PocketSmith Blog - budgeting, personal finance and money management articles

Buying v.s. Renting: Which Is Better For You?

Tuesday, August 31st, 2010 by Syndicated

Buy_Rent

There was a time in the not too distant past when we all thought that owning a home was the key to getting ahead in life and being financially secure. Everyone from young couples to driven singles were saving money and taking on risky mortgages in order to own a piece of property. We thought that this was the best way to build wealth because we owned our home, rather than wasting money on rent, which meant we could sell that home at a profit at some point in the future.

As we all know, that has not turned out to be true. Many people found themselves trapped in their homes when the economy crashed. Homes were not selling and those questionable mortgages rapidly skyrocketed beyond the value of the home. It really was an economic disaster of global proportions. Now that things are turning around many people still believe that home ownership is the way to getting ahead in life, but that is only somewhat true.

Why Renting Is Better

The first thing you have to do when you think about renting a home is get rid of the idea that you are throwing your money away. Even though you are not building up equity that you will earn back you are not simply throwing money into the trash. Instead, you are exchanging money for a place to live. You would never think of buying food or paying the electric bill as throwing money away because they are basic necessities, spending money on a place to live is the same thing. This is especially true if you do not plan to be in the house or apartment for a long period of time. The general rule is that you need to live in a place for at least five years in order to be able to sell it and break even or make a profit. If you move around a lot for work or simply by choice then renting is your smartest financial decision.

The second reason renting is better is that it is usually less expensive. When you purchase a home you have a big initial investment for the down payment and any other closing costs. If you do not have that money you might be able to find a lender willing to loan you the full amount, but odds are it will not be the best financial choice. The problem many people found themselves in during the recent economic crisis is that they had purchased homes with no money down. Once the lender tacked on interest their actual loan was more than the value of their home. While that would have been OK if the shortfall was small, many mortgages were tens if not hundreds of thousands of dollars over the value of the house. If you have not saved up for the down payment of a home then you are better off renting until you do.

The start up costs are not the only extra expense of owning a home. As a renter if your water heater breaks or your sink is leaking you simply phone the property manager and they send out someone to fix it on their dime. While you pay for it indirectly with your rent, it is still a fixed expense that you can budget for each month. When you own a home whenever something goes wrong the cost to repair it comes out of your pocket. Too often people become what is referred to as ‘house poor’ meaning they can afford their mortgage and not much else. When you buy a home you have to be able to pay for the mortgage each month and any potential repairs, including big expenses like broken furnaces and leaking roofs. If you cannot do that, then sticking with renting is a better choice.

Why Buying Is Better

As you would expect, buying is better because of the investment aspect. If you save up money for the down payment and get a good house and a solid mortgage you could wind up making a few dollars when it is time to sell the house. If you have the money to spend on a house it is often the best investment you can make because the return on it can be quite high. Not only are you making a great investment but you also have a place to live, killing two birds with one stone.

There are tax incentives for home ownership. The government wants people to own homes, as such they are willing to give tax breaks to home owners based on the interest they are paying on their home. Each year you will be able to deduct some or all of the money you have spent on interest when you do your taxes. This is especially important during the first few years you have a mortgage because this is when you pay back the largest chunk of interest. However, try not to depend too much on any tax break as laws change regularly so the break you get one year may be significantly less of non existent next year.

Buying is usually a better choice if you are going to live in a home for a long period of time. As we noted before if you will live in a house for more than five years you will probably be able to recoup your initial investment and sell the house for a profit. However, before you run off and find a realtor because you plan to live somewhere for the next several years make sure you meet the other criteria too like having the down payment cash and being able to afford repairs.

Last Words

The choice between renting or buying a home is a very personal one. Only you can decide what is right for you and for your finances. Always keep in the back of your mind that there is nothing wrong with renting and that it is not a waste of money until you are financially ready to take on home ownership. Don’t let anyone influence you into buying a home and taking on a big mortgage until you are ready to do so.

This article was written by Timothy Ng. You can read more of his work at Credit Card Finder, where he has a number of comprehensive guides to all types of credit cards.

Posted in Home & Mortgage, Money Management | No Comments » Comments

To Buy or Not to Buy… How to Evaluate your Next Purchase

Tuesday, August 24th, 2010 by George

Buy Now Many of us suffer from periodic bouts of weakness when it comes to personal financial management. Even people who are generally great at making decisions sometimes end up spending money on something that was completely sporadic only to bear the guilt of buyer’s remorse when it is too late to take back that poor decision.

To avoid spending on something that will end up adding to household clutter, or worse, potentially set back your financial goals for some time to come, take a look at the following suggestions.

Before you buy ask yourself these four questions.

1. Can I Afford to Pay Cash?

Often a purchase is evaluated on the grounds that the payment terms are so flexible that it will hardly be noticed on a month to month basis. This is not necessarily a good way to start thinking about your finances because it leaves room for the slow trickle of mounting debt. If you can’t afford to pay for the item with cash, then you should seriously consider putting the decision through some more tests before committing to a decision to purchase.

2. Is it Worth Paying Interest on This Purchase?

If you are not paying cash, you will most likely be using a credit card, which may have astronomical interest rates payable on outstanding balances. The purchase must then be put through the wringer because if you are going to pay double digit interest for the pleasure of owning the item, it definitely should be a fantastic item. If you are taking a consumer loan then you also need to make sure that the item will either hold value or be absolutely necessary for the furthering of other important life goals.

3. Do I Need It? Really?

Sometimes the lines between ‘want’ and ‘need’ are substantially blurred because emotions run high. This might be because there is a desire to keep up with your friends or family, because the marketing for the particular product has been particularly successful or because you may be in a vulnerable emotional state and you believe that you deserve a treat. Whatever the case, you should try to reclaim some sense of logic and answer the question logically, especially if you have already established that you cannot afford to pay cash and the item is not really worth the interest payments it would accrue.

4. What Will I Have to Sacrifice?

If you have come to this point and the craving for the item has not subsided then you should start thinking in terms of your opportunity costs. Since your resources are not unlimited, buying the item in question will most certainly mean you must give something up. What will you sacrifice in order to have this purchase? Will it mean not saving for the month? Will it mean you may need to cut back on other expenses? Will making the purchase jeopardize your ability to meet other obligations?

PocketSmith Can Help!

Of course, your PocketSmith tool can help you to evaluate this decision by manipulating your budgets to figure out when the purchase will be feasible.

When you are faced with the decision “to buy or not to buy” it is rarely a clear cut case. Often several factors come into play and to make the decision that is right for you and your finances you must give them all a fair hearing. It is only then that you can walk away either confident that you can pay for the item you so desire, or happy that you managed to resist the overwhelming temptation to buy wheat you could not afford.

Posted in Budgeting, Consumer Spending, Credit & Debt, Money Management, Spending Habits | No Comments » Comments

How to Secure Your Financial Future with Life Insurance

Tuesday, August 17th, 2010 by Mike

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Families need to have preparation made for a secure financial future in the event that the main breadwinner should die unexpectedly. Life insurance is one of the best ways to meet this need and it also comes with many possible options for a greater degree of flexibility.

Life Insurance Can Provide for Your Financial Needs

Keeping your family out of debt in the event of your death can be prevented with life insurance. You can obtain enough coverage to pay for your mortgage, any credit card debt, pay your bills, and provide them with the money needed to enable them to keep on living at their current comfort level. Things like property taxes, funeral costs, medical expenses, and estate taxes can also be provided for in a life insurance policy.

Two Types of Life Insurance

There are only two main kinds of life insurance, so you will want to have a good idea of why you want to buy it before you purchase it. Term life insurance is the less expensive, and it is pure insurance – no frills attached. This kind of insurance provides level protection (face value) for a pre-determined number of years, which ranges from five to thirty years.

The other kind of life insurance is whole life, which is also known as permanent life. This type of insurance policy has a built in “cash value” which builds over time. The available cash may be borrowed once a significant amount has accumulated. The considerably higher price enables money to go toward fees, the agent’s commission, and savings (the cash value).

Long Term or Current Needs

Term life insurance provides you with a low cost life insurance that can easily meet your needs while your bills are higher. Because of the low cost, it is ideal for those who want coverage and be able to invest in interest-bearing accounts elsewhere. At the end of the term, a term life insurance policy can be converted to whole life if desired, or a new term insurance policy can be purchased if you are still around 50. After that, term life insurance starts getting rather expensive.

If you feel you cannot save any other way, then perhaps a whole life insurance policy may be the way to go. However, it will give you much less face value for the same amount of money, and minimum interest in your cash value. Universal life and variable life will give you more options, but are also more costly. At the end of the policy, which is often at 100, you can receive the face amount of the policy.

You should also be aware that you would not ever collect the face value plus the cash value in a standard whole life insurance policy. If you die, your beneficiaries will only receive the face value, no matter how much cash value has been built up.

Life Insurance Can Also Prepare Loved Ones for the Future

The good thing about life insurance is that you can choose how much you want to buy and where it should go. This enables you to think about the future for your loved ones, too. You can help them pay for college, get them started in business, ensure continued medical care if they should need it, or even provide them with some inheritance money, too. Of course, it is also possible that it may not be needed at all.

Getting started is easy. Simply go online and find a life insurance calculator to determine how much you will need. Then get several life insurance quotes – term insurance quotes or whole life insurance quotes – depending on which one you want.

Posted in Budgeting, Money Management | 1 Comment » Comments

Top 5 Things Men and Women Choose To Spend Their Money On

Tuesday, August 10th, 2010 by Syndicated

For as long as there has been money, whether you were born a man or a woman meant that you were most probably raised to view and spend money very differently. While experts say our socialisation (our trained behaviour), is primarily modelled after our same-sex parent, they also agree these generalisations are being broken down. The focus here is on where men and women “choose” to spend their money, their expendable income, so forget necessities like rent, mortgages, household goods, petrol, bills, children etc, we want to know where men and women spend their hard earned cash.

It’s long been the knowledge of our Neanderthal history that men hunt and women gatherer. So it should come as no surprise that when you enter your local Target, you’ll tend to see women browsing around, “gathering” up the best from various sources and enjoying the experience, while men haven’t got much time to waste and prefer going straight in for the kill.

Women have been taught to invest in lifestyle and children, while men have been taught to invest in things that hold value like a house and retirement. The way that translates into spending is that women spend more money on the stuff that makes the day work. The problem with that is most of that stuff has no real value. According to surveys conducted in The US, the top 5 things men and women choose to spend their money on are:

Men Men

Men don’t spend, they invest. Men don’t want something, they need it. Theirs is a future-money orientation. Men are trained to fix and provide, so they view money as a means to capture and accumulate things to add more value.

1. Investments
With as much progression in equality between the sexes as we’ve had, men are still the primary bread winners in most cultures, (about 25% of women in The US make more money than their husbands or boyfriends) and caring for the future of their family is a duty most happily accept. Whoever makes the most income aside, governments and financial institutions are aware that people can’t be apart of the workforce forever and as such cleverly provide workers with provisions so they won’t have to pick up the slack later and our economy remains strong.

Depending on the age you retire, planning for how much you’ll need to live like you would like is hard to estimate with many financial planners advising that you need about 65% of your pre-retirement income. Women mostly feel comfortable about everyday money management like budgeting but are less confident when it comes to investing. Whether it be in stocks and bonds, property or art, the male need to keep accumulating wealth sees investing as the number 1 thing they choose to spend their money on.

2. Entertainment
This includes electronics, games, movies, TV, music, travel and events which cover the majority of male spending. Male spending on these purchases is usually reoccurring and tend to come with expensive additions. As the need to be more digitally connected and state of the art continues, our obsession with technology, not only to navigate us through life but to do business, sees men more than willing to pay for high end products.

Following on to sporting events, advertisers and sponsors are responsible for making this a multi-million dollar industry. With an advertising spot during a Superbowl commercial break going for around $3 million and sport star contracts costing teams hundreds of millions of dollars, men making and spending money through sport is a phenomenon. Filling the need to have the latest item or the one their favourite sport star uses puts entertainment in a close second.

3. On Women/Love/Online Dating
With these 3 all falling under the same heading, men see finding love as important as women; with the one thing the sexes seeming to have in common is the need for companionship. Men and women are very willing to spend their hard earned money on the search for a happy ending and according to a study in Canada for every woman using an online dating service, there are at least 2 men. That accounts for $214 million a year and this is even before the people even meet! That’s when the dinners, gifts, coffees and movie tickets get factored in.

With women more often paying for themselves, there is still a social obligation that men pick up the tab. The new rule that has come out of all this is: whoever asks the other out should pay. But men can’t help that innate feeling to provide and in some instances can feel emasculated if the woman foots the bill.

4. Hobbies and Sports
From collections of cars, guitars and musical gadgets to stamps, model aeroplanes, train sets and coins, every man enjoys a hobby and is willing to pay enormous amounts to enjoy it. And following on from a man’s need to invest and accumulate things that add value, there are even hobbies that can make money. Collecting and later selling sporting memorabilia is one such hobby. There is a tremendously large market for balls, bat, clubs, hats, shoes, jerseys, or anything that a famous sport star has touched or even better used to win something.

5. Betting and Gambling
Men love any opportunity to make something they already enjoy watching even better and putting a wager on your favourite sports team or horse takes the 5th place position for male spending. Proven to make more money than the lotteries, the gambling industry provides men with everything they like: risk, adrenalin, competition and potentially fast rewards.

The biggest trend to come out of the past decade was the increase in popularity of poker. Thousands flocked to casinos all over the world, especially in Las Vegas to try their hand at beating the pros (something a lot of sports can’t offer the everyday punter). The World Series of Poker is played once a year and anyone with $10,000 can enter. Past winner have collected between $7 and $12 million for about a week’s work.

Women

Women
Women are trained to nurture and seek acceptance and so view money as a means to create a lifestyle. Women spend on things that enhance day-to-day living. Theirs is a now-money orientation. “Women are the collectors of stuff and are taught that what they need to get through life is approval. They have to look good, act good and be good, as their Top 5 choices expose:

1. Shopping
An average woman will spend 8.5 years of her life shopping and with so many clothes, handbags and shoes to choose from, there was never a doubt that this would take the number 1 spot. According to a report, women make up 70% of al consumer spending in The United States with 60% of online shopping being done by women.

For women, shopping is an adventure for the senses and a great way to indulge them. With sales and coupons regularly made the most use of, women may come home with a lot of bags, but the total cost of a women’s shopping isn’t even comparable to a man’s number 1 spending choice. However, shopping is only a temporary source of happiness for women, with the order going: pets, sex, food, friends and then shopping.

2. Beauty
With the popularity of gossip and fashion magazines and with wealthy reality TV stars often gracing the covers, everything from anti-aging products to cosmetic surgery has women spending thousands of dollars a year on beauty products in order to look as good as them. This exploding industry has come from the long agreed viewpoint that looking good makes people feel good and the market that appeals to these emotions is boundless.

With niches that extend to eyebrow shaping and bejewelling ones private parts, women fuel a never ending fire that keeps the beauty industry flourishing. Japanese men are now even buying cosmetics. Factor in all the places on a woman’s body that might be seen in public (hair, nails, feet, face, skin) and there will be five different methods to make it look and smell good.

3. Health and Fitness
Along with the fear of illness and death comes the large majority of female spending on preventative measures and natural remedies to stay fit and healthy. We all know the benefits a healthy lifestyle can have in extending one’s lifespan and this industry particularly hits home with women. Vitamins, Supplements, Medicines, Teas and Exotic Juices are all used in the battle for good nutrition and weight loss.

Particular phenomenon’s that have taken the western world by storm like the lemon detox diet and the cabbage soup diet have done so because they really appeal to women’s emotions to feel and look good at an cost (not just a monetary one).

4. Love/Online Dating
The booming online dating industry sees millions of dollars being spent on personal ads, online dating websites, relationship books and this even extends to pets, with women choosing their partner based on the pets each owns.

5. Home Furnishings
Women are said to be responsible for today’s mass-luxury trend. With the movement of both partners working to afford a luxurious lifestyle, women enjoy spending their hard earned cash on making the home warm and friendly for their families and guests. It is now not uncommon for women to save up for new bathrooms and kitchens than holidays. A bathroom that promotes relaxation on a daily basis will serve her much better than a week away at the end of the year. And home furnishing companies are aware of their huge buying force in the marketplace.

The case may be that men spend much more than women and their spending habits couldn’t be more different, but the message here is to spend wisely and never spend beyond your means. And remember, you read it on the Internet so it must be true.

This article was written be Alban who is a personal finance writer at Home Loan Finder, where he provides advice on first home buyer loans. Visit the Home Loan Finder website for more information on how to compare home loans.

Posted in Consumer Spending, Money Management, Spending Habits | 1 Comment » Comments

Four Ways to Conserve Energy and Save Over the Summer

Wednesday, August 4th, 2010 by Syndicated

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Summer is a beautiful time of year where a whole lot fun can take place, but you need to be conscious of the fact that summer can also drain your bank account if you aren’t careful. Unlike fall or spring, summer generally forces us to use quite a bit of energy to keep things comfortable. There are some ways to keep your costs low, and save money while having an enjoyable summer. Here is a list of four great ways to conserve energy and save money in the summer.

1. Lower the Hot Water Heater Temperature

Many hot water heaters have the thermostat set at 140 degrees, but this is really not necessary at all. By turning down the thermostat to 120 degrees, you could save 6-8 percent on energy costs.

In the long run, lowering the water temperature also helps prevent mineral buildup and corrosion in your pipes. Scalding water isn’t needed, and you’ll save nicely by lowering that thermostat by just a small amount.

2. Shorten Those Showers

Showers can actually be a more efficient way of using water than baths, if you are quick about it. Some studies show that teenagers average 30 minutes or so in the shower, which is a good way to run up the energy costs in a hurry.

While cold showers usually aren’t much fun, don’t take too hot of a shower or you’ll be wasting even more energy. For men, shaving while in the shower may seem like an interesting concept, but it is extremely expensive in the long run. Anything longer than a 10 minute shower and you will be hurting your pocketbook.

3. Be Wise about Cooking

The warm weather of summer provides a nice opportunity to get outside and have a grill out. A nice outside meal from the grill is a great way to save money by keeping the heat from the grill outside instead of having the air conditioner fight the heat from the oven.

If you are going to be cooking inside, make sure you put a lid on pans so the heat doesn’t escape. Also, make sure your oven is clean. An oven with numerous spills in it leads to inefficient heating.

4. Turn Up/Off the Air Conditioner

The air conditioner is a must in the summer, but you don’t always need to cool the house as much as many people do. Consider turning the temperature up a great deal before you leave for work. If you are going on vacation or away for a couple days, shut the air condition off and save that energy.

Some summer nights cool off nicely to where windows can be opened, and the breeze can cool the room quickly. The most important time to have a nice cool house is when you are sleeping. Every degree you turn the air conditioner up will save you hundreds of dollars in the long run.

Posted in Cashflow, Money Management | 1 Comment » Comments

PocketSmith Guest Posting Guidelines

Wednesday, August 4th, 2010 by Francois

We love the idea of hosting guest posts at PocketSmith, and are always interested in featuring high quality content that bring value to our readers. Currently we publish one guest post every two weeks, usually on Thursdays. Here are three reasons why you may want to write a guest post for PocketSmith:

Guest Post

1. You will help people through your writing?:
Through our software, our users are already committed to making changes and improvements in their financial habits – you can make a real difference in their lives through your contributions. Use this as an opportunity to reach a whole new audience!

2. You will get exposure for your work?:
Your writing will introduce our readers to your work, bringing you more targeted traffic over time.

3. You will build a strong reputation:
Writing successful guest posts is a great step towards becoming better-known in your community. As you build a reputation, bloggers will be far more likely to recommend your site and run future posts of yours.

You may choose any personal finance topic for your post. The important thing is that it provides useful value for the readers! Of course, there are some guidelines for the post. The post must be:

1. Original:
Original content that tells our readers something new. It can’t be a post that has been posted on your own blog or anywhere else before. You also need to agree to not publish the post anywhere else. You may, however, link to it.

2. Specific:
Show, don’t tell. If you have an interesting technique for saving, earning, automating, or investing money, show our readers how you did it. Use screenshots, spreadsheets, examples, and practical tips. Anything you can include that is a ‘how to’ or something that they can go back and try out immediately will be greatly appreciated!

3. At least 400 words long?:
This is for the content part, not counting the title and bio. We’re happy to post long and short posts – length isn’t a factor, but quality is!

4. At most 50 words bio:
You may include links to your work in your bio. Please put the bio at the end of the post, we will write an introduction at the beginning.

5. No links to unrelated sites and no affiliate links:
As we write above, you may link to your work in the bio. Please note, however, that we won’t accept posts that link to sites that are unrelated to personal finance nor SEOd anchor text.

We reserve the right to edit the posts as needed and to reject posts that we feel are not appropriate for this blog. If you have a post that meets the guidelines above, you can send your submission to contact (at) pocketsmith.com and put “Guest post idea” in the subject line. Cheers!

Posted in General | No Comments » Comments

Retirement Planning: How To Realize Your Dream Of Retiring Early

Thursday, July 29th, 2010 by Syndicated

This article was written by Timothy Ng who is a regular personal finance writer and part of the team at Credit Card Finder a 100% free Australian credit card comparison and application service. Visit the Credit Card Finder website for more information on how to compare credit cards.

retirement-planning

Retirement planning is something that everyone needs to think about early in life, especially if you want to retire at a young age. Just imagine how much travel or golf you could get in if you were able to retire five, ten, or even fifteen years earlier then everyone else. Taking an early retirement allows you to get started doing the things that you love while you are still young enough to really enjoy them. Too many people are forced, because of finances, to wait until they hit age 65 to retire. By then, many find that their bodies simply will not let them travel around the world or play golf or tennis five days a week.

If you start planning for your retirement now and make great choices in your investments you can be way ahead of the curve. Not only will you be able to start enjoying your retirement early but you will be able to do it with enough money to feel secure throughout your golden years. It might be hard to imagine this, especially in the midst of raising a family, working, and just trying to get through day to day life, but it is an absolute necessity.

You probably think that there is no way to add retirement investments to your list of bills each month, but you can. All you have to do is decide that your retirement is important an make the sacrifices now to make it happen. A few small concessions, like driving an older car or taking a less extravagant vacation will allow you to have your dream retirement earlier then you ever imagined.

5 Steps To Early Retirement:

1. Set up a household safety net
If you have a safety net in place for household emergencies you will be less likely to give in to the temptation to dip into your retirement savings or not to pay into it in a given month. Most households can start out with $1,000 in an emergency fund that is either held in an easily accessible savings account or in cash at your home. This money is not for paying off regular bills, but for real emergencies like unexpected car repairs or veterinary bills.

2. Pay off your debts
Aside from your mortgage, you should come up with a plan to get completely out of debt. To do this you should add up the total of all of your debts including any student loans, car loans, credit card debt, and any other debts. Then, come up with a plan to pay them all off by making extra payments on the smallest debt first. Once you have paid off one debt use the extra cash to pay off the next debt. Continue to do this until all the debts are cleared.

3. Make extra money
This might be the hardest thing for many people to do, but making extra money allows you to pay off your debt. That does not mean working loads of overtime at your job, but if that option is available take it whenever you can. You can also sell items you do not need or want or getting a second job. Also, use any extra money like birthday gifts or inheritances to pay off your debt.

4. Save more money
In reality, $1,000 is probably not enough money to save you in the event of a real disaster like being injured or laid off from your job. Once you have cleared your debts you can begin working to save enough to get you through three to six months of lost wages. This money can be kept in a money market account that does not charge penalty fees if you access it but does pay a bit of interest. It is not a true investment account, so try not to think of it that way.

5. Invest smart
Once your debts are clear and you have enough emergency savings to feel comfortable it is time to begin investing your money. It is wise to invest at least 15% of your income into retirement savings accounts. One of the best options is a 401K account through your employer. You should maximize this account by investing as much as your company matches, so if they match up to 3% then you invest 3% of your 15% into the 401K.

After a 401K consider investing in a Roth IRA. You should put as much money into this account each year until you meet the maximum contribution amount. Roth IRA’s are excellent investments because you pay the taxes up front. So, when it comes time to withdraw your money at retirement you will not have to set aside a chunk of it for taxes.

If you still have money left over you can consider other individual retirement accounts. Although they do not offer the tax breaks that the previous accounts do they still earn money at a good rate and eventually convert them to your Roth IRA, thereby taking advantage of the tax breaks.

After you have set aside your monthly retirement fund money, paid your debt, and built an emergency fund you can think about other contributions. Your children will probably need college savings accounts opened for them. These are great, but only after you have saved for retirement. Remember that there are many ways to finance a college education, but very few to finance retirement. You might also want to work on paying your mortgage off early, just be sure to consider the fees associated with doing so. You may be better off investing more money toward your early retirement instead of paying off the mortgage early.

If you have done all of these things and still have some money to spare a charitable donation is a great way to spend your extra cash. It will make you feel good, help others, and provide a money saving tax break. By following these steps you can retire early and enjoy the good life without any financial worries at all. Having no financial worries is perhaps the best retirement there is.

Posted in Credit & Debt, Money Management, Retirement | 1 Comment » Comments

How to Stop Living Paycheck to Paycheck

Tuesday, July 27th, 2010 by Natalia

Raining_Money

If your paycheck regularly finishes before your next payday then you are living beyond your means and you are one of those people who struggle to make ends meet from paycheck to paycheck.

This malady can happen at any income bracket because all that needs to happen is for your expenses to outstrip your income and you will find yourself in this unhappy situation.Take a look at the following steps for how to stop living from paycheck to paycheck and take back control of your finances.

Stop Using Your Credit Cards

Some people believe they can improve their finances a bit at a time but they refuse to take drastic measures to get things done. Giving up or at least putting away your credit cards until you have your spending under control can feel extreme but it can also be the only way to put a freeze on your escalating bills.

Figure Out Where Your Money Goes

Have you ever genuinely wondered where your entire paycheck went? Well, this doesn’t have to be a mystery. You can track your spending by keeping all your sales receipts or writing down every time you spend money on an item. This information will later be fed into your budget.

Find Ways to Cut Spending

They might not be immediately obvious but after some real soul-searching and bargain hunting you might just discover there are cheaper ways to get things done and some things aren’t really necessary at all.

Think of How You Can Increase Your Income

On the flip side of your expenses is your income. While cutting back on how much you spend is a great start, there is nothing like increasing the size of the pie to really get on the path to wealth creation. You might be able to start a side business or improve your qualifications to get a promotion. Everyone’s path is different but there are lots of options to explore.

Set Goals for Yourself

Goal setting is an important part of this process because goals give direction to any future saving. When you save with a purpose in mind it is more motivating because you can actually visualize the reward for your delayed gratification. If you are simply saving for the sake of it then this becomes difficult and eventually you might be tempted to start spending instead.

Create a Realistic Budget

Budgeting is the means to stem the cycle of living paycheck to paycheck. The information you gathered about your expenses must be categorized and then listed under your outflows. The income you generate goes under your inflows and then you can use any surplus to put towards your various goals. A few of your goals may be reducing debt, saving for retirement, taking a trip, even buying a house or a car.

Stay the Course

Finally, when you have everything in order you might be tempted to expand your spending just a little but you always need to be mindful not to allow yourself to slip into your old spending habits. You might be especially vulnerable when you get a lump sum payment or an increase in your salary, but always look towards your list of goals for inspiration and direction.

Posted in Budgeting, Credit & Debt, Money Management | 1 Comment » Comments

10 Quickest & Smartest Debt Management Tips

Thursday, July 22nd, 2010 by Syndicated

In this guest post Kevin Craig, the web master of Monsterhols.com would like to share few quickest and smartest debt management tips with the help of Pocketsmith.

Debt Management Tips

Shakespeare did not live in the age of the plastic cards so he could say “Neither a borrower nor a lender be,”. In recent times how many people have ready cash in hand to buy a house, car or even pay off emergency hospital expenses?

Taking out loan has become common in the current economic scenario. However, rapid increase in loan application has also given way to speedy hike in number of consumers entrapped in debt. So this article would help you with smartest debt management tips that would help in the process to organise your debt and pay it off.

1) Try to avoid borrowing:
Are you planning to take loans to pay off your existing debts? Then give it a thought. As it might burn a hole in your pocket in the long run. It would be a herculean task to unburden you from the torment of debt. If you take another loan to pay off your existing debt then it would be an added burden on your shoulders. The money lender would charge you higher interest rate as there is risk associated with you since you are in debt.

2) Debts are curse:
If you are unable to manage your debt then you might consult a financial advisor. The proficient advisors would guide you to settle your debts. You can negotiate with the creditor not only to lower the outstanding balance but also the mounting interest rate charged on it. The repayment plan would be more affordable for you and this would help to manage to pay off your debt. The financial advisor with their able guidance shows you how you can avoid debt in the near future.

3) Check your expenses:
Make a budget that can check your reckless expenses. Make sure that your expenses do not exceed your income then the situation might be adverse. Make two columns one for the income and other for the expenditure. Calculate the total amount you spend each month and scan where your expenses are actually high. The moment your expenditure exceeds your budget try to restrain yourself from over spending.

4) Pay off your high interest debts:
Give priority while paying off the higher interest rate debts. If these higher interest debts are kept for the last moment then the soaring interest rate added to the outstanding amount would make the payment plan unaffordable for the pocket.

5) Avoid using credit cards:
In order to avoid getting further trapped into the maze of debt, stay away from the use of credit cards. The plastic card tempts us to get things that are beyond our income as we cannot see the cash flowing out of the pocket. The impulsive shoppers have to bear penalty due to their reckless spending. But a limited amount of cash in your pocket would hold you back from over spending.

7) Use the facility of Mortgage Breaks:
If you go through the clause of the mortgage plan you might see that the debtor can take a break from the repayment plan up to 3 months. This break would be enough to settle your financial situation but you would not be exempted from paying off your debt.

In the meantime while you are on break the interest rate would rise and would get added to the outstanding amount. It would be wrong to choose mortgage break clause as an option for long term debt solution but can be used for a short term debt.

8 ) Negotiator with your creditor:
Ask your creditor to lower the interest rate as well as the outstanding dues by negotiating with him. He would consider lowering the existing debt to a reasonable amount if you show eagerness to pay off the creditor’s balance.

9) Make an emergency fund:
In order to shield the unanticipated expenses one needs to save at least for 3 to 6 months. The saved cash can rescue you from unexpected emergencies.

10) Take help from FTC:
As a debtor you should be aware of your rights. If you want a valuable information and efficient management of debt the Federal Trade Commission is an exceptional source for help.

These few simple but smartest tips would help you to restrain yourself from the labyrinth of debt. Follow these points that might help you to achieve a secured and a debt free life.

Posted in Budgeting, Credit & Debt, Home & Mortgage, Money Management | 2 Comments » Comments

Tips for Saving Money in the Summer and Still Taking a Vacation

Tuesday, July 20th, 2010 by Mike

Summer_Vacations The summer is a great time to have fun. Most people look at it as a time for vacations and travel. With money still being tight in many places, it can be hard to find the money needed for a vacation. Here are some ways you can save money and still go on your vacation.

Start to Save Money by Raising Your Thermostat

Keeping cool in the summer does not mean you have to cool the whole house. You can raise the thermostat to around 80 degrees and then circulate the air with a ceiling fan in the room you are in or by using regular fans. With the higher temperatures, you can also use a dehumidifier that will take moisture out of the air and make it feel cooler.

Other tricks to lower your air conditioning costs include cleaning out your filters on your air conditioner and making sure you have no leaks in your duct system. If it has trouble cooling, then have it checked out, because it is working harder to try and bring the air temperature down to where it needs to be.

Save Money with Eating More Meals at Home

Eating out a lot is a sure way to see a quick drain on your cash flow – whether it is for lunches or an evening meal for the whole family. You can save money on groceries and eating out by planning your meals and eating at home more often. Using coupons for your grocery shopping can also enable you to save many dollars each month, too, and stash it away for that long needed vacation.

More money can be saved if you invite another family over for a meal and fun. Ask them to bring some food with them that you can share. This enables you to entertain friends and have special occasions at home for a much lower cost.

Plan Free Local Day Trips

It is easy to fill a summer, especially when you have children, with plenty of activities. Saving money won’t happen, however, if you are frequently doing things that cost. You can find more ways to save money by planning activities that are free and nearby. Libraries and parks often have activities going on in the daytime, as well as public pools. Even better, though, would be to find things to do at home to entertain the children.

Pay Cash As Much as Possible

You can save even more money by paying for things with cash, rather than using credit cards. Remember that if you keep a balance on a credit card, you are paying interest on those purchases. This results in actually paying more than you would pay otherwise.

Save Money by Using Travel Discounts

As you make the actual plans and arrangements for your vacation, be sure to take the time needed
to find great travel discounts. Making arrangements in advance can help you get hotel discounts, discount meals, rental discounts, and even discount tickets for places like Disney, Universal Studios, etc.

Find Ways to Save Money Throughout the Year

Other ways to save more money is to start using money saving tips now that will enable you to save money throughout the whole year. This will help you save money all year long and build up a sizable amount of cash for a better vacation next year. Some things that will help you get started are to make a budget, choose your purchases carefully, save energy, and look for great discount deals.

Posted in Budgeting, Money Management | 3 Comments » Comments