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What Type of Bank Account is Right For You?
In today’s competitive banking environment, there are more options than ever for you to obtain the correct type of account for your banking needs. In this post, we’ll look through several of the available account types in an effort to help you figure out which is right for you.
Online Checking Account vs. Standard Checking Account
Let’s face it. If you’re going to get by in today’s society, you’ll likely need a checking account to serve as the center piece of your personal banking system.
And, one of the first choices to make when seeking out a checking account is deciding whether or not you want the checking account to be virtual (online-based) or housed at a standard brick and mortar bank.
While brick and mortar banks will often be more convenient and offer services such as certified checks, giving you quarters for laundry, etc, their fees and interest rates (if any) that they offer on their checking accounts will be less favorable than online banks. Therefore, it’s important to keep these differences in mind in determining which are the more important features for you to have.
Savings Accounts vs. a Checking Account
Having decided between an online or standard checking account at a brick and mortar bank, the next decision is whether you need to add a savings account to the mix.
While modern savings accounts and checking accounts have about the same amount of liquidity and security, there are still some differences. For example, checking accounts, as the name suggests, allow you to make more frequent withdrawals from them for purchases with checks or debit cards, while savings accounts will often have more limited withdrawal capability. In addition, the interest rate on savings accounts will almost always be higher than the rate on a checking account.
Certificate of Deposit
Similar to a savings account, a Certificate of Deposit (CD) is designed as a savings accumulation vehicle. However, there are important differences to understand regarding this type of account. The biggest difference is that with a CD, your money cannot be withdrawn for a set time period without incurring a 10% or more withdrawal fee.
It used to be the case that the yield curves made CD’s a pretty attractive options over savings accounts. However, my experience has been that the currently, the yield curve is such that the interest rate you’ll obtain on a CD where you money is locked up for a set time period isn’t that much higher than a liquid savings account. However, this may change in the future.
Business Account
Our last “stop” on our tour of the various types of bank accounts on the market today is the business account.
A business account is a great idea if your business is set up so that yourself and the business are separate legal entities or you are needing a multi currency account to conduct operations in a different country from where you live. However, a business account may not be required in all circumstances, such as if you conduct business as a Sole Proprietorship and have a lot of your business transactions going online through Paypal or a similar tool.
The Pros vs. Cons of Being a Landlord
The following post is by Amy Bennett, enjoy!
When you decide to become a landlord, there are forms to fill in, contracts to compile and phone calls to make. It can seem like a huge amount of effort and the rewards may not actually seem that large. So, is it really worth it to become a landlord? We assess the positives and negatives to give you a clear idea of whether you are ready to take the plunge into the world of letting.
Pros
If you are keen on investing for your future, buying to let could be a great idea. With the current housing market slowly starting to improve, now could be a great time to jump on the bandwagon and get your hands on property. As a future investment it could be a great option as it will cost you barely anything in the long run. With tenants essentially paying your mortgage payments, you will eventually be left with property which you own outright and can either sell on or give to your children when they are older.
Owning property for rental purposes essentially makes you the owner of your own business and therefore the master of your own fortune. You may be able to expand your property portfolio throughout the years and create a successful business for yourself. One of the keys to achieving this success is to be involved in the process and take a key interest in your tenants and property. It is an exciting business and you will feel far more in control if you are involved in each decision.
If you live in a sought after area and are able to charge a high fee for the property, you could be making a large monthly profit. This will allow you to expand rapidly and will give you some extra cash for your piggy bank. The majority of the monthly rent you would receive will go towards mortgage payments and bills that need paying. However, you could still make a small packet on top of this.
Cons
There are a number of problems that can occur and that you will have to deal with as a landlord. For instance, if there is a problem within the property such as a leak or a broken appliance, you could be receiving phone calls at unsociable hours. This can be disruptive and you can have to deal with damage control on short notice. Depending on the problem, you may also have to fork out the bill once it has been fixed. You may therefore want to consider the property carefully before you purchase as it could cost you a fortune in repair bills.
There may be times when your property is empty and you are waiting for new tenants to arrive. This could mean that you have infrequent payments and could result in you paying the bills for quite a few months. This is especially apparent when you are completing major structural repairs and cannot have tenants present in the property.
If you are renting to students, you may be able to make a lot of money from renting the individual rooms. However, this can also result in problems as a large number of personality’s means that there can be clashes and you may have to deal with squabbles. They could also cause a large amount of noise, causing disruption to neighbors.
If you are prepared for the difficult yet exciting profession of being a landlord then you will need to consider a number of legalities. You may also want to prepare for breakages, times where you will receive no rent, and any other foreseeable problems. This way you will be far more prepared and it is less likely to end badly.
How Much Money Do Beggars and Street Performers Make?
Every day on my drive home from graduate school, I get on the local bypass for a few miles and then take the exit to where I live. If it is during rush-hour, there is inevitably a 5 minute wait at the light because the traffic gets backed up from the ~40,000 University employees heading home for the day.
At the very bottom of the off-ramp, gaining a stadium-seating viewing from the 70 cars waiting at the stoplight, is almost always someone begging for money. “Anything helps, gets cold at night, God Bless,” or “US Army Veteran, anything helps,” their signs read.
Personally, I have only witnessed cars at the stoplight giving money to the beggar on 1-2 occasions, so pretty rare considering that I go by there every day. However, this got me thinking – just how much do people requesting money on the street or performing on walking malls make? Is it not much money at all, or is it something pretty high, like $30 per hour?
Ideally, if I had more guts, prior to writing this post I would have personally posed as a beggar and been able to provide some first hand account knowledge. However, I decided against doing that, so we’ll just have to go with what I could find online and from other people’s experiences.
How Much Money Do Beggars / Panhandlers Make?
First, let’s take a look at what I could find about a consensus for how much beggars can make:
- A 2013 South African study found that beggars could make the equivalent of $18 per day begging in South Africa.
- A 2008 report stated that some Oregon beggars outside a Wal Mart make $100k per year / $300 per day.
- A beggar in Oklahoma City, OK makes $60k per year, or $30 per hour average.
- An actual homeless person who runs a Blogspot blog stated that he makes between $15-$30 per hour, but it is usually closer to $15 per hour on average. In addition, he mentions that it is very un-steady income, meaning that sometimes, he can beg all day and only make $60.
- Another article reported that they talked to several local beggars who said they would make the equivalent of $13 per hour.
As we might expect, there is obviously a lot of variability in to how much one can make begging. If you were highly manipulative, intelligent, and simply posing as a beggar, you could likely figure out a way to optimize your facade and make a ton of money. However, this would come at a cost of your dignity and morality.
Overall, I would say that a reasonable estimate for how much can be made in begging / panhandling is $15 per hour, which is about $30,000 per year and more than graduate students in my engineering department make.
How Much Do People Make as Street Performers / Busking?
Now, let’s move on to a related topic – seeking a general feel for how much street performers make. We’ve all seen these folks before – whether they are people dressed up on Times Square who take pictures with tourists for tips, to magicians, to people singing and playing musical instruments.
When it comes to street performing, I do have a little bit of personal insight in to how much can be made. One of my friends said he has played a musical instrument on the local pedestrian mall and made about $30 in 45 minutes. That’s pretty good if you ask me!
Listed below are some other related reported figures I could find:
- In Vegas, some of the street performers dressed up like Gene Simmons and a Storm Trooper make the hourly equivalent of between $60,000 – $200,000. Quite impressive!
- Another article reported that street musicians earn between $30-$40 per hour.
Unlike begging, street performing seems like it is more lucrative and likely less mentally degrading. From the figures above, it seems to be realistic to make $30 per hour doing this if you are committed to it. However, I can imagine that the income is very unpredictable, and likely can be frustrating.
How about you all? Do you see many beggars and/or street performers in your area? If so, how much money do you think they make? Is it close to the figures mentioned in this article?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/kulmalukko/5397742256/sizes/m
Get Bicycle Insurance for Peace of Mind at Affordable Prices
The following is a guest post. Enjoy!
The rise of diesel and petrol prices has definitely not gone down well with the general public. To add to this, the entire world’s economy is in a state of meltdown. This inconvenience has led to some ditching their automobiles and taking up alternate modes of transport. With no solution from the automotive industry in sight, cycles and bicycles have grown in popularity. This popularity is fed by the fact that cycles do not require fuel to be used. Apart from that, they are masters at keeping a check on the health of its owner.
In return, the only thing that bicycle owners should give to their cycles is cheap bicycle insurance. Insurances like this protect your cycles from all the possible damages that it might suffer over time. Cycles, like their automated brothers are entitled to the harsh conditions whenever they are taken out. Over time, this would definitely have an impact on the performance of the cycle itself. Not keeping a check here means the owners would have to bear the impact of the cost in case of damages over time or accident. Thus, best cycle insurance makes sure that your investment in the bike is safe and convenient. Cycle Insurance is a reliable option if you are planning to get your bicycle insured.
Bicycle insurance is a true need for those cyclists who have to travel abroad regularly or even those who are passionate about taking their bikes for hiking and exploring the tough terrains and the hilly regions. If you are planning to go for adventure activities in the mountains, you should carry a copy of the insurance policy or get it dome instantly to avoid drain of cash in the case of danger.
Cheap bicycle insurance is offered by almost all the insurance firms all over the world; making it convenient for buyers to avail one for their own cycles. There are however, some things that should be kept in one’s mind before they commit to a particular insurance policy. They are mentioned below.
Choosing one among the thousands is not a simple task. However, it’s necessary to take efforts to compare bicycle insurance and choose the best one in order to obtain complete value for your money and gain attractive insurance benefits at the same time. When you compare bicycle insurance, make sure you have all the necessary information about the quotes. If not, contact the company through phone or email to obtain all the vital information that’s necessary for an effective comparison.
Best cycle insurance can be purchased from the company’s office or websites itself. However convenient it may sound, there are certain drawbacks that customers hardly know. These are the fact that, insurance companies always try to promote the policy that is not always cheap. On top of that, nearly all of them do not mention all the clauses of the cheap bicycle insurance. These hidden conditions can turn out to be real barriers to protection for your bicycles.
There are brokers, who are ready to any insurance policy available in the area. These brokers have a deep understanding about the various policies and their usefulness to the user as a whole. They are the next best thing to the internet.
***Photo courtesy of http://www.flickr.com/photos/24736216@N07/5103846910/sizes/m/in/photolist-8M1xSw-7WCpvY-baAutK-8pxbJi-81SWUy-81SX2d-g8Bktb-7KnrRt-e39tvP-bibPnn-99dMUR-farn9N-8oH5Y7-apLLzV-bj5Rev-fac7w6-8SRTk6-8pgmi7-fL8zk6-arYxM3-aWtbHk-97acip-8pcikk-9ZAu47-gtahJr-e58pZs-8wgUeX-9ukk67/
Credit Card Myths: Debunked
The following is a guest post. Enjoy! If you’re thinking of getting a credit card, there are probably a few misconceptions that are often stated as fact. While there’s often a grain of truth in the common myths, it’s best to get a good idea of what you are going to be expected to do as a credit card owner. If you need a bit of financial help before payday, a credit card can be a good option. When used correctly, they can help to build your credit score – but only consider applying for one if you are sure that you are able to maintain repayments on what you spend, plus the interest. Here are some credit card myths set straight: 
The advertised rate is what I will get This isn’t necessarily true – the typical APR is not always offered to applicants. The rate is affected by your income, your credit rating and your current financial circumstances. If your credit rating is poor, you will be offered a much higher APR – or perhaps won’t be offered a card at all. A spokesperson from Yorkshire Building Society suggested: “Set up a regular savings account and shop around to make sure you get the best rate. Ensure that you are on the electoral roll as this can improve your credit score. Review your day-to-day spending to see if you can make any cuts to increase your savings, then set up a budget for essentials and stick to it.” It’s okay if I go over my credit limit as long as I pay it back before payment is due Different lenders will charge different prices for exceeding your credit limit. Lenders can also boost your interest rates if you go over your credit limit – even if it’s just for a day or so. If I try to check my credit rating, it will hurt my credit score You can check your credit rating whenever you want – it’s a good idea to check it before applying for a credit card so you can be sure that you will be accepted. You can check your credit report with any of the major credit providers, such as Experian. Lenders will not be able to see that you have checked your score when they view your report. It’s okay to apply for multiple credit cards at once Whilst applying for multiple credit cards at once doesn’t hurt your credit rating, every lender who views your report will leave a ‘hard footprint’. This means that lenders can see if other lenders have checked your credit report and lots of footprints looks poor. I’ve not had a credit card before, so my credit report is bound to be fine This isn’t true – there are some payments which can include (but are not limited to) utility bills. If you are taken to court over council tax arrears, it can affect your credit score too. As long as you use it responsibly and always make sure that you don’t use more than 70% of your credit each time, there’s no reason why you can’t own a credit card.
The Good, The Bad And The Hare Brained
The following is a guest post. Enjoy!
‘You only live once’ is a motto that many people live by. Determined to get the most out of this brief time on the planet, lots take out loans to pay for the must-haves in life. Some of these choices are wise, others, well, require a little more thought.
Here are just a few of the main reasons why people apply for personal loans, including a few cases where you’d be forgiven for holding your head in your hands in disbelief.
Paying for a wedding
Understandably, no one wants to spend the happiest day of their life in jeans and T-shirt or treat their guests to a round of sandwiches after the ceremony. Nor do they wish to honeymoon at the local caravan site, so many apply for a personal loan to cover wedding expenses such as clothes and catering or the honeymoon. In recent years, Middle East destinations such as Qatar and the UAE have become popular post-wedding getaways.
On the flip side, some of the wackier borrowers out there don’t just use the loan to pay for the wedding. They use it to pay for an overseas bride as well, including transport costs!
Home improvements
The first thing some people do when they step into a nice new home is knock a few walls down and whip paint over the hideous colors the previous owner has decorated the house in. Extensions, refurbishments or even plain expensive repairs are all reasons why many people step into the bank manager’s office.
But then there are others who would rather live in a spaceship than a home. Courtesy of a personal loan, die-hard Star Trek fans have been known to transform rooms of their house into something resembling the U.S.S. Enterprise. That’s life, but not as you and I know it.
Starting up a business
Although there are business loans available for budding entrepreneurs, determined to get their hands on as much capital as possible some people also take out a personal loan to invest in their business. Passionate about their new endeavor and the prospect of profits, they feel the extra debt is worth it.
Of course, there are businesses and there are businesses. Some out there are buying rare or exotic animals on the Internet, such as poisonous snakes, and selling them at a profit (normally prices that cover the loan repayments). Others choose to buy rare antiques with their loan and, again, sell that at a convenient, loan-covering price and then some.
Settling debts
Some people are lousy with credit cards and bills and end up taking a personal loan to cover such debts. Felling debts in one almighty swoop like this, though, helps because they can reconcile them into a single, more manageable payment.
However, there are times when people should avoid spending the bank’s money, such as on gambling. On a roll on the horses, greyhounds or the blackjack table, some actually apply for personal loans hoping to repay it with the drop in the ocean from their theoretical gains. Not the best of ideas is an understatement.
If you’re looking to get the most out of life and need to request a personal loan, think carefully about the reasons for doing so. Life is for living, most certainly, but worrying about how to make loan repayments after living for the moment is no way to spend your days. Borrow sensibly and the future remains yours, financially and non-financially.
How To Treat Your Car Like An Investment
The following is a guest post. Enjoy!
New cars start to depreciate in value as soon as they are driven off the lot, but no matter what type of vehicle you drive there are several ways to slow down the rate of depreciation and protect your investment.
A car’s worth is determined by several factors, including its age, condition, mileage, and brand value. By keeping your car in peak condition and choosing a model that is known to retain its value well over time, you can increase your chances of making the best possible investment.
The following are a few ways to protect your car and even increase its value.
Protect your Car Inside and Out
One of the most obvious ways to keep your car in its best possible shape is to clean and condition it regularly. The interior and exterior condition of a car is one of the key factors in determining its market value. By washing and waxing on a regular basis, you’ll maintain its quality and keep it looking new. This is particularly important during periods of poor weather, especially if your car is covered in salt. Salt and grit can eat through sheet metal over time. Avoid smoking, eating, or drinking in the car. A vehicle with stained upholstery and the lingering odor of stale cigarettes will be a hard sell.
Research Brand Values
Some brands age more gracefully than others, so if you’re looking at your car from an investment perspective you’ll want to purchase wisely. It’s helpful to look at values of used cars at listings sites like Kelly’s Blue Book. New cars from trustworthy brands like Volkswagen and Ford tend to depreciate more slowly than others, while luxury and classic cars may also be good investments and even appreciate in value.
Take Care with Parking
Your parking location can not only impact insurance rates; it will also impact your car’s condition. Severe weather conditions can take their toll on your vehicle. Hot, sunny weather can crack vinyl dashboards and cold temperatures can cause engine troubles. Park in the shade or in a climate controlled garage if possible. When parking in public lots, try to stay away from other vehicles when possible to avoid scratches and dents.
Keep a Paper Trail of Regular Maintenance
It’s vital to stay on top of a regular service schedule if you want to treat your car as an investment. Routine care will keep your car running at its best possible level, keeping the engine healthy and reliable. It can also prevent potential breakdowns in the future. You’ll want to keep all of your receipts from tune-ups, oil changes, maintenance checks, and even car washes to create a record of your car’s care. By saving proof of this service, you’ll show any potential buyers in the future that your car has been kept in top condition.
Don’t Go Crazy with Customization
A common mistake made by car owners trying to increase their vehicle’s value is to customize it with crazy colors or turbocharged engines. This could be a turn-off to buyers, and a poor financial investment overall. Simply spending money on customizing your car will not increase its value, and in many cases can lower the eventual sale price.
These are a few factors to keep in mind when you purchase a new or used car. Taking care of your vehicle will keep it in peak condition and improve its eventual resale value when the time comes to trade it in.
***Photo courtesy of http://www.flickr.com/photos/10047629@N04/6057753185/sizes/m/in/photolist-
Risk-Averse Strategies for Retirement Savings
The following post is by Amanda Green. Enjoy!
Saving for retirement is not complicated, but you do have to make your money work for you if you want to realize the greatest returns. Deciding on a retirement plan for yourself should also involve your spouse. Ideally, the two of you would be able to pool your money together and create a plan to replace your income after you are unable to work. Some of these options, like an IRA, are flexible to help safeguard your savings when your income dips.
There are a host of options to choose from, and you should definitely shop around to find the best option for you.
IRAs
An individual retirement account is an investment that you have control over. You pick which companies you’ll invest in over time, and you can divert a portion of your income each year to the IRA. If you’re not covered under any other retirement plans, that portion may be eligible for a federal tax deduction too, making an IRA something of a safe haven for taxes. It’s not going to net you thousands in tax savings, but it will benefit you now and later.
IRAs are advantageous because you can pull money from them as needed depending on the circumstances. When you withdraw, that money is included in taxable income for the year, but you do not have to show proof of hardship. Therefore, IRAs are commonly used as savings vehicles for investments later in life.
Life Insurance
If you have dependents, you should consider investing in simplified issue life insurance. Chances are you won’t die before your 50’s but a whole life policy can help pay for college for the kids. If something does happen to you, a term life insurance policy can payout enough to cover your family’s expenses for many years to come after your passing.
As this simple guide to life insurance points out, this kind of investment is best for people who are not independently wealthy and have families who rely on their income. All policies do require a medical exam, and determining what you need to cover your family, does take some shopping. The payout can take care of a home mortgage or help supplement lost income. In general, try to take a policy that is worth three to five times your annual income.
401k
A 401k is normally offered through a company workplace, but recent changes have opened these plans to individuals as well. The plans began in 1978 to help alleviate some of the burden tax payers faced at the time by deferring their income to later on in life. Depending on the rules of the plan, you should be able to invest before or after taxes are taken out. 401k’s do have severe restrictions when employees wish to withdraw funds, often restricting withdrawals until the employee ages to 59 ½.
Annuities
Purchasing annuities is like purchasing insurance that is guaranteed to pay out at a later date. It starts with you making an investment into the annuity, then on the pre-determined date it matures and payments can be dispensed. From there, you have the option of receiving income monthly, quarterly, or annually. In some cases, you can also accept a lump sum payment.
Annuities are great alternative retirement income because you can arrange your payment structure to cover you for the rest of your life if you need to. The money you invest grows tax-deferred, but if you are planning on investing in an annuity you should thoroughly research the plan. Annuities can be expensive, which may create a scenario for debt in the short term.
Mutual Funds
Mutual funds are basically a pool of funds that come from many investors. Funds invest in securities such as stocks, bonds or money market assets. A mutual fund manager uses the fund’s capital to make capital gains, which translates to income for the fund’s investors. Most banks have mutual funds you can invest in, and mutual funds are open to anyone who wishes to contribute.
Tips on Investing
If you want to get the most out of your investments, plan to manage several at a time. You should not rely solely on a Roth IRA or 401k, just like you don’t want to pool all of your money into a mutual fund. You should take percentages of your cash and move it around to your investments, letting your money work for you over time. You’ll gain more over time and you won’t have as much trouble moving your money around when you need it.
Tips to Nurse Your Home Back to Life on a Budget
The following post is by fellow blog reader, Mark Tallery. Enjoy!
Has your home’s health deteriorated because of old age? Are you faced with the hard dilemma of whether you should move to a new house or renovate your existing one? Well, as Jane Kennedy explains, there are many elements to consider. However, if you decide that you are not willing to give up on your house, here are some helpful tips that will save you a great deal of money as well as increase your home value.
Painting and Caulking
Painting is a relatively easy project for anyone. It is also one of the simplest ways to increase your home value as it brings back that fresh look and make it appear well cared for. Moreover, simply repainting exterior and interior walls can generate an extra $3000 to $4000 in home value.
In an older house, it is best to begin with a paintable caulk. All older homes have suffered settling and the abuses of the years. Caulk every single crack where baseboards, crown molding or other trim work meets the walls or floors. Caulk around windows and re-caulk all of the glass panes before painting. The next step is to use “Kilz”, which is a primer coat that also kills molds. Use this product on walls, ceilings and all trim work. It provides a smooth opaque surface on which to paint, and will not allow old stains to bleed through your new paint. Use a high quality wall and trim paint brand which also contains a primer. This will allow you to achieve complete coverage on old stained walls and ceilings, with only one coat of paint.
In many older homes, you will find cheap and quite ugly paneling on the walls. One very economic and easy way to resolve this issue without the need for hanging sheetrock or applying plaster is to paint over it. Simply remove the vertical and/or horizontal trim pieces and discard them. Leave the corner pieces. Use your caulk to fill all cracks between the 4 X 8 sheets of paneling, and then give it a good coat of the “Kilz.” One coat of the paint mentioned above will cover, and you will have walls that appear as if they are made of varying sizes of planks. It is an extremely attractive solution, and far less costly than any other.
Kitchen
The kitchen is always the most difficult room to remodel or upgrade in the house, other than the bathroom. Of course, the extent of the renovation will depend on your wants and desires, as well as your needs. You must carefully consider what is already there and whether or not you can work with any of the current installations in the kitchen. The important thing to remember, when doing a kitchen remodel on your own, is to work around the existing utility entrance and exit points. Otherwise, you will need both an electrical and a plumbing contractor. Replacement cabinets and countertops are readily available at home centers, and they are easy to install. If you plan to use the existing cabinets, you can always replace outdated countertops, and repaint the cabinets with oil-base enamel. After painting, it is easy to replace outdated hardware, such as door and drawer knobs and hinges, for more modern versions.
Another thing to consider is that renovating your kitchen is always a great investment. According to the AIC (Appraisal Institute of Canada), a kitchen remodel can yield up to a 100% ROI (Return on Investment).
Lighting & Plumbing Fixtures
New lights and ceiling fans are very easy to install in the same locations as the old ones. Each new fixture comes with step-by-step instructions. Just make sure that the appropriate breaker in the electrical box is turned off before you begin. It is also a good idea to purchase an inexpensive tester, and use it after putting the breaker in the off position, just to be doubly sure you will not get shocked. The same is true of replacing electrical outlets and switches.
Plumbing fixtures such as new faucets are also just as easy to install, with the included instructions. This is also true of garbage disposals, if you wish to have one, as well as hooking up the water line to the dishwasher or refrigerator water supply, on models which have automatic ice makers, or water and ice dispensers in the door.
***Photo courtesy of http://www.flickr.com/photos/35188692@N00/235866
The Advantages and Disadvantages of Structured Settlement Annuities
The following is a guest post. Enjoy!
Many judges across the United States now accept structured settlements options when claimants win their legal cases in a court of law. Typically, structured settlement annuities are provided to individuals that have been injured in a job-related accident, or as a result of medical malpractice. These structured settlements often serve as an ideal solution for the claimant to provide them with the money they need to survive. However, it comes with its own inherent problems.
Accepting a Structured Settlement
Usually, the claimant would rather take a large sum of cash as a way to settle the lawsuit. However, many court systems across the nation believe that providing a structured settlement annuity with monthly installments work to the benefit of the lawsuit claimant. The annuity is structured to produce ongoing monthly payments (or annual payments) as a way to ensure all the financial needs of the individual are covered in future years. Additionally, some annuities are automatically transferred to the heirs of the claimant in the event that they die before the total amount is paid off.
Structured settlements can be issued two different ways. The first type of annuity is a traditional method where yearly or monthly installments are paid to the claimant directly by the defendant that lost the lawsuit case. Usually, the monthly payment is determined by the total amount due, divided by the agreed-upon number of years of payments plus interest.
The other available structured settlement is an annuity that can be purchased through annuity or life insurance companies. Typically, the court orders that the defendant will need to purchase the annuity and redirect the monthly cash payouts to the beneficiary – the claimant in the case. These types of annuities are purchased for a reduced rate. The defendant provides a lump sum to the annuity company in an amount large enough to start paying out on the policy immediately.
Structured Settlement Time Frames
Typically, the court system will order that the annuity will pay out each month or year for the remainder of the claimant’s life. However, some annuities are designed to payout for a pre-determined amount of years. Other annuities can be set to meet the rate of inflation, where the payments are adjusted upwards for inflation, over the course of the remaining payouts.
The Best Solution
While there are certain advantages for obtaining a structured settlement annuity after winning a lawsuit or settling out of court, there are disadvantages too. The structured settlement can offer a high level of financial security and a continuous steady income for years.
However, many times, the amount of payments are not high enough to cover extensive medical bills, increasing rent, and making adjustments for costs of living. As a result, many individuals are choosing to sell the remainder of their structured settlement annuities for cash. The amount is often sold to a reputable third-party company that offers a specific amount for all or a portion of the structured settlement in exchange for a lump sum.
The entire process of selling a structured settlement for a lump sum needs to go through the court system, and be approved by the judge.
***Photo courtesy of http://www.flickr.com/photos/76657755@N04/8125974243/sizes/m/in/photolist-do4K3c-bud2wG