Defining your savings goals is the first thing to do before you invest, especially when that investment will have an impact on your childs future.
It is after-all your childs future that you are investing in–and school finance cannot be avoided, as babies will grow into adults who need to be given the best opportunities we can offer as parents.
The best advice that any parent can get is to start saving early. College tuition fees can cause a strain on your family’s budget and lifestyle. You need to have a goal to keep you motivated to save. And what better motivation is there than knowing that the money you save will finance your child’s education.
Normally the best stage to start saving for your childs finance towards college tuition is at birth. If, however, you have not started, then the time to start saving is now. It is never too late to start saving.
The sooner you start saving, the more time therell be for compound interest to build up into a nice college fund for your child. Remember that each child should get his or her school finance savings fund.
You also need to decide the amount you intend to save by the time that your child reaches college age. There are many options available for you to choose from when it dollar amount. This means that you calculate the projected cost of public college tuition by the time your child is ready for college.
The other commonly used method, which many parents prefer, involves devoting a fixed percentage of income to their child’s future college costs. The idea is this: whatever you do, you have to have a defined goal. You should save as much as you can, whether it be a large amount, like several hundred dollars a month or a more modest amount, such as $25 to $50 each month.
A college education is an investment in the future of your child. If you truly want to see your child succeed, as all parents do, what could possibly be a better investment?
For all people shop around for the best rate, there are few who have taken the time to sit down and add it all up. After all, why would you bother? The answer is that understanding just how interest rates work can help you see how important small differences in rates and payment amounts can be.
Interest Rates are Compound.
It is important to remember that what you owe is compounded – that means you pay interest on the interest you owe from the month before. That means that if you’re paying 2% per month in interest, you’re not paying 24% per year – you’re actually paying 26.82%. Charging interest monthly instead of yearly is a trick to make it feel like you are paying a very low price for your borrowing.
A Thought Experiment.
Here’s a question: would you rather have $1 million, or $10,000 in a savings account earning 20% per year in compound interest?
Well, let’s see how that $10,000 would grow. After 10 years: $61,917. 20 years: $383,375. 30 years: $2,373,763. 40 years: $91,004,381. 50 years: $563,475,143.
So after fifty years, you’d have over $500 million?! Well, not so fast. Of course, you have to take inflation into account – if we say inflation is 5%, then that money would have the buying power that $10,732,859 does today. Still, that’s not a bad return on your investment of $10,000, is it?
That’s the power of compound interest, and the way the credit card companies make their money (it’s also the way pensions work, and the reason the prices of things seem to rise massively as you get older). Be very, very afraid of compound interest. Or, of course, you could start saving, and be very glad of it
Compound Interest Adds Up.
Let’s work through an example on a more real kind of scale. Let’s say you have an average unpaid balance of $1,000 on a card at 15% APR.
You will owe $150 in interest for the first year you borrow. However, this amount is then added onto the balance, and interest is charged on that. The second year, you’d owe another $172.50, for a total of $1322.50. It goes on, with totals like this: $1,520.88, $1,749, $2,011.35.
After just five years at 15%, you’d owe double what you borrowed. And after 10 years, you’d owe four times what you borrowed! Bet you weren’t expecting that. If you let something like that carry on for long enough, you’ll end up paying back that credit card for years afterwards, paying back what you borrowed many times over and still not clearing the debt. Most people don’t work this out, and feel that the payments must simply be their fault for spending too much money to begin with.
One Percent of Difference.
One more thing. You might think there’s not that much difference between a card that charges 15% APR and one that charges 12% APR. Let’s see the difference the lower rate would make to that $1,000 borrowed for five years. Remember, after five years at 15%, you owed $2,011.35.
At 12%: $1120, $1254.40, $1404.93, $1573.52 $1762.34 after five years. So you’ve saved $249.01 from that 3% difference in APR – in other words, you’ve paid almost 25% less interest.
Interest rates are a complex subject. In some cases you will want them to be high, in others you’ll want them to be as low as possible. But, what they are is not something that you or I can change. It is determined on many things especially on the way the economy is moving. So, how much you will pay for that car or the home you wanted and how much you will make on your savings accounts is determined by interest rates and factors that you can not control.
But, there are many ways in which you can do well with interest rates. One of the most important things that the average consumer can do to lower interest rates that will effect them is to simply shop around. There are many deals to be had when it comes to these rates. You should consider looking not only at your bank and those in your area but also (and especially) at the banks and lending institutions on the web. You can truly save money by shopping around.
It also helps considerably to get a low interest rate if you have good credit. While this is not something that you can instantly fix, it is something worth working for. Improving credit by lowering debt and making payments on time helps to increase your credit worthiness. This is very important when it comes to banks and lending institutions in determining whether or not you are a good risk to take.
But, how are interest rates set? For the most part, the determination of what the rates are has a lot to do with what the Federal Reserve says it should be. This determination is based on many things but one of the largest is the economy. Should the economy be doing well, interest rates tend to go up to help increase profitability and allow your savings dollar to do more. Likewise, when the economy is doing poorly, it is necessary for the interest rates to fall slightly to help encourage people to open new businesses and purchase more homes. This will then strengthen the economy in the long run.
Being smart about interest rates is essential to living a profitable life.
They say the first step to beating an addiction is to admit that you have a problem.
Dealing with someone who has a gambling addiction can be painful. They have a tendency to withdraw from family and loved ones, so what are you supposed to do when someone you care about has developed a gambling addiction.
There are several things you will need to do and some of them are very hard to do.
The first thing you have to do is to hide all your valuables, and if this person lives with you, then you need to keep them behind locked doors and if that is not possible then take them to a bank and lock them in a safety deposit box.
If this person is you child or your spouse then you need to limit there access to your money. In many circumstances people have spent their family’s savings and kid’s college funds. So if at all possible try to get that persons name of the accounts if it is not already too late, and cancel all their credit cards.
At some point you will have to confront them. When you do confront them it is important to not yell and do not get angry just tell them how what they are doing affects you. Make sure that all the persons close friends are there to help with this.
It is important that everyone take turns and tell the person how his gambling has affected their relationships, but in a non angry, caring manner. This will help the person realize that the people that care about him see something that maybe he does not and hopefully will take an honest look at his gambling.
Remember the goal of confronting someone is not to make them stop gambling, it is to help them recognize they have a gambling problem and to encourage them to seek professional help.
Some people recommend that you try to get your friend to go to a gamblers anonymous meeting, but I do not recommend this. Gamblers Anonymous is a great organization that truly helps those with gambling problems stay away from gambling, but before you are ready for this most people need one on one sessions with a psychologist or a counselor trained to deal with gambling addiction.
After all is said and done, you must be prepared because most of the time the gambler continues to gamble, maybe they will make a brief attempt to stop before starting again in secret.
With most addictions the person with the problem needs to hit what they call a “bottom”. This is when the gambler has lost everything that really meant anything to them, such as family and friends, and it is only at this point many will see the problem and seek help.
If you know someone who is unwilling to admit their gambling problem I recommend that after you have tried your best to get this person to seek help if they do not, you may have to be prepared to leave them, remember at some point you have to abandon a sinking ship before you go down as well.
To find more information on gambling addiction search gamblers Anonymous and
Codependence websites.
Everybody starting in life should avoid running into debt.
There is scarcely anything that drags a person down like debt. It is a slavish position to get ill, yet we find many a young man, hardly out of his “teens,” running in debt.
He meets a chum and says, “Look at this: I have got trusted for a new suit of clothes.”
He seems to look upon the clothes as so much given to him; well, it frequently is so, but, if he succeeds in paying and then gets trusted again, he is adopting a habit which will keep him in poverty through life.
Debt robs a man of his self-respect, and makes him almost despise himself.
Grunting and groaning and working for what he has eaten up or worn out, and now when he is called upon to pay up, he has nothing to show for his money; this is properly termed “working for a dead horse.”
I do not speak of merchants buying and selling on credit, or of those who buy on credit in order to turn the purchase to a profit. The old Quaker said to his farmer son, “John, never get trusted; but if thee gets trusted for anything, let it be for ‘manure,’ because that will help thee pay it back again.”
Mr. Beecher advised young men to get in debt if they could to a small amount in the purchase of land, in the country districts. “If a young man,” he says, “will only get in debt for some land and then get married, these two things will keep him straight, or nothing will”.
This may be safe to a limited extent, but getting in debt for what you eat and drink and wear is to be avoided. Some families have a foolish habit of getting credit at “the stores,” and thus frequently purchase many things which might have been dispensed with.
It is all very well to say; “I have got trusted for sixty days, and if I don’t have the money the creditor will think nothing about it.” There is no class of people in the world, who have such good memories as creditors. When the sixty days run out, you will have to pay.
If you do not pay, you will break your promise, and probably resort to a falsehood. You may make some excuse or get in debt elsewhere to pay it, but that only involves you the deeper.
A good-looking, lazy young fellow, was the apprentice boy, Horatio. His employer said, “Horatio, did you ever see a snail?” “I – think – I – have,” he drawled out. “You must have met him then, for I am sure you never overtook one,” said the “boss.” Your creditor will meet you or overtake you and say, “Now, my young friend, you agreed to pay me; you have not done it, you must give me your note.”
You give the note on interest and it commences working against you; “it is a dead horse.” The creditor goes to bed at night and wakes up in the morning better off than when he retired to bed, because his interest has increased during the night, but you grow poorer while you are sleeping, for the interest is accumulating against you.
Money is in some respects like fire; it is a very excellent servant but a terrible master. When you have it mastering you; when interest is constantly piling up against you, it will keep you down in the worst kind of slavery.
But let money work for you, and you have the most devoted servant in the world. It is no “eye-servant.”There is nothing animate or inanimate that will work so faithfully as money when placed at interest, well secured. It works night and day, and in wet or dry weather.
In the former “blue-law State of Connecticut”, where the old Puritans had laws so rigid that it was said, “they fined a man for kissing his wife on Sunday”. Yet these rich old Puritans would have thousands of dollars at interest, and on Saturday night would be worth a certain amount; on Sunday they would go to church and perform all the duties of a Christian.
On waking up on Monday morning, they would find themselves considerably richer than the Saturday night previous, simply because their money placed at interest had worked faithfully for them all day Sunday, according to law!
Do not let it work against you; if you do there is no chance for success in life so far as money is concerned. John Randolph, the eccentric Virginian, once exclaimed in Congress, “Mr. Speaker, I have discovered the philosopher’s stone: pay as you go.”This is, indeed, nearer to the philosopher’s stone than any alchemist has ever yet arrived.
A frugal shopper has skills and ways of looking at things that help him or her take advantage of the money-saving opportunities in life. There are eleven of these techniques below. You can learn them in a matter of a day or two, practice them for a few weeks, and then save money for the rest of your life.
1. A frugal shopper studies other people. Do you know someone who always gets the best deal on cars, boats, or whatever? Ask him how he does it! Some people will tell you that the cheapest coffee in town is $3 per cup, while others will say 50 cents. There are probably people near you living a good life on half of what you make. Learn how others do things, so you’ll know your options.
2. Frugality requires knowledge of values. It’s tough to get a great deal on a car if you don’t know what a great deal is. Start educating yourself on prices, especially before you’re ready to buy anything that costs a lot.
3. Frugal shoppers pay cash. Things are cheaper when paid for in cash instead of credit. Want that new patio set? The price divided by the number of weeks you can wait to get it equals how much you need to set aside each week. You’ll not only save on interest when you pay cash, but you’ll often get a better price.
4. A good shopper looks for alternatives. Maybe you’d have just as much fun taking that discounted trip to the Bahamas as you would going to Jamaica. If you happen to enjoy pizza just as much – or more, skip the expensive restaurant and call Dominoes.
5. Frugal shoppers tell people what they need. Just mention it in conversation. Do you know how many people get free or cheap things, just because they talk? My neighbor wanted to upgrade her living room debt, and was thrilled that I would take her 3-month-old couch off her hands for $30. Glad I mentioned I was looking for one.
6. Do the math. You didn’t really save $400 on that car if it costs you $500 more in gas each year. Also, be aware that some stores are cashing in on shopper’s assumptions that larger is cheaper. Yes, the gallon of pickles might actually cost more than four quart jars. Be ready to do the math if you want to be a frugal shopper.
Equity is the value of your home at current market value after deducting the outstanding mortgage on your home, which is what you would have left over in the event that you sold your property at market value and repaid your outstanding mortgage. Home equity is built over time; as equity builds, you create a pool of money which your can utilize it later for many purposes.
In general, it is unadvisable to spend your equity money on things that do not give you ROI (return on investment) such as frivolous vacations. Use your home equity to clear your bad debts is actually a type of spending on your equity money. You could avoid yourself from trapping into debts by carefully plan your budget and spend with what you earn.
A smarter way of using your equity is use it to grow your equity further, spend on things that will bring you ROI. Ways to use your equity smartly include:
Start Your Own Business
You can use your home equity to borrow a low interest loan to generate the capital necessary to start your own business. Just be sure that you have a sound business plan in mind and that you have other safety cushions in place.
During the initial stage of your own business, you could maintain your reliable first income stream (to protect you against any cash problems) while working to bring your own business up to the stage.
Home Improvement
A better home condition will increase your home's resale value. Hence you can dip into your equity to generate funds for home improvement. Your home improvement project will improve your home condition and provide you with a more comfortable living, and you could get a higher resale price whenever you want to sell it. But remember that not all home improvement projects will contribute equally to your homes resale value.
Children Education
Growing equity is a great way to generate fund for your children education needs. You can get loan against your home equity for your children educational needs. Using your equity to invest on your children education will get them a brighter future and at a better position to compete in the challenging job market.
Improve Your FICO Score Debt is unavoidable for many people as long as we have credit cards, mortgage or car, but you could prevent yourself from trapping into bad debts condition by carefully planning your budget and spending with your financial affordability. Instead, your equity can help you to improve your FICO score. By paying off creditors, you can improve your FICO score and potentially qualify for a lower refinancing rate. To make the most out of this process, know your interest rates, for both savings and debts. You can get help from expert such as an accountant to help you with the calculations. With so many rate variables in play, its easy to get confused about how to consolidate, how to pick the right term for your home equity loan, and how much to allocate to savings and how much to allocate to payments.
In Summary
Home equity is the money you have put down against the principal of your house as a savings account, be aware that if you fail to budget effectively and over draw your equity. You could lose your house, wind up in credit trouble, or even have to file for bankruptcy. Hence, use your equity smartly is a great way to pursue your wealth building.
A frugal shopper has skills and ways of looking at things that help him or her take advantage of the money-saving opportunities in life. There are eleven of these techniques below. You can learn them in a matter of a day or two, practice them for a few weeks, and then save money for the rest of your life.
1. A frugal shopper studies other people. Do you know someone who always gets the best deal on cars, boats, or whatever? Ask him how he does it! Some people will tell you that the cheapest coffee in town is $3 per cup, while others will say 50 cents. There are probably people near you living a good life on half of what you make. Learn how others do things, so you’ll know your options.
2. Frugality requires knowledge of values. It’s tough to get a great deal on a car if you don’t know what a great deal is. Start educating yourself on prices, especially before you’re ready to buy anything that costs a lot.
3. Frugal shoppers pay cash. Things are cheaper when paid for in cash instead of credit. Want that new patio set? The price divided by the number of weeks you can wait to get it equals how much you need to set aside each week. You’ll not only save on interest when you pay cash, but you’ll often get a better price.
4. A good shopper looks for alternatives. Maybe you’d have just as much fun taking that discounted trip to the Bahamas as you would going to Jamaica. If you happen to enjoy pizza just as much – or more, skip the expensive restaurant and call Dominoes.
5. Frugal shoppers tell people what they need. Just mention it in conversation. Do you know how many people get free or cheap things, just because they talk? My neighbor wanted to upgrade her living room debt, and was thrilled that I would take her 3-month-old couch off her hands for $30. Glad I mentioned I was looking for one.
6. Do the math. You didn’t really save $400 on that car if it costs you $500 more in gas each year. Also, be aware that some stores are cashing in on shopper’s assumptions that larger is cheaper. Yes, the gallon of pickles might actually cost more than four quart jars. Be ready to do the math if you want to be a frugal shopper.
How would you like to earn more in 2006? Up to $4000 more? The answer is not by earning more, although that can help, its by cutting back on your daily expense. We work to earn a living. We live paycheck to paycheck. Never have money left over at the end of the month? Where does it all go? You can probably account for the majority of where you paycheck goes. Housing, car payments, credit card bills, food. But where do all those other dollars go?
You might be surprised how much cash you spend every day without really knowing it. Lets start with your drive to work. Long commute? How much gas do you use a week commuting? Are there ways you can reduce that? Car pool, public transportation? A job closer to home? Do you have to pay for parking? If you have to park in a downtown area anywhere in the county you are probably spending $8-$12 or more per day. Can you find a less expensive place to park even if it means walking a few extra blocks? A job where you dont have to pay for parking can save you $100-$200 a month.
How about the morning coffee. $30-$40 per month? Do you bring your lunch or eat out everyday? $3-$10 a day is another $60-$200 a month. Dont forget the snack out of the vending machine and your afternoon soda break. There is another $35 a month.
If you add it up you are looking at spending $300 a month or $3600 a year that it is costing you to work. These are just some of the daily expenses you may have, not including other work related expenses. Now divide $300 a month by how much you make per hour and you will know how many hours you need to work just to be able to work!
You dont have to give up everything at once but if you start to cut back now when you get your next raise you will have even more money to put away. The easiest thing to do now is simply keep track of your daily expenses for the next few weeks. You may be surprised just how much you are spending. Once you know where your money is going then you can start to cut back.
Dont get in the habit of going to the cash machine every few days. Once cash is in your hands, you will never know where it went. If you want to keep more of your hard earned dollars start to budget today. You will be glad you did.