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Archives for April 2011

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What is a CD (Certificate of Deposit)?

A CD, or Certificate of Deposit, is a common fixed-income investment offered by banks and credit unions. CDs are more often used for short-term savings than long-term investing.

CD’s typically (but not always) have the following characteristics:

  • Fixed interest rate
  • Fixed term between one month and seven years
  • FDIC/NCUA insured up to $250,000
  • Higher interest rate with higher principal
  • Higher interest rate for longer term
  • Higher interest rate from smaller banks/institutions

Advantages

  • Typically offer higher rates than savings and money market accounts
  • Choices in term that best fits your time horizon
  • Can be laddered (explained below)
  • More flexible than bonds
  • Many types of CD to fit your needs (traditional, liquid, zero-coupon, bump-up, high-yield, etc.)

Disadvantages

  • Penalty for early withdrawal (before maturity)
  • Not as liquid as savings and money market accounts
  • The longer your term, the better off you might be with savings bonds

Exceptions

  • Not all banks and credit unions are FDIC/NCUA insured, usually offering higher rates for more risk
  • Preceding a recession we can get something called an inverted yield curve, where long-term rates and lower than short-term rates for instruments of the same quality.  This comes from higher demand of long-term rates in anticipation of lower rates.

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Personal Finance Courses, Manuals, PowerPoints & More

Personal finance is an important topic and free quality resources are hard to find. BYU has developed a number of quality online courses on various personal finance and financial planning topics.  In addition to these free online courses are PowerPoint presentations, worksheets and personal finance manuals with complete course content that you can download, use offline and share under Creative Commons License 3.0.

Note: Material developed and provided courtesy of BYU and occasionally share a religious (LDS) perspective.  Whether or not you share this point of view, the material is extremely valuable in developing a strong financial foundation.

These free online courses cover many areas of financial planning including investing, retirement, estate planning, money management, debt, credit, insurance and taxes.  In addition to being organized by topic, they’re also organized by difficulty, i.e. beginner, intermediate and advanced topics as well as by audience, i.e. high school students, college students, married couples or single adults.

Personal finance courses available here:

Personal finance manuals available here:

Personal finance PowerPoints available here:

All material provided by BYU, available here and licensed under Creative Commons License 3.0.

Posted By Mays Financial

How to Ladder Your CDs (Certificate of Deposit)

CD laddering is an effective investing strategy to produce consistent returns relatively higher than a standard savings account without completely sacrificing liquidity.   The goal of CD laddering is to  match the ‘rungs’ of your CD ‘ladder’ with the maturity dates of your CDs. The rungs represent your needs.  The CD’s should mature when you need them, be it every three months, every six months, annually, etc.

[Read more…] about How to Ladder Your CDs (Certificate of Deposit)

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Understanding Risk and the Fundamentals Behind Insurance

Introduction to Risk

An introduction to the concept of risk, the types of risk and how we manage those various risks through financial planning.

Ways Of Managing Risk

There are four main ways to manage risk: risk avoidance, risk transfer, risk reduction and risk retention. Each is applicable under different circumstances. Some ways of managing risk fall into multiple categories. Multiple ways of managing risk are often used simultaneously.
[Read more…] about Understanding Risk and the Fundamentals Behind Insurance

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Your Guide to Understanding Auto Insurance

Introduction to Auto Insurance

A basic overview of auto insurance policies.

Property Coverage

The property coverage part of your personal auto policy covers repair and replacement costs for your vehicle. Property coverage only covers the insured’s vehicle. Damages to other parties are covered through liability coverage. There are two types of coverage: collision coverage and other-than-collision coverage (also called comprehensive coverage).

Liability Coverage

In terms of property-liability insurance, auto insurance is the most familiar to the general population. With the number of accidents that occur each year, it is easy to understand why.

Medical Coverage

Uninsured and Underinsured Motorist Coverage: Life insurance has become extremely complicated with all of the features and options available. It is important to remember that many of the extras are just that, extras. Be sure to develop an adequate understanding and do not pay for more than you need.

Uninsured & Underinsured Motorist Coverage

Life insurance has become extremely complicated with all of the features and options available. It is important to remember that many of the extras are just that, extras. Be sure to develop an adequate understanding and do not pay for more than you need.

Posted By Mays Financial

Everything You Need to Know About Life Insurance

Introduction To Life Insurance

Your primary purpose with life insurance is to ensure that, in the unfortunate event of your passing, all of your obligations are taken care of.

Life Insurance Terminology

An introduction to some of the more common terms used in describing life insurance.

Participating vs. Non-Participating Policies

Both types of insurance policies, term and cash value, can act as either participating or non-participating (par or non-par, respectively).  Read more to understand the difference.

Term Life Insurance

Term insurance is the most basic type of life insurance. It is a pure protection policy in that it only provides death benefit and accumulates no cash value.

Cash Value Life Insurance

Cash value life insurance policies differ from term policies in many ways. The major differences are that cash value policies offer permanence and cash value accumulation in addition to death protection. It is very important to understand how this cash value aspect works so as not to be misled.

Whole Life Policies

Whole life insurance is the most common form of cash value insurance policy. It bundles death protection with cash value accumulation.

Universal Life Policies

Universal life policies are third in popularity behind whole life and term insurance policies. Like whole life policies, universal policies also offer lifetime coverage. With universal policies interest is variable and cash values are separate from death protection.

Life Insurance for Kids

A look at the advantages and reality of life insurance for kids. Bottom line: Not recommended, but as with all financial decisions, this must be made based on your individual situation.

The Value of Human Life

Though we cannot readily assess the value of a human life, we do put a price on it in different ways (some more direct than others).  One of the ways we do this is when we evaluate life insurance policies.