Finance & Money

Archive for November 30th, 2009

The absolute best time to get paid by your bank is when you are actually shopping around for a new account. Whether it is to be your first account or you are switching banks, you are in the best position to negotiate with financial institutions when they are trying to earn your businesses. Most banks have incentives and bonuses designed to attract new banking customers. Some of the incentives are as simple as free checks for a year, while other banks actually offer cash amounts ranging from $25 to $100. Use a bank comparison Web site to see what banks in your area are offering, and always make sure to read the fine print and do your homework before committing to one bank or another.

Earning More Interest

A great way to get your bank to pay you is to open only interest-bearing accounts. If you hold a savings account, it may or may not earn interest. You should find out if the account that currently holds your savings bears the maximum interest possible for the amount in deposit. These days, most banks also offer interest-bearing checking accounts.

If your bank does not, it may be worth your while to switch banks in order to earn interest on your deposits. Compare banks and accounts to see where your money is likely to earn the most interest. Don’t forget to include credit unions in your research, as they are co-ops that generally pay out dividends to members.

Avoiding Bank Charges and Fees

One of the most common misconceptions when it comes to banking involves “free checking.” Most banks offer some sort of promotional checking account that they attempt to pass off as “free checking.” While the free checking account programs can be very attractive and beneficial, you mustn’t assume that you will avoid any and all bank account charges.

Most free checking accounts require a minimum daily balance in order to remain “free.” The average monthly balance required in order to avoid a monthly service fee on an interest-bearing checking account is around $3000. If your balance goes any lower than the minimum balance, the average monthly fee is around $11. It may not sound like much, but in a year, you are looking at $132. Multiply that by 5 or 10 years and….you get the picture.

In order to get rich you need to understand the different types of debt, and you then need to use the good kind to make yourself rich. The two types are:

1. Bad Debt – This is the one that you have to pay for, that takes money out of your pocket each month in repayments. Usually credit cards, personal loans, car loans or home loans.

2. Good Debt – This is the one that puts money into your pocket, that earns you money that you wouldn’t have been able to earn otherwise. Eg. Debt from purchasing a positive cashflow property where rental income is great than all expenses.

The thing that determines the good from the bad is the effect it has on your cashflow. The good adds to your cashflow each month, the bad takes away from your cashflow each month. Good debt makes you richer and richer, bad debt makes you poorer and poorer.

In order to look at debt in a fresh way you need to look at your debt in terms of cashflow, not in terms of the overall figure or net worth. So instead of saying “I have $20,000 of debt” say “My debt costs me $100/week”.

By looking at debt in this fresh way (looking at cashflow instead of the figure) you can begin to see whether your debt is good debt or bad debt.

For example if you think all debt is bad then when someone says pay off all debt you will agree with them. But if you look at your debt and you see that your $20,000 of debt is making you $1,000/month, then the advise to “pay off all debt” is stupid advice.

By looking at debt in terms of cashflow you can become financially free quicker and you can easily reduce the stress of your debt.