Smart Finance and Money Saving Tips
Unless you are one of those people lucky enough to have an amazing advisor who keep you accountable and on track, you are probably like most of us who spend a minimal amount of time actually thinking about and planning strategies for personal finance.
I heard the other day that we spend approximately 20 hours a year planning for our vacations and just one or two hours a year on taking care of our personal finances! Does that shock you? It definitely shocked me.
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It doesn’t seem to matter how much money a person earns, if they don’t work on developing effective money management skills, they can end up bankrupt. I was reading an article on Yahoo! that talked about seven professional athletes who squandered away their money on all kinds of gadgets and doodads rather than investing it wisely.
Although it may seem like it would be easier to manage your money if you had a lot of it, it’s obvious from reading the article that having more money isn’t the solution. Instead, what it takes is a disciplined approach; creating a budget, paying yourself first, controlling your spending, and most importantly, not spending more than you earn. Although people who make a lot of money may not have to be as strict with their spending, they still need to follow the basic principles of effective money management; otherwise they could end up like Scottie Pippen and Lenny Dykstra.
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The majority of us are sticklers for finances at work, but often disregard our personal finance at home. For those who are not accountants, the process of keeping financial records and ensuring all financial items are squared away can be quite boring and often confusing. Instead of ignoring your personal finance until a problem arises, take the initiative today!
The most important aspect of your personal finance is undoubtedly your credit. Your credit score, often a mystical number of much confusion, is critical to your success in the financial realm. Without a respectable credit score, you will be unable to borrow money or obtain a home or vehicle loan. This number can literally hold you back from completing your goals and can severely limit your future.
The credit in your name has a direct bearing on the credit number. Thus people who do not use their credit cards properly and have huge bills running in their names lend a bad streak to their credit. A point to be noted is that it is not the amount you charge but it is the amount that is kept on credit that poses the threat of being harmful. It is important to keep a check on the monthly statement and you should endeavor to pay it in full each month.
In today’s society, identity theft is often a problem. If someone steals your identity, they can wreck your finances, ruin your credit, and tarnish your good name and reputation. In order to prevent identity theft, carefully monitor all your financial statements and safe guard your personal information.
The attitude of most people towards money is spending today and saving later, thus relegating saving for a later part of their life. But this habit catches them unawares in the later part of their life where they get jolted with the rude shocks of a fast approaching retirement date and a non-existent retirement fund. So do not wait for tomorrow, start saving today by putting some portions of your income in the retirement fund account.
One of the best ways to handle the finances is a budget. This is the best way to keep a tab on the finances and keeping the spending in control. When you create a budget you need to make two columns, one meant for the incomes and the second for expenditures. You need to mention all the items of expenditure in the expenses column such as rent or mortgage payment, car payment, insurance, utilities, and food. Whatever is left after deducting all this from the income is the monthly excess that of course can be used in different ways.
It’s a good idea to consult an accountant if you are not sure about setting your personal finance records straight. This person will help you correct any potential problems and ensure nothing goes wrong in the future.
The world of finance is fascinating. There’s no need to be scared of it. Just keep your finances straight and you will be able to build, or rebuild, your credit score.
About the Author
David Neehly is an independent Investment writer for “Investment Finances” at http://InvestmentFinances.com You’ll find all the latest Investment news there.
Although you may have failed at managing your money wisely in the past, it’s never too late to start to develop good habits. Whenever you begin to feel it’s a losing battle or that there is just no way you can make ends meet let alone save for your retirement, think of WD-40.
For those of you who have never heard of it, WD-40 is a spray designed to repel water and prevent corrosion. It’s creator, Norm Larsen, invented WD-40 in 1953 after 40 attempts! That means he failed 39 times before finally getting it right! He was persistent. If he had given up, the world would never have been able to benefit from such a product. In the same way, you cannot afford to give up on developing good money management skills. Giving up is not the answer.
There are many ways you can improve your money habits. You can meet with a financial planner at your local financial institution and they can crunch some numbers and help you to create feasible goals for yourself. You can create a budget and stick to it, and you can also read books and Internet articles that will give you ideas on how to save money and invest it wisely.
Although it will take discipline now and mean that you will be making some sacrifices in the present, you will reap the benefits in the future. The sooner you start getting your finances in order, the better off you will be.
Today more than ever, it is important to learn the basics of personal financial management. With the costs of nearly everything rising, it is crucial to learn how to set and stick to a budget, pay off debts, and save for the future. There are many small things you can do that will contribute greatly to helping you with your own personal financial management.
The easiest way to do this is by learning how to make the most out of the money you earn. Earning more money will not help you in the end, because you will only end up spending more if you do not learn an effective way to handle your personal financial management. You must learn the difference between what you want and what you need, and how to prioritize them both. It takes self control to live within your means, and to know when you can afford something, and to walk away from it if you cannot. But that is what it takes to make the most of your income.
Your budget should include money set aside for emergencies, expected purchases, living expenses, and bills. Setting a small amount out of each paycheck aside for unexpected emergencies, such as illness or car repairs, will save you from having to possibly pay interest on a loan to take care of your problem. Taking it out of your check allows you to prepare ahead of time, and keeps you from having to come up with a lump sum of money all at once, hopefully, preventing you from incurring more debt.
If you know you need to make a large purchase in the near future, such as a new washing machine, or a new computer, plan ahead, and set aside money for that item from each check as well. Once you have saved enough money, shop around for the best deal. Try to never make a large purchase unless you can do it with cash, to avoid paying high interest and fees.
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“I will be rich if I strike the top prize in this week’s lottery!” That seems to be the most usual exclamation from fellow workers looking for a quick way to escape the rat race.
Thinking back, is wealth really measured by how much money you have in the bank?
A lot of us usually think that wealth is signified by the possession of a lot of money or owning a lot of luxurious items. We have often associated wealthy people with the luxurious house, big car, expensive jewelry they owned or the posh restaurant, which they dine in, etc.
For Robert Kiyosaki however, the concept of wealth is defined simply as “The number of days you can survive going forward if you stop working today”. It is not measured in dollars and cents, but by the number of days, which you do not have to work! It is not your conventional definition, which you might have expected but I must say that this is very logical and common sense!
Based on my understanding of Robert Kiyosaki’s definition of wealth and the concept of income and expenses, I see the amount of money one has, formed just part of the wealth equation. We also need to look at the other part of the equation, which is the outflow of money, i.e., expenses. The number of days we can survive if we don’t work is dependent on the amount of money we have and the amount we spend.
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It’s never too soon to talk to kids about money, and as for a card, it’s best to start them on one before they leave home, say perhaps when they are a junior or senior in high school. Let me give an example.
Before my daughter left for college, she got a checking account, linked to her parents (of course), and then later a credit card with a very low limit. The idea here was for her to learn to pay for things herself before she got out into the big bad world on her own. I like starting them on these things while they’re still under their parents’ roof, so they get practice, and when they decide on the 5 jeans, and then realize there isn’t enough dough left for lunch and gas money, guess what? They brown bag it to school and take the bus! Or they ride with friends, etc. There’s no harm in their experiencing the consequences of overspending while they are with you, and their limit is low.
You can get a card with just a few hundred dollars limit, and then help them pay it off in full and on time every month. This is actually very good because it builds good credit, it gives them practice, and they feel like a big shot! Not only that, they aren’t constantly asking you for to cover the pizza fund. Well, probably they are still asking, but at least your child can see how far a finite amount of money goes, and learn to adjust, or not!
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