The Difference Between Money Reality and Financial Goals

When you look at where your finances are now, you probably see the gap between your financial reality and your financial dream. In many cases, it might seem as though it will be impossible to bridge that gap and create a new financial reality that encompasses your dreams. The good news is that it’s not impossible. In fact, if you follow the steps outlined below, you could be well on your way to creating your ideal financial reality.

Break Down Big Goals

One of the factors that makes your goals seem so unattainable is the sheer grandiosity of them. But when you break these large goals down into smaller goals that can be attained in intervals, they are much easier to both visualize and achieve.

Let’s say your goal is to buy a house. To break this down into smaller goals, you can:

  • Set a goal to save the downpayment by a certain date
  • Set a goal to start saving the difference between your rent now and your mortgage, insurance, and property tax payments once you buy
  • Set a goal to improve your credit rating, so you get a better interest rate

Let’s look at another example. Say your goal is to pay off $25,000 in student loan debt. You can break this down into the following smaller goals:

  • Start living according to a budget
  • In that budget, set aside 10 percent of your income for student loan repayment
  • Pay off 10 percent of your loan balance this year, 20 percent of the balance next year, and so on

Create Steps for Accomplishing Smaller Goals

Once you’ve determined what the small goals are, you need to come up with a plan for accomplishing each of them. Using an example from above, let’s say you want to save for the downpayment on a house. Your steps toward doing so might be:

  • Save $500 a month
  • Sell any unused vehicles, electronics or other expensive items and put the money toward the downpayment savings
  • Get a part-time job during the holiday season and save your paychecks toward your downpayment

Through the creation of smaller goals and steps to take toward making them a reality, you will create a viable plan for reaching your financial ideals, and you’ll have built-in measures for accountability that keep you on track.

Basics of Cryptocurrency Investing

Cryptocurrency is not well known among many people, including some who are involved in the finance and investment industries. Many have heard of Bitcoin but don’t exactly know what it is or how it works. Bitcoin was introduced to the public in 2008, but it’s still a mystery as to whether it’s a currency that can be used to buy goods and services or if it’s something else. Before you decide to invest in cryptocurrencies, it’s important that you know what it is and how it works.

Satoshi Nakamoto, the anonymous inventor of Bitcoin, wanted to create a decentralized peer-to-peer digital cash system outside of any centralized banking system. A simple explanation as to how this works is that the Bitcoin network, or any other cryptocurrency network, is made up of peers who make digital Bitcoin transactions between one another. There must be a consensus among the peers who can confirm that a transaction took place.

For instance, if John gives 20 Bitcoins to Jane, then Jane must confirm that this transaction took place, and peers in the network must agree that this transaction happened. Essentially, cryptocurrency like Bitcoin is a place to exchange monetary units that have no intrinsic value, no physical form, and has no centralized structure that controls the supply and demand.

Cryptocurrency is more like a stock than actual currency. When you invest in a cryptocurrency, you are basically buying the equivalent of a tech stock. You can invest and trade cryptocurrencies by purchasing and selling cryptocurrency through an exchange. There are several reputable exchanges that specialize in cryptocurrencies such as Coinbase, Kraken, Poloniex, Bitstamp, and Bitsquare. You should check the exchange’s fee, exchange rates, verification requirements, restrictions, payment methods, and reputation before you start trading with the exchange.

Once you have opened an account with an exchange and linked it to your bank account, buying cryptocurrency is easy. You just need to access the ‘Buy’ button, select payment type and desired amount, then hit the ‘Buy’ button. At that point, your exchange account will be credited with the purchase. You can invest in cryptocurrencies, but you will have to check to see if the exchange you have chosen will allow you to invest. You can also open an account on multiple exchanges and trade between those exchanges. There are many ways you can trade, invest, and make money with cryptocurrency. Find a strategy that works for you and take advantage of this new market.

Major Expenses that Happen During Retirement and How to Prepare

What do you need to include in the retirement expenditure budget? This is a daunting question every retiree must ask themselves. The future remains uncertain, and consequently, plans may not be relevant by the time you retire. Employee Benefit Research Institute (EBRI) found that many people do not try to calculate how much they will need in retirement.

Therefore, it is of paramount importance to prepare early. There are several expenses you need to budget for in retirement. The Bureau of labor statistics (BLS) lists the following as the significant annual expenses for older families.

• Housing
• Transportation
• Food
• Pension and social security
• Healthcare
• Entertainment
• Other expenditures – include personal care products, alcohol, tobacco, education, life and personal insurance, reading among others.

Note that old people from the age of 55 to 64 years tend to spend more than older people from the age 65 to 74 years of age.

How to prepare

There are five steps needed to get your retirement plan on track. Additionally, there are unknowns in the retirement plans, but it should not scare you from making one anyway. It is better to be prepared than to be caught off-guard without a working plan in your old age.

1. First of all, consider your current budget

This is the most challenging step in preparation. However with a current budget then its easier to use it for future projections. If you do not have an existing monthly budget, then make one by recording your monthly expenditure.

For variable expenses, like electricity bills, use the average yearly bill by adding up all monthly bills and dividing the total amount by 12 months. For bills requiring payment other than monthly subscription, like auto insurance payment, divide the total amount by 12 to get monthly expenditure.

2. Secondly, establish your likely expenditure in retirement

Write down the expenses you might incur during retirement. Deduct paid off debts. Be as real as possible. You should include fun items like golfing, eating, travel, ballroom dance lessons, and many more. Then, add up these expenses to your monthly bill. Additionally, you need to use projected spending to calculate estimated expenditure during retirement.

In projected spending, multiply your current income with a certain percentage to give you the retirement needs. However, it is not accurate, but it gives you a rough estimate of your needs during retirement.

Moreover, you should also consider the 80 percent rule which states that you should have a plan of replacing 80 percent of your current income in retirement. You can be more conservative by using the 90 percent rule or 70 percent rule if you feel won’t spend as much.

Further, with your retirement money stashed away you can use the four percent rule which states that you can withdraw four percent of your saving yearly without running it dry.

Finally,
3. Evaluate your retirement planning progress – by instituting benchmarks.
4. Once you decide what to do, Create your plan and make changes if necessary.
5. Revisit your plan often, like yearly, by monitoring your finances.

Lending a Friend Money Can Ruin Relationships

Some would say, lending money should be left to the banks and other financial institutions. However, when a friend or family member is in need, it is oftentimes difficult to turn them away. As a friend, or a genuinely caring and generous person, you may be the type who have no problem helping people out with money in cases of emergency with a promise to pay it back in a reasonable period.

Lending money to friends can become a volatile situation. Once you cross the line and begin to lend money to your friends, you can ruin the relationship altogether, depending on the circumstances of course. There are many scenarios where it may not affect the relationship at all, specifically, if the money is paid back each time, in the exact amount, and the agreed upon date. However, the relationship may begin to suffer if these deal breakers begin to occur over time, more frequently, and with no respect or regard for the agreement to pay the money back.

A friendship is generally based on trust, honesty, support, and reliability. You want your friends to listen well, be there for you in times of stress, need, or simply as a companion. Friends who run into money issues occasionally are easier to lend to than those who seem to always have problems. There’s also other factors such as the type of money issues your friend encounters. Is it the same issue over time? Perhaps, they overspend, or shop too much and end up short and can’t pay their bills? Did they lose a job, go through a divorce, or became ill and lose work wages? You see, there are many legitimate financial issues that can occur at any given time, to literally anyone.

However, if you are constantly bailing your friends out and the money is not paid back in a timely fashion or even with a good explanation, then this is when the relationship may suffer. You may begin to feel used or disrespected. After a long time of waiting to be paid back, your communication with your friend may even suffer, now with the added tension of trying to avoid the “money” topic. The friend who borrowed the money may feel guilty and start avoiding you if they can’t pay you back as promised. They no longer return calls, texts, or emails. The trust in the relationship is now gone and until the money situation is resolved, or until that strain no longer exists, the contact with your friend, soon decreases.

Finally, before lending money to a friend and possibly ruining your relationship, consider two simple things; can you afford to simply just give them the money instead of loaning it? Think about it as charitable giving. If you will not need the money back anytime soon, no matter how much your friend promises to return it, why not just let them have it as say, a gift? The second thing to consider, is a contract the better way to handle the loan? This is ideal for large amounts and for those friends who need an agreement to keep them honest and on track. For example, a loan agreement is the best of action for a business venture or partnership that relies on future earnings or income in order to pay the loan back in full.

Always remember that lending money to a friend falls into a different category then say paying for lunch or for concert tickets. Basically, it can be a bad idea and destroy your relationship once you realize you made a financial mistake and that the loan itself, indicates that the person is now indebted to you and has made a promise to pay it back. When it doesn’t happen as planned, the next step or how you communicate will determine the path of your relationship.

Most Important Pillars of Managing Personal Finances

For many people, money is a difficult area to navigate. Sometimes it’s good to step back and take a hard look at the basics. In order to do so, we’re going to break down three of the most important pillars of personal finance. They include monitoring, educating, and saving. These three areas are at the core of everything to do with money and can help you get into a money-savvy mindset.

Keep a Watchful Eye

The only good way to know what’s happening with your finances is to monitor them. It’s very easy to lose track of spending when not checking in on your accounts. Luckily, most financial institutions make it simple to access accounts and monitor your activity. Online banking services and smartphone applications are a vital tool for everyone’s personal finance. The more you know about your money, how you’re spending it and identifying problem areas, the better equipped you are to improve your financial status.

Stay Educated

Achieving personal finance goals takes a fair amount of planning, understanding of the market, and general know-how. In order to reach a place of stability, it’s imperative to soak up as much knowledge as possible. Learning everything from effective budgeting to best investing practices will only help you succeed. Devoting time and energy to increase your knowledge is one of the best things you can do for yourself and your wallet.

Save Aggressively

Increasing personal wealth comes down to how aggressive of a saving plan you have. There are two things to keep in mind when it comes to saving. The first thing is to save as much of your income as possible. If this means you live like you’re broke – do it! Surviving on less money is excellent motivation to continue building up your savings. The more you save, the easier it becomes to reach financial independence. The second thing to keep in mind is how you save. The best option is using an account that makes it difficult to withdraw money from unless you absolutely need it. Having an account like this will remove the temptation of dipping into savings for unnecessary spending.

Investing the right way. How to do it well

Billionaire Warren Buffett is a good example for value investing. Buffett gives a good example of value investing that other people should pay attention to. Buffett recommends that we buy low and sell high. Sadly, many investors tend to let emotion handle their financial decisions. This causes them to buy when others are buying, and sell when others are selling. When we buy when others are buying, we get a high priced Apple stock that is not really a good deal. When we sell when others are selling, we get a trashy Kodak stock that just went bankrupt. The key to becoming the investor that succeeds is being a shareholder in Apple before they became successful. It is selling Kodak stock before the rise of the digital camera. All of these things are what the biggest investors do well.

If you do not know how to begin stock investing, think about something practical in your life that you can try this principle with. A good example is food purchases. Most people are eagerly buying sweet and popular premade meat products. They are eagerly ignoring bitter and unpopular raw vegetable products. A smart investor would buy mostly raw vegetables and sell sweet popular meat products during the day.

The best investment models buy something unpopular, and then they convert it into something very popular. The worst investment models take something popular, and then they convert it into something very unpopular. Evaluating your personal financial practices to see how you are doing in this area can show you the things that need to improve. A person who is smart will take a job that others do not want, and give others exactly what they want. A person who is foolish will take a job that others desperately want, and give others exactly what they do not want.

If you do not know what is popular, look at the universals of marketing. The universals of marketing include survival, protection, freedom, pleasure, relationships, and likability. These are the things we should be selling to be a great investor. We should also be buying danger, slavery, suffering, enemies, and unpopularity to be a great investor. Why? These things have a low purchase price because no one wants them.

There are different great companies to try stock investing cheaply. One of the recent ones is Robinhood. Robinhood lets you place trades from the convenience of your smartphone without having high fees bothering you.

Robinhood puts the investing market in the hands of the common person. If you are curious about how to begin with stock trading, remembering the buy low and sell high principle can go a long way toward removing the issues you are having.

Fast Cash: How to Make Supplementary Income Quickly

When it comes to making fast cash, most of the time, it’s not a good thing. Get rich quick schemes and things that seem too good to be true probably are. However, that doesn’t mean all ways of making fast money is bad. In order to give you a few examples and context, here are a few ways to make some extra money on the side.

Ride Sharing

Apps like Uber and Lyft are providing individuals with the flexibility of an open schedule and their own cars to earn money. Some people have gone as far as giving up more traditional jobs in order to make their own hours and be in charge of their income. Plus, with a job like this, you decide how much you want to earn. You can drive a little or a lot depending on how much supplementary income you’re looking to make.

Selling Old Items

Most people have items in their homes that are no longer of use to them. If you’re in a similar situation, you very well could be sitting on money! Have a yard sale or sell unwanted items online to make a few bucks. Sites like Ebay are great because you may end up receiving much more money than expected. Opening it up to bidding, you could make some serious cash if a few people really need to have your item.

Freelance

Think of a skill you have mastered and odds are there’s a way to make money doing it. Freelancing is one of the best ways to make money using skills you have that others may not. For instance, a lot of businesses need help with logos and design, web design, or content creation and they’re willing to pay for fast help. Try your hand at offering your work for a small fee. As you get better and have more clients, you can begin to charge more and see referrals from happy clients coming your way!

Seasonal Yard Work

Lastly, each season brings a new type of yard work with it. In the winter, driveways need to be shoveled, summer brings landscaping with it, and fall tends to require a lot of leaf cleanup. Not many people enjoy doing these types of yard work and would often pay someone to take care of it for them. Earn a bit of cash by sprucing up someone’s yard – plus, it’s a good workout.

Too Much Savings?

Is there such as thing as having too much money in savings? The answer is yes! A savings account does not make your money work for you like it can elsewhere. Sure, you’ll receive interest, but it’s nothing compared to what you could be doing with your money. Below you’ll find a guide to savings – how much to have on hand and what to do with all the rest.

How much is too much?

This answer varies from person to person. A good rule of thumb is to have at least 6 months worth of necessary expenses on hand. Having this emergency fund in savings provides you with quick access to money should you need it for anything or in the event of losing your job. Other than this savings account, all extra income should be put to work and earning you more.

Certificate of Deposit

For short term savings goals, you should talk to your bank about a CD. These insured deposits are held for a predetermined amount of time and mature at varying rates. No matter what, they have more of a return than the interest on a normal savings account. If you’re planning to save for up for a larger purchase in the next few years, a CD is your best bet.

Invest for the Future

Once you establish your short term savings, your next priority is to invest for retirement and the future. Investments take much longer to grow, but the returns can be substantial. When investing there are many different options to chose from. The most common are IRAs and 401ks. If your employer has a 401k plan set up, you should be contributing to it and benefiting from whatever match they provide.

Working with a wealth advisor is a great option for all other types of investments. They have experience growing wealth and can help you set out to achieve your financial goals. The biggest thing to take into consideration about investments is your risk tolerance. Riskier investments provide much larger returns, but you may very well loose that extra money if the investment does not pan out. There are plenty of moderate to low-risk investments that can still put your money to work for you.

How to Spend Your Tax Return Wisley

Tax season is finally here, which means you probably have a long list of things you’re going to buy once you get your return, right? If your resolution this year is to be more confident and wise with your money, then you may want to make sure you’ve done these things before you actually go blow your cash. By all means, we all deserve to treat ourselves, however, make sure you don’t go on a spending spree. Here are the best ways to spend your tax return after this season.

Pay Down Debt

Your tax return most likely won’t be able to cover all of the student loan debt or mortgage amount you have out, however, high-interest, short-term debt, such as credit cards, could be what’s keeping you down in the dumps. One of the best things you can do to help save your credit score and lift some weight off your shoulders is to pay off your credit card debt. Credit cards are sneaky little creatures as they tend to have a high interest rate that could be what’s keeping you from paying off your total balance and lowering your credit score each month. If you have multiple cards, begin by writing out your balances for each one, along with the interest rate. The cards you should be paying off first are the ones with the highest rate. You can also use your tax return to split it up in multiple monthly payments to show that you are consistent each month.

Open Emergency Funding

Over 66 million Americans don’t have an emergency savings account. This is quite possible the most critical point in the U.S. debt crisis. Many believe that a small amount of cash, won’t help them when a true emergency comes along, however this is wrong. The slightest bit of savings could help you cover emergency expenses in such a case. Starting an emergency account with your tax return can actually help you save more money each paycheck, compared to trying to open an account with no money. By using your tax return to open a cash account, you’ll inspire yourself to contribute more, and you’ll be very thankful for doing this when life decides to take a turn. Although taxes are technically your money being deducted to the IRS, think of it as a yearly bonus that you weren’t expecting to get.

Invest

If you’ve already paid off your credit card debt and have an emergency fund already established, spending your money on investments is a great way to ensure you’re being wise. For example, maybe you’ve been saving for a home and can afford the monthly payments, but not the huge wad of cash that you need for a down-payment. Using your tax return could be the solution to your predicament, only if you’re really ready for the purchase. If you don’t already have a retirement plan set in place, taking this extra amount of cash could also be a great way to start one. Just like starting an emergency savings plan, starting a retirement plan with cash will convince you to contribute more money each month. Another way to invest your hard earned return is in yourself. Maybe there’s a skill or class you really want to take, but it’s too costly. You can never go wrong in investing into experiences, as if will help you grow into a better person.

How to Become a Financial Advisor

Becoming a financial advisor is not an easy task and requires a specific skill set. Education, work experience, and acquiring special certifications are all things that will help you on the way to becoming a successful financial advisor. Depending on where you want to work, you will be required to have certain levels of experience and licenses. Below are some of the more common steps to entering the world of financial advisement. This is not the only path, but the most standard.

Education

The minimum requirement for most firms is a bachelor’s degree. Typically, wealth managers hold degrees in business, finance, or economics. All relevant and similar fields will normally be acceptable. The most important thing to do while gaining your education is to look for work related experience outside of the classroom. Joining clubs on campus is an excellent way to gain experience. Most colleges have associations or clubs that focus on finance related subject matter. You also can work towards becoming the treasurer of an organization. The experience of budgeting and managing the organization’s finances will be excellent for your resume. Additionally, internships are a fantastic way to acquire real world experience.

Landing the Right Internships

As mentioned above, internships are a vital part of getting work experience while completing your degree program. The more relevant experience you have before looking for your first job, the better. Look for internships that will directly help the career path you are looking for. For example, if your goal is to get into the risk management niche of finance, look for an internship working in that environment.

Additionally, interning with larger, well-known firms can help you as well. The larger firms often come with a solid reputation, which will help you in your job search after completing your degree program.

Recommended Certifications

There are a number of certifications and licenses that a financial advisor can obtain. A majority require at least 3 years of experience, continued education, and a passing score on an exam. The most common certification and licenses financial advisors go after are:

  • Certified Financial Planner (CFP)
  • Personal Financial Specialist (PFS)
  • Chartered Financial Consultant (ChFC)
  • Chartered Financial Analyst (CFA)

By obtaining further certifications, you show you’re an expert, you continue learning about the field, and you are extremely qualified.

Continued Education

Most financial advisors continue their education past the initial undergraduate level. You can go through a master’s program while still working your normal hours. Many financial advisors obtain an MBA or some degree in a relevant field. Continuing your education provides you with a broader knowledge base and understanding the financial world. It also acts a vote of confidence for your clients.