Personal Finance guide

If you are working in the corporate world, producing a letter seems to be a very simple task for you. However, writing a legal binding letter is not as easy as you expect. For people who intend to negotiate with their creditors for debt reduction, it is indeed important for them to use the right techniques to hammer out a perfect proposal so that they are able to reduce their total debt at the maximum amount and at the same time, protect their credit score.

Here are some useful tips which can guide you to organize your letter systematically.

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Many people have the wrong assumption that once a person dies, it is a “full stop” to his or her credit card debt. In actual fact, it is not that simple. His or her family may have a hard time dealing with the debts after he or she passes away.

Who will actually be responsible for the debt when you die?

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During financial hard times, many creditors start to accept debt settlement as they foresee that their debtors have lost the ability to pay back their outstanding. However, it is important for all the people in debt to understand the fact that not every settlement letter you send to your creditors will be accepted. No matter how good your writing skill is, there are circumstances where your proposal will be rejected. Let’s take a closer look at the situations below:

• If your past due is only one or two months
• If you don’t state the financial hardships you are facing currently
• If you fail to provide supporting documents to prove your financial difficulties, for instance, letter of retrenchment from your employers, medical bills, etc. In general, creditors do not entertain any settlement request if they find that the debtors are just looking for discounts. You are required to prove to your creditors that your requests are “genuine”.
• If your proposed settlement amount is too little and it is hard for the creditors to justify
• If your original creditors have sold your accounts to debt collection agents
• If your creditors find that you still have the financial ability to pay back in the near future as you have fixed monthly income or other fixed assets

Continue reading ‘Will Your Debt Settlement Letter Be Rejected?’ »

Global Credit Crunch – UK Economy

The recent credit crisis which initially started to show its colors during the end of 2008 is continuing to play the spoilsport in the growth of world economy. It’s been seven to eight months when we first heard of Lehman Brothers filing for liquidity. The root causes of present credit crisis could be summarized as the improper policy of successive governments that failed to check the financial institutions and mind gobbling schemes offered by various banks and financial institutions. The major causes could be termed as excessive liquidity, excessive lending, excessive leverage and excessive risk taking by the banks and other financial institutions. The global credit crisis posed a greater threat to UK Economy. It is estimated that almost 20,000 people will be losing their jobs alone in London’s Financial Service Industry. The overall financial solutions to UK clients thus would be greatly affected. (CEBR, 2008) Therefore it is necessary to find necessary solutions to various aspects of present global credit crisis to strengthen the UK economy.

Implications for Borrowing

The global credit crunch has had the attention each and every human being for bad reasons. The present crisis has effected in job lay offs around the world mostly in the developed countries like USA, the UK, Japan, etc. As mentioned earlier, one of the root causes was excessive lending by the banks to the customers. In other words, the banks and other financial institutions lured the customers to borrow loan without any hassle such like low interest rates, 24 hours approval of loan, pay the installments after one year, etc. Such were the schemes offered by various banks to attract the wide range of customers mainly from housing sector. The banking authorities didn’t even bother to check the liability of the person to whom they are lending, whether the person was able to pay back the money.

The Bishop of London quoted in the Daily Telegraph that ‘it is becoming clearer how far we have been mortgaging our children’s tomorrow to fund our today, both financially and in our use of the finite resources of earth’. Looking at the past experiences of financial crisis occurred during the last millennium, it can be assumed that the process of borrowing from the financial institutions will be a Herculean task. The need to restore capital ratios and to recover the losses incurred, it is understandable the borrowers will have lesser flexibilities, less leverage, hike in interest rates and fees will soar at historical high. (John L. Moscione : p.6) The customers will have to face a strict scrutiny of their valuable documents before receiving loans as a process to identify previous lack luster performance by the bank officials.

Implications for Lending

The present crisis is the result of irregularities by the bank and financial institutions in providing loans to the customers without proper verification of their documents and checking the liability of the person. Excessive liquidity with the financial institutions was the foundation for excessive lending by the banks to rake in more customers. In a bid to acquire more customers, they offered lucrative schemes which were spontaneously grabbed by the seekers. Credit crisis was inevitable in view of real estate market boom in recent years which blew the bubble by way of irregular mortgages, unverified loans without scrutinizing the income or assets of the borrower. This facilitated borrowers to indulge in fraud and leveraging of accounts. Most of the loans were approved on the house mortgage which was another cause for real estate boom all over the world. Selling and buying of houses were on spurge, with rates touching the all time high.

According to statistics from the Bank of England, total net lending to individuals in January 2009 was £1.1 billion which was lower as compared to December 2008 that stood at £2.1 billion. The total net lending secured on dwellings was £0.7 billion in January 2009 as compared to £1.8 billion in December 2008. It is learnt from the facts and figures derived from Bank of England, that lending has drastically come down as a result of present credit crisis. Stern measures have been taken by the financial institutions before the lending process to any individual.

Effect on the regulatory environment

The credit crunch would not have been possible without the golden hand of irresponsible government authorities. Prominent economists did already warn the federal governments in 2007 itself about the coming monster, but their warning was not taken seriously. It all started with New Century Financial, specialized in sub-prime mortgage, filed for bankruptcy in April 2007, which led to collapse of many financial institutions around the world. Aftermath of credit crisis, different Federal Reserve stressed on changing the monetary policies to bail out the financial institutions from the crisis. The UK government announced a temporary cut in the level of VAT to 15% from 17.5%. The Bank of England slashed interest rates from 4.5% to 3% – the lowest level since 1955. The UK government announced plans to pump billions of pounds of taxpayers’ money into three UK banks in one of the UK’s biggest nationalizations. Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them. The UK government launched the bail out plan by extending £400 bn to eight of the UKs largest banks. The credit crunch has affected the government and Federal Reserve policies.

Effect on profitability and long-term viability

Using the U.K implications, it’s prospected that the wider U.K economy will have a slower prospected growth. The consumers, like those of the U.K, are experiencing hard times over the entire globe. The resulting low growth rates if the economy may lead to high taxation rates as well as inflation in the process of the government’s seeking to cover deficits of tax revenues. Those governments with big government expenditure plans are bound to experience the same.

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Most of the Banking activities are derived from the above definition. Apart from the activity of accepting and lending money, banks are allowed to perform certain activities which are supplementary to this business of accepting deposits and lending, Banks are allowed to perform certain activities which are ancillary to this business of accepting deposits and lending. A bank’s relationship with the public revolves around accepting deposits and lending money. Another activity which is assuming increasing importance is transfer of money – both domestic and foreign – from one place to another. This process is generally known as “remittance business” in banking phrase. Forex (foreign exchange) business is largely a part of remittance although it involves buying and selling of foreign currencies.

In short, a banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money, it is an institution where one can deposit and borrow money and take care of financial affairs.The first modern bank, named Bank of St. George was founded in Italy in Genoa in 1406.

Functioning of a Bank is among the more problematical of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather strictly. In India, the regulation traditionally has been very strict and at the same time NPAs are also of a very high order. The process of financial reforms, which started in 1991, has cleared the staleness but a lot remains to be done. The large number of policy and regulations that a Bank has to work with makes its operations even more complicated, sometimes bordering on illogical. Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, order or otherwise.”The law governing Banking Activities in India is called as “Negotiable Instruments Act 1881″. Following are the major activities of banks:

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Do you need and deserve a second chance financially? We have all made financial mistakes at one point or another in our lifetimes. And while some mistakes are short lived, other financial mistakes seem to follow us for years. In the event that you have financial issues with financial institutions, you may be unable to obtain crucial financial instruments such as checking and savings accounts through traditional channels. If this is the case, it may be time to explore how a second chance bank account can benefit you and your financial life.

What is a Second Chance Bank Account?

A second chance bank account is a checking/savings account offered to individuals who have been denied these same financial accounts through traditional banking channels. Higher fees are often associated with these bank accounts to provide protection to the financial institution offering to open an account for your personal or business use.

Why Do you Need a Second Chance Bank Account?

Sure; you could work on a 100% cash basis if absolutely required. But, consider the headaches associated with paying for utility bills, rent, automobile loans, insurance and cell phone bills with money orders each and every month. Every time a bill is due, you are required to take cash to a financial institution in order to exchange it for a cashier

Continue reading ‘Understanding the Basics of a Second Chance Bank Account’ »

Accurate job costing is one of the most critical tasks for managing job-based business like construction companies, professional services firms, and even nonprofits that are awarded grants. Many owners put it off because it seems too complicated or time-consuming. But if you’re serious about helping your business grow and prosper, it’ll help you:

- Analyze how each of your jobs us doing financially

Continue reading ‘How to Use QuickBooks for Job Costing: Setting Up Preferences and Items’ »

For smaller companies, changes in economic activity are especially unwelcome as SMEs are more susceptible and have less control over their business environment than do bigger enterprises. Every action the company, its customers or suppliers take in an uncertain situation, may create a risk to the very survival of its business.

In an economic climate such as our current one, the pressure on companies to reduce staff costs is overwhelming, especially as more companies face extinction. The first cutback business owners and managers tend to make, will involve reducing payroll as that seems to have a more immediate effect than do other measures. The danger however, is that in desperation, companies will make rash permanent decisions to save costs even when this results in such an unfortunate situation as under-resourcing. The consequence of this is that business opportunities from prospects or existing clients may be missed; administration gets behind, reporting gets delayed- all resulting in further unwelcome pressures on the business.

So why isn’t under-resourcing an option – or, technically not an acceptable option? There are many risks to having insufficient capacity to deal with current orders or potential increase in demand. The business opportunity that may be lost might well have provided the cashflow needed to eradicate the cut back in the first place. Also additional costs often arise through fines, penalties, uncollected debts and other results of not having enough manpower.

With this in mind, most businesses are in favor of an option that has become acceptable in today’s business world. Outsourcing and insourcing – entrusting another company with your finances and other strategic assets has become a viable lifeline, even an essential business model. The advantage is that companies can afford to plug the gap in staffing as and when required, usually on a flexible payment platform, and often at a lower cost than full time employment.

Continue reading ‘Gary Jesson Offers Some Advice On Outsourcing Your Admin’ »

How Do I Make Sure My Restaurant is Following IRS Tip Reporting Guidelines for 2010?

As a restaurant or bar owner, you know the importance of staying abreast of tip and tax related laws? How do you do that? Tips are subject to the full range of employment and withholding taxes. They are compensation received for services rendered by your employees.

Here are the Top 3 reasons to make sure you are up on the IRS guidelines for the Form 8027, “Employer’s Annual Information Return of Tip Income and Allocated Tips, with the IRS.”

1. You operate a business where food or beverage tipping is customary
2. you have greater than 10 employees
3. Your food or beverage is sold for consumption on the premises

For a complete guide on tip income reporting rules from the IRS, read the instructions for IRS Form 8027 and Publication 15, IRS Employer’s Tax Guide. You may find printable pdf versions of all of the publications listed here by going online and searching for “IRS form _______” with the form number in the blank space.

Here are some other Forms and Reports that you should consider using with your Restaurant payroll:

1. On the “Employee’s Report of Tips to Employers,” you, the restaurant owner, receives written proof each payroll period of the of employee’s tips.

2. FICA Tip Credit. IRS Form 8826. This tax credit is a “general business credit.” Your restaurant may be able to reduce federal income taxes by the amount of FICA (Social Security and Medicare) taxes paid to employees on certain tips. These FICA tax payments have to do with FICA taxes you pay on tips beyond those tips used as a “tip credit” to meet your requirement to pay employees the federal minimum wage. This is the 45(B) credit. In order to properly calculation this, it is a good practice to use an experienced restaurant payroll company who has the software and experience calculating payroll tips, and the review of an cpa with restaurant tax experience.

Now that you have details on Tax Tip Reporting, we want to give you practical resources to stay abreast of the payroll tax filing requirements.

Continue reading ‘Restaurant is Following IRS Tip Reporting Guidelines for 2010? + 5 Ways to Stay Informed’ »

Besides writing a debt settlement letter to your creditors or debt collectors, another way to communicate with them is through phone calls. If you think that you are better in verbal negotiation, you can start calling your creditors to bargain with them. Here are some important reminders you need to keep in mind. Make sure that you DO NOT take the following actions:

• Don’t call your creditors if you are not well prepared. If you haven’t got all your statements and details of debt ready, don’t start any conversation with them. Don’t propose anything before assessing your financial position. If you are not sure how much fund you have on hand, how do you offer any settlement amount?
• Don’t start your negotiation if you are not sure whether you are talking to the right person who has the authority to make decision
• Don’t contact the officer in charge if your emotion is not stable
• Don’t cry when you are telling your creditors your current financial situation. Don’t try to gain sympathy through crying
• Don’t yell to the officer if your offer is rejected. You still need to be calm and respect the creditors no matter what situation is as your main intention is to seek approval for settlement
• Don’t use the threatening words as the telephone conversation is recorded by the creditors most of the time
• Don’t review your saving account number until you receive written agreement from your creditors
• Don’t change your terms each time you call your creditors. It causes confusion and inconsistency. It will delay the negotiation process if you are uncertain with what you want.

Continue reading ‘Knowing the Don'ts For Debt Negotiation’ »