Tips for Managing Personal Debt and Avoiding Bankruptcy

In our modern lives, debt is inevitable. We need to take out loans to get an education, buy a car, which is essential for work, and buy a house to start a family. None of these important life events are possible without loans. While loans have their advantages, they can also become too much. Most people pile up personal and credit card loans in their lives, and they end up neck deep in debt. To ensure that you don’t sink further into debt and face personal bankruptcy, follow the tips below.

Make a Monthly Budget

The first step in debt management is to make a monthly budget and literally become a cheapskate when it comes to spending money. Monitor your income and expenses. Categorize expenses into fields like mortgage, groceries, travel and so on. When you make a monthly budget, you can let go of speculation and come to a realistic understanding of how much you need to pay back loans each month.

Cut Down All Unnecessary Expenses

Once you have made your monthly budget, you will be able to understand which needs cost you the most money. Also, you will be able to spot where you may be wasting money. For example, you could be spending hundreds of dollars eating out each month. This is not an expense you want when you are deep in debt. Look for such unnecessary expenses and eliminate all of them. Use the money towards paying down debt.

Learn to Control Compulsive Spending

Compulsive spending can eat away your budget unlike anything else. Compulsive spending is also a prime reason why many people sink into debt. Therefore, it’s never late to control compulsive spending. You can try doing things like your grocery shopping with a list. That will prevent you from compulsively buying things advertised near the cashier. You can also try doing things like deleting your credit card information from online shopping sites. Then when you have to make a purchase you will have to reenter the information, which should act as a barrier to prevent those impulsive, one-click buys.

Pay Off High-Interest Loans First

If you have multiple loans to repay, it’s time to prioritize which to pay off first. Those small, high-interest yielding loans should be paid off as soon as possible. The longer they mature, and the more payments you miss, the amount you owe will exponentially multiply.

Get Expert Help to Settle Debts

If you are on the brink of bankruptcy, instead of running away from creditors, try to negotiate with them. The creditors get nothing if you go bankrupt. Some creditors may write off really small loans, and some will at least be willing to write off a portion of the debt, or even reduce the interest rate.

If you have multiple debts, you may also want to consider debt consolidation. You will be able to combine several loans into one big loan and pay a single interest rate. Importantly, don’t be discouraged. It’s not impossible to pay down your debt and avoid bankruptcy if you follow the above suggestions.

Is it possible to invest in too many mutual funds?

One of the hallmarks of investing is diversification.  Having a portfolio that’s sufficiently diversified means having a wide mix of different assets so that, if some are not doing well, the ones that are will support it, This basically means spreading your money around in different assets and investments so that, should one of them fail, the others will be there to protect your wealth.

On the other hand, some consumers and investors actually spread their money a bit too much, and end up with a portfolio that, rather than being a coherent whole, is a jumbled mess.

The reason that diversification works so well is that, in the long run, it gives your portfolio the ability to generate much higher return with a much lower risk. That being said, there’s no need to get extremely fancy with your portfolio’s assets because it’s quite easy to cover all of the major sectors of the stock market and bond market with only 2 or 3 ETF’s or broad index funds.

For example, you could get a total stock market index fund that covers the US, or do the same thing but make it international stocks. You can even get a target date retirement fund and completely diversify your portfolio in one fell swoop.

That’s not to say that adding some funds, ETF’s, a real estate commodity or even some Treasury Inflation Protected Securities (TIPS) is a bad idea, especially if you want to protect your portfolio from inflation. If you’d like to protect yourself against rising interest rates you could also get a short-term bond fund or, for a little bit of tax-free income, a municipal bond fund.

Want income that’s more assured than what Social Security can provide? Throw an immediate annuity into your portfolio and you’ll be all set.

The point being is simply this; once you have a nicely diversified portfolio, filled with a smattering of asset classes, there’s really no sense to keep piling on more. The first thing it does is make managing your portfolio a lot more difficult and, if you need to rebalance it, a big hassle. Depending on the type of investments that you choose you might also find that your fees go up sharply, bringing down the performance of any assets you have.

If you’re not sure about the health of your portfolio, you can always get MorningStar’s Portfolio Manager. Once you put in the names and/or ticker symbols of all of the funds that you own, you’ll get a great overall view of your portfolio and the different asset classes that you have. You’ll also see what type of expenses you’re paying and possibly where some of your funds might be overlapping.

The best thing is that, when you’re done, you’ll have a much better idea of whether your portfolio is as diversified as it needs to be and also if it falls in place with the risk tolerance that you have. If it does, there’s really no need to do more.

New to Investing? Here are some of the Basics you Need to Know

Today’s blog is for anyone who is new to investing, and will go into some of the most basic terms and tips. The old adage about every journey beginning with a first step begins, if you’re a new investor, right now. Enjoy.

First, when it comes to stocks, over the long haul they have historically outperformed almost every other type of investment. In fact they outperformed practically every other asset class with 10% returns, which is nearly double the next best-performing asset class, long-term U.S. Treasury bonds, at 5%.

However, in the short term, stocks can be very risky. Just ask anyone who was around on October 19, 1987, when the stock market lost 22.6% in one day. In 2009 they lost a heart attack inducing 37%!  In other words, stocks are something that you purchase for the long term and hold onto for many years.

When it comes to risk, the higher the risk an investment has, the more it will return (generally speaking). Stocks have a higher risk than bonds, for example, and tend to return more than bonds as well. Of course, as we talked about in the last paragraph, occasionally those risky stocks end up collapsing and you lose everything. That’s why financial advisors always tell their customers to diversify their portfolios.

Speaking of the long term, when it comes to stock prices, the single most important factor is earnings. If you focus on what stock prices do every day you might just drive yourself crazy because they fluctuate all the time.

When it comes to bonds, rising interest rates have a very negative effect on them. The reason is simply because bond buyers don’t want to pay as much for an existing bond that has, for example, a fixed interest rate of 5%, because the fixed interest rate on a new bond, since rates have gone up, will pay more.

When it comes to a “sure thing”, the only asset that qualifies are U.S. Treasury bonds. The American economy has historically been very strong and, when need be, the government always has the ability to print more money. Add that to the fact that the US government is very unlikely to default on its bonds, and you have what is as close to a sure thing as an investor could possibly get.

We mentioned a diversified portfolio above and, in almost every respect, it’s better to have more diversification than less. While it’s true that a diversified portfolio more than likely will not outperform the market by a very big margin, it will definitely protect your assets much better.

Finally, if you have the choice between mutual funds and actively managed funds, you should probably choose the former because they almost always outperform the latter. In fact, it’s a rare actively managed fund that can consistently outperform the market enough to cover their higher expenses.

The Secret to becoming a 401(k) Millionaire

We recently came across an article from Fidelity Investments where they had analyzed the savings habits of approximately 1100 investors with 401(k)s. All of them were people who earned less than $150,000 a year but still had managed to accumulate more than $1 million in their 401(k) savings plan.

Fidelity found that the average person that they looked at, who was 59 at the time of their survey, had a number of things in common. Most of them started quite young, took advantage of any company matching program that their employer had and saved approximately 14% of their income each year (not counting the match that their employer made).

Roughly speaking the average worker had put aside just over $13,000 of their own pay every year and, with the employer contribution of approximately $4500, and up with a total of nearly $18,000 in their retirement 401(k) every year. As a result of this they were able to grow their account balance from $426,000 in June 2000 to just over $1.2 million in the same month of 2012.

If those numbers sound good to you (and they should) then the tips below should sound good as well.

Tip 1: Start putting money into your 401(k) as early as possible. The fact is that compound interest is your best friend and any money that you are able to put in your 401(k) during your 20s and 30s will pay off greatly once you hit your 50s, 60s and 70s.

Tip 2: Put as much into savings as possible during your working lifetime. 15% is a good number to start with if you want to retire by the age of 65 but if you want to retire much earlier than that you’ll need to go up to 20, 30 or even 40% of your salary. (If that sounds impossible you might want to refer to our other recent blog about how to make that happen.)

Tip 3: Don’t be too conservative. One of the best ways to stall your savings is to put all of your money into “safe” investments. The fact is that bonds or savings accounts can’t hope to match the high returns that you’ll get from stocks and definitely won’t go nearly as far in building up your retirement nest egg.

Tip 4: Subtract your age from 120. This is a common rule of thumb that can help you figure out what percentage of your investments should be allocated to stocks. For example, if you are 45 years old the percentage of your portfolio that should be in stocks should be 75%.

Tip 5: Don’t follow your emotions. Many people make the mistake of letting the highs and lows of the markets scare them into making bad decisions. Your best bet is to find an asset allocation that make sense for you based on your age and your risk tolerance and stick to that, going back to it occasionally to change it as your financial situation changes.

Tip 6: Keep an eye on fees. On average, what you pay in fees on your investment choices can mean a difference in your savings account of $100,000 or more. The lowest fees are usually found with index funds while the highest are found with actively managed funds. 401(k) plans tend to have fees that are quite high but you can still find plants that have cheaper options.

Tip 7: Keep working for as many years as you can. Simply put, the longer that you work the longer that your 401(k) and other retirement plans can increase as well as the fact that you will have money coming in to pay for expenses and won’t need to use what you’ve put away.

Hopefully these 7 Tips have opened your eyes to some of the things that you need to do in order to max out your 401(k) benefits and retire with a lot more money. If you have any questions about planning for retirement or personal finance questions in general, please let us know and we’ll get back to you with answers and advice ASAP.

Where Did All the Mutual Funds Go?

Here’s an interesting and uncomfortable fact about the mutual fund industry; every year a substantial number of mutual funds fail entirely. While the fact is that there are many ways in which mutual funds can fail, including underperforming, many are failing in a much more permanent sense these days as they either drop off the mutual fund map completely, are liquidated or are merged into other investing products.

Between 2001 and 2012 approximately 7% of all mutual funds “died”, up about 1% from the 1960s. If you assume that this same failure rate will persist over the coming decade, approximately 2500 of the 4600 equity funds in existence today will be gone at the end of the decade, a number that amounts to approximately 1 fund every two business days.

The interesting, and unnerving, part is that while these statistics seem to suggest that available mutual funds are declining dramatically, the opposite actually is true. There are actually more mutual funds being “born” these days then there are “dying”.

For example, there were 7238 mutual funds available at the end of 2012, including equity funds and other open and mutual funds (but not including money market funds). That number was 6876 at the end of 2000 meaning that, even though they were “dying” at a rate of 7% per year, the actual net amount of mutual funds has increased in the last 12 years.  (These statistics and others that we are using come from a Morningstar analysis put together for US News.)

If you want to get a better idea of how the mutual fund industry has grown it helps to go back to the end of 1990 when only 2395 mutual funds existed. The number of funds has tripled since then and 786 new funds were actually created in 2000 alone. That’s a substantial amount of new funds even though the number has fallen off slightly as of late but,  more notably, 500 new funds have been “born” in the 2 most recent calendar years alone.

Of course  it’s really not a big surprise that so many funds are dropping off the map as so many new ones come into existence. Many are highly specialized funds that come with arcane risks and others are simply created to chase a fad or trend. At the height of the tech bubble in 2000 for example it was no surprise that so many funds were created.

All industries, including the mutual fund industry, are spurred by innovation but, as is true in all other industries, the benefits of proliferation are usually outweighed by the costs at some point. At the end of the day many of the funds that have recently been created never should have been started in the first place, especially when you consider that the rate of failure has increased from 1 to 7%.

The cost of a mutual fund failing  and fading away is not some abstract notion however and, when one liquidates or is merged away, the people who are affected the most are those investors who put their hard-earned money into the failed fund. Mutual funds don’t fail if they’re doing well, obviously, but when they do people lose money.

Since calculations of how well the mutual fund industry is doing have a tendency to focus on existing funds, investors can actually suffer even if they’ve never heard of a particular fund that has failed and gone on to the scrap pile of fund history. The term for this is “survivorship bias” and it gives investors a skewed impression about the types of returns they can expect (on average) for their mutual fund investments. These false impressions, not surprisingly, are exactly what to contribute to the willingness (or inability) of investors to see the actual risk involved with a particular fund.

In the end this “excess proliferation” isn’t really good for the market or investors. The increase in mutual funds, including prudent funds that are a good investment as well as complex and even absurd funds that probably aren’t, aren’t going to serve the overall interests of investors. From what we’ve seen in the last few years, the fact that so many mutual funds are “dying” is a trend that doesn’t bode well for the industry.

If you have questions about investing, mutual funds, the stock market or financial questions in general, please send us an email or leave a comment and we’ll get back to you with answers, advice and solutions ASAP.

Top Questions to Ask to Determine your Target Market


In the rush to bring new products to market or to start a new business, many entrepreneurs forget that they first need to determine one factor that is very vital to their success; their target market. The fact is, the better a new business owner, or for that matter a successful and established business owner, understands who their target market and customers are, the more successful they will be.

Conversely, many new businesses and new products fail not because they aren’t valuable but because they don’t define their target market beforehand or set their sights on a target market that is too broad to be able to support said new product or service.  It’s for this reason that we put together a blog with some of the top questions that you need to ask yourself, as a business owner, to determine your target market before either starting a new business or bringing a new product or service to market. Enjoy.

One of the most important questions that you need to ask is simply this; who would pay for this product or service? At its core this question simply needs to be seen from the end consumer’s viewpoint. What need does your new service or product fulfill and what problem does it solve? In many cases, your target market may not even know that they have a problem to begin with and if you don’t figure out how to show them that they do and that you have the solution, you may find that getting your new product or service off the ground is a bit difficult.

If you already have a company and have a track record with customers who have purchased your other products or services, one of the questions that you need to ask is “who has already purchased from my company?”  In many cases it’s an excellent idea to contact current or past customers and let them know about your new product or service and then simply keep track of who and how many of them purchase it.

Do you have a solid network of business associates, friends and acquaintances that you can go to for feedback? This is a good question and, if you don’t have just as good an answer to go with it, you may end up spending a lot more time and revenues on finding focus groups and performing surveys than necessary.  Taking advantage of any network affiliations that you have in order to get feedback on your coming launch is not only a great business idea but in many cases can get you some excellent, opinionated and honest feedback. (Just be prepared to take criticism gracefully.)

One soul searching question that you must ask before any new product or service launch this; are making too many assumptions based on your own personal experiences and knowledge about your soon to be released product?  For example, if you own and run a health food store you may assume that, since you know your products quite well, the new one you’re going to be releasing will be a hit. That’s an assumption that can backfire on you and you’d be well advised to actually talk to your customers and get feedback from them directly rather than assuming that you know best.

An extremely important question will to ask is “how am I going to sell my new product or service?” If you have an online-only business this might be a relatively easy question to answer but if you are combining online sales with brick-and-mortar store sales you’re going to need a lot more feedback and knowledge of the market in order to answer this vital question.

Just as important as this is; how are you going to find your new customers? Market research will serve you well when answering this question but, until you have the answer, you may want to hold off on launching any new product or service. The reason, obviously, is that if you don’t know how you’re going to find customers you’re going to be at a rather large disadvantage when it comes to selling anything.

Here, in no particular order, are a few other important questions that you should definitely have answered before your launch.

  • How and where did your competition get started selling the same or similar products and services?
  • As far as your target market is concerned, is there sufficient room to expand and support your new product or service?
  • Are you overestimating the need or want for your new product or service?

Every single one of these questions is vitally important to the success of whatever it is that you’re going to be bringing to the public, whether it’s a service that helps people fill out surveys or a product that will help folks walk and chew gum at the same time. If you can honestly and thoroughly answer all of them you’ll be well on your way to a successful launch of any new product or service. Best of luck and make sure to come back and join us soon for more great information just like this. See you then.

5 Tips for Purchasing Your Next New Laptop Computer.

Today there are so many options and models of laptops on the market that finding the prefect one for your computer / internet needs can prove a bit difficult.  The fact is, when you’re looking at options like desktop replacement models, high-end systems that are perfect for gamers and relatively cheap netbooks that are best for taking notes you’ll need to know exactly what your needs are before beginning your search. With that in mind here are the 5 Tips (in no particular order) that will help you choose your next laptop. Enjoy!

First things first, what exactly do you need your new laptop to do for you?  Will you be making Power Point presentations all day long as well as taking notes and performing other basic but necessary work tasks? If yes a lower end model may be just fine for you.  If however you’re an intense gamer and you play some of the newest memory-draining games or you like to watch HD movies and video chat with all your friends you may need to go a little higher end to get the best graphics and sound card. You should know this all before you start looking.

Battery life is also a big thing especially when you consider that the reason to buy a laptop is for the mobility.  If your battery rapidly dies when your laptop isn’t plugged in you’re certainly not going to get very far are you?  If you take your laptop everywhere you go to keep up with work (or whatever) you’ll need a battery that lasts long.  If on the other hand you’re just looking to replace your desktop model the battery may not be important.

Of course if we’re talking portability the weight of your laptop becomes an important issue as well.  Many of the newest ‘ultra-light’ laptops have done away with disc drives and other options to focus on slimming their models down and taking off the weight (sounds like an episode of the ‘Biggest Loser’). The less weight the more portable and, usually, the more pricey as well so make sure you know if this is important to you before you purchase.

The size of the screen is vital to some and not as important to others, depending on what the laptop will be used for.  The standards sizes are 13, 15 and 17 inches and the bigger they are the more tech that they usually pack into their models.  Of course this affects the weight and portability (as well as price) so again you need to know if this will mostly stay home or mostly go with you all over the place.

Finally there’s an optical disc drive which is becoming less and less vital.  With streaming movies and, well, everything else there’s really no need for a disc drive any more in most cases but, if you still want one, you should make sure you get a model that has one. Or not, which will usually save money and decrease the weight.

There you have them.  Now go out and find the best laptop for you.  Good luck.

What Is Needed To Set Up A Limited Company

If you’re setting up your own limited company, then you’re bound to be full of questions. Not only does setting up limited company involve more administration and regulation, but it also costs a lot more than the sole trader route too. However there are some benefits to setting up a limited company, like the finances for example.

Sole traders are solely responsible for their business finances, and if a sole trader’s business gets into considerable debt, then they could be declared bankrupt – there is no separation between personal and business finances. Limited companies on the other hand provide protection from debt, and employees are not responsible for any debt incurred by the business. Let’s take a look at what is needed to set up a limited company.

Why A Limited Company?

Limited companies are treaded as separate legal entities, and that means that they are entirely responsible for their own actions. Depending on what type of limited company you want to set up, there are a number of regulations that you must adhere to. For example, private limited companies can have a number of shareholders, but the company’s shares cannot be sold on the stock market. Public limited companies on the other hand can sell their shares on the stock market.

As a director of a limited company, your financial risk is only limited to the amount of money that you have invested, provided that the company does not trade recklessly. In order to take out bank loans in your company’s name however, a director will have to provide personal guarantees for that company. In a nutshell, if you’re looking to attract partners or investors, then running your company as a private limited company may make you appear more credible.

Setting Up A Limited Company

The first step to setting up your limited company is to register online at Companies House. Companies House resides under the remint of the Department of Business, and is an Executive Agency of the Government. Usually for a small fee, accountants or solicitors will register your company for you – all you’ll have to do is provide a few basic details and your signature.

If you prefer, ready-made limited company names are available to buy, just in case you can’t come up with your own. If you want to set up a completely original company however, you will need to send a memorandum of association, as well as a completed IN01 form and articles of association to Companies House. Memorandums and articles are not supplied by Companies House, but can be bought from company-forming agents or legal stationers.

Director Responsibilities

By law, private limited companies must have at least one director. This director can also be a shareholder in the company, however they will not be able to assume the role if they have ever been disqualified from a previous company as a director. Furthermore, limited company directors are also classed as employees of the company, meaning they must pay income tax and national insurance. Additionally, unlike public limited companies, private limited companies don’t need to appoint a company secretary.

Visit Brookson at to find out more on setting up a limited company.