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April 30, 2008

Procuring a Small Business Loan through the SBA

One of the main reasons individuals decide not to go into business is due to a lack of funding. At least that is what they perceive to be the reason. The real reason is that they simply do not know what kind of funding is out there and they do not know how to obtain it. One of the best tools for obtaining funding is by contacting your local Small Business Administration.

Not only does the SBA, or Small Business Administration, help small business owners find funding; they also offer SBA loan guarantees. These can be just the tool you need to fund your small business.

The SBA guarantee loan program works much in the same way as a student loan guarantee. The loan is actually procured through a commercial lending facility. However, the SBA helps by offering their guarantee to the lender. In the event that you are unable to pay the loan, the SBA will be responsible for a portion of the loan. This takes some of the risk out of lending you money allowing you to gain more capital for your small business.

Most small businesses qualify for the SBA loan program. However, it is important to do your research first, since there are a few types of businesses that do not qualify. Generally, you should be in business for the purpose or creating a profit and you should be operating your business within the U.S. or its territories.

You can pick up an application for your SBA loan at your local SBA office. You can also find these forms on the internet. However, lenders who currently partner with the SBA will have these applications on hand. In fact, receiving this application at your lending institution where they can offer live advice is probably the best way to go.

In order to qualify for a SBA loan you will need to have some of the following basic requirements. You will definitely have to have the ability to pay the loan. However, the equity you have invested in your company, the collateral you have on hand, and your moral character may also factor into the decision making process.

The process for obtaining a SBA loan will involve finding a lending institution. There are actually three types of SBA loan programs and a qualified lending institution will be able to help you decide what is right for you. When meeting with your lender you should have the following items:

• Your business plan
• Your personal financial statements
• Your business financial statements, (if applicable)
• Collateral to secure the loan
• Your projected earnings statements
• Resumes for the management involved in your business
• Pro-forma balance sheets, (anticipated for the business using the capital)

If you do not have collateral, you are not automatically denied. Collateral can be based on the ability of your small business to repay the loan through its profits rather than cash on hand. However, every owner that holds 20 percent or more of the small business must personally guarantee the SBA loan.

The interest rate for SBA loans varies. This is because the SBA only sets the maximum rate that the lender can charge. The actual rate depends on the lender. The amount of time you have to pay back the loan is determined by a number of factors including the cash needs of your small business and the assets being financed. Loans can be granted for between five and twenty-five years based on the above factors.

In the end, receiving a SBA loan may be just what your small business needs. The best way to find information about these loans is to visit a participating lender, or your local SBA office. You can also visit the website to find information or to find contact information for your SBA office or participating lenders.

April 28, 2008

Low Cost Summer Activities for Children

With summer vacation rapidly approaching, many parents are scrambling to find affordable programs for their children to attend. Even if you are a stay-at-home parent, you probably realize that it’s wiser to have your children involved in some type of summer program instead of having them home with you all the time. And if you work during the day, it’s absolutely imperative that you find some place for your children to go while you work. No matter what your income is, every parent could benefit from paying as little as possible for summer activities for their school-aged children. Summer camps and day program prices can be astronomical, so what’s a parent to do? Well, you have many options, which depend on your children’s preferences.

The Boys & Girls club is a great place for your children to interact with other children, play games and participate in field trips. Depending on your children’s ages, there are age appropriate games, as well as opportunities to join a baseball league or other sports team. One good thing about the Boys & Girls club is that there is usually at least one location in just about every town. Another great thing is that the cost of a membership per child is a mere $25 for the entire year. That’s only a fraction of the $200 and up that most summer programs charge. Of course it costs extra for field trips and other activities, but you can’t beat the price. One thing that you must be aware of is that children at the Boys & Girls club can come and go as they please, so you will have to give your children specific instructions regarding leaving the center.

Many area libraries offer free or low cost activities for children during the summer. Many have crafts, reading groups, theme-based parties/celebrations, etc. Now while it will probably not be a daily program, whatever activities that your local library does offer can be beneficial to you children. Not only can library activities help enrich your children’s education, but it also gives them something to do in order to prevent boredom. Another plus is that your children will be exposed to books each time they are at the library, which will hopefully spark their interest in reading more often. In order to find out what activities your local library offers, simply call or visit for more information.

If you have no choice but to stay home with your kids or leave them with a babysitter, there are still ways to keep your children occupied and out of trouble for the summer. If you’re home with them, you need to take the time to spend quality time with them. You can go on bike rides, picnics, and to the beach, just to name a few. These are great ways to bond while saving money simultaneously. If you must work while your children stay with a babysitter, then by all means, make sure that your babysitter isn’t going to sit in front of the TV all day while your children play outside all day. You should choose a sitter who is going to read with your children, take them on nature hikes, to age-appropriate dollar movies, if one is available in your area, as well as other activities.

You don’t have to settle for paying for summer programs with rates equivalent to your mortgage payment. Your children can have a wonderful, productive, and fun summer without causing you to go broke in the process. If you can’t enroll them in a summer program and there is no Boys & Girls club in your area, there is always the option of allowing them to go to a recreation center near your house to play free games. You could also plan a “trip” to take them on each week, to bowling alleys, carnivals, museums, zoos, etc. If your children become bored rather easily, then you need to ensure that there is very little downtime during their day, even if you designate certain times of the day “quiet time,” when they’re supposed to read a book or complete a written assignment. Whatever you choose to keep your children occupied over the summer, just remember that it doesn’t have to be expensive to be fun.

April 25, 2008

How to stop Living Paycheck to Paycheck

No matter how hard they work, many people find themselves living paycheck to paycheck, which means that they spend all or just about all of their paycheck each payday, just to make ends meet. People who live paycheck to paycheck are often depressed and feel that they are in a rut they just can’t get out of. Unforeseen expenses, such as a car breakdown, household repairs, etc. can really cause a financial crisis. If this describes you and your current life, the good news is that you can get out of that rut you’re in, and you can start saving money, going on trips— living. By following easy life-changing strategies you can greatly reduce the stress in your life, as well as improve its quality.

The first step to ending the madness of living paycheck to paycheck is to evaluate exactly how much income you receive from all sources, as well as your regular expenses. Next, you need to scour through everything that you pay on a regular basis in attempt to eliminate any unnecessary costs. You may be able to get your telephone, cable, internet, and cell phone services for less by going to another company, or by downgrading your current services. Many companies will even find ways to lower your bill in order to keep you as a customer. You simply need to contact the company in question to see what savings can be applied.

If you’re willing to make the sacrifice for a good cause, then in order to improve your current financial state you may need to change your work situation in order to bring in more money. This can be accomplished by either getting a temporary second job, or even working overtime at your current job, if available. If you spend and/or save the extra money earned wisely, then you may only have to work overtime or a second job for a short period of time. You may not even have to leave your home in order to earn extra money, and the sky is the limit when it comes to exactly what you can do to earn extra cash. You may choose to mow the lawns of your neighbors, find an at-home job working online, or even start a latchkey program to assist working parents in your neighborhood.

You would be surprised at how much extra money you can make available each month simply by reducing the amount of takeout you purchase. Cooking large pots of stews, casseroles and soups can be stretched for as long as 3 – 4 days at a time, depending on your family’s size and appetite. Buying hamburger meat instead of steaks, all natural instead of all natural and organic, and shopping at discount grocery stores can reduce your monthly food bill substantially. The small changes really add up quickly, making more money available to put in a savings account.

If the rent or mortgage that you currently pay is more than you can comfortably afford, perhaps moving would be an option for you. If you rent, it should be pretty easy to find a less expensive home or apartment, especially if you don’t have a lease. If you have a lease, simply wait until the lease expires and then make arrangements to move to a less expensive but comparable house, even if it’s in a different area. If you’re purchasing your home, you have to option of refinancing or either finding a roommate who can assist with some of the expenses. This would help take some of the financial burden off you, enabling you to save more money.

With a few simple life changes, you can successfully and quickly change your financial situation from bleak to prosperous. There is absolutely no need for you to settle living paycheck to paycheck, as there are many ways to remedy this common problem. You never know when you may lose your job, which could potentially cause you to lose everything that you have. You need to have a savings account with enough money to sustain your current lifestyle should something such as a layoff occur. If you’re due a raise at work, then by all means, make sure that you get the raise you’re entitled to. However you’re able to create extra money to put in your savings account, whether you decide to clean houses on the weekend, or refinish people’s furniture after work, then by all means, do it, and your bank account will thank you.

April 23, 2008

Mystery Shopping - Enjoy Dining Out at No Cost

If you enjoy dining out but could do without the high prices that restaurants charge, including the tip, then believe it or not there is a way to eat at your favorite restaurants absolutely free: Mystery shopping. Most people believe that mystery shopping is a scam, as there have been many claims that you can shop for TVs, computers, stereos, etc., while secretly judging how well the store is run and you can keep these items. Most of the claims that these companies are scams are true, or they are at least greatly exaggerated, but there are some reputable companies to “mystery shop” for. Mystery shopping can be fun and rewarding, if you have the extra time to commit to it. You don’t need to have experience, but you just need to be able to follow simple directions, fill out the appropriate forms after you’ve visited the business, and you can be on your way to receiving as many free meals and other items that you can handle.

One thing that you need to remember when mystery shopping is that most companies are not going to pay you up front or send you a gift card, etc. You have to pay for your own meal and wait for reimbursement after you’ve answered all of the appropriate questions. Oftentimes the company will reimburse you for the cost of your meal, so it is imperative that you save all your receipts to send in with your paperwork, and most companies will also pay you a small fee for actually completing the shop. If there is only a day or two remaining for certain shops and they haven’t yet been assigned, many companies will pay extra bonuses as well. After the receipts and paperwork have been received, then your check will be sent out, and you can choose your next shop.

Another important aspect of mystery shopping is that you must remain anonymous at all times. If the instructions state that you are not to take children with you on the shop, then you shouldn’t. Your responsibility (besides eating) will be to report how clean the restaurants’ premises were, including the rest room. You must visit the rest room even if you don’t have to use it, if your instructions state that you must. You’ll also be responsible for describing what your customer service was like, such as how you were greeted, how long it took for you to be seated, and how long it took to receive your food. You also shouldn’t bring attention to yourself by asking unusual questions, staring at employees, or otherwise causing yourself to appear suspicious. Be as discreet as possible and act as you would if you were not completing a mystery shop.

By now you’re probably wondering where you can find a legitimate company that hires mystery shoppers. One great place to start is: volition.com/mysteryUSA1.html. This comprehensive site provides a free A – Z list of popular and reputable mystery shopping companies. The site even gives you a small amount of information about each company, so you can decide whether or not you want to visit the site to apply or not. You should be able to find more than enough mystery shopping companies on this site, in case you want to work for several, but if you don’t you also have the option of visiting money-making forums, chat rooms and newsgroups. These sources will give you information about even more mystery shopping opportunities.

There are numerous legitimate mystery shopping companies looking for people to complete shops for them on a regular basis. Now while you certainly won’t get rich by mystery shopping, you can certainly earn some free meals, make a small amount of money, and have some fun while doing so. If you don’t like the restaurant shops that are offered, because many have numerous fast foods restaurant shops available, there are often other shops available to numerous different businesses in your community, from retail stores to auto supply shops. All you have to do is check the mystery shopping sites of your choice and you’ll be well on your way to having some free entertainment in your community.

April 21, 2008

Watch Out for the Credit Card Default Clause and Universal Default Clause

If you do not have the first clue as to what default and universal default clauses are, then you are one of those credit card users that most credit card companies come to love. First of all, you should know which one of these two practices your personal credit card uses. If you want to find out, try reading the small print that came with your credit card. If you already tossed that information away, call your credit card company's customer service department and ask.

A universal default clause carries with it the right of the credit card company to increase your interest rate in the event that you make a payment late. So, you are thinking, "No big deal. I did know that." But did you know that the universal default clause also applies to a late payment on any one of your billing accounts whether it be a utility bill, mortgage payment, store credit account, credit card account, car installment loans, or some other type of billing payment?

The default clause that most of the credit card companies employ simply involves the one specific credit card account that it is attached to. The credit card company only has the right to increase your interest rate in the event that you make a payment late on that account.

Therefore, every consumer should read the small print on each account that they acquire to determine which type of default clause is on it. In any event, they should avoid the universal default clause and close out any accounts that utilize it, replacing them instead with accounts that utilize the simple default clause.

April 18, 2008

The Lowdown on Payday Advances

Unexpected expenses such as car repairs, medical bills, college tuition, etc. can arise at anytime in a person's life, causing serious financial hardship. Unfortunately, many people are unprepared for these costs, and often have few options when it comes to obtaining the money that they need in a timely manner. So what are you to do if you find yourself in such a situation? A payday loan is one option, but only as an absolute last resort, and only if you plan on paying back the loan in full on your next payday should you even consider getting a payday loan.

Payday loans are easy for just about anyone to obtain, but paying them back is usually where the problems arise. As long as you have a checking account (or a savings if borrowing online) you are usually able to be approved to borrow money. You simply present them with a post-dated check for the full amount of the loan, plus their fee, dated for the day of your next payday, and the company will give you a check, cash, or electronically transfer money into your bank account. On your next payday you authorize the agency to either deposit your post-dated check in order to repay the loan, or you can re-advance, meaning you will incur the finance charge all over again.

Since many payday advance customers are often desperate to get the loan and pay whatever bill that they need to as quickly as possible, a great deal fail to pay attention to the fees that are charged. If you ever decided to get a payday advance, then you will quickly realize that a twenty-five percent interest rate when receiving financing for a home or car isn't as high as you may think. Many payday advances will charge between fifty and ninety dollars to borrow three hundred dollars.

If you find yourself in a predicament where you're in dire need of immediate cash, perhaps it would be a better option for you to borrow money from a friend or relative, than obtaining money from a payday advance company. If you don't have friends or family who are able to lend you the money that you need, getting cash from a credit card, obtaining a small loan from a bank or credit union, or asking your employer for an advance in pay are all better alternatives. If your credit is bad, you don't want to make it worse by racking up more debt, so if you do ultimately decide that a payday advance is your only option, then you should be very careful and be sure that you're able to repay it as soon as possible. Another way to protect yourself is to deal with payday advance companies that are members of the CFSA. The Community Financial Services Association of America (CFSA) is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA's Best Practices.

April 16, 2008

Alternative Ways to Buy Furniture

Perhaps you've just purchased your first home, or are renting an apartment and are in need of new furniture. Or maybe you simply need a new bedroom set because your current one is in dire need of replacing. Whatever the reason you're in the market for new home furnishings, nothing should get in your way of acquiring what you need. Everyone needs furniture to sit on, but unfortunately not everyone has the cash upfront to comfortably afford the furniture necessary to fill a house or apartment. What are your options if you find yourself in this situation? Well, believe it or not, you have more options than you may have ever thought possible.

If your credit is good you can simply choose the furniture store of your choice and purchase the furnishings that you need using credit. Many furniture stores are quite strict when it comes to extending credit, and some even require that you have a current major credit card in order to prove that you have established credit already. The credit card information that you provide will be verified before your account is approved. These stores often have special sales where you don't have to make a payment until a year or two later, with little or no interest, which would give you a great deal of time to get situated in your new home, if you've recently moved.

If your credit isn't good enough to be approved for credit at a traditional furniture store, there are nontraditional furniture stores that offer special financing. With this type of financing, you will usually have to pay at least ten to fifteen percent of the purchase before your furniture is delivered. Your monthly payments will also be higher than they would be had your credit been good, as will your interest rate. The upside of using this type of financing is that it can not only help you rebuild your credit, but can also allow you to purchase the furniture that you need without paying full price upfront, or going without. After you've paid off one piece of furniture, the furniture store will undoubtedly be more than happy to extend even more credit to you in the future, enabling you to make more purchases to completely furnish your home or apartment.

Everyone in just about every town has heard of Rent-A-Center or similar rent-to-own stores. These stores make it possible for nearly everyone to be able to own high-priced items that they normally wouldn't be able to afford. It's not difficult to get approved at a rent-to-own store, and one reason why they're so popular is because they don't check your credit report. Another great thing about Rent-A-Center and other rent-to-own stores is the fact that they have a large selection of merchandise, and you can choose how often you want to make payments, whether it's weekly, biweekly or monthly. One negative aspect of using a rent-to-own agency to purchase furniture is that you will pay a great deal in finance charges and other fees. They do offer you a ninety-day same-as-cash option, which will save you a great deal of money, if you can afford to pay off your furniture so soon. If you need more time, you will have up to eighteen months to pay it off, but paying over this extended amount of time won't save you any money, but it will make it easier for you to afford.

If you don't necessarily need brand-new furniture and have a small amount of cash saved up, there's always the option of checking your local classified to search for individuals looking to sell used furniture, some of it which is in almost-new condition. You might be able to get furniture for pennies on the dollar this way, as long as you have a way to pick up the items and set them up yourself. Many people also have garage/estate sales instead of placing newspaper ads as a way to get rid of furniture that they no longer need. This is the perfect way to furnish your house without the need to stress over lack of cash or good credit.

Just because you may not have two or three thousand dollars to purchase new furniture doesn't mean that you have to resort to sitting on the floor or sleeping in a sleeping bag for the next few years. If you are determined to furnish your house despite having derogatory credit or very little money, then you can. All you have to do is set a budget, and then you can figure out which method will work best for you to obtain the furniture that you need for your home or apartment.

If you can't see yourself paying all the extra money that rent-to-own stores charge, then you can always choose another method that will work better for you. There's always the option of searching through the clearance centers of regular furniture stores, because you can sometimes find furniture with slight defects at deeply discounted prices. As long as you don't mind the time and effort involved in acquiring the furniture that you seek, you can own nice, comfortable and trendy furniture despite your financial problems. If one method falls through, you need to remember that there are always other options.

April 14, 2008

Taking Advantage of the 0% Capital Gains Tax

In 2008 to 2010, the capital gains tax rate for individuals in the 10% or 15% tax bracket will be 0% (down from 5% previously). After 2010, the rates will revert to pre-2001 rates, unless further legislation is passed. Who will benefit from this reduction?

Many parents with children in college or near college age in 2008 to 2010 were planning to gift appreciated investments to children, who could then sell them during these years and pay 0% tax on any gains. However, legislation that went into effect last year raised the age limit for application of the "kiddie tax" to all children under age 19 (previously under age 18) and to students under age 24, starting in 2008. The "kiddie tax" refers to the manner in which unearned income is taxed for children. In 2008, the first $900 of unearned income is tax free, the second $900 is taxed at the child's marginal tax rate, and any remaining unearned income is taxed at the parents' marginal tax rate.

Thus, it will be difficult for individuals with students under age 24 to take advantage of the 0% capital gains tax rate. However, if you have older children in graduate school, medical school, or law school, you may be able to sell investments and pay 0% capital gains tax. Another alternative is to make sure your student has significant earned income. If the earned income of an individual over age 17 exceeds half of his/her support, the "kiddie tax" does not apply. Scholarships are not considered for this test.

Individuals retiring in 2008 through 2010 may be in the best position to take advantage of the 0% tax bracket. With no or low salary, even high-income individuals may find themselves in the 10% or 15% tax bracket in the early years of retirement, although it may be necessary to delay benefits from pension plans and Social Security to do so. If that is the case, this would be a good opportunity to sell highly appreciated assets without incurring any taxes.

April 11, 2008

The Basics of Stock Earnings Calculations

When evaluating a stock, you'll typically look at a variety of historical figures. One of the most important statistic is earnings, which is also used as a basis for several other important statistics.

From an accounting standpoint, earnings are calculated by subtracting operating costs, taxes, and preferred stock dividends from revenue. Those earnings are typically divided by common stock shares outstanding to come up with earnings per share, or EPS. EPS is a convenient way to compare earnings over a period of years, so upward or downward trends can be identified.

The price/earnings ratio, or P/E ratio, is calculated by dividing the stock's price by its EPS. It is one of the most common measures of stock value, both for individual stocks and the overall market. It basically indicates how much investors are willing to pay for a dollar of the company's earnings. P/E ratios can be calculated using different earnings numbers. Trailing P/E ratios, which are typically reported in newspapers, use earnings per share for the most recent four quarters, while forward P/E ratios use forecasts of future earnings per share.

For individual companies, investors' expectations regarding future earnings affect the P/E ratio. Confidence that a company will improve its profitability or remain profitable generally results in a higher P/E ratio. If profits are threatened or weak, the P/E ratio is likely to drop. Higher forward P/E ratios indicate investors regard the company more highly and expect it to have good future prospects. P/E ratios for the overall market change based on broad market conditions and investors' views about how desirable stocks are compared to other investments. P/E ratios can fluctuate significantly over time and among companies and industries.

A company's growth prospects can be evaluated using the price/earnings growth, or PEG, ratio, which is calculated by dividing the P/E ratio by the company's projected earnings growth rate. A PEG ratio of one is considered standard, meaning its growth rate is incorporated in the stock's price. A PEG ratio higher than one means the stock is trading at a premium to its growth rate, while a ratio less than one may mean the stock is undervalued.

April 9, 2008

Coverdell Education Savings Accounts (ESAs)

If you're looking for a tax-advantaged way to save for your child's college education, consider Coverdell Education Savings Accounts (ESAs). The basic features of ESAs include:

• Annual contributions of $2,000 per beneficiary under age 18 can be made to an ESA. This amount is in addition to limits for other types of IRAs. After December 31, 2010, the annual limit will decrease to $500.

• Contributions are not tax deductible, but earnings grow tax free as long as distributions are used for qualified education expenses.

• Qualified education expenses include: tuition, certain room and board charges, books, and other supplies. Tax-free distributions can also be used to pay elementary and secondary school tuition and expenses, including: tutoring, room and board, uniforms, and extended day care programs; and to purchase computer technology and equipment, including Internet access and services.

• Eligibility to make contributions is phased out at adjusted gross income levels of $95,000 to $110,000 for single taxpayers and $190,000 to $220,000 for married taxpayers filing jointly. If your income exceeds those limits, you can ask other relatives to contribute for your children. Your child can also make the contribution to his/her own ESA, since there is no earned income requirement for contributions.

• Corporations and other entities can make contributions to ESAs, regardless of their income.

• Contributions can be made until April 15 of the following year.

• Distributions must be made before the beneficiary turns 30. Any funds not used for qualified education expenses are subject to normal income taxes and a 10% federal income tax penalty. However, the ESA balance can be rolled over to another ESA for a different family member.

• Contributions can be made to both an ESA and a section 529 plan for the same beneficiary in the same year.

• You can claim the Hope scholarship credit or lifetime learning credit in the same year tax-free distributions are taken from an ESA, as long as the credit is not claimed for amounts paid with the tax-free distributions.

• For special-needs beneficiaries, contributions can now be made after age 18, and tax-free distributions can be taken after age 30.

Keep in mind that many of the provisions related to ESAs are scheduled to expire in 2011 unless further congressional action is taken.

April 7, 2008

Incentive Trusts

You're looking for an effective way to get your heirs to do what you think is best for them, for the family, and for the world. Is an incentive trust the right vehicle to accomplish that?

An incentive trust is much like a traditional irrevocable trust, except that it sets specific conditions on trust distributions. Some people establish incentive trusts to make sure beneficiaries stay in the family business. Others want to encourage higher education or public service. Some want to discourage behavior, i.e., laziness, reckless spending, or drug use. Still others want to encourage beneficiaries to get married and raise a family.

Incentive trusts have advantages and disadvantages

If you think an incentive trust may be a useful part of your estate plan, consider the advantages and disadvantages.

The advantages of incentive trusts include:

• If you write the conditions for disbursement properly, they provide objective criteria for when and how to make these disbursements.

• They encourage beneficiaries to behave in ways that are important to you.

• They allow you to condition disbursement on your beneficiary's age, so you can decide when he/she is old enough to responsibly manage the inheritance.

• They can help you accomplish goals through your beneficiaries, such as continuing the family business or pursuing philanthropic interests.

But there are also disadvantages:

• While incentive trusts allow you to specify conditions for distributions, they restrict the ability of trustees to make different decisions if new circumstances arise.

• Incentive trusts can cause resentment among beneficiaries, who may feel it is not your place to tell them how to live their lives.

• Encouraging goals you think are important may cause beneficiaries to neglect other good opportunities. For example, you may want a beneficiary to start a business, but he/she may be better suited to another career choice.

• Incentive trusts may be plagued by the law of unintended consequences. How can you foresee the future long after you've died? You may instruct the trust to pay out a stipend for your beneficiaries to go to school, but that may encourage them to become "professional" students.

• Because incentive trusts are often more complicated than traditional irrevocable trusts, they may be more expensive to establish and maintain.

What to think about

There are a number of issues that could affect the design and implementation of an incentive trust. Consider these points carefully:

Goals -- What behaviors do you want to promote? Incentive trusts are often created to encourage beneficiaries to pursue higher-education degrees. Discouraging reckless consumption and unproductive behavior are other common reasons behind incentive trusts. Think about what matters to you and your beneficiaries. What goals are fair and reasonable for you to expect your beneficiaries to achieve?

Coordination with your estate plan -- Incentive trusts are just one component of an estate plan. Decide whether you want to create a separate incentive trust or build incentive clauses into a trust designed for another purpose. Make sure the incentive trust doesn't conflict with or detract from other components of your estate plan.

Duration -- How long do you want the incentive trust to last? For grantors with substantial wealth, a trust may span many generations. Can you realistically set expectations for beneficiaries who aren't even born yet?

Beneficiaries -- Who will benefit from the monies disbursed from the incentive trust? Considerations here are similar to those for any kind of trust: who do you include and exclude?

Trustee designation -- The trustee of an incentive trust typically has a more difficult job than the trustee of a simple traditional trust, since he/she must decide when beneficiaries have met the conditions you specified. Make that job easier by writing conditions that are objective and easily measured.

How to prepare an incentive trust

If you decide an incentive trust may be right for you, you should:

• Sit down with your beneficiaries and trustee to discuss your goals for the incentive trust. The likelihood that your beneficiaries will later resent the incentives is greater without this discussion.

• Build flexibility into the trust to accommodate changes in circumstances. This will mitigate unintended and undesirable consequences.

• Ensure that the conditions you want to include comply with state and federal laws.

If you don't want to establish an incentive trust, you can limit each beneficiary's inheritance to an amount that isn't likely to encourage reckless consumption and unproductive behavior. Another alternative, if your interest lies in philanthropy, is to establish a private foundation and name your beneficiaries as board members. That way, your money is still controlled by your beneficiaries, but it is put to charitable use.

April 4, 2008

Reevaluate Your Portfolio Annually

The market changes. Companies change. Investments change. Your needs and goals change. That’s why it’s important to check, at least once a year , if your investment portfolio also needs to change. Here is a disciplined approach to reevaluating your portfolio.

1. Review the value of your investment portfolio.

Have your investments lost value? Gained value? By how much? Answering these questions will give you the big picture overview of your portfolio’s status.

2. Check how your portfolio is performing in comparison to benchmarks.

If you simply review the absolute performance of your investments, you may feel you’ve done very well or quite poorly. However, what really matters is how your investments have performed relative to their respective benchmark indexes. There are a number of indexes that can be used as benchmarks against which you can measure your investment’s performance.

3. Compare the individual investments in your portfolio against comparable investments in the same asset class.

Step 2 will give you an idea of how your particular investments performed against their relative indexes, while Step 3 will help you understand how individual investments similar to yours have performed. Compare your individual investments against comparable investments in the same asset class.

4. Ensure that your investments remain consistent with your established goals.

As your life circumstances change, so should your investments. If your financial goals include sending children to college or saving for retirement, you’ll want to transition your assets into more conservative investments as you get closer to your goal.

You’ll also want to evaluate whether your asset allocations remain consistent with your financial goals. As investments gain and lose value, your asset allocations can change. You may need to adjust your investments if uneven gains and losses have disrupted your asset allocations.

5. Make any necessary tweaks to your investment allocations.

Once you’ve gone through steps 1 through 4, you should know what changes are needed in your portfolio. To make those changes, you can:

• Sell off investments from overweighted asset categories and use the proceeds to purchase investments for underweighted asset categories.

• Purchase new investments for underweighted asset categories.

• Alter your contributions (if you make regular contributions to your investment portfolio) so that more investments go to underweighted asset categories until your portfolio is back in balance.

April 2, 2008

Buying a Car with Less-than-perfect Credit

If your credit is less-than-perfect and you find yourself in need of a new car, there is no reason to think that you have to catch the bus or buy a bicycle. It doesn't matter if you've got a few late payments on your credit report, or numerous delinquencies, charge-offs and judgments, you have many options for getting the car that you need. You won't have to settle for a wreck that will break down a week after purchasing it, either. You can buy a nice and dependable vehicle that you will be proud to drive.

If you have some money saved up, you have the option of avoiding the hassle of finding the right lender to provide financing for you to purchase a vehicle. Depending on how much money you have saved up, as well as what type of car you're looking to purchase, you can possibly pay cash for your next car. There are many car lots that sell great used cars that are guaranteed to be in A-1 condition. These special car lots may be hard to find, but they do exist. If you do decide to buy a car from a private owner or a car lot that doesn't guarantee that their cars are in excellent condition, it's a good idea to hire a mechanic to thoroughly check out the car you've chosen to purchase prior to closing the deal. You don't want to get stuck with a car that will have frequent costly repair problems down the line.

Another way to avoid having your credit report affected when purchasing a car is to seek a buy-here, pay-here car lot. These types of car lots are notorious for selling cars with extremely high mileage and numerous mechanical problems. There's no reason to be discouraged though, because despite this fact, there are still some great cars that can be bought with this type of program. Some car lots even specialize in nothing but buy-here, pay-here deals, and often have a larger selection of cars in every condition for you to choose from.

If your absolute only option is to finance a car, then there is no need to believe that getting approved is impossible. Being approved is possible, provided you choose the right car dealership. When choosing to finance a car with bad credit, you have to make sure that you seek dealerships that offer special finance programs. Many dealerships offering special financing will even guarantee your approval or they will pay you a certain amount of money. Of course no dealership is going to pay several people money for declined applications, but it's simply their way of saying that they won't turn down anyone for a car loan. Usually the more money you have to pay for a down payment, the better car you can get, so it's a good idea to have as much money as possible if you expect to get a decent, late model car.

If you're in a bind and are in need of a car immediately yet only have the minimum amount to pay down, there is always the option of getting an older car with higher mileage. You only have to make six to eight on-time payments for the vehicle, and then you can trade it in for a later model. With your improved credit rating, you shouldn't have a problem getting approved for the car of your choice, and you could possibly even get a deal where you don't have to come up with any money down.

If your credit circumstances have caused you to use bankruptcy as a form of debt relief, this may actually be a positive thing when looking to finance a car, because lenders are aware of the fact that you can only file Chapter 7 bankruptcy once every 7 years, which will make it more likely that you will repay your loan as promised. As long as you have proof that your bankruptcy has been discharged, and you visit the right lender, you should have no problem being approved for financing for the vehicle of your choice. You may not be approved for a brand-new car or truck, but a good used one is often just as good as a new one.

No matter which route you choose when purchasing a new car, whether you're paying cash or having it financed, there is no reason to feel limited just because you may have problem credit. You will probably not be able to get approved to finance a forty-thousand dollar vehicle, but you have many more options than you may have realized. If you have a good friend or family member with favorable credit, perhaps they would be willing to co-sign for you to purchase a vehicle with less interest and little or no money down. Of course finding a co-signer is not imperative, because there are many lenders that will put you in a nice, dependable without one. Just take your time when searching for the right lender, the right car, and the right deal, and you're likely to be rewarded with a nice vehicle to drive in the end.


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