Friday, June 28, 2013

To Give Or Not To Give: Credit Cards And College Kids

When your kid is about to go to college, you need to prepare them for a lot of changes and responsibilities. They will be living on their own while getting a higher education and you need to equip them with the right knowledge and skills that will teach them how to be mature adults.

One of the hardest lessons to teach is financial management. Even parents still have a lot to learn about it. The average American household is burdened with debt and you want to make sure that the future household of your child will not be part of this statistic. But to teach them how to avoid debt, you have to dangle in front of them the temptation of debt. And what better debt temptation is there than credit cards.

These plastic cards are one of the things that you have to entrust to your child before they go away to college. They need this to help finance their daily expenses and to help them build a good credit reputation. Some parents, especially those who are struggling with credit card debt themselves may be hesitant to pass on this problem to their child. However, if you do not let your children make their own mistakes, they will never learn the lessons that will make them stronger in the future.

Credit cards are the perfect way to teach your kids about proper financial management. It’s actually all about establishing rules about credit cards.

One of the important rules include who gets to pay for the card. This has to be very clear. You can ask your child to get a part time job to pay for the credit card. Or you can tell them that the payment should come from the allowance that will be coming from you every month. Teach them how to create a budget so they can learn how to live within their means. Make sure to teach them that basics of budgeting before they move away to college.

You also have two options in issuing credit cards. One is to co-sign it with your child and the other is to let them own the card themselves. Again, whatever you decide, make sure your child understands that any purchase on those cards will be on their tab. Be firm about not bailing them out if they rack up a huge debt in their cards.

Before you issue the credit card, make sure the following points are clear:

1. Purchases made on credit card uses the money of the credit card company - not your own. They need to pay it back.
2. Credit card companies are not patient when it comes to payments. The have to pay them at least the minimum amount and pay them on time.
3. Late penalty charges and interest rates are a waste of money so try not to add this to the balance. Learn about the billing cycle and the grace period to avoid incurring both.
4. Credit scores can be greatly affected by credit card use.

Trust your children when it comes to their financial decisions so that means you have to maintain a respectable distance. Do not make the decisions for them but make sure you are still near enough to remind them of how to make the right choices.

Of course, the best teacher is one who lives by what they teach. You cannot force your child to practice wise financial management if you do not implement it in your life.

Monday, June 24, 2013

Debt Traps That You Should Avoid

There are many causes for your debts and most of them come from your own decisions. However, there are subtle hints that are coming from your own circle and society in general that contribute to the wrong decisions that you make in your life.

Consumerism is rooted deep into our system that you need to be very careful about the suggestions that you receive from your environment. Though most of them mean well, they can actually be considered as debt traps that can give you quite a problem in the future.

One of the obvious debt traps that you should be wary of are advertisements. Remember that corporations spend millions on their marketing campaigns. They design every detail to encourage you to spend your money on them. Be very careful when you get the urge to buy something after seeing an advertisement dedicated to it.

Sale events and product promotions are also something that you have to filter when you are deciding to buy something. If you do not need it, no discount can be considered as savings. Despite the smaller expense, it will still be a waste of your money simply because you do not need it. Make that a rule in your spending. If you do not need it and if you cannot afford it, do not buy it. Even if you have the money to spend, just put it in your savings or invest it in something else that will make it grow. That the how you make wise spending choices.

Suggestions from the people close to you can also be considered as debt traps. We all want to give everything to our children but you have to keep your budget in mind. It is better to save for their college fund instead of buying them another high tech car when they have trunk loads at home. It is better to let them wear hand me downs when you know that they will outgrow the clothing in a month or two. It is not really about being frugal. It is knowing where your money is best spent on to benefit your future. You are not really depriving yourself or making yourself go hungry.

It is important for you to understand that making smarter spending choices now will keep you in debt through your savings. Instead of making all those unnecessary purchases, deciding to put them in your savings account will help you finance any emergency need in the future.

Always consider your own personal needs before you decide to purchase something. As mentioned, most of the suggestions may mean well but if you cannot afford it, that can lead to a financial disaster. If you are battling with it, give yourself some time. A need to buy something usually goes away if it is just fueled by hype. But if there is a real need for it, time will not quench the thirst of acquiring it. A couple of days should be enough time for smaller purchases but for expensive ones, give yourself a month to think it over.

Thursday, June 20, 2013

How To Put Your Personal Finances In Order

Debt stems from the fact that you have been unable to put your finances in order. That is true even if the primary reason for your debt is a current illness that is digging deep into your monthly salary. If you had been good at practicing the right personal financial management, you should have savings to finance that emergency situation. You should not have been put in a position that requires you to borrow money. The same is true if your debt was a result of a job loss.

So the simple solution to your money problems is actually just a better financial management on your part. But the question is, how can you do that. Debt requires you to change something in your life and that will depend on the gravity of your problem. To help you out, here are four important concepts that you should think about adapting in your life.

Financial goals. If you really want to improve the financial aspect of your life, you want to set up goals for yourself. This is a good motivator and will push you even as you go through the tough times in your financial life. You will be besieged with spending temptations always and your goals will help keep you from straying. You can aim for bigger savings to buy a home or put up a business. Or you can aim for a debt free life in 5 years. These are goals that you can set your eyes on for your future self.

Monitor your spending. It is also important that you monitor where your money goes. This is one of the biggest culprits in putting your finances in complete disaster. See where every penny is spent on. If you have to write down the details, you may have to put yourself through the tedious task. This is a great way for you to define the problem in your finances. Are you spending too much on entertainment? You need to cut back on that a bit. Do you have too many subscriptions? You may have to consider terminating some of them. Or are your credit card payments taking up most of your extra money? You could put yourself through a debt relief program to help pay it all down.

Set up a budget. Once you have identified the problem, you need to make sure that you will not put yourself further in debt. This requires you to create a budget that will tell you where every penny should go to. The technique to keep yourself from falling short is to place your net income - not the gross. Identify your priority expenses and ensure that they are all funded. Align your budget so it supports your financial goals. For instance, if your goal is to boost your savings, put that in your budget. As soon as you receive your income, you can remove it off the top so you won’t miss it.

Track your net worth. You have to know your personal net worth so you can see your progress. This figure is the sum of your cash and the value of your personal assets against any debt that you owe. If your net worth is growing, you know that you are on the right track when it comes to your personal finances. If it is steadily going down, then you know that something is wrong and you have to fix that.

As you organize your finances, you will begin to develop the right financial management skills like budgeting, saving, smarter spending and the other habits that will help you live within your means.

Saturday, June 15, 2013

How To Make Saving Fun And Effective

Of all the money advice that you will get in your life, there is nothing more important than saving. However, some people find it hard to save and that is because they think it restricts the fun activities in their lives. Most of the time, when your resources are limited and yet you are required to boost your savings, the first that has to be cut back on are your entertainment expenses. This is why people make a lot of excuses to put off spending - especially the young ones. They think that it is too early to save and that they have a more than enough time before they really need to start on it.

In light of the recent economic events and the evident problems of the baby boomers, you know that this mentality has to go. It is not that you should not enjoy your life. It is more of not making your future suffer just so you can enjoy today.

What you need is to find a balance. Saving is a must - no excuses about it. If you think that you cannot give up on fun activities, then the solution is to make saving fun.

One way to make it fun is to make it into a competition. Get a competitive friend or family member to join in. It pays to invite someone who needs to save just as much a you. That should make it very interesting. Set a time frame for the saving game and see who can save the most. It can be a percentage of your salary or a specific amount? Feel free to set the rules and the reward. Just make sure that the reward is not too big or too small. Giving an expensive prize may defeat the purpose of savings if you will splurge. Remember, there are inexpensive gifts that still has a big value. For instance, you can offer to mow their lawn or something similar. Just make sure that it is something that the participants consider valuable enough to make them want to do their best.

And it doesn’t always have to be who has the biggest savings. It can be something more general like who has the biggest net worth. It amounts to the same thing because your net worth means more savings and less debt. Or it can be a simple “how much money can be added to your bank account?” Take note of the figures at the beginning of the competition and see how much can be added within the agreed time frame.

You can also involve your kids and come up with a game as to who can come up with the funniest or most unusual ways to save. Getting the whole family in on the effort could prove to be beneficial to your savings account.

Or, it doesn’t have to be a competition at all. Set up a savings meter in the house and put markers along the way with corresponding rewards. For instance, when you have saved up $1,000, the whole family gets to drive to the beach. Or when you have reached the $10,000 mark, everyone gets to buy something new. Again, make sure the rewards are not too expensive so you don’t eat too much of your savings.

Tuesday, June 11, 2013

Know When Credit Cards Are Just About To Make Your Life Hell

Let us make one thing clear: credit cards are not from hell. We are pretty sure that those who created these cards meant well by providing us with the means to protect our cash. If you lose your cash, the chances of you seeing it again is next to impossible. But if you lose your card, you can simply call your credit card company and have it cut off so the person who found (or stole?) it will not get the chance to use it. There are also the reward points and its capability to increase your credit score.

These are only a few of the things that credit cards will do for you. However, we cannot erase the current statistics of it being one of the top three debts that is crippling the average American household. But you need to be clear on what caused it in the first place - which, unfortunately, puts the blame on yourself.

Our debt is a result of several wrong financial decisions. For a lot of us, we fail to recognize the signs that our credit cards are leading us to ruin. To help you avoid this, here are some of the telltale signs that your credit card is about to make your life a living hell.

First is your use of credit cards. Are you using it to purchase the most basic needs of your family? If so, then your debt is in danger of growing. Credit cards should only be used for emergencies. If you want to use it for the most basic purchase, you should have the cash in your account so you can pay off what you owe during the grace period of the billing cycle.

Another sign that indicates your card debt is about to be unmanageable is when you can barely pay the minimum on your card bill. This is an indication that your debt has grown to a sizable amount. Sticking to the minimum payment will keep you in debt for a very long time. If you are working longer hours just to have enough to pay your cards or you are considering a cash advance just to pay off the incoming bill, then you need to reassess your finances.

If you have multiple cards, you may want check all of their credit limit. If you are about to reach all of them, then you are in big trouble. You need to stop using them and concentrate on paying them off one by one. If you are purchasing more than you can pay for the minimum every month, then you are setting up your card debt to grow exponentially.

Lastly, a clear sign that your card is going to start making your life undesirable is when collectors begin calling you. That means you have been late on one or more card payment. If that is the case, you should start to think about how you will pay it off.

If you don’t have these signs yet, that does not mean you should continue using your card for unnecessary purchases. Do not create a credit card problem for yourself because it is very difficult to get out of this type of debt. The high interest rate and the penalties just keep on mounting.

Fortunately for you, there are various ways to eliminate credit card debt. Look for the right debt relief option that is perfect for your debt and your financial capabilities.

Friday, June 7, 2013

How To Implement Budgeting In Your Home

If you really want to solve your financial problems, you have to learn how to take control of it. The best tool that you can use for that is a budget plan. It allows you to get a general overview of your income so you can make sure that you are only spending within your means.

Of course, deciding to budget is easy. The challenge is in the implementation - especially when it involves the rest of the household. But before you can implement, let us discuss how you can prep your budget so the family can adapt to it easily.

The creation of your budget involves a simple detailing of your income and expenses. While that is simple, it can be very tedious. But it has to be done so that you and your family can take control where your money goes to.

Here are some of the household costs that you will analyze in your budget.

The bulk of your budget will go to your home expenses. Usually, 40% of your expenses are spent for your home. Most of it goes to either rent or mortgage. Make sure that you list down the things that you need at home and you will not leave out the annual or quarterly expenses. Some people fail to place these costs on their monthly budget and usually, when the time comes for these financial obligations, their budget goes down the drain. So consider carefully and make sure your list is complete. The home expenses also includes your home taxes, insurance, maintenance and utility bills.

The second expense on your list is your transportation costs. This is the second expensive spend that you will have on your budget - at least when you own your car. From the car loan, insurance, fuel expenses and saving up for the maintenance - all of these will take up approximately 20% of your budget. If you want to trim this down, you can opt to use the mass transport system or carpool with colleagues. And if you have to run errands, make sure they are done in bulk so that you save on gas.

Another expense is for the food. This takes up around 15% of your total monthly budget. Although it is unwise to sacrifice the quality of your food, there are ways to save like buying in bulk or cooking at home instead of eating out. Marketing tips like buying fruits that are in season will allow you to eat them without spending too much.

Savings, health care and insurance expenses should also be a part of the list. Unfortunately, most households do not consider these as priorities. When there is are debt payments, this is the first to be cut off. These are all important and when prioritized, can keep the household from incurring debt when an emergency strikes.

Lastly, the personal expense is also a part of your budget. This is where you will get a lot of savings. If you really want to cut back on your expenses, this is where you will get most of them. This is where your entertainment expenses fall into. You need to regulate and make smarter choices on how much of your money goes to personal wants and needs.

When you are creating your budget, it helps to involve the rest of the family. This way, you can all decide on what sacrifices everyone can pitch into so you can start living within your means and in the long run, grow your household wealth.

Tuesday, June 4, 2013

How Can Debt Consolidation Save Your Retirement

Have you ever thought about how you will spend your retirement? Regardless of the picture in your mind, one thing is for certain, debt is not a part of it. We all want to retire with financial security but sadly, this is not the reality for the baby boomers who are about to leave the workforce. A lot of them are facing retirement with a lot of debts to their name. This forces them to work beyond the average retirement age and worse, it gives them stress that leads to a lot of health problems. Some of them expect to keep on working until they drop while others have decided to just let go of the personal assets they have accumulated throughout their lives and live a simple life.

If you are in the pre-retirement phase in your life and you have a lot of debts, you need to start doing something about it. Do not let the financial mistakes of your younger self affect your senior years.

Fortunately for you, there is a debt solution that will allow you to get rid of your financial problems in time for your retirement. At the very least, this will help solve your unsecured debts - especially your credit card debt.

Debt consolidation is the best way to get out of debt fast - without damaging your credit history and your financial history. It will free you from your unsecured debts for a short amount of time and it can also allow you to manage any mortgage or student debt that you are also burdened with. Here are the reasons why this is a good idea for those who only have a few years left in the workforce before they retire.

First of all, it will help you get out of debt in 5 years or less. The two types of debt consolidation usually do not exceed 5 years - unless it is a home refinancing. Since your mortgage is a big amount, this usually takes a lot longer lest you will end up paying a high amount on your monthly contributions. But for your other debts, you can be rid of them in a couple of years. The bigger payments you can contribute every month, the faster you can get over your financial problems.

The second benefit that pre-retirees can get from debt consolidation is the fact that you can choose the monthly payments that you will contribute. Most of the time, people choose lower monthly payments so they free up funds for other expenses. For instance, those who are about to retire would want to boost their savings or their retirement fund.

The third benefit is the single monthly payment that consumers will adapt when they use this debt relief option. This will relieve some of the stress that they will be feeling because money management will not be as difficult to apply.

These are only some of the benefits of debt consolidation for retiring individuals so it is best to do your research further. Of course, you still have to consult your finances before you finalize your decision to use this debt solution. While the possibility of a lower monthly payment is there, it will not reduce the amount that you owe. You will still end up paying for everything that you owe - albeit over a longer period. A steady income is a requirement - among others.