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Friday, May 28, 2010

10 Tips For Managing Holiday Spending



Worried about holiday spending? Stop fretting! A little planning will get you through the season with your both spirits and your bank account intact.by Julie Crawshaw

That magical, whirlwind time between Thanksgiving and New Year’s Day—when the pressure to buy is heaviest and managing spending can be difficult—is almost upon us.

A recent Gallup poll showed that American consumers will spend an average of more than $900 buying gifts this year.

Since that’s a mean average figure, many of us need to spend a good bit less—and while nobody wants to think like Scrooge, good planning is clearly the key to managing holiday spending.

Use the 10 tips below to avoid having a "money hangover" when January 1st rolls around.
Hold a family pow-wow: This is a great way to reaffirm the true meaning of the season by planning low or no-cost things the entire family can do to celebrate the season. Putting plans and events on your calendar and post it where everyone will see it daily. Knowing when you’re going to bake cookies, go ice skating or caroling or attend a seasonal concert keeps everyone in the loop and creates a pleasant anticipatory glow.
Make a list and check it twice: Do what Santa does and make a list first. Then remove anyone to whom you don’t genuinely want to give a gift. Remember, the season is supposed to be about giving because you genuinely want to not because you feel guilt or obligation!
Plan purchases and have alternate selections: Ask your "giftees" to suggest three or four things they would enjoy receiving within the price range you can spend. That way, if the sweater at the top of your sister’s wish list is sold out, you have a couple of "back up" choices that cost about the same to fall back on.
Draw a shopping map: As the big day for gift giving gets closer, it’s easy to feel pressure to get your shopping done. But before you grab your car keys and head for the mall, sit down and map out a shopping route that begins with the store that’s farthest from your home. Following a planned route saves gas and time. Knowing exactly where you plan to spend your money help keeps you from making budget-busting random or impulse purchases.
Keep shopping forays short: Short trips make it easier to stay focused on buying only what you’ve planned to buy. They also guard against becoming overtired, which can cause you to mislay your list, lose receipts or make other avoidable errors.
Stick to your budget: While this seems obvious, few people actually do it—much to the delight of credit card companies, whose January statements universally reflect our excessive holiday spending. Keep track of how much you spend on each shopping trip and deduct that amount from your overall gift budget. If you spend a bit more than anticipated for one person’s gift, be sure to adjust your spending downward on one or more of the other gifts you plan to buy.
Give personal gift certificates: When money is tight (and even when it’s not) friends and family members can give personal gift certificates that entitle the recipient to a specific service. A certificate for a special dinner with all the recipient’s favorite foods, an afternoon of babysitting, a day spent cleaning out the garage, getting the spring garden into shape or other service that saves your giftee time and labor are often among the best gifts of all.
Keep receipts: Not every gift works out. The jeans you were sure would fit your brother may not. Your cousin may already have the CD you bought for her. Let recipients know that receipts are available if needed.
Protect your purchases: Never leave packages into the trunk of your car and continue shopping. Experienced thieves who can pop your trunk lid in a few seconds frequent mall parking lots at this time of year.
Plan for next year: If you’d like to have a few more seasonal decorations, don’t buy them until December 26th, when merchants often reduce prices by as much as 75%. Saving money on next year’s holiday décor and gift wrapping supplies allows you to deduct those costs from the amount you need to set aside for next year’s gift-giving. If you buy a gift you plan to give next year, be aware that it probably won’t be returnable since most merchants impose a time limit on returns.

By Buzzle Staff and Agencies

5 Steps To Getting Ahead With Your Personal Finances



Enlarge ImageFew of us have any formal training when it comes to dealing with our finances. Most of us learn the hard way -- through the school of hard knocks. For some those lessons cost very dear in the form of bankruptcy and lost homes. Others are fortunate to ride the storms out and come out on the other side battered but not beaten.

I have learned my lessons the hard way. I do not come from money and my family had to work hard for every penny. Bad choices and bad luck meant hardship and expenses that had to be paid for with even more sacrifice. However it doesn't have to be that way. Here are the five important lessons, or steps, that will make your road to financial security easier for you and your family.

Step One is simply tracking your expenses. No you don't have to go the route of carrying a little notebook around and jotting down every candy bar or even getting receipts for your morning coffee. However if you want to get a real handle on your money then you need to know where it goes. This means keeping track of all your major expenses and watching the pocket money you set aside for smaller purchases (such as coffee and candy bars). Within a few weeks and certainly by the end of a month you'll know what expenses are eating up your budget which gives you the power to make changes so you can meet your goals.

Step Two is to create a budget. Once you have your basic expenses charted then you need to draw up a budget. First outline all the monetary commitments you have made including housing, transportation, food, clothing, entertainment, etc. Now make a note of your goals such as savings, retirement, etc. What adjustments (if any) do you need to make to meet your goals? The golden rule of financial security is only to spend money you have. That means not using your credit cards unless you can pay them off every month. It is not about making more money but simply living within your means. If you want to spend more money then you need to find a way to either save money in one area or increase your income.

Step Three is planning ahead. Do you have a rainy day fund? What happens when you have unexpected car repairs, dental or medical expenses, or some other unexpected expense? How will you fund this? While some unexpected expenses are just that -- unexpected (and that's why it is good financial planning to have a rainy day fun) -- others can be anticipated. You know after so many miles that your tires will need to be replaced and after so many years your hot water heater can be expected to fail. Start saving before the event so you don't have to utilize your credit and even better if you take the time to shop around and save money too!

Step Four is start saving. You can have just one savings account but likely once you get going you are better off looking into other savings vehicles. Obviously saving your retirement money in your basic savings account is not a good strategy for the long-term. However you can use your savings account to save money for short-, medium- and long-range plans. I start saving for Christmas in January and this strategy means I don't have those depressing post-Christmas bills to pay. It is easy to save a little bit every month and then not worry about how to fund the holidays. Similarly I save for vacations so I don't have to put my fun on credit.

Step Five is doing your homework. It could be as low level as clipping coupons and shopping the supermarket specials but it can really pay off when you look at major expenses such as mortgages and car loans. Should you refinance? Should you simply add another $50 or $100 a month to your mortgage? What are the tax implications of one strategy? Doing your homework certainly means researching and shopping for all major expenses as well as regular bills. My parents moved their cable, telephone and internet service to one provider and saved money while gaining high-speed internet access in the process. I put our utilities on the budget plan so it was easier to control expenses. Our mortgage payment was eligible for a lower rate when drawn directly from an account at the bank holding the mortgage. I designated a savings account and made that account my designated savings account for Christmas and vacations which means most of the time our balance is over the $500 minimum needed for a free account.

This is not tough and it is not a terribly ambitious strategy, but I guarantee if you follow these five steps you will find yourself on the road to financial security.

Deanna Mascle offers more articles about family finance at http://answersaboutfamilyfinance.info or http://answersaboutfamilyfinance.info
By Deanna Mascle

Personal Finance: What People Buy On Payday



It is interesting to find out that different people with different financial background buy different things on payday, and why they do so.
Enlarge ImageSome people think that to become wealthy, they need to live in a certain lifestyle and buy certain things that the real wealthy people have. Buy doing so many of them would finally end up in a financial turmoil and are far from being what they had always dreamed of: real wealthy or simply financially free.

The truth is, different people with different financial conditions buy different things on payday not because of how much money they have but because of their particular mindset that drove them to buy those things in the first place.

When the poor go shopping...

Poor people would go and buy the things we would simply call 'little stuff'. They buy things that are inexpensive (and sometimes useless) simply because they are inexpensive. The 'little stuff' won't cost them much but it won't worth anything to them over the years -- and because the money was all spent on 'little stuff', this will be the only thing they will have.

Some people who are even less fortunate like many in my own country, Indonesia, won't even have 'stuff'. When they go shopping on payday they buy food and maybe some clothes -- just basic things they need to survive for one month.

The poor won't have enough money to save, let alone invest. So what comes in on payday, goes out on 'little stuff' or food to survive. They simply just don't educate themselves that their income could have been used to create more income -- and this has caused a lot of financial pain. Yet, it does not need to be this way.

When the middle class go shopping...

These are successful people with well-paying jobs and great career. Because of this, society mistakenly considers them as 'the rich'. The middle class would buy things that we would call 'liabilities'. Liabilities are things that cost you money. A car would be a liability -- you would spend money on gasoline, insurance and not to mention the thousands of dollars of monthly payment for the new car. A house should also be considered as a liability -- although some people would call it 'asset', we can't escape the fact that buying and owning a house would actually cost you -- which makes this more a 'liability' instead of an 'asset'. But when you buy a house and rent it out and it pays you money regularly, then the house is called an 'asset'.

Typically, the middle class split their big fat check into two and one portion of it goes out to pay for the down payment of a new car (or a new house) or anything that are actually 'liabilities'. By the next month, they will have created another thousands of dollars of monthly expenses for paying the installments. After this, they would want a new Rolex watch, or another car, or a boat, or an expensive vacation.

The middle class may make big fat paychecks because of their successful career. But if the money that comes in is constantly spent on 'liability', it won't take long until they wind up highly stressed out in a financial turmoil. In the end, the middle class find themselves enslaved by their jobs because of the liabilities. It means they have no choice than to go to work and make more money every month to be able to pay off their liabilities.

The problem with both the poor and the middle class is, generally their income is dependant on their own effort/ time. The case with the poor is, that they exchange their time with their employers money -- while there is only so much you can do in 24 hours with your own effort. On the other hand, the middle class exchange their high education and expertise with someone else's money. As soon as they stop 'exchanging' time and education, the money stops coming.

When the real wealthy go shopping...

Real wealthy people would go out and buy things that we would call 'asset'. Assets are things that pay you money. The example would be investments, stocks, bonds, real estate,... Another example of asset is education. If you buy education and apply it to produce income, your education is an 'asset'.

Real wealthy people would always put aside a certain portion of their income to buy assets like those. The wealthy simply spend their money on things that can produce more money.

If you want to become wealthy you have to find assets that would earn you income and with the income, buy more assets to earn you more income and so on. One example of affordable asset you could buy is a business. Any business that creates for you passive ongoing income is your asset. Passive income is income that requires little work or no work at all. This type of income is the income that you earned from work you did just once.

There are numerous of passive income creation opportunities. One asset that I have found (and is affordable for me) is investing in my own small business, Success University. I find this an invaluable asset because I have free access to the most powerful success oriented personal development education, presented by over 50 of the world's greatest minds in personal achievement. The education that I get is applied in my day job, causing me to earn even more income than before. And the business opportunity of Success Universityis just an outstanding asset that allows you to earn money even during your 14 day free trial.

This article has been written in the hopes that it will be an eye-opening piece of information on managing you personal finances better. By Elisheva Wiriaatmadja

Monday, May 24, 2010

5 Key Personal Finance Problems - Which One Do You Want to Overcome?

Personal financial problems can rob you of happiness and contentment. Learning about these key issues now can save you years of heartache later on. It's your life - why not enjoy it?You can take control of your personal finances by applying the lessons listed below.

Problem #1. Spending Without Knowing Your Limits

As in business, you will not last long financially if you spend without regard to your income. Knowing your spending limits is not hard to do. Just find the answers to these 4 easy questions:

Question #1. What is my take-home income per pay? (that is your total income less taxes)

Question #2. What do I need to spend to live?

Question #3. What is the difference after taking spending from income?

Question #4. Can I save enough for my future from the answer in Question #3?

There are many tools to help you gain answers to these questions. You can find many on the Internet. Helpful Hint: Find one that helps you set your savings targets, checks your ability to meet the targets and then shows your progress towards your goals.

Problem #2. Spending Without Setting Savings Targets

It's OK to spend to the limits of your income but that does not provide you with any buffer for urgent purchases, or protect you from a financial emergency. Urgent purchases could be renewing a broken fridge or stove, calling a plumber to fix a broken pipe or having to spend for major car repairs. Financial emergencies could be temporary loss of income or hospitalization of a family member. How would you survive financially in any of these situations?

You can begin to save today, it's easy. What if you went without your bought lunch each day at work? That saves you $1,000 per year on $5/day. What if you reduced your Starbuck's coffee by 1 each working day? That's another $1,000 per year on $5/day. Just those two amounts alone can mean a holiday for you, the beginnings of a savings plan, or an emergency buffer.

If you set a target of 10% of your take-home pay each payday that would be a good start. If you think creatively, you are sure to come up with ways to achieve this. Think of the peace of mind that would bring.

Problem #3. Spending Without Knowing How to Save

There are many easy ways for you to save money that allow you the freedom to spend when you see something you really want. Some of these are:

1. Don't buy on impulse. Ask yourself 2 or 3 times "Do I really NEED this?" before you buy. If you cannot answer with a resounding "YES " let it go.

2. Don't buy things JUST because they are on sale. Only buy things you need. If you do need them wait a few weeks the price may fall even further.

3. Don't buy the latest fashion items at the height of the season. Just wait a while. The prices usually reduce.

4. Don't compare yourself with others and what they have. They may have purchased making the same finance mistakes as you.

5. Set yourself a savings target. Put this money aside each payday BEFORE spending any of your pay.

Problem #4. Spending Without Feeling Satisfied

Spending can leave you feeling pretty shallow and unrewarded when you purchase on a whim or fancy when you really know you cannot afford the item. What's more you may not even use it. What a waste!

To really FEEL GOOD ABOUT SHOPPING and spending you need to know these 4 things:

1. My budget allows me the freedom to purchase this item

2. I have the cash put away already for this purchase (even though I will use my credit card for the transaction).

3. This purchase is something that I really want and will use.

4. I have purchased this item at the best possible price, saving as much as I can.

Problem #5. Spending Without Caring About Your Future

Unless you are planning for your future and financial security, you cannot be really happy. There are always worries lurking in your mind about how you would survive in a financial emergency if you have no savings. It can be very rewarding to see how quickly your savings multiply over time with only a small investment each payday.

Did you know that by saving just $5 every day this would grow into $1,867 in 12 months at 5% interest and then it grows into a whopping $10,343 in 5 years? Isn't your future worth investing in?

Why not start to overcome your personal finance problems today? Looking back you'll be so glad you did!

If you click on the links below you will be taken to a great budget solution. It helps you set your savings targets, checks your ability to meet the targets and then shows your progress towards your goals.

Bruce Hokin has designed a simple budget tool called "5 Steps to Freedom Personal Budget." It based on his extensive background as a qualified, experienced accountant, manager, consultant and financial adviser. You can download this powerful budget assistant today and be on your way to financial freedom within the hour. It is available at his website www.freedom-personal-budgets.com.
By Bruce Hokin

10 Tips For Managing Holiday Spending

Worried about holiday spending? Stop fretting! A little planning will get you through the season with your both spirits and your bank account intact.by Julie Crawshaw

That magical, whirlwind time between Thanksgiving and New Year’s Day—when the pressure to buy is heaviest and managing spending can be difficult—is almost upon us.

A recent Gallup poll showed that American consumers will spend an average of more than $900 buying gifts this year.

Since that’s a mean average figure, many of us need to spend a good bit less—and while nobody wants to think like Scrooge, good planning is clearly the key to managing holiday spending.

Use the 10 tips below to avoid having a "money hangover" when January 1st rolls around.
Hold a family pow-wow: This is a great way to reaffirm the true meaning of the season by planning low or no-cost things the entire family can do to celebrate the season. Putting plans and events on your calendar and post it where everyone will see it daily. Knowing when you’re going to bake cookies, go ice skating or caroling or attend a seasonal concert keeps everyone in the loop and creates a pleasant anticipatory glow.
Make a list and check it twice: Do what Santa does and make a list first. Then remove anyone to whom you don’t genuinely want to give a gift. Remember, the season is supposed to be about giving because you genuinely want to not because you feel guilt or obligation!
Plan purchases and have alternate selections: Ask your "giftees" to suggest three or four things they would enjoy receiving within the price range you can spend. That way, if the sweater at the top of your sister’s wish list is sold out, you have a couple of "back up" choices that cost about the same to fall back on.
Draw a shopping map: As the big day for gift giving gets closer, it’s easy to feel pressure to get your shopping done. But before you grab your car keys and head for the mall, sit down and map out a shopping route that begins with the store that’s farthest from your home. Following a planned route saves gas and time. Knowing exactly where you plan to spend your money help keeps you from making budget-busting random or impulse purchases.
Keep shopping forays short: Short trips make it easier to stay focused on buying only what you’ve planned to buy. They also guard against becoming overtired, which can cause you to mislay your list, lose receipts or make other avoidable errors.
Stick to your budget: While this seems obvious, few people actually do it—much to the delight of credit card companies, whose January statements universally reflect our excessive holiday spending. Keep track of how much you spend on each shopping trip and deduct that amount from your overall gift budget. If you spend a bit more than anticipated for one person’s gift, be sure to adjust your spending downward on one or more of the other gifts you plan to buy.
Give personal gift certificates: When money is tight (and even when it’s not) friends and family members can give personal gift certificates that entitle the recipient to a specific service. A certificate for a special dinner with all the recipient’s favorite foods, an afternoon of babysitting, a day spent cleaning out the garage, getting the spring garden into shape or other service that saves your giftee time and labor are often among the best gifts of all.
Keep receipts: Not every gift works out. The jeans you were sure would fit your brother may not. Your cousin may already have the CD you bought for her. Let recipients know that receipts are available if needed.
Protect your purchases: Never leave packages into the trunk of your car and continue shopping. Experienced thieves who can pop your trunk lid in a few seconds frequent mall parking lots at this time of year.
Plan for next year: If you’d like to have a few more seasonal decorations, don’t buy them until December 26th, when merchants often reduce prices by as much as 75%. Saving money on next year’s holiday décor and gift wrapping supplies allows you to deduct those costs from the amount you need to set aside for next year’s gift-giving. If you buy a gift you plan to give next year, be aware that it probably won’t be returnable since most merchants impose a time limit on returns.

By Buzzle Staff and Agencies

Personal Finance Planning for the Layman

In this fast paced world of consumerism, money is a commodity that is all powerful and yet, ephemeral. The nagging worry of "How did I spend so much in so short a while" is something that haunts even the most affluent, and more so for the forever wanting middle class. It is in this context that the planning of one’s personal finance gains immense import.The Need

Modern science has increased the life expectancy of humans by decades. At the same time, it has also ushered in a plethora of temptations garbed as necessities – needless to say, these temptations do not come cheap. The ever-increasing avenues of spending give today’s man a wholly different perspective on wealth as compared to even those of just a century ago. While earlier wealth referred to tangible objects such as land and jewellery, today a wide range of tangibles and intangibles have crept into the picture – while owning a Monet is wealth, so is owning a yacht. And the means to achieve either are the greenbacks. However, while money remains a constant to define wealth, destiny is forever fluctuating – what appears as an immense pool of money today may just dry up tomorrow. In such a situation, one needs to plan years ahead to hedge the uncertainty of the future.

The most common situations, which call for financial planning for the average middle class person, are:

Retirement: For any salaried individual, retirement is an eventuality. While many countries provide social security to retired people, the real income that one earns from such schemes may be severely hit by inflationary trends. For example, over a ten year period considering an average inflation rate of 4%, $1225 would fetch the same value as $1000, provided the growth in prices of all commodities remain fixed at 4%. Thus, a person who subsists on an amount of $10000 today would need to earn at least $12254 to maintain his current living standard ten years hence. In other words, if a person retires with a capital of say $100000 and earns 10% on this capital through investment in bonds, etc, he/she would require a capital of $122540 to earn the same value ten years hence. That, at an age when he/she may not mentally or physically be in a position to engage in constructive, income generating employment. Obviously, such depreciation of real income/capital calls for long-term planning.

Children’s Education: With the steep rise in unemployment the world over, people need to acquire special skills to be assured of even a moderate living. And as the demand for such skills is increasing, so is the cost of acquiring such skills getting pushed up. A person whose child is say ten years old today would require a substantial amount of money a decade hence for his college education, and planning for the same needs to done from today to avoid complications at the last moment.

Medical Contingencies: Medical contingencies have become so much a part and parcel of everyone’s lives that they can no longer be termed as contingencies. Again, while newer and better medical tools are being developed everyday, the cost of medical treatment is unfortunately on an upward spiral. Thus, while a person can expect to live longer thanks to the modern day medicine, it is not a very comforting thought when one takes a look at what effect it could have on one’s finances. Even planning ahead may at times not suffice, but it can at least provide a cushion to fall back on when ailments hit.

Apart from the above, sudden cash flow mismatches may occur for numerous reasons – an impulsive tour to Hawaii, for instance. While every such eventuality cannot be anticipated in advance, the least a sensible person can do is to create a buffer for himself for the rainy days. And that buffer can only be created through proper planning of one’s finances while the going is good.

The Planning Aspect

The planning structure may vary widely from person to person. However, there are a few common factors that everyone needs to consider while planning his/her finances:

Age: The age of the individual is an important factor to be weighed in. For example, an executive in his early twenties may not wish to spend too much on his retirement funds; the dreaded day, after all, is a long way away. On the other hand, a person in the forty-something age bracket can see his retirement looming over the horizon; he would naturally have a stronger desire to save. Unfortunately, the time value of money is forever on an upward curve, and saving nominal amounts at an early age is wiser than saving huge amounts at a later age. Thus, if an investor starts saving at the age of thirty, then at a 10% rate of return on capital, and an annual saving of say $6000, the investor shall have roughly a capital of $ 1.1 million at the age of sixty when he retires. However, if he begins saving at the age of forty, he would be required to make an annual investment of $18000 to have a similar amount at his disposal at the age of sixty. Thus, if he starts saving at a later age, the annual saving burden is thrice the amount that he would need to forego every month if he starts saving ten years earlier. Again, if we assume that at age forty, our investor is in a position to save $15000 annually and not feel the pinch (as against $18000 which he is required to invest), then we find that if he starts saving $6000 per annum at age thirty and thereafter saves $15000 from age forty, at the retirement date he would have a capital of around $1.7 million, half a million more than what he would have if he starts saving at age forty at the rate of $18000 per annum (which would also cause him undue hardship to the extent of $3000 per annum).

Investment Avenues: The available avenues of investment also play a major role planning one’s finances. While different countries have differing rate structures for investment products, the mode of operations and the nature of the investment avenues are generally the same. Thus, while the United States and India, countries at two ends of the economic spectrum, have differing bank rates (the rates in India being almost four times that of the US), the underlying product is essentially the same. However, the preferred investment mode is certain to vary amongst the two countries owing to the difference in rates, as is observed in the US where the preference is towards mutual funds while in India people are more comfortable with bank deposits. Again, the various investments provide varying tax benefits, ranging from zero to a handsome percentage in the form of tax rebates. One also needs to keep this factor in mind to work out the time value of the savings parked in a particular investment.

Investment Horizon: Probably the most important aspect of financial planning is chalking out the investment horizons for the various requirements. The need to plan for different time horizons arises from the fact that financial requirements vary widely over any given length of time. For example, the finances required for retirement planning call for a long term, substantial accumulation of funds; children’s college education, on the other hand, provides a much smaller time frame and calls for a relatively lower capital accumulation. While money for all such requirements may be accumulated in a common pool, it is ideal to have separate investments for separate requirements, as this would hedge against the risk of inadvertent mismanagement. To exemplify, if there are separate retirement and children’s education funds, our investor, in case of any shortfall in the college fund at the time of withdrawal, would prefer to resort to some other, external revenue source such as a bank loan rather than break his retirement fund as well, thereby keeping his retirement money intact. While this may not work out in every case, it does mitigate the chances of mishandling the savings.

Other planning tools: Besides personal savings, one needs to try and provide for contingencies through other avenues as well, such as insurance. While our investor might be having all his future income and expenses planned out to a "T", a freak accident could upset the apple cart, leaving himself and/or his dependants high and dry. To avoid such a situation, one should try and keep as much of self, family and property insured as possible. It is true that the premia paid on insurance seem to be a waste of hard earned money since they carry little or no returns, but what is a small sacrifice today might yield handsome dividends in times of need.

The Final Word

While planning and monitoring ones finances to provide for as many contingencies and necessities as possible is cumbersome indeed (after all. spending is so much more fun than saving!), the benefits far outweigh the trouble taken. As the old adage goes "A Stitch in Time Saves Nine"; All that is called for is a little disciplined "stiching". With disciplined planning and regular status reviews, this seemingly daunting task can be expected to become a part of everyday life, thereby providing for a reasonably secure future.
By Anirban Ray Choudhury

Monday, May 10, 2010

Basic Money Management Skills

Having money is no doubt, important. But managing that money well, is just as, or maybe even more important. Read the following article for more details on some important money management skills.Money. That which makes the world go round. Literally. Without encouraging romantic notions of 'but that is love', let's get moving. What I simply mean is, that it all boils down to the money that we have at the end of the day. Money determines the way we live, what we do, and basically every other decision of our lives. Without money, we are basically nothing. And that, I know, is something that no one will want to go through. So it becomes imperative that we earn well. But earning well is not the end all of everything. It actually begins from there. That money which is earned, needs to be managed well, so that, we continue to benefit from it for a long time. And therein comes the part where we need to learn some basic money management skills. Because without these money management skills, we will not be able to develop effective methods of money management.

Most of us do not have the knowledge of what some of the most simple, effective and basic money management skills are. So to help you out, this article shall provide you with just that. Some basic money management skills that you can use to manage your money effectively.

Money Management Tips

Basic money management skills are not difficult to learn once you get the hang of how to go about it. Given below is a step by step plan that you can follow in order to nurture some money management skills. Have a look at some money management tips too.

Take Stock
The first thing you need to do is check how much you are earning. Add in ALL the resources. Once you have this figure, calculate how much money you need to spend every month. To learn how much you spend every month, the best method is to write down each and everything that you spend on during that time. You cannot imagine how much the amount will be! We don't realize how much we end up spending on small things. Keep in mind that you need this spending figure to learn some money management skills. Keep in mind that the figures of two months will never be the same, there will be more expenditures incurred in a particular month and not so many in the next. But an average figure can be definitely arrived at.

Allot Amounts
Now that you know an average amount of the money that you need to spend for a month, it'll be easier to allot amounts to different things. Make a list of all the things that you NEED to spend on - Rent, tuition, bills (newspaper, Internet etc.) groceries, miscellaneous and emergency (very important!). You can make a long term-short term list as well. Like monthly/weekly/daily. And segregate the items accordingly. Now calculate the amount that you need for each and allot the money accordingly.

Many people use the envelope method for household items and it seems to work for them. For this use different envelopes and mark them - For example 'vegetables', 'toiletries', 'groceries' and at the beginning of the month fill the envelop with the amount that you need. Now stick to that amount no matter what. When you put it down on paper like that, you are constantly reminded of it and the tendency to overspend is curbed.

Take Care of Debts
This is a very important step when you need to learn money management skills. Never ever keep a debt. Pay a debt off as soon as you can, because if you keep on piling it, it'll just keep getting bigger and bigger and cut into your regular saving plan. Find out how much you owe and what you need to pay off, that is the first step in debt management. Credit cards, surplus bills - everything. Make a plan for the same. How? Along with the other envelopes, make another one for the debts so that it helps in debt assistance. It might be difficult in the beginning, but once you start physically putting in the money, you'll deal with the problem head on and with continued efforts the amount will be paid off.

Plan the Future
Now that the preliminary stage is taken care of, you'll need to save for the future. The most important thing to do here, is draw up a goal. What do you want to save for? Retirement? Children's education? A house? Car? Or even small plans like a music system, a new phone. Calculate the amount you'll need to save for it. This is your first step. The next steps will be how to get that money in a stipulated period of time.

Budget
Having a budget is really important. One way of budgeting is the envelope way, so that you don't end up spending more when you have already allotted a fixed amount to yourself. The second method of how to make a budget, and this is somewhat of a conscious change in attitude, is that you get it in your head to budget things. Consciously decide that you want to budget. Do not spend recklessly. Other than that planning for the future and drawing up plans of the things you need to save for will help you to budget well. Because you'll know what and how much you need to save up on to get that amount.

Invest
After paying all the bills, with the surplus amount in hand, you need to invest it well. There is nothing worse than stagnant money. So consult a financial advisor or an investment advisor who will calculate how much you can afford to save per month, after deducting the expenditure and surplus. After which he will draw up a scheme that suits you best. It could be anything from a fixed deposit account to investing in mutual funds or buying property as assets.

Easy Saving Tips
Along with budgeting and drawing up plans, you can also consciously decide to save. Here are some money saving tips that you can use:
Buy things in wholesale.
Instead of buying books, join a library or start a club. Use this same formula for different things.
Car pool to work, that'll save on money for gas AND is good for the environment.
Buy things on sale.
Go through your daily expenditure sheet, you will find that there are several things in there that you can easily give up. Like a very expensive brand of hair products.
Turning off the power when you don't need it.
Read more on:
How to Save Money
Ways to Save Money
Earn Extra
It has been found that we never tap the full potential when it comes to expending our talents or finding other means of earning some extra money by some money making ideas. This is one of the more indirect money management skills that we need to learn. Here are some of the easiest ways to make money: Taking on freelancing jobs, giving tuition, making use of your hobbies and talents like singing or dancing (giving classes, singing in a club) or cooking (providing snacks for a establishment or making a fixed amount for a bakery). Other methods include, selling things for scrap, holding garage sales etc. Read more on:
Making Money Online
Wealth Creation
Acquiring money management skills allows you to live better. It secures your future and helps you to gain control over your life other than debts and money problems controlling you. It should therefore be our prerogative to learn and practice the several money management skills to lead a more fulfilling life. All the best!
By Rujuta Borkar
Published: 5/4/2010