Archive for July, 2014

Saving for Retirement

Saving and investing for retirement is no easy task, and the sooner you start the better off you will be later on down the road. The power of compound interest, and years worth of incremental savings will help you achieve a sound and comfortable retirement that will stay with you the duration of your life. You don’t want to save for years, retire, and then after 20 years you find that you are running out of money and need to return to work! Make sure you employ a sound retirement strategy that grows and adapts with you as you age.

First things first, if your employer offers a retirement account then you need to take advantage of it. Often times employers will offer a contribution match, and giving up that match is like giving up free money. If possible you should not only take advantage of the match, but also max out the account so that you can receive the full tax benefits as well. Too often people fail to consider the consequences in passing up these employer sponsored retirement plans.

Now that you are maxing out your employer sponsored plan you can start to invest in other retirement accounts. Other common types of accounts are SEP IRA’s, traditional IRA’s, Roth IRA’s, and now they even have a Roth 401k. There are so many options to choose from that it’s best to research each one as they all come with different investment options and tax benefits.  As someone who runs a side business I am eligible for a SEP IRA, but that’s something that average employee isn’t eligible for.  Make sure you talk to a retirement professional so that you can make sure to choose the right type of account for your situation.

Tax-deferred retirement accounts are a great way of saving, but they shouldn’t be the only way.  Opening an online brokerage account is a great idea so that you can take advantage of low cost ETF and mutual funds. These funds are a great way to balance the allocation of your portfolio, while at the same time keeping your costs to a minimum. Guarantee investment certificates is another place to store some of our money. What is a GIC you ask? It’s a very low risk investment that offers you a guaranteed rate of return over a specified period of time. The rate of return can vary depending on the term length,  and some are even based on a specific market index.

Regardless of how you decide to save and invest that important thing is that you start as soon as possible. The sooner you start the better off you will be in the end.

CC careds

Switch on the TV and you are bound to be bombarded with economists and those with serious knowledge of the finance industry, pontificating on national debt and their indignation at it – and rightly so. However, in all these financial analyses, the not so enlightened viewer is left wondering where he forms in part of this picture. Or does he take an apathetic approach completely?

A Simple Look

To begin with, it is vital to know what the phrase “National Debt” means. It is the total sum of money that the national government has borrowed. The deficit is what the government borrows in a single year or annually which forms part of national debt. The bottom line is national debt is not owed by you and me, but rather the national government. The amount could be owed to a variety of sources which include pensions, banks, funds etc.

So, how does it affect us as citizens? The not so attractive fact is that it is the public who have to bear the brunt of the government’s misspending. It means higher taxes so that the government can pay the interest owed, or it will cut on spending on public welfare schemes – which would include key areas like education, health and infrastructure.


The other effect of course is the cost of borrowing. Those who have high income levels annually get loans at a regular interest rate, whereas individuals who fall in the lower income bracket will be charged a higher rate of interest, as the banks compensate for such individuals deemed as high risk. The same principle is applied to governments, when the national debt rises with higher interest rates for the government, it in turn increases our rate of interest, as the government rate is the baseline for all other interest rates.

This leads to people turning to alternative sources of lending like payday loans which are out of the largest lenders to private individuals in the country. One of the top lending company’s, shows a customer base of over 7 million and it is growing exponentially. This is due to a dramatic rise in the cost of living, which has skyrocketed with less value for more money spent. This means a higher mortgage rate which reduces the number of people who can afford to buy houses. If demand for houses dip because of higher costs, then eventually the housing market compensates in a downward spiral, which does not augur well for those already owning property. All of this leads to us feeling poorer and spending less.

Other areas we see an impact

Those are just the direct repercussions! There are numerous other areas where the consumer has to take a beating. Businesses are affected as the more they borrow, the higher amount they have to payback. This could lead to a rise in costs where businesses increase their prices known as “cost-push inflation”. Higher price for products means lower purchases by consumers.

This could lead to businesses being unable or unwilling to invest in new technology, which would mean the end user, the consumer, not having access to the best products using the latest technology. As businesses will be affected, their profits are likely to decrease even if they raise prices, because of higher costs of production. This would affect their market shares which would in turn affect any pension funds linked to them.

If borrowing gets too expensive, especially for new businesses, they may not be able to take off at all. In such a situation the government moves in to fill in the vacuum by providing services or goods needed. The downside is that the government uses resources less efficiently and effectively as compared to businesses, which are driven by profit. This could lead to a decrease in quality of services, along with complex documentation and a maze of bureaucracy, which does not really help the public. It makes people realise that actually having private enterprises is a far more effective solution.

So, in summary, national debt can lead to a host of problems which directly impacts us, the public. Can we make a change to it? In part, yes. We can of course vote in local elections to help decide on the next Government. You can also read national newspapers and take part in the open discussions and forums to take a more active role in what is going on in our country. Politics and national debt isn’t just for politicians- it affects all of us. Understanding the basis of the issue is one step towards taking part in the national, political discussion and knowing where you stand as an individual living in the UK.


Three Sectors to Invest in Now

Experts say that here in the United States a manufacturing renaissance is beginning to take off. A recent Markit flash PMI ticked to 57.5, up from 56.4 in May. While it’s not the biggest increase ever seen, it definitely shows that manufacturing is heading in the right direction.

“The last 10 years has been about shipping goods and services overseas, and trying to get price and quantity of services and goods,” says Brian Belski of BMO Capital Markets. He believes that the next 10 years is going to be about time and quality.  “We here in America can make the highest quality part much more efficiently and not have to wait to get it overseas,” Belski says, and agrees that the boom in manufacturing is set to take off, regardless of what the specific numbers happen to be.

The fact is, labor costs around the world are climbing rapidly and shipping costs are right behind them. Belski believes that this will force American companies to bring jobs back here to the United States. As far as investing in this trend, three sectors that BMO Capital Markets and Belski like are as follows:

First is Technology. Simply put, the technology sector will be providing a lot of the newer, more efficient processes that manufacturers are going to depend on in the future. “We remain the number one country in terms of patents issued in the world and we remained a technology center of the world,” says Belski.  Shareholders of any tech company will definitely reap the benefits of the technological advantage that the United States has on the rest of the globe.

Second is Financials. Belski says that “At the end of the day, corporate America remains very conservative,” adding that “they don’t want to use their balance sheet because they’re still scared and they’re running their corporations like we’re still in a recession so they will go out and seek a commercial loan from a bank. Regional banks are a great place for that.”

Finally, at third there’s Industrials. It goes without saying that any manufacturing boom will also see significant gains in this sector. Belski and BMO are very keen on large conglomerates with exposure in North America, as well as the rest of the world, as any resurgence in manufacturing production will definitely have a lot of benefits for the industrial sector. Belski adds that “We think you want to own the railroads to ship the goods and services.”

How to Avoid Borrowing and Still Get Cash

Oftentimes, when people face a financial emergency or they do not bring enough money in to cover all their monthly bills, they borrow money to help cover these costs. While this often seems like a good idea at first because it covers their immediate need, paying this debt off is not so easy. In fact, the interest accrued on any type of loan will require you to repay a lot more money then you borrowed in the first place.


Unfortunately, this typically causes people to get in further behind on the debt and increase their monthly bills. The good news is that there are effective ways that you can earn money to cover your bills. This will avoid the need to borrow money. Below is a look at some effective ways to avoid borrowing money while still earning cash.


Apply for Centrelink Payments (government benefits)

If you are a low-income earner, you may qualify for special benefits through the Centrelink office. These benefits can bring extra income into your home, or reduce the costs you need to pay for some of your bills, such as childcare expense and rent. Contact your local Centrelink office to see what benefits you qualify for. Many people don’t realise that the government can provide alternative financial assistance to keep you from taking out high interest loans.


Get a Part-Time Job

If you do not have enough money coming to cover all of your expenses, you may need to get a part-time job. Just a few extra hours may be enough to help cover some of your additional bills. You can look for temporary work or seasonal work just to get you through the tough times. You may even be able to find some part-time work online, but be extremely careful to only work through secure sites, and never distribute your personal information.


Create a Household Budget

While creating a household budget will not put more actual money into your pocket, it can help to make more cash available. Managing a budget will help you track your money and prevent you from overspending in certain area and then not having enough left to pay your bills. It is vital that you set up a household budget, if you ever hope to get control of your finances.


Set Up an Emergency Fund

Setting up an emergency savings account is one of the best tools you can use to avoid borrowing in the future. By setting aside just a little bit of money out of each pay cheque, this account will grow over time. This money should be placed in a separate savings account that is not connected to your other bank account. Then when you have an emergency, you will have this money available to use.


Hold a Yard Sale

Most people have many items in their house they the rarely ever use, or no longer use. Rather than having these items clutter up your home, hold a yard/garage sale at your house. Not only will this give you more space in your house, but you will be able to earn some much needed cash, as well.


Start a Side Business

Starting a small side business is not as hard as you may think. Consider things that you enjoy doing, or are good at doing, and then determine how to turn those talents into a small business. For example, if you love pets, you may want to start a business as a dog sitter or dog worker. There are many different opportunities, such as babysitting, home repairs, jewellery making, and woodworking. Start by selling your goods and services to your friends, family members, neighbours and co-workers. Use your social media sites to promote your business and bring in some extra cash.


If you need more cash to help cover some of your expenses, or you want to make a special purchase, try one, or more, of the great ways listed above to bring more cash into your household. This can help you avoid the need to borrow money and pay all of those high fees and interest payments. This gives you more money to spend on the things that are important to you.

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