Planning Is Essential if You Are to Grow Your Assets

For many years it was thought that buying real estate was the best way for an ordinary working family to build up their wealth. It is too simplistic to say that people 30 or 40 years ago bought real estate which is now worth many times more than their purchase price. The best way to look at home ownership is to look at what percentage of their income at the time was needed to fund the purchase and the ongoing monthly mortgage costs. Having said that owning a home means no rent. The bottom line is the calculation on owning real estate involves more than simple figures on a piece of paper.

Real Estate

In recent years the recession has called into question whether it is worth taking a risk with investing in real estate, perhaps being overly optimistic on buying something that it is difficult to afford. Recessions occur periodically but in general families can expect the value of their properties to grow. It is a medium to long term exercise to grow an asset and in the situation when many people approaching retirement have such limited funds set aside that asset growth may be needed to provide a comfortable retirement.

Demands on Your Pay Check

The problem that many of the younger working generations face these days is they are struggling to meet their current financial commitments and therefore find it difficult to save the necessary deposit. Those starting out on a career find so many demands on their pay check. Student loans are an obvious problem and graduates who used a credit card to fund their student lifestyle often have expensive card balances to handle. Even being able to pay the monthly minimum that is required stretches finances. If this is your problem then a word of advice; get a cheaper personal loan at a cheaper rate of interest, get rid of that balance by using the urgent loan to pay it off and only use the card in the future when you can afford to pay the month end balance in full.

The point is that you cannot spend your time balancing your debts and save the money you need to get a deposit for real estate. Equally you will struggle to invest for the future anyway and certainly not be able to get the money together to have an emergency fund unless you understand financial management and have the self-discipline to follow a budget.

Those who leave home for a new city to start their careers face the prospect of finding somewhere to live; it will cost money even if it is shared accommodation. Perhaps you are luckier? If you can live at home and your parents understand that you are saving for your own place then your monthly expenditure may be far less than your friends who have significant rent to pay.

Living at Home

In the USA today it seems that an increasing number of people, even up to the age of 35, are living at home rather than moving out. The important thing is that if you have the chance to live at home that you use your money wisely; don’t spend everything you earn on things you don’t need. Devise a saving strategy with a clear idea of what you are aiming for financially.

No one teaches financial management at school and unfortunately some people learn the hard way. Investing in general is an alien concept on those in their 20s, even their 30s because they often have a problem identifying spare money that they can use. Alternatively they think that if they have a specific amount in the bank then they can spend it all before the next pay check comes in.

Budget

Don’t fool yourself into thinking that there is no point in saving because with interest rates so low there is no real growth available. You need to look beyond the very short term. Once you decide to live by a sensible budget you can expect to have a surplus to use for a few things that will potentially help your financial future:

  • Saving towards a deposit for real estate.
  • Accumulating an emergency fund, ideally a minimum of three months regular expenditure
  • Investing so that you have the chance of building up a retirement fund that will provide for comfortable retirement

In many ways these things are interlinked. Unless you understand the importance of planning for the future you have little chance of owning real estate and ultimately building up the assets to provide a comfortable future.

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Important Tips For Hiring a Financial Advisor

If you are trying to plan for your retirement, want to try your hand at the stock market, or plan to do other important financial planning, having a financial advisor would be in your best interest. A financial advisor will ensure you put your money to the best use. If you have never had a financial advisor and aren’t sure what you should be looking for, know these important tips for hiring a financial advisor.

Consider Pay Structure

Different financial planners work on a different pay structure and you want to make sure you understand what it is and consider it before you hire anyone. Some advisors are commission-based, and that’s something that you want to avoid. When a financial advisor works on commission, that means they’ll make more money if you purchase certain insurance packages or invest in some mutual funds. You don’t want a financial advisor that is constantly pushing certain types of investments and insurance on you just so they can make some more money. You want a financial advisor that will work in only your best interest. Of course, fee-based financial advisors still have their downfall. Typically, this type of advisor earns about 1% of your annual assets. This means the advisor might encourage you to buy an expensive home or property that you don’t particularly need. However, it might be easier for you to pass on a house that you know you don’t need than pass on an insurance package that you don’t quite understand. If you can find an affordable financial planner that charges by the hour, that would probably be in your best interest. They make the same amount of money, even if you opt out of insurance packages or a private island. These planners have the purest motives, and you don’t have to worry about anyone pushing you to buy things you don’t need.

Check Their Background

When you hire a financial planner, don’t forget that they’re working for you, not the other way around. Many people hire services like this and feel like they need to be submissive. You should be interviewing the advisor. Ask if the person has ever been convicted of a crime, ask to see the license, and ask the advisor to write down references that you can call. The person you are hiring is going to have some control over your money, and you need to make sure that it’s someone you can trust. You wouldn’t put your hard-earned money in the hands of a stranger on the street, so you shouldn’t put it in the hands of a stranger behind a desk.

Ask for Recommendations
 
The most simple thing you can do is ask around for recommendations. Asking friends and work colleagues if they recommend anyone is your best bet. If there are people you trust who have been seeing the same financial advisor for years with success, it’s a good indication that it’s an advisor you would want to work with. It’s best to avoid a financial advisor no one knows. It doesn’t mean they won’t be good at the job; but when it comes to your money, it’s better not to take any chances. Financial advisors who work for large, regulated companies tend to come highly recommended, so check out those companies. You can look at the Fisher Investments top 10 RIA here.

Verify Credentials

Just looking at credentials doesn’t prove anything, you need to verify them. The financial advisor should be a certified financial planner (CFP). If certified financial planners get into any trouble, their disciplines become public knowledge. These disciplines can include a suspension, letters of admonition, or even a license revocation. The good thing about this public knowledge is that it’s very easy to find. You can simply go to the website, click on the state, and there are lists of names under each type of discipline. Make sure you look through the list and ensure the financial planner you are looking into isn’t on it. If they are, move on to the next person. You can also verify the certification on the same page. All you have to do is fill out the person’s information and you will know for sure.

Avoid Guarantees

You might find a financial advisor that continues to brag about performance and guarantees you certain returns in investments. There are rarely guarantees in the financial world, so this is a huge red flag. When you interview your financial advisor, pay attention to everything the person is saying. Make sure he or she isn’t promising a market-beating performance a certain return after a certain amount of time. If the person seems overly confident, it would be in your best interest to thank them for their time and walk away.

Hiring a financial advisor is a great way to manage your money. Just make sure you find someone you can trust so your money is in good hands. Follow these tips so you can be confident in your decision.

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Secure Investments That You Can Make

One of the deterrents of investing is how unstable the markets can seem. Many people are not willing to place their hard earned money in ventures that they are not even sure are going to succeed. The dismal state of the economy only proves the mistrust that many people view investment with. This fear of financing, however, can prevent many people from making a profit in the long run. There are, thankfully, methods to invest your money and limit the amount of risk that you face. Here are some of the ways you can invest with some measure of security:

Gold

Many investors advise people to begin buying gold. This is because, compared to many other commodities, this precious metal is actually stable. The value of gold has been quite consistent for many years. It is certainly a more established investment than currency. It also requires minimal risk. Once you have purchased a few ounces of gold, there is no immediate threat to your investment.

You can simply wait until you wish to sell the precious metal. When the prices are high enough, you can sell your amount of gold for a handsome profit. This type of investment ensures that there is no continued risk to your venture at all. As you have physical ownership of the commodity, you are entirely in control of what happens to it.

Savings Account

One of the advantages of a savings account is the liquidity that it offers. Few other investments or commodities can be accessed quite as easily as a savings account. Most banks allow you to withdraw a specific amount of money, at least six times a month. The more you have in your savings account, the more interest you earn. This is also a great method to encourage saving.

To make the best of a savings account, shop around for the highest interest rates on your savings. It is important to note the minimum required when opening the bank account. You should also check how much you are required to have in your bank account at the end of each month. To ensure that your income is truly safe, you should invest in a bank that is a part of the Canada Deposit Insurance Corporation (CDIC). Authorities such as these will insure the savings that you place in the account. This will allow you to protect your savings from unforeseen events.

Canada Premium Bond

The Canada Premium Bond (CPB) is guaranteed by the Canadian government. These bonds can be bought at most financial institutions throughout Canada. You can purchase one for as low as $100. Once you have bought a certain number of bonds, you will receive interest on this investment every year until the bond matures.

You can then redeem your original investment. This method offers you a great way to earn a little extra money, depending on how much you have invested. As this venture is guaranteed by a government entity, there is reduced risk.

Investment does not always have to be a gambling game. There are often times when you can remove the risk from the equation and make a stable investment.

 

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