Series of Personal finance and Money Management Articles

2008-11-25T08:40:00.000-08:00

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Personal finance and Money Managemant Articles Written By Kyle J. Norton (All these articles have been public at Ezine article, article base and over 500 other sites.)
I. Personal Finance
1. Types of Loans
By pooling the funds of savers, money could be lent at reasonable rates to those who needed to borrow. Consumer loans refers to people borrowing money to make a wide range of secured and unsecured loans to consumers for consumable items from lending institution. Consumer loan does not include mortgage loans, that is typically used only for home purchases. In this article, we will discuss types of consumer loans.

2. What is Security for Loans?
Security loan is the type of loan borrowers have to assign collateral to the lender to certain tangible assets such as stocks, bonds, life insurance policies, a car, or a home, in case of borrower defaulting on the loans, in order to reduce the lender's risk.

3. Other Cost and Needed for Borrowing
Lenders often require that their consumer loans be life-insured. They do this by having a group life insurance policy that covers the lives of their borrowers against the risk of someone dying before her/his debts have been repaid. This insurance on the life of the borrower is called credit life insurance.

4. Understand Debit Cards and Credit Cards
After receiving the credit card statement, you may pay off the balance in full without interest, or you may make a partial payment and start to pay interest.
If you make a partial payment, there are 3 types of concurrent interest rates are charged....

5. Understand Home Mortgages
When home, house or real estate is used to secure a loan, the borrower signs a contract called a mortgage. It is a contract refers to the borrower as the mortgagor, and the lender is called the mortgagee. The gradual repayment over many years of a mortgage, usually 15, 20, 30 years including the accrued of interest, is called amortization and equity of a property can be estimated by finding a fair market value price and subtracting the outstanding mortgage debt.

6. What is A Mortgage Contract
Buying a home is one important decision that many people have to made sometime in their life. If you decide to buy a home now, there are many thing you have to known and many papers have to be signed before the home you brought can be registered to your name.

7. Investment Options for A Personal Retirement Plan
Planing your longer term to build wealth for retirement becomes more important than ever, because our government pension plan now nearly bankrupted, there are many doubts that our government can take care all the baby boomers who will start to retire on 2010. Combine these facts with the uncertainty surrounding the government's pension plans, the savings and investments making up your own personal pension plan will be the key to financial well-being in your retirement years.

8. What is $5000 Tax Free Saving Account
In spring of 2008, Canadian financial minister tabled the 2008 budget including $ 5000 tax free saving plan in order to assist Canadians aged 18 and older to save for their retirement. A Tax–Free Savings Account (TFSA) is a flexible investment account that allows you to earn investment income without paying taxes and gives you access to your money whenever you want it. Starting January 2, 2009, you can open an account with any financial institution, including bank, trust, mutual fund company etc. and any qualified investments include all arm's-length registered retirement savings plan (RRSP) qualified investments.

9. Understand the Characteristics of Short term Investments
Money market fund is a way of pooling contributions from many small investors and managing them by a professional fund manager working for mutual fund companies with very low fees.

10. Understanding Characteristics of Fixed Term Investments
Term deposit
a)The rate of return on term deposits is usually higher than on savings accounts. Some institutions may allow the funds to be withdrawn before maturity by sacrificing some interest.
b) Interest rate is guaranteed and is higher than savings account.

11. Understand Characteristics of Bonds
Bonds are issued by government or corporation through bond underwriters as they agree to purchase all of the bonds offered at a stated price, then sell them at a slightly higher price to other corporation and willing investors. Each bond has a par value that is the face value of the bond and is printed on the bond itself.In this article, we will discuss The characteristics of bonds

12. Understand The Special Features of Bonds
Some bonds give bondholders the option of exchanging the security for a specified number of common shares of the company allowing the investors of a debt security the possibility of capital gain.

13. Understand the Characteristics of Common and Preferred Shares
Common and prefer share holders are corporations owners who provide capital for the business. while common shareholders take greater risk, and may gain or lose more than preferred shareholders, therefore the returns and dividends are higher than for the preferred shares.

14. Investment Returns of Equity Market
Investors invest in the companies equity shares expecting a return on their capital in one of 3 ways: cash dividends, stock dividends, or capital gains.

15. Other Investment Vehicles
Beside investing in short, long term certificates and equity market of some public companies, investors may invest their money in private companies (non public), mortgage security of amusement park, as well as certain private bond.
Remember, all these types of investment are presented without following any guide line of the security laws and you are the one that have to make the decision as well as additional information to reduce risk.

16. Closed-end and Open-end Funds
Closed-end and open-end funds are one of many choice that have been appeal to many investor for assets diversification and professional management. In this article we will discuss characteristics of closed and open end funds.

17. Types of Mutual Funds
Mutual fund is a pool of investor's money and is sold as a unit. It is an open end fund and managed by professionals. It also must meet certain regulations of the security commissions and laws governed before it can be sold to the general public. There are 4 types of mutual funds depending to the fund objectives:

18. Understand Fee of Mutual Funds
Mutual fund is a pool of investor's money and is sold as a unit. It is an open end fund and is managed by professionals. It also must meet certain regulations of the security commissions and laws governed before it can be sold to general public. In this article we will discuss mutual fund fees.

19. Investment Return and Inflation Rate, Interest Rate, Market and Business Risk
Inflation means too much money chasing too few goods, and this results in prices for goods and services going up. Inflation may also be expressed as too much money having been printed by the central bank causing too much money compares to the same goods produced.

20. Risk Management
Government employees have more income security than someone self-employed, someone working in a service industry that often lays off workers, or seasonal workers. It is wise to balance your risk if you doubt your job security, you may consider putting some savings in very low-risk debt securities in case of lay off.

21. Understand Major Consumer Lenders
Banks borrow from depositors to lend to those who need money. They charge sufficient interest on the money they lend to pay interest to their depositors, normally with the spread (spread is the cost of operation and profit for bank shareholders) of 2-4% depending on the credit history and risk of the lenders.

22. Types of Consumer Loans
Banks, trust companies, and credit unions may offer their creditworthy customers a personal line of credit as a convenient substitute for personal loans, usually 10,000 to 15,000 dollars. Sometimes, they may also require some types of collateral for this type of credit such as the equity of your home if your want to have a larger personal line of credit.

23. What is Growth Domestic Product (GDP)
GDP represents (in dollars) the total value of all of a country goods and services being produced and consumed. In order to understand the GDP number, it is important to understand the following that makes up the GDP as well as interconnecting each other.

24. How to Handle Economic Risks ?
Economic risks play an important role to determine consumer spending. If consumers feel secure about their job they are willing to spend and help to increase economic expansion. If not, we may have a recession soon. In this article, we will discuss how to handle consumer economic risks.

25. How to Reduce Your Tax
Paying income tax out of your income is a federal law. Understand your personal situation and the basic of the income tax laws will help you reduce the risk of overpaying. We all want to be fair, but we don't want to pay when we do not need to. In this article, we will discuss how to reduce your taxes (legally of course).

26. Registered Retirement Pension Plan and 401 k Plan Maturity Options
Some people choose to invest into personal registered retirement saving plans in Canada or 401k plans and IRA plans in the US. In this article, we will discuss RRSP, 401k plan maturity options.

27. Retirement Allowance Options
Many young people prefer this option. They may be right because they are too young to think about retirement. For many other older people, taking all your retirement allowance all in cash will trigger tax withholding from 10-30% in Canada and 20% in the US.

28. How Pension Adjustment Effects Your RRSP Contribution Room
The PA reduces your RRSP contribution amount since you earn pension benefits through your employer's respective pension plan and your RRSP is limited to 18% of the previous year`s income up to $20,000 in the year of 2008 that varies every year with adjustment to inflation index.

29. Understand Characteristics of Registered Retirement Saving Plan
Contributing to RRSP through pay role deduction will reduce the amount of income tax withheld on your employment income. You pay less income tax over the year, rather than overpaying and then applying for a refund the following year. Usually, Customs & Revenue Canada will permit a reduction in withholdings for RRSP contributions made early in the year.

30. Common Types of Annuity
Term certain annuity provides you with a fixed monthly income until age 90, rather than for your full life. Should you die before age 90, your spouse receives the payments until her/his 90th year.The minimum term of term certain annuity is 3 years and the maximum term is 40 years.

31. Types of Life Annuity
A joint life and last survivor annuity provides payments to you and for that of a second life. Payment continues with the same amount, after the first person dies. This type of annuity appeals to married couples. For registered funds, the joint life must be a spouse.

32. Characteristics of Certain Term Annuity
Term certain annuities pay varying amounts depending on how much money was used to purchase the annuity. If the term certain annuity is short, then each payment back to the annuitant will be large. If the term is long, then each payment will be small.

33. Characteristics of Non Registered Annuity
Annuity payments are fixed for the term of the plan and cannot be changed. The payment amount is determined by the interest rate for the term and the term chosen, if term is long than payment will be small, on other hand if the term is short than the payment will be large. Each payment includes principal and interest and only the interest portion of the payment is taxable for the year of receipt.

34. Types of Deferred Annuity
Deferred annuity is a contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received.

35. The Baby-Boomers and Equity Investments
You can set up your investment in RRIF when RRSP is required roll over to RRIF,so you can increase your cash flow each year to ensure your needs are adequately covered. In case of IRA account, the same ste up will do the trick.

36. Eligible RRIF, IRA Investment Options
RRIF is registered retirement income fund that the government allows RRSP holders to transfer their RRSP to when they reach the year of roll over with minimum withdrawn payment is required.
IRA account holder do not need to roll over but minimum withdrawn payment is also required.

37. Options in Case of Death of RRIF and IRA Account Holder With Spouse as Beneficiary
a) The RRIF payments will be paid to the surviving spouse, who becomes the successor annuitant.
b) Upon the death of both spouses, the market value remaining of the RRIF is passed on to the family's beneficiaries.

38. Option in Case of Death of RRIF and IRA holder with Beneciary Other Than Spouse
All assets in the IRA are distributed to the beneficiary at once and before 12/31 of the year of IRA holder dies. Income taxes will be paid on the distribution all at once.

39. Major Types of Registered Retirement Income Fund
Saving account is most conservative investment. It is guaranteed up to $100,000 by Canadian deposit insurance corporation (CDIC) and pay very little interest.

40. Registered Retirement Income Fund or Annuity
You may consider staggering maturity so portion of your investment in RRIF will generates the necessary cash flow for withdrawals such as buy GICs or bonds so that 20% of the total matures every year. In RRIF, you are allowed to invest up to 100% of your investment funds in global investments, thereby increasing your investment's long-term growth and protection? You also protect your investments against any future declines in the value of our Canadian dollar. Besides, it is far more risky to leave all your money in any single country.

41. How to Choose between RRIF and Anuity For Your RRSP
Now you reach the year of RRSP conversion year, you are facing the choice to choose either to convert your registered retirement saving plan to RRIF or annuity. In this article, we will discuss How to choose between RRIF and annuity for your RRSP.

Posted by Kyle J. Norton

Personal Finance and Money Management

Series of Personal finance and Money Management Articles