Monthly Archives: December 2017
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?
If you are looking for a way to add to your financial security for the future, there are a lot of things that you can do. One of those things would be investing in the stock market. If you have never done this before you will need to learn how to start your own investment portfolio. Just remember that whenever you deal with the stock market you are taking a risk with your money, so it’s a good idea for you to learn as much as you can before taking such a big step.
The first and foremost important thing is to educate yourself. You should read about the stocks as well as the market. You should consider taking several seminars or even take a class that teaches investing. You can also go online to a variety of different online financial websites that can provide you with a wealth of information.
You will also need to create for yourself some financial goals and an investment and stock picking strategy. You will need to take time to research different stocks by reading their annual reports, their quarterly reports and any other information there might be on file with the Securities and Exchange Commission. You can also look these up at various websites (Tip: Google freedgar)
Make sure that when you invest that you only invest in the stocks that you have studied and feel that you know. You might want to start by looking into the stocks of companies in your area, companies that you are somewhat familiar with and ones that you might have a little bit of confidence in.
Another thing you need to do is to make sure to check the holdings of some very successful mutual fund companies and if they appear to be doing well with certain stocks then it might be that you could do well with those same stocks.
Make sure that you try to be diversified. You want to try to stay away from investing your money in just a couple of stocks. It’s better if you have a handful that you have investments in. When you do start buying your stocks you need to try and find a discount broker to buy the stocks for you, however, if you feel confident in yourself then you might want to just do the investing yourself and you will save yourself from having to pay out any commissions.
Make sure that the stocks you buy you are going to feel comfortable holding onto for 3 to 5 years, you need to try and resist dumping your stocks the minute you see them dipping in price a few points. You need to give the stocks a chance to do something.
Another way you can invest and it’s a lot easier for you in the long run is if your company offers any 401(k) plans, retirement plans or Keogh plans consider investing in those. Here you don’t have to worry about picking the stocks yourself and there are different tax breaks that come with these types of investments.
Note: Avoid thinking that when you invest your money today that you are going to become an instant millionaire. You need to be thinking of the long term picture not the immediate picture. Besides very few people become millionaires off the stock market, if that were the case everyone would do it. You can however, if you are patient and invest wisely, make a good nest egg for later in life.
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:
- 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.
- 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.
- 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.
- 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.
- 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.
This article aims to provide a few tips regarding personal finance for working adults. In this time of recession and slow growth we all need to save enormously and curb any unnecessary expenditures. But, most importantly we need to manage our finances wisely.
1. Try to spend according to your budget and save some extra cash. Keep track of your income and expenditures. You should be able to save some cash each month and keep it aside for bad times.
2. Invest wisely and ensure that you get optimal returns for your investments. Avoid investing in one scheme or with single company. Instead spread your investments astutely amongst various schemes and companies.
3. Avoid missing your credit card or loan payments; else you may receive a bad credit rating. Do not miss the payment dates otherwise you may have to pay huge interests and find difficulty in getting further loans.
4. There is much we can do to save on our expenditures. Go green and save on expensive energy bills. Even the government is providing some tax rebates to people trying to make their homes more energy efficient. This way you can save doubly by receiving tax rebates and paying less on your energy bills.
5. Usually in tougher times people tend to invest less, but this should be avoided. Keep your investments regular whether small or big. Remember that even these small investments will pay you good returns in the long run.
6. Avoid exorbitant spending on expensive food and alcohol. These are few things that can be avoided in rough times. The more you save the better it is for you.
7. In case you need financial advice, do not hesitate in consulting. You can also do some research online to make wise investments.
These tips will certainly guide you to control your personal finances and pass through rough times easily.