Wednesday, May 5, 2010

Money Working For Us – The Ultimate Financial Success

First, work for the money, save money then grow money

While we usually work to earn income, having money work for us is the pinnacle of financial success. When money works, it does not complain, or takes a vacation or gets sick. If you are money’s boss, you are a fortunate boss indeed.

How money works? Money has the capability of doubling itself through the power of compound interest. When you let it grow, it will grow tremendously at your advantage. Money should be given time to achieve this.

Once money is big, it can give you interest amounts that is if big, and if managed properly, can feed and sustain you for life. Now, how to make money grow? When we save money, interest rate matters. If we aim money to be working for us in the future, go for higher interest rates as early as possible. It makes money grow faster.

While having income today, we all need to save, for our own financial success, even if it seems to be difficult. Aside from getting old, it’s the only chance to retire gracefully. Most of all, we do not want to work for the rest of our lives.

Money working for us

If given enough time, money saved will grow to your advantage tremendously. That is why it is always encouraged to start saving at an early age and let the money stay in the financial institution long-term. Young people, when saving early have more chances to have more money working for us, even with lesser savings. Time is on their side. Older people have to do save bigger amounts to catch-up with time; and also catch-up with financial success.

With big money on hand, you can keep it as it is by only spending the interest yield so this principal does not diminish. This is now called “living on interest” or money sustaining you or working for you. Living on interest though is not possible if the principal is small. That is why we have to save and let it grow to reach this ultimate goal.

People who are “living on interest” have the option to still work or not to work. It is most ideal though for people who are too old to work. They need money badly to work for them instead. To avoid that scenario, we should have money working for us and get financial success.

Maximizing Profits Through Sound Finance Management

The process of finance management

To ensure continuous profits or positive cash flow, finance management or financial management is applied. It is the process of planning for the future of a person or a business. It includes maintenance and administration of financial assets and covers the process of identifying and handling risks. The main concern of finance management is the assessment of financial quantification.

A finance manager analyzes the available data to conclude on the performance of the enterprises. Some refers finance management as the science of money management. It is important at all levels of human existence because every entity needs to look after money. Finance management for a person, means living according to one’s resources, or better below one’s profits and resources. Finance management to a company or business means financial planning and control. It is to see the available funds of the company and plan its spending and the timing of spending. Financial control is to monitor cash flow – inflow and outflow. Managing this movement and relate it to the budget is important in the business.

Purpose of finance management

In both individual and business, the main purpose of financial management is to achieve the individual’s or the business’ financial goals at a given point of time. It is for them to generate substantial amounts of profits, after a particular set of financial processes are done. Finance managers aim to boost resources on hand. They also control the money from external investors and provide profits or returns due to them. The company is most concerned on the later part. Good finance management sees to it that this happens.

Financial management activities

Some of the things to do in financial management is to interpret financial reports like income statements, profit and loss, balance sheets, cash flow statements, etc. It also includes moves like fine-tuning budgets and cost forecasting; allocating how much to make for the company’s revolving capital; looking at options for business expansion either short- or long-term; assess the company’s financial health; decide on techniques whether or not to proceed with an investment and understand valuations for the businesses, portfolios and tangible assets. Either for individual and business concern over profits, finance management is essential to both, in order to meet financial goals and profits, which is why businesses are established in the first place. No one wants to have financial hardships anyway.

Health Care Or Health Insurance - An Investment Obligation

Building your health care

The first step to build a brighter financial future is to purchase health insurance. It is ideal especially for countries that do not fund its people’s hospitalization. Having a sick family member can cause the household to become poorer. While healthcare is the management and treatment of illnesses and preservation of health through services like dental and medical, some people find this a last priority.

You cannot take healthcare for granted. It is a necessity; a type of insurance wherein the health insurance company shoulders your hospitalization bills when you get sick. This can be a great relief in times of illness where money should not aggravate the health problem. Without healthcare, some patients get worse upon learning their escalating hospital bills.

Not all people get sick. No one wants to. Purchasing a health care is a manifestation of your love for self. You do buy health insurance because you know it can help you, you just do not know when. But like any insurance, it is a precautionary measure of a loss - in this case, loss of health. Forget about healthcare and all the funds you have will all be drained when you are beset with health problems.

Short-term and long-term healthcare

Today’s financial industry offers a various forms of health insurance. Some even offer to have a healthcare-investment-insurance package. The investment side it has is usually return-of-investment (ROI) that works like time deposits. The insurance aspect of the healthcare is a burial assistance in case of death which doubles in amount if an accident causes the death.

Short-term and long-term are the two types of healthcare. For short term, we have the yearly renewable government healthcare and Health Management Organization (HMO) as examples. Short-term health insurances are yearly healthcare that offers higher coverage per hospitalization but the package has to be renewed and reassessed every year especially the price. Thus, approval is done annually. This is a no sickness no money package. Short-term healthcare generally do not cover people 61 years old and up since they are more susceptible to sickness than the younger ones.

Example of a long-term healthcare is Health Savings Account or HSA. It is a healthcare that includes savings on top of the health insurance. The healthcare-turned-to-investment benefit can be stretched till the older age to serve as a cash healthcare coverage upon sickness during retirement. The key though is to buy it at a younger age.

Save Money…For A Brighter Financial Future

A great need to save

As we might feel our income today is not enough so as to save, we have to remember that savings is for the future – our financial future and that of our loved ones’. We save to build wealth. Wealth is big savings. So, if I have a $1 saving, that is not a wealth, because $1 is not big. Wealth is big money that is capable of feeding us for a lifetime. We know we can feed our family presently since we can work and earn. But what about tomorrow?

Our income today is temporary. We might lost our job due to company closure or retrenchment, or due to disability and death but our needs are permanent. Needs for food, shelter, clothing, education of children, healthcare and debts. Save now for a brighter financial future. A saving today is an income tomorrow. And the best way to save is when we have income, that is, today.

Our fate

Many people want things that are guaranteed. Well in life, there are mainly two things which are guaranteed 100% - we either die too soon or live too long.

When we die too soon, we need savings for the family we left behind. That form of savings is either cash or insurance. When we live too long, we definitely need savings to sustain us when we get old and cannot work anymore. Yet if we can, doing so at a pretty older age, because we failed to save, might not be that fulfilling… still submitting to a boss younger than us, racing with people at the street and be stressed with reports and deadlines. That is the prize of not taking the financial future seriously. Old age brings in illness. When we are too weak to work, then have the savings out and use them to buy our basic needs.

For the love of self

Savings is the solution to both life’s major possibilities! Then, why should we not prepare for something that is guaranteed to happen?

In biblical times, when Egypt had seven years of abundance and seven years of famine, the famine was survived by the country because they practiced to save 15% of their harvest during the seven years of abundance, to prepare for the financial future that they were already informed of. Not all countries saved though. Egypt did because of the the divine guidance which was brought to them through the dream of Joseph. Those savings sustained them during the famine years. Other countries who failed to save even came to them for help.

We are living in duality - day and night, up and down, rich and poor, abundance and famine. Albeit these things cannot be stopped from happening, still we can do something by being prepared. Savings is definitely a way to prepare or shape our financial future.

All About Banks and Their Financial Services

Banking services

The banking industry is one of the most popular, profitable and fast-growing financial industries worldwide. The banks which offer variety of financial services like investments, savings, investments, mortgages and even financial education are one of the foundation stones of our economy. Heavy government involvement is what separates the banks from other financial industries. The government sets restrictions on the amount of deposits the banks should hold and their borrowing limits. The government has a big influence on the bank’s profitability.

Importance of banking services

Having banks anywhere makes it seem very common and ordinary. However, we cannot afford the absence of banks. Depositing money in the banks is more than just like safe-keeping to most businessmen and average citizens. It is for safety and convenience. Due to the banks’ nature as support of businesses and commerce as part of their financial services, transactions in this industry - deposit and withdrawal of money is very fast, make it offer relatively not-so-big interest rates even on long-term savings.

Maximizing banking services

With its capability to fast move the money, the banks are the most qualified financial institution to hold “emergency fund” or short-term savings. On the other hand, funds intended for future use or long-term investments meant for retirement, educational plans, memorial plans, etc. can have more opportunities to grow in other financial entities.

Credits, loans and mortgages are also offered by the banks. Credit cards are one of the major businesses of the banks. So are housing loans, car loans or salary loans. As part of their financial services, the banks offer minimal interest rates for these loans. Since banks are able to facilitate faster money movement, it is a good middle entity to also transfer money from one financial institution to another. It is used for the convenience of paying bills as electricity, water, telephone, credit cards, savings plans, loans, mortgages, etc. Many modern banks are now engaged in internet banking, where the depositor can make funds transfer, pay bills and even trade stocks over the internet.

Using Debit Cards For Effective Money Management

The convenience of debit cards

A debit card is a plastic card that serves as a cash substitute when making purchases. Also known as bank cards, cheque cards or electronic cheque, they serve as an effective budgeting or money management tool. Unlike the credit card, if a purchase is made, the funds are directly withdrawn from the funds of the debit card or from your bank account. Thus, limiting your purchase to the amount of money you have in the bank. The bearer does not have the obligation to pay for the transaction at a later date. Debit cards are not for credits nor loans.

Debit cards are easy to use and carry. The fees are small and when you can easily cancel if the card is lost or stolen. While cash when lost or stolen is irreplaceable. Debit cards have proved to be aligned with personal money management and they gradually replace the cheque as well especially for big transactions. Some are designed for internet or telephone exclusive use only. In this case, no physical card is needed.

When you use a debit card, the transaction debits (withdraws) the amount of the transaction from your checking account, usually on the same day. Debit cards may act like ATM cards or cheque guarantee cards that allow for instant withdrawal of cash. Like credit cards, they can be swiped at stores or shops or through a pay phone to make a call.

Widespread use of debit cards

After the wild recession in 2009, money management and budgeting become higher in priority than usual. Many countries have used debit cards more instead of credit cards for they are regarded as a money management tool. They are applicable for consumers who are finding ways to have more control over their money. The new era had sprung with people resolving to improve their finances. People now are more afraid of going into debt. Young professionals are financially conscious on their spending and find the no-debt policy of debit cards more appealing.

When to use debit cards

With the widespread use of debit cards come enticing reward programs to encourage more people to use them.

On the other hand, because of its being linked directly to a bank account, debit cards can be more vulnerable to hack and fraud than credit cards. For a more sound money management, you may avoid using debit cards when purchasing online; buying big items in which you are not protected with dispute and item insurance when something goes wrong with the purchase; in restaurants where the card can be brought out of your sight; in recurring payments that might give you over charges or with future travel or items to be delivered in the future. Of course, you do not want to pay beforehand with items from which you have not benefited yet.

Nevertheless, the banks and other institutions are incessantly looking for more ways to protect debit card holders who are more conscious of their money management schemes, from falling into disadvantageous situations.

Credit Cards – Convenience or Loans?

How credit cards originated

Credit cards were conceptualized for convenience and not for loans. They became existent when a New York businessman Frank McNamara, during the fall of 1949 went out at to a restaurant to entertain a client. But when he was about to pay the bill, he realized he left his wallet in another suit. Luckily, his wife was able to save him from potential embarrassment. That incident made him think of a cash substitute that can make someone freely spend in the absence of cash.

A few weeks later, he discussed with his lawyer to form a club of diners who would be able to sign for their meals at certain restaurants and then settle the bill at a later date. That started the Diners Club, the early form of credit cards and dining loans. Though the Diners Club was applicable for restaurants only, from it came universal credit cards. It is now a system of payment using a small plastic card issued to users of the system, entitling the holder to purchase goods and services. The issuer of the card pre-established the cardholder’s credit line.

Benefits of credit cards

The major benefit of credit cards is for the cardholder’s convenience. He can go out and buy goods without cash and thereby avoid the danger of losing cash or having his cash being stolen. Credit cards, if stolen, are useless to another person and so cannot be used by anyone other than its owner. The banks, as issuer of the credit cards have more fraud protection. Even if they are loans, in some places, cardholders gain more prestige in the cash register queues than customers.

Compound interest working against you

Later on, credit cards when used without much planning can become someone’s nightmare. Since the credit is only short-term, interest applies to credit bills and in addition, penalties and charges for unpaid balance. Many have their dilemma begin when they use credit cards without much planning. The payable amount can skyrocket to huge figures card holders have no capability to pay.

Since then, education on how to properly use credit cards circulated among the society members, scaring the others who never had the chance to have credit cards, and never had the experience to use them, develop fear in acquiring these forms of loans. Its compounding interest is the very factor that transforms convenience to nightmare.

Bloomberg – A Financial News Provider

Products and services

Bloomberg L.P. (Limited Partnership) is a financial news and information services media company in New York. Its main business is leasing terminals to subscribers. Bloomberg provides financial software tools such as analytics and equity trading, data services and news to financial companies and organizations around the world.

Bloomberg services is the source of real-time and historical financial news and information for central and commercial banks, investment institutions, government offices and agencies, law firms, corporations and news organizations. Its customers do trading and researching that help them make decisions and execute. The information from Bloomberg is delivered to its customers’ desktop in whatever they need it.

Bloomberg also has grown to include a global news service as television, radio and internet and printed publications. Bloomberg L.P. is founded to supply financial news, by Michael Rubens Bloomberg (born February 14, 1942), the current mayor of New York City who owns more than 80% of the company. Bloomberg L.P. is located at the Bloomberg Tower, 731 Lexington Avenue in Midtown, Manhattan New York. The tower is also known as One Beacon Court, since it has a lighted rectangle beacon that caps the building and the paved courtyard at the ground level is a news and data company.


Bloomberg L.P. founder Michael Bloomberg was fired from Salomon Brothers in 1981 where he was a general partner. He was given $10M severance package. With this money, he went to set up Innovative Market Systems. In 1982, Innovative Market Systems had Merrill Lynch as Bloomberg’s first customer where they installed market master terminals for the financial news monitoring. It was in 1986 that the company was named Bloomberg L.P. and in 1988, they have installed 5000 terminals. Later, they launched Bloomberg’s auxiliary products like Bloomberg Tradebook (a trading platform), Bloomberg Messaging Service and Bloomberg newswire.

Bloomberg today

In 2000, it is estimated that Bloomberg’s cash flow margins on its $2.3 billion

Life Insurance... High Protection Coverage for the Love of Family

For the love of family

As the word implies “to make sure or to ensure”, life insurance is a form of managing the risk - the risk of losing a major income. It is the family’s protection against loss of income when the main breadwinner dies.

Dying can happen to anyone. It is not a question of ‘if’ but of ‘when’. Only fate knows our destiny and the date of our death. To make sure that our beloved whom we might leave behind shall not have financial collapse, we buy insurance. The insured does not enjoy the insurance money. It is solely for his loved ones. Insurance agents call life insurance a symbol of love. You pay it and your family benefits from it. Life insurance is just like telling your family that you love them even if you will not be around, thus, providing them protection against financial difficulty. It originated long time ago with community people who have the thoughtful idea of financially helping the family who lost a loved one in the burial or funeral.

Term and whole life insurance

Term Insurance is the cheapest of insurances. It provides coverage at a fixed amount of premiums for a limited period of time, thus the word “term”. When that period expires, the coverage is no longer there. The client may acquire a new life insurance policy at a different payment term and amount. If the insured dies during the term, instant money shall be given to his beneficiaries. Term insurance is a life insurance, but the cheapest way to purchase a substantial protection or death benefit on a coverage amount per premium.

Whole insurance policy covers you for life, not just for a specific period like term insurance. Your death benefit and premium in most cases will remain the same.

Buying the right coverage

While most people buy insurance for the love of family, they do not exactly realize how much life insurance they need to serve just that. Coverage or the face amount should be big so that the interest alone can provide the beneficiaries money enough to equal the breadwinner’s regular income when he was still alive. That is instant money for income replacement, the very essence of life insurance and income protection.

Income replacement means to replace the income of the breadwinner. Thus, they should be of equal amount. When the breadwinner’s income was $10k a month, then income replacement should also be $10k a month. An example insurance coverage of $1.2M can give a $10k monthly income replacement. Put the 1.2M in a 10%-per -annum-yielding financial institution, and you will get exactly that. So simply, the breadwinner as the insured must buy a $1.2M life insurance coverage. Buying less than that will make him under-insured.

Insurance agents are trained to compute for their clients how much coverage to buy. For making a wise purchase of life insurance and right protection, clients have just to take them very seriously.

Merrill Lynch – The World’s Leading Financial Advisory

Pillar of Wall Street

Merrill Lynch, one of the pillars of Wall Street, stockbroker of Main Street and the world’s leading financial management and financial advisory company was founded with the idea that everyone, not just the wealthy, should have the chance to invest in the financial markets.

It came into existence to realize the importance of providing small investors with conservative, sound and simple financial advice that would make them understand and participate in buying stocks and bonds in the financial industry.


The company was founded in 1914 by Charles Edward Merrill, a Florida-born broker of New York. The firm had its first office in the seventh floor of 7 Wall Street. Less than a year, Mr. Merrill and some partners expanded the firm into a brokerage company with a name Charles E. Merrill & Co. That former name of Merrill Lynch was so resounding that some Wall Street jokesters said that the firm’s name sounded like a beer barrel which is being rolled downstairs. Years after, the financial advisory unrolled itself as the Merrill Lynch, Pierce, Fenner & Beane.

The first of Mr. Merrill’s associate was a young bond salesman whose name was Edmund C. Lynch. Together with some other associates, they struggled and survived, which is a common thing, for firms in Wall Street.

Building a reputation

A bull, the logo of Merrill has been a symbol of Wall Street’s basic optimism. Merrill Lynch leaders have been regarded as spokesmen of the entire financial industry. Merrill Lynch gained the reputation of giving sound financial advisory to companies for financial management and investment banking. The firm has a big contribution to the growth and health of financial markets, in which the society heavily relies on, not to mention its enormous giving to charity.

Merrill Lynch had grown to two companies: one was a wealth-management company that had $1.4 trillion of assets which was managed by 16,000 brokers; and a 49 percent interest in a fast-growing management operation called Black Rock.

The other one was a bond-trading or fixed-income operation which investment was heavy in high-return securities and high-risk backed by sub-prime home mortgages. These securities lost value during the mortgage crisis that started in the middle of 2007, when the prices of housing fell and foreclosures grew. In October 2007, Merrill Lynch posted a write-down of $8.4 billion to recognize the decline of these securities.

Acquisition of Merrill Lynch by Bank of America

Merrill Lynch, as an independent financial advisory company, survived the Great Depression and wars, but succumbed to the mortgage meltdown by agreeing to be purchased by the Bank of America on September 14, 2008, rather than taking the risk of being pulled down by the turmoil in the industry as other companies had.

Wall Street – Mirroring America’s Economy

Physical location

We think of the Wall Street as the financial center of the world. It is actually America’s influential financial interests or its financial market. In this narrow street, where life is fast-paced with hurrying crowd, towering sky-scrapers and massive riches, people find each other reach the heights of wealth, sometimes hastened with a touch of greed and sometimes for mere personal or business goals.

Centered in the New York City area, Wall Street is a street in Lower Manhattan running east from Broadway to South Street on the East River through the Financial District where New York’s major financial institutions are found. Wall Street is the permanent home of the New York Stock Exchange (NYSE).

The Financial District of Wall Street is also the headquarters of the U.S. economy as major stock and other exchanges take place including National Association of Securities Dealers Automated Quotations (NASDAQ), American Stock Exchange (AMEX), New York Mercantile Exchange (NYMEX) and New York Board of Trade (NYBOT).

How Wall Street got its name and origin of the stock market

In 1644, a strengthened 12-foot (4m) wall was built in the location which is presently New York City, by the Dutch West India Company to protect the place from attacks of the Native Americans tribes. In 1699, this wall was dismantled by the British colonial government. But the place is already called Wall Street.

Towards the end of the 18th century, at the foot of Wall Street was a buttonwood tree where speculators and traders gathered to informally trade. That was the time when economy was not as established since the country was still young. These traders eventually formalized their association later in 1792 with a Buttonwood Agreement. This started the stock market and New York Stock Exchange.


In 1789, Wall Street was the venue of the first presidential inauguration of the United States of America. The first president of USA’s George Washington took his oath of office on April 30, 1789 overlooking Wall Street on the balcony of Federal Hall. This also was the location of the passing of the Bill Of Rights.

In 1889, Customer’s Afternoon Letter, the original stock report, became The Wall Street Journal. This daily business newspaper published in New York is now internationally influential, with widest circulation in the United States second to USA Today. This newspaper, named after the actual Wall Street in New York is owned by Rupert Murdoch’s News Corporation since 2007.

The world’s economy continuously goes up and down. To be updated and informed, the world eyes on the trends and transactions happening in Wall Street.

Stock Market Index - Monitoring the Performance of Stocks

Stock market index

A stock market index is a number that measures a section of the stock market or a group of stocks. Any movement of stocks in this group will affect the index value. The stock market index in turn is used to measure the performance of portfolios like mutual funds.

For example, XYZ index is composed of 5 companies. Two companies out of 5 companies of XYZ go up in value today, one company goes down and the remaining two stay as they were yesterday. The total value of the stocks of these 5 companies is now 2% higher. The best way to look at an index number is to compare it with the previous day’s figure to see if the value goes up or down. This is more important than points.

You heard about stock market indexes like Dow Jones or S&P 500 index? They are indexes made up of stocks of different companies.

Types of indices

The Dow Jones Total Stock Market Index represents the stocks of the companies publicly traded in the United States, including those traded in New York Stock Exchange (NYSE) and American Stock Exchange (ASE).

A division of McGraw-Hill, Standard & Poor’s or S&P is also one of the most famous indices. The number following S&P refers to the number of companies that are included in the index. For example S&P 500 for 500 companies, 1500 for 1,500 companies and so on. The same is true with the British FTSE100 stock market index, informally “footsie” index which lists 100 highly capitalized UK stocks in the London Stock Exchange.

S&P 500 and FTSE 100 together with the Japanese Nikkei 225 are some of the mostly quoted indices in the world’s business news. MSCI World, (MSCI stands for Morgan Stanley Capital International), is an index that includes the world’s large companies regardless of where they are traded.

Some indices track the performance of specific sectors of the market like The Morgan Stanley Biotech Index for the 36 firms in the biotechnology and Linux index for companies that service or sell Linux operating system environment.

Why are indices important?

A national index stands for the country’s stock market index and the performance of the country’s stocks, thereby reflecting an investor’s sentiment with regards to the country’s economy.

Measure your investments against a relevant stock market index if you are investing in individual stocks or mutual funds. It is highly important to know if your investments are consistently lagging behind the index or not. If it is lagging behind, then it might be the proper time to come up with a new investing approach.