Monthly Archives: September 2018

Personal Finance Tips

Keeping your personal finance in order is not something that is an easy task. Personal finance disasters can sneak up on you. Sometimes an emergency expense can mess up your budget so badly that you have to take months to get things back in order.

To help prevent emergency expenses or other unexpected situations from blowing your personal finance out of order you need to develop something called an emergency fund. An emergency fund is basically a savings that is used only in case of emergencies.

Importance of an Emergency Fund

The idea of an emergency fund is basically to help prepare you for extreme situations such as the loss of a job. An emergency fund should ideally be something you could live off of for at least three months if you were to suddenly lose your income.

However, an emergency fund can also be something you can dip into should you have an unexpected expense. The whole point is that you have this extra money there if you should need it for something important that does not fit into the budget.

An emergency fund is not a savings account you can use to make special purchases. It is important to understand and maintain that the emergency account is only for emergency situations.

Make a Budget

To start setting up your emergency fund you need to establish a budget. This will help you to learn about your expenses and be able to set up the amount of the emergency fund.

A budget will also help you when it comes to deciding how much money to put in the fund every month. Be honest with your budget.

Find Out How Much You Need

You will want to consult your budget for how much you will need in an emergency fund. You want to make sure that the fund’s total amount would allow you to live for at least three months.

Of course you can feel free to save above that amount, but shooting for a goal of three month’s living expenses is a good place to start. Always remember, too, that when you take any money out of the account that you need to put that amount back.

When deciding you may want to consider extra expenses and if you want to include those in your emergency fund. If you fall on tough times you may end up deciding to forego extra expenses like cable television or weekly night out. Or you may still want to keep those things. Just make sure you come to an honest amount that you could really off of if you needed to.

Build Your Fund

Once you have decided how much you need in an emergency fund and how much you will add to it each month the only thing left to do is start saving. Make sure you choose an account that will pay you a good amount of interest and be a secure place to keep this money.

Personal Finance Tips From the Wealth Masters

If you pay attention to these tips like the wealth masters do, you will learn exactly how the top dogs at WMI make their millions. Believe me, it starts small.

Small tips make it possible. For instance, knowing what you need money for… what are your financial goals? Why bother with all this? Once that is clear, personal finance becomes personal and steers finance the right way.

That, after all, is what personal finance is about. Personal is ‘one’s own’ and finance is ‘a way to pay’. If one doesn’t know why one is paying for anything, obviously one will fumble with ‘one’s own way of paying for it’. So tip 1 is, know why you are learning this and why you’re spending any money.

Some of the money mistakes people make start from the late teenage years. They are probably climbing up debt through school, house, marriage, or material purchases. Wealth Masters advise you keep a tab on how much you’ve borrowed because that will affect everything about how you repay for the next 10-20 years and your income is the least at startup. The best way to handle a credit card is to not carry it with you.

The third tip is to get a free copy of your credit report every quarter to know you are clean. This will help to get an apartment, borrow money, get a cell phone, even get a job. There are many agencies that organize these reports in USA.

If you ‘don’t know where your money is going’, write down every expense every day for a month… or get a receipt for everything you spend money on. One of the wealth masters discovered he was spending $350 on taxicabs before it struck home that he needn’t be broke because of that avoidable expense.

Finally, use the ‘pegging technique’ by which you do business with businesses that are the best bang for your buck. Which is the bargain dry cleaner? Where are the appetizers free? What time is the half-off movie show? Where do you get flowers cheaper on particular days? Know these things and splurge intelligently and economically.

Those with kids are advised to start them early on spending education. Even 3 year olds can understand the concept of money and control personal finance. Get them into bargain hunting, for instance finding the best deal on spaghetti sauce – a bigger bottle or a different brand?

Auto Financing Tips

If you are looking to buy a new automobile no doubt you have already started doing your homework. Comparing vehicles and models, accessories and mileage and checking out an abundance of dealerships to see who has the best price for the exact vehicle you want to drive.

You need to do the same thing when it comes to getting financing for your new vehicle. Financing options abound, and everyone has a slightly different rate with slightly different terms. It is up to you, the consumer, to find the deal that is right for you.

The process of finding a financing option which is best for you can seem daunting but there are at least a few things you can do to make the process a lot less painful and lot more effective in the long run.

Dealer financing

In many cases the dealership will work to help you find an option that you can handle. Remember, they want to sell you a car, so it is in their best interest to help you buy it, but there is only so much they can do. The rest is usually up to you.

Start by comparing financing options available at institutions other than the one your dealer recommends. Don’t be afraid to search online, visit your bank, the neighborhood credit union or anyone who makes new auto loans. Everyone will have different interest rates, terms and options. The more options you have the better the deal you can secure for yourself.

Leasing might be better for you

You might also want to consider a leasing option rather than a straight purchase. With leasing you can often get a much lower monthly payment and also not have to worry about maintaining the car month after month because dealer provided maintenance is part of the agreement. Of course at the end of the least the car belongs to the dealer, not you, so be sure you understand how that will impact you in the long run if you decide to go with that option.

Your credit report

If you do decide to purchase you vehicle there are a few simple steps you can take to make certain you get the financing options that you need.

First, get a copy of your current credit score and credit report and start checking it for errors. It is not uncommon for credit reporting companies to use outdated or completely wrong information. It is up to you as the consumer to make certain the information in your credit report is accurate.

Every lender is going to use your credit report and credit score to determine whether or not to loan you money and what terms to offer you. Making certain this information is correct will go a long was to getting you the deal you need.

Compare lenders

Don’t just settle for the financing option offered by the dealer. Start comparing rates of as many lenders as you can. Visit your bank, local credit unions and even internet lending agencies. Collect a list of the top five deals offered then revisit them and start negotiating. Don’t be afraid to haggle for the best possible deal. Lenders, if they want your business, will be willing to fight for it and will adjust the terms of their loan to better suits your needs in order to get you to deal with them.

Personal Finance Tips

The key to getting the edge on average-Joe finances and struggling with money worries is through gaining first-rate ‘financial literacy’ which reduces any over-dependency on accountants, financial advisors and so on, so that you can get control of and start to manage and direct your own personal finances. A great starting point on this journey is to know about and understand the 5 main financial needs in life as per classic financial planning.

The 5 Main Personal Finance Needs in Life

In classic financial planning there are 5 defined financial needs a typical person will have, oftentimes at pretty predictable time frames.

I find it can be a useful back of a napkin checklist to have the following 5 financial needs listed in front of you and then ask yourself what you could be doing now to ensure you are actively addressing each of these 5 financial needs:

  1. Savings i.e. the financial need to accumulate a lump sum from surplus income (typically saved from earned income) to meet some financial objective and/or build up a rainy day fund. An example of this would be you saving a down-payment for a home purchase at some stage in the near future. Another example of saving is building up an emergency fund (e.g. setting aside 6 months living expenses). You might also start saving with a view to utilizing these funds for a longer term objective such as building up a rainy day or retirement fund.
  2. Investments i.e. the financial need to invest a lump sum not required by you for a period of time, so as to earn a better return than standard saving can generate. A common example of this is investing a capital sum into bonds or stocks so as to generate a medium-to-high return. Another example of this need could be where you’ve recently retired and have received a lump sum retirement benefit and want to invest this appropriately. You’d have a financial need to invest this lump sum in the most suitable fashion possible (in a manner keeping with your age, risk profile and financial goals) so as to maximize your capital return and/or generate a future stream of (passive) income.
  3. Protection i.e. the financial need to provide financially for certain unpredictable events in life, such as ill health or death, causing the total cessation of earned income for you and/or your dependants. An example of this is when you get a mortgage, you will take out a life assurance policy (mortgage protection payment insurance) which would ensure the mortgage is paid off in full were you to die before the end of the mortgage term. In addition to simply buying life policies you can “protect” yourself by building sources of passive and portfolio income.
  4. Retirement Planning i.e. the financial need to accumulate funds to provide a replacement income (passive income and portfolio income) in retirement as you’re no longer working (either by choice or necessity) and not generating earned income.
  5. Mortgages i.e. the financial need to borrow a capital sum to fund the purchase of a property, usually an apartment (condo) or house, which will typically be used as your home.

The Typical Timeline of Your Personal Financial Needs

Your financial needs generally change as you get older. A typical timeline of changing financial needs during the course of someone’s life would be as follows:

  • Age 20- 30: Savings & Mortgages,
  • Age 30-40: Protection & Longer Term Savings
  • Age 40-50: Investment & Retirement Planning
  • Age 60: Investment

It’s important to note that this is a very general timeline. Personally, I think retirement planning should be looked at much earlier in life. With the exception of the current generation of kids (who actually will live shorter lives than those of us in our 20s, 30s and 40s now due to the growing obesity problem), people are living longer than ever before. However, less and less people are planning for and providing for their longer than ever retirement financial needs. (Why not take a look out our website and other articles on retirement planning to understand you retirement planning needs further.) I’ve heard it is said that people spend 5 times more time planning their holidays than they do their retirement! Sad but unfortunately true!

Becoming Your Own Financial Advisor

The process of personal financial planning is a process you can either undertake yourself or most likely with a financial advisor. The objective of financial planning is to achieve your financial plans and goals through the most efficient management of your available financial resources and proper use of financial products. Unfortunately, most people are not equipped to undertake financial planning themselves and they therefore over-rely on financial advisors and institutions.

A word of warning!! There are only a minority of financial advisors that truly have your best interests at heart (sorry…but it’s true). Many are merely flogging you financial products for commissions and fees. The only financial advice worth taking is paid-for financial advice and advice that is in writing. This is as close to independent financial advice that you are going to get I’m afraid. At least by paying for the service, you know the financial advisor is going to provide a service in return for payment rather than have some financial institution line his pockets with initial and trail commissions on financial products sold to you which may or may not be entirely suitable.

After the recent financial crisis and the expos on the entire financial system, there has never been a more important time to get skilled-up and be your own financial advisor. I’m not saying don’t have a team of financial/tax/legal experts you can turn to for advice. Do! However, I am saying, get empowered and become knowledgeable on the financial requirements you have and the strategies, tools and techniques you will need to achieve them. To become rich and create wealth beyond mere averages requires you, to at least some extent, become your own financial advisor.