Household Family Finance

Financial planning is not optional

2006-08-24T07:58:00.000-07:00

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.

Supermarket Primary Tips

2006-08-22T04:38:00.000-07:00

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.

Technorati Tags: money, budget

Millionaires - Ignore or inspired by critics?

2006-08-21T06:15:00.000-07:00

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?

What is financial planning?

2006-08-21T04:45:00.000-07:00

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!

TIME & CREDIT

2006-08-18T22:52:00.000-07:00

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

Technorati Tags: credit, life, time

Insuring is the best policy

2006-08-18T22:50:00.000-07:00

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.

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.
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.
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.

Technorati Tags: insurance, life, money

Keep an eye on Expenses

2006-08-18T06:54:00.000-07:00

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.

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."
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.
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.
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.
Use energy-effecient appliances. Pressure cooker and slow cookers use less energy than ovens and burners. Appliances that radiate heat waste energy and money.
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.

Where are the sources of MONEY?

2006-08-17T07:12:00.000-07:00

Where can you get the funds to pay off your crippling debts? Actually, there are a lot of available sources where you can get money. Listed below are just a few places where you could start your search.

Your savings. However, do not use the cash from your reserves fund. If you have extra savings on top of the reserves fund, use this money to pay or at least reduce the debt. It makes little sense to leave the money in the savings account, earning a measly five percent interest and be charged 15 percent interest on your loans.
Extra income. This extra income may include bonuses, gifts or even money from independent work such as direct selling, tuition classes or payments from your writings.
Cashing in your not-so-good investment. No matter how good you are, not all your investment will turn out winners. On the law of averages, there will be turkey as well. If you have some investment that have gone nowhere for the past two or three years, perhaps it is time to call it quits. Cash out the investments and use the money to pay off the debt.
Cashing in even on the big winners. You have made a fair bit of money in the stock market and would like to get some of that money. Other than just celebrating your genius streak and splashing it out on the town, you can use part of that money to reduce your debts.
Cash value insurance. Cancel those expensive policies, take the money and reduce your debts. This is assuming that the policy has earned some cash value already.
Inheritance.

Save Where You Can

2006-08-17T05:46:00.000-07:00

Regardless whether you're currently ending each month with surplus funds, you can do more to squeeze savings from your monthly income. A dollar here and a dollar there quickly add up. Here's what you can do:

Eliminate unnecessaries. If you think you can afford the lifestyle you're living, ask yourself this: How much money are you keeping after taxes and basic living expenses? Cutting back on little things or taking the time to find better bargains can make a big difference in your long-term savings. Decide which parts of your lifestyle are really important to you, and cut out the expenses you can do without. It will add up
Pare down indulgences. Sure, splurging on an expensive pair of shoes or a new tool feels good. Eventually - in a year, or even a month - your purchase will be out of style or obsolete. Meanwhile, the money you spent could have been earning interest for you. Financial security may mean making a small sacrifice - say, shopping at Wal-Mart instead of Bloomingdale's. That may be hard to swallow at first, but remember, your family future is at stake.
Pocket your payments. Once you've paid off a car loan or a credit card balance, continue making the monthly payments to your savings account. You're already accustomed to not having access to that money, so you don't have to do anything different.
Pay yourself first. Every week (or whenever you get paid), take a small amount of money from your paycheck or checking account and invest it. You can put this money in a savings account, mutual fund or stocks, just as long as you are contributing to your future well being. No matter how small, every investment will help you fare better in the future.
Practice restraint. If you suddenly receive a significant amount of money that you weren't expecting, you may have the urge to treat yourself. Saving the money will reward you more in the long run.
Put away your raises. Instead of using a pay increase to purchase items you don't really need, put the extra money into some type of savings. Whether you add a little more to your bank savings account or your employer's investment plan, you'll gain more in the long run than you would by spending your raise on stuff that isn't important or needed for an emergency.
Be prepared for disaster. Losing your job can turn your money situation topsy-turvy and lead to mountains of debt. Be sure that you always know where you stand financially, and don't underestimate the importance os a nest egg. At the very least, you need to put away two to three months' worth of paychecks as a safety net in the event you lose your job or experience some other emergency that leads to loss of income. Of course, more you save, the better off you'll be.

Insurance: An excellent financial product with a bad rep

2006-08-16T04:55:00.000-07:00

Insurance is a fabulous financial tool and a great armounr for defence. But, like most tools, it is beneficial only when used correctly. In the real world out there, no other financial product is as misunderstood as insurance. Many people view what is basically a superb product with skeptical eyes. Insurance has to be an excellent concept because it has survived for almost five hundred years. No product can survive that long if it does not do any good. Yet, poor reputation exists because:

Most folks don't know anything about insurance.
A few know a litle about insurance but the wrong little.
The handful who know a lot don't want others to know.
All of the above.

All of the above lead most people to buy the wrong form of insurance or avoid insurance altogether. It is not all gloom and doom though. As long as you know some basics and remember those basics, insurance should be a walk in the park. You'll not only save a lot of money but more importantly, have the right form of insurance and adequate coverage. That, after all, is the name of the game

Twin Strategies To Cure Debt

2006-08-16T03:50:00.000-07:00

There are two distinct debt-killing strategies that work like a Gred A assassins:
Twin 1:

Keep your total monthly repayments constant.
First, make sure that you meet all minimum payments necessary.
Then channel whatever is left over of the fixed monthly allocation to attack the smallest debt.
When that has been eradicated, move on to the next debt in order of the size.

Twin 2:

Try your level best to swap high interest debt for no - or low - interest debt.
Once you've done your best in that regard, keep your total monthly repayments constant.
Meet ALL minimum payments expected by your creditors.
Then channel what is left from the fixed monthly allocation for total debt repayments to pay off the debt attracting the highest interest rate.
When that debt has been wipe out, shift your artillery to attack the next debt down in order of interest rate charged.

If you stop and think about these two different approaches, you should quickly realise that the second option of decimating highest interest debt first is the more logical - mathematically speaking - choice. And you would be right.

But people who get in debt, and then stay there, usually do so beacuse of personal reasons that seldom tied to cold logic. In other words, poverty is not the most common reason.

Instead, low self-esteem, a lack of self-discipline or an over-exuberant adherence to the philosophy espoused by Doris Day in her hit song Que Sera Sera, Whatever Will Be, Will Be ranks much higher.

That is why I favour, for most people, the approach of attacking the smallest debt first and, once that is accomplished, taking the full monthly repayment on the conquered debt and applying it to the next largest debt.

Taking Charge of Your Credit

2006-08-16T01:46:00.000-07:00

How much debt can you reasonably handle? Here's an easy way to find out:

Determine your monthly take-home pay (what you retain after taxes and other deductions).
Add up all of your monthly credit payments, including car loans, student loans, and credit cards. Do not include monthly mortgage payments or rent.
Divide your total monthly credit payments by your monthly take-home pay. Suppose your monthly credit payments are $540 and your take home pay is $3,600. Your debt-to-income ratio is 0.15, or 15%. Now find your percentage in the list below:

Less than 10% - You're in excellent shape, debt-wise.
10 to 15% - You're okay, as long as you stay under 15%.
16 to 20% - You're perceived as too much af a risk. Work to reduce your debt-to-income ratio to less than 15%.
More than 20% - Take action now. Find ways to increase your income or pay off some of your debts. Aim to live within your means.

Facing Your Financial Future

2006-08-16T01:03:00.000-07:00

Did you know that 80% of American millionaires made their money in one generation? According to Thomas Stanley, co-author of the Millionaire Next Door, two-thirds of all millionaires are self-employed, usually in blue-collar businesses. Why do these people fare so much better than the white-collar workers and old-money families whom we normally associate with wealth? The self-employed tend to live below their means.

The reality is that having a higher-paying job usually means having a higher standard of living, which leaves less income for saving. Self-employed folks have the ability to control how much they save , and they adjust their lifestyle to leave as much or as little for saving or investing as they like. By creating a well-planned budget that allows for investing sensibly and living comfortably but not extravagantly, virtually anyone can become a millionaire.

Okay, so maybe you have less lofty goals. Perhaps you want only to establish a budget and stick with it. Living within your means is an essential component of simplicity.