How Does 4o1k Work?

A 401k is basically a retirement plan allowing current workers to save for the future. A 401k plan is actually fairly simple to understand. An employee chooses to put away a certain amount of money each week. This is known as a ‘contribution’. Some employers will even match all or part of your payment as an incentive to put money in the 401k account. The money you put away will be invested by the 401k company. Most companies allow you to choose how the money is invested. When you retire, the account is close and all the funds go to you so you can enjoy your retirement. Employers can automatically enroll their employees in a 401k plan. However, an employee is allowed to opt-out if they so choose.

Two different 401k plans are available. Traditional 401k plans are the most common. The employee pays no income tax on the amount put into the 401k account. Tax is paid when the money is withdrawn from the account. Roth 401k accounts work differently. Income tax is either paid or withheld on all the money put into the 401k account. Therefore, when you retire and receive the money, you don’t have to pay any tax on it!

Other Financial Topics:

When was the first credit card issued

Why is it important to save money

When was the First Credit Card Issued?

From the 1930’s to the 1950’s, charge cards were popular in the United States. These cards were similar to credit cards as people would make purchases on the card and pay it off at a later date. However, the whole amount had to be paid. The first real credit cards, which did not have to be paid off all at once, were issued by the Bank of America in September 1958. It was launched as the BankAmericard in Fresno, California. This card eventually became the Visa system.

Interesting Facts About Credit Cards

• Actor Richard Hatch partly financed his production of Battlestar Galactica: The Second Coming using credit cards.
• Edward Bellamy described using credit cards to pay for purchases in his 1887 book ‘Looking Backward’. He used the phrase ‘credit card’ 11 times.
• Some fees charged by credit card companies include late fees, overlimit fees, transactions in foreign countries, membership fees (often called annual or monthly fees) and exchange rate fees.
• Prepaid credit cards are often used be teenagers to make purchases online.

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Tips to Get Out of Debt

Tips to Get Out of Debt

• Get another job and use most or all the money you earn to pay off your debt.
• Ask for lower interest rates. Don’t be afraid to call and tell them you are struggling to repay. Banks and financial institutions would rather get their money than have you declare bankruptcy.
• Cut up your credit cards. Only spend cash.
• Budget. Determine how much you really need to spend each week. Stick to the budget and don’t overspend.
• Stop buying things you don’t really need such as entertainment items (games, DVD’s and Blu-rays etc.)
• Look at other ways to save. What do you spend a lot of money on? You may have to give up a few luxuries for a while. Stop eating out for meals, drinking as much alcohol, going to the movies etc.
• Make extra repayments as much as possible.
• Use coupons to save money!
• Sell some old things you don’t need to earn a bit more money to pay off debt.
• Consider a debt consolidation loan. This rolls all secured debt into one loan with a lower interest rate. Be aware, however, that you will end up paying more over a longer period of time.
• Most importantly, don’t give up! It takes times to get out of debt and it won’t happen easily. Just keep going and stop using those credit cards!

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How Does a Home Equity Loan Work?

Everyone has a certain ‘equity’ in their home. It is calculated by subtracting any amount owing on a home mortgage from the true market value of your property (what you would get at an auction). So if you have a home worth $400,000 with a $100,000 mortgage you have a $300,000 equity in the property. A home equity loan lets you borrow against the equity in your property. In the example above, you would be able to take out a home equity loan up to $300,000 (depending on various factors).

Using the equity in your home as collateral is a great way of securing some extra cash for any need. Home equity loans are often referred to as second mortgages as you are borrowing against your home. If you fail to make the repayments on a home equity loan the lender has the right to sell your home to secure any money owing to them. Most home equity loans are non-recourse loans. This means that the borrower is not personally liable for the debt. However, some home equity loans are recourse loans and the borrower may be liable to pay the debt even on a foreclosed property.

Note: If you take out a home equity loan make sure you tell your tax agent as it may be possible to deduct the interest from the loan from your income taxes!

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How to Obtain a Free Credit Report

How to Apply for a Home Loan

Can I File For Bankruptcy For Free?

Problem 1: Attorney Fees

Legal fees can be quite costly. There are two ways to avoid paying a lot of money to your lawyer. Firstly, you can ring up legal aid in your region and find out if you would qualify for free representation. If you earn a good income then you will not be able to get free representation. Secondly, you can choose to fill out the bankruptcy forms yourself (you’ll find them here). You have to be careful to fill out all your information accurately and properly. If you are declaring bankruptcy for a business you will have to go through a lawyer.

Problem 2: Credit Classes

Before you file for bankruptcy you must take credit classes (or credit counseling). You must keep proof that you took these classes at least 180 days before filing. Unfortunately, you have to pay for these classes which can be quite expensive. Fortunately, you can get these classes for free if you have an attorney from a legal aid center or earn a very low income. For people on a good income, this cost will be unavoidable.

Problem 3: Court Fees

Unfortunately, these are unavoidable if you filing for bankruptcy on your own. If you go through an attorney they will just add these to your legal fees.

How Much Will It Cost?

It depends on your circumstances. If you must pay an attorney and classes then you might have to pay between $800 and $1000.

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Pros and Cons of Bankruptcy

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Disclaimer: This post is intended only to give general information.

How to Obtain a Free Credit Report

Many people do not realize that they are entitled to obtain free copies of their free credit reports under the Fair and Accurate Credit Transactions Act (FACT Act). You can get these free credit reports at absolutely no charge at annualcreditreport.com. You can get all these reports simultaneously, but most experts recommend obtaining them over a period of 2-3 months. You can your credit score(s) for a low cost at the same website.

Avoid Other ‘Free’ Sites

There are dozens of other websites that claim to offer ‘free credit reports’ with even more features, such as credit monitoring. Unfortunately, these website fail to tell you (unless you thoroughly inspect the terms and conditions) that you are actually signed up to a ‘free trial’. When the trial period expires you will be charged a set fee every month. If you have already signed up to one of these services, make sure you cancel the trial immediately (unless you want to pay for the credit monitoring service). While credit monitoring may be a good service for those worried about identify theft, there is no way to get it for free. Security freezes on credit reports are provided by many states for a much better price than credit monitoring services.

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How to Obtain a Construction Loan

How to Raise Your Credit Score

How to Get a Construction Loan

• Firstly, you should determine exactly how much the building project is likely to cost you.
• Secondly, you should decide on which type of construction loan you would like. There are two types. The ‘closing’ construction loan requires you to pay a big upfront deposit and, when the house is completed, you pay the remaining balance owed to the builders. ‘Progress payment’ construction loans are the most common type. You need to pay a big deposit to the builder and then the bank pays them ‘progress payments’ as they build the house. Most builders require a ‘progress payment’ construction loan, so check with them before applying.
• Thirdly, you should apply and get some quotes for construction loans online. There are heaps of lenders that offer construction loans, so compare them all to get the best deal. Read through all the terms and conditions as some of the fees for construction loans can be very high.
• Lastly, you will need to supply the documentation that the lender requires before they fully approve you for the loan. The lender will require details of the builder and a set of building plans. They will also need details of employment, where you live, your assets, your income and your social security number (and possibly some other details depending on the financial institution).

So now you know how to get a construction loan!

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How to Apply for a Home Loan

How to Apply for a Loan

How to Apply for a Loan

Here is a step by step guide to applying for a home loan.

1. Decide whether you want a secured or unsecured loan. If you are a homeowner, a secured loan may be a good option as it guarantees a lower interest rate. However, your home may be sold to pay off the debt if you don’t pay the loan off on time. Generally, secured loans are not given to people who don’t own a house, unless they have another asset which is valuable. Unsecured loans have higher interest rates but they will not put your home or other assets in danger.
2. Check your credit rating! Make sure that it will be high enough to get a loan. Remember, the more of a ‘risk’ you look to the bank, the higher interest rate they will charge.
3. Apply for the loan. You can apply online and get a reply very quickly. Make sure you compare some different lenders to find out which will give you the best deal. Have a look at all the terms and conditions, as some lenders charge large fees to keep their interest rates low. Some also charge large penalty rates (penalties for not paying off the loan in time).
4. If you are refused for a loan, always ask why! While they are not legally obliged to tell you, most will anyway. There are some technicalities that will prevent you from getting a loan so if you know why you were refused you can ensure that you are approved the next time.

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How to Apply for a Home Loan

Here are the best ways:

• Go to your local bank and apply there. You may need to make an appointment, which leads into…
• Ring up the major banks and other financial institutions that offer home loans. Make an appointment to see them of apply over the phone. You will need to send the required documents to be approved.
• Call a broker. They will help negotiate the best home loan for you.
• Apply online. You just have to enter a few simple details and then the financial institution you have applied to will ring you (or email you) further instructions. Check out this page on the Bank of America website.

Documentation You Will Need

• Bank statements.
• Details of any loans and credit cards you have. You will also need the statements for these.
• Approximate value of any assets you currently own.
• Any debt you owe.
• Recent pay slips and group certificates.
• A letter from your employer that states how long you have been employed for and how much you are being paid.
• If you are self-employed, then ask the lender what details you need to give them.

Thanks to ninemsn for some of the info!

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How to Raise My Credit Score

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Improve Your Credit Score

• Pay all your bills on time! It sound obvious, but it is very important. Pay bills late and your score will decrease (even if it is in the ‘grace period’).
• Show you can manage different credit sources. If you have a car loan, credit card and mortgage and your are paying all of them off on time, your credit rating will improve.
• Even if you pay off all the debts in an account, don’t close it down! When you have an account with no negative reports, it looks good on the credit report.
• Don’t apply for any new credit. It is better to just ask for increased limits on your credit cards than apply for a new one.
• Don’t pay off debts all at once, do it gradually. This shows you can manage your debts well. If you pay it all off at once, you aren’t ‘managing’ it effectively. Remember, a credit score is just a bunch of statistics!
• Get a copy of your credit report and scan for any errors. If you find any, get them resolved. You will need proof.
• Spread the balance of a maxed out credit card to other credit cards. It’s much better to have all your credit cards at 20-30% of maximum that to have some at near maximum at others being unused (or rarely used).
• Have someone else (who has a very good credit rating) add you to their credit account. Make sure you have a very trusting relationship with this person. Also ensure that you pay off all your bills on time, as you hurt their credit rating when you don’t!
• Don’t file for bankruptcy or foreclosure unless you have absolutely no other option. Bankruptcy stays on your record for years. The number of years depends on where you live and what type of bankruptcy you file for.

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