Some Money Management Hints
| Category: Home Based Business - Finance | Date: 2003-09-15 |
"We share what we know, so that you and your money will grow."
The following are miscellaneous tips on making the most of your money. The most important basic principle is to live within your means and a penny saved is a penny earned. (In fact a cent saved is worth nearly two cents earned because of the effect of tax on your earnings). Treat yourself occasionally; but don't live extravagantly, unless your can afford it and still save. This is fundamental to good money management; yet many people don't follow this principle.
Firstly evaluate where you are now - by drawing up a statement of your assets (e.g. house, car, furniture, etc.) and liabilities (mortgage, personal loans, overdraft, hire purchase, credit cards etc.) From this you can draw up a budget of income and expenditure. Look at your outgoings and make a commitment to live within that budget. Meet those goals on a weekly basis and monitor your progress regularly. Sometimes it is necessary to get help from budget advisors if you have a severe problem that you cannot manage yourself.
WHAT DO YOU DO IF YOU CAN'T MEET YOUR DEBTS AND MAKE AND MAKE ENDS MEET?
The best advice is admit it and try and to come to some arrangement with your lender.
1. Draw up a budget of income and expenditure - cut down on expenses, household and personal . Also consider part time employment.
2. List your debts outstanding including payments still to be made.
3. List your assets for possible sale.
4. Approach lenders to see if you can negotiate lower repayments over a longer period to repay the amount.
5. Attempt to reorganise borrowings into one loan, perhaps at a lower rate over a longer term.
You can also improve your financial position without receiving a dollar more in income by not spending it. Most families spend money inefficiently and could live more economically by cutting costs in housing, car expenses, entertainment or hobbies. A person smoking two packets of cigarettes a day would spend over $3,000 a year which is about 10% of the average wage. The golden rules to spending less are paying off debts as quickly as you can - interest is the killer of your financial health. The other is saving a nest egg fund for emergencies, such as unexpected medical expenses.
HAVING FINANCIAL DISCIPLINE
* An inability to save is usually due to bad spending habits.
* There is more to be gained by cutting spending than receiving a salary increase (because of the effect of tax).
* Aim to save at least 10% of your income, even if it means cutting your costs to achieve this.
But all this is unsound, if the potential investor is heavily mortgaged. The fastest route to financial freedom is to pay off debts. "Knock your mortgage on the head as soon as possible". It does not make a great deal of sense to invest spare cash on one hand at 12% (and be taxed on that income), while at the same time you're paying a mortgage at 16% after income tax. Perhaps you could take on a boarder, or do some repairs yourself, if you are technically minded. This is what I do. Also sell under-utilized assets like boats and caravans. Some items can be bought second-hand and will not lose their value as quickly as new ones. Enlist the help of family members for housework and gardening (in places like South Africa.)
2. Avoid excessive borrowing and do not borrow to buy consumable or luxury items, such as cars and holidays. Rather implement a savings plan to pay cash for those items in the future - make them financial goals. Credit cards can be useful; but use them sparingly, as the exception and not as the rule.
3. Borrow from the most cost efficient source - get your mortgage from the bank or building society offering the lowest interest rate. Also be alert to alternative cheaper forms of finance. You will not achieve financial success, if you borrow money to buy an asset that is not rising in value. The financial return from the asset must be more than the interest cost of the debt. If an asset fails to return at least the cost of financing its purchase, then sell it.
4. Speculation. There are time's in a man's life when he should not speculate. "When he can't afford it and when he can" (Mark Twain). There is nothing wrong with financial speculation, as long as it is done with money you can afford to lose and as long as the odds are in your favour. However, don't gamble on the horses or other high risk games of chance. Treat them purely as entertainment and not the way to make a fortune. Investing in the sharemarket is not really gambling, as the odds are in your favour long term... even in the uncertainty and turmoil of today's markets!
5. Opportunities. Opportunities are everywhere; so look out for them - like perhaps going into business for yourself. Create your own by looking at a situation from a different point of view. Remember that change is an opportunity in disguise. Problems are not insurmountable, but a challenge. Obstacles present opportunities to find new paths.
6. Gain Knowledge. Investing without knowledge is perilous, so expand your knowledge and insight by reading, listening and thinking about financial matters. When in doubt, seek advice from an independent financial consultant - as Ronald Reagan said, "trust but verify". With knowledge and discipline you will be financially successful.
Finally, a most important factor in good money management is a positive outlook towards the future. You should also have a positive mental attitude towards yourself; but at the same time recognise your strengths and weaknesses. With a belief in yourself and with commitment to your goals, you will be a successful money manager. Have courage to take the tough financial decisions that sometimes have to be made - ones like selling the family home or downgrading the car to free up capital. Do not fear failure. Project a positive image and market yourself as a person, who enjoys the challenge of achievement.
Most of these proposals are common sense; but many people ignore these basic rules of money management. Use your IMAGINATION well in managing your personal finances... then they will not manage you.
Good luck
Craig Lock
http://www.craiglockbooks.com
© Craig Lock 2002
About the author
Craig Lock has been involved in the personal finance field for over twenty-five years in South Africa, Australia and New Zealand. He is now an author of six published books with another twelve being published and marketed on the Internet. Craig has studied and written extensively on money matters: articles, brochures for financial institutions and books. He is presently living in beautiful slow New Zealand waiting for the next adventure life has in store for him.
Best Wishes from the First City to see the Sun in "Godzone" (as "little" New Zealand is affectionately known)
C.Lock@xtra.co.nz
http://www.celebrityhowto.com/CLock.html
The following are miscellaneous tips on making the most of your money. The most important basic principle is to live within your means and a penny saved is a penny earned. (In fact a cent saved is worth nearly two cents earned because of the effect of tax on your earnings). Treat yourself occasionally; but don't live extravagantly, unless your can afford it and still save. This is fundamental to good money management; yet many people don't follow this principle.
Firstly evaluate where you are now - by drawing up a statement of your assets (e.g. house, car, furniture, etc.) and liabilities (mortgage, personal loans, overdraft, hire purchase, credit cards etc.) From this you can draw up a budget of income and expenditure. Look at your outgoings and make a commitment to live within that budget. Meet those goals on a weekly basis and monitor your progress regularly. Sometimes it is necessary to get help from budget advisors if you have a severe problem that you cannot manage yourself.
WHAT DO YOU DO IF YOU CAN'T MEET YOUR DEBTS AND MAKE AND MAKE ENDS MEET?
The best advice is admit it and try and to come to some arrangement with your lender.
1. Draw up a budget of income and expenditure - cut down on expenses, household and personal . Also consider part time employment.
2. List your debts outstanding including payments still to be made.
3. List your assets for possible sale.
4. Approach lenders to see if you can negotiate lower repayments over a longer period to repay the amount.
5. Attempt to reorganise borrowings into one loan, perhaps at a lower rate over a longer term.
You can also improve your financial position without receiving a dollar more in income by not spending it. Most families spend money inefficiently and could live more economically by cutting costs in housing, car expenses, entertainment or hobbies. A person smoking two packets of cigarettes a day would spend over $3,000 a year which is about 10% of the average wage. The golden rules to spending less are paying off debts as quickly as you can - interest is the killer of your financial health. The other is saving a nest egg fund for emergencies, such as unexpected medical expenses.
HAVING FINANCIAL DISCIPLINE
* An inability to save is usually due to bad spending habits.
* There is more to be gained by cutting spending than receiving a salary increase (because of the effect of tax).
* Aim to save at least 10% of your income, even if it means cutting your costs to achieve this.
But all this is unsound, if the potential investor is heavily mortgaged. The fastest route to financial freedom is to pay off debts. "Knock your mortgage on the head as soon as possible". It does not make a great deal of sense to invest spare cash on one hand at 12% (and be taxed on that income), while at the same time you're paying a mortgage at 16% after income tax. Perhaps you could take on a boarder, or do some repairs yourself, if you are technically minded. This is what I do. Also sell under-utilized assets like boats and caravans. Some items can be bought second-hand and will not lose their value as quickly as new ones. Enlist the help of family members for housework and gardening (in places like South Africa.)
2. Avoid excessive borrowing and do not borrow to buy consumable or luxury items, such as cars and holidays. Rather implement a savings plan to pay cash for those items in the future - make them financial goals. Credit cards can be useful; but use them sparingly, as the exception and not as the rule.
3. Borrow from the most cost efficient source - get your mortgage from the bank or building society offering the lowest interest rate. Also be alert to alternative cheaper forms of finance. You will not achieve financial success, if you borrow money to buy an asset that is not rising in value. The financial return from the asset must be more than the interest cost of the debt. If an asset fails to return at least the cost of financing its purchase, then sell it.
4. Speculation. There are time's in a man's life when he should not speculate. "When he can't afford it and when he can" (Mark Twain). There is nothing wrong with financial speculation, as long as it is done with money you can afford to lose and as long as the odds are in your favour. However, don't gamble on the horses or other high risk games of chance. Treat them purely as entertainment and not the way to make a fortune. Investing in the sharemarket is not really gambling, as the odds are in your favour long term... even in the uncertainty and turmoil of today's markets!
5. Opportunities. Opportunities are everywhere; so look out for them - like perhaps going into business for yourself. Create your own by looking at a situation from a different point of view. Remember that change is an opportunity in disguise. Problems are not insurmountable, but a challenge. Obstacles present opportunities to find new paths.
6. Gain Knowledge. Investing without knowledge is perilous, so expand your knowledge and insight by reading, listening and thinking about financial matters. When in doubt, seek advice from an independent financial consultant - as Ronald Reagan said, "trust but verify". With knowledge and discipline you will be financially successful.
Finally, a most important factor in good money management is a positive outlook towards the future. You should also have a positive mental attitude towards yourself; but at the same time recognise your strengths and weaknesses. With a belief in yourself and with commitment to your goals, you will be a successful money manager. Have courage to take the tough financial decisions that sometimes have to be made - ones like selling the family home or downgrading the car to free up capital. Do not fear failure. Project a positive image and market yourself as a person, who enjoys the challenge of achievement.
Most of these proposals are common sense; but many people ignore these basic rules of money management. Use your IMAGINATION well in managing your personal finances... then they will not manage you.
Good luck
Craig Lock
http://www.craiglockbooks.com
© Craig Lock 2002
About the author
Craig Lock has been involved in the personal finance field for over twenty-five years in South Africa, Australia and New Zealand. He is now an author of six published books with another twelve being published and marketed on the Internet. Craig has studied and written extensively on money matters: articles, brochures for financial institutions and books. He is presently living in beautiful slow New Zealand waiting for the next adventure life has in store for him.
Best Wishes from the First City to see the Sun in "Godzone" (as "little" New Zealand is affectionately known)
C.Lock@xtra.co.nz
http://www.celebrityhowto.com/CLock.html
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