I know exactly what he means – and it’s not just the debts either. The same thing can be true if you’re saving for a down payment for a house or simply waiting until you can make the next leap in your career. Personal finance success often means waiting. Patience is pretty much a required virtue. It’s an interesting contrast to many aspects of day-to-day life, where speed is valued and instant gratification is the rule. It’s no wonder, given how other elements of life work, that many people struggle with the patience needed to make personal finance work for them. How can you play and win the waiting game when it comes to your money? Here are some things that I do in my own life. Automate everything I make most elements of my finances completely automatic through automatic transfers and other mechanisms. I never have to talk myself into moving money into savings each and every month. It just happens without me taking any action on it. Money gets transferred to my retirement savings. It gets transferred to 529 accounts for each of my kids. Several of my regular bills are paid. And I don’t have to lift a finger. It just happens. Don’t look at your balances Come up with a plan for achieving your goal before you start, then don’t even look at your account balances until you’re close to that goal. Seriously. Looking at your balances forces you to reflect on how long it is until you reach your goals, adding to the sense of waiting. I just don’t look at these balances at all. Whenever I examine a statement, I’m mostly verifying that things are being deducted and contributed correctly. The balance itself just causes me to reflect on the distance I’ve yet to travel. Set a mix of goals Most people think about personal finance in terms of big goals, such as paying off big debts or saving for big things. In truth, you can feel success with personal finance and get the sense of achieving goals if you choose some shorter term goals, too. I’m usually saving for some specific goal or specific item that I expect to come to fruition within the next several months. Right now, for example, I’m saving for a walking desk for my office. I’ll be able to achieve that goal in the next few months, giving me a strong sense of success in my endeavors. Share your experiences It’s a lot easier to manage a big, long term goal if you know you’re in it with others. Don’t be afraid to talk about the challenges of being patient with your friends. You’ll probably be surprised to find that they’re dealing with much the same thing that you are. Over time, I’ve found it a comfort to talk to my friends about personal finances when I focus on the struggles we all have in common. Simply knowing that they’re in it for a long haul as well makes it easier to deal with. We’re all in this together. Patience is a vital virtue when it comes to personal finance, but it doesn’t have to be a weight dragging you down. By simply taking a few basic actions to combat impatience, you can make the whole process easier as you head down the road to success.The Waiting Game
Recently, a friend of mine offered up an interesting thought on personal finance issues: “You know what the worst part about getting your money straight is? The waiting. It doesn’t happen overnight. It can take years. All of that waiting on your debts to go away is just excruciating.”
Tuesday, September 27, 2011
The Waiting Game-why waiting pays
Thursday, September 15, 2011
7 Biggest Mistakes when Buying a House
Buying your home is one of the biggest financial decisions you will make in your life. Don’t hurry through this process or it will cost you dearly. These are 7 of the most common mistakes I see:
1.Getting a house in a neighborhood that does not support your lifestyle. For example, if you are a young professional couple with kids, why buy into a senior neighborhood?
2. Getting too big or too small a house without considering your health (stairs? no stairs? family size, etc.) Think about relatives and guests coming. How long will they stay? Will they be comfortable? Are there enough bathrooms to accommodate the family?
3. Not putting 20% down. You need this to get a little equity in case you know what happens.
4. Getting the wrong kind of loan. Determine how long you are going to stay in the home and do not purchase the loan with the lowest payment loan but the loan with the lowest interest and fees. That is how you save money on a mortgage loan (despite what a loan broker will tell you).
5. Not repairing your credit rating. The time to repair your credit is before you consider buying a home not after. Clean it up and you will save loads of money since you will get better loan rates. Better loan rates means you pay less interest over the life of the loan.
6. Not considering taxes, insurance, water, utilities, garbage, and assessment fees. Home ownership means you pay all of the extras too. Don’t underestimate these charges. They add up.
7. Not making sure all appliances, electrical outlets, plumbing, lighting, window and roof leaks. Many people rely too heavily on home inspectors who really don’t thoroughly inspect the things that you are going to be using every day. Take the time to turn on and off all of the appliances, check water temperature and flows, look for good sealed windows and insulation, etc. It will pay off in fewer home maintenance fees –especially in the first couple of years.
Once you are in, don’t have buyer’s remorse. Look at the mistakes as a learning experience and look at your home as something you will enjoy for years to come.
10 Ways to Simplify Your Finances
1. Make Electronic Payments
Setting up electronic payments means that people don’t have to do anything. Their payments will be taken from their bank accounts when they are due and they can never be late. This frees up the time they would have had to take writing checks and mailing these bills every month; it also saves money on stamps.
2. Take Advantage of Electronic Statements
Receiving statements in the mail means that people have to keep track of a lot of paperwork. A better plan would be to have electronic statements. The company would be happier with this arrangement because they save on administrative costs, and the customer can keep everything in a convenient place online.
3. Use Online Bill Pay
Online bill pay with the bank makes it possible to pay the bills online. This makes managing finances simple like in the previous example.
4. The Old Tried and True Spending Budget
Creating a budget helps people tremendously who don’t know where their money is going every month. A budget is a plan, and people who make a list of all the necessary bills they have to pay know they will be able to pay those bills when they give them the highest priority.
5. Reduce the Amount of Money Spent Each Month
When creating a budget, people might notice that they have too many different types of bills to pay each month. This can mean that they will have an unmanageable number of spending categories in their monthly budget. If the budget is too complicated, it’s not going to benefit people who want to make their finances simpler. They need to keep all of their spending categories to a minimum in order to make the budget strategy work.
6. Consolidate Accounts
A big help is to consolidate accounts which will keep them all in one place. For example, some people have more than one savings account. If all of these savings accounts are under one bank then these accountholders can log into that one bank and see all of their accounts in one place making managing money much easier.
7. Set Up a Level Pay System for Utilities
When people set up level pay for their utilities, they know that they will be billed around the same amount of money each month. Utilities can be unpredictable and in some months, people can use more than of one type of utility than another. For example, in the summer people tend to use their air conditioning more often. Level bill pay will help keep them from overspending during these months.
8. Give Things Away
By giving things away, the house is much less cluttered and there are fewer things to manage.
9. Purchase a House that Fits the Family’s Needs
When purchasing a new home, be sure that the house is exactly what will be needed and nothing more or less. This will ensure that the mortgage payments will be easily manageable and that the maintenance on the house isn’t overwhelming.
10. Make a List of Things to Accomplish
Making a change from a disorganized state to a more organized one can take a little time. Before getting started on this project, people can make a list of their most important goals down to the least and finish each goal before moving on to the next. Setting a time when they would like to have the goal accomplished will ensure that the item gets done and can be crossed off of the list.
10 Ways to Simplify Your Finances
1. Make Electronic Payments
Setting up electronic payments means that people don’t have to do anything. Their payments will be taken from their bank accounts when they are due and they can never be late. This frees up the time they would have had to take writing checks and mailing these bills every month; it also saves money on stamps.
2. Take Advantage of Electronic Statements
Receiving statements in the mail means that people have to keep track of a lot of paperwork. A better plan would be to have electronic statements. The company would be happier with this arrangement because they save on administrative costs, and the customer can keep everything in a convenient place online.
3. Use Online Bill Pay
Online bill pay with the bank makes it possible to pay the bills online. This makes managing finances simple like in the previous example.
4. The Old Tried and True Spending Budget
Creating a budget helps people tremendously who don’t know where their money is going every month. A budget is a plan, and people who make a list of all the necessary bills they have to pay know they will be able to pay those bills when they give them the highest priority.
5. Reduce the Amount of Money Spent Each Month
When creating a budget, people might notice that they have too many different types of bills to pay each month. This can mean that they will have an unmanageable number of spending categories in their monthly budget. If the budget is too complicated, it’s not going to benefit people who want to make their finances simpler. They need to keep all of their spending categories to a minimum in order to make the budget strategy work.
6. Consolidate Accounts
A big help is to consolidate accounts which will keep them all in one place. For example, some people have more than one savings account. If all of these savings accounts are under one bank then these accountholders can log into that one bank and see all of their accounts in one place making managing money much easier.
7. Set Up a Level Pay System for Utilities
When people set up level pay for their utilities, they know that they will be billed around the same amount of money each month. Utilities can be unpredictable and in some months, people can use more than of one type of utility than another. For example, in the summer people tend to use their air conditioning more often. Level bill pay will help keep them from overspending during these months.
8. Give Things Away
By giving things away, the house is much less cluttered and there are fewer things to manage.
9. Purchase a House that Fits the Family’s Needs
When purchasing a new home, be sure that the house is exactly what will be needed and nothing more or less. This will ensure that the mortgage payments will be easily manageable and that the maintenance on the house isn’t overwhelming.
10. Make a List of Things to Accomplish
Making a change from a disorganized state to a more organized one can take a little time. Before getting started on this project, people can make a list of their most important goals down to the least and finish each goal before moving on to the next. Setting a time when they would like to have the goal accomplished will ensure that the item gets done and can be crossed off of the list.
Friday, September 9, 2011
How to Limit Student-Loan Debt
With the volume of student loans on the rise, fears of a bubble in educational spending are not without merit, warns Moodys Analytics in a recent report. Moodys sober assessment: Unless students limit their debt burdens, choose fields of study that are in demand and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.
Amen. In my previous column, I gave graduates advice on how to ease their debt burden. But the best strategy is to limit how much you borrow in the first place.
Related Links
SEE ALSO: Tax Credits for College Expenses
Choose a school that fits into the family budget. Families seem to be learning that picking a school is an economic decision as well as an academic one. In a survey by Fastweb.com, 45% of students ranked quality of major as their top reason for choosing a school. But scholarship or financial assistance (43%) and total costs (41%) came in a close second and third -- even higher than academic reputation (38%).
Among students who leave school with no debt, 85% graduated from public colleges, according to a report by Mark Kantrowitz, publisher of Fastweb.com and FinAid.org. Selecting an affordable school doesnt have to mean sacrificing quality. To find public and private schools that deliver both, see our Best College Values special report.
Bypass the four-year route. Starting at a community college and transferring to a four-year school can save a lot. You can also slice a year off your expenses if your child takes Advanced Placement courses in high school or qualifies for college credits through the College Level Examination Program.
In Kantrowitzs study, half the students who graduated with no debt graduated from a community college (one-third graduated from a public four-year college). Other hallmarks of students who graduate debt-free: They tend to spend less on textbooks -- $1,000 or less per year (see How to Cut College Textbook Costs in Half -- or More) -- and are more likely to live at home with their parents.
Use money you dont have to pay back. Its never too late to save, especially if you live in a state that gives you an income tax break for contributions to state-sponsored 529 plans (find the best 529 plan for you). Visit FastWeb.com to look for scholarship and grant money from schools and other sources where your students grade point average or other achievements would make him a standout (for inspiration, read about a student who put himself through school with zero debt).
If you must borrow, borrow smart. Start with government-sponsored loans, which offer flexible repayment options -- such as lower payments and deferral -- and fixed interest rates. These include Perkins loans, for eligible students, and Stafford loans, which may be subsidized if your student qualifies. Also look into PLUS loans for parents or a home-equity line of credit. (For more information on student loans, go to StudentLoans.gov.) With that combination you shouldnt need private loans, which carry a variable interest rate and generally require a co-signer (see Be Wary of Private Student Loans).
Apparently, many students dont realize that federal loans are the most attractive. A majority of undergraduates who take out risky private loans could have borrowed more in safer federal loans instead, reports the Project on Student Debt.
One of our young staff members here at Kiplinger told me that the financial-aid office at his college steered him to private loans before he had exhausted his federal borrowing. He spotted the mistake, but not every student is so savvy. The Project on Student Debt found that counseling and information at critical decision points can really help borrowers make smarter choices.
Its also smart to pay all or part of any loan interest as it accrues so that it isnt added to the balance that has to be repaid. And remember that even the best student loan can be a dual-edged sword, encouraging a student to borrow more than he should.
Know what youre getting into. Use the Student Loan Advisor calculator at FinAid.org. It provides an estimate, based on starting salaries of various professions, of the maximum in student loans your child should take out and how much it will cost to pay it back.
One rule of thumb is that students should try to limit their total borrowing to no more than their expected starting salary when they graduate. FinAid warns that if you borrow more than twice your expected starting salary, you will be at high risk of default.
Choose a marketable major. Moodys is right on the money in suggesting that students pick fields of study that are in demand. That doesnt mean your child has to major in engineering or computer science. But if shes majoring in economics, it couldnt hurt to take accounting. If shes studying history or government, she could learn a foreign language. And if she insists on studying something as precarious as journalism, she should minor or concentrate in another subject -- such as business, health or computer skills.
Follow Janet's updates at Twitter.com/JanetBodnar.
Great ideas on how to lower student loan debt