Many Americans find themselves in quite the situation financially these days.  Their situation is nothing short of bondage.  They are completely trapped because of years of borrowing money to finance a lifestyle that was unattainable without debt.  They aren’t the only guilty party.  The government has encouraged it and the banking system was more than willing to loan the money.

The problem is that while government can tax, print and borrow, and banks can ask for bailouts, most individuals are stuck in the bondage that they have created for themselves.  People have been living beyond their means for far too long and the bills have finally come due.

Photo by sparr0 via Flickr

The ride while things are good is fun (big homes, nice cars, boats, extravagant vacations, etc.), but the pain of the bondage is worse, and most would not say that it was worth it.  Unfortunately, Americans as a whole have completely bought into this idea that it is better to live now, borrow and spend rather than be responsible and save for tomorrow.

Trapped In Financial Bondage

Individuals all over the country are underwater on their homes since they bought more than they could afford at inflated prices.  Individuals have massive credit card debt from funding a lifestyle that they could not have otherwise afforded.  Individuals also have excessive student loans and other forms of debt.

For many people, there is no way out other than a financial bankruptcy.  Climbing out of the debt hole that some find themselves in is all but impossible.  For others, it is possible, but will be a long and hard process.  Meanwhile, there are folks that struggle to put food on the table and provide their families with the basic day-to-day necessities.  The bondage is real.

The Freedom Of Zero Debt

While the responsible individuals who find themselves debt free may have not partaken in the orgy of spending during the most recent economic boom, they find themselves with something priceless: freedom.  Because they don’t have a massive burden of debt that is crushing them, they are free to save for their future, they are even able to spend more today because they don’t have money going towards interest payments.  These people are free to invest in assets that will pay them money rather than being someone else’s asset and paying someone else interest.

It is this lifestyle and financial picture that millions of people need to get back to.  Unfortunately, there is a conflict of interest with the political class due to the fact that our economy is consumer-driven and a short term recovery is dependent on people spending their money.

Young People

If you’re young and you weren’t able to partake in the previous economic bubble (mostly housing bubble), consider yourself fortunate.  While the job market might be weak and the broad economy not favorable, you got out of a major bust unscathed for the most part.

But my fear is that you didn’t recognize a valuable lesson that will prevent you from jumping into the debt financed bubble of the future.  Pay attention to the actual causes of today’s economic collapse, not the results of it.  Focus on keeping your spending in check and saving a significant part of your income.  Financial freedom is worth much more than having fancy gadgets and a new car.  Just ask the millions of people going through foreclosures and bankruptcies.

Thankfully, I see a large segment of young people waking up to economic reality.  They are seeing the flaws in the macro economic picture as well as the free spending lifestyle that so many Americans have embraced.  I hope that this trend continues and our country becomes more financially sound at every level.  Our futures will be determined by this trend.

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• Save, Invest and Borrow To Achieve Your Financial Goals

This post was written by Kevin (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

During college, I stayed close to campus every summer in order to work. Plus, I liked living on my own. The second summer I stayed, I got a job as a waitress and rented a room in a house to get me by until the new school year, when I would have a free room and a stipend as a Resident Adviser. What with one thing and another, I wasn’t going to have enough from my brand new job to pay my first month’s rent right then. Instead of calling up my parents for a quick interest-free loan to get me by for two weeks, I did the independent thing: I headed to the pay day loan place.

Photo by The Truth About via Flickr

I only need $200, so I brought my bank statement and proof of my employment. I was told that I could write a post-dated check for two weeks in the future, but I would have to write it for $220, since there was a 10% fee for each payday loan. If I wanted to renew, I just needed to come in with $20 cash for the new fee the day before the two weeks was up, and they would hold the check I wrote for another two weeks. They took all of my information so they could report it to the credit bureaus, but didn’t actually run a credit check. I wrote the check, they gave me $200 cash. I paid my rent, and made sure there was plenty of money in the bank. I never went back, and haven’t got a payday loan since. But the shame of it haunts me a little now that I write about personal finances.

At the time, it seemed like a great deal. Pay an extra $20 and get the money I need immediately? Perfect! (Of course, if I had been saving as I should have been, instead of living beyond my means and maxing out my credit card, none of that would have happened.) Later, as I reflected on the fee, it occurred to me just how expensive it was. If I had renewed that payday loan, I would have paid $40 in one month for no benefit beyond being able to borrow $200 quickly and easily. It’s not hard to see how quickly that would add up. For me, it turned out okay. But most people, no matter what they say when they get a payday loan, a one time visit doesn’t represent the end. Most extend their terms or get another loan in the future, creating a money habit that is difficult to break.

The Business of Payday Loans

There is a very simple reason that I was charged such a high fee for my payday loan: Payday loan providers said I was a risk. The annual rate on payday loans can be anywhere from 300% to 1,000%. It is hard for consumers to recognize this because they are paying what seems to be a small fee at the time. But as they renew — and keep paying fees — it starts to snowball. But many borrowers don’t realize this because it seems a small price to go in and pay $50 or $60 instead of having to repay a $750 to $1,000 loan. It only takes a few months of renewals for a payday loan business to make back what they loan out, provided customers don’t default.

Pay day loan providers fill a niche. Many who turn to payday lenders can’t get loans anywhere else. But lenders really making loans that are so high risk that they need to charge such high interest? Consumers Union, the non-profit that publishes Consumer Reports thinks not. The group pointed out that in the states that collect data on payday lenders, it appears that these lenders charge off their loans at a rate that is only a little higher than credit card issuers — but the interest charged is much, much higher. Of course, since data isn’t collected very widely, it’s hard to say whether this holds up.

In a market, though, some argue, demand sets the tone. And this is a valid point. Clearly, there is a demand for payday loans. Consumers are not usually aware of how detrimental these types of loans can be, or even how expensive they can become. Additionally, some of them use these loans to enable them to continue living beyond their means. Unfortunately payday loans reflect poorly in a credit report, they encourage poor spending habits and they do very little to help improve your credit score. And, of course, they are among the most expensive loans out there, often ultimately trapping borrowers with high fees.

Choosing a payday loan as a way to get out of debt is often counter-productive. Instead, you might find yourself in a worse situation. If possible, borrowers are much better off looking to other sources, including friends and relatives, before turning to payday loans. And if you are in such a horrible debt situation that you feel a payday loan is your only option, it might be time to get some sort of professional help or counseling with your debt repayment plan.

Relevant Articles You May Like

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• No Such Thing As Good Debt?
• Is Your Budget Doing Its Job?

This post was written by Miranda Marquit (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

Do you efile? If you do then you already know about many of the advantages that efiling has over the “traditional” paper method of filing a tax return. If not, maybe you don’t know about the benefits of electronically filing your tax return. Maybe you’re like a friend of mine who refused to get a cell phone until it became all but a necessity to get by in the modern world. Don’t get left behind — efiling is the future.

So, let’s go over the many reasons why you should probably scrap the paper forms and power up the computer when it’s time to do your taxes.

The IRS Wants You to Do File Electronically

To quote the title of an IRS publication: “Isn’t it time you e-filed?” In 2009, over two thirds of taxpayers efiled their 2008 tax returns. To be precise, 67.18% of individual tax returns received by the IRS in 2009 were filed electronically. More and more people realize the benefits and efile every year, and the IRS has set a goal of 80% efiled returns by 2014. There is little doubt that in a perfect world the IRS would like to have 100% of tax returns efiled. Efiling makes the whole tax process easier for them and easier for you.

Efiling is Just Easier

You don’t even have to pay someone else to do your taxes. You can purchase tax software on your own, or go to one of the many easy-to-use websites that are licensed by the IRS to process efile returns (such as www.efile.com) and do it all online. There may be a modest fee, but many taxpayers will qualify for free processing. In most states, you can even go ahead and do your state taxes at the same time.

The actual process of filling out your return is simple. Instead of poring over lines of instructions and pages of forms, you will only have to answer a series of questions. Then the efile software will choose the appropriate forms and fill them out for you. The only way it could be easier is if the software read your mind.

Less Errors, More Accuracy

Since a computer is processing your tax return, it can find mathematical errors easily and efficiently, before your return is even submitted to the IRS. When the IRS receives a paper return, an employee must enter your written data into the computer system, which introduces the possibility of human error. Electronic filing greatly reduces the chances of a mistake or a math error getting through, which means less chance of your return being rejected by the IRS. This means, of course, getting your refund check sooner (which you should, of course, request to have directly deposited into your bank account).

Faster Processing MeansFaster Refund!

Do you want your refund check in half the normal time? Then file electronically. Do you want your money within about 10 days of filing your return? Then efile and sign up to have your refund deposited directly in your account. It takes time for humans to go through handwritten forms and enter the data into computers. Why not help speed up the process and efile?

Security and Privacy

Sometimes things get lost in the mail, and your tax return is full of the kind of information you don’t want falling into the hands of identity thieves. Another reason to efile your tax return is to protect your personal information. The IRS guarantees the privacy and security of your information when you file electronically.

Peace of Mind

You can submit your tax return online and avoid standing in long lines at the post office, hoping and praying that your return will be accepted, and nervously awaiting a return receipt (if you remembered to request one). After you submit your electronic tax return and it is accepted by the IRS, you will receive notification within 48 hours. Once you have proof of acceptance, you can relax and smile — your taxes are done for the year!

Be sure to pass on the word that efiling is easy, fast, safe… and the future. And the future is here!

Relevant Articles You May Like

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This post was written by Clayton Bourges

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

This week, when you find yourself scrambling for a last minute gift, dreading the shopping malls, you may be able to take advantage of regifting. During any time of gift-giving, from weddings to baby showers, Christmas and birthdays, you inevitably unwrap at least one present, and are rewarded with pure puzzlement. A myriad of thoughts flash through your mind: Who would give me this? Do I look like I enjoy this? I know this wasn’t on the registry. It’s gotta be from….yup, it is. You smile widely, say a hearty thank you, and put it with the other presents knowing it will never see the light of day in your house.

Photo by kevindooley via Flickr

This really isn’t uncommon. Many of us give gifts that we would like to receive, assuming it is something anyone would love. Some of these gifts we are stuck with, like the gaudy brooch from your husband’s sister that she insists on seeing at every family dinner; some gifts we are glad to have, like the antique doilies from your mother-in-law that you still treasure as a family heirloom. Some gifts are returnable for something you would like. Other gifts seem to sit on that one closet shelf in present purgatory; you can’t bring yourself to throw them out or even donate them to Goodwill, but they are nothing you would use.

Enter the Controversial World of Regifting

According to wikipedia, regifting “is the act of taking a gift that has been received and giving it to somebody else, sometimes in the guise of a new gift.”

In the past, many have regarded regifting as cheap, stingy, or ungrateful, but it seems to be gaining more traction in the economic downturn. Why has it been controversial?

Some people believe a gift is only as thoughtful or worthwhile as what was spent on it. To those people a gift without a gift receipt is one without care and love.

The main concern I hear is: “What if I regift something and the original giver becomes offended?” If it makes anyone feel better, before I figured out how to wisely regift, I made the mistake of giving a gift back to the person who gave it to me. I was stunned and embarassed, even though my Aunt thought it was quite funny. Using some simple regifting etiquette can minimize the potential for any faux pas.

Regift New, Not Used

Unless you’re known for giving gifts from your local Goodwill, you really should regift only new or new in package items. No one was truly excited to get their older siblings hand-me-downs, so don’t give a jacket that you just decided to stop wearing. Even though it’s a regift, it should still be an actual gift, something you are proud to give.

The exception to this is giving a family heirloom (obviously) or if you like to give vintage or antique gifts/collectibles. M.P. Dunleavy from MSN Money advises not to give gifts that people have seen sitting on your shelves, but I give a little leeway. If you know someone who’s been coveting a piece of kitsch in your display case that you’re tired of dusting, I see nothing wrong with giving someone a gift you know they really want.

Know the Value of Your Regift

Gift exchanges with price limits have been getting more popular as families and companies grow larger. Even though you didn’t spend money on it, giving a $50 crystal vase at an exchange with a $20 limit, might not always be the best idea.

Rewrap Your Gift

Do not give a gift in the same old dusty wrapping paper it’s been in for however long. You are already spending nothing on the gift. Go to the dollar store and pick up a little wrapping paper. Above all, please remove the card addressed to you. It’s not rocket science, but sometimes an errant scrap of paper taped to the bottom of a box is all it takes to “out” your regift.

Use an Identification System

Since my embarrassing regift moment, I developed a system so that it won’t happen again. I attach a Post-it or sticky note to the gift before it goes onto the gift shelf (or into the gift drawer, etc.). On the sticky note I write a detailed description of the item, who gave it to me, and when.

Keep Your Regifts Away from the Original Gifters

If you’re using an identification system, this is much easier. You will know that your mother will never encounter your husband’s second cousin. It is equally as uncomfortable to unintentionally give something back to someone, as it is to have someone sit next to them and say, “Didn’t I give that to you…?”

Disclose When Appropriate

Sometimes it’s easy. One of my old companies had Christmas gift exchange that was specific to regifting. It also had a competition to bring in the most awful thing you’d received that year for a prize.

If you feel comfortable, or even feel morally obligated to disclose your regifting, you should. There have been occasions where I have received a present that is nothing like me, but I know is collected by a loved one. I honestly can’t wait to rewrap that present and send it to them.

In the end…

When someone receives a gift that they truly love, from someone they appreciate, the source of the gift is of secondary concern.

Relevant Articles You May Like

• A Christmas Gift Card Giving Guide

This post was written by A.B. (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

The year’s end is quickly approaching, and with it rests the spending deadline of flexible spending accounts (FSAs). What is an FSA? A flexible spending account is an account that employees can use to cover out-of-pocket medical expenses completely tax-free. FSAs are built as employees make equal, recurring contributions from their paychecks to the account.

Why Have an FSA?

The advantage of having an FSA is that it is tax-free, budgeted money for medical expenses — a huge benefit if you anticipate significant medical care such as the birth of a baby, surgery, or any other expected out-of-pocket costs. Even without major expenses, it can still save you a good amount of money.

How does it works? You determine the total amount available in your FSA; this amount is then divided by your number of paychecks for the year. The resulting figure is withheld from each paycheck, pre-taxes.

So How Much Can I Save With FSA? Quite a bit actually. Here is a FSA Saving Calculator to help you figure out exactly how much you’ll be able to save.

How to Get Started with FSA

You can start your FSA by enrolling during your company’s open enrollment period. This almost always corresponds with when you can enroll for other benefits, such as your company’s 401(k) or health insurance plan.

Note: unfortunately, if you’re self-employed, FSA is not available to you.

Using Your FSA

As soon as you have an active FSA account, you can use the entire year’s balance as soon as you would like. If you use your entire FSA and for any reason leave your employment before the end of the year, you are no longer responsible for the remaining FSA paycheck deductions — your former employer will pay the balance.

But, and this is important, if you do not use the full amount of your FSA by the end of the year but you make your full payments, your employer receives the unused balance. In this way, FSAs benefit both the employees — by giving employees tax-free money that can be used immediately; and the employers — by giving employers remaining employee FSA balances at the end of the year.

The deadline for most FSAs — December 31 — is quickly approaching. Use your FSA before then or forfeit your balance to your employer. You could use your FSA to pay for:

1. Birth Control — Includes condoms, birth control pills, and other forms of contraceptives.
2. Contacts or Prescription Eyeglasses
3. Dentistry — Covers dentistry services and supplies with the exception of teeth whitening treatments or products.
4. First Aid Supplies — Includes kits for convenience or supplies purchased separately.
5. Flu Shot — Also covers any other immunizations needed.
6. Hearing Aids and Batteries
7. Orthodontia
8. Over-the-Counter and Prescription Medications — Most, but not all, medication is included. Drugstore.com has a special FSA-approved store where you can see items that are eligible.
9. Planned Procedures — Includes surgeries, routine test, checkups — any medical procedure that requires out-of-pocket expenses.
10. Smoking Aids — Covers over-the-counter or prescription aids, such as nicotine gum and patches.

These are just a few of the treatments and products you can buy with your FSA. The Internal Revenue Service (IRS) establishes FSA guidelines. For the complete IRS list of covered expenses, see IRS Publication 502, Medical and Dental Expenses.

Using your FSA

When using your FSA, be sure to follow your company’s protocols. Some companies issue debit cards for flex accounts, others require you to submit receipts for reimbursement — so make sure to know which your company does. Also, it is always a good idea to keep all of your receipts anyway in order to verify that your expenses were FSA-approved.

You have your FSA — now go to using it! Remember — you can spend your FSA for approved items both in traditional retail stores and online. Often, a little searching around will save you a bundle — stretching your FSA even further.

Reevaluate

Lastly, it is critical to reevaluate your FSA every year to determine your needs. Perhaps you had put too much money in your FSA and were scrambling last minute to use every penny. Or maybe you found yourself without any FSA money left long ago and wish you had deposited more to your FSA.

Either way, assess your needs and determine the FSA figure that is right for you and your family. And if you have never used an FSA before, now may be the time to. If you wear prescription glasses or contact, if you use adhesive bandages or antibacterial ointment, even if you see the doctor — ever — an FSA is a good idea.

How much have you saved using your FSA? Do you have ideas on how to creatively use FSA Funds?

Relevant Articles You May Like

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• Getting the Most Out of Your Health Insurance Before 2010

This post was written by Jocelyn Gibbons

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

As we approach the holidays and end of the year, many people are finding their wallets just a little thinner than normal. If you’re trying hard to stay within your December budget, consider some of these winter activities to save money this holiday season. Who said frugal activities cannot be fun and enjoyable?

• Enjoy movies or games by the fire: Staying in with your significant other or a group of friends is one of the very cheapest ways to enjoy a Friday or Saturday night at any time of the year. Doing it in Winter when you can avoid the cold is just extra cozy! It’s often more fun too, since you can actually talk instead of shouting in a crowded (and expensive) bar. For a bonus, you can whip up some homemade hot chocolate. Don’t have a fire? Watch this instead.
• Go caroling: Gather up a group of friends, and maybe a guitar or two, to spread some old-fashioned holiday cheer. If you’re uncomfortable caroling to strangers, you can pile in a few cars and drive to carol for family and friends. But you can make this truly free by skipping the gas and walking around your neighborhood or apartment complex. You might even be invited in for a winter treat or two!
• Volunteer: Yes, volunteering can be fun — and rewarding too. Gather up your family or friends and make a day or evening out of it. You can volunteer to wrap gifts, cook meals, hand out food/presents, spend some time with a child, or many other activities. If you’re not sure where to start, check with your church, community center, or local newspaper for ideas. If you have the money to sponsor gifts or meals for a disadvantaged family, that’s great — but the gift of your time can be just as valuable, and allows you to contribute even when you don’t have money to spare.

Photo by MGShelton via Flickr

• Host a cookie swap: Invite several friends over, and ask each to bring a batch or two of their favorite homemade cookies. Spend some time tasting each, then swap and take home a few of each kind. For the cost of a few ingredients, your guests get to spend time with friends AND take home a variety of festive treats.
• Party at home: Instead of going out for holiday celebrations, host your friends for a potluck or “bring your own” cocktail party. Guests can bring their favorite food and/or liquor. You can end up with a GREAT meal for much less than the cost of a fancy meal out. And just like the game night, you end up having much better conversation in the relaxed setting of home.
• Group gift exchanges: If you get together with several groups of friends over the holidays, and everyone exchanges gifts, your holiday budget can expand quickly. Suggest a Secret Santa or White Elephant instead. In a Secret Santa, everyone draws names and buys a gift for one specific person. In White Elephant, each guest brings one gift. During the party/exchange, everyone draws numbers and selects a gift in order — but you can also “steal” from people who have chosen before you! This doubles as party entertainment, saving you from worrying about a boring party, or spending money on activities.
• Host a snowman contest: If you’re lucky enough to live in a snowy climate, a snowman contest is a great way to get people together and enjoy the winter weather. Invite friends over for an afternoon, spend some time building snowmen (or other snow sculptures!) and have an impartial person or group serve as judges. You can purchase a small treat or gift card as a prize, or just let the winner have bragging rights! You can also have everyone put up a small amount of money (say $2-$5) as an entry fee of sorts, and use that as the prize.
• Make your own holiday gifts: This has the double benefit of being a cheap winter activity AND a way to save money on gifts. The time you spend making will be time that you don’t spend money elsewhere. If you have kids, you can get the whole family involved in simple projects or gift wrapping. For some ideas, check out this post from Wisebread. You can extend this idea to making your own holiday decorations.
• Attend community events: Many schools or community theaters put on excellent holiday or year-end shows for only a few dollars. My high school choir used to do a 2-hour concert for $5 a person. Some events are even free! Check the website of your local newspaper or school district for announcements, and enjoy the performing arts without shelling out the big bucks.

If you want to celebrate the season but just don’t have the money to do it big, don’t worry – there’s lots of fun to be had within your own home, for just a few dollars or even free. As with most things, you are only limited by your own creativity and the ability to plan ahead!

Relevant Articles You May Like

• Saving for the Holidays – How Not to go Broke this Year
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• Money Saving Tips for the Holidays Guide eBook
• 50+ Frugal Tips, Ideas, and Resources

This post was written by Jill (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

Just like a runner must run, I believe those who are financially fit must budget. Your budget might look different than another person’s budget.  Someone might have a complex computer system and another might use a simple pen and paper system.  But, to thrive financially you must have a sense of what you want to spend your money on and what you did spend your money on.

What is a Budget?

Photo by Kristian D. via Flickr

1. It is a form of financial conciseness. It is a tool that helps you start paying attention to where your money is going.
2. It is a proactive spending plan. It is a decision to oversee your money instead of investigating its disappearance.
3. It is a resource utilized to achieve financial goals. It is a map that guides you to a destination that you have decided fulfills your goals.
4. It is a form of accountability. It forces you to account for 100% of your income and expenses.
5. It is a concrete reflection of your true priorities.
6. It is a tool that allows you to answer the following questions:
   • What are you spending your money on?
   • Do you know where your money is going?
   • Is your spending proactive or reactive?
   • Do you spend less than you earn?
   • Are you on track to meet your goals?
   • Do you have a financial plan?
   • Do you know how much you are earning?

Budgeting and the Game of Risk

Did you ever play that popular Parker Brothers game Risk?

Remember that map of the world with countries that were separated by a thin dotted line?  Each player would get a set number of pieces and then they would decide where the pieces should go.  The goal was to strategically place your pieces in both defensive and offensive positions.   As the game progressed, pieces were moved to other areas to help win the game.

In many ways budgeting is the same.

On a regular basis you are given a set number of dollars over which you are the general. The budget represents your game plan.  You game plan should reflect your ultimate financial goals and values. Each time you receive those dollars you allocate them to the proper category. A common misconception about budgeting is that it is about saving.  Budgeting, is in fact, all about spending.  It is about spending the right number of dollars on the right categories.

Three Things a Good Budget Should Accomplish

1. A Good Budget Will Help You Balance Your Spending

Recently I was glancing through a cook book called More-With-Less.  In a section about eating it talks about the dangers of “overeating calories,” “overeating protein,” “overeating processed foods,” and “overeating processed foods.”  Notice a pattern?

There is no problem with each of those items, however, when things are done in excess they become unhealthy. Perhaps the same rules apply to your own budget.  Clothing, entertainment, groceries, and insurance are good.  However, you can over budget for any of those items.  Thus, a good budget produces healthy and balanced spending.

2. A Good Budget Will Help You Spend Less than You Earn

As a general rule, you should make it a priority to live within your means and spend less than you make.  I believe this requires that a budget be on paper and that a calculator be handy.

Take your income and subtract your projected expenses until the calculator congratulates you with a zero reading.  If your numbers fall below zero re-allocate, re-discuss, re-calculate until you are not spending more than you earn. Here are some tips on cutting items out of your budget.

A budget is not a budget if it is not designed to help you spend less than you earn.

3. A Good Budget Helps You Spend Money on Important Purchases

Sometimes money feels more like water.  For a moment it passes through our hands, but regardless of how hard we try we are never able to hold on to it.

The problem might not be over spending, but spending too much on things that we ultimately don’t care about.

Ever hear anyone say, “I don’t know where the money goes.  I guess I just spend it on random stupid stuff”.  The spending is not the issue, but what you are spending money on is not things that ultimately are not valuable to you.  If you are in this situation it is time to start a budget.

Perhaps you could try and write out your budget by category according to the most dollars spent.  Look over the list and see if the things you spend the most money on are the things you wish you spent the most money on.  You can now look over your expenses and know what you are prioritizing for your spending.

For my wife and I, the budget helps us spend in categories that we might otherwise neglect.  In our budget we now add more money to things like entertainment, dates, and dining out because they are priorities to us.

With 2010 around the corner a lot of people will start to budget once again.  Be sure you avoid the ten common budget busters by making your budget functional.  You must also know your own biggest budget busters.  A good budget does not need to be a complex system, just something that works for you and your family.

Do you think budgeting is an important part of a good financial plan?  What makes a budget ‘good’?

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This post was written by Craig Ford (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

Whether your child is involved in school sports, music, dance, theater, art or some other activity that goes beyond the scope of ordinary schooling, participation is costly. There are activity fees to pay, lesson providers to compensate, equipment and supplies to purchase and, on occasion, trips to go on. All of this starts to add up. Even in the best of economic times, extracurricular activities can become a burden on the budget. So what is there to do?

Photo via Wikimedia Commons

Here are 5 things you can do to save money your kids’ extracurricular activities:

1. Limit the number of activities your children can participate in

We may want to provide a large number of activities for your children to experience, but the fact of the matter is that it is just too expensive to be involved in everything. Instead of letting your kids participate in five or six activities, limit it to two or three (or as many as your budget can handle). Have your child choose his or her favorite activities. This will not only save you money, but it will also require your children to learn to excel at what they do. Plus, it will provide you with more quality family time.

2. Rent necessary equipment

Many school districts allow you to rent various equipment and supplies. Band and orchestra students can rent instruments and athletes can rent certain pieces of sports equipment. Most towns also have rental offices and organizations for various types of equipment. Before you buy, it is worth it to check into rentals. This is especially important if purchasing something would be expensive. What happens when your child decides that playing the oboe was a phase? Renting sports equipment can also be helpful, as kids usually outgrow what they have.

3. Buy used equipment

In some cases, there is no avoiding the purchase of equipment. If it becomes necessary to buy equipment, see if you can find reasonable quality equipment used. There are a number of places that you can look if you want to buy used sports equipment, musical instruments, opened art supplies and other items. Obviously, eBay and Craigslist offer good places to begin your search. Your local Classifieds can also serve as a good resource. Freecycle is another good place to find used equipment. For sports equipment, Play It Again Sports is a great place for you to find used equipment — and even earn store credit bringing in your own used items. Just make sure you are getting something of acceptable quality.

In some cases, you may not have to buy used equipment at all. Put the word out among family and friends that your child is participating in an activity. It could be that you can get something on second hand for free from people you know.

4. Watch for sales

Some things, like athletic shoes and some dance shoes, should not be bought used. If you need equipment that is best bought new, or if you cannot find what you need used, it is time to look for the sales. If your child has been participating in the same activity for years, this can ease the planning process, since you will have an idea of what is needed, and can buy when you see a good sale.

Make a list of what you need and do some comparison shopping. Look online, and at multiple stores in town. Do what you can to find the best price. And, if you buy online, make sure you understand the return policy. You don’t want to be stuck with something that doesn’t fit your needs after all.

5. Have your kids help pay for their activities

When your children are younger, you may have to pay the entire cost for extracurricular activities. However, as they get older (and their activities become more expensive), there is nothing wrong with having your kids help you pay the cost of activities. They can do this by using some of their allowance money, participating in fundraising, or by using money earned from part-time jobs and odd jobs that they might do around the neighborhood. The key is to be clear about how much your child is responsible for. My parents required me to pay the cost of any trips I wanted to go on with my activities. It taught me to be responsible with money. They paid for everything else. It’s up to you to decide what you can afford to do, while at the same time making it possible for your child to afford his or her contribution to at least one extracurricular activity.

Easing your extracurricular budget

If you are concerned about the budget crunch that can come with paying for extracurricular activities, a little advance planning can help. Figure out how much you are likely to need, and divide that number by how many months you want to save up. My parents knew, every year, that it was going to cost $100 apiece for my sister and I to do do swimming. They also knew that my younger brothers’ activities were likely to cost close to $75 a year. That meant that they knew that, at the beginning of the school year, they would need $425. If they divided that number by eight months, it would require $53.13 each month. That’s a much more manageable number. Put the money into some sort of high yield account, and that money can work even harder for you.

Image ideas:

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This post was written by Miranda Marquit (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

The holiday season is in full swing and everyone is looking for ideas to help them stay out of post-holiday financial nightmare. One way to help you spend more sensibly is by using an American Express Charge Card*. Unlike using a credit card, you must repay your full balance at the end of each month thus helping you stay in check with your spending. And unlike using a debit card, you has greater flexibility with no pre-set spending limit. Additionally, American Express Charge Card comes with the Membership Rewards program. You earn points that you can turn around and use to finish off the rest of your gift list. Some of this season’s hottest items avaliable through the program include: HP mini, video games, and Flip video camcorder.

To help promote its Charge Card and the Membership Rewards program, American Express is offering to giveaway 10 Flip video cameras where 10 lucky readers can win one camera each!

For a chance to win, all you have to do is answer this question in the comment section below:

How are you planning to (how did you) make your money work harder for you this holiday season?

Starting on December 16th, I’ll be picking two winners randomly from comments below. I’ll then email the winner for contact information — i.e., your name and address. The information will be forwarded to American Express, who will ship the Flip video camcorder prize to you. We’ll pick two winners each day until we giveaway 10 camcorders at the end of the 20th.

Important: Although the American Express Charge Card gives you more control than credit and debit cards, the ultimate responsibility still rests with you.

Disclaimers:

• The operator of Moolanomy was not compensate for this giveaway.
• All prizes are provided by American Express, and shipped directly to winners.
• The camcorder shown may not be the exact same model or color that you’ll receive.
• No sign up or purchase necessary. Signing up for an American Express Charge Card will not improve your chance of winning.
• Open to residents of the 50 United States and the District of Columbia.
• You must be 13 or older at the time of entry.
• Only 1 prize per household.
• Void where prohibited.

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This post was written by Pinyo

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance

When it comes to long term investing, I believe that you should focus more on dividend yields and cash flow versus speculation and share price appreciation. While this might mean avoiding sexy names like Apple (AAPL) and Amazon (AMZN), there is nothing unsexy about constant cash flow with regards to your assets.

Photo from stock.xchnge

Dividend Income Is More Stable

When it comes to sustainable investment income, dividend payments are much more stable than share price and capital gains. While dividend payments can be cut by companies that are in trouble as in recent years, it is a rare thing and most companies do everything possible to avoid a dividend cut. Even with dividend cuts from a select few companies (namely financials) over the past few years, you still fared better than the overall drop in share price.

Additionally, dividend yields historically tend to increase along with inflation, making it inflation protected income. In an inflationary environment, businesses pass on the costs to their end consumers which results in comparable growth in revenues and profits. This allows companies to continue to increase the dividend payment along with inflation.

If you focus on dividend yields, you will be much more likely to buy stocks at very depressed prices (which is when you should buy them), because you will see a higher yield. When you’re focused on share price, you will tend to avoid the stocks because of a falling share price. When it comes to long term, cash flow focused investing, share price fluctuation means nothing; so maximize lower share prices and lock in high yields for years to come by buying stocks low.

What This Means For Non-Dividend Stocks

Because we’re buying a cash flow for dividend stocks, what are we actually buying for the non-dividend stocks? Well, you’re buying the opportunity of selling the stock at a higher price than you bought it (hopefully). Because you aren’t earning any cash flow from the position, the only way you can make money from the position is to sell the stock at a higher price than which you bought it. This requires effective trading skills and/or sound forecasting. Most individuals investors lack both.

It is very hard to earn profits on non-dividend stocks for the reasons I just shared. As such, focus on high dividend stocks over a long term perspective. Instead of trying to build up the overall balance of your equities account, build up the monthly or quarterly income of your portfolio from your dividend stocks. By tracking the income growth of your portfolio, you can also make projections on if and when you can live off your investment income.

For an example dividend portfolio, check out the Dogs of the Dow, a portfolio that attempts to invest in the highest yielding Dow components each year. This is a great starting point for new investors.

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This post was written by Kevin (Staff Writer)

Do you have a financial question? Ask it now at Moolanomy Answers!

Copyright © 2007 – 2009 Pinyo B. This feed is provided for the convenience of Moolanomy’s subscribers. You are not allowed to reproduce the content within this feed in any manner.

Please visit Moolanomy Personal Finance Blog, Moolanomy Finance Directory, and Moolanomy Answers for more great content.

Source: Moolanomy Personal Finance