Personal Finance

How and Why to Calculate Your Personal Net Worth (Includes Calculator)

Any good financial planner will tell you that the first step toward developing a long-term financial plan is calculating your personal net worth. Net worth is a better measure than your annual income or your credit score as it provides a snapshot of your current financial state; it is the difference between the assets [...]

The Wealth Effect and Consumer Spending

The Wealth Effect is the term used to describe spending increases that tend to accompany an increase (or perceived increase) in wealth. The wealth effect premise says that when stock portfolio, real estate, and other personal wealth values increase, consumer spending tends to rise as people feel more secure about their wealth. To [...]

The Impact of LIBOR Rates on Personal Finance

LIBOR, the London Interbank Offered Rate, is the most active interest rate market in the world. The LIBOR is fixed on a daily basis by the British Bankers’ Association and serves as a widely used short-term interest rate benchmark. LIBOR is designed to indicate the cost of borrowing between the world’s largest and most [...]

What Are Mortgage Qualifying Ratios?

Qualifying ratios are a set of ratios used by lenders to compare a borrower’s income to their proposed monthly mortgage expense. Lenders use these guidelines to determine the credit-worthiness of potential home buyers, taking into consideration all monthly housing expenses including the mortgage principal, interest payments, homeowner’s insurance and property taxes. Depending on [...]

Investing in Certificates of Deposit (CDs)

A Certificate of Deposit (CD) is a time deposit that entitles the holder to receive interest that is typically higher than traditional savings accounts. CDs pay these higher rates of interest because the holder of the CD agrees to a set term. Certificates of deposit are offered by most banks, credit unions and [...]

The New Standards for Mortgage Loan Approval

With the recent, widely reported, problems in the subprime mortgage market, lenders have developed more stringent standards when considering mortgage loan applications. While people who can demonstrate good credit history are not being dramatically impacted, borrowers with flawed credit are being more closely scrutinized, especially now that the lender cannot count on rising home values [...]

What is Subprime Lending?

Subprime lending, also known as second chance or near-prime lending, is the practice of extending credit to borrowers in ways that do not meet “prime” standards. Subprime borrowers may be classified as such due to bad credit or a lack of credit history, maxed-out credit, or less than desirable debt to income measures; any [...]

Choosing Between Separate and Joint Bank Accounts

While it was once pretty much given that a newly married couple would share their finances in a single account, this is no longer the case. More and more couples seem to favor a system in which each spouse gets their own money and often a third account is set up as a joint [...]

Evaluate Your Financial Situation Using the
Debt-to-Income Ratio

Most people have some kind of debt, whether it is in the form of a mortgage, student or auto loans or credit card debt. It’s important to understand that not all debt is bad. Carrying a mortgage, for example, can make perfect financial sense and help you to enjoy the benefits of home ownership [...]

Develop a Personal or Family Budget
to Achieve Your Financial Goals

A personal or family budget is a plan to effectively manage money by tracking your income and monitoring your expenses. Developing a budget is a critical component when setting your financial goals. Done properly, a budget can help you to optimize the use of your income and minimize financial stress. You should be [...]