What You May Not Know About Personal Finance

September 1st, 2008 — Banking, Budget, Financial Security, Goal, Long Term, Money, Personal Finance, Wealth 

budgetUnless you’ve taken some courses on handling finances, there is a chance that you may not be aware of a few of the key points about budgeting, managing your money and planning for the future. While a lot rests on common sense, there are a few techniques that everyone can use to correctly manage their finances and stay on top of their bills. Let’s look at some of the best tips that you can put to use right now.

1. You need to pay yourself a salary.

Sounds a little odd, doesn’t it? However, setting aside a portion of your income every month that will go into savings is one of the first steps on the road to financial security. The best amount to put aside is 10% of your gross earnings each month, but this may not always be possible. Try to get as close to that number as possible and watch your savings grow!

2. Always have money in case of an emergency.

The problem with emergencies is that you never know when they will happen. From losing your job, to a car accident, to an unexpected repair bill, there are financial disasters lurking around every corner. To protect yourself, you need to create an emergency fund that will not be touched unless you have an actual emergency. We recommend putting about four months of your salary aside for this fund if possible, however, anything you can put aside for a rainy day will be useful.

3. Always have a budget.

Even if you’re not restricted on your spending, you may need to be. Everyone can benefit from a budget and chances are, you’ll end up spending less every month. Take a hard look at your regular monthly expenditures and see where there is room for improvement. You should always have at least some money left at the end of the month, so aim for this goal when making your budget.

4. Paying your bills on time really does matter.

Even if your phone company doesn’t report late payments to the credit reporting agencies, this doesn’t mean that you should be late. Paying your bills on time forms a good habit and it will last throughout your life. Work your payment dates into your budget so that you always have enough put aside to handle all of your bills. If necessary, when you get paid, add up all of your set bills and then put that money aside immediately to be used when they are due.

5. Remember the key financial equation.

The key to getting ahead is to always make sure that you are spending less than you earn. It sounds very simple, but it’s not always easy to accomplish. The amount that you charge should be figured in to this equation for the best results. By keeping your spending under control, you’ll be able to start planning for the future right now, instead of when it may be too late.

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3 Habits of a Smart Investor

June 30th, 2008 — Investing, Money, Personal Finance, Wealth 

CheersEvery day we hear success stories of those who made a killing in the markets, and at the same time, we hear about those who lost everything they owned in the markets. What makes one person succeed and another fail? While there are thousands of answers to this question, let’s focus on the fundamentals of smart investing. Granted, you can never invest without at least some risk, but there are ways that you can minimize that risk, make smart choices and become one of the success stories instead of one of the failures.

  1. Trust

    First, there’s the premise of going with your gut. Our instincts are very powerful and usually do not lead us astray. Usually – but not always. Smart and successful investors learn to go with their guts, but they also learn to separate what their heads, hearts and guts are saying to find the answer they need. This isn’t some strange spirituality, it’s actually common sense. We can convince ourselves of almost anything, but it’s hard to get rid of that little pit in your stomach that is warning you.

    In order to become a smart investor, you need to learn how to hone your gut instincts. Listen to that little voice that says, “Are you sure?” before automatically defaulting to what your head is telling you. This is the easiest way to save yourself a lot of trauma, but it’s only one of the components that you’ll need to become a smart investor. There are a few others that are just as important.

  2. Due Diligence

    Next, you’ll need to learn how to research and do your own due diligence on an opportunity. The Internet has made this easier than ever and you can learn quite a few things with just a simple search. If you’re thinking about investing in a new company, do background searches on all of the principles. You’ll learn a lot about what they’ve done in the past and if they have been involved in anything untoward or overly risky. Check the company with the Better Business Bureau and see if other people have had issues with it in the past.

  3. Balance

    Due diligence is the key to becoming a smart investor, but it’s not the only one. The last piece of information that will separate the success stories from the failures is that you need to know how to balance your risks. Would you put your entire family into a car and head them toward a cliff, trusting that the breaks will not fail? You should never put your home, family or livelihood in jeopardy with an investment, no matter how solid you think it may be. It’s just not worth it.

Smart investors learn how to combine all three of these keys into one main philosophy that keeps providing them with winners, over and over again. Your best bet is to start small to test your instincts. Never get in over your head and always remember your instincts.

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