Where Does Your Money Go?

If you feel as if you’re spending too much on your credit cards, it might be time to learn how you can better control spending and save money at the same time.

Credit cards are great and they can be one of the best ways to build and maintain your credit while allowing you to have the extra spending power that so many people crave. The problem often isn’t the credit card itself becasue many cards offer fantastic low rates that most people can handle. What really causes problems is the overspending that can occur with a credit card.

Try these pointers to help you control your credit card spending.

1.Set a budget you can live with: This might seem a little crazy because when most people think of budgets, they think of the unpleasant business of working to pay for the essentials. You can set your budget however you would like, but if you’re carrying some debt on your credit cards then you’ll want to allocate enough money for your credit card payments – usually the minimum payment plus some – and then focus on working with cash for a while.

2. Give yourself a little spending money: There is no reason why you can’t let yourself spend a little money. Work with cash for a while so it’s easier to control your spending and you can focus on paying down your debts.

3. Think, think, think: Before you make that purchase you should think about it. If you’re feeling impulsive and really want to buy yourself something it’s important to take some time to “mull it over”. One of the biggest offenders when it comes to overspending on your credit cards is impulsive spending, so take some time to decide if you really want that big purchase and then pay cash for it if you can.

4. Switch to cash for most things: Switch to paying cash for most of your purchases. In other words, if you can cut your credit card expenses to one night to dinner and the movies a month and few tanks of gas, while making sure to pay cash for your groceries, lunches and every day needs, you will find that you cut your credit card spending dramatically.

5. Take someone shopping with you: If you have your budget friendly spouse or friend shopping with you, they can act as a voice of reason to help you curb your desire to spend irrationally. When you’re hearing those little words asking you if you really need that $200 of perfume right now it can change the way you look at your spending habits.

6. Make a list before you shop: One of the best ways to control your credit card spending is to make a list. For instance, school clothes shopping might be something you would put on your credit card, but when you know in advance what your kids need and even plan for just one extra something they must have, you’ll find you’re able to put a cap on the expenses easily.

7. Stop carrying a balance: The bottom line is that if you’re carrying a balance on your credit cards, you’re overspending. Instead, know how much you will be able to pay for your credit card bill each month and plan to pay it off at that time. If you can’t do that then you’re spending too much.

8. Take a look at why you spend: Yes, it’s likely an emotional thing. Spending can make us feel good and justified and more beautiful or attractive and happier, but it’s possible that you’re overcompensating for something. When you can recognize the feelings that encourage you to spend, you can stop the spending before it starts.

9. Get an idea of your big financial picture: When you have a good idea of where you stand in the whole world of finances and you can see where you want to be, it could be enough to prompt you to stop credit card overspending.

10. Leave it at home: Here’s a crazy concept: leave your credit cards behind at home before you shop. It’s that simple; if you don’t have your cards, you can’t overspend.

These are just 10 ways that you can help to begin controlling your credit card spending so you can start loving your plastic again and stop wishing you didn’t have to deal with credit cards anymore.

Mark Brown is a personal finance writer who works for CreditCardCompare, a leading Australian credit card reviews website where consumers can find the best deals to reduce their interest repayments and help them get out of debt faster. For more of his writing, follow @thecreditletter on Twitter.

There are those who feel that the market has risen too far too fast. Some are predicting a double dip decline. For every view that the market is rising there is an equal number who feel the opposite will be reality. Let’s see if we can shed some light on the subject.

Most agree that markets move in cycles. The inexperienced investor always waits for the market to rise to new levels before investing. A sense of euphoria sets in at market highs. Caution is thrown to the wind. At that point the market has given all it’s going to give on the upside and is poised to turn downward. As the market declines the ride down is filled with the emotion of anxiety, fear and panic. The inexperienced investor sells – exactly when they should be buying.

So how do you feel about investing right now? If you say you’re not comfortable, you’re not alone. The vast majority of Canadians are still sitting on the fence waiting for the “right time” to invest. Bank account balances and short-term investments are at record levels. Yet by the end of 2009 the TSX index went up more than 50% from the lows recorded only a few months earlier. But it hasn’t reached new highs yet. So according to our market cycle analogy people continue to wait.

Clearly we are not at the excitement, thrill and euphoric stage of the market cycle. However we may have seen the bottom and are now on a new upward trajectory. The ride won’t be smooth. It never is. By keeping your emotions in check you should be more comfortable investing at this stage than any other.

The US estimates for GDP are 2.2% for the third quarter and 5.7% for the fourth quarter of 2009. Although not a perfect indicator of financial health, it is a definite improvement from the previous four quarters while the global economy was in recession.

So what should your investment strategy be right now? It really doesn’t matter whether we are talking about right now or last year or next year. The investment principle is the same at any time. First decide how much money you may need in the short-term and keep this money absolutely safe. Then decide if you want to keep any money aside for mid-term contingencies. This money may or may not have market exposure depending on whether you are flexible with your timing to draw the money out. As your time horizon narrows this money should be moved into the safe account. The remaining money is your long-term savings. That’s the money that should be working and invested for your future.

One thing to keep in mind is that the easy money may have been made last year. Most equities showed a high correlation during the decline of 2008 and the following recovery of 2009. It is not normal for the majority of equities to move in the same direction at the same time. If you’re investing in mutual funds you want to be selective about the fund manager you choose. You want a manager who is picky about the equities in the portfolio. You want a manager who has a flair for finding undervalued equities with good profitability prospects and then commit to your investment strategy for the long-term.

This is a monthly article on financial planning contributed by Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments. The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments Inc. can be reached at 613-798-2421 or e-mail rick@invested-interest.ca.

Debt reduction is one of the most important goals to map out within your budget, but it is often the easiest one to neglect or put on the backburner.

Let’s say you’ve finally gotten serious about creating a budget for your household and are committed to sticking to it. You’ve tallied up your income and expenses and set aside a chunk of your disposable income into savings. You’re living at or below your means, so why does it seem like your financial situation is not improving? Why are you still unable to reach your financial goals?

Many times the reason is that you haven’t taken a close enough look at your credit card debt. Sure, your credit card payments may be marked as monthly expenses in your budget, but are you budgeting at or near the minimum payment? If this is the case, you may have just discovered a fatal flaw in your current budget.

Finance guru Dave Ramsey gives the following advice to those in this situation using what he calls the Debt Snowball Plan. The plan starts with budgeting to sock $1,000 away in savings for emergencies, so you don’t end up in even greater debt in the case that you lose your job, your vehicle breaks down, or you have a health crisis. Accomplishing this, your second goal is to shift your focus off of savings and on to debt reduction. You begin by budgeting as much of your disposable income as possible into paying down the credit card with the lowest balance, paying minimum payments to all your other creditors. Once you pay off the lowest balance, move on to the second lowest balance, overpaying your monthly payment with the excess leftover in your budget from the first paid-off card. This is where the “snowballing” starts taking place. If you encounter two credit cards with similar balances, attack the one with the highest interest rate. However, first you will need to calculate how much debt you owe to each credit card company. Credit card companies often profit from the fact that those they lend money to never quite nail down how much they owe. If you don’t know how much you owe, it is difficult to set budgeting goals for debt reduction. There are a variety of free debt calculators to help you toward this end. Click here to access one of such calculators.

Debt reduction is still an important budgetary consideration even if you have zero credit card debt. Can you budget extra money to overpay on your vehicle or home mortgage? You could save yourself hundreds or even thousands of dollars in interest by accelerating re-payment of these debts.

It’s time to ask yourself this question. When you set up a budget for your family, how much do you allocate for debt reduction? Significantly increasing that allocation could be your quickest ticket to financial freedom.

This guest post is contributed by Raine Parker, who writes for the online accounting degree blog. She welcomes your comments at her email Id: raine.parker6@gmail.com .

In the aftermath of the Global Financial Crisis many people are wondering how they are going to be able to retire on their now depleted portfolios. Some are now planning to work longer, while others are looking for ways to avoid the same situation. Therefore, following are 10 pieces of advice and retirement savings strategies to help you feel more secure in planning for your golden years, and ways to ensure they truly are solid gold and not just gold-plated.

Why You Need to Think About Your Retirement Now

Financial experts agree that you will need around 75 per cent of your current income to maintain your standard of living after you retire. This is a general figure and of course depends on whether your mortgage is paid off, if you have other debts, and how you plan to spend your retirement. The 10 tips below address these issues.

It is also important to know that 50 per cent of working Americans who are actively saving for their retirement have less than $25,000 saved, and 70 per cent who are not saving for retirement have less than $10,000 in a savings account. This is why you need to start thinking about your retirement savings plan now, because it is a good chance to get your finances in order and start working towards some truly meaningful savings goals.

1. Curb your spending and plan your budget

Making a clear budget will help you with the rest of these tips and will help you clarify the standard of living you have now, what you can go without and what you’d really like to be able to afford. You’ll also be able to see how much money you are directing to your bad debts such as credit cards, and whether there is any extra spending room to pay down your mortgage faster.

When starting any savings plan it is important to first remove any bad debt like credit cards or personal loans. Any interest you earn in a savings account will be cancelled out by the interest you are paying on your debt, so budget to pay more than the minimum monthly repayment to wipe out that debt as soon as possible.

Once you have your debt under control, get your spending under control too. This means analyzing all of the luxuries in your budget and deciding which are necessary and which can be cut back on or removed all together. You don’t have to cut back on all your indulgences and you don’t have to cut back forever either – you can create a savings plan for six months or a year where you channel as much spare cash as you can into a high interest savings account to give it a boost, before sticking to a more flexible savings plan for the long term.

2. Know how much you need for your retirement

This is where your budget will help you again because you will be able to calculate which expenses will be constant when you retire and which will go up or down. Your fuel expenses may go down when you retire, for example, because you’re not driving to work every day, and so too may your food bills because you’ll be able to make more meals at home and avoid fast food and take away. Your mortgage repayments may be reduced, but hopefully paid off entirely when you retire so this part of the budget will be less too.

At the same time your entertainment portion of the budget will increase, and this is where you will decide how you want to spend your retirement. Is it important to have an overseas trip twice a year, or do you plan to purchase a boat and sail the local seas fishing? Will you move to a smaller house or will you keep your larger house to accommodate a growing extended family?

All of these factors influence how much money you need in your retirement savings account, and are important in helping you plan a way to achieve that retirement savings goal.

3. Know when you plan to retire

While we’d all love to retire tomorrow, that’s not always possible, so set a realistic retirement time frame. Would you like to retire at 60 or work to the traditional 65? Or perhaps you’d like to keep working part time until you’re 75 to keep active and maintain your working relationships.

These decisions will determine when you need your retirement savings to reach that magical number which means you have enough funds, and it also helps you determine how much money you will need. For example if you imagine you’ll live until 100, if you retire at 60 you need your retirement fund to last you 40 years, but if you retire at 75 you only need it to last 25 years. That can make a big difference in funds.

4. Save your windfalls

As for the practical retirement savings advice, from our first tip you know you need a high interest savings account to keep your savings separate from your everyday spending money, and to help you earn interest on your way to your retirement goal. So what else can you put in your retirement savings account?

Save every little windfall which befalls your finances and you will be surprised at how quickly your retirement savings can grow. Put your tax return straight into a savings account, along with any gifts of money for birthdays or Christmas, or inherited money. Plus, whenever you get a pay rise, have the additional money transferred directly to your savings account, and continue to have the same amount of money deposited into your everyday account each week. In saving the difference between your old and new wage, you are saving without even realizing it – it doesn’t get much easier than that.

5. Dedicated retirement savings accounts

Find out about specialized retirement savings accounts available to you. Some retirement savings products will allow your contributions to be taxed at a lower rate when you withdraw them for your retirement, and most retirement savings accounts will have a lower fee structure too.

There are differing retirement savings accounts available depending on your contributions and your age, but it is worth finding out about the incentives and assistance which is available to you. All you have to do is ask your bank, accountant or financial advisor, because someone who knows your financial situation will be able to advise you on the best retirement savings account for your needs.

6. Retirement fund

Depending on your job or career, you may also be eligible for employer contributions to a retirement fund. A retirement fund is an account held by a specialized investment institution that manages your contribution to keep it growing, while you keep working and your employer keeps contributing. Retirement funds are also tax protected, and even if you are able to access the money, it makes sense to leave it in the fund until you retire.

7. Salary sacrifice into a retirement fund

Choosing to negotiate a salary sacrifice with your employer can also help you save for your retirement as you can have a portion of your wage deposited directly into a retirement fund so you are saving for your future. Plus you will be taxed in a lower tax bracket because you have a reduced wage.

8. Make retirement fund contributions for your spouse

If your spouse is earning below a designated amount, in some cases you are able to make contributions to a retirement fund or a retirement savings account in their name. These contributions are also eligible for tax benefits, while accumulating retirement savings for both you and your partner.

9. Consult a financial advisor, now and into the future

Managing your finances can be a full time job, especially if you are looking for a way to aggressively grow your retirement savings or recover from a recent loss of retirement funds. The fees of a financial advisor are generally tax deductible, and having someone advise you on the savings and investment options which are best for your current situation, and which can help you achieve your dream retirement, is well worth the investment. Also be sure to seek a professional who can stay with you and continue to give advice as your life situation changes over the years.

10. Start as soon as possible

You may want to start saving for your retirement right now, but if you have credit card debt or are unprepared for a retirement savings plan then you are not going to effectively achieve those goals. Instead, work your way through these 10 tips before you start saving for your retirement to make sure you don’t waste any time when you do start saving.

At the same time it is important to start saving for your retirement as soon as possible, as there will be less ground to make up and more time to save the amount you’ve been dreaming of.

Fred Schebesta writes for Savings Account Finder, where he helps people to compare savings accounts and term deposits.

As the world moves out of recession, it’s never been more important to assess your finances and sort out any debt problems you may have.

Although the recession will have left a lot of us with debts, it is important to understand that there are ways out. This article aims to highlight ways in which you can reduce your debts by budgeting. 

Budgeting is all about understanding and controlling your finances: your income and your expenditure. But how is it done?

Create a realistic budget

To create a realistic budget, you will need to work out your total income (everything you earn/receive each month) and your total expenditure (everything you spend on your ‘priority’ debts and day-to-day living expenses – so, your mortgage/rent, secured debts, food, petrol, utility bills, etc.).

Then you should subtract your total expenditure from your total income, which will leave you with your ‘disposable income’. This is simply the money you have available for saving, spending on yourself, and servicing your ‘non-priority’ debts (store/credit cards, unsecured loans, etc.).

Keep track of your spending

Now you have your budget, you will be able to see how much money you have available to spend each month. It is important that when you do spend, you keep track of it – it all adds up.

If you fail to keep track of everything you’ve spent, your budget won’t be accurate, and you might find you start running out of money before the end of the month.

By keeping track of your spending you can also see where you are wasting your money, which leads us onto the next point…

Cut back on your non-essential spending

Once you can successfully keep track of where all your money is going, you should be able to identify any areas where you are spending money you could be using to overpay your debts.

By cutting back on this non-essential spending, you can ‘free up’ money to put towards your debts, so you can clear them faster than you would if you just kept making the minimum payments.

Plan what you need to spend for the month

At the start of every month, sit down and plan out what you need to spend for the weeks ahead – for example, food, travel costs, bills, debt repayments – taking into account any unusual expenses (the kind you just don’t run into every month).

Once you have compiled your list, you should add up how much each expense will cost you. Of course, you may not be able to predict how much your travel will cost you, or how much you’ll spend on food, so if necessary you’ll need to estimatecosts like these.

Planning how much you need to spend each month means you will be in much better control of where your money is going. What’s more, you will be able to spot early on if you won’t have enough money to cover your expenses – and see if you can find a way around it.

Unfortunately, budgeting alone won’t be enough for everyone – some people’s problems are so serious that their income simply isn’t enough to cover their expenses.

If that sounds like you, you should contact a professional debt adviser.

The right debt adviser will be able to assess your situation and let you know if a professional debt solution could be right for you. This will vary from country to country – in the UK, for example, people with unmanageable debt may be able to enter into debt management plans or IVAs (Individual Voluntary Arrangement).

This guest post was written by Melanie Taylor, personal finance expert at financial solutions provider Think Money.