You must mean the current debt ceiling debacle.

The meaning of it is: US government is constantly borrowing money (by issuing treasury bonds) and constantly repaying some of the bonds that come to maturity, and also has other obligations it has to meet by law all the time - such as Social Security checks, bonds interest, federal employees' salaries and pensions, etc.

By law, total amount of money that can be borrowed at the same time is capped.

That means, there can be situation where the government needs to borrow money to pay, say, interest on existing bonds, but can not, since the limit is reached.

Such situation is called a default, since the government promised to pay the interest, but is unable to do so.

That does not mean the government has no money at all and will completely collapse or couldn't raise money on the market if it were permitted by law to do so (currently, the market is completely willing to buy the debt issued by US government, and with interest that is not very high, though of course that may change).

It also does not mean the economy ceases to function, dollars cease to have value or

banks instantly go bankrupt.

But if the government breaks its promises to investors, it has various consequences such as raising the costs of borrowing in the future.

Breaking promises to other people - like Social Security recipients - would also look bad and probably hurt many of them.

Going back to your bank account, most probably nothing would happen to the money you store there.

Even if the bank had invested 100% of the money in US treasury bonds (which doesn't really happen)

they still can be sold on the open market, even if with some discount in the event of credit rating downgrade, so most probably your account would not be affected.

As stated in another answer, even if the fallout of all these calamities causes a bank to fail, there's FDIC and if your money is under insured maximums you'll be getting your money back.

But if your bank is one of the big ones, nothing of the sort would happen anyway - as we have seen in the past years, government would do practically anything to not allow any big bank failures.

In principle, a default will have no effect on your bank account.

But if the US's credit rating is downgraded, the knock-on effects might cause some more bank failures, and if the debt ceiling is still in place then the FDIC insurance might not be able to pay out immediately.

I have been through default in Ukraine august 1998.

That was a real nightmare.

The financial system stopped working properly for 1 month, about 30% of businesses went bankrupt because of chain effect, significant inflation and devaluation of currency.

So, it is better to be prepared, because this type of processes result in unpredictable situation.

If you are actually referring to all the political rhetoric and posturing over the debt ceiling issue.

That's a long ways from the US actually defaulting on paying debts.

A lot of government offices might shut down, but I expect anyone holding US debt to be paid off.

(they have the printing presses after all)

If that's what you are referring to, based on the LAST time that the governement had to shut down because they didn't raise the debt ceiling, it won't be a big deal.

Last time, no debt was defaulted on, a bunch of the less essential government offices shut down for a few days, and the stock market did a collective 'meh' over the whole thing.

It was basically a non event.

I've no reason to expect it will be different this time.

(btw, where were all these republican budget cutters hiding when 10 years ago they started with a nearly balanced budget, and ended up blowing up the national debt by about 80% in 8 years time?

(from roughly $6B to $11B)

I wish they'd been screaming about the debt as much then as they are now.

Not that there isn't ample blame to go around, and both sides have not been spending in ways that make a drunken sailor look like the paragon of a fiscal conservative, but to hear nearly any of them tell it, their party had nothing to do with taking us from a balanced budget to the highest burn rate ever while they were in control (with a giant financial crisis through in as pure 'bonus')

money.stackexchange.com/users/3924/Chuck van der Linden

Government default doesn't mean that all US money is immediately worthless.

First, the bondholders will get stiffed.

Following that, interest rates will shoot up (because the US is a bad credit risk at this point) and the government will monetize its ongoing expenses -- i.e., fire up the printing presses.

If you're concerned about not having access to your money, start pulling out a little extra when you get cash at an ATM.

Build it up over time until you have enough currency to weather through

whatever emergency you envision with your bank account.

Question: Will I still be able to withdraw from my bank account if the U.S. defaults?

If the U.S. defaults on its debt, what will happen to my bank money?

In principle, a default will have no effect on your bank. The knock-on effect of a government default might be banks failing, but even if your bank were to default, your money is still insured by the FDIC.

In principle, a default will have no effect on your bank account or your money stored there. Government default doesn't mean that all US money is immediately worthless.  Your money is also insured with FDIC, but if the US's credit rating is downgraded, the knock-on effects might cause more bank failures, and if the debt ceiling is still in place then the FDIC insurance might not be able to pay out immediately. If you're concerned about not having access to your money, start cashing out a little extra whenever you get cash at an ATM.

Even if fallout a bank to fail, there's FDIC and if your money is insured so you'll be getting your money back. But if the US's credit rating is downgraded, the knock-on effects might cause more bank failures, and if the debt ceiling is still in place then the FDIC insurance might not be able to pay out immediately.

If you're concerned about not having access to your money, start pulling out a little extra when you get cash at an ATM.


The power of compounding interest and returns is an amazing thing.

Start educating yourself about investing, and do it -- there are great Q&As on this site, numerous books (I recommend "The Intelligent Investor", tools for small investors (like Sharebuilder.com) and other resources out there to get you started.

Your portfolio doesn't need to include every dime you have either.

But you do need to develop the discipline to save money -- even if that savings is $20 while you're in school.

How you split between cash/deposit account savings and other investment vehicles is a decision that needs to make sense to you.

For most people, investing in the stock market directly is one of the last things to do.

That's not to say you shouldn't, but rather that there are other things to consider as well.

Start with automatic monthly deposits to a liquid account such as savings or money market.

The morale boost you get from seeing the balance grow is nearly impossible to beat.

Following that, paying down any debts such as student loans or credit cards.

Once you've done that, then you should look at company sponsored 401k plans or IRAs.

Sharebuilder offers IRAs holding whichever stock or fund you pick.

Again, automatic monthly deposits are the way to go here.

Good luck, and happy investing :)

There isn't really a clear way to answer this question objectively.

I'd offer my opinion that yes it is a good idea.

You don't need very much money to start (I began investing on $200).

To answer your second question, no there are never any "sure things."

Instead on focusing on making money, focus on learning how the markets work.

Pick a few companies you know (perhaps in an industry you are familiar with) and buy one or two shares at a time.

Watch the prices evolve over time and make note of the changes and always ask the question

"why did it go up/down".

Good luck.

Investing in the stock market early is a good thing.

However, it does have a learning curve, and that curve can, and eventually will, cost you.

One basic rule in investing is that risk and reward are proportional.

The greater the reward, the higher the risk that you either (a) won't get the reward, or (b) lose your money instead.

Given that, don't invest money you can't afford to lose (you mentioned you're on a student budget).

If you want to start with short but sercure investments, try finding a high-interest savings account or CD.

For example, the bank I use has an offer where the first $500 in your account gets ~6% interest - certainly not bad if you only put $500 in the account.

Unfortunately, most banks are offering a pittance for savings rates or CDs.

If you're willing to take more risk, you could certainly put money into the stock market.

Before you do, I would recommend spending some time learning about how the stock market works, it's flows and ebbs, and how stock valuations work.

Don't buy a stock because you hear about it a lot; understand why that stock is being valued as such.

Also consider buying index funds (such as SPY ) which is like a stock but tracks an entire index.

That way if a specific company suddenly drops, you won't be nearly as affected.

On the flip side, if only 1 company goes up, but the market goes down, you'll miss out.

But consider the odds of having picked that 1 company.

Contrary to most other advise given here, I'd recommend (in your situation) not to invest in stock (yet).

There are some 'hidden' cost to investing that will eat your profit and in the end, that's why you are investing.

Banks will charge for buying, selling and maintaining stock as well as for cashing dividends.

Depending on which bank or intermediary these costs will rise.

So, my advise is to start playing with stock creating a virtual portfolio and track that.

Just as duffbeer says, start saving.

Also look at my answer here .

I say, before investing your real capital into the Stock Market, play around on the virtual stock exchange game.

It let's you invest with virtual capital and you can gain experience with the stock market.

I wouldn't start investing in stock until I'm sure I can cover losses though.

If you do intend to invest stocks so early in your career, then you should learn how to read SEC filings (not necessary, but helpful in understanding how investors think) such as 8-K/10-K/10-Q documents so you can predict profitability and growth of companies you invest in.

Once you become a veteran of the stock market game, you probably won't need to read the SEC filings into too much detail - especially if you have a diverse portfolio.

Good Luck.

The one takeaway from this message would probably be:

Stop! and play around on virtual stocks before immersing yourself in the real thing.

You can start investing with any amount.

You can use the ShareBuilder account to purchase "partial" stocks through their automatic investment plan .

Usually brokers don't sell parts of stock, and ShareBuilder is the only one allowing it IMHO using its own tricks.

What they do basically is buy a stock and then divide it internally among several investors who bought it, while each of the investors doesn't really own it directly.

That's perfect for investing small amounts and making first steps in investing.

Question: I'm a University student (with a University student budget) and I was wondering if it is worth my trouble and my money to invest in the stock system? I don't know much about it, but it seems like a good way to make money. Are there any stocks that are "sure things"?  Basically, I want to know if its worth investing now when I only have about 2000$ in personal money after paying for University.

A University student wondering if investing in stocks is a good idea?

Investing in the stock market early is a good thing. You can start with very little money. There are never any completely sure investments, so don't invest money that you can't afford to lose. Start by learning about the stock market and investing a little at a time.

You don't need very much money to start investing in the stock market, but there are never any "sure things."  One basic rule in investing is that risk and reward are proportional.  The greater the reward, the higher the risk that you either (a) won't get the reward, or (b) lose your money instead. Therefore, you shouldn’t invest money you can't afford to lose and probably shouldn’t start investing in stock until you are sure you can cover your losses. You can use the  ShareBuilder  account to purchase "partial" stocks through their  automatic investment plan. Start by picking a few companies you know and buy one or two shares at a time and focus on learning how the markets work. On the other hand, be aware that there are 'hidden' costs to investing, e.g. banks will charge for buying, selling and maintaining stock as well as for cashing dividends.

Investing in the stock market early is a good thing and you don't need very much money to start. Although for most people, investing in the stock market directly is one of the last things to do.  You can also use the  ShareBuilder  account to purchase "partial" stocks through their  automatic investment plan.

There are never any "sure things."  One basic rule in investing is that risk and reward are proportional.  The greater the reward, the higher the risk that you either (a) won't get the reward, or (b) lose your money instead. Therefore, you shouldn’t invest money you can't afford to lose and probably shouldn’t start investing in stock until you are sure you can cover your losses.

You can also consider buying index funds, which are like stocks, but tracks an entire index.

On the other hand, others would not recommend investing in stock in your situation as there are 'hidden' costs to investing, e.g. banks will charge for buying, selling and maintaining stock as well as for cashing dividends.


The most important point to me: If you don't use everything in your fridge before it goes bad, then a full fridge will have costs that a (nearly) empty one doesn't, because you'll be throwing away more food.

If you keep the door closed, then the amount of heat leakage from the fridge is independent of what's in it, so either should be equal; it's (almost) entirely based on the barriers between the inside of the fridge and the outside.

If you open the door, then most of the heat leakage is going to be in the form of convective heat transfer from air leaving the fridge.

At this point a full fridge has an advantage, because more of the air is blocked by the contents of the fridge.

Chad brings up a useful point:

the fridge is likely to work harder to cool things quickly than it is to cool things slowly, even if the heat energy transfer involved is the same.

That said, I think the cooled mass of the fridge itself is so large that it swamps any such effect from the material in the fridge.

MrChrister's point about ice machines requiring heat to dislodge the ice is definitely true, although not all ice machines do things this way.

Keep the door closed to save money.

And if you have an ice machine, turn that off too.

You need to warm up the tray to get ice out of it and heating something inside your freezer

is expensive.

Full fridge uses less.

Mostly due to a sort of 'flywheel effect' from the mass inside the fridge.

frankly I think this is more of a science trivia question, If you are trying to save money on power, then there's a lot of other things you can do, and there's tons of websites out there with power conservation tips.

just google it.

A better question here would be what to do with the money you save ;-)

money.stackexchange.com/users/3924/Chuck van der Linden

Well an empty fridge is a waste of 100% of the cooling.

If you are cooling nothing then all of the energy to cool it is wasted.

Air is not very conductive of Heat.

Its why double paned glass is more effiecent than single pane

the air provides an isulation barrier.

So in a fridge you want to quickly bring the temperature of items placed inside down to a storage temperature.

(Around 34F 1c)

Having a fridge full of already cold items will allow for a much quicker transfer of heat out of the item placed within.

And since the heat is dispersed out through a larger mass the amount of cooling required will be the same but because the mean temperature change over time is less the fridge will have to work harder for less time if the fridge is full.

But in the end the amount of energy required to cool a full freeser will be higher than an empty one as there is more heat to disapate.

But the cost of keeping it cold is spread out among many items.

So if you only have 1 orange per day in your fridge and it costs you 30 a month to run your fridge then your oranges have an additional 1 cost on them.

But if you use 20 things a day and it costs you 60 a month it only costs you .1

extra per item.

In "steady state", the refrigerator only has to pump out the heat that has leaked in from outside.

The amount of heat leaked is related to the difference between interior and exterior temperatures, and the overall insulation quality.

Thus, a refrigerator full of cold food uses the same amount of energy as a refrigerator full of cold air.

In practice, people open the door, take cold food out, put "warm" food in, and the unit may also make ice, dispense cold water, and defrost itself.

Aside from tweaking those uses, (e.g. minimizing time with the door open), a useful trick is to use empty milk cartons or similar containers to fill up unused space.

This helps by reducing the amount of cold air that escapes when the door is opened, and the air in the cartons has low thermal mass, so it cools down rapidly.

When you need the space, you can remove the cartons and set them aside.

Similarly, water-filled cartons may be used as a sort of thermal ballast--leveling out the temperature fluctuations within the refrigerator, particularly if the electric utilities are erratic.

However, they increase the cost of refrigeration when cooling the water in the first place, and when you eventually dump out the water, the expense of cooling it goes down the drain.

Question: To save money on hydro (electricity), I'd like to make optimum use of my refrigerator.For this purpose, is less energy used when the fridge is full? Or when it is empty?

Saving money on electricity: Is a refrigerator more efficient when empty, or full?

A full fridge uses less energy. Make sure you keep the door shut to save money.

Keeping the door closed saves money. If you open the door, most leakage is going to be in the form of convective heat transfer from air leaving the fridge. A full fridge has an advantage, because more of the air is blocked by the contents of the fridge and therefore uses less electricity. An empty fridge is a waste of the cooling, because if you are cooling nothing, then all of the energy to cool it is wasted. A useful trick is to use empty milk cartons or water-filled cartons or similar containers to fill up unused space to level out the temperature fluctuations within the refrigerator, particularly if the electric utilities are erratic.

Keeping the door closed saves money. The amount of heat leakage from the fridge is independent of what's in it, and is mostly based on the barriers between the inside of the fridge and the outside. If you open the door, most of the heat leakage is going to be in the form of convective heat transfer from air leaving the fridge.

Having a fridge full of already cold items will allow for a much quicker transfer of heat out of the item placed within and since the heat is dispersed out through a larger mass the amount of cooling required will be the same, but because the mean temperature change over time is less, the fridge will have to work harder for less time if the fridge is full. In the end the amount of energy required to cool a full fridge will be higher.


You do not have to endorse a check at the bank you have an account with.

By leaving the back of the check blank, and thus failing to endorse it, you automatically endorse the check with a restricted endorsement (similar to "For Deposit Only").

As such, the teller wouldn't have to call you back to the window as alluded to in stoj's answer.

For clarification see Restrictive Indorsement in the Uniform Commercial Code (UCC) § 3-206 Subsection C .

If a bank employee catches it then typically they would call you and ask you to come in to sign the check.

If they can't get a hold of you they would probably mail it back to you.

There is a chance that they won't catch in which case it would just be deposited into your account like any other check.

It may clear, or they (either bank) may call you.

I'm POA on my mother-in-law's account.

When she wrote a check and forgot top sign it, it made it through the first bank, but the bank the check was written from called me.

I was able to fax them an authorization to clear the check, and all was well.

money.stackexchange.com/users/187/JTP - Apologise to Monica

I'm not sure if this necessity to endorse a cheque only applies in the U.S.

In Canada, I have never endorsed a cheque I deposited.

I have never been requested to do so when dealing with a teller, and have never had an issue depositing a cheque via an ATM.

Almost all checks are processed electronically nowadays.

Thus, signatures probably don't matter much unless you use the teller and you want cash instead of a deposit.

However, I would still think that they spot check some checks and if you don't sign then as luck would have it, they'll pick your check to spot check.

This may delay clearing the funds for your use until the matter is taken care of.

The banks in the U.S., when I worked for one, had a stamp that says "Deposit Only To the Within Named Payee" for deposits only if the name on the front of the check matches to the name on the account it's going to....

it's logical

considering it's being deposited to the person the check is made out to.

Funds will most likely not be available for a few days however, under these circumstances.

The reasoning behind endorsing a check is to restrict what other people can do with the check.

If you're the named Payee on the check, then of course you can deposit it without an endorsement.

If you endorse it as "for deposit only", then someone else who gets ahold of it can't deposit it into their own account (because you're the payee, not them).

But if you leave it blank, then they can fake your endorsement (e.g., "payable to Joe Blow") and try to cash it or something.

Question: What if I deposit a check into a Bank of America ATM but forget to endorse it with my signature on the back of the check?

What happens if I deposit a check and forget to endorse it with my signature on the back?

It is not necessary to endorse the check if your name is on it as payee. The bank might call you to come in and sign it.

You do not have to endorse a check at the bank you have an account with. If you are the named Payee on the check, you can deposit it without an endorsement. By leaving the back of the check blank, and thus failing to endorse it, you automatically endorse the check with a restricted endorsement (similar to "For Deposit Only").  There is a chance that the bank won't catch this, in which case it would just be deposited into your account like any other check. If on the other hand, an bank employee catches it, then typically they would call you and ask you to come in to sign the check. This necessity to endorse a cheque may only apply in the U.S.

If a bank employee catches it then typically they would call you and ask you to come in to sign the check.

It may clear, or they (either bank) may call you.

I'm not sure if this necessity to endorse a cheque only applies in the U.S.


When in doubt, call (the card issuer) and ask.

Ask if you overpay your current bill if the overpayment becomes available credit and tell them why you are asking.

It can go either way.

For what it's worth, I made a payment that was well over what was due, and this is a snapshot of my balance.

My credit line is $25,000, but since I overpaid, I can now charge $26,600 if I wish.

This doesn't "answer" the question, as each card issuer has his own rules, and OP needs to ask.

But, it proves that what he proposes is possible.

As the comment below notes, trying to charge $26,600 may (most likely) will not go through, a fraud alert would block it.

But.

I doubt if one does this with a $1000 credit limit card, pushing the available credit to $2000, that it would trip, or trip as fast.

To close this one - personal anecdotes only can suggest what 'might' be.

To actually do this, call the card issuer, they'll be happy to answer the question.

money.stackexchange.com/users/187/JTP - Apologise to Monica

I live in Canada and have a BMO mastercard.

I called them and asked them and their answer was "of course!".

I have put thousands of dollars on my mastercard from my bank account to pay for rare, large purchases.

The money I put on appears differently on my online mastercard account though.

EX: account balance: $6,000.00 CR available credit: $3,000.00

This confused me at first, but when I called and asked them, they said my available credit doesn't change (ie: how much BMO lends me), but when I add my available credit + what I've put on my card

(my account balance, which is CR (meaning my balance has a surplus of money)), then my spending limit is $9,000.00

So, I don't increase my "credit" limit, but I do increase my spending limit.

It just comes down to terminology.

I assume it is like this for other credit cards, but I would recommend calling and asking, just to be on the safe side. Heath

No. You will need to call your credit card issuer and ask for a credit limit increase.

If you plan to pay off your card then I see no problem in this.

You could also ask the seller if they will put $1000 on your card, and $500 in cash.

(Ask for a cash discount too.)

Found some anecdotes!

My card keeps a separate 'cash advance' limit, that's lower than the regular rate.

I believe balance transfers also trigger that limit and (much higher) interest rate.

I have an upcoming purchase that will be just over $2000, and recalled this question.

I tried to pay $2000 more than my balance on my card, and this is the note I got back via email.

Now, I did try to pay it directly to the card issuing bank.

I do

n't (yet) know what they'd do if I made a payment via ACH through my own bank.

So for this type of situation, I'd suggest calling customer service and ask how they handle these.

(Yes, the Joe was edited in.

The rest is factual)

I know this contradicts my older answer, but it serves as a counter-example.

Not all banks handle the same.

money.stackexchange.com/users/187/JTP - Apologise to Monica

I had a macys card which only had $75.00 credit limit...

I accidently paid over the limit so the card had $100.00 in it.

I left it that way for a month..

My credit limit turned into 100..

So I do think its possible to increase your credit limit that way..

I've tried many times requesting for a credit limit increase..

I was denied many times..

The only thing I have is to add money but the tricky thing is that you'll have to add money and spend the whole amount and then pay it off at once for the credit limit to stick.

But since you have great credit assuming because your limit is 1000, you should request for an increase of your credit limit.

Question: I have a credit card with a credit limit of $1000, but I would like to make a purchase of $1500. If I transfer $500 into my credit card account, would that increase my credit limit to $1500?

Can I increase my credit limit by transferring money to my Credit Card account?

You will need to call your card company and ask for an increase to your credit limit.

Not all banks handle this the same. You will need to call your credit card issuer and ask for a credit limit increase.  If you pay money in, you don't increase your "credit" limit, but you do increase your “spending” limit.

S7: So, I don't increase my "credit" limit, but I do increase my spending limit.

S0: No. You will need to call your credit card issuer and ask for a credit limit increase.


The biggest factor is: Are you really going to invest the difference?

It is easy to say you will now, but unless you have a ton of discipline or some form of automatic investing, that is a hard thing to do in practice.

Another consideration is that the 30 year loan will usually cost you more over the life of the loan because of the length of it.

Another option is to take the 30 year loan and pay at the rate you would with a 15.

Then you get the benefit of paying it down quickly, but have the flexibility to only make smaller than usual payments in any month where you have a financial emergency and need the extra cash.

Mortgage rates are at record lows.

The 30 yr fixed is now below 4%, if you are in the 25% bracket and itemize (state income tax, property tax, donations, easy to pass the minimum) it costs you 3% post tax.

This is the rate of long term inflation, effectively making this money free.

You are likely to be able to average a far greater return than this mortgage is costing you.

These rates may last another year or two, but long term, they are an anomaly.

ETFs such as DVY (the Dow high dividend stocks) are yielding over 3.75%, 3.2% after the 15% cap gain tax.

i.e. you get a small positive return, and the potential for capital gains.

If this ETF rises just 3%/yr

it's all profit above your cost of money.

That said, there are those who sleep better with a paid in full house, regardless of the rate.

To that extreme, I've read those who make paying their mortgage a priority ahead of funding their matched 401(k).

While I can guess what the market will return, but can't know what will actual happen, it's foolish to skip one's match.

They reason that the market can crash, I reply the 401(k) has to have a short term fund, money market or T-bill type returns, but a 100% match is a no-brainer.

Using an estimated 4% for the 30 and 3.5% for the 15, the payment on the 15 yr mortgage will be 50% higher, $1430 (15yr) for $200K vs $955 for the 30.

How does this play in your budget?

Do you have an adequate emergency fund?

Are you funding your retirement plan at a decent level?

In the end, there is no right answer, just what's right for you.

Understanding the rest of your financial picture will get you more detailed advice.

Not knowing your situation limits the answers.

Edit

- When I wrote this answer, the DVY was trading at $48.24.

$100,000 invested would have given off $3187/

yr after a 15% dividend tax rate.

At $75/share now, the $100,000 investment would be worth $155,472 and yielding $5597 for a net $4757 after tax.

The choice to go DVY would have been profitable from the start, with room now for a 35% crash before losing any money.

money.stackexchange.com/users/187/JTP - Apologise to Monica

In general, it makes sense to go for the 15 year fixed if you can afford it, as you'll pay down far more principal than if you go for a 30 year.

Take a peek at the amortization tables for two loans, keeping in mind that the average American lives in a house for 7 years.

The best way to look at it is this: If you owned the house outright, would you borrow against it to invest?

(Do you want to leverage your assets?)

I would suspect most people would say no.

Most people do not have the time, skill, or risk tolerance to be able to leverage capital as large as the value of their own home.

Remember that a 15-year fixed has a slightly lower interest rate than a 30-year fixed (difference of 0.5–1%).

If you won't have the discipline to invest every cent left in your pocket, then you are better off with the 15-year and the lower rate.

There is another factor to consider when refinancing is the remaining term left on your loan.

If you have 20 years left, and you re-fi into another 30 year loan that extends the length that you will be paying off the house for another 10 years.

You are probably better off going with 20, or even 15.

If this is a new loan, that is less of an issue, although if you moving and buying a house in a similar price range it is still something to consider.

My goal is to have my house paid off before I retire (hopefully early semi-retirement around 55).

Question: What factors are to be considered when deciding to go with a 15 year fixed vs a 30 years fixed?Pretty simple really; I could make the payments on a 15 year fixed, but at today's low interest rates, am I better off taking the difference and investing it?

What factors are to be considered when deciding to go with a 15 year fixed vs a 30 years fixed?

The 30 year loan will cost you more over the life of the loan. It will also have a slightly lower interest rate.

The 30 year loan will usually cost you more over the life of the loan because of the length of it. In general, it makes more sense to go for the 15 year fixed if you can afford it, as you'll pay down far more in principal than if you go for a 30 year.  A 15-year fixed has a slightly lower interest rate than a 30-year fixed (difference of 0.5–1%). Unless you have the discipline to invest every cent left in your pocket, then you are better off with the 15-year and the lower rate. Another option is to take the 30 year loan and pay at the rate you would with a 15. In any case, there are those who sleep better with a paid in full house, regardless of the rate.

That said, there are those who sleep better with a paid in full house, regardless of the rate.


Think about the implications if the world worked as your question implies that it "should": A $15 share of stock would return you (at least) $15 after 3 months, plus another $15 after 6 months, plus another after 9 and 12 months.

This would have returned to you $60 over the year that you owned it (plus you still own the share).

Only then would the stock be worth buying?

Anything less than $60 would be too little to be worth bothering about for $15?

Such a thing would indeed be worth buying, but you won't find golden-egg laying stocks like that on the stock market.

Why?

Because other people would outbid your measly $15 in order to get this $60-a-year producing stock (in fact, they would bid many hundreds of dollars).

Since other people bid more, you can't find such a deal available.

(Of course, there are the points others have brought up: the earnings per share are yearly, not quarterly, unless otherwise noted.

The earnings may not be sent to you at all, or only a small part, but you would gain much of their value because the company should be worth about that much more by keeping the earnings.)

When you buy a stock, you're really paying for a STREAM of earnings, from now till whenever.

The job of an investor is to figure out how large that stream will be in the future.

But if the stock price were the same as "earnings" (for one year), it would mean that you would get all future earnings for "free.

" That's not likely to happen unless 1) the company is in liquidation," meaning "no future" and 2) it earned ALL of the money it ever earned in the past year, meaning "no past.

" If there are likely to be any earnings in the future, you will have to pay for those future earnings, over and above what was earned in the most recent year.

First, the earnings are per year, not per quarter.

Why would you expect to get a 100% per year return on your money?

The earnings can go one of two ways.

They can be retained, reinvested in the company, or they can be distributed as a dividend.

So, the 'return' on this share is just over 5%, which is competitive with the rate you'd get on fixed investments.

It's higher, in fact, as there's the risk that comes with holding the stock.

money.stackexchange.com/users/187/JTP - Apologise to Monica

Earnings per share are not directly correlated to share price.

NV Energy, the company you cited as an example, is an electric utility.

The growth patterns and characteristics of utilities are well-defined, so generally speaking the value of the stock is driven by the quality of the company's cash flow.

A utility with a good history of dividend increases, a dividend that is appropriate given the company's fiscal condition, (ie.

A dividend that is not more than 80% of earnings) and a good outlook will be priced competitively.

For other types of companies cash flow or even profits do not matter -- the prospects of future earnings matter.

If a growth stock (say Netflix as an example) misses its growth projections for a quarter, the stock value will be punished.

Stock prices are set by supply and demand.

If a particular stock has a high EPS, say, $100, then people will bid more for that stock, driving up its price over one with a $10 EPS.

Your job as an investor is to find stocks with low share prices, but which will give you high earnings (either in dividends, our future share price).

This means finding stocks which you believe the market has priced incorrectly, for whatever reason (as an example, many bank stocks are being punished right now, even if the underlying banks are in good shape financially).

If you want to beat the market indices, be prepared to do a lot of research, because you're trying to outsmart the market as a whole.

Imagine a stock where the share price equals the earnings per share.

You pay say $100 for a share.

In the next year, the company makes $100 per share.

They can pay a $100 dividend, so now you have your money back, and you still own the share.

Next year, they make $100 per share, pay a $100 dividend, so now you have your money back, plus $100 in your pocket, plus you own the share.

Wow.

What an incredible investment.

What you have to remember is you are buying a piece of the company.

Think of it in terms of buying a business.

Just like a business, you need to decide how long you are willing to wait to get paid back for your investment.

Imagine you were trying to sell your lemonade stand.

This year your earnings will be $100, next year will be $110, the year after that $120 and so on.

Would you be willing to sell it for $100?

Question: This may sound obvious to you, but I'm new to all this. Why is the stock market price for a share always higher than the earnings per share? For example, the stock price for a company like  NVE  today is 15.53$ but its EPS is 0.87$. We would have to wait quite a while (like 4 years: ~1$ x 4 quarters x 4 years ) for it to start being worth buying.  Am I missing something?

Why is the stock market price for a share always higher than the earnings per share?

When you buy stock, you are paying for a stream of earnings. As an investor you want to look for stocks with a low share price that will give you high earnings.

Earnings per share are not directly correlated to share price. When you buy stocks, you are really paying for a STREAM of earnings, from now until a time in the future. Stock prices are set by supply and demand. If a particular stock has a high EPS, say, $100, then people will bid more for that stock, driving up its price over one with a $10 EPS.  Your job as an investor is to find stocks with low share prices, but which will give you high earnings (either in dividends, our future share price).


A company's stock value is indicative of the market's collective belief of the future of the company.

The relationship of between price and book value will vary according to the quality of the company, the category of stock, etc.

In extreme cases, say Bank of America, the stock trades at a fraction of book, because BOA's books are a fantasy by most people's reckoning.

Discrepancies between what the book value is reported as and what they'd fetch if sold on the open market.

Legal disputes in court.

The key to evaluating book value is return on equity (ROE).

That's net profit divided by book value.

The "value" of book value is measured by the company's ROE (the higher the better).

If the stock is selling below book value, the company's assets aren't earning enough to satisfy most investors.

Would you buy a CD that was paying, say two percentage points below the going rate for 100 cents on the dollar?

Probably not.

You might be willing to buy it only by paying 2% less per year, say 98 cents on the dollar for a one year CD.

The two cent discount from "book value" is your compensation for a low "interest" rate.

all of these examples are great if you actually believe in fundamentals, but who believes in fundamentals alone any more?

Stock prices are driven by earnings, news, and public perception.

For instance, a pharma company named Eyetech has their new macular degeneration drug approved by the FDA, and yet their stock price plummeted.

Typically when a small pharma company gets a drug approved, it's off to the races.

But, Genetech came out

said their macular degeneration drug was going to be far more effective, and that they were well on track for approval.

A company's book value is the worth of all their assets.

A companies book value is the value that accountants place on their assets, minus the accountants estimates of their liabilities.

The thing is most assets don't have a single well-defined value.

The cost of acquiring an asset can be much greater than the money that could be recovered by liquidating that asset.

Furthermore the money that could be recovered by liquidating an asset may not be known until you actually try to liquidate it.

So in general, if you liquidate a company you won't get the full book value back.

Question: A company's book value is the worth of all their assets. What would cause a stock to trade below book value?

What could cause a stock to trade below book value?

Assets don't have a single well-defined value. If the stock is selling below book value, then the assets are not earning enough to satisfy investors.

A company’s book value is the value that accountants place on their assets, minus the accountants estimates of their liabilities, but most assets don't have a single well-defined value. The relationship of between price and book value will vary according to the quality of the company, the category of stock, etc.  The key to evaluating book value is return on equity (ROE). If stocks are selling below book value, the company's assets aren't earning enough to satisfy most investors. In addition, the cost of acquiring an asset can be much greater than the money that could be recovered by liquidating that asset.

A company’s book value is the value that accountants place on their assets, minus the accountants estimates of their liabilities, but most assets don't have a single well-defined value. The key to evaluating book value is return on equity (ROE).


It is absolutely worth it.

My wife and I have two of these accounts (different banks).

We are required to use our cards 20 times for one bank, and 15 for the other.

We have yet to miss the required transactions in a month (over 15 months of use now), and are actually considering getting a third account.

Between the two of us, we simply have to use our card on average once a day.

Getting gas?

Use your debit card.

Getting stamps?

Use your debit card?Self checkout?

Use your debit card twice.

Eating out?

Use your debit card.

If married, split the bill.

As soon as we reach the minimum, we stop using the debit cards and switch to credit cards to further boost the rewards.

Maybe it's easier for us since we don't have kids and are out a lot, but 12 transactions is really simple to obtain.

We receive ~$100 a month from our two accounts, all for doing something we already do.

What qualifies as a transaction?

Does the bill pay count?

Otherwise, not sure what you'd do to get 12.

If this requires you to actively do something 12x per month, not worth it.

But I can easily set up 12 online bill payments.

money.stackexchange.com/users/187/JTP - Apologise to Monica

Overall I think it sounds like it's worth it.

It's hard to find that high of a rate on a checking account these days.

It looks like you're looking at this bank , and I can see they have a few more requirements that seem a little tedious: Complete at least 12 Debit/Check Card Point-of-Sale purchases (transactions must be made without using your Personal Identification Number, or PIN, to count towards the minimum of 12 and must post and clear your account on or before the last day of the calendar month)

Each calendar month, one direct deposit OR one ACH debit OR pay one bill when using Consumers Credit Union’s free online bill payment system, must post and clear your account on or before the last day of the calendar month Access Online Banking at least once each calendar month If you don't do these things every month, then you lose the great interest rate.

If you can think of an easy way to jump through these hoops and not forget, then it's probably worth it.

For example, if you routinely eat out for lunch or buy a morning coffee, you can use that card to pay for it.

Set yourself a recurring reminder in your calendar or smartphone to remind you to login to the online banking site.

Ultimately, since this is an emergency fund, it's a good idea to keep it nice and liquid in a checking account.

You're not likely going to find many other options that will give you a better (and safe) return and still keep your funds available for when you need them.

In summary, it sounds like a good idea to me so long as you think you can reliably jump through their hoops.

It depends on how much your time is worth.

Those interest rates from that amount of money will not generate anything convenient.

And the effort you make to fulfill the requirements can possibly turn into an overhead cost to getting that $34 a month.

For instance, lets say you make $20/hour

but you spent an hour trying to figure out how their billpay works.

Suddenly not worth it.

And if that interest rate is only granted up to $10k, then the compounding effects will be nullified because they won't even grant that same interest rate once the money starts to grow.

Hope that helps.

$34/month for doing 12 transactions or more.

If your time is worth less than about $2.50 per transaction, then it makes sense.

I'd also check to see what happens if you miss and make only 11 transactions one month.

Do you lose a finger or something?

Or (less dramatically) do they take away your nice rate forever or slap you on the wrist financially?

The fine print taketh away in these deals.

I'd be sure to see what it says.

Question: I am trying to decide what to do with my emergency fund.  Looking around I found a bank giving out a 4.09% APY up to $10K USD.  This will generate approximately $34 USD/Month.   They require that you do 12 transactions per month and at least one online bill payment.    Is anyone else going through the same hassle to obtain a little more interest rate on your emergency fund?  Could anyone through any other point of view that I am missing?

Is it worth the hassle to open a reward checking account for 4.09%?

You probably won't find a better return and still keep your funds available. You need to think of an easy way to jump through these hoops and not forget.

You're not likely going to find many other options that will give you a better (and safe) return and still keep your funds available for when you need them. You could receive money every month for doing something you already do. If you can think of an easy way to jump through these hoops and not forget, then it's probably worth it. Bear in mind, the effort you make to fulfill the requirements can possibly turn into an overhead cost. Ultimately, since this is an emergency fund, it's a good idea to keep it nice and liquid in a checking account.

The effort you make to fulfill the requirements can possibly turn into an overhead cost. Ultimately, since this is an emergency fund, it's a good idea to keep it nice and liquid in a checking account.


It just takes a decent power outage to make it worth having some cash on hand.

It's possible that worse things can happen as well -- things that would shut the financial system down or cause bank runs.

It is an assumption that you'll always be able to (a) access your money at your bank, either via teller transaction or ATM, and (b) pay with a debit card or credit card.

If either (or both) of these abilities are taken away, you'll be glad you have some cash.

The amount that you have on hand (how much you want to hedge against these possibilities) is up to you.

Houses burn down a lot more frequently than banks fail.

Also, I'll bet the odds that FDIC will insure the loss of money in a bank is much higher than the odds of a homeowner's policy believing a huge pile of cash burned up in your house AND

even then your policy probably wouldn't have coverage limits high enough to reimburse you for substantial cash losses.

Oh yeah

, then there is theft, floods,etc.

The biggest danger is that routine inflation will eat up that money faster than the rats in the basement.

Now, having some cash for a small emergency on hand isn't a terrible idea, but using your closet as a personal bank doesn't seem very smart.

Cash can be a lifesaver after a natural disaster.

I was in central Mississippi in 2005 after Katrina.

There were a few things selling for cash only (generators for one).

The banks opened pretty quick (1 day) where I was; south of me it took much longer (days or weeks).

It's quite the contrary.

If there are mass failures of banks, then the money supply will collapse and there will be vicious deflation, increasing the value of money held as cash.

It's only if governments print money to bail the banks out that there's a (small) risk of hyperinflation and the effective collapse of the currency.

(in response to last comment to me)Ok.

I understand now.

Forgive me if I appeared to be splitting hairs.

When it comes to understanding, exact wording is important.

I keep money at home, enough to not be a frequent ATM user, not enough to imply any distrust of the banking system or preparation for Armageddon.

You last comments implies the brochure said 13% keep all their money at home, i.e. have no banking relationship.

A recent poll concluded 25% of people had less than $2500 available if they had an issue, such as the need to repair a car, or furnace.

From that factoid, it wouldn't surprise me that half of those people have no bank acount at all.

Not for lack of trust, but lack of money to deposit.

money.stackexchange.com/users/187/JTP - Apologise to Monica

I think that its ok to keep your "emergency fund" money in cash in your home.

By emergency fund, I mean $1,000-2,500, that doesn't get touched.

There are risks.

You have a risk that the money will be stolen, or be wholly or partially destroyed, or even lost if you stash it somewhere and forget.

You're also not going to earn interest.

So go for it.

But keep your emergency funds in cash -- if you want to buy silver and gold, that's fine...

you need to treat them as commodity investments.

Question: I was in the office of one of the investment companies and on the brochure they said that 13% of people keep money at home.  I wonder if there is a good reason to do that.  even if banks would fall the currency would follow, right?  Is there any good reason to do that? In what scenarios that might be a good idea?

Keeping money at home

Having some cash on hand at home can be a lifesaver in a disaster. However, houses burn down more often than banks fail. You could keep an emergency fund at home in cash.

It is an assumption that you'll always be able to (a) access your money at your bank, either via teller transaction or ATM, and (b) pay with a debit card or credit card.  It just takes a decent power outage to make it worth having some cash on hand. Cash can also be a lifesaver after a natural disaster.  If there are mass failures of banks, then the money supply will collapse and there will be vicious deflation, increasing the value of money held as cash. But there is a risk: Houses burn down a lot more frequently than banks fail. You also have the risk that the money will be stolen, or be wholly or partially destroyed, or even lost if you stash it somewhere and forget, but the biggest danger is that routine inflation will eat up that money faster than the rats in the basement. Also bear in mind that the odds that the FDIC will insure the loss of money in a bank is much higher than the odds of a homeowner's policy believing a huge pile of cash has been burned up in your house. It might be a good idea to keep your "emergency fund" money in cash in your home, but using your closet as a personal bank doesn't seem very smart.

Also, I'll bet the odds that FDIC will insure the loss of money in a bank is much higher than the odds of a homeowner's policy believing a huge pile of cash burned up in your house

I think that its ok to keep your "emergency fund" money in cash in your home, but using your closet as a personal bank doesn't seem very smart.


There actually are legitimate reasons, but they don't apply to most people.

Here are a few that I know of: You're self-employed and have to pay quarterly estimated taxes.

Rather than wait for the refund when you already have to pay 1/4 of next year's taxes at the same time, you just have the IRS apply to refund forward.

(so you're not out the money you owe while waiting for your refund).

You're filing an amended or late return, and so you're already into the next year, and have a similar situation as #1, where your next year's taxes have already come due.

You're planning on declaring bankruptcy, and you're under the Tenth Circuit,

those credits might be safe from creditors For almost any other situation, you're better off taking the money, and using it to pay down debt, or put it somewhere to make interest (although, at the current rates, that might not be very much).

Aside from the fear that you or a loved one will spend it frivolously, I'm hard pressed to come up with another reason.

If you'll owe money in the next tax year, you have the rest of the year to adjust your withholdings and/or make quarterly payments.

As both my fellow PFers state, you're better off getting your money back.

Better still, use it to pay off a high interest debt.

money.stackexchange.com/users/187/JTP - Apologise to Monica

If your refunds are subject to seizure because of certain debt arrears, it makes sense to let the IRS hold onto them until next year.

It is a bad deal.

It saves the government from processing your refund as a check or an ACH deposit, and lets them keep your money -- money that they overwithheld! -- interest-free for another year.

Get it back. :)

If you expect your taxes to be higher next year, it saves you the trouble of sending estimates or changing the withholding levels.

But yes, its basically a free loan you're giving to the government.

If you have non-salary income, you might be required to file 1040ES estimated tax for the next year on a quarterly basis.

You can instead pay some or all in advance from your previous year's refund.

In theory, you lose the interest you might have made by holding that money for a few months.

In practice it might be worth it to avoid needing to send forms and checks every quarter.

For instance if you had a $1000 estimated tax requirement and the alternative was to get 1% taxable savings account interest for six months, you'd make about $3 from holding it for the year.

I would choose to just pay in advance.

If you had a very large estimation, or you could pay off a high-rate debt and get a different effective rate of return, the tradeoff may be different.

The refund may offset your liability for the next year, especially if you are a Schedule "C" filer.

By having your refund applied to the coming year's taxes you are building a 'protection' against a potentially high liability if you were planning to sell a building that was a commercial building and would have Capital Gains.

Or you sold stock at a profit that would also put you in the Capital Gain area.

You won a large sum in a lottery, the refund could cushion a bit of the tax.

In short, if you think you will have a tax liability in the current year then on the tax return you are filing for the year that just past, it may be to your benefit to apply the refund.

If you owe money from a prior year, the refund will not be sent to you so you will not be able to roll it forward.

One specific example is you did qualify in the prior year for the ACA.

If in the year you are currently in-

before you file your taxes-- you realize that you will have to pay at the end of the current year, then assigning your refund will pay part or all of the liability.

Keep in mind that the 'tax' imposed due to ACA is only collected from your refunds.

If you keep having a liability to pay or have no refunds due to you, the liability is not collected from you.

If your refund is so small (like $20 - $25), and it's not worth receiving, it can be put towards next years just to give you a slight edge.

Not a financially sound decision in my humble opinion.

Basically, you are prepaying your taxes and the only reason you want to do that is if you don't have the discipine to save that money for when it is time to pay next year (assuming you will have to).

i filed a chapter 13 and as part of the settlement with bankruptcy trustee i must give them a copy of my 1040 and any tax refunds.

I may use the carryover rule to get around losing money.

Question: Every year I get a refund and the tax software asks me if I'd like to apply some of my refund to next year's taxes.  Is there some benefit I'm not seeing to this?  Because it looks like a bad deal to me.

Why would you elect to apply a refund to next year's tax bill?

It saves you from having to keep the money aside to pay your taxes next year. Otherwise, it just lets them keep your money, interest free, for another year.

If you end up owing money in the next tax year, you will have the rest of the year to adjust your withholdings and/or make quarterly payments. By having your refund applied to the coming year's taxes you are building a 'protection' against a potentially high liability if you were planning to sell a building that was a commercial building and would have Capital Gains for example. It would also be advantageous if you were planning on declaring bankruptcy. It also saves the government from processing your refund as a check or an ACH deposit, and lets them keep your money interest-free for another year.  Basically, you are prepaying your taxes and the only reason you want to do that is if you don't have the discipline to save that money for when it is time to pay next year (assuming you will have to).

S5: You're planning on declaring bankruptcy, and you're under the Tenth Circuit,

S1: It saves the government from processing your refund as a check or an ACH deposit, and lets them keep your money -- money that they overwithheld! -- interest-free for another year.

S0: If you expect your taxes to be higher next year, it saves you the trouble of sending estimates or changing the withholding levels.

Basically, you are prepaying your taxes and the only reason you want to do that is if you don't have the discipline to save that money for when it is time to pay next year (assuming you will have to). Also if you have non-salary income, you might be required to file 1040ES estimated tax for the next year on a quarterly basis. So if you think you will have a tax liability in the current year then on the tax return you are filing for the year that has just ended, it may be to your benefit to apply the refund.

S1: By having your refund applied to the coming year's taxes you are building a 'protection' against a potentially high liability if you were planning to sell a building that was a commercial building and would have Capital Gains.


Start now.

It's a lot easier to save now than it is to start to save later.

Start as early as possible and you will want to kiss your younger self when you get to retirement age.

I know you (and everyone else at that age) thinks that they don't make enough to start saving and leans towards waiting until you get established in your career and start making better money.

Don't put it off.

Save some money out of each paycheck even if it is only $50.

Trust me, as little as you make now, you probably have more disposable income than you will when you make twice as much.

Your lifestyle always seems to keep up with your income and you will likely ALWAYS feel like you don't have money left over to save.

The longer you wait, the more you are going to have to stuff away to make up for that lost time you could have been compounding your returns as shown in this table (assuming 9.4 percent average gain annually, which has been the average return on the stock market from 1926-2010).

I also suggest reading this article when explains it in more detail:

Who Wants to be a millionaire ?

Start as soon as you can and make your saving routine.

Start with whatever you feel comfortable with and be consistent.

Increase that amount with raises, income gains, and whenever you want.

Does you job offer a retirement plan? (401k, SIMPLE, etc)

Does your employer offer a match on contributions?

Typically an employer will match what you put in, up to a certain percentage (e.g. 3%).

So, say you contribute 3% of your paycheck into your retirement plan.

If your employer mathes that, you've effectively contributed 6%.

You've just doubled your money!

The best thing a young professional can do is to contribute to your employer-matched retirement plan, up to the maximum amount they will match.

You should do it immediately.

If not, you are leaving money on the table.

Here's a good strategy: Open up a Roth IRA at a discount-broker, like TD Ameritrade, invest in no-fee ETF's, tracking an Index, with very low expense ratios (look for around .15%)

This way, you won't pay brokers fees whenever you buy shares, and shares are cheap enough to buy casually.

This is a good way to start.

When you learn more about the market, you can check out individual stocks, exploring different market sectors, etc.

But you won't regret starting with a good index fund.

Also, it's easy to know how well you did.

Just listen on the radio or online for how the Dow or S&P did that day/month/year.

Your account will mirror these changes!

My basic rule I tell everyone who will listen is to always live like you're a college student - if you could make it on $20k a year, when you get your first "real" job at $40k (eg), put all the rest into savings to start (401(k), IRA, etc).

Gradually increase your lifestyle expenses after you hit major savings goals (3+ month emergency fund, house down payment, etc).

Any time you get a raise, start by socking it all into your employer's 401(k) or similar.

And repeat the above advice.

Question: I just started out with my first job and I was curious, what is a good time when I should start with my long term saving plans?  Update: Thanks for the advice and I was expecting that answer. So my detailed question would be,  how should I plan it?  How did you guys go about it? Fixed deposits (safe)? Invest in stock markets? Any advice and personal experiences are welcome!

When should I start saving/investing for my retirement?

Start as early as possible and make your savings routine. Save a little money from every paycheck. Contribute to your employer's retirement plan, they will match everything you pay in.

It is easier to save now than later, so start as early as possible. Start a saving routine and save something out of each paycheck. Also contribute to your employer retirement plan, to the maximum amount they will match. Act like you are a college student - live on the minimum amount you need and put all the rest into savings and save any raise you get.

It's easier to save now than later, so start as early as possible.


A simple response is that it's a good political/strategic move.

Ford have effectively said, "We know we still have debt, but we think the long term future is so good we can go back to paying dividends.

" It builds investor confidence and attracts new money.

It can also be seen as a way of Ford indicating that they believe the type of debt (regardless of the amount)

is okay for them to carry.

Ford paid off a tremendous amount of debt prior to reinstating the dividend.

While they still have a sizable amount of debt on the balance sheet, they've been able to refinance this debt to a much more affordable point.

Their free cash flow + cash on the balance could enable them to pay it off in the very near future (12 - 16 months).

Most auto companies have debt on their balance sheet if they choose to offer financial services.

Their overall credit rating (if you really think such things are valid) has also improved.

Generally speaking, I agree its a poor idea to give money back to shareholders if you have high-interest bearing debt.

One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend.

In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders.

Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight.

The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power.

Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends.

While Ford and the other auto makers have a bad few years, some companies want to have a cash dividend.

It appeals to certain investors.

Others have tried to avoid dividends: Microsoft didn't start until ~2003; Apple only from mid 80's until mid 90's.

; Google never has had a cash dividend.

The desire to keep the dividend, or even to increase it, make some companies continue the practice; even when it doesn't make complete sense.

Here is a list of stocks that have INCREASED their dividend for the last 25+ years: http://www.dividend.com/dividend-stocks/25-year-dividend-increasing-stocks.php

Some have had good years,

others bad years, in the last 25+ years.

Having a debt on a balance sheet does impact the capability and willingness of the company to pay dividend.

But more than this it depends on the profitability of the company.

If the company is profitable, there is no reasons why it's share holders should not be rewarded.

If the company does not have debt, lot of money and no profit, normally no or a symbolic dividend is paid.

It is a good move by Fort.

Dividend is the effective way of paying something back to the shareholders.

Question: As an example, Ford Motors recently reinstated its dividend.  It still has  a lot of debt and a high debt-equity ratio .  Its bonds are still rated as junk.  Why would a company like this spend its cash paying dividends?  Wouldn't the long-term value of such a company be improved more by paying down debt?

Why would a company with a bad balance sheet be paying dividends?

They paid off a lot of debt before reinstating the dividend. They have said that they think the future is good, so it makes sense to do it.

Even though Ford has debts, they know that the long term future is so good so they can return to paying dividends. Ford also paid off a lot of debt prior to reinstating the dividend. Some companies might pay dividends due to pressure by influential stockholders and some companies continue the practice of paying dividends even when it doesn't make complete sense.

A company might pay dividends due to pressure by influential stockholders and some companies continue the practice of paying dividends even when it doesn't make complete sense.

Having a debt on a balance sheet does impact the capability and willingness of the company to pay dividend.


While it's not true that you have to use leverage to participate in Forex, the alternative makes it impractical for most people to be able to do so.

You need to be able to put a lot of money into it in order to not trade on leverage.

The fact is, most accounts for "normal" people require leverage because the size of the typical contract is more than the average person can afford to risk (or usually more than the average person has).

Leverage, however, in the Forex market is not like Leverage in the stock or commodities market (well, they're the same thing in theory, but they are executed differently).

In Forex, the broker is the one lending you the money in nearly all cases, and they will cash out your position when your account balance is exhausted.

Thus, there is no risk for them (barring fraud or other illegal issues).

Technically, I don't believe they guarantee that you will not accrue a debt, but I've never heard of anyone having their position cashed out and then owed more money.

They've very good about making sure you can only spend money you've deposited.

To put this another way, if you have $1,000 in your account and you are leveraged to 100,000.

Once your trade drops to $1000 in losses your position is automatically cashed out.

There is no risk to the broker, and no risk to you (other than your $1000)...

So trading without leverage has little value, while traiding with leverage has lots of potential gain and no downsides (other than a faster rate of loss, but if you're worried about that, just trade smaller lots.)

No one is FORCED to use leverage.

But most people do.

Trading companies like it because, the more leverage, the more "business" (and total commissions).

If someone starts with $1 million and leverages it up ten times to ten million, companies would rather do ten million of business than one.

That's a given.

On the other hand, if you're Warren Buffett or Bill Gates, and you say I want to do $1 billion of FX, no leverage, no trading company is going to turn it down.

More often, it's a company like IBM or Exxon Mobil that wants to do FX, no leverage, because they just earned, say $1 billion Euros.

Individuals USUALLY want to use more leverage in order to earn (or lose) more with their capital.

It isn't that the companies force traders, it is more the other way around.

Traders wouldn't trade without margin.

The main reason is liquidity and taking advantage of minor changes in the forex quotes.

It goes down to pips and traders make profit(loss) on movement of pips maybe by 1 or 2 and in some cases in 1/1000 or less of a pip.

So you need to put in a large amount to make a profit when the quotes move up or down.

Supposedly if they have put in all the amount upfront, their trading options are limited.

And the liquidity in the market goes out of the window.

The banks and traders cannot make a profit with the limited amount of money available at their disposal.

So what they would do is borrow from somebody else, so why not the broker itself in this case maybe the forex company, and execute the trades.

So it helps everybody.

Forex companies make their profit from the fees, more the trades done, more the fees and hence more profit.

Traders get to put their fingers in many pies and so their chances of making profits increases.

So everybody is happy.

I recommended Currency Trading For Dummies , in my answer to Layman's guide to getting started with Forex (foreign exchange trading)?

The nature of the contract size points toward only putting up a fraction of the value.

The Euro FX contract size is 125,000 Euro.

If you wish to send the broker US$125K+ to trade this contract, go ahead.

Most people trade it with a few thousand dollars.

money.stackexchange.com/users/187/JTP - Apologise to Monica

Actually, most of the forex traders do not prefer the practice of leveraging.

In forex trading, a contract signed by a common trader is way more than any common man can afford to risk.

It is not a compulsion for the traders to use leveraging yet most of the traders practice it.

The other side of it is completely different.

Trading companies or brokers specifically like it because you turn into a kind of cash cow when your account gets exhausted.

As for trader, most of them don’t practice leveraging.

Question: I heard today that all Forex traders are forced by the Forex companies to use large leverages.  Is this true? I understand this might be good for some companies, but possibly bad for the traders. How come that all Forex companies do this (if true), and no company allows to just trade without leverage?

Are Forex traders forced to use leverage?

It is not compulsory but most traders do it. Trading without leverage has little value. Forex companies make profit from the fees.

No one is forced to use leverage, yet most Traders do so. You do not have to use leverage to participate in Forex, but it is impractical for most people not to do so. Leverage in the Forex market is not like Leverage in the stock or commodities market. Trading without leverage has little value, whilst trading with leverage could have much potential gain and no disadvantages, besides a faster rate of loss. The main reason for using leverage is liquidity and to take advantage of minor changes in forex quotes. Also note that Forex companies make their profit from the fees, therefore the more trade, more fees and more profit.

No one is FORCED to use leverage, yet most Traders do so. You do not have to use leverage to participate in Forex, but it is impractical for most people not to do so.


Please note: I am not a lawyer.

I will assume you are in the United States.

In the event of a discrepancy between the written and numerical amounts on a check or other negotiable instrument , the written amount legally takes precedence over the numerical amount .

The Uniform Commercial Code states: § 3-114.

Contradictory terms of instrument.

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.

As such, the check should be processed as $50.00, not $25.00.

It is technically valid, but the discrepancy could cause it to be rejected by the bank when it is deposited.

I gather you are from the US, as you spell it check whilst in Australia

we spell it

cheque, but I am sure the rules should be the same in Australia as in the US in regargds to your question.

If the word and number amounts are different the bank or financial institution won't accept the check, so you either have to get the person who issued and signed the check to correct one of the amounts so that both amounts are the same and initial the correction, or else get them to send you a new check with both amounts matching and destroy the first check.

You will probably have less troubles though with a brand new check.

This answer is based on my recent experience (past 6 months) depositing a check in the U.S.The check in question was mismatched such that the spelled-out amount was approximately $50 less than the numeric amount.

The check was deposited via an online transaction with a scanned image.

The discrepancy was not caught by the bank until a few days later and I received an email notifying me of the error.

The check was accepted by the bank, however at the amount spelled-out in words.

I spoke personally with a bank representative who informed me that the check was indeed valid as written but the spelled-out amount takes precedent.

This seems like a bizarre protocol to me as it will almost surely result in some party experiencing an unexpected transaction amount.

That being said, and to answer the question, if the spelled-out amount is correct you should let the other party know about the discrepancy, let them know you intend to deposit it that way, and go ahead an deposit it making sure to check (no pun intended) with your bank that they'll accept it as-is and not accuse you of fraud.

A new cheque is suggested.

In many countries, in case of mismatch amount in word is accepted.

In few countries, these cheques are rejected.

Suggest, get a new cheque.

If you have to get the old cheque initialed, you will have to send them the cheque and get it back.

BTW, in India, we too write cheque and not check.

A check or draft must describe a certain sum of money to be paid to the drawer (the person presenting it).

If there is ambiguity about the amount of money to be paid, it is not valid.

In the United States, according to the Uniform Commercial Code, when there is a difference between the words and the numerals, the words are what counts.

Question: I received a check personally written to me from a family member.  The family member that wrote & sent me the check wrote where you write out the amount of what the check is suppose to be for, in words, "Fifty Dollars-------00/00".  Then, in the box above where you write the amount with numbers, they wrote "25.00".  They signed the check and mailed it to me to cash.  What should I do?

What if I received a check with two different amounts written on it (words vs. number)?

The written amount legally takes precedence, however the bank might not accept the check if the amounts are different.

Where there are contradictory terms, typed terms prevail over printed, handwritten over both, and words prevail over numbers. Where there is a discrepancy between written and numerical amounts on a check, the written amount legally takes precedence over the numerical amount. If the word and number amounts differ, the bank or financial institution may not accept the check and you will have to ask the person who issued and signed it to correct one of the amounts so that both are the same and initial the correction, or ask them to send you a new check with both amounts matching.

If the word and number amounts differ, the bank or financial institution may not accept the check and you will have to ask the person who issued and signed the it to correct one of the amounts so that both are the same and initial the correction, or ask them to send you a new check with both amounts matching.


With the big nationwide firms (H&R Block, Jackson Hewitt, etc), they typically guarantee against calculation errors.

If you are audited as a result of their error, they will pay the associated fines and interest, as well as provide you with some sort of representation for the audit.

If you get audited for some other reason, you typically don't get any gratuitous services.

I'm a CPA, and I would charge by the hour for audit defense unless the audit is due to my error.

The way I view

it is that I don't want a client to knowingly give me bad/incomplete information and then expect to hide behind the fact that I signed the return.

I'm here to help clients, not be a fig leaf.

But then again, most "audits"

I get involved in usually just require a letter of explanation to the IRS, usually stating somewhere "correct as originally filed", and they usually end up with no adjustment.

(That's the bonus of doing it right, and not playing the audit lottery.)

Normally no, unless the audit was caused by their errors.

Some companies may offer free audit assistance as part of their package.

H & R Block does this in Canada if you use their tax filing software.

A lot of the big firms and software programs also offer an additional audit "insurance" TurboTax audit defense is a good example.

I would guess that any independent accountant would offer something like that as well.

If they don't offer it, I might consider looking for another accountant if that was important to me.

As an accountant, I have to agree with ExpatTaxCPA.

If we made the error, our office fixes it free, and even covers the penalty at times (not the interest).

If it's due to something the taxpayer failed to give us, or something they misrepresented, it's only fair to charge them for the audit work done.

Question: If I pay an accountant to prepare my taxes, and then I'm audited, is it typical for the accountant to handle the audit as part of the original filing fee, or will he/she charge me by the hour to deal with the audit?  I understand there's probably variance between accounting firms, but I'm wondering what the most common case is?

If I'm audited, will the accountant who prepared my taxes charge me an additional fee to handle the audit?

Some companies offer audit insurance or offer free audit assistance.

Some accountancy firms, especially the larger ones, usually guarantee against calculation errors, so that if you are audited as a result of their error, they will be responsible for any associated fines and interest, and represent you for the audit. If the audit was not due to their error, they would charge by the hour. Some companies and software programs also offer free audit assistance as part of a package or additional insurance to cover an audit.


What is your investing goal?

And what do you mean by investing?

Do you necessarily mean investing in the stock market or are you just looking to grow your money?

Also, will you be able to add to that amount on a regular basis going forward?

If you are just looking for a way to get $100 into the stock market, your best option may be DRIP investing .

(DRIP stands for Dividend Re-Investment Plan.)

The idea is that you buy shares in a company (typically directly from the company) and then the money from the dividends are automatically used to buy additional fractional shares.

Most DRIP plans also allow you to invest additional on a monthly basis (even fractional shares).

The advantages of this approach for you is that many DRIP plans have small upfront requirements.

I just looked up Coca-cola's and they have a $500 minimum, but they will reduce the requirement to $50 if you continue investing $50/month.

The fees for DRIP plans also generally fairly small which is going to be important to you as if you take a traditional broker approach too large a percentage of your money will be going to commissions.

Other stock DRIP plans may have lower monthly requirements, but don't make your decision on which stock to buy based on who has the lowest minimum: you only want a stock that is going to grow in value.

They primary disadvantages of this approach is that you will be investing in a only a single stock (I don't believe that can get started with a mutual fund or ETF with $100), you will be fairly committed to that stock, and you will be taking a long term investing approach.

The Motley Fool investing website also has some information on DRIP plans : http://www.fool.com/DRIPPort/HowToInvestDRIPs.htm .

It's a fairly old article, but I imagine that many of the links still work and the principles still apply If you are looking for a more medium term or balanced investment, I would advise just opening an online savings account.

If you can grow that to $500 or $1,000 you will have more options available to you.

Even though savings accounts don't pay significant interest right now, they can still help you grow your money by helping you segregate your money and make regular deposits into savings.

Sure.

For starters, you can put it in a savings account.

Don't laugh, they used to pay noticeable interest.

You know, back in the olden days.

You could buy an I-bond from Treasury Direct .

They're a government savings bond that pays a specified amount of interest (currently 0%, I believe), plus the amount of the inflation rate (something like 3.5% currently, I believe).

You don't get paid the money -- the I-bond grows in value till you sell it.

You can open a discount brokerage account, and buy 1 or more shares of stock in a company you like.

Discount brokerages generally have a minimum of $500 or so, but will waive that if you set the account up as an IRA.

Scot Trade, for instance.

(An IRA, in case you didn't know, is a type of account that's tax free

but you can't touch it till you turn 59 1/2.

It's meant to help you save for retirement.)

Incidentally, watch out of "small account" fees that some brokerages might charge you.

Generally they're annual or monthly charges they'd charge you to cover their costs on your account -- since they're certainly not going to make it in commissions.

That IRA at Scot Trade is no-fee.

Speaking of commissions, those will be a big chunk of that $100.

It'll be like $7-$10 to buy that stock -- a pretty big bite.

However, many of these discount brokerages also offer some mutual funds for no commission.

Those mutual funds, in turn, have minimums too, but once again if your account's an IRA many will waive the minimum or set it low -- like $100.

You could also start a business.

I ran a project called the Thousand Rand Challenge a few years ago in South Africa where we supported people in starting a business for about $100 each.

Some of them were surprisingly profitable.

You can find a few ideas at the wiki site.

Yes, it is.

Got to start somewhere.

Typically directly through a company itself.

Check out this site that lists a bunch of them and their minimum requirements.

Not many only accept $100 but there are a few.

ie.

ACTIVEnergy Income Fund , CIBC , COMPASS Income Fund ,

Suncor Energy Inc. and a few others.

There are websites out there that let people apply for micro-loans, and let other people fund those loans, and get a percent of the interest back as the loans are paid off.

I have heard of people with spare cash "investing" in these sites.

However, I don't think there is a guarantee of return of your money, and I have heard mixed reviews by people, so I will not link to any such sites here.

A safe investment would be to get a 5-year CD from Ally Bank.

No minimum deposit and no monthly maintenance fees.

1.74% APY at the moment.

I would choose a 5-year CD since the early withdrawal penalty is only 60 days interest, which will be negligible for a $100 investment and increasing the term significantly increases your interest rate.

Regarding other suggestions: Even if you find a way purchase stock commission free, it will probably cost a $5-$10 commission to sell, wiping out probably a year or two of gains.

Also, I-Bonds must be held for a year minimum, which is problematic.

At the end of the day, it's probably not really worth your time to do any of these.

$2 a year or $5 a year, it's still fairly insignificant and your time is surely worth more than that.

Question: Is it feasible to invest a very small amount of money?  If it is, how can I attain it?

How can I invest my $100?

You can open a discount brokerage account and buy a share in a company you like. The money from the dividends could go into adding shares. A savings account can also be a good option for putting money aside.

You could buy shares in a company and use the money from the dividends to buy additional shares, or buy an I-bond from Treasury Direct. Even though the interest is not significant right now, putting money in a savings account can still help grow your money, especially if you make regular deposits. You could also start a business. A 5-year CD from Ally Bank would be a safe option.

Buy shares in a company and use money from the dividends to buy additional shares

Put in a savings account. Even though interest not significant now can still help grow your money, especially if you make regular deposits

A 5-year CD from Ally Bank would be a safe option or put in a savings account.


Using your credit card: May earn points for your credit card rewards program Major credit cards usually have lower APR's than store credit cards, so smaller interest charges if it takes you a while to pay Convenience of all expenses appearing on one bill, easier to pay down Applying for a store credit card: May get one-time discount, or several months of no interest, for opening an account Hassle of applying for a new account Hassle of them trying to sell you credit protection, insurance, etc for additional fees

Hard credit pull will hurt your credit score for a brief time Additional available credit may help your credit score Additional available credit may tempt you to go more into debt Additional account may help or hurt your credit score, depending on your number of accounts and their average age May be a big hassle to close account if desired

In general it is far better to not buy bigger items like a computer until you can pay cash, or pay for it on credit card (to get reward points) and then pay off the card the next month

so you don't pay interest.

Since you have a credit card, I recommend you use it for the purchase.

It gets you two things at the very least: Gets the purchases reported as credit utilization.

If you handle that correctly, you can improve your score

Most card vendors give free extended warranty and return policies that a retailer or manufacturer does not without extra fees.

I buy all my electronics using my cards and not only does that optimize my scores

but I have been able to enjoy painless/better RMAs for defective products just because my AmEx card would have refunded me the money anyways and the retailers knew it (AmEx would have recovered it from them in the end

so it was in their interest to resolve the matter within 30 days)

As far as the money goes, it all comes down to the terms.

What is going to cost you the least?

Look for hidden fees and costs with the store credit.

You will need to read the fine print of the credit agreement

some automatically sign you up for a service that will cost you extra money every month.

Compare what the costs are going to be over the term you will pay it off.

A good calculator to help you figure this out is http://www.amortization-calc.com/ It is designed with larger loans but works for smaller loans too.

Realize that you will have to add fees and finance charges into the total loan amount to get a good comparison.

** Unless you NEED a computer you should wait until you can afford to pay for it.

Charging these types of expenses tends to lead down to a pit of debt that is hard to get out of.

Wanting a computer really bad is not the same as a need.

The downside of the store card is that the "deal" for using the card is typically 6-12 months of "no payments" or "no interest".

In reality, the "deal" is deferred payments/interest.

The problem is, if you miss any payment, or fail to pay the computer off in full, you'll have to pay for the accrued interest -- at a rate typically 25% or higher.

That means if you buy your computer for $1,000, and pay $999 at the end of 12 months, you may have to pay $250 in accrued interest.

These cards can be great deals, just be really careful!

In my experience dealing with credit cards and store cards, you may find that the store card is much more flexible than the credit card in terms of the enforcement of the card agreement.

For instance, I've missed payments on credit cards and only been 1 day late and saw a rate increase, but on a store card when the same thing happened, it was like they didn't even notice.

Granted, this was a 100% store card with no VISA/MC logo on it, and it was through their bank.

This may not be true of all store cards and your experience may differ, but I felt like the store card was more of a tool for acquiring the merchandise and helping the store make a sale than it was for some big bank to make money off of my interest.

With credit cards, you are the product, and the bank makes money purely from interest.

The store, on the other hand, makes money from selling the product, and credit helps increase sales.

My suggestion is to avoid credit altogether as all debt is risk, but if you must use credit, you may have a better experience with the store card.

Of course, don't forget to consider the interest rates, payment plan, and other fees that may apply as they may affect your decision in terms of which to go with.

Question: I am interested on buying a computer (approximate cost USD 600).   I can pay for it either with my credit card, or apply for credit in the computer store.   What are the advantages of using one form of payment over the other?

Is it better to buy a computer on my credit card, or on credit from the computer store?

Since you already have the credit card, you may as well use that. You may earn points and credit cards generally have lower APRs than store credit. Make sure you check the terms of the store credit carefully.

Credit cards have the advantage of sometimes having lower interest charges over a longer period. They also have the convenience of all your expenses showing on one bill. You can also earn points by using your credit card. In the end which to use depends on the terms. With store credit you may get a one-time discount or several months of no interest but you need to look for hidden costs. There is also the hassle of the store trying to sell you credit protection, insurance etc. On the other hand store cards may be more flexible with respect to enforcement of the card agreement. A good calculator to use to help you figure this out is  http://www.amortization-calc.com.

Credit card has the advantage of sometimes having lower interest charges over a longer period. It also has the convenience of all your expenses showing on one bill. You can also earn points by using your credit card.


Many banks offer online payment.

He can add a payee and just type your name and address in.

The bank will mail the check out if they cannot deliver payment electronically.

Edit: Recently I came across this ( Citibank Global Transfer )

, you and your friend should see if your bank offers a similar service.

Citibank requires both of you to have an account with them.

Three ideas: Bank Wires can be done via telephone.

Your partner should talk to someone at his bank about getting his account authorized to do this.

You can setup some sort of business presence in the United States, and then wire money to your Indonesian bank.

Get squared away with PayPal

so your suspension is lifted.

PayPal is probably the best/cheapest way to transfer small/medium amounts of money overseas.

Most bank bill pay services will work for this purpose.

Generally you can pay any person or business that has a valid address.

As an added Paypal will no longer take ~3% of the money.

Not to overkill the theres a few more I can think of right now ING Direct Orange Checking Savings Western Union and monygram essentially same options (variable transaction reate) Dwolla great service for $0.25 per transaction

Have his bank put the money on a gift card or gift cards and have somebody send them to you in the mail.

In fact, if you are going to spend the money online all you need is the numbers and codes from the card to spend the money.

If you have more time have the bank send you a cashiers check or money order.

If wire transfer through your bank does not work then perhaps one of the more popular money transfer services may be what you are looking for such as MoneyGram or Western Union.

Now these rely on a trusted "registered" third party to do the money transfer so you need to make sure that you are working with a legitimate broker.

Each money transfer service has a site that allows you to perform the search on registered parties around your area.

There are certain fees that are sometimes applied due to the amount being transferred.

All of these you will want to do some detailed research on before you make the transfer so that you do not get scammed.

I would suggest doing a lot of research and asking people that you trust to recommend a trusted broker.

I have not personally used the services, but doing a quick search brought many options with different competitive conversion rates as well as fees.

Good luck.

Question: My friend is a paraplegic. He can't go to the bank and wire the money. He used to send money from our partnership via paypal. Now I am banned from paypal. What's the alternative? Google checkout?  I need something that won't limit my account. I'm in Indonesia and my friend is in the US.

How can my friend send $3K to me without using Paypal?

You can wire money by telephone or using a bank's online service. You could also try MoneyGram and Western Union to wire money.

Many banks offer online payment or will offer bank wires via telephone. Banks will also mail a check out if they cannot deliver payment electronically. The bank could also put the money on a gift card and send them to you in the mail. If wire transfer through your bank does not work then use one of the more popular money transfer services such as MoneyGram or Western Union. You could also find a recommend, trusted broker.