Money Management - Personal Finance Tips For All Ages

Young people get a bad reputation in society these days. Actually, the concept of blaming ills on younger adults is nothing new. Certainly the non-conformist generation of the 1960’s got their fair share of bashing in their day. Nowadays, young adults contend with many stereotypes, some imagined, others that are real and are completely unique to their generation. One of the preconceptions is that they are not responsible with money. In a lot of cases, that notion is true.

Most college graduates leave school with an average of $20,000 worth of school loans saddled to them. Couple that figure with several more thousand from the numerous credit cards they’ve accepted and possibly even a car loan, and some college graduates can feel as though they’ve lost before they’ve even begun. Irresponsibility and indebtedness is common within younger generations, yet that fact doesn’t make the challenges that debt presents easier to deal with. There are, however, some very real ways to manage debt and to prevent falling back into it.

If young adults are already in debt, then the ship has already sailed on preventing themselves from getting into that trap. It is never too late, however to right the ship. Even though a person may be starting in a harder position, they can always learn from their experiences and add those experiences to their money management-personal finance knowledge.

It’s important to note that debt is necessary for most people and that not all debt is bad. For instance, lenders look upon student loans and mortgages favorably as positive debt if the account is in good standing. Credit cards, though useful at times, are the things that get most young people into trouble. Many credit card companies approach people as young as eighteen with credit card offers, often times on college campuses. If a parent or another guardian hasn’t properly taught a young person of the pitfalls of credit card debt, ignorance and irresponsibility could very well be causes that makes a young person indebted. There is no such thing as a free anything!

To prevent young adults from falling into poor money management habits, it’s important to give them money management-personal finance responsibilities early. In addition, an overall financial education is vital to a responsible view of how money flows through our global economy and how it affects their bank account. For instance, opening a low balance checking account, requiring them to get a job and budget and save income can be key learning tools and a good foundation for young people. Fiscal responsibility is essential to understand how money functions as a tool in our society.

Once they’ve reached adulthood, encouraging young adults to continue to educate themselves about money management - personal finance becomes even more important. The doors that open to further indebtedness are just as vast as the doors that open to financial freedom. An understanding of money as a tool and a respect for it will help to make smarter, more financially savvy adults. It's also important to review that how you see money and wealth is a choice. What will happen is that financially savvy adults teach their children to be financially savvy, and it becomes a domino effect. Think of the doors that would open to so many more people if they chose financial freedom versus indebtedness.

Young adults can learn proper money management-personal finance techniques if they are taught early on in life and stay committed to those principles. Once a young person becomes independent, it’s easy for that newfound freedom to turn into irresponsible spending habits. Young people, with help and the proper money management strategies, can become responsible adult consumers and investors.

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Personal Finance Do's and Don'ts

Every single one of us, no matter our location, age, gender, hair color, family background or race has to manage our personal finances.
For some, it’s an exciting passion, a never-ending game of “how much can I accumulate in one lifetime”. For others, it’s just part of life, something that needs to be dealt with but doesn’t border on obsession. And finally, for many of us, personal finance is nothing but drudgery at best and an emotional trigger at worst.

Every single one of us has to manage our personal finances. Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Do get organized: Even if you’re a “messy”, this is crucial. You’ll miss important due dates, pay exorbitant late fees and possibly get into serious debt (or credit trouble) if you don’t have a handle on what you owe and when you owe it. A simple rule of thumb: the messier you are, the simpler your system.

Do draw up a spending plan: Every dollar that comes into your household goes out in one way, shape or form, even if it’s to a savings account. Know where your money’s coming in and where it’s going. Without this information, you can’t possibly make wise financial choices. Overwhelmed by the thought? Ask a financially responsible friend or relative (whom you trust) to do it for you. You can’t argue with success and they can help you make the hard decisions when it comes to having to “trim” spending in certain areas.

Don’t cut out all your fun: Decide, along with your family, what’s most important to you in terms of living a happy life. Then divide up your budget accordingly. If your family really enjoys eating out, plan for it. Just keep in mind you may have to spend a lot less on groceries or clothing. If none of us are the same then our spending plans shouldn’t be the same. If you love to read then cutting back on cable TV wouldn’t be a problem. If you love to watch sports, then cutting back on cable TV would be a serious problem.

Do allow impulse spending: You read it correctly. Unless you plan for a certain amount of miscellaneous, unexpected expenses in your spending plan, you’ll always feel as though you’re blowing your budget when you pick up items you weren’t planning to buy. Just like anything else, give yourself a “buffer”. A side benefit: you get to skip the guilt when you pick up that neat velour Elvis on the boardwalk.

Don’t use your local bank: Unless you absolutely have to. Check out all available credit unions first. In most cases, they’ll have better rates and more friendly policies on everything from fees to lending practices. Each dollar you deposit buys you a share, or membership, in the credit union. So instead of being a customer you’re actually a “member”. Like the ad says, membership has its privileges.

Do use a debit card with protection: Before you use a debit card, make sure your checking account is safe in case you lose your card or it’s somehow stolen. Also make sure you have the right to reverse charges in case merchants don’t provide the goods or services you purchased.

Don’t buy a new car: Considering the fact that new cars depreciate thousands of dollars as soon as you drive them off the lot, can anyone explain why buying a new car would be a good idea?

Do run numbers before every major financial decision: Conventional wisdom works most of the time. But there are always exceptions. For example, in most cases, it doesn’t make sense to borrow from a 401(k). But there are instances where it’s financially beneficial. You’ll hear it preached from the rooftops that you shouldn’t use a home equity loan to pay off credit cards, or that debt consolidation loans are nothing but trouble. But if you’re financially responsible and ran into some tough circumstances, a HELOC or debt consolidation could be a lifesaver. Search online for calculators that will help clarify the situation. Numbers don’t lie.
And finally, perhaps the most important “Do” of all…

Do remember that personal finance is just that personal: Everyone loves to give advice, and everyone loves to share their opinions. What worked for your mom and dad may not work for you. On the other hand, they probably have years of wisdom you can draw from.

Consider your personal finances an extension of who you are and where you’re going. Study the topic, and take the time to develop your own unique strategies when it comes to saving, spending and investing. During this information age there’s never been a better time to find the facts you need, in record time.

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Year End Financial Tips

When year-end is fast approaching, taking a few minutes to give your finances an once-over will help ease the post-holiday money hangover. By completing just a few tasks, you will save money on your taxes, make your tax preparation much less stressful and give you a bit more peace of mind during this hectic holiday season.

At Work
Use up your flex spending dollars at work. If you don’t, you will lose it! This is for those extra medical expenses (eyeglasses, prescriptions). Don't miss out on saving those hard earned dollars. Schedule those doctors’ appointments or get those new glasses you need. Plus, there are some over-the-counter drugs that some flex-plans cover, such as Claritin and Zantac. Check with your HR department about new items that are now covered. If your company offers a flex spending account and you don’t take advantage of it, you could be missing out on saving hard earned dollars. If you are self-employed, you can check out a medical savings account to get similar benefits. If you haven’t already, maximize your retirement contributions for your 401(k) or self-employed retirement plan. Also, if you have moved recently, let your employer (or previous) know therefore you can get all your W-2 forms together. This will save you so much time when you are doing your taxes.

At Home
It’s time to clean out your closet. Donate any clothing or other items you don't use any more to your favorite charity. It is a great tax deduction! Make sure you keep your receipts. You can also attend a charitable benefit (another reason to celebrate with friends and support a good cause). If you itemize your deductions, it should help save money on your taxes. Consider setting up an automatic savings plan. Why not get a head start on your New Year's Resolutions? Start small, $50 a month, and then raise it in 6 months. You will be saving so much money without even thinking about it. If you already have one, raise the monthly contributions by $100.

Your Investments If you are expecting a tax refund, get your paperwork together now (i.e. charitable donations, work-related expenses, brokerage account statements, medical receipts)! You will have a head start on collecting your refund - and putting it straight into the bank - which will save you time and get you your money sooner. Even if you are not expecting a refund, this is a good time to start collecting information for your taxes. You should also put off buying any mutual funds for your taxable accounts until January 1st. Many mutual funds declare capital gains in December and you could be hit with a tax bill right away.

Now, when January 1 rolls around, you can start thinking about your New Year’s Financial Resolutions with a head start.

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How Financial Planner can Help you Meet your Goals

Choosing a financial planner can help you meet your financial goals. However, the process is not without pitfalls. Selecting a financial planner is a very personal decision depending upon what you would like to accomplish, but there are broadly applicable criteria as well.

Personal Financial Planning by G. Victor Hallman, Jerry S. Rosenbloom Provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on planning and paying for education expenses, including the new 529 plans; ramifications of the GST estate tax repeal; new checklists and questions to tie up each chapter; and more.

The most important thing to remember is that the financial planning industry is unregulated. The majority of planners have not passed any tests to demonstrate their competence. Only about 40,000 of the 250,000 or so planners in the United States are Certified Financial Planners. Chartered Financial Consultants and Personal Financial Specialists, which are certifications offered by the insurance and accounting industries, account for only a small portion of the remaining planners. Selecting a planner with a certification is a critical initial consideration. Finding someone who is also experienced and participates in continuing education is important as well.

In addition to their qualifications, it is important to understand how you will be compensating your financial planner. Many supposed financial planners are really just sales representatives for a particular financial product. Understanding whether your planner subscribes to a code of ethics that includes fiduciary responsibilities can shed light on the degree to which the planner is likely to place your needs ahead of their compensation system.

Two compensation systems are prevalent in the world of financial planning. Most planners get a portion or all of their compensation through commissions on financial products they sell you. These arrangements can create a conflict of interest between you and your planner. Your planner should be forthcoming about how commissions affect their compensation and will influence the products they will recommend to you.

Alternatively, some planners are compensated solely by an annual fee. The fee is typically based on a percentage of your assets under management. One percent per year is typical. Fee-based planners are not subject to the same conflict of interest that exists with commission-based planners. However, you may pay more for their advice than you would by going the commission-based route. They are also more difficult to find.

Another important consideration is the aspects of your financial life that you are seeking advice about. Many financial planners only have adequate knowledge to address a small portion of a client’s financial condition. Those with an insurance background are best at insurance, while those with a brokerage background tend to be better at investing. It is best to find a planner who can understand your entire financial situation and provide comprehensive financial advice. At the very least, try to match your planner’s background with your most important problems or obtain advice from multiple planners with different specialties.

The final consideration is the nature of the firm you would be working with. Larger companies and smaller companies will likely provide different degrees of service and fee structures. Understanding whom you will be working with on an ongoing basis to formulate and implement a financial plan is very important. There is little point in interviewing a famous financial planner if you are ultimately going to be assigned to a staff planner that you have never met to actually create your plan.

By interviewing multiple financial planners before you make a selection, you will best be able to find one you are comfortable with. Personality, qualifications, and compensation structure are all important areas to evaluate. Before making a final selection, check into any disciplinary problems your prospective advisor has had by contacting your state’s insurance department, the National Association of Securities Dealers, the Securities and Exchange Commission, and the group overseeing their planning certification. While not guaranteeing you will not encounter problems, applying this approach will greatly reduce your chances of having an unpleasant experience.

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