Monthly Archives: October 2016

Selecting the Right Budgeting Strategy and Program

There are so many personal finance programs and books on the market, trying to decide where to begin can make your head spin. Besides the myriad of options on the bookshelves and internet stores, there are dozens of popular, national programs that can cost hundreds of dollars. I’ve seen people spend over $100 to $150 on such programs and upon completion ask the question, “okay, how do I get started.” I find it unbelievable to spend that much money and time on a program and still not know how to get started.

Most of these books, programs and seminars focus on the much larger picture of Financial Planning and wealth building which are great resources to pursue after you get your spending under control, paid off all your debt, live within your means and have money left over to invest. To get started in the world of personal finance, most people just need a simple budgeting program to help them get started.

I’m also a proponent that budgeting should not be a “look back” to previous months spending and then model that for the coming months. If you’re overspending and base your future month’s budget on a bad model, you really don’t have a “going forward” budgeting strategy. It will be extremely difficult, if not impossible, to accomplish your financial goals.

My definition is that budgeting is a set of learned behaviors that help you manage your expenses relative to your income and provide you with a strategy and discipline to get out of debt and reach your financial goals.

To be successful, it’s important to start with what your goals are and what motivates you and write them down. Then you can analyze your income, expenses and debt with a budgeting tool to figure out how you can get on track to meet those goals. The last key component is to have some structure and discipline to your budgeting process so that you review it regularly and track how well you are progressing toward your goals. I summarize the 3 components as:

  • Motivators / Goals
  • Knowledge (i.e. “how to”)
  • Discipline

Once you’ve got the understanding that budgeting is more behavior-based than analytical, then it’s time to research the types of budgeting tools that are on the market to meet your requirements. If you’re already an expert budgeter and want a tool to also track your investments and wealth building strategies, that’s very different program than someone that just starting out looking for a simple, inexpensive budgeting tool. There are just a few categories of budgeting tools available:

  • Pencil, paper and calculator(Cost: $0 if you have a calculator)
  • Computer Spreadsheet such as MS Excel (Cost: less than $20 for the forms; MS Excel extra if not already installed on your computer)
  • Budgeting programs such as Quicken (Cost: You will shell out $40 for just the Starter Edition, $60 for the Deluxe and $90 for Premier
  • Online budgeting programs such as mint or Mvelopes (cost: mint is “free” but look out for the safety risks. Mvelopes has a per month charge)

Do some research on the web to find out which category of budgeting tool is best to meet your needs. A good budgeting coach can also work with you to provide solid advice on what’s best for your budgeting needs and match your skills to what’s available on the market. Whatever programs and tools you select, remember it’s all for naught if you don’t alter your behavior. Motivation / Goals and Discipline will get you to your end goals.

Tips on How to Save Or Spend That Hard Earned Cash Wisely

Planning your expenses is an important thing which you will need to do if you would like to have a certain level of savings or even want to invest minimally in order to get a decent income flowing when you wish to retire. What this article aims to do is provide some easy tips which you can immediately carry out in order to control and at least help you curb your expenditure and spend wisely. I will describe this in two phases. The first is what I would call structural methods. In this section, I will describe to you some methods you can use to at least implement a system into your personal finances so that you will have some form of financial plan for any period of time in place. The second is what I shall call personal methods. These are methods and habits which you can carry out for your everyday life. Believe me, these will at least improve how you plan your finances.

1) STRUCTURAL

a) Budget your finances, Monthly, Weekly and Daily.

Yes, the first thing that will come out of the lips of everyone when they talk about personal financial planning is always creating a budget. And for good reason too. Creating a budget for your finances would at least provide a system for you to actually set aside some money for whatever purposes or things you wish to get, or even cover you in emergencies. While most people would recommend that you plan your budget monthly, I would suggest that a monthly AND weekly plan would actually be beneficial. Why? Because anything can happen within a week that may result in us tweaking or compromising our monthly budget plan. I will cover daily budgeting in the personal section later.

An example of how to do monthly budgeting is to firstly, list down all your necessary expenses. This can range from monthly household items like bills for the home to even the amount of allowance you give your kids. Minus off that from your income (usually your monthly salary only) and you should have a balance. Now plan the amount of savings you believe you can draw out of that monthly balance after you have already taken away necessary. I strongly recommend you set aside at least 10% of your income before expenses as savings to ensure that at least you have some cash for a rainy day.

The same can be said for your weekly planning. Plan for weekly expenses or events which you know you need to plan for in the particular week. It can range from things like grocery shopping expenses, or even the pizza you feel you want on that week because of a night of Football or Soccer on tv. This will allow you the flexibility of changing the monthly plan, without being so drastic about it.

b) Sign up for a monthly savings account from a bank.

Well, if you do not want the hassle of planning to save (though I feel it is VERY IMPORTANT that you do), you can try signing up for a monthly savings plan with your bank. What happens here is that when you sign up, every month, the bank will withdraw from your main bank account a certain set amount into another savings fixed account. This way, every month, you will have peace of mind that at the very least, you have set aside a certain amount of money for savings. If your local bank does not have such a service, then you could open a fixed account, which will not allow you to withdraw the cash, but will ensure you will save every month.

2) PERSONAL

a) Plan your daily budget.

Alright lets get personal. When I am talking about personal daily budgeting, I mean that limit your amount you wish to spend daily. Also, watch what you are spending on and really ask yourself “Do I Really Need That Thing?”

This is due to the fact that we buy a lot of things on impulse. Hence this is why we need to be conscious about what we are spending on and limit the amount which we are willing to take out for expenses on that particular day. Remember, BUY ONLY WHATS NECESSARY. Try not to spend beyond how much you have set aside for that day.

b) ALWAYS ask for a receipt and other small tips that you can use.

There are small everyday habits which you can use that can make a whole lot of difference in your lives in terms of personal finance. For one, I personally find keeping my receipts of my purchases useful. This would allow me to keep track of my expenditure for the day or week, and will also tell me what I spent on and what I can reduce. Another tip I can offer is to really practice delayed gratification. What I mean by this is, do not immediately jump in whenever you see the latest tech gizmo on sale, or that scarf on discount. Hold yourself back and question yourself whether is it really worth it? For example, once I saw this iPod Nano selling for $130 and it was ON SALE. I felt myself wanting to jump in, but I held myself back, thinking do I really need this? That held me back and stopped me from making that wild eyed decision. True enough, there was another shop selling it for even cheaper. At $100, and it’s a 4th Generation model.

Marriage and Money Tips

The ceremony and honeymoon are over and reality has now set in. You are living together as one and both of you will need to make some adjustments. This is especially true of money and debts that both of you have incurred prior to your marriage. This article will provide you with some tips on how to begin the process in making your marriage last, being prosperous and taking control of your finances.

Begin With The Basics

  • Create a household budget and stick to it!
  • Pay down any debt accrued before you got married.
  • Start saving for our future together.
  • Plan for the unexpected.
  • As a couple, create a total financial game plan.

This step requires patience and persistence. Sit down together and begin to formulate your plan. There are tools that you can use to assist you in budget planning. The sooner you do this the better chance you have of not fighting over finances as a couple. SmartMoney indicated this is the biggest problem facing married couples.

Some Tips to Consider

  • Update your will if you have one. If not, make one.
  • Update your life insurance policy if you have one. If not, buy a term life insurance policy that covers the entire family including children.
  • Update your medical power of attorney.
  • Decide on guardians for your children.

Suggested Budget Plan

  • 35% Housing – includes mortgage or rent, utilities, insurance, taxes and home maintenance.
  • 20% Transportation – includes car payments, auto insurance, tag or licenses, maintenance, gasoline, parking, tolls and transit.
  • 15% Debt – includes student loans, retail installment contracts, credit cards, personal loans, tax debts and medical debts.
  • 20% Other – includes all other expenses: food, clothing, entertainment, childcare, medical expenses and charity.
  • 10% Savings – save at least 10% of your income throughout your working years. Pay yourself first!

Keeping finances separate or in a joint bank accounts is a matter of personal preference. But, whatever you decide, do not forget to communicate! This should be done on a regular basis.

Do’s and Don’ts

  • Do break bad debt habits (90 million households carry credit cards, with an average debt load of more than $10,500 (USA Today, March 22, 2009.)
  • Do not delay in paying off credit cards completely. (The average household pays about $1,000 in credit card interest a year. (The Atlanta Journal-Constitution, January 18, 2004)
  • Do communicate honestly about your spending habits.
  • Do not abuse your credit.
  • Do communicate on a regular basis converting the household finances. This cannot be stressed enough.

Save For A Rainy Day

Starting a family or retiring from your job might seem like a long way off, but it pays to start planning early. Saving and investing is an essential part of your financial game plan. This means more than just putting a few dollars into a savings account. Here are some suggested areas of saving:

  • Emergencies: According to a recent survey, only 28% of households said they have enough money saved to weather a financial difficulty. (Money, April 2004). If you have to make a home repair, pay for an unexpected injury or supplement a spouse’s income due to unemployment, you need to have some cash on hand. A good goal to shoot for is to have enough for at least 3 months of core expenses.
  • Short Term Goals: Maybe you are dreaming of a summer vacation, new appliances for your home or another big-ticket purchase. Save up for things. It is better to pay cash than getting locked into high interest credit card debt.
  • Children’s Education: If you plan to start a family, it is a good idea to think about education. With annual tuition at a 4-year public university topping $8,000, starting early can make a big difference. Determine if you plan on paying all or part of this expense. Inform your children how much they will be paying for before they start there first college course.
  • Retirement: If you are among those who have not saved a dime for retirement, starting now will pay big dividends later. You need to start saving and investing now. Social Security checks will not cover all of your basic retirement needs. You will have to supplement Social Security with additional retirement funds. The average Social Security check for individuals was $1,079 and $1,761 for couples as of 2008.

Plan For Tomorrow…Today

No one wants to think about tragedy or loss, but you should discuss with your spouse a game plan if something unexpected should happen to either of you. Nothing can replace the loss of a spouse. A term life insurance policy protects your family if something should happen. Depending upon your expenses, if you have children, a policy that covers between 6 and 10 times your income should be enough. (MoneyCNN.com, August 4, 2003).

In addition to the life insurance policy, it is important to talk about each other’s wishes if one should die. Discuss burial site, to be cremated or not, and a will covering the distribution of your assets and care of your children.

Next Steps

What has been presented seems like a monumental task for you to think about. It is not that hard. You will need to focus on your situation. Every married couple is unique and their finances are no exception. Good luck! May your marriage be successful and prosperous.

Finance Management Tips

If you are a college student, you are probably suffering from a serious lack of money. However, all this can change once you learn how to manage all the money that you have, because that way you will be able to have a lot more money available for you. Here are some of the best tips for money management for college students:

  • First of all, make sure that you will spend some time and keep track of all the things that you are buying. That way you can easily see what amount of money you are spending on items that you do not need and later on you will be able to cut those expenses.

 

  • Get all the possible college student discounts that are available, because that way you will be able to save a lot of money from, for example riding the bus, going to movies or even ordering pizza. There are a lot of places where you can get information about the college student’s discounts that are available, so make sure that you will spend some time and see what you can do for that.

 

  • Be caution when giving any kind of personal information. That is one of the best ways to protect yourself from possible theft of our money. Make sure that you will not give your Social Security number to anyone. Furthermore, remember that you should never give any information about your credit cards or other places that you keep your money.

 

  • Use only of the credit cards that you have, because that way you will be able to keep yourself from getting in debt. Furthermore, make sure that you will set a credit limit on your own and do everything possible not to exceed it. For example if your credit card have $5000 limit, make sure that you will set a limit of $2000 and keep it.

 

  • Organize all the money that you have and create a budget that you will follow. That way you will be spending only the amount of money that you had set, which will allow you to avoid getting into any debt. Furthermore, make sure that you will keep your money in a place that you do not have access, because that way you will be able to resist the temptation of spending them. It is a good idea to get a debit card issued.

 

  • Start saving money for emergency expenses, which will allow you to cover all the expenses that may occur. It is a good idea to buy a piggy bank and start putting money in it. You will be amazed how much money you will have after an year, if you place only 5% of the money that you get there.

 

  • Start buying all the books that you will need during your college period. There are a lot of websites that are offering comparison services, which will allow you to choose the best price for the book that you need.