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Creating your own personal wealth, from whatever means of income you enjoy, requires knowing where you’re going, and accounting for your own personal finances. It is essential to know what you are worth – your assets and liabilities – and Owner’s Equity – before you can start to develop a good
financial plan to create wealth. In the world of accounting Assets = Liabilities Owner’s Equity so this is what we have to establish now.Firstly you have to work out what your assets and liabilities are, then you can calculate your Owner’s Equity. When you know what you are worth, developing a financial plan to reduce your debt and achieve your financial goals is the frst
step to personal wealth.Step 1. Calculate the amount of your outstanding liabilities (or money you owe). This means you write down in a list exactly how much you owe right now on
your mortgage, credit cards, and any other bills or loans.Step 2. Now make a list of all your assets (dollar value you would get for these if they were sold). For example your cars, home and cash you have in the bank – list all your major assets.Using the Assets = Liabilities Owner’s Equity equation we gave you before, calculate what you are worth. Most financial or credit advisers agree you need to allocate money every month into responsible saving, investing and paying down your debts as crucial part of your financial success. It’s not enough to just put money in the bank when you are also carrying a credit card balance because you are losing the benefits of any interest earned on your savings.To increase your Owner’s Equity you must pay down your liabilities and avoid borrowing more money to buy more assets. It’s dificult sometimes to stick to this plan when there’s advertising in your face all the time to buy this, buy that and buy it NOW! – the “must have everything now” attitude. But you must stay with your financial plan if you want success and personal wealth.Here is an example of a good financial plan (but this is by no means th only one):1. The money you are currently investing or putting into your savings account every month, divide the total of it by 3, then – 2. Pay off one third of this money every month to your outstanding debts.3. Pay one third of this money and deposit it in your savings account at your bank. This will accumulate into a pool of money for your monthly needs. Over time you can use it to finance your family’s Read more…

Most people want to retire with some level of financial security. We all want the peace of mind and self-dignity that comes from knowing that we are not at risk of ever becoming a burden on our families, the government or the state.

Knowing and understanding the three different phases of financial planning can act as a road map and help us prepare a good solid financial plan to improve our chances of meeting our life goals.

There are three different phases of financial planning:

? The Accumulation phase

? The Distribution phase, and

? The Preservation phase

As the name implies, the first phase, the accumulation phase is the period of accumulating assets that will contribute to your wealth. This phase include your working years. First you learn to earn money, and then you determine how best to manage your money to make it grow into wealth. You can effectively do this by investing in different asset classes that will form the foundation of your wealth.

This phase provides a certain level of financial stability and most people never leave this phase their entire lifetime. However, majority of the population do not even enter this phase to begin accumulating any assets. They continually live from paycheque to paycheque without giving much thought to their financial future.

If you find your self in this phase, if you have invested in your first property (not your residential home), if you have started or purchased your first business, or purchased some stocks and shares, congratulate yourself.

Examples of common asset classes to contribute to your wealth include:

? Cash (Treasury Bills, Money Markets, CDs)

? Bonds

? Stocks and shares

? Land and Property (real estate)

? Precious metals

The best advice for those in the accumulation stage is to hold onto the assets you are acquiring, and allow time to work it?s magic. Set time-bound goals for how long you intend to accumulate your assets before moving on to the next phase. Work diligently on your plan and keep your focus.

Continually learn more about the different asset classes available and diversify by investing in several classes. Different assets have different qualities and strengths, as well as risk and rewards.

Investing in several asset classes is a sound investment strategy that can significantly increase your ability to reach your investment goals faster.

The distribution stage is the period when you get to enjoy the benefits of wealth, when you get to draw down income from your assets. It is the reason for accumulating assets in the first place. After years of planning, investing and accumulating assets by the time you reach Read more…

It seems as if a million dollars is the magic number. What would you do with a million dollars? It might seem like the answer to all of life’s problems. But the fact is, you don’t have to look far for a million dollars.

Let’s say that you average $36,000 a year in earnings. If you work for 30 years before retirement, you will make $1,080,000 in your lifetime. If you work 40 years, you will make $1,440,000.

According to the government, the average disposbale income in the US is around $24,000 a year. This is the income that is left after your taxes are paid. That is around 30% in taxes — and is probably accurate.

For simplicity, we won’t look at growth and investments. We will only look at the basics of the income earned.

You worked forty years. You made over almost a million and a half dollars. You will pay the government a half a million dollars in taxes. If you have had your million in your lifetime.

If you save what the average American does, you will have saved less than 3%. That is only $30,000 — if you ignore interest and investment returns. That is all you have left of $1,000,000.

To have $100,000 saved, you will have to save 10% of your income and work an extra 43 years.

At 25%, the savings jumps to a quarter of a million dollars saved in 43 years of work. If you factor in basic interest and some investment returns, that could easily grow into a million dollars in savings.

You may be saying that it is nice Read more…

Many Americans and people in countries where ready credit is available find themselves in greater debt then ever before and this makes you wonder whether you are working for yourself or for your creditors. This ends up being a problem of financial spending

Have you ever sat down and taken a good hard look at your finances?

I’m not just talking balancing the checkbook. I mean every single part of your finances. If you’ve never thought about it before — you should now. Think of it as a way to see where you are and where you are going. You could be surprised.

Start by simply writing down what your financial goals are. Do this without looking at your checkbook or savings accounts. Simply list what is important to you financially. This could be saving for retirement, paying off your debt or even working on a college savings fund for your children.

Now look at you checkbook, savings, budgeting (or lack of) and other financial accounts to see if you are on the right track. See how much debt you have paid off in the last year. If you haven’t been paying more than the minimum payments, you aren’t getting anywhere. You can really see this if you compare this monthly statement to last year’s monthly statement for your credit cards.

Or perhaps you do see that your investment accounts have grown appropriately. But maybe you’ve been putting too much into your children’s college funds and not enough into your retirement savings. Calculate how much you will need at retirement and assess whether or not you are on the right track.

Take the time to sit down and look over all of your insurance policies. Over time, many personal insurance needs change. It may be that you no longer need maternity coverage on your health insurance. Or perhaps you need to increase your term life insurance policy. Look at your homeowner’s insurance to see if you need to increase the personal property coverage or even the coverage amount on the home itself. Having the correct coverage can save you a lot of heartache and money in the case of an emergency or disaster.

Look at Read more…

It’s almost the time to graduate. After four, or five, years in college, you are ready for the real world. But the real world means real money, so where do you start?

It can be both an exciting and scary time for college graduates. For many, they are facing bills and responsibility for the first time. Some have already gotten a grip on it and some will continue to avoid it for a while. But what should you start to get on the right foot?

The first step is finding a job. Once you find a career, you should realize that working yourself up in the field you want is better than making money in something you don’t have a passion for. Taking a job simply because it pays well will either trap you for the rest of your life or make you face a hard decision later. Make the choice now to make a good decision for you future. Take the lower salary and do what you want to do. Believe me, it is for the best.

It may be tempting to move back in with your parents to save money. I don’t advise it. Living with your parents after living on your own is a form of torture for many young adults. You need to get out there and learn your own lessons. Learn how to struggle and make ends meet on your own. Living at home hurts you. Many grads that return home won’t save their money and will end up trapped into staying there for a long time. Get your own place, you’ll be much happier.

My sister made this mistake. She got a big job, felt like a big shot and bought a new car. She was sure that she could make the payments and was not going to continue driving a junker. College graduates are on a tight budget. You may not see it now, but give it a few months — at least until the loans begin repayment. But a car that is a few years old Read more…

Many professionals earn an income that is only sufficient for their living. They work hard in order to have money to finance their daily activities. From this income they take the payments for their bills, personal expenses, foods, transportation, hobbies, as well as their savings and investments. They need income in order to survive. But their income is only sufficient for daily living. What if they need money to finance their unexpected losses or expenses? Where do they get this money in order to pay all of these bills?

Other people would borrow money from their friends or colleagues and pay it with interest in order for them to pay for these unexpected payments. Others would take money from their savings; some would pawn their jewelry and some do worse than that: they steal money from other people. But there are ways to obtain money for these kinds of contingencies that are not costly as these other ways. Some of it can be attained from a loan in an insurance policy if the policy has its existing cash values. The other source of money for contingencies is what we call cash from structured settlements. This can help you sell your structured settlements and convert it into cash in the times of uncertainties.

In this unpredictable time, we should prepare for the unknown. We should set aside money that will be available in times of contingency. We should put up a contingency fund in our Read more…

Money?based on my observations over the years I have learned that it pays dividends when considering large purchases like cars, homes, education and the like, to get your facts and financing together first. Nothing can be worse than purchasing large ticket items while you are carried away on an overwhelming whirlwind of emotion, which often accompanies these big-ticket purchases. The best way to minimize purchasing mistakes and errors in judgement is to get your financing together first. Let?s take a quick look at a few of these purchases and how they can be best approached.

Buying a home-if you are planning on buying or refinancing a home take the time to learn about the details about various loan programs on the market by talking to several lenders including both banks and mortgage brokers. There are a wide variety of conventional and governmental home loan programs (including FHA and VA loans) that may be more tailored to your short, medium and long range needs.

One of the best things you can do is ask a bank for a free HUD booklet, which explains the fundamentals of home loans and how they impact you. Learn the ?financial speak? and don?t sign ANYTHING unless you (really) know what you are doing. Always be sure to talk to at least three loan officers and take notes, read loan literature, get pre-qualified for financing and understand exactly what you are doing BEFORE you look at homes. Doing so makes you a smarter buyer and less likely to make mistakes.

Buying a car-it doesn?t make any sense to me to buy a new car and lose thousands of dollars within minutes by driving it off the car lot. It makes more financial sense to buy a nice pre-owned car at a far less price? of course, you want to have it professionally inspected by a third party (licensed mechanic) before you buy it. And the key is the time of year you buy the car. In my opinion the best time of the year to buy a car is January or February of each New Year. Here?s why: A used car may be selling for $10,0000.00 on December 31 of a given year but on January 1 (the next day/the new year) it will not be worth as much as the day before because of the calendar change (.) Used cars tend to sell slower during this period of the year and your negotiating strength is highest. I like to think of this strategy as being ?prudent? not ?cheap?.

Buying education-colleges are in the business of selling education. They have classes to fill and representatives to help steer students into those classes. Many people who go to school seem to ?follow the follower? by chasing trends. Remember the ?rush? to get a computer programming degree during the 80?s? Everybody ran off to be a programmer only to find out (after they graduated) that much of the employment demand had been filled by the glut of computer graduates. Trends are like that? by the time you hear about a ?hot job market? and run off to get educated for it, the market is filled. Read more…

Does your budget never seem to balance the way it should? Are you constantly digging into the savings to make ends meet?

If you find that your budget isn’t doing the job, then it’s time to take a good look at essential components you might be missing or you have not allowed sufficiently for.

Some of the biggest budget blunders are . . . . . .

1. Failure to plan for inevitable expenses

We all have irregular expenses that we naively refer to as “unexpected.” Come on, is that flat tire really unexpected? Don’t you secretly know that these things happen? Have you ever owned a car that did not need repairs or maintenance? If you have, you probably didn’t own it long enough. The solution; Start counting on the car breaking down instead of hoping it doesn’t!

The car isn’t the only area we slight in the budget. Do you find yourself hoping and praying that the hot water heater, washer, dryer, or some other major appliance doesn’t need to be repaired or, worse yet, replaced.

Home maintenance is always a factor in our finances. Even if you rent, you probably have some home related expenses waiting to creep up on you.

These are just a couple examples of variable expenses that we often overlook.

When you consider the following other categories that could be included in this list, you can see the serious consequences this oversight can have on your budget. . .

Property, Auto, Health and Life Insurance if not paid on a monthly schedule.

Even if you do pay monthly, you should try to save for a lump payment if at all possible. Most companies charge up to a $3 fee for monthly payment options. It doesn’t sound like a lot but, over a years time it’s $36 you won’t be investing in their cause. I say, it’s always best to invest in yourself. Don’t you agree? Put the $36 in your savings!

Taxes – Property, Federal, and State – If you know you will have to pay Uncle Sam, prepare for it. If you value your home or other property investment, prepare for the costs. Don’t scramble at the last minute to come up with enough to pay your obligations. It’s likely other areas of your budget will suffer greatly, since these expenses have a high priority.

Clothing – Now, I can wear a piece of clothing ’til you can see through the threads. I work at home, so I only have a few choice pieces for special occasions. I’m a no frills kind of gal. But, I have four kids. Do I expect them to stop growing or somehow not care how they look to their peers? Of course not! But, I’m working on it. Just kidding! I know that they will need more clothes, more shoes, more accessories….etc., etc., etc., etc…..

I use every resource available to me to cut down the clothing budget, I know I must account for this expense. It will arise, whether I am prepared or not!

School Supplies – This is another one you just can’t omit if you have kids. You can, however, use some clever money saving techniques and multiple resources to keep this expense to a minimum.

Pet Care – If you have a pet, you most likely have expenses that come with this beloved family member. Vaccinations, flea control, veterinarian, and food are just a few that come to mind. Again, minimize the costs by using all your resources.

Tip: My local county animal shelter gives rabies vaccines for $5. Good for three years if regularly vaccinated. Does yours?

Gifts – If your friends, family, and kids don’t care if they don’t get gifts from you, if you’ve declared war on the holidays, or have a convenient hiding place when these occasions take place, then you can skip this one!

I’m guessing most of you are including this one. It’s inevitable. My best advice is to set strict limits and be a smart shopper. Seek out the bargains and buy when it’s a deal, even if it’s months ahead of time.

Medical – Unless you’re lucky enough, or not lucky (depending on how you look at it), to qualify for medical assistance, you undoubtedly have medical expenses over and above the cost of your health insurance; Co-pays Read more…

That most of us are considered poor is no disgrace, but does us credit; for, as the mind is weakened by luxurious living, so it is strengthened by a frugal life.(Minucius Felix, 3rd century A.D.)

People who live a frugal lifestyle often live with less stress. Typically, those who take control of their money feel they have more control over their life in general. You’ve heard the old clich? “Money is Power.” What most of us fail to understand is that the power isn’t in having the money, or how much you have, rather in the ability to control what money you do have!

With that power comes peace of mind. It’s the peace of knowing that all you have is truly “yours”. With that peace of mind comes Frugal Freedom. Freedom from debt. Freedom from envy. Freedom from ridicule, shame, and loss. Loss of what you might ask. Sanity, for one thing. Trust me, when the walls of financial ruin come tumbling down around you, it’s easy to loose your sanity! And, no matter how much money you have, if you can’t control it, you are headed for financial ruin. There are many stories of those who have become wealthy and eventually fell to financial ruin. These are people who let money control them instead of responsibly managing their money.

Much of the transition from spendthrift to frugal is within the mind. It’s not so much a physical shedding of the luxuries of life. Rather, it is the ability to accept that you don’t have to “keep up with the Joneses.” This can be a huge mental leap living in today’s world of material values.

It takes an understanding of what you really need to be successful. Focus inward to what drives you to want more money. Is it necessity or just appearances that drive you to spend more, have more and, consequently, owe more?

In review of your own unique situation you might find the answers very enlightening. Hopefully, seeing the true origin of your desires and re-evaluating what you “need” will lead to change. Then again, you may not like what you see and in denial exclaim that it?s all baloney!

I hope you have the courage to make the changes needed to achieve financial security and peace of mind. Many of us forget that we do have the ability Read more…