Personal Finance 2009

How to Survive and Beat the Financial Crisis in 2009

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The holidays are over, a new year is upon you, and by all accounts, the economy is not going to be much better this year. A quick glance of your desk reminds you of the piles of unopened post-holidays credit card bills to be dealt with. Sounds familiar?

At this point you have a couple of options available to you:
1) Hope (and pray!) the economy experiences a miracle and you strike lottery this weekend.
2) Take control of your finances and have a great year in spite of the economic downturn.

Hopefully, you have chosen option 2 and to do this you will need some help. Following are some helpful tips that will make sure you not only survive but come out on top in 2009.

Goals
You have heard all your life that you should set goals, if you are like most people, that has not made it any easier for you to do it. Setting goals is important because they force you to take a solid look at where you are. You cannot plan a trip to Mexico if you have no idea whether you are in New York or London, can you? The same principal applies to finances, you have to look at where you are before you plan on where to go. That being said, here are a few tips to setting up your financial goals:

Assess all of your income, count every penny, and write it down
Assess all of your expenses, keep a running total for at least a week and do not skip that candy bar you bought at lunch.
Prioritize your expenses- Most important first and on down the line.
Trim unnecessary things from the budget for instance that Grande Caramel Mochachino you have everday. Only buy what you need!
Calculate outgoing from incoming and assess if there is any balance left to go into savings or entertainments.

Once you know exactly where you are financially, you will have to make some decisions. If the income is less than the expenses you are going to have to make some changes in your spending habit.

Frugal Lifestyle
Don’t, worry. This doesn’t mean you have to be a cheap to lead this lifestyle. All it is, is that anytime you have more to pay than you have money for it is time to see where you can trim the budget. The first and easiest thing you should do is to practice living more frugally.

Purchase a coffee thermos to take coffee from home to work. This can save you big money, especially if Starbucks is your coffee of choice. This is a potential savings of $1000 per year Alternatively, if you really cant live without takeaway coffees, then just cut down on the size. Do you really need a Grande Caramel Mochachino? Why not just settle for a Tall and still get to keep the extra change in your pocket for another cuppa another day.
Cut back or eliminate eating out, buying food and preparing it at home is always cheaper than a restaurant. Plus, it’s a healthier choice as well. Who knows what they put in those noodle boxes to make them taste like they do?
Make your errands count by having a to-do list. The less driving you do the more money you will save on petrol and time.
Make a weekly menu and grocery list, you will find that you can spend much less on food when you plan it out, plus you will virtually eliminate impulse buying.

Debts and Liabilities
So when you have eventually freed up extra cash you can now begin working on debts and liabilities. First order of business is to forget purchasing a new car, boat or other luxury item. This may seem extreme but remember it is more important to pay off all your debts and liabilities first before allowing yourself to indulge. Look at this as a war, you are going to war with debt and preparing for a life free from worry.

Learn
Finally do not neglect your education. Often when people worry too much about their finances, the first thing they will do is to cut everything down. There’s no reason why you can’t enjoy a little bit life even if you are in the red. The only thing you need to realize is that we don’t save stupid, we spend smart. There are plenty of good books, websites, magazines, software out there that will boost your ability to control your finances. Consider investing in these tools to equip yourself with these information and knowledge to solve the root of your financial problem.
Things may still look grim on the financial front but remember those who are prepared will survive and will become successful when the economy has soured.

Best Investments Tips for 2009

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With an uncertain economy, many people are wondering just where to invest their money so that it will not only be safe, but will grow. There are several alternatives, and by researching the pros and cons of each one, you will be making an informed decision. This is much better than simply handing your money over to someone to make the decisions for you.

Pay Off Debt
The first thing you should do before investing money is to pay off high interest debt. This is the most effective way to free up your disposable income: credit cards, vehicle payments, and possibly student loans, take up much of your potential savings ability. Once you have quit giving the companies money for loaning it to you, you have exponentially increased your saving power. The payment you are giving the credit card company not only has the power to grow, it doesn’t come with a monthly charge. Getting back that 14 to 19% interest charge is a pretty good return to yourself.

Money Market / High Interest Savings Accounts
This is a low risk savings investment. Savings accounts offer widely different interest rates. It is well worth your time to investigate different rates offered by other banks. With a higher rate of return, you can easily increase your income on sedentary monies.

Money market accounts invest your money in mutual funds while it is still usable for the owner. While the owner is often given a checkbook upon opening a money market, there is generally a limit on the amount of checks or withdrawals allowed within a certain amount of time.

This is a good option for people who want easy access to money while still seeing a return on the investment. Investing money in a savings or money market account is best for those who are creating an emergency fund or saving for a specific purpose.

Stocks / Mutual Funds
With the volatile natural of the stock market, it is easy to see the risk associated with stock recently. However, over time the stock market has proven to give a good yield over time. When deciding to invest in the stock market, be fully aware of the risk of dropping prices, and invest over a broad range of stocks. By diversifying your funds, you decrease your risk. Also, you can invest a small amount of a particular fund/stock every month to average to cost price and to reduce market risk. This popular investing method is called dollar cost averaging.

Real Estate
Right now, the real estate market is struggling. With dropping prices, it is the premium time to buy if you want to be a homeowner or to investor. With so many foreclosures, rental properties are going to be in more demand. If you are considering owning several properties as a landlord, keep in mind the cost associated with non-paying tenants and repairs you may be responsible for. With several properties, it is easier to offset costs with different sources of income. Single property owners have a harder time unless the income generated is enough to cover the repayments.

House “flipping” can be considered if you have the capital to make the necessary improvements. By buying a distressed property, one can easily sell it quickly for a good return, therefore the term flipping. In today’s real estate market, remember that it is a good time to buy, but a tricky time to sell. Make sure you are buying a wise property in an area of high demand.

These are not the only investments you can make. Also consider tax deferred IRA’s, or investing in commodities such as gold or oil. Research all of your options for pros and cons so that you make a wise choice for the long term. With a little planning and diversification, you can keep your investments working for you for the long term.

Contact

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About

2009-02-15T16:45:00.001+10:00

What is this blog about?
Hie, I’m DebtFreeDeb and I’m the webmaster of this blog. This blog is created with the intent to share valuable personal financial knowledge with everybody who graces its pages.

What will you find here?
Because personal finance is a topic that affects every one of us, therefore this site explores all the tips / guides to some of the most common financial conundrums faced by ordinary people out there. Here, I will talk about debt management, financial savings and practical investing. I will also look particularly into how the year of 2009 and its economic turmoil will affect our personal finances.

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Getting a new car during recession?

2009-01-15T23:58:00.002+10:00

Should I get a new car during this recession?

The truth is that no one can answer that question better than you. No one knows your finances and automotive needs better than yourself. If you are thinking about purchasing a new car, and you aren’t sure which way to go, here are a few points to consider.

The decision to buy a new car is always based on two things, want, and need. Before you go into a dealership, know which factor is motivating you. (There is nothing wrong with buying a new car just because you want one, as long as you can afford it!) Don’t select a model that is not suitable to your wants and needs just because it’s cheaper. If you do, you will be sorry for it later. It’s always good to research a few models before you shop, and rebates and incentives on all models are available online. Keep in mind while searching the internet that rebates are based upon where you live. For instance, if Sunnytown, California has a lower rate of unemployment than Middletown Indiana, chances are the rebates are going to be higher in Middletown, Indiana.

An important point to remember, due to the financial crisis dealers across the country are desperate to reduce their inventory. They are worried that manufactures will not be able to pay on the floor plan. Here is how a floor plan works. Let’s use the fictional dealership named Quality Cars as an example. Over the course of the year, Quality Cars has ordered 500 cars and trucks from the manufacturer. When a vehicle sells, a preset amount of money goes back to the manufacturer, and whatever money is left over goes to cover expenses such as commissions, advertising, and operating expenses. At the end of the year, Quality Cars has 400 vehicles on the lot. The manufacturer then pays the dealership for the remaining vehicles, and when the vehicle eventually sells, they get their money back. Quality Cars uses this money to pay the huge property taxes on the vehicles. If something were to happen where the manufacturer doesn’t pay on the floor plan, the dealer is still stuck with paying the property tax. If Quality Cars doesn’t have enough money to pay the taxes plus operating costs, they will file for bankruptcy and go out of business. To keep this from happening, Quality cars needs to sell as many vehicles as possible, which translates into a huge savings for you, the customer.

It’s not just new cars that are affected by the financial crisis; used cars are overstocked as well. When a car’s lease is up, it goes back to the bank, which in turn sells it back to a dealership through an auction. The amount of money the bank has invested in the vehicle was determined at the time the vehicle was leased. Due to the financial crisis, used car values are not where banks thought they would be, and they are now overstocked and losing money. To compound the problem, repossessions are up as well. Customers now have a chance to get a great deal on a used car, and there is a huge selection of them to choose from.

Manufacturers are also offering low finance rates on new cars. Most often, a customer has to give up part of the rebate for the low rate. It’s a good idea to check the rate at your own bank. If it’s lower than the rate the dealership is offering with the rebate, then go with your bank’s rate. The dealership then might “work” to beat your banks rate. Dealerships receive commissions when they use their own banks, so they will want to keep your financing “in house”. If it’s a new car you are buying, you should consider buying gap insurance for your protection. It’s also important to research insurance rates on the car you are interested in before making a purchase, so you don’t put yourself in a tough spot financially.

Here’s how you handle post holiday debt

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Each year we all promise to do things different where the holidays are concerned. Some people say they will buy their gifts early so that they are ready long before the holiday season where others use things such as law away to help pay off the gifts in a timely manner. In reality though, as the holiday season comes upon us, more people find that they end up buying their gifts at the last minute and they generally end up paying for those last minute gifts with their credit cards.

So how do you handle post holiday debt when they holidays are done with? It would be nice if we all included the holidays into our yearly budget as then you would have the cash put aside to cover these expenses but that isn’t possible for most people. Therefore these are some tips to help you handle the post holiday debt if you fall into the majority.

1. Set a holiday budget and stick to it.

You can be sure that you have a good idea of what you want to buy for the holidays for each person on your list, so set a spending limit and budget things out. This will help you to not go over your spending limit and spend money that you really do not have.

2. Look for coupons and sales.

There are plenty of manufactures that offer deals certain times of the year such as black Friday. This is the day after Thanksgiving. If you are not into fighting the large crowds then you may want to utilize coupons and other special sales days. If you buy your gifts throughout the year with coupons and special sales promotions, you can save up to 50% on your shopping.

3. Plan for the extra bills.

You can utilize such things as holiday savings accounts and Christmas bonuses to help you do your shopping. If you set aside a certain amount of money to help with the extra expenses, the holiday’s wont seems so rough. You have to have a backup plan if you do not have the extra holiday cash. If you find that the extra bills are too much to handle, you may want to look into something such as debt consolidation.

4. Pick and choose how you pay off the credit cards.

I can be very beneficial if you pay off the credit cards with the highest interest first so that you save yourself money in the long run. You need to look at what cards have the highest interest rates and the worst late fees. This can help you make a plan of attack on those holiday bills and work them down one by one.

5. Debt Consolidation

When the mountain of bills gets too high, you can opt to consolidate all your loans into one large loan under a fixed monthly rate. Although you will have to lengthen your loan period, you will be able to get away with paying a lower fixed monthly rate. Once you finally save enough, you can pay off your loans in one lump sum. This situation is ideal for people with a lot of bills to pay and manage.Battling the holiday bill blues does not have to be difficult. By following some of the tips above you will find that you are sailing through the holidays with ease and when they roll around next year, you will be well ahead of the game.

Investing Tips for College Students

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Getting Started

For young adults who are just getting started, investing on a tight budget can seem like a daunting task. As a young student or recent college graduate, you might be just starting to consider investing your money. You might be wondering what options are available. Should you invest in the stock market? Should you work with an investment advisor? What about a long-term investment plan like an IRA or 401(k) plan? What options are available, and where will I find them? With all of the choices available, it’s easy to get overwhelmed. Before you get discouraged, you should know that it is possible, and even quite simple, to get started on a shoestring budget. With $100 to $250, you can easily get started in investing. Some of the options you can start to think about are:

Mutual Funds
Employer-sponsored 401(k) Plans
Individual Retirement Accounts (IRAs)

Mutual Funds

First, consider a mutual fund with a low initial investment requirement. Mutual funds take advantage of the principle of diversification - putting your money into a number of different investments. By doing this, you lower your risk of losing all of your money if one stock tanks. Investing all of your money in one place carries much greater risk than spreading it out over multiple investments. A mutual fund is a package where the different investments have already been compiled for you; you only need to decide how much you can contribute each month. So, how can you go about finding a mutual fund that fits your student budget? There are many ways to find something that will fit your needs. Start by searching the web. You’ll find tons of investments with a low minimum starting price. You’ll want to check past performance of any fund you are considering. If an investment has floundered significantly in the recent past, you should avoid it.

Retirement Accounts

It may seem a little daunting to use the word retirement on a newly graduate student, however retirement accounts are one of the easiest way to get started on investing. When you choose to contribute through your employer, you canoften invest with pre-tax dollars. This means you won’t have to pay taxes on the portion of your salary that goes to your investment account. This can also be relatively painless, because you won’t miss the money so much since it comes out of your check ahead of time. You’ll be able to make your budget with your actual net income in mind. Some employers even match your contribution, making it even more lucrative to invest this way. If your employer doesn’t offer a retirement account plan, you can open an individual retirement account, or IRA, through your local bank. Plan to put away a specific amount each month. After your initial opening deposit, many banks allow you to contribute as little as $50 per month.

Long-term Investment Strategy

With so many options available, it is fairly simple to get started with a very small budget, especially if you’re willing to invest in the long term. While we haven’t discussed them here, short-term investments generally require more capital - and involve greater risk. Low cost, low to moderate risk investments are the best options for students with a limited budget. Though you may start small, but if you start investing early, you can see your money growing tremendously due to compound interest which generates earnings from your asset’s reinvested earnings. For you to take advantage of this low risk, low cost investment, all you need to do is put your money in a high interest account and invest a little time and patience.