Sabtu, 17 Maret 2012

Financial Management

Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. It includes the administration and maintenance of financial assets. Besides, financial management covers the process of identifying and managing risks.

The primary concern of financial management is the assessment rather than the techniques of financial quantification. A financial manager looks at the available data to judge the performance of enterprises. Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance.
Some experts refer to financial management as the science of money management. The primary usage of this term is in the world of financing business activities. However, financial management is important at all levels of human existence because every entity needs to look after its finances.

Financial Management: Levels

Broadly speaking, the process of financial management takes place at two levels. At the individual level, financial management involves tailoring expenses according to the financial resources of an individual. Individuals with surplus cash or access to funding invest their money to make up for the impact of taxation and inflation. Else, they spend it on discretionary items. They need to be able to take the financial decisions that are intended to benefit them in the long run and help them achieve their financial goals.

From an organizational point of view, the process of financial management is associated with financial planning and financial control. Financial planning seeks to quantify various financial resources available and plan the size and timing of expenditures. Financial control refers to monitoring cash flow. Inflow is the amount of money coming into a particular company, while outflow is a record of the expenditure being made by the company. Managing this movement of funds in relation to the budget is essential for a business.
At the corporate level, the main aim of the process of managing finances is to achieve the various goals a company sets at a given point of time. Businesses also seek to generate substantial amounts of profits, following a particular set of financial processes.
Financial managers aim to boost the levels of resources at their disposal. Besides, they control the functioning on money put in by external investors. Providing investors with sufficient amount of returns on their investments is one of the goals that every company tries to achieve. Efficient financial management ensures that this becomes possible.
Strong financial management in the business arena requires managers to be able to:

  • Interpret financial reports including income statements, Profits and Loss or P&L, cash flow statements and balance sheet statements
  • Improve the allocation of working capital within business operations
  • Review and fine tune financial budgeting, and revenue and cost forecasting
  • Look at the funding options for business expansion, including both long and short term financing
  • Review the financial health of the company or business unit using ratio analyses, such as the gearing ratio,profit per employee and weighted cost of capital
  • Understand the various techniques using in project and asset valuations
  • Apply critical financial decision making techniques to assess whether to proceed with an investmtn
  • Understand valuations frameworks for businesses, portfolios and intangible assets

Meaning of Financial Management

Meaning of Financial Management
Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.
  1. Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
  2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
  3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
    1. Dividend for shareholders- Dividend and the rate of it has to be decided.
    2. Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.
Objectives of Financial Management
The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be-
  1. To ensure regular and adequate supply of funds to the concern.
  2. To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders.
  3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.
  4. To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.
  5. To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.
Functions of Financial Management
  1. Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.
  2. Determination of capital composition: Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.
  3. Choice of sources of funds: For additional funds to be procured, a company has many choices like-
    1. Issue of shares and debentures
    2. Loans to be taken from banks and financial institutions
    3. Public deposits to be drawn like in form of bonds.
    Choice of factor will depend on relative merits and demerits of each source and period of financing.
  4. Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
  5. Disposal of surplus: The net profits decision have to be made by the finance manager. This can be done in two ways:
    1. Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus.
    2. Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.
  6. Management of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.
  7. Financial controls: The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.

Sabtu, 10 Maret 2012

Savvy Stuff : Top 10 Financial Tips

Begin improving your finances right now with our Top 10 Financial Tips.

1. Be realistic.

Time spent developing a budget is time well spent.
A common error people make when they’re planning their household budget is to list unrealistic dollar amounts. If you spend $500 at the grocery store each month, then it isn’t reasonable to list $300 in your budget.
Keep a spending journal for at least two weeks prior to creating a budget for your family and yourself. This will help you establish realistic numbers. A comprehensive budget will not only tell you where the money is going, it can give you a map to tightening expenses. Also, it will allow you to put more money away for your short-term and long-term goals.

2. Know the difference between luxuries and necessities.

Knowing the difference between a “want” and a “need” can help you save money.
Many of the items we spend money on are things we want. If you don’t have to have it in order to survive, then it is a want. If the item doesn’t fit comfortably into your budget, you need to set it aside until your budget is ready to handle the purchase.

3. Don't bet on the next bonus.

Until the money is in your account, don’t spend it. Many moneymaking ventures are not guaranteed, and it’s not wise to gamble with what “may be.”
For instance, stocks may or may not double within a year, so to plan your budget around what might happen or what you hope will happen can leave you in the lurch.
Focusing on your present financial state will help you reach your financial goals in a more realistic fashion.

4. Keep control of your money.

You earned it, so you should know how it is being spent. When you let someone else control your money, you are putting yourself at risk. A divorce, serious illness, or death can place married individuals at risk.
When you know the details of your family's finances, investments, debts, and retirement savings, you are more likely to come out of a negative situation on top. Not knowing can produce a lot of heartache and financial strain that could easily have been avoided.
If you are single, you should know what your broker or financial consultant is doing with your money. Your involvement will help negate any questionable activity that could have a negative impact on your future finances.

5. Think before acting.

Make wise buying decisions. Consumers’ spending decisions are processed “5% by the numbers and 95% by emotions,” according to Connie Kilmark, a financial counselor and consultant in Madison, Wisconsin.
It is critical to make decisions based upon need and not just by what you want. When you sign a loan or lease, you are locked into a payment that may not give you the room needed for financial emergencies like illness, auto repairs, etc.
To avoid over-extending yourself think before you act. Before you sign on the dotted line for a large ticket item, such as a house or a car, you should examine your budget and rent or borrow the item to ensure that your purchase will be a true fit.

6. Use cash instead of credit.

If more than 20% of your monthly net income is going to pay credit cards and other loans, there are signs of financial problems in your future.
When you use a credit card and don’t pay off the balance at the end of each month, you spend more on your purchases. The interest earned on your credit cards will limit the amount you can save over time. Use cash to make your purchases or only buy what you can afford to off when your bill arrives and you can avoid credit card debt that will prevent you from reaching your financial goals.

7. Be credit savvy.

Credit is not evil, but it must be used wisely and judiciously. In order to avoid common pitfalls of debt, consumers need to read the fine print, pay on time, and limit the amount of credit they have. If you miss a payment or get another account, credit card companies can make money.
Even though you have signed up for 0% APR interest, there is no guarantee that the amount will not be revoked. Missing a payment can cause the 0% APR to be revoked, so it is important to be organized and pay your bill on time. Credit card companies can even use late payments with other companies against you, so be on point at all times.
Also, don’t cancel cards once you’ve paid them off. Creditors consider a consumer’s credit history, including the length, when offering interest rates.

8. Don’t ignore retirement.

Saving for retirement at an early age is a win/win situation. You will have to save less if you start early, and your savings will have longer to grow. Start early and save at least 10-to-15% of your income, if you plan on accumulating the wealth you need to live comfortably later.
Work with a financial planner when determining which savings option is best suited for you. Not all savings are guaranteed, such as 401K and stocks, so choose a savings option that is comfortable for you.

9. Examine your options.

When you select a shorter repayment term on a home, you avoid paying two-and-a-half times the value of the item. A 15-year mortgage can help you save money and build wealth. Before you buy, balance what you can afford with the healthiest option available.

10. Roll it over.

If you change employers, you should roll over your 401(k) balance into an Individual Retirement Account (IRA) rather than cash it out. Cashing out incurs penalties, rolling over maintains your wealth building efforts.
Make sure you make a direct rollover from your previous employer to the financial institute where you have opened your IRA, if you want to avoid giving your previous employer 20% for taxes. Many times a past employer will cash you out after a certain period, so act promptly.

Financial Tips and Advice

Money Management Advice

  • Prepare a comprehensive budget taking into account all living costs and repayment amounts you have to make. This is the most important thing to do before you spend any money
  • Plan gift buying ahead of time. You will often find suitable gifts at lower prices at sales and you can avoid the rush before holiday periods, such as Christmas time.
  • Plan buying a house one or two years beforehand. This will enable you to investigate the most suitable sources of finance, and arrange to satisfy requirements such as a history of saving with a particular institution.
  • Be aware of interest free periods on items, check the type of borrowing, is it if you pay it off in the time period no interest, if you do not pay off in time the interest may go back to the start and you will be paying at line of credit charges, it is like a credit card and interest will compound
  • Credit card payments, interest charges, interest compounds, don't rely on minimum payment, if you do use credit you must know by your budget that you can afford to pay it back and not incur interest or too much interest.
  • Before lodging an insurance claim for the cost of repairing damage to your car, check the future loss of no-claim bonus which this might involve. The insurance payout you receive could be more than offset by the loss in your no-claim bonus.
  • You may be able to pay insurance premiums by the month instead of yearly, without incurring a penalty for doing so. It should be easier to pay a small amount each month than a large amount once a year.
  • Organisations such as credit unions sometimes have special group arrangements with insurance companies so members can buy home, contents or life assurance at a discount.
  • Remember if you buy a mobile phone that it may be on a contract — be careful of this and any disconnection fee if the contracted amounts are not paid

Love & Money : 25 Financial Tips for Couples

The way we earn, spend, and save money is a practical expression of our most fundamental beliefs. When our priorities are out of sync, money can become the great divide in an otherwise harmonious relationship. 
By working together toward financial freedom, money can cease being a source of conflict and become a way to express our highest values, while providing comfort and security to those we love most.
Here are ways that you, as a couple, can improve your relationship with money.
While dating
  1. Learn to have fun without a lot of money. A bike ride, walk in the park, home-cooked meal, free concert, or ice cream cone are just a few of the opportunities available to enjoy time with your lover without spending a lot of money.
  2. Pay attention to your partner’s financial habits. Just because your beloved is a lot of fun and a good kisser does not mean that she is fiscally responsible. Before you commit yourself, learn how your partner handles the big issues of real life, including financial matters.
  3. Discuss your dreams and goals with your partner. Almost everything you will do during your lives together will cost money. Make sure your partner’s goals are compatible with yours.
Living Together
  1. Don’t move in by degrees. Some people leave their toothbrush one night, then a few changes of clothes, and before they know it, they’ve moved in. Have a discussion with your partner about leases, household expenses, and other important matters before you make your decision.
  2. Create a written living-together agreement. Clarifying your intentions in writing will help you to avoid misunderstandings and costly disagreements later. In most cases, your agreement will be enforceable in court.
  3. Plan carefully before you borrow with your beloved. Determine in advance who will be responsible for debts incurred during the relationship. In the absence of an agreement, each partner is generally responsible for debts for which she has signed, often without recourse to the other partner for repayment.
For Newlyweds 
  1. Time your marriage to minimize taxes. If both you and your beloved are employed, the "marriage penalty" may force you to pay more taxes as a married couple than you would if you were single, so marry the following January rather than December. However, if one spouse earns most of the money, you’ll enjoy a "marriage bonus," paying less tax as a married couple than you would as two single people, so a December wedding might be wise.
  2. If you are paying for your own wedding, pay cash instead of going into debt. Have the courage to care more for the reality of your joint finances than the symbolic ritual of a lavish party. Consider having a small get-together to memorialize your love, and then throw a larger party when you can afford it.
  3. If you receive monetary gifts on your wedding day, don’t spend them all. Set aside as much as you can to invest for shared dreams, such as a house, business, or children.
  4. Review your investments. Determine if you need to change your investment allocations to meet your joint goals. Your partner’s assets can provide you with some investment flexibility that you could not achieve while single.
Joining Your Financial Lives
  1. Create a workable structure for your financial lives. Who will be responsible for paying bills, filing invoices, balancing the checkbook, and researching large purchases? Establish a division of labor that suits your talents and needs.
  2. Celebrate your differences. If one of you is a saver and the other a spender, create a budget that allows for both. If your partner is a bargain-hunter, put him in charge of the spending part of the budget, while you invest the savings.
  3. Confide in your partner. Keeping financial problems to yourself is destructive to the openness and stability of your relationship. Discuss your worries with your mate and ask her for practical suggestions and support.
  4. Rank your financial priorities. Where your individual goals coincide, make a list of the steps it will take to accomplish those goals. Where they collide, figure out which you can live without and how to combine the rest with your partner’s plans.
Starting a Family
  1. If one partner will stay at home while the other works full-time, discuss the model you will use for your finances. Will you pay the homemaker a salary for her services? Have a spending limit for purchases, like a corporate buyer? Create an arrangement that shows respect for the most important job on Earth: raising a wonderful human being.
  2. If you haven’t already, now is the perfect time to prepare your will. You don’t want guardianship issues to be settled in court if anything happens to you. Ask a friend or relative if he would be willing to be the legal and/or financial guardian for your children after you’re gone. Then, follow through by updating and signing your will.
  3. If you stay home, keep up your career skills. Work part-time to maintain your skills and contacts, or go to school part-time to improve your financial prospects. Maintain your skills so you can ease your transition to the workplace.
  4. Contribute to your child’s Roth IRA. Children, like many other taxpayers, can contribute up to $2,000 of their earnings to an IRA. If your children have part-time jobs, encourage them to save the money in a Roth IRA, perhaps by "matching" the funds they contribute. Roth IRA contributions can be withdrawn tax- and penalty-free and used for college expenses. Earnings can be withdrawn as well after the IRA has been open for five years, but they are subject to tax.
Relationship Skills for Financial Success
  1. Organize regular "money meetings" to discuss your financial situation, dreams, and goals. Use this time to brainstorm creative solutions to problems and generate ideas to improve your future.
  2. Work with your mate’s personality, instead of against it. One of you makes financial decisions instantly, while the other one deliberates for days. One of you hates paperwork, while the other has anxiety if every blank is not filled out completely and perfectly. Focus on a positive outcome, not the method of traveling.
  3. Don’t ignore your partner’s needs. It may not be important to you, but if it’s important to your partner, it’s important to your partnership. Treat your partner as a business associate, not a dumping ground. Hear what your partner is saying, consider it, and respond.
  4. Join an investment club, or form one for your family. Investment clubs are social gatherings where the members can learn about finances together. It’s a great opportunity to share good times and learn how to invest at the same time.
  1. Talk about the money differences you had with your prior spouse. That way, your new mate will learn more about you and will know where you are coming from when differences arise in this relationship.
  2. Be polite to your partner’s ex-spouse. He or she is the lion at the gate guarding your partner’s relationship with his children. Don’t indulge in vengeful or petty actions that may keep you from your larger goal of a happy stepfamily.
  3. Don’t let the children come between you. It takes special vigilance to keep children from prior marriages from fueling disagreements. Discuss in advance how you will share responsibility for children who live with you and how their expenses will be handled.

6 Savvy Financial Tips for Women to Succeed

Women are increasingly becoming involved in family finances, and the decisions that go with them. Women have long been involved in the shopping aspects of family finances, and in frugality. However, with a greater number of women earning money, and more women — including those that stay at home — interested in using money to make money, it seems natural that women would be more interested in participating in major money decisions. However, finances are still seen as traditionally male turf. Here are some financial tips that women (and men!) can use to improve their situations:

1. Don’t Let Someone Else Direct Everything

A stay at home spouse deserves a say in how the money is spent. Someone staying home is sacrificing to provide real value to the family, and, even though our society doesn’t recognize these contributions with a pay check, they are still important for the family’s overall financial well-being. No matter your situation, make it a point to be informed, and be involved in family financial decisions.

2. Get Educated About Money

A recent study pointed out that many women are still uncomfortable with investing. A big part of that is a lack of knowledge about how investing works. Take the time to learn about how money works, and about how different investments work. You can learn in bite sized bits, tackling a concept a day, until you feel comfortable with money, and with making money decisions. You might even decide to take a little more risk with some of your investments.

3. Fund a Retirement Account

Many women rely on their partner’s retirement account for the future. However, it is important that you have a retirement account in your name as well. If you have a job, make sure some of that money goes into a retirement account. If you do not have a job, talk to your partner about a spousal IRA. You can still have a retirement account, even as a stay at home spouse.

4. Consider Your Own Financial Needs

It is common for women, especially mothers, to sacrifice for others. However, you need to make sure that your finances are under control. Before paying for your child’s college, consider whether or not your own retirement is in good shape. You might even want to pay to finish your own degree, so that you are prepared to work if the need arises. You can’t truly help others financially until your own finances are sold.

5. Know Your Worth

Learn more about what your skills and experience are worth in the job market. Know your worth, and learn how to ask for what you’re worth in a professional manner. Many women accept less money than their male counterparts because they are afraid of rocking the boat. (Take realities, such as the recession, into account during a salary negotiation.) Additionally, if you are a stay at home spouse, develop confidence in your worth as a member of the family.

6. Look for Support When Necessary

Don’t be afraid to look for financial support when you need it. This may mean working with a financial planner who can help you create a roadmap to financial freedom. It can also mean joining a legitimate investment club. If you are nervous about financial decisions, look for ways to find help and support, and look for legitimate and helpful sources of information.

59 Tips on personal finance

  1. Always make sure you know how much money is there in your bank.
  2. Distinguish between needs and wants and learn to prioritize your needs.
  3. In order to control your finance first understand where you are.
  4. Stick to a frugal budget - Eliminate stuff that you can do without./li>.
  5. You only have to do a very few things right in your life so long as you don't do too many things wrong.
  6. We can tell our values by looking at our check book stubs.
  7. Practice thriftiness before preaching...know more.
  8. Prioritize expenses to tackle your personal budgeting problems.
  9. Opting for online documents can help you monitor your accounts regularly as well as save environment.
  10. Pay yourself first.
  11. Always read the "fine print" section of the contract minutely.
  12. Always borrow money from a pessimist; he doesn't expect to be paid back.
  13. Try to make your home appliances last longer so that you can avoid buying big-ticket items frequently.
  14. Use cash to purchase things instead of swapping your credit cards unnecessarily every time.
  15. Once you get an accurate picture of your personal finances, you should figure out your short and long term goals.
  16. Do not use too many credit cards.
  17. Build an emergency cushion on which you can fall back as the credit downgrade will push up the interest rates on loans.
  18. Visit multiple stores to get the best deals.
  19. Live within your budget so that you can manage your expenses and save a considerable amount.
  20. Check out any leakage that may have been caused within your car pipes.
  21. Understand the importance of money and spend it only when needed.
  22. Get paid what you're worth and spend less than you earn.
  23. Learn self control to establish solid financial footing.
  24. It is not necessary to have common financial goals in a marital relation, but both should work together to achieve them.
  25. Making payments on time can save you from a major financial crisis.
  26. Know where your money goes.
  27. Use smart meters to monitor your electricity usage.
  28. Get help of unemployment benefits when you are unemployed.
  29. Use an online spreadsheet to plan a suitable budget.
  30. Take full advantage of Thanksgiving sale! Buy items at a relatively cheaper price!
  31. Update your will.
  32. Try to use the Internet to the optimum, when using an unlimited plan.
  33. Get advice from trusted sources to decide which loan option will be best suited for you.
  34. Avoid financial blues by increasing the flow of your income.
  35. Do Christmas shopping year-round.
  36. Book a hotel room with a kitchen.
  37. Make extra money this holiday to stay within your budget.
  38. Don't see a budget as being about what you can't have, but instead, working out what you can afford.
  39. When you receive a windfall - a raise or a tax refund, you should contribute it towards the retirement savings accounts.
  40. Be aware of your bank balance and avoid over draft fees.
  41. Avoid buying a new car when you have one already.
  42. Grow your own food.
  43. Procrastination is the enemy of your financial success.
  44. Make your own Christmas cards, not only will it add a personal touch, it will also help you to save money.
  45. Ignore all offers that sound t?? good to be true.
  46. Before you buy something new, sell something old.
  47. A little risk is good, too much risk is foolishness.
  48. Prevention is better than cure even in personal finance.
  49. Take advantage of federal student aid to lower your child's education cost.
  50. Have regular "financial" family meetings.
  51. If you have dependents, get disability/life insurance, a will and an estate plan!
  52. Practice the habit of buying things in bulk so as to manage money efficiently.
  53. Keep distance from lavish and high-roller friends.
  54. Before getting married, open your communications regarding money.
  55. Learn self control.
  56. Be up front with your children regarding your financial situation when you’re a single parent.
  57. Take advantage of alternative work schedules such as flextime and telecommuting when you’re a single parent.
  58. Pursue tax breaks and qualify for the child-care tax credit as a working parent.
  59. Take advantage of financial grants available to a single parent.

4 Finance Tips I Wish I Knew at 18

Man, sometimes don’t you wish you could go back in time and change something in your life – even your financial life?  Sometimes I wish I could go back to that time right after high school graduation and re-think some of the financial decisions I made.  While none of them have been detrimental to my current financial well-being, I always wonder if I could have been better off had I followed the advice I know give (but then, if I hadn’t learned these lessons, I wouldn’t be where I am today either – catch 22 anyone?).
Whatever the case, here are four things I really wish I knew at 18!

1. That Retirement Thing

I worked all the way through high school and college, and now that I fully understand what a Roth IRA is, I wish I had started one way back then.  It would have been awesome to witness the power of compounding over the last few years from the money I could have invested in high school and college.  I mean, what was a really spending my money on then anyway?  Usually beer and video games.  It would have been so much more productive to invest that cash!
Second, my first job in college offered a 401k with an employer match.  I didn’t want to give up 5% of my paycheck at that point – but what I realized now is that I was really leaving an additional 5% on the table by not taking that match!
Lesson learned: don’t give up free money, save for retirement, and enjoy the power of compounding.

2. Don’t Buy That Car!

Since I was working full time during school, I always had more money than my friends.  My cocky self thought it would be a great idea to buy a new car.  Really, my old beat-up truck served it’s purpose well, but I really wanted something new.  I ended up shelling out over $13,000 (after selling my truck) for this car.
And you know what?  Nobody cared about the car.  After about 2 weeks of driving the car, I didn’t even care I had the car.  Plus, over time, I think I ended up sinking more money into repairing this new car than I ever put into my old truck.
Lesson learned: don’t go buy a new car unless you really need a new car.  Cars are just liabilities, and you want to limit your liabilities.

3. Stay Away From Day Trading!

After taking a few finance and investing classes in college, and interning at a brokerage company, I thought I was an investment pro.  Little did I know, I wasn’t!  I learned this strategy for picking stocks based on technical analysis, and running them through a spreadsheet.  I thought it was a fool-proof system.
Well, once I put my first $2,000 into my account and started trading, I started racking up losses.  In about three months, I’d lost all that money.  It was an expensive lesson.
Lesson learned: don’t day trade, actually invest in companies for their fundamental earnings potential.

4. Saving is Not Just “Not Spending”

Finally, I always thought of myself as saving if I just didn’t spend all my money every month.  And while, yes, technically, I had “saved” something, it was really just because I hadn’t spent the money.  All the money did was sit in my checking account until I needed it – for buying a car I didn’t need or day trading.
Lesson learned: actually save each month, and designate a savings account with a set amount.

Readers, what financial lessons do you wish you knew at 18?  I’d love to hear your thoughts!

5 financial tips for young couples Focus on eliminating debt, work towards purchase of home, experts say

 For many couples in their 20s or 30s, financial life together evolves much like everyday life, with connections taking root on ever-deeper levels. But it's also a time when the wrong decisions about money can have a major impact on long-term goals, such as being able to afford a home and save enough for retirement, according to financial experts.
And the decisions that have to be made aren't necessarily very complicated. It's mainly a case of developing good habits and sticking to them.
Investment or fiscal planning advice for couples who are early in their professional careers is remarkably similar to the game plan of a single person at the same age: budget wisely, tackle debts such as student loans and credit card bills, and begin saving as much as possible.
The difference is that as a couple you can tackle these goals as a team, often getting ahead financially much more quickly than a single person could.
Assuming the relationship is a stable one, and both spouses have similar long-term plans such as buying a home together, it really pays for the couple to manage themselves as a single economic unit, financial experts told CBC News. Here are some investment and financial tips they shared for young couples:


The advice here is unanimous among the investing pros interviewed, and it's simple. Wipe debt out as quickly as possible.
Eliminating any non-tax-deductible debt, including student loans or lines of credit, should be a top concern for most people in their 20s and should usually take priority even over buying a house.
The focus should be primarily on the debts that have the highest financing costs, such as credit card bills. If you're carrying large sums on credit cards, consolidate the debts into a lower-interest loan and then concentrate on erasing that single loan. A recommended approach is to have the bank automatically take a specified amount from your account on payday and apply it to paying down a consolidated loan, so that you get used to how much disposable income you have available and don't have to struggle to save up money for lump-sum payments.


Figuring out a workable household budget sounds like a no-brainer, but many people never get around to it and often end up living paycheque to paycheque. A budget is a crucial part of any financial plan — which applies to all age groups — and involves taking an honest look at how money is being spent.
Apart from fixed monthly expenses, particular attention should be given to irregular costs, including one-off purchases, says Rose Raimondo, a financial planner with Calgary-based Raimondo & Associates Ltd. Small impulse buys can add up over time, and keeping them under control can keep money that's important to long-term investing goals from being frittered away on unnecessary purchases.
A budget can keep a lid on spending, and keep money from slipping through couple's fingers. Young couples should get their spending under control as soon as possible and, hopefully, that will form the foundation for good fiscal habits for life. Then they can start turning their attention to investing for the future — since part of a budget includes making sure part of any disposable income is either paying off debt, or being put aside for a major future purchase like a vehicle or home.

Home and retirement

Working towards the purchase of a first home, which includes amassing a down payment, is a worthwhile goal and becomes a main priority for young couples. It's such a massive expense that it often consumes all of a couple's financial attention.
However, they need not abandon retirement planning while saving for a home — they can do both at once.
Under the government’s Home Buyers’ Plan can withdraw up to $25,000 for a down payment as long as they return the money over a number of years. So contributing to an RRSP early can provide an immediate tax benefit, and also help with a house purchase.
Once a home has been purchased, paying it down becomes the main focus for most couples. However, any extra money beyond the regular mortgage payments should probably be invested in either a registered retirement savings plan or a tax-free savings account, according to the experts, rather than being held in a simple investing account.
“It’s good to do a little bit of saving for the retirement,” says Judith Fulton, a senior consultant with the Calgary-based office of T. E. Wealth.
An RRSP provides immediate tax savings, but you'll pay a penalty if you need to dip into that money before retirement. Alternatively, money can be put into a tax-free savings account, where the growth is sheltered from tax. The money in a TFSA can be put towards emergency expenses if necessary, or held as a long-term retirement nest egg.
Either way, getting money into a savings plan early can yield big savings over the course of the couple's next 40 years thanks to compound interest.

Two incomes, but act as one

Apart from the obvious advantage over single people of having two incomes, couples can reap rewards by treating their finances as combined resource.
Spousal contributions to RRSPs, for instance, are one way to transfer immediate tax benefits to a partner, since the initial investment results in an up-front tax savings, Raimondo says.
For couples who are self-employed or who own a business, there are often ways to reap tax savings as a couple, too, which a tax expert can help identify.

Opening dialogue

Finally, the things that promote financial health have a lot in common with the things many people say promote a healthy realtionship.
A key part of a couple’s financial development, Raimondo says, involves having an open conversation about what their future plans are — and just as importantly, where each partner stands in terms of income and debt.
Only by having a clear picture of assets and debt can a couple make the most of their financial resources and make a solid spending and investing plan.
“If you don’t have those conversations early on, it’s not going to get easier,” Raimondo says. “It’s going to get harder.”

Financial Tips For College Kids

1. Use credit cards sparingly Use credit cards wisely because this is a chance to establish a solid credit history. Watch the interest rates. Don't be suckered by low introductory rates. Expect the interest rate, or annual percentage rate (APR), to climb above 20 percent in three to six months. Don't use the card for routine living expenses or a night on the town.
2. Pay credit card balances in full Remember: Credit is a loan -- and it doesn't come from The Bank of Dad. That means any balance on the credit card must be repaid. Get a card with a low limit. Shop around for the best deal and read the fine print before signing up. If you move, inform the bank of your new address. Guard your credit card number and close unused accounts.
3. Get the best checking account deal
Shop around before opening a checking account. Smaller banks may offer a better deal. Compare fees. Ask if there's a fee for dealing with a teller, including deposits or withdrawals. Ask if there's a fee to use a debit card. Ask about ATM fees. Ask if overdraft protection is part of the student package. If not, ask about linking such coverage to a bank-issued credit card.
4. Start saving
Open a savings account. Establish a savings plan and kick in a little money each week. Stick with it. Compound interest is a wonderful thing and it's always wise to have a little extra tucked away.
5. Keep track of your spending
Use cash whenever possible because counting out the bills underscores the connection between the purchased item and money leaving your wallet. Use a debit card before a credit card for the same reason. Keep track of spending because a budget means nothing without accurate accounting.
6. Set a limit on entertainment Mad money should be sane and sober. Set a limit for walking-around money and stick to it. Hitting up the ATM for another fistful of crisp twenties is easy -- and guaranteed to deplete your bank account.
7. Shop wisely
Remember this Yankee adage: Use it up, wear it out, make do or do without. If you learn to say no to that fancy stereo, ski trip or new set of duds, you'll be ahead of the pack. Consider buying used textbooks. Shop at second-hand stores. The look isn't frumpy -- it's professorial.
8. Keep an eye out for free money
Apply for scholarships. This requires digging and persistence. See what's available. Don't be bashful. If you have a shot, apply. If it's a long shot, how can you go wrong for the price of a stamp?
9. Get a part-time job Check out college work-study programs. A few jobs may be related to your studies. Otherwise, look for a job with tips such as waiting tables, parking cars or delivering pizza. If you hustle, tips will exceed the hourly wage. Summer work is a necessity for many students, but don't overlook internships -- they're a good way to get a taste of what you may make a career and establish contacts in the field.
10. Walk or take public transportation
Leave the car at home. The insurance, maintenance and gas will eat you alive. Most university towns are compact and everything you need will be within walking distance of campus. If some of your friends have a car, great -- let them cover the expense.
11. Avoid unnecessary expenses
Avoid unnecessary expenses at all costs. Parking fines are a tax on stupidity or laziness. Read the signs and follow the rules. This goes for little things like returning library books or videos. Pay your bills on time or you'll get stuck with a late fee.
12. Look for student discounts
Clip coupons. Many businesses give students discounts in an effort to establish a relationship that will continue when they enter the real world and start earning a paycheck. Take advantage of the perks. Be on the lookout for deals on plane tickets, pizza, books, clothes -- everything. The student newspaper is a good place to start. The Internet can be a gold mine of discounts.
13. Don't eat out all the time Pack a lunch. This will save you big bucks. Don't eat regularly at fast-food restaurants because it will reduce your bank account while bloating your belly. At the supermarket, buy the house brand and increase your savings. Never shop on an empty stomach.

Financial Tips for New Grads

After countless hours studying, late nights, final exams and some parties, now it’s time to head out into the “real world”… or at least that’s what everyone has been calling it as long as you can remember.
When moving on to the adult phase of your life, be sure to take care of your financial situation. Your actions now will have significant impact on how the rest of your life shapes up financially.
Many older adults look back and say the number one thing they wish they would have done differently was learned about money management while they were young. Here’s your chance to jump start your finances!

Financial Tips for New Grads

  1. Get health care coverage immediately. If it hasn’t already, your parent’s health care coverage will probably end with your graduation. Get a quote for an individual health insurance plan or sign up with your new employer’s plan. Going without coverage could have a devastating effect on your finances if you have a severe illness or accident. Make this the first thing you do… and don’t put it off!
  2. Get your own home and auto insurance. Now that you aren’t a student, you’ll need to get your own auto and renters insurance policies. Start by calling your current insurer, you might be eligible for a discount based on the length of time you’ve been with the company, but don’t forget to shop around to save on insurance premiums.
  3. Save money for your future self. Join the retirement plan at work. If you are young and your company offers it, you may want to explore the Roth 401k at work. In addition to your plan at work, begin saving money on your own for both retirement and other goals. Now may be the perfect opportunity to save a lot and use the reverse savings strategy before you have lots of financial obligations (kids, house, etc.)
  4. Start an emergency fund. Earmark some of your first dollars from your new job to build up a savings account to serve as an emergency fund. You never know when an emergency will hit, but it is inevitable.
  5. Learn about taxes. What? I know, this isn’t a fun one. However, hopefully you’re going to go from a poor college student to an highly paid worker. With that luxury comes higher taxes. Educate yourself about taxes, and you’ll be able to take advantage of incentives and deductions to cut your tax bill. Pay particular attention to the student loan interest deduction and the savers credit for retirement savings contributions.
  6. Begin payments on student loans. Begin paying your student loans right away. Your future self will thank you.
  7. Handle credit cards wisely. Use credit cards carefully to earn cash rewards. Always pay your balance in full every month. If you ran up some credit card debt while in school, begin paying it off aggressively. To save interest while paying it off you may want to transfer the balance to a 0% balance transfer credit card or explore other ideas in how to payoff credit card debt.
  8. Create savings goals. Before you commit your paycheck away, create savings goals. As a new grad, you may want to focus on retirement or a downpayment for a house.
  9. Spend money slowly. It can be very tempting with a new job to buy a new car and rent a fancy apartment. Not so fast! Wait a few months to see how your finances work out. My husband found this out the hard way.
  10. Follow your heart. Did you meet the man or woman of your dreams at school? If so, and you are planning a wedding in the future, don’t forget to check out frugal tips for the ring and the wedding.

The New Freshman 15: Financial Tips for College Students

Forget the "freshman 15," the dreaded additional pounds freshmen frequently pack on when they settle into life on their own. More important are the 15 smart financial moves you need to know to get through freshman year and beyond without racking up unnecessary debt.

"Waiting until after college to take control of your finances could cost you," says Nick Certo, senior vice president in University Banking at PNC Bank.
"And like any good fitness regimen, getting started is half the battle."

Here's how to pass finance 101.

1. Be careful with credit

Free T-shirts are the late-night burritos of finances, Certo says. "They look good now, but you'll pay later. Think twice before signing up just to score some cool swag," he says.

It's not worth it to saddle yourself with a high-interest, annual-fee credit card that you don't need. Buy a T-shirt instead, and your bank account will thank you later, says Jackie Warrick, the chief savings officer at

Remember that a credit card doesn't equal free money. If you can handle a credit card, start with a $1,000-limit card that offers points or other rewards and pay your balance monthly. "Don't look at your credit limit as a goal for spending," says Steve Weisman, a senior lecturer at Bentley University. "Carrying too high a balance on your card can hurt your credit and cost you more." Late fees can add up quickly.

Research which card makes the most sense given your spending habits and paying ability. Look at the annual percentage rate, annual fee, grace period and penalty fees, says Todd Mark, vice president of education for Consumer Credit Counseling Service of Greater Dallas.

Also, keep track of your credit score and your credit report.

2. Stick to a budget

Make a budget. You don't have to go crazy with the details. Just outline how much money you receive monthly and what you need to spend. "Include an allowance for walking around money, and don't just go to the ATM for more than you budgeted, or you will frequently run out of money before you run out of month," says Burton Speer, a certified public accountant with Mengel, Metzger, Barr & Co.

Then, track your spending to make sure you're sticking to your budget. "Unlike the federal government, you can't just print more money," Speer says. "Spending less is often easier than earning more."

Check out your bank's website budgeting tools, as well as software programs like Quicken, to help keep your budget on track.

And take extra care of your wallet when you're out partying. It's easy to get caught up in the moment and dish out more than you want to spend when you're having fun. "When going out with friends, decide ahead of time how much you can afford to spend, leave the rest behind," says Tahira Hira, professor of personal finance and consumer economics at Iowa State University.

3. Save early and often

In your 20s, you have a small window of opportunity to wield the power of compounded interest. Consider this: If you save $3,000 a year when you're between 20 and 30 years old, put the money into an IRA with a 7% average annualized rate of return and never save again, you'll have $442,000 by the time you're 65, calculates Nicole Rutledge, a certified financial planner with Resource Consulting Group.

However, if you wait to begin saving until you're 30 years old and put in $3,000 each year until you're 65, you'll end up with only $283,000 at the same rate of return. That's 35% less than if you had just saved the money in your 20s, even though you'd have put in more than three times the amount of money.

So save regularly now. Skip a pizza or a couple of pitchers of beer a week and save for emergencies and retirement. Just save.

4. Take advantage of student perks

Don't spend extra money on food if you have a cafeteria. Research college meal plans, which can be much cheaper than outside meals. "It might not be offering the meal you want, but that's another charge you won't have to make," Mark says.

And when you do go out, take advantage of any student discounts at businesses or venues you frequent.

5. Pay less for textbooks

The average student can pay $1,000 a year for books, an often unexpected high cost for college freshmen, says Michael Geller, vice president of marketing for

Don't buy new books at the campus bookstore. Campus prices are almost always higher than at online retailers like or, says certified financial planner Derrick Kinney. Consider renting textbooks at your school's bookstore or from sites like Renting books or buying them used can save you 50%.

If you're using an online site, sign up for a rebate program, such as, which gives money back on each purchase. And remember to sell used books back at the end of the semester.

6. Borrow as little as possible

The average college student leaves school with about $23,000 in debt. "Borrow just enough to pay for your legitimate college costs," Hira says. "Explore all options. A student loan should be your last resort."

If you do borrow money, make sure you fully understand the cost and other terms of the loan before signing on the dotted line. The cheapest loans come from the federal government, says Ruth Vedvik, principal at Hardwick-Day, an enrollment consulting firm. And because federal interest rates are set, you know how much debt you're taking on, she says.

Remember to start looking into funding early and to submit applications before the deadlines. Search online for scholarships, grants and other financial aid based on gender, religion, race, ethnicity, the type of degree you want or other relevant criteria, suggests Ornella Grosz, author of Moneylicious: A Financial Clue for Generation Y.

Also consider working part time, which can decrease the amount you have to borrow.

7. Get organized

Little things can chip away at your budget. Avoid parking fines or late fees for library books or videos and CDs rentals, for example, says Cheryl Smith, financial adviser with JHS Capital Advisors.

Also, nail down your schedule early. "Many students wander into each semester and don't meet with their adviser and figure out which classes to take," says Rachel Cruze, host of the Graduate Survival Guide. "This can be costly when it comes time to register. If a class fills up before you can get in, you may have to take it during summer school or even stay an extra semester."

8. Avoid unnecessary fees

Avoid paying extra ATM fees by researching your bank's ATM availability on campus. These small fees can add up. After all, if both your bank and the bank hosting the ATM charges a $1 fee for each $10 withdrawal, that amounts to a cost of 20%, says Kathryn Mullaney, vice president for finance at St. Lawrence University.

If your bank doesn't have a branch in your college town, it might be smart to open an account at a different bank so you can get cash without paying those fees.

Overdraft fees range from $35 to $50, so consider getting overdraft protection to avoid those charges, even if it means asking a parent to sign up for the account with you, Mullaney says.

9. Use technology wisely

Set up text and email alerts for your bank accounts and credit cards to help you keep tabs on your spending and avoid missing payment dates. "It's an easy way to stay in-the-know about your own finances," says Justine Rivero, credit adviser at "Plus you can make sure you don't ruin your credit by missing a payment or maxing out your credit card."

10. Protect yourself from fraud

Research conducted by Javelin Strategy & Research found that it takes 18- to 24-year-olds nearly twice as long to detect fraud compared to other age groups, making them fraud victims for longer periods of time. Young adults are also more likely to fall victim to fraud and identity theft by people they know. Living in a dorm, where other students or strangers might easily access a student's room, also ups the need for vigilance.

Take advantage of services that allow you to monitor your accounts regularly, such as by reviewing statements online or using mobile banking to see a snapshot of your account information, suggests Secil Watson, senior vice president at Wells Fargo Internet Services Group. Students can also forward sensitive mail, like financial information, to their parents' homes.

11. "Insure" success

Parents can help you save money through insurance. June Walbert, a certified financial planner with USAA, advises parents to re-evaluate their insurance when a child heads to college. "The increased liability of a child away at school potentially opens the door to a number of financially catastrophic events," she says. "Re-examining your family's insurance needs in the wake of a college-bound child can not only safeguard your finances, but even lead you to insurance savings."

Homeowner's policies provide limited coverage of children's personal property, and usually come with a large deductible. Opting for a renter's insurance policy provides better coverage with lower deductibles, Walbert says.

If your child is taking a car with them, update the usage. If school is 100 miles away or further, some insurers will offer a discount. Insurers also usually provide discounts for students with B averages or better.

12. Capitalize on coupons

It's no longer geeky to clip coupons. "Don't think your friends will mock you and call you a coupon-clipping grandma if you use coupons or deals," Warrick says. "They'll probably be jealous of the additional money you'll have to spend for next week's party."

Daily deal sites like Groupon offer deals on dining out and other services that can help you maintain your budget. And if you have unused gift cards you don't want, you can trade them for cash on sites like and

13. Master relationships

Personal relationships that you make now can turn into business relationships in the future, says Dan Greenshields, president of ING (ING) Direct Investing. Make friends and also find a mentor in your desired field to get career advice. Being social now could boost your prospects in the future.

14. Invest in your future self

Seek out internships and volunteer. Learn skills that will help you land a job later. Employers are increasingly expecting more from candidates. Investing in yourself as a freshman will pay you back for years to come, Greenshields says.

15. Set limits

If you're going to spend more than $50 on something, figure out if you really need it. The $50 dollar limit, Cruze says, is a good point to stop and ask yourself if you can do without it. "Is the restaurant too expensive?" she says. "Do you really need that video game now, or will it drop down 30% in three months? Ask yourself what you can do without."

10 Financial Tips For Young People

If I could go back in time, I would do certain things differently. I'm not saying I have a lot of regrets. But when I was younger, I tended to have myopic vision. For instance, it was hard to imagine that one day I would be older. Even today, sometimes I look in the mirror and wonder, who the hell is that?
I wish that, when I was younger, someone had sat me down and told me a few things. Or else I wish that I'd listened when someone attempted to do this.
If you're young, take a seat and listen up. These gems will help you on your quest for financial success.
1. Go to college. You may want to do something that doesn't require a college degree. For instance, you may dream of playing professional golf or running a barn and training horses. But give serious consideration to enrolling in college anyway. Yes, it's a major investment, but if your parents are unable to help you pay for it, make it happen yourself, even if it means taking out loans. One way to save on costs: Go to a community college first; then transfer to a four-year university after two years.
It's easier to get a degree when you're young than when you have a home, family and all the adult responsibilities that go with these things. Your earnings potential increases significantly with a college degree -- which will come in handy if your other dreams don't materialize. Plus, you will likely experience a love of learning that you will never outgrow.
2. Find your purpose. If you're having trouble figuring out what you want to do with your life, look within. You were born with certain talents and natural abilities. You know which subjects you excel in and which ones you struggle with. Choose a career that enables you to maximize your gifts in a way that fulfills you or helps others. As you grow, your career may change along with your desires. But for now, gravitate toward a field that feels like home.
3. Begin retirement planning with your first job. This tip is so important. If the company you work for offers a 401(k) plan, sign up at your first opportunity. If there's no such plan, divert some of your paycheck into an IRA. Believe it or not, if you're lucky, one day you'll find you are older, so it's best to be prepared. Setting up automatic contributions to either one of these retirement vehicles at a young age will help you build wealth painlessly.
Just as an example, let's say you invest $200 a month beginning at age 25, and you earn 7 percent annually on that money. By the time you turn 65, you will have about $525,000 saved up. If you wait until you're 35 to begin saving, assuming the same monthly investment and rate of return, you'll have amassed less than half that amount -- about $244,000. This illustration simply shows the impact that a 10-year head start can make on your savings, thanks to the magic of compounding. Do the math yourself with Bankrate's retirement calculator.
Naturally, the more you earn, the more you can stash away. A better way to invest: Rather than target a specific monthly dollar amount, sock away 7 percent of your earnings in the beginning, and increase it each year a little bit until you're diverting 15 percent a year.
4. Place a value on money. It doesn't buy happiness, but it can certainly make you comfortable. Just understand what it's worth. Money is what you earn in exchange for your time in some productive pursuit. Let's say you earn $20 an hour at your job, and you're considering purchasing a TV for $500. You may calculate that you spend 25 hours, or about three days, earning that money. It's worth it, you may think. But that's not an accurate value estimate. If you're single, you're in the 25-percent tax bracket, so you actually spend about 33 hours earning the net income required to make the purchase. It still may be worth it, but there may be competing demands for that money, such as rent and car payments, not to mention your retirement fund. Each purchase represents a trade-off. Make these decisions wisely.
5. Use the credit card sparingly. This tip is also really vital. Bankrate receives tons of letters from strapped consumers who regretfully overused their credit cards and now find themselves in really dire financial situations, some contemplating bankruptcy. It's easy to spend now with plastic and much harder to pay later. Use credit responsibly. Comparison shop for your card. Remember that you'll be relying on your future earnings to pay for today's credit card purchases. And if you keep a running balance, you'll also be paying interest, sometimes at usurious rates. Don't fall into this trap. Instead: Save money to meet financial goals.
6. Follow the golden rule. Contrary to popular belief, the duplicity and craftiness of Machiavellian tactics won't really help you survive, but instead will engender mistrust in your relationships. Treat others fairly, the way you wish to be treated. No one looks good when trying to make others look bad. When you're on the job, avoid gossip. Beware that when someone takes you into his or her confidence to point out someone else's foibles, it's only a matter of time before your foibles come to light. Always be honest in your dealings with others. Seek out the company of people who are positive and supportive of your efforts.
7. Select your partner wisely.Choose someone whose values match your own -- not just where money is concerned, but more importantly, ethical and moral values. Get to know your soul mate over the course of at least a year. Passion is important, but trust more so. Make sure you are free to be yourself. If you hook up with an angry or overly critical partner, you will be subjected to hostility and may lose your sense of self. Conversely, if you're the one with anger issues, resolve them before they poison a perfectly good relationship.
8. Be prepared for the unexpected.Someday you may lose a job through no fault of your own. Prepare today by stashing money into an accessible emergency fund. The easiest way to do this is to automatically divert a portion of your earnings into a savings account in addition to the amount you're contributing to a 401(k) plan or IRA.
Try not to use that 401(k) money for emergencies. It will cost you plenty, between income and penalty taxes. For instance, if you have $10,000 in your account and you're in the 25-percent tax bracket, you'll lose $2,500 to taxes, plus pay another $1,000 penalty for breaking into the money before you reach age 55. (For IRAs, the early withdrawal penalty applies up to age 59½, with certain exceptions.) Bottom line: Your $10,000 dwindles to $6,500. Worse, you will have lost the opportunity for that money to compound and build wealth for your retirement.
But don't leave that money behind with the former employer either, lest you lose track of it. Instead, in a trustee-to-trustee transfer, roll it over into your new employer's plan or into a rollover IRA.
9. Learn about investing or hire help. It's not rocket science; in the beginning you just need to overcome fear and select one or two good, cheap mutual funds. Ask the human resources department for help with that. After you've amassed some wealth, it may be time to hire someone. If you do, you will obviously have to pay for the service. Get referrals and then check out the qualifications and credentials of a prospective financial adviser or broker.
Make sure you understand the fee structure of the services. Is it commission-based or do you pay an hourly fee or a percentage of assets or some combination of these fees? Ask for a complete breakdown. Also, check with the appropriate authority to see if any disciplinary actions have been taken against a certified financial planner or broker before you initiate contact. The Financial Planning Association's Web site is a good starting point to search for a qualified planner.
10. Be thankful for your good fortune. It's not all about money. If you work at it, you will have abundance -- through strong family ties and solid relationships as well as monetary assets. Take some time out each day to reflect on the good in your life. Spend at least one day a week in a recreational activity or hobby that you enjoy, and take a minimum one-week vacation annually if you possibly can. My aunt Genie advises that you travel throughout your life, rather than waiting for retirement to do it. Again, save for the trip.
If you have children, spend as much time as you can with them when they're still young and dependent on you. Before you know it, they'll be old enough to get a driver's license, and you'll see less and less of them from that point on.
Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.
If you have a comment or suggestion about this column, write to Boomer Bucks.

Suze Orman's 10 Tips for a Fresh Financial Start

1. No Blame, No Shame

The foundation of a financial fresh start actually has nothing to do with money or specific financial dos and don'ts. The first, and most difficult, step is to absolve yourself and your spouse or partner of any guilt. So you need to make a promise to me. I need you to agree that the past is past, and we are going to focus on the future. Whatever mistakes you feel you have made with money, whatever moves you wish you had or hadn't made, are irrelevant. We are free to move forward only when we remove the emotional shackles of regret. This cleansing step is especially important for couples. You are in this together, so no finger-pointing or arguing about any past decisions. Do we have a deal? Deep breath, everyone. Exhale. Now you are ready to put your financial house in order.
2. Take a Snapshot of Your Finances

It's impossible to map out a route to your destination if you don't know where you're starting from. So let's take a "before" picture of your finances. You've heard me say this a million times, but I want you to open every single financial statement—bank, credit card, mortgage, 401(k), brokerage account—and take a look. Only when you have everything in front of you can you set priorities about what to do next. If you're vexed by your checking account (you swear you should have more money; you can never figure out why your checks bounce), start fresh by opening a new one. Leave enough in your existing account to cover any checks that haven't yet been processed, then transfer the rest to the new account and close the old one. Next, sign up for online banking. It should be free, and as long as you use your home computer, it's also safe. The advantage of online banking is that you can pay bills superfast, and your account is automatically credited or debited for each deposit and payment, making it easier to stay on track.

3. Adopt a Foolproof Credit Card Strategy

Make this the year you tackle that credit card debt once and for all. Doing so will make you and your family stronger and happier—forever. What happens to the stock market and the housing market is completely beyond your control. Credit card debt, however, is completely within your control. Every time you pay off a card with a 15 percent interest rate, you get a 15 percent return on your money.

See if you can qualify for a balance transfer card that offers a low or 0 percent introductory interest rate for the first six to 12 months. If you can get a good deal, move your high-rate debt to that new card. Do not use the card for any new charges, and push yourself hard to pay off the balance as soon as possible. If you don't qualify, no worries. Always pay the minimum due on each card, on time, every month. Whenever possible, send in some extra money on the card that charges the highest interest rate. Your goal is to get the costliest balance paid off first. When the first card is cleared, direct your payments to the card with the next highest interest rate. Keep doing this until you've zeroed out the balances on all your cards.
  4. Try Harder to Save

When I suggest that people send in more money to pay off credit card balances or increase the amount they save each month for retirement, I hear the same sad story: "Oh, Suze, I would if I could, but I can't because there's no extra money left at the end of the month." I beg to differ. There's no money left because you haven't evaluated your spending habits. You need to dig deep and be willing to change those habits; to set goals and use those goals as the motivation for lifestyle changes that will allow you to save and invest. Take a clear-eyed look at your credit card statements for the past six months. Can you really tell me that there isn't at least $50 or $100 showing up that you could easily do without? I didn't think so. I call this "hidden money," and here's how you can find it.

I challenge you to reduce every one of your monthly utility bills by 10 percent. Change your calling plan or get rid of the landline account unless you absolutely need it. Dial back the platinum cable package to silver. I bet you can seriously trim your utilities by spending one afternoon increasing your home's energy efficiency: Attach a draft-blocking guard to the bottom of any external doors; add caulk or weatherproofing material around drafty windows; put low-flow aerators on your showerheads and faucets; and replace burned-out bulbs with compact fluorescent energy savers (they're pricier than conventional bulbs but last much longer, saving you money over the long term).

Cars are another great place to save. Plan on driving yours for at least seven to ten years (regular tune-ups will help keep it running longer). Consider buying a used or certified pre-owned car rather than a brand new one. If you get a three-year loan, you have plenty of life left in your car, and money that once went to car payments is freed up for other financial needs. And please, avoid leasing. Since you don't own the car, you never have a time when you are driving your car free and clear. Also, raising your deductible or designating one car to be used for low-mileage driving (under 15,000 miles a year) can reduce your insurance premiums by 15 percent or more.

5. Separate Savings from Investments

Now we're ready to move on to how you put your money to work for you and your family. There is a vitally important difference between money you need to save and money you need to invest, yet it's a distinction many people don't grasp. Money you know you need or want to spend in the next few years is savings. Money you keep handy for an emergency belongs in savings. Money you hope to use soon for a down payment on a house belongs in savings. And all savings belong in a low-risk bank savings account or money market account. The goal is to keep your money safe so that when you go to use it, it will be there.

Money you won't need to use for at least seven years is money for investing. The goal here is to have your account grow over time to help you finance a distant goal, such as building a retirement fund. Since your goal is in the future, money for investing belongs in stocks. As I'll explain later, the potential inflation-beating returns that only stocks can deliver make them the right choice for a successful long-term investment strategy.
6. Know Your Credit Score

The big takeaway from the meltdown of 2008 is that banks are going to be a lot less eager to lend money to you. You will need a sparkling financial personality: a FICO score above 700, solid verifiable income, a manageable amount of existing debt—to get good offers for credit cards, auto loans, mortgages, and refinancings. And you can expect lenders to continue to tighten the screws on your existing credit lines; all the credit they loved to give you before 2008 now makes them nervous. Get your credit score by going to If your score is below 700, two of the best ways to improve it are to pay your bills on time and push yourself to reduce your credit card balances.

7. Evaluate Your Retirement Plan

If your 401(k) and Roth IRA lost value in 2008, that's a good sign. It means you were invested in stocks, and that's exactly where you should be invested—assuming your retirement is at least a decade away. Only stocks offer the chance of high returns that outpace the annual 3 to 4 percent inflation rate. In your 20s and 30s, aim to keep 80 percent in stocks and just 20 percent in bonds; you have time to ride out stock swings. As you age, slowly ramp up the percentage in bonds; in your 50s and 60s, consider keeping 40 percent or more in bonds to help buoy your portfolio when stocks are slumping. The biggest mistake you can make is to stop investing in your retirement accounts or to shift money from stocks into "safe" money market accounts.

Instead of worrying that your account is down, remember that your money buys more shares of your retirement funds. The more shares you own now, the more you will make when the market recovers. Buy and hold is the way to go.

Here's some perspective: The 2008 market slide is the tenth bear market (commonly accepted as a decline of at least 20 percent) since 1950. If you'd put your money in stocks in 1950 and stayed invested through the ups and downs, your average annual return through 2007 would have been more than 10 percent. That's not to say you can count on an average of 10 percent over the next 50 or so years (7 to 8 percent is probably more realistic), but it illustrates how keeping focused on the long term pays off.
8. Diversify Your Assests

Try to reduce any company stock you own in your 401(k) to less than 10 percent of your total retirement assets. Just ask employees of Enron, Bear Stearns, Merrill Lynch, and Washington Mutual how smart it was to make big bets on their own stock. Mutual funds and exchange-traded funds (ETFs) are ideal for retirement savings because they own dozens of stocks in their portfolios.

If you're flummoxed by all the investing options in your 401(k), look for a "target retirement" or "life cycle" fund. Then pick the specific portfolio that dovetails with your expected retirement age and you're all set; you will be invested in a mix of stock and bond funds appropriate for your age. You can also invest your Roth IRA in these types of funds; Fidelity, T. Rowe Price, and Vanguard all offer these one-and-done options.

9. Don't Obsess Over Your Home's Value

If you own a house and can afford the mortgage, consider yourself lucky. Try to love your home for what it is: a haven for you and your family, not a path to riches. Unless you bought at the height of the market in a super-popular region that has gone Ice Age–cold, you're going to be fine. And even if you did buy at the peak, if you plan on staying put for five to 10 years, the real estate market will recover with time. But let's be clear: A home is not an investment that will fund your retirement or vacations. The 10 or 20 percent annual gains during the housing boom were temporary insanity. Buy a house you can really afford, and over time it will rise in value. But its main value is as a home. Period.

If you got caught buying into the housing bubble and are now in mortgage trouble, talk to the lender about your options. Don't raid your retirement accounts to keep up with the payments. What happens when the retirement accounts run dry? You still won't be able to cover the mortgage, and you will have lost all your future security.

10. Protect Your Family—and Your Nest Egg

If there is anyone dependent on your income—parents, children, relatives—you need life insurance. For the vast majority of us, term life insurance is all we need, because it protects you for the "term" of the policy (from five to 30 years) and is incredibly inexpensive. As always, it's important to buy a policy from a firm with a strong financial rating, but even if an insurance company runs into trouble, your state insurance department has funds set aside to help protect you. I also want you to get your estate papers in order. You should have a living revocable trust (this document spells out how your assets should be distributed) with an incapacity clause, as well as a will. Also, have an "advance medical directive" in place that tells your doctors the type of care you want if you become unable to speak for yourself.

Finally, every family should have an emergency savings account that can cover at least eight months of living expenses. And I also want every woman to have her own personal savings account that could support her for at least three months, because you never know. The best place for your savings is an FDIC-insured bank (or a credit union backed by the National Credit Union Share Insurance Fund). If you keep less than $100,000 at an FDIC bank, no matter what happens to the bank, the Federal Deposit Insurance Corporation (part of the U.S. government) will make sure you get every penny back. Online banks that are FDIC insured are just as safe as the bank downtown. (Please note: The emergency federal legislation passed last October increased the FDIC insurance limit to $250,000 through December 2009. But to be extra safe, keep no more than $100,000 in any single bank.)

Feel better? Follow these steps and no matter what the future brings, you will be in control of your financial destiny. And there's nothing more valuable.

8 Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math.

To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.

  1. Learn Self Control
If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Debt Management feature.)
If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of.

  • Take Control of Your Own Financial FutureIf you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

    Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)

  • Know Where Your Money GoesOnce you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don't waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Budgeting 101 special feature.)

  • Start an Emergency Fund
    One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.

    Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, vacation money and even money for a home down payment.

    Don't just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

  • Start Saving for Retirement Now
    Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".

    Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)

  • Get a Grip on Taxes It's important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with, which is also known as net, or take-home pay.

    For example, $35,000 a year in California will leave you with about $27,600 after taxes in 2008, or about $2,300 a month. By the same token, if you're considering leaving one job for another in search of a salary increase, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won't give you an extra $6,000, or $500 per month - it will only give you an extra $4,200, or $350 per month (again, the amount will vary depending on your state of residence). Also, you'll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there. (To learn all about your taxes, visit our Income Tax Guide.)

  • Guard Your Health
    If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills.

  • Guard Your WealthIf you want to make sure that all of your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset - the ability to earn an income - by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

    If you want help managing your money, find a fee-only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You'll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds. (Find out all you need to know about insurance in Understand Your Insurance Contract, Five Insurance Policies Everyone Should Have and Insurance 101 For Renters.)

  • A Financial Basis for LifeRemember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.

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