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Monthly Archives: March 2017

Long Term Wealth Management

Savings

Having income properties and investments is, of course, important. However, for you to be truly content, cash savings is a must. It is highly suggested that you save a minimum of 20% of your income. The easiest way to do this is to have it directly deposited from your check into an interest-bearing savings account. This ensures that you won’t forget to set the cash aside yourself, and it prevents you from being tempted to spend the money while you have it. Having that extra cash in your back pocket will put you at ease in case any emergency situations arise.

Credit

It is essential to know how and when to use your credit wisely. This includes credit cards, mortgages, and loans. Do not overextend yourself when using credit by making impulsive purchase decisions or by taking out loans that you cannot afford. Paying any types of loan debts on time is the key to a good credit score, which will help build a positive impression for a future lender.

Goals

Take your investments slowly by first concentrating on small, achievable goals. If it is your desire to purchase that dream home or car, know your allowance and what you can realistically save. These purchases usually involve a large sum of cash, so they may take you longer to afford them, but patience goes a long way!

Plans

Don’t get caught up in the risky get-rich-quick schemes. As an investor, have a long-term strategy in multiple markets. Consider your interests, and invest in rental properties and stocks. These may not pay off huge dividends in the beginning, but think about your retirement: in 30 to 40 years, your properties will likely be paid off, and the rent you generate from these homes is cash in your pocket. If you have invested well, your stocks will gradually grow and grow.

Personal Bank Loans

Options

Generally speaking, there are two types of personal bank loans:

– Secured, which will require you to put up an asset, such as a home or car, for collateral. In exchange, you get a lower interest rate, and potentially a better chance at being approved.

– Unsecured, which can be harder to get approved for, particularly if your credit score is less than perfect. Interest rates are higher, but, on the other hand, there is no risk of losing your home or car if you cannot pay.

Though a secured loan can be very tempting, it is important to take a step back and consider whether or not it is worth the risk. You will also want to look into other options that your bank might have, such as auto loans that might be more favorable for your purposes.

Your Local Bank or Credit Union Can Help

Being an account-holding member in good standing at your local financial institution can make it far easier to be approved. They will often look at the account balance and age when you apply. Generally speaking, the higher the better. It is a good idea to make this your first stop in the search. Keep in mind, also, that credit unions may be more willing to take risks than larger institutions, and as not-for-profit establishments, they can offer lower interest rates.

Consider Your Credit Score

When you apply for your personal loan, nearly everything from the interest rate to final approval is determined from your credit score. Search the web for sites that let you make a “soft” inquiry into your rating; this pings the major credit bureaus without hurting your score. Some will give you a fairly detailed report on all major factors, including open accounts, late payments, collections, and other records. This knowledge can help you take the right actions. In general, though, it is good to make at least the minimum payments on all accounts on time, every time. You may also consider getting a credit card to help build your rating, but be careful with your spending.

Home Loan Pre Approval

When to apply for a Home Loan Pre-Approval

Only apply for your home loan pre-approval once you are ready to take the next step from inspecting and researching properties. Typically, the approval will only last 90 days so don’t apply for one until you are seriously considering purchasing.

What to have ready

The lender will ask you to verify your personal and financial details and provide evidence in the form of pay slips, tax returns, bank statements and identification documents. You will also have to provide information about any outstanding debts. To ensure a reliable and accurate pre-approval, be honest about any anticipated changes to your personal circumstances, such as a redundancy or starting a family.

What’s the next step?

Your Pre-app is not a guarantee of finance from a lender so you will still have to obtain full (or formal) approval once you have found a property. It’s not until you have this final approval that the loan application is binding. The benefit of having obtained pre-approval is that it will significantly speed up the paperwork process.

Watch out for

Home loan Pre-approvals can be called conditional approval, indicative approval or approval in principle but their meaning is the same.

Don’t confuse these with a ‘pre-qualification assessment’, which means a quick investigation of what you might expect to be approved for. It can be done over the phone or on the internet and is based only on the information you supply to the lender. Brokers and Lenders usually conduct a credit check to verify this information.

Buy Income for Life

I suggest you avoid fixed indexed annuities, variable annuities, indexed universal life, variable universal life and whole life insurance products for generating retirement income. Their payback periods are long and these are high commission products, which is why they are sold. Some can have high surrender charges and the illustrations that I’ve seen are very optimistic. Separate your investment and insurance needs.

Insurance should be used to mitigate risk and not bought as an investment. You should focus your annuity needs on the contractual guarantees they provide, not on hypotheticals or what they might do. Also, avoid any free meal seminars you might get invited to; it could end up being a very expensive meal indeed. High commission products are typically sold at those seminars.

Here is a very interesting table for a hypothetical, single premium immediate annuity. SPIA for short.You make a lump sum premium payment to an insurance company and exchange they pay you an income for life. The income you get is a function of the premium you paid, current 10 treasury yields and your life expectancy. Here are the details for the table:

The top scale is the age at which you purchase the SPIA. You can get a SPIA for a male, female or multiple lives; this example is for a male.

The left hand scale is the interest rate on a 10 Year Treasury Note at time of purchase. You can see several interest rates; one line each for 10 year treasury yields ranging from 0 to 8%. I’ve shown several rates so that you get a feel for interest rate sensitivity on these products.