Manage Money Wisely

Knowing where money goes can be a tough challenge. But having a plan and doing a budget aren’t difficult. They help get finances checked. Here are money management tips and insights to track wisely where money goes.
 

The Budget Planner

A budget planner is a valuable tool to manage money. It can be weekly, fortnightly or monthly guide. Once the period has been decided, all the numbers or entries written down are for the same time period. It's also important for partners to agree on what they want to do with money. Therefore, it is good to prepare a budget together.

The actual income and expenses should be written down. Once these two factors are realistically worked out, result is taken by subtracting the total expenses from the total income, which is a straightforward formula. What is more significant from financial planning perspective is seeing the result: the regular total income coming in and where the money goes (total expenses).

Spending Money Wisely

Here's the question: Is the result from the budget planner the one expected? The budget can show areas where changes in spending can be effected. One suggestion in sorting out expenses is to group into two, essentials and non-essentials.

Spending can be reduced in the non-essentials. If there's money left over, money should be spent wisely. This is where debt management comes into play, that is, to get debt under control. Some options where the "extra" money can be used are increase in credit card repayments or loan, or organizing a deduction for an investment account or separate savings.
More Tips How to Spend Money Wisely

    Avoid buying take away for lunch, take lunch to work
    Consider pre-paid options for personal mobile or cell phone
    Leave credit card at home
    Prepare a shopping list and stick to a limit

Setting Goals

It's difficult to have a budget if there's no plan what to do with the money. Setting goals will lead to what's being worked towards. Goals must be realistic, specific, and motivating enough for time frame to be followed. They can also have some dependencies like commitments and age, among others. Some of these commitments are:
    Getting debt under control
    Saving for a home deposit
    Savings for retirement
    Providing for Unexpected Expenses (to avoid using credit card or a personal loan)
    Other Savings

By using the budget planner, it can be worked out how much money has been left after expenses and how long it will take to get the amount needed, to save for those deposits.
Teaching Children about Money

For families who have children, parents should teach them the basics of money. Here are some tips to help kids:

    Encourage them to save regularly and as much as possible.
    Set an example by managing money well.
   Set up a savings account with a passbook to help them keep track of transactions in terms of deposit, withdrawal and interest they earn.
    Make savings fun by letting the kids choose their own realistic goals

Change being inevitable, it's advisable to revisit budget and goals regularly in order to reflect changes, perhaps twice a year, or when necessary.

Readers may want to check out these related articles: Basic Investment Tips, How to Make Money Work, Tips to Financially Thrive, When to Avoid Using Credit Cards, How to Prepare for Effective Budget and Strategies to Start Making Money on a Shoestring Budget.

9 Ways How to Pay Off Debt

You can throw the reminders in the Cuisinart or chuck them into a garbage can, but that won't make the debt go away. Debt hovers like a carrion bird over a dying beast, with annual rates of 20% or more compounded monthly, month in and month out. You can't wish it away. But you can pay it down with determination, our free debt-fighting resources, and the good graces of a few wealthy relatives (see tip No. 5). Here are nine ways to get out of debt:

1. Pay more than the minimum
First, break the habit of paying only the minimum required each month. Paying the minimum -- usually 2% to 3% of the outstanding balance -- only prolongs the agony. Besides, it's precisely what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Don't play their selfish game.

Instead, bite the bullet and pay as much as you can each month. If your minimum payment is $100, double that to $200 or more. Examine your normal expenses -- you can find the money. (For a gazillion ideas, check out our Living Below Your Means discussion board.) Skip eating out at lunch, and bring it from home instead. Eliminate desserts. Give up happy hour. We all have "luxuries," and you know what yours are.

Make a few sacrifices, and you will find the extra dollars needed to increase your debt repayments dramatically. Those increased payments will save you hundreds, if not thousands, in interest payments. Plus, you will get out of the hole you've dug for yourself much more quickly. Is it fun? No. But it sure beats living a hand-to-mouth existence, fearing bills each month.

2. Snowball your debt payments
Take a long, hard look at all your credit cards. Pay particular attention to the one with the lowest interest rate. Have you reached the maximum limit on that card? If not, consider transferring a higher-interest bill to that one. Many credit cards permit this, and it's positively Foolish to trade an 18% debt for one at 12%.

If your entire balance is too large to fit on one low-interest card, pay at least the minimum amounts due on all of your cards except one. Funnel the majority of your debt repayments into that one credit card, and pay it off as quickly as possible. When the balance on that card reaches zero, move on to the next with the same aggressive repayment plan.

Lather, rinse, and repeat. This method of repayment is aptly called "snowballing." As your debts decrease, the amount of money you have to attack them increases. Your payments snowball until all of your debt is pummeled. Pretty neat, eh?

Another way to transfer higher-interest debt to a lower-interest card is to take advantage of the promotional offers many banks use to entice you to their line of credit. You've seen the come-ons. "Transfer all your credit card balances to us, and pay just 5.9% until next January." It could be worth it. Moving to 5.9% from 18% interest could mean substantial dollars to you. And the money saved in interest could then be applied toward the principal each month, thus reducing your outstanding debt balance even further.

Take care, though, before you act. Examine the offer closely. Look for the hooks. Will the interest rate after the introductory period be higher than you're paying now? If so, you may have to switch again at that time. That, in turn, could give rise to another surprise. Banks have caught onto the charge card hoppers who switch from card to card to take advantage of the low introductory rates. Many of these offers now stipulate that if you transfer balances from the new card within a 12-month period, the normal interest rate will be applied to all outstanding balances retroactively. That proviso could be a bitter pill to swallow for someone short on cash, and it certainly doesn't help the debt repayment schedule. Read the fine print, Fool.

3. Cash out your savings account
You could cash out your savings and investments and use the proceeds toward debt repayment. Yeah, no one wants to do that. But sometimes it's just Foolish to do so. Even when debt interest is at 12%, your investments would have to pay more than 18% before federal and state taxes to equal that outflow of dollars. We doubt the dollars in your savings account are earning anywhere near that rate of interest. Pay off the debt, and it's the same as getting that 18% return without any risk on your part. The higher the interest rate on your debt, the more attractive repayment versus investment becomes.

4. Borrow against your life insurance
Do you have life insurance with a cash value? If so, borrow against the policy. Yes, you're borrowing your own money. But the interest rate is typically well below commercial rates, and you can take your time repaying the loan. Do repay it, though. If you die before it's repaid, the outstanding balance plus interest will be deducted from the face value of the policy payable to the beneficiary. While that seems a small price to pay to get out of debt now, it could be burdensome to your loved ones should you sleep the eternal sleep before paying it back.

5. Finagle family and friends
Perhaps your family or friends could float you a loan. Who else knows, trusts, and loves you like they do? Unless you're really the black sheep of the flock, chances are you'll get a very favorable interest rate. They may even tolerate a late payment or two. But if you want to maintain the relationship, it's best to keep things on the straight and narrow by using a written agreement. You should clearly establish the interest and repayment schedule in writing to avoid misunderstandings and hard feelings. And it goes without saying that you must be scrupulous about adhering to that schedule. Otherwise, you can forget the family reunions and birthday presents.

6. Get a home equity loan
Do you own your own home and have equity that's accumulated through the years as you've paid off the mortgage? If so, now's the time to consider a home equity loan (HEL) line of credit for the maximum amount possible.

A HEL gives you two ways to save. First, by using the loan proceeds to pay down your debt, you trade something like an 18% loan for a 6%-7% loan. Second, if you itemize deductions on your income tax returns, HEL interest is a deductible item under most circumstances. In a 25% marginal tax bracket, the 6% loan really has an effective rate of 4.5%, and that's probably the cheapest interest rate you'll see on personal indebtedness.

The danger here is falling into a common trap. Many get an HEL, pay off existing debt, and then ring up the charges on the credit cards all over again. Now they have the HEL to repay on top of the credit cards. The hole just got much deeper. Fools use the HEL to pay off the credit cards, and then keep them paid off until the HEL is repaid.

7. Borrow from your 401(k)
Do you participate in a 401(k) qualified retirement plan at work? Most 401(k) plans have a feature that lets you borrow up to 50% of the account's value, or $50,000, whichever is smaller. Interest rates are usually a point or two above prime, which makes them cheaper than that found on credit cards. Thus, 401(k) plan loans may be a Foolish option to debt repayment. Not only is the interest typically much lower than that on credit cards, the best part is you pay it to yourself. That's right, every dime in interest paid on a 401(k) loan goes directly into the borrower's 401(k) account, not the lender's.

But there are drawbacks. First, the loan and interest will be repaid with after-tax dollars, but the interest will be taxed again when you withdraw money from the 401(k) years later. Additionally, you must repay this loan within five years. If you leave your employment prior to full repayment, the outstanding balance becomes due and payable immediately. If it's not repaid, that amount will be treated as a distribution to you. You'll be taxed on that amount at ordinary rates. And if you're under the age of 59 and one-half years, you will also be assessed an additional 10% excise tax as a penalty for an early withdrawal of retirement funds. Accordingly, ensure any 401(k) loan can be repaid before you leave your job.

8. Renegotiate terms with your creditors
OK, you've done all you can. Savings are gone; relatives have been tapped out; you don't have a home or 401(k) to borrow against. You feel like you're against that proverbial wall. The money just isn't there. Is bankruptcy the only way out? No way. Try pulling an  ace out of your sleeve prior to taking that step. What ace? The threat of bankruptcy, of course.

Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you'll have no other recourse but to declare bankruptcy. Ask for a new and lower repayment schedule; request a lower interest rate; and appeal to their desire to receive payment. Faced with the prospect that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss.

Indeed, many will negotiate away the farm before they'll write off your debt. As lawyers love to say, everything is negotiable. Therefore, what do you have to lose, except time? It's worth a try. And if you don't wish to do this yourself, organizations exist that can do it for you.

9. As a last resort, file bankruptcy
What if you decide you can't pay down your debt using any of the methods listed above? What should you do? The absolute last resort is bankruptcy. Within Fooldom, we firmly believe everyone has a moral obligation to repay their debts to the utmost of their ability. There are times, though, when repayment may be impossible. In those cases, bankruptcy may be the only available course of action. Nevertheless, be aware of the significant drawbacks.

Your credit record will contain this information for 10 years, thus ensuring you will have a tough time obtaining credit you can afford during that period. Additionally, as odd as it seems, it costs money to file for bankruptcy. Attorney and court filing fees cost in the hundreds of dollars, and they must be paid to obtain the relief sought. Finally, bankruptcy laws have gotten a lot tougher in recent years, so you may not qualify for complete relief.

There are two types of personal bankruptcy relief: Chapter 7 and Chapter 13. Chapter 7 is straight bankruptcy that allows the discharge of almost all debts. Those that aren't discharged are alimony, child support, taxes, loans obtained through filing false financial statements, loans not listed in the bankruptcy petition, legal judgments against the petitioner, and student loans.

While Chapter 7 relieves you of the responsibility of repaying most creditors, you may have to surrender much of your property to help satisfy the debt. However, different states have different laws that grant you exemptions on certain types of property, such as a certain amount of equity in your home, a low-value vehicle, small amounts of jewelry and other personal property, and tools you use in your trade or business. These exemptions usually aren't huge, but they do mean you won't have to start over with absolutely nothing.

Chapter 13, sometimes called the "wage-earner plan," is different. You keep your property but surrender control of your finances to the bankruptcy court. The court approves a repayment plan based on your financial resources that provides for repayment of all or part of your debt over a three-to-five-year period. During that time, your creditors are not allowed to harass you for repayment. You also incur no interest charges on the indebtedness during the repayment period. When all conditions of the court-approved plan have been fulfilled, you emerge debt-free from the bankruptcy.

One-fifth of Britons bereft of savings

One-fifth of Britons have no savings, according to Mintel, the consumer intelligence group.

Research by the firm suggests that while the financial crisis and economic downturn have focused attention on the need for consumers to shore up their finances, 35% of adults have less than £500 reserved for a rainy day, while 19% have no savings at all.

Of the totally uncushioned, 22% are women and 17% men, with the findings also suggesting that 22% of Britons with families are without savings.

Forty per cent of respondents believed their financial position worsened during 2010, with low interest rates, repayment of debts and meeting everyday costs the biggest savings barriers.

Mintel’s head of finance, Toby Clark, says: “The accepted wisdom is that low interest rates are stopping people from saving, however we have found that it is only really an issue for the top end of the market and the reality is that meeting everyday costs and expenses is by far the largest savings barrier.”

When asked how to describe their current financial situation, almost three in ten respondents said conditions were “tight”, only just making ends meet.

A further one in ten said they were “really struggling” and in real danger of falling behind with bills or loan repayments.

Four per cent had missed loan repayments or household bills.

ANZ Group appoints global chief economist

ANZ has announced the appointment of Warren Hogan as the bank’s new global chief economist, with responsibility for co-ordinating teams in Asia, New Zealand and Australia.

Hogan joined ANZ six years ago, and since last year has served as chief economist for Australia.

In his new post, he will be directly responsible to Global Markets Managing Director Steve Bellotti.

Hogan will take on the leadership of the Economics and Global Markets Research team, offering economic analysis on national and global levels as well as analysis of financial markets.

Regional economic chiefs in Asia, New Zealand and Australia will continue to hold responsibility for regional economic analysis and will report directly to Hogan.

The basics of credit insurance: Do you really need it?

If you've just taken out a loan, or are in the process of borrowing money or signing up for a credit card, your lender may offer you credit insurance. The policies promise to pay your loan if you die, go on disability or lose your job.  You might wonder if you really need credit insurance.

Credit insurance is optional. However, before taking out a policy, weigh its advantages and disadvantages. Studies by consumer groups suggest that credit insurance may not be a good value for your money. Do your homework before you buy.

Here are some of the basics of credit insurance:

    * You are not required to buy credit insurance as a condition of any loan or financing.
    * You must purchase credit insurance at the institution where you obtain your loan.
    * Credit insurance is most commonly offered as a group policy through a bank, credit union or vendor such as an auto dealer or furniture store, although you may be able to buy a policy individually.
    * Credit insurance benefits are first paid to the lender, not to you, in the event you make a claim. Any excess benefit will be paid to you.
    * The credit insurance benefit decreases as your loan balance decreases.
    * There are two primary ways to pay for credit insurance: monthly premiums or a single premium. Some "single-premium credit insurance" gets added to your principal and financed with your loan when you buy new furniture or a new car. That means you don't have to write a check for the credit insurance but you're paying interest on those premiums.
    * Credit insurance is often sold in a package, which typically includes credit life insurance, disability insurance and unemployment or property coverage. In some cases, your only choice is to buy the whole package or none, even if you are ineligible for benefits under some of the policy types. Some states mandate that you must be offered individual coverage.
    * Credit insurance can be purchased without a medical exam and the premium does not vary according to your age, unlike life insurance.
    * Credit insurance may not pay if you have a pre-existing health condition.
    * A credit insurance application may ask for your medical history. You may not be eligible for credit insurance if you have had a serious medical condition like cancer or heart disease.
    * Some credit insurance will not cover the full amount of your outstanding loan or the full term. For example, in New York the maximum allowable coverage for credit life insurance is $220,000 and you may have a higher mortgage; some policies may cap the amount at less. The maximum amount for all other debts is $55,000.
    * The lender or insurance company can cancel your credit insurance with advance notice if you pay your premiums in monthly installments. If you've paid with a single premium, your credit insurance cannot be cancelled.

Citibank Secured Credit Card

The Citibank secured credit card, which is more commonly known as the Citi Secured MasterCard, may be a good option for you if you're looking to rebuild your credit. You can open one even if you have some negative marks on your credit report because you use a certificate of deposit as collateral. This interest-bearing certificate can have a balance of $200 to $25,000, and your credit limit is equal to the amount you have on deposit, up to $5,000. Using this method, Citibank does not have to assume any risk. It knows that you have the money to repay any balance you owe.

Features of the Citibank Secured Credit Card

This credit card doesn't require a cosigner or have any income requirements, and you get many of the features of a regular Citibank card. These include:

- Purchase Protection - In most cases, you can get items that are stolen or accidentally damaged replaced if you buy them using your cards. This is valid for the first 90 days after you make the purchase.

- Zero Liability - You aren't responsible for unauthorized charges if someone steals your credit card number.

- Car Rental Insurance - If you rent a car and don't use the rental company's collision policy, you're covered by Citibank's rental insurance. Note that this is only true if you use your card to pay for the car rental.

You can also sign up for PayPass if you so choose. This innovative product lets you make charges even when you don't have your card on you. Simply use your PayPass, which you can attach to your keychain, by tapping it on a designated reader. You may not even have to sign anything, depending on the amount you spend.

Additional Details

As of July 2010, this card had a variable rate of 12.24% APR and an annual fee of $29. You have a 20 day grace period in which you do not have to pay finance charges on purchases if you pay your balance in full each month. If you're careful with your spending and don't pay late or go over your limit for a period of 18 months, you may find yourself eligible for a regular Citibank card. You could also notice a significant improvement in your credit rating, as long as you keep up on your other bills as well.

A Word of Caution

Even though this is a secured credit card, it can still negatively impact your credit if you don't manage your account properly. This card has a default interest rate that is substantially higher than its regular rate, so you need to be careful that you don't miss payments. Also, even though you have your Certificate Deposit as collateral, that doesn't mean that Citibank can't ultimately send your account to a collections agency.

Little money, big stress

Little money, big stress !!! Those on the opposite side of the spectrum also have stress. They may love their job, but financially things are really tight. Sometimes it takes thinking outside the box. What are some other ways you can make a little extra money? What are some expenses you really could live without? Work together as a family to make a plan to make things work.

Big money, big stress

Big money, big stress !!!  If you are making good money, that is wonderful. So, stress and money do not go hand in hand for you…or does it? Usually if you are making good money, it comes with some pretty good stress too. In the corporate world, money and stress really go hand in hand. There is a reason the more responsibility you have the more money you make. Then you may get into the situation of not really liking your job, but the money is so good… Then you feel stuck. If you are in this situation, please remember no amount of money is worth your happiness or your health. If you find yourself miserable, there is a way out, you just have to be willing to look for it.