November 16th, 2008 — Goal, Personal Finance
One of the hardest things for many of us to do is to manage our finances properly. It can be hard if you’ve had no training and you’re used to just spending freely, whenever you want. There are thousands of people out there that can’t balance their checkbooks let alone plan for their future, but there is no shame in that. You just need to take that first step towards learning about how to start managing your finances and getting ready for the future.
For some, this may just not be possible, and again, there is no shame in that. If you simply cannot make sense of your money, you will need to get some help before you get into trouble. An accountant can really make a difference if you’re struggling and they usually do not cost that much money. You’ll actually be saving money in the long term and you’ll be able to spend less time worrying about your money.
But for most of us, it’s important to learn how to do this on our own. Unless you are incredibly bad at math, there is no reason that you cannot manage your finances. It’s really just basic addition and subtraction and anyone can do it. It takes a little bit of focus and you may need to learn a few terms along the way. However, you’re investing in your future when you learn how to manage your finances and it will pay off.
Let’s start off with basic financial planning. A lot of people hear that term and simply turn off. However, it’s actually pretty easy. Here’s an example - You need to ask yourself, how much money do I want to have saved five years from now. Now, divide that number by five. This is how much money you’re going to need to put aside every year to meet that goal.
If your goal isn’t reasonable, you may need to fine-tune it a little bit to bring it line with your income. Now, you’ll need to take that yearly figure and divide it by twelve. This is the amount you’ll need to put aside every single month. Set up an interest bearing savings account and make that deposit every single month. You may need to discipline yourself for the first few months, but it will get easier. If you find that your finances are a little tight, try revisiting a few of your expenses to free up some cash.
Lastly, it is important to understand how debt works. There is bad debt – which most of us are in, and then there is good debt. A simple formula to tell the difference is:
Bad debt = money spent on consumables and things that will never give you a return
Good debt = money spent on something that will create new income streams or pay off in the future.
By using good debt, you can reach your savings goals a lot faster and it won’t be so difficult.
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November 13th, 2008 — Book Review, Money, Personal Finance, Wealth
With all of the hype surrounding Robert T. Kiyosaki’s book, Rich Dad Poor Dad, I fully expected a life changing read that would open new horizons and unlock the mysteries of the wealthy. What I got was a nice little parable with very little actual advice and a whole lot of pep talk. While there is absolutely nothing wrong with getting people fired up about making money, it won’t do them much good if they can’t put the advice into action right away.
My main complaint with this book is that the techniques mentioned in it are really only useful for those who are in their early 20’s and willing to go the long haul when it comes to making money. I think the majority of readers are those who are already established and need to find a way to get more money for retirement or as a way to break free from their dreary jobs. Most of the focus appears to be on ways to make money that are already well known.
We all know that taking money and putting it into high interest bearing accounts will pay off eventually. We all know that the wealthy usually have many assets. What we don’t know is how they get them, how they keep them and how they keep their money rolling in. You don’t play high stakes poker with interest. You have got to be willing to get out there and put your money on the table and take that chance at winning the pot.
While this book is a great resource for teenagers and those just starting out in life, I really can’t recommend it to those who are looking for a path on the way to becoming wealthy. It’s already pretty much an accepted fact that watching your money and living frugally is a good way to save and amass wealth. But how you do get that wealth in the first place?
In order to get money, you’ve got to have money. For most of us, who don’t have a rich dad, that either means waiting for 20 years to have a savings account that we can actually work with, or it means taking that chance and leveraging debt in a smart way. This book was very anti-debt, which is a good thing for some people, especially if they are caught up in bad debt. However, it did not address good debt appropriately enough and the benefits that it can bring if managed correctly.
Most of the rich got that way by leveraging their debt when they first started out. It’s one thing to be born wealthy, but somewhere along the line in that family, somebody had to take that risk that would eventually pay off to secure the futures of their descendants. Leveraging debt to make money is the oldest method of finding financial freedom. I wish the book had gone into more detail on this premise instead of focusing on what most people already know.
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August 25th, 2008 — Banking, Debt, Financial Security, Leverage, Money, Personal Finance, credit cards, credit score, retirement
Whether you are pushing thirty and trying to get your first home or your retirement is staring you in the face, there are times when you may feel as though you’ve run out of time financially. We don’t always make the best decisions when it comes to saving money and before long, we end up wondering where it all went wrong. If you’re trying to figure out how to catch up financially here are a few tips to get you started on the right track.
1. Fixing your credit.
First and foremost, your credit should be your main focus. This will make a big difference in whether or not you are able to get any kind of loan and it is always good to have as high of a score as possible. If you are below 600, there are plenty of things that you can do to improve that score. You’ll need to start by paying off any delinquent accounts. Then, open up a secured credit card or get a small loan and make regular payments. In six months, your score can jump as much as 80 points or more.
2. Putting money aside.
If you’re already in a financial bind, putting money away can seem impossible, but it’s not. There are a few ways that you can start saving money right now, even if it is only a little bit. Place it in a high interest bearing savings account to get the most out of your money and add to it as much as possible. Some nest egg is better than no egg at all, and every little bit does help.
3. Consider debt leverage.
In this situation, when you need to start getting more money in to secure your future, debt leverage may be the best choice. If you are not familiar with how this process works, you basically take out a loan and invest that money. Whether it is into stocks or even real estate property, the idea is to have it start earning money for you. This is a good kind of debt and one that can mean a big difference when it comes to retirement. If you don’t have a savings account, you’ll need to have an alternative source of income coming in that will last through your older years.
4. Realize that it is never too late.
Many people make the mistake of thinking that there isn’t any point in turning things around. It doesn’t matter how old you are, or how bad your situation may be. There is a way out and you can turn your financial life around. Never give up, find new ways to make more money and hang in there. By sticking it out, you will be able to start securing your financial future, one dollar at a time. It’s not the quickest way, but it will work, provided that you dedicate yourself to wise spending and investing.
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August 18th, 2008 — Money, Mortgage, Personal Finance, Real Estate
As housing prices keep falling, many people are considering getting into the property market like never before. If you are looking for an investment property, now is certainly the time to strongly consider your options. However, before you get in over your head, there are a few things you need to know about foreclosed property. First, it is a good idea to figure out how you plan to use the property. Since the rental market is booming right now, we’re going to focus on that for this particular article. Most of the tips will also apply if you are planning on purchasing a property for resale. However, you should be prepared to wait several years before seeing a return.
1. What kind of renters are you looking for?
This makes a huge difference when it comes to purchasing property. Different types of renters will have different needs and risks change significantly. For example, renting to a family is generally safer than renting to a biker gang, but in some ways, the family could do more damage. Every tenant is a potential risk but you’ll really need to think long and hard about your intended market.
The type of renter you select will have a bearing on many aspects of the property. For example, families will need a yard, and will need to be a in specific location. Other renters may want a deck, or other features that make the home stand out. By focusing first on the type of renter you’re looking for, you can save a lot of time.
2. Where is the property located?
Just any property will not do for a rental. For example, if you want to rent to a family, it will need to be located near good schools. If you want to rent to someone that is on the career track, it helps to have the property located close to a metropolitan area, or at the very least, close to transportation. Consider the location of the property very carefully before making your move on any property.
3. What makes the property special?
If you want to charge more rent to make more money on your investment, the property is going to need to have a feature that makes it worthwhile. How big is the yard? Does it have something that makes it truly special? These are things that renters will be looking for, and you can charge a higher price for that rent if your property has it.
4. What kind of shape is the property in?
We always recommend actually visiting the property before you buy it and getting an inspection. There is no point in investing in a property only to find out later that you’ll have to spend more money on it. If you’re looking for a fixer upper great, but if not, you will need a property that is ready to go and requires a minimum of repairs or painting.
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