Category: Money

Avoid Impulse Spending, Part II

[NEEDS VERSUS WANTS]

 

To overcome impulse spending, the first thing to do is learn to separate your NEEDS from your WANTS.

Your budget will help you do this. Rent, electric, phone, paying your taxes, all of these are essential needs. Food, a modest amount on clothing and shoes which will help you hold down your job and keep money coming in, also NEEDS.

That designer handbag, great shoes, amazing jeans, well, sorry, those are NOT life’s essentials.

 

WE DESIRE WHAT WE SEE, AND SEE WHAT WE DESIRE

You are NOT entirely to blame. The whole of the ad industry is based on turning WANTS into perceived NEEDS.

Advertisers blitz us with their products at us 24/7. Perhaps you really DO need a new computer, for example. But don’t just say yes to the first as you see or the first salesman who comes along and tells you that you really NEED the model with the most expensive bells and whistles.

Or that you have to act now before the sale is over. Most of the time if there is a sale, it means it’s a slow month and they are trying to keep their numbers up!

 

SUCCESSFUL SHOPPING TIPS

The trick with shopping, even in a ‘sale’,  is to give yourself a cooling-off period before you buy anything that you haven’t planned for or budgeted for. Especially if you have a credit card.

When you go shopping, make a list and stick to it. In particular, never go shopping in a supermarket when you are hungry. At the holidays, make your list, check it twice, and do not go overboard at the holidays and then have to keep on paying for it via your credit cards months after the fact.

When you do go shopping, take only enough cash to pay for what you have planned to buy, or use a debit card linked to your checking account.

Leave your credit cards at home. In fact, try to get rid of all your credit cards by paying them down, and then keep the one with the lowest APR for emergencies.

 

EMERGENCY, OR IMPULSE?

And be very strict about what qualifies as an emergency. For Carrie in Sex in the City it was the Manolo Blahnik Mary Janes. For me, it would be my dog’s surgery in January.

If you see something you think you really need, give yourself two weeks to decide if it is really something you need or something you can easily do without.

By following this simple solution, you will curb your impulse spending. Then you will mend your financial fences and your relationships, and be able to move forward toward your short and long terms goals aligned with your budget, and not constantly busting it.

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Avoid Impulse Spending Part I

 

Is your weakness impulse spending?

 

Answer these questions truthfully:

1.)    Does your spouse or partner complain that you spend too much money?

2.)    Are you surprised each month when your credit card bill arrives and you see how much more you charged than you thought you had?

3.)    Do you have more shoes and clothes in your closet than you could ever possibly wear?

4.)    Do you own every new gadget before it has time to collect dust on a retailer’s shelf?

5.)    Do you buy things you didn’t know you wanted until you saw them on display in a store?

6.)    Do you often wonder what happened to the money you had in your purse or wallet?

 

If you answered YES to any two of the above questions, chances are you’re an impulse spender and indulge yourself in retail therapy.

 

THE DANGERS OF IMPULSE SPENDING

Impulse spending is not a good thing. It will prevent you from saving for the important long term goals you really want, like a house, a new car, a vacation, or retirement.

 

YOUR FINANCIAL GOALS

Once you define your adult financial goals, you will have to set a budget and stick to it.   Impulse spending is an enemy of any budget. It is pointless to sacrifice your long term goals for a bunch of short term ‘hits’.  Your retail therapy doesn’t cure anything, you just end up spending money on items that really don’t matter in the overall scheme of things.

 

THE RISKS OF IMPULSE SPENDING

Impulse spending will not only put a strain on your finances, but your relationships as well. Arguments over money is touted as the number one reason for divorce in this country.

 

Continued in: Avoid Impulse Spending Part II

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Determining Where To Invest Your Money, Part II

(Continued from Determining Where To Invest Your Money, Part 1)

 

PRACTICE INVESTING ON THE STOCK MARKET

With access to the Internet, you can actually play the stock market with fake money to start with at some sites, in order to get a feel for how it works. Then when you feel confident, you can move on to the real thing.

To start with make-believe investments, do a search with any search engine for Stock Market Games or Stock Market Simulations, and start studying.

 

FOREIGN EXCHANGE

Other types of investments outside of the stock market, such as foreign exchange, also known as FOREX, also have make-believe accounts and simulations.

The great thing about FOREX is you don’t have to worry about which stocks to buy. Currency is traded in pairs, and the main pairs you really want to look at all have to do with the American Dollar.

So for example, the  American Dollar trading against the Canadian, or against the Euro, or the British pound. You can look at only 6 pairs every day, day after day, and make money, IF you are patient and learn how to spot and ride a trend.

And unlike the stockmarket, you can also make money in FOREX whether your pairs are going up or down. ll you have to do is predict the trend.

As a potential investor, you should read anything you can get your hands on about investing, but start with the beginning investment websites first, and go through them methodically so you don’t get lost or confused. It can certainly be a maze, so if you want to keep it simple, but have some moderate risk tolerance, go for FOREX.

 

CONSULT A FINANCIAL PLANNER?

Finally, you might want to speak with a financial planner. Tell them your goals, and ask them for their suggestions–this is what they get paid for!

A good financial planner can easily help you determine where to invest your money, and help you set up a workable plan to reach all of your financial goals.

Many will even teach you about investing along the way–make sure you pay attention to what they are telling you, rather than thinking you know best. Resist the temptation to try to get rich quick as well.  And always make sure you are not risking more than you can afford.

Knowing your investment goals, and where you want to invest, are two of the cornerstones to successful investing.

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Determining Where To Invest Your Money, Part I

 

There are several different types of investments, and there are many factors in determining where you should invest your money.

Of course, determining where you will invest begins with researching the various available types of investments, determining your risk tolerance, and determining your investment style once you have determined your financial goals.

 

KNOW YOUR INVESTMENT GOALS

Remember, without a financial goal, you will lack the clear vision to know what you want to achieve by investing. It would be a bit like starting to run a race, but not having any idea where the finish line was supposed to be.

 

SHORT-TERM VERSUS LONG-TERM INVESTMENT GOALS

So, what is your financial goal? Do you have a list of short-, medium-, and long-term ones? A new house will probably be more short to medium term than say, a college fund if your children are in diapers, or a retirement fund if you’ve just got your first job.

If you were going to purchase a new car, you would do quite a bit of research before making a final decision and a purchase. You would never consider purchasing a car that you had not fully researched, examined, determined if it was suitable for your overall lifestyle (eg, a two-seater sports car is not practical if you have 4 children and a Great Dane. Or even just the Great Dane!)

You will examine the details, look at the performance history of the car, and take for a test drive. You might even get recommendations from friends and review sites online.

The good news is, investing works much the same way.

 

RESEARCH THE MARKET

You will of course want to learn as much about the investment as possible before plunking down your hard-earned cash, and you would want to see how past investors have done as well.

 

STOCKS AND SHARES

Learning about the stock market and investments can take a fair amount of time  depending on the kinds of investments you are interested in, and there can be all sorts of applicable fees, or even hidden fees you might not be aware of until you are actually investing online.

So any research you do before you risk one penny will be time well spent. There are numerous websites to help first-time investors, and you can even take courses online or at your local college.

Continued in:  Determining Where To Invest Your Money Part II

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Different Types of Investments: An Overview Part II

(Continued from Part I)

 

If you are  not a conservative or moderate investor, then you are an aggressive one.

AGGRESSIVE INVESTORS

Aggressive investors commonly do most of their investing in the stock market, which is higher risk, especially in a volatile economic climate. As we write this, for example the Dow went up 400 points on Tuesday and has pretty much last all those gains when it plunged about 175 points again on Thursday and on Friday.

Aggressive investors also tend to invest in business ventures as well as higher-risk real estate. For instance, if an aggressive investor puts his or her money into an older apartment building, then invests more money renovating the property, they are running a risk.

They expect to be able to rent the apartments out for more money than the apartments are currently worth, or to sell the entire property for a profit on their initial investments.

 

KNOW YOUR MARKET

In some cases, this is a worthwhile gamble, but given the current property market, especially in certain areas, it might not be the most sensible place to put your money at the moment.

 

RISKS AND REWARDS

Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and investors know this first hand.

 

401Ks

All of the funds you have the chance to invest in for your 401k retirement fund, for example, should have a full record of past history, both recently, in the past year, the past 5 years, and even the past 10.

 

529s

For those of us interested in saving for college, a 529 also offers similar investment choices, with different portfolios. Since we are based in New York State, we have certain options administered by Vanguard Funds.

 

OTHER HANDY WAYS TO INVEST

We could have opted for their choice, but with a little more time, effort, and research at the Vanguard site we are making that much more money, and with a credit card from Upromise which gives you money on all the purchases you use on the card, plus extra percentages for things you buy regularly, like household products, it makes it easy to save money and invest it even if you don’t think you can afford it with your present budget.

 

STABILIZE YOUR CURRENT FINANCIAL SITUATION BEFORE YOU INVEST

As we said in a previous article, make sure that you stabilize your current financial situation before you start thinking of investing, and remember how credit card companies make their money.

But investing in a 401k if the money is taken out as pre-tax dollars, and especially if your company gives you a match, is very worthwhile and easy. So is a 529, and you can get started with as little as $25.

 

KNOWLEDGE EQUALS SUCCESS WHEN IT COMES TO INVESTING

Educating yourself by looking at these options is the best way of dipping your toe in the water, and if you start making money, well, stick to your formula and do a bit more.

Above all, though, know your investing style and how much you can afford to invest, because it really means, how much time can you spend building your  portfolio, and how much can you afford to risk on different types of investments.

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Different Types of Investments: An Overview, Part I

There are three different main kinds of investments, stocks, bonds, and cash. Sounds simple, right?

Well, unfortunately, it can get very complicated from there. You see, each type of investment has numerous types of investments that fall under those three categories.

There is quite a bit to learn about each different investment type. The stock market can be a big scary place for those who know little or nothing about investing, and often the first time investor is disappointed, and perhaps even so badly burnt that they never have the confidence to try again.

In the same way that you have to practice in order to learn how to swim,  and swim well on your own, you can easily learn the basics of investing and then decide to dip your toe in to test the water. Jumping in without checking, diving, or doing a belly flop, is not recommended.

Fortunately, the amount you have to learn is usually in proportion to the type of investor that you are.

 

THREE TYPES OF INVESTOR, TWO LEVELS OF RISK

There are also three types of investors: conservative, moderate, and aggressive.

The different types of investments also cater to the two levels of risk tolerance: high risk and low risk.

 

CONSERVATIVE

Conservative investors often invest in cash. This means that they put their money in interest-bearing savings accounts, money market accounts, mutual funds, US Treasury bills (T-Bills), and Certificates of Deposit.

These are very safe investments that grow over varying periods of time, usually a longer period of time. These are also low-risk investments, and don’t require a great deal of time each week in follow-up and decision-making.

For example, if you go to the government website to buy T-Bills, you can set up your account in minutes, buy one for the sum you want, and the duration of time before it accrues its value.

So as an example, for a $1000 T-bill, you would pay $970, and in 4 weeks time, it would be worth  $1000. This is a simple but fool-proof strategy, and while the returns might not seem that high, in a volatile economy, it is an investment with no risk. Plus, this is just one example. There are t- bills and t-notes, and auctions online that might secure you that same $1000 T-bill for, say, $930 or even less.

 

MODERATE INVESTORS

Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risk investment. Moderate investors often also invest in real estate, providing that it is low-risk real estate.

For example, in your 401k portfolio, you may see a US Property Fund account, with a 6 to 8% return.  Again, it may not be a huge return, but there is not much risk.

 

Continued in Part II.

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A Budget: Your Ultimate Financial Management Tool, Part IV

(Continued from Part III.)

Now let’s look at your own personal finances in more detail.

 

SAVINGS, INVESTING, AND PAYING OFF DEBT

Savings should always come first before any spending or investing, except if you are carrying a fair amount of consumer debt or student loans. If you are, make it a point to pay if off first, as we have discussed above.

But do also make sure that there is no penalty actually involved in paying it off quickly. Seriously, they WILL do that. WHY? Because they make more money out of you paying interest, than in paying back the principal (the money owed.

Once you are in the clear on debt, then it makes sense to save.  If an APR is at 15%-29%, then the 4-5% savings you would get from the average online savings account would be meaningless.

Look at your savings options, and choose something with relatively easy access so you don’t run the risk of penalties if you have to withdraw it in an emergency (such as if you had it in a 1 year CD).

If you are thinking of investing it to get a higher return on your money, decide what you can afford to invest and thus risk.

Even a small amount saved will help you reach your short term and long term  financial goals.

 

BUDGETS: A LIVING DOCUMENT

Above all, keep in mind that your budget is a living entity, as the cost of living goes up or down, and your situation changes.  If you are living on your own, make sure you hold yourself accountable, by realizing that short-term sacrifices can lead to long term gains.

If you are in partnership, both of you will need to be happy with the final budget, and feel like it’s something you can stick to. Remember, you’re working together towards a brighter and better future, not playing the blame game.

Once you have your budget, you can look at your overall financial health, and work on the areas that need improvement. At least with your budget, you will have a workable map toward your destination, so while you may not always steer the straightest course, at least if you follow your budget, you won’t sail onto the rocks.

 

 

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