General Motors or Government Motors

NEW YORK – General Motors filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.

GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81 billion in debt and $82.29 billion in assets.

"The General Motors board of directors authorized the filing of a Chapter 11 case with regret that this path proved necessary despite the best efforts of so many," GM Chairman Kent Kresa said in a written statement. "Today marks a new beginning for General Motors. ... The board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world."

As it reorganizes, the fallen icon of American industry will rely on $30 billion of additional financial assistance from the Treasury Departmentand $9.5 billion from Canada. That's on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans.

Late Monday, U.S. bankruptcy court judge Robert Gerber gave interim approval for the Detroit-based automaker's use of a total of $33.3 billion in bankruptcy financing, with $15 billion available for use over the next three weeks. He will rule on final approval of the financing on June 25. Gerber also approved GM's sale procedures, setting a sale approval hearing for June 30.

"Our agreement with the U.S. Treasury and the governments of Canada and Ontario will create a leaner, quicker more customer and completely product-focused company, one that's more cost competitive and has a competitive balance sheet," CEO Fritz Henderson said at a news conference in New York. "This new GM will be built from the strongest parts of our business, including our best brands and products."

The Detroit automaker said warranty coverage, service and customer support will continue uninterrupted, plants will continue to make cars and trucks, and essential suppliers and GM's 235,000 employees worldwide will continue to be paid. GMAC Financial Services said in a statement that it will continues to provide automotive financing to GM and Chrysler dealers and customers, and the federal Pension Benefit Guaranty Corp. said workers' pension plans remain safe.

GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for Chapter 11 protection April 30. A judge on Sunday gave Chrysler approval to sell most of its assets to Italy's Fiat, moving the U.S. automaker closer to a quick exit from court protection, possibly this week.

The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

GM shares fell as low as 27 cents in Monday morning trading, their lowest price in the company's 100-year history, but rebounded to rise 10 cents from Friday's close to 85 cents in afternoon trading. On June 8, Cisco Systems Inc. will replace GM in the Dow Jones industrial average, which excludes companies that have filed for bankruptcy. Standard & Poor's also will remove GM from its S&P 500 index Tuesday, with secondary education provider DeVry Inc. taking the automaker's place.

The government's partial stake in GM comes on top of a far smaller ownership of Chrysler, as well as significant federal equity in banks, the AIG insurance giant and two mortgage industry titans — all victims of an economic crisis unrivaled since the Great Depression.

But the president said the actions were part of a "viable, achievable plan that will give this iconic company a chance to rise again."

The president said the government would refrain from playing a management role in all but the most critical areas.

"Our goal is to help GM get back on its feet ... and get out quickly," he said.

Henderson declined to offer a firm timeline for how long it would take the government to sell its stake in GM, but he indicated it could take some time.

"These are a substantial block of shares," Henderson said. "This is a question of years, not months."

GM said it expects the bankruptcy court process to last 60 to 90 days. If successful, GM will emerge as a leaner company with a smaller work force, fewer plants and a trimmed dealership network.

"We're confident that we will move fast," Henderson said. "Not with a sense of urgency. We're talking about pure unadulterated speed."

GM said Monday that it will permanently close nine more plants and idle three others.

The Pontiac, Mich., and Wilmington, Del., assembly plants will close this year, while plants in Spring Hill, Tenn., and Orion, Mich., will shut down production but remain on standby. One of the idled plants, or GM's Janesville, Wis., plant that closed in April, will be retooled to build a small car that GM had originally planned to build in China.

Seven powertrain and parts stamping plants will be closed starting in June 2010, while an additional stamping plant will be idled but remain in a standby capacity.

GM will move forward with four core brands — Chevrolet, Cadillac, Buick and GMC — and cut four others. The company plans to cut 21,000 employees, about 34 percent of its work force, and reduce its 6,100 dealers by 2,600. GM said it was finalizing a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.

The third of the one-time Big Three, Ford Motor Co., has also been stung hard by plunging sales of cars and trucks, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly $25 billion, giving it a financial cushion GM and Chrysler lacked.

Ford issued a statement Monday saying it "remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government."

The bankruptcy filing represents a dramatic downfall for GM, which was founded in 1908 by William C. Durant, who brought several car companies under one roof and developed a strategy of "a car for every purse and purpose." Longtime leader Alfred P. Sloan built the global automaker into a corporate icon.

GM first sought help from the Bush administration and Congress last year as it was in the midst of being staggered by $30.9 billion in losses and seeing its cash resources shrink by more than $19 billion.

Consumers, worried about the economy and the future of GM, shied away from the company's cars and trucks this year even after President George W. Bush promised loans and Obama followed through with billions more in assistance — plus a stiff set of new requirements GM was ordered to meet.

When GM failed to do so by a March 31 deadline, Obama forced out CEO Rick Wagoner and replaced him with Henderson.

Wagoner served at the helm since 2000 and was the face of GM when he first flew on a company jet to ask Congress for aid. After a firestorm of negative publicity, Wagoner rode in a hybrid Chevrolet Malibu from Detroit to Washington for a second set of withering questions before lawmakers.

But that amounted to only a sideshow as the automaker's financial position worsened. Its revenues plunged almost 50 percent in the quarter ended March 30 and it racked up another $6 billion in losses.

The Henderson-led GM faced a government-imposed June 1 deadline to restructure, slash costs and modify contracts with its union and dealers. But meeting most of those demands, plus a late agreement by many bondholders to swap the $27 billion in debt they are owed for shares in a new GM, were not enough to prevent the court filing.

Some bondholders might still fight GM's reorganization plan, but the company and Treasury hope the 54 percent who supported the debt-for-equity offer will convince the judge that its a fair deal.

"There is no other sale, or other potential purchasers, present or on the horizon," Henderson said in an affidavit filed Monday in bankruptcy court. "The only other alternative is the liquidation of the debtors' assets that would substantially diminish the value of GM's business and assets, (and) throw hundreds of thousands of persons out of work and cause the termination of health benefits and jeopardize retirement benefits for current and former employees and their families."

It was an all-out sprint to Monday's filing, as GM quickly sought to nail down deals with its union, bondholders and sell off brands along with most of its Opel operations in Europe to appear in court with a near-complete plan to quickly emerge with a chance to become profitable.

The German government on Sunday agreed to lend GM's Opel unit $2.1 billion, a move necessary for Magna International Inc. and Russian-owned Sberbank to acquire 55 percent of the company.

In the U.S., the UAW's ratification of concessions, announced Friday, will save GM $1.3 billion per year. Thenew deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.

It moves billions in retiree health care costs off GM's books. In exchange for its ownership stake, $6.5 billion of interest-bearing preferred shares, and a $2.5 billion note, the trust will take on responsibility for all health care costs for retirees starting next year. Higher health care costs alone accounted for a $1,500-per-car cost gap between GM and Japanese vehicles.

GM will offer buyouts and early retirement packages to all of its 62,000 hourly workers to shrink employment. The company also has about 29,000 white-collar employees, according to court documents. In contrast, GM employed 618,000 Americans in 1979, more than any other company.

GM earlier outlined a plan to cut about 1,100 of its dealers by the end of 2010. It also plans to shed about 500 dealerships that market the Saturn, Hummer and Saab brands.

A person familiar with GM's plans said the automaker has no plans to accelerate the dealership cuts that were already announced. The person spoke on condition of anonymity because the details have not been made public.

The person said dealerships that the company is planning to terminate began receiving wind-down agreements Monday. Those agreements, if dealers sign them, will allow targeted dealers to receive compensation and support from GM as they close down their franchises and sell off inventory.

But just cutting labor and overhead costs won't be enough to save the company. It also has been working to streamline its engineering and design, as well as standardize many parts so they can go into multiple models.

The once powerful GM earns a place in history as the largest U.S. industrial company to file for bankruptcy protection, and the fourth-largest company overall to do so based on its $82.29 billion in assets as of March 31.

Lehman Brothers Holdings Inc.'s Sept. 15 bankruptcy filing is the nation's largest with $691.1 billion in assets, and it likely served as a catalyst for GM and Chrysler's downfall, as it hastened the erosion of credit markets, making it impossible for GM to borrow money and difficult for consumers and dealers to finance new vehicles.

Washington Mutual Inc. and WorldCom Inc. are the second and third largest U.S. companies to file for bankruptcy protection.

___

AP Auto Writer Kimberly S. Johnson reported from Detroit. AP Auto Writer Tom Krisher in Detroit, AP Business Writer Harry R. Weber in Atlanta, AP Business Writer Vinnee Tong in New York, and Associated Press writers David Espo, Ken Thomas and Jim Kuhnhenn in Washington contributed to this report.

Source : Yahoo! News

G8 says economies stabalizing

The Group of Eight industrialized nations have begun preparing for an economic recovery, acknowledging on Saturday "signs of stabilization in our economies" and agreeing to ask the International Monetary Fund to study ways to unwind hefty stimulus packages.

In a communique released at the end of a two-day meeting, the group's finance officials said that although the global economy is still weak, so-called exit strategies from monetary and fiscal stimulus measures -- like tax cuts and lower interest rates -- were "essential to promote a sustainable recovery over the long term."

The ministers said they had asked the IMF to analyze potential strategies to assist with the process.

However, ministers from the US, Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union added that the "situation remains uncertain and significant risks remain to economic and financial stability'' and stressed their commitment to provide any more stimulus the economy might need.

"These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges," US Treasury Secretary Timothy Geithner said after the meeting.

The talks here were designed to set an agenda for a meeting of G-8 heads of state next month in L'Aquila in central Italy.

Source : NDTV Profit

Signs of a credit crisis

A credit crisis occurs as a result of an unexpected reduction in accessibility to loans or credit and a sharp increase in the price of obtaining these loans. The credit markets are good indicators of the depth of a credit crisis. They can also provide clues as to when that crisis will ease up. To understand how to judge the severity of the crisis, we must be able to look at a number of factors, such as what is happening with U.S. Treasuries, how it is affecting the London Interbank Offered Rate (LIBOR), what effect this has on the TED spread and what all this means for commercial paper and high-yield bonds. In this article, we'll examine how these indicators can be used to determine the severity and overall depth of a credit crisis.


Measuring the Severity of a Credit Crisis
There are several tools that can be used to measure the overall depth of a credit crisis:

U.S Treasuries: U.S. Treasuries are debt obligations issued and backed by the U.S. government. What this means is that the chances of default are almost zero. As a credit crisis unfolds, investors take their money out of other assets, such as stocks, bonds, certificates of deposit (CDs) and money markets. This money goes into U.S. Treasuries, which are considered to be one of the safest investments. As the money continues to flow into this area, it forces the yield on short-term treasuries (also known as Treasury bills) down. This lower yield is a sign of high anxiety in the markets as a whole as investors search for safer places to put their money. (To learn more, read Trying To Predict Interest Rates.)

LIBOR: LIBOR is the rate that banks charge other banks for short-term loans. These loans can be for one month, three months, six months and one year. When LIBOR rates are high, this is a sign that banks don't trust each other and will result in higher loan rates across the board. This means tighter lending standards and a general unwillingness among banks to take on risk.

TED Spread: This spread represents the change between the three-month LIBOR rate and the three-month rate for U.S. Treasury bills. It is used to measure the amount of pressure on the credit markets. Generally, the spread has stayed under 50 basis points. The bigger the difference between the two, the more worry there is about the credit markets. Economists will look at this to determine how risk-averse banks and investors really are.

Commercial Paper: Commercial papers are unsecured debts used by banks or companies to finance their short-term needs. These needs can range from accounts receivable (AR) to payroll to inventory. Generally,maturities for commercial paper range from overnight to nine months. Higher interest rates make it more difficult for businesses to obtain the money they need to fund their day-to-day operations so that they can continue to expand. These high rates can cause businesses to pay the higher costs or not borrow at all. This creates a situation in which companies look for ways to get the money they need to fund their short-term operations; when more commercial paper is issued, this can be a sign of a tight credit market. (To learn more see, Money Market: Commercial Paper.)

High-Yield Bonds: High-yield bonds are bonds that do not qualify for investment-grade status. Ratings agencies rate high-yield bonds as those with the greatest chance of default. The higher the yields on these types of bonds, the tighter the credit market is likely to be as this suggests that there are few borrowing opportunities for businesses. Businesses that are unable to get more favorable financing may issue bonds instead. (For further reading see, What Is A Corporate Credit Rating?)

Using Indicators to Understand a Credit Crisis
Any indicator by itself, while important, will not provide the overall big picture. However, when a combination of indicators consistently points in the same direction, this correlation can point to which direction the credit markets are headed. If the credit markets are headed toward crisis, these indicators can provide insight into how big the credit crisis will be and how afraid banks or investors are to take risk. If the fear is great enough, it can spill over into the general economy, causing recession. Conversely, when indicators are weakening, this suggests that banks and investors are willing to take risk. In this case, borrowing conditions are easy and businesses have access to the capital they need, causing the economy to expand.

Conclusion
There are several tools that can help determine the depth of a credit crisis. By looking at U.S. Treasuries, LIBOR, the TED spread, commercial paper and high-yield bonds, you can get a glimpse into how nervous bank and investors are about assuming risk, which is an important determinant of what the economy will look like going forward. While no single indicator is more important than another, the correlation of all of these will confirm the overall conditions in the credit markets.

What is private equity?

Fashion mavens will be happy to know that the stock market creates - and reuses - fads too. Like the rise and fall of hemlines, the total available domestic stock in the market expands and contracts in cycles. This typically stems from companies that are public and are being taken private and vice versa, due to inefficiencies in how capital is allocated.

Although the terms "private equity" and "venture capital" are often used interchangeably, venture capital is actually just one category of private equity. In this article, we'll show you how private equity sets the trend for stocks everywhere.

Private Equity Funding for Different Risks
Like each one of us, a company experiences a life cycle - that is, different stages of growth - which require capital in varying amounts and from different sources. The stages of a company's life can be plotted on a "risk continuum". Typically, a very young company with norevenue and no earnings is highly risky from a funding point of view. (To learn more, read The Stages Of Industry Growth.)

This sort of business usually can't afford to borrow, so capital must be obtained from friends and family, or individual "angel investors". As a company matures and becomes profitable, however, its risk profile diminishes. By the time a company is well established, it can usually fund operations inexpensively with a mix of debt and equity securities.

Private equity comes into play at different points along the risk continuum. Private investors can include institutions (pension funds, university endowments, insurance companies, etc) or individuals (high net worth families, friends and relatives). Private equity also refers to leveraged buyouts (LBOs), mezzanine debt, private placement loans, distressed debt and funds of funds.

These types of financing solutions come in various shapes and sizes; however, most are structured as limited partnerships.

Venture Capital for the Next "Big Thing"
When a company is just being launched and has little more than a great new idea, loans from friends and family or sometimes government grants are the typical funding sources available. Venture capital only enters the picture when the company has finally created its product or service, and is ready to bring it to market. Venture capitalists are sophisticated investors who are always on the look-out for the next "big thing", or the newest product that will be all the rage for consumers. Some of the largest and most successful companies - such as Dell Corp., Intel Corp., Apple Computer Corp. and many others - began as venture-funded operations. (Learn more about venture capital in Private Equity Opens Up For The Little Investor and our IPO Basics Tutorial.)

Structured as private partnerships and usually with institutional money, venture capitalists generally provide all equity financing, with a minority stake in a start-up or early expansion company. Sometimes a venture capitalist will take a seat on the board of directors for its portfolio companies, ensuring an active role in guiding the company along. Venture capitalists look to hit big early on, and exit investments within five to seven years. The majority of venture-backed investments will fail; however, the few shining stars will return 10-50 times or more of the value of the original investment.

LBOs and Mezzanines for Mature Financing
Other private equity strategies like LBOs or mezzanine financings are usually tapped when a company is more mature. These financings usually involve some mix of debt and equity, and deals may be backed by the cash flows and assets of the portfolio company itself, or those of the company being acquired in a transaction. Unlike venture capital, other private equity strategies usually involve taking a majority shareholder position. Because target companies are more established and have achieved profitability, the risk involved is far lower. Consequently, fewer of these investments fail. (Find out more about mergers and acquisitions in The Basics Of Mergers And Acquisitions and The Wacky World of M&As.)

Leveraged Buyouts
An LBO is one of the most common types of private equity financing. In an LBO transaction, a company receives a loan from a private equity firm to fund the acquisition of a division or another company. The loan is usually secured by the cash flows or the assets of the company being acquired. After a company is acquired in an LBO, it is sometimes broken up and sold in pieces, and the cash generated is used to pay down the highleverage of the transaction. This breakup strategy was much more popular during the 1980s than it is in the new millennium. Because companies now are more expensive, most LBO deals focus more on buying companies and creating value-added from their assets, rather than busting up the companies to sell off their parts.

Mezzanine Financing
Mezzanine debt is a private loan, usually provided by a commercial bank or a mezzanine venture capital firm. Mezzanine transactions often involve a mix of debt and equity in the form of a subordinated loan or warrants, common stock or preferred stock. By not taking a 100% equity position, a mezzanine debt firm can reduce its risk thanks to the capital preservation and current income features of debt. (Read more on this in The All-Equities Portfolio Fallacy.)

Private Equity and the Individual Investor
Private capital is illiquid and usually involves high amounts of leverage, which is a risky combination for the individual investor. There are limited ways, therefore, for a retail investor to play safely in the private equity markets. To participate in private equity or venture capital partnerships, an investor must be "accredited". For example, an accredited investor enjoys net worth, either individually or jointly, in excess of $1 million.

For investors who are less well-off, there is the option of exchange-traded funds (ETFs) - the PowerShares Listed Private Equity ETF, in particular. This ETF is designed to replicate the Red Rocks Capital Listed Private Equity Index, which includes more than 30 publicly traded companies that invest directly in private equity. Unlike straight private equity investments, the PowerShares ETF provides liquidity and transparency. Moreover, proceeds can be reinvested back into the ETF, which is rarely possible in a pure private equity investment.

Even if you can't participate directly, the power of private equity in the market can boost stock prices by reducing the total domestic stock available - which may be good for the overall value of your portfolio.

Conclusion
Venture capital is just one form of private equity funding that's available to companies at various stages of their life cycles. Moreover, private equity and public equity take turns in cycles over time as the key engine driving capital market valuations higher. Investors should be able to recognize these cycles and understand the impact on their portfolios.

by Stephanie Loiacono (Contact Author | Biography)

Stephanie Loiacono, CFA, is a financial writer and analyst with 20 years of experience in investment management and research. She is currently writing a book, titled "Financial S.O.S. for Divorced Women." Check out her website, Loiacono Financial.

High yield mutual funds for beginners

In today's economy, it seems like a lot of investments are risky with many companies reporting less than stellar returns. If you want to get started in investing but feel overwhelmed by the amount of decisions and other factors involved, then high yield mutual funds are an excellent choice even for those with little to no experience.

When the economy slows down and stock prices are going down, it makes sense to invest into stable industries that provide healthy dividends. Examples of mutual funds that pay high yields include utility companies as they are a fairly stable industry. Here are 5 tips to get you started.

1. Diversify - High yield mutual funds shouldn't be your only investment as you also want to diversify into other holdings for reduced risk. You can literally find hundreds of different funds available that invest into specific assets ranging from only energy stocks to those that invest in large cap companies.

2. Risk factors involved - Keep in mind that high yield mutual funds also tend to be more aggressive so the fund may go down when the economy slows down or the company is unable to pay back its debts. Be sure to take risks factors into consideration before investing.

3. Use rating systems - Companies such as Morningstar use simple rating systems to rate individual funds based on a multitude of criteria. Be sure to thoroughly use these for your market research into how well a fund might perform in the future.

4. Decide on a load or no-load fund - Load funds charge a fee which is typically a percentage of your investment while no-load funds do not. Always try to find those do not charge a fee as this would mean a higher return on your investment.

5. Choose those that interest you - There are many different funds available for you to invest in and while you can choose the one that many recommend, choosing the one that interests you or that you are familiar with will enable you to make better decisions.

Ready to get started? Get free investment tips including more about mutual funds definition and how you can invest for a secure financial future. Find out why mutual fund investments has many advantages that the successful investor will find useful for their portfolio. Article Source: http://EzineArticles.com/?expert=Warren_Parker

Advantages of starting a business in a downtun

Starting an e-commerce business in a recession? You must be crazy! Even Donny Deutsch has disappeared from TV, where are the big ideas now? Well, this should be quick and very sincere. Start the clock, 2 minutes is all you need.

Whether you should start a business on the internet right now or, forget about the slightest idea of building one today, you're going to at least get some clear points and even some sense of direction. Most importantly, if you're smart and understand valid points when you see the wisdom in some reads, you'll not just take your reads into consideration - you'll learn from the person that told them to you freely. But remember, just to see if we are in the same boat; free is good, but the best things in the world aren't found for free - right?

If you agree, don't exit. We are getting into the good stuff! In great economic times everyone wants to start a business, every imaginable TV business goes into air and every Juan and San Marcos proudly says; "I'm an entrepreneur!" God Bless America!. Good for some of us, but for how long?

Here's a quick fact on what's happening today in the business world and worldwide. One quick word describes it all, uncertainty! That's right; from Queen Elizabeth to Pocahontas they all might be asking themselves what's happening with our economy.

Here's where some people will rise up, where some business will remain mediocre, where new business systems will be ready once the slow times are over and where some businesses will bloom again in the recession. Here's a good edifying point for you to indulge yourself on and on through the day as of need. A cup of tea or a cheap glass of wine won't hurt neither. Nothing fancy for now.

Where there is uncertainty there is some degree of panic. Any degree of panic and as you may imagine, stress symptoms make a presence. Once you've stress, without being a medic, evidently tension and worry follow. Human nature! The new Terminator is a good movie, but you as a human will always have it one way or another. But it's how you control it and act on it that may lead to good or vice versa. No kidding, right?

But how does this relate in today's business environment on the internet and even locally? Logics and statistics! People freeze up, the majority obviously gets scared as fumes of security diminish and the poor will get poorer. Does it sound harsh, it's the real world and it may suck like a vampire if you let it! What can you do about it?

If you're ok financially, don't wait until the recession gives you the green light. That's like asking your third grade teacher to go to the bathroom when you have a real urge? For such time, the hell with the teacher, spank me later but you're still going where you need to go - right?

Start building a second stream of income while you still have the capabilities of doing so. Chances are that if you're not above the limit in human age expectancy, you'll still be alive when the challenging days of slow times start to slowly vanish. Both internet businesses and small business shops are in great percentage consumed by TV drama, Nancy Grace talking about missing kids and about 10 new experts saying how the economy is improving and how it's rotten. Oh dear.

Can someone please dial 911? It's because of this non-sense of "the world is ending" that some businesses are falling asleep and going broke, while others are still kicking and some keep making a killing for years on and on.

Warren Buffet said it best; "I always say you should get greedy when others are fearful and fearful when others are greedy". Now, don't worry I don't have any stocks to sell you. But, what I do have are free continued suggestions for starting a business slowly, strategically and carefully planned to later on profit when everybody else is going green yet again. Just like whisky, a vicious cycle but with the economy.

Does it make sense to start a business in your situation right now? If you're broke and don't have enough money to eat, two plus two needs to equal four in your end, forget it! However, if you're financially secured to greater length and have enough for the next 6 months, I'll seriously advice you to consider adding a contingency plan and adding room in your own asset portfolio.

An internet business can be started with less than $100. Yes, less than $100 and sometimes even less according to your know-how experience. There are not many things more satisfying than knowing your going up and up and up, and playing the life the smart way. But you got to start somewhere and obviously forget the repertoire of get-rich-quick all over the internet.

Ending point, what would 2 hours a day of pure productive time 5-6 days a week from today to 3 years from now to your bottom line? Interesting. Reflex on it, take your time and talk to yourself. Here's some help? More TV, Armageddon, Deep Impact and additional chaotic entertainment? Or financial freedom once everyone is willing to spend in what they want just like good-old times?

You probably didn't choose one; you probably chose both options as I did few years ago, as I still love entertainment, the good times and the green that makes life easier and happier days one way or another for you and yours. But again, the point is still what would you choose?

Starting a Wholesale Business is one of the business components Joaquin serves as reference source, e-commerce coach and certified author. His focus today is assisting people receive extra income through the acquirement of an in-demand Wholesale List Article Source: http://EzineArticles.com/?expert=Joaquin_Reveron

Leading a debt free life

Many of us may feel like it is impossible to live without debt because of the way certain purchase experiences are structured in our society. For big-ticket items like cars, higher education and homes, financing with loans and mortgages is the norm. However, if you think there has to be a better way, you may be right. Read on for an examination of common borrowing situations and how you can avoid taking on stifling amounts of debt - or in some cases, any debt at all.


Daily Transportation
Most of us live in cities and towns where the automobile is considered the primary form of transportation; while there may be a bus system, most people consider it a subpar way to get around. Of course, even the cheapest new car can still cost over $10,000, which is more money than most people can afford to fork over at one time. 

One alternative that many people do not consider because of their misconceptions about the experience is buying a used car (with cash) from a private seller. Issues with this choice often spawn from older cars being less reliable sometimes more costly to repair. Or, buyers may be concerned about getting ripped off by the stranger they purchase the vehicle from or worry that they'll unknowingly purchase a stolen vehicle. However, if you do some research and choose a model known for its reliability like a Volvo or Honda, you can have a reliable older car for less. There are simple precautions anyone can take to avoid getting ripped off, like verifying that the VIN on the dashboard matches the VIN number on each of the front door stickers; you should also take the car to a reputable mechanic for an inspection. 

Another thing to consider is that the salesman at the car dealership is no less a stranger to you than the person from the classified ad. Sites like Craigslist make it easy to find vehicles for sale by individual owners in major cities. It's true that you might have expensive repairs from time to time, but if you choose your car carefully, you'll still come out ahead over the much higher expense of buying a car new and paying 5% or more in annual interest on an auto loan. (To learn more, see Car Shopping: New Or Used? and Wheels Of A Future Fortune.) 

Travel
There are some purchases for which you are seemingly required to have a credit card, such as staying in a hotel or renting a car. Some businesses, however, will accept a debit card with a major credit card company logo on it in lieu of a credit card. Be aware, however, that to use your debit card in these situations, most companies will place a hold on a portion of your funds in the amount of several hundred dollars so they can collect payment if you damage their property. This means that if your checking account balance hovers near zero, you won't be able to use your debit card in these situations. 

Even if you do keep a comfortable amount of money in your checking account, you'll want to do some advance planning to make sure enough funds will be available to cover any outstanding or upcoming payments while the hold is on your account. The best way to do this is to find out in advance how much the hold will be for and then treat this as an expense. When you've safely returned the car or checked out of the hotel, you can then "refund" the held money back to yourself. (For related reading, see Credit, Debit And Charge: Sizing Up The Cards In Your Wallet.) 

Not all rental car companies and hotels will accept debit cards, so you'll need to do some calling around to find a place that will. Keep in mind that some national chains are franchises and payment rules can vary by location, so instead of calling a hotel's national toll-free number to inquire about payment, you should call the front desk of the specific location where you want to stay. 

School
According to an October 2007 article in U.S. News & World Report, the cost of higher education has been outpacing inflation for years. In 2007, private universities charged upwards of $34,000 a year for tuition, room, board, books and transportation. Even state schools can cost more than $15,000 a year, which is beyond the reach of many families. (For background reading, see Preparing Parents' Pockets For College Tuition.) 

While it may sometimes seem like everyone is going straight from high school to college, many students actually don't take this path. Many start working during and after high school to save up money for college, or work part-time while attending classes.

Scholarships are always an option, but they often aren't available to people who don't stand out in some significant way. If you're not the Alabama Jiu-Jitsu champion or a breeder of rare lizards, but rather a straight-B student who plays acoustic guitar, you'll probably get stuck footing most of the bill for school. 

If your family's income is on the lower side, you might qualify for enough need-based aid (in the form of grants) that can help pay for a four-year university, but to increase your odds of getting that aid, you'll have to apply to a lot of schools, which is both time-consuming and expensive. However, if you can find a school that needs someone like you, you may be able to get a significant scholarship even if your credentials aren't extraordinary. For example, perhaps there is a small university in North Dakota that would happily pay to have you because they aren't highly competitive academically, they don't have enough students from Florida, and they're looking to expand their music program. 

What about paying for expensive post-graduate programs like medical school and law school? While the costs of these programs may be insurmountable (by the time you saved up enough to pay for law school outright, you will have wasted many years of your potential career), you can at least try to ensure that the cost will be worthwhile by getting some practical experience in your chosen field before you commit your time and money to another degree. If you think you want to be a doctor, try working as a receptionist in a doctor's office, as a volunteer in a hospital or nursing home, or even getting a less time-consuming and less-expensive nursing degree before committing to med school. Postponing your educational plans by a few years isn't such a bad thing when you're gaining practical experience in the field. Most importantly, if you discover that you hate it, you won't have wasted all that money and effort on school, and you'll be one step closer to figuring out what you really want to do. If you really want to go now, don't expect Harvard to foot your bill for law school, but as in the example above, a lower-tier school might give you a scholarship, or at least have lower tuition costs. (For more on college planning, read Invest In Yourself With A College Education and Graduate With A Degree In Financial Security.) 

A Place to Call Home
In some areas, prospective tenants must pass a credit check, which usually means that you'll need to have a credit history. How can you have a credit history if you don't have any credit cards or loans? It seems unfair to require a person to prove his or her financial responsibility by forcing that person to incur debt, however temporary. Most people would argue that the complete absence of any debt also proves a certain amount of financial responsibility, but if your landlord isn't one of them, you can always sublet a room from an individual who doesn't care to perform a credit check. You might also have better luck renting in a part of town near a college, because many college students don't yet have credit histories and area landlords will be used to this. It is possible to rent an apartment without a credit history, but your options may be somewhat limited. (For more on getting an apartment, read Are You Ready To Rent?)

As far as buying a home, if you want to pay all cash, you'll almost certainly need to choose an inexpensive area to live, at least initially. For example, most people will never have enough money to pay cash for a two-bedroom starter home in even the suburbs of a pricey city like Los Angeles, where most homes can cost well over $500,000 dollars. People who have that much money saved up are often near retirement age, which is longer than most people want to wait to become homeowners. 

On the other hand, if you choose to live near the far edges of some major cities, it may easier to buy a home for closer to $100,000, which makes saving up to pay all cash a more reasonable (but still a fairly difficult) goal. Not having to shop for a mortgage will take a lot of the stress out of shopping for and owning a home and might even give you an advantage as a potential buyer over someone who can only put up a down payment. (To learn more, read Be Mortgage-Free Faster.)

Conclusion
There's no question that avoiding debt involves a certain amount of sacrifice, but it is not as difficult as you may think. Then again, when everyone around you is buying things they can't really afford, maybe you're not sacrificing anything except trying to fit in - and running the rat race with the Joneses is no way to become wealthy, anyway. Although you'll have to go off the beaten path to live a debt-free life, the peace of mind and financial security it can give you may be well worth the extra effort.

Retirement assets

Retirement can be a comforting but challenging event in many people's lives. You want to be able to live comfortably during this time without worrying about how to make ends meet. To do this requires that you have a solid strategy in place that can provide consistent income, protect you against inflation and allow you to live a comfortable lifestyle during your retirement years. In this article, we will examine some of the things that you can do to have an enjoyable retirement without the stress and challenges that so many retirees face today.

Factors That Erode Retirement Assets
There are many factors that can lead to loss in value orpurchasing power of your retirement assets, and one of them can create a situation where you might not have enough money to live on during retirement. In this case, knowledge is power, and if you are aware of these factors, you can take steps to ensure that they do not affect you. (If you need more reasons to plan for retirement, or just need help getting started, see our Retirement Planningtutorial.)

Inflation
It doesn't take a rocket scientist to understand how inflation can affect your everyday life. However, it can also have an effect on your retirement in that it increases your cost of living every single year. Between 1960 and 2009, inflation has averaged a 4% increase per year. This means that something that costs $100 today will cost $180 in 15 years if inflation continues at the same rate. This can be significant when you are living on a fixed income. To be able to continue to live a comfortable lifestyle in retirement, your portfolio must be able to keep up with inflation. (For more on how to accomplish this, see Coping With Inflation Risk and Curbing The Effects Of Inflation.)

Living Longer
People are living longer now than at any other time in history. The average man who retires at 65 can expect to live until 82, while the average woman who retires at the same age can expect to live until 85. This can pose an enormous potential challenge for you in that the longer you live, the better the chance that you will not have enough money to live on when you retire. To be able to live a comfortable retirement, you must be able to structure your income and investments so that they can continue to provide for you, even if you surpass the average life expectancy. (Read more about longevity risk in Unexpected Bumps That Can Derail Retirement.)

Lack of Diversification
Many people don't balance out their portfolios to protect themselves against a bad investment. They usually end up placing a substantial amount of their investments in one particular area or asset class. Far too often, investors assume that a particular area or company is "good" and that as long as they stick with their current strategy, they will retire with more than enough income and assets. Such was the case with many retirees and pre-retirees who invested in Enron stock. When the energy-trading company collapsed, many employees had invested the majority of their assets in the company's stock, and their savings were virtually wiped out. Along with that went the retirement savings that they had accumulated for years. The basic idea here is not to put all of your eggs in one basket. (For tips on diversification, see Introduction To Diversification. To see how this strategy can help your portfolio through a down market, read Bear-Proof Your Retirement Portfolio.)

Medical Expenses
Another area that can affect your retirement income and assets is medical expenses. As you age, the need for medication and healthcare will only increase. Consider too that healthcare costs have been rising consistently over time. According to a March 2008 report by Fidelity Investments, the cost for healthcare had risen by a total of 41% since 2002, with an annual average increase of 5.8%. It is estimated that within the next 10 to 15 years, many retirees will spend half of their incomes from Social Security on healthcare costs. To be able to have a worry-free retirement you must keep up with these costs so that they don't reduce your income or assets. (For more on this topic, see Failing Health Could Drain Your Retirement Savings. For tips on reducing medical expenses, see 20 Ways To Save On Medical Bills.) 

There may be other factors that could derail your retirement plans. It may help to use the ones presented here to start a list, so that you can take a proactive approach to implementing ways to protect your retirement assets.

Ways to Protect Assets and Create Income
There are many ways you can protect your assets against some of the risks listed above and create additional income. Diversification is the key to allowing you to maintain stability, growth and income. Below are several tips and tactics that you can use to protect yourself against the challenges that you may face in retirement.

Equities / Dividend Stocks
In order to combat the forces of inflation, your assets and income must grow at a rate greater than inflation. One way to do this is through the use of equities or dividend-paying assets. Over the past 50 years, stocks have averaged 6.6%, while the average inflation rate has been 4%. The average dividend rate of the S&P 500 is 5.3%. What this shows is that investing in stocks and dividend-paying stocks can keep your assets and income growing faster than inflation by giving you long-term growth and strong, consistent dividends. When you put the two elements together, the overall return is much greater than inflation. The important key is to use a conservative approach that can provide you with consistent long-term growth and dependable, increasing dividends. (Read more about dividends in Dividends Still Look Good After All These Years.)

Bonds
Another way that can provide income and stability during retirement is through the use of bonds. Over the past 50 years, bonds have averaged 5.5%. Generally, bonds are considered to be a conservative investment. When you purchase a bond you become a creditor to the company or government that issued the bond. During the life of the bond (five years, 10 years, 30 years) you will earn a consistent interest rate, which is stated at the time of purchase. These interest payments will continue until the bond matures. U.S. government bonds are the safest, followed by municipal bonds and corporate bonds. These types of assets will provide you with consistent income on a regular basis. In retirement, they can compliment your overall strategy by bringing a conservative, income-orientated side to your portfolio, providing you with income stability. (See Advantages Of Bonds and Bond Portfolios Made Easy to learn more about bonds.)

Mutual Funds / Bond Funds
If you are uncomfortable investing in stocks or bonds, consider mutual funds and bond funds. A mutual fund is a company that raises money from investors (shareholders) and invests that money in a portfolio of stocks, bonds or both. The idea is that they will provide you with diversification and balance so that you won't have to worry about which stocks to buy or sell. A bond fund invests in bonds with the purpose of providing income and stability. (See Evaluating Bond Funds: Keeping It Simple and Advantages Of Mutual Funds for more information.)

These two types of funds can provide your portfolio with balance and income without you having to determine which stocks or bonds are the best for you.

Fixed Annuities
An alternative way to protect your assets and create income is through the use of fixed annuities. A fixed annuity is a written contract between you and an insurance company that is designed to provide you with regular payments at specific times (usually monthly, quarterly or annually) and can be for a certain number of years or your lifetime. These types of annuities are not tied to stocks and will pay you a stated guaranteed amount as a worst-case scenario. They can be used to supplement your retirement income and can provide you with diversification as well. (To learn more about annuities, see Exploring Types Of Fixed Annuities andWatch Your Back In The Annuity Game.)

Ideally, your retirement portfolio should have a mixture of some or all of these investment options to balance growth and income. The percentage allocation will usually depend on your risk tolerance, your retirementhorizon and your growth and income needs. (Read more about finding your optimal asset balance in A Guide To Portfolio Construction and Five Things To Know About Asset Allocation.)

Conclusion
Your retirement doesn't have to be burdened with the stress and challenges that so many face today. By using a diversified strategy, you can achieve stability, income, growth and peace of mind. This diversification can be achieved by using a variety of tools, such as a balanced portfolio and asset-protection strategies. However, as with all strategies, it is important to first evaluate your own situation to determine the strategies and solutions that are suitable for you.  Unless you are an expert in these areas, you may want to work with professionals who can help you to achieve your goals. This will help you to have the worry-free retirement that you've always envisioned.

What is a credit union ?

Many bank customers are becoming increasingly frustrated with the litany of fees their banks are charging, as well as the difficulties often associated with obtaining a loan. Credit unions represent an alternative to banks and possible solutions to common complaints about traditional banking institutions. Let's take a look at credit unions and what they have to offer.


What Is A Credit Union?
A credit union is a savings and loan entity formed by a group of people who share some common characteristics, such as a profession or geographic location. The members of the group pool their money to provide loans and demand deposit accounts to other members. Credit unions are not-for-profit entities that are owned and founded by their members; they function as democracies, with each member having a say in how the credit union is run. 

History
Credit unions originated in Rochdale, England, in 1844 when a group of weavers established the Rochdale Society of Equitable Pioneers. They raised capital to buy goods at discount prices and then passed the savings along to their members. Friederich W. Raiffeisen is considered to be the founder of the modern credit union, and established the Heddesdorf credit union in Germany in 1846. Credit unions were then introduced in Canada in 1901 and finally came to America in 1908. Today, there are approximately 90 million members of credit unions nationwide.

Regulation
Credit Unions' not-for-profit status does not exempt them from regulation. The National Credit Union Administration (NCUA) was created by the federal government in 1934 to oversee all credit union activities nationally. Like banks, credit unions are insured up to $100,000 for each account by the National Credit Union Share Insurance Fund, which guarantees solvency for credit unions in the same manner that the Federal Deposit Insurance Corporation (FDIC) protects the banking industry. Certain retirement accounts, such as IRAs may even be insured for up to $250,000, depending on state and local regulations. (For related reading, see Are Your Bank Deposits Insured?)

Philosophy
The objective of a credit union is summed up in the saying, "not for profit, not for charity, but for service." Since inception, credit unions have run according to a philosophy that has come to be known as the "Seven Cooperative Principals for Credit Unions". These principals are as follows:

1. Voluntary Membership: All credit union members join on a voluntary basis and there is no discrimination of any kind among potential eligible members.

2. Democratic Organization: Each member has one vote and all are equally able to participate in making decisions and creating policy.

3. Economic Participation of Members: Credit unions are owned and therefore controlled by members, each whom will benefit proportionately according to the number of   transactions in which he or she is involved, as opposed to the amount of assets that is deposited.

4. Autonomy: Credit unions are independent organizations, and any association or dealings with an external organization or other entity must be done via popular democratic consent.

5. Education and Training: Credit unions have a mission to educate and train their volunteer board members and administrators and also to provide financial education to their members and the public at large.

6. Cooperation: Credit unions must endeavor to work together to achieve common goals at all levels of organization, including locally, statewide and nationally.

7. Community Involvement: Credit unions have an interest in creating policies that help sustain the development of their immediate communities.

Higher Rates, Lower Fees, Better Service
The main advantage that credit unions offer is the ability to provide members with superior rates for loans and savings and also charge lower and fewer fees. Credit unions do not have to make a profit; all of their excess revenue is used to benefit the members, either by improving rates or reducing or eliminating fees. Furthermore, their not-for-profit status entitles them to a tax-exempt status not available to banks. Bankrate.com conducts monthly surveys that consistently show that credit unions pay higher rates on certificates of deposit (CD) than banks or other traditional savings institutions. Surveys of money market accounts show a similar difference in rates. (To learn more about money market accounts, read Getting To Know The Money Market and Money Market Vs. Savings Accounts.)

The banking industry does not regard credit unions as serious competition, as the combined assets of all credit unions in the U.S. equal only a small fraction of total U.S. bank deposits. However, membership in credit unions continues to grow, and most credit unions can now offer virtually all of the same technological amenities as any bank, such as internet banking, debit cards and a wide variety of products and services. Furthermore, membership criteria for credit unions is shifting away from organizational involvement to community residence. Many credit unions now regard any potential customer who lives within several counties of its location as a member. 

Conclusion
Customers who are dissatisfied with the fees, rates and service of traditional banking institutions may be pleasantly surprised at the terms that are offered to them at their local credit union. For more information on credit unions, check out America's Credit Union. 

by Mark P. Cussen (Contact Author | Biography)

Mark P. Cussen has over 13 years of experience in the financial industry, which includes working with investments, insurance, mortgages, taxes and financial planning. He has two years of experience in writing and editing insurance and securities test training manuals, as well as other financial topics. He has also worked in in retail, discount and bank brokerage systems and been involved in a venture capital enterprise in the oil and gas sector. Cussen has a Bachelor of Science in English from the University of Kansas and completed his CFP®; coursework at the Bloch School of Business at the University of Missouri-Kansas City in August of 2001.