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 Posted: Mon Sep 18, 2006 7:50 pm
Ok, I am not by any case the most authoritative source for this type of topic. As always, any of my topics are open ended for people to add material, or challenge any inaccuracies I present.
Without further adue, here is a topic inspired to help you handle your money in a sensible manner!
From "The Idiot's guide to Managing your money in Canada" - these are random tips that I have picked up from this book. Sure, it's specifically geared to Canadians but I have made this information general for the others.
If you do not have enough money to invest right now, it is ok. It is recommended that you start investing as early as you are able to. mutual funds can start you out for just 1000 dollars U.S. These tips should still be able to help you learn something new at least.
- It's ok to make mistakes. Don't stress yourself too much, ok?
- accumulate an "emergency fund" that is approximately 3-6 month's worth of your salary. You never know what will happen in life.
- distinguish carefully between your needs and your wants.
- record daily spending.
- have two times assets versus liabilities ratio. So, for every liability you have, get two assets.
- don't buy exercise equipment. They are needlessly expensive. (I would recommend joining a fitness membership or club instead, where you have access to many machines, and they are of higher quality).
- buy your car wisely.
- 1 credit card is ok. Some people recommend up two two different credit cards. You only use this as a tool to establish a decent credit rating. Be very cautious in this area because credit card debt is the worst!!
- don't go shopping when down in the dumps or hungry at the current moment. Wait for sales instead.
- for non-perishable groceries, consider joining a warehouse club. (This is wiser if you make enough money and have enough storage space in your house to justify the costs).
- eye-level merchandise at any given store is the most expensive. dart your eyes around the ailes and take your time, instead.
- do your own research for investment advice. ("mutual investment" firms are one option, but are not very recommended, from my observations, but you can still do more research on it and find it a viable investment option!).
- before you decide to invest, know what your goals are and how much money you can "toy with", and their risks.
- Be aware of all of the fees involved before jumping to banker or broker.
- knowing what personal checking habits you have will help you find the bank that fits you the best, so that you do not face as much fees.
- keep 10-30% of your investments in cash so that you can take advantage of bargains when they appear.
- The more frequently your bakn compounds your money, the more interest you earn. Accounts that compound daily are the best!!
- Get your lender or financial institution to explain the "deal" to you in dollars and cents- NOT percentages.
- Interest rates will rollercoaster- they go up and down.
- You ideally save when the interest rates are high, and borrow when the rates are low.
- To get your first credit card, shop around! You can get a "secured" card (ideal for those with bad or no credit rating), and keep that one for 6 months. Then after 6 months, apply for a different card and plan because the interest rates are naturally very high for secured cards. OR, you can start your credit with a reputable family member.
- Review your credit reports often, once a year or more! Because many credit reports contain inaccurate errors which would tarnish your record for no good reason!
- don't invest more than 50% of your money in stocks.
- beginners in investments should stick to well-known, blue-chip type companies.
- never buy penny stocks, never buy "hot tips". rumors are just that, they are rumors.
- The best time to buy bonds are when the interest rates have reached a peak and are just beginning to fall.
- never buy bonds unless the interest rates are high.
- mutual funds are professionally-managed investment portfolios that allow individual investors to put a minimum payment a month for stocks and bonds.
- don't start joining a mutual fund in december! You'll get hit with taxes! instead, buy funds that don't have a big taxable distribution, or buy funds inside of tax-sheltered accounts.
- at regular intervals, put a fixed amount of money into mutual funds to help seperate your emotions from your investments.
- the best performing years are near the end of a decade, and the worst performing years are near the beginning.
- the cycle of the presidential election influences the stock market/economy.
- the best six months to invest in stock market is from november -april. the worst six months are from may-october.
- if the stock market is up in January, there's a good chance that the rest of the year will show positive results.
- the best days to invest are the last four trading days of each month, and the first two trading days of the new month.
- use the employer's retirement plan, if you are eligible for benefits. it is tax free.
- have your paycheck directly deposited into your bank account.
- organize your tax-related documents! tax-preparation software can help.
- the cheapest way to handle your taxes is by yourself. your government provides booklets and advice over the phone and internet.
- for your child, a trust fund will help pay for college expenses.
- everyone 18 and older should have a will.
- make important documents to be easily located by trusted family members.
- hire a lawyer to draw your will up.
- don't take the executor position lightly.
- review your will every 5 years.
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Posted: Tue Sep 19, 2006 10:54 pm
More money managing tips:
From "The Idiot's guide to getting rich for Canadians" :
I'm sorry, although the title reads its for Canadians, it's really for anyone *shrugs*...
With that said, I didn't find this book to be the best guide for a young person trying to aim for independence, but you can learn anything anywhere. But yeah, most of the info in this book discussed investing strategies. As you should be aware of, you cannot rely on the government or your company you work for in order to have financial security for retirement. There isn't really "such" a thing as "loyalty" these days. You can't rely on just letting your money rot in a savings account either, where the bank pays you at best, a measly interest rate. People have to learn how to invest well.
in one sentence, the book "says" that the "key" to getting rich is knowing how to invest successfully.
First, save up enough money that you can play around with it. I realize that many young people starting out simply don't have any money saved up that they can risk playing with and losing... At least, if you get enough money to invest with, don't put all of your "Eggs" in one basket- spread out your investment options. Beginners in investing should try out stable, reputable investments and reputable companies.
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Posted: Thu Sep 21, 2006 6:28 am
For a long time, I was barely making enough money to pay rent and buy food. Though some people may want to be rich, I just wanted to stay afloat. Here's what I did to make sure I didn't go over budget.
I took all of my FIXED (or nearly fixed) monthly expenses and added them up: rent, utilities, laundry money, bus pass, cat food, etc. I did not include groceries. I then divided that total by the number of paychecks I get in a month (usually two).
The amount left over, I divided by the number of days between paychecks. That is how much money I have every day. I kept a little sheet where I'd keep track of the money I was spending. If I didn't spend my whole day's allowance, it rolled over into the next day.
I rounded out change and dealt with only whole dollars. Otherwise it's tedious.
It may not sound like it, but it's actually kind of fun. You get a nearly immediate reward for being good by having "extra" money the next day. After a few days, you might have enough to treat yourself to a fancier meal, or a movie, etc.
When I started to make a bit more, I included savings into my fixed expenses. If you take it off the top, you never miss it.
When you are buying your food, clothes, entertainment, etc. day by day, you get a good feel for how much you spend on those kinds of things, and this will help a lot when you decide to create a more detailed budget in the future. For me, the idea of drawing up some big plan for my ridiculously tiny paychecks seemed daunting. After doing this plan for a while, it seemed a lot more reasonable.
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Posted: Sat Sep 23, 2006 8:00 pm
Grip of Death - accumulate an "emergency fund" that is approximately 3-6 month's worth of your salary. You never know what will happen in life. I want to emphasize the importance of this one. Even if it means "going without" for a while until you have this amount saved, do it. When my husband lost his job for half a year (no unemployment benefits because he was fired before having worked enough time there), we thought we were cooked. But it turned out that we were actually able to survive, without taking out any loans or putting ourselves, for the entire time. We had to tighten our belts a bit, but we did it. I don't know what we would have done if we hadn't saved up enough money first. Grip of Death - don't buy exercise equipment. They are needlessly expensive. (I would recommend joining a fitness membership or club instead, where you have access to many machines, and they are of higher quality). Meh, we bought a bike. It's good enough quality and I use it quite a bit. For the amount of time we've owned it, it's almost paid off how much it would have cost for gym memberships + transportation for that amount of time. Don't get one if you aren't going to use it. And if you do decide to get one, shop around first. We got ours very cheaply because we waited until there was a sale. If you live in an area with public transportation, consider not buying a car at all. A lot of my friends have cars because they don't like having to wait for buses and such, but they end up paying so much money on them. It hardly seems worth it. Grip of Death - 1 credit card is ok. Some people recommend up two two different credit cards. You only use this as a tool to establish a decent credit rating. Be very cautious in this area because credit card debt is the worst!! I would recommend getting a credit card as soon as possible, but keeping it in a drawer or, if you insist on keeping it in your wallet, make sure not to use it unless you HAVE the money currently to pay it off. It's great for building credit, but you have to be careful. We use ours like a debit card. We don't use it unless we have the money already to pay it off. Grip of Death - knowing what personal checking habits you have will help you find the bank that fits you the best, so that you do not face as much fees. I want to add that you should pay attention to the amount charged when you take out money. I was watching a show on debt and they had a family that had gone bankrupt partially because they kept going to the cash machine and taking out cash, so the $2 fees just kept adding up and up and up and ended up being something like $300 a month. Grip of Death - the cheapest way to handle your taxes is by yourself. your government provides booklets and advice over the phone and internet. I've actually found that the cheapest way is to go with H&R Block. Because they just know so much more about the system, they were able to get us thousands more than we had calculated by ourselves (and we did use booklets and programs and all that stuff). It ended up saving us about $2K, even after their fees. What I would recommend is shopping around. Some places will give you a "review" for free, so you can check their totals against yours. If you feel confident that you can do it on your own, then do so. By all means. I'm just saying that is shouldn't be an absolute "you MUST do them yourself!"
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Posted: Sat Sep 23, 2006 8:35 pm
Kukushka If you live in an area with public transportation, consider not buying a car at all. A lot of my friends have cars because they don't like having to wait for buses and such, but they end up paying so much money on them. It hardly seems worth it. I just want to second this. I've never owned a car, and it's ludicrous how much money I've saved. I spend less on a monthly bus pass than most people do on gas for a month, not to mention I don't have to make car payments or insurance payments, and I never have to worry about what might go wrong with my car that I'll have to fork over to fix. Not to mention that driving a car is just about the worst thing that an individual can do to the environment. Also, more and more metro areas are getting car sharing programs, like Flexcar. Kukushka We use ours like a debit card. We don't use it unless we have the money already to pay it off. Also excellent advice. A side benefit of this, is when you get a solicitor on the phone telling you about balance transfers or low, low interest rates, you can tell them the truth: "I never pay interest, since I pay my balance in full every month." I haven't found anything else that shuts them up quicker. xd
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Posted: Sat Sep 23, 2006 9:25 pm
way too cool advice, both of you ladies! I am thankful to have learned something new.
I know in Ottawa, ON, has an excellent bus system. You can save at least 6-7 k Canadian a year by not owning a car and just using the bus to get around instead. That is a lot of money saved in the long run!
If your city has an excellent or decent bus system, use it and save money! A monthly pass is probably ones best bet if you are going to go out often. Its even better if you are a full time student or a senior citizen, where oftentimes they get discounts.
If, however, you live in a city that has awful public transportation, that is an unfortunate situation because cars have lots of costs. Buying the car alone is not the only cost. You have car insurance, all those hidden check ups and maintenence costs, etc. The best way I know so far to keep the costs down is to try to learn how to repair and maintain the car yourself, or to know a good friend or neighbor who is a mechanic (but offer something nice to him or her in return for their help!)
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Posted: Mon Sep 25, 2006 7:14 pm
GET A BICYCLE. God I can't stress this. A fair bike from even a good bike shop(read on) will cost you probably $200-300, maybe $400. Unless you have to go really far or need to pack a lot, you can usually manage the trip on a bicycle.
And as for bike shops, don't buy a cheap bike from Wal-Mart. THe man who was at the till when I bought my bike at the bike shop told me places like Wal-Mart don't sell bicycles, "they sell bicycle-shaped objects." So you may get a bi tof a worse looking bike or have to pay a bit more, but in the long run the bike will last you longer and most shops have good repair warranties and even give free tune-ups if you bought your bike there.
Also, if it's summer, daytime, and you're hot, turn off the lights and open the windows. Lightbulbs give off heat. Fresh air circulating in the room will cool off the room, and if you don't want the sun heat, pull the blinds or what have you - air will get in but the sunlight and heat from that won't.
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Posted: Tue Sep 09, 2008 3:26 pm
How to have a credit card and get RICHER, not POORER, with it.
Step 1. Understanding what a credit card does.
Whenever you use a credit card, you're borrowing money from the bank. Like any bank and any loan, it's not going to let you off scot-free when you do this. Depending on what card you signed up for, the bank will charge you interest depending on when you pay it back.
The fact that this is a loan is VERY IMPORTANT. Most people forget that they have to pay money back to the bank when the bill arrives, and if they don't have that money reserved in time they end up having to pay even more interest when they DO pay it back. Not having the money to pay off a credit card must be avoided at all costs. Never increase your limit if it's above what your income can pay for.
Step 2. Interest.
There are essentially two types of interest on credit cards - those that have a lower interest rate but start counting from day 1 of you spending that money on the card, and those with a higher interest rate but an 'interest-free' period for a few months right after you spend the money.
It is dumb, dumb, DUMB to get any card that makes you pay interest from day 1. People go for this option because the smaller interest number looks more enticing, but you'll pay MORE in the end because that interest compounds. Instead, budget properly, get the other card and pay it off before interest kicks in so you don't have to give the bank any extra of YOUR money.
Step 3. Earning money with your credit card.
This looks kinda weird at first. Making money by spending money? What? The premise is really quite simple, though. It involves a savings account with a decent amount of interest that the bank gives to you.
Person with no credit card: x amount of money sitting in savings, person takes it out to spend on goods, as soon as goods are bought that block of money is gone.
Person with constant interest on credit card: x amount of money sitting in savings, person buys goods with credit card, his own money earns y interest in the bank but then at some point he has to pay off credit card with x money + z interest. This z interest is usually more than the y interest earned with the money sitting in the savings account.
Person with interest-free period on credit card: x amount of money sitting in savings, person buys goods with credit card, his own money earns y interest in the bank but then at some point he has to pay off credit card with x money. Hold on! Suddenly he's got that y interest still in his bank, which is his to keep. Compared to the guy without a credit card, he has a net gain of $y because by borrowing money interest-free, his own money could still 'work' for him by earning him the bank's interest, and he ONLY had to pay back the original x borrowed.
And that's how you do it, boys and girls. Remember, it only works if you pay it off BEFORE the interest kicks in.
Short tips for those short on reading time:
Get a card with an interest-free period, and pay it off DURING THAT PERIOD.
Treat it like a debit card - don't borrow what you don't already have in your savings account to pay it off. Think of the credit card as YOUR money RIGHT NOW, not as "the bank's money which I'll just pay off eventually".
Don't forget that your salary still has to pay for your spending - do a budget first and don't go over your spending limit!
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