Monthly Archives: December 2016

The 3 Simple Rules of Personal Finance

Personal Finance seems to be one of those subjects where there is as much nonsense written as good advice. There is a thin line between giving financial direction and promoting the next get rich quick scheme. You’ll hear about this 10 point plan or these 7 habits but if you want to get right to the heart of it, there are only 3 rules you need to follow in order to make sure you finish rich. Granted these three rules will not make you into Donald Trump over night but living by them will ensure you are ahead of 80% of the population.

1. Spend less than you earn.

If your money is running out long before your next pay is due at the end of the month then you have a problem. You need to start recording what you are spending and then cutback. Everyone has some slack in their monthly expenses – we loosely term it “the Latte Factor”. Find these indulgences and cut them out. You don’t need to go in with a scythe and switch back to the Stone Age lifestyle. You only need to make sure that you live within your means. If you are clearing £1000 a month then doesn’t drive a Jag – stick to an old Corsa! Charles Dickens put it best in David Copperfield, “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

2. Put 10% of everything you make into the bank

The Steady Drip will always fill the bucket. Many a mickle maks a muckle. However you want to put it, everyone knows that small amounts soon add up over time. The best way of describing why you should place 10% of your salary into a savings fund was written down many years ago in the book “The Richest Man in Babylon” by George S Clason: “Now I will tell a strange truth, the reason for which I know not. When I ceased to pay out more than nine tenths of my earnings, I managed to get along just as well. I was not shorter than before. Also, ere long, did coins come to me more easily than before. Surely it is a law of the Gods that unto him that keepeth and spendeth not a certain part of all his earnings, shall gold come more easily. Likewise, him whose purse is empty does gold avoid. Which desireth thou the most? Is it the gratification of thy desires each day, a jewel, a bit of finery, better raiment, more food; things quickly gone and forgotten? Or is it substantial belongings, gold, lands, herds, merchandise, income-bringing investments? The coins thou takest from thy purse bring the first. The coins thou leavest within it will bring the latter.”

3. Don’t miss payments

By missing payments you do not only leave yourself open to missed payment fees but you will also ruin your credit record. Just one missed payment leaves a blot on your record that can take a long, long time to come off.

Having missed payments on your credit record means that you are less likely to get the best rates that banks have available. Your mortgage will suddenly be £600 a month instead of £550 a month. Your car loan will be £109 instead of £92. This might not mean a lot over a single month but when you multiply these extra costs over a 3year or 25year period then you suddenly begin to see how much you can get punished for a really small error. Jealously guard your credit report to ensure this doesn’t happen to you.

By following these simple rules you’ll never know the feeling of the bank charging you £30 for going over your overdraft limit; you’ll never go to take money from the bank only to be told you have insufficient funds; you’ll never be repossessed; you’ll never have endless sleepless nights worrying about money; you’ll be able to buy the items you desire with cash rather than having to take out expensive credit agreements.

The Importance of Personal Finance

There are very few people who will say that shared ownership mortgages – or any types of mortgages, for that matter – are among their primary interests. The average American today doesn’t like financial topics very much. There’s a reason for this: as you might know, financial topics tend to be boring. By that I mean they are dry and there are no easy ways to learn them, as for example with food. Many people are interested in food because it is much easier to understand. There are things like the food pyramid or other categorizations of food that make it easier for us to understand what it’s all about.

In addition to that, financial topics aren’t taught in schools. Many financial experts argue that this should be the case because many people have trouble with their money. If you don’t believe, look up the statistics on national credit card debt.

But it is certainly worth the while to get educated on financial topics such as mortgages or insurance. You should also make sure to know how your credit card works. If you value financial security, reading up on this topics is a very important step in the right direction. You don’t need to know specific things like the exact way a tracker mortgage works or the standard car insurance rate in America or anything of that sort. You just need to know the fundamentals. Luckily there are some excellent resources on the internet that will teach you everything you need to know about personal finance in a way that is easy to understand to everyone.

5 Action-Ideas To Manage Your Personal Finance

It’s unbelievable that schools does not teach us everything that we have to know but left out one important subject, that is Personal Finance Management. No wonder we see rising cases of people with bad debts and bad credit.

Here are 5 ideas to better manage your personal finance.

Build a savings account

Your money is something that you work very hard for. If you want to build a savings account for yourself, and for your family, you can do it – but perhaps a little slower than you might like. You can get started by saving all the change you get from shopping at the grocery store, from the gas station and from anywhere else you might go. Putting all this change into a container, you can then fill the container, day by day. As the container is full, roll the coins and deposit this money into your new savings account. You might be surprised, but in just two weeks it is possible you saved twenty dollars, or even one hundred dollars. Your savings account will grow, and you will be managing your money at the same time!

Paying bills on time

Paying your bills on time is going to be a something you need to make a habit for your entire life. Your credit report, your credit rating and your personal credit worthiness is going to depend on how often you are on time when paying your bills. Paying your bills on time is important for a solid financial future. As you pay bills on time, you are less likely to pay higher interest rates, you are not going to pay late fees, and you will build a good credit rating at the same time. To pay your bills on time, all the time, use a system that will have all your bills put into a pile in the same place. Put the bills that are due first on the top of the pile. Put the bills that are due at the end of the month in the bottom of the pile. Look at the pile every day, or at very least every other day. When you have the money, pay the bill on the top of the pile and work your way through all the bills for the month, and then you can start on the bills for next month!

Building good credit

To build good credit you want to pay your bills on time, and avoid paying those higher interest rates. If you have good credit, you want to keep it. What some people do not realize is that you can hurt your credit if you are moving often. Moving every month, moving every year, and moving more than needed it going to lower your credit score. If you live in the same house, the same apartment for over five years this is going to help your credit. Avoid moving when possible. Get a copy of your credit report; review the addresses that are listed for you. Remove addresses that are not applicable to where you have lived in the past.

Use coupons and save money

If you are not using coupons now, you should be. With the price of everything going up, and up, you need to learn to make your money ‘go further’. To make your money last longer, and to get more for your money seek out coupons for the goods and services that you always purchase. The secret to using coupons is this: don’t use, clip or keep coupons for items that you don’t usually use in your home. Coupons are enticing to get you to try other items, and sometimes can cost you even more money. Clip coupons from the Sunday paper, from the Internet online coupon sites, and look for coupons on the products you already purchase. This is going to give you the best savings possible, stretching out the money you have, and that you want to make last much longer for your household budget.

Money management involves working for a living

Money management is a budgetary thing, meaning you need to know how much money you have, and how much money you can spend. If you are spending more money than you are earning, you are most likely relying on your credit cards just way too much. If you are relying on your credit cards, your payments are going up and you will never pay off those credit cards. Money management involves your earning money, and spending the money you earn, and not more than that. If you need more money in your home budget, you can do a few things: get a new job with better pay, ask for a raise, get a second job, or build a business of your own. Relying on others for handouts, making minimums payments on credit cards you can’t afford, and living beyond your means is only going to come back to cause you trouble later in life.