about paying off any debt early. Also, consider this tweet and what it means for student loans - to you, they're debt, to the government, they're assets. If you had no debt at all and enough financial assets to cover the cost, would you borrow money at [interest rate] to obtain a degree? Put it in the housing way, if you paid off your home, would you pull out an equity loan/line for a purchase when you have enough money in savings? I can't answer the question for you or anyone else, as you can probably find many people who will see benefits to either. I can tell you two observations I've made about this question (it comes a lot with housing) over time. First, it tends to come up a lot when stocks are in a bubble to the point where people begin to consider borrowing from 0% interest rate credit cards to buy stocks (or float bills for a while). How quickly people forget what it feels (and looks like) when you see your financial assets drop 50-60%! It's not Wall Street that's greedy, it's most average investors. Second, people asking this question generally overlook the behavior behind the action; as Carnegie said, "Concentration is the key to wealth" and concentrating your financial energy on something, instead of throwing it all over the place, can simplify your life. This is one reason why lottery winners don't keep their winnings: their financial behavior was rotten before winning, and simply getting a lot of money seldom changes behavior. Even if you get paid a lot or little, that's irrelevant to success because success requires behavior and when you master the behavior everything else (like money, happiness, peace of mind, etc) follows. |
Which Novo Nordisk ticker is most tax efficient in a UK SIPP? | What I ended up doing was finding where each ticker of Novo was registered (what exchange), then individually looking up the foreign taxation rules of the containing country. Luckily, most companies only have a few tickers so this wasn't too hard in the end. |
Do you avoid tax when taking a home equity loan? | You'll be taxed when you sell the house, but not before that (or if you do some other transaction that realizes the gain, talk to your real estate attorney or accountant for more details). A Home Equity line-of-credit is simply a secured loan: it's a loan, conditioned on if you fail to pay it back, they have a lien on your house (and may be able to force you to sell it to pay the loan back). |
Can we cash a check under business name? | All banks in the US that I have ever worked with will allow you to deposit checks if: In your case, you have 3 options: |
A guy scammed me, but he gave me a bank account number & routing number. Can I use that to take out what he owes me? | OK, reading between the lines here it looks like the services offered by your company are of an "adult" (possibly illegal?) nature and that this individual has actually paid you in full for the services rendered up to this point. The wrinkle here is that you say that you've been offered large cash "gifts" in return for unspecified future favours, but that your client hasn't provided a real Paypal account to do so. When you pressed him on it, he sent a fake email and invented a "financial adviser" to fob you off, then hasn't contacted you since. It's pretty clear that he hasn't got any intention of making these payments to you. What you're now proposing to do is to use his known banking details to collect money to cover those verbal promises. In pretty much every part of the world, that's a crime. Without a written agreement to use that payment method for those promises, he could easily call the police and have you arrested for theft of funds. The further wrinkle is that his actions (claiming to have made payment via paypal, forged email headers, etc) strongly suggest that this individual is involved in cyber-crime and may well have used a fake bank account to pay for your initial services. The bottom line here is that you need real legal advice, from an actual lawyer. |
If the co-signer on my car loan dies, can the family take the car from me like they're threatening to? | If you've been paying on the car for three years, it's possible that your credit is in a place where you don't need a co-signer any more. See if your bank will re-fi with you as the sole debtor. If they won't do it, find another institution who will. The re-fi will take your grandpa off the loan, and whichever institution that does the re-fi will still have a lien on the title until you pay it off. Then, if you can do this soon enough, figure out if grandpa can sign you off the title. |
What does an x% inflation rate actually mean? | Let's say there's a product worth $10 in July and the inflation rate in August is 10%. Will it then cost $11 in August? Yes. That's basically what inflation means. However. The "monthly" inflation numbers you typically see are generally a year over year inflation rate on that month. Meaning August 2017 inflation is 10% that means inflation was 10% since last July 2016, not since July 2017. At the micro consumer level, inflation is very very very vague. Some sectors of the economy will inflate faster than the general inflation rate, others will be slower or even deflate. Sometimes a price increase comes with a value increase so it's not really inflation. And lastly, month over month inflation isn't something you will feel. Inflation is measured on the whole economy, but actual prices move in steps. A pear today might cost $1, and a pear in five years might cost $1.10. That's 10% over 5 years or about 2% per year but the actual price change might have been as abrupt as yesterday a pear was $1 and now it's $1.10. All of the prices of pears over all of the country won't be the same. Inflation is a measure of everything in the economy roughly blended together to come up with a general value for the loss in purchasing power of a currency and is applicable over long periods. A USD inflation rate of 3% does not mean the pear you spent $1 on today will necessarily cost $1.03 next year. |
Joining a company being acquired | Is there anything I need to ask or consider during my negotiation process based on the fact that they probably will soon be own by another company? Very tricky situation. You are being hired by one company, and one hiring manager. But you already know that there are big changes ahead. What you don't know is how all those changes will actually play out. You will at least end up working for a different company. I've worked for several companies in the past that were acquired, and some that acquired other companies. After each acquisition, the nature of the company changed significantly. Some teams were let go completely (often "overhead" departments like accounting, marketing, etc, that were handled at the corporate level), some teams were moved to a different location, others stayed the same. Sometimes management changed. In one case I was working for a new boss who worked out of the home office in another state. The time frame for these changes ranged from immediately, to several years after the acquisition. For me at least, some of the things that made the job appealing earlier typically were gone. Try as best you can to ask questions about the acquisition, and about the nature of the acquiring company. If they are allowed to tell you the name of the company that is acquiring them, do some searching. See if you can find out how the company typically deals with acquisitions - do they immediately let almost everyone go (keeping only the "essential" few), or do they run new acquisitions as separate divisions and leave them alone for at least a while? Try to find out from your hiring manager what their expectations are for your specific team post-acquisition. Try to find out if anything within your offer is subject to change, post-acquisition. Are you being hired under the old, pre-acquisition rules? Or under the new, post-acquisition rules? The fact that you even know the company is being acquired is good. Often, companies cannot even divulge that fact until very near the end. On the other hand your use of the phrase "probably will soon", makes me wonder how much is definite here. Here's something you might wish to read: https://workplace.stackexchange.com/questions/20357/a-coworker-beat-me-to-resignation-how-can-i-resign-in-a-professional-manner |
183 day rule in conjunction with expatriate | There's no "183 days" rule. As a US citizen you must pay taxes on all your income, where you live is irrelevant. |
FICA was not withheld from my paycheck | According to this section in Publication 15: Collecting underwithheld taxes from employees. If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you’re the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. [...] it seems that if the employer withheld less than the correct amount of FICA taxes from you, it is still the employer who owes your FICA taxes to the government, not you. I do not believe there is a way for you, an employee (not self-employed), to directly pay FICA taxes to the government without going through the employer. The employer can deduct the underwithheld amount from you future paychecks (assuming you still work for them), or settle it with you in some other way. In other words, you owe the employer, and the employer owes the government, but you do not directly owe the government. If they do deduct it from your future pay, then they can issue a corrected W-2, to reflect the amount deducted from you. But they cannot issue a corrected W-2 that says FICA were deducted from you if it wasn't. |
Can I do periodic rollovers from my low-perfoming 401k to an IRA? | There are certain allowable reasons to withdraw money from a 401K. The desire to free your money from a "bad" plan is not one of them. A rollover is a special type of withdrawal that is only available after one leaves their current employer. So as long as you stay with your current company, you cannot rollover. [Exception: if you are over age 59.5] One option is to talk to HR, see if they can get a expansion of offerings. You might have some suggestions for mutual funds that you would like to see. The smaller the company the more likely you will have success here. That being said, there is some research to support having few choices. Too many choices intimidates people. It's quite popular to have "target funds" That is funds that target a certain retirement year. Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund. These are a collection of funds that rebalances the investment as they age. The closer one gets to retirement the more goes into bonds and less into stocks. However, I think such rebalancing is not as smart as the experts say. IMHO is almost always better off heavily invested in equity funds. So this becomes a second option. Invest in a Target fund that is meant for younger people. In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match. Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested. You could always move on to a different employer and ask some really good questions about their 401K. Which leads me back to talking with HR. With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year. No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it. |
Roth IRA all in one fund, or not? [duplicate] | First, you should diversify your portfolio. If your entire portfolio is in the Roth IRA, then you should eventually diversify that. However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund. For example, I used my IRA to buy a riskier REIT that my 401k doesn't support. Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees. It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested. Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000. So try to exceed the minimum with a decent cushion. A balanced fund may make sense as a first fund. That way they handle the diversification for you. A targeted fund is a special kind of balanced fund that changes the balance over time. Some have reported that targeted funds charge higher fees. Commissions on those higher fees may explain why your bank wants you to buy. I personally don't like the asset mixes that I've seen from targeted funds. They often change the stock/bond ratio, which is not really correct. The stock/bond ratio should stay the same. It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement. Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund. Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market. Long term, I'd prefer low-load index funds. A bond fund and two or three stock funds. You might want to build your balance first though. It doesn't really make sense to have a separate fund until you have enough money to get the best fees. 70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%). Balance annually when you make your new deposit. |
What could be the harm in sharing my American Express statements online? | As a person who has had several part time assistants in the past I will offer you a simple piece of advise that should apply regardless of what country the assistant is located. If you have an assistant, personal or business, virtual or otherwise, and you don't trust that person with this type of information, get a different assistant. An assistant is someone who is supposed to make your life easier by off loading work. Modifying your records before sending them every month sounds like you are creating more work for yourself not less. Either take the leap of faith to trust your assistant or go somewhere else. An assistant that you feel you have to edit crucial information from is less than useful. That being said, there is no fundamental reason to believe that an operation in the Philippines or anywhere else is any more or less trustworthy than an operation in your native country. However, what is at issue is the legal framework around your relationship and in particular your recourse if something goes wrong. If you and your virtual assistant are both located in the US you would have an easier time collecting damages should something go wrong. I suggest you evaluate your level of comfort for risk vs. cost. If you feel that the risk is too high to use an overseas service versus the savings, then find someone in the states to do this work. Depending on your needs and comfort you might want to seek out a CPA or other licensed/bonded professional. Yes the cost might be higher however you might find that it is worth it for your own piece of mind. As a side note you might even consider finding a local part-time assistant. This can often be more useful than a virtual assistant and may not cost as much as you think. If you can live without someone being bonded. (or are willing to pay for the bonding fee) yourself, depending on your market and needs you may be able to find an existing highly qualified EA or other person that wants some after hours work. If you are in a college town, finance, accounting or legal majors make great assistants. They will usually work a couple hours a week for "beer money", they have flexible schedules and are glad to have something pertinent to their degree to put on their resume when they graduate. Just be prepared to replace them every few years as they move on to real jobs. |
Car Loan upside down--refinance before selling? | Carmax will be interested in setting a price that allows them to make money on the reselling of the vehicle. They won't offer you more than that. The determination of the value compared to the BlueBook value is based on condition and miles. The refinancing of the auto loan could lower your monthly payment, but may not save you any money in the short term. The new lender will also want an evaluation of the vehicle, and if it is less than the payoff amount of the current loan they will ask you to make a lump sum payment. This is addition to the cost of getting the new loan setup. If you can pay the delta between the value of the car and loan then do so, when you sell the car. Don't refinance unless you plan on keeping the car for many months, or you are just adding paperwork to the transaction. |
Buying puts without owning underlying | In the money puts and calls are subject to automatic execution at expiration. Each broker has its own rules and process for this. For example, I am long a put. The strike is $100. The stock trades at the close, that final friday for $90. I am out to lunch that day. Figuratively, of course. I wake up Saturday and am short 100 shares. I can only be short in a margin account. And similarly, if I own calls, I either need the full value of the stock (i.e. 100*strike price) or a margin account. I am going to repeat the key point. Each broker has its own process for auto execution. But, yes, you really don't want a deep in the money option to expire with no transaction. On the flip side, you don't want to wake up Monday to find they were bought out by Apple for $150. |
Should we prepay our private student loans, given our particular profile? | You're in good shape as long as your income stays. Your only variable-rate debt now is your private student loan. I think you'd be wise to pay that down first, and you sense that already. Worst-case, in the event of a bankruptcy, student loans usually cannot be discharged, so that isn't a way out. Once that loan is gone, apply what you were paying to your other student loan to knock that out. You might investigate refinancing your home (to another 30-year fixed). You may be able to shave a half-percent off if your credit is stellar. Given the size of the mortgage, this could be several thousand out of pocket, so consider that when figuring out potential payback time. Consider using any "free time" to starting up a side business (I'm assuming you both have day jobs but that may not be a correct assumption). Start with what you know well. You and your wife are experts in something, and have passion about something. Go with that. Use the extra income from that to either pay down your debts faster, or just reinvest in the business so that you can offset the income on your taxes. Again, you're in good shape. Just do what you can to protect and grow your income streams. |
How are shares used, and what are they, physically? | If you are particularly interested in the share certificate artifacts themselves, there is a collection hobby in paper share certificates and bonds, called scripophily. This can include both active share certificates (for instance, think about giving your kid or grandkid a frameable paper share of Hasbro, Disney or McDonalds?), inactive certificates from famous bankruptcies or famous companies of the past, or just the visual interest in scrollwork and engraved vignettes. |
What are the best software tools for personal finance? | KMyMoney Pros: Cons: |
How do I estimate my taxes when I have only 1099 income? | So there are a lot of people that get into trouble in your type of self employment situation. This is what I do, and I use google drive so there are no cost for tools. However, having an accounting system is better. Getting in trouble with the IRS really sucks bad. |
How much of a down payment for a car should I save before purchasing it? | At minimum, put down the sale price less what insurance would pay if you got in an accident when driving home, OR purchase gap insurance. This auto loan calculator is fun to play around with. The larger the down payment, the smaller your monthly payments will be. Don't forget to budget insurance and gas! Insurance on a car you make payments on is more expensive. http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx A buddy of mine had a string of bad luck and totaled his car a few months after the date of purchase. He learned what it meant to be 'underwater', insurance paid him a few thousand less than the value of his loan. What's worse than having no car, having no car and a loan! |
Should I stockpile nickels? | At one point it was illegal to melt silver coins in the US, but it is legal now. I don't know that will happen with copper coins, but that's what happened with silver coins. Accumulating nickels and leaving them as-is (in their spendable state) is legal. It's also a way to take physical ownership of copper. I expect to see more sales of nickels based on weight. People are already selling high-copper-content cents on eBay, by weight. There are machines in production that sort the zinc ones from the copper ones. Gresham's Law has small business backing. ;) Copper cents are already worth twice their face value in the copper content. Nickels will get up there, too. They are awfully heavy and bulky relative to their value, though. Precious metals give you better bang for your ounce. |
Cannot get a mortgage because I work through a recruiter | I think you are running into multiple problems here: All these together look like a high risk to a bank, especially right now with companies being reluctant to hire full-time employees. Looking at it from their perspective, the last thing they need right now is another potential foreclosure on their books. BTW, if it is a consolation, I had to prove 2 years of continuous employment (used to be a freelancer) before the local credit union would consider giving me a mortgage. We missed out on a couple of good deals because of that, too. |
Approximate IT company valuation (to proximate stock options value) | You also need to remember that stock options usually become valueless if not exercised while an employee of the company. So if there is any chance that you will leave the company before an IPO, the effective value of the stock options is zero. That is the safest and least risky valuation of the stock options. With a Google or Facebook, stock options can be exercised and immediately sold, as they are publicly traded. In fact, they may give stock grants where you sell part of the grant to pay tax withholding. You can then sell the remainder of the grant for money at any time, even after you leave the company. You only need the option/grant to vest to take advantage of it. Valuing these at face value (current stock price) makes sense. That's at least a reasonable guess of future value. If you are absolutely sure that you will stay with the company until the IPO, then valuing the stock based on earnings can make sense. A ten million dollar profit can justify a hundred million dollar IPO market capitalization easily. Divide that by the number of shares outstanding and multiply by how many you get. If anything, that gives you a conservative estimate. I would still favor the big company offers though. As I said, they are immediately tradeable while this offer is effectively contingent on the IPO. If you leave before then, you get nothing. If they delay the IPO, you're stuck. You can't leave the company until then without sacrificing that portion of your compensation. That seems a big commitment to make. |
Should I pay off a 0% car loan? | Here's my take: 1) Having a car loan and paying it on time helps build credit. Not as much as having credit cards (and keeping them paid or carrying balance just enough to be reported and then paying it), but it counts. 2) Can't you set in your bank, not the lender, something to pay the car automagically for you? Then you will be paying it on time without having to think on it. 3) As others said, do read the fine print. |
Visiting vacation rental with immediate family | If you and your wife are owners, your tickets might be a business expense against the rental income. 'Might' as in the IRS will be happy to audit you, seeing the kids went as well and prorating the expense as say 25% was really business, the rest, family vacation. If this $4000 write off is the make or break for this deal, don't do it. |
Tax planning for Indian TDS on international payments | I am an Israeli based citizen who represents and Indian company who sells its products in Israel. As an agent I am entitled to commission on sales on behalf the Indian company who advised that. Any commission paid to you will be applicable to TDS at 20.9% of the commission amount, the tax will be paid and a Tax paid certificate will be given to you. According to a Bilateral Double tax avoidance treaty if the tax has been deducted in India you will get credit for this tax in Israel. |
Confused about employee stock options: How do I afford these? | the short answer is: No. you do not HAVE to pay $125,000.00 at the end of your first year. that is only the amount IF you decide to exercise. *fine print: But if you leave or get let go (which happens quite frequently at top tier Silicon Valley firms), you lose anything that you don't exercise. you're basically chained by a pair of golden handcuffs. in other words, you're stuck with the company until a liquidation event such as IPO or secondary market selling (you can expect to spend a few years before getting anything out of your stocks) Now, it's hard to say whether or not to exercise at that time, especially given we don't know the details of the company. you only should exercise if you foresee your quitting, anticipate getting fired, AND you strongly feel that stock price will keep going up. if you're in SF bay, i believe you have 10 years until your options expire (at which point they are gone forever, but that's 10 years and usually companies IPO well within 7 years). i would recommend you get a very good tax advisor (someone that understands AMT and stock options tax loopholes/rules like the back of their hand). I'm going to take a long shot and assume that you got an amazing offer and that you got a massive amount of ISOs from them. so i'll give this as an advice - first, congrats on owning a lot on paper today if you're still there. you chose to be an early employee at a good tech company. However, you should be more worried about AMT (alternative min tax). you will get enslaved by the IRS if you exercise your shares and can't pay the AMT. suppose, in your fictional scenario, your stock options increase 2x, on paper. you now own $1 Mil in options. but you would be paying $280000 in taxes if you chose to exercise them right now. Now, unless you can sell that IMMEDIATELY on the secondary market, i would highly advise you not to exercise right now. only exercise your ISOs when you can turn around and sell them (either waiting for IPO, or if company offers secondary market approved trading). |
Changing the price in a limit order | This depends on the stock exchange in question. Generally if you modify an existing order [including GTC], these are internally treated as Cancel/Replace Orders. Depending on the action, you may lose the time priority position and a new position would get assigned. More here. (f) Cancel/Replace Orders. Depending on how a quote or order is modified, the quote or order may change priority position as follows: (1) If the price is changed, the changed side loses position and is placed in a priority position behind all orders of the same type (i.e., customer or non-customer) at the same price. (2) If one side's quantity is changed, the unchanged side retains its priority position. (3) If the quantity of one side is decreased, that side retains its priority position. (4) If the quantity of one side is increased, that side loses its priority position and is placed behind all orders of the same type at the same price. |
What are the advantages of a Swiss bank account? | Here are some reasons why it is advantageous to hold a portion of your savings in other countries: However, it should be noted that there are some drawbacks to holding funds in foreign banks: Don't worry; I haven't forgotten about the elephant in the room. What about tax evasion and money laundering? In general, simply transferring funds to a foreign jurisdiction will do nothing to help you evade taxes or hide evidence of a crime. Pretty much any method you can think of to transfer money is easily traceable, and any method that is difficult to trace is either illegal or heavily-regulated, with stiff penalties if you get caught. There are a few jurisdictions that have very strict banking privacy laws (the Philippines, for example). If you can somehow get the money into a bank account in one of these countries, you might be OK... at least, until that country's government decides (or is pressured) to change its banking privacy laws. But, what would you actually do with that money? Unless you want to go live in that country, you're going to have to transfer the funds out to spend them, and now you're right back on the radar — except now it's even worse, because the fact that the funds come from a suspicious jurisdiction will automatically cause your transfer to get flagged for investigation! This is where money laundering comes into play. There are lots of ways to go about this (exceptionally illegal) activity, many of which do not involve banks at all (at least, not directly). How money laundering works is outside the scope of this question, but in case you are curious, here are a couple of articles about the "dark side" of finance: In short, if you want to break the law, opening a foreign bank account isn't going to help much. In fact, the real crime is that offshore banking has such a criminal reputation in the first place! That said, it is possible to create legal distance between yourself and your money by using a corporate structure, and there are legitimate reasons why you might want to do this. Depending on which jurisdiction(s) you are a tax resident of, you can use this method to: Exactly how to do this is outside the scope of this question, but it's worth thinking about, especially if you have an interest in geopolitically diversifying your financial assets. If you're interested in learning more, I came across a pretty comprehensive article about Offshore Basics that covers how and why to set up offshore legal structures. (and yes, that makes now 4 links from the same site in one post! I promise it's just a coincidence; see disclaimer below) I am a US citizen with bank accounts in several countries (but not Switzerland; there are far better options out there right now). I have no affiliation with the website linked in this answer; while I was doing research for this answer, I found some really good supporting content, and it all just happened to be from the same source. |
Am I “cheating the system” by opening up a tiny account with a credit union and then immediately applying for a huge loan? | Credit Unions turn a profit by lending money at a higher interest rate than their savings do, just like banks do. It is an amoral feat, completely parallel to any moral weights you have assigned to "the system". If the most favorable circumstance is you receiving access to capital, then you can easily achieve that with zero reservations about the system that granted it to you. |
What is the best credit card for someone with no credit history | You have what is called in the biz a "thin file". Check with a Credit Union. They will get you a secured card or maybe a straight credit card. They usually will graduate you from a secured card to a real credit card in 12-18 months. Then you are on your way. You should also sign up for Creditkarma to get your credit report updated every week. They make their money on referring people to credit card companies so you might be able to kill two birds with one stone. |
Prepaid Rent (Accrual Based Accounting) | Your account entries are generally correct, but do note that the last transaction is a mixture of the balance sheet and income statement. If Quickbooks doesn't do this automatically then the expense must be manually removed from the balance sheet. The expense should be recognized on the balance sheet and income statement when it accrues, and it accrues when the prepaid rent is extinguished when consumed by the landlord, so that is when the second entry in your question should be booked. The cash flow statement will reflect all of these cash transactions immediately. |
Where should I invest my savings? | Since you mention the religion restriction, you should probably look into the stock market or funds investing in it. Owning stock basically means you own a part of a company and benefit from any increase in value the company may have (and 'loose' on decreases, provided you sell your stock) and you also earn dividends over the company's profit. If you do your research properly and buy into stable companies you shouldn't need to bother about temporary market movements or crashes (do pay attention to deterioration on the businesses you own though). When buying stocks you should be aiming for the very long run. As mentioned by Victor, do your research, I recommend you start it by looking into 'value stocks' should you choose that path. |
From Facebook's perspective, was the fall in price after IPO actually an indication that it went well? | @Joe.E, I disagree with your logic. The IPO clearly didn't go well--not relative to other IPOs. Were it not for the stocks underwriters stepping in late in the trading day, Facebook would likely have closed below their opening price. This story and others indicate that institution investors were given negative information by an analyst for the underwriters that other investors didn't have. This inside knowledge is certainly contributing to the drop in the stock. It's fair to argue that many individual investors were suckered into buying the stock at the IPO price because of this incomplete disclosure. It wouldn't surprise if what's happens has a negative impact on future trading volume, and creates reluctance to invest in the firm--which would certainly be an additional negative outcome beyond the dropping stock price. Edit: Dilip mentioned a lawsuit. Here's a link to an article about it. |
Owning REIT vs owning real estate - which has a better hypothetical ROI? | You've already hit on the big difference. If you buy a property, you've made a big commitment, for better or worse. If you bought wisely, you'll be very happy. If not, you could go bankrupt. An REIT spreads out the risk, but the reward isn't as great. There's less barrier to entry in buying shares of an REIT than there is in buying an investment property: money, time, maintenance. The answer for you depends on what level of effort you want to put into your investment. If you are all ready to pick up an investment property, make the down payment, get appraisal and inspection, clean up the house, and fill it with tenants, then go for it. Otherwise, research some REITs and buy some shares. (Disclaimer: I have a rental property that's doing pretty well now.) |
How are the best way to make and save money at 22 years old | Get an education. A bachelor's degree preferably, but AA or even a certificate are fine too. It will increase your earning potential significantly and over your lifetime it will earn you a lot of money. You make around $30,000 a year now, median salary for someone with a bachelors in the humanities is around $45,000. If you degree is in the STEM field, that goes up to $55,000 - $65,000 range. Second best option is to start a small business of some kind that does not require substantial investment. Handyman comes to mind as an example or some sort of billing service maybe? I would not recommend self directed investment in the stock market - most people lose money and since you don't have a lot of money to invest, commissions and fees will eat up a significant portion of it. I would usually recommend a CD but interest rates it's not really worth it. |
Why do people buy stocks that pay no dividend? | Instead of giving part of their profits back as dividends, management puts it back into the company so the company can grow and produce higher profits. When these companies do well, there is high demand for them as in the long term higher profits equates to a higher share price. So if a company invests in itself to grow its profits higher and higher, one of the main reasons investors will buy the shares, is in the expectation of future capital gains. |
Proper etiquette for loans from friends | The standard approach is to reach an agreement and put it in writing. What you agree upon is up to you, but in the US if you want to avoid gift taxes larger loans need to be properly documented and must charge at least a certain minimal interest rate. (Or at least you must declare and be taxed upon that minimal income even if you don't actually charge it. Last I looked, the federal requirement was somewhere under 0.3%, so this isn't usually an issue. There may also be state rules.) When doing business with friends, treat it as business first, friendship second. Otherwise you risk losing both money and friendship. Regarding what rate to charge: That is something you two have to negotiate, based on how much the borrower needs the money, how much lending the money puts the lender at risk, how generous each is feeling, etc. Sorry, but there is no one-size-fits-all answer here. What I charge (or insist on paying to) my brother might be different from what I charge my cousin, or a co-worker, or best friend, or... If both parties think it's fair, it's fair. If you can't reach an agreement, of course, the loan doesn't happen. |
Can housing prices rise faster than incomes in the long run? | When over the long term housing costs in a area rise faster than wages rise, the demographic of who lives in the area changes. The size and income parameters change. A region that was full of young singles is now populated with couples with adult children, that means that the businesses and amenities have to change. At a national level it isn't sustainable unless other items change. The portion of monthly income that can be safely allocated to housing would have to change. One adjustment could be the the lengthening of home loan periods, thus dropping the monthly payment. This has been seen with car loans, over the last few decades the length of loans has increased. In interesting related event could be the change in deduction of mortgage interest and property tax. If this was to change abruptly, there could be an abrupt change the estimated value of housing, because the calculus of affordability would change. |
Where do stock traders get realtime updates on Fed announcements? Is there a feed I could scrape? | Tthe easiest place to see Fed announcements as soon as they're published is the Federal Reserve itself. If you want the information as soon as it's made publicly available, scrape the Federal Reserve press releases. I assume you're most interested in the announcements after the FOMC meetings, so you might want to scrape the FOMC calendar. The statements come out right after the meeting, and the minutes are released three weeks later. If you want to catch instances where the minutes are leaked, that's a bit trickier. For a lot of other market data, services providers like Bloomberg, Reuters, etc. are usually the best bet for realtime information, since these companies earn their revenue and keep their customers by providing the data as fast as humanly possible. They may offer an analysis or a distilled version of the FOMC minutes for traders to use within minutes of the announcement itself (I'm not sure if they do or not), but the announcements themselves will come from the Federal Reserve itself first and foremost. |
The doctor didn't charge the health insurance in time, am I liable? | I had a similar issue take place at a hospital when the repeatedly billed the "wrong me" -- a stale insurance record left behind from when I was a dependent on my parent's insurance a decade earlier. They ended up billing me for anesthesia when I had a major surgery (everything else was billed to the correct insurance.) The outsourced billing people were pretty unhelpful (not usually the case with hospitals), so I became the squeaky wheel. I sent certified letters, had my priest rattle the cage (it was a Catholic hospital) and eventually talked myself into a meeting with the VP of Finance, who started paying attention when the incompetence of his folks became apparent. Total cost: $0 + my time. |
How and why does the exchange rate of a currency change almost everyday? | It's simply supply and demand. First, demand: If you're an importer trying to buy from overseas, you'll need foreign currency, maybe Euros. Or if you want to make a trip to Europe you'll need to buy Euros. Or if you're a speculator and think the USD will fall in value, you'll probably buy Euros. Unless there's someone willing to sell you Euros for dollars, you can't get any. There are millions of people trying to exchange currency all over the world. If more want to buy USD, than that demand will positively influence the price of the USD (as measured in Euros). If more people want to buy Euros, well, vice versa. There are so many of these transactions globally, and the number of people and the nature of these transactions change so continuously, that the prices (exchange rates) for these currencies fluctuate continuously and smoothly. Demand is also impacted by what people want to buy and how much they want to buy it. If people generally want to invest their savings in stocks instead of dollars, i.e., if lots of people are attempting to buy stocks (by exchanging their dollars for stock), then the demand for the dollar is lower and the demand for stocks is higher. When the stock market crashes, you'll often see a spike in the exchange rate for the dollar, because people are trying to exchange stocks for dollars (this represents a lot of demand for dollars). Then there's "Supply:" It may seem like there are a fixed number of bills out there, or that supply only changes when Bernanke prints money, but there's actually a lot more to it than that. If you're coming from Europe and want to buy some USD from the bank, well, how much USD does the bank "have" and what does it mean for them to have money? The bank gets money from depositors, or from lenders. If one person puts money in a deposit account, and then the bank borrows that money from the account and lends it to a home buyer in the form of a mortgage, the same dollar is being used by two people. The home buyer might use that money to hire a carpenter, and the carpenter might put the dollar back into a bank account, and the same dollar might get lent out again. In economics this is called the "multiplier effect." The full supply of money being used ends up becoming harder to calculate with this kind of debt and re-lending. Since money is something used and needed for conducting of transactions, the number of transactions being conducted (sometimes on credit) affects the "supply" of money. Demand and supply blur a bit when you consider people who hoard cash. If I fear the stock market, I might keep all my money in dollars. This takes cash away from companies who could invest it, takes the cash out of the pool of money being used for transactions, and leaves it waiting under my mattress. You could think of my hoarding as a type of demand for currency, or you could think of it as a reduction in the supply of currency available to conduct transactions. The full picture can be a bit more complicated, if you look at every way currencies are used globally, with swaps and various exchange contracts and futures, but this gives the basic story of where prices come from, that they are not set by some price fixer but are driven by market forces. The bank just facilitates transactions. If the last price (exchange rate) is 1.2 Dollars per Euro, and the bank gets more requests to buy USD for Euros than Euros for USD, it adjusts the rate downwards until the buying pressure is even. If the USD gets more expensive, at some point fewer people will want to buy it (or want to buy products from the US that cost USD). The bank maintains a spread (like buy for 1.19 and sell for 1.21) so it can take a profit. You should think of currency like any other commodity, and consider purchases for currency as a form of barter. The value of currency is merely a convention, but it works. The currency is needed in transactions, so it maintains value in this global market of bartering goods/services and other currencies. As supply and demand for this and other commodities/goods/services fluctuate, so does the quantity of any particular currency necessary to conduct any of these transactions. A official "basket of goods" and the price of those goods is used to determine consumer price indexes / inflation etc. The official price of this particular basket of goods is not a fundamental driver of exchange rates on a day to day basis. |
What is the difference between a bad/bounced check and insufficient funds? | This may vary some by the state, but the general facts are consistent broadly. The elements of check fraud typically are: This means that not only do you have to have presented a check that is returned for insufficient funds, but you must have known at the time that it wouldn't be honored. It must typically also be given for present consideration, which is why the comments to the other answer correctly note that the post-dated check "scam" cooked up by the payday loan folks shouldn't generally be relevant under these laws; on the same site, they note the cases that are clearly not present consideration: So if I give you a check for $50 and it's returned for NSF because I screwed up my bank accounts and had all my money in savings, that's probably not fraud. But if I decide I really want a Tesla X and give Tesla Motors a check for $95,000, knowing I don't have $95,000, that's fraud. How the prosecutor proves knowledge is probably beyond the scope of Personal Finance and Money Stack Exchange, though I imagine it tends to commonly be done so by showing the person doesn't normally have that much money in their account. |
How to invest with a low net worth | You most definitely can invest such an amount profitably, but it makes it even more important to avoid fees, um, at all costs, because fees tend to have a fixed component that will be much worse for you than for someone investing €200k. So: Edit: The above assumes that you actually want to invest in the long run, for modest but relatively certain gains (maybe 5% above inflation) while accepting temporary downswings of up to 30%. If those €2000 are "funny money" that you don't mind losing but would be really excited about maybe getting 100% return in less than 5 years, well, feel free to put them into an individual stock of an obscure small company, but be aware that you'd be gambling, not investing, and you can probably get better quotes playing Roulette. |
30% share in business | Get involved a lawyer and Accountant. Without it you may not be sure what you are getting. What exactly will 30% mean for me? It will mean exactly what gets written in contract. It can mean you are owner of 30% of the company. If this is structured as partnership, it would also mean you are party to 30% loss. It can mean by current valuation, you get x fixed shares. In future if the directors creates more shares, your % ownership can get diluted. Or anything else. It all depends on what is written in contract and how the contract is structured. Is there anything I should I be aware of before agreeing? Get a draft and talk to a Lawyer and Accountant, they should be able to tell you exactly what it means and you can then decide if you agree to it or not; or need this contract worded differently. |
I'm only spending roughly half of what I earn; should I spend more? | Your Money or Your Life is a great book on this topic. |
Why do banks insist on allowing transactions without sufficient funds? | This really should be a comment, but I can't yet. The question desperately needs a location tag. In at least some countries(New Zealand), the default action on all insufficient funds transactions is to refuse the transaction. Credit cards are the only common exception. Every bank operating in NZ that I know of acts this way. Sometimes there is a fee for bouncing a transaction, sometimes not, that depends on the bank. Any other option must be explicitly arranged in writing with the bank. Personally, coming from a country where declining transactions is the default, I'd be shocked and angry to be stuck with an automatic transfer from another account. Angry enough to change banks if they won't immediately cease and desist. |
Where to park money while saving for a car | Bond aren't necessarily any safer than the stock market. Ultimately, there is no such thing as a low risk mutual fund. You want something that will allow you get at your money relatively quickly. In other words, CDs (since you you can pick a definite time period for your money to be tied up), money market account or just a plain old savings account. Basically, you want to match inflation and have easy access to the money. Any other returns on top of that are gravy, but don't fret too much about it. See also: Where can I park my rainy-day / emergency fund? Savings accounts don’t generate much interest. Where should I park my rainy-day / emergency fund? |
How to see a portfolio's overall profit or loss on Yahoo Finance? | The steps that I could imagine following: |
JCI headache part 1: How to calculate cost basis / tax consequences of JCI -> TYC merger? | I finally found it! Johnson Controls International PLC FORM 8-K/A (Amended Current report filing) Filed 10/03/16 for the Period Ending 09/02/16 from http://investors.johnsoncontrols.com/financial-information/johnson-sec-filings, says on page II-6: (my emphasis for the relevant paragraph) On September 2, 2016, Johnson Controls and Tyco completed their combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 24, 2016, as amended by Amendment No. 1, dated as of July 1, 2016, by and among Johnson Controls, Tyco and certain other parties named therein, including Jagara Merger Sub LLC, an indirect wholly owned subsidiary of Tyco (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on September 2, 2016, Merger Sub merged with and into Johnson Controls with Johnson Controls being the surviving corporation in the merger and a wholly owned, indirect subsidiary of Tyco (the “merger”). Following the merger, Tyco changed its name to “Johnson Controls International plc.” Immediately prior to the merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to as “combined company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the merger, each outstanding share of common stock, par value $1.00 per share, of Johnson Controls (“Johnson Controls common stock”) (other than shares held by Johnson Controls, Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes. The election to receive the cash consideration was undersubscribed. As a result, holders of shares of Johnson Controls common stock that elected to receive the share consideration and holders of shares of Johnson Controls common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of Johnson Controls common stock, $5.7293 in cash, without interest, and 0.8357 combined company ordinary shares, subject to applicable withholding taxes. Holders of shares of Johnson Controls common stock that elected to receive the cash consideration became entitled to receive, for each such share of Johnson Controls common stock, $34.88 in cash, without interest, subject to applicable withholding taxes. In the merger, Johnson Controls shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the merger, former Johnson Controls shareholders owned approximately 56% of the issued and outstanding combined company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding combined company ordinary shares. This answers what actually happened in the transaction; as far as my cost basis in the new JCI, it's a little more obscure; on page II-7 it says: For pro forma purposes, the valuation of consideration transferred is based on, amongst other things, the adjusted share price of Johnson Controls on September 2, 2016 of $47.67 per share and on page II-8: Johnson Controls adjusted share price as of September 2, 2016 (2): $47.67 (2) Amount equals Johnson Control closing share price and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of Johnson Controls stock for $34.88 per share. and both agree with the information posted at http://www.secinfo.com/dpdtb.w6n.2n.htm#1stPage (R66 Merger Transaction Fair Value of Consideration Transferred (Details)) which I can't seem to find on an "official" website but it purports to post from the SEC EDGAR database. So for each share of JCI, it had a fair value of $47.67 prior to the acquisition, and transformed into $5.7293 in cash, plus 0.8357 of "new" JCI shares with a basis of $47.67 - $5.7293 = $41.9407. Stated in terms of "new" JCI shares, this is $50.1863 (=$41.9407/0.8357) per "new" JCI share. (I'm not really 100% sure of this calculation though.) I also found JCI's Form 8937 which states Fair market value generally is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the facts. U.S. federal income tax law does not specifically prescribe how former JCI shareholders should determine the fair market value of the Tyco ordinary shares received in the merger. One possible method of determining the fair market value of one Tyco ordinary share is to use the average of the high and low trading prices on the date of the merger, which was $45.69. Other methods for determining the fair market value of Tyco ordinary shares are possible. Former JCI shareholders are not bound by the approach described above and may, in consultation with their tax advisors, use another approach. as well as similar text on the IRS website: One possible method of determining the fair market value of one Tyco ordinary share is to use the average of the high and low trading prices on the date of the merger, which was $45.69. Using this figure, former JCI shareholders that elected to receive shares in the merger would receive cash and Tyco ordinary shares worth approximately $43.91 per share of JCI common stock exchanged in the merger (assuming no cash received in lieu of fractional shares). |
If you buy something and sell it later on the same day, how do you calculate 'investment'? | You're confused because the source you cite leaves out one number that isn't relevant to the argument they're making: total costs. The number you're expecting, $9 x 365 or $3285 is the total cost of buying the jewelry which, when subtracted from the $3650 sales volume gives us the net profit of $365. The investment is the amount of money original put into a system our company. In this case the merchant bought his first piece of jewelry for $9, sold it for $10, took one dollar in profit and used the other 9 to reinvest by buying a new piece of jewelry. We can extend the analogy further. After 9 days of selling, the merchant will posses $18, allowing him to now buy 2 pieces of jewelry each morning and sell them for $20. Every day his costs will be $18 and he'll turn a $2 profit, all with the original investment of $9. |
Should you keep your stocks if you are too late to sell? | If the stock starts to go down DO NOT SELL!! My reasoning for this is because, when you talk about the stock market, you haven't actually lost any money until you sell the stock. So if you sell it lower than you bought it, you loose money. BUT if you wait for the stock to go back up again, you will have made money. |
How are dividends for shareholders of banks paid? | Why? Balance sheet is balance sheet, why is it complicated? Bank shareholders get dividends in exactly the same way as any other company shareholders do: the company ends up with net profits, which the board of directors decides to distribute to shareholders based on certain amount per share. If at all. Not all the profits are distributed, and in fact - there are companies who don't distribute dividends at all. Apple, for example, hasn't ever distributed dividends until very very recently. |
Is buying a lottery ticket considered an investment? | Although this has been touched upon in comments, I think the following line from the currently accepted answer shows the biggest issue: There is a clear difference between investing and gambling. The reality is that the difference isn't that clear at all. Tens of comments have been written arguing in both directions and looking around the internet entire essays have been written arguing both positions. The underlying emotion that seems to shape this discussion primarily is whether investing (especially in the stock market) is a form of gambling. People who do invest in this way tend to get relatively emotional whenever someone argues that this is a form of gambling, as gambling is considered a negative thing. The simple reality of human communication is that words can be ambiguous, and the way investors will use the words 'investments' and 'gambles' will differ from the way it is used by gamblers, and once again different from the way it's commonly used. What I definitely think is made clear by all the different discussions however is that there is no single distinctive trait that allows us to differentiate investing and gambling. The result of this is that when you take dictionary definitions for both terms you will likely end up including lottery tickets as a valid form of investment. That still however leaves us with a situation where we have two terms - with a strong overlap - which have a distinctive meaning in communication and the original question whether buying lottery tickets is an investment. Over on investorguide.com there is an absolutely amazing strongly recommended essay which explores countless of different traits in search of a difference between investing and gambling, and they came up with the following two definitions: Investing: "Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): sufficient research has been conducted; the odds are favorable; the behavior is risk-averse; a systematic approach is being taken; emotions such as greed and fear play no role; the activity is ongoing and done as part of a long-term plan; the activity is not motivated solely by entertainment or compulsion; ownership of something tangible is involved; a net positive economic effect results." Gambling: "Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): little or no research has been conducted; the odds are unfavorable; the behavior is risk-seeking; an unsystematic approach is being taken; emotions such as greed and fear play a role; the activity is a discrete event or series of discrete events not done as part of a long-term plan; the activity is significantly motivated by entertainment or compulsion; ownership of something tangible is not involved; no net economic effect results." The very interesting thing about those definitions is that they capture very well the way those terms are used by most people, and they even acknowledge that a lot of 'investors' are gambling, and that a few gamblers are 'investing' (read the essay for more on that). And this fits well with the way those two concepts are understood by the public. So in those definitions normally buying a lottery ticket would indeed not be an investment, but if we take for example Vadim's operation example If you have $1000 and need $2000 by next week or else you can't have an operation and you will die (and you can't find anyone to give you a loan). Your optimal strategy is to gamble your $1000, at the best odds you can get, with a possible outcome of $2000. So even if you only have a 1/3 chance of winning and getting that operation, it's still the right bet if you can't find a better one. this can suddenly change the perception and turn 'gambling' into 'high-risk investing'. |
Is this Employee Stock Purchase Plan worth it when adding my student loan into the equation? | In many ESPP programs (i.e. every one I've had the opportunity to be a part of in my career), your purchase is at a discount from the lower of the stock prices at the start and end of the period. So a before-tax 5% return is the minimum you should expect; if the price of the stock appreciates between July 1 and December 31, you benefit from that gain as well. More concretely: Stock closes at $10/share on July 1, and $11/share on December 31. The plan buys for you at $9.50/share. If you sell immediately, you clear $1.50/share in profit, or a nearly 16% pre-tax gain. If the price declines instead of increases, though, you still see that 5% guaranteed profit. Combine that with the fact that you're contributing every paycheck, not all at once at the start, and your implied annual rate of return starts to look pretty good. So if it was me, I'd pay the minimum on the student loan and put the excess into the ESPP. |
When is Cash Value Life Insurance a good or bad idea? | Buy term and invest the difference is certainly the standard recommendation, and for good reason. When you start looking at some sample numbers the "buy term and invest the difference" strategy starts to look very good. Here are the rates I found (27 yr old in Texas with good health, non-smoker, etc): $200k term life: $21/month $200k whole life: $177/month If you were to invest the difference in a retirement account for 40 years, assuming a 7% rate of return (many retirement planning estimates use 10%) you would have $411,859 at the end of that period. (If you use 10% that figure jumps to over $994k.) Needless to say, $400k in a retirement account is better than a $200k death benefit. Especially since you can't get the death benefit AND the cash value. Certainly one big difficulty is making sure you invest that difference. The best way to handle that is to set up a direct deposit that goes straight from your paycheck to the retirement account before it even touches your bank account. The next best thing would be an automatic transfer from your bank account. You may wonder 'What if I can no longer afford to invest that money?' First off, take a second and third look at your finances before you start eating into that. But if financial crisis comes and you truly can't afford to fund your own life insurance / retirement account then perhaps it will be a good thing you're not locked into a life insurance policy that forces you to pay those premiums. That extra freedom is another benefit of the "buy term and invest the difference" strategy. It is great that you are asking this question now while you are young. Because it is much easier to put this strategy into play now while you are young. As far as using a cash value policy to help diversify your portfolio: I am no expert in how to allocate long term investments after maxing out my IRA and 401k. (My IRA maxes out at $5k/year, another $5k for my wife's, another $16.5k for my 401k.) Before I maxed that out I would have my house paid for and kid's education saved for. And by then it would make sense to pay a financial adviser to help you manage all those investments. They would be the one to ask about using a cash value policy similar to @lux lux's description. I believe you should NEVER PUT YOUR MONEY INTO SOMETHING YOU DON'T UNDERSTAND. Cash value policies are complex and I don't fully understand them. I should add that of course my calculations are subject to the standard disclaimer that those investment returns aren't guaranteed. As with any financial decision you must be willing to accept some level of risk and the question is not whether to accept risk, but how much is acceptable. That's why I used 7% in my calculation instead of just 10%. I wanted to demonstrate that you could still beat out whole life if you wanted to reduce your risk and/or if the stock market performs poorly. |
Is there an online cost-basis calculator that automatically accounts for dividend re-investments and splits? | Reinvestment creates a nightmare when it comes time to do taxes, sadly. Tons of annoying little transactions that happened automatically... Here's one article trying to answer your question: http://www.smartmoney.com/personal-finance/taxes/figuring-out-your-cost-basis-when-youve-lost-the-statements-9529/ You could also try this thing: http://www.gainskeeper.com/us/BasisProIndividual.aspx But I couldn't tell you if it would help. If it makes you feel better, brokerages are now required by the IRS to track your basis for you, so for new transactions and assets you shouldn't end up in this situation. Doesn't help with the old stuff ;-) |
Stock trading after a crash | There are two things going on here, neither of which favors this approach. First, as @JohnFx noted, you should be wary of the sunk-cost fallacy, or throwing good money after bad. You already lost the money you lost, and there's no point in trying to "win it back" as opposed to just investing the money you still have as wisely as possible, forgetting your former fortune. Furthermore, the specific strategy you suggest is not a good one. The problem is that you're assuming that, whenever the stock hits $2, it will eventually rebound to $3. While that may often happen, it's far from guaranteed. More specifically, assuming the efficient market hypothesis applies (which it almost certainly does), there are theorems that say you can't increase your expected earning with a strategy like the one you propose: the apparent stability of the steady stream of income is offset by the chance that you lose out if the stock does something you didn't anticipate. |
How can all these countries owe so much money? Why & where did they borrow it from? | By the phrasing of your question it seems that you are under the mistaken impression that countries are borrowing money from other countries, in which case it would make sense to question how everyone can be a borrower with no one on the other side of the equation. The short answer is that the debt is owed mostly to individuals and institutions that buy debt instruments. For example, you know those US savings bonds that parents are buying to save for their children's education? Well a bond is just a way to loan money to the Government in exchange for the original money plus some interest back later. It is as simple as that. I think because the debt and the deficit are usually discussed in the context of more complex macroeconomic concerns people often mistakenly assume that national debts are denominated in some shadow banking system that is hidden from the common person behind some red-tape covered bureaucracy. This is not the case here. Why did they get themselves into this much debt? The same reason the average person does, they are spending more than they bring in and are enabled by access to easy credit. Like many people they are also paying off one credit card using another one. |
How should I value personal use television for donation? | The usual lazy recommendation: See what similar objects, in similar condition, of similar age, have sold for recently on eBay. That establishes a fair market value by directly polling the market. |
How is not paying off mortgage better in normal circumstances? | One way of looking at it is that your equity in your house is an investment in a particular class of asset, and investing further in that asset class may drive you away from, rather than towards, your preferred asset mix. It's pretty common here in New Zealand for people's only investments to be their homes and rental properties. I wish those people luck when our current property boom ends. |
Which online services offer logarithmic charts for equities such as index funds and ETFs? | The charts on nasdaq.com are log based, if you look closely you can see that the spacing between evenly incremented prices is tighter at the top of the chart and wider at the bottom. It's easiest to see on a stock with a wide price range using candlestick where you can clearly see the grid. I'm also not seeing the "absurdism" you indicate when I look at google finance with the settings ticked to use log on the price axis. I see what I'd expect which is basically a given vertical differential on the price axis representing the same percentage change in price no matter where it is located. For example if I look at GOOG from the earliest date they have (Aug 20 2004) to a nice high point (dec 7 2007) I see a cart where the gap from the the bottom of the chart (seems to be right around 100) to the 200 point, (a 100% increase) is the same as from 200 to 400 (a 100% increase) is the same as 400 to 800 (a 100# increase) That's exactly what I expect from a 'log' chart on a financial site, each relative move up or down of the same distance, represents the same relative change in value. So I'm having difficulty understanding what your complaint is. (note: I'm using chrome, which is the browser I'd expect to work best with any google website. results with other browsers could of course vary) If you want to do some other wacky math with the axis then I humbly suggest that something like Excel is your friend. Goto the charts at nasdaq.com get the chart displaying the period you care about, click the chart to display the unlying data, there will be an option to download the data. cram it into excel and go wild as you want with charting it out. e.g. note that step 2 links to client side javascript, so you will need javascript enabled, if you are running something like noscript, disable it for this site. Also since the data opens in a new window, you may also need to enabled 'popups' for the site. (and yes, I sometimes get an annoying news alert advert popup and have to close it when the chart first appears.. oh well it pays the rent and nasdaq is not charging you so for access so such is the price for a free site. ) |
In the US, does getting a loan with a cosigner, help your credit rating? | It all comes down to how the loan itself is structured and reported - the exact details of how they run the loan paperwork, and how/if they report the activity on the loan to one of the credit bureaus (and which one they report to). It can go generally one of three ways: A) The loan company reports the status to a credit reporting agency on behalf of both the initiating borrower and the cosigner. In this scenario, both individuals get a new account on their credit report. Initially this will generally drop related credit scores somewhat (it's a "hard pull", new account with zero history, and increased debt), but over time this can have a positive effect on both people's credit rating. This is the typical scenario one might logically expect to be the norm, and it effects both parties credit just as if they were a sole signor for the loan. And as always, if the loan is not paid properly it will negatively effect both people's credit, and the owner of the loan can choose to come after either or both parties in whatever order they want. B) The loan company just runs the loan with one person, and only reports to a credit agency on one of you (probably the co-signor), leaving the other as just a backup. If you aren't paying close attention they may even arrange it where the initial party wanting to take the loan isn't even on most of the paperwork. This let the person trying to run the loan get something accepted that might not have been otherwise, or save some time, or was just an error. In this case it will have no effect on Person A's credit. We've had a number of question like this, and this isn't really a rare occurrence. Never assume people selling you things are necessarily accurate or honest - always verify. C) The loan company just doesn't report the loan at all to a credit agency, or does so incorrectly. They are under no obligation to report to credit agencies, it's strictly up to them. If you don't pay then they can report it as something "in collections". This isn't the typical way of doing business for most places, but some businesses still operate this way, including some places that advertise how doing business with them (paying them grossly inflated interest rates) will "help build your credit". Most advertising fraud goes unpunished. Note: Under all of the above scenarios, the loan can only effect the credit rating attached to the bureau it is reported to. If the loan is reported to Equifax, it will not help you with a TransUnion or Experian rating at all. Some loans report to multiple credit bureaus, but many don't bother, and credit bureaus don't automatically copy each other. It's important to remember that there isn't so much a thing as a singular "consumer credit rating", as there are "consumer credit ratings" - 3 of them, for most purposes, and they can vary widely depending on your reported histories. Also, if it is only a short-term loan of 3-6 months then it is unlikely to have a powerful impact on anyone's credit rating. Credit scores are formulas calibrated to care about long-term behavior, where 3 years of perfect credit history is still considered a short period of time and you will be deemed to have a significant risk of default without more data. So don't expect to qualify for a prime-rate mortgage because of a car loan that was paid off in a few months; it might be enough to give you a score if you don't have one, but don't expect much more. As always, please remember that taking out a loan just to improve credit is almost always a terrible idea. Unless you have a very specific reason with a carefully researched and well-vetted plan that means that it's very important you build credit in this specific way, you should generally focus on establishing credit in ways that don't actually cost you any money at all. Look for no fee credit cards that you pay in full each month, even if you have to start with credit-building secured card plans, and switch to cash-value no-fee rewards cards for a 1-3% if you operate your financial life in a way that this doesn't end up manipulating your purchasing decisions to cost you money. Words to the wise: "Don't let the credit score tail wag the personal financial dog!" |
What is the minimum age for early retirement | You can withdraw from CPP as early as 60. However, by doing so, you will permanently reduce the payments. The reduction is calculated based on average life expectancies. If you live for an average amount of time, that means you'll receive approximately the same total amount (after inflation adjustments) whether you start pulling from CPP at 60, 65, or even delay your pension later. People may have pensions through systems other than CPP. This is often true for big business or government work. They may work differently. People who retire at 55 with a pension are not getting their pension through CPP. A person retiring at 55 would need to wait at least five years to draw from the CPP, and ten years before he or she was eligible for a full pension through CPP. Canada also offers Old Age Security (OAS). This is only available once you are 65 years old or older, though this is changing. Starting in 2023, this will gradually change to 67 years or older. See this page for more details. As always, it's worth pointing out that the CPP and OAS will almost certainly not cover your full retirement expenses and you will need supplementary funds. |
Why would my job recruiter want me to form an LLC? | I don't know about the US, but in the UK this is common practice, even required in some situations, and not sketchy at all. It's perfectly legal, saves you tax, and protects you from a legal standpoint. (i.e. what if you break something and your employer wants to sue you?) This is what companies are for, they are legal entities that are separate from an individual. There is no requirement for a company to have more than one employee. |
Insurance company sent me huge check instead of pharmacy. Now what? | The insurance company issued the check. I'd contact the insurance company to have the current check voided and a new one issued to the pharmacy. |
Is it possible to allocate pre-tax money to a specific stock? | Whether an investment is pre-tax is determined by the type of account (i.e., tax-advantaged vs ordinary taxable account), but whether you can invest in individual stocks is determined by the provider (i.e., the particular bank where you have the account). These are orthogonal choices. If you want to invest in individual stocks, you need to look for a bank that offers an IRA/401k/other tax-advantaged account and allows you to invest in individual stocks with it. For example, this page suggests that Fidelity would let you do that. Obviously you should look into various providers yourself to find one that offers the mix of features you want. |
What is a mutual fund? | Let's say that you want to invest in the stock market. Choosing and investing in only one stock is risky. You can lower your risk by diversifying, or investing in lots of different stocks. However, you have some problems with this: When you buy stocks directly, you have to buy whole shares, and you don't have enough money to buy even one whole share of all the stocks you want to invest in. You aren't even sure which stocks you should buy. A mutual fund solves both of these problems. You get together with other investors and pool your money together to buy a group of stocks. That way, your investment is diversified in lots of different stocks without having to have enough money to buy whole shares of each one. And the mutual fund has a manager that chooses which stocks the fund will invest in, so you don't have to pick. There are lots of mutual funds to choose from, with as many different objectives as you can imagine. Some invest in large companies, others small; some invest in a certain sector of companies (utilities or health care, for example), some invest in stocks that pay a dividend, others are focused on growth. Some funds don't invest in stocks at all; they might invest in bonds, real estate, or precious metals. Some funds are actively managed, where the manager actively buys and sells different stocks in the fund continuously (and takes a fee for his services), and others simply invest in a list of stocks and rarely buy or sell (these are called index funds). To answer your question, yes, the JPMorgan Emerging Markets Equity Fund is a mutual fund. It is an actively-managed stock mutual fund that attempts to invest in growing companies that do business in countries with rapidly developing economies. |
Freelancing and getting taxes taken out up front instead of end of year? | Maybe I can explain a little clearer: Your LLC is not a person, and cannot have taxes withheld on its behalf. Therefore, anyone paying your company should not withhold taxes. If they are paying you directly, and withholding taxes, they are treating you as an employee, and will probably issue a W2 instead of a 1099. Put it this way: Your LLC is a separate company providing services to that company. They shouldn't withhold taxes any more than they would when paying their ISP, or power company. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | I don't think there is a definite single answer for this. I think it largely depends on where you are on your financial journey. In the ideal world you'd have everything in bucket 2 built into your budget and be putting a little bit aside every paycheck to cover each of those things when they do come up but that takes a fair bit of discipline to do and experience (and data) to estimate reasonably. When you are just starting out in actually setting and keeping a budget or digging yourself out of CC debt/living paycheck to paycheck the odds are you aren't going to have the experience or disciple necessary to actually budget for those things in bucket 2 and even if you did the better option might well be to pay off that high interest debt you already have rather than saving up for an eventual expense. How ever as you start to improve your situation and pay off that debt, develop the disciple to set and follow a budget that is when you should start adding more of those things into your budget. How you track them doesn't really matter. A separate account at your bank. A total for a category in your budgeting software. An XLS file or even paper (ick). Ultimately it isn't about how you plan for and track things but more about actually doing that. So my question to the OP is where are you? If you already have a budget and do a good job of following it but don't have those items in it then consider that the next step in your financial journey. |
The doctor didn't charge the health insurance in time, am I liable? | This has a straightforward answer. It's likely that your doctor and the hospital have no responsibility to ensure that your insurance claim is filed in a timely manner. They bill you whether you or they get reimbursed by insurance, or not. The insurance company is more than happy not to pay you any way they can. Sorry if this is harsh, but it's up to you to follow through. See also here. |
How to mitigate the risk of Euro Stoxx 50 ETF? | You could go with either of: Choosing this you'd pretty much have minimized your risk by using the whole world asa market. |
Should I set a stop loss for long term investments? | Stop loss orders are the exact opposite of what you should be doing if you are implementing a long term buy-and-hold strategy. The motivation of a buy-and-hold strategy is that in the long term, the market rises even despite the occasional crash or recession. Setting a stop loss simply increases the probability that you will sell for a low price in a temporary market downturn. Unless you are likely to need near-term liquidity (in which case you're not a long term investor), that makes no sense. |
What are the usual terms of a “rent with an option to buy” situation? | In most cases an rent with option to buy is structured as follows: The renter/buyer will place a deposit/premium (not the same as a security deposit) that purchases the option( the right ) to buy the home at a future date at a specific price. The renter / buyer will often pay extra rent in addition to market rent. Many times this additional rent is contracted to be applied to the purchase price of the home. The risks to the renter/buyer are as follows: Also, something to note: Many people will recommend that you use the additional rents to be applied specifically towards the downpayment. Be wary of this. There are no institutional lenders available today that will allow the additional rent money to be applied towards your downpayment. That means you must come up with the downpayment in cash before closing. The additional rent payments can be used towards the price. Hope that helps. Good luck! |
Can I buy stock of a company that just IPO | Yes, you could buy a stock on the day of its IPO. I'm a college student, and I wonder if I can buy stock from a company right after it finishes its IPO? Yes, you can. However, unless you are friends or family of an employee, chances are you'll be paying a higher price than you think as there is generally a fair bit of hype on most IPOs that allows some people to "flip them" which means someone is buying at a higher price. If I am not allowed to buy its stocks immediately after they go on sell, how long do I have to wait? Generally I'd wait until the hype dies down as if you look at most historical IPOs the stock could be bought cheaper later but that's just my perspective. And also who are allowed to buy the stocks at the first minute they are on sell? Anyone but keep in mind that while an IPO may be priced at $x, the initial trades may be a few times that value and the stock may come down over time. Facebook could be an example to consider of a company that had an IPO at one price and then came down for a little while on its chart over the past couple of years. |
Why is short-selling considered more “advanced” than a simple buy? | In addition to the higher risk as pointed out by @JamesRoth, you also need to consider that there are regulations against 'naked shorting' so you generally need to either own the security, or have someone that is willing to 'loan' the security to you in order to sell short. If you own a stock you are shorting, the IRS could view the transaction as a Sell followed by a buy taking place in a less than 30 day period and you could be subject to wash-sale rules. This added complexity (most often the finding of someone to loan you the security you are shorting) is another reason such trades are considered more advanced. You should also be aware that there are currently a number of proposals to re-instate the 'uptick rule' or some circuit-breaker variant. Designed to prevent short-sellers from driving down the price of a stock (and conducting 'bear raids etc) the first requires that a stock trade at the same or higher price as prior trades before you can submit a short. In the latter shorting would be prohibited after a stock price had fallen a given percentage in a given amount of time. In either case, should such a rule be (re)established then you could face limitations attempting to execute a short which you would not need to worry about doing simple buys or sells. As to vehicles that would do this kind of thing (if you are convinced we are in a bear market and willing to take the risk) there are a number of ETF's classified as 'Inverse Exchange Traded Funds (ETF's) for a variety of markets that via various means seek to deliver a return similar to that of 'shorting the market' in question. One such example for a common broad market is ticker SH the ProShares Short S&P500 ETF, which seeks to deliver a return that is the inverse of the S&P500 (and as would be predicted based on the roughly +15% performance of the S&P500 over the last 12 months, SH is down roughly -15% over the same period). The Wikipedia article on inverse ETF's lists a number of other such funds covering various markets. I think it should be noted that using such a vehicle is a pretty 'aggressive bet' to take in reaction to the belief that a bear market is imminent. A more conservative approach would be to simply take money out of the market and place it in something like CD's or Treasury instruments. In that case, you preserve your capital, regardless of what happens in the market. Using an inverse ETF OTOH means that if the market went bull instead of bear, you would lose money instead of merely holding your position. |
Insurance company sent me huge check instead of pharmacy. Now what? | Deposit check and send a personal check (resulting in tax and IRS reporting issues) That's a bad idea, unless maybe the check you're receiving is a certified bank draft. Suppose the insurance company are crooks and the check is fraudulent. It could take weeks or months for some investigation to catch up to that, long after your own personal check was cashed by the pharmacy. The bank will then put you on hook for the 20 grand by reversing the check, even though the funds had been deposited into your account. Do not put yourself into the position of a money handler; you don't have the cash base, insurance, government protection and whatever else that a bank has. And, of course, you're being a free money handler if you do that. (You're not even compensated for postage, time and whatnot). If you're handling money between two parties, you should collect a percentage, or else refuse. That percentage has to be in proportion to the risk, since cashing a check for someone carries a risk similar to (and is effectively a form of) making a loan. |
What's the least risky investment for people in Europe? | First of all, congratulations on saving some money. So many people these days do not even get that far. As far as investments, what is best for you depends heavily on your: Here is a quick summary of types of assets that are likely available to you, and my thoughts on why they may or may not be a good fit for your situation. Cash Equivalents Cash Equivalents are highly liquid, meaning you can get cash for them on fairly short notice. In particular, Money Markets and Certificates of Deposit (CDs) are also considered very safe when issued by a bank, as they are often insured against loss by the government up to a certain amount (this varies quite a lot by country within Europe, see the Wikipedia article here for additional detail. Please note that in the case of a CD, you are usually unable to get access to your money for the length of the investment period, which is usually a short period of time such as 3 months, 6 months, or 1 year. This is a good choice if you may need your money back on short notice, and your main goal is to preserve your principal. However, the returns tend to be very low and often do not keep pace with inflation, meaning that over several years, you may lose "real" purchasing power, even if you don't lose nominal value in your account. Special Note on Cash Equivalents If the money you want to invest is also your Emergency Fund, or you do not have an Emergency Fund, I would highly recommend Cash Equivalents. They will provide the highest level of Liquidity along with a short Time Horizon so that you can get your money as needed in the case of unforeseen expenses such as if your car breaks down. Debt Debt investments include government and corporate bonds. They are still considered relatively safe, as the issuer would need to default (usually this means they are in bankruptcy) in order for you not to be paid back. For example, German bonds have been considered safer than Greek bonds recently based on the underlying strength of the government. Unlike Cash Equivalents, these are not guaranteed against loss, which means that if the issuer defaults, you could lose up to 100% of your investment. Bonds have several new features you will need to consider. One is interest rate risk. One reason bonds perform better than cash equivalents is that you are taking on the risk that if interest rates rise, the fixed payments the bond promises will be worth less, and the face value of your bond will fall. While most bonds are still very Liquid, this means that if you need to sell the bond before it matures, you could lose money. As mentioned earlier, some bonds are riskier than others. Given that you are looking for a low-risk investment, you would want to select a bond that is considered "invesment grade" rather than a riskier "junk" bond. Debt investments are a good choice if you can afford to do without this money for a few years, and you want to balance safety with somewhat better returns than Cash Equivalents. Again though, I would not recommend investing in Debt until you have also built up a separate Emergency Fund. If you do choose to invest in bonds, I recommend that you diversify your risks by investing in a bond fund, rather than in just one company's or government's debt. This will reduce the likelihood that you will experience a catastrophic loss. Ownership Ownership assets includes stocks and other assets such as real estate and precious metals such as gold. While these investments can have high returns, in your situation I would strongly recommend that you not invest in these types of investments, for the following reasons: For these reasons, debt is considered a safer investment than equity for any particular company, government, or the market as a whole. Ownership assets are a good choice for people who have a high Risk Tolerance, long Time Horizon, low Liquidity needs, and will not be bothered by larger potential changes in the value of the investment at any given time. Special Note on Gold I would consider Gold a very risky investment and not a good fit for you at the moment based on what you've shared in your question. Gold is considered "safe" in the sense that people believe that if the economy goes into recession, depression, or collapses entirely, gold will continue to be valuable. In a post-apocalyptic world where paper money became worthless, it is still a good bet that gold will always be considered valuable within human society as a store of value. That being said, the price of gold fluctuates almost entirely based on how bad people think things are going to get. Think about the difference between gold and a company like Coca-Cola. Would you like to own 100% of Coca-Cola? Of course, because you know there is a very good chance that people will continue to spend money all over the world on their products. On the other hand, gold itself produces no products, no sales, no profits, and no cash flow. As such, if you buy gold, you are really making a speculative bet that gold will be in higher demand tomorrow than it is today. You are buying an asset (the gold) rather than part of a company's equity or debt that is designed to throw off payments to its investors in the form of bond payments or dividends. So, if people decide next year that things are improving, it is possible that gold could lose value, given that gold prices are at historically high levels. Gold could be a good choice for someone who has a large, well-diversified investment portfolio, and who is looking for a hedge to protect against inflation and other risks that they have taken on via their other investments. I hope that is helpful - best of luck in your choices. Let us know what you decide! |
Combined annual contribution limits for individuals [duplicate] | Your contribution limit to a 401(k) is $18,000. Your employer is allowed to contribute to your 401(k), usually a "matching contribution". That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year. However when you retire and you take money out, you pay taxes on the money you take out. On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money. This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax. In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year. So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it. Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year. You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)). They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here: Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you. A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov |
What happens to my savings if my country defaults or restructures its debt? | First question: Any, probably all, of the above. Second question: The risk is that the currency will become worth less, or even worthless. Most will resort to the printing press (inflation) which will tank the currency's purchasing power. A different currency will have the same problem, but possibly less so than yours. Real estate is a good deal. So are eggs, if you were to ask a Weimar Germany farmer. People will always need food and shelter. |
Does gold's value decrease over time due to the fact that it is being continuously mined? | Like anything else, the price/value of gold is driven by supply and demand. Mining adds about 2% a year to the supply. Then the question is, will the demand in a given year rise by more or less than 2%. ON AVERAGE, the answer is "more." That may not be true in any given year, and was untrue for whole DECADES of the 1980s and 1990s, when the price of gold fell steadily. On the other hand, demand for gold has risen MUCH more than 2% a year in the 2000s, for reasons discussed by others. That is seen in the six-fold rise in price, from about $300 an ounce to $1800 an ounce over the past ten years. |
Will my current employer find out if I have a sole proprietarship/corporation? | Some governments offer business information search for corporations in their jurisdiction. The search results may show the director information for the company. If this information is made publicly available, keep in mind there are websites that make money from indexing publicly available information to show in Google search results. I don't mean to scare you as this is a likely a slim possibility. It really depends on the privacy practices in place at the jurisdiction you're in. But do keep in mind if you're planning on doing business on the side for a few years policies may change. I would call Service Ontario (or whichever province you're incorporating in) or Corporations Canada if federally incorporating and ask them if they offer a business search service and exactly what information they make public. You might be able to reach a Privacy Officer and find out what exactly their policy is. |
What emergencies could justify a highly liquid emergency fund? | This might vary from other answers but I generally prefer to use debt before touching an emergency fund. But one of the reasons I have an emergency fund is to that I can make sure I can cover any debt payments. Essentially, this give you leverage. You might start off with a small emergency such as needing a new refrigerator. If you pull the cash out of the fund to pay this off immediately, you've depleted your account and if something major comes along, you might be short. By using debt, you can often cover the costs with cash-flow and leave your risk buffer in place. Often, retailers will offer really sweet financing deals. 0% for 12 months or whatever. Often, though, if you don't pay it off in time, they can be costly. I'm not sure if this is legal (in the US) anymore but if it wasn't fully paid off in time, you'd be retroactively charged interest on the whole amount. But if you have an emergency fund, you pretty much guarantee that won't happen. The only time it will is if something else happens that requires the emergency fund to be cashed in. But if things are that dire, the debt is unsecured. You're credit may suffer but they can't come after your assets. It's not an either-or situation. You give yourself options by having the cash available. It allows you to take advantage of opportunities that might be too risky otherwise. Ultimately what you want to be able to weather the storm in a situation where you have, say, a mortgage on a house that is underwater, the stock market is down, and you have no income. In that situation, you don't want to liquidate your stock when it's down and you (probably) don't want to lose your home equity in a foreclosure. |
Do dividend quotes for U.S. stocks include witheld taxes? | No. As a rule, the dividends you see in the distribution table are what you'll receive before paying any taxes. Tax rates differ between qualified and unqualified/ordinary dividends, so the distribution can't include taxes because tax rates may differ between investors. In my case I hold it in an Israeli account but the tax treaty between our countries still specifies 25% withheld tax This is another example of why tax rates differ between investors. If I hold SPY too, my tax rate will be very different because I don't hold it in an account like yours, so the listed dividend couldn't include taxes. |
Why might it be advisable to keep student debt vs. paying it off quickly? | I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? "Debt bad." Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question. |
Should market based health insurance premiums be factored into 6 months emergency fund savings? | Yes, you should budget some amount of your emergency fund for healthcare expenses. How much you budget is really dependent on your particular anticipated costs. Be aware that health insurance likely costs significantly more than your employer charges you for access to its plan. Since healthcare reform mandated guaranteed issue individual coverage you will have the ability to buy individual coverage for you and, if applicable, your family. When buying individual coverage you have essentially two choices, your decision hinges on whether or not you'd qualify for a premium subsidy. If your AGI is below 400% of the poverty line you'll be able to receive subsidized coverage at a state or federal health insurance exchange. If the subsidy is not meaningful to you, or you wouldn't qualify, you can buy an "off exchange" plan offered either directly through a carrier or an insurance agent (some insurance agents are also licensed to sell exchange plans though it's somewhat rare). In order to receive subsidized coverage you must buy through a state or federal exchange, or an agent licensed to sell exchange products specifically. If your employer was large enough to be required to offer its plan via COBRA or you live in a state that extends the COBRA requirement to smaller businesses, you can choose that as well. Bear in mind this option is likely to be expensive relative to individual plans. It's becoming a less relevant solution with the advent of guaranteed issue individual coverage. COBRA is not a special type of insurance, it's a mandate that your employer allow you to remain on its plan but pay the full gross premium plus an up to 2% (10% for calCOBRA) administrative fee. Despide popular vernacular, there is no such thing as Obamacare or ACA coverage. Obamacare reshaped the insurance market. The ACA outlines certain minimum coverage requirements, generally referred to as "Minimum Essential Coverage." While employers and plans are not "required" to meet all of these coverage requirements there is a penalty associated with non-compliance. The single exception to this is grandfathered plans which can still sidestep a few of the requirements. The penalty is harsh enough that it's not worth the cost of offering a non-compliant plan. Whether you buy coverage through a state or federal exchange, through an insurance agent, or via your employer's COBRA program you will have "ACA" coverage (unless on the off chance your employer's plan doesn't check the "Minimum Essential Coverage" box). So generally all plans available to you will have $0 preventive coverage, pregnancy benefits, cancer treatment benefits etc. Another thing to consider is your entire family doesn't need to be on the same plan. If your family is healthy with the exception of one child, you can purchase $0 deductible coverage for the one child and higher deductible more catastrophic plan for the remainder of your family. In fact you could choose COBRA for one child and purchase individual coverage for the remainder of the family. The things to consider when you face a lay-off: I tried to mitigate my use of "all" and "always" because there are some narrow exceptions to these requirements, such as the "Hobby Lobby" decision allowing closely held organizations with highly religious owners the ability to remove certain contraception benefits. Understand that these exceptions are rare and not available to individual plans. |
Why do consultants or contractors make more money than employees? | The "more money" aspect is only true if you ignore the lack of symmetry between employment and contracting. Consulting is another story altogether. Companies are willing to pay consultants for a number of reasons but the most important is deniability. If a decision is recommended and goes wrong then the consultants can be sued. Liability cover is expensive. Cynicism aside, it often isn't cost-effective to keep specialists permanently on the payroll for tasks that are performed once a year. Recently I've noticed that the nature of consulting is changing. Companies are starting to assemble brains-trusts of internal consultants who can create and manage projects while outsourcing only the labour-intensive data-collection roles. Expect this to have a big impact on the management consulting industry. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | This is probably a very opinion-based Q&A. But anyway: My solution to such questions is to have multiple layers of emergency funds. I have one amount in a bank account that I do not like to tap, but can (and do) when I need money. This is most close to your infrequent but not completely surprising moments of cash need. I have a second layer in the form of stocks. As I understand that selling stocks should not be done when you need money, but when the stock price is good, this provides a fairly high barrier to selling it on a whim. Before I do so, especially if the stock price isn't at a local max, it would have to be an emergency. My third layer is even more fixed investment which I can't access with online brokerage. The physical aspect makes sure that it has to be a real, serious emergency before I turn that into cash. If you have such a layered approach, the question is not black and white anymore, and easier to answer. |
What is the point of owning a stock without dividends if it cannot be resold? | If that condition is permanent -- the stock will NEVER pay dividends and you will NEVER be able to sell it -- then yes, it sounds to me like this is a worthless piece of paper. If there is some possibility that the stock will pay dividends in the future, or that a market will exist to sell it, then you are making a long-term investment. It all depends on how likely it is that the situation will change. If the investment is small, maybe it's worth it. |
Can a credit card company raise my rates for making a large payment? | No. That's pretty unlikely. Card issuers typically base your rate on your credit score. Paying down debt reduces your percent of available credit used, and improves your score until you are in the 1-20% range. That's optimum. To this issuer, you are one of a million customers, there's no emotion in this, just numbers to them. For what it's worth, if a card issuer raises your rate, you are permitted to "not accept" the rate, stop using the card for new charges, and pay at the current rate. Of course this doesn't apply to zero interest deals, only to increases to your regular rate. |
Can I estimate other people's credit limit at the grocery store? | What you're referring to is Visa Easy Payment Services (VEPS). Other payment processors have similar programs. Basically, certain merchants (based on merchant category code - or MCC), are not required to obtain a signature under $50. This limit was raised to $50 from $25 last year. Here is the press release from Visa describing the increase, and the program in general. |
Should I file taxes or Incorperate a personal project? | There are two reasons for incorporating a business in Canada - limiting liability and providing some freedom in structuring your taxes. Since you are asking about taxes, I will restrict myself to that topic. First of all, remember that if you don't make much money, there isn't much tax to save by clever structuring of your affairs. And if you do incorporate, you will pay taxes as a corporation, and pay taxes again on your salary paid from that corporation. It can still be advantageous, because the small business tax rate is less that the higher tax brackets of personal taxes, and you don't have to pay out all of the profit as salary. If you don't incorporate, you still must pay taxes on your net income from the business. (See brian's answer.) Definitely keep track of your income and expenses, even if you don't plan on making money, in case you get audited. If the CRA wants to call your hobby a business, you will need to show that you haven't made any profit. I am just giving you a few bits of advice because this subject is complicated. Too complicated for an answer on this site. If you are still interested, go to your local library and get some books on the subject. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | I think it's wise to account for those inevitable but unpredictable expenses like car/house repairs and abnormal medical bills when deciding on your emergency fund amount. So if you average $100/month for car repairs, and you have a 6-month emergency fund, then part of that fund is $600 for car repairs. If your total annual out of pocket for health insurance is $5,000/year, then emergency fund gets $2,500 and so on. This way, you add cushion to your emergency fund to handle those unpredictable but inevitable expenses without setting up a bunch of separate accounts. It doesn't have to be inflexible either, I know my furnace and air conditioner are way past their expected life, so I'm keeping a larger than normal emergency fund. Ultimately it's personal preference, to me, cash is all the same no matter what account it's in, but other people do best by keeping some logical/physical separation of funds intended for different purposes. |
New to investing — I have $20,000 cash saved, what should I do with it? | Another thought: Higher education in the US is frightfully expensive with the sticker price for a 4-year undergraduate degree at a decent private college us sitting at around $250,000 and rising fast. Consider starting a 529 savings plan especially if you planning on more kids. |
What's the most conservative split of financial assets for my portfolio in today's market? | This is a somewhat complicated question because it really depends on your personal situation. For example, the following parameters might impact your optimal asset allocation: If you need the money before 3 years, I would suggest keeping almost all of it in cash, CDs, Treasuries, and ultra safe short-term corporate bonds. If however, you have a longer time horizon (and since you're in your 30s you would ideally have decades) you should diversify by investing in many different asset classes. This includes Australian equity, international equity, foreign and domestic debt, commodities, and real estate. Since you have such a long time horizon market timing is not that important. |
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