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Are you a saver or a spender?

Figuring out if you are a saver or a spender seems to be a simple proposition. Simply put, if you spend more than your make, then there is no chance that you can be a real saver, since your liabilities will be greater than your assets.

If you have a BBT checking account with a balance that makes you feel good when you look at it, but at the same time you have a credit card bill that is higher than the bank balance, then your are fooling no one but yourself.

Rather than staring at a bank balance, one should think about saving in a more general way. Think of savings as an attitude or a habit that makes it more likely that you have positive financial things happening in your life. Having a savings habit doesn’t guarantee that positive financial outcomes will happen, but it makes it more likely that they are happening in your life.

In the following simple example, imaging that the following money habits or money situations are true:

  • Having a savings account with a high interest rate is better than having one with a low interest rate (note that banks typically give higher rates for accounts with higher balances).
  • Paying off a car loan is not as attractive as owning a car free and clear.
  • Paying off a card in full at the end of a month is better than carrying a balance.
  • Spending less than you make every month is better than having some months where you run out of money or have to dip into your savings.
  • Believing that savings is easy is better than thinking that savings is hard.
  • Saving for a special project or for your health or education is better than not doing so.

Reading about good examples stimulates your mind in one way, and looking at pictures stimulates a different part of you mind. You can check out at the infographic below and the words above and between the two you should be about to figure out what good money habits would work for you.

Savers Vs Spenders Infographic by Newcastle Permanent Building Society

Savings stop as the economy slows

Since the global economic recession of 2008 began, life has been difficult for the everyday American. The cost of living has increased and it has become tough to manage competing priorities.

Wage freezes, unemployment levels of 9.1%, a struggling real estate market and an increase in day-to-day living expenses have all combined to make it harder to survive, let alone prosper!

Yet most Americans do not have a safety net to help overcome these financially tough times. Statistics suggest that one in four citizens do not have any savings at all.

This is a worrying situation, as a lack of savings means there is no emergency fund for when the going gets tough. A range of financial products can help with savings, such as those offered by short-term loan companies.

The recommended amount of savings suggested by industry experts is the figure you would need to cover a minimum of six months without an income. Yet only around 25% of all Americans have such financial security and these tend to be higher wage earners in the 50-60 years age bracket.

In today’s economic climate, it can on the surface seem hard, if not impossible, to find the money to save. Many households are experiencing increasing levels of debt instead.

According to published statistics, Americans have just under £118,000 dollars of debt per household. The combined personal debt of all Americans reaches a staggering $2 trillion dollars.

Savings are essentially an emergency fund for when the unthinkable happens. We all like to imagine we live in a certain world, but illness and unemployment can affect anyone.

Warnings and forecasts of a ‘double dip’ recession are hopefully nothing more than a worst case scenario, but those with savings have a greater piece of mind.

How would you cope in such challenging circumstances? For many people, that can be a frightening thought. However, it does not have to be, because you can easily take action to create a safety net.

Take a long, hard look at your income and outgoings. What could you honestly live without each month? A treat meal or night on the town, or perhaps the latest gadget or game?

If you can save even a small amount each month, the dollars will quickly add up. $50 dollars per month multiplied by twelve months is $600 dollars per year to invest.

It may not sound much but once you start saving, you will find that the great feelings it creates become addictive! Soon you will be happily contributing more each month to your emergency fund.

After all, this is the basis of the American Dream, to rise up against adversity and carve out your own road to freedom and success.

There is no greater freedom than financial freedom that comes from you yourself making the effort necessary, as the odds of winning the lottery are narrower than getting struck by lightning!

People who create better financial circumstances for themselves and their families gain much more than an emergency money fund. They gain a peace of mind and feeling of accomplishment too. Create your destiny now.

Financial planning tips for working aborad this summer

Many students opt to take jobs abroad for the summer holidays, or their gap year after college. It’s a great way to earn money, broaden horizons, have fun and experience a new culture.

At the same time, however, working abroad in a foreign country for the first time, managing a new culture and keeping a reign on your finances can be difficult.

Common problems include failing to budget, failing to accurately translate prices into UK pounds mentally when purchasing items, relying on expensive balance transfers rather than setting up an international bank account and withdrawing regular small sums from a UK account from foreign cash points.

It can be tempting to keep a UK bank or checking account when heading abroad, but your new employer will pay you in the local currency and regular small amount exchanges will attract costly fees. Of course, if your are an insurance agent in Charlotte, an overseas checking account may not be of much use.

Furthermore, carrying out regular transfers from UK pounds to local currency will erode your valuable earnings through fees and commissions.

This is particularly prevalent when using cash points, debit cards at certain outlets, or changing money at exchange bureau with high rates of commission.

So firstly, sort out a local currency account with a local bank in your country of summer employment. You’ll need your passport, residential identification and proof of employment.

Arrange to have your wages paid into this account, get your head around the exchange rate and begin operating and managing your summer in the local currency.

Secondly, make sure you have adequate insurance set up before you go abroad. If you get sick or hurt at work, how will you be covered? Have your paperwork in a safe place, with photocopies and key details backed up elsewhere just in case.

Thirdly, avoid using your mobile phone to call home. Get a local SIM card to your summer home or an international calling card, which will make significant cost savings on your calls. Similarly, look for free WiFi areas, use internet cafes or get local data SIMs before using a UK laptop or mobile abroad for the internet.

Get used to cooking the local food and experiment. Ask for recommendations and find the local supermarket as eating out will rapidly eat into your wages!

Find ways to socialise without spending a fortune. If your objective is to save money beyond your summer stay, this is especially important, as it’s easy to drink away your wages.

Join a football team, or an evening running group. Go on Twitter or Meet Up and find interest groups in the area. Speak to colleagues for ideas, especially if community is a strong theme. Meet new people in the town squares, at Sunday sports events, at house parties and dinners. Just avoid expensive bars every night.

Also, try to learn the local language – until then you will really be a stranger in your host country. At least show willing to picking up a few phrases here and there to dispel the myth that foreigners don’t make the effort.

Finally, enjoy the experience! Get your daily finances in place – and ideally book a return ticket home while funds are high – and then make the most of your summer working holiday. Meet new people, get on a bike and see new sights, experience new tastes, sounds, scents – and come home all the better for the broadening experience.

Quick Budget

If you’ve never had to budget before it can sometimes seem like an overwhelming task. There are all kinds of elaborate methods to create very exact budgets that track everything. For most of us, this is probably overkill and prevents us from getting to the task of actually saving money. To get started today you can do something very simple. Take all of your absolute necessary expenses. We’ll call these our fixed expenses. These are the things that we can’t stop paying without making some major life changes.

Examples, include

Mortgage $1,000
Babysitting $500
Utilities $250

The next step is to list out your monthly income

Salary $3,000
Spouse Salary $2,000

Next you will need to think about how much you would like to save. You’ll need a cash buffer and to save for retirement. You may want to think about other goals such as your next car and whether or not you will save for your kids college education. This is the whole idea of pay yourself first. It represents a way to make sure you put your savings goal first.

The difference is then the amount you can spend on all the other things.
Obviously, you need to think about groceries, gas and everything else that you need day to day. I purposefully lump all of these items into one big general fund. Because they involve a large range of trade offs that you will need to think about. This is the opportunity to get creative.

You can think about what you truly value and use to make your life fulfilling. Personally, there is no way I could actually live without Internet access, but I could live without my NetFlix account. To save on gas I started carpooling and got a special fuel perks card. If I really want some purchase that I can’t afford perhaps I’ll find some coupons or cut back in other spots.

A great one we have started is cooking with our kids. We save money by not going out and our kids really enjoy it. I’m sure you can think of similar examples to help you cut back spending, but still enjoy life.

A Case for Cash

I’ve heard financial planning experts talk about cutting up credit cards and telling people to use a cash based system to manage their finances. I’ve typically thought didn’t apply to me. I always paid off my balance every month and had an excellent credit score. Recently, I wanted to tighten down how much my family spends on various purchases. We’ve always used credit cards for every day purchases, but the credit card bill tended to fluctuate every month based on the families desires. I’ve tried various mechanisms for tracking. I’ve said that we’re only going to spend X dollars a day etc. It seems there was always some special 1 time event or purchase that ended up on the card.

The problem is that the mental accounting the family had to do to stay on track just wasn’t working. Instead we switched to a complete cash based system. Each family member was given an envelope with a certain amount of cash for everything. If my wife finds bargains at the grocery store she can have a little extra the next time she goes to the beauty salon. If she decides she has to have that certain something at the grocery store and doesn’t have enough money for the salon then she will just have to live with a few of the grey hairs a little longer before her next color treatment.

After using the system for a month it has worked well for us and allowed us to stay on budget.

30 Year Fixed Hovers around 5%

If you don’t currently own your the place you live in you may be missing out on one of the greatest opportunities in your life. Most of us are well aware that it is a buyers market and that homes are being sold dirt cheap. The other opportunity is the incredibly low prices on 30 year fixed mortgages. The last time they were even close was March of 2004 at 5.45%. If you look at the charts since 1971 this has rarely happenned and could truly be a once in a lifetime opportunity to have a low monthly payment on a loan. Even if you already have a home loan your payback period to refinance could be less than 2 years. The reason for that is you typically have to pay some fees to refinance your home. Let’s say you save $100 a month in mortgage payments by refinancing, but the fee is $2,400. Even with the lower payment it will take you 2 years to make up for the difference. If you plan on staying in your current home for more than 2 years it should certainly be considered. Over the next 30 years you would save $36,000.

$100 Homes

Last night 20/20 featured an interesting segment on homes in foreclosure. They interviewed some urban pioneers in Michigan who are rebuilding an entire neighborhood one house at a time. The homes sold for $100-$500. They were in terrible shape. Most of them were either burned and partially destroyed. While it will probably take 10’s of thousands to repair them and the area is awful the pioneers were doing something very interesting. They were building a community. Instead of trying to go it alone they found other people that wanted to renovate this area. One by one they began attracting friends and family to come join them in their quest to rebuild this area.

I have no doubt that in ten years this will be some cool, hip part of Detroit that everyone wants to visit. An interesting example of creativity during a tough patch in our economy.

Break up with Your Money

By Dr. Bonnie Eaker Weil

As we face an economic downturn unlike most of us have ever seen, what I call “breaking up” with your money can be an important step for your financial well-being, for your relationship, and for your sanity. We never know what the future may hold – things may start to get a lot better, or they may get worse – but creating healthy relationships with your finances and budget is something that will pay off no matter what type of financial situation we face as a nation or you face as an individual or couple.

The first step is to realize the areas in your relationship where money has “intruded” to create what i call a triangle. I discuss these areas in more detail in my book, Financial Infidelity, but here are some possible triangles, and how you can break up these patterns!

1. Family/Money/Relationship: Family legacies of money behaviors are not always contained in our subconscious minds – they can be very real! Demands of extended family members for financial support can be one way in which money can encroach and put a strain on a couples finances AND on their relationship.
2. Children/Money/Relationship: Nearly 70% of couples experience relationship stress after having kids. When a couple becomes contentious over spending on their children, the couple’s relationship can suffer – as can the family’s relationship.
3. Spending (or saving)/Money/Relationship: This can be a case of “opposites attract” in the extreme: the relationship then becomes at risk for damaging power struggles, sneaky “pay back,” and other deceit.

Hiding or denying the role money has in your life and in your relationship – as in any of the scenarios above, or other scenarios – has a toxic affect on a relationship. These types of “triangle” behaviors negatively influences your relationship with your partner. You may not think of it as cheating, but if you continue in this type of lop-sided relationship, it will take a toll. Attachment to your money can often ruin chances for you and your partner to build an intimate relationship.

Learning to prioritize the role of money in your relationship is an important step toward a healthy dynamic between your, your partner, and your money. I’ve come up with several ways to do this – here is one such exercise:

Withdrawals and Deposits:

Day 1: pretend you have suddenly been forced into bankruptcy. You are poor and have nothing – no money, no investments. Take your negative fantasies into the extreme – imagine yourself selling everything you have, being free of all your material goods.

Day 2: Visualize yourself with plenty of money, and all that entails. You are comfortable and able to do the things that are truly important to you.

Day 3 – and forever after: be consciously grateful. Each day, count the things you are grateful for.

Dr. Bonnie Eaker Weil has been an internationally acclaimed relationship therapist for thirty years. New York magazine named her one of the city’s top therapists and Psychology Today named her one of America’s best therapists. Her most recent book, Financial Infidelity, is available on Amazon.

Money Market Accounts – Safety and Liquidity

With the economy in such poor shape, it is no surprise that people are looking for ways to maximize their return without sacrificing the liquidity or security they desire. Investing in risky stocks is not what a lot of American’s want to do with their money. But letting the money sit in a checking account losing value is not the best choice. Thankfully, online banking offers plenty of opportunities to move your money into accounts that not only offer convenience and security, but also a risk-free way to grow your money.
Money Market accounts are just one way to put your money to use. Money Market accounts are a cross between checking and savings accounts. They allow customers greater access to their money than a savings account while still allowing customers to earn interest on it.
M&T Online Banking has a new e-Money Market Account allows you to do just that. With 1.15% APY, your money can grow without the hassle of a CD. To sweeten the deal, there is no minimum balance and no monthly fees.
Opening an account is easy and can be done securely online. Although you have to open an account online to receive their special APY, you can call and talk to a representative or stop into any one of their over 650 branch locations for service once the account is open.
With the economy in recession and your new Money Market account just a click away, there is no excuse not to maximize your money’s potential!

How old are you in credit years?

I came across this fun credit quiz that will tell you your credit age. It takes about 2 minutes to take the quiz. At the end you will get your credit age and a description of your credit self.

I’m interested to hear how many of you are credit newbies versus connoisseurs. You can leave a comment and let everyone know how you did. I would be interested to hear if any of you seemed to struggle on a particular section of the quiz or were troubled. I know personally, I pay off my credit card every month but the amount of credit on the card I use is high relative to my credit limit. I didn’t realize, but this can actually be viewed as a negative.

Oh, and by the way my credit age was also 47. In this case I am assuming that older is better, but I’m not really sure. I had my cousin take the quiz and she failed miserably. I think that explains a lot. This is the same woman who collects tons of longaberger baskets and complains about not having any money. Hmm, I don’t know what could be the problem.

Anyway, here is the link to the quiz Credit Quiz. Don’t forget to tell everyone how you did.

How Living Cheap, Looking Rich Can Help Your Personal Finance and Career in Recession

Live Cheap, Look RichLiving below your means doesn’t seem a desirable decision to survive today’s recession.

There are better ways, and although living below your means are the next logical step when you are in financial strain, your sense of achievement must be maintained.

Why is that?

In order to keep yourself on track in navigating through the economic storm, you need to stay focus. Staying focus can be achieved through the fulfillment of your need for achievement – and living below your mean is not the way to fulfill yours.

Live cheap, look rich

Living cheap is not living below your means. Living cheap means living within a closely controlled budget to achieve the living standard that anybody else has on a higher budget.

The main idea of living cheap, looking rich is to aim to get the best deal in every way, including clothing, entertainment, etc. in such a way that nobody would know that you spend less for the look you have right now.

‘Look’ here is not only clothing, accessories, or any other apparel and fashion related products – ‘look’ is your lifestyle, in a standard that can’t be achieved by living below your means.

‘Look’ is going to Starbucks occasionally, and socialise with your friends and colleagues. ‘Look’ is how people perceive of you, no matter you achieve ‘it’ by bootstrapping. You shouldn’t overdo them, though.

The key in living cheap is total control of your budget.

Why living cheap, looking rich is smart

We live in a society that value physical appearance, lifestyle and charisma. Enhancing yours will actually help you land better job, secure more business, or socialise with more people (which can present you with more opportunities) – all in all will affect your bottom line: your personal finance, in a positive way.

You deal with people, and most of them don’t really care how much you make – what they care is what they see, and how they preceive of you. For example, in a meeting with business prospect, you need a professional look that commands confidence, charisma, and trustworthy. You don’t want to meet your future client in your t-shirt, don’t you.

How to live cheap, look rich

There are ways you can consider to live cheap but look rich:

  • If you are into fashion and business as well, purchase your clothing needs with a wholesaler. While hard to find, wholesale clothes can save you a lot of money. The problem is, they usually only allow you to buy in bulk (usually in half-dozen or dozen).
  • Alternatively, you can shop in consignment and/or discount stores.
  • Shop for everything on the web – groceries, clothing, accessories, electronics, travel deals, etc. You can always receive a lower price for the same item you want.
  • Attend charity events and/or be volunteer. Charity events – the large one – are where socialites and celebrities. Attending the events, as an attendee or a volunteer will help you raise your profile.
  • Purchase used car – no body is really care how much you pay for the car, as long as its condition is top-notch.

Remember, don’t live below your means – Live cheap, look rich. That is good for your economics and, in effect, your personal finance endeavour.

Image by net_efekt.

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