The biggest challenge of money
is managing your income for sustainability. Many people have been
described as wealthy but after some time they become poor again. How did
that happen? Many reasons can be identified for this and one of them is
perhaps the lack of knowledge about how to manage wealth.
Without doubt, there are certain secrets
of money that makes wealth sustainable and these keys, expert say, form
the basis of wealth creation for long term sustainability.
Now is the time to make the most of your
money and develop a plan for this phase of your financial life. While
these may not be applicable to every individual because everyone has his
or her own unique characteristics, they are general principles that at
least guarantee minimum success. Enjoy your money life…
Savings
Pay yourself first. You’re probably
inclined to pay everyone else first. You may even still be supporting
children or other dependents. But it’s vital to start paying yourself
first by saving money. It’s the only way to ensure your financial
longevity and well being. Most banks can automatically transfer funds
from your checking account to your savings account, money market, mutual
fund and other accounts. Automatic deposit makes the payment a habit
you can maintain.
Join retirement savings programme if you
do not have one from your employer. Plan immediately and max out the
amount you can contribute. Also make sure you’re setting aside enough to
be eligible for any matching funds — extra money for your retirement
fund— given by many employers.
Saving is so crucial, the government even
encourages it if you’re a low-income worker. If you qualify, you can
get a federal tax credit, depending on your income and how much you put
into retirement programs.
Make sure you know the details about your bank’s savings account plans.
Delay before you pay
This doesn’t mean pay bills late. It
means stop yourself before you buy. Online shopping has taken impulse
buying to new levels. Give yourself a timeframe before you decide to
commit to a purchase. Think over that new pair of shoes for two weeks.
If, after two weeks, you still can’t live without them, make room in
your budget before you buy.
Once you decide to start saving, you need
to determine where you’re going to put the money. And remember “under
the mattress” doesn’t count. Several common savings options include:
Savings accounts, money market accounts, certificates of deposit (CDs).
Some of the most important considerations
in choosing a savings vehicle include: Access: How quickly can you
access your money?; Safety: How safe is your money? Is it federally
insured?; Interest: How much money will you earn?; What are the interest
rates and terms?; Limitations: Are there minimum balances required? Are
there limited checks that can be written per month or penalties for
early withdrawals?
Start Now
Even if you can only put aside a small
amount at first, the sooner you start, the faster your savings will
accumulate. For every five years you delay, you may need to double your
monthly savings amount to achieve the same income at retirement.
Budgeting
Live happily within your means. You want
to love your money, right? Then you’ve got to live well within your
means. That’s important at any age, but it’s especially important when
planning for retirement, which often demands that you live on a fixed
income.
Not to mention that many of us are
enjoying longer, healthier lives. Living more years means needing more
money and stretching our dollars. The best way to stretch, save and
spend wisely is to build a budget.
Only 40 percent of Americans use a budget
to plan their spending.1 But 60 percent of Americans routinely spend
more than they can afford. A budget’s end goal isn’t to punish you, keep
you from enjoying your golden years or make you miserable. It’s to keep
your dreams of the moment and your long-term goals truly alive and
golden.
Question your needs and wants
What do you want? What do you really
need? Evaluate your current financial situation. Take a look at the big
picture. Make two lists – one for needs and one for wants. As you make
the list, ask yourself: Why do I want it?; How would things be different
if I had it?; What other things would change if I had it? (for better
or worse); Which things are truly important to me?; Does this match my
values? And what will I need to live happily.
Set guidelines
We all have different budgets based on
our needs and wants. But this chart shows some guidelines on how much
should go toward different expenses. It’s especially useful as you plan
for retirement and living expenses. You may need to make adjustments for
a daily latte fix or visits to children living on the other side of the
country, but remember to subtract amounts from other areas if you do.
Add up your income
To set a monthly budget, you need to know
what’s coming in. Make sure you include all sources of income such as
salaries, interest, retirement accounts, social security, pensions, and
any other income sources.
Estimate expenses
The best way to do this is to write down
every penny you spend each month. Once you’ve created your budget, keep
records of your actual income and expenses. This keeps you aware of the
difference between what you budget and actually spend.
Track, trim and target
Once you start tracking, you may be
surprised to find you spend a month things that you don’t really need or
long calls to the grand kids. Some expenses are easily trimmed. Cutting
back is usually a better place to start than completely cutting out. Be
realistic. It will help you to be better prepared for unexpected costs.
Credit cards
Credit cards can be an important
financial asset to you and your family. And like all financial tools,
they need to be used carefully. Credit cards offer many useful features.
There is the convenience of being able to buy needed items now and the
security of not having to carry cash. You also receive fraud protection
and in some cases rewards for making purchases.
With these advantages also come
responsibilities. You need to manage credit cards wisely by:
understanding all of the card’s terms and conditions; staying on top of
payments; and realising the true cost of purchases made with credit.
Using a credit card is like taking out a loan. If you don’t pay your
card balance in full each month, you’ll start paying interest on that
loan.
Understand your rights
Credit cardholders are entitled to
protections: Zero liability means you are not responsible for fraudulent
charges when you report them promptly. In some cases, you have the
right to dispute purchases with merchants for unsatisfactory products or
services.
We all change over time, and so do our
credit scores. These scores are the numerical value used by lenders to
assess individuals’ “credit risk” at a given time. It changes based on
history of payments, amounts owed, new credit and more. Make no
mistakes.
A lot of people each year find
inaccuracies on their credit reports — incorrect late payments, accounts
that should have been closed, other people’s debt information and more.
Report mistakes right away; errors could lower your credit score,
costing you money.
You’re the one who has to ensure your
report is correct. If you find an issue: Check the last page of your
report — instructions for claim disputes are usually on the last page;
Contact the credit bureau and report the error immediately and put it in
writing — if the issue remains.
Debit Cards
If credit cards mean “pay later,” debit
cards mean “pay now.” These cards are tied to your bank account and work
like you were paying with cash. With debit cards, you’ve got to have
the money in the bank to cover your purchases. These cards look similar
to credit cards so make sure you know what type of card your financial
institution issued you.
Always know your current bank account
balance and available funds. And don’t forget about checks that haven’t
cleared your account. If you’re comfortable using the Internet, consider
setting up online access to your banking account so you can manage
debit card purchases, checks and bill paying all at once.
You’ll have a one-stop shop for managing
all the ins and outs on your account. When using a debit card don’t
forget to: Always take sales receipts or copies;
Record your transactions in your check register as soon as possible or
check transactions online; Remember to account for any bank fees that
may apply and Review statements carefully. If you suspect a mistake,
call your financial institution immediately. And always follow up with a
confirmation letter.
Many banks charge a fee if you use
another institution’s ATM with your debit card, and they usually charge
non-account holders to use their ATMs. Instead of paying extra, choose a
bank with ATMs convenient to where you live and work or use your debit
card to get cash back when making purchases.
Be Secure. For maximum security, remember
to take advantage of free alerts for your debit card. Most financial
institutions offer the same free, automatic updates by phone or email
for debit cards as they do for credit cards.
Receive customised alerts when: ATM
withdrawals or any debit card activity exceeds your set dollar limits;
Your online ID or passwords change and Large transactions are made. Know
Your Limits. Many debit cards have daily spending and cash withdrawal
limits. These limits are meant to protect you in case your card is
stolen.
But remember, your card might be declined
if you exceed your limits even if you have enough money in the bank.
Know your limits and contact your lender if you need to raise or lower
amounts.
Also remember to track your spending.
When you make a purchase, withdraw money from your account or pay bills
that exceed your account balance, you may be subject to “overdraft fees”
if you’ve opted for overdraft service. Many financial institutions
offer overdraft protection options.
If you sign up, they’ll cover your check
or debit transaction so it doesn’t bounce. But this protection often
comes with a price tag, too. You may be charged a fee for each purchase
that uses overdraft, as well as an additional fee for being overdrawn.
Balance your account regularly to avoid
added fees. Keep a Secret. Your debit card will require a Personal
Identification Number (PIN) for security. Choose a unique number. Avoid
obvious choices like your address, phone number or birth date.
Always keep your PIN private. Memorise
it. Don’t write it down anywhere. And never tell it to anyone. If you
feel your PIN has been compromised or someone may have identified it,
change your number immediately by Like credit cards, debit cards are
accepted at millions of locations worldwide.
Remember for your protection, usage across state and
international lines can cause a fraud or security alert with your
financial institution if it’s different than normal spending patterns.
If possible, let your bank know your travel plans in advance.
Some transactions — like hotel stays — won’t be
immediately cleared. Banks place a “hold” on the transaction when the
final amount isn’t known. So, when you go to a hotel and your card is
authorised before any long-distance phone calls or room service charges
are applied, funds are earmarked to cover potential additional costs.
This protects you and the hotel owner. Most transactions have a
less-than-24-hour hold, and all holds are removed within 72 hours.
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