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Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What happens to my savings if my country defaults or restructures its debt? ### Answer: This question is different because you are asking for actual advice vs. a more academic, "what if" scenario. The answer that I'll give will be different, and similar to another recent question on a similar vein. Basically, if you're living in a European country that's effectively in default and in need of a bailout, the range of things that can happen is difficult to predict... the fate of countries like Ireland and Greece, whatever the scenario, will be economic and social upheaval. But, this isn't the end of the world either... it's happened before and will happen again. As an individual, you need to start investing defensively in a manner appropriate for your level of wealth. Things to think about: I'd suggest reading "A Free Nation Deep in Debt: The Financial Roots of Democracy" ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What happens to my savings if my country defaults or restructures its debt? ### Answer: My 0,02€ - I probably live in the same country as you. Stop worrying. The Euro zone has a 100.000€ guaranty deposit. So if any bank should fail, that's the amount you'll receive back. This applies to all bank accounts and deposits. Not to any investments. You should not have more than 100.000€ in any bank. So, lucky you, if you have more than that money, divide between a number of banks. As for the Euro, there might be an inflation, but at this moment the USA and China are in a currency battle that 'benefits' the Euro. Meaning you should not invest in dollars or yuan at this time. Look for undervalued currency to invest in as they should rise against the Euro. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What happens to my savings if my country defaults or restructures its debt? ### Answer: Best thing to do is convert your money into something that will retain value. Currency is a symbol of wealth, and can be significantly devalued with inflation. Something such as Gold or Silver might not allow you to see huge benefit, but its perhaps the safest bet (gold in particular, as silver is more volatile), as mentioned above, yes you do pay a little above spot price and receive a little below spot when and if you sell, but current projections for both gold and silver suggest that you won't lose money at least. Safe bet. Suggesting it is a bad idea at this time is just silly, and goes against the majority of advisers out there. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What happens to my savings if my country defaults or restructures its debt? ### Answer: I am going to add in an opinion here from the Wall Street Journal that I read this morning in What's at Stake in the Greek Vote, in light of current events and elections in Greece. The article claims that if the election results make it sound like a break from the Euro is imminent then ... we will see a full-fledged bank run. Greek banks would collapse ... The market exchange-rate would likely be two or three drachmas to the euro, which would double or triple the Greek price of imported goods within a few days. Prices of assets, including real-estate assets, would crumble. Those who moved their deposits abroad would be able to buy these assets cheaply, leading to a significant, regressive redistribution of Greek wealth. In short, you'd lose two-thirds of your savings unless you were storing them somewhere safe from the conversion. The article also predicts difficulty importing goods (other nations will demand to be paid in euro, not drachma) leading to disruption of trade and various supply shortages. I will note that the predictions here seem to be in opposition to some other advice here which suggests that real estate will be an effective hedge. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What happens to my savings if my country defaults or restructures its debt? ### Answer: Remove your money. If you do not need this money for some time, you can convert it to Gold, and now is a good time to buy. Gold is not expected to decrease much in price as we're already at the bottom of the employment cycle and the Depression is already begun and will take about two years to grip the world. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Ensuring payment from client ### Answer: Use some form of escrow agent: Some freelancer sites provide payment escrow services (e.g. E-Lance). In this system the client puts money in escrow for the project in advance and then when they accept the project it forwards the payment to the provider. Progress Payments Arrange a progress payment approach with the client where they pay at certain milestones rather than a single payment at the end of the project. Ideally you would have them pre-pay for each milestone before you start work on it. However, you could ask for payment after each milestone, which might be easier to sell to your client. It does leave some risk, but minimizes that risk somewhat. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Ensuring payment from client ### Answer: You should absolutely have a contract between you and your client stipulating the quid-pro-quos of the arrangement. They get the product, you get the money. First off, this contract should specify what you must do, and what they must do, for the contract to be "satisfied". This isn't necessarily just product for money; your client may be under deadlines to approve the product in various stages of work in process. Depending on the product, the client may be required to provide starting materials (like existing logos/slogans for advertising/marketing graphics), information on or access to computer systems (for software or infrastructure consulting, or accounting auditing), etc. Second, if you provide a tangible product like graphics or software, the contract should clearly state that "intellectual property transfers on satisfaction of contract"; they don't own what you have made until they have accepted it and paid you accordingly. If they try to stiff you by taking what you made them and using it before you've been paid, you can take them to the cleaner's for copyright violations. Third, you should structure a payment schedule; don't do too much for free. You can get the money in thirds, for instance; a third up front, a third at some defined halfway point and a third on final delivery and acceptance. Lastly, you should stipulate that the client is responsible for all expenses incurred by you as a result of their failure to pay as stipulated, up to and including attorney's fees. Definitely have a lawyer draft these agreements; contract law is a many-layered area of law with hundreds of years of case law and slightly different nuances in every state. A competent lawyer will know things that can and can't be stipulated in a contract, and if you try to do it alone you'll wish you hadn't when the contract's tossed out by a judge because of some technicality. If they refuse to pay, get the lawyer on the phone and file suit. A well-written contract drafted by a competent lawyer, which you have lived up to on your end, will give your client no loopholes to slip through. As far as recovering damages, it shouldn't matter whether he's in the U.S. or not; if he does business in the U.S. then he very probably has money in banks that have to listen to U.S. courts (or at least court orders). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Explanations on credit cards in Canada ### Answer: A credit card is a way to borrow money. That's all. Sometimes the loans are very small - $5 - and sometimes they are larger. You can have a credit card with a company (bank or whatever) that you have no other relationship with. They're not a property of a bank account, they are their own thing. The card you describe sounds exactly like a debit card here, and you can treat your Canadian debit card like your French credit card - you pay for things directly from your bank account, assuming the money is in there. In Canada, many small stores take debit but not credit, so do be sure to get a debit card and not only a credit card. Now as to your specific concerns. You aren't going to "forget to make a wire." You're going to get a bill - perhaps a paper one, perhaps an email - and it will say "here is everything you charged on your credit card this month" along with a date, which will be perhaps 21 days from the statement date, not the date you used the card. Pay the entire balance (not just the minimum payment) by that date and you'll pay no interest. The bill date will be a specific date each month (eg the 23rd) so you can set yourself a reminder to check and pay your bill once a month. Building a credit history has value if you want to borrow a larger amount of money to buy a car or a house, or to start a business. Unlike the US, it doesn't really have an impact on things like getting a job. If you use your card for groceries, you use it enough, no worries. In 5 years it is nice to look back and see "never paid late; mostly paid the entire amount each month; never went over limit; never went into collections" and so on. In my experience you can tell they like you because they keep raising your limit without you asking them to. If you want to buy a $2500 item and your credit limit is $1500 you could prepay $1000 onto the credit card and then use it. Or you could tell the vendor you'd rather use your debit card. Or you could pay $1500 on the credit card and then rest with your debit card. Lots of options. In my experience once you get up to that kind of money they'd rather not use a credit card because of the merchant fees they pay. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Explanations on credit cards in Canada ### Answer: Is my understanding okay ? If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. Which is where the credit card company can add fees so you pay more and they make more money. Don't forget that in the credit case, you are borrowing money rather than using your own. Another thing that bothers me is that the credit card apparently has a rather low credit limit. If I wanted to buy something that costs $2500 but only have a credit limit of $1500, can I make a preemptive wire from my check account to the VISA account to avoid facing the limit ? If so, what is the point for the customer of having two accounts (and two cards for that matter...) ? If you were the credit card company, do you believe people should be given large limits first? There are prepaid credit cards where you could put a dollar amount on and it would reject if the balance gets low enough. Iridium Prepaid MasterCard would be an example here that I received one last year as I was involved in the floods in my area and needed access to government assistance which was given this way. Part of the point of building up a credit history is that this is part of how one can get the credit limits increased on cards so that one can have a higher limit after demonstrating that they will pay it back and otherwise the system could be abused. There may be a risk that if you prepay onto a credit card and then want to take back the money that there may be fees involved in the transaction. Generally, with credit cards the company makes money on the fees involved for transactions which may come from merchants or yourself as a cash advance on a credit card will be charged interest right away while if you buy merchandise in a store there may not be the interest charged right away. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Explanations on credit cards in Canada ### Answer: If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. I have my back account (i.e. chequing account) and VISA account at/from the same bank (which, in my case, is the Royal Bank of Canada). I asked my bank to set up an automatic transfer, so that they automatically pay off my whole VISA balance every month, on time, by taking the money from my bank account. In that way I am never late paying the VISA so I never pay interest charges. IOW I use the VISA like a debit card; the difference is that it's accepted at some places where a debit card isn't (e.g. online, and for car rentals), and that the money is deducted from my bank account at the end of the month instead of immediately. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Explanations on credit cards in Canada ### Answer: I think it's worth pointing out explicitly that the biggest difference between a credit card (US/Canada) and a debit card (like your French carte de crédit) is that with a credit card, it's entirely possible to not pay the bill or to pay only the "minimum payment" when asked. This results in you owing significantly more money due to interest, which can snowball into higher and higher levels of debt, and end up getting rapidly out of control. This is the reason why you should ALWAYS pay off the ENTIRE balance every month, as attested to in the other answers; it's not uncommon to find people in the US with thousands of dollars of debt they can't pay off from misuse of credit cards. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Do I need to start a 529 plan for each child (2 separate plans), or can I just open one 529 plan and let both children use it? ### Answer: Create one account. You can change the beneficiary of the plan (even to nephews, nieces, yourself or your wife) as many times as you need so long as you are spending the money on valid educational expenses. Are you 100% sure both of your kids are going to college? If you aren't really 100% sure, a single account that you can move between them is the best bet. Also, having recently looked in 529 plans, here are some things you have probably already thought about. Look up good 529 plans here: http://www.clarkhoward.com/news/education/preparing-for-college/clarks-529-guide/nFZS/ EDIT: I don't think you can worry about fairly dividing the money up. I can see your wanting to be fair but what is more important, school or fairly dividing the money? A 529 is money only for school. Assuming your kids aren't the same age and won't go to the same school, their expenses will likely be different. The younger kid will benefit from more interest from a longer investment, but suffer from having higher costs. So if you want to insure both kids got $50K (for example) from you by the time it is all said and done, I think you would have to make that up from your own pocket. If only one child goes to school, any money you give the other for starting their own business couldn't come from the 529 without big tax penalties. Depending on your position and finances you could state something like "I will cover your college expenses up to $50K" and then that is that. Just monitor your 529 and shoot for having $100K in the account by the time they are both college age. That runs a risk though, because if one child doesn't go to school your money is locked up for a while or will have tax issues. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Do I need to start a 529 plan for each child (2 separate plans), or can I just open one 529 plan and let both children use it? ### Answer: MrChrister makes some good points, but I saw his invitation to offer a counter opinion. First, there is a normal annual deposit limit of $13,000 per parent or donee. This is the gift limit, due to rise to $14,000 in 2013. If your goal is strictly to fund college, and this limit isn't an issue for you, the one account may be fine unless both kids are in school at the same time. In that case, you're going to need to change beneficiaries every year to assign withdrawals properly. But, as you mention, there's gift money that your considering depositing to the account. In this case, there's really a legal issue. The normal 529 allows changes in beneficiary, and gifts to your child need to be held for that child in an irrevocable arrangement such as a UTMA account. There is a 529 flavor that provides for no change of beneficiary, a UTMA 529. Clearly, in that case, you need separate accounts. In conclusion, I think the single account creates more issues than it potentially solves. If the true gift money from others is minimal, maybe you should just keep it in a regular account. Edit - on further reflection, I strongly suggest you keep the relatives' gifts in a separate account, and when the kids are old enough to have legitimate earned income, use this money to open and deposit to Roth IRAs. They can deposit the lesser of their earned income or $5000 in 2012, $5500 in 2013. This serves two goals - avoiding the risk of gift money being 'stolen' from one child for benefit of the other, and putting it into an account that can help your children long term, but not impact college aid as would a simple savings or brokerage account. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Yahoo Finance not showing detailed information for foreign stocks ### Answer: The cause of incomplete/inaccurate financial data's appearing on free sites is that it is both complicated and expensive to obtain and parse these data. Even within a single country, different pieces of financial data are handled by different authorities. In the US, for example, there is one generally recognized authority for stock prices and volumes (CQS), but a completely different authority for corporate earnings data (SEC). For futures and options data the only authority is each individual exchange. Each of these sources might have a vastly different interface to their data; some may have websites, others may have FTPs, others may have TCP datastreams to which you must subscribe, etc. Now throw in the rest of the world and all their exchanges and regulatory agencies, and you can see how it's a difficult job to gather all this information, parse it on a daily (or more frequent) basis, and check it all for errors. There are some companies (e.g. Bloomberg) whose entire business model is to do the above. They spend tens of millions of dollars per year to support the infrastructure and manpower required to keep such a complex system working, and they charge their consumers a pretty penny in return. Do Google/Yahoo pay for Bloomberg data access just to display information that we then consume for free? Maybe. Maybe they pay for some less expensive reduced data set. Or a data set that is less rigorously checked for errors. Even if they pay for the best data available, there's no guarantee that a company's last earnings report didn't have a glitch in it, or that Bloomberg's latest download from the Canadian Agency for Corporate Dividends and Moose Census-Taking didn't get cut off in the middle, or that the folks at Yahoo built a robust system that can handle a particular file's not arriving on time. Bloomberg has dozens or even hundreds of employees focused on just this one task; Yahoo probably has 5. Moral: If you really need the best available data you must go to the source(s), or you must pay a provider to whom you can then complain when something is wrong. With free data you get what you pay for. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Simplifying money management ### Answer: Track your spending and expected income -- on paper, or with a personal-finance program. If you know how much is committed, you know how much is available. Trivial with checks, requires a bit more discipline with credit cards. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Simplifying money management ### Answer: Many banks will allow you to open multiple accounts. Create a secondary checking account that has no automatic withdrawals and doesn't allow overdraft. This is the account you'll use for you discretionary spending. Get an account with a debit card and always use it as a debit card (never as a credit card, even if it allows that). Your employer may allow you to split your direct deposit so that a certain amount of money goes into this account each month. When it gets to $0, you have to stop spending. It will automatically refill when you get your paycheck. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Simplifying money management ### Answer: Personally, I have a little checkbook program that I use to keep track of my spending and balance. Like you -- and I presume like most people -- I have certain recurring bills: the mortgage, insurance payments, car payment, etc. I simply enter these into the checkbook program about a month before the bill is due. Then I can run a transaction list that shows the date, amount, and remaining balance after each transaction. So if I want to know how much money I really have available to spend, I just look for the last transaction before my next payday, and see what the balance will be on that day. Personally, I always keep a certain amount of pad in my account so if I made a mistake and entered an incorrect amount for a check, or forgot to enter one completely, I don't overdraw the account. (I like to keep $1000 in such padding but that's way more than really necessary, it's very rare that I make a mistake of more than $100.) In my case, I don't enter electric bills or heating bills because I don't know the amount until I get the bill, and the amounts fall well within my padding, and for just two bills I can factor them in in my head. BTW I wrote this program myself but I'm sure there are similar products on the market. I used to use a spreadsheet and that worked pretty well. (Mainly I wrote the program because I have a tiny side business that I have to keep tax records for even though it makes almost no money.) You could in principle do it on paper, but the catch to that is that when you write payments on your paper ledger in advance of actually writing the check, you will often be writing down payments out of order, and so it becomes difficult to see what your balance is or was or will be on any given date. But a computer system can easily accept transactions out of order and then sort them and re-do the balance calculations in a fraction of a second. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to respond to a customer's demand for payment extension? ### Answer: In the event that payment is not made by the due date on the invoice then the transaction is essentially null and void and you can sell the work to another client. For your particular situation I would strongly suggest that you implement a sales contract and agreement of original transfer of work of art for any and all future sales of your original works of art. In this contract you need to either enforce payment in full at time of signing or a deposit at signing with payment in full within (X) amount of days and upon delivery of item. In your sales contract you will want to stipulate a late fee in the event that the client does not pay the balance by the date specified, and a clause that stipulates how long after the due date that you will hold the artwork before the client forfeiting deposit and losing rights to the work. You will also want to specify an amount of time that you provide as a grace period in the event client changes their mind about the purchase, and you can make it zero grace period, making all sales final and upon signing of the agreement the client agrees to the terms and is locked into the sale. In which point if they back out they forfeit all deposits paid. I own a custom web design business and we implement a similar agreement for all works that we create for a client, requiring a 50% deposit in advance of work being started, an additional 25% at time of client accepting the design/layout and the final 25% at delivery of finished product. In the event that a client fails to meet the requirements of the contract for the second or final installment payments the client forfeits all money paid and actually owes us 70% of total quoted project price for wasting our time. We have only had to enforce these stipulations on one client in 5 years! The benefit to you for requiring a deposit if payment is not made in full is that it ensures that the client is serious about purchasing the work because they have put money in the game rather than just their word of wanting to purchase. Think of it like putting earnest money down when you make an offer to buy a house. Hope this helps! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Retirement formula for annual compound interest with changing principal ### Answer: The equation is the same one used for mortgage amortization. You first want to calculate the PV (present value) for a stream of $50K payments over 20 years at a10% rate. Then that value is the FV (future value) that you want to save for, and you are looking to solve the payment stream needed to create that future value. Good luck achieving the 10% return, and in knowing your mortality down to the exact year. Unless this is a homework assignment, which need not reflect real life. Edit - as indicated above, the first step is to get that value in 20 years: The image is the user-friendly entry screen for the PV calculation. It walks you though the need to enter rate as per period, therefore I enter .1/12 as the rate. The payment you desire is $50K/yr, and since it's a payment, it's a negative number. The equation in excel that results is: =PV(0.1/12,240,-50000/12,0) and the sum calculated is $431,769 Next you wish to know the payments to make to arrive at this number: In this case, you start at zero PV with a known FV calculated above, and known rate. This solves for the payment needed to get this number, $568.59 The excel equation is: =PMT(0.1/12,240,0,431769) Most people have access to excel or a public domain spreadsheet application (e.g. Openoffice). If you are often needing to perform such calculations, a business finance calculator is recommended. TI used to make a model BA-35 finance calculator, no longer in production, still on eBay, used. One more update- these equations whether in excel or a calculator are geared toward per period interest, i.e. when you state 10%, they assume a monthly 10/12%. With that said, you required a 20 year deposit period and 20 year withdrawal period. We know you wish to take out $4166.67 per month. The equation to calculate deposit required becomes - 4166.67/(1.00833333)^240= 568.59 HA! Exact same answer, far less work. To be clear, this works only because you required 240 deposits to produce 240 withdrawals in the future. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Retirement formula for annual compound interest with changing principal ### Answer: I've found the systems that seem to work. Firstly, you need to find how much money is required to pay for the withdrawals after retirement, while still accruing interest. I couldn't seem to do this with an equation, but this bit of javascript worked: yearsToLast: Number of years of yearly withdrawals yearlyWithdrawal: Amount to withdraw each year interest: Decimal form of yearly compounding interest Now that we have how much is required at the beginning of the retirement, to figure out how much to add yearly to hit this mark, you'd use: amount: Previously found required amount to reach interest: Decimal form of yearly compounding interest yearsSaving: Number of years saving till amount needs to be hit I hope this helps some other poor soul, because I could find squat on how to do this. Max ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is a typical investment portfolio made up of? ### Answer: Most people carry a diversity of stock, bond, and commodities in their portfolio. The ratio and types of these investments should be based on your goals and risk tolerance. I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for. If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs). Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k. You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds. If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is a typical investment portfolio made up of? ### Answer: Paying off the high-interest debt is a good first start. Paying interest, or compound interest on debt is like paying somebody to make you poor. As for your 401k, you want to contribute enough to get the full match from your employer. You might also consider checking out the fees associated with your 401k with an online fee analyzer. If it turns out you're getting reamed with fees, you can reduce them by fiddling with your investments. Checking your investment options is always a good idea since jobs frequently change them. Opening an IRA is a good call. If you're eligible for both Roth and Traditional IRAs, consider the following: Most financial institutions (brokers or banks) can help you open an IRA in a matter of minutes. If you shop around, you will find very cheap or even no fee options. Many brokers might try to get your business by giving away something for ‘free.' Just make sure you read the fine print so you understand the conditions of their promotional offer. Whichever IRA you choose, you want to make sure that it's managed properly. Some people might say, ‘go for it, do it yourself’ but I strongly disagree with that approach. Stock picking is a waste of time and market timing rarely works. I'd look into flat fee financial advisors. You have lots of options. Just make sure they hear you out, and can design/execute an investment plan specific to your needs At a minimum, they should: Hope this is helpful. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is a typical investment portfolio made up of? ### Answer: An investment portfolio is typically divided into three components: All three of those can be accessed through mutual funds or ETFs. A 401(k) will probably have a small set of mutual funds for you to pick from. Mutual funds may charge you silly expenses if you pick a bad one. Look at the prospectus for the expense ratio. If it's over 1% you're definitely paying too much. If it's over 0.5% you're probably paying too much. If it's less than 0.1% you have a really good deal. US stocks are generally the core holding until you move into retirement (or get close to spending the money on something else if it's not invested for retirement). International stocks are riskier than US stocks, but provide opportunity for diversification and better returns than the US stocks. Bonds, or fixed-income investments, are generally very safe, but have limited opportunities for returns. They tend to do better when stocks are doing poorly. When you've got a while to invest, you should be looking at riskier investments; when you don't, you should be looking for safer investments. A quick (and rough) rule of thumb is that "your age should match the portion of your portfolio in bonds". So if you're 50 years old and approaching retirement in 15 years or so, you should have about 50% in bonds. Roughly. People whose employment and future income is particularly tied to one sector of the market would also do well to avoid investing there, because they already are at risk if it performs badly. For instance, if you work in the technology sector, loading up on tech stocks is extra risky: if there's a big bust, you're not just out of a job, your portfolio is dead as well. More exotic options are available to diversify a portfolio: While many portfolios could benefit from these sorts of holdings, they come with their own advantages and disadvantages and should be researched carefully before taking a significant stake in them. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is a typical investment portfolio made up of? ### Answer: Don't over think about your choices. The most important thing to start now and keep adjusting and tuning your portfolio as you move along in your life. Each individual's situation is unique. Start with something simple and straight forward, like 100 - your age, in Total Stock market Index fund and the remaining total bond market index fund. For your 401k, at least contribute so much as to get the maximum employer match. Its always good if you can contribute the yearly maximum in your 401k or IRA. Once you have built up a substantial amount of assets (~ $50k+) then its time to think more about asset allocation and start buying into more specific investments as needed. Remember to keep your investment expenses low by using index funds. Also remember to factor in tax implications on your investment decisions. eg. buying an REIT fund in a tax advantaged account like 40k is more tax efficient than buying it in a normal brokerage account. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: People ... are nearly twice as likely to ... feel confident Great, confidence is amazing. That and $5 will buy you a cup of coffee. 44% [who hired a pro] have $100K or more [vs.] 9% of DIYers There's no way to examine these numbers without a link to the source, but it stands to reason that if you have a plan that you're sticking to you'll save more money than if you are just investing haphazardly. It's too bad that we can't see what the returns are for those using a pro vs. DIYers. That would be much more valuable than an arbitrary dollar level. Unfortunately $100K isn't really that much money if you live in the US, so it's an irrelevant talking point. The real question is whether investment knowledge is readily available to the masses or if having a person who specializes in finance is required to make good decisions about investment. I think the fact that the conventional wisdom prefers index funds to actively managed funds demonstrates that investment professionals are less useful than they might have been even a decade or two ago. If money should be spent on professional advice, it's probably better spent on CPAs or other tax professionals who can help optimize your investments for tax efficiency, though even that is now available as more common knowledge. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: Let me start with something you might dismiss as trite - Correlation does not mean Causation. A money manager charging say, 1%, isn't likely to take on clients below a minimum level. On the other hand, there's a long debate regarding how, on average, managed funds don't beat the averages. I think that you should look at it this way. People that have money tend to be focused on other things. A brain surgeon making $500K/yr may not have the time, nor the inclination to want to manage her own money. I was always a numbers person. I marveled at the difference between raising 1.1 to the 40th power, getting 45.3 (i.e. Getting 45.3 times your investment after 40 years at 10%) vs 31.4 at 9%. That 1% difference feels like nothing, but after a lifetime, 1/3 of your money has been skimmed off the top. the data show that one can do better by simply putting their money into a mix of S&P index and cash, and beat the average money manager over time, regardless of convoluted 12 asset class allocations. Similarly - There are people who use a 'tax guy.' In quotes because I mean this as an individual whom they go to, year after year, not a storefront. My inlaws used to go to one, and I was curious what they got for their money. Each year he sent them a form. 3 pages they needed to fill in. Every cell made its way into the guy's tax program. The last year, I went with them to pick up the tax return. I asked him if he noticed that they might benefit from small Roth conversions each year, or by making some of their IRA RMD directly to charity. He kindly told me "That's not what we do here" and whisked us away. I planned both questions in advance. The Roth conversion was a strategy that one could agree made sense or dismiss as convoluted for some clients. But. The RMD issue was very different. They didn't have enough Schedule A deductions to itemize. Therefore the $3000 they donated each year wasn't impacting their return. By donating directly from their IRAs, this money would avoid tax. It would have saved them more than the cost of the tax guy, who charged a hefty fee, in my opinion. It seemed to me, this particular strategy should be obvious to one whose business is preparing returns. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: Ask yourself the same question for furniture making. Would you feel more comfortable sitting in a chair that you made yourself versus one that you bought from a furniture store? How about one that you bought from IKEA and assembled? For an experienced, competent furniture maker, you might be able to make an equivalent chair for less money and be highly confident. For a "DIY" builder, you might be less confident but be willing to take more of a risk with the possibility of making a good chair for less money (and gain experience on what not to do next time). The same applies to investing - if you are highly confident in your own abilities, DIY investing may work better for you. For the "general population", however, relying on experts to do the hard work (and paying a little more for their services) is probably a better option and gives you more confidence. As for the second quote, I'm note sure there's a causality there. If anything, I think it's the other way around - people who have more money saved for retirement are more likely to use investment advisors. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: I am sure there would be many views on the above topic, my take is that DIY takes the following: Now, for many, one or more of the other factors are missing. In this case, it is probably best to go for a financial adviser. There are others who have some of the above in place and are interested but probably cannot spend enough time. For them a middle ground of Mutual Funds probably is a good choice. Here they get to choose the fund they invest in and the fund manager manages the fund. For the people who have the above more or less in place and also are willing to take risk and learn, they probably can do a DIY for a while and find out the actual result. Just my views and opinion. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: Even if we accept these claims as being true, neither the fact that their clients are more confident, nor the fact that people who use an investment professional have a higher net worth tells you anything about the value of the service that such professionals provide. Judging a service provider is a complex matter where you take into account multiple variables but the main ones are the cost and quality of the service, the cost and quality of doing it yourself and the value you assign to your time and effort. I think it's highly likely that professional gardeners will on average maintain larger gardens than those who do their own garden work. And any professional will have more experience at his profession than an average member of the public. But to determine if hiring a professional is objectively "better" requires defining what that word means. Finance is a bit weird in that respect since we actually do have objective ways of measuring results by looking at performance over time. But since the quotes you give here don't address that at all, we can simply conclude that they do not make the case for anything related to financial performance. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: Agree with the above poster regarding causation vs. correlation. Unless you can separate out the variables questions like this are somewhat impossible to answer. Additionally, one of the fundamental issues is the Agency Problem. Depending on the fee structure the advisor might be more interested in their own self benefit then yours. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I Use an Investment Professional? ### Answer: Yes. The investment world is extremely fast-paced and competitive. There are loads of professional traders with supercomputers working day in and day out to make smarter, faster trade decisions than you. If you try to compete with them, there’s a better than fair chance you’ll lose precious time and money, which kind of defeats the purpose. A good wealth manager: In short, they can save you time and money and help you take the most advantage of your current savings. Or, you can think about it in terms of cost. Most wealth managers charge an annual fee (as a % of the amount invested) for their services. This fee can range anywhere from close to zero, to 0.75% depending upon how sophisticated the strategy is that the money will be invested in, and what kind of additional services they have to offer. Investing in the S&P500 on the behalf of the investor shouldn’t need a fee, but investing in a smart beta or an alpha strategy, that generates returns independent of the market’s movement and certainly commands a fee. But how does one figure if that fee is justified? It is really simple. What is the risk-adjusted performance of the strategy? What is the Sharpe ratio? Large successful funds like Renaissance Technologies and Citadel can charge 3% in addition to 30% of profits because even after that their returns are much better than the market. I have this rule of thumb for money-management fees that I am willing to pay: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What exactly happens during a settlement period? ### Answer: Securities clearing and settlement is a complex topic - you can start by browsing relevant Wikipedia articles, and (given sufficient quantities of masochism and strong coffee) progress to entire technical books. You're correct - modern trade settlement systems are electronic and heavily streamlined. However, you're never going to see people hand over assets until they're sure that payment has cleared - given current payment systems, that means the fastest settlement time is going to be the next business day (so-called T+1 settlement), which is what's seen for heavily standardized instruments like standard options and government debt securities. Stocks present bigger obstacles. First, the seller has to locate the asset being sold & make sure they have clear title to it... which is tougher than it might seem, given the layers of abstraction/virtualization involved in the chain of ownership & custody, complicated in particular by "rehypothecation" involved in stock borrowing/lending for short sales... especially since stock borrow/lending record-keeping tends to be somewhat slipshod (cf. periodic uproar about "naked shorting" and "failure to deliver"). Second, the seller has to determine what exactly it is that they have sold... which, again, can be tougher than it might seem. You see, stocks are subject to all kinds of corporate actions (e.g. cash distributions, spin-offs, splits, liquidations, delistings...) A particular topic of keen interest is who exactly is entitled to large cash distributions - the buyer or the seller? Depending on the cutoff date (the "ex-dividend date"), the seller may need to deliver to the buyer just the shares of stock, or the shares plus a big chunk of cash - a significant difference in settlement. Determining the precise ex-dividend date (and so what exactly are the assets to be settled) can sometimes be very difficult... it's usually T-2, except in the case of large distributions, which are usually T+1, unless the regulatory authority has neglected to declare an ex-dividend date, in which case it defaults to standard DTC payment policy (i.e. T-2)... I've been involved in a few situations where the brokers involved were clueless, and full settlement of "due bills" for cash distributions to the buyer took several months of hard arguing. So yeah, the brokers want a little time to get their records in order and settle the trade correctly. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What exactly happens during a settlement period? ### Answer: During the settlement period, the buyer transfers payment to the seller and the seller transfers ownership to the buyer. This is really a holdover from the days when so much of stock trading was done by individual human traders, and computers were still not a huge part of the operation. Back then, paper tickets for trades exchanged hands, and the time period was actually 5 days, so 3 days is an improvement. A settlement period was necessary for everyone to figure out their trades and do what was necessary to make the settlements happen, so it was not always a quick process, mainly because of smaller trading firms that didn't have technology to help them along. Nowadays, technology makes settlements easy, and they usually occur at the end of the trading day. The trading firms sum up their trades, figure out who they owe, and send lump sum settlements to the counterparties to their trades. If anything, the 3-day period may just be used now to let parties verify trades before settling. I hope this helps. Good luck! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: When you buy a property the house or the building goes down in value every year (it gets depreciated) similar to when you drive a new car out of the lot. However, it is the land that increases in value over time. As land becomes scarcer the value of land in that area will increase in value, as does land in sought after areas. If more people want to live in a particular suburb the land value will keep on increasing year after year. Sometimes established areas with houses built in the 1980s or even earlier can be worth much more than newly built areas. It comes down to the supply and demand of land and houses in a particular area. You might even get a situation where a run-down dilapidated house in a very sought after suburb sells for more than a brand new house in a less sought-after suburb nearby. Properties can be a very good investment and they can be a very poor investment. It can largely depend on the decisions you make in buying your investment property. The first thing you need to make a decision on is the location of the property. If you buy a property in a good area that is well sought after you can make good capital and rental returns over the long run. If you buy poorly in an area no one wants to live in then you might have problems renting it out or only be able to rent it out to bad tenants who cause damage, and you may not get any capital gains over many years. The second thing you need to decide on is when in the property cycle you buy the property. If you buy at the right time you can get higher rents and make some quick capital gains over a relatively short time. I can provide a personal example of this situation. I had bought a house (in Australia) in 2007 for $240,000 at a time when interests where at their highest (9%), no one was buying property and rents were on the increase (with low vacancy rates). Today, eight years after, we are getting $410 per week rent and the house next door (in worse condition than ours) has been put on the market asking for between $500,000 to $550,000 (most houses in the area had been selling during this year for over $500,000). So you can say that our house has more than doubled in 8 years. However, up to a few months ago houses were selling within 2 weeks of being listed. The house next door however, has been listed for over a month and has not had very much interest. So from this you can conclude that in 2007 we had bought near the bottom of the market, whilst now we are near the top of the market. What you also need to remember is that different areas of a country can have different cycles, so there is not just one property cycle but many property cycles in the same country. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: As some others have pointed out, it's key to remember the difference in market value and accounting value. To simplify things, book value is the only item that specifically depreciates... it happens in the world of accounting to try to time "when did I use a long term asset?" with "when did I obtain value from that asset?" For a house, governments usually allow owners to claim depreciation of the building over a set period of time. This does not affect your resale value of the house. Similarly, for a commercial property, governments set laws for how an individual or a company can time the "use" of that asset vs. their accounting. Some companies can have totally depreciated ("zero cost") assets that are still very productive. Market Property values are derived from 3 specific sources: Value in Trade is an estimate of the value that others would be willing to pay for a similar asset. That's why you can buy a house today, and in a "normal" market, the same house should be worth a similar amount of money in the future. Value in Use can be more interesting... this is where a farmer can extract $100,000 in value per year from 10 acres of land. But as a region develops, a manufacturing company can generate $300,000 per year from the same 10 acres of land. The company can buy out the farmer at a 'fair' price (>$100,000 per year) and still net positive from the investment. Income Approach tends to be focused on properties that have a cash flow, but can be adapted to other property estimates. It evaluates the current "business case" for any property with the cost of money down, the overall investment price, and the expected value from any returns. Remember, the market value is very simply, the price you could obtain if you sold the asset at a given time. It is rarely considered in terms of "how much will this go down?". Book value is an accounting exercise and declines by a set amount every year, because it means you can estimate the "cost" of owning an asset vs the value it generates in a particular time period. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: One reason for this is that many people don't simply allow their houses to rot and decay. If you're talking about a house built in 1980 and left vacant and unmaintained for 35 years, it probably will be in pretty poor shape. But a homeowner generally wants to preserve their house and maintain it in good condition, so they invest in things like new roofs, siding, gutters, windows, paint, exterminators, new furnaces, hot water heaters, air conditioners, etc... All this stuff costs money (and for tax purposes, can often be factored into the cost basis of the house when it is sold), but it maintains the value of the property. A small hole in the roof may be fairly cheap to fix, but if left unrepaired, it could eventually cause much of the building to rot, making the structure near worthless. If a car slams into your living room, you don't generally leave it there; most people repair the damage. It's not uncommon in some areas to have 100 year old houses (or 300+ year old houses in some countries) that were built well in the first place and have been well maintained in the interim. People also renovate their homes, ripping out outdated construction and appliances and sometimes building new additions, decks, porches, etc... This also serves to make the property more attractive and increases its value. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: It's all about the land value. The structure is only ever worth as much as it would cost to build a new one (minus demolition costs) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: Some of the other answers mention this, but I want to highlight it with a personal anecdote. I have a property in a mid-sized college town in the US. Its current worth about what we paid for it 9 years ago. But I don't care at all because I will likely never sell it. That house is worth about $110,000 but rents for $1500 per month. It is a good investment. If you take rental income and the increase in equity from paying down the mortgage (subtracting maintenance) the return on the down payment is very good. I haven't mentioned the paper losses involved in depreciation as that's fairly US specific: the laws are different in other jurisdictions but for at least the first two years we showed losses while making money. So there are tax advantages as well (at least currently, those laws also change over time). There is a large difference between investing in a property for appreciation and investing for income. Even in those categories there are niches that can vary widely: commercial vs residential, trendy, vacation/tourist areas, etc. Each has their place, but ensure that you don't confuse a truism meant for one type of real estate investing as being applicable to real estate investing in general. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: I just read this: Housing and inflation Adjusted for inflation the price of a house has increased a miniscule amount. A better investment would be an ETF that buys REIT stocks. You would be investing in real estate but can cash in and walk away at any time. Here is a list of mREITs: Stockchart of REITs ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: There are many different reasons to buy property and it's important to make a distinction between commercial and residential property. Historically owning property has been part of the American dream, for multiple reasons. But to answer your questions, value is not based on the age of the building (however it can be in a historic district). In addition the price of something and it's value may or may not be directly related for each individual buyer/owner (because that becomes subjective). Some buildings can lose there value as time passes, but the depends on multiple factors (area, condition of the building, overall economy, etc.) so it's not that easy to give a specific answer to a general question. Before you buy property amongst many things it's important to determine why you want to buy this property (what will be it's principal use for you). That will help you determine if you should buy an old or new property, but that pales in comparison to if the property will maintain and gain in value. Also if your looking for an investment look into REIT (Real Estate Investment Trust). These can be great. Why? Because you don't actually have to carry the mortgage. Which makes that ideal for people who want to own property but not have to deal with the everyday ins-and-outs of the responsibility of ownership....like rising cost. It's important to note that the cost of purchase and cost of ownership are two different things but invariably linked when buying anything in the material strata of our world. You can find publicly traded REITs on the major stock exchanges. Hope that helps. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: Properties do in fact devaluate every year for several reasons. One of the reasons is that an old property is not the state of the art and cannot therefore compete with the newest properties, e.g. energy efficiency may be outdated. Second reason is that the property becomes older and thus it is more likely that it requires expensive repairs. I have read somewhere that the real value depreciation of properties if left practically unmaintained (i.e. only the repairs that have to absolutely be performed are made) is about 2% per year, but do not remember the source right now. However, Properties (or more accurately, the tenants) do pay you rent, and it is possible in some cases that rent more than pays for the possible depreciation in value. For example, you could ask whether car leasing is a poor business because cars depreciate in value. Obviously it is not, as the leasing payments more than make for the value depreciation. However, I would not recommend properties as an investment if you have only small sums of money. The reasons are manyfold: So, as a summary: for large investors property investments may be a good idea because large investors have the ability to diversify. However, large investors often use debt leverage so it is a very good question why they don't simply invest in stocks with no debt leverage. For small investors, property investments do not often make sense. If you nevertheless do property investments, remember the diversification, also in time. So, purchase different kinds of properties and purchase them in different times. Putting a million USD to properties at one point of time is very risky, because property prices can rise or fall as time goes on. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: nan ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is property investment good if properties de-valuate over time? ### Answer: Real estate is not a good investment. In fact, it's easy to make a case for it being the worst possible investment imaginable: Imagine over a cup or coffee or a glass of wine we get to talking about investments. Then maybe one of us, let’s say you, says: “Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?” Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible: -- Why Your House Is A Terrible Investment There are plenty of good reasons to own a home, but the key word there is "home". Owning housing as an investment property is a horrible idea, and anyone who does it, especially right now with as bubbly as the market is looking again, (or, better put, still, since the last bubble never did fully pop and clear out the underlying systemic instability,) is an idiot. And even after the current housing market bubble pops, it's likely to remain a bad idea for decades. We're never getting the early 2000s back, for basic supply-and-demand reasons: with the Baby Boom generation retiring, aging and dying off, they're not likely to do much more home-buying, and no generation after them is as big as they are, which means a glut of oversupply and weak demand for the entirety of the foreseeable future. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What should I be doing to protect myself from identity theft? ### Answer: Here are a handful of measures I take myself: I check my credit reports once in a while and look for anything out of the ordinary. If somebody calls me on the telephone claiming to be from my bank or credit card company, utility, etc. I ask for their number, check it, and call them back. I don't give personal information to people merely claiming to be from a place I do business with. I never fill out ballots for free contests. Most of the time these are scams. When I get a call telling me "you won a free cruise" for a ballot I supposedly filled out at the mall, I say they're lying through their teeth. For excitement, I'll sometimes buy a lotto ticket instead. I'm careful when I surf the web. I don't give my personal information to web sites I can't trust. If they look the least bit shady, I'm out. Also, I use different passwords at different web sites. I avoid using a password from a public terminal, but when I must, I change my password soon after. I'm careful when I download software. I don't install anything I didn't get from a trusted source. I pay for software when necessary, so finding a trusted source is not hard. But, I've heard of people who – to save a buck – would download a pirated application from a shady warez site only to be "gifted" a trojan horse key logging or other spyware along with it. When I no longer need a bill, receipt, statement, etc. or any document containing personal information, I shred it, and I use a shredder that does a micro-cut, not just a strip- or cross-cut. The micro-cut remains go in the green bin with wet and yucky organic waste. When I no longer need a hard drive, I use a secure wiping tool like Darik's Boot & Nuke before reusing. If the drive isn't worth reusing, I'll wipe first then take apart with my Torx screwdriver. Once I have the drive platter, I scratch the heck out of it. Remains go to the community recycling depot. That's all I can think of right now; I probably missed a few :-) So, what do others do? I'm curious, too. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What should I be doing to protect myself from identity theft? ### Answer: http://annualcreditreport.com gives you free access to your 3 credit bureau records. (Annual, not "free". The "free" guys will try to sell you something.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What should I be doing to protect myself from identity theft? ### Answer: Every 90 days add an Initial Fraud Alert to each of the 3 major credit bureaus. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What should I be doing to protect myself from identity theft? ### Answer: I've received letters notifying me of data breaches in the past. In the end, I've never signed up for the offered protection service, figuring if "they" can hack Target or ADP or the IRS, they can hack anybody, like... Equifax. And now Equifax has been hacked. My family's Social Security Numbers were stolen from a hospital database. I think that information, plus public information was used to gain further data from the IRS FAFSA tool. (we got a letter from the IRS). Ultimately, fraudsters used whatever data they had to file a tax return with the IRS and with the Cali FTB (we don't and never have lived in California). We got letters from both, and managed to stop the fraud before it really impacted us...other than having to file a paper tax form this past tax season. Anyway... in a world where Equifax gets hacked: the only solution is: I don't bother with the crazy password schemes you talk about... I have a few different passwords I use, but most my investment accounts use the same username and password. It's all about risk. Bruce Schneier says the same thing. The amount to spend on security should depend on what you're trying to protect. I don't care much if somebody gets into my google account, because I have a google account just because I have to. I barely use it at all. Similarly my yahoo account. My yahoo account uses my "insecure password", and my investment accounts use my "secure password". Credit Card info? Meh. Unless they get into the credit card company database, which undoubtedly has my Social Security Number, it's not that big of a deal. Yeah, they can make fraudulent charges, but there are legal protections, so in theory I can't be out any money. So think this way: what's the risk, and what's the appropriate level of effort to take to mitigate that risk. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What should I be doing to protect myself from identity theft? ### Answer: I believe the answer is that to protect yourself it is good to get credit protection so you will be notified when new credit is taken in your name. Also, you can use http://www.annualcreditreport.com/ to look at your credit report. HINT: While you do that, and while you are in the TransUnion report, you will have the option to DISPUTE adverse items. I always suggest that people dispute everything adverse. That puts the onus on the other parties to produce evidence to TransUnion within 30 days attesting to the validity of the adverse item. You would be surprised how many will simply drop off your report after doing that. Everybody should do this Here is a direct address for TransUnion: https://dispute.transunion.com/dp/dispute/landingPage.jsp ==> Once the disputes are finalized, the results get communicated to the other two bureaus. It is amazing how well it works. It can raise your credit score significantly. It really helps to watch your credit report yourself, and also to get whatever protection is offered that may help protect you against others opening new accounts in your name. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I purchase a whole life insurance policy? (I am close to retirement) ### Answer: First of all, congratulations on being in an incredible financial position. you have done well. So let's look at the investment side first. If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax. If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return. The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%. At that growth rate, the opportunity cost is $350k. Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance. Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy. So the same amount of term life insurance costs only $110,000. Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you "invest" in a 1.7% insurance policy when you are paying a "low" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance. Then you can do whatever you want. Retire early, invest and give like crazy, travel the world, whatever. I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I purchase a whole life insurance policy? (I am close to retirement) ### Answer: I'll start by saying that if this is being explored to scratch a specific itch you have then great, if this was a cold call it's probably safe to ignore it. Certain whole life products (they vary in quality by carrier) can make sense for very high earners who are looking for additional tax preferred places to store money. So after you IRA, 401(k), etc options are maxed out but you still have income you'd like to hide from taxes whole life can be a potential vehicle because gains and death benefit are generally exempt from income taxes. Be on the look out for loads charged to your money as it comes in to the policy. Life insurance in general is meant to keep your dependents going without having to sell off assets in the event of your death. People may plan for things like school tuition, mortgage/property tax for your spouse. If you own a business with a couple of partners it's somewhat common for the partners to buy policies on each other to buyout a spouse to avoid potential operating conflicts. Sometimes there can be estate planning issues, if you're looking to transfer assets when you ultimately pass it can make sense to form a trust and load cash in to a whole life policy because death benefits can be shielded from income tax and the estate tax calculation; the current estate tax exemption is about $5.5 million today (judging from your numbers you might actually be close to that including the net value of the homes). Obviously, though, the tax rules are subject to change and you need to be deliberate in your formation of the trust in order to effectively navigate estate tax issues. You seem to have a very solid financial position from this perspective it looks like your spouse would be in good shape. If you are specifically attempting to manage potential estate tax liability you should probably involve an financial planner with experience forming and managing trusts; and you should be very involved with the process because it will absolutely make your finances more complicated. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I purchase a whole life insurance policy? (I am close to retirement) ### Answer: There's nothing new about Whole Life Insurance. The agent stands to earn a pretty hefty commission if he can sell it to you. I don't think your assets warrant using it for avoiding the taxes that would be due on a larger estate. I don't see a compelling reason to buy it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should I purchase a whole life insurance policy? (I am close to retirement) ### Answer: Disclaimer: I work in life insurance, but I am not an agent. First things first, there is not enough information here to give you an answer. When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself. Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite. People love to discuss projections of the market, like for example, "7-8% a year compounded annually". Go look at the historical returns of the stock market. It is never close to that projection. Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration). As long as you pay your premiums, this money is guaranteed to accrue. Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time. These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest). B. Tax treatment. I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries. Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy. Tying all of this together, what exactly is the point of this? To transfer wealth, to accrue wealth, or some combination thereof? This is important and unstated in your question. So again, without knowing more, there is no way to answer your question. But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam. And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component. This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy. But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: In the United States, the Fair Credit Reporting Act allows companies to buy your credit information for "legitimate business needs." The legitimate use of credit scores and credit reporting varies state to state, but like it or not, you can expect a lot more non-lending use of your credit information in the future. Companies and individuals use credit reports as an assessment of general behavior because, unfortunately, they work. You've seen the disclaimers about "past performance…", but unfortunately in this case… past performance really has been shown to be a pretty reliable indicator of future behavior. So… ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: what are the incentives to that person to actually pay off his/her debt as opposed to just walking away from it and relying on the cash (s)he has for the future spending needs as opposed to borrowing Well, you can't just "walk away" from debt - you still owe it. Eventually your creditors would end up suing you in court for the money, plus interest owed. I suppose you could try to continually duck the authorities, but you'd still owe the money legally. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: If you're wealthy why do you think they wouldn't sue you for the money you owed?? And, as sunk818 says, credit scores can influence insurance costs. While you could self-insure your home you generally can't self-insure when it comes to liability coverage on a car. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: Only reason I can think of is that having a credit card, or several, is handy for buying stuff on-line, or not having to haul around a fat wallet full of cash. Of course for some of us, getting the cash back and 0% interest periods are nice, too, even if we don't really need the money. Same as for instance trying to get good mpg when you're driving, even if you could easily afford to fill up a Hummer. It's a game, really. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: According to Money Girl, home insurance premiums are higher if you have a poor credit score. You might self-insure though if you are wealthy. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: There's many concrete answers, but there's something circular about your question. The only thing I can think of is that phone service providers ask for credit report when you want to start a new account but I am sure that could be worked around if you just put down a cash deposit in some cases. So now the situation is flipped - you are relying on your phone company's credit! Who is to say they don't just walk away from their end of the deal now that you have paid in full? The amount of credit in this situation is conserved. You just have to eat the risk and rely on their credit, because you have no credit. It doesn't matter how much money you have - $10 or $10000 can be extorted out of you equally well if you must always pay for future goods up front. You also can't use that money month-by-month now, even in low-risk investments. Although, they will do exactly that and keep the interest. And I challenge your assumption that you will never default. You are not a seraphic being. You live on planet earth. Ever had to pay $125,000 for a chemo treatment because you got a rare form of cancer? Well, you won't be able to default on your phone plan and pay for your drug (or food, if you bankrupt yourself on the drug) because your money is already gone. I know you asked a simpler question but I can't write a good answer without pointing out that "no default" is a bad model, it's like doing math without a zero element. By the way, this is realistic. It applies to renting in, say, New York City. It's better to be a tenant with credit who can withhold rent in issue of neglected maintenance or gross unfair treatment, than a tenant who has already paid full rent and has left the landlord with little market incentive to do their part. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of credit score if you never plan to borrow again? ### Answer: You're definitely not the first to pose this question. During the peak of the housing crisis I noticed a decent amount of very high dollar properties get abandoned to their fates. Individuals who can afford the mortgage on a 5 million dollar home don't necessarily need their credit to survive so it made more sense to let the asset (now a liability) go and take the hit on their credit for a few years. Unsecured debt, as mentioned is a little trickier because its backed by default by your personal estate. If the creditor is active they will sue you and likely win unless there are issues with their paperwork. Thing is though, you might escape some impacts of the debt to your credit rating and you might not "need" credit, but if you were to act as a wealthy person and not "new money" you would observe the significant value of using credit. credit allows you to leverage your wealth and expand the capacity of your money to import your overall wealth picture. It may prove best to learn that and then make more wealth on your winnings than take the short sighted approach and welch on the debt. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: Unless you need extremely large sums of money, I suggest you use an ATM or look for a credit card that has no foreign transaction fees (rare). AFAIK, it's not possible for a retail buyer to purchase currency at the current exchange rate quoted online. You are always going to be paying some spread above that, and the ATM gets you the closest. You could also try to use a bank that has branches in your country and Japan (like HSBC) and do your banking there. Then you likely wouldn't have to pay as much in fees (and possibly could draw on your account in Japan). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: You don't. When you get to Japan, use your ATM card to withdraw local currency. My bank (ETrade) doesn't charge me int'l fees. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: Have you tried calling a Forex broker and asking them if you can take delivery on currency? Their spreads are likely to be much lower than banks/ATMs. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: Check whether you're being charged a "Cash advance" fee with your withdrawals, because it's being withdrawn from your credit card account. If that's happening to you, then having a positive balance on your credit card account will dramatically reduce the fees. Quoting from my answer to a similar question on Travel Stack Exchange: It turns out that even though "Cash advance fee - ATM" has "ATM" in it, it doesn't mean that it's being charged by the ATM you're withdrawing from. It's still being charged by the bank of your home country. And depending on your bank, that fee can be minimized by having a positive balance in your credit card account. This isn't just for cards specially marketed at globehoppers and globeshoppers (mentioned in an answer to a similar question), but even for ordinary credit cards: Help minimise and avoid fees An administrative charge of 2% of the value of the transaction will apply to each cash advance made on your card account, where your account has a negative (debit) balance after the transaction has been posted to it. A minimum charge of $2.50 and a maximum charge of $150 will apply in these circumstances. Where your account has a positive (credit) balance after the transaction has been posted to it, a charge of $2.50 will apply to the transaction. Any such charge will appear on your credit card statement directly below the relevant cash advance. A $2.50 charge if your account is positive, versus $20 if the account is negative? That's a bit of a difference! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: When I went on vacation to London a few years ago, I looked around at banks with ATM deals with UK banks. I found that B of A had a deal with a UK bank that you could use their ATMs to take out money from your US account for practically no fees. So the week or so before I left, I opened an account at B of A, put a bunch of money in it, and used the B of A debit card during my trip as much as possible. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Best way to buy Japanese yen for travel? ### Answer: I already commented the best existing answers, however let me note a couple of other things. Some of my friends in the past have wanted to do one of the following: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: For SSI, is “authorized user” status on a bank account the same as “ownership”? ### Answer: Having dealt with with Social Security, state agencies, and banks more than I'd care to, I would urge you to do the following: 1) Get a 100% clear answer on whether or not you are listed as "joint" or "authorized user/signer" for an account. This will probably require a call to the bank, but for less than an hour of you and your friend's time you will save yourself a whole lot of hassle. The difference is like this: if you worked at a business that added you as an authorized user for a credit or debit card, this would allow you to use the card to buy things. But that doesn't make the money in the bank yours! On the other hand if you are listed as "joint", this regards ownership, and it could become tricky to establish whether its your money or not to any governmental satisfaction. 2) You are completely correct in being honest with the agency, but that's not enough - if you don't know what the facts are, you can't really be honest with them. If the form is unclear it's ok to ask, "on having a bank account, does being listed as an authorized user on someone else's account count if it isn't my money or bank account?" But if you are listed as holding the account jointly, that changes the question to: "I am listed as joint on someone else's checking account, but it isn't my money - how is that considered?" To Social Security it might mean generating an extra form, or it might mean you need to have the status on the account changed, or they might not care. But if you don't get the facts first, they won't give you the right answers or help you need. And from personal experience, it's a heck of a lot easier to get a straight and clear answer from a bank than it is from a federal government agency. Have the facts with you when you contact them and you'll be ok - but trust me, you don't want them guessing! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: The insurance company issued the check. I'd contact the insurance company to have the current check voided and a new one issued to the pharmacy. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: Checks are awesome things in that, even if it gets lost the money doesn't change hands until the check is cashed. I would highly recommend NOT signing a check over and putting it in the mail though. Essentially putting your signature on it is saying yes, pay to whomever. Theoretically acceptable, rarely a good idea. Call the insurance company and have them cancel current check to reissue to the correct people. Don't forget to write VOID (in huge letters) on the check before throwing away and/or tearing it up. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: Option 4: Go talk with someone in person at an office of the Insurance company. They have helped me several times with things like this. They can get everyone involved on a conference call and make something happen. But you have to go in. Calling is a good way to waste time and get nowhere, they will throw the issue back and forth. Find an office and go. This is the most effective solution. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: So: What you do: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: Deposit check and send a personal check (resulting in tax and IRS reporting issues) That's a bad idea, unless maybe the check you're receiving is a certified bank draft. Suppose the insurance company are crooks and the check is fraudulent. It could take weeks or months for some investigation to catch up to that, long after your own personal check was cashed by the pharmacy. The bank will then put you on hook for the 20 grand by reversing the check, even though the funds had been deposited into your account. Do not put yourself into the position of a money handler; you don't have the cash base, insurance, government protection and whatever else that a bank has. And, of course, you're being a free money handler if you do that. (You're not even compensated for postage, time and whatnot). If you're handling money between two parties, you should collect a percentage, or else refuse. That percentage has to be in proportion to the risk, since cashing a check for someone carries a risk similar to (and is effectively a form of) making a loan. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: In one of your comments you say: Even if the pharmacy is not in the insurance provider network? This is why you got the check instead of your insurance company. I have Blue Cross/Blue Shield, and recently my wife underwent a procedure in the hospital, where one of the physicians involved was not in my providers network. I got a letter from the physicians office stating that since they are out of network, the standard practice was for BCBS to issue the check to me, rather than to the provider. I received the check and made the payment. The main contention is the difference in price, and that is what you need to discuss with both the pharmacy (actual billing) and your insurance company (paid benefits). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: You mentioned depositing the check and then sending a personal check. Be sure to account for time, since any deposit over $10,000 the money will be made available in increments, so it may take 10-14 days to get the full amount in your account before you could send a personal check. I would not recommend this option regardless, but if you do, just a heads up. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: nan ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Insurance company sent me huge check instead of pharmacy. Now what? ### Answer: This is not a mistake. This is done for "Out of Network" providers, and mainly when the patient is an Anthem member, be it Blue Shield or Blue Cross. Even though an "Assignment of Benefits" is completed by the patient, and all fields on the claim from (CMS1500 or UB04) are completed assigning the benefits to the provider, Anthem has placed in their policy that the Assignment of Benefits the patient signs is null and void. No other carrier that I have come across conducts business in this manner. Is it smart? Absolutely not! They have now consumed their member's time in trying to figure out which provider the check is actually for, the member now is responsible for forwarding the payment, or the patient spends the check thinking Anthem made a mistake on their monthly premium at some point (odds are slim) and is now in debt thousands of dollars because they don't check with Anthem. It creates a huge mess for providers, not only have we chased Anthem for payment, but now we have to chase the patient and 50% of the time, never see the payment in our office. It creates more phone calls to Anthem, but what do they care, they are paying pennies on the dollar for their representatives in the Philippines to read from a script. Anthem is the second largest insurance carrier in the US. Their profit was over 800 million dollars within 3 months. The way they see it, we issued payment, so stop calling us. It's amazing how they can accept a CMS1500, but not follow the guidelines associated with it. Your best bet, and what we suggest to patients, either deposit the check and write your a personal check or endorse and forward. I personally would deposit the check and write a personal check for tracking purposes; however, keep in mind that in the future, you may depend on your bank statements for proof of income (e.g. Social Security) and imagine the work having to explain, and prove, a $20,000 deposit and withdraw within the same month. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much of my home loan is coming from a bank, how much it goes back? ### Answer: Judging from your comments, you seem to be confused about the way banking works. Banks can only lend out money that they actually have: whether from deposits or investors or loans taken from other banks/government entities. The rules on how this works varies from country to country, but the principle is always the same. There is no magic money. Let's imagine a closed system. There's only one town, and that town only has one bank. There are 100 people total in town, and each has $10,000. Everyone deposits all of their money in the bank. The bank now has $1,000,000 in total deposits. You take a loan for $100,000 and buy a house. The bank now has $900,000. You make your payments of $965 per month: $833 of interest and $132 toward principal. In this ideal world, the bank has no costs associated with doing business. After one month, the bank has $1,000,000 in deposits, $900,965 in cash on hand, $99,868 in loans, and $833 in profit (from interest). Now here's the confusing part. You bought a house from someone. That person also lives in town. He takes the $100,000 you gave him and... deposits it in the bank. The bank now has $1,100,000 in deposits, $1,000,965 in cash, $99,868 in loans, and $833 in profit. Assume 10 more people buy houses at $100,000 each, taking loans for that whole amount (for the same terms you did). Assume those sellers then deposit the money back in the bank. The bank now has $2,100,000 in deposits, $1,000,965 in cash, $1,099,868 in loans, and $833 in profit. The bank is taking in $10,615 per month ($965 x 11) in loan payments, making profit of $9,163 ($833 x 11) per month from interest. This process of loans and deposits and payments can go on forever without any outside influence. This is the primary way money is created. It's like printing money without the paper. Of course, we're not in a closed system. Banks are limited in endlessly creating money, primarily by two things: Reserve Requirements are set by government agencies. They might say banks can lend until their cash on hand (or liquid equivalent) is, at minimum, 35% of total deposits. So a bank with $1,000,000 in deposits would have to keep $350,000 in cash at any given time. Capital Requirements work largely the same way. It's more the bank saying, "What happens if a bunch of people want their deposits back?" They plan a reasonable amount of cash to have on hand for that scenario. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much of my home loan is coming from a bank, how much it goes back? ### Answer: When you get a loan (car, home, student) the lending company (bank) give the (auto dealer, previous home owner, school) money. You as the borrow promise to pay this money back with interest. So in your case the 100,000 you borrow requires a payment for principal and interest of ~965 per month. After 240 payments you will have paid the bank ~231,605. So who got the ~131,000 in interest. The bank did. It was used to pay interest to the people who made deposits into the bank. It was also used to pay the expenses of the bank: salaries, retirement, rent, electricity, computers, etc. If the bank is a company with investors they may have to pay dividends to them to. Of course not all loans are successfully paid back, so some of the payment goes to cover the loans that are in default. In many cases loans are also refinanced, or the house is sold long before the 20-30 year term is up. In these cases the amount of interest received for that loan is much less than anticipated, but the good news is that it can be loaned out again. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much of my home loan is coming from a bank, how much it goes back? ### Answer: Ditto mhoran_psprep. I'm not quite sure what you're asking. Where does the money come from? When someone starts a bank, they normally get together a bunch of investors -- perhaps people they know personally, perhaps they sell stock -- to raise initial capital. But most of the money in the bank comes from depositors. Fundamentally, what a bank does is take money from depositors and loan it to borrowers. (Banks also borrow money from other banks and from the government.) They charge the borrowers interest on the loan, and they pay depositors interest on their deposits. The difference between those two interest rates is where the bank gets their profit. Where does the money go when you pay it back? As mhoran_psprep said, some of it goes to pay interest to the depositors; some of it goes to pay the bank's expenses like employee salaries, cost of the building, etc; and some of it goes as profit to the owners or stockholders of the bank. If you're thinking, "Wow, I'm paying back a whole lot more than I borrowed", well, yes. But remember you're borrowing that money for 20 or 30 years. The bank isn't making very much money on the loan each year that you have it -- these days something like 4 or 5% in the U.S., I don't know what the going rates are in other countries. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the rough estimate of salary value for a taxpayer to pay AMT? ### Answer: Alternative Minimum Tax is based not just on your income, but moreso on the deductions you use. In short, if you have above the minimum AMT threshold of income (54k per your link), and pay a tiny amount of tax, you will pay AMT. AMT is used as an overall protection for the government to say "okay, you can use these deductions from your taxable income, but if you're making a lot of money, you should pay something, no matter what your deductions are". This extra AMT can be used to reduce your tax payment in a future year, if you pay regular tax again. For example - if you have 60k in income, but have 60k in specific deductions from your income, you will pay zero regular tax [because your taxable income will be zero]. AMT would require you to pay some tax on your income above the minimum 54k threshold, which might work out to a few thousand bucks. Next year, if you have 60k in income, but only 15k in deductions, then you would pay some regular tax, and would be able to offset that regular tax by claiming a credit from your AMT already paid. AMT is really a pre-payment of tax paid in years when you have a lot of deductions. Unless you have a lot of deductions every single year, in which case you might not be able to get all of your AMT refunded in the end. Wikipedia has a pretty good summary of AMT in the US, here: https://en.wikipedia.org/wiki/Alternative_minimum_tax. If you think AMT is unfair (and maybe in some cases you might pay it when you think it's "unfair"), look at the root causes of paying AMT listed in that Wikipedia article: I am not trying to convince you that AMT is fair, just that it applies only when someone already has a very low tax rate due to deductions. If you have straight salary income, it would only apply in rare scenarios. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the rough estimate of salary value for a taxpayer to pay AMT? ### Answer: Turbox Tax states the following: "For 2015, the AMT exemption amounts are $53,600 for individual taxpayers, $83,400 for married taxpayers filing jointly and surviving spouses, and $41,700 for married persons filing separately. This is the amount you're allowed to deduct from your taxable income before applying the AMT." ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are there any statistics that support the need for Title Insurance? ### Answer: There seems to be no such information available. What is available is that number of claims are high and the Title Insurance companies have gone bankrupt as per the wikipedia article In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion taken in as premiums. By comparison, the boiler insurance industry, which like title insurance requires an emphasis on inspections and risk analysis, pays 25% of its premiums in claims. However, no reference to the relationship between when claims are made and when policies are issued is found. As of 2008, the top three remaining title insurers all lost money, while LandAmerica went bankrupt and sold its title business to Fidelity http://en.wikipedia.org/wiki/Title_insurance#Industry_profitability The amount of premium received and claim made can be got from some of the companies balance sheet. For Fidelity its at http://www.investor.fnf.com/releasedetail.cfm?CompID=FNT&ReleaseID=363350 The article in here mentions the claims ratio as 5%. Refer http://www.federaltitle.com/blog/title-insuance-qaa ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are there any statistics that support the need for Title Insurance? ### Answer: The point of title insurance is that when you buy a house, it is possible that you may eventually find out that the seller didn't actually own the property - either because they were trying to deceive you, or some transfer of ownership in the past wasn't carried out properly. If that happens you can find yourself with no house, and still owing the mortgager the purchase price. Hardly anybody can afford to take that kind of hit, which is why you need some form of protection against it. The traditional way of doing this was to get a lawyer to do a title search, in which they check that everything in order. However this costs tens of dollars at least to do the work for every sale, and hardly ever finds anything. Title Insurance is a company volunteering to take the hit for you if there turns out to be a problem, in return for a payment of less than the title search would cost. In essence they are saying that it's cheaper to take the risk than do the work. What are the statistics? This report seems to indicate that payout is around 5% of premium, but title insurance is a one-off premium and the payout can theoretically happen many years down the line. However it is almost certain that the insurance companies have done the math and believe that selling this insurance will be profitable for them, so they believe that payouts are going to be substantially less than 100%. Is title insurance worth it for you? If the payout is 5% of premiums, the in a purely statistical sense it is not worth it. You would on average gain more by not taking it. However that is true of almost all insurance. The policy is there to protect you in the unlikely but not impossible event where you would otherwise lose a huge amount of money. Unless you can afford to lose the value of your house, you need some form of protection. We've already seen that the only other form of protection is a title search, and they cost more. The other issue is that if you are taking a mortgage, your mortgager will absolutely insist that you have either a title search or title insurance. There is no other way - and title insurance is the cheaper of the two. In this case it is best to look on the title insurance as simply a cost of doing business. It's irrelevant whether it's worth it or not - you can't do the transaction without it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are there any statistics that support the need for Title Insurance? ### Answer: I'm really surprised at the answers here. Claims/year per region isn't a statistic that is meaningful here... you need to think about the risk factors and the purpose of the insurance. First, what does title insurance do? It protects you against defects in the deed -- defects that may crop up and mean that your mortgage is no longer valid. This is different from most forms of insurance -- the events that render your title invalid are events that may have happened years, decades or even centuries ago. A big part of the insurance policy and its cost is conducting research to assess the validity of a deed. The whole point of the insurance is to reduce claims by improving data associated with the "chain of custody" of the property. So how do you evaluate the risk of finding out about something that happened a long time ago, that nobody appears to know about? IMO, you have to think about risk factors that increase the probability that things were screwed up in the past: You need to have an informed discussion with your attorney and figure out if it makes sense for you. Don't dismiss it out of hand. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are there any statistics that support the need for Title Insurance? ### Answer: When I bought the house I had my lawyer educate me about everything on the forms that seemed at all unclear, since this was my first time thru the process. On of the pieces of advice that he gave was that title insurance had almost no value in this state unless you had reason to believe the title might be defective but wanted to buy the property anyway. In fact I did get it anyway, as an impulse purchase -- but I'm fully aware that it was a bad bet. Especially since I had the savings to be able to self-insure, which is always the better answer if you can afford to risk the worst case scenario. Also: Ask the seller whether they bought title insurance. Often, it is transferrable at least once. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: My biggest concern with this plan is that there's no going back should you decide that it is not going to work, either due to the strain on the relationship or for some other reason. If you were borrowing from a relative in place of a mortgage or a car loan, you can always refinance, and might just pay a little more interest or closing costs from a bank. Student loans are effectively unsecured, so your only option for a "refinance" would be to get a personal, unsecured loan (or borrow against existing collateral if you have it). You are going to have a tough time getting another 50k unsecured personal loan at anywhere near student-loan rates. The other negative aspects (overall risk of borrowing from family, loss of possible tax deduction) make this plan a no-go for me. (I'm NOT saying that it's always a good idea to borrow from family for homes or cars, only that there's at least an exit plan should you both decide it was a bad idea). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: Personally, I avoid making business deals with friends and relatives. There's just too much of a possibility that things can go wrong. Let's assume that you're honest people and you have no intention of cheating your mother-in-law. Still, all sorts of things could happen that could make it difficult for you to repay the loan. You could lose your job. You could get some big medical expense. Etc. Then what happens? Then your financial problems become family problems. There's a strong temptation when people borrow from relatives to make paying the loan the lowest priority in their budget. "I know I promised to pay \$X per month, but things are really tight right now and Mom should understand." Maybe she does understand and can manage without it. But maybe not. And then it becomes a family fight. "You promised you'd pay it back." "And we will, we're having a hard time right now. Can't you just give us a break?" Etc. Or she might have some extra expense, and say, "Hey, can't you pay a little more this month? I really need some extra cash." "I'm sorry, we're struggling just to make the regular payments, we can't." "Well I was willing to loan you all this money. The least you could do is pay me back when I need it." Etc. You can end up ruining family relationships over money. Your wife can find herself in the position of having to choose whether to side with her mother or her husband. Etc. I'm sure plenty of people do things like this and it works out just great. But there are big risks. And by the way, apparently this was your idea, not your mother-in-laws. I wonder what her reaction is. Is she eager to help out her daughter and son-in-law and had nothing in particular to do with the money anyway? Or is she feeling very imposed on? It's one thing to ask relatives to let you borrow their car for the weekend. Asking someone to loan you $50,000 is a very big request. If one of my kids asked me to loan them $50,000 from my retirement fund, I'd consider that a very presumptuous request. (Unless they needed the money for life-saving surgery for my grandchild or some such.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: I struggle to see the value to this risk from the standpoint of your mother-in-law. This is not a small amount of money for a single person to lend to a single person ignoring your personal relationship. Right now, using a blended rate of about 8% and a 5 year payment period, your cost on that $50,000 is somewhere in the neighborhood of $11,000 with a monthly payment around $1,014. Using the same monthly payment but paying your MIL at 5% you'll complete the loan about 3.5 months sooner and save about $5,000, she will make about $6,000 in interest over 5 years against a $50,000 outlay. Alternatively, you can just prioritize payments to the more expensive loans. It's difficult to work out a total cost comparison without your expected payoff timelines and amount(s) you're currently paying toward all the loans. I'm sure a couple hours with a couple of spreadsheets could yield a plan that would net you a savings substantially close to the $5,000 you'd save by risking your mother in law's money. A lot of people think personal lending risk is about the relationship between the people involved, but there's more to it than that. It's not about you and your wife separating, it's not about the awkward dinner and conversations if you lose your job. Something might physically happen to you, you could become disabled or die. Right now, that's an extremely diversified and calculated risk taken by a gigantic lender. Unless your mother in law is very wealthy, this is not nearly enough reward to assume this sort of risk (in my opinion). Her risk FAR outpaces your potential five year savings. IF you wanted to pursue this as a means of paying interest to a family member rather than the bank, I'd only borrow an amount I budgeted and intended to pay within this single year. Say $10,000 against the highest interest loan. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: I will start with the assumption that you will never have any late payments and will fully pay off the loan. This may be a big assumption, but if you can't assume that, then you wouldn't have asked the question in the first place. The answer depends on your income: You should calculate how much student loan interest you can deduct before and after the switch, and adjust the interest rate accordingly to compensate for any difference. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: I have recently been the lender to a couple people. It was substantially less money (~$3k), but I was trusting their good faith to pay me back. As a lender, I will never do it again. Reasons, Overall, not worth it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: Would it make sense to take a loan from a relative... Other people have pointed this out, but honestly, I'd be very reluctant to answer "yes" to this no matter how you completed that sentence. There's always an intangible risk to mixing money and relationships. There's a lot that can go wrong during the duration of the loan, and if it does, the consequences could be a lot greater than just a bad credit score. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Would it make sense to take a loan from a relative to pay off student loans? ### Answer: The interest that you are proposing to pay your MIL is actually quite low compared to even extremely conservative investing which easily earns 7% or more with quantifiable low risk. You claim that it would be no risk, but what would happen if you lost your job? The risk she faces is more or less exactly what a bank would experience while giving the loan, or in other words it is pretty much whatever your credit score says. Even worse, she does not have a large pool of investments to distribute this risk like a bank would. Making loans this large in a family situation is a recipe for disaster. Taking a huge risk with the relationship your wife has with her mother over three points of interest is exceptionally unwise. Are these private or federal student loans? Federal student loan debt is some of the safest to carry due to its income based repayment plans and eventual loan forgiveness after 25 years. Have you investigated income based repayment options? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: My medical bill went to a collection agency. Can I pay it directly to the hospital? ### Answer: Short Answer Collections agencies and the businesses they collect for are two different animals. If you don't want this to hurt your credit I suggest you deal directly with the hospital. Pay the bill, but prior to paying it get something in writing that specifically says that this will not be reported onto your credit. That is of course if the hospital even lets you pay them directly. Usually once something is sold to a collections company it's written off. Long Answer Credit reports are kind of a nightmare to deal with. The hospital just wants their money so they will sell debt off to collections companies. The collections companies want to make money on the debt they've bought so they will do what ever it takes to get it out of you, including dinging your credit report. The credit bureaus are the biggest nightmare to deal with of all. Once something is reported on your credit history they do little to nothing to remove it. You can report it online but this is a huge mistake because when you report online you wave your rights to sue the credit bureaus if they don't investigate the matter properly. This of course leads to massive amounts of claims being under investigated. So what are your options once something hits your credit history? I know this all sounds bleak but the reason I go into such depth is that they likely have already reported it to the credit bureaus and you just don't see it reported yet. Good luck to you. Get a bottle of aspirin. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to work around the Owner Occupancy Affidavit to buy another home in less than a year? ### Answer: Danger. The affidavit is a legal document. Understand the risk of getting caught. If you are planning on using the condo to generate income the chances that you default on the loan are higher than an owner occupied property. That is why they demand more down payment (20%+) and charge a higher rate. The document isn't about making sure you spend 183+ nights a year in the property, it is making sure that it isn't a business, and you aren't letting a 3rd party live in the property. If you within the first year tell the mortgage company to send the bill to a new address, or you change how the property is insured, they will suspect that it is now a rental property. What can they do? Undo the loan; ask for penalty fee; limit your ability to get a mortgage in the future; or a percentage of the profits How likely is it? The exact penalty will be in the packet of documents you receive. It will depend on which government agency is involved in the loan, and the lenders plan to sell it on the secondary market. It can also depend on the program involved in the sale of the property. HUD and sister agencies lock out investors during the initial selling period, They don't want somebody to represent themselves as homeowner, but is actually an investor. Note: some local governments are interested not just in non-investors but in properties being occupied. Therefore they may offer tax discounts to residents living in their homes. Then they will be looking at the number of nights that you occupy the house in a year. If they detect that you aren't really a resident living in the house, that has tax penalties. Suggestion: If you don't want to wait a year buy the condo and let the loan officer know what your plan is. You will have to meet the down payment and interest rate requirements for an investment property. Your question implies that you will have enough money to pay the required 20% down payment. Then when you are ready buy the bigger house and move in. If you try and buy the condo with a non-investment loan you will have to wait a year. If you try and pay cash now, and then get a home equity loan later you will have to admit it is a rental. And still have to meet the investor requirements. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to work around the Owner Occupancy Affidavit to buy another home in less than a year? ### Answer: Although it may be a little late for you, the real answer is this: When you close on a mortgage for a primary residence you are affirming (in an affidavit), two intents: Now, these are affirming intentions — not guarantees; so if a homeowner has a change of circumstance, and cannot meet these affirmed intentions, there is almost always no penalty. Frankly, the mortgage holder's primary concern is you make payments on time, and they likely won't bother with any inquiry. That being said, should a homeowner have a pattern of buying primary residences, and in less than 1 year converting that primary to a rental, and purchasing a new primary; there will likely be a grounds for prosecution for mortgage fraud. In your specific situation, you cannot legally sign the owner-occupancy affidavit with the intention of not staying for 1 year. A solution would be to purchase the condo as a second home, or investment; both of which you can still typically get 80% financing. A second home is tricky, I would ask your lender what their requirements are for 2nd home classification. Outside that, you could buy the condo as a primary, stay in it for a year, then convert. If you absolutely had to purchase the 2nd property before 1 year, you could buy it as a primary with a 2 month rent back once you reach 10 months. Should you need it earlier, just buy the 2nd house as an investment, then once you move in, refinance it as a primary. This last strategy requires some planning ahead and you should explain your intention to the loan officer ahead of time so they can properly price the non-owner occupied loan. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to work around the Owner Occupancy Affidavit to buy another home in less than a year? ### Answer: In your particular condition could buy the condo with cash, then get your mortgage on your next house with "less than 20%" down (i.e. with mortgage insurance) but it would still be an owner occupied loan. If you hate the mortgage insurance, you could save up and refi it when you have 20% available, including the initial down payment you made (i.e. 80% LTV ratio total). Or perhaps during the time you live in the condo, you can save up to reach the 20% down for the new house (?). Or perhaps you can just rent somewhere, then get into the house for 20% down, and while there save up and eventually buy a condo "in cash" later. Or perhaps buy the condo for 50% down non owner occupied mortgage... IANAL, but some things that may come in handy: you don't have to occupy your second residence (owner occupied mortgage) for 60 days after closing on it. So could purchase it at month 10 I suppose. In terms of locking down mortgage rates, you could do that up to 3 months before that even, so I've heard. It's not immediately clear if "rent backs" could extend the 60 day intent to occupy, or if so by how long (1 month might be ok, but 2? dunno) Also you could just buy one (or the other, or both) of your mortgages as a 20% down conventional "non owner occupied" mortgage and generate leeway there (ex: buy the home as non owner occupied, and rent it out until your year is up, though non owner occupied mortgage have worse interest rates so that's not as appealing). Or buy one as a "secondary residency" mortgage? Consult your loan officer there, they like to see like "geographic distance" between primary and secondary residences I've heard. If it's HUD (FHA) mortgage, the owner occupancy agreement you will sign is that you "will continue to occupy the property as my primary residence for at least one year after the date of occupancy, unless extenuating circumstances arise which are beyond my control" (ref), i.e. you plan on living in it for a year, so you're kind of stuck in your case. Maybe you'd want to occupy it as quickly as possible initially to make the year up more quickly :) Apparently you can also request the lender to agree to arbitrarily rescind the owner occupancy aspect of the mortgage, half way through, though I'd imagine you need some sort of excuse to convince them. Might not hurt to ask. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to work around the Owner Occupancy Affidavit to buy another home in less than a year? ### Answer: Look into the definition of "primary residence" for your jurisdiction(s). In some states, living in the home for 183 days qualifies it as your primary residence for the entire year. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I buy a new house before selling my current house? ### Answer: You can make a contingent offer: "I will buy this house if I sell my own." In a highly competitive environment, contingent offers tend to be ignored. (Another commentator described such a contingency clause as synonymous with "Please Reject Me".) You can get a bridge loan: you borrow money for a short term, at punishingly high interest. If your house doesn't sell, you're fscked. You pay for two mortgages (or even buy the other house for cash). If you can afford this, congratulations on, you know, being super-rich. Or you can do what I am doing: selling one house and then living at my mom's until I buy another one. (You will have to stay at your own mom's house; my mom's house will be full, of course.) Edit: A commentator with the disturbingly Kafkaesque name of "R." made the not-unreasonable suggestion that you buy both and rent out one or the other. Consider this possibility, but remember: On the other hand, if the stars align, you might not want to extricate yourself. If the tenant is paying the mortgage and a little more, you have an appreciating asset, and one you can borrow against. With a little work and a little judicious use of leverage, doing this over and over, you can accumulate a string of income-producing rental properties. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I buy a new house before selling my current house? ### Answer: The two most common scenarios are: Since you have more control of timing when you are the buyer compared to when you are the seller, #1 is probably more common, however, a good real estate attorney should be able to walk you through your options should #2 come up. Fortunately, many real estate attorneys do not charge you anything until the sale completes, and you will likely get a discount if you involve them in both the sale and purchase, so I would start by finding an attorney. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I buy a new house before selling my current house? ### Answer: A bridge loan (or bridging loan) is designed for exactly this circumstance. They're short-term loans (6 months is common) designed to help home-buyers to bridge the gap between buying and selling. MoneySupermarket defines them like this: Bridging loans are designed to help people complete the purchase of a property before selling their existing home by offering them short-term access to money at a high-rate of interest. As well as helping home-movers when there is a gap between the sale and completion dates in a chain, this type of loan can also help someone planning to sell-on quickly after renovating a home, or help someone buying at auction. Interest rates are very high, and there are likely to be fees, because you'll only need the loan for a short period. Here are some links to Canadian websites that explain more. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I buy a new house before selling my current house? ### Answer: If you can qualify for two mortgages, this is certainly possible. For this you can talk to a banker. However, most people do not qualify for two mortgages so they go a different route. They make offers on a new home with a contingency to sell the existing home. A good Realtor will walk you through this and any possible side effects. Keep in mind that the more contingencies in an offer the less attractive that offer is to sellers. This is how cash buyers can get a better deal (no contingencies and a very fast close). Given the hotness of your market a seller might reject your offer as opposed to first time home buyer that does not need to sell an old home. On the other hand, they may see your contingency as low risk as the market is so hot. This is why you probably need a really good agent. They can frame the contingency in a very positive light. ###end

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