Thursday, April 17, 2014

What is a Good Credit Score?

What is a good credit score?
A good credit score is what each of us aspires to. After all, a credit score is one of the important determining factors when it comes to borrowing money - and getting a low rate when you do.
But trying to pin down a specific number that means your credit score is "good" can be tricky. When it comes to figuring out what makes a good credit score, there are a few different schools of thought.

Credit Score Range

Most credit scores - including the FICO score and the latest version of the VantageScore - operate within the range of 301 to 850. Within that range, there are different categories, from bad to excellent.
  • Excellent Credit: 750+
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • Bad Credit: below 599
But even these aren't set in stone. That's because lenders all have their own definitions of what is a good credit score. One lender that is looking to approve more borrowers might approve applicants with credit scores of 680 or higher. Another might be more selective and only approve those with scores of 750 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate!

What's Your Score?

Don't assume your score is good (or isn't) just because you have always paid your bills on time (or haven't.) The only way to know whether you have a good credit score is to check. You can get your credit score free once a month using's Credit Report Card. This is a truly free credit score - no payment information is requested. In addition to the number, you'll see a breakdown of the factors that affect your score and get recommendations for making your credit as strong as possible.
Read more:What is a Good Credit Score?

The Effects of Inflation on Loan Repayments

The Effects of Inflation on Loan Repayments


“5 Ringgit for a bowl of curry noodles? In my day, it was 50 sen!” Sounds familiar? No doubt you hear your parents and grandparents griping about today’s prices more often than not.
The reason for these price differences is simple and straightforward: inflation. We won’t go into the mechanics of inflation and its causes here; all we need to know in this context is that it devalues a currency over time by increasing the prices of goods and services.
Now, you might be wondering about the significance of inflation when it comes to loan repayments, and how you can utilise this knowledge. Let’s start from the beginning.

A Misled Mind-Set?

There’s a piece of conventional wisdom when it comes to housing loans – pay them off whenever you have spare cash, and the more the better because you’ll be done with them earlier.
However, the opposite could ring true if you take into account the inflation factor. Simply put, a Ringgit 30 years ago has higher value than a Ringgit today due to inflation. Going by the same logic train, a Ringgit now would obviously be of higher value than a Ringgit 30 years down the line.
Imagine that a simple roadside meal will cost ten times more, 30 years later. So, logically, paying ahead on your housing loan instalments, you’d be using Ringgit that would worth more compared to years down the line.
Thus, wouldn’t you be losing out by paying more than you have to, despite shortening your loan tenure?

 Read more:The Effects of Inflation on Loan Repayments

Wednesday, April 16, 2014

The No. 1 Budgeting Step You Have to Stop Avoiding

Mid section of a senior man calculating financial budget
Budgeting isn't easy. Many people feel overwhelmed and give up before they even get going.

But even among those people who don't quit, many miss the most critical step when creating the family budget: tracking all of your expenses. And I mean down to the penny.

According to Gallup's annual economy and personal finance survey, only 32 percent of American households prepare a written budget or use software for a spending plan.

There are only two sides to a budget: income and expenses. Most American workers receive a pay stub that lays out exactly how much they earn. Of course, for those on commission, small-business owners and others, income fluctuates from month to month. But the majority of us have steady wages. There may not be enough money coming in, but that's a separate issue.

Do You Lose Track of Cash?

It's the spending side of the equation we struggle with. And that's why you have to be vigilant.

It's easy to lose track of cash, for example. That's one reason that my wife and Iuse a credit card to budget with each month and track spending. Cash has a way of leaking out of your pocket. You don't remember where it went, and it's easy to toss or misplace receipts.

"Tracking every penny of expenditures with receipts and income is the first step to gaining control of your finances," says Eric Wentworth, author "A Plan for Life: The 21st Century Guide to Success in Wealth." "Money leaks are nearly invisible, but can ruin any attempt to get control of your finances."

Dave Ramsey is famous for saying that every dollar of income must have a name. Families must assign every dollar in the budget a purpose at the beginning of the month. At first, families often find it burdensome to track spending that closely. But start by committing to do it for just one week.

Keep a notebook with you and write it down every time you spend cash, along with the place, and item category. Save your receipts. Odds are, after you get the hang of it, you'll find it's not too hard keep at it for another week, or two or three. Tracking your spending will soon start to become second nature.

Track Expenses Like You Track Calories

"If you want a successful budget, you have to be honest with yourself and figure out where all of your money is going," says Glen Craig, author of the popular personal finance blog "Too often we list out most items, but we don't take it serious enough to find everything. And then the budget never has a chance to work."

You will have no idea how much your family is spending every month until you keep track. Like counting calories, we focus on what we count. It has our attention. When we write the money spent or calories eaten in a journal, it helps us to visualize, monitor and change behavior.

How do you categorize your spending in your budget? Do you use the envelope system? Many financial experts recommend putting a set amount of cash in categorized envelopes at the beginning of each month. Then you spend the money from the envelopes.

An empty envelope forces you to stop spending in a category. You can prioritize and visualize how much you are spending on separate expenses of your family's life with this system.

"Understanding what you spend and where you spend it is the most important step to setting up a family budget," says Matthew Moore, founder of the Clear Retirement Group. "Most people don't track where their money goes. By categorizing your spending or allocating to envelopes, you put a system in place that holds the family accountable to their long-term goal."

Read more:The No. 1 Budgeting Step You Have to Stop Avoiding

10 Money Conversations You Must Have With Your Family

10 Money Conversations You Must Have With Your Family
Discussing finances with your family can be difficult. Many of us associate feelings of shame or guilt with money — or in some cases, we were raised thinking that we shouldn’t share details of our financial lives at all. But having open, reasonable discussions about money is one of the most important things a family can do.
Not sure what money conversations you should be having with your family? Here are 10 to get you started.
1. The Budget Conversation
Every month, sit down with your spouse, evaluate your budget, and consider whether any updates need to be made. Has your income increased or decreased? Have your expenses gone up, or have you been able to lower them? Are you spending more than you earn and need to cut back? Discuss and adjust accordingly. If you have kids, it can be good to include them in this conversation, so they understand how budgeting works.
2. The Saving Conversation
Once you’ve looked over your budget, spend some time with your spouse and kids identifying ways to save more. Brainstorm ways you all can cut costs, such as using coupons at the grocery store, replacing cable with a basic Netflix or Hulu subscription, switching to energy efficient appliances, or using Skype Credit to make calls to mobile and landline phones at low rates. Include your kids in the conversation and make saving money into a game. Write down all their ideas, post the list on the refrigerator, and tally up how much money they’ve saved the family each month. Put a gold star next to the best money-saving ideas on the list. Set savings goals for the family and celebrate reaching those goals with an ice cream party at the end of the year!
3. The Financial Emergency Conversation
Are you able to foot the mechanic bill if your car breaks down? What happens if you or your spouse become unemployed? Emergencies happen, and it is vital to have the funds to be able to pay for them — otherwise these emergencies could throw you deep into debt. Discuss whether or not you have enough savings to cover expenses that could arise if a financial emergency came up. Ideally, you should have enough saved to cover three months’ worth of expenses, but aim for six months or more if possible.
4. The Retirement Conversation
Retirement may feel like a long way off, but it is essential to start preparing for it now for one reason: compound interest. With compound interest, the interest from your initial investment earns interest, and so on, which means that the sooner you start saving, the more money you will have when you finally retire. Also discuss with your spouse what your ideal retirement looks like. How much money do you think you’ll need? Where will you want to live? What sort of lifestyle do you want to have? Make sure you are both on the same page and working towards the same goals.
5. The College Conversation
If you have kids, you should start thinking about how (or if) you will foot some or all of the bill for them to go to college. If you do want to pay for their college education, consider opening a 529 plan or another savings account for them early. Another way to help save money for college is to encourage family members to contribute to savings accounts for your child as opposed to giving physical gifts when your kids are young and don’t grasp birthdays or holidays.
Also, if your child is in high school, include him or her in your college planning discussions. Encourage him or her to join clubs or sports teams and get the best grades possible to increase his or her chances of getting a scholarship.
Read more:10 Money Conversations You Must Have With Your Family

Tuesday, April 15, 2014

5 Life Insurance Policies You Really Need to Cancel

A hand holding an umbrella with paper money design
Life insurance is sold based on one thing: fear. Fear of dying, of being injured. Fear of a catastrophe befalling you or your family. If worrying about death isn't enough of an inducement, there's the financial fear of not being able to replace a breadwinner's salary once they're gone.

Insurance companies know this, and they use those levers. And they should: Financial peace of mind in the face of loss is exactly what they're selling.

But some types of life insurance just aren't worth buying, because the policies aren't used often and don't provide much of a return on the premium. You're better off putting that money aside in an emergency fund for that rainy day, if it ever happens. Here are five life insurance policies you probably want to think about canceling if you have them:

1. Life insurance for a child. Term life policies are meant to replace an income if someone dies. Unless your child is a model or actor and is bringing in a major share of the family's cash, your offspring doesn't need life insurance.

Gerber Life Insurance Co. advertises a $10,000 policy for "pennies a day" that could be used to cover funeral expenses. The chances that a baby born in the United States will die in childhood, however, are extremely low.

"Child life insurance policies are sold to parents and grandparents by preying on their emotions," says Eric Stauffer, president of

If you really want to have coverage in case you need to pay funeral expenses for a child, add a cheap rider to your term policy that would cover them for $10,000 or $15,000, but don't have them on a separate policy, says Liran Hirschkorn, an independent life insurance agent.

"Most Americans don't have enough life insurance themselves and should not be buying life insurance on their children," Hirschkorn says. "This is especially true if you have some savings and have the funds to pay for funeral costs should the worst happen."

2. Whole life insurance. Unlike a term life insurance policy, which only runs for a specified number of years, whole life insurance covers the policyholder's entire life. The policies are more expensive than term life insurance because the risk is for a person's whole lifetime. But they also have a cash value, which grows over time, and which the policyholder can use or borrow against. This makes them an investment, though not a generally high performing one. It's especially not a good deal for young people, says Matt Becker, a financial planner who has written about the subject.

"Life insurance is great when used properly. Whole life insurance is usually just expensive and burdensome," Becker says.

Stauffer says he had a 28-year-old client ask him if he should keep the $10,000 whole life insurance policy his parents have been paying on for his entire life, or take the cash out. They did the math, Stauffer says, and found that his parents had paid close to the entire death benefit in premiums, but the cash value was only worth $2,000. He cashed it out and invested the money.

3. Industrial life insurance. Also called accidental-death insurance, these policies often have low values and cover you in the event of mishaps such as losing an eye or limb at work, or dying in a car wreck or fire at work.

"It all sounds good, but [this type of policy] is riddled with exclusions,' says lawyer Mark Hankins. "The policy was once sold door-to-door to laborers with weekly payments and known as the 'Little Giant.' Its creator boasted on his deathbed he had never paid a claim."

Read more: 5 Life Insurance Policies You Really Need to Cancel

More Seniors Are Doing Reverse Mortgages. Is This a Good Idea?

Rural Brick Cottage
Reverse mortgages are growing in popularity now that the big baby boom generation is entering its silver years.
A reverse mortgage is a type of loan that lets you borrow some of your home’s equity. The twist is, no payments are required until the last surviving borrower dies or sells.

Boomers in financial distress

The new surge in equity borrowing is partly a legacy from the recession, which wounded the boomer generation financially. But even before then, boomers (and nearly half of all American workers) were short on retirement savings.
Reverse mortgage borrowing grew by 20 percent between 2012 and 2013, Reuters says, adding:
Many retirees haven’t saved enough to cover expenses for the rest of their lives. But many of them have one major asset — a home.
The oldest boomers turn 68 this year. The concern is that many are using reverse mortgages to drain their home equity too early, leaving them nothing to fall back on in 15 or 20 years. In a 2012 report to Congress in 2012, the Consumer Financial Protection Bureau said younger borrowers are increasingly using reverse mortgages to pay off debt, even before retiring.

You must be at least 62

To qualify for a reverse mortgage you must be at least 62 and have paid off your mortgage or have substantial equity in your home. Depending on the loan type, loan proceeds can be received as cash, a line of credit, or monthly payments.
The amount you can borrow depends on your age, your equity, the type of reverse mortgage and the interest rate on the loan. In the best case, homeowners can stay on for decades, enjoying the money with no need to repay until they die or sell.
Here are resources for learning more:

Lifeline or risk?

Reverse mortgages are particularly complicated loans. They’re not good for everyone, and so a borrower’s entire financial picture needs to be considered. A reverse mortgage taken in desperation can even make things worse, certified financial planner Sean Keating told CNBC:
“When an older couple cannot afford to live in the home anymore, getting a reverse mortgage will only delay the loss of the house and will leave them with no assets,” he said.
Better to sell the house and downsize, move in with a family member, take on a roommate or explore whether one of your adult children might be willing to purchase the family house through an installment sale, Keating added.
Because of the risks, the federal government (which funds most of these loans) requires borrowers to get financial counseling first, so they know their options and understand what’s involved.
Among other risks:

High fees

Fees on reverse mortgages often are steeper than on conventional mortgages. There are closing costs, an origination fee, mortgage insurance premiums (on some federally insured loans) and other fees. Reuters says:
The margins on selling these loans can be three to five times the margins on regular mortgages, said Don Currie, president of lender High Tech Lending. Banks can also collect fees for performing tasks like sending out account statements to borrowers.


Monday, April 14, 2014

10 Habits of High Net-Worth Women


Keep Your Eye on the Prize

As a financial advisor, I have occasionally found myself feeling envious of certain clients. Not because of their wealth — but because they were disciplined and determined enough to do all the right things that enabled them to accumulate their wealth and, in many cases, retire early. Despite my expertise, I, like a lot of people, sometimes struggle not to do the wrong things that make being rich, let alone retiring at all, a pipe dream. 
Financially responsible and successful people don’t build their wealth by accident — or overnight. Becoming rich takes serious willpower and long-term vision. You have to be able to keep your eye on the prize of financial freedom, be willing to sacrifice your present wants for the sake of your future and develop good habits to win. Here are 10 habits you can start putting into practice now.

Start Early

As the old saying goes: The early bird catches the worm… or, in this case, gets to retire in style. The sooner you put your money to work, the more time it has to grow. Earning a paycheck, whether you are self-employed or work for a company, means the opportunity to contribute to an IRA, which you should seize ASAP. If you’re fortunate enough to get a job with a company that offers a matching contribution to their retirement plan, you need to make it a priority to enroll in the plan as soon as you are eligible. It can be the difference between retiring early and never retiring.
Think about this: If you invested $10,000 and left it to grow for 40 years, assuming an average return per year of 8 percent, you would end up with over $217,000. But if you waited 10 years and invested $20,000 — twice as much — you would only end up with just over $200,000. 
Whatever your situation might be, saving and investing money today is better than waiting until tomorrow. Start now.


You can be your own worst enemy when it comes to financial success. It’s all too easy to procrastinate and neglect what needs to be done and, in the meantime, give in to temptation and spend more than you should. It’s the perfect recipe for not becoming rich. 
The best way to protect yourself from yourself is to automate your savings. That means setting up recurring transfers on a regular basis from your checking account to your savings and investment accounts (or setting up auto deduction from your paycheck to your employer-sponsored retirement plan). This way, you force yourself to avoid bad money habits and save what you would likely otherwise spend. If you haven’t already, set aside 15 minutes on your calendar now to do it. Not later, now. Your rich future self will thank you. 

Maximize Contributions

When it comes to retirement account contributions, you’ve probably been told to start small and then try to increase the amount by at least 1 percent every year until you max out. If you’ve been procrastinating, then yes, even a small starting contribution is better than none. The problem is that small efforts can lead to small results. If you want to be rich, you have to save like you mean it. And that means contributing the max amount allowed from the get-go (and at least as much as your employer will match in your 401(k)). 
This is especially true if you are starting to save later in life and need to play catch up. You might worry that maxing out your contributions will squeeze your cash flow too tightly, but it is easier to get in the habit of spending less if you don’t have that extra to money to spend in the first place. It’s much harder to increasingly scale back your budget year after year to accommodate for increasing contributions

Never Carry Credit Card Balances

Revolving, high-interest debt is one of the biggest threats to your financial freedom. It can seriously drag you down, costing you thousands in unnecessary fees and interest charges — and prevent you from saving more. If you ever want to be rich, you have to ditch the bad habit of carrying credit card balances, along with the minimum payment mentality. 
Instead, you need to learn how to use credit wisely, rather than as a crutch, and commit to paying off your balances in full each month. Smart credit card holders know and practice the tricks to maximize rewards, points, discounts and monthly cash flow without getting in over their head. Of course, living within your means is key to your success. 

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Read more10 Habits of High Net-Worth Women
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