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Thursday, August 24, 2006

Financial planning is not optional

Let's get it straight. Managing your finances or in other words, money, is not the most important thing in your lives. It's not the second or even the third most critical item in our world. Yet, to be able to enjoy most of the other things in life, our finances must be in order. In this day and age, our survival often depends on it.

"Financial planning should never be an optional extra in anyone's life" Polly Ghazi and Judy Jones wrote in their book Downshifting - The Guide to Happier, Simpler Living. Now if a book that shows the way to a simpler life mentions the need to plan your finances, what more for up and coming people like you and me. In a land where folks have little choice but to run to catch up with the big brothers, financial planning must be right and in place.

In other words, financial planning is not something that you do only when you have some spare time. It's not something you do only when you are about to retire. You have to do it, and do it now. Because if you don't, there will be no future to look forward to. And perhaps with it, no happiness and no good health either.

So now money becomes an enigma. We'd much rather concentrate on other important things in life such as fulfilment and health, but at the same time, the money must somehow be right and in place.

The solution is obvious. We must learn to manage our finances and ensure that we do not fall into that failing 98 percent. Whatever and however, we must get our finances in order. As mentioned earlier, our very survival could depend on it. How are we going to pay for our children's education? Will we have enough funds to last through twenty or thirty years after retirement? Have we set aside some money for emergency situations?

Folks, love and fresh air aren't enough here. It's the money that talks in the end.

Tuesday, August 22, 2006

Supermarket Primary Tips

The modern supermarket bears little resemblance to the corner store of a few decades ago. These days, you can get a can of green beans in one aisle and a pair of socks in another."Picking up a few things" can take a good hour rather than mere minutes.

Can you shorten the amount of time you spend in the supermarket? The answer is, absolutely yes. By taking five minutes out of your weekly schedule to plan your grocery run, you can save time, aggravation and money.
  • Make one trip. Plan one big trip to the supermarket each week, rather than two or three small trips. Those small trips often turn into big time-wasters. You'll likely stop by the store after work, when everyone else is there, and end up doing a lot of waiting in line. Also, you may pick up more items than you need, because you don't have a list with you. Do your grocery shopping before work, if you have time. Supermarkets tend to be busy least busy then. In general, the odder the hour when you go to the store, the less crowded it will be.
  • Designated a dollar figure. Before you even set foot in a supermarket, decide how much you want to spend. Your budget should cover the items that you need and allow for a few (but not too many) extras. By limiting your spending, you'll be less tempted to splurge on nonnecessities.
  • Keep a running list. Add items to your grocery list as they run out. If you wait to write up your list until just before you go to the store, you risk forgetting half the items that you really need.
  • Organize by aisle. How often do you get to the checkout only to realize that you've forgotten a particular item? You have to step out of line an back-track through the store to get what you need. A better way is to organize your grocery list according to the aisle that it's found in.
  • Plan according to your palate. By creating weekly menus for your family,you know in advance what you'll need from the store to prepare each meal. You can use your menus to write up your weekly grocery list. And you won't get caught without important ingredients while you're cooking.
  • Go shopping in cyberspace. Right now, this option is available primarily to those living in large metropolitan areas. It's such a good idea, though, that it will surely catch on in other areas as well. You log onto your computer, choose from a list of groceries on a supermarket's website, and pay with your crdit card. You can even have the groceries delivered to your door, so you needn't leave your home.
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Monday, August 21, 2006

Millionaires - Ignore or inspired by critics?

What do millionaires tell us about the relationship between thier success and how they deal with critics? The majority either ignore their critics or use criticism as an inspiration to succeed. Most millionaires define a critic as someone who makes negative judgements and predictions about other people. Unlike mentors, who focus on how others can improve themselves, critics are not interested in helping their targets improve. In fact, they seem to enjoy watching people fail. It's as if they get satisfaction from watching their predictions come true.

Critics are those who have told many millionaire:
  • You will never succeed.
  • You lack the intellect to become attorney.
  • That's the dumbest idea for a new business I have ever heard.
  • There is no place for women in the medical profession.
  • There is just no hope for you ever succeeding.
  • You are not graduate school material.
Those who accepted such negative reviews withdrew early from the economic battlefield, while others discounted the criticism. Many millionaires actually viewed such comments as merely being theories, and they enjoy disaproving theories. The really vicious, negative critics have a common trait - their only talent is voicing negative predictions. Often they are jealous of people with real talent, people with the will to succeed. But I find that most professional critics are lacking in this same quality - they can't stand othe people criticizing their views. So what do they do to ensure they won't be criticized? They play offense. They aggresively and offensively criticized those who are or will be successful. It's one way they enhance their own status, like palying judge, jury or even God.

So, what are you? A millionaire or just a critic?

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What is financial planning?

If you have your own definition of financial planning, please feel free to stick with it. But if you lack a working mental model, you're welcome to adopt my own thought on the subject for your personal use.

Financial planning, I believe, is not exclusively about retirement planning or investing or even portfolio management. If distilled to its purest elements, this discipline is more accurately understood as one that involves applying guiding principles to deal with our past, present and future finances.
  • Our past - because some of us may be carrying the baggage of yesterday's excesses that are costing us our future happiness and financial well-being.
  • Our present - because now is the best time to act and change course toward a better destination.
  • Our future - because each of us is entitled to dream of a better tomorrow.
"Financial planning is the process of meeting your life goals through the proper management of your finances."

Almost everyone who has ever entered into a situation of runaway debt can attest to the end to the need to properly manage your finances!

Friday, August 18, 2006

TIME & CREDIT

Imagine there is a bank that
Credits your account each morning with $86,400.
It carries over no balance from day to day.
Every evening it deletes whatever part of the balance
You failed to use during the day.
What would you do?
Draw out every cent, of course!
Each of us has such a bank.
Its name is TIME.

Every morning, it credits you with 86,400 seconds.
Every night it writes off as lost whatever of this you
Have failed to invest to good purpose.
It carries over no balance.
It allows no overdraft.
Each day it opens a new account for you.
Each night it burns the day's deposits; the loss is yours.

There is no going back.
There is no drawing against the "tomorrow".
You must live in the present on today's deposits.
Invest it so as to get from it the utmost in health,
Happiness and success!
The clock is running.
Make the most of today.

Treasure every moment that you have!
And remember that time waits for no one.
Yesterday is history.
Tomorrow is a mystery.
Today is a gift.
That's why it's called, "the present".

Anonymous, from Growing The Distance by Jim Clemmer


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Insuring is the best policy

Most people put off buying life insurance because they don't want to contemplate their own demise. Buying life insurance is seen as a type of personal validation that they will, in fact, die someday. It's the same with disability policies and other types of coverage.
You need to be sure that you have enough insurance - not just life but also health, disability, auto and personal-liability insurance. These are relatively affordable and offer valuable protection against financial loss. To keep your insurance premiums affordable, give these measure a try.
  1. Deduct the maximum. You can save money on your health insurance premiums by signing up for larger deductibles on your policies. the amount saved increases if you carry a family policy. this may not be an option, however, if you have a chronically ill family member or if you don't have enough savings to cover the deductible in the event of a medical emergency.
  2. Wait longer. Most employer offer disability insurance. It is up to you to decide how long of a waiting period you want before payment of benefits begins in the event of disability. Calculate how long you can afford to live without benefits and set that as your waiting period. Often times, the longer the waiting period, the lower the cost of the coverage.
  3. Go for term insurance. Always buy renweable term-life insurance. Do not buy whole-life insurance or any of the 200 other things that it's called - universal life, life plus and so on. You want a renewal term-life policy and nothing else. With renewable term-life, you pay small premium each year in exchange for pure insurance coverage. You can cancel the policy at any time. Whole life, on the other hand, has an insurance component and an investment component. If you want to cancel, you may face a substantial penalty, depending on the terms of your contract. So rather than purchasing a whole-life policy, invest the difference between the term-life and whole-life premiums (term life is chesper) as you wish. You'll make a lot more money this way.


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Keep an eye on Expenses

Saving money is only half of the cash flow equation. The other half is spending money. You will always have some unavoidable expenses for goods and services you can't live without. But every dollar that you spend is a dollar that you haven't saved.

Watching over your own finances is much easier than watching over the finance for an entire family. One option is to put every family mamber - including the kids - on a budget. Instruct everyone to keep track of what they buy and spend. Here are some other ways to curb family expenditures so that money stays where it belongs: in your pocket.
  1. Create a spending plan. "Spending is the key to saving," says Paul Richard, executive vice president of the National Centre for Financial Education, based in San Diego. "Everyday spending decisions, especially credit-based ones, can have a far greater negative impact on your financial future than most investment decisions you're ever likely to make."
  2. Let the urge pass. How often have you seen something you wanted but been without your credit card or checkbook and been unable to buy it? Afterward, you probably realize that you didn't really need the item anyway. This is a good tactic to use all the time: When possible, travel without your impulse-buying tools. Then if you see something you want, you'll be forced to go home for your credit card or checkbook. You'll have time to decide whether or not you really need the item. If you have the resolve to go back to the store, perhaps the item is worth purchasing.
  3. Review receipts. When making purchases, be sure to check that you've been charged the right price. For example, watch the scanner at the grocery store. Does the scanned price match the price on the shelf? Little things like this add up to big savings.
  4. Eyeball your bills. Although you're a busy person, you may save money just by reviewing your monthly bills. That's the only way you'll catch mistakes. ANd they do happen - especially on power bills and phone bills. Cable services and credit card bills may also contain errors.
  5. Use energy-effecient appliances. Pressure cooker and slow cookers use less energy than ovens and burners. Appliances that radiate heat waste energy and money.
  6. Use flourescent lights. Flourecent lightbulbs may cost more than incandescent bulbs. But they also are more energy-effecient and last longer, which will save you a bundle in the long run.