Travel Tips for the First Time Flier

Upon getting information about an upcoming school science fair and the need to consider a topic of interest, many students will typically have no idea where to get started. While the science fair is typically a common occurrence in any school at any grade level, there are different types of topics that should be taken a look at depending on the age of the student. After first taking a look at the many different categories of science projects, you will be able to locate a suitable choice of topic to take to the next level.There is a wide variety of categories that fall under the types of science projects that can be chosen for a school science fair. These include biology, chemistry, physics, microbiology, biochemistry, medicine, environmental, mathematics, engineering, and earth science. While you may not have yet learned very much in any of these categories, don’t be afraid to see what each one entails. Taking a good look at your interests will allow you to focus on the right direction to take.Many resources are also available for those who are unsure as to the topic they are wanting to use to create their science projects. If you take a look at the topics that fall under the biology category, you will likely notice that there are topics that deal with plants, animals, and humans. For those who are in 2nd grade or 3rd grade, an interesting topic may be to determine if ants are picky over what type of food they eat. While this topic might not be of interest to an 8th grader, it is certainly something in the biology category that an elementary school student would enjoy.Along with the biology category, a high school student may want to take a look at diffusion and osmosis in animal cells as this would be a more appropriate topic for the grade level. A student in 6th grade would be more advanced than an elementary school student, but not as advanced as a high school student. At this middle school grade level, a topic of how pH levels effect the lifespan of a tadpole may be of interest.Whichever resource is used to locate a topic for science projects, it is always a good idea to consider the grade level of the student prior to making a selection. It is always assumed to be best to have a project at an appropriate level in order to keep the attention of the student and provide a fun and enjoyable learning experience.

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Case Study: Do I Pay Down My Mortgage or Invest My Cash?

If you have cash available, the question of paying down your mortgage versus investing the money will depend on many factors. This article will go through the factors to consider and what assumption are implied in the process.

The situation is that the mortgage is $300,000, with an interest rate of 3%, due in 3 years’ time. The current monthly payments are $1500 per month. There is an amount of $200,000 USD which is available to pay down debt or invest. There is no other debt to speak of, and the mortgage is held against a house valued at $700,000 that generates rental income of $20,000 per year. The income of the person holding the mortgage was $80,000 per year and has now been reduced to $40,000 and the income used to be from full-time employment and is now self-employment income. There is assumed to be no other sources of income.

Criterion #1

Is there an aversion to holding debt? If the number one priority is debt reduction or elimination, the cash should be handled conservatively and the debt should be paid off either in lump sum payments where possible or as a large payment at the end of the 3 year period when the mortgage is up for renewal.

Criterion #2

What is the comfort level in taking risk? Another way to say this is: If I lose a large percentage of the money that I have invested, will I panic and lose sleep? Another version of this question is: If I lose a large percentage of my investment, am I willing and able to wait for the investments to recover? How much is a “large percentage”? The typical number I use is 1/3 or 33%. You can insert your worst case scenario figure instead. Where does this worst case figure come from? The number comes from a typical equity market crash scenario or the worst decline in investment value that you can imagine happening. How long does it take for investments to recover? The typical figure is at least 5 years. If you want a lot of certainty in your income, 10 years is more realistic if the drop is long lived. The assumptions here use an equity correction. A real estate correction or a drop in another market can be used as well, but the equities market is the most common exposure.

Criterion #3

How proficient of an investor am I? A related way of phrasing this is: Do I have an alternative way of using my money to generate higher returns? If you are a new or novice investor, paying debt would be preferred because that is likely to be the best outcome. If you would like to learn more about investing or have conviction about how to make money, then you may want to consider alternatives to paying down debt.

Criterion #4

Income generation from the cash can be compared using an equity / fixed income allocation of investments compared to the interest costs of the debt after fees and taxes. Why? Interest costs on debt are paid after taxes, whereas income from investments is typically generated before fees and taxes. Looking at criteria #2 and #3, what is the best return I would achieve from my investments? If you feel you can generate some return, use the equation: Income Return generated less investment fees and taxes compared to debt interest rate you are currently paying.

Let’s say that you plan to invest 50% in equities and 50% in fixed income. The dividend yield on the equities is 4% and the interest return on the fixed income is 2%. The average rate of return is 3%. For the taxes, there are a few additional questions. What is my tax rate right now on my income? Do I have any registered accounts that I can park money into that could change my tax rate? The assumptions so far ignore capital gains because these are unpredictable in the short run. Let’s say that your tax rate is 20% and you have no registered accounts available. The 3% earned on the investments less management fees of 0.25% per year less taxes of 20% * 2.75% = 0.55%. The net return from your investments after taxes is 3% – 0.25% – 0.55% =2.2%. The debt interest rate is 3%. If you believe that the capital gains on your investments will make this worthwhile, you can assume a return for the capital gains portion of the investment and add it to the return. The tax on the capital gain is generally half of your tax rate – in this case 10%.

Within the investment rate of return in this case is the currency exchange rate from U.S. Dollars (USD) to Canadian Dollars (CAD). This would be another factor to consider as well.

Criterion #5

Will the future interest rate change by the time I renew my mortgage? If the investment return exceeds the mortgage return but the future rate in 3 years will rise to 6%, is the investment still viable? If it is not, paying down the debt looks more promising. Should the interest rate drop when the mortgage is renewed, the investment return looks more promising. This decision involves predicting the future which is not easy to do. If it becomes obvious which way the interest rate will go, the decision will become clearer.

Other criteria

Other criteria could be whether the investment rate of return prospects become better – such as after a market correction. You may have a better conviction on a specific market versus the average which would make investments more enticing. Your income may increase to the point that paying down your mortgage is easier and faster, or vice versa. The equity in your house may go up or down which can also change the decision.

This article is meant to examine the thought process of how to make a decision with many unknowns. As you go through the process, the answer for your situation becomes clearer and more applicable to where you are at a moment in time.

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Will a Reverse Mortgage Work For You?

As a reverse mortgage loan officer, I see many heart-breaking stories every day. The sad truth is most of us have not planned properly for our retirement I am 64 myself and fall into this category. Most of my friends are already retired and have fat 401K’s or Pensions to fall back on. Nearly all of them worked for large companies.

I took a different path. I was self-employed for most of my life. It gave me a lot of freedoms and the ability to control my own destiny. I was mildly successful, being able to support myself in a comfortable lifestyle, buy flashy cars and clothes and take expensive vacations. I did not put money away for my retirement and will have to retire to the fixed income the Social Security Agency provides. Had I paid my home off, I would be in much better shape and could nearly get by on the $1850 Social Security would pay me if I retired now. If I wait until I and 66 year and 6 months that skyrockets up to $2200 and if I continue to work until I am 70, I’ll get a whopping $2600 per month. The only problem is I haven’t paid off my home.

At this point, I would be much better in a reverse mortgage. A reverse mortgage would eliminate my house payment for the rest of my life and allow me to stay in my home forever. They can never call the loan due unless I pass away, move out of the home or sell the home.

I would be responsible for the taxes and insurance which amounts to about $300 per month. I would also have to pay my Home Owner Association dues which are currently about $325 per month. So out of my $1850 per month from SSA, I would have to live on $1200 per month. Its doable but not very comfortable. Not what I have worked for 40 years to achieve

A reverse mortgage will also give me a line of credit which I can tap at any time. If I don’t tap it, it will grow at approximately 3% per month. It doesn’t sound like a lot but keep in mind its more than the interest I would get at a bank. Once my value is established, they can never cut the amount of my line or credit or call the loan due even if my home falls in value.

If you had a HELOC, a home equity line of credit, the amount of the HELOC can and has been cut in the past due to prevailing real estate values. This happened to nearly everyone in 2008 when the subprime bubble burst. People found that when they needed the money the most, it was not available to them. This caused a lot of people to declare bankruptcy because they were no longer able to pay their bills after being laid off on their jobs.

The Reverse mortgage prevents this from ever happening. They place an insurance policy in the loan called Mortgage insurance that protects the bank in the event the values plummet again. It also protects the borrower from adverse affects of their bank going out of business.

A reverse mortgage was designed for Seniors who were cash poor but had built up a lot of equity in their homes. Its not unusual for me to find Seniors trying to get by on less than $2000 per month but have several hundred thousand dollars in their homes that is just sitting there.

If you find yourself in this situation, look into a reverse mortgage. It will help you with your finances, provide a little more spendable money each month and give you the security of being able to stay in your home as long as you want.

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