1 A The Dallas Ost March 8, 2000 Glossary of financial terms Annuity A form of contract sold by life insur- ance companies that guarantees a fixed or variable payment to the buyer at some future time, usually retire- ment. A FIXED Annuity pays out in regular (fixed) installments varying only with the payout method elected. A VARIABLE Annuity pays out an amount that varies with the value of the account. Asset Anything owned that is convertible into cash. Usually divided into two broad classes: 1) Real assets /property; house, car, computer, etc., 2) Financial assets/money; cash, bank account, mutual funds, etc.. Bond (debt security) A negotiable, long-term debt in- strument that carries certain obli- gations (including the payment of in- terest and repayment of principal) on the part of the issuer. Common issuers are the Federal government (Treasuries), State and Local govern- ments (Municipals) and Businesses (Corporates). Bond, Discounted Also called Zero-Coupon bonds, no periodic interest payments. Instead, the bond is sold at some price below (discounted) its face value and re- turns full face value at maturity. Because of the IRS's treatment, this type bond is best used in tax deferred accounts such as IRA's. Budget An estimate of income and expenses for a specified period. Capital Wealth, net worth in money and/or property. Any form of wealth em- ployed or capable of being employed in the production of more wealth. A subset of Assets. Dividend Distribution of earnings to share- holders, the amount is decided by the company's board of directors and is usually paid quarterly. Dividends must be declared as income in the year they are received. Dollar Cost Averaging A method of purchasing assets by investing a fixed amount of dollars at setintervals (such as $100 per month). This method automatically buys more shares when the prices are down and overall is a very good way to invest. Most Mutual Fund companies offer this service, though, they may call it something different. Earnings Corporate profit remaining after paying taxes and bondholder inter- est. 401(k) Plan An employer sponsored, tax de- ferred, retirement plan which uses pre-tax contributions from an em- ployees regular compensation to in- vest for that employee in a number of possible financial instruments. Many companies that offer these plans will MATCH a portion or all of the ’ employee's contributions with cash or securities; this is, in essence, free money fully added to the employees account usually after some set period of time (vesting). 403(b) Plan A tax deferred retirement plan very much like the 401(k) [above], with the main difference being that the employer is a non-profit organization (school, church, etc.). : Futures Bonehead Alert - these securities are often speculative. Currently, they're outside the scope of this Web site. ~ Futures Option Also known as an Option on a Fu- tures Contract. Bonehead Alert - just like Futures and Options separately, these are taboo for nonexperts. Gambling To risk money or property on some- thing involving chance or random out- comes. Basically the riskiest thing you can do with your money, hope you have fun. Inflation A sustained rise in the prices of goods and/or services. Two common measures of the Inflation RATE are: the Consumer Price Index and the Producer Price Index. Investment The use of capital to create more money. Usually includes the idea that safety of principal is important. IRA - Individual Retirement Ac- count A personal, tax deferred, retirement account that an employed person can set up with a deposit limited to $2,000 per year ($4,000 for a couple when both work, or $2,250 for a couple when one works and the other's in- come is $250 or less). Withdrawals from IRA's prior to age 59 and a half are generally subject to a 10% penalty tax. Money Market Fund : A type of Mutual Fund that invests in commercial paper, banker's accep- tances, repurchase agreements, gov- ernment securities, certificates of de- posit, and other highly liquid and safe securities that pay money market rates of interest. Though these funds are not federally insured, like a bank ac- count, there hasn't been a complete failure to date (there have been two failures, but, the shareholders were reimbursed in the first case and the second is still pending). A Money Market Mutual Fund is not the same as a Money Market Deposit Account (MMDA's) that you get through a bank. Mutual Fund A pooled investment vehicle whose securities are managed for a fee (an- nual management fee) by a profes- sional investment advisor. Mutual Funds exist that invest in most in- vestment alternatives available (Stocks, Bonds, etc.). See GLOSSARY, pg 7 Eo RY SSRN SNL Se ee | Financial Services High Quality Companies & Organizations O ver the years, I’ve seen people waste money on pro- grams (Insurance, Investments, etc.) that do not ad- dress their current or future needs. They often don b t under- stand their programs, rarely do they review them and get advice from people who are not qualified to give correct or current information. y job is to get to understand what goals or problems a client has and design plans that help the achievement or resolution of those goals/problems. Together we come to understand how these programs work without a lot of jar- gon and confusion. y goal 1s not to try and impress you with a fancy suit, car and a bunch of gee-whiz mumbo jumbo. Simply to work with you with quality products and services to meet your financial needs. ® Personal Financial Services ® Business Financial Services e Estate Conservation ® Mutual Funds ® Tax-Free Funds ® Prescription Plan ® IRAs/SEPs and IRA Rollovers ® Money Market Funds * Annuities/Life Insurance ® Reverse Mortgages ® Health Insurance FOR INFORMATION Call (570) 696-4818 OR (370) 696-8408 - The Dallas Post Ne Pd SLSR, =D wp March 8, 2000 Budget holds the key to living within your means A budget is a tool that can both reveal problem spending areas and help fine-tune your cash flow. The mere process of gathering informa- tion to begin or maintain a budget can help you control your spending and free up cash to save, invest, or pay off debt. All budgets are not created equal, however; some are overly com- plicated, others require constant monitoring. A budget that is simple enough to appeal to non-accountants and yet able to provide the benefits listed above is described under the heading: Basic Budget Guidelines (be- low). Basic Budget Guidelines: 1. A monthly budget is often the most useful; since some expenses and income items are seasonal or irregu- lar, figure their annual amounts and then divide by 12. What we're shoot- ing for is an estimated picture of your future cash flow. Why estimated? Because, you use past figures of in- come and expenses to estimate your monthly budget for the coming year. 2. Take your time, be thorough, list all of your income and expenses. Don't waste your time, though; if a certain bill (or income item) is always NO EQUITY 125% Programs Home Remodeling Programs Conventional Interest Rates Regardless of Your Credit History the same, there's no need to tally it over an entire year. It may help to view my Budget Example at this point, not only for a glimpse at a finished budget, but also to see the categories I use and give you ideas for your own. 3. Listed below are average per- centages per general expense category. They are meant as guidelines and suggested maximums. 4. As one of your regular expense items you should include payments Average % of Gross Income Housing + Utilities 25 to 40% Taxes (actual percent) 20% Transportation + Upkeep 15% Food 10% Clothing 5% Savings 10% and up Entertainment + Vacations 5% Debt (credit cards, personal loans) 5% Other Expenses 5% and up into a savings (or investment) account (otherwise known as paying yourself first). A good minimum savings goal is 10% of your gross income. The Improvement importance of this step cannot be stressed enough; given enough time, it can literally bring you financial independence. 5. Some expense (and income) items are not easy to figure; overall food expenditures is usually one of these. So as not to delay your initial budget indefinitely, on these items put down your best estimate; they can always be adjusted later. 6. When you have all income and expense items listed, crunch the num- bers (do the math); subtracting ex- penses from income. You should have a positive amount remaining; this is your bottom line and cushion for unforeseen expenses. A negative bottom line is a sign that you need to work at reducing your expenses. Itis often possible to reduce your living expenses without reducing your standard of living (see frugality, be- low). Frugality A closely related subject to budget- ing, frugality, is gaining in popularity; it can be considered the conservation of one’s finances. There are many good books and newsletters dealing with this subject. MORTGAGE, CO., INC. Home Improvement Mortgage Co., Inc. is the missing tool that can make your home improvements easier, whether you're a contractor, or a homeowner. At Home Improvement Mortgage Co., Inc. we will help you upgrade you home. ..and your life, with quick and easy access to the financial resources to help you handle those high interest credit card bills, home improvement projects, a new car, college or any other personal needs. — OVER 20 LENDERS — FREE CONSULTATION - — OVER 100 FINANCIAL PROGRAMS - — PROFESSIONAL, IN-HOME SERVICE — N YOU pick your interest rate, [0] pick your lenders & YOu get immediate answers! Software Recommendation To help yourself organize finan- cially I highly suggest obtaining one of the more popular personal finance programs. The two most popular titles are: Quicken by Intuit and Microsoft Money. These programs contain functions such as: check books, credit card accounts, budget- ing, financial planning, investment tracking, online banking, online bill paying, tax records, etc.. Each pro- gram can usually be bought for under $40 and can often be found on sale for even less. Quicken is, by far, the most popular. Copyright ©1998, Michael C. Carli, All Rights Reserved (Updated: January 25, 1998) Send Sugges- tions, Questions, and Comments to: Bonehead_Finance@compuserve.com. $ave $6 with a subscription to The Dallas Post Delivered with your Wednesday mail.* Local delivery is Wednesday. Out of area takes longer.
Significant historical Pennsylvania newspapers