How To Open A Yuan Bank Account

Opening A Yuan Bank Account

First Published Date : February 16, 2011 ADawnJournal.com

Recently, China moved a step forward in terms of economic integration with the rest of the world when it allowed, for the first time ever, accounts in the United States to be opened under their currency; the Yuan. This is a big step for China, which will soon become the largest and most powerful economy on the planet and many see it as a sign China is opening up to the rest of the world.

So, if you are thinking of opening an account in the Yuan, what do you need to do to make it happen? Well, first of all, if you live in the American Midwest, you are out of luck because you are as about as far as you can get away from where you can open up a Yuan bank account, unless of course you live in Alaska or Hawaii.

No, there are only two places in American where you can open an account in the Yuan, and those are New York and Los Angeles, which happen to be on opposites ends of the country from each other.

This is a huge step forward for China because for years the country kept a tight grip on its exchange rate through its restrictions on the number of Yuan bills that could be brought into, and taken out of, the country. China didn’t want a lot of bank accounts being used in the Yuan because if a large group of people take out accounts in Yuan, it pushes up the exchange rate of the currency since there is an increased demand for it. If that happens, then China can no longer offer cheap goods and services to the rest of the world, which would affect its economy in a monumentally horrible way.

As for why you would open an account in the Yuan, the two biggest reasons are because it diversifies your currency portfolio and if the value of the Yuan increases, you benefit.

Now, how do you open a Yuan currency account? Here are a few easy steps.

1. First, go to New York or Los Angeles to a Bank of China office.

2. Next, you will need $500 at least to open up a U.S. dollars to Renminbi (RMB) account.

3. In order to open a RMB account, make sure you have two forms of identification, a W-9 form and a signature card.

4. You will need to fill out an application on a saving account because you cannot open a checking account that is RMB. This means you can put money into the account, but you cannot take money out, as of yet that is.

That is all there is to opening an account that is in the Yuan. In the future, as China becomes more powerful, you will begin to make a lot of money off your decision to use the Yuan in the account instead of the dollar, which itself is becoming weaker as time goes on and we move into the 21st century.

NB – In Canada, Bank of China is not offering a Yuan currency account yet.

Manage Your Debt With A Simple Budget

The Budget And Debt Management

First Published Date : March 2, 2011

When you are putting together a plan to manage your debt, one of the most important pieces of making debt management successful is the budget. A budget is so important in debt management that without it, there is little chance of success.

A budget is a simple tool that goes a long way because it shows you how much you are spending, how much you need to save, how far you are to your goal, and most importantly, how much you are allowed to spend.

To make a budget, it is actually a very easy process. First, you should look at how much you are spending so you can create a realistic budget. This is important because if you do not know how much you spend, how will you know how much to allocate. If you assume you spend $150 on food in a month, when you actually spend $500, then budgeting only $100 will doom you to failure. So, it is important you spend an entire month collecting receipts that you can then use to check how much you are spending.

You may not think that spending three dollars a day on a latte is much, but when you spend $90 a month, and $960 a year, well that can add up to a lot of wasted cash.

The next thing you need to do is determine what you can eliminate from your expenses. Find anything that is not essential and cut it out. Once you do that, you can then put together your budget.

When writing up your budget limits, make sure you do not set them too low, or too high. Find out how much you spend on average on bills and food, and go with that. Cut out anything you don’t need and cut back on anything you can.

Now, once you have done that you will be able to see how much you are saving each month. If you are managing your debt, depending on the size, you will want to ensure that you get as much of the debt paid off as possible. Shoot for saving $500 or more per month on your expenses by sticking to your budget and you should be well on your way to paying off your debt. Of course, even paying minimum payments until you can pay more will ensure your debt does not grow at all.

Now, the most important thing to remember with your budget is you need to keep it flexible. Things change over time and you may need to adjust the budget to reflect higher expenses (heat in winter, etc), higher pay, new income and more. If your budget is rigid and never changes, it will become obsolete with your needs. Every six months or so, look at your budget and rework it.

By just having a budget, you are well on your way to fixing your debt and practicing proper debt management. That way you get out of the dreaded debt spiral.

What Is Debt?

Debt 101

First Published Date : October 9, 2010 ADawnJournal.com

Something that seems to dominate our lives is debt. Debt routinely influences the lives of individuals, allowing them to buy things, or preventing them from buying things they want or need. As the years have gone by, the debt load of people in the Western World has increased greatly. While most people had little debt in the 1950s and 60s, but the 1990s and 2000s, people owed more money than they made, which is a very bad situation to be in. So, what is debt and how does it influence our lives so much?

Debt is something that is owed to someone else. It can mean money that is owed, or a moral obligation that is owed. Either way, it is something that must be repaid. Like a favour, you are agreeing to pay or do something for someone else at a future date because you are in his or her debt. A debt is created when a creditor agrees to give a lump sum of assets to a debtor. The debtor agrees to repay the debt with interest in most cases.

The word debt itself comes from the French word dette, which itself comes from the Latin word debere, which means to owe. In the 17th century, the letter b was put into the word debt in Samuel Johnson’s dictionary.

When a debt is made, the debtor and creditor must agree on the manner in which the debt is going to be repaid, this is a deferred payment. The payment is typically a certain amount of money that will help pay off the debt, or it could be the entire debt at once. Payment of increments of a debt over time is one of the most common forms of repayment, but repayment in full at the end of the loan agreement is also very common these days as well.

There are several types of debt that you should be aware of when dealing with debt:

1.   Secured Debt – This is debt that is made against some sort of collateral. For example, you agree to put up your house as collateral when you get a loan for your business. If you do not repay your business loan, you lose your house. Secured debt typically has lower interest rates because the risk is less.

2.   Unsecured Debt – This debt is not against any sort of collateral and therefore has a greater risk for the creditor. As a result, interest rates are higher for this and one’s credit score must be good to obtain this credit.

3.   Private Debt: This is a bank-loan obligation.

4.   Public Debt: This is a general definition that covers freely tradable debt on a public exchange with few restrictions.

5.   Basic Debt: This is the simplest form of debt and is just an agreement to lend someone a sum of money over a certain period of time, which must be repaid at a certain date.

6.   Syndicated Loan: This is a loan granted to companies who want to borrow more money than a single lender is prepared to risk. Therefore, the loan comes from several lenders at once and typically runs into the millions of dollars.

7.   Bond Debt: A bond is a debt security that is issued by certain institutions such as companies and governments. This bond entitles the person who holds it to repay the principle sum, plus interest.

There are other forms of debt that many people and companies use to help them manage day-to-day.

1.   Cash credit: This is the primary method in which a bank will get money for the security of debt. It is like a current account except the money that can be withdrawn is done so without restriction to the amount that is deposited.

2.   Working capital: Firms need money to pay for day-to-day activities like paying wages, buying supplies and more. This is the working capital of the company and the main source of working capital is the current assets the company can use to generate money.

3.   Bank overdraft: When you withdraw more money than you have in your bank account, you will often go into your overdraft, which is money lent to you by the bank. You will have a negative balance on your account, which must be repaid at some point.

Debt has a lot to do with credit worthiness. The better your credit, the more of a debt you can take on. Typically, if you have a FICO score above 600, you will be able to accumulate more and more debt, and anything between 350 and 599 will mean you will have difficulty getting debt until you manage your credit better. Companies also have the same type of system for when they borrow money. The best credit rating for a company is AAA, while the worst is C.

When debt becomes too much, one of the most common things for people to do is file for bankruptcy, which is one of the only ways that a debt can be removed without repayment. A debtor cancelling the debt is very rare, but becoming more common especially during the economic crisis. In fact, many economists feel that the only way for developing nations to reach equity with developed nations is for their immense debt load to be erased. As for individuals, many will try debt consolidation or debt counselling, which will allow them to repay their debts without having to declare bankruptcy. The problem with declaring bankruptcy is that it will destroy a credit rating for several years, often as long as seven years in total.

Debt is a big fixture of our lives these days and not something that is going to disappear any time soon. The only way to manage debt properly is to be smart with debt and make sure that it does not become something that causes you to fall behind. Be smart with debt and it will not overload you and make your life less than what you want it to be.

What is Opportunity Cost?

Opportunity Cost

First Published Date: July 4, 2010 ADawnJournal.com

There are a lot of complicated concepts in economics, and while some are easier than others, all of them are important to understand. Economics is a diverse field with many things at play, and if you want to invest, or just save money, you should at least have a basic understanding. This brings us to opportunity cost, something that you may not have heard of, but which you deal with on a regular basis.

Opportunity cost is the cost that is associated with the next-best choice available to you based on two, or more mutually exclusive choices. It is a very important factor in economics and it helps blend the relationship between scarcity and choice together. Thanks to opportunity cost, resources that are scarce and difficult to obtain, are therefore used more efficiently. This also means that opportunity cost goes well beyond economies and financial costs, and into other areas including pleasure, lost time, utility and more.

First created by John Stuart Mill in the 19th century, opportunity cost has become a cornerstone of economics around the world, helping to shape the world we currently live in. Now, opportunity cost may seem rather foreign, and slightly difficult to comprehend, but to help you here are some examples that illustrate opportunity cost.

·   Someone takes $50,000 and puts it into a stock, while the person makes money if the stock goes up; they have lost the money that would have come from leaving the $50,000 within the bank, where they would have collected interest on it. Therefore, the opportunity cost to that person, who chose to invest in stocks than leave it in the bank, is the interest they would have received on their savings.

·   An individual walks into a store and must decide between spending $20 on a video game or on a new pair of jeans. If the person buys the jeans, the opportunity cost is the video game, while conversely if they buy the video game the opportunity cost is the jeans.

Opportunity cost is not just about material or monetary items; it is about what has more value to a person. For example, if a person can afford to go see one movie, and must choose between action and comedy, they must assess which will give them more enjoyment. If they choose the action movie, then the opportunity cost is the comedy, while if they choose the comedy, the opportunity cost is the action movie.

As you can see, the opportunity cost is something you use on a regular basis throughout your life. When you are choosing between what TV shows to watch, what book to buy, which turn to make on the street and more, you are using opportunity cost. Understanding opportunity cost, especially in finances, will then allow you to get the most out of your decisions and help you earn more money, or save it based on the decision you make. Opportunity cost is something you may not have heard of, but it is something you use every day of your life.

Canadian Popular ETFs

 Some Popular ETFs in Canada

First Published Date : July 10, 2010 ADawnJournal.com

Investing in exchange-traded funds is considered to be one of the better ways to invest in the stock market. Where usually you are trying to beat the stock market, with exchange-traded funds you are only mirroring the index itself. This means that there is a better chance for long-term rewards. Of course, conversely you will end up having lower reward because there is lower risk. However, with lower risk comes the long-term ability to slowly build your investment without worry that you will lose it all. In Canada, ETFs are a very popular because they are somewhat safer investment vehicle than others and here are the most popular ETFs within Canada.

·   iShares CDN Jantzi Social Index: if you want to be socially-responsible with your investments, then this is the ETF for you. All the stocks on this index are picked through an extensive process that must meet criteria in terms of environmental records, social records and governance. This index has consistently outperformed the TSX 60 Index, which it mirrors.

·   iShares CDN LargeCap 60 Index: The most popular ETF in Canada, it consistently does well, leading the list of the most active TSX stocks. More than any other ETF in Canada, this is the choice for most investors who want to invest securely and safely.

·   Claymore S&P/TSX Cdn Dividend: This ETF tracks the TSX Canadian Dividend Aristocrats Index, which has stocks and income trusts on it that have, for at least five straight years, continually raised their dividends on an annual basis. One of the biggest benefits here is that there is a high yield dividend, twice that of other ETFs, plus the fact that there is very little competition on the ETF when compared with other ETFs like iShares.

·   Horizons AlphaPro Managed TSX 60: One of the more unusual of ETFs, this one is actively traded, which is unusual for ETFs as most use simple index tracking, rather than having a broker populate a list of stocks. What the broker will do is take the index and play around with the stocks on it to find the best option. The one drawback is that the ETF has only been around for a year and a half, so there is very little history to go on.

·   Claymore Canadian Fundamental Index: This ETF uses a basic index approach in that it will look at various factors based on things like revenues and cash flow, which gives a better and higher rating to stocks that are undervalued. Each year in March, the stock is rebalanced to reflect any changes in the world of the stock market. This index routinely does better than others, making it very popular for ETF investors.

If you are investing in ETFs, then you are probably doing it because it provides you with long term rewards and lower risk. If you are in Canada, then these are some of the ETFs you can keep an eye on to meet your investment goals to give you consistent rewards well into the future.