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How to Avoid Finance Charges on Credit Cards.

If you are late paying off the balance of your credit card, you will likely incur further finance charges on the balance until it is paid. The best way to avoid these charges is to pay off the balance on time. You will often get a grace period of around 21 days after receiving the bill in which to do this. If you just pay off the minimum you will be incurring more and more interest and it will take you a long time to pay off the debt.

Method 1 Clearing Your Card Balance.

1. Pay off your balance at the end of every billing cycle. The most straight-forward way to avoid charges on the balance of your credit card is to pay it off in full at the end of each billing cycle. Paying off the whole balance by the due date on your bill will mean that you do not incur any additional finance charges on the balance.

Paying the balance of on time will also help your credit rating improve over time.

2. Determine if you have a grace period. Once you receive your bill, you will often have a grace period in which you can pay it off without incurring charges. These vary depending on what credit card deal you have, so you will have to check the details of your specific account. The typical grace period tends to be around 25 days.

If your card does have a grace period, your card provider must give you at least 21 days after your bill is mailed for you to pay it off.

3. Pay off the balance within your grace period. If your card has a grace period, you must pay off the balance in full before the end of this period to avoid any finance charges. If the grace period is 21 days, make sure you pay off the balance in advance of the due date. You can make the payment up to 5pm on the last day without incurring charges.

Make your payments in plenty of time so that you don’t accidentally miss the deadline.

If you mail your payment, allow 7 to 10 days for the payment to be applied to your account.

For online banking, check with your bank. It can be the same day, or it can take three working days. It’s best to be safe, so pay it off early if possible.

4. Consider transferring the balance to another card. If you are unable to pay off the balance within your grace period, there is an alternative way to clear the balance. You may be able to transfer the balance to another credit card, with a lower APR. For example, some cards will give you 0% APR for a limited time. In this specified period you will not have to pay any finance charges, so you will be able to pay the balance off more cheaply.

If you are considering this, it is important that you are careful and conscientious with your finances.

After the 0% APR period expires you may have to pay a higher rate of interest, so you should be completely sure of the terms and conditions.

If you transfer the balance from one card to another, remember that you have not paid off the debt. Don’t do this just to free up the card to take on more debt.

Method 2 Finding the Best Credit Card Deal.

1. Choose credit cards that do not charge annual service charges. There are numerous charges and fees connected to credit cards that you cannot avoid by paying off the balance on time. These include annual fees that are incurred regardless of how much you use the card. By shopping around you can find a card that doesn’t have these unavoidable service charges.

You can search through a database of hundreds of credit card agreements that are available from a variety of companies online.

The database is available on the website of the Consumer Financial Protection Bureau here: http://www.consumerfinance.gov/credit-cards/agreements/

2. Read the fine print. It’s important that you spend some time reading up on the all small print before you sign up for a credit card. Read it again before you activate a card, and call the company if you don't understand something. Be sure you know the interest rate and how finance charges are determined. Find out if there are ways for the lender to raise the interest rate, and if anything seems questionable, avoid working with that company.

Check to see what fees there are for balance transfers.

When you use the "checks" that arrive with your bill, these are considered balance transfers and are often subjected to additional fees.

3. Determine whether there is a universal default clause. When you are looking at different credit card agreements you should note whether or not they have a universal default clause. This type of clause gives the credit card company the right to raise the interest rate on your card if you are late paying your credit card bill or any other creditor. The credit card provider can monitor your credit report and alter your rates during the contract.

This clause can also be activated for a high debt-to-income ratio.

Remember that a higher interest rate or APR on your card results in high finance charges.

If you have a card with this clause, pay all your bills on time.

Question : I have never missed minimum due date, but still there is a finance charge. Is it because of the outstanding balance, or is the bank cheating me?
Answer : In all likelihood, the bank is not cheating you. If you fail to pay the full balance due before the due date, you will pay finance charges, which usually consist of interest on the unpaid balance.

Question : If the bank is closed on the first 3 days of month, can they charge the full month's interest when you were not able to contact them previous 3 days?
Answe : Yes. Some purchases compound interest monthly, and once the month has started, you could owe interest for the next 30 days. It's just like when you mail a check: it is credited on the day it is received, which would not be on a weekend or holiday.

Question : If my account has been closed but I still have a balance, can I avoid paying the finance charge?
Answer : You can try to negotiate with the credit card company for a payment plan that doesn't involve finance charges or a lump sum payoff but typically you will continue to pay interest as long as you have a balance.

Question : Do I get a personal loan on the basis of my credit card score?
Answer : A lender will consider your credit score as well as your credit history, work history and current income.

Question : If I pay total unbilled amount before due date, can I use my credit limit the next day?
Answer : You should wait until the card issuer has acknowledged receipt of your payment.

Question : If I paid all the outstanding balance, is there any finance charges?
Answer : It's possible there are finance charges left over from before you paid off the balance. If you pay off the full balance on time, there will be no further finance charges placed on your account after that point. If you keep paying the balance down to zero on time every month, you will not see any more finance charges.

Tips.

Check your credit report annually and correct any erroneous information. Some creditors use information obtained in credit reports to increase the finance charge percentage charged.


January 18, 2020


How to Avoid Finance Charges on Credit Cards.

If you are late paying off the balance of your credit card, you will likely incur further finance charges on the balance until it is paid. The best way to avoid these charges is to pay off the balance on time. You will often get a grace period of around 21 days after receiving the bill in which to do this. If you just pay off the minimum you will be incurring more and more interest and it will take you a long time to pay off the debt.

Method 1 Clearing Your Card Balance.

1. Pay off your balance at the end of every billing cycle. The most straight-forward way to avoid charges on the balance of your credit card is to pay it off in full at the end of each billing cycle. Paying off the whole balance by the due date on your bill will mean that you do not incur any additional finance charges on the balance.

Paying the balance of on time will also help your credit rating improve over time.

2. Determine if you have a grace period. Once you receive your bill, you will often have a grace period in which you can pay it off without incurring charges. These vary depending on what credit card deal you have, so you will have to check the details of your specific account. The typical grace period tends to be around 25 days.

If your card does have a grace period, your card provider must give you at least 21 days after your bill is mailed for you to pay it off.

3. Pay off the balance within your grace period. If your card has a grace period, you must pay off the balance in full before the end of this period to avoid any finance charges. If the grace period is 21 days, make sure you pay off the balance in advance of the due date. You can make the payment up to 5pm on the last day without incurring charges.

Make your payments in plenty of time so that you don’t accidentally miss the deadline.

If you mail your payment, allow 7 to 10 days for the payment to be applied to your account.

For online banking, check with your bank. It can be the same day, or it can take three working days. It’s best to be safe, so pay it off early if possible.

4. Consider transferring the balance to another card. If you are unable to pay off the balance within your grace period, there is an alternative way to clear the balance. You may be able to transfer the balance to another credit card, with a lower APR. For example, some cards will give you 0% APR for a limited time. In this specified period you will not have to pay any finance charges, so you will be able to pay the balance off more cheaply.

If you are considering this, it is important that you are careful and conscientious with your finances.

After the 0% APR period expires you may have to pay a higher rate of interest, so you should be completely sure of the terms and conditions.

If you transfer the balance from one card to another, remember that you have not paid off the debt. Don’t do this just to free up the card to take on more debt.

Method 2 Finding the Best Credit Card Deal.

1. Choose credit cards that do not charge annual service charges. There are numerous charges and fees connected to credit cards that you cannot avoid by paying off the balance on time. These include annual fees that are incurred regardless of how much you use the card. By shopping around you can find a card that doesn’t have these unavoidable service charges.

You can search through a database of hundreds of credit card agreements that are available from a variety of companies online.

The database is available on the website of the Consumer Financial Protection Bureau here: http://www.consumerfinance.gov/credit-cards/agreements/

2. Read the fine print. It’s important that you spend some time reading up on the all small print before you sign up for a credit card. Read it again before you activate a card, and call the company if you don't understand something. Be sure you know the interest rate and how finance charges are determined. Find out if there are ways for the lender to raise the interest rate, and if anything seems questionable, avoid working with that company.

Check to see what fees there are for balance transfers.

When you use the "checks" that arrive with your bill, these are considered balance transfers and are often subjected to additional fees.

3. Determine whether there is a universal default clause. When you are looking at different credit card agreements you should note whether or not they have a universal default clause. This type of clause gives the credit card company the right to raise the interest rate on your card if you are late paying your credit card bill or any other creditor. The credit card provider can monitor your credit report and alter your rates during the contract.

This clause can also be activated for a high debt-to-income ratio.

Remember that a higher interest rate or APR on your card results in high finance charges.

If you have a card with this clause, pay all your bills on time.

Question : I have never missed minimum due date, but still there is a finance charge. Is it because of the outstanding balance, or is the bank cheating me?
Answer : In all likelihood, the bank is not cheating you. If you fail to pay the full balance due before the due date, you will pay finance charges, which usually consist of interest on the unpaid balance.

Question : If the bank is closed on the first 3 days of month, can they charge the full month's interest when you were not able to contact them previous 3 days?
Answe : Yes. Some purchases compound interest monthly, and once the month has started, you could owe interest for the next 30 days. It's just like when you mail a check: it is credited on the day it is received, which would not be on a weekend or holiday.

Question : If my account has been closed but I still have a balance, can I avoid paying the finance charge?
Answer : You can try to negotiate with the credit card company for a payment plan that doesn't involve finance charges or a lump sum payoff but typically you will continue to pay interest as long as you have a balance.

Question : Do I get a personal loan on the basis of my credit card score?
Answer : A lender will consider your credit score as well as your credit history, work history and current income.

Question : If I pay total unbilled amount before due date, can I use my credit limit the next day?
Answer : You should wait until the card issuer has acknowledged receipt of your payment.

Question : If I paid all the outstanding balance, is there any finance charges?
Answer : It's possible there are finance charges left over from before you paid off the balance. If you pay off the full balance on time, there will be no further finance charges placed on your account after that point. If you keep paying the balance down to zero on time every month, you will not see any more finance charges.

Tips.

Check your credit report annually and correct any erroneous information. Some creditors use information obtained in credit reports to increase the finance charge percentage charged.


January 18, 2020


How to Protect Your Finances when Your Spouse Files for Bankruptcy.


When your spouse files for bankruptcy, the bankruptcy should not affect your credit score. However, you may still be affected in other ways. For example, you will still have to pay off joint debts. Also, the bankruptcy trustee can seize any property your spouse owns, even if you are a joint owner. Accordingly, you and your spouse should carefully consider which bankruptcy is best for the family or whether you should pursue a non-bankruptcy option.



Part 1 Identifying Joint and Separate Property.

1. Identify all property you and your spouse own. When your spouse files for bankruptcy, they will have to list all of their property on a schedule and report it. The trustee uses this information to determine the size of the bankruptcy estate. This information is important because the trustee may be able to force your spouse to sell property in order to pay their creditors. The less property your spouse owns, the better off they will be.

Go through your possessions and estimate how much the property is worth. Also figure out who owns it.

As a spouse, you want to be on the lookout for property you jointly own with your spouse. Unless this property is exempt, it goes into your spouse's estate, which means you might lose it depending on the bankruptcy your spouse files.

2. Check if you live in a community property state. The ownership of certain property may depend on the state where you are living. Some states are “community property” states, and this means that any property you or your spouse acquired during the marriage is owned equally by both of you.

For example, you might have bought a car. In a community property state, the car is generally considered the property of both you and your spouse—regardless of whether your spouse is on the title.

The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community property laws also apply in some situations in Alaska.

Because community property laws differ, you should work closely with a lawyer in your state to identify all property that will be counted as part of the bankruptcy estate.

3. Determine ownership in a common law state. If you don't live in a community property state, then you live in a common law state. In common law states, the owner is generally the person whose name is on the title. If your name alone appears on the title, then the asset probably will not be included in the bankruptcy estate.

If both names are on the title, then you and your spouse both own half of the asset and the asset will have to be listed as part of the bankruptcy estate.

The trustee might be able to force a sale of the asset if they can convince the judge that the benefit of selling the asset outweighs any detriment you will face. However, the trustee will still have to pay you the full-value of your half of the asset. The trustee can only use the portion your bankrupt spouse owned to pay their creditors.

4. Check if you own your home in “tenancy by the entirety.” This is a form of ownership in which the asset is owned by the marriage. Many couples own their home in tenancy by the entirety. Depending on your state, assets owned in this manner are exempted from the bankruptcy estate.

5. Identify bankruptcy exemptions. You can exempt property from being counted as part of your spouse's estate. Each state has bankruptcy exemptions which you can use. The federal government also has a list of exemptions. In some states, you can choose between the state or federal exemptions, whereas other states will require that you use the state exemptions.

In Missouri, for example, you can exempt up to $15,000 in a home that you live in or up to $5,000 in a mobile home. You can also exempt up to $3,000 in a motor vehicle.

Say you and your spouse jointly own a car in Missouri. If the car is worth $16,000, then your spouse has $8,000 in the car. Only $3,000 is exempt. Accordingly, the trustee might want to sell the car and use the $5,000 to pay off creditors. If the trustee sells the car, they must pay the spouse who didn't file for bankruptcy $8,000.

In some states, you can double an exemption if you file a joint bankruptcy petition so long as you both own the property. For example, if the state allows you to exempt $3,000 in a car, then you can exempt $6,000 if you and your spouse own it together.

6. Avoid transferring property. You might think you can protect your assets by having your spouse transfer them before filing for bankruptcy. If you live in a common law state, you might think you can make the transfer into your name so that you hold title to all of the family property and your spouse holds only the debts individually. Unfortunately, this tactic won't work.

Instead, your spouse must report all transfers. If your spouse transferred the property during the two years before they filed for bankruptcy, then the trustee can get the property back.

Your spouse will also get in trouble if they try to hide the transfer. Everyone files a bankruptcy petition under penalty of perjury. If caught lying, your spouse could be prosecuted and have the entire bankruptcy cancelled.



Part 2 Handling Joint Debts.

1. Identify your joint debts. You and your spouse might have joint debts. This means that you both have agreed to be 100% responsible for the full debt. Accordingly, if your spouse files for bankruptcy, you are not relieved of your responsibility for the debt. Although your spouse will have their obligation discharged, your obligation will not be. You will still remain responsible for the entire amount. Joint debts can be formed in the following ways.

You and your spouse took out the debt together.

You cosigned on a loan for your spouse.

You live in a community property state and you or your spouse took out a debt during the marriage.

2. Continue to make payments on your joint debts. If you have a joint debt—say, for your car—then you must continue to make payments on it, even if you are the spouse who didn't file for bankruptcy. If you stop, then your credit score will take a hit because your missed payments will be reported to the credit reporting agencies.

3. Consider filing a joint bankruptcy petition. You have the option of filing for bankruptcy along with your spouse. By doing so, you can discharge joint debts.[12] After a discharge, neither you nor your spouse is responsible for the joint debt.

Of course, a bankruptcy stays on your credit report for several years, and neither you nor your spouse will probably be able to secure new credit in the near future.

Nevertheless, a joint bankruptcy can be an excellent option if you have high joint debts which you have no way of paying off in the future. A joint bankruptcy can free you and your spouse of these crushing joint debts.



Part 3 Choosing the Right Bankruptcy.

1. Identify the different types of bankruptcy. U.S. law provides many different types of bankruptcies, but the two most common for individuals are Chapter 7 and Chapter 13. You should analyze which is best for you, depending on your circumstances.

Chapter 7. This is called a “liquidation” bankruptcy. In a Chapter 7, your spouse can wipe out all of their debts. However, in order to get that benefit, they generally must sell non-exempt property and use the proceeds to pay their creditors.

Chapter 13. In a Chapter 13, the debtor gets to keep their property. Instead of selling it, they will pay back creditors for three to five years. At the end of the repayment period, any remaining unsecured debts (like credit cards) will be forgiven. Chapter 13 is a good option if you have a lot of non-exempt property that is jointly owned.

Joint bankruptcy petition. A joint bankruptcy petition may be the best option if you and your spouse have large joint debts. You can file both Chapter 7 and 13 jointly.

2. Meet with an attorney. Only a qualified bankruptcy attorney can analyze your situation and identify the best course of action. You should get a referral to a bankruptcy attorney by contacting your local or state bar association. Once you have a referral, call up the attorney and schedule a consultation. Ask how much the fee will be.

Your attorney can help you think through which bankruptcy to file—or whether a different alternative would be best.

3. Consider alternatives to bankruptcy. Your spouse should consider other options. These options might be better because they will impact your spouse's credit score less severely. Also, you don't jeopardize losing property. Common alternatives include.

Get a debt consolidation loan. Sometimes you can get a low-interest loan which you use to pay off all debts. You then have one payment to make.

Transfer debts to low interest credit cards. Many credit cards give 12-month grace periods for balance transfers. Interest doesn't accrue until the grace period ends.

Create a repayment plan with your creditors. They might be willing to work with you, especially if you mention that you are thinking of filing for bankruptcy. In bankruptcy, unsecured creditors rarely get paid back 100% of what they are owed. For this reason, they may be willing to reduce the interest rate or extend payments over a long period of time so that you don't file for bankruptcy.

Use a credit counselor. Credit counseling services can help you negotiate with creditors and then consolidate debt. These counselors also help you come up with repayment plans you can afford.



Question : If my wife files bankruptcy, what happens to our jointly-owned house? How does this affect my loan on the house?

Answer : In a bankruptcy, all your debts are listed against all your assets. If your wife does not have sufficient assets to pay for her debts, then her half of the house can be seized. It can either be transferred as an asset to a creditor, or (forcibly) liquidated. But if the bank sells your house, you have to get your share. I.e. only her share can be seized. For a detailed calculation, contact an accountant.
February 17, 2020


How to Protect Your Finances when Your Spouse Files for Bankruptcy.


When your spouse files for bankruptcy, the bankruptcy should not affect your credit score. However, you may still be affected in other ways. For example, you will still have to pay off joint debts. Also, the bankruptcy trustee can seize any property your spouse owns, even if you are a joint owner. Accordingly, you and your spouse should carefully consider which bankruptcy is best for the family or whether you should pursue a non-bankruptcy option.



Part 1 Identifying Joint and Separate Property.

1. Identify all property you and your spouse own. When your spouse files for bankruptcy, they will have to list all of their property on a schedule and report it. The trustee uses this information to determine the size of the bankruptcy estate. This information is important because the trustee may be able to force your spouse to sell property in order to pay their creditors. The less property your spouse owns, the better off they will be.

Go through your possessions and estimate how much the property is worth. Also figure out who owns it.

As a spouse, you want to be on the lookout for property you jointly own with your spouse. Unless this property is exempt, it goes into your spouse's estate, which means you might lose it depending on the bankruptcy your spouse files.

2. Check if you live in a community property state. The ownership of certain property may depend on the state where you are living. Some states are “community property” states, and this means that any property you or your spouse acquired during the marriage is owned equally by both of you.

For example, you might have bought a car. In a community property state, the car is generally considered the property of both you and your spouse—regardless of whether your spouse is on the title.

The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community property laws also apply in some situations in Alaska.

Because community property laws differ, you should work closely with a lawyer in your state to identify all property that will be counted as part of the bankruptcy estate.

3. Determine ownership in a common law state. If you don't live in a community property state, then you live in a common law state. In common law states, the owner is generally the person whose name is on the title. If your name alone appears on the title, then the asset probably will not be included in the bankruptcy estate.

If both names are on the title, then you and your spouse both own half of the asset and the asset will have to be listed as part of the bankruptcy estate.

The trustee might be able to force a sale of the asset if they can convince the judge that the benefit of selling the asset outweighs any detriment you will face. However, the trustee will still have to pay you the full-value of your half of the asset. The trustee can only use the portion your bankrupt spouse owned to pay their creditors.

4. Check if you own your home in “tenancy by the entirety.” This is a form of ownership in which the asset is owned by the marriage. Many couples own their home in tenancy by the entirety. Depending on your state, assets owned in this manner are exempted from the bankruptcy estate.

5. Identify bankruptcy exemptions. You can exempt property from being counted as part of your spouse's estate. Each state has bankruptcy exemptions which you can use. The federal government also has a list of exemptions. In some states, you can choose between the state or federal exemptions, whereas other states will require that you use the state exemptions.

In Missouri, for example, you can exempt up to $15,000 in a home that you live in or up to $5,000 in a mobile home. You can also exempt up to $3,000 in a motor vehicle.

Say you and your spouse jointly own a car in Missouri. If the car is worth $16,000, then your spouse has $8,000 in the car. Only $3,000 is exempt. Accordingly, the trustee might want to sell the car and use the $5,000 to pay off creditors. If the trustee sells the car, they must pay the spouse who didn't file for bankruptcy $8,000.

In some states, you can double an exemption if you file a joint bankruptcy petition so long as you both own the property. For example, if the state allows you to exempt $3,000 in a car, then you can exempt $6,000 if you and your spouse own it together.

6. Avoid transferring property. You might think you can protect your assets by having your spouse transfer them before filing for bankruptcy. If you live in a common law state, you might think you can make the transfer into your name so that you hold title to all of the family property and your spouse holds only the debts individually. Unfortunately, this tactic won't work.

Instead, your spouse must report all transfers. If your spouse transferred the property during the two years before they filed for bankruptcy, then the trustee can get the property back.

Your spouse will also get in trouble if they try to hide the transfer. Everyone files a bankruptcy petition under penalty of perjury. If caught lying, your spouse could be prosecuted and have the entire bankruptcy cancelled.



Part 2 Handling Joint Debts.

1. Identify your joint debts. You and your spouse might have joint debts. This means that you both have agreed to be 100% responsible for the full debt. Accordingly, if your spouse files for bankruptcy, you are not relieved of your responsibility for the debt. Although your spouse will have their obligation discharged, your obligation will not be. You will still remain responsible for the entire amount. Joint debts can be formed in the following ways.

You and your spouse took out the debt together.

You cosigned on a loan for your spouse.

You live in a community property state and you or your spouse took out a debt during the marriage.

2. Continue to make payments on your joint debts. If you have a joint debt—say, for your car—then you must continue to make payments on it, even if you are the spouse who didn't file for bankruptcy. If you stop, then your credit score will take a hit because your missed payments will be reported to the credit reporting agencies.

3. Consider filing a joint bankruptcy petition. You have the option of filing for bankruptcy along with your spouse. By doing so, you can discharge joint debts.[12] After a discharge, neither you nor your spouse is responsible for the joint debt.

Of course, a bankruptcy stays on your credit report for several years, and neither you nor your spouse will probably be able to secure new credit in the near future.

Nevertheless, a joint bankruptcy can be an excellent option if you have high joint debts which you have no way of paying off in the future. A joint bankruptcy can free you and your spouse of these crushing joint debts.



Part 3 Choosing the Right Bankruptcy.

1. Identify the different types of bankruptcy. U.S. law provides many different types of bankruptcies, but the two most common for individuals are Chapter 7 and Chapter 13. You should analyze which is best for you, depending on your circumstances.

Chapter 7. This is called a “liquidation” bankruptcy. In a Chapter 7, your spouse can wipe out all of their debts. However, in order to get that benefit, they generally must sell non-exempt property and use the proceeds to pay their creditors.

Chapter 13. In a Chapter 13, the debtor gets to keep their property. Instead of selling it, they will pay back creditors for three to five years. At the end of the repayment period, any remaining unsecured debts (like credit cards) will be forgiven. Chapter 13 is a good option if you have a lot of non-exempt property that is jointly owned.

Joint bankruptcy petition. A joint bankruptcy petition may be the best option if you and your spouse have large joint debts. You can file both Chapter 7 and 13 jointly.

2. Meet with an attorney. Only a qualified bankruptcy attorney can analyze your situation and identify the best course of action. You should get a referral to a bankruptcy attorney by contacting your local or state bar association. Once you have a referral, call up the attorney and schedule a consultation. Ask how much the fee will be.

Your attorney can help you think through which bankruptcy to file—or whether a different alternative would be best.

3. Consider alternatives to bankruptcy. Your spouse should consider other options. These options might be better because they will impact your spouse's credit score less severely. Also, you don't jeopardize losing property. Common alternatives include.

Get a debt consolidation loan. Sometimes you can get a low-interest loan which you use to pay off all debts. You then have one payment to make.

Transfer debts to low interest credit cards. Many credit cards give 12-month grace periods for balance transfers. Interest doesn't accrue until the grace period ends.

Create a repayment plan with your creditors. They might be willing to work with you, especially if you mention that you are thinking of filing for bankruptcy. In bankruptcy, unsecured creditors rarely get paid back 100% of what they are owed. For this reason, they may be willing to reduce the interest rate or extend payments over a long period of time so that you don't file for bankruptcy.

Use a credit counselor. Credit counseling services can help you negotiate with creditors and then consolidate debt. These counselors also help you come up with repayment plans you can afford.



Question : If my wife files bankruptcy, what happens to our jointly-owned house? How does this affect my loan on the house?

Answer : In a bankruptcy, all your debts are listed against all your assets. If your wife does not have sufficient assets to pay for her debts, then her half of the house can be seized. It can either be transferred as an asset to a creditor, or (forcibly) liquidated. But if the bank sells your house, you have to get your share. I.e. only her share can be seized. For a detailed calculation, contact an accountant.
February 25, 2020


How to Discuss Finances Together in a Marriage.


Finances are a hot topic when it comes to all relationships, especially marriages. Saying “I do” means more than just sharing a life together, it also means sharing financial responsibility for that life. Whether good or bad, each spouse needs to be open and honest about his or her current financial standing. What’s more, the couple must work together to decide on important financial decisions for the future. Learn the basics for discussing money with your spouse.



Part 1 Communicating Effectively

1. Broach the subject casually with your spouse. The time to start talking about merging your finances is before the wedding, but at least 40% of couples avoid doing so.

Start the conversation with your action items first. This could mean starting off by talking to your spouse about your desire to look at your own credit score as you prepare to buy a house and suggest that he or she does the same. Say something like “Have you checked your credit report lately? I’ve been wanting to get a good picture of my financial standing. Maybe we can do it together?”

Things like credit scores for both of you may change how you approach buying a home, for example. You may find if one of you has a higher score than the other, it may be better to buy without both of you on the mortgage. However, things line up, remember you are on the same “team”.

2. Gather data to support your decisions. Print your credit reports and any supporting documentation, such as account balances and credit card debt. Financial choices need to be based on numbers not emotion. Make sure you both have a clear idea of what debts came into the union and how you can work to pay those down.

Early on you are doing this to get on the same page about your individual financial pictures. However, in the future, it may be nice to take time each month to sit down together and look over the numbers. Viewing credit card statements and account balances can be a way to keep you accountable as far as goals and also open the floor for an ongoing discussion with your spouse.

3. Be candid about any bad habits. Before you get started, you must be forthright with your spouse about any habits you happen to have that are not apparent on your credit reports.

An example of a bad habit would include not taking the time to write down purchases made on your debit card so you can balance your check book. When you were single, this may have not seemed like a huge deal, but with two people sharing accounts it can quickly become a problem.

Other bad habits you need to bring to your spouse would include past blemishes on your credit like having too many credit cards open, being in default on student loans or having bills in collection. All of these issues can impact credit, but they can also be addressed and resolved.

4. Refrain from pointing the finger. Placing blame and arguing over money will not make any issues better. If you ask your spouse to be honest about credit challenges and then start the blame game you will probably not get that same level of honesty in the future.

5. Listen to understand, not to reply. This means looking at your spouse as he or she is speaking, listening carefully to fully get his or her point of view, and then taking that one step further by confirming what you have heard.

When you sit down to have a tough conversation with your spouse, you will break the trust if you are not willing to listen. Don’t ask the tough questions unless you are ready to handle any answer.

The exchange of information should be fair and equal.



Part 2 Setting Ground Rules.

1. Decide if you will merge all the money or maintain separate accounts. Even after getting married there are no laws that say you have to merge all your accounts. Having separate accounts does not mean neither of you knows what the other is doing. Both partners should have access to the records of the other since you are sharing a household.

Depending on the credit scores for both spouses, it may make more sense to keep separate accounts especially if you want to buy a home soon. One spouse alone on a mortgage is going to have a higher chance of getting the loan than two people with mixed credit scores.

2. Determine who will be the primary overseer of your money. This will include how you make decisions about both small and large purchases. The person who is most organized and financially savvy may be the best choice for managing the finances. However, both partners should take on the responsibility in some way. So, choose duties according to your individual strengths.

For example, one of you may be better at saving, so you will be in charge of building an emergency fund and overseeing retirement savings. The other may be in charge of paying monthly bills and balancing the checkbook. Decide based on what’s best for you and your spouse.

3. Agree about which of you will handle certain expenses. You will need to know who is writing the check for rent, paying the electric bill and other household bills. You do not want to get into a situation where both of you thought the other paid the electric bill and you learn that it wasn’t paid when the lights are turned off. You also don’t want to pay bills twice and be short money.

Being upfront about how much both of you make and how you will divide the bills will make things much easier. Some families divide everything I half while others just pool their money regardless of who makes what.

The use of credit cards versus cash should also be explored as one partner may be used to always using a card and then paying it off once a month while the other only uses cash. This needs to be talked about.

4. Don’t make big purchases without your spouse’s blessing. Regardless of who makes more money, a big ticket item should be bought together. This is a good time to set boundaries about how much either of you can spend without talking to your spouse. This can be as simple as saying you have a spending limit of $100 without checking in since that is a low amount in your budget and won’t overdraw the account.



Part 3 Overcoming Money Troubles.

1. Build a household budget. This budget should include all the household bills, ongoing needs and bills that were outstanding from before you got married. The budget needs to be realistic and something you both commit to. Consider these tips:

Tally up every single monthly expense and plan for them in advance.

Include separate and joint goals.

Include long-term goals like saving for a down payment on a house.

Negotiate with ongoing bills to cut down interest rates or get rid of fees.

Automate whatever you can so that you don’t miss paying bills and acquire late fees.

Go back and revise your budget as needed.

2. Start building an emergency fund. If you didn’t already have an emergency fund before getting married, now is the time to build one. An emergency fund acts as a cushion in times when unexpected expenses pop up or one of you is out of work.

How big your emergency account is will depend on you and your spouse. Many families tuck away enough money for at least 3 to 6 months of expenses. This provides greater security over the long haul.

This savings account would be for true emergencies only, not impulse buys. Take the time to set boundaries as to what qualifies as an emergency.

Some households use a credit card for emergencies like car repairs. Make sure you both agree if this is a good use of your credit cards and leave the available balance for such an emergency. If either of you has problems with managing credit cards, this may not be the best option for your household.

3. Know your debt situation and decide on a strategy to pay it off.[13] Both of you should have a very clear idea of the other person’s debt as well as your own. Don’t fall prey to the idea that it’s your spouse’s problem—it’s not. Both of your debt is usually considered during major purchases, so working together to shrink each person’s debt is ideal.

It can also be helpful to get financial advising or attend a debt reduction course for couples. If you have a significant amount of debt—or have no idea where to start to pay it down—it may be practical to involve a professional who can assist you.

4. Plan for your retirements. Talk to your spouse and come up with a plan that suits both of you for retirement and start saving. Keep in mind, that men and women often have varying opinions when it comes to retirement, so be willing to compromise and consider your spouse’s perspective.

Include payments to 401K and other investments as a part of your budget. Part of this process also includes changing the beneficiaries for each account now that you are married.

If you don’t already, you also need to draw up life insurance policies to secure your spouse and your family in case of a tragedy.



Question : If we get a divorce, will my wife get 50% of my 401K too?

Answer : Honestly, this depends on the state and the county where you are getting divorced. Different locations have different rules of division in a divorce. Some states are equitable division, meaning you split 50/50 while others are not.



Warnings.

Money troubles have ended more than a few marriages. If you are both responsible, open and honest about money, it will make for a stronger marriage.

Be mindful that some people are sensitive about discussing money. To some, money means power and control and these are very volatile subjects. Handle with care.

It can be a difficult and uncomfortable transition going from being a single person in total control of your finances to being part of a couple. If your partner is resistant, give him or her time. If you can show them that you are interested in working as a team with no judgments, your spouse will eventually come around.
February 10, 2020


How to Discuss Finances Together in a Marriage.


Finances are a hot topic when it comes to all relationships, especially marriages. Saying “I do” means more than just sharing a life together, it also means sharing financial responsibility for that life. Whether good or bad, each spouse needs to be open and honest about his or her current financial standing. What’s more, the couple must work together to decide on important financial decisions for the future. Learn the basics for discussing money with your spouse.



Part 1 Communicating Effectively

1. Broach the subject casually with your spouse. The time to start talking about merging your finances is before the wedding, but at least 40% of couples avoid doing so.

Start the conversation with your action items first. This could mean starting off by talking to your spouse about your desire to look at your own credit score as you prepare to buy a house and suggest that he or she does the same. Say something like “Have you checked your credit report lately? I’ve been wanting to get a good picture of my financial standing. Maybe we can do it together?”

Things like credit scores for both of you may change how you approach buying a home, for example. You may find if one of you has a higher score than the other, it may be better to buy without both of you on the mortgage. However, things line up, remember you are on the same “team”.

2. Gather data to support your decisions. Print your credit reports and any supporting documentation, such as account balances and credit card debt. Financial choices need to be based on numbers not emotion. Make sure you both have a clear idea of what debts came into the union and how you can work to pay those down.

Early on you are doing this to get on the same page about your individual financial pictures. However, in the future, it may be nice to take time each month to sit down together and look over the numbers. Viewing credit card statements and account balances can be a way to keep you accountable as far as goals and also open the floor for an ongoing discussion with your spouse.

3. Be candid about any bad habits. Before you get started, you must be forthright with your spouse about any habits you happen to have that are not apparent on your credit reports.

An example of a bad habit would include not taking the time to write down purchases made on your debit card so you can balance your check book. When you were single, this may have not seemed like a huge deal, but with two people sharing accounts it can quickly become a problem.

Other bad habits you need to bring to your spouse would include past blemishes on your credit like having too many credit cards open, being in default on student loans or having bills in collection. All of these issues can impact credit, but they can also be addressed and resolved.

4. Refrain from pointing the finger. Placing blame and arguing over money will not make any issues better. If you ask your spouse to be honest about credit challenges and then start the blame game you will probably not get that same level of honesty in the future.

5. Listen to understand, not to reply. This means looking at your spouse as he or she is speaking, listening carefully to fully get his or her point of view, and then taking that one step further by confirming what you have heard.

When you sit down to have a tough conversation with your spouse, you will break the trust if you are not willing to listen. Don’t ask the tough questions unless you are ready to handle any answer.

The exchange of information should be fair and equal.



Part 2 Setting Ground Rules.

1. Decide if you will merge all the money or maintain separate accounts. Even after getting married there are no laws that say you have to merge all your accounts. Having separate accounts does not mean neither of you knows what the other is doing. Both partners should have access to the records of the other since you are sharing a household.

Depending on the credit scores for both spouses, it may make more sense to keep separate accounts especially if you want to buy a home soon. One spouse alone on a mortgage is going to have a higher chance of getting the loan than two people with mixed credit scores.

2. Determine who will be the primary overseer of your money. This will include how you make decisions about both small and large purchases. The person who is most organized and financially savvy may be the best choice for managing the finances. However, both partners should take on the responsibility in some way. So, choose duties according to your individual strengths.

For example, one of you may be better at saving, so you will be in charge of building an emergency fund and overseeing retirement savings. The other may be in charge of paying monthly bills and balancing the checkbook. Decide based on what’s best for you and your spouse.

3. Agree about which of you will handle certain expenses. You will need to know who is writing the check for rent, paying the electric bill and other household bills. You do not want to get into a situation where both of you thought the other paid the electric bill and you learn that it wasn’t paid when the lights are turned off. You also don’t want to pay bills twice and be short money.

Being upfront about how much both of you make and how you will divide the bills will make things much easier. Some families divide everything I half while others just pool their money regardless of who makes what.

The use of credit cards versus cash should also be explored as one partner may be used to always using a card and then paying it off once a month while the other only uses cash. This needs to be talked about.

4. Don’t make big purchases without your spouse’s blessing. Regardless of who makes more money, a big ticket item should be bought together. This is a good time to set boundaries about how much either of you can spend without talking to your spouse. This can be as simple as saying you have a spending limit of $100 without checking in since that is a low amount in your budget and won’t overdraw the account.



Part 3 Overcoming Money Troubles.

1. Build a household budget. This budget should include all the household bills, ongoing needs and bills that were outstanding from before you got married. The budget needs to be realistic and something you both commit to. Consider these tips:

Tally up every single monthly expense and plan for them in advance.

Include separate and joint goals.

Include long-term goals like saving for a down payment on a house.

Negotiate with ongoing bills to cut down interest rates or get rid of fees.

Automate whatever you can so that you don’t miss paying bills and acquire late fees.

Go back and revise your budget as needed.

2. Start building an emergency fund. If you didn’t already have an emergency fund before getting married, now is the time to build one. An emergency fund acts as a cushion in times when unexpected expenses pop up or one of you is out of work.

How big your emergency account is will depend on you and your spouse. Many families tuck away enough money for at least 3 to 6 months of expenses. This provides greater security over the long haul.

This savings account would be for true emergencies only, not impulse buys. Take the time to set boundaries as to what qualifies as an emergency.

Some households use a credit card for emergencies like car repairs. Make sure you both agree if this is a good use of your credit cards and leave the available balance for such an emergency. If either of you has problems with managing credit cards, this may not be the best option for your household.

3. Know your debt situation and decide on a strategy to pay it off.[13] Both of you should have a very clear idea of the other person’s debt as well as your own. Don’t fall prey to the idea that it’s your spouse’s problem—it’s not. Both of your debt is usually considered during major purchases, so working together to shrink each person’s debt is ideal.

It can also be helpful to get financial advising or attend a debt reduction course for couples. If you have a significant amount of debt—or have no idea where to start to pay it down—it may be practical to involve a professional who can assist you.

4. Plan for your retirements. Talk to your spouse and come up with a plan that suits both of you for retirement and start saving. Keep in mind, that men and women often have varying opinions when it comes to retirement, so be willing to compromise and consider your spouse’s perspective.

Include payments to 401K and other investments as a part of your budget. Part of this process also includes changing the beneficiaries for each account now that you are married.

If you don’t already, you also need to draw up life insurance policies to secure your spouse and your family in case of a tragedy.



Question : If we get a divorce, will my wife get 50% of my 401K too?

Answer : Honestly, this depends on the state and the county where you are getting divorced. Different locations have different rules of division in a divorce. Some states are equitable division, meaning you split 50/50 while others are not.



Warnings.

Money troubles have ended more than a few marriages. If you are both responsible, open and honest about money, it will make for a stronger marriage.

Be mindful that some people are sensitive about discussing money. To some, money means power and control and these are very volatile subjects. Handle with care.

It can be a difficult and uncomfortable transition going from being a single person in total control of your finances to being part of a couple. If your partner is resistant, give him or her time. If you can show them that you are interested in working as a team with no judgments, your spouse will eventually come around.
February 10, 2020


How to Avoid Probate in Canada.


Probate is the legal process of collecting and distributing a person's assets after his or her death. As attorney fees, court costs, probate fees, or taxes can be expensive, many choose to plan their estate in order to avoid probate. Avoiding probate generally means ensuring that certain assets do not become a part of your probate estate. To prevent assets from becoming a part of your estate and avoid probate in Canada, follow the steps below.

Steps.
1. Name beneficiaries on your life insurance policies. Life insurance is paid directly to the named beneficiary, so the funds never become a part of the probate estate, therefore not subject to probate taxes and fees. You may also wish to name a secondary beneficiary, in case the primary beneficiary predeceases you.
2. Hold your assets in cash and/or bearer certificates. Assets held in cash or bearer certificates, such as stock, may be excluded from the probate estate, reducing the amount of fees and taxes charged to it. A bearer certificate is a financial instrument, such as a check payable to ‘cash', which may be redeemed by any party possessing it.
3. Add a Pay on Death (“POD”) or Transfer on Death (“TOD”) designation to your accounts. This can only be done in the USA. Canada does not have such a law for non-registered investment accounts. Only registered accounts such as an RRSP, RRIF, TFSA accounts can have named beneficiaries. Joint ownership is the only way to avoid probate for non-registered accounts.
A POD or TOD designation allows you to decide to whom the property will transfer or be paid upon your death. As it will be paid or transferred directly to the designated party, it will not be subject to probate taxes. To name a POD or TOD, contact the bank or investment firm where the account is held. The procedure will vary from company to company and will most often involve filling out and returning a simple form.
4. Title your assets to a joint owner. Assets, which are held jointly with rights of survivorship, pass directly to the surviving joint owner, and never become subject to probate. Joint ownership is not right in all circumstances. You may wish to consider the following, before naming a joint owner of any of your assets.
A joint owner can clean out your accounts or otherwise encumber your property. Once a party owns an interest in your property, he or she may take out loans against it, or in the case of a bank or investment account, empty it. This can be done without your knowledge or consent.
You will need the cooperation of the joint owner in order to sell or mortgage the property. Once you name a joint owner, he or she will need to consent to any sale of the property, or any mortgage taken against it.
Naming a joint owner, when he or she is not the only beneficiary of the estate, may cause discontentment between heirs. The other beneficiaries may believe that the joint owner was only meant to hold the property in trust for all of the beneficiaries, and a dispute as to who should inherit the property can easily arise.
There may be tax consequences, such as capital gains property transfer tax, when naming joint owners of certain property. You may want to consult with a Certified General Account (“CGA”) or tax attorney before doing anything that may affect your obligation to pay taxes.
Just as a joint owner has a claim to the joint property, so does his or her creditors. Titling your property with another as a joint owner may subject it to the claims of the joint owner's creditors and/or his or her spouse.
5. Give gifts. Gifting your property now will reduce the value of the estate at your death, thereby reducing the amount of taxes and/or fees due. Be aware that certain legal requirements and/or obligations may apply when making inter-vivos gifts or to those made while you are alive, for the purpose of reducing probate taxes. These considerations include:
You must actually give up control of the gift to the giftee. For example, if you make a gift of an antique piece of furniture, you must deliver the piece to the giftee, and discontinue your possession of it. Another example is if you bestow a bank account upon another, you must add their name and remove yours from the title.
There may be tax consequences for the one who receives the gift. For example, if the fair market value (“FMV”) of the gift exceeds its cost, the accrued gain may be taxable as a capital gain. The Canadian Revenue Agency (“CRA”) defines FMV as “the highest price, expressed in dollars, that a property would bring in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.”
Property tax transfer and other fees may be due when gifting real estate to another. You may wish to consult with a CGA, tax attorney, or probate lawyer before transferring any real property to another party, in order to ensure that your legal and financial rights are protected.
6. Set up a trust. A trust allows you to title your property to it, to be held by an appointed trustee, on your behalf. You may appoint yourself as trustee if you choose. The trust will provide for the distribution of the property after your death. Since the property is owned by the trust, it never becomes a part of your probate estate and is not subject to probate taxes.
7. Title assets to your company. If you have outstanding debt other than a mortgage, that debt will not be subtracted from your assets when the value of your estate at the time of your death is determined. This will increase the value of your estate, causing a higher probate tax to apply. Transferring the loan and the asset purchased with it to a limited company will reduce the gross value of your estate, which in turn will reduce the amount of probate tax due.
8. Make two wills. Parties who hold certain assets may decide to make two wills. A Primary Will, which deals with those assets that are required to be subject to probate, and a Secondary Will, which provides direction as to the distribution of all other assets. While this is not a widely known practice, the Court in Ontario recently approved of this estate planning approach in Granovsky Estate v. Ontario.

Community Q&A.

Question : If a partial distribution was made as a part of the deceased mother's will and the son dies before final distribution, how is the balance handled?
Answer :  In most cases, the balance will be given to the next person listed in the document.
Question : Can a person's RRIF be allocated in a will to someone prior to death and avoid having to be a part of any probate?
Answer :  Registered accounts with named beneficiaries are not subject to probate calculation as it is not part of a taxable estate. If the named beneficiary is "Estate," then it will be subject to probate.
Question : Without a named beneficiary, does life insurance and RRSP go to the probate?
Answer :  Yes, without a named beneficiary any life insurance or RRSPs become part of the deceased's estate and are therefore subject to Estate Administration Tax.
Question : A wife, as beneficiary of a life insurance policy, predeceases the husband. Upon the husband's death, how can their children receive the proceeds of the policy?
Answer :  You must put the children down now as contingent beneficiaries. Contact the insurance provider of the policy.
Question : How do I avoid probate in Canada if everything the deceased has is cash in a bank?
Answer :  You will be able to avoid probate, but you will need to be cautious about how the cash is divided up afterwards. A huge addition of cash will probably put you in a different tax bracket, and you will have to pay more income tax as a result. You will need to find out what the tax burden will be on the amount you receive, if it's purely cash.
Question : What happens when probate is started on a will and then another will is found?
Answer :  The dates the documents were signed will determine the legitimacy. The later one should be the one that is used.
Question : How do I keep my family home from probate? I would like it to continue to be a family home for my children and to let them decide what to do with it in the future.
Answer :  Add their names to the title.Then it will automatically be their property and you will avoid probate, and also, depending on where you live, estate taxes.
Question : Can a financial institution make a claim for the beneficiary's share of an estate?
Answer :  All life insurance products such as deferred annuities or segregated funds are creditor-proof.
Question : Is there a waiver of probate form or a waiver for banks to release bank funds in Canada?
Answer :  In Canada, if the estate size is small, the beneficiary is the spouse and the strength of the relationship of the deceased and the beneficiary is know to be strong by staff of the bank, the financial institution can offer a waiver of probate on a case-by-case basis.
Question : How do I know how much tax I will pay in Ontario?
Answer :  Ontario's official government website has an estate administration tax calculator.

Tips.
If you wish to control when a beneficiary inherits the property, you may want to consider creating a trust instead of naming TODs and PODs.
Talk to your friends and family about how you wish for your personal property to be distributed upon your death. If you really want a specific person to have an item, and are unsure if your loved one's will abide by your wishes, simply give it to them now.

Warnings.

Naming a joint account owner on an account will allow the joint owner to withdraw all of your money or cause a lien to be placed on the account if they are sued and a judgment is entered against them. Naming a POD or TOD may be the safest way to ensure that your property passes to whom you wish, without giving up interest in it until after your death.
Before taking an action, which may affect your legal or financial rights and/or obligations, you should consult with a qualified barrister.
Avoiding probate is not right for everyone. You may wish to consult with a barrister in order to determine if taking steps to avoid probate is appropriate in your particular situation.
June 02, 2020


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

Ten Ways to Create Shareholder Value (part 3).

by Alfred Rappaport.

Principle 8.

Reward middle managers and frontline employees for delivering superior performance on the key value drivers that they influence directly.
Although sales growth, operating margins, and capital expenditures are useful financial indicators for tracking operating-unit SVA, they are too broad to provide much day-to-day guidance for middle managers and frontline employees, who need to know what specific actions they should take to increase SVA. For more specific measures, companies can develop leading indicators of value, which are quantifiable, easily communicated current accomplishments that frontline employees can influence directly and that significantly affect the long-term value of the business in a positive way. Examples might include time to market for new product launches, employee turnover rate, customer retention rate, and the timely opening of new stores or manufacturing facilities.

My own experience suggests that most businesses can focus on three to five leading indicators and capture an important part of their long-term value-creation potential. The process of identifying leading indicators can be challenging, but improving leading-indicator performance is the foundation for achieving superior SVA, which in turn serves to increase long-term shareholder returns.

Principle 9.

Require senior executives to bear the risks of ownership just as shareholders do.
For the most part, option grants have not successfully aligned the long-term interests of senior executives and shareholders because the former routinely cash out vested options. The ability to sell shares early may in fact motivate them to focus on near-term earnings results rather than on long-term value in order to boost the current stock price.

To better align these interests, many companies have adopted stock ownership guidelines for senior management. Minimum ownership is usually expressed as a multiple of base salary, which is then converted to a specified number of shares. For example, eBay’s guidelines require the CEO to own stock in the company equivalent to five times annual base salary. For other executives, the corresponding number is three times salary. Top managers are further required to retain a percentage of shares resulting from the exercise of stock options until they amass the stipulated number of shares.
But in most cases, stock ownership plans fail to expose executives to the same levels of risk that shareholders bear. One reason is that some companies forgive stock purchase loans when shares underperform, claiming that the arrangement no longer provides an incentive for top management. Such companies, just as those that reprice options, risk institutionalizing a pay delivery system that subverts the spirit and objectives of the incentive compensation program. Another reason is that outright grants of restricted stock, which are essentially options with an exercise price of $0, typically count as shares toward satisfaction of minimum ownership levels. Stock grants motivate key executives to stay with the company until the restrictions lapse, typically within three or four years, and they can cash in their shares. These grants create a strong incentive for CEOs and other top managers to play it safe, protect existing value, and avoid getting fired. Not surprisingly, restricted stock plans are commonly referred to as “pay for pulse,” rather than pay for performance.

In an effort to deflect the criticism that restricted stock plans are a giveaway, many companies offer performance shares that require not only that the executive remain on the payroll but also that the company achieve predetermined performance goals tied to EPS growth, revenue targets, or return-on-capital-employed thresholds. While performance shares do demand performance, it’s generally not the right kind of performance for delivering long-term value because the metrics are usually not closely linked to value.

Companies need to balance the benefits of requiring senior executives to hold continuing ownership stakes and the resulting restrictions on their liquidity and diversification.

Companies seeking to better align the interests of executives and shareholders need to find a proper balance between the benefits of requiring senior executives to have meaningful and continuing ownership stakes and the resulting restrictions on their liquidity and diversification. Without equity-based incentives, executives may become excessively risk averse to avoid failure and possible dismissal. If they own too much equity, however, they may also eschew risk to preserve the value of their largely undiversified portfolios. Extending the period before executives can unload shares from the exercise of options and not counting restricted stock grants as shares toward minimum ownership levels would certainly help equalize executives’ and shareholders’ risks.

Principle 10.

Provide investors with value-relevant information.
The final principle governs investor communications, such as a company’s financial reports. Better disclosure not only offers an antidote to short-term earnings obsession but also serves to lessen investor uncertainty and so potentially reduce the cost of capital and increase the share price.

One way to do this, as described in my article “The Economics of Short-Term Performance Obsession” in the May–June 2005 issue of Financial Analysts Journal, is to prepare a corporate performance statement. (See the exhibit “The Corporate Performance Statement” for a template.) This statement:

separates out cash flows and accruals, providing a historical baseline for estimating a company’s cash flow prospects and enabling analysts to evaluate how reasonable accrual estimates are;
classifies accruals with long cash-conversion cycles into medium and high levels of uncertainty;
provides a range and the most likely estimate for each accrual rather than traditional single-point estimates that ignore the wide variability of possible outcomes;
excludes arbitrary, value-irrelevant accruals, such as depreciation and amortization; and
details assumptions and risks for each line item while presenting key performance indicators that drive the company’s value.

Could such specific disclosure prove too costly? The reality is that executives in well-managed companies already use the type of information contained in a corporate performance statement. Indeed, the absence of such information should cause shareholders to question whether management has a comprehensive grasp of the business and whether the board is properly exercising its oversight responsibility. In the present unforgiving climate for accounting shenanigans, value-driven companies have an unprecedented opportunity to create value simply by improving the form and content of corporate reports.

The Rewards—and the Risks.
The crucial question, of course, is whether following these ten principles serves the long-term interests of shareholders. For most companies, the answer is a resounding yes. Just eliminating the practice of delaying or forgoing value-creating investments to meet quarterly earnings targets can make a significant difference. Further, exiting the earnings-management game of accelerating revenues into the current period and deferring expenses to future periods reduces the risk that, over time, a company will be unable to meet market expectations and trigger a meltdown in its stock. But the real payoff comes in the difference that a true shareholder-value orientation makes to a company’s long-term growth strategy.

For most organizations, value-creating growth is the strategic challenge, and to succeed, companies must be good at developing new, potentially disruptive businesses. Here’s why. The bulk of the typical company’s share price reflects expectations for the growth of current businesses. If companies meet those expectations, shareholders will earn only a normal return. But to deliver superior long-term returns—that is, to grow the share price faster than competitors’ share prices—management must either repeatedly exceed market expectations for its current businesses or develop new value-creating businesses. It’s almost impossible to repeatedly beat expectations for current businesses, because if you do, investors simply raise the bar. So the only reasonable way to deliver superior long-term returns is to focus on new business opportunities. (Of course, if a company’s stock price already reflects expectations with regard to new businesses—which it may do if management has a track record of delivering such value-creating growth—then the task of generating superior returns becomes daunting; it’s all managers can do to meet the expectations that exist.)

Value-creating growth is the strategic challenge, and to succeed, companies must be good at developing new, potentially disruptive businesses.

Companies focused on short-term performance measures are doomed to fail in delivering on a value-creating growth strategy because they are forced to concentrate on existing businesses rather than on developing new ones for the longer term. When managers spend too much time on core businesses, they end up with no new opportunities in the pipeline. And when they get into trouble—as they inevitably do—they have little choice but to try to pull a rabbit out of the hat. The dynamic of this failure has been very accurately described by Clay Christensen and Michael Raynor in their book The Innovator’s Solution: Creating and Sustaining Successful Growth (Harvard Business School Press, 2003). With a little adaptation, it plays out like this:

Despite a slowdown in growth and margin erosion in the company’s maturing core business, management continues to focus on developing it at the expense of launching new growth businesses.
Eventually, investments in the core can no longer produce the growth that investors expect, and the stock price takes a hit.
To revitalize the stock price, management announces a targeted growth rate that is well beyond what the core can deliver, thus introducing a larger growth gap.
Confronted with this gap, the company limits funding to projects that promise very large, very fast growth. Accordingly, the company refuses to fund new growth businesses that could ultimately fuel the company’s expansion but couldn’t get big enough fast enough.
Managers then respond with overly optimistic projections to gain funding for initiatives in large existing markets that are potentially capable of generating sufficient revenue quickly enough to satisfy investor expectations.
To meet the planned timetable for rollout, the company puts a sizable cost structure in place before realizing any revenues.
As revenue increases fall short and losses persist, the market again hammers the stock price and a new CEO is brought in to shore it up.
Seeing that the new growth business pipeline is virtually empty, the incoming CEO tries to quickly stem losses by approving only expenditures that bolster the mature core.
The company has now come full circle and has lost substantial shareholder value.
Companies that take shareholder value seriously avoid this self-reinforcing pattern of behavior. Because they do not dwell on the market’s near-term expectations, they don’t wait for the core to deteriorate before they invest in new growth opportunities. They are, therefore, more likely to become first movers in a market and erect formidable barriers to entry through scale or learning economies, positive network effects, or reputational advantages. Their management teams are forward-looking and sensitive to strategic opportunities. Over time, they get better than their competitors at seizing opportunities to achieve competitive advantage.
Although applying the ten principles will improve long-term prospects for many companies, a few will still experience problems if investors remain fixated on near-term earnings, because in certain situations a weak stock price can actually affect operating performance. The risk is particularly acute for companies such as high-tech start-ups, which depend heavily on a healthy stock price to finance growth and send positive signals to employees, customers, and suppliers. When share prices are depressed, selling new shares either prohibitively dilutes current shareholders’ stakes or, in some cases, makes the company unattractive to prospective investors. As a consequence, management may have to defer or scrap its value-creating growth plans. Then, as investors become aware of the situation, the stock price continues to slide, possibly leading to a takeover at a fire-sale price or to bankruptcy.

Severely capital-constrained companies can also be vulnerable, especially if labor markets are tight, customers are few, or suppliers are particularly powerful. A low share price means that these organizations cannot offer credible prospects of large stock-option or restricted-stock gains, which makes it difficult to attract and retain the talent whose knowledge, ideas, and skills have increasingly become a dominant source of value. From the perspective of customers, a low valuation raises doubts about the company’s competitive and financial strength as well as its ability to continue producing high-quality, leading-edge products and reliable postsale support. Suppliers and distributors may also react by offering less favorable contractual terms, or, if they sense an unacceptable probability of financial distress, they may simply refuse to do business with the company. In all cases, the company’s woes are compounded when lenders consider the performance risks arising from a weak stock price and demand higher interest rates and more restrictive loan terms.

Clearly, if a company is vulnerable in these respects, then responsible managers cannot afford to ignore market pressures for short-term performance, and adoption of the ten principles needs to be somewhat tempered. But the reality is that these extreme conditions do not apply to most established, publicly traded companies. Few rely on equity issues to finance growth. Most generate enough cash to pay their top employees well without resorting to equity incentives. Most also have a large universe of customers and suppliers to deal with, and there are plenty of banks after their business.

It’s time, therefore, for boards and CEOs to step up and seize the moment. The sooner you make your firm a level 10 company, the more you and your shareholders stand to gain. And what better moment than now for institutional investors to act on behalf of the shareholders and beneficiaries they represent and insist that long-term shareholder value become the governing principle for all the companies in their portfolios?


July 25, 2020