Sunday, January 24, 2010

Understanding your finances:1st step to controlling your debt

If you don't really understand your finances, you're bound to find it harder to get / keep them under control. It's true of anything, but it's particularly true of personal finance matters - that's one reason there are so many companies, charities and government organizations which exist to help people get to grips with their money and control their debts.

Understanding your finances: income and expenditure

  1. How much do you earn?
  2. How much do you spend?

These two questions are right at the heart of your personal finances. When you know exactly where your money is coming from and exactly where it's going, you'll know:

  1. How much you can afford to put towards your debts every month.
  2. Where you can cut back on your spending so you can put more towards your debts and get 'back in the black' faster.
  3. When your situation is serious and you need to look for debt help.

So, start by writing down everything you receive in a month:

  • Wages, child benefit, income support, tax credits, Jobseeker's Allowance, Incapacity Benefit, Disability Living Allowance, etc.

    Add it all up to get your Total income.

Next, write down everything you need to spend in a month:

  • Rent/mortgage, secured loan payments, council tax, utility bills, pension contributions, phone bills, TV licence, housekeeping, child care, the cost of essential transport, clothing and food, etc.

    (Please note that this list includes payments to your priority debts but not payments to your non-priority debts (see below).)

    Add it all up to get your Total expenditure.

Take your Total expenditure away from your Total income and you'll get your Disposable income. This is the money that's available for:

  • Making payments to your non-priority debts.
  • Spending on non-essential goods and services.
  • Saving.

Understanding debt

  • Priority debts

    Your priority debts are the most important ones, with the most serious consequences if you don't keep up with them.

    If you fall behind on your payments, you could have your possessions removed by bailiffs, or have your gas / electricity supply cut off. If the worst comes to the worst, you could be evicted - or even imprisoned! (Having said that, you should have plenty of warning if any of your creditors were thinking about taking action against you, giving you the opportunity to get some debt advice and sort out your problems before things got so far.)

  • Non-priority debts

    Unsecured loans. Credit cards. Store cards. Catalogue debts. Overdrafts. Some Hire Purchase agreements (for non-essential goods).

    These are your non-priority debts - but that doesn't mean you don't have to repay them! It just means they're less important than your priority debts, since the consequences of non-payment aren't as serious.

So staying on top of your non-priority debts is important - but staying on top of your priority debts is vital. That's why your priority debt payments make up part of your Total expenditure. Your non-priority debt payments will have to come out of your Disposable income.

If your Disposable income isn't enough to cover your payments to your non-priority lenders, your creditors may agree to accept lower payments if you ask them - and show them that this is the best way for you to clear your debts. Just bear in mind:

  1. They won't know you need help unless you tell them.
  2. You need to take action as soon as possible, before your creditors decide that they need to.
  3. You don't have to do it alone. Click here for help with managing debt.

Wednesday, January 20, 2010

Find Answers to Foreclosure Questions on Foreclosure Avoid

Nearly everyone I talk to has been affected by the real estate crisis in one way or another. From the very wealth to the extremely poor, everyone has been touched in some fashion. Even the commercial real estate market is now starting to get hit.

With so many businesses cutting back or closing their doors, more and more office spaces are sitting empty. Foreclosures seem to create more questions than they do answers.

While it's true that a few real estate investors are finding some great bargains on foreclosed homes, home owners are left out in the cold wondering how this happened and what the will do next. One site, Foreclosure Avoid, has put together foreclosure blog which helps home owners find answers to their questions about foreclosures. Do not miss to check this interesting video :

Tuesday, January 19, 2010

Boost your financial IQ

People with high IQ have one thing in common, they recognize patterns, even the most complex ones, and they can act upon it. Making the right choice at the right time is very valuable, and it happens more often than you think. IQ is not limited to paper puzzles, many real-life situations can be categorised and mapped on patterns, for which the solution then becomes obvious. The main problem is to be able to identify the pattern in the first place. This is what intelligent people with high IQ scores are good at.

For example, highly intelligent people schematize real-life situations into decision trees which enable them to come up with the best strategy. Normal people tend not to do that, especially when the situation becomes complex. We, normal people, are submerged by the complexity of the situation and we just guess and pray for our choice to be the right one.

Now, just try to see yourself in the future, what kind of car you want, where will you live, how many children you will have, etc. Just try to imagine what the costs will be and the associated nest egg you need to build up over time to be able to achieve it, can you come up with the funds you need? Probably not. A gifted person might make a quick calculation and tell you that she needs to invest $500 a month to achieve her objective, but most of us can’t do that without help.

This is where simulation models can save your life. Simulation models are built to compute the real-life situation for you, because not everybody has a high IQ. Financial planning models are there to this work for you, peak at the future and tell you how much you need to save today to be able to achieve your objective tomorrow.

Financial planning models are therefore boosting your financial IQ; No surprises, just see the future, define your strategy and make the best decision to achieve your goals.

Monday, January 18, 2010

Why Would You Need A Irish Visa Credit Card If You Live In The UK?

An Irish Visa credit card is a good idea if you live in the UK. You never know when some type of emergency will come up that you need a credit card for. It is also very convenient when it comes to reserving hotel rooms, buying flights, or shopping online. Such a credit card can come in handy for a variety of needs. You will find plenty of different offers though so take your time to find one that is perfect for you.

With an Irish Visa Credit Card you will pay interest for the money you access on it. Having a low interest rate compared to a very high one will significantly impact the amount of money it costs you to use that credit card. The goal should be to get as low of a credit card offer as you can when it comes to the rate of interest.

Be wary though of offers with a lower rate for a small period of time. After that, the interest rate could be extremely high. In the long run you are better off having an Irish Visa credit card with a moderate interest rate that doesn’t go up after you have had the card in your possession for a limited period of time.

If you are interested in an Irish Visa credit card, you can find plenty of great offers on the internet. It only takes a few minutes to apply for one. Then you will be notified by mail if you have been approved or not. There are credit card offers for all credit situations so find one that is a good match for your current situation.

You can also apply for a business credit card. That is a very good idea if you have your own business. Mixing your personal accounts and business accounts is difficult to manage. With a separate credit card your business can start to build a solid credit history. It also keeps your personal finances out of the business world.

In order to be approved for an Irish Visa credit card you will need to offer several pieces of verification. The most common one is verification of your identity. The second one is verification of your income. You need to be able to show you have a method of paying back the credit that is extended to you. Verification of residence in the form of utility bills is often required as well.

Sunday, January 17, 2010

Lessons from the credit crisis

I used to joke about the fact that taxi drivers know everything about high speed Internet, the difference between cable, ADSL, ADSL2, or even satellite dishes, but when you ask them about how compounding and inflation works, that was none of their business.

This anecdote shows very well what the general trend was before the crisis, finance, even simple personal finance, was for the big shots in Wall Street, bankers and financial advisers. They were there to look after your money, to advise you on your investments, and to prepare your nest egg for your pension.

Unfortunately, it went all wrong. The finance professionals are collecting your money to invest it wisely and to advise you on your investments? That was the tale until we discovered that the pension funds are digging holes so deep we won’t be able to get out of it, banks were packaging CDOs based on mortgages from subprime borrowers who would never be able to pay it back, private equity companies were going public to raise money from mom and pops whereas in the end they destroy jobs. That is what happened, and all of it with your money.

Finance, and more specifically financial planning, is not complex. Although you might believe it is complex, it is less difficult to understand than Internet technology. The problem is that finance and financial concepts have been kept away from the crowd to benefit from information asymmetry. This means that you end up paying more for the service just because you don ‘t know how it works, even if it is based on very simple concepts.

So, what to do about it? Spend some time to learn about personal finance and financial planning, it is the best investment you can make. And guess what, you can do it for without paying a dime. offers interactive graphical tools to do your own financial planning taking into account retirement, buying a property, education fees and much more, everything for free.

Although building a financial plan on your own might be a little complex at first, you can start by using the application to understand the effect of compounding, why inflation is your worst enemy, and how buying a property can affect your long term cash position.

The site comes with many articles and examples on how to use the application, for beginners as well as for advanced users. With its friendly user interface and cute icons, the tool offers a very intuitive way of understanding financial planning.

Friday, January 15, 2010

Educational Article: Paying the Man

The current financial situation in the United States is on the precipice of major interest rate increases that will be precipitated by one of two events. The basis for both scenarios is the profligate monetary expansion undertaken by the Federal Reserve over the last year to address a perceived risk of deflation and purchasing bonds from the Treasury to artificially hold down interest rates. This current trend of monetary expansion cannot be sustained indefinitely without consequence.

At some point in the near future, the Federal Reserve will be forced to decide whether to tighten the access to credit. In order to stem monetary inflation, the Federal Reserve will need to raise interest rates in order to contract the availability of money in the system. If this happens, it will result in a higher prime rate and higher credit card rates. This will increase the yield on short-term treasury notes, and will prompt many bond investors to sell their long-term bonds to purchase shorter term notes with higher yields. As more people sell their long-term bonds, it will push down prices and force up the yield.

Another option for the Federal Reserve is simply allowing price inflation to roll through the economy. This will happen as credit markets normalize, and more dollars end up chasing fewer goods and services. This will inevitably result in higher prices for consumer and capital goods, including housing. As prices continue to increase, a resurgence of the 'bond vigilantes' will occur as more people refuse to buy government bonds at the current low rates. As the government needs to discount their bond offerings to clear the inventory, it will push up effective interest rates on long-term bonds.

Regardless of which event transpires, there is an extremely high likelihood that long-term bond rates are headed up in the near future. This phenomenon will also push up mortgage rates since most mortgages are indexed against government bonds. As the mortgage rates continue to increase, the number of people in the pool of home buyers will decrease because higher rates translate into less buying power per dollar of monthly payment that a person can afford.

As more people transition out of the home buyer pool into the renter pool, it will increase demand for rental housing. This increase in demand will eventually manifest itself in higher rents as the supply of rental housing adjusts more slowly than the movement of people into the renter pool.

An important factor to consider is that income property owners will benefit greatly from this effect, as it will place upward pressure on rents. These increased rents will provide additional cash flow to people who bought at low fixed rates and locked-in their cost of borrowing for three decades. The most important point of this unfolding event is the fact that the window of opportunity to act will be closed very soon. Once inflation begins to occur, or monetary tightening commences, it will be too late to capture the best deals that are currently in the marketplace.

The reason is because either event will be quickly followed by a step-up in interest rates, which will decrease affordability for income property investors. Because of this, it is critical for prudent investors to act now and lock-in their cost of debt at the current low rates; this will protect you against the coming increases in interest rates by making them work to your advantage, instead of to your detriment.

In the end, the United States has been enjoying artificially low interest rates for a very long time because of its position as the global reserve currency. Unfortunately, the government is nearing the point at which it can no longer absorb the profligate government spending with no detrimental impact.

Ultimately, we must 'pay the man' at some point by enduring the market correction that must eventually result from current government policy. By taking action now, you can benefit handsomely from the coming economic disruptions while many other people are enduring the problems implicit with trying to get something for nothing.