Ten Ways to Create Shareholder Value (part 1).

Ten Ways to Create Shareholder Value (part 1).

by Alfred Rappaport.

It’s become fashionable to blame the pursuit of shareholder value for the ills besetting corporate America: managers and investors obsessed with next quarter’s results, failure to invest in long-term growth, and even the accounting scandals that have grabbed headlines. When executives destroy the value they are supposed to be creating, they almost always claim that stock market pressure made them do it.

The reality is that the shareholder value principle has not failed management; rather, it is management that has betrayed the principle. In the 1990s, for example, many companies introduced stock options as a major component of executive compensation. The idea was to align the interests of management with those of shareholders. But the generous distribution of options largely failed to motivate value-friendly behavior because their design almost guaranteed that they would produce the opposite result. To start with, relatively short vesting periods, combined with a belief that short-term earnings fuel stock prices, encouraged executives to manage earnings, exercise their options early, and cash out opportunistically. The common practice of accelerating the vesting date for a CEO’s options at retirement added yet another incentive to focus on short-term performance.

Of course, these shortcomings were obscured during much of that decade, and corporate governance took a backseat as investors watched stock prices rise at a double-digit clip. The climate changed dramatically in the new millennium, however, as accounting scandals and a steep stock market decline triggered a rash of corporate collapses. The ensuing erosion of public trust prompted a swift regulatory response—most notably, the 2002 passage of the Sarbanes-Oxley Act (SOX), which requires companies to institute elaborate internal controls and makes corporate executives directly accountable for the accuracy of financial statements. Nonetheless, despite SOX and other measures, the focus on short-term performance persists.

In their defense, some executives contend that they have no choice but to adopt a short-term orientation, given that the average holding period for stocks in professionally managed funds has dropped from about seven years in the 1960s to less than one year today. Why consider the interests of long-term shareholders when there are none? This reasoning is deeply flawed. What matters is not investor holding periods but rather the market’s valuation horizon—the number of years of expected cash flows required to justify the stock price. While investors may focus unduly on near-term goals and hold shares for a relatively short time, stock prices reflect the market’s long view. Studies suggest that it takes more than ten years of value-creating cash flows to justify the stock prices of most companies. Management’s responsibility, therefore, is to deliver those flows—that is, to pursue long-term value maximization regardless of the mix of high- and low-turnover shareholders. And no one could reasonably argue that an absence of long-term shareholders gives management the license to maximize short-term performance and risk endangering the company’s future. The competitive landscape, not the shareholder list, should shape business strategies.

The competitive landscape, not the shareholder list, should shape business strategies.

What do companies have to do if they are to be serious about creating value? In this article, I draw on my research and several decades of consulting experience to set out ten basic governance principles for value creation that collectively will help any company with a sound, well-executed business model to better realize its potential for creating shareholder value. Though the principles will not surprise readers, applying some of them calls for practices that run deeply counter to prevailing norms. I should point out that no company—with the possible exception of Berkshire Hathaway—gets anywhere near to implementing all these principles. That’s a pity for investors because, as CEO Warren Buffett’s fellow shareholders have found, there’s a lot to be gained from owning shares in what I call a level 10 company—one that applies all ten principles. (For more on Berkshire Hathaway’s application of the ten principles, please read my colleague Michael Mauboussin’s analysis in the sidebar “Approaching Level 10: The Story of Berkshire Hathaway.”).

Principle 1.

Do not manage earnings or provide earnings guidance.
Companies that fail to embrace this first principle of shareholder value will almost certainly be unable to follow the rest. Unfortunately, that rules out most corporations because virtually all public companies play the earnings expectations game. A 2006 National Investor Relations Institute study found that 66% of 654 surveyed companies provide regular profit guidance to Wall Street analysts. A 2005 survey of 401 financial executives by Duke University’s John Graham and Campbell R. Harvey, and University of Washington’s Shivaram Rajgopal, reveals that companies manage earnings with more than just accounting gimmicks: A startling 80% of respondents said they would decrease value-creating spending on research and development, advertising, maintenance, and hiring in order to meet earnings benchmarks. More than half the executives would delay a new project even if it entailed sacrificing value.

What’s so bad about focusing on earnings? First, the accountant’s bottom line approximates neither a company’s value nor its change in value over the reporting period. Second, organizations compromise value when they invest at rates below the cost of capital (overinvestment) or forgo investment in value-creating opportunities (underinvestment) in an attempt to boost short-term earnings. Third, the practice of reporting rosy earnings via value-destroying operating decisions or by stretching permissible accounting to the limit eventually catches up with companies. Those that can no longer meet investor expectations end up destroying a substantial portion, if not all, of their market value. WorldCom, Enron, and Nortel Networks are notable examples.

Principle 2.

Make strategic decisions that maximize expected value, even at the expense of lowering near-term earnings.
Companies that manage earnings are almost bound to break this second cardinal principle. Indeed, most companies evaluate and compare strategic decisions in terms of the estimated impact on reported earnings when they should be measuring against the expected incremental value of future cash flows instead. Expected value is the weighted average value for a range of plausible scenarios. (To calculate it, multiply the value added for each scenario by the probability that that scenario will materialize, then sum up the results.) A sound strategic analysis by a company’s operating units should produce informed responses to three questions: First, how do alternative strategies affect value? Second, which strategy is most likely to create the greatest value? Third, for the selected strategy, how sensitive is the value of the most likely scenario to potential shifts in competitive dynamics and assumptions about technology life cycles, the regulatory environment, and other relevant variables?

At the corporate level, executives must also address three questions: Do any of the operating units have sufficient value-creation potential to warrant additional capital? Which units have limited potential and therefore should be candidates for restructuring or divestiture? And what mix of investments in operating units is likely to produce the most overall value?

Principle 3.

Make acquisitions that maximize expected value, even at the expense of lowering near-term earnings.
Companies typically create most of their value through day-to-day operations, but a major acquisition can create or destroy value faster than any other corporate activity. With record levels of cash and relatively low debt levels, companies increasingly use mergers and acquisitions to improve their competitive positions: M&A announcements worldwide exceeded $2.7 trillion in 2005.

Companies (even those that follow Principle 2 in other respects) and their investment bankers usually consider price/earnings multiples for comparable acquisitions and the immediate impact of earnings per share (EPS) to assess the attractiveness of a deal. They view EPS accretion as good news and its dilution as bad news. When it comes to exchange-of-shares mergers, a narrow focus on EPS poses an additional problem on top of the normal shortcomings of earnings. Whenever the acquiring company’s price/earnings multiple is greater than the selling company’s multiple, EPS rises. The inverse is also true. If the acquiring company’s multiple is lower than the selling company’s multiple, earnings per share decline. In neither case does EPS tell us anything about the deal’s long-term potential to add value.

Sound decisions about M&A deals are based on their prospects for creating value, not on their immediate EPS impact, and this is the foundation for the third principle of value creation. Management needs to identify clearly where, when, and how it can accomplish real performance gains by estimating the present value of the resulting incremental cash flows and then subtracting the acquisition premium.

Value-oriented managements and boards also carefully evaluate the risk that anticipated synergies may not materialize. They recognize the challenge of postmerger integration and the likelihood that competitors will not stand idly by while the acquiring company attempts to generate synergies at their expense. If it is financially feasible, acquiring companies confident of achieving synergies greater than the premium will pay cash so that their shareholders will not have to give up any anticipated merger gains to the selling companies’ shareholders. If management is uncertain whether the deal will generate synergies, it can hedge its bets by offering stock. This reduces potential losses for the acquiring company’s shareholders by diluting their ownership interest in the postmerger company.

to be continued part 2.

July 25, 2020

How to Keep Track of Your Personal Finances

How to Keep Track of Your Personal Finances.

Staying on top of your personal finances can be challenging, tedious, and even discouraging, but for most people this process is a necessary evil. Spending more than you earn is a sure way to bury yourself in debt, and not being careful about precisely where your money is going can leave you struggling to pay for necessities like groceries. Fortunately, learning how to keep track of your personal finances is not difficult, but it does require a fair amount of time and discipline. Following either of the methods below will help you down the path of becoming better with your money.

Method 1 Keeping Track of Your Finances Manually.
1. Create a system. The most important part of keeping track of your finances is consistency. Regardless of which way you choose to log your transactions, you have to be able to refer back to them easily and reliably. Be sure to include important information like the date, amount spent or gained, and expense category with each entry. Also be sure to make your recording consistent. For example, you can record transactions as soon as they happen, every time you get home, or even once a week.
Expense categories are an easy way to figure out what you spend the most money on. These categories may include things like housing, utilities, household expenses, groceries, health care, pets, personal expenses, and entertainment. These categories will of course vary from person to person and you can be as specific or general as you want with your categories. For example, you may simply want to record expenses as either need or wants. The important thing is that your categorizing is consistent between transactions.
2. Keep a notebook. The absolute simplest way of tracking your finances is to write a record of each transaction in a notebook. By always carrying this notebook, you are able to know exactly where every dollar came from and went. At the end of each period (week or month), you can also transfer the information to a computer spreadsheet so that it is more accessible.
You can organize this notebook in several different ways. For simplicity, you may simply choose to use the notebook for spending. Alternately, you can treat it more like a logbook and record both your income and your expenses and how they affect the balance of your checking account. Some people choose to use a notebook to track cash expenses only, combining it with debit and credit card expenses at the end of each month or week.
3. Keep a checkbook. It may be considered old-fashioned, but recording your transactions in a checkbook is still a simple and reliable way of tracking your finances. The recording process involves simply writing down the amount of the transaction, writing a description of the transaction (a good place to write down the category), and then adding or subtracting the amount from account balance. For more information, and a look at balance a checkbook, see how to balance a checkbook
4. Use a computer spreadsheet. By using a simple spreadsheet on a program like Microsoft Excel, you can organize your expenses clearly and even create graphs easily to better understand your spending. They are many specific ways to do this, but a good start might be to create a personal budget. This would be done on a week or monthly basis, and include information like the amount, category, and date for each transaction.
To create a personal budget, start by listing your fixed expenses each month (like rent and utilities) as an expense on the first day of each month, along with your expected income for that month. You can then subtract other expenses or add other incomes as necessary throughout the week or month.
5. Analyze your finances at the end of each month. Regardless of which method you choose to keep track of each transaction, you will need also need some way of combining and analyzing your spending at the end of each month. This will allow you to see where your money is going and allow you to make adjustments for next month if needed.
Start by totaling your expenses and compare the sum to your income for the month. Obviously, if you're spending more than you're making, you'll have to identify the source of your overspending and try to make a change for next month.
To identify where your money is going, you can try totaling your spending by category. That is, you should combine the totals spent in each expense category and compare them either to each other or to your total expenditures. Specifically, you can divide the total of each category by the sum total of all of your expenses for the month to get the percentage of total expenses accounted for by that category. This will allows to you identify areas where you might be overspending.
You can also use this information to create a working budget for next month.

Method 2 Using a Personal Finance Application.
1. Select a personal finance app. There are a multitude of personal-finance apps available both for mobile phones and web browsers that offer services to track, tabulate, and analyze your expenses. These apps also offer a range of comprehensiveness, from simply acting as a budget-creation tool to displaying all your assets in one place. In choosing one, keep in mind your financial goals and ability to commit to using the app.
You may want to choose a comprehensive app that pulls in all of your financial information from bank accounts, retirement accounts, and other sources. These often also track your bills and remind you to pay them. Award-winning examples include:
Mint, Personal Capital, Pocket Expense.
Alternately, you may want a simpler app that just keep track of your expenses and/or your income. These apps also connect to bank, but offer a simpler interface and fewer options than the more comprehensive apps. Good examples include:
Level Money, BillGuard.
Finally, if you want to use an app to track your finances, but don't feel comfortable handing over your financial information (bank passwords and account numbers), there are also apps that function as manual-input ledgers and analysis tools. Good examples include:
Mvelopes, You Need a Budget.
2. Input your information into the app. If the app you have chosen requires bank information, input your information and wait for the app to sync with your accounts. Alternately, input your own transaction information as you spend money and watch the app work its magic. The apps will guide you during this process.
3. Study the app's analysis. At regular intervals, the apps will supply you with analyses of your spending habits. Be sure to actually read these reports and think about adjusting your spending habits if necessary. Some apps will provide guidance on how to save money in certain areas.

Tips.

This article is mainly about keeping track of your expenses and income. For more information about managing your finances and saving money, see how to save money and how to manage your finances.
Try to minimize your use of cash, as it tends to be more difficult to track than debit or credit card expenses.

June 04, 2020

How to Get Money Quickly Without Borrowing It

How to Get Money Quickly Without Borrowing It.

It can be difficult to come up with cash at short notice for an emergency. Fewer and fewer people have secure jobs and savings accounts to rely on during tough times or unexpected circumstances. Fortunately, there are still ways to scrape together necessary funds quickly.

Method 1 Doing Odd Jobs In Your Neighborhood.
1. Advertise your services. Build your own website or post on online pages such as Craigslist.
Specify in your advertisement what types of jobs you can do (home repairs, plumbing, electrical work, yard work, cleaning etc.), what you charge, and when you are available.
Provide multiple ways to contact you. If you can be reached by both phone and email, you might have a better chance at getting work.
2. Build your potential customer base. Speak to nearby friends and neighbors first.
Tell them that you need money and are willing to do light housework and yard work in the area.
Ask them to tell their friends and neighbors too, and recommend your services.
Your neighbors and friends may very well end up being your first customers. Be sure to tell them to spread the word that you do good work when you're finished.
3. Charge reasonable rates for your work. The main reason someone might consider hiring you over a professional service is that you're a lot less expensive.
Ask for a small amount of money that you can live with, rather than a large sum.
A good way to estimate what to ask for is to set a low hourly rate, say $8 or $10. Also, prorate your work to the nearest half hour. In other words, if you work for 6 hours and 33 minutes, just bill for 6 hours and 30 minutes. That keeps things simple.
4. Act professionally. Dress in clean clothes and smile when people answer their doors. Offer a handshake when you introduce yourself. Make eye contact.
Be sure to describe exactly what types of services you offer, whether its small home maintenance, yard work, cleaning etc.
Be willing to do jobs on weekends and evenings.
Return calls and job offers quickly and promptly.
5. Bring your own equipment. If you have specialized equipment you can bring, such as a toolbox for house repairs or a rake for leaves and grass, bring it with you.
Heavier items like ladders and lawnmowers can be left at home, but be sure to mention you have access to your own.
Don't accept jobs that you don't have the equipment to complete.

Method 2 Finding Short-Term Jobs.
1. Think about what your skills are. You might be able to find a short term job more easily if you have certain skills.
Bookkeeping and accounting jobs are often short term or temporary. If you have skills as a bookkeeper, you can often find a well paying position on a short-term basis.
Offices and human resource departments often look for part-time workers when they have an increase in paperwork or filing.
If you have tech skills, some firms or websites may hire on a short-term basis.
2. Check the local listings for short-term jobs. The online marketplace Craigslist features an “ETC” category under the Jobs heading local newspapers also often carry advertisements for quick, temporary work. Check everywhere you can and think about what you're able to do.
Take a job as a sign waver. All kinds of businesses hire sign wavers to stand outside for 8 or 10 hours and wave a large sign at passing cars. Used car lots, payday loan stores, and furniture stores in particular use this marketing technique and often pay in cash at the end of the day.
Help out with event work. Browse listings for people and small businesses who need help setting up, running, and tearing down booths for local events like farmer's markets and street fairs. These jobs often start early in the day and often pay the same day. Be prepared to do anything from construction to running a booth.
3. Participate in studies or surveys. This isn't a reliable way to make a lot of money, but if you're just a few dollars short, it can make up the difference. A Google search will help you find some online surveys.
Be sure you qualify for the study before you apply. For example, you won't want to apply for a study that is looking at the effects of smoking if you aren't a smoker.
Apply in person to expedite the process. In the case of some surveys, you'll be able to show up and do a paid survey right then and there. Studies usually last longer, but may provide compensation before the end of the study period.
4. Join a temp agency. Temporary work agencies place thousands of employees with daily work. If you have specialized work skills or previous experience in a field, you might have very good luck temping. There are a number of tips to help you get started with an agency.
Visit the agency. Tell them you want to work, and follow their instructions. There will usually be an application to fill out, followed by an interview where you go over your work history and qualifications.
Bring a resume with you. It will help the temp agency sort out what types of jobs you are qualified for.
Dress for an office environment. Business dress shows you are looking to be successful and will fit in a professional setting.
Meet your agent. He or she will work to find jobs for you every day. Try to be pleasant and get along with your agent; it could help your chances some.
Take any job you're offered. Temp agencies can't work miracles; they don't find work for every temp employee every day. If your agent finds work that you can do and offers it to you, take it immediately.
Sometimes, a temp in a longer-term contract can get hired on as a regular employee, so always treat it like a “real” job.

Method 3 Selling and Reselling.
1. Think about selling your car. This isn't a practical step for many people, but if you're lucky enough to live somewhere you don't need a car to get to work or the grocery store, you're sitting on a huge mound of cash in the driveway. There are some helpful steps to complete this process.
Gather your car's information. Find the title and registration, maintenance receipts and records, and a car history report. Also know the features of your car (CD Player, seat controls etc.)
Having regular receipts and records for oil changes and routine maintenance can show that your car was well cared for and can help you get a good offer.
Set a price for your car. To find the right price, you can look up the value of your car with Kelly Blue Book or look in the classifieds section of your newspaper to see what price cars like yours are selling for.
Advertise the car online and in newspapers. In your ad specify the model and year of the car, its features, its true condition (if it is in need of repairs be honest), your asking price, and acceptable forms of payment. Include lots of photos and multiple ways to contact you.
2. Have a yard sale. Advertise it for free on Craigslist, or for a small fee in the local newspaper. Clean and organize everything you intend to sell, and lay it out in front of your house or apartment on the morning of the day of the sale.
This approach works best for people who haven't previously sold things for cash out of necessity, and still have a lot of items to sell. People are more interested in bigger yard sales.
Price everything slightly high, but be willing to haggle down. Most yard sale items will reasonably sell for 1/3 to 1/2 of the original price, if the item is in good condition.
Keep your prices in $.25 intervals to keep change handling simple.
To make up the difference, try to feature some bigger items, like furniture and exercise equipment, that you can get a bigger chunk of change for. Place these items at the end of the driveway or yard to lure in buyers.
Many neighborhoods have a coordinated yard-sale day. It is a good idea to hold your yard sale during this event because it will draw in a large crown of potential buyers.
3. Sell your belongings online. There are two basic ways to do this if you need to turn a quick profit: Craigslist and eBay.
On Craigslist, post your item for sale in the appropriate section of the site. Be sure to post pictures if you can; people often don't bother with listings that don't have photos attached.
Use the word “firm” if you refuse to haggle on the price; use “OBO” to indicate you might be willing to go down on it a bit.
On eBay, you can set various time and purchase options, which may have fees attached to them.
If you choose to sell it at a fixed price with the Buy It Now option, you will have to pay a flat fee of a couple dollars in addition to a percentage of the sale price. Buy It Now allows you to control your selling price.
If you choose to sell your item at auction, choose a period of time the auction will be active. Sunday evening is said to be the most lucrative night of the week for auctions by frequent eBay sellers.
4. Sell to a pawn shop. Pawn brokers are people who will pay cash for just about anything you own that isn't disposable or perishable. Pawn brokers tend to pay very low amounts and won't haggle.
Bring your items with you to the pawn shop. Most pawn shops keep short hours for security reasons, so go before 4PM to be sure you get in.
Decide whether or not to accept the offer. Expect to get $60 for a $500 bicycle, and on down the line proportionally. In most cases, you should only visit a pawn shop if you absolutely need money right now and have no other options available as you won't get a good value on your items.
5. Resell to collectors. There are collector's markets for just about everything with any cultural significance, from commemorative plates to video games and old toys. If you arm yourself with knowledge, you can make a killing buying items for cheap and selling them to collectors at a profit.
Specialize in one type of collectible. You might specialize in retro toys or specialized glassware. Start by seeing what collectibles you already own and build from there.
Know your subject. Do the research to find out what an item in good condition looks like and is worth. Know which items are commonplace or super rare. Rare items will get a better price.
Visit cheap places. Yard sales and thrift shops are your best friends as a collectables reseller.
Use computer resources. Websites that specialize in collectibles can help you to gauge what collectibles are selling for in your area.
Sell online. You'll often get a better price online than you will selling to a local collector, and this can widen your customer base.
Get to know dealers and insiders. These people can be great connections for you to advertise your collectibles and get to know vendors who can help you sell your items.

Method 4 Using Unorthodox Approaches.
1. Perform on the street. If you're lucky enough to own an instrument and talented enough, busking is the art of musical street performance. A good busker in a busy spot can make a nice little pile of cash in an hour or two of playing. The following are some helpful tips for busking.
Get permission. Some cities and communities have ordinances that require a permit or fee for street performance.
Choose a good location. Avoid areas where there are other street performers but still have high traffic. Choose busy downtown areas in safe locations as a starter.
Choose your repertoire carefully. A good time of year to busk is during the holiday season. Jazz and popular music are also successful themes.
Be polite to your audience. Be warm and friendly with everyone who crosses your path. Smile and nod whenever you make eye contact with anyone.
2. Collect scrap metal. Iron, steel, and especially copper can be sold to scrapyards by the pound. To make a significant amount of profit, you'll need to bring in quite a few pounds, so be sure you have a vehicle with space for the metal.
Look around abandoned lots and derelict buildings for pipes and metal fixtures. Junk bins outside tech and office firms may have bunches of wire or other components that can be sold as scrap.
Be very careful if you collect scrap. Wear heavy gloves, bring a partner, and don't hunt for scrap at night.
Don't steal or strip metal from anything that's still in use.
Search neighborhoods in the morning before garbage collection. You can often find items that can be used for scrap or fixed up and sold.
3. Go rock hounding. There are guidebooks available in most areas that show where valuable rocks can be found. Fossils, geodes, and semi-precious gemstones are all widely available in some areas. Keep in mind though that this may take time to find a collection and might not be a fast solution to your money problem.
Learn different gemstone grades. If you're hounding for semi-precious gems, remember that coloration and size can sometimes make them quite valuable.
Bring a shovel or spade, gloves, a hat, and a pail or bucket. Very often, to find the better-quality rocks and fossils, you'll have to dig down into the ground a little bit. Be sure this is legal where you are; most places marked in a guidebook should allow it.
Be careful to stay off of private property, including mining claims.
Sell your haul to a specialty store. You won't get a whole lot, most of the time, but it's next to impossible to sell raw stones online.
4. Sell plastic bottles for money. It's possible to collect bottles from other people's recycling and sell them for money.
You'll have to collect quite a few of them before you can make a profit, so be prepared to put some effort into this method.
You'll also have to find a national recycling buyer that purchases plastic bottles in bulk. A simple Google search should help you find companies that you can work with.
5. Sell you hair. Believe it or not, there is a market for your hair. If you have "virgin" (non-dyed or treated) lengthy hair, you can earn quite a bit of money for it.
Your hair is an outgrowth of what goes into you, so if you eat healthy and don't smoke, you can sell your hair for a premium.
An online tool exists to tell you how much your hair is worth.

Community Q&A.

Question : Where can I sell foreign coins?
Answer : A local coin dealer might be interested. Try Craigslist, too.
Question : Do people really buy hair?
Answer : Yes, they do! Some people don't have hair, so real-hair wigs are very popular.
Question : How do I sell old and rare postal stamps?
Answer : Find the value of the stamps by doing some research online first. Then, look for local auctions, swap meets, or even antique stores where you could find someone to purchase the stamps. There are also plenty of places online where you could sell them yourself once you've found the value, like eBay or Craigslist.
Question : How can you do this if you are a kid?
Answer : Start with scrap metal. It is easy to do and is free.

Warnings.

Don't steal, blackmail, or counterfeit to get money. If you think it's a lot of trouble being broke, wait until you're broke and standing in a courthouse on a felony charge.
You may have to pay income tax or other taxes on your earnings, especially if you are working a second, or even third job. Don't fall into the trap of getting paid cash-in-hand for more than you are legally allowed to earn as having to pay the Inland Revenue, IRS or other agency a large amount of back tax is not going to improve you financial situation in the long or short term.
Don't gamble if you need money. The odds are even at the very best (and only in craps betting); generally speaking, odds are that you'll lose. There's a reason people call the lottery an “idiot tax.”

June 04, 2020

How to Transfer Property After the Death of a Parent

How to Transfer Property After the Death of a Parent.

The death of a parent can be a traumatic and difficult time. However, if they left you some of their property, you may need to go to court to get that property transferred into your name. The process you'll use varies depending on whether your parent had a trust or a will. If they left behind a small estate and didn't have a will or trust, you can use an affidavit to take control of the property without going through probate. Regardless of how you transfer the property, you can't get started until you have a copy of your parent's death certificate.

Method 1 Transferring Property out of a Trust.
1. Go over the trust documents. Typically, the trustee will send notice to you within a couple of months after your parent's death. This notice includes information about your parent's trust as well as a copy of the trust documents. These documents detail the property your parent left in the trust and lists the people who are beneficiaries of the trust.
Trust documents can contain a lot of complex language and legalese. If you don't understand the information in the trust documents, you might want to have the trustee or an attorney go over the documents with you.
2. Contact the trustee named in the trust. If your parent's trust names someone as trustee, they will be responsible for settling the trust and distributing the assets. If your parent had a living trust in which they were the trustee, you'll be looking for the successor trustee.
If your other parent is living, they may be named as the trustee. If your parents were divorced, on the other hand, it's possible that you are listed as the trustee. However, if you are listed as a beneficiary of the trust, you can't also serve as trustee.
Some trusts list an institution, such as your parent's bank, as the trustee. Most institutions have specific individuals that serve as trustees on behalf of the institution.
Tip: If you are listed as the trustee, hire an attorney with experience in trusts to assist you. They'll make sure you follow all the legal requirements and fulfill your duties as trustee.
3. Wait for the trustee to pay creditors and taxes. The trustee is responsible for sending notice to creditors and paying all the debts and taxes that are owed by your deceased parent. In some situations, this involves selling assets from the trust to pay what is owed. With the typical trust, this shouldn't take longer than a year.
For example, if your parent owed $100,000 and the only asset in the trust was a house, the house would have to be sold to pay your parent's debt. Any leftover money would go to the beneficiaries of the trust.
4. Complete any necessary documents to transfer the property. The documents required to transfer property after all debts and taxes are paid depend on the type of property. For most personal property, no documents are required to transfer ownership of the property. However, you will need documents to transfer the ownership of real estate or titled property, such as cars or boats.
For example, if your parent left you their car, you would need the title for the car to transfer the ownership to your name. If the car was held by the trust, the title would be in the name of the trust. The trustee would fill out the title to transfer ownership from the trust to you.

Method 2 Going through Probate.
1. Read your parent's will to determine what property was left to you. Reading your parent's will can be a difficult task mentally and emotionally, especially if the two of you were close. You might want to get a friend or loved one to sit with you as you read it. Generally, the will lists your parent's property and the specific items they want to leave to specific people, if any. Some wills are relatively short and simply leave all of the person's property to one person, while others are more detailed.
Sometimes it can be difficult to find your parent's will, especially if they didn't tell you where it was before they died. Check safe deposit boxes or other places where you know your parent kept important personal papers.
Some people also file a will with the clerk of the county court. Although this isn't a legal requirement, it ensures that you can easily find the will. Call the county court in the county where your parent lived and find out if they allow people to file wills. If they do, they'll explain the procedure for retrieving your parent's will, if it's there.
If you know the name of your parent's attorney, call them and ask them about the will. If they drafted your parent's will, they might have a copy of it.
Tip: If your parent has significant assets, such as real estate, you may need to go through the probate process even if your parent didn't have a will. If there's no will, distribution of your parent's assets is determined by state law.
2. Calculate the value of your parent's estate. Courts have different requirements for probate depending on the value of your parent's estate. If your parent left few assets, you might be able to use simplified procedures that don't require as much time and effort as the full, formal probate procedures.
For this calculation, you're just looking for a ballpark estimate. Generally, if your parent owns real estate, they're probably over the threshold. However, if your parent only owns a vehicle and some personal property (such as furniture, clothing, and household goods), they likely fall below the threshold.
The specific threshold for formal probate varies among states. However, it's typically over $50,000.[8] In some states, such as California, it's as high as $100,000.
Tip: Assets that don't have to go through probate, such as life insurance policies or retirement accounts with a named beneficiary, aren't counted towards the value of your parent's estate for probate purposes.
3. Identify the personal representative of your parent's estate. Your parent's personal representative is the person who will be responsible for the administration of their estate, including paying their creditors and distributing their property. If your parent has a will, they likely named the person they wanted to be their personal representative.
If the personal representative your parent named in their will is not available, see if your parent named an alternate. If they didn't, you'll have to determine who is willing to serve in this capacity. Choose someone who is mentally and emotionally prepared to take on this role.
You can also hire a lawyer to serve as your parent's personal representative. However, this is usually a more expensive option than using someone who is a close friend or member of the family.
Avoid naming someone who is listed as a beneficiary in the will as your parent's personal representative. For example, if you know that you're getting the majority of your parent's property, you probably shouldn't serve as their personal representative.
4. Choose the correct probate court. Typically, you'll use the probate court in the county where your deceased parent lived. If your deceased parent owned property in a different county, you might also be able to use the probate court there.
For example, your parent might own a house in one county but spent the last few months of their life in a hospice in the neighboring county. In that situation, you would likely want to file your application in the probate court for the county where your parent's house is located.
If you call the clerk of the probate court, they can help you figure out which court you should use. You may also be able to find information on the court's website.
5. Submit your parent's will to the clerk of court. Some probate courts require you to submit the will you want to be probated before you file an application or petition to start the actual court process. Call the clerk's office. They'll be able to let you know if you need to submit the will and what the specific process is for doing that.
Usually, there will also be information about the process on the probate court's website.
Typically, you need to bring the will to the clerk's office in person. You may also need to submit copies of the will. However, before you submit the will, make at least one copy for your own records.
6. Complete an application for probate. The probate court you use will likely have a form that you can fill out if you're using simplified procedures. For formal probate, you'll typically have to hire an attorney to draft a formal petition.
You'll have to pay a filing fee when you file your application. These fees vary greatly from state to state and, in many states, even from county to county. However, they're typically a few hundred dollars. If you're filing the application yourself, you'll likely have to pay these fees out-of-pocket initially, but you can get reimbursed from your parent's estate.
7. Hire an attorney to assist with the administration of the estate. If you were chosen as your parent's personal representative, you'll typically want to hire an attorney to help you. The attorney's fees are paid by your parent's estate.
If your parent doesn't have substantial assets or a lot of debt, the administration of the estate might be relatively simple. In that situation, you might not need to hire an attorney, but you still definitely want to talk to one. Most attorneys who specialize in estate planning offer a free initial consultation.
If you are planning on hiring an attorney, it's a good idea to meet with 2 or 3 local attorneys so you can choose the one who best suits your needs. Also, make sure you pick someone you get along with because you're likely going to be working with them for at least a year.
Tip: Attorneys' fees for estate administration are typically determined by state law. In some situations, the judge might also order a set fee.
8. Attend court hearings as necessary to distribute property. With simplified procedures, you typically only have to go to court once. However, if you end up needing formal probate, you'll likely need to attend several court hearings for the judge to approve the distribution of property.
Formal probate proceedings can take anywhere from 6 months to a year for more complex estates. Expect it to take longer if your parent had a lot of debt, or if they had a substantial estate with numerous investments.

Method 3 Completing an Affidavit.
1. Create a list of heirs. List all of your parent's living relatives and show your relationship to them. If your parent died without a will, typically you need to be their next of kin if you want their property transferred into your name. If you are not the next of kin, or if you have other siblings, you'll need letters or affidavits from them stating that they have no interest in the property.
For example, if you have a sister and your parent has a brother who has 2 kids, you would typically list your uncle, 2 cousins, yourself, and your sister on your list of heirs. You and your sister would be considered your parent's next of kin, assuming your parent was divorced or your other parent was not living.
If you aren't close to your parent's family and have no idea who is still living, there are ways you can publish a notice of their death calling for heirs to come forward. The clerk of the probate court will help you with this.
2. Check with banks or other institutions for an affidavit form. Many banks and other institutions that might have control of your parent's assets have their own affidavit form. Using that form makes it easier to get your parent's property because the form includes all the information the institution needs to release the property to you.
For example, if your parent had a bank account, go to one of that bank's branches, explain the situation, and ask if they have an affidavit form for you to fill out.
The website for your state court system might also have affidavit forms that you can use. Banks and other institutions will also accept these forms, provided all the information they need is included on the form.
3. Fill out the affidavits that you need. The affidavit requires you to provide information about the death of your parent and any proceedings that are being conducted in court, or have already been conducted in court, regarding their estate. Typically, if you're transferring property using an affidavit, there won't be any court proceedings. You'll also need to provide details about the property that you want to be transferred to you.
If there are other heirs, they'll likely need to sign your affidavits as well. For example, if you have a sibling, they would need to sign the affidavit, even if you're the only one submitting it.
If someone else signs the affidavit who won't be present when you submit the affidavit, typically their signature needs to be notarized, even if yours does not.
Tip: Not all states require these affidavits to be notarized. However, some banks and other institutions may require it, so generally, it's a good idea to go ahead and sign your affidavits in front of a notary.
4. Gather ownership documents for the property. In addition to your parent's death certificate, the institution holding the property needs proof that your parent owned the property you're trying to take ownership of. Generally, the institution will tell you exactly what documents or information you'll need.
For example, if your parent had a bank account, you'll typically need to know the bank account number and the name on the account. You might also need your parent's debit card, if they had one. A recent bank statement would have the information that you need.
Some property has a specific ownership document. For example, if your parent owned a car, you would use the title in their name to prove their ownership. With their death certificate and an affidavit, you could then get the title transferred to your name.
5. Submit your affidavits to the relevant authorities. For titled property, such as cars or boats, you'll typically submit your affidavit to the local title office to get the title transferred to your name. For banking or investment accounts, submit the affidavit and supporting documents to the financial institution that's holding the account.
For items of personal property that don't have a title or other documentation, usually you can simply take it. You might consider getting a friend or family member to come with you to help clean out their place, or at least to be there for moral support.

Warnings.

You typically have to wait at least a month after your parent dies before you can take ownership of their property. Different states have different time requirements.
This article discusses how to transfer property after the death of a parent in the US. If you live in another country, the rules may be different. Consult a local attorney who specializes in estate planning.

May 07, 2020

How to Get HR Certification

How to Get HR Certification.

Getting certified in human resources can help jump start your career, so of course it's something you'd want to do. The first step is to figure out what kind of program you want. Then you can complete the certification through a credentialing institute like the HR Certification Institute or through a college.

Part 1 Finding a Program.
1. Use the HR Certification Institute for self-directed certification. The HR Certification Institute is one of the main credentialing organizations for human resources in the U.S. They offer a variety of certification programs that you can complete through their website at https://www.hrci.org.
2. Check with your local community college for a cheap option. Community colleges offer an affordable way to get your certification. Look at the offerings for certifications on your local community college websites.
Generally, courses are anywhere from a couple of semesters to an associate's degree. It can vary greatly by college.
You. Might also find programs at 4-year universities, but those are more likely to be a bachelor's degree with a focus in HR certification.
3. Look at online colleges for convenience. Many online colleges offer HR certification. These programs can be good if you don't have time to go to physical classes. However, many of these schools are for-profit, which sometimes doesn't hold as much weight as a traditional university or other certification organizations.
It's up to you whether you think a for-profit university is a good idea. Nonetheless, keep in mind that this certification may not hold as much weight as one from another university or a credentialing program.
It may not be easy to tell which universities are for-profit. However, they're usually the ones that have campuses across the country, such as University of Phoenix, DeVry University, Kaplan University, and Capella University. If you're not sure from the university's website, look it up elsewhere to find out if it's for-profit or not.

Part 2 Completing Certification through the HR Certification Institute.
1. Pick a certification exam. The HR Certification Institute offers a variety of self-directed certification programs to choose from, depending on where you are in your career. This program focuses on certifying you based on your knowledge, rather than putting you through courses. You'll need to pick one before moving ahead with certification. Most require some combination of HR experience and a degree. It's best if the degrees are in HR management, but it's not a requirement.
For instance, the Associate Professional in Human Resources is for people who are starting out. You can even take this certification right out of high school. You can purchase study materials along with the test.
The Professional in Human Resources requires a combination of experience and education. You need 4 years of experience if you have a high school diploma, 2 years of experience if you have a bachelor's degree, and 1 year of HR experience if you have a master's degree.
The Senior Professional in Human Resources requires even more experience. You need 7 years of HR experience if you have a high school diploma, 5 years if you have a bachelor's, and 4 years if you have a master's.
2. Study for the exam to gain your certification. This certification is basically just an exam you take to prove your knowledge. Before you take the exam, you'll need to study up for it. The HR Certification Institute offers both preparation materials for free and for purchase. If you wish, you can even bundle your test exam and preparation materials to save a little money.
For instance, you can get exam outlines for free at https://www.hrci.org/how-to-get-certified/preparation-overview/exam-content-outlines
However, you'll need to pay for practice exams.
3. Schedule the exam. Schedule the exam at your convenience with Prometric, the company that proctors the exams. You'll need to schedule the exam at one of the many testing centers, which are located in most major cities. You can use Prometeric's site to search for a testing center.
You can take the exam most weekdays, as long as you make an appointment before the center fills up.
4. Take the exam. Arrive at the center at least 15 minutes ahead of time. Bring a government-issued ID with you, such as a driver's license or passport. You will use a computer to take your test.
Keep in mind that all of your personal belongings must be put in a locker issued by the test center. In fact, you can have nothing in your pockets except your ID and your locker key.

Part 3 Getting Certification through a College.
1. Apply for the program. Just like any program at a college, you'll need to apply to go there. Typically, applications will require information such as your high school transcript and GPA, SAT scores (in some cases), and biographical information. Most for-profit schools and community colleges are not difficult to get into. In fact, some community colleges have open admissions policies, meaning almost anyone who applies gets in.
You can also enroll for financial aid at the same time. You may be able to get student loans to help you pay for school. You'll need to fill out the FAFSA, the application for federal student aid.
2. Enroll in the required coursework. Once you apply and are accepted, you'll need to enroll in classes. You should have a detailed plan from the school stating exactly what classes you need to take. If you are confused about what to do, you should have a school-assigned advisor you can discuss questions with.
To enroll, you typically go online during the enrollment period and choose your classes, especially if you are in an online program. For brick-and-mortar universities, you can also visit the registrar's office.
3. Complete the coursework. Usually, if you're getting a certificate through a college, it will require coursework. How many semesters you'll need to complete depends on the program. Some programs have as few as 18 to 27 hours or 6 to 9 courses. However, others are closer to an associate's degree.
In some cases, you'll need to complete the coursework in person. In other instances, you can complete it online. It depends on your university. Even if you complete it online, you may need to come to the college for orientation or a few other in-person meetings.
Check with your program to determine the grades you need to pass the program.
4. Apply for graduation. Often, once you've completed the coursework, you'll need to apply for graduation. Basically, you're just asking the school to verify that you've completed the program. You'll likely need to pay a fee, as well. Visit your school's website to find out how to apply for graduation at your school.

May 04, 2020

How to Get Immediate Cash for Your Annuity

How to Get Immediate Cash for Your Annuity.

An annuity is a type of investment that is usually handled by an insurance company. An investor will invest her money in an annuity fund in exchange for periodic payouts over a predetermined interval (such as for the next ten years) or indefinitely (for the rest of your life). Some annuities provide the option of getting immediate payment. However, if you are in a financial emergency and require immediate cash, you might have to cash out an annuity early. While there may be hefty fees involved, particularly if your annuity is held within a retirement account like an IRA or 401k, it is possible to get immediate cash from your annuity investment.

Method 1 Getting Cash from an Immediate Annuity.
1. Consider carefully whether you need immediate cash. Investments work best when they are allowed to grow over the long term. Withdrawing cash early from an annuity brings with it a risk of fees and will significantly harm the long-term potential of your investment. Consider very carefully whether you are in a true financial emergency before taking steps to sell an annuity, and be sure to use early withdrawal options only as a last resort.
2. Think about other options for immediate cash. Because of the potential penalties of getting cash from an annuity, consider other options for getting cash during a financial emergency. Many of these options come with lower risks and few to no financial penalties. These include:
Take out a short-term, unsecured loan (a loan without collateral) from your bank or a local credit union.
Renting out a room via AirBNB or another website.
Sell unwanted items online.
Take on an additional part-time job or side gig, such as babysitting, dogsitting, or working retail.
Get a Home Equity Loan. These loans will require interest payments, but they might be lower than the penalties you would pay for cashing in an annuity.
3. Determine exactly how much money you need. In some cases, you might be able to receive small, immediate cash payouts from your annuity without too many penalties and fees. However, if you need to cash in your entire annuity, you will likely pay some hefty fines. Therefore, it is important that you know exactly how much cash you need to get through your financial emergency. By only taking out the money you absolutely need, you might be able to be more financially stable in the long run.
4. Determine whether you have an immediate or deferred annuity. An immediate annuity will provide monthly, quarterly, or annual cash payments to the investor immediately after the investment is purchased. A deferred annuity, however, allows the investment to grow for a period of some years before the payouts begin.
If you have an immediate annuity already, you can simply collect your cash installments at the appropriate intervals. Depending on how much cash you require, these installments might be sufficient for your needs.
When payments are made, annuities are taxed on the earning portion of the asset, not a return of principal.
Additionally, an immediate annuity within a retirement account, like a Roth IRA, can provide penalty-free payments to persons under 59.5 years of age.
5. Convert a deferred annuity to an immediate annuity. This option is one that many investors consider as they transition into retirement. They use the deferred annuity to grow their money over the long-term and then convert into an immediate annuity to guarantee an income stream during their retirement. If you convert your deferred annuity to an immediate annuity, you might have the best of both worlds: immediate access to some cash while still allowing your investment portfolio to grow.
Depending on when you purchased your deferred annuity, however, it might be costly for you to pursue the conversion option. Make sure you discuss fees and penalties carefully with your insurance company and your financial advisor before undertaking a conversion.
6. Collect your cash payments without penalty. If you have an immediate annuity, you will receive several small payments each year. This option is a good one for those who are in immediate need of cash (such as those who are on a fixed income). And as long as you only collect the amount specified in your contract, you can do so without paying extra fees.
You will still likely have to pay income tax on a portion or all of the amount you collect.
While immediate annuities provide an immediate cash flow, they generally pay out less total money than deferred annuities, which have more of an opportunity to grow.
7. Determine your surrender period. A surrender period is the period of time after the initial purchase of the annuity where you will be charged hefty fees for cashing out your plan. A surrender period can be anywhere from 5-10 years after purchase, depending on your contract, though it is usually between 6-8 years.
If your surrender period has passed, you might be able to cash out your annuity without paying too many fees.
If your surrender period has not yet passed, you might want to consider the expenses involved before continuing the early withdrawal process.
8. Decide to sell your immediate annuity. Unlike deferred annuities, most immediate annuities do not provide an option for small-sum early withdrawals or partial sales. You will likely have the opportunity, however, to sell the entire immediate annuity for a lump-sum. Again, reserve this option as a last resort given the hassle and fees involved in cashing out your immediate annuity early.
9. Be aware of possible financial penalties. Withdrawing cash from your annuity early can lead to hefty penalties, taxes, and fines. Be sure that you take these penalties into account before making your decision to withdraw your cash.
If your annuity is part of a retirement account and you withdraw your money before you are 59.5 years old, you will have to pay a 10% early withdrawal fee to the federal government.
If you withdraw your money within the first 5-8 years of purchase, you will likely have to pay a "surrender fee" to your insurance company. The exact fee amount depends on your contract. Many surrender fees begin at about a 7% penalty for the first year after purchase and decrease over time from there. However, some companies might charge a fee as high as 20%.
Cash you receive from annuities counts as income. You will likely have to pay income taxes in addition to the early withdrawal fees and surrender fees. The one exception is that payments from an annuity as part of a Roth IRA are not taxable.
10. Research companies that offer cash in exchange for annuity payments. None will give you the full value of your future payments. They might offer anywhere from 60% to 85% of the value of your annuity. Getting 85% of your annuity’s value would be considered a fairly good offer. Since you are legally transferring your rights, you want a company that follows standard procedures and will prepare you for any required court proceedings.
Understand that you are not getting a good deal here because the company you are selling to has to make a profit. Annuity sale prices are reached by discounting a series of future cash flows by some interest rate. Typically, a buyer will use a lower rate than is earned in the annuity to make a profit themselves. This results in a lower sale price for you.
11. Consult your tax attorney or financial advisor. Before agreeing to sell your annuity to a third party, consult a trusted legal or financial expert. They will help you determine your financial liability and help you navigate through the complicated contracts you might have to sign. This will help to ensure that you understand what is happening and that it is done correctly. They might also be able to help guide you to the most reputable companies that purchase annuities.
12. Collect your documents. Documents required for the sale of an annuity include two forms of identification, your initial annuity policy, and an application to sell your annuity to a third party. You might have to contact your insurance company in order to receive correct, up-to-date copies of your paperwork.
13. Complete the transaction. Upon submitting your paperwork and paying your fees and penalties, you will be able to receive your cash payout. Make sure that you report this income correctly during tax time and that you pay all the extra taxes on this money to avoid future penalties.
You might want to consider discussing your finances with a financial advisor to ensure that you will use and invest the cash payout properly.

Method 2 Getting Cash from a Deferred Annuity.
1. Determine what kind of annuity you hold. There are three kinds of annuity, each one of which pays out money slightly differently. The U.S. Securities and Exchange Commission (SEC) regulates all variable annuities and some index annuities. The SEC does not regulate fixed annuities.
A fixed annuity pays out a predetermined amount at specific intervals over a period of time. This amount is usually based on a specific interest rate applied to your initial investment.
An indexed annuity provides payment to the investor based on the performance of a stock market index fund (or, a fund that tracks the entire stock market performance). Most indexed annuities, however, have a set minimum for payments even if the index fund performs poorly.
A variable annuity allows the investor to choose amongst various investment vehicles, usually mutual funds. Your periodic payment will depend upon the performance of these investments.
2. Determine the type of account your annuity is held in. In addition to the different types of annuity payments, annuities can be held in various types of accounts for certain purposes. These typically include investment and retirement accounts. Both types operate generally the same way, however, they may differ in early withdrawal and tax penalties charged. Check your investment documents or retirement plan agreement to see what type of penalties and restrictions there are on your annuity.
3. Consider penalty-free early withdrawal options. Some deferred annuity policies provide an option for small cash withdrawals without extra penalties. For example, a withdrawal of 5-10% of your initial investment might be accomplished without paying a "surrender fee" to your insurance company. While taking an early withdrawal will diminish your investment's ability to grow, you might be able to get the cash you need without completely emptying your annuity.
If your annuity is part of a retirement account and you are under 59.5 years old, you might still have to pay a 10% tax to the federal government, even if you don't have to pay a penalty to your insurance company.
4. Determine your surrender period. A surrender period is the period of time after the initial purchase of the annuity where you will be charged hefty fees for cashing out your plan. A surrender period can be anywhere from 5-10 years after purchase, depending on your contract, though it is usually between 6-8 years.
If your surrender period has passed, you might be able to cash out your annuity without paying too many fees.
If your surrender period has not yet passed, you might want to consider the expenses involved before continuing the early withdrawal process.
5. Reread your annuity contract. Review the details of your annuity contract. Pay attention to the full-disclosure clause of your agreement. It’s important that you understand what portion of your annuity payments you are exchanging for a lump-sum cash payment.
6. Understand the process. If you are seeking a lump sum of cash in lieu of structured payments, you are in effect signing over to someone else all your rights to receive future annuity payments. That "someone else" is the entity giving you the lump-sum cash.
Be aware that in the long term your annuity is worth much more if you receive structured payments according to the original contract. Talk to your insurance agent to determine the exact worth of your annuity. You may decide to ride out your immediate cash-flow crisis instead of cashing in.
7. Be aware of possible financial penalties. Withdrawing cash from your annuity early can lead to hefty penalties, taxes, and fines. Be sure that you take these penalties into account before making your decision to withdraw your cash.
If your annuity is part of a retirement account and you withdraw your money before you are 59.5 years old, you will have to pay a 10% early withdrawal fee to the federal government.
If you withdraw your money within the first 5-8 years of purchase, you will likely have to pay a "surrender fee" to your insurance company. The exact fee amount depends on your contract. Many surrender fees begin at about a 7% penalty for the first year after purchase and decrease over time from there. However, some companies might charge a fee as high as 20%.
8. Research companies that offer cash in exchange for annuity payments. None will give you the full value of your future payments. They might offer anywhere from 60% to 85% of the value of your annuity. Getting 85% of your annuity’s value would be considered a fairly good offer. Since you are legally transferring your rights, you want a company that follows standard procedures and will prepare you for any required court proceedings.
9. Consult your tax attorney or financial advisor. Before agreeing to sell your annuity to a third party, consult a trusted legal or financial expert. They will help you determine your financial liability and help you navigate through the complicated contracts you might have to sign. This will help to ensure that you understand what is happening and that it is done correctly. They might also be able to help guide you to the most reputable companies that purchase annuities.
10. Collect your documents. Documents required for the sale of an annuity include two forms of identification, your initial annuity policy, and an application to sell your annuity to a third party. You might have to contact your insurance company in order to receive correct, up-to-date copies of your paperwork.
11. Complete the transaction. Upon submitting your paperwork and paying your fees and penalties, you will be able to receive your cash payout. Make sure that you report this income correctly during tax time and that you pay all the extra taxes on this money to avoid future penalties.
You might want to consider discussing your finances with a financial advisor to ensure that you will use and invest the cash payout properly.

Community Q&A.
Question : How can I get money from a union annuity?
Answer : Start by contacting your union steward.
Question : Can I cash out a fixed annuity early?
Answer : What you'll typically lose by cashing out early is a 10% penalty on the taxable portion of your annuity, forfeited to the IRS if you're under age 59½. That's in addition to the 10% federal tax penalty you'll pay on earnings if you're under age 59½.

Tips.

If you aren’t comfortable with the idea of cashing in part or all of your annuity, explore other ways you can raise cash, such as taking out a second mortgage or selling other assets. Downsizing is another way to cover a tight financial spot in your life.
Use the formulas in Discount Cash Flow to find the value of your annuity. You won't be able to sell it for full value, but you need to know what the contract is worth so that you'll know if you're getting a fair offer.

Warnings.
Consult your tax attorney or accountant before selling. If you sell too early, you may be liable for a hefty surrender charge, and if you sell before you have reached the age of 59-and-a-half, you will probably be faced with federal taxes and penalties.
Thoroughly research any company offering to purchase your annuity. You can research any formal complaints filed against a company by contacting the Better Business Bureau.[21] It’s a good idea to ask your tax accountant for recommendations as well.
Do not purchase an annuity unless you have a decent emergency savings account that you can access easily and without penalty. An annuity is not a suitable emergency fund because of the fees, delays, and hassles in receiving quick cash.
To avoid fraud, make sure you purchase an annuity from a reputable, licensed company.

May 04, 2020

How to Get a Small Business Loan

How to Get a Small Business Loan. 

Whether you’re planning to expand an existing business or just now getting one off the ground, a small business loan can give you the financial support you need. Not all businesses can get a small business loan, so you need to take special care when applying for one. Make sure your credit history is as strong as possible, and search for lenders. Lenders will want to see numerous financial documents, so gather them ahead of time. Although getting a small business loan takes a lot of work, it is possible.

Part 1 Improving Your Credit Profile.
1. Pull your personal credit score. Most lenders will look at your personal credit history, even when you apply for a business loan. For this reason, obtain your credit score and check whether it’s high enough to qualify for the best interest rates. Generally, you’ll need a score above 680. You can get your credit score in the following ways:
Check your credit card statement. Many credit card companies now give their customers their FICO score.
Buy your FICO score for $20 at myfico.com.
Use a free website, such as CreditKarma.com or Credit Sesame.com.
2. Obtain a copy of your personal credit report. Errors on your credit report can pull down your credit score. In the U.S., you can get a free copy of your credit report each year from the three major Credit Reporting Agencies (CRAs). Don’t contact the CRA’s individually. Instead, visit annualcreditreport.com or call 1-877-322-8228. All three credit reports will be sent to you.
3. Remove inaccurate information from your credit report. Highlight any errors and contact the CRA that has the wrong information. Common errors include accounts listed that don’t belong to you or accounts inaccurately listed as in default.
You can contact the CRA directly through its website. If the inaccurate information appears on more than one credit report, you only need to contact one CRA, which will alert the other two.
It can take up to 60 days to remove inaccurate information.
4. Improve your credit score. Paying down your balances is the fastest way to improve your credit score. Tackle high-interest debts first, such as credit card debts. Send every monthly payment on time and pay at least the minimum. You should see a slow but steady improvement in your credit score.
Avoid taking out a new credit card, which will temporarily hurt your score. Instead, you can ask for an increase in the credit limit on one or more cards.
Unfortunately, there’s no quick fix for improving your credit score, and you should avoid any company promising to improve your score fast. These companies are often scammers.
5. Build your business credit. Lenders will also look at your business credit profile. Start building your business credit history by obtaining a D-U-N-S number from Dun & Bradstreet. You can get it for free by registering at their website.
Your creditors should report your payment history to Dun & Bradstreet. If not, list them as trade references. Dun & Bradstreet will then follow up and collect payment information.
Your business credit report will contain information about court judgments or liens against your business. You can boost your business credit by paying off any liens and judgments.

Part 2 Identifying Loans and Potential Lenders.
1. Determine the type of loan you need. There are several types of business loans you can get. You should identify the type you need before talking to a lender. Consider the following options.
Line of credit. You can draw from a credit line whenever you’re short of cash. For example, you might need money to make payroll or pay a vendor. You then pay back what you drew on your credit line. A line of credit is a lot like a credit card.
Installment loan. You can get an installment loan to expand operations. You pay it back in equal monthly installments over one to seven years.
Equipment loan. You get a loan to buy equipment, and the lender takes a security interest in the equipment until the loan is paid back. If you default on your loan, the lender seizes the equipment.
2. Stop into banks. Some banks are hesitant to lend to small businesses, but you still should stop in and talk to a loan officer. Discuss your business and ask for the bank’s requirements. You should stop in at least a month before you intend to apply.
Visit banks you’ve done business with as well as banks with whom you have no prior relationship. However, local community banks are more likely to lend to a small business than a large national bank.
3. Check with credit unions. Credit unions have increased the number of business loans they make, so they are a good option for small business owners. You’ll need to become a member of the credit union before you can apply for a business loan, but setting up an account shouldn’t be too burdensome. Credit unions typically offer better rates and lower fees than traditional banks.
4. Research online lenders. Online lending has exploded over the past few years and is a good option if your credit isn’t perfect. You can find online lenders at different aggregator sites, such as LendingTree and Fundera.
There are many online scammers, so thoroughly research online lenders. Look up the business with the Better Business Bureau and Google the company to check for complaints. Only do business with an online lender that has a street address.
5. Research government-backed loans. In many jurisdictions, the government will guarantee loans. This means they agree to pay back a certain percentage of the loan if the borrower defaults. Because of this guarantee, you generally get more favorable interest rates and repayment terms.
In the U.S., the Small Business Administration (SBA) guarantees small business loans. It’s most popular loan program is the 7(a) program which guarantees up to $5 million in loans. 7(a) loans can be used to build a new business or expand an existing one.
Even though the SBA guarantees the loan, you still apply with a bank. Talk to the bank about whether it is experienced with SBA loans and ask if it is part of the SBA Preferred Lender Program (PLP).
6. Ask friends or family for a loan. The people who know you the best might be willing to loan your business money. Approach your friends and family in the same manner you would a bank. Provide them with a copy of your business plan and your financial documents.
You can agree to pay interest, which will show that you are serious about repaying the loan. In the U.S., the interest rate shouldn’t be higher than the maximum allowed in your state, but it should be at least the federal funds rate, which you can find at the IRS website.
Also draft a promissory note and sign it, which will make the loan official.

Part 3 Gathering Required Information.
1. Create a personal financial statement. Every owner who owns at least 20% of your business should create a personal financial statement. Financial statements contain information about your assets, such as cash, mutual funds, certificates of deposits, and real estate. They also identify all liabilities owed to lenders, creditors, and the government.
2. Pull together business financial documents. Lenders will want to see your business balance sheet, profit and loss statement, and cash flow statement. If you need help creating these documents, consult with an account.
Ideally, your financial statements should be audited by a certified public accountant. Ask another business owner if they would recommend their CPA, or contact your nearest accounting society to obtain a referral.
3. Collect other required information. Lenders want a complete picture of your business, so they will require plenty of paperwork. Gather this ahead of time so that the application process goes smoothly. Get the following.
Personal tax returns for the past three years.
Recent personal bank statements.
Business tax returns for the past three years.
Recent business bank statements.
Resumes for each owner and member of management.
Business leases.
Articles of Organization (if an LLC) or Incorporation (if a corporation).
Franchise agreement (if applicable).
4. Show you have the necessary down payment. Generally, you need a cash down payment of 20%. If you hope to borrow $100,000, then you should have $20,000 in cash. Make sure that you have bank records showing the necessary down payment.
5. Draft a business plan. Your business plan lays out where your business is headed in the next few years and how you plan to get there. Lenders want to see a solid business plan before they will make a loan. Your business plan should identify your target market, marketing plan, management, and financial projections.
Some lenders want your business plan to contain specific information. Stop into the bank before applying and ask about their specific requirements.
Business plans can be hard to write. In the U.S., you can get help at your nearest Small Business Development Center, which you can find at https://www.sba.gov/tools/local-assistance/sbdc.
6. Document any collateral. Some lenders won’t give you a loan unless you pledge assets as collateral. Collateral protects lenders since they can seize the assets if you default on your loan. Common forms of collateral include inventory, heavy equipment, accounts receivables, and your home.
You should document the location and condition of the collateral. If possible, hire an appraiser to value the collateral.

Part 4 Applying for Your Loan.
1. Fill out your application. Each lender’s application will be slightly different. However, most will ask your reasons for applying for the loan, as well as the identity of your management team. Also identify any suppliers you will be buying assets from.
Each lender will pull your credit report, which will ding your credit score. However, all credit pulls in a two-week window will count as a single pull, so plan accordingly.
2. Wait to hear back. You should hear back within two to four weeks. If you want, you can call once a week and ask for an update on your application status. The lender might need more documentation, so provide it as quickly as possible.
About 80% of applicants for small business loans are rejected, so don’t be surprised if you get turned down. Ask any lender who rejects you to explain why. For example, you might need to save a larger down payment or draft a better business plan.
If no lender will give you a loan, consider other forms of funding, such as getting a business credit card.
3. Review the loan terms. Any lender that approves you should provide a term sheet which contains the details of the loan—the loan period, the annual percentage rate, and fees. Make sure you are comfortable with the terms.
You probably will need to personally guarantee the loan. This means that if you stop making payments, the lender can come after your personal assets, such as your car or home.
4. Close on the loan. Sign the term sheet or commitment letter and return it to the lender. The lender will then schedule a closing, which usually happens 45-60 days later. If your loan is guaranteed by the SBA, you’ll work with the loan officer to gather the necessary documents to submit. At the closing, you will review and sign a variety of documents before receiving your loan proceeds.

FAQ.

Question : Where can I find investors for small business?
Answer : If you're in the U.S., contact your nearest Chamber of Commerce or Small Business Development Center. They might know of local investors who are interested in small businesses.
Question : Are there any charities the will help me start a business?
Answer : You should start looking into crowdfunding websites. If people like your product or service, they'll donate money. Sometimes you can give the donators your product/service at a discounted price as an incentive.

April 07, 2020

How to Write a Proposal Letter

How to Write a Proposal Letter.

A proposal letter is a professional letter that states, in an abbreviated form, why an organization, institution, or company should support a professional venture of yours. You might write a proposal letter for a number of reasons—for example, to request a grant, a business loan, or that a publisher accept your book idea. There are general formats, details, and arguments you should make in each instance, although the specifics will vary based on the recipient’s requirements. In all cases, however, you must be succinct, informative, and persuasive.

Method 1 Writing a Grant Proposal Letter.
1. Review the eligibility guidelines so you can offer proof throughout the letter. Most public and private organizations that issue grants for research or other projects have a detailed list of eligibility requirements. You must meet these requirements to be eligible, and you must confirm to the organization that you meet these requirements.
Check the organization’s website or call or email them to get complete and up-to-date eligibility guidelines.
Instead of dedicating an entire paragraph to explaining how you meet each requirement, weave this information into the body of your letter as you write it. For instance, if the organization has certain requirements concerning the types of projects the money can be used for and separate requirements for how that money will be allotted, describe these issues in separate paragraphs instead of trying to cram all the information into one.
2. Introduce your organization to an appropriate degree in the first paragraph. If you are not in regular contact with the grant organization, you should introduce your organization in fairly substantial detail in the first body paragraph of your letter. For instance, provide the name of your organization, what it does, why it does it, and who benefits from your organization's work.
If you have had previous contact with the grant agency or organization, don’t rehash basic information the recipient already knows. Instead, mention any changes or developments your organization has made since you were last in contact.
3. Explain your need for the grant and its importance to your organization. Make this the central focus of the second body paragraph. Tell the recipient what your organization hopes to accomplish and what group or groups in society are the focus for your efforts. Also explain why your research, charitable effort, or venture is important and what sort of outcome you are expecting to have.
Balance optimism and realism in this section and throughout the letter. Don’t make outlandish claims like “ending poverty” with this grant. Instead, explain how the grant will help “alleviate food insecurity for at-risk children both before and after school hours.”
4. Provide a timeline and other practical details on how the grant will be used. In the third paragraph, include realistic content about the timeline your project will require, the locations you will operate in and/or impact, and similar information.
State when the project will begin and how long you expect it to run. Be as precise as possible: “If the grant is approved, we intend to operate the program from August 25, 2020 through August 24, 2021.”
Some grants are location-specific. If this is true of the grant you apply for, you will need to indicate where your organization is based, the geographic area that will be studied during your project, or the geographic area that will benefit from the project.
5. Mention how much the project will cost and how much grant money you are requesting. Be as specific as possible so that the grant organization can get an idea of how crucial its funding is. Provide this information in its own paragraph or integrated into the prior paragraph on grant use details.
Particularly if you are applying for a grant without a pre-determined funding amount, be sure to state precisely how much money you are requesting.
Be precise in your cost estimates and provide supporting documentation as enclosures in your application packet, as per the organization’s application instructions.
6. Include any additional information requested in the application instructions. The grant agency or organization may require additional information that should be included in your proposal letter, or it may require separate documents as enclosures in your packet. Refer to the application instructions carefully and frequently, and contact the organization whenever you have questions or need clarification.
Additional documents may include financial budgets, past financial records, and past records indicating the success of similar projects performed by your organization in the past.
Make sure your grant request isn’t delayed or even rejected because you failed to provide a required piece of information.

Method 2 Writing a Business Financing Proposal Letter.
1. Refer to any prior contact at the beginning of the letter. If your business is already established and has a previous relationship with the lender or funder you are contacting, be sure to mention that prior contact. This doesn’t guarantee success for your current request, of course, but it may strengthen your status as a “good bet.”
If you interacted with a specific contact at the company, mention that individual by name. For example: “Nearly seven years ago, I worked with Jane Goodson at your company to help secure the funding that got my business off the ground.”
2. Discuss the size, scope, and focus of your company. Include your mission statement and a short description of the products or services your company provides. To make your case for funding more convincing, also include details like the number of customers served, the number of employees, and information about any administrative boards.
Providing a brief summary of your business helps the funder get a better understanding of who you are, what you do, and why you are a good choice for funding.
Aim to spend 1 paragraph on this content, in most cases.
3. Pinpoint the amount of funding you need and why you need it. Take a paragraph to both identify precisely how much funding you are requesting and explain why you need financial help from the funder. Describe what, specifically, the funding will be used for.
For example: “The $50,000 loan we are requesting will enable us to expand production in our highest-profit product range and grow sales by an estimated 20% within 2 years.”
You may need to include budget data that spells out how funds have been used in the past and projections on how the funds will be used this time around. This additional data may need to be included as a separate attachment.
Regardless of how much information you include in the body of the letter itself, you should always state the total cost of the project and how much of that cost will be covered by the funder's support.
4. Explain how you will use the funding, specifically but succinctly. You need to provide enough information about how the provided funds will be used to make the prospective funder curious and excited by the prospect. Provide key highlights in a paragraph, mentioning specifics but not going into excessive detail.
This should only be a summary. With a full-scale proposal, this information can take pages. This information should take no more than a half page when writing a shorter proposal letter, however. Provide separate enclosures as needed.
5. Offer to provide additional details at the close of your letter. Since a proposal letter is shorter than a full proposal, make it clear that you are willing and able to provide additional details as requested. Do this instead of sending excessive amounts of information that has not been requested with your proposal letter.
For instance, you last sentences might read: “Should you need any further information, please feel free to contact me directly by phone or email. I would also be happy to meet with you at your offices.”
6. Include any necessary enclosures with your packet. Check over the application requirements again. If the prospective funder requires additional documentation along with your proposal letter, include it in the envelope as an enclosure. Note the enclosures in your proposal letter.
Possible documentation might include a list of board members, copies of your tax documents and financial documents, and resumes of key staff members.

Method 3 Writing a Book Proposal Letter.
1. Check the submission guidelines before starting the letter. Every publishing agency and publisher has its own set of submission guidelines. These can usually be found on the publisher's website—if not, call, email, or write to the company and request a copy of their guidelines before proceeding.
Submission guidelines outline the types of books a publisher or agent will accept, as well as the required format and content for the proposal letter.
2. Spend the first few paragraphs describing your book. Right from the start, you need to convince the agent or publisher that the book you want to submit will be successful in the marketplace. In the first paragraph, use around 300 words to write a brief but intriguing summary of your book. Write a second paragraph that describes the essentials of the book, such as genre, word count, and likely market.
If you’re writing fiction or creative non-fiction, outline your narrative and describe your main characters in the first or second paragraph.
State whether or not the book is finished at some point in these opening paragraphs. Note, however, that some publishers will not accept proposals for unfinished works.
3. Identify your expected target market and competitors. Use a paragraph to thoroughly describe the demographic your book is aimed at. If possible, provide provide statistics and make sure they address your target demographic in specific, rather than general, terms.
Perform a competitive analysis in this section. List a few main competitors to your book, explain how well these competitors do in the market, and describe why your book will offer something its competitors do not.
4. Provide biographical information, especially in relation to the book’s subject matter. Describe yourself and explain why you are the perfect person to write this book. Don’t fabricate or exaggerate details, but do put a positive spin on your personal bio.
Mention any writing experience and publishing experience you have.
Mention any experience you have with your book’s subject matter. For instance, if you’ve written a book about fashion and have experience as a fashion designer, include that in your letter.
5. Summarize your intended role in the marketing plan. Provide specific information about what your plans are concerning the promotion of your book once it gets published. Be specific, not general. Do not state what you are willing to do, but rather what you will do.
Instead of writing “I would be willing,” for example, go with “I will.”
Possible forms of marketing include professional blogs, book signings, and professional conferences.
6. Include a more detailed synopsis as a separate enclosure. You will usually need to include a 1-2 page synopsis that describes your book in fuller detail than your 300-word summary at the start of the proposal letter. Unless otherwise directed, include this as an enclosure, not as part of the main body of the letter.
Provide a full summary of the entire plot and purpose of your book. Include all the major details about the plot and significant sub-plots.
7. Enclose a sample table of contents and an extract, if requested. Some publishers expect you to send along a table of contents, an extract from the work, or both. Follow the specific submission guidelines provided by the publisher, and get clarification if needed.
If you do not yet have a table of contents, you may instead need to provide a brief summary of each chapter.
Some publishers and agents will request the first few pages or chapters of your book. Others may not specify which part of the book the extract needs to be pulled from. Regardless, the extract should be an example of your strongest writing.

Method 4 Formatting the Letter.
1. Start by placing your address at the top left of the letter. In the upper left corner of the letter, write your street address on the first line, then the remainder of your address (such as city, state, and ZIP code in the U.S.) on the second line. Left align the text (here and throughout the letter) and single space between lines.
You do not need to include your name or title in the return address, since this information is provided in the closing section.
Do not type out the return address at the top of the letter if you are using paper with a formal letterhead that already includes the address.
2. Include the current date below your address. Double-space after the return address and type the current date in "month-day-year" format in the U.S., or “day-month-year” in nations that typically use that format. The month should be spelled out, but the day and year should be represented by numerical values.[
For instance, write “October 8, 2019” (month-day-year) or “8 October 2019” (day-month-year).
If you are not using a return address because your paper has a formal letterhead, the date should be the first piece of information you add at the top left.
3. Type in the recipient's name, title, and address. Double-space after the date, then use a single-spaced line for each of the following: recipient name; recipient title (if applicable); recipient street address; recipient city, state, etc.
Alternatively, you can put the person’s name and title together on one line—for instance: “Mr. Thomas Jones, Director of Operations.”
Use the person’s personal title—Mr., Ms., Mrs., Dr., etc.—if you know their preference. It’s generally acceptable to assume “Mr.” for a male and “Ms.” for a female. However, you can instead choose to exclude the personal title and write “Thomas Jones” instead of “Mr. Thomas Jones.”
The entire block should be left-aligned and single-spaced.
It’s preferable to write to a specific individual at a company instead of writing a general letter to anyone who may read it.
4. Include an appropriate salutation to the recipient. Double-space after the recipient's address and type the salutation "Dear" followed by the recipient's personal title and last name. End the salutation with a colon, not a comma: “Dear Ms. Amy Watson:”
If you do not know the recipient's preferred personal title and prefer not to assume either “Mr.” or “Ms.”, skip the personal title and use the recipient's full name: “Dear Amy Watson:”
Double space after the salutation as well.
5. Write the body of your letter using single-spaced block paragraphs. The exact content and length of your proposal letter will of course vary depending on the type of proposal you’re writing. The format of the letter should remain the same for each type, though.
Single space and left justify each paragraph.
Do not indent the first line of your paragraphs.
Double space between paragraphs.
6. Use an appropriate closing and signature. Double-space after the final body paragraph and include a formal closing, followed by a comma. Hit the "Enter" key four times before typing your full name and personal title—this blank space is for your signature.
Capitalize only the first word of your formal closing—That is, “Thank you” instead of “Thank You.”
Common closing options include “Thank you,” “Sincerely,” “Regards,” “Best regards,” and “Best wishes.”
Add a comma after the formal closing.
7. Mention any enclosures below your signature and name and title line. If you send any enclosures with your proposal letter, like a resume with an employment proposal or financial information with a business proposal, indicate this by double-spacing after your typed name and title and typing "Enclosure” or “Enclosures.”
You also have the option of listing each document you are enclosing. Use the following format: “Enclosures: resume, writing sample, 3 letters of reference.”
8. Review the letter for spelling, grammar, and formatting errors. Run your finished letter through a spell-check program, but don't stop there. Read it out loud to check for any awkward phrasing or grammar errors. If possible, have someone else read through it as well, since they may spot errors that you've missed.
Don't let a silly spelling error or misplaced comma reduce the impact of an otherwise carefully-crafted letter. Proofreading is important!

FAQ.

Question : How do I write a proposal for a musical tour?
Answer : dentify the potential donors and outline your plans for the tour, including the bands involved, the venues where you will be playing, and an estimate of the upfront costs and potential profit. If this will be for charity, clearly identify the cause.
Question : How do I write a proposal letter to the ministry of safety, wanting to supply them with stop signs and police gear?
Answer : A proposal is generally understood to mean something the receiver has not yet thought of. "Dear city council, after reading your urban planning blueprints, I propose to plant more trees" rather than "I see you're looking for trees and I want to sell you some." Governments are typically bound by public tenders when they buy equipment, so if you want to sell signs and gear, you have to submit your offer when they issue a tender and hope yours is the best of all offers received.

Tips.
If someone else typed the letter for you, double space after the enclosures line and include their initials. For example, add “HU” if Hilary Underwood typed the letter for you.

April 07, 2020