Money Management

Money management is important for any individual. As long as you have income and expenses, it is vital that you are able to manage your money in order to remain financially independent. The good news is that money management is a skill that can be learned so even if you have been having trouble in this area, you can learn tools to help you manage your money more effectively.

Creating a Budget

A budget is the first step in money management. This involves listing all of your income and all of your expenses. When it comes to your expenses, you need to list them in order of importance, including every amount you spend (magazine subscriptions, daily coffees, chocolates from the vending machine etc). If your expenses are greater than your income you will need to cut down on your expenses.

Cutting Down Your Expenses

Having made a budget, cutting your expenses will be much simpler. You may not have even realized you were spending so much money on small expenses. It is often a shock how quickly the small expenses add up and make the difference between financial independence and struggling financially. Look to the bottom of your expenses list and cut off the unnecessary expenses. Perhaps you could bring lunch from home each day or you could bring a coffee with you instead of buying it from a machine. Once your budget works, you need to make sure to stick to it and review it regularly.

Saving

Another important aspect of money management is saving. You should be saving money every month and should cut enough unnecessary expenses off your list in order to do this. Create a direct debit and make your savings one of your expenses to ensure you save automatically every month.

Paying Off Debts

Many people have debts that they are struggling to pay off and paying high interest rates for. If you are getting your finances under control you should sort out your debt as much as possible. Personal cash loans such as car title loans can help. Personal cash loans can be used to pay off individual debts or you can use a loan such as car title loans in Sacramento to help you consolidate your debt. This will involve you paying off your smaller individual loans, leaving you with one larger loan with a more competitive interest rate. This will help you manage your finances.

source: 20smoney.com

Dollar Cost Averaging: Should You Buy Stocks Over Time To Save Money?

You’ve heard of dollar-cost averaging before, but you’re not sure it’s the right thing to do. Right now, you just buy investments as you see fit and when you can afford to invest money. But, your broker is putting a bug in your ear to save money over the long-term by making regular purchases. Should you?










The Pros:

• It’s Affordable – This is a big one. Most people find that dollar-cost averaging is an affordable way to invest in stocks. With dollar-cost averaging, you choose three parameters. First, you decide how much money you want to invest. Then, you decide the frequency you want to invest. Finally, you decide for how long you want to invest. So, for example, you might choose to invest $500 (the amount) every month (the frequency) for 12 months (the time horizon). This makes it easy to make a budget and stick to it. You just add the dollar amount to whatever you’re spending right now and it’s sort of like investing on autopilot.
  
• It’s Convenient – There’s not a heck of a lot to think about once you’ve decided on the three parameters. You just keep investing every investment period until you’ve invested all of the money you previously decided to invest.

The Cons:

• Lump Sum Investing Might Improve Your Returns – One major drawback with dollar-cost averaging is that you’re not taking advantage of cheap stocks when they’re cheap. In fact, the whole idea is that you pay an average price for the stock over time. This is supposed to optimize what you pay so you don’t have to guess at what the cheapest price is. 

• But, this tries to shortcut an important premise in value investing. Namely, that your job, as an investor, is to buy cheap stocks and then hold them until their intrinsic value has been achieved. If you’re dollar-cost averaging, you can’t do this. All you can do is get an average price. It muddles your returns.
  
  
  On the other hand, if you invested lump sum amounts, you would be able to realize the full profit on a good investment.
  
• There’s More Fees – Because you’re making regular purchases over an extended period of time, you’re going to rack up more fees with your broker. That’s good for the broker, but not so good for you. You can use sites like BrokerStance to help you navigate the mine-field of online brokers so that you can hopefully avoid the ones that are out there to maximize their earnings off of you, but most brokers are of the opinion that dollar-cost averaging is “smart.” At the end of the day, all it really does is lower your total return. That doesn’t sound so      smart, does it?

What Should You Do?


You’re looking for a broker that has your best interests at heart. There’s a lot you can do to make sure you end up with someone you like and that’s good for you.

First, try to work with an online broker. These brokers offer the same service as traditional brokers, but they charge lower commissions. Find one that also offers additional assistance – some of them will do it at no additional charge.

Ask about the broker’s investment philosophies. This could clue you into how the broker will steer you in regards to investing strategy. While many brokers do recommend dollar-cost averaging, some don’t. Some brokers are focused more on helping you find long-term plays that will pay off in a big way.

These brokers are value investors and are more concerned about getting you into a stock at a good price instead of getting you into a stock over time.

Can Dollar-Cost Averaging Ever Be A Good Idea?


Believe it or not, there are times when dollar-cost averaging makes sense. Usually, it’s when you’re hunting for the bottom of the stock’s price but you don’t know where it is. If a stock starts to fall, in price, you want to buy it at the moment it rebounds and not a second too late. But, this can be an almost impossible task.

Dollar-cost averaging allows you to get close to an ideal price, especially if the stock is falling slowly and is expected to make a recovery soon. Keep in mind that this strategy works well when you expect a major recovery in a company’s stock price – you’re paying commissions on every trade you make. So, the recovery has to be enough to make the entire investment profitable.

Jarryd Harden has years of experience working in finance. He greatly enjoys blogging about his insights into smart investing and money management.

source: 20smoney.com

Why your Credit Score Matters

A bad credit score can make it hard for you to get approved for a loan, and may even require you to have a co-signer and/or a decent chunk of change to use as a down payment in order to get approved. A bad credit score can put a damper on your career, too – did you know that more and more employers are doing background checks that include a peek at a potential employee’s credit history? And planning for the future — trading in your current vehicle for a new one, buying a house, investing in the stock market — can be a little difficult to do when the current state of your credit makes things uncertain.

The first step to fixing bad credit is to grab the bull by the horns: contact the three credit reporting bureaus (Experian, Equifax, and Trans-Union) and request copies of your credit history. Then find a reputable company or even a bank to purchase your credit score from. With the bad news in hand, you can now go through the reports, line by line, and highlight any discrepancies. For instance, if you know you paid off the $400 balance on your Sears credit card, but it’s showing as being an outstanding balance (unpaid) on your credit report, then that’s something you’ll want to look into right away.

Once you’ve determined just how bad things are, you’ll need to decide if you’re going to fix your credit on your own, or if you’ll hire a third party to do the fixing for you. Credit repair companies, for example lexingtonlawreveiws.com, will take the time to go over your credit report in fine detail, and they’ll do the leg-work required to take care of discrepancies and disputes. Either way, fixing your credit will take time and dedication. If you don’t have the available time and resources to handle the fixing of your credit on your own, then the fees a credit repair firm charge will be well worth it. Plus, they’ll go over your report repeatedly with a fine-tooth comb, and may even be able to handle disputes in a more efficient and resolution-seeking manner than you could.

Keep in mind that repairing your credit and keeping it in good condition takes time and a willingness to change spending habits and improve on money management, but in the end, the pay-off — financial security — is well worth the effort.

source: 20smoney.com

The truth (in buying) shall set you (financially) free

Question: I have time and again found myself buying stuff that I don’t really need because of sales offers and gimmicks, especially during the Christmas season. What is the best way to avoid unwanted spending?—Heavy holiday season shopper

Answer: I recently went to a trade exhibit to conduct a talk on the basics of money management. After the talk, I walked around the exhibit to get a glimpse of what was being sold.

From time to time, people would approach me offering their flyers. My usual reaction would be to smile and politely beg off. But there was this lady who was hurriedly going through the crowd of exhibit patrons giving away ordinary ball pens, not flyers.

My knee jerk reaction was to turn the offer down. But being the “El Cheapo” that I am, I decided to accept the free ball pens; after all, she was giving away not just one but two of them. I knew there was a catch.  But I decided to play along.

She said she would need me to sign the attendance sheet at their exhibit booth. So I dutifully followed her to their booth. There she showed me a gadget that help kill the bacteria on foods that we eat raw like vegetables (for fresh garden salads) and fruits. While the gadget looked neat, I felt it was something I could do without.

The lady then proceeded to show me an induction stove. This got my attention a bit because it was something that would look nice in our kitchen; not that we have space for it. But it was so expensive that it would take nine long years before the cost of the stove would match the savings on doing away with LPG.

As I asked for the attendance sheet, the lady requested me to sit down inside the booth. The lady kept on asking me for the province where I came from. Having been born and raised in Metro Manila, I told her I was from Quezon City. On cue, the lady expressed amazement and hugged me just because I said I was from Quezon City. I am sure she would have expressed the same amazement no matter what my answer would have been. She said that because I was from Quezon City, I would be getting a 24” LED TV for free because it was a “sponsored” product.

She then asked me how long I had lived in Quezon City. When I said since birth, she hugged me again with this flabbergasted look on her face and said that because I had lived long in Quezon City, I would also be getting a stainless cookware set for free. She then introduced me to her supervisor who displayed the same excitement. This time, everybody in the booth joined in and sort of ganged up on me to ensure my interest.

When the supervisor found out that I was from Quezon City, he offered me another free “sponsored” product, a medium-sized washing machine. At this point, things resembled the show “the Price Is Right” because as they would announce a freebie, one of the staff would “wheel in” the item while the first lady I met would give me a hug.

So what was the catch? I had to buy the induction stove for tens of thousands of pesos. To further coax me into buying, the supervisor showed me, albeit unethically, the credit card charge slip of a previous customer. It was funny at that time because here I was, just after giving a talk on money management, and there they were inviting me to splurge on something that had not even entered my mind.

This was the time I decided to end the show by saying I already had many of the “sponsored” items they were offering. Moreover, I was not about to spend tens of thousands of pesos on something that was not programmed into my budget. I politely said I would think about their offer and proceeded to walk away. And don’t worry, I walked away with the two ball pens in hand.

Here’s the thing. I quickly checked the Internet for the price of the induction stove. I saw the exact same model being sold at half the price and with a stainless cookware set already bundled. That means I would still be paying for the supposed free “sponsored” products.

The people I met were trained to do hyped-up selling by the promoters of the product. They were just trying to earn a living.

Remember that a legitimate transaction can only happen between a willing seller and a willing buyer. Even if the sales pitch was not truly attractive, it would be the buyer’s responsibility to check on the facts.

So how should you approach hyped-up selling? Just answer the following simple questions before you buy:

1.) Does the product fall under “must spend” or “may spend”? The first category includes utilities, basic food, clothing, shelter, savings and investments. Things falling under “may spend” include entertainment expenses, vices and gadgets.

2.) If the product falls under must-spend, can it be postponed or not? If yes, provide for it in your budget for the future. If not, how do you expect to fund its purchase? Consider the outflow for principal and interest payments. The outflow should fit in your current budget. If not, you will need to cut down on the “must spends.”

3.) If the product falls under may-spend, see if you have extra funds after providing for all of your must-spends. If yes, go ahead and enjoy the product. If not, postpone the purchase until you have excess funds. Minimize, if not totally avoid, borrowings.

To help you become financially free, find out the truth behind a product, especially when promotion is hyped up.

source: business.inquirer.net