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8 Simple Tips To Save Money Around The House

piggy bank homeA lot of people are trying out different ways to save money and some of them go to the extremes just to make it happen. Some would try to live off on noodles for months just to get some savings into the account. There are some who will walk miles and miles to and from work just to save on transportation cost.

For those with houses of their own, they also try and look for ways to save up some money the best way they know how. As Statisticbrain.com shares that about 65% of American consumers own a house in 2013, there are a lot of people have to meet big mortgage payments while simultaneously trying to save some funds despite their limited resources.

This is quite a challenge because the mortgage payment every month can easily be the biggest expense in the household budget. Regardless if it is a fixed interest rate, the payments can still change every month. For those that makes escrow payment every month, the taxes and insurance payments can go up and down year on year changing the house payments.

With this expense combined with all other living expenses, there are a good number of homeowners who are having a hard time looking for smart ways to save money. This becomes a lot harder when there are kids involved because the costs at home significantly increases with every child added into the family.

The reason why it is very difficult to put aside money is simply because it is really expensive to maintain a home. Your expenses would include repairs, utilities, and other items that would make your home not just livable, but also comfortable. Saving on car expenses is different because it is smaller and requires little compared to what your house will take from you. The tips to lower car costs becomes easier to follow.

Save funds with simple tweaks in the house

But despite the obvious difficulty, it does not mean you cannot save money through your home. Homeowners need not fret because there are a lot of ways to stop overspending at home. Here are some tips to consider when you are trying to save money at home.

  • Upgrade your appliances. This might sound a little bit counter productive to what you  you are trying to accomplish. If you are trying to save some funds in the budget, the last thing you need is to spend money buying new equipments at home. But there is good reason behind this. The older appliances has the tendency to use up more electricity. Newer appliances can be more energy efficient and can actually help you get the job done (like laundry or baking) at a lower cost. You reap the benefits when you see the bills at the end of the month.
  • Do not compete with neighbors. This is one area in your life that you have complete control over but you sometimes choose to look the other way to one up your neighbors. If you see them pulling up the latest SUV model in their garage, you decide to go the the dealers the next day and get something more expensive just to show people that you have made it. If you see them renovating a new room, you suddenly hire contractors to put up another level in your house. Stop competing with the people around you and save money instead if increasing your lifestyle.
  • Monitor heating and cooling in the house. If you are out of the house, there is no need to heat up the house unless kids at home. Try to adjust the temperature accordingly with the time of the day and the number of people inside the house. This can benefit your electricity bills greatly and save you some funds for the rainy day. There are self regulating temperature controls that you may want to invest in. It could save you a lot in the long run.
  • Check your water use. This is again one of the simple tweaks that people tend to forget and end up paying a lot for water bills. If you do the laundry, try to do it once or twice a week when you already have a lot of clothes to wash. Loading up a full dishwasher rather than making several loads can also save you water which can lower your bills at the end of the month.
  • Fix for prevention. When you see areas in the house that needs a quick fix, do it! Do not wait for it to get bigger and require experts to fix. You can basically address small house repairs like a broken hinge, busted lightbulb or a leaking hose. Bring out the DIY persona out of you and repair small problems at home. It helps you save money by not having to call professionals when you can no longer fix the problem.
  • Cleaning can save you money. More than prolonging the life expectancy of some household equipments, it can also keep you and your family from getting sick. Make it a habit to clean around the house and you can even get your kids to help you out. Make it a family affair to get them used to cleaning their surroundings. Financial fitness can start from a healthy body.
  • Declutter and minimalism is a plus. Letting go of old items that you do not need anymore can help you declutter and even earn a little from the sale. It can also help you save space in the house is one great mental practice for relieving mental stress. Investopedia.com even explains that minimalism is gaining traction as a popular lifestyle with Amercian consumers with the goal of living back to basics.
  • Unplugging can save money and lives. When you are not watching the television, unplug it and not just turn it off. Do you see that little red light on the panel? It means that it is on standby and still consuming energy. Not a lot but still adding to your electric bill at the end of the month. Making this a habit can help you save electricity and even help prevent the risk of short circuiting the appliances which is a leading cause of fire.

What to do with the money that you saved?

Now that you have been able to save money with a few simple tips at home, what do you do with it? Do you paint the town red or set up a dinner date with your friends in that fancy new restaurant that just opened up? Here are some ideas how you can put that money into better use.

  • Add to your reserve funds. This refers to your emergency fund and rainy day fund – both of which helps you face financial problems in the future. The bigger your reserve funds are, the longer it can fuel your budget even with an impacted income.
  • Add to your retirement fund. The sooner you start building up your retirement fund, the more proactive it becomes with the help of compound interest. You also get the chance to retire at a date that you want rather than need.
  • Pay down credit card debt. Credit cards usually have the highest interest rate among all financial credit instruments. The sooner you pay off your debts, the more you can save on interest payments.
  • Put in a college fund. Bloomberg.com shares a report that the student loan payment delinquency increased in the lat quarter of 2014 from 11.1% to 11.3%. This might look like a small increase but it actually represents millions of loan holders in repayment trouble. You can actually help your children attend and graduate higher education debt free by building up their college fund early on.

When you are able to save money, you get the chance to use that amount to better your financial standing. Saving funds from an already tight household budget might sound hard and challenging but it is definitely not impossible.

Tough Saving Times For Millennials: What Can We Do About It?

man carrying savingsIf you want to keep your finances from flying apart, you need to seriously consider your savings. At this point in time, you should already believe that saving will help you get out of most financial problems. There are times when you are in abundance and most people tend to increase their spending instead of putting more money into their savings. This is not the best way to go about it. When you are in abundance, you should always think about your savings first.

We are all receiving reports that the economy is steadily growing. That means more and more people are getting jobs and have the means to support themselves financially. With more people able to support their financial needs, there should be more money going to their savings account right?

If this is the case, then why are we also receiving reports that Millennials are not saving as much as their parents (Gen X) or grandparents (Baby Boomers) when they were the same age?

According to an article published on Slate.com, Millennials may be putting aside a few dollars a month but it is not enough to really give them financial security. They are said to be burning more cash than they should be putting away. At least, if you consider the percentage of their savings and spending as compared to how much they are earning. This article cited a report from Wall Street Journal that revealed how the savings rate of Americans under the age of 35 is down by -1.8%. This is probably why a lot of young adults have a lower median net worth after the recession happened.

The question is, why is saving such a difficult task for these young adults? Does it really go to show that they do not prioritize savings as much as they should?

What keeps Millennials from increasing their savings?

If you look at the whole picture, you will probably understand why putting aside money is hard for this generation.

According to TheAtlantic.com, we should not immediately conclude that Millennials have the worse financial behavior when it comes to savings. Citing data from the Census Current Population Survey, the article said that wages may be to blame for the lack of savings of this generation. The rise of wages is quite dismal compared to the increase in health care, housing and education costs. In fact, the article calls it a stagnant wage growth. Across all industries, only health care wages have gone up. The rest have fallen by more than 10% from 2007.

As we all know, your income affects your ability to save more. If you earn less, you get to have less to save too.

After the Great Recession, a lot of businesses suffered financial setbacks. This made them financially unable to raise wages. Not only that, it also forced them to let go of a lot of employees. With businesses trying to reduce overhead costs and a lot of people trying to get a job, new graduates have to deal with a very competitive job market. The result? They have to settle for less when it comes to their income.

There are degree holders sweating it out on jobs that do not require a college degree in the first place. Having a smaller income is definitely preferable to having none at all. With the growing student loans, it is no wonder that new graduates are willing to compromise what could have been a high-paying career.

With incomes compromised, you can see why it is unfair to blame the financial behavior of Millennials for their lack of savings.

Why Millennials really need to save

But despite this difficulty, it does not erase that fact that Millennials still have to improve their savings. There are three important reasons why this generation specifically has to work harder to save up for their future.

Student Loans

The first reason why you have to think about saving is because of your student loans. Most young adults get out of college with this type of debt. Not only is it a hefty amount to pay off, it is also a scary debt to default on. But if you have savings, you do not have to worry about defaulting on this loan.

Saving can complete your debt solution. It works in two ways. If you ever come upon a financial situation that leave you unable to pay off your monthly payments, your savings can come to literally save the day. You do not have to miss out on a payment. You also do not have to bother with any late payment charges.

The second way that it can help is by keeping you from debt. If you need to spend on something unexpectedly, you no longer have to borrow money for that expense. All you need to do is to withdraw the amount that you need from your savings account. You do not have to add to the already burdensome student loans that you currently owe.

Financial Investments

Savings are also important because it allows you to invest your money so it can grow your personal wealth. The only way you can invest is when you have the extra money to put in there. It is tough to invest the money that you need to spend on your monthly expenses. That will only lead to debt. Investments, although it is rewarding is still risky. You need to invest money that you can afford to lose. Because if you lose that investment, it could lead to a financial crisis. You still need to invest since it will help you grow your wealth – but it should ideally be done with your savings to lessen the risk that you are taking.

Prepare for the Future

Finally, you need to save for your future. This does not only refer to your retirement. It also refers to your future plans of buying a home, a new car, and other purchases that you want to make. It can also refer to life milestones like marriage or parenthood. These will need money and your savings will help you go through these changes and improvements in your life. Instead of borrowing money, you can spend on these expenses. Or if you cannot save up for the whole amount, like the amount needed to buy a home, you can at least limit the debt that you have to borrow.

How can you save money when you earn so little?

While we know how important it is to save more money, the question is, how can we make this possible? According to Forbes.com, Millennials are showing optimism when it comes to their finances but data shows that a lot of them are living from paycheck to paycheck. That translates to them having just enough for their expenses. The article states that more than half of the young adults are in this financial condition. In fact, 35% of them are still receiving financial aid from their families. How can you start improving your savings if you practically have just enough money to spend?

Definitely, the government needs to help make the job market more stable – something that they say they are doing. With the improvements in employment, you can safely say that they are doing their job. But relying on their actions is not enough. You need to exert effort to improve your own savings.

It is important that you treat your savings like a bill. This will keep you from forgetting about it. Prioritize your savings and do not focus too much on how much you are earning. The truth is, a minimum wage increase is not the answer to your financial difficulties. Here are some tips that you need to consider.

  • Change your lifestyle. Remember that less is more if your income is not sufficient to meet both your spending and saving needs. If you cannot do something about your income, then do something about your expenses. Change your lifestyle if you have to and downsize to spend less each month. Some MIllennials moved back in with their parents to help increase their savings.
  • Plan what you spend. Planning always works. It helps you reach your goals and that includes your saving targets. If you can plan your spending, it should be easy to put aside money to increase your savings.
  • Be wise about debt. You do not have to turn your back on debt because there are investments like a home or business loan that you cannot avoid if you want to improve your financial situation. But make sure you are smart about it. Borrow money if you are sure that you can pay it back. Not only that, the debt that you should take on must increase your personal net worth.
  • Focus on the future. Lastly, always focus on the future. While it is important to live in the present, it is also a must that you prepare for your future. This mindset will help you put aside more money into your savings.

Here is a testimony from a blogger known as the Frugal Girl. Find out how she practices frugal living to help her family survive cheerfully despite a small budget.

5 Questions To Ask Before You Use Savings To Pay Off Debt

debt and save targetDid you know that your savings can keep your finances from flying apart? In fact, you can use savings to pay off debt. These are only a few of the reasons why this is such an important part of your financial life. In fact, some experts are saying that you cannot be a financial success unless you have some form of savings to your name.

While we are all aware of the importance of savings, sadly, this is a difficult goal for a lot of Americans to reach. According to an article published on Mint.com, the ideal saving rate is 10% to 20% of consumer’s income. However, a report from the Federal Reserve Bank of St. Louis reveal that the current savings rate in the country is actually 4.2% only. That is not even half of what the saving rate should be. The article also mentioned why it is so difficult for consumers to save. It is because they have too much debt.

But if you think about it, that is not the only issue that we have about savings. While it makes sense to get rid of debt first, a lot of people are actually struggling to decide if it is a good idea to use savings to pay off debt. After all, this is already money that you have. Some experts will frown at the idea but if you do the math, you will be losing more if you keep your savings intact and your debt accumulating. Looking at the interest rate alone, debt has a higher rate compared to your savings account. It makes more sense to pay off debt first because you will be saving more in terms of the interest amount that you are paying.

However, that decision is harder to make than you think. Some people need the security of a savings – that is why they opt to keep it intact. But if you find yourself right in the middle of saving or paying off debt, there are a couple of questions that you can ask yourself to help you decide.

Ask yourself these questions before you pay your debts with savings

If you are torn between using your stashed cash to get rid of your debts, there are 5 simple questions that you can ask yourself.

Where will you get the savings from?

There are a lot of savings that you can use to finance your debt payments. According to WashingtonPost.com, debt has a high effect on our retirement savings. In fact, a study done by the Employee Benefit Research Institute revealed that 74.8% of their respondents cashed out their retirement savings after leaving their jobs to pay off debt. Whether you are leaving your job or not, it is never a good idea to use your retirement savings for anything other than your retirement expenses.

Do you have sufficient emergency savings?

Unless you have your emergency fund intact, you should never use savings to pay off debt. This is one of the requirements that you need to have. In case you do not have this yet, you need to save up for sufficient emergency savings. Anything in excess can be used for your debts. This emergency fund can actually help you sustain your debt payments. In case something happens, your reserve fund will allow you to continue paying off what you owe while taking care of that additional unexpected expense.

How much is your debt and the respective interest rate?

In case of multiple debts, list all of them down and take note of each interest rate. In case the interest rate is more than 7%, then you will end up saving more money if you pay off your debts first with your savings. But if you mostly have mortgage or student loans that have less than 7% of your debts, then to use savings to pay off debt is not really that beneficial. The best scenario to finance debt payments through your savings is when you have mostly credit card debt – a debt that can reach up to 36% of interest rate.

Are you expecting any extra money in the near future?

Another question to ask yourself is this: will there be any extra money in your near future? This should be something guaranteed like a commission that is already being processed, a confirmed holiday bonus or your tax refund. If you have this extra money, you can go ahead and use your savings and just replace it with the money that is coming your way.

Is it in line with your financial goals?

The last question that you should ask yourself is whether this move is in line with your financial goals. Smart money management requires you to set goals and that also means your decisions should be aligned with your goals. If you are saving up for a downpayment of a new home, then it might not be a good idea to use your stashed money to lower your debt. But if you need to lower your debt level to have better chances at a low interest home loan, then go ahead and use savings to pay off debt.

Other options to pay back your debts without touching your savings

In case the answer to the 5 questions point you towards not using your savings to pay off your debts, then that is okay. There are other means for you to eliminate debt without touching your savings.

PIOnline.com published a survey that revealed how more than half of Americans set saving goals. But when it comes to retirement, less than half are able to save through their employer’s saving plans. The current survey revealed that the number of Americans saving is basically slipping – that is why you may want to opt not to use savings to pay off debt. Use other options that will allow you to get out of debt while still adding to your savings.

Here are some of your options:

  • Debt Consolidation Loan. This debt relief program involves you borrowing a bigger loan that can help you pay off all or most of your existing debts. What will happen is you will consolidate your old debts under one low interest loan. That should make things easier to pay off.
  • Debt Management. This is also a form of consolidation – but this time, you get the help of a credit counselor. For a maximum fee of $50 a month, you can enjoy their service that includes a careful analysis of your debts and the creation of a Debt Management Plan or DMP. This plan contains your proposed lower monthly payment plan that stretches it over a longer period. That means you get a lower monthly payment requirement.
  • Debt Settlement. In case you are in need of debt reduction, this is a debt solution that can work for you. The whole idea is to convince your creditor or lender that you are in a financial crisis. Then, you will offer them a lump sum money that can pay for a percentage of your debt. You will ask them to accept this lump sum and have the rest of the debt forgiven (at least anything that this big payment cannot cover).

These are only a few of the debt relief programs that you can use to achieve debt freedom. If you do not want to use savings to pay off debt, then make sure you know your other options.

How To Be Responsible When Using Your Emergency Fund

hammer and piggy bankThere are many reasons why you need an emergency fund. It is not enough that you make the right spending choices. It is not enough that you spend within your means. You need to prepare for any unexpected situation because it can cause you to fall into debt so easily.

A lot of people have gone through life without debt. They have made the right choices when it came to spending and have used credit wisely. They have invested in their home and made smart choices about how much they can afford to borrow. However, these acts will not exempt these people from falling into a financial problem. One sickness that requires thousands of dollars in payment or one tragic accident or job loss can quickly pull you under. All because you do not have an emergency fund.

According to a survey done by Bankrate.com last June 2014, 50% of their survey respondents have less than 3 months worth of expenses in their reserve fund. More than half of that (or 26% of the respondents) do not have a single cent tucked away for emergencies. The survey revealed that some consumers failed to save for emergencies because they did not plan for it. They pay off the usual expenses like utilities, rent/mortgage, etc and will only save what is left after everything is paid off. But guess what? In most cases, there nothing left to save.

Some people say that they find it hard to save because they have other priority expenses. They put their emergency fund last on the list. For instance, some people choose to save up for a new car or the down payment of a new home instead of saving on their emergency fund. Some people choose to pay off debt first.

While these expenses are important, you have to know that preparing for emergencies is also very important. It should be comforting to know that although they are not the majority, 40% of the Bankrate survey participants, have three months worth of expenses or more in their emergency accounts. 23% said that they have 6 months or more in in case of emergencies.

3 ways to use your emergency savings

Although there is a lot of room for improvement when it comes to building our emergency finances, it is also important to consider how you will use the money you have saved. You may have the emergency fund all saved up but you need to commit to how that money should be used in the first place. Some people blow up their reserve fund because they did not clearly define what an emergency is. When the more devastating disaster strikes, they are left with nothing.

One of the emergency fund best practices that you should learn is how you can learn to use this fund correctly. To help you decide, here are 3 important uses for an emergency fund that you should not hesitate to push through.

After an unexpected job loss.

Obviously, this is an emergency. When you do not have any income to get your funds from, then you need to dip your hand into your emergency savings. The only other alternative is to rely on your credit cards – which will put you in debt. That is not really a good idea because you will just make your financial situation worse. Just use your emergency fund frugally while you are in the midst of looking for an alternative source of income.

After a natural disaster.

Another good reason to use your emergency resources is to help you survive a natural disaster. This is another one of the unexpected disasters that you are saving up for. According to an article published on FinalDaysSurvival.com, preparing for a natural disaster is not only about protecting what you have as the disaster is happening. It is also about recovering from the aftermath. And when it comes to recovery, we all know that it usually requires money. If your house was flooded or totally wrecked, there are government financial aids but you can act on rebuilding your life if you have your own emergency savings.

During a health emergency.

Lastly, you need to use your emergency fund for your health. This is one of the unexpected expenses that you should not hesitate to pay off – especially if it is a matter of life and death. With the high cost of getting health care, it is common for some people to deplete their reserve fund just to pay this off. This is okay as long as you make a plan to rebuild your emergency fund. Dave Ramsey, in one of his shows, encountered a caller who had this dilemma. His medical bill threatens to deplete their emergency savings and he was hesitating to do it. Watch the video to hear what Dave Ramsey had to say about it.

3 ways you need to think twice before using your reserve fund

Of course, the use of emergency funds go beyond the three that we have listed above. But the other uses of this reserve fund will have to be done carefully and smartly. While they are smart uses of your money, it does not always mean that you should use your emergency money on them. You need to analyze the situation first before you go ahead and use it.

Here are the three examples of the emergency fund uses that you need to think twice before spending on them.

When there is a financial opportunity.

There is an interesting article in Investopedia.com about emergency savings being a bad idea. The author said that putting your money in a savings account will restrict its growth. This is probably the reason why some people tend to use their emergency fund to help them fund a financial opportunity. While investing to grow your money is okay, make sure that you put your funds somewhere it can be easily liquidated. That way, if an emergency strikes, you can easily take the money and use it to survive a disaster.

When you have unexpected home and car repairs.

Most people will think it is okay to use your emergency fund for home and car repairs. But here’s the thing – these are not unexpected expenses. If you know that your car’s transmission needs replacement, this is something that you can monitor and prepare for. The same is true for any repair or maintenance expenses that your home requires.

When you need to buy basic necessities.

Unless you lost your job, never use your emergency fund to buy basic necessities. If you find yourself in a situation wherein your money cannot afford to spend on basic commodities, then you should know that there is something wrong with your budget. Buying your everyday needs should not be an emergency. It should be something that your finances can easily accommodate. There might be an area in your finances that requires you to spend more than you should. Or maybe your lifestyle is beyond what you can afford. This may be a sign that your finances is not being used correctly.

It is true that saving can literally save your life but only when it is available when you need it the most. Make sure you decide on what is the right way to use your emergency fund. Just because you run short of money, that is enough reason to tap into your emergency resources. Be strict and develop self control. That is how you can hope to have a secure financial future ahead.

8 Signs That You Need To Implement Financial Management

checklistFinancial management is a critical part of growing up. It dictates how well you are able to handle income and dispense the same for payments on your expenses and other loans. It restricts your purchases and tells you what is important and what can wait. It tells you as well what you can do to increase your income to meet financial targets. Financial management can also be a potent tool against debt.

This is important to share when there are about 20 million college students on an average at any given year according to Asa.org. That is a lot of college seniors entering the workforce where they will be earning on their own and experiencing life in full blast. The walls of their colleges and universities has now grown bigger to accommodate a lot more responsibilities. On top of these is developing financial management in running their money.

It starts with a desire to get their finances in order. There are still  a good number of Americans who are not able to balance a checkbook. The 410 (k) retirement fund, investments and emergency funds are alien to them. These are some of the foundations of financial management and college graduates and even some seasoned professionals needs to understand this to survive financially.

8 signs that you should start working on money management skills

As you go through life, there are pit stops where you need to make decisions and add some financial tools in your arsenal. Some of these can start as early as when you get your first job and for others, it could be as late as a few years before retirement. Whenever it happens, you should be able to discern these signs and know that it is time to work on your financial management skills.

When you start earning your own money

As soon as you leave university, the first order of business is not a vacation with your friends or a cruise with your partner. It should be to look for a job because your expenses and loan payments will not wait for your to finish a good time. If you have student loans, six months is a short time for a grace period and you need to start making payments after. Getting a place to stay, applying for utilities and others will require you to have a steady income.

When you get a job, income will not be too far behind. And when you start earning your own money, it is a clear sign that you need to implement proper financial management. This will put order in your finances and ensure that your monthly salary will not only last you until the next paycheck but will actually provide financial security for you in the long run.

When you already have a bank account

Forbes.com shared that there are about 7.7% of American households who still do not have their own bank account. That is approximately 1 in every 13 American families. There are mixed sentiments on how the banking system helps consumers but it cannot be denied that it is one of the safer ways to keep money and allow it to grow. When you open your own bank account, it is another step up  that needs proper management of your finances.

When you are saving for a goal (e.g. retirement, etc)

Having financial targets is another clear sign that it is high time for financial management skills. These can be in the form of emergency funds or retirement funds. In fact, there is only about 18% of Americans who are confident that they have enough funds for retirement according to Statisticbrain.com. Having financial goals is also a clear sign of financial maturity as you are already planning ahead and not just for the moment.

Here is a video explaining how saving for retirement might need to be done until 68 years old:

When you are responsible for paying monthly bills

Being able to pay for utilities such as water, electricity, phone, internet, and cable is another benchmark on the need to implement financial management. You need to be able to juggle your income with your expenses to avoid coming out short at the end of the month.

When you have started taking on credit

Taking on credit is another sign of financial maturity. Adding expenses on your card or taking out a payday loan to fix some part of the house needs proper management of finances. Without it, you might just end up in a store sale using up the loan you took out for another unnecessary expense.

When you start monitoring your credit

Monitoring your credit comes from the need to understand where you are putting your hard earned money. What items are you buying and where you can cut down on expenses. Financial management will help immensely at this point because it can provide a clear direction on how you can proceed after monitoring your credit.

When you  have started investing

Investment is a by-product of forward thinking and once you start delving into the world of investments, you will need financial management to guide you through your options. In fact, investing is one key to financial independence. It can help you plan for your future and hopefully retire at the time when you want to, not when you need to.

When you start paying your taxes

Making tax payments is a sign that you are already earning your own money. This calls for the need for financial management not only to monitor your income but to check as well if you are remitting the right amount for your taxes. Tax refund is a great surprise at the end of the year but it actually stems from wrong tax calculation. That would have been money you could have used for investment at the early part of the year. Instead of just giving the government an interest-free money, it could have earned a few dollars somewhere else.

4 important concepts of financial management

Financial management has four key pillars that consumers need to understand. It is beneficial to know these points in order to practice proper management of your finances.

  • Budgeting. Income has to be treated as the output of your hard work. You should put importance on how you use it and this is where budgeting comes in. Understand the important expenses and forego those that you can live without.
  • Saving. At this day and age, not a lot of people has an excuse not to save. Even technology has made saving easier. This is an important aspect of financial management because it allows the consumer to have funds for future use.
  • Smart spending. Similar to budgeting, spending smartly allows you to weed out your needs from your wants. It helps you identify and prioritize the important spending items in your budget.
  • Credit monitoring. It is important to be on top of your finances and monitoring your usage of credit can give you a great overview of your habits. Where you spend too much and where you can make improvements are just some of the advantages of checking your credit spending.

Financial management is an important tool in putting sense in your finances. Some people say that it is not how much you earn but how well you use what you have. This is where proper management of your finance kicks in. As long as you see the signs along the way, financial management can guide and steer you in the right direction.

Technology Makes Saving Easier

Man counting moneySaving up for a rainy day has always been a challenge to do. But there are a lot of tips in saving and plenty pieces of advice out there that should make it easier to undertake. Putting aside a part of our earnings so we have something to pull-out of our pockets in times of need is the basic idea. This serves as a safety cushion during emergencies.

It is a challenge for a lot of people mostly because of the attitude more than the amount. Putting aside savings could start with any amount just to get started. You should get used to the routine to be successful in saving. It also helps that you already have a goal in mind on why you are saving. It could be increasing your retirement fund, padding up your emergency fund or even saving for a mobile device.

Saving through technology

Aside from physically putting aside money in a bank, technology has allowed us to save up on a few areas as well. Advances in technology has paved the way for smarter use of the dollar. There are existing inventions and modern applications that can help us increase our savings.

Learnvest.com shared some ways to use technology for our advantage. There are opportunities out there to maximize technology in order for us to increase our savings.

Communication

It is the day and age of mobile devices. Gone are the days when we idly sit by the phone waiting for a phone call from a friend to know where to meet up. It also used to be a tedious task to tell 20 people where the party is if you had to make phone calls to each one of them.

Mobile phones has disconnected us from our landlines and gave us mobility. It served not only as a calling device but taken on the communication and socialization to a different level. It is no longer just a passive receiver and dispatcher of our calls. Technology has brought us smartphones.

Communicating with 20 people is easier now with just a text message. Talking to more than one people is easier as well with conference call. But all these are paid services. Whenever you send out an sms message or make a call, it reflects on your bill and they easily pile up because of the convenience of using the service.

There are Voice over Internet Protocol (VoIP) services we can use to lower down our monthly bill. Using internet connection with which most smartphones comes equip with, we can use skype or viber or other applications to call and send a message for free. As long as the receiving party has the same application, you can communicate for free.

Using internet enabled smartphone, you can freely talk and message your friends and it will not add up to your bill

Internet capability

As most devices are dependent on internet connection, you do not have to apply for a connection for each device. Let’s say you have a mobile phone, a tablet and a laptop – you do not need to have 3 internet connection for each device. You can tether the internet of one device to share the connection with the other gadgets. Tethering is the ability to convert the internet connection of one device and share it through a wifi connection for the others.

This saves you precious dollars in applying for a connection or even buying internet cards. Saving the money that was supposed to be used for internet connection can now be part of your savings account.

File storage

We used to have photo albums and cassette tapes of our precious photos and music interest. Now, there are digital files of all these saved up either in our mobile phones, tablets or desktops. As months go by, we add on to those files increasing the need for storage space. This is similar to having a lot of photo albums to store actual photos.

The problem sometimes is that one photo is in one device and another photo is in the other device. We then buy a hard disk to store all our files in one central location. This is useful as a back-up but bulky to carry. This is where online file storage and sharing comes in.

Dropbox is one perfect example of such technology that can help us in our saving endeavors. It virtually gives us a space where we can put in all our files without having to carry a hard disk around. What is even more better is that you can access the files with any of your devices saving you time and energy in saving, filing and locating the files.

CLF lightbulbs

Compact fluorescent lights or CLF is better than using a standard incandescent light bulb. It might seem like a small part but it is actually a thrifty money saving tip. The idea behind using CLFs is the fact that it can outlast a standard bulb ten times over and using about 30% less energy. This can be a significant amount in the future.

Saving to build wealth

Technological advances are making our lives easier by the minute. It is connecting us much faster and quicker than ever before. It allow us as well to find creative ways to save up and build up our wealth. As Businessinsider.com shares, there are some habits that will make wealth building a lot easier.

  • Anonymous Rich Person. As most people would associate the wealthy with big yachts and shiny cars, most millionaires live a frugal lifestyle. As much as saving can save your life down the line when you need the money the most, frugality is a nice option as well.
  • Pay Yourself First. Reverse the attitude of paying the bills first before saving up money. Reward yourself by putting money into the savings first before anything else. This forces you to save up on expenses rather than cutting down on your savings.
  • Goal Setting. Having a target makes your efforts quantifiable. This allows you to check your progress and see how far you have gone or how far along you still need to go. This is helpful in setting your eyes on the ball and making sure you succeed in your goal.
  • Increase Earnings. There are ways to maximize your current income to suit your lifestyle. But one approach to saving and building your wealth much faster is adding extra sources of income. Some would take on a second job while others explore a side business. The latter usually works when you venture into something you love doing. Think of a hobby you can turn into a business venture.
  • Tracking Money. Not a lot of people practices this attitude. As important as it is to increase your earnings, you need to track as well the expenses. You can be earning a lot but spending a lot more and this will get you in debt. Having a method to track your income and expenses will guide you in knowing where you can make adjustments to increase your savings.
  • Debt Payment. Though regular payment on debt shows a positive effect on your credit score, it is better to have more money for saving purposes rather than debt payments. Pay off your debt and use the money to put into your savings. One advantage of this is preventing the cycle of paying down debt so you can borrow for life emergencies resulting in paying more debt. This gets you deeper in a financial bind.

Combining the positive uses of technology and simple tips in building wealth proves beneficial in saving for the future. It is better to have money in the bank for your use in the future rather than borrowing money from the bank.

Emergency Credit Cards? 6 Reasons Why It Is A Bad Idea

road signsNobody knows what the future brings and it is for that reason why we have to be very careful about preparing for it. Some people may think that you are being paranoid when in truth, you are just being cautious. It is also being practical because there are many disadvantages of being unprepared for an emergency. When we say unprepared, we are mostly talking about not being ready financially.

In most cases, an unexpected event comes with a financial need. Whether it is an accident, an illness or any other requirement in your personal or work life, it usually requires you to pay a certain amount to get over it. If you are not prepared, the chances of you being in debt is very high. Instead of solving the problem entirely, you have just immersed yourself into another financial emergency.

This is where most people turn to emergency credit cards. Their inability to pay for emergencies in cash made it alright for them to use credit cards. While it may seem logical to do so, you have to understand that it will actually do you more harm than good.

6 ways that using a credit card for emergencies is a bad financial choice

In an article written by Dave Ramsey in his website, daveramsey.com, he revealed an important truth about credit cards. He said that cash is better to use because you have an emotional attachment to it. That mean you will be more cautious in using it. When you use credit card, Dave Ramsey said that you are more likely to spend more because you do not feel the parting with your money. In fact, his article cited a McDonalds study that revealed how consumers usually spend 47% more when they use credit cards.

Even if you are using emergency credit cards, it will still work the same way. You will still experience a detachment when you pay for that emergency expense. But beyond that, here are 6 reasons why it is a really bad idea to use credit cards for emergencies.

  • A credit card is a loan. Do not think that just because your credit card is under your name, you are using your money. That is what makes people overspend through their credit. You have to understand that this is not an extension of your wallet. Every payment that uses your credit card is actually using the money of the creditor. You are just borrowing money. That means when the whole crisis or emergency situation is over, you have yet to deal with the payments of your credit card bills.

  • You can put yourself under so much debt. As mentioned in the Dave Ramsey article, credit will make you spend more. If you cannot pay for  your dues immediately, your credit card balance will incur finance charges. That will make your debt grow until you have paid it off completely.

  • You will not feel the need to look for alternatives to finance your situation. Since the credit card will make you feel like you have sufficient funds, you will not feel the need to look for alternatives to lower the cost you need to pay for. You have to understand that looking for better options should be a priority – regardless of how you intend on paying off the unexpected expense. You will not feel the need to approach charitable organization or similar companies that have programs to help you out.

  • Even emergency credit cards can be closed due to inactivity. You may be wondering why this is an issue. An emergency cannot be predicted. That means you can go for a long time not having an emergency. If that happens, you can have your credit card closed due to inactivity. These cards are usually automatically cancelled when there is no activity within 6 months. If you are not aware of this and something does happen, you may find yourself really unable to pay for that financial need – both card and cash.

  • Emergencies can strike one after the other and that can lead in accumulated debt. The opposite of the previous reason is you can have one emergency after the other. If that happens, the debt on your card can continue to accumulate even before you have the chance to pay for the previous debt. Do not let that happen by relying entirely on emergency credit cards. Your credit score may be seriously affected by this.

  • Your budget will be ruined. An emergency can ruin your budget because you have to input your credit cards payments into it. Depending on how much you credited to your card, you can spend months or even years paying off this expense. That will limit your budget even further.

The thing about paying off credit card debt is you will be wasting a portion of your money on interest rates. Credit.com revealed in an article about medical bill nightmares that the credit extended for medical emergencies usually start out with a low interest. The example was 9.9%. But that will rise after the introductory rate to as high as 24%. Imagine the money that you will be wasting if you use your card for emergencies. And we all know that most of the expensive unexpected expenses are our medical treatments.

The better alternative to using a credit card for the unexpected

Obviously, the better alternative to emergency credit cards is growing your reserve fund. You want to be prepared to pay for these unexpected expenses in cash. But unfortunately, only 38% of Americans have an emergency fund. That is according to the data compiled by Statisticbrain.com. That means 62% of Americans do not have savings to deal with emergency situations. They are more than likely to depend on credit cards to help them survive a crisis.

If you are part of the statistic that does not have a cash emergency fund, you need to work hard to build up one. There are many benefits to relying on a cash emergency fund and here are some of them.

  • After the financial crisis, you do not have to worry about any additional payment and you can move on immediately.

  • You will not waste money on the interest rate.

  • You will be living a stress free life because you know that you are prepared for any emergency.

  • When tragedy strikes, you can concentrate on how you can solve it because you have the funds to back up any plan or solution that you can come up with.

Given all of these points, you know that you have to start computing your emergency fund target so you can work on your financial security. Growing your reserve fund to replace your dependency on emergency credit cards is simple but it requires some form of sacrifice from you. Naturally, you have to ensure that there is something left over from your income so you can put it aside in your savings account. You can work longer hours to earn more or you can cut back on some of your usual expenses. Either way will help you grow your emergency fund the fastest.

When is it okay to pay for emergency situations with credit cards

While we strongly advise you to build up your rainy day fund, we are not saying that you completely shun emergency credit cards. If you can only be a smart credit card user, you can really make this work for you.

What we are proposing is for you to have both – emergency cash and credit cards. But instead of prioritizing the use of your card, you turn to your cash first. If the need is great and you require additional funds, you can look at your card already for help. Here are important reminders before you use your emergency credit cards.

  • It has to be used for a real emergency only. That dress that you need to buy for a friend’s wedding is not an emergency. These include the car breaking down, an illness that has to be spent on or the pipes breaking.

  • You have to completely pay it off in the shortest amount of time. That way, you minimize the money you waste on interest.

  • Look for other options before using it. As mentioned, there are other ways for you to finance an emergency – you just have to look really hard for these options.

Be wise with your credit card spending so that you will have less to worry about in your llife. Here is a video from National Debt Relief to give tips on how you can get credit card debt help in case you have accumulated this debt already.

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.

3 Important Rules To Maintain Debt Freedom

man behind dollar signBecoming debt free is a great experience. You must have gone through a lot to reach this stage in your life. Looking back, you think about the sacrifices that you had to make and the various temptations that you had to overcome. But while you have gone through highs and lows just to become debt free, you need to know that your journey is far from over.

You know how people has to continue dieting and exercising to keep their ideal weight? The same is true to maintain debt freedom. It will not be as tough as losing weight but there is still effort to be exerted.

3 habits that will keep debt problems away

You must understand that staying debt free will entail some work. There is a conscious effort to correct the mistakes that you made in the past. Obviously, your old life is no longer something that you can follow. There are changes that you have to make in order to ensure that you will keep your debt freedom.

There may be any changes but there are 3 important personal finance rules that you need to follow to keep your new found financial freedom. These three are vital because they result in several other habits that will all contribute to making you a smarter manager of your personal finances.

Budgeting

First is budgeting. You want to make sure that you will live within or below your means and the best tool for this is a budget plan. This habit basically encourages you to consult your budget at all times. You have to know when a purchase is to be made or when it shouldn’t. This plan will identify your income and the various expenses that it finances. If you always consult your budget plan, you will never be in danger of overspending. That means you will not have to resort to credit for the important expenses that you have to make. In case you are unsure of how you can do this, you can always go to BudgetWorksheets.org to find the right template that you can follow. You can start with this and slowly revise your budget as you see fit. Take note that this is not something that you do only once. Your plan should continue to change as time goes by.

Smart spending

The next important rule to maintain debt freedom is smart spending. This can be easily done if you have a budget plan. You simply have to stick to your budget and decide which expenses must be prioritized. But beyond that, it is important for you to remember that smart spending is not just about saying no when you cannot afford a purchase. The real test is saying no when you can afford to buy something. Being smart is prioritizing savings before you purchase unnecessary expenses that you can live without.

Saving

Speaking of saving, that caps off the three rules that you have to follow while living a debt free life. It may surprise you but there are actually consumers who never spent more than their income but ended up in debt when an emergency struck. They were not prepared for the unexpected expenses and that pushed them to borrow money to help tide over that immediate cost. If you have your emergency fund, you can avoid this possibility. Another reason to save is for your financial goals. You want to retire in comfort and that means you have to save up for it. If you want to buy a home and you don’t want your mortgage payments to end up ruling your future finances, save up for a portion of home buying price.

All these three will help you reach the personal goals that you have for yourself and your family (or future family). Now that you have reached this stage in your life, it pays to take the effort to make sure you will experience it for a very long time.

Being debt free does not necessarily mean zero debt

There is a popular misconception about debt freedom that you also need to revise. Being debt free does not necessarily mean you will be completely out of debt. When you do not have any debt, you will keep your credit history thin. That will not bode well for your credit score. When the time comes for you to borrow money for your mortgage, you might be given a high interest simply because you have a low score on your credit rating.

Some people are quick to implement credit card debt elimination and while this is helpful, it does not solve the problem. What we suggest that you do is this: eliminate debt but not the credit card. You can continue using your card while keeping yourself free from debt. You just have to make sure that purchases made with your card are budgeted so you can pay for it immediately. Not only that, you want to make sure that you understand the features of your card. That means familiarizing yourself when it comes to finance charges, interest rates and grace periods. Knowing what these are all about will help you make better spending choices when it comes to your credit cards.

Going beyond credit card debt, you also have to identify the type of debts that are actually good for you. These are the debts that will help put money in your pocket like home loans, business loans and student loans. These all contribute to your personal wealth.

5 Basic Questions When Computing Your Emergency Fund Target

home with cashLearning how to save money is one of the most important lessons that you have to go through. This is one of the ways that you can protect yourself from the unexpected circumstances in the future. Your savings will help you finance any emergency situation without jeopardizing the expenses that you are currently making.

Your emergency fund is an important saving goal that will protect you from debt. People who do not have this fund usually spend for the unexpected expense by either compromising their budget or borrowing money. In most cases, people choose the latter by using their credit card.

If you want to protect yourself from debt, you should seriously consider building up your emergency fund. But even as you are convinced that you need this fund, an important question to ask is, how much should you put aside for this saving goal?

5 questions to help determine your target reserve fund

It is true what they say, saving can save your life when emergency strikes. But you need to save up the right amount in your emergency fund to keep you from falling short. You can overestimate the amount but having insufficient finances when you need it the most can prove to be disastrous. Despite your best efforts, you could still end up in debt if you fail to save enough funds.

To help keep this from happening, here are 5 questions that you need to ask yourself.

What is the condition of my home?

One of the biggest expense that we spend for involves our home. If you rent your place, all you really have to worry about is your lease. But if you own your home, things could get a bit more complicated and oftentimes more expensive. If you still owe on your mortgage, you want to make sure that an emergency crisis will not compromise this payment because you can end up losing your home. Not only that, you need to consider the repair and maintenance costs of the appliances, furniture and fixtures in your house. The same is true for the structure of your home. The older it is, the more money you have to prepare to spend for its upkeep.

What is the state of my car?

Another culprit that eats away at our emergency fund is our vehicles. Changing tires, oil, busted transmission – all of these have to be attended to. Not only do you have to pay for the parts, the labor is also quite costly. You do not want to tinker in your car yourself because your inexperience can put you in danger while you drive. Leave it to the professionals and just save up for it.

How stable is my job?

A freelancer’s emergency fund differs from someone who is employed by a big corporation. There is consistency in the salary of a person who is employed. A freelancer, on the other hand, relies on project based compensation. If you have an irregular salary, you should aim for a bigger emergency fund to help tide you over the lean months when you have no clients.

Do I have insurance?

Your insurance is one of the ways you can also prepare for an emergency. However, the insurance is usually for a specific purpose only like your health, car, home, etc. If you have most of the possible emergencies covered by insurance, you can target a smaller amount on your emergency fund. After all, these insurances sometimes need monthly payments too.

How many are relying on me?

If you are alone, your emergency fund can be relatively small since you only have to think about your expenses. But if you have a family, you need to consider the number of people that will be relying on your reserve fund. This includes your spouse, children and even your parents. This is a very important consideration when you are trying to figure out how much to put aside for unexpected situations.

Steps when calculating your savings amount goal

When you have answered the 5 questions mentioned above, your next step is to do the computations. Here are the steps that you need to follow.

  1. Create a budget plan. A budget plan will identify the various costs that you are spending your net income on. If you do not have this yet, spend a month or two in listing down the expenses that you usually make. Do not forget to factor in any expense that you make once a year or even quarterly.

  2. Look at your monthly expenses. Scrutinize the expenses that you make – both wants and needs. Total this amount and multiply it by 8 months. That is the amount that you need to save up for to live comfortably for 8 months in case your job is compromised.

  3. Determine the emergency costs. These include the repairs and maintenance costs that you need to expect. You may want to estimate for medical funds – at least those that are not covered by your health insurance.

  4. Factor in the rising cost of living. Although your emergency fund is calculated for the next 8 months, the rising cost of living could shorten that. When the time comes, your fund may only be able to finance 6 months of your needs.

All in all, you have to add your monthly expenses, multiply it by 8 months and add the emergency cost that you have estimated. Put a little buffer for the inflation rate and you should be able to arrive at your target emergency fund.

You don’t really need a financial planner to help you out. There are various tools available online that will help you calculate the amount that you need to target for your emergency fund. All you need is to input the details found on your budget plan. You can check out the emergency fund calculators of the following site: PracticalMoneySkills.com and Calcxml.com. It will help you get started on an amount. If you think that it is not enough, feel free to increase it further. Having a big emergency fund is never a bad thing.

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