Financial Planning

So, you’re off on your own in college now. If you’re like most people, your funds are quite limited, but you probably haven’t had to write a real budget before. Chances are that up until now, if you got yourself into a tight financial corner, your parents would be there to bail you out. Now that you’re an adult, though, you don’t want to ask your parents to do this even if you know they will. It’s time to grow up, and it’s time to work with a budget.

Budgeting can sound a little scary, but if you follow a few easy steps, it isn’t terribly hard. These steps will ease you into the whole budgeting process so that by the time the year is over, you will be totally in control of your money.

First, take stock of where your money is actually going. The first step to making a budget isn’t actually writing down what you will spend but figuring out what you do spend. For the next two weeks, write down every penny that you spend, and also write down where you spent the money and what you spent it on. The more specific you are, the better.

Second, figure out what you can spend. If you’ve been charging your spending to a credit card, it’s time to stop! That $200 now could end up costing you another $200 in interest by the time you pay it off. If you have a part-time job, a work-study job, or a certain allowance of money from your parents, figure out what you have to spend on a monthly basis. If you’re never sure what kind of hours or tips you’ll get, it’s best to undershoot your average a little. Then if you have extra money one month, it can be a bonus for fun spending.

Third, start your budget with the big things. The easiest way to fill a jar with rocks, pebbles, and sand is to start with the biggest rocks first. The same thing goes with your budget. You should be worried about major expenses like health insurance, your car payment and car insurance, tuition, and books. Write those down first, and then see what’s left over each month. From that, work on the pebbles – your groceries, gas, and other spending that is necessary but variable. Finally, you can pack in whatever sand you can still fit into your spending limits – eating out, random shopping trips, and maybe a little bit of savings.

Fourth, decide how you’ll work your budget. You can write checks for the big stuff or pay it online. For the smaller things, use a debit card only if you can keep your checking account balanced. If this gives you problems, withdraw cash and use an envelope system with an envelope for every piece of your budget. If you run out of cash in one envelope, then that budget is shot until the next month.

Finally, be sure that you tweak your budget as you need to. This is what many people forget to do. If the original budget isn’t working for you, then start looking at what you can change. Maybe going on a school meal plan next semester will save you money on food, or maybe you just need to say “no” to eating out with your friends more often. Also, you’ll want to revamp your budget if your income or your major expenses change.

you should know that you are able to pay the home equity loan with a lower amount if you can obtain the low rest interest rates. Luckily, today you have internet connection that will help you find thousands of websites that offer you the better rates for the home equity loans.
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Home equity loan is one of the lots kinds of loans that people usually take. What is home equity loan? Home equity loan is a loan which uses the home of the borrower to put as the collateral. When you are able to pay off the mortgage, you can get the equity or the extra amount of money.
With the home equity loan, you can get the amount of money without any venturing. You can use your equity to get the certain money depend on your equity value. The home equity loan has some advantages. With the home equity loan, you will surely get the lower borrowing cost. If you compare it to the average credit card, you will find that this loan has the lower interest rates for sure.

It is not common to struggle with your personal finances. These days it seems the price of everything is going up, but your income stays the same. It can be frustrating to try to make ends meet, let alone save money for the future. Here are some great personal finance tips for the two biggest problem areas n personal finance- spending and saving- that you can use to help you get your personal finances under control.

Spending

When it comes to personal finances spending is the one area where we tend to mess up the most. Often people have problems deciding between what the need, want and must spend their money on. It can be hard sometimes to decide just where your money should go.

- Track your spending. One of the easiest ways to get a handle on your spending habits is to track them. Do this by writing down everything you spend. Write down the date, the amount and what the money was spent on. After about two weeks you should be able to look at your record and easily spot ways you can control your spending.

- Make a budget. It is the backbone of every how to on personal finance management. A budget is the easiest way to get control over your personal finances. It basically is a plan that tells you how to spend your money so that you can afford to pay your bills and get the things you need.

- Be realistic. It can be easy to live beyond your means. However, if you ever want your personal finances to be under control you have to be realistic and only spend what you can afford.

Saving

Most people tend to overlook this area of personal finance. It can be easy to just say you’ll save later, that you just don’t have the extra money to save right now. Saving money, though, is very important and you can find small ways to save now, even if you think you are too broke to do so.

- Save your change. Like you did when you were a kid, keep a piggy bank. A little change can add up over time.

- Set a certain savings amount. Put saving in your budget so you automatically put it back every time you get paid.

- Set goals. Goals are powerful. Set some saving goals for yourself. Like if you really want something special, instead of just buying it, save your money to buy it. This will help you avoid a binge shopping trip and help you to value saving.

What is a 401(k) Plan?

A 401(k) plan is a retirement savings plan that is funded by employee contributions with matching contributions from the employer. The major attraction of these plans is that they are taken from pre-tax salary, and the funds grow tax-free until withdrawn.

Advantages of 401(k) Plans

Following are advantages of 401(k) plans: Since the employee is allowed to contribute to his/her 401(k) with pre-tax money, it reduces the amount of tax paid out of each paycheck. All employer contributions and any growth in the capital grow tax-free until withdrawal. There is a compounding effect of consistent periodic contributions which is quite dramatic over a 20- or 30-year period. The employee can decide where to direct future contributions and/or current savings, giving much control over the investments to the employee. If your company matches yours, it’s like getting extra money on top of your salary. Unlike a pension, all contributions can be moved from one company’s plan to the next company’s plan (or to an IRA) if a participant changes jobs. Since the program is a personal investment program for your retirement, it is protected by pension (ERISA) laws. This includes the additional protection of the funds from garnishment or attachment by creditors or assigned to anyone else, except in the case of domestic relations court cases dealing with divorce decree or child support orders. While the 401(k) is similar in nature to an IRA, an IRA won’t enjoy any matching company contributions, and personal IRA ones are subject to much lower limits.
Disadvantages of 401(k) Plans

Following are disadvantages of 401(k) plans: It is difficult and expensive to access your 401(k) savings before age 59 1/2. 401(k) plans don’t have the luxury of being insured by the Pension Benefit Guaranty Corporation (PBGC). Employer matching them are usually not vested (i.e., do not become the property of the employee) until a number of years have passed. The rules say that employer matching contributions must vest according to one of two schedules, either a 3-year “cliff” plan (100% after 3 years) or a 6-year “graded” plan (20% per year in years 2 through 6).

401(k) plans have proven to be popular with employees for several reasons, being the tax deferral, the increased portability of this plan, employer matching contributions, and the increased control associated with self-direction of investments.

While it has an unusual name, envelope method budgeting is perhaps one of the simplest ways to get yourself into the habit of following a budget.

The first stage is to work out how much you have to keep aside each pay period for all your different bills (pretty much like any other budget). For example, if your internet bill was $40 a month and you got paid weekly, you would have to put aside $10 from each pay to cover that bill. Once you’ve figured out how much you are setting aside, you then get an envelope for each major bill or expense category and write the name of the expense on the front. When you get paid, you simply put the amount you worked out per pay period into each envelope, and then set the envelopes aside.

You can have as many or as few different envelopes as you want. At the most basic you might create one for food, one for “fun”, one for your various utilities, one for irregular expenses (like car servicing) and one for unexpected expenses. Or you might have separate envelopes for every bill you get – phone, electricity, gas, internet, etc. How many envelopes you have is up to you. The important thing is that you put the money in the envelope, and then put the envelope aside.

The only time you access the money in the envelope is when you want to pay that bill. For example, when going grocery shopping you would take the food money envelope with you, and pay for the groceries with that money (and only that money). It would be up to you to keep track of your total while shopping in the store, and make sure that you don’t try to spend more money than you have with you. While this may seem limiting at first, after a short while having that fixed limit in place should feel comforting.

The benefits of envelope method budgeting are simple. Because you only have the money in the envelope to spend, it is extremely difficult to spend extra money and break your budget. True, you can choose to just take money out of another envelope to buy extras that you haven’t budgeted for. But this makes it an obvious physical act when you want to break the budget – you can no longer just hand over your plastic to spend you money, you have to go and actually get the money out of an envelope.

A second benefit is that you always know exactly how much you have to spend. Instead of having to think to yourself “do I have $10 or $20 left for food this week?” every time you need to buy groceries, you can simply see the amount left by looking in the envelope.

Of course, there is one important note about this method (besides remembering to do it!) As it will involve you having cash sitting around your home, be sure to keep the money in a hidden and secure location (and no, the freezer is neither hidden nor secure). The last thing you want is for someone to break in and steal your money!