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Finances
Keys to Financial Success Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top ten keys to getting ahead financially. 1. Get Paid What You're Worth and Spend Less Than You Earn
It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.
No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.
In a recent test of basic economic principles administered to over 1000 adults and 1000 high school students by the National Council on Economic Education (NCEE), the average American grade was a big, fat F. A similar test in 1997 showed that high school students' understanding of basic personal finance was equally dismal. Young adults are leaving school without the ability to make informed financial decisions.
Sure, economics sounds boring. But the practical application of economics is personal finance, or financial planning, which is the basis for critical decisions faced by each of us in our daily lives.
The Jumpstart Coalition for Personal Financial Literacy, which seeks to improve the financial literacy of young adults, says that the average high school graduate "lacks basic skills in the management of personal financial affairs. Many are unable to balance a checkbook and...have no insight into the basic survival principles involved with earning, spending, saving and investing."
The Second Step in Personal Financial Planning The first step in personal financial planning is controlling your day-to-day financial affairs to enable you to do the things that bring you satisfaction and enjoyment. This is achieved by planning and following a budget, as discussed in the first article in this series.
The second step in personal financial planning, and the topic of this article, is choosing and following a course toward long-term financial goals. As with anything else in life, without financial goals and specific plans for meeting them, we drift along and leave our future to chance. A wise man once said: "most people don't plan to fail; they just fail to plan." The end result is the same: failure to reach financial independence.
The third step in personal financial planning, "Building a Financial Safety Net," is discussed in the third article in this series.
Most Common Roadblocks on the Road to Building Wealth Many Americans will never reach their dreams of building wealth, being financially secure, and being able to retire in comfort. The reason is most often a combination of these seven biggest money mistakes.
1. Having a Thirty-year Mortgage
Where do you find the money to build wealth? Try looking at your mortgage. Millions of Americans think nothing of paying for their home over 30 years, even though the average homeowner ends up paying two-and-a-half times the purchase price of the home by stretching the payments out this long. Having a 15-year mortgage instead of a 30-year mortgage can save you large sums of money and help you build wealth. See page two of this article for examples of how you may be able to save over $100,000 over the life of your mortgage.
2. Giving Control of Your Money to Someone Else ....
For those that are just starting out and looking for the best way to make their money grow, learning how to save money is the best investment strategy for most people. While saving money is often looked upon as the ugly duckling of the personal financial world and arguably the the best low risk, high return investment that you can make, setting up a plan to put it in motion can be difficult for many. Here is a beginners guide to ugly duckling investing for those that want to take advantage of this investment strategy.
There are a couple of basics that already need to be established to undertake this investment strategy. You need to at least know what you are currently spending (ie - have a basic budget) as this will allow you to look for areas where your current expenses can be cut to save money. You also need to realize that cutting expenses doesn't equal saving money.
Step One - Set Aside A Set Amount Of Time: The first step is to set aside a specific amount of time that you will dedicate to this investment strategy. While it may take more time in the beginning while you are getting used to your new habits, it will still take much less time than trying to learn a completely new investment strategy. If you can set aside 2 to 3 hours a week, you'll have plenty of time to maximize the ugly duckling investment strategy to the fullest.
One of the best ways to control your spending is to force yourself to use a mandatory waiting period before making any unnecessary purchases. Tell yourself that you will buy nothing until that waiting period is up. A waiting period gives you time to cool off, get away from the temptation, review your finances, and decide if you really, really want and can afford this thing that has you so captivated in the store. A waiting period can save you a lot of money (or time on the return lane when you decide to return the thing because you really didn’t want it anyway).
The first thing to do is to decide how long your waiting period will be. I like to use two weeks because I find that two weeks is usually enough time for me to make a rational decision. Use your waiting period to review your finances, compare prices, think about how you’ll use or store the item, inventory your existing possessions and look for duplicates or very similar items, look for used, free, or rental alternatives, and look up product reviews and specifications to make certain this is something you’ll like and use. Some people only need a week, others need a waiting period of a month. You know how you think, so set a waiting period that will give you enough time to decide whether this item is something you want to own.
At the end of your waiting period, one of four things will happen: ...
When we get bored or stressed, some of us tend to head for the stores to look for something to do. Maybe we want a new book, a new CD, or a new movie. Maybe we want new clothes so we can jazz up our wardrobe. Maybe a new board or video game will do the trick. This quest for new stuff might alleviate the boredom or the stress for a while, but it can get expensive and lead to a lot of clutter in your house. The next time you feel the urge for something new, try going shopping in your own home, first.
What do I mean by shopping in your own home? Many of us (except the most disciplined of people) buy things that we never get around to using. We buy books and forget about them or don’t have time to read them. We buy CD’s and listen to that one great track and never listen to the rest. We buy movies and never get around to watching them. We buy board and video games but then never get around to playing them. We buy clothes, shoes, and housewares that we see on sale and then we put them away to be used when other stuff wears out. We receive gifts that we’re not sure what to do with so we stuff them in a closet. Wherever it comes from or whatever the reason it has been ignored, chances are you’ve got something hiding in your house that will be “new” to you.
When a foot injury (and bitterly cold weather) recently sidelined me from my regular running routine, the doctor suggested that I find some low impact exercise to see me through my recovery time. Biking was out, at least for a while, because biking in sub-zero temperatures holds no appeal for me. I was already doing a lot of yoga and pilates as cross training to give my body a break from running, but I get bored if I have to do the same things over and over again. Doing the same pilates and yoga DVD’s every day, without being able to go out and run to break the monotony was likely to make my recovery seem much, much longer.
So, I gave some thought to joining a gym. I thought that maybe some exercise classes and a variety of machines would keep me entertained and in shape while my foot healed. Well, when I found out that a gym membership in my area would cost me about $600 for a year (including enrollment fees), I got serious about finding something else to keep me entertained. I looked into exercise DVD’s but found that, while they were cost effective, most of the ones I rented were either too short to be challenging, boring, or too hard on my injured foot. And, as I noted above, if I have to do the same exercises every day, I tend to get stir crazy. With DVD’s, once I’ve learned and mastered the routine there’s no more challenge. It becomes rote exercise. So I looked for some more alternatives.
Despite the fact that it’s the middle of winter here, my dog has fleas. I got this great news at the vet’s office when she went in for her checkup. He said that the weather conditions here have been perfect for growing a huge flea population and now that it’s cold, all those fleas are moving indoors. Great. To top it off, he told me that the veterinary community is starting to see fleas evolving resistance to many of the popular topical treatments like Frontline and Advantage. So what’s a pet owner to do in the face of a flea invasion when the usual approaches aren’t working?
I did not want to launch an all out chemical assault in the house if I could avoid it. I didn’t want to have to break out the bug bombs, the carpet powders, or the special shampoos. And I really didn’t want to call an exterminator. Aside from being toxic and messy, chemical flea controls are expensive. So I went looking for lower cost, less toxic alternatives. I came up with several good ideas, most of which have worked very well.
A while back I wrote about twelve things you could do with an old shower curtain liner. In the same spirit of saving money and cutting down on waste, I now offer you fourteen things you can do with an empty jar. Of course, what you’re able to do with a jar will depend on the size of the jar. A big spaghetti sauce jar can be used differently than a baby food jar. But in general, here are some ideas for all those jars.
Glasses: I’ve been in several restaurants where the beverages were served in Mason jars. It brings a country feel to the meal and it’s a cheap source of glassware. A plus: Jars are harder to break than fine glassware.
Vases: A big jar makes a great vase, especially if you tie a ribbon around it or decorate it in some way.
Gifts Maybe you make a great sauce, jam, or dip. Make your best recipe, put it in a jar, and give it away.
