Reverse mortgages to finance your retirement

Reverse mortgages to finance your retirement?

Reverse mortgages to finance your retirement? A mortgage to finance your retirement sounds like eating doughnuts to lose weight. Shouldn’t retirement be the time to reap all the results for your life long hard work? Well if you have built a nice big retirement saving account, well done. However most people have not had the situation or means to plan a perfect life. Life got in the way with its various ups and downs, recessions, and college fees to pay. Your daughter’s wedding, well that got the last bit of your so-called retirement savings plan. What is more, even if you did have a nice retirement investment portfolio it is likely that the current crisis has dampened if not destroyed years of conservative investments.

However, what you might not have thought about is what is probably your most valuable (valued in dollars, that is) asset, your home. Couples nearing or in retirement often sit on a property worth hundreds of thousands of dollars while they live like paupers worrying and stressing about every services bill. Even in cases where the basic expenses are covered, couples will go for decades of the time of their life where they have more time without well deserved holidays or the odd treat.

This situation can be solved by getting a reverse mortgage. The beauty of reverse mortgages is that they are so flexible. If you are 62 or over, own your own home and have paid for it or have considerable equity (equity is the difference between the value of your home (market value) and the amount left to pay for it) on it, you are eligible.

If it is the first time you hear about these mortgages you might be surprised. This is how they work. You borrow either a lump sum, a line of credit, or receive monthly payments (nice change from PAYING monthly payments) and don’t pay a penny, cent or peso until you a) die, b) sell your home or c) leave it vacant for over 12 months (maybe due to going to a home or other care facility). The interest rates are low and banks cannot touch you until the above mentioned scenarios are completed. Even if you have to move banks will give you up to a year to make arrangements. Even if you die it does not necessarily mean that your family has to lose the home of their youth. They can refinance the home and keep it or sell it, pay for the reverse mortgage and keep the change. Of the three options detailed above the cheapest alternative is the line of credit. With this type of reverse mortgage you are given access to a pool of money you can use when and for what you want.

For obvious reasons this is not a solution or option for everyone, but if you are over 62 and have liquidity issues being able to live in your home until you “don’t need it anymore” and spend the money from its eventual sale, sounds very much like having your cake and eating it.

Improving Your Financial Situation With Investments and Business Ideas

Improving Your Financial Situation With Investments and Business Ideas

With financial information and virtual business transactions just a click away, people are finding themselves more financially savvy and in the know on how to fatten up their financial portfolios.

While most people rely on banks and properties to secure their retirement days, others who are smart enough and worldly enough with the affairs of the green buck opt for more lucrative financing opportunities. They do not just let their money sit idly inside a bank vault and wait for the interest to add up. A few actually roll their money and invest them in the high stakes of stocks, bonds and currency.

Stocks can be very risky but if you start small and give yourself time to get the hang of it, you may enjoy it and may even discover that you have the gift of foresight. Watch for stocks that are just on the rise. These are often companies that are very promising. Their value will still be relatively small compared to blue chips so you really don’t have to shell out much. If you want to risk more, you can actually buy blue chips or those stocks that established companies offer to the public. Examples are Microsoft and Dell.

Bonds on the other hand may have modest returns but they are probably the best and most secure of financial investments. Bonds come highly recommended and should not be absent in any financial portfolio.

Currencies are trickier to deal with as their value are affected by so many forces, local or within the country involved, regional and global. Though banks also offer currencies, most have high exchange rates. Others just buy but they do not sell, choosing to keep the currencies within the financing institution.

Debt is perhaps the single worst thing that you can do to damage your financial portfolio. Do not get the wrong idea, debt can be good when used the right way. In fact, successful businessmen have debts too. This is because they have their money tied up in other ventures that have a higher return of investments than the interest of the loans. After all, you cannot make money without having some money to begin with. So, if you feel that you can yield more money using the money that you got from a loan, then by all means, get a loan!

What should be avoided are debts that come from credit cards. Credit cards hold the highest interest rates in debts perhaps because the whole debt business is risky. Getting into deep credit card debt can mean paying a lifetime for the interest without even touching the principal. It is important that when you use the credit card, make sure that you pay on time and that you pay for the whole amount. Otherwise, you would find yourself slowly falling into a financial trap.

It will be risky but the fastest way you can earn big money is to venture on a business. Even something as small as operating a cafeteria in a factory or school or engage in buying and selling of goods over the Internet, can be a great start. With the advent of technology, it is even easier now than before, not to mention faster, to conduct financing and business transactions. You don’t even have to meet face to face. You just have to learn to communicate through emails and mobile phones.

This is not intended to give financial advice and professional advice is suggested before investing.

Savings vs Investments

Savings vs Investments

I lost all my savings in the stock market scam of 1992.

Do I hear other murmurs that say -

"I lost all my savings in the panic that ensued after the nuclear tests in 1998."

"I lost all my savings when CRB Capital markets shut down."

Or if you want something current then try -

"I lost all my savings in the 'New' economy meltdown of 2000."

Make no mistake- these are painful statements. All through our lives, we have been repeatedly advised that we must save money for a rainy day. And when we did just that, some of us have suffered the misfortune of losing it all.

A penny saved...
... is a penny earned is what I was told by my favorite English teacher in middle school. Unfortunately that penny doesn't get us very far anymore. Nobody told me about the silent enemy called inflation that could lay waste to the coin that the tooth fairy left under my pillow. Incidentally I was also taught how to calculate interest by an excellent but stern Mathematics teacher. But at that point I did not comprehend that it (interest) was my best weapon against that stealthy enemy (a simple preference for English over Mathematics?).

Realisation dawns
In High School I was introduced to the dismal science of economics and the world of basic finance. Thats when it all fell in place - the way to safeguard my savings from inflation was to put it in the bank or invest it somewhere. So that I could earn a rate of interest higher than inflation and protect my money.
Life rolled on
I entered the workplace at the age of 22. The saving habit came naturally to me. What with all those sayings ringing in my head - a penny saved...

I was determined. I wasn't going to let that sneaky character 'Inflation' get at my savings. No simple bank deposits for me - I was going to beat the hell out of inflation by investing my savings profitably in the stock market. In fact, I would beat the rate of inflation by a wide margin. I was too cool for my own good. And with impeccable timing, I caught the concluding part of the great Harshad Mehta orchestrated boom (caught in the Bulls' tail!). But I caught the full impact of the downdraught that followed the famous boom. The rest is history.

Some more...
My financial situation or shall I say penury as a result of that debacle taught me some more lessons that none of my English, Mathematics or Economics textbooks had. A new host of aphorisms pored forth- No free Lunch, No pain-No gain...

You see it is true that you must save for a rainy day. But what follows, as a natural corollary is that to protect your savings against inflation you must invest it in some asset that will earn you returns. Be they shares, debentures, bonds, gold or even real estate.

And therein lies the crux of the issue. All these investment options have been associated with rags to riches as well as riches to rags stories. So - Investing is a risky business. The higher the return you expect from your investment, the higher the risk you will have to take. Your savings are not savings anymore. When you decide to invest your savings you are crossing the Rubicon threshold. Your savings have now taken the form of Risk Capital.

Risk capital?
Yes, because that is what it is. Don't panic at the thought. You could put your money in a government bond or in a NSC and that would qualify as almost a zero risk investment. (Actually it is just the lowest risk investment available to you, but that's the topic of another debate). And at the other end of the spectrum you have equities, which come with a high degree of risk. So do Gold and real estate. But we'll discuss that some other time.

It's time to step back and spell out what I have learnt
• Savings is the difference between Income and Expenditure
• You must save for a rainy day
• Savings have no 'form' and must be protected from Inflation
• When you invest your savings it has morphed into Risk Capital
• Risk Capital can be eroded
• Risk can be minimized by choosing to invest in low risk investments
• The risk associated with each investment changes with time, and must be monitored carefully.
The take home from all of this is that the Rubicon must be crossed. And this is not a Catch-22 situation. Yes you must invest to protect your savings from inflation but that need not necessarily place your financial future at jeopardy. There are low risk investments that exist in the market place. You can structure your investments based on your appetite for risk.

Words of Wisdom
I am now wiser. Wise enough to encapsulate all of this into my own saying - 'It is not how much you save but where you invest it that counts' - Sharekhan circa 2000.

By the time you get to this point in the write-up, you may be feeling just a wee bit nervous about your savings. Nay, Investments. Don't. At the end of the day, Investing your Savings is like falling in love. It can be risky and it can hurt, but that doesn't stop us from falling in love does it? For the heady and glorious experience....