The Habits You Should Change to Start Saving Money

saving account
saving account

You probably know that you should save more money. The desire can be intense, but following through may still be challenging. The truth is that saving money is all about changing habits. If you are struggling to achieve the goal of putting money aside, then you might want to consider eliminating some of the bad habits in your life.

Look at the Little Expenses

One way to increase savings is to curb spending. Little expenses are little savings thieves that cost you more money than you realize. A daily cup of coffee can cost you more than $30 dollars a month. A single meal at the fast food restaurant can cost more than two or three meals at home. Even though they don’t cost much at the moment, they add up to a serious expense that stands in the way of you saving money. The next time you are considering spending a few dollars on something, ask yourself how many times a month you make that purchase. Calculate how much money that little expense is really costing you a month, and you may quickly decide that you don’t need it after all.

Understand Wants and Needs to Avoid Impulse Buying

You need a roof over your head and gas in the car to get to work. You want to have those adorable new shoes or the hot new gadget. Impulse purchasing happens when you see something you want and decide that you need it. If it’s not necessary for daily survival, then you really don’t need it. Add it to a wish list, and create a plan to save the money to buy it. You will feel great when you finally make the purchase, and you will curb impulse spending.

Start an Emergency Fund to Avoid Payday Loans

If you are turning to payday loans in emergencies, then you are doing a great deal of harm to your finances. The high fees associated with payday loans make it impossible to save money or get ahead on your other debts. The more loans you take, the more damage you will cause to your financial position. Avoid payday loans by starting an emergency fund. Make a payment into this fund every month, so you won’t have to take a short-term loan to deal with car repairs, illnesses or other emergencies.

Automate the Payments

Most institutions offer free online bill pay programs, so it’s easy to automate paying the bills. This is a smart choice for several reasons. If you haven’t already made the switch to automated payments, here are the reasons you should do so.

  • Eliminate late fees – When the payment is sent out automatically through the bank, you won’t have to worry about forgetting to drop a payment in the mail.
  • Save money on stamps and supplies – There is no reason to buy stamps, envelopes and checks when the bank will automatically send the money at no charge to you.
  • Save time every month – Going in and programming your payments may take an hour or so, depending on how many bills you have. You can set the amounts and the payment dates at one time, then forget about it for the month. It’s a lot faster than writing out checks, stuffing envelopes and making the trek to the mailbox.

It will take time to create new habits and eliminate the old ones. Don’t be too hard on yourself if you still cave to temptation once in a while. However, you shouldn’t give up on the ultimate goal. Get back on track as soon as possible, so you can ultimately achieve your goal of building a healthy savings account.

Guest author Donald Kyte is a personal finances guru and freelance blogger writing for paydayloan.org.uk.

 

Ed Butowsky on Risks in Investment Portfolios

We often hear discussions about risk but there is no one better to explain it in detail than Ed Butowsky, a 25 year veteran of the financial services business. Butowsky says he shocked at how limited the conversation about risk really is. Most people take on the surface that risk is loss of principal. However, there are many other risks you need to evaluate when organizing an investment portfolio, he says. Below are three examples of various risks.

stock portfolio
stock portfolio

1. Capital Risk.
This is the easiest risk to understand. You put $100 in an investment and it drops to $80. Most people are only worried about capital risk so they are falling victim to many other risks in their portfolios that are lesser known.

2. Purchasing Power Risk.
This risk is something that everyone is falling victim to, however, the severity of each case varies. No one is immune to Purchasing Power Risk. Since many people are afraid of capital loss, they have decided to remain in money market earning basically less than 1% on their investments. Cost of living increases are rising dramatically and everybody’s lifestyle is different, however we can generally say that if you are earning 1% on your money, after taxes and the real cost of living increase, you are losing about 6% purchasing power a year.

3. Correlation Risk.
Professional money managers have been aware of this problem for years. Most equity categories are going up and down together. If all of your investments rise based on a positive economic condition, they will most likely decline together when that positive economic condition changes. The genius of investing is finding investments that can make you money but don’t have the same risk characteristics of all of your other investments. Everyone needs to know that due to the unrelenting printing of money by the Obama administration, we are seeing more assets rise together than ever before. With money being force fed into the economy due to Obama’s quantitative easing policies, all equity investments have risen together. This presents a major potential risk for all investors. Make sure to compliment your portfolios with investments that can also go up when equity prices go down.

Butowsky recommends that you discuss each of these in detail with your financial advisor immediately.

 

Be Prepared- Singing the Praises of the Emergency Fund

An emergency fund is a stash of money set aside to help you cope with unexpected expenses, and yes, you need one.  Everyone gets into a bind sometimes where they need a little bit of financial help, and for the smart money savers who have kept their emergency stash safe it’s possible to survive unexpected financial surprises.

emergency fund
emergency fund

The emergency fund is also an essential financial planning tool as, without one, money to cover emergency expenses has to come out of one’s regular income or it has to be borrowed.  Not having an emergency fund has the potential to throw an otherwise organized budget into sever disarray.

So what is it exactly?

An emergency fund is not a regular savings account, it is not an investment, nor is it a sinking fund (one into which you pay regularly to cover a planned expense like a new car or vacation).  It is a form of insurance against catastrophes such as severe illness or fire, breakdowns of things like the car or furnace, or a suddenly being fired from a job which leaves you temporarily stranded without income.  In other words, the emergency fund is there to be used in circumstances over which you have no control, and for expenses that you would otherwise have no way of covering.  By the way, feeling a strong desire to buy a new entertainment system doesn’t count as an emergency need- just wanted to make that crystal clear.

Insurance Isn’t Enough

Even for those people who go the extra mile to have the most coverage in their insurance policies- it’s important to keep an emergency fund handy.  Here are a few examples of insurance policies that may not quite carry you through difficult circumstances.

  • Medical Insurance: Even with good medical insurance, there are inevitably some things that could happen that are usually not covered under any medical insurance. Additionally there are always deductibles associated with medical insurance.
  • Homeowners Insurance: More deductibles.
  • Disaster Insurance: In the case of a flood, fire or weather-related disaster, a good insurance policy should pay for all expenses including temporary accommodations.  In spite of the security that disaster insurance offers, few insurers will turn up with a check in hand right away.  It may be weeks, even months before you see any money from them.

For glitches that inevitably occur with insurance policies and insurance companies an emergency fund is your lifeboat that can carry you through the rough seas.

Warranties, Murphy’s Law, and Modern Engineering

Murphy’s Law says that something will go wrong with your car the day after the warranty expires, and ditto with the furnace, computer, fridge, washing machine and every other electronic gadget that you own.  Actually, thanks to modern engineering there is no longer any reason to worry about your electronics breaking as a result of Murphy’s law, electronics are actually made to break right after the warranty expires.  So if you have an air conditioner that the company provides a five year warranty on, you can expect it to break down during the sixth year.  But I digress.

The main point is that when electronics break it is usually not the most opportune time, such as the air conditioner that breaks in July, or the laptop that breaks during a business trip.  Often, at these inopportune times, when electronics break people end up asking “What are we going to do now.”  If you have been putting away an emergency fund, the answer is simple.

When your car suddenly needs a new engine, or your house a new furnace, you will be very glad that you had the foresight to establish an emergency fund.

Sudden Loss of Income

Possibly the most important reason for establishing emergency fund is to mitigate the problems that result from loss of income.  Losing one’s job or otherwise being unable to work not only drastically reduces income, but can likewise increase expenses for things like health insurance.  If you have unemployment or disability insurance that will help a bit, but considering the cost of essentials such as mortgage or rent, utilities, food and so on, insurance probably won’t cover everything. Careful planners will have built in loss-of-income insurance as part of their mortgage and only need to dip into the emergency fund for other expenses.  Those who failed to plan ahead will incur the debt.

How Big Should the Fund Be?

The truth is that the more money you have in an emergency fund the more you will have available in case you need it.  But considering that you probably have other things that you will want to use your money for, other than stuffing it in the emergency fund, the experts recommend having enough money available to cover at least three months worth of living expenses.

Money Doesn’t Grown On Trees- Funding the Emergency Fund

Start small by setting aside a few dollars every week, and once you get accustomed to setting money aside start setting a little bit more aside.  Eventually you can work your way up to the goal of having 3 months worth of money in the bank.  Once you reach the goal of 3 months worth of money, you can stop feeding the fund unless you want to have a larger pillow in which to fall back on.

Authors bio:
Rachel Walker is a FastUpFront Blog contributor and business consultant. Fastupfront offers an alternative to business loans and based on future sales.

Managing Money Tips

If you want to utilize your money efficiently than take some help of expert ideas on money tips that allow you to understand what the best choices are available to save and invest wisely.

Importance of Money Tips for Happy Life

With the persistent increase in price rise and economy boom, people need some careful saving money tips to sustain a comfortable living. Undoubtedly, a well planned life allows you to live better whether you have less or ample amount of money. These days rising price levels of different commodities and services make it essential to manage money and enjoy its benefits. A wise planning and money tips ensure an easy purchasing power and allow you to save your money for difficult times.

money tips

By following some intelligent money tips you can avoid unwanted financial stress and shortage of any kind. Money tips and proper management skills results in making good decisions sustain your relationships happily and enjoy the benefit of healthy life. The way you manage your money ultimately allows you to perform your various responsibilities and functions well. It is the smart saving and money tips guides to make clear plans and take some financial decisions on your journey to a better lifestyle. Any wrong decision may become the reason for unsuccessful marriages and personal life disturbances. Money tips provide you an opportunity to plan your life as per your requirement and likings.

Know About Your Budget

Due to recession and inflation conditions, people wish to increase their financial knowledge and various options through which they can navigate their savings and income. Nowadays, you can easily find several money tips on the internet and books from experts which help you to adopt an investment strategy for future life. Just you need to spend some time on practicing those tips when it comes to saving money. Money tips are the important thing that make your life easy by designing your budget is realistic and achievable manner. As it often seen that most people tend to adopt some unrealistic schemes and plans resulting in a lot of discouragements, when they are not able to attain their set goals. It may appear little difficult to understand different strategies and schemes for utilizing money smartly, but the well-timed efforts will secure your future in a positive manner. Some wise efforts and management of money of today can empower you to enjoy financial freedom to meet any type of goals and expenses.

Search About The Different Options to Save Money

saving money

If you want to live your life comfortably and enjoy the richness then you need to be aware about the different methods to save and invest money, almost every successful person in this world whether the person is millionaire or famous business personality has gained their status because they have designed their money and resources by following some smart money tips. You can also save money regularly and in time, through some quite practical and sensible investment ideas, the amount that you save now will eventually allows to make your future easy and you can also plan to buy a new house and initiate your own business without much difficulty.

To Save Money is Not a Rocket Science

With the proper guidance and money management tips one can save and make considerable amount of money: if you become successful in controlling your money, you will find the entire activity useful and valuable. It is good for you to spend on various investment plans which include insurance, government savings, bonds and the like. Some saving money tips also provide you an effective way to organize your hard-earned income in some profitable manner. Even if a financial problem comes it will not affect your life much through good money management skills and surely you can reduce the stress of financial breakthroughs and circumstances. Money tips will allow you to prioritize your liabilities, electricity bills, water, Internet, and other monthly bills in a much easier way.

Generation X vs. Generation Y: Who Are The Best Savers?

As we go through lives we are pigeonholed – man, woman, executive, tradesman, graduate, parent – this is done in attempt to understand ourselves and each other, what motivates us, where we’re going and how we’re planning on getting there. Another popular classification which allows us to assign certain characteristics to a group of otherwise unrelated individuals, is that of their generation.

The Baby Boomers are the post war generation, born between 1946 and 1964 who, if they are not already retired, are looking down the barrel at the last handful of their working years. However, it is their children and grandchildren, Generations X and Y who are well positioned to research and understand investments and plan for their retirement, so it is now it’s time to see what they’ve learned from their parents, and how world and economic changes have shaped their relationship with money.

kids save money
kids save money

As much as we try to deny it, we are a product of our upbringing and just as you will hear yourself scolding your children in the same way your parents chastised you growing up, you form an attitude and understanding of money from your parents, so is it Generation X or Generation Y who are better positioned as the financially secure future generation.

Savings Statistics for Generations X and Y

Generation X is those born between 1965 and 1976, while Generation Y comes in from 1977 to 1989. Compared to the Baby Boomers, Generations X and Y have grown up in a time when the economy is significantly more turbulent and this difference is demonstrated in their greater savings abilities.

However, compared to each other, Generation X and Generation Y still have some significant differences in their savings abilities. For example, a survey of more than 1,500 adults in the US conducted by Maritz Inc, found that a quarter of the Gen Ys were putting money into their 401K and their retirement savings account, while 23% of the Generation X members surveyed were doing the same. The good news is that so many people are taking advantage of the opportunity to save for retirement, with the key being making regular contributions to long term savings accounts to take the greatest advantage of compounding interest.

A survey by financial institution RaboDirect has also found that Generation X appear to be less savvy with their money than the younger Generation Y, where of all the Generation Xers, a disproportionately high number of them are struggling with large debts, and a high number of them feel like they are in the red. A third of Generation X have said their savings would only last them two months if they lost their job, and more than a third admitted they have to scrimp and save just to make ends meet.

Findings from many studies have revealed a fatal flaw with the savings of Generation X, who are struggling with home ownership because their Baby Boomer parents have spent their inheritance. While a cash injection from your parents is nice, it’s not to be relied upon, especially if your parents have their own ideas about leaving you in the dust of their motor home. Generation Y however, were lucky enough to be able to benefit from government grants, although it is the savings habits of Generation X which is holding them back from home ownership as it is still Generation Y who is the most savings conscious, having taken the lessons from the GFC to heart, and more importantly – acted on them.

Savings Habits of Generations X and Y

The reality is that we are all spending more than we used to, regardless of our generation or situation, partly because it is so easy to gain access to credit cards. The increase in capital gains also encourages us to spend more because we feel wealthier, and as the value of our houses, shares and other investments goes up, this lowers the savings ratio in most households.

As much as the Baby Boomers are splurging now, to some degree they have earned the right to let loose because of their financial diligence earlier in life. Baby Boomers lived through one of the highest interest rate periods and yet they were still able to buy and hold onto their homes. They did this through careful saving and spending, and not spending more than they were earning – in fact spending much less.

Looking at the next generation, Gen X don’t appear to be following in their parent’s footsteps, and many are leaving the savings track all together. For Generation X it has been easy to accumulate lifestyle debt such as credit cards and store credit to buy items such as fridges and couches on interest free terms. Of course these forms of credit aren’t a problem when used properly, but can become very expensive if you don’t stick to the interest free days and let interest accumulate and them compound.

Generation X also spent a lot of time studying and as a result accumulated a HECS debt, or acquired student loans which they now have to repay. Their time in tertiary education also meant they entered the workforce later and waited longer than their parents did to acquire assets. However, those with money to invest in the 1980s were able to take advantage of the rising asset prices and learnt to manipulate and profit from the stock market in a way that no generation before had done.

Generation Y have grown up in the information age with the ability to find the information they need quickly and easily and as a result have a high level of financial literacy. Having this sort of instant access to information has also meant that many Gen Ys expect instant results and instant gratification – spending up big on depreciating assets such as information technology, cars, clothes and furniture. However as the statistics from around the world have shown, it is Generation Y who are the more savvy savers as they use their desire for and access to information and ideas, to look ahead and find ways to make their actions today, work for them in the future.

Tips for Generation X and Generation Y to Save

For Generation X who have long been paving the way in investment markets, you may be interested in turning your investment interests towards the property market. You still have a number of years until your retirement and the long term investment benefits of property and the benefits of negative gearing to save you at tax time can be a good way to recoup some financial strength and stability.

Generation Y needs to make sure they keep their credit card debt under control, otherwise the benefits of any savings made will be cancelled out by the credit card interest. Therefore, Generation Y may need to consider balance transfer credit cards to clear their debts, and this will allow them to focus on their at call high interest savings accounts to easily make regular deposits.

Over the last 3 years, Alban has been blogging about personal finance and money savings strategies. When he is not sharing his opinion online, he contributes to SavingsAccountFinder.com.au

 

Seven Things Kids Need to Know About Money

Teaching a kid about money is very significant. It helps the kid to be responsible and have self esteem. It also enables a kid to know the best way to spend the money that he or she has earned wisely. Below are some things that a kid should know about money.

calculator

1.  Saving from income

It is very important for a kid to develop a habit of saving. The best approach is to advise a kid to save at least 10% of his or her earning.

2.  Don’t borrow more than what you can pay back

Debt is one of the leading causes of depression. It is important to let the kid know that it is mandatory for one to pay back what he or she borrows. It is also important for the kid to know that a debt can make him or her to be anxious and stressed. These are some of the causes of heart problems and lack of self esteem. Let the kid understand why an indebted person is unlikely to get rich.

3.  Giving out is getting more

It is important to let your kid know that managing money is not the same as hoarding it. The kid should know that money has to be spent wisely and with a purpose. Let your child understand that donating money for good course is a noble undertaking.

4.  Money is not evil

There is a common say that money is the root of every evil. You should ensure that your child is not imprisoned by this say. Money has brought good things to human life. They include the creation of wealth, investing in business and donations to charity organizations.

5.  Spend less lose less

One of the earliest philosophies about wealth creation is “it takes money to make money”. However, it is also possible that it takes money to loose money. It is important to let your kid understand the value of money and the need to be cautious while getting into business deals.

6.  Get the best price for everything you can

What defines ones financial help is the amount he or she earns as compared to the money that he or she spends. Let the kids also know that by bargaining it does not imply that one is a miser.

7. The fast buck is your last buck

It is important to let your kids understand the importance of creating wealth. However, let them understand that it is a life time process that is based on common sense, discipline and hard work.

Article by Noelle Greenwood who believes children should not miss out on financial education which is important for making responsible decisions upon reaching adult life. Noelle helps manage a number of finance sites that help consumers choose financial products to meet there needs such as the best savings account interest rates to the credit card with the best rewards.

 

Creating a Savings Account Despite Your Debt

If you have a lot of debt, then you may wonder what the importance of having a savings account would be. After all, if you could afford to save money, then you would be able to pay off that debt, right? Well, that’s not necessarily true. It’s important to have a savings no matter what, as it’s likely that you accrued a considerable portion of your debt due to the fact that you weren’t prepared for a financial emergency when it happened. For example, you may have racked up hundreds of dollars on a credit card fixing your car, and that would not have been necessary had you had a savings account to back you up. Those car repairs will end up costing you much more than they would’ve had you paid cash. Now do you see the importance of a savings, no matter what? Here are some pointers for creating a saving account despite your debt:

saving account

Shop around. First off, you must realize that not all savings accounts are created equal. You want your money in savings to work for you while you are not using it. How does that happen? You need to find an interest-bearing savings account with as high a return as possible. Usually, savings accounts offer only minimal interest returns, but it’s possible to find savings account specials that will pay you upwards of five percent interest at least for the first year, as a bonus for signing on. Shop around for your savings account, and find one that pays you.

Cut the credit card. Chances are you have been using your credit as a makeshift savings, meaning credit has been your standby for getting out of financial tight spots. All this method does is get you further and further into debt. Commit to relinquishing this habit – and today.

Prioritize your savings. Once you set up a savings account and stop using credit as a savings substitute, it’s time to begin growing your savings. Work your monthly savings stipend into your budget the same way you would any of your other monthly expenses. Every little bit counts, so every little bit you can contribute to savings needs to go into savings – period.

Once start building your savings and watching it grow with interest, your debt situation doesn’t haven’t have to feel so overwhelming. No one likes to be in debt; however, most people get there the exact same way. Do what you can to reverse your debt habit now by creating a savings habit, and watch your financial well-being take a turn for the better.

About the Author: Tomoko Creveling specializes in personal finance and knows how difficult it can be to let money sit in savings whiel in debt – but it is possible. She also enjoys writing about finance recruitment companies and how they can help HR personnel find new recruits.

 

The Rich Dad, Poor Dad Guide To Personal Finance

Rich Dad Poor Dad is a book about the financial lessons that can be learned in life. Robert delves into his life as he was brought up in Hawaii and discusses the differences between his fathers approach to finance and the approach of others in his life. As he tells about his life and schooling in Hawaii, you get a really clear glimpse into the financial mindset of two men who played an important role in his life and what he learned from their experiences.

cashflow robert kiyosaki
cashflow robert kiyosaki

There were several instances in Robert’s upbringing that effected the decisions of these two men and these instances are discussed in this book. Robert spends some time in the book describing why it is so important to have intelligence in the financial avenue of your life and how it can improve the outcome of the financial decisions that you make. He discusses the major difference between individuals and corporations when it comes to how they spend their money.

Robert has strong opinions when it comes to personal finances as well. He believes that investing in 401K retirement funds is not the way to go about creating a strong financial future. While this belief was met with strong criticism, he continues to stand behind it. He also believes that those people that strive to achieve a formal education are setting themselves up to be employees or to be self employed. Robert believes that the best avenue to achieve financial freedom is to become a business owner or to become an investor.

cashflow quadrant

Robert created a conceptual tool which allowed him to describe four categories for the ways that someone can create an income. He called it The CASHFLOW Quadrant. Each quadrant is represented by a letter, E, S, B, or I. They stand for employee, self employed, business owner, and investor. He has also created four main classes for assets. They are business, real estate, paper assets, and commodities.

A big part of what Robert teaches covers creating a passive income by taking advantage of investment options that come up. This includes businesses and real estate. The main goal of these teachings is to get yourself into a place where you can support yourself on the income that is created from your investments.

Robert believes that financial intelligence can be taught early in childhood by introducing certain games to a child. Playing Monopoly with a child teaches them to think strategically about their investment decisions. They learn that trading in a few small houses for a larger hotel can bring more income into their game. Robert has created other games like this to help teach our children how to become strong in their financial avenues as they grow older.

While Robert has opinions that are not accepted by all, the book Rich Dad Poor Dad is a well written book that contains valuable information for anyone that reads it. The story gives a real like example of what impact the decisions in our financial life can have on the successes that we achieve through our lives. This personal story provides an insight into his life and an explanation of why following the coaching he provides can lead to a more secure, financially free lifestyle for you and your family.

For More on The Rich Dad Poor Dad Book by Robert Kiyosaki, visit The Personal Development Company