The housing market’s record-breaking quarters in the back half of 2020 have left some observers wondering if this growth is sustainable and whether sales in the near future will bear out the current rate of rapid house-price appreciation. According to a new potential home sales report from First American, the party in the housing market is far from over. Indeed, it might just be getting started.
The January 2021 potential home sales report models existing-homes sales and underlying market conditions to understand if the market has become dislocated from its fundamentals. The January report found that potential existing-home sales increased to a 6.17 million seasonally adjusted annualized rate, a 0.4% month-over-month increase. The market for existing sales outperformed that potential by 3.0%. The report’s author, First American deputy chief economist Odeta Kushi (pictured), explained why underlying market fundamentals support some of that outperformance.
“The housing market constants – low rates and millennial demand – will continue to drive home-buying demand in 2021,” Kushi said. “As vaccines successfully roll out and the economy improves, existing homeowners who were hesitant to sell amid the worst of the pandemic will be tempted to use the equity they’ve built up in their homes to move out and up. The faster pace of new home construction may provide some relief to a supply-starved market and further encourage existing owners to sell.”
Those fundamentals, driving rapid house price appreciation, have unlocked more existing homes for sale, especially at the top end of the market. Kushi explained that homeowners are seeing the potential their new home equity gives them, and are listing their homes accordingly.
Kushi stressed that even as rates currently turn upwards, we’re unlikely to see enough of an uptick to derail a fast-appreciating purchase market. Rates should remain around 3% through the balance of the year, more than attractive enough to fuel home purchases from a millennial generation entering the housing market with gusto.
Those millennials, in Kushi’s view, will keep the entry-level portion of the market strong, despite more rapid appreciation occurring in the higher priced bands. Even as lower earning employees are disproportionately hurt by the pandemic, younger people with stable jobs are better able to make up any gaps they leave at the entry-level points in the housing market.
One longer standing issue for existing home sales, however, is the so-called ‘homebodies.’ Many homeowners, Kushi explained, might want to upgrade but fear they won’t be able to buy a home in this cutthroat market. The model found that, year over year, tenure length in a home was 4.0% longer than January of 2019. That increase in tenure length had the largest negative impact on the potential home sales model, accounting for a 167,000 unit reduction in potential home sales. If homebuilders can bring enough new supply back on-line, featuring upgraded amenities homeowners want, then Kushi expects many of those ‘homebodies’ will be more comfortable listing their homes for sale.
The broad takeaway, according to Kushi, is that mortgage professionals can expect robust demand and positivity throughout the 2021 housing market. According to this model, at least, it’s all systems go.
“The outlook for housing in 2021 remains bright,” Kushi said. “By the time spring arrives, there will likely be more economic certainty driven by the dissemination of a vaccine and the housing market constants – still low rates and millennial demand – will keep home-buying demand robust.”
There may be many benefits to growing your own garden, including better quality of produce, saving money, and having a healthy hobby. If you’re just getting started, use the guide below.
Here are our tips for growing fruits and vegetables at home!
● Gather your tools: Before you get down in the dirt, gather your gear. If you aren’t properly equipped already, head to your local home improvement or gardening supply stores to stock up on the essentials. To get started, you will need: a trowel (weeding, digging small holes), gardening gloves, a watering can and/or hose, a wheelbarrow, a shovel (digging large holes), a rake, shears (pruning), and sun protection.
● Decide how your garden will grow: Once you’ve planned the spot for your garden, you’ll need to decide which type you will grow. The traditional route is an in-ground garden, which uses natural soil and should ideally receive at least six hours of natural, direct light. If you have poor soil, you can choose a container garden instead by using store-bought potting soil (just make sure the container you use has proper drainage and enough space for deep-rooted plants). If you’re looking for something between the two, consider a raised-bed garden or the square-foot gardening method to get better control over the soil.
● Prepare your soil: Set your garden up for success by using high-quality soil. It should be well-aerated, free of stones and sand, and rich in compost for plenty of nutrients. Test the pH as well to make sure that your soil is only slightly acidic (unless you’re growing something like blueberries which prefer acidic soil).
● Pick your plants: Deciding what fruits and vegetables to grow is entirely up to you (and your growing conditions, of course). Plants like tomatoes, squash, beans, eggplant, corn, and peppers all love lots of sunlight, while leafy vegetables, potatoes, carrots, and turnips can do with less (which means they can be planted in early spring or late summer). If you’re a beginner, consider starting with seedlings from your local nursery.
● Tend to your garden: After the seeds are in the soil, keep a close eye on them. You may want to add more compost to help control weeds or cool roots during the summer. Depending on the weather, you may need to supplement the rain with additional water. Be careful not to water too much, though (watch out for leaves and stems that start to lighten in color or turn yellow).
Impress your friends and family with great, fresh meals all season long.
Breaking up with your bank is much easier than ending a romantic relationship.
But that’s not to say you should wing it. There’s a correct way to do the actual work of closing a savings or checking account or any other type of bank account, and a number of steps you need to take — including opening a new bank account — before officially saying goodbye.
Ready to get started? Here’s what you need to know to close your old account properly and start fresh with a new account.
Why Close a Bank Account?
One of the most common reasons to open a new account with a different bank is convenience.
Brick-and-mortar banks and credit unions might have their charms, but many lack the basic online banking capabilities most of us expect from our financial partners: mobile check deposit, fast person-to-person money transfers, seamless online bill paying, self-serve travel alerts and debit card locks, and more.
Taking advantage of everything brick-and-mortar banks have to offer means taking time out of your day to visit in person and speak with a teller — or maybe even make an appointment with a besuited banker, depending on what sort of help you need.
In-person banking is anything but convenient. And for many — like those of us who travel frequently for work or move long distances more often than the average person — it’s simply not workable at all.
Top online banks, like CIT Bank, make it easy to bank from anywhere at any time. CIT Bank’s mobile app and online account management tools completely reproduce the in-branch banking experience, minus the suits and handshakes.
Switching to an online bank like CIT streamlines the account closure process too. Getting started at your new bank is much easier when you don’t have to visit a branch to sign documents or make your first deposit.
Convenience isn’t the only reason to ditch your old brick-and-mortar bank for an online alternative. Without expensive branches to keep running and armies of bankers to pay, lean online banks can pass the savings along to their customers through higher account yields (interest rates) and lower loan rates.
It’s rare to find traditional banks offering interest checking accounts these days, but you needn’t look further than CIT Bank’s eChecking account to find one online. Ditto on the savings side, where high-yield savings accounts like CIT’s Savings Builder and Savings Connect (a bundle that combines eChecking with a generous savings account) leave brick-and-mortar competitors in the dust.
How to Close an Old Account With Your Former Bank and Open a New Bank Account
So, you’ve decided to close your old bank account and start a new banking relationship. Follow these steps to complete the process and ensure you don’t leave any loose ends.
1. Open and Fund Your New Bank Account
Before you can close your old bank account, you need to open a new bank account. You’ll need it open to migrate payment information and balances from the soon-to-be-closed account.
Opening an online bank account with CIT Bank is super easy, so don’t fret about this step. You’ll need to provide some basic personal information about yourself, such as your home address and phone number, electronically sign the account opening documents, and initiate funding to the new account. The whole process takes about five minutes.
2. Switch Your Direct Deposit(s) to the New Account
Once your new account is open and funded, you need to make sure it stays funded. Contact your employer and any other party that pays you by direct deposit to update your direct deposit “pay-to” account information.
You’ll need to provide the new account number and the financial institution’s routing number. Once confirmed, the change should take effect by your next scheduled pay date.
3. Switch Any Automatic or Recurring Payments to the New Account
Next, ensure that any recurring or automatic payments will come from the new account moving forward. These might include:
Rent or mortgage payments
Media or streaming subscriptions like Netflix, magazines, and so on
Warehouse club memberships
Professional association dues
Transportation expenses, such as monthly parking or public transit passes
Log into each payment account and look for the old bank account number. Update it to the new account number and routing number and confirm that the payment is set to be an automatic transaction rather than one-time.
If you can’t remember every automatic payment you’ve set up, refer to bank statements going back 12 months. This will take some time, but it’s the best way to ensure no infrequent recurring payments — such as annual subscription payments or membership dues — fall through the cracks.
Ideally, complete this step two to three weeks before you’d like to close your old account. It can take some time for automatic payment changes to update on the payee’s end. You don’t want to incur late payment fees because a payee tried to draw from an empty or closed bank account.
4. Make the New Account Your “Pay-From” Account for Manual Payments
Next, make your new bank account your default “pay-from” account for any nonrecurring payments or transfers. Skip this step and you run the risk of attempting a payment or money transfer from an account that no longer exists.
To be safe, remove your old bank account number from all accounts and subscriptions that contain payment account information, even if you rarely use them.
5. Confirm That All Payments Pending From the Old Account Have Completed and None Will Recur
Wait a couple of weeks and check your old account to confirm that any automatic or recurring bill payments pending from the account have completed and that none are scheduled to recur in the future. Closing the old account while payments remain pending could cancel the transaction and expose you to late fees or worse.
6. Transfer All Funds Out of the Old Account or Request a Check for the Entire Balance
After confirming that no further payments are pending from the account, transfer the entire balance to your new account. Be warned: Some behind-the-times banks may still cut you a cashier’s check for the remaining funds. But in that case, you’ll have the opportunity to try out your new CIT Bank account’s handy mobile check deposit feature.
7. Sign and Notarize Account Closure Documents, If Required
Your old bank may require you to sign official account closure paperwork. In the worst-case scenario, where the bank requires notarization, you’ll need to visit a branch to do this.
However, most banks permit e-signatures and waive notarization requirements these days. If you’ve already moved out of the area, your old bank may not have a choice, or it may simply choose to forgo the paperwork altogether.
8. Get Written Confirmation That the Account Has Been Closed and Won’t Be Reopened
Ask your old bank for written confirmation that the account has been closed and won’t be reopened. Many banks mail former account holders letters to this effect, but it never hurts to ask.
You want to be able to point to something in writing should the bank erroneously reopen your account at some point in the future, which can happen if some long-forgotten payee attempts to draw on the account.
9. Verify That the Closed Account Is Actually Closed
Finally, if possible, log into your old bank’s online bank portal and confirm that the account is no longer active. If you didn’t have online banking for your old account, the letter informing you of the account’s closure will have to suffice.
Special Considerations for Joint, Custodial, and Inactive Accounts
Closing a custodial account (a type of supervised bank account for kids) or joint account (held with a current or former spouse or domestic partner) may require some additional work. The same may be true for inactive bank accounts.
Closing a Custodial Bank Account
If your parents opened a bank account for you as a kid, take a moment to thank them for teaching you how to save from an early age. Then, prepare to say goodbye to the account.
Closing a custodial bank account isn’t much different than closing an individual bank account, with one important exception: If they’re still alive, the account’s co-owner — your parent — will also need to sign account closure documents. Hopefully, e-signatures will suffice, but be prepared to find time to visit a branch with them if not.
If your old bank insists on cutting a bank check rather than transferring the remaining balance electronically, make sure the check is made out to you and not your parent. It’s your money now.
Closing a Joint Bank Account
Closing a bank account held jointly with a current or former spouse or domestic partner also requires two signatures.
If you’re still in the relationship or amicably parted, this is a straightforward matter. It gets more complicated amid a less-than-amicable divorce or separation when your partner’s opinion about what to do with the account — or who should control it — might differ from your own.
Ultimately, you may need to hash out these and other financial issues in a divorce settlement with help from your respective lawyers. In the meantime, open a new individual bank account, transfer any funds from the joint account that you can claim as your own, and update direct deposit and bill pay information so that you no longer need to rely on the old account.
Closing an Inactive Bank Account
If you haven’t used your bank account in a while, your financial institution might deem it inactive. Don’t worry — you can still pull your money out. You’ll just need to go through the trouble of reactivating it, which may involve signing another form or making an extra phone call.
The good news: If your bank asks you to come to a branch in person to reactivate an inactive account before closing it, you should be able to take care of both tasks on the same visit.
The bad news: If your account was overdrawn before lapsing into inactivity, you’ll need to deposit funds to get your balance back into the black.
The process of closing an old bank account has an air of finality. After all, a properly closed bank account should be gone for good.
But closing an old bank account should feel like a new beginning too. It’s an opportunity to start a fresh relationship with a new financial institution, one that’s hopefully a better fit for your financial needs now and in the future.
See for yourself what’s possible. Take the first step in your account closing journey and open a new account with CIT Bank.
Budgeting can give people the jitters. Big time. Everyone knows setting a budget is important, but it’s no fun to think about.
To find ways to make your budget simple sans the headache, we asked several experts in the personal finance community to weigh in. Here’s what they had to say:
1. Budget for the most important things in your life, and nix the rest
Lauren Greutman, frugal living expert and author of The Recovering Spender, suggests budgeting according to your values.
“To set a budget you can stick to, write down everything in your life that’s important to you,” Greutman says. “Next, write down all of the things you currently spend money on: your daily expenses.”
When you set those two lists side-by-side, look for the things that aren’t as meaningful to you, and cut those—or trim back on them—right away. Exhibit A: You’re buying lunch every day simply out of habit (you can really take or leave dining out), and choose to pack your own instead. Take that lunch money and put it toward one of your priorities, like paying off debt.
2. Go back to basics with a cash-only, envelope budget
If you tend to overspend with the plastic in your wallet, financial advisor Benjamin Brandt suggests simplifying your budget by breaking out some envelopes for a cash-only budget.
To get the ball rolling, create a list of your regular expenses, then set aside a certain amount of cash to cover each category.
Take your groceries, for example. “Withdraw the exact amount you want to spend on groceries next month and fill your ‘groceries’ envelope,” Brandt says.
If you tend to overspend with the plastic in your wallet, financial advisor Benjamin Brandt suggests simplifying your budget by breaking out some envelopes for a cash-only budget.
Use the cash from this envelope when you hit the store, but be prepared to stop buying when the money runs out, Brandt says. This may mean you’ll have to learn to make your money stretch further, or come up with some creative, cost-saving meals at the end of the month.
The same budgeting strategy can be applied to your expenses across the board, Brandt says. “Using cash instead of swiping your card will make you feel more connected to your money and might cause you to actually spend less.”
Good Financial Cents suggests a way to simplify your budget that should also save you time: set designated shopping dates. Pick one day a week for groceries—say, Sundays. For other types of shopping, set aside another day to get the job done. The rest of the time, try not to spend a cent.
“By not hitting the store every time you drive by, you’ll save money by default,” Rose says. “Plus, setting aside a special day for shopping might make you more intentional with what you buy, leading to more savings.”
4. Give yourself an allowance
An allowance isn’t just a way to reward kids for taking out the trash. It can help keep your spending on track.
“Set aside a certain amount of money you can spend on whatever you want, then stick with that amount month after month,” Rose says. This money can be used for a fun splurge or as regular spending money—whatever you want. Outside of your allowance, try to spend only on regular and recurring bills.
“You’re not depriving yourself completely this way,” Rose says. “You’re just cutting your extra spending to reach your goals.”
5. Let budgeting apps or tools do the work for you
When it comes to simplifying your budget, make technology your friend. With a website like Mint.com, for example, you can create a budget and track all of your spending in one fell swoop. With You Need a Budget, you’ll learn to live on last month’s income and cut the waste from your budget.
Nobody likes the idea of budgeting at first, but those who succeed love the results (no joke). With the right approach, simplifying your budgeting process can be much more of a help than a hindrance.
The mere thought of filing for bankruptcy is enough to make anyone nervous. But in some cases, it really can be the best option for your financial situation. Even though it stays as a negative item on your credit report for up to ten years, bankruptcy often relieves the burden of overwhelming amounts of debt.
There are actually three different types of bankruptcy, and each one is designed to help people with specific needs. Read on to find out which type of bankruptcy you might be eligible for. We’ll also help you determine whether it really is the best option available.
What are the different types of bankruptcy?
In general, bankruptcy is the process of eliminating some or all of your debt, or in some cases, repaying it under different terms from your original agreements with your creditors.
It’s a very serious endeavor but can help alleviate your debt if you calculate that it’s unlikely to you’ll be able to repay everything throughout the coming years.
The two most common for individuals are Chapter 7 and Chapter 13. Chapter 11 is primarily used for businesses but can apply to individuals in some instances. Take a look at the other details that set them apart from each other.
Chapter 7 bankruptcy is designed for individuals meeting certain income guidelines who can’t afford to repay their creditors. You must pass a means test in order to qualify. Then, instead of making payments, your personal property may be sold off to help settle your debts, including both secured and unsecured loans.
There are certain exemptions you can apply for in order to keep some things from being taken away. It all depends on which debts are delinquent. If your mortgage is headed towards foreclosure, you might only be able to delay the process through a Chapter 7 delinquency.
If you’re only delinquent on unsecured debt, like credit card debt or personal loans, then you can file for an exemption on major items like your home and car. That way they won’t be repossessed and auctioned off.
Eligible exemptions vary by state. Usually, there is a value assigned to your assets that are eligible for exemption. You may keep them as long as they are within that maximum value. For example, if your state has a $3,000 auto exemption and your car is only valued at $2,000 then you get to keep it.
Most places also allow you to subtract any outstanding loan amount to put towards the exemption. So in the situation above, if your car is valued at $6,000 but you have $3,000 left on your car loan then you’re still within the exemption limit.
Chapter 7 is the fastest option to go through, lasting just between three and six months. It’s also usually the cheapest option in terms of legal fees. However, keep in mind that you’ll likely have to pay your attorney’s fees upfront if you choose this option.
A chapter 13 bankruptcy is the standard option when you make too much money to qualify for a Chapter 7 bankruptcy. The benefit is that you get to keep your property but instead repay your creditors over a three to five year period. Your repayment plan depends on a number of variables.
All administrative fees, priority debts (like back taxes, alimony, and child support), and secured debts must be paid back in full over the repayment period. These must be paid back if you want to keep the property, such as your house or car.
The amount you’ll have to repay on your unsecured debts can vary drastically. It depends on the amount of disposable income you have, the value of any nonexempt property, and the length of your repayment plan.
How long your plan lasts is actually determined by the amount of money you earn and is based on income standards for your state. For example, if you make more than the median monthly income, you must repay your debts for a full five years.
If you make less than that amount, you may be able to reduce your repayment period to as little as three years. You can enter your financial information into a Chapter 13 bankruptcy calculator for an estimate of what your monthly payments might look like in this situation.
To qualify for Chapter 13, your debts must be under predetermined maximums. For unsecured debt, your total may not surpass $1,149,525 and your secured debt may not surpass $383,175. However, unlike Chapter 7, you may include overdue mortgage payments to avoid foreclosure.
Chapter 11 bankruptcy is usually associated with companies. However, it can also be an option for individuals, especially if their debt levels exceed the Chapter 13 limits. A lot of the characteristics of Chapter 11 and Chapter 13 are the same, such as saving secured property from being repossessed.
Having to pay back priority debts in full and having a higher income bracket than a Chapter 7 are also common characteristics. However, unlike a Chapter 13, you must make repayment for the entire five years with a Chapter 11. There is no option to pay for just three years, no matter where you live or how much you make.
Another reason to pick Chapter 11 is if you are a small business owner or own real estate properties. Rather than losing your business or your income properties, you get to restructure your debt and catch up on payments while still operating your business, whether it’s as a CEO or as a landlord.
One downside to be aware of with a Chapter 11 bankruptcy is that it’s usually the most expensive option. However, you can pay your legal fees over time so you don’t have to worry about spiraling back into debt.
What are the long term effects of bankruptcy?
It should come as no surprise that going through a bankruptcy causes your credit score to plummet. Depending on what else is on your report, your score could drop anywhere between 160 and 220 points.
Those effects linger. A Chapter 13 bankruptcy stays on your credit report for seven years. And a Chapter 7 remains there for as many as ten years. Their effects on your credit score do, however, begin to diminish as time goes by.
You’ll probably have trouble getting access to credit immediately following your bankruptcy. Eventually, you’ll start getting approved for loans and credit cards, but your interest rates are likely to be extremely high.
A new mortgage will probably be out of reach for at least five to seven years from the time you file for bankruptcy. Additionally, any employer performing a credit check can see all of these items on your credit report.
Government agencies can’t legally discriminate against you because of your bankruptcy, but there is no specific rule for privately-owned companies. It could be particularly damaging if the job you’re applying for deals with money or any type of financials. No matter where you work, though, you can’t be fired from a current employer because of a bankruptcy.
Should I file bankruptcy?
There’s no correct answer to this question and it’s ultimately something you’ll need to decide on your own. However, there are a few things you can do to make sure you’re making the best decision possible. Start off by finding a licensed credit counselor to help analyze your individual situation. They’ll help you review the guidelines for each type of bankruptcy and determine if you’re even eligible.
At first glance, filing for bankruptcy may seem like a great way to settle your debts and move on with your life. Unfortunately, the process isn’t as simple as filling out a form. The effects of bankruptcy will stick with you for years.
As you begin the evaluation process of whether or not bankruptcy is right for you, there are a number of considerations to take into account. This overview will get you thinking about your situation. It will also point you in the right direction for more in-depth resources when you need them.
Is your current status temporary or permanent?
You should also look at your expected future and compare your potential earnings to your amounts of debt. If you don’t realistically see how you’ll ever pay off that debt, then bankruptcy may be a wise option. Also, understand the types of debt you owe. Tax payments, student loans, and liens on your mortgage or car will not be discharged even when you file for bankruptcy.
Once you figure out which specific options are available to you, it’s time to contact a bankruptcy attorney. You’re certainly able to represent yourself, but the process is complicated. It’s usually best to have a professional work on the case on your behalf. Just be sure to interview a few different lawyers to get multiple opinions and prices to compare.
Evaluate Your Situation
Even when your bankruptcy is underway, it’s smart to spend some time evaluating how you got there. Was it due to a one-time financial hardship, like a long bout of unemployment? If that’s the case, then you know that you have a brighter future ahead of you with the promise of work and steady income to pay your bills.
However, if you’re on the path to bankruptcy because of reckless spending, you really need to look inward and address your overspending habits. Otherwise, it becomes too easy to put yourself in the same situation a few years down the road. Use your bankruptcy as a second chance to start fresh with a clean financial slate.
Why Consider Bankruptcy?
If you’re considering bankruptcy, then you’re most likely feeling overburdened with debt and other financial obligations. You probably have a tough time paying your bills each month and may even worry how you’ll ever pay off some of your outstanding balances.
If you’ve already exhausted your other options, like working overtime and cutting back on your non-necessities, it might be time to seriously think about potentially declaring bankruptcy. Some signs that you might be ready include:
Increased interest rates because of late payments or bad credit
Using credit cards for daily purchases without paying off the balance each month
Already downsized things like house, car, and other assets
Working multiple shifts or jobs
Paying off debt with retirement funds
Wages are being garnished
If one or more of these situations apply to you, then you should probably continue your research into bankruptcy. If not, try finding other ways to improve your financial situation. For example, you could rework your budget if there are easy places to cut back on.
You can also try negotiating with your lenders, particularly if you’re experiencing just a short-term setback. Most lenders are willing to work with you. They would much rather set up a new payment plan than have the debt discharged or settled through bankruptcy.
Understanding Bankruptcy and Alternatives
If you want to file for bankruptcy it takes careful planning. Due to the long-term legal and financial consequences of bankruptcy, there are many rules that must be followed before you’re eligible.
For example, it’s necessary to show the courts you have obtained credit counseling and considered alternatives like debt settlement or debt consolidation. Bankruptcy is controlled exclusively by the federal judicial system, which strongly recommends hiring an attorney before attempting to file.
If you need help finding a bankruptcy lawyer contact the American Bar Association. They offer free legal advice and you may qualify for free legal services if you are unable to afford an attorney.
Creating a Checklist to Avoid Dismissal
Before you file for bankruptcy, there are a number of important questions you should ask yourself. There are also several key steps that you need to take. First, it’s necessary to ask yourself if you really need to file for bankruptcy.
If you don’t, you probably won’t be approved anyway. You also need to calculate income, expenses and assets, find a trustworthy attorney, and select a credit counseling program.
It’s helpful to be methodical and to use a checklist. Failure to take the right steps and find the right credit counseling could result in more wasted money and a bankruptcy dismissal where they throw out the case.
Reasons to Delay Bankruptcy
Even if bankruptcy is the best choice for you, there may be some situations where it’s smart to delay the process so you can maximize your benefits. First, if you had a high income within the last six months that no longer applies to your situation, then you might want to wait.
That’s because the court weighs your last six months of income to determine your eligibility for Chapter 7. If you had a nice monthly salary a few months ago but have been laid off since then, that means test isn’t going to reflect your current situation accurately.
Another reason to delay bankruptcy is if you are anticipating an upcoming major debt. New debt isn’t allowed to be discharged once you file for bankruptcy.
So, for example, if you’re about to have a major medical surgery, you might consider waiting until it’s over to include the medical bills as part of your bankruptcy plan. Talk to a professional to see the eligibility requirements. Luxury items charged right before bankruptcy, for example, likely won’t be included as part of your debt discharge.
Changes in Bankruptcy Law
Before getting started, it’s important to note the changes that went into effect in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). While the changes don’t affect some people applying for bankruptcy, they may affect others.
The law requires mandatory credit counseling to make sure you fully understand the consequences of declaring bankruptcy. It also created stricter eligibility requirements for Chapter 7 bankruptcies. For Chapter 13 bankruptcies, the law requires tax returns and proof of income.
An informed decision begins with understanding the law, the bankruptcy process, and what has changed. It’s important to better understand these changes before you make any final decisions.
Filing Under Chapter 7 or Chapter 13
Understanding how bankruptcy works means understanding the process and laws related to Chapters 7 and 13 of the Bankruptcy Code. Depending on the details of your situation, you might be eligible to file under Chapter 7 or Chapter 13. Which route you choose has a lot to do with your income and what assets you want to keep.
Your debts can either be resolved quickly or over a several-year period. It’s helpful to read up on in-depth frequently asked questions related to each route.
Calculating Chapter 7 Means
To have all your unsecured debts completely eliminated under Chapter 7, you must qualify under the Chapter 7 means test. Using your personal information, or a basic estimate, an online calculator can help determine this for you. When filing, you must also fill out an appropriate form in which you enter your income, expense information, and data from the Census Bureau and IRS.
If you don’t meet the income level requirements to file for Chapter 7, you can still file for Chapter 13. A Chapter 13 will settle many of your debts after you successfully complete a three to five-year repayment program.
Qualifying and Qualifying Debts
Your debts qualify for bankruptcy relief when you can prove you are unable to pay them, but a great deal depends on your situation and which chapter you are filing under. Debts can be either unsecured or secured. Secured debts include mortgages, cars, and debts related to a property you’re still paying for.
Unsecured debts include credit card debt, bills, collections, judgments, and unsecured loans. It’s important to know which debts qualify for bankruptcy. But, it’s even more important to know whether or not your situation makes you eligible for this major step. To determine this, a full financial assessment is necessary. You can start by reading more about debts that qualify.
Defaulting on a Student Loan
If you have defaulted on a student loan, there are several options open you. Bankruptcy is one of them, but if your goal is to have a student loan discharged under Chapter 7, this can very difficult.
Nevertheless, taking certain steps as soon as possible can help prevent wage garnishment. Knowing your options can help you make the best choice before matters become more difficult. Under Chapter 13, your defaulted loan can be consolidated with your other bills. This will give you a better payment plan or a temporary reprieve from making payments.
If you have a federal student loan, check out your repayment options, especially if you are facing financial hardship. Otherwise, read more to figure out how to pull yourself out of student loan default.
What Assets You Can Keep During Bankruptcy
Depending on how you file for bankruptcy, there are certain assets you can keep. Different states have different exemptions, and in certain states, you can choose between state and federal bankruptcy exemptions.
If you need to have debts discharged, are out of work, and cannot afford a repayment plan, some assets might be lost. In most cases, however, people who file for bankruptcy can keep their homes and cars and much of what they own while they repay their debts under a modified plan. It all depends on your unique circumstances and how you file.
Get a FREE Credit Evaluation Before You File Bankruptcy
A bankruptcy can affect your credit for 7 to 10 years and should be considered a last resort option when all other options have failed. Many times people file bankruptcy when it is completely unnecessary. A credit professional can help you fix your credit and deal with your creditors so you can avoid filing for bankruptcy.
Before filing bankruptcy, talk to a credit specialist:
Call 1 (800) 220-0084 for a FREE Credit Consultation with a paralegal.
It all starts with a plan. Get tips to budget, save and achieve your goals.
If you feel a little out of control of your finances, join the club.
In a 2015 NerdWallet survey, roughly one in four consumers said they were at least sometimes surprised by their bills, and households reported spending an average of $6,658 on interest payments every year—or 9 percent of average U.S. household income.
The good news is there are a few time-tested ways to get your finances in order. Here are five steps anyone can take to get on track:
1. Create a budget
Tracking your money isn’t always easy, but it’s the simplest way to lift the veil on where your cash is going. Knowing your spending habits will help you determine if they align with your financial or personal goals and make it easier to create a budget to bridge the gap. For example, if you find your social habits are consuming too much of your disposable income, impose a cap on expensive nights out (maybe go with dinner or a movie) and make every effort to stick to it. Start by taking inventory of your income and expenses, and then take a closer look at spending by category.
2. Save more money
Resolutions to save more money are one thing; following through on them is another. But your savings goals might be easier to tackle than you think. Start by narrowing your focus and setting a goal for the amount of money you want to save each month, or the amount you wish to have in a savings account by the end of the year. Then find a few small changes to your daily routine that could boost your savings. Pack lunch a few times a week. Cancel a subscription service you rarely use. Try to be more conscious of your water and electricity use at home. Whatever it is, direct the savings into an account where it can sit untouched.
3. Automate your finances
Automating your savings by scheduling monthly transfers to a savings or investment account is a reliable way to make sure you stick to your plan. Automation can start with your paycheck. More likely than not, your employer offers direct deposit, which electronically transfers your paycheck to the account or accounts of your choosing. Try depositing a portion of your paycheck straight into a savings account (you won’t have time to miss it if you avoid a pit stop in checking). You can also sign up for automatic bill pay, which can help you avoid late fees.
4. Pay off debt
Once you’ve gained some money momentum, commit to paying down your debt. Start with the three steps above—budgeting, saving and automating. Know where your money goes, find a way to save a little more of it and then put the extra toward your highest-interest loan. Keep in mind that you may want to keep some cash in a savings account as an emergency fund so you can cover unexpected expenses without borrowing.
5. Save for long-term goals
Saving early for long-term goals—retirement, a child’s education or buying a house—is a savvy financial decision. Even if you can only put aside a little money now, the sooner you start, the longer your money can grow with compound interest. Depending on your goal, look into opening a retirement account, savings account or Certificate of Deposit (CD) to hold your savings.
that report, a large amount of the population, particularly millennials, overestimate the cost of life insurance, assuming it to be out of reach. That same study found that half of the respondents would prefer a no-exam policy.
If you are in pristine health, though, you likely aren’t concerned about a medical exam or the results, and you can expect the best rates out there with Health I.Q.
Health I.Q. rewards healthy people
Health I.Q. rewards healthy people, but they do more than that.
They take a long, hard look at your health, not just a broad overview of the numbers. Many traditional insurance companies will look at your health and weight to figure out your BMI or some similar number.
With Health I.Q., they want to know more about your healthy lifestyle.
For example, let’s say you’re a bodybuilder, or you just like to lift weights. You’re probably going to have a lot of muscle.
All that muscle can skew your BMI. To the insurance company, you will be seen as overweight, even though you may have a very low body fat percentage.
Health I.Q. knows that muscle is more dense than fat. It knows how often you go to the gym, and will be sure you don’t get penalized for your high BMI.
Instead, Health I.Q. will offer you cheaper rates because you workout.
During your application process, Health I.Q. will want to know how you manage your health. This is done through the classification of individuals in the following categories:
and several more
Health I.Q. has special rates for those who adhere to those specific diets
They have a whole page dedicated to showing why Vegans should get lower insurance rates. They have a lower risk of hypertension, lower risk of diabetes, lower risk of certain types of cancers, and much more.
What to Know About Health I.Q.
Currently, Health I.Q. has relationships with over 30 A+ insurance carriers. These are some of the biggest companies out there, including:
These are the standard partnerships they have built.
In addition to these, they have also forged special relationships with three companies:
With these three companies, Health I.Q. customers are able to get an ever higher rating than an average customer. A better rating means lower rates.
Health I.Q. uses your quiz answers and activity levels to secure special rates from those companies and picks the lowest one.
There are some unique aspects of Health I.Q. which are different from a normal insurance company.
One of those is that you won’t have to take a medical exam if you’re getting less than $500,000 worth of coverage.
This is a much higher limit than several other companies.
Health I.Q. justifies this limit by verifying your level of activity and by you taking the quiz.
Any company can make outrageous claims, but Health I.Q. seems to have the numbers to back up its own.
According to the company website, 70% of Health I.Q. clients who are considered “health conscious” are put in the top rating class for insurance. Not only are these customers getting better rates classes, but they are enjoying savings of anywhere from 3% to over 40%.
Get A HealthIQ Quote!
How to Use Health I.Q.
Getting Health I.Q.’s cheaper rates is pretty simple.
Go to the website, you can get started by filling out the form at the top.
Provide your basic information including, name, address, coverage amount, nicotine use, height, and weight.
After the basic info, you’ll need to give some more specific information, like whether or not you have had any serious health problems or driving violations.
After that, you’ll take the Health I.Q. quiz. The Health I.Q. questions are going to be based on your lifestyle. If you said you’re a swimmer, the questions will revolve around swimming. If you picked weightlifting, then you will be asked about proper form and how to avoid injuries while weightlifting.
While you’re taking the quiz, you’ll see a bar at the top. For every question you get right, the bar fills up and gets close to the “elite” category. You need to answer enough questions correctly to fill up the bar.
After the quiz (which is about 20 questions), you need to do some groundwork. One of the Health I.Q. agents will give you a call in 24 hours. Before then, you need to verify your workouts. If you’re a runner, you probably use a smartphone app to track your runs. You will need to take some screenshots of your mileage and speeds and send them to Health I.Q. All you have to do is email them those pictures. A Health I.Q. agent will walk you through the process.
Within a few short minutes of talking to an agent, you’ll be able to see their special rates, as long as you qualify.
Pros and Cons
Possible Lower Rates
Rewarded for Healthy Lifestyle
Access to 30+ Carriers
Additional Step in Life Insurance Process
Health I.Q. Quiz can be Difficult to Earn “Elite” Status
If you live a healthy lifestyle and want cheaper life insurance, it doesn’t hurt to take the Health I.Q. quiz.
It only takes a couple of minutes, and it could secure you some serious savings on your life insurance policy.
It’s an added step in getting life insurance, but the Health I.Q. agents make the whole process simple and easy to understand.
Even if you don’t qualify for one of the special rates, it’s well worth a few minutes of your time to find out.
Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Most of us know the importance of keeping a budget. These tips can help you stick to one.
Budget: It’s the word we love to hate. Most of us understand the importance of keeping a budget, but for a variety of reasons still haven’t found the time or energy to actually implement one. The purpose of a budget isn’t to create a complex and lengthy document, it’s to help control spending and maximize savings to ensure financial security. Keep in mind, there isn’t a one-size-fits-all budget; each individual and family is unique, and their budgets should be equally unique.
Get started on your budget by following these four guidelines.
1. Know What You Earn Vs. What You Spend
It doesn’t matter if you’re new to budgeting because all budgets start with knowing how much money you earn as opposed to how much money you spend. All budgets are designed for the same reason: so you can live within your means on a month-to-month basis. Think of budgeting this way – if you spend more than you earn, you may end up in debt, or have to dip into your savings. Spend less than your income and you get to save money. Put a few months of savings together as a result of your budgeting efforts, and you may end up with a little extra cash.
2. Create a “Zero-Based Budget” Plan
Once you have a better understanding of how your income stacks up to your expenses, it’s time to establish your budget. One simple method is called “zero-based budgeting” in which every dollar earned and spent is tracked for an entire month. Add up all your expenses including your rent or mortgage, food, cell phone bill, cable and internet, and compare them with your income for the month. The goal of the “zero-based budget” is to have zero dollars left over. Keep in mind that the purpose of creating any budget is to help you reach your financial goals.
3. Make Savings a Priority
At first, making savings a priority may be the most difficult part of budgeting. However, it will also make the biggest difference down the road. A simple habit of putting away money before spending ensures you won’t spend more than you earn, and allows you to contribute to retirement funds, rainy day funds, future vacations, car purchases and a variety of other things. When you are ready to start saving, you should consider an online bank such as Discover Bank. Online banks may allow you to save more with competitive rates because their overhead expenses are much lower. It’s also a good idea to consider a bank that offers a variety of products including savings, certificates of deposit (CDs), and money market accounts so you spend less time managing your money because it’s all in one place.
4. Be Flexible
Your budget isn’t going to be perfect. Unexpected expenses and emergencies happen to all of us, more frequently than we’d like. So don’t be unrealistic with your expectations. Understand that changes in your budget will happen, and they’ll happen frequently. The important thing is that you remain flexible and maintain your “zero-based budget”. For example, let’s say your car is having problems and you need to take it to the mechanic; you may need to cut back on your recreational expenses in order to cover the repairs.
This isn’t an exhaustive budgeting list, but it’s a good starting point. Remember that your budget is unique to you, so do what works best for you and your family. The most important thing is that you implement the budget; you won’t regret it.
If you are trying to get out of debt, there is a lot of discussion as to how you should pay off your debts. Some experts say it should be paid off by the lowest balance and others say the higher interest rate? While there is not a “right” way to do it, I will share what we did to get out of debt and the reasons why.
First of all, let’s talk about credit cards and why it is not good to carry a balance. When you owe on your credit cards, your interest keeps compounding and that increases the amount you owe. Here is an analogy for you:
If you have a large fire going and dump a cup of water on it, you will do nothing. You might make the flames go down for a minute, but they will return. At this point, you need to figure out a way to really tackle it and get it under control.
However, if you dump a bucket of water on that same fire, you may not put it out completely. But, you will probably make it smaller. If you throw two or three more buckets it, you can actually extinguish it.
The same is true with credit card debts. When you make small, minimum payments you are throwing cups of water on a fire. However, if you send in a larger amount, you can actually pay it off much more quickly. But of course, you can’t send in larger amounts to everyone at once, so you have to prioritize.
WHICH DEBT TO PAY OFF FIRST
There is a lot of discussion about paying down higher interest rate cards first or those with a lowered balance first. There is no right or wrong answer, as it will be different each time you talk to another expert.
Both options are listed below. Read through them carefully to determine which is the right one for you.
FOCUS ON THE HIGHEST INTEREST RATE
Many financial experts will recommend that you list your debts in order of the interest rate, from high to low. Then, focus on paying on the one at the top of your list first. They recommend this method as the one with the highest rate is the one which usually will cause you the most financial stress.
Your monthly payment is around 4 – 5% of the balance That means if you pay the minimum payment, 95% of what you pay is strictly paying interest.
For instance, if your rate on a $1,000 loan is 15% and you pay $40 each month, it will take you 5 1/2 yrs to pay it in full! OUCH! During that time, you will have paid out more than $360 in interest alone – double OUCH!! That makes your $1,000 purchase now $1360 (and chances are what you bought has not appreciated in value).
Start by making larger payments on the loan with the highest rate. Continue making the minimum payments on your other debts. Once you get the first debt paid in full, roll the amount you were paying on that card to the one with the next highest rate.
The only downside to this method is that it may take you a long time to pay the balance in full. That might lead you to get discouraged – but don’t let it! If you find that you feel this way, perhaps you should consider paying the lowest balance first, which we explain next.
FOCUS ON THE CARD WITH THE LOWEST BALANCE
We followed this method when paying off off our debts. It was the right answer for us and countless others. The reason it can work better is realizing faster progress.
To begin, list your debts by the least amount owed down to the greatest. Toss any additional funds you can at the bill with the lowest balance. Continue making your regular minimum payments to the other debts on the list. As you get this each debt paid off, roll those payments to the next one and continue until all debt is eliminated.
You may end up accruing more in interest, but you might be better off psychologically. When you can see that you are making progress, you will be more likely to continue and not be as quick to quit otherwise.
Paying down debts in this method allows for short-term, attainable goals and that can make all of the difference.
EITHER WAY IS THE RIGHT WAY
Whichever way you decide to tackle those credit cards, it is good that you are doing just that. While there is no such thing as good debt, credit card debt is the worst debt. One day you will be able to live a debt free life — and it will be the most amazing feeling in the world!
If you are just getting started trying to get out of debt, catch up with our other steps shared previously on our How To Get Out Of Debt Page.
When you’re working with investments and trying to make sound decisions, it’s best to use hard data and publicly available information instead of relying on subjective feelings like your instincts. Your emotions may easily be swayed, but it’s hard to argue with numbers and facts.
Fundamental analysis, or FA, is one method that can help inform your choices regarding whether or not a company makes a good investment option. FA isn’t just for finance experts; it can help you make independent decisions about your own investment portfolio. Below, we’ll explore the fundamental analysis basics, how to practice this method, and explore other investment tips.
What is Fundamental Analysis?
Fundamental analysis is a way to determine a security’s fair market value by examining different financial and economic factors. The state of the economy, industry conditions, or the effectiveness of a company’s leaders can all influence fundamental analysis.
The main purpose of FA is to decide whether or not a security’s current pricing is overvalued or undervalued. Ideally, you’ll be able to find a company whose value is greater than or will be greater than its current market value.
Understanding Fundamental Analysis
Fundamental stock analysis helps potential investors figure out whether a security’s value makes sense within the market at large. FA can be conducted on a micro or macro scale in order to choose securities.
Analysts typically start from a wider perspective, such as current economic conditions, and then hone in on an individual company’s performance. Variables like interest rates, the state of the economy, and the bond issuer’s credit ratings may all come into play. Basically, any public data can be used to evaluate a security’s value – but we’ll dive specifically into what kinds of data and information fundamental analysis evaluate below.
Quantitative Fundamental Analysis
When you start to investigate a company to determine its potential for growth and overall health, it’s essential to get a good read on the underpinnings of the business. Of particular importance is understanding the financial statements of a company. This is what’s called quantitative fundamental analysis since you’re focused on the hard numbers a company provides.
A business’s income statement, balance sheet, and statement of cash flows are three large indicators that determine the overall health and success of a business.
Income statement: The income statement shows a company’s profit after expenses are taken out. It also reveals a company’s performance within a specific time period.
Balance sheet: A balance sheet reveals business assets compared to its liability and shareholders’ equity. A balance sheet follows this simple equation: Assets = Liabilities + Shareholders’ Equity. Assets can be cash, buildings, inventory, or equipment.
Statement of cash flows: The statement of cash flows shows where money comes in, goes out, and for what purpose. In most cases, a statement of cash flows focuses on the activities below:
Cash from investing (CFI): Cash used for investing and from the sale of other businesses or assets.
Operating cash flow (OCF): Cash made from business operations.
Cash from financing (CFF): Cash received from borrowed funds.
Qualitative Fundamental Analysis
Numbers don’t always give you the full picture. That’s where qualitative fundamental analysis comes in to help. For example, part of your qualitative investigation might come from a company’s annual report. In an annual report, a company’s leaders will explain the company’s performance and mention a strategy for the future.
Qualitative information might also come from the company’s brand name recognition, patents, the performance of key executives and leaders, and proprietary tech. Here are some basic fundamentals you’ll want to pay attention to conducting a qualitative analysis:
Business model: Although this seems straightforward, it’s important to look at how the company makes its money (aka the business model). Does it sell a main product or mostly coast by on fees and franchising?
Competitive advantage: A company can do well for a while based on its own products and services… until another company comes along and does it better. That’s why it’s incredibly important for companies to show a competitive advantage and be able to maintain it over the long term. Need an example? Think about the staying power of large corporations like Coca Cola or Johnson & Johnson.
Leadership: There are a few experts that believe management is the most important part of the decision to invest in a company. And if you think about it, it makes sense. Even a company with a million-dollar idea can tank under the influence of incompetent leadership. With that said, it’s hard for small-time investors to go in and meet managers or vet them in an interview. Instead, you can look through the company’s main website to read about a company’s top executives. If you want to go a step further, you can even investigate board members and execs’ performance at their past companies.
Corporate governance: Corporate governance refers to the policies that guide the relations between management, directors, and shareholders. You’ll find references to these policies in the company charter. The rules and bylaws governing how a company does business are important to know. Why? Because it’s important to put your money into a company that’s ethical and fair. Make sure to note any sections referring to management and shareholder interests. As a potential shareholder, you’ll want to see transparency and fairness as guiding principles.
Qualitative information is more abstract, but it’s not any better or worse than quantitative information. In fact, qualitative indicators provide analysts with a way to put the numbers in context and can provide insight into the business’s future. Most fundamental analysts use a combination of both qualitative and quantitative data to arrive at their conclusions.
So, what does an analyst do with the information after they’ve conducted a fundamental analysis of a stock?
If an analyst finds that a stock’s value is more than the stock’s current price, they might publish a “buy” or “undervalued rating” for the stock.
If an analyst finds that a stock’s value is lower than the current price, they might publish a “sell” or “underweight rating” for the stock.
Investors who follow analyst recommendations use them to buy stocks with good ratings since they deem them to have a higher chance of growing in value over time.
Examples of Fundamental Analysis
There are different approaches analysts use for fundamental analysis but they can be placed into two main buckets: top-down analysis and bottom-up analysis. The first, top-down refers to an approach that takes in a larger perspective of the economy. That view gets narrower, from the economy, to the sector, to industry, and then whittled down to an individual company.
Bottom-up analysis starts with a particular stock and then zooms out to consider all the other variables that influence its market price.
The tools that a fundamental analyst uses depends on what asset is being traded. The tools that can be used in fundamental analysis can be found below.
Fundamental Analysis Tools
Fundamental analysts use a variety of tools to measure the value of a stock. Although an analyst might not use all of the ratios and calculations below, these represent common metrics you might find useful.
Return on equity: To get this metric, divide the company’s net income by the shareholders’ equity, this will give you the return on equity. Return on equity is also referred to as a company’s return on net worth.
Dividend yield: This is a stock’s yearly dividends in comparison to the share price, expressed as a percentage. To get the dividend yield, you need to divide dividend payments per share in one year by the value of a share.
Dividend Payout Ratio: This ratio shows what was paid out to the shareholders in dividends compared to the company’s net income. It shows you a security’s retained earnings.
Price to Book Ratio (P/B): Also referred to as price to equity ratio, this ratio compares a stock’s book value to its market value. To get this ratio, you can divide the stock’s most current closing price by last quarter’s book value per share. The definition of book value is the value of an asset, as it appears in a company’s books.
Price to Sales Ratio (P/S): The price-to-sales ratio tells what a company’s stock price is as compared to its revenue. It’s also referred to as the PSR, sales multiple, or revenue multiple.
Projected Earnings Growth (PEG): PEG is an estimate of what the one-year earnings growth rate of the stock will be.
Price to Earnings (P/E): This ratio compares the current sales price of a company’s stock to its per-share earnings.
Earnings Per Share (EPS): The number of shares or the earnings can’t tell you very much about a company isolated by itself, but if you put those numbers together, you get an EPS or Earnings Per Share. EPS gives you an idea of how much a company’s profit is assigned to each share of stock
How to Improve Your Understanding of Fundamental Analysis
Do you want to ensure that you have a concrete understanding of fundamental analysis? Consider giving yourself a homework project like the one below to practice your skills.
Follow two stocks for three months
Opt for one stock that you like and one that you don’t. Make sure you examine the fundamentals of each and try to make a choice about each stock according to the information you gather on those metrics. Take note of the progress of each stock pick and evaluate performance from the selection day up to the three-month mark.
Use a checklist
Now it’s time to get out the pencil and paper to compare hard numbers. Those ratios and other important numbers will comprise a checklist that you can use as your cheat sheet to evaluate a stock or security.
Figure out your benchmarks
When you analyze stocks that you’re interested in tracking, use another stock in the same industry to act as a benchmark. What’s a benchmark? Benchmarks serve as a standard way for analysts to study the stock you’re evaluating.
But remember, not all stock comparisons make sense – you’ll need to compare similar companies. Comparing Google with a heavy industry stock like Steel Dynamics Inc. won’t yield any useful information for you. Make sure you use ratios and comparisons among similar companies, industries, or sectors. For example, comparing JPMorgan Chase and Bank of America would potentially reveal usable information for you regarding each company’s health and value.
Pros and Cons of Fundamental Analysis
FA helps you better evaluate a stock within a broader context. Although this stock analysis method has many benefits, it also has a few drawbacks to consider as well. Below, we’ve laid out a few key pros and cons:
Pros of Fundamental Analysis
Easy to gather data: FA uses lots of publicly available data, which is fairly easy to acquire and analyze.
Provides more relevant context: Knowing you’re putting your money into a company with a healthy financial background is typically a good idea.
Gives you peace-of-mind: Although a company that performs well and has strong business underpinnings doesn’t guarantee success, it can still help you make a sound investment decision for the long-term.
Cons of Fundamental Analysis
Time-consuming: Each company needs to be analyzed and studied independently. Depending on what data you’re gathering and what numbers you’re crunching, this can be a significant investment of your time and effort.
Unique datasets necessary: Because fundamental analysis involves public information, it’s fairly difficult to find unique datasets that have limited publication to gain an edge.
Short term “blindness”: Short-term volatility can’t be predicted by past financial statements.
Fundamental Analysis vs. Technical Analysis
When you start researching fundamental analysis, you’ll likely see another analysis method come up in your search results: technical analysis. Technical analysis is based on only a stock’s price or on its volume data. Instead of predicting the future, technical analysis, or TA, attempts to figure out price patterns.
Technical analysts use chart patterns, trends, price, and volume behavior to identify stocks with the greatest chance for growth in value. It doesn’t take into consideration the business’ health or the broader economy.
The main difference between fundamental and technical analysis is that fundamental analysts want to figure out the difference between a stock’s intrinsic value versus its current market price. Technical analysis is focused on price action, which points to a stock’s supply and demand pattern. While this isn’t always the case, FA is often used for long-term investments, and TA is typically used for short-term investments.
The debate over fundamental and technical analysis is ongoing. Fundamental analysis can be more helpful for figuring out long-term investments while technical analysis is better served for short-term trading and timing the market. You can use both to plan investments over the short term and long term.
Top Research Tools for Fundamental Analysis
Finviz: Finviz allows you to screen stocks based on fundamental parameters you set. You can use the free version to access basic information or upgrade to the subscription model for more comprehensive access.
TD Ameritrade: TD Ameritrade is a very popular online brokerage with a huge section dedicated to stock research. You can use the site’s stock screener to filter stocks based on the fundamental benchmarks you choose. You’ll also be able to peruse other types of research like investing newsletters from major news sites.
Yahoo Finance: Yahoo is one of the oldest sites that shows investors stock data. You can use the search bar to explore different data sets. Explore a company’s historical data, financial reports, and statistics.
Fundamental Investing Tips
Every investor has their own strategy for investing in stocks. Fundamental analysis can be a great method to use, but it comes down to personal preference and your overall financial objectives.
For example, if you’re interested in steady growth, then you’d probably look for a company that would make a sound long-term investment. So, you’d focus on the fundamentals to evaluate what company to invest in, based on how the business is expected to grow over a longer timeline.
For value investors, the focus is on identifying a stock that makes a good buy. In turn, you’d use tools like dividend yields and low P/E ratios which show strong fundamentals within a market that undervalues it.
When you’re first getting started with fundamental analysis, focus on the basics in the beginning. It’s very easy to get overwhelmed when faced with a veritable tidal wave of ratios, figures, and numbers. Instead, focus on simpler numbers like profits and earnings or revenue to determine whether or not a stock makes a good investment. These fundamentals don’t guarantee future earnings, but it’s a way to “hedge your bets”. Once you feel like you’ve built up experience with looking at basic numbers, you can jump into more complex figures to evaluate your stock options.
It’s also a smart idea to think about what you’d gain from working with a professional advisor as opposed to working on your own. If you’re a brand new investor, you can use an online brokerage to make stock trading lower cost and user-friendly.
Wrapping Up: Learning Fundamental Analysis, One Stock at a Time
Investors use a variety of methods to evaluate whether a stock makes a good investment choice – fundamental analysis is just one of them. Although you can practice this approach on your own, you might find more success working with a financial advisor that can help you tailor your investment strategy to better align with your money objectives.
Here are a few main takeaways to remember before putting money in an investment and to help you avoid beginner investing mistakes:
Know your objectives: Make sure that you understand your objectives before you get started. Do you want long-term growth? Are you looking for short-term gains? Are you focused on value? How long will you hold the stock?
Decide on DIY or use an advisor: Do you feel confident in your knowledge and ability or will you rely on an expert (or robo-advisor) to help you plan your investment strategy?
Take care of other financial priorities: Do you have enough money to portion out for an investment, or are there financial priorities that demand your attention first? For example, you might want to pay off any high-interest credit card debt before funneling money into an investment since any returns might be negated by high interest rate fees from your debt.
Don’t forget all investments are a risk: All investments represent a risk, although it’s true that some investments are riskier than others. Even if you conduct an incredibly thorough fundamental analysis, it doesn’t provide you with any foolproof guarantees.
If you want to better comprehend how your investments will impact your overall finances, you may want to consider using Mint’s investment calculator. This online financial calculator can help you understand what gains you can expect over time. By entering in a few key numbers, you can generate your own investment goals, forecast growth, and look for potential opportunities to increase your portfolio’s success.
Want to learn more about investing and investment strategy? Both SEC.gov and investor.gov are good resources to help boost your investment comprehension.