AndrewWBradley.ca Financial Services Blog

In general, most of us have some financial goals in our life, both short-term and long-term goals. Basically, the objectives are diverse depend on the preferences of each person. On the other hand, in the process of achieving those goals, we are confined by current household budget. In accordance with the basic principles of economic, even though our financial dreams may not be limited, but with a limited amount of earnings, we may not achieve all of our dreams, so that our task is to perform optimization of our priority at the moment. As explained in previous article Basic Personal Finances – Initial Road to be Rich, determination of our goals have to be set based on the needs in-spite of desire. Thus, when we determine our financial goals, there are some basic principles should be noticed. The principles consist of two major priorities – level of significance and level of urgency. 1. Goals setting based on the level of significance Let’s divide our needs into three major groups, namely primary needs, secondary needs, and tertiary needs. In preparing personal finance management, we must start from the primary needs first. Primary needs are: The needs of monthly basic necessity It’s important for us to review again the types of our regular monthly household expenses, whether the money are spent for primary needs, or we used to spend money without any controlling on the level of significance. So that, just make a list of quite specific spending items from all of our current regular monthly household expenses, and temporarily remove all routine spending which is not a primary needs from the list. We shall move this kind of expenses to some lower priority list. Rent or mortgage payment (for those who already had a house), or house ownership planning (for those who don’t have a home yet) Ownership of one “standard house” is included in primary needs we must to achieve. Ideally, standard house is a medium-sized house with 2 or 3 bedrooms, but it could be only small flat in some countries where land price is very high. If currently we don’t have a house yet, we have to expect standard house price within 2 – 3 years to come. From the benchmark price, we can set household budget in term of amount of required deposit and repayment amount should be paid every month. Education needs of children, for those who already have children In term of time to spend, needs of education consists regular monthly needs (children’s school tuition, tutor, etc.) and a one-time pay (registration fee of our child’s school, annual fees, etc.). Both of them are primary needs, but have different pattern of personal finance management. Next, followed by a secondary needs: Car/motorcycle payment(if any), or the planning of car/motorcycle ownership (for those who don’t have them yet) The cheapest reasonable transportation tool is motorcycle, followed by a car. If our income is quite limited, just start from motorcycle as a standard, don’t start from car. Home equipment needs, such as furniture, standard electronic equipment, etc We can make a list of standard equipment such as home television, standard furniture, computers, and others, then sorting them from the most important ones to less important things. Entertainment needs I include entertainment needs as secondary needs, not tertiary, because under current high level of life’s stress, everybody needs entertainment to maintain our mental balance. Specify one or two of our main hobby under reasonable budgets, and make monthly household budget for those hobbies. The need of emergency funds I recommend for having special savings for emergency fund, because the future is uncertain. Once upon a time, we may need it. Other secondary needs based on our own preference Let’s define needs based on necessity, not desire. The later is a tertiary needs: Pension funds reserve We can create some expectation of our retirement budget using retirement planning software or financial calculator. Other tertiary needs based on our own preference Some of luxury things can be included in this list. It’s normal to dream about something which doesn’t significant but give us some enjoyable life. 2. Set goals based on the level of urgency We can make a list of needs by making and filling the columns of urgency. Make some columns with title “Need by Time” from left to right respectively, starting from this month, next month, a half more years, one year longer, until the distance of our retirement age, then fill each column with our needs, starting from the most important (primary) to tertiary needs from up to bottom in the column. From this worksheet, we will get a comprehensive picture of all of our needs. For example, let say somebody with 30 years old of age, has one child with 2 years of age, with current $ 3,000 monthly income. He has calculated his household expenses, and got $ 1,500 monthly primary needs, $ 700 repayment of mortgage payment, and $ 200 payment of motorcycle. Let’s add another assumption, saving interest net rate is 3% per year, then he can sort the list as below: Monthly primary needs $ 1500; remaining income = $ 1500 ($ 3000 – $ 1500) Mortgage Payment $ 700; remaining income $ 800 Motorcycle Payment $ 200; remaining $ 600 of income Next year his child will enter pre-school, with $ 1,000 expected registration fee, so he must save as much as $ 82 a month from now; the remaining income will be $ 518 Monthly purchasing of home equipment is allocated $ 200 per month; remaining income $ 318 His hobbies are go to the cinema and soccer sport, and he allocates $ 100 per month for those hobbies; remaining income will be $ 218 $ 118 for other secondary needs; remaining income $ 100 At this time, he still not able to set aside the money for his retirement, then he allocates the remaining $ 100 as emergency savings fund. Two years to come, his emergency reserve fund will be $ 2,476 We can freely make this kind of budgeting simulation depend on our financial situation and preference. The point is, by organizing our spending based on priority needs as mentioned above, we will be habitual with self-control, can create personal finance management, and control our household expenses effectively. As a result, we will not be burdened by urgent needs that must be fulfilled when we don’t have even any money in our wallet / savings. AndrewWBradley.ca

During the process of getting a mortgage refinanced, many things might go the wrong way. The mistakes made while refinancing the mortgage may cost more a fortune for the borrower. Most of us, who overpay for their mortgages, may not even be aware of it. To avoid this, the borrower should take some time while researching for the options of mortgage refinance and should contact different lenders to get a better idea on how it works. Some of the valuable suggestions are given below: Many people do concentrate only on the interest rate while looking for mortgage refinance. Interest rates are very much important, but it should not be the only criterion as the rest of the aspects of mortgage may cost more if the closing costs are enormous. All the aspects of the mortgage need to be considered. To avoid this the borrower can get a good faith estimate from the lender in a written form, which is normally given, only if it is asked for. It will outline all the aspects of the loan to make an informed decision. Along with the interest rates, the length of the loan term and the amortization schedule should be studied, as it will give an idea about the payment to be made. Selecting a right mortgage will save money while at the same time wrong decision leads to financial disaster. Hence, it is good to know the basics of different loans and select the one, which is very suitable. The borrower should get a guarantee on the interest rate that will give him enough time to close the mortgage. In case of any fees charged for making a guarantee by the lender, the borrower should never get scared for paying the fee as the interest rate lock gives enough time to the borrower to close the loan. In case the borrower fails to close the loan before the expiry of the lock period, the lender will raise the interest rate, hence it should be made sure that the guarantee covers the points paid and what the borrower gets for paying points. A borrower should not accept a loan that includes prepayment penalty as one of its conditions. Predatory lending practice is still a common phenomenon in the market. Despite laws protecting the borrower from predatory mortgage lenders, some of them will take advantage of the borrowers by charging more interest rates and lender fees. Mortgage guidebook can provide valuable knowledge on how to compare mortgage offers and select the best one from them. Break-even analysis has to be made to know how long the borrower needs to stay in his house to attain break even on the refinancing cost. Another mistake is that the borrower pays more towards mortgage insurance called as PMI. The PMI need not be paid if the person has 80 percent equity stake in his home. Since the interest rates and loan terms are dependent on the credit score, it is good to correct the credit report incase of any mistakes in it and then apply for the mortgage refinance as the borrower can get better interest rates and loan term. AndrewWBradley.ca

Home equity loans are supposed to be a type of second mortgage loans. Money is borrowed against the value of the house. Even though it carries risk, it is worth taking it. The common type of home equity loan is called as a “closed end” equity loan which allows a certain amount of money based on the value of the house. More money cannot be borrowed on the same equity loan. However, if more money is needed at a later stage another loan can be obtained. Many people prefer a home equity loan to clear off their debts as the money is borrowed against their houses. They get very low interest rate resulting in lower monthly payments than any other loans. It also helps to consolidate all the debts into one single debt, which can be handled with ease. The other type being the home equity line of credit, which too works the same way as the home equity loan except for the fact that more money can be borrowed against pledging the house, some times even up to 125 percent of the value of the house. The home equity line of credit is for a person who does not have any idea of how much money is needed to borrow. With this option the person can get more money borrowed against his house very easily. Home equity line of credit also helps the borrower to postpone the payment of principal for a certain period of time agreed upon by both the lender and the borrower or to get a special discounted interest rate. Some lenders even offer flexible interest rate where the borrower pays both the principal and the interest or avails fixed monthly payment plan. It is up to the borrower to choose from. The home equity line of credit comes with a shorter term payment plan. However the risk of losing the home in case the loan payment is defaulted should be thought about. It is not a big achievement to get a home equity line of credit, but the key lies in the effective utilization of funds. The house is the biggest asset for any person and the home equity loan helps in take the full advantage of it. Home equity line of credit can be used for unexpected emergencies such as the medical expenses or even for a funeral expenses. The required money is got quickly without damaging the credit score. Credit card debts, loans and so on can be effectively managed with the help of home equity line of credit. It is wiser to clear off the debts with higher interest rate like the credit card debts and loans and pay back the home equity loans with a lower interest. Educational expenses are very expensive these days, even a community college will cost thousands of dollars per semester. Home equity loans can be very invaluable in paying these expenses. For remodeling the house, the amount got through a home equity line of credit is best utilized. New additions like a bedroom, bathroom or remodeling can be done to increase the value of the house. As an owner, the person enjoys the benefits or updates and at the same time adding more value to his house. AndrewWBradley.ca

Most people who invest in mutual funds don't know what they are doing. They take advice from someone at a bank or perhaps a friend and plunk down money into a fund. Sometimes this strategy works, but most of the time, it doesn't. When you invest your money in a mutual fund, you are trusting someone to invest in the stock market for you. Because of this, you want to be sure this person knows what he or she is doing. Also, you want to make sure that this person is not charging you too much to manage your money for you. Mutual funds fees are "hidden," in the sense that they do not charge you an upfront fee but rather a percentage of the amount of money in your account. If this percentage is too high, you would do better just blindly picking stocks yourself. Here are five helpful tips for choosing the right mutual funds. 1. Keep the fees low. Generally, expense fees should not be much higher than 1% if it is just a basic domestic equity fund. You should never invest money in a fund that also charges a "load," which is an additional fee that is ridiculous to pay. Never invest in funds that charge loads; those funds are for suckers. 2. Check the asset base. Mutual fund managers only know of so many good investments. When they have too much money to manage, they begin investing in stocks they don't like much but need to invest in anyway or else they'll just have money laying around. There's little reason to invest in a fund with over $5 billion in assets. It's best if it's under $2 billion generally. 3. Consider an index fund. This is a fund that tracks a stock index, such as the S&P 500. For these funds, the manager just buys whatever stocks happen to be in the index. Since this is not much work, the fees are much lower. Even though this method is simple, it has proven to perform better than most mutual funds. Some high performance index funds include FSMKX (Fidelity S&P 500) and VIMSX (Vanguard S&P 400 Midcap. 4. Evaluate the fund's strategy. If you have a long term outlook, look for a more aggressive fund that invests in small-cap stocks, international stocks, and riskier stocks in general. High risk tends to result in high performance in the long run. If you are more risk-averse, consider an S&P 500 index fund. 5. Keep the fees low. Did I mention this already? Well, I'll mention it again. This is where most people mess up. Make sure you are not paying a load or paying too much in fees to the mutual fund. AndrewWBradley.ca

Can't seem to get ahead financially? Debts piling up? Maybe you're making some of these mistake unknowingly. These mistakes listed below will help you understand where you may be going wrong and how to get back on track quickly. You can be debt free. Mistake 1. Living Beyond Your Means This is the real cause of your worry and stress. If you are spending more than you are earning, whose money are you spending? It's the credit card provider's or the bank's. The cost of this money is interest. The way out - Make a Commitment to yourself only to spend within your income limits. Maybe you could increase your income (or cash in) by applying for more skilled positions, selling some of your unused articles or assets. Is the second car really a necessity? What about working out ways to make your hobby pay for itself? Why not find ways to reduce your spending? How much would you save each year if you decided not to have the daily coffee shop coffee? Why not make your work lunch each day rather than buying it? Commit to only buying the necessities. Mistake 2. Paying Off Less Than the Full Credit Card Balance Each Month Get this debt under control and your life will be much easier. If you are like many others and only pay the minimum balance each month, the interest on the interest makes those purchases oh so expensive. The way out - Find ways to put aside more money to apply to the credit cards. It will take time to reach this goal. However, if you don't make a start now you may never pay them off. This situation did not occur overnight and neither will the solution. But, by diligence and commitment you'll get there. Mistake 3. Not Really Knowing Your Financial Situation Before you can set meaningful goals and develop savings strategies you need to know your financial situation now. The best, proven and tested method by far, is by developing your own personal budget. This is not hard to do. Please don't give up now. Just follow these simple steps: The way out - a)Find your latest credit card statements. Write down all the unpaid balances. b)Are there any other unpaid debts (not home or car) then include these balances as well. c)List out your (or family) monthly income. Only the amounts "brought home". Include all types of income. d) Work out your monthly spending. List out where all the money goes. Don't leave anything out. e) Minus the monthly spending total from the monthly income total and review the answer. This will give you an initial idea as to whether you are living within your means or on borrowed money. Mistake 4. Continually Adding to Your Debt If debt has got you into this situation it is critically important not to add to the state of affairs and thus make it worse. The way out - cut up the credit cards, keeping only 1 for emergencies. Don't buy on impulse. Ask yourself twice or three times before you buy anything "Do I really need this?" before you hand over your hard-earned money. Don't buy at the height of the fashion or fad. Commit to never paying full retail for anything. Get it on sale or negotiate a lower price. Mistake 5. Spending All Your Income It may sound OK to spend any money you earn but there are risks attached to this strategy. How are you going to pay for emergency items? What about major car repairs. What about major electrical appliance replacement? Are you going to pay for these on credit? Bad idea! How are you going to save for a substantial deposit on the next car? The way out - Once you've prepared your budget you will clearly see what you need to do to put some income aside for other needs such are emergencies and repairs. Mistake 6. Spending Without Caring About Your Future Unless you are planning for your future and financial security, you cannot be really happy. There are always worries lurking in your mind about how you would survive in a financial emergency if you have no savings. It can be very rewarding to see how quickly your savings multiply over time with only a small investment each payday. The way out - Take stock of your life and realize that tomorrow won't look after itself. It needs your attention. Keep some funds aside to put away for your retirement, children's college costs, emergencies, holidays and major purchases. Avoid these 6 spending mistakes and you'll be well on your way to financial freedom. Guaranteed. AndrewWBradley.ca

Of late, there has been an overwhelming demand for life insurances no exam policies across the globe. Numerous people do not want to go through the hassles of facing a medical exam both as you do not want to run to the doctor or pay him handsome fees. Senior citizens, who have some medical problems and were hitherto hard to insure cases, are now getting the facilities of no medical life insurance from many providers. In fact such policies are now open to persons in the age group of 25 to 80. Numerous options will be available before you when you decide to go for an Insurance Policy. However, there are a number of pitfalls on the way. There are some unscrupulous and dishonest traders who are lurking in the wings to lure you into their traps. Such malicious people will come up to you with the offer of a policy that promises a lot. Since the plan seems quite attractive initially, you fell for it and enrol under it. At real times you find to your utter dismay that the plan that promised so much offers almost nothing. Thus simply obtaining a life insurance no medical exam would not solve your problem unless and until it delivers. This is why many people prefer to have their enrolments under the insurance plans as a first hand delivery from an agency physically instead of going for the on-line enrolment. It is true that there are risks in your obtaining an on-line whole life insurance without medical examination because there are possibilities of the policy being a fake. However, Internet has shrunk the globe and you are able to access the farthest corners of the world with ease and convenience with a mouse click or a key stroke of your computer. The Internet is a repository of information and there is hardly a subject on which you fail to find information on the nets. You will not only find multiple options to choose from on the nets but also a host of information on the policy as well as the provider agency from it by simply surfing the websites. But you must make sure that you have carefully gone through all the terms and conditions relating to the policies like term life insurance no medical exam so that there are no hidden expenses involved and you are not in for any unpleasant surprises at the end of it. Obtaining a life insurance no exam has become so easy now a day that you can obtain insurance in just five minutes time from a provider on-line. You may like to see a few life insurance quotes before going for one. Since the rates of term life and other life insurances are on the decline including the survivor’s life insurance plan, such quotes would help you to compare and choose the real beneficial insurance policy. When you are spared of the medical examination you will have to choose a plan. The option for younger people with a lot of financial commitments and liabilities are likely to choose term life insurance owing to the lower premium rates while senior citizens would prefer the whole life insurance plan because they have limited life to live. AndrewWBradley.ca