If you have an AMEX from another country, you can get an AMEX in the US.

American Express has a separate system that is not as strongly country-dependent as, say, VISA and MasterCard.

Equifax operates in both Canada and the United States, so if you're from Canada you can ask the bank to get your credit score through Equifax.

Not a lot of people know about this

but it can be done, so be persistent if they say it can't.

This may be possible with other credit reporting agencies as well.

If you have proof of income and some cash, most banks will let you get a card.

They let teenagers with no credit get a card!

Secured credit cards are usually not very cost effective for building credit.

Find a local credit union, of medium to large size.

A credit union is like a bank, but operates under slightly different rules, and is non-profit.

Locally based credit unions often have more flexibility when it comes to offering you loans and credit.

If you just need a card that you can use for daily and online purchases, get a debit card from your credit union.

Most CU's will offer a small personal line of credit to protect you from overdraft and overdraft fees when using the debit card.

This will not build much credit, but it can help protect you from accidents when using the debit card.

To have a good credit score, you need a long history of paying loans on-time.

A great way to build credit long term is through cash-secured loans from your local credit union .

You essentially take out a loan against your own money.

You can typically set up automatic payments, so you never miss a payment deadline .

The loan term (length of time to pay it off) should be fairly long, so that more history is built.

One of the best ways to build credit is getting a mortgage & paying it on-time, every month.

With little credit history, you won't get a good interest rate on that mortgage, at first.

Once you have built a better score, refinance the mortgage for a better rate, better terms, etc.

Once again: go to a local credit union , they can help you navigate most of this.

Most banks will give you a credit card if you open an account with sufficient funds.

It especially helps if you have have a job that direct deposits into your account.

I think your options are to get a secured card like you said or possibly get a credit card from a local bank that you can build a relationship with.

Sometimes local banks are more willing to work with you as a person instead of the National Banks that look at you like an account number.

If you have had an American Express card abroad, you can try and get a US Amex on the strength of it, otherwise you're looking at a secured card if you really want a credit card.

That's basically what I did.

Of course the downside with Amex is that it's not accepted everywhere.

I'm not a big fan of people

co-signing for credit cards (or loans for that matter).

I'd also talk to the local credit union(s) and see what they have available.

If the country you came from has an HSBC, you can ask HSBC to use your credit rating from that country to give you an HSBC Mastercard in the US.

This might only be a service for HSBC Premier

but it's worth checking.

I moved from UK to US and got $10,000 credit limit immediately based on my UK credit rating.

My local bank (on which I had had my pay direct-deposited for a while when I applied) rejected me for a credit card, but a major national institution accepted me after an online application.

I had expected the opposite, but this is what happened.

I got a tiny amount of credit at first and had to be careful for a while not to go over the limit, but I immediately set up "automatic full payment" from my checking account and started getting automatic increases regularly.

It only takes a year or so to have a very good score if you use your card and always pay it in full.

This was before the new "consumer protection" laws when it was easier to get credit, so you might have to get a secured card.

It might be a $25 investment or so, but if you ever get a real loan (like a mortgage or even for a car) it's more than worth it.

Even just the cashback you'll get once you upgrade to a real card will pay back those $25 fast.

Also, it might depend on how it's set up, but being an authorised user on someone else's account might not contribute to your history.

If you have family or friends in the US, you can ask them to add you as an additional card holder on their credit card account.

I have done it for a friend, and he was able to obtain his own credit card after a year on my card.

Otherwise, look for a credit union that will be a bit more flexible than a bank.

Question: I recently relocated to USA and have no Credit Score.  Is Secure Credit Card is the only option for me to start building my credit score?   Also please recommend which other credit cards are available for people like me to build credit score

Relocated to USA. How to get credit card without existing credit history / score?

Get a secured card or a credit card from a local bank. If you have an AMEX in another country, then you can get an American one too. If you had an account with HSBC, then you can ask them to use your credit rating from the other country for an account in the US. In any case, most banks will give you a credit card if you open an account with sufficient funds.

There are a range of options available to you, although your chance of success will depend on the bank that you apply with. However, if you have previously had a card with HSBC or American Express, the process may be simpler. Other options could include borowing from a credit union or asking a friend or family member to be an additional cardholder with you.

Some local banks are more likely to give you a credit card than larger institutions.

If you have an American Express card from another country, it will be easier to get one in the USA.

If HSBC operates in your country, you can ask HSBC in the US to use your previous credit history in the country you're from.

You could consider using a US-based friend or family member as an additional card-holder.

Some national institutions actually may be less discerning than local banks.

You could consider borrowing money from a credit union.

Most banks will give you a credit card if you deposit enough money with them.


There are flaws in the risk models regarding no credit status.

They don't take into account the fact that someone who lives in society and responsibly meets their obligations for years is more likely to pay off loans than someone who has no history of paying off their loans.

People with very poor credit will still be able to get some RTO and auto loans, but they pay high interest, and the lender expects collateral property to have value when it's repossessed.

Initial credit is not that difficult to obtain if you plan and put some time into it.

A cell phone contract, utility bills and bank accounts (especially those overdraft "accounts" that you should opt out of) are ways to establish credit without a credit card.

Secured credit cards should be more than sufficient to establish credit within a few years.

A No Credit standing can be verified at annualcreditreport.com , and should be checked whether you believe you have credit or not because of identity theft concerns.

In summary, it's only better to have bad credit if you want to get a small, high interest loan right now.

That's a good way to be even more in debt, and pay lots of money to creditors rather than yourself.

If you are patient, good credit is easier to obtain than repairing really bad credit.

Either way, you won't be able to get a mortgage for a few years.

This sounds counter intuitive to me but this is the best answer I found.

Bad credit is better than no credit.

Bad credit means that you were extended and trusted at one point.

Bad credit score could also mean that you're paid off, but the bad history of the past is still weighing your score down.

Depending on your current credit situation, you'll probably get extended another loan or card...

your rates will stink, but you'll get one.

Also, bad credit shows that the application you filled out is probably not filled with any fraudulant information and they will have some way of being able to get a hold of you.

NO credit is riskier for creditors because they have absolutly NO track record to what the person's character is.

With no credit or anything on your report, how do they know that none of the info on the application is good or bad?

Someone with no credit is going to have the higher interest rate from the beginning.

Higher risk =

higher interest rate...

the same with every investment, the higher risk of loss you possibly face, the higher return you want on the investment.

No credit record equals a higher risk of loss.

Source:

Yahoo answers

From my limited experience, I would say yes.

My justification for that has to do with data I've analyzed from Prosper.com (a p2p lending site).

They grade borrowers on a scale as follows - AA,A,B,C,D,E,HR.

They also used to have a "NC" grade for people with no credit.

The "NC" graded loans were the worst performing group, even worse than "HR" (score below 600 or so).

Assuming other lenders have the same experience, it would be reasonable that they would treat people with no credit as if they have the worst possible credit.

With regard to Plus loans (school loans in the US backed by the government) No credit is better than bad credit.

They require that you do not have an "adverse credit history" How do Federal Student Loans use Credit Scores?

The Stafford, Perkins and PLUS

loansdo not depend on your credit score.

The Stafford and Perkins loans areavailable entirely without regard toyour credit history.

The PLUS loan,however, requires that the borrowernot have an adverse credit history.

(Undergraduate borrowers whose parentsare denied a PLUS loan will beeligible for increased unsubsidizedStafford loan limits.)

An adverse credit history is definedas being more than 90 days late on anydebt or having any Title IV debt(including a debt due to grantoverpayment) within the past fiveyears subjected to defaultdetermination, bankruptcy discharge,foreclosure, repossession, tax lien,wage garnishment, or write-off.

Itdoes not otherwise involve your creditscore.

I think the answer may change based on a person's net worth.

If you have money in the bank, andnever borrow, you could have nocredit but you wouldn't need it.

Inthat case no credit is better thanbad credit.

If you need to borrow then I couldbe convinced a bank would prefer tohave any history, even bad, overnothing at all.

This is because mostbanks let computers make lendingdecisions instead of people.

With nodata to use for the risk assessmenta computer can't provide an answeron whether to make a loan.

In thatcase bad credit may be better thanno credit.

I'm assuming that a lender might make a high risk loan over a loan with unknown risk.

Question: There's a popular saying:   It's better to have bad credit than no  credit.   Is this true?

Is it true that it's better to have bad credit than no credit?

Bad credit is better than no credit if you need a small, high interest loan. A bank would prefer to have even bad history, than nothing at all.

The answer to this question is subjective and will probably depend on your net worth and the type of loan that you're applying for.

The answer to this question is subjective.

The answer to this question may well depend on the type of loan that you are applying for.

The answer to this question may depend on your own net worth.


Consumerist posted a list of how long to keep bills.

In general, you don't need to keep bills around for more than a few months.

The exceptions are: anything that was itemized on your federal or state income taxes.

You want to keep these around for seven years in case of an audit by the IRS brokerage statements buying/selling stocks, bonds, mutual funds, etc.

You need to know how much you bought a stock for when you sell it, to calculate capital gains.

information relating to major renovations to your house.

This can be used to reduce the gain when you sell.

anything relating to a business, again for tax and valuation purposes.

When selling a house, the last years worth of utility bills might be useful, to show potential buyers.

However, I get almost all of my recurring bills electronically now.

They get saved and backed up.

In that case, its easier to just keep everything than to selectively delete stuff.

It takes very little space, is easier to find things than in paper files, and is much less hassle when moving than boxes full of paper.

In normal cases you don't need it beyond 3-6 months.

Beyond this destroy it.

However in certain cases its required to be kept; For example if you need to prove that you are legally occupying a place/property and do not have relevant documents, the utility receipts can play a role in establishing that you were occupying a place and using it.

In case you are not originaly a resident by birth, and your citizenship is at dispute, these records help.

More so if the records are not maintained properly by the utitlity companies themsleves as in most developing countries.

In India, these help for many individual who are occupying goverment properties for decades and then resolution is passed that people staying for past 25 yrs now own it, other become illegal and are evicted.

For such cases, you could keep a history record say one per year, for past 5 years, and then one for every 5 year of a particular month ...

basically in a systematic way.

Other than that, just junk them.

I'd imagine you want to keep the utility bills around to dispute any historical billing errors or anomalies for perhaps 6 months to a year.

Beyond that, you always have the financial records of making the payments -- namely, your bank statements.

So what benefit is there in keeping the paper receipts for utility payments around for longer than that?

I say shred them, with extreme prejudice -- while wearing black Chuck Norris style.

Shred it all.

You might want to keep a record going back at most a year, just in case.

But just in case of what?

What is a good idea is to have an electronic record.

It's a good practice to know how your spending changes over time.

Beyond that, it's just a fire hazard.

The thing is, I know I'm right in the above paragraph, but I'm a hypocrite:

I have years' worth of paper records of all kinds.

I need to get rid of it.

But I have grown attached.

I have trucked this stuff around in move after move.

I have a skill at taking good care of useless things.

I've even thought of hiring somebody to scan it all in for me, so that I can feel safe shredding all this paper without losing any of the data.

But that's insane!

Question: Until now I've kept all my bills, but it's too much paper.  Gas, Water, Electricity, telephone, etc. Why is it a good idea to keep them? For how long should I keep them?

How long should I keep my bills?

Comsumerist has a list of how long to keep bills. In normal cases, you don't need to keep bills beyond 3-6 months.

The answer to this question will be subjective, with some people recommending not keeping any with other people suggesting saving them for up to a year. It's true that they could come in handy for resolving any future disputes with your utility company. Consumerist has published a list as a guide to how long you might want to keep your bills.

Consumerist has shared a guide on how long to keep bills.

The answer will be subjective but some people will recommend keeping bills for a few months up to a year.

Keeping bills can be helpful if you need to resolve a dispute with your utility supplier.

You may want to not bother keeping any paper bills.


I've used ING Direct for several years.

Never had any problems with them.

They were (and maybe still are?)

ahead of the curve on security arrangements.

You don't need to have a brick and mortar bank to transfer money in, but it is faster and easier if you do.

(At least this is true with my mail account -- see next item.)

You don't have to have an online account.

You can bank entirely by mail if you want.

(At least I have one account set up this way, I assume you can still open an account by mail.)

They offer CDs with somewhat mediocre rates that are easy to open and fund online from your savings account.

The website is relatively simple to use.

I have never had any problems with transfers in or out.

When you have to call, you get a human on the phone, quickly.

Someone who speaks American English with reasonable diction.

(At least it used to be this way, I don't think I've called them in over a year.)

I'm a fan of ING, but I do wish they managed to keep their rates on top of the chief competition.

It serves its purpose.

It is online, although you will still need a brick and morter bank to transfer money to it.

It has a decent interest rate, although it hasn't been at the top in a while ( compare rates ).

Takes about a week to get money transferred back from it, which is typical of others as well.

It has a habit of not working with third-party management sites/software (they have actively worked to prevent Mint from working.

I have an account there, but transferred most of the funds in it to an American Express account a while back.

The primary reason was that, unlike ING, AE actively worked with Mint.

I used to be both a customer of theirs, and of NetBank.

When ING bought NetBank, I felt like they handled the transition very poorly from a customer-service standpoint.

I felt like they didn't really value me as a customer, and they didn't do anything to make the transition easy for me.

For that reason, I decided to pull my money out from all of my accounts I had with them, and I have never looked back.

I now get considerably better rates with a high-yield rewards checking account at my local brick & mortar bank.

I am still able to pay bills online, or mail checks into my local bank if I don't want to physically go to a branch or ATM.

They are pretty good.

But for better rates, shop around.

I'd suggest Ally or Alliant Credit Union.

If you're looking for an alternative, HSBC also has an online only savings account that used to be called HSBC Direct, but is now called HSBC Advance.

They offer high interest savings (currently 1.1%) with no minimum balance, CDs and give you an ATM card.

I've been a satisfied customer for a few years.

It's a good saving account from the persepective of usability.

Easy to open, easy to manage, and free at least in Italy.

Anyway be aware that in 2008 you would not probably have been so happy to know that your saving were in bank that was close to go banckrupcy.

On October/19/2008 the Ducth government had to inject 10 billions euro into ING Group to save it from a probable collapse.

At least the CEO

Michel Tilmant was fired, and also 7000 poor employees was cutted off.

After that, it seems they just went on selling themslevs in pieces in order to restructure 2009

: ING closed retail banking in Ukraine 2009: In order to save €1.4 billion, ING announced that they would be cutting about 7,000 employees from their payroll.

The CEO, Michel Tilmant, also resigned.

: ING Group sold all of its ownership stake in ING Canada (Property & Casualty Insurer operating in Canada which was renamed to Intact Insurance Company of Canada).

: ING Group’s Restructuring Plan announced, stating that ING needs to divest ING Direct USA by the end of 2013.

: ING announces that it will move towards a separation of its banking and insurance operations. 2009:

ING secures €7.5bn rights issue and repays

€5bn to the Dutch State.

ING Australia and ING New Zealand

(superannuation, investment and insurance business) are sold to the Australian ANZ Bank.

source: http://en.wikipedia.org/wiki/ING_Group#History

But they also partially repaid the Dutch goverment and now their rating is around A , so it seems to be a safe place to put your saving for now.

That's the one I use.

They've been around a long time.

I've had no problems.

I've used ING and have no complaints with them, but right now if you can work with their restrictions, SmartyPig.com has a better rate than ING and better than any listed on SavingsAccount.com .

Question: I'm looking for a good savings account that's 100% online and provides a good interest rate.  I saw ING Direct (http://home.ingdirect.com/products/products.asp?s=OrangeSavingsAccount) and it this looks decent.  Has anyone used this?  Anything to look out for?

Is ING Direct Orange Savings a decent online savings account?

It serves its purpose and has a decent interest rate as well as being good from a usability perspective. However, Smartypig does have a better rate.

Many people claim to have used this type of savings account and the reviews are generally quite positive. However, people have complained that they didn't feel valued as customers and others would like their rates to be higher.

The reviews of ING are generally very positive.

Many people claim to have used this type of savings account.

Potential complaints about ING involve lower rates than hoped-for and not feeling like a valued customer.


This sounds more like a behavioral than a debit card issue to me TBH.

Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'?

That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know

I've got $x in the savings accounts,

the debit card I carry only lets me spend money from my main bank account.

By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer.

It's a real pain in the rear to get cash only from a bank teller (the end result of cutting the card as suggested).

There is a self control issue here that, like weight loss, should ultimately be addressed for a psychologically healthy lifestyle.

You don't mention a budget here.

A budget is one of the first tools necessary for setting spending limits.

Categorizing your money into inviolable categories, such as: savings (in a savings account separate from your debit/checking account) home auto grocery fun stuff (clothes, toys, electronics etc.) will force you to look at any purchase in context of your other needs and goals.

Note that savings is at the top of the list, supporting the aphorism to, "Pay yourself first."

Make realistic allowances for each budget category, then force yourself to stick to this budget by whatever means necessary.

Cash in several envelopes labeled with each category can physically reinforce your priorities (the debit card is usually left at home for now).

Roll remaining funds from each month over into the next month to cover irregular larger expenses, such as auto repairs.

What sort of investing are we talking about?

If you are just talking about retirement savings, an automatic deduction of just $50 to a Roth IRA account at a discount brokerage

every pay check is a good start.

An emergency fund of 6 months expenses is also common financial advice, and can likewise be built from small automatic deductions.

In defense of wise use of plastic, a debit card can be a great retroactive budgeting tool because it records all spending for you.

It takes a lot more effort to save and enter receipts for cash, and a compulsive spender without a budget is just as likely to run out of money whether or not he uses plastic.

You could keep receipts in the envelope you take the cash out of when you're getting started.

If you are so addicted to spending that you must cut your debit card to enforce your budget, at least consider this a temporary measure to get yourself under control.

When the bank issues you a new card, re-evaluate this decision and the self control measures you've implemented to see if you've grown enough to keep the card.

If your goal is to make it harder for you to use to make impulse purchases then YES.

Having to always have cash for purchases will make you less likely to make impulse purchases you don't really need.

If it is one of those debit cards you use just like a credit card without a PIN, I'd cancel it regardless of whatever you are trying to do with your finances.

They just seem too dangerous to me.

Unlike a credit card, if someone makes fraudulent purchases on a debit card the money is gone from your bank account until you resolve the issue with the issue.

With a credit card, the BANK is out the money until it gets worked out.

My brother once had

his credit card number (not the card) stolen and the criminals emptied his bank account.

Eventually the bank put the money back after an investigation, but it had two really nasty side effects: 1)

Dozens of checks bounced.

The bank refunded the bounced check fees, but not all of the stores would.

2) He had no money in his account until it was resolved.

Luckily in his case they resolved it in a few days, but he was already making preparations to borrow money to pay his rent/bills.

How about just stop buying stuff?

Using cash instead of a debit card lets you see in real time how much cash you have left and where it's going.

It's a lot "harder" to see the cash disappear from your wallet than it is to swipe the plastic

(whether it's a debit or credit card).

Using cash is a way to keep the funds in check and to keep spending within a budget (i.e. you can't spend it if you don't physically have the cash anymore).

Debit cards are the dumbest development ever.

I now have a piece of plastic that allows any yahoo to cause me to bounce my mortgage.

Great.

Throw away the debit card.

Use a credit card and exercise some self control.

Take out a sufficient amount of cash to cover your weekly incidental expenses under $50.

If you want something that costs more than $50, wait a week and use the credit card.

You'll find that using cash at places like the convenience store or gas station will cause you to not spend $3 for a slim jim, lotto ticket, donut or other dumb and unnecessary item.

Question: I have been saving for some time now with the aim of building up enough money to begin investment. But the problem is I keep withdrawing money with my debit card whenever i want to buy something. Would it be better if i just snapped the debit card in two, so that i can concentrate on saving, just as i did to my credit card so long ago?

Debit cards as bad as credit cards?

If you think it will make it harder for you to make impulse purchases, then you should throw away the debit card.

The answer will depend on the type of debit card that you have but you might want to consider getting of rid of your card.


Howard seems open to borrowing and using credit if the terms are right, whereas I am pretty sure Ramsey is strongly in favor of a cash only lifestyle.

Howard focuses on getting a good deal, and if you want or need a thing, to get a good value for it.

Howard repeats that he wants the lowest price, even if that means accepting inferior quality.

Howard however often talks about traveling, electronic gizmos and paying more for electric cars that suit his view of the world.

Howard makes a very concerted effort to make neither political or value judgments, and just offers his opinion and insight to specific questions.

Ramsey's goal seems to be leading a life within your means, and sacrificing and saving money now to be set for the future.

"Beans and rice and rice and beans" is his catch phrase for illustrating that living below your means and never borrowing now will keep you from ever having to borrow.

Better to learn to live without if you can't pay cash.

Ramsey, in my opinion, treats debt like an addiction and wants to 12 step you out of it.

Ramsey:

Don't spend it, spending it on credit is a mistake.

Ramsey has a special cheer for people who are 100% debt free.

Howard: Try not to spend it, debt is usually bad, but there are some circumstances when you can persuade him.

The bottom line is they both preach living frugally, within your means, it is better to save AND earn more and knowledge is king.

You wouldn't hurt yourself to follow either of their advice.

I think you just have to listen to both their shows to get a sense of what makes these guys tick.

I think both guys give good advice.

I think the better question is why each feels the way they do.

Dave Ramsey admits he made some financial mistakes early on, and the the banks took him to the cleaners.

As a result he has made it his mission to teach others in a similar situation, with no mercy toward the banks.

Howard, on the other hand, admits he had enough to retire by 31, with no early financial mistakes.

Ramsey was bankrupt, lost everything, and almost lost his family.

I don't blame the guy for his views.

I think people look at the two and follow the one that most closely resembles their own situations.

I personally like Dave Ramsey's take no prisoners destroy the credit card mentality.

But I think they are both doing good work.

Keep it up.

Dave and Clark are two different individuals.

Dave is a cash only person because he was bankrupted by credit.

He has mentioned that he had no discipline with credit.

Clark on the other hand is great with credit and understands how to use it.

Credit isn't bad, it's the person who is to blame for misuse of credit.

Dave is great for those who have experienced the same financial destruction or those that have no control over credit.

But those are his personal convictions.

I believe a strong individual should be able to have some control over personal decisions.

The borrower is only slave to the lender when he can't repay the lender.

Debt is only a term used when you can't repay the lender.

You should only borrow what you can afford.

Both Dave and Clark are great in what the offer, I have and will continue to listen to both of them.

One major difference I see is Clark giving investment advice here and there and is open to many of the options out there.

Dave seems to not focus too much on investing beyond solid mutual funds and more about helping people on the opposite end of the spectrum and leading them towards a better path.

Clark Howard suggests you go to the library and read his books for free.

Dave Ramsey encourages you to buy multiple items every hour.

Both are helpful, and their differing opinions do compliment each other - and lead you to financial security.

Clark does not advertise anything.

He is a rare and true consumer advocate.

They both bring great ideas and valuable information.

Dave does advertise.

You have to look at Dave's advice with a much more critical eye.

Just listen to his show or go to his website and see the many, many products and services he promotes.

Question: I'm unfamiliar with Clark Howard's teaching but I am familiar with Dave Ramsey's teaching.  How do Clark Howard and Dave Ramsey compare?   Do they cover the same material? Any striking differences between their advice?

How does Clark Howard's advice compare to Dave Ramsey's advice?

They both preach living frugally but Howard seems open to borrowing if the terms are right, while Ramsey favors a cash only lifestyle.

Howard and Ramsey are two different people, but they both teach people to live within their means and achieve financial stability. The main difference appears to be that Howard is open to the use of credit whereas Ramsey is firmly against it.

Howard is considered to be open to using credit whereas Ramsey is firmly against it.

Howard and Ramsey are two different people.

Both oth them teach people to live within their means and achieve financial stability.


I actually had to go to the bank today

and so I decided to ask.

The answer I was given is that a check is a legal document (a promise to pay).

In order to get your money from the bank, you need to sign the check over to them.

By endorsing the check you are attesting to the fact that you have transferred said document to them

and they can draw on that account.

The best reason for endorsing a check is in case it is lost.

If the back is blank, a crooked finder could simply write "pay to the order of " on it and deposit it in his own account.

You do not need a signature for the endorsement.

The safest way to endorse a check is to write "FOR DEPOSIT ONLY" followed by an account number, in which case the signature is not needed.

most businesses make up rubber stamps with this and stamp it the minute they receive a check.

That way it has no value to anyone else.

Depositing checks is increasingly going the way of the dodo.

Many businesses today use check truncation - the business scans the check in, sends the digital image to the bank, and stores the check.

I was surprised that Chase already has an applet for iPhones that you can use to deposit a check by taking a picture of it!

In my experience, you don't need to endorse a check with a signature to deposit it into your account.

You do if you are exchanging the check for cash.

Businesses usually have a stamp with their account number on them.

Once stamped, those checks are only able to be deposited into that account.

Individuals can do the same.

I have had issues depositing insurance and government checks in the past that had both my and my wife's name on them.

Both of us had to endorse the check to be able to deposit them.

I think this was some kind of fraud prevention scheme, so that later one of us couldn't claim they didn't know anything about the check.

Paper trail of who did the deposit.

Less significant for a personal account, but a bigger deal for accounts that are used by multiple people (e.g. a corporate checking account).

So the bank can (theoretically) compare that signature to the ID you provide, showing that the names and signatures match and that you are the person to whom the check was written.

I believe the banks are protecting themselves when they "require" your endorsement.

Years ago.

they used to ask for your endorsement, and not require it.

If you endorse the check, it legally authorizes them to debit your account, if the check is later returned for non-sufficient funds (NSF).

It mostly protects the bank, and not the customer.

When the check is deposited, the bank verifies the signature in the check matches your signature in file.

Question: Why do you need to sign a check on the back when you deposit it to your account?

What is the purpose of endorsing a check?

You endorse the check in case it gets lost, and to show that you endorse the cashing of the check.

Whilst it is not clear that endorsing a check is necessary, there are number of reasons why it might be useful. It can help set a papertrail for the bank's records and also allows them to check that you are the person that the check was made out to. This being said, you will need to endorse a check if you are exchanging it for cash.

Endorsing a check may come in handy if the check is lost.

It is doubtful that endorsing a check is necessary.

Endorsing a check helps to establish a papertrail of who made the deposit.

Endorsing a check may just be a safeguard for the bank.

Endorsing a check allows the bank to check that you are the person who the check was made out to.

Endorsing a check is necessary if you are exchanging the check for cash.


I believe that article provides some good reasons, though it may be a bit light on technical details and there are likely other reasons a company would do it.

Apparently much of its cash is held overseas, which would pare down the cash pile if brought back into the U.S. With their high credit rating (and probably due to current market conditions) a bond sale would be relatively cheap As long as they do not take on too much debt, it does not matter that debt is used to finance a buyback and/or dividend payments.

The shares are bought back -- bringing down the number of shares on the market, thus boosting share price -- and/or shareholders are payed their dividends.

So, if they can finance for less then they would lose to taxes by bringing the money home and they do not take on too much debt, this will likely work just fine and increase share holder value.

Hopefully, someone else can provide some other reasonable scenarios.

The bottom line is that it does not matter how they finance the share buybacks and/or dividend payments as long as they do not shoot themselves in the foot while doing it.

It's a tax shelter.

Foreign affiliates hold most of Microsoft's cash and investments.

The cost of borrowing is much cheaper than repatriating the money and paying taxes.

Those bonds are selling at rates similar to US Treasury Debt.

Also, many people and organizations with lots of assets still borrow money for day to day expenses.

Why?

You tend to make a better return on investments which are committed for a number of years, and the timing of income from those investments may not coincide with your expenses.

There is a substantial likelihood over the next several years that the US Dollar will experience inflation .

(You may have heard terms like "Quantitative Easing.")

With inflation, the value of each dollar you have will go down.

This also means that the value of each dollar you owe will go down as well.

So, taking out a loan / issuing a bond at a very good rate, converting it into an asset that's a better way to store value (possibly including stock in a big stable company like MSFT) and then watching inflation reduce the (real) value of the loan faster than the interest piles up... that's like getting free money.

Combine that with the tax-shelter games alluded to by everyone else, and it starts to look like a very profitable endeavour.

When I play Railroad Tycoon III, I often send my company deep into debt to get cash on hand to buy back shares, effectively increasing my ownership of the company as an absolute percentage.

Then I issue massive dividends until my company goes bankrupt, and start a new company.

It's a way to shuttle money borrowed against a company's assets into my personal bank account at no risk to me.

In the MSFT case, maybe they think there will be inflation and this is a hedge against holding so many dollars in cash already.

If they can borrow a couple billion in 2010 dollars and pay it back in 2015 dollars, they're probably going to end up ahead if all they do is buy back shares.

Paying dividends with the money seems stupid vs. buying back shares - they're just driving up income taxes for investors.

My answer is not specific, or even maybe applicable, to Microsoft.

Companies don't want to cut dividends.

So they have a fixed expense, but the cashflow that funds it might be quite lumpy, or cyclical, depending on the industry.

Another, more general, issue is that taking on debt to retire shares is a capital allocation decision.

A company needs capital to operate.

This is why they went public in the first place, to raise capital.

Debt is a cheaper form of capital than equity.

Equity holders are last in line in a bankruptcy.

Bondholders are at the front of the line.

To compensate for this, equity holders require a larger return -- often called a hurdle rate.

So why doesn't a company just use cheaper equity, and no debt?

Some do.

But consider that equity holders participate in the earnings, where bondholders just get the interest, nothing more.

And because lenders don't participate in the potential upside, they introduce conditions (debt covenants) to help control their downside exposure.

For a company, it's a balance, very much the same as personal finances.

A reasonable amount of debt provides low-cost capital, which can be used to produce greater returns.

But too much debt, and the covenants are breached, the debt is called due immediately, there's no cash to cover, and wham!

bankruptcy.

A useful measure, if a bit difficult to calculate, is a company's cost of capital, and the return on that capital.

Cost of capital is a blended number taking both equity and debt into account.

Good companies earn a return that is greater than their cost of capital.

Seems obvious, but many companies don't succeed at this.

In cases where this is persistent, the best move for shareholders would be for the company to dissolve and return all the capital.

Unfortunately, as in the Railroad Tycoon example above, managers' incentives aren't always well aligned with shareholders, and they allocate capital in ways advantageous to themselves, and not the company.

Businesses have bond ratings just like people have credit ratings.

It has become common for businesses to issue low rate bonds to show that they are strong, and leave the door open for further borrowing if they see an opportunity, such as an acquisition.

One of the reasons Microsoft might want to build a credit reputation, is that people become familiar with their bonds and will purchase at lower rates when they want to borrow larger amounts of money, rather than assuming they are having financial issues which would lead them to demand higher rates.

Question: For example, why did Microsoft take on debt to create shareholder value?  http://www.bloomberg.com/news/2010-09-13/microsoft-is-said-to-plan-debt-sale-to-pay-for-dividends-buy-back-shares.html

Why would a company sell debt in order to buy back shares and/or pay dividends?

It brings down the number of shares on the market and boosts their value. It's a tax shelter as borrowing is cheaper that repatriating the money and paxing tax on it.

The answer to this question will be speculative, however, there are a number of reasons why this may have happened. Firstly, this operation could be more tax efficient for the company. Secondly, debt is a cheaper form of capital than equity. And finally, this may be seen as a good way to make money if inflation is likely to occur over the next few years.

By buying back shares, the company is boosting the share price.

This operation may be more tax efficient for the company.

The company may be expecting inflation and are selling debt in order to pay it back in the future and thus make a profit.

Debt is a cheaper form of capital than equity.


You can choose to pay your mortgage instead of another bill, or vice versa.

Your net will change from month to month while your gross is relatively static.

I can make a bunch of promises to my load officer about my expenses, but it is very difficult to verify.

Moreover, it is pretty hard to give your net income and plan for emergencies.

So for the sake of reliability, verifiability, and general ease a lender will look at your gross.

YOU should definitely look at your net when deciding if you can afford a loan.

The percentage of gross income is a quick and easy way to arrive at the rough ballpark figure of the mortgage one can afford.

The net income is something which one does not know offhand.

If you want to seriously evaluate then most of the standard mortgage calculators will ask you to enter your gross income, your other liabilities like Auto Loan, Student Loan, personal Loan, Card Payments, Any other regular payments like Child Support etc.

After factoring all these one arrives at the actual mortgage one can afford.

As is evident, the above requires a good amount of calculation and hence the preffered method becomes on the basis of gross income.

People typically present themselves to be as wealthy as possible to banks and as poor as possible to the government at tax time.

Gross income is really the most reliable number for most folks.

Your and your employer are required by law to report an accurate gross income figure annually.

Anything else is totally situational.

All they are doing anyway is computing your total debt-to-income ratio and mortgage-to-income ratio.

The government agencies that buy mortgages, the big bank that buys the mortgage or the self-underwriting bank has differing standards for different products.

I would ignore the bank completely when they use gross income.

Decide, based upon your current living situation, what your MAX limit on a monthly payment is.

Then from that determine the size and cost of the house you can buy.

My husband and I decided on a $2000 monthly payment max, but also agreed $1500 was more reasonable.

When using those numbers in the calculators it is way less than when using gross income.

When we used our gross pay the calculators all said we could afford double what we were looking for.

Since they don't know what our take home pay is (after all the deductions including 401k, healthcare, etc), the estimates on gross income are way higher than what we can comfortably afford.

Set a budget based on your current living situation and what you want your future to look like.

Do you want to scrimp and coupon clip or would you rather live comfortably in a smaller home?

Do the online calculators based on take home pay and on gross pay to get a sense of the range you could be looking at.

Gross income is used because there are a lot of variables inherent in the calculation of a "net income", including a lot of things under your direct control that you could use to game the system.

"Net Income", as others have inferred, is a very flexible term.

For the average individual, the definition that would most easily come to mind is likely post-deduction, post-tax earnings; "take-home pay".

It sounds reasonable, too, as the amount you take home each month can be easily demonstrated with your two most recent pay stubs (which you need to bring in anyway to verify gross earnings).

However, even that simplistic definition is fraught with possibility.

You have the ability to modify your pre-tax deductions, such as for retirement or healthcare, and that in turn affects your taxes and thus your net take-home pay.

To assume that you won't do that is foolish for the loan officer.

Other definitions of "net income", such as, in the case of shopping for a house, "disposable income plus current rent", are the result of even longer lists of deductions from gross pay.

Many are also dependent on your current home; your electric bill is a function of the size, location and construction of your current home, all of which will change as soon as you move in.

Your other bills, such as telecom (TV/phone/internet) are also more or less location-dependent, as even within a single city or metro area, your choice of services and service providers is dictated by the home's physical location.

You may have to pay through the nose right now because your current home isn't serviced by anyone's fiber-optic network, while the home you're moving into could be in a hotly-contested area with access to multiple fiber-optic trunks.

So, to simplify all this, mortgage companies simply ask for gross income, then apply a metric that makes relatively conservative assumptions about your spending habits to arrive at a final amount.

The upside is simplicity, the downside being that two people both making $60,000/

yr may have two completely different financial pictures behind that single number.

Cynical answer: Real Estate agents make money on commission from sale of houses, so their compensation is tied to the home price.

Banks make money off loans, so it is in their interest to make larger loans (as long as the loan gets paid).

So their is a tension at the bank between selling a larger mortgage, and ensuring that their customer can pay the mortgage.

Gross income is easier to check, and the taxes at a given income are fairly predictable.

And banks realized that people can change their medical and retirement deductions.

Question: Whenever I see someone ask how to calculate how big a mortgage he can afford, the answer almost always comes back as a percentage of  gross  income.   Why use gross income as the baseline?  Why not net income?

Why do mortgage affordability recommendations use gross income?

Gross income is constant whereas net income is flexible. There are a lot of variables inherent in the calculation of a net income.

Gross income is used because it is a more stable figure than Net Income, which can be less predictable. As a consumer, however, you should be more concerned with Net Income.

Gross income is fairly static and therefore the simplest figure to use.

Net Income is less stable and difficult to know off-hand.

As an individual, you should be more concenred with Net Income.


I quit diligently reconciling monthly statements some years before everything was online, when I realized that for years before that, every time I thought I found a mistake, it was always my own error.

I was spending a fair amount of time (over the years) doing something that wasn't helping me.

So I quit.

That said, I do look at the statements and/or check the transactions on a regular basis

(I now use email notifications of automatic deposits as the trigger, and then look over withdrawals, too) to make sure everything looks appropriate.

I'm less concerned about a bank error than I am about identity or account theft.

While it's wise, easier and safer to check your transactions online a few times a month, I opt to receive and file paper statements as a hard copy back up of account history.

Any reconciliation I perform is a quick glance to make sure the numbers sound right.

It's probably a small waste of time and space, but it settles some of my paranoia (due to my training as a computer engineer) about failure of electronic banking systems.

If someone tampers with bank records or a SAN explodes and wipes out a bunch of account data, then I will have years worth of paper statements to back up my numbers.

Having years worth of statements printed on the banks stationary will have better credibility in court than a .pdf or printout thereof that could have been doctored, in case I ever needed to take my bank to court.

A little piece of mind for the price of a letter opener, a square foot file box and a couple of minutes a month.

Account statements and the account information provided by your personal finance software should be coming from the same source, namely your bank's internal accounting records.

So in theory one is just as good as the other.

That being said, an account statement is a snapshot of your account on the date the statement was created, while synchronizations with your personal finance application is dynamically generated upon request (usually once a day or upon login).

So what are the implications of this?

Your account statement will not show transactions that may have taken place during that period but weren't posted until after the period ended (common with credit card transactions and checks).

Instead they'd appear on the next statement.

Because electronic account synchronizations are more frequent and not limited to a specific time period those transactions will show up shortly after they are posted.

So it is far easier to keep track of your accounts electronically.

Every personal finance software I've ever used supports manual entries so what I like to do is on a daily basis I manually enter any transaction which wasn't posted automatically.

This usually only takes a few minutes each evening.

Then when the transaction eventually shows up it's usually reconciled with my manually entered one automatically.

Aside from finding (infrequent) bank errors this has the benefit of keeping me aware of how much I'm spending and how much I have left.

I've also caught a number of cashier errors this way

(noticing I was double-charged for an item while entering the receipt total) and its the best defense against fraud and identity theft I can think of.

If you're looking at your accounts on a daily basis you're far more likely to notice an unusual transaction than any monitoring service.

My wife and I are paid every two weeks.

I go on line

see the exact deposit, add it to register, and see what checks cleared.

In effect, I reconcile twice per month, and the statement can't be different that what their system tells me.

Since the online site shows "last statement balance"

I feel there's no need to bother with the paper, nothing left to reconcile.

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

Banks make mistakes.

Reconciling your account with your bank statement is the way to catch the errors.

I don't use debit cards, but if I did I would review that portion of the statement.

I look at my credit card statements pretty closely, and probably catch one or two mistakes or things I want to question every year.

Sounds like you are reconciling more than once a month.

I like to say I glance at all my statements, but these days I just look at the final balance and call it good.

If a transaction shows up by mistake, I would find it in a couple of days because of

how often I update my Quicken and Mint.com

Question: I used to be very diligent in reconciling my accounts with the monthly statement when it came in the mail. Now that I don't receive paper statements, I rarely even look at the statement or bother downloading it from the bank website.  I track my income and spending with Mint and Quicken, and download and categorize my transactions once per week. I am paying attention to my accounts, just not to the statements provided by the bank.  Is it worth the time for me to spend reconciling my statements?

Is it worth it to reconcile my checking/savings accounts every month?

Reconciling the account with the statement is the best way to catch errors.

The answer to this question is subjective, with some people saying this is no longer necessary whilst others see it as a sensible way to catch potential bank errors.


In many states banks are required to pay interest on your escrow according to this article .

I know i am getting interest paid.

Once your mortgage is setup with an escrow there is no way to get rid of it (only to refinance).

Also nowadays many banks require you to escrow taxes and insurance.

It's their way to make sure you don't default on your taxes and don't cancel insurance on "their" property.

My bank did fine the first couple years of handling my escrow, then out of the blue, totally messed it up and cost me a lot of time straightening it all out with them as well as straightening out with my taxing authority.

I told them to send me the balance of the escrow and cancel it, that I would handle it from then on and they did.

There was a qualification that I met

, I just can't remember what that was.

I too have a lot of equity and was never late on a payment.

I also manage it via direct deposit from my paychecks into interest bearing accounts.

My mortgage started out with an escrow, but it seemed like they were mismanaging it.

They often over-collected it and locked up my money unnecessarily or under-collected and had to catch up later to pay the tax bill.

Despite what Vitalik said, I told them I would pay my own taxes and insurance and to stop the escrow and they did without argument.

Keep in mind, you should only do this if you are good about saving money.

The banks know that many people aren't and will have trouble at the end of the year when a multi-thousand dollar tax or insurance bill comes due, hence the reason they try to get you to do the escrow.

In my case, I just had the estimated tax/escrow amount automatically deposited from my paycheck into a special interest bearing savings account that I manage.

The terms of most mortgages usually include the requirement for tax escrow.

Some banks will let you handle your own taxes once you loan to value drops below 50%.It's annoying that you lose the use of your own funds, I agree.

It can't hurt to write a note to the bank and see it they'll waive escrow.

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

I simply wrote my bank an email and said, "I want to handle my own escrow".

They said, "fine" and even let me set up a third account called "escrow" (savings and checking being the other two) that I just transfer money into whenever I want.

But, I don't actually know what their requirements are for doing that.

I have a ton of equity in the house, and I never missed a payment, AND I have direct deposit at that institution.

So, it can be done.

The escrow rules used to be A LOT more lax.

The banks used to screw people pretty hard.

For example - after paying off a loan banks would drag their feet about sending back the money.

This does not account for much on one loan, but if you multiply that by all the loans they service

it is a significant amount.

There are not strict rules governing the amount of money that can be held in escrow and how quickly the money has to be returned after a loan payoff.

Question: I notice on a mortgage payment that a portion of every payment goes towards an escrow account (which goes towards homeowner insurance and property taxes).  In the meantime, there seems to be a significant amount of money sitting in the escrow account that doesn't reduce payments or earn interest (that I know of).  Is there a better way to handle the money going into the mortgage escrow account?

Mortgage Escrow Balance - is there a better way?

You can ask the bank to waive the escrow so you pay the taxes and insurance yourself.

It is possible that there is no way of exiting your current arrangements without refinancing. However, it is also possible that you could write to your bank and ask to handle your own Escrow arrangements. They may well accept your proposal.

It is possible that there is no way to change the current arrangement without refinancing.

It is generally considered that if you write to your bank and ask to handle your own Escrow arrangements, they will let you do so.


Simply put, the interest you're paying on your loans is eating into any gains you have in the stock market.

So, figure out how much you're paying in interest and consider the feasibility of paying off some of the loan.

Also figure in if you would be selling the stock at a profit or a loss.

Generally speaking, a home loan is typically long-term, with a high principal.

I believe the consensus is that it is typically not worth paying down extra on it.

A car loan, though, is much shorter term, with a lower principal.

It may be worth it to pay that down.

I would certainly consider paying down the loan with 10% interest, even without running any numbers.

What about doing this without selling stock?

The reason I suggest that is that you should not sell the stock unless you truly need the money or for some material reason(s) related to the company, the market, etc.

(Of course, one other reason would be to cut losses.)

Unless I was looking to sell some stock anyway, I would try other ways to come up with the money to pay down the highest interest loan, at least.

If you are thinking of selling stock to pay down debt, definitely run the numbers.

Put yourself in this position - if you had no debts and no investments, would you borrow money at those rates to invest in the stock market?

If no, then pay off the debts.

If yes, then keep them.

I'd get rid of the debt with the stock money.

Stocks are at a high for the year.

Get out while the getting's good and get your financial house in order.

Obviously, you should not buy stock when the option is to pay down your debt.

However, your question is different.

Should you sell to reduce debt.

That really depends on your personal situation.

If you were planning to sell the stock anyway, go ahead and reduce your loans.

Check out how the stock is doing and what the perspectives are.

If the stock looks like it's going down, sell... Do you have savings?

Unless you do, I should advise to sell the stock at any rate.

If you do have savings, are they earning you more (in percentage) than your loans?

If they are, keep them...

Depends from your general overall situation, but for what we know i would say: Definetely get rid of the high interest loan (10%)

since average stocks return is not as high.

Not sell shares for the car loan, the market is not so high (the s&p500 is just above the 200dd moing average).

But if you have extra savings you should emduce this debt, since average savings rate is lower than 4% Keep the student loan for the moment.

I'm surprised no one has picked up on this, but the student loan is an exception to the rule.

It's inflation bound (for now), you only have to pay it back as a percentage of your salary if you earn over £15k (11% on any amount over that I believe)

, you don't have to pay it if you lose your job, and it doesn't affect your ability to get credit (except that your repayments will be taken into account).

My advice, which is slightly different to the above, is: if you have any shares that have lost more than 10% since you bought them and aren't currently recovering, sell them and pay off your debts with those.

The rest is down to you - are they making more than 10% a year?

If they are, don't sell them.

If your dividends are covering your payments, carry on as you are.

Otherwise it's down to you.

Question: The question is obvious.  I have debt, not in excess, but I have.  And I have some stocks in the market.  Should I use the stock money to pay my debt, and be debt free.  The debt is not high interest.  Just a few loans: car loan 4%, student loan 2.75%, misc loan 10% (low balance)  Ideas?

Should I sell my stocks to reduce my debt?

Work out whether it would be profitable to sell the stock in relation to how much interest you are paying. You should not sell the stock unless your really need the money.

The answer to this question will depend on your personal situation and the outlook for your stocks. Some people would not recommend selling stocks unless you truly need the funds. Other people would say that it would be worth it to be debt-free. In any case, if you are planning on selling your stocks anyway, you might want to consider paying off your debts as an option.

You may want to consider this as an option if you were planning on selling the stock anyway.

The answer will depend on your personal situation and what the outlook is for your stocks.

Some people would say this is worth it to be debt-free.

Some people would try to avoid selling stocks unless you truly need the funds.


That depends whether you're betting on the market going up, or down, during the year.

If you don't like to bet (and I don't), you can take advantage of dollar cost averaging by splitting it up into smaller contributions throughout the year.

From a purely analytical standpoint, assuming you are investing your Roth IRA contributions in broad market securities (such as the SPDR S&P 500 ETF, which tracks the S&P 500), the broader market has historically had more upward movement than downward, and therefore a dollar invested today will have a greater expected value than a dollar invested tomorrow.

So from this perspective, it is better to "max out" your Roth on the first day of the contribution year and immediately invest in broad market (or at least well diversified) securities.

That being said, opportunity costs must also be taken into account--every dollar you use to fund your Roth IRA is a dollar that is no longer available to be invested elsewhere

(hence, a lost opportunity).

With this in mind, if you are currently eligible for a 401k in which your employer matches some portion of your contributions, it is generally advised that you contribute to the 401k up to the employer-match.

For example, if your employer matches 75% of contributions up to 3.5% of your gross salary, then it is advisable that you first contribute this 3.5% to your 401k before even considering contributing to a Roth IRA.

The reasoning behind this is two-fold: first, the employer-match can be considered as a guaranteed Return on Investment--so for example, for an employer that matches 75%, for every dollar you contribute you already have earned a 75% return up to the employer's limit.

Secondly, 401k contributions have tax implications: not only is the money contributed to the 401k pre-tax (i.e., contributions are not taxed), it also reduces your taxable income, so the marginal tax benefit of these contributions must also be taken into account.

Keep in mind that in the usual circumstances, 401k disbursements are taxable.

Finally, many financial advisors will also suggest establishing an "emergency fund", which is money that you will not use unless you suffer an emergency that has an impact on your normal income--loss of job, medical emergency, etc.

These funds are often kept in highly liquid accounts (savings accounts, money-market funds, etc.)

so they can be accessed immediately when you run into one of "life's little surprises".

Generally, it is advised that an emergency fund between $500-$1000 is established ASAP, and over time the emergency fund should be increased until it has reached a value equivalent to the sum of 8 months' worth of expenses.

If funding an IRA is preventing you from working towards such an emergency fund, then you may want to consider waiting on maxing out the IRA before you have that EF established.

Of course, it goes without saying that credit card balances with APRs other than 0.00% (or similar) should be paid off before an IRA is funded, since while you can only hope to match the market at best (between 10-15% a year) in your IRA investments, paying down credit card balances is an instant "return" of whatever the APR is, which usually tends to be between a 15-30% APR.

In a nutshell, assuming you are maxing out your 401k (if applicable), have an emergency fund established, are not carrying any high-APR credit card balances, and are able to do so, historical price movements in the markets suggest that funding your Roth IRA upfront and investing these funds immediately in a broadly diversified portfolio will yield a higher expected return than funding the account periodically throughout the year (using dollar cost averaging or similar strategies).

If this is not the case, take some time to consider the opportunity costs you are incurring from not fully contributing to your 401k, carrying high credit card balances, or not having a sufficient emergency fund established.

This is not financial advice specific to any individual and your mileage may vary.

Consider consulting a Certified Financial Planner, Certified Public Accountant, etc.

before making any major financial decisions.

If you have the money put it in, and invest the money over a few months.

Always keep a modest reserve of cash to give you the flexibility to take advantage of market opportunities.

More often than not the market will rise year on year.

Your best move is to put the $5000 in on Jan 2.

Are you in the 15% bracket?

If not, that is, if higher, I'd suggest the traditional, deductible, IRA.

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

Dollar cost averaging is a method of regularly investing money as it is available.

For example, $100 from each paycheck.

It has been shown to bet better, on average, than collecting the money and investing it all at once.

It is not intended to be used when you have the entire amount up front.

See this link .

Dollar cost averaging a lump sum would only be beneficial if the market was just as likely to go up as is to go down.

Since, over time, the market (historically) has always gone up, your best bet is to invest all of your money right away.

Anything else is just trying to time the market.

This may be a lame answer, but the best IRA contribution strategy is the one that will actually stick to .

A single lump sum contribution every year may be a difficult thing for you to maintain.

When it's time to make your contribution, you may say "eh, $5000 is a lot of money, and my checking account balance is kinda low

, I'll wait before I contribute".

You keep putting it off, and then you miss the opportunity for the year.

If you setup small regular automatic withdrawals, your IRA contribution will run on auto-pilot.

Depending on your cash flow, this may not be favorable, though.

Question: Assuming that I can afford it: should I try to max contribute ($5k) to my Roth IRA as soon as possible in the tax year or break up the contributions evenly throughout the year?

Should I try to max contribute to my Roth IRA asap?

It depends whether you want to take risk. You can take advantage of the dollar cost averaging and split it up into smaller contributions throughout the year. You might also be better putting in all the money at the beginning of the year.

The answer will depend on what you are expecting the market to do over the year. If you don't like to bet, then spread your contributions out evenly. On the other hand, many people expect markets to go up and would recommend paying as much as you can at the beginning. In any case, your best option would probably be to consult a professional financial advisor.

The answer will depend on what you are expecting the market to do over the course of the year.

If you don't like to bet, you should consider breaking up your contributions evenly.

Some people believe that the best choice is to invest as much as you can straight away.

Others would recommend a strategy that you are likely to stick to in the long term.

You may wish to consult with a professional financial planner for the best advice.


I recently came across bitcoin, it is what I was really looking for at the time.

You say you want a more "stable" system.

Recall from your introductory economics courses that money has three roles: a medium of exchange

(here is $, give me goods), a unit of account (you owe me $; the business made $ last year), and a store of value (I have saved $ for the future!).

I assume that you are mostly concerned with the store-of-value role being eroded due to inflation.

But first consider that most people still want regular currency, so as a medium of exchange or accounting unit anything would face an uphill battle.

If you discard that role for your currency, and only want to store value with it, you could just buy equities and commodities and baskets of currencies and debt in a brokerage account (possibly using mutual funds) to store your value.

Trillions of dollars' worth of business takes place this way every year already.

Virtual currency was a bit of a dot-com bubble thing.

The systems which didn't go completely bust and are still around have been beset by money-laundering, and otherwise remain largely an ignored niche.

An online fiat currency has the same basic problem that another currency has.

You need to trust the central bank not to create more money and cause inflation (or even just abscond with the funds... or go bankrupt / get sued).

Perhaps the Federal Reserve may be jerking us around on that front right now....

they're still a lot more believable than a small private institution.

Some banks might possibly be trustworthy enough to launch a currency, but it's hard to see why they'd bother (it can't be a big profit center, because people aren't willing to pay too much to just use money.)

And an online currency that's backed by commodities (e.g. gold) is going to be subject to potentially violent swings in the prices of commodities.

Imagine getting a loan out for your house, denominated in terms of e-gold, and then the price of gold triples.

Ouch?

Congratulations!

You see the problem.

You can't get away from unstable currencies.

The other problem is that the US will shut down anything that appears to be providing a replacement for the US Dollar.

Once a token or medallion or gift certificate or whatever starts being used outside the confines of one business or one network of businesses, it will be shut down, quickly.

It happened with Las Vegas gambling tokens .

Another more recent attempt was with the Liberty Dollar , gold and silver coins and certificates that not only had precious metal backing, but whose proponents encouraged taking them to retailers and paying with them as if they were US Dollars.

There were other problems with this idea, but it was the competitive stature of the Liberty dollar that got the headquarters raided and the main site shut down .

Basically, all signs point toward dealing with currencies and their state of being systematically eroded over time.

If you do find one that appears to exist, be wary, because the rules can change at any time, and the "money" will be nowhere near as liquid as a proper currency.

Edit: I discovered Bitcoin a few months after I posted this answer.

I would strongly recommend anyone interested in this question to review it, particularly the myths page that dispels much of the FUD.

Original answer:

Although it is not online, as a concept the Totnes Pound may be of interest to you.

I live quite close to this village (in the UK) and the system it promotes does work well.

According to the Transition Town Totnes website this means that it is "a community in a process of imagining and creating a future that addresses the twin challenges of diminishing oil and gas supplies and climate change , and creates the kind of community that we would all want to be part of."

If you are looking for a starting place to introduce a new type of currency, perhaps in response to over-dependence on oil and global trade, then reading about the Transition Towns initiative could provide you with the answers you're looking for.

I'm the equivalent of the FED at ROBLOX.

I run a virtual economy there worth millions of dollars.

Even though we are in the business of printing our own money, we've seen much more stability in our currency than in the USD.

It actually appreciates over time.

I don't think it would make a good investment though, nor would any of the online virtual currencies that I am aware of.

I'm not sure, but I think the monetary system of Second Life or World of Warcraft would correspond to what you are looking for.

I don't think they are independent of the dollar though, since acquiring liquidity in those games can be done through exchange for real dollars.

But there can be more closed systems, maybe Sim type games where this is not the case.

I hope this helps.

This site lets people deposit gold into an account.

Once you have an account setup you can pay others in gold online .

I haven't used it or know of anyone who has so

I cannot provide any feedback to how well it works.

Question: I'm actually looking for something that would resemble a monetary system of a sovereign country. The value of its currency would be somewhat independent of, say the dollar. If there was a more stable system online, maybe it could replace the less stable real world systems.  I'm just curious if anyone has heard of anything like this, or if there is place i can read more about related topics.

Do you know of any online monetary systems?

Bitcoin would be similar to this concept. You could also look at local currency like the Totnes pound or video game currency like Second Life.

Two examples of online currency include Bitcoin and the Totnes Pound. Currency systems used in games like Second Life or World of Warcraft may also fit this description.

Currency systems used in games like Second Life or World of Warcraft might fit this description.


If it is a credit card bill, the money goes towards your balance because on all of my cards, the interest for the month will show up as a line item that increases the balance.

So all your payment goes towards the balance.

This is good because your interest is probably calculated daily, and any amount you can lower your balance will therefore lower the interest you have to pay.

Additionally, in the US the CARD act means that you payment must be applied to items with the highest interest rates first.

http://www.helpwithmybank.gov/faqs/credit_late_payment.html#drop11 http://www.creditcards.com/credit-card-news/law-bans-credit-card-payment-allocation-trickery-1282.php

The extra money will go toward principal (assuming you're paying on time and don't have late fees).

Usually payments are applied towards: Fees Interest Principal

Yes, for a credit card, payments in excess of the minimum will go toward principal.

This is not always the case with a mortgage, where prepayments of extra principal need to be explicitly stated.

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

The fine print of your credit card agreement will always tell you exactly in what order things are paid off.

You should have a copy of the agreement, and it's easy to get one if you don't.

In most cases I believe the order is: Fees Interest Older purchases Recent purchases

This applies to your minimum payment as well as any excess

- the minimum isn't a separate kind of payment, it's just the minimum you are allowed to make.

There are some loan types where your minimum payment may be less than the interest due in the current period; this is not true of credit cards in the US.

Separately, if you have a minimum payment amount due of less than the interest due in the period, the net interest amount would just become principal anyway so differentiating

it isn't meaningful.

With credit cards in the US, the general minimum calculation is 1% of the principal outstanding plus all interest accrued in the period plus any fees.

Any overpayment is applied to the principal outstanding, because this is a revolving line of credit and unpaid interest or fees appear as a charge just like your coffee and also begin to accrue interest.

The issue arises if you have multiple interest rates.

Maybe you did a balance transfer at a discounted interest rate; does that balance get credited before the balance carried at the standard rate?

You'll have to call your lender.

While there is a regulation in place requiring payment to credit the highest rate balance first the banks still have latitude on how the payment is literally applied; explained below.

When there IS an amortization schedule, the issue is not "principal or interest" the issue is principle, or the next payment on the amortization schedule.

If the monthly payment on your car loan is $200, but you send $250, the bank will use the additional $50 to credit the next payment due.

When you get your statement next month (it's usually monthly)

it will indicate an amount due of $150.

When you've prepaid more than an entire payment, the next payment is just farther in to the future.

You need to talk to your lender about "unscheduled" principal payments because the process will vary by lender and by specific loan.

Call your lender.

You are a customer, you have a contract, they will explain this stuff to you.

There is no harm that can possibly come from learning the nuances of your agreement with them.

Regarding the nuance to the payment regulation: A federal credit card reform law enacted in May 2009 requires that credit card companies must apply your entire payment, minus the required minimum payment amount , to the highest interest rate balance on your card.

Some credit card issuers are aggressive here and apply the non-interest portion of the minimum payment to the lowest interest rate first.

You'll need to call your bank and ask them.

Question: I have a $80 minimum on my credit bill. If I pay them $100, do the additional $20 go to the card's  Principal  or  Interest ? If it goes to Interest, do I have to explicitly state that those $20 go to Principal?

Paying over minimum monthly charge of credit cards

All your payment goes towards the balance. You can call your lender to be sure.

You may want to speak to your credit card provider for an exact answer, however it is generally the case that any excess payments go to your credit card balance.

Any excess money you pay will go to your balance.

You may want to speak to your lender for a precise answer.


I think that is the wrong approach.

You certainly need to teach the value of work, but you cannot tie it to income levels as a hard and fast rule.

If you do, how do you then explain athletes making millions per year and only 'working' half a year, at most.

And, then comparing that person to a person working hard in a factory, 40-50 hours per week, 50 weeks per year, bringing home $50K per year?

I've always taught my kids to work hard and with integrity.

And, most importantly, you better enjoy the work you do because no matter how much money you make, if you dread getting up in the morning to go to work, your money won't make you happy.

I've never focused on the amount of money they should be making.

Completely linear?

We don't do that.

Our daughter has a fixed allowance, and we expect a certain amount of help around the house as being part of the family.

We don't make any explicit ties between the two, and we don't seem to have any problems.

We bought an eBay lot of Polly Pockets and divided them up into $5 bags.

(This is a better deal that what we could get in the store new.)

Her allowance isn't enough that she can "buy" one every week.

After sensing her frustration we gave her the opportunity to earn some more money by doing extra work.

It happened to be cleaning up after our dogs in the back yard, a chore we had neglected for quite a while.

She stuck with the job, and truly earned that money.

(She'll be six in January.)

What's more, it was a good deal for me.

It needed to be done, and I didn't really want to do it.

So, for now this seems like a fair balance.

It prevents her from getting the idea that she won't work unless she gets paid, but she also knows that working harder does have its rewards.

We still have time to teach her the idea of working smarter.

(This isn't a formal study.

It's just my experience.)

I don't know if it counts as a formal answer, but Dale Carnegie has always preached that income is related to how well you treat and get along with other people.

His observation is that the highest paid people are those with the best people skills, because the ability to manage other people has higher value than singular ability.

Conversely, people making minimum wage often work "harder" than people making more money.

The old saw about "work smart, not hard" is a bit trite.

In many fields, efficiency is valued over "hard work".

As a parent I think you absolutely have to teach them that income is related to work because (for most people at least) it's a more fundamental principle than budgeting, investments, interest, etc.

Once they've learned that the primary source of income is work, then you can start teaching them what to do with it, i.e. how to budget, economise, save, invest, etc.

Get a copy of Capitalism for Kids - finally back in print (after being out of print for years).

It's a great introduction to being an entrepreneur, aimed at young people.

Six years old might be a bit early, though - but definitely before the teenage years.

My family instilled in me early on that hard work was important, and the output of that work was its reward.

My grandparents really made in impression with me about telling the truth and being fair (probably after I was busted for lying and cheating about something) -- I remember my grandfather talking about the solem trust associated with shaking hands over something.

I remember opening a savings account at school on bank day and being really excited about the interest accruing...

but my folks never really allowed us to spend it on toys or other stuff.

I didn't really think about money at all until I was probably about 10 or 11, when I started watching "Wall Street Week" on PBS with my dad on Friday night and bombarding him with dozens of questions.

Then games like Sim City really got me going...

my grandmother was always amazed that I was talking about bonding construction projects.

I think that before 10 or so, kids needn't concern themselves with money, but should understand responsibility, the rewards that come from working hard, and the consequences for not doing so.

Question: It seems to me that, if you want to teach children at an early age about the benefits of careful personal finance, and other fun concepts (like an intuitive understanding of compound interest), paying an allowance that's directly related to chores or work around the house is probably a bad idea.  Are there any formal studies on this, or standard answers that are accepted in the personal finance community?

Is it a good idea to teach children that work is linearly related to income?

It is better to teach them that income is related to work. Try getting a copy of Capitalism for Kids.

The answer to this question is subjective and there will be people who agree and disagree with this particular approach. As for standard answers, the book, Capitalism for Kids, may have some interesting information on the topic.

Some people would disagree with this approach to educating children about work and finance.

Some people see financial education as a fundamental skill to be taught to children.

The book, Capitalism for Kids, might be an interesting read on this matter.


put a fake "foreclosure notice" on your door.

Make sure that you have the smallest house in the neighborhood.

Then hopefully anyone with nefarious intent ill go elsewhere.

Don't have anything visible from the street that is expensive.

This includes cars (park the BMW in the windowless garage), fancy grills, pools, bikes, etc.

For maximum effect, put a broken down car in front of the house.

Preferably something 20-30 years old and up on blocks, like an old pickup truck.

A couch on the front porch and a old tub in the yard (unmowed) will complete the effect.

You might want to consider how much effort mitigating this risk is worth.

For example, having homeowner's insurance and sufficient documentation of your valuables is probably enough to satisfy your fears if they are based on simply losing your property.

In the end is there really any benefit in living like you don't have money in an effort to keep people stealing it from you?

That said, One piece of good advice I have heard for how to avoid encouraging robbers is to avoid putting boxes for expensive items (e.g. electronics) out by the trash until the morning they pick it up.

No need to advertise that you just bought a super expensive home-theater system.

Don't robbers look at neighborhoods first?

You might try making your house the shabbiest on the street. :)

The best practices for this sort of thing: Don't keep too much money and valuable jewerly around.

You should have no more than a couple of thousand dollars lying about.

Keep the exterior of your house clean and well-lit.

Gates and doors, even if not locked, should be in good repair and consistently closed.

Secure stuff like bikes, lawnmowers, etc in a place not visible from the outside of the street, preferably in a shed. Have decent locks and keep accessible windows closed and locked when you're not home.

Get a dog.

In terms of electronics and such, you're always at risk for some crackhead busting in your door and grabbing your iPod or whatever.

Thieves don't really care about clothes...

they want items quickly converted to cash: small electronics with resale value, cash, jewelry.

Keeping things locked and having a dog are probably the best deterrents for that scenario.

More professional/organized burglars who rob houses during the day stake out a neighborhood and look for places where their presence won't be noticed.

If things are clean and consistent, your neighbors, police patrol, mailman, etc are more likely to notice something awry and call the police.

That's a risk factor for the "pro" thief, who will more likely look for a softer target.

If you live in an area where there has been a burglary spree or you are really worried about this, get a basic, centrally monitored alarm system.

If you're not living a flashy lifestyle and are deliberately thinking about ways to look like you don't have anything, it is money well spent.

If you are living a flashy lifestyle, unwanted attention comes with the territory.

In any case, feeling safe at home is something you need to be able to do.

Question: There's a question on DIY SE asking  how to secure the house from intruders . One of the answers is  to not have anything valuable or at least to not appear to .  Can the illusion that a person doesn't have anything valuable be achieved through some specific practices of dealing with money and property? What can be done to achieve that?

How do I create the illusion I don't have anything valuable, so thieves wouldn't want to steal from my home?

Make your house look shabby in relation to the others on the street. Don't have anything visible from the street that looks expensive.

You probably want to make sure that any expensive property is kept well out of sight. To go further, you may want to actively make yourself look poor and make your house look shabby.

You might want to consider adding elements to make yourself look poor or make your house look shabby.

You should aim to avoid leaving any expensive property readily in view.


In Australia, you will typically be required to pay for mortgage insurance if you borrow more than 80% of the value of the property.

Basically this means another ~1% on top of the regular interest rate.

So it's in your interests to save until you can at least reach that point.

If you can't rent and save at the same time, it suggests your finances may be too stretched for buying now to be a good idea.

The typical down-payment was expected to be 20%.

The idea being that if one could not save 1/5 of the cost of a house, they were not responsible enough to ensure repayment of the loan.

It is hard to say whether this is truly a relevant measure.

However, in the absence of other data points, it is pretty decent.

It typically requires a fair amount of time to amass that much money and it does demonstrate some restraint.

(e.g. it is easily the cost of a decent new car or some other shiny "toy.")

Income is not necessarily a good measure, on its own.

I am certainly more responsible with my spending when I have less money to spend.

(Lately, I have been feeling like my father, scrutinizing every single purchase down to the penny.)

A bigger down payment is good, because it insulates you from the swings in the real estate market.

If you get FHA loan with 3% down and end up being forced to move during a down market, you'll be in a real bind, as you'll need to scrape up some cash or borrow funds to get out of your mortgage.

Well hindsight tells us now that by and large, doing 100% borrowing was not the best policy we could have taken.

It gets nitpicky, but in the US the traditional 20% is the answer I presently feel comfortable with.

It could be a reactionary judgement I am making to the current mess (in which I have formed the opinion that all parties are responsible) and arm-chair quarterbacking "

if we had only stuck with the 20% rule, we wouldn't be here right now .

The truth is probably much more gray than that, but like all things personal finance it is really up to you.

If the law allows 100% financing ask yourself if it really makes sense that a bank would just loan you hundreds of thousands of dollars to live somewhere.

I think anything from 10% on demonstrates a reasonable ability to save.

I would consider ongoing debt level a better indicator than the size of the down payment.

It's been my experience that, without exception, there is a direct correlation between a persons use of revolving credit and their ability to manage their money & control their spending.

Living in Seattle, I only put 10% down on my first house, but not only have we never missed a payment we have always paid extra and now have about 50% equity after 10 years with a family.

Yet it would have taken me another year to save the other 10% during which time I would have burned that amount and 1/2 again in useless rent.

I am currently in the process of purchasing a house.

I am only putting 5% down.

I see that some are saying that the traditional 20% down is the way to go.

I am a first time homebuyer, and unfortunately we no longer live in the world where 20% down is mandatory, which is part of the reason why housing prices are so high.

I feel it is more important that you are comfortable with what your monthly payments are as well as being informed on how interest rates can change how much you owe each month.

Right now interest rates are pretty low, and it would almost be silly to put 20% down on your home.

It might make more sense to put money in different vehicle right now, if you have extra, as the global economy will likely pick up and until it does, interest rates will likely stay low.

Just my 2 cents worth.

EDIT:

I thought it would not be responsible of me not to mention that you should always have extra's saved for closing costs.

They can be pricey, and if you are not informed of what they are, they can creep up on you.

Question: In Australia, even after the  global financial crisis , it's still common to only have 5-10% and some people even use other assets as collateral to borrow all 100%. I hear historically this has not been the case, it's only been the last decade of so during the housing boom.  In terms of avoiding risk and stuff, what do you think is a sensible percentage? Or is that even a relevant measure? Should people be looking at say, income?

For a mortgage down-payment, what percentage is sensible?

In the US, the traditional downpayment is 20%. 10% onwards is a reasonable amount of money to save.

It is generally considered that 20% is a good-size down-payment on a home, though other people may feel comfortable with less. Making a bigger down-payment will provide you greater security, but the most important thing is probably for you to feel comfortable with your monthly payments. Income in isolation is generally not a good measure for assessing what the best option would be.

It is generally considered that 20% is a good level of deposit on a home, although other people may feel comfortable with less than this.

The bigger the down-payment you make, the better protected you are from swings in the housing market.

It is difficult to say whether the percentage of your deposit is especially important.

Income is generally not a good measure of your situation in isolation.

Some would argue that the most important thing is that you can make your monthly payments.


With the information you have given, I would say never.

Remember the banker is a salesman, and the line of credit is the product.

If you don't need to borrow the money for something specific, then you don't need the line of credit in the first place.

Even if you did need something I would tell you to save up and pay cash for it.

On the tax advantage:

There is none, in the US you can deduct your mortgage interest on your taxes but it's not a tax credit

it's a tax deductions.

Let me explain further:

You spend $10,000 on mortgage interest, and you're in the 25% tax bracket.

You send the bank $10,000 in return

you get at tax savings of $2500.

You are still in the hole $7500

You would have been better off not taking out the loan in the first place.

On the Emergency Fund : You should have 3 - 6 months of expenses in cash, like a money market account.

This money isn't for investing, it's like insurance, and you don't make money on insurance.

The last thing you want to do is have to go into debt right in the middle of an emergency.

Say you lost your job, the last thing you would want to do is borrow money, right at the time you have no income to pay it back.

The bank is under no obligation to maintain you credit limit and can without notice reduce it, they can in most cases call the loan balance due in full with little or no notice as well.

Both of those are likely scenarios if the bank were to become aware of the fact that you were unemployed.

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There are two basic types of lines of credit typically offered at a retail bank: Overdraft line of credit is essentially a revolving personal loan that you can draw upon as needed or automatically draw on when you overdraw on your checking account.

Typically with a commercial bank there is a fee to use the automatic overdraft in addition to interest.

Some credit unions don't charge a fee.

Interest is typically computed using average daily balance.

A Home equity line of credit is a revolving loan that is secured against your home.

Interest on home-improvement related expenses is deductible.

Since the bank gets a lien on your home, the rates are low.

Sometimes you can even get debit cards that will hit the line.

I think these are a good idea if: You are making substantial home improvements.

You are a 1099 worker or business owner who doesn't always get paid on time.

A home equity line of credit is a cheap way to borrow money for a short term.

A line of credit is a poor substitute for an emergency fund.

Banks typically have a clause that allows them to stop further withdrawals from your line of credit if there is a change of vaguely defined type.

For example, if you lose your job they can stop you from making withdrawals from your line-of-credit.

The only really good reason to open a line of credit is that you want to buy something that you don't have money for.

That's got its own risks - see plenty of other places to see warnings about not borrowing too much.

The only other reason is that you might want to use a line of credit as your emergency fund.

The usual way of doing this is to keep the money in an easily acccessible savings account - but such accounts usually pay rather now interest, and there is an argument for instead investing your emergency money in a higher-interest but less-accessible fund and using a line of credit to tide you over until you can extract the money.

I'm worried about the comment that you can "deduct my interest on my tax returns".

That is usually only possible if you are borrowing money to invest.

It sounds as if your banker is going to persuade you to not only open a line of credit, but then invest that money in something.

Be aware that this kind of 'leveraging' is much higher risk than investing money you already own.

I have a line of credit that I have attached to my checking account in case of an overdraft.

Since I haven't over drafted my checking account in 4 years, I typically borrow the minimum $5 from the line of credit and then pay it back the next day.

This usually costs me a couple of cents

and I have to do it twice a year, but it keeps the account active

and they don't close it down.

Question: I'm new to the concept of "line-of-credit", and my banker says I should be able to open one based on the number of stocks I own.  I have no mortgage.  I'm told that I'm able to deduct my interest on my tax returns.  When is it wise or unwise to open a line of credit?

When should I open a "Line of credit" at my bank?

You should only open a line of credit if you want to borrow money to buy something.

The answer to this question will be subjective, however, some people would suggest that opening a line of credit is only a good idea if you need to buy something that you don't have the funds for.