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Roth IRA Investing Tips

Mar 8th, 2010 by Free Help Finance

If you’ve been thinking about your financial future and how to make it more secure, you should consider investing in a Roth IRA. An IRA is an Individual Retirement Account and a great choice for solidifying a person’s financial future. Investing in one is not as difficult as you might think. However, there are some steps to consider before getting started and we have them listed here.

Get an early start – remember that compounding interest over the long-term is a powerful financial ally. For example, if you wait 5 years to get started, it would mean that your nest egg could be up to 25% smaller.

Open a 401(k) account first – if your employer matches your contributions in that 401(k) plan, you should do this before opening your Roth IRA account.

You can still contribute for last year – usually, you can contribute to an IRA account up until you file your taxes. In other words, you have until April 15th each year to contribute for the prior year.

It’s never too soon to start – Roth IRA accounts have no minimum age requirements. However, you do have to be earning taxable income. So even if you’re a minor, you can still open an account.

You aren’t too old either – even if you’re no longer in your 20’s or 30’s, it’s never too late to open your account. Interestingly enough, even if you are over the age of 50, you are allowed to make what is called “catch up” contributions each year of up to $1,000 over the allowable limit.

Your money will not be trapped forever – contrary to many beliefs, you have access to your money whenever you want it, even though you may still be contributing to your Roth IRA account. Additionally, since your money has already been taxed, in many situations, you won’t incur any early withdrawal penalties.

Do some shopping first before making your decision – either your local bank or another financial institution probably offers these types of retirement accounts. However, no two are alike and you need to do some comparison shopping in order to find the one that best suits your financial needs.

Make this a financial priority – a Roth IRA account is one of the best retirement savings plans you can invest in. If you need to think about either funding your child’s education or starting to save towards retirement, we recommend you give retirement the utmost consideration as there are numerous options for financing an education.

Convert your regular IRA to a Roth IRA – despite the fact that this type of IRA came into being long after the traditional type, the Roth type has more advantages, especially if you are older. These IRA’s grow tax-free throughout the lifetime of the account.

Diversify your investments – as the old cliché goes, “never put all your eggs into one basket.” Most financial planners will tell you to diversify your investments. You should open a Roth IRA account to supplement whatever retirement plans you may already be contributing to.

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Finding The Best Performing Mutual Funds

Mar 6th, 2010 by Free Help Finance

Lots of people might want to know everything there is to know about the best performing mutual funds. However experts advise not to do so. There is a proper reason that exists, as there are no yardsticks that can actually fathom the prospect of success at the same time assessing the future presentation of the funds. In case a person attempts to look at the records history of the mutual funds in order to guess the future performance is kind of akin to take a look back and see what lies ahead that is virtually impossible.

There are several companies that assess the mutual funds and then each of them actually give several ratings, all of which are based on a particular criteria. The aforementioned criteria are usually in the exposition, that are the funds from the past performances over the last decade or so and all of them are to be noted. That particular observation is duly utilized and then the best performing of the mutual funds are properly marked. However, this technique hasn’t actually proven receptively effectual. If this were the case what should a hard working as well as a careful investor do and more importantly how would he move about his entire business.

Morningstar is perhaps the most popular amongst all the companies that are trying to rate the funds. Thankfully this company lives up to its name and assigns stars to each of the funds and the highest is the five stars strictly reserved for the best of the performers the poor ones only get just one star. In case there are a few doubts raised about any of its decision, then the judges involved in the funds all lean on the past records and this scheme is naturally faulty.

There is yet another company that also indulges to dabble in this hard task is the LLFR or the Lipper Leader Fund Ratings. The LLFR doesn’t actually assess all the funds and the worth is based upon the performance of the past as much as they rely on analytical formulas. They do a factor on the past performance, and all of them actually utilize the five criteria that exist and all of which are about the total return, consistent return, preservation, tax efficiency and also the expense so as to charge the funds. However, all the investors have to register with Lipper in order to obtain the rankings of the funds.

Business Week is yet another well name in the mutual funds sector and alongside with other business journals assess each and every of the existing mutual funds rates on an annual basis.

It tends to publish the “Mutual Fund Scorecard” in their magazine on a yearly basis, even though it is also available online in their website, which is rationalized each and every month of the year. On the website, one can find a handful of reviews that can be quite helpful when deciding on the best investment.

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Paying Off Credit Cards In Full

Mar 4th, 2010 by Free Help Finance

In these rocky economic times, both banks and consumers are scrambling to protect themselves. Our credit card accounts can be an important aspect of our financial well-being, and proper handling of them, as well as lessening our indebtedness is critical.

Credit card companies, aggressively lessening their exposure, are reducing credit limits, closing down accounts without warning, and increasing interest rates (any of which can cause your credit rating to decline). Low credit ratings, late payments and high balances all trigger alarms for them, and could have serious repercussions for you. The best way to protect yourself from this is to pay off the balance. But there are some steps you can take to protect your credit rating, while you’re doing that.

First of all, stay away from debt consolidation loans. Even though your total monthly payment may be decreased, the companies that offer these loans are in it to make money for them. The actions they recommend will often leave you with a destroyed credit rating, which could take several years to rebuild.

If you have sufficient cash available in your savings or retirement fund, simply make a lump sum payment, and retire the debt completely. Even paying a penalty for taking money out of a retirement plan can sometimes be more cost-effective than paying the accrued interest on the card balance.

If you can’t manage that, then first pay the balance down as much as you can, and then make double payments each month. NEVER pay only the minimum amount, as this has very little effect on the balance, and in fact, may even increase it.

It is advisable to avoid making the already nervous credit card companies any more so. For instance:

• Pay early, or on-time, NEVER late.
• Avoid seeking other cards – every credit check can affect your credit rating.
• Don’t signal your intention to pay off the balance – just do it. You can estimate additional interest since your last statement, and make any adjustment later.
• Always pay more than the minimum. The credit card companies are interested only in good risks, and paying only the minimum doesn’t inspire confidence.

As a footnote, NEVER cancel a credit card, until AFTER you have paid it off, as cancellation will almost always result in the card company raising your interest rate – usually to 30% or more.

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Saving Money Wisely

Mar 1st, 2010 by Free Help Finance

Believe it or not, saving money is not as difficult as what many individuals say it is. It is just a matter or disciplining yourself and saving money wisely in the process. The harsh reality is that many individuals are still living on a paycheck-to-paycheck basis without establishing any kind of a savings plan. The following information will hopefully enable you to start saving money for unexpected future emergencies or events.

Develop a budget and stick to it – take all of your monthly bills including your food, rent, utilities, and other critical living expenses into consideration when you do this. If you can set aside only 5% of your paycheck, you will be surprised at how much this adds up on an annual basis.

Dump the home phone if everyone has a cell phone – what is the point in having a landline anymore anyway? Dump those mega-minute family plans, especially if it is not a rollover type of plan and there are unused minutes left each month. We recommend the pay-as-you-go plans and to stop running up your used minutes by making unnecessary phone calls.

Prepare a weekly dinner menu and go grocery shopping accordingly – you should only be purchasing enough food to cover each individual meal as well as avoiding cooking for an army and throwing out leftovers that never get eaten. This helps to get a handle on your spending habits.

Get over the idea of always having to purchase the top name brands – in most instances, those high priced name brands are no better than the lesser known brands. Doesn’t it bother you to know that you are a sucker for the marketing schemes out there? Even though it may seem undignified and beneath your standards, purchasing second-hand items is not going to kill you.

Try to avoid spending excessively in order to keep up with the Joneses – there’s a good possibility that you’re going to be disappointed if you keep trying to look as good as your neighbors who spend excessively. Appearances are like other material objects – they mean absolutely nothing and you are just throwing money away when you pursue that kind of lifestyle.

Instead of driving, sometimes you should consider other options for getting from point A to point B – try riding a bicycle, carpooling, taking the bus, or even walking instead of driving your car to go shopping or to work. It costs you more in fuel to drive to the mall by in your vehicle compared to not being lazy and either riding a bicycle, taking the bus, or just getting off your butt and walking.

It’s not necessary to have 500 TV channels with a cable or satellite TV plan – chances are you’re only going to watch 20% of those channels at the most – probably far less when it comes down to it. If you enjoy watching movies, consider renting them from a movie rental company or purchasing previously viewed copies for less money. Again, this is a matter of disciplining oneself and not being concerned about appearances.

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Futures Trading Explained

Feb 27th, 2010 by Free Help Finance

Futures trading is a form of investing that involves buying a commodity at today’s price but acquiring them at a later date. Futures trading can be a lucrative investment and if you are looking for investment opportunities then having futures trading explained to you can be of a great benefit. Many people have made substantial sums by investing in futures trading.

Futures trading can benefit both the buyer and seller of the commodity that the futures trading pertain to. This can also be a of a great investment benefit to those that are willing to speculate on futures. Futures investing involve a marketplace that consists of buyers and sellers who are interested in a particular commodity.

A commodity is an item that is bought and sold. Commodities typically fall into several categories. These categories include Metals, such as gold and silver or livestock such as hogs, live cattle and pork bellies and other commodities such as corn, soybeans or wheat.

The marketplace of a particular commodity such as wheat may take place in different locations throughout the country, such as commodity markets for Wheat in New York and in Chicago. When a speculator is interested in a commodity they need to determine what market area they are interested in. They they need to find out what the price of the item was at that marketplace. Then they need to speculate at what the price of the commodity will be in the market.

The buyer and the seller involved with the commodity deal in contracts. Contracts of a commodity consist of a set quantity of this commodity such as wheat selling at 5,000 bushels per contract. The contract between the buyer and the seller predetermines the price the commodity will sell at a later time. This locks in the price for future delivery of the commodity.

As a result of the contract the buyer is required to buy the amount set in the contract and the seller is required to deliver the amount specified in the contract. This contract can be transferred and both parties have the right to pass this obligation to another party any time before the contract expires.

This is where the investment potential comes into effect. Lets say a buyer of a contract purchases a contract at a set price and they are able to transfer the contract to someone else being willing to pay a higher price they can then make a profit on the contract. For example if a contract of wheat was to sell initially cost the buyer $50 and they are able to sell it for $80 then they have made $30 on that contract.

A speculator can make money by anticipating what price the contract will sell at and purchase low then sell at the higher price of the contract before delivery. The entire purpose of this process is to provide buyers and sellers of these commodities with a common place to sell and buy their goods. The idea of purchasing the contract before delivery gives the seller of the commodity a set price that they have sold future goods at therefore giving them a sense of security on the commodity.

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How to Open a Roth IRA for Children

Feb 24th, 2010 by Free Help Finance

What is a Roth IRA?

An allowable retirement investment vehicle that many people use and is based on United States tax law is a Roth IRA or Individual Retirement Account. The late Delaware US Senator, William Roth, was the primary legislative sponsor of the measure that was passed to create these types of accounts, hence the name “Roth IRA.” Be aware that there are significant differences between this type of IRA and others that are available.

Many people do not realize that you can open a Roth IRA for anyone in your family, including your children. There are a few requirements which may need to be met when opening an account, depending on which family member it is that you are opening the account for. To get a better idea as to how advantageous or disadvantageous this is based on who the beneficiary is, you should visit the IRS website and investigate this.

The rules governing opening up a Roth IRA for a child

In answer to the question as to whether or not you can open up a Roth IRA account for your child it basically comes down to one thing. Unless your child is either a child actor or a TV performer, chances are you cannot open an IRA for your child. Despite the fact that this is not a hard and fast rule, you should probably consider opening some other type of savings plan for your children.

Typically, a Roth IRA account can only be opened for a child that has earned income. Additionally, any unearned income resulting from an investment or a savings account typically doesn’t count towards this requirement. Conversely, for those children who can qualify for this type of IRA, they will be far better off with this option than with a traditional IRA account. Since their income is no doubt smaller than most others, they won’t benefit that much from contributions to a traditional IRA which are tax-deductible.

There are a number of ways in which a child can earn an income such as finding a part-time summer job, babysitting, or having a newspaper route. Since babysitting and lawn mowing jobs usually do not result in the child receiving a W-2 for wages earned, accurate record keeping is imperative. You’ll want to list the amount of the payments received for those services rendered, the dates that they were paid for said services, and who the employer was. Any other facts pertinent to the child’s earnings should be listed as well.

Maximum allowable contributions

The allowable maximum contribution to any Roth IRA account is $4,000 annually. Your child has the option of contributing their entire annual income to their Roth IRA account or $4,000 each year, based on which sum is the lesser of the two amounts. So if your son or daughter only earns $3,500 per year, they are allowed to contribute every penny of that income into their Roth IRA account. Just consider the qualifying criteria mentioned above.

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Savings Bonds Basics

Feb 21st, 2010 by Free Help Finance

What exactly are Savings Bonds?

Savings bonds are a type of financial vehicle for saving money. They were originally called “Liberty Bonds” as they were created for the sole purpose of helping the US finance their involvement in World War I. Although savings bonds have a lengthy history, the United States Treasury Department began gutting the savings bond program in 2002 by closing their marketing offices and lowering the amount of interest paid on the bonds.

Some of the different types of savings bonds

The US Treasury Department issued several types or “series” of savings bonds over the past years. The following were some of the more common series that were issued:

Series EE – these savings bonds take 30 years to reach their final mature and are initially issued at 50% of the bond’s face value. As the bond matures over the 30-year period, interest is added to the value of the bond. It usually takes 17 years for this type of savings bond to attain its face value. However, you are allowed to hold them for up to 30 years should you choose to do so.

Series HH – unlike certain agency issues and US Treasury Bonds (or T-Bonds), these are non-marketable savings bonds and are usually sold at a discount and eventually mature at face value. As is the case with other savings bonds, Series HH bonds pay interest on a semi-annual basis. Despite the fact that many Series HH bonds have yet to mature, the US Treasury Department stopped issuing these at the end of August in 2004.

Series I – based on inflation rates, these savings bonds will have variable yields However, these bonds are issued at face value. The key characteristic of Series I bonds is a dual component interest rate. One of the rates is fixed and stays constant throughout the life of the savings bond. The other interest rate is a variable one which gets reset every 6 months from the time it is issued. This resetting stems from the effects of inflation on the value of US currency.

Treasury Bonds (T-Bonds or long bonds) – these take the longest to mature, usually 20 to 30 years and has a coupon payment that comes due every 6 months just like T-Notes. They are usually issued with a maturity term of 30 years. Beginning in October of 2001 and ending in February of 2006, the issuance of US Treasury Bonds was temporarily suspended. During the late 1990’s, the Treasury Department began issuing the 10-year Treasury bond in order to replace the 30-year ones.

A few tips for buying Series EE Bonds

You can purchase Series EE bonds at numerous brokerage firms as well as your bank or other financial institutions. Some employers offer savings bonds by virtue of deductions from your paycheck. Series EE bonds come in a variety of denominations from $50 up to $10,000 so you need to determine how much your budget will allow you to spend when considering the purchase of these savings bonds.

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