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Money Management Basics

April 2, 2018/in Money Management /by admin

The way you spend and manage your money has a significant effect on your entire lifestyle. Unfortunately, critical money management skills aren’t commonly taught in schools, although that’s starting to change.

Determine your income sources

Whether you are a student, an employee, a business owner or a retired, you need to list your income sources and determine how much income each source generates. For most of us, the main source of income is the salary or wage we receive from our employer and in the most cases, it is a fixed amount each month. If this money is insufficient, consider additional income sources: you can start a second job, offer some services as a freelancer, sell your own products or declutter your house and organize a garage sale.

Spend less than you make

Once you know how much you expect to make on a monthly basis, add up your expenses. The rule of thumb when it comes to personal finance is to spend less money than you earn. If you spend even a thousand dollars more per year than what you earn, you will end up in a spiral of debt that is hard to come out of. If you spend exactly the same amount as your income, you will never be able to save money and be prepared for unexpected events, good or bad. Spend less than your earnings and put some money aside.

Do this by setting up a budget. You need to know where your money goes. Get in the habit of categorizing your bills and tracking your spending. The easiest way to set up a budget – even a basic one – is with a pen, paper and a calculator to help you determine how much money you can spend on each category. Now that you can see your budget at-a-glance, you can decide on the expenses you can cut – do you really need that new dress? Is it really time to upgrade your car? Can you afford this vacation right now? Set a budget threshold that is below your monthly income and try to stick to it.

Make smart investments

Do you wonder why rich people get richer? The simple answer is because they invest their money. Even if you do not have a lot of money, it is better to invest some, rather than keep all of it under your mattress. If you have no financial education or investment knowledge and experience, you can consult an expert, like a financial adviser or a money management coach. They will help you select the right investment vehicle based on your personal financial situation, risk tolerance and goals. Generally, it is better to have a diversified investment portfolio, rather than put all your eggs in one basket.

Choose the right bank account

Some banks require a minimum balance to open a bank account. Some banks charge monthly fees for maintaining your account or your credit card, or if you write more checks than the limit. Some institutions combine both, while others may have no fees. Some accounts come with handy apps that help you manage money, free transfers, automated bill pay and fee-free ATM.

Use your credit card wisely

It is easy to get a credit card and it is also easy to get into debt using one. Never buy things using a credit card that you can’t afford otherwise. In other words, if you don’t have the amount in your bank account to pay the credit card installments every month, don’t make that purchase. In addition to that, some credit card companies may give you a cash back or points if you make payments on time. There are a number of different credit cards with various rewards options. If you have one and find another that suits you better, you may be able to transfer your balance at 0% interest, so it’s worth looking into. Always pay your credit card bill on time to avoid late fees and extra interest.

10 signs you need help managing your money

March 1, 2018/in Money Management /by admin

Is it time to change your money habits, talk to a credit counselor or a financial coach? We all fall behind every now and then, but if you seem to always be financially stuck – you may need a bit of outside help – and there’s no shame in that.

You have no idea where your money goes or whether your card will be accepted

It seems that your paycheck arrives on time every month, however, the respective amount of money suddenly disappears just in a couple of days and you have no idea where it went. A similar sign is if you are standing at the line in the supermarket trying to calculate the cost for all your purchases as you are not sure whether your credit card will be declined as you are already over the limit. If this has happened more than two consecutive months, then it is a sure sign you need to seek help for your finances.

Your credit card is often declined

If your credit card gets declined too often it is a sure sign that you need help with your finances. The reason might be that you are spending too much on luxury items or aren’t tracking how your small expenses add up. Either way, professional advice will do you good.

You have bad credit history and poor bank balance

If you have a bad credit history or you don’t understand what led to it then you are in trouble. The same goes if you have a poor bank balance with about $100 left in your account before payday. If it happens every month, then you should take a note that you might need some financial advice before things get worse.

You don’t save for the future

You don’t have the habit to put money aside for the future or at the very best you save only a few bucks that are left at the end of the month for that dream holiday in the summer. While this does not directly affect your current financial situation, it may turn out badly if you are faced with unexpected expenses in the future. Learning to put aside a certain amount of money every month is a good routine that you should get into in order to avoid financial trouble.

You always spend your savings on daily expenses

You have made an effort to put some money aside, however, you regularly draw from these funds in order to cover your utility bills or daily expenses. Thus, in practice, you are not saving any money for the future at all. It is a good idea to consult a financial expert how to better manage your budget so that you actually end up with cash in your bank account for future spending.

You have no clear plan for retirement

Whether you like it or not, your retirement will come, so it is better to be prepared for it. Think about your retirement and decide on a plan that will help you enjoy those years. If you have no idea or no money at all saved for this period of your life, then surely you need some financial advice how to proceed.

You don’t understand your insurance policies or have none

It is important to have insurance policies that cover both your property and yourself in case of accidents. If you have none, then you are missing an important asset. If you have insurance policies but you are not aware of their benefits, it means you may not be able to get the full coverage in case something bad happens. Talk to your agent and find out how you can get the most out of your policies and how you can fill the gaps.

You have no investments or you don’t understand them

Do you have an investment portfolio that is right for your financial goals? The chances are that you have some investment accounts established by your previous employers but if you have changed jobs way too often, you might have lost track of them. While, those accounts may not be much of an asset right now, in 20-30 years that will be another story. Consult an investment professional and get your money working for you. Managing your investments properly is one of the essential steps for getting control over your finances.

You have no clear budgeting strategy and constantly switch between different ideas

You have some financial struggles that you are aware of, however, you have no clear budgeting strategy. If you apply a different approach to curbing your budget every week or so, it will be counterproductive. Choose a strategy that will be easy to follow and stick to it a few months at least to see if it works for you. If you have problems deciding on what’s best for you, do not be afraid to ask for expert advice. Get into the habit of saying “No, this item is not on my list this month. I will see if I can include it in my budget next month”.

You take out unnecessary personal loans

If you are taking out personal loans to buy the newest gadgets or fund vacations – you’re in trouble. Taking a personal loan, regardless of its type, should be to pay a debt, cover medical expenses or other urgent costs and not for treating yourself with a luxury holiday or a new wardrobe.

Get in charge of your finances. Read money management books, talk to a credit counselor or a financial adviser, get an accountability partner or a financial coach. It’s never too late to start managing your money better. Start today!

Understanding different types of Liquid Accounts

February 26, 2018/in Money Management /by admin

If you need quick and easy access to your money, then you need a liquid account. In order to better understand liquid accounts, let’s define liquidity and liquid assets.

Liquidity determines how fast an asset can be converted into cash. If the asset can be sold quickly and with little impact on its value, then it can be defined as a liquid asset. Examples are: bank accounts, shares of stock, bonds and money market accounts.

A good example of a non-liquid asset is real estate, since it may take a few months to sell it and get the money you need. If you need urgent cash, you might be forced to sell the real estate quickly and with a significant loss.

Bank accounts are one of the most common liquid assets. There are three main types of accounts that are considered liquid assets—checking account, savings account, and money market account—since you can easily make withdrawals. Certain certificates of deposit (CDs) also give you the opportunity to withdraw money without penalty when the account is mature.

Checking account

Checking accounts are considered liquid accounts since the purpose is to keep money in it to pay bills or purchase goods. You can withdraw the money at an ATM, make online payments or write checks. In some cases, you pay a charge for using your money. Some banks limit the checks you can write each month without paying a fee. In most cases, the bank also imposes a service charge if your balance is below a given amount, often the threshold is $1,500.

Savings account

The savings account in its traditional form allows you to withdraw money at the teller window. Some banks even allow for money withdrawal at an ATM or allow online transfers. The disadvantage is that you cannot write checks. If you have a savings account, you receive some kind of interest, but it is usually quite low.

Money market account

Another type of liquid account is the money market account. Its main advantage is that it usually pays much higher interest than the savings or checking accounts. The rate may change depending on the market conditions. There is a minimum balance required for such an account to be open, usually $1,000. The specific details of money market accounts depend on the financial institution that provides them, but banks generally waive ATM fees and give free checks. The disadvantage is that there is usually a limit to the number of checks you can write monthly. There can be limitations on debit card purchases as well.

Certificates of Deposit

The certificate of deposit is not a typical liquid account. There are, generally, two types of CDs—traditional CD and liquid CD.

Traditional CD

The traditional CD is not as liquid as the above-mentioned types of accounts. The reason for that is the requirement to leave your money in the account for a given period. It can be months or years, the typical period varying between 6 months and 5 years. The benefit is that you get a much higher and fixed interest rate for the lifespan. The drawback is that you cannot withdraw the money prior to maturity without a penalty.

Liquid CD

It allows you to withdraw money before the maturity date without paying a penalty. While the overall conditions depend on the financial institution, the common rule is that you receive interest, lower than that of the traditional CD. Often there are limitations on the amount of money you can withdraw or on the frequency of withdrawals within a given period. Perhaps one of the main disadvantages of this type of accounts is the requirement of an opening balance of at least $25,000.

Smart Strategies to manage your Student Loans

January 4, 2018/in Money Management /by admin

Student loan debt can be overwhelming and many people end up paying it off well into their 40-s and 50-s. We have a few strategies to help you manage your loans better.

Understand Your Loans

Many students don’t really understand the terms of their loans and end up overpaying down the road. Know the type of loans you have, the interest rates, balances, and grace periods. You may have Perkins loans, subsidized and unsubsidized Stafford loans or private loans. If you visit your loan servicer’s website, you will be able to see each loan account, balances, interest rates and current repayment plan. Be aware that frequently students have loans managed by 2 or 3 different servicers. Two common servicers are Navient and Great Lakes. If you go to the Department of Education website, you will find help creating a smart repayment plan.

Know the Numbers

It is crucial for you to know the precise amount of money you owe if you want to have control over your student loans. Most students end up with multiple loans and sometimes lose track of them before and during repayment. Know how many loans you have, how much you have to pay each month, the interest rates of each loan and the grace periods.

If you are a current student or a recent graduate, ask your financial administrator at School for assistance or visit the National Student Loan Data System website or Clearinghouse Meteor Network website to find out how much you owe. You can also see all of your loans and debt by checking online your credit report at AnnualCreditReport.com.

Accelerate Your Loan Repayment

You can either pay less money for longer time at a high interest rate, or you can pay more money than the minimum for a shorter time with a lower interest rate. Basically, the faster you pay back your loan and the more money you pay each month, the less interest you will have to pay, thus paying less overall and getting out of debt sooner.

Refinancing

A lot of students end up refinancing their federal student loans; however, this means that you will lose your right of using benefits, such as loan forgiveness and income-based repayment plans. If you are interested in refinancing your student loans consider contacting different lenders to compare total repayment amounts and get a complete picture of your options.

SoFi, CommonBond, Citizens Bank and LendKey are decent lenders who offer good interest rates. LaurelRoad has interest rates starting from 2.99% to 6.99%; Earnest has very decent interest rates, too, between 2.57% and 6.39%; CommonBond offers interest rates starting from as little as 2.57% to 7.12%. SoFi and Earnest might even help you get employed if you struggle with finding a job.

Avoid Default

Depending on what school you are attending, your loans may have a grace period of 3 months, 6 months, or more and the same goes for the total repayment period. Despite most students starting a job right after graduation, often times they are stuck under the burden of repaying these student loans.

If you are more than 270 days late with your payments, your loans will go into default, which is going to lead to taking away your social security benefits. Remember that no matter how difficult your financial situation is, you ought to make at least the minimum payments.

Federal Student Loan Consolidation

This gives you the option to merge all of your student loans into one, thus get rid of all the different interest rates, however, bear in mind that you will, indeed, pay one interest rate but it is going to be quite high.

Aim Higher

Firstly, focus on the loans with the highest interest rate because they will add up the most to your overall debt. Afterwards, shift your focus on the second to last debt with the highest interest rate. This may be challenging, but you will save a significant amount of money if you pay off the costlier debts first. Since your interest rate is based on your principal, another smart move would be to pay extra principal because this will lower your interest payment.

Automatic Payments

Once you have started a job and have consistent, reliable income, you can set up your payments to be automatically withdrawn on a monthly basis. This is just a precaution in case your life gets too hectic and busy and you forget to make your payments on time. Another bonus is that you will get a small reduction on your interest rate.

Programs And Forgiveness

Income-based repayment programs allow you to be forgiven from your outstanding loan money after 25 years of regular payment. However, there are certain criteria to be met if you want to use the benefits of IBRP, like the payments you have to make on your federal student loans must exceed 15% of your total earnings above 150% of the poverty level.

Pay As You Earn (PAYE)

This is a good program which will forgive outstanding money on your federal student loan after 20 years of regular payment. To be eligible to use PAYE your payments must exceed 10% of your total income above 150% of the poverty level. There are other criteria which must be met in order to qualify for the program.

Public Service Loan Forgiveness

Certain people can be eligible for PSLF after 10 years of qualifying payments. One of the stipulations is that you must be hired by a non-profit organization, volunteer organization or other public service organization. It is worth doing your own research to see what your chances of benefiting from this program are.

The approximate number of people with student loans in the USA is 40 million with around $1.3 trillion total debt. In 2014 the federal government seized portions from the social security checks of about 135,000 people because their loans went into default. Get educated about your student loan repayment options, pay more than the minimum whenever you can and do whatever is necessary to avoid defaulting on your loans. Don’t worry, you are not alone. There is free student loan counseling available from the Federal Government, from your loan servicer and from most reputable banks. If you feel overwhelmed or fell behind on your payments, contact your servicer as soon as possible. Do not wait. You can get back on track with some timely action.

Best Budgeting Apps: Keep track of your income, spending and saving with ease

December 4, 2017/in Money Management /by admin

Like everyone else, you are probably doing these two things every day:

Looking at your smartphone to check Facebook, read your email, check the weather, count your steps or simply play a game.
Wondering where all your money went.

Keep track of your income, spending and saving with a budgeting app. Turn your smartphone into a personal financial advisor and let it do the budgeting for you.

Downloading a budget app is a simple way to create a budget, learn new positive financial habits and avoid costly mistakes.

How to choose a budgeting app

A good budgeting app:

Is free – if you are on a budget, you don’t have the extra money to spend on apps.
Saves time – the app should streamline typical budgeting activities, like allowing you to scan or take a picture of your receipts, calculating automatically how much you spent or being able to connect to all your devices or accounts, etc.
Tracks your expenses – that’s a no-brainer – after all this is the main function of the app.
Links to your accounts – it links to your bank accounts and credit cards directly.
It tracks your credit score – this is a newer feature on some apps, and we are sure others will catch on – if you can snag a free app with credit tracking – go for it.
Identity theft protection – some apps offer alerts if they uncover suspicious activity or inconsistencies.

Top 7 free budget apps to help you manage your money

Mint – Mint has been around a long time and is one of the best budgeting apps you can get. It helps create a budget with several spending categories. Then it uses brightly colored graphics to warn the users when they are near the end of the budget in each. It is free and links to your accounts. What’s even better is that it gives you access to your credit score. You can download the app on iOS, Android, and Kindle.
BillGuard – The app keeps track of your spending by type, month and location. It links to your account and gives you free access to your credit score. You can upgrade for an annual fee of $83.88 and get credit monitoring and identity theft insurance. You can download the app on iOS and Android.
Dollarbird – The app allows you to divide your spending by category and also adds past and future income and expenses to a calendar. Thus, it calculates the impact on your balance. The disadvantage is that it doesn’t link to your bank account. You can download the app on iOS and Android.
Good budget – The app uses the envelope budgeting strategy. You can set a budget for each category and it will warn you when the money is about to run out. Then you simply stop spending from this category. It doesn’t link to your account and if you want to sync up to five devices, have access to unlimited categories and five-year history you will need to pay $45 a year. The app is available for iOS and Android.
Level Money – The app recreates the experience of actually opening your wallet. In order to determine how much you can spend per month, week or day, the app subtracts recurring expenses and savings from your income and then distributes the budget according to the period you have set. It links to your bank account and is completely free. The app is available for iOS and Android.
LearnVest – The app is quite useful as it categorizes transactions by expense type and helps set and track goals. You can also use it for net worth calculation as well. It links to your bank account and only for $19 per month you can partner up with a financial planner if you wish. The drawback is that it only operates on iOS.
Personal Capital – This app offers something more than the usual sophisticated budgeting tools. It can be used to track investments and helps to establish goals and models for retirement, college or other important life events. What’s more, since it links to your account, the app will send recommendations for investment opportunities to people with more than $25,000. The app is available for iOS and Android.

Bonus: You can also install an app that helps you with your saving, without any complications or sophisticated actions on your behalf. Acorns app offers to automate savings for you, thus modeling good financial behavior. You need to select a portfolio of low-cost exchange-traded funds (ETFs) and each time you make a payment with a card connected to the app it will round the amount up to the next highest dollar and automatically invest the difference. You can end up accumulating some nice savings over a year – just keep in mind that since it is invested in ETFs, the value of your savings will fluctuate with the market. The good news is that the service is free to college students and costs about $1 per month for the rest.

Download one of these great apps to optimize your budget and identify why and where you are losing money. Once you master your budgeting skills, you can move on to the next level and start actually making money.

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