I don't know what it is about me and money. We just don't get along. She's spending it faster than we can make it.
You'd have to chain me up to keep me away from the mall.
Well I was never really good at math.
It was on sale.
I just can't help myself.
I try to save, but every time I put some money aside, something else comes up.
Smart with money? I don't think so.
Our ability to handle money affects more than just our bank balance. It can also play a big role in how we feel about ourselves, in our relationships with others, and how we succeed in life.
Money means many things to many different people. But primarily money means power and control. The person who has the gold has the power. Money means security and food to eat. Clothes to wear. A safe place to live. Ability for transportation to get back to work. Money means status, about how people view us as successful or not very successful, certainly in our society.
Money is important in how we learn to manage it, because if we don't learn it, it becomes a major issue in marriages. It's one of the major problems that are presented in family therapy sessions for marital issues, is money, and how it gets used, and seen, and managed.
Scary, isn't it? Still, you don't have to be a certified accountant to be a good money manager. All you need to master are three simple organizational skills to make the most of even a part time or entry level income.
One, set short and long term financial goals. Two, create a budget or spending plan. And three, select financial services that are right for you. You know the old saying, you never get there if you don't know where you're going? Well, it's like that with money management. While we may not be satisfied with the amount of money we have, we can learn ways to make it go further, if we have a clear plan.
A financial plan is a wish list. It's like a road map. It shows you where you want to go and how you're going to get there. And it's probably going to take more than one or two stops. That's why we start with making a list of our goals. Not just the big ones, like buying a house or taking a trip overseas, but the smaller, easier to get to stops, that we can make along the way. This is the fun part.
We need everything. I don't know where to start. Just a mountain bike. I'd be happy with that.
An apartment. But then of course, I'd have to fill it with furniture.
I just know I won't be happy with a compact car. I need something fast, something I can really move.
I can't stand to see all this money wasted on rent. If we had our own place, we could be building equity. And saving. For the future.
Financial planning is important because it helps establish those goals that are important to you. Everything that you do in this world revolves around money, or the lack of money. So the better the plan you have to start with, the more likely you are to achieve the goals you want.
When you're setting goals, it's important to distinguish between the things which you can accomplish easily, and the ones that are going to take a little more work. Short term goals can include anything from a new dress, or a new stereo, to a summer vacation. You need to do some initial research to find out just how much cash you'll need, and how long it will take to get it. You'll be surprised how much easier it is to save when you have a clear destination. If you are a student click here to view 10 Finance Tips for Students to Save Money after reading the whole article. Let's continue!
Achieving your short term goal will give you the encouragement you need to aim a little higher. Maybe you're dreaming about having a place of your own, buying a new car, or even giving up that dead end job and going back to school.
I've been doing odd jobs in our neighborhood since I was 10 years old. You know, mowing lawns, paper route, walking the neighbor's dog. But it's never been enough to save. Next year, I'm planning on going to college. I'd like to have my own car, but where am I going to get my hands on 12 grand?
I've been working for nearly a year now, but my entry level salary doesn't even cover my expenses. So I have to live at home. My girlfriend wants me to get an apartment with her, but I don't know how I can afford it.
With your present earnings, many things might seem way out of reach. But by setting priorities, creating a workable budget, and establishing a realistic time period in which to achieve your goal, you'll be surprised at what your income can do for you.
Now comes the part that most people hate. The moment where you work out a budget or spending plan and agree to stick with it. Without it, you might as well be driving in a blizzard with no idea where you're going, or how you're going to get there. Yet, strangely, many of us would prefer not to know. We'd rather throw our fate to the wind and fly by the seat of our pants.
So, what is a spending plan? A spending plan is a record that shows how much we earn and exactly how we spend it. It helps us plan how to best use the money we earn to get the things we really want or need.
If you're going to spend money, and you know what types of things you spend your money on, you can better develop a plan that meets your lifestyle. If you go out, and you enjoy going out on the town, or having fun, or that kind of thing. You go to bars or whatever it is. There's a lot of money you can spend in those kind of places. If you enjoy clothing, you can spend money there. But if you understand how you spend your money, you can develop a plan that suits your lifestyle.
Sounds simple, but when it comes to money, many of us live in a fantasy world. So the key element to a successful spending plan is truth. In order to take charge and change our spending habits, we must see what we really do with our money.
And the first step is being realistic about what we really earn. When you get your first paycheck, you may not get the feeling of exhilaration you thought you would have. You may find that you actually get a lot less cash than you thought you would. And that's because nobody is taking the time to explain to you the difference between gross and net pay. When your new boss tells you you're going to be earning so much a week, he may not mention that this is before the government has taken out a series of standard deductions that can reduce your income by as much as 25%.
The normal deductions for almost everyone are, federal income taxes as an example, that's probably anywhere from 8-10% of your check. There are the state and local taxes. 2, 4, 5% of your pay, is not uncommon. There are social security taxes to the government to fund this whole security plan for retirement and other benefits the government offers. That's about 7% of your gross pay. So, those are the basic deductions most people, everyone, will have.
In addition to that, there are also deductions such as for medical insurance, where your employer pays a part of your medical insurance, and you pay a portion. There are also special kinds of coverages. Long term disability, different kinds of things like that. One of the most common deductions these days are 401k programs.
401ks are a form of self-directed retirement. You put money into the account, most employers will match that same money into your account. And you can build for your own retirement that way. Overall, the kind of deductions you can expect to have will amount to anywhere from about 15-25% of your gross pay.
So, there can be a nasty difference between your gross pay, or what you thought you were getting, and your take home pay, which is what you actually have to spend. Once you've determined your real yearly income, divide by twelve to determine your monthly income, and enter it into your spending plan.
The next step is honestly looking at where your money goes. To do this, you need to make a list of all your monthly expenses and divide them into three columns or categories. The first category is fixed expenses. These are the bills you pay the same amount on every month. They include your rent, or house payment, insurances, installment loans, and services like cable.
The second category is flexible expenses. These include food, clothing, telephone, and other utilities, as well as car expenses, and recreation. The things that are harder to estimate. By keeping a record of these expenses over a period of several months, you can average out approximately what you spend each month.
The third category is periodic expenses. If you own a car, this will include your yearly registration and insurance. It may also cover things like tuition, property taxes, and any charitable contributions that you make. You could include gifts for family members and friends, and holiday expenses that you know will affect your budget at the same time every year. Divide each of these by 12 to find the monthly average. Money management experts strongly advise that within your fixed expenses, you should include a standard 5% of your monthly take home income to go automatically into a savings account for emergencies and future needs.
Finally, add up all your monthly expenses and compare them with your monthly income. If your expenses are greater than your income, you need to figure out how to cut your expenses, or find additional income. If you have trouble remembering when all your bills are due, it's a good idea to mark them on a regular calendar, including those that only come up once or twice a year.
You can pick one day, maybe the first, the fifteenth, or the last day of the month, and get into the habit of paying them all on that day, so you don't get off track. Always pay your bills on time. Those late fees and accrued interest payments are definitely money down the drain. Keep a written record and always file your receipts. You might need them at tax time for deductions or if a payment is disputed.
It's hard for me to know how much I actually earn. I do odd jobs for folks in our neighborhood. Sometimes I get paid 50 bucks. Sometimes I get paid 10. How can I make a budget out of that?
Even if you don't have a regular income every week, you could still make a workable budget. Again, you have to be very honest with yourself. Keep an accurate record of what you've earned over a period of say, three months. And average it out on a monthly or weekly basis. If your work is seasonal or relies on other conditions, you'll have to include the savings you need to cover these down times.
The most important thing to remember when you're estimating your income is not to include money that you think you might get. This counting your chickens routine can get you into a lot of trouble.
When that was a bummer. According to this, I have less than zero to put on my down payment towards my car.
Our budget shows that we should have $300 a month more than our bill.
Where'd it go? It's a good question. It is, in fact, the very next question you have to ask yourself. There's a big difference between what most of us think we spend and what we really spend. In order to determine your true spending habits, you have to make like a detective and write down every little thing you spend for the next four weeks. Keep a diary of every soft drink, every candy bar, every gotta have it, and but it's on sale, extravaganza. The results may surprise you.
I spent at least $10 a day on lunch and snacks. That's $60 dollars a week and that's my share of the rent.
Clothes? I just put it on my card. I tell myself I'm doing really good, because I got them on sale. But after the interest charges, I might as well have paid normal retail.
I don't think about it. If the money's in my pocket, I just spent it.
Take a look at your spending diary. I'm sure you'll find several areas of flagrant extravagance that just leap out at you. In order to change your spending habits, you need to practice a technique called behavior modification. This means first, identify the problem. Then, take steps to change or modify it, by deciding on an action, like not going to the movies, department store sales, or fast food restaurants. Until you've met your savings goal.
I guess you could do simple things like not carry big wads of cash with you. If you've got the money, a lot of people will spend it. I can be that way. And I have to really think about that. One of the things that you can also do is avoid maybe taking credit cards with you on that first pass. Do comparison shopping. But if you have that plastic and say, well, OK, I want it. And you throw it right down, you can blow your plan right away. I personally keep receipts for a lot of things. If I keep the receipt for something I do purchase and I think about it, so I don't really need that, I can take it back.
And that brings it to the point. Do you really need it? Think about it. Hang on, why am I buying this? If you keep asking yourself why enough times, you maybe come to a conclusion, you don't really need that item after all. So you may forgo it. And don't blow the plans. So you just have to think about what you're doing. You have to have that discipline and then follow through. And know that those goals you set aside are really important.
It's obvious I've got to up my yard rates.
Well, I guess brown bagging it for a couple months isn't going to kill me. I have to admit, I can't only wear one pair of shoes at a time.
Sometimes, just trimming your budget isn't enough. Maybe your situation calls for more drastic measures. This might mean giving up your odd job routine for something like a part time restaurant or laboring job. It might mean relocating to an area where you can earn better wages or find a broader range of opportunities. It might mean changing your career.
Maybe you've set your sights too high for now. Your heart may be set on a fancy car, or a home with your own, but it may take the middle step of settling for a cheaper apartment, or a less expensive model, to build up the equity and credit record you need to qualify for a more ambitious target.
High interest bearing, revolving credit, no money down, service charges, early payment penalty, balloon payment, adjustable rate, CD's, what does it all mean? From the time you enter college or open your first bank account, you become a genuine consumer. And as such, you'll be instantly bombarded with offers and information regarding all kinds of monetary temptations and get rich quick schemes. There are a lot of good financial services designed to get the most out of your dollar and start you on the road to lifelong security and opportunity. If you can only understand what they're talking about.
Let's start with your bank account. Now most of us will agree that it's better to store your money in a steel vault than under your mattress. And your money can be earning you interest while you're not using it. The trick is to find out what type of bank account will serve you best.
A savings account, when you put the money into the bank, we're going to pay you interest. So, the money that you give to us, is going to work on your behalf. It's going to grow for you, as long as you leave the money in the bank. It's going to grow.
The benefit of a saving account principally is to be able to monitor the progress to meeting you saving goal. The account shows all your deposits, shows those withdrawals you're making. And if you keep your eye on the account balances, you can then determine how well you're meeting those financial goals you set for yourself.
I think everyone should have a savings account, and the earlier the better. A good starting goal for someone joining the work force would be 5% of your pay. As you get older, you have different goals. You may want to buy a house. You may have to save for that down payment for that new car that you need. You may have other personal goals. You know, vacations, etc. Which will require more savings.
But most people start out trying to do 5% After a while, getting up to 10% Maybe even 15% of your pay. Once you get a good basis and foundation of saving, it becomes easier to increase it. Because you see the impact of that savings and your watching that growth. So you can meet your goals and objectives.
Certificates of deposit are for people who have, their savings accounts have grown, and they have more money. It's limited access, so you want to put money into CD's that you're not going to be needing for a little while. Because the CD has a term and you can't get your money back out for 6 months, or a year, or whatever the term might be, without paying a penalty on that. You're going to receive a higher rate of interest on your CD's then you would receive on your savings account, because it is tied up for certain period of time, whatever time you might want.
A checking account is a record keeper of all the purchases that you make. The bills that you pay. When you open up a checking account, you purchase checks. Then, when you go out to make a purchase, buy your groceries, pay your bills, you write a check. Then, at the end of every month, those checks are going to come back to you.
Those checks will then give you a permanent receipt for what you've done and also maybe help you to budget your money. You can see where you're spending your money and what you're doing with it. Then you maybe can make changes. So a checking account not only gives you receipts for what you do, but it helps you to budget your money, also.
I think a checking account really helps you manage your money from the stand point of being able to see what you spend your money on. It's a really good convenience from the stand point that you don't have to carry cash wherever you go. And you can utilize the checks for your purchases.
Checking accounts, when you get to the point where you really need to keep track of those expenses, when you're mature enough to handle that, a checking account is a great tool. It's very efficient way to pay for your purchases. You just have to be willing to do the record keeping.
The important thing about keeping control of your checking account is to remember to write down every transaction on the reconciliation form provided. When the bank returns your checks to you every month, along with your statement, take the time to sit down and check off each entry, adding in your monthly charges and any fees for new checks, or insufficient funds. Don't get into the habit of writing checks against future income and hoping to beat the mail. It's too easy to lose the race and end up bouncing checks.
Writing checks without money in the bank is a really bad idea. Let's give you an example. You go to a store and you write a $10 check for some item you purchase. You then, unfortunately, don't have any money in your account to cover that. Well, the bank is very unhappy with you about that kind of thing, because they're effectively loaning you money on good faith with a checking account, assuming you have money in the bank. You write that check. It bounces. They charge a fee usually anywhere from 10- $20. For every check you bounce.
The merchant that you wrote the check for isn't very happy with you either. They typically charge you $15, maybe even $20, for that bounced check. So let's see. You wrote a $10 check. You've got a $15 bank charge fee, which they take directly out of your account, and you've got a $15 fee the from the merchant who says, I want the money you owe me, the $10. Plus, $15 for all processing cost and handling. So that becomes a very expensive 10 dollar item in a hurry.
You've probably seen people lining up at these things all over town. Automatic teller, or ATM machines, give you instant access to your bank account, any time, night or day. All you need is your personal access card, your personal identification number, which you punch in the machine, and abracadabra Money magically appears. That's if you have anything in your account, of course.
In your excitement at receiving instant money any time night or day, it can be easy to forget to record your ATM transactions in your check register. To help you remember, always keep your receipt and file it.
You can get cash out of an ATM. You can make deposits into your ATM to your checking account, or to your savings account. You can even pay bills in some ATM machines, for utilities, things like that. All in all, they're really a great tool. You can avoid those long lines and you can do your banking at odd hours any time of the day. Makes them a great tool.
If you're a compulsive spender, you might think twice about availing yourself of this process. Sometimes, it's a blessing that the bank closes at 5 and doesn't open again until the morning.
I got this thing in the mail the other day offering me a gold card. They said I was qualified for $5,000. That would provide everything I need to get out of the house.
John says I don't need 10 credit cards. But I figured if I only have a few hundred dollars on each one of them, we'll be able to manage OK.
I can get into college on loans. But what if I don't get a job when I graduate?
Pretty, aren't they? Just holding them in my hand makes me feel like a Rockefeller. Too bad I haven't got more than $50 in the bank. Of all the great illusion tricks in history, the easy availability of credit is probably the most spectacular. It's very hard to live in our society without getting into debt. And debt, as we all know, is very easy to get into, and very hard to get out of.
Having good credit is essential to your financial planning, to your financial well being. Credit is easy to build. Credit is easy to maintain and keep healthy. The downside is, if you make mistakes in judgment, over extending yourself, buying things that you can afford on credit, can get you in a lot of trouble.
When you think of the word credit, you should always add the word debt. Because that's what credit is. It's rented money. For the privilege of renting a sum of money, so that you can buy what you want right now, you'll be charged a fee. That fee, or interest charge, can increase the price of your purchase by up to 25%.
One family out of every 96 will be going into bankruptcy this year. You think of one family, you might think that is one father. But it's not. It's a family that's involved. The mother, and also children within this family, that will be affected from this total debt. So you need to be very cautious when you do go out and ask for credit.
Scary, isn't it? Now, don't get me wrong. Credit's not all bad. Without credit, many of us would never get to buy a house, or a car, or even get a decent education. Credit is in fact a wonderful invention that allows us to enjoy one of the highest standards of living in the world. The trick about credit is knowing how to use it.
Some of the ways people get into trouble are buying things they can't afford, making impulse purchases, using credit cards to buy every day items, and taking out a lot of charge cards, and running up-charges on all of them.
My friend had three cards for department stores all maxed out. And then she lost her job.
I've seen people at the discount stores using their cards to buy toothpaste.
I ran up my mom's credit card and ruined her credit record.
On the first day of college, there's this guy on campus offering us credit card with thousand dollar limits. And we didn't even have a job.
Financial consultants seem to agree that whatever your income, your total credit payment should never exceed more than 15% of your take home pay. They also agree that credit should only be used for well planned, well researched investments, that will have some definite benefit on your way of life.
To learn how to manage credit, it's best to start small by taking out a limited charge card at a local department store, and disciplining yourself to pay off the existing balance every month, before you charge more debt. This will achieve the added bonus of showing to future creditors that you are a responsible payer. You can do the same thing with a gas card or a utility card.
Another way to establish a credit history is to take out a small personal loan at your local bank. Don't spend the money. Deposit it in your savings account, then make the loan payments to build up a positive credit record.
I want to get a simple loan, they want to see my credit record. I told them, I didn't have any. I thought that was bad or something. Like a rap sheet. But they still turn me down.
Do they put everything on your credit record? I've had some bounced checks and some late utility bills. Does that count against me?
Your credit record, which shows your ability to handle debt in a responsible way, can be accessed by potential lenders, landlords, banks, and even potential employers. So it's very important to keep it squeaky clean. You should think of your credit record as a financial resume. It may not mean that much to you now, but it will several years down the line.
Creditors look at how you pay your bills to determine whether they will lend you money or extend you credit in the future. You may have a 10 dollar payment to a Discover card right now, and that may not seem very important. But if you disregard even the smallest of payments, you're going to find down the line, when you apply for a car loan, or even a home, you may have trouble obtaining credit.
If I am president of company A, and you're asking me for money, and I come and take a look at your credit report. And I see that you haven't paid your bills, or you're paying late on your bills to company B, what makes me think that you're going to pay me?
If you're having trouble establishing credit, you might need a co-signer to get you going. This is usually someone close to you, like a mom or a dad, who loves you enough to take on the liability of your debt.
Co-signing for loans is very simple. When you go to borrow money from a lender, the lender asks you to sign papers. I will pay this back, with interest, over a period of time. A co-signer is a person who is jointly obligated with you on that loan. Which says that, if for some reason you cannot, or are unwilling to pay the lender back, that lender has the legal right to go to the co-signer for payment.
When I went to the dealer, he said they can do all the financing right on the spot. That sounds great, but is there a catch? What should I check for before I sign?
For larger loans, like the kind of installment loans needed to purchase a car or furniture, you'll be required to show proof of income, and an existing debt ratio. So that the lender can determine your ability to pay. You'll also be asked to provide collateral in the form of savings and assets that the loan companies can seize if you fall too far behind in payments.
You need to shop for credit, just like you would shop for a pair of shoes.
Shop around. Don't be too hasty to sign before you check out other options. Make sure you know what you're signing. Go through the figures to find out exactly what the purchase price is. What interest rate you're paying and how much this adds to the overall cost of your purchase. Ask if there are any service charges or penalties for late or early payoff. Don't rush into big financial commitments. Even if your budget can handle them, you have to weigh the advantages of credit against tying up your future income for up to three years.
I did a stupid thing. I knew I was finishing work at the end of the summer. But I ran up my card, and now I'm stuck with monthly payments and no income.
I owe money everywhere. There's just so many places I can't go.
If you do find yourself in over your head, you don't need to rush to the bankruptcy court. Most creditors will work with you to reduce your monthly payments, if you make situation known to them. The worst thing you can do, which unfortunately is what most people do, is to avoid the situation. If you simply stop paying bills, your creditor will consider you a defaulter, and turn your account over to a collection agency.
Their job is to collect the money, no matter how much they harass and embarrass you. They will write and call, maybe even tell your employer. If you still don't pay, your bad debt will be recorded on your credit report, and can result in your being denied further credit for up to seven years.
They called me every day at work. I was so embarrassed. I kept telling them that I would pay, when finally I had to admit that I couldn't raise the amount. We made a deal that I would pay a little every month.
I thought they were bluffing until the repo man showed up at my door.
I was scared to answer the phone, to open my mail, to answer the door. I couldn't sleep. I just wanted to die.
To help you avoid that situation, here are some of the golden rules of credit management. Keep your total credit debt 15% percent of your income. Pay off existing debt before you add more. If you plan to charge a major purchase, add it to your budget and plan to pay it off over, let's say, three months, before you use the card again. Always ask yourself, would I buy this if I had to pay cash for it? Try to save for the things you think you need. That way, you'll know if you really need them, or you just want them.
Research your purchases. Leave your cards at home while you check prices and compare terms. If you decide to consolidate your existing debt for a reduced overall monthly payment, make sure you get rid of your card so you won't be tempted to run them up to the limit again.
Well, it's probably for the best. Of course, there's no magic involved in good money management. The ability to identify and plan your financial goals, to create and follow a budget, and to research and take advantage of financial services, are skills that you can learn. And use for the rest of your life. If you can practice now while you're still young on the little stuff, you'll be in good shape later on, when the stakes are a lot higher, and the returns a lot greater.
Successful money management means the difference between living with ease and confidence. Being able to afford and do the things you'd like to do. First is really in some ways struggling. Trying to determine how you're going to meet this obligation or that obligation. If you have a successful spending plan, if you use your credit wisely, if you keep your eyes on the ball, if you will, of money management, there are no limitations to the things you can do. You just have to keep that focus. And you have to really, really strive to do the things the meet your lifestyle. And to get and meet the goals that you think are important for you.
I found three things I can cut from my budget to reduce my monthly spending. And that gives me the extra cash I need to pay my share of rent. I've worked out that I can cut my clothes budge, and that will give me a little something every month to save for the things I really need.
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