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17 Nuggets Of Wisdom That Could Help Improve Your Financial Life

Couple Using Laptop And Discussing Household Bills Sitting On Sofa At HomeLet’s face it. Thinking about personal finances isn’t much fun unless you’re a member of that fortunate 1%. Of course, if you’re a member of the 1%, you probably don’t have to think much about your financial life anyway. But if you’re like us and are a member of the other 99% then finances are something you think about a lot. You’ve probably read articles or even books about personal finance with advice about creating a budget, having an emergency fund, paying down your debt and so forth. Beyond this, there are some other things you could do that would help improve your finances and here are 17 of them.

Create a roadmap of your goals

Just sitting down and asking what are your goals can get you on the path to realizing them. Don’t be afraid to think big and pursue those really big dreams even if they don’t seem doable. If you want to increase the chances that you will succeed, create a spreadsheet and do some number crunching to make sure you will have enough money to fund those adventures.

Drive less

This may seem a bit radical but the less you can drive your car the better. While driving is very handy, it can also be incredibly expensive when you take into consideration the oil and gas, insurance and depreciation. Automobile accidents are very common these days and if you get into one – even if it’s not your fault – you would have to at least pay the deductible. If you do have to drive a lot, make sure you do regular oil changes and all of the maintenance recommended by your car’s manufacturer.Avoid products that could be dangerous

Avoid products that could be dangerous

The Consumer Product Safety Commission is now issuing hundreds of product recalls a year. This makes it hard to keep track of all of them. It’s easier if you sign up for alerts from the Commission or download an app that will alert you when a recall occurs. Be particularly careful when it comes to used baby products, as there has been a number of crib, stroller and highchair recalls.

Cut your spending dramatically

If you focus your attention on monthly expenses such as cable, phone and Internet, you should be able to reduce them and your spending dramatically. Once you’ve done this, get to work on some of your variable expenses like groceries. We know of one person that did all of this and managed to cut his spending by $1000 a month.

Use the new online tools

There are a wide variety of web-based tools and apps available to help you manage your money. The company Corporate Insight recently found there are more than 100 new startups with apps or software that could help you manage your finances. In addition, there are apps such as Shopular, RetailMeNot and RedLaser that make it easy to use coupons and discounts when you’re making purchases.

Commit to earning more

If you’re one of the many Americans that are under-earners, commit yourself to earning more money. The best first step is to promise yourself to earn more and to make sure you say “yes” to any opportunities you come across that would allow you to do it.

Keep your finances off of Facebook

While it might be fun to brag about your high credit score on Facebook, it’s much better to keep that kind of information off the Internet. Facebook and other types of social media are very public and are places where the scam artists hang out and look for financial information they could use to defraud you. When it comes to your personal finances, a good rule is that less sharing is better.

Review your auto and life insurance policies

Automobile insurance policies can have different deductible amounts, coverage limits and important limitations. These are things that could surprise you if you’re in an accident. Review your policies and make sure you understand them including your life and disability insurance. If there is insurance available where you work think about supplementing it with your own policies.

Be ready for an increase in interest rates

Interest rates are now very low. However, most financial experts say they will eventually rise and possibly more sooner than later. To get ready for this, you need to pay off any debts where your interest rates could rise, and if you are a homeowner you should think about refinancing if you haven’t already done so. If you are a first-time buyer and are looking to buy a home, you might want to think about doing it very soon so that you could get rates that are still low.

Reduce your tax bill

The ugly fact is that many people pay more in taxes than they really should. If you put money into a retirement account that is pre-tax, buy some municipal bonds or start your own business, you will pay less in taxes. If you’re part of a gay couple you might also check to see what refunds you’re entitled to for the past two or three years as the Internal Revenue Service now recognizes same-sex marriages for income tax purposes.

Trade for or rent a high fashion dress

While you may not be aware of this, you can rent and trade for high-end clothes on the Internet. For example, Tradesy makes it very easy to sell and buy seldom-worn fashion items including designer dresses. This gives you the opportunity to wear fancy clothes without buying them. There is also a number of websites growing in popularity such as Bag Borrow or Steal and Lending Luxury where you can rent accessories and dresses for that big party. While it will cost you some money, you will spend a lot less than if you were to purchase the items and will still look like a million bucks.

Kick something off on Kickstarter

More than one hundred thousand projects have been launched on this site and about 44% achieved their goals as of December 2013. You don’t have to be a celebrity to use Kickstarter to fund that creative idea of yours. If you do go for it, promote your project first on Facebook and Twitter and to your friends. Make a great video and, above all, have a very appealing product like the Coolest Cooler that just raised millions of dollars.

man holding credit cardsGive gift cards

While gift cards might seem a little soulless, they really are an ideal gift in a lot of ways. And this reduces the time and strain of gift giving. The majority of people say they really like to get these cards. If you choose cards that are retailer specific (think Cabela’s or Ace Hardware), they generally don’t have fees or penalties for delayed use. Be careful about gift cards from the credit card companies as they generally come with fees that can range from $4 to $6.95. Also, you can get some additional protection by registering the card in the event it is stolen or lost.

Watch out for online scams

It’s easy to buy items on websites like Craigslist but there are fraudsters that prowl these sites. To make sure you’re safe, always arrange to meet the person face to face when paying cash for goods. Be sure to meet some place public and if possible bring along a friend for added protection. And under any circumstances do not wire money before you see the item, as this is how much fraud occurs

Talk to your honey about money

Finances are one of the biggest reasons why couples end up splitting. You should always be honest with your spouse or partner. One good idea is to make a periodic “money date” to review your finances, talk about the big decisions and consider each other’s financial mindset. Do this and you should be able to work together to set and reach big-money goals whether it’s buying a home or traveling to Europe.

Stop worrying and be happier

Finally, sitting around and worrying about money can waste a lot of time. One recent study found that 36% of the people queried said that they spent at least two hours a day worrying about their money or managing it. There are a number of free resources available that can help reduce some the strain of personal finances and save you time to boot. So get busy, find a few apps and stop worrying so much.

12 Keys To Making Better Decisions About Your Personal Finances

man fanning money near his earDid your parents teach you to be a smart money manager? If so, consider yourself lucky. Most parents will talk to their kids about the birds and the bees but not about budgets and CDs. They must assume we’ll pick it up on our own, which is how most of us learn about personal finance. The Irish writer and poet Oscar Wilde once said, “Experience is simply the name we give our mistakes.” Unfortunately this is how many of us learn to be better money managers. We make mistakes like maxing out our credit cards, learn the consequences and become smarter about money.
Keys to making better decisions

If you’d rather not learn how to make good financial decisions by making bad ones and learning from them, there are some keys to making better financial
decisions …

Be brutally honest with yourself

If you’re not careful you can fool yourself into making some really bad financial decisions. For example, you could decide to borrow from your 401(k) because, heck, you would be paying interest to yourself. Or you might buy furniture you don’t really need because of the lure of zero interest financing. These are the kind of decisions where you could be deceiving yourself into financial problems. Be brutally honest with yourself about all of your decisions and the motivations behind them. Do you really need to borrow from your 401(k) to buy that new car or could you just save money for a year or 18 months and then pay cash? And while 0% interest can be a good deal in some cases you shouldn’t use it as an excuse to buy something you don’t really need. A good rule of thumb is that when in doubt, get a second opinion from a family member or friend that you know is good with his or her money. As George S. Clason once wrote, “It costs nothing to ask wise advice from a good friend.”

Watch out for fees

There are almost always fees attached to things that have to do with finances – credit cards, banking, investments and other financial products. It’s absolutely critical to keep fees low especially when it comes to investing. Making money in the stockmarket is tough enough by itself without paying fees that wipe out your gains.

Use cash not credit

Whatever you do, don’t finance your lifestyle on credit. Credit card debt can just ruin your life. Pay cash for everything from groceries to vacations to cars. If you need to make sacrifices to pay cash, do it. Using credit to buy things is the equivalent of stealing money from yourself in the future. Every cent you borrow must be paid back and often at very high interest rates. As the Persian poet Omar Khayyam wrote, “Take the cash and let the credit go. Nor heed the rumble of a distant drum.”

Save a dime out of every dollar

This is very simple but very powerful. Make a habit beginning right now to save at least 10% of your gross pay. Save 20% or even more if possible. If you don’t doubt what this can mean to your lifer, read the book The Richest Man In Babylon by George S. Clason.

Think long-term

Ours has turned into a “get rich quick” society. But if you really want to build lasting wealth, you need to think long term as you make your financial decisions. This puts everything into perspective from a $4 latte at Starbucks to how much you should invest in your 401(k). As an example of this, if you think long term you would realize that a daily $4 latte eventually adds up to $21,056 over 10 years. And investing $1000 a month beginning at age 25 (instead of age 35) generates $1.7 million more by age 65.

Learn to live with uncertainty

While you may think you should avoid uncertainty like the plague when making financial decisions, the problem is that it costs a lot to avoid it. For example, the insurance industry thrives on uncertainty when it comes to cash value life insurance and annuities. However, some protection against uncertainty is unavoidable such as term life insurance and auto insurance. Be sure to think twice before spending a lot of money in return for guarantees.

For example, this concept can be especially important if you are evaluating an annuity. Annuities can be part of some financial plans but there are always fees associated with these products and they tend to limit the upside. An annuity will generate a constant stream of payments but at a high cost. The key here is to think carefully before spending a lot of money to avoid uncertainty. There are rewards to learning to live with it.

Keep things simple

There is an old rule of thumb that the more complex is a “solution,” the less likely it is to be your best option. For example, in most cases term life insurance is a better investment than complicated permanent life insurance products. And index funds are generally better than more complicated actively managed funds. One simple way to invest is in funds or ETF’s as this is usually better than complicated insurance products that have an investment component. In other words, all things being equal, simple is most often better.

stack of moneyHarness the power of compounding

It’s important to harness the power of compounding. Once you understand it, you can better evaluate your financial decisions to make sure they take advantage of it and not ignore it. If you’re not familiar with compounding this is where you earn interest on your investment and then interest on that interest. For example, if you started with $100 and added $100 a month at 2% interest, you would have $1,313.08 at the end of year one and then $2,550.64 at the end of year two and not just $2500.

Always consider the power of compounding whether it comes to paying off debt or how you need to be investing today.

Do the critical things first

Don’t put off the big financial decisions. Begin every day thinking about those things you need to accomplish and get to the important stuff first. Don’t put off actions such as preparing a will, investing for retirement or buying life insurance. When you do the critical things first, everything else will just be much easier.

Take responsibility for your actions

Despite what the politicians might want you to believe, you are not a victim. These people may tell you that the problem is corporate America or that the system is rigged but the result are the same – it makes us feel helpless. This is all nonsense that’s created to score political points rather than moving the country forward. Never play the victim.

Learn to think outside the box

Do you tend to view financial decisions in black and white? For example, do you believe that your emergency fund should always be in cash in a bank or that you should pay off all your non-mortgage debt before investing? These approaches to personal finance often turn out not to be in your best interest. Don’t make a financial decision without weighing the pros and cons and considering all alternate options.

Don’t be greedy

Your friend has a great stock tip that’s absolutely guaranteed to make you money. But you also worry that this might be too good to be true. When this is the case, it usually is. Whenever you’re faced with one of these deals you need to monitor your own emotions. You may be tempted by a get rich quick mentality. But think twice before acting as these deals often do turn out well.

Three Questions To Test Your Personal Finance IQ

writing on a checkDo you believe you have a high personal finance IQ? Well, if so you can consider yourself to be both smart and well informed. The COUNTRY Financial Security Index found that most Americans just don’t know much when it comes to personal finance. When people were asked about financial facts, this survey found that they would need to devote more time learning about finances if they want to get a decent grade on their report cards.

Here are three of the questions that were asked in this survey. See if you can answer all three correctly. If so, we’ll give you an A on the test.

1. What’s the percentage of your income you should spend on housing?

If you answered 30%, go to the head of the class. Most experts say that you should stick to about this amount so that you don’t become overextended and end up as what’s referred to as “house rich and cash poor.”

Unfortunately, just one in three or 31% of the people that took this test answered the question correctly. That means 69% of us are unaware as to how much we should spend on housing and the impact it has on our financial future. If you didn’t know the answer to this question, don’t despair. You can talk to a real estate agent to get the information you need to buy what will probably be your biggest investment – your housing – to make sure you’re not buying too much. The downside of devoting too much of your income to buying a house is that you may not then have enough money left for retirement and personal savings.

Here’s a video where a mortgage professional explains how she would calculate how much a person could afford to spend on housing including factors such as the down payment.

2. Will you have enough money to retire and live your same lifestyle if you save 10% of your income annually?

The answer to this question is probably not. A comprehensive retirement plan is like a three-legged stool. It’s based on three things – contributions from your employer (in the form of a pension or 401(k)), personal savings, and Social Security. If you are the beneficiary of a really generous employer program and live a modest lifestyle, then saving 10% of your income might be enough. But this is generally not the case for most of us.

How did Americans do on this question? Forty-four percent either agreed that saving 10% a year would lead to a comfortable retirement or were not sure whether it would or not. Men (30%) answered yes more than women (18%).

Also, 43% of those surveyed said that saving for their kid’s college education was more critical than their own retirement savings. And only 30% of Americans were able to tell the differences between a traditional and Roth IRA. Thirty-two percent answered incorrectly and another 30% just weren’t sure.

Why is saving for retirement more important than for your child’s education? The simple fact is that you can borrow for college but not for your retirement. As a general rule, saving for retirement should come first. However, Americans often put a priority on education expenses.

3. Is it better to have less money taken out your paycheck for taxes throughout the year or to get a large tax refund?

The majority (59%) of those surveyed got this question right. It‘s better financially to have less money withheld for taxes. You might think it’s great to get a large refund check in April or May but this is a very costly way to save. This is due to the interest you lose throughout the year plus the things you could have done with the extra money you would get on each paycheck. The good news is that 59% of Americans got the question right; the bad news is that 41% got it wrong. And this is still an important number. In addition, even fewer Gen Y people (46%) said it was better to have fewer taxes withheld. Twenty-six percent were either ensure as to how much they should have in emergency savings or guessed a number that was much less than what’s recommended, which is four to six months of living expenses.

What you don’t know is costing you money

You can be a genius, a rocket scientist or a nuclear physicist but if you don’t know about personal finance, it’s very likely costing you a significant amount of money. If you want to have a secure future, it’s important to improve your financial literacy. You will find it much easier to achieve both your short and long-term financial goals if you know how to prioritize your savings and your spending.

Speaking of saving

If you don’t think that saving money is vitally important to a good financial future, you could take a lesson from Jay Leno who just retired from hosting the Tonight Show. Jay was interviewed recently by Jerry Seinfeld and asked about his secret to making sure that he always had enough money in the bank. It was simple. Jay said just don’t spend it. When he hosted the Tonight Show, Jay earned more than $30 million.

And he saved every penny of it.

So how’s Jay living?

Jay does standup comedy nonstop, week in and week out – even while he was hosting the Tonight Show. Combining that money with his endorsements meant that Jay made about a cool $15-$20 million a year. This is the money he used to live, eat and amass his incredible collection of motorcycles, cars trucks and airplanes. And he’s been doing this since he was a kid. In fact he always had two jobs. He would live off the income from one and bank his salary from the other. This not only ensured that he had money put away just in case but it also instilled in him the lifelong habit of saving that he follows to this very day. For that matter, Jay will likely keep his Tonight Show money stashed away as he is still touring full-time as a comedian.

It’s not just for multimillionaires

Jay’s savings habits are not just for multimillionaires. You could do the same thing. We know it’s tough to find one job let alone two. But it’s doable. You can then do as Jay has done and that’s use the money from one of your jobs to pay your bills, buy groceries and just plain live your life, while you stick the income from the other job in the bank and forget that it’s even there. You might be shocked at how quickly this can add up.
Here’s an example. If you got a second, part-time job for 20 hours a week at $10 an hour, that’s about $150 after taxes that you could stash away every week. This means that after taxes you would have about $7800 saved in a year. Having $7800 in a savings account would be an incredible safety net given the fact that almost anything can happen at any time. But even more importantly, you’d be doubling that $7800 every year at that job or a comparable one.

If you can’t work a second job

We understand that not everyone can take on a second job. Your current job may be so time-consuming or stressful that there’s just not enough of you left over to work another 20 hours a week. But even at that there’s ways to make money and stick it away into savings. One of the best is freelancing on the Internet. There are a huge number of websites that will pay money for various services such as editing, blogging, creative writing or acting as a virtual assistant. Regardless of what you’re an expert in, you should be able to find a site that will pay for your help. And you could do this all at home since its online – in a coffee shop – or any place you can access the Internet.

Rent out a room

If you have an extra room in your house that you’re not using or an insulated basement you could rent it out and bring in several hundred dollars a month. Of course, you’ll want to make sure that the person to whom you are renting is reliable and will pay the rent every month.

But whether it’s through a second job, freelancing on the Internet or renting out a room, if you save 100% of that income it will be easy and more productive than you might imagine. Of course, you may not be able to amass a stable of expensive automobiles like Leno but you should be able to live comfortably, knowing that there is food on the table your expenses are paid and that extra work will keep you and your family secure for many years to come.

How To (Almost) Instantly Improve Your Finances For 2014

happy woman with raining moneyIf you are like many of us, you’d just love to be a better money manager. The problem is that good money management is hard. It takes time and dedication. For example, you should really be tracking all of your spending – right down to that drive-through cup of coffee you bought this morning. Then you have to divide your spending into categories, review your categories, decide where you could make cuts, etc., etc. But you’re busy, life is just full of distractions and there just never seems to be enough time in the day to do all those things you should be doing to improve your personal finances.

Does this sound familiar? Well, you’re not alone. When it comes to money management, most people are not perfect. Whether you earn $20,000 a year or $120,000, there are some simple things you could do to be a better money manager and happily enough, some take only a few minutes to complete such as these seven.

Think before you spend

When you’re out shopping, don’t be in a state of mindlessness. This is another way of saying don’t just start piling things into your cart. Stop and think about what you really need and how much you could save by not buying extra stuff. It’s fairly easy to cut unnecessary spending if you can make a habit of just stopping briefly to think about what you really need before hitting the checkout counter.

Have a budget

Okay, this will take more than just a few minutes. But if you’re like most people you don’t have a budget. You need to create one and then learn to stick to it. Write down all of your expenses and then see where you could make adjustments. Be sure to refer back to your budget on a regular basis to stay on track. If you need a little help getting started on a budget, this short video should help.

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Cut 5%

You’d be pretty unhappy if your employer cut your paycheck by 5%. However, you’d still be able to survive. So how about taking a cut now? Reduce some of your extras like that daily latte or weekly visit to the hair salon to cut your spending by at least 5%/ Do this and you should see your savings mount fairly quickly.

Have multiple savings accounts

Think about it this way. The tougher it would be to access your money, the easier it would be to reduce your spending. Open multiple savings accounts and make sure you pay yourself first. One of those accounts could be your emergency fund while another might be earmarked for a future vacation or a new car.

Save

When it comes to saving money, every little bit counts. If you forgo those fast food lunches and save just five dollars a day, you’d end up with $1800 at the end of a year. It’s okay to begin slowly but your ultimate goal should be to put away at least 10% of your net income or your income after taxes and your other deductions.

Make it visual

Paper your cubicle, home and automobile with pictures of what you’re saving for. This is a great way to discourage overspending as this will serve as a constant reminder of why you’re saving money. For example, you might put photos of your vacation destination or that hot new car all over the place to remind you why you’re cutting costs and saving money.

Put your money to work

You’re working hard and your money should be, too. If you contribute to your savings regularly, you will be harnessing the power of compound interest. The longer you can leave your money untouched in a savings account or another investment, the more it will grow. That’s called putting your money to work.

Are you not just able to save money?

Of course, some of this advice won’t help if you have a really hard time saving money. The sad fact is that saving money is difficult. Plus, it’s easy to get caught up in what’s happening today and forget about future priorities like retirement or that new car. But there are some good ways to kick-start your savings. For example, you could change your withholding. If you’re typical, you probably pay most of your annual tax bill through payroll withholding. When you do this, a percentage of your salary is taken out of each pay period and sent to the IRS where it is credited toward your final tax bill. The IRS has reported that in 2011 the average tax refund was $2913. That translates into $242 a month. If you have your withholding set up to get you a big tax return at the end of the year, it means you’ve just given the IRS free use of your money and you’ve earned no interest on it. You could give yourself a quick raise by adjusting your withholding exemptions and then putting the money you get into your savings.

Automate your saving

It’s hard to miss money you never see. Set up an automatic monthly or semi-monthly transfer from your checking account to your savings account. You would not only be saving money but you might find you hardly miss it.

Change the deductibles on your auto insurance

You might also be able to free up money by changing the deductibles on your auto insurance. Review your policy. Check to see the deductibles on your comprehensive and collision coverage. For example, if you were to find that they’re $250, you might increase that to $500 or even $1,000. This would definitely free up money you could tuck away into your savings account.

Buy in bulkSmiling woman hugging sack of groceries

Do you find yourself running off to the grocery store several times a week just to pick up a few items? Then you’re probably wasting both gas and money. Your favorite supermarket might be a good place to buy eggs and fresh produce but if you want to save money, you should join one of those warehouse clubs and start buying in bulk. This is especially true for nonperishable’ items such as toilet paper, laundry detergent, dish soap, paper towels and the like. You could stock up on three months’ worth of these items at a fraction of what you would pay for them at the supermarket and they’d never go bad. For that matter, you might even find that you could save money by buying meat and frozen fruits and vegetables in bulk.

Make it a game

You might find it easier to add money to your savings account if you make it more of a game. As an example of this, you could create a chart consisting of a football field except the yard markers would be your monthly savings goals. Then every time you got a first down by achieving one of your goals, you would move your “football” down the field and then reward yourself – maybe with a movie or a dinner out. Just don’t be too generous with your rewards as this could reduce your savings. If you have a spouse or partner you might make it a competition as to which of you could find the most ways to save money in the next 30 days. You might even make things more “interesting,” by putting a small wager on the outcome. Plus, whoever wins the competition for the month would have bragging rights – at least until the end of the next month.

Teaching Your Kids Smart Money Management Skills

 

mother, father and daughterDo your kids learn anything about personal finances in school? My three certainly didn’t. We have seen kids taught about life in ancient Egypt but nothing about how to manage money here in the 21st century. Do you think this makes sense?

Some schools do teach personal finances

The good news is that some schools do teach personal finances – usually in senior high school. We know of at least 14 states that require kids to take a semester-long course on personal finance to graduate from high school. But the bad news is that 26 states don’t require any courses in financial literacy in order to graduate fro

m high school let alone as semester-long courses.

The underlying problem?


The biggest problem seems to be that teachers just don’t feel good about teaching personal finance skills. The National Endowment for Financial Education released a study

that 64% of teachers don’t feel qualified to teach to their state’s’ financial literacy standards. However, almost 90% of those same teachers said that students should be required to either pass a financial literacy test or a semester-long course in order to graduate from high school.

One thing your kids must learnCard that says credit card

Whether your child wants to be a botanist, a civil engineer, a social worker or a philosopher, the one thing that he or she needs to know before they graduate is about smart money management. He or she needs to understand loans and credit card terms, how to accurately balance a checkbook and create a budget – as critical life skills. If they learn financial literacy when they are young, this will not only help them manage their own finances but will enable them to better understand business financial matters as they go on to develop their careers.

A few great programs and initiatives

Fortunately, there are some good initiatives and programs available that can help teachers and parents get a conversation going and the education process started. For example, there is a national coalition of organizations called the Jump $tart Coalition for Personal Financial Literacy whose mission it is to improve the financial literacy of pre-K through college-age kids. Junior Achievement is another nationwide program that connects students with today’s business leader through a variety of programs. And Northwestern Mutual has a site titled TheMint.org that has great financial tools and tips for kids, parents, teachers and tweens. Your kids could use this site to learn various money management skills from how to earn and save money to how to track spending and make investments.

Trial and error

Most of us learned about smart money management by making dumb mistakes. As you may have learned on your own, financial literacy doesn’t just happen and very few people are born with a smart money management gene. These initiatives and organizations mentioned above are attempting to provide children with a better start on managing their finances by giving them a jumpstart on financial literacy.

Young people and the DOD

Our Department of Defense has seen that young people are not coming into the armed services with the knowledge required to successfully manage their finances. And it believes that it’s impor

tant for service members to have the life skills required to successfully manage their finances and create good credit ratings. As a result, the DOD begins training people financially as early as basic training and then offers financial guidance throughout their careers. It believes that the more information their service members have about making choices the faster their credit scores will go up. And when service members have good credit ratings they are able to get credit cards and loans and pass the credit checks required to rent apartments.

Numerous resources

One spokesman for the Defense Department said that there are numerous resources available to help with financial readiness. There are installation family centers with personal financial managers that are available to help service members develop plans for reducing debt and for spending. There are also many credit unions and banks on military installations that offer these services. Finally, there is the Military OneSource website. It provides downloadable podcasts, articles and CDs on becoming financially fit. Plus, the site has certified financial counselors that can help service members manage their debt. These people are available face-to-face or online.

Questions to ask your children

Of course, one of the best ways to teach your children smart money management is by being a good role model. Beyond this, there are some questions you could ask your teenagers to start discussions about finances and here are 10 of them.

  1. Could you live on the federal minimum hourly wage that is $7.25?
  2. If not, how would you get your boss to pay you more?
  3. How many hours do you think you would have to work to pay for new tennis shoes?
  4. Should you be paid to do household chores?
  5. What’s the difference between a checking account and a debit card?
  6. Why do the credit card companies charge different interest rates?
  7. Do you think you would be able to save one dollar every day from now until Christmas?
  8. What do the letters CD stand for besides compact disc?
  9. What would you do with the money if you got $100 for your birthday?

If your teenagers can successfully answer all or most of these questions, you will at least know that they’re on their way to financial literacy. If not, you definitely have some work to do.

You don’t have to wait until your children are teenagers, either. As the following video demonstrates, you can start teaching them financial literacy when they’re as young as five or six.

8 Signs That You Could Be Headed For A Financial Catastrophe

man holding multiple credit cardsYou’ve probably heard that old story about ostriches and how they stick their heads in the sand when they feel they are in danger. Well, that’s a myth. The reason why ostriches stick their head in the ground is to find water. But you could be sort of an ostrich when it comes to your debts – sticking your head in the ground and refusing to face up to them. This is one of the most serious mistakes you can make when it comes to your personal finances because the earlier you realize you’re having a problem with your debt, the better are the odds that you will be able to fix it. Here are eight signs that you could be headed for a financial disaster and that you might start looking for help.

Banking on a windfall

If you’re counting on a future windfall such as a bonus, a big tax refund or an inheritance, your finances could be in real trouble. Plus, it can be a symptom of a larger problem that you’re rationalizing when it comes to your debts. For example, if you’re planning on a big bonus to bail you out, you’re in real trouble if it doesn’t materialize.

Using credit card hocus-pocus

Credit cards can be useful tools if you use them sensibly. It’s an easy way to make purchases without having to carry cash all the time, plus these days you can probably earn rewards by using them. However, if you see that your credit card debt is consistently getting larger and you can’t make more than the minimum payments, your balances will continue to rise. Your interest rate could take a big jump if you fail to make a minimum payment for more than 60 days. This would make your financial condition even worse. You might be able to hold off trouble temporarily by making your minimum payments or by moving your balances to new cards. But then any sudden change in your finances could cause things to spiral out of control

Juggling fees and paying late bills

Most experts feel that this is a clear sign that you have financial trouble ahead of you. If you’re paying those late fees simply because you’re lazy, you’re basically throwing money away. If you’re juggling monthly bills by making payments large enough to keep things going – but without paying balances on time – this is even more of a symptom of a coming financial disaster.

Constantly arguing with your partner over finances

Just about every couple has fights occasionally over debt. But if you’re doing this regularly with your spouse or partner this can be a sign that you don’t have enough disposable income to cover your spending. Also, if you’re continually stressing out over your debts this can be a sign that your finances have become unsustainable.

Continuously paying overdraft fees

You could be on the very brink of a catastrophe if you’re constantly having to pay fees for overdrawing your checking account. In fact, you can actually compare NSF (nonsufficient funds) fees to those nautical signs you see that are raised to warn of a coming hurricane. In fact, if you’re getting a lot of NSF notices, this is beyond being a warning. It shows that you have a real problem. If you don’t have enough income available to cover your debts and are required to write NSF checks, you could actually be on the verge of having to declare bankruptcy.

Using retirement savings to cover expenses

Unfortunately, it’s common for people to borrow or withdraw from their retirement funds such as a 401(k) to cover their expenses. This is a bad idea under any set of circumstances but if you do this more than once, it shows you’re not managing your cash flow effectively. If you find that you’re withdrawing regularly from your retirement savings, this is more than just a warning sign that you’re living beyond your means. It will have very serious consequences for your retirement as it lessens the effects of the compounding interest that would help your retirement funds grow.

Having a savings rate of zerowoman with help sign

Your finances are definitely in bad shape if you are unable to put aside even a small amount of money every month. You should budget for savings just as you would any other expense. You can just count on something coming along such as an unexpected car or home repair and if you have not savings to tide you over, you may find yourself in a very bad place. Most experts say that if you have no savings, you’re basically standing on the edge of a financial cliff. While you could use credit as your emergency backstop, this isn’t as good as having an emergency savings fund. If you want to be financially healthy, it’s important to set aside money for those unexpected emergencies as well as your retirement.

Using your home as a piggy bank

You may also be headed for a financial disaster if you’re using your home equity as a financial crutch. It may be okay to take out a home equity loan if you have a serious financial need but not for a “want” such as an elaborate vacation. It’s also not a good idea to use one of those loans to pay for a new automobile. It just doesn’t make any sense to use a homeowner equity loan that you would be amortizing over 15 or 20 years just to pay for something you can’t afford or are not willing to save for.

Finally, here’s a video with more information about dealing with debt, including why its dangerous to make only minimum payments.

Can You Really Trust Those Online-only Banks And Lenders?

woman inserting coins in piggy bankWe sometimes sit in amazement when we think about the massive changes that the Internet has made in our lives. We once worked for a company that was almost literally destroyed by the Internet. On the plus side, the Internet has made our lives much easier in a number of different ways. Many people, us included, have stay-at-home jobs made possible by the Internet. We can comparison shop for thousands of different items including our auto and life insurance without ever leaving the comfort of our homes – again thanks to the Internet. And now, there are online-only banks that can seem very attractive because of the interest rates they offer. You can even borrow money online through a process called peer-to-peer lending where there is no bank involved. But can you really trust those online-only banks?

Why they can offer higher interest rates

The reason these online-only banks can offer higher interest rates is for the same reason that companies can sell products online cheaper than through brick-and-mortar stores. These banks simply have lower overhead. They have no buildings that must be maintained, no branch banks and many fewer employees. Of course, the interest rates they offer are still fairly paltry as they typically range from 0.84% to 1% – but that’s due to today’s low prime rate as set by the Federal Reserve and not because of anything those banks are doing or not doing.

Security isn’t really an issue

Those brick-and-mortar banks might seem to offer more security but they actually don’t. They are really no safer than the online-only banks according to many financial planners. This is because they use a technique called encryption to protect your and their information. Encryption makes it very difficult if not impossible for people other than you or the bank to access your information,

Just follow these tips

If you decide to use one of these online-only banks and want to protect your money and personal information, there are some tips you should follow.

  • Check to make sure that all your deposits are federally insured
  • Watch for copycats
  • Look out for identity thieves
  • Carefully craft your banking password

Check to make sure that all deposits are federally insured

The FDIC or Federal Deposit Insurance Corporation protects your money in the event that your online-only bank fails. However, do keep in mind that this protects you only up to $250,000 in deposits for each account holder. You can see if the online-only bank is FDIC insured by checking its website. Or you could go to the FDIC web site and click on the link titled Help – First Time Users.

Watch for copycat sites

As you may know, there are a lot of scammers out there that will attempt to trick you by creating sites that look to be those of real financial institutions. Keep in mind that just because the site looks like it’s that of a popular bank, it doesn’t mean that it is. You should always make sure that you type the correct web address into your browser before doing any transaction. Also, don’t ever click on any link within an email. This is because con artists often send fraudulent messages in an attempt to get your personal information.

Look out for identity thieves

Before you use any online banking tools, whether it’s through an online-only or physical bank, you need to ensure that it’s encrypting your information. There should be a lock or key icon in the web address window of your Internet browser. If so, you’ll know that your information is being encrypted and that it’s unlikely that a thief will be able to steal your identity.

Carefully craft your banking password

Whatever you do, don’t use a password associated with your birthday, street address, Social Security number or some other number that would be easy for a thief to guess. Your password should be at least eight characters long. At least one of those characters should be a number and one should be a capital letter. If you have a problem remembering passwords, you might create one associated with a school or event that only you would know. For example, if you graduated from South High School in 1984, you might create the password 1984_SHS_99x.

You should also use a password that’s different from those used with other accounts such as your email. And, finally, try to remember to change your password regularly.

loanPeer-to-peer lending

A second way to use the Internet for your banking is through what’s called peer-to-peer lending. This is where you borrow money directly from a person or group of people to consolidate debts, buy a car or for any other worthwhile cause and where there is no third party such as a bank involved. There are a number of these lenders available online. Three of the most popular are the Lending Club (www.lendingclub.com), P2P Credit (www.p2p-credit.com ‎) and Prosper (www.prospecr.com). All three of these offer unsecured loans at a variety of interest rates that range from 6% to 29.99%, depending on your credit score and situation. One of these loans can be a good way to pay off credit card debt because you should be able to get a much better interest rate than what you’re currently paying on those debts.

If you think you might like a peer-to-peer loan, here are some tips that might be helpful.

  • Think like a lender – the more you can convince the potential lender that you’re a good risk the better
  • Tell the truth
  • Describe your situation as much as possible
  • Be sure to check your grammar and punctuation
  • Have realistic expectations
  • Don’t act desperate
  • Respect the contract

Here’s a short video explaining more about peer-to-peer lending and how it helped one Army vet.

5 Money Saving Tips For Back-To-School Shopping

mother, father and daughterIt’s definitely that time of year. Millions of kids across America will soon be starting elementary, middle and high school, not counting another several million who will be starting or returning to college. The way things work these days you could be out more than a hundred dollars just buying school supplies. We know because we just spent more than this getting our daughter ready to return to middle school. Plus, there’s the several hundred dollars more you’ll be spending for clothes, backpacks, locker shelves and on and on. So, what could you do to keep that spending under control? Here are five tips that should help you save money.

  • Spend smartly
  • Show your teen how to make his or her money go further by using discounts
  • Challenge your child to save even more by going onto Facebook or Twitter to find promotional codes and coupons
  • Put off any technical upgrades until after the holidays
  • Go to websites such as PromotionalCodes.com, CashCard.com and DealNews.com to look for discounted electronic gift cards

Follow the three golden rules

There are also three golden rules followed by almost all savvy shoppers. The first is to sit down and catalog your needs. Make a list of what you will need to buy and then make sure you stick to it. Research has shown that 57% of school supply shoppers regularly spend more than they had planned.

Second, forget brand loyalty. If your child is demanding a certain clothing brand or store and you give into it, you’re likely to miss out on markdowns or sales that you could get from competing merchants.

And third, do your homework. Spend at least an hour online comparison-shopping before you begin visiting stores. This alone could save you as much as $100.

The beauty of discounted gift cards

Did you know that you can save as much as 35% by buying discounted gift cards? There are websites such as CardCash.com and GiftcardRescue.com were you could find some really good savings. As an example of this, PlasticJungle’s affiliate CashCard.com was offering (at the time of this writing) Abercrombie cards at 3% off, Aeropostale at 8% off, American Apparel at 20% off and American Eagle also at 20% off. While saving 3% at Abercrombie may not seem like much of a deal, these kinds of savings do add up.

Got gift cards you don’t really need?Hand holding batch of credit cards credit card debt

You could  make some extra shopping money by selling unwanted gift cards at sites like CashCard.com. For example, if you had an Ann Taylor gift card in the amount of $100 that you didn’t need, you could sell it on Cash Card.com for $65. And you could get nearly $75 for a $100 Bath and Body Works gift card.

Buy last year’s model or a refurbished unit

If your child absolutely has to have a new laptop this year, you can save money by buying last year’s model or by choosing a refurbished unit. Refurbished laptops are often ones that were returned for some reason so they can’t be sold as new even though they’re in perfect condition. Other types of refurbished units are ones that have been completely overhauled so to be in near-new condition. I’m writing this article on a refurbished Samsung 27-inch monitor I bought nearly one year ago for about half of what it would have cost new. I’ve also seen refurbished MacBook laptops in excellent condition, again for about half of what you would pay for a new one.

Good places to find refurbished laptops, monitors and so forth are PriceGrabber.com and Amazon.com. Apple itself sells refurbished units though it tends to charge more than comparable laptops available on Amazon.com or PriceGrabber.com. Dell has an online outlet store where it sells its Inspiron laptops at discounted prices and Walmart has a department with refurbished HP laptops where it’s currently offering a 15.6-inch Pavilion laptop for $318 – which should fit almost anyone’s budget.

Get email alerts

You can also sign up yourself or your teenager to get email sale alerts from his or her favorite retailers. The website SaleLocator.com can be used to track down back-to-school promotions by store in your area or even by specific item.

How to save on books

If your child is in a class where the required reading includes classics such as Mark Twain, Shakespeare or Charles Dickens, you can save a bunch by getting them free through Amazon.com or the Gutenberg Project (http://www.gutenberg.org/). Gutenberg currently has 42,000 free books that can be downloaded as ePub books, Kindle books or read online. It also has another 100,000 free books available through its partners, affiliates and resources.

Two words no teen or preteen wants to hear

Teenagers never want to hear the words “clothes” and “budget” strung together. However, it’s important you sit down with your child and discuss his or her needs and then develop a clothes budget. This may require some negotiations with give and take on both sides. However, if you can arrive at a budget number on which the both of you agree, you will eliminate many of those arguments that begin with the words, “But I really need to have this (fill in the blank).”

More back-to-school shopping tips

Watch this video for some good tips about organizing and buying back-to-school supplies form an actual freshman in high school.

Is A Frugal Budget Really Helpful?

Is A Frugal Budget Really HelpfulBeing in debt means you had been spending more than what you should have. It led to the debt amount that you are currently buried under and you know that has to change. One of the changes that you have to implement involves cutting back on the things that you used to spend for.

In some cases, the changes are minimal but in others, it can be very drastic. That will depend on the debt that you owe against the income that comes in every month.

For some people, a frugal budget seems like the best solution to get out of debt. It basically cuts out all the unnecessary expenses and places the whole household under a very tight and restrictive spending plan. It only gives room for priority expenses so that debt payments can be maximized.

When does it make sense to use a frugal budget

A frugal budget is not the easiest plan to follow because the restrictions border on the extreme. For a few people, they possess the ability to implement it for life. For most of us, we can probably live on a frugal budget for a short time.

Ideally, you can use a frugal budget alongside a debt relief program that requires you to maximize debt payments for a short period of time. One of them is balance transfer. This involves a new card account that has an introductory promo that eliminates the interest rate on the debt that was transferred. To maximize the benefits, you want to make sure that you pay as much as you can towards your debt within the promo period. At this point, a frugal budget can help you grow your payments significantly.

Another debt relief program that you can partner with a frugal budget is debt settlement. As you are waiting for the creditors to accept your settlement offer, you want to be able to grow your fund significantly. This is where your budget can also play a huge role. Once the creditor is satisfied with the amount you offered, you can switch to a less restrictive budget to give more room for your fun activities.

How to make a frugal budget

Here are the steps to make a frugal budget:

  1. Analyze your monthly expenses first. Start by detailing all your expenses: from the priority to the entertainment costs that you spend on. Include your debts and savings too.

  2. Get your total net income. If you have an income apart from your day job, include this as well.

  3. Calculate the difference between your income and expenses. You have to know if you have anything left or if you are spending too much.

  4. Tweak your budget by removing the expenses that you can live without. Find out how much you can still add to your debt payments. Remember that your debts will be the priority so feel free to slash on the expenses that you do not need to survive.

  5. Build up a separate amount from your budget to boost savings and to have something to invest as well.

  6. Give your budget a trial run to see how you can stick to it.

  7. Assess if you need to tweak your budget further to make room for more debt payments or fun activities (whichever you think you need to meet your financial goals).

There are several budget worksheet templates that you can use online. National Debt Relief offers a free budget worksheet and you can also find some in Crown.org. The latter even has a budgetometer that can tell you if your budget allocations for specific categories are reasonable or not.

Tips to make your frugal budget work

Some people are scared of frugality. In truth, it is really a difficult lifestyle. Most, if not all, of the fun stuff are thrown out the window – at least, this is the common perception. However, that is wrong. Being frugal do not mean you make your life miserable. You just make better choices when it comes to your money.

Here are four important concepts that you should know about frugality.

It’s all about smart financial management.

Being frugal begins with proper money management. You need to be smart about your money simply by knowing what you have and where it should go. This is actually where a frugal budget is most helpful. It will help you identify when you can or cannot afford to spend on something.

It leads to smarter spending.

Frugality does involve the elimination of unnecessary expenses but you need to have the right mindset to make it easier to implement. You always have to keep in mind your spending limitations. Not only that, you want to make the most out of the limited budget that you have. This involves going to thrift shops, buying products on sale events and taking advantage of discounts and promotions. It’s all about clipping coupons, using rebates, and bulk buying when it makes sense. Most importantly, it is knowing when to say no to a purchase that you really want to make, yet you know is not part of your frugal budget.

Going back to what you can do yourself.

Frugality is also about knowing what you can do yourself. The services that you used to pay for can actually be accomplished by you if you only took the time to learn. That will help you cut back on a lot of expenses. It can be changing the car oil by yourself, baking your own bread, etc.

It’s about using your imagination to fuel the fun things in life.

Contrary to what you may believe, frugality should not eliminate the fun things in life. It may seem that way because when you adapt a frugal mentality, you make better choices about the expenses that you know you can live with. However, you should know that you do not really have to stop having fun. You just have to find ways to make your fun activities less expensive so it fits your budget.

What Star Athletes And Lottery Winners Have In Common

Senior man enjoying tropical vacationYou might find it hard to believe that star athletes and lottery winners have something in common but they do. Both have suddenly come into large sums of money without being prepared to handle it.

Star athletes and bankruptcies

You’ve probably read those stories about star athletes who went through millions of dollars and ended up having to file for bankruptcy. Unfortunately, the same has been true of some lottery winners. People who are just not used to having or investing big sums of money can lose it almost as quickly as they got it.

Not knowing the basics of money management

The root cause of the problem – whether it’s a star athlete or a lottery winner – is that he or she received the millions of dollars before learning the basics of money management. It actually doesn’t matter whether you earn $50,000 a year or suddenly get a check for $5 million, it’s the same thing. You can get in trouble with overspending, poor tax planning and other mistakes.

Overspending

A mistake commonly made by both star athletes and lottery winners is called “spending creep or overspending.” It’s just hard for people who suddenly find themselves wealthy to resist the urge to go out and start buying stuff. Plus, these people have never had a huge amount of money before and it’s hard to leave all of it just sitting there. It’s more fun for these people to “reward” themselves by purchasing some expensive toy and then another and then another with no idea as to how much money they’ve spent in total – until suddenly it’s gone.

Ignoring the IRS

A second mistake the newly wealthy often make is to forget about the IRS. It’s just not good to owe the IRS money. One heavyweight boxer earned more than $250 million during his career but ended up losing his 54,000 sq. ft. mansion due to a $200,000 debt to the IRS. The lesson to be learned here is that regardless of whether you earn thousands of dollars or millions of dollars a year, make sure you report all your income and never forget that the IRS will get its share, one way or another.

Overestimating how long the money will last

Another mistake that both star athletes and lottery winners make is to overestimate how long the money will last. An athlete who lands a $10 million contract might think that he or she is set for life. However, by the time the IRS takes its bite out of the $10 million there may be only enough to live on comfortably for 10 years or fewer. While you might not ever have to worry about how long you’d make $10 million last, you do need to make sure you don’t overestimate how long your retirement savings will last.

Bad or risky investments

Just about anyone can make bad or risky investments and star athletes and lottery winners are no exception. Some of these people lost millions of dollars when the housing market collapsed in 2007. And the same was true of some very average people who had put too much money into real estate. The lesson here is that if you have money to invest, it’s important to keep two things in mind. First, you should find an expert financial advisor at a firm that can be trusted and pay for his or her help. Second, keep your investments diversified. Whether you’re rich or just middle-class, it’s important that you have a mix of investments such as bonds, stocks, mutual funds and maybe some real estate. And be careful that you don’t fall for one of those risky investments that promise huge returns. Just remember the old saying, if something seems to be too good to be true, it probably is

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