Get All The Support And Guidance You Need To Permanently Get Your Budgeting Under Control. This Book Is One Of The Most Valuable Resources In The World When It Comes To Ways To Learn How To Better Your Finances By Budgeting! Most people are weary of budgeting due to the wrong perception that budgeting would mean having to stop spending on non essentials and concentrating only on essentials.
After you understand the basic concepts and know where to buy the best financial products when you need them, you'll soon see that managing personal finances well is not much more difficult than other things you do regularly, like tying your shoelaces and getting to work each day. Regardless of your income, you can make your dollars stretch further if you practice good financial habits and avoid mistakes. In fact, the lower your income, the more important it is that you make the most of your income and savings (because you don't have the luxury of falling back on your next fat paycheck to bail you out). Personal finance involves much more than managing and investing money. It also includes making all the pieces of your financial life fit together it means lifting yourself out of financial illiteracy. Like planning a vacation, managing your personal finances means forming a plan for making the best use of your limited time and dollars. Knowing the right answers isn't enough. You have...
If you believe that you could keep your finances organized with just a little direction and better systems, you've come to the right place. This book is meant for readers who Have moderately complicated personal finances (multiple accounts, investments, credit cards, insurance policies, and the like)
You have in your hands an entire book of projects for organizing your finances, and you want to complete them in as little time and with as little stress as possible. To do that, you must let go of any lingering fear, doubt, or self-recrimination you might be harboring about your abilities in this area. First, stop blaming yourself if you have trouble getting a mental grip on financial management. The truth is it's not easy financial management is complex, and it takes time, precision, and a lot of attention to detail. Even if you're highly skilled in other areas, organizing and managing finances might be challenging for you that's probably why you purchased this book To get the most from the advice offered here, though, you need to disregard your past failures and commit fully to creating your own solution using the tools, systems, and ideas contained here.
I can't help you with the first three. (Actually, I could motivate you with gum-disease horror stories courtesy of my friend the dental hygienist, but I won't.) However, backing up computer files becomes especially important when you're tracking your entire financial life electronically, so let's give it a shot. At the very least, back up your financial management software from within the program by following its instructions, and make a disk copy of any other documents you use to manage your finances. For example, I use the backup function built in to QuickBooks to create backup copies of my QuickBooks files on floppy disks (see Figure 2.4), and I copy the subdirectories containing my most critical business and personal files onto CDs. It helps that my computer files are organized so I can quickly determine what to copy and what to skip, but that's a whole other book.
And so it goes with your personal finances. If you don't have a system for paying bills on time, you'll incur late charges and possibly damage your credit rating. If you don't keep your financial records up-to-date with regularly scheduled reconciliation times, you'll bounce checks and incur still more fees and ill will from creditors. I believe that awareness is half the battle in all organizing challenges therefore, if you struggle with time management as it relates to your finances, you'll make huge strides toward helping yourself to improve if you become aware of a few things
What do you do when your debt has become truly unmanageable If,despite your best efforts, organizing your finances and creating a budget just aren't going to be enough,you might need to consider a more drastic measure, such as declaring bankruptcy. Information on how to file for bankruptcy is available at www.uscourts.gov bankruptcycourts.html.
For the purpose of organizing your finances, these definitions are quite simple Income is any money you can expect to receive on a regular basis (for example, your take-home pay and child support or alimony payments you receive if they arrive reliably), and debt is anything you are committed to paying (installment loans such as a mortgage, revolving loans such as credit card payments, and child support or alimony that you pay refer to the items you listed in Figure 8.3). Debt does not include expenses such as utilities or groceries these are living expenses not loans. Add up your monthly debt payments, divide by your monthly net income, and you have your debt-to-income ratio.
Many of my clients thought they would never get organized. They thought the little bit we accomplished each week would never be enough. But they kept chipping away, and gradually they began to see a difference. You can, too. You might have a lot of work to do to get your finances into the shape you want, but if you create a budget and start using it today, by this time next year you'll be amazed at how far you've come. Think a year is too long to wait Look at it this way That year is going to pass one way or another why not be better off financially by then
If you want to computerize your finances, you have a lot of software choices so many that you might find it difficult to determine the best one for you. The choice is further complicated by the ongoing revisions and improvements software manufacturers make to their products, meaning that whatever you buy today will probably be reincarnated by next year. You can even split a single transaction across multiple categories (see Figure 2.1). For example, if you spend 22 at the gas station but only 20 was for gas, you can record the purchase as a single transaction and categorize 20 of it as Gas and the other 2 as Snacks or Lottery Tickets, all in one step. You can even separate the sales tax on a purchase if you want to track it separately. Categorizing saves innumerable hours of on-paper analysis and allows you to see the big picture of your bills and spending habits. Online services Some programs can be used in conjunction with online services offered by your bank, such as online...
To keep your finances organized, it is imperative that all financial documents mixed in with the rest of the paper wave somehow are identified, separated, and moved into your financial management system. The best way to make sure nothing slips through the cracks is to formulate a plan for managing not just financial papers, but all papers.
Insurance is an important part of your financial life. Unfortunately, for most people, insurance is a thoroughly overwhelming and dreadfully boring topic. But perhaps I can pique your interest in this esoteric topic by telling you that you're probably paying more than you should for insurance and that you probably don't have the right coverage for your situation. This part tells you all you ever wanted to know (okay, fine all you never wanted to know but probably should know anyway) about how to buy the right insurance at the best price.
Before you're even ready to start investing in funds, your personal finances need to be in order, so in Part I, I give you some financial house-cleaning tips. You also discover the importance of fitting mutual funds to your financial goals. After your finances are shipshape and you've identified your goals, you are ready to find out how to pick great funds, how to avoid losers, where and how to purchase funds, and how to read all those pesky reports (such as prospectuses and annual reports) that fund companies stuff in your mailbox. Part I touches all these bases.
Personal budget management is about choices. You make choices in your life about how to make money and how to spend it. Some of these are big choices where you work and where you live, for example, or the plans you make for your future. And some are small, like whether to buy a snack for yourself or what to do on a Friday night. Most of us make these choices without understanding how they fit into an overall pattern of income and expenses and without thinking about how they affect our financial well-being. Before you make a budget plan it's helpful to step back and think about the important choices you're making with your life and your money. And it's helpful to think about your goals.
If you don't track where all your money goes, what will happen Over time, the following things will happen you'll wind up in the cold month of January wondering how the heck you spent 2,769 on Christmas presents for the family, you'll know your banker better than you'd like because you'll probably bounce checks all over town as a result of mismanaging your finances, and someday you'll live on a monthly Social Security benefit check of 455 (that's it ) because you piddled all your money down the drain when you were young. Does that scare you It should Budget is a scary word it's too constrictive for some folks. What you need to understand, however, is that everybody needs to have a daily record of where all his or her money goes. Accept it and motivate yourself toward the feeling of accomplishment. The true reward of having a budget is something all Americans want control. Imagine having control over all of your finances. Once you do, you can reach your dreams and financial goals even...
By going through the process of compiling an income statement, you can see where money has been spent and where you need to reduce expenditures, if necessary. The income statement is not only an important tool in helping to understand current spending patterns, it also assists in formulating a budget.
In absolute terms, it is arithmetically possible for volume to increase indefinitely. On the other hand, a growth rate far in excess of the gross domestic product's annual increase is nearly impossible to sustain over any extended period. By definition, a product that experiences higher-than-GDP growth captures a larger percentage of GDP each year. As the numbers get larger, it becomes increasingly difficult to switch consumers' spending patterns to accommodate continued high growth of a particular product.
In reviewing your insurance, you may also discover unnecessary policies or ways to spend less on insurance, freeing up more money to invest in mutual funds. (See my book, Personal Finance For Dummies, 2nd Edition, published by IDG Books Worldwide, Inc., to learn about the right and wrong ways to buy insurance and whip the rest of your finances into shape.)
John and Patty Richardson are the parents of Ryan Richardson and live one town over from their son and his family. John, who has been a sales rep in the industrial equipment business for close to 40 years, is nearing retirement. Patty stayed at home to raise Ryan and his brothers and has enjoyed the perks of working as a travel agent since the boys moved out of the house. Neither John nor Patty has ever kept to a budget on a sustained basis. They did manage to put some money into investments for their retirement, but most of that went into mutual funds that have not performed well for them. Having grown up in the 1940s, John took on the role of financial decision maker in the household. Patty, although more of a saver than John, never felt as though she should voice her concerns about their finances and always took a backseat to her husband when it came to money. John and Patty still take frequent trips and feel that they deserve to splurge on themselves. On top of their spending...
Don't let the spending habits of others dictate yours. Certain people and you know who they are bring out the big spender in you. Do something else rdll with them besides shopping and spending. If you can't find any other activity to share with them, try shopping with limited cash and no credit cards. That way, you can't overspend on impulse.
The Industry Insider database is a compilation of information from trade associations. Trade associations compile data on industry growth trends, consumer spending habits, sales figures, manufacturing capacity, product developments, market share rankings, and demographics. The Industry Insider trade association research collection is the only electronic collection of trade association intelligence available. Chief economists at over 200 trade associations worldwide provide valuable analysis, trends, forecasts, statistics, and economic indicators.
The first method for figuring deductions requires no thinking or calculating. If you have a relatively uncomplicated financial life, taking the so-called standard deduction is generally the better option. (Earning a high income renting your house or apartment and having unusually large expenses from medical bills, moving, charitable contributions, or loss due to theft or catastrophe aren't symptoms of a simple tax life.) Folder or shoe box If you have a simple financial life (that is, you haven't saved receipts throughout the year), you can confine your filing to January and February. During those months, you receive tax summary statements on wages paid by your employer (Form W-2), investment income (Form 1099), and home mortgage interest (Form 1098) in the mail. Label the shoe box or folder with something easy to remember ( 2010 Taxes is a logical choice) and dump these papers and your tax booklet into it. When you're ready to crunch numbers, you'll have everything you need to...
This chapter describes the essential features of a budget and includes a comprehensive example of the preparation of a monthly budget for a small business. Although the focus of this chapter is on budgeting from a business perspective, many of the principles are also applicable to individuals in the planning of their personal finances.
You may decide that it's too much trouble to research mutual funds and plan the rest of your finances. So you'll be tempted to find a financial advisor to relieve you of the burden. Dealing directly with various fund companies or simply selecting funds from among the many offered through a discount brokerage service may seem overwhelming to you.
If you've optimized the structuring of your finances and you have a chunk of money that you're willing to pay as a sales charge to invest in load funds, make sure that you're getting the best funds for your investment dollars. The criteria to use in selecting those load funds are no different from those used to select no-load funds
Now that we have our segmentation and analysis of the clusters, the challenge is to interpret this data and turn it into business decisions. We know we have four distinct groups of customers with different spending habits. From a marketing perspective, we can now target promotions at these groups. Customers who fell into the largest group will get promotions on appliances. The second largest group, which is older, will get furniture catalogs, not sporting goods or exercise equipment. The fourth group will be targeted with sporting goods and entertainment advertisements. This information basically falls out of the segmentation. It is useful for our tactical sales strategy. But what about strategic issues. Have we learned anything about our customer set
If you're like most people, you probably see some opportunities to do things differently when you look over your monthly income and expenses and compare your current situation with your goals. Though the information can be uncomfortable to face, gathering these numbers is an important step in the process of understanding and improving your relationship with money. It took some time and work, and that's an important sign of your commitment to take charge of your finances. Now you have the basic information you need to move forward. If personal budget management were simply a math problem, you'd nearly be done. You'd just identify the parts of the budget that are out of balance and fix them. But our relationships with money are complicated. When we try to address personal money issues we quickly come up against some challenging obstacles.
You can forget about how private you think your personal financial life is. The odds are 450-million-to-l that if you have a credit card, department store account, savings or checking account, auto loan, student loan or mortgage, there's a computer file on you. Everything is in it your job, how much money you make, where you've lived, and how you've paid your bills.
Yet without open communication, agreement on goals, and a well-understood financial plan, money can be a terrible source of conflict in a family and financial health can remain out of reach. If different people contribute to the income of your household and draw on that income through their spending (or through expense-causing activities such as inviting friends over for dinner, adjusting the heat or air conditioning, or making telephone calls), cooperation around the household budget is essential to solving your financial problems. You simply can't do it alone.
Credit cards definitely have a place in your personal financial life, although we know lots of wise people, especially older folks, who make a habit of paying cash, who aren't plagued by one cent of debt. The key to avoiding credit card trouble is to be smart about how you use credit, before you even apply for a card Make up your mind that you're going to be disciplined you're too smart to fall into that plastic trap
Once you've mapped out your current income and spending patterns and focused on your most important financial goals, the next step is to work on a realistic plan to get you from where you are now to where you'd like to be. If your finances are affected by the income or expenses of others, you'll need to work this plan out together. It's a common mistake for one person to impose a budget on a family and it almost never works. If household members with spending power are left out of the planning process, they are likely to ignore or even sabotage the plan. It's your plan, not theirs, and they feel no sense of ownership for its success. Even if opposition isn't deliberate, family members are unlikely to understand just what they're supposed to do to make the imposed budget work, whether it's turning lights off when they leave a room or cutting back on credit card spending. Build a plan together and agree on the specific behavior or actions that will make it succeed.
Although buying and owning your own home can be a wise financial move in the long run, it's a major purchase that can send shock waves through the rest of your personal finances. You'll probably have to take out a 15- to 30-year mortgage to finance your purchase. The home you buy will need HANG Since the first edition of this book was published back in 1994, I have warned that many homeowners run into financial trouble because they don't know their spending needs and priorities or how to budget for them. Some of these owners have trouble curtailing their spending despite the large amount of debt they just incurred in fact, some spend even more for all sorts of furniture and remodeling. Many people prop up spending habits with credit. For this reason, a surprisingly large percentage some studies say about half of people who borrow additional money against their home equity use the funds to pay consumer debts.
Financial life by saving you from writing a check every month to pay your I ffOj credit card bill. On the other hand, you give up the float the free use, until the credit card bill is due, of the money that you owe because debit cards quickly deduct the money owed from your account. Some brokerage accounts come with even more features that make organizing your finances easier, such as unlimited check writing and a bill payment service. These services cost more money at Fidelity, for example, you must put more money into your account ( 10,000 instead of 5,000), pay a 5 monthly service fee, and also pay an annual account fee of 24 if you don't place at least one trade per year.
No one wants to put their spending habits under a spotlight and be told they have to change them. Well, that's not quite what we have in mind, and you'll never read the words, You've gotta go on a budget here. But to help get you out of any debt mess you're in, we first have to convince you that a few basic steps are a must, no matter who you are.
Allow us to loosen the reins on our spending. Too often that means spending money we don't really have. Credit card spending is definitely within your control, and the sooner you begin to change bad credit card spending habits the sooner you'll reach your financial goals.
Understanding hybrid and derivative securities will benefit you in your investment activities. Even more useful is an understanding of leasing, which you may use to finance certain long-lived assets such as housing or cars. Knowing how to analyze and compare leasing to the alternative of purchasing should help you to better manage your personal finances.
Choosing a person or persons to take over your finances is something to do far in advance, while you're still capable of making those decisions. Once a helper has been chosen, they should be fully informed of your financial situation, including any insurance policies and far-flung business arrangements that you may have entered into. An understanding of your estate plan is also critical, and especially important is the location of your wills, trusts, and other important documents.
Another departure from principle is the fact that about 14 of households are left out when expenditure weights are calculated. These consist of most pensioner households (10 ) and the very rich (4 ), because they tend to have significantly different spending patterns from the rest of the population and their inclusion would make the index too unrepresentative. A separate RPI is calculated for pensioners, while the very rich have to do without one.
M iring a competent and ethical financial planner or advisor to help you make and implement financial decisions can be money well spent. But if you pick a poor advisor or someone who really isn't a financial planner but a salesperson in disguise, your financial situation can get worse instead of better. So before I talk about the different types of help to hire, I discuss the options you have for directing the management of your personal finances.
One exception is the accountant who also performs some basic financial planning by the hour. Likewise, a good financial advisor should have a solid grounding in the basic tax and legal issues that relate to your personal finances. Large firms may have specialists available in different areas.
Lthough a computer may be able to assist you with your personal finances, it simply represents one of many tools. Computers are best for performing routine tasks (such as processing lots of bills or performing many calculations) quickly and for aiding you with research. This chapter gives you an overview of how to use software and cyberspace as you work with your finances. I tell you how to use this technology to pay your bills, prepare taxes, research investments, plan for retirement, trade securities, buy insurance, and plan your estate, and I direct you to the best software and Web sites.
Question You've asked Phyllis, the CFO, for a report on how much money your department has to run its operation over the next 120 days. She says that all depends on your spending patterns and asks you what type of document you need for your evaluations. What answer do you give her
If you just graduated from college or some other program, or you're otherwise entering the workforce, your increased income and reduction in educational expenses are probably a welcome relief. You'd think, then, that more young adults would be able to avoid financial trouble and challenges. But they face these challenges largely because of poor financial habits picked up at home or from the world at large. Here's how to get on the path to financial success
Track all of your investments from Mportfolio , so that you can see the big picture from one summary page. As an integral part of your Mvelopes Personal budgeting system, you can customize Mportfolio to access and track all of your investment accounts, such as IRAs, 401(k)s, and mutual funds. This summary page allows you to see your complete financial picture in one quick snapshot, rather than surfing around to several different sites to see the balances in all your varying accounts. (See Figure A.6.) Should you want to make changes to an account, you can simply click on that account to access the screen where you can make the appropriate adjustments.
Locking yourself into higher monthly payments with a 15-year mortgage comes with a risk. If money gets too tight in the future, you can fall behind in your mortgage payments. You may be able to refinance your way out of the predicament, but you can't count on it. If your finances worsen or your property declines in value, you may have trouble qualifying for a refinance.
Many of us have impulses to have fun now and to avoid difficult choices or conflict. Many of us also want to be generous, plan for the future, and take care of the people we love. The more aware you are of these often conflicting impulses and values, the easier it will be to take charge of your personal finances.
In terms of the composition of public sector income and expenditure it can be noted that there are differences in the details between countries. However there is common reliance on similar tax instruments and spending patterns are not all that dissimilar. It is these commonalities that make the ideas and concepts of public economics so broadly applicable.
Many of the principles of managerial finance apply to your personal life to making purchase and sale transactions, borrowing money, and saving and investing to achieve financial goals. These actions require you to interact with financial institutions and markets.-You also need to consider the impact of taxes on your financial plans. Learning the basics of managerial finance can help you manage your personal finances effectively.
The Bureau of Labor Statistics (BLS) publishes CPI data monthly. BLS workers collect price data on a set market basket of goods and services in selected cities across the country each month. The market basket includes hundreds of goods and services typically purchased by consumers. The price data is then weighted to represent the mix of goods and services typically purchased by consumers. The mix of goods and services and the weights are based on the Consumer Expenditure Survey, a national survey of the spending habits of 29,000 families (BLS, How BLS Measures''). The decennial census of the population is used for selection of the urban areas included in the monthly surveys.
Identify your Personal Spending Habits. Now that you have determined exactly how you want to spend your money and you've designed your plan for achieving your financial goals, this section will help you identify all your sources of income and find ways to get the most out of the money that you make. It will help you identify past and present spending patterns and find where the leaks are in your budget. Then you will develop a workable spending plan. You will find it both interesting and helpful to do some of the exercises which will help you work through this process. This lesson contains many exercises that will help you develop the daily spending skills you need so you can stick with your financial plan. Using the exercises, you can look at the past to get a better understanding of the way you used to spend your money. Using the tracking methods described later in this lesson, you will get a better understanding of your present (current) spending habits. This will help you answer...
Lack of awareness of tax matters through ignorance or improper planning techniques is a major factor that determines the quality of your financial life during retirement. Later examples will illustrate dramatically the difference between knowing and implementing just one or two of the various tax reduction strategies.
Adam Smith's approach to resource allocation via the free market may well be the most efficient from an economics perspective, but not necessarily from the perspective of politicians who have extensive non-economic agendas. In a totally free market, some get rich and some get poor. It all depends on your natural endowments, your investment in skills, your saving and spending patterns, your entrepreneurship and ingenuity, your level of effort, and your luck. It's all up to you.
The do-nothing approach has a large following (and you thought you were alone ). People who fall into this category may be leading exciting, interesting lives and are therefore too busy to attend to something as mundane as dealing with their personal finances. Or they may be leading mundane existences but are too busy fantasizing about more-appealing ways to spend their time.
The idea that you're going to spend endless hours on your finances if you direct them yourself is a myth. The hardest part of managing money for most people is catching up on things that they should have done previously. After you get things in order, which you can easily do with this book as your companion, you shouldn't have to spend more than an hour or two working on your personal finances every few months (unless a major issue, like a real estate purchase, comes up).
If you have serious debt problems, a credit counselor may be able to help you get your finances in order while negotiating for you with creditors and collection agencies to arrange a manageable repayment schedule. By taking the step of working with a credit counselor, you send a clear signal to creditors that you're taking your financial situation seriously and that you're trying hard to set things straight.
The most important reason to manage your money is to get control. It goes beyond you and your pocketbook or your wallet. Acquiring control over your personal finances can change your future. But in order to get control, you must make the first big decision getting started
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