Deal With Credit Issues

Where a person transfers anything of value either on death or during his lifetime, Inheritance Tax (IHT) may be payable. This fact could have a dramatic impact on the way a business owner structures a family succession plan.

IHT law, like most tax laws, is complex and an understanding of its implications requires careful study. Business owners contemplating a family succession as an exit route should obtain early advice on IHT law from their tax advisors.

On death the transfer of an estate of a UK resident up to a certain value is tax-free.

For the tax year 2005/2006 the tax free amount is £275 000.

Transfers to your spouse of any property either in life or after death, if both spouses are resident in the UK, are also free of tax.

Gifts can be tax free if certain conditions are met. These conditions include that the transferor lives for seven years after making the gift, or that the gift does not exceed a certain (relatively small) value, or that the total value of gifts does not exceed a specified amount in any single year.

Besides the exemptions for transfers after death and for gifts made in life, there is also significant business property relief under the IHT legislation, which could be crucial for business owners wishing to dispose of their business assets to family members, either through a sale at less than arm’s length, or through a gift, or a combination of both.

Are the most effective and relevant performance measures in place to monitor and assess the effectiveness of financial
decisions?

Have you analysed key business ratios recently?

Is there a positive attitude in your organisation to budgets and budgeting?

Is decision-making focused on the most profitable products and services, or is it preoccupied with peripheral issues?

What are the least profitable parts of the organisation, and how will these be improved?

Are market and customer decisions focused on improving profitability? Too often the emphasis is put on such objectives as increasing market share or sales, which may involve a reduction in margins and greater financial exposure.

How efficiently is cash managed in your organisation? Do your strategic business decisions take account of cash considerations, such as the time value of money? Are you giving more credit than you are receiving?

While money addiction is more prevalent in our society than most people realize, the vast majority of investors suffer from less extreme forms of investment incompatibility. The more common symptoms include loss of sleep, irritability, unexplained anger or depression, random resentments, a sense that investing is meaningless, money arguments with a spouse Or partner that neither can comprehend, a dim view of retirement possibilities, and a thousand forms of fear.

The major investment fears are that you do not have enough investments now, won’t have enough in the future, or will lose what you already have. Then these fears lead to further fears. If you don’t have enough savings, then how could you have enough money for travel, clothes, restaurants, a new car, a better house, a real life? Or you fear you cannot and will not ever grasp the mathematical complexities of compound interest and probability theory and you cannot trust those who do understand these concepts.

Then there is the underlying fear that investing is irrational and no amount of study will help. The premise of this book is that these feelings and fears are normal and healthy; understanding them and understanding the emotional hooks of different investments will lead to a greater sense of peace and contentment in your life. They don’t sell peace and contentment on Wall Street. You have to find it within yourself first and then look for the investments that enhance
it, rather than disturb it.

When you know more about yourself and about the products that are out there, no risk tolerance tests with hidden agendas will sell you incompatible investments anymore. Investing will become an area of great satisfaction in your life.

As a college diploma has become a virtual requirement for many careers and the cost of a college education has skyrocketed, student loans have become a necessary evil for many young adults. According to the National Center for Education Statistics, the average graduating college senior has just over $17,000 in debt. One quarter of all graduates have at least $25,000, and one tenth have at least $35,000. Sadly, many spend the first decade after college struggling to make the required payments on student loans.

The situation has become even more overwhelming as more students than ever are pursuing post-graduate degrees that can cost in excess of $150,000. Understanding your student loan options and avoiding high-cost lenders and programs are key to eliminating your debt.

As you fight tooth and nail to get out of debt, there is no mortgage that stands more opposed to this than the payment-optional or negative amortization loan. These loans, if misused, may actually cause your debt to swell past the point of no return.

On the surface, these loans are presented as a homeowner’s best friend, because they actually give you the option of deciding what you pay each month. In fact, they usually give you four different options:

1. Pay a minimum dollar amount, less than the interest actually added to the loan in a month.
2. Pay only the interest that was added to your loan balance in a month.
3. Make a monthly payment that’s equivalent to a 15-year fixed mortgage.
4. Make a monthly payment that’s equivalent to a 30-year fixed mortgage.

While the 15- and 30-year fixed-rate payments would be good choices that move you toward eventually owning your home, the minimum-payment and interest-only options either keep your debt the same or increase it further. The term negative amortization actually comes from the fact that instead of increasing your ownership in the home through an amortized monthly payment, you’re actually decreasing it by not covering the basic interest added each month.

If you are in a Payment Option of Negative Amortization, it’s critical that you take a good, hard look at this loan and how you’re using it.