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Financial article essay Essay

1. Financial planning is a means of managing one’s money by making investments, reducing tax liability, and saving for retirement. My first financial goal is to save enough money to buy a home, then to rent it out in order to purchase another home in which I would live. In order to do that, I will need to establish credit and maintain a high, if not perfect, credit score.

2. I would prefer to have a fixed interest rate on my mortgage. An adjustable rate means that my rate will not stay steady; rather, it can fluctuate with the market either up or down. A fixed rate won’t go down when the market demands it, but I can refinance if the new interest rate is low enough.

3. The only advantage to renting one’s home is that a person is not committed to live in a particular area. However, they are paying rent on a place they don’t own, much like leasing a car. It is better to own a home. Not only does the owner receive significant tax credits, but they establish credit, have collateral for a loan, and are putting equity into the home.

4. The main advantages of using credit

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are: being able to get things one cannot afford, establishing credit for future purchases, and leaving cash available for emergencies. The main disadvantage of credit is that there is a danger of abusing it – taking on too much credit and not being able to pay it back. Once a person’s credit is damaged, it is a difficult process to rebuild it.

5. Savings accounts usually earn less interest than a certificate of deposit. In the short term, a savings account is preferable because withdrawing money from a certificate of deposit early can lead to penalties. In the intermediate perspective, one should choose based on how likely they are to need the money; in the long-term, the certificate is preferable because of the higher interest. A mutual fund is an investment made by a large number of people, and the money is invested in stocks, bonds, etc. A corporate bond is used to raise money for a company. Both are good for long-term investments, but do not yield the interest for a short-term or intermediate situation.

6. I chose Time Warner (stock symbol: TWX). Its 52-week price went from 15.70 to 23.15.

7. A savings program is the best way to have money for emergencies and to take advantage of opportunities. However, the program needs to go through a financial institution and not be conducted as a private venture between individuals (often, these are pyramid schemes).  Retirement funds should not be put into a savings account because it won’t earn much interest. Rather, it should be contained in an investment program.

8. Whole life insurance offers death benefits at a fixed premium – there is little flexibility in premiums or investments. Variable life offers a death benefit and the possibility of withdrawing funds. Universal life offers a death benefit with premium flexibility. Finally, universal variable life offers a death benefit with flexibility, but the policyholder must manage the account.

9. Estate planning is the process of dividing up one’s assets in the event of death. The goal is to minimize tax liability and reap the largest benefit for the beneficiaries. It is essential for those with funds to leave in a will, not as essential for younger people or those who do not have money or property to leave behind.

10. At the beginning of the course, I was mostly concerned with how to go from one paycheck to the next. Now, I realize that in spite of not having a great deal of money, I can maximize my potential by keeping a good credit score and owning property. I plan to establish good credit, save money via investments, and purchase a rental property.

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