Determine Whether A Lump Sum Payment Or Payments Over Time Are Better

Should You Pay off Your Credit Card or Save Your Money?

Annuities are essentially insurance policies with a twist. While life insurance pays a death benefit and protects from the risk of dying prematurely, annuities' distinction is that they can ensure a source of income for as long as a person lives; annuities protect one from the risk of outliving one's assets. The other attractive aspect of annuities is that their values grow on a tax-deferred basis. An annuity is an insurance contract and can be offered only by a licensed insurance agent.

There are two basic kinds of annuities:

• Fixed annuities are based on both guaranteed and current interest rates that are declared. The value of a fixed annuity can never fluctuate downward.
• Variable annuities build value based on the performance of the underlying investments in the fund, which are not guaranteed.

Advantages of a Good Credit Score

Interest is the charge added to a loan that makes up the cost of money. Interest is usually expressed as a percentage of the loan principal. The principal is the original amount of the loan. The interest rate tells you what percentage of the unpaid loan will be charged each period. The period is usually a year but may be any agreed-upon time. Here is how it works. Let's say you loan your friend $100 at 5% annual interest. At the end of a year—the period—you should receive $105, or $100 of principal and $5 interest. Simple, isn't it?

Let's say your friend doesn't repay the $100 principal, but pays you only the $5 interest; then the next year your friend will still owe you the $100 plus another $5 in interest. The preceding is an example of simple interest. Simple interest is the amount of money to be paid each period on a principal amount due.

How to Conquer Credit Card Debt

While credit is very important to the economy, its abuse is harmful. Credit is extended with the faith that borrowers will repay the debt. Goods and services are provided on credit with the expectation that they will be paid for with money in the future. Credit makes commerce more convenient. When credit is abused, everyone loses. Credit abuse increases the cost of credit to everyone.

One should never use credit to purchase things for which one will not be able to pay in the future. Many impulse purchases are made on credit with little thought given to how the debt will be repaid in the future. If one calculated the true cost of goods bought on credit, one would have second thoughts about making the purchase in the first place. Here is an example: a new television flat-screen HDTV model retails for $5,000. If purchased on a credit card with a 12% annual percentage rate (APR) compounded daily, and with minimum monthly payments of $166 paid over three years, it winds up costing over $5,980. Is it worth almost $1,000 more to have it now (furthermore, the retail price in 3 years will probably drop)? That is like going into a store that advertised "SALE--ADD 20% TO EVERY PURCHASE."