Life after graduation: Girl friend and the First Car

Source:http://kclau.com/wealth-management/life-after-graduation/


This is a personal story shared by a reader. Let’s call him Alex.

I graduated in 2000 and get a job at IT Support in an international Australian branch university. The salary of RM1650 (not net pay) was barely enough. My dad so called “help me” to buy a brand new Kancil 850. First month it was free and second month I have to pay for it. All I wanted that time was a 2nd-hand car or I don’t mind at all to use public transport.

If I use public transport, it would take me two buses before I actually reached at home. Office hour finished at 5pm and arrived at home around 7.30pm. The place was like the end of Miri Town (about 45min from town).

The monthly instalment was RM587 for 5 years. Plus fuel consumption would cost me around RM250/RM300. I filled RM30/RM40 tank and can use it for 4days before refuelling again. Owning a car has teach me how to DIY almost all the basic car maintenance from changing Engine Oil to changing Air Filter. I managed to spend around RM1K or RM2K to make the car beautiful (ICE and body-kits). My determination to get a Japanese rim was too strong that I saved RM300 every month to get it. At last I ordered a 2nd hand Japanese rim for RM1800 complete with tires. I even skip my lunch for few times in a month and even “tapau” food (packed food) from home.

At the same time I was paying credits card that I don’t use. Why?? My GF used it for her NOKIA 6680. I pay for it for the name of love. My mistake!! It accumulated to RM3.8K because my GF never pay the minimum amount required. Luckily she got her scholarship to pay for it but again my useless money handling took over. I never fully settled it and only pay half of the total amount. And I keep using it for online purchase such as plane tickets and so on.

I occasionally paid my “PTPTipu” study loan. Sometimes RM200, sometimes RM50 and most of the time none! And I never received any letter or payment acknowledgment from PTPTN that time. I assumed they had lost the students’ list names.

One thing I did right was to pay myself first (RM300/RM200) once I received my salary.

Notes from KCLau:

As normal young graduates, getting a car had become more of a necessity if you are living in Malaysia. Public transport is available but it is many times more troublesome if you had to travel quite a distance to your work place.

I do agree with most people that car as a necessity, we as Malaysians are forced to spend a big chunk of our income on owing a car that makes it seems like a luxury item.

For the case of Alex above, he had to spend RM900 out of RM1650, which is more than 50% of his gross pay. This is without considering the extra he spent on beautifying his Kancil with accessories. The sad news is that Kancil is like the smallest car and also the cheapest new car one can get in Malaysia. Some foreigner said that it looks more like a toy car, which we can’t deny about it.

Since you can’t do much to change the car price, what you can do is to reduce the spending on cars based on the budget you can afford.

What do you think about this story? What does it remind you of? What do you think Alex can do to improve his financial standing? Write something in the comment section below.

Here is the Part II of Alex’s story:

I left the company after 3 years plus to join new IT company to implement new project in Sarawak. The basic pay was actually smaller from previous one but i get do OT regularly due to project implementations. That include on call duty at night and weekend. I also entitled to claim milleage to do site visit and maintenances. Roughly i earned about RM2600-RM2800 per month. I still continued to pay my car installments(5 years loan tenure) but i hardly spent money on car modification anymore. I saved a lot on fuel consumption because the office is nearer to my house and milleage claims.

I finally settled my credit card installment about a year after i joined the company. The card actually expired but i didnt bother to renew it. Then i started to pay my study loan regularly. Instead of paying minimum of RM192, i paid RM200. I dont changed my handphone to latest one in the market. Instead i repaired my own handphone;updating firmware and hard reset. I used it untill it died or cost of repair more expensive than the phone itself.

Instead of buying expensive phone, i look for “ordinary” CSL handphone. It served me well untill i forgot to take it out when i am doing my laundry. I rushed to buy RM110 Nokia phone when it happen. I promised myself to upgrade later when the time is right.

Fast forward my story, i changed another job to an International company almost two years after that. I thanked GOD for HIS blessings. Then i started to buy and read financial planning books. It was KC LAU’s book(cant remember the name though) then followed by others.

Early this year, i bought a landed property RM230K(property in Miri is expensive compare to other place in Sarawak). My 850 kancil still with me minus the installments. I am still living with my dad(my mum passed away last year) ,brother and little sister. I planned to rent out my house when it completed next year and keep staying with my dad. Our family house is double storey terrace house.

I already bought an investment linked insusrance for myself. On top of it i also used my EPF account 2 to buy some unit trusts. I was lucky to have cousin working with bank industry. Now i am trying to save 50% of my salary every month instead of 10%.

My principle is easy “if you cant afford to buy things cash, you cant afford to buy that thing at all”. Example, i saved some money for two months to buy my FIRST laptop(RM2K), though i am IT guy i never owned a laptop. My advise is buy AMD based laptop instead of INTEL. It will save you around 20% of the price.

Recently i purchased a second hand DSLR to pursuit my interest in photography. I owned a Canon EOS 350(film) when i was in university but i have to sell it because i cant afford to pay for the films(i shoot a lot but only handful of photos useable). I hope my photography skills will help me to pay for some bills later.

The best is to get a good cheap second hand DLSR and try it. If you dont like it, you can always sell it. Instead of buying an expensive DSLR but later you found out that you prefer “auto” settings or compact digital camera. Some good place to look for cheap second hand DSLR are lowyat.net and free trade zone photograph

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Wealth Is What You Save, Not What You Spend

Source:http://financiallyfit.yahoo.com/finance/article-112550-9317-5-what-millionaires-have-in-common
Want to be a millionaire? Don't overspend and use debt wisely.

We all may not be millionaires but there are plenty of financial and life-planning secrets we can learn from the well-heeled.

Most people know that wealth in the U.S. is in the hands of a small percentage of the total population. And, today, most of those folks with a net worth of $1 million or more have earned it themselves.

They're mostly entrepreneurs who create everything from high-speed networks to garbage haulers. They dig ditches and build houses and grow corn and make jewelry. They deal stamps or coins or artwork and control pests and cut lawns. They also cure people and give them new teeth. Others will defend their neighbors or even feed them.

And they're not big spenders. In fact, most of those with big bucks live well under their means -- think about Warren Buffett still living in that modest Omaha home -- and they put their money instead toward investments that help them stockpile more wealth.

"Wealth is what you accumulate, not what you spend," according to Thomas Stanley and William Danko, the authors of the seminal tome on America's wealthy "The Millionaire Next Door," first published in 1996.

"It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes," the authors wrote. "Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self discipline."

Wealth is defined in many ways, though it's generally determined as the value of everything you own minus debts. But there's a difference between marketable assets -- things you own that could be liquidated rather quickly, like stocks, bonds, real estate -- and possessions like cars, clothing and household items that you use regularly and aren't likely to sell.

Income alone does not make one rich. It helps, of course, to build wealth, but the financially independent look to their salaries as a means to an end, which is that pile of cash.

"The wealthy don't spend their wealth on discretionary purchases," said Pam Danziger, founder of Unity Marketing, a consumer market-research firm specializing in luxury goods and experiences. "They get rich by maximizing the value of their investments."

That doesn't mean they don't pay big bucks for pretty shoes or outfits, but that most choose those items carefully and shop for value and quality. "They truly evaluate the purchase as an investment, not an expense," Danziger said.

What they do though is diversify those investments, which gives them more flexibility to ride out difficult times. "The wealthiest clients have very, very diversified portfolios that go way beyond just stocks and bonds into hedge funds, currencies, commodities and emerging markets," said Leslie Lassiter, managing director of the JPMorgan Private Wealth Management.

"There are many, many mutual funds out there that will allow you to get exposure to those types of asset classes," Lassiter said.

Among the biggest differences between those flush with cash and those wishing they were is in how they pay for things. Millionaires tend to use cash for most of their purchases, including cars, homes and boats.

For the average wage earner, of course, that's not always an option but it still holds this lesson: Don't look to debt to fund your lifestyle.

Most wealthy people use debt for investment purposes and are careful not to over-leverage themselves. "A prudent use of debt is an appropriate thing for anyone," Lassiter said.

They also plan very well and spend a lot of time at it. Many are compulsive savers and investors who often say the journey to riches was far more fun than the reaching the goal.

And they're patient, willing to invest in the long term and wait it out. "They stick with their investments and are more likely to have a financial plan," said Sanjiv Mirchandani, president of National Financial, a subsidiary of Fidelity Investments.

Many take the long-term approach to investing because they're working at being financial independent. When they retire, for example, many will know exactly how much they need to live on, to give away and to leave as a legacy.

"The best ones really understand how much liquidity they need to cover their expenses and make sure they have that much cash on hand," Lassiter said. "That's something the average person should do as well."

At the same time, she said most are very careful about leveraging debt. "The wealthy tend to balance between the two," she said.

Recommendations for accumulating wealth:

Live below your means: People with high incomes who spend all that money are not rich; they're just stupid.

Plan: That means plan for today, tomorrow and 30 years after retirement. Take time doing it too and spend time monitoring it every day. Use budgets and stick to them.

Diversify: As Lassiter said, look for mutual funds that allow you exposure to asset classes that aren't related to each other.

Reduce use of credit and turn to cash: It's easier, of course, for a prosperous person to pay for a house in cash than it might be for most folks, but credit-card debt for luxury purchases or extravagant vacations will never pave a road to riches.

Have access to cash: While the rich keep much of their wealth invested, they can get cash when they need it. "Have some kind of line of credit available, like a HELOC (home-equity line of credit) that you never use," Lassiter said. "It's a safety valve." She suggests a year's worth of cash to cover expenses; Danziger thinks three years worth is a better bet.

Spread cash around: When the wealthy pulled money out of the equities markets two and three years ago, they opened a bevy of bank accounts, all guaranteed up to $250,000 of deposits by the Federal Deposit Insurance Corp.

Bring your children into the mix, and remember the importance of estate planning: The affluent can go to great lengths to teach their children about money and how to manage it -- something every family should do. Though talking about money with children consistently ranks as one of the most dreaded conversations, it's important that your heirs know where all the bank accounts and safe-deposit boxes are -- even that their names are on them, too -- who the attorney is, where the will and trusts are filed.

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8 Steps to Get Your Financial Life in Order

Source:http://financiallyfit.yahoo.com/finance/article-112321-8882-5-8-steps-to-get-your-financial-life-in-order
Do you have "frugal fatigue?" You're not alone. Pinching pennies becomes exhausting, year after year. You dream of breaking free and buying everything in sight.

But tiresome as budgets are, consumers haven't quit them yet. You threw some money around in December, when credit card use bumped up for the first time since the 2008 financial collapse. Then remorse set in. Consumers slashed their credit-card spending in January by 6.4 percent at an annualized rate, the Federal Reserve reported this week.

That fits with what the National Foundation for Credit Counseling is seeing on the ground. In a recent NFCC survey, two-thirds of consumers said that they're sick of having to question every dollar they spend, but have no choice. Incomes are virtually flat, employers aren't calling the long-term jobless back to work, and the cost of critical purchases such as health insurance and gasoline are leaping up. Only 5 percent of the people questioned said that they couldn't stand to keep living under fiscal restraint, and intended to spend more. About 8 percent said they didn't need to be particularly frugal. They hadn't cut spending and were doing fine.

The rest -- about 20 percent of the consumers -- overcame their frugality stress in the old fashioned way: they changed their lifestyles so they could live comfortably within the incomes they had. They found this new life so positive that they said they'd never go back, reports Gail Cunningham, a spokesperson for NFCC.

If you're sure that your financial troubles are temporary, it pays to pinch the pennies until the dollars start rolling back in. But the story is different if you see little hope of raising your income by enough to make your current expenses each to cover. Emotionally, making big changes is hard to do. But the faster you reinvent your life, the more money you'll have in your pocket and the sooner you'll be able to save again.

Your two largest expenses are probably your home and your consumer debt (plus health insurance, if you're not on a company plan). Your first step is to quit adding to debt -- put your credit cards on deep freeze and pay bills with cash or a debit card. Then follow these steps:

1. If you live in an apartment, check comparable rents in your neighborhood.

They've dropped in many parts of the country. If you find that you're paying more than the market requires, show your landlord proof and ask for a rent reduction. If the answer is no, move.

2. If you own a home and it's salable, sell.

Put any net gain into savings and investments, and find an apartment to rent. You'll be saving the high cost of maintaining a house, as well as tax and insurance bills.

Don't hold onto a house because you think you "need" the mortgage interest deduction. Financially, you're far better off without it. As an example, say that you're paying $1,000 in interest, in the 25 percent tax bracket. The taxpayers cover $250, leaving $750 as your net cost. Now imagine that you have no mortgage and $1,000 in income. You'll pay $250 in taxes, leaving you with $750 in your checking account. Losing the mortgage gives you more money to spend.

3. Restructure your credit card debt.

Move some of it to a new card with a zero-rate promotional offer. Don't use that card for purchases right away. Instead, concentrate on repaying this debt within the promotional period. You might also move debt from a high-rate card to one that's charging a lower rate.

4. Start a debt-repayment avalanche.

Get the latest bill for each of your credit cards, to see which one is charging you the highest rate (some cards have two rates, one higher than the other). Pay the minimum on the lower-rate cards and put all the rest of the money toward knocking off the high-rate debt. When that card is clean, move on to the next one.

Some people prefer to start by repaying the card with the smallest debt, even if its interest rate is low, for the pure pleasure of eliminating an annoying bill. Do whatever works. But you'll get the most bang for the buck by tackling the high-rate card first.

5. If you have savings, put all but a token amount against credit card debt.

Keep only $500 or $1,000 for unforeseen expenses. Consumers often don't realize the enormous return on investment they get from cleaning up their credit cards. For example, say that you're paying interest at a rate of 18 percent. Every payment you make against that debt gives you a guaranteed 18 percent return on your money. If you're paying a penalty interest rate of 24 percent, every payment equals a 24 percent investment gain. Where else could you get a yield like that, and totally safe?

6. If you have money in a 401(k) retirement plan and your job is safe, consider borrowing against it.

In theory, I consider these plans inviolable -- never to be touched. In practice, it makes sense to use them if they can help you rightsize your life. The transaction will look like this:

You'll borrow from the plan at 1 to 3 percentage points over the bank prime rate, which is currently 3.25 percent. So the loan might cost you 5.25 percent. You'll repay credit card debt at 18.25 percent, for a 13 percent gain. Typically, you'll have to repay the 401(k) loan over five years, with the payments deducted from your paycheck automatically. The interest you pay goes right back into your account, so you're paying t to yourself.

There are two financial downsides. First, you're repaying the loan with after-tax dollars. When you eventually take money out of the 401(k), those dollars are taxed again. But you're probably still ahead, thanks to the savings on your credit card bills. Second, you'll lose any appreciation that would have accrued to the money you borrowed. You can minimize this risk, however, by arranging to borrow against only the bond portion of your plan, leaving the stock portion exposed to any gains.

If you leave your job, and part of the loan is still outstanding, you'll have to repay it right away, in full. If you can't, the remaining loan will be treated as a withdrawal. You'll own income taxes on the money and a 10 percent penalty if you're younger than 59 1/2. So this loan is for someone who is pretty sure that his or her job is safe.

7. If you're one of the lucky 78 percent of homeowners who have equity, you could -- potentially -- pay off your credit card debt with a new home equity loan.

But the argument isn't as compelling as it is for loans against 401(k)s. Ideally, you're aiming for a paid-up home when you retire. That will cut your cost of living, give you access to a reverse mortgage for extra cash, and provide money needed for long-term care. A home equity loan might make that impossible.

8. If you don't have health insurance, any major illness could put you into bankruptcy.

Try for a high-deductible policy, or see if you (or your kids) qualify for Medicaid or the children's program, Schip. If insurance companies won't take you because of a medical condition, try for a place in the high-risk pools set up by the new health reform act. We're a long way from equal access to medical care, let alone care at an affordable price. But if you cut other expenses, you just might be able to afford good health.

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5 Ways to Retire Before Age 40

Source:http://finance.yahoo.com/focus-retirement/article/110197/5-ways-to-retire-before-age-40?mod=fidelity-startingout&cat=fidelity_2010_starting_out
Voluntary early retirement before the age of forty is not typical. Leaving work behind as early as possible to focus on other aspects of life is a popular goal, but most people will not achieve it.

In order to retire in your forties and still have the funds you need to finance all that you'd like to do, you need to create the right environment to foster extraordinary results with your money. Don't count on winning the lottery or selling the company you built in your basement to Google.


Those who leave the workforce before age forty compose a small percentage of the working population, just as Olympic-level swimmers are a small percentage of everyone who competes in the sport. To achieve in the Olympic Games you need to take several extreme actions. To retire early, you will have to do the same. These tips may help you generate enough money to retire before age forty.

Ignore what other people think. You'll need the right mindset. As you make choices that could lead you to extreme early retirement, you may face resistance from family and friends. The decisions you will need to make are often directly opposed with others' expectations. Find like-minded individuals whose advice and encouragement will help move you in the right direction.



Save as much as possible as soon as possible. This is the first of your unpopular decisions. You will need to sacrifice your spending at the beginning of your career in order to have a better chance of living the way you want when you want, with financial freedom, for a longer amount of time. To you, frugality should be elevated to an art form. Your friends may call you cheap, but you won't care because you are focused on your goal without distraction.

Earn as much as possible as quickly as possible. With more income, you can keep more money in high-yield savings accounts and investments. Those funds will be ready for your early retirement. While it's the amount you save that matters, you can significantly extend those savings by earning more. Work more hours or take an additional job or two. Olympic athletes train and practice constantly and this is the same intensity you need to achieve an early retirement.

Avoid fees while investing. While this concept is one part of saving as much as possible, it deserves its own mention. Most investments underperform index funds and you'll pay higher fees for those lackluster results. While some investments do beat the market, you won't know which investments will skyrocket until it's too late. Invest in index funds and make sure you have a sensible mix of asset classes that present a good chance of protecting you from down markets when you need the money you've invested.

Consider a new definition of retirement. You may still want to work in retirement to earn additional money, particularly if you can do work you enjoy. Consider a part-time job or even a full-time job with a non-profit organization aligned with your interests and values. Leaving the corporate world to work for an organization you care about can be exhilarating and you will enjoy the work. Extreme early retirement is an achievement most people will not accomplish, even if you put forth a good effort. Leaving the workforce behind before the age of forty is an extraordinary accomplishment and it requires dedication, intensity, and a willingness to live differently.

Luke Landes writes for Consumerism Commentary, where he encourages discussions about money and consumer issues. Consumerism Commentary regularly tracks and reviews the best online savings accounts and other financial products and other financial products.

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Does 'good' debt really exist?

Source:http://www.creditcards.com/credit-card-news/does-good-debt-still-exist-1264.php?aid=52aae854
Does "good" debt exist anymore? Financial experts differ, but many say that in today's economy, it's time to reconsider how we look at some common types of debt.

Traditional thinking separates debt into "good" and "bad." Mortgages and student loans have been considered good debt because they have fairly low interest rates and hold the promise of a substantial long-term payoff. Auto loans and credit card debt usually rate a bad debt label.
Does 'good' debt still exist?

But with unemployment hovering around 9 percent, housing prices falling nationwide and the average cost for a four-year private education soaring to an average of just more than $37,000 a year, according to the College Board, does good debt really exist anymore?

Noted personal finance author David Bach says no. The recession, he says, taught us that "all debt is bad if you can't pay it off."
"With many Americans today, almost 30 to 50 percent of their paycheck is going just to interest payments," says Bach, whose latest book is "Debt Free For Life." "Often it's more than that. There's been a real awakening that debt is bad."

Others say good debt still exists, that buying a house is still a sound investment over the long haul, and borrowing for a college education is a good risk -- if you keep borrowing down and study for a profession that can pay it off.

Here are some ways the debate shakes out:
Cars and credit cards
In terms of bad debt, financial experts agree that a large amount of auto loan debt is hard to justify. If you have to have a car to get a job, then get a cheap car, but borrow as little as possible. Borrowing money at high interest to pay for a depreciating asset just doesn't make financial sense, they say. But there is more debate on credit card debt.

Jordan Goodman, author of "Master Your Debt," warns against it. "If you're paying 18 or 25 or 29 percent, it's hard to imagine what you'd invest in that would pay you more than 29 percent reliably," he says. "And, of course, it's not (tax) deductible."

But Lita Epstein, author of "The Complete Idiot's Guide to Improving Your Credit Score," says credit card debt isn't all bad if it helps you establish a solid credit history that will help you with big purchases later: "Generally, you get your best credit score when you use 10 to 20 percent of your credit limit," she says. "That shows any creditor who's considering you that you know how to manage your credit wisely, you know how to pay your bills on time and you're not going to get yourself in over your head."

Robert Pagliarini, president of Pacifica Wealth Advisors in Los Angeles, says credit card debt is good if it will make you money. Period. He gave an example of buying a piano on credit so that you may give piano lessons.

"Why wait four years to save up and buy the piano, when you can buy it on credit now and make some money? This is what businesses do. They borrow money ... so they can invest it into research, into assets so they can make more money. That's what individuals need to do."


Student loans: Good debt or bad debt?
Student loans are good debt, even as costs escalate, if you can expect to make a salary when you graduate that will allow you to pay off the debt within a few years, says Carol Roth, business strategist and author of "The Entrepreneur Equation." In today's economy, that may mean only taking on the debt only if you are entering a high-paying field or finding a less expensive college that will make the math work, she says.

You also have to consider that a college education pays off in other ways, she says. "There's a value to having an education, to learn and to be a well-rounded person but only you can assign what that value is, based on your own circumstances."

Personal finance columnist and author Liz Weston says there's a rough dividing line between good student loan debt and bad: "Don't borrow more than you can make in the first year of your career," she says.

Pagliarini says student loans are still a good bet financially, even in a time of high unemployment.

"The research shows that the more education you get, the more you're going to make long term," he says.

He notes the national unemployment rate is an average and doesn't fully illustrate the difference in unemployment among different education levels. "When you look at the people with bachelor's degrees and above, that number just about drops in half." In fact, Bureau of Labor Statistics numbers for February 2011 show unemployment rates for people with a high school diploma and no college to be 9.5 percent; it's 4.3 percent for people with bachelor's degrees and above.

Goodman says he agrees that on average people with college educations make more than people without. But the risk for making that choice has gotten too high, he says.

"People are taking on huge debt and, in the case of student loans, they're not forgivable even in bankruptcy. The two debts you can't get rid of are taxes and student loans."

That debt burden is exactly what concerns Thomas Alexander, Finance Department chair at Northwood University in Midland, Mich. He says paying for a college education with student loans is no longer a good risk unless you're entering high-paying fields, such as medicine, engineering or accounting.

"If someone is getting a degree in sociology or history -- the chances of landing anything that would give them a high return is pretty small," he says.

He says college is not for everyone and the better payoff may be skipping college and going into a trade.

"If you take a student who does not go to college and becomes a plumber or electrician -- those guys are going to make more money than 75 percent of the college graduates, but we've made the feeling in this country that that is beneath them."

Mortgages vs. renting
Goodman says taking on a mortgage is not a way to build wealth as it has been in the past.


"Home prices are falling -- probably will continue to fall -- and 25 percent of the population is underwater (the house is worth less than the amount of the loan). Home deductions [for interest] are overrated. You get a deduction at your tax bracket, so if your tax bracket is 25 percent, you're still paying 75 cents on the dollar. If you're not being bailed out by home-price appreciation, this may not be a good deal."

Roth says it's all about the math. She gives an example of buying a $275,000 home purchased with 25 percent down and taking out a 30-year mortgage at 4.5 percent. It will cost you $68,750 today to buy that home (that's the 25 percent down), and you will pay out more than $376,000 over 30 years. Even if the home doesn't appreciate in value, you will have an asset worth $275,000 at the end of 30 years. Rent at $1,500 a month over 30 years would be $540,000 and that would be without inevitable rent increases. There would also be no asset at the end.

That makes the beginnings of a case for why a mortgage is a good idea over the long haul, she says. "But you also have to ask yourself some questions," she says, "such as what are you doing with the difference in money you spend on the mortgage (only $1,045 vs. $1,500 in rent)? That money may also be able to be invested. Do you have property taxes? That creates more costs. Do you have assessments? How much is maintenance on your home? Is homeowner's insurance more than renter's insurance?"

Answering those questions will help you make up your own mind about what qualifies as good debt.

Regardless of where financial experts stand on what's good debt and bad debt, all agree working to pay it off as quickly as possible is a good idea.

"One thing that never backfires is paying down your debt," Bach says. "It is the safest, simplest investment you can make."

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7 Lasting Money Lessons From Mom

Source:http://www.foxbusiness.com/personal-finance/2011/05/05/7-lasting-money-lessons-mom/
Mom taught you to tie your shoes, say"please" and "thank you," and never pick up hitchhikers. What else did she do? She acted as your first teacher of personal finance. Here are the most-lasting lessons people learned from their mothers about the right and wrong way to use money and credit.

1. Money Equals Effort: Waste Neither.

"My mom gave me the single best piece of financial advice I ever received," says Corona, Calif.-based motivational speaker Barry Mahar. "She said, 'Before you buy anything, think of how long and how hard you'd have to work to earn that much money.' It's amazing how many things I've thought I needed turned out to be a lot less necessary when stacked up against the hours of work it would take to own them."

2. Don't Wait to Save.

Blogger Emmie Scott from Richmond, Va.,cites her mother's instruction in socking cash away as pivotal to her positive net worth. "She helped me open a savings account when I was about 8 years old, so I could start getting in the habit of putting money aside."


At 23, Scott has two high-interest savings accounts, maxed out her 401(k) and will soon open a Roth IRA. "I'm so grateful to her for taking the time to set me on a smart financial path and get me interested in what happens to my money." Today she features financial tips --based on her mom's counsel and her own research -- for young adults on her blog, Are Toe Rings Professional Attire?

3. The Sky's the Limit.

Atlanta-based financial planner KarenLee became a self-made millionaire by the age of 37 and credits her wealth toher mom, a high school economics teacher.

Besides teaching Lee to invest her savings, shop from the clearance rack and cook inexpensive food, she instilled the unerring belief that economic aspirations are not just limitless, but achievable. "She told me and my sister that we could do anything in life and to become independent financially. No glass ceilings here!"

4. A Good Budget Keeps You Out of Debt.

The woman is the accountant in many homes, and so are often coaches of the craft. Such is the case for Michelle Morton, an organizing consultant living in Raleigh, N.C. Not only did her mother teach her how to create a budget, but she uses the very same plan tothis day.

"I wanted to learn how to save and payoff some debt when I was in my early 20s and didn't know how to do it all, so she sat down with me and showed me how to budget," says Morton, who notes that the lesson also included essential banking skills. "She taught me how to balance my checkbook to the penny!"

5. You're Never Too Young to Spend Smartly.

Sarah Finch, a Chicago corporate trainer, cites the early education she got from her mom (Lynn Finch, author of the family finance book,"No-Cash Allowance") for her own financial aptitude and resilience. "She began teaching me money lessons when I was 5," says Finch. "I was given responsibility for real expenses as I grew older -- school supplies,lunches, clothes, etc."

Finch believes that the skills her mom gave her have been instrumental in keeping her out of financial trouble, even in down times or unexpected unemployment. "I will be using this same approach with my 3-year-old daughter as she grows up as well," says Finch.

6. Stop Whining -- Get to Work!

Self-reliance is paramount. That's what Andi Wrenn, a financial counselor from Boston, says she gleaned from her mom. Though they were poor, her mother neither complained nor went on government assistance, even though she probably qualified. "She showed us by example thatif you didn't have enough income to pay the bills, you go out and do something about it," says Wrenn. She soon began earning, too, taking on babysitting jobs and newspaper routes. As a high school student, Wrenn pitched in for household bills.

"It was so valuable to me to learn to be responsible for myself. By the time I left to attend college, I was prepared financially to enter the world as an adult," says Wrenn.

7. There is a cut-off point.

And what happens when cash is plentiful? According to Judy Woodward Bates, the Birmingham, Ala., founder ofBargainomics.com, a smart mom stops the gravy train. It's how she learned real independence.

"My parents spoiled me," admits Bates."But when I married at the age of 17, she and my dad refused to pay for my college and told me and my husband, Larry, that we were on our own." While Bates feels confident that her mom would have helped out in a crisis, "she let me know that the free ride was over and that, regardless of how young I was, I was an official adult and responsible for my own spending habits at that point."

If you're free from debt, your bank account is brimming, and you can overcome financial adversity with aplomb, you may have mom to thank. Be sure to do so -- it's good manners, after all.

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Overspending: 4 Lies That Lead to Debt Problems

Understanding financial concepts like credit and budgets is critical to long-term success with money. But equally important, it seems, is recognizing (and controlling) the impulses that lead you to buy things you don't need.

People with debt problems tend to share a common costly trait: they have unrealistic expectations for how material things will make their life better. That is the chief finding of a new study, Materialism, Transformation Expectations, and Spending: Implications for Credit Use by Marsha Richins and Myron Watkins, marketing professors at the University of Missouri.

The authors found that people who wind up deep in debt often got there because they expected "unreasonable degrees of change in their lives from their purchases." The authors also concluded "these beliefs are fallacious for the most part, but nonetheless can be powerful motivators for people to spend."

Studies like this complicate what has become a global quest to raise personal financial literacy through programs in schools and communities and at work. We need to do more than simply lay out the nuts and bolts of saving and investing. We also must examine the psychology of why we buy all the stuff we buy. It's not a bad idea to ponder your own behavior in this regard.

The study identifies four types of unrealistic expectations common to overspenders. These expectations are much less evident in folks who do not have debt problems. Here, then, are four lies that people tell themselves when buying things they don't need:

• It'll make me a better person: Many overspenders believe a purchase will literally change them into a better person. One woman in the study was certain that cosmetic dental surgery would improve her looks and quickly render her more confident and successful.

• People will like me more: Overspenders may believe that a purchase will make it easier for them to connect with others. One woman in the study wanted to buy a house so that she could entertain and be more social, and thus find more friends.

• I'll be more fun: Some believe that a purchase will make them more fun and fulfilled. A man in the study wanted a mountain bike because then, he figured, he'd become more adventuresome and interesting.

• It'll make me more effective: The typical overspender believes that a purchase will make them better at a certain pursuit. Several in the study said that a new car would make them more independent and self-reliant.

See the pattern? Heavy users of credit have a greater tendency to believe that the product makes the person. Which, of course, is backwards. A cyclist may need a new bike; a new bike does not make a cyclist. You can't buy personal transformation in a store.

Sure, whiter teeth may give you a confidence boost and a new house might make you more social — for a while. But it won't last if that's not who you really are. It's far more likely that the guy with the new bike will never take it out of his garage than turn it into a passion.

You know people like that, right? They have tons of unused stuff in the attic, and they may still be paying for much of it. The more you believe that happiness is for sale the more likely you are to end up with debts you cannot repay.

Source:http://finance.yahoo.com/banking-budgeting/article/112643/lies-lead-debt-problems?mod=bb-budgeting

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5 Step Plan To Financial Freedom & Making A Ton of Money

Source:http://money.gather.com/viewArticle.action?articleId=281474978010554&nav=Groupspace
If there is a common goal of successful people I met is this: they want to become wealthy or they are already wealthy. Wealth is something you can create if you know how.

Here’s how:

1. Decide what you want – This is the starting point to wealth building. If you do know what you want you will know what steps to make in order to achieve this goal. Have clear goals, not just say I want more money say instead I want $50,000 dollars income by 2011, be specific, have deadlines and create your wealth map starting from that.

2. You need to understand your strengths and weakness, your likes and dislikes – If you are good at buying properties, you can become a real estate investor, if you are good at teaching, you can have your own school. Whatever you do, it’s easier to achieve wealth if you do what you are good at and what you really like.

3. Create your wealth plan starting from your strengths and passion – It’s not surprise that Martha Stewart, Bill Gates, Warren Buffett, and Oprah are so successful. They have talent in what they do plus they are passionate. So Talent + Passion + Product or service people want to buy = Speed Wealth Building. Find your talents, your passion and find if people are willing to give you money in exchange of that, you will be on the right track.

4. Break down your goal to mini-realistic goals – Rome wasn’t built in one day, so do wealth. Focus on understanding your ultimate goals and breaking them in small but realistic steps that will put you one step further to success.

5. Write your plan on paper and put in a place you can see it every day – You need to remind yourself of your goal every single day if you want to succeed. If you are consistent and persist you are going to become successful sooner or later.

If you find useful this article and you are serious about solving your money worries for good I recommend you read this blog article here click here.

It’s a short article and I know it will help you understand money so easily you will say “aha!” and understand that making a lot of money is within the reach of everyone, no matter were you are you can make alot of money.

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The Million-Dollar Retirement Plan

Source:http://finance.yahoo.com/focus-retirement/article/111446/million-dollar-retirement-plan?mod=fidelity-buildingwealth
Achieving millionaire status is a noteworthy financial goal. But saving $1 million doesn't necessarily mean you are ready to retire or that you will be able to afford a lavish retirement lifestyle. Here's what it takes to save that amount over a working career and how much income you can expect a $1 million nest egg to provide in retirement.

Making your first million. Many people should be able to save $1 million for retirement if they start saving early enough. A worker who saves $5,500 per year beginning at age 30, gets a $1,500 401(k) match each year, and earns 7 percent annual returns will have $1,014,640 by age 65. However, someone who waits until age 40 to start saving will have to tuck away closer to $14,000 a year to reach $1 million by age 65, assuming the same 401(k) match and investment returns.

Those who do not get an employer 401(k) match or don't consistently save in a 401(k) plan will need to save even more on their own. "You may have to adjust for time frames when you were not contributing to your 401(k), such as when you are saving for a house or you change jobs," says Mark Fuller, president of Fuller Wealth Management in Broomfield, Colo. "Life happens, and you have got to be able to make some mid-course corrections along the way." Excessive fees and investment costs, 401(k) waiting periods and vesting schedules, and taking early 401(k) withdrawals or loans can also make it more difficult to become a millionaire. "It sounds easy and it sounds good on paper, but in actuality it is tough for people to do," says Doug Kinsey, a certified financial planner for Artifex Financial Group in Oakwood, Ohio. "People need to really keep their transaction costs to a minimum. If you shave off a couple of points a year in expenses, that goes a long way toward saving a million for retirement."

What $1 million will generate. We associate the word "millionaire" with luxury. Spread out over a 30-year retirement, $1 million will likely make you comfortable in many parts of the country, but not especially wealthy. "I have clients who have got a million dollars in retirement and they don't feel wealthy," says Jay Hutchins, a certified financial planner for The Wealth Conservatory in Lebanon, N.H. "It's not enough that you can put it in the bank and draw half a percent of income and live off it. You have to invest it and you have to take on risk." If you draw down 4 percent of your $1 million nest egg each year, you will receive about $40,000 annually for 30 years, before adjusting for inflation. To that amount you can add any Social Security or pension income you expect to receive. But you will likely need to subtract taxes, especially if most of your savings is in tax-deferred accounts including 401(k)s and IRAs, and account for inflation.

Making it last. You may have to adjust your withdrawal strategy in retirement as new expenses arise or cut back on discretionary spending such as travel or entertainment in years when your investments perform poorly. There's also inflation, which can erode your spending power in retirement. Most people have one major source of inflation-adjusted income: Social Security. Other strategies for staying ahead of inflation include holding Treasury inflation-protected securities, a government bond that promises a rate of return above inflation, certain inflation-adjusted annuity products, some exposure to stocks or stock-based mutual funds, and owning real estate. "If you're living off $50,000 a year today, once you factor inflation in there, you're going to need more in retirement," says Fuller. Depending on what you estimate your expenses will be in retirement, he says, "you need to make it a goal to have a seven-figure portfolio when you retire."

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How to Save More Money?

Source:http://kclau.com/money-saving-tips/save-more-money/
Beside the most frequently asked question about how to make more money, this is the second financial challenge most people demands for solution. Most of the dreams you have would have most part of it linked to how much money you saved. Be it a dream to travel the world, or a dream to send your children to study oversea, a substantial amount of money saved beforehand will ensure to fulfill those dreams.

Let’s go through what I think is the three most important things that ensure you to accumulate money seriously.

Motivate your elephant early

Most people give up their long term goal for short term pleasure. You find it hard to keep those two hundred ringgits untouched at the moment you are looking at some high quality fashion at a deep discount. Almost immediately you forgot that you should have save this two hundred allocated for your annual trip savings, which is only needed ten months later.

That’s the part controlled by the elephant in your mind, which is the irrational part of your brain. Your rational part of brain is thinking that you should save RM200 for twelve months then you can treat yourself a nice trip, or whatever is your dream. But the elephant is so huge that is too hard to be controlled by your rational thinking.

That’s why you need to motivate your elephant. Make it go to the direction you want, not following where it wants. And you better motivate it early enough because accumulating money takes time. The longer time you have, the better is your chances to achieve the saving goals.

Pay yourself first

You need to make yourself the first priority. When money comes to you, you have a very important decision to make. You can give the money to other people (paying bills, shopping etc). You can also save it for yourself.

Many people make the mistake of paying other people first. They always put themselves at the bottom of the payees list. That’s miserable because at the end, you will only get peanuts. But how do you ensure that you save first before you spend? That’s why the next component of having an effective saving system is so crucial.

Have an effective saving system

Since you know that it is really hard to ride elephant when it senses danger, you don’t want to let it face those risky moment. Since It is your emotional part of the brain that is holding you back from your long term saving goals, you need to have a system that prevent your emotion to take part in financial decisions.

That’s why an effective saving system always works for most people. Consider the EPF. It is a forced saving scheme. You may feel a pinch when you see your salary statement every month. So much is cut away for your future retirement savings. But there is nothing you can do about it because you are forced to take part in the program.

Why not put such saving system to do more good for you? There are rational parents who take up education saving plan from insurance company almost immediately for their every newborn child. Since it is a commitment to the education funding of their children, they never fail to save and complete the tenure of the plan.

Trust me. These saving systems successfully put the elephants to sleep. Your financial decisions will no longer be distracted by it. Be creative enough, and you will be able to design your own system that works.

Conclusion

As a conclusion – to save more money, you need to start an effective saving system that pays yourself first as soon as possible.

Just start now!

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How to Strategize Against Debt

Source:Yahoo Finance
From putting spare change to work to going on a spending fast, these folks found creative ways to chop their debt.

Anna Newell Jones

Strategy: Go on a spending fast for a year
Advice: Get creative. There are endless ways to save.

I had been spending over my means for a while. Every month I was spending at least $300, overdrafting my account and feeling horrible about it.

I realized I had all these wants and it was an insatiable thing. I would say, "Oh, I love this top from Anthropologie," and then as soon as I got it everything would be great... until I wanted something else. So I knew I needed to do something drastic. And one day, it clicked.

I decided to start a spending fast for the new year, which meant no spending on anything except absolute necessities -- like my mortgage, utilities, car payments -- oh, and hair dyeing. That was one "want" that I turned into a necessity as I started to see my roots grow in.

I can't buy clothes, no coffee out, no eating out. To save money, I've done the normal budgeting things like buying generic brands of groceries. But I've also started wearing all black and dyeing my clothes to extend the color. I've been re-gifting, growing my hair long to avoid haircuts, stuffing two loads of laundry into one and eating a lot of old canned food I've found in my cupboard. I also make random stuff to sell in my spare time. I have a store at Etsy.com where I sell zombie portraits of people, super cute baby onesies and banners, tags and shipping labels.

My year-long spending fast began on January 1, and so far, I have saved $5,772.25. $4,800 of that went to credit cards and the rest will go to paying my parents back the $3,247.97 I owe them and my $10,000 in student loans.

Lance Pickett

Strategy: Live without the little things
Advice: Don't go too far -- like trying cloth diapers to save $60

My wife and I owed $18,000 in student loans, $6,000 in car loans, $2,000 in credit cards and $152,000 in my mortgage.

We were living paycheck to paycheck and I was tired of seeing my bank account zero out every month. So we wanted to get out of as much debt as possible as soon as possible. We started by saving an extra 1/12th of our total required expenses -- like mortgage, utilities and Internet -- each month, in order to have one month worth of bills saved up at the end of the year. Then we got excited and doubled that. In three years we had six months of living expenses and threw that into a high interest CD at 5%. That really got us going, seeing the money grow -- and we became obsessed with eliminating debt.

We just really took a look at what we need and only spending money on those things. I used to eat out a lot and that cost me $200 a month. Now we invite friends to "eat-in" at our house. We have a garden and purchase produce from co-op programs. Before we became debt-obsessed we would also get nice Christmas gifts for each other, but now we limit each other to $50.

Now, if there's something we want we put it on our "Dream Board," a cork board by our bedroom door that we see everyday. And it will stay there until we're debt free. It also has the loan schedule for our house, and each month we scratch off a month. Next to the schedule, we post our ultimate "want" that we agree to purchase -- with cash of course -- once our house is paid off. I have a 2010 Camaro waiting for me.

Cutting back so much has been hard, but we've learned a lot along the way. My wife learned some things are worth paying more for after trying to use cloth diapers -- which most people use as burp rags -- pinned inside training pants with plastic pants over them for our two kids, all so that she could reuse the diapers and not spend $60 a month on Pull-ups. As a result they both got horrible rashes, so we switched to a cheaper brand of regular diapers.

Altogether, we've paid off around $90,000 since 2005.

Jowharah McNeil

Strategy: Put spare change to work.
Advice: Cut back, use cash.

I was laid off for 18 months and had two credit cards to pay off, so I had to learn to be creative. My husband and I have been trying out a cash-only spending system and we're only allowed to spend $40 a week per person on non-necessities. That means once the cash is gone, it's gone -- no more spending.

While doing this strict new budget, we noticed we had a lot of loose change everywhere -- in our cars, leftover from doing laundry -- so we started collecting all the change we could find and putting it in a jar by the door. Every month, we would use whatever money is in the jar to make payments on one of the credit cards. The minimum payment is only $39, but we usually paid an extra $50 or $60 using the coins we collected so that we can get it totally paid off as soon as possible.

Since we started collecting the coins about six months ago, we've already paid more than $560 of the $1,000 balance on the card, so this is really working for us.


Brian Leigh

Strategy: Track your expenses
Advice: Don't limit yourself too much, or you will give up.

I was able to pay off $22,000 of my $35,000 in credit card debt over the past 24 months just by looking really closely at where I was spending my money.

Being young, I made foolish mistakes with my credit cards, so when I started really wanting to knock out my debt, the biggest thing for me was tracking my expenses. I started by adding up how much I had been spending on meals and found out I was spending almost $55 a week just on lunch at work.

After that, I sat down, got a little notebook and started tracking every single thing I spent money on. I did that for a couple months, and then I came up with a payment plan. After overestimating how little I could live on the first month, I decided to take small steps.

I readjusted my allowance until it worked with my lifestyle. I started to bring my lunch to work four days a week, I shopped for groceries for one week and would then eat only leftovers during the weekend. I learned how to cook and found foods -- like broccoli -- that I can use in multiple meals so I don't have to waste anything.

To make sure my money goes where I need it to go, I set up two checking accounts and two savings accounts. I deposit $250 into the first checking account every two weeks --when I get my paycheck -- to use for everyday expenses. When it runs out, I don't go out.

I put another $250 into the first savings account as an emergency fund. Every five paychecks, I remove $1,000 from this account and apply it toward my credit card debt. I deposit $100 into the second savings account every paycheck. This account is used for long term goals, like a down payment on a house or a big vacation I want to take. Everything else gets deposited into my second checking account, and my bills and rent are automatically paid out of this account. Those automatic payments include an extra $1,000 toward my non-credit card debt -- like my student loans and car loans -- every month.


Jaime Tardy

Strategy: Budget!
Advice: Save, save, save before you quit your day job.

A couple years ago, I decided I wanted to have a baby and quit my job. But there was a problem. My husband and I were in debt, and I made two-thirds of our household income. So I couldn't just quit.

I started out by sitting down and adding up all our debt -- which ended up being around $70,000. The first thing I thought was, 'Wow, we really need to start getting rid of this. We should sell our car right away.'

After some prodding, my husband got on board too. We sold his car and were able to immediately get rid of $19,000 of our total debt. After that, we knew we were totally doing this.

Craigslist and eBay became our best friends, and we sold everything from a kayak to a weight bench and a computer monitor.

My husband did some website design jobs on the side to make some extra money, and we printed out a budget each month so we knew exactly how much we could spend and what we would be spending it on.

We saved on gas costs by limiting the amount of driving we did, and we put ourselves on a grocery budget of $300 a month. On top of that, we cut out cable, lowered our phone bill as much as humanly possible and switched our car insurance twice in one year to find lower rates.

By the time I quit my job for good -- which was less than two years after I started the budget -- we had paid off $70,000 in debt and put $23,000 in the bank as an emergency fund

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First Person: Why I Never Borrow Money

Source:http://finance.yahoo.com/banking-budgeting/article/111088/first-person-why-i-never-borrow-money?mod=bb-debtmanagement
Like many 20-somethings, I made a lot of financial mistakes before I finally grew up. Nearly every dollar I spent through eight years of college and law school was borrowed before I actually earned the money to pay for it. Between student loans and credit cards, I graduated with significant debt. And the crushing weight of that debt is why I never borrow money now.

Debt Leads to Depression

This is not a scientific fact that I've verified, but rather a conclusion I drew after crawling out of debt for more than 10 years. Every time a bill arrived in the mail or someone called to ask why a payment was late, I grew more withdrawn and disheartened. I felt like a tire with a slow leak, and I often wondered if it would ever end. To borrow money is to impose upon yourself an unnecessary burden -- both financially and emotionally.

Debt Becomes a Habit

Safe within the comfortable bubble of college, the real world never intruded to remind me that borrowing money would one day lead to consequences. It was painfully easy to pull out my credit card to make a purchase or to apply for yet another student loan. The money I earned went directly to pay for the debt I had incurred, though it was never sufficient to cover all of it. It became a habit for me to use my income to pay off debt rather than to fund the necessities of life.

Debt Provides False Security

Because I knew that I had a credit card to pay for the things I wanted, there was no reason for me to stay in my dorm or apartment rather than go out with friends or to put off a purchase until I had saved the money to buy it. During those years in school, I never felt financially strapped. Then, upon graduation, the money I'd borrowed became an albatross I thought I'd never shake.

Debt Creates Stress

This seems like a given, especially if you've ever accumulated a massive amount of debt, but when you borrow money, stress is a constant companion. For years, I lived in fear of losing my home and everything else. I worried about whether I'd be able to cover utilities after paying on my debts, and I was always looking for ways to make a few extra dollars. It's no way to live.

Saving Is Rewarding

Now, when I want to buy something expensive, I save my money. My wife and I have a separate savings account that is devoted to vacations, electronics, conferences, and anything else we want to do. We don't borrow money to obtain the things we desire; we save for them until we can afford them. And it's far more satisfying than if we just plunked down our credit cards.

Saving Makes You Think

When I was borrowing money hand over fist, my purchases were never carefully considered. I took the caveman approach to spending money: Want, Find, Buy. Now that I never borrow money, every purchase gets run through my mind many times during a period of weeks or months. Often I decide it isn't worth the effort, and my money goes toward more worthy purchases.

There Are Exceptions

What if my child needed an expensive medical procedure for which I didn't have the cash? I'd borrow money. What if my car broke down and I didn't have the money to fix it? I'd probably borrow money.

There are exceptions to every rule. But my goal is to continue saving money until I've stowed enough cash in the bank to wipe out all those exceptions. In my opinion, there is no greater security on earth than the knowledge that I don't have to borrow money, ever, to take care of my family.

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You Don’t Need A Broker: 9 Keys to Investing Successfully On Your Own

Source:http://millionairemommynextdoor.com/
I’m sure there are investment brokers worth their high commissions and fees, but I haven’t experienced one. I burned through five brokers before realizing that no one cares as much about my money and my future as I do. Brokers are salespeople. Naturally, they care more about their bottom line than mine.

Most people I coach don’t realize that they’ve been paying a 5-6% sales commission every time they buy new mutual fund shares because the commission is built into the price, making it difficult for the investor to “see” it. And paying a sales commission has nothing to do with the performance of a fund; you aren’t buying a better fund simply by virtue of paying more for it.

Each year, I’d compare my broker-managed portfolio’s performance with the stock market indexes (Wilshire 5000, S&P 500, Dow Jones Industrial Average, NASDAQ, MSCI EAFE, etc.). I found that despite paying a decent sum to brokers for their expertise, my portfolio usually under-performed the standard index benchmarks. In 1999, I decide that it was worth my time and energy to learn how to manage my own investment portfolio. My efforts have paid off very handsomely. Here’s a down-n-dirty summary of what I’ve learned:

1. Start Today

Start as early as possible to take advantage of the astounding power of compounding growth. By reinvesting the gains you receive from the money you invest, you can double your money in less than eight years assuming a 10% average annual return. Take a look at the following example, then try this calculator to see how much postponing your savings plan could cost you.

Start Now:
Save $10,000 per year for 30 years
@ 10% annual rate of return
= $1,809,434 ending balance

Start Later
Postpone saving for 10 years, then save $10,000 per year for 20 years
@ 10% annual rate of return
= $630,025 ending balance

Cost of waiting = $1,179,409

2. Put Your Investment Contributions on Auto-Pilot

Instruct your bank to automatically transfer at least 10-20% of your gross income to your investment account each month. If you don’t think you can afford to do this then you can’t afford your lifestyle! Get creative, cut expenses elsewhere, and start paying yourself first.

3. Maximize Retirement Account Contributions

How taxes are applied to an investment can make a big difference in the long run. There are tax advantages to retirement accounts which is why (in most cases) you should maximize your contributions to these accounts first, then add to your taxable accounts. Additionally, some employers match your contributions — which equals free money. This calculator compares a normal taxable investment to two common tax advantaged situations: 1) an investment where taxes are deferred until withdrawals are made, and 2) an investment where taxes are paid on money that goes into the account but all withdrawals are tax free.

4. Be Mindful of Fees and Do It Yourself

Invest $10,000 each year and use a broker to place your order and you might pay $575 per year in sales commissions. Alternatively, learn to place investment orders yourself and your commission savings, compounding 10% annually, would be an extra $104,042 in your pocket in 30 years. Invest in a low-cost equity portfolio using no-load mutual funds, Exchange Traded Funds (ETFs) and index funds. Even a small difference in the fees you pay on your investments add up over time. Use this calculator to see how different fees can impact your investment returns.

5. Diversify and Build a Balanced Portfolio

Speculative investments are like eggs: when they fall, they make a mess. Don’t place your bet on a single stock or sector. Spread your risk into a variety of market caps and styles as well as domestic, foreign and emerging markets. Proper diversification helps your portfolio weather any ups and downs the market can take. Asset allocation accounts for 94% of the variation in portfolio returns, while market timing and stock picks account for only 6% (Gary Brinson, Randolph Hood and Gilbert Beebower). Review and rebalance your portfolio annually to maintain your desired allocation percentages. The Asset Allocator calculator is designed to help you create a balanced portfolio of investments. Your age, ability to tolerate risk, and several other factors are used to calculate a desirable mix of stocks, bonds and cash.

6. Don’t Invest Money You Can’t Afford To Lose

Rises and falls in the stock market are normal and frequent. Don’t invest your emergency fund into the stock market because you don’t know when you’ll need to use it. Money you may need within the next few years doesn’t belong in the stock market either. Investing for portfolio growth is your long-term goal.

7. Cover Your Ass

Protect your growing wealth with adequate insurance. The number one cause of bankruptcy is major medical expenses. In addition to medical insurance, consider coverage for disability, life (consider a term policy rather than whole life), auto, homeowner/renter, business, and personal liability. Buy policies with the highest deductible you could afford to cover from your emergency fund — and invest what you save from the reduced rates.

8. Understand Your Assets and Liabilities

Most people consider the home they live in as an asset but the truth is, it’s a liability. And if you are counting on future home appreciation, it’s speculation. Stop thinking of your home as a savings account. Don’t believe the sales-pressure hype that homeownership is your best investment: you’re spending money on a property that isn’t producing income. If you insist on owning real estate as a part of your investment portfolio, buy an investment property that produces a positive monthly cash flow.

If you’re finding it difficult to squeeze your budget for investment contributions, downsize to a smaller home. Invest any remaining home equity, plus your new-found monthly savings, into your long-term-growth portfolio.

9. Don’t Invest Until You Understand

Question every piece of advice you are given through the filter of “what’s in it for them?” Unfortunately, there is no shortage of people who are skilled at separating you from your hard-earned money. It pays to be suspicious. If you aren’t committed to learning how to self-manage your investments, consider hiring a FEE-ONLY financial adviser (rather than a commissioned-sales broker) to assist you.

What I’ve offered today is a summary. I’ve shared my opinions and experiences. But don’t just take my word; ask questions and read investing books and web sites. Learn about different investing strategies and styles, assess your own personal risk tolerance, make a plan, then stick to it. Use your head — not your emotions — to guide your decisions. Practice investing first, using virtual online applications (not real money), as you wean off of your high-commission broker.

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Five Quick Ways to Bankrupt Yourself

Source:http://financiallyfit.yahoo.com/finance/article-110806-6784-1-five-quick-ways-to-bankrupt-yourself?ywaad=ad0035&nc
It's always been easy to go bankrupt but the recession made it that much easier, with 15 million people unemployed and struggling to pay their bills.

An astonishing 1.5 million people went bankrupt in the past year, up 20 percent from a year earlier.

"It's easier than most people realize," said Samir Kothari, co-founder of BillShrink.com, a site that helps people find the best, most cost-effective providers for everyday services like cellphones, cable, credit cards and gas.

"There is a general lack of financial discipline in the way people live their lives, manage their money and plan -- not that they don't do it well, but rather that they don't do it at all," Kothari said.

Remember the days when Intuit's Quicken and Microsoft Money software for managing your personal finances became popular? Millions of people bought the software, but as it turns out, they were used about as often as infomercial exercise equipment: Only about 10 percent of the people who bought it actually used it.

toilet_money_bucket_red_200.jpg
©Getty Images/CNBC.com
A how-to guide for bankruptcy, Step 1: Pour all of your money down the toilet.

"There was already a minority of people buying it to help manage their money -- and even those who bought it aren't using it!" Kothari said.

To help illustrate the point -- and maybe help a few people avoid becoming a statistic, here are five quick ways to bankrupt yourself:

1. Doing the Plastic Shuffle

The single best way to go bankrupt is to bury yourself in credit-card debt.

Our parents didn't have the option to rack up tens of thousands in credit-card debt -- credit cards didn't really become widely used until the 1960s. But for today's generation, it's an easy -- and common -- way for people to live above their means.

Transferring balances to a lower annual interest rate can be helpful if used sparingly, and in conjunction with a plan to pay it off, but chronic transferring often just masks a bigger problem.

"People think it will all just work out somehow. They think: 'I'll get a raise. I'll get a good tax refund,'" Kothari explained. "These things are not based on logic but on people being very optimistic about life -- defying reality. I think that's what gets people into trouble."

With the new credit-card legislation, lenders are now required to print on each statement the amount of time it would take to pay off the bill by only paying the minimum, and how much you'll ultimately be paying after all that interest.

"Imagine if you see that it will take you 17 years to pay off your bill!" Kothari exclaimed. "That should help shock America into realizing the trouble with living a reckless credit-card kind of spending game," Kothari said.

2. Assuming Insurance Will Cover Your Medical Bills

So, maybe you budget. You make an allowance for food, clothes, beer.

But do you have an allowance for medical costs?

Here's why you should: The No. 1 cause of bankruptcy is medical bills.

Harvard researchers found that 62 percent of all bankruptcies are caused by medical bills. Even more disturbing: 78 percent of those were people who had insurance.

"Things happen. Surprises happen," Kothari said. "And people don't prepare for the unexpected. They don't have a mindset of, 'How do I prepare myself for the unexpected?'"

Of course, the best medicine is to not get sick. And to that goal, you can do your best to lead a healthy lifestyle. But you also need to live a healthy "fiscal lifestyle," Kothari said -- make sure you're saving every month and building a cushion for the unexpected.

"Then you can be more resilient when life happens," he said.

3. Taking Out Advances on Your Paycheck

So you think just this one time, because you really really have to, it's OK to take an advance or loan on your paycheck?

Sounds like somebody needs a timeout!

If you need to get your paycheck money before it's due, there is some seriously fuzzy math going on.

"Payday loans are financial products that keep you in the poor house," BillShrink says.

When our parents were running short ahead of payday, they did things like split a can of beans for dinner and save the steak for when they're more financially secure.

These are humbling experiences but they build solid financial habits -- not to mention provide great stories they can proceed to repeat to their children 1,489 times throughout their lifetime.

Your parents' stories don't always work to scare you into managing your money better. But here's something that might: Fees on paycheck advances and loans make credit-card interest rates look like chump change.

BillShrink estimates that, when you factor in all the fees, the interest rate is 911 percent for a one-week loan, 456 percent for a two-week loan and 212 percent for a one-month loan.

4. Keeping Up With the Joneses

A huge part of the nation's money problems today are psychological: You see your neighbor, who you know doesn't make as much as you, just bought a luxury car.

How can he afford it, you wonder.

What most people often don't realize is -- he can't.

So you just sit there and think about how much you want it. You convince yourself that if he can afford it, so can you. And then, you just hit the breaking point -- and you buy it.

"There's a strong association between materialistic possessions and status," Kothari says. "Remember 'he who dies with the most toys wins?'"

From new houses and cars to the latest gadgets or exotic vacation destination, it's all very tempting to want to either keep up with -- or outdo your neighbor.

"People think that stuff matters to other people more than it really does," Kothari says.

Here's a statistic to keep in mind the next time you get neighbor envy: There are approximately 181 million people with credit cards in this country and more than half of them carry a balance.

So maybe next time you ask yourself, "How can he afford it?" you can also ask, "Is he one of the 100 million who carry a balance on their credit cards?"

And remember: Whatever you buy is on your credit card -- not his. Before you make a big purchase, make sure you've got the cash in the bank to back it up.

Maybe he should be keeping up with you!

5. Overestimating the Value of an Expensive Degree

The more education you have, the higher your pay, right?

Wrong.

When people take out student loans, few do the math to see what the average salary will be after graduation -- and how long it will take to pay off their loans.

They just assume that someone else has probably already crunched the numbers, making sure the cost of the degree is proportionate to the salary. They assume that because they've invested in education instead of, say, a new pair of shoes or golf clubs that their money was spent wisely.

Well guess what? Those people already got the first question wrong -- before even signing up for the class.

"The for-profit education sector is really, really big industry with huge advertising budgets," Kothari says. "They'll have a guy who says he graduated and now he makes $200,000 a year -- if you compare data on average salary, I'm sure it's not aligned with some of those marketing claims," Kothari said. "They're just selling a product."

So do your homework -- before you go to school.

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Advice for the 'Poor Rich'

Source:http://finance.yahoo.com/banking-budgeting/article/110801/advice-for-the-poor-rich?mod=bb-budgeting
Everybody hates Todd Henderson.
In case you haven't heard, he's the University of Chicago law professor who unwisely blogged last week about his financial woes in a post headlined "We Are the Super Rich."

Mr. Henderson and his wife, an oncologist, make more than $250,000 a year, and apparently they're struggling to get by. If President Barack Obama gets his wicked way, and tax rates rise for those earning more than $250,000 a year, Mr. Henderson says it will mean real sacrifice in his family.

It's too easy to pelt Mr. Henderson with rotten eggs, as so many have now done. (He yanked the post, but way too late—and on the Internet, one's blunders never die.) But can we, instead, give him some useful advice?

Sure.

Adjust your expectations. "I can show you a client of mine right now who lives in a suburb of Chicago, he's a doctor, makes $350,000 a year, and he routinely racks up $25,000 on his credit cards," says Michael Kalscheur, a financial planner at Castle Wealth Advisors in Indianapolis. The reason? Too many people have "unrealistic expectations," says Mr. Kalscheur. They figure they should be vacationing in Italy, driving expensive cars, the whole deal. "We need to knock him upside the head. He's got to stop spending money." Every financial planner will tell you the same thing: The real challenge is tackling the psychology.

Refinance your mortgage. I have no idea how big and expensive your home is, but you can now get a 30 year jumbo mortgage at around 5.3%. Even on a $1 million loan that comes to $5,500 a month, and it's tax deductible. If your home is so expensive that you can't even afford it at these rates, you can't afford it. Sell it and move somewhere more affordable. If you're underwater on the mortgage, talk to the bank. Forget about "equity," which may not exist, and look at the cashflow.

Get a grip on your discretionary spending. Carry a pocket notebook with you for a month, and write down everything you spend. Get your wife and children to do the same. It will help you understand where your money is going. Almost every financial planner will tell you that this is invariably a huge eye-opener. As Jonathan Sard, a financial advisor in Atlanta, says, you may find you spend $100 in Target every time you go in for lightbulbs, or spend $300 taking your kids to a White Sox game. With everyone it's different, but you need to know where the losses are. If writing everything down is too much of a challenge: Junk the plastic, and just carry cash. This is instant budgeting. If you carry $500 a month, that's all you can spend.

Stop blaming the government. According to the Congressional Budget Office, a household earning $265,000 a year is in the top 20% in the country, and one earning $395,000 is in the top 10%. (The relevant thresholds are $190,000 and $290,000, respectively. And those figures were from 2007, a more prosperous time). So you're near the top of the tree in the richest country in history. At the same time, contrary to what you seem to think, federal taxes are not extortionate by modern historical standards. According to the CBO, families in the top 20% pay average federal taxes of 25.1%. The figure in President Reagan's final year in office: 25.6%.

Think about relocating. No kidding. It's not about how much you earn, it's about how much you get to keep, and if you are paying too much to live in an expensive town like Chicago, you may be much better off earning less somewhere cheaper. You and your wife both have highly portable jobs. According to the ACCRA Cost of Living Index, someone earning $350,000 in Chicago could get the same standard of living on just $230,000 a year in, say, Austin, Texas or Cincinnati.

Reconsider the investments. You say you're putting money into the stock market each month, even though you are paying off huge student loans. You need to do the math. If your investments are through a 401(k), they make sense: They're saving you taxes, maybe taking advantage of a company match. But if they are in addition to your 401(k) plan, they may not make sense right now. You are probably better off using the money to pay down that debt.

Rethink the two cars. Are you leasing them? How much are they costing you a month? This is one of the biggest ways middle class families blow their cash. I can't believe the number of people who think these moving white elephants are a status symbol. When I see an expensive car go by, all it tells me is that the owner is (a) insecure and (b) has no sense. These days you can get a decent set of wheels for a lot less than $10,000. Buy used. Pay cash. Run it till it dies.

Rethink the schools. You're sending your children to private school. But how much is it costing you? I take your point about terrible local public schools, but can you move to a neighborhood with better public schools? Or downscale to less-expensive schools?

Talk to a tax accountant. You say you're using TurboTax. With your income, you might benefit from some professional assistance. Are there deductions you can take that you're not using? Are you subject to Alternative Minimum Tax? Should you make your fourth quarter state and federal tax payments before Dec. 31? You may be able to help your financial position.

Go after all the little costs. You're hemorrhaging money. Get the kids to mow the lawn or do it yourself. Bake your own bread. Cook your own meals. Buy generic brands and bulk brands. Go to Costco, Sam's Club and other discount clubs. Junk the landline. Junk cable for Netflix. Rethink your banking: You're probably bleeding money through needless "fees" every month. Forget the "conspicuous consumption." Go for the conspicuous unconsumption. Brag about how little you spend. Find new ways to avoid spending money.

Oh, and one more thing. Never, ever, ever again blog about how hard it is to live on $300,000 or $350,000 a year at a time when one middle-aged man in four can't find a full-time job, and one in five can't find any job at all.

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Kalau Melabur Jangan Sampai Rugi

Source:http://www.pakdi.net/kalau-melabur-jangan-sampai-rugi/

“Di mana saya patut melabur?”

“Ok kah saya melabur di sini?”

“Adakah saya membuat keputusan pelaburan yang betul?”

Barangkali itu adalah persoalan-persoalan yang sering keluar dalam pemikiran kita semua apabila kita melabur, apatah lagi kalau kita baru hendak memulakan pelaburan.

Pertama, kita kena faham prinsip asas pelaburan yang paling penting iaitu jangan rugi. Pelabur yang bijak adalah pelabur yang tahu bagaimana untuk memastikan modalnya kekal. Maksudnya, kalau pelabur itu memulakan pelaburannya sebanyak RM 100, dia mesti cuba sedaya upaya agar nilai RM 100 itu kekal.

Betul, pelaburan juga datang dengan kos. Komisyen broker, ejen, guaman, spread, cukai dan sebagainya. Ini juga mesti diambil kira oleh kita semua. Maka, sekiranya sejurus selepas kita beli sesuatu produk pelaburan dan kita dapati kita tidak boleh terus menjualnya kembali paling kurang dengan harga kos, itu bermaksud kita dalam posisi rugi. Pelaburan kita telah rugi.

Justeru, kita perlu merangka plan pelaburan yang tepat untuk memastikan kerugian awal sebegitu dapat dikurangkan ke jumlah yang paling minima.

Di Malaysia, ada 2 penanda aras yang sangat sesuai untuk kita semua. Penanda aras yang dimaksudkan adalah:

1. Kadar pulangan fixed deposit (FD) / mudharabah di bank-bank yang ketika ini dalam sekitar 3-4% setahun.

2. Kadar pulangan Tabung Haji / ASB yang ketika ini dalam sekitar 5-7%.

Sudah tentu untuk individu yang mempunyai net-worth yang tinggi dan juga institusi pelaburan adalah dengan merujuk kadar pulangan bon / sukuk yang bertaraf AAA.

Instrumen kewangan yang disebut ini adalah instrumen kewangan yang mempunyai risiko yang rendah (secara umumnya). Justeru, modal pelaburan kita selalunya kekal dan kerugian tidak berlaku dengan mudah.

Jadi sekiranya kita mahu memulakan pelaburan di tempat lain kita perlu pastikan adakah kita boleh dapat lebih dari pulangan 3% di FD / mudharabah atau lebih dari 5-7% di Tabung Haji / ASB.

Ingat, RM 100 yang kita letak di FD / mudharabah membolehkan kita mendapat RM 3 dan menjadikan nilai pelaburan kita menjadi RM 103.

Kalau kita melabur RM 100 dan setahun kemudian nilainya menjadi RM 94 misalnya, itu bermakna kita sedang kerugian dan kita perlu menilai balik pelan pelaburan kita.

Harus kita ingat, sekiranya kita tidak berjaya mendapat pulangan melebihi dua penanda aras ini secara konsisten, maka kita perlu melihat kembali pelan pelaburan kita. Adakah kita telah melabur dengan pengetahuan dan kemahiran yang betul?

Adalah lebih baik kita meletakkan sahaja duit kita dalam FD / Mudharabah, Tabung Haji / ASB kalau pelaburan kita di tempat lain sentiasa rugi.

Ingat, prinsip utama ini sentiasa, jangan rugi.

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10 Reasons To Buy a Home-Yahoo Finance

Source:http://finance.yahoo.com/real-estate/article/110685/10-reasons-to-buy-a-home;_ylt=ApNb62Jt0CnS2txcwUHdZwlO7sMF;_ylu=X3oDMTE5dmh0aG1oBHBvcwMyBHNlYwN3ZWVrZW5kRWRpdGlvbgRzbGsDd2h5YnV5aW5nYWhv?mod=realestate-buy

Enough with the doom and gloom about homeownership.

Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.


After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make your rich?"

But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way— about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.

3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains—if any—when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension—zoning permitted—or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.

5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.

6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities—for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy—if it happens—and still managing to sleep at night.

8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed—either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.

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