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It is not shameful to get behind on your taxes. Surprising medical expenses and family emergencies happen, and you can find yourself stuffed to the bottom with a retroactive tax debt before you know it. Have you ever wondered if you can consolidate all your debts as people consolidate all their credit card debts? Well, yes you can. It just does not work in the same way as consolidating credit card debt. If you dismiss them, unpaid taxes can allow the IRS to confiscate assets, garnish your wages and place garnishments on your home or property. If you have difficulties with several invoices for IRS back taxes, you are not alone. In 2018, there were 937,514 taxpayers with delinquent accounts.

Americans do not pay $ 458 billion a year in taxes, and the IRS wants to get their money back in any way possible. Your tax debt can be negotiated with the IRS, however, it rarely goes from dollars to cents. One way to consolidate your IRS debt is to obtain an offer in commitment. This is an agreement between the taxpayer and the IRS to settle the tax liability of the taxpayer for less than what is owed. It is likely that the IRS will accept a reduced amount if there is no way you can return the money you owe now or in the foreseeable future. Unless paying the IRS causes financial hardship, doubts about the amount owed, or you can not pay the full amount within a reasonable period of time, it is unlikely that the IRS will grant you an offer of commitment.

Here are the requirements for an offer in commitment:

The IRS has doubts about the amount you can recover in the near future. The IRS calls this “doubt as to the ability to collect” and, in general, is linked to a business or individual that has lost all income and is likely to never get enough profits to pay their back taxes.

Due to exceptional circumstances, the payment of your total tax bill could cause an “economic hardship” or be “unfair” or “inequitable”. The IRS is not going to force you or your company to give money that you do not have or that would leave you on the street.

It’s weird, but the IRS is capable of making mistakes. You can file Form 656-L if you or your company have “doubts about the responsibility of payment”. If the IRS did not process your taxes correctly and the amount you think you owe is incorrect, it will reduce the amount or eliminate it entirely according to your circumstances.

If you plan to negotiate with the IRS to reduce the amount of taxes you owe or to obtain fiscal consolidation, the best thing you can do is hire a specialized and professional attorney. Obtaining an IRS commitment offer requires a lot of time, paperwork and correspondence. Talking with a professional (before you apply) can tell you if you can qualify before you spend time in the process.

The nature of unpaid taxes

Before you can proceed with the understanding of fiscal consolidation, it is important to know that each tax debt you accumulate with the IRS is a balance that is assigned to a specific year. Each year’s debt generates its own fines and interest (which means that the IRS does not consolidate all your debt as it accumulates over the years). Fortunately, the IRS will allow you to consolidate back taxes for several years of delinquency.

Tax debt consolidation solution

If you do not believe that the IRS will accept an offer in compromise, installment payment agreements are a great alternative and the most common way to achieve fiscal consolidation with the IRS. Instead of paying each of your tax debts separately, the IRS will allow you to make a monthly payment instead of paying a single lump sum. Depending on the size of your debt, these payments can be extended up to 6 years. Despite fines and interest that will continue to accrue during the term of your debt, you do not have to pay several different delivery agreements at the same time. The IRS will group all your tax debts for several years into a single partial delivery, providing the convenience of a monthly tax bill.

It is important to be alert to any new tax liabilities after you consolidate. This process does not suspend the rest of your tax obligations; however, you will be required to submit new taxes for each fiscal year that comes with the tax consolidation of your IRS. If you do not pay new taxes, you can jeopardize your existing agreement with the IRS. For example, if you or your company have a delivery agreement, and you become delinquent in the next year’s tax bill, your IRS payment plan will be invalidated. This could force you to start the whole process, just that the IRS may not be as flexible or unwilling to work with you the second time. One way to avoid this is to hire a professional tax or accounting representative to ensure that you are not making mistakes in your IRS consolidation.

The post Can you negotiate your tax debt with the IRS? appeared first on Personal Finance News.

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On too many occasions things are not really as we think they are.

The image we sometimes have of something or someone does not fit the reality, mostly due to ignorance or prejudices and fears.

Well, this is what happens with the Stock Exchange at the level of society.

I started in the stock market with a mentality very different from the one I have today. Fortunately in a short time I realized that the stock market was not as I thought it was.

If I had not noticed it on time, I could have lost a lot of money, for that reason I do not want the same thing to happen to you.

In this article I will tell you what is the big lie of the stock market that is essential that you know.

An unreal image

Film and television have done a lot of damage to the image and the concept that most people have on the stock market.

The idea that is reflected in the media is that of a place similar to a casino, where highly successful characters, geniuses of finance who with a couple of orders earn millions, who lead a life of luxury … A world that is only within the reach of the rich.

Starting from this image, there are many who approach the stock market with curiosity to see if they can also participate in this attractive cake.

But to those curious people who want to make money there are those who are already waiting for them with open arms?

Speculation in the Stock Market

In a previous article I already explained what the Stock Exchange is and how it works.

It is basically a market where buyers and sellers meet to exchange financial assets normally.

It is a necessary place for the economy of any country and that fulfills an indispensable and very useful function; however, the Exchange can also be used for speculation.

Speculation itself does not have to be bad, it also fulfills a function within the market that is to provide liquidity.

However, it is this speculation that appeals to many people, since speculating can earn enough money in a few minutes or seconds, although you can also lose it.

When someone speculates in the stock market or the financial markets it is said that he is trading, and to which he habitually devotes himself to speculation, he is called a trader.

The trading business

We have already seen that in the Stock Exchange you can speculate trading and you can earn money quickly.

If we add that the human being has a point of ambition and greed, and human psychology is predisposed to play, bet and risk, then we have a combination that can be catastrophic.

Many people approach the stock market attracted by these claims of being able to make money by making quick operations that are more like bets than a thoughtful decision.

And if there are people willing to “bet” on the stock market in this irrational way, there are those who will use those unscrupulous people to earn money at their expense.

Trading brokers

A broker is simply an intermediary between a private individual and the financial markets.

He is the one who has the license and authority to buy financial assets in our name.

Logically, that intermediary broker will charge some commissions for performing that service, and this is where the big business comes in: in the commissions.

Every time we buy or sell shares or other products the broker will charge us a commission, therefore, what is it that interests our broker? Indeed, we do many buying and selling operations.

The broker is interested in you doing trading, speculating in the financial markets, that you buy and sell at every minute.

That’s where the business is … For them, of course.

The hook

For this reason there are so many brokers that offer their clients services oriented towards trading.

It’s like in the Wild West and the Gold Rush. Many people, motivated by the promise of getting gold, left their jobs and possessions to embark on the adventure of getting rich. Logically many never did, but those who really made money were those who sold picks and shovels to the greedy seekers of fortune.

This is the same. People eager to earn easy money by speculating in the markets, and brokerage companies that are covered at the expense of charging commissions to those unwary.

I have seen publicity of everything on the part of these companies, always oriented to give the image that you can earn a fortune in a very easy and fast way speculating with certain financial products, even using indebtedness.

I have come to see video ads of some broker companies where you see a young man at home operating from the computer, euphoric and with a big smile, and in the next image appear driving his sporty convertible accompanied by two attractive women.

That is the image they want to sell you, an image that is not real.

A big lie

No one will ever go to your house to offer you a big investment.

The gurus

Other “sellers of picks and shovels” are those that offer courses, seminars or days of trading on the stock exchange and other systems to make money speculating in the markets.

There are trading courses with a thousand names, all oriented to the same: make money speculating in the markets.

Surely the subject taught in these courses is good and very useful. I do not say that people are deceived with the didactic material that is offered. The problem is that people leave these courses thinking that he is the god of the finances and that when he gets home he will earn a thousand dollars a day.

Then reality comes and people lose money and get frustrated. It happens too many times.

Those sellers of courses and books will surely earn more money with the material they sell than with their operations in the Stock Exchange, that’s why there are so many who dedicate themselves to it.

But is it impossible to earn money by trading?

From time to time they write to me by private message through the blog some people who consult me ​​about the investment system they are using or want to use.

In some occasions they ask me about speculation with stocks, to operate in Forex (currency market), binary options, to use an automated investment program …

I find it funny, because in my blog absolutely everything I talk about is long-term investment, and even then there are those who ask me about speculating on the stock market to give them my opinion.

Something is clear: a person who writes to me to ask me about speculation doing trading in the markets is evident that he does not have enough knowledge to embark on that adventure.

The only thing you will get is losing money sooner or later.

There are very few people who earn money consistently trading, and those who do is because they are people with very high skills and knowledge.

It is estimated that 90% of people who trade lose money.

What people make money with trading?

A part of the brokers, who always win, at a general level to make money with trading you have to be the professional of the financial markets. Be a true professional of the subject, or at least have good knowledge and skills.

You, reading four stock books and doing a morning course, can not pretend to start trading and earn money like the professionals.

Also, I tell you a secret, the professionals often also lose money.

Trading in the stock market is a zero-sum “game”: for some to win, others have to lose, and it is very possible that the pack will be you.

Those who make money with trading are the big investment banks of New York or the City of London that have real professionals and very complex computer systems working for them.

Then there are some people who manage to earn some money by trading privately, but they are few, and if they do it is because they have very good knowledge and skills and because they operate in the markets as if it were their job.

To trade in the markets you have to be stuck to the screen several hours a day: it becomes a job.

Do you really think that you are going to be smarter than all those professional banks and investors?

Speculating in markets requires hours and a great psychological drain. Are you willing to pay that price?

Invest with common sense

I came to the world of the stock market with the idea of ​​trading, in fact I did not think of another way to do it.

I had that distorted image because of cinema and television.

Ignorance led me to open a demo account in one of those attractive brokers to do intraday operations.

I read books and blogs on the subject, but after some time operating and trying to learn I stood up and said: “This is not for me”.

I did not want to be all day stuck to the computer analyzing graphs, calculating figures and having a stress and anxiety in each operation.

I was looking for something else.

For a while I left the issue of the Stock Exchange parked and a little disappointed, until one day I started to investigate other ways of investing in markets that were more suited to my goals and my way of being.

I was really looking for a source of passive income.

So today, after much reading and self-training, I am clear that long-term investment is the only way to get some money consistently in the markets. The historical data shows it.

Mine are the dividends, buy solid companies and invest in the long term: the slow finance.

I no longer consider another way to invest.

However, there are many people who want results NOW. They are not willing to wait. They do not want returns, they want easy money to be able to consume things quickly. They seek immediate satisfaction.

There will always be people like that, therefore there will always be trading and brokers and gurus willing to make money thanks to them.


I do not want to leave the image that I want to demonize it trading.

I just think that it is an investment strategy that is not suitable for the vast majority of people, and if you are reading this modest blog it probably is not for you either.

Trading is a complicated investment system, with a lot of risk, which requires a lot of time and great emotional control.

Only a few earn money with him.

The ones that really do win are the brokers that capture unwary and greedy “players” to operate in this way and fry them to commissions.

They also win the supposed experts and gurus, who sell courses, seminars and books.

So you’ve already seen the big lie. I have already put the information on the table, in your hand is to take it or not.

In any case, inform yourself and if you want to try the trading, but yes, try not to lose a lot of money in the meantime.

The post The trading. The big lie of the Exchange that you should know appeared first on Personal Finance News.

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The most immediate symbol of the modern consumer society is undoubtedly the credit card. A name that in many occasions serves to denominate all type of cards of payment, even those of debit or balance preloaded. It can be a very practical tool, or a very dangerous trap, depending on how it is used. We will give some recommendations for its correct use.

What is a payment card?

At this point, few people are unaware of this instrument, but it is not bad to define it to better understand how it works. A bank card is a mode of payment, associated with a bank account, used to make different types of purchases. It is a plastic card, with magnetic stripe and normally chip, whose use is protected by a security code.

These cards are for personal use (normally, the contract is clearly indicated that can not be loaned to anyone), and with them you can pay in various stores and establishments, or withdraw money at ATMs automatic banks.

Each payment card is associated with various limits, established for the security of the user and the bank. For example, it usually has a maximum of weekly and monthly payments, as well as maximum daily, weekly and monthly withdrawals at ATMs. In case of theft of the card, and if for some reason the thief knew the code, these limits would allow a cap on the stolen amount.

Types of payment cards

Currently, there are three large groups of bank cards.

Debit cards have the characteristic of immediately withdrawing from the account (debit) the money from the purchase or taken out of the ATM. Therefore, except for some devices that are not connected directly to the banking network (such as a toll collection machine), everything paid with these cards is no longer in our account on the same day. At all times, the money in the account is the available balance, and nothing remains to be paid.

Prepaid cards are relatively new. They have a balance that we previously procured from our bank account. If at any time we do not have sufficient balance on the card, and although we have a lot of money available in the associated bank account, we can not make the purchase. They are very similar to the electronic wallet, and allow early management of expenses per card.

Finally, the third group (and the most used together with the debit cards) is made up of credit cards. As our article deals with them, we will detail them in the following paragraph.

Specificities of the credit cards

As its name suggests, this type of cards allows you to buy on credit. That is, instead of the money from a purchase, or the one we withdraw from an ATM, is immediately charged to the associated bank account, we can pay this amount in installments.

There are many ways to pay on credit with a card, from a payment facility that is usually free and that debits the purchase amounts the following month in the account, up to credit installments with a high interest that allow you to spread the payment in months and Until years

This tool allows the user to contract a loan at any time, but not for any amount. In order to prevent people with a risk profile from incurring unattainable debts that result in losses for the bank, a credit limit is established for each card, related to the economic situation of the holder. Normally, when a card is granted it usually has a relatively low limit (for example $ 1,000), which can be extended if the user complies with the appropriate profile.

Advantages of the credit cards

The possibility of deferred payment without cost is undoubtedly the main advantage of a credit card. In effect, during a certain time (variable according to the cards but normally one month) the purchases are not paid and this ease of payment is not taxed with interest. In general, all payments by card of a specific month are charged the following month, for example on the 20th. With a good treasury forecast, it can be a very practical tool.

Credit cards have other practical advantages. For example, most car rental companies require the driver to present a card of this type, because it allows them to reserve an amount (within the credit limit that the user has) to cover possible incidents (mainly accidents and gasoline). Although the user is not charged anything and the user does not realize it, in reality the landlord temporarily consumes part of the available credit. Something similar happens with some reservations with travel agencies.


The main drawback of a credit card is that it allows very easy access to consumer credit, something that we consider in savings as one of the great enemies of the good management of personal finances. It’s hard to imagine anything worse than buying things by installments with your credit card. For two reasons. First, because almost never buy something that allows increase future income, but consumer goods and leisure. And secondly because, of all the credits, those based on the cards are the most expensive, with very high interest rates.

We repeat once again: if there is something you want to buy and you do not have the money, wait and save. Most things bought with cards are not so essential, and if you find yourself in the desperate situation of having to throw away credit card to pay for food, it is not a good idea to increase your debts.

Another drawback of these cards is that they can easily complicate your vision of your real situation. Even a good theory tool such as deferred payment without cost has its risk. If you have a high card limit, you could spend a lot without realizing it, and when you should be in the red.

The gold cards

Who has never received a gold card from their bank or even from another entity of which they were not a customer? It is a strategy in my opinion abusive, which seeks to make us believe special to take us to use a credit card paying in installments.

Normally, a nice envelope comes home explaining how wonderful we are and for this reason the bank has selected us to use the happy gold card. We have not requested anything, but there it is, with its special brightness, and its relentless arguments as “I am free” or “how elegant you will look when you take me out of the box”. Of free nothing, of course. Even if you do not have a fee, it is designed by default to postpone any payment, charging interest. If you use it, you may unwittingly find yourself paying your next plane ticket in 36 installments despite having the money available in your account.

My recommendation: throw them away as soon as they arrive in the mail.


Bank cards have made life easier for us, and it is even more relevant now that so many things are paid online. However, consumer credit is very counterproductive, and therefore we do not recommend using cards to defer payments, except within the limits of the free facility.

The post How to Use a Credit Cards appeared first on Personal Finance News.

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One of the most common fixed expenses for families is the insurance policy. It is a somewhat peculiar game, because when nothing happens it seems that we have been paying in vain, but if something happens, on the contrary it gets us out of a bind, since accidents usually represent an immediate money disbursement sometimes important. So, how to save?

When to buy insurance?

In some cases it is mandatory (car case), in others it is optional (case of life insurance). But in practice what matters is to make a small analysis of risks and benefits, and choose (or not) insurance accordingly.

For example, if we take the example of insurance Geico, we can see on their page that they offer a wide variety of services, from home insurance to life insurance, going through perhaps more surprising examples such as pet insurance or more classic benefits like the insurance for the business and of course those of the automobile.

I will take as an example the theme of animals. When you look carefully the biggest risk covered by the policy is the civil liability associated with the animal. In this case, a person who has a dog with a somewhat uncontrollable behavior, could be interested in protecting themselves from the risk of a lawsuit for having bitten a child, for example. However, another person with a very calm dog that always goes out with a muzzle could say that it is not worth it.

In short: for the saver, the insurance has to be contemplated in a very rational way. Paying an amount to cover a very unlikely risk may not be the most appropriate, but the other way around, to dispense with a small expense in exchange for exposing yourself to a risk with some probability of costing a lot of money would not be rational either. Everyone has to take care of their budget in the short and medium term.

What kind of insurance?

It is not enough to choose if a policy is going to be contracted or not. Within a family of services there are dozens of different coverages. They are a bit like insurance in insurance, and therefore the previous advice applies.

Let’s take the case of a car insurance. Some include replacement cars, others do not, some include fines, others do not, etc. Again, depending on our behavior and our interests, we will design the insurance that best suits our needs and our budget. If you have two cars, one of which you use little, you may not want the insurance to include a free replacement car. If you drive and park carelessly at times, you will probably be fined.

That is why it is essential to make the effort to read in detail the conditions of the contract. It is not going to be that in spite of paying very expensive the coverage is bad, or that precisely the policy is very cheap because it does not cover almost anything real. It is a quick price quality analysis work (we are not experts either), but essential.

Always compare

Although in recent years tools have appeared to compare insurance, the truth is that unless very specific cases (for example the car) it is still difficult to compare prices and benefits, precisely because most products vary greatly as their coverage varies and particular conditions. Even in car insurance comparators you have to be careful, because sometimes the products are very different.

However, there is no choice but to compare. To simplify, I think we should focus on the two or three coverages that we consider most important and try to make queries on different pages.

Be aware of renovations

To avoid having an automatic renewal of the insurance, it is best to create some type of alarm a few months before the expiration (with the mobile phone or the mail works very well). At this time you can compare prices, talk to different insurers and even negotiate with the current one to get a better price. Each company has its policy and its promotions, and sometimes there can be significant savings.

The post Insurance Policy: How to Save appeared first on Personal Finance News.

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Throughout all these years a lot of material has gone through my hands, where many topics related to financial freedom are discussed. In all this material I miss that one does not speak of a key aspect: how to create our own business as a way to achieve financial independence.

If you look, especially in the English-speaking world, when we talk about financial freedom we always find the same recipes in books and blogs on the subject: speculate in the financial markets.

It sells the idea that accumulating money in large quantities is easy and fast and that everyone is able to get it (when it is the opposite, to speculate successfully is very difficult). People go crazy to the market victim of the shift marketing campaign and end up losing a significant part of their money.

Without denying the importance of knowing how to move successfully in the financial markets to achieve our goals (I use them myself but in a totally different way), today I want to focus on transmitting the idea of ​​why developing your own business is one of the ways smarter to achieve financial independence.

As you already know, I am in favor of diversifying our personal finances in different sources of income, and developing our own business allows us to create multiple products and services that will increase our current account exponentially.

Why Create Your Own Business?

It may seem contradictory to speak of financial freedom at the same time that we talk about creating a business, because actually raising our own project will make us dedicate more hours and more effort than a job as an employee.

What I am going to propose to you in these lines is not that you create a traditional business, with a physical office, warehouse and employees. What I’m going to propose is that you develop your own online business.

The advantages of creating an online business compared to a traditional physical business are many, but for me the most important, and that is what will allow us to gain freedom, is that they are businesses that can be automated by dedicating very little time to their maintenance and that Once this is achieved, you can bill money while you are sleeping or on vacation. Your computer becomes an ATM.

It is essential that you distinguish from the beginning the difference between business and autonomous work. Having a professional office of your own or any other type of employment does not stop being a job to which you will dedicate more hours than if you worked for another.

When I talk about creating a business, I do it taking into account that the objective is to increase the quality of life, not to kill you to work. It is very easy to know if you have a self-employed job or if you really have a business: If you are self-employed your income stops if you stop working, in a business you continue to enter money even if you do not work.
With the online business you stop working for money and the money goes to work for you 24 hours a day. But before arriving at this situation you have to be aware that first you will have to dedicate many hours until the business takes off, that is, in the beginning your business will be a job so you must be careful not to stay in that phase forever. I repeat, your ultimate goal should be to automate your business.

How Do I Create My Online Business?

If you are not familiar with the online business world, you are likely to see all this as something distant and even rare. You may be skeptical about the possibility of making money online, or you may be interested in the topic but have no idea how to start taking the first steps.

If you have little or no knowledge about the creation of businesses but you have an interest in creating yours, it is very likely that you wonder where you have to start working. The first thing you must do is decide what you are going to contribute to your potential clients, and for that you have to be clear about a series of basic elements so that your business has the possibility of succeeding.

Determine your market

The businesses that have been successful have been those businesses that have brought enormous value to customers who have purchased their products or services. To be successful as an entrepreneur or to have greater consideration in your company if you are employed, you must focus on providing value above the average.

Many people enter a business or a job for the money that can be earned in it without being aware that they are not able to stand out in the sector, so they end up disappointed and without achieving the desired results. So remember: first add value, then money.

Therefore, in order to be successful in your own business you must determine your perfect market, that is, that market in which you can add more value to your potential clients and where you can position yourself as a relevant expert.
To know what you can dedicate yourself to, you must carry out a personal analysis process where you determine what your capabilities are.

To carry out a correct personal analysis, you must carry out a reflection exercise and write down on paper what your main assets are as a person based on your skills, knowledge, hobbies and experiences:

Knowledge: Here you must write all those knowledge that you have acquired in a formal way, through the educational system and through readings, throughout your life.

Skills: Everything you know how to do but have not studied. All those things that are good for you, without you having to spend time learning them.

Hobbies: All those things that you like.

Experiences: It is about describing all those personal and professional experiences, both positive and negative, that you have had and what you have learned from them.

Once you have made your personal analysis, it is time to determine the market in which you are most likely to succeed in your business by combining your knowledge, skills, hobbies and experiences. For example:

1) Journalism (knowledge) + writing (skill) + football (hobby) = Online magazine about football.

2) Finance (knowledge) + communication (ability) + ability to motivate (experience) = Financial coach

3) Pastry (hobby) + video edition (knowledge) + social networks (skill) = recipe blog video.

Your market has to be profitable

Once we have determined the market or the markets in which we can position ourselves as experts it is necessary to know if it is going to be worthwhile to get going.

A market will be valid for our business if it is monetizable, profitable and scalable. That is to say, the market that we have chosen must have enough public so that we can live on our products and services, it also has to be a growing market that allows us to reach more people each time we sell a new product.

A quick and easy way to know if our market is broad enough is through Google Adwords. With the keyword search we can find those related to the market that interests us and thus see what is the relevance of the keywords. The more searches a certain keyword has, the more likely it is that it is an ideal market for our business.

What to Offer in My Online Business?

When we have already determined what our market is and we have verified that it can be a profitable market, it is time to start thinking about how we can develop our business and what we can offer.

The best thing when creating an online business is to offer your own products. Creating quality products is an unquestionable example of authority and will make us position ourselves as experts much faster than if we promote third-party products.

My recommendation is that you make a cross selling strategy, that is, that you combine physical products and services that complement each other. Depending on your market and your field of experience you can develop certain products or others, but there are certain products that can be offered in almost all businesses:

  • Books or ebooks
  • Online courses
  • Mentoring services

You can complete the utility generated by your products and services to your customers by recommending third-party products, which will increase your market positioning and help you increase your sales.

Finally, do not stop offering value for free. Offering free value not only helps many people who can not pay for a certain product or service, but builds your personal and professional brand by exposing much of your knowledge

For this there is a basic tool: the blog.


To create an automated online business that positions you as an expert in a certain subject will accelerate your process towards financial independence. Not only will you get money while you sleep, but it will make new related projects arise which will increase your value and make your project grow to unsuspected limits.

The post Why You Should Create Your Own Online Business appeared first on Personal Finance News.

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As is tradition every year in the first days of January we see how the vast majority of people around us make promises of purposes to meet during the year that begins, although those purposes are abandoned within a few days.

Many times the abandonment of the objectives that we propose at the beginning of the year occurs because, deep down, the person who poses them does not really want them, which makes the first setback that arises as an excuse to leave an objective that I really did not want.

However, in other cases, people do not achieve what they propose because they have not planned well the objectives to achieve and have not established the process that brings them closer to that desired goal.

The reality is that, as a general rule, we will not achieve anything important in our lives if we do not stop to think carefully about what we really want and how we are going to work to achieve the final goal.

As you may have imagined, the world of personal finance does not escape this tendency of lack of goal setting. I know very few people who, in the first days of each year, analyze what their financial situation is at that moment and what monetary objectives they want to achieve during the next year ahead.

So that you are not one of those people, today I want to share with you an effective formula to establish your financial objectives for the year 2019 (although it is also valid for any other field, not only the economic one) and a series of steps so that the Achievement of your objectives is as accessible as possible.

Steps to Achieve Your Objectives in 2019

Although the financial sphere is one of the most important aspects of a person’s life, and a very large percentage of people suffer money-related problems all their lives, there are many who take the money issue as a taboo and avoid treating the issue for what it is, something important.

The consequence is that they do not consider fixing their situation by taking the bull by the horns and establishing priorities for their personal finances. With the aim that this does not happen to you, here I leave a series of steps that you can follow to set realistic financial goals for 2019 and be able to get them.

1.- Be realistic in your approaches

When you discover the exciting world of financial independence and economic improvement, as in everything we discover and we are interested, we tend to go to the bag trying to achieve in a short time those goals that we have not achieved in all our previous life.

As happens when we start to go to the gym or when we start to make a diet, the excess of dedication can cause the opposite effect to the desired, that is, the abandonment.

Thus, if we set ourselves very ambitious financial objectives to achieve in a year, both the lack of discipline and the slowness in achieving the objectives make us give up our attempt.

That is why it is very important to establish realistic and achievable objectives that allow us to design a pleasant task to develop. A very common mistake is to want to get as much money in a year as you have spent in your life in all previous years. Remember that you have spent your whole life without focusing on improving your personal finances, so neither you nor your brain is trained to reach such high levels.

Perhaps the objective of the first year for you is to make an analysis of what is the real situation of your personal finances and dedicate yourself to solve the problems they may have before looking to increase your wealth. Or perhaps first you need to train first to know how to achieve higher levels of financial freedom. Or if you already have an advanced path, your goal may be to create new sources of income.

Be that as it may, write your objectives in detail on a piece of paper, but do not do it in any way.

It is proven that the most effective way to establish objectives is to do so by defining them in a specific, measurable, attainable, relevant and temporary way. That is, we must establish objectives that are as detailed as possible, quantifiable so that we can evaluate and measure our evolution, as well as being a realistic objective as we have said and that has a deadline of achievement.

That is why the generic objectives are not valid, such as “On December 31st, I will have much more money in the account”; A well-defined objective should read: “On December 31, 2019 I will have 10,000 $ more in my current account than I have today, January 1, 2019” (for example).

2.- Act, analyze and review

Once you have established your realistic goals correctly, the moment of truth arrives. It’s time to get to work, and for this it is necessary that you do it with the necessary tools. With the best training, the best resources … look for the best weapons at your fingertips to achieve your goals.

And, finally, devote time to your cause. If you have bothered to think and set your financial goals, the least you can do is put as much as you can to achieve them.

It is not possible to achieve something without spending a lot of time. Therefore, you must begin to act as soon as possible and with constancy. I suggest that if you are serious about achieving your goals you dedicate at least one hour a day to work on them, with that you will be spending 365 hours at the end of the year working on achieving your monetary objectives. How much are you currently dedicating?

The post How to Get Your Financial Objectives in 2019 appeared first on Personal Finance News.

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It seems a lie but today, with the large amount of information that exists on the Internet, many people still make mistakes in the management of their personal finances. It seems as if people are not able to learn from all the financial problems they have lived or are living, and when these problems are solved they quickly forget about the past and act irresponsibly with their money again.

If we want to improve our relationship with money and enjoy a much healthier personal finances that do not generate concerns and allow us to sleep at night, we must change the chip and analyze how we behave when managing our money. Do we keep track of our spending and our debt? Do we control those small daily expenses that add up little by little? Does our money work for us? Do we know the risks of the financial products that I request at the bank?

I already say that may seem a lie but the reality is that many people would answer with a no to these and many other questions like that in everything related to the management of their personal finances. How do you intend to improve your financial situation if you continue to make the same mistakes that have caused you to suffer some kind of financial problem?

Since I do not want you to make mistakes when managing and managing your bank account, today I want to present to you what I consider to be the six most common mistakes people make when it comes to managing their money. Of course there are many more, but today I want to talk to you about the most common ones. Take note and correct everything that you are not doing well and forget forever to worry about your financial situation.

6 Financial Errors You Must Avoid

As I say, there are hundreds of mistakes, but I think these are the most serious ones. Maybe many of you have already heard them, if so, it is worth remembering them. If on the contrary you discover that you are making a mistake and you did not know it, get to work!

Our income only comes from the salary.– This is a very common mistake among the vast majority of people. Their only source of income is the salary they receive for working for others, which means that in the current economic context, with wages falling, it may be insufficient. If this is your case, it is urgent that you begin to build alternative sources of income. Ways to create additional income there are thousands. You can take advantage of some hobby: For example, if you are good at making designs you can create your own shirts and sell them online; You can write a book about a subject in which you are an expert, self-publish it, and sell it over the net … In the end, you should look for some skill or knowledge that is monetizable and profitable.

Not having an emergency mattress.– Another of the basic (and very serious) mistakes that most people make in the management of their finances is the lack of an emergency mattress that allows them to be protected if the Things get ugly. In order to know how wide the mattress should be, you should analyze the amount of your main expenses (housing, food, supplies …) for a whole year. Ideally, you have a savings account or a short-term deposit with the amount of two years of major expenses, which will make you get out of step if for example you run out of work.

Do not keep track of our personal finances.– When our financial situation is bad we racked our brains controlling each of the cents that come out of our portfolio, however, when things go well we downplay the control of our finances. Well, very badly done. It must be a custom for us to keep track of the evolution of our economy (without becoming obsessed) regardless of the situation. How do you pretend not to have financial problems if you do not control your finances when they are going well?

Do not protect ourselves from the dangers.– People trust too much that in the future they will be able to enjoy decent social benefits. I do not want to be a doomsayer, but as things evolve, it is very likely that young people do not enjoy a retirement pension as we know it today. Either these will be of misery, or they will have very hard access conditions. For this reason, I suggest you start protecting yourself against the future and that you create a capital that can complement your income for tomorrow. But forget about the products that banks offer you (pension plans), since they are expensive and fiscally inefficient. Better study to create a liquid investment portfolio, cheap and with low taxes.

Not having a money creation system.– You must put the money to work for you. Create a system that combines additional income to your payroll, savings and investment. It also combines flow income with capital gains. All this will mean that over time you have accumulated capital that you will not get if you only focus on salary income.

Do not buy in a compulsive way.– The compulsive purchase, the one that we make following fashion, is the most harmful purchase we can make. Normally we buy products that we do not really need, and often we do it on credit, paying high interest. As I always tell you, guide your life by the principle of necessity, buy only what you really need. Every time you go to buy something with a price above $ 100, devote 48 hours of reflection to know if it really is a product that you will use or if it is just another whim. Of course, it goes without saying that you should get rid of all the credit cards, because they can take you to an impasse.

These are for me the main financial mistakes that most people make, and I hope that from this moment you can correct them if you are also committing them.

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If your goal is to achieve the highest degree of financial freedom possible in your life you will have to leave a space in your financial plan for investment in the markets. This is not news, in fact I have already mentioned this on more than one occasion in the pages of this blog.

For us, minority investors, it is very important to have control over the costs of everything related to the management of our investment portfolio, since together with taxes, they are the factor that directly affects the reduction of profitability obtained through our investment products.

With regard to the costs of our operations, if we choose as I recommend for a long-term passive investment, the transaction costs will be reduced, but even so, it is necessary to minimize them. Therefore, choosing with certainty the broker with which we are going to work is of vital importance.

6 Keys to Choosing a Good Broker

A broker is nothing more than a company that acts as an intermediary between investors and financial markets. For this intermediation, our broker will charge us a series of commissions for carrying out their work. Therefore, select the appropriate broker according to our investment time frame, the type of management (active or passive) and the frequency with which we operate with our money. So today I want to give you six keys so you can choose the broker that best suits your needs:

Commissions. A broker charges a large amount of commissions for its activity. Thus, we can find intermediation commissions, those that the broker charges for carrying out the operations that we order; canons of stock exchange, that is to say, the commission charged by the exchange in which the shares or funds are quoted, through which we invest our capital and that the broker transfers us in the form of a commission; custody commission, which is the commission that the broker charges us for keeping our money stopped, without investing, in our securities account. What we should get is a broker with these commissions as low as possible.

Markets covered. If we want to create a portfolio of investment as diversified as possible, we should be able to access as many companies and investment funds as possible, not only from our geographical area, but from all the geographical areas of the world.

Product offer. Unfortunately, not all brokers offer the same amount of investment funds, or all the managers. Therefore, it is necessary to observe well how many financial products that interest us are available in the brokers we analyze. We must select the one with the largest product offer present.

Customer Support. It is essential that the broker you choose to carry out your financial operations has a fast and efficient customer service. Remember that you are playing your money, and if the company that offers you the intermediation service does not act with agility, it is not valid to work with it. And of course, the entirety of this service must be free.

Platform. One of the conditions that you must demand from the broker you are going to work with is that it presents an easy-to-use and intuitive operating platform. It should be very easy to enter the purchase and sale orders, as well as the possibility of monitoring your portfolio to know at all times what profitability you get, in addition to other important variables such as volatility.

Broker’s financial position. Brokers are companies, and as such they have a certain financial situation. We will be interested in a broker with a solid financial position, since if we do not have it, we could have problems returning our capital when we decide. Therefore, make sure that your broker is a company that is regulated by the national stock exchange and that presents audited accounts.

These are, in my opinion, the main characteristics that we must demand of a broker to compensate us for being his client. Today there is a great competition among this type of companies and there are innumerable offers (usually consisting of reduction of commissions) to attract potential customers.

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A debt consolidation loan is a personal loan that is used specifically to combine multiple debts into a single monthly payment. You get a loan and use the funds you receive to pay off multiple debts of the same type. This offers several advantages:

a) Simplify the refund, so you should only worry about an invoice

b) In many cases, it reduces the interest rate applied to the debt, so it saves money

c) You can reduce your monthly payment and always offer fixed monthly payments, which are easier to manage in your budget.

d) You can settle your debts faster, even if you pay less each month, because it makes the payment of the debt more efficient.

What types of debt can I consolidate with a personal loan?

In general, you can use debt consolidation loans for two types of debt:

  1. Debt of the credit card
  2. Student loan debt

In general, you must keep each type of debt separately. Therefore, if you have credit cards and student loans to pay, you may need two consolidation loans. However, with the consolidation of credit cards, you may be able to include other unsecured debts, such as medical bills to your charge, personal loans and store lines of credit.

How does a debt consolidation loan work?

Consolidation loans do not always work in the same way. Specifically, Direct Federal Consolidation Loans are unique. But this is what you can usually expect:

  1. Apply for a loan for an amount that covers all the debts you wish to consolidate.
  2. Once approved, the loan funds are distributed to pay off all those debts.
  3. This leaves only this loan to pay.
How to use a credit card debt consolidation loan

Credit card debt consolidation loans are the most common. They offer low interest rates and fixed monthly payments, which are often lower than what you are paying now. Low interest charges mean that you can often pay off your debts faster, even though you are paying less each month.

  1. Apply for a loan large enough to cover the debts of your credit cards and other obligations you wish to pay.
  2. You choose a term that offers monthly payments that fit your budget. A period of 36 to 60 payments is recommended.
  3. The lender reviews your debts and credits to see if you qualify, based on your credit score and your debt / income ratio (DTI).
  4. If you approve, the interest rate will be based on your credit score.
  5. Your DTI must be below 41% to be approved. If your ratio is only less than 41% once all your other debts are paid off, then the lender will require a direct outlay. This means that he will send the money directly to his other creditors instead of giving it to you.
  6. This clears the balances on your credit card, leaving only the loan to pay.
How to use the consolidation of debts of private student loans

When it comes to student loans, there may be two ways to consolidate, depending on the type of loans you have. If you have federal loans, you can use federal or private debt consolidation loans for them. If you have private loans, then you have to use private consolidation.

Private consolidation loans work in a similar way to credit card debt consolidation loans, only for a different type of debt.

  1. You apply for a loan that covers all the student loans you wish to pay. This can include both federal and private loans.
  2. You then choose a term that offers monthly payments that work for your budget. Again, you will usually want to keep the term in less than 60 payments.
  3. The lender will review your debts and credit to see if you qualify.
  4. The interest rate will be based on your credit score, although student consolidation loans tend to offer lower rates than you can get for credit card debt.
  5. Again, your debt-income ratio is important for approval and how the money will be disbursed once it is approved.
  6. Once approved, the loan funds are used to pay your existing loans, leaving only the consolidation loan to pay.
How a direct federal consolidation loan works

This process works differently from other types of consolidation, because it is a federal option for student loan relief. This is what you need to know:

  1. Apply for a Federal Direct Consolidation loan; The amount should be enough to pay for all the federal loans you want to consolidate.
  2. To qualify, you must have at least one direct consolidation loan among the loans you have for consolidation. Your credit score is not a qualifying factor.
  3. Direct Federal consolidation always has a term of 10 years, and monthly payments depend on the amount of consolidated debt.
  4. The interest rate is calculated by taking a “weighted average” of the rates of your existing loans.
  5. Once approved, the funds are disbursed to pay your other federal loans.

The use of a Federal Direct Consolidation loan has the added benefit of making more debts eligible for federal payment plans. It may also be necessary to make sure that all of your loans qualify for the forgiveness of student loans, if you work in the public service sector.

Frequently Asked Questions about Debt Consolidation Loans Are debt consolidation loans a good idea?

This depends on your financial situation, but in many cases, they may be the best solution. If you have to pay several debts and your budget is very low, consolidation loans can be extremely beneficial.

You integrate all your debts into a single monthly payment and make the payment of the debt more efficient. As a result, you can pay less and still get out of debt faster. You will save both things: money and time.

Can I get a debt consolidation loan with bad credit?

Yes, but bad credit is one of the factors that can make a consolidation loan less beneficial. For federal direct consolidation loans, the credit score is not a factor for qualification. Therefore, even if you have a FICO score of 500, you can consolidate student loan debt, as long as it originates from a federal program.

For credit card debt and the consolidation of private student loans, your credit score not only affects loan approval, but also determines the interest rate for which you qualify for the new loan. If the rate is too high, it does not provide the cost savings you need. The monthly payments will be higher, too.

Always be sure to calculate loan costs carefully when looking for debt solutions. Consider the monthly payment and the total interest charges; consider this against what you are paying now. If the loan does not offer you monthly savings or reduction in your total interest charges, you may be better off with another solution.

Do Debt Consolidation Loans Hurt Your Credit?

When used correctly, debt consolidation loans should improve your credit instead of hurting it. A consolidation loan pays your balances in full, so it’s good for your credit history. It also improves your credit utilization rate: the ratio that measures the use of credit versus the total credit limit. These are the two most important factors used to calculate the credit score. Then, a consolidation loan can be extremely beneficial for your credit.

However, if you consolidate in the wrong circumstances and can not keep up with the payments, the default will damage your credit. It can also damage your score if you do not keep up with the minimum payment requirements for your debts during the subscription. Before receiving loan approval, make sure you meet all the payments assigned to your debts; otherwise, you can create lost payments on your credit history.

What does direct disbursement mean in a debt consolidation loan?

The direct disbursement simply refers to when the lender requires that it is he who sends the money directly to his other lenders. This requirement depends on your debt to income ratio.

To qualify for any loan, your DTI must be below 41% with the new loan payments included. However, consolidation loans are used to cancel the debt, so it will change your DTI.

 If your DTI with the new loan AND your existing debts are below 41%, the lender will disburse the consolidation loan funds to you. Then, you will send the money to pay your other debts.

However, if your DTI is only below 41% once the other loans are canceled, the lender will require a direct outlay to your creditors.

What is the best debt consolidation loan for federal student loans?

This depends on your financial situation, needs and objectives.

If you work in a public service profession that qualifies for the forgiveness of student loans (teaching, nursing, first responders), you will almost always want to use a Federal Direct Consolidation loan.

If you face financial difficulties and you need monthly payments to be as low as possible, Federal Direct Consolidation is also the best option. Consolidate, then enroll in a payment plan based on difficulties, such as “Pay as you earn”.

On the other hand, if your main goal is a faster payment and save money on interest, look for private consolidation.

When are bad debt consolidation loans?

  1. When they increase, instead of decreasing the total interests
  2. If the loan increases your monthly payments to an amount that you can not comfortably pay
  3. If you do not have stable income to meet fixed monthly payments

Debt consolidation of private student loans is also bad if you ever think you may need a federal relief option or loan forgiveness. A private consolidation loan effectively converts the student’s federal debt into private. Therefore, you will no longer qualify for federal aid options in the future.

Where can I get a loan to consolidate my debt?

If you want to use a Federal Direct consolidation, you can request it through studentloans.gov. For private student loans and credit cards, you can go to any traditional lender:


Credit Cooperatives

Online lenders

Loan comparison websites

It is best to explore the loans of several different lenders to find the best rates and terms. If you do not visit a loan comparison site, check with several lenders on your own. A lower rate is always better. Also beware of the penalties of making prepayments or prepayments; You will want to avoid the loans that include them. This way, if you get extra money and want to pay the loan faster, you can do it without extra charges.

Why can not I consolidate together, student loans and credit card debt?

Student loans are usually unique, even when it comes to loans issued by private lenders. Private lenders tend to offer lower student loan rates than other unsecured loans. Basically, it is your way of recognizing that many student loan borrowers have low credit scores or no credit at all. Since most students would not qualify for low rates, they soften the standards of the loans and offer better rates from the beginning.

But that makes the merger of student loans and credit card debts problematic. Credit cards have relatively high interest rates. Therefore, using a personal loan to consolidate credit card debt almost always offers a reduction in the rate significantly with a good credit score. But a low rate on a credit card debt consolidation loan can often be higher than the original rates on your student loans.

There is also a problem with the discharge during bankruptcy. Student loans, private and federal, can not be easily written off during bankruptcy. On the other hand, the debt of the credit card, which is downloaded very frequently. So, if you combine the debts, it creates a problem with the discharge of possible bankruptcy.

For all these reasons, most lenders will not allow you to consolidate the two together. And even if you find a lender who could do it, it’s really not advisable.

Why do I want to limit the term from 36 to 60 monthly payments?

There are two basic reasons why you will want to keep the limited timeframe in a consolidation loan:

  1. A longer term means more months to apply interest charges, which increases total costs.
  2. It is difficult to avoid the use of credit and, in addition, assume new debts for more than five years.

When you consolidate, you want to focus on paying off the debt before you start taking on a new debt. This is especially true for the consolidation of debts with credit cards. If you run new balances too quickly, consolidation worsens your debt situation instead of improving it. Basically, it increases your debt instead of paying it more efficiently.

Giving up credit cards for a few years can be difficult, but it is feasible. Renouncing credit cards for more than five years can be downright unfeasible. It’s like a yo-yo diet: it gets tired of eating insipid and boring food, so it finally fails with the program. It is the same here.

Debt consolidation loans are the best solution when:

The current debt is … Credit score is … The interest rates are … The monthly payments are … The main objective is …
Credit card debt consolidation loans Generally less than $ 50,000 and most debts are current Good or excellent High (like more than 20%) They will use more than 10% of their income Pay your debts faster and save money
Private student debt consolidation loans Usually less than $ 50,000; be careful when converting federal debt into private Higher than when you first took out your student loans High compared to what you would qualify for the consolidation loan Higher than you would rate in the consolidation loan Lower the interest rates applied to your debt
Direct consolidation federal loans Federal student loans with at least one direct loan n / a (the credit does not apply to loan decisions) n / a (federal consolidation will not reduce your rates) n / a (to reduce payments, you must enroll in reimbursements based on difficulties after consolidating) Simplify reimbursement and take as many loans as possible to be eligible for federal aid programs

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The times I mentioned in the blog the word dividends and had not yet explained what they are or how they work.

And it is that the dividends are the fundamental piece in the strategy of investment in stock market that I teach in this blog and that I myself follow.

They are the main objective of the investment in stock market with the strategy “Buy and Hold”, so I am going to dedicate a small post where I explain in an easy way what the dividends are and how they work.

Sometimes, when I give some of my sermons on the stock market, I assume that everyone knows what the dividends are, but as the conversation progresses I realize that not everyone is clear about it at all. The majority intuits that they can be for the context, but they do not know it for sure and I have to stop to give them a more detailed explanation.

Since this blog deals with investment and finance starting from scratch, explaining what dividends are becomes basic.

If you want to invest in the stock market with the strategy of collecting dividends, the first thing is to learn a little about them.

Basic Concept

The dividend could be defined as the part of the profits that a public company uses to remunerate its shareholders.

When you have shares of a company you become its owner, owner of a part of the company. So, as the owner of that company, you have the proportional part of the profits obtained by that company. Even if it is a very small percentage, you own a part of the company, for which part of your benefits correspond to you.

The dividends paid by a company to its shareholder owners are decided by its board of directors and approved by a vote at the general meeting of shareholders, detailing the amount, modality or date of payment.

Types of Dividends

These are the types of dividends that you can receive as a shareholder:

Dividends in cash: the usual thing is for companies to pay dividends to their shareholders in cash. The shareholder receives in his securities account, through the broker, the payment of the corresponding amount.

Dividend in scrip: in this modality, the company pays the shareholders the dividends in the form of more shares. Also through the broker, the corresponding actions are added to your securities account.

Extraordinary dividends: if the company has unexpected benefits, or a capital that does not know how to dedicate it, it can approve an extraordinary dividend payment not foreseen within the ordinary dividend payment for that year, normally in cash.

Explanation of the Dividend in Scrip

As I have commented, the payment of the dividend in scrip is the remuneration to the shareholder in the form of more shares of that company. However, this modality has some peculiarities that I will explain below.

When a company makes the payment of dividends in this way, it first delivers to its shareholders some products called “rights”.

Suppose you had, for example, 200 Apple shares. In that case, the company would give you 200 rights. These rights are delivered to you through your broker, the day in question appear in your securities account. These rights are quoted at a certain price and can be bought and sold in the market as you will see below.

Once you have those rights in your possession, you have two options:

Sell ​​them: you sell the rights at the market price and you get the money. You give the order to your broker, they are sold and you get their price in cash. So, even if the company pays you in scrip, you can decide to get the cash.

Redeem them: You can use the rights to exchange them for company shares. For example, the company can decide that with 5 rights you acquire a new share of the company. So, if you want to buy shares and you have 100 rights, you could exchange them for a total of 20 shares. You just have to give the order to your broker and convert the rights into shares.

You could also exchange a portion of the rights for shares and sell another part to obtain cash. In the same way, if by redeeming the rights for shares you will have some rights left over because they are not multiple numbers, those rights would be automatically sold and converted into cash.

Do not be scared with this “scrip dividend”. It is all simpler than it may seem here, and the way to perform these operations with the broker is extremely simple.

Peculiarities of Payment in Scrip

A priori, the payment of dividends in shares seems fantastic: you receive more shares of the company as payment and you continue to accumulate shares in the portfolio.

However, the collection of dividends in shares is sometimes not as good as it seems.

When a company pays its dividends in shares two circumstances can occur:

Dilution: the company pays its shareholders in new shares, but what it delivers are newly created shares, therefore, the company is now divided into more “pieces”. You have more actions but they are worth less, therefore, you stay the same as you were. That type of payment is like not receiving any dividend.

To understand it better, suppose I have a cake that I give birth in 12 parts, you have 6 parts, so you have half the cake. Now I tell you that I’m going to give you another 6 parts of the cake, but what I do is split the whole cake into 24 pieces and I give you those 6 new parts that I promised you. Now you have 12 pieces of the cake, but being smaller you still have the same thing, half the cake; therefore, even if you have more pieces of cake, you still have the same amount, since the portions are smaller. The same happens when a company divides the company into more shares and delivers them to its shareholders.

Amortization: in this case, the company also makes the payment of the dividend in the form of shares, but after having delivered these new shares to its shareholders, what it does is repurchase new shares in the market, in this way, the shareholder now has more shares but the company is still divided into the same number of total shares. In this way, the shareholder does not lose value, he gets more shares of the company that have the same value as the ones he already had. This system of amortization of capital represents a true dividend payment, not as in the previous case.

When receiving the dividend payment in the form of shares by one of your companies, you must take into account if the company plans to amortize by repurchasing shares or, on the contrary, will dilute them by offering only new shares.

As you have seen, the case of amortization represents a true dividend payment, while in the case of dilution it represents a symbolic payment with no real value, at least until the company does not repurchase shares.

In the end it is simple: if the company increases the number of shares of which it is composed, the shares lose value as the company is divided into more “pieces”.

If, on the other hand, the company makes a repurchase of shares with its own funds, the shares increase their value since the company is split into fewer “chunks”.

It is basically the same as in the example of the cake.

How to Calculate the Dividend Yield

Dividend yield is represented in a percentage, and that percentage is linked to the price of a share price.

What I show you now is a simple math lesson.

Suppose we have the Apple company, and its board of directors has decided that, since the company has had very good profits this year, it will make a dividend payment to its shareholders of 1 dollar for each share.

Now suppose that you bought Apple shares for a total value of $ 1,000 at a price of $ 10, therefore you have a total of 100 shares. If you are going to receive 1 dollar for each share, you would get a total of $ 100. That means that you will have a dividend yield of 10% on the $ 1,000 you had invested.

But now let’s say the case of a friend of yours who bought Apple shares, also for a total amount of $ 1,000, but at a price per share of $ 8. In that case, your friend with those $ 1,000 would have obtained the amount of 125 shares of the company. If you receive 1 dollar of dividends for each share, that would make a total of $ 125, and would represent a return of 12.5%.

As you can see, the stock price of the share is the one that finally determines the dividend yield percentage that you can obtain.

The amount of dividend that the company will pay is fixed, but depending on the price at which you buy the shares, the percentage of profitability you are going to obtain is calculated.

Logically, the cheaper you buy the shares, the more dividend yield you will get, and on the contrary, even if a company pays a lot of dividends, if you buy the very expensive stock, you will get lower profitability.

As you can see it is something simple to understand. Simple mathematics.


There is no better feeling for an investor in dividends than when you see an income in your account for a good amount of dollars from one of the companies that you have in your portfolio.

A fantastic feeling. Better than a payroll at the end of the month, because dividends are passive income: you have not had to work to get them.

That’s what makes dividends a very interesting asset.

They are a flow of money that goes directly to your pocket. Just what rich people are looking for.

And you already know that the dividend is the primary objective in the stock market investment with the “Buy and Hold” strategy.

The objective of this strategy is to accumulate enough stocks and enough companies so that the collection of your dividends will provide you with a good return on your money, or a constant flow of money with which to achieve financial independence one day.

The post What are dividends? Direct passive income to your pocket appeared first on Personal Finance News.

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