Friday, February 17, 2012
6 Deadly Financial Sins
Source : SiliconIndia:16 feb 2012
To maintain finance, it’s good to know what you should do with your money but tips what you shouldn’t do will make you smarter financially. Here are six deadly financial sins – which you should never commit.
Co-signing a Loan
When you co-sign with your partner for a loan, it means you are agreeing to pay if the partner fails to pay. The lender may catch hold of you if your partner doesn’t make payments. Even if you are sure you could cover the payments, experts’ advice that you should step back and ask why you are being asked to co-sign. Is it because the borrower has a bad credit score and sketchy financial history? Or the borrower is looking forward to borrow a huge amount? Figure out the answers before you sign, rather drop the idea because it is no point of being accused because of your partner’s bad decision.
Buying Variable Annuities
You shouldn’t buy these variable annuities, especially in a retirement account. These annuities are too expensive but plain as simple as well. These variable annuities are a better deal for the agents rather than consumers. Relatively you should build your own investment accounts through low-cost exchange-traded funds or no-load mutual funds.
Designating a Minor as a Life Insurance BeneficiaryLife insurance benefits cannot be paid to minors. If you make such mistake then ultimately, a judge will oversee how the funds are distributed to your young ones. To make sure this doesn’t happen, you must set up a revocable living trust and make the trust the beneficiary of your life insurance. In this same trust, you can include the proceedings to be used by your minors.
Investing in a Long Term Bond FundsBond funds are never a good help for investors. In an individual bond you can hold the investment to maturity and be assured that you will get your principal back (in case you don’t fall into a default), but in a bond fund no finite maturity date is there, and most funds are actively traded.
Especially it is not good times to invest in long term bond funds, as interest rate are so low. Rate might rise in future, even if it’s not in 2012. When rates will raise, the longer the maturity of a bond, the bigger will be the decline in the bond’s price. The bond prices are inversely proportional to the yields it fetches. When yields rise, prices drop.
If you own an individual bond, you can at least make the decision to hold on until it matures, so that you can receive all your principal back. But a bond fund may sell bonds at those lower prices, locking in a principal loss.
Defaulting on Student DebtEven if you fall into extreme financial hardship and file for bankruptcy, the student debt loan will not be exempted in bankruptcy. Falling into a default debt can lead you to have your wages garnisheed that is the borrower gets to take money out of your paycheck to make good on your debt.
If you have a student loan, no matter how financially stressed you are contact your borrower and let him know about your opinions. If the loan is from a government bank, then you have a variety of repayment plans which will reduce your monthly payments as well as student loan deferment and leniency during periods of economic difficulty.
Not having four essential documentsThese four documents are a must for a responsible estate planner.
· A will
· A revocable living trust
· An advance directive - The advance directive is a document which includes your medical intervention if your are unable to express those wishes yourself, along with a durable power of attorney for health care in which you designate the person who will advocate on your behalf to make those wishes known.
· A durable power of attorney for financial matters which includes the incapacity clauses. This allows a person of your choice to step in anf make financial decision on your behalf if you can’t make them yourself.
Top 10 Celebrity Bankruptcies
Source :Time : February 14, 2012
So … Where’d All That Money Go?
It’s an old story by now: An actor makes it big, starts raking in piles of money, spends it foolishly, goes into debt and winds up declaring bankruptcy.
It’s as much of a Hollywood ending today as a classic movie kiss. The latest celeb to go broke is actor Gary Busey, who filed for Chapter 7 bankruptcy last week. Papers show that he has less than $50,000 and debts of up to $1 million.
The 67-year-old Busey has appeared in dozens of films over the past several decades and was a regular in shows like “Gunsmoke” and “Walker, Texas Ranger.” But over the years, Busey mishandled his finances and now owes money he can’t pay to the IRS, the UCLA Medical Facility, Wells Fargo and others.
According to a statement by Busey’s manager, the bankruptcy follows “past unfortunate choices, associations, events and circumstances that visited themselves upon this great American icon.” Busey, of course, is just one in a long line of celebs who have managed their money so poorly that they’ve had to file for bankruptcy.
Here are 10 of the most notorious.
1 .MC Hammer
Forget Turtle and Johnny Drama. MC Hammer had an entourage for the ages: a 200-person crew that reportedly cost him $500,000 every month.
To be fair, who else was going to wash all of those Hammer pants? Not to mention there was probably a lot of housework to be done in Hammer’s $30 million mansion. Back in 1990, spending that much cash on a house might not have seemed so crazy.
According to Forbes, Hammer pulled in $33 million after his Diamond-selling album Please Hammer, Don’t Hurt ‘Em was released. It only took six years before he found himself in bankruptcy court claiming assets of $9.6 million compared to debts of $13.7 million.
He even owed $500,000 to NFL-star-turned-analyst Deion “Prime Time” Sanders. While Hammer has recovered to, among others things, help start a new search engine called WireDoo, the sting of his bankruptcy lives on.
In 2010, the most lopsided beef in rap history played out when Jay-Z joked about Hammer’s financial troubles on Kanye West’s song “So Appalled,” prompting Hammer to release a music video on YouTube featuring a Jay-Z lookalike running away from the Devil.
2 .Mike Tyson
Between 1985, when he made his professional debut at age 18, to his retirement two decades later, “Iron” Mike Tyson made somewhere between $300 million and $400 million. At the height of his career, a single fight was worth $30 million.
But during that time, Kid Dynamite bought mansions, cars and Bengal tigers. In late 2003, Tyson walked into a Las Vegas jewelry store and bought a $174,000 gold chain with 80 carats in diamonds. Eight months later, Tyson filed for bankruptcy.
The New York Times reported that he was $23 million in debt, owing the U.S. and British governments $17 million in taxes, three-quarters of a million dollars to seven law firms and $300,000 for limo services.
Tyson later appeared in a cameo in the hit comedy “The Hangover,” which parodied his high-flying lifestyle. But the former champ also appeared on “The View,” where he told the hosts he was living paycheck to paycheck but had found happiness with his third wife. “I’m totally destitute and broke,” Tyson said. “But I have an awesome life.”
3.Willie Nelson
American original Willie Nelson was a pioneer of the “outlaw country” movement of the 1960s and ’70s, but the ’80s saw the singer become a real outlaw — in the eyes of the IRS.
For much of the decade, Nelson funneled his income into a tax shelter later deemed illegal by the agency. His tax bill totaled $16.7 million and forced the government to seize his assets in 1990, including his Texas ranch. Nelson eventually helped settle the debt by releasing a compilation album The IRS Tapes: Who’ll Buy My Memories?, the revenue from which he shared with the feds.
The singer, however, was able to keep his head up throughout, saying, “I had a lot of things I owned, I needed to get rid of,” he said. “I had a lot of people around and needed to back off and stop supporting half the world so I could stop and look at my situation. It’s given me time to take inventory.”
4.Walt Disney
Before he created the Magic Kingdom and built one of the largest movie production companies in the world, Walt Disney owned and operated an animation company called Laugh-O-Gram Studios.
Based in Kansas City, the company created animated fairy tales that were shown in local theaters. The Laugh-O-Grams became popular, leading Disney to seek a financial backer to support the endeavor.
But as luck would have it, the backing firm went broke and Laugh-O-Grams went bankrupt. While he tried to save his venture by living in his office and eating beans from a can, he eventually closed the studio.
Looking for a turn in fortune, Disney scrapped together enough money for a bus ticket and went to Hollywood, where he was able to make a very successful fresh start.
5.Larry King
The legendary talk-show host could have used his famous suspenders to hold up a wooden barrel. As any journalist will tell you, work in media doesn’t always pay the bills, and Larry King’s first gig in radio was no exception.
As a fledgling Miami radio announcer in the 1960s, King made no secret that he was “flying high,” despite the paltry salary that came along with the gig. But his money management troubles came to a head when he was arrested in 1971 and charged with grand larceny for allegedly stealing $5,000 from his business partner, Wall Street financier Louis Wolfson.
The charges were eventually dropped, but the dark mark on his career wasn’t, as he was fired from his radio jobs.
King wouldn’t hold a regular journalism job for more than four years, dropping him deeper into debt, to the tune of $352,000, and forcing him to declare bankruptcy in 1978.
That same year King was offered a late-night talk radio show in Washington, D.C., that eventually became his hugely successful eponymous CNN television show, which ran for 25 years.
6.Jerry Lee Lewis
Jerry Lee Lewis’s career is now in its seventh decade, so it’s no surprise that the “The Killer’s” career has had a few ups and downs. Lewis was kicked out of bible college for “playing the piano his own way,” but made it to Memphis just in time to get signed by the legendary owner of Sun Records Sam Phillips.
Soon after, Lewis released two smash singles — “Whole Lotta Shakin’ Goin’ On” and “Great Balls of Fire,” which helped launch rock n’ roll into the mainstream. However, Lewis’s scandalous marriage to his 13-year-old second cousin soon caused his career to all but collapse.
He returned to the charts in the 1960s, trading in rock n’ roll for country, but in 1988, he filed for bankruptcy, listing $3 million in medical, personal and tax debts
. But the music icon has rebounded once more, and at age 76, he’s still touring and is currently one of the subjects of the hit Broadway musical “Million Dollar Quartet.”
7.Anna Nicole Smith
The 27-year-old alleged golddigger thought her 90-year-old husband would leave her a hefty sum when he passed away in 1995 after their marriage of just over a year.
But when oil mogul J. Howard Marshall II bequeathed $0 to Anna Nicole Smith, Smith’s bank account read the same amount. She sued his $1.6 billion estate for a cut, claiming that Marshall had expressed his intention to set up a trust for her and alleging sabotage by Marshall’s son Pierce, who received the lion’s share of the money.
While the case was being fought, Smith was slapped with a judgment in a sexual harassment lawsuit by a former housekeeper. The judgment was based on perceived earnings from the estate, so Smith owed $850,000 in the case.
She was forced to declare bankruptcy in 1996, while continuing to fight for her $400 million portion of the Marshall estate.
But a series of legal flip-flops kept any money out of her hands, until her claim was finally rejected by the Supreme Court in 2011 – four years after her death.
8.Elton John
Perhaps it was the grand stage shows, extravagant parties and luxurious suits that led Elton John into financial distress. In 2002, the singer filed for bankruptcy after accruing debt at an astounding rate of $2 million a month.
With an estimated wealth near $265 million, five homes around the world and an extensive art collection, one would think that Sir Elton would have no problem saving money. But he has admitted to being an excessive spender.
In fact, before he filed for bankruptcy, the BBC reported that the singer’s credit card bills were averaging $400,000 a month.
That’s a whole lot of velour suits. Thankfully, Sir Elton got out of debt and has gone on to make many more millions — hopefully he’ll hold onto it this time.
9.Lawrence Taylor
During the 1980s, there were few linebackers in the NFL more feared than Lawrence Taylor. The 10-time Pro Bowler won two Super Bowls on the way to being inducted into the Pro Football Hall of Fame.
But like many pro-athletes, L.T. played hard off the field as well. “Crazy as it seems, there is a real relationship between wild, reckless abandon off the field and being that way on the field,” he said in 1987 near the height of his career.
Taylor claimed he could outdrink any other linebacker in the game and tested positive twice for cocaine use. Years after he retired, he claimed he would send prostitutes to the hotel rooms of opponents to tire them out before games.
While Taylor’s lifestyle didn’t come cheap (he once estimated that at his peak, he spent thousands of dollars a day on drugs), he didn’t help his cause with business decisions.
He started a company late in his career that was worth more than $10 million, then went bust. In 1997, he pled guilty to filing a false tax return in 1990. In 2009, Taylor filed for bankruptcy to avoid foreclosure on his home.
10.Gary Coleman
The late Gary Coleman, who was once the highest-paid actor on television for his role on “Diff’rent Strokes,” declared bankruptcy in 1999.
After a series of costly medical troubles and even costlier legal battles with his adoptive parents, the then 31-year-old claimed a $72,000 debt and filed for Chapter 7 bankruptcy. A decade prior, the actor reportedly boasted a $7 million fortune.
But he said he could “spread the blame” for his bankruptcy “from me to accountants to my adoptive parents, to agents to lawyers and back to me again.” The 4’8” star had difficulty landing steady jobs after his “Diff’rent Strokes” days, and after ongoing medical woes, passed away in 2010 at age 42.
Despite the considerable financial troubles he faced during the latter portion of his life, Coleman will always be remembered for uttering that iconic, million-dollar question: “Whatchoo talkin’ ’bout, Willis?”
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