How to Find a Good Real Estate Agent.

How to Find a Good Real Estate Agent.

Whether you're buying or selling a property, a quality real estate agent is vital to make the process run smoothly. Seek out an agent with excellent credentials and references. Meet with a handful of agents to make sure any Question : s you have are answered. Watch out for potential red flags. Agents who charge very low costs or only work part-time may not be reliable.

Part 1 Finding an Agent with the Right Credentials.
1. Look for someone who does at least 1 or 2 transactions every month. When reviewing an agent's credentials, look for someone who's been working in sales, negotiations, and contracts for at least five years, preferably in real estate or property management. Five years experience and a regular stream of transactions means an agent likely has a good feel for the process and can help find you the best deals.
Agents with less experience can still be a good choice if they know you and the area well, especially if they demonstrate a great work ethic and strong customer service skills.
2. Find someone who works in your area. The agent you work with should know the area in which you're looking to buy or sell. Agents who live and work in your area will be aware of the best neighborhoods and trends regarding prices. A local agent will also know small details, like where the best schools are, commute times, and so on.
3. Check the agent's license. Obviously, you want an agent who's properly licensed. Every state should have a list of licensed agents online. While making a list of agents to contact, check to ensure every agent you interview has a legal license to buy and sell real estate in your state. You can also see the continuing education classes they are taking which will help you to know what their focus is.
4. Look for awards and honors to help narrow your choices. Check a real estate's website and resume for awards, honors, and other signs of recognition. Things like a "Realtor of the Year" award can be a sign of a quality agent who's likely to exceed your personal needs. However, realize that it may also indicate a very busy Realtor who may not be the right choice if you'd like more individual attention and you may need to base your decision on other indicators.
5. Ask friends and family members for referrals. If you know someone who recently bought or sold a home, reach out to them. Friends and family members are likely to give you honest assessments of their experience with a particular agent.
However, be cautious about choosing an agent ONLY because a friend or family member recommended them. Your real estate needs and what you desire in a Realtor may be different so make sure you understand what exactly your friends or family's objectives were and what specifically they liked about their Realtor. Ask about any hesitations the person has recommending the agent as well. This way, you'll get a sense if the agent has any major flaws that would be a deal breaker for you.

Part 2 Interviewing Real Estate Agents.
1. Ask how long they've been in business. When interviewing a real estate agent, one of the first Question : s to ask is how long they've been handling sales, contracts and negotiations for clients. They should be able to answer the Question :  quickly and accurately. Remember, while five years of experience is ideal, someone with less experience who otherwise meets your needs may still work if you've developed a good rapport with them.
Also, ask how long the agent's been working in your area. Even better, ask if they live near the area. An agent with extensive experience may not be the best choice if they are not familiar with your particular area.
2. Ask if they work alone or in a team. Agents who work alone are best if you want a lot of personal contact with the agent. Agents who work on a team are good if you like the idea of specialists for each step. The agent you hire may actually be a team leader who will then introduce you to a transaction coordinator, assistant, or buyer's agent who will handle those parts of the transaction.
Agents who work alone are more likely to walk you through each step themselves and more likely to reach out frequently by phone or even in person.
3. Ask about any planned vacations or other commitments. Real estate often requires quick action and response time. If a Realtor has a vacation planned soon or some other commitment that might interfere with their availability, you need to decide whether this will affect you buying or selling a property. Make sure they have someone to help you out if they will have an extended absence.
4. Ask about what other properties they've sold. In addition to looking at current properties online, have the agent show you some of the other properties they've sold. Make sure these properties are similar to what you're looking to buy or sell. It's vital to pick an agent who works with the right properties for your needs. If the agent is typically used to working at a higher, or lower, price point, they may not understand your particular transaction as well.
If you're selling a home, ask where the home will be featured. The main places you'll need to be is on the MLS and the big online sites (Realtor.com, Zillow, Trulia, etc...). Other sites, including the agent's personal website aren't as important. Also, beware of an agent who wants to keep your house off the MLS for any reason. Unless you are selling a luxury home, the MLS is where most buyers, and their agents, are. "Pocket" listings or similar are generally suggested when an agent wants to market your house first to their own investor clients or to others in their brokerage, but limiting the exposure is almost never a good option for you as a seller.
5. Contact their recent clients. Ask for a list of references after meeting with an agent. A quality agent will not hesitate to hand you a list of recent clients for you to call to ask about their experience. Call a few references for every agent you interview to make sure they have stellar reviews. Don't put too much stock in online reviews. Most people will give a 5 star review in exchange for a Starbucks gift card and a single bad review may not tell the whole story (ask the agent if you're concerned).
6. Make sure you get along with the agent. Chemistry is important in real estate. If you're working with someone who you don't get along with, this can cause unnecessary tension during an already stressful process. Make sure you click with the agent and feel comfortable in their presence.

Part 3 Watching for Red Flags.
1. Avoid agents who don't answer their phone or return calls. A good real estate agent considers their work a full-time job and knows that weekends and evenings can be the busiest times. In real estate, every day is a "business day" and if crucial items come up on evenings or weekends, you need an agent whom you can reach. An agent who isn't available throughout the day may not be your best option.
If an agent does not answer during "regular business hours," you may have an agent who is doing real estate on the side. Their "day job" may not allow them to give you the attention you deserve.
Conversely, an agent who doesn't answer evening or weekend calls, or worse yet, has a voicemail that states anything about "the next business day," may not be available when you need them.
2. Stay away from agents who don't know the area. If an agent does not work in your area, or cannot readily provide information about the area, this is a bad sign. A quality agent should be able to quickly rattle off things like neighborhoods, general price ranges, nearby businesses, and so on. If an agent cannot provide specific details about an area, you may want to find someone who knows it better.
3. Check that lower commissions don't mean fewer services. Typical commissions are usually between five and seven percent. When agent offers a lower commission, make sure they aren't offering you less service than higher commissioned agents. Before signing a contract, verify that all of their promises are in writing.
When buying, you don't usually have to worry about the commission because the seller generally pays both sides (buyer and seller) so focus instead on customer service and contract knowledge.

Community Q&A

Question : I'm looking for a great real estate agent in Bergen County, NJ. How do I find someone who is experienced with contingency, since we are selling and buying?
Answer : Your best option is to ask someone you know for a recommendation. Another option is to drive around your community to see which agents are listed on for sale signs so that you can contact them. You can also search for agents online. Ask your potential agents if they have experience working with buyers who are also selling a home. Finally, ask them for references from previous clients who've gone through the same process.
Question : I'm a first-time home buyer. What should I expect from a realtor, other than finding me a home?
Answer : First-time home buyers have some special benefits when buying a home. Your agent should spend time reviewing these, your needs and wants, and discussing your financial strength (down payment, deposit money, the closing cost, etc). On top of that, you have to consider property taxes and home insurance. Once you're comfortable, you'll be referred to a mortgage broker, if you don't already have one. Once you get pre-approval, the search for the home with the best fit for your finances and needs will begin.
Question : How do you tell an agent you do not want their services any longer?
Answer : Let them know over the phone you want to go with a different agent. Thank them for their time, but explain to them it's simply not working out.
Question : My realtor agent is being really pushy. How can I tell if they are only in it for the money?
Answer : A pushy agent is usually a bad sign. A good agent will want you to have a good experience renting from them and will be willing to give you time to think it over.
Question : How much does a real estate agent cost?
Answer : If you are listing your property then the listing agent charges a percentage commission to list, market and advertise, show, and negotiate through the process of selling your home. If you are a buyer looking for a home with a buyer's agent, you don't pay your real estate agent directly. The buyer's agent receives their commission through the seller's transaction for getting a buyer for their home which is based on the percentage set by the listing agent.
Question : How can I get a 3-month contract for selling my home? It is hard to find anyone willing to work hard enough to do this?
Question : Answer : The length of listing agreement is negotiable between you and the real estate brokerage. Since you are the owner and you are the one who is hiring and paying, it should be your decision as to how long you want to be in agreement. However, allow sufficient time to market your property and get you good price. If your realtor is not doing as agreed or if you are not satisfied (obviously some solid reasons for that), you can always cancel or terminate your listing. Some agents only suspend your listing, hoping to win back your listing. Insist for getting it terminated and find the right agent.
Question : Is it advisable to use the same agent to sell your home as well as buy a home?
Answer : It can be a big benefit because your listing agent will have all of the necessary information to keep the buying side of the new home going along smoothly. A lot of agents who have a seller who is also buying with them will negotiate their commission differently since they will be getting paid on two sides.

Tips.

If the Realtor has an assistant, this could mean they'll have more time to focus on your needs rather than paperwork. However, make sure that the assistant won't be undertaking work that you expect to have done by your agent.

July 02, 2020

How to Start an Investment Club

How to Start an Investment Club.

If you're interested in investing but don't want to go at it alone, you can join an investment club or even start one of your own. An investment club consists of members who study stocks, bonds and other investments. The goal is to have each member take an industry and report to the group why they think it is a great investment. Knowledge is power, and wisdom from many helps assure success. Many times they will pool their money together in order to make joint investment decisions. It's a great way to give and get wisdom. Working with others will help you and others make intelligent investment decisions.

Part 1 Getting Your Club Together.
1. Find potential members for your club. They can be local, so you can meet in person, or they can live far away, and you can meet online. Aim for a club with 10 to 15 members, but anything from six to 20 is workable. When you have fewer people you might have trouble getting enough funds together to invest (some investments favor the larger investor). However, with a large group, both maintaining high-quality discussions and finding a place to meet become concerns.
Spread the word. Tell family, friends, and co-workers about your club-in-the-making. Put together a flyer describing what you have in mind, and pass it out, post it on message boards, send it through e-mail, etc.
2. Hold a preliminary meeting. Get together with the people who are interested, provide snacks and refreshments, and discuss the formation of a club.
Define goals. Are people more interested in the club for its educational value, or for the financial returns? Are they interested in short-term or long-term investing? (Most investment clubs use a buy-and-hold strategy.) Will your members share a general investing philosophy and approach?
Determine how much each member can contribute financially.
If people make different contributions, their returns should be proportional.
You can either pool your investment funds and invest together (a common practice) or invest through individual accounts (self-directed).
Consider starting your club through BetterInvesting.org, an organization that can provide education, support, and online tools and resources for your club.
Determine if your club needs to register with the SEC. You can find more information on the U.S. Securities and Exchange Commission at: https://www.sec.gov/investor/pubs/invclub.htm
3. Gauge member interest level. In other words, decide whether you really want to invest with these people. An investment club will involve significant risk for those involved. The risks, and consequently the rewards, are shared among all members. This means that everyone involved should be equally interested and participate similarly. Be on the lookout for red flags among your potential members. For example, consider carefully members that might.
4. Hold an organizational meeting to iron out the details. Have another get-together with the people who are still interested to discuss and implement the club's policy and organization. The first step should be to decide on an official name for your group. Next you'll want to decide when and where to meet (a living room, library, church, or coffeehouse, depending on the size of the group). Meetings should last an hour or two. After defining these basic rules, consider also doing the following.
Defining and appointing roles within the club (president, secretary, treasurer, investor). What are their responsibilities? The terms should be one or two years, and the treasurer should have an assistant who can move up later.
Writing out how the club will manage payouts, divestiture (reducing assets or investments), or dissolution.
Laying out the policies on gaining new members and figuring out what happens when a member wants to leave the club.
5. File the necessary paperwork. In order to pool your money and invest together, you will need to incorporate your investment club into what is known as a general partnership. You will have to write out the rules of this partnership and its operation and have each member sign it once you all agree.
You should also write a club operating agreement. This would outline all the policies discussed in the previous meeting and should be signed by everyone in the group (as well as others who may join later). There are sample contracts and agreements available online and in books.
To pay taxes, you also have to apply with the IRS for an Employer Identification Number (EIN) and file a "Certificate of Conducting Business as Partners" form with a local jurisdiction (such as a Secretary of State office). Contact your local jurisdiction (city, county, or state) for more information.

Part 2 Investing with Your Club
1. Open a brokerage account or bank account. Most clubs start with both a checking and a brokerage account. Choose a broker who suits your needs (full-service, discount, or online). A full-service broker will provide advice and may attend a few meetings, while a discount or online broker will leave you to your own devices. Many investment clubs end up choosing the latter.
2. Develop an educational agenda. In most cases, investment clubs are formed by people who are still learning about investing. Not everyone is on the same page in terms of his knowledge base. Ask each member what big Question : s they have about investing. Having them submit Question : s anonymously is a good option. Choose the topics you feel should be addressed as a group. Make a "syllabus" and decide who will be doing the research and presenting the topic to the group.
You may also wish to provide a list of good, reliable sources for research. In general, you should stick to reputable financial news services and online investing encyclopedias.
3. Research potential first investments. After a period of time, when contributions to the club have been made by group members, you're ready to start looking at first investments. Have each club member research potential asset purchases like stocks, mutual funds, or investment properties and defend her choices with research. Then, you can have the group vote on their favorite choices and determine how much money to allocate to each.
Remember to keep some of your initial money uninvested in case the market presents an opportunity.
4. Invest as a group. Finalize your choices for your first investment and take the plunge. As your club continues operating, evaluate new and old investments during your regular meetings. These will typically be held once a month, although market conditions may dictate more frequent gatherings. In these meetings you should also:
Review club finances (overall gains or losses, individual investment progress and cash balance available for investment).
Make sure you have designated a single, trustworthy member who has the authority to buy and sell on behalf of the club.
5. Have fun. Celebrate your victories and commiserate your losses. This is one of the biggest reasons people join investment clubs. You could even set aside some of your gains for group outings or events. The idea is to keep everyone entertained and involved in the group so that they keep contributing funds each month and don't get bored over time.

Community Q&A.

Question : Can a group of my friends start a club where we focus on trading Futures contracts?
Answer : Yes, you can focus on any sort of investment you like. Find a full-service broker who's very experienced in that area unless you know what you're doing, in which case you can use an online brokerage.
Question : I have an existing Investment Club of 20 years and now our broker is asking for an updated membership list. We have had numerous changes in membership that we have not made officially through our by-laws. What should we do?
Answer : It is not necessary for your by-laws to list your members by name. It's a good idea, however, to keep a current membership list. Let it include identifying information such as Social Security numbers. Share that list with your broker. He may be required by law to have that information on file. If your club has a secretary or treasurer, it can be that person's responsibility to keep your membership list current along with all individual contributions and earnings.
Question : Can whole life insurance be a viable investment tool for investment clubs?
Answer : No. Life insurance could potentially be a decent investment for an individual but not for a group.
Question : We are forming an investment club for stocks, real estate, etc. How do we register and what type of account do we need?
Answer : "Registration" is not necessary. You are simply private parties making private investments. If you'll be making group purchases, you'll want a checking account for the club, as well as trading accounts with one or more brokerages. (You don't have to work exclusively with one broker.)
Question : Why, when we leave the investment club, do we only get 95% of our money?
Answer : Read the by-laws of your club. There may be a provision stating that the club retains 5% of your money for maintenance purposes.
Question : In this era where investing in stocks is highly risky, what other investment windows would you advise?
Answer : Bonds are usually considered to be less risky than stocks. You can invest in certain mutual funds that own an array of bonds. Some mutual funds invest mainly in stocks, and that's a way of diversifying your stock investment and taking on less risk. Money-market instruments such as certificates of deposit (CDs) are safe investments, but they don't pay very much interest. Unfortunately, that's usually the case: the safer the investment, the less it's likely to pay you.
Question : There are six of us. We want to pull our funds together each month and ultimately invest it. Would we need to register our group as a limited partnership the state's secretary of state office?
Answer : Probably a general partnership. Re-read Part 1, Step 5 above.
Question : Are we limited as a group to investing in stocks, bonds and real estate? Can we also invest in things like buying and selling cars, boats, auctioned-off storage units, estate sales, etc.?
Answer : A club is free to choose its own investments without restrictions.
Question : How should the profits be shared among the club members?
Answer : Profits are commonly shared in direct proportion to the amount of each member's investment, but you can agree on other arrangements if you like, such as recognizing certain members' investing prowess or willingness to do administrative work on the club's behalf.

Tips.

Don't invest immediately. Give the group a couple of months to deposit money. This will weed out those who aren't really committed to the club or who can't afford it.
When an investment goes wrong, keep your pointing finger to yourself. Use the experience to learn what not to do. Go back to the drawing board and change things if need be.
Trust has to be established for the club to be effective.
Limit investments to cash with no leverage. If margin accounts are used, every partner may be liable for the full debt.

Warnings.

Make sure that everyone understands that they might not make money and could actually lose money. Not all investments are profitable. If they were, everyone would be doing it.
Proper planning, a supportive group, and an understanding leader are vital in promoting cohesion and optimism within the group
Some members may be tempted to embezzle funds. This is why having an operating agreement and ironing out the details is important. So is your choice of club officers.
Be ready for the fact that your group will experience emotional highs and lows in the course of investing their hard-earned money.

July 02, 2020

How to Create an Investment Plan

How to Create an Investment Plan.

Creating a viable investment plan requires a little more than simply establishing a savings account and buying a few random shares of stocks. In order to structure a plan that is right, it's important to understand where you're at and what you want to accomplish with the investments. Then, you'll define how to reach those goals and select the best investment options to reach them. The good news is that it is never too late to create and implement a personal investment plan and begin creating a nest egg for the future.

Part 1 Assessing Where You're At.
1. Select an age-appropriate investment option. Your age will have a significant impact on your investment strategy.
Generally speaking, the younger you are, the more risk you can take. That's because you have more time to recover from a market downturn or loss of value in a particular investment. So, if you're in your 20's, you can allocate more of your portfolio to more aggressive investments (like growth-oriented and small-cap companies for example).
If you're nearing retirement, allocate more of your portfolio to less aggressive investments, like fixed-income, and large-cap value companies.
2. Understand your current financial situation. Be aware of how much disposable income you have available to invest. Take a look at your budget and determine how much money is left over for investments following your monthly expenses and after you have set aside an emergency fund equivalent to three to 6 months' worth of expenses.
3. Develop your risk profile. Your risk profile determines how much risk you're willing to take. Even if you're young, you might not want to take a lot of risks. You'll select your investments based on your risk profile.
Generally speaking, stocks are more volatile than bonds, and bank accounts (checking and savings accounts) are not volatile.
Remember, there are always risk trade-off's to be made. Often, when you take less risk, you make less. Investors are richly rewarded for taking significant risks, but they can also face steep losses.

Part 2 Establishing Your Goals.
1. Set goals for your investments. What do you want to do with the money you make from your investments? Do you want to retire early? Do you want to buy a nice house? Do you want a boat?
As a rule of thumb, you're going to want a diversified portfolio no matter what your goal is (buying a house, saving for a child's college education, etc.). The idea is to let the investment grow over a long period of time so that you have enough to pay for the goal.
If your goal is particularly aggressive, you should put more money in the investment periodically rather than opting for a more risky investment. That way, you're more likely to achieve your goal rather than lose the money that you've invested.
2. Establish a timeline for your goals. How soon do you want to reach your financial goals? That will determine the type of investments you make.
If you're interested in getting a great return on your investment quickly, and you are prepared to take the risk that you could also see a great loss just as quickly, then you'll select more aggressive investments that have the potential for significant return. These include undervalued stocks, penny stocks, and land that might quickly appreciate in value.
If you're interested in building wealth slowly, you'll select investments that generate a slower return on investment over time.
3. Determine the level of liquidity you want. A "liquid" asset is defined as an asset that can be easily converted to cash. That way, you'll have quick access to the money if you need it in an emergency.
Stocks and mutual funds are very liquid and can be converted into cash, usually in a matter of days.
Real estate is not very liquid. It usually takes weeks or months to convert a property to cash.

Part 3 Creating the Plan.
1. Decide on how you want to diversify. You don't want to put all your eggs in one basket. For example: Every month, you might want to put 30% of your investment money into stocks, another 30% into bonds, and the remaining 40% into a savings account. Adjust those percentages and investment options so that they're in line with your financial goals.
2. Ensure that your plan is in line with your risk profile. If you put 90% of your disposable income into stocks every month, then you're going to lose a lot of money if the stock market crashes. That might be a risk that you're willing to take, but be sure that's the case.
3. Consult a financial adviser. If you're uncertain about how to set up a plan in line with your goals and your risk profile, talk to a qualified financial adviser and get some feedback.
4. Investigate your options. There are many different accounts you might use for an investment plan. Familiarize yourself with some of the basics and figure out what works for you.
Set up a short-term emergency savings account with three to six months worth of living expenses. It's important to have this established to protect yourself if something unexpected happens (job loss, injury or illness, etc.). This money should easy to access in a hurry.
Consider your options for long-term savings. If you are thinking about saving up for retirement, you may want to set up an IRA or 401(k). Your employer may offer a 401(k) plan in which they will match your contribution.
If you want to start an education fund, think about 529 plans and Education Savings Accounts (ESAs). Earnings from these accounts are free from federal income tax as long as they’re used to pay for qualified education expenses.

Part 4 Evaluating Your Progress.
1. Monitor your investments from time to time. Check to see if they're performing according to your goals. If not, reevaluate your investments and determine where changes need to be made.
2. Determine if you need to change your risk profile. Generally speaking, as you get older, you'll want to take less risk. Be sure to adjust your investments accordingly.
If you have money in risky investments, it's a good idea to sell them and move the money to more stable investments when you get older.
If your finances tolerate the volatility of your portfolio very well, you might want to take on even more risk so that you can reach your goals sooner.
3. Evaluate whether or not you're contributing enough to reach your financial goals. It may be the case that you're not putting enough money from every paycheck into your investments to make your goals. On a more positive note, you might find that you're way ahead of reaching your goals and that you're putting too much money into your investments on a regular basis. In either case, adjust your contributions accordingly.

Community Q&A.

Question : Is 400, 000 dollars enough money to retire on?
Answer : If you own your own house and a new car, then possibly. If not, then no. Try to retire on 900,000 to a million at least.
Question : As a young investor, where can I find a reasonably priced, honest financial advisor?
Answer : See Hire a Financial Advisor and Select a Financial Advisor.
Question : Is it possible to invest with $500?
Answer : Yes. See Invest Small Amounts of Money Wisely and Invest a Small Amount of Money Online.
Question : Where do I start investing my money?
Answer : Ask this Question :  of a professional, fee-based financial advisor. If you don't want to pay for advice, open an account with a large mutual fund company. Fidelity, Vanguard and T. Rowe Price are excellent choices among many others.
Question : Can a kid make an investment plan?
Answer : Absolutely. Use the above suggestions. The younger you are when you start saving and investing money, the better off you will be later in life.
Question : Which business is less risky and more profitable?
Answer : Profit follows risk. That means that any business that's quite profitable probably involves considerable risk. To address your Question :  specifically, "blue chip" companies typically represent the chance for profit at less risk. They are large, well-established firms such as those on the Dow Industrials index or the S&P 500 index.
Question : Is it good to embark on an investment where $200,000 is needed as capital, while in return I get $100,000 as profit in a year's time?
Answer : It's not possible to say whether such an opportunity is "good" without knowing a lot more about it, but you're talking about a 50% annual return, which is probably not a realistic possibility.
Question : How do I select the kind of business I want to invest in?
Answer : Most people choose a business that they want to invest in based on what their gut instinct is telling them. Risk takers will most likely want to invest in stocks or assets that will yield more significant returns. "Safer" investors will stick to low-risk investments, wishing to gain what they will over a more extended period. Overall, identify the type of investor that you are and then do a bit of research about companies that offer you the returns that you are looking for.
Question : How can I create an account for a simple investment plan?
Answer : It is very easy to open an account with any brokerage firm or mutual fund company. Call them, and they will lead you through the process, or go to their website, and they will have all the instructions you need.

Tips.

Even the best investment plan may need tweaking as changes in the economy occur or your personal circumstances shift in some manner. See those situations as opportunities to rethink your strategy while still keeping your goals uppermost in your mind. Doing so will lend direction to your investment activities and make it easier to see the big picture even as you deal with what is happening today.

June 02, 2020

How to Create a Profitable Property Portfolio

How to Build a Diversified Portfolio.

“Don’t put all your eggs in one basket” is sound advice in life as well as in finance. Diversifying an investment portfolio can help cushion the ups and downs of the market and the broader economy. You can diversify by investing simultaneously in different asset classes. These classes include stocks (or "equities”), bonds, the money market, commodities, precious metals, real estate, gemstones, fine art and any of several other valuable assets. Because most growth in wealth comes from owning stock, equities also represent the most risk in a portfolio, so you will want to diversify your stock holdings. The following article presents a number of commonly acknowledged steps in building wealth through a diversified investment portfolio.

Method 1 Diversifying in Stocks.
1. Invest in many different companies. When you buy stock, you buy a share of the ownership of a company. You can buy stock in individual companies by using an online broker, such as E-Trade, Charles Schwab or TD Ameritrade (among many others). Do not, however, commit a large portion of your money to any single company. If such a company were to get in trouble, you could lose most of your money.
For example, Snap Inc. received a lot of press when it went public in March 2017 with shares priced at $27. However, by the following August the stock price had fallen to $11 per share. That's a drop of about 60%, which would have really hurt someone who had invested a large amount of money at the opening price.
To avoid such a disaster, limit your investment in any one stock to 5% or (preferably) less of your total portfolio.
2. Invest in different sectors. Entire industries often rise and fall as a unit. If the price of oil surges, most oil-related stocks will rise as a group. When the price of oil dips, oil-company stocks tend to fall together. You can protect yourself against this risk by investing in several different industries or sectors of the economy.
Major sectors include technology, health care, financial services, energy, communication services, utilities and agriculture.
The industries or sectors you choose should have a low correlation to each other. That is, invest in various sectors whose stock prices tend to fall at different times.  For example, technology and communication services might be too closely related. On the other hand, energy and health care are not closely related and might be expected to rise or fall separately.
3. Look at foreign stocks. As the economy in one country falters, the economy in other countries might be doing well. For this reason some experts recommend that you diversify by buying foreign stocks in addition to the domestic stocks you own.
Buying stock in multinational corporations automatically exposes you to international markets. For example, if you buy McDonald’s stock, you are already investing in foreign markets, since McDonald’s has expanded into more than 100 countries.

Method 2 Investing in Other Assets.
1. Diversify with bonds. When a company or government need to raise money, they may borrow it by issuing bonds to the public. A bond is a promise to repay borrowed money, accompanied by a certain amount of interest. Owning bonds is a good way to hedge against equity risks, because bond values tend to move in a direction opposite to stock values in general.
You can buy individual bonds or invest in a bond mutual fund. A bond fund holds a portfolio of many different corporate or government bonds. Research a fund to see how diversified its holdings are before buying shares. As with equities, bond diversification is very desirable.
Bonds are rated based on the issuer’s creditworthiness. Find bond ratings at Moody’s or Standard & Poor’s credit-rating services. A highly-rated bond will offer a lower interest rate but a higher likelihood of repayment. Choose bonds or bond funds that reflect your tolerance for risk. An aggressive investor (whose risk tolerance is high) might choose bonds with a higher interest rate but a lower safety rating.
2. Invest in U.S. Treasury bonds or bills for increased safety. U.S. Treasuries are the safest securities you can own. You lend money to the U.S. government and receive a promise for repayment. Treasury bonds often rise when the stock market falls, so they are a good way to diversify your portfolio.
3. Consider money market funds. Such a fund is similar to a savings account. The fund invests money in low-risk vehicles such as certificates of deposit and government securities. You can buy CDs and government bonds yourself, but a money market account can be more convenient, because it will do the investing for you at a nominal fee.
As an added benefit, some money market accounts let you write checks (or use a debit card) on the account. However, you will be limited in the number of withdrawals you can make per year.
4. Forget commodities. Some experts recommend diversifying by buying commodities such as oil, wheat, gold, and livestock. These commodities have no correlation to the stock market, so the value of these commodities should be unaffected if the stock market collapses. However, commodities are a poor bet if you are looking to buy and hold investments. Commodities are meant to be traded regularly and are therefore considered speculation (gambling) rather than investment.
5. Invest in real estate. One way to do this is to buy an apartment building and rent it to tenants. However, you may not have the time or energy to involve yourself in what can be a complicated endeavor. Instead you might invest in REITs, real estate investment trusts. With this option you invest in companies that own real estate. In exchange for your investment, you receive a share of the companies' income.
Many REITs charge very high fees, so they might not be the best way to diversify your portfolio.
Another option is to invest in a mutual fund that invests in REITs. This can save you a lot of research time by letting the fund managers do the research for you. You do pay for that service, of course, but it may be worth it to you if you value your time.

Method 3 Investing in Mutual and Other Funds for Diversity.
1. Diversify easily with mutual funds. A mutual fund is a portfolio operated by a fund manager. Buying into a mutual fund is a great way to diversify because each portfolio can hold multiple equities and other assets. For example, a mutual fund might hold stocks and/or bonds from 40 companies in various sectors. By buying into a fund, you can get instant diversification.
However, mutual funds are not automatically diversified. Everything depends on the assets held in the portfolio. Carefully analyze the individual holdings in the portfolio. Some mutual funds will be better diversified than others.
If you invest through an employer-sponsored plan (such as a 401k or an IRA), chances are you are investing in mutual funds.
2. Invest in an exchange traded fund (ETF). An ETF is like a mutual fund, except you buy it on a stock exchange, not from a fund. ETFs generally have lower fees than mutual funds, so they are a good option for investors.
As with mutual funds, an ETF is not automatically diversified. For example, you might buy an oil ETF, which is concentrated in one industry. Carefully analyze the underlying investments to make sure the ETF has the necessary diversity.
3. Consider an index fund. An index fund is a mutual fund designed to track an index, such as the Standard & Poor’s 500 Index or the DJ Wilshire 5000, which tracks the entire U.S. stock market. It is an easy way to get broad market exposure and thus diversify.
Remember that you want to diversify across asset classes. Don't forget bonds, Treasuries and the money market. Some funds do invest in these other assets.
Remember, too, that all mutual funds and ETFs charge fees for their service. Investigate the size of those fees before committing money. There are many good funds that charge total fees of less than 1% of your account balance, so there is no valid reason to pay more than that.  If you do your research, you should be able to find funds that are properly diversified.
With respect to equities, aim to hold at least 20 stocks spread across various sectors. You can invest by picking individual stocks, or you can more easily diversify by investing in a fund that contains hundreds of stocks and/or bonds.
4. Get expert advice. Every person’s situation is different, and there’s no one right diversification approach for everyone. Instead, you should meet with a "fee-only" financial advisor who can help you analyze your situation. Look for an advisor who is a certified financial planner (CFP). To earn this designation, candidates must meet certain experience, education, and ethics standards. The advisor should also be a fiduciary, someone legally bound to work primarily in your best interests. (Just ask, "Are you a fiduciary?" If you don't get an immediate "yes" for an answer, find another advisor.)
You can find a fee-only financial advisor through the National Association of Personal Financial Advisors. A fee-only advisor is one who does not earn a commission by recommending the purchase of specific financial products.
Discuss your investment goals with your advisor. Many people invest for retirement, and what qualifies as a well constructed portfolio will change over time. As an investor gets older, they will want to increase the ratio of bonds to stocks in their portfolio in order to diminish risk. (Some mutual funds can do that for you automatically.)

Method 4 Buying and Selling Intelligently.
1. Analyze your risk tolerance. How comfortable are you in taking financial risks? The more aggressive an investor is (the larger the rewards they hope to achieve), the larger the stock portion of their portfolio -- and the greater their risk tolerance -- will have to be.
A conservative portfolio might have only 20% in equities, 70% in bonds and 10% in cash and cash equivalents (including certificates of deposit, banker's acceptances, treasury bills and other money-market instruments).
A person more tolerant of risk might invest 70% in equities, 20% in bonds, and 10% in cash or cash equivalents.
2. Invest on a periodic basis. Let’s say you have $6,000 to invest in a year. If you invest all of that money at once, you might inadvertently buy into the market at a moment when equities are priced relatively high. A better option is to invest $500 a month. You would invest the same amount of money in a year's time, but as prices rise and fall, it's likely you would acquire a larger number of shares by year's end.
This type of investing is called “dollar-cost averaging,” and it allows you to take advantage of the inevitable price dips that regularly occur in the market.
3. Avoid market timing. You might dream of getting into the stock market at a price bottom and then selling at a peak. Many people who try to "time" the market in this way end up losing money, because recognizing a market peak or bottom isn't possible until after the fact.
4. Choose appropriate assets based on when you plan to withdraw investment income. For example, if you have 40 years before you plan on retiring, you can ride out peaks and valleys in the stock market. There’s less reason to worry if the market falls when you are in your 30s, because you have plenty of time to recoup your losses. A younger person can afford to be more aggressive in their investing than an older person.
5. Rebalance your portfolio when necessary. Building a diverse portfolio is not a one-time event. Instead, you may need to rebalance your portfolio periodically. Review your investments once a year, and see if they still align with your investment goals.
You might need to rebalance if some assets outperform others. For example, your equities might be on a hot streak for six years. Although they were 50% of your portfolio when you started investing, they now make up 70% through price appreciation. Assuming you still want stocks to form 50% of your portfolio, you’ll need to sell some stocks and replace them with bonds or other assets in order to maintain your preferred ratio.
Rebalancing might trigger tax consequences or transaction fees. Carefully analyze the process with your financial advisor before going ahead.
If you invest through a "balanced" mutual fund, they will typically do this rebalancing for you automatically. (A "balanced" fund invests in both stocks and bonds.)

Warnings.

Diversification can manage risk, but it cannot completely eliminate it. Diversification won’t save you if the entire market goes into a tailspin, as it did in 2008 and 2009. Nonetheless, diversifying is a critically important tool for all investors

April 01, 2020

How to Take a Healthy Approach to Finances in Your Relationship

How to Take a Healthy Approach to Finances in Your Relationship.

If you've ever been in a relationship for very long, especially if you were married or living together, it is almost a guarantee that you've had a money fight. One of the biggest causes of problems in relationships is differences in values and goals and habits when it comes to money, and especially communication about money issues.

Money can't buy you love, but it sure can tear it apart.

The crux of this article is to learn how to talk about money, and learn to align your financial goals. If you can do those two things, you've done more than most couples, and you've done a lot to keep your relationship on solid ground.



Steps.

1. Sit down and talk about house, kids, college education for the kids, a healthy emergency fund, nice cars, travel each year, nice clothes, gadgets and computers, etc.

Then prioritize, and see if you can come up with things in common. If you want different things, it is important that you talk about why, and consider the other person's desires. If that's what makes the other person happy, you should want to make them happy - that's the basis of a good relationship. But relationships aren't one-sided, either, so you should be able to be happy too. The point is that both sides should be considered, and you should look for a win-win solution or compromise so that you can both be happy.

Discuss how you will handle assets and debts that were accumulated before the relationship began. If you are married in the U.S., your spouse's creditors can hold you legally responsible and pursue your assets if you don't keep your finances completely separated, or if you ever get divorced. Plus, your spouse's credit score will affect your ability to get joint credit, which is often necessary for large purchases (such as a home). So if you're married, the best route is to work together to pay off debt as quickly as possible, avoiding late payments. If you're planning on getting married soon, a pre-nuptial agreement can help protect one person's assets from the other person's creditors. If you're not married, you may choose to treat individual debt as a shared expense, or you may not - the choice is yours as a couple.

2. Remove emotions from financial talk. From your first meetings about financial goals to your subsequent weekly talks (addressed in a later step), it's important that the two of you stay calm, don't get hurt or angry over any of the issues, and try to look at these issues objectively. Often financial issues are tied up in all kinds of emotional issues, stemming from childhood, from issues of security to feeling like your way is better, to feeling hurt if your way of spending is criticized in any way, and much more. These emotional issues are all tangled together with financial issues, and it's important that you untangle them and just deal with financial goals and habits:

Don't use emotional, accusatory, or inflammatory language. Use nonviolent communication.

Don't blame the other person or even be negatively critical.

Simply talk about your financial goals, developing a plan for getting to those goals, developing a system for dealing with finances, and so forth.

Also, try not to feel like you're under attack if the other person talks about your goals or habits — let this be an open discussion, and if you feel under attack, stop and take a breath and remember that this isn't a discussion about you personally but about how the two of you are going to meet your goals. Again, think of this as a team effort, not as a you-vs-me effort.

3. Come up with a plan to meet your goals. Once you're able to come up with common financial goals (a huge step - celebrate!), you will need a plan to get you there. This will take into account your joint income, your debt, your savings, how much you can put towards debt and/or saving each month, whether you want to cut back on certain things in order to meet your savings goals, how long you want to give yourself to meet financial goals, and so forth:

Start by having a definite time frame for each goal, and then figure out how much you need to save (or pay towards debt) each month to get to your goals. Try to get into the habit of paying yourselves first.

Create a spending plan (if you haven't already) for each month, and see if you can adjust it to meet that monthly goal. You might need to cut back on some things, or earn extra income, or both. Or you might discover that your goals aren't realistic and you need to cut back on them, reprioritize, or push them back a bit in order to meet them. This plan to meet your goals is how you will align your daily and monthly spending with your long-term goals. It's also a great way to resolve minor short-term disputes - for example, "you should definitely buy fewer shoes, and I should buy fewer video games, so we can buy that house in three years and travel to Europe in two years". Spending plans will evolve as time goes by -- this is inevitable; be prepared to adjust and adapt to your changing situations (promotion at work, unexpected expenses like constant car repairs indicating an upcoming major expense, etc.) as needed.

4. Develop a system for finances that works for both of you. It may take some trial, error and tweaking before you get it right. Keep in mind that no one arrangement is in any way "better" than the other. The best arrangement is the one that creates the most harmony in your relationship.

Use the communal approach if you have very similar spending styles and saving goals. All of the income received by the couple goes into a single account, and all expenses come out of that single account. If you're not on the same page about spending, like if one person tends to make money decisions that the other person tends to disagree with, this approach can lead to frequent arguments. Communication, trust, and discipline are essential for this arrangement to work smoothly.

Use the individual approach if you have different spending styles. Keep separate accounts to which your individual incomes are deposited. Put money into a joint account only for shared expenses. Decide what those shared expenses are going to be (usually rent or mortgage, utilities, etc.) and what proportion each partner will pay. You can each put in half of the expenses, or you may decide to contribute a percentage that's relative to your individual income (e.g. one person makes twice as much per year as the other, so one person puts twice as much towards the shared expenses as the other). The remainder of the money in each person's account is theirs to keep and spend or save however they wish.

Use the allowance approach if it fits. This is a hybrid of the previous two arrangements. Put everything into a joint account, but then give each person an allowance to spend as they wish. The allowance can be in cash, or it can be transferred to individual accounts. Decide as a couple how much of an allowance each person should get. This works best for people who tend to spend money on different things, but who still want to pool their income.

5. Decide who will be handling the "administrative" aspects of your finances. In order to put your financial plan into action, you'll need to figure out how you're going to pay your bills, pay debt, deposit into savings, have money for various spending needs (like gas and groceries and eating out), and so forth. Someone will have to take responsibility for each part of the system (it's better if you're both involved, but you should find what works best for you as a couple). Usually there's one person who's more inclined to do the bookkeeping, and sometimes he or she doesn't mind carrying this responsibility. Otherwise, you'll need to define and assign responsibility. One person might go to the bank while the other updates your financial program (like Quicken or Money) or your checking register to make sure you're in balance, for example.

If one person will be handling the finances more than the other, what is his or her responsibility in consulting with the other before, say, moving money into the savings account or IRA?

If the person who normally handles these tasks can't do it (e.g. medical issue, away on a trip, etc.) does the other person know enough about the process to step in?

6. Have weekly financial meetings. This is very important, and it's a step that many couples overlook. Just because you have common financial goals and a plan and a system doesn't mean that everything is fine. If one person takes responsibility for the finances, for example, and the other is out of the loop, there will likely be problems down the road. You don't want to be in the situation where one partner took care of the finances and the other was blissfully ignorant...until it was revealed that they were way behind on payments and would soon have to file for bankruptcy. That isn't a good time in a relationship! To prevent problems like this, have a weekly meeting where you sit down and talk about finances. You can review your accounts, your spending plan, what is coming up in the next few weeks that you'll need to budget for, any problem areas, what to do with your annual bonus, where you are with your goals, and so forth. Make sure you're both caught up on everything, and that you're working well as a team.

7. Adapt as needed. You may need to adjust the allowances or proportions if a big expense arises, like one person loses a job, or suffers from a major illness or injury, or even takes up a new (and expensive) interest or hobby. For instance, let's say a couple uses the communal approach, and then one partner decides to take up golfing again. The couple may decide that the best way to accommodate this is to designate a "golfing allowance" so that one partner knows exactly how much the other partner is going to be spending on this hobby, and there are no surprises ("You spent how much on that golf club?!?"). (In the golfing example, additional expenses could be drawn from the person's personal allowance.) Many couples modify their arrangement significantly as their circumstances change. A couple may, for example, start off with the individual approach, then transition into the communal approach when they start a family or make a large investment together.

8. Above all, stay positive and be honest. Remember: you're a team. You have the same goals and you want each other to be happy. Team members can help each other out and encourage each other, or they can rip the team apart by being negative, by blaming, by working against common goals. If you always stay positive, you'll succeed as a team. Be encouraging, stay focused on solutions not blame, and make sure love is the foundation of everything you do.



Question : My fiance is always asking me to bail him out of his financial problems and I feel like it's too much for me. How can I approach him without hurting his feelings?

Answer : Tell it to him straight. Honesty is the best policy.



Tips.

No matter how you choose to handle your finances as a couple, you should talk about and dedicate money to an emergency fund of 3 to 6 months' worth of living expenses.

Just because you have individual accounts doesn't mean you don't trust one another. Sometimes it's not convenient to discuss every single purchase in real time, and this can occasionally lead to misunderstandings and even overdraft fees at the bank. It's possible to make individual accounts into joint accounts so that you can see each other's financial activities, but agree not to use money from the other person's designated account without discussing it first, or unless it's an emergency.

Even if you have a 'joint account', you should still have a separate account for yourself, 'cause it gives you independence from your partner.

February 25, 2020

how to take a healthy approach to finances in your relationship

How to Take a Healthy Approach to Finances in Your Relationship.

If you've ever been in a relationship for very long, especially if you were married or living together, it is almost a guarantee that you've had a money fight. One of the biggest causes of problems in relationships is differences in values and goals and habits when it comes to money, and especially communication about money issues.

Money can't buy you love, but it sure can tear it apart.

The crux of this article is to learn how to talk about money, and learn to align your financial goals. If you can do those two things, you've done more than most couples, and you've done a lot to keep your relationship on solid ground.



Steps.

1. Sit down and talk about house, kids, college education for the kids, a healthy emergency fund, nice cars, travel each year, nice clothes, gadgets and computers, etc.

Then prioritize, and see if you can come up with things in common. If you want different things, it is important that you talk about why, and consider the other person's desires. If that's what makes the other person happy, you should want to make them happy - that's the basis of a good relationship. But relationships aren't one-sided, either, so you should be able to be happy too. The point is that both sides should be considered, and you should look for a win-win solution or compromise so that you can both be happy.

Discuss how you will handle assets and debts that were accumulated before the relationship began. If you are married in the U.S., your spouse's creditors can hold you legally responsible and pursue your assets if you don't keep your finances completely separated, or if you ever get divorced. Plus, your spouse's credit score will affect your ability to get joint credit, which is often necessary for large purchases (such as a home). So if you're married, the best route is to work together to pay off debt as quickly as possible, avoiding late payments. If you're planning on getting married soon, a pre-nuptial agreement can help protect one person's assets from the other person's creditors. If you're not married, you may choose to treat individual debt as a shared expense, or you may not - the choice is yours as a couple.

2. Remove emotions from financial talk. From your first meetings about financial goals to your subsequent weekly talks (addressed in a later step), it's important that the two of you stay calm, don't get hurt or angry over any of the issues, and try to look at these issues objectively. Often financial issues are tied up in all kinds of emotional issues, stemming from childhood, from issues of security to feeling like your way is better, to feeling hurt if your way of spending is criticized in any way, and much more. These emotional issues are all tangled together with financial issues, and it's important that you untangle them and just deal with financial goals and habits:

Don't use emotional, accusatory, or inflammatory language. Use nonviolent communication.

Don't blame the other person or even be negatively critical.

Simply talk about your financial goals, developing a plan for getting to those goals, developing a system for dealing with finances, and so forth.

Also, try not to feel like you're under attack if the other person talks about your goals or habits — let this be an open discussion, and if you feel under attack, stop and take a breath and remember that this isn't a discussion about you personally but about how the two of you are going to meet your goals. Again, think of this as a team effort, not as a you-vs-me effort.

3. Come up with a plan to meet your goals. Once you're able to come up with common financial goals (a huge step - celebrate!), you will need a plan to get you there. This will take into account your joint income, your debt, your savings, how much you can put towards debt and/or saving each month, whether you want to cut back on certain things in order to meet your savings goals, how long you want to give yourself to meet financial goals, and so forth:

Start by having a definite time frame for each goal, and then figure out how much you need to save (or pay towards debt) each month to get to your goals. Try to get into the habit of paying yourselves first.

Create a spending plan (if you haven't already) for each month, and see if you can adjust it to meet that monthly goal. You might need to cut back on some things, or earn extra income, or both. Or you might discover that your goals aren't realistic and you need to cut back on them, reprioritize, or push them back a bit in order to meet them. This plan to meet your goals is how you will align your daily and monthly spending with your long-term goals. It's also a great way to resolve minor short-term disputes - for example, "you should definitely buy fewer shoes, and I should buy fewer video games, so we can buy that house in three years and travel to Europe in two years". Spending plans will evolve as time goes by -- this is inevitable; be prepared to adjust and adapt to your changing situations (promotion at work, unexpected expenses like constant car repairs indicating an upcoming major expense, etc.) as needed.

4. Develop a system for finances that works for both of you. It may take some trial, error and tweaking before you get it right. Keep in mind that no one arrangement is in any way "better" than the other. The best arrangement is the one that creates the most harmony in your relationship.

Use the communal approach if you have very similar spending styles and saving goals. All of the income received by the couple goes into a single account, and all expenses come out of that single account. If you're not on the same page about spending, like if one person tends to make money decisions that the other person tends to disagree with, this approach can lead to frequent arguments. Communication, trust, and discipline are essential for this arrangement to work smoothly.

Use the individual approach if you have different spending styles. Keep separate accounts to which your individual incomes are deposited. Put money into a joint account only for shared expenses. Decide what those shared expenses are going to be (usually rent or mortgage, utilities, etc.) and what proportion each partner will pay. You can each put in half of the expenses, or you may decide to contribute a percentage that's relative to your individual income (e.g. one person makes twice as much per year as the other, so one person puts twice as much towards the shared expenses as the other). The remainder of the money in each person's account is theirs to keep and spend or save however they wish.

Use the allowance approach if it fits. This is a hybrid of the previous two arrangements. Put everything into a joint account, but then give each person an allowance to spend as they wish. The allowance can be in cash, or it can be transferred to individual accounts. Decide as a couple how much of an allowance each person should get. This works best for people who tend to spend money on different things, but who still want to pool their income.

5. Decide who will be handling the "administrative" aspects of your finances. In order to put your financial plan into action, you'll need to figure out how you're going to pay your bills, pay debt, deposit into savings, have money for various spending needs (like gas and groceries and eating out), and so forth. Someone will have to take responsibility for each part of the system (it's better if you're both involved, but you should find what works best for you as a couple). Usually there's one person who's more inclined to do the bookkeeping, and sometimes he or she doesn't mind carrying this responsibility. Otherwise, you'll need to define and assign responsibility. One person might go to the bank while the other updates your financial program (like Quicken or Money) or your checking register to make sure you're in balance, for example.

If one person will be handling the finances more than the other, what is his or her responsibility in consulting with the other before, say, moving money into the savings account or IRA?

If the person who normally handles these tasks can't do it (e.g. medical issue, away on a trip, etc.) does the other person know enough about the process to step in?

6. Have weekly financial meetings. This is very important, and it's a step that many couples overlook. Just because you have common financial goals and a plan and a system doesn't mean that everything is fine. If one person takes responsibility for the finances, for example, and the other is out of the loop, there will likely be problems down the road. You don't want to be in the situation where one partner took care of the finances and the other was blissfully ignorant...until it was revealed that they were way behind on payments and would soon have to file for bankruptcy. That isn't a good time in a relationship! To prevent problems like this, have a weekly meeting where you sit down and talk about finances. You can review your accounts, your spending plan, what is coming up in the next few weeks that you'll need to budget for, any problem areas, what to do with your annual bonus, where you are with your goals, and so forth. Make sure you're both caught up on everything, and that you're working well as a team.

7. Adapt as needed. You may need to adjust the allowances or proportions if a big expense arises, like one person loses a job, or suffers from a major illness or injury, or even takes up a new (and expensive) interest or hobby. For instance, let's say a couple uses the communal approach, and then one partner decides to take up golfing again. The couple may decide that the best way to accommodate this is to designate a "golfing allowance" so that one partner knows exactly how much the other partner is going to be spending on this hobby, and there are no surprises ("You spent how much on that golf club?!?"). (In the golfing example, additional expenses could be drawn from the person's personal allowance.) Many couples modify their arrangement significantly as their circumstances change. A couple may, for example, start off with the individual approach, then transition into the communal approach when they start a family or make a large investment together.

8. Above all, stay positive and be honest. Remember: you're a team. You have the same goals and you want each other to be happy. Team members can help each other out and encourage each other, or they can rip the team apart by being negative, by blaming, by working against common goals. If you always stay positive, you'll succeed as a team. Be encouraging, stay focused on solutions not blame, and make sure love is the foundation of everything you do.



Question : My fiance is always asking me to bail him out of his financial problems and I feel like it's too much for me. How can I approach him without hurting his feelings?

Answer : Tell it to him straight. Honesty is the best policy.



Tips.

No matter how you choose to handle your finances as a couple, you should talk about and dedicate money to an emergency fund of 3 to 6 months' worth of living expenses.

Just because you have individual accounts doesn't mean you don't trust one another. Sometimes it's not convenient to discuss every single purchase in real time, and this can occasionally lead to misunderstandings and even overdraft fees at the bank. It's possible to make individual accounts into joint accounts so that you can see each other's financial activities, but agree not to use money from the other person's designated account without discussing it first, or unless it's an emergency.

Even if you have a 'joint account', you should still have a separate account for yourself, 'cause it gives you independence from your partner.

February 25, 2020

How to Manage Business Finances

How to Manage Business Finances.

Effective and efficient management of finances is critical to the growth and success of any small business. The easiest way to do this is to hire a dedicated accountant or bookkeeper right away. If you don't have the resources to hire a professional, take advantage of bookkeeping and other financial software to track your cash flow and generate reports. That way you can stay on top of your profits and act quickly to minimize losses.



Method 1 Taking Payments and Paying Expenses.

1. Create a budget and review it regularly. A budget is essential if you want your business to be profitable. Categorize your business's regular expenses to determine how much income your business needs to generate.

Creating multiple budgets can be helpful. For example, you may want to create one with a bare minimum of sales, so you know how to allocate the money when there isn't much coming in.

Use your budget to plan for the growth of your business, such as hiring a new employee or expanding your advertising and marketing.

2. Open a separate business bank account. Even if you're running your business as a sole proprietorship, you still want to keep your business finances separate from your personal finances. Mixing your assets together can cause problems if you're audited, or sued by a business creditor.

Don't take money from your business bank account to pay for personal expenses. If you need money from the business, label it appropriately as a draw from the business and transfer the money to your personal bank account first.

3. Decide what types of payment you'll accept. Having a variety of payment options is a convenience for your customers. Each method of payment has its own costs and risks that you'll want to take into account.

Cash is the simplest method of payment, but presents security risks. If you're going to take cash, have a secure safe and plan on making regular bank deposits.

If you want to take credit or debit cards, look into the different services to find the one that best suits your needs and your overall budget. You typically have to pay a subscription fee for the service, plus a fee per transaction. You may want to require a minimum purchase amount for credit or debit cards.

4. Standardize payment terms. You should have a policy in place that establishes rules for payment of your products or services. Apply those rules to all customers, rather than creating payment terms for individual clients on a piecemeal basis.

Universal payment terms will make your bookkeeping easier, and can smooth your collections process. If you apply the same terms across the board, you also don't have to worry about remembering the arrangements you made with each individual customer.



Method 2 Tracking Overall Cash Flow.

1. Choose your accounting method. To manage your business finances, you must choose either the cash or accrual accounting method and use it consistently. With the cash method, you record sales and expenses when money actually changes hands. For the accrual method, on the other hand, you record sales and expenses when they take place, rather than when money changes hands.

For example, suppose you are a construction contractor and you receive an invoice. If you were using the cash method, you would record the expense in your books when you actually paid the invoice. However, if you were using the accrual method you would record it the day you received it, even if you didn't pay it for several days or weeks.

Cash accounting works better if you have a small business that deals primarily with point-of-sale transactions. If you deal with larger contracts that aren't paid all at once, the accrual method may be a better option for you.

2. Record all sales and expenses. Set up a system so that all sales and expenses are put on the books the day they occur, following the accounting method you've chosen. Only doing the books on a monthly or quarterly basis may result in errors.

If you have a store, you can use a point of sale system to track sales and produce reports that you can easily use to reconcile your books each day.

When you have employees or other partners buying things for the business, make sure you get those receipts as soon as possible so you can keep your books up to date.

3. Purchase bookkeeping software. There are a number of bookkeeping programs, such as QuickBooks, that you can purchase and use to manage your business finances. Most of these programs are arranged so that you pay a monthly subscription fee to use the service.

When you use a subscription, software-as-a-service platform, your data is stored in the cloud so that you don't have to worry as much about security or data loss.

These programs can be connected to your business bank accounts, credit cards, and other systems so that much of the information is entered into your books automatically.

4. Hire an accountant if you need help. If you don't have accounting and bookkeeping education and experience, you may want to hire someone who does. Particularly if you've borrowed money to start up your business, a professional can help you avoid potentially costly mistakes.

Check with the local licensing or regulatory authority to make sure any financial professional you want to hire has all the necessary education and certifications, and that their licenses are active and free of any disciplinary actions.

If you can't afford to have someone working for your business full-time, you may be able to consult with an accountant periodically, or use a bookkeeper occasionally to go over your books and correct any errors.



Method 3 Generating Financial Reports.

1. Download bookkeeping software to simplify report creation. When you use bookkeeping software, you also have the ability to generate the financial reports you need with the click of a button. However, the reports created are only as good as the information you put into the software.

Go over your sales and expenses before you generate your final reports. Reconcile your books with your receipts and bank account statements to make sure the information is correct.

Once you're satisfied with the information, click through to create your reports. You'll typically be prompted to enter the dates you want the report to cover, and the specific information you want included.

2. Create quarterly profit and loss (P&L) reports. Your P&L reports are among the most important tools for assessing and growing your business. Many bookkeeping programs will generate these reports for you if you input the parameters of the report you want.

Your P&L starts with your total sales. You then subtract from those sales the cost of the products or services sold to get your gross profit.

Take your gross profit and subtract other expenses, such as rent or utilities, from that number. You'll be left with your net profit for the time period.

P&L reports are especially important if you anticipate needing small business loans or other outside funding.

3. Prepare quarterly business financial statements. In addition to your P&L, there are several other statements, such as your cash flow statement and your balance sheet, that help you determine where money is flowing in and out of your business.

Your cash flow statement reports the increase or decrease of money flowing into your business. You can quickly see the amount of cash on hand and what you did with it, as well as where that money came from (whether from sales or other sources, such as a loan).

The balance sheet summarizes your business's assets and liabilities. It will be particularly helpful if you have a business credit card, or if you've taken out a small business loan to help fund the start up of your business.

4. Update your projections based on your actual cash flow. Your business plan likely includes cash flow and profit projections several years into the future. As you operate your business, you'll want to check periodically and make sure these projections are still accurate given your business's actual performance.

Look at your business plan and update it twice a year. You also want to update it any time you're applying for a small business loan or courting investors, so they have the most up-to-date information to make their decision.

Depending on how your actual performance compares to your initial expectations, you also may want to adjust some of your business goals and plans for growth or expansion.



Method 4 Filing Business Taxes.

1. Get a separate tax ID number for your business. Even if you're running your business as a sole proprietorship, a separate tax ID number for your business will help keep your business and personal finances separate.

If you have a US business, you can get an employer identification number (EIN) easily online at the IRS's website. Simply go to https://sa.www4.irs.gov/modiein/individual/index.jsp and begin your application.

In other countries, consult a tax professional or business attorney to find out what you need to do to correctly document your business for tax purposes.

2. Choose your tax year. For tax purposes, you can use the calendar year, or any 12-month period that starts on a specific date. In most cases, it's easiest to use the calendar year. When you choose your tax year, you have to use it consistently as long as you remain in business. Typically, you can't change it later.

Most businesses use the calendar year as their tax year. If you're thinking about using a different 12-month period, you may want to consult an attorney or tax professional first.

3. Maintain records of deductible expenses. When you run your own business, you have the ability to deduct many of your business-related expenses on your taxes. These deductions lower your profits and decrease your business's tax liability.

Generally, anything you buy to conduct business will be at least partially deductible. The expense must be reasonable. If you're unsure about something, save the receipts and discuss it with a qualified tax professional.

Expenses such as rent and utilities for commercial space, computers, and office supplies are examples of business expenses that typically are deductible.

4. Use depreciation for more costly assets and fixtures. If you buy something to use in your business that you anticipate using for many years, you typically can't deduct the entire cost at once. Rather, you deduct a portion of it for several years.

The amount and length of time you can claim depreciation depends on how the expense is categorized and the length of its useful life. These are defined by the government.

If you have a significant amount of purchases that are subject to depreciation, it's a good idea to have a tax professional do your taxes so you can make sure you're depreciating them using the right method and getting the maximum possible deduction.

5. Check tax and licensing obligations with your state or local government. State and local governments also may tax businesses, or require you to maintain certifications or licenses if you want to operate your business.

Your local small business association or chamber of commerce typically will have information on the licenses required to operate a small business in your area.

Visit the website of your state or local government tax authority to find out what taxes you must pay as a business owner. For example, if you have employees you typically are required to pay for worker's compensation insurance.

6. Set up the correct withholding for any employees. If you hire regular employees and pay them salary or hourly wages, you must withhold federal taxes and Social Security from their paychecks. You also may need to withhold for state taxes.

Many small businesses contract with a payroll service to take care of their withholding and the issuing of paychecks for them. Talk to business owners in your area to find out how they handle payroll.

7. Pay quarterly estimated taxes. As a business owner, you typically must pay taxes on a quarterly basis and then reconcile on the business tax return at the end of the year. Your state may have estimated tax filing requirements as well.

Depending on the nature of your business, you also may have to collect state or local sales tax for all purchases.

8. Use a tax preparation service to simplify the process. Many companies that offer bookkeeping services also have tax preparation services. Connecting the accounts together can save you a lot of hassle because they will automatically categorize your deductions and estimate quarterly tax payments for you.

As with bookkeeping services, tax preparation services are only as good as the information you put into them. If you're unsure about whether something qualifies as a deduction, talk to a qualified tax professional.

February 10, 2020

how to manage business finances

How to Manage Business Finances.

Effective and efficient management of finances is critical to the growth and success of any small business. The easiest way to do this is to hire a dedicated accountant or bookkeeper right away. If you don't have the resources to hire a professional, take advantage of bookkeeping and other financial software to track your cash flow and generate reports. That way you can stay on top of your profits and act quickly to minimize losses.



Method 1 Taking Payments and Paying Expenses.

1. Create a budget and review it regularly. A budget is essential if you want your business to be profitable. Categorize your business's regular expenses to determine how much income your business needs to generate.

Creating multiple budgets can be helpful. For example, you may want to create one with a bare minimum of sales, so you know how to allocate the money when there isn't much coming in.

Use your budget to plan for the growth of your business, such as hiring a new employee or expanding your advertising and marketing.

2. Open a separate business bank account. Even if you're running your business as a sole proprietorship, you still want to keep your business finances separate from your personal finances. Mixing your assets together can cause problems if you're audited, or sued by a business creditor.

Don't take money from your business bank account to pay for personal expenses. If you need money from the business, label it appropriately as a draw from the business and transfer the money to your personal bank account first.

3. Decide what types of payment you'll accept. Having a variety of payment options is a convenience for your customers. Each method of payment has its own costs and risks that you'll want to take into account.

Cash is the simplest method of payment, but presents security risks. If you're going to take cash, have a secure safe and plan on making regular bank deposits.

If you want to take credit or debit cards, look into the different services to find the one that best suits your needs and your overall budget. You typically have to pay a subscription fee for the service, plus a fee per transaction. You may want to require a minimum purchase amount for credit or debit cards.

4. Standardize payment terms. You should have a policy in place that establishes rules for payment of your products or services. Apply those rules to all customers, rather than creating payment terms for individual clients on a piecemeal basis.

Universal payment terms will make your bookkeeping easier, and can smooth your collections process. If you apply the same terms across the board, you also don't have to worry about remembering the arrangements you made with each individual customer.



Method 2 Tracking Overall Cash Flow.

1. Choose your accounting method. To manage your business finances, you must choose either the cash or accrual accounting method and use it consistently. With the cash method, you record sales and expenses when money actually changes hands. For the accrual method, on the other hand, you record sales and expenses when they take place, rather than when money changes hands.

For example, suppose you are a construction contractor and you receive an invoice. If you were using the cash method, you would record the expense in your books when you actually paid the invoice. However, if you were using the accrual method you would record it the day you received it, even if you didn't pay it for several days or weeks.

Cash accounting works better if you have a small business that deals primarily with point-of-sale transactions. If you deal with larger contracts that aren't paid all at once, the accrual method may be a better option for you.

2. Record all sales and expenses. Set up a system so that all sales and expenses are put on the books the day they occur, following the accounting method you've chosen. Only doing the books on a monthly or quarterly basis may result in errors.

If you have a store, you can use a point of sale system to track sales and produce reports that you can easily use to reconcile your books each day.

When you have employees or other partners buying things for the business, make sure you get those receipts as soon as possible so you can keep your books up to date.

3. Purchase bookkeeping software. There are a number of bookkeeping programs, such as QuickBooks, that you can purchase and use to manage your business finances. Most of these programs are arranged so that you pay a monthly subscription fee to use the service.

When you use a subscription, software-as-a-service platform, your data is stored in the cloud so that you don't have to worry as much about security or data loss.

These programs can be connected to your business bank accounts, credit cards, and other systems so that much of the information is entered into your books automatically.

4. Hire an accountant if you need help. If you don't have accounting and bookkeeping education and experience, you may want to hire someone who does. Particularly if you've borrowed money to start up your business, a professional can help you avoid potentially costly mistakes.

Check with the local licensing or regulatory authority to make sure any financial professional you want to hire has all the necessary education and certifications, and that their licenses are active and free of any disciplinary actions.

If you can't afford to have someone working for your business full-time, you may be able to consult with an accountant periodically, or use a bookkeeper occasionally to go over your books and correct any errors.



Method 3 Generating Financial Reports.

1. Download bookkeeping software to simplify report creation. When you use bookkeeping software, you also have the ability to generate the financial reports you need with the click of a button. However, the reports created are only as good as the information you put into the software.

Go over your sales and expenses before you generate your final reports. Reconcile your books with your receipts and bank account statements to make sure the information is correct.

Once you're satisfied with the information, click through to create your reports. You'll typically be prompted to enter the dates you want the report to cover, and the specific information you want included.

2. Create quarterly profit and loss (P&L) reports. Your P&L reports are among the most important tools for assessing and growing your business. Many bookkeeping programs will generate these reports for you if you input the parameters of the report you want.

Your P&L starts with your total sales. You then subtract from those sales the cost of the products or services sold to get your gross profit.

Take your gross profit and subtract other expenses, such as rent or utilities, from that number. You'll be left with your net profit for the time period.

P&L reports are especially important if you anticipate needing small business loans or other outside funding.

3. Prepare quarterly business financial statements. In addition to your P&L, there are several other statements, such as your cash flow statement and your balance sheet, that help you determine where money is flowing in and out of your business.

Your cash flow statement reports the increase or decrease of money flowing into your business. You can quickly see the amount of cash on hand and what you did with it, as well as where that money came from (whether from sales or other sources, such as a loan).

The balance sheet summarizes your business's assets and liabilities. It will be particularly helpful if you have a business credit card, or if you've taken out a small business loan to help fund the start up of your business.

4. Update your projections based on your actual cash flow. Your business plan likely includes cash flow and profit projections several years into the future. As you operate your business, you'll want to check periodically and make sure these projections are still accurate given your business's actual performance.

Look at your business plan and update it twice a year. You also want to update it any time you're applying for a small business loan or courting investors, so they have the most up-to-date information to make their decision.

Depending on how your actual performance compares to your initial expectations, you also may want to adjust some of your business goals and plans for growth or expansion.



Method 4 Filing Business Taxes.

1. Get a separate tax ID number for your business. Even if you're running your business as a sole proprietorship, a separate tax ID number for your business will help keep your business and personal finances separate.

If you have a US business, you can get an employer identification number (EIN) easily online at the IRS's website. Simply go to https://sa.www4.irs.gov/modiein/individual/index.jsp and begin your application.

In other countries, consult a tax professional or business attorney to find out what you need to do to correctly document your business for tax purposes.

2. Choose your tax year. For tax purposes, you can use the calendar year, or any 12-month period that starts on a specific date. In most cases, it's easiest to use the calendar year. When you choose your tax year, you have to use it consistently as long as you remain in business. Typically, you can't change it later.

Most businesses use the calendar year as their tax year. If you're thinking about using a different 12-month period, you may want to consult an attorney or tax professional first.

3. Maintain records of deductible expenses. When you run your own business, you have the ability to deduct many of your business-related expenses on your taxes. These deductions lower your profits and decrease your business's tax liability.

Generally, anything you buy to conduct business will be at least partially deductible. The expense must be reasonable. If you're unsure about something, save the receipts and discuss it with a qualified tax professional.

Expenses such as rent and utilities for commercial space, computers, and office supplies are examples of business expenses that typically are deductible.

4. Use depreciation for more costly assets and fixtures. If you buy something to use in your business that you anticipate using for many years, you typically can't deduct the entire cost at once. Rather, you deduct a portion of it for several years.

The amount and length of time you can claim depreciation depends on how the expense is categorized and the length of its useful life. These are defined by the government.

If you have a significant amount of purchases that are subject to depreciation, it's a good idea to have a tax professional do your taxes so you can make sure you're depreciating them using the right method and getting the maximum possible deduction.

5. Check tax and licensing obligations with your state or local government. State and local governments also may tax businesses, or require you to maintain certifications or licenses if you want to operate your business.

Your local small business association or chamber of commerce typically will have information on the licenses required to operate a small business in your area.

Visit the website of your state or local government tax authority to find out what taxes you must pay as a business owner. For example, if you have employees you typically are required to pay for worker's compensation insurance.

6. Set up the correct withholding for any employees. If you hire regular employees and pay them salary or hourly wages, you must withhold federal taxes and Social Security from their paychecks. You also may need to withhold for state taxes.

Many small businesses contract with a payroll service to take care of their withholding and the issuing of paychecks for them. Talk to business owners in your area to find out how they handle payroll.

7. Pay quarterly estimated taxes. As a business owner, you typically must pay taxes on a quarterly basis and then reconcile on the business tax return at the end of the year. Your state may have estimated tax filing requirements as well.

Depending on the nature of your business, you also may have to collect state or local sales tax for all purchases.

8. Use a tax preparation service to simplify the process. Many companies that offer bookkeeping services also have tax preparation services. Connecting the accounts together can save you a lot of hassle because they will automatically categorize your deductions and estimate quarterly tax payments for you.

As with bookkeeping services, tax preparation services are only as good as the information you put into them. If you're unsure about whether something qualifies as a deduction, talk to a qualified tax professional.

February 08, 2020