Money Tool Shed

Those who are considering taking a mortgage to buy a house face a very important decision. A mistake will cost a lot of money, while correct planning can help save a lot. If you are looking for a home mortgage, the advice below will most assuredly help you. First I will overview methods to have you paying less.

1. Generally, you should try to make your monthly repayments as high as you can support without considerably harming your quality of life. The more you pay each month, the sooner your mortgage will be repayed, and in the long run, you will end up paying less.
2. See if the mortgage payments will decrease your tax, or make you eligible for some government help. This is more money for your budget in any case, and will allow you to make higher monthly payments.
3. Check your credit score – this should be completely free. If your credit rating is bad, consider first repaying existing debts and improving your score. This will make your mortgage terms considerably better – the lender will have less fear that you will fail to pay your mortgage. Perhaps it is even worthwhile to postpone buying your house until your credit rating improves.
4. Similarly, the higher your income, the less fear the lender will have of you defaulting. Therefore, if you expect a promotion or an increase in your income, it may be profitable to postpone the mortgage until your income rises.
5. If you have savings in your bank, you are probably better off using them to pay as much as possible towards your mortgage, as it is improbable that the savings interest rates is higher than the mortgage interest rates. Additionally, by taking a smaller mortgage you will have to pay less mortgage insurance, which is another cost you should consider.
6. A good mortgage broker can make a great difference especially if you are inexperienced, yet at the same time, again, if you are inexperienced, an unscrupulous broker can have you enter a deal you will regret your entire life. If your friends or family members can recommend you a mortgage broker they worked with and were satisfied, consider applying to him or her for assistance.

Finally, a word of caution. You look for home mortgage on the internet, and may be tempted by very low interest mortgage quotes. While some of those might be real opportunities to save, note that some companies use good quote to lure customers in, and then inform them that because the market has changed or something is problematic with that particular customer, that mortgage quote is no longer offered, and make another, less attractive offer. They hope that by now the customer is theirs, and will believe that the market change or his or her situation will adversely effect mortgage offers wherever he or she turns. If this happens to you, send your information to other companies and ask them for quotes too – you might be surprised to find out that the market situation is not as bad after all!

Instead of thinking how to make money, see how much you can save simply by stopping to harm yourself.

It’s amazing! If you smoke one 5$ pack a day and stop smoking now, in a year you could save about $1,825 – a good family vacation. In 10 years you could save $26,000, enough to buy yourself a new car!
And this is not counting the money you save on smoking-related health issues.

Different types of pyramid schemes have been plaguing humanity for about 100 years, if not more. Millions of people were fooled out of their savings over the years, so one could think that nobody would fall for such type of scam anymore. However, the web is full with offers of this type, and as there would be no supply without demand, probably some unfortunate souls are still caught in pyramid schemes.

What is a pyramid scheme? It is an investment scam in which the con artist promises high profits for those who join his company, fund, scheme, program, or however he wants to call it. In fact, the only cash that flows into the program is the money payed by new “customers” or “investors”.  In the beginning, the con artist is able to pay what he promised – as long as more and more people are joining, he may have enough money to pay those already in the program. Eventually a moment will come when more people need to be payed than are joining, and this is the moment that the swindler takes what money is left and escapes.

How to spot a pyramid scheme?

The easiest sign is if you are aware that the program has no means of making money except for recruiting yet more members. Such a structure is doomed to collapse, and do not fool yourself saying that you will repay your investment before it falls tumbling down. The chance of this happening is very small – you will get better odds betting in the casino.

Another sign of a pyramid scheme is a company that offers what is called “multilevel marketing” where customers also becomes affiliates and distributors of the product.  No legitimate company would charge people to become distributors of it’s products. If you are asked to pay to become an affiliate, the chances that the offer is not a scam is very low.

Finally, there are pyramid schemes disguised as legitimate investment funds. With Madoff’s scam being a recent example. In such cases, while there could be subtle warning signs, even professionals fail to spot the scam until it is too late. It is unfortunate, but a certain, albeit small, percentage of currently operating legitimate looking investment offers are built at least partially as a pyramid scheme. This is why your savings, especially those you depend on, should be diversified. This slightly increases your chance of being affected but, much more importantly ensures that even if a part of your funds is lost, you will still have most of what you earned left.

Ireland, like most European countries, has quite high taxes on personal income. In this article the method of their calculation will be described, and then an example of calculation will be presented. This information is based on rules for the 2009 tax year.

Let’s start with the income tax. The income is divided to two brackets. Up to a certain amount, one pays 20% of all income, and beyond that a higher 41% rate is applied. This amount depends on family status:

• Unmarried persons with no children pay 20% up to €36,400, and 41% on all earnings beyond that sum.
• Unmarried persons that support a dependent child have this amount raised to €40,400.
• Married couples have an even higher ceiling for the 20% tax. It is a base of €45,400 plus the lesser of €27,400 and their spouse income. For example, a family where one spouse earns €12,000 a year will pay a 20% tax on their income up to €57,400, and 41% for all income in excess of this sum.

Since 2009 Ireland introduced an income levy, which is basically an additional tax on income. 2% is payed for all income up to €75,036, 4% for extra income up to €174,980, and 6% for income in excess of €174,980.

People with incomes below €15,028 per year are exempt from the income levy.

After income tax liability is determined, certain credits apply that reduce the total tax payed. Those credits reduce the tax you would pay, but can not reduce it below zero:

• A personal tax credit is given. It depends on family status. It is €1,830 for single persons and €3,660 is given to married couples and parents of incapacitated children. A widowed person with no children receives a credit of €2,430, while a widowed person who has children receives a credit varying between €3,660 and €1,830 depending on year of bereavement (a widowed person with children who became bereaved a long time ago receives a credit of €1,830, a smaller credit that a widowed person with no children, but this is offset by the One Parent Family Tax Credit).
• A One Parent Family Tax Credit is given to unmarried persons who raise a dependent child in the sum of €1,830.
• People who pay tax in the Pay As You Earn system, and this includes almost all Ireland employees, receive a €1,830 tax credit.
• A person who becomes 65 years old during a tax year receives a tax credit of €325.
• A person who supports a dependent relative gets a €80 tax credit.
• Members of trade unions receive a €70 tax credit.
• A person whose spouse acts as a carer for a child or an elderly or incapacitated person can claim a tax credit of €900 if the carer (his or her spouse) earns less than €5,080 each year.

Now let’s look at an example to illustrate income tax calculation. John is an employee who earns €60,000 each year. His wife earns €12,000 each year. She is a member of a trade union.

His joint family income is €72,000, of which he will pay 20% of the first €57,400 and 41% of the excess €14,600. It is €17,466.

This is not all, as Income Levy should be applied. It is 2% on the first €75,036, and as John earns less than this amount,  he will pay 2% on his entire income, or €1,500. John’s wife earns less than €15,028 and therefore pays no income levy.

The total tax liability is 17,466 + 1,500 = €18,966, of which tax credits are deducted.

John’s family get the following deductions:

• €3,660 as a married family.
• Being both employees, John and his wife each receive a €1,830 deduction, making it €3,660.
• As John’s wife is a member of a trade union, the family receives a deduction of €70.

The deductions amount to a sum of €7,390.

Therefore, John’s family would pay 18,966 – 7,390 = €11,576 in income tax.

This is a summary of income tax in Ireland. It is intended for informational purposes only and should not serve as a professional guide as the rules written here may not cover every situation.

In addition to income tax, employees and employers in Ireland also pay PRSI (Pay Related Social Insurance), but it is not covered here.

You are invited to use the Round the World Tax Calculator which will calculate your tax liability in different countries, including Ireland.

MoneyToolshed.com is happy to present a unique tax calculator that shows you the taxes you would have payed in different countries in the world:

MoneyToolshed.com tax calculator requires that your browse enables iframes

Currently it shows results for Australia, Canada (including the different provinces), Denmark, France, Germany, India, Ireland, Israel, Japan, New Zealand, Russia, United Kingdom and the United States.

You can embed this tax calculator into your site for free! Click ‘calculate’ above and the result page will show an embed text.

There are many bad effects to having a credit history that is not spotless, with the main one being that if you have bad credit, new loans either carry a much higher interest rate or refused altogether. In most cases, I would advise people with a bad credit history to stay away from getting more loans (both because of the higher interest rate and because they must learn to get by without relying on lending money), but sometimes the loan is absolutely necessary. Also, sometimes families need a loan to consolidate their other debts. If your case is one of those, the following advice might be relevant.

Step 1
First of all, assess your situation. Make a list of every loan you have, with a column saying how much do you pay in interest every month. Having a clear picture of your situation is the first step to finding the solution.

Step 2
The second step is to improve the odds as much as possible.
Verify that the bad credit statement is correct, and try to negotiate with your current lenders – you may agree on a convinient consolidation plan. Too many people, when faced with mounting debts, simply ignore notices hoping that they will simply go away. If your lenders do not agree to negotiate now, wait for a while while making payments that are exact and on time. The lenders will see that you are serious and may be more willing to come towards you. Finally, get rid of the high-interest loans by consolidating them with other, preferably secured loans.

Step 3
The third step is the hardest one, and it is the most important. This when you calculate your debts (hopefully after improving their terms on step 2) and your income and work out a plan to pay off the debt. Cut all unnecessary expenditure and make sure that you stick to this plan. It will not be easy, but think of the debt-free life ahead of you as inspiration. Tell yourself that you are strong and can do it.

I wish you luck in this endeavor. Come back later, as MoneyToolshed.com plans to upload an excel spreadsheet to sum your loans and monthly interests, as well as too calculate a repayment plan.

This calculator is helpful if you want to know (very approximately) how much you should invest in retirement. If only retirement planning was as simple as that…

Among the things that many people admit are annoying one of the top places belongs to visiting the bank. Unless you can afford private banking, a visit to the bank may take a lot of your time. Twenty years ago this was unavoidable, but today online banking allows you to perform most banking operations from your house. Some people even never visit their bank after openning their account (we can only hope that in the future this will be also available online in all banks).

However, some people feel insecure managing their finances through their computer. Beyond simple technophobia, this hesitation is reasonable as the web is not a 100% secure place. In this article I will talk about the risks of online banking, and how to avoid them.

Risk #1: bank fraud

You may find online banks with no physical offices, or ones with offices overseas, and such banks are expected to offer better terms – sometimes promising no fees at all for new customers. Having no offices reduces costs, so such a thing is not unreasonable, yet there is a greater danger of fraud. Everyone can create a web page, and you surely do not want to deposit your money to someone who could easily disappear one day without notice.

Therefore, before joining verify that the bank is legit. If the bank is in the USA, use this page to see if this bank is insured:

http://www2.fdic.gov/idasp/main_bankfind.asp

For banks in other countries go to corresponding governmental agencies to see if the bank is legit.

Risk #2: hacking

If your computer is infected with a virus, other people may have access to all information that you are sending, and therefore they could easily obtain your password. Have a good and updated antivirus installed whenever you access online banking.

Risk #3: phishing

Phishing is a rather new tactic used by online fraudsters. They create a website that looks just like your bank’s website, and host it under a very similar domain name. Then they invite you to log in to their site (usually by sending you an email that looks like it came from your bank). Once you log in they have your password, and then can log in to the real bank.

To avoid phishing, never go to your bank page through a link in an email! Even if the domain name seems exactly the same, phishers were known to purchase domain names that look exactly the same, but having some letters from a different alphabet (for example, Russian). Have the online banking website in your favourites list, and access it only from there.

Other forms of identity theft

Any way that may allow others get access to your password is dangerous. When abroad, do not access your online banking account from shady internet cafes. Do not keep the password written on a piece of paper in your wallet – in case of a theft you may also lose the funds in your online account.

Besides what was written here, make a habit of reviewing online transactions to see if any money is leaking. Tracking your expenses is an important habit anyway.

Mortgage refinancing is usually worthwhile if you plan to stay in your current house for a certain amount of time. This calculator allows you to find out for how much time you should stay in your current home to make mortgage refinancing worthwhile:

http://www.lendingtree.com/mortgage-refinance/calculators/refinance-calculator

Following my article on reverse mortgage, here are some calculators. Remember that all of them only give an approximate suggestion of what you will receive, but they can be useful in giving an idea of the sums you could expect.

USA

• A reverse mortgage calculator that takes your zip code into account.
• MetLife Bank calculator

Australia

• Official Australian FIDO calculator
• Calculator that shows graphs and let’s you change interest rate.

UK

• Calculator that shows how much you can get in different plans

New Zealand

• New Zealand mortgage calculator

Please comment if you can suggest a reverse mortgage calculator in other countries.