By the time you’re nearing retirement, you should have substantial equity in your home, regardless of what your local market has done. If that’s the case, you can leverage your home to help you boost your income that don’t rely on the stock market or home prices to keep you solvent. Simply down-sizing can be one way to take out extra income from the equity in your home, and since your kids should be grown by then, it makes a lot of sense for families. Another way to leverage the home is to take the money and invest some of it into funds that produce income while you sit snugly in a new, smaller, home.
Why Downsizing Makes Sense
While it’s true that no one likes to move, the expenses for moving can be covered with short-term cash advances or loans, and the long-term benefits outweigh the costs. Downsizing provides relief in the form of lower real estate taxes, insurance, maintenance, and utilities. Month to month, you should see a positive effect in your cash flow, just by moving to a smaller home. And, the nice part of it is that you can still have a fixed mortgage and not worry about stock market fluctuations at all.
Financing More Income Options
If you downsize and don’t need all the income for living expenses, it’s still a great time to invest in funds or annuities that can help you develop more income down the line in retirement. Once you cash out of the bigger home, prices can drop however much they want, and you’re not as affected. If you pick some safer investments that increase over time, you will have diversified your risk and made some additional income too.
In the time of crisis a lot of people try to cash their possessions in order to pay their bills. There are companies out there who try to take advantage of the situation and scam people off their money. Cashing your jewelry may lead you to a lot of trouble. This is how it works:
- The company receives your refiner’s pack (jewelry) for appraisal.
- They appraise it by hand (no specialized equipment is used, no experts involved)
- They send you a check with a 100% Satisfaction Guarantee.
The catch is that the check is mailed to you very late and you can get your jewelry back or refund only if you contact the company within 10 days from when your check is dated (This begins with the time it takes for the accounts payables department to issue the check and also including the transit time for you to receive your check in the mail). The check is usually dated within 24 hrs of receiving your jewelry, but it is sent out a few days later. You usually receive your check around the 7th, 8th, or 9th business day so you may have only 1-2 days or none to ask for refund. If you try to contact company representatives, it is nearly impossible to get in touch with anyone. After the ten-day period has lapsed, you will be told that the item is already melted or it is no longer available for return.
The company insures your package for up to $100. If your jewelry is worth more than that, it often happens to get lost in mail. If you call the company to check on the status of your items, they will that you should have added extra insurance on your items.
International finance is, of course, a vital aspect of the overall area of current finance. However, “international finance” is something of a misnomer in that it presumes that if there is an international side to finance, there must also be a domestic understanding of the field. In the modern era all finance is international, especially as the result of advances in communication technology.
In contemporary times money flows around the globe seeking its best levels, like water – in terms of risks, returns, and entry and exit mechanisms. The large securities firms and investors pass their portfolios around the globe seeking optimum commitments in terms of risks, returns, and entry and exit costs. (Portfolio diversification is also a consideration for such investors; however, the complexities of diversification are beyond the scope of this analysis.) Large securities firms and investors can trade on a 24-hour basis; they can trade at any time and place they wish. As a result, in the contemporary world all finance is international and has been so for some time. National boundaries no longer come into play with respect to large-scale investing, and since large investors move markets, all current finance may be said to be international.
This was surely not always the case in the past as financial transactions across international boarders were often greatly hindered at one time as the result of national concerns with sovereignty and other similar issues. Relative exchange rates between currencies fluctuated greatly at one time, consequently drying up international trade because of the uncertainty as to the domestic value of international transactions that were to be settled in the future.
In the modern era these concerns have been alleviated as a result of the development of effective markets in international currencies that allow for transactions calling for the future delivery of any of the world’s major currencies. For example, a wine merchant in New York who is required in one month to pay a fixed amount in Euros for the purchase of French wine can, with U.S. dollars, buy Euros for one-month delivery, thereby fixing his commitment in dollars and eliminating the possibility of loss in dollars through the adverse movement during the month of the dollar versus the Euro. This has greatly enhanced international trade, with the consequent benefit to both sellers and buyers of international products and services and the countries involved.
Over the last 25 years of the 20th century, cash dividends declined as a percentage of earnings, but companies paying higher cash dividends have generally experienced higher returns during periods of market downturn. Dividends cushion the stock price fall and normally prop up share returns as long as the dividend can be sustained. However, there have been many cases of cuts in cash dividends. So the purchase of equity shares simply because of a current high dividend yield (dividends/stock price) cannot assure success. Accordingly, the ability of a company to maintain, or possibly increase, its cash dividend is an important aspect of share valuation for stocks with a high dividend yield. The best way to understand the ability of a company to continue paying its current dividend is by looking at the firm’s cash flow, not necessarily the income statement or the balance sheet.
A common fallacy with respect to dividends paid in a company’s stock (stock dividends or stock splits) is that investors get something of value as the result of the share distribution. Uninitiated investors normally like receiving such share distributions. They often feel a stock is cheaper if it’s at 20 as opposed to 40. This is silly in that if a company has 200 shares outstanding at a price of $20, it is quite the same thing as having 100 shares outstanding at a price of $40. In both cases the total capitalization (shares outstanding multiplied by their market price) of the firm is $4,000. All it has accomplished as the result of a two-for-one stock split or a 100 percent stock dividend is to double the number of shares outstanding with an almost certain halving of their market price. Stockholders have more pieces of paper as the result of a share distribution, but no increase in total value. So stock dividends and stock splits, when unaccompanied by increases in earnings or cash dividends, do not really mean a thing.
With electronic recording of share ownership, having more pieces of paper is not of great consequence. However, in terms of transaction costs, when investors seek to sell their shares, the cost of exiting their position will generally be greater if a larger number of shares are sold. This is particularly the case for institutional investors such as mutual funds that pay their commissions on the basis of pennies per share. The greater the number of shares such investors sell, the more the trade will cost.
Also of consequence in this respect is the bid-ask spread, which is the difference between what an investor can sell his or her shares for at any particular time versus the price the investor must pay if the shares are bought at that precise time. (Bid-ask spreads are more commonly known as the price a dealer will pay for a security – the bid price – versus what the dealer will sell the security for – the ask price). Accordingly, other things being equal, in terms of the total cost of the bid-ask spread, the greater the number of shares involved in any particular transaction, the larger the cost to the investor. In essence, the bid-ask spread is also a form of transaction cost in addition to commissions and must be considered in determining the cost of entering and exiting a position in stock. If an investor has more shares as the result of a share distribution, his or her transaction costs will, other things being equal, be greater. In this sense, contrary to popular belief, share distributions provide negative value to investors.
