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I'm thinking of getting a new car … why shouldn't I LEASE one? | You SHOULDN'T lease one if you are going to get an economy car, if you don't drive too much (<15K / year), and you want to hang on to the car for a long time. Otherwise, if you are a regular driver, driving a leased new quality car can be cost effective. Many cars now have bumper-to-bumper warranties that last as long as the lease (say 80K). So there is rarely any extra costs apart from regular maintenance. The sweet spot for most new cars is in the 5th, 6th, or 7th years, after they are paid off. But at that point, you may find you have maintenance bills that are approaching an average of $200 - $300 per month. In which case, a lease starts to look pretty good. I owned a 7 year old Honda Accord that cost only $80 less per month in maintenance than the new leased VW that replaced it. Haven't looked back after that. Into my 3rd car and 9th year of leasing. |
How to trade at Athens Stock Exchange (ASE) | Saxo Bank offers direct access to Athens Stock Exchange. Interactive Brokers is your next best bet, and as you probably already noticed, they do not have a free platform. They are open to US and non-US citizens. Although they do not currently have direct exposure to individual companies on the Athens Stock Exchange, the various european exchanges they do provide direct market access for will give a lot of exposure. There are a few Greek companies that trade on non-Greek stock exchanges, if you want exposure. There are also Greek ETFs which bundle several companies together or try to replicate Greek company indices. |
Why is Net Asset Value (NAV) only reported by funds, but not stocks? | The (assets - liabilities)/#shares of a company is its book value, and that number is included in their reports. It's easy for a fund to release the net asset value on a daily basis because all of its assets (stocks, bonds, and cash) are given values every day by the market. It's also necessary to have a real time value for a fund as it will be bought and sold every day. A company can't really do the same thing as it will have much more diverse assets - real estate, cars, inventory, goodwill, etc. The real time value of those assets doesn't have the same meaning as a fund; those assets are used to earn cash, while a fund's business is only to maximize its net asset value. |
How to spend more? (AKA, how to avoid being a miser) | Ultimately, money derives its value from being spend on a good or service. Investing it is an act of denying your present-self a good or service so that your future-self can obtain (hopefully more) goods or services. Investing is a sensible and responsible default position, but you clearly have passed the point at which the opportunity cost of the dollar not spent today is greater than its benefit in the future. Not all dollars are the same. Remember that money is a temporary store of value but you have to spend it to realize that value. In your search, learn about the "psychology of money." What are you saving it for? How much do you want left over when you die? If you die tomorrow, will you regret not having spend a little more? I'm sorry to get morbid on you, but saving for the future requires answering the question "How long?" and it's never forever. This may be tangential but it shaped my behaviour towards money nonetheless: Frank Zimbardo on The Psychology of Time. I would hazard a guess and say that you land in the future-oriented camp. |
Buy securities at another stock exchange | Also important to keep in mind is the difference in liquidity. The stock could be very liquid in 1 exchange but not in another. When times get bad, liquidity could dry up 1 one exchange, which results in a trading discount. |
Why is the highest quintile the only quintile whose wealth exceeds its income? | In a business environment, this phenomenon could be easily explained by 'operational leverage'. Operational leverage is the principle that increasing revenues by a small amount can have a disproportionately large impact on net income. Consider this example: you run a business that rents out a factory and produces goods to sell to consumers. The rent costs you $10k / month, and all of your other costs depend on how many goods you produce. Assume each good gives you $10 in profit, after factoring your variable costs. If you sell 1,000 units, you break-even, because your variable profit will pay for your rent. If you sell 1,100 units, you make $1,000 net profit. If you sell 1,200 units, you double your overall profit, making $2,000 for the month. Operational leverage is the principle that adding incremental revenue will have a greater impact than the revenue already received, because your fixed costs are already 'paid for'. Similarly in personal finance, consider these scenarios: You have $1,000 in monthly expenses, and make $1,000 - your monthly savings (and therefore your wealth) will be zero. You have $1,000 in monthly expenses, and make $1,100 - your monthly savings will be $100 per month. You have $1,000 in monthly expenses, and make $1,200 - increasing your income by ~10% has allowed your monthly savings double, at $200 per month. You have $1,000 in monthly expenses, and make $2,000 - your monthly savings are 5 times higher, when your income only increased by ~80%. Now in the real world, when someone makes more money, they will increase their expenses. This is because spending money can increase one's quality of life. So the incline does not happen quite so quickly - as pointed out by @Pete & @quid, there comes a point where increased spending provides someone with less increase in quality of life - at that point, savings really would quickly ramp up as income increases incrementally. But assuming you live the same making $2,000 / month as $1,000 / month, you can save, every month, a full month's worth of living expenses. This doesn't even factor in the impact of earning investment income on those savings. As to why the wealth exceeds income at that specific point, I couldn't say, but what I've outlined above should show how it is quite reasonable that the data is as-reported. |
Is there anything I can do to prepare myself for the tax consequences of selling investments to buy a house? | Have you changed how you handle fund distributions? While it is typical to re-invest the distributions to buy additional shares, this may not make sense if you want to get a little cash to use for the home purchase. While you may already handle this, it isn't mentioned in the question. While it likely won't make a big difference, it could be a useful factor to consider, potentially if you ponder how risky is it having your down payment fluctuate in value from day to day. I'd just think it is more convenient to take the distributions in cash and that way have fewer transactions to report in the following year. Unless you have a working crystal ball, there is no way to definitively predict if the market will be up or down in exactly 2 years from now. Thus, I suggest taking the distributions in cash and investing in something much lower risk like a money market mutual fund. |
Any difference between buying a few shares of expensive stock or a bunch of cheap stock | Open Google finance and divide the Market Capitalization by the total price. That will give you the total number of shares outstanding. Now see the number of shares you could buy for $1000(40 shares of $25 each or 10 shares of 100 shares each). Now divide the number of shares you own, by the number of shares outstanding in the company and multiply it by 100(i.e (Shares you own/shares Outstanding) * 100). That will give you the percentage or stake of the company you own(With $1000, don't expect it to be a very large number). Now ask your self the question, Is it worth it if I can buy x % of this company for $1000? If the answer is yes, go ahead and buy it. To answer your question in short, NO! it does not matter whether you buy 10 shares for $100 or 40 shares for $25. Cheers |
Stock Options for a company bought out in cash and stock | There is no chance the deal will complete before option expiration. Humana stock will open Monday close to the $235 buyout price, and the options will reflect that value. $40 plus a bit of time value, but with just 2 weeks to expiration, not much. |
Buying an option in the money, at the money, or out of the money | 1 reason is Leverage.... If you are buying out of the money options you get much more bang for your buck if the stock moves in your favor. The flipside is it is much more likely that you would lose all of your investment. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | For the person being hired this is a tricky situation. Specially with the new laws. There is no real magic number that can be applied as a lot will depend on what benefits you want, and what is actually available. This will really shift the spectrum quite a bit. Under the affordibal care act, everyone has to have insurance or pay a ?fine? (were really not sure what to call this yet) but there are two provisions that really mess with the numbers you look at as an employee. First, the cost of heath care has skyrocketed. So the same benefits that you had 5 years ago now cost maybe 10-15 times as much as they used to. This gets swept under the rug a bit because the "main costs" of insurance has only increased a tiny amount. What this actually comes down to is does your new ACA approved heath plan cover exactly the benefits you need, or does it cut corners. Sorry this is complicated, and I don't mean it to come off as a speech against the ACA so I will give an example. My wife has RA, she really has it under control with the help of her RA doctor. This is not something she ever wants to change. Because she has had RA from the age of 15, and because it's degenerative, she doesn't want to spend 5 years working with a new doctor to get to the same place she is with her current doctor. In addition, the main drugs she takes for RA are not covered under any ACA plan, nor are the "substitutions" that her doctor makes (we are trying to have kids so she has to be off the main meds, and a couple of the things this doctor has tried has been meds that reduce inflammation, are pregnancy safe, but are not for the treatment of RA) You now have to take into effect rather the cost of health insurance + the cost of the things now not covered by the heath insurance + the out of pocket expenses is worth the insurance. Second the ACA has set up provisions to straight up trick those people that have lower income and are not paying close attention. When shopping for insurance, they get quotes like "$50 a month" or "$100 a month". The truth is that the remainder of the actual cost is deducted from their tax returns. This takes consideration, because if you thing your paying $50 a month for insurance but your really paying $650 then you need to make sure your doing your math right. Finally, you need to understand how messed up things are right now in the US with heath care. Largely this goes unreported. I'm not really sure why. But in order to do this I will have to give examples. For my wife to see a specialist (her RA doctor) the co-pay is $75. So she goes to the doctor, he charges her $75 and bills the insurance $200. The insurance pays the doctor $50. With out insurance, the visit costs $50. At first you want to blame the doctor for cheating the system, but the doctor has to pay for hours of labor to get the $50 back from the insurance company. From the doctors perspective it's cheaper to take the $50 then it is to charge the insurance company. And by charging the insurance company he has no control over the cost of the co pay. He essentially has to charge more to make the same money and the patient gets the shaft in the process. Another example, I got strep throat last year. I went to the walk in clinic, paid $75, saw the doctor got my Z-Pack for $15, went home crawled in bed and got better. My wife (who still had separate insurance from before the marriage) got strep throat (imagen that) went to the same clinic, they charged her $200 for the visit ($50 co-pay) and $250 for the z-pack ($3 co-pay). The insurance paid the clinic $90 for the visit and $3 for the drugs. Again the patient is left out in this scenario. In this case it worked better for my wife, unless you account for the fact that to get that coverage she had to pay $650/month. My point is that when comparing costs of heathcare with insurance, and without out insurance, its often times much cheaper for the practices to have you self pay then it is for them to go through the loops of trying to insurance to make them whole. This creates two rates. Self pay rates and Insured rates. When your trying to figure out the cost of not having insurance then you need to use the self pay rates. These can be vastly different. So as an employee you need to figure out your cost of heath care with insurance, and your cost of heath care without insurance. Then user those numbers when your trying to negotiate a salary. The problem is that there is no magic number to use for this because the cost will very a lot. For us, it was cheaper to not have insurance. Even with a pre-existing condition that takes constant attention, it's just better if we set aside $500 a month then it is to try to pay $750 a month. That might not hold true for everyone. For some people or conditions it may be better to pay the $750 then to try to handle it themselves. So for my negotiations I would go with x+$6,000 without insurance or x+$4,500 with insurance. Now as an employer it's a lot simpler. Usually you have a "group plan" that offers you a pretty straight $x per year per person or $y per year per family. So you can offer exactly that. Salary - $x or Salary - $y. AS a starting point. However this is where negotiations start. If your offering me $50,500 and insurance, I would rather just have $57,000 and no insurance. Of course your real cost is only $55,000 cause you don't care about my heath care costs only about insurance costs. So you try to negotiate down towards $55,000 and no insurance. But that's not good enough for me. So I either go else where and you loose talent, or I accept $50,500 and insurance (or somewhere in between). |
Is there any way to buy a new car directly from Toyota without going through a dealership? | Yes, nothing is impossible! :) You can buy it directly from the factory of manufacturer, but then you will have to pay for sea shipping of this car. E.g. you can buy it directly from Japanese Toyota but then you will have to pay to sea cargo ship to deliver your car in container from Japan. Since this car is already your property, before importing to US, I doubt that you would need to pay any custom fees. In the end, the total payment might be a lot cheaper that you can buy there, but you need to be prepared to all this hassle |
What is the difference between “good debt” vs. “bad debt”? | All very good answers for the most part, but I have a definition for Good and Bad debt which is a little bit different from those mentioned here so far. The definitions come from Robert Kiyosaki in his book "Rich Dad Poor Dad", which I have applied to all my debts. Good Debt - Good Debt is debt used to fund a money making asset, an asset which puts money into your pockets (or bank account) each month. In other words the income produced by that asset is more than all the expenses (including the interest repayments on the debt) associated with the asset. Bad Debt - Bad Debt is debt used to fund both money losing assets and non-assets, where the interest repayments on the debt are more than any income (if any at all) produced by the goods or services the debt was used to purchase, so that you need to take money out of your pockets (or bank account) each month to sustain the debt. Based on this definition a mortgage used to purchase the house you live in would be classed as bad debt. Why? Because you are making interest repayments on the mortgage and you have other expenses related to the house like rates and maintenance, but you have no income being produced by the house. Even a mortgage on an investment (or rental) property where the rent is not enough to cover all the expenses is considered to be bad debt. For the debt on an investment property to be considered as good debt, the rent would have to cover the full interest payments and all other expenses. In other words it would need to be a positively geared (or a cashflow positive) asset. Why is this definition important in distinguishing between good and bad debt? Because it looks at the cashflow associated with the debt and not the profit. The main reason why most investors and businesses end up selling up or closing down is due to insufficient cashflow. It may be a profitable business, or the value of the property may have increased since you bought it, but if you don't have enough cash every month to pay the bills associated with the asset you will need to sell it. If the asset produces enough cashflow to pay for all the expenses associated with the asset, then you don't have to fund the asset through other sources of income or savings. This is important in two ways. Firstly, if you are working and suddenly lose your job you don't have to worry about paying for the asset as it is more than paying for itself. Secondly, if you don't have to dig into your other source/s of income or savings to sustain the asset, then theoretically you can buy an unlimited number of similar type assets. Just a note regarding the mortgage to buy a house you live in being classed as bad debt. Even though in this definition it is considered as bad debt, there are usually other factors which still can make this kind of debt worthwhile. Firstly, you have to live somehere, and the fact that you have to live somwhere means that if you did not buy the house you would probably be renting instead, and still be stuck with a similar monthly payment. Secondly, the house will still appreciate over the long term so in the end you will end up with an asset compared to nothing if you were renting. Just another note to mention the definition provided by John Stern "...debt is a technology that allows borrower to bring forward their spending; it's a financial time machine...", that's a clever way to think of it, especially when it comes to good debt. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | Having no utilization makes you an outlier, it's an unusual circumstance for most people, and the scoring model cannot make any predictions based on it. If you think of it from the underwriter's perspective, zero utilization could mean all sorts of things... are you dead? indigent? unable to work? When you buying a product (like money or insurance) whose pricing is based on risk, being "weird" will usually make you a higher risk. That said, it isn't the end of the world. If you are in this situation, I wouldn't lose sleep over it. |
Is it a good idea to get an unsecured loan to pay off a credit card that won't lower a high rate? | I am answering this in light of the OP mentioning the desire to buy a house. A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance. No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run. |
Is Cost of Living overstated? | I do not believe there is a strong correlation between CPI (Consumer Price Index) and housing value appreciation. Take, for example, New York City which has the highest CPI in the US. A great deal of the CPI number is skewed by Manhattan. One can live in Brooklyn or Queens and avoid some of NYC's high CPI. I would say that housing appreciation occurs because of the human activity in the area. That same human activity is what drives the CPI. There are other contributing factors, like limits on economies of scale. You simply cannot set down a Super Walmart in much of NYC, so goods are distributed over a larger number of stores. (Sure, NYC is a port city, but the goods are distributed within the city by trucks.) The San Francisco Bay Area is another high CPI area in the US. Here, as well, it is the location that draws people. While NYC is mostly about economic activity, the SF Bay Area is a mix of the draw of a great location and the economic activity that occurs due to the large number of people living there. I know of a house in Oakland that sold for approximately $350k, in 2004/05. It was located not too far from the "Killing Fields," as they were known locally. It was not the worst neighborhood in Oakland, but it was not very far from it. This was for a shabby, single-story unit which I believe had 5 (maybe 6) rooms. That is a lot of money for a house that required a lot of attention and was in a bad neighborhood. I have no idea how the housing market is after the housing bubble, but the higher value areas had the most room to fall and many of them fell hard. Ultimately, it is supply and demand that determines the CPI and housing values. This supply and demand is determined by the human activity in the area and some practical considerations regarding the area. A final note: If we are talking about a primary residence, it should not necessarily be looked at as an investment. First and foremost, it is a necessity. Second, if you need to hire people for the maintenance and/or upgrades, that will eat into your gains. Contractors are not cheap, especially where they are in high demand. Finally, the tax incentive is actually not that great. Sure, you take what you can get, but its impact is relatively marginal. |
Where to park money while saving for a car | Bond aren't necessarily any safer than the stock market. Ultimately, there is no such thing as a low risk mutual fund. You want something that will allow you get at your money relatively quickly. In other words, CDs (since you you can pick a definite time period for your money to be tied up), money market account or just a plain old savings account. Basically, you want to match inflation and have easy access to the money. Any other returns on top of that are gravy, but don't fret too much about it. See also: Where can I park my rainy-day / emergency fund? Savings accounts don’t generate much interest. Where should I park my rainy-day / emergency fund? |
Can I deduct equipment that I'm required to purchase by my employer? | It looks like you can. Take a look at these articles: http://www.googobits.com/articles/1747-taking-an-itemized-deduction-for-job-expenses.html http://www.bankrate.com/finance/money-guides/business-expenses-that-benefit-you.aspx http://www.hrblock.com/taxes/tax_tips/tax_planning/employment.html But of course, go to the source: http://www.irs.gov/publications/p529/ar02.html#en_US_publink100026912 From publication 529: You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You can claim the amount of expenses that is more than 2% of your adjusted gross income. You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 36. I hope that helps. Happy deducting! |
Why will the bank only loan us 80% of the value of our fully paid for home? | The banks figure that they'll get 80% of the value of the property at a sheriff's sale. So, they're lending you what they think they can recover if you default. |
Why call option price increases with higher volatility | When volatility is higher, the option is more likely to end up in-the-money. Moreover, when it ends up in-the-money, it is likely to be over the strike price by a greater amount. Consider a call option. With high volatility, moves in the stock price are big - both up moves and down moves. If the stock moves up by a lot, the call option holder will benefit greatly. On the other hand, when the stock moves down, below a certain point the option holder does not care how big a down move the stock has. His downside is limited. Hence, the value of the option is increased by high volatility. I know everyone who searches this is looking for this answer. Bump so people are able to get this concept instead of looking all over the web for it. |
What actions should I be taking to establish good credit scores for my children? | You really can't. Credit rating is determined by financial history, and until your kids are old enough to legally sign a contract they have essentially no financial history. Interesting out-of-the-box thought, but not workable. |
Should I sell a 2nd home, or rent it out? | So here are some of the risks of renting a property: Plus the "normal" risk of losing your job, health, etc., but those are going to be bad whether you had the rental or not, so those aren't really a factor. Can you beat the average gain of the S&P 500 over 10 years? Probably, but there's significant risk that something bad will happen that could cause the whole thing to come crashing down. How many months can you go without the rental income before you can't pay all three mortgages? Is that a risk you're willing to take for $5,000 per year or less? If the second home was paid for with cash, AND you could pay the first mortgage with your income, then you'd be in a much better situation to have a rental property. The fact that the property is significantly leveraged means that any unfortunate event could put you in a serious financial bind, and makes me say that you should sell the rental, get your first mortgage paid down as soon as possible, and start saving cash to buy rental property if that's what you want to invest in. I think we could go at least 24 months with no rental income Well that means that you have about $36k in an emergency fund, which makes me a little more comfortable with a rental, but that's still a LOT of debt spread across two houses. Another way to think about it: If you just had your main house with a $600k mortgage (and no HELOC), would you take out a $76k HELOC and buy the second house with a $200k mortgage? |
Why should we expect stocks to go up in the long term? | Companies are expected to make a profit, otherwise there is no point to their existence and no motivation for investment. That profit comes back to shareholders as growth and/or dividend. If a company is doing well and has a healthy profit to turn back into investment to facilitate increased future earnings, it increases shareholder equity and share price. If a company is doing well and has a healthy profit to pay out in dividend, it makes the shares more attractive to investors which pushes the price up. Either way, shares go up. Share prices drop when companies lose money, or there are market disturbances affecting all companies (recessions), or when individual companies fail. Averaged over all companies over the long term (decades), stocks can be reasonably expected to go up. |
What's the fuss about Credit Score / History? | Your credit score, for better or worse, is increasingly about more than just getting loans. For example insurance companies can use it to some extent to determine your rates,. |
The difference between Islamic Banks and Western Banks | One of the principles of Sharia Banking is (Wikipedia): Shariah prohibits what is called "Maysir" and "Gharar". Maysir is involved in contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future whereas Gharar describes speculative transactions. Both concepts involve excessive risk and are supposed to foster uncertainty and fraudlent behaviour. In other words risky investments are prohibited in Sharia Banking. |
Are there contracts for fixed pay vs. fixed pay rates? | Software Contractors are not employees of the company that is procuring the software. Software Contractors necessarily work for another legal business entity. There is a business to business relationship between the procurer of the software and the entity producing the software. Therefore, the company procuring the software is not required to pay a minimum wage, or adhere to any other employment law. When any individual or company orders a software product and agrees to pay for it, that is a fixed priced contract. This happens millions of times a day. The amount of time taken to produce the software has no direct bearing on price. For instance, there is no minimum price for Microsoft Word based on the number of hours taken to produce it. Generally a Software Contractor will be a director and shareholder of a limited liability corporation. Directors are exempt from the standard protection offered under employment law. If the company producing the software was employing non-directors to produce the software, rather than sub-contracting to another business then employment law would apply. |
How to transfer personal auto lease to business auto lease? | See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease. |
How is it possible that a preauth sticks to a credit card for 30 days, even though the goods have already been delivered? | This is not a normal occurrence, and you have every right to be annoyed, but the technical way it usually happens goes like this: What can happen is when the merchant incorrectly completes the transaction without referencing the pre-authorization transaction. The bank effectively doesn't "know" this is the same transaction, so they process it the same way they process any other purchase, and it has no effect on the pre-authorization and related held/pending transaction. As far as the bank knows, you purchased a second set of blinds in the store for $200 and are still waiting on the first order to come in, they have no idea the store screwed up. The reason this is possible is the purpose of the pre-auth in the first place is that it is a contractual agreement between the bank (credit card) and the merchant that the funds are available, will be available except under rare special circumstances, and thus they can go ahead and process the order. This lets the merchant be secure in the knowledge that they can collect their payment, but you aren't paying interest or monthly payments on something you haven't even gotten yet! This system works reasonably well for everyone - right up until someone screws up and fails to properly release a hold, makes a second transaction instead of properly referencing the first one, or the bank screws up their system and fails to correctly match referenced pre-authorization codes to purchases. The problem is that this should not be a normal occurrence, and the people you are speaking with to try to sort out the issue often do not have the authority or knowledge necessary to properly fix the issue, or its such a hassle for them that they hope you just go away and time fixes the issue on its own. The only sure-fire solution to this is: make sure you have so much extra credit line that this doesn't effect you and you can safely let it time out on its own, or stop doing business with this combination of merchant/payment that creates the problem. Back when my credit limits were being pushed, I would never pay at gas pumps because their hold polices were so weird and unpredictable, and I would only pre-pay inside or with cash to avoid the holds. |
How to calculate cash loss over time? | There are two things you need to keep in mind when you look at Inflation as an entity. Inflation is necessary to keep in check the value of goods. As per Moore's Law for example, a mobile phone that you buy for £100 today will be available for £50 in two years. With increased purchasing power, one needs to maintain balance between the purchasing power and its value. If you think about the 'loss' at a rate of 2% you would have £96.04 (in terms of today's value) in two years. But if you looked at the same cell phone as leverage for your business where it allowed you to do work and earn £1000 in two years - the investment would clearly offset the cost of inflation. Inflation is incentive for people to spend their money. If you for example spent all of your £100 today, it is £100 income for someone else. He has further incentive to spend it creating a chain of transactions. In theory while this is a true mathematical loss, the increasing purchasing power helps you leverage your financial asset to get a return on your investment. |
How should I think about stock dividends? | At 19 years old you can and should be investing to see your money grow over the years. Reinvesting the dividends does get to be pretty significant because they compound over many years. Historically this dividend compounding accounts for about half of the total gains from stocks. At 70 years old I am not investing to see my money grow, although that's nice. I am investing to eat. I live on the dividends, and they tend to come in fairly reliably even as the market bounces up and down. For stocks selected with this in mind I get about 4% per year from the dividends. |
Can we amend last year's Schedule C to indicate reduced income due to a customer refund this year for a product we sold last year? | I am not an accountant, but I have a light accounting background, despite being primarily an engineer. I also have a tiny schedule C business which has both better and worse years. I am also in the United States and pay US taxes. I assume you are referring to the US Form 1040 tax return, with the attached Schedule C. However little I know about US taxes, I know nothing about foreign taxes. You are a cash-basis taxpayer, so the transactions that happen in each tax year are based on the cash paid and cash received in that year. You were paid last year, you computed your schedule C based on last year's actual transactions, and you paid taxes on that income. You can not recompute last years schedule C based on the warranty claim. You might want to switch to an accrual accounting method, where you can book allowances for warranty claims. It is more complex, and if your business is spotty and low volume, it may be more trouble than it is worth. At this point, you have two months to look for ways to shift expenses into next year or being income into this year, both of which help offset this loss. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. This article on LegalZoom (link here) discusses how to apply a significant net operating loss (NOL) in this year to the previous two years, and potentially carry it forward to the next two years. This does involve filing amended returns for the prior two years, showing this year's NOL. For this to be relevant, your schedule C loss this year must exceed your other W2 and self-employment income this year, with other tests also applied. Perhaps a really aggressive accountant would advise otherwise (and remember, I am not an accountant), but I would take the lumps and move on. |
What is a bond fund? | As Michael Pryor answered, a bond fund is a mutual fund that invests in bonds. I'd also consider an ETF based on bonds to be a bond fund, but I'm not sure that all investors would consider these as "bond funds". Not all bond funds are the same -- just like stock funds. You can classify bond funds based on the issuer of the bonds: You can also classify funds based on the time to maturity: In general, bond funds have lower risk and lower expected return than stock funds. Sometimes bond funds have price movements that are not tightly correlated to the price movements in the equity markets. This can make them a decent hedge against declines in your equity investments. See Michal Pryor's answer for some info on how you can get tax free treatment for your bond fund investments. |
What does it mean that stocks are “memoryless”? | @jidugger mostly got it right. It basically mean that past performance of a stock, or a basket of stocks, are not at all useful when trying to predict its future. There is no proven correlation between past and future performance. If there was such a correlation, that was "proven" or known, then investors would quickly exploit this correlation by buying or selling this stock, thus nullifying the prediction. It doesn't mean the specific individuals cannot predict the future stock market - hell, if I set up 2^100 different robots, where every robots gives a different series of answers to the 100 questions "how will stock X do Y days from now" (for 1<=Y<=100), then one of those robots would be perfectly correct. The problem is that an outside observer has no way of knowing which of the predictor robots is right. To say that stock is memoryless strikes me as not quite right -- to the extent that stocks are valued based on earnings, much of what we infer about future earnings relies on past and present earnings. To put it another way - you have $1000 now, and need to decide whether to invest in a particular stock, or a stock index. The "memoryless" property means that no matter how many earning reports you view ... by the time you see them, the stock price already accounts for them, so they're not useful to you. If the earning reports are positive, the stock is already "too high" because people bought it before you did. So on average, you can't use this information to predict the stock's future performance, and are better off investing in an index fund (unless you desire extra risk that doesn't come with more profitability). |
Where Can The Fully Diluted Outstanding Shares Of A Company Be Found? | You can calculate the fully diluted shares by comparing EPS vs diluted (adjusted) EPS as reported in 10K. I don't believe they report the number directly, but it is a trivial math exercise to reach it. The do report outstanding common stock (basis for EPS). |
Effect of Quantitative Easing on Price of Bonds | The classic definition of inflation is "too much money chasing too few goods." Low rates and QE were intended to help revive a stalled economy, but unfortunately, demand has not risen, but rather, the velocity of money has dropped like a rock. At some point, we will see the economy recover and the excess money in the system will need to be removed to avoid the inflation you suggest may occur. Of course, as rates rise to a more normal level, the price of all debt will adjust. This question may not be on topic for this board, but if we avoid politics, and keep it close to PF, it might remain. |
What evidence exists for claiming that you cannot beat the market? | There seems to be a common sentiment that no investor can consistently beat the market on returns. What evidence exists for or against this? First off, even if the markets were entirely random there would be individual investors that would consistently beat the market throughout their lifetime entirely by luck. There are just so many people this is a statistical certainty. So let's talk about evidence of beating the market due to persistent skill. I should hedge by saying there isn't a lot of good data here as most understandably most individual investors don't give out their investment information but there are some ok datasets. There is weak evidence, for instance, that the best individual investors keep outperforming and interestingly that the trading of individual investors can predict future market movements. Though the evidence is more clear that individual investors make a lot of mistakes and that these winning portfolios are not from commonly available strategies and involve portfolios that are much riskier than most would recommend. Is there really no investment strategy that would make it likely for this investor to consistently outperform her benchmark? There are so, many, papers (many reasonable even) out there about how to outperform benchmarks (especially risk-adjusted basis). Not too mention some advisers with great track records and a sea of questionable websites. You can even copy most of what Buffet does if you want. Remember though that the average investor by definition makes the average "market" return and then pays fees on top of that. If there is a strategy out there that is obviously better than the market and a bunch of people start doing it, it quickly becomes expensive to do and becomes part the market. If there was a proven, easy to implement way to beat the market everyone would do it and it would be the market. So why is it that on this site or elsewhere, whenever an active trading strategy is discussed that potentially beats the market, there is always a claim that it probably won't work? To start with there are a large number of clearly bad ideas posed here and elsewhere. Sometimes though the ideas might be good and may even have a good chance to beat the market. Like so many of the portfolios that beat the market though and they add a lot of uncertainty and in particular, for this personal finance site, risk that the person will not be able to live comfortably in retirement. There is so much uncertainty in the market and that is why there will always be people that consistently outperform the market but at the same time why there will be few, if any, strategies that will outperform consistently with any certainty. |
Help! I've cancelled their service, but this company continues to bill my credit card an annual fee. What can I do? | I'm not a lawyer, and am certainly not familiar with your jurisdiction, but the general guidelines I've seen around this kind of situation are: If all else fails, you could just cancel the card, though I'm not sure what liability you have to honour the contract. I cancelled a card once to stop being charged by a particularly annoying company and had no problems, but I'm not sure if that is a good way to deal with it in general. |
How can I transfer and consolidate my 401k's and other options? | The simplest way to consolidate the funds your old 401(k) plans is by doing what's called a Direct Rollover (whereby the funds go directly into the new plan and skips you completely) from each of the old plans into either an IRA that you establish with a provider of your choice or even into your current employer's 401(k) plan if that is available. That way, the funds are in one central account and available to invest. Plus it eliminates the mandatory 20% withholding if the rollover is indirect and is sent to you first before the deposit into the new plan. It is important to bear in mind that you have 60 calendar days from the date of distribution to get the full amount into the new plan and a rollover is considered a tax reportable, but not necessarily a taxable event provided you deposit the funds within the time frame allotted. |
How do online referal systems work? | Yeah, I'll take the challenge...:) How trustworthy these are and what are their sources of income? These are in fact two separate questions, but the answers are related. How trustworthy? As trustworthy as they're clear about their own sources of income. If you cannot find any clue as to why, what for and how they're paying you - you probably should walk away. What's too good to be true usually is indeed too good to be true. For those of the sites that I know of their sources of income, it is usually advertisements and surveys. To get paid, you have to watch advertisements and/or answer surveys. I know of some sites who are legit, and pay people (not money, but gift cards, airline miles, etc) for participating in surveys. My own HMO (Kaiser in California) in fact pays (small amounts) to members who participate in enough surveys, so its legit. Are these sites worthwhile to consider for extra income? Not something you could live off, but definitely can get you enough gift cards for your weekly trip to Starbucks. What do I need to consider tax wise? Usually the amounts are very low, and are not paid in cash. While it is income, I doubt the IRS will chase you if you don't report the $20 Amazon gift card you got from there. It should, strictly speaking, be reported (probably as hobby income) on your tax return. Most people don't bother dealing with such small amounts though. In some cases (like the HMO I mentioned), its basically a rebate of the money paid (you pay your copays, deductibles etc. Since the surveys are only for members, you basically get your money back, not additional income). This is in fact similar to credit card rebates. Is there a best practice for handling the income? If we're talking about significant amounts (more than $20-30 a year), then you need to keep track of the income and related expenses, and report it as any other business income on your taxes, Schedule C. Is there a good test to determine what is and isn't a scam? As I said - if it looks too good to be true - it most likely is. If you're required to provide your personal/financial information without any explanation as to why, what it will be used for, and why and what for you're going to be paid - I'd walk away. Otherwise, you can also check Internet reviews, BBB ratings, FTC information and the relevant state agencies and consumer watchdogs (for example: http://www.scamadviser.com) whether they've heard of that particular site, and what is the information they have on it. A very good sign for a scam is contact information. Do they have a phone number to call to? Is it in your own country? If its not in your own country - definitely go away (for example the original link that was in the question pointed to a service whose phone number is in the UK, but listed address is in Los Angeles, CA. A clear sign of a scam). If they do have a phone number - try it, talk to them, call several times and see how many different people you're going to talk to. If its always the same person - run and hide. Do they have an address? If not - walk away. If they do - look it up. Is it a PMB/POB? A "virtual" office? Or do they have a proper office set up, which you can see on the map and in the listings as their office? And of course your guts. If your guts tell you its a scam - it very likely is. |
Is it legal if I'm managing my family's entire wealth? | All the other answers posted thus far discuss matters from the perspective of US tax laws and are unanimous in declaring that what the OP wants to do is indeed a very bad idea. I fully agree: it is a bad idea from the perspective of US tax laws, and is likely a bad idea from the perspective of Indian tax laws too, but what the OP wants to do is (or used to be) common practice in India. In more recent times, India has created a Permanent Account Number ("PAN number") for each taxpayer for income tax purposes, and each bank account or investment must have the owner's (or first-named owner's, in case of a joint account) PAN number associated with it. This most likely has decreased the popularity of such arrangements, or has led to new twists being used. The OP has not indicated the residence and citizenship of his family (or his own status for that matter), but if they are all Indian citizens resident in India and are Hindus, then there might be one mechanism for doing what the OP wants to do: apply for a PAN number in the name of the Hindu Undivided Family and use this number to carry out the investments in the name of the Hindu Undivided Family. (There presumably are similar statuses for undivided families for other religions, but I am not familiar with them). There are lots of matters here which are more legal questions than personal finance questions: e.g. if the OP is a US tax resident, then the family presumably will not be able to claim Hindu Undivided Family status since the OP has been divided from the family for tax purposes (or so I think). Even if HUF status is available, the OP might not be able to act as the pater familias while his father is alive, and so on. Consultation with tax lawyers, not just chartered accountants, in India is certainly advisable. |
When should I start an LLC for my side work? | It really depends on the type of business you are running. If there is any chance of liability, you should protect yourself with an LLC. Then it is much more difficult for them to sue and take personal assets. For example, if you are a wedding photographer, you would want to be an LLC in case you lose someones pictures. |
Economics of buy-to-let (investment) flats | Lucky you - here where I live that does not work, you put money on the table year 1. Anyhow... You HAVE to account for inflation. THat is where the gain comes from. Not investment increase (value of item), but the rent goes higher, while your mortgage does not (you dont own more moeny in 3 years if you keep paying, but likely you take more rent). Over 5 or 10 years the difference may be significant. Also you pay back the mortgage - that is not free cash flow, but it is a growth in your capital base. Still, 1 flat does not make a lot ;) You need 10+, so go on earning more down payments. |
Free “Rich Dad” education, with “free gift”: Is it legitimate, or is it a sales ploy? | Robert Kiyosaki's is basically a get-rich quick author. But to answer your question: It is a sales pitch in disguise. See Marketplace's report on a Kiyosaki seminar, which reveals that the free work shop is a sales pitch for a 3-day work shop which costs several hundred dollars. And the 3-day workshop is a sales pitch for "advanced" training which can cost as much as $45,000 (presumably in Canadian dollars, as the report was done in Canada). He does touch on some basic sound principles, but it's mixed with a lot of really bad (and in some cases illegal) advice. You'll do much better to invest your time and money in reading materials that aren't advertised via infomercials. Kiyosaki may well be rich, but it's from selling his Rich Dad-branded material, not from investing in real estate, or any other investment portfolio See also John T. Reed's guru rating, and his review of Kiyosaki's book, Rich Dad, Poor Dad. |
What's The Best Way To Pay Off My Collections? | If you can pay it then there's no need to involve a credit counselor. After all, their main role when you use them is to negotiate payments with creditors so you can pay off your debts. In this case you have the funds to pay, so why make it any more complicated than it needs to be? To be honest, a 597 score is going to make it tough for you to find auto financing. Whatever options you find, they'll charge pretty steep interest rates and have high payments because they'll keep you on as short a payment term as your finances will allow. I would strongly suggest that you work on improving your score for awhile before trying to buy a car. If you can, buy a car for cash. You might not get much, but it will solve your transportation problem while you work on resolving your credit issues. Using a credit counselor won't have any impact on your credit score as far as the debts are concerned. What will make a difference is not having them show as open collections, which is pretty bad. You'll still take a hit for having gone to collections in the first place, but paying them off will mitigate at least some of the effect. I hope this helps. Good luck! |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | Just get out. If the investment isn't going up, you are losing money to inflation, as well as the opportunity cost of not having the money somewhere more profitable. These things happen to the best of us. Just learn from it and move on. Some valuable lessons: Just keep trying. Mistakes like this are all part of the learning process. Best of luck. |
How to understand the caculation of interest for credit cards? | Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June). |
In which country can I set up a small company so that I pay a lower rate of corporate tax? | There are countries out there that are known as tax havens, where they offer companies low or no taxes on earned revenue. I haven't looked into this in over a decade, but recall that countries like the Cayman Islands, Switzerland, Ireland, and Nauru, to name a few fit that tag. But like bstpierre stated, there's a reason why the IBM's of the world can pull that off easier then us mere mortals. They have the financial clout to make sure they have accountants that dot every i, cross every t, and close every loophole that would give an "in" to the folks at the IRS, CRA, Inland Revenue, or who have you. |
How do I explain why debt on debt is bad to my brother? | The only thing that comes to mind is a recent HBO Real Sports segment (http://www.youtube.com/watch?v=WDjkbgrgcmo) on a couple of NFL players who blew all of their money. Seeing how they've ended up might make the right impression, but given that your brother ran up $148K in debt, I'm not optimistic. |
Where does the money go when I buy stocks? | When you buy a share of stock, you are almost always buying from someone who previously purchased that share and now wants to sell it. The money -- minus broker's fee -- goes to that other investor, which may be a person, a company (rarely the company that issued the stock, but that will occasionally be the case), an investment fund, the "market maker" for that stock (websearch for definition of that term), or anyone else. They owned a small percentage of the company; you bought it from them and gave them the money for it, just as you would buy anything else. You don't know or care who you bought from; they don't know or care who they sold to; the market just found a buyer and seller who could agree on the price. There are a very few exceptions to that. The company may repurchase some of its own shares and/or sell them again, depending on its own financial needs and obligations. For example, my own employer has to purchase its own shares periodically so it has enough on hand to sell to employees at a slight discount through the Employee Stock Ownership Program. But you generally don't know that's who you're selling to; it happens like any other transaction. And during the Initial Public Offering, if you're lucky/privileged enough to get in on the first wave of purchases, you're buying from the investment bank that's managing this process ... though that's an almost vanishingly rare case for "retail" investors like us; we're more likely to get the shares after someone has already pushed the price up a bit. But really, when you buy a share the money goes to whoever you bought it from, and that's all you can know or need to know. |
Recommendation on Options Back Testing tool please | Power Options is one such example of what you seek, not cheap, but one good trade will recover a year's fee. There's a lot you can do with the stock price alone as most options pricing will follow Black Scholes. Keep in mind, this is a niche, these questions, while interesting to me, generate little response here. |
My university has tranfered me money by mistake, and wants me to transfer it back | You have received some good answers, but since your concern is proper protocol, keep everything in writing (emails, not phone calls). Also, you'll get a quick response by contacting the University "Accounts Payable" department, confirm the situation with a summary as you posted here and ask for the ABA routing number for the transfer. The routing number, email, and you bank statement is all the records you need to cover your but. |
Do Online Currency Exchanges' registration with the government guarantee safety and reliability? | Government registering of financial institutions usually is to make the government safe (eg FINTRAC is watching for money laundering and financing terrorism) rather than to make it's customers safe. Most governments have many levels of registrations and regulatory bodies. The most stringent requirements are usually obligatory only for banks, and they indeed often include precautions for insuring customer's deposits. Even this insurances have limits, eg in most EU countries the state guarantees deposits up to 100kEUR. If you deposit more and the bank flops - you lose everything over the limit. Companies like forex or currency exchanges usually make their best effort to avoid as many regulations as possible, just because it's costly. If a given company does have guarantee funds and/or customer insurance, it should be advertised and explained on their website. However the whole issue of trust is misguiding. You don't have to "trust" in your grocery store to shop there. There is no government guarantee that the vegetables sold will be tasty. If you buy and the product fells short of your expectations, you call it a loss and start shopping elsewhere. Financial services are no different than any other product. I recommend to your aunt to start small and see how it works. If a service turns out well, she can increase the amount sent through exchange and decrease amount sent through bank. But still, it's always prudent to send eg $1000 every week instead of $4000 once a month. It's more time consuming and cumbersome than having your bank do it - but it's the safety and convenience you're paying premium for. |
Multi-state K-1 earnings to S-Corp | I'm not sure why you think that it matters that the distribution goes to an S-Corp vs an individual tax payer. You seem to think it has any relevance to your question, but it doesn't. It only confuses your readers. The situation is like this: LLC X is deriving income in State #2. It has two members (I and S) residents of State #1. Members I and S pay all their taxes to State #1, and don't pay taxes to State #2. State #2 audited member I and that member now needs to pay back taxes and penalties to State #2 on income derived from that State. Your question: Does that mean that member S should be worried, since that member was essentially doing the exact same thing as member I? My answer: Yes. |
What is a good way to save money on car expenses? | Don't buy the first model year of a new model unless the fuel economy is much better in the latest model. Buying a car in later years just before the changeover will result in a slightly higher quality vehicle or in some cases dramatically higher quality. Find the best forum for your make/model/year of car. Join the forum, check the FAQ, sticky threads and post questions when you have trouble. Do NOT rely passively on the dealer or even private mechanics as they do not drive the car every day. You are in the best position to identify problems but only if you have some help. Preventive maintenance is the best if you intend to keep the car for a really long time. Forums are a really good place to find the typical problems of a particular model and potentially head them off. |
(Theoretical) Paying credit cards with other credit cards | A "balance transfer" is paying one credit card with another. You probably get offers in the mail to do this all of the time. As other posters have noted, however, this usually comes with finance fees rather than the rewards that you get for normal purchases because it's written into your credit card agreement as a different class of transaction with different rules. I'm not sure if it's urban legend or true, but I have heard stories that suggest there were some "loop holes" in the earliest credit card reward plans that allowed for something like what you want. I doubt that any plan ever allowed exactly what you've written, but I've heard stories about people buying gift cards from merchants and then using the gift cards to pay their bill. This loop hole (if it ever existed) is closed now, but it would have allowed for essentially infinite generation of rewards at no cost to the cardholder. The banks and credit card companies have a lot of years of experience at this sort of thing now, so the threshold for you finding something that works and conforms with the cardholder agreement is pretty small. |
Why can't I withdraw the $57 in my account? | Is there a debit card accessing this account? When you spend money on a debit card for certain item, including, but not limited to gas, restaurant, hotel, a bit extra is held in reserve. For example, a $100 restaurant charge might hold $125, to allow for a tip. (You're a generous tipper, right?) The actual sales slips my take days to reconcile. It's for this reason that I've remarked how credit cards have their place. Using debit cards requires that one have more in their account than they need to spend, especially when taking a trip including hotel costs. |
Are real estate prices memory-less? | No, at least not with specific houses. When I bought my current house, our realtor looked at the previous selling price of this house, along with the prices at which it had been placed on the market. These values influenced the amount we offered for the house. I'm sure it also influenced the amount the house had been listed at. |
How are the best way to make and save money at 22 years old | Make sure you have a budget, there is a pretty cool budget tracker that you can download here (it works in excel and is easy to use). The important thing is to not only make a budget but also keep in touch and track your budget, some free ebooks and other investment ebooks too. Just start with the budget tracker: http://www.futureassist.com.au/young-to-mid-life Focus on paying off debt first Next look at ETF's (Exchange Traded Funds) as a possible investment option - this is an Australian Government Website but ETF's all work in the same way: https://www.moneysmart.gov.au/investing/managed-funds/exchange-traded-funds-etfs |
How can I legally and efficiently help my girlfriend build equity by helping with a mortgage? | I just wanted to give you a different perspective, as I own a house (purchased with a mortgage), with my girlfriend. I think it can be done safely and fairly, but you do need to involve legal help to do it right. There really is nothing to be terrified about, the extra cost to set this up was almost irrelevant in the bigger picture of legal costs around purchasing and the documents describing the ownership scheme are quite straightforward. Maybe it's a UK thing, but it seems rather commonplace here. We've chosen to hold this as "tenants in common" and use a trust deed for this when we purchased. We had a solicitor write the trust deed and it clearly states what percentage of the house is owned by either party and exactly what the steps would be taken, should we decide to end the trust (e.g. in case of a split-up). This includes things like the right to buy out the other person before selling on the market etc. We also had to make wills separately to indicate what should happen with our percentage of the property in case one of us died as with this type of ownership it doesn't automatically go to the other person. Finally we're both on the mortgage, which I guess is the main difference versus your situation. But again, you could get legal advice as to how this should best be handled. |
Owing state tax Interest and a result of living in Maryland and working in Virginia | Ultimately, you are the one that is responsible for your tax filings and your payments (It's all linked to your SSN, after all). If this fee/interest is the result of a filing error, and you went through a preparing company which assumes liability for their own errors, then you should speak to them. They will likely correct this and pay the fees. On the other hand, if this is the result of not making quarterly payments, then you are responsible for it. (Source: Comptroller of Maryland Site) If you [...] do not have Maryland income taxes withheld by an employer, you can make quarterly estimated tax payments as part of a pay-as-you-go plan. If your employer does withhold Maryland taxes from your pay, you may still be required to make quarterly estimated income tax payments if you develop a tax liability that exceeds the amount withheld by your employer by more than $500. From this watered-down public-facing resource, it seems like you'll get hit with fees for not making quarterly payments if your tax liability exceeds $500 beyond what is withheld (currently: $0). |
merging transactions in 8949 | From the instructions: If you do not need to make any adjustments to the basis or type of gain or loss (short-term or long-term) reported to you on Form 1099-B (or substitute statement) or to your gain or loss for any transactions for which basis has been reported to the IRS (normally reported on Form 8949 with box A checked), you do not have to include those transactions on Form 8949. Instead, you can report summary information for those transactions directly on Schedule D. For more information, see Exception 1, later. However, in case of ESPP and RSU, it is likely that you actually do need to make adjustments. Since 2014, brokers are no longer required to track basis for these, so you better check that the calculations are correct. If the numbers are right and you just summarized instead of reporting each on a separate line, its probably not an issue. As long as the gains reported are correct, no-one will waste their time on you. If you missed several thousand dollars because of incorrect calculations, some might think you were intentionally trying to hide something by aggregating and may come after you. |
0% APR first 12 months on new credit card. Can I exceed that 30% rule of thumb and not hurt my credit score? | I cannot stress this enough, so I'll just repeat it: Don't plan your finances around your credit score. Don't even think about your credit score at all. Plan a budget an stick to it. Make sure you include short and long term savings in your budget. Pay your bills on time. Use credit responsibly. Do all of these things, and your credit rating will take care of itself. Don't try to plan your finances around raising it. On the subject of 0% financing specifically, my rule of thumb is to only ever use it when I have enough money saved up to buy the thing outright, and even then only if my budget will still balance with the added cost of repaying the loan. Other people have other rules, including not taking such loans at all, and you should develop a rule that works for you (but you should have a rule). One rule shouldn't have is "do whatever will optimize your credit score" because you shouldn't plan your finances around your credit score. All things considered, I think the most important thing in your situation is to make sure that you don't let the teaser rate tempt you into making purchases you wouldn't otherwise make. You're not really getting free money; you're just shifting around the time frame for payment, and only within a limited window at that. Also, be sure to read the fine print in the credit agreement; they can be filled with gotchas and pitfalls. In particular, if you don't clear the balance by the end of the introductory rate period, you can sometimes incur interest charges retroactively to the date of purchase. Make sure you know your terms and conditions cold. It sounds like you're just getting started, so best of luck, and remember that Rome wasn't built in a day. Patience can be the most effective tool in your personal finance arsenal. p.s. Don't plan your finances around your credit score. |
How does a brokerage firm work? | Brokerages offer you the convenience of buying and selling financial products. They are usually not exchanges themselves, but they can be. Typically there is an exchange and the broker sends orders to that exchange. The main benefit that brokers offer is a simpler commission structure. Not all brokers have their own liquidity, but brokers can have their own allotment of shares of a stock, for example, that they will sell you when you make an order, so that you get what you want faster. Regarding accounts at the exchanges to track actual ownership and transfer of assets, it is not safe to assume thats how that works. There are a lot of shortcomings in how the actual exchange works, since the settlement time is 1 - 3 business days, depending on the product (so upwards of 5 to 6 actual days). In a fast market, the asset can change hands many many times making the accounting completely incorrect for extended time periods. Better to not worry about that part, but if you'd like to read more about how that is regulated look up "Failure To Deliver" regulations on short selling to get a better understanding of market microstructure. It is a very antiquated system. |
How do I determine ownership split on a franchise model? | There is no one solution to every project finance problem. Two models might make sense in this situation, however. In this case, you would count all the money that you give to your friend as a loan which he will pay back with interest. The interest rate and loan amounts will have to be agreed on by both of you. One one hand, the interest should be high enough to reward you in a successful outcome for the amount of risk that you take on if things don't work out. On the other, the interest rate needs to be low enough where his earnings after loan repayment justify your friend's effort, in addition to being competitive to ant rate your friend could secure from a bank. The downside to this plan is you don't directly benefit from the franchise's profits. In this model, you will record the cash that each of you invests. Since your friend is also adding "sweat equity" by setting up and operating the franchise, you will need to quantify the work that your friend and you invest into the franchise. Then you can determine how much each of you has invested in terms of dollars and split any franchise profits based on those proportions. The downside of this plan is that it is difficult to estimate how much time each of you invests and how much that time is worth. |
Questioning my Realtor | A mortgage lender will not usually lend more than they could get if they had to repossess the property and sell it to recover their investment (in the U.S. it is generally accepted that 80% of market value is the golden number that makes the mortgage work). That's why an appraisal is required. Even with 50% down, the numbers might not add up if your property is appraised very low (extremely unlikely, though. It's more likely your realtor is inexperienced). |
car loan life insurance | This greatly depends on the local laws and the insurance contract terms. If I remember correctly, my own life insurance policy does also have special terms in case I die within a year of applying, so it doesn't sound totally bogus. For car loan insurance, the amount of coverage and premiums were probably low enough for the insurer not to want to spend the money upfront on the thorough investigation, but they probably do have a clause that covers them in case the insured passes away unreasonably quickly (unreasonably for a healthy person of the given age, that is). |
Why would someone want to sell call options? | Covered calls, that is where the writer owns the underlying security, aren't the only type of calls one can write. Writing "uncovered calls," wherein one does NOT own the underlying, are a way to profit from a price drop. For example, write the call for a $5 premium, then when the underlying price drops, buy it back for $4, and pocket the $1 profit. |
Formula that predicts whether one is better off investing or paying down debt | Old question I know, but I have some thoughts to share. Your title and question say two different things. "Better off" should mean maximizing your ex-ante utility. Most of your question seems to describe maximizing your expected return, as do the simulation exercises here. Those are two different things because risk is implicitly ignored by what you call "the pure mathematical answer." The expected return on your investments needs to exceed the cost of your debt because interest you pay is risk-free while your investments are risky. To solve this problem, consider the portfolio problem where paying down debt is the risk-free asset and consider the set of optimal solutions. You will get a capital allocation line between the solution where you put everything into paying down debt and the optimal/tangent portfolio from the set of risky assets. In order to determine where on that line someone is, you must know their utility function and risk parameters. You also must know the parameters of the investable universe, which we don't. |
Why index funds have different prices? | Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units. |
Who creates money? Central banks or commercial banks? | A central bank typically introduces new money into the system by printing new money to purchase items from member banks. The central bank can purchase whatever it chooses. It typically purchases government bonds but the Federal Reserve purchased mortgage-backed-securities (MBS) during the 2008 panic since the FED was the only one willing to pay full price for MBS after the crash of 2008. The bank, upon receipt of the new money, can loan the money out. A minimum reserve ratio specifies how much money the bank has to keep on hand. A reserve ratio of 10% means the bank must have $10 for every $100 in loans. As an example, let's say the FED prints up some new money to purchase some office desks from a member bank. It prints $10,000 to purchase some desks. The bank receives $10,000. It can create up to $100,000 in loans without exceeding the 10% minimum reserve ratio requirement. How would it do so? A customer would come to the bank asking for a $100,000 loan. The bank would create an account for the customer and credit $100,000 to the customer's account. There is a problem, however. The customer borrowed the money to buy a boat so the customer writes a check for $100,000 to the boat company. The boat company attempts to deposit the $100,000 check into the boat company's bank. The boat company's bank will ask the originating bank for $100,000 in cash. The originating bank only has $10,000 in cash on hand so this demand will immediately bankrupt the originating bank. So what actually happens? The originating bank actually only loans out reserves * (1 - minimum reserve ratio) so it can meet demands for the loans it originates. In our example the bank that received the initial $10,000 from the FED will only loan out $10,000 * (1-0.1) = $9,000. This allows the bank to cover checks written by the person who borrowed the $9,000. The reserve ratio for the bank is now $1,000/$9,000 which is 11% and is over the minimum reserve requirement. The borrower makes a purchase with the borrowed $9,000 and the seller deposits the $9,000 in his bank. The bank that receives that $9,000 now has an additional $9,000 in reserves which it will use to create loans of $9,000 * (1 - 0.1) = $8100. This continual fractional reserve money creation process will continue across the entire banking system resulting in $100,000 of new money created from $10,000. This process is explained very well here. |
What are the reasons to get more than one credit card? | I keep one card just for monthly bills (power company,car loan, etc.). This one is unlikely to get hacked so I won't have to go change the credit card information on my monthly bills. I pay the credit card from my bank account. I just don't want a lot of businesses with direct access to my bank account. |
How to calculate car insurance quote | On top of the given answers, the type of referral will also factor in. When you're up for renewal and go to a comparison site (in the UK: CompareTheMarket, MoneySupermarket, Confused, GoCompare, ... ) and struggle accurately through all their lists of questions, you see that some of the data differs (e.g., not all the same jobs can be entered; if you have had an accident, not all ask whose fault it was and/or don't leave the option "not yet resolved" --possibly forcing you to guess which way it will be adjudicated,-- and/or what the total repair cost was). So as these referrers feed slightly different data to roughly the same set of insurance providers, you will get slightly different quotes on the same providers. And expect your own provider to offer a slightly better quote than you'll get in reality for renewing: The referrer's (one-time) cut has to be still taken off, but they count it as a new client so somebody gets a bonus for that --- you they disregard as a captive client and give what boils down to a loyalty penalty. [Case in point: I had an unresolved car accident, resolved months later in my favour. With all honest data including unresolved claim and its cost and putting my 'accident-free years' factor at 0 instead of 7, my old provider quoted about 8% more than the previous year on comparison sites; but my renewal papers quoted me 290% more, upon telephone enquiry the promised to refund the difference if court found in my favour though they refused to give this in writing. So: No thanks!] Then the other set of referrals they get is from you directly going to their website asking for a quote. They know what type of link you've followed (banner, or google result, etc), they may know some info from your browser's cookies (time spent where) or other tracking service, and from your data they may guess how tech-savvy and shop-wise you are, and scale your offer accordingly. [Comparison-site shoppers are lumped together at a relatively high savvy-level, of course!]. Companies breaking down your data and their own in a particular way can find advantages and hence offer you better terms, as said in the main answer (this is like Arbitration in stock exchanges, ensuring a certain amount of sanity: if there's something to exploit, somebody will, and everybody will follow). It may be that they find a certain group of people maybe more accident-prone but cheaper to deal with (more flexible in repair-times, or easy to bully in accepting shared-fault when they weren't at fault), or they want a certain client (for women, for civil servants, for sporty drivers, for homeowners --- often for cross-selling other insurance services). Or they claim to want pensioners because the company can offer them 'a familiar voice' (same account manager always contacting them) while they're easier to bamboozle and less likely to shop around when offered a rubbish deal. Also, 100% straight comparison of competing offers isn't possible as the fine details of the T&Cs (terms & conditions) would differ, as well as various little pinpricks in the claims handling process. And depreciation of a car, and various ways of dealing with it: You insure it for the buying prices, but two years later it's worth about 40% less on paper --- so in case of total loss, replacing like-for-like will cost you still at least 80% of the value for which you've been insuring it while they'll probably offer you the 100-40= 60%. Mostly because instead of your trusted car you have something unknown that may have hidden defects, or been mistreated and about to die. [Case in point: My 3-y-old dealer-bought car's gearbox died just outside the 6month warranty period, notwithstanding its "150-item inspection you can rely on". In the end the national brand agreed to refund the parts (15% of what I paid for the car) but not the labour (a few hours).] And any car model's value differs (in descending order) from its "forecourt price", "private selling price", "part exchange price", and "auction price". Depending on your ompanies may happily insure you for forecourt price (=what you paid to dealer) but then point out that the value of that car is the theoretical P/X value, i.e., the car without anybody's profit, far less than you've been paying for. [Conversely, if you crash it after insuring below market value, they can pay you your stupidly low figure.] |
What are the reasons to get more than one credit card? | 1- To max out rewards. I have 5 different credit cards, one gives me 5% back on gas, another on groceries, another on Amazon, another at restaurants and another 2% on everything else. If I had only one card, I would be missing out on a lot of rewards. Of course, you have to remember to use the right card for the right purchase. 2- To increase your credit limit. One card can give you a credit limit of $5,000, but if you have 4 of them with the same limits, you have increased your purchasing power to $20,000. This helps improve your credit score. Of course, it's never a good idea to owe $20,000 in credit card debt. |
For a car, what scams can be plotted with 0% financing vs rebate? | Here's a number-crunching example of how the "Zero interest rate" offer is misleading. Suppose the offer is that a car "costs $24,000.00 with zero percent financing over 24 months" or as an alternative, "$3,000.00 off for cash". Ignore the hype: the quoted prices and the quoted interest rates. Look at what really happens to two people who take advantage of the two offers, One person hands over $21,000.00 cash, and leaves with the new car. The second promises to make 24 payments of $1000.00, one a month, starting in one month's time, and also leaves with the same make and model new car. The two people have received exactly the same benefit, so the two payment schemes must have the same value. A mortgage program will tell you that paying off a $21,000.00 loan by making 24 monthly payments of $1000.00 requires an interest rate of 1.10% a month, or an effective annual rate of 14.03%. |
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. |
Why invest in becoming a landlord? | There are at least three important aspectss missing from your equation. However they come with some uncertainty as one typically cannot tell the future performance. Appreciation of the rental units value. When comparing to the gain of any alternative investment an increasing value of the flat is a gain too. Increase of rent. Rents are typically adjusted either on a regular basis or at least when changing tennants. Calulation with a flat rent over 20 years is therefore way off. Tax deductions due to capital expenditures (i.e. mortgages), expenses for the upkeep and maintenance of the property, conserving and management, and so on. Obviously those are depending on your local legislation. There are multiple other issues to consider of course, e.g. inadvertant vacancy, which would not act in your favour. |
Calculating the total capital of a company? | Total Capital This is a very old fashioned term that really is mostly only used in the finance industry today, like when everyone was obsessed with "bank capital". Total Capital = Preferred Equity + Common Equity + Liabilities True blue preferred shares are almost only used by financial companies, banks specifically. The more modern ones that convert to common are used by all other companies. Notes Payable This is another old fashioned term that now carries a different meaning in Generally Accepted Account Principles (GAAP). The oldest definition of a note or a promissory note is a promise to pay a fixed amount of money on a specific date. This has been modified to resemble more a bond and evolved into the zero coupon bond, a bond that makes no cash interest payments but makes one final payment that includes principal & interest. A bank note, like a One Dollar bill, is a note that pays something, in this case One Dollar, never (technically, the repayment date is simply not specified in the contract). While it pays One Dollar, it never pays it back, so it has a constant value of One Dollar. The constant nature, inflation notwithstanding, is what makes bank notes the preferred medium of exchange. GAAP has taken its' own definition to mean any debt payable within 12 months, as it is a current (<12 months) liability. |
Will ADR owner enjoy same benefit as common shares holders | As far as I know, with ADRs you're essentially trading by proxy -- a depository bank is holding the actual stock certificate, and must provide you with the actual stock on demand. The one thing that is different is that in the event that the ADR is terminated (which sometimes happens with mergers), you have a limited period of time to sell the shares -- otherwise, you get the actual foreign stock that you may or may not be able to trade without transferring to a different broker. |
Is it common for a new car of about $16k to be worth only $4-6k after three years? | It isn't common to lose that much value in 3 years, but it is possible. If you don't take care of small dents, scratches, etc., you can quickly reduce the value far beyond what you might expect looking at graphs. Another big factor is the trim level of the car that you purchase. If you spend $30,000 for the highest trim level of a car, instead of $22,000 for the lowest trim level, the higher trim car could lose 50% of it's value while the lower trim car loses only 35%. There's no way to know why the OP of your linked question had such a large loss, but again, that's not the usual experience. It is definitely a good idea to consider used though. |
Mitigate Effects Of Credit With Tangible Money | Genius answer: Don't spend more than you make. Pay off your outstanding debts. Put plenty away towards savings so that you don't need to rely on credit more than necessary. Guaranteed to work every time. Answer more tailored to your question: What you're asking for is not realistic, practical, logical, or reasonable. You're asking banks to take a risk on you, knowing based on your credit history that you're bad at managing debt and funds, solely based on how much cash you happen to have on hand at the moment you ask for credit or a loan or based on your salary which isn't guaranteed (except in cases like professional athletes where long-term contracts are in play). You can qualify for lower rates for mortgages with a larger down-payment, but you're still going to get higher rate offers than someone with good credit. If you plan on having enough cash around that you think banks would consider making you credit worthy, why bother using credit at all and not just pay for things with cash? The reason banks offer credit or low interest on loans is because people have proven themselves to be trustworthy of repaying that debt. Based on the information you have provided, the bank wouldn't consider you trustworthy yet. Even if you have $100,000 in cash, they don't know that you're not just going to spend it tomorrow and not have the ability to repay a long-term loan. You could use that $100,000 to buy something and then use that as collateral, but the banks will still consider you a default risk until you've established a credit history to prove them otherwise. |
Is it better to ask for a raise before a spin-off / merger or after? | gef05 hit it on the head -- the books get frozen when mergers/spinoffs happen. I worked as an IT guy at a company whose mission was operating call centers -- and they didn't bother paying the phone bill! Why? the terms were already agreed upon, and the powers that be were waiting for final legal sign-off. Try to figure out who the leaders are going to be after the spinoff, and start politicking them. |
Should I take a personal loan for my postgraduate studies? | I would delay purchase of a condo or apartment until you have at a minimum, 6 months of living expenses including mortgage set aside in other investments that could be liquidated. If you lost your source of income though disability or layoff or an unexpected termination of a grant, you need to have that cushion or a significant other whose salary can sustain payments. You could lose a lot if you either cannot make the payments and/or the value to the apartment dips greatly. Many folks in the recent housing bubble and Great Recession learned this the hard way. Many lost their entire investment by not being able to make payments AND seeing their house lose 1/3 of its value. |
Could one person with a card with no spending limit pay off everyone's debt? | The problem would not only be that of Kyle but also that of American Express. When Kyle pays by credit card, American Express pays the bills out of their pockets on his behalf and then forwards the bill to Kyle. The issuer of a credit card takes the risk that the holder of the card won't pay the credit card bill. In practice there are safeguards in place which prevent a company like AE to pay such huge sums in one day through an automated process. Credit card companies have sophisticated algorithms to determine unusual spending patterns and block any transactions which appear unusual. Also, after a few billions their bank will likely block them and prevent them from paying any more bills. But let's play along and pretend these safeguards wouldn't exist. That means after Kyle's spending spree, American Express will be trillions in debt, with their main debitor being a 10 year old boy who won't ever be able to pay. Kyle will have to declare personal bankruptcy. There are various variants of bakruptcy in the US, but they basically all boil down to him paying everything he can pay (not much considering that he is 10) and then defaulting on his debt. Afterwards he is debt-free. That means the debt is now that of American Express. American Express will not be able to pay that debt with their bank(s) either, so they will have to declare bankruptcy and default on their debt too. This domino effect passes the burden on to the banks which can not carry a trillion-level debt either. A bank going bankrupt is a serious issue because it means they can not pay back any of the money in the saving accounts hold by companies or private people with them. So the problem would return to those people Kyle wanted to help in the first place. Also, the collapse of one bank will often result in the collapse of further banks, resulting in a collapse spiral destroying the whole world-wide finance system. Nothing would be gained. |
US: Basics of taxation of stocks | E.g. I buy 1 stock unit for $100.00 and sell it later for $150.00 => income taxes arise. Correct. You pay tax on your gains, i.e.: the different between net proceeds and gross costs (proceeds sans fees, acquisition costs including fees). I buy 1 stock unit for $150.00 and sell it later for $100.00 => no income taxes here. Not correct. The loss is deductible from other capital gains, and if no other capital gains - from your income (up to $3000 a year, until exhausted). Also, there are two different tax rate sets for capital gains: short term (holding up to 1 year) and long term (more than that). Short term capital gains tax matches ordinary income brackets, whereas long term capital gains tax brackets are much lower. |
Typical return for an IRA? How can I assess if my returns were decent? | There is no typical return for an IRA. Understand that an IRA is not an investment type, it is just an account that gets special tax treatment by the Federal Government. The money in the IRA could be invested in almost anything including Gold, Stocks, Bonds, Cash, CDs, etc. So the question as phrased isn't exactly meaningful. It is kind of like asking what is the typical price of things if I use $10 bills. As for a 10.6% annualized return on your portfolio. That's not a bad return. At that rate you will double your investment (with compounding) every 7.2 years. Again, however, some context is needed. You can really only evaluate investment returns with your risk profile in mind. If you are invested in super safe investments like CDs, that is an absolutely incredible return. You compare it to several indexes, which is a good way to do it if you are investing in the types of investments tracked by those indexes. |
Deductions greater than Income : Traditional IRA to Roth Conversion? | Yes. A most emphatic yes. I suggest you look at your 2014 return and project what 2015 will look like. I'd convert enough to "top off" the 15% bracket. Note, if you overshoot it, and in April 2016, see that you are say $5K into the 25% rate, you can just recharacterize the amount you went over and nail the bracket to the dollar. If you have the time and patience, you can convert into 2 different Roth accounts. One account for one asset class, say large cap stocks/funds, the other, cash/bonds. In April, keep the account that outperformed, and only recharacterize the lagger. Roth Roulette is my name for this strategy. It's risk free, and has the potential to boost the value of your conversions. Edit - To be clear, you are permitted to recharacterize (undo) any or all of the converted amount. You actually have until tax time (4/15 or so) plus the 6 month extension. You can recharacterize for any reason - A personal anecdote - I manage my mother in law's money. She is well under the 25% bracket cutoff. Each year I convert, and each April, recharacterize just enough to be at the top of the 15% bracket. Over $100K has been shifted from Traditional IRA to Roth by now. Taxed at 15% so her daughters will 'not' pay 25% when they withdraw. $10K in tax saved from uncle sam, for my effort of filling out paper twice a year for 12 years now. Well worth my effort. |
Stock return based on percentage | would you earn $600 or $1600? You would have $1600, and your earnings would be $600. That's the only answer it could be, since if you start with $1000 from your savings, then it's impossible for you to have also earned that money in the stock market. When you sell, do you keep your original capital, ($1000)? If you own a car which you bought for $1000, and then sell it for $1600, do you keep the original $1000? |
Pay off credit card debt or earn employer 401(k) match? | Nope, take the match. I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments. But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can. If you save for retirement in the process, all the better. |
What is the most effective saving money method? | Entire books have been written on how to get to the end of the month before you get to the end of the money. It's a very broad problem. But in your case, let me point out that your salary never "suddenly disappears" (unless you're paid in cash and it blew away or was stolen while you were sleeping.) You spent it. For a month, monitor your spending. One approach is to write everything down in a small notebook. Come up with categories like "Rent", "Food", "Transportation" and look at the totals. Over time, you can estimate what you spend in a normal week or month on these things. When you spend much more, you can ask yourself why. It might be because you just splurged money you didn't have on something you didn't need. It might be because something broke, and you hadn't been saving a small reserve month after month to pay for those repairs when they would be needed. It might be because some bills only come once a year or every 6 months, and you hadn't been saving a small reserve to pay that bill when it came in. Once you understand where your money is going and why it sometimes runs out, you can work out what to do about that. It might involve spending less. But that's not the first step. The first step is not to be surprised by "sudden disappearances" that are anything but. |
How is not paying off mortgage better in normal circumstances? | Certainly there are people who do pay off their homes. Others do not. It's a question of risk tolerance and preference. Some considerations relevant to this question: Taxes - Interest on a mortgage is tax deductible. Particularly for high earners, this is a significant incentive to maintain a mortgage balance and place extra money in the market instead. Liquidity - If you lose your job, you can sell stocks to pay the mortgage. But if you have made principle payments on your mortgage but still owe some outstanding balance, you are still required to make monthly payments without any source of income. Rates - In recent years it is been common to get a mortgage for 3.2% to 3.5%. The difference between those rates and 9% rate of return for the market is substantial. There are other considerations but the answer in the end is that for many people the risk / reward calculus says the ~5% difference in rate of return is worth the potential risks. |
Snowball debt or pay off a large amount? | I agree with the Dave Ramsey method as well. If you don't have $1k in the bank already, do that. Total up the smaller debts and the best buy card. if they are $4k all together, then pay them off. Don't get caught up in keeping the smaller one around because they are at zero percent. If they exceed $4k, then payoff the interest bomb best buy card, then pay off the smaller ones, starting with the smaller balance. That is the only tweak I will make here. Dropping any amount into the Citi balance is pointless because it only reduces the amount, not the total number of hands reaching into your bank account. |
Can a company donate to a non-profit to pay for services arranged for before hand? | Donations need to be with no strings attached. In this case, you make the cash donation, a deduction, and then they pay you, in taxable income. It's a wash. Why not just give them the service for free? Otherwise this is just money going back and forth. |
If I want a Credit Card offered through a different Credit Union should I slowly transition my banking to that CU? | No. There's no inherent reason to link the place that you bank with any other financial service. There may occasionally be benefits; for instance you can sometime get lower rates on mortgages or loans by having a a checking account with an institution. Or perhaps it'll be easier for you to make a same-day payment on a credit account. There could be some negatives as well. If you fall behind on a loan account, the bank may take money from your savings/checking account to satisfy your debt. Choose a bank or CU that's convenient to you. Choose a credit card from whatever bank or CU provides you with the best benefits. If that credit card is coming from a CU that requires a savings account for membership, open a minimum balance savings account and apply for the product you're interested in. If your credit is as good as you claim, they'll be happy to offer you the credit card regardless of whether you do your day-to-day banking with them. |
What is the meaning of “writing put options”? | Write means sell to open. It is called that because options writers are creating (i.e. writing) new contracts. No such thing as "reading" an option. |
Why do employers require you to spread your 401(k) contributions throughout the year to get the maximum match? | If one makes say, $10K/mo, and the company will match the first 5% dollar for dollar, a 10%/mo deposit of $1K/mo will see a $500/mo match. If the employee manages to request 90% get put into the 401(k), after 2 months, he's done. If the company wished, they could continue the $500/mo match, I agree. They typically don't and in fact, the 'true up' you mention isn't even required, one is fortunate to get it. Many companies that match are going the other way, matching only after the year is over. Why? Why does any company do anything? To save money. I used to make an attempt to divide my deposit over the year to max out the 401(k) in December and get the match real time, not a true up. |
Will a credit card issuer cancel an account if it never incurs interest? | Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank. |
Should I be claiming more than 1 exemption? | It's not possible to determine whether you can "expect a refund" or whether you are claiming the right number of exemptions from the information given. If your wife were not working and you did not do independent contracting, then the answer would be much simpler. However, in this case, we must also factor in how much your contracting brings in (since you must pay income tax on that, as well as Medicare and, probably, Social Security), whether you are filing jointly or separately, and your wife's income from her business. There are also other factors such as whether you'll be claiming certain child care expenses, and certain tax credits which may phase out depending on your income. If you can accurately estimate your total household income for the year, and separate that into income from wages, contracting, and your wife's business, as well as your expenses for things like state and local income and property taxes, then you can make a very reasonable estimate about your total tax burden (including the self-employment taxes on your non-wage income) and then determine whether you are having enough tax withheld from your paycheck. Some people may find that they should have additional tax withheld to compensate for these expenses (see IRS W-4 Line #6). |
How could a company survive just on operations cash flow, i.e. no earnings? | It depends on the definition of earnings. A company could have revenue that nets in excess of expenses, so from that perspective a good cash flow or EBITDA, but have debt servicing costs, taxes, depreciation, amortization, that alters that perspective. So if a company is carrying a large debt load, then the bondholders are in the position to capture any excess revenues through debt service payments and the company is in a negative equity positions (no equity or dividends payable to shareholders) and has not produced earnings. If a company has valuable preferred shares issued and outstanding, then depending on the earnings definition, there may be no earnings (for the common stock) until the preferences are satisfied by the returns. So while the venture itself (revenues minus costs) could be cash flow positive, this may not be sufficient to produce "earnings" for shareholders, whose claim on the company still entitles them to zero current liquidation value (i.e. they get nothing if the company dissolves immediately - all value goes to bondholders or preferred). It could also be that taxes are eating into revenue, or the depreciation of key assets is greater than the excess of revenues over costs (e.g. a bike rental company by the beach makes money on a weekly basis but is rusting out half its stock every 3 months and replacement costs will overwhelm the operating revenues). |
Is it irresponsible for me to lease a $300/month car for 18 months? | Presumably you need a car to get to work, so let's start with the assumption that you need to buy something to replace the car you just lost. The biggest difficulty to overcome in buying a car is the concept of the monthly payment. Dealers will play games with all of the numbers to massage a monthly payment that the buyer can swallow, but this usually doesn't end up giving the customer the best deal. The 18 month term is not normal for a lease, typically you'll see 24 or 36 months. You are focusing on another goal of paying your student loans by then which would free up much more money for other wants (like a car) but at what cost? The big difficulty of personal finance is the mental mind game of delaying gratification for greater long-term benefit. You are focusing on paying your student loans now so that you can be free of that debt and have more flexibility for the future. Good. You're tempted to spend another $5400 (assuming no down-payment or other surprise fees) to drive a car for 18 months. That doesn't sound any wiser than $5,000 for an unreliable used car that gave you more problems than you bargained for. Presumably you got some percentage of that money back from the insurance company when the car was totaled, but even if not, the real lesson should be finding a car that you can afford up-front, but also one that you can still use when the loan is paid off (like your education--that investment will keep giving even when the loans are a distant memory). My advice would be to look for a car that has about 30k miles on it and pay for it as quickly as possible, then drive it at least for 70-120k more miles before replacing it. You may wish for a newer car, especially in 3 or 4 more years when it starts to show its age, but you'll also thank yourself when you can buy a newer better car with cash and break out of the monthly payment game that dealers try to push on you. You might even enjoy negotiating with car salesmen when you see through their manipulations and simply work for the best cash price you can get. |
Why is short-selling considered more “advanced” than a simple buy? | In addition to the higher risk as pointed out by @JamesRoth, you also need to consider that there are regulations against 'naked shorting' so you generally need to either own the security, or have someone that is willing to 'loan' the security to you in order to sell short. If you own a stock you are shorting, the IRS could view the transaction as a Sell followed by a buy taking place in a less than 30 day period and you could be subject to wash-sale rules. This added complexity (most often the finding of someone to loan you the security you are shorting) is another reason such trades are considered more advanced. You should also be aware that there are currently a number of proposals to re-instate the 'uptick rule' or some circuit-breaker variant. Designed to prevent short-sellers from driving down the price of a stock (and conducting 'bear raids etc) the first requires that a stock trade at the same or higher price as prior trades before you can submit a short. In the latter shorting would be prohibited after a stock price had fallen a given percentage in a given amount of time. In either case, should such a rule be (re)established then you could face limitations attempting to execute a short which you would not need to worry about doing simple buys or sells. As to vehicles that would do this kind of thing (if you are convinced we are in a bear market and willing to take the risk) there are a number of ETF's classified as 'Inverse Exchange Traded Funds (ETF's) for a variety of markets that via various means seek to deliver a return similar to that of 'shorting the market' in question. One such example for a common broad market is ticker SH the ProShares Short S&P500 ETF, which seeks to deliver a return that is the inverse of the S&P500 (and as would be predicted based on the roughly +15% performance of the S&P500 over the last 12 months, SH is down roughly -15% over the same period). The Wikipedia article on inverse ETF's lists a number of other such funds covering various markets. I think it should be noted that using such a vehicle is a pretty 'aggressive bet' to take in reaction to the belief that a bear market is imminent. A more conservative approach would be to simply take money out of the market and place it in something like CD's or Treasury instruments. In that case, you preserve your capital, regardless of what happens in the market. Using an inverse ETF OTOH means that if the market went bull instead of bear, you would lose money instead of merely holding your position. |
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