Economic indicators range from consumer confidence to the stock market, from unemployment figures to inflation, from the housing market to oil prices, from the price of gold to the exchange rates on various foreign currencies. Given the complexity of this range of indicators and the fact that they appear to go up and down almost at random, how will we know that the economy is improving?
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Do you remember when you were a kid and you got an allowance? Maybe there was something special and you saved up for it. When you finally got it, it was a wonderful feeling.
Now, we halfway think we want something, whip out the plastic, and then have a heart attack with the credit card bill comes in. It’s not as much fun as it used to be.
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When you buy a house, you will experience a loan that is amortized. The first payment you make will be just a tiny bit of the principal (the actual amount of money you borrowed) and the rest will be an interest payment. For example, if your mortgage payment is $500, in the beginning the amount you are paying on the actual debt may be something like $20. The next month, you might be paying $25 on the debt and $475 on the interest. Over the course of time, the debt goes down slowly and the rate of principal to interest climbs. By the end of the loan, thirty years later, you may be paying $475 in principal and $25 in interest.
There was a generation or two that retired at 65 or even earlier and had enough money to take cruises and do other interesting things. That is not the present generation of working people. Social security is scheduled to run out all too soon and in the recent financial troubles, many people have lost money in their 401k retirement accounts.
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In this world of instantly checking your bank balance by internet or cell phone, the idea of balancing one’s account seems quaint, a relic from the past. Yet there are some compelling reasons to do this on a monthly basis, when your bank statement comes out. (more…)
So much of our money is electronic in nature. When we go to a store and use a credit card, there is no physical exchange of dollar bills. Instead, an electronic signal goes through a maze of computer networks from the store to your bank and back and you get a charge to your account.
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Have you ever stood behind someone in line at the store and watched him take out his wallet with at least 5 credit cards? Consumers with so many cards are now in the majority. Actually, almost all people hold at least one card. It’s true that credit cards have become important sources of recognition. If you want to rent a car, for example, you really need a major credit card. Moreover, a credit card can provide convenience and allow you to make purchases with nearly a month to pay for them before finance charges kick in. (more…)
Much of popular culture tells us that we need a lot of stuff: certain brands of clothing, certain types of cosmetics, a certain car, a particular vacuum cleaner, even a special knife for slicing tomatoes available through this television offer. But hurry. Supplies are limited. Have your credit card ready.
An important step along the road to financial security is to redefine needs and wants so that you don’t get confused by infomercials late at night.
It’s actually easy: Needs are things you have to have or you cannot live. You have to have food, you have to have water, you have to have some way of keeping warm through clothing, and you have to have some kind of roof over your head. Everything else is a want and therefore optional.
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One of the best ways to save money is to pay your self.
Every time you get a paycheck, “lose” a little to a savings account. It’s gone. Do that before you pay the bills because if you think of savings as what’s left over, you’ll never save. Most people don’t have money left over. There are plenty of places it can go before it lands in the savings account unless you bypass the financial back roads and send it on the superhighway to savings. Most banks will do this for you automatically, which means you don’t even have to make a decision to save; the money just goes out of your account.
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There are some bills that come due two or four times a year, such as car insurance, real estate taxes, and house insurance. Some annual special events require money, as well, such as birthdays and holidays. These can feel like financial surprises when it comes time to pay them because too often when something is out of sight, it is out of mind. Every time we get a pay check we portion some to rent or mortgage, some to the bills, maybe some to savings, and then some to us to spend. Or maybe we give ourselves a lot to us to spend. (more…)