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Frugality And Investing: 2 Keys To Financial Independence

woman chained to a dollar signWill financial independence translate into financial success? If you can achieve the former, will you automatically be the latter? That depends on your perception of what it really means to be successful financially.

We all want to be a financial success. Regardless where you came from or how much you are earning every month, we all strive to measure high in the wealth meter. That is how the consumerist society defines success. We need to have a high amount in our bank account. That is what we try to achieve as we go to work day in and day out.

While there is nothing wrong with the pursuit of wealth, you have to make sure that you know its role in your life. Having a big amount in your bank account is not the answer because you have to match it with a couple of habits to. This is why instead of focusing on building up your wealth, you need to concentrate on achieving independence.

But before you take the first step towards financial independence, you need to ensure that you understand what it is all about first.

What does it take to be financially independent?

You need to understand the real meaning of being free from financial dependence before you can hope to have it. An article published on Forbes.com discussed the results of a Capital One survey that revealed what consumers think about being financially independent.

According to the article, 44% of Americans believe that it is when you do not have any debt. 26% said that it is when you have enough money in your emergency fund. 10% said that it is when you are financially able to pursue an early retirement.

Of all these definitions, only the early retirement got it right. You can be debt free and yet still be financially dependent. You can also have an emergency fund and still you are not financially independent.

When you want to financial freedom, that simply means you do not have to work to support daily needs. It implies that you money is already sufficient for your lifestyle and that eliminates the need to work just like everyone else does. In case you are working, it is simply to occupy time and not out of real necessity.

We all love that definition but you have to be careful that it does not indicate that you have amassed huge amounts of wealth. According to Wikipedia.org, there is more to being independent financially than just the amount of money that you have amassed.

Your assets should be generating income.

This financial status involves having your assets generate enough income that is beyond your expenses. It does not necessarily mean that you have millions in your account. The key to this is you make your money work. You do not just put it aside and save it. You have to make sure that it is placed in a basket where it will make you more money – even if you do not lift a finger.

You assets are not weighed down by liabilities.

You can say that you have a house, two cars and even a yacht. You think that makes you financially independent? It makes yo flashy, but it does not make you independent. If all of these assets are bought through credit and they are not yet paid, you cannot fully consider them as a part of your wealth. And unless your home is being used for rental or your cars are used to generate income, you are a bit far behind when it comes to financial independence.

How does frugality and investing help with being independent financially

Trying to free yourself from your dependence on money is only as complicated as your willingness to change your habits. There are two important financial concepts that you need to learn to help you achieve this financial situation: frugality and investing. We will discuss below why we think this is true.

Frugality is when you make smart choices about your money so you will not spend beyond your means while keeping yourself happy.

As the key towards financial independence, frugality encourages you to:

  • Maintain a standard of living that makes you happy. A popular misconception about being frugal is you will feel restricted. This is not about deprivation. In fact, if you do this correctly, you can find abundance despite your frugal lifestyle. Remove the notion that being frugal will make you miserable because that is really what you will get. But if you think that it will free you from the unnecessary expenses, then that is the lifestyle that you will have.
  • Pursue a higher level of satisfaction without breaking the bank. Since you are free from the unnecessary expenses, you get to enjoy what you love to do without breaking the bank. This is the most important part about being frugal. You have to live below your means. Not doing so will defeat the purpose of frugality and will keep you from financial independence.
  • Seek out alternatives. To maintain your fun activities while sticking to your budget, you will learn how to look for alternatives that will allow you to enjoy the usual activities without spending as much as you used to. With a frugal lifestyle, you will become more creative a resourceful.
  • Spend according to your needs and not affordability. It is very important that you learn how you can spend only based on what you need and not how much you are earning. That is how we lose out regardless of our income. When you are quick to upgrade your lifestyle with your income, that is how you will end up earning a 6 figure income and still lack financial independence. According to an article published on MrMoneyMustache.com, the only way that you can get rich is to spend much less than what you earn.

If you do not know who Mr. Money Mustache is, he and his wife were able to retire at the age of 30 even with a kid at home. They did that by being financially independent. And if you look ever their blog, you will see two important things that they preach to their readers. Frugality and investing is the key to achieve financial independence.

Now that we have discussed frugality, let us learn how investing can help you be more independent of the need to work for money.

As a key to financial freedom, investing helps you:

  • Put your money to work. In the Wikipedia definition, it is mentioned that your assets should be generating income for you. It can be in the form of a rental place that will give you a monthly income through the lease. Or it can be through stocks, bond and other forms of investments.
  • Grow your wealth exponentially. Investing is the best way to grow your personal wealth. The great thing about it is you get to earn even while you sleep. By having your basic necessities taken cared of without the need for you to work, you are free to pursue other activities. It can be to pursue a hobby that you can also capitalize on. That will help you grow your actual wealth. Or can be to enrich your life and relationships – which is far more valuable than what money can buy.
  • Gain freedom from having your schedule dictated for you. When you work in a corporation, your life is dictated by your work schedule. When you have financial independence, you do not have to be bound by that. Since your assets are working for you, it eliminates the need to go to the office just so you have the money to pay for your daily needs.

With frugality and investing working hand in hand, you are sure to find financial independence. You see, frugality will help you keep your spending to a minimum while investing will allow you to earn money without lifting a finger. That is the combination that you need to be completely free from financial concerns.

Reasons Why You Do Not Feel Any Financial Improvement

man shoutingAre you still wondering how to improve your finances? Despite the news coming from the government that the economy is getting better, some people are wondering why they are not feeling it. Their financial improvement has yet to be experienced and a lot of them are wondering if the economic news is real or not.

Even if 2013 was a bad year or so-so year for you, let go of the past and just keep moving forward. Of course, you want to make sure that you learn the reasons why you are not keeping pace with the economic growth of the country. It helps to know so you can create a plan that will eliminate the mistakes that you made in the past.

How did the economy improve in 2013?

But before we can look at your personal finances, let us check how the economy performed in 2013. This will help you gauge just how far you have fallen behind in terms of your personal financial improvement.

One of the best indicators of an improving economy is displayed in the employment conditions of the country. Based on the information taken from the Bureau of Labor Statistics (BLS.gov), the unemployment rate in the country is steadily improving. Here are the data to prove this: (average unemployment rate per year)

  • 2007: 4.6%

  • 2008: 5.8%

  • 2009: 9.2%

  • 2010: 9.6%

  • 2011: 8.9%

  • 2012: 8.0%

  • 2013: 7.3%

Although the unemployment rate has yet to reach the pre-recession level, it has steadily improved since it reached the peak in 2010. Hopefully, this will continue to improve so more and more people will get their jobs back – or be employed for the first time.

In terms of the average hourly earnings, the BLS.gov reports a steady increase even as the unemployment rate had been rising. There were months when it was going down but on an annual average, the statistics are steadily rising. Here are the data to prove this: (average hourly earning per year)

  • 2007: 20.9

  • 2008: 21.6

  • 2009: 22.2

  • 2010: 22.6

  • 2011: 23.0

  • 2012: 23.5

  • 2013: 23.9

These figures along indicate that the US economy is indeed in a better place than it was before. But how does the consumers feel about it?

A recent poll done by Gallup.com say that various economic indicators prove that the country is indeed on the mend in 2013. It was a good year for financial improvement in the country. The highlights of the report are as follows:

  • Economic Confidence Index: improved from -21 in 2012 to -16 in 2013. Overall, the change is a positive 5.

  • Job Creation Index: improved from 18 in 2012 to 20 in 2013. This accounted for a positive 2 change.

  • Average consumer spending: improved from $72 in 2012 to $88 in 2013. This accounted for a positive $16 improvement.

The same site also reports that in January 2014, the economic confidence went even higher at -14. This is a good sign of further growth for the economy. The question is, are you feeling all of these financial good news?

Reasons why you may not be improving financially

If the answer is no, then we need to start searching for the reasons why it is so. While the economic growth and recovery may not give you an immediate financial improvement it should at least provide you with some level of relief. In most cases, the reasons for your continues financial slump might be your own doing. Remember how the bad spending habits in the past got you into trouble? You never realized it until it was too late. If you do not check yourself right now, you might be losing out on the financial opportunities that are cropping up because of the economic growth in the country.

Here are some areas that you may want to look into.

  • Budget plan. Start with your budget plan. If you do not have one, that is probably one reason why you are not feeling any change in your financial situation. This plan is one of the most basic tools that you will need to improve your money management skills. Create one if you have not yet started on the habit. If you already have one, check if it is still aligned with your goals. Budgets need revision every now and then as our needs change.

  • Credit balance. One of the clear signs that you are not improving is when your debt continues to pile up. When it is decreasing, then you are on the right path. If not, then this is another reason why you are not feeling any financial improvement.

  • Spending habits. Ask yourself: are you living within your means or have you been failing your budget? If your answer is no, then this means you are still incurring debt and that will not improve your finances in any way. If you are living within your means, you need to step it up. You need to start living below your means. That will free up some money to improve your financial stability.

  • Savings account. If your savings are not increasing, then your financial security may be in danger. If you have no savings at all, then you are in trouble. One emergency situation is all it takes to ruin your financial life. Do not let this happen. Grow your emergency fund and continuously contribute to your retirement fund.

  • Investments. Lastly, how are your investments? This is the most proactive thing that you can do to reach a significant financial improvement this year. Learn how to invest and put your money where it will go. Your savings account will not be enough to keep up with the average inflation rate. Only investments can make this happen.

What to do to improve your finances this year

Obviously, if you really want to improve your finances in 2014, you have to stop making excuses for yourself. Here are the three common excuses that people usually make that hinder their financial growth.

  • I do not know how to invest. This is a lame excuse. There are so many articles, guides and informative materials online that you can use to help you learn how to invest. You will never learn if you do not read about them. Also, experience is the best teacher. You will never learn how to invest if you do not try it.

  • I have too much expenses to have enough to save. This may seem like a valid excuse but if you think about it, there are ways for you to try and lower your expenses to make room for saving. Even if it is just a small amount, you should still save it. Soon, that will grow.

  • I am earning too little to invest. This is another poor excuse. Investing will help you earn on the side. Sacrifice some of your expenses for a couple of months so you can use the money to invest.

Financial improvement will take time and effort on your part. If the economy is improving and your personal finances are not, then that is a clear sign that something has to change with the way that you are managing your money. Stop making excuses for the mistakes in the past. It is time to move on to pick up the pieces of your financial life. Just make sure that you will implement the right financial habits from now on.

7 Important Financial Lessons You Could Learn From A TV Program

Debt Relief Options For Different Financial SituationsWe watched all five years of a television program that has already become a legend. It was one of the most intense shows we’ve ever seen. The program? Breaking Bad.

Word of warning – if you have never seen Breaking Bad, it’s very intense and watching it isn’t a happy experience. The protagonist, Walter White, is first seen as a mild-mannered high school chemistry teacher. But then year after year he descends further and further into madness as he becomes more and more of a master criminal.

Despite this, we found there were some important financial lessons that could be learned by watching it. Walter and his meth-cooking sidekick, Jesse, made some awful decisions. But on a lighter note, some of Walter’s choices offer lessons in money management that could be helpful to any normal, law-abiding citizen. The seven that made the biggest impression on us were.

1. Do good estate planning

The reason why Walter began making meth is because he had been diagnosed with cancer and wanted to be able to pay his medical bills and leave enough money for his family that they would be taken care of. However, there are definitely better ways to do estate planning. For example, everyone with a family should have life insurance. You should also make sure that you have enough coverage. You might check into buying an annuity or some other investment vehicle that would provide a consistent stream of payments to your family should the worst happen to you. Of course, you should have an emergency fund, which is something Walter definitely lacked. One we like is to use a Roth IRA because of its tax advantages.

2. Buy good-quality health insurance

For reasons that were never explained, Walt either had no healthcare insurance or went over its cap. In this post-Obamacare world of healthcare insurance, his medical expenses would’ve been capped at $12,700 a year if he had the low-cost “Bronze Plan.” However, an insurer wouldn’t have turned him down because of his pre-existing terminal illness. So even with Obamacare, you need to find coverage that won’t cost you thousands of dollars out-of-pocket. If you get insurance through you employer, make sure you review your coverage closely to ensure you have the proper amount. And you might check out the Gold or Platinum plans under the Affordable Care Act. These have higher premiums but offer more comprehensive coverage.

3. Discuss money with your spouse or partnerStudio shot of a young couple fighting

We were amazed to read this statistic but according to one foundation, 31% of American adults who have combined assets with a partner or spouse admit they have tried to conceal the truth about their finances. Even worse, nearly 60% of them said they had hidden cash from their partner or spouse. Since Walter’s wife knew about his “business,” she was able to help him. But if you try to hide financial truths from your partner or spouse, this can cause you to make bad choices. It’s always better when everyone fully understands the family’s finances.

Do you find it difficult to discuss finances with your spouse or partner? If so, here’s a video that could help.

4. Don’t let your money just sit around

Because Walter’s money was obtained illegally, he was unable to invest it. Instead, he had to hide it behind walls, under floors and even underground. The lesson to be learned here is don’t follow the “hide your money under the mattress” philosophy. It’s not possible to earn very much of a return with a savings account or money market account these days but there are safe investments that do provide a decent return such as bonds and index funds.

5. Don’t get greedy

Walter’s biggest mistake was that he kept cooking and distributing meth to the point where he had more money than he would ever need in 100 years. He continued to take big risks even though he didn’t need to. The lesson to be learned here is don’t be greedy and go after the highest return on your investments. Take a more conservative approach and work to protect what you have. This is especially true if you’re nearing the age of retirement.

6. Don’t buy flashy stuff – especially for your children

Even though Walter was trying to keep a low profile he broke down at one point and purchased a flashy sports car for his son. This not only put him at risk for being caught by the DEA but it didn’t give him the opportunity to teach his son about good money management. If you have a child who is about to reach that magic age of 16, don’t do like Walter and buy him or her something flashy and expensive. Instead, take your kid to the car dealer and help him or her learn how cars are priced and marketed. You might let your child help you negotiate the best price on what would be a sensible purchase – a small, fuel-efficient SUV or sedan.

7. Don’t be scared to ask for help

When Walter got into a pickle he would call either his lawyer Saul (Better Call Saul), or his henchman, Mike. In fact, without Saul’s help Walt and Jesse probably wouldn’t have lasted past season three. It just never hurts to consult with experts if you feel you’re into a situation over your head. For example, if you’re uncertain about the best way is to invest your money, find a good financial advisor. He or she will definitely charge for the advice you’re giving but this could be well worth the money. The same is true of home and auto repairs. If you run into a situation where you’re not certain you know what to do, call in an expert.

Where To Put Your Investments Short Term

How To Convince The Whole Family To SaveToday’s interest rates on short-term investments like savings accounts, CD (certificates of deposit) and money markets remain stubbornly low. In fact, it’s tough to get more than a 0.80% return on those investments – though they might still be your best bet. However, depending on your savings goals, you may want to get a better ROI (return on investment).

Two basic rules about investments

For  a higher return on your investment, there are two basic rules you need to be aware of. The first is that you will have to tie up your money for a longer period of time. For example, you might be able to earn a better interest rate on a certificate of deposit if you were to buy a 5-year CD vs. a 6-month or one-year CD. As examples of this, Eve Bank offers a 5-year CD with an interest rate of 1.86% and iGOBanking has one with a 2.05% interest rate. Of course, neither of these will set the world afire, plus it’s important to remember that you would be tying up your money for 60 months.

Take more riskier investments

The only other way to get a better return on your investments is to take more of a risk. You could buy bonds, which are considered to be safe because you’re actually loaning money to a company on which it must pay interest. Unfortunately, if interest rates do go up, bonds become a riskier investment – especially for short-term investors.

Mutual funds

Mutual funds can generate a nice ROI but only over the long term. In the short-term, they can be a risky investment because they can go up and down from day-to-day. The fund you buy today at $36 a share might be worth $30 a share next year or $40 a share. It’s just hard knowing. If you’re not familiar with mutual funds, here’s a short video that explains what they are are.

However, in the long term stocks tend to be a good investment. Since World War II stocks have increased an average of 10% per year, which is well above the return you would get on just about any other investment, including real estate.

Take a flyer

As noted above, about the only way to get a better return on your money is to take more of a risk. If you have money you could spare (i.e., treat as a gamble) you could become involved with Forex and speculate on foreign currencies. We have a friend who has purchased millions of dollars worth of Iraqi Dinars with the hope that they will eventually reevaluate upwards and he will make hundreds of thousands of dollars. Of course, this is sheer speculation and it may or may not ever happen.

Other risky investments

If you’re really willing to gamble, here are 10 other risky investments.

  • Lottery tickets
  • Collectibles
  • Previous metals (gold, silver, platinum)
  • Cash value life insurance
  • Timeshares
  • Art
  • An interest bearing checking account
  • Microcap stocks
  • Futures and options
  • Any investment sold as a “sure thing”

Pay down debt

If you are staring at a big lump of debt, the best investment you could make would be to pay it off. You don’t believe us? Just do the math. Let’s say your debts are costing you an average of 19% APR. This means if you owed $20,000 and wanted to pay it off in three years, your monthly payment would be $747 and you would pay $10,880 in total interest. You would pay back a total of $35,880 on that $20,000 of debt. The $10,880 in total interest divided by three years is about $3600 a year. Can you imagine any low risk investment that would return $3600 a year on a $20,000 investment? We certainly can’t.

Paying off debt with a loan

There are a number of ways to pay off debt but some of them are real “foolers.” For example, some forms

How To Make Debt Consolidation Loan Effective

of debt consolidation are not at all ways to pay off debt – short term. For example, a debt consolidation loan might get you debt free but it would likely take 5 to 7 years. Plus, when you take out that loan you will not really reduce your debts. You’re simply transferring them from one set of creditors to a new one. You probably would get a lower interest rate and a lower monthly payment but you’d end up paying more in interest over the life of the loan because of its longer term.

Consumer credit counseling

A second way to become debt free is consumer credit counseling. If you’re not familiar with this, it’s where you go to an agency or company that helps you develop a debt management plan (DMP) for paying off your debts. If you stick with the plan, which is not a given, you might become debt free but it will probably take five years.

Paying off debt via debt settlement

Many American families have turned to debt settlement as a way to become debt-free because it represents the only alternative for getting your debts reduced. And it could help you become debt free in just two to four years. If you are not familiar with debt settlement, it’s where you contract with a company that then negotiates with your lenders to get your balances reduced. In many cases, a good debt settlement company can get debts reduced by as much as 50%. This would cut that hypothetical $20,000 in debts down to $10,000. Plus, you would be presented with a payment plan that you would be required to approve before the company charges you anything for its services. In fact, if you talk with a debt settlement company that requires upfront fees, run a way. It might actually be a scam. In fact, the Federal Trade Commission has filed suit against a number of these companies over the past few years for that reason as it illegal to charge upfront fees before settling a person’s debts.

5 Money Principles from MyMoney.gov (Part 1)

MyMoney.gov is a website created by the US federal government to help American consumers get the proper financial education that will keep them from making major money-related mistakes. This is one of the resource sites that you can go to if you want to take more active steps in putting your finances in order.

5 Money Principles from MyMoney.gov (Part 1)While exploring the site, we found some interesting financial principles that is called the MyMoney Five. It talks about five different money principles that consumer must learn and implement in order take better control of their financial life. These financial truths will keep people from going under in case another economic crisis hits the country or the world in general.

So to help you make that first step towards a better financial management, let us discuss them one by one. We will split them into two parts. In this article, we will discuss the first three money principles. The last two will be in another article (plus a bonus money principle that we will add).

Money truth 1: Understanding your earning potential

The first truth that the website promotes is what they refer to as Earn. This is not just about earning more money. While we encourage consumers to increase their income especially for debt payments, this particular principle goes beyond that. It more or less educates consumers about understanding their current earnings so that it can be maximized. At least, that is the conclusion that we got out of it.

Here are tips that we got out of the website and our own ideas so you can implement this money principle.

  • Know what benefits are included in your compensation package.

  • If your employer offers to match your 401(k) contribution, make sure you maximize your own to get more from them too.

  • Get the details of employee coverages like health and medical benefits, life insurance policies. If there are any lacking based on your personal needs, see how you can cover those holes.

  • In case you need to increase your income, check with your employer first to see if you can work longer hours. That will keep you from having to look for another means to earn more. But if you want to set up a supplemental income, go ahead and find income sources outside.

  • Work efficiently and within your working hours. If you do not qualify for overtime pay, finish your work on time.

Money truth 2: Growing your personal net worth through saving and investing

The second money truth that the site provides is called Save and Invest. This is simply paying yourself first and growing your personal net worth by increasing your wealth.

There are several ways that you can grow your net worth.

  • Save and do it as soon as possible. If you do not have savings right now, it is highly encouraged that you start immediately. It doesn’t have to be a big amount. It can be a few dollars a day – if that is what your budget can accommodate because of your debt payments. In the long run, that small amount is will grow as long as you consistently make contributions.

  • When you have enough savings (a.k.a. emergency fund), you can start investing. It may be hard to invest if you have limited funds but know that there are options to do so that will not put in too much strain on your other payment obligations. Just know that you should not put all your investments in one basket. And as you are getting the hang of it, invest only what you can afford to lose.

  • MyMoney.gov suggests that you try to get a professional financial adviser and we think this is not a bad idea – especially when you have a of debts to your name. There are non-profit credit counseling agencies that you can consult with about your debts. And if you are new to investing, you should also hire a separate manager for that – at least until you are certain that you know what you are doing.

Money truth 3: Protecting your money at all times

The third truth is known in the site as Protect. This is all about protecting your money from scammers and other people who intend to rob from you. Unfortunately, when it comes to money, you can expect that there are malicious minded people who wait and prey on the gullible and desperate. This is why a lot of illegitimate debt relief companies emerged during the tough economic times. People who found themselves drowning in debt are in a desperate situation that they will resort to a new idea so easily. This is was how scammers got to swindle them out of their money.

Well if you want to grow your money, you need to learn how to protect it. The more you have, the more you risk losing. Here are some tips that you can use to help protect yourself.

  • Always conduct proper due diligence before getting the service of any financial related company (e.g. debt relief, financial adviser, money manager, etc.)

  • Monitor your credit score always to see if you had been a victim of identity theft. This can also help you keep tabs on your debt.

  • Be organized and keep important documents in a safe place.

  • Make sure you are covered by the right insurance program.

  • Set up an emergency fund for you and your family.

  • Check any statement or bill that comes your way before paying it. Medical bills, for instance, are notorious for charging you services and materials that you did not use.

These are only a few of the things that you can do to protect yourself. The details will vary depending on your unique financial situation.

The fourth and fifth money principles will be discussed in another article. We will even provide you with a bonus principle that we believe is quite beneficial too – regardless of your financial condition in life.

How To Invest To Grow Your Personal Wealth

Some people are afraid of investing. Even if it has the ability to grow your personal wealth, there are risks involved and that is what scares some people. Although the economy seems to be holding up and steadily improving, people are still hesitant to part with their money – choosing to prioritize saving over spending.

How To Invest To Grow Your Personal WealthBut if you think about it, even with all the risks, investing will do you more good than harm – but only if you do it correctly. One of the things that you must do while paying off your debts is to increase your income so you are assured of a steady stream of debt payment fund. To secure that, you need to look for a supplemental source of income that will not get in the way of your current day job and will not remove too much time away from your family.

Beginners guide to investing for personal growth

Investing is simply putting your money where you know it will grow. This can really help you increase your debt payment fund. When you invest, it can come in any form – as long as whatever you use the money on will grow in value over time. For instance, buying a car is not really considered an investment because it decreases in value as soon as you drive off from the car dealer. Buying a home, on the other hand, will increase in value – more so when the surrounding area is being developed or modernized.

There are also investments that you can hold on to and earn from for a very long time and there are those that you only own for a short period then you sell it for profit.

Here are different types of investments that you can use to grow your personal wealth.

  • Stock. When you buy a stock, you get to own a part of the company that it represents. When you buy a stock for $5 per share and it increases to $10 the week after, you just doubled your investment. The value of stocks rise and fall and the technique is to know when to buy and sell your stocks for profit.

  • Mutual fund. This refers to a group of stocks that is managed for you by a money manager. you can buy shares in the mutual fund and the professional money manager will trade the stocks to grow the value of the whole fund. Usually, a mutual fund is traded in a specific sector only – for instance, the retail or energy sector.

  • Bond. A bond is the safest way that you can invest but it is not always the best in terms of payout. It is something that you buy for a set price and after a pre-defined term, you can redeem it along with the gain that comes with it’s maturity. There are types of bonds that earn interest periodically while there are those that only payout when it matures.

Most investments comes with a risk factor of losing value instead of gaining. It is no longer wise to assume otherwise so you need to exert extreme caution when choosing your investments. Bonds are the least risky while stocks are on the opposite of the scale because the market is very unpredictable. But know that the greater the risk, the more potential for wealth building.

Make sure you read thoroughly about what you are doing so you can manage your investments wisely. Visit authority sites like MarketWatch.com or Money.com for investing news. You can also look for investment tools that will help you stay on top of your finances like those from CNN Money.

When to save and when to invest for personal growth

It is very important that your investment be treated differently from your savings because the latter will not grow as much money as it should. Your reserve fund should remain intact because that is what you will use in times of emergency. By keeping it separate, you are also protecting your investment from being withdrawn before it can reach its maximum returns. Regardless of how their personal finances go or what their expenses will demand, they don’t have to sacrifice the momentum of their personal wealth because they have adequate savings for that.

This means you may have to grow your savings to 4-6 months worth before you can fully engage in investing. But that does not mean you have to postpone investing. Some people invest a little and whatever they get earn from  it will be invested in something else. That is how they keep the ball rolling and the monetary growth more significant.

Here are some tips that you can use to keep your investment and savings intact.

  • Create a budget plan to determine how you will pay off your bills and at the same time, put aside money for your savings and investment.

  • When investing with limited money, put in only what you can afford to lose.

  • Do not put everything in one basket. Buy stocks from different companies or invest in both mutual funds and bonds.

  • Take advantage of investments that you can make for your future like your 401(k) plan. This is beneficial because employers usually put in as much amount on this plan as you are giving every month.

  • Always use your logical sense when investing and do not use your emotions. Lower your stress by not watching the market news everyday. A bad interpretation of the news can lead to your selling of valuable stocks that could eliminate the potential to earn more.

How To Teach Your Child Proper Financial Management

Financial management is a lesson that all must learn. For most of us, this lesson came in too late – we already got ourselves in debt. The good news is, the mistakes of our past can save the future of our children – at least if we act on it immediately and correctly.

How To Teach Your Child Proper Financial ManagementThere is no such thing as being too young to learn about proper financial management. By simply practicing the right decision making for household finances, you are already teaching your kid through example. The first and important lessons are taught at home so be careful when your kids are around. No matter what age they are in, you will be surprised at how insightful they can be even when you are discussing money.

The recent economic decline brought a lot of financial difficulties but it also taught us a lot of valuable lessons. Most of the changes are evident in the younger generation.

The FICO.com showed a study about how the younger adults are starting to live without credit cards. We are talking about those within the age of 18 to 29. The report showed two different pie charts comparing 2007 and 2012. The data shows that in 5 years, the average credit card debt of this age group declined from $3,073 to $2,087. While student debt is still rising, it goes to show how the young ones are making smarter choices with debt. Compared to credit card debts, student loans are more practical as it helps the borrower gain the skills that will help them earn more.

But the thing is, do you really want to wait for the economy to go down before you teach your kids the right skills that will protect them from a financial disaster? Encourage them to learn about personal finance management because knowledge will prevent them from making mistakes.

Personal finance lessons for kids

Teaching your kid about finance concepts while they are very young is also possible. If you want them to manage their finances well, you need to start them young. Do not let them get used to buying what they want without knowing the value of money. If you spoil them while they are young, it will be very difficult to instill financial management skills when they age. Here is a guide that you can use as your kid discovers what money is all about.

Step one: Use coins

Coins are the first money that we all grow accustomed to. You can make it fun for you kid to learn the value of money because of all the tinkling sounds that it make. Show them how various coins have different values and how each of them is important to add up into a sizable amount.

Step two: Make them love their piggy bank

Introduce a piggy bank and give it personality. Tell your kid how this can open doors for better purchases if they are patient enough to put in coins into it. Choose a piggy bank that your child will have to break in order to get money. Let them grow attached to it to make them hesitant to get money from it unless it is a real emergency.

Step three: Budget their allowance

If your kid starts receiving an allowance, teach them how to budget it. Make them responsible in ensuring that it will last for a specific time frame. A weekly or monthly allowance will force them to manage their money until the next allowance comes in.

Step four: Let them suffer for their mistakes

This is not to be heartless but you need to help them develop a sense of personal responsibility. For instance, give them a weekly allowance and do not add to it even if it runs out in the middle of the week. If you really have to add, take it from next week’s allowance.

Step five: Example is the best teacher

When you are teaching your kids money concepts, they will have an easier time understanding if they see you implementing what you teach. Put the household under a budget. When you are buying in the grocery, create a list and stick to it. Children are very observant and you will be surprised at what they will pick up.

Younger generations are learning from the economy

As your child start earning their own money or is about to move out of the home, you need to encourage them to practice what you had been teaching them since they were young. There are many ways to start teaching your kids about financial management despite today’s dire economic conditions. Actually, this is the right time to teach them about concepts that will help them prevent or recover from a financial crisis. When a young adult gets a taste of their own salary, they sometimes splurge on a lot of things. Here are a couple of concepts that you can discuss with them.

Value of a savings account.

Savings will help keep your child from ever having to borrow money. Any emergency situation can easily be funded when there is adequate savings. Not only that, money kept in a bank account can grow interest. By growing their savings, they are not only earning interest, they are also building a secure future for themselves.

Investing and personal wealth.

Investing is a tricky part of any person’s financial life but you need to teach this to your child to help them grow their money. Compare what they will earn if the investment pushes through. Identify the areas that they can invest in. It can be a great source of supplemental income for them.

Budgeting everyday expenses.

One of the most important tools that will help your child live within their means and thus practice proper financial management is a budget plan. Help them create their own household budget and teach them how to revise it as their income and expenses change over time. Stress out why it is important that they spend only what they can afford.

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