For most, paying off your mortgage or car loan instills a sense of relief – the end of an arduous journey that would have taken years to complete. However for some debtors, the end of their term may signal a sizable balloon payment that must be made before they can sufficiently clear the debt.  Learn what a balloon payment is and whether it’s right for you.

What is a car balloon payment?

Car finance with a balloon payment is a type of interest only loan where the principle amount on the loan is due at the end of the term, rather than being gradually paid off throughout the life of the loan. Because this final payment is usually a substantial amount, this phenomenon has been dubbed a “balloon payment”. Car loans in Australia with balloon payments are very similar to car leases in that your monthly payments only cover the interest accrued over the life the loan and not the principle amount, and you are essentially only paying for the use of the car and not for its actual value. The difference of course, is that you still officially own the car during the life of the loan.

Who should get car loan with a balloon payment?

Some of the benefits of a car balloon loan include a lower deposit, lower interest rate and lower monthly payments as the payments and deposit only cover the interest. However, at the end of the loan term, borrowers will need to find the money to make the final lump sum payment or refinance the outstanding amount.

Balloon payments are generally taken out by individuals who are financially strapped and cannot afford to make higher monthly payments or secure more favorable loan terms. Others, in an attempt to take advantage of the balloon payment, try to sell their vehicle privately before the balloon payment is due. The money can then be used to pay off the loan in full.

Balloon Payment Pitfalls

The main risk associated with a balloon payment arrangement is, of course, the size of the final payment. If the borrower is not able to make the balloon payment and is unable to refinance, he or she risks the car being repossessed by the lending institution. Balloon payments will also generally involve slightly higher interest rates than standard car loans.

For most borrowers, a balloon payment will be a loan of last resort, as many will find it difficult to make the final balloon payment in one lump sum. Professional advice from a financial advisor will help you determine the best type of loan for your situation.

Source: Flickr

This is a guest post by Aaron Pinkston who created Clarifinancial (www.clarifinancial.com) to make buying life insurance easier and better. It is the only way to get custom life quotes from multiple agents without any hassle. Seriously. Check it out now to see how easy choosing can be when choices are clear.

How to Budget for Life Insurance

If you are like many young couples or new parents, you may be wondering how to fit life insurance in your budget. And how much should you set aside and plan for to make sure you can meet those premium payments?

Well, don’t worry. The answer is that insuring your life could be easier to budget for than you imagine. Protecting your family is easy to do.

How much life insurance will you need?

If you are already in a budgeting mindset, it will probably be easier to figure out how much life insurance you need than your peers. You already know how much of you income you need to replace if you can no longer be there for your family. Just figure out how long that need will last.

If you need your life insurance to cover expenses for less than 8 years, skip ahead. If you need 8 years or more of your income, try a simple calculation to figure a lump sum differently. Take the amount of your budget you need to replace and divide it by your spouse’s expected investment return; then subtract any investable assets you have.

Here’s an example: You need to replace $3,000 a month of your budget. Your net worth consists of $50,000 of investments and $40,000 of equity in your house. Your spouse or childrens guardian feels comfortable managing money at a 6% (0.06) return.

(($3,000 * 12) / 0.06) – $50,000 = $550,000

Notice I didn’t include the equity in your house because you can’t feed your family with home equity. (Or at least it’s not a financially secure thing to do.)

Neither of these methods will give you the exact amount of life insurance to budget for. Going through your financial plan is about personal choices too. Once you have an amount (or two) of insurance from these methods, talk to your loved ones about how your family will continue financially in your absence.

Go shopping

Now that you know how much life insurance you need and how long that need might last, go shopping. Don’t delay. Do it now.

The sooner you can get accurate life insurance quotes customized to your needs, the better. That means you can finally incorporate your life insurance payments into your budget.

There are a few ways to do this:

1. Call different agents to get quotes over the phone. If they are anywhere close to you, they will probably want to schedule meetings with you in person too. Expect at least 20 minutes per phone call. 1-2 hours for meetings in person. You should call more than just one agent (I recommend at least 3) to make sure your quotes are competitive and benefit you more than the agent.
2. Get instant quotes online from any number of companies. But instant quotes can only be so accurate, leaving a lot of uncertainty. Most online companies either sell insurance like a regular agent with a website, or they sell your contact information to agents who contact you for the aforementioned phone call. This doesn’t quite do it for me.
3. Get customized quotes from different agents anonymously. Another online solution unlike other methods is Clarifinancial. You benefit from agents competing for you without the hassle of unwanted contact. When you find a quote you like, only that one can contact you. Sounds pretty awesome, I know.

Source: Flickr

In today’s uncertain economic environment, a pink slip could be lurking just around the corner. It seems everywhere you look, people are being laid off in droves and it might make you wonder aloud, ‘What would I do it that was me? Would I be able to survive? And if so, for how long?’
They are good questions. Ones that more people should be asking themselves. Maybe if more people did, they wouldn’t be as unprepared as they often are when jobs are unexpectedly lost. Whether or not you suspect lighting might be about to strike your job, here are some steps you may want to consider taking in preparation for being dismissed.
1. Talk to family: If you think there is a chance you might be laid off, it can be a good idea to let your family know what is happening. Keeping them informed of the situation can decrease stress on you and them, and it can make the event less of a shock to them should it occur. Family can also help by keeping an eye out for open positions, looking for other forms of incomes, and decreasing expenses.
2. Start a reserve fund: Having a reserve stash of cash in the event that you loose your job can make the transition easier and less stressful. Don’t tie up these funds in investments that aren’t accessible though. Keeping at least three or four months worth of income in a savings or checking account as an emergency fund is a good idea, even when your job is secure.
3. Pay down debt: If you think your income will be dramatically decreased, you certainly don’t want to have to keep paying on debt. Eliminating debt in the form of credit card bills, paying off a vehicle, home equity or similar loan, and limiting the amount of interest you pay each month. One of the easier ways of doing this is to apply for a 0% balance transfer card, which will significantly reduce interest on your credit card balance.
4. Prepare a budget: Having and abiding by a budget can be important for one’s personal financial situation in the best of times, so it becomes even more relevant when it comes to the possibility of being unemployed. Knowing and understanding where your money comes where, and where it goes, can help you make tough decisions as to what expenditures must be could, should it become necessary.
5. Assess income: When creating your budget, review your income – and be honest. It won’t help you to inflate the numbers to make yourself look good. Give special consideration to the sources and amounts of income that don’t come from your regular job, as these may be your main sources of income when you are unemployed.
6. Evaluate expenses: It’s often easier to cut expenses than create new streams of income after you’ve been laid off. Sitting down and reviewing all of your expenses can help you determine what items you can eliminate if you lose your job. To help you make decisions, you can divide your expenses into categories. You can make a list of essentials, which might include food, shelter, health insurance, etc. and things you want – things like cable television, internet or entertainment costs.
7. Review assets: After you’ve made your budget, you might want to make another list consisting of your available assets and their respected values. This is another area in which it pays to be honest with the values you assign to given assets. Understanding how much your belongings are worth can help you with the next step when preparing to be laid off.

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8. Determine liquidity of assets: Once you have a list of your assets, you can consider ways of disposing of those assets for cash. In a squeeze, you might be forced to sell some of your belongings to pay bills. If this is the case, you want to be the most bang for your buck. The internet can be a great tool in helping you find people or businesses to buy all sorts of stuff. From CDs and DVDs to books, clothing, workout equipment, antiques, and all sorts of other goods, internet sites like Craigslist, eBay, Cash4books.net, CarMax, SecondSpin.com, and similar sites, can be good ways to get cash for your stuff.
9. Look for outside sources of income: In preparation for being laid off, you should also consider what you can do while unemployed to earn extra cash. Besides cashing in your belongings, you should consider odd jobs you might do in your area, or talents you have such as artistry, home repair, tutoring, writing, and similar work that can supplement you during your income drought. Again, the internet as well as local want ads and can be good places to search for people or businesses that might be in need of your services.
10. Review your situation: If you actually are laid off, it might be time to re-evaluate your life and career decisions. However, while it may be tempting to wipe the slate clean and begin anew, you still have to survive and will need an income of some sort. Therefore, it is important to be to be prepared to take temporary work or file for unemployment if it comes to that. Review your state’s process for filing unemployment and understand the timetable for getting benefits. It’s better to be knowledgeable regarding the process and never have to use it than suffer a costly delay in receiving your benefits because you were unprepared.

What are ways you would prepare financially?

Source: Craig’s shelter in solo isolation in the jungle

In the early 2000’s, the housing market was doing well and most people who bought a home during this time believed that their homes would be an investment. They assumed they would have a home that would appreciate. Unfortunately though, that was not and has not been the case. More and more homeowners who bought homes in the early part of this decade are finding that their homes are depreciating. Now they are finding it hard to find buyers for their homes.

With that thought in mind, it might be wise to be on the side of caution when considering buying a home. The first thing you might want to consider is how good your credit is. If you have bad credit, it would be in your favor to consider renting instead of buying, especially during a time with so much economic upheaval.

A lot of those owners who now are finding it difficult to sell their homes are willing to rent a home for a $1,000 a month that was worth over $250,000 when they purchased it. In this day and age, $1,000 a month is a far cry from the house payments and interest you would have to pay if you were to buy a home. Not to mention the large down payment that you would need up front to buy a home. You can get rental deals from homeowners that are finding it a difficult selling market and are at least wanting some income from their property.

These days, there are a lot of different benefits from renting instead of buying. You don’t have to pay interest, you don’t have to pay taxes, and it should give you the ability to be able to save money for the future, should the opportunity come up to buy a home in perhaps a better housing market in the future.

Another advantage to renting in this days market is the fact that you’re not going to run into any unexpected expenses forcing you to dig into any reserve funds that you might have. Remember once the monthly rent is paid, all obligations for repairs and maintenance is the sole responsibility of the owner of the property.

On the other hand, if you have very good credit, there would probably be an advantage to buying a home right now. The reason for this would be the fact that going prices on homes right now are much lower than they were a few years. The major advantage for those with good credit to own a home instead of renting is the fact that their monthly payment is an investment and not being thrown away as it is in renting a home. The homeowner also has the benefit that their monthly payments will not increase over the years, whereas the renter can probably expect an annual increase of 5%.

In the end, whether or not you buy or rent, will mainly depend upon just how good your credit is and whether or not you feel secure that your income, where it stands at the time of purchase, will remain the same for quite some time to come.

Source: Medic999

About the Author: Joel is a CERTIFIED FINANCIAL PLANNER™ that has founded and managed 5 startup companies. Some of the projects he is working on now within one of his web publishing startup companies include websites for comparing credit card offers, searching for car insurance, and comparing health insurance providers.

If you have ever run a young and creative start-up company or have ever even spoken with anyone who has run a young and creative company then much of the culture was likely dominated by two words: getting funded. Raising money from outside investors is one of the primary focuses (if not THE primary focus) of almost every start-up company, especially technology companies, but should searching for outside investors really be something that is a priority for most early stage companies?

I say no. N-O. “NO” in all capital letters.

With the increasingly low cost options for bringing products and services to market via the Internet, the dampening effect on creativity that outside investors can often bring into a young company, and the added pressure that outside investors will bring I believe that often chasing after outside investment can not only do real damage to a young company by wasting time that is better spent on doing other things but do even worse damage if that goal of outside investment is actually realized! Let’s take a look at some of the reasons why I believe that in most cases small start-up companies should just quit trying to raise capital all together and instead focus all of their time and effort on building their business.

#1 Building an Internet Business CAN BE Cheap

If you are attempting to start a company that sells auto parts or weaves sweaters by the crateful or any other type of business that needs a large warehouse or has some other type of very capital intensive need then you can disregard what I am about to say because your company is the exception to this point about starting a business for cheap (although maybe you should start out by outsourcing…?). For the other 99.98% of startup companies I believe that if you took a good hard look at what your business model is that you can likely bootstrap yourself to launching a very meaningful test of your business model on the Internet for much less than you might think.

Why give up a large chunk of your company just for extra cash to spend on 6 web developers, 3 sales people, and a CFO when you could keep 100% ownership of your company by testing your business model out with 2 web developers, 1 sales person, and a paid by the hour CPA? Sure, you (the founder) may end up filling multiple roles at first before you can generate enough money to expand and hire more people but isn’t that better all around? With full control of your company you can test out what works and what doesn’t as you cheaply bring your beta idea to the market instead of having outside investors constantly breathing down your neck who you may or may not agree with when it comes to running the company.

Things like Amazon Web Services, Elance, and Odesk all make it very easy, very cheap, and very scaleable to bring your business idea to the mass market. Sure, you may end up not being able to afford to crank out every single feature that you would like to when you first release your beta version of your website but just focus on getting your product/service out there and in front of potential customers and then test, test, test (when I built my credit card offers website it was never a “build it and be done with it” line of thinking but rather an iterative development process that has me even now constantly refining features and adding totally new features like a comprehensive credit card FAQ section of the site – much like BudgetPulse is constantly adding cool new features to their core product like their recently released new savings goals functions).

#2 Outside Investors can be a Creativity Killer

When you take on outside investors into your company, yes, you are certainly getting an influx of cash but you may or may not be getting an influx of experience as well. Like it or lump it, your company that you have obsessed about, dreamed about, and poured blood, sweet, and tears into – “your baby” now has more than just you controlling it.

If you take on outside investors that are seasoned industry veterans then you may just find that they have some great ideas for growing your company. What you may also find is that those outside investors are most interested in one thing and one thing alone: getting a great return on their investment – sooner rather than later.

You may think that “your baby” is better off being launched after a full quality review while your outside investors that are hungry for a quick buyout demand quick results. It’s one thing to concentrate on bringing your product/service quickly to market but its quite another to be rushed by hurried investors who may or may not understand the creative underpinnings of your company and what your goals for the company’s future really are.

#3 Outside Investors = Pressure

Outside investors can not only stifle creativity by pushing for a quick return on their investment but outside investors can just add an extra layer of pressure all around. It not only takes quite a bit of time in most instances to find an outside investor but it can also take a good bit of time to manage your outside investors. Time that should be spent on building your company is instead spent answering phone calls, sending emails, and meeting face to face with your outside investors to discuss new hires, sales reports, progress reports, revised budget estimates, etc. There can be enough pressure inherent with starting your own company and making it successful without adding the extra dimension of pressure that comes from accepting money from people who very much want to see that money quickly turn a profit.

Is ALL Outside Investment Bad?

Every company is different and I certainly am not trying to make the point that it is always a bad thing to do to raise capital. However, before you get sucked into the “I must seek outside investors before I start my company” mindset that is prevalent among many startups I would challenge you to take heed to the 3 points mentioned above and see if you might be able to launch your startup while still owning most of or even all of your company.

By Heather Stubblefield

For today’s savvy planners, that first positive pregnancy test brings all sorts of changes.  For me, immediately following my daughter’s first cries, money was put into a 529 plan.  A 529 plan is like a 401(K); however, its sole purpose is for the beneficiaries’ education.  There are many things to consider when choosing the perfect 529 plan.  Here are things to look for before you hand a penny of your hard earned money over.

If you are like me, you want to begin saving for your child’s college fund when they are very young.  That way, when their high school years begin, you have a realistic picture for them as to what types of goals they need to set for themselves.  If your child wants to go to an Ivy League school and you have enough saved up for an in-state college, they will need to know as a freshman that they need to get good grades to ensure a scholarship is awarded four years later.

When choosing a 529 plan, you want a company that has age based options for your money.  Since money in a 529 plan is invested, age based options are in place to manipulate what type of investing you are doing.  A baby is extremely far away from attending college, so more aggressive investing is o.k. because the risk is low that you will lose that money as your child ages and gets closer to college.  The same can be said about your junior in high school.  You want to be able to have very conservative investing then so that your college egg does not break.

Another thing to research is the company’s record of return.  This refers to their rate of success in increasing the money you have put in.  You don’t want to choose a company who has recorded a small amount of returns and a lot of losses with their client’s money.  All of this information is public record, so do not hesitate to investigate numerous state’s plans.

In referencing states there is a small amount of guesswork that goes into choosing a 529 plan.  You would like to invest your money in a plan that is geared for where your child is attending school.  You do not have to live in the state to put money into their plan.  For example, Utah has been heralded as having a great 529 plan, as does Ohio.  But, if your 529 plan is rooted in Ohio and your child’s heart is set on a school in Michigan, you will pay a penalty for withdrawing your money.  The way 529 plans work is instead of you getting the money, the plan pays the bill directly to the public college.  This is why the state you choose for your 529 plan is important.  Make sure the penalty is not big if you need to withdraw the money because your child chose a school in a different state.

While most things done surrounding 529 plans involve investing, it is important to make sure your company offers some guaranteed returns.  These can be in the forms of CDs or another savings option.  That way, you know for sure what money is there and can give your child a more realistic picture of how to plan and pay for college.

It may seem scary, but the sooner you begin a 529 plan for your child, the easier those high school years will be when your child wants to go look at colleges one summer.  Be prepared, do your homework, and you will set your child and your bank account up for success.

By Heaven Stubblefield

While it seems summer is coming to a screeching halt and Halloween costumes are sprouting up in department stores,  it is not too late to prepare your fall finances.  Here are some things to keep in mind has we say goodbye to summer and hello to fall…

1. Gas Prices

You have probably noticed that the price of gas begins to drop as fall weather sets in.  Don’t be fooled.  As a mother, I know my mileage always goes up when school starts.  I am making more trips to friends’ houses because the pool is not available, and the simple running around of summer to the grocery store is now doubled with trips to buy sporting equipment, clothes and school supplies.   On the same note, if you have a gas furnace, those cold nights might require more than an extra blanket, so don’t forget to budget an increase in utility bills if you don’t have a fixed rate per month.

2. Clothing

Last month, I went through my closet and donated clothes that were too big (from my post baby days), too small (from my pre baby days), and simply worn out.  Because of my savvy saving this summer, I have a chunk of change to spend on some fall clothes for work.  Make sure you take into account keeping your clothes clean.  A friend of mine works in a dry cleaning shop and shared with me how much more busy she is once school starts.  It seems the mom’s who were donning t-shirts and jean shorts this summer are returning to work and breaking out the pant suits and blazers.  Make sure you have money for both the clothes and keeping their upkeep.

3. Fall fun

Things get more expensive in the fall when it comes to entertainment as outdoor venues, aside from the Friday night high school football game or season tickets at your favorite sports arena, start to dwindle.  Having fun comes at a swelled price.  Your child may want spend the day at a gaming station or simply home watching television.  While both activities are not superb for your child, if it becomes a habit in the fall, it will come with a price.  Make sure you have plenty of low-cost options for fall fun.

Budget conscience planning

Getting ready for fall does not just mean being aware of what you are going to need to buy.  Revisit your finances.  Did you or your spouse get a raise?  Is it time to increase your fund allocation to your retirement account or child’s college tuition plan?  If you have had a change in salary, make sure you look ahead at your new income.  In my household, when I stopped working full time and went to work part time, my husband and I were able to look at our finances with a clear lens so that there were no unexpected surprises.  Make sure you look at those things first, then make your list of the things that you know will be needed this year.  It will make fall more fun, and winter more bearable.

What are you doing to be ready for your fall finances?

Financial planners provide personal finance management, and their help allows simple people to find solutions to big problems. If you are looking for help setting long-term goals and you want to know where you can go in the future in terms of savings and investments, financial planners are definitely your best option to aid you in the process. Finding a financial planner is simple to do, but let’s look at some ways to figure out what you want to look for in a good financial planner. Also included are steps for deciding if a financial planner is needed in your life.   

Times to look for a financial planner   

If you’re living a busy and hectic life or you just don’t have time to get your finances going, then it is time to get a financial planner. Figuring out your financing is not only hard but it’s also confusing, and to top it off, it just takes too much time! Making a personal budget is always a good idea, but if you can’t make one due to time constraints, it is better to get a personal finance planner.   

When your life has just become too complex with bills (like multiple loans or mortgages), then getting a financial planner will help you understand where you are and where you want to go. They will help you get organized and show you what it will take to maintain all those bills in an easy manner. 

Another time to look for a financial planner is when you decide that you aren’t knowledgeable to figure out the best solutions for your money. This may happen when you find you have come into a large sum of money, like the lottery or an inheritance.  You may find out you simply aren’t qualified to make the proper decisions. If you try out some budgeting tools, you can really determine when you need professional finance help.  

Looking for a financial planner  

Looking for the right financial planner is not hard once you know how to.  While it seems that anyone can start a financial planning company and use the adage, it is relieving to know that there is a financial planning association and certain credentials that make them part of this group.  You can go to their website, www.fpanet.org to locate a certified financial planner in your area.  It’s as simple as entering your ZIP code.  You can do the same at www.napfa.org where you can locate advisors on a fee-only basis, or www.cfp.net on its search tool.  

After meeting one, decide if they fit your needs.  If you choose to look for one on your own or are referred, don’t be shy.  Ask for educational credentials.  Many universities offer a program for its students to complete while working toward their degree.  It wouldn’t hurt if someone had a bachelor’s degree in finance, accounting, or business. 

There many different types of financial planners out there. You need to determine what kind of personal financing you have problems with. There are financial planners who work for big companies and their strategies may not suit your needs. A small business owner, for example, is going to have a different set of issues than a stay at home mom. You have to pick someone who attends to your needs. Budget software like that at www.BudgetPulse.com, is available to help you identify where you need the financial planner’s help by showing you  areas you may struggle in.  

Preparing so your financial planner can help you  

Make a list of your current assets or liabilities and come up with a general picture of your financial situation. It is important that you understand where you are and where you want to go in terms of your business or finances. It gives you a better way of getting help if the financial planner has an understanding of all aspects of your situation. Make a personal budget with everything that you pay to keep yourself and your planner updated with your finances. 

It is also important to find about fees and charges when dealing with financial planners. Make an average assessment on the fees and look for a financial planner that would give you the best price. That fee will become part of your monthly payments. 

When you have chosen a financial planner, you need to schedule a meeting to discuss your options. Money tracking is now easier with professional help. Bring all your financial documents and have an idea on how you would like the financial planner to help you. Then all you have to do is listen to their suggestions.

Be smart on your vacation or business trip and you won’t have to budget for a loss. Here are 7 tips that came to mind for being smart & safe while traveling. As I wrap up my trip in China these tips definitely come in handy!

1) Once you arrive at your vacation or business trip destination exchange your currency. Usually the airport will be the best place. Many times hotels or off site currency exchanges will have much higher exchange rates! This may seem small but doing it once in a larger sum can save you big money.   Then, once you exchange, don’t carry it all with you. Use your hotel safe or other safety options. Don’t put all your eggs in one basket

2) Depending on your destination it may be smart to carry a travel belt. I always feel like a grandpa wearing one (although I did when I was in Kenya) so I usually just move my wallet from my back to my front pocket. It is also a good idea to keep your passport in a very safe (un-theivable) spot.

3) Use small bills when possible. Flashing around your 500 unit bills will make you a sure target. When getting change keep all bills in site otherwise you may get suckered into the, “you gave me a smaller bill”, scam. However, pretending to have only larger bills can help with certain negotiations. Just be aware of your surroundings at all times!

4) Carry only 1 credit card if you can. There is no reason to overexpose yourself. Also, before you leave it’s a good idea to leave a copy of that credit card (and a copy of your passport) with a family member. This way in worse case scenarios a copy can be faxed or email to you.

5) When you pay with your credit card make sure to check 3 things…
a) the amount on the receipt is in fact the correct amount.
b) it is in fact your card (the same that you paid with).
c) you always get a copy of your receipt…even if you don’t normally, this is important when traveling.

6) Be very aware of your surroundings. Ever seen the Bourne Identity? The old fashioned bump and run pick-pocket’er is still very prevalent so check your pockets often and watch out for strangers in close quarters.

7) Be careful what you pack away. If you put valuable in your luggage you’ll have an excruciatingly difficult time getting them back when/if your luggage is lost. Your vacation could turn to a net loss if you lose the wrong piece!

• Make sure to pack accordingly. Having to buy clothes or other items while on your trip can be very expensive. If you start packing and planning early you’re much less likely to forget something important. However, if you’re going to a place like China, you could find some great deals!
  

• When it comes to bills make sure you remember the “non-monthlies”. Think about car titles, insurance payments, or maybe condo dues. Be sure to think ahead at least until your return to not miss anything out of the norm.

• Pay those bills for an extra week. Crazy right? No. What if you love our vacation so much that you want to stay an extra week, or heaven forbid something goes wrong.  Paying your bills for that extra week and you’ll give yourself some time to relax when you return.

• Planning ahead can save you a ton! Using a service like Yelp.com can give you more information on the costs of restaurants, hotels, and almost any other commercial establishment. Find the best combination of quality and price to really make your trip great! If you’re going abroad try out Tripadvisor.com for reviews.

• The last thing is to have a blast! Now that your ready for your trip, with your finances in order, you’ll be able to completely enjoy your trip, worry free!