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What is Mortgage Modification?
Mortgage modifications are arrangements agreed to by the lender that are outside of the contractual mortgage agreement, in instances where the borrower experiences unique circumstances or hardship. An example of a mortgage modification is a loan forbearance, which is when a lender agrees to let the borrower temporarily stop payments for an agreed-upon span of time, before resuming payments with an added repayment stipulation for the time spent not paying. Continue reading...
What is a Mortgage Short Sale?
A mortgage short sale occurs when a borrower and a lender settle for less than is owed on a mortgage because changes to the housing market or financial status has made it impossible to continue the arrangement. Lenders would rather take what they can get, while they still can, in this sort of situation. An example of a short sale would be an older couple reaching retirement age with a house that is bigger than they need in a neighborhood that has seen the property values decrease, and due to pension cuts they will have hard time affording the house in retirement. The lender would settle short to avoid having to go through a foreclosure and all that it implies. Continue reading...
When Can I Take Money Out of My 403(b)?
403(b)s have essentially the same distribution rules as 401(k)s. The advice given for 401(k) accounts still applies here: taking money out of a retirement account before retirement is strongly discouraged. You may withdraw your money penalty-free at age 59½, and you must begin taking annual withdrawals that satisfy RMD requirements on April 1st of the year you turn 70½. If you withdraw money before age 59½, you will be subject to a 10% penalty in addition to regular income taxes. Continue reading...
What are Financials Stocks?
Financial stocks are those that make up the financial sector, which encompasses banks, lenders, wire houses, and other companies that facilitate the flow of capital and debt. Real estate companies can also fall under this category. Financials tend to do well when yield curves are steep and the regulatory environment favors banks. When credit markets aren’t under strain financials tend to perform well. Continue reading...
Can I Make Early Withdrawals From My 401(k)?
It depends on the 401(k) plan, but in general the answer would be “yes,” if you’re willing to pay the penalty. It is generally a pretty bad idea to withdraw 401(k) money early. If you withdraw the money before age 59½, the money will be subject to a 10% penalty in addition to regular income taxes. There are exemptions from the penalty, but there fewer exemptions in a 401(k) than an IRA. In an IRA the penalty can be waived for first-time homebuyer’s expenses up to $10,000, or even for educational expenses, but in a 401(k) the 10% penalty will still be levied if withdrawals are made for these reasons — and a plan may not even permit such withdrawals. Continue reading...
What is Financial Liquidity?
Financial liquidity refers to the ease with which an asset can be converted to cash. Assessing financial liquidity is important on a corporation’s balance sheet, as it serves as an indication of how readily a company can pay off debts or weather a crisis. Continue reading...
How Much Money Should I Set Aside for Emergencies?
Research suggests that more than half of adult Americans do not have sufficient savings needed for emergency purposes. Here’s a startling but true piece of information: most surveys conducted in the past few years indicate that more than half of adult Americans do not have any kind of emergency fund at all, and even fewer have enough to cover three months of living expenses in the event of an unexpected event, like job loss or health emergency. Continue reading...
What is a Financial Advisor?
The term "Financial Advisor" applies to professionals who are compensated for helping to implement investment strategies, but it is a broad and non-specific term. There are thousands of people who are called “Financial Advisors” – but within this category are various professions with different specialties and compensation structures. There are Financial Advisors, Financial Planners, Investment Managers, Registered Investment Advisors (RIAs), and at times even CPAs, insurance agents, and lawyers are included in this umbrella term. Continue reading...
Do I Need a Financial Advisor?
The answer to this question will depend on the preferences and circumstances of each individual. As your assets grow and your financial picture becomes more complex (with unclear tax implications, and interdependent asset classes), then the answer is more likely to be yes. For those investors with a more modest-size portfolio, it may not be necessary. Financial modeling tools and market research publications are widely available, and while they are not one-size-fits-all answers, they can serve investors quite well when used wisely. Investors who choose not to consult an advisor must be willing to educate themselves. Continue reading...
What are the Best Financial Programs to Use?
There are many apps and online programs that investors can use, often for free, to help keep an eye on their holdings and to track their investment portfolio. In addition to the software accessible through your custodian, you might want to look at the programs available through Morningstar, Microsoft Money, and others. Apps on your phone (CNBC, TheStreet, Barron’s, MarketWatch, etc.) can keep you updated on market news related to your stocks, mutual funds, and ETFs. You can also subscribe to market commentaries delivered via email. Continue reading...
Where Do I Find a Financial Advisor?
A financial advisor can be found through an online search, at events, or through the recommendation of friends. Believe it or not, while there are thousands of resources and databases, the best way to find a Financial Advisor is to ask your friends. You will need to determine a few basic criteria when looking for a Financial Advisor, such as geographical location, his or her age bracket, years of experience, frequency and medium of communication, and the amount of fees you are willing to pay. While there are thousands of resources and databases, sometimes the easiest way to find a Financial Advisor is to ask your friends. Continue reading...
What are the Best Internet Sources for Financial Information?
The internet is overflowing with the advice, analysis, and chest-pounding of millions of self-purported gurus and market commentary services. There are plenty of well-informed and trustworthy sources out there, too. There are literally millions of websites providing you with various kinds of financial information, advice, recommendations, opinions, rumors, get-rich-quick schemes, and “facts.” There is a short list of companies that are well-established with a reputation worthy of trust: Morningstar, Moody’s, Fidelity, Schwab, Goldman Sachs, etc. Continue reading...
What is a Good Financial Advisor?
A good financial advisor should care as much about your investments as you do, and be personable and knowledgeable enough to make the relationship worth your time, money, and trust. Choosing a Financial Advisor is a bit like choosing a caretaker for your child: you would want someone who gives you a sense of security, who has professional references or the recommendation of a trusted friend, years of experience, is reliable and honest, can foster growth, and ideally, will care about your child almost as much as you do. Continue reading...
What is a Certified Financial Planner?
A Certified Financial Planner (CFP) is a financial advisor capable of investment and insurance/estate planning. For an advisor that wants the “CFP” designation, they must complete the CFP Board’s initial and ongoing certification requirements, which include extensive exams in the areas of financial planning, taxes, insurance, estate planning and retirement. They must also complete continuing education courses. Continue reading...
Should I Listen to Commentators on Financial News Programs?
It’s easy to become drawn in by the financial media, but it’s important not to let them do your thinking for you. Commentators on the most reputable financial channels will always be sharp-looking, smooth-talking, and quoting a barrage of statistics that makes it seem like you didn’t know anything before you tuned in. Is this an indication of being camera-friendly? Without a doubt. Is it an indication of sound financial advice? Absolutely not. Continue reading...
How many financial advisors do I need?
It’s good to have the opinion of advisors who are knowledgeable in various areas of your planning and portfolio, but for most portfolios this can be reasonably accomplished with one advisor. It’s a good idea to have one Financial Advisor who oversees all of your assets, and if the individual parts of your portfolio are of significant size, you might consider having a specialist in those fields to oversee them. Continue reading...
What is Cash-Flow Financing?
Cash flow financing is an alternative method of securing a loan, in which cash flows are the collateral, not assets. In cash flow financing, also known as cash flow loans, a lending institution will base their decisions regarding the size of the loan and the loan repayment schedule on future expected cash flows of the company. The cash flows serve as collateral instead of assets, as in an asset-backed loan. Continue reading...
What is Accounts Receivable Financing?
Financing companies can step in and take over the accounts receivables of a company who no longer wants to wait to be paid on their receivables. Financing companies, who are sometimes called Factoring Companies or Factors, will pay about 75% of the amount due to companies who want to offload or outsource their Receivables. The factoring company will then take over the task of collections, and will transfer most of the money received back to the original company, after their fees have been deducted from the proceeds. Continue reading...
How often should I call my financial advisor?
While a client should be involved in communication efforts as well, it’s really the advisor that should be reaching out with information and scheduling appointments at least once a year. You should definitely discuss your investment portfolio with your Financial Advisor at least annually. Even if nothing has changed, it’s important to keep communication lines open. On the other hand, doing that more than once a quarter without a pressing need to do so might lead you to make poor decisions based on emotions and shortsightedness, rather than on investment discipline. Continue reading...
Should I pay for financial planning services?
Any professional that you work with for financial planning is going to be compensated for the work they do, but there are different ways they earn their pay. Whether it’s worth it to you is another question. If you have enough knowledge and time on your hands, and your investment portfolio is not very complicated, you may be able to manage it on your own. This can save you some money on financial advisor fees. Continue reading...