Personal Finance Ology

Have you taken a New Year resolution of managing your personal finances?
Most people who have taken financial resolutions have forgotten to follow them and this is the reason behind the surging level of debt in the US. If you’re one among them who have taken fake financial resolutions, you must be aware that you need to plan your personal finances to stay away from debt.

Though credit card debt management companies are there to assist people in making their debt more manageable, it is better to stay aware of your finances so that you do not need to seek help of professional companies. Here are some simple ways of managing your personal finances.

• Make a frugal budget:

Budgeting is the most effective way of personal finance management. Unless you follow the budget and keep a close watch on your finances, it is not possible for you to stay within your means. Make a frugal budget so that you can keep a track on what you make each month and how you spend it. If you can determine where each penny goes, you can immediately get better results. You must follow the budget that you make to get best results.

• Pay off your debts:

Nothing can be more effective than reducing your credit card debts. Debts are something that can have a terrible impact on your financial life. Therefore, you need to make sure that you save enough money and pay off your credit card debts. You can even seek the help of a credit card debt management company that may help you repay your multiple creditors in easy and affordable monthly payments.

• Stop using your credit cards:

Credit cards may apparently seem to be attractive, but you must know that ineffective usage of credit cards may get you into a serious financial mess. The more you use your credit cards, the more you will push yourself towards the debt hole. You must always carry cash in your wallet and stop shopping as soon as you exhaust cash. Don’t go for purchasing things on credit.

• Contribute to your retirement plan:

If your employer offers a retirement account, you must make sure that you contribute money to that account. Nothing can be better than planning your retirement. Contribute a part of your monthly income to the retirement account, the 401(k) account. This will act as a future savings account or even an emergency fund.

Thus, with the present economic conditions, it is extremely necessary to manage your personal finances in order to stay away from credit card debt. You can get help from credit card debt management companies to eliminate your unsecured debts, but it is always better to stay safe than sorry.

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Savings Accounts
It is always a good idea to have an emergency fund set aside for times of uncertainty. The normal recommendation is to have at least three months of expenses saved. With that being said here are a few options you have to choose from so that you can assure yourself a safety net is there to catch if the unexpected occurs.

Basic Savings Account

The Basic Savings Account is a type of account you can use to store your emergency cash. I wouldn’t recommend using it for large amounts of cash being that the interest rates on the Basic Savings Account is usually pretty low and you could find other accounts with higher interest rates for your large lump sums of money so that you can earn more money on your money.

With this type of account there may be fees associated with it if you don’t meet the minimum balance or if you perform more transactions beyond the minimum amount allowed. Therefore, it is important for you to ask your bank representative about any fees associated with this type of account before you consider opening one.

High-Yield Money Market Accounts

These accounts can be compared to a checking and savings account rolled into one. On the savings side they pay an interest rate, which is usually higher than a Basic Savings Account and on the checking side you have the ability to write a limited amount of checks. However, with a High Yield Money Market Account you will need a higher balance to open one compared to the required minimum balance of a Basic Checking or Savings Account. Another difference in High Yield Money Market Accounts is that you normally would have to go to an online bank to find one. Online banks are able to offer higher interest rates due to their minimal expenses they incur in relation to a physical bank such as Chase or Bank Of America.

Once you begin to look around for online banks offering High Yield Money Market Accounts, you are sure to find many other institutions offering them however it is important to do your research on these offers. I would recommend, for those just starting out, to go with institutions that are FDIC insured this way you know your money is safe.

Certificates of Deposit

A Certificate of Deposit is a way to earn higher interest on your money. However, it is different from the Basic Savings Account and the High Yield Money Market Account being that you can’t make any transactions on the account. You can’t withdraw any money or write checks on the account. You earn higher interest rates by keeping your money in the account for a certain amount of time.

Basic CD’s

When you invest in a Basic Certificate of Deposit you are committing your money to the bank for a certain period of time. The longer you commit your money to the bank the higher interest rate you will receive. This is because any money that you deposit into this account the bank will use to offer loans to it’s customers at a higher interest rate. Therefore, the longer you commit to leaving your money untouched the higher compensation you get because the bank will be able to make a profit off of your money. This is the business of banks.

The normal time commitment can range from three months to five years. When you have completed your time commitment you are free to take your money and your earnings or you could rollover the balance into another CD. In some instances your bank may automatically renew your CD therefore it is important to ask your representative how they handle that and ask to be notified once your CD has matured. If you have to withdraw your money before the end of your time commitment you will be charged a fee. Therefore, it’s important to decide how much money you can afford to put away for the length of time required by your bank.

There are many different types of CD’s you could choose from. Some banks offer a variety of CD’s while others may offer one or two options. Just know that just because you are banking with one bank that doesn’t mean that you can’t go to other banks and compare their investment options with your current bank. You may find a better option somewhere else.

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So I was taking some time catching up on current events and the top finance news stories when I began to think about the effects a firm knowledge of personal finance issues can have on the future of my generation. The reason I became an advocate for being knowledgeable on personal finances is because I noticed that a lot of people my age just weren’t that interested in learning about their finances. This in turn leads to bad spending habits, unpreparedness for emergencies and a lot of time an extended dependence on their parents for financial assistance. I can go on an on about how this cycle then effects the parents of those uninterested in controlling their finances and how that can later trickle down to the economy, however I am choosing to take a different route.

Rather than rant and rave about the effects, I thought I’d take a look at the causes and by doing this hopefully deter some from making irresponsible financial choices or lackadaisical attempts to learn about their finances. What we don’t realize is what we pay the least attention to is what has a large impact on our lives.

Take for instance myself. During my earlier years in college, I took advantage of all of the offers of credit I was given only to later find myself unable to pay back my debts, which in turn was reflected on my credit report. The negative reports on my credit would later come back to haunt me when I was trying to purchase my first car. However, I didn’t think of that while I was carelessly spending money I didn’t really have. I just think that personal finance should definitely be talked about more in high school and college if not in depth at least to the point where it would peak the interest of students to go out and learn more about it on their own.

I know I’ve talked about this in my other blogs, but making smart decisions is a benefit in all aspects of your life-especially concerning your finances. So I thought I’d offer some areas where you could start making better decisions.

Plan What You Spend - being conscious of the amount of money you make in relation to your overhead will keep you aware of what you can and can not spend and also help you to focus on areas where you can lower expenses and create more spending money.

Use Your Credit Wisely - this means knowing the advantages and disadvantages of credit cards, their rates and their purpose. This also gets into Good Debt vs. Bad debt. I wrote about this in an earlier blog.

Stay Within Your Means - when you do this you make room to increase your means so that you are able to comfortably afford even more luxuries without overextending your finances.

Build An Emergency Fund - when you have an amount of money put aside you don’t have to worry about car trouble or a pricey repair putting you behind on your monthly expenses.

IRA or 401(k) - contributing to one of these accounts prepares you for a comfortable retirement.

Learn More About Investing - gaining more knowledge on investing will help you to increase your finances by having the ability to choose the investments that are right for you. A lot of people shy away from investing thinking they can’t do it however if you learn about it you will find that anyone can use investing to their advantage.

All of these topics, if they haven’t already been discussed, will be discussed in depth throughout this blog so that you can gain full control of your financial future. It all starts with a base. Having a firm knowledge of how personal finances work and what areas to strengthen before you move on to the next is the best way to go. That’s why in this blog I started with the base, the ground floor, of your financial fortress so that you can learn about how everything works together for your benefit. Once you understand how everything works, why you should do certain things in a certain order and how to make the right financial choices that will lead you to the achievement of your financial goals, it makes it that much easier to move along the right path to financial success. Here’s to the desire to learn more about personal finance and the want to make the right financial choices towards financial abundance!

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Money Market Accounts

The characteristics of Money Market Accounts resemble that of a savings account rather than a checking account because of their limitation on monthly transactions. The benefits of these types of accounts are their interest rates. They offer a much higher interest rate. However, along with the higher interest rates comes a required higher minimum balance. Therefore if your balance falls below the minimum balance you will be charged a large amount of fees. These types of accounts are used to save up for large purchases such as college tuition or income taxes.

Money Market Mutual Fund

These accounts can be used as another way to earn interest on your money while still being able to use it and they work almost the same way as a Money Market Account. However, the FDIC does not insure these. Therefore, a lot of people just use them to hold money for a short period of time until they decide where they would like to invest that money. If you have a certain amount of money that you won’t need for about 6- 12 months I would recommend you consider investing it rather than just holding it in this type of account.

Asset Management Account

An Asset Management Account is a mixture of a bank account and a brokerage account. What this means is that you get the benefits of investing your money while still being able to have access to it. You have check writing privileges with this account however you don’t want to use the money for everyday purchase as you would use your checking account ATM card. The advantage of having access to the money in this account is that you can use it to take advantage of other investment opportunities.

As you can see there are quit a few options when it comes to checking accounts. Take the time to have your banking representative explain them to you so that you can choose the one that best suits your needs.

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