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How do I figure out what my expenses are?
What you need to do is to make a list of your fixed costs (bills that come regularly, either every month or quarterly) that require a set payment. Then make a list of your irregular costs, or what you might expect your unplanned expenses for the month to be. You can guess at that by looking at what you had to spend unexpectedly last month, or the month before (usually things like car repairs, emergency medical and dental care, unplanned travel). By recording each of the bills that you're expecting (along with the actual amounts you spend each month on expenses), you will be able to track your spending each month, and throughout the year.
Should I save for an emergency?
Having a little cash put aside for emergencies is certainly a good idea, especially if it will save you dipping into your credit cards. As you know credit cards charge the highest interest rate around -- starting at 18%. You can save yourself a lot of money if you have a cash reserve available to meet life's emergencies.
My spending is out of control. How do I cut down?
Control is the most important thing in every successful budget. You have to know at all times what money you have and where it's going. If you lose track of this simple, yet complicated process, you're heading for financial trouble. Keep a close track of what you spend every day, by writing everything down. Even that coffee and muffin you buy every day. Record the expense. It all adds up. Once you have list of your daily expenses, ask yourself what can you realistically do without. Do you really need to buy that coffee and muffin. Wouldn't it be better to have breakfast at home? And how about lunch? Can't you pack your own and again save? This kind of questioning will get you back in control of your spending. And before spending, always ask yourself a simple question: do I really need to buy this, or do I want to buy it?
What is a spending trigger?
A spending trigger is an event, emotion, or activity that stimulates your desire to spend money.
How do I control my spending?
Firstly, you need to understand that you should not make unrealistic demands on yourself when it comes to cutting back on spending. If you suddenly stop all pleasurable activity, your budget is bound to fail. What you need to do is make adjustments by cutting costs in fixed costs, unexpected costs, and pleasurable costs (such as, going to the movies). These adjustments are a contribution toward achieving you goals. Don't consider them as sacrifices. You are spending what you need to, not on whim.
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How do I stop playing catch-up on bills?
Create and follow a budget. It will allow you to harness more of your income, so you can channel it toward specific goals and dreams, rather than uncontrolled spending. You need to take a hard look at your spending habits, and then change the ones that are purely wasteful. Before long, you will have a bit of money each month, which you can put toward your goals.
I'm a plastic addict! How do I stop?
Firstly, remove yourself from harm's way, and get rid of all temptation. That means removing all of your credit cards, store cards, and ATM cards from your wallet, and locking them away somewhere, so you can't get at them easily. Better still, cut up all your cards. Don't worry, you can easily get replacements when you need them. Then on a piece of paper, write down the balances that you owe on each card. Next, create an action plan for yourself to repay the debt. You can also put yourself on a "crash course" where you stop all unnecessary spending for a month. You can keep repeating this until saving becomes a habit.
What is revolving debt?
Revolving debt is any bill you cannot pay off each month. Revolving debt includes credit card and store charge card balances, car, home equity and student loans, as well as medical, dental, legal, and tax bills.
How do I make debt less painful?
You need a repayment strategy that you must strictly follow. Avoid late payments, don't just pay the minimum but try to pay at $20 on top of the minimum. Trade in your more expensive balances by consolidating with cards that charge a lower interest rate. If you get a raise or bonus, use it to pay your debts; don't just spend it. Make smart payments, so when one debt is paid off, apply that same amount to paying other balances. Refinance your mortgage by finding the best interest rate and closing costs.
What is liquid investment?
A liquid investment or asset is one you can cash out of quickly without paying an early withdrawal penalty. Such investments include, savings and checking accounts, money market accounts, money market funds, mutual funds, and even stocks and bonds.
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What is compounding interest?
Compounding interest is the interest you earn on the interest you have earned. So at the end of each year, you rack up a good earning on your investment. Ask your bank for any such programs that they might have.
Can I borrow against my house?
You can, if your house has built up equity. This means that you have paid off part of the mortgage, or the value of your house has increased. You can borrow in the form of a loan or a credit line. A loan gives you a lump sum. A credit line is issued in the form of funds that you can draw on as you need to, usually by writing checks that the bank will give you. You pay interest on the loan right away. But on a credit line, you pay interest on the amount you have used.
How do I make up a savings plan?
The best way is to write everything down. Firstly, you need to put at least 15% of your paycheck aside every month. Next write down the twelve months in a year, and beside each month put down how you have saved. Don't dip into this cash. This is taboo, because you're putting this money aside for your goals and dreams. Don't shortchange yourself. Keep creating such a list each year. Saving is a way you make sure that some part of what you earn hour-by-hour, week-by-week, month-to-month goes to you, and not to paying for goods and services.
How much will I need to retire?
This, of course, depends on your lifestyle. But the general rule of thumb is that you will 50% to 70% of your pre-retirement income, for each year that you plan to spend in retirement.
What's the best way to start small in investing?
The best way to start is to put a little aside each month into an IRA. But if you already have your retirement looked after financially, and you want to make your money grow safely, the best place to start off is in mutual funds, which let you diversify and minimize risk -- the two good ingredients to successful investing. To start with, always choose a "no-load" mutual fund. This means no fees.
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