My Personal Finance Blog

Basically, an investment plan is your plan to achieve a certain financial goal. That is quite obvious, but people tend to forget about goal setting. They say “Who needs planning? I just want to be rich.” This is a straight road to financial hell. If you don’t know what do you want, then you won’t have any guidelines for your actions, and you’ll probably be under emotional stress. Fear and greed are very powerful emotions and they can drive you to the undesired outcomes.

In order to help you, the first thing you will need to know is how much money you can invest. This could be an amount for a week, month, year or some other period of time. If you are in debt, your first step is paying it out. You should, also, consider future investments amount. For example, if you are going to be married and you are the only one that works, it is likely that your investment capability will be lower in the future.

The next step is to resolve how much do you need and when. Using these parameters, you can calculate the return rate of your investments. For example, let’s say that you are going to invest 600$ per year (that’s 50$ per month) and that you want to withdraw 20,000$ after 20 years. This means that your average return rate should be about 4.6% per year, which is not very high rate. In the previous 20 years average return rate of Dow Jones was 10% per year.

You can calculate the resulting amount of money for any yearly addition. Let’s say that you could invest 3000$ per year and that after 20 years and that you would like to have 200,000$. That means that you should have return rate between 10% and 11%. 5 times 600 is equal to the 3000$, 5 times 37801 is equal to the 189005$ and 5 times 42759$ is equal to the 113795$.

This way you can determine required return rate and the types of investment. Also, it can happen that your desire doesn’t match reality. For example, if you wish to invest 600$ per year and you want 100,000$ after 20 years that would mean that you need return rate of around 18% and that is very unlikely to achieve. Therefore, you should lower your expectations or you should increase your yearly addition. With these parameters, you can find asset allocation that should give you required result with the lowest possible risk. There is a theory that helps you to do this. We will elaborate this in details some other time. Let’s just say that with this you can select assets that should be in your portfolio.

To sum it up, investment plan takes into account your desire and as a result it finds out what kind of assets you should have.

Crises never ask for their permission before coming. They come without informing people and sweep all their well done things. It is always better to be prepared and aware for the circumstances so that precautionary measures can be taken. Investments could be one of the best options so that people can save as well as double their money in no time. People have various options to save their money in bonds, mutual funds, stocks, savings accounts, property, etc. Some people have become smart enough to invest their money in liquid assets like cash, currencies, gold jewelry, etc.

It is always necessary to know whether you investments are safe. Never take chances on risky investment options as all your hard work and effort could be looted. There are a plenty low risk options available and one should choose the best among the rest. Mutual funds for investments are a viable option. Mutual funds consist of bonds and stocks. Their values keep fluctuating and are not fixed but are a reliable selection for investments. Always take advice from the professionals so that they can guide you the right way.

Another low risk option, bonds are a perfect selection for investments. Banks issue most of the bonds which are a very safe option. Whereas, the most low risk options for investments are the bonds by government. Certificates of deposits are one of most preferred options as you have a surety that you are getting some fixed amount of interest for the amount you kept save in the bank. Annuity is another option which is like a contract and after a given period of time it is collected into a series of returns. It’s a feasible option for the retired people.

Real Estate Trends in 2010 have followed a pattern that was expected: as mortgage rates and homes sales have dropped, inventories of unsold properties have risen. The inventory currently on the market is only a portion of a larger inventory of REO (Real Estate Owned) by banks, which is held back and released slowly over a period of time, in order not to cause an even greater decline in housing values.

As we approach the end of the year, trends of 2010 will continue into 2011, following the same general pattern, with a slow recovery expected towards the end of 2011.

Some speculations predicted that the recovery would have started towards the end of 2010, but with new problems in the international economic markets, it looked like we took a double dip into the current recession. However, economists state that a double dip recession is unlikely, although spending and investments in the established economies have been challenged by emerging economies, like India and China.

Real Estate Trends are following the larger economic picture: the mortgage crisis has indeed caused a lot of turmoil and scars, which have created a domino effect with high unemployment, low consumer spending, consumer credit slow down and weak housing markets.

The large number of homeowners, who have lost their house in foreclosure, are not going to buy another property in the near future, because of the impact of the foreclosure on their credit (banks will not even consider a mortgage for a borrower for 4 years, if he/she had a foreclosure, 3 years for FHA loans,) therefore there is a new population of renters.

Investors, who have access to capital, can acquire homes for 60 cents on the dollar or less, via short sales and REO. They in turn keep these properties as rentals and investments, waiting on an inevitable economic recovery and increase in values.

Other Real Estate Trends worth mention are in the arena of commercial properties: commercial properties have followed a different pattern than residential properties, holding on to the market value longer and only in this last year have started to lose their balance, as large mortgage notes have become due and refinancing has become harder. Some great deals are available in commercial investments, from larger apartment buildings to shopping centers.

This is definitely the time to buy and it will continue for another couple of years. Inventory in residential and now commercial properties is abundant, seller’s contributions as allowed are more available and the Government (especially HUD) is providing grants and incentives not only to homeowners, but also investors, in an attempt to expedite the housing recovery.

Once you know how to initially set up a family budget, figuring out what kind of budget you need is the next step. A common mistake is thinking there is only one kind, but in reality there are budgets that can help your monthly family spending, help create financial safety or help you and your family achieve your financial goals.

As I’m sure you’ve already read our article on how to set up a family budget, the next step is here- figuring out if you need a comprehensive, problem solving or planning budget.

1. Comprehensive Budget (used for general family budgeting)

i. This family budget can also be referred to as a Master Budget. This budget is for families on a limited income who is trying to limit spending. This budget would include making lists of your spending, with categories and exact numbers broken down by month. This comes in most handy when you need to cut down your family expenses because you have all your information in an organized list in front of you.

ii. This budget can also be used to review your spending over a long period of time, which is referred to as an overall budget.

2. Problem Solving Budget (used for creating financial safety for a family on a budget)

i. This type of family budgeting tool works off the comprehensive budget when you notice you are having problems keeping your spending down in a particular area. You create a more detailed list of the area so as to see exactly where your money is going and what areas you can afford to stop spending on.

ii. This budget is known for finding problem spending areas in a family budget and fixing them.

3. Planning Budget (used for achieving your family’s financial goals)

i. This budget works hand in hand with your family investments. If you are planning your budget specifically around an event or time in your life, this budget can help. It adds an extra category to your initial family budget for your goal.

ii. First, you pay for all other necessary expenses (rent, bills, groceries, etc.). With the leftover money, decide on an amount to set aside in this column for your investment. This is a category that does not show money spent, but money saved.

iii. This plan can be used for family savings as well as investments. This column does not need to be geared toward a specific goal; instead, it can be family savings or money for emergencies. Either way, it is an important category for both family budgeting and investing.

A bank credit card is a financial tool that can act as a form of revolving credit. A consumer, who uses a bank credit card, must pay back the money after a period of time, along with some interest. Sometimes, the bank waives interest charges when the balance is paid completely each month.

Any U.S. citizen who is above eighteen years of age is eligible to obtain a bank credit card. Despite this, many banks issue bank credit card only after opening a bank account. The consumer needs to maintain a good credit history and his income must meet the bank’s criteria.

Most of the U.S. banks verify the details written in the consumer’s credit card application form before issuing the bank credit card. This is usually done by contacting the consumer in person or by telephone. Some banks even assign agencies to check the consumer’s credit history. It is always advisable to have a copy of the credit report from any of the major national credit bureaus before applying for a bank credit card.

When the application is approved, the bank sends a Personal Identification Number (PIN) that serves as the key to obtain cash from an ATM. A PIN is a highly confidential number known only to the consumer; it is unique to every bank credit card. In most cases, the consumer can obtain a bank credit card within ten business days upon approval of the application.

With the advent of online banking, it is very easy to apply for credit cards online. It is a more secure method, as it protects the consumer’s personal financial information. Some U.S. banks provide additional benefits such as insurance, credit card protection, rebates, and discounts along with the credit card.

Even when the consumer has bad or a damaged credit, it is possible to obtain a secured bank credit card; to do so, the consumer is required to open and maintain a savings account to act as collateral for the credit line.