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A Plan to Double Your Wealth With the Rule of 72

Sunday, January 17th, 2010

By: Jason Markum

If you are interested in doubling your wealth, it doesn’t really mean much unless you create a specific time frame first. If you have any assets or investments that produce income, they will probably *eventually* double your wealth, and you won’t have to do anything. Of course it may take 200 years. That’s the point of having a time frame.

Yes doubling your wealth within a certain time frame, takes a little bit of planning on your part. Luckily you found this article!

If the money you’ve invested remains constant, that is, you don’t add any to it, then you can use the so-called rule of 72. All you have to do is divide the number 72 by the number of years within which you would like to double your wealth. The number you get when you do that calculation ends up being the percentage you must earn on the money you’ve invested in order to double your wealth.

For example if you wanted to double your money in 10 years, your investment would need to produce 7.2% increases (72/10) for each of those years. If you wanted to double in five years, you would need to return 14.4%. And if you wanted to double your money in two years, you need to earn a 36% gain on that investment. Pretty easy huh?

If you would like to know what your current investment portfolio is producing, and whether it is producing up to your expectations, review things very carefully. Think about getting rid of investments that aren’t doing very well and taking the money and reinvesting it in something that performs better. Think of it this way; look at each of your investments and ask yourself this question… “if I had the cash again when I make the same investment?”. If the answer is no, then you know it’s time to sell that investment and reinvest into something else.

Good portfolios for building wealth are diversified, and also balanced. For me personally, a good balance is about one third of my assets in stocks, one third in real estate that produces income, and one third in other things; things like annuities and gold, and municipal bonds; things like that.

However your portfolio seems to be balanced, it will grow far quicker if you continue to add to it in a regular fashion. For me I like to add a percentage of all the income I bring in to my investments. This can be in the form of automatic payroll deductions, or an automatic checking account transfer system, or however you’d like to do it yourself.

No matter what you do, it is important for you to remain educated about all of your investments, and upcoming investment opportunities. The more you know about an investment to less risky it becomes. And the closer an eye you keep on your investments, the less chance they will decrease dramatically before you notice and take steps against the loss.

So there you have it! Remember the rule of 72, it’s a good plan for setting a time frame for doubling your wealth…

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How to Find a Financial Planner

Sunday, January 17th, 2010

By: Jason Markum

If you are a successful person, chances are you’re too busy being successful to put any serious time into analyzing and finding investment opportunities, creating and fulfilling personal finance goals, or creating and executing a solid financial plan for your life. The paradox is, successful people are the ones that need financial plans!

That is why you should have a personal financial planner… someone who can take away the time burden necessary to create and execute your financial plan on a day-to-day basis.

So what should you expect with a financial planner? When you hire a financial planning firm, or a financial planner, they will assume responsibility for handling and coordinating your financial affairs. They will balance your investments, plan for your retirement, manager taxes, plan your estate, in some cases handle your insurance, and most of all - protect your assets.

They will need you to take an inventory of your current assets and gather up just about every kind of financial paper that you can think of. We’re talking financial records here…

When you get together all of your records, your planner will analyze it and create a sort of financial profile of you from which they will create a comprehensive plan for achieving the goals that you have set. This plan is not set in stone, but merely a recommendation and an organizational structure for you to follow. They will also give you periodic reports of your financial situation in case you need to adjust certain things over time.

Everybody is different, every financial plan is different, therefore every planner will act differently based on your exact situation. There is no one-size-fits-all, and that’s why you need a planner who will take your specific circumstances into account and work with you to reach your goals.

What should you look for in a planner? Well the first thing to look for is professional expertise. What kind of credentials do they have? The best credentials for a planner to have are the chartered financial consultant credentials (ChFC), and the certified financial planner (CFP) credential. There are also certain attorneys and also accountants the specialize in financial planning, look for these as well.

The second thing to look for is resources. Your planner should work closely with other financial professionals. People like attorneys, accountants, tax experts, investment specialists, and people of this nature so as to cover all of the bases in your financial planning needs. The more contacts they have the better off you will be.

The third thing to look for is affiliation with a major institution. Are they affiliated with a certain major bank? That may be a plus. Are they affiliated with a major investment bank? That could be a plus. Are they affiliated with a major law firm who specializes in taxes and financial matters? That could certainly be a benefit. Who your planner is affiliated with can be very important, especially if the company they are affiliated with has a long-term reputation.

I hope you understand now the importance of using a planner and I hope you have a better understanding of how to find and select a financial planner. It may just be one of the most important decisions you ever make.

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Best Way to Interview a Financial Planner

Sunday, January 17th, 2010

By: Jason Markum

If you’ve had some success in your life it may be time to sit down with a financial planner. The problem is, it’s not always so easy to find a good financial planner. You should never pick the first person you meet. You should interview several until you find one that fits your situation and one whom you feel comfortable with.

Which leads to the question, how should you interview a planner? Well you’ve come to the right place! In this article, I will explain exactly what you should ask your potential new planner before you hire them.

First ask about their experience. They should have at least three years track record as a planner, that’s the very minimum. Any sort of related financial background they may have is a plus. I’m talking about accounting, banking, brokerage, or insurance here.

What credentials do they have? Are they a certified financial planner? Are they a Chartered Financial Consultant? These two designations are important for any planner to have. They indicate extensive education and multiyear testing. You may also ask if they have been admitted to the registry of practicing financial planning practitioners.

Next ask about their support services. Do they have up to date computer services and a professional staff working with them. There may have been a time when a sole practitioner working on their own was a benefit, but that is not the case today in our interconnected global economy. Today many planners work together so as to offer more services to their clients, and broader services to their clients.

Next, ask about their clients! People often feel nervous about this, but don’t. You have a right to know how their clients see them. How many clients do they have? What type of client do they have? A planner that has more than 150 clients may be spread too thin to adequately handle your affairs. On the other hand, too few clients suggests something else entirely. Ask how many clients renew their services each year. If more than 25% renew each year, run for the door.

Ask about ongoing services. Will the planner review your circumstances every year and make changes if necessary? Are there scheduled sitdown meetings every six months or every quarter, or once a year? What exactly is the protocol, that is to say, how does your financial planner keep in contact with you? What can you expect as far as ongoing care?

Finally discuss fees. F. Planners are expensive, and you need to know exactly what charges are in store for you. Don’t expect a personalized plan for less than $2,000. If your situation is more complex, you can expect fees to go up many times this amount depending on your exact situation and the complexity of your financial affairs. Be sure to ask about all these fees before hand.

These are the main questions to ask when interviewing a planner. Above all, make sure you feel comfortable with your financial planner. You need to be able to trust their expertise, after all, this is your financial health were talking about…

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What To Do If Your Check Bounces

Monday, January 18th, 2010

By: Jason Markum

If you are one of the unlucky ones to recently have a check bounce, you may be absolutely amazed at the size of the fee that the bank charged you for a bounced check
. It may have been $10 and it may have been $15 and it may have even been $25 or more depending on the bank. Now there is legislation that has been passed by Congress to help you out in this area but those changes don’t go into effect for a few months.

Doesn’t it seem weird to you with all the technology banks possess, they don’t seem to have the simple technology that will handle a stop check cheaply? Why does it cost so much money when you bounce a check? There is no reason why it should. Of course, the reason is simple. Bounced check fees are major profit centers for the banks. Whether this is right or wrong morally is a different question for different article; it simply is and that’s what we have to worry about.

So what can you do if you bounce a check? The bank just takes the money out of your account, that is to say, they take the fee for your bounced check right out of your account. Many people would consider this trespassing or theft! Of course, it is not because you signed an agreement with the bank when you opened your account allowing them to do this…

But, there is hope…

If the overdraft fee was the result of a bank error such as losing track of a deposit or maybe charging some other customers check to your account or something like this that was the fault of the bank, you should absolutely demand that they not only take off the fee but they should also send a letter to each person that tried to cash your check and wasn’t able to, explaining that the bank was at fault and not you. What I’m talking about here is if you paid your electric bill with a check and it bounced because of a bank error, the bank should send a letter to the electric company explaining that it wasn’t your fault that the that the check bounced.

This way the electric company doesn’t charge you a late fee or a bounced check fee or doesn’t hurt your account in some way.

Of course, the bank will NOT want to do that. So what should you do? First of all be firm and be persistent. If whoever you’re talking to isn’t being helpful go over their head and talk with their supervisor, talk to the branch manager, talk to whoever you have to and don’t stop talking until you get what you deserve.

Don’t forget about small claims court and don’t be shy about letting the banks know that you are willing to go to small claims court to settle this matter. Small claims court doesn’t require a lawyer, it’s basically just people like you with small grievances standing in front of a judge and explaining what happened in everyday language. Of course it doesn’t cost you any money in lawyers fees because you won’t need a lawyer, but the bank almost certainly will need a lawyer to defend itself because banks are institutions with shareholders and responsibilities and they can’t just walk in any court without a lawyer. So very often just the threat of small claims court is enough to get the bank to do what you want especially if it’s obvious that it was a bank error to begin with.

If the current small claims court doesn’t work there’s always the threat of larger court and class-action lawsuits. Of course this may cost you some money and definitely more time as you will definitely need to hire a lawyer for the sort of thing hopefully the threat of this is enough for you to win.

Of course if your overdraft is completely a result of your OWN negligence, that is to say, it was your own fault, you may just have to grin and bear it and pay the fee. And look for a new bank that either doesn’t charge overdraft fees or charges much less costly overdraft fees.

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How To Determine Your Personal Net Worth

Tuesday, January 19th, 2010

By: Jason Markum

Over the years one question that I get asked over and over is this; how do I calculate my personal net worth? It’s true that most Americans have no net worth or negative net worth. Is it any wonder when we don’t even know how to calculate our net worth?

Since the massive recession of late 2008 Americans have become more frugal. We are saving more, and spending less. That is one good thing that has come out of this recession. And as we pare down our credit card debt and put some money aside for a rainy day, Americans are beginning to have net worth’s once again.

Which leads us to the question, how do you calculate your net worth? It is, after all, the basic method of determining if you’re getting ahead in life… well, getting ahead in your financial life at least. First things first, you need to recalculate your net worth often. Quarterly is okay, but I recommend calculating your network every single month. It just helps keep things in your mind, it helps keep you on the path to financial responsibility
if you’re always looking at your financial net worth calculations.

The first thing to calculate is your assets. These are things like cash and non-income producing assets as well as insurance, investments, and retirement assets. Cash is easy to figure, it’s just that amount of cash you have in any checking or savings accounts or in money market funds and CDs. Non-income producing assets are things like the value of your home, or your vacation home, or jewelry, cars, home furnishings, or stuff like that. Insurance is easy to determine as well as your insurance policies have cash values (some don’t). Likewise, investments are fairly easy to calculate especially if you receive monthly statements from your brokerage firm. And finally retirement assets are also fairly easy to calculate using statements from your brokerage firm.

The second thing to calculate his liabilities, what you owe. Liabilities include mortgages, bank loans, credit cards, and any notes due.

Now just add up your assets and you liabilities. Subtract your liabilities from your assets. That is your net worth!

Don’t get discouraged if you have a negative net worth, most people do. Just be sure, once you know your figures, to work on lowering your liabilities as much a possible.

Knowing your personal net worth is something that every responsible adult should do. It is a great tool that helps you know how well you’re doing financially and lets you know when things are getting bad or better.

So go figure out your personal net worth right now, it’s never too late to start being financially responsible.

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How To Discover Your Credit Report And Credit History

Wednesday, January 20th, 2010

By: Jason Markum

Have you ever been turned down for a business loan or a house loan or any kind of loan at all? Have you ever filled out a credit card application that said “pre-approved!” only to receive a letter two weeks later saying that you have been denied credit? Have you ever been turned down for a rent application because of your poor credit?

Have you ever wondered how these people determine what your credit rating is? And have you ever wanted to check your credit report to see why you’ve been turned down for credit or for a loan? If so, you’ve come to the right place. In this article I’m going to talk about your credit report and let you know exactly how to check your own credit history and credit report…

So what exactly is a credit report? Basically it’s a list of all your current outstanding credit as well as any applications for new credit that you have recently submitted. Your credit report can contain lots of different things, not just your credit card bills and things of this nature. Basically anyone that you pay money to can submit a report to the credit agencies. Of course, most companies don’t bother, so we generally see the same sorts of companies doing this.

Besides credit card companies and banks, other companies that may report your credit history include utility companies such as your local water, sewage, or electric company. Cell phone companies quite often make reports to your credit history because most cell phone plans are contracts in which you pay monthly. Telephone companies sometimes report, and cable and satellite dish companies sometimes report as well.

Car companies almost always submit reports to your credit history if you have a loan for a car with them or even if you lease. And your bank or mortgage company will definitely submit credit reports on you either monthly or quarterly. Depending on your landlord, they may report you as well if you rent an apartment. And they will almost always reports you if you miss a payment.

So how do you find out exactly what is in your credit report? The fair credit reporting act guarantees that you can find out the contents of your credit report at any time. If you were denied credit within the past 30 days, which is true for probably most people even if you don’t realize it, then you are entitled to a free credit report.

If you haven’t been denied credit recently but still want to see your credit report, just contact one of the three main credit reporting agencies and they will provide you with a copy of your credit report for a low fee, or sometimes for free. The three main credit reporting agencies are Equifax, TransUnion, and Experian.

The fair credit reporting act gives you the right to dispute any items in your credit file that you do not agree with. Errors occur frequently so be sure to check your credit report every three or four months. Common errors include similar naming errors. For instance, if you have the same name as your mother or father then quite often credit reports can be attributed incorrectly. You want to get these things cleared up as quickly as possible.

Being financially responsible means keeping up-to-date with your current credit history. It’s a good idea to get in the habit of checking your credit report every quarter, or the very least once a year. I suggest you check it every year during tax time if not more often. With the Internet, checking your credit history can be done very quickly and easily, and often for free… so there’s no excuse not to check often..

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Best Way To Stop Credit Card Addiction

Wednesday, January 20th, 2010

By: Jason Markum

We are a credit card country. Buying on credit is a way of life for most Americans. We don’t often stop to think what the long-term impact of the purchases will be; after all, it’s just a few extra dollars a month on the credit card statement!

But if there’s one thing that this great recession of 2008 and 2009 has taught us it’s that buying on credit should be kept to a minimum. The problem is, most of us are so used to spending money on credit cards that it’s hard to stop! Most of us don’t even carry money around anymore, we just whip out the credit card!

It’s especially bad if you are over your head in credit card debt. How can you get out from underneath this mountain? Luckily most of the problem has to do with simple money management. Knowing which bills to pay when, and which credit cards to consolidate, can solve a large chunk of the problem.

But even if you’re not in trouble with credit card debt, you may still want to consider cutting back on credit card use. Unless you pay your credit card bill in full each month, in which case you can stop reading this article right now!

So what do you do to get out from underneath this crippling credit card addiction? You may be tempted to simply cut up your cards and throw them away. Unfortunately this is not always possible because like it or not we live in a credit card world.

So what should you do? I have a few suggestions… first of all try to consolidate all of your cards into just two or three main cards. Don’t close the accounts of your other credit cards, just transfer the balances away from each card and onto the card that you designate as one of your two or three main cards. The idea here is to shop around for the lowest interest rate. Keep your other cards open because once you take your balances off those cards, they may contact you via mail to offer you lower interest-rate offers in order to bring your business back.

By playing each credit card off one another, you can get a much lower interest rate… sometimes close to 0% for several months at a time. If the cards don’t contact you, call them! Tell them the rate of interest that your other card is charging and ask them to beat it. They almost always will.

Once you’ve consolidated outstanding credit to 2 or 3 main credit cards you’re only halfway there. The next step is to choose one credit card to use daily for regular purchases. I’m talking about groceries, gas for your car, movie rentals, and basic things of this nature.

The idea here is to pay off this credit card in full each month. So only put things on this card that you are able to pay off each month. Don’t use this card to make large purchases, for instance don’t use it to buy a new TV or a lawn mower or something like that. From now on you must pay cash for large purchases. And if you don’t have enough cash, you don’t buy the thing until you do.

Just putting these 2 Ideas into Place can go a very long way to getting over credit card addiction…

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How To Buy Your Parents House And Rent It Back To Them

Saturday, January 23rd, 2010

By Jason Markum

With the massive recession of 2008 to 2009 in full swing, credit markets have dried up. Because of this, many of us have had to resort to creative forms of financing, one of which is the classic transaction known as a sale-leaseback. You can create fairly decent amounts of income and estate tax savings if you buy your parents house and then rent it back to them.

These sort of arrangements allow for tax deductions for your parents if they are over 55 years old. If so, tax law will allow them to exclude up to $125,000 in profit from the sale of the house.

There are many advantages of a sale-leaseback arrangement.

The first advantage is that future appreciation from the house isn’t included in your parents estate any longer. This can be a fairly large tax break, right off the bat.

The next advantage is one for the person who buys the house… namely you. By owning your parents house you can shelter some of your own income by deducting the expense of owning the house as will the upkeep and the depreciation on the house.

The next advantage is for your parents; it’s a very straightforward one in that they simply receive cash in exchange for the equity that they’ve built up in their house. Think of it as taking out a home-equity loan that they don’t ever have to pay back.

The next advantage is one that I mentioned earlier, and that is that your parents will get a one-time $125,000 tax exclusion on the gain they receive to sell the house to you.

The next advantage is slightly less tangible but it is the fact that your parents will enjoy the advantages of renting. They won’t have to necessarily take care of the maintenance and upkeep anymore, that will be your responsibility from now on. At the same time, they get to enjoy living in the same house that they are used to.

A sale-leaseback might make especially good sense if your parents are elderly and have trouble supporting themselves. If you are already paying for their support, this may be an attractive way to continue supporting them at a tax advantage.

And it’s a way for your aging parents to save a little face because they won’t be simply taking handouts from you for support, they will be selling you their house which you will eventually be able to sell once they’re gone.

There are several technicalities that need to be upheld in order to create a valid sale-leaseback arrangement. For instance, the house has to be purchased at fair market value, and your parents must sign an actual lease. It must be clear that your parents don’t plan to buy back the property from you in the future, and it also must be clear that your parents no longer maintain control over the house.

Before entering into one of these arrangements be sure to run it by your local accountant or CPA to make sure you’ve crossed all the T.’s and dotted all the i’s.

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How To Calculate The Cost Of A College Education

Saturday, January 23rd, 2010

By Jason Markum

College is just about one of the most important expenses you will ever incur throughout your entire life. Besides buying your home, it could very well be the most expensive thing you ever pay for. And the prices just keep climbing! Even with careful planning and long-term savings. The cost of a college education is becoming unaffordable for a large part of society.

Which means that it is more important than ever to calculate the true cost of a college education and start saving as soon as is humanly possible. In this article, I’m going to talk about the cost of a college education and give you some tips on how to plan accordingly.

The first thing to note is time. It is incredibly important to plan for education savings as early as possible. It’s not ever to soon to start planning. As soon as your children are born you should put a plan in place. If you didn’t start that soon, don’t worry; you can still play catch-up but you need to get started right away.

Next it’s important to be realistic about the cost of college. These days, even state schools could run close to 10 or $12,000 a year! Elite private colleges are nearing $50,000 a year or more as of 2010. Harvard, for instance, cost around $37,000 a year in tuition alone. That doesn’t count room and board, textbooks, and other incidental expenses. When you add up all of those things the price shoots to nearly $60,000 per year!

Let’s create a quick example. Imagine that you have an eight-year-old daughter and you want her to go to a specific school that costs around $12,000 a year today. Basically were looking at around 10 years left for you to start saving.

How much is that $12,000 a year college going to cost by the time your daughter is old enough to attend? Let’s assume inflation is running around 5% a year. For the most part colleges tend to increase their prices at the nominal rate of inflation.

Also to clarify, let’s say that that $12,000 will cover everything including tuition, room and board, books, and all other incidental expenses. Calculating for inflation, you will need just over $80,000 to pay for four years of college at the current growth rate of 5% per year.

Luckily you won’t need $80,000, because you have 10 years to invest during which time your investment can earn interest which compounds on top of more interest, and that’s the name of the game. Assuming that your investments increase at 8% per year, and they increases tax-free… you can expect to invest around $36,000 over the next 10 years in order to meet the $80,000 fee.

Check with the financial aid office of the college that you have your eye on. Quite often they will have investment worksheets that you can print out that will help walk you through the costs involved and show you how much you need to invest before hand at different interest rates, over different time periods, in order to finance your children’s education. And no matter what, the earlier you start the better.

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How To Find Sources For College Financing

Saturday, January 23rd, 2010

By Jason Markum

College is one of the most difficult things to pay for on the planet. The costs of college have skyrocketed in recent years and show no signs of slowing down anytime soon. Colleges almost always increase their tuition rates every year at a rate higher than normal inflation. Even less expensive state colleges are becoming prohibitively expensive for most Americans.

Apart from buying your house, a college education could very well be the most expensive thing you purchase during your entire lifetime. Finding money for college can be difficult. After you have exhausted scholarships, and government grant options, where can you go to find the money you need for yourself or your children? That’s what I’m going to discuss in this article today…

One program to look into is the parent loans for undergraduate students program or PLUS as it is often referred to. This program allows parents to borrow up to $4000 a year per child from the government generally at lower than market rate interest rates. These loans are usually made based on how well the parent can repay, not on financial need. Usually you have to begin repaying these loans almost immediately, usually within 60 days after the funds have been sent in to the school.

Another way to raise money for college is with an unsubsidized bank loan. A lot of different banks as well as credit unions offer special college loan programs, and often charge interest rates one to 2% below market norms. These programs generally have longer financing schedules than you would normally see in a regular consumer type loan. These loans are made to the parent, not the student as the parent has more of a financial history and credit history from which the bank can rely on.

Another way to raise money for college is to use a bank savings and loan plan. This is similar to a line of credit except it’s based on how much money you have in your savings account. The bank usually multiplies the amount of money you have in your savings account by a certain figure and loans you that amount. Of course, if you have already exhausted your savings account paying for college up to this point… this program may not be very helpful to you.

Another way to raise money is by looking to college-sponsored financing programs. Some colleges, especially private colleges, offer many different creative financing options. In essence, the college will loan you the money themselves and allow you to pay them back over a very long period, sometimes 20 to 30 years. The disadvantage of this is that you may pay more interest over that long loan period. Often the college will sell your loan after you child has graduated to another financial institution such as a bank or loan company of some sort.

The point is, don’t ever give up! Even if you feel like you’ve exhausted all the possibilities, keep looking because there are always new programs springing into existence, and old programs that you may not have explored yet. If nothing else, meet with your college’s financial services office and explained your situation to them. Tell them that you just can’t afford tuition and ask if there’s anything they can do, or if there’s any way you can work together to figure out how to make it work. You’ll be surprised how often this will yield results.

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