The foundations of the basics of personal finance are security stability and growth and protection as well as management. Investment growth begins with security.

The subject of personal finance is very broad, but as a beginning, I would like to discuss what I consider the foundations of personal finance: Security, Stability, Growth and Protection & Management. This article will discuss security. Investment growth and financial freedom begins with security.

A good question to ask yourself is what is security? For the average individual it means that you have health, disability, auto and home insurance on top of life insurance. These policies will insurance that if something happens to you your family will be taken care of. If you are the head of household and you make most of the financial decisions make sure you leave explicit instructions for your family to follow. These should include the names and locations of all your insurance policies. The names and numbers of your insurance agents. Include all the basic policy information like account numbers and associated costs. Make sure all your important paper is placed in a secure local like a safety deposit box, at work, or at a friend house. Keeping the only copies of your insurance information in the house may be a problem especially if the house is damaged by a fire.

Additionally you should maintain a emergency fund. This is money which is placed into a money market account which checks can be written from. This is money that can be used if there is a financial or natural disaster. Make sure you have at least six months of income saved up, a year would be even better. This can be done by putting a side a little bit of money each month as well as adding gifted money to the account (from birthdays or inheritances). It is also important that you have will which reflects what you want to be done in the case of your death. It should include references to both finances, personal property, and your personal opinion about life support and end of life options.

Making sure your family is safe and secure can give you the piece of mind to invest fully in the stock market. Often times investors are held back by the fear of risks and losing money. No can predict your success in the stock market. The one thing that all investors know is that sometimes you will fail and lose money. This is less devastating if you do not have all your money wrapped up into your stock portfolio. Having an emergency fund means losing money in the stock market is not the end of the world. It also means that for unexpected bills and expenses can be paid without having to sell of stocks which are mean to be long term investments. Especially in the case of mutual funds and IRAs where they are severe penalties for withdrawing money before retirement. Security is your first step to starting your investment portfolio.

As those over 50 try to work out how best to make use of the extra ISA allowance that has now come their way, those of us with a bit more youth on our side still have to wait until next April for the new limits to come into play.  

Having come into effect from 6 October for anyone born on or before 5 April 1960, the new rules have seen the overall ISA allowance increase from £7,200 to £10,200.

For those with a penchant for risk, the whole allowance can be invested in a stocks and shares ISA. But be warned, there is absolutely no guarantee you will get all your money back.

For the more conservative saver, up to £5,100 can be placed in a cash ISA (up from the previous limit of £3,600).

Introduced in 1999 to try to kick start a savings habit in the UK, the popularity of ISAs still proves strong today. Around £400 billion worth of funds are currently stashed away in these tax-free accounts.

Providers, unsurprisingly, are keen to get their slice of the action and offering some attractive rates as a result.

Indeed, accounts that are only available to those over the age of 50 have recently been all the rage.

However, savers over the age of 50 should know they are not restricted to these accounts alone: the whole of the ISA market is their oyster to find the account type and rate that best meets their needs.  

Besides the standard cash option, fixed rate ISAs involve your money being locked away for a given period of time; generally, the longer you’re prepared to forego your funds, the better the rate of interest you’ll receive.

It’s also important to remember that transferring your ISA from one provider to another is allowed, so you can continually hunt for the best rates around.

Meanwhile switching your money between the types of ISA might be another option worth considering.

Changes to the rules in April 2008 means swapping from cash into stocks and shares is easily done and does not affect your yearly allowance.

However, it is not a two way street. Anyone wanting to take their funds out of their stocks and shares ISA and put them into cash still has to use the annual contribution allowance to do so. It is therefore not a decision to be taken lightly.

But while cash ISA rates might not currently be what they once were, for the safety conscious investor, they’re still one of the best bets around.

What is a Trust? by Tony Melvin & Ed Chan

 

One of tools of investing or business is the use of trust structures. The main benefit of a trust structure is that it provides flexibility. Income can be distributed to the lower income earner, assets can be protected, and wealth can be passed onto the generation with minimal fuss and little or no tax.

 

Trusts however come in all shapes and sizes and there is no “one-size-fits-all”. The type of trust you use depends on many factors, such as; type of asset or business, financing, income type, marriage status, susceptibility to be sued – just to name a few. So be weary of anyone saying – such-and-such a trust will suit all situations because they are lying.

 

While it is not possible to cover every type of trust in this article we will explain what a trust is. This basic understanding is often missing and therefore trusts and their usage become unnecessarily ‘complex’.

 

A trust is basically an agreement or promise. A person or company agrees to hold assets for the benefit of another. The one who holds the assets is called the trustee; those who benefit are called beneficiaries. (See figure 1)

The trustee has legal control, which is legal title only. (A person with legal control can buy and sell an asset but will never own or enjoy the benefits of ownership, such as income or usage). It’s the trustee’s name that appears on all legal documents, bank accounts, etc.

 

The beneficiaries are not mentioned on such documents and have beneficial ownership (allowing a person to enjoy the benefits of ownership, including; usage, income, profits etc – even though legal title is in another name.) Therefore the beneficiaries are entitled to the assets and profits of the trust.

 

The basic function of a trust is to separate control and ownership. The result is that asset protection is possible and profits distributed in the most tax effect way.

 

The part you need to get your head around is that, when you establish a trust of your own, you have both legal control and beneficial ownership. Most people don’t separate the hats, they think they are one and the same but that are not.

 

For example, asset protection occurs because even though legal title is in the name of Joe Bloggs, Joe is trustee for a trust and therefore doesn’t own the asset – the assets are held in trust for the beneficial owners – hence nothing can be taken from Joe because he doesn’t own it.

 

Ownership plays a key factor in not just asset protection but with in the tax system too. This is why a Player will endeavour to own nothing and control everything!

 

There are many benefits to structures such as companies and trusts that a Player can use to his or her advantage.