Top Ten Financial Mistakes Young People Make

Most young people dream of becoming financially independent and even rich by the time they are past middle age. However, most of the time, this depends on a host of factors, the most important of which is how financially responsible they are. The issue of financial responsibility is unfortunately very difficult for many young people to grasp, and this in turn means that they may not have a chance to put their financial life in order when they are young. There are a few mistakes that most of them make, and which often have a negative impact on their finances. Some of these include:

Not making full use of discounts

These days it’s very easy for one to use discounts to buy various goods and services. For instance, you could go online to get coupons and then use them to buy whatever you need at a much lower price. However, the problem is that most young people don’t think much of such discounts. The fact that the nominal value of each normally seems very small usually makes such individuals think that they won’t save much anyway if they used the discounts. However, this is essentially faulty reasoning, since regular use of such discounts has beneficial effects on long-term finances.

Improper use of credit cards

Most youngsters also have a difficult time using credit cards and other forms of credit. For instance, they might fall into habits of not paying off the bills on time, which could end up ruining their credit scores. This is not a good thing when you consider the fact that they do this from an early age, which means that when they reach middle age they usually have very bad credit scores. This in turn means that it would be difficult for them to get loans or other forms of credit at friendly rates.

Not getting a hang of budgeting

When you need to take control of your finances, one of the most basic yet important skills you can have is how to budget. However, most young people don’t do this right, and this means that they end up having a hard time later on. With the advent of Internet Technology and the use of apps, budgeting should be very easy to do today compared to the past. The fact that economic times are harder today compared to in the past also means that most young people have more to lose by not budgeting properly, so this is something they need to keep in mind.

Not assessing limits when getting credit

In life, it’s usually necessary to get a loan or mortgage to buy something of very high value such as a house or a car. In fact, it’s better to do this when you are young, since it means that you will have enough time to pay off the debt before you get too old to enjoy your investment. However, one problem that most young people make is not applying for such things in the right manner. For instance, they might not adequately figure out how much of a debt they can handle, and then end up chewing off more than they can swallow. This often leads to problems such as difficulty in paying back the debts.

Not keeping in mind the fact that little things do matter

Some habits count as little things, and these tend to add up over time. For instance, there are some people who make a habit of drinking coffee regularly, even if it’s evident that they would still be able to function without it. Most of the time, this is done with the idea that this habit is not very expensive. However, the costs of these little habits can add up, and with time you may end up spending a huge chunk of your income on them. It’s therefore best to take even the smallest of expenditures wisely, especially if they are regular.

Not having an emergency fund

Whenever problems that need urgent attention crop up, most people who don’t have emergency funds to handle them end up having a difficult time handling them. In some cases, they might have to borrow money at exorbitant rates in order to deal with them. Making sure that one has an emergency fund for such occurrences is wise, and ultimately cheap as well.

Using automatic payment systems

Using automatic payments seems like a good idea. The fact that they get deducted from your account automatically means that you need not focus on some of these recurring bills, which is a good thing for a busy young individual. However, some of these payment services cost money, and there are times when you may end up over drawing your account as such costs eat into your deposits. If you want to take control of your finances, it would be easier to set reminders to pay such bills manually.

Getting joint accounts

Most young people open joint accounts with their partners on a whim. However, this might turn out to be a source of trouble, since you may end up having trust issues and even having disagreements over how money is used. Before doing this, it’s wise to first iron out the fine details such as how you are going to operate the account, and who will be responsible for what expenditures.

Not understanding ATM fees

Most people draw money from ATM’s, and this might turn out to be a drain on resources if one does not understand how they work. It’s important for young people to minimize how much they spend on ATM fees, such as by always withdrawing from ATM’s of their banks, and also making sure that they minimize the number of withdrawals they make.

Having no long-term plans

In order to secure themselves, people need to have long-term plans, and also make a point of making such plans work. This is something that most young people don’t think of, mostly because they don’t find it necessary given how much time they have. However, this is an attitude that should not be used. Having long-term plans increases the chances of one being at a better place by the time they are at a more advanced age, at least in terms of finances.

Three Reasons Why You Need a Personal Property Appraiser

There are many reasons why you will have the need of a Personal Property Appraiser in your life time and this article is going to cover three reasons. An Appraiser can do many things to help in your life. When you are in need of cataloging or placing a value on your many collectables call an appraiser.

One thing is they can help protect your investment in collectables from art to zebra rugs and everything in between, by providing a complete inventory of all your items in question.

Collectables include;

  • Antiques
  • Art work
  • Bronzes
  • Vehicles and Equipment
  • Coins
  • Stamp collections
  • Gun collections
  • Precious Metals
  • Quilts
  • Sport Memorabilia
  • Taxidermy mounts
  • Autographs
  • Etc

Second benefit of hiring a Personal Property Appraiser is they are unbiased and not involved in any disputes of value when it comes to an appraisal. They use recent market activity to figure out the current value that is needed for your collection and provide you with a report. This is very important when it comes to tax donations, IRS requires an appraisal before accepting the donation.

The third reason is they are very helpful is, they catalog your collectables in one report and supply you with their current value. A Personal Property Appraiser should provide you a printed copy and an electronic copy on a PDF for your safe keeping. This is very helpful in times of disaster to refer to, or when there is an inheritance involved and the children want to know what a parent had and its current value.

There are many other reasons you need a Personal Property Appraiser and these reasons will present themselves many times in your life. Feel free to give one a call and discuss your needs with them.

Financial Planning – Create Surplus

My personal financial plan is the road map that navigates me to my dreams. Cash flow management always the first part of a financial plan. It is all about my income and expenses. It leads me to know exactly my yearly take-home pay and spending. It is not just about counting pennies, it allows me to plan for next year budget, create a significant amount of surplus and subsequently plan for my luxuries.

Surplus or savings is an amount left over when requirements have been met. It is a financial situation in which income exceeds expenditures. It might be used to pay off debt, save for future, or to make a desired purchase that has been delayed.

Increasing income with well-controlled expenditure effectively increases my savings.

Increase Income

There are active income, passive income and portfolio income. Active income is an income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation. Passive Income is an income received on a regular basis, with little effort required to maintain it. It could be generated from rental activity or “trade or business activities” in which you do not materially participate. Portfolio income defined as income from investments, dividends, interest, royalties and capital gains.

Multiple sources of income help in increasing income. You may create your second active income by having a part-time job. Options could be tutoring, authoring, sales and etc. However, converting active income to passive income would be the challenge. Lastly, portfolio income could be created by diversifying savings into various types of investments.

Well-Controlled Expenditure

Increasing income with increasing expenses at equal amount does not help in increasing surplus. A budget plan plays an important role in determining how much to save and control expenditure. If you spend below budget, you would have surplus higher than expected. If you overspend, you would leave a smaller sum for saving.

Quotes by Warren Buffett:

  • on spending: “If you buy things you do not need, soon you will have to sell things you need”.
  • on savings: “Do not save what is left after spending, but spend what is left after saving”.

It is important to know the difference between what you want and what you need. Whatever not in your budget is not a need. Before any spending, please ask yourself: “Do I really need it?” If the answer is “No”, forget about it! There are more important goals waiting for you.

Top Line and Bottom Line

Whenever a publicly traded company announces earnings, you will street Wall Street talking about top line and bottom line – if the news is positive, it will go something like this “XYZ company beat both top line and bottom line estimates this quarter.” And the stock price will spike right after the news due to pure emotion and excitement following the earnings announcement. Honestly, the worst time to buy a stock, but that is a story for another day.

What is top line?

Top line refers to the total revenue or gross sales for a company. In the case of personal finance, it applies to your gross income which includes income from all your sources – paycheck, wages earned through side gigs, capital gains, and interest income etc.

What is bottom line?

Bottom line refers to the net income (earnings) of the company after all expenses including taxes have been paid. In the case of personal finance, it is basically your savings per paycheck after all your bills have been paid.

Personal finance is very similar to corporate finance. If your expenses are greater than your income, then your bottom line is negative. That is a sign of major trouble. The first thing you need to do is to turn that around.

January 2016 is history now. 2016 is flying by. Here are a few things to pause, ponder, and take action on:

#1. What is the one thing you could be doing to increase your top line (aka gross income)?

This could be asking for a raise, asking for a promotion, looking for career growth within or outside the company you are currently working at, working a part-time job, monetizing your hobby etc. The goal must be to consistently push for top line growth of about 5-10% per year.

#2. What is the one thing you could be doing to increase your bottom line (aka savings)?

Look at your monthly bank and credit card statements. What are the areas where you could cut down your expense? If you can cut down anywhere between 1% to 5%, then pat your self in the back. That 1%-5% goes straight towards your bottom line (aka savings).

#3. What is the one thing you could be doing to make your savings work hard for you (aka investing)?

Do you have emergency funds saved away to cover six months worth of living expenses. If not, that is the first thing you should do. You could start out by opening savings account with something like Discover Online Savings Account (that offers 0.95% APY) or a bank of your choice and start building up your savings account.

If you are ready to invest, then you could start out by investing with Betterment or Wealthfront. You get to diversify your investments across stocks and bonds at a very low cost.

What question motivated you the most? What actions are you planning to take?

Saving on a Low Income

Savings are the cornerstone of financial security at any level. We all know that it’s something we should be doing, so why do so few people manage it?

When you’re living paycheque to paycheque, as many people are in the current economic climate, it becomes a daunting task to set aside any money for the future. The primary concern is to meet the rent and bills now rather than worry about hypothetical costs further down the line and this perfectly natural. This doesn’t mean that it’s impossible to start saving, just that it requires discipline.

So what are the key points to start saving for the future?

Firstly, start small. If you don’t think that you can afford anything then start very small.

Put away £1 a week if necessary, 10 pence, whatever you can afford. Make sure that you do this regularly, have a set time every week so that you don’t forget. In fact, the easiest way to do this is to set up a regular transfer from your account to a savings account. If you set the transfer to go through on the same day as your payday then the money will go straight out to your savings, it won’t be in your account long enough for you to notice that it’s gone!

Secondly, start today. Don’t plan to start next week, next month or next year, start now. Every day that goes by your savings will increase, every day that you don’t is a missed opportunity.

Another crucial point is very simple. Don’t touch the savings! Towards the end of the month you may be tempted to take money out of your savings to see you through until payday, often with the intention of paying the extra back in. Don’t. You’ll have to pay a little more in to your savings just to get back to where you were, so you’ll be more likely to do the same the next month, and the next month. It’s an easy cycle to get into and a difficult one to get out of so avoid this trap in the first place.

However, you do need to establish what your savings are for. Are you saving for retirement, a new car or just to have some emergency money? What establishes an emergency? Set yourself boundaries and stick to them!

I’ve found it helpful to have to separate savings accounts, one for long-term, one for an emergency fund. The long-term savings I do not touch under any circumstances, that will eventually be a deposit on a house, or even a retirement fund. The emergency fund is different, this covers expenses that aren’t covered in my monthly budget, but only emergency expenses.

For example, if the MOT is due on my car, then this is budgeted for and paid for out of my regular account. However, if my car breaks down and costs £200 to get back on the road, then this is an emergency payment from my savings. I need the car working and cannot afford to take that hit to my monthly budget.

Using the same example, it shows how important savings are. If I didn’t have that backup in place then that would have to come out of my monthly budget and leave me short on everything else for a month. This could leave me with no money for petrol, food or even rent. Having that backup, however small it is, can make the world of difference when the situation gets difficult.

A lot of keeping control of finances is about forming the right behavioural habits and this is no exception. You’ll feel the difference in your budget initially, but after a few months it’s unnoticeable. You grow accustomed to living off slightly less money, meanwhile your savings can just grow and grow.

Tips for Personal Finance

Monitoring income and expenses is a tedious process that requires patience and foresight. While it may be dull to balance your checkbook and ensure bills are being paid, the security provided from managing your money is priceless. By employing a few simple techniques you can make the process both easy and enjoyable.

When I first entered college, I found myself having to manage my first income along with a sizeable amount of bills-rent, groceries, cell phone and recreation money. I spent the first semester going out to eat, to the movies and buying unnecessary items. I soon found that I had blown my savings from my summer job. Instead of having a comfortable financial cushion, I was soon living off a meager income from a part-time campus job-lets just say ramen noodles became a fixture of my diet.

Unfortunately, I had not set up a balanced budget to ensure I was paying all my bills, saving money and allotting for “fun” money. I had overlooked one of the crucial steps for managing money: I did not set up a budget to know how much I was making or spending. It is important to sit down with your pay stubs, bills and receipts to determine how much money can be allotted for each item. In fact, this basic step is really half the battle to ensuring a sound money management strategy.

The repercussions of not having a balanced budget can often cause you actually to lose money. For instance, many banks charge overdraft fees when you buy an item and do not have sufficient funds. While in college, I often found myself not only with depleted bank account but also a hefty overdraft fee-usually around $35 dollars-after not closely monitoring my spending. It is hard to imagine now, but I was actually paying for my poor money management choices.

So, what are a few simple steps to balancing a budget? The first step you must do is actually total the money you receive monthly. Add the sum of all the income or support you receive-whether it is from a job, rental property or a relative. After figuring out your monthly income, next add up all your monthly bills-rent, mortgage, cell phone, water, gas, electricity etc. Once you have both of these numbers, subtract your total income from your expenses and what remains constitutes your surplus from each paycheck.

Now, many people decide to spend their surplus income on personal hobbies or entertainment. While it is certainly appropriate to spend a portion of your income on these items, it is not wise to spend all your extra money on dining, clothes or other luxury items. Instead, saving a portion or investing your money in a personal project allows you to invest in yourself and help you grow as a person. For example, I spent my summers while in college working for a landscape company, so I could invest in my education and myself. Although I had a lot of surplus money from the job-I lived with my parents during the summer and had almost no bills-I choose to invest and save for my education. This investment took years to pay-off, and I had to sacrifice going out and having fun; however, the “nest egg” I saved over the summer helped me pay for college expenses and develop a better future.

Finally, it is important to not see money management or a budget as a hindrance to your life. Instead, it is important to view it as a necessary tool to ensure a successful future. When I save money now, I do not feel as if I am “sacrificing” for tomorrow; rather, I recognize that I am ensuring I will have a safety net later in life. By positioning saving money as a “precaution,” it reframes it as a necessity and a much more essential part of my livelihood-rather than a burdensome sacrifice.

So, the next time you find yourself out of money at the end of the month or paying overdraft fees, reflect back on the techniques you are employing for managing money. Make sure you have developed a balanced budget, allotted “fun” money and are investing in your future. Whether you are a young professional or an individual nearing retirement, it is never too late to develop the skills necessary to managing money. Most importantly, do not think of budgeting money in detrimental manner. Rather than seeing it as a deterrent to your current life, view it as a necessary insurance policy to ensure a bright and secure future.

Secure Your Finances With Three Simple Actions

Millions of people do not understand how important it is to be financially stable. Financial stability does not necessarily refer to having a well paying job and a lot of money. In order to be secure, one has to know how to handle their monetary resources. You need to be able to determine how you will spend, save and invest your money. This will make sure that you are financially secure.

How to use your money

There are simple tricks you can apply to your life to ensure you are utilizing your money well. The three main elements are to make sure you can;

· Spend

· Save

· Invest

When you get your salary or profits from your business ventures, you must be willing to pay attention to all these three areas. The secrets to maintaining a constant structure that will ensure you are financially stable is by following the pointers below.

1. Budget

Always budget whenever you get your money. Be logical when you do so. Write down all your expenses and needs. When you budget, always indicate payments you have to make to insurance companies or loan payments if they are not part of your net pay. Once you have a clear picture of how much you are spending, you can now know how much to save.

2. Saving

Choose a savings account that will generate more funds for you. You may need to do some research before you settle for one. If you have dependents, you may want to put money aside for their needs as well such as tuition savings. Allocate your savings according to your needs.

3. Invest

Investing ensures that your future is secure. Once you have done your savings and budgeted well, make sure you take a leap of faith and invest your money in other ways. For instance, you can put some money into company shares.

For the sake of your family, you can also apply for insurance. Life insurance is the best since it covers both you and your loved ones. There are many options available for such insurance covers like new policies that offer life insurance without medical.

With these three factors in place, you can begin to take charge of your finances. In the event that you have extra money to spare, hiring a financial manager will ensure you keep track of all your expenditures. Be sure to prioritize in the first stages so that you meet your goals and live within your means.

Financial Planning at Every Life Stage

Just like there are four seasons in a year, there are different seasons of financial planning during your lifetime. Financial planning can help you can gain a better understanding of where you are at financially, how to prepare for challenges that may be ahead, and how to plan for where you want to go.

Of course, every situation is unique, including the age and circumstances under which you begin implementing a financial strategy. And what suits you at age 25 is typically different from what meets your needs at age 55.

In a nutshell, the stages include:

· Building assets

At the beginning of your career, your financial focus is typically on accumulating your assets. Your ability to earn income may be your most valuable asset, so investing in your career is critical. It’s also important to establish an emergency fund, build your personal savings and pay off student loans.

· Investing for the future

When you grow more successful financially, you will increase your discretionary income. During this stage, you’ll start planning and saving for future goals, such as a child’s college education and/or a comfortable retirement. Make sure you have a well-balanced and tax-diversified portfolio to provide potential growth opportunities.

· Planning for retirement

As you near retirement, planning for it often becomes your financial priority. Begin by thinking about your retirement goals and dreams. Then, create a detailed plan that will help you get there. You’ll want to make sure you have the flexibility to take income in tax-efficient ways that will enable you to continue your lifestyle and be prepared for the unexpected in retirement.

· Generating retirement income

Once it’s time to enter retirement, begin implementing your retirement plan and enjoying the assets you’ve accumulated. After a few months, reevaluate your plan and make adjustments so you stay on track.

· Leaving a legacy

As you become older and more financially secure, leaving a legacy becomes paramount. Legacy is about the impact you’ll make on people, charities and causes that are important you. It’s also about making sure you have the right beneficiaries in place to protect your assets.

Of course, there is some overlap in each of these stages. For example, you may take steps to get the right protection in place while laying a foundation to grow your assets. Or you may take retirement income while planning ways to transfer your wealth.

Regardless of the stage you’re in, it’s important to make sure that your legal and financial documents are properly structured to ensure the most efficient and effective transfer of your assets – including property, personal belongings and investments – in the event of your death. Doing so can give you the added peace of mind that comes from knowing your family is as financially stable no matter what happens.

Is Online Banking Safe?

Online banking is becoming an increasingly popular form of financial account management because it gives people the convenience of performing financial transactions such as depositing and transferring money whenever they want from any location – provided they have an Internet connection. Although banks use various strategies to secure the electronic transactions of their clients, consumers must take certain steps to make their electronic transactions much safer.

Security Issues
One of the biggest security problems in online banking is harmful malware. These applications are used by malicious people to intercept users’ personal data, including transaction information and passwords. Malware can affect different types of electronic systems including tablets, network routers, desktop computers, and smartphones.

Another type of security problem in Internet banking is phishing. This refers to an electronic attack that compromises people’s personal information. Criminals often send fraudulent emails that mimic the appearance of official bank emails and with links that lead to fake websites. Phishing steals users’ personal information and passwords when they enter the data into their computers.

Avoiding Risks
The most obvious risk of online banking is theft. However, some bank deposits are secured by the Federal Deposit Insurance Corporation (FDIC). Certain financial products such as stocks, mutual funds, non-deposit investments, and insurance products are not covered by the FDIC.

A person risks becoming ensnared in identity theft if a criminal successfully steals his personal information through Internet financial account management. Many criminals use the information they steal from online bank accounts to commit fraud like applying for credit and loans under other names.

Institutions typically use encryptions and protocols to protect their clients’ information when transactions are conducted electronically. One of the technologies used in Internet financial account management is secure socket layer protocol, which helps to authenticate clients’ electronic connections with their lending institution so that they can avoid connecting to a fake website. The bank then checks to make sure that the information it’s receiving has not been tampered with before continuing with the transaction.

Safe Account Management
Install antivirus software on your desktop computer and laptop to protect it against viruses and malware. Update your anti-virus software regularly to ensure it has the latest security features and updates.

Avoid sharing laptops and other portable Internet devices to avoid risk of exposing yourself to malware and other potentially malicious applications. Only perform exchanges on laptops and computers that are properly secured.

Never disclose your personal pecuniary information including account numbers, PIN, or passwords to anyone through word of mouth, text messages, emails, or phone calls. In addition, do not perform Internet transactions with a financial institution that does not encrypt its client’s electronic transactions.

Online banking is a great way to perform transactions and keep track of your money and account activities. One of the most important things to remember when doing transactions online is that your money is only as safe as the devices you are using. While Internet financial account management is considered safe and convenient, it is important to protect your identity and money when doing transactions electronically.

Steps to Open a Savings Account

Anyone with financial goals also needs methods for achieving them. A savings account can be one way to build a nest egg for the future. When you wish to begin this type of relationship with a bank, you will need to follow prescribed guidelines for becoming a customer.

Research Options

Different financial institutions have specific policies and guidelines for their services. Before opening a savings account with any one bank, gather information from several to enable you to compare. Optimally, the facility you select will have a convenient location, possibly with more than one branch. Also, look for a lender with hours that match your schedule, an extensive ATM network, and attractive features such as online banking. Find out about minimum balances and fees to help you choose the institution that offers the best package to fit your needs.

Gathering Materials

After choosing the bank you want to use, gather the documents you will need to open the savings account. Most financial institutions require at least one form of identification (possibly two) and proof of address. Acceptable forms of identification include a driver’s license, passport, school identification card, voter ID card, or government-issued photo identity card. Acceptable types of proof of address include a bill from a utility service, a registration letter for the connection of a utility service, or a rental lease. You will also need to know your Social Security number, so bring your card if you have not memorized this number. Minors will need a parent or responsible adult to accompany them to the bank to open a joint account in both the minor’s name and the adult’s name. Bring the cash along that you wish to deposit, also.

The Process

You will meet with a representative to open the savings account. The representative will present the options you have for different terms and packages, and you will need to choose the one you wish to use. Ask specific questions about fees, service charges, interest, minimum balances, and statements at this time. Take notes, if necessary. If online banking is available, arrange this service at this time. You will likely need to choose a username and password to access the bank’s online portal. Review terms of online services, also. Request an ATM card to be connected to the account, if desired. Review all terms to ensure you understand them. Sign the contracts to indicate your understanding and agreement. Give the representative the cash to be deposited. You will receive a receipt to show this transaction. You will also receive a book that displays deposits, withdrawals, and balances.

To maintain the account effectively, stay up-to-date on your balance. Add all deposits and subtract all withdrawals to ensure you know the balance. When the bank adds interest or subtracts fees, add or subtract these amounts to or from the balance to get an updated balance.

With proper preparation and ongoing maintenance, a savings account can be an effective way to manage money in both the short and long term.