|
Written by Stephen Grimes
|
|
Thursday, 04 February 2010 09:16 |
|
 SoMoney
By Stephen Grimes
I usually do not write about anything except investments, but because we have been flooded with questions regarding debt and loans, I thought I would address some of these issues.
The $30,000 millionaire is a term that most have probably heard thrown around once or twice. It typically refers to a person that acts and lives beyond their financial means. Quite simply, this is someone who spends like a millionaire, but has a median income. This is not meant to criticize, in fact, I think most people have probably fallen into the trap at least once in their lives when they made a purchase of some sort that was not in the budget. Many times, these purchases are made on credit cards. The following is an example of what those decisions might actually cost in the long run.
Before you reach into your wallet or purse and bring out one of the five credit cards that the average American owns, I want to give you a quick example of how much $5000 in credit card purchases might actually cost you. Let me be clear, credit cards can be useful tools that allow many conveniences, but they should be used as an alternative to cash that you currently have, and not as an ATM or a loan. Currently, some of the credit card interest rates range from 13.99% to 21.99%, and this is for people who pay balances on time, every time. Quite frankly, that is not what this article is talking about. This article is intended for those who only pay the minimum payments which the card company allows.
Let's say, for example, you have a credit card on which you owe $5,000. That doesn’t sound like a lot of money to most people today, and is actually much much lower than the average person's credit card debt. You have been using the card in the past to make purchases, and have been making payments which are usually close to the minimum, and have not thought about paying the full balance off soon. Below is a break down of credit card debt with an interest rate of 21%, and what it actually will cost you to pay the balance off using minimum payments. Remember, these numbers do not include the fees for cash advances, late penalties, and over the limit and balance transfer, which can add substantial cost to your card.
Paying $100 minimum until balance is paid off.
$5,000 takes 279 months - $8124 in interest
$10,000 takes 348 months - $16,874 in interest
$15,000 takes 389 months - $25,621 in interest
($15,000 is the U.S. average for people under 40 with more than 3 credit cards)
It is understandable that during these tough economic times, it is easy to turn to the cards in your wallet, but be aware of what you are signing up for in the long term as you sign that receipt.
|
|
Written by Stephen Grimes
|
|
Sunday, 15 November 2009 08:03 |
SoMoney - Roth Vs Traditional IRAs
by Stephen Grimes
Q. I am planning on opening an IRA, which would be better and what is the difference between an IRA and a ROTH? … Courtney 28, The Village
A. Courtney, the first thing to realize is that both are a type of IRA (Individual Retirement Accounts), the difference between the two is the way the money you put in and pull out of the accounts is treated when it comes to taxation.
As a retirement account, Roth IRAs differ from regular IRAs in some important ways.
-
There is an income limit on the Roth IRA. If you make too much money, you can’t contribute to a Roth. The limits start if your income is over $95,000 and you’re single, or over $150,000 if you’re married and filing a joint tax return, however as early as 2010 this will change.
-
There is no age limit with the Roth IRA. You can make contributions no matter how old you get and you are never required by IRS to take money out. With a regular IRA, you have to stop making contributions in the year in which you hit age 70-1/2 and you have to start taking required amounts then as well.
Besides these basic there are other factors to consider when choosing which IRA is right for you, your financial advisor and tax advisor can assist you further in determining which would best meet your needs.
Remember, send us your questions to be answered directly or in the magazine
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
|
|
|
Written by Stephen Grimes
|
|
Saturday, 14 November 2009 05:42 |
|
Finance Questions from the Readers !!
Q. I am 29 years old, and I just got married, I don't have a big savings account, but I do have some savings in my 401(k), is there anyway I can use that money now to help with expenses? ... Mitchell 29, Oklahoma City
A. Mitch, I would tell you to consult a CPA or other tax professional before making any final decisions. This is a question a lot of younger adults and families have asked over the past year and there are different options available depending on your 401(k) guidelines.
In general money withdrawn from your 401(k) prior to being 59 ½ years old carries a 10% penalty and will be seen as additional income that year, (example $1500 withdrawal assessed a $150 penalty and distribution taxed (ex. 28%). There is also the issue that most major plans do not allow for in-service withdraws (I.E. you are still employed with the company) so the only way to take a distribution is if you have left that company. There are however some options available, some plans allow for 401(k) loans, you could check with your plan administrator to see of you have that option. If your plan offers loans it might be a better short term option that does not come with the penalties such as a withdrawal. A 401(k) loan is similar to bank loan. You can borrow a set amount of money (up to 50% of account) within a certain time frame (usually 5 years max) and you pay a set interest rate (interest paid is back to yourself within the 401(k), loan repayment can be deducted from upcoming employer pay. Most advisors do not recommend 401(k) loans as a traditional lending vehicle due to the difference between pre tax and after tax dollars, but it is better than taking an early withdrawal with penalties. It is however an option and in hard times might be better source of funding for emergencies than something like a credit card which carries extremely high interest rates. The last way that you can get money from your plan is a hardship withdrawal, these are very specific areas that come without penalty. Areas include medical expenses, some home purchases, college tuition, payments to prevent eviction, funeral expenses, and major un covered damages to primary residence, again consult plan and tax advisor for details and availability.
Next months question... Q. I have some credit card debt, and the interest seems to keep me from paying it off, is there something I can do to pay it off quicker or lower payments without putting down a huge payment?? ... Jessica 28 Edmond
A. Yes .... (check back next month to see full answer)
Remember, send us your questions to be answered directly or in the magazine
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Stephen-Taylor Grimes
UBS Financial Services
4801 Gaillardia Parkway Suite 100
Oklahoma City OK 73142
Tel. +1-405-302-1924
Fax. +1-405-302-1933
Mobile +1-405-250-4344
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
www.ubs.com |
|
Written by Stephen Grimes
|
|
Wednesday, 09 September 2009 07:11 |
MANAGING INVESTMENT RISK
By: Stephen Grimes
UBS Financial Services Inc.
How does an investor create an appropriate, long-term investment plan? Spreading assets over a variety of different investments is perhaps the most common rule investors follow. Because no single type of asset performs best in all economic environments, the performance of a diversified portfolio is expected to fluctuate less over an extended period of time, this practice is commonly referred to as asset allocation.
Asset allocation is the act of balancing the three common investment classes: stocks, bonds and cash alternatives. Knowing the differences among them is important:
· Common stocks, which represent ownership rights in a corporation, entail more risk than other types of financial assets in the short run. But over longer holding periods, they have historically provided the highest returns and the greatest margin over inflation. Common stocks also have the greatest potential for short-term downturns.
· Bonds are IOUs issued by corporations, governments and federal agencies. They typically offer higher yields than cash alternatives, but their value can fluctuate dramatically in response to changes in interest rates. Bonds historically have offered higher current income with less volatility than stocks, but have limited potential for increased returns.
· Cash Alternatives include money market securities such as Treasury Bills and short-term certificates of deposit. Because these investments have shorter maturities, they typically provide a stable investment value and current interest income. However, inflation can quickly erode the purchasing power of these investments, leaving investors short of reaching their financial goals.
What Should the Allocation Be?
How much emphasis should be placed on stocks for growth, bonds for income and cash alternatives for safety and liquidity will depend in part on an investor’s tolerance for risk and the time horizon for pursuing financial goals. If the goal is the near-term purchase of a house or car, a shorter time frame calling for lower- or moderate-risk investment approaches may be appropriate. For goals like college education or retirement may mean investors have a longer time horizon that allows an investor to pursue more aggressive and potentially rewarding strategies because of the ability to wait out any short-term fluctuations in the market. To find out about asset allocation and how a customized asset allocation strategy may assist in pursuing your financial goals, contact Stephen Grimes.
(We want to hear from you!!!! please send us your financial questions
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
)
Asset allocation does not ensure gains nor can it prevent losses from occurring in a portfolio or account. The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors regarding your personal circumstances before making investment decisions.
|
|
