ASSET MANAGEMENT ACCOUNTS

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Asset management accounts, offered by brokerage houses in the hope of attracting customers for securities transactions, provide comprehensive financial services in a single account:  the buying and selling securities; a free checking account (with no limits on the number or size of the checks); money market fund for your cash balance; the safekeeping of your securities, with interest, dividends, and sale proceeds paid directly into your account; a credit card; automatic payment of mortgage and other constant-figure payments; and telephone payment of any other bills you specify.  Each monthly statement covers all these activities, and the year end statement provides you with most of the information needed for your tax return.  If you own a wide variety of securities or write large numbers of checks, you may find these accounts both convenient and economical, since the higher interest they earn on their cash balance usually offsets the services charges.

Eligibility requirements for these accounts, however, are fairly stringent.  The minimum balance required ranges from $5,000 to $25,000, although some firms will waive the minimum balance if the depositor transfers into the account $20,000 in securities.  In addition, annual service fee range from $25 to $100.  Seguir leyendo ASSET MANAGEMENT ACCOUNTS…

Preparing your Dream House

Preparation for future homeowners is almost like planning for a wedding. It can be time-consuming and demanding, but not unmanageable. A great deal of time should be spent on planning and research.

1. Decide on your priorities

Especially for first time homeowners, ask yourself: How important is the house I’m planning to build? Is this really my dream house? Or am I planning to build something bigger and better?

There are usually two types of home owners: the one who will settle for a small but ‘complete’ house or the one who would opt to have a big house and work piece by piece on the details. This is a common practice among medium class subdivisions.

In this case, there is no right or wrong answer; it is a matter of choice. However, keep in mind that your priorities will have a lasting effect in your family’s lifestyle.

2. Do your research and be open to new information

Concerning the lot, familiarize yourself with local standards and laws. Design of any type of construction conforms to governing laws and regulation set by national and local government and other applicable governing bodies like the homeowners association of a subdivision. These materials are public documents and are readily available. Seguir leyendo Preparing your Dream House…

MONEY MARKET MUTUAL FUNDS

If your banking needs include a liquid savings account that offers a relatively high yield and limited check writing privileges, a money market mutual fund may be a very attractive alternative to the savings or money market accounts offered by banks.  Money market mutual funds are in many respects similar to bank sponsored money market accounts.  Indeed, the latter were established to stem the outflow of funds.  Although money market funds are not protected by federal insurance, most experts regards them as a safe investment, and they almost always offer lower fees and higher interest rate than the bank money market accounts.  In winter 1989, for example, the average bank money market account was paying 6.33 percent interest (before fees and minimum balance requirements).  At the same time, money market funds were paying a much higher interest average yield, even after management fees, of 8.76 percent.
 
Money market funds are operated by private investment companies that use their depositor’s money to invest in a variety of short term (usually under 30 days) high denomination debt obligations, the funds pay their depositors the interest thus generated, after deducting small amount (usually less than 1 percent per annum of the fund’s asset value) for administrative expenses and profit. Seguir leyendo MONEY MARKET MUTUAL FUNDS…

Quicken vs. Money

Sure you can do your budget using paper or Excel spreadsheets, but if you want an easier and faster way of tracking your accounts, expenses, and investments, you have to go for personal finance software. There are plenty of options out there, but the leading applications are Quicken and Money.

Both have great tools for tracking and budgeting, and the numerous reports and colorful charts will give you a better handle on your finances. Each program offers versions from the basic to the more sophisticated. Unfortunately, you won’t be able to integrate your local bank and investment accounts—you have to manually enter every transaction yourself—but they still are a must-have tool. Seguir leyendo Quicken vs. Money…

CREDIT UNIONS

A credit union is essentially a nonprofit financial cooperative that offers its members many, if not most, of the services provided by banks.  In theory, because credit unions are operated for the sole benefit of their members and have relatively low overhead expenses, both loan rates and savings interest rates should be more attractive than those offered by profit making financial institutions.  A 1988 survey of banking services by Consumer Reports confirmed this.

Small credit unions provide their members with basic services loans and savings accounts, certificates of deposit, automated teller machines, direct payroll deposits, auto and personal loans, bill payment services and credit cards.  About 10 percent of credit unions also offer mortgages. Seguir leyendo CREDIT UNIONS…

BANKING ALTERNATIVES:NEW COMPETITION FOR BANKS

In the same area of personal finance, the substantial changes that took place in the 1970’s in the structure and functions of financial institutions prompted a proliferation of alternatives for consumers. Perhaps nowhere have the changes been felt more than in banking. Early in the decade, federal laws limited banks in regard to the maximum interest they could pay and the services they could provide. As these restrictions gradually were lifted, banks gained more freedom to compete for depositors accounts, but—even more important—so did a number of competing institutions that had previously been barred from providing consumer financial services.

As a consequence, you are no longer captive to the low interest rates and high service charges of traditional banks and can take you savings accounts elsewhere; to credit union, money market funds, brokerage houses, and even your local sears, roebuck store. The banks new nonblank competitors are also vying successfully for a share of the loan and credit card business, and many provide their customers with checking accounts. Seguir leyendo BANKING ALTERNATIVES:NEW COMPETITION FOR BANKS…

CLOSE UP:LEGAL PROTECTION FOR CARDHOLDERS

The Fair Credit Billing Act of 1974 offers cardholders significant protection against billing errors made by the card issuer or the merchant and limited recourse if you are dissatisfied with the goods or services you have charged on your card.

Billing Errors

Billing errors for which the issuing bank is responsible include failure to record payments that you made and mathematical errors made in totaling your charges or calculating the finance charge.

Billing errors for which merchants are responsible include charges for items you did not order or never received; items delivered to the wrong address, in the wrong quantity, or so much later than promised that the bill arrived before the item; and items that turned out to be different from what you had ordered. Seguir leyendo CLOSE UP:LEGAL PROTECTION FOR CARDHOLDERS…

LOSS AND FRAUDULENT USE

Although MasterCard and Visa report annual losses of about $250 million resulting from the counterfeiting, theft, or fraudulent use of their cards, your personal responsibility as a cardholder is strictly limited.

If your card is lost or stolen, you are expected to report its loss promptly to the issuing bank through the 24 hour telephone hotline number the bank provides.  If you report the loss before a finder has made any use of the card, you are not responsible for any charges.  If unauthorized use has been made before you report the loss, you will waive the charge.  If, however, unauthorized use of your card was made without actual presentation of the card—as in the case of a telephone order—you are not liable for any amount.  Because if these limits, the various credit card insurance policies, which cost several dollars a year, may not be worth buying.

Although loss of a card will do you no major harm financially, it can inconvenience you seriously, because as soon as you report the loss, the bank cancels your card and may take as long as two weeks to set up a new account for you.  In the interim, your card is unusable, even if is should turn up at home or be returned by the finder.  For this reason, and to protect yourself against other unauthorized uses, we suggest you take the following precautions: Seguir leyendo LOSS AND FRAUDULENT USE…

The Dangers of Plastic Money

As we have noted, charge cards offer some conveniences at relatively low cost to cardholders who consistently pay the charges in full each month.  But for those cardholders who are less orderly in managing their finances they can be extremely hazardous.  The issuers of MasterCard and Visa write off $1.9 billion annually in uncollectible charges, dramatic evidence of the overspending and the very serious indebtedness that cards can produce.  The vast proportion of personal bankruptcies precipitated by the irresponsible use of charge cards provides further proof of the danger of their uncontrolled use.

There are several reasons why a charge card can easily lead its holder into financial difficulties.  Purchasing an item with a piece of plastic does not give the buyer pause, as it might if he or she had to use actual cash or determine the bank balance before writing a check.  The card makes impulsive—and unnecessary—buying  all too easy, allowing many to disregard budgetary restraints and to use the card for restaurants, travel, and clothing they cannot afford. Seguir leyendo The Dangers of Plastic Money…

What is the most critical skill you need for good personal finance?

Reading.

Honestly, the skill you learnt during your early years in school is the most important skill you need to improve your finance.  Over the years, most of the information you will ever learn about finance will be in the form of written words (e.g books, blogs, news papers, magazines etc. So if you don’t like reading, chances are, you financial condition hangs in balance. Reading is the key that every one need to unlock the treasure trove!

If you enjoy reading for pleasure, you are most likely to pick up books to read and that includes personal finance books. You can’t learn anything unless you make that first step. Seguir leyendo What is the most critical skill you need for good personal finance?…