Hello dear readers!
Time for
Saving and Investment!!
Well, logically, whether it is to save or it is to invest, we kind of need to have some unused money.
Well, logically, whether it is to save or it is to invest, we kind of need to have some unused money.
Alrighty then.....
so,,, how much can you.. "save"?
You can buy two fast food meals or one movie ticket or save seven
dollars or ninety thousand rupiahs this week. You can buy two small cheese
pizzas or one large pepperoni pizza, delivered or one new CD or save fourteen
dollars or one hundred eighty thousand rupiahs this week. You can do shopping
or you can save your money. It is up to you. But if only you choose to save
your money each week at 5% interest rate in 10 years, you’ll have
Rp.61.360.000,00 (sixty-one million three hundred sixty thousand rupiahs), if
you save ninety thousand rupiahs this week, and double the number if you save
one hundred eighty thousand rupiahs this week.
The question
is what can you give up to save for your financial goals? For
every goal, there will be things to be sacrificed.
Assuming you now have a lot of money saved. You might automatically think about opening an account. It is better if you open a checking account if you regularly take money from it. But it is better if you open a saving account if you don't regularly take money you save in the bank because the interest of saving account is higher than of checking account. Yet, if you open a saving account and then you regularly take money from it, your account will automatically turn into checking account (noted :) ).
Assuming you now have a lot of money saved. You might automatically think about opening an account. It is better if you open a checking account if you regularly take money from it. But it is better if you open a saving account if you don't regularly take money you save in the bank because the interest of saving account is higher than of checking account. Yet, if you open a saving account and then you regularly take money from it, your account will automatically turn into checking account (noted :) ).
Now, there are Major Types of Savings Accounts: first, Regular
Savings Account, second, Money-Market Account, third, Transactional
Account (Deposit), and fourth, Time Deposit (Bonds).
Firstly, we are going to talk about regular saving account. If you open
a regular savings account, you can receive information about your
transaction thru: Passbook Account in which you receives a
booklet in which deposits, withdrawals, and interest are recorded, you have
average interest rate that is lower at banks and savings and loans than at
credit unions, and the funds are easily accessible. You also can choose to
have Statement Account, which basically the same
as a passbook account, except depositor receives monthly statements instead of
a passbook, the accounts are usually accessible through 24-hour automated
teller machines (ATM), the interest rates are the same as passbook account, and
the funds are easily accessible.
Basically, a regular savings account are an Interest-earning
Checking Account, which combines benefits of checking and savings, and you
can earn interest on any unused money in your account.
Secondly, about Money-Market Account. Money-Market Account
is a Checking or savings account. Its interest rate paid built on a
complex structure that varies with size of balance and current level of market
interest rates. You can access your money from an ATM, a teller, or by writing
up to three checks a month. The Benefits of having a Money-Market
Account is an immediate access to your money. To have
a Money-Market Account, you need to fulfil some conditions called the
trade-offs. The bank will usually requires a minimum balance of $1,000
(One thousand dollars or around thirteen million rupiahs to $2,500 (two
thousand five hundred dollars or around thirty two million five hundred
thousand rupiahs), you can only write limited number of checks each month, and
your average yield (rate of return) will be higher than regular savings
accounts.
Thirdly, about certificates of deposit (CDs). Having
certificates of deposit (CDs) means you’ll get the bank pays a fixed amount of
interest for a fixed amount of money you saved during a fixed amount of
time. Benefits of certificates of deposit (CDs) are no risk of
losing your money, the way it works is pretty simple, there is no additional
fees, and it offers higher interest rates than savings accounts. Its trade-offs are it
is a Restricted access to your money, and if you withdraw money before
expiration date, you’ll get penalty (penalty might be higher than the interest
earned). There are types of Certificates Of Deposit, first, Rising-rate
CDs with higher rates at various intervals, such as every six months.
Second, Stock-indexed CDs with earnings based on the stock
market. Third, Callable CDs with higher rates and long-term
maturities, as high as 10–15 years. However, the bank may “call” the account
after a stipulated period, such as one or two years, if interest rates drop.
Fourth, Global CDs that combine higher interest
with a hedge on future changes in the dollar compared to other currencies.
Fifth, Promotional CDs that attempt to attract
savers with gifts or special rates.
Fourthly, Time deposit or bonds. A bond is an “IOU,” certifying
that you loaned money to a government or corporation and outlining the terms of
repayment. Buyer may purchase bond at a discount. The bond has a fixed interest
rate for a fixed period of time. When the time is up, the bond is said to have
“matured” and the buyer may redeem the bond for the full face value. There are Types
of bonds, first, Corporate bond.
It is sold by private companies to raise money and if company goes bankrupt,
bondholders have first claim to the assets, before stockholders. Second, Municipal bond.
It is issued by any non-federal government and its interest paid comes from
taxes or from revenues from special projects. Earned interest is exempt from
federal income tax. Third, Federal government bond, it is the
safest investment you can make, because even if U.S. government goes bankrupt,
it is obligated for them to repay bonds.
Investment!
Look at that pyramid! It describes how investment works.
Look at that pyramid! It describes how investment works.
But,,, we are talking about several kinds of investment here. We know that investing means
allocating money (or sometimes another resource, such as TIME) in the
expectation of some benefit in the future. There are ways to invest that
we are going to talk here: first, Mutual funds, second, Stocks, third,
Real Estate, and fourth, Retirement Plans.
Firstly, mutual funds. It is a professionally managed portfolios made up of stocks, bonds, and other investments. The way mutual funds work is that individuals have to buy shares, and fund uses money to purchase stocks, bonds, and other investments and then profits will returned to shareholders monthly, quarterly, or semi-annually in the form of dividends. The advantage of having mutual funds is that it allows small investors to take advantage of professional account management and diversification normally only available to large investors. There are Types of Mutual Funds: First, Balanced Fund that includes a variety of stocks and bonds. Second, Global Bond Fund that has corporate bonds of companies from around the world. Third, Global Stock Fund that has stocks from companies in many parts of the world. Fourth, Growth Fund that emphasizes companies that are expected to increase in value; also has higher risk. Fifth, Income Fund that features stocks and bonds with high dividends and interest. Sixth, Industry Fund that invests in stocks of companies in a single industry (such as technology, health care, banking). Seventh, Municipal Bond Fund that features debt instruments of state and local governments. Eighth, Regional Stock Fund that involves stocks of companies from one geographic region of the world (such as Asia or Latin America).
Secondly, Stocks. Stock represents ownership of a
corporation. Stockholders own a share of the company and are entitled to a
share of the profits as well as a vote in how the company is run. Earnings
are made from: company profits. It is divided among shareholders in the
form of dividends. Dividends are usually paid quarterly and larger profits can
be made through an increase in the value of the stock on the open market.
The Advantages are if the market value goes up, the gain can
be considerable and money from stock is easily accessible. The disadvantages are that if market
value goes down, the loss can be considerable, and selecting and managing stock
often requires study and the help of a good brokerage firm.
Thirdly, real estate. The ways to invest are to: Buy a
house, live in it, and sell it later at a profit; Buy income property (such as
an apartment house or a commercial building) and rent it; or Buy land and hold
it until it rises in value. Advantage of
real estate is an excellent protection against inflation. The disadvantages are that it can be difficult
to convert into cash and it needs a specialized type of investment requiring
study and knowledge of business. If you do invest, you can have capital
gains: that is the profits from the sale of a capital asset such as
stocks, bonds, or real estate.
These profits are tax-deferred; you do not have to pay the tax on these profits until the asset is sold. Long-term capital gains occur on investments held more than 12 months. Short-term capital gains occur on investments held less than 12 months.
Fourthly, retirement plans. It is the Plans that help individuals set aside money to be
used after they retire. Its federal income tax will not immediately due on
money put into a retirement account, or on the interest it makes. There will be
income tax paid when money is withdrawn and penalty charges apply if money is
withdrawn before retirement age, except under certain circumstances. Because
income after retirement is usually lower, so tax rate is lower.
These are types of retirement plans: first, Individual Retirement Account (IRA). It allows a person to contribute up to $5,000 (five thousand rupiahs or sixty five million rupiahs) of pre-tax earnings per year. Contributions can be made in installments or in a lump sum. Second, Roth IRA (also called the IRA Plus). While the $5,000 annual contribution to this plan is not tax-deductible, the earnings on the account are tax-free after five years. The funds from the Roth IRA may be withdrawn after age 59, if the account owner is disabled, for educational expenses, or for the purchase of a first home. Third, 401(k) (four hundred and one) that allows a person to contribute to a savings plan from his or her pre-tax earnings, reducing the amount of tax that must be paid. Employer matches contributions up to a certain level, and fourth, Keogh plan that allows a self-employed person to set aside up to 15% of income (but not more than $35,000 per year).
These are types of retirement plans: first, Individual Retirement Account (IRA). It allows a person to contribute up to $5,000 (five thousand rupiahs or sixty five million rupiahs) of pre-tax earnings per year. Contributions can be made in installments or in a lump sum. Second, Roth IRA (also called the IRA Plus). While the $5,000 annual contribution to this plan is not tax-deductible, the earnings on the account are tax-free after five years. The funds from the Roth IRA may be withdrawn after age 59, if the account owner is disabled, for educational expenses, or for the purchase of a first home. Third, 401(k) (four hundred and one) that allows a person to contribute to a savings plan from his or her pre-tax earnings, reducing the amount of tax that must be paid. Employer matches contributions up to a certain level, and fourth, Keogh plan that allows a self-employed person to set aside up to 15% of income (but not more than $35,000 per year).
Hopefully that table above is understandable and can be a help for you to choose between saving or investing,, or maybe both?
So, what should you choose? Maybe this is the answer (?):
Here is a simple quote: "You should just think about work first, collect much money, and if there is money left after you use it for regular needs and so on, try to invest it. hahaha." – Anonymous
See ya in a longggg time dear readers!#WriterTakeABreak
Best of Luck.
