Cash flow is the process, in which a business uses cash to generate goods or services for sales to its customers, collects the cash from the sales and then complete the cycle all over again. Cash flow can be seen in two forms; Cash inflows and cash outflows
Cash inflows describe the movement of money into the business. This includes cash collected from sales to customers, collection on accounts receivable and the proceeds of a bank loan or any other types of business loans.
Cash outflows describe the movement of money out of the business. This includes payments for business related expenses such as salaries and wages, utility bills, purchase of property or equipments and loan repayments.
In order for a business to consistently meet its financial obligations to customers, creditors, employees, investors, suppliers, it will need to properly manage its cash flow. Here are six ways for a business to save costs and increase its cash flow
Financial Management- Offer Cash Discounts
Regain Your Money And Your Time We Give You Our Proven Easy Methods
A business can offer cash discounts to customers willing to pay cash immediately for goods or those who are willing to make prepayment for goods. This will significantly increase its cash flow.
Financial Planning- Debt Factoring
This is essentially the sale of business invoice to a third party who goes ahead to process the invoice while business receives cash from it (factoring business). Factoring allows a business to have access to cash upfront rather than wait for an expected invoice to be paid.
Lease Instead of Outright Purchasing
As a business grows, it may need to purchase new equipments and machinery such as cars and computers. Instead of an outright purchase, the business can arrange for a finance lease with a financial institution. This will enable the business free up its cash for other business activities.
Financial Planning- Embrace Outsourcing
Outsourcing involves ceding non-core business operations and activities to other businesses that are specifically set up for such services. Outsourcing non-core activities will help the business save costs in areas of salaries, acquisition of office furniture and training costs helping to boost its cash flow.
Financial Management- Share Resources
The business can significantly increase its cash flow by sharing its resources (and the costs) with another business. It can share office space, secretaries, human resource personnel, and accountants amongst others.
Negotiate Discounts with Suppliers
Find suppliers that are willing to provide the business with significant discounts in exchange for bulk purchases and a long term partnership. This will go a long way in boosting the cash flow of the business.
Wednesday, April 14, 2010
Monday, April 12, 2010
Maintaining Financial Health
Maintaining Financial Health
You are to be commended for deciding to chart a positive course of action for your life that will prove beneficial to you, your family, your friends and your creditors. This lesson is all about how to regain control of your life, establish financial security and achieve your own personal goals and dreams. It will help you develop the skills and resources you need to be successful.
ValuesIt is especially important at a time of hard financial choices that you begin to examine, and re-examine the things you really value in life. If you're not careful, you may end up devoting all your time, money and energy only to the "fires that need to be put out" or the immediate crisis of the day, and neglect some things that are really important to you.
Values are the things we think are important or unimportant. They can be very specific, or be very broad. Values are at the core of a good financial management plan. You need to really understand your own values and what is important to you as you develop your goals, for financial management and for life. Be sure to spend time on the exercises in this lesson for values. It is the basis of your goal setting and priorities.
The Planning ProcessThere are hundreds of approaches to planning, and they all have their own strengths and weaknesses. We are going to review a fairly simple 4-step planning model that will apply to a wide variety of situations. The four-step process includes assess needs, set goals, make a plan and take action.
There are hundreds of approaches to planning. You might have some you've already tried. You might have seen something you're thinking about trying. The most important thing, however, is that you take a system and work with it. Here's a 4-step model, which should be helpful.
Assess NeedsThis looks at the idea of "what do you WANT?" and "what do you NEED?" In deciding those two issues, try:
Evaluate your current financial situation. Take a broad look at the way things are now. You can call this step taking stock, taking inventory, or even taking a step back to see the big picture. Whatever you call this step - don't skip it!
Ask yourself, "What else do I NEED?" and "What else do you WANT?" Its time to make two lists. We'll come back to these later. Think about whether your lists coincide with your values.
As you're asking yourself, and making your list of needs and wants, ask yourself the following questions:
Why do I want it?
How would things be different if I had it?
What other things would change if I had it? (for better, or worse)
Which things are truly important to me?
Set GoalsThe process of setting goals involves turning your NEEDS into goals. A goal is a very specific result you intend to work toward. You can have both long-term and short-term goals. You can have goals for the day, the week, the year, and for your lifetime. We'll talk more about goals throughout the lesson.
Make a PlanIt is important in this process to begin to develop a plan for your life. Ask yourself, "where do I want to be five years from now?" and "where do I want to be 10 years from now?" and yes, its difficult, but also ask, "where do I want to be 20 years from now?" Once you have this in mind, you can then imagine the actions you need to take to achieve those goals. The more steps you can visualize, the more successful you will be in reaching your goals. The next step is to visualize the order of importance for those steps. What will you do first, second, ... last?
Take ActionThis is sometimes where people have trouble. The next step, and the first step to accomplishing those goals, is to take action. Take the first step. Many times goals are not reached just because the first step was never taken. Having a plan, by itself, doesn't mean you will reach your goals. Yes, you must actually do the things listed in your plan. (And just when you were beginning to think this would be easy!)
You will encounter obstacles. We can plan on that. The obstacles, however, do not always come in the shape and form and timeframe that we expect. When you encounter obstacles, persistence wins more often than talent.An important part of taking action is affirming your goals. It is important to write them down. In fact, goal setting experts will tell you to post them around where you will see them. Say them out loud. Share them with your trusted friends. Seeing them in writing helps them to become a reality.
Focus On Setting Realistic GoalsNow we're suggesting that your goals are realistic. When you are realistic, then it's easier to proceed towards those goals. For example, "I plan to get out of all my money troubles by winning the lottery" would not be counted as a realistic goal. In other words, borrowing money on your credit cards to purchase beanie babies, Internet stocks or lotto tickets is not what this lesson is about. Planning to put it all on 17 in Vegas won't cut it either. Your goal needs to be something that you can impact for achievement. You can't plan to win the money to relieve all your financial frustrations. Get-rich-quick schemes also fall into this category.
Goal setting can be the start of a wonderful life. Remember the adage, "If it's going to be, it's up to me!" It's your life. Start living it by understanding your values, your goals, your wants and your needs!
A realistic goal is SMART (in more ways than one)
SpecificMeasurableAttainableRelevantTime-related
Specific - Smart goals are specific enough to suggest action. Example: Save enough money to get a refrigerator, not just save money.Measurable - You need to know when you have achieved your goal, or how close you are. Example, the refrigerator costs $600, and you have $300 already saved. Goals, which aren't measurable, like "I'd like to have more money", are much harder to achieve. And, you don't even know when you get there!Attainable - The steps toward reaching your goal need to be reasonable and possible. Example: I know I can save enough money each week to arrive at my goal within one year. This would eliminate the goal of solving your money problems by winning it big!Relevant - The goal needs to make common sense. You've heard them say, "it's the journey, not the destination." You don't want to struggle or work toward a goal that doesn't fit your need. Time-related - Set a definite target date. Example: The repairman says my refrigerator won't last another year.
PrioritiesIdentify priorities for your life.
Priorities is one of the four lessons in The Setting Goals course. It builds on what you learned and worked on in the Goals lesson plan. It cannot be completed without first working on the Goals lesson. If you haven't completed that lesson plan and exercises, go there now. If you have, congratulations, you're one step closer to getting a good financial fitness program set up.
Understanding the Difference Between Needs and WantsWants tend to be things that would be nice to have, but not necessary. It is important to understand what you need. This is a step in prioritizing and goal setting.
Since most people can think of more goals than they can ever accomplish, it is really important to go back to the basics, and start by understanding the difference between wants and needs.
Examples of wants would include:
Credit cards
Lots of Money
Concert Tickets
Everything Your Friends Have
Examples of needs would include:
Continuing Education
Transportation
Glasses
Health Care
Good Credit History
Stable Home Life
Enthusiasm for Work
What You Might Need To Provide Basic Needs:
Stay Employed or Employable
Stay Healthy
Develop Additional Skills
Remember that All Problems have Many Possible Solutions
Basic Needs
Shelter
Food
Clothing
Air to Breathe
Prioritizing Your GoalsMost of us can think of more goals than we could accomplish. In fact, you might have listed enough goals in your prior exercise to last you more than one lifetime. If so, you'll need to work even harder at understanding how to prioritize those goals. It goes back to the lesson learned earlier, values are a critical element of goal setting and priorities.
To get the most out of this lesson plan, spend some quality time on the exercises. Remember, you're setting up your program for financial fitness. These exercises are there to help!
A Goal Without a Plan is Just a Dream
Putting first things first is an important part of beginning the prioritization process. Goals, people and activities all compete for your time, money and energy. Now that you understand the difference between wants and needs, and can identify your goals, its time to start thinking about the process of putting first things first. It is important to rate the goals that you have. You might do this based on a scale of 1 to 10, or based on urgency or importance, or maybe both. Once you have rated your goals, you'll want to understand the pros and cons, or the costs and benefits of each. During this process, you might even redefine some of your goals. That's okay. In fact, goals may change, with life circumstances, with age, or with achievement. They could even change because of some of life's obstacles. You'll also want to think carefully about the outcomes of each of your choices. Many times, when choosing a high priority goal, we are not choosing another goal which is either lower on the list of priorities, or even in conflict with the chosen goal. For example, you may wish to send your kids away to a private college, but you also want to save for a vacation home. At some point in your savings plan, these two goals might be in conflict. Or, you might want to get all your bills paid off and have no credit card interest payments, while your favorite band has just released a new CD you've got to have. Then those two goals could be in conflict. Yes, you can pay the bills first, then get the CD, and they don't have to be in conflict forever. Remember, things change. Plan on it. You'll want to make sure you've thought about alternatives. Maybe a state college and renting a vacation place at the beach will help you meet both goals.
Prioritize Your Spending TooAnother way to look at prioritizing your goals is to consider prioritizing your spending.
As part of prioritizing your goals, you will also find that it seems like you are prioritizing your spending. Since your goals and spending would naturally be connected, take a look to see if your current spending is prioritized to your current goals. Here's how one person prioritized their spending:
Essential:
Home or Rent
Phone
Electric & Gas
Water / Trash
Food
Child Care
Car Maintenance / Gas
Essential, but not as immediate:
Computer Software
Clothing
Entertainment
Personal Care Products and Services
Miscellaneous
Discretionary:
Clothing
Entertainment
Miscellaneous
Personal Care Products and Services BudgetingCreate a budget that you can live with.
Why Budget?A budget is necessary for successful money management. Common financial problems can be minimized through an effective budgeting program. In fact, budgeting can also help you understand if your current expenses and plan match your goals and priorities. If not and you were accurate and appropriate with your goals and priorities, you'll want to make some changes in your spending.
The main purposes of a budget are to help you:
Live within your income
Spend your money wisely
Reach your financial goals
Prepare for financial emergencies
Develop wise money management habits.
Many people complain that the month is too long for the amount of money they have to spend. A budget is your spending plan.
Budget GuidelinesA variety of sources provide budgeting information and guidelines.
The following guidelines are from a variety of sources:
30% Housing
18% Transportation
16% Food
8% Miscellaneous
5% Clothing
5% Medical
5% Recreation
5% Utilities
4% Savings
4% Other Debts
This will give you an idea of the ranges you can expect. If you live in an area where transportation is higher than normal or rents/mortgage are higher, you may want to adjust. Also, if you would like to add a section for Gifts, or something else, then you'll need to subtract from another area.
The Budgeting ProcessSpending is a process, not just a laundry list of who you owe, what you owe, and when you need to pay it. Your budget will be a living document.
There are three parts of a spending plan: Past - Present - Future.
Past: Looking to past financial records for spending habits: ledger, bookkeeping, tracking expenses.
Present: Recording present spending: cash flow, tracking expenses, making choices based on good information.
Future: Projecting and planning: short-term and long-term goals.
Setting Up and Maintaining a BudgetYou'll want to look at your ACTUAL spending compared to what you THOUGHT you were spending, then identify why and where you spend your money, and finally, develop a spending plan that will bring your financial resources on the things that will give you piece of mind. It is important to know exactly where the money you make is going. Be prepared. When you find out where your money is really going, you might be shocked!
Step One: Add Up Your Income
Step Two: Estimate Your Expenses
Step Three: Figure Out the Difference
Step Four: Maintain it Monthly - Track, Trim and Target
For starters, you'll want to create spending categories. How much you budget for various items will depend on your current needs and your future plans. You can use the spending categories in this lesson, or start with a detailed record of your own spending to help you determine how much to budget.
Budgeting is an ongoing process. You will need to review it on a regular basis.
Step One: Add Up Your Income
Step Two: Estimate Your Expenses
Step Three: Figure Out the Difference
Step Four: Maintain it Monthly - Track, Trim and Target
Step One: Add Up Your IncomeSince we're going to work with a monthly budget, you need to determine how much take-home pay you get on a regular basis. If you get paid once per month, this one is easy - it's the amount of your check that you "take home". If not, you'll need to do some math.
If your check does not come monthly, use the following chart:
For weekly checks, multiply by 4.333
For every two weeks checks, multiply by 2.167
For twice a month checks, multiply by 2
For irregular annual income, divide by 12
You also want to make sure you add in other sources of income other than your paycheck. If you receive interest income, alimony, child support, rent, or other payments, you can add them into your plan as well.
Step Two: Estimate Your ExpensesHere is where you write down what you think you'll be spending in the category areas. Here are some sample categories. You can change these to whatever works for you; it's just a start.
Housing
Rent or Mortgage
Property Taxes
Food
Groceries
Restaurant Meals
Lunches at work
School Lunches
Utilities
Electric
Gas
Telephone
Long Distance
Water
Garbage
Other
Personal
Prescriptions
Laundry / Dry Cleaners
Hair Care
Clothing
Toiletries
Family
Medical / Dental / Vision
Pet Food / Supplies / Veterinarian
Child Support
Alimony
Day Care
Baby Sitting
Children's Allowance
Parent Support
Other
Basics
Furniture
Appliances
Linens
Utensils
Tools
Home Cleaning / Repair Supplies
Other
Transportation
Car Payment
Gasoline
Oil, etc.
Repairs
Tires
Registration / Inspection
Public Transportation
Parking
Other
Insurance
Car
Life
Property / Casualty
Disability
Renter
Burial
Other
Recreation and Entertainment
Hobbies
Vacation
Shows / Movies
Sporting Events
Dining / Entertaining
Club Dues
Alcohol
Tobacco
Lottery Tickets
Reading Materials (Books, Newspapers)
Cable TV
Other
Gifts / Contributions
Church / Synagogue
Charities
Birthdays
Holidays
Weddings
Other
Savings
Regular
Occasional
Retirement Contributions
Investments
Bonds
Other
Miscellaneous
School Tuition / Dorm / Apartment / Supplies
Union Dues
Professional Fees
Lessons
Household Business Expenses
Legal Fees
Installment / Credit Card
Checking Account Charges
Other
Taxes (this would be for income other than your check if you're using net payroll numbers)
Income Tax
Social Security
Medicare
State Taxes (Not Sales Tax)
Other
(If you're not paying the full balance on your credit cards each month, be sure to keep track of how much you're charging as well as how much you're paying and how much interest is being added to the unpaid balances on your accounts.)
Step Three: Figure Out the DifferenceAfter you've created your budget, you need to keep records of your actual income and expenses. This information helps you to understand any "budget variances" - the difference between the amount you budgeted and what you actually spent for the month, or time period.
Step Four: Maintain it Monthly - Track, Trim and TargetAs you track your monthly expenses, you may find you need to trim expenses is some areas. Some expenses are more easily trimmed. For example, you need to make the house payment and get groceries, but you may be able to go without seeing the premier of that new movie. Cutting back is usually a better place to start than cutting out.
Tips for Maintaining a BudgetA common budgeting mistake is to save what is left at the end of the month. When you do that, you often have nothing left for savings.
Spending more than you planned for one item can be offset by reducing spending in another area. If you find, however, that you are consistently spending more for recreation, and taking away from savings, you might want to revise your budget and goals.
A common budgeting mistake is to save what is left at the end of the month. When you do that, you often have nothing left for savings. It is better to consider savings a fixed expense.
The most common areas where overspending occurs are entertainment and food (especially away from home meals). Some tips to maintain your budget include: purchasing less expensive brands, buying quality used products, and avoiding credit card impulse purchases.
A surprise tax refund can seem like found money, but it is wiser to take a look at the budget, and the goals and priorities before you spend it all.
Everyday Tips for SavingsFind ideas for saving money that work in your life.
If you save $7.00 each week, at 5% interest, in 10 years you'll have $4,720.....If you save $21.00 each week, at 5% interest, in 10 years you'll have $14,160.... If you save $28.00 each week, at 5% interest, in 10 years you'll have $18,880....
Types of Savings AccountsThere are many types of savings accounts and activities, including some we'll define as investing opportunities. Investing opportunities are discussed further in the Managing Your Money lesson. This lesson covers the basic savings plans: passbook accounts, statement accounts, money market accounts and certificates of deposit.
Other than investment opportunities (discussed in detail in the Managing Your Money lesson) the basic savings plans include: passbook account, statement, money market and certificates of deposit.
With passbook accounts the depositor receives a booklet in which deposits, withdrawals and interest are recorded. The average interest rate on these accounts is likely to be lower at banks and savings and loans than credit unions. Funds are easily accessible. These are often referred to as "regular" savings accounts.
Statement accounts are very similar to passbook accounts, except that the depositor receives a monthly statement instead of a passbook. Funds are also easily accessible, often through a 24-hour automated teller machine (ATM). Expect the same interest rate as a passbook account. Statement accounts are interest bearing checking accounts, which combine the benefits of checking and savings. The depositor earns interest on any unused money in his/her account.
Money Market accounts are a combination of checking and savings accounts. The interest rate paid is built on a complex structure that varies with the size of the balance and the current level of market interest rates. The average yield (rate of return) is higher than regular passbook savings accounts. You can access your money from an ATM, a teller, or by writing up to three checks per month. This type of account provides immediate access to your money, but usually requires a minimum balance of $1,000 to $2500 with a limited number of checks that can be written each month.
Certificates of Deposit offer the benefits of being simple, with no risk, no fees, and have higher interest than a passbook or statement account. On this type of account, the financial institution pays a fixed amount of interest for a fixed amount of money during a fixed amount of time. The trade-off for the higher return is that you have restricted access to your money. There is usually a withdrawal penalty if you cash in the account before the expiration date of the certificate of deposit. This penalty can be higher than the interest earned. If you think you might need the money before the time period expires, don't use this method!
Types of certificates of deposit include:
Rising-rate CDs with higher rates at various intervals, such as every six months.
Stock-indexed CDs with earnings based on the stock market.
Callable CDs with higher rates and long-term maturities, as high as 10-15 years. However, the bank may "call" the account after a stipulated period, such as one or two years, if interest rates drop.
Global CDs combine higher interest with a hedge on future changes in the dollar compared to other currencies.
Promotional CDs attempt to attract savers with gifts or special rates.
Shopping For the Right Savings For YouYes, you can shop for a savings account that is right for you. Learn how some reduce your money earned, and can even result in a loss!
Not all savings accounts are created equal. In fact, not all passbook accounts, or money market, or any type account will offer the same services and dollar yield. Yes, you can shop around for a savings account that is right for you. As always, you'll first need to think about which account is right for you. When and how often you need to access the account will be key factors. Then, you'll want to look at the interest rates offered by the variety of banks and credit unions. But don't let that be your only deciding factor. Also, check the benefits you receive with the account. Some will have fees, charges and even penalties based on minimum balance requirements or number of transactions. Some accounts require a certain balance prior to paying interest. On some money market accounts, a financial institution may pay a higher interest amount for a higher balance - you'll want to know what the cutoff balance is for the higher rate. Most calculate interest on a daily basis, and some use the average of all daily balances.
The Power of $50 a MonthPaying down your credit cards bills can give you real "savings". Paying the minimum due each month can be deceiving. Take a look at what happens, and how much you can "save" on interest.
Here's an example of what $50 can do. If you have a credit card with a $3,000 balance at an annual interest rate of 18 percent, and pay only the 2% minimum monthly payment of $60 per month, it would take you 8 years to pay off your bill. Think about that before you HAVE to BUY that item! By the way, that $60 payment for eight years means you paid in $5,780, not the $3,000 you thought the item or items cost. You would have paid almost twice the original debt over the eight-year period. Now, here's a great idea to save you money. If you pay an additional $50 per month on that debt, for a total payment of $110 a month, you would pay off the debt in 3 years and save over $1800 in interest payments. So, $50 a month can be quite powerful! Imagine what you could do with $100 more per month.
Saving Money on Everyday ActivitiesSavings can happen everywhere - in your daily activities and in some of the most common items we use and purchase. Find out ways to save - every day, without cutting into your fun and needs; on fees; and even on deductibles.
Saving money can be done everyday. Savings accounts are good, but you can also save money by paying more on your debts, as mentioned above. Also, think about what you are saving when you "don't spend" money. Here's some ways to save:
Getting cash - if the ATM you use charges $1.00 or more to access your account, try another ATM, or consider other methods of payment. If your financial institution charges you a fee each time you withdraw cash from an ATM, then think about how many times you use that service. If you pull out $20 from a machine, and end up paying fees of $3.00, that's a 15% charge. That's a lot! Check your monthly statement to see how many of these charges you have, and how quickly they add up. Maybe a little more planning is in order.
Would you spend $4,720 for coffee or soda? Maybe you do, and don't know it yet. Too much caffeine - your doctor will discourage it, and your savings plan might too! If you got in the habit of a super latte morning wake up, try an exercise routine, or coffee at home and skip the coffeehouse. If you don't spend a dollar a day, (and invest at 5%), you'll have saved $4,720 on that coffee over the next 10 years. Snacks can end up costing you a small fortune. Things like bringing lunch to work, or a snack, can end up allowing you to save for that vacation or family outing. By thinking about where you spend money, you can save, and buy the things that are important to you.
How's your deductible? Unless you get into an accident every year, you may want to consider finding out the difference in your insurance premium if you raise your deductible. If it costs you $75 to have a low $100 deductible rather than having a $250 deductible, then you are actually buying only $150 of coverage with that $75. That's very expensive insurance! Be careful however, don't raise that deductible too high if you don't have money set aside in case you do have an accident.
Time to look for a new company? If you have been with the same company for a while, it may be time to compare rates and services from other companies. If you have a good driving record, and are currently insured, call some other companies for quotes. Be sure to have a copy of your existing policy so you are getting a quote on the same coverage. Beware of some agents who may lead you to believe you are getting a substantially lower rate - check the coverage and services. If you get a lower quote, double check with your existing insurer to see if they will match it before switching.
Forget to deposit money and your check was overdrawn? Overdraft fees can be at least $10 these days. Plus, many companies you wrote the check to are now charging as much as $20 for a return check fee. These are costly mistakes. You might want to check to see if your bank offers overdraft protection. Take a look at this if you have a problem with overdrafts.
Late? It costs more than ever now! Paying your credit card bills on time and in full is the best way. But, we all know this doesn't always happen. When you don't pay on time, however, it could cost you up to $29 each month you're late. Make the time, and take the trouble - to get those bills paid on time… or at least the minimum balance, to avoid those very costly late fees!
Start the Savings Habit Now.
You are to be commended for deciding to chart a positive course of action for your life that will prove beneficial to you, your family, your friends and your creditors. This lesson is all about how to regain control of your life, establish financial security and achieve your own personal goals and dreams. It will help you develop the skills and resources you need to be successful.
ValuesIt is especially important at a time of hard financial choices that you begin to examine, and re-examine the things you really value in life. If you're not careful, you may end up devoting all your time, money and energy only to the "fires that need to be put out" or the immediate crisis of the day, and neglect some things that are really important to you.
Values are the things we think are important or unimportant. They can be very specific, or be very broad. Values are at the core of a good financial management plan. You need to really understand your own values and what is important to you as you develop your goals, for financial management and for life. Be sure to spend time on the exercises in this lesson for values. It is the basis of your goal setting and priorities.
The Planning ProcessThere are hundreds of approaches to planning, and they all have their own strengths and weaknesses. We are going to review a fairly simple 4-step planning model that will apply to a wide variety of situations. The four-step process includes assess needs, set goals, make a plan and take action.
There are hundreds of approaches to planning. You might have some you've already tried. You might have seen something you're thinking about trying. The most important thing, however, is that you take a system and work with it. Here's a 4-step model, which should be helpful.
Assess NeedsThis looks at the idea of "what do you WANT?" and "what do you NEED?" In deciding those two issues, try:
Evaluate your current financial situation. Take a broad look at the way things are now. You can call this step taking stock, taking inventory, or even taking a step back to see the big picture. Whatever you call this step - don't skip it!
Ask yourself, "What else do I NEED?" and "What else do you WANT?" Its time to make two lists. We'll come back to these later. Think about whether your lists coincide with your values.
As you're asking yourself, and making your list of needs and wants, ask yourself the following questions:
Why do I want it?
How would things be different if I had it?
What other things would change if I had it? (for better, or worse)
Which things are truly important to me?
Set GoalsThe process of setting goals involves turning your NEEDS into goals. A goal is a very specific result you intend to work toward. You can have both long-term and short-term goals. You can have goals for the day, the week, the year, and for your lifetime. We'll talk more about goals throughout the lesson.
Make a PlanIt is important in this process to begin to develop a plan for your life. Ask yourself, "where do I want to be five years from now?" and "where do I want to be 10 years from now?" and yes, its difficult, but also ask, "where do I want to be 20 years from now?" Once you have this in mind, you can then imagine the actions you need to take to achieve those goals. The more steps you can visualize, the more successful you will be in reaching your goals. The next step is to visualize the order of importance for those steps. What will you do first, second, ... last?
Take ActionThis is sometimes where people have trouble. The next step, and the first step to accomplishing those goals, is to take action. Take the first step. Many times goals are not reached just because the first step was never taken. Having a plan, by itself, doesn't mean you will reach your goals. Yes, you must actually do the things listed in your plan. (And just when you were beginning to think this would be easy!)
You will encounter obstacles. We can plan on that. The obstacles, however, do not always come in the shape and form and timeframe that we expect. When you encounter obstacles, persistence wins more often than talent.An important part of taking action is affirming your goals. It is important to write them down. In fact, goal setting experts will tell you to post them around where you will see them. Say them out loud. Share them with your trusted friends. Seeing them in writing helps them to become a reality.
Focus On Setting Realistic GoalsNow we're suggesting that your goals are realistic. When you are realistic, then it's easier to proceed towards those goals. For example, "I plan to get out of all my money troubles by winning the lottery" would not be counted as a realistic goal. In other words, borrowing money on your credit cards to purchase beanie babies, Internet stocks or lotto tickets is not what this lesson is about. Planning to put it all on 17 in Vegas won't cut it either. Your goal needs to be something that you can impact for achievement. You can't plan to win the money to relieve all your financial frustrations. Get-rich-quick schemes also fall into this category.
Goal setting can be the start of a wonderful life. Remember the adage, "If it's going to be, it's up to me!" It's your life. Start living it by understanding your values, your goals, your wants and your needs!
A realistic goal is SMART (in more ways than one)
SpecificMeasurableAttainableRelevantTime-related
Specific - Smart goals are specific enough to suggest action. Example: Save enough money to get a refrigerator, not just save money.Measurable - You need to know when you have achieved your goal, or how close you are. Example, the refrigerator costs $600, and you have $300 already saved. Goals, which aren't measurable, like "I'd like to have more money", are much harder to achieve. And, you don't even know when you get there!Attainable - The steps toward reaching your goal need to be reasonable and possible. Example: I know I can save enough money each week to arrive at my goal within one year. This would eliminate the goal of solving your money problems by winning it big!Relevant - The goal needs to make common sense. You've heard them say, "it's the journey, not the destination." You don't want to struggle or work toward a goal that doesn't fit your need. Time-related - Set a definite target date. Example: The repairman says my refrigerator won't last another year.
PrioritiesIdentify priorities for your life.
Priorities is one of the four lessons in The Setting Goals course. It builds on what you learned and worked on in the Goals lesson plan. It cannot be completed without first working on the Goals lesson. If you haven't completed that lesson plan and exercises, go there now. If you have, congratulations, you're one step closer to getting a good financial fitness program set up.
Understanding the Difference Between Needs and WantsWants tend to be things that would be nice to have, but not necessary. It is important to understand what you need. This is a step in prioritizing and goal setting.
Since most people can think of more goals than they can ever accomplish, it is really important to go back to the basics, and start by understanding the difference between wants and needs.
Examples of wants would include:
Credit cards
Lots of Money
Concert Tickets
Everything Your Friends Have
Examples of needs would include:
Continuing Education
Transportation
Glasses
Health Care
Good Credit History
Stable Home Life
Enthusiasm for Work
What You Might Need To Provide Basic Needs:
Stay Employed or Employable
Stay Healthy
Develop Additional Skills
Remember that All Problems have Many Possible Solutions
Basic Needs
Shelter
Food
Clothing
Air to Breathe
Prioritizing Your GoalsMost of us can think of more goals than we could accomplish. In fact, you might have listed enough goals in your prior exercise to last you more than one lifetime. If so, you'll need to work even harder at understanding how to prioritize those goals. It goes back to the lesson learned earlier, values are a critical element of goal setting and priorities.
To get the most out of this lesson plan, spend some quality time on the exercises. Remember, you're setting up your program for financial fitness. These exercises are there to help!
A Goal Without a Plan is Just a Dream
Putting first things first is an important part of beginning the prioritization process. Goals, people and activities all compete for your time, money and energy. Now that you understand the difference between wants and needs, and can identify your goals, its time to start thinking about the process of putting first things first. It is important to rate the goals that you have. You might do this based on a scale of 1 to 10, or based on urgency or importance, or maybe both. Once you have rated your goals, you'll want to understand the pros and cons, or the costs and benefits of each. During this process, you might even redefine some of your goals. That's okay. In fact, goals may change, with life circumstances, with age, or with achievement. They could even change because of some of life's obstacles. You'll also want to think carefully about the outcomes of each of your choices. Many times, when choosing a high priority goal, we are not choosing another goal which is either lower on the list of priorities, or even in conflict with the chosen goal. For example, you may wish to send your kids away to a private college, but you also want to save for a vacation home. At some point in your savings plan, these two goals might be in conflict. Or, you might want to get all your bills paid off and have no credit card interest payments, while your favorite band has just released a new CD you've got to have. Then those two goals could be in conflict. Yes, you can pay the bills first, then get the CD, and they don't have to be in conflict forever. Remember, things change. Plan on it. You'll want to make sure you've thought about alternatives. Maybe a state college and renting a vacation place at the beach will help you meet both goals.
Prioritize Your Spending TooAnother way to look at prioritizing your goals is to consider prioritizing your spending.
As part of prioritizing your goals, you will also find that it seems like you are prioritizing your spending. Since your goals and spending would naturally be connected, take a look to see if your current spending is prioritized to your current goals. Here's how one person prioritized their spending:
Essential:
Home or Rent
Phone
Electric & Gas
Water / Trash
Food
Child Care
Car Maintenance / Gas
Essential, but not as immediate:
Computer Software
Clothing
Entertainment
Personal Care Products and Services
Miscellaneous
Discretionary:
Clothing
Entertainment
Miscellaneous
Personal Care Products and Services BudgetingCreate a budget that you can live with.
Why Budget?A budget is necessary for successful money management. Common financial problems can be minimized through an effective budgeting program. In fact, budgeting can also help you understand if your current expenses and plan match your goals and priorities. If not and you were accurate and appropriate with your goals and priorities, you'll want to make some changes in your spending.
The main purposes of a budget are to help you:
Live within your income
Spend your money wisely
Reach your financial goals
Prepare for financial emergencies
Develop wise money management habits.
Many people complain that the month is too long for the amount of money they have to spend. A budget is your spending plan.
Budget GuidelinesA variety of sources provide budgeting information and guidelines.
The following guidelines are from a variety of sources:
30% Housing
18% Transportation
16% Food
8% Miscellaneous
5% Clothing
5% Medical
5% Recreation
5% Utilities
4% Savings
4% Other Debts
This will give you an idea of the ranges you can expect. If you live in an area where transportation is higher than normal or rents/mortgage are higher, you may want to adjust. Also, if you would like to add a section for Gifts, or something else, then you'll need to subtract from another area.
The Budgeting ProcessSpending is a process, not just a laundry list of who you owe, what you owe, and when you need to pay it. Your budget will be a living document.
There are three parts of a spending plan: Past - Present - Future.
Past: Looking to past financial records for spending habits: ledger, bookkeeping, tracking expenses.
Present: Recording present spending: cash flow, tracking expenses, making choices based on good information.
Future: Projecting and planning: short-term and long-term goals.
Setting Up and Maintaining a BudgetYou'll want to look at your ACTUAL spending compared to what you THOUGHT you were spending, then identify why and where you spend your money, and finally, develop a spending plan that will bring your financial resources on the things that will give you piece of mind. It is important to know exactly where the money you make is going. Be prepared. When you find out where your money is really going, you might be shocked!
Step One: Add Up Your Income
Step Two: Estimate Your Expenses
Step Three: Figure Out the Difference
Step Four: Maintain it Monthly - Track, Trim and Target
For starters, you'll want to create spending categories. How much you budget for various items will depend on your current needs and your future plans. You can use the spending categories in this lesson, or start with a detailed record of your own spending to help you determine how much to budget.
Budgeting is an ongoing process. You will need to review it on a regular basis.
Step One: Add Up Your Income
Step Two: Estimate Your Expenses
Step Three: Figure Out the Difference
Step Four: Maintain it Monthly - Track, Trim and Target
Step One: Add Up Your IncomeSince we're going to work with a monthly budget, you need to determine how much take-home pay you get on a regular basis. If you get paid once per month, this one is easy - it's the amount of your check that you "take home". If not, you'll need to do some math.
If your check does not come monthly, use the following chart:
For weekly checks, multiply by 4.333
For every two weeks checks, multiply by 2.167
For twice a month checks, multiply by 2
For irregular annual income, divide by 12
You also want to make sure you add in other sources of income other than your paycheck. If you receive interest income, alimony, child support, rent, or other payments, you can add them into your plan as well.
Step Two: Estimate Your ExpensesHere is where you write down what you think you'll be spending in the category areas. Here are some sample categories. You can change these to whatever works for you; it's just a start.
Housing
Rent or Mortgage
Property Taxes
Food
Groceries
Restaurant Meals
Lunches at work
School Lunches
Utilities
Electric
Gas
Telephone
Long Distance
Water
Garbage
Other
Personal
Prescriptions
Laundry / Dry Cleaners
Hair Care
Clothing
Toiletries
Family
Medical / Dental / Vision
Pet Food / Supplies / Veterinarian
Child Support
Alimony
Day Care
Baby Sitting
Children's Allowance
Parent Support
Other
Basics
Furniture
Appliances
Linens
Utensils
Tools
Home Cleaning / Repair Supplies
Other
Transportation
Car Payment
Gasoline
Oil, etc.
Repairs
Tires
Registration / Inspection
Public Transportation
Parking
Other
Insurance
Car
Life
Property / Casualty
Disability
Renter
Burial
Other
Recreation and Entertainment
Hobbies
Vacation
Shows / Movies
Sporting Events
Dining / Entertaining
Club Dues
Alcohol
Tobacco
Lottery Tickets
Reading Materials (Books, Newspapers)
Cable TV
Other
Gifts / Contributions
Church / Synagogue
Charities
Birthdays
Holidays
Weddings
Other
Savings
Regular
Occasional
Retirement Contributions
Investments
Bonds
Other
Miscellaneous
School Tuition / Dorm / Apartment / Supplies
Union Dues
Professional Fees
Lessons
Household Business Expenses
Legal Fees
Installment / Credit Card
Checking Account Charges
Other
Taxes (this would be for income other than your check if you're using net payroll numbers)
Income Tax
Social Security
Medicare
State Taxes (Not Sales Tax)
Other
(If you're not paying the full balance on your credit cards each month, be sure to keep track of how much you're charging as well as how much you're paying and how much interest is being added to the unpaid balances on your accounts.)
Step Three: Figure Out the DifferenceAfter you've created your budget, you need to keep records of your actual income and expenses. This information helps you to understand any "budget variances" - the difference between the amount you budgeted and what you actually spent for the month, or time period.
Step Four: Maintain it Monthly - Track, Trim and TargetAs you track your monthly expenses, you may find you need to trim expenses is some areas. Some expenses are more easily trimmed. For example, you need to make the house payment and get groceries, but you may be able to go without seeing the premier of that new movie. Cutting back is usually a better place to start than cutting out.
Tips for Maintaining a BudgetA common budgeting mistake is to save what is left at the end of the month. When you do that, you often have nothing left for savings.
Spending more than you planned for one item can be offset by reducing spending in another area. If you find, however, that you are consistently spending more for recreation, and taking away from savings, you might want to revise your budget and goals.
A common budgeting mistake is to save what is left at the end of the month. When you do that, you often have nothing left for savings. It is better to consider savings a fixed expense.
The most common areas where overspending occurs are entertainment and food (especially away from home meals). Some tips to maintain your budget include: purchasing less expensive brands, buying quality used products, and avoiding credit card impulse purchases.
A surprise tax refund can seem like found money, but it is wiser to take a look at the budget, and the goals and priorities before you spend it all.
Everyday Tips for SavingsFind ideas for saving money that work in your life.
If you save $7.00 each week, at 5% interest, in 10 years you'll have $4,720.....If you save $21.00 each week, at 5% interest, in 10 years you'll have $14,160.... If you save $28.00 each week, at 5% interest, in 10 years you'll have $18,880....
Types of Savings AccountsThere are many types of savings accounts and activities, including some we'll define as investing opportunities. Investing opportunities are discussed further in the Managing Your Money lesson. This lesson covers the basic savings plans: passbook accounts, statement accounts, money market accounts and certificates of deposit.
Other than investment opportunities (discussed in detail in the Managing Your Money lesson) the basic savings plans include: passbook account, statement, money market and certificates of deposit.
With passbook accounts the depositor receives a booklet in which deposits, withdrawals and interest are recorded. The average interest rate on these accounts is likely to be lower at banks and savings and loans than credit unions. Funds are easily accessible. These are often referred to as "regular" savings accounts.
Statement accounts are very similar to passbook accounts, except that the depositor receives a monthly statement instead of a passbook. Funds are also easily accessible, often through a 24-hour automated teller machine (ATM). Expect the same interest rate as a passbook account. Statement accounts are interest bearing checking accounts, which combine the benefits of checking and savings. The depositor earns interest on any unused money in his/her account.
Money Market accounts are a combination of checking and savings accounts. The interest rate paid is built on a complex structure that varies with the size of the balance and the current level of market interest rates. The average yield (rate of return) is higher than regular passbook savings accounts. You can access your money from an ATM, a teller, or by writing up to three checks per month. This type of account provides immediate access to your money, but usually requires a minimum balance of $1,000 to $2500 with a limited number of checks that can be written each month.
Certificates of Deposit offer the benefits of being simple, with no risk, no fees, and have higher interest than a passbook or statement account. On this type of account, the financial institution pays a fixed amount of interest for a fixed amount of money during a fixed amount of time. The trade-off for the higher return is that you have restricted access to your money. There is usually a withdrawal penalty if you cash in the account before the expiration date of the certificate of deposit. This penalty can be higher than the interest earned. If you think you might need the money before the time period expires, don't use this method!
Types of certificates of deposit include:
Rising-rate CDs with higher rates at various intervals, such as every six months.
Stock-indexed CDs with earnings based on the stock market.
Callable CDs with higher rates and long-term maturities, as high as 10-15 years. However, the bank may "call" the account after a stipulated period, such as one or two years, if interest rates drop.
Global CDs combine higher interest with a hedge on future changes in the dollar compared to other currencies.
Promotional CDs attempt to attract savers with gifts or special rates.
Shopping For the Right Savings For YouYes, you can shop for a savings account that is right for you. Learn how some reduce your money earned, and can even result in a loss!
Not all savings accounts are created equal. In fact, not all passbook accounts, or money market, or any type account will offer the same services and dollar yield. Yes, you can shop around for a savings account that is right for you. As always, you'll first need to think about which account is right for you. When and how often you need to access the account will be key factors. Then, you'll want to look at the interest rates offered by the variety of banks and credit unions. But don't let that be your only deciding factor. Also, check the benefits you receive with the account. Some will have fees, charges and even penalties based on minimum balance requirements or number of transactions. Some accounts require a certain balance prior to paying interest. On some money market accounts, a financial institution may pay a higher interest amount for a higher balance - you'll want to know what the cutoff balance is for the higher rate. Most calculate interest on a daily basis, and some use the average of all daily balances.
The Power of $50 a MonthPaying down your credit cards bills can give you real "savings". Paying the minimum due each month can be deceiving. Take a look at what happens, and how much you can "save" on interest.
Here's an example of what $50 can do. If you have a credit card with a $3,000 balance at an annual interest rate of 18 percent, and pay only the 2% minimum monthly payment of $60 per month, it would take you 8 years to pay off your bill. Think about that before you HAVE to BUY that item! By the way, that $60 payment for eight years means you paid in $5,780, not the $3,000 you thought the item or items cost. You would have paid almost twice the original debt over the eight-year period. Now, here's a great idea to save you money. If you pay an additional $50 per month on that debt, for a total payment of $110 a month, you would pay off the debt in 3 years and save over $1800 in interest payments. So, $50 a month can be quite powerful! Imagine what you could do with $100 more per month.
Saving Money on Everyday ActivitiesSavings can happen everywhere - in your daily activities and in some of the most common items we use and purchase. Find out ways to save - every day, without cutting into your fun and needs; on fees; and even on deductibles.
Saving money can be done everyday. Savings accounts are good, but you can also save money by paying more on your debts, as mentioned above. Also, think about what you are saving when you "don't spend" money. Here's some ways to save:
Getting cash - if the ATM you use charges $1.00 or more to access your account, try another ATM, or consider other methods of payment. If your financial institution charges you a fee each time you withdraw cash from an ATM, then think about how many times you use that service. If you pull out $20 from a machine, and end up paying fees of $3.00, that's a 15% charge. That's a lot! Check your monthly statement to see how many of these charges you have, and how quickly they add up. Maybe a little more planning is in order.
Would you spend $4,720 for coffee or soda? Maybe you do, and don't know it yet. Too much caffeine - your doctor will discourage it, and your savings plan might too! If you got in the habit of a super latte morning wake up, try an exercise routine, or coffee at home and skip the coffeehouse. If you don't spend a dollar a day, (and invest at 5%), you'll have saved $4,720 on that coffee over the next 10 years. Snacks can end up costing you a small fortune. Things like bringing lunch to work, or a snack, can end up allowing you to save for that vacation or family outing. By thinking about where you spend money, you can save, and buy the things that are important to you.
How's your deductible? Unless you get into an accident every year, you may want to consider finding out the difference in your insurance premium if you raise your deductible. If it costs you $75 to have a low $100 deductible rather than having a $250 deductible, then you are actually buying only $150 of coverage with that $75. That's very expensive insurance! Be careful however, don't raise that deductible too high if you don't have money set aside in case you do have an accident.
Time to look for a new company? If you have been with the same company for a while, it may be time to compare rates and services from other companies. If you have a good driving record, and are currently insured, call some other companies for quotes. Be sure to have a copy of your existing policy so you are getting a quote on the same coverage. Beware of some agents who may lead you to believe you are getting a substantially lower rate - check the coverage and services. If you get a lower quote, double check with your existing insurer to see if they will match it before switching.
Forget to deposit money and your check was overdrawn? Overdraft fees can be at least $10 these days. Plus, many companies you wrote the check to are now charging as much as $20 for a return check fee. These are costly mistakes. You might want to check to see if your bank offers overdraft protection. Take a look at this if you have a problem with overdrafts.
Late? It costs more than ever now! Paying your credit card bills on time and in full is the best way. But, we all know this doesn't always happen. When you don't pay on time, however, it could cost you up to $29 each month you're late. Make the time, and take the trouble - to get those bills paid on time… or at least the minimum balance, to avoid those very costly late fees!
Start the Savings Habit Now.
FINANCIAL SAFETY.
Financial Safety
Avoiding Mortgage Fraud
Mortgage fraud is one of those types of swindles that you don't always think about or catch, but one you most definitely need to be aware of. If you simply verify the facts yourself and go in with a wary eye then you should be in good shape when it comes to selling or purchasing a home
Differences Between a Recession and a Depression
The differences between a recession and a depression come down to severity. A recession indicates a decline in GDP for a total of two or more consecutive quarters. A depression indicates a decline in GDP for over three years. A depression can also be defined as a decline in GDP of over 10%. Economic downturns are less severe today than historic downturns such as the Great Depression of the 1930s due to increased government spending and fewer bank failures.
How Safe Is Your Bank?
The federal government provides several safeguards to protect your savings and investments. The Federal Deposit Insurance Corporation (FDIC) is the logo to look for when choosing a bank. It provides assurance that your deposits are protected up to $250,000. There are also similar safeguards on credit unions and brokerage accounts.
If Someone Calls at Your Door to Sell Something
You know the feeling: It is a busy day, and suddenly a knock comes at the door. Someone is there to sell you something, and you're not sure if it is safe to trust the person.
Keeping Your Online Bank Accounts Safe
Online banking is taking the internet and money world by storm, but with this financial revolution there is also significant risk. Keeping your online bank accounts is paramount for the success of the online banking world, and if you can follow these few simple guidelines, you should be able to stay in control of your money and information.
Protect Yourself from Con Artists
There are people out there whose self-selected job it is to separate you from your hard-earned money. Protect yourself by learning how you can avoid and deal with con artists.
Recognizing Credit Counseling Scams
Credit counseling is a useful credit tool that can get you well on your way to a stable financial score, however you do need to watch out for scams and fraudulent activity. If you can simply do research and use caution when investigating credit agencies then you'll be able to protect your information and your financial reputation.
Recognizing Financial Scams
Financial scams can be found everywhere and if you're not careful you could find yourself in a tight financial bind because of fraud. If you can spot and consequently avoid scams however, you'll be in good control of your finances and recognizing financial scams actually isn't that hard.
Avoiding Mortgage Fraud
Mortgage fraud is one of those types of swindles that you don't always think about or catch, but one you most definitely need to be aware of. If you simply verify the facts yourself and go in with a wary eye then you should be in good shape when it comes to selling or purchasing a home
Differences Between a Recession and a Depression
The differences between a recession and a depression come down to severity. A recession indicates a decline in GDP for a total of two or more consecutive quarters. A depression indicates a decline in GDP for over three years. A depression can also be defined as a decline in GDP of over 10%. Economic downturns are less severe today than historic downturns such as the Great Depression of the 1930s due to increased government spending and fewer bank failures.
How Safe Is Your Bank?
The federal government provides several safeguards to protect your savings and investments. The Federal Deposit Insurance Corporation (FDIC) is the logo to look for when choosing a bank. It provides assurance that your deposits are protected up to $250,000. There are also similar safeguards on credit unions and brokerage accounts.
If Someone Calls at Your Door to Sell Something
You know the feeling: It is a busy day, and suddenly a knock comes at the door. Someone is there to sell you something, and you're not sure if it is safe to trust the person.
Keeping Your Online Bank Accounts Safe
Online banking is taking the internet and money world by storm, but with this financial revolution there is also significant risk. Keeping your online bank accounts is paramount for the success of the online banking world, and if you can follow these few simple guidelines, you should be able to stay in control of your money and information.
Protect Yourself from Con Artists
There are people out there whose self-selected job it is to separate you from your hard-earned money. Protect yourself by learning how you can avoid and deal with con artists.
Recognizing Credit Counseling Scams
Credit counseling is a useful credit tool that can get you well on your way to a stable financial score, however you do need to watch out for scams and fraudulent activity. If you can simply do research and use caution when investigating credit agencies then you'll be able to protect your information and your financial reputation.
Recognizing Financial Scams
Financial scams can be found everywhere and if you're not careful you could find yourself in a tight financial bind because of fraud. If you can spot and consequently avoid scams however, you'll be in good control of your finances and recognizing financial scams actually isn't that hard.
FINANCIAL MANAGEMENT.
Financial Management
Financial Management involves critical management of funds. This simply implies optimizing monetary resources to meet with unavoidable risk cover and expenses. The management of finance is crucial to personal and business welfare!What does Financial Management mean?
Financial Management means putting together the economic resources at hand to make efficient use of them and taking decisions that can successfully culminate in acquiring more assets for the family or business. With effective Financial Management you can even attract finance to meet the short term and long term requirement of the family or firm. The whole process is intense and deals with the selection of specific or a combination of assets to deal with a financial issue, if any. The aim of Financial Management is to reduce the size of a problem and ensure fiscal growth of the enterprise or family funds.
What is Financial Management analysis?
Financial Management Analysis deals with the calculated and predicted cash in-flow and outgoings. The analysis is directed towards the study of the effect of existent funds on managerial objectives. Financial Management handles everything from procuring the funds to effective utilization of the same. Dedicated Financial Management analysis handles procurement of funds from multiple sources and since the funds are from different sources, they naturally need to be addressed considering the difference with regards to the potential risk and control.
Tips on effective Financial Management:
Effective financial management involves the optimum use of funds issued via equity, especially in the case of a business. This source is the best from risk point of view, since there is no involvement of any repayment. Financial management of business funds should ideally capitalize on equity capital, inspite of it being the most expensive source of funds. Effective financial management involves calculation of risk, cost and control and maintaining the cost of funds at minimum. This is done with the intent of establishing a proper balance between the involved risk and optimized control.
Tapping foreign investments:
In the competitive business world today, mobilization of funds is very important. The implications play a very significant role in the overall growth of the venture. Financial management involves the raising of funds through the domestic and foreign market. When considering overseas solutions, direct investments and foreign institutional investments are major resources to tap, to raise the required funds. The whole financial management mechanism designed for effective procurement of funds has to be periodically reviewed and modified, understanding the changing requirements of foreign investors.
Utilization of Funds
Financial management cannot be addressed without first designing a strategy to ensure the proper utilization of funds. This helps to evade situations in which the funds remain idle or lack of profitable utilization of funds in hand. When availing of funds for the business it is important to understand the involved cost and risk factors. Wastage of funds will only result in the business short and long term objectives not being met and ultimately – loss! The funds existent within the business should be critically reviewed from time to time and employed properly and profitably.
Scope and extent of effective Financial Management
It has become imperative to address sound financial management in all types of organizations, to guarantee efficient use of all resources. Research reveals that many firms liquidate because of mismanagement of funds and not, as it is commonly believed, because of obsolete technology or the lack of skilled labor. Financial management is designed and customized according to different client needs to optimize output from the assessed fund input. In a situation where resources seem scarce and the demand for funds is high, proper financial management is an absolute necessity.
Objectives of proper and timely Financial Management:
The objectives of efficient financial management include maximization of profit. However, profit maximization is a limited objective and if it becomes the sole focus, then the approach only leads to more problems! Profit maximization must take into consideration the relationship between risk and profit and work towards achieving a balance. The value of a business is analyzed on the evaluation of the stock market price. Financial management should take into account present and expected future income and the dividend policy of the firm to come up with a near perfect understanding of the company’s progress potential.
Financial Management involves critical management of funds. This simply implies optimizing monetary resources to meet with unavoidable risk cover and expenses. The management of finance is crucial to personal and business welfare!What does Financial Management mean?
Financial Management means putting together the economic resources at hand to make efficient use of them and taking decisions that can successfully culminate in acquiring more assets for the family or business. With effective Financial Management you can even attract finance to meet the short term and long term requirement of the family or firm. The whole process is intense and deals with the selection of specific or a combination of assets to deal with a financial issue, if any. The aim of Financial Management is to reduce the size of a problem and ensure fiscal growth of the enterprise or family funds.
What is Financial Management analysis?
Financial Management Analysis deals with the calculated and predicted cash in-flow and outgoings. The analysis is directed towards the study of the effect of existent funds on managerial objectives. Financial Management handles everything from procuring the funds to effective utilization of the same. Dedicated Financial Management analysis handles procurement of funds from multiple sources and since the funds are from different sources, they naturally need to be addressed considering the difference with regards to the potential risk and control.
Tips on effective Financial Management:
Effective financial management involves the optimum use of funds issued via equity, especially in the case of a business. This source is the best from risk point of view, since there is no involvement of any repayment. Financial management of business funds should ideally capitalize on equity capital, inspite of it being the most expensive source of funds. Effective financial management involves calculation of risk, cost and control and maintaining the cost of funds at minimum. This is done with the intent of establishing a proper balance between the involved risk and optimized control.
Tapping foreign investments:
In the competitive business world today, mobilization of funds is very important. The implications play a very significant role in the overall growth of the venture. Financial management involves the raising of funds through the domestic and foreign market. When considering overseas solutions, direct investments and foreign institutional investments are major resources to tap, to raise the required funds. The whole financial management mechanism designed for effective procurement of funds has to be periodically reviewed and modified, understanding the changing requirements of foreign investors.
Utilization of Funds
Financial management cannot be addressed without first designing a strategy to ensure the proper utilization of funds. This helps to evade situations in which the funds remain idle or lack of profitable utilization of funds in hand. When availing of funds for the business it is important to understand the involved cost and risk factors. Wastage of funds will only result in the business short and long term objectives not being met and ultimately – loss! The funds existent within the business should be critically reviewed from time to time and employed properly and profitably.
Scope and extent of effective Financial Management
It has become imperative to address sound financial management in all types of organizations, to guarantee efficient use of all resources. Research reveals that many firms liquidate because of mismanagement of funds and not, as it is commonly believed, because of obsolete technology or the lack of skilled labor. Financial management is designed and customized according to different client needs to optimize output from the assessed fund input. In a situation where resources seem scarce and the demand for funds is high, proper financial management is an absolute necessity.
Objectives of proper and timely Financial Management:
The objectives of efficient financial management include maximization of profit. However, profit maximization is a limited objective and if it becomes the sole focus, then the approach only leads to more problems! Profit maximization must take into consideration the relationship between risk and profit and work towards achieving a balance. The value of a business is analyzed on the evaluation of the stock market price. Financial management should take into account present and expected future income and the dividend policy of the firm to come up with a near perfect understanding of the company’s progress potential.
MONEY MANAGEMENT.
Money Management Tips
Learning effective money management not only enables you to live comfortably within your means, but also helps you to increase your wealth. Use these money management tips to stay in control of your money!
Set a Money Management Goal
Money management is a means to an end. However, make your goal practical and be sure the “end” is in clear sight. Although your money management goal may be to have a comfortable retirement, start small with objectives like paying off a credit card within X number of months or saving $X by the end of the year. In money management, like in any regimen, there’s nothing like the satisfaction of success to keep you on track!
Know what you have
Before you can live within your means, you need to know what your means are. Start money management by taking stock of your money. You’ll probably be surprised at how rich you really are!
As well as the cash in your pocket or purse, include piggy bank cash, bank balances, and available credit from credit cards. (Lines of credit, such as overdraft protections and available credit from credit balances, are additional resources we can use to purchase goods and services. At first look, they appear to be a part of our money. However, credit always belongs to the creditor. When we tap into these financial resources, they decrease our spending power over the long haul with finance charges, fees, and interest that increase our debt.)
Go on a treasure hunt to find lost money. Look in coat and trouser pockets, through Birthday and other greeting cards, jewelry boxes, dresser drawers, under furniture cushions, behind and under furniture, in your freezer, and under your mattress!
Although our money is an asset and all of our assets are types of our money, generally we’re more inclined to think of assets as property.
However although all of our possessions are parts of our wealth that we can turn into cash, usually they are the types of our money that we want to protect from creditors. For instance, you probably don’t want to sell your car or cash in a valuable coin collection to pay a bill. Yet, the ability to convert property to cash is a good concept to remember in identifying and effectively managing your money.
Some assets like vehicles and appliances depreciate (decrease in value) over time. Yet, while they don’t increase spending power, you can turn them into cash.
Long-term assets like real estate holdings, investments, and personal property such as collections, artworks, and antiques appreciate (increase in value) over time and actually enable us to save money and increase our wealth.
Track your income
Really track your income! If you have at least a month’s worth of old check stubs, add them up and divide them to see what your average income is. Better yet, if you can add them for a quarter year and divide by 13 (number of weeks in a quarter) you’ll get a more accurate view of your earning power. If you haven’t saved check stubs, do it for at least four weeks. Don’t just add your weekly wage times four. You’ll be forgetting sick days, flat-tire days, and omitting extra income from overtime and holidays.
Track your spending
Once you know what money you have now and what income you can expect to get, it’s time to find out where your money goes. Take a month and track your spending down to the penny. Make your first purchase a small notebook and pen you can carry in purse or pocket.
Record everything! In addition to tracking the cash you spend, use your notebook to record every bill payment, check, debit, and credit card expenditure. Include the amount you paid, who you paid (or where you shopped), and the date you made the purchase.
After a couple of weeks, you’ll find yourself reconsidering if you really need that pack of gum or mid-morning café latte. However, this money management exercise is designed to show you how you usually spend your money. It’s important during this month not to deny yourself your usual pleasures, no matter how trivial they are.
Setting a realistic goal, knowing what you have, what you expect to earn, and tracking your spending are the basics of money management that enable you to control your money and make wise budgeting choices in the future.
Personal Budgeting Tips
Learning effective money management not only enables you to live comfortably within your means, but also helps you to increase your wealth. Use these money management tips to stay in control of your money!
Set a Money Management Goal
Money management is a means to an end. However, make your goal practical and be sure the “end” is in clear sight. Although your money management goal may be to have a comfortable retirement, start small with objectives like paying off a credit card within X number of months or saving $X by the end of the year. In money management, like in any regimen, there’s nothing like the satisfaction of success to keep you on track!
Know what you have
Before you can live within your means, you need to know what your means are. Start money management by taking stock of your money. You’ll probably be surprised at how rich you really are!
As well as the cash in your pocket or purse, include piggy bank cash, bank balances, and available credit from credit cards. (Lines of credit, such as overdraft protections and available credit from credit balances, are additional resources we can use to purchase goods and services. At first look, they appear to be a part of our money. However, credit always belongs to the creditor. When we tap into these financial resources, they decrease our spending power over the long haul with finance charges, fees, and interest that increase our debt.)
Go on a treasure hunt to find lost money. Look in coat and trouser pockets, through Birthday and other greeting cards, jewelry boxes, dresser drawers, under furniture cushions, behind and under furniture, in your freezer, and under your mattress!
Although our money is an asset and all of our assets are types of our money, generally we’re more inclined to think of assets as property.
However although all of our possessions are parts of our wealth that we can turn into cash, usually they are the types of our money that we want to protect from creditors. For instance, you probably don’t want to sell your car or cash in a valuable coin collection to pay a bill. Yet, the ability to convert property to cash is a good concept to remember in identifying and effectively managing your money.
Some assets like vehicles and appliances depreciate (decrease in value) over time. Yet, while they don’t increase spending power, you can turn them into cash.
Long-term assets like real estate holdings, investments, and personal property such as collections, artworks, and antiques appreciate (increase in value) over time and actually enable us to save money and increase our wealth.
Track your income
Really track your income! If you have at least a month’s worth of old check stubs, add them up and divide them to see what your average income is. Better yet, if you can add them for a quarter year and divide by 13 (number of weeks in a quarter) you’ll get a more accurate view of your earning power. If you haven’t saved check stubs, do it for at least four weeks. Don’t just add your weekly wage times four. You’ll be forgetting sick days, flat-tire days, and omitting extra income from overtime and holidays.
Track your spending
Once you know what money you have now and what income you can expect to get, it’s time to find out where your money goes. Take a month and track your spending down to the penny. Make your first purchase a small notebook and pen you can carry in purse or pocket.
Record everything! In addition to tracking the cash you spend, use your notebook to record every bill payment, check, debit, and credit card expenditure. Include the amount you paid, who you paid (or where you shopped), and the date you made the purchase.
After a couple of weeks, you’ll find yourself reconsidering if you really need that pack of gum or mid-morning café latte. However, this money management exercise is designed to show you how you usually spend your money. It’s important during this month not to deny yourself your usual pleasures, no matter how trivial they are.
Setting a realistic goal, knowing what you have, what you expect to earn, and tracking your spending are the basics of money management that enable you to control your money and make wise budgeting choices in the future.
Personal Budgeting Tips
Friday, April 9, 2010
Financial Planning Tips
Financial Planning Tips
How to Build a Financial Safety Net
IntroductionThe importance of having contingency plans for dealing with a financial crisis cannot be overstated. Whilst you may be fit and healthy now, what will happen if you are unable to pay the bills in the future? This article looks at how you can build a financial safety net to deal with unexpected emergencies.1. Savings and InvestmentsSavings and Investments are often a good means of building a short term safety net to cope with a short term health problem or the result of redundancy or a career change. Research shows that you should seek to put aside the equivalent of 3-6 months in wages to deal with an emergency. Savings and Investments are easy to access or cash in, should you need some emergency resources and are a great short term safety net.TIP: Money put aside for dealing with a financial emergency should be readily accessible. Whilst it is possible to get a better return by investing in a high interest savings account, these often require 3 months notice to access funds. Instead consider placing these funds in an instant access savings account preferably an online one, where the you can get at your money quickly.2. Budget PlanningCreating a budget is one of the best tools available for helping to build a financial safety net. It can help you identify how best to spend your money at the beginning of each month and critically, help you to plan what amount you can afford to put aside each month, even on a tight budget.There is a great free budget planner available via Microsoft at http://office.microsoft.com/en-us/templates/TC062062 791033.aspxThere is also a more detailed article available that I have written in relation to good budgeting, you can find it at http://www.helium.com/tm/475075/introductionbudgetin g-under-utilised-toolsTip: Take an hour now to sit down and plan next month's budget and get an overview of your income and expenditure and what you can afford to save.3. Insurance PoliciesFew people like paying out for insurance policies because we rarely need to use them. Whilst there may be some things we can do without, like extended warranties on electrical goods, failing to plan adequate cover for loss of employment or ill health can have serious repercussions. No one can guarantee that their health will always be good and not building a financial safety net is like playing Russian roulette with your future.There are so many insurance policies it can sometimes be daunting trying to establish which will be beneficial. I have highlighted a few of the key policies for further consideration.a) Life InsuranceIt's not pleasant realising that we are all mortal, but ignoring the matter can leave debts and hardship for those we leave behind. If you're concerned about how much cover you will need then factor in the main debts you could leave behind, like a mortgage or loans and base your insurance cover on meeting these.b) Disability/Critical Illness InsuranceThis type of insurance is worth considering, if for example like me, you are the sole wage earner in your family unit or live alone. I wouldn't recommend it for dual income earners as it can be expensive and providing one of you is able to work you won't need it. This policy will set you back between $25-40 a month and will pay out if you become seriously ill and unable to work. Basically it will cover your mortgage repayments.c) Income ProtectionThis a better option than disability/critical illness cover, as it will pay out for your mortgage if you are unable to work due to redundancy. Research shows that the average time spent with any employer is now 5 years, gone are the days of a job for life. Insolvency within businesses has also increased meaning that you are more likely to be made redundant at some point in your career. It can often take 3 months to a get a new job due to waiting for responses from applications, attending interviews and getting a written offer of employment. Income protection insurance can provide an invaluable financial safety net. You should expect to pay between $35-60 per month for this insurance plan.d) Medical InsuranceThis really is essential as unexpected costs of health complaints or accidents can be significant. Medical insurance will ensure that you get treatment quickly should you need it, without having to consider cost implications. You should expect to pay a few hundred dollars per month for this insurance.4. Antiques and Collectables.Antiques and collectables are often a great source of investment given that they hold their value at the very least and have the added benefit of being easy to sell if you need a quick cash injection. In addition if you wish to leave a sum of money to family after your death they won't be hit with inheritance taxes often associated with large amounts of physical cash. Perhaps one of the major drawbacks to investing in Antiques and collectables is the requirement of a level of technical expertise, or access to those skills, to ensure that suitable items are invested in.SummaryThis article has attempted to examine the numerous ways in which you can build a financial safety net to cater for almost every aspect of your life. We have explored the importance of short term savings and investments to provide an immediate safety net and also examined how you can ensure you have a financial cushion in the future.
Step by Step guide to Getting out of Debt
IntroductionEasy access to credit and buy now, pay later deals have caused increasing numbers of people to encounter debt related problems. This article offers some step by step advice to enable you to get out of debt.Step 1. Recognise the problemAll to often it is easy to ignore mounting debts or final reminder letters because of fear or simply due to feeling overwhelmed by the enormity of a debt problem. The first step to getting out of debt is recognising that there is a problem and being prepared to do something about it.Step 2. Communicatea) Once you have accepted that there is a problem with debt talk to your spouse or partner or trusted friend/family member and explain the gravity of the situation This can often be a very daunting experience due to the fear of what others will think of you and the stereotypes that exist in society about individuals with debt problems. However, talking through the problem is essential.b) If you feel that your debt problems will can be resolved within one to two months and that this is just a temporary blip, perhaps because of a pending pay rise, then you could consider two short term solutions.I) Balance Transfers. These can be a great way to give you extra breathing space if you are experiencing debt problems. Most large credit card companies now offer you 0% for the first 6-9 months if you transfer your credit card to them. This can prove invaluable if you are struggling to keep up with credit card payments as interest can be a real killer.Ii) Mortgage Holiday Period. Most big banks now offer what they term a Mortgage Holiday period when you sign up for the mortgage. This enables you to take a break from making payments for between 1-3 months enabling you a breathing space to get your finances back in order.If you debt problems are more serious or your circumstances are unlikely to improve within the next 2-3 months then continue with the next step;c) Contact those to whom you owe money and attempt to resolve the problem directly. It could be that there are a number of companies but either way most organisations are willing to work with you to deal with debt problems by reducing repayments, if you can demonstrate that you are serious about resolving the situatio , rather than them risk losing all the money owed to them.Ensure you get any agreement to reduce payments in writing as telephone conversations are not legally binding commitments.If you are unable to reach a settlement through direct contact with debtors, then proceed to the next step.Step 3. Seek Professional advice.Sometimes debt is so substantial or an agreement cannot be reached with those to whom you owe money. At this stage it is worth speaking to a debt counsellor to discuss your options.Try http://myvesta.org/ for more informationStep 4. Debt ConsolidationThere are many debt consolidation companies and their role is to help individuals in financial difficulties to reduce payments by combining various debts into one larger amount but with lower monthly payment rates. A professional debt counsellor will often refer you to a reputable organisation as a next logical step, but alternatively you can research them online.Step 5 Create a BudgetMost debt consolidation companies or debt counsellors should help you to produce a monthly budget based on your income. Take time to think about this thoroughly and list every piece of income and expenditure in any given month, but be realistic.Even if your debt problem is minor it is a good idea to create a budget to help manage finances better in the future.Financial Planning in your 30's
IntroductionThis article seeks to discuss some of the specific financial planning that needs to be considered by individuals in their thirties. The age range between 30-40 is significant time in relation to financial planning given that it is during this time that many financial decisions will directly effect retirement plans and long term financial matters, all of which will effect future prosperity.1. Pension PlanningIf you haven't yet had opportunity to start saving towards a pension this is a critical time because failure to do so before you reach 40 will almost definitely mean that you will have insufficient time before retirement to build up a decent level of pension contributions to ensure a comfortable lifestyle.Where possible join a corporate or government related pension plan as these employers often contribute additional amounts to whatever you can afford to save. So for instance if you put 4% of your wages/salary a month into a pension plan they will likely match it.These schemes are often referred to as final salary schemes, as the pension provider promises to pay you a pension based upon your final salary before leaving the organisation and the level of financial contributions made to the plan. So the sooner you can start saving in your 30's the more pension contributions you will have built up by retirement and the greater your final pension pay out.2. Property InvestmentIf you have not yet been able to purchase your own property, your 30's are a good time to get into the market. The benefit those in their thirties have over those looking to buy in their 20's, is that you may already have 10 years worth of savings from employment which can be used to place a larger deposit on the perfect property. This often reduces the size of the monthly repayment levels and the total amount of interest you will have to pay in the long term. Whilst the decision to own a property is down to personal choice it is advisable, as property usually gains in value and is therefore a long term investment In the future you may be able to sell your property and downsize leaving you with a healthy profit with which to improve your retirement.Delaying a decision until you reach 40 means that your may be unable to retire early in the future due to ongoing mortgage repayments into your 60's or even 70's. In addition insurance payments that you take out for the duration of your mortgage term to protect against critical illness or disability and life insurance or income protection will be cheaper than they would be at 40 because of your age.3. Life InsuranceLife insurance gets more expensive the older you get because the risk of death increases with age. If you have not yet thought about life insurance consider taking it out now as it will never be cheaper. Whilst no one likes to think about death, it is important to protect loved ones from an excessive financial burden should you die early. Taking out life insurance whilst in your 30's can save you anywhere between $300 and $600 dollars a year on an average policy.4. Saving for your children's educationIf you have children as you reach your 30's, planning for their future educational needs is now critical if you intend to give then a good start in life and not place excessive financial burdens on yourself another 5-10 years further along. College and university education can be very expensive. Costing between $30-40,000 per child. Whilst this figure is spread over a period of years it is important that you start thinking about how you will meet this cost now.Also think carefully about what level of risk you are willing to expose yourself to as you save or invest for your child's College/University fund. Do you really want to invest in high risk shares where the potential to lose your original investment is significant. Try instead investing in government bonds or placing money on deposit in a high interest savings account.SummaryThis article has attempted to explore some of the financial planning considerations for those in their 30's and the commitment this requires. We have examined the importance of good retirement planning through sound pension and property investment along with the need to make contingency plans through life insurance in case of death. Finally we have explored the importance of thinking now about financing college or university education to dependent children.maximising your income)
Understanding The Costs of Credit Cards
IntroductionThere is no getting away from the fact that credit is now more widely available than ever making it simple to use a plastic credit card to make purchases. What isn't so straight forward are the costs associated with using credit cards. This article attempts to provide an overview of these costs to help inform your spending decisions.1. APRHow often do you choose the first Credit Card you see or the most popular one? What most people don't realise is that it pays to shop around and yet we rarely do. Some credit cards charge higher rates than others which will have a major impact upon your finances, especially if you don't pay your bill outright at the end of the month.If I told you that a top of the range television was for sale for $2,000 but that just down the road you could get it for $1,800, most people would quickly choose to save $200. In essence this is exactly how much of an effect choosing the right credit card can have on your finances, in relation to interest payments.Annual Percentage Rates (APR) is the means that Credit Card companies use to charge you interest. These can vary substantially from company to company but they range between 15-25%. Ensure you choose a card with the lowest possible APR and don't just accept the first one available.It should also be noted that credit card companies often charge a higher interest rate for cash withdrawals via your card so read your small print and don't presume it is the same APR rate.2. International ChargesUsing your credit card in another country is often promoted by finance companies as one of the key benefits of their product and yet they often fail to explain the costs involved.If you use your credit card outside your own country you are liable to pay an additional charge for the privilege which varies from company to company but is usually between 2-5% of the transaction cost. So buying that Ming Vase on a trip to Europe may be more expensive than you think. Credit card companies claim that it is the cost of processing these transactions in another country, but this doesn't hold up well given that most big credit card firms are likely to have offices based in most countries, that could easily process the transaction with limited effort.3. Balance TransfersA word of warning about the costs of balance transfers. These were introduced to entice customers to a different credit card company. The company offers you between 6-9 months of 0% interest on your existing debt in exchange for you changing to their credit card. This is hugely tempting for many people however there are some pitfalls to it.a) You will only get 0% interest on your existing debt. Some people wrongly assume that they will not pay interest on any new spending on their credit card for the 6-9 month period but this is incorrect.b) Always check the interest rate that your card will revert to after the balance transfer period, as it could be that it is higher than your current credit card provider meaning that you pay more interest in the long term.4. Late FeesLate fees are also associated with credit cards if you fail to make at least the minimum payment required each month. These can vary but usually come in at around $35.5. Over Limit FeesThese are fees that you will be charged if you go over your credit card limit without agreement. Most companies will charge you a 1.5% handling charge for this.SummaryThis article has sought to provide an overview of credit card costs and the direct effect these can have on an individual. Attention has been given to the vast differences in APR rates and the use of international charges and balance transfers. Finally we have examined costs linked to late payments and the consequences of going over an agreed credit limit.
The Financial Costs of having a baby
Introduction
Responsible parenting begins before a child is born. Research reveals that the cost of having a baby is extensive and whilst should in no way cause people to think twice about having a child it is important that consideration is given to the costs involved. This way prospective parents can give their child the best quality of life possible. This article will examine in more detail the costs involved.
1. Diapers/Nappies
There is much debate about whether disposable diaper/nappies are better than the rewashable material type, but the cost differences are not significant. The cost of using energy to wash material diapers is about equal to those involved in producing the plastic type. The biggest cost is to the environment as plastics just don't biodegrade.
2. Maternity Leave
Most employers now offer good maternity leave packages but even the best don't contribute a significant income. The loss of earnings during the period on maternity is rarely factored into the costs associated with having a baby, but it is often one of the largest.
3. Moving House
It is often the case that couples seek to move house to a bigger property prior to having children in order to accommodate their growing family unit. This can be very expensive business, costing thousands of pounds in fees and additional mortgage repayments associated with upgrading your property.For those who decide to stay put, then redecorating a room for use as a nursery can set the average family back between $300 and $1000.
4. Baby Milk/Formula
Specialist baby foods or formula for your baby add an additional burden to your household food bills.
Tip: A way around this is to make your own baby food by using your food processor.
5. Baby Clothes
Parents know just how quickly babies grow and frequent clothing changes are often required.Tip: Asking friends and family for hand me downs is a great way to reduce these costs. Alternatively try visiting charity/second hand shops. After all babies rarely have an image to maintain at that age.
6. Specialist Equipment
Babies often need specialist equipment to improve comfort or keep them safe. These include Prams, Pushchairs, baby monitors, baby carriers, car seats, sun blinds, potties, bottles, dummies and numerous other items. All of these can add thousands of dollars to your already stretched budget.
Tip: Once again friends, family or second hand shops can be invaluable source for obtaining these items and reducing your baby bill significantly.
7. Toys
Children often get bored with toys very easily or as they rapidly grow need different stimulus. Frequent changes of toys are also costly.
8. Childcare Costs
Over the period of time your baby is growing up it is likely that you will need a babysitter or take your child to a nursery or play group and these costs are often excessively expensive.
Summary
This article has attempted to highlight the significant costs associated with having a baby. Such information should not deter prospective parents, as they are unlikely to do so, but rather used to highlight the importance of good planning.There is en excellent professional article available through the BBC which can provide even more informative information.Best Online Broker Services
IntroductionNot everybody has thousands of dollars to invest in stocks and shares, so is it really possible to do this on a lower income? This article reveals how you invest small amounts of money to secure your future.Small amounts of money really can make a difference to your financial future, if you know how to make it work a profit for you, here is a proven practical way to do it:1. DPP's (Direct Purchase Plans)If you are willing to except some level of risk in your investment then DPP's are an option worth serious consideration. These are designed to give individual investors direct access to stock and share trading, and you don't need to have had previous experience in this area to benefit from them.DPP's permit you to invest as little as $5 dollars a month, which is ideal for those with only small amounts of money available.All you do is set up an account with a DPP provider and arrange a direct debit of a set amount each month of your choosing. They use your money to invest in stocks and shares of your choosing, allowing you to develop an investment portfolio. Brokers fee's are substantially smaller via DPP's as they are designed for the individual investor and these fee's range from between $1 and $3 per share. If you've not heard lots about DPP's this is because they are legally not permitted to advertise their services directly. Whilst exact reasons for this are not clear it could be linked to concerns from professional brokers, who fear losing substantial fees from investors going direct to the stock market. There is always a risk of making a loss on the stock market and if you are concerned about losing your investment, whilst there can never be an guarantee, look to invest in well established companies to spread your risk. Another way to boost your confidence and skill in this area is by trying it for fun first.There are numerous virtual trader games online, where you get given a fictional sum of money to invest in real shares. Once you've got the hang of it a few times and are getting better at selecting profitable stocks and shares, why not try it for real?
How to Build a Financial Safety Net
IntroductionThe importance of having contingency plans for dealing with a financial crisis cannot be overstated. Whilst you may be fit and healthy now, what will happen if you are unable to pay the bills in the future? This article looks at how you can build a financial safety net to deal with unexpected emergencies.1. Savings and InvestmentsSavings and Investments are often a good means of building a short term safety net to cope with a short term health problem or the result of redundancy or a career change. Research shows that you should seek to put aside the equivalent of 3-6 months in wages to deal with an emergency. Savings and Investments are easy to access or cash in, should you need some emergency resources and are a great short term safety net.TIP: Money put aside for dealing with a financial emergency should be readily accessible. Whilst it is possible to get a better return by investing in a high interest savings account, these often require 3 months notice to access funds. Instead consider placing these funds in an instant access savings account preferably an online one, where the you can get at your money quickly.2. Budget PlanningCreating a budget is one of the best tools available for helping to build a financial safety net. It can help you identify how best to spend your money at the beginning of each month and critically, help you to plan what amount you can afford to put aside each month, even on a tight budget.There is a great free budget planner available via Microsoft at http://office.microsoft.com/en-us/templates/TC062062 791033.aspxThere is also a more detailed article available that I have written in relation to good budgeting, you can find it at http://www.helium.com/tm/475075/introductionbudgetin g-under-utilised-toolsTip: Take an hour now to sit down and plan next month's budget and get an overview of your income and expenditure and what you can afford to save.3. Insurance PoliciesFew people like paying out for insurance policies because we rarely need to use them. Whilst there may be some things we can do without, like extended warranties on electrical goods, failing to plan adequate cover for loss of employment or ill health can have serious repercussions. No one can guarantee that their health will always be good and not building a financial safety net is like playing Russian roulette with your future.There are so many insurance policies it can sometimes be daunting trying to establish which will be beneficial. I have highlighted a few of the key policies for further consideration.a) Life InsuranceIt's not pleasant realising that we are all mortal, but ignoring the matter can leave debts and hardship for those we leave behind. If you're concerned about how much cover you will need then factor in the main debts you could leave behind, like a mortgage or loans and base your insurance cover on meeting these.b) Disability/Critical Illness InsuranceThis type of insurance is worth considering, if for example like me, you are the sole wage earner in your family unit or live alone. I wouldn't recommend it for dual income earners as it can be expensive and providing one of you is able to work you won't need it. This policy will set you back between $25-40 a month and will pay out if you become seriously ill and unable to work. Basically it will cover your mortgage repayments.c) Income ProtectionThis a better option than disability/critical illness cover, as it will pay out for your mortgage if you are unable to work due to redundancy. Research shows that the average time spent with any employer is now 5 years, gone are the days of a job for life. Insolvency within businesses has also increased meaning that you are more likely to be made redundant at some point in your career. It can often take 3 months to a get a new job due to waiting for responses from applications, attending interviews and getting a written offer of employment. Income protection insurance can provide an invaluable financial safety net. You should expect to pay between $35-60 per month for this insurance plan.d) Medical InsuranceThis really is essential as unexpected costs of health complaints or accidents can be significant. Medical insurance will ensure that you get treatment quickly should you need it, without having to consider cost implications. You should expect to pay a few hundred dollars per month for this insurance.4. Antiques and Collectables.Antiques and collectables are often a great source of investment given that they hold their value at the very least and have the added benefit of being easy to sell if you need a quick cash injection. In addition if you wish to leave a sum of money to family after your death they won't be hit with inheritance taxes often associated with large amounts of physical cash. Perhaps one of the major drawbacks to investing in Antiques and collectables is the requirement of a level of technical expertise, or access to those skills, to ensure that suitable items are invested in.SummaryThis article has attempted to examine the numerous ways in which you can build a financial safety net to cater for almost every aspect of your life. We have explored the importance of short term savings and investments to provide an immediate safety net and also examined how you can ensure you have a financial cushion in the future.
Step by Step guide to Getting out of Debt
IntroductionEasy access to credit and buy now, pay later deals have caused increasing numbers of people to encounter debt related problems. This article offers some step by step advice to enable you to get out of debt.Step 1. Recognise the problemAll to often it is easy to ignore mounting debts or final reminder letters because of fear or simply due to feeling overwhelmed by the enormity of a debt problem. The first step to getting out of debt is recognising that there is a problem and being prepared to do something about it.Step 2. Communicatea) Once you have accepted that there is a problem with debt talk to your spouse or partner or trusted friend/family member and explain the gravity of the situation This can often be a very daunting experience due to the fear of what others will think of you and the stereotypes that exist in society about individuals with debt problems. However, talking through the problem is essential.b) If you feel that your debt problems will can be resolved within one to two months and that this is just a temporary blip, perhaps because of a pending pay rise, then you could consider two short term solutions.I) Balance Transfers. These can be a great way to give you extra breathing space if you are experiencing debt problems. Most large credit card companies now offer you 0% for the first 6-9 months if you transfer your credit card to them. This can prove invaluable if you are struggling to keep up with credit card payments as interest can be a real killer.Ii) Mortgage Holiday Period. Most big banks now offer what they term a Mortgage Holiday period when you sign up for the mortgage. This enables you to take a break from making payments for between 1-3 months enabling you a breathing space to get your finances back in order.If you debt problems are more serious or your circumstances are unlikely to improve within the next 2-3 months then continue with the next step;c) Contact those to whom you owe money and attempt to resolve the problem directly. It could be that there are a number of companies but either way most organisations are willing to work with you to deal with debt problems by reducing repayments, if you can demonstrate that you are serious about resolving the situatio , rather than them risk losing all the money owed to them.Ensure you get any agreement to reduce payments in writing as telephone conversations are not legally binding commitments.If you are unable to reach a settlement through direct contact with debtors, then proceed to the next step.Step 3. Seek Professional advice.Sometimes debt is so substantial or an agreement cannot be reached with those to whom you owe money. At this stage it is worth speaking to a debt counsellor to discuss your options.Try http://myvesta.org/ for more informationStep 4. Debt ConsolidationThere are many debt consolidation companies and their role is to help individuals in financial difficulties to reduce payments by combining various debts into one larger amount but with lower monthly payment rates. A professional debt counsellor will often refer you to a reputable organisation as a next logical step, but alternatively you can research them online.Step 5 Create a BudgetMost debt consolidation companies or debt counsellors should help you to produce a monthly budget based on your income. Take time to think about this thoroughly and list every piece of income and expenditure in any given month, but be realistic.Even if your debt problem is minor it is a good idea to create a budget to help manage finances better in the future.Financial Planning in your 30's
IntroductionThis article seeks to discuss some of the specific financial planning that needs to be considered by individuals in their thirties. The age range between 30-40 is significant time in relation to financial planning given that it is during this time that many financial decisions will directly effect retirement plans and long term financial matters, all of which will effect future prosperity.1. Pension PlanningIf you haven't yet had opportunity to start saving towards a pension this is a critical time because failure to do so before you reach 40 will almost definitely mean that you will have insufficient time before retirement to build up a decent level of pension contributions to ensure a comfortable lifestyle.Where possible join a corporate or government related pension plan as these employers often contribute additional amounts to whatever you can afford to save. So for instance if you put 4% of your wages/salary a month into a pension plan they will likely match it.These schemes are often referred to as final salary schemes, as the pension provider promises to pay you a pension based upon your final salary before leaving the organisation and the level of financial contributions made to the plan. So the sooner you can start saving in your 30's the more pension contributions you will have built up by retirement and the greater your final pension pay out.2. Property InvestmentIf you have not yet been able to purchase your own property, your 30's are a good time to get into the market. The benefit those in their thirties have over those looking to buy in their 20's, is that you may already have 10 years worth of savings from employment which can be used to place a larger deposit on the perfect property. This often reduces the size of the monthly repayment levels and the total amount of interest you will have to pay in the long term. Whilst the decision to own a property is down to personal choice it is advisable, as property usually gains in value and is therefore a long term investment In the future you may be able to sell your property and downsize leaving you with a healthy profit with which to improve your retirement.Delaying a decision until you reach 40 means that your may be unable to retire early in the future due to ongoing mortgage repayments into your 60's or even 70's. In addition insurance payments that you take out for the duration of your mortgage term to protect against critical illness or disability and life insurance or income protection will be cheaper than they would be at 40 because of your age.3. Life InsuranceLife insurance gets more expensive the older you get because the risk of death increases with age. If you have not yet thought about life insurance consider taking it out now as it will never be cheaper. Whilst no one likes to think about death, it is important to protect loved ones from an excessive financial burden should you die early. Taking out life insurance whilst in your 30's can save you anywhere between $300 and $600 dollars a year on an average policy.4. Saving for your children's educationIf you have children as you reach your 30's, planning for their future educational needs is now critical if you intend to give then a good start in life and not place excessive financial burdens on yourself another 5-10 years further along. College and university education can be very expensive. Costing between $30-40,000 per child. Whilst this figure is spread over a period of years it is important that you start thinking about how you will meet this cost now.Also think carefully about what level of risk you are willing to expose yourself to as you save or invest for your child's College/University fund. Do you really want to invest in high risk shares where the potential to lose your original investment is significant. Try instead investing in government bonds or placing money on deposit in a high interest savings account.SummaryThis article has attempted to explore some of the financial planning considerations for those in their 30's and the commitment this requires. We have examined the importance of good retirement planning through sound pension and property investment along with the need to make contingency plans through life insurance in case of death. Finally we have explored the importance of thinking now about financing college or university education to dependent children.maximising your income)
Understanding The Costs of Credit Cards
IntroductionThere is no getting away from the fact that credit is now more widely available than ever making it simple to use a plastic credit card to make purchases. What isn't so straight forward are the costs associated with using credit cards. This article attempts to provide an overview of these costs to help inform your spending decisions.1. APRHow often do you choose the first Credit Card you see or the most popular one? What most people don't realise is that it pays to shop around and yet we rarely do. Some credit cards charge higher rates than others which will have a major impact upon your finances, especially if you don't pay your bill outright at the end of the month.If I told you that a top of the range television was for sale for $2,000 but that just down the road you could get it for $1,800, most people would quickly choose to save $200. In essence this is exactly how much of an effect choosing the right credit card can have on your finances, in relation to interest payments.Annual Percentage Rates (APR) is the means that Credit Card companies use to charge you interest. These can vary substantially from company to company but they range between 15-25%. Ensure you choose a card with the lowest possible APR and don't just accept the first one available.It should also be noted that credit card companies often charge a higher interest rate for cash withdrawals via your card so read your small print and don't presume it is the same APR rate.2. International ChargesUsing your credit card in another country is often promoted by finance companies as one of the key benefits of their product and yet they often fail to explain the costs involved.If you use your credit card outside your own country you are liable to pay an additional charge for the privilege which varies from company to company but is usually between 2-5% of the transaction cost. So buying that Ming Vase on a trip to Europe may be more expensive than you think. Credit card companies claim that it is the cost of processing these transactions in another country, but this doesn't hold up well given that most big credit card firms are likely to have offices based in most countries, that could easily process the transaction with limited effort.3. Balance TransfersA word of warning about the costs of balance transfers. These were introduced to entice customers to a different credit card company. The company offers you between 6-9 months of 0% interest on your existing debt in exchange for you changing to their credit card. This is hugely tempting for many people however there are some pitfalls to it.a) You will only get 0% interest on your existing debt. Some people wrongly assume that they will not pay interest on any new spending on their credit card for the 6-9 month period but this is incorrect.b) Always check the interest rate that your card will revert to after the balance transfer period, as it could be that it is higher than your current credit card provider meaning that you pay more interest in the long term.4. Late FeesLate fees are also associated with credit cards if you fail to make at least the minimum payment required each month. These can vary but usually come in at around $35.5. Over Limit FeesThese are fees that you will be charged if you go over your credit card limit without agreement. Most companies will charge you a 1.5% handling charge for this.SummaryThis article has sought to provide an overview of credit card costs and the direct effect these can have on an individual. Attention has been given to the vast differences in APR rates and the use of international charges and balance transfers. Finally we have examined costs linked to late payments and the consequences of going over an agreed credit limit.
The Financial Costs of having a baby
Introduction
Responsible parenting begins before a child is born. Research reveals that the cost of having a baby is extensive and whilst should in no way cause people to think twice about having a child it is important that consideration is given to the costs involved. This way prospective parents can give their child the best quality of life possible. This article will examine in more detail the costs involved.
1. Diapers/Nappies
There is much debate about whether disposable diaper/nappies are better than the rewashable material type, but the cost differences are not significant. The cost of using energy to wash material diapers is about equal to those involved in producing the plastic type. The biggest cost is to the environment as plastics just don't biodegrade.
2. Maternity Leave
Most employers now offer good maternity leave packages but even the best don't contribute a significant income. The loss of earnings during the period on maternity is rarely factored into the costs associated with having a baby, but it is often one of the largest.
3. Moving House
It is often the case that couples seek to move house to a bigger property prior to having children in order to accommodate their growing family unit. This can be very expensive business, costing thousands of pounds in fees and additional mortgage repayments associated with upgrading your property.For those who decide to stay put, then redecorating a room for use as a nursery can set the average family back between $300 and $1000.
4. Baby Milk/Formula
Specialist baby foods or formula for your baby add an additional burden to your household food bills.
Tip: A way around this is to make your own baby food by using your food processor.
5. Baby Clothes
Parents know just how quickly babies grow and frequent clothing changes are often required.Tip: Asking friends and family for hand me downs is a great way to reduce these costs. Alternatively try visiting charity/second hand shops. After all babies rarely have an image to maintain at that age.
6. Specialist Equipment
Babies often need specialist equipment to improve comfort or keep them safe. These include Prams, Pushchairs, baby monitors, baby carriers, car seats, sun blinds, potties, bottles, dummies and numerous other items. All of these can add thousands of dollars to your already stretched budget.
Tip: Once again friends, family or second hand shops can be invaluable source for obtaining these items and reducing your baby bill significantly.
7. Toys
Children often get bored with toys very easily or as they rapidly grow need different stimulus. Frequent changes of toys are also costly.
8. Childcare Costs
Over the period of time your baby is growing up it is likely that you will need a babysitter or take your child to a nursery or play group and these costs are often excessively expensive.
Summary
This article has attempted to highlight the significant costs associated with having a baby. Such information should not deter prospective parents, as they are unlikely to do so, but rather used to highlight the importance of good planning.There is en excellent professional article available through the BBC which can provide even more informative information.Best Online Broker Services
IntroductionNot everybody has thousands of dollars to invest in stocks and shares, so is it really possible to do this on a lower income? This article reveals how you invest small amounts of money to secure your future.Small amounts of money really can make a difference to your financial future, if you know how to make it work a profit for you, here is a proven practical way to do it:1. DPP's (Direct Purchase Plans)If you are willing to except some level of risk in your investment then DPP's are an option worth serious consideration. These are designed to give individual investors direct access to stock and share trading, and you don't need to have had previous experience in this area to benefit from them.DPP's permit you to invest as little as $5 dollars a month, which is ideal for those with only small amounts of money available.All you do is set up an account with a DPP provider and arrange a direct debit of a set amount each month of your choosing. They use your money to invest in stocks and shares of your choosing, allowing you to develop an investment portfolio. Brokers fee's are substantially smaller via DPP's as they are designed for the individual investor and these fee's range from between $1 and $3 per share. If you've not heard lots about DPP's this is because they are legally not permitted to advertise their services directly. Whilst exact reasons for this are not clear it could be linked to concerns from professional brokers, who fear losing substantial fees from investors going direct to the stock market. There is always a risk of making a loss on the stock market and if you are concerned about losing your investment, whilst there can never be an guarantee, look to invest in well established companies to spread your risk. Another way to boost your confidence and skill in this area is by trying it for fun first.There are numerous virtual trader games online, where you get given a fictional sum of money to invest in real shares. Once you've got the hang of it a few times and are getting better at selecting profitable stocks and shares, why not try it for real?
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