FACULTY OF MANAGEMENT

ADVANCED MANAGEMENT ENGLISH

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CRITICAL ANALYSIS

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NAME :

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LECTURER : MR. RAJANDARAN PERUMAL

SECTION : BC 251

The article “8 Financial Tips For Young Adults “ was written by Amy Fontinelle, a financial journalist and editor of websites, public policy organizations and books publishers. The author has written the definition of several hundred financial terms for Investopedia’s online dictionary as well as in depth tutorials on budgeting, banking and home buying. In addition, Amy Fontinelle has extensive experience editing corporate documents, public policy papers and articles, scholarly books and finance articles. Her articles have been posted on Yahoo.com, Finance, Forbes.com, SFGates.com and various local news websites. Furthermore, we can read more personal finance articles at Amy’s own personal finance website and learn more about Amy at amyfontinelle.com.

The purpose of the article is to inform with factual material. We can learn the basic of managing our money effectively, protecting our wealth and making it easy and fun to save more to be financially secure both today and future. The article consists of eight main points, which are learn self control, take control of your own financial future, know where your money goes, start an emergency fund, start saving for retirement now, get a grip on taxes, guard your health and guard your wealth. The content of this article was organised, through and presented in a clear and concise manner.

Amy state that “Do you really want to pay interest on a pair of jeans or a box of cereal?” in her first main point. This statement appeal readers should take consideration before purchase using credit card. Besides that, Amy has include the details and relevant in her article such as Understanding Credit Card Interest and Debt Management feature in order to get more clear about credit. Amy also mentioned the effect of using credit cards by “If you make a habit of putting all your purchase on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still paying for those items in 10 years.” This sentence illustrates to ensure have enough money for each month to pay mortgage of paying interest. In the article, Amy knows the convenience factor to use credit cards, but she has made clear about the rules of payment. She gets her points by describe pay the balance in full on time and limit the number of cards.

Through the second main point in this article, the author makes an effort to convince readers to learn manage their own money by stating “If you don’t learn to manage your own money other people will find ways to (mis)manage it for you.” Moreover, “Other may be well-meaning, but may not know what they’re doing like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage”, Amy has gave the example that other people will manage financial for you.

As discussed by the author the importance of personal finance knowledge, I also realise the expense should not exceed the income. Amy outlines “The best way to do this is by budgeting”. She gets her point across by using descriptions the effectiveness of budgeting. “Once you see how your morning java adds up over the course of a month, you’ll realise that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.”, she use this sentence as a example to support her ideas. In addition, Amy has brought the important of budgeting, which is the foundation of financial plan. According to Jeremy Vohwinkle, “Budgeting helps to keep your spending on track and even uncover some hidden cash flow problems that might free up even more money to put toward other financial goal”.

“One of personal finance’s oft-repeated mantras is “pay yourself first” used as the introduction in the fourth main point, also provided the feeling that would make to read further into the article. Amy has presented clearly the advantages of having emergency fund to support her main point in the statements of “Having money in savings to use for emergencies can really keep out trouble financially and help you sleep better at night.” and “Also, if you get into a habit of saving money and treating it as non-negotiable monthly “expense”, pretty soon you’ll have more than just emergency money saved up: you’ll have retirement money, vacation money and even money for a home down payment”. On the other hand, the author mentioned saving account, certificate of deposits and money market account in her article. I found the fact is, according to Jeremy Vohwinkle, “In order to build an emergency fund, but where you should keep your savings so that it earns the higher interest for you”. Employees may have many choices in the retirement plans. The statement “Because of the way compound interest works, the sooner you start saving, the less principal you’ll have to invest end up with the amount you need to retire, and the sooner you’ll be able to call working an “option” rather than a “necessity”, is the main reason to start saving for retirement now and do not leave the retirement plans behind. According to Loral Langemeier, “Put the money in an account to gain more compound interest. I completely agree that the best way to ensure our future financial success is to start saving for retirement today. In this article, I can understand and get more depth into contribute a company-sponsored retirement plans rather than individual retirement plan. In addition, according to Rachelle Williams, “A guide to savings plan benefits provided by employers”. Basically, if an employee is contributes into company-sponsored retirement plans, he or she will be financially secure in the life.

The sixth point which Amy describes is to get an understanding on income taxes in order to manage money. She has discusses about the risk to use online calculators by giving an example as the evidence of her point. Furthermore, she explores more depth in insurance to guard the health and wealth. She outlines the important of insurance and the clues to keep a healthier lifestyle. According to Jeremy Vohwinkle, “The health insurance is the most important type of insurance”.

Overall, I feel that Amy Fontinelle has proposed her points, gave example and backed up the information in a clear and structured well. The clarity and organization of this article makes me easy to read and understand well. I can understand about the eight financial tips for young adults in order to live in a comfortable and wealthy life.

REFERENCES:

1) http://www.investopedia.com/articles/younginvestors/08/eight-tips.asp

2) http://financialplan.about.com/od/budgetingyourmoney/tp/budgeting-101.htm

3) http://financialplan.about.com/od/savingmoney/a/wheretokeepsave.htm

4) http://www.articlecontentprovider.com/articlesubmit/Article/Double-Your-Money-With-Compound-Interest/157493

5) http://www.suite101.com/content/employer-based-retirement-plans-a214263

6) http://financialplan.about.com/od/insurance/a/insuredoneed.htm

APPENDIX:

Article 1

Budgeting 101

Everything You Need to Know About Budgeting

By Jeremy Vohwinkle

Budgeting lies at the foundation of every financial plan. It doesn’t matter if you’re living paycheck to paycheck or earning six-figures a year, you need to know where your money is going if you want to have a handle on your finances. Unlike what you might believe, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life. It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds. Here’s everything you need to help you create and maintain a budget.

1. Budgeting Basics

Do you know why a budget is so important? On the surface it seems like creating a budget is just a tedious financial exercise, especially if you feel your finances are already in good order. But you might be surprised at just how valuable a budget can be. A good budget can help keep your spending on track and even uncover some hidden cash flow problems that might free up even more money to put toward your other financial goals.

2. How to Create a Budget

The hardest part of creating a budget is sitting down and actually creating one. It’s like staring at a blank piece of paper when you need to write something and that first step seems like a massive hurdle. Don’t worry--I’ve broken down the budget creation process into a few easy to follow steps. You’ll be able to sit down and create a basic budget in just a few minutes.

3. Traits for Budgeting Success

Once you’re taken the time to create a budget, now it’s time to make sure you follow it. Budgeting can be like going on a diet—you start with good intentions, but after a few weeks or months you drift away from your plan. Don’t let that happen to you. Here are a few basic traits that will ensure budgeting success.

4. Basic Budget Worksheet

If you’re having difficulty coming up with all of the various expense categories for your budget, I’ve created a budget worksheet that can help you organize everything. This worksheet has the most common expenses and can help you keep track of everything in an orderly fashion.

5. How Overspending Breaks Your Budget

The main reason to create a budget is to help you keep your finances under control by keeping track of how much money you’re spending and where it goes. When you begin to stray from your budget it’s usually because of spending too much money somewhere. But if you have a budget that tells you exactly how much you’re supposed to spend, why is it so easy to overspend? There are a number of reasons we overspend, so when you understand what causes overspending, you can help put a stop to it and keep your budget on track.

6. Try Using Cash to Keep Spending Under Control

Swiping plastic has become incredibly easy. With both credit cards and debit cards, we can be in and out with a purchase in a matter of seconds. Unfortunately, this convenience comes at a cost. By using plastic we can begin to lose track of how much money is actually being spent. Sure, two dollars here, 4 dollars there, it doesn’t seem like much at the time of purchase, but if you aren’t careful they can really add up and bust your budget. One trick to help keep your daily spending under control is to use cash instead of your credit or debit cards. It might not be as fast, but it helps you visualize just how much money you’re actually spending.

Article 2

Where to Keep Your Savings

Make Sure You’re Putting Your Money to Work

By Jeremy Vohwinkle

So, you’ve set up an automatic savings program and you’re finally building up that emergency fund, but where should you keep your savings so that it earns the most interest for you? Luckily, there are many different savings vehicles available, but not all of them are appropriate for every situation.

Savings Accounts

Most likely, you have already established a savings account at your local bank or credit union, and you may have this linked up directly to your primary checking account to make transferring money to savings easy. A savings account is the most convenient place to save money, but it might not be putting your money to work.

When using a savings account, it is important to look at the interest rate. Depending on where you bank and what type of account you have, you could be earning anywhere from less than 1% up to 4% or more. The problem is that many banks only provide high interest rates for significant balances over a certain amount. If you find you are only earning 0.65%, after accounting for inflation, you are actually losing purchasing power.

The best thing about savings accounts is that they are completely liquid. This means you can access your money on very short notice. You may be able to go online and transfer money from savings to checking, withdraw from an ATM, or stop into your local branch.

Money Markets

In addition to your basic savings account, you may encounter another savings vehicle called a money market. There are actually two different kinds of money market accounts: money market bank accounts and money market mutual funds.

Money market accounts offered by your bank work almost the same as far as the consumer is concerned, but since the money held in a money market account is invested a bit differently, there are usually more restrictions on the account. Typical restrictions are usually higher balance requirements and a limited number of withdrawals per month or quarter.

Money market mutual funds are not issued by a bank, but are offered by investment companies. You would need to have an existing brokerage account or establish a new account with the fund company directly to take part in a money market mutual fund. These funds invest in various short-term investments collectively in order to produce an attractive interest rate. Unlike a money market account at your bank, these are not FDIC insured.

Although money market accounts generally have higher interest rates than a savings account, the restrictions on the number of withdrawals per month or the requirement of opening a separate account makes these funds slightly less liquid.

Certificates of Deposit

A certificate of deposit, otherwise known as a CD, is another place to save money that is routinely offered by your bank. A CD is a time deposit, which means that the money you place on deposit must remain there for a specified amount of time before you can withdraw it.

You can purchase a CD with a variety of time frames as short as one month to upwards of many years or more. In most cases, the longer you agree to leave your money on deposit, the more interest the bank will pay you.

Since you are required to leave your money in the CD for the amount of time selected, this can make your money less accessible than a savings or money market account. This can be a good thing, since it encourages you to leave the money alone, but in an emergency where the money is needed very quickly, this can be a hindrance. Fortunately, you can access your money before the CD matures, but the bank will impose a penalty which could effectively wipe out the interest you have earned.

Savings Bonds

Another possible option for your savings is in savings bonds. Savings bonds are issued by the U.S. government and are backed by its full faith and credit. Similar to CDs, savings bonds have a maturity date set in which the bond reaches the maximum value. In most cases, this is 20 or 30 years.

Savings bonds are credited interest each month and you can cash in a savings bond at any time, although doing so prior to maturity may result in foregoing some interest. You can purchase savings bonds at most banks or online at Treasury Direct.

Like CDs, you may encounter liquidity issues with savings bonds since they are purchased separately and you can only receive money from them through redemption at either a bank or by mail.

What is Right for You?

When it comes to savings, there isn’t a right or wrong answer. It ultimately depends on your needs. If you are using your savings for overdraft protection and want to have it available instantly in the event you need it, a savings account might be the most appropriate. If you are saving for a large purchase or something predictable a few months or years down the road, you can probably find better rates with a CD or possibly a money market fund.

For many people, it comes down to having a mix of multiple savings vehicles. There will be part of an emergency fund in a savings account at the bank, possibly some cash in a money market fund in an investment account, and some CDs or bonds stashed away for longer-term savings. Whatever the case may be, you want to make sure your money is working as hard as it can.

Article 3

Double Your Money With Compound Interest

By Loral Langemeier

It is much smarter to put your money in an account that pays compound interest. This is where you can really watch your money grow, and make more money from your initial deposit. Compound interest is basically interest that is collected on the original amount you deposited plus the interest that has already been applied to that amount. So, whenever interest is applied, the amount of interest is added to the principal for the next time interest is applied. Unlike basic interest that is applied only to the principal, compound interest is applied to the entire amount in the account, not just the principal. The act of applying interest is also known as “compounding.” Your money can earn more in a compound interest account than in other types of accounts because you’re earning interest on a greater amount of money each time the interest is compounded. This is a very smart way to invest your money and watch it grow and even double.

You can find out how long it will take your money to double in a compound interest account by applying a very simple calculation. Take the interest rate you’re earning for your money and divide it into 72. For example, if you’re earning four percent interest, you would divide four into 72 and learn that it will take 18 years to double your money. If your money is in an account that pays six percent compound interest, it would take 12 years to double your money. Loral Langemeier millionaire maker guide will help you through this. This has been proved to be Loral Langemeier direct money opinion.

These examples illustrate how your money will be compounded on an annual basis. Some financial institutions will compound your interest on a more frequent basis, such as quarterly or monthly. Some even compound it daily.
Putting your money in an account that will earn compound interest is a wealth-generating secret you can’t afford to neglect. There is no easier way to increase your wealth than just letting your money sit there and watching it grow. Loral Langemeier offers you detailed information on her site.
Article Source: http://www.articlecontentprovider.com/articlesubmit
It’s a long way to your financial goals but you can double your money with compound interest accounts. Let’s begin by looking at how basic interest works. Basic interest is paid on the amount deposited into your account. Even when interest is applied and the amount in your account grows, the interest is still only applied on the principal – the amount without the interest. You won’t earn a lot this way because you’re only earning interest on the principal amount.
Born in Nebraska, Loral Langemeier did not start out in life with money or connections. She was raised on a farm where work was hard and what money there was, was never discussed. By contrast, today Loral is the Millionaire MOM and Money Maker, teaching thousands of people how to achieve financial freedom. Her live events, the Wealth Building Blitz and Cash Machine Workshops, continue to break records in attendance and success. 100% of her clients have been known to make money at the Cash Machine Workshop. Loral was recently one of the "Money Makeover Experts" on the Dr. Phil Show. She's also been seen on CNBC, Fox, CNN, and more National television stations. She is sought as the leading woman expert in the space of "Making Money". Loral knows what it takes to "have it all" and inspires people to do the same to create a life they deserve. A mom of 2 beautiful children, Loral lives in S. Lake Tahoe. She also has a home in Marin County, California, and is building another in Mexico.

Article 4

Employer Based Retirement Plans

A Guide to Savings Plan Benefits Provided by Employers

By Rachelle Williams

In addition to healthcare benefits, and flexible spending accounts, many companies also offer various retirement savings accounts for their employees. Unfortunately, many employees neglect these benefits because they do not want the extra money deducted from their paycheck; such is an example of a person who may be living from paycheck to paycheck. Ironically, it is these very same employees who would benefit the most from company sponsored retirement plans. It is for the betterment of anyone’s future that they should learn all that they can about employee sponsored retirement saving plans.

Two Different Categories of Employer Based Retirement Plans

There are many different employer based retirement savings plans, but there are only two different categories under which they each may fall: defined benefit and defined contribution. Over the years, defined benefit plans have fallen by the wayside and defined contribution plans have become the more popular choice.

Defined Benefit Plans
These type of employer based retirement plans pay either a lump sum or a guaranteed monthly benefit upon retirement. The amount received upon retirement is normally based on a preset formula. In most cases the employer funds the plan – these are traditional pension plans, but sometimes the employee contributes as well. Defined benefit plans are usually insured by the federal government.

Defined Contribution Plans

Defined contribution plans do not guarantee a specific amount of money upon retirement, but the federal government does offers protection from abuse of assets by employers. The amount accumulated is based on the length of time invested in the plan, how much money has been invested, and the growth of the investment over a period of time.

Article 5

Type of Insurance Policies You Need

By Jeremy Vohwinkle

You can find an insurance policy to cover almost anything imaginable but only a handful of policies are actually ones that you need to have. You work hard throughout your life to build wealth and live a happy and comfortable life, so some types of insurance can protect your possessions, income and even provide for a loved one when you are gone.

Health Insurance

One of the most important types of insurance to have is health insurance. Your good health is what allows you to work and earn money and otherwise enjoy life. If you were to come down with a sickness or have an accident without health insurance you may find yourself unable to receive treatment or even in debt to the hospital.

Thankfully, many employers provide health insurance benefits to full-time and even some part-time employees. If you do not currently have health insurance coverage this is the first place to check as it will generally be the most affordable. If you are married, you may both be able to receive coverage under just one of the employer plans.

If your employer does not offer health insurance or you are self-employed you still need it. While it may not be cheap the fact remains; what do you have if you don’t have your health? Even a basic hospital bill without insurance can run into the thousands of dollars. It isn’t worth risking financial ruin to save a few bucks on a health insurance premium.

Life Insurance

This type of policy is more important if you are married and/or have children. Your life is valuable because it is what allows you to work and earn an income to provide for your family. When you are gone you create an income gap which could put your spouse or children in financial trouble.

Death is hard enough; don’t make it even harder by putting your loved ones in a financial jam if the unfortunate does happen. Funerals alone can be expensive and it creates even more stress on the family. At the very least you should have enough to cover basic funeral expenses and provide a cushion for your family, and at most it should provide a stream of income for your family that can replace what is now gone.

If you do not currently have life insurance your best bet is to check with your employer first. Many employers offer a basic life insurance as a benefit and some even allow you to purchase additional coverage at a very affordable rate. Outside of employer plans there are hundreds of insurance companies that can provide the right coverage for you.

Property Insurance

One type of policy that for most people that is actually mandatory to have is homeowners insurance when you have a mortgage. If you borrow money from the bank to purchase a home they will require the asset to be insured. For many people this insurance premium is built into the mortgage payment. For many people their home is their greatest asset so it is vital to adequately protect it.

If you rent instead of own, a renters insurance policy is just as important. Your belongings inside the dwelling can add up to a significant amount of money. In the event of a burglary, fire or disaster you should be able to at least have a policy that can cover most of the replacement costs.

Auto Insurance

Another type of policy that is often required is auto insurance. Most states require by law that you have basic auto insurance. While it may be a law, too many people still drive around without it.

The most common reason to have auto insurance is to cover the replacement of an expensive asset. Like a home, automobiles can be quite expensive and if it gets damaged you want to be able to repair or replace it. But there is more to auto insurance than just covering the car itself.

Most automotive insurance policies cover bodily injury or death of another person in an incident that you are legally responsible. While it generally pays for medical expenses related to the incident it can also cover legal defense costs. You will also generally find medical payment coverage that pays for medical treatment for you and your passengers during an accident regardless of who was at fault.