Quick Budget

If you’ve never had to budget before it can sometimes seem like an overwhelming task. There are all kinds of elaborate methods to create very exact budgets that track everything. For most of us, this is probably overkill and prevents us from getting to the task of actually saving money. To get started today you can do something very simple. Take all of your absolute necessary expenses. We’ll call these our fixed expenses. These are the things that we can’t stop paying without making some major life changes.

Examples, include

Mortgage $1,000
Babysitting $500
Utilities $250

The next step is to list out your monthly income

Salary $3,000
Spouse Salary $2,000

Next you will need to think about how much you would like to save. You’ll need a cash buffer and to save for retirement. You may want to think about other goals such as your next car and whether or not you will save for your kids college education. This is the whole idea of pay yourself first. It represents a way to make sure you put your savings goal first.

The difference is then the amount you can spend on all the other things.
Obviously, you need to think about groceries, gas and everything else that you need day to day. I purposefully lump all of these items into one big general fund. Because they involve a large range of trade offs that you will need to think about. This is the opportunity to get creative.

You can think about what you truly value and use to make your life fulfilling. Personally, there is no way I could actually live without Internet access, but I could live without my NetFlix account. To save on gas I started carpooling and got a special fuel perks card. If I really want some purchase that I can’t afford perhaps I’ll find some coupons or cut back in other spots.

A great one we have started is cooking with our kids. We save money by not going out and our kids really enjoy it. I’m sure you can think of similar examples to help you cut back spending, but still enjoy life.

A Case for Cash

I’ve heard financial planning experts talk about cutting up credit cards and telling people to use a cash based system to manage their finances. I’ve typically thought didn’t apply to me. I always paid off my balance every month and had an excellent credit score. Recently, I wanted to tighten down how much my family spends on various purchases. We’ve always used credit cards for every day purchases, but the credit card bill tended to fluctuate every month based on the families desires. I’ve tried various mechanisms for tracking. I’ve said that we’re only going to spend X dollars a day etc. It seems there was always some special 1 time event or purchase that ended up on the card.

The problem is that the mental accounting the family had to do to stay on track just wasn’t working. Instead we switched to a complete cash based system. Each family member was given an envelope with a certain amount of cash for everything. If my wife finds bargains at the grocery store she can have a little extra the next time she goes to the beauty salon. If she decides she has to have that certain something at the grocery store and doesn’t have enough money for the salon then she will just have to live with a few of the grey hairs a little longer before her next color treatment.

After using the system for a month it has worked well for us and allowed us to stay on budget.

30 Year Fixed Hovers around 5%

If you don’t currently own your the place you live in you may be missing out on one of the greatest opportunities in your life. Most of us are well aware that it is a buyers market and that homes are being sold dirt cheap. The other opportunity is the incredibly low prices on 30 year fixed mortgages. The last time they were even close was March of 2004 at 5.45%. If you look at the charts since 1971 this has rarely happenned and could truly be a once in a lifetime opportunity to have a low monthly payment on a loan. Even if you already have a home loan your payback period to refinance could be less than 2 years. The reason for that is you typically have to pay some fees to refinance your home. Let’s say you save $100 a month in mortgage payments by refinancing, but the fee is $2,400. Even with the lower payment it will take you 2 years to make up for the difference. If you plan on staying in your current home for more than 2 years it should certainly be considered. Over the next 30 years you would save $36,000.

$100 Homes

Last night 20/20 featured an interesting segment on homes in foreclosure. They interviewed some urban pioneers in Michigan who are rebuilding an entire neighborhood one house at a time. The homes sold for $100-$500. They were in terrible shape. Most of them were either burned and partially destroyed. While it will probably take 10’s of thousands to repair them and the area is awful the pioneers were doing something very interesting. They were building a community. Instead of trying to go it alone they found other people that wanted to renovate this area. One by one they began attracting friends and family to come join them in their quest to rebuild this area.

I have no doubt that in ten years this will be some cool, hip part of Detroit that everyone wants to visit. An interesting example of creativity during a tough patch in our economy.

Break up with Your Money

By Dr. Bonnie Eaker Weil

As we face an economic downturn unlike most of us have ever seen, what I call “breaking up” with your money can be an important step for your financial well-being, for your relationship, and for your sanity. We never know what the future may hold – things may start to get a lot better, or they may get worse – but creating healthy relationships with your finances and budget is something that will pay off no matter what type of financial situation we face as a nation or you face as an individual or couple.

The first step is to realize the areas in your relationship where money has “intruded” to create what i call a triangle. I discuss these areas in more detail in my book, Financial Infidelity, but here are some possible triangles, and how you can break up these patterns!

1. Family/Money/Relationship: Family legacies of money behaviors are not always contained in our subconscious minds – they can be very real! Demands of extended family members for financial support can be one way in which money can encroach and put a strain on a couples finances AND on their relationship.
2. Children/Money/Relationship: Nearly 70% of couples experience relationship stress after having kids. When a couple becomes contentious over spending on their children, the couple’s relationship can suffer – as can the family’s relationship.
3. Spending (or saving)/Money/Relationship: This can be a case of “opposites attract” in the extreme: the relationship then becomes at risk for damaging power struggles, sneaky “pay back,” and other deceit.

Hiding or denying the role money has in your life and in your relationship – as in any of the scenarios above, or other scenarios – has a toxic affect on a relationship. These types of “triangle” behaviors negatively influences your relationship with your partner. You may not think of it as cheating, but if you continue in this type of lop-sided relationship, it will take a toll. Attachment to your money can often ruin chances for you and your partner to build an intimate relationship.

Learning to prioritize the role of money in your relationship is an important step toward a healthy dynamic between your, your partner, and your money. I’ve come up with several ways to do this - here is one such exercise:

Withdrawals and Deposits:

Day 1: pretend you have suddenly been forced into bankruptcy. You are poor and have nothing – no money, no investments. Take your negative fantasies into the extreme – imagine yourself selling everything you have, being free of all your material goods.

Day 2: Visualize yourself with plenty of money, and all that entails. You are comfortable and able to do the things that are truly important to you.

Day 3 – and forever after: be consciously grateful. Each day, count the things you are grateful for.

Dr. Bonnie Eaker Weil (http://bonnieblog.significantauthors.com/) has been an internationally acclaimed relationship therapist for thirty years. New York magazine named her one of the city’s top therapists and Psychology Today named her one of America’s best therapists. Her most recent book, Financial Infidelity, is available on Amazon: http://www.amazon.com/Financial-Infidelity-Conquering-Relationship-Wrecker/dp/1594630453/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1217873178&sr=8-1

Watch her appearance on Jen and Barb Mom Life (JenandBarbMomLife.com), starting on March 5th, as she talks about issues affecting families and couples today. Join her Facebook group to keep up with events: http://www.facebook.com/group.php?gid=69563300615&ref=mf&nectar_impid=a328a6e23a72d33f318c4c51e1e44260&nectar_navimpid=a328a6e23a72d33f318c4c51e1e44260

Money Market Accounts - Safety and Liquidity

How old are you in credit years?

I came across this fun credit quiz that will tell you your credit age. It takes about 2 minutes to take the quiz. At the end you will get your credit age and a description of your credit self.

Oh, and by the way my credit age was also 47. In this case I am assuming that older is better, but I’m not really sure. I had my cousin take the quiz and she failed miserably. I think that explains a lot. This is the same woman who collects tons of longaberger baskets and complains about not having any money. Hmm, I don’t know what could be the problem.

Anyway, here is the link to the quiz Credit Quiz. Don’t forget to tell everyone how you did.

How Living Cheap, Looking Rich Can Help Your Personal Finance and Career in Recession

Living below your means doesn’t seem a desirable decision to survive today’s recession.

There are better ways, and although living below your means are the next logical step when you are in financial strain, your sense of achievement must be maintained.

Why is that?

In order to keep yourself on track in navigating through the economic storm, you need to stay focus. Staying focus can be achieved through the fulfillment of your need for achievement - and living below your mean is not the way to fulfill yours.

Live cheap, look rich

Living cheap is not living below your means. Living cheap means living within a closely controlled budget to achieve the living standard that anybody else has on a higher budget.

The main idea of living cheap, looking rich is to aim to get the best deal in every way, including clothing, entertainment, etc. in such a way that nobody would know that you spend less for the look you have right now.

‘Look’ here is not only clothing, accessories, or any other apparel and fashion related products - ‘look’ is your lifestyle, in a standard that can’t be achieved by living below your means.

‘Look’ is going to Starbucks occasionally, and socialise with your friends and colleagues. ‘Look’ is how people perceive of you, no matter you achieve ‘it’ by bootstrapping. You shouldn’t overdo them, though.

The key in living cheap is total control of your budget.

Why living cheap, looking rich is smart

We live in a society that value physical appearance, lifestyle and charisma. Enhancing yours will actually help you land better job, secure more business, or socialise with more people (which can present you with more opportunities) - all in all will affect your bottom line: your personal finance, in a positive way.

You deal with people, and most of them don’t really care how much you make - what they care is what they see, and how they preceive of you. For example, in a meeting with business prospect, you need a professional look that commands confidence, charisma, and trustworthy. You don’t want to meet your future client in your t-shirt, don’t you.

How to live cheap, look rich

There are ways you can consider to live cheap but look rich:

• If you are into fashion and business as well, purchase your clothing needs with a wholesaler. While hard to find, wholesale clothes can save you a lot of money. The problem is, they usually only allow you to buy in bulk (usually in half-dozen or dozen).
• Alternatively, you can shop in consignment and/or discount stores.
• Shop for everything on the web - groceries, clothing, accessories, electronics, travel deals, etc. You can always receive a lower price for the same item you want.
• Attend charity events and/or be volunteer. Charity events - the large one - are where socialites and celebrities. Attending the events, as an attendee or a volunteer will help you raise your profile.
• Purchase used car - no body is really care how much you pay for the car, as long as its condition is top-notch.

Remember, don’t live below your means - Live cheap, look rich. That is good for your economics and, in effect, your personal finance endeavour.

Image by net_efekt.

How to Improve Your Sense of Security in Uncertain Economy

People are often being overly reactive when it goes to bad situations.

The recession itself is happening largely due to global public reaction toward financial crisis, that is more often than not, doesn’t actually affect them directly whatsoever.

Negative outlook on financial issues cost the community lost productivity, thus worsening the effect of the financial crisis.

As a major part of your community, you, in whatever way possible, need to feel secure about your financial stature.

Why? Because if you feel secure about your financials and your life in general, you will be able to affect the community surrounding you.

Sense of security

Improving personal sense of security has never been this important in the past decades.

Sense of security is driven by facts and assumptions. The more you assume, the more insecure you will be. The more you identify facts, the more secure you will be.

Sense of security = know more facts and less assumptions.

Assumptions can be ‘altered’ into and identified as facts - no matter they are right or wrong - if you increase your knowledge through learning from reliable sources.

Facts also related to control. If you want to feel secure, you need to gain (and regain) more control on your life based on a set or series of facts.

Financial sense of security

In term of finance, assumptions leave you unguarded.

For example, consider these statements: “Stock A will go up in 10 minutes.” “Real estate B will increase in value.” etc.

The problem in the above example, is due to the fact that nobody can guarantee the above statement. Any guarantees on such would be classified as misleading, even illegal.

On the other hands, facts can secure your personal finance and help you see things from the right perspective.

For example, consider these statements: “I’m getting a 10% rate of return on my investment.” “The foreclosure houses I bought make me $150 positive cashflow per month.”

Warren Buffet, the maestro of investment, do all of his investment based on intrinsic value - the facts - not based on the floating stock value on stock exchanges - the assumptions.

Again, it is all about control. “Sure things” improve control, hence reducing investment risks.

How to improve your financial sense of security these days

You need to get more facts about personal finance. You will eventually find out that there is a certain consensus between personal finance experts about some of the best practices in managing your finances.

Such knowledge you acquire should be enhanced with tools that can help you with a more exact (and measurable) facts. For example, the use of Savings Calculator to learn how much you would receive within a period of time can provide you with a measurable fact that allow you to decide what’s best for your personal finance - finding savings account that yield you more, finding new investment that can increase the speed of your money, and so on.

Nevertheless, your diligence in increasing your financial knowledge will determine how secure you feel about your personal finance, and how well you cope (and thrive) in today’s economic crisis.

Image by bragadocchio.

New Year, New Hope: Plan Your Finance to Yield the Best Return

Forget what some people said about how bleak the year 2009 is. The truth is, all we need right now is financial planning.

The premise - plan your finance well, and it will deliver you from financial woes that hit many who unprepared in 2007 and 2008.

The significance of financial planning in 2009

Financial planning has always been important.

Unfortunately, not all people believe the fact, until they were hit by financial problems. ‘Thanks’ to recession, the financial problems are magnified - due to the recession, financial planning has never been this important in the history of the mankind!

Particularly in 2009, financial planning is probably your most important task to do, either for your business finances or personal finances.

Creating a form of safety net or save haven for your money and finance will not only help you survive the recession, but also triumph over it.

Even better, you need to find a way to utilise all financial knowledge and tools you have to yield the best return for every penny or cent you have.

Here’s several plan ‘items’ you should consider thinking about.

Plan #1: Saving and deposit account - forget about it! Says hello to precious metals

As we know, banking and financial institutions are one of the hardest hit in today’s recession. In the US, the Fed squeezes record-amount of fund to keep those institutions afloat. Why? One of their fear: People rush to close their accounts.

However, in my opinion, that’s what you suppose to do - forget your saving and deposit account.

I’m not suggesting you to close your saving and deposit accounts - they are important parts in diversification. What I’m suggesting you is NOT to put too much money in them.

With the rising inflation in every part of the world, your saving and deposit accounts interest rates are becoming more and more insignificant.

You need to get back to what all the money in the world should base upon - gold and the other precious metals. Although the price of the metals are sky high, they are one of the safest investment forms today.

Plan #2: Utilise your credit cards better

Unlike most financial planners suggest, I suggest you not to cut your credit cards.

Instead, I recommend you to consolidate your credit cards - transfer your existing credit cards to lower APR ones or to credit card issuers that offer the most perks and rewards.

How to know which ones you should transfer balance to or apply for, invest some time to browse the Net for reviews and recommendations on credit cards issuer. Credit card sites, such as CreditCardFlyers.com, offer alternatives you can consider, including which credit cards are good for what purposes.

My favourite credit cards story is that of my colleague’s - he shop for his business needs with his business credit cards. With tens of thousands dollar month after month business spending made on his credit cards, he is enabled to vacationing regularly and staying in luxury hotels, courtesy of his business credit card issuers - a win-win situation for credit card issuers and holders.

Plan #3: Cut bad debts, utilise good debts

When I say ‘utilise your credit card better’ in plan #2 above, I think credit cards as your ‘bridging’ in your financial planning. That being said, avoid using credit cards for loan purposes, as the interest rates are high.

Instead, cut any debts related to credit cards. In fact, cut any debts that are aimed to people with low credit scores, such as payday loan. Not that payday loan is not useful - it does in certain circumstances - but you should consider a lower interest loans that brings positive cash flow to your pocket.

Happy holiday and happy planning!

You need a break somehow, and be prepared for the coming 2009. Remember the butterfly effect I mentioned in my previous articles - what you do and think about your finances will affect your community - being positive is contagious, and it will eventually end the recession somehow.

I wish you have a happy holiday and happy planning!

Image by Zach Alexander.

Don’t Live Cheap - Live Smart

The credit crunch and global economic crisis push many people to live cheap and below their mean. Although sometimes doing so is not a choice, in most cases, people do actually have choice.

Why people tend to life cheap?

One of the most common routes people take to tackle any negative financial issues is live cheap. This is a simple human behaviour. People tend to act cautiously, often in paranoid-like ways, whenever they hear negative issues, especially those that involve money.

As you might already know, the fall or stock markets worldwide is mainly caused by negative sentiment and outlook on the economy. This is a strong indicator that people these days are more sensitive to any movements in the economy, in a negative way - they are tend to be overreacted to negative news, and overly cautious to positive news.

Why live cheap is not a good idea

Living cheap might hurt your ego and drown you in negativity even more. People do need a form of achievement in their life, and these days, maintaining their lifestyle is arguably the best achievement of all.

Living cheap might also worsen your state of personal finance. For example, if you ’skimp’ on your daily meal, you might get sick - you and I know that getting sick these days is the least thing you want to have.

Ultimately, you have to stay healthy and pumped up to face the current money problems and issues.

Ways to live smart, not cheap

There are actually ways to live smart, not cheap today.

Smart shopping

Retails hit hard in recession today. The logical action? They do prolong promotional campaigns and release coupon codes to keep consumers ‘near’.

You can easily access Money-saving Codes from many sites on the Net, that allows you to shop online and off line for less.

With the high season of Christmas nearing, you can expect more promo and discounts from retailers. Again, you can access Christmas Sale News from the Net to learn what kind of perks you can have from your favourite retailers.

Smart traveling

With the rise of gas prices, traveling costs you considerable amount of money. You can invest in a scooter that consumes extremely less gallon per mile than any other motorised vehicles. If you also want to better your health, you should consider bicycle.

Related to smart shopping, not only promo codes, many retailers online can have your purchased items and goods to be delivered to the comfort of your home. This service will dramatically cut your traveling cost.

Smart living

In everything you do to survive today’s recession, I suggest you to keep this words in mind:

Your health is your money.

Living cheap and in constant insecurity will eventually bring your health and morale down. They will definitely affect your personal finance, either now or later. So, take any benefits of today’s situation to maintain your physical and emotional welfare.

Image by timparkinson.

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