A great way to start living a frugal life is to plan for it. And when it comes to finances, the most important plan is a budget. Setting up a budget is possible no matter what you income, how you get paid, or what your current financial situation. Developing a budget is the first (and most crucial step) to becoming frugal. Here are some great tips on how to do it:
Showing posts with label money. Show all posts
Showing posts with label money. Show all posts
Monday, July 27, 2009
Sunday, July 26, 2009
Beginning the Frugal Life
Most people think of being frugal as living without enjoyment. Frugal people are seen as the scrooges of life – the ones who count every penny and refuse to part with one even for some heat in winter. The truth is that frugal people live some of the most joyous lives of anyone. They have money, little or no debt, and lots of freedom to enjoy it all.
The truth is that frugal people are not stingy, they are wise. They have learned to spend their money in the best way possible. The years have taught them to be thrifty and to look for the best deal or bargain. Experience has shown them to be patient and wait for the sale or to purchase when the time is right. Most importantly, frugal people have learned to save as many pennies as they spend.
There are many wonderful benefits to living a frugal lifestyle. The first is security. By choosing to hold off on purchases, trips, or other spending and putting that money into savings, you know that you have money if something should come up in the future.
Frugal people often have more time to enjoy life than others. Because they spend less, they need less to spend. This monetary need translates into easier working hours or even working from home. It’s a lot like retiring well before your time.
When it comes to making purchases, cash is still king and it gives you a great deal of power in negotiations. Living a frugal lifestyle will help you accumulate the cash you need to buy the things that are important to you. It will teach you to make calculated decisions with your money, not emotional ones. And it will help you be in a position to almost name your own price.
It is not extremely difficult to become a frugal person. It probably is a good idea to talk with your family (or anyone who lives with you) before you begin your quest. It is easier to accomplish it together. Start small by paying for what you need with cash and getting rid of your credit cards. Cut your spending and begin to institute a 24 hour waiting period for purchases. The more you wait and think, the less likely you are to purchase something you don’t need.
A frugal life can be a wonderful life. You have security, freedom, and an appreciation for all that you have.
The truth is that frugal people are not stingy, they are wise. They have learned to spend their money in the best way possible. The years have taught them to be thrifty and to look for the best deal or bargain. Experience has shown them to be patient and wait for the sale or to purchase when the time is right. Most importantly, frugal people have learned to save as many pennies as they spend.
There are many wonderful benefits to living a frugal lifestyle. The first is security. By choosing to hold off on purchases, trips, or other spending and putting that money into savings, you know that you have money if something should come up in the future.
Frugal people often have more time to enjoy life than others. Because they spend less, they need less to spend. This monetary need translates into easier working hours or even working from home. It’s a lot like retiring well before your time.
When it comes to making purchases, cash is still king and it gives you a great deal of power in negotiations. Living a frugal lifestyle will help you accumulate the cash you need to buy the things that are important to you. It will teach you to make calculated decisions with your money, not emotional ones. And it will help you be in a position to almost name your own price.
It is not extremely difficult to become a frugal person. It probably is a good idea to talk with your family (or anyone who lives with you) before you begin your quest. It is easier to accomplish it together. Start small by paying for what you need with cash and getting rid of your credit cards. Cut your spending and begin to institute a 24 hour waiting period for purchases. The more you wait and think, the less likely you are to purchase something you don’t need.
A frugal life can be a wonderful life. You have security, freedom, and an appreciation for all that you have.
Saturday, July 25, 2009
Being Frugal Now Can Mean Future Security
Nothing can tighten your chest more than knowing the electric bill is past due and that the bank account is hitting rock bottom. Not having the finances to pay ordinary bills can be the stress that breaks a marriage’s back. Learning to live a frugal life not only helps with your finances today, but it can also prepare a secure life for tomorrow.
Learning to cut expenses, to make thrifty choices, and to save all your excess opens doors that would never be possible otherwise. You could choose to retire early, start a business from your home, or just live off your savings. Being frugal will help you have choices that you wouldn’t have if you didn’t know how to manage your spending.
Retirement is not simply the idea that you are leaving your current employment. It is choosing to have a life where you don’t make a regular paycheck. With frugal choices you will no longer need as much income to maintain a financial balance. You can finally say goodbye to your nine-to-five if you choose (although that lifestyle is not for everyone).
Making frugal choices will help you build up your savings. Having several months' worth of income in the bank could finally give you the courage to start that business you have always dreamed of having. Being in a position where you don’t have to rely on your income will make it easier for you to find success on the path that you desire. The stress to make money will be replaced by a simple desire to succeed.
Being thrifty and putting aside your savings can help you build up a hefty nest egg in no time. You could choose to live off that money for a while and take a trip across country or around the world (backpacking of course, because that is a frugal way to travel). The money could be your living expenses while you go back to school. Living off your savings could give you enough time to finally write that novel.
The main idea behind the frugal life is that it gives you freedom. As you choose to walk away from purchases and save that money, you set yourself up to be able to make different and better choices tomorrow. As you cut your budget and save the difference, you protect yourself from unexpected events. Building a nest egg today will give you choices and security for tomorrow.
Learning to cut expenses, to make thrifty choices, and to save all your excess opens doors that would never be possible otherwise. You could choose to retire early, start a business from your home, or just live off your savings. Being frugal will help you have choices that you wouldn’t have if you didn’t know how to manage your spending.
Retirement is not simply the idea that you are leaving your current employment. It is choosing to have a life where you don’t make a regular paycheck. With frugal choices you will no longer need as much income to maintain a financial balance. You can finally say goodbye to your nine-to-five if you choose (although that lifestyle is not for everyone).
Making frugal choices will help you build up your savings. Having several months' worth of income in the bank could finally give you the courage to start that business you have always dreamed of having. Being in a position where you don’t have to rely on your income will make it easier for you to find success on the path that you desire. The stress to make money will be replaced by a simple desire to succeed.
Being thrifty and putting aside your savings can help you build up a hefty nest egg in no time. You could choose to live off that money for a while and take a trip across country or around the world (backpacking of course, because that is a frugal way to travel). The money could be your living expenses while you go back to school. Living off your savings could give you enough time to finally write that novel.
The main idea behind the frugal life is that it gives you freedom. As you choose to walk away from purchases and save that money, you set yourself up to be able to make different and better choices tomorrow. As you cut your budget and save the difference, you protect yourself from unexpected events. Building a nest egg today will give you choices and security for tomorrow.
Friday, July 24, 2009
Self-control Is a Key to a Thrifty Lifestyle
It is generally agreed that if you want to live longer you have to exercise your body. Likewise, if you want to have financial security during that life you have to exercise your self-control. Having the ability to walk away from a purchase, being able to wait until you have the cash before you buy, or simply having the boldness to just say no are all key elements to living a thrifty life.
One of the best ways to develop a thrifty lifestyle is to quit carrying around all those cards. Leave your debit cards at home. Cut up your credit cards. Start paying cash for your purchases. This one step that requires you to physically pass your money to another party is likely to have you rethinking purchases from the onset.
Set aside your money for specific purposes and only use if for those purposes. Some people go so far as to put it in separate envelopes (each one labeled for a different use like groceries, gas, rent, utilities, medical, etc). If you don’t have money set aside for something you want to buy, then it is a good idea to wait until you do have money in that envelope.
Another way to develop your self-control is to set up a waiting period for purchases. Three days would be ideal but you should wait 24 hours (at least) before following up on a purchase. If you still want it and just can’t live without it after the waiting period (and you have the money already set aside), then it is probably a good purchase for you to make.
Find an accountability partner. For many people this is their spouse, although sometimes spouses will go out of the beaten path to avoid talking about finances. Be open and honest with someone about your financial situation and make sure it’s okay to call them when you are feeling tempted or weak. Support is one of the most important elements to developing any positive character trait.
Self-control in a frugal lifestyle is all about restraining your impulses so that you can make wise decisions. It will help lead you to a place where you can develop a plan for your future and begin the process of implementing that plan. Self-control teaches you to walk away from anything not in line with your goals. Saying no will become part of your regular vocabulary. And with the right support you will be able to develop this amazing characteristic in no time flat.
One of the best ways to develop a thrifty lifestyle is to quit carrying around all those cards. Leave your debit cards at home. Cut up your credit cards. Start paying cash for your purchases. This one step that requires you to physically pass your money to another party is likely to have you rethinking purchases from the onset.
Set aside your money for specific purposes and only use if for those purposes. Some people go so far as to put it in separate envelopes (each one labeled for a different use like groceries, gas, rent, utilities, medical, etc). If you don’t have money set aside for something you want to buy, then it is a good idea to wait until you do have money in that envelope.
Another way to develop your self-control is to set up a waiting period for purchases. Three days would be ideal but you should wait 24 hours (at least) before following up on a purchase. If you still want it and just can’t live without it after the waiting period (and you have the money already set aside), then it is probably a good purchase for you to make.
Find an accountability partner. For many people this is their spouse, although sometimes spouses will go out of the beaten path to avoid talking about finances. Be open and honest with someone about your financial situation and make sure it’s okay to call them when you are feeling tempted or weak. Support is one of the most important elements to developing any positive character trait.
Self-control in a frugal lifestyle is all about restraining your impulses so that you can make wise decisions. It will help lead you to a place where you can develop a plan for your future and begin the process of implementing that plan. Self-control teaches you to walk away from anything not in line with your goals. Saying no will become part of your regular vocabulary. And with the right support you will be able to develop this amazing characteristic in no time flat.
Wednesday, July 22, 2009
Small Change Makes Big Wealth
There is an old saying that if you don’t break a dollar then you won’t spend that dollar. That is even truer today if you talk about bigger bills, but the idea behind the saying stands. The smaller the money, the easier it is to part with. That’s why so many people are parting with big bucks in small increments. Our minds just don’t seem to be able to add it up. But if we stopped the little spending then we would be able to save big money every week. Here are some great ideas on how it can be done:
Cut the coffee shop out of your day, or break that smoking habit that you’ve been promising to break. Take that $4 and put it into a savings account at the end of every week. By the end of the year you will have added around $1000 (depending on how many weeks you have off each year).
Take your lunch to work each day instead of buying it there. You can have a much healthier meal and a greater variety by doing it yourself. Plus, you’ll save around $5 each day and that will add an additional $1250 to your savings account.
Eat in more often. If you are a regular at dining in restaurants then you are probably wasting a large sum of money each year. By giving up just one meal out each week for you and your family you will probably be able to add another $2500 to your savings.
Cut hair at home. This is a pretty big saver for large families (especially those high on the girl numbers). You could potentially save $30 a head and that would mean lots of additions to your savings account.
Give up the cable. The television is only eating your valuable time and it doesn’t give you anything in return. By cutting the cords you could save $60 a month. That means you would be building your savings by $720 each year.
Once you build up your savings, switch them over to a higher interest rate investment option. CDs are one of the most secure, higher rate investments on the market. As you continue to grow your savings, you can seek professional advice about the best way to invest that money.
Use the savings to pay off your mortgage early and you can save yourself even more money (in the form of interest). But be sure to check on prepayment penalties before you make that leap. It could end up costing you more than it would save you.
Cut the coffee shop out of your day, or break that smoking habit that you’ve been promising to break. Take that $4 and put it into a savings account at the end of every week. By the end of the year you will have added around $1000 (depending on how many weeks you have off each year).
Take your lunch to work each day instead of buying it there. You can have a much healthier meal and a greater variety by doing it yourself. Plus, you’ll save around $5 each day and that will add an additional $1250 to your savings account.
Eat in more often. If you are a regular at dining in restaurants then you are probably wasting a large sum of money each year. By giving up just one meal out each week for you and your family you will probably be able to add another $2500 to your savings.
Cut hair at home. This is a pretty big saver for large families (especially those high on the girl numbers). You could potentially save $30 a head and that would mean lots of additions to your savings account.
Give up the cable. The television is only eating your valuable time and it doesn’t give you anything in return. By cutting the cords you could save $60 a month. That means you would be building your savings by $720 each year.
Once you build up your savings, switch them over to a higher interest rate investment option. CDs are one of the most secure, higher rate investments on the market. As you continue to grow your savings, you can seek professional advice about the best way to invest that money.
Use the savings to pay off your mortgage early and you can save yourself even more money (in the form of interest). But be sure to check on prepayment penalties before you make that leap. It could end up costing you more than it would save you.
Friday, December 26, 2008
Be Cautious When Taking Out a Cash Advance Loan
Has Christmas left you short of money? Need some quick cash? Getting a cash advance may be the answer, but beware, there are risks involved and you need to know exactly what you're signing up for.
Taking out a cash advance requires little on your part. All you need to do is prove you have a bank account and a job with a minimum monthly salary and the money is as good as in your bank with the cash being available in less than one day. However, money that comes this easy also comes with a few red flags and warnings.
Here’s what to look for:
Maximum Loan. How much can you borrow? Most payday loans have a maximum of $1000 or $1500. Consumer advocates warn against taking out a number payday loans, particularly at once. Not only because the fees you’ll be paying are expensive but because many banks will close your account if you bounce too many payday loan checks.
Most payday loans are paid back by the lender cashing a predated check that you write. If this money isn’t in your account when the loan comes due, the check will bounce and your bank will make record of it. If you’re taking out several payday loans to cover a debt or payment, and the funds aren’t available then the bank can close your account, which means it may be difficult to get another bank account.
Term. How long do you have to pay back your loan? Standard loan terms range from one week to two weeks. Make note to find out exactly when the loan is due and your check is going to be cashed so you can make sure you have money in your account.
Fees. How much is your loan going to cost you? The standard rates seem to range between $30 and $40 per $100 borrowed. That means that if you borrow $100 you owe $140. On top of that, if you’re unable to pay the loan back when its due you may owe significant fees. Find out what these fees are before you sign on the dotted line.
Contract terms. Some lenders have lots of small print. Read the small print. Many online lenders have a policy where they automatically deposit cash into your account every month, and they automatically deduct that cash, plus a fee, every month. Make sure you’re not signing up for one of these loans or you’ll be paying your lender on a monthly basis for loans that you do not need and getting out of this loop can be difficult.
Because payday loans are so expensive and there are inscrutable lenders out there, it may be helpful to consider other options.
Cash Central Payday Loans: Quick, Friendly, Secure
Taking out a cash advance requires little on your part. All you need to do is prove you have a bank account and a job with a minimum monthly salary and the money is as good as in your bank with the cash being available in less than one day. However, money that comes this easy also comes with a few red flags and warnings.
Here’s what to look for:
Maximum Loan. How much can you borrow? Most payday loans have a maximum of $1000 or $1500. Consumer advocates warn against taking out a number payday loans, particularly at once. Not only because the fees you’ll be paying are expensive but because many banks will close your account if you bounce too many payday loan checks.
Most payday loans are paid back by the lender cashing a predated check that you write. If this money isn’t in your account when the loan comes due, the check will bounce and your bank will make record of it. If you’re taking out several payday loans to cover a debt or payment, and the funds aren’t available then the bank can close your account, which means it may be difficult to get another bank account.
Term. How long do you have to pay back your loan? Standard loan terms range from one week to two weeks. Make note to find out exactly when the loan is due and your check is going to be cashed so you can make sure you have money in your account.
Fees. How much is your loan going to cost you? The standard rates seem to range between $30 and $40 per $100 borrowed. That means that if you borrow $100 you owe $140. On top of that, if you’re unable to pay the loan back when its due you may owe significant fees. Find out what these fees are before you sign on the dotted line.
Contract terms. Some lenders have lots of small print. Read the small print. Many online lenders have a policy where they automatically deposit cash into your account every month, and they automatically deduct that cash, plus a fee, every month. Make sure you’re not signing up for one of these loans or you’ll be paying your lender on a monthly basis for loans that you do not need and getting out of this loop can be difficult.
Because payday loans are so expensive and there are inscrutable lenders out there, it may be helpful to consider other options.
- Looking to local community-based organizations may make small business loans to individuals.
- Asking your creditors for more time to pay your bills. Find out what they will charge for that service - as a late charge, an additional finance charge or a higher interest rate. This may be significantly less than what a payday loan will cost.
- Find out if you have, or can get, overdraft protection on your checking account.
- If you need help working out a debt repayment plan with creditors or developing a budget, contact your local consumer credit counseling service.
- Look at the possibility of obtaining a credit card. The cash advance fees and interest rate may cost less than a payday loan.
- If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.
Cash Central Payday Loans: Quick, Friendly, Secure
Saturday, December 13, 2008
Benefits of Creating a Personal Budget
A budget is a spending plan. It is your single best tool for knowing where your money is going and how much you have to work with. Of course, just the mention of the word budget can send even the most structured and organized person running for the hills. A budget, however, has several tremendous benefits. Among them are:
1: A budget makes it easy to save and have extra money. By tracking your expenses and income and controlling how much you spend on variable expenses, you will quite likely find that you have more money than you thought you needed. What are you going to do with that extra money? Of course the experts will tell you to save it and that’s probably a good idea, but maybe you could set aside just a little bit of that extra money to do something fun - like take a vacation or go to that five star restaurant you’ve been anxious to try.
2: A budget saves you time. How long does it take you to collect information at the end of the year for taxes? Even if you don’t do your taxes yourself, gathering all of those financial documents can take days and can be extremely stressful. When you have a budget, all of your expenses and income, including your taxes, are documented. This is particularly the case if you use a spreadsheet program or accounting software.
3: A budget makes it easy to track, and control, your spending. It gives you freedom from the stress of not knowing you have enough money to cover certain expenses. It is so much better to control your finances than to let them control you.
4: A budget can reduce family and personal stress. A family budget creates an environment of teamwork and communication rather than one of stress and blame. Everyone is accountable for the spending decisions made and the financial goals you’re striving towards.
5: A solid budget makes it easy for you to make spending and investment decisions with confidence. Have you ever had the chance to invest in something but you weren’t sure if you could? With a solid budget in place you know exactly where you stand financially and your investment decisions can be made with the right information at your fingertips.
6: Budgets help you plan for the future with ease and confidence. Are you saving for your retirement? If yes, are you saving the right amount or should you be saving more? Are you going to need a new car soon? If you are, will you have the money for it? A budget gives you the ability and the confidence to plan for the future because you know exactly how much money you have to work with right now.
There really is no downside to budgeting. It reduces one of the most significant causes of stress and it puts you in control of your money and your future.
1: A budget makes it easy to save and have extra money. By tracking your expenses and income and controlling how much you spend on variable expenses, you will quite likely find that you have more money than you thought you needed. What are you going to do with that extra money? Of course the experts will tell you to save it and that’s probably a good idea, but maybe you could set aside just a little bit of that extra money to do something fun - like take a vacation or go to that five star restaurant you’ve been anxious to try.
2: A budget saves you time. How long does it take you to collect information at the end of the year for taxes? Even if you don’t do your taxes yourself, gathering all of those financial documents can take days and can be extremely stressful. When you have a budget, all of your expenses and income, including your taxes, are documented. This is particularly the case if you use a spreadsheet program or accounting software.
3: A budget makes it easy to track, and control, your spending. It gives you freedom from the stress of not knowing you have enough money to cover certain expenses. It is so much better to control your finances than to let them control you.
4: A budget can reduce family and personal stress. A family budget creates an environment of teamwork and communication rather than one of stress and blame. Everyone is accountable for the spending decisions made and the financial goals you’re striving towards.
5: A solid budget makes it easy for you to make spending and investment decisions with confidence. Have you ever had the chance to invest in something but you weren’t sure if you could? With a solid budget in place you know exactly where you stand financially and your investment decisions can be made with the right information at your fingertips.
6: Budgets help you plan for the future with ease and confidence. Are you saving for your retirement? If yes, are you saving the right amount or should you be saving more? Are you going to need a new car soon? If you are, will you have the money for it? A budget gives you the ability and the confidence to plan for the future because you know exactly how much money you have to work with right now.
There really is no downside to budgeting. It reduces one of the most significant causes of stress and it puts you in control of your money and your future.
Tuesday, December 02, 2008
Is a Cash Advance Loan Right for Me?
With the holiday season here, and Christmas right around the corner, many are looking for cash to help with the holiday spending. One way of getting cash to help is through Payday loans or Cash Advances, but is it right for you?
Payday loans or cash advance loans are personal unsecured loans, which means you don’t have to put down any collateral for the loan. You do however have to pay significant interest rates and fees. They can be good for someone who is an immediate cash crunch, if you’re willing to pay the price. For example, you have a car or home payment which is due tomorrow and you don’t have all of the cash you need to make the payment. Rather than risk a late payment, expensive fees, and a bad mark on your credit report, you decide it is worth the extra fees to get a payday loan.
Payday lenders are able to charge such high rates because the loans are unsecured and they take very little information from you. Meaning, for the lender they are incurring a bit of risk, which you’re paying for. All you really need to get a loan is a job, an address and a checking account that is in good standing. Another benefit for consumers is that they money is available almost instantly with cash in hand times ranging from one hour to 24 hours.
One of the nice features about cash advance loans for consumers is that they are easily accessible and you can likely find a cash advance store in your hometown or online – whichever is more convenient for you. The average loan pays out generally no more than $1000-$1500 and the loan term generally lasts less than 14 days. The fees generally range from $20-$40 per hundred dollars. That means if you borrow $1000, you owe them $200-$400 in fees. Pretty steep, though some do charge a flat fee of around $30 or $40. If you extend or "roll-over" your loan, you will pay hefty fees for each extension.
If you’re in a bind and need cash fast, the process is simple. In store you would write a personal check payable to the lender for the amount you need to borrow plus a fee. So if you’re borrowing $300 and the fee is $40 per every $100 borrowed, you’d write a check for $420. The lender will give you the amount of the check minus the fee. They’ll give you $300. If you borrow online, the process is similar in that you give them your routing number and account number and they deposit your loan into your account.
Payday or cash advance loans are an alternative for people in a cash crunch, however great care must be taken to make sure borrowing doesn’t turn in to a cycle of debt. When the loan comes due, not being able to make a payment will result in extremely costly fees. Be careful and weigh all options before you make a decision to obtain a payday loan.
Payday Loans up to $1000. No Gimmicks. Secure. Fast.
Payday loans or cash advance loans are personal unsecured loans, which means you don’t have to put down any collateral for the loan. You do however have to pay significant interest rates and fees. They can be good for someone who is an immediate cash crunch, if you’re willing to pay the price. For example, you have a car or home payment which is due tomorrow and you don’t have all of the cash you need to make the payment. Rather than risk a late payment, expensive fees, and a bad mark on your credit report, you decide it is worth the extra fees to get a payday loan.
Payday lenders are able to charge such high rates because the loans are unsecured and they take very little information from you. Meaning, for the lender they are incurring a bit of risk, which you’re paying for. All you really need to get a loan is a job, an address and a checking account that is in good standing. Another benefit for consumers is that they money is available almost instantly with cash in hand times ranging from one hour to 24 hours.
One of the nice features about cash advance loans for consumers is that they are easily accessible and you can likely find a cash advance store in your hometown or online – whichever is more convenient for you. The average loan pays out generally no more than $1000-$1500 and the loan term generally lasts less than 14 days. The fees generally range from $20-$40 per hundred dollars. That means if you borrow $1000, you owe them $200-$400 in fees. Pretty steep, though some do charge a flat fee of around $30 or $40. If you extend or "roll-over" your loan, you will pay hefty fees for each extension.
If you’re in a bind and need cash fast, the process is simple. In store you would write a personal check payable to the lender for the amount you need to borrow plus a fee. So if you’re borrowing $300 and the fee is $40 per every $100 borrowed, you’d write a check for $420. The lender will give you the amount of the check minus the fee. They’ll give you $300. If you borrow online, the process is similar in that you give them your routing number and account number and they deposit your loan into your account.
Payday or cash advance loans are an alternative for people in a cash crunch, however great care must be taken to make sure borrowing doesn’t turn in to a cycle of debt. When the loan comes due, not being able to make a payment will result in extremely costly fees. Be careful and weigh all options before you make a decision to obtain a payday loan.
Payday Loans up to $1000. No Gimmicks. Secure. Fast.
Monday, October 06, 2008
Savings Account Interest Rates Overview
From the amount of debt Americans have today, it’s obvious that people like to spend money. What’s better than spending money however is saving money. Unfortunately, most people don’t save, and if they do, they don’t understand about savings account interest rates.
To understand saving money, one needs to understand interest rates, how the rates differ, how they are figured, and how they can benefit the saver. If people realized the potential of saving, even a little, each week, there might be more savers than non-savers.
One way to determine interest is with Simple Interest, and it is just that, the simplest type of interest to calculate. It is calculated as I = P r t or Interest ( I ) = Principal ( p ) times the Rate ( r ) times Time ( t ) periods. If you invest $100 at 5% interest for a year, the calculation would be $5 = $100 x 5% x 1 yr. So, for a year at 5% interest, you would gain $5 interest on $100.
Banks generally don’t pay simple interest, although that may be the initial interest payment since compounding hasn’t begun. Most banks will use compounding rather than simple interest. They also use annual percentage yield to figure interest. (Check around to see which bank offers the highest APY.)
The annual percentage yield (APY) is how banks determine how much interest a person earns in a given time period. The higher the APY, the more money you will receive for leaving money in that institution. The APY is the amount of yield you earn on any money deposited over a year’s time. This is how much money you’re making for maintaining this financial relationship.
It is rare for a bank to pay out interest on a monthly basis any longer, but will usually pay quarterly. Suppose you opened a savings account with $1,000. Each week you saved $50. At the end of the quarter (three months), you would have $1,600 of your own money in the account. The bank would figure the interest based on and pay interest on that $1,600. If the interest rate were 5.3%, you would receive an additional $84.90 automatically deposited into your account. Maintaining this rate of deposit and interest, you would have $4,408.28 in your account at the end of the year.
The calculation for figuring the APY is: APY = (1 + r/n)n -1 where r is the stated annual interest rate and n is the number of times it is compounded each year. This is also called the Effective Annual Rate (EAR) calculation, if you’re in finance.
All of the mathematical calculations aside, you can save with confidence if you find the highest APY and choose to save at that institution. With a little work, it is possible to understand savings account interest rates. Just remember, the higher the APY, the more money you’ll earn in the long run. And isn’t that why you’re saving in the first place?
To understand saving money, one needs to understand interest rates, how the rates differ, how they are figured, and how they can benefit the saver. If people realized the potential of saving, even a little, each week, there might be more savers than non-savers.
One way to determine interest is with Simple Interest, and it is just that, the simplest type of interest to calculate. It is calculated as I = P r t or Interest ( I ) = Principal ( p ) times the Rate ( r ) times Time ( t ) periods. If you invest $100 at 5% interest for a year, the calculation would be $5 = $100 x 5% x 1 yr. So, for a year at 5% interest, you would gain $5 interest on $100.
Banks generally don’t pay simple interest, although that may be the initial interest payment since compounding hasn’t begun. Most banks will use compounding rather than simple interest. They also use annual percentage yield to figure interest. (Check around to see which bank offers the highest APY.)
The annual percentage yield (APY) is how banks determine how much interest a person earns in a given time period. The higher the APY, the more money you will receive for leaving money in that institution. The APY is the amount of yield you earn on any money deposited over a year’s time. This is how much money you’re making for maintaining this financial relationship.
It is rare for a bank to pay out interest on a monthly basis any longer, but will usually pay quarterly. Suppose you opened a savings account with $1,000. Each week you saved $50. At the end of the quarter (three months), you would have $1,600 of your own money in the account. The bank would figure the interest based on and pay interest on that $1,600. If the interest rate were 5.3%, you would receive an additional $84.90 automatically deposited into your account. Maintaining this rate of deposit and interest, you would have $4,408.28 in your account at the end of the year.
The calculation for figuring the APY is: APY = (1 + r/n)n -1 where r is the stated annual interest rate and n is the number of times it is compounded each year. This is also called the Effective Annual Rate (EAR) calculation, if you’re in finance.
All of the mathematical calculations aside, you can save with confidence if you find the highest APY and choose to save at that institution. With a little work, it is possible to understand savings account interest rates. Just remember, the higher the APY, the more money you’ll earn in the long run. And isn’t that why you’re saving in the first place?
Monday, September 29, 2008
Tips for Choosing the Right Savings Account
The reasons for saving are as varied as the types of accounts you will find at financial institutions. People set aside money for emergencies or for future major purchases. Others save for a child’s education or retirement. Knowing the reason for having a savings account will help you choose the type you need, along with these tips for choosing the right savings account.
Consider one of the following types of accounts when you’re searching for a new savings account:
• Certificates of Deposit (CDs) – CDs are best for those leaving their money for short periods of time, as little as one month up to five years. The longer you leave the money in the CD, the higher payout you will receive. There are penalties for early withdrawal; if you know you won’t need your money for a while, a CD might be a good option for you.
• Money Market Funds (MMFs) – A good choice for an “emergency fund,” the MMF allows the owner to access the money through check-writing privileges, if the need arises. They are as safe as a bank money market account, but may earn more interest than a money market account.
• Money Market Accounts (MMAs) – This type of account would also be viable as an emergency fund. They are insured by the FDIC, and interest rates are usually competitive with MMFs. You may be able to access your MMA account online through your regular check account.
• Ultra Short-Term Bond Funds – This type of account carries more risk. In fact, instead of earning interest, you may actually lose money. If having a certain amount of interest added to the money you’re saving is important, a CD would be a much better choice. The possibility of earning more interest is there, but these accounts tie up your money from six to twelve months.
• Short-Term Bond Funds – If you know you won’t need your money for two to three years, the short-term bond fund is a good option. They take longer to mature but this type of bond will receive higher yields. The downside, however, is that the funds may fall if the interest rates rise. Weigh the risk against the possible gain to determine if this account is for you.
• Mortgage-Backed Bond Funds – Often referred to as Ginnie Mae funds, these funds are invested in mortgage-backed securities. They are very sensitive to the changes in the prime interest rate and can easily lose money if funds are removed prior to maturity. Keeping the money in this fund for the duration will allow it to earn the most money. Expect these funds to be tied up at least three years.
You may also find online savings account through institutions other than your local bank. These accounts, however, may require you to deposit more initially. They may also require additional fees for keeping the account for you, and they may require a higher balance. For these reasons, an online account may not be the best choice.
Research the various types of savings accounts. Then follow these tips for choosing the right savings account for you. You just might find that your local bank has what you’re looking for and what will bring you the most return for your money.
Consider one of the following types of accounts when you’re searching for a new savings account:
• Certificates of Deposit (CDs) – CDs are best for those leaving their money for short periods of time, as little as one month up to five years. The longer you leave the money in the CD, the higher payout you will receive. There are penalties for early withdrawal; if you know you won’t need your money for a while, a CD might be a good option for you.
• Money Market Funds (MMFs) – A good choice for an “emergency fund,” the MMF allows the owner to access the money through check-writing privileges, if the need arises. They are as safe as a bank money market account, but may earn more interest than a money market account.
• Money Market Accounts (MMAs) – This type of account would also be viable as an emergency fund. They are insured by the FDIC, and interest rates are usually competitive with MMFs. You may be able to access your MMA account online through your regular check account.
• Ultra Short-Term Bond Funds – This type of account carries more risk. In fact, instead of earning interest, you may actually lose money. If having a certain amount of interest added to the money you’re saving is important, a CD would be a much better choice. The possibility of earning more interest is there, but these accounts tie up your money from six to twelve months.
• Short-Term Bond Funds – If you know you won’t need your money for two to three years, the short-term bond fund is a good option. They take longer to mature but this type of bond will receive higher yields. The downside, however, is that the funds may fall if the interest rates rise. Weigh the risk against the possible gain to determine if this account is for you.
• Mortgage-Backed Bond Funds – Often referred to as Ginnie Mae funds, these funds are invested in mortgage-backed securities. They are very sensitive to the changes in the prime interest rate and can easily lose money if funds are removed prior to maturity. Keeping the money in this fund for the duration will allow it to earn the most money. Expect these funds to be tied up at least three years.
You may also find online savings account through institutions other than your local bank. These accounts, however, may require you to deposit more initially. They may also require additional fees for keeping the account for you, and they may require a higher balance. For these reasons, an online account may not be the best choice.
Research the various types of savings accounts. Then follow these tips for choosing the right savings account for you. You just might find that your local bank has what you’re looking for and what will bring you the most return for your money.
Thursday, September 04, 2008
Roth IRAs, 401(k), and 403(b) – Which one is Right for Me?
The task of planning for retirement can seem confusing, but it doesn’t have to be. You can learn about the different options. But you’re probably wondering - Roth IRAs, 401(k), and 403(b) – Which one is right for me? The following overview of each might help you make that decision.
The Roth Individual Retirement Account (IRA) is less than 10 years old, but it has been widely used since its introduction. Contributions to this IRA are not tax-deductible, but the funds can be withdrawn tax-free after the age of 59 ½ if the account is five years old or older. The Roth IRA does allow for some early withdrawals without penalty, but you are limited in the amount of money you can contribute, only $2,000 per person for a joint account. If you won’t be retiring for a number of years, this might be a good match for your retirement plan rather than a traditional IRA.
A 401(k) is a defined contribution plan in which the employer makes contributions. The employee may make contributions, but they are not required. The amount of money you can have contributed to a 401(k) is considerably larger than an IRA, so they may have an advantage if your employer offers them. They also have the benefit of being transferable should you ever leave your current job. These funds may be left as they are, moved to a new 401(k) plan with your new employer, they may be rolled over into an IRA, or they may be dispersed as a lump sum. Remember, however, if you take the lump sum you will have to pay a penalty for early dispersal.
The 403(b) plan is similar to the 401(k) except that it is restricted to employees of educational institutions or staff of non-profit organizations (501(c)(3)s as determined by the Internal Revenue Service). They are tax-deferred until the funds are withdrawn, and are generally an addition to the normal pension plan that educational employees and non-profit organizations give their employees. Having a 403(b) will not affect your social security benefits, and this plan can be used by part time employees as well. This plan does not allow you to move your account without paying penalties, unlike the 401(k).
These short overviews for the Roth IRA, 401(k), and 403(b) plans are not exhaustive, but they might help you answer the question, “Roth IRAs, 401(k), and 403(b) – which one is right for me?” The person who can best answer that question, however, is a trained professional such as a financial planner or counselor. Remember, ultimately the choice belongs to you. Listen to the advice and then you choose based on the information you understand.
The Roth Individual Retirement Account (IRA) is less than 10 years old, but it has been widely used since its introduction. Contributions to this IRA are not tax-deductible, but the funds can be withdrawn tax-free after the age of 59 ½ if the account is five years old or older. The Roth IRA does allow for some early withdrawals without penalty, but you are limited in the amount of money you can contribute, only $2,000 per person for a joint account. If you won’t be retiring for a number of years, this might be a good match for your retirement plan rather than a traditional IRA.
A 401(k) is a defined contribution plan in which the employer makes contributions. The employee may make contributions, but they are not required. The amount of money you can have contributed to a 401(k) is considerably larger than an IRA, so they may have an advantage if your employer offers them. They also have the benefit of being transferable should you ever leave your current job. These funds may be left as they are, moved to a new 401(k) plan with your new employer, they may be rolled over into an IRA, or they may be dispersed as a lump sum. Remember, however, if you take the lump sum you will have to pay a penalty for early dispersal.
The 403(b) plan is similar to the 401(k) except that it is restricted to employees of educational institutions or staff of non-profit organizations (501(c)(3)s as determined by the Internal Revenue Service). They are tax-deferred until the funds are withdrawn, and are generally an addition to the normal pension plan that educational employees and non-profit organizations give their employees. Having a 403(b) will not affect your social security benefits, and this plan can be used by part time employees as well. This plan does not allow you to move your account without paying penalties, unlike the 401(k).
These short overviews for the Roth IRA, 401(k), and 403(b) plans are not exhaustive, but they might help you answer the question, “Roth IRAs, 401(k), and 403(b) – which one is right for me?” The person who can best answer that question, however, is a trained professional such as a financial planner or counselor. Remember, ultimately the choice belongs to you. Listen to the advice and then you choose based on the information you understand.
Sunday, August 24, 2008
Creating a Personal Budget
Where does all that money go each month? Everyone wants to know but no one wants to tackle the one thing that can answer the questions: create a personal budget. For some, you might as well be strapping the handcuffs on them. A personal budget is tedious at the outset, but once it is in place, you’ll be glad you did it.
Let’s start with the basics. A personal budget needs to have a listing of all the money coming into the house on a monthly basis. This includes salaries from work, child support, alimony, income from real estate investments, and pensions. All of these sources make up your monthly income that can be used towards household expenses.
Add these up. This is the amount you have to start with. You probably can’t believe you have that much money coming into the household when you open your wallet at the end of the month and nothing but moths fly out.
Now we tackle the debt. What are the expenses that you pay each month? This includes mortgages, utility bills, other loan payments, child support, alimony, credit card payments, child care, entertainment bills, car insurance, and car payments. If the price of these bills stays the same each month your budget will be easier to figure out.
Money also needs to be allocated for variable expenses. Clothing, food, gas, medical co-pays, and entertainment fall in this group. This type of entertainment includes going to the movies, a play, or out to dinner. Monthly cable television bills would go in with the recurring bills.
Add up all of the recurring debt and subtract that from your income. The remainder will create monthly allowances for the variable expenses. People who send money to their savings account each month can record that amount as an expense. If you are having trouble saving, this is the perfect time to allocate an amount for that purpose.
Keep a log such as a check register, or use finance software aids in tracking where the money goes. One way that money disappears is through the ATM machine. It is easy, convenient, and the number one way to ruin your budgeting efforts.
Creating a personal budget is a family affair. Parents don’t have to go it alone. Let everyone in the house contribute to the final product. After all, each person will be governed by it in some way. Children can benefit from the financial habits that they see you implement in your daily life.
Budgets are not quick fixes. Just like any other habit it will take time to become second nature. Before it is all said and done, you may find that you have to change the original budget several times until it fits your lifestyle. An ideal budget should allow wiggle room but provide structure to keep to your goals.
Let’s start with the basics. A personal budget needs to have a listing of all the money coming into the house on a monthly basis. This includes salaries from work, child support, alimony, income from real estate investments, and pensions. All of these sources make up your monthly income that can be used towards household expenses.
Add these up. This is the amount you have to start with. You probably can’t believe you have that much money coming into the household when you open your wallet at the end of the month and nothing but moths fly out.
Now we tackle the debt. What are the expenses that you pay each month? This includes mortgages, utility bills, other loan payments, child support, alimony, credit card payments, child care, entertainment bills, car insurance, and car payments. If the price of these bills stays the same each month your budget will be easier to figure out.
Money also needs to be allocated for variable expenses. Clothing, food, gas, medical co-pays, and entertainment fall in this group. This type of entertainment includes going to the movies, a play, or out to dinner. Monthly cable television bills would go in with the recurring bills.
Add up all of the recurring debt and subtract that from your income. The remainder will create monthly allowances for the variable expenses. People who send money to their savings account each month can record that amount as an expense. If you are having trouble saving, this is the perfect time to allocate an amount for that purpose.
Keep a log such as a check register, or use finance software aids in tracking where the money goes. One way that money disappears is through the ATM machine. It is easy, convenient, and the number one way to ruin your budgeting efforts.
Creating a personal budget is a family affair. Parents don’t have to go it alone. Let everyone in the house contribute to the final product. After all, each person will be governed by it in some way. Children can benefit from the financial habits that they see you implement in your daily life.
Budgets are not quick fixes. Just like any other habit it will take time to become second nature. Before it is all said and done, you may find that you have to change the original budget several times until it fits your lifestyle. An ideal budget should allow wiggle room but provide structure to keep to your goals.
Saturday, August 23, 2008
Reasons for Why Every Family Should Have an Emergency Fund
Long ago, men could expect to work at a job long enough to retire and be given a gold watch for their years of service. They knew that if they started working at a company, they would most likely be working there the rest of their life. Times have changed, however. Job security is a thing of the past. That is one of the reasons every family should have an emergency fund.
There are many reasons to have an emergency fund: your washing machine breaks down and cannot be fixed, you must attend a funeral across the country and have to buy a plane ticket, or you or your spouse get laid off from what you thought was a permanent job. There are reasons every day that cause us to spend money that we hadn’t intended on spending. You could put those bills on credit cards, but you’re only delaying the inevitable. If you have an emergency fund, you may be able to avoid unnecessary debt and sleep a little better at night.
Every family should have an emergency fund, and the sooner you get one started, the better off you will be. Unexpected things happen to everyone. Starting to save money now is a proactive way to prepare for the unexpected when it happens.
Financial experts advise having a minimum three to six months living expenses in an emergency fund. This would include everything that you normally pay out over the course of a month – mortgage, car payments, car and home insurance, groceries, electricity, telephone, and any other bill you might have. If all of your bills add up to $2,000, you would need to save between $6,000 and $12,000 in your emergency fund.
If you’re used to living from paycheck to paycheck, setting aside money for an emergency fund might seem daunting. You can, however, find little ways to save money during the month. Refrain from eating out. Depending on the size of your family, that could save you $25 or more each meal. Don’t go out for movies and popcorn. That would be an additional $30 or more savings. Take any money you would spend on luxuries and put it into savings. It’ll take a while to build the fund up, but you’ll be so glad you did.
After you have started an emergency fund, how do you determine an adequate reason for getting money out of it? If your car breaks down and it will cost more than you have available in your regular account, by all means use the emergency fund. What happens if your air conditioner breaks in the middle of an oppressively hot summer? Yes, that constitutes an emergency. Go ahead and use some of the money you have saved up.
The reason every family should have an emergency fund is to avoid taking money out of their normal budget or putting more money onto credit cards. Emergencies happen and can wreck havoc on a family budget. By having an emergency fund set up, handling emergencies will be easier and will cause you much less stress. And it won’t take you into financial ruin should an emergency happen to you.
There are many reasons to have an emergency fund: your washing machine breaks down and cannot be fixed, you must attend a funeral across the country and have to buy a plane ticket, or you or your spouse get laid off from what you thought was a permanent job. There are reasons every day that cause us to spend money that we hadn’t intended on spending. You could put those bills on credit cards, but you’re only delaying the inevitable. If you have an emergency fund, you may be able to avoid unnecessary debt and sleep a little better at night.
Every family should have an emergency fund, and the sooner you get one started, the better off you will be. Unexpected things happen to everyone. Starting to save money now is a proactive way to prepare for the unexpected when it happens.
Financial experts advise having a minimum three to six months living expenses in an emergency fund. This would include everything that you normally pay out over the course of a month – mortgage, car payments, car and home insurance, groceries, electricity, telephone, and any other bill you might have. If all of your bills add up to $2,000, you would need to save between $6,000 and $12,000 in your emergency fund.
If you’re used to living from paycheck to paycheck, setting aside money for an emergency fund might seem daunting. You can, however, find little ways to save money during the month. Refrain from eating out. Depending on the size of your family, that could save you $25 or more each meal. Don’t go out for movies and popcorn. That would be an additional $30 or more savings. Take any money you would spend on luxuries and put it into savings. It’ll take a while to build the fund up, but you’ll be so glad you did.
After you have started an emergency fund, how do you determine an adequate reason for getting money out of it? If your car breaks down and it will cost more than you have available in your regular account, by all means use the emergency fund. What happens if your air conditioner breaks in the middle of an oppressively hot summer? Yes, that constitutes an emergency. Go ahead and use some of the money you have saved up.
The reason every family should have an emergency fund is to avoid taking money out of their normal budget or putting more money onto credit cards. Emergencies happen and can wreck havoc on a family budget. By having an emergency fund set up, handling emergencies will be easier and will cause you much less stress. And it won’t take you into financial ruin should an emergency happen to you.
Sunday, August 17, 2008
It’s Never too Early to Start Saving for Retirement
Well, maybe that title isn’t entirely true. If you’re six and just got $20 for a birthday present, it might be a “tad” bit early to start saving for retirement 60 years in the future. However, if you’re an adult, it’s never too early to start saving for retirement. In fact, the sooner you start the better off you’ll be when the time to retire comes.
Most financial advisors will advise you to begin saving money for retirement when you begin your first job, so it really isn’t too early to begin planning for the future. The fact is, if you begin saving when you begin a job, and save faithfully every month, when you’re ready to retire, you could have saved a good deal of money. If you waited ten years to begin saving, you’d have less money saved in the long run.
Look at it this way, if you retire at age 65 and you live until you’re 90, you’re going to have to live on what you’ve saved for 25 years, and you won’t have a paycheck to help you out. So starting to save when you’re younger will give you that many more years to save, and compound interest on all that you’ve deposited.
Savings options abound when it comes to retirement. There is the traditional 401 (k) that you can start at your place of employment. You can also open an Individual Retirement Account (IRA). There are stocks and bonds, Certificates of Deposit (CDs), and Money Market Accounts. It is advisable that anyone beginning to save for retirement speak with a financial planner to give them the best advice for where to put their hard-earned savings.
Deciding to save money for retirement depends on a number of things:
Speaking to a financial advisor will help you learn how much money you will need for retirement, how much money you will need to save, and approximately how long that money would last you. You can also find online calculators that will give you similar information.
Everyone agrees that saving for the future is important. Unfortunately not everyone does it. Remember, even if you’re getting close to retirement age, you can still begin to save. While it’s never to early to start saving for retirement, it can be too late. Begin now, regardless of how old you are, and you’ll have more to time to save for the future – your future.
Most financial advisors will advise you to begin saving money for retirement when you begin your first job, so it really isn’t too early to begin planning for the future. The fact is, if you begin saving when you begin a job, and save faithfully every month, when you’re ready to retire, you could have saved a good deal of money. If you waited ten years to begin saving, you’d have less money saved in the long run.
Look at it this way, if you retire at age 65 and you live until you’re 90, you’re going to have to live on what you’ve saved for 25 years, and you won’t have a paycheck to help you out. So starting to save when you’re younger will give you that many more years to save, and compound interest on all that you’ve deposited.
Savings options abound when it comes to retirement. There is the traditional 401 (k) that you can start at your place of employment. You can also open an Individual Retirement Account (IRA). There are stocks and bonds, Certificates of Deposit (CDs), and Money Market Accounts. It is advisable that anyone beginning to save for retirement speak with a financial planner to give them the best advice for where to put their hard-earned savings.
Deciding to save money for retirement depends on a number of things:
- Your age when you start saving
- The age you plan to be when you retire
- Whether or not you’re married with a family
- What lifestyle you would be most comfortable with when retirement comes.
Speaking to a financial advisor will help you learn how much money you will need for retirement, how much money you will need to save, and approximately how long that money would last you. You can also find online calculators that will give you similar information.
Everyone agrees that saving for the future is important. Unfortunately not everyone does it. Remember, even if you’re getting close to retirement age, you can still begin to save. While it’s never to early to start saving for retirement, it can be too late. Begin now, regardless of how old you are, and you’ll have more to time to save for the future – your future.
Friday, August 15, 2008
Budget is Not a Bad Word...
Sit amongst a group of friends and associates and mention the word budget, and suddenly everyone has somewhere else they need to be. Usually no one wants to talk about budgets, no one wants to think about budgets, and no one wants to follow a budget. However, when looked at with open eyes a budget is actually a fantastic thing. Here are three reasons why budget may become your favorite word:
Reason #1: A budget puts you in control of your money instead of your money controlling you. What did you spend your last $100 on? You may not remember. Maybe it was a pizza, or stickers for your children, maybe it went to piano lessons or a new pair of boots. The point is, many people have no idea where their money goes. When you set, and follow, a realistic budget your cash is freed up so you can spend your money on things that are important to you and your family rather than spending it on purchases you won’t remember buying ten minutes later.
Reason #2: A budget can improve your relationships. There’s little worse than the stress money can cause. Debt causes tremendous stress and so does the fear that you won’t be able to pay your bills. It can ruin your health and it can destroy relationships. When you form a financial plan with your family you work together as a team to reach your goals. The lines of communication are opened and the stress is eliminated because you have a plan and a team of support. Additionally, when you’re all on the same page financially there are no arguments about money, which makes better relationships with your spouse and your children.
Reason #3: Most people would agree that it is better to live within your means than to get into debt. However, some people don’t realize they’re living beyond their means until it is too late and the debt has become overwhelming – and stressful. A sound budget keeps you living within your means and prevents or eliminates debt. A structured and realistic budget prevents the “Oops I spent too much on my credit card this month” mistake that we often make month after month until we’re paying more on our minimum balance than on our mortgage. If this applies to you, don’t let it get to this point. Take advantage of the power of a budget and gain control over your financial life.
There is absolutely no downside to forming a budget and we’ve only scratched the surface of the benefits they provide. Take a few minutes to realistically analyze your spending habits, your income, and your financial goals. I promise you’ll be glad you did.
Reason #1: A budget puts you in control of your money instead of your money controlling you. What did you spend your last $100 on? You may not remember. Maybe it was a pizza, or stickers for your children, maybe it went to piano lessons or a new pair of boots. The point is, many people have no idea where their money goes. When you set, and follow, a realistic budget your cash is freed up so you can spend your money on things that are important to you and your family rather than spending it on purchases you won’t remember buying ten minutes later.
Reason #2: A budget can improve your relationships. There’s little worse than the stress money can cause. Debt causes tremendous stress and so does the fear that you won’t be able to pay your bills. It can ruin your health and it can destroy relationships. When you form a financial plan with your family you work together as a team to reach your goals. The lines of communication are opened and the stress is eliminated because you have a plan and a team of support. Additionally, when you’re all on the same page financially there are no arguments about money, which makes better relationships with your spouse and your children.
Reason #3: Most people would agree that it is better to live within your means than to get into debt. However, some people don’t realize they’re living beyond their means until it is too late and the debt has become overwhelming – and stressful. A sound budget keeps you living within your means and prevents or eliminates debt. A structured and realistic budget prevents the “Oops I spent too much on my credit card this month” mistake that we often make month after month until we’re paying more on our minimum balance than on our mortgage. If this applies to you, don’t let it get to this point. Take advantage of the power of a budget and gain control over your financial life.
There is absolutely no downside to forming a budget and we’ve only scratched the surface of the benefits they provide. Take a few minutes to realistically analyze your spending habits, your income, and your financial goals. I promise you’ll be glad you did.
Wednesday, August 06, 2008
Live and Spend Within Your Means...
Living within your means is a liberating way to live your life. It means no debt – debt is one of the most common causes of relationship stress. Living within your means gives you the freedom to save money for special things rather than always scrimping to pay your bills.
Unfortunately, many people don’t live within their means. They live above it, way above it. This happens for many reasons. Maybe they just don’t track their expenses, and purchases are made without thinking. Maybe they’re trying to keep up with their friends and family. Maybe shopping is a misguided form of therapy. Whatever the reason, the end result isn’t a happy one.
If you feel that you could do more to live within your means, here are a few tips to help keep your life on track and your financial status right where it belongs:
Tip #1: Keep track of your spending. It is important to know where your money goes. Once you have an idea of what you’re spending your money on, you can begin to control it.
Tip #2: Buy a used car or at least keep your new car for more than a couple years. A new car depreciates the moment you drive it off the lot. Sometimes it depreciates as much as 50%. A used car already has that depreciation figured into the cost.
Tip #3: Don’t be afraid to grocery shop with coupons or stock up on items for sale. Personally I love it when the grocery offers "buy one get one free items", particularly when the items are large ticket items like meats. Not only do I save tons of money but when I can’t figure out what to make for dinner, I can just open my freezer and I have options.
Tip #4: Do buy quality clothing items, not quantity. When you’re shopping for yourself, don’t make whimsical clothing purchases or follow the latest trend. What’s better? Spending $100 on a pair of jeans that will be out of style next season, or spending $150 on a pair of jeans you can wear for five years?
Tip #5: If you have a credit card debt, develop a plan to get out of it. A debt elimination plan begins with reducing your interest rate. A phone call to your creditor can usually start the process. Next, stop the charging on those credit cards and get busy paying them down. Pay more than the minimum balance or you’ll never get it done. A great way to manage the process is to develop a monthly budget. Your budget will contain your income, expenses including debt and your savings.
Living within your means is possible! It is empowering to have complete control over your money and your finances, certainly less stressful than letting your money control you!
Unfortunately, many people don’t live within their means. They live above it, way above it. This happens for many reasons. Maybe they just don’t track their expenses, and purchases are made without thinking. Maybe they’re trying to keep up with their friends and family. Maybe shopping is a misguided form of therapy. Whatever the reason, the end result isn’t a happy one.
If you feel that you could do more to live within your means, here are a few tips to help keep your life on track and your financial status right where it belongs:
Tip #1: Keep track of your spending. It is important to know where your money goes. Once you have an idea of what you’re spending your money on, you can begin to control it.
Tip #2: Buy a used car or at least keep your new car for more than a couple years. A new car depreciates the moment you drive it off the lot. Sometimes it depreciates as much as 50%. A used car already has that depreciation figured into the cost.
Tip #3: Don’t be afraid to grocery shop with coupons or stock up on items for sale. Personally I love it when the grocery offers "buy one get one free items", particularly when the items are large ticket items like meats. Not only do I save tons of money but when I can’t figure out what to make for dinner, I can just open my freezer and I have options.
Tip #4: Do buy quality clothing items, not quantity. When you’re shopping for yourself, don’t make whimsical clothing purchases or follow the latest trend. What’s better? Spending $100 on a pair of jeans that will be out of style next season, or spending $150 on a pair of jeans you can wear for five years?
Tip #5: If you have a credit card debt, develop a plan to get out of it. A debt elimination plan begins with reducing your interest rate. A phone call to your creditor can usually start the process. Next, stop the charging on those credit cards and get busy paying them down. Pay more than the minimum balance or you’ll never get it done. A great way to manage the process is to develop a monthly budget. Your budget will contain your income, expenses including debt and your savings.
Living within your means is possible! It is empowering to have complete control over your money and your finances, certainly less stressful than letting your money control you!
Thursday, November 29, 2007
Determine Just What Your Debt Is...
The very first thing that you need to do to address your current financial position and reduce and eliminate your debt is to determine exactly what your current debt is.
Now this might seem very obvious and when you ask most people they would probably say that they know how much money they owe but more often than not it comes as a great surprise to them when they sit down with a pen and paper to work out exactly what the current debt actually is.
It is very difficult to remember precisely how much you owe on so many different areas of debt and it is only when you do take account of all the individual debts and add them up that you can actually see the extent of your debt.
Be prepared for a surprise because that is what happens most often and it will give you a really good picture of why you are struggling to make ends meet each week and why all the income that might seem reasonable isn't enough to cover your outgoings.
So step number one on your debt management program is to address the situation.
It is only after you have done this that you will be able to create a budget that will help you move towards eliminating debt from your life.
You will be able to compare your monthly spending to your monthly income and that will give you the opportunity to see how much is left over if any to start reducing your debt.
When you are making a note of your debt you must ensure that you put down everything that you owe even the most minor of debts because at some stage they need to be settled and even small debts that are left unpaid can give you a bad credit rating.
Now this might seem very obvious and when you ask most people they would probably say that they know how much money they owe but more often than not it comes as a great surprise to them when they sit down with a pen and paper to work out exactly what the current debt actually is.
It is very difficult to remember precisely how much you owe on so many different areas of debt and it is only when you do take account of all the individual debts and add them up that you can actually see the extent of your debt.
Be prepared for a surprise because that is what happens most often and it will give you a really good picture of why you are struggling to make ends meet each week and why all the income that might seem reasonable isn't enough to cover your outgoings.
So step number one on your debt management program is to address the situation.
It is only after you have done this that you will be able to create a budget that will help you move towards eliminating debt from your life.
You will be able to compare your monthly spending to your monthly income and that will give you the opportunity to see how much is left over if any to start reducing your debt.
When you are making a note of your debt you must ensure that you put down everything that you owe even the most minor of debts because at some stage they need to be settled and even small debts that are left unpaid can give you a bad credit rating.
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