Category Archives: General Financial Planning

What Is A Credit Score And Why Does It Matter?

Maintaining a high credit score will mean more for some people than others. If you lead a financially simple life- have one home, perhaps a child or two, earn money- but aren’t in debt or particularly rich, your credit score probably should not be the first thing on your mind. However, if you like to live rich, invest in real estate, perhaps leverage yourself in your transactions, your credit score will make a big difference. It’s sort of like a comprehensive resume which some other agencies make for you. Your score varies from 450-850 based on a variety of factors and changes on a regular basis.

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Fee-Based vs. Commission-Based Financial Planners

In the world of financial planning, a variety of factors may affect the advice one receives from an advisor. I’ll tell you an obvious one: a company which sells their own products. Without volunteering names, you probably will if you haven’t already, bumped into this kind of business. Be aware when meeting with an advisor or broker that does so, that his/her advice may be slanted towards selling in-house products- which sometimes pay higher commissions to the selling broker. Even if current law requires this sort of incentive to be disclosed, good luck reading through and understanding financial disclosure documents.

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The Difference Between Stocks and Bonds

Many people don’t understand the differences between stocks and bonds. It occurred to me recently that even those who invest in these types of securities through either personal investment accounts or retirement plans can’t really articulate what the differences are. I’ve noticed that people have a general idea- such as associating stocks more with risk and bonds more with safety, but that’s about the extent of it. While both are types of investments which can earn you money, they are different as night and day in terms of the potential risks and rewards.

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A Lesson on College Funding

The cost of college funding has taken center stage for financial planners in recent years. The reason for this is the dramatic increase in cost, averaging 8% annually for the past 30 years. The average cost for a private college education, including tuition, housing, books, and spending money is approximately $157,000 for a 4-year private university. The costs for a state school are more reasonable, but still alarming at $68,000. While scholarships, grants, and both state and federally funded loans are available to students and their parents, some people like to pay in advance. For this reason we investigate the savings plans which are most conducive to meeting college costs.

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The Story Behind Scholarships, Grants, and Student Loans

If you’re looking to do your kids a huge favor, consider the cost of college when they are quite young. As many are aware, the burden of college costs has increased dramatically in the past 10 years and is showing no signs of decreasing anytime soon. The earlier parents start saving, the lower the regular contributions to qualified plans will have to be.

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Liquidity in the Housing Market

What’s up with the housing market in America? It was my opinion as a child that purchasing a home was a routine and boring procedure. A family would save up over a number of years to gather enough money to purchase a home. They would then use that home as a foundation for a family and work to improve and maintain that home. I suppose this belief was a reflection of my experience growing up in a suburban environment and meeting throngs of people who could relate to my experiences. Several years later, at age 23, I’ve developed some new feelings about housing, how it became a “market” and what the important risks and rewards are to participating in this market. My first eye-opening experience was discovering that taking out a mortgage means more than the bank handing you a pile of cash.

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Good Alternatives To Traditional Stock And Bond Investments

In the late 1990’s it was difficult to picture the major stock market averages staying down for a full year. We saw 20-30% gains each year in the price of stocks from 1996-1999. However, in the post technology bubble and 9/11 era we’ve seen some important changes in the world economy. In light of this, investors need to do more than throw a dart at the stock market and expect to make money. You must think logically about where money is flowing and what businesses will thrive in their sectors. Fortunately, I’ve done most of this research for you and am willing to share it. What I’ve found in many cases are alternative investments which can potentially outperform your traditional stock and bond investment or at least improve your diversification and round out your portfolio. Here are some of my ideas:

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How to Rollover Your 401k

Pat yourself on the back if you’re leaving a job and have questions about your 401k. If you do, at some point you took the time to establish a 401k account at work. By doing so, a portion of your pay was directed into a tax-deferred vehicle which allowed you to accumulate funds, presumably for retirement. You didn’t have to save through the 401k, but you did because you either understood its benefits, or heard it was a good idea. Continue reading