Roth-IRA or Roth-401(k); Predict its Future Value

Jul 31, 2010 by

How much money will be accumulate in your Roth retirement account?

If you’ve got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your Roth IRA or Roth 401(k).

The FV function calculates the future value of an investment given its interest rate, the number of payments, the payment, the present value of the investment, and, optionally, the type-of-annuity switch.  (More about the type-of-annuity switch a little later.)

The function uses the following syntax:

=FV(rate,nper,pmt,pv,type)

This little pretty complicated, I grant you. But suppose you want to calculate the future value of an individual retirement account that’s already got $20,000 in it and to which you are contributing $400-a-month. Further suppose that you want to know the account balance—its future value—in 25 years and that you expect to earn 10% annual interest.

To calculate the future value of the individual retirement account in this case using the FV function, you enter the following into a worksheet cell:

=FV(10%/12,25*12,-400,-20000,0)

The function returns the value 771872.26—roughly $772,000 dollars.

A handful of things to note: To convert the 10% annual interest to a monthly interest rate, the formula divides the annual interest rate by 12. Similarly, to convert the 25-year term to a term in months, the formula multiplies 25 by 12.

Also, notice that the monthly payment and initial present values show as negative amounts because they represent cash outflows. And the function returns the future value amount as a positive value because it reflects a cash inflow you ultimately receive.

That 0 at the end of the function is the type-of-annuity switch. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the period (month in this case), following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the period following the ordinary annuity convention.

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How to lodge a financial dispute

Jul 10, 2010 by

To lodge a financial dispute, you must first contact your nearest financial service provider. It is encouraged to contact the financial service provider under the consumer complaints department and discuss the issue. See if it can be resolved quickly.

Before considering the dispute, the financial service provider must have been given an opportunity to resolve the dispute with you directly. In most cases, the financial services provider has up to 45 days to respond to your complaint.

If the dispute remains unresolved after you have made a complaint to your financial service provider, you can lodge a dispute with any independent financial dispute’s consultant. For example, The Financial Ombudsman Service in Australia. You can even lodge a dispute through their online dispute registering services.

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2 tips on Credit Card Balance Transfer

Jun 30, 2010 by

People like to own money, house & car. All are essential, as long as they serve as necessity but not as a pricey status symbol! But also people owe money on other expenditures, and it’s sure will accumulating debt and the first goal in financial planning is to pay of these debts. Credit cards is the one of expense that can carried away money which is better to put on saving. Banks do assist with debt consolidation and once credit card debt is dealt with more money can be spend on reducing a home loan. Another way is through balance transfer. 2 tips here:

  • First, consider your current credit situation. Is your credit history solid, with a consistent pattern of on-time credit card payments and a reasonable number of open credit lines? If so, you may qualify for a lower interest credit card onto which you can move some or all of your outstanding balances. This can end up saving you thousands of dollars a year in interest charges.
  • A second important thing to consider is the amount you wish to transfer. If you have $20,000 in outstanding balances on several high interest rate credit cards, it is highly unlikely you will be able to move all of this onto a single low-rate balance transfer credit card. If only a portion (say $5,000) is allowed to be transferred, this is better than nothing and can be a productive step in the direction of lowering your overall interest costs. Many borrowers take an all or nothing approach, but this can be self-defeating behavior. Just like weight, personal debt gain doesn’t happen overnight and, conversely, doesn’t go away overnight, either. It’s important to make a decision to change and then start moving consistently in the direction of change.

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7 Simple Ways to Increase Your Credit Card Limit

Jun 20, 2010 by

Many credit card holders aspire for a higher credit card limit. The obvious reason for this is that a higher credit card limit enables the purchase of otherwise unaffordable merchandise.

First and foremost, credit card holders need to remember that to get a higher credit card limit, they must abide by the terms and conditions of the credit card company or bank.

Below are 7 other ways to get a higher credit card limit.

• The most important thing to do for getting a higher credit card limit is to prove your credit worthiness. This is the first thing that banks and companies look for when giving a higher credit limit.

• Attract positive attention from the credit card company or bank by paying finance charges once in a while. Obviously, this is not advisable on a repeating basis and should only be used as a last resort to increase your chances of getting a higher credit limit.

Proving to credit card companies and banks that you are good “borrower” can be a convincing way to get a higher credit limit. But be careful because this strategy also means that you will be paying finance charges which can accumulate in a hurry.

And always remember, a higher credit card limit means greater purchasing power, but it also increases the risk of your having to pay greater interest charges and other processing and late fees.

• Always spend within your credit card limit because doing so means that you are capable of controlling your expenses.

• Use your credit cards regularly. Don’t keep your cards for emergency use only. If you use your credit cards sparingly, banks and credit card companies will be unable to understand your spending and pay-back behavior. Under these circumstances, most banks and credit card companies will be reluctant to give you a higher credit card limit.

• Never make minimum payments. Instead, try to pay for the entire outstanding amount. This will usually give you a better chance of getting a higher credit card limit.

• Avoid late payments as much as possible. Not only will your increase payment increase, but you may also have to pay an additional fine for not clearing bills on time. This will also dim your chances of getting a higher credit card limit.

• The best and simplest strategy for getting a higher credit card limit is to use your credit card wisely. Always keep in mind that credit card companies keep a record of your transactions and payment patterns, so always pay on-time.

The bottom line is that your performance in the records of banks and credit card companies will determine whether you’ll get a higher credit card limit or not.

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Turn a Bad Credit Rating to be a Good Thing

May 24, 2010 by

Can a bad credit rating save you from bigger problems? Hasn’t it done just that for many young people? I’ll explain how with a couple true stories.

Good Credit Rating Story

My friend started his adult years with good credit. Soon he was able to get credit cards at will, as well as finance cars, snowmobiles and more. He made the payments, and went deeper and deeper into debt while he was at it. When he was 30 years old, he had over $20,000 in credit card debt, plus loans on cars and business tools.

Eventually it was just too much to handle. After considering bankruptcy, he was convinced that the credit card companies would reduce his balance due if he just threatened to declare bankruptcy. However, he had to stop paying on the cards, or the credit card companies wouldn’t believe he was in financial trouble. He did this, and then drafted a nice letter to the companies, explaining his situation. Most cut at least 30% off what he owed, but he had to pay the remaining balances immediately, which he did with a home equity loan.

As a result, his bad credit rating wasn’t as bad as if he had actually declared bankruptcy, so he was able to rebuild his credit score. He also started to rebuild his credit balances. His good credit rating enabled him to begin again the process of overburdening himself with debt. He lives a stressful life, to say the least.

Bad Credit Rating Story

Another friend had her first credit score based on the phone bill in her first apartment, which she never paid on time. It was eventually disconnected. This, along with a few other minor credit infractions, destroyed her credit scores while she was young. What has this meant for her?

Well, because she can’t borrow, she hasn’t had the pleasure of being overwhelmed with debt and at the edge of bankruptcy. She has to buy things for cash when she has it, or wait until she saves enough. Has the inability to have a bunch of things around that are worth a fraction of what she owes on them made her less happy? I don’t think so. She seems happier than most people, perhaps partly because she just doesn’t have the debt-stress that is so typical today.

Bad Credit Is Good?

I’m not saying you should purposely try to get a bad credit rating, but if you already have one, know that it isn’t all bad. The habits that got you here could get you into even more trouble if you could borrow more. Why not look at it as an opportunity to stop going further into debt, and a chance to learn better habits?

Pay cash for everything. Pay down those credit card and loan balances (the higher interest ones first). The moment you get your cards paid off, start setting aside money to buy a good used car for cash. then, when you’ve done that, start putting what would have been a car payment into a savings account, for a future down payment on house or a business (the only things you should borrow for). Yes, a bad credit rating can be good thing, if you take it as a lesson, and an opportunity.

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