Category Archives: Finance

Saving Money Tips

Having a baby is one of the greatest joys in one’s life.

However, it also brings about a monumental change in our responsibilities, which can appear daunting and intimidating if not planned well in advance.

“Easy making money tips”

So here’s a short and sweet 10-point check-list to make sure that the transition into parenthood is both smooth and joyful.

1. Start by creating a short-term kitty to take care of both the delivery expenses and the numerous items you will need for your kid… from baby-pram and baby-toys to baby-cot and baby-seats.

2. Don’t be hesitant to use hand-me-downs. As any baby outgrows the clothes, toys etc. very fast, it makes no sense to buy everything new. All this money saved would be more useful for other critical needs such as debt-reduction, education, etc.

3. Check out the maternity (and now in some cases even paternity) leave and other benefits, if any, offered by your employer(s). Accordingly, you can derive maximum gains from these benefits.

4. Include your baby’s name in your health insurance policy. And if your employer is also providing medical insurance for your family, don’t forget to furnish the updated family details.

5. Your life is now precious to one more person. So, enhance your life insurance cover. To reiterate the obvious, term policy is the simplest, cheapest, easiest and the best way to do so.

6. Monthly budgets would have to be redrawn so that you can comfortably accommodate the increase in expenses on baby feeds, baby powders, baby clothes, baby doctor and so on. And, in a few months after the baby’s birth, once the mother goes back to her job, day-care and baby-sitting expenses will become a critical part of your monthly expenses.

7. Use your bonuses and other lump sum inflows to part prepay your loans and slash down your debt burden. You will sleep more peacefully, just like your baby.

8. Though still years away, education is becoming quite expensive. So “now” is the time to start building a suitable education fund for your child. By the way, don’t be lured by the terrible insurance plans. Go for pure-investment products ONLY.

Budgeting Money Tips

Money is known to be one of the major causes of tension in a relationship. So, try something new. Follow a few simple guidelines that can help you keep the fireworks in the relationship from exploding out of control.

1. Understand your Motivations and Goals

Traditionally individuals and couples will earn an income and automatically adjust their lifestyles to that income level. It’s nice to have the finer things in life such as home, new cars, vacations, etc. Very little thought, however, goes into motivations or values. It’s an important first step to understand what’s most important to you (your values) and from there you can set some specific financial goals.

Spending some time alone AND together and WRITING out your individual motivators (or values) and goals can be enlightening. Give it a try separately at first and then compare with your spouse or significant other. You’ll be well on your path to understanding each other better and set up for fruitful communications.

Once you’ve agreed on some goals, be realistic about the amount and timeframes. For example, if a goal is to buy your first home, calculate how long it will take you to save for a 30% down payment. Anything less than 30% down in this real estate market is very risky should you need to sell in the next few years.

2. Understand Your Current Financial Situation

Take some time to organize your records: Assets, Liabilities, and Income (ALI). Make a page for each ALI and list all the items in that group. For example, for the Assets group you would list home, cars, savings accounts, investments, and other major property items.

On the debt page, list all debts such as mortgage, car payments, outstanding credit card balances, student loans, etc. Do the same for all your sources of Income such as wages, alimony, child support, rental income, investments, etc.

Writing this all down will help you gain a big picture understanding your current situation. Once that is understood, you can work as a team to figure out how to achieve those financial goals you listed in step 1.

Remember, your financial information is your ALI!

3. Work Together as a Team

Work out your monthly budget as a team. Each of you will have a different value system or set of motivators that cause you to place emphasis on certain budget categories. Learn to work with each other and compromise where you disagree. Set up pre-set spending limits by budget category so that you are living within your means. When you disagree, you have your values and financial goals as your foundation. Keep coming back to revisit those. Make sure your spending plan supports those!

To help resolve conflicts, put in terms of “Needs vs Wants.” Once you think in those terms, many of your “wants” may need to be eliminated in order to achieve one of your financial goals. Remember, you based those on your life motivators or values, so those are much more important than some of your daily “wants,” i.e. a daily Starbucks budget category!

Set aside 30 minutes per month to work out your differences. Communicating your concerns lovingly and working through to the benefit of “one team” will help you maintain your financial goals and keep those fireworks going too!

4. Start Where You Are

Even if your financial picture looks grim, do not despair. Even if you are 50+, do not give up hope. You will probably live into your 80’s or 90’s, so there’s a lot of time to recover from past financial mistakes or just simply a late start. There’s a great book by Chris Gardner called “Start Where You Are.” If you need any inspiration at all, this book is a must read. Chris was a homeless single father of a small child and made a tremendous comeback to build a successful business. The book is full of inspiring techniques that will help you get started, no matter what your current situation is.

My advice is to start your financial plan within 24 hours of reading this. Studies show that a new thought, idea, or writing (such as this blog) should be implemented within 24 hours or the new thought, idea, or writing will NOT happen. So start planning now. Talk to your spouse or significant other today and encourage each other to take some ACTION.

5. It’s All About the LOVE!

Working together on your financial plan and making progress toward your life goals will bring harmony to your relationship. There’s nothing more comforting than knowing you are a blessing to someone else. When you put yourself on a mission to LOVE, you will be pleasantly surprised how good it will make YOU feel too!

As you work through your financial plan together and you start reaching those life goals, stretch yourself out – spread the LOVE even farther. What can you do to give back to the community, to your church, to your value system? When you start to think in terms of others and what life impact you can have on them, your own troubles start to disappear.

Saving Money Tip

To get ahead financially the statement “live within your income” is one of most critical fundamental steps you can take on board. I cannot stress enough how important it is to get your finances in control and to have you living within the amount of money you earn.

I know it is easy to think that you don’t live beyond your means, but often you can be doing this without even realising it. Some questions to ask yourself to establish whether or not you do “live within your income” are:

  • Do you pay cash for your purchases?
  • Are your debts going upward instead of downward?
  • Is your home loan increasing instead of decreasing?
  • Do you have more credit cards than you did a couple of years ago?
  • Do you have large amounts of debt owing for personal purchases such as cars, boats, renovations?
  • Are you behind with some of your bills?
  • Do you struggle to afford your bills when they come in?
  • Are you always running out of money before your next pay day?
  • Do you owe money to your family / friends / work colleagues?
  • Do you have a lot of ‘interest free’ loans for purchases such a whitegoods, furniture, household items

If you answered yes to any of these questions, then it appears that you might be living beyond your means or could soon be heading that way if you aren’t careful.

The money you earn can only go so far. No matter how much you earn this is what you have to start to learn to live on. Be happy with your salary and rather than spending your time and energy yearning to earn that bit extra, concentrate your energies on working solutions to manage your money efficiently so you do live on what you earn.

The answer to any money problem isn’t going out and earning more money. If you have bad money habits, no matter how much you earn you will still find a way of spending more as you will just lift your level of lifestyle to absorb the extra money being received in each week. Get used to your salary and start to manage your money at this level. If you are then fortunate to get a pay rise, the smart thing to do with the extra money is to put that money aside for savings.

Some clues to start living within your income:

  1. Do up a budget

Work out exactly how much money you have coming in to your household and how much money you are required to spend for fixed bills and commitments. This will give you some indication of how much money you have over for discretionary spending. If you find you don’t have any money over, then you need to look at ways to either increase your income or reduce your expenses. Budgeting is as simple as that.

  1. Stick to a budget :

After you have written your budget, you must work out a plan to stick to your budget. There is no point just writing down a whole lot of figures on paper or plugging them into a spreadsheet if you don’t do anything with them. Use different accounts / money jars / envelopes to cover different spending purposes and start to manage your money accordingly. Put money aside so you have sufficient funds to pay for your upcoming bills and aren’t having to live from pay to pay or borrow off friends / family.

  1. Say no to borrowing money :

To stop living beyond your means one of the most critical steps is to start saying no to debt no matter how attractive the purchase looks or how easy it is to get finance. The spiral of debt generally works in a downward direction. You can get pulled further and further into the core as the masses of debt around you grow and grow. Once in this spiral, it is very hard to get out.

Debt is something that can take over our lives and start controlling us if we aren’t careful of what we do and if we aren’t disciplined enough to say no to ourselves every now and then. If you can’t afford the item now without borrowing money, how do you think you can afford it with interest and loan charges loaded on top? If you can’t afford it, you have to start to say ‘no’.

  1. Ignore interest free marketing campaigns :

Another measure you can adopt is to not be tempted by smart advertising campaigns such as pay nothing for 36 months. You still have to pay the item back at some stage and all you are doing is delaying the pain.

  1. Leave the credit card at home :

Credit cards are a trap. They can entice you to go on spending sprees without really realising how much you are spending. It isn’t until you get the monthly statement that you get that rude shock and say gee “how can I have spent that much?”. By that time it is too late. If you want to go shopping set yourself a spending limit that suits your budget and available cash funds.

  1. Take regular notice of your financial position :

Taking an interest of your financial position and noticing if your accounts are going upward or downwards is also a key to living within your income. Many times people don’t know their situation as they don’t look at it. I have had many clients over the years come to me and it isn’t until I point out to them that their home loans (generally set up as lines of credit) are going upward instead of downwards that they become aware of their situation. Many also think they are paying off their credit cards but don’t realise that they are spending more per month than they are paying off so the debt is actually going upwards instead of downwards. Take notice of your credit card balances, loan balances and records of your savings. Keep an eye on these on a regular basis.

  1. Be careful how you justify borrowing money :

It is easy to say I need a new this or a new that and as I don’t have the money I will go out and get a personal loan for that item. This can be an easier solution to sticking it out for several months and saving the money to pay cash, especially if we are talking about the bigger ticket items such as cars, boats, home renovations, household appliances etc. However many people don’t realise the total cost they will incur on the item after they have included the payment of interest and bank fees on the loan over the next 5-7 years. Plus, you need to consider depreciation on the item and how little it will be worth by the time you have eventually paid the loan off. If you can stick it out and pay cash for something then you are going to be much better off.

Also, it can be easier to say yes when considering buying something when the deal can be done and dusted in less than 30 mins if the store provides you with instant finance at your finger tips. If you know you have to save hard for several months before buying something, you might make the decision to look for cheaper and alternative measures or you might decide that you don’t really need the item after all.

Stay Out Of The Red With Our Money Tips

America seems to have a high ignorance when it comes to personal finance. In this article, you will learn some basic financial concepts that will help you get the most from your money. You will see how to make your money go further, and find out how to supplement your income with side projects.

Replace old incandescent light bulbs with CFL light bulbs. Changing to more efficient light bulbs will decrease your electric bill and help the environment. CFL bulbs also last much longer than traditional light bulbs. Buying bulbs less frequently can help you save money.

Financial issues can come up suddenly, without warning, so it’s always good to be prepared. You should find out now what fees and penalties you will face for late or missed payments, so you can prepare for the worst. Do not commit to a lease without knowing this information.

Check your credit report regularly. There are more than a couple of ways that you can see your credit report at no cost. Make sure that this is done two times a year to make sure that there aren’t any unauthorized changes done to your report, and that someone hasn’t committed identity theft by using your information and name.

If you do not want to hash out your monthly finances with pen, paper, and check register, take your budgeting and checkbook-balancing tasks online. These programs can track your income and expenses, as well as creating a budget plan for you with minimal effort.

You shouldn’t take out too much credit if you want your finances to be healthy. If you have more credit extended to you than you should your credit will be affected negatively, which will cost you a great deal of money over time on higher interest rates.

Don’t sell if the time is not right for you. If you are getting money from one stock more than another, let that one stay. If you have stocks in your portfolio that are not performing well, you may wish to change them up a bit.

Do not deal with a broker you cannot trust. Check their references, and ensure that they tell you everything you want to know. Being a beginner means you’ll have to take extra care to find a broker who understands your personal needs.

Every time you receive a check, always save some money. Do not expect to save money if you simply plan to save what is left. With the money actually being stored away safe and secure, you have a much lower chance of spending the money on something trivial or impulse-driven.

For small purchases, you should have 10 dollars on a debit card, or in cash, readily available. Laws that were passed recently on credit cards allow a merchant to include a minimum amount you can purchase.

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.

Valuable Money Tips for All

Whether you have $3 million dollars stashed away somewhere, or you are struggling to pay bills and get a steady income, there are set of principles you should follow no matter what income level you are apart of. When you learn to manage your money wisely, your financial Saving.

Organize Your Finances

This is the most common tip regarding your finances, and should always be first on your list. Organization is key to being successful with anything you do whether it is shopping for groceries or investing in your 401k. No matter what, you need to be on top of your finances and know what to expect in the future. You aren’t going to be able to predict everything and anything life throws at you, but you should always try. This will limit the amount of messes you will have to clean up, and also limit the amount of money you lose in the long run.

Keep Good Records

You never know when you are going to have to go back and re-check a bill or statement that could have a mistake in it. Maybe you don’t know why $4,000 is missing from your bank account, and you want to see if your bank made a mistake. You could buy something online and the company might charge you extra for it, but you simply miss it because you don’t keep good records. You want to make sure you are keeping all of your past receipts so that you can return a purchase if it is a faulty product, or if you simply don’t like it. You also want to write any purchase you make down along with the price, date, and company you purchased it from. This may seem like a tedious thing to do over and over, but it is always worth it in the end. There are also a lot of smart phone apps that allow you to do this automatically and cut the work you have to do. Either way, you want to make sure you are keeping records of anything you do with your finances, big or small.

Look for the Opportunity to Save

Even if you have plenty of money to spend and aren’t worrying about spending the extra money, try to save anyways. You never know when something is going to come up and you are going to need the extra money. If you really aren’t motivated to save the extra money buy taking the few extra minutes to research and look around, then make it a reward system. For all the money you save, you can put it towards something you really want to purchase. After awhile you have the opportunity to buy something you probably would have bought anyways, but now you have the clear mind knowing you aren’t really spending any money considering it is money you saved when buying other products.

Search for Money Making Opportunities

Whether you need the extra money to get from paycheck to paycheck or you simply just want money to spend on the things you want to buy, don’t try and take money from your savings or money that you could have saved for more important things. Disaster can strike at anytime, and you need to be ready. You may be financially stable right now, but tomorrow may not look the same. When you are earning extra money buy selling your old items, or simply working more hours, you have money that you earned to spend. All of your income is money you earned, but it should be put into your savings, bills, groceries, investments, etc. This doesn’t mean you shouldn’t spend any money on yourself, it just means that you should try and make any extra money you can so you don’t have to spend money you don’t have to. You will be more confident in knowing that you aren’t spending away your future, and you won’t end up feeling guilty afterwards.

Predict the Future

Okay, no one can actually predict the future, but this shouldn’t stop you from trying. Always be looking into the future as far as you can without forgetting about the present as well. Try and plan out your financial future into the next 6 months, and then start looking into your short term future. Find out how much money you want saved in 2 months, 2 years, and even 20 years. This doesn’t need to be exact, just a good estimate. You also want to make sure you are including how much you predict you will have to spend, and then add extra for unseen expenses. After awhile you start to see your future unfold and it will come pretty close to your prediction, if you plan well enough.

How You Buy a Car Significantly Affects Your Finances

There are not as many financing options to buying a car these days as in years past. Maybe that’s a good thing! People have asked me, “what’s the best way to buy a car these days?” Here’s a few options, from least attractive to the best.

5) Use your 401k to finance the car.This is about the worst idea on the planet. I had someone actually do this before they spoke to me about it, so it was too late for them. But not too late for you. If you think of just some simple math and compound interest you can easily see that this is the most expensive way to buy a car (or anything else for that matter). Let’s say the car is $20,000. Removing $24,000 from your 401k (because 20% will be withheld for taxes), that $20,000 car is actually costing you about $112,000! Check it out for yourself. I used $24,000 at 8% for 20 years. If you’re a young person and could keep the $24,000 in there for 30 or 40 years, the money lost is astounding. (See my article on the magic of compound interest).

You are using your 401k as a financing tool and seriously jeopardizing your long term goals, especially if it becomes a habit. In general, it just doesn’t make economic sense to use long term savings for short term goals, especially when your retirement is at stake.

4) Financing a purchase of a brand new car. New cars are expensive and interest rates are up. The new car depreciates significantly during the first year, so you are paying interest on a constant dollar amount for 4-5 years, but the value of that purchase is constantly declining over that time period. The banks do not adjust the balance based on the value of the car! By the end of the life of the loan your monthly payment isn’t going toward the purchase of a $20,000 car, it’s going toward the purchase of a $8,000 car or whatever it’s worth at that time. In other words your payment remains the same even though the value is declining.

The $20,000 car can cost you up to $30,000 depending on the terms you got, but the car ends up being worth much less than that.

3) Leasing on new car. It’s a toss up whether this is worse than financing a brand new car. Many people justify leasing because they want a new car every couple of years and they can afford to do so. Still, it’s an expensive way to go. There is usually an upfront fee of $999 to $2999 depending on the type of car. There is also some fine print about turn in fees. I’ve seen those as high as $750. You pay them to turn in your vehicle! It’s just crazy. Not to mention the over mileage fees if you are over their 10k or 12k miles per year limit.

All the leasing fees need to be included in the monthly payment calculation over the length of the lease. When you do so, the monthly payment far exceeds the advertised monthly lease rate.

2) Buying a new car for cash. Okay, so you’re wise to all the financing schemes out there and you’ve decided to pay cash for your new car. That is a great goal and makes a lot of financial sense. You can easily save for a new car by driving your older paid off car longer and put the savings into a separate account or Virtual Envelope (see my article on Virtual Envelopes) and before long you will have saved for that new car. You’ll avoid all the financing charges, lease fees, etc and not have a monthly payment – except to yourself so you can save for the next new car.

1) Buy an almost new car for cash. I like this approach the best because the car you are purchasing has already gone through it’s highest depreciation cycle during the first year of ownership. Someone else covered that for you! You get a great price on a car that may only have 8k – 12k miles on it and you’re paying up to 20% less than the original price. You could easily pick up that $20,000 car for about $16,000. Now paying cash is even easier!

Notice the big difference in money outlay as you look at option #5 to #1, there’s about a $96,000 difference. You just don’t notice it because you think you’re only withdrawing $24,000 from your 401k.