We'll focus on just one technique to improve your finances - paying in cash. Here's how making cash-only purchases can help you to budget, save and invest.
A Plastic Paradise
With rapid increases in the use of plastic over hard currency, some people consider carrying cash old fashioned. To be fair, plastic is much sexier than a bit of colored paper with a deceased president gazing into the great beyond. Some banks even allow you to customize the color and graphics on your credit and debit cards.
Debit and credit cards also offer the advantage of security. With them, you need a signature and/or a PIN number to access your funds. Cash is only protected by your ability to defend it should someone want to take it from you.
Except for the odd country store, plastic is accepted in as many places as cash is. Yet cash is almost always the better choice for making a purchase. Here's why:
Overpaying
One of the drawbacks of credit and debit cards is that they encourage you to spend more than you intend to by giving you easy access to more capital. With cash, spending more than you intend requires going to a bank or ATM, then returning to the store to complete your purchase. This provides time to reconsider whether your budget can handle the extra strain.
Carrying only the cash you are prepared to spend on a given product can prevent you from 'buying up' and paying for features you don't need. This works for minor items, but buying a boat or pickup truck requires more cash than you may be comfortable carrying on you. If a check can't be used, a debit card is better than a credit card because you can only spend money you already have.
Over-Shopping
Cards won't just lead you to pay too much for single purchases, they also encourage you to buy more items than you mean to. Stores build displays to make their wares appealing so that you will purchase more. In some cases a checklist is insufficient in preventing impulse buys.
People tend to spend more with credit cards than with cash. One study found that people spend up to 18% more when using credit cards, and McDonald's notes that average purchases rose from $4.50 to $7 when customers used plastic over cash.
Only carrying enough cash to buy the things on your list is the best way to shop within your budget. If you take the time, you can find sales or inexpensive alternatives to your regular brands to make your cash go further.
Cash Vs. Credit
For the purpose of this article, cash means money you have already earned. Using your Visa for a cash advance does not solve the problem of using high-interest debt to cover your expenses.
Cash has one clear advantage over credit cards: if you carry a balance on your card, or only make the minimum monthly payment, you will incur interest at a rate of 15% or more on your purchase. This means paying $15 or more for every $100 you spend. If you save enough cash for the same purchase, you give yourself the equivalent of a 15% discount by not using your card.
Cash Vs. Debit
If we just portrayed cash as a better alternative to credit cards, few would argue against us. In contrast, debit cards enjoy a protected status, despite ATM fees.
A debit card can also trivialize purchases. Being a square of plastic, it is difficult to tell how much money is spent through your debit card. It becomes a matter of $2 here, $6 there and so on until you give up tracking how much you spend. It's a shock when the monthly statement comes. With cash, you can monitor your funds as you spend.
So, in conclusion, using a credit or debit card offers more security than cash in most cases. For large purchases, cash is often not an option and writing a check or getting a bank draft may be more trouble than it is worth. In addition, a properly used debit card can be a great alternative to cash instead of resulting in credit card issues.
A credit card can also be a convenient tool, but it's only a fair substitute for cash when your balance is paid in full at the end of each month. Otherwise, your reward for convenience is debt.
If you tend to overspend, shopping with cash is one way to adhere to your budget and limit impulse buying.
Image Source: http://www.aboutfinance.biz
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Monday, June 30, 2008
Paying in CASH
Monday, June 23, 2008
Dave Ramsey or Suze Orman
Whose financial advice do you like better ?
Please let me know why in the comments section of this post.
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Wednesday, June 18, 2008
Why do people not save for retirement
Ellen Rinaldi, who leads Vanguard's Investment Counseling & Research group, offered some observations to help investors overcome a few common myths and help achieve their long-term goals.
Myth #1: It's too late for me to start saving for retirement
This myth can lead to inaction—whereas the reality is that it's never too late to start saving.
Of course, the best strategy is to start saving early, because $10,000 saved in your 20s or 30s is going to be worth a lot more when you are 65 than $10,000 saved in your 40s or 50s. But no matter where you are in life, you'll benefit from putting your money to work for you now.
As Ms. Rinaldi explained, "The first thing to do is to maximize the contributions you make to your 401(k) plan, if you have one, and to make sure you're getting the full employer match. Second, look at a traditional IRA or a Roth IRA as a supplement. Finally, if you're 50 or over, take advantage of the catch-up contributions that are available to you—they can help you boost your savings in a dramatic way."
Myth #2: I got a late start, so I should invest aggressively to compensate
With this approach, you're trying to make up for lost time, but it may expose your savings unnecessarily to dramatic ups and downs in the market.
If stock markets drop precipitously—say, when you're 58—you may find yourself with insufficient savings, and you may have to work longer, save more, or spend less when you do retire.
Myth #3: My retirement savings need to last only 10 or 20 years
The pitfall of believing this myth is that it might cause you to run out of money.
Life expectancy tables tell us that for every 65-year-old couple, there's a 72% chance that at least one will live to age 85, and an almost 20% chance that one will live to 95. "Today, you have to plan on your retirement income lasting 25 or 30 years, not 10," said Ms. Rinaldi. Consider an investment strategy designed for asset growth and for an income stream.
Myth #4: I need a dozen or more funds for my portfolio to be diversified
Diversification is a good way to spread your risk, reducing the impact of a steep downturn in any one asset class or market sector. The danger here lies in misinterpreting diversification.
"For lots of people, holding either a target retirement fund—which is actually a basket of mutual funds—or a combination of a total stock market index fund and a total bond market index fund will provide all the diversification they need," said Ms. Rinaldi. "You don't need to hold a lot of funds to be diversified, if the funds you do hold are well-diversified themselves."
Myth #5: When I retire I should move out of stocks
This myth also can put you at risk of outliving your money.
"If an investor moves completely out of equities into bonds, this may allow inflation to eat up more of their return, because they're removing the potential for greater growth from their portfolio," said Ms. Rinaldi. Over long periods, returns from an all-bond portfolio are likely to be more modest and may not keep pace with inflation.
"Holding a well-diversified portfolio is key," said Ms. Rinaldi.
Related Links:
- Investing Strategy for building your Nest Egg
- How to choose Funds in your 401K
- Keeping Cash Under My Mattress..makes sense !
- Financial Planner: Do I need one ?
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Tuesday, June 17, 2008
Simple Foreclosure Solutions
Due to default on your payments, if your lender, bank or mortgage company is looking to take your home through foreclosure, you should be looking for solutions to prevent this from happening. Here in this article, we are going to look at two simple things you can do to stop the proceedings and save your home from foreclosure.
Simple Foreclosure Solutions You Can Live With
There are several things you can do to stop the bank from foreclosing on your home, but most foreclosure solutions involve one simple step - talk to the bank. More than likely it is not in the bank's best interest to foreclose on your home and they will probably be more than willing to help you with finding different foreclosure solutions so that you can keep your house and they can keep receiving their payments.
After contacting your bank or lender, they may give you the option to refinance your mortgage balance at a reduced interest rate. This option to refinance at a lower rate could also effectively lower your monthly mortgage payment. This can certainly help you regain control of your monthly budget, and at the same time put you back on good footing with the lender. By the way, a refinanced loan is a new loan that begins all over again with a fresh start. You may even find that your first payment may be delayed a month or two as the loan is going through the processing. Another feature of the refinance, depending on your equity, is that the lender likely will allow you to 'roll' any late payments and fees into the new loan amount so you start with a new home loan that is current.
While you can get back on good terms with the lender and get a fresh start, should you be able to get a lower interest rate for your new mortgage, your payments will likely be lower as we said before. Of course, that is assuming that you keep the same terms as your previous loan. If you get a longer term, you payments, your payments could be even less. However, there are reasons why a longer term is not a very good idea. While your monthly payment will be less and this options looks attractive after being in a financial mess, less of your new payment will go to principle (equity) and more will go toward interest, all of which could prove to be detrimental over the longer term. Either option is one of the foreclosure solutions that can help you get back to sound financial footing, get the bank or lender off your back and get you a fresh start.
Another choice, and far less appealing option in most cases, is to sell your home. For the most part this can be very difficult as it will put a lot of pressure on you, your family and the bank as well. The bank will become very leery of you if it looks like you are trying to bail out on the loan. Additionally, there are many fees associated with selling a home so the actual sales price will not be the amount of money you receive.
At the end of the day, the best foreclosure solutions are the ones that keep you paying on your current loan. If you can find a way to get caught up and get back on track, that is always the best way. Taking a second job or finding a way to work from home when you can are good options while you try to get ahead of the mortgage curve.
Image Source: http://www.bankforeclosuressale.com
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Thursday, June 12, 2008
Free: Website Magazine
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Friday, June 6, 2008
It's Not About the Money: Unlock Your Money Type to Achieve Spiritual and Financial Abundance
About the Author
Brent Kessel was named one of the top 250 financial advisors in the U.S. by Worth magazine and his company, Abacus Wealth Partners, which manages more than $800 million in client assets, was named one of the "top 250 wealth management firms in the U.S." by Bloomberg's Wealth Manager. Dubbed a "Financial Soul Searcher" by Research magazine, Kessel has been featured in Newsweek and Yoga Journal, and has been widely quoted in the Los Angeles Times, Newsweek, Business Week, and the Wall Street Journal. After meeting the Dalai Lama and Mother Teresa as a young man, Kessel began practicing yoga and meditation and skyrocketed to success in a career that uniquely combines spirituality and wealth management.
In the Book
Part One: First we have to understand what is happening inside on an emotional level before we can work on outside circumstances.
Part Two: This part focuses on recognizing and understanding your core money personality.
Part Three: This is the intellectual side of money management. Here is when It's Not About The Money gets into investing, financial planning and using your core story to help you make money.
Part Four: This is the nuts and bolts resource section. Here you will find pages of valuable information which standing alone is worth the price of the book.
Brent Kessel did a great job of marrying the emotional, spiritual and practical aspects of money, financial planning and wealth management. It's Not About The Money is the type of book you'll want to make time to read, study, work the activities and absorb the material on both an emotional and intellectual level.
You may want to revisit the concepts after an initial reading, but that will be efficient because the book is easy to follow. The book is well organized with chapters & sections for various archetypes, so that in the future the reader can just refer to the pertinent sections.
This book might be appealing to perhaps a college freshman with a sudden profound interest in psychology and finance and absolutely no prior experience.
Overall a good read!!
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Tuesday, June 3, 2008
Five Online Resources for Forex Beginners
(Guest post by Heather Johnson)
Have you considered getting into the foreign exchange market? Also known as Forex, this is a fast market that operates 24 hours a day, five days a week. If you have previous experience with trading on the stock market, Forex is quite different. However, it can be a great way to make some money and Forex is gaining popularity with investors all over the world. If you would like some tips and tutorials for getting started with the Forex market, consult the following online resources for help.
School of Pipsology – This site will literally school you, as it is organized into lessons according to grades. Start out in kindergarten and, as you learn more about the market, eventually graduate from the School of Pipsology.
Cyber Trading University – This site, also constructed in the guise of an online Forex school, offers free tutorials for beginners. These include video tutorials, which can be viewed at no extra charge.
Forex Training – Not only does this site offer comprehensive lessons in Forex trading, it also provides a free practice account. Using a practice account with virtual money allows you to trade with real-time quotes and get used to the process before investing real money.
Forex Facts – If you are in need of an all-inclusive FAQ list for Forex trading, you will find it here. From charting to market analysis, this teaches you everything you need to know about Forex philosophy and strategy.
Investopedia – Always a reliable source for investment advice, Investopedia has a section devoted entirely to the Forex market. The whole site can be of great use to Forex traders, however.
People from all walks of life are trading on the Forex market. Thanks to the advent of the Internet, online trading has never been easier and it affords "regular Joes" the chance to try out the system. Whether you are interested in trading as a hobby or as a serious investor, learn the ins and outs of Forex with the five resources above.
Image Credit: OnlineForexTradingBlog
About the Author
This article is contributed by Heather Johnson, a freelance writer as well as a regular commentator on the topic of credit card review. Heather invites your questions, comments and freelancing job inquiries at heatherjohnson2323 at gmail dot com.
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