How to navigate the life-insurance labyrinth

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Life insurance is one of those financial matters that is often complicated, time consuming and expensive. People are often naturally cautious of life insurance when they cannot understand the labyrinth of terms, scenarios and cost structures set out by the policy. This is a financially healthy perspective to take and reflects awareness of possible red flags in the insurance acquisition process.

Clarify

The terms of life insurance influence cost, however these conditions are not always favorable. For example, in a CBS MoneyWatch report, it is pointed out that the age of an insured person at the time of death affects pay outs. If this age range is unrealistic, then the benefits of the insurance are less likely to be obtained. When reviewing a policy ask specific questions that clarify broad claims. For example, if an insurance agents says the return of policy X will be Y amount per year that may be true, but is that before or after additional surcharges and fees? 

Research

Numerous variables affect the quality and cost of life insurance. For instance, according to the Wall Street Journal, life insurance agents have an advantage over brokers because they can offer lower rates by working with a single insurer. Being aware of all the factors that influence a policy as well as the various types of policies is important. To build consumer awareness, also consult and compare insurance ratings from companies such as A.M. Best, and take time reviewing the policy details before signing anything. 

Evaluate

Knowing how to assess and evaluate life insurance involves more than just referring to ratings and assuming it is the right financial decision. To illustrate, the insurance needs of a single person with no debt and no children are far different from those of an indebted single parent of three. Identification and incorporation of financial planning goals, in addition to individual and family needs is prudent before embarking on a long-term life insurance contract. Completing a life insurance question list such as the one provided by the Motley Fool Insurance Center is one way to accomplish this task. 

Decide

There should be no pressure to decide whether or not a life insurance policy is the right choice. Offer expirations, time related policy benefits and incentive rates are somewhat relevant, but also distracting to overall financial objectives that are more important. Effective policy choices take into account individual health, available insurance products, agent compensation and much more. Self-educating via sources such as CNN Money's "Money 101", rather than relying on just what a salesperson says helps with making informed decisions. 

Life insurance is a financial instrument that serves to protect financial needs and interests in addition to being a potential source of retirement savings. Life insurance products do have some advantages such as creditor protection, however they also have costs and require substantial financial commitment. When assessing life insurance, and in order to fully benefit from a policy, it is wise to consider future financial scenarios such as affordability after layoff, and opportunity cost in addition to financial security.

A complete guide to self-directed individual retirement accounts

By Rick Pendykoski

Provided by financial partners, custodians and CPAs amongst other licensed and authorized entities, having a self directed individual retirement account (IRA) is one of the most effective and easy ways through which you can save on the taxes  you pay and accumulate significant savings for good use in the future.

A self-directed individual retirement plan is an arrangement where you establish a retirement account and reserve the sole rights to dictate on what types of investments your accumulated funds are invested in, on behalf of your retirement plan. Your custodian or trustee merely serves the role of maintaining the assets and records of transactions relating to the same. Your custodian also has the responsibility of filing reports as required under IRS regulations.

 

IRA benefits

There are several benefits that you obtain by establishing a self directed IRA. They include:

• Doing so expands your investment options, meaning that you are no longer restricted to such traditional investments as CDs and stocks.

• Establishing an IRA provides you with the best opportunity to diversify your investment portfolio.

• You have the freedom of choosing where to invest your IRA funds.

• Establishing a traditional IRA means you enjoy tax reprieve on your deposits.

 

Investment Prohibitions

The fact that establishing a self directed IRA gives you the freedom to dictate how your funds are invested does not mean that you can invest in any vehicle you choose. Under IRS regulations, you are prohibited from investing in such vehicles as life insurance, collectibles (artwork, rugs and antiques) and particular metals. 

You are also prohibited from irregularly using your IRA such as borrowing cash from the account, using it to secure a loan and selling property to the account amongst other prohibitions. You are however allowed to invest your funds in real estate, mortgage, stocks, partnerships, precious metals (gold, silver and platinum) and franchises amongst other investment vehicles.

 

Types

There are basically three types of IRA you can establish to grow your retirement funds as an individual:

• Traditional IRA – At times referred to as Regular IRA, traditional IRA gives you the opportunity to contribute and at the same time take out a deduction from your contributions. Withdrawals are however only permitted after you have attained a specified age. Although your contributions remain tax-free, your withdrawals are subjected to tax using IRA calculators.

• Education IRA – This is the most suitable IRA you may establish in case you have a child below the age of 18 years. The account gives you the opportunity to save for specified higher education expenses for your child or other beneficiary with all your savings being tax-free.

• Roth IRA – This is probably the simplest types of IRA that you can establish. It tax regime differs from the other two in that you pay any applicable tax before making any contributions. This means that any both your contributions and resultant growth are never subjected to taxation. Furthermore, you can withdraw your funds at any time that you wish.

An IRA is not only available to individuals. Self directed retirement IRA plan is also available for small businesses. You can opt to establish this in case you operate a small business and reap the tax benefits that accrue. Like with a personal IRA, all contributions to a small business IRA are also tax deductible.

Your retirement investment options have never been that open with IRA. You only need to ascertain the most suitable type of IRA to establish. In choosing a type of IRA to establish, it may be necessary to make use of IRA calculator to ascertain the level of taxation you will be subjected to. You may also choose to establish a personal IRA, small business IRA or both, depending on your retirement investment need.

Rick Pendykoski, is an expert on retirement savings plans. In this article, he discusses various self directed IRA however, he finds self directed IRA to be the most suitable one. To learn more about LLC retirement plans, visit sdretirementplans.com

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How ill-gotten gains are legally bypassed

As evident in the infographic below, investment banks and the Treasury Department make money via an unspoken collusion of rewarding ill-gotten gains via the guise of  economic stewardship. One need not look far to see how the Securities and Exchange Commission, and a seemingly weak or soft-handed judiciary has fallen short of firm financial regulation countless times.

In the past, the SEC has even admitted as much per the New York Times. Steve Denning, a contributor to Forbes magazine reiterates the problem that big banks are still getting away with risky derivatives trading that has the potential to cause another financial meltdown. Why? The reason, according to another NYT article by Gar Alperovitz, is that Wall Street is too big to regulate. However, the lucrative fines that are redistributed to the Treasury and cost-benefit of the fines to financial institutions offer another reason, specifically financial incentive.

Source: Wall Street Crimes: What Financial Advisors Don't Tell You via Infographic File: Infographics and Data Visualization

Careers in finance: Bankers vs. financial planners

By Amy Knapp

According to a recent report, careers in banking and financial services are some of the highest paid in Australia. But are they worth it? Is the $90,000+ salary worth the high stress and fiduciary responsibility, long hours and lack of freedom?

Careers in banking can be very lucrative, especially at the senior management level. But before you jump into a degree in finance or a low level banking job in hopes of a big promotion, consider some of the things you might be dealing with on the job.

Anyone who works at a bank is obliged to the CEOs and shareholders. Bank employees are under constant scrutiny to bring in the big dollars required meet constant demand for sky-high salaries and year-end bonuses. Because of the bonus tradition, there will almost always be pressure from someone higher up.

Not your sky-high salary, of course. You’ll spend the greater part of your career working your way up to a position you may never get. Senior management positions often require a postgraduate degree, years of experience and an outstanding track record. At the very least.

What’s more, you will rarely get any thanks or appreciation. In corporations that large, no one is going to pat you on the back. In some ways, it can be a thankless profession. All work and no play.

Most important to recognise is that you will always be an employee. Even when you get to the upper echelons of the banking industry, long hours will always be required of you. Your vacations will always be regulated. While you may not need to get them approved, you will inevitably have to navigate around your employer’s priorities.

So why independent financial planning?

If you’re truly set on a career in the financial world, you might consider a career as an independent financial planner. Successful people in this profession get a lot of the same perks bank employees do, but without the downside. For example: It’s personal; in a bank you rarely get to build long-term relationships with clients. As you are promoted or moved around in the corporation, your clients are transferred to other advisors. As an independent financial planner, you take your clients with you your whole life long. Relationship building is all part of the fun.

You can offer clients honest, comprehensive services. Banks are limited to the products they offer. When you work for yourself, you can offer virtually any product you think may be good for the client. Service can be customized in a way that is simply not possible at a bank. You can’t put a price on this kind of integrity. At the end of the day, you can be confident you offered the best, most appropriate service to your clients.

You can choose your own hours. At the bank, the clients are sent to you directly. No muss, no fuss. The corporation advertises for you and sends the clients to your door. As an Independent Financial Planner, you have to hustle. Early in your career, you’ll be putting in hours of cold calling and making the hard sales. The bonus is that you will be creating a clientele that is your own, that will return to you again and again for their needs. The fee-for-service model means you can set your own schedule, decide how much you want to make, how many hours you want to work and go from there.

You’re self-employed. Need more be said on that subject? You vacation when you want and work as much as you want. You choose your own desk. If you don’t want to work in a bland, grey office you don’t have too.

You build a residual income. This is perhaps the biggest factor of all. When you work independently, you earn a small percentage of the returns on all of the amount of money you manage. After ten years on the job, your residual income represents a substantial amount of money annually.  When you work for a bank, all of that income goes back to the bank. If you want to make the move to lucrative jobs in self-employment, you start at zero. Is that enough motivation for you?

About the author: Amy Knapp is an HR blogger for InsideTrak, where you can search jobs with anonymous employees reviews from employers across the country.

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How protective is your emergency fund?

By Jennifer Langley

Everyone should have an emergency fund regardless of their age or financial status. Not only can one of these funds protect you in the event of an emergency, but they are also a great way to learn about the importance of saving money. Even if you are just getting ready to move out of your parents' house for the first time, you should already be considering how much money you can put into your emergency fund on a monthly basis.

How to build an emergency fund

Most people in the U.S. live paycheck to paycheck, and this can make it very difficult to put any money aside. Unfortunately, these are also the same people who will find themselves in the most financial trouble if even one thing goes wrong. Therefore, it is necessary to make some sacrifices in order to build an emergency fund.


Even if you can only afford to put aside $5 a week, it is better than nothing, and over the course of the year you will save $260. Hopefully you will not have to touch the fund for many years, but if you end up with an unexpected car repair or other issue, it will be much better to have even $260 set aside than no money at all.

Why do I need an emergency fund?

Life is unpredictable, and it is always a bad idea to use a credit card to deal with an emergency situation, especially if you have limited financial resources. Consider for a moment where you are going to get the monthly credit card payments from before you simply move forward with a credit card purchase.

If you do not have an extra $100 a month to make a credit card payment, then you are not in a good position to rely on a credit card. Instead, you should have your own emergency fund in place that will help you replace your transmission, pay for a medical bill or cover your expenses if you miss a couple of days of work due to getting the flu.

No matter how well we take care of ourselves and our possessions, things will inevitably break down and we will eventually become sick. Therefore, the only way to keep ourselves from becoming buried by debt is to dip into an emergency fund instead.

What if I really cannot afford an emergency fund?

There are very few people who actually spend every dollar that they have in a careful way. Consider what your current bills are, and whether or not you actually need to keep all of them the way that they are. For example, if you have premium cable channels, you could easily save $20 or more a month to put into an emergency fund by canceling them.

Keep in mind that there are cheaper entertainment alternatives such as Netflix Instant Streaming if you are a movie addict. Another thing that a lot of people spend money on is a daily cup of coffee. Instead of getting it from a restaurant, you should make your own. The money that you save will give you a nice start to your emergency fund.

What if my emergency fund does not cover my expenses?

There will be some instances when your emergency fund will not have enough in it to cover all of your expenses, but it is always better to cover as much of the cost as possible from your fund. That way, if you do need to get a loan or use a credit card, you will be able to pay it back more quickly and in smaller installments.

This article was written by Jennifer Langley. Jennifer is an avid finance writer who stresses the importance of protecting oneself before venturing out into any endeavor.

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How the risk-free interest rate is determined

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On the surface a risk-free interest rate is perceived to be the rate of return on an a financial allocation that has no financial risk associated with it. However, 'risk' itself is a word that has more depth to its meaning when coupled with financial instruments. This is because risk also includes the influence of variables such as devaluation from inflation, opportunity cost, and issuer default.

According to Aswath Damodaran of the New York University Stern School of Business, risk-free assets have no variance from the expected rate of return. In other words, what you see is what you get without question; an example of such being guaranteed fixed interest rates. In this sense, risk-free rates do not have to be universal or the same across financial instruments such as savings accounts and government bonds, but do have to possess a strongly assured yield. 

Risk-free interest rates do not include a 'risk premium' or an added amount of interest yield that accounts for the risk associated with investing or depositing money into a financial instrument. For example, a 5 year corporate bond from Company A offers 4.5%, whereas a 5 year bond from Company B offers 5.6% These yields differ with perceived risk as measured in part by credit ratings. These ratings are determined by credit rating agency methodologies such as those used by Moody's. 

To illustrate 'risk premium' and 'risk-free rate' further, bond issuers with lower credit ratings have more credit risk associated with them, and are not therefore 'risk free'. The risk premium is determined by market forces such as the rate of return  investors are willing to accept for financial instruments  priced at certain levels with specific levels of risk as defined by credit rating and investor valuation(s). The risk free rate is often bench-marked using a shorter-term financial instrument such as 3-month Treasury Bills according to Rutgers University. 

Even if an issuer has a very high credit rating and is considered 'risk free', that can change. A recent example of this, and as reported by Reuters, was when the Standard and Poor's Credit Rating Agency lowered of the U.S. Government's credit rating from AAA to AA. These changes are somewhat predictable via rating agency 'outlooks', but for longer-term time horizons, are not always so clear. It is for this reason that a risk-free short-term financial instrument is not actually risk free when longer loan terms exist for the same issuer and instrument. 

What constitutes a risk free rate is not constant, and multiple financial vehicles can be considered to have risk-free rates.  For example, a financial statistics class at The Wharton School of Business considers a 1-month Treasury Bill as being risk free instead of a 3-month. This difference in opinion is further highlighted in a report by the financial consulting firm Value Advisor Associates. Moreover, in the report, both 5 year and 10 year financial instruments are considered acceptable proxies for the risk-free rate due  to factors such as upward sloping 'term-structure' i.e. higher rates of return for longer duration bonds.

5 reasons why securities transactions assist with financial goals

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Securities transactions include a wide range of financial products. Carefully investing in a number of these is beneficial to financial goals in a number of ways. If this was not the case, many pensions and retirement accounts would not have the values they do. Moreover, securities transactions are essential to effective financial planning whether the transactions are made independently or not. After knowing which financial instruments to utilize, securities transactions are able to facilitate several financial objectives.

1. Profit

The first, and most important reason to participate in securities transactions is profit. Without it, investing would not be a worthwhile venture. In order to make profits, one must correctly allocate funds at risk levels proportional to one's tolerance for risk and loss. For example, the higher a particular securities transaction's risk becomes, the less amount of money is used to accommodate that risk. This helps ensure money within a portfolio is earned and not lost.

2. Hedging

Another good reason to engage in securities transactions is risk management. Hedging not only helps minimise risk exposure, but improves optimisation of one's capital allocations for potentially higher gains. To illustrate, an investor places 10 percent of his or her retirement account capital into small-cap stocks in an industry that is forecast to grow rapidly in the next five years. That same investor hedges this amount by allocating 60 percent of his retirement account's liquid assets into a bond fund consisting of of AAA rated international bonds.

3. Diversification

Diversification is used for hedging, but is different because the principle behind the diversification has less to do with how the transaction is made, and more to do with what the transaction buys. More specifically, diversification works by partaking in capital allocations across a number of industries via financial vehicles such as foreign exchange spread betting, whereas hedging is only performed via individual transaction construction such as a stop-loss order in forex, or bear put spread in stock options trading.

4. Security

Financial security is built through well implemented transactions. Over time the right money management decisions become the catalysts for financial security. However, to avoid investments leading to financial havoc, carefully planning transactions with financial professionals to meet individual or household financial planning objectives is often a good idea. With a well planned portfolio, financial security should grow to meet investment benchmarks, or provide an income via income investing strategies.

5. Retirement

Last but not least, securities transactions facilitate a good retirement. As investors move through life stages, they often make changes to their prior financial decision making, or restructure their investment plan to better meet retirement objectives. For instance, higher 401(k) contributions allow a more rapid saving, and reallocation of funds account for changes in economic conditions. Furthermore, a greater knowledge of new or specific financial products allows for a wider choice of financial transactions.

Social Security's unknown future and 401(k) investing

One of the great political questions of our day is whether or not Social Security can be saved, and if so, how?

 

There are many competing voices in the press, from financial advisors, the elected officials on Capitol Hill, and other politicians, about what is the best solution for the ills that plague this government institutionalized program that began under President Franklin D. Roosevelt. It is crisis time for many Americans who depend on their monthly disbursements, and all they want is a reasonable and sustainable solution that will guarantee them that the money they were forced to place in this system actually returns to them.

 

What was Social Security supposed to provide?

Many millions of Americans rely on social security benefits to meet their monthly financial needs, and most aren’t swinging from grand chandeliers in palaces of gold. Social security was never intended to be the sole providers of retirement income. In the past, family members, churches, and communities banded together to take care of the aged members of society.

Over time, since the Great Depression, the government saw and took an opportunity to tell people that they were unable to save, invest, and provide for themselves.  Instead, the government would take part of their income and sock it away until one turned 64 and they then would get their money back in monthly increments. This is not an investment but a taxation, mind you. Congress has used this money for years for other purposes, radically depleting the social security account our nation is supposed to maintain. Both major political parties have varying solutions to the problem without confessing that they are the problem. It has become a piggy bank that simply does not get repaid. “Just print more money,” seems to be their mantra.

 

Affect of the Babyboomers 

Now with our aging population, suddenly concerns about the veracity and sustainability of social security have come to the forefront of political talk and rightfully so, our population is worried.

For many who have seen their 401(k) accounts melt away in the radiant remains of the current economic downturn, their government check each month has increased in value and importance to them. New strategies have had to be employed as worry and fear about being able to continue a certain quality of life have run head on into the reality of their former dreams and goals about retirement.

 

Hope is still alive

Still, opportunities exist for those who are seeking to rebuild their 401(k) so they are able to still fulfill their retirement dreams and goals, but it will take finding the right financial advisor. Rock Hill retirement planner Matthew Griffin suggests that relying on your company’s 401(k) manager is not wise because their job is not to help you plan for your future and they typically are not investment experts.  This new era requires a steady and sober approach to the marketplace if one is to rebuild their accounts and get back on course. He also suggests that people under 40, who still have more time to rebuild than those who are older, should not allow that extra time to make them unworried.

Griffin suggests you take hold of the freedom we have to be more in control of your economic future, especially since social security may not be around by the time that age group retires. It is less about being aggressive in the marketplace than being wise with your future. Let your money work for you. Regardless of what plan Congress finally decides on, social security will never match private sector growth (or the potential of its losses) but with a little help from a financial advisor, you can climb the mountain of your future goals with confidence and hope. 

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The Self-Employment 401(K)

It is a common misconception among contractors and other self-employed individuals that they do not have access to a 401(k). The individual 401(k), aka a solo 401(k), has been a legal tax deferred retirement option since 2001. The problem has been, and still is, that very few people have heard of it and only a few investment companies offer the option. Vanguard, Fidelity, and E-Trade are all offering these plans now. Here are a few details about this retirement savings option.

 Solo 401(k) Details

• You can contribute up to 100 percent of the first $17,000 your business makes.
• Although it is called a solo 401(k) your spouse can be part of the plan if they work for your company.
• If you work for another company full time and have self-employment income on the side, you can contribute to your company's 401(k) and a solo 401(k), doubling your retirement contributions. In this situation, you can only contribute 25% of your profit instead of the $17,000 limit.

What Paperwork is Required

There is, of course, some government required paperwork to establish a solo 401(k). This is minimal, well minimal for the government. It may take up to an hour for the initial round of paper shuffling. Then there are some guidelines and filings to keep in mind. You will need a Federal Employer Identification Number(EIN), which takes all of five minutes to get online at irs.gov. You do not need the EIN if you are incorporated. If you are unincorporated, you will need to use the EIN for the 401(k) paperwork and enter it, along with your Social Security number, on Schedule C of your 1040 at tax time. If you find yourself in the enviable spot of having more than a quarter mil in the 401(k), you have to file an additional form with the IRS.

TurboTax versions that support self-employment income understand solo 401(k) contributions. This should help at tax time. Unfortunately, these accounts are so unheard of that some accountants do not know what to do with them. You may want to make your accountant aware of what you are doing so that they can get up to speed before it is time to file.

The guidelines and points of interest mentioned above are only a few of the items to be considered before you open an individual 401(k). Make a call to all three of the investment firms mentioned above and ask for information. Each may offer a different set of investment options within their plan. Once you have these in hand, talk to your accountant again. It never hurts to have a second opinion on where you are going to invest.

This article has been provided by the finance experts at GetApprovedforaCarLoan.com.  We help people get approved for financing, even with bad credit.

Why traditional financial advice is a joke

Wake up folks and smell the home brew, because when you're looking for jobs in your pajamas, you aren't going to be able to afford Starbucks (complimentary ad, you're welcome). Traditional financial planning and saving methods are undeveloped, cater to mid-to-high income levels, and are unrealistic in an economy with an increasing amount of working poor, and working age people who have given up looking for work.

Financial advisors, or planners also often only deal with clients with net worth over a certain amount of money. Obviously many low-income people have the intelligence they need to manage their own finances, it's the advice and lack of money that is faulty. How can someone have a back up plan when they are trying to pay for rent and food, and only have a couple of dollars left over?

The reason old money management methods do not really work is because it is so easy for a simple, but devastating medical event, or a layoff in a right to work state to ruin years of financial planning in a heartbeat. Traditional plans are based on stable incomes in a solid economy; they are obsolete like a manual typewriter, and assume people have job stability. For example, according to the Wall Street Journal citing DOL data, 73 percent of American adults work 9 or fewer years with a single employer, and 52.8 percent stick around for less than four years.

If traditional financial plans were really effective, they would be able to handle worst-case scenarios, and help individuals achieve financial goals at the same time without relying on a trite formula that simply reallocates assets, and reorganizes budgets. For example, television financial evangelists with their loud piercing voices and savvy investment advice are like the financial advisors of 1928 still playing cards and commenting on the game rather than telling people to think in realistic terms. After all, 1928 was very profitable.

A new kind of thinking needs to evolve in financial advising, a kind that helps multiple income levels. Even the rich can end up at the food banks, and it is too easy to just advise people how to manage money, when really what many people need is a plan of how to make less money work smarter, and how to get the money in the first place. Financial advisors should also be life management consultants that understand the world is not the prosperous, linear, black and white, "father knows best" place it used to be.

To get you started, the following comparison illustrates the contrast between ways of thinking about saving money. On the left are more mainstream ways of saving money; even these tips are the type of advice high-end financial planners try to avoid. On the right are money saving alternatives for low-income individuals or households. These represent a meager lifestyle that is attainable within a low-budget and is often far beyond what we many are accustomed to practicing in their daily lives, but might have to after retiring, losing a job, receiving a harsh medical diagnosis etc.   

 Mid-to-high income saving tips                Low-income money saving tips

  

1. Build emergency account	1. Sell everything
2. Bulk shop	2. Fishing, edible vegetation
3. Refinance mortgage	3. Move in with relatives, R.V or Van
4. Go to state school	4. Learn at library, or earn jail degree
5. Downsize vehicle	5. Tax free old vehicle, scooter, bicycle
6. Turn down pool heater	6. Shower at the gym
7. Bundle utilities	7. WiFi, Antenna, VoP phone
8. Downgrade theater membership	8. Freegan events -ex. Art gallery
9. Extend salon visits	9. Learn to cut & style hair
10. Sale shop only	10. Dollar stores, & church garage sales

 * Left image attribution US-PDGov

Apocalypse on a budget: How to prepare

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An apocalypse requires more financial planning than a smaller disaster because the affects are more widespread. If the probability of an apocalypse is high, more reason exists to utilize part of one's budget for that apocalypse. When budgeting for any apocalypse, reallocation of funds into non-conventional currency such as seeds helps ensure wealth in a post-apocalyptic era per Recession Ready America. Once an apocalypse strikes, traditional money management techniques change along with the value of assets, but the principles stay the same.

Ice Age

If an ice age is imminent, then preparing for that ice age would be a logical consideration within a budget. Depending on where one lives this could involve seeking affordable sources of home insulation and investing in alternative food sources to prepare for a rise in food prices associated with the decrease in global agricultural land. Self-sustainable heating resources such as active solar heating outlined by the U.S. Department of Energy can be used to save money regardless of an apocalyptic occurrence, and is consequently also a way to hedge one's budgeting for an ice age.

Nuclear

Budgeting for a nuclear apocalypse may require a second mortgage or access to radiation protected food and water. The Oregon Institute of Science and Medicine states unsurvivable nuclear winter is a myth and that dust tight containers, and deep wells would not be contaminated by nuclear fallout. For those seeking nuclear residences Popular Mechanics reviews six types of bomb shelters one of which starts at $40,000 and includes filtration systems, and another called the Earthcom Dome which starts at $420,000.

Deluge

After worldwide massive flooding caused by global warming the sea level rises circumstances change. Naturally, this would make higher elevations more favorable and influence the price of inland real estate. Budgeting for deluge includes things like emergency supply kits recommended by the Federal Emergency Management Agency (FEMA), flood insurance, boating and fishing equipment are investments that would be more likely to pay off in a deluge apocalypse. Moreover, since there would in effect be more sea, ocean and rivers and less land, water related food sources such as fish would increase in contrast to land sources.

Earthquake

Massive earthquake activity on a global scale can domino into an apocalypse if the affects are compounded by tsunamis, and ensuing destruction of global infrastructure. Earthquake related apocalypse, as with many types of apocalypse, can necessitate an alternative living arrangement. The New York Times natural disaster map illustrates the safest places from an earthquake in the United States. If such arrangements are postponed, travel expenses and food expenses will have to be accounted for after an earthquake related apocalypse. 

Economic

James Buchanan of the Cato Institute emphasizes the need for security in anarchic settings that conceivably would coincide with an economic apocalypse. In other words, since an economic apocalypse involves a failure of the world economy such that the majority of the global population can no longer realistically sustain itself, a high competition for limited resources would ensue. Moreover, budgeting for security in this type of apocalypse is plausible because the economic resources that once funded public services would become limited.

Top 5 U.S. cities to retire in

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In terms of tax laws, cost of living and affordable quality healthcare, several U.S. cities and states stand out as being retirement-friendly. Other factors such as low levels of property crime, commuting and climate add to the benefits or retiring in some of these places. Although these are all important variables to consider when seeking a place to retire, it's also a good idea to review personal retirement goals with a financial professional in order to optimize financial aspects of retirement decision making.

1. Charleston, SC

Located in an area known for its tax friendliness and relatively low cost of living, Charleston offers warmer winters and numerous cultural charms for a multitude of retirees. Affordable access to beautiful public beaches and parks also make Charleston a great place to retire. According to Trulia real estate listing services, South Carolina properties rank in the middle tier in terms of average national costs.

2.  Louisville, KY

Home of the Kentucky Derby at Churchill Downs, Louisville is listed in Kiplinger's most tax-friendly states for retirees. It is also in the sixth least costly state to live in per the Missouri Economic Research & Information Center (MERIC). And while healthcare is not as affordable in Louisville as in other places, neighboring Indiana just a few miles away does score higher in the Commonwealth Fund healthcare rankings. Real estate in Kentucky is also more affordable than many other places in the country per the Trulia real estate heat map, and state crime rates are lower than average according to U.S. Census data.

3. Pittsburgh, PA

Pittsburgh offers some considerable financial benefits to retirees, many of which can be transposed to the whole state. Pittsburgh ranks among the five best U.S. cities for commuting and top 25 for retiring by Forbes, and the state is considered among the most tax-friendly to retirees by Kiplinger. Pennsylvania also scores higher in healthcare quality per the Commonwealth Fund, and low in cost of living per MERIC. Additionally, despite having relatively high inner-city crime rates, Pittsburgh has safe suburbs per Neighborhood Scout.

4. Oklahoma City, OK

Oklahoma places first among U.S. states with the lowest cost of living  which lowers retirement expenses for those living around Oklahoma City. Moreover, in addition to having affordable real estate prices, Oklahoma is also considered to have some of the best municipal and state taxes for retirees in the country per Kiplinger. U.S. News reports Oklahoma City to have comprehensive healthcare coverage, and retirement here may benefit those retirees seeking to live with a demographically younger population.

5. Honolulu, HI

Although Honolulu is among the U.S. states with the highest cost of living, it's rated among the top 10 safest cities to live in with populations above 500,000 by the Morgan Quitno Press State & City Ranking publications. This, nearby deflation of real estate purchase prices and its reasonable climate can offset some of those costs with lower property insurance premiums, heating and cooling costs. Additionally, U.S. News ranks Honolulu  among the best cities for public transportation. Honolulu is also ranked within the top 10 states for overall healthcare services by the Commonwealth Fund.

Guide to dividend payments

Diagram: How corporations allocate dividends

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Shareholder dividends are a form of monetary distribution most commonly paid to owners of business stock and mutual funds. The dividends for company stock are made from corporate earnings and income earned from mutual funds. In the case of mutual funds, how the dividend is treated depends on the type of investments made by the fund. For example, bond funds are sometimes exempt to state tax because they invest in tax free bonds. In the case of corporations, the issuance or increase of a dividend sometimes leads to an increase in stock trading activity.

Corporate dividends are issued by boards of directors, and increases or decreases to dividend amounts are typically announced via quarterly reports. To qualify for a dividend payment the shareholder has to own the shares by a specific date. This date is called the record date. In addition to owning the shares by the record date, the shareholder must hold the shares until the ex-dividend date, the day of dividend distribution.

When dividend payments are made, they are either deposited directly into a Federal Deposit Insurance Corporation (FDIC) insured account such as a money market account or a FDIC defined non-insured investment sweep account. As an alternative to having funds deposited into a sweep account, dividends can be reinvested into the issuing corporation via a Dividend Reinvestment Plan or DRIP. Dividends may also be paid into retirement accounts and life insurance polices that hold shares in either stocks or mutual funds.

Qualified dividends

Qualified dividends are paid to investors at a lower tax rate and generally dividends issued by U.S. Corporations. Moreover, qualified dividends are taxed at a maximum rate of 15 percent per the Internal Revenue Service (IRS). Income earners in the lowest tax bracket pay less than 15 percent according to the brokerage firm Fidelity Investments. Qualified dividends earnings are are reported on a Form 1099-Div that is typically sent to taxpayers in January of each year and use for tax filing purposes on IRS Schedule-D.

Ordinary dividends

The IRS describes ordinary dividends as payments made from the earnings of corporations that do not qualify for the net capital gains tax rate. One such qualification is the holding period of shares. For example, when shares are not held by investors for a certain amount of time they are paid as ordinary dividends. According to Fairmark, mutual funds that are owned for 60 days or less don't qualify for lower tax rates. Since ordinary dividends are not subject to a maximum of 15 percent tax, they are taxed at the regular income tax rate.

Special dividends

Special dividends are usually one time, larger than average dividends paid to shareholders when corporations have extra earnings. In the case of public companies, these dividends are reported to the Securities and Exchange Commission (SEC) using a Form 8-K. It is important to note that share prices can drop proportionate to the size of the dividend on the ex-dividend date. For example, if Company A has a share price of $100 and issues a $10 special dividend per share on January 26, then the share price opens for trading at $90 on that ex dividend date, it is most likely due to the special dividend according to the Motley Fool.

Guide to surety bonds

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Surety bonds are a mechanism that protect individuals and businesses from certain kinds of work or service related performance problems. For example, according to the Small Business Administration (SBA) surety bonds on contracts are like insurance, and guarantee individuals or organizations work will be finished according to predetermined specifications. Moreover, in the case of payment surety bonds, those completing the work are guaranteed payment per the SBA.  

Depending on the service being performed and which party is seeking guarantee, specific kinds of surety bonds are used. According to State Farm Insurance, many kinds of surety bonds exist including permit bonds, contract performance bonds and public official bonds. Each type of bond serves a particular function of surety. To illustrate State Farm also claims license bonds assure clients whose contractors are 'licensed and bonded' that they will receive services such as electrical work within allowable standards. 

Surety bonds are not like Treasury bonds that are purchased in full and pay interest. Neither do they pay for claims like insurance companies do according to JW Surety Bonds. Rather, only a percentage of the surety bond's full surety coverage is paid by the buyer to guarantee service, work or payment. To make a claim against a surety bond, a filing of that claim and subsequent investigation similar to other types of insurance takes place. However, unlike many types of insurance, the buyer of the surety bond and not the seller is responsible for payment or service.

If a business, contractor or official holds a surety bond, it not only gives 'surety' of their services, but can improve their marketability. This is because guaranteed service is more likely to have a higher value to paying clients and assuming competitive pricing and functions of a business, provides a market advantage if competing businesses are not bonded. In some cases, especially in reference to government services, surety bonds are mandated. For example, surety bonds on Medicare equipment supplier services are required by the Department of Health & Human Services.

For buyers of services, it may not be enough if a business simply states it is bonded. The specific type of bond and the buyer's right to make claims against that bond are ideally verified for good measure. To confirm the authenticity of surety bonds the registration of the surety bond issuer can be verified with the U.S. Treasury Department. Following this, and upon successful identification of issuer legitimacy, that issuer or surety company can also be contacted to determine whether or not a specific company or service provider is indeed bonded.

How book building works

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Book building is the valuation of  new financial securities carried out by securities underwriters known as book runners. When a company issues new bonds or shares, they have to be priced. This pricing is performed by the book builder(s) who market the new financial instruments for the issuing company. This price assessment is partially based on a measured demand for the security by both institutional, private and public investors. However, book value for securities is also determined using financial formulas such as the discounted value of future cash flows.

Initial public offerings (IPOs) such as the Dunkin' Brands Group, Inc. IPO in July 2011 serves as an illustration of how  additional issuer based valuation influences book building. The IPO had shares offered at $19 per a July Wall Street Journal report. Arriving at this initial offering price is theoretically the role of book building, but is also be influenced by the issuers capitalization needs. In other words, if the IPO is designed to raise money, the amount of money to be raised can influence the IPO price per share regardless of book building valuations.

In light of the competing motives behind IPOs the process of book building involves capitalization requirements, buyer demand for financial securities, and actual valuation of corporate worth as represented by the financial security. Some financial observers also believe book building undervalues valuation. For example, in academic research published by New York University and authored by two professors named Boyan Jovanovic, and Balázs Szentes, it is suggested initial public offerings are pre-valued below actual worth before soliciting bids from buyers in an effort to share 'super-normal' returns with preferred clients for business purposes. 

The actual value of shares to be offered via an IPO are only issued shortly before the offering takes place according to research in the Journal of Corporate Finance. Moreover, according to this research, yet another variable affects the valuation of book building. Specifically, regulatory environment as evident in the form of opt out rules. In other words, the author of the study demonstrates that since book-builders can withdraw their offering of securities if demand is not high enough, the undervaluation that can take place during IPOs is accepted due to the surety made possible via the opt out option.

The function of book building is fundamentally straightforward, however what actually happens when organizational entities seek to raise funds by issuing financial securities via book-building isn't quite so simple. This process and the valuation of securities is carried out by book-builders that are securities underwriters or book-runners. However, the actual price of the securities offered, IPOs in particular, are affected by several factors including book-builder financial motives, the issuer's financial security, and investor demand.

A look at financial freedom

Everyone knows how to gain financial freedom the hard way, but what isn’t quite so evident, is how to gain financial freedom quickly, easily and with no risk i.e. effortlessly. However, societal structure is not designed for this, but rather to the contrary. Perhaps if all humans were wealthy no one would work. Even so, how does one gain financial freedom in 30 words or less? i.e. with a straight answer that doesn’t wander off into the world of rhetoric, or semantics.

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Since 30 words have already passed, the answer to that question should now be evident. That is to say, the answer to this question is, if financial freedom doesn’t already exist, chances are it can’t be found in 30 seconds or less. That’s a reality hurdle that can make attaining financial freedom that much more possible. Having said that, before explaining how to gain financial freedom, it is important to first define what financial freedom is as it is a loaded term that differs based on perception of what it is.

For one person financial freedom may be living a life of luxury without having to work, but for another it may simply mean being free of the concept of money altogether. The path toward financial freedom is different for both types of financial freedom. Being free of the idea of money altogether is actually harder to do because it is such a prevalent aspect of so many economic systems.

When effort is thought of as overcoming personal, cultural or economic friction, that effort is at least somewhat determined by the level of that friction. For example, one who does what comes naturally i.e. out of  un-manipulated personal choice while earning money doing so, can be thought to be making less effort than one who does something that earns money against his or her will. In such case, the former of the two makes less effort to gain financial freedom because the path to that financial freedom is more effortless. Thus, the first step toward gaining financial freedom effortlessly is to do what comes naturally.

For the person who seeks to avoid training his or her mind to acquire financial freedom, a more literal, and even more effortless notion of financial freedom is alluded to. The lottery winner almost fits this criterion, but is accompanied by the one key caveat of low probability. Thus, how to achieve financial freedom with high probability in addition to minimal effort is the question. The answer to this question is to find the financial opportunity that has high probability of success, is accessible, and requires little or no effort to implement.

Naturally, the next question in how to gain financial freedom might be, if financial opportunity is required, how does one find financial opportunity. Now the notion of financial freedom is gone, and instead replaced by the more accurate question of how to gain financial opportunity that pays. The easy answer is of course to look, but this would be followed up with the question, where does one look? The answer to this question varies, but can be quickly answered by saying, look where money is most easily acquired, but think in a way that is not designed for the macro-economic mass.

Obstacles to financial planning success

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To claim a single reason why some people fail to achieve financial freedom would be questionable, as semantically, we don't really know 'who' of the 'some' we are referring to. However, taken less literally, and more approximately, there are several reasons why some people fail to achieve financial freedom. These reasons include far more than closely correlated financial concepts such as arbitrage investing, effectively rolling over retirement plans, and taking advantage of available tax deductions.

Priorities

Some people fail to achieve financial freedom because priorities can compete among each other. For example, if one has a top priority of restoring a car, the cost of that restoration must be lower that than the top priority unless the top priority is amended to include restoring a car within a budget.

The example of automotive restoration accents the importance of integrating priorities so they do not conflict. Thus budgeting, and financial planning ideally go hand in hand with life goals so together they all improve and in the case of money, lead to financial freedom.

Skill

Growing money is a skill that more often than not requires adeptness at applying a certain amount of know how. Basic principles of money management are essential to achieving financial freedom, but more may be needed to achieve financial freedom. The inability to execute financial skill via  an effective financial plan is another reason why some people fail to achieve financial freedom.

In other words, people who fail to achieve financial freedom may benefit from a flexible, productive, intuitive and demonstrable financial plan. If the results of that financial plan cannot be measured as consistently moving toward financial freedom within an applicable time frame, then evidence of a strong financial plan is questionable.
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Adaptability

Adversity can have a dramatic affect on financial goals, even those with financial know how. For example, a successful financial manager who loses a job, a sudden unpredictable tragedy in life, or an error in what may otherwise be a good financial plan can all have a negative affect or result in set backs of the goal of financial freedom.

To deal with adversity it is good to be able to have risk tolerance, accept loss, and have financial resilience. Being resourceful, adapting to change and seeing opportunities in situations where there seems to be none are ways to work toward financial freedom during times of adversity.

Capacity

Different people have varying capacity to obtain financial freedom. Capacity includes skill, but is not limited to skill. Capacity to achieve anything requires focus, understanding, willingness, and circumstance. It represents the overall probability of achieving financial freedom.

Not having the capacity to achieve financial freedom is a major obstacle to that goal. Some people might not achieve financial freedom due to this. Capacity also includes things like leverage, low costs, career, birthright, and other measures of financial strength. Capacity is not unattainable in most circumstances but is ideally built before implementing a financial plan leading to financial success.

All the above reasons are rather around the point of direct cause and effect relationships that build wealth. That is to say, they are often one or more step removed from actual financial relationships such as consistently investing in an IRA or maintaining a budget and growth investing via a well-optimized financial portfolio. The above are reasons why people don't get to the point of being able to optimize their portfolios that are in some cases among the last steps to financial freedom.

Risks associated with equity inflation

Equity inflation is an increase in the price of stock, but a decrease in the purchasing power and actual underlying value of that stock. Like monetary inflation, equity inflation gives the impression of more money, but in actuality means lower wealth. This is a financial phenomenon also described in the Quarterly Journal of Economics as “The Money Illusion Hypothesis”.

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Risk #1: Currency devaluation deflates increases in stock price

According to The Money Illusion Hypothesis investors can lose track of actual purchasing power of liquid assets such as stock via corresponding financial events such as monetary inflation. In other words, for each unit rise of stock prices with corresponding increases in market values, this increase loses actual value in proportion to the value of money. This however, is just one of several explanations and risks associated with the occurrence of equity inflation.

Risk #2: Stock investing expenses rise

Another cost associated with investing that may be overlooked are commissions, fees, margin interest, option contract premiums and management expenses. With a rise in the value of equities, fund managers, brokerage firms and investing services may find it easier to justify higher brokerage account costs. Yet if these costs amount to just 1% more, added to monetary inflation the total cost could be 3-4% off the total unadjusted yield of stock not including capital gains taxes.

Risk #3: Decline in business financial fundamentals

A corresponding decline in currency value and increase in equity related costs are not the only way equity inflation can occur however. This is because worth is determined by more than just yields and the currency  in which a stock is valuated. Moreover, if a company's revenue declines 5%, but earnings increase 7%, a business has essentially shrunk in size especially if the increase in earnings is due to downsizing, accounting techniques such as mark-to-market accounting, and sales of assets. These methods are further elaborated upon by Aswath  Damadoran of the Stern School of Business. 

Risk #4:  Increased potential for future devaluation

Eventually, investors are believed to price in shorter-term inconsistencies in price valuation such as asset bubbles  according to the 'Efficient Market Hypothesis' described by Burton G. Malkiel of Princeton University.  One reason for this is because equity inflation is not sustainable unless underlying growth in revenue, and/or improvements in a company's operational assets occurs. Moreover, business that have products and services with clearly defined increases in revenue, market share, and competitive positioning are more justified in valuating assets in a way that can increase equity prices, than those that do not.

Key aspects of investment decision making

Investment decisions are made to reach financial planning goals. For example, make $100,000 by age 50. Traditional investment plans often assume an interest rate and consistent periodic contribution. In reality this can be easily disrupted by a lay off, change in market returns, or other unplanned for life disruptions. These models of investing are outdated in some ways; in such case, a new way of thinking about investing is needed. The following are key factors in many investment plans whether they are traditional or not.

Inflation

Inflation is the increase in the cost of goods and services according to the U.S. Bureau of Labor Statistics (BLS). Inflation usually occurs every year and amounts to approximately 2-3 percent. This means a $100 can only buy $97-$98 of goods after one year's time at that rate. In light of that, investments should at a minimum cover the cost of inflation if only to preserve the value of money. Treasury Inflation Protected Securities (TIPS) are a government financial security  that periodically adjust for an inflation adjusted return.  

Time 

Time is another important factor in investing. Time really is valuable, and when diligent savings is added with the discipline to only increase the amount, financial results can be pleasing. Everyone retires or dies, and money is needed in retirement.  To see time in action try a savings calculator like the one at the Financial Regulatory Authority (FINRA) and play around with the numbers. To illustrate, $1,000.00 at 5% compounded annually yields  $7,078.04 inflation adjusted over 10 years with monthly deposits of $50.00 and $19,590.82 in 30 years. 

Interest 

Interest is also very valuable and can turn small amounts into big amounts over time. When investing small amounts with a disrupted schedule look for the highest fixed interest rate available. For example, assuming a beginning savings of $8,000.00, low income, and monthly investments of just $50 a month at just 2% one can accumulate $39,205.94 over 30 years with annual compounding i.e. interest added yearly. At 5% the amount rises to $77,354.89 and at 7% the value is $125,930.53.  An international bond fund with fixed returns and low management fees is one place to look. An example of a bond fund is the Total Return Bond Fund (TGLMX) listed by US News Money.

Risk

Bond funds are also low-risk if they are high quality bonds. For those individuals with a higher risk tolerance, yields can be higher, but losses can also occur wiping out previous year's gains. Be careful to properly consider risk level in terms of time as risk can sometimes even out over time while providing a higher return. The investment risk pyramid below describes the types of risk and possible returns. Also, be sure to consider schemes and scams described by the Securities and Exchange Commission (SEC).  

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Contributions

In a volatile working environment and unsteady economic conditions it is a good idea to assume no consistent investment contributions, nor a steady return on investment. Using this method, one's investment plan is not caught off guard when a disruption such as unforeseen expenses, or changes in cash flow do occur. Keep in mind starting off with a high savings balance is a good way to leverage and begin earning more by saving. For example, 2% on $1000 is $20 but 2% on $100 is $2.  A key is to be consistent and keep the amount manageable, a low risk investment won't be exciting to watch but sticking with it can make all the difference.

Instrument

Financial instruments can make or break an investment. High risk investments such as leveraged stock options can destroy savings and kill years of investment savings; be careful. In reality, investors might not have enough to diverse risk across multiple investments. In such case safer long-term, medium-volatility utility stocks with high income dividends might be an option. The Motley Fool provides some examples of dividend paying utility stocks with yields above 6%.   Be forewarned though, even utility stocks can move with the market. The Empire District Electric Company Stock (EDE) listed by the Motley Fool declined over 50% from its 2007 high and still hasn't returned to that price.