Tag Archives: personal finance

Passive Income Ideas You Can Use to Build Real Wealth

So many people research to make passive income and yet, a lot of them cannot find the answers they seek. The streams of passive income require a great deal of nurturing initially and upfront investment. After a while, they can maintain themselves and you will have consistent revenue. 

Here are a few ideas.

Dividend stocks: A lot of research is required on your side and a significant amount of capital. 

Peer to peer lending: This involves lending money to people who do not qualify for other loans.

Rental properties: investment in rental properties can be done in so many ways and it is a great way to have a steady monthly income.

Money market funds and high yield savings accounts: this is best if you want your money to work for you, but you do not want to think about it too much.

CD ladders: this involves buying certificates of deposits (CDs) in specific increments from banks.

Annuities: pay for an insurance product (annuity) then get monthly payments for life.

Automatically invest in the stock market: through a robo-advisor people who are not sure about the process of picking stocks can passively invest in the stock market.

Invest in a real estate investment trust (REIT): REITs are investment vehicles which hold your property within them.

Refinance your mortgage: if you refinance your mortgage, you can free up significant income.

Reduce or pay off debt: reducing your debt or paying it off completely helps you build your income. 

Invest in a business: being a silent partner in your business of choice can generate passive income for you.

Ideas That Need Initial Time Investment

Sell an eBook online: self-publishing is huge today and easy.  

Create a course on Udemy or Teachable: if you are an expert in any field, you can create a video course and let other Udemy/Teachable users buy it.

Sell stock photos: submit your best photography work on stock photo sites and earn commission whenever someone buys your photo.

Licensing music: this works like stock photos.

Create an app: hire a programmer and let them turn your idea into an app.

Affiliate marketing: this is ideal if you have a website or blog.

Network marketing: investigate Avon, Young Living Oils, etc.

Design T-shirts: you can start with Amazon Merch or Café Press.

Sell digital files on Etsy: this is perfect for talented designers.

Semi-Passive Small Business Ideas

Airbnb: list up apartments, houses, etc. and earn some money.

Start a car wash business.

Rent out your car (just like listing your place for rent).

Vending machines: you can have them all over town.

Storage rentals: these are very low maintenance.

Own a laundromat.

Easy Passive Income Ideas

Cashback reward cards: make sure your credit card offers these.

Cashback sites: when shopping online, use a cashback site.

Get paid to use an app: look for apps that pay you to install and use them.

Save money on your electric bill (you can use the Truebill app).

Introduction to Consumer Credit

Consumer credit refers to credit in some form given to the consumers. It is a way of financing a client on condition of a deferred payment, later or within a particular period.

The businesses that provide consumer credit facilities need to comply with some regulations as lay down by the laws of the state. It is equally applicable to specialist credit businesses like credit card providers and money lenders to mail-order businesses or shops that permit the customers to buy on credit or lease out or hires goods. That is, the enterprises that give consumer credit facilities must have a valid consumer credit license from the Office of Fair Trading (OFT). It is a mark of assurance to the customer that the business firm certified by OFT is fit for serve the customers. 

Let us see which all businesses require a consumer credit license as a mandatory requirement by the law. The businesses that sells on credit, leases out or hires goods for over a period of 3 months, lends dollars, involved in credit card selling, arranges credit for others, provides hire/purchase commodities, collects debts, and give advise on others credit standing come under the purview of a consumer credit license.

But those lends amounts or hire goods for a cost more than a fixed amount, those deal only with limited companies and those allow the clients to pay back the amount in four or lesser installments are exempted from the consumer credit license.

Ideally one should check the guidelines from the OFT website to find out clearly which all businesses need a consumer credit license. Remember, to trade without a consumer credit license when you are required to earn one is a crime that invites fine or prison term or both.

Consumer credit license is valid for a fixed time period (5 years or so) and is required by the business to renew it after its expiry. However, the OFT can revoke, suspend or change the license at any point of time. The decision to do so is at the exclusive discretion of the authority. All the consumer credit license holders will be listed in the Consumer Credit Register, which is given free of cost for the public.

If the business consists of many companies, each trading in any of the categories, then each of the firms requires a separate license. Also, the OFT has laid down rules regarding advertising credit and credit agreements. All these details are furnished in the OFT website.

The government and the regulatory body assume that it is the duty of the business to keep themselves informed about the rules and regulations that govern their enterprises. Any breach of conduct can result in hefty fines and prison terms. It is all about being law-obedient and straight.

How to Stop the Paycheck-to-Paycheck Cycle

Almost everyone has caught themselves anxiously waiting for the next paycheck—counting days obsessively. 

You may have received a shocking credit card bill. Or maybe you are supposed to get your car repaired soon. Or maybe you have a pressing need and you can’t wait for the check. You probably also fear that it will not be enough. 

This is a common scenario for the 78% of Americans who live paycheck to paycheck. As soon as they get paid, the money gets eaten up by expenses and they go back to waiting for the next paycheck. It is like going around in circles and ending where you started—with no way out. But there is actually a way to escape this cycle. If you are tired of living like this, you don’t have to.

Create an Emergency Fund

Life is always taking unexpected turns. And that is one of the reasons that make it so hard to move forward. You may be prepared for all your usual expenses and then you’re hit with an emergency. Your entire budget comes crumbling down and the money problems begin. But you can prepare for these unexpected events and avoid all that.

Set aside an emergency fund, about $1000, to help you handle the money surprises. You can keep adding to the account.

Have a Budget

A budget allows you to control your money. You direct every single dollar and tell it what to do. You always hear people say that you should, “let your money work for you.” Well, this is where you start. 

Create a monthly budget, where you see your income and expenses. For the first few months, this will not be easy. But you’ll soon get used to it. Some people opt to use budgeting apps. 

Monitor Your Spending

Your budget will be pretty much useless if you don’t follow it up with actions. Even the most organized budget won’t help if you never look at it. 

Sticking to your budget doesn’t get easier with time, unfortunately. But when you see the benefits that come with it, the effort will be worth it. 

Track all your expense within the month. Know where your money is going. If it seems like too much work, get an app that lets you link to your bank. 

Save for Big Items

Making big purchases without thinking will keep you in the cycle from which you are trying to escape. You buy the newest gadget as soon as it is released. When invited for a vacation, you don’t think twice. 

You can still go for vacations and buy expensive stuff. But don’t ruin your budget. Get the total cost and divide it into smaller amounts. Then save up over several months. 

Assess Your Wealth-Building Tools

Your income is your biggest tool for building wealth. So sit down and assess your job. Do you love your job? Are you utilizing your talents and skills? Do you feel like you’re paid enough? 

Should Business & Personal Finance Be Taught at School?

What business & personal finance advice do you wish had been taught to you when you were at school? Isn’t the purpose of education to prepare children for the real world?

I believe that all children should learn basic business & personal finance skills from the age of twelve to sixteen years. Why not teach children how mortgages and pensions work? Everybody needs a place to live and if they have a long life, they will need to retire one day.

Schools should teach their students how to manage credit card debts. They should be taught how credit card companies make their money by charging extortionate amounts of interest far higher than a personal loan to people that pay late.

Students should learn how to negotiate and barter. After all they are going to be doing this every day for the rest of their lives. What about learning the difference between mark up and profit margin?

Learning how to handle money would be the best compulsory course at school. If you add a class like “Business & Personal Finance” and make it standard for all children, then what subject would you remove or do less off?

I had a period a day of Latin. This has been pretty much useless in my life. Has anybody benefited from learning Latin? I read about the Greek gods, translated old books and I must admit that after doing it for over 4 years, I only remember a handful of phrases now.

How many of you remember sweating over stuff like Algebra and Trigonometry? Has this been useful to you in life? Surely this does not need to be taught in such detail to every child & only needs to be taught to budding scientists and mathematicians?

I had art classes. Where they necessary? I was also taught how to knit and dance? What was the point of that? What about religious education? Shouldn’t this type of stuff be taught in Sunday school? Should this subject really be taught in school at all?

I am not advocating that we remove these subjects completely. As you can see it would be easy to teach slightly less of some other subjects to make space for one period a day of Business & Personal Finance for all older children.

Would this benefit the UK economy? I am sure it would. Imagine students leaving school understanding fixed and variable interest rate mortgages. They would have learnt how to manage their bank account and check their bank statements. Wouldn’t it be great if they knew how to calculate gross / net profit margins and compare one investment with another?

Many people will make the argument that this information should be taught by parents and not by schoolteachers. The problem is that many parents themselves do not understand basic concepts of personal finance! Some view their own personal finances as a private matter that should not even be discussed in front of the children.

What subjects do you think they should teach more of and which subjects should they teach less of to make room?

It is very important to notice that the current generation of young people is getting more and more involved into a lot of things which were either nonexistent or possible in the past. Besides the usual late night drive-in movie or mid-afternoon soccer practice, today’s technologically savvy youths can write a letter, talk to a friend, listen to a playlist of more than a thousand songs, update a social networking personal page, and send a letter of application to a favored university, all at the same time, and all this while squeezing a stress ball with one hand. It obviously shows that for today’s youth, a whole world of opportunities lies within their reach. But with opportunity comes corresponding responsibility. And, often, there is money involved. Now, more than ever, today’s generation of ecoboomers needs to know how to manage their personal finances, wisely and responsibly. That responsibility is emphasized even more for those enrolled in a university.

Take the case of an average college student. The day begins at around midnight with either a late night out together with friends with boxes of pizza with a lot of six packs, or a full-blown house party with beer kegs and the works. Night wears on, and the next morning reality kicks in with a vengeance. All those wasted money on beef jerky and nacho chips, now nothing but crumbs on the filthy floor. There’s laundry to do. Papers to finish. Food that was stocked up for the week is gone from the previous night’s party. There’s a trip to the nearest store to restock. If there is a car involved, there’s gas to think about (since there are practically no convenience store within reasonable distance from a university; for stores within campus, customers pay more than usual for this extra privilege of convenience). There remains the day ahead. There’s lunch and dinner. The overdue rates at the video store. That planned movie date the succeeding night. Not to mention the real responsibilities. Payment for rent electricity, heating and water bills not to mention tuition fees. And nothing but a limp, twisted wad of money intended to last for the rest of the week.

It is but human to succumb to the pressure of spending while there is money to spend it with. Even matured, responsible, emotionally stable adults fall for it, so why should young people be blamed for it? The real problem is the lack of education, both from adults and friends. The spending habits that start early on in life carry through to adulthood. A teenager who spends sixty dollars on a fad shirt now may spend several hundred for another later in life. These so-called little things tend to stack up and become a huge financial crisis. It is better for young people to learn how money does and does not work as soon as they gain their freedom in college, as soon as they get their student driver’s license, before they graduate from high school. The earlier, the better! Because in the real world of credit cards and mortgage payments, anyone who does not know how to stretch, squeeze, scrimp and save money for all its worth ends up in financial trouble, to say the least. And it is very disheartening to splurge all day with nothing to answer for it but candy wrappers, pizza boxes, dirty laundry and old magazines. Young people should learn more about taking care of personal finances, while they are still young and ready.

Personal Finance Is Key for Long Term Financial Health

The ability to manage your personal finance is key for successful long-term financial health and stability. Regardless of how much you earn, being able to make your income work for you is essential. Not everyone requires a large salary and an expensive home and car to be happy, but they do need to be comfortable in terms of being able to eat and sleep in a healthy environment and provide adequate clothing and shelter for their families as well. This can only be achieved through sensible personal financial management, that is, only spending what you can afford, not borrowing money over and above what you can realistically afford to pay back, and ensuring you and your family will be comfortable and able to maintain the standard of living when you retire.

Banks are often very willing to give credit to customers, which is where you need to be careful, they are not so easy going when it comes to paying the money back. Overdraft interest can be very expensive, and you end up paying back much more than you originally borrowed. On top of that, they charge high prices for going over the agreed amount, whether by accident or not, so customers need to be extra vigilant when approaching their limit. On the other hand, when the need is only short term, an overdraft is a very viable option. If you know in advance one month you will be caught short, then having an overdraft facility can be a big help. Similarly, simply setting up and overdraft but not using it until/unless there is an emergency will give you piece of mind that you will not struggle to suddenly raise any money unexpectedly.    

Credit cards can be very useful, especially when using them as opposed to debit cards purely to take advantage of any spending bonus points/offers gained by regular use  which will only happen if the balance is paid off fully at the end of every month. Having a credit card for emergencies is again a sensible idea, especially for larger, unexpected bills such as car repairs. Many credit cards offer a 0% interest on the balance for a set period, often 6 months, and this can be manipulated so that you change company every six months to avoid paying any interest. Of course, this just keeps the interest rate down; it does nothing to shave the amount of what you owe. It is a common mistake to see credit as an extension of your wages nothing could be further from the truth, it is not your money. You will have to pay it back at some point, and the sooner the better. Therefore, the best advice is again to only borrow what you can afford to pay back.

Finally, to secure your future when you eventually settle down and retire, it is an extremely advisable idea to set up some form of pension scheme, whether that is with your bank, or your employers. Pension schemes can move from company to company in the event of job changing, and your employers simply take a percentage of your wage each month and put it aside, to be given to you in a lump sum as and when you are retired, so you can maintain a good living standard when you are no longer working.

We are living in a society of consumerism. Prices skyrocket demands multiply; the only thing that remains static is your income. How to survive in a consumer society keeping a control of the expenses?

Personal finance is all about planning your finance. You need to keep a budget in every step of your life. Start from the household budget and categorize the household expenses as follows.

Fixed expenses – These are monthly bills to be paid such as rent, telephone, cable, electricity, etc.

Variable expenses – These include the cost of all essentials including your food, medicine, entertainment expenses, etc., and may vary slightly depending on the items purchased.

The extra cash that you have after deducting the expenses for the above determines your true financial status. If your extra cash is zero, or if it is negative, you have to seriously think about reworking your personal finance plans or consult a financial adviser.

What if you have loans and debts to be paid off? Most of the people have mortgage payments, auto loans, credit card payments and other types of loans recurring every month.

The best possible way to balance these is to maintain a decent debt-to-income ratio. Always make sure that your debt-to-income ratio is never higher than 50%. If you are overloaded with too many loans, consolidation of the heavier loans will be a better option than keeping a bad record of the debts.

Refinancing your mortgage is chosen as the best option by many debtors to consolidate their debts. The only thing you need to be careful while refinancing is to get a better deal, in terms of the market value of your property and the best interest rates. Higher the market value of the property, higher is the loan amount. With lower interest rates and longer mortgage period, your monthly payments will be reduced considerably, relieving you from your debt worries.

Possessing a credit card is another way to keep your finance move without worries. You can handle the day-to-day expenses without looking into your pocket always. But make a habit to pay off the balance at the end of the month. You can opt for credit cards that offer lower interest rates so that you can bear a certain debit in times of crisis. 

Insurance is another important rider in personal finance. Possessing a personal insurance, home insurance, and auto insurance are the smart ways of dealing with the hurdles that may jump on your way. It is also a good investment option and a beneficial tool to secure your life and property from the unexpected disasters.

Once you take care of your loans and emergencies, the next step is to think about the investment options. There are many investment plans that ensure huge returns irrespective of the market fluctuations. There are long-term and short-term deposits offered by different banks and credit unions. One of the safest ways of saving money is to invest in money market accounts (MMA). MMAs offer a greater interest rates and insurance for your deposit.

To overcome the rainy days of your life, you need to keep a good control on your finance, whatever may your present status be.

Understanding how to manage your personal finance goals will bring rewards rather than despair. We all want a secure future so here are a few things to help you get started.

Firstly, know your current financial status. This can be a little intimidating for some, but it is essential to a better financial future. This entails knowing three important things: your expenses, financial problems and financial desires.

Be aware of how much you spend in order to find out how much you can afford. Write down your monthly expenses if you have time, or use a personal finance program. Make allowances for problems that may arise such as unexpected doctors bills, school uniforms, tax returns.

Knowing your lifestyle aspirations is just as important. Taking note of your desires will help you decide which ones are reasonable and which ones are not. Focus on the reasonable ones as they will provide the motivation to manage your personal finances.

Honesty is another key attitude to managing your personal finance plan. If you decide not to accept the facts surrounding your current financial status, you are not likely to move ahead. Be honest with yourself in how much you can afford and how much you owe, otherwise your financial plan will most likely end in financial trouble.

Discipline is perhaps the most important when managing personal finance. Once you have discovered what you truly can and cannot afford, you must learn to say no when needed. This is easier said than done, but if you are determined on having a financially secure future, discipline is imperative.

Knowledge is most definitely power. You must be wise in your investments if you wish for success in your personal finance. Consult accountants and financial planners, research on trends on the market or speak with your friends and co-workers about their investments. This research is sure to pay off whereas lack of it will surely lead to more debts and deviating from your personal finance plan. Also, diversify your investments to reduce risk and leverage out your financial investment. Very simply, the most effective method to improve your personal finances is to spend wisely. Do not spend more than you can earn. Make sure all your expenses are covered first. Understanding this will allow you to manage your personal finance a little better.

10 Tips To Make Sure Your Financial Budget Will Succeed

You’ve analyzed your past expenses, put them into spreadsheets, loaded Quicken with all of your data and come up with a budget. Now what? The tough part! You actually have to stick to your budget and put your plans into action. This is easier said than done. In many cases you will have forgotten about your budget and your financial goals 6 months or a year down the road. How do you keep this from happening to you?

Here’s how. Make sure you follow some of these tips below so this doesn’t happen to you.

  1. Create a budget with realistic targets – Let’s say one of your budget goals is to not eat out for lunch or dinner on a regular basis. If you are honest with yourself you may find this to be an unrealistic goal. Sometimes it’s a nice break to eat out and have a relaxing rewarding evening. In other words, don’t set the bar too high. Drastic and unrealistic goals are one of the surefire ways your budget will not succeed.
  2. Budget for expenses that don’t occur on a routine basis – Make sure you give consideration to expenses that occur once a year, such as holiday presents, birthdays, vacations, weddings, car maintenance costs, etc. These expenses don’t occur every month and they will bust your budget plans wide open. Make a list of these events on a calendar and put a dollar figure to them. Place them in the month they are expected to occur so you can plan in advance how you will pay for them. The regular routine expenses are not the reason your budget will fail. It is these gotchas that will wreck havoc on your budget if you don’t plan for them.
  3. Put your budget in writing – Take the time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. Don’t assume that your financial future will take care of itself by making a simple mental note to yourself. If you have your budget goals detailed in writing you can review and remind yourself weekly and monthly of your financial goals.
  4. If you have a bad month or week, don’t give up! Let’s say you have been reaching your budget goals for three months. In the fourth month, for whatever reason, you didn’t reach your budget goals. Maybe you even stopped trying to stick to your budget! If this happens, don’t just throw your hands up in the air and admit to failure. Everyone falls off the wagon sometimes. Your budget is a journey. There will be bumps in the road, so the key is to realize that everyone makes mistakes. This relates to a story I like about a great old time golfer named Walter Hagen. Before each round of golf, he told himself that he would have 4 or 5 bad shots. During the golf round, if he hit his ball into a bunker, he would tell himself, There is one of my bad shots that I was expecting, hit the ball out of the bunker and move on. It didn’t phase him one bit because he had knew there would be some bad shots in his round.
  5. Adjust your budget over time – This one is a biggie! It can take months or even years to fine tune a personal budget. When you initially made your budget plans, you probably had to guess at some of your figures. They might not have been in touch with the realities of every day life. For example, you may have underestimated your monthly grocery or utility bills. If this happens, analyze all of the underlying money that was spend in this category to see if your initial estimate was unrealistic. If it was, try to come up with a more accurate number and then to stick to that new figure. It is this type of adjustment that is one of the keys to making sure you can stick to your budget.
  6. Review your budget every month – This is where you will make any adjustments that are needed. Set aside the first day of each new month to review your income and expenditures and match them to your budget goals. By actively reviewing your finances and comparing it to your budget, you can adjust your spending habits. This gives you a chance to analyze areas that exceeded your budget expectations and make the adjustments in your spending habits or your budget. The goal here is to not forget about your budget. One tip that has worked for me is to put a printout of my basic budget goals on the refrigerator. That way every day, several times a day, I would notice my budget goals sheet. I may not read it every time, but I notice it and it reminds me that I need to stick to my budget. That is why tip number 3 is so important.
  7. Set specific short-term goals – Let’s say one of your budget goals is to have all of your credit card bills paid off in two years. If your credit card balances total $20,000 that would be $10,000 a year. Divide that number further into quarterly reductions in your credit card bills, in this case $2,500 every 3 months. Now, this is a more tangible budget goal to shoot for isn’t it? I find that when I divide intermediate and long term goals into short-term tangible stepping stones, I am able to feel a greater sense of accomplishment and am more likely to succeed. This brings us to number eight.
  8. Reward yourself – That’s right! Treat yourself when you reach your some of your short-term goals. Since your financial budget is really a journey, take some time to smell the roses on your way. Sticking to your budget should not be a restrictive, unpleasant experience. Not only should you take the time to enjoy your financial accomplishments along the way, but use part of your budget for fun things that you enjoy. Just make sure your rewards don’t end up breaking your budget!
  9. Pay yourself first I’m sure that one of your budget goals is to save and invest a portion of your income. One of the keys to make sure you succeed at this is to do what the IRS does with your paycheck, take it out of your discretionary income immediately. This way, the money is saved away right off the bat. Move the money immediately into a savings or mutual fund account. Many mutual fund companies can setup automatic deductions from your paycheck. Despite your best intentions to save, the hectic, daily demands of life can reduce the amount you are able to save.
  10. Attitude is everything when most people think of a budget, they picture restrictions and pain. Almost like a diet. You know what happens with most diets? They don’t seem work for long! First, if your budget is too strict, too restrictive on your spending, it won’t work either. However, you will need to limit your spending in some areas and this will take some adjustment in your attitude. I found that when I am feeling limited and sorry for myself when I can’t purchase something that I want, I remember my financial goals I set with my budget. I think about the satisfaction I feel when I reach those goals. Over time, you find that you don’t want to disappoint yourself by breaking your spending goals on a spur of the moment purchase. Now, I actually get more pleasure knowing that I am reaching my budget goals when the thought of an impulse purchase crosses my mind.

If you follow these tips, your budget plans are more likely to be a great success. By taking some simple steps you will find that living within a budget is not as tough as you imagined. It can actually be fun and rewarding!

9 Places You Can Save Money For Your Family

Most families are spending more and more money every year (and not just because the cost of living rose) while also saving less and less. One reason is that few household managers spend much time reviewing expenses and expenditures to find ways they can save money. However almost every family has places where costs can be cut and pennies can be pinched — and if those freed up funds are then used to pay down debt and save for the future it could have a dramatic impact on their quality of life.

Food is one big area where many families could be more thrifty. Families spend an average of $2,434 on food away from home, according to the Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics. If you (and your spouse and your children) eat lunch out every day of the week then try brown-bagging at least one of those days. If just one of you does it you may save up to $400 a year and if you can double or triple that savings you could finance a family vacation with it.

Another major expense is your home. When was the last time you looked at refinancing? Can you find a lower interest rate? Can you renegotiate to a shorter time frame? Even if you can’t change your mortgage payment you may be able to pay a bit extra each month which over time will help pay down your mortgage faster. Also, don’t overlook your utilities. There are ways to save in this area as well including updating your insulation and weather stripping, keeping up-to-date with maintenance and cleaning of your furnace and air conditioner or using a programmable thermostat to take advantage of those times when your house is empty or the family is asleep.

Transportation is another major expense for many families. Not only are vehicles expensive to buy but also to maintain and operate especially with gasoline prices at such high levels. Is carpooling an option for any members of the family on at least a part-time basis? Make sure to combine errands and trips to cut down on your travel and save money when buying gasoline by taking advantage of special programs and discounts and remaining vigilant about gas prices. In addition, following a regular maintenance schedule and proper tire inflation can also help you achieve maximum gas mileage for your vehicle.

Choosing your bank wisely can be another way to save money. Make sure the bank you use offers free (or at least low cost) checking as well as electronic bill-paying. Electronic bill-paying and a debit card can cut down on your need to use checks and postage which will save you in the long run as well as help you better manage payments so you will avoid fees, penalties, and higher interest rates.

Cutting your credit card costs can be another major savings. This means making sure you are using the best possible credit card with a low interest rate and low or no annual fee. Shop around until you find your perfect match and don’t forget to cancel and cut up those rejected suitors.

Health care is not really an area where you can cut expenses but you can save money by taking advantage of special offers and programs. For example, many employers offer a Flexible Spending Account where you can save money before taxes for out-of-pocket medical expenses for prescription and nonprescription drugs, dental expenses, and eye care.

Tuning up your insurance policies can also help you save money. When did you last compare rates for your home, your vehicles, and yourself? Some other ways to cut costs are to raise your deductible level or using the same company for multiple coverage (your home and vehicles). When you are shopping around make sure to give your current company a shot at keeping you. Sometimes they can offer a better rate too.

Another major expense for many families is the cost of communication including local and long distance phone service, cell phones, cable or satellite television, and Internet access. Review your expenditures and cut out the services you don’t need. Can some of these expenses be bundled to save money? Are there better plans for your needs?

When looking to save money it is important to become an aggressive shopper. The Internet makes it possible today to compare prices and product reviews while not spending a lot of time and money driving from store to store. Any big ticket item (and that includes your weekly groceries, cleaning products and health and beauty aids) deserves a closer study.

Over the next, month take time to review your family expenses and expenditures in each of these nine areas. Making a few alterations in your family’s spending habits will soon make a difference in the overall household budget. You can raise your family’s quality of life by making just a few changes in your monthly budget.

15 Startling Reasons Why Your 401(k) May Be Your Riskiest Investment

Financial institutions have a distinct genius for marketing. They are able to get millions of Americans to hand over their money with very little thought taken, very little knowledge of the so-called investments offered, and even less control of their investments.

When the evidence is plainly presented, it becomes overwhelmingly clear that putting money into 401(k)s and similar qualified plans is not investing at all–it is one of the riskiest gambles for most individuals. Read the following reasons why I say this, and ask yourself if it’s time to reconsider your 401(k).

  1. Limited Opportunity For Cash Flow

Qualified retirement plans, such as 401(k)s and IRAs, do not provide immediate cash flow, which means that you cannot benefit from them through velocity and utilization. The theory is that letting the money sit allows it to compound, but for most people this really means that it stagnates. Most people will not choose to utilize these funds even when a particularly compelling opportunity arises that will make them far more than the 401(k) would, even accounting for the penalties. This means that numerous legitimate opportunities are passed by as people stay “in it for the long haul.”

  1. Lack of Liquidity

The money is tied up with penalties attached for early withdrawal. Although there are a few technicalities that allow penalty-free withdrawals, the restrictions are so numerous that very few know how to get around them.

  1. Market Dependency

The performance of the funds is dependent upon market factors that most individuals do not have the knowledge nor the ability to understand or mitigate. This means that your retirement plans are based on unknowable projections, making for a dangerous and uncertain planning environment. Uncertainty causes fear, and fear leads to mistakes, worry, scarcity, and ultimately lost hopes and dreams. Do you want to live your ideal life only if the market cooperates?

  1. The Match Myth

“Take the match–it’s a guaranteed 100 a year, based on an average return of 8 annually, but that means that some years will be lower, some will be higher. If in one year your fund is down 10%, you’re tapping into your principal to take your interest withdrawal. At that point, you have only two choices: 1) start withdrawing principal, or 2) leave the money alone until your funds are up again.

  1. No Holistic Plan

I’ve witnessed on many occasions people whose finances are in shambles and although they have much more pressing needs, they diligently contribute to their 401(k). They’ve been convinced to do so, of course, because of the match, tax deferral, etc. It’s like a person trying to take care of a scraped knee when their wrist is slit. What they really need is a macroeconomic approach to their finances that will help them identify, prioritize, and manage all pieces of their financial puzzle, with all pieces coordinated and working together.

  1. Neglect of Stewardship

Ultimately, the most destructive aspect of 401(k)s is that they cause many individuals to abdicate their responsibility, abandon self-reliance, and neglect their stewardship over their own prosperity. People think that if they just throw enough money at the “experts” that somehow, some way, and without their direct involvement they will end up thirty years later with a lot of money. And when things don’t turn out that way they think they can blame others–despite the fact that they only have themselves to blame.

Conclusion

Qualified plans are promoted on such a wide scale because those promoting it have vested interests–and their interests don’t necessarily coincide with yours.

If you currently contribute to a 401(k), stop and think about it for a minute. What is it really doing for you, now and in the future? The desire to save money for retirement is wise and prudent, but after reading the above, do you think it’s possible to find other investment philosophies, products, and strategies that would meet your financial objectives much more quickly and safely than a qualified plan? Are you really comfortable exposing yourself to this much risk? How can you mitigate your risk, increase your returns, and create safe and sustainable investments? How can you create more control and better exit strategies, reduce your tax burden, and increase your cash flow?

Your financial future depends on your answers to these questions.

Contrary to what is taught in popular financial media, 401(k)s and other qualified retirement plans are one of the riskiest investments for most people. Increase your wealth by learning 15 secrets that the media and conventional retirement planners don’t want you to know.

7 Steps to Financial Freedom and Personal Finance Success

It is possible to achieve financial freedom. But it takes time and consistent efforts. This post highlights a few steps that you can take to attain financial success and freedom. 

What Is Financial Freedom?

What exactly is financial freedom and why should you care about it? 

It simply means being able to use your energy and time however you want without being concerned about money. It is also referred to as financial independence. 

It may mean having enough investments and savings so you don’t have to work. Or owning several businesses that bring in enough cash flow to cover your monthly expenses. 

This is something that everyone wants—whether they admit it or not. The problem is knowing how to achieve that. 

7 Steps to Financial Freedom

If you have heard about the 7 steps to financial freedom, you have probably heard one of two versions (or both). There is one by Tony Robbins and another one by Dave Ramsey. 

7 steps according to Dave Ramsey:

  1. Create an emergency fund worth $1000.
  2. Clear your debt with the debt snowball.
  3. Save about three to six months of living expenses.
  4. Use 15% of your household income to invest into pre-tax retirement and Roth IRAs.
  5. College fund for kids.
  6. Pay off your home early.
  7. Create wealth and give back. 

7 steps according to Tony Robbins:

  1. Become the investor, rather than a consumer.
  2. Don’t invest before you know the rules.
  3. Amass knowledge to win.
  4. Decide on asset allocation.
  5. Come up with a lifetime income strategy.
  6. Model hedge funds portfolio.
  7. Have fun and share.

7 Steps to Financial Freedom for You

Everyone’s financial situation is different. It is not easy to come up with a one-size-fits-all strategy. Hopefully, this will make sense to you.

Create an emergency fund: When it comes to personal finance success, an emergency fund is crucial. Unplanned emergencies don’t announce their arrival. So always be prepared.

Pay off your consumer debt: Debt restricts you. You cannot live the way you want to. Spend less and use the surplus to pay it off. 

Save 10% of your earnings: Having cleared your debt and set up an emergency fund, you can now start saving. Direct 10% of your earnings to a savings account and use the money for investing. 

Educate yourself about investing: Learn as much as you can about investing to know what suits you. 

Invest in yourself: work on developing yourself too. 

Be consistent: keep saving, don’t sink back into debt and continue growing your wealth. 

Give back: always be willing to share your wealth, time and knowledge with others. 

2 Steps for Financial Success

The above steps may seem difficult and a long-term thing. But there are two actions you can start taking today and you will see the results almost immediately. 

Monitor your income and expenses: where are you financially? Know how much you are making and what you are spending it on.

Learn: take the time to learn about personal finance and be consistent in your actions. 

Time Is Money: Financial Independence Retire Early

FICO Score Vs Credit Score: What’s the Difference?

Everyone should know their credit score. However, a credit score is calculated using several ways and it is never just one number. 

Your credit score is a simple way of portraying your credit history—it is compiled into a number that tells lenders the risk they’ll be taking if they offer you a loan.

There are two main ways of estimating your credit score: the VantageScore and the FICO Score. This article seeks to explain the two and how they affect your journey to getting good credit. 

Defining a Credit Score

‘Credit Score’ is a general term encompassing the various models used to calculate a 3-digit number, from 300 to 850. This number shows your creditworthiness. A good credit score means higher chances of getting approved for credit. And not just that; you also get lower interest rates.

Unused credit, total debt load, payment history and other information about your credit are reported to Equifax, Experian and TransUnion. These are the major credit bureaus. They use an algorithm to translate that data into a credit score. 

When you seek new credit, the lender requests for that information from one of the credit bureaus. 

Each of the three bureaus will gather and organize your data in a different way. So they will most likely give you a different score. 

The Credit Scoring Models

The VantageScore and the FICO Score are the most commonly used models. The financial institution asking for the report determines which model will be checked. 

FICO Score

This one ranges from 300, which is very bad credit to 850, which is considered exceptional credit. This model is the most common one and almost all of the top lenders use it. 

Fair Isaac Corporation came up with the model in the ’90s. The biggest mortgage companies, Freddie Mac and Fannie Mae started using it in 1995 to determine loan applicants’ credit risk.

Over a dozen FICO Score versions have emerged and the most used one is the FICO8, devised in 2009. The rest of the versions are slightly different depending on how they are used. 

The FICO8 Score Ranges

  • 350 – 579: Very Poor Credit
  • 580 – 669: Fair Credit
  • 670 – 739: Good Credit
  • 740 – 799: Very Good Credit
  • 800 – 850: Exceptional Credit

FICO8 Score Components and Their Weight

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Getting Your FICO Score

You can refer to your credit card statement. Some issuers let their customers know their FICO Scores for free every month. Alternatively, get it from Experian for free at http://www.freecreditscore.com/ .

VantageScore

This is another major scoring model that the credit bureaus came up with. It also has multiple versions and ranges from 300 to 850. The standard version is the VantageScore 3.0. The main difference between VantageScore and FICO is that with the former you’ll get a score even with a short credit history. 

VantageScore 3.0 Ranges

  • 350 – 630: Poor Credit
  • 630 – 690: Fair Credit
  • 690 – 720: Good Credit
  • 720 – 850: Excellent Credit

Vantage 3.0 Components and their Weight

  • Payment history: 40%
  • Depth of credit: 21%
  • Utilization: 20%
  • Balances: 11%
  • Recent credit: 5%
  • Available credit: 3%

Getting Your VantageScore

Most banks let you know your VantageScore every month for free. Alternatively, opt for Credit Sesame. They will give you your TransUnion VantageScore for free. 

Your FICO Score and VantageScore may be similar in most cases, but that doesn’t happen every time. Sometimes, they will vary by almost 100 points because the models are different. You don’t have to keep up with both models. One is enough as it will let you know where you stand. 

How to Make Money with Airbnb

Airbnb was launched in 2008. It started as an online platform where people looking for accommodation were connected to people who wanted to rent out space. 

Being an Airbnb host almost seems like being the owner of a mini motel. And some people may think that it’s just too much work. But you don’t need a lot of capital or experience to start.

How Airbnb Works

It has a very simple business model. There are people with extra space and they’d like to make good use of it so as to reduce cost of ownership. Then there are travelers who are willing to pay for somewhere to stay when in town or have cheaper, homely accommodation for longer periods. 

Is Airbnb Hosting Right for You?

Potential hosts are the backbone of Airbnb. The company is just a middleman. Because of the high demand for accommodation caused by the growing popularity of Airbnb, there has been an inventory shortage. Some super hosts are even becoming overwhelmed by the demand. This means that there’s an opportunity for you if you desire to get in the business.

Making Money with Airbnb

While this may seem like a simple business, you still need a plan. First, know your market and assess whether your listing will have demand. 

Airbnb Vs Traditional Leasing: Case Study

Suppose there’s a property worth $300,000. Your initial costs include costs of closing (insurance, inspection, etc.) and down payment. So the total cost is roughly $70,000.

Don’t let this scare you. This cost is almost doubled up. You can find good properties for half that price.

Traditional Tenant Revenue

After acquiring the property, assume you get a tenant. The lease is a traditional one at $3000 a month. You will collect $36,000 in revenue by the end of the year. The standard cost of maintenance is 1% of property value. Your revenue is now $3000 less. If you account for managing costs, you may end up with about $31,300.

Return on Investment

So you invested $70,000 and got $30000 after one year. But if you subtract property tax, insurance and mortgage payment, you’ll end up with less than $10k. 

Comparing with Airbnb

Using the same property, assume the daily rate is roughly $50. In a month, you have 150 bookable nights. With a 90% occupancy rate, you can expect to have 135 booked nights in a month. That’s $6750. Add $12 cleaning fees with each turnover. If you estimate 70 turnovers, that will be $840. The total income is now $7590.

Now subtract cleaning (about $1400), utilities ($400), supply cost ($600) and mortgage ($2000). Your net income will be $2515. Add insurance premium ($100) and the total is $3440. 

Airbnb is definitely more profitable.

Note: you will need a higher initial investment because of furnishing and decorating. 

Advantages of a Traditional Lease

  • Dependable renters
  • Lower initial investment
  • Easy to find management
  • Low regulation risk

Why You Should Consider Airbnb

  • Higher potential revenue
  • Lower variance revenue
  • Less wear and damage on property

Airbnb Risks

  • Potential regulation by the city
  • You need liability protection

Surefire Ways to Stay Motivated and On a Budget

Creating a budget is way easier than following it. This post will teach you how to stay motivated.

Why Does Motivation Leave?

Many people don’t create a budget because they would love to. They do it because it will bring peace and happiness in the long run. It is just another thing that you have to do as an adult. 

But it gets hard. Sometimes you want to do what feels good in the moment. You don’t have the energy to keep up the discipline. When that happens, try the ways discussed below.

Have like-minded friends. If you are surrounded by careless spenders, it will be difficult for you to stay the path. People who have similar goals will motivate you and remind you of your own goals. 

Make it easy. On your calendar, mark dates within the month for you to check in on your budget. Alternatively, get a budgeting app. 

Have short-term goals. These are easier to achieve and they don’t take long. Attaining them motivates you to go for bigger ones.

Come up with rewards. celebrating budgeting victories is highly recommended. But be careful not to overspend in your rewards.

Make goals visual. On a book or a board, stick pictures that remind you of where you want to be. And look at it every day.

Test your budget. Try accomplishing a goal with your budget—like saving for a pair of shoes or paying off a small debt. 

Watch and listen to helpful content. Whether you’re watching a TV show, reading a book or listening to a podcast, ensure that the content is financially sound.

A budgeting journal. Check in occasionally to monitor your progress. The notes will help you track your comfort level, savings and debt.

Plan activities around your budget. You can still do fun things but keep them within the budget. Or take advantage of free activities like movie night at home.

Make money decisions individually. Controlling one choice is easier than several choices at once. 

Refer to yourself as a budgeter. When you slip, tell yourself that you can still do better because you are a budgeter.

A standard response to money urges. Anytime you are tempted to spend, try a new recipe or do something to distract yourself.

Track expenses seriously. If you have a budgeting app, open it first in the morning before your socials. 

Define a goal. What do you hope to accomplish with budgeting? This is what will motivate you. 

Long-term Motivation

Divide bigger goals. If you have a big goal, like a huge loan amount to pay, divide it into several smaller amounts.

Eliminate decision fatigue. Thanks to technology, there are many things that you can automate. For instance, you can set up an automatic system to send money to your lenders, mortgage or retirement account. 

Be ready for burnout. This is unavoidable, so you might as well be prepared. Plan for it and what you will do. Maybe schedule a small break. 

Budgeting For Beginners : The Ultimate Guide On How To Get Out Of Debt And Start Building Financial Wealth

A 31-year-old millionaire who’s read 360 personal finance books shares his favorite

After graduating from college, Grant of Millennial Money moved back home with just $2.26 in his bank account.

“That was a huge wake-up call for me,” the now 31-year-old — who goes by his first name exclusively — told CNBC. He took a screenshot of his balance, set the goal of having $1 million in assets in five years, and immediately started educating himself.

“As soon as I began this journey, I looked up the best reviewed personal finance books on Amazon,” says Grant, who reached seven-figures exactly five years after taking the screenshot, thanks to a side hustle that he turned into a lucrative consulting company.

 

Since, the Chicago-based self-made millionaire has read over 360 personal finance books and “the best book on money period” happens to be the first one he picked up: “Your Money or Your Life,” by Joe Dominguez.

It changed his relationship with money, and his approach to spending and saving, he told CNBC: “The premise of it is that you exchange your time for money. And when you start thinking about how many hours of your life it took to save up the money to buy something, you really start thinking twice about your purchases.”

 

For example, “say I work eight hours a day and after taxes, make $10 an hour, meaning I’m earning $80 a day. I want to go out for a nice dinner on Friday and that costs about $80, meaning I spent an entire day of my life working for this meal. And then you start thinking about even larger purchases, like a $1,000 TV, and you think, ‘How much of my life did I trade for this? Is it worth it?'”

During his five-year journey to seven figures, Grant saved 50% of his income. Today, despite his financial success, he still focuses on living simply and sets aside 40% to 50%.

He doesn’t just save half of his income — he puts it to work. After all, “in order to build wealth you need to be making as much money as possible on your money,” Grant writes on his blog. “Because you can only make so much money at any career, investing is truly the key to wealth.”

Source:

http://www.cnbc.com/2017/02/20/grant-millennial-money-favorite-finance-book.html?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=104293025&yptr=yahoo