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Advice for a college student interested in investment opportunities. | Put it in a Vanguard fund with 80% VTI and 20% VXUS. That's what you'll let set for 10-15 years. For somebody that is totally new to investing, use "play money" in the stock market. It's easy for young people to get dreams of glory and blow it all on some stock tip they've seen on Twitter. |
What is the difference between trading and non-trading stock? | Every company has Stocks. For the stocks to be traded via some stock exchange, the companies must follow the eligibility criteria and guidelines. Once done, these are then listed on the stock exchange and can be traded. The advantage [amongst others] of listing is liquidity and stocks can easily be bought and sold. Some small companies or closely held companies may not want to list on stock exchange and hence are not traded. This does not mean they can't be bought and sold, they can be outside of the market, however the deals are complex and every deal has to be worked out. During the course of time a stock that is traded on a stock exchange, would either fail to meet the criteria or voluntarily choose not to be traded and follow the delisting process [either by stock exchange or by company]. After this the stocks are no longer traded on the exchange. |
Including the region where you live in your investment portfolio? | Diversification is just one aspect in an investment portfolio. The other aspects in Investment are Risk Taking Ability, Liquidity, Local Regulations, Tax benefits, Ease & Convenience, Cost of carrying out transactions etc. Investing in other regions is prone FX risk and other risks depending on the region of investment. For example investing in Emerging markets there is a risk of Local Regulations being changed, additional tax being levied, or Political instability and host of such risks. Investing in local markets give you better understanding of such changes and the risk associated is less plus the Ease of carrying out transactions is great, less expensive compared to cost of transactions in other markets. Diversification in Investment should also be looked upon how much you invest in; Equities Debt Bullion Real Estate Once you have a sizeable amount of investment in Equities or Debt, it would then make more sense to diversify this portion more to include funds from other regions. Unless you are an Running your own business, it makes sense to invest in your line of business if that is performing well. The reason being that the benefit / returns from the equities is much greater than the salary rise / bonus. For example I am in Information Technology and yet invest in all leading IT companies because the returns from companies in these segments have been good. |
Consequences of not closing an open short sell position? | You would generally have to pay interest for everyday you hold the position overnight. If you never close the position and the stock price goes to zero, you will be closed out and credited with your profit. If you never close the position and the stock price keeps going up and up, your potential loss is an unlimited amount of money. Of course your broker may close you out early for a number of reasons, particularly if your loss goes above the amount of capital you have in your trading account. |
Why can't I short a stock that sells for less than $5? Is there another way to “go short” on them? | A bit of poking around brought me to this thread on the Motley Fool, asking the same basic question: I think the problem is the stock price. For a stock to be sold short, it has to be marginable which means it has to trade over $ 5.00. The broker, therefore, can't borrow the stock for you to sell short because it isn't held in their clients' margin accounts. My guess is that Etrade, along with other brokers, simply exclude these stocks for short selling. Ivestopedia has an explanation of non-marginable securities. Specific to stocks under $5: Other securities, such as stocks with share prices under $5 or with extremely high betas, may be excluded at the discretion of the broker itself. |
Is it a good investment for a foreigner to purchase a flat/apartment in China? | It is a lousy investment to purchase an apartment in China. Chinese citizens purchase apartments in China because, well... here's how China works: There's some fundamentals driving Chinese property values higher, but mostly it's a bubble caused by those reasons. |
What factors of a stock help determine its potential | Knowing the answer to this question is generally not as useful as it may seem. The stock's current price is the consensus of thousands of people who are looking at the many relevant factors (dividend rate, growth prospects, volatility, risk, industry, etc.) that determine its value. A stock's price is the market's valuation of the cash flows it entitles you to in the future. Researching a stock's value means trying to figure out if there is something relevant to these cash flows that the market doesn't know about or has misjudged. Pretty much anything we can list for you here that will affect a stock's price is something the market knows about, so it's not likely to help you know if something is mispriced. Therefore it's not useful to you. If you are not a true expert on how important the relevant factors are and how the market is reacting to them currently (and often even if you are), then you are essentially guessing. How likely are you to catch something that the thousands of other investors have missed and how likely are you to miss something that other investors have understood? I don't view gambling as inherently evil, but you should be clear and honest with yourself about what you are doing if you are trying to outperform the market. As people become knowledgeable about and experienced with finance, they try less and less to be the one to find an undervalued stock in their personal portfolio. Instead they seek to hold a fully diversified portfolio with low transactions costs and build wealth in the long term without wasting time and money on the guessing game. My suggestion for you is to transition as quickly as you can to behave like someone who knows a lot about finance. |
What is a reasonable salary for the owner and sole member of a small S-Corp? | You can get audited for anything Business owners are more likely to get audited than people filing 1040-EZ's for their simplistic income tax obligation. According to HR Block I hope you enjoy the process where you explain the source of your earnings |
Can I buy a new house before selling my current house? | The two most common scenarios are: Since you have more control of timing when you are the buyer compared to when you are the seller, #1 is probably more common, however, a good real estate attorney should be able to walk you through your options should #2 come up. Fortunately, many real estate attorneys do not charge you anything until the sale completes, and you will likely get a discount if you involve them in both the sale and purchase, so I would start by finding an attorney. |
How much more than my mortgage should I charge for rent? | Agree with the previous posts the question is poorly worded. -but- Clark Howard does say you really need to be getting 90% back in the mortgage payment. Remember that what ever your paying in principle a month is adding to your net worth and every month that gets you a little more money than the last payment. Also this is a good hedge on inflation and at some point within a few years you will be at break even. |
Do I have to sell worthless stock to claim a loss and clean up? | Generally, to be able to write off worthless securities, you need to show that they're indeed worthless. It's not necessarily easy, as you need to prove that there's no way they will regain any value in the future. What is usually done, instead, is very simple: you sell them. Many brokers are aware of this problem and will assist by buying these securities from you at a nominal price (E*Trade, for example, for $0.01, ScotTrade for $0.00), and providing a proper trade confirmation. This is a bona fide sale, so if the stock does regain value - it will be a profit for the broker. In this case - you just report it as a sale at loss. Check with your broker if they support such a solution. |
Snowball debt or pay off a large amount? | Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some "wins" sooner than later in the goal of becoming debt free. |
Why would anyone buy a government bond? | Great question. There are several reasons; I'm going to list the few that I can think of off the top of my head right now. First, even if institutional bank holdings in such a term account are covered by deposit insurance (this, as well as the amount covered, varies geographically), the amount covered is generally trivial when seen in the context of bank holdings. An individual might have on the order of $1,000 - $10,000 in such an account; for a bank, that's basically chump change, and you are looking more at numbers in the millions of dollars range. Sometimes a lot more than that. For a large bank, even hundreds of millions of dollars might be a relatively small portion of their holdings. The 2011 Goldman Sachs annual report (I just pulled a big bank out of thin air, here; no affiliation with them that I know of) states that as of December 2011, their excess liquidity was 171,581 million US dollars (over 170 billion dollars), with a bottom line total assets of $923,225 million (a shade under a trillion dollars) book value. Good luck finding a bank that will pay you 4% interest on even a fraction of such an amount. GS' income before tax in 2011 was a shade under 6.2 billion dollars; 4% on 170 billion dollars is 6.8 billion dollars. That is, the interest payments at such a rate on their excess liquidity alone would have cost more than they themselves made in the entire year, which is completely unsustainable. Government bonds are as guaranteed as deposit-insurance-covered bank accounts (it'll be the government that steps in and pays the guaranteed amount, quite possibly issuing bonds to cover the cost), but (assuming the country does not default on its debt, which happens from time to time) you will get back the entire amount plus interest. For a deposit-insured bank account of any kind, you are only guaranteed (to the extent that one can guarantee anything) the maximum amount in the country's bank deposit insurance; I believe in most countries, this is at best on the order of $100,000. If the bank where the money is kept goes bankrupt, for holdings on the order of what banks deal with, you would be extremely lucky to recover even a few percent of the principal. Government bonds are also generally accepted as collateral for the bank's own loans, which can make a difference when you need to raise more money in short order because a large customer decided to withdraw a big pile of cash from their account, maybe to buy stocks or bonds themselves. Government bonds are generally liquid. That is, they aren't just issued by the government, held to maturity while paying interest, and then returned (electronically, these days) in return for their face value in cash. Government bonds are bought and sold on the "secondary market" as well, where they are traded in very much the same way as public company stocks. If banks started simply depositing money with each other, all else aside, then what would happen? Keep in mind that the interest rate is basically the price of money. Supply-and-demand would dictate that if you get a huge inflow of capital, you can lower the interest rate paid on that capital. Banks don't pay high interest (and certainly wouldn't do so to each other) because of their intristic good will; they pay high interest because they cannot secure capital funding at lower rates. This is a large reason why the large banks will generally pay much lower interest rates than smaller niche banks; the larger banks are seen as more reliable in the bond market, so are able to get funding more cheaply by issuing bonds. Individuals will often buy bonds for the perceived safety. Depending on how much money you are dealing with (sold a large house recently?) it is quite possible even for individuals to hit the ceiling on deposit insurance, and for any of a number of reasons they might not feel comfortable putting the money in the stock market. Buying government bonds then becomes a relatively attractive option -- you get a slightly lower return than you might be able to get in a high-interest savings account, but you are virtually guaranteed return of the entire principal if the bond is held to maturity. On the other hand, it might not be the case that you will get the entire principal back if the bank paying the high interest gets into financial trouble or even bankruptcy. Some people have personal or systemic objections toward banks, limiting their willingness to deposit large amounts of money with them. And of course in some cases, such as for example retirement savings, it might not even be possible to simply stash the money in a savings account, in which case bonds of some kind is your only option if you want a purely interest-bearing investment. |
If a stock doesn't pay dividends, then why is the stock worth anything? | There are two main ways you can make money through shares: through dividends and through capital gains. If the company is performing well and increasing profits year after year, its Net Worth will increase, and if the company continues to beat expectations, then over the long term the share price will follow and increase as well. On the other hand, if the company performs poorly, has a lot of debt and is losing money, it may well stop paying dividends. There will be more demand for stocks that perform well than those that perform badly, thus driving the share price of these stocks up even if they don't pay out dividends. There are many market participants that will use different information to make their decisions to buy or sell a particular stock. Some will be long term buy and hold, others will be day traders, and there is everything in between. Some will use fundamentals to make their decisions, others will use charts and technicals, some will use a combination, and others will use completely different information and methods. These different market participants will create demand at various times, thus driving the share price of good companies up over time. The annual returns from dividends are often between 1% and 6%, and, in some cases, up to 10%. However, annual returns from capital gains can be 20%, 50%, 100% or more. That is the main reason why people still buy stocks that pay no dividends. It is my reason for buying them too. |
Is it bad practice to invest in stocks that fluctuate by single points throughout the day? | Its hard to write much in those comment boxes, so I'll just make an answer, although its really not a formal answer. Regarding commissions, it costs me $5 per trade, so that's actually $10 per trade ($5 to buy, $5 to sell). An ETF like TNA ($58 per share currently) fluctuates $1 or $2 per day. IXC is $40 per share and fluctuates nearly 50 cents per day (a little less). So to make any decent money per trade would mean a share size of 50 shares TNA which means I need $2900 in cash (TNA is not marginable). If it goes up $1 and I sell, that's $10 for the broker and $40 for me. I would consider this to be the minimum share size for TNA. For IXC, 100 shares would cost me $4000 / 2 = $2000 since IXC is marginable. If IXC goes up 50 cents, that's $10 for the broker and $40 for me. IXC also pays a decent dividend. TNA does not. You'll notice the amount of cash needed to capture these gains is roughly the same. (Actually, to capture daily moves in IXC, you'll need a bit more than $2000 because it doesn't vary quite a full 50 cents each day). At first, I thought you were describing range trading or stock channeling, but those systems require stop losses when the range or channel is broken. You're now talking about holding forever until you get 1 or 2 points of profit. Therefore, I wouldn't trade stocks at all. Stocks could go to zero, ETFs will not. It seems to me you're looking for a way to generate small, consistent returns and you're not seeking to strike it rich in one trade. Therefore, buying something that pays a dividend would be a good idea if you plan to hold forever while waiting for your 1 or 2 points. In your system you're also going to have to define when to get back in the trade. If you buy IXC now at $40 and it goes to $41 and you sell, do you wait for it to come back to $40? What if it never does? Are you happy with having only made one trade for $40 profit in your lifetime? What if it goes up to $45 and then dips to $42, do you buy at $42? If so, what stops you from eventually buying at the tippy top? Or even worse, what stops you from feeling even more confident at the top and buying bigger lots? If it gets to $49, surely it will cover that last buck to $50, right? /sarc What if you bought IXC at $40 and it went down. Now what? Do you take up gardening as a hobby while waiting for IXC to come back? Do you buy more at lower prices and average down? Do you find other stocks to trade? If so, how long until you run out of money and you start getting margin calls? Then you'll be forced to sell at the bottom when you should be buying more. All these systems seem easy, but when you actually get in there and try to use them, you'll find they're not so easy. Anything that is obvious, won't work anymore. And even when you find something that is obvious and bet that it stops working, you'll be wrong then too. The thing is, if you think of it, many others just like you also think of it... therefore it can't work because everyone can't make money in stocks just like everyone at the poker table can't make money. If you can make 1% or 2% per day on your money, that's actually quite good and not too many people can do that. Or maybe its better to say, if you can make 2% per trade, and not take a 50% loss per 10 trades, you're doing quite well. If you make $40 per trade profit while working with $2-3k and you do that 50 times per year (50 trades is not a lot in a year), you've doubled your money for the year. Who does that on a consistent basis? To expect that kind of performance is just unrealistic. It much easier to earn $2k with $100k than it is to double $2k in a year. In stocks, money flows TO those who have it and FROM those who don't. You have to plan for all possibilities, form a system then stick to it, and not take on too much risk or expect big (unrealistic) rewards. Daytrading You make 4 roundtrips in 5 days, that broker labels you a pattern daytrader. Once you're labeled, its for life at that brokerage. If you switch to a new broker, the new broker doesn't know your dealings with the old broker, therefore you'll have to establish a new pattern with the new broker in order to be labeled. If the SEC were to ask, the broker would have to say 'yes' or 'no' concering if you established a pattern of daytrading at that brokerage. Suppose you make the 4 roundtrips and then you make a 5th that triggers the call. The broker will call you up and say you either need to deposit enough to bring your account to $25k or you need to never make another daytrade at that firm... ever! That's the only warning you'll ever get. If you're in violation again, they lock your account to closing positions until you send in funds to bring the balance up to $25k. All you need to do is have the money hit your account, you can take it right back out again. Once your account has $25k, you're allowed to trade again.... even if you remove $15k of it that same day. If you trigger the call again, you have to send the $15k back in, then take it back out. Having the label is not all bad... they give you 4x margin. So with $25k, you can buy $100k of marginable stock. I don't know... that could be a bad thing too. You could get a margin call at the end of the day for owning $100k of stock when you're only allowed to own $50k overnight. I believe that's a fed call and its a pretty big deal. |
On what time scales are stock support and resistance levels meaningful? | Support and resistance only works as a self-fulfilling prophecy. If everyone trading that stock agrees there's a resistance at so-and-so level, and it is on such-and-such scale, then they will trade accordingly and there will really be a support or resistance. So while you can identify them at any time scale (although as a rule the time scale on which you observed them should be similar to the time scale on which you intend to use them), it's no matter unless that's what all the other traders are thinking as well. Especially if there are multiple possible S/P levels for different time scales, there will be no consensus, and the whole system will break down as one cohort ruins the other group's S/P by not playing along and vice versa. But often fundamentals are expected to dominate in the long run, so if you are thinking of trades longer than a year, support and resistance will likely become meaningless regardless. It's not like that many people can hold the same idea for that long anyhow. |
Do people tend to spend less when using cash than credit cards? | Unless a study accounts for whether the users are following a budget or not, it is irrelevant to those who are trying to take their personal finances seriously. I can certainly believe that those who have no budget will spend more on a credit card than they will on a debit card or with cash. Under the right circumstances spending with cards can actually be a tool to track and reduce spending. If you can see on a monthly and yearly basis where all of your money was spent, you have the information to make decisions about the small expenses that add up as well as the obvious large expenses. Debit cards and credit cards offer the same advantage of giving you an electronic record of all of your transactions, but debit cards do not come with the same fraud protection that credit cards have, so I (and many people like me) prefer to use credit cards for security reasons alone. Cash back and other rewards points bolster the case for credit cards over debit cards. It is very possible to track all of your spending with cash, but it is also more work. The frustration of accounting for bad transcriptions and rechecking every transaction multiple times is worth discussing too (as a reason that people get discouraged and give up on budgeting). My point is simply that credit cards and the electronic records that they generate can greatly simplify the process of tracking your spending. I doubt any study out there accounts for the people who are specifically using those benefits and what effect it has on their spending. |
How to approach building credit without a credit card | Keep in mind that credit takes time to build. Your best short-term solution is to save enough cash to put enough of a down-payment that the lower loan-to-value ratio outweighs the lack of credit history. If there's enough equity to ensure that the bank will get their money back if they have to foreclose, you will have a better chance of securing financing. In addition, the stability and consistency of your employment may also be a factor that makes it difficult for you to get a loan without a substantial down-payment. Finally, don't ignore the risk present in resting a property that you have a loan on. Make sure you have a plan in place to pay your payments if the other half goes unrented for several months, or you risk losing the entire property. My advice is to rent somewhere else for enough time that you can save up a lot of cash to purchase a duplex rather than getting in a rush and doing something unwise (like apply for a bunch of credit cards you don't need). |
Should I buy stocks of my current employer because of its high dividend yield? | Generally, it is considered a bad idea to put significant parts of your money in your own employer's stock, no matter how great the company looks right now. The reason is the old 'don't put all your eggs in one basket'. If there is ever a serious issue with your company, and you lose your job because they go down the drain, you don't only lose your job, but also your savings (and potentially 401k if you have their stock there too). So you end unemployed and without all your savings. Of course, this is a generic tip, and depending on the situation, it might be ok to ignore it, that's your decision. Just remember to have an eye on it, so you can get out while they are still floating - typically employees are not the first to know when it goes downhill, and when you see it in the papers, it's too late. Typically, you get a more secure and independent return-on-invest by buying into a well-managed mixed portfolio |
Best personal finance software for Mac for German resident | I haven't used it in years, but look at GnuCash. From the site, one bullet point under Feature Highlights: |
Death and Capital Gains Taxes (United States) | Stocks (among other property) currently is allowed a "stepped-up basis" when valuing for estate tax purpose. From the US IRS web page: To determine if the sale of inherited property is taxable, you must first determine your basis in the property. The basis of property inherited from a decedent is generally one of the following: The fair market value (FMV) of the property on the date of the decedent's death. The FMV of the property on the alternate valuation date if the executor of the estate chooses to use alternate valuation. See the Instructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. If you or your spouse gave the property to the decedent within one year before the decedent's death, see Publication 551, Basis of Assets. Your question continues "the person that died still has to pay taxes on their profits in the year they died, right?" Yes. The estate would be subject to tax on realized gains/losses prior to death. |
Should I sell when my stocks are growing? | I reread your question. You are not asking about the validity of selling a particular stock after a bit of an increase but a group of stocks. We don't know how many. This is the S&P for the past 12 months. Trading at 1025-1200 or so means that 80-100 points is an 8% move. I count 4 such moves during this time. The philosophy of "you can't go wrong taking a gain" is tough for me to grasp as it offers no advice on when to get (back) in. Studies by firms such as Dalbar (you can google for some of their public material) show data that supports the fact that average investors lag the market by a huge amount. 20 years ending 12/31/08 the S&P returned 8.35%, investor equity returns showed 1.87%. I can only conclude that this is a result of buying high and selling low, not staying the course. The data also leads me to believe the best advice one can give to people we meet in these circumstances is to invest in index funds, keeping your expenses low as you can. I've said this since read Jack Bogle decades ago, and this advice would have yielded about 8.25% over the 20 years, beating the average investor by far, by guaranteeing lagging the average by 10 basis points or so. A summary of the more extensive report citing the numbers I referenced is available for down load - QAIB 2015 - Quantitative Analysis of Investor Behavior. It's quite an eye-opener and a worthy read. (The original report was dated 2009, but the link broke, so I've updated to the latest report, 2015) |
How do you calculate the P/E ratio by industry? | You could sum the P/E ratio of all the companies in the industry and divide it by the number of companies to find the average P/E ratio of the industry. Average P/E ratio of industry = Sum of P/E ratio of all companies in Industry / Number of companies in industry |
Why would my job recruiter want me to form an LLC? | This sounds very like disguised employment. You act like an employee of the company, but your official relationship with them is as a contractor. You gain none of the protection you get from being an employee, and this may make you cheaper, less risky and more desirable for the company who is hiring you. Depending on your country you may also pay corporation tax rather than income tax, which may represent a very significant saving. Also, the company hiring you may not have to pay PAYE, national insurance, stakeholder pension, etc. This arrangement is normal and legal providing you genuinely are acting as a subcontractor. However if you are behaving as an employee (desk at the company, company email, have to work specific hours in a specific location, no ability to subcontract, etc.) you may be classified as a disguised employee. In the UK it used to be common practice for highly paid employees to set up shell companies to avoid tax. This will now get you into hot water. Google IR35 It sounds like your relationship in this case is directly with the recruiter. You will have to consider if the recruiter is acting as your employer, or if you remain a genuinely independent agent. The duration of your contract with the recruiter will have a bearing on this. In the UK there are a whole series of tests for disguised employment. This is a good arrangement provided you go in with your eyes open and an awareness of the legislation. However you should absolutely check the rules that apply in your country before entering into this agreement. You could potentially be stung very badly indeed. |
How can a 'saver' maintain or increase wealth in low interest rate economy? | Personally, I invest in mutual funds. Quite a bit in index funds, some in capital growth & international. |
Interest on self assessment tax | Assuming you are Resident Indian. As per Indian Income Tax As per section 208 every person whose estimated tax liability for the year exceeds Rs. 10,000, shall pay his tax in advance in the form of “advance tax”. Thus, any taxpayer whose estimated tax liability for the year exceeds Rs. 10,000 has to pay his tax in advance by the due dates prescribed in this regard. However, as per section 207, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from business or profession is not liable to pay advance tax. In other words, if a person satisfies the following conditions, he will not be liable to pay advance tax: Hence only self assessment tax need to be paid without any interest. Refer the full guideline on Income tax website |
Calculating profits on a covered call. What method do you use? | at $8.50: total profit = $120.00 *basis of stock, not paid in cash, so not included in "total paid" at $8.50: total profit = $75.00 |
Are solar cell panels and wind mills worth the money? | I have personally known a family in the hills of Southern Oregon, US who lived off the electricity grid. As far as being "possible" yes, but easy is a certain no. This family was very dedicated to the point of living without grid electricity. A special built home of native field stones, careful alignment with the sun, location within the valley. I would assume that making a normal home be off the electric grid is much more difficult. Not impossible, but pretty darn hard. |
Why do people build a stock portfolio if one could get a higher return from bank interest than dividend per annum? | Large companies whose shares I was looking at had dividends of the order of ~1-2%, such as 0.65%, or 1.2% or some such. My savings account provides me with an annual return of 4% as interest. Firstly inflation, interest increases the numeric value of your bank balance but inflation reduces what that means in real terms. From a quick google it looks like inflation in india is currently arround 6% so your savings account is losing 2% in real terms. On the other hand you would expect a stable company to maintain a similar value in real terms. So the dividend can be seen as real terms income. Secondly investors generally hope that their companies will not merely be stable but grow in value over time. Whether that hope is rational is another question. Why not just invest in options instead for higher potential profits? It's possible to make a lot of money this way. It's also possible to lose a lot of money this way. If your knowlage of money is so poor you don't even understand why people buy stocks there is no way you should be going near the more complicated financial products. |
Are there any countries where citizens are free to use any currency? | Shops in most touristic places tend to accept major currencies (at least dollar and euro). I remember a trip in Istanbul before the euro existed, the kids selling postcards near the blue mosque were able to guess your country and announce in your language the price in your currency. |
How to value employee benefits? | To fairly compare a comp-only job to a job that offers insurance, get a quote for health insurance. Call your local insurance broker and find out what it would cost. Because if you aren't getting insurance from your employer, you'll have to get it elsewhere. If you get a quote on an HSA, don't forget to add in the annual deductible as part of the cost. On the ESPP, I'd count it as zero. The rationale being that so much of your financial status is tied to your employer that you don't really want to tie up too much more in company stock. (I.e. Company hits hard times, stock tanks, and then they lay you off. Double whammy -- both your assets and income.) But given that I've only been employed by companies that no longer exist in their original form, my perspective may be warped. |
What are the alternatives to compound interest for a Muslim? | Because so many businesses make some money through some form of compound interest, like a business that saves its earnings in a business account that pays interest, it heavily depends on how strict you interpret this law. Some Muslims I know interpret it to mean directly and indirectly, while for some it's just direct interest earned. What I would suggest is either a direct investment in agriculture or a share in agriculture, where you are directly paid from your share in the investment and not through money that comes from a bank account earning interest. If you do a direct investment in agriculture, like owning livestock, you will be paid money in the form of food, which compounds through reproduction and can sell the offspring to others and collect the money. Year to date, agriculture is crushing the S&P 500 and many places around the world are facing shortages in food, like sugar and corn. If you don't have enough money for a direct investment, you can try the share route where you own a share of a direct investment. Rather than go through stock exchanges, where many of these companies make money indirectly through interest also, you can negotiate directly with farmers, ranchers, livestock owners, etc. Some of these individuals are looking to diversify their money, so they may be willing to let you own a fraction of what they produce and pay you directly. All of this comes with risk, of course. Livestock and plants die for a variety of reasons, but none of it will be interest from lending whether to individuals or through a bank. In addition, if we experience very high inflation in the future, livestock and plants do very well in this environment. |
How can a company charge a closed credit card? | If this is a pre-authorized automatic billing, and if you have signed any contract with the merchant, cancelling may not block any future charges from the merchant. Happens with gyms, magazines, memberships quite often. There is a time period after the cancellation this will occur, then it'll be completely dead. |
Can a company block a specific person from buying its stock? | A more serious problem: how do you know who's really buying your stock? "Shell companies" are an increasingly obvious problem in corporate and tax accountability. There are jurisdictions where companies can be created with secret lists of directors and shareholders. If stock is bought by one of these companies, it is very hard to trace it to a particular individual. |
Why might it be advisable to keep student debt vs. paying it off quickly? | There are several ways you can get out of paying your student loans back in the USA: You become disabled and the loan is dismissed once verified by treating doctor or the Social Security Administration. You become a peace officer. You become a teacher; generally K-12, but I have heard from the DOE that teachers at state schools qualify as well. So the "malicious" friend B is prescribing to the theory that if one of those conditions becomes true, friend A will not have to pay back the loan. The longer you drag it out, the more chance you have to fulfill a condition. Given that 2 of these methods require a commitment, my guess is that they are thinking more along the lines of the first one, which is horrible. Financially, it makes no sense to delay paying back your loans because deferred loans are only interest-free until you graduate and are past your grace period, after which they will begin accruing interest. Unsubsidized loans accrue interest from the day you get them, only their payback is deferred until you graduate and exhaust your grace period. Anytime you ask for forbearance, you are still accruing interest and it is capitalizing into your principal — you are just given a chance to delay payback due to financial hardship, bad health, or loss of job. Therefore, at no point are you benefiting beyond the time you are in school and getting an education, still looking for a job, or dealing with health issues. In the current market, no CD, no savings account, and no investment will give you substantially more return that will offset the loss of the interest you are accruing. Even those of us in the old days getting 4.X % rates would not do this. There was a conditional consolidation offer the DOE allowed which could bring all your loans under one roof for a competitive 5.x-6.x % rate allowing you a single payment, but even then you would benefit if you had rates that were substantially higher. From a credit worthiness aspect, you are hurt by the outstanding obligation and any default along the way, so you really want to avoid that — paying off or down your loans are a good way to ensure you don't shoot yourself in the foot. |
How and Should I Invest (As a college 18 year old with minimal living expenses)? | I have about $1K in savings, and have been told that you should get into investment and saving for retirement early. I make around $200 per week, which about $150 goes into savings. That's $10k per year. The general rule of thumb is that you should have six months income as an emergency fund. So your savings should be around $5k. Build that first. Some argue that the standard should be six months of living expenses rather than income. Personally, I think that this example is exactly why it is income rather than living expenses. Six months of living expenses in this case would only be $1250, which won't pay for much. And note that living expenses can only be calculated after the fact. If your estimate of $50 a week is overly optimistic, you might not notice for months (until some large living expense pops up). Another problem with using living expenses as the measure is that if you hold down your living expenses to maximize your savings, this helps both measures. Then you hit your savings target, and your living expenses increase. So you need more savings. By contrast, if your income increases but your living expenses do not, you still need more savings but you can also save more money. Doesn't really change the basic analysis though. Either way you have an emergency savings target that you should hit before starting your retirement savings. If you save $150 per week, then you should have around $4k in savings at the beginning of next year. That's still low for an emergency fund by the income standard. So you probably shouldn't invest next year. With a living expenses standard, you could have $6250 in savings by April 15th (deadline for an IRA contribution that appears in the previous tax year). That's $5000 more than the $1250 emergency fund, so you could afford an IRA (probably a Roth) that year. If you save $7500 next year and start with $4k in savings (under the income standard for emergency savings), that would leave you with $11,500. Take $5500 of that and invest in an IRA, probably a Roth. After that, you could make a $100 deposit per week for the next year. Or just wait until the end. If you invested in an IRA the previous year because you decided use the living expenses standard, you would only have $6500 at the end of the year. If you wait until you have $6750, you could max out your IRA contribution. At that point, your excess income for each year would be larger than the maximum IRA contribution, so you could max it out until your circumstances change. If you don't actually save $3k this year and $7500 next year, don't sweat it. A college education is enough of an investment at your age. Do that first, then emergency savings, then retirement. That will flip around once you get a better paying, long term job. Then you should include retirement savings as an expected cost. So you'd pay the minimum required for your education loans and other required living expenses, then dedicate an amount for retirement savings, then build your emergency savings, then pay off your education loans (above the minimum payment). This is where it can pay to use the more aggressive living expenses standard, as that allows you to pay off your education loans faster. I would invest retirement savings in a nice, diversified index fund (or two since maintaining the correct stock/bond mix of 70%-75% stocks is less risky than investing in just bonds much less just stocks). Investing in individual stocks is something you should do with excess money that you can afford to lose. Secure your retirement first. Then stock investments are gravy if they pan out. If they don't, you're still all right. But if they do, you can make bigger decisions, e.g. buying a house. Realize that buying individual stocks is about more than just buying an app. You have to both check the fundamentals (which the app can help you do) and find other reasons to buy a stock. If you rely on an app, then you're essentially joining everyone else using that app. You'll make the same profit as everyone else, which won't be much because you all share the profit opportunities with the app's system. If you want to use someone else's system, stick with mutual funds. The app system is actually more dangerous in the long term. Early in the app's life cycle, its system can produce positive returns because a small number of people are sharing the benefits of that system. As more people adopt it though, the total possible returns stay the same. At some point, users saturate the app. All the possible returns are realized. Then users are competing with each other for returns. The per user returns will shrink as usage grows. If you have your own system, then you are competing with fewer people for the returns from it. Share the fundamental analysis, but pick your stocks based on other criteria. Fundamental analysis will tell you if a stock is overvalued. The other criteria will tell you which undervalued stock to buy. |
Can you explain why it's better to invest now rather than waiting for the market to dip? | This simulation game uses actual historical S&P 500 data to test whether you can "time the market." You start with $10,000 invested, and it plays back 10 years of index values, in which time you can choose to sell (once), and if you do sell you can subsequently buy (once). Then you find out how you did relative to just holding what you started with. If you play it enough times, you might eventually beat it once. I never did. |
Why does ExxonMobil's balance sheet show more liabilities than assets? | You are reading the balance sheet wrong. Everything Joe says is completely correct, but more fundamentally you have missed out on a huge pile of assets. "Current assets" is only short term assets. You have omitted more than $300B in long-term assets, primarily plant and equipment. The balance sheet explicitly says: Net tangible Assets (i.e. surplus of assets over liabilities) $174B |
What to do if my aging father is sustaining a hobby that is losing several thousand dollars every month? | If this was going on in the UK, I would try to get a mental capacity assessment done on the father. There are laws that stop you taking advantage of people that don’t understand what is going on; these laws could be used against the manager, but only if you can clearly prove that the father does not understand that the “business” is losing money. If the father does understand what is going on, then there is nothing you can do, as he has every right to waste his money, and anyone that may inherit what is left has no rights until he is dead. |
Importance of dividend yield when evaluating a stock? | Dividends yield and yield history are often neglected, but are very important factors that you should consider when looking at a stock for long-term investment. The more conservative portion of my portfolio is loaded up with dividend paying stocks/MLPs like that are yielding 6-11% income. In an environment when deposit and bond yields are so poor, they are a great way to earn reasonably safe income. |
Higher returns from international markets? | Foreign stocks tend to be more volatile -- higher risk trades off against higher return potential, always. The better reason for having some money in that area is that, as with bonds, it moves out-of-sync with the US markets and once you pick your preferred distribution, maintaining that balance semi-automatically takes advantage of that to improve your return-vs-risk position. I have a few percent of my total investments in an international stock index fund, and a few percent in an international REIT, both being fairly low-fee. (Low fees mean more of the money reaches you, and seems to be one of the better reasons for preferring one fund over another following the same segment of the market.) They're there because the model my investment advisor uses -- and validated with monte-carlo simulation of my specific mix -- shows that keeping them in the mix at this low level is likely to result in a better long-term outcome than if i left them out. No guarantees, but probabilities lean toward this specfic mix doing what i need. I don't pretend to be able to justify that via theory or to explain why these specific ratios work... but I understand enough about the process to trust that they are on (perhaps of many) reasonable solutions to get the best odds given my specific risk tolerance, timeline, and distaste for actively managing my money more than a few times a year. If that. |
What's the appropriate way to signify an S-Corp? | Subchapter S Corporations are a special type of corporation; the difference is how they are taxed, not how they relate to their vendors or customers. As a result, they are named the same way as any other corporation. The rules on names of corporations vary by state. "Corporation" and "Incorporated" (and their abbreviations) are allowed by every state, but some states allow other names as well. The Wikipedia article "Types of business entity" lists an overview of corporation naming rules for each state. The S-Corp that I work for has "Inc." at the end of its name. |
In general, is it financially better to buy or to rent a house? | An important factor you failed to mention is the costs associated with owning a home. For example, every 10 / 15 years, you have to replace your AC unit ($5k) and what about replacing a roof (depends on size, but could be $10k)? Not to mention, paying a couple thousand annually for property taxes. When renting, you never have to worry about any of these three..... |
How do I go about finding an honest & ethical financial advisor? | If someone recommends a particular investment rather than a class of investments, assume they are getting a commission and walk away. If someone recommends whole life insurance as an investment vehicle, walk away. Find someone whose fiduciary responsibility is explicitly to you as their client. That legally obligated them to consider your best interests first. It doesn't guarantee they are good, but it's done protection against their being actively evil. |
how derivatives transfer risk from one entity to another | The important thing to realize is, what would you do, if you didn't have the call? If you didn't have call options, but you wanted to have a position in that particular stock, you would have to actually purchase it. But, having purchased the shares, you are at risk to lose up to the entire value of them-- if the company folded or something like that. A call option reduces the potential loss, since you are at worst only out the cost of the call, and you also lose a little on the upside, since you had to pay for the call, which will certainly have some premium over buying the underlying share directly. Risk can be defined as reducing the variability of outcomes, so since calls/shorts etc. reduce potential losses and also slightly reduce potential gains, they pretty much by definition reduce risk. It's also worth noting, that when you buy a call, the seller could also be seen as hedging the risk of price decreases while also guaranteeing that they have a buyer at a certain price. So, they may be more concerned about having cash flow at the right time, while at the same time reducing the cost of the share losing in value than they are losing the potential upside if you do exercise the option. Shorts work in the same way but opposite direction to calls, and forwards and futures contracts are more about cash flow management: making sure you have the right amount of money in the right currency at the right time regardless of changes in the costs of raw materials or currencies. While either party may lose on the transaction due to price fluctuations, both parties stand to gain by being able to know exactly what they will get, and exactly what they will have to pay for it, so that certainty is worth something, and certainly better for some firms than leaving positions exposed. Of course you can use them for speculative purposes, and a good number of firms/people do but that's not really why they were invented. |
Why is the stock market closed on the weekend? | After-hours trading and alternate venues allow one to trade outside of regular market hours. However there are a few reasons why you would not want to: The purpose of an exchange is to improve liquidity by gathering all buyers and sellers in the same place at the same time. If trading was 24/7, not all market participants would be trading at the same time. Some markets (including NASDAQ) depend on market makers or specialists to help liquidity. These exchanges are able to mandate that the market maker actively make a market in a security during a meaningful percentage of the trading day. Requiring 24/7 active market making may not be reasonable. Trading systems, meaning both exchange infrastructure and market participant infrastructure, need maintenance time. It's nice to have the evenings and weekends for scheduled work. Post-trade clearing and settlement procedures are still somewhat manual at times. You need staff around to handle these processes. |
How to calculate ownership for property with a partner | To add to ChrisInEdmonton's answer: Your conveyancing solicitor should be able to advise on the details, but a typical arrangement involves: As an alternative to the numbers in Chris' answer, it could be argued that you should first be reimbursed for the fees you paid (accounting for inflation), but that any remaining profits from the property itself should be divided in proportion to your individual investments (so 51.6% to you, and 48.4% to your partner, assuming you contribute to the loans equally). |
Is www.onetwotrade.com a scam? | It is a binary options market licensed by the "gaming authority" of Malta. One of the most liberal "pay to play" jurisdictions in the European Union. It sells access to tighter regulatory regimes. This is distinctly a gambling website, not licensed or protected by securities regulations. But that aside, even if they were able to masquerade more as a financial service, none of that dictates whether you will lose your money. Therefore try to find reviews from people that already use the site. This is not investing, a distinction I am able to make because no product they offer has positive expected value. Cash settled binary options do sound like a lot of fun though! And maybe you can make successful predictions in the allotted time period of the option. The things I would expect are issues withdrawing your funds, or unexplained fees. |
Why do many British companies offer a scrip dividend option in lieu of cash? | There are quite a few reasons that a company may choose to pay dividends rather than hold cash [increasing the share value]. Of couse there are equally other set of reasons why a company may not want to give dividends and hold on to cash. Related question here Please explain the relationship between dividend amount, stock price, and option value? |
15 year mortgage vs 30 year paid off in 15 | I just wanted to point out that the most "leverage" for pre-paying occurs at the very beginning of the mortgage, and declines rapidly after that. So, your very best scenario is to get the 30-year, and make one extra payment entirely to principal the first month of every year. This causes the amortization to drop by 96 payments, to about 22 years. I don't know of any other way that you can get nearly 4 times value for your money (22 payments extra to save 96 payments later). After that, reducing from 22 to 15 years takes more of your money for the same result, but do it if you want. I actually did this, and it put me way ahead when I sold the house about 12 years later. |
How can I determine which stores are regarded as supermarkets for a rewards credit card? | Credit card companies organize types of businesses into different categories. (They charge different types of businesses different fees.) When a business first sets up their credit card processing merchant account, they need to specify the category. Here is a list of categories that Visa uses. Grocery stores and supermarkets are category number 5411. Other types of businesses, such as the examples you provided in your question, have a different category number. American Express simply looks at the merchant category code for each of your transactions and only gives you rewards for the ones in the grocery store category. It's all automated. They likely don't have a list of every grocery store in the US, and even if they did, they would probably not provide it to the public, for proprietary reasons. If you are in doubt about whether or not a particular store is in the grocery category, you'll just have to charge it to your card and see what happens. Often, the category of transaction will be shown for each transaction on your credit card's website. |
Where do countries / national governments borrow money from? | There no legal framework that allows states like the US or countries in Europe to default on their debt. Should congress pass a law to default the US supreme court is likely to nullify the law. |
Should I pay off a 0% car loan? | Mathematically, the wisest choice is to invest your extra money somewhere else and not pay off your 0% loan early. An extreme example highlights this. Suppose some colossal company offered to loan you a billion dollars at 0 % interest. Would you take it? Or would you say "No thanks, I don't want that much debt." You would be crazy not to accept. You could put that money in the safest investments available and still pocket millions while making the minimum payments back to them. Your choice here is essentially the same, but unfortunately, on much smaller scale. That said, math doesn't always trump other factors. You need to factor in your peace of mind, future purchases, the need for future borrowing, your short term income and job security, and whether you think you can reliably make payments on this loan without messing up and triggering fees that wipe out the mathematical advantage of slow paying the loan. You are fortunate because you really can't make a wrong choice here. Paying off debt is never a bad choice IMO. However, it may not always be the best choice. |
Does it make sense to refinance a 30 year mortgage to 15 years? | There's several different trade-offs wrapped up in your question. In general, refinancing a mortgage to a lower interest rate makes sense if you are certain you'll be living in the house for N years. N depends on your closing costs and points. Basically you need to calculate the break-even point for when the savings from the reduced interest rate exceeds the cost of the re-fi. When I refinanced, the broker did the calculations for me for a range of options, maybe yours could as well. The trade off in selecting 30-year vs. 15-year is between monthly payment and total outlay. A 15-year mortgage will have a higher monthly payment, but the total money that is paid out the bank (rather than to your equity) will be less. Using the Heloc to do the down payment seems sketchy; plus then you have two loan payments you're making each month. Why not keep it simple and look for a $250k loan with 5% down? Presumably with the current mortgage you already put in a good down payment, and have built some equity up. |
How should we organize our finances to effectively plan and prepare for an retirement in next 10 years? | The biggest issue is your lack of diversification. Your real estate investments have performed quite well so far, but you have also likely enjoyed a period of unprecedented growth that is not sustainable. In the long term, stocks have always outperformed real estate investments, which tend to track more closely to the inflation rate. You need more balance for when when the real estate market cools off. You don't mention tax-deferred retirement savings accounts. You should prioritize your attention to these to keep your income tax low. Consider selling one of your investment properties if you can't adequately fund the 401k. |
Can I donate short-stock to charity? | No. There is no asset associated with your short position, so there's nothing to gift. The short position in the stock is purely a liability. When you note that you have a profit in the position, what you mean is that the cash you made when you shorted the stock is more than enough to cover the short position. The only asset in this picture, then, is the cash you made when you entered the short position. |
How do I get into investing in stocks? | Before putting any significant money into stocks, I would recommend spending at least a year paper trading. It is amazing how much money you can lose trading stocks when you don't know what you are doing! |
Can I write off (deduct) expenses in a period where my corporation makes no money? | Your corporation would file a corporate income tax return on an annual basis. One single month of no revenue doesn't mean much in that annual scheme of things. Total annual revenue and total annual expenses are what impact the results. In other words, yes, your corporation can book revenues in (say) 11 of 12 months of the year but still incur expenses in all months. Many seasonal businesses operate this way and it is perfectly normal. You could even just have, say, one super-awesome month and spend money the rest of the year. Heck, you could even have zero revenue but still incur expenses—startups often work like that at first. (You'd need investment funding, personal credit, a loan, or retained earnings from earlier profitable periods to do that, of course.) As long as your corporation has a reasonable expectation of a profit and the expenses your corporation incurs are valid business expenses, then yes, you ought to be able to deduct those expenses from your revenue when figuring taxes owed, regardless of whether the expenses were incurred at the same approximate time as revenue was booked—as long as the expense wasn't the acquisition of a depreciable asset. Some things your company would buy—such as the computer in your example—would not be fully deductible in the year the expense is incurred. Depreciable property expenses are deducted over time according to a schedule for the kind of property. The amount of depreciation expense you can claim for such property each year is known as Capital Cost Allowance. A qualified professional accountant can help you understand this. One last thing: You wrote "write off". That is not the same as "deduct". However, you are forgiven, because many people say "write off" when they actually mean "deduct" (for tax purposes). "Write off", rather, is a different accounting term, meaning where you mark down the value of an asset (e.g. a bad loan that will never be repaid) to zero; in effect, you are recognizing it is now a worthless asset. There can be a tax benefit to a write-off, but what you are asking about are clearly expense deductions and not write-offs. They are not the same thing, and the next time you hear somebody using "write off" when they mean "deduction", please correct them. |
Getting a mortgage while self-employed | Would it be worth legitimizing his business or is it too late at this point? To be blunt, you're asking if we recommend that he stop breaking the law. The answer is obviously yes, he should be declaring his income. And it would probably benefit him to get on the same page as his employer (or client) so they can both start obeying the law together. Once he's filed a tax return for 2016 that would certainly help his cause as far as a lender is concerned, and as soon as he can provide some recent pay stubs (or paid invoices) he should be ready to move forward on the mortgage based on that additional income. |
Is gold subject to inflation? [duplicate] | No. If you have to ignore a price spike, obviously its value is not constant. Gold is a commodity, just like every other commodity. |
How do I protect myself from a scam if I want to help a relative? | Since you mentioned that it is your close relative, he has never done enything dodgy and is wise with his money, then I would take it that you have some implicit trust in him. Now your options in this case are limited to either saying an outright no, which may impact familial ties adversely or to do as he has requested. One way could be to ask him for a mail requesting a short term loan and then transfer the money to his account. Then after a few days/weeks he repays the money back to your account. Now, this may or may not be 100% black & white depending on the legalities of your country but in most countries/cultures giving and taking of personal loans between friends/families is quite common. |
Changing Bank Account Number regularly to reduce fraud | We change it every so often to reduce fraud. This is idiocy. They receive regular payments. They are asking the people who pay them to regularly change where their money is being sent. This increases their exposure to fraud dramatically as each time the account is changed, there is a risk it will be changed to an account they do not control. This is a huge red flag. Confirm that this is authentic and, if so, insist that they sign an agreement accepting all liability for the risks this crazy policy causes, otherwise, you should refuse to go through the effort of confirming new accounts and risking typing or communication errors on a regular basis. This is definitely a "what were they thinking?!" kind of thing. If it's not fake entirely. (This answer assumes that you were given a correct explanation, that they change it regularly believing that will reduce fraud.) |
Where should I park my money if I'm pessimistic about the economy and I think there will be high inflation? | If you think your cash will buy fewer goods in the future due to inflation, are there goods you will want or need in the future that you can purchase now? I think the cost of storage would need to be less than the inflation in price for this to make sense. If you used commodity trading there may not actually be a storage cost but likely some fees involved that would need to be weighed against the expected inflation. Basically if "things" are going to cost more in the future, making your cash worth less, can you convert cash into "things" before prices escalate? |
How to explain an income discrepancy to the IRS? | The IRS doesn't tax "increased wealth" They tax Revenue -- income. If this money or property came to you as a gift, you would owe no tax on it but the giver probably would owe gift tax. If it came to you as a loan, you would owe no tax on it but the lender would owe tax on any interest you pay (and must charge at least minimal interest, though they could give that to you as a gift and possibly not have it be taxable). But if came as payment for goods or services or investment or anything of that sort, and you aren't demonstrably tax-exempt, it is income and you are responsible for declaring it as such and paying tax on it. |
Would investing equally in all 30 companies which comprise the DJIA net the same performance as the DJIA? | DJIA is a price weighted index (as in the amount of each component company is weighted by its price) and the constituents change occasionally (51 times so far). With these two effects you would not get anything like the same return by equally weighting your holdings and would have to rebalance every so often. Note that your premise was most obviously flawed thinking the number of near bankruptcies there have been in that time. More details of the differing make-ups of the index are available on Wikipedia. When you ask about the "average investment" you would have to be a lot more specific; is it limited just to US shares, to shares, to shares and fixed income securities, should I include all commodities, etc. see also What's the justification for the DJIA being share-price weighted? |
Why do grocery stores in the U.S. offer cash back so eagerly? | The only card I've seen offer this on credit card purchases is Discover. I think they have a special deal with the stores so that the cash-over amount is not included in the percentage-fee the merchant pays. (The cash part shows up broken-out from the purchase amount on the statement--if this was purely something the store did on its own without some collaboration with Discover that would not happen). The first few times I've seen the offer, I assumed it would be treated like a cash-advance (high APR, immediate interest with no grace period, etc.), but it is not. It is treated like a purchase. You have no interest charge if you pay in full during the grace period, and no transaction fee. Now I very rarely go to the ATM. What is in it for Discover? They have a higher balance to charge you interest on if you ever fail to pay in full before the grace period. And Discover doesn't have any debit/pin option that I know of, so no concern of cannibalizing their other business. And happier customers. What is in it for the grocer? Happier customers, and they need to have the armored car come around less often and spend less time counting drawers internally. |
Should I use a bank or a credit union for my savings account? | In practical terms, these days, a credit union IS a small "savings and loan" bank -- the kind of bank that used to exist before bankers started making money on everything but writing loans. They aren't always going to offer higher interest and/or cheaper loans than the bank-banks, but they're almost always going to be more pleasant to deal with since they consider the depositors and borrowers their stockholders, not just customers. There are minor legal differences (different insurance fund, for example), and you aren't necessarily eligible to open an account at a randomly-chosen credit union (depending on how they've defined the community they're serving), but they will rarely affect you as an account holder. The main downside of credit unions is that, like other small local banks, they will only have a few branches, usually within a limited geographic area. However, I've been using a credit union 200 miles away (and across two state lines on that route, one if I take a large detour) for decades now, and I've found that between bank-by-mail, bank-by-internet, ATM machines, and the "branch exchange" program (which lets you use branches of participating credit unions as if they were branches of your own) I really haven't felt a need to get to the branch. I did find that, due to network limitations of $50K/CU/day, drawing $200,000 worth of bank checks on a single day (when I purchased the house) required running around to four separate branch-exchange credit unions. But that's a weird situation where I was having trouble beating the actual numbers out of the real estate agents until a few days before the sale. And they may have relaxed those limitations since... though if I had to do it again, I'd consider taking a scenic drive to hit an actual branch of my own credit union. If you have the opportunity to join a credit union, I recommend doing so. Even if you don't wind up using it for your "main" accounts, they're likely to be people you want to talk to when you're shopping for a loan. |
What headaches will I have switching from Quicken to GnuCash? | I have not used Quicken; I've used GnuCash exclusively. It feels a bit rough with the UI: Balancing that, the data is stored in a gzip-compressed xml file. The compression is also optional, so you can save it as a plain xml file. This means that you have some hope of recovery if you wind up with a corrupted file. (And for programmer-types, you could keep it in source control for additional peace of mind.) My wife and I have been using it for several years now, and has worked well for us. LWN.net had a pair of Grumpy Editor reviews on personal finance software here and here which would be worth reading. |
Why real estate investments are compared via “cap rate”? | Cap Rate is the yearly return NOT including your mortgage. Everyone will finance the property differently. From 0% - 100% down. This is why Cap Rate is the best way to compare properties. Once you include your finance it is then called Cash-On Cash Return (CCR). |
Can one get a house mortgage without buying a house? | Not unless you have something else to put up as collateral. The bank wants a basic assurance that you're not going to immediately move the money to the Caymans and disappear. 999 times out of 1000, the collateral for a home mortgage is the home itself (which you wouldn't be able to take with you if you decided to disappear), so signing up for a 30 year mortgage on a nonexistent house is probably going to get you laughed out of the bank. It's sometimes possible to negotiate something else as collateral; you may, for instance, have a portfolio of securities worth the loan principal, that you can put in escrow for the term of the loan (the securities will stay in your name and make you money, but if you default on the loan the bank goes to the escrow company and takes the portfolio for their own). The bank will consider the risk of value loss on the securities in the portfolio, and may ask for a higher collateral value or only allow a lower loan amount. In all cases, it's usually a bad idea to go into long-term personal debt just to get "cheap money" that you can use to beat the interest rate with some business plan or investment. If you have a business plan, take that to the bank with an LLC and ask for a business loan. The business itself, if the plan is sound, should become valuable, and the terms of business loans take that into account, allowing for a "shrinking collateral" transferring the initial personal risk of the loan to the business. |
Why would you ever turn down a raise in salary? | I probably wouldn't turn down a raise, but there are some circumstances in which you might hesitate. Having a disproportionately high salary for your type of role or the value you are providing to the company makes you an attractive layoff target in an economic downturn. I've heard anecdotally of lots of corporate lawyers getting laid off because they were getting raises every year, and ended up with such ridiculous salaries that when the economy went south, the company basically asked "why are we paying these people so much?" Same thing happens in lots of places - Circuit City lays off the experienced, highly-paid salespeople and brings in cheap-o high school students (that didn't work out well for them, but they did it anyway). Still, even knowing that, I'd accept the pay raise. You're making more money the whole time you're employed, and prior salary is the biggest predictor of the salary you can negotiate at a new position. |
Why would a company with a bad balance sheet be paying dividends? | A simple response is that it's a good political/strategic move. Ford have effectively said, "We know we still have debt, but we think the long term future is so good we can go back to paying dividends." It builds investor confidence and attracts new money. It can also be seen as a way of Ford indicating that they believe the type of debt (regardless of the amount) is okay for them to carry. |
How do you save money on clothes and shoes for your family? | I speak as a person without kids, but I'll give this a shot anyway, using my memory of the perspective I had when I was a kid. My advice is, if the kids are young enough to not care much, don't be afraid of the thrift store. My parents got a bunch of clothes from the thrift store as I was growing up (around elementary school age) and I didn't care at all. When I got to be older, (middle school age) shopping at Target and K-mart didn't seem bad either. By the time the kids are old enough to really care beyond, they are probably old enough to get their own part-time jobs and get their own clothing. I however, am probably naive, as I still care little for such things, and judging from popular culture, most care about them a great deal. |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | If you think that your parents' home is in danger, you might want to check what it would take to make sure their house is safe, and what the financial situation actually is. You are paying rent, there are brothers who may or may not be paying rent. We don't have the information, you have. Saving that house might be a worthwhile investment. I assume that if you moved out, either rented or by buying a house, they wouldn't get any rent from you anymore and whatever the situation is, it would be much worse. |
What is the difference between “good debt” vs. “bad debt”? | When I look at debt I try to think of myself as a corporation. In life, you have a series of projects that you can undertake which may yield a positive net present value (for simplicity, let's define positive net present value as a project that yields more benefit than its cost). Let's say that one of the projects that you have is to build a factory to make clothing. The factory will cost 1 million dollars and will generate revenue of 1.5 million dollars over the next year, afterwhich it wears out. Although you have the knowledge to build this wonderful factory, you don't have a million bucks laying around, so instead, you go borrow it from the bank. The bank charges you 10% interest on the loan, which means that at the end of the year, the project has yielded a return of 400k. This is an extremely simplified example of what you call "good" debt. It is good if you are taking the debt and purchasing something with a positive value. In reality, this should be how people should approach all purchases, even if they are with cash. Everything that you buy is an investment in yourself - even entertainment and luxury items all could be seen as an investment in your happiness and relaxation. If more people approached their finances in this way, people would have much more money to spend, William |
Why does gold have value? | A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. |
What should I do with the stock from my Employee Stock Purchase Plan? | I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge. |
Can I buy only 4 shares of a company? | Open an account with a US discount online broker, or with a European broker with access to the US market. I think ETRADE allow non-resident accounts, for instance, amongst others. The brokerage will be about $10, and there is no annual fee. (So you're ~1% down out of the gate, but that's not so much.) Brokers may have a minimum transaction value but very few exchanges care about the number of shares anymore, and there is no per-share fee. As lecrank notes, putting all your savings into a single company is not prudent, but having a flutter with fun money on Apple is harmless. Paul is correct that dividend cheques may be a slight problem for non-residents. Apple don't pay dividends so there's no problem in this specific case. More generally your broker will give you a cash account into which the dividends can go. You may have to deal with US tax which is more of an annoyance than a cost. |
Why are options created? | Do you need to buy car insurance? If you do, you are buying to open a put option. |
Is trading stocks easier than trading commodities? | I would not argue if its more difficult, its different, and it much depends what kind of stocks you refer to, i take large caps as example. The players are different. Companies and even govts may hedge in the commodities (futures) market while in big caps this and other entities mainly invest. (Of course there’s HFT in large caps too). Futures often come with way higher leverage, lower spread and less commissions than stocks attracting retail and institutional speculators/HFT. Another big difference is that commodity prices react to all kind of news events (Stocks do too, but not that much and frequent), this kind of reactions big caps only do on earnings or on news directly affecting the company. Commodities are much more volatile on geo economic / political news events. This combined with higher leverage & HFT produces astounding moves. To sum it up, the players are different and act different than in large stocks, liquidity may be another thing. |
Can I default on my private student loans if I was an international student? | You signed a contract to pay the loan. You owe the money. Stories of people being arrested over defaulted student loans are usually based in contempt of court warrants when the person failed to appear in court when the collection agency filed suit against them. Explore student loan forgiveness program. Research collections and bankruptcy and how to deal with collection agencies. There are pitfalls in communicating with them which restart the clock on bad debt aging off the credit report, and which can be used to say that you agreed to pay a debt. For instance, if you make any sort of payment on any debt, a case can be made that you have assumed the debt. Once you are aware of the pitfalls, contact the collection agency (in writing) and dispute the debt. Force them to prove that it is your debt. Force them to prove that they have the right to collect it. Force them to prove the amount. Dispute the fairness of the amount. Doubling your principal in 6 years is a bit flagrant. So, work with the collectors, establish that the debt is valid and negotiate a settlement. Or let it stay in default. Your credit report in the US is shot. It will be a long time before the default ages off your report. This is important if you try to open a bank account, rent an apartment, or get a job in the US. These activities do not always require a credit report, but they often do. You will not be able to borrow money or establish a credit card in the US. Here's a decent informational site regarding what they can do to collect the loan. Pay special attention to Administrative Wage Garnishment. They can likely hit you with that one. You might be unreachable for a court summons, but AWG only requires that the collectors be able to confirm that you work for a company that is subject to US laws. Update: I am informed that federally funded student loans are not available to international students. AWG is only possible for debts to the federal government. Private companies must go through the courts to force settlement of debt. OP is safe from AWG. |
Why don't banks print their own paper money / bank notes? | In the US, this was the case during the 19th century. There was a system of "subscriptions" between banks, where larger banks backed the smaller banks to some extent. In trade, notes from distant banks were not accepted or discounted relative to known local banks, or silver/gold coinage. There were a number of problems with this system which came to a head during the Panic of 1907. During this crisis, a cascading series of banking failures was only stopped by the personal intervention of JP Morgan. Even when Morgan intervened, it was very difficult to make capital available in a way that avoided the panic. The subsequent creation of the Federal Reserve was a response to that crisis. |
Market Hours and Valuations | Company values (and thus stock prices) rely on a much larger time frame than "a weekend". First, markets are not efficient enough to know what a companies sales were over the past 2-3 days (many companies do not even know that for several weeks). They look at performance over quarters and years to determine the "value" of a company. They also look forward, not backwards to determine value. Prior performance only gives a hint of what future performance may be. If a company shut its doors over a weekend and did no sales, it still would have value based on its future ability to earn profits. |
Why is it important to research a stock before buying it? | Most markets around the world have been downtrending for the last 6 to 10 months. The definition of a downtrend is lower lows and lower highs, and until you get a higher low and confirmation with a higher high the downtrend will continue. If you look at the weekly charts of most indexes you can determine the longer term trend. If you are more concerned with the medium term trend then you could look at the daily charts. So if your objective is to try and buy individual stocks and try to make some medium to short term profits from them I would start by first looking at the daily charts of the index your stock belongs to. Only buy when the intermediate trend of the market is moving up (higher highs and higher lows). You can do some brief analysis on the stocks your interested in buying, and two things I would add to the short list in your question would be to check if earnings are increasing year after year. The second thing to look at would be to check if the earnings yield is greater than the dividend yield, that way you know that dividends are being paid out from current earnings and not from previous earning or from borrowings. You could then check the daily charts of these individual stocks and make sure they are uptrending also. Buy uptrending stocks in an uptrending market. Before you buy anything write up a trading plan and develop your trading rules. For example if price breaks through the resistance line of a previous high you will buy at the open of the next day. Have your money management and risk management rules in place and stick to your plan. You can also do some backtesting or paper trading to check the validity of your strategy. A good book to read on money and risk management is - "Trade your way to Financial Freedom" by Van Tharp. Your aim should not be to get a winner on every trade but to let your winners run and keep your losses small. |
Gap in domestic Health Insurance coverage, expect higher premiums? | I bought Health Insurance for myself after a period without it, and my premiums were not terrible. I was a 27 year old man, living in California, no preexisting conditions, and I paid approximately 90$ a month. This was for a standard Health Insurance plan. However, when I moved back to NY a little while later, insurance companies wanted almost $500/month for catastrophic coverage. So, from personal experience, my answer is that price varies widely by state. Different states have different regulations as to what Health Insurance Companies need to cover and at what price. In NY, Health Insurance companies can't charge different rates according to age. Also, in NY, there is a price spiral, where the price is so high, few people buy it, so they have to raise the price because not enough well people are in the pool, so fewer people buy it.... To test it out, go to an online insurance broker, like ehealthinsurace, and put in your proposed information, including that you haven't been covered for a period. This way you will know. |
Better ways to invest money held by my small, privately-held Canadian corporation? | Since you are talking about a small firm, for the long term, it would be advisable to invest your money into the expansion - growth, diversification, integration - of your business. However, if your intention is to make proper use of your earnings in the short term, a decent bank deposit would help you to increase the credit line for your business with the benefit of having a high enough liquidity. You can also look at bonds and other such low risk instruments to protect your assets. |
What is the contribution limit for a SEP-IRA? | Both are saying essentially the same thing. The Forbes articles says "as much as 20% [...] up to a maximum of $50,000". This means the same as what the IRS page when it says the lesser of a percentage of your income or a total of $53,000. In other words, the $53k is a cap: you can contribute a percentage of your earnings, but you can never contribute more than $53k, even if you make so much money that 20% of your earnings would be more than that. (The difference between 20% and 25% in the two sources appears to reflect a difference in contribution limits depending on whether you are making contributions for employees, or for yourself as a self-employed individual; see Publication 560. The difference between $50k and $53k is due to the two pages being written in different years; the limits increase each year.) |
Does keeping 'long-term' safety net in bonds make sense? | The answer to your question depends very much on your definition of "long-term". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an "emergency" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible. |
What does it mean when someone says “FTSE closed at xxx today” | FTSE is an index catering to the London stock exchange. It is a Capitalization-Weighted Index of 100 companies listed on the London Stock Exchange with the highest market capitalization . When somebody says FTSE closed at 6440, it basically means at the end of the day, the index calculated using the day end market capitalization of the companies, included in the index, is 6440. |
Changed from job that had a 401K, and the new one doesn't. How do I answer when filing? | If you had a retirement plan at any time in 2013 you are considered covered by an plan. Are You Covered by an Employer's Retirement Plan? You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a: Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year; IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year. Box 13 on the Form W-2 you receive from your employer should contain a check in the “Retirement plan” box if you are covered. If you are still not certain, check with your (or your spouse’s) employer. The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute. Additional Resources: Publication 590, Individual Retirement Arrangements (IRAs) |
Can signing up at optoutprescreen.com improve my credit score? | Sounds like a case of false causality. If somebody is taking the time to sign up at opt out sites, then that same person is probably making other smart decisions with their credit, causing scores to rise. Optoutprescreen.com does not help your score, the other actions taken might. People seeing different results can probably be tied to the timeframe they signed up. People who signed up then took care of their credit vs. people whose credit was already good and then signed up. A 10 pt bounce one way or the other is not significant. |
what is this type of stock trade? | I think that pattern is impossible, since the attempt to apply the second half would seem to prevent executing the first. Could you rewrite that as "After the stock rises to $X, start watching for a drop of $Y from peak price; if/when that happens, sell." Or does that not do what you want? (I'm not going to comment on whether the proposed programmed trading makes sense. Trying to manage things at this level of detail has always struck me as glorified guesswork.) |
What happens if I just don't pay my student loans? | Never forget that student lenders and their collection agencies are dangerous and clever predators, and you, the student borrower, are their legal prey. They look at you and think, "food." My friend said she never pays her student loans and nothing has happened. She's wrong. Something has happened. She just doesn't know about it yet. Each unpaid bill, with penalties, has been added to the balance of her loan. Now she owes that money also. And she owes interest on it. That balance is probably building up very fast indeed. She's playing right into the hands of her student lender. They are smiling about this. When the balance gets large enough to make it worthwhile, her student lender will retain an aggressive collection agency to recover the entire balance. The agency will come after her in court, and they are likely to win. If your friend lives in the US, she'll discover that she can't declare bankruptcy to escape this. She has the bankruptcy "reform" act of 2006, passed during the Bush 43 regime, to thank for this. A court judgement against her will make it harder for her to find a job and even a spouse. I'm not saying this is right or just. I believe it is wrong and unjust to make university graduates into debt slaves. But it is true. As for being paid under the table, I hope your friend intends on dying rather than retiring when she no longer can work due to age. If she's paid under the table she will not be eligible for social security payments. You need sixteen calendar quarters of social security credit to be eligible for payments. I know somebody like this. It's a hell of a way to live, especially on weekends when the local church feeding programs don't operate. Paying people under the table ought to be a felony for the business owner. |
How to reconcile these contradictory statements about the effect of volume on stock price? | The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend). |
Health insurance deduction on schedule C if also full time employee with w2? | Do you satisfy the necessary criteria listed there? Then why not?... It sounds like you do. |
Close to retirement & we may move within 7 years. Should we re-finance our mortgage, or not? | I would think it depends on when within the 7 years you're planning to move. If you want to move within a year or two, the closing costs for the new mortgage may postpone the break even until after your move date; that wouldn't be a financially smart decision. If your plans suggest you're going to move after the break even point I'd definitely refi sooner rather than later and would try to reduce the term, either by overpaying or by choosing a 15 year mortgage that should have an even lower interest rate anyway. |
Options vs Stocks which is more profitable | More perspective on whether buying the stock ("going long") or options are better. My other answer gave tantalizing results for the option route, even though I made up the numbers; but indeed, if you know EXACTLY when a move is going to happen, assuming a "non-thin" and orderly option market on a stock, then a call (or put) will almost of necessity produce exaggerated returns. There are still many, many catches (e.g. what if the move happens 2 days from now and the option expires in 1) so a universal pronouncement cannot be made of which is better. Consider this, though - reputedly, a huge number of airline stock options were traded in the week before 9/11/2001. Perversely, the "investors" (presumably with the foreknowledge of the events that would happen in the next couple of days) could score tremendous profits because they knew EXACTLY when a big stock price movement would happen, and knew with some certainty just what direction it would go :( It's probably going to be very rare that you know exactly when a security will move a substantial amount (3% is substantial) and exactly when it will happen, unless you trade on inside knowledge (which might lead to a prison sentence). AAR, I hope this provides some perspective on the magnitude of results above, and recognizing that such a fantastic outcome is rather unlikely :) Then consider Jack's answer above (his and all of them are good). In the LONG run - unless one has a price prediction gift smarter than the market at large, or has special knowledge - his insurance remark is apt. |
Do I need multiple credit monitoring services? | Monitoring your credit doesn't do much. There are some vendors that actually have staff to repair your credit/identity. Substantially all of the credit monitoring services do what they say and monitor. If you have a problem they notify you then point you to the place(s) that you can work with to repair the issue. This is not terribly valuable, definitely not worth having multiples, but the repair aspect of some IS very valuable. You sign a limited power of attorney and set loose someone else to fix the problem. |
How to share income after marriage and kids? | My own personal point of view. I earn about twice what my wife to be earns. We are planning on getting married next year. I ultimately do all the finances (basically because she hates that kind of thing) not because I'm in charge or whatever. To work out how we do this I wrote a spreadsheet: At the top it has my monthly pay in one column and her's in another. I add all our bills (against me initally). At the bottom I have a total of both of our "spending money". Spending money is wage - bills - savings I then move money out of my column into her column. My goal is that we pay all the bills and save a decent amount and have roughly the same amount to spend each month. So each persons spending money should be roughly equal. I then fine tune this as things change (if we get a pay rise we alter it, if a bill goes up or down we alter it) To manage this we have 4 accounts, a joint account to pay bills (both give a set amount to each mont), a savings acount (both give a set amount to each month) and our own accounts (where we get paid and where our spending money lives). Like everyone else says, this seems fair to me. I don't earn more, we both earn "an amount" and this should be split equally. |
What things should I consider when getting a joint-mortgage? | Your lack of numbers makes the question a difficult read. What I'm hearing is "I want a house requiring a mortgage 8X my income." This alone is enough to suggest it's a bad deal. On a personal note, when my wife and I bought our house, it was 2.5X our income. 20% down, so the mortgage was exactly 2X income. And my wife was convinced we were in over our heads. The use of a partner who will take a portion of the profit is interesting, but doesn't change the fact that you are proposing to live in a house that costs far too much for you. If you are determined to buy such a house, I'd suggest you do it with the plan to rent out a room or two to roommates. If you are living in an area where the cost of buying is so high, the demand for rentals is likely high as well. Absent a plan to bring ion more income, I see no good coming from this. Heed the warnings posted in the other two answers as well. |
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