Thoughts On Finance

One of the biggest keys to successful financial structure is to put in place a budget and stick to it.  A budget is the best way to get a grip on your spending and making sure that your money is being used in the way that you want it to be.  Life on a budget is a necessity and so if you haven’t been living on a budget, there is no time like the present to get started and the following information may be helpful in getting started.

Creating a budget generally requires taking the following three steps.

1.  You must track your spending to figure out your current spending patterns.  You can’t change what you don’t know about.

2.  You must evaluate your current spending and set goals to take into account not only your day to day living expenses, but also your long term financial goals.

3.  Continue to track your spending to make sure that it is within the guidelines that you have laid out for yourself.

PITFALLS TO WATCH OUT FOR

Cash leaks.  If you are spending money and you don’t know how much or where it went, then you have a leak.  In general, if you are well budgeted, then you should be able to predict how much cash you need to take for the week, and that should be it.  There should not be constant runs made to the ATM machine or bank, this shows that you are not budgeting effectively.

Spending More Than You Have.  This is a common problem in most households, but you really need to come up with a reasonable budget and then stick to it.  Overspending causes debt, and once debt takes over, it can be difficult if not impossible to overcome, so don’t fall into the trap of spending more than you make.

Don’t Confuse Luxuries With Necessities.  Understanding the difference can be the key to making a realistic budget.  Cable TV, cell phones, internet service and fast food, are not necessity items, even though many people try putting them in that category.  It is important to not try and fool yourself into thinking that you can’t live without these items.

Don’t Count On Windfalls.  When you are figuring out how much money you can live on, don’t include in your budget things like bonuses, tax refunds, or investment gains.  The extra money from such items may be nice, but shouldn’t be figured into your income.

Watch Out For Spending Creep.  This is what happens as you begin to make more money, you begin to spend more money.  You are much better off sticking to the same monthly budget and putting the extra income into your savings.

Many people will be hitting hard times, and be left without enough money to pay even their most essential bills.  With this many people, who are without good credit, will be left wondering about their options, one of which may be to take out a payday loan.  Payday loans, as they advertise, are meant for short term financial need, and if you go in to take out a payday loan, they make you sign an agreement to that effect.  Yet, once you get into the payday loan cycle some people have trouble getting back out.  Paying off only the interest each time and hanging onto the loan.  For people who are living paycheck to paycheck, this can be a very difficult debt to repay.  Some succeed, however, even they usually return to re borrow at some point in the future.  So when should you consider taking a payday loan? If you are about to have a check bounce on the bank, then you should.  Although the banking industry will have you believe that they are above charging 300% interest on a loan, they will charge you $35.00 and up for a bounced check of even just a few dollars.  So really how is that any different, especially since, if you have ever bounced a check then you would know that once one bounces usually several bounce, and if you have a few checks bounce and your paycheck directly deposited, then that will just eat up your paycheck. Also, taking a payday loan is a better alternative to buying items from a rent to own place.  You can more inexpensively borrow the money from a payday loan and then buy the item out right.  So this is a time to consider a payday loan.

If you can avoid taking a payday loan, then by all means do it, because it is very easy to get caught up in the cycle, but if you have to do it, then don’t feel badly about it, just do it.  It may actually save you some money in the long run.

Everyone is thinking and talking about finances lately and the stress of it all is really getting to some people. Maybe you think that it isn’t effecting you, but I would tell you that it is probably effecting you more than you think. Take this scenario:

You hop online to check your bank account, just like you do on a regular basis, but the screen says sorry we are experiencing technical difficulties, and you can’t check to see if your direct deposit is in your account. So you try this over and over again, but still it doesn’t work. Still trying to find out if your deposit has come in, you now try to call the bank’s 1-800 number, and when you call you receive a recording that says “sorry this service is not available at this time”. So you shoot up to the local ATM machine to check your balance, and it is Temporarily Out of Service. Now let me ask you a question, do you think “wow, there computers must be on the fritz” or do you think to yourself “I wonder if my bank went out of business”? Well, I have encountered computer glitches on several occasions, but when this scenario happened to me last week, I started to think that maybe my bank had gone under and my money was gone. Unfortunately, with all the hype and focus on the state of the economy, you can’t help but keep these worries in the back of your mind. Even when you think that they aren’t seeping in, they probably are. One way to keep things in check is to read your news instead of getting it over the airwaves. Although, they can still put a spin on it, it is a little less traumatizing to read it in print then to listen to it. Then if you read something and you are unclear about what was said you can go back and reread it. When you hear it, it is in a fleeting moment and then it is gone, sometimes leaving you unsure as to what you just heard. Also, tone and inflection can play a big role in how you interpret what is being said, and in the paper they are less likely to influence you in this way.

Don’t feel alone, we are all feeling the heat. Try to do things to keep yourself calm and realize that either way we will make it through this difficult time, as have many who have come before us, we will persevere.

FDIC insurance is what our banks supposedly have to cover our money in case the bank that you have your money in goes under.  This insurance used to cover up to $100,000 per account and has recently been extended to cover up to $250,000 per account and if your money is in a non-interest bearing account, all the money that you have in an account is supposedly covered according to the new FDIC rules effective until December 2009.  Investment and finance expert Suze Orman has been on TV of late for commercials regarding the new FDIC online evaluator, that allows you to check and make sure that your money is insured.  My real question to all is, if this system were to crash, would our government really be able to cover all of the money that every single person in the US has in the bank? And the answer in my opinion is NO WAY! Take a moment and think about the movie “It’s a Wonderful Life”.  In that movie, when people got wind of the bank’s problems they all ran to the bank to withdraw all their money at once and very quickly they knew they were in trouble.  How do you think that our government would handle such a crisis? Do you think that they could just explain to people that their money was invested in their neighbor’s homes and farms? I think not.  So is it a good idea to keep all your money in the banking system? I suggest not.  I am not saying to withdraw every penny, however, it may be a more advisable to begin to save some cash on hand, just in case.  I mean with the stock market so iffy, and the potential that banks and real estate could crash and no credit available, isn’t it possible that you could be left without a dime.  I think it is not only possible, but perhaps likely.  In any case, it is not meant to scare people, but to take note of where your money is and who has the control over it.  It is actually ironic that we are allowing the Federal Government full control over our personal finances, especially since they seem to be such prudent financial wizards, don’t you think?