Sunday, August 31, 2014

Mistakes To Avoid For First-time Property Investors

The real estate game is quite hard to navigate in these troubled financial times. Before, it was possible to make a property investment and to be sure that that investment is going to pay off. However, today, with the omnipresent shortage of money, the profit is by no means guaranteed, and there are many bad shortcuts that you can take.  These shortcuts can easily leave you lying naked in the bankruptcy bushes with multiple financial cuts and bruises.

Since there are so many articles on what to do when investing in property for the first time, here are some definite don’ts when it comes to investing. Doing these things is something that should be avoided at all costs, if you have plans to rise to the top of the property investment game.

Don’t let your heart cloud your judgment

When purchasing your first home, it is only natural that you will let your emotions decide what you are going to purchase. You will live there, possibly for the rest of your life, and because of this, you will need to make sure that the house has that real ‘feel’ about it and that you will be able to call it home.

However, when making a first-time investment in a house that is supposed to pay off later on, it is most definitely undesirable to let your emotions rule your purchase. You don’t want to end up with a house that you cannot rent or sell, just because you liked how the lawn was done or how nicely painted it was. Also, letting your emotions rule your purchase can lead you to over-paying for a house, thus going into red from the very beginning. 

This is why it is advised to perform thorough checks for the property that you are willing to purchase. Is the neighborhood right for attracting quality people to live there? Will the property provide the return that you require for the invested capital? When making an investment, always bear in mind that real estate business is governed by economy, not emotions.

Rushing in or procrastinating

There are three types of real estate investors, and these are: rushers, procrastinators and those who are in the middle. Of all these, only the last ones have a chance of making money in the real estate investing business. The other two groups usually never make it past their first investment, if they make one at all. And here’s why:

The rushers are the ones who attend one seminar and see this as an excellent opportunity for them to get rich over-night and get out of their financial troubles. This is why they jump the first wagon that is open to them, and buy the first property they hear about. After that, they are left with a property they can hardly sell, or can hardly recoup the money they invested. When this happens, they usually quit the property investment, and that’s the end of it.

The procrastinators are the ones who go beyond that one seminar. However, they have another problem. They go to too many seminars and get their minds overburdened with information. This abundance of information leaves them baffled as to what to do, and they usually pass up vital opportunities just because they are unsure of their further doings. They analyze things too much and end up doing nothing. This is called paralysis by analysis.

The best thing to do here is to find the middle ground. While the first group may overcome their mistakes and learn through their experience, the second group will never get into the property business. This is why it is essential to note that you cannot learn everything at the beginning. You should learn as you go, but be sure to learn quickly. Only this way will you succeed in the harsh game that is real estate investing.

In the end, all I have to say is to stress that these two of the most common mistakes should be avoided at all costs, because if you make them, you can count yourself out of the game before you have even joined properly. Avoid them, and there are great chances that you will prosper. Who knows, maybe in a few years’ time you will be the next big thing that happened in the real estate investment. 

Author

Damian Wolf is a writer and online marketer. He mostly writes about business opportunities and self development tips. Damian currently works  on advanced online strategy for Simple Home Invest website , great Australian property investment service.
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Friday, August 29, 2014

Ways To Make It Through College Without Debt

When you're going to school, it is easy to be drawn into both student and personal loans. While having the money right now is extremely helpful, in the long run it's a bad idea. Once you have to start paying back the loans, it can become detrimental to your budget and your overall lifestyle. The best thing to do is to work toward graduating as debt-free as possible. Here are a few great ways to keep your loan debts small, or even nonexistant.

Find Great Scholarships

Image via Flickr by Saad Faruque

One of the best ways to work your way through school without debt is to get as many great scholarships as possible. Schools such as Wake Forest University offer scholarships for students with financial need. However, there are other scholarships you can seek out. If you are good at an art or sport, try for scholarships based on these. There are also options for minority students. You can even find scholarships for attributes, such as those for left-handed students.

Invest Wisely

Another option is to make the money you have work for you. Look into investing your money, so that you are getting interest payments. In some cases, you may start getting a return long before your student loans come due. Watching the markets and investing wisely is a great way to make money while you're going to school. While this may not seem feasible to everyone, keep in mind that you can start investing with just a small amount of money. Then you can use the interest payments that you receive to add to your investment portfolio.

Get a Second Job

Paying for your own way through college is difficult. However, if you get a second job instead of taking out loans, you'll be happier in the long run. If you are able to pay for your schooling as you're going, you're going to be able to start your post-school life more quickly and easily. Working full-time, or even working two jobs while taking classes isn't easy. However, one option is to take your classes online, allowing you to study at your own hours. Another option is to take fewer classes. This extends how long you are in school, but allows you more freedom from debt.

Get Grants

There are many grants for students. Some are government grants, and others are private. Either way, this is money that you can use toward school that you don't have to pay back. If you are working or you have parents who are, look into whether the companies they work for offer education grants. Make sure to apply for government grants that are available to you. For example, the Pell grant is perfect for those who are going back to school later in life.
While it's tempting to get loans, there are better options to get yourself through school. When you graduate debt free, you can continue with your life without having the burden of payments hanging over your head. Consider the best ways you can get through your schooling and you'll finish without tens of thousands of dollars in loans.


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Monday, August 18, 2014

How to Measure Risk

Investing in stocks is a risky business. There are some risks you have some control over and other that you can only guard against. Thoughtful investment securities selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

However, other risks inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

There are two ways to measure risk. One is by using modern portfolio theory and the capital asset pricing model and the second is to look at the various risk factors which affect a business.

Capital Asset Pricing Model
We will not discuss in detail this theory of asset pricing as it requires you to have a working knowledge of first or second year university level statistics and finance. Since this is an introductory article, readers who are interested to learn more about the CAPM and Modern portfolio theory are encouraged to attend a course in finance or seek advice from a qualified advisor.

Basically, the CAPM makes some major assumptions about investors and their preferences. In order to use the CAPM to find the proper discount rate, one must know three things: a stock's beta, the nominal risk free rate, and the expected return on the market. Stock's with betas greater than one are more risky than the market and betas of less than one are less risky. For example, a stock with a beta of 1.5 is expected to gain 1.5% when the market rises 1%.

Modern portfolio theory is also where the main ideas about diversification come from. We will look at this concept in more detail later. For now, we can define a diversified portfolio as containing securities which have little or no correlation to other securities in a portfolio or the market. These securities are then placed in a portfolio in such a way as to minimize the volatility of the portfolio.

You may be scratching your head by now but this is essentially the basic concept of diversification and minimizing risk. There are a lot of disadvantages and advantages to using the CAPM and MPT. One assumption of the CAPM I will mention is that there are two types of risk. Market risk and firm specific risk. The CAPM assumes that investors only get a premium return for taking on market risk because the firm specific risk can be entirely eliminated through diversification. Thus, beta only measures market or nondiversifiable risk.

Second Way to Measure Risk
The second way to measure risk is to start by taking a nominal risk free rate. How do you do this? Well you take the yield that is currently offered on US Government bonds that match your investment horizon. For example, if you plan to invest for 5 years, you should use the yield on 5yr U.S. bonds. Now add to this the premium for risk and voila-you have your required return or discount rate. You may be asking, what makes up the risk premium? Well, remember from lesson one there are five things: financial, business, liquidity, foreign exchange, and political risk.

Financial Risk:
Financial risk involves a company's capital structure. What is their debt/equity? What is their current ratio? etc. We will look into how to assess financial risk in greater detail later in lessons on accounting and financial statements analysis.

Business Risk:
This involves the economics of the firm you are looking at. Ask yourself, how will this company look ten years from now? Do they have barriers to entry? (ie patents, economies of scale etc. more on this in the economics lessons).

Liquidity Risk:
It has been shown through various studies that firms which are private or thinly traded are sold at a significant discount to their value compared with similar firms with active markets. Firm's which can be easily bought or sold with little transaction costs are called liquid or marketable. The lack of liquidity can occur if the stock you are researching is not widely followed. It can also happen if you plan to liquidate a large block of stock. Your transaction could bring down the price significantly.

Foreign Exchange/Political Risk:
This involves firms which derive significant portions of their sales overseas. For example, many exporters to Asia have been affected by weaker demand for their goods. Foreign Exchange/Political risk can also happen because the company you are looking into is heavily restricted by the government. Finally, different countries have different accounting rules so you should be aware of this when investing in foreign stocks.
When investing in foreign stocks, you also run the risk of the U.S. appreciating. To adjust for this, you should restate your foreign returns to U.S. returns.
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Tuesday, August 12, 2014

5 Apps That Help You Manage Your Money

Let’s be honest. Most people are not accountants, financial advisers or qualified money managers. The normal person is not always equipped with the knowledge needed to maintain their personal finances. And with the economy in flux, responsible money management has never been more important. Luckily, there are several financial apps available to help you manage your money.

Mint

Mint.com app Image Via Flikr by Linsey Knerl
Price: FREE
Are you the kind of person who has no idea how much money you have in your bank account at a given moment? If so, the Mint application is the perfect way for you to start organizing your finances. It allows you to see all your account balances and transactions in an easy to read list. You are able to connect it to a variety of different accounts including credit cards, checking accounts, investments, and even loans. Not only are they listed for you to see the balances, but Mint breaks down your spending into categories. This can include Entertainment, Food, School, and Rent just to name a few. You can even set it up to send weekly breakdowns. Mint is an excellent app to get you on the right track to managing your money.

BillTracker

BillTraccker
Price: $1.99
Remembering to pay bills is one of the reasons people are having such a hard time managing their money. When thinking about your personal funds, it is important to realize future payables. This can include loan payments, rent, utilities, and a variety of other bills. BillTracker is a great app for displaying all your monthly bills in an organized and easy to follow manner. It allows you to input all your bills, set payment reminders, and even can be linked to provide payment confirmations. It is an excellent app to help anyone keep track of their bills and is a must have for managing your money.

Adaptu Wallet

Adaptu Image Via PCmag
Price: Free
Adaptu Wallet is a hybrid app combining both of the aforementioned apps. It allows you to display your latest account balances and also set up bill reminders. The idea behind the app is to act as a virtual wallet that allows you to carry all your information in the palm of your hand. It even allows you to store images of your insurance, social security, and business cards. Not to mention, the added benefit of spending forecasts so you can evaluate your finances. The best part of all is that everything is stored under bank-level security, so you will never have to worry about losing your information.

PayPal

PayPal Image Via Itunes
Price: Free
The PayPal application can be used on all cell phone plans. If you have ever purchased something online you have probably come across PayPal before. This app makes it extremely easy to transfer money at the push of the button. You can shop around for the best deals on your smartphone and then quickly purchase the item through this safe and easy app. Another great feature is that it allows you to deposit a check immediately to your account by simply snapping a photo. Having an accessible and secure way to transfer money over a variety of different accounts makes PayPal an excellent app for people looking to manage their money.

StockTwits

PayPal
Image Via Itunes
Price: Free
If you are someone who is relatively responsible with their personal finances, but looking to become more connected with investments and stocks then StockTwits is for you. This is a financial communications platform for anyone looking to gain insight into the stock market and investing. It connects you to traders and investors, financial news, charts, and all kinds of investment information. It pulls up real time stocks and connects it with all of your investment portfolios. This app is an excellent way to monitor the money you have invested and makes it very easy to see trends and gain professional insight. Monitoring your personal finances is no easy task. From bill paying and account management all the way to investment portfolios it is tough to keep track of where and what your money is up to. There are hundreds of useful financial apps on the market and many of them are free to download. If you are looking to take control of your money take the opportunity to look at some of the apps mentioned above.  
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Saturday, July 5, 2014

Tax Return Filing Season is here – 11 Things to keep in Mind!

Online Tax return filing for Indians for FY 2013-14 would be different in many ways. However, one thing which really stands out is that it will have more tax payers under its ambit in compare to any previous year since now it is mandatory to e-file your tax return if your income is more than Rs.5 lacs.  This article would stress on 11 things which a tax payer should keep in mind while e-filing his tax return, especially first time filers.

1) Permanent Account Number - This is a unique alpha-numeric number allotted to you, which basically is the base identifier for all correspondence with the IT department. Thus it is of paramount interest to double check the PAN number while e-filing your tax return. 

2) E-mail Id – IT has become hi-tech and moving towards paper less environment, wherein most of the correspondence from them, including ITR acknowledgment and intimation would come to the email id you provide in the tax return.  

3) Your Bank Account Details - This would contain your bank a/c number, MICR code and from this year onwards one more mandatory detail is required i.e., IFSC code of your banker.

4) Correct ITR Form - It is very important to select the correct ITR form that is applicable to you for E-filing of tax return as the government has made various changes in regard to the selection of ITR forms for different assessees. If you fail to select correct form then your IT Return may be regarded as defective return. 

5) Check Form-26AS before filing- The Government keeps record of all tax deposited/ credited to your PAN number. You can register with the e-filing site of IT Department to view your Form-26AS. It is important to note here that the information disclosed in your income tax return form should match with the details in your Form 26AS. Thus there is a need to check Form-26AS while doing e-filing your tax returns. 

6) Provide Details of all the Tax saving investments made by you- It is advisable that one should always make a list of Tax saving investments made throughout the year which are eligible for deduction under Chapter VI of the Income Tax Act, otherwise there is always a chance to miss those in the tax returns, and not claiming benefit on those. 

7) Filing ITR with Multiple Form16- Form 16 is a certificate issued by an employer to an employee who provides details in respect of salary earned by the employee and tax deducted at source by the employer. Tax payers often get confused regarding how to file their income tax return with multiple Form16, wherein they have worked for more than one employer in a financial year.

8) Interest on savings bank account is taxable- Interests on savings bank account, post office savings and savings in cooperative banks are taxable when amount exceeds Rs.10000. Thus if you have such income then you should disclose it the income tax return. Only saving bank interest income is exempt upto Rs. 10000, and this fact misunderstood. For example, interest on fixed deposit and recurring deposit are fully taxable income which is to be shown under the head “income from other sources”. 

9) Exempt income need to be disclosed separately in the returns - It has been noted that many tax payers do not disclose exempt incomes in their income tax return on the contention that they are not taxable. IT department has taken this very seriously by making ITR 2 applicable to tax payers, who have exempt income of more than Rs .5000, thus they can’t file ITR 1.  Thus, it is advisable to disclose all exempt income at the required schedule in the ITR return. 

10) Mailing ITR-V submission is a must when ITR is uploaded without digital signature – ITR-V (income tax return verification ACK) is generated when a ITR is uploaded online without use of the digital signature. ITR-V ACK is required to be mailed to the CPC, Bangalore within 120 days of the upload of the ITR online. Upon the receipt of this, the CPC sends a final Acknowledgement to the email id. 

11) Keep documentary evidences of all the information you give- Last but not the least, tax payers should look to properly maintain all the documentary evidence that is associated with the filing of return which the assessing office might call upon in future. 

About Author:
Alok Patnia founded Taxmantra.com to understand and address the pain points of individuals, businesses and startups. He is an expert in handling ITR filing, has great insights on the business startup issues such as choosing right business entity and also has vast experience in the field of business maintenance services such as accounting, auditing, company law compliances, service tax and other related fields.


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