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Master Your Health Insurance

Brian — Mon, 30 Jan 2012 22:17:58 +0000

How well are you mastering your health insurance comparison? It is possible that you are ignoring some key items that could help you save money. Follow along as we examine your health insurance from a number of perspectives.

How Well Do You Understand Your Plan?

It is surprising to see consumers set themselves up for the disappointment and expense of a denied health insurance claim. In most cases it isn’t as a result of a bad policy, a bad insurance company, or some other error – it is in lack of understanding.

One of the most important things for your relationship with your health insurance policy is knowledge. It sounds simple, yet you may think there is too much to learn. However, if you don’t, how will you know how to use your plan? Take the following examples to test your understanding of your private health fund:

What happens when you seek health care from outside your insurer’s network – what will you have to pay for a doctor, emergency room, or specialist when this occurs? Is there an easy way for you to find the closest treatment facility when you’re away from your network?
How does your plan work with regard to your children, if you have a family insurance plan? Will their coverage end when your teen gets a full-time job, reaches a certain age, or some other milestone?
Have you ever read through your whole policy? When we say this, we mean every word. Do you have questions about it that are still unanswered?

Health Insurance Improvement

Are you happy with your health insurance policy? Are there some things that you would like to change about the plan, such as lowering the premiums or adjusting the coverage? You should re-evaluate and compare health insurance policies to your needs once a while (every six months is a good rule of thumb). Take care of the many items that can be approached:

Your health insurance needs may have changed. Alternatively, there may be changes in you or your health; if you don’t inform your insurer, you could run a risk of having future claims denied.
There may be opportunities for discounts or lower premiums. Just like you should with other insurance products such as home insurance or car insurance, talk to your insurer or agent about those that may be available.
Consider other ways to save money. For instance, to battle possible increases in car insurance rates, consider paying your premiums for the next year at once. You can often avoid a service fee for such a transaction.

Master Your Health Insurance Comparison

There are so many areas in which you can progress concerning your health insurance comparison:

Increase your understanding of a policy
Save money on your health insurance
Know when it may be necessary to change your plan – which may save you money or adjust your coverage appropriately
Compare your existing policy to those from other insurers

The list could go on. However, the point is this: don’t ignore your health insurance. Few insurance products are “set and forget it” items. You have to work on it from time to time, ensuring that it fits your needs, fits your budget, and so forth.

Are you the master of your health insurance?

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Make a Plan for Money Management

Sabrina — Mon, 02 Jan 2012 21:18:44 +0000

Regardless of where you are in your life personally and financially, you need a plan to work by. Without a budget you can stick with, you can’t invest intelligently, save effectively or spend with confidence. But the word “budget” means different things to different people.

Managing your money is a lot like managing what you eat. Some people do well with strict routines, lists, and firm self-discipline. Others like to have a support network to help them out when they’re tempted with bad choices. And others prefer a looser awareness of what food they eat, or money they spend, while keeping a finger on the pulse of broader issues like what they weight from week to week and how they feel (or how their bank account balance looks from month to month).

Any of these methods can work well, but you must be matched with the right one for your personality. Below are three money management strategies to cater to differing preferences.

For the Organized

Some people like to be extremely organized and thorough in their bookkeeping. Others don’t have a choice: living paycheck to paycheck doesn’t leave any room for error. Another group that may want to consider this budgeting method is those who are usually disorganized with their money, but otherwise lead very structured and orderly lives.

This method involves creating a spreadsheet on your computer, or keeping records with pen and paper. Divide your expenses into individual categories: rent or mortgage, electric bill, phone bill, groceries, health insurance and medical expenses, etc, and budget a reasonable amount for each category. Add up the budgeted amounts and multiply by 12 months, and you’ll know how much money you’ll need to earn to pay your baseline expenses for a year. Keep in mind that unexpected expenses always jump into your budget.

Next, start keeping every receipt, every time you spend money. At the end of the week or month, enter your receipts into your budget and see where you stayed under budget and where you went over. Adjust accordingly in the weeks ahead.

Problems:

This method only works if you keep every receipt or otherwise track every expense (such as on a credit card statement). The inherent strictness and care required to make this system work gets easier over time, but adjusting to it is difficult if you’re used to spending what you want, when you want, so don’t give up too easily.

For the Party Lover or Impulse Shopper

This method is for the person who is good about keeping their expenses reasonable in day-to-day life: you don’t go out to lunch every day, don’t impulse buy at the grocery store, don’t let window shopping turn into a shopping spree. But when you go out with friends, whether to a restaurant, bar, mall, concert or other event, your money flows like water. And even if you only go out with friends as little as once or twice a month, that can be a serious budget buster.

Or maybe your weakness is the grocery store. You promise yourself to be reasonable, but you can’t resist the speciality sodas, the over-priced pre-packaged snacks, or the best cuts of meat. You look at your account balance and wonder what happened.

For the person who has one problem spending habit, but otherwise manages their money just fine, I recommend using cash for your problem-area expenses. Before you go out with friends, go to the grocery store or go to the mall, decide how much you will spend. Put that amount of cash in your wallet and don’t spend a penny more, absolutely no exceptions.

Problems:

People who have been used to overspending may find it difficult to stick to that budget. And we will make all sorts to excuses as to why we deserve to relax with friends, order one more drink, or buy a special treat. Fortunately, if you can get through the first few outings without cheating, things will get easier as you develop strategies to stretch your dollar further and prioritize your spending.

For the Free Spirit

Some people say they “just aren’t good with money”, plain and simple, and are almost unwilling to learn better money management skills. They don’t have a clue what they spend or where they spend it, and it seems too much effort to sort it all out. But they aren’t necessarily doomed to financial failure.

For this category of people, I recommend depositing your paycheck in savings and then withdrawing a predetermined amount per week, no cheating. This should be enough to buy you groceries, go out to eat and provide entertainment. And when the money for the week is gone, that’s it. No more until the next week.

Problems:

The big problem here is making sure you know how much money you have left. If you don’t pay attention and spend too much early in the week, you may end up with three days left, no money and no groceries for your kids. And if that happens, you will cheat. And once you’ve cheated the first time, it is easier to do it again, and again.

The key to good money management in any method comes down to good old-fashioned self-discipline and awareness. But how you apply them to yourself and your money is up to you. Using the right method, you can manage your finances well, no matter who you are.

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How to Choose a Budgeting App for Your Mobile Device

Brian — Thu, 22 Dec 2011 21:41:12 +0000

Budgeting apps are very popular among finance apps for mobile devices. This is no surprise, as budgeting is an important part of life for many people. Follow along for more information on this aspect of the app market.

A Helpful Solution for Many Users

Budgeting apps are a handy tool for many consumers. They compete well with most other methods of keeping your budget, unless you have specialist budgeting requirements, and it is fair to say that mobile apps can be very convenient to use. With advanced reporting features on many high-caliber budgeting apps, this may be a useful way to keep track of your budget.

Keeping a budget hasn’t always been as easy as it is today. The pen-and-paper method has long ago been outdone in popularity by computer programs, and there are plenty of strong software choices there. The point to keep in mind is convenience – you may be more likely to track your expense if you have a mobile device with you at the time on which to enter them.

If you haven’t experienced using a mobile app for budgeting before, you may be in for a pleasant surprise. They aren’t too complicated, and you can keep a basic budget without having to go into every last feature of the app if you’d rather keep everything as simple as possible.

Finding and Using Budgeting Apps

Find a helpful budgeting app by deciding how you will use it:

Will this complement your budget or be your budget?
Do you need to budget for only one area of your financial life (i.e. for food, or to track your superannuation fund, or for business accounts)? Or are you looking for an app that helps you record and budget for every expense you encounter?
Do you also want to keep track of credit card or bank accounts using your mobile device? You can often do this via the internet, or seek out a personal finance app that give you an overview of your accounts.
Do you prefer to see your finances displayed as graphics and charts, or in a table? What kind of budgeting information do you want to get from your app?

From these and other considerations, you’ll be able to narrow down the wide range of available budgeting apps to those that may suit your needs. After installing your chosen app, you might want to set it up to show only the categories you need, to help you work more smoothly.

You may want to do some research on which apps work well with your mobile device’s operating system. As you read reviews of interesting-sounding budgeting apps, be aware that not every app will be available for your device. Try adding your operating system to the search: for instance, searching for “best Android budgeting apps” may net you some useful results.

Read reviews and take advantage of free apps to get a good idea of an app; or start with a free trial of a paid app to see if the price is worth it for you. Many excellent budgeting apps are free, or priced at less than $5. Once you’ve done a bit of research, you should feel more confident to choose one or two budgeting apps that appeal to you.

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Keeping Credit Under Control at Christmas

Pam — Thu, 08 Dec 2011 21:07:46 +0000

Ahh, it’s that time of the year again, when our thoughts turn to Christmas decorations, carols, gatherings, tasty treats, and, of course, shopping. It’s a wonderful time, full of fun and festivities, but it can also be an expensive time. Between buying gifts, decorating your home and preparing all the special foods, you can end up spending quite a lot on Christmas-related things in the month of December.

Before you get caught up in the excitement of the season, and in the process, get caught up in the spending, consider this. With credit card in hand, it’s easy to shop ’til you drop without blinking an eye. After all, you want to make the holidays perfect, right? But while buying great gifts, making amazing meals and decorating your home to the hilt may be fun at the time, paying the bills you racked up creating that perfect holiday won’t be as much fun.

There’s a lot of pressure to spend, spend, spend around the holidays, and it’s easy to succumb to it, rationalizing that you can pay it all off after the holidays. That’s often easier said than done. This season, instead of spending now and regretting later, you could take control of your credit card and avoid the after-Christmas debt blues.

Know Your Limits

You may have a credit card with a spending limit of $5,000, but that doesn’t mean you should spend $5,000. If your budget is a squeeze to pay for groceries, utility bills and regular expenses like private health insurance, then how will you pay back that Christmas shopping money if you put it on credit? You could end up taking a long time to pay off your Christmas purchases, which may mean paying hundreds of dollars in interest.

We all have a basic idea of how we’re doing financially, even if we don’t really want to admit it. As the holiday season begins, take a look at how you are doing and begin thinking about how much you really can afford to spend. This may not be easy, I know. I wish I could spend more on gifts for my family, but I simply can’t, at least not without going too far in debt.

Set a Budget

As you look at your financial situation and begin planning your holiday spending, set a budget. If you have some money saved up to spend, that’s great. Begin with that amount. If you know you are going to have to put some purchases on a credit card, consider how much you can pay off in the few months following December. You don’t want to spend so much that you’ll have to pay it off over a period of years. Keep your credit card spending to a reasonable amount that you can expect to pay off in a comfortable amount of time.

As you work on your budget, make a list of everyone you want to give gifts to, and set an amount you plan to spend on each person. If you go to the mall with only a list of names and no idea of how much you can afford to spend on each one, you may end up spending more than you mean to.

Shop With Cash

One simple way to keep from spending more than you plan to is to shop with cash. Leave the credit and debit cards at home, grab your list and your cash and start shopping. Stick to your budget and when the cash runs out, you’re done shopping.

I know that if I only have a certain amount to spend, I shop more carefully and look for better deals. And going Christmas shopping and paying in cash feels great. You aren’t worried about how you’ll pay for it later.

Shopping with cash is a really good idea when it comes to making less expensive purchases. Little gifts for friends, stocking fillers and such. You may think that it’s fine to put those small items on your credit card, but the problem is that those small items begin adding up. If you charge $20 here, $15 there, and $25 there, then soon you may have spent over $100 and aren’t really sure where that money went. So consider leaving the credit cards at home, and give shopping with cash a try.

Get Creative

It seems to me that gifts get more expensive each year. With so many high-tech gadgets and gizmos on the market, it’s easy to want to buy lots of gifts that cost $50 to $100. But not everybody can afford that, no matter how generous-hearted you may be. And is buying the latest, coolest tech toy really what Christmas is all about? Don’t fret about rushing out for the best deals on the latest products. Instead, get creative and put some thought and effort into your gifts. After all, it’s the thought that counts.

Get creative when it comes to gift giving. You don’t have to spend a fortune to give a great gift. Make cookies and create a cookie box, or combine some spices to create a spice tea mix. These and other homemade goodies make great gifts, and they aren’t that expensive to make.

Focus on the Future

Christmas is a wonderful time of the year and it’s easy to get caught up in the excitement and hustle and bustle of the season. But as you enjoy the holidays, don’t let your spending get out of hand. Know your financial situation, set a budget, shop with cash and get creative if necessary when it comes to gift giving. If you don’t do these things, you may end up with more debt than you can manage. Make sure you plan ahead for a happy New Year without a struggle to pay your bills.

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Mobile Apps for Personal Finance: An Introduction

Brian — Thu, 10 Nov 2011 12:14:23 +0000

Welcome to the world of personal finance mobile apps. In this seven-part series, we will take a look at the ways in which mobile apps can transform your life. Of course, new apps are developed every day, so you’ll need to first learn the basics and then keep yourself up-to-date as useful new apps become available.

The Basics of Mobile Apps

Who uses personal finance apps on their phone? After all, if you don’t have a smartphone then you have no mobile access to these apps. Many are available on the Internet, so you can still access them from your laptop or home PC. You can also get personal finance programs to install on your computer, but that may undermine the point of convenience on a mobile device.

If you have a mobile device – a smartphone, tablet or other similar device like Apple’s iPod Touch – then you are probably already aware that you can obtain additional software applications for your device. You may also have noticed that individual apps may or may not be available on your device. There are several operating systems (OS) that will define which apps you can use: Windows Phone 7, BlackBerry, Android, and iOS from Apple are some of the most common OS.

An app can be exclusive to one OS, or be available for several.

Simple Tips to Get You Started

Organization may be a great place to start. After all, you’re less likely to use your apps if you struggle to find them! Don’t underestimate the inconvenience of having a disorganised screen on your mobile device.

Consider placing similar apps in a folder together for easy access. For instance, you might want to put your personal banking and credit card apps in one folder. You could then put miscellaneous “research” apps, such as apps to compare health insurance or calculate loans and investments, in another folder. Your budgeting app could perhaps be placed on your home screen to encourage daily use.

Another important consideration is security. The security of your personal information is important so you may need to consider this and look at apps that secure access with passwords. Ensure that your security is protected even if you lose your mobile device.

Ensure that the data is backed up on a regular basis, too. It would be unfortunate for you to lose it all due to a technical error. Many apps will regularly back up your data to online servers. Others will recommend that you do this yourself on your computer. Make sure you understand how your apps work in this respect; it would not be fun to to try and recover lost data that you’d exclusively kept on your smartphone for many years.

Welcome to the world of personal finance apps. They may help you to save money, budget, pay bills on time, and stay on top of many other tasks concerning your money.

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A Financial Attitude Adjustment

Sabrina — Thu, 03 Nov 2011 18:05:47 +0000

My husband recently told me about one of his work associates, who had retired early since he was raking in about $100,000 a year in policy renewals. When I heard this story, I thought of how wonderful it might be if my husband is equally successful in his business and is able to retire early as well. What an incredible blessing that would be!

My husband mentioned the story in passing to an acquaintance. Her response was to ask if his friend was still going to work part time. “No,” my husband replied, rather confused, “He retired. He doesn’t need to work.”

“Oh,” she said, “Well, I could never live on $100,000!”

And that, in my opinion, is a large part of what is wrong with the world.

Is it Just Me, or Are We Consumer Crazy?

Let’s keep in mind that I am living in an area with a very moderate cost of living, and an average income of around $30,000. Also, my husband and I have no dependants to support. And believe me when I say that I am quite certain I could find a multitude of ways to spend $100,000 a year. Indeed, I could even get used to spending 100 grand a year. But to say that I could not live with less than that would be absurd.

There is a pervasive culture of entitlement in the world that I find genuinely frightening. There is nothing wrong with being able to afford luxuries, but equating luxuries with needs is both dangerous and foolish. Buying organic produce, for example, is a very nice luxury. Shopping in only the nicest malls and stores can be lovely. Going out to eat is a ton of fun. And many people recognize that these things are indulgences, and are ready to cut them out if times get hard. But others need to come face to face with their own sense of entitlement.

You do not need the newest cell phone, the biggest television or this season’s coolest jacket, suit, toy, purse or shoes. You do not need to get your nails done or go out drinking every weekend with friends. You do not need to shop at the organic grocery. To enjoy material things is not evil in itself, but it takes my breath away when people are buried so deeply in their money that they can’t see the difference between needs and wants. This disordered thinking is just as likely in a 25-year-old as a 50-year-old, in a single man as a mother of two.

And our risk is that we will fall back into the pit of the recession by making the same mistakes again. If we continue to believe we are entitled to the best of everything the instant we want it, we will go right back to taking on debt and buying more than we can afford. There is nothing wrong with living within your means, shopping frugally and making things last, or with cautiously taking on debt when it is needed.

But there is something wrong with continuous instant gratification, and there is something wrong with confusing your passing desires with your daily needs. If we want to climb free of the recession entirely, a whole segment of the population needs a financial attitude adjustment.

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4 Recession Lessons We Shouldn’t Forget

Sabrina — Sun, 16 Oct 2011 12:52:40 +0000

The world is emerging slowly from the recession with a tentative, collective sigh of relief. Unemployment is improving and the economy is inching back to more normal levels. Of course, ‘normal’ has a different meaning now. We’re not going immediately back to the booming economy we had. But a slow and steady improvement is quite satisfying to most of us at this point.

In any disaster, though, there are lessons to be learned, about ourselves as people and about the way we choose to live our lives. Here are some trends from the recession that we shouldn’t leave behind as our fortunes improve.

Money Consciousness

During the recession, the whole world became more conscious of how much money we were spending and what we were spending it on. And as our prosperity returns, it is going to be very tempting to also return to looser spending habits. The problem is, that’s the sort of behavior that landed people in financial trouble in the first place.

So when we get jobs or raises we’ve been waiting for, our discipline must remain. Put money away in savings, since experts say you should have at least six months’ worth of living expenses socked away; or maybe you put your dollars in a solid retirement account. Whatever you do, don’t waste your extra dollars when they start coming in!

Compassion

During the depths of the recession, plenty of people complained about not getting a job that related to their field, not getting a job at all, or not getting a long-awaited raise or bonus. But most of the time, we then modified our complaint: “But at least I still have my home.” Or “But at least I still have a job.” And many of us translated that sentiment into action by being good neighbors.

We donated money, time and skill to friends and family who were worse off financially than we were. We opened our homes to one another, taking in those who suddenly could not pay their bills. That kind of love and compassion is something the world could always use more of.

Thankfulness

Seeing our family, friends and neighbors around the world falling into bad situations made many of us refocus on what we have, and simply be thankful for it. When things start to go back to ‘normal,’ it is far too easy to go back to the pursuit of material things and worldly honors. Ambition isn’t bad; but save some room in your day-to-day life for a simple acknowledgement of what you already have. You’ll be happier for it.

Frugal Living

Suddenly strapped for cash due to layoffs, pay cuts, lost investments, and the like, we all learned tricks to stretch our money further than we thought it could go. We paid more attention to our receipts and bills, making sure discounts and coupons had been included. We shopped with care, finding sales and clipping or printing coupons. We learned to make do or to refurbish what we had.

Some of us even began gardening, canning, sewing or knitting to save money. We found ways to make money with hobbies and interests. Now that these frugal habits are a part of your life, don’t let them go! They are much harder to relearn than they are to keep.

There can be no doubt that the recession has changed the world. The question that remains is this: will it be for better or for worse? Will we let fear, distrust and anger take over, leading us on a dark financial path? Or will we learn our lessons well and come out of the danger with greater strength and greater wisdom? Only time will tell, but I, for one, am very optimistic.

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High Interest Online Savings Accounts – How Much Can You Make?

Sophie — Mon, 03 Oct 2011 12:04:31 +0000

If you want to get high interest on your savings, without the inflexibility of a fixed term deposit, then an online savings account is the way to go. But which one is the best for you? To help us, let’s compare some high interest online savings accounts and find out which one can best boost your hard saved dollars.

ANZ Smartypig Account

ANZ offers the Smartypig account with a variable rate of 5.5% p.a. It has no account keeping fees associated with it and you can make direct credits to a nominated account at any time. You can even receive value boosts from top retailers when you reach your savings goal, which could be perfect for that shopping spree.

Bank of Cyprus Australia – Midas Account

The Midas account is a high interest online savings account which offers a variable base rate of 5.5% p.a. Funds are available at a call and can be accessed online 24/7. There are no account keeping fees and you can transfer funds any time through internet banking. Interest is paid monthly.

FCCS Credit Union

This high interest online savings account also offers a variable base rate of 5.5% p.a. The account has no catches, a great going rate and access to you money whenever you need it. The bases rate of 5.5% is the account’s real rate not just a promotional rate and you can access to your money easily via the Internet and Phone Banking as well as BPAY services.

Arab Bank Australia – Online Savings Account

The online savings account offered by Arab Bank Australia has a variable base rate of 5.55% p.a. Your funds can be accesses 24 hours a day, 7 days a week through Internet Banking. You can also access funds over the counter at any of the branches via direct debit and make periodical payments. Interest on this account is paid monthly and there are no monthly account keeping fees.

This is the perfect savings account for those who prefer to transact online and earn a high rate of interest, but also wish to access their funds through other means, such as through a branch, via an ATM, or EFTPOS.

ME Bank – ME Bank Online Savings Account

This account was the winner of the AFR Smart Investor Blue Ribbon Awards 2009 in the Overall Savings Account Category. It was also Money magazine’s Best of the Best Awards 2009, top 3 Finalist in the Best Online Savings Account category. You will earn a competitive variable base rate of 5.60% p.a. on every dollar sitting in your account, with interest calculated daily. It has no bank fees and no set savings terms – deposit and withdraw without penalty at any time. You have 24/7 access to your account via Internet and Phone Banking.

Queensland Professional Credit Union – Netsaver

The Netsaver account is an online “at-call” cash management account earning a variable base rate of 5.75% p.a. It combines high daily interest rates with financial flexibility and control. The Netsaver Account works in tandem with the S1 transaction account. You can access your accounts at any time through QNet Internet Banking, QPhone Telephone Banking, EFTPOS and ATMs, or through the branch.

RaboDirect (RaboBank) – RaboDirect Savings Account

The RaboDirect savings account has a usual variable base rate of 6.01% p.a., but as a special, it is offering a variable rate of 6.51% for the first 4 months to new customers. Over one year, that works out to an average of 6.16%. Interest is calculated daily and paid monthly. Like most of these accounts, there are no fees attached. There is no need to switch banks and you will have access to your savings 24 hours a day, 7 days a week.

UBank backed by NAB – USAVER

For the second year running, USaver has been judged the Best Online Savings Account 2011 in Money magazine’s ‘Best of the Best’ awards. The USaver has a base variable interest rate of 6.01% p.a., but if you commit to the automated savings plan which requires you to deposits $200.00 per month into the account, then you will earn a base variable rate of 6.51% p.a.

Interest is paid monthly and there are no fees or charges whatsoever. The account comes with a useful Goal Tracker online savings tool which will help you learn how to save money to achieve your goals. You can transfer funds to any Australian account with the ‘Pay Anyone’ feature. This account also offers 24/7 anytime access to a real person.

RaboDirect (RaboBank) – Premium Saver

Another online savings account offered by RaboDirect, but instead, this one offers a variable base interest rate of 6.10% p.a. The difference between this account and the Savings Account is that in order to obtain the 6.1% p.a., you must be sure that, on the last business day of the month, your account balance is a minimum of $200 higher than it was at the beginning of the month, and that the $200 additional balance must be from a transfer or deposit you’ve made – not from any interest that was paid in to your account.

Don’t worry too much if you can’t meet this obligation, because you will still earn 4.75% p.a. Interest is paid monthly and there are no account fees.

Hunter United – Premium Online Investor Account

The Premium Online Investor Account offers a base variable rate or 6.41% p.a. This is a great return without locking yourself into a term deposit, and there are no monthly account keeping fees. You have access to your savings through Internet Banking which is available 24 hours a day, 7 days a week. There is, however, a small catch -interest is only payable in calendar months where no withdrawals or transfers have occurred and, unlike most of the other accounts that have a minimum opening deposit of between $0.00 and $10.00, this account asks for a minimum opening deposit of $5,000.

Even though we’ve looked at only a few of the high interest online savings accounts available, these are the highest earning ones. Obviously each account will have different features and the idea is to find one that is tailored to your needs.

Aside from the $5,000 minimum deposit, the Premium Online Investor Account is the highest earner if you don’t intend to withdraw or transfer any money soon. If you’re looking for pure flexibility and a good return, check out the Arab Bank Australia Online Savings Account and the ME Bank Online Savings Account as well. Happy saving!

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4 Financial Lessons to Learn Now

Sabrina — Fri, 02 Sep 2011 21:28:56 +0000

When we look back on our lives, most of us can recognize the times that our parents gave us the right advice and we ignored it, even if we won’t admit it. Another, similar kind of recognition is when we look back and think, “I wish someone would have told me that! I wish I knew at 18 what I know at 30.” Or, “I wish I knew at 30 what I know at 60.”

In either case, you’re looking back at mistakes or regrets. They don’t have to be Earth-shattering, novel-worthy tales of lost opportunity to be valid. Everyone makes mistakes; it’s just nice when we can avoid them.

With those thoughts in mind, here are 4 life lessons about money that you should learn now, no matter how young or old you are. This way, at least you can’t say we didn’t warn you!

Your Savings Account

Whether you’re single, married or have a family with kids, the rule is the same: experts recommend keeping enough in your savings account to keep you going for six months. Yes, that’s a lot of money. But if you got into a situation where you needed it, you would certainly be happy it was there.

What sort of situation? Maybe you lose your job. Maybe you’re in a car accident and can’t work for a while during your physical therapy. Maybe you’re diagnosed with cancer. These are the “what ifs” no one wants to think about. But if they happen to you, you won’t be able to hide your head in the sand. So if your savings account is lower than it should be, start saving.

Needs vs Wants

This is something we all should have learned as children, but some people missed the message. You need food, for example. You don’t need to eat sushi grade tuna once a week. You need to get to work. You don’t need to get there in a limo with a personal chauffeur. You need water. You don’t need imported, sparking spring water for $5 a bottle.

My examples my be extreme, but be honest with yourself about what you spend and how you spend it. That doesn’t mean you should cut out all “wants” and live like a deprived hermit; just don’t lose sight of the difference between them and start to consider your spring water a need.

Save for Retirement Now

Albert Einstein said, “Compound interest is the eighth wonder of the world.” You really want a force that powerful to be on your side, right? Well that means starting to save for retirement now. That means preferably during your twenties, or even your teen years if you’re able. What if you’re in your forties and haven’t saved a penny? Better late than never. The point is that the more time you have to save, the more interest will contribute to your nest egg.

Living Within Your Means

Most of us want to stretch our dollars to get us the most out of life. So we push for the nicest houses and cars our money can buy. Well, that’s not entirely accurate: we push for the nicest houses and cars our credit will buy.

Let’s face it, the vast majority of us aren’t sitting pretty with enough money to buy a home outright with cash. And I’m not suggesting you should never, ever take on any debts. If you didn’t, you wouldn’t get very far in this world unless you were very lucky. All I’m saying is that we should do our best to set ourselves up for success.

So if you’re thinking of buying a home with no down payment that stretches your budget, perhaps you should reconsider. By the end of your mortgage, you will have paid a phenomenal amount to the bank in interest. You’d do better to take on a smaller loan and pay more than your required payment each month. That is how you get ahead financially, not by taking on the biggest mortgage you think you can handle.

If you can learn these lessons now by reading them off of a page, you’ll save yourself a lot of difficulty and struggles later on. And I don’t know about you, but I have enough to learn in life as it is. So try making these lessons the ones that were easy to learn.

Image by Marlith / Wikimedia Commons

Money Missteps: 5 Common Mistakes

Pam — Thu, 25 Aug 2011 14:05:26 +0000

We’re taught a lot in school, from algebraic equations to national history. We spend years of our lives sitting at desks, listening, studying and learning. But while students may be able to solve a geometric proof or quote Shakespeare when they graduate, many know little to nothing about personal finance.

When it comes to managing money, many of us are pretty clueless when we get out on our own and, therefore, we make mistakes. Even as we get older, many of us still mess up financially. Here’s a look at some of the most common money missteps that can throw your finances into a loop.

1. Impulse spending

You go to the mall and see the latest movie out on DVD. If you hadn’t been planning on buying it, but decide to right then, that’s an impulse buy. Or how about a pretty sweater that would go great with, well, you don’t know what it would go great with, but it’s such a cool sweater. You don’t really need it, but you like it, so you decide to buy it.

See it, want it, buy it. Impulsive spending can catch up with you and overwhelm you quickly. You may think that a $25 DVD here and a $40 sweater there isn’t really that bad, and it’s not if it’s very rare that you buy impulsively. The problem is, once you’ve bought something on the spur of the moment once, it’s easy to do it again, and again. And that is a problem.

Let’s say you impulsively spend only $25 a week. Over a year, that’s $1,300. Or say you impulsively spend $10 a day, which will add up to $3,650 a year. So, when you pick up that DVD or sweater that you hadn’t planned on buying, put it back down and think about it before just pulling out the charge card.

2. Not having a budget

You may think, especially if you’re young and single, that you don’t need to be on a budget. Not true. Anyone who earns money and has to pay for essentials in life with it should be on a budget, even if you have “plenty” of money.

A budget is a guide to spending, and instead of limiting you, it can actually free you. If you aren’t on a budget, you may worry about whether or not you have the money to buy a new sweater, but if you’re on a budget, you’ll know for sure. Budgeting also helps you get a true grasp of how much money you’re bringing in and where it is going. Include things like savings and investment money in your budget, and set limits for how much you spend on things like eating out and entertainment.

Budgeting is important no matter what your income. If you don’t have a budget to guide your spending, you can quickly and easily get in trouble, running out of money before your bills are paid and spending your money but having nothing to show for it. Not having a budget is a common mistake, but one that can be easily rectified.

3. Not living within your means

It’s Friday night and all your friends are going to that nice new restaurant and then to a movie, and they’ve invited you. You’re part of the group and you really should go, but you know you don’t have the money. But what the heck, you go anyway and spend money you don’t have to spend, at least not on dinner and a movie.

Living within your means isn’t fun, but when you don’t, you get into financial trouble. Not living within your means means that you spend more money on non-essential things in life than you really should. On the small end, maybe you buy a $3 cup of coffee twice a week; on a larger scale, you’ve bought a lovely home that you can’t really afford.

Living above your means is simple today. Just grab your credit card and you are on your way to all the fun. You can buy that cup of coffee or even that house. But eventually, it will catch up with you. You’ll be unable to pay your bills and will be forced to live within your means.

4. Not having an emergency fund

Most of us live pretty much pay check to pay check. If we can keep our bills paid, keep our families fed and clothed and maybe every once in a while, go on a vacation or something, we’re doing pretty well. Putting money back into an emergency fund may seem like a luxury you can’t afford, but the truth is, you can’t afford not to have an emergency fund. A couple of years ago, we had to put a new roof on our house. This year I had to replace the air conditioner in my van. These things cost money, and I didn’t have enough in the bank, so I had to charge them.

Credit cards are very handy like that, but when you have one emergency after another, the debt can begin to add up quickly. It’s much easier to deal with unexpected expenses if you have an emergency fund. Most financial experts recommend having at least $1,000 set aside, but even better is to have an amount equal to three months’ pay. That may seem impossible to most of us, but at least try for the $1,000. Then, when you have a car problem or other expense not in your budget, you’ll have the money to pay for it. When you take money out of the fund, replace it as quickly as possible.

5. Too much credit card debt

This one may seem obvious, but really, it’s probably the most common financial misstep people make. Credit card debt is related to all the other problems we’ve gone over. If you spend impulsively and don’t live within your means, you’ll likely accumulate credit card debt. If you don’t have a
budget or an emergency fund, you’ll most likely have to use your credit card
more often than you should.

Credit cards are great and convenient, but they’re also dangerous and too convenient. Sure, it’s tempting to have a card and say you’ll only use it a little and pay off the balance each month. If you can actually do that, perfect, no problem. But most of the time, even those of us who plan to do that end up charging more than we wanted to.

Credit card debt is a slippery slope. You start out with a little and before you know it, it’s turned into a lot. Stick to a budget, avoid impulse spending, live within your means and have an emergency fund and you’ll avoid the problem of credit card debt.

Managing your money isn’t really all that difficult. It may not be fun when you have to say no to things you’d like to buy and stuff you’d like to do, but avoiding these money missteps is much easier than having to deal with them.

Image by opensourceway