Saving and budgeting

We have all heard all sorts of advice about saving and budgeting. Experts tell us what we should be doing and how we should be doing it the best way. Family members tell us what we should be doing and how we should be doing it. Friends who seem to be doing better financially than we are will tell us how they have do in and what has worked for them. We should save more. We should save less. We should save three months of income for emergencies. We should have at least a years’ worth of savings. We don’t need savings as long as we have income, investments and credit. We should never rely on income investments or credit to live on. It all gets confusing and overwhelming. As for budgeting, that just plain seems scary and hard to stick to. Let’s look at 5 ways to think about saving and budgeting that will make them seem clearer and less confusing.

1. It’s never too late to start saving – In a perfect world we would have all started to save at age 20 and would have added regularly to it every month from then on. Obviously we don’t live in a perfect world. There are all sorts of circumstances and situations which get in the way of saving. There is nothing wrong with that. There is also nothing wrong with starting to save whenever you can. Starting at age 40 might not be as good as starting at age 20, but it is a whole lot better than starting at 50. The best time to begin is right now.

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2. There is no such thing as too little – Some people don’t want to start saving because by the time they have paid all of their other bills they are only left with a little bit of money, so it doesn’t seem worth it. This is silly. Even a little bit makes a big difference. You have to consider that something is better than nothing, that you are benefiting from the interest which is letting your money grow and you are getting in the habit of saving, so you will be able to save more when you start making money. Start saving now, no matter how much you can save!

3. Don’t save too much – This sounds like contrary advice, but it really isn’t. Saving is important, but so is living today. If you are saving so much now that you can’t do or enjoy anything, then you begin to dislike savings. You will resent it and you will quit doing it. You are much better off saving a reasonable and sustainable amount now and continuing at that level for years to come.

4. Don’t think of it as a budget – Budget sounds like a negative word. It is all about constraints. Try calling it a spending plan instead. That sounds so much more positive and will make it easier to stick with it over the long run.

The Trouble with Skipping an IFA for a Pension

Trying to think about the future when it comes to your pension needs or even an annuity down the road? You’re not the only one. Many people in the UK today are more concerned about retirement than ever before. Many are waking up to realize that if they don’t plan ahead as much as possible, they’ll actually end up without a comfortable retirement. This means working until they die, and who really wants to wake up to that type of future? No one that we know, of course. So if you’re really serious about making sure that you’re going to have the best future possible, then you definitely owe it to yourself to start thinking through what you’re going to do.

Some people skip over hiring an IFA (independent financial advisor), because they’ve been told that the IFA will charge a commission in order to work with them. They work on commission and they will give you advice — that’s the way it works. But if you’re thinking that you’re better off skipping over them completely, then you might want to think again. The truth is that you actually get more out of going with an IFA than directly to the pension provider.

Why is it this way, you might wonder? Well, it’s really simple — you will have to calculate in the fact that the pension providers aren’t trying to give you the type of advice that you need to really determine what’s right for you. Even if you’re trying to avoid the commission, you might find that they’ll charge you just as much even without the commission. And you’ll go without the independent advice that could help you avoid making a huge mistake.

Even though it’s true that you can transfer your pension around and around if that’s what you really want to do, the reality is that there are fees involved every time you transfer. There could be stiff penalties for messing with that money. Therefore, you’re much better off finding the type of policy that you really can count on. It’s better to do that than try to figure out everything on your own without the adviser’s help. Keep in mind that this is exactly what they do for a living. If you don’t spend your days mulling over annuities and pensions, then what chance do you have of surpassing what they can do for you? Internet research is important, yes — but there is something special to be said about professional advice.

You have to realize that there are limits to the IFA’s. You can get compensation if the advice they give you is faulty, but that doesn’t mean that you get compensated if your pension pot goes down due to the market. It’s something that you have to deal with as par for the course. Losses do happen but you stand to gain a lot more if you explore the pension world carefully. Good luck!

New Data Shows That Lottery Winners Aren’t as Happy As We Once Thought

What would your life be like if you won the lottery? What would you buy first? Who would you bring into your life…or push out of it? Most people assume that their lives would be incredibly amazing if they could just win the Lottery. However, a new story out indicates that all that glitters really isn’t golden after all.

It starts with a cluster of 12 bus drivers who pooled their money to buy lottery tickets. They won and they had to split the prize pot.

Sounds good, right? Well, many of the bus drivers have had to deal with outright strangers asking them for money, along with family members getting into the fights. The rising stress has turned many back to old habits — such as smoking and drinking. Hospital visits have become common. The overall stress of having a lot of money to manage tends to make things very difficult for people. If you have negative thoughts about money, coming into a lot of money isn’t going to necessarily change anything. You will suddenly be part of a group that you used to envy. This is a pretty painful thing for a lot of people. There’s no need to fall into this trap though.

First and foremost, you need to think about a solid plan for the money. Quitting your job when you have no idea what you’re going to do with your life isn’t going to make matters any better. You’re just going to make yourself tired, lonely and confused. Why would you want to put yourself through that type of pain if you could avoid it? Why would you want to make yourself miserable?

You want to sit down and have a good discussion with your spouse. One of your spouse’s highest fears is losing you to a new life of wealth and power. If you make sure that they know they are still one of your highest priorities, you will be good to go. Don’t change anything for a while. Have money, but make sure that you are in control and not the other way around. The trouble comes from people thinking that money has to change them. There’s nothing that says that your life has to suddenly become focused with luxury cars and travel. If that’s to what you really want out of life, you don’t have to pursue it.

Let the money sit and collect interest — there’s nothing wrong with that. And if you’re trying to become entrepreneurial and let your money grow, going with an independent financial adviser is really the best way to go.

Trust in your own instincts. This is a sad tale for the 12 Lottery winners, but that doesn’t mean it has to be YOUR story, either. Good luck!

Save Money – Choose an Online Only Bank!

Here’s something you probably already know: we’re a mobile society that’s always on the go. There’s just no getting around that. Yet there does come a point where you have to look at how well things fit into your new mobile life. If you’re on the go, shouldn’t your banking be too?

That’s the subject of debate in a lot of banking circles. Getting account info on your phone is cool, but there are security issues that every banking institution has to think about. It can’t just be a matter of customer convenience. Your sensitive financial information has to be protected at all costs. Hackers could get your information and have a field day. Not what you really want to look forward to at all.

The conversation naturally tilts towards online banking. After all, it isn’t like we don’t know how to protect customer information online. We’ve gotten good at encrypting things. Online banking is full of regulations involving security, so you wouldn’t have to worry too terribly much about your information.

Online banking has been around for a while now, so it’s not like you’re missing out on too much. You can get an online bank account without any stress, giving you a new world to explore. If you bank from a physical location, you probably have online access to your account as well. If you’re someone that travels a lot though, it might be wise to think about an online only bank. The overhead is less which means that you can get better rates than a traditional bank where the overhead is so high.

The nice part about online banking is that it’s available anywhere you have an online connection. So if you happen to move away from that particular location where the physical bank is located, you’re not going to want to drive all the way back just to use their services.

In a troubled economy, cutting costs is a good thing. Services that we like in the online banking sector include ING Bank and Ally Bank. There are plenty of other ones out there, so make sure that you truly explore all of your options.

Bank Loans

In the borrowing and lending process of loans the one lender has to be trustworthy as well along with the borrowers. Giving out loans was started by banks officially and that is why they are the most trusted and reliable source of loans to date. Although today several other lending institutions have also emerged bank financing remains as the most obvious choice of source when it comes to taking loans. The reason behind this trust could be their experience and also the transparency of policies and the way in which these policies are clearly communicated to the borrower.

Banks today deal in all sorts of loans such as bank loans to individual borrowers and banks loans to institutions and businesses etc. Banks also deal in the two broad categories of loans: secured loans and unsecured loans. Secured loans are guaranteed to be paid back and a property such as a house is used as collateral. The loan is typically decided according to the value of the collateral.

Typically the loan will not equal the entire value of the house but may be around 60 to 80% of the value of the house. In case of default in paying back the loan the bank can sell the property off to recover the money that they loaned to the owners of the property. The interest rates for secured loans are lower then the unsecured loans. The bank interest rates for unsecured loans are high because the bank has no security or guarantee that the loan will be paid back. Typical examples of secured loan is mortgage banking by the bank in which the house being financed is used as a collateral and car finance is also a similar secured loan example.

In the event of default in paying back the loan taken to buy the house or the car the house or the car is confiscated by the bank after a few warnings. An example of unsecured loan would be credit cards which are more fitted to the debt category but are still a short term loan. Bank rates may be higher for such unsecured loans. Another event in which the bank rates will be higher is if you have a bad credit rating.

The credit banking side of the financial banks deals in credit lines to businesses called the corporate credits and individual personal credits like credit cards etc. Credit banking rates vary from customer to customer. Several banks now offer affordable credit solutions to small businesses but at higher interest rates than they do to most established companies. Banks consider several factors when extending a bank loan to businesses.

Some common factors include whether or not the business has a checking account with that particular bank, the credit history of the owner (in case of private firm) and the company’s credit history, and the business performance and life span of the company. Similarly, the credit card limits vary from person to person based on their credit rating. Credit card payment records also have an effect on the credit rating although they are not considered important by most people. Loans to small businesses and credit cards are usually unsecured loans.

Unlike typical banks business does not come easy in mortgage banking. Mortgage banks are entities that are licensed to give out mortgage loans. They can also be called a home loan bank when dealing with house mortgage specifically. But it is not just houses that they deal in. Mortgage banks offer specialized mortgage loans to consumers and these are licensed institution constituted to cater to this need. As consumers do not deposit any money in mortgage banks they can not earn from this source and hence, require other secondary sources of income.

Operations of mortgage banking are governed by the state laws of the state that they are operating in. As these banks service only mortgage loans they have to stay very competitive to keep the business up and like general banking they can not rely on other departments to cover for the losses or the bad business in a particular month. It is becoming a trend for mortgage banks to only create a loan and earn from it and later sell it off to a mortgage servicing company which will pay the bank for the loan and then service the loan for the borrower and earn from its servicing till the borrower keeps the loan.

An investment bank would usually help companies, governments or individual investors in raising money and investing etc. These banks also advice these entities regarding their business decisions and investment options etc. Apart from financial banking and banks loan side of the banks investment banking usually deals with consultancy and advisory mainly. Investors dealing on behalf of the investment bank and dealing with the customer’s money try to get the best out of his trading decisions and tries to get the best bank rates. An investment bank is typically divided into three parts: front office, middle office, and back office.

The main interaction of the bank is with the capital market after the client where they buy and sell securities through traders. In investment banking the main services are helping clients raise funds and advisory services regarding mergers and similar business decisions. Bank financial aspect deals with corporate finance. Sales or trading constitute the basic revenue for the investment banks. These banks also have a research division which analyzes the buy and sell aspects of various companies.

This division does not contribute anything to the revenues but the information that the division collects can help in many strategic decisions like the mergers and acquisitions advice that the bank services its clients in. Several products have been floated in the market by investment banks to facilitate their clients and new products are being added to their portfolios as the needs of the people seeking services of these banks change. Pension, mutual and hedge funds are some of the products of an investment bank among other products. An investment bank also monitors and works around different level risks to get to a profit trade for their client.

Bank Accounts

You will likely want to open an account at a bank near the college. Whether a savings account or a checking account, you must be aware of the minor yet irritating problems that can occur.

First and foremost, you are an adult in the legal sense. This means that if you have a financial problem, you are treated as an adult and not as a child. If you sign something, it can become a binding contract.

Banks charge fees for many things… be aware of what fees you will have to pay.

•    If you open a savings account, there probably will be fees collected from the account each month…unless your account is large! Think about whether or not it is worth having the account. Ask questions of the bank before you sign on.

•    If you open a checking account, there will be even more fees, which might include charges for the checks you write. And if you overdraw your account by writing a check for an amount greater than what you have in the bank, then you’ll find yourself in trouble with everyone. The bank will refuse to pay the check and charge an overdraft fee, to boot. The person who gets the ‘bounced’ check will be upset because the money will not be sent. And, if you bounce checks often enough, the authorities might be called in. What you consider a minor slip will be taken seriously by everyone else.

If you deposit a check in your account, you probably won’t be able to use the funds for a few days. Your bank will make you wait until the deposited check “clears” — until then, the bank can invest this money, known as the “float”, and earn interest for itself. In effect, customers are lending money to their banks for a few days at no interest — this might seem like a trivial matter, but investing the float is a very profitable business for banks.

Your new bank will probably offer you an Automatic Teller Machine (ATM) card — this will allow you to get cash from your account at any time. You won’t be able to “overdraw” as with a check, because the ATM will never give you more than what you have in your account. Be sure to ask if there are any fees connected with your new ATM card. (Often, if you use it at another bank, there is a fee to be paid.)

Make sure you record each check you write, and balance your checkbook each month. Your bank might offer some instructions regarding the best way to do this.

Do We Trust the Banks Or Not

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Watching big companies get bailed out while you struggle with your personal finances everyday is enough to make you tired — and want to protest right along with the Occupy Wall Street crowd. However, that’s not what we’re trying to talk about here.

If you’re feeling fed up and looking for changes, you might naturally look at all of the relationships that you have with the current corporate environment. That would be a smart place to start, because we never really know what we have or what we’re working with until we look at all of the finer details.  Banking is something that affects us all whether we have a bank account or not.

After all, there’s going to come a point where you’re going to need financing for something, and that means that you’re going to want to talk to a bank at least once. They might not have the most competitive rate for what you’re looking for, but you will never know what they have until you actually ask. It’s just up to you to figure out what you want to achieve, and how you actually want to achieve it. Never think for a moment that you can’t do the things you want just because you can’t do them right this moment. It would be wiser to really make sure that you focus on the bigger picture. A lot of people have turned their financial futures around simply by realizing that even though they can’t see a solution right away, the solution truly is right around the corner.

The question that’s probably on your mind right now is whether or not you can really trust the bank. We don’t think it’s a bad question to ask, and we definitely aren’t going to tell you that you should make a snap decision too quick. You just need to make sure that you think about the greater picture here.

In order to grow your money, you’re going to have to trust someone. Sure, you could store all of your money under your mattress, but having it in a bank is definitely safer. In the United States, all banks worth their salt are going to carry FDIC insurance, which means that your deposit is protected up to $250,000 through 2013. It is likely that this higher limit will be renewed after 2013. Since the inception of the FDIC, no one has ever lost a deposit. Yes, banks have failed but the FDIC has stepped in and made sure that these people have gotten their money back.

Of course, you have to make sure that you claim the rights that you deserve — it’s not going to be anyone’s job to chase you down to get you your money back. You have to know that you’re entitled to getting that money back and fighting for it that way. Sure, it’s going to be an issue of making sure that you can actually claim the rights you want, but a little research will lead you down the right path in the long run.

We always recommend building a long term relationship with a bank so that you’re going to be able to use their services to the fullest. There’s no reason why you can’t qualify for good financing, for example. It’s just a matter of realizing that it’s what you ultimately want to do. If you don’t get things on the right track, you’ll end up hurting your self in the long term. Becoming a cash customer is something that only works in the short term. What about when you’re ready for a car or a house? Those are going to be some big ticket items that usually require good credit. If you’ve been burned by credit in the past, we definitely understand why you might want to avoid pushing forward. However, if you take the time to build your credit back slowly and replace it with positive trade lines, there’s no reason why you cannot have a good credit score again.

Not giving up is the key to success in life. We don’t think at this time that there’s any reason why you should give up on the banking industry. You never know where the industry will take you next, after all!

Overlooked Points to Consider With Respect to Your Employer’s 401(k) Plan

401(k) Plan

If there’s one way to build up your retirement, it will definitely be form your employer’s 401(k) plan. There’s nothing that says that you can’t build wealth this way, but one of the biggest mistakes that newbie investors make is that they glorify the 401(k) a little too much. They assume that all they will need to is just pour in money and let it grow. While it’s true that you can essentially set it and forget it, Ronco style, the reality is that you always want to start thinking about the type of retirement you ultimately want to have. You need to be aware that nobody is going to think more about your best interests than you. It’s tempting to just assume that everyone’s going to have your best interest at heart, but this isn’t the case. If you don’t monitor your retirement account, you’re not going to be able to hit your goals at all.

The best thing that you can do is actually read those retirement documents that come with your account. Study them well. See how the funds actually get handled — your funds, in particular. What is their plan for growth and preservation of capital? What is their risk profile? How are the assets allocated? These are all questions that need to be handled before you really start putting away your hard earned money.

While employer matching is good, you always want to make sure that you understand the terms and conditions. For example, what happens to the money if you leave the company? Remember that no employer is ever going to give you something just for the sake of giving you something. There’s always a price that needs to be paid for that — and for the matching, it usually means a certain number of service years with the company. So before you get excited about employer match, you really need to make sure that you have the right information about it. If you are not planning to stay at the company for very long — and let’s face it, jobs are getting shorter and shorter these days — you might not actually get to enjoy that match.

You need to also think about rollover possibilities — if you were to lose your job, how do you move your savings from that account to another account without facing penalties. It can be a lot more complicated than it needs to be, so this is something that you want to tackle up front while you’re in the “era of good feelings” with a company.

Overall, it’s a lot to think about, and we totally understand that you might be a little confused. Take the process slowly, get help when you need it, and refuse to deal with confusion — you can overcome anything with time, patience, and information! Hang in there!

Your Shortcut to Financial Freedom – Debt Consolidation

Financial Freedom

Financial emergencies are part and parcel of our lives, and it is human nature to settle an emergency as it occurs without thinking of the future implications of your actions. Of course this leads to debt and more financial problems, since once you are in the habit of getting a loan even for the tiniest of issues that crop up in your life as ‘emergencies’, it would be very hard to get out of the habit i.e. old habits die hard. It will only be a matter of time before you get labeled a debtor, a time when all your creditors will be calling you almost at the same time demanding for monthly repayments, a time when you will be having sleepless nights thinking of how to get out of debt. Undoubtedly the shortcut to your financial freedom is a debt consolidation loan.

There are two types of debt consolidation loans – secured and unsecured wherein for the secured, you will be expected to offer some form of collateral such as your home or car and the unsecured is the opposite of secured. You can take a debt consolidation to help manage and offset your current debt & equity release UK. Note that once you will be labeled a debtor, you ought to do all you can to save your reputation and name. When you think of debt consolidation, the lender will give you a very wide range of cash amount to choose from, depending on the level in which you are in debt. Since the lender is fully aware you will need enough time to pay back the loan, you will get a period of between 6 and 25 years, and sometimes even more if you sight valid reasons to get the loan repayment period extended. Note however that the added time will attract an extra rate of interest.

The two types of debt consolidation loans have their pros and cons. For the secured debt consolidation loan, its pro is that the rate of interest charged is significantly lower compared to that charged on an unsecured debt consolidation loan. Its con however is that you will have to put your property or auto in line as security. You ought to ensure the cost of the property or auto is equal to that of what you borrow. You should also ensure you repay your debt consolidated loan within the set time, failure to which the property auto will be taken by your lender. Another advantage of a secured debt consolidation loan, you can easily get an advance when you want, which is not the case with an unsecured debt consolidation loan.

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