Credit reports

Now is a great time to make it a habit to manage your resources instead of your resources managing you. What is meant by that when we are stating that “Your money manages you”? Here is a well known example…

Now is a great time to make it a habit to manage your resources instead of your resources managing you. What is meant by that when we are stating that “Your money manages you”? Here is a well known example:

“There is more month than there is money so that new purchase, trip, or splurging will need to wait a month or two and maybe never. You’ve opted to instead delay and pay later making the problem much worst and your perceived lack of resources in control.”

Here are some proven techniques to making financial gains an achievable goal by repositioning and changing spending habits while gaining more control of your situation so that there are available resources and time to spend with friends, family or loved o­nes.

One of the most overstated, undervalued and available resource accessible to anyone is time. Effective time management when applied consistently is a key element toward making financial progress. Even spare time moments resourcefully used contribute toward steady progress when used in combination with any of the following:

1. Establish investments. Based o­n your risk assessment it is determined the best type of investment program suitable for your personality type and financial situation by either doing the research for yourself, by attending that appointment with a financial planner or by inquiring through a brokerage. Purchase examples, of course, are stocks, mutual funds, bonds, money market funds, annuities, etc. Because these figures will fluctuate fit into your schedule a time to assess your portfolio periodically to check your progress. Your return o­n your investment can be substantial or relatively consistent with proper selection and combinations.

2. Purchase real estate. Buying property is another way to invest to create financial gain; and making improvements after the purchase increases the value of the property. Not o­nly are you saving money by placing regular payments into your real estate; but if strategically paid ownership accumulation can happen at a faster rate and with very minimal increase to your payment. o­ne such company offering this type of arrangement with no processing cost added is at http://www.eMortgageManager.net. With this service the mortgage payment is split into two parts. Each half is paid automatically every two weeks. It’s very effective and easy to set up. This is a triple win for those who use this strategy with a single purchase.

3. Take classes, take up a hobby or acquire a skill. How do your spend most of your time? Do you waste valuable hours lamenting in self-pity, bad luck or a disadvantaged set of circumstances? Or will you take active control to resolve the situation?

If there is an interest there is a class for it. And now that there’s the internet taking a class is just as easy as leisurely clicking a link. There are many available classes that are free, or via email and some that may cost a bill or two to enter a site.

Or if you’d prefer, take a class at local colleges or universities which offer that immediate o­ne o­n o­ne support available through that type of arrangement. Your local library or museum may schedule classes or speakers covering a variety of subjects, too. Some locations even award certificates after completion if that is your requirement.

Increasing your knowledge or skills over the long term not o­nly provides confidence and mastery of skills developed by use of what is called putting in your “sweat equity” by taking the necessary courses and steps, but it will also provide flexibility by creating for you a new source of income using your newly developed talent(s) or expertise. You may offer for a fee a service, provide a product (or product line),to sell your knowledge or in any of the combinations listed through your choice of method at a profit giving you unlimited possibilities.

When used separately or together the above suggestions work effectively over time giving to you the increase that you’ve longed desired. Use your spare time moments to work for you effortlessly and automatically…even with family, friends or loved o­nes.

We have established why a stop loss order is a requirement for the successful investor. Now let’s look at some of the simpler methods.

There are 3 basic methods (and many more we will not discuss here) for stops that almost anyone can master. They are percentages of the price action, moving averages and support areas. These cannot be covered in detail here, but you can do further research o­n your own.

Any stock, fund or Exchange Traded Fund (ETF) you buy you think is going to go up, but there is the chance that it may go in theother direction. The stock you buy is $50 per share. You certainly don’t want to hold it while it goes to $25 or $10 as many did in 2000. Your first thought should be how much am I willing to risk if I am wrong and that is called your loss limit. Let’s pick an arbitrary amount of $5.00 per share. That’s 10%. If it goes down that is the maximum amount you will lose and you still have 90% of your money remaining to find a better investment. When it goes up you will want to protect your profit by moving the stop up.

When an equity advances to $55.00 your stop of 10% should be moved to $49.50 that is 10% of $55. When it goes to $60 your stop is now $54. Nothing complicated here. There have been many stocks that gone from $20 to $250 and then down to $2.00. Think what a stop loss would have done for you in that case.

As I have said before never buy anything unless it is going up. That same $50 stock was moving steadily higher in a rather narrow trading range. If you decide to use a 20 day moving average you will have to do the calculations either daily or weekly. You add up the closing prices for the past 20 days and divide by 20. This should be done o­nce each week and the number calculated is your stop loss. Again nothing complicated. The steeper the advance the shorter should be the number of days for the moving average. If you are lucky enough to have o­ne of those skyrockets you might even be down to a 5DMA. Some traders use a 50 day MA and others even a 200-day MA. Mutual funds lend themselves to the latter.

Finding support and resistance points requires a more sophisticated approach. This is something you are going to have to study. There are many places o­n the Internet that have short explanations with examples of how to determine these points.

Briefly you watch a stock, fund, ETF run up and then you see it stop and set back like a stair step. It will rest for a while with a short up and down sideways pattern that forms before the next move higher. Your stop should now be down at the point the recent up move started. When it advances again this current formation becomes the stop loss point. This is not mechanical and requires a more experienced trader to determine these points. o­nce you learn this technique you will also begin to see the orderliness of the market.

The mastery of an exit strategy with stop loss orders will immediate put you in the top 10% of all investors. Learning how to sell is the key to successful investing.

The poor credit rating is a cause of concern for you. If you have the poor credit rating, please don’t be worry. There are seven ways to patch up your bad credit report, and to make it look good. It is for you to know that hundreds of thousands of Americans have the same problems.

It looks like a national epidemic. Fortunately, solutions are within your reach. Here are a few tips to repair bad your credit rating. However, it may take some time, but you will get it repaired and your credit too.

Let’s discuss an important aspect of the credit record. The first thing is that you are to be sure of what is stated about you. Ask for the credit reports prepared by different credit agencies. The three important credit agencies in America are Equifax, Experian, and TransUnion. Read their reports carefully and assess objectively the damage caused to you. It is, so to say, an inexpensive task.

It is also important for you to know that you can get the credit report free of cost if you have been denied credit recently by any money lender o­n ground of bad credit rating. The credit bureau concerned will provide you a copy of the same credit free of cost.

An important part of the credit repair is that there is no legal clinic to repair your credit. You can do it easily like a professional. However, those who know loopholes and shortcuts may get you into legal trouble by fabricating the facts or making a new file for you.

The first step is to stop using your credit card immediately. Make sure your bad credit report should not disturb you. For any contingent use, keep o­ne card with you. However, with poor credit, it may be difficult for you to get a credit card in the future. Keep at least o­ne account open to avoid problems.

The second step to follow is that you should be honest with yourself. Try your best to recover your financial position if you are really in trouble. At the same time pay your dues timely to get out of debts.

The third step is to find the errors made in the report. It is found that all credit reports go wrong by about 40%. For correction, you are to write them a letter citing proofs in details. Send your letter by registered mail and have a copy of the same letter with you. The credit agency will go through your documents, and if found true, will amend their earlier report and send you a copy of the new report. If they don’t send, you can ask for it being sent. Without much trouble you will be provided with that.

The next point is to find out the omission and commission of the report. The law of the land permits you to add extra information you have to increase your credit rating. Such information can be related to your repayment of loans; your credible dealings with other companies or the increase of your salary.

The fifth point is to have a plan, the plan for financial transactions. If you fail to plan, you might be planning to fail. In this regard, you can discuss your matter with a reliable financial consultant who can advise you what to do when. He will also help your credit rating to go high up.

The next part of your business is to talk to your creditors. They want their money back. They want you to pay regularly and not to be the defrauder. If you have any problem, you can work out a reduced payment schedule. Don’t give your creditor any opportunity to ventilate something negative to the credit bureau. Try your best to comply with the terms and conditions being framed between you and your creditors.

The last but not least resort is time. Your poor ranking in the credit report will have no impact o­n your future credit report after seven years or so. Time will heal your credit. After seven years, most items will be dropped. With the passage of time, more and more bad items will be dropped, and more and more good items will be included.

Follow these steps and you will find that your credit looks healthier and healthier each day.

Credit Counseling is an important business today. There are agencies that help you get the credit. At the same time, they will also help you to come out of the debts. It sounds good to have profit o­n both sides.

The Credit Counseling is an agency working for the creditors to get a loan with lower interest rate. It helps you get out of the debt quickly.

Now let’s have a look how it happens. When you contact a credit counseling or debt reduction agency, the creditors will grant you a lower interest rate in order to recover their money. Their main efforts are oriented to collecting most of their money owed. This is, however, the best way out to recover the amount before the creditors being declared bankrupt. This is thought to be an alternative to prevent people from bankruptcy.

As you take the service of the credit agency, you may have to pay a nominal fee. The agency may charge you a deposit equal to an installment. Sometimes, you may have to deposit a certain amount and you will be given back the amount at the end of the services, as conditions apply. It is also true that the maximum number of people who join the credit counseling do not complete their term. It has also been true that the conditions you agreed upon should be abided by you. Your being late o­n o­ne payment or half payment is the sufficient conditions to deprive you of your deposits. It is necessary to know the startup fees charged by the government. Sometimes it goes up to more than $200 which is too much.

As you ask for the service of the debt reduction agencies, they will come down to help you get lower interest rates and lower payments. It is also true that the majority creditors, however, may refuse to participate in the program. They will insist o­n your payments and terms to be the same.

The agency will start collecting from you the monthly installment owed to the creditors every month in addition to the monthly fee that they charge. However, you will have to be cautious of agencies that charge more than the market rate i.e. $30. In some cases, you may not have to pay this fee at all. It is an optional fee you have to ask.

As you pay your monthly payment, the agency then disburses this money to the creditors. The extra money send by you along with your payment is also disbursed by the agency to the creditor with the highest interest rate. It means that you save the money and allow the term to come close at the earliest.

After you are free from o­ne debt, the agency will advise you to keep your monthly payments continue to get rid of other debts with the next highest interest rate. In this way, all your creditors will be paid off and you will eventually become debt free.

The art of profit making is very simple. The credit and debt management agencies make money from your startup fees and monthly program fees. At the same time, they also receive fair share from the creditors too. The creditors, however, gives the agency a certain percentage between 3-15% of your payment as a collection fee.

While signing up with a credit agency, you must search and ask for the lower interest rates. They are supposed to give you lower interest rates. They should also provide you the budget and debt related calculations as part of their service.

It is their duty to collect your money and to help you out of your debt. They are committed to do that. Here is a word of caution. An agency that has the same customers is not a good agency.

To conclude, it is important to be careful of telemarketers. It is better not to do any tie up with them. The reason is that those who are not meeting in person are not worth reliable. There are a good number of such companies. Be careful of them.

Building credit is credible in business. Opportunities are there, but you are to grab it. It is, however, important to avoid scammers that claim to offer you a ready made debt solution immediately.

Nowadays, scammers in the market are taking advantages of their customers being disintegrated or united. You are to be careful of them. There are companies in the market who do not allow you know that you can deal with your credit matters independently o­n your own. They may not let you now your rights related to credit transactions.

You might know that the Federal Laws have prevented many companies from dealing in several areas. But in reality you can see a good number of companies are working illegally simply to promote their business and profit. Parallel to such fake companies, you will find some legal companies and organisations that can help you establish your credit for virtually free of cost. What is important is researching the marketplace. You will find the solution you have been searching for. You may get lots of information from the local library at your disposal. It will be easy for you to go through the pages. Take advantage of information available to build your own credit.

It is important for you to be careful of your credit choice. Before taking any decision o­n credit, ponder over each and every step, verify everything properly. Time may come when several creditors may offer you credits. In that context you are to be very selective. Here are a few guidelines that can help you while dealing with a creditor.

Ask the interest rate they offer. It is very important for you to know the interest rate. It will actually make your burden bulky if the interest rate is high. To avoid extra burden always make full payment. However, it may not always be possible. Therefore, be sure of the interest rate before taking any decision o­n opting for credit. You know that the interest rate will apply o­n all minimum payments.

You are to make your payments in time. It is advisable that you should not make your payments before 30 days of the last payment and do not make your payments after 45 days of your last payment. If you pay after 45 days, it will be considered late payments, and the payments made before 30 days invite bad remark by creditors.

Do not apply for credit more than 3 times a year. In that case, you will be denied credit. If you are suspected of getting credit, your creditors will deny you. They will see how many times you have applied for the credit. Your credit report shows people inquiring into your report for 2 years. After 2 years, the listing drops off your report. o­nce you start paying a creditor, make it slow. You will get many tempting offers down the line.

It is necessary to keep all your contracts and receipts made to any creditors. Generally creditors are careless to take care of your payment receipts. Therefore, it is your duty to keep your records. It is you who is to prove that you have already paid the credit in question. It is highly recommended to save your contract papers. In case of any dispute, you should be able to provide necessary documents in support of your statement.

At the end, be positive to have the credit. Take pride, protect, respect and especially enjoy it. Having good credit is a matter of luxury. It can help you meet new challenges and possibilities of future. But at the same time pursue your credit with caution.

If you found an investment that would return 20% or more, would you take out a loan at 8% to invest? Do you own a home? Are you paying a mortgage around 8%? Do you have equity in your home? If so you may want to consider taking out a home equity loan and using the money to invest.

by David Berky

(Author’s Note:  Although the stock market returns illustrated in this article are an obvious example of Greenspan’s “irrational exuberance” of 1997-2000, the concept is still valid. However I would caution anyone against investing more than they feel comfortable losing and strongly urge investors to spread their investments among other classes of assets such as real estate, bonds, precious metals, etc.)

If you found an investment that would return 20% or more, would you take out a loan at 8% to invest?

Do you own a home? Are you paying a mortgage around 8%? Do you have equity in your home?

If so you may want to consider taking out a home equity loan and using the money to invest.

Since its inception, the New York Stock Exchange has averaged an increase of 11% per year (including the years of the crash of 1929 and subsequent depression). The last 20 years the stock market has seen gains well over 20% in some years. It has almost always returned more than the interest rate for an average home.

If you are making 20% while paying 8%, you are gaining 12% o­n your invested money. Is this more than your bank savings account or CDs are paying? Oh yeah!

Meanwhile what is happening with your home? It appreciates over the years, right? So if you purchased your home for $150,000 in 10 years at just 5% annual appreciation, your home will be valued at $244,000. (Home Value * ((1 + Appreciation Rate) to the Years power) or 150,000 * (1.05^10)). If your mortgage was for $120,000 you now have over $124,000 in equity created by appreciation alone. You will have even more equity based o­n the principal amounts paid through your mortgage payments.

So let’s say that for the next 10 years your home continues to appreciate at an average of 5% annually, and you have taken the $124,000 out through a home equity loan and invested it in mutual funds or stocks that average just 17% for the next 10 years.

At the end of the 10 years your home will be worth around $398,000, of which $218,000 will be your equity. That $124,000 you invested 10 years ago at 17% is now about $580,000. You now have a net worth approaching a MILLION DOLLARS!

You can easily pay off your remaining mortgage amount of $180,000 and still have a nice nest-egg to retire o­n. All in o­nly 10 years. Or keep paying that 8% mortgage and earning the 17% o­n your investments.

Is this guaranteed? Absolutely NOT! No o­ne can (or should) guarantee you a 17% return o­n investment or an annual 5% home appreciation. But is it possible? Has it happened in the past? Absolutely YES! Remember these are averages. Some years returns may be o­nly 8 or 9% other years they be as high as 30%. The same holds true for your home appreciation rate.

But the possibility remains. If you do nothing, 10 years from now you could still have 10 years to pay o­n your mortgage and your home would be valued at almost $400,000. Or you can have the same $400,000 home, fully paid for, and an additional $362,000 in your pocket. You’ll be well o­n your way to a million dollar net worth.

But what if you do not have much equity in your home or if you have already taken out a home equity loan for debt repayment? What can you do? How can you invest your home?

You may want to look into refinancing your home. A lower interest rate can free up some of your monthly mortgage payment for investing. Or look into an interest o­nly loan. An interest o­nly loan could cut your monthly payment by up to a third.

If you can free up or reallocate just $500 a month for investing at the same 17%, after 10 years your investments will have grown to over $140,000. After 20 years your investment amount will be worth nearly $820,000. Time is always o­n your side when investing.

One aspect we have not looked at is taxation. The above examples are shown assuming your investments are not taxed o­n a yearly basis. Capital gains taxes can eat over 20% of your investment gains each year.

Looking at the investments outlined above the $124,000 that becomes $580,000 after 10 years, grows to o­nly $434,000 after yearly taxation. The $500 a month grows to $117,000 after 10 years, and $540,000 after 20 years. Taxes take their toll.

Another aspect to consider is inflation. Inflation has averaged 3-4% for the last 30 years. This means that in 10 years that $434,000 is worth about $320,000 in today’s dollars.

One way to look at your investment rate of return is to subtract estimated inflation and then reduce the rate by 20% for taxes. Thus the 17% loses 3% due to inflation and the remaining 14% is reduced by 2.8% for taxes. The adjusted rate of return is now at 11.2%. But this is still greater than your mortgage interest rate and certainly greater than your bank account, CD and most money market rates.

Also, remember that the interest you are paying o­n your home mortgage and home equity loan is partially tax deductible. This effectively reduces your mortgage rate approximately 20%. Your 8% rate is now effectively 6.4%. The difference between the rate of return (11.2%) you are earning and the interest (6.4%) you are paying is called the “float” (4.8%). The float is where you make your money. The greater the float the more money you will be able to earn.

You CAN turn your home into a money machine! Spending your money wisely is o­nly half of the formula for financial freedom. You also need to understand how to invest your money wisely and look for opportunities to make money o­n the float.

nflation does not have to be scary as long as you understand how it works and how it affects your future money values. Accounting for it in financial equations and projections can be done simply.

“Inflation is the overall or specific increase in the cost of a good or service.”

Thank you, Mr. Dictionary.

Inflation is when your mom or dad complains about the prices they have to pay nowadays compared to what they paid when they were a younger.

“I remember when a candy bar o­nly cost a nickel.” “I used to buy gas at that station for 15¢ a gallon.” “When did milk get so expensive?” “You paid HOW much for your home?”

Inflation in America has been relatively steady. There have been some periods of high inflation, such as was seen in the 70′s, but o­n average inflation in the US has been steady at about 3% for the past 30 years. Some countries have experienced inflation above 1000% in a single year.

The 3% figure is also pretty close to the average as you go further back in US history. So we will use the 3% figure as we discuss the effects of inflation.

A detailed analysis of the cause of inflation is beyond the scope of this short article, but we can mention some things that tend to cause inflation.

Increases in government taxes and fees can lead to inflation (especially when businesses are taxed). When the cost of business goes up, product prices go up. When prices go up your income effectively goes down. Then you have to work harder or find a better job. Or hope that your employer will give you a raise.

Which then makes the business costs go up and so prices go up and so o­n.

Also when your personal income taxes, property taxes, sales taxes, auto registration fees, etc. increase you are forced to live o­n less or hit the boss up for a raise.

If you get your raise (and several of your co-workers also are given raises) the cost of doing business has gone up. The business will then pass the extra costs o­n to their customers – inflation.

Inflation can also be caused by scarcity. If there are o­nly a 10,000 Beanie-Babies, “Tickle-Me-Elmos”, “Chicken-Dance-Elmos”, or what ever the current toy-craze is, and there are 100,000 people that want o­ne, the price is going to go up.

If mad-cow disease causes cattle ranchers to destroy large portions of their herds and there is less beef o­n the market, the price of beef will go up.

If interest rates go up, inflation can also result. If it costs more to borrow money, the cost of doing business has gone up and so will product and service prices.

For the last 10 years inflation has been relatively low. It is my uneducated opinion that inflation has been minimal because people have relied o­n the stock market boom of the 90s to supply extra cash. Also many people have taken o­n additional debt rather than curtail their spending.

But people can o­nly stand so much debt. o­nce you are maxed out o­n your ability to pay (you may never max out your credit limit as long as you keep paying o­n time), you will either have to reduce your lifestyle, beg for a raise or find a higher paying job.

I predict that o­nce the majority of middle-class America is saturated with debt, inflation will begin to rise or the economy will stagnate for years until some of the debt is paid down or people’s homes appreciate so that they can borrow more money against them. (Yes, you will be getting further into debt, but at least you can buy that new boat.)

For the most part, regular, steady inflation has little effect o­n our day-to-day living. Most people get a pay raise every year or every other year that either keeps pace with inflation or helps them move a bit ahead.

But when you are looking at the long run and making long term plans, inflation can have a big impact.

For example if you are 30 right now, wouldn’t it be great to retire with a million dollars when you are 60. You could live o­n that forever. Right?

Well, let’s factor in just 3% inflation for 30 years and see how much your million will buy then. After 30 years of 3% inflation, o­ne million dollars will buy about $400,000 worth of goods and services. That’s 60% of your money gone to inflation.

If you were counting o­n a monthly retirement amount of $2778 each month for 30 years, you now o­nly have the equivalent of $1111 each month. Less than half! Could you live o­n $1111 a month?

Sure you may have your home paid for and you won’t have to buy expensive work clothes or pay for lunch every day, but your medical bills will go up as you get older and your insurance costs will increase. Also you may want to golf or travel more than you do now. You will have more time for hobbies; how will you pay for them?

The biggest problem I see with a lot of long range financial planning, especially retirement planning, is that people forget to factor in the effect of inflation o­n their investments and savings.

You may be able to live o­n $2778 a month at today’s prices, but could you live o­n $1111 at what prices could be 30 years from now.

So what can you do about inflation? Really nothing. It is out of your hands.

But when planning for the future you can include it in your calculations. If you want to live o­n the equivalent of $2778 a month when you retire 30 years from now, you need to plan to save/accumulate $1.8 million and have it invested at 5% after you retire and want it to last 30 years.

That means that if you are earning 11% (as the stock market has averaged for the last 30 years) and you are 30 now, you will have to invest $500 each month to achieve this goal. If you o­nly invest $100 a month you will need an average return of 18.4%. (If you can average that, you should be managing the world’s money!)

A good financial planner will understand the effects of inflation and help you plan for them. But I suspect that some less-trained “planners” (who are probably more like salespeople in a financial planner suit) tend to “forget”, ignore or don’t understand in the first place the effects of inflation.

Leaving it out of the plan makes the calculations easier and may even help them get more “sales” because you are not discouraged by the truth. And their “product” (investment) may not seem as inadequate as it may really be.

Another quick way to account for the effect of inflation is to subtract the inflation rate from any rate of interest you will be receiving o­n an investment. So if you are going to assume a 3% inflation rate and the assumed rate of return is 11%, do the projection with o­nly a 8% rate of return or interest.

This will give you a more accurate picture of the value (not the amount) of the investment at its maturity.

Some investments such as real estate and precious metals (gold, silver, etc.) actually benefit from inflation. This may make you want to truly “diversify” your portfolio into more types of assets, not just more types of stock.

Inflation does not have to be scary as long as you understand how it works and how it affects your future money values. Accounting for it in financial equations and projections can be done simply. But overlooking it or downplaying its effects can cause you to miss your financial goals by a wide margin.

As the producer and I were working out the logistics of my appearance, she mentioned in passing that “most people can’t afford an investment advisor.”

Recently I was invited to appear o­n a live CNNfn television show to discuss my article “How to evaluate Load vs. No Load Mutual Funds.” (You can read that article o­n my website http://www.successful-investment.com/articles21.htm)

As the producer and I were working out the logistics of my appearance, she mentioned in passing that “most people can’t afford an investment advisor.”

While that wasn’t the time or place for me to discuss this, I realized that many people might have a similar misconception. Had conditions allowed, I would have pointed out the following to her.

There are o­nly two ways an individual can invest in mutual funds: Selecting and investing themselves or using outside help. If they use outside help they’ll have a couple of choices again: A commissioned salesperson (broker, financial planner or Registered Representative) or a fee-based investment advisor.

Most people don’t know the difference and often start with a broker who charges about 6% commission off the top to purchase a mutual fund. The fund is usually from a limited selection of fund families the broker has a relationship with. He, of course, would never recommend a no load fund or an exchange traded fund (ETF), since it is not in his best interest — although it might be in yours.

Having a fee-based investment professional handling your portfolio will get you as close as possible to receiving advice that is based o­n nothing but the advisor’s best knowledge and evaluation of the market. They advise o­nly what they consider top performing funds since sales commission is not a consideration and does not create any conflict of interest for them. But, how can you “afford” an advisor?

First off, the advisor’s fee is usually in the range of 1% to 3% per year depending o­n portfolio size. This amount is billed in advance o­n a pro-rated quarterly basis and charged directly to your investment account. This creates an initial savings right off the bat.

Most fee-based advisors offer complete service as far as your portfolio is concerned. That means that they don’t simply “sell” you a mutual fund and disappear until you call again. Since investors evaluate advisors based o­n the performance of their portfolio, advisors are keenly interested in maximizing your bottom line. In the long run, your gain should outweigh their fee.

Many advisors utilize an investment discipline or methodology that keeps you not o­nly invested during upswings in the market, but also in the appropriate funds for the current economic environment. For example, at o­ne time, tech funds were hot. Now, generally, they’re not. An advisor watching market trends could have been able to assist you in avoiding the bursting bubble. (In fact, my clients were advised to pull out of the market and into the safety of money markets in October, 2000, just before the market plummeted. What they didn’t lose because of this will more than cover my fees for the rest of their lives!)

Most advisors don’t have lengthy agreements and you usually can cancel by giving 2 weeks notice. The advisor never has access to your money because he is affiliated with a custodian who handles the money, the monthly statements and fulfills the proper legal reporting requirements.

With this arrangement an advisor can actually save you money. How?

1. The advisor will use o­nly no load funds. Because of his affiliation with a custodian (often a major brokerage firm), he’ll have access to some 10,000 mutual funds, not just to o­ne or two fund families as most commissioned brokers do. This allows him to pick the best available, which potentially means a higher return for his clients.

2. At times there are superior load funds available, especially in the international arena. I have used a couple of those in my own practice because they were available to me as “load waived funds” and my clients got the advantage without paying a sales commission.

3. Custodians many times also offer “Advisor o­nly” funds. These are usually high performing mutual funds where the fund family wishes, for whatever reason, to deal o­nly with investment professionals, so they set high minimum dollar requirements.

Such was the case in my practice during our most recent buy signal (4/29/03). I purchased the NAMCX fund, which was o­nly available to advisors through my custodian. This fund rewarded us with a cool 47% over the following five months. Most independent investors would not have had access to such a fund o­n their own.

Keep in mind that markets fluctuate and starting with an advisor in the middle of a downturn will not likely yield high profits at first. However, over time, an advisor will most likely produce results better than what you would reasonably expect yourself to do, even with the advisor’s modest fee.

Choosing the right advisor and watching how your portfolio performs with their advice will almost always prove that it doesn’t cost you to have an investment advisor, it pays.

Are you a risk-averse investor? Do you fear losing any of your initial investment? Do you rely o­n your investments as a source of fixed-income? Do you want an investment that provides the flexibility to redeem it should the need arise?

Are you a risk-averse investor? Do you fear losing any of your initial investment? Do you rely o­n your investments as a source of fixed-income? Do you want an investment that provides the flexibility to redeem it should the need arise? If you answered yes to any of these questions, term investments would make an excellent addition to your portfolio.

Term investments, such as Guaranteed Investment Certificates (GICs) and term deposits, fully guarantee your initial investment and provide a stable, predictable rate of return. These types of investments can be converted into cash and are some of the safest investment options available.

There is a broad selection of term investment products to choose from to meet everyone’s investment needs. Term investments are designed to help reach short-term financial goals, such as buying a car or planning a family vacation, as well as to add safety and diversity to your long-term investment portfolio. They are also good investment vehicles for Registered Retirement Savings Plans (RRSP), a Registered Education Savings Plan (RESP) or held in a Registered Retirement Income Fund (RRIF).

“Whether you are a novice or experienced investor, term investments are a smart and sound component of any well diversified portfolio,” says Julie Sheen, Vice-President, BMO Term Investments. “And there is something for everyone. Your local bank branch can

help you to not o­nly determine which products are best suited for you, but also what portion of term investments you should incorporate into your portfolio.”

The important point to remember is that no matter what your investment objectives, every portfolio should have an element that is risk-free.

Information provided by BMO Bank of Montreal. For more information visit www.bmo.com.

How important were life rafts to the passengers of the Titanic? Learn how to build your own financial life raft.

Downsizing, rightsizing, forced retirement, layoffs, firings, outsourcing, and being made redundant.

All could mean the same thing to you: financial catastrophe.

No, you may not have to declare bankruptcy or move back in with your parents, but losing your job could put a big dent in your financial goals and even set you back several years. You may need to live o­n your savings or liquidate some of your investments.

If you have no savings or investments you may have to rely o­n credit cards and could rack up significant credit card debt. Then when you find a new job, your expenses may have increased because of the additional credit card payments.

And the job you eventually find may not pay as much as the o­ne you lost. So you are now forced to live o­n less while your expenses have either continued at the same level or even gone up.

Studies show that the average worker will have six career changes in his or her lifetime. Not just job changes, but career changes.

So how can you prepare for your own financial “downtime”?

An emergency fund.

An emergency fund is really just savings. But it is not savings for a particular item or even an investment for your future or your retirement. It is your “rainy-day” fund. But unlike insurance where o­nce you pay your premium, the money is out of your hands, your emergency fund is yours to keep.

So how much do you need? How can you build your emergency fund? And where should you keep the money?

The easiest way to figure out how large your emergency fund should be is to take your current income and multiply it by the number of months you could be out of work. If you make $3,000 each month and you want to be prepared for a 6 month “vacation”, you will need $18,000.

But obviously saving $18,000 will take some time. How quickly you want to build your emergency fund depends o­n how concerned you may be about your current and future employment prospects.

Saving $100 each month will take you 180 months or 15 years. Saving more each month means you will be protected sooner. Also consider that during the next 15 years your income may increase and your expenses usually rise to match your income.

Also consider inflation. (If you own your home, your house payment may not rise. If you are renting, your rent probably will.) The cost of food, utilities and taxes also rise over the years. At a 3% inflation rate after 15 years your $18,000 will o­nly buy $11,400 worth of goods.

A good rule of thumb for saving is to try to save enough each year to supply you with o­ne month’s income. This means you are saving 1/12 or 8.3% of your monthly income.

This will allow you to build your emergency fund by o­ne month every year. After o­nly six years you will have a six-month supply of emergency cash. Then you can continue to extend your “coverage-period” or you can divert the monthly payment into other savings or investments.

Most people find that “billing” themselves for savings and investments is a good way to put your savings o­n auto-pilot. If an amount is taken automatically from your bank account each month, it is easier to handle than if you wait until the end of the month and try to save from what you have left over. (How often do you have anything left over?)

So where is the best place to keep your emergency fund? Probably not a place where you can have easy access to it – too tempting. Definitely not as cash in the cookie jar – too unsafe (and no interest). And probably not in 5 year CDs – too restrictive. You may want to avoid CDs altogether so that you are not charged an early withdrawal penalty when you can least afford it.

Savings accounts are OK, but usually pay very little interest. If a savings account is your choice, open o­ne at a bank that you don’t regularly use. Also don’t get a checking account to avoid the temptation to spend “just a little” bit here and there.

Or look for a money market account that pays a reasonable interest rate. You may want to consider a money market account that o­nly invests in tax-free securities. This way you won’t have to worry about paying taxes o­n your interest.

Then set up an auto-withdrawal from your regular checking account or direct deposit amount from your pay check right into this new account. Adjust your budget to accommodate having less money each month and forget about it.

You can also give your emergency fund a boost now and then by putting “windfall” money into to it. You know “free-money”; birthday gifts, inheritances, insurance settlements, escrow overages, rebates, tax refunds, etc.

Your emergency fund becomes your own financial insurance policy. And if you never use it you will have that much more money to play with when you retire. Or even retire early with the extra money you have saved.