November 20th, 2008 — Debt, Money, Personal Finance, credit cards, holiday shopping
A lot of people make use of their credit cards when shopping for the holiday season on the premise that they are going to pay all of the newly formed debt off within only two or three months time. Unfortunately, most people are still trying to tackle these credit card debts six to eight months later, and by then they are paying as much as 10 percent to 20 percent more because of credit card interest, making the holiday bargains much more costly in the end. This debt pattern is repeated every year for many Americans. Debt and the holidays tend to go hand in hand in this day and age, because incurring debt during the holidays is something that seems to make sense to some people, even though incurring debt for gift buying purposes is one of the worst possible things that you can do. Using credit cards for gift giving is an act that simply leads to impulse buying and overspending, along with resulting in a steep increase in debt.
A better approach to avoiding debt and the holidays is simply to save small amounts of money all throughout the year, putting together a fund specifically designed for holiday gift giving. Put together a list of people that you would like to give gifts too and how much money you can afford to spend on each one of them. This way you can plan ahead and pay cash for each purchase. As soon as the cash is done, you are done shopping.
If you find it to be difficult for you to save money all throughout the year, then consider joining a Christmas Club, which is something that many credit unions and banks still offer. You put so much money into the account a week into the account at your bank. Sometimes this money can be automatically deducted from your paycheck or regular bank account to save you the effort of doing it yourself. The account will most commonly accrue interest at the same rate as traditional savings accounts. In October, November or December the money will be transferred into your regular checking account, allowing you the necessary means to get your holiday shopping done, debt free!
Four other things that you can do to stay out of debt during the holiday season include:
- Setting spending limits. How much can you set aside reasonably every month based on your budget? Plan ahead and only put away the amount that you can actually afford.
- Putting together a list. Follow Santa’s example and put together a list of people deserving of gifts including smaller gifts for teachers, babysitters, delivery people, etc. Budget ahead of time through planning and you will not end up with any unnecessary expenditures.
- Setting a limit. Decide how much to spend on each person on your list and make sure to add everything up so it doesn’t exceed the spending limit that you set for yourself.
- Deciding where to shop. Comparison shop by shopping early and you can save a lot of money. If you wait until the last minute, you won’t have time to shop around and may end up paying more for something that could have been purchased for much cheaper a week or two earlier.
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November 18th, 2008 — Banking, Financial Security, Income Streams, Long Term, Money, Personal Finance, Real Estate
While many are reacting to the news of bank failures and bailouts badly, there are a few people that are taking the time to assess the situation and figure out what they can do to stay on top, and keep their money safe. Panic is an ugly thing, especially when it involves money. Britain has already seen a run on their banks once this year, and many other countries are finding that their banks are on tenuous footing at best.
This creates an environment that is very unstable and as a result, the very real prospect of earning everything you worked so hard is now possible. The biggest mistake that people make when the economy goes through corrections is overreacting. Granted, no one wants to lose all their money in the stock market, and you would find few people indeed that aren’t at least somewhat concerned over the direction the economy is going.
While some are bleating “Great Depression” and others are scoffing, this is a good time to start developing some strategies that will keep your money safe. While there are no guarantees that you can protect every dime, there are ways that you can keep your money safe, and even increasing, in times of economic hardship.
One of the best ways to secure more income in these times is to find ways to make the situation work for you. As an example, the car market is struggling right now, people can’t pay their interest payments and housing is in the tank. However, a smart investor will look at this issue and see ways that they can profit from it.
Thanks to the falling value of homes, there is a rush to pick them up cheaply to flip at a later date. Whether you decide to use the property as a rental to keep regular income coming in, or you want to flip it quickly, real estate has a lot to offer at this time, even though everything seems gloomy. All hope is not lost, and while outright speculation is not a good thing, taking stock of the market and seeing how you can turn your finances around is a good thing.
While you should not invest if you have no experience, at least not without the help of a broker, it helps to broaden your view of the situation and see where you can profit. Reading the financial news on a daily basis is something proactive you can do and it can help you spot trends right as they are occurring. By becoming an informed consumer and taking the time to learn the ropes, you’ll be in a much better position than those who have not paid attention and frittered away their money.
If you are truly worried about your money, consider speaking with a financial analyst, or an investment broker that can help you develop long term strategies that will keep your money safe, and increase your income, no matter what happens in the world.
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November 15th, 2008 — Budget, Debt, Investing, Leverage, Personal Finance
If you want to start making money, you’ve got to stop looking at your finances like a regular person and start treating your checkbook like you work for the bank. This is the key towards successful management of your finances and will help you grow your current income and create more streams of income at the same time. By getting the right mindset in place, you can easily start making more money and get on the road to financial independence.
In the event that you’re not good with managing your own money, it’s definitely time to take a crash course in good debt management principles. Remember, you’re going to need a little bit of debt to build up your credit and if you want to get ahead and make more money, you’re going to need to leverage that debt properly. The first place to start is to make a budget and force yourself to keep it. Put aside enough money every month to pay your bills so that you can keep your finances running smoothly.
A banker looks at things a bit differently than the average person. They are all about returns – and making more money. Bankers want money to go to work instead of sitting there collecting dust. If you want to start managing your money effectively, you’re going to need to adopt this mindset. Instead of thinking, “cool, I’ve got an extra $500 I can blow,” start thinking, “How am I going to invest that $500 so it becomes $1000?”
After all, who wants to settle for a little money, when you could be making a lot of money? The next step towards thinking like a banker is understanding risk. All banks take risks every single day and while some are more conservative, other recognize that in some cases, big risks have big payoffs. The key is knowing how to read an opportunity and knowing how to take advantage of it.
Let’s say that you’ve got a chance to get in on a stock that is bargain basement priced, but has the potential to quickly take off. You don’t have a lot of spare cash on hand. In this situation, a banker would go to the board and get a loan in order to get in on the opportunity. You need to do the same thing. Once you’ve determined how risky the investment is, and come to the conclusion that if it does fail you won’t be ruined, go out and get that loan to take advantage of it!
Bankers also know that the bottom line is essential. They don’t run around overspending your money, so why should you? Never get into debt over your head and curb your spending habits so that they’re in line with your income, not your desires. By thinking like a banker, you’ll be able to turn your finances around and start seeing some amazing returns in a very short time. Give it a try and see what kind of a difference it makes.
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November 11th, 2008 — Personal Finance
Getting married is stressful and emotional, but when it comes to handling finances, things can get really scary. You’ll be combining two incomes in most cases and many people get the impression that they can start spending twice as much. This usually leads to double the expenses and a lot of heartache. If you’re just starting out on your path of wedded bliss, there are a few tips that will help you use these first few years to create a solid income for your future.
1. Business is business.
Too many relationships end up spoiled due to money problems. The best way to approach this is to understand that business is business. Your money should never be handled emotionally. Think of it this way – you are dealing with two banks. The manager at the first bank is sobbing and pulling out his hair. The manager at the second bank is calm and collected. Who are you going to trust more? Find a way to separate your finances and financial discussions from the rest of your life and create a zone where no emotion can enter. They’re cold hard numbers and they won’t appreciate your outpouring of emotion anyway.
2. Start thinking about your future right now.
You may be lost in the throes of wedded bliss, but now is the time to start planning for the rest of your lives. You need to develop multiple streams of income that will make it easier to save for your retirement and achieve your financial goals. Set up a path on paper of where you want your finances to be in 5, 10, 15 and 20 years. Set up definitive goals and then take the steps to make those goals happen. Chances are, neither one of your jobs are going to cut it.
In today’s economy, multiple streams of income are vital if you want to get ahead. This usually means making smart investments, purchasing property that will bring in returns and finding new ways of making your money work for you. If you don’t have the money to invest now, consider taking out a small loan to get started. This is a powerful method known as debt leveraging and it is used by millionaires throughout the world.
3. Avoid the Bad Debt Trap.
Leveraged debt is good debt. Overspending on things you don’t need is bad debt. Learn to separate the two and train yourself to stop before purchasing something you don’t need. Ask yourself – should I spend $5k on a new television or $5k on some stock that is going to pay be back four times over? This makes it a lot easier to get your priorities on the right path.
Too many couples end up trapped in the endless cycle of bad debt. Consider taking a course together that discusses debt leverage and learn more about it as a married couple. You’ll have more time to bond and you’ll be learning techniques that will carry you through the rest of your lives together.
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November 4th, 2008 — Financial Security, Money, News, Personal Finance, credit
A few years ago if you referenced the term “credit crunch”, most people would be puzzled. Today barely a single day can pass without the phrase seeing consistent if not constant use in the newspapers and on television. The credit crunch is a crisis that is affecting numerous financial institutions and banks, and has been wrecking havoc on the economy since the summer of 2007. This is when it had officially become apparent that millions of mortgage borrowers in the United States were not going to be able to pay their loans back.
For a number of years banks were offering mortgages to people even when they did not have the credit to support them. These loans were offered at low rates, but only initially, and when the rates went up over time, borrowers were no longer able to pay the mortgages back, which meant that banks were becoming less willing to lend money, clamping down on the newer, fresher loans to other customers, only offering higher interest options to customer needing loans.
All of the world’s money markets have been affected by these financial issues, including markets in the United Kingdom and elsewhere. Regardless which bank or building society you turn to, credit is much harder now to attempt to obtain than ever before, and also much more expensive, and this goes for personal loans, mortgage loans, credit cards and even overdraft fees. Here is what you need to understand in order to stay calm and avoid becoming affected by the credit crunch. If you want to resist panic by surviving the credit crunch, consider these things:
- The credit crunch is absolutely not going to affect everyone equally.
If your credit is good or even just reasonable, then it should not be difficult for you to find a mortgage or another loan or line of credit that you need, even if you have to pay more now than if you had applied a year or two ago.
- Many banks are now cutting their base rates in half.
They are pumping money into other investment options to make it easier for responsible borrowers to get the money they need, which is going to bring down the cost of credit over the span of the next year or so.
- While some lending options are going to be a bit harder or more expensive to get, such as automobile loans and mortgage loans, you can get money when you absolutely need to.
So if you need a student loan, for example, rest assured that there are still options out there because the government is working to provide lending options that are most easily obtainable for those who are in need.
This will work wonders for keeping your lending options open when you need them, which is the best way to make sure that you can get a loan when you absolutely need to.
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September 22nd, 2008 — Banking, Money, Personal Finance, children
Many of the best lessons we can learn about personal finance are taught when we are very young. By laying a strong financial foundation for your children, you can help shield them from making catastrophic financial decisions in the future. There are some great options available out there that can help any child learn more about money, how to handle it and how to respect it.
There is a lot to be said for a paper route, or even earning money for doing chores. Instead of handing out an allowance as an obligation, teach your kids to respect that money by having them work for it. We’re not saying put your three year old to work scrubbing floors, but once your kids are around the age of 9 or 10, they should be able to start grasping the concept of work = money.
This can have a pleasant side effect of reducing spoiling, and will help your children realize that hard work does pay off. Introduce the concept of bonuses early on and they will be able to stay motivated and keep on track. But you can just stop here. Now that your kids have money, they need to know what to do with it.
The best solution is to open up a kid-friendly checking account. Most banks now offer options for children’s accounts and this can instill a brand new sense of responsibility. Open an account with your child and make sure they understand the basic principle of not spending what you don’t have.
They may need to learn this the hard way, but over time, this first checking account will open up many new horizons for them. Stay on top of what they are spending and offer advice when necessary. The next step is to introduce the concept of budgeting. Now that they have money, and a place to put it, they will need to decide how they want to spend it.
This is a great opportunity to teach children about what to buy and how to determine whether or not a purchase is really worth the effort that went into earning that money. Grab a notebook and have your child draw up a wish list of what they would like to buy with that money. Once they’re done, you can go over the list and help them figure out what it will take to earn each item. Chances are, once they consider how many hours it takes to earn a pair of jeans, they’ll start gaining more respect for money and work.
Last but not least, it is vital to teach children how to grow their money. Open up an interest bearing savings account in your own name, and deposit their savings fund into it. Describe how the process works and keep them updated on how much interest they are earning. Again, this is a powerful motivator and can help a child learn more about how to make money when they are adults. All the work that you put in now will have a big impact on their future.
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August 17th, 2008 — Debt, Leverage, loans
Right now, the student loan industry is going through one of its worst periods in decades. New Federal regulations have forced many banks to stop offering student loans, and students are being forced to either find a direct loan or start paying back what they owe. Enrollment figures are being affected dramatically and right now, many students simply cannot afford to go to school.
This problem is extending to those that are already trying to pay on their student loans. It has become harder than ever to consolidate old student loans and the interest rates are not helping matters either. It is important to pay off your student loans as quickly as possible, especially if you want to save money over the long term. Here are some tips to help you accomplish this.
1. Try asking your family for help.
If your family is in the position to help you financially, this should be your first stop. No one really likes borrowing money from their parents, but if you can pay off all of your loans, it is worth it. You won’t have to worry about crazy interest rates and you’ll have a chance to make bigger payments on the loan. However, you’ll need to make sure that you can set up a payment plan and stick to it to avoid causing any family disputes.
2. Get a second job.
This is a tough one, especially if you are already working full time. However, it can mean the difference between paying on student loans for the next decade, or taking just a year to pay them off. For example, if you owe $98,000 on your student loans, and you get a part time job that pays an extra $1000 a week, you could pay off that loan in less than two years. There are many high paying second jobs, such as bartending, where you can easily work off that student loan in no time at all.
3. Leverage your debt.
If you don’t have the time to get a second job, you may want to consider a technique known as debt leveraging. This involves taking out a loan and making an investment. Whether it is in an interest bearing account, new business idea or stock is up to you. Just make sure that you can count on the returns. This will create a secondary stream of income that can be used to pay down your student loans in a lot less time.
4. Negotiate.
If all else fails, try negotiating with the loan company to get a lower interest rate. If you have been paying on your loan faithfully they will be much more likely to help you out. It never hurts to ask or to apply for a consolidation loan. The worse they can say is no, and you’ll still have a lot of different options out there. The important thing is that you don’t fall behind on your debts. It may take some hard work, but you’ll appreciate it once you’re free of the yoke of your student loans.
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May 27th, 2008 — Banking, Debt, Diversification, Financial Security, Leverage, Money, Personal Finance, Wealth
If you’re interested in leveraging your credit in a safer environment, credit card arbitrage is one of the best ways. In order to succeed, you need to make more interest than your low interest balance transfer offer and for that you need to invest your money in a high interest bearing account. However, there are many different high interest banks out there and it can be difficult to know which one is right for you. Here are some guidelines to help make your choice easier and help you get the best deal for your investment.
1. Are there any fees?
Numerous high interest banks charge account fees that can gradually chip away at your funds. If possible, look for a bank that does not charge these fees so that you won’t be out anything. If you can’t find one that you like, look for the banks that charge minimal fees and guarantee that they won’t go up. There are numerous scams out there that involve getting you in a low fee rate and then suddenly raising the costs.
2. How reliable are they?
Just because a bank sounds good on paper doesn’t mean that they are. You’re going to need to do some due diligence to protect your investment. If you’re dealing with a pretty well known bank than this isn’t such a large concern. Keep in mind however, that even big banks can fold suddenly, as evidenced by the fallout in the current housing markets. While US banks are insured up to $100K, getting access to your money in such an event is a potential issue in the short term and more than likely the high interest paid will convert to a substantially lower amount paid after the closure.
3. What is the minimum amount required to open an account?
If you are only placing a limited amount of funds in a high interest bank you need to be aware that some of them have limits as to how little you’ll be able to put in. For some larger banks, like ING, the minimum is only a dollar. For others, the minimums may be higher than $10,000. This can really help narrow the field, especially if your investment is very limited.
4. How good are the rates?
Although most high interest banks offer similar rates, keep in mind that even a tiny little point or percentage can make a big difference when it comes to the amount of your return. Make sure that you do your homework to find the right bank that not only meets the criteria above but also offers you the best interest rate.
5. Will the rate fluctuate?
It goes without saying that it is much smarter to put your money into a fixed account. Sure, if the rates go up suddenly you may be out a few bucks, or even a lot of bucks. But it’s a lot better than facing the music when the rates plummet down.
It is also a good idea to consider opening more than one high interest bearing account with different banks. Diversity is always key when it comes to smart investments. It’s never a good idea to put all of your eggs into one basket. As we mentioned earlier, even the best banks can fail. You won’t be hit quite as hard if you’ve got your money spread around with different banks.
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