In this case, the reality is somewhere in the middle, although the term “predatory lender” is, on its face, pejorative. Consumer reporters and progressive legislators will argue that the pay day loan has extremely high interest, despite the fact that most states now control interest rates for banks and other financial institutions. Again, proponents counter, correctly, that the higher interest rates offset the amount of bad debt attributable to non-payers.

Extreme, but needed

The fact is, some people would have no credit at all were it not for the pay day loan. The cost, admittedly, is high, but this is a function of the consumer’s previous credit history, not an assessment made independently by the pay day lender. A person with a steady employment history, a decent record of debt repayment and a current car loan or mortgage will rarely have to avail himself of this kind of high-cost loan.

For the marginal credit risk, the $10 to $30 fee per hundred dollars borrowed, over a two-week term, results in a very high rate. A $100 pay day loan with a $20 fee, about the average, equates to a 520% APR (Annual Percentage Rate). This dwarfs even the rate charged by pawnshops, which brings up another salient point.

Assets or income?

It would be less costly, if a consumer needed a very short-term (less than a month) loan, to pawn some jewelry. Even with the cash advance fees and the higher interest rate for cash as opposed to purchases, most credit cards also offer a better deal for a short-term loan than the pay day loan. Of course, all of this assumes that the consumer has assets.

Consumers who have no assets can only “bank” on their employment and income. When the average $100 bounced check costs an average of $48 in fees, that translates to an APR of 1,251%, and if you pay your $100 credit card balance even one day late, the $26 (average) late fee amounts to 678% APR. There are a lot of ways that consumers can overpay on interest charges, and pay day loans are not unique.

As with any high-cost service or product, you should carefully consider your options before taking a pay day loan. Some people get into a vicious circle of refinancing the same loan over and over without ever paying it off completely, and this is the last thing you want to have happen if you are trying to establish new, responsible financial habits. A pay day loan, like anything else, can be used correctly, misused or even abused, so it is incumbent on you to educate yourself on the subject so you can make an intelligent, informed decision.

Health insurance is a fundamental component of a sensible financial plan, which is something all sensible, employed people should have. Most middle-class Americans today, whether in trades or professions, are covered through their employers’ group plans, at least for the major portions of their careers. Self-employed people, of course, have to fend for themselves, while business owners not only have to insure themselves and their families, but make sure their workers are covered, too.

Employer plans

Many people in employer-paid health insurance plans think very little about their insurance coverage, its cost or its terms, until they have an accident, injury or long-term illness. However, even employed people should include health insurance in their financial plans, whether it means buying a small policy for additional coverage of certain types, or simply having a contingency plan in place (and funded) to continue coverage when unemployed.

Employers of a certain size and/or who do business with the Federal government have to comply with COBRA (Consolidated Omnibus Budget Reconciliation Act). The act requires employers to offer continuing coverage to terminating employees and exercises some control over costs and benefits. At the very least, being prepared to fund a COBRA health insurance policy during a period between jobs, or transitioning into retirement, is something to think about.

Self-insurance, you might say

Being properly insured is even more important for the hard working, ambitious and entrepreneurial among us. If you are building a business, perhaps even an empire, your needs will require constant reappraisal so that your property, life and health insurance are adequate to support your company and your family if you suffer losses in any area. You have to insure yourself, your family, your employees – either you delegate the task to a trusted professional, or be prepared to learn a lot about insurance during your life.

One of the main lessons, of course, is not to procrastinate. You can’t buy health insurance if you wait until you need it, not if you want to be managing your money wisely. By establishing insurance policies earlier in life, you can lock in lower rates (at least for a certain number of years) and save a great deal of money in the long run. Unlike life insurance, however, health insurance policies have no financial mechanism by which they can earn and pay interest, or accrue equity. Financially speaking, it is a straight expense, although your family (and your company’s employees) will consider it an investment in their lives.

You may have one or the other among many different political views of the health insurance issue. Politics affects the financial markets, there is no question about it. Your politics must yield, however, to reality, as long as you do not compromise your ethics. Financial planning is really just an ongoing reality check for the things that you value – not just cash, stocks, bonds and real estate, but life, family, friends and others who depend on you. Keep this foremost in mind as you work on your own financial plan.

Oh, how times have changed.

Today we live with a confusing array of taxes on everything from gasoline to car tires, collected by counties, states and, as ever, the federal government. For tax planning purposes, of course, the most important additional ones to consider are state taxes, as these take the biggest bite from most Americans’ paychecks. Thus they require more planning to minimize, or avoid entirely, whenever it is possible (and legal) to do so.

Past not perfect

The “once upon a time” stories always seem to speak of the past as a simpler time, but when you talk to people who lived through it you find that there have always been challenges in life. Having your financial life buffeted to and fro by the changing face of politics and the expansion of taxation has never been fun, regardless of the publicly expressed reasons.

The fact is, today’s total tax burden, including state taxes, is lower than at many times in the last century. Politicians finally began to learn that high marginal tax rates suffocated innovation and entrepreneurialism, and that a lower rate on greater cumulative earnings resulted in increased government revenue. This model has affected the last 20+ years of tax policy. With a stable tax system, of course, it is much easier for individuals and businesses to minimize the bite of both federal and state taxes through various strategies.

The era of tax planning

Since the 1970s and the passage of various tax amendments – creating Individual Retirement Accounts and Roth IRAs, for examples – American taxpayers have been provided a number of ways to save money advantageously. With employer contributions and tax deferrals, these new investment and retirement plans have encouraged more and more people to take an active role in their retirement planning, and look at everything from stocks to annuities as ways of minimizing federal and state taxes.

Financial planning is not just about retirement, of course. Particularly if you are a business owner or have a substantial net worth, your financial plan also has to include strategies and contingency plans for insurance, disability income, current taxes, future living arrangements and possible long-term care. Tax planning is a specialty area that not every financial planner is good at, so make sure to choose your advisors carefully.

Bottom lines

Depending on your particular situation, you may take a variety of approaches to minimizing, eliminating or even recovering a portion of the state and federal taxes that you pay. The people who do good financial planning early in their careers will accrue more wealth, have more options and retire earlier than those who wait. If you are a young, ambitious professional, starting (and maintaining) a solid, sensible financial plan today is the single wisest financial move you can make.

As your situation changes – in any area, from income and expenses to state and federal taxes – you need to adjust your plan and its particular procedures. This is something that you should do on a regular annual basis, at any rate, since constant fine-tuning is needed to stay on track in changing conditions. Study up, get good advice and stay focused on the results you are trying to achieve, and do not fall for any get-rich-quick sales pitches.

You are not in a race, but if you were, slow and steady wins it, just as in the rabbit and tortoise story. Be creative and flexible, certainly, but never be rash. It’s your future, after all, and you only have one!

It was not that long ago that buying insurance meant calling around town, making appointments and going out to insurance agents’ offices to listen to dry, dull facts about actuarial tables and risk management. This is just one more task that has been “obsoleted” by the information superhighway. With an Internet connection and a $50 used computer, you can now shop for insurance of all kinds, from companies and brokers all over the world. Of course, having too many choices can be almost as problematic as having too few.

Study first, then shop

Buying insurance is not something you should do on a whim, in a hurry or without adequate study. This is always and ever a recipe for disaster, no matter what it is you are shipping for. You have to approach every financial decision – and make no mistake, buying insurance is part of your de facto financial plan, whether you’ve written it down or not – with up-to-date facts and information.

The fact is, you don’t go buying insurance without making a variety of calculations, depending on the kind of coverage you are looking to get. If you are buying life insurance, you need to calculate how much your survivor(s) will need for support for both determinate and indeterminate periods of time. If you are not up to making these kinds of calculations, by all means get some help.

Various types

Life insurance is only one kind of protection that you will need. You may, especially when younger, decide to save money by relying on employer-provided health insurance, and some companies also buy (usually modest) life insurance policies for their employees, sometimes with a face value that represents annual earnings. You may need other types of coverage, though, and you may have to pay for it yourself.

If you are not satisfied that the state- and/or employer-funded disability insurance will pay you enough if you are too ill or injured to work, you can augment your coverage with other personally purchased policies. Again, you cannot know the amount to buy, or what constitutes a “good deal,” unless you can see your various insurance coverages as part of your larger financial situation. You need to delay buying insurance of any kind just long enough to get good advice in the matter, and not so long that you start forgetting you need it!

Overall coverage

Once you get in the habit of assessing your financial situation, making plans for the future and buying insurance as part of those plans, you can begin the process of continuous review. That is, you will need to revisit your insurance policies at least annually to ensure that the coverage is sufficient for your changing needs. Families grow, careers advance and your net worth will increase, too, so you need to stay abreast of the mechanisms, like insurance, that help keep your plan (and life) safe from the vagaries of the modern world.

You can protect yourself against death, disease, injury and unemployment with a solid and sensible financial plan. This plan will include any number of insurance policies for various purposes, so buying insurance will be something you will do a number of times over your lifetime. Once you take the mystery out of it, and understand how insurance works with investments and tax planning to maximize and protect your life and livelihood, you will consider buying insurance just another one of the many small tasks that, taken together, add up to a comfortable and secure existence.

If, on the other hand, the financial help you need takes the form of a home mortgage or a reduced-interest credit line, you will need to sort the facts from the sales pitches that you receive from banks and lenders. Take your time, do your homework and make sure that the financial help you get addresses your specific needs and situation.

Bottom line help

Financial help can also mean cash aid, from various sources and for various reasons. The best way to insure yourself against such needs, of course, is insurance – unemployment and disability insurance for income protection, property insurance to cover possible losses in natural disasters, etc. Being prepared before such events occur is the best approach.

Should you not be insured, and suffer an unexpected loss, your financial help can still come from your own quarters. You can take a cash advance on your low-interest credit card, unless you also have a home equity line of credit at a lower rate. You can borrow against physical assets, as well.

When you need financial help, you should consider every possible source, from family and friends to business associates. If you can get an interest-free loan of a short duration, make sure you can pay it back as promised. Be prepared, though, for some cost to attach to your solution, since there are always tradeoffs in life. Think it through.

Prevention is best

Having insurance is one way to avoid unexpected financial hardship. Having a comprehensive financial plan is even better, as it goes far beyond simple insurance policies and helps you manage your finances in such a way as to provide you the flexibility you often need in today’s economy.

With a range of savings and investments, you can earmark certain funds as your own “self-insurance” policy for that rainy day. In the event that nothing untoward occurs, this money will be earning interest for you, preferably in a safe, long-term position. Then, when you need financial help, you can be completely self-reliant and keep your business “off the street.”

It is never too early to start arranging your finances for both long-term growth and short-term needs. Financial planning is a balancing act, where you learn to arrange your finances through a series of tradeoffs and contingency plans that are solid enough to be safe, and flexible enough to offer financial help when you need it. Savings, investments, insurance and the home (and/or business) budget all need to be taken into consideration when devising your own, custom financial plan – and there is help to be had if you need it. If you stay positive, and make some good new habits, you will find that your greatest financial help comes from your own attitude.

Forex trading actually adds up to over three times the total value of the stocks and futures markets combined. There is money to be made in Forex trading, but it is not the place for either neophytes or the faint of heart. It is serious, serious business.

What’s traded?

The short answer is the best. Forex trading is all about money, meaning national currencies – specifically the simultaneous buying of one currency and selling of another. Currencies have to be traded through brokers, and are always traded in pairs. Common pairings, for example, are the Euro (EUR) with the US dollar (USD) or the British pound (GBP) and the Japanese yen (JPY).

Simply put, the “exchange rate” of a currency (versus other currencies) embodies the financial markets’ judgments of that particular country’s economy (compared to the other countries’ economies). You are effectively buying into the comparison and competition between countries and economies through Forex trading.

Of course, you are not buying anything “solid” so Forex trading might potentially confuse a newcomer. The best analogy is that you buy a currency as a “share” in a particular nation, more specifically in that nation’s economy and financial future. Buying Swedish krona, for instance, means you are actually buying shares in the Swedish economy. The trading price of the krona is a simple, direct measure of how “the market” diagnoses and evaluates the current and future performance of the Swedish economy.

Where’s the Forex office?

Financial markets like the Tokyo Stock Exchange and the NYSE have office buildings, employees and corporate-type structures. On the other hand, Forex trading takes place in a virtual market with no physical location and no single, centralized staff or computer banks. In fact, the Forex market is legally defined as an Over-the-Counter (OTC) or “Interbank” market and is run electronically, by a network of different banks, on a continuous, 24/7/265 basis.

Only institutional investors (“the Street”) were doing Forex trading until the late 1990’s, as one of the initial requirements was a trading account funded with millions of dollars. Forex trading was originally designed for use by multinational banks, governments and other large institution, not day traders and investment clubs.

Once again, it was “technology to the rescue,” as the Internet and powerful personal computers opened the financial markets to greater and greater individual participation. Today there are numerous online Forex trading firms that offer trading accounts to “retail” traders – like you. By aggregating small accounts, these firms can put your dollars to work the same way that “the big guys” do.

Careful now!

To get started in Forex trading, you just need a computer, a (preferably high-speed) Internet connection – and a lot of good information, of course, along with some sound financial judgment. There are any number of sites on the Internet that will teach you Forex trading, but it is not something that should be entered into lightly.

Even more so than with “regular” day trading of stocks, Forex trading is fraught with peril and is no place for the uninitiated or anyone looking to make a quick fortune. You can easily lose everything you have with one ill-advised trade, so the most important thing to do is be honest with yourself about your currency trading abilities.

If you visit a Forex trading (or “training”) site and the terminology still confuses you an hour later, it is probably something you should not attempt. If you are an experience day trader who wants to chart a new course, though, it might pay you to investigate the Forex markets as part of your overall investment strategy.

As opposed to the “regular” IRA, the Roth IRA allows no deductions for plan contributions, but does establish a benefit unavailable in other traditional retirement plans. By meeting certain criteria, you (or your designated beneficiary) can draw out all of the plan earnings tax-free when they’re needed.

Pros and cons

The Roth IRA also eliminates what is called the “early distribution penalty” for certain kinds of plan withdrawals, and relieves you of the requirement to take only “minimum distributions” after age 70-1?2. These are important benefits, but may or may not fit your own retirement plan, so make sure to get good advice, as always.

The primary advantage of the Roth IRA, of course, is clear. With it, you can shield your account earnings from taxation. Because this advantage comes at a known price – no deductions for contributions – the appropriateness of a Roth IRA for your specific financial plan can be calculated with a fair degree of accuracy.

How to decide

The decision to use a Roth IRA versus a “regular” one always depends on your personal financial situation, as well as on what you are assuming about your future income and future needs. Do you know long you will wait before you need to take money from your IRA? What do you think your tax bracket will be at that time? What other earnings, taxes, investment results and life/career changes will happen in the meantime to affect your decision?

Of course, you need to do your own calculation and analysis, but generally speaking, most people today are better off in the Roth IRA. The main reason is that the Roth IRA is simply bigger than the regular IRA since it contains after-tax, not untaxed, dollars. Therefore, if you can maximize your contributions you can add a great deal of “tax leverage” to your retirement income. Depending on how you answer these questions – and what a sensible financial plan indicates about your lifetime earning potential – you will soon understand whether your particular situation warrants a Roth IRA.

Other advantages

There are two other, very compelling advantages to the Roth IRA. The first is that minimum distribution rules are irrelevant, so if your other retirement resources are sufficient you are not required to take your Roth IRA distributions at age 70-1?2. What this means, of course, is that your account continues to grow, and does so in a tax-free fashion.

The second big advantage is that you are able to take specified, early distributions without paying a penalty. To summarize, then, the Roth IRA is an easier and more efficient way to keep your money in the account and working for you - and offers easier ways to take your money out, too. As always, “your mileage may vary,” but a lot of folks get farther down the retirement road, and in better overall shape, thanks to the advantages of the Roth IRA.

If your employer offers a 401(k) plan, you gain all of these advantages. That is why the 401(k) is one of the most popular and widespread retirement plans offered by American businesses today.

The beginnings

Congress decided in the late 1970s that the nation’s workers probably needed some additional motivation to save more money for retirement. Of course, this was an implicit admission that Social Security is not up to the task, but they sidestepped the criticism and passed the Tax Reform Act anyway.

By lowering people’s state and federal tax bill if they participate in this new tax-deferred savings plan, Congress hit upon a way to encourage participation in the scheme. The section number and paragraph of the Internal Revenue Code (section 401, paragraph “k”) became the name of the plan.

It was actually a financial consultant named Ted Benna who designed the first version of a 401(k) plan, and after it was officially adopted by the IRS the first tentative rules and regulations were issued in 1981. The next year, taxpayers became invested in this new kind of retirement plan for the very first time, but it was almost 10 more years (1991) until the final rules were published.

Planting seeds

If you are under, say, 30 years of age, retirement plans may be one of the farthest things from your mind. The fact is, though, that the earlier you start planning for your “golden years,” the more you will gain from accrued interest and consistent addition of more funds over time

So if your employer does offer a 401(k) plan, you should consider joining the plan as soon as you can. Starting in your mid-20s, you could easily build a nest egg of several million dollars over the course of your working career. By the time you retire, you will be well provided for, even if you do nothing else.

Augment the plan

There are a number of ways that small monthly investments can turn into million-dollar accounts by retirement age. The 401(k) plan is one of the best ways to save for this purpose, which is why employers offer it. With additional research and planning, you can augment the plan in such a way as to increase its growth and earnings.

The 401(k) plan is technically known as a “defined contribution plan” because the payout is a function of the specific, regularly timed deposits to the account. Other defined contribution plans are Individual Retirement Accounts (IRAs), so-called “money purchase plans” and corporate profit-sharing arrangements.

With a comprehensive financial plan, you will develop and maintain an array of investments, savings accounts and employment-based retirement plans to provide income and security after your working career ends. It is especially important for today’s young, upwardly mobile workers to look beyond Social Security for their retirement income, and 401(k) plans are one the best, easiest ways to do that.

When seeking a financial planner, have an idea of the specific services you are looking for. Know which planners specialize in the service you’re looking for, their track record for performing those services, and what limitations the planner may have on what he or she can recommend. Since there are so many financial planners from so many educational and occupational backgrounds these days, be sure that the one you approach has the sort of qualifications you’d expect for. Always ask about their background, their credentials, and what they had to do to earn those credentials. Be aware of common credentials such as Certified Financial Planner (CFP), or Chartered Financial Analyst (CFA); these credentials are helpful indications that your financial planner is above and beyond the herd of other, less qualified shysters promising to help you reach the goal of financial freedom [LINK]. Any financial planner claiming to have CFP or CFA credentials can be verified on the CFP and CFA official websites. Any financial planner who provides clients with investment advice must be registered with the Securities and Exchange Commission, or an approved state securities regulator. Be sure to do your homework.

You also need to understand just how your financial planner makes his or her money. Some financial planners work for fixed, or hourly fees helping you go over your finances to develop a solid financial management strategy. Other planners provide that advice while also selling investment products to their customers, and make the bulk of their money on commission. Some planners both advise and sell investments, and make their money on both rates and commission. Be aware of your planner’s ultimate motivations and don’t let yourself be steered into purchases or decisions that don’t seem to serve your needs.

A good financial adviser should be aware of every aspect of your finances. If you are working with a financial planner, and the only interaction that is happening is between you and them, you are being shorted. Finances are an intricate puzzle for anyone, and a good financial planner knows this. He or she should be in touch with their client’s attorneys, accountants, investment planners, trust officers, bank account reps and any other person or institution involved with their client’s finances. By coordinating the varied aspects of a client’s finances, a good financial planner will be able to assess the whole puzzle and determine which pieces need to placed where, in order for the client to come out with the best financial plan for they can have for reaching their goals.

If you only need a financial planner for a very specific purpose, (buying a home, or piece of real estate tends to a common incentive for people to seek out a financial planner for instance,) be sure that the financial planner you approach understands this, and that you are never paying for any more than the services you require. With the market for financial planners as flooded as it is, it can be hard to distinguish A-list talent from the D-list talent. Be a discriminating shopper.

First, investors input data about past trends in the market of their choice, generating an in-depth graph of the stock’s performance over time. Investors can then input their proposed trading strategy and the trading software in turn generates a performance analysis charting the success (or failure) of the investment strategy, based on the past performance of the market. While by no means absolute, trading software can give investors a likely idea of what sort of fruit their trading strategy will bear.

Trading strategies, it should be known, are objective rules for buying and selling stock. Often these strategies are based on patterns in stock pricing or volume that have emerged within the market. These patterns are far from intuitive, or subjective; many were identified by analysts who spent decades watching particular markets. By utilizing trading software, investors can preview their investments, fine-tune them to yield the best results—based on the history of the stock—while simultaneously establishing personal rules and guidelines for themselves, so that future decisions are based on a tested and reliable method of investing.

For amateur investors, trading software can serve as the perfect foot-wetter. Looking before you leap is always a good idea, and trying out what you think to be a good investment strategy against some time-tested facts will give you clear indication of just how well you do, or do not, know the trends of the market you want to invest in.

Once you’ve done the research and have established a reliable trading strategy, you can then make your trade. Because there are so many varied markets, finding trading software that will allow you to trade on the market of your choice can be an expensive enterprise. Shop around, and be sure that you’re getting the proper program for you. If you’re further unsure of what program you should purchase, sit down with a professional broker; many of them use the same trading software for their own trading. But remember: trading software can only predict the outcome of a trading strategy based on the history of the market. Radical or sudden shifts in the market are not pitfalls you can avoid by having trading software sketch you a graph.

In almost every case, the safest way to ensure that your investments will be good ones is to establish a diverse investment portfolio. You should always invest in low-risk markets that will grow in profit over a long period of time, to off-balance those high risk-markets you’re hoping are going to earn you that quick fortune. Trading software is a tool, not a guarantee, and should be used as such. If you have a high-risk market you are on the fence about investing in, by all means, plug the figures into the trading software and give your trading strategy a whirl. Best to be wrong in theory, than wrong with your money.