How to Invest in CD with Proper Knowledge?

The best thing about long term CD investment is that the interest rates are high. Short term strategy will attract even smaller interest rates. A Certificate of Deposit (CD) investment has always been a reserve for the wealthy but things are changing. If you are the type of investor who is future oriented, you will want your investment to earn better interest over time. CDs are good for long term investments and the risks are negligible. In order to ascertain whether or not CD is right for your investment portfolio, you need to look at two distinct factors:

• Time Horizon: As an investor, there are times you are short of cash.  With CD investments, you need to determine when you will cash out. It is recommended that you cash out when the investment has matured, otherwise you will be attracting unnecessary penalties which could be detrimental to your investment strategy.

• Interest Rates: The interest rates can be used as an indicator on just how long you are suppose to keep the money in the CD. If inflation rates are sky rocketing, it is advisable that you go for short term CD. If inflation is falling, long term CDs will be the best option since the interest rates are high.

Before you decide to invest your money in CD, you need to consider:

• Annual percentage rates (APR) - This is rate is usually pegged to the bank that you are buying the CD from. You can have a look at cd rates prophet to compare the rates.

• Annual percentage yield (APY) - This basically shows you the CD potential earnings in multiyear life considering the compounding rates.
Compounding is a mathematical computation process where the interest rates are charged based on the total earnings of a given set period. It could be monthly, quarterly or annually.

Once you have all this knowledge in mind, the next big question is on which term to choose. There are generally two terms. If you are a long term investor, you can go for long term CDs. If you depend on your CD investment, then you can opt for short term.

Having chosen the type of investment that suits you, next step is to assess the rates. This you can do by going through different banks. You can always use the internet to your advantage.

Laddering

This is a risk free strategy that enables you accesses the cash even if inflation rates are soaring high. An example is let’s said you have $30,000. By laddering, you will only be investing $10,000 of the total investable amount. It goes year by year and you will be able to cash out once one part of the investment matures.

With laddering, you do not have to worry about penalties because the system was invented for such eventualities. The interest rates are favorable since it is a long term investment which has been divided into segments. You can always have a chance of even better interest rates if you were to re-invest the profits.

Let's Talk Money

Anything For Money

 Money, good or bad, moves people. When I was young, I did not want to spend my time studying. But when there's money involved, boy did I work hard to push my grades up to Bs and As. One thing for sure though, it's a rather unsustainable motivator. It didn't build any positive habits in the process (for me at least) and a burden for parents to pay up.

 It's a relationship that I don't want to build with my kids, though my wife had promised my daughter a toy of her choice if she can read the Quran and she's almost there. I haven't offered my daughter, seven years old, anything in return for any achievement.  I want her to discover her emotions of being proud of herself and any other positive outcomes from her experiences.

 The relationship that I do want to build on, and what I think every Muslims should, is to talk about money rather bluntly with their kids depending on their level of understanding. A survey done by Visa found that families in Brazil and Mexico (38 and 42 days respectively) spends most time talking about money, Asians are best savers, young people aren't learning about money but Brazilians get an early start at the age of nine. These are very key things that as a parent should do, talk and teach about money and how to save.

“God commands you as regards your children’s (inheritance): to the male, a portion equal to that of two females; if (there are) only daughters, two or more, their share is two-thirds of the inheritance; if only one, her share is a half.  For parents, a sixth share of inheritance to each if the deceased left children; if no children, and the parents are the (only) heirs, the mother has a third; if the deceased left brothers (or sisters), the mother has a sixth.  (The distribution in all cases is) after the payment of legacies he may have bequeathed or debts.  You know not which of them, whether your parents or your children, are nearest to you in benefit; (these fixed shares) are ordained by God.  And God is Ever All-Knower, All-Wise.” 4. Surat An-Nisa (Women; 11)

 The ayat focuses mainly on the distribution of wealth. But underneath, I think highlights an importance in communication of wealth. Most people will find it appalling, offensive or taboo to talk about distribution of wealth after death while still alive, but I think it's a must. Especially since debt can be passed down. Money becomes a family affair. If you choose to take on debt, know that your family might take on it as well if you die in debt.

And, DEBT!

A Personalized Cash Based System

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I don't like to keep track of my expenses. I don't want to put on an app what I ate and how much I spent. Expense tracking is very tedious for me. I'm a very impulsive person, and I don't think I can change immediately to the ideals of how to manage money properly.

So, I've hacked a cash-based system to fit my personality. I spend very early in the month on any bills that I have to pay. Even money that I commit to save, I "spend" it by separating it quickly. The rest, is money that keeps me alive. My lunch money. I can do what I want with it. I have a baseline on how much I should spend everyday. Any day I overspend, I know that I will compensate on other days by spending less, or none.

It's worked well so far. I don't go to the ATM to pull out cash because I pulled all of it early. This month, I forgot my ATM PIN, entered the wrong PIN 3x and had my card blocked. Luckily, it was only for 2 days.

Top 4 Factors to Consider Before Having a Loan

With the enormous rise of lending institutions and banking industries, taking a loan is just a matter of seconds. Financial institutions are luring customers for a big purchase with a guarantee of 1 year to pay, no collateral, zero interest or other hype.

But you must take into account these 4 factors to consider before having a loan or you will blame yourself in the end.

1. The purpose must be a need or has a future value (FV) appreciation

Needs: house, car, education

FV: business, investment

iPhone is not a need, communication is. But you can simply have a cheaper phone to provide your communication needs. Likewise, BMW is not a need, travel is. And you can opt for a reliable Toyota without having any trouble. In any way, it will depreciate and are not worth for a loan.

Meanwhile, loans for business and investment are different. It doesn't guarantee a return but the payback outweighs the loan undertaken. Best example is business loan. How about having a $5,000 loan, payable in one year with monthly installments of $480 but the potential income is $1,000 a month?

That would be $520 pure profit every month! That is considered an unlimited ROI since there is no cash outlay or No Money Down!

2. Monthly payments are affordable

If the above condition is met, make sure you are capable of repaying it. The source of paying off the loan must be decided. Else, your credit rating will suffer. Bear in mind that the loan must not affect your savings, short-term plans and other monthly expenses/bills/loans.

3. Annual Percentage Rate (APR) is industry average

Most of us don't really mind how one loan could ruin us financially. Some loans would take 10 years and it really sucks.

By default, APR should not be more than 16%, else seek another lender. In most cases, banks' annual rate ranges from 12% - 16%. Choose the lowest.

If a loan really matters to you and can't afford to miss that opportunity, try to negotiate the APR and/or increase your monthly payments to shorten the term. Take note, the latter may sacrifice savings or plans so evaluate wisely.

4. Commit yourself to pay off the loan

Acquiring is bliss but repaying is painful. Self-conviction is very important as it will make or break your credit standing. Bad credit standing will result to lesser chances of future loans from creditors. Handle debts carefully. The purpose of the loan is reward; paying off the loan is the offering. So take it positively. 

Moving Without Transgressing

Transgressor!

Believe in Allah and His Messenger, and spend of that whereof He has made you trustees. And such of you as believe and spend (in Allah's Way), theirs will be a great reward. 

57. Al-Hadid (The Iron; 7)

And We said, "O Adam, dwell, you and your wife, in Paradise and eat therefrom in [ease and] abundance from wherever you will. But do not approach this tree, lest you be among the wrongdoers."

2. Surat Al-Baqarah (The Cow; 35)

Since the beginning, we have been given limits that we could not cross. Like a board game, those limits become rules in which we must abide to, it is still possible to come out a winner. However, board games like Monopoly doesn't really teach the complexity of how money is spent monthly.  It doesn't have charity or monthly expenses. The sole purpose of the game is to spend all the money we have, as quickly as possible, to win.

The game of life (not the board game) has its limits. The limits within personal finance is our income. If we spend our money on a cash basis, it would be impossible to step over the limits. The only way to step over is to use debt instruments, like credit cards, then falling into debt.

O you who have believed, do not prohibit the good things which Allah has made lawful to you and do not transgress. Indeed, Allah does not like transgressors.

5. Surat Al-Mā'idah (The Table Spread; 87)

I have to underline that debt itself is not forbidden (credit cards, however, is a wider discussion which needs to be saved for a later time). It is possible to have debt but not transgress. From my previous post, by dividing our budget into present, future and past needs, we can set either the future or the past as our limits to debt.

We can also switch our focus to our limitation, income. It is possible to raise the limit by having a bigger income. Find a job that pays higher or negotiate it. And that is probably the only way we can move within the limits, with Allah's blessings (getting an increase in income or a job with one).

How to Control Risk Management in terms of Finance?

One of the easiest ways to avoid catastrophe regarding your finances is to get them insured. There are many insurance companies willing to help. But before taking any step, it is very important to understand what insurance and finance are. Finance is the management of your investment, funds, and revenue. It is the knowledge of how to take care of money and the way to generate it more. On the other side, insurance transfers the risk. In simple words, insurance is the safeguard, a precaution taken against the investment.

Different Types of Finance
There are three types of finance such as personal finance, public finance, and corporate finance.

• Personal Finance: Finances taken to satisfy any personal need is known as personal finance. For example buying a car, purchasing an apartment, buying your school bills, paying for your health all come under it.

• Corporate Finance: Corporate finances deal with the financial conditions of the companies. Its job is to make sure that what amount of fund is raised, and how is it distributed. Furthermore, it also helps to make necessary decision for the betterment of the company regarding capital.

• Public Finance: Public finance deals with all the capital which the government or the state, exhibiting control at all levels. The government is accountable to spend and receive revenue to improve the condition of the economy and also the effect on the society. For example, the tax which government receives and how the state invests further for the betterment comes into the category of public finance.

Risk Management Strategies

Risk management is a way to avoid the troubles and all the risk one comes across. It is a process to deal and reshape problems the company, state or the person himself is facing or is about to face. Problems such as fraud, lack of innovation, manipulated data, loan delinquency, bankruptcy, and interest-rate volatility lead to devastating consequences and can havoc the reputation of the company. The company requires a body that can take care of these issues and protect the interest of the organization whether on personal or a state level.

The body insuring the safeguard of the financial position can deal with new strategies in order to keep the organization safe. The idea of protecting the capital is done by keeping an open eye and taking decision to make sure that the funds are safe and are invested and distributed properly.

Structure settlement is another way to insure the finance of a person seeking easement. The owners of these settlements enjoy a tax free life according to the tenure of their contract. In these types of settlements, you sell your annuities to the company and then the company pays you according to your contract. Einstein Structured Settlements is one of such companies. They transfer the risk on themselves in exchange to monetary consideration taken on monthly basis. Here, an insurance agent comes to a settlement which can be on terms of years, a payment after a required time, a shared settlement with your family or after retirement. These settlements are a way to provide a risk free finance to the people suffering from personal injury, lottery winnings or workers’ compensation claims.

Why Car Buying is one of People's Least Favorite Activities

To numerous people visiting the DMV is their idea of Hell, but to countless others the terror begins before they've even driven their car off of the lot. You would assume that buying a car would be a happy and somewhat exciting occasion, but that isn't always the case. Buying a car is a task that almost everyone will undertake at some time in their life, and for some people, it is a task that they will undertake numerous times over their lifetime. When asked, customers say that visiting a car dealership makes them feel stupid, weak, powerless, and manipulated. They find that the process of buying a car is extremely stressful, and the process seems to take forever. Ultimately, they leave the car lot after spending a large amount of money feeling as if they have been taken advantage of.

Critics believe that local legislature has been changed to ensure that your car buying experience remains an unpleasant one. A paper by economist Fiona Scott Morton published in the Journal of Economic Perspectives states that “There is a system of state franchise laws that protect the profits of new car dealers.” States earn approximately 20 percent of all states sales taxes from auto dealers, and these car dealerships account for up to 8 percent of all retail employment. The majority of these taxes that are generated by car dealerships account for 89 percent of tax revenue that states earn. Because of this, local and state car dealership associations have gained considerable power over local legislatures. The result of this influence has resulted in a set of state laws that basically guarantee car dealership survival and profitability. Evidence shows that the result of these laws have caused distribution costs and retail prices to climb higher than they should be. This means that the excess costs are transferred to consumers, making it harder for them to find an actual “good deal” on their vehicle purchase.

Although consumers take a big hit, this legislature affects car manufacturers as well. Manufacturers deal with car dealerships directly, and the current legislature that is in place comes at the expense of their profits as well. For instance, a manufacturer can't simply close a dealership that is causing it to lose money, even if the dealership's contract with the manufacturer has expired. In order for the dealership to be closed, the motion must first pass through the car dealership review board. The problem with this is that the review board is made up of car dealers, so the manufacturers don't really stand a chance. For example, in 2008, Chrysler and GM were facing bankruptcy. The government stepped in, and both manufacturers began the process of restructuring. Both manufacturers planned to close approximately 2,200 dealerships, but all of the designated dealerships weren't closed. The manufacturers were forced to reinstate almost 700 of the dealerships, and countless others were referred to arbitrary hearings to become reinstated against the manufacturer's wishes. In the end, it's not hard to see that car dealerships are causing grief for both their customers and the manufacturers that help to keep them in business.



About the Author: Blair Thomas is an electronic payment expert, who loves all things finance and planning.  He is also the co-founder of eMerchantBroker.com, the credit repair merchant account company in the country. If you would like to see what he's up to, add him to your Google+ circle.