I've been through about 5 different banks in the past 8 years because of school, moving, my job, etc. My first priority when picking one during college was the availability of ATM's. I got lucky because there was a credit union based out of my school. It was fucking awesome to have an ATM in every dorm and not have it charge a withdrawl fee, which is my second reason for picking it, there were no fees for ATM usage. Also, they had no fee checking accounts which were fucking awesome. I'd recommend checking out those two things, the ATM locations and fees, before anything else. Once you figure out a bank, check out the returns on savings accounts, most of them are low, like 1% per year, but whatever that's what you get. What I did was keep a little bit of money in a savings account back home, something like $500 for safe keeping and emergency use, and put the rest into both a savings and checking account at the credit union on campus, like a 10%-90% split respectively between the accounts at the CU. If you direct deposit for work, put it into your checking acct. When you go home for the summer, just write yourself a check and open up a checking acct at your home bank and you're all set.
It's true because if you get a new car that cost's more monthly you could be increasing your back end ratio or DTI (debt to income ratio.) The banks generally do not like seeing this number go above 45%. It's also a rule of thumb because any inquiry on your credit can potentially lower your credit score. Reason behind this is that people with bad credit are usually constantly trying to attain it. Unless it's an absolute need I would wait until you close on your home to buy a new car. Truthfully you should do that anyway because the home is a much larger payment and you want to make sure everything is kosher with that first. FYI, rates are under 5%. I just locked my buddy in at 4.75% with zero points, that was giving him the "friend" discount but there are amazing rates available.
This also might fall under the Advice board, but here we go. Jägerette and I have some decent savings, and got a lot of money from the wedding. We are looking into investing, but it just seems too shaky right now to really consider the market. Now, Jägerette's dad is retired, and fairly well off, but this year has seen a lot of expenses, and he is nearing the limit he can withdraw from his IRA without major tax bills, so he would be using his home equity line at 4% in the future as he has home repairs, and other things that need to be done ASAP, such as a new roof as all the rains this year have ended the useful life of their roof. So he offered us this option. I hope I can explain it to make sense. We loan him x amount. Say, 20k. He wants to pay us the same rate that he would pay the bank, 4% on the balance because rather than helping the rich banks by giving them the interest he would accrue (as there is no grace period) he would help us. Now I am countering with 3.75%, so that way there is a financial benefit to them as well, and then they only pay off the interest that would accrue at that rate, until such a time that we might need the 20k for loans, but we would get a steady investment income of ~750 a month that would otherwise be going to a bank. Now, does this seem like a decent "investment"? I know that the dollar amounts a month sure add up, but I have never dealt with giving money to family members, or would it be better to just sock it away in a Cd at a much lower rate, but avoid the classic issues that can arise with loaning family members money.
Strictly from the math of it, I think it's a poor idea. If you're trying to do him a favor, just realize that this isn't entirely a win-win situation, particularly for you. The biggest issue I would have with it is that it prevents you from using the money yourselves, for something like a house down payment, starting a college fund for your kids, putting it away for your own retirement, etc. And while you could do worse on the interest rate, now is most likely the time in you and your wife's life where your best-equipped to handle risk in your investments (i.e. losing money in the stock market.) I would also urge caution because this sort of a loan (basically a HELOC) was at the heart of the subprime crisis, and is considered a very risky product by every mortgage originator out there. You've said he's pretty well off, but the fact that he's borrowing money in retirement means he's not sitting on a fortune, and there is risk involved. When a bank makes a loan like this, they generally have access to every sort of metric imaginable to judge a borrowers ability to repay and risk of default. The less information they have, the higher the interest rate they charge. You, in all likelihood, know little if any of this information, yet you are giving him a better than prime interest rate. You're being undercompensated for the risk you're taking on and you should be keenly aware of that before agreeing to loan him the money. Bottom line, I think what it comes down to is how big a chunk of change this would be to you and your family. What would happen if you could only get half of it back, or less?
I PM'd him this but will say it here too. Based on $750 a month interest at 3.75% they are asking for a $240,000 loan. Please do not do this, they will not pay you back and if they do it will be something you will be thankful for not expect after many missed payments. Edit: Unless you don't realize that 3.75% is for the year and it is 750 for year not month or like 60 bucks a month. Either way, I still would not loan any family member money. My brother still owes me over a grand (I will repay you in 2 weeks) after 4 years.
What Porkins and Zyron said are pretty much the truth. Never loan a friend or family member money unless you don't care if you don't get paid back. That may sound cold but IME these kind of arrangements always lead to detroyed friendships and ruined relationships. Since he already has a HELOC with his bank let him use that.
I don't intend to sound like a dick, but do you have money riding on this stock market? I know that what you say is basically correct, in the sense that you can find it in any decent book on investments, but I am also young, have some cash, but I am too uncomfortable in investing in todays stockmarket. @kuhjäger I don't know what your financial position is or the financial position of your wife's dad, but if what zyron states is correct, it implies that you have a lot of savings and the willingness of your wife's dad implies that he has a fairly large amount of equity, but very little liquidity. Porkins is correct that you will suffer some oppertunity costs and the interest rate offered by your father-in-law has to weigh up against that lost income. The worst case scenario here is that you wont get repaid and you probably would have to claim the money from the estate after your father-in-law passes away. I am taking a stab in the dark here and I am guessing that would be in 20 to 30 years. This therefore is the duration of your worstcase scenario investment period. You should compare this rate you could get with a deposit over that period at a bank or in US treasuries. (You could have the rate of the loan adjust to minimize your interest rate risk). The debt of your father-in-law would be a debt of the estate and over that part you would not pay any estate-taxes (if you would pay them anyway). This is something to keep in mind and perhaps to consult an estate lawyer about. Though mind you, there are several plans to change the current estate tax. To ensure that this indeed is the worstcase scenario you would have to get a real right over your father-in-law's assets. So that in the case of insolvency, other creditors won't get to it before you do. There are a couple of security devices in the USA that you can use for that purpose, but for that you should have a look at whether and what the registration costs are for such a security device. Trakiel is correct that it is quite dangerous to loan money to family and friends, but if your father-in-law has access to credit from a bank as the alternative, I don't see why he wouldn't be able to repay you from that. Not to mention that if you have a real right over his assets you should be able to have access to a similar or the same facility when you'd be in need for some liquidity. (Then again the nasty thing about liquidity is that your need is probably highly correlated with the need of others so the moment you might need liquidity it will be dried up or terribly expensive). The only problem that remains is the relationship to your father-in-law, as long as you are all clear, and I mean absolutly clear, on what the deal is and what should happen in the case of certain contingencies, there shouldn't be much of a problem. The only huge risk I see that if you and your wife got seperated or the relationship between your father-in-law and you or your wife should turn sour (happens in the best of families), then you'll find yourself in a huge pile of shit. The size of this pile of shit can be diminished by drawing up a clear contract what is to happen in the case of certain contingencies and then still you might find yourself in a legal battle. This is the absolute and most worst-scenario, a grey swan so to speak. I don't know any particulars about your situation, but these are the points I'd find worth looking into if I'd be in your situation. Bottomline is, compare the alternatives to what you could invest your money into and what your father-in-law can loan for and if there's something in the relationship between you and your father-in-law that gives the three of you an advantage over the capital markets (like the estate tax), you should go for it. If not, there seems to be little to no point in doing this.
Why not invest in an index fund? Especially in this market. Why wait until a bull market when prices are sky-high and all returns have pretty much passed? Today's youth are in one of the few financial situations that happen every few decades, the passing of an economic collapse. Even if we hit a double-dip, you have the time to weather the storm and are pretty much guaranteed to come out ahead if you invest wisely. Imagine if you had the opportunity to invest in or right after the Great Depression? We've got time on our side, and if you don't need the money in the near future, by all means invest long-term in the market. CDs are great if you like to watch your money erode by inflation or you're nearing retirement and don't want to bury it in your backyard anymore. They offer less liquidity than a money market and comparable rates.
This is by far one of the riskiest things a retail investor can do right now. People who still believe that this is the way to go to ensure 5% to 7% appreciation annually are either salesmen or not adjusting to the new paradigm that has taken over this market. If you can't live with +/- 4% volatility in a DAY on your supposedly diversified index fund, I think it is a terrible idea to put a significant chunk of your savings in a passive investment vehicle like this. Volatility is in this market to stay, and I personally see no strong argument for equities at this time at all. There is no inflation, so don't let someone shit all over CDs. We are only two years removed from the worst financial collapse in the history of the modern Global Economy. There is no rush. With deflation looming (see Japan's lost decade) capital preservation should be a significant priority. Short duration, investment grade corporate bonds are yielding 2-3% annually, and a truly diversified bond fund will have you exposed no more than 1% to a single issuer. You can get your money out when you want, and due to the short term maturity schedules of the bonds in the portfolio, you won't face capital loss if the bond vigilantes ever show up and kick Uncle Sam in the balls like they did to our friends in the Mediterranean. How do you think all those people who put their life savings into a Vanguard S&P fund back in 1999 feel? They're breaking even, and have negative real returns. "Now is a great time to buy" is something asshole real estate agents were saying in 2006 right before we went off the cliff. Fannie and Freddie are still black holes of shareholder and taxpayer value, institutional and program traders control the flow of the market, and the Fed is out of levers to pull (Rates can't go lower). One more shock to the market could be disastrous, and is not a good place for an unsophisticated passive retail investor to be.
That's exactly the problem, I am not sure whether the current conditions are similar to the conditions back then. During this crisis I did buy at one of the lower points in my domestic stockmarket. Mostly picked some financials which in my opinion were too big too fail and I guessed (correctly) that my government would not have the guts to nationalize and leave the stockholders with the toxic assets. My edge there or my alpha, was that I had liquidity and others didn't and were forced to sell at lower prices. That was then, now however I am not sure whether the government has the neccessary fiscal space to intervene and the current demographics, unlike back then, imply future fiscal troubles down the road and probably lower economic growth. I am not entirely sure what my advantage is in this situation. Yes I am young and I probably have an investment horizon of 40-50 years to look forward too. This means I have staying power and the current demographics also imply that I am one of the few to do so. This might be my edge. On the other hand P/E values from the past predict that the current market (at least the last time I looked at it), isn't headed for very high growth in the future for the next 10-20 years if this is my buying point. This is basically the point made by Shiller. Siegel on the other hand claims that we will see high growth and that the P/E values reflect this correctly so there is nothing to worry about. Buying an index fund is therefore out of the question for me, this superficial examination makes me think that the current direction is very uncertain and any loss I could make would require a sizeable gain to make up for it. If consumer prices would start to increase again, I might change my mind, but currently holding cash isn't that bad of a deal. Given more time I might start looking at individual companies to buy shares of, but currently that time is better invested elsewhere.
New paradigm? Has the US gone socialist? Wait, dont answer that. In all seriousness, I'm betting on capitalism in the long run. Stay away from individual companies and you'll be fine. You can't take a short-term annual return into account on a long-term investment. Has the market plateaued permanently? Have we reached a saturation of the global economy? Is productivity tapped? Yes, another economic meltdown will happen. It's inevitable. But the odds of it happening within my retirement timeframe are minimal, especially when compared to the alternatives. If the boomers that got scared and cashed out this past year decided to suck it up and delay retirement a couple years, they wouldn't be in the dog house right now. So you're quoting a real estate agent praising the bubble at its peak while I'm suggesting buying after/during the collapse? Yeah, that's comparable.
I'm saying that there is no rush until there is more certainty that the system has stabilized. I would rather miss another 5% run-up in the Dow than lose 5% of my hard earned capital in a month. I'm fundamentally bullish on America as an economic superpower, but we just came out of a complete shit show, the relationship between the government and the private sector is in complete flux, there is too much uncertainty about the next couple years of growth and unsubsidized credit policy to know if the economy can stand on its own without a great deal of intervention and easy money from the Fed. In 2006 we had just experienced an historic run-up in RE prices. In 2010 we have just experienced an historic collapse of the entire financial system, and a 50% re-tracement of the equity losses from that collapse. What is going to be the main driver of growth from here on out with all the damage to the American consumer's balance sheet? I think it is irresponsible to jump in head first to broad market exposure after what we just went through. Where is the growth going to come from as the consumer and the federal government are likely going to start de-leveraging in the next couple of years? Purely saying "buy now because prices just came down a lot" is about as logical and fundamentally sound as the real estate shills saying "prices are going to go up because they've been going up for the past x years". It is merely a broad technical observation, and in the long run (which is your target investment horizon) complete bullshit to be making long term decisions after two hundred year floods in 10 years (Tech Bubble then the Credit Bubble - also you're being short sighted if you think there can't/won't be another meltdown in your lifetime. Do you really believe that?). And no I don't think we're becoming socialist, where the fuck did you get that from? My comment on market paradigm was clearly about daily equity volatility. There is no rush to put your life savings at risk- let the real money figure it out first before jumping in to broad index exposure. I'm talking a couple years tops, not about a "permanent plateau" as you put it. The volatility is there but in my view the growth rationale isn't for kids to be jumping into index funds full force.
My retirement window doesn't mean from now until the day I retire. It's the few target years I plan on liquidating my investments. In essence, you're talking about timing the market. If that statement isn't fundamentally flawed, nothing is.
Would you say that anyone who is not always dollar cost averaging over the course of their investment horizon market timing? If you want to be that broad in your interpretation of Market Timing, I could say the same thing about you, since your only rationale for getting into the market NOW is based on your observation that prices have just come down after a recession, and you are recommending buying the whole market, dogs and all. Per Wiki: Added emphasis is my own.
Not at all. But your words were to wait a few years for the market to stabalize, yet in a long term strategy that's a moot point. Especially when trying to time the market on a short-term basis. Recommending CDs for a long-term investment is equivalent to burying it in the backyard. Start digging!
I don't think that's his point. The premise on which value investing is based and thus strategies like buy and hold and dollar cost averaging is indeed that marketing timing is silly, but also that you should minimize your loss. Whilst your point is indeed valid that market timing is not a smart thing to do, Curtain's point is that you're as likely to loose money as to earn money in this market. The point that is stressed in investment classics as 'the intelligent investor' and 'margin of safety' is that the most important part of your investment strategy is to limit your downside. A 50% loss requires a 200% return to make right. Strategies like buy and hold and dollar cost averaging have been extolled by people like Malkiel in 'the random walk down wall street' however that strategy is based on the assumption that the USA won't become Japan in the near future. Which given the current price developments isn't that unlikely. As you can see the stock market there has been steadily trending downward or basically stagnating. I don't know what the future will hold, and therefore I stay out for now. If what Malkiel says still holds I might get in, but that's not at all that clear now.
I'm going to be graduating from college in about four months. Currently, I have a student credit card with Visa, and I'm looking to change it soon. Any suggestions on what type to get? Just as some background info, I pay my housing and student bills on my credit card and then my parents pay me back, so I spend about $1,500 a month. I have no idea what my credit score is, but I've paid every bill off for about 3 years.
Assuming you're going to pay it off every month, it doesn't really matter what kind of card you get. You'll get differing opinions on rewards various cards give you, which ones are better, etc., but I think they're all basically a wash. Whatever card you decide on, the important thing is that you don't pay an annual fee. Paying a fee will negate any sort of benefits you're getting from the card, I 100% guarantee it. Personally, I like American Express. Here's why: 1. Easy to navigate the website. A lot of credit card website are somewhat confusing, particularly when it comes to $ you've spent / $ you owe / payments you've made. My Citi Visa card is absolutely horrendous with this. It just shows how much of my credit line I've got left, and when one statement period closes and another begins, it doesn't separate out the two, so it appears like I've spent twice as much in one period as I actually have. Plus, it doesn't let you set your own autopay date, it forces you to pay the last day it's due. This may not sound like much, but little ease-of-use things like that make a big difference to me. 2. Excellent customer service. I've had to dispute charges with Amex and with other companies and hands down Amex was a better experience. Obviously, a lot of this is just my personal experience, but if you have the credit history to qualify for an Amex card (and it sounds like you do), I'd check them out. I would also encourage you to go to annualcreditreport.com and check out a current copy of your credit report (it's free, so why not?). It won't give you your credit score, but it will show you who has pulled your credit, any dings, etc. and it's a good habit to get into.
Do you spend this much on your card each month and then pay off the balance? If so, look for a card that offers reward points (or cash back).
You can have a mortgage and note drawn up and a lien placed against said person's home if you really want to cover your ass. You can get mortgage and note software online or at staples and have a title company record it as a legal lien. If they don't pay you can put a judgement of the property.