Archive for the ‘Personal Finances’ Category

How Living Within Your Means Can Make Life More Enjoyable

Tuesday, June 8th, 2010

With the recent downturn in the economy, many people are realizing that they cannot afford to sustain the lifestyle that they have grown accustomed to living. Fortunately, this does not mean life cannot be enjoyable. There are a number of easy ways to live within your means without hurting your quality of life. With a little planning and knowledge you can live on budget without feeling the financial strain.

The following are a number of ways to live within your means while making life more enjoyable:

1. In order to live within your means, you have to be able to bring in more money than you are spending. Create a monthly budget that includes how much you spend on essential items such as home and vehicle insurance, utilities, food, cable, phone, mortgage payments, gas, etc. Then, calculate how much you earn monthly. Subtract your monthly income from necessary expenses to determine how much extra money you have to work with.

2. List extra expenses such as entertainment, recreation, and products you shop for in the home and on yourself such as clothing, personal care products, etc. Calculate how much you spend monthly on these items. You will then need to come up with ways to control your spending habits. This can include cutting down on the number of times you dine out each month, shopping for discounts at large department stores, second hand stores, surplus stores, etc. When shopping, look for deals, coupons, and sales. Never pay full price for an item. As well, you can often find great deals when shopping online.

3. Credit card debt is a major source of financial hardship. If you have several credit cards with high outstanding debt, you should at least pay the monthly minimum for each card, and then start to pay off the card with the highest interest rate. Owning fewer credit cards will make it easier to manage and remember. Always pay your bills on time to avoid having to pay any interest at all. To help wean yourself off of credit cards, start carrying cash with you at all times and pay using cash. Seeing the physical money literally change hands will help you consider needs vs. wants on a more regular basis.

4. If you are having trouble keeping up with debt payments, then maybe you should consider consolidating your debt in order to manage it better. Instead of making multiple monthly payments to several creditors, you can consolidate your debt and only need to make a single monthly payment. In addition to helping you get organized, this can also alleviate stress that is often associated with debt.

5. Clean up your credit score. Request a copy of your credit report from one of the following two major credit bureaus: Equifax, or TransUnion. Check it over for any inaccuracies. Look to see what debt is affecting your credit rating and work with a creditor to establish a repayment plan. Don’t ignore your creditors as they will send your debt to a collection agency.

At first, implementing a plan to live within your means can seem very unpleasant. You may miss a few of the luxuries you had grown accustomed to. However, once you get used to the plan, you will find life more enjoyable as you will not longer have the worry of how you are going to pay all of your bills. You may even realize that you are much happier living on a budget.

Adriana Noton is a freelance writer who specializes in providing great financial information for Canadians. When searching online for debt counselling or credit counselling, one of the many resources available is Consolidated Credit; offering a variety of debt counselling services and financial planning tools to help Canadians get their debts under control.

Debt Counselling FAQ:

Question: How to Utilize Christian Debt Counseling?
Can somebody please explain me how to utilize debt counseling?

Answer: They offer consolidation services that help you reduce your interest rate and monthly payment on some of your cards. They charge a monthly service fee when you enroll, and are also paid by your creditors. There are pros and cons to their service like any other debt services out there. There are other debt options out there, and to really get out of debt, you have to make sure you choose a solution that tailors to your needs. The main options out there are consolidation, settlement, and bankruptcy. All of them work, but they do not work for all. Its very important you understand each one from an un-bias source. Typically each company that offers one of those services will only praise their solution and degrade the others.

Question: What are the advantages and disadvantages of debt consolidation?
What is the best debt Counseling and debt consolidation services? Are there any debt or credit card consolidation services that are easy to use and secure and worth the time?

Answer: Debt consolidation can be good if you can get your interest rate below your other cards, which is often feasible since the balance will be higher, then they usually give you a lower rate. It’s never a good idea if you have to pay ANY consolidation fee or have to pay a higher rate.

You need to first examine and change how you manage your debt in particular and your personal finances in general. The biggest challenge of debt refinancing is to not go out and load up with more consumer debt because you have new room in your budget.

Question: I need suggestions on the best debt counseling services available, free or fee based.?
Before I have to file for bankruptcy or the bank forecloses on my home I would like to explore other options available.

Answer: Some options are:

Buy Dave Ramsey’s book, Total Money Makeover. Go through the Financial Peace University (you can go through it online now). It is a great tool for planning your way out of debt and to better habits for the future.

If you are working, chances are your company has some kind of an EAP program (Employees Assistance Program) for help with life’s problems. Mostly they refer people to counseling, but that can include debt counseling services. Whatever debt counseling program they refer you to will be a reputable one, and your benefits plan may cover any costs.

Check with a NFCC credit counseling service. These are legit, non-profit companies offering debt management programs for a nominal fee.

Question: How Does Consumer Credit Counseling or Debt Affect Credit Rating?
I need to know how actually consumer credit counseling actually affect my credit rating.

Answer: Your credit score is affected by two things. Your payments and your debt to income ratio. So, if you have never been late on anything but your debt keeps increasing, then eventually your scroll will start dropping. Many people are so worried about their credit score and would rather drown in debt than have their score affected. This is why many people are against any debt solutions out there. Its like wondering why would any one have a perfect lawn, but the house on it not be live able. There are many debt programs out there that can help get rid of debt, but there are also many scams out there as well. Each as its pros and cons, and honestly not all affect your score. Some actually may help it in the long run. All the debt solutions out there work, but they DO NOT work for all. Meaning, you have to find a solution that is tailored to your circumstances and debt needs.

Question: What does debt relief companies do for me?
Can debt relief services affect my credit if I use them to lower my interest rate?

Answer: Yes they can negatively impact your credit.

Question: Does Chase, Bank of America, and Capital One give credit debt counseling/budgeting?
Like, advice on how to eliminate debt. If so, which ones and is it free?

Answer: I would just call and ask them. Almost all banks can offer debt consolidation if the client qualifies, which is one way to lower those rates and clear that debt.

Question: Where is the best place to go for individual debt counselling?

Answer: I have found that there are a few ways to get help, the CCCS seem a very good company as it is free and they don’t make false promises, national debt line have a good, informative website and your local CAB will help you budget as well.

Question: Can you explain the difference between a Credit Card Debt Relief program and Credit Counseling?
I’m trying to figure out which route to take with my financial situation. Are there any other options for a person who is still current with all payments but on the verge of possible financial ruin?

Answer: With Credit counseling, the credit counseling company works with your creditors to have your interest rates lowered so you can pay off your debt faster. You normally will make one payment to the company and they will distribute it to all your creditors. Usually takes 4-7 years to become debt free.

The Negative to credit counseling is that while your credit score itself will usually not be negatively effected by enrolling in a credit counseling program, your ability to establish new credit, or any use of existing credit for that matter, will be abolished. Throughout the duration of the program, it is unlikely that you will be able to qualify for a home loan, car loan, or any other credit.It is hard to get a loan or credit card during this period. Also, although interest rates are usually (but not always) lowered for consumers in credit counseling programs, the monthly payments typically will stay the same as your minimum payments, and sometimes more. That means, for consumers that are truly struggling or unable to make their minimum monthly credit card payments, this option will not provide cash flow relief.

With Debt Relief, the debt settlement company can help people that are truly struggling with credit card debt, by representing them in negotiations with creditors to secure settlements of anywhere between 40-60% of the amount of debt owed (at time of enrollment). Of the debt relief options, debt settlement is the least expensive, and shortest in length, with most debt settlement programs averaging between 24-48 months in length.

The Negatives to debt relief include negative marks on your credit for up to seven years. Also, most creditors will report the forgiven debt as income and will send you a 1099c form. You have to report this as additional income on your taxes which would increase the amount of taxes you owe on your tax return.

Homeowners Guide – Getting a Good Handle of Your Financial Position

Monday, May 31st, 2010

Gaining financial leverage does not necessarily mean that you need to have a substantial pay package, own a large home or drive a high-end car. The critical aspects of your financial management are your competency and capability to handle your personal finances sensibly so that you are able to live a comfortable life. A comfortable living means that you are able to enjoy healthy environment, eating, adequate shelter and clothing. It is important that you are able to satisfy your needs as well as your wants by having sufficient amount of money. The source of funds to support your kind of lifestyle must come from your earnings and not from borrowings. The core foundation of a good financial management is the development of the right habits in handling personal finances. Proper management of personal finances must be second nature to you.

In order for you to have the necessary finances to support your home improvement project or upgrade, personal finance experts recommend that you start by plugging the leaks of your financial portfolio. This means that you must identify the problem areas and start implementing corrective actions to resolve the issues. These “financial cracks” may have different forms for every family.

The following is a quick rundown of the most important tips that you have to follow in order to “plug” those leaks in your financial portfolio:

1. Gather the basic information about your finances

You need to establish a complete profile of your finances. It is also essential that you get data and information that would cover a specific time range. For instance, you have to get hold of your credit card bills and bank statement for the last six months. As soon as you are able to gather all the information about your expenditures and incomes, the next thing that you must do is to group these items into logical categories. You can perform this task by using your own spreadsheet or choosing one of those spreadsheets that are available online.

2. Sum it all up

As soon as you are able to completely organize the expense items, sum up the items in each of the categories to determine what your financial position is in each of the main expense categories. It is important that you don’t under-estimate your income and expense items.

Here are the major items which you need to carefully assess to ensure that you get an exact measure of your financial position:

• Income source – all sources of income, including your salary, bonuses, rental income and benefits.

• Housing expense – utilities and maintenance, insurance, property taxes, mortgage payments or rents

• Communication – internet, home phone, cell phone

• Entertainment and Leisure – vacation and travel, health clubs dues, liquor and beer

• Children stuff – parties, gifts, lessons, clothing

3. Compute your percentages

Use your NET income as your base figure in analyzing the specific items of your personal finance portfolio. Financial experts recommend that your mortgage or rental payments must not exceed 30% of your net income. Other basic guidelines that you have to follow in managing your cash outflow include 10% of income for compulsory savings, 15% of income for debt servicing and 15% of income for transportation expenses. There may be some aspects of your personal finance where you breach the upper limit. This may be allowed for a few items. However, if you are going beyond the limit in almost all of the expense items, then you really have your work cut out for you.

4. Establish your priorities

Determine which items are more important than the rest. In the event that you need to overhaul your expense items, then it is incumbent upon you to make adjustments or give up items you consider of less importance than the rest of the expense items. In most instances, major adjustments are usually done on items involving recreation and entertainment.

5. Formulate your monthly budget

The last thing that you must do once you are able assess the critical aspects of your personal finance portfolio is to formulate a monthly budget. With the proper handling of your expense items, you will be able to come up with a financial template that achieves a perfect balance between your essential expense items and fun stuff.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listing

Personal Finances FAQ:

Question: What personal finance records should we keep at home or in safety box?
I keep everything at home and a lot of it I did not need, but recently moved and somehow lost most of it. Yes, I certainly do blame myself….How many years of tax returns should we keep and where? ( i can only find 2 yrs back) What documents should we have concerning our home (title, deed of trust, etc). Where and how can I get copies of these docs that I need?

Answer: Personally, I keep all tax records for seven years as well as bank statements. In addition, you should keep copies of wills, powers of attorney (medical and general), life, auto and homeowner’s insurance policies, and an extra key for your home and cars – so you know where it always is. I also have a special section for warranty papers on household items we purchase. You can get copies of your titles and deeds of trust for property from the courthouse in your county of residence, or from the lender if you still owe. Automobile title copies can be purchased from the bureau of motor vehicles.

Question: What is the best personal finance book to start with?
I am 28 years old, single and made $41,000 last year. I am struggling financially due to my own ignorance and need to get a hold of the reigns.

Dave Ramsey and Suze Orman have some pretty mixed reviews on how overly simplistic and what a waste of money their work is and Givens sounds too risky. Where should I start? What do you recommend?

Answer: Try the Idiots and Dummies guides on personal finance / money management. Yes, it’s incredibly simple, but it’s a good foundation, and even financially savvy people can pick up a few tips and refresh themselves on good reminders there.

Then move on to David Bach, David Ramsey, and/or Suze Orman. They all give very similar advice, and it’s all very sound. Maybe not all of it will apply to your situation, but you pick and choose the parts that are relevant to you. Remember, you’re not looking for the hot magic stock tip that will make you instantly rich – you’re looking for practical real-life advice on how to maintain and improve your actual finances.

Don’t expect to go from novice to expert overnight, or expect one book to provide you with all the answer. Read several, then mull it all over and form your own opinion of what is best for you.

Question: How can budgets help people to manage personal finance?

Answer: By first tracking what you are spending and what you are spending it on. Then comparing that to a proven program that outlines what percentage of your income should be used for what expenses. That will balance your finances to eliminate debt and live within your means. The good thing about a budget is that you can adjust it based on your lifestyle as long as it remains balanced.

Question: What are the tools of the trade for personal finance?

Answer: You need a personal life plan, a personal budget and a personal balance sheet. After that you may need some financial coaching or financial therapy to help you get past your human foibles and enable you to use these tools rationally.

Question: Personal finance planning?
I am 25 yrs old, and feel its important to start planning ahead of time, but I don’t know what to do. Should I buy stocks? bonds? mutual fund? All these seem confusing. So then I figure why not look for a professional, and saw the Ameriprise commercial on tv, so my question is would you recommend Ameriprise? If so, how much money should I have before I contact them? What other advice you would have for a starter in personal finance planning?

Answer: 1. First you need an emergency fund of 6-8 months’ living expenses (not income, what you actually need to live). Don’t even think about investing until you have this.

2. Then you need to have your various insurances in line: HO or renters, auto, health, life if you have dependents (none if you don’t), personal liability if you own a home.

3. If you have dependents, you need a simple will. IRAs and 401ks and life insurance pass by beneficiary form, not your will, as do joint assets. But if you own a car in your own name, or have personal property, these pass by will. If you’re single, in most states your parents would inherit. If you’re married, your wife and kids. Do a cheap will online or with Quicken Willmaker, then pay a lawyer for one hour to look over it and make sure it says what you want (not what you think it says). Look for a woman atty, they’re cheaper.

4. Only THEN should you think about investing. Ameriprise is fine, but they are “boiler-plate” and they are really looking for people who can invest. You are probably not at that stage yet. Maximize your 401k contributions before starting an outside investment program.

Read, read, read, before investing. Look online: Investopedia.com, morningstar,com, fidelity,com, vanguard.com–all have educational sections and you don’t have to invest anything to access them. Don’t invest in anything you don’t understand, and don’t invest any money you can’t afford to lose. Once you have funded your emergency fund and 401k, start a personal investment program with $10-15,000. There’s nothing wrong with cash in the bank till then. Good luck! Wanting to save is half the battle.

Question: What is a good book on personal finance?
I want to do a better job managing my money.

Answer: Any book by Suze Orman. I would also watch MSNBC. Here is a tip if you don’t want to spend money on a book, go to your local library and they should and almost always have a section with books full of personal finance information. That way you spend no money and have access to several different ones.

Question: From a tax and personal finance standpoint, why should an employee ALWAYS invest in an employer’s 401k?

Answer: That’s only true if an employer offers you a “match” on the 401(k) plan. Matching funds are extra money that an employer gives you as an incentive to save for retirement. However, when there’s no match, an IRA can be a better choice because you have control over it and there’s more flexibility in your investment choices.

Question: How is a spreadsheet superior to a cash book in keeping and analyzing personal finances?

Answer: A spread sheet is better cause it also allows you to determine taxes and multiple other equations allowing you to figure out your balance even easier than calling the bank.

5 Tips on Starting a Budget at Home

Tuesday, March 2nd, 2010

If you need to save money, it is very important that you start a budget at home. Although you may think that there is no way you can cut corners, the truth is that there are ways you can do it. You can cut corners in areas that range from your utility bills to how much you pay for groceries each month. If you save money in just these two areas alone, you may be pleased to find that you can save quite a bit of money. If you apply this to all areas of your life, you will be amazed that saving money is so easy.

So what are 5 tips that you can use to start your budget at home?

- Organize all of your bills each month and determine what it is you are spending on average each month. It is important for you to determine this so that you can get an idea of how much money is actually going out.

- Make sure you accurately figure how much money is coming into the home on average. By doing this, you are able to compare what it is you have going out and what it is you have coming in. If you do the math, you can then see what it is you have left each month. If not a lot, you may want to consider credit counseling on your unsecured debt.

- After you have determined how much money you have left each month, it is time for you to take a look at your bills and see what you can reduce and what you can’t. For example, you may not need that text messaging package on your cell phone. You may also not need all of those minutes that you’re using. This will save you a significant amount. This also means you need to do things such as not run excessive amounts of water in your home, turn off lights when you leave a room, and turn down the heat and the air conditioning since they result in high heating and cooling bills.

- When it comes to grocery shopping, it is not always necessary to buy the name brand. Sometimes the store brand is just as good, depending on what it is. For example, you may not need to buy the name brand pain killer because the store brand pain killer has the same quantity and the same exact ingredients. The main difference is the price, which usually around $2 or more less than the name brand.

- If you find that you are doing a lot of unnecessary spending, you need to see what is necessary and what isn’t. This means you need to stop buying all of those unnecessary things. You may not need to go out to the movies every week. Every other week may be fine. When you see that new outfit on the Internet, question whether or not you really need it. If you don’t, then you can move on and use the money for something that is necessary.

There are so many small things that you can do to make a difference in your budget. You would be amazed how much money you spend and shouldn’t spend. It is rather amazing, really. We all spend thousands of dollars per year that could be used to reduce other expenses such as credit cards, loans, mortgages, car payments, and so much more.

If you find that you are in a tough financial situation, you may want to try something such as debt counseling to help you with your budget. Credit counseling is another solution that you may wish to look into. If you have a lot of loans, then debt consolidation may be an option. Many individuals go the credit counseling route when they feel that there is nothing they can do to make their budget work.

Amy Nutt is a freelance writer who writes on a variety of financial topics including personal budgeting and debt consolidation. For more information about personal finance and credit counselling, ConsolidatedCredit.ca is a tremendous resource on the topic for Canadians.

Home Budget FAQ:

Question: Terrible credit. It just seems like one thing after the other. Any budget ideas to help me?
I am 25 years old and I am really feeling overwhelmed. When I was a teenager I was a little irresponsible. But since then I obtained a copy of my credit report and got on the track to paying back what I owe. I already paid off my school loan which in itself is a load off my back. I moved onto the next thing which was all my old cell phone bills. Now I’m looking at my credit report and I’m having a hard time moving on to the next. I have about $3000 left on my credit to pay off which I can do. But I just found out I owe my first college $10,000 from early withdrawal and library fees. How will I ever pay these things off? I can have the 3000 paid by the end of the year but the 10,000 is surely going to hinder me from buying a home. Any budget ideas?

Answer: $10,000 just from early withdrawal? That sounds pretty extreme. Contact them and ask for a breakdown of charges. The best way to do it is how you are. One thing at a time. That way, as you pay them off, they’ll come off one at a time. If you try and pay a little at a time to all at once, they’ll all remain on your report until the last payment. Keep your head up and you’ll be ok. You’ll manage. Also, get on some sort of payment plan with the school and that should prevent anymore charges being added to it.

Question: Home budget question?
I’m plugging in my expenses into Quicken to determine my incoming/outgoing balance. Do I input my VISA purchases AND my VISA payments as expenses in the same month? When I get a breakdown of outgoing money, it looks like I’m spending a huge amount of money on VISA. Am I doing this correct?

Answer: By entering both the Visa expenses and the Visa payment you are in effect entering the same amounts twice and therefore doubling what you have actually spent. The way you need to look at it is, you only spent the money once from your account, i.e. when you made the payment to your Visa. The charges on the Visa were on credit – using the bank’s money not yours.

A couple of suggestions would be to have a separate document for your Visa expenditure, itemising the expenses if necessary, and only entering the actual Visa payments on your original document.

Or, if you pay the Visa in total each month you could enter your Visa charges as per your statement, but not enter the payment as well. For this to calculate properly, your Visa expenditure and your Visa payment must be the exact amount.

Question: What’s a simple and efficient home budgeting software?

Answer: Quicken Personal is my favorite. It’s a check register, but it also does pie charts and graphs of where your money is going. I also believe it has a budgeting tool – just look at the package. I’m not a budgeter, I’m a saver; If I don’t save then I don’t spend. Ex: Easy to see in a pie chart if you are reaching your goals like saving 10%.
I would be lost without it. About 30 or 40 bucks at walmart – it might be by the printer cartridges.

There are fee sites on the net such as Mint.com. But you have to give the site your personal bank ID and your password. Plus sites like mint don’t have the check register that I need to keep track of my checkbook. They just show you the past and where your money went. Give it a try – but I would change your password at your bank after you try it.

Question: Need answers on how to budget my money?
My wife and I just had a our son 7 months ago and had to move back home. Now we have enough to move back out (I think) so I just wanted advice on how to budget my money for us to be able to afford an apartment or house.

Answer: Make a list of every bill you have- rent, utilities, phones, etc. Figure out about how much you spend on groceries and other absolute necessities per month (toilet paper=necessary, new sneakers=probably not). Then add all those numbers together and subtract that number from your total monthly income. Whatever you have left over is what you’re allowed to spend on non-necessities or put into savings. Since you have a kid you should probably build a 3-6 month savings cushion, so severely cut back or completely stop buying non-essential things until you have that safety net.

If your spending is greater than your income, figure out how to reduce it- cheaper apartment? Get rid of the cable TV? Pack your lunch? Find a better-paying job?

Money isn’t for spending- it’s a tool to help us live our lives. If you have $900 in your checking account, that’s not $900 that you can spend if you have a $700 rent payment due next week.

I find it helpful to mark payments on a calendar in red and write in when you get paid and how much in black. I also check my balance online often and have decided that I’m not allowed to spend any money if my checking account balance falls below a certain amount.

Question: When budgeting, how much should I subtract for taxes?
I am trying to make a budget for myself, but when referring to my monthly income, I only know what I make gross. Is there a way to estimate how much I should take from taxes to get a roundabout figure of what I bring home?

Answer: Roughly 30%. And if you’re only collecting gross income (i.e., no taxes withheld), then you must make “quarterly estimated payments” to the CRA. Which is a fancy way of saying “do your own withholding, and mail a check to CRA every three months”.

Question: Budget Baby Blues, How to make it work?
I have a 3 year old son, I am 22 will be 23 in June. Hubby and I are ready for a new addition to the Family. I am stay at home mom, and Hubby works at nights. Money is a little tight, but its always been that way, but we always made it through just fine. Hubby and I have been together for 7 years and married for 3. Any advice you can give to make this happen for me on a budget?

Answer: I know people who make plenty of money at 30 and over who are afraid to jump into starting a family. There is no perfect time to start (or continue) having babies. As long as you can provide a warm home and good food for everybody, go for it.

Question: Free home budget software with charts and graphics?
Please suggest some sites for Free home budget software with charts and graphics. I tried google search but all softwares were just with 30 days validity period or such.

Answer: I know this isn’t exactly a budgeting program, but there is a free checkbook/accounting application called GnuCash. It does come with a budgeting tool built in. You can graph/chart your income/expenses etc. I use GnuCash to track expenses, and compare that to a simple budget spreadsheet in Open Office.

Question: Looking for a very simple home budget planner?
Can anyone recommend a very simple easy to use home budget planner that I could download and use free of charge? Nothing fancy or to dramatic, just enough to keep track of monthly income and monthly expenses?

Answer: If you have office you can setup a monthly budget in excel using a spreadsheet.

Lowering the Fear Factor on Finances

Tuesday, February 16th, 2010

One of the major reasons why a lot of people are averse to the idea of managing their personal finances is because they find it complicated and cumbersome. However, this state is just indicative of your failure to perform the necessary housecleaning. Your efforts are actually wasted on tasks that could have been avoided in the first place. You have multiple accounts with several banks and overlapping investment portfolio and several brokerage accounts. If your finances are in this kind of situation, then the first thing that you must to is to simplify and get rid of the “excess” fat in your personal finances. Once you are able to simplify your personal finances, managing them will not be very complicated.

How can you simplify your personal finances?

1. Get Rid of Excess Bank Accounts

If you try to analyze your requirements, you will find out that there is no need in having more than one bank account. If you currently have several bank accounts, consider closing those accounts that are deemed unnecessary. If you are married, then you may have a joint account to pay for your household expenses and two separate bank accounts for you and your spouse. You will be able to manage and monitor your cash flow once you are able to reduce the number of your bank accounts.

2. Go for Paperless Transactions

There are a lot of transactions that allow paperless billing. Take advantage of this opportunity since this is will reduce the paperwork. The record of your paperless transactions is stored on your PC and you can access them for future reference anytime and anywhere. This is also a more convenient way of doing transactions since you can perform the task at your most convenient time.

3. Automate the payment of your monthly bills

You can also set up a standard payment arrangement for all your monthly bills through your credit card. In this way, you can just make a lump sum payment for a specific set of monthly bills. You will no longer have to remember and follow up your payments for individual bills that fall due every month. This makes it also easier for you to monitor and manage your monthly expenses.

4. Streamline your Brokerage Accounts

Like your bank accounts, you will have to review your existing broker accounts and explore the possibility of consolidating them so that you can simplify the monitoring and management your investment portfolio. You can avoid having overlapping investments if you are able to reduce the number of your broker accounts to the ones you feel most comfortable doing business with. With a reduced brokerage portfolio, you can also enjoy certain benefits such as reduced fees when your investment reaches a certain threshold level.

5. Perform a monthly financial review

In most instances, people start off on a high note in their budgeting only to taper off after a few months. The next thing they knew is that their finances have turned into a complex jumble. They are left with no choice but to start all over again. You must be consistent in keeping track of your cash flow and net worth. You must perform a periodic review of your personal finances. You can easily manage your finances if you consistently perform monthly review. This set up also allows you to spot potential financial problems before they become serious and unmanageable.

There is no magic formula when it comes to effective personal finance management. You only have to keep things simple so that you will be able to manage them more effectively. If you are able to develop this mindset, you are well on your way to becoming a financially independent person.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings

Personal Finances FAQ:

Question: Is their a personal finance site on the internet that can help me budget?

Answer: If you know how to use excel, they have a great personal/family budget application. Just open up Excel, go to the search bar in the upper right hand corner and type “family budget” and samples you can download will pop up. It’s a very easy fill in the blank form with all the categories you probably need already there.

Question: Does the study of economics help a person to manage their personal finances better?
or I should ask if this study should help a person to manage their finances better or if what is learned has nothing to do with a person’s financial situation.

Answer: Economics has nothing to do with personal finances. Actually an entry level finance class would be more appropriate for that. Economics is more of a study of rational behavior and the allocation of scarce economic resources like time and money. An understanding of economics does allow a person to realize and seize upon opportunities to save or make money.

Question: What is the best money management program out for personal finance?
To help get a plan to reduce debt, balance checkbook, and reminds you to pay your bills.

Answer: My personal favorite is Quicken. I’ve used it since 2001 and can’t imagine managing my personal finances without it. There are others out there though. Obviously different people will have different preferences.

Question: Can state of Mississippi garnish my wife’s paycheck for a personal finance loan?

Answer: Is the state her employer? Is the state the creditor?

If the state is the employer and the loan was granted through the state then yes. Otherwise they will have to follow the procedures of collecting debt. In order for them to garnish wages, a judgment must be entered against her. The creditor will have to sue to get this.

Question: Personal Finance Question. Please help, I’m desperate.
I am a young adult. My parents are disabled so we live in public housing. I am trying really hard to move out but I can’t work out the numbers. Lets say for example I work for $10/hour, 5 days a week, from 9-5 pm. Annually I can make about $19,200. But the problem with public housing is that I need to pay 30% of my income for rent and my income tax is 10%. So when is all said and done I still don’t have enough money to move out. Any ideas on how I can solve this problem?

Answer: Most people who are just starting out can’t afford their own place. They usually get roommates. I knew 4 guys who shared a nice 2 bedroom apartment once. Get the job first. See how much you can save per month (put it in a bank account) — if you commit to a rent that you can’t afford it won’t make anybody happy. Don’t try to spend more than 1/3 of your total income on rent, because there are always other expenses that come up.

Question: What kind of jobs deal with personal finances?
I have a Bachelor’s Degree in Economics, with a major in Banks and Finances. I currently work for a credit union but I am really interested in personal finances, credit issues, stuff like that. What are some jobs related to these things?

Answer: Today most “financial advisors” are loan officers, branch managers or investment counselors. Unfortunately, the industry has gotten so sales driven, that those are really your options. There is not a way to only advise and not sell, it’s not really profitable for a firm. You could do not-for-profit work, and city/government work, but there is little room for advancement and you will typically end up being tasked with other things. If you think about it though, the best people to give advice are those working in the field and understand how things work. Once you have established enough retail experience you could (in commercial banking or investment firms) move to a “wealth management” where you are doing financial counseling and advising for the affluent.

Question: Can creditors go after my LLC if my personal finances are in ruin?
My personal finances are in ruin. I cannot pay my credit cards and am currently trying to find a solution. Can a creditor attach a claim on my LLC’s bank account that we use for our store? I have 2 employees and the store basically just breaks even. All credit card debts are in my personal name and not the name of my LLC.

Answer: No they can not. If you are a registered corporation under an LLC guidelines and registered with your state attorney general office (you didn’t just use some online legal scam to incorporate), then your personal finances do not affect the corporation. That is why they call it a Limited Liability Corporation, to protect the officers assets.

Question: Personal finances?
I’m 22 and am just out of school. I’ve never had a very good control over my finances and would like any tips to help with budgeting, lowering spending habits, easy ways to keep track of spending habits, etc. I don’t want to have to pay for any of it though. I want to know how to get myself out of debt so when I start paying college loans in June I’ll have a better grip on covering my expenses and being able to save up so I can move out of my parents’ house.

Answer: Yes, you CAN take control of your finances. A little dedication and self-control can transform your financial situation, if you’re willing to stick to it.

Look at your expenses from the past year and create a budget that realistically reflects how you spend. Then see what you can cut out, and focus on long-term goals. Make debt repayment a top priority, since the interest will play havoc with your finances as long as you have the debt. Starting today, never spend more than you make – use your credit card only if you are 100% sure you will pay off the entire amount every month. Track all your spending, in a computer program or even just scribbling down the amount in a handwritten budget list.

You can do it. Just stick to it and remind yourself of the goal.

Surviving a Worst Case Scenario

Tuesday, February 16th, 2010

Financial experts strongly recommend that you perform an assessment of how long you can survive on your savings in a worst case scenario. How long will you be able to maintain your present state if you suddenly find yourself jobless or lose your main source of income? You must immediately work on the numbers so that you know where you stand.

What is the first thing that you must do if you find yourself in this tight situation? You have to focus on your household expenses and determine which cost items can be reduced or eliminated, at least for the meantime. Once you have worked on the outflow side of your finances, the next thing that you must do is to assess the income types that are available. This means that you will have to look at your existing savings account and investment portfolio. Decide which items you can liquidate to improve your cash flow. Your last resort will be to consider your debt options and the liquidation of your retirement fund.

Here is a list of assets which you have to assess in order to determine your present financial condition:

1. Employment insurance – This safety net sets in within 4 weeks from the time you were separated from your job. This financial relief will last for 12 months. The upper limit of employment insurance is about $1,500 per month net of deductions and taxes.
2. Cash Savings – This is the time where you are going to rely on your savings. If you had the foresight and a good sense of management of your finances, then you can definitely rely on this asset item.
3. TFSA – You can withdraw your TFSA tax free and use it as your emergency fund while you are still looking for a job.
4. Unregistered Investments – If you have leveraged some unregistered investment accounts that yield dividends, then you can liquidate them when the need for cash arises.
5. Line of Credit – If you already have a substantial home equity, then you can apply for a credit line that offers competitive rates. However, you have to remember that the interest rate will increase as you increase your credit exposure.
6. Retirement Funds – Your retirement funds must be your last option when it comes to generation of much needed cash. This is because such option is a taxable transaction. This also means perpetual loss of your contribution room.

These asset items can provide you with the much needed relief until you are able to find a new job. It is important that you decide which asset item you are going to touch first. The rule of thumb is to go for the items which are not taxable or have the least cost. Obviously, you first relief will be your employment insurance. However, you may also have to start tapping your cash savings and TFSA. This three asset items are actually your first set of safety nets.

If these first three asset items are about to hit bottom, you may have to move on to your next asset item – your TFSA. It is at this point that you should have at least some job prospects. If not, then you may have to start looking at your unregistered investment portfolio and credit line. You may go for a credit line instead of liquidating your investment if the interest rates are low. The major downside of a credit line is that it adds to your monthly obligations. You will have to work on the numbers to determine whether you can afford additional cash outlay or not.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings

Personal Finances FAQ:

Question: Has anyone used the new online personal finance software program MoneyDesktop?

Answer: I started using it a couple months ago. I’ve been rather impressed with it not only for its budgeting features but also for it tools to help me payoff my mortgage years sooner than I was going to be able to. Would I recommend it to someone? Sure, it has a 30 day free trial period, you don’t have to give any credit card info for the trial period either. If you don’t like it move on.

Question: Does anyone know the best personal finance book for teens?

Answer: Your Money, Day One: How to Start Right and End Rich by Michael J. Wagner is an excellent read for teens. It is available on Amazon or in Audio form on Audible.com or Itunes.

Question: I want to be better at managing my personal finances and investments – is there a course for this?
I have seen courses for business accounting but does anyone know of a course for personal finance?

Answer: I know lots of banks will offer free or cheap courses to learn how to manage money and whatnot so they can recruit people to their bank. You don’t have to join the bank when the course ends, so it doesn’t matter. Maybe contact your own bank or banks in your area about such courses.

Question: What is a good free personal finances tracker that doesn’t require Internet usage & account numbers/passwords?
Looking for something similar to microsoft money, however I am a mac user and am also very reluctant to give out account information online. I am perfectly willing to manually punch in every single transaction, I just need something with more functionality than a basic spreadsheet.

Answer: If you are an iPhone user, I am sure that the iPhone has some application that is able to do the personal finances function. Too bad you don’t like spreadsheets as I think spreadsheets are a great way to track your accounts as you can create your own database as well.

Question: I am looking for a bank to open an account for personal finances?
Particularly just a checking and savings account. Obviously I don’t want to pay any monthly fees or anything ridiculous like that. I’ll be earning about $800 a month starting in January and using direct deposit. I just want to find the best bank out there that won’t charge an arm and a leg for overdraft fees. I am aware of overdraft protection and will most likely sign up for that.

Answer: There is no best bank, best credit union, or best bank account. You need to look at the totality of the bank’s services, accounts, and fees. Every bank offers several accounts with different features and different fees. Some banks may have low overdraft fees, but high fees in other areas. Some accounts waive all fees if you maintain a minimum balance. Other accounts have a monthly fee, but no fee on each transaction. Other accounts have no monthly fee, but a fee for each transaction.

Some banks have a large number of ATMs which you can use without a charge. Other banks have a charge for ATMs.

I suggest that you visit several banks. Find out the features and charges of each of their accounts. Find out how many ATMs are available, and whether there is a service charge for using the ATM.

Make sure you get everything in writing. Do not accept anything the customer service person tells you verbally.

Question: What personal finance software is available for Mac?
I use a Mac at home and want to use a software to track my investments and personal spending. I do not want anything complicated.

Answer: iBank, Moneydance and Quicken for Mac all track investments and personal spending. There’s a new version of Moneydance 2010 which has just come out. iBank actually seems quite popular with Mac users

Question: What is a good alternative to microsoft money for managing personal finances?

Answer: Exactly, MS Excel – or any alternative to it – is more than enough for personal finances. If you want a ready software with templates for everything, then use a specialized personal finances management software, if you have some time available, and a bit of knowledge of Excel, you can setup a great template for personal finances management for yourself, without all those things that you don’t need in specialized programs.

Another software that is similar to Microsoft Money is Quicken. You can also use an online program like mint.com (which is free) to track your expenses.

Question: What personal finance lesson do you wish you had been taught by your parents or in school?
Personal finance was slightly taught to me by my parents or in school. I had to learn how to balance a checkbook, the dangers of credit cards and about saving all on my own.

Answer: I wish I could teach the world:
1. Don’t ever carry credit card balances; it ruins your credit
2. Don’t even think of leasing a car
3. Don’t ever rent furniture
4. Don’t ever buy a time share
5. Don’t even think of financing furniture; save up for things
6. Save to buy a car, as much as possible
7. Put 20% down on a house; even if you think your friends will make fun of you for having a small house
8. Put money away in a RRSP or savings investment; as much as possible
9. Become as self-insured as possible; stop making insurance companies rich
10. Always have 6 months worth of living expenses socked away

A Template For Your Financial Executive Checkup

Thursday, February 11th, 2010

Your life can suddenly turn into a rat race. However, you have already found the art of allocating your time among all the things that you have to manage on a day to day basis. You are able to manage your career, provide the needs of your family, attend to home repairs and deliver on a lot of other things which are expected of you. How about your finances? When was the last time you had evaluated and assessed your financial position?

It is important for you to learn the basics of financial management. You have to develop a keen understanding of the ways by which you can effectively handle your finances. This means that you must learn about net worth, cash flow, debt, credit scores, insurance and cash reserves.

Assess your Cash Flow

Using a spreadsheet or other financial management software, prepare a list of all sources of income and their respective amounts. Create another column where you will put the list of all your expenses. Include in this column your retirement contributions and automatic savings. Compare the two columns. The difference must always be on the positive range. If you are getting a negative amount, then this means that you are spending beyond your means. You have to get rid of the excess fat in your finances by reducing your expenses. You also have to look for ways by which you can increase the amount on the income column.

Assess Your Net Worth

Your net worth is a measure of your personal wealth. This gives you the “macro” view of financial health condition. There are 3 ways by which you can improve your net worth. You can increase your assets, reduce your debts and you can do both options simultaneously. Your net worth can be derived by subtracting your liabilities from your assets. You can use your net worth to determine whether you are meeting your financial goals or not.

Check Your Cash Reserves

The state of your liquidity is also a good measure of your financial health. Your cash reserve should be enough to cover your financial requirements under a worst case scenario. It is not enough that you have an existing credit line. A sufficient cash reserve is essential especially if your cash flow is limited or almost zilch.

For instance, you must have sufficient cash reserve in the event that you get separated from your present job. The amount must be enough to cover your expenses until you receive your employment insurance.

Check Your Credit Score

Develop the habit of regularly checking your credit score and credit report. You have to make sure that all the information that are reflected in your credit report are accurate and with basis. Make sure that errors are immediately rectified as this can seriously impact on your credit standing.

Check Your Insurance Portfolio

Your insurance is probably the most neglected item in your personal finance portfolio. You must be able to understand the importance of having the appropriate insurance policy that will protect your family from financial ruin in the event that something happens to you. It is important that your family can survive if your source of income is suddenly cut off as a result of disability or death.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings

Personal Finances FAQ:

Question: From Canada, took out personal loan from finance company.
Applied over the internet, was called & informed of much different terms/payment info. Signed under duress. Is there a cooling off period allowed to cancel contract?

Answer: Generally if a contract for goods and services is signed in your residence, there is a cooling off period of 48-72 hours depending on the province. But if you signed it on their premises you’re SOL. However, there could be different terms for certain contracts. For instance, I believe if you are approved for a bank loan, the contract only becomes enforceable when you actually withdraw the money from your account. Also there may be special rules in the case where the borrower and lender do not actually meet. Call your provincial Ministry of Consumer and Commercial Relations.

Question: What are some tips to save money and what is the best type of account to open for savings in Canada?
I am single in my early thirties, and I only have $1500 in savings right now. I am trying to rebuild my finances after a devastating personal and financial loss.

Answer: The Canadian government has implemented a “Tax Free Savings Account”. It lets you save money and you don’t have to pay tax on any gains you make from interest, etc in the account. You can contribute up to $5,000 per year. Ask at your bank how to open one.

Question: Which checking account type would you choose and why?
What is one thing you might do to make sure you use an ATM responsibly? Why might someone choose a checking account that had a fee associated with it?

Answer: I personally use two types of accounts. One with a fee because it allows me the privilege of going into the bank and talking to someone. It’s the account that also allows me to get money orders, drafts, etc.

The other account is a no-fee account but I don’t get any of those perks. It’s mostly only online and telephone banking. Cheques are free though.

Make sure you hide your pin when using an ATM, as well as use your branches ATM’s to avoid fees of convenience ATMs in malls and such.

Question: Can someone explain to me how municipal bonds work?
I recently took a personal finance class in school and I think I’m misinformed about this. I know municipal bonds have no taxes. I was taught that for example, if you put out 10,000 with 4%, you get 4% interest every year until maturity but that’s a lot, and it makes no sense. I think that percent might be given over the whole maturity of the bond? But then the coupon which I think is like dividend or payment to you every year? I’m confused.

Answer: The only thing that is tax free is the interest payments, and there are exceptions to that rule. Most states have a personal income tax. The interest payments from Muni bonds issued in another state may be taxable. It depends on the individual state. However if you live in a state with an income tax, income from bonds issued in your own state are usually not taxable. Again, there are exceptions.

Generally, Bonds pay periodic interest payments, usually twice a year. These are known as the “coupon” payments. When a bond is issued, the coupon rate is determined based on various factors and once set, it never changes. Also, the overwhelming majority of bonds issued in the USA have a “Par” value of $1,000.00 and that coupon rate is based on that one thousand dollar par. So if you “put out” or purchased ten thousand dollars you would be buying 10 individual $1000 face value bonds that are paying (in your example) a 4% coupon. That amounts to $40.00 per year divided into two equal payments of $20 made 6 months apart. If you had ten of them, you would get $400 per year.

A bond with a 4% coupon pays 4% on an annual basis. It pays 4% every year until the maturity date at which point it is redeemed by the issuer and the holder gets $1000.00 back for each bond he owns. The coupon is an interest payment. Dividends are different. Stocks pay dividends. Bonds pay interest.

Question: Why is it bad to discuss personal finances with colleagues?
And anybody else besides close family and friends?

Answer: Well, with colleagues it becomes an ethical issue at work. People each have their own rights to privacy, and a lot of fights get started at work over who is getting paid more than who.

With other people in general, its a very touchy subject. I have found that people who have money come off like they are bragging. Other people have less money and they don’t want you to feel sorry or have pity on them. And surprisingly the amount of money you have can have a large impact on what others think about you, and some people just don’t want to get into that kind of drama.

Question: Need a spread sheet for personal finances. How and where do I start?

Answer: Mint.com is a very good website for personal financial management. It can detect what money is spent on your debit/credit cards and show you graphs about spending. Quicken Online is also very good or just make it yourself in Excel/Open Office. It’s actually brutally easy.

Question: What’s the difference between online personal finance software and desktop personal finance software?

Answer: Desktop software is something you install on your local hard drive.

On-line software is something you ACCESS through a web browser. It MIGHT download temporary applets to run on your computer, but those get deleted when you exit the program.

Online financial software actually has many advantages over desktop software. But, if storing your data on an online provider’s server makes you nervous, then desktop is the way to go as long as you take the appropriate measures to secure your data (back up, anti-virus and firewall software).

Question: Most important personal finance number – personal net worth or credit score?

Answer: Net Worth. Credit score is useful when you want to borrow money, but a person with a great credit score can buy lots of stuff he can’t afford. With a high net worth you can liquidate assets and buy what you like. However, a good credit score is more important when borrowing money.