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Should I Make a Budget, and Why?

Posted by admin on Feb 6, 2010 in Investing | 0 comments

You say you know where your money goes and you don’t need it all written down to keep up with it? I issue you this challenge. Keep track of every penny you spend for one month and I do mean every penny.

You will be shocked at what the itty-bitty expenses add up to. Take the total you spent on just one unnecessary item for the month, multiply it by 12 for months in a year and multiply the result by 5 to represent 5 years.

That is how much you could have saved AND drawn interest on in just five years. That, my friend, is the very reason all of us need a budget.

If we can get control of the small expenses that really don’t matter to the overall scheme of our lives, we can enjoy financial success.

The little things really do count. Cutting what you spend on lunch from five dollars a day to three dollars a day on every work day in a five day work week saves $10 a week… $40 a month… $480 a year… $2400 in five years….plus interest.

See what I mean… it really IS the little things and you still eat lunch everyday AND that was only one place to save money in your daily living without doing without one thing you really need. There are a lot of places to cut expenses if you look for them.

Set some specific long term and short term goals. There are no wrong answers here. If it’s important to you, then it’s important period.

If you want to be able to make a down payment on a house, start a college fund for your kids, buy a sports car, take a vacation to Aruba… anything… then that is your goal and your reason to get a handle on your financial situation now.

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Secured Personal Loans

Posted by admin on Feb 5, 2010 in Loan | 0 comments

Personal loans provide borrowers with the opportunity to access funds for those areas in their life that need some assistance or where additional funding would work to their benefit. A secured personal loan is a type of personal loan that involves the borrower having to provide some type of collateral to the lender as assurance that they will repay the loan. This is due to the borrower falling into a high risk category. There are pros and cons to accepting a secured personal loan that we will explore further.

High risk in regard to loan repayment can mean a variety of things. It can mean you have an unsteady income, including self employment where the amount of income you have coming in varies each month. While the lender can see you have an income source, it is not considered to be a reliable as getting a regular paycheck. The decision will depend on the regulations of the lender, length of time you have been self employed, and the loan amount you are requesting.

High risk in terms of a secured personal loan generally imply the borrower has either poor credit or has not established enough of a credit history for a decision to be made. Poor credit can be the result of poor money management or circumstances that took place in your life which you had no control over. Some individuals think it is very unfair to be penalized for not having an established credit history. I agree that it can be frustrating, because you can’t really be expected to establish a credit history if no one will give you credit.

In either situation, use the opportunity of a secured personal loan as a way to prove yourself worthy of lenders working with in the future. Your credit is an area that is going to make or break you down the road, so use your opportunities wisely. A secured personal loan that is repaid as scheduled or sooner can help you on the road to re-establishing your credit worthiness or start your newly documented credit history of to an amazing start. Secured personal loans can offer opportunities to those individuals who would not be eligible for any other types of loans the chance to have the funding they need.

On the flip side, secured personal loans can be risky. It is very crucial that you understand that risk. Since you will be required to provide collateral for the loan, any default could result in you losing your home, other property, vehicle, whatever it was that you used as collateral on the loan. While entering the contract of a secured personal loan, no one really anticipates the loss of their collateral. It can be very damaging to an individual when the lender comes to collect that collateral.

To protect yourself, be realistic with your financial endeavors. You will need to ask yourself some tough questions and be honest with the answers. If you have a pattern of not being able to fully commit to financial obligations, then do not create further financial hardships for yourself or your family by becoming involved with a secured personal loan.

As yourself exactly how much you need to borrow and for what purpose, then stick to those terms. It can be tempting to borrow more when you need $5,000 and the lender tells you that he can approve the loan for $10,000. Don’t let your common sense and judgment be clouded by dollar signs.

Secured personal loans can be a great means of generating necessary revenue for those in need. They offer an opportunity for individuals to establish or re-establish a good credit rating. However, caution should be taken to protect against losing the collateral for this type of loan from being lost to the lender. If you are eligible for an unsecured personal loan, it involves less risk though you will incur a higher interest rate.

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How To Avoid Those Mind-Boggling Depreciation Rules

Posted by admin on Feb 4, 2010 in Tax | 0 comments

Tired of dealing with those complex depreciation rules? Thanks to recent tax law changes, here’s how to avoid them completely while benefiting from a lucrative small business tax break that not only puts money in your pocket, but also makes the filing of your income tax return much simpler.

What am I talking about? It’s called the Section 179 deduction, and if there’s one tax law you need to understand, this is it. Here’s why:

The Section 179 deduction enables the Small Business Owner to “expense” (i.e. deduct in the current year) up to $105,000 of the cost of most business equipment, rather than use those stingy depreciation rules that require you to write-off the cost over five or more
years.

What’s so great about that?

Think about it like this: I’ve got a dollar and I’d like to give it to you. You have two choices — I give it to you now, or I give it to you 5 years from now.

Which do you prefer?

Obviously, you’d rather have it now, right?

And why is that?

Because of what you learned way back in Finance 101: something your banker calls “the time value of money.”

I’ll spare you a boring textbook definition. Instead, let’s just assume we agree on this simple point: Is a dollar worth more today or 5 years from today?

It’s worth more today.

And that’s why the Section 179 deduction is so valuable.

Huh?

Let’s use an example to bring all this financial theory into reality.

You buy $5,000 worth of office equipment in 2005. Under normal depreciation rules, you wouldn’t get to take a deduction for $5,000 in 2005. Instead, you’d write off the $5,000 over 6 years — part in 2005, part in 2006, etc.

If you’re in the 35% tax bracket, you get your $1,750 in tax savings over 6 years. Yawn. That’s a long time!

You’d get your deduction, and the resulting tax savings, but you’d have to wait 6 years to realize all the benefits.

Section 179 says that if you meet certain requirements, you can deduct the full $5,000 in 2005. You reduce your taxes by $1,750 in Year 2005.

So let me repeat my rhetorical question: Uncle Sam has $1,750 he’d like to give you. When do you want it? All at once, or spread out over 6 years?

That’s the beauty of Section 179.

But you have to meet certain requirements to benefit from Section 179. One requirement concerns the total amount of equipment you can deduct rather than depreciate. In 2002, the amount was $24,000. And for 2003, the amount was originally set at $25,000.

Then Congress and the President passed a new tax bill in late May 2003 that raised that amount to a whopping $100,000. And since that $100,000 is adjusted for inflation each year, the maximum Section 179 deduction amounts have been increasing:

Year 2004 — $102,000
Year 2005 — $105,000
Year 2006 — $108,000

Never liked depreciation? Well, you can pretty much kiss it good-bye now.

One final note: A few other requirements must be met to claim the Section 179 deduction. Here’s a brief, but not comprehensive, overview:

1. Most personal property used in a trade or business can be deducted via Section 179. Real property cannot. Typical examples of personal property include: office equipment such as computers, monitors, printers and scanners; office furniture; machinery and tools. Real property means buildings and their improvements.

2. The $100,000 amount (adjusted for inflation) can be used through 2007. In 2008, unless new legislation is passed, the amount goes back down to $25,000.

3. There are special rules regarding the application of Section 179 to the purchase of business vehicles. For example, the special “SUV rule” that allowed 6,000 LB vehicles to be fully deducted (up to the $100,000 amount) was recently changed to $25,000, effective October 22, 2004.

4. Your total Section 179 deduction is limited to the business’ annual profit. In other words, you cannot use the Section 179 to create or increase a loss.

This is known as the “taxable income limitation.” For “C” Corporations, this limitation is very cut and dried. But if your business is an “S” Corporation, Partnership, LLC, or Sole Proprietorship, it may not be as limiting as it seems. For these non-”C” Corp businesses, the Section 179 deduction can be used to offset both business and non-business income.

And if you’re married filing jointly, the Section 179 deduction can offset your spouse’s income, including W-2 income.

Example: You start a new business in 2005 that ends up with a loss for the year of $5,000 (before taking the Section 179 deduction). Your spouse has W-2 income of $60,000. Even though your business is unprofitable, you can still take the full Section 179 deduction of $5,000 (again, assuming your business is an entity other than a “C” Corporation).

Be sure to consult with your tax professional to get the scoop on all the Section 179 rules.

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Re-Financing with a Line of Credit Loan

Posted by admin on Feb 2, 2010 in Refinancing | 0 comments

Some homeowners might consider re-financing with a home equity line of credit as opposed to a traditional loan. There are definite advantages and disadvantages to these types of situations. The key to understanding whether or not re-financing with a home equity line of credit is worthwhile involves understanding what a home equity line of credit is, how it differs from a home loan and how it can be used. This article will briefly cover each of these topics to give the homeowner some useful information which may help them decide whether or not a home equity line of credit is ideal in their re-financing situation.

What is a Home Equity Line of Credit?

A home equity line of credit, sometimes called a HELOC, is essentially a loan in which funds are made available to the homeowner based on the existing equity in the home. However, in this case, it is not really a loan but rather a line of credit. This means a certain amount of money is made available to the homeowner and the homeowner may draw on this line of credit as funds are needed. There is a specified period in which the homeowner is able to make these withdrawals. This is known as the draw period. Additionally there is a repayment period in which the homeowner must repay all of the funds they withdrew from the account during the draw period.

How Does a Home Equity Line of Credit Differ from a Home Equity Loan?

The difference between a home equity line of credit and a home equity loan is really quite simple. While both loans are secured based on the existing equity in the home, the manner in which the funds are disbursed to the homeowner is rather quite different. In a home equity loan the homeowner is given all of the funds immediately. However in a home equity line of credit the funds are made available to the homeowner but are not immediately disbursed. The homeowner is able to draw against this line of credit as he sees fit. There are limits to the amount which can be withdrawn and there is also a limit on when funds can be withdrawn. A home equity has a draw period and a repayment period. Funds can be withdrawn during the draw period but must be repaid during the repayment period.

How Can a Home Equity Line of Credit Be Used?

One of the biggest advantages of a home equity line of credit is that the funds can be used for any purpose specified by the homeowner. While other loans such as an auto loan or even a traditional mortgage might have strict restrictions on how the money lent to the homeowner can be used, there are no such restrictions on a home equity line of credit. Common uses of a home equity line of credit include the following:

* Home renovations or improvement projects
* Opening a small business
* Taking a dream vacation
* Pursuing higher educational goals
* Opening a small business

In some cases the interest paid on a home equity line of credit may be considered tax deductible. This may apply in situations where the funds are used to make repairs or improvements to the home. However, these expenses are not always tax deductible and the homeowner should consult with a tax professional before making decisions regarding which interest payments can be deducted.

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Credit Card Fraud

Posted by admin on Jan 31, 2010 in Credit Issues | 0 comments

This day and age, credit card fraud is very common.  Victims of credit card fraud often experience a lot of hassle and stress.  If you have a credit card, you should always be aware of the security features that is included with the card.  If you are looking to get a credit card, you should always make sure that it offers plenty of security.

With credit card companies all over the United States, credit card fraud is becoming more and more common.  Consumers are becoming more and more aware of the situation, and always look for ways to protect themselves.  Many companies that offer credit cards are looking into other methods of security, to prevent credit card fraud from happening.

The best way to protect yourself against fraud is to check the monthly credit card statements you receive.  By looking at your statements, you’ll easily be able to tell if your account has suffered any type of fraud.  If you notice any type of fraudulent charges, you should instantly contact your credit card company and inform them.  This way, they look into it and try to retrieve the money that was illegally stolen from you.

Another way that you protect yourself from fraud is to never reply to emails that may appear to be sent by your bank or credit card company.  There are a lot of fake emails going around, that will steal your information should you enter it in.  You should always use caution with emails, and reply only if you know that the email was indeed sent from your bank or credit card provider.

You can also protect yourself from fraud by keeping your credit card around you at all times.  When you hand it to someone to make a payment, ensure that it is given back to you promptly. You should also keep it safe from others so they can’t view your information.  When you carry your credit card with you, you should always keep it in a safe place, such as your wallet.  This way, you don’t have to worry about it falling out.

There are always steps that you can take, to avoid falling into the trap of thieves and criminals.  Criminals are always out there, looking for ways that they can steal your credit card information.  Therefore, it’s up to you to protect yourself.  Credit card fraud happens quite frequently these days, normally as a result of credit card holders not being aware of how to protect themselves.  Anytime you suspect credit card fraud, you should contact your bank or company.  This way, you can let them know what happened – and take the necessary steps in stopping fraud before it goes on any farther.

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