17. November 2016 · Comments Off on Easy Guide to the Basics of Personal Finance · Categories: Finance

Why should you NOT save?

When you have more than enough savings, it offers you peace of mind, security, convenience, and freedom to pursue the things you want for yourself and your loved ones. Living paycheck to paycheck is very stressful and worrisome. As much as possible, you will want to prevent this financial fear from re-occurring. If you do not work and are not earning, you can help the earner in your family by being the family’s Financial Manager and assisting on how you can grow the family’s income and savings and reduce your expenses.

What can you do now?

You can start by analyzing and taking control of your finances. How much is your income? How much of your income should go to your expenses and how much will go to your savings? Inspired by the Suze Orman show, your personal financial report should have the following categories:

PART 1 – INCOME

a. Income – Your income sources could be your job, sideline work, business, stocks and dividends, rent income, and any other monies you receive. How much is your income? Can it truly support you and if you are not single, can it support your entire family’s needs? If you work very hard but your income is too low that you have to depend on others to take care of your expenditures, it will be difficult to save for the future. You have to work hard but ‘smarter’ and find a way to improve your earnings, otherwise, you and your loved ones could suffer deprivation. So don’t give up on looking for opportunities on how you can grow your hard-earned money into wealth. Educate yourself but know that you cannot also do everything on your own; know when to get help.

PART 2 – EXPENSES

a. Living Expenses – Divide your income into portions. Determine how much total monthly spending you need to take care of your fixed monthly living expenses such as your food, water, and utilities. If your income is not enough to take care of your needs, cutting down on your expenses and evaluating if your spending is a need or a want is always the best practice in being in control with your money. It’s not bad to have wants in life but before indulging, ask yourself first if you can afford it. Can you afford to spend a big chunk of your savings for a luxury shoe that you will only wear for a year? Before buying that flashy BMW car, ask yourself if you can afford the insurance, maintenance and repairs for this car.

b. Debt – Sometimes, debts are inevitable such as debts incurred due to an accident or a medical emergency. However, the stress of falling into debts may be avoided by making sure you have more than enough savings and also, by borrowing wisely. For one, there are banks that offer credit for a zero percent interest. You should start investing on long-term relationships with these banks to earn financial benefits, secure a good credit, and to avoid the large penalties and interests that other lenders have. Most people end up in so much debt through poor use of credit cards. In fact, if you use it wisely, credit cards are great financial tools where you can grow your credit based on your spending performance. If you spend wisely and pay your dues in advance, banks could increase your credit. Use your credit card as a tool where you can buy something and have the ability to pay for it within 30 days. In this way, you can earn some free money and rewards with your spending. Don’t use your credit card if you are sure that you wont be able to pay back the entire amount after a month. Only buy what you need and can afford. Also, don’t make the mistake of spending impulsively and shopping for unnecessary things just for the goal of earning rewards; you will lose more money when you do so this way.

PART 3 – SAVINGS AND INVESTMENTS (Where else can the rest of your money go? In your savings and investments!)

a. Cash – This is your revolving fund; the money that you use to take care of your ‘needs and wants’ such as food and water, mortgage or rent, electricity, clothes, medicines, insurance, and car. When you are left with money that you are not ready to invest, save it and add it into your savings account. It’s always a good practice to save at least 10 percent of your salary into your personal savings. As a matter of fact, save first before making purchases; otherwise you will most likely end up not having any saving once you have spent all your salary. Must you still carry cash? Yes, but do not carry your entire life savings in your purse or home safe. Put your money in a bank where it is much secured and only allot cash that you may need for the entire week. Cash could get lost so utilize your debit card or ATM card. Just imagine if you had lost your entire month’s paycheck just because you didn’t put it in the bank!

b. Emergency Fund – Suze Orman is strict on making sure you have secured at least eight months worth of income into your emergency fund. If you think eight months could be extreme, think pregnancy, unemployment, or recession! Your emergency fund should not be treated as a revolving fund; this is cash reserve intended strictly for emergencies like a major house repair, or a surgery, or when you lose your job. It may take a father of four several months to land a new source of income after his company went bankrupt, or a young graduate who just switched careers, or a new mom to get back to health, so a well-funded emergency fund could save you the detrimental effects of these situations.

c. Investments – Your house and lot, farm lands, rental buildings, or other valuable assets such as jewelries, gold, stocks, and bonds are all good investments where you can put your money into. These types of investments allow your money and capital to work for you. Other personal items such as cars, cellphones, and appliances are not good investments as they lose their value very quickly. Despite not having sufficient savings, many people spend their money on clothes, shoes, cars, and electronics that wear out, depreciate, and cost repairs and maintenance; while there are also other people who save their money first, avoid materialistic spending, and who choose to invest their money on gold and real estate. Are you going to be a spender or would you rather be an investor?

d. Retirement Fund – Sources of your retirement fund could be your pension, social security, company stocks, retirement accounts, equity from your home and other real estate investments, and personal savings. When we get older, the costs of healthcare can be drastic to our finances. Not having enough retirement fund leaves you in a vulnerable state. You could end up penniless during your retirement years, you may not afford your medication, or you might have to move in with your family members. If your family members are not wealthy, they and their children could end up sacrificing too and this could hurt their budget and living situation. Retiring is a time where you should be rewarding yourself for all the years you have worked so hard and you can still afford to retire on your own by saving now.

e. College Fund – Plan for your children’s education as early as possible. Invest in your children. Education for your children provides them a good foundation to compete in this fast changing global market. Your children are not slaves, tools, or robots who should work for you. Instead, your children are your obligation and you have a duty to provide for them until they are legally capable of earning on their own, so invest in them.

Think through your finances and this could help you see the reality of your financial ability. Do not feel discouraged if you don’t think you have organized your finances accordingly. What’s important is to work on these key points NOW.

© 2014

04. November 2016 · Comments Off on Commercial Finance and TARP Money Small Business Loans Considered · Categories: Finance

There has been a lot of talk in the financial news about the challenges of getting money into the small business community so those companies can expand, hire more workers, and provide the economic engine to sustain our economic recovery. The Obama Administration has a plan, but like any plan to revive an economy, it requires all the players to be on board. If they are, then this infusion of small business financing money couldn’t come soon enough.

There was an interesting article recently in the Wall Street Journal, sub-section CFO Journal on June 23, 2011 titled “Banks Wary of TARP Approach to Small Business Lending,” by Emily Chasen (Senior Editor). The article stated:

“The Obama administration’s efforts to spur small-business lending through a spin-off of the Troubled Asset Relief Program (TARP) – hasn’t exactly received thunderous support from community banks, who may be too worried about government intervention if they accept funds, and the creditworthiness of prospective borrowers, to make a dent in the frozen small business lending market.”

Okay so perhaps you watched the TV Movie “Too Big to Fail” about the TARP Program and the financial crisis, fall of Lehman Brothers, and global economic crash. There was a decent write up on that TV Movie in the New York Times recently titled “The Financial Crisis Comes to TV” by Michael J. De La Merced published on May 23, 2011. In that movie we watched the fiasco, and the laws of unintended consequences during times of crisis management.

Now, another TARP Program comes to town, one which will lend money to small self-run businesses. Unfortunately, demand for little business loans is weak. Some say this is due to the uncertainty of future government regulations and the future economy and no little business owners wish to take the risks. Others say the small business community already knows the risks and the new regulations and therefore are not interested in borrowing more money, or taking on new debt.

This also means that small businesses will not be hiring more employees to help us with our unemployment situation here in the United States. And that of course doesn’t bode well for the reelection of President Obama, or boost confidence in the business sector of the strength of the economy. Yes, it is quite important to have more funds available in the banks for small companies, but they are not willing to borrow money, even at the current low interest rates, and if it really isn’t worth the risk for the bank’s at those low interest rates then the program is likely to fail and not satisfy its objectives.

Our small business community is too important, and each and every one of those businesses is too small to fail, well most of them. And if they do fail, they should fail on their own accord, not at the hand of poor government policies or over regulation. The good thing in all of this is if you are a small self-run business, or a startup entrepreneur looking for funds, you might find them available, and you just might convince a bank to give you a decent loan for your future projects. Indeed I hope you will please consider all this.

24. September 2016 · Comments Off on How Much Money Do I Need To Live On Today · Categories: Finance

How much money do I need is the right question to ask. It points to the real area of concern which is income. As an analyst I have been watching the constant rise of prices over the years. For example years ago believe it or not, a new car cost around $2,500 and a new house around $20,000.

The challenge for everyone is figuring out how to afford things. In order to afford the things you want you need the income.

Conventional Thinking About Income

I’ve studied this problem in terms of financial frustration. Financial frustration results when you are trying to make ends meet and you can’t get ahead.

People try to solve this by doing things like:

  • Get a second job
  • Get a higher-paying job
  • Seek professional financial advice

The evidence trail and even individual experiences show these things really don’t work. They do not address the root problem.

How Much Money Do I Need To Make

A better question to ask is how much money do I need to make?

While getting another job or a higher-paying job is a step in the right direction in terms of increasing income, what people fail to understand is that there are a number of obstacles that hinder people from getting ahead.

You must understand how all of these things are related:

  • How much money do I need to buy that item relates to
  • Can I afford to buy the item relates to
  • Do I make enough money to afford the item?

A Different Approach To Personal Finance

What I’ve come to realize is that because people have very conventional thinking about income, they limit their options.

On a broader scale this is reflected in the way people approach personal finance.

Now it’s really not your fault. You are doing the best you can with what you know. The dominate thinking doesn’t allow room for thinking “outside the box” or to stop and consider what is really going on.

When people rely on the government, the financial sector and the educational system to provide the information they need to know they will never arrive at solutions that work.

Conventional thinking in terms of money and employment will not do. If you really want to get ahead you must totally rethink your strategy. This is where I teach people a different way to look at personal finance from the popular expression “The rich get richer.”

03. September 2016 · Comments Off on How to Increase Your Church Contributions and Church Finances · Categories: Finance

Regardless of denominational differences or where a church is located, across the board they have one thing in common…they are almost always concerned about finances. Money is a necessary part of running a successful church.

Whenever a recession hits the nation and jobs become more difficult to find and less production means less income, eventually a church congregation is going to feel the pinch. And, like many things in life it actually provides us with an opportunity to see and do some worthwhile, even wonderful things. In these times, what can a church do to encourage giving so that the monetary needs of the church are met? Well, there are several….

* Have a fun event! Some churches will have a special dinner before embarking on a building campaign as a way to energize the church and open wallets. Instead of a private restaurant or having something catered, meet on your own grounds with a covered dish dinner, some fun games and singing and rally the people to rise to the occasion and give graciously during this tough time.

* Learn from the best! There are several good, Christian financial seminars, books and conferences to be taken advantage of. They will give you the tools and the know-how of setting up a working budget, giving to God the tithe of our income, wise spending and good saving habits. If a congregation is well trained on how to handle their income in their homes then the church shall lack no good thing. Think of it! Ministries are well supplied, food pantry and clothing racks filled to the brim, benevolence funds available and all because God’s people learned the simple ways of handling God’s money!

* Make sure you are using your existing resources effectively, or find out how you can streamline existing processes. For example, using our site specifically as an example, you could use this software to create a photo membership directory automatically, instead of doing it by hand (in a program such as Microsoft Word, etc). While of course you could do that in Microsoft Word, to edit it, keep it current, move pictures around, move text around, try and alphabetize it, etc would literally take 100’s of hours over the course of several months. So sit down and evaluate which of your existing processes can be streamlined.

* Understand what ministries your money supports! For most churches the bulk of the budget goes to pay the minister’s salary and the mortgage payment on the building if it is not paid for. The rest goes to support the various ministries in the church whether it is for children or seniors adults. Therefore, one Sunday a month or two or three, take a moment just before the worship service and have the leadership explain a particular ministry, introduce someone who is benefited by that ministry so the congregation makes a personal connection with where their money is going and who it truly benefits. When people see the good cause that is being supported, they are more likely to support it, both financially and in terms of volunteering.

* Don’t merely ask for money, get support for a vision! A trusted axiom is this: money follows vision. Where is the church going? What frontiers in the community are you going to blaze into? Where is all this headed? Ask your leadership to clarify the vision of the church. Dollars follow the asking, but checks follow vision!

If you apply these steps, not only will you see almost immediate results to the bottom line of your Church’s finances, but you will find that you have the funds and resources to accomplish what is important to you.

14. August 2016 · Comments Off on Money Matters – Savings, A Key To Economic Power · Categories: Finance

Money… If you have a lot of money then you probably don’t need to read this article…or, do you? If you only have a little money or you are broke, this information probably won’t help you…or, will it?

Whether you have money or not, the chances are that you have some kind of credit debt like a home loan, car loan, credit cards and the like. But do you have a savings account? Are you able to save any money from your income? If not, here’s a tip you should keep in mind: Pay yourself 10% of your income to a savings account before you pay anything else and here’s why; you are your most important utility. It is you that gets up and goes to work everyday, it is you that manages the household, the bills and other responsibilities in life. Without you nobody gets paid…not the mortgage, not the car loan, not the bills and other debts.

You are your most important “service provider”. Saying that you don’t have enough money to save 10% every week is not a good argument… the world is a vampire…the more money you make, the more the world takes one way or the other. You have to draw the line and understand that generating an income for yourself and your household is just as important a service/utility as having lights. Try to pay yourself first because without you, nobody gets paid. You owe it to yourself to save 10% of your income because that is your reward for working and generating that income.

Do you realize how important savings can be to your decision making and economic power? Here’s a helpful example of the power of saving called CD financing. By having a savings account with $2,500.00 to $5000.00 or so (at least) in savings, you can put that money into a CD (certificate of deposit) and use that CD as collateral at your local bank to borrow a secured loan with an interest rate 2-3% over the CD rate. I’ll explain… A CD is a cash-based investment instrument where you give the bank say, $5,000,00 and they give you a “certificate” of deposit (CD). The CD pays a better rate of interest than a traditional savings account during the term of the CD which may be 90 days, 6-months, one- year, two-year and so forth. Let’s say you have a $5,000.00 CD and you pledge that CD as collateral for a $2,500.00 loan from the bank.

Remember; rate is a function of risk and by borrowing money against your CD in this way you are providing the bank 100% cash collateralized no risk loan. Let’s say you have a two-year CD is paying 3% interest…there is virtually no reason why you can’t get a two-year loan where you are paying 5-6% interest because it is secured by the CD for the term of the loan. Now, in this example you have $5,000.00 CD earning 3% interest per year and a loan for $2,500.00 at 6% interest per year…which is a very low interest rate loan (and) the interest earned by the CD basically cancels out the interest paid on the loan! Other benefits of using a CD to collateralize a loan are as follows: First, if you took your savings and bought something, the money is gone (.) By using the CD financing concept, you get the money you need and you still have the CD asset, which is earning interest. When the loan is paid and your CD matures you still have your original money!

Other benefits include the fact that you can structure the loan so that you are not obligated to make a monthly payment under this arrangement. You can set up the loan with your banker…if you make some payments or no payments during the loan/CD term, you simply cash out the loan from the proceeds of the CD when it matures. OR you can roll the CD and the loan over for another year or two. This is an intelligent way to borrow or rebuild credit ratings even after a bankruptcy. This is one example of how you can benefit from saving money. It gives you power to make decisions…to be your own bank. So the next time you hurry to dish out all your income to pay bills, stop and think about saving 10%.

Copyright © 2006 James W. Hart, IV All Rights reserved

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