Wealth creation involves setting and achieving one's financial goals by maintaining a disciplined mindset in the entire process. If any of these factors are missing in a financial plan, then an individual behaves like a rudder less ship in a stormy sea of finance. Sometimes when you are out of cash and you try to find out ways from where to borrown funds, we land up using credit cards for small amounts specially if we are shopping. And if we need a big amount we got for loans. I think this is the time when we have to really take a wise decision, people who are good in playing with credit cards have fun using it, but who don't land up in a big mess, like me.
And if nowadays people take loans at a very young age, they have a mindset that they will pay it off while working, but they don't realise that slowly they are getting into the vicious grip of debt.
Always when you use credit cards make sure that you pay it off within the no interest period to avoid any interest being charged and also try to make purchases in the begining of the interest free period so that you get maximum number of days to pay it back. Also whenever you take loans make sure that you verify the rate of interest, coz sometimes when you receive the documents, interest charge reflecting on the documents is different from what was promised to you.
Just the Basics
Where Do I Find the Money to Invest?
The first question for many people is "where do I get the money to invest?" There are plenty of stock mutual funds that allow you to invest with $500 or less. Use your next bonus at work, or your income tax refund, or put in some overtime for extra cash. If you just can't come up with $500 to start your portfolio, many funds will allow you to skip the initial lump sum investment if you sign up for automatic monthly withdrawals of $25 to $50 from your checking account.
How Do I Choose an Investment?
You're ready for some long-term investments. How do you choose? The first step is to know what your goals are. Are you saving for a house? A college education? Retirement? The type of investment you choose will depend on the amount of time available before you need the money. Stocks are considered long-term investments, and it's best to plan on holding stocks or stock mutual funds for five years or longer. If you need the money sooner than this, you may reduce your return by cashing in when the stock's value is down.
How Do I Determine My Risk Tolerance?
Next, you need to know your risk tolerance. If you hide your money under your mattress because you don't trust the bank, then you're probably not going to feel comfortable investing in volatile technology stocks. CNBC's Investment Risk Test can help you determine what level of risk you can tolerate.
How Do I Choose an Investment?
How do you decide where to put your money? Most experts recommend spreading your money over several different types of investments to reduce risk, because typically one type of investment does well when another doesn't. For example, usually when returns on stocks and stock mutual funds are high, returns on bonds are low, and vice versa. By having money in both types of funds, you're more likely to get a decent combined return if one category takes a downturn. Your asset allocation should be tailored to your risk tolerance and the number of years before you'll need to withdraw the money from your investments.
For beginning investors, I recommend stock mutual funds instead of stocks in individual companies. Why? It's all about risk. A well-chosen stock mutual fund is less risky than an individual stock because mutual funds invest in many companies, thus spreading out the risk. If one company does poorly, the fund as a whole may still have a good return. If you buy stock in one company and the company does poorly, you lose money.
Real estate, like a business, is a great form of investing, but it takes a lot of work and time on your part. Especially if, to begin with, your resources are limited. But that's okay because you're going to build your wealth one brick at a time.
If you are seriously considering investing in real estate property, it means essentially that you will need:
Investment capital, or a legitimate means of attaining some without putting yourself in debt.
A good knowledge of the real estate market and the neighborhood in which you are looking to buy property.
Good management, people and negotiating skills
The ability to do repair work or access to people who can do it for you.
The name and number of a property inspector or engineer.
Identify Theft
How Can I Protect Myself From Identity Theft?
While you may not be able to prevent this from occurring, there are actions that you can take to reduce your risk:
Shred all unwanted materials containing sensitive personal information, such as bank statements, credit card receipts, etc.
Secure personal information in your home, especially if you have roommates or are having service performed in your home.
Do NOT give out personal information over the phone unless you are sure you know to whom you are speaking. Be wary of promotional scams where you are asked to provide your personal information.
Deposit outgoing mail in post office collection boxes, rather than your unsecured personal mailbox.
Do NOT carry your Social Security card. Keep it in a secure place. Do NOT provide your Social Security number unless absolutely necessary.
Pay attention to your billing cycles and follow up with creditors if you haven't received your statements.
Review your credit report annually. Contact creditors and the credit reporting agencies immediately if you notice anything unusual (e.g., new accounts you didn't open or inquiries you don't recognize).
Choosing the Right Lender and the Right Loan
When you are looking for business financing, the need may be so immediate that you are tempted to jump at the first offer, like a pre-qualified line of credit offer that arrives in your mailbox. But lenders and loans vary considerably and finding the best financing for your business involves more than just taking what comes along or comparing a few interest rates.
Evaluating lending sources
Who you get a loan from can be just as important a consideration as what kind of loan you get. Consider these issues when you’re assessing different lending sources:
· Accessibility: You may be able to find a loan on a toll-free hotline, through a Web site, or with a business credit card, but the convenience could cost you through higher upfront charges or a higher interest rate. And who will you talk with after the ink is dry and a problem or additional need comes up?
· Wide range of capabilities: Your financing needs may be simple and relatively easy to satisfy now, but in the future you could need more sophisticated financing services for challenges like a major expansion or change in direction.
· Sizeable resources: A successful company can grow more rapidly than you expect, and the need for financing support will expand with the business. You can’t afford to be limited by your lender’s size, lending limitations or lack of knowledge about your business.
· Balanced credit decisions: You’ll want a lender who can take into account your total picture, including all of your business’s assets and potential. A lender with an in-depth understanding of your business can look past temporary aberrations to make informed decisions.
· Commitment: The movement of interest rates and the relative health of market sectors can make lenders eager to offer cash one moment and reluctant the next. You want a lender committed to supporting the small- to midsize business market, regardless of the fluctuating economic climate.
Gauging loan flexibility
It is also important for your lender to have enough flexibility to adapt your credit terms to your business’s individual circumstances. You don’t have to settle for a one-size-fits-all program that, in the long run, could hinder your progress. Your financing program should accommodate the amortization terms, prepayment and reborrowing conditions, rates, range of usage and loan configurations that fit your needs.
For example, a conventional term loan may be appropriate for your medium-to-long-term credit needs, such as financing an equipment purchase or real estate transaction. However, what if your company has periodic high cash balances? Could you use these to prepay your loan and reduce interest costs? If you prepay your balance, could you reborrow those funds to finance other needs as they arise? Not all companies have the same cash flow profiles and not all need the same loan features.
By taking the time to assess your company’s situation and evaluating the lending options available to you along with the characteristics of the lender, it may be possible to choose a loan that’s flexible enough to meet your current and evolving needs.
Source : Merill Lynch
mGinger - Make money
14 years ago
