Monthly Archives: March 2017

Simple Personal Finance Management Tips

It is important that we start saving for a rainy day as early and as soon as possible. Personal finance management is essential in today’s day. In today’s capitalist society most people don’t think twice about taking loans to buy unnecessary and expensive things. The recession however has woken up most people and scared them into learning to manage their finances. Because of the daunting nature of this task or because of insufficient knowledge most people never know how to effectively manage their finances.

Getting started

There are many steps to follow during personal finance management. These are some of the most essential ones you need to know to get you started.

Prepare your Budget

Preparing a budget will help you to curb overspending. Total your net income from all sources like work salary, any mutual funds, alimony, etc. Prepare a list of all your monthly expenditures and how much it is going to cost. These would include your bills, shopping and household budget, insurance premiums, etc. This is a great way to learn to adjust your expenses and create an estimate of your actual monthly expenses.

Saving

After preparing a budget the next thing you need to do is save money. Preparing a budget gives you an idea of where you overspend. Depending on your income, open a saving account and contribute a suitable percentage of it towards your account. This account should be used only in the case of emergencies.

Invest

Investing is a great way to earn a little extra income. The best place to invest is in the mutual fund of a reputed company. There is minimum risk involved when investing in mutual funds compared to other stocks. Further more you can leave the worrying caused as a result of volatile stock markets to experienced and professional fund managers.

Insure

Insurance is a great way to secure your future. It also reduces the risk of needing to empty out your saving account in the case of an emergency. You must at least take out insurance for your house, car and life. Choose a reputable company whose premium rates suit your income to avoid defaulting and wasting your money.

Tax Planning and Retirement Planning

Plan your tax so as to minimize the amount of your taxes. Reducing your income will bring down your taxable income. An easy way to do this is to contribute towards a retirement plan at work. As a result you can also plan for your retirement while planning your tax. You can also deduct your taxable income by donating to charity. State tax and mortgage interest will also deduct your taxable income. Having more dependents or getting married is another way to deduct your taxable income. You can also get tax credits for adopting children or college expenses.

Personal finance management gets more complicate every year; these simple tips are all you need to get started.

Pay up relative’s card debt or have your credit trashed – case of co-signing!

Lending your personal credit to a friend or family member for use in a small business may be considered a kind gesture.

But it’s often a dangerous one. They need your personal credit to opentheir own business credit card for a business to build its creditworthiness because they can’t prove it based on their own track record. This alone is a red flag. And choosing to sacrifice your personal finances to help a family member in that manner often backfires.

When they turn out in debt that they refuse or are unable to pay, there is little you can do to protect yourself from the liability but to pay up. A sure bet is, it’s also hard to determine their true situation – whether they could be persuaded to pay the bills or not.

Such people go unpunished all the time. The creditors won’t look into your family situation, they consider you liable as long as you signed a contract binding you to the credit.

Joint account

It would be a joint account if both you and the family member signed as joint applicants. You both have equal access to the account and control over it.

Equally, such co-signing commits both of you to a shared responsibility for debts incurred even though you won’t typically have a physical card for the account. Your role remains similar if you took up a guarantor’s position.

Joint and several liability 

There are some small-business cards that provide for ‘joint and several liability’, an option that provides shared responsibility between the signer and the business. Nonetheless, this doesn’t absolve you, the signer of the responsibility for debts either.

So, the credit card company will often pursue you if the business owner refuses to pay the tab whichever way the co-signing happened. And this can lead to trashing of your credit should you fail to settle the payment.

Way out?

Notify the issuer of the credit card about the situation. Then take any necessary steps to immediately shut down all charging privileges on the card.If it gets to a point where your card is trashed, you could be looking at a complicated situation. Thanks to new payment processing organizations like First American Merchant (firstamericanmerchant.com) however, you can still get other credit card applications instant approval even as you figure out how to pay the debts on the business account.

How to Manage Debt More Effectively

There are many people in today’s society that do not know how to manage their debt effectively. Because of this they are over run with debt repayments and can never seem to get on top of their finances. I want to show you how you can manage your debt more effectively so that you can begin on the road towards becoming rich.

Debt is a problem that is extremely prevalent in today’s society. Almost everyone knows someone who is overrun by extreme debt, and it is likely that you have some sort of debt that you could manage more effectively.

Debt is a complicated matter because often dealing with debt is an emotional problem, not just financial. If the way we managed our finances was purely logical then we wouldn’t be in debt in the first place. When managing debt we have to take our emotions into account. Often people are unable to follow a plan because emotionally it offers no reward.

The advice many financial planners give to people who are in a lot of debt is to consolidate their high interest debt into a low interest loan (such as a home loan). That way they only have one repayment to make and they can slowly but surely pay of their debt. The problem is they don’t take emotions into account. These people then find they have a cleared credit card and will go out and spend money on their credit card, putting them in even more debt than before.

Another problem people have with reducing their debt is that they are constantly trying to reduce their means by living frugally. The more debt they have the more frugal they try to live. This does not offer any emotion reward either as life is extremely tough as you are trying to pay off debt. Even once all of the debt is paid off people still do not find themselves rich.

A more effective way to manage debt is to focus on cashflow instead of of the figure of the debt. Your goal should be to get rich by increasing your means, and to pay off debt at the same time. This offers the best emotional reward, and it is financially logical. It is just a little more creativity and intelligence than the methods most financial planners recommend.

The goal is to generate enough passive income (income that you don’t have to work for) to pay for the interest on your debt, and to pay off your debt over time. Most people focus on putting a lot of money onto their debt to pay it off quickly. I am suggesting that you minimise the cashflow impact your debt has. Do what you can to lower the interest rates you have to pay on your loan, then lower your monthly repayments by paying just the interest (or the interest plus a little extra). Let me just state in the moment that I am not a financial advisor and I am not telling you that you should do this, I am just educating you of a method you might like to use. Always seek financial advise before choosing how to manage your debt.

Now you can use the extra money you would have used to pay off debt to invest in an asset that generates passive income. I like to invest in positive cashflow real estate. It offers the advantages of leveraging the banks money, and you get both capital appreciation and rental income. Now you can use the passive income to offset the interest repayments on your loan. The goal is to get your passive income to equal your interest repayments, plus a little extra.

Once you achieve this you can then forget about your debt, as your asset will be paying it off for you. This offers maximum emotional reward as you don’t have to live below your means, and you are building wealth. Eventually your asset would have paid off your debt completely and instead of being left with nothing, you now have an asset that continues to generate you income each and every month. You have increased your means and you now have increased you skill set so you can continue to invest and get richer and richer. Now doesn’t that sound like a more effective way to manage your debt?

Your next step towards becoming rich is to increase your financial IQ through education. By educating yourself in the area of finances you will be able to get a greater return on investment and you will be able to earn more with less work and less risk. Does that sound good to you?