Annuities can be appealing investments to the right investors, but like any investment vehicle, there are advantages and disadvantages to using them. Annuities are not complicated and are pretty straightforward when calculating earnings, making them a popular choice among investors. However, some of the particulars of the investment vehicle means that it could end up costing the investor, and their estate, much more than they ever receive in benefits. Here are some of the things you should know about the advantages and disadvantages to investing in annuities.
Types Of Annuities
There are two basic types of annuities to choose from. Immediate annuities begin paying you as soon as you purchase them and can be set to distribute payments over a set amount of time, typically 5 to 20 years, or to distribute payments for the remainder of your life. The rate of return on immediate annuities depend on a number of factors, including your sex and your age when the annuity was purchased. Deferred annuities delay payments for months or years, so contributions to can be made in several payments instead of one lump sum.
There are also two ways used to calculate the earnings from the annuity. Fixed annuities have earning rates that are guaranteed for the life of the annuity, resulting in regular payments of the same amount for the entire term. Variable annuities have earnings that fluctuate based on the performance of the underlying investment portfolio, which means that any payment could be higher or lower than the one before. However, variable annuities typically have a guaranteed minimum payment, so the investor can depend on getting at least that amount in each payment.
Advantages To Investing In Annuities
Annuities are an attractive investment vehicle because the interest and earnings grow on a tax-deferred basis. If an annuity is scheduled to begin payments after you retire, the tax savings can be substantial because your income and your tax rate will be lower. If you have maxed out your contributions to your 401k or IRA retirement account, you can save additional money for your retirement years by investing in an annuity.
Disadvantages To Investing In Annuities
The biggest disadvantage to investing in annuities is that any undistributed proceeds present after the death of the annuity’s owner revert to the insurance company, not the beneficiaries of the annuity owner’s estate. While some annuities will allow you to name a beneficiary, that beneficiary is bound by the same terms that you agreed to when investing in the annuity. Your beneficiary will also lose the tax advantages because inherited annuities are taxed on both interest and principal. If your beneficiary also dies before the end of the term, the undistributed proceeds revert to the insurance company.
Finding the best price when shopping can be an arduous task. Reviewing ads, comparing prices and clipping coupons can take hours of time that you just don’t have with your busy life. Fortunately, there are a number of great shopping apps available that can help you save money on the majority of your purchases. Here are some of the best shopping apps to check out.
Amazon has its own budget-shopping app called Amazon local that offers deals, discounts, and coupons at a wide variety of local retailers and national chains. The app allows users to view and purchase deals from the retailers you are interest in and you can set an alert to receive a notice when a favorite retailer posts a new deal. The purchases are guaranteed through Amazon, giving customers another incentive to discover new businesses in their community.
Coupon Sherpa is one of the most well known shopping apps available today. The app offers consumers hundreds of coupons from retailers and restaurants that can be stored on and used from your phone. The app also includes grocery coupons, which are often missing from other coupon apps. Show the coupons you find to a store’s cashier at checkout to save a considerable amount off of the price of your purchase.
ShopSavvy is a price comparison app that allows you to scan the bar code of a product and search for its lowest price amid various local stores and websites. If you find a lower price at a local store, you can use the app to call the store, get directions to the store, or visit its store website via ShopSavvy. The app also provides alerts for when a new deal for a wanted item is found. All of the information is updated from various retailers and brands in real time.
SnipSnap is a coupon-clipping app that allows you to keep all of your coupons at your fingertips on your smartphone. SnipSnap recognizes the text and images on printed coupons that you take a picture of and turns them into mobile-ready offers that can be shown to a store cashier. The app can also be used to search a database of coupons and search offers from various retailers. You can also post pictures of the coupons that you have found and use coupons found by other shoppers.
Although late payments are sometimes unavoidable, you try to deal with it as best you can. You send out letters or emails, or try to contact the customer to know exactly what is going on. You even extend payment schedules and make leeway for customers who are having financial difficulties. But it cannot be denied that late payments are sometimes the consequence of a bigger issue that results in absolute non-payment.
If you have done all you can and have not received payment from a customer, what else can you do? Following is a guide to dealing with non-payment to prevent cashflow issues on your end as well.
Before you take more stringent measures
First, before you decide to take further action, you must ascertain whether you have sent out the proper invoice. Does the invoice have the right information, such as the customer’s exact business name? Also, you have to find out whether the customer has in fact received the invoice. This is where talking to the customer becomes of prime importance. Once you have contacted them, ask them if they have any questions about the invoice. If you have been able to contact them and they promise to pay you at a later date, then you may not need to take action yet.
Send a letter to your customer
The next step when you have failed to reach your customer is to send them a letter informing them that you will be availing of your right to charge them for interest. Let them know that this interest will be 8 percent over the base rate of the Bank of England. In the letter, also state that you will be asking them for compensation for the cost of debt recovery as confirmed under the legislation for Late Payment. It would also be good to let them know that you will be considering further legal action if they still do not pay. This letter is a good way to prompt your customer to make the payment, or at least contact you.
Do not let the debt grow bigger
Sometimes, we end up still supplying a customer even though they haven’t made any payment, simply because we do not want to lose their business. But the best thing to do for non-payment is to stop sending any more supplies to the customer until their debt is paid. If your customer values your product or service, this may get them to pay. If not, then you know that you are better off without this customer.
Check the state of the customer’s business
If you have done all of the above and have still not received payment, it would be a good time to weigh your options. Check the status of your customer’s business – is it in financial difficulty or does it look like the business will close down? If this is the case, any further steps or legal action may not be worth it. Weigh the time and effort you will be spending – as well as the cost – of further legal action against the size of the customer’s debt.
Dealing with non-paying customers is a reality for many businesses. But if you do not want these non-payments to affect your own business cashflow, you can make sure to always have available cash by taking advantage of cashflow solutions such as those provided by Ultimatefinance.co.uk, where you can draw funds based on your unpaid invoices through factoring or invoice discounting.
Image courtesy of Serge Bertasius Photography/ FreeDigitalPhotos.net
Purchasing a home for the first time is one of the most significant financial decisions you will ever make. Home loans are offered at alternate lending rates, so it is important to shop around for the right deal and options for your lifestyle and circumstances. There are three different type of home loans: fixed rate, variable or split loans.
Interest rates and repayments are locked in place for a designated time period (typically between one to five years). The fixed rate is generally higher than other mortgage rates, but the certainty of the loan enables you to budget easier. This type of loan reverts to a variable rate at the end of the allocated time period. Opting for a fixed rate mortgage might mean making extra repayments isn’t possible. This loan is usually accompanied with a fee for a break free.
Australia’s most popular type of loan, the rates are generally lower than fixed home loan rates. The interest rate together with your repayments will vary (both rising and falling) throughout the duration of the loan. This loan usually allows you to make extra repayments as you go. The negative is that your lender may increase the loan rate at any time.
This loan enables you to hedge your bets both ways. You fix a portion of the loan to a set rate and allow the remaining portion of the loan to fluctuate with the market. While less flexible than a fully variable rate loan, your lender with usually allow you to make extra repayments on the variable rate portion. This type of loan will benefit if interest rates go down on the variable portion of the loan. You may still be charged a break fee for the fixed rate portion.
Features offered by lenders are also key when factoring in the type of payments that will work in conjunction with your lifestyle and needs. Below are a list of mortgage features to consider:
Interest only repayments
This option allows you to pay off the interest portion of the loan only for a set period, typically one to five years. It won’t save you money in the long run because you won’t be reducing your principal loan. You will still be required to pay off the original amount you borrowed after the interest only repayment period comes to an end.
Weekly or fortnightly repayments
Some lenders allow you to make your loan repayments fortnightly or weekly as opposed to the typical monthly repayments, saving over time because interest does not have the chance to accrue over the month.
Having a home loan with this feature allows you to make larger sums of repayments intermittently or regularly to pay off your mortgage faster, saving in interest payments in the long term.
It is important to find a home loan with all the features and option that suit your individual lifestyle and needs.