Smith Business and Finance

Many people do not consider the importance of a budget. They indulge in spending according to their earning and do not leave room for emergencies. This usually ends up in the incurring of debts and sometimes, personal bankruptcy. A budget helps to counter these consequences.

The essential calculations in a budget are income and expenditure. The purpose of a budget is to ensure that the expenses do not exceed the income and also provide for savings for the future.

A budget needs to be documented in the form of a chart or table. This needs to be easily comprehensible and provide a quick summing up of the relevant details. The chart needs to effectively reflect the different heads of expenditure. Suggested heads are housing and utilities, entertainment, health and beauty, transportation, communication and household. These can be further subdivided as follows:

Housing and utilities

- Mortgage payment or rent
- Insurance
- Taxes and electricity
- Natural gas
- Water and garbage pick up

Entertainment
- Cable television or satellite service
- Internet access
- Dining out
- Bars clubs

- Sporting events, parties, lessons and recitals

Health and Beauty
- Hair-cuts, perms etc.
- Make-up
- Medical, dental, vision, weight loss, diet products
- Nutritional supplements

Transportation

- Car payments, insurance
- Gas
- Routine maintenance, repairs
- Air travel
- Rental cars, public transportation

Communication

- Telephone
- Cellular phone
- Voice mail

Household

– Groceries
- Cleaning supplies
- Laundry, dry cleaning
- Home improvement
Projects, towels, linens

Others

- Credit card payments
- Other loan payments
- Child care, items for baby/elderly
- Allowances for children, book clubs, magazines, music, etc., fast food
- Investments, vacation, spending money, donations to church or charity
- Gifts (Christmas, birthdays, anniversary, etc.)
- Emergency fund
- Cigarettes.

If you have any other expenses that are not covered, you could add them to the list.

Next, try to reflect all expenses on a monthly calculation. For example, if you pay yearly taxes, calculate the monthly expense by dividing the yearly amount by twelve. Having done this, add up all the figures to arrive at the total monthly expense figure. Then subtract this amount from your take home salary amount. If you find the remainder in negative, you need to look for expenses where you ought to cut down. For example, if your take home salary is $1000 and your expenses total to $1150, you would need to trim down $150 each month, from the expenses.

If you need to cut down on your expenses, you would be the best judge to decide where to make the changes. However, it would be prudent to cut back on the extra subscription channels of the television. If you are smoker, cut down on smoking instead. Take home cooked lunch to office instead of eating fast food. Economize on power consumption by avoiding unnecessary use of the air conditioner and heating and make less use of the phone.

Creating a budget is absolutely necessary to manage your finances and is not dependent on the size of your income. It helps to prevent overspending and personal bankruptcy, allowing you keep track of your income and expenditure.

Defining your savings goals is the first thing to do before you invest, especially when that investment will have an impact on your child’s future.

It is after-all your child’s future that you are investing in–and school finance cannot be avoided, as babies will grow into adults who need to be given the best opportunities we can offer as parents.

The best advice that any parent can get is to start saving early. College tuition fees can cause a strain on your family’s budget and lifestyle. You need to have a goal to keep you motivated to save. And what better motivation is there than knowing that the money you save will finance your child’s education.

Normally the best stage to start saving for your child’s finance towards college tuition is at birth. If, however, you have not started, then the time to start saving is now. It is never too late to start saving.

The sooner you start saving, the more time there’ll be for compound interest to build up into a nice college fund for your child. Remember that each child should get his or her school finance savings fund.

You also need to decide the amount you intend to save by the time that your child reaches college age. There are many options available for you to choose from when it dollar amount. This means that you calculate the projected cost of public college tuition by the time your child is ready for college.

The other commonly used method, which many parents prefer, involves devoting a fixed percentage of income to their child’s future college costs. The idea is this: whatever you do, you have to have a defined goal. You should save as much as you can, whether it be a large amount, like several hundred dollars a month or a more modest amount, such as $25 to $50 each month.

A college education is an investment in the future of your child. If you truly want to see your child succeed, as all parents do, what could possibly be a better investment?

Contribute the Maximum

401K plans and IRAs offer the best opportunities to take advantage of tax-deferred savings and contributions from your employer. If you’re working, ideally you should contribute the full amount to your 401K plan that you can. But at the very least, contribute up to the match offered by your employer.

An IRA provides tax efficiency to set aside money for retirement. For example, by contributing to a Roth IRA (just one type of IRA), you don’t pay income tax when you withdraw the money (including gains, dividends and interest) assuming you are age 59- and the account has been open for five years. If your annual income is less than $95,000 for a single taxpayer or $150,000 for married couples filing jointly, you can contribute to a Roth IRA.

Develop a Support Network

This is the age of information. Most likely, you may have a cell phone, voice mail, pager and a handheld computer. You prefer to learn through conversation and communities rather than reading text books and reports. The same goes for financial planning. ‘Xers’ are much more willing to talk about their financial situation than their grandparents or even, parents. Embrace this new freedom. Schuldt recommends creating a community, either online or an old-fashioned investment club, and learn from each other. Whether you pool your money and start investing in the stock market or share investment tips and advice, communities offer a fun, easy way to get interested in your financial future. Or go to IHateFinancialPlanning.com to plug into a growing community of people who share a similar hatred for financial planning.

Keep Dreaming

What is that you really want? Home ownership? Early retirement? Financial independence? It’s important to understand your financial goals and to realize that your actions today either bring you one step closer to — or pull you one step back from — your goals. If you plan to buy a home in five to ten years, are your actions today helping or damaging your credit rating? Not only do you need a down payment to buy a house, you need an established credit history and a record of on-time payments.

The bottom line for ‘Xers’ is that you should ignore the marketing messages geared towards cynical, unmotivated slackers. It’s not too early to start planning for your future and saving for retirement, says Schuldt. Consider the big picture. The decisions you make today about your career, education, debt and retirement will stick with you and shape your future. So, invest in yourself. Start small. And ignore the stereotypes.

(ARA) – So, you were born between 1965 and 1978. Are you tired of the Generation X label and being portrayed by the media as a cynical, Xtreme sports-loving, body-piercing slacker? If you’re one of the 76 million Americans that are considered to be ‘Xers,’ you may see yourself more as an independent, career-minded, technologically savvy, young adult. As someone between the age of 22 and 35, ‘Xers’ most likely tune out the thousands of marketers with retirement messages geared towards ‘boomers.’ Insurance providers, investment companies and financial planners are virtually ignoring the millions of Americans considered to be ‘Xers.’ Meanwhile this misunderstood group continues to buy homes and select mortgage companies and retirement plans with little attention and relevant advice.

So, are boomers the only generation that should be concerned about their future? Absolutely not. Planning for your future can be tough for anyone, no matter what his or her age. But individuals between the ages of 22 and 35 need to recognize the important opportunity they have of starting early and understanding the basics, according to Randy Schuldt, vice president with IHateFinancialPlanning.com, a new Web site geared to the more than 75 percent of Americans who hate financial planning.

Schuldt offers some additional financial planning tips for Generation Xers:

Think Retirement

According to the 1990 U.S. census, the average American worker has only saved $1000 towards retirement. Pretty sad, isn’t it? To make matters worse, the average monthly Social Security benefit for a retired worker in 2000 was $804 (Source: U.S. Social Security Administration). You’ve heard it before, the sooner you start saving for your future, the better. So where do you start? First of all, just start. Consider putting away a little at a time — $25 or $50 a month – in a mutual fund or 401(K) account. If you’re 25 years old and put $25 away each month into an account earning 8.0 percent, you will have saved $58,099 by retirement at age 60. Compare this amount to the $14,940 you would save by starting when you’re 40.

Develop a Financial Plan

Whether you’re graduating from college, getting married or having a baby, you need to set specific goals (home ownership, vacation property, college education, retirement, etc.) and develop a financial plan for the future. To get started, consider meeting with a financial professional. A financial professional can help you get off on the right foot, by helping you develop a long-term financial plan that will make your hard earned money work harder for you.

Explore Life Insurance

If you’re still living the ‘Friends’ lifestyle and spend most of your time at coffee shops like Monica, Joey, Phoebe, Chandler, Ross and Rachel, you may not need to think about life insurance just yet. However, ‘Xers’ do settle down, get married and start families. If you have dependents (a spouse, children or aging parents) you need life insurance. The good news is that many employers offer life insurance as an employee benefit. But this may not be enough. First, talk to your benefits or human resources manager to learn more about their offerings and how to enroll. Then, see an insurance agent who offers insurance from major providers to determine if you may need more.

Deal with Debt

‘Debt is one of the biggest financial problems facing young adults,’ says Chris Newell, principal of Newell Financial Corp. in Little Rock, Ark. When it comes to paying off debt, Newell says to start high. Rather than concentrating on paying down a little of each credit card balance, find out the interest rate for each card — it should say on the monthly statement — and pay down the cards with the highest debt and interest rates.

‘First, make a pledge, ‘no more additional credit card debt,” Newell says. ‘Then, start paying off the highest debt cards. As soon as one card is eliminated, continue the same payments on the other cards. Never reduce this monthly debt payment amount until they are all paid off. You will have to be disciplined and pay substantially more each month than the minimum balance.’

Not Enough Money?

I believe that most people haven’t got enough money for everything they wish to have – the more you have the bigger your plans, and you have a feeling that you have less and less money.

Whether you have lots of money or just so-so, you need to economize and take proper care of your money ie your income, expenditures, savings and investments.

Below I give you 7 Golden Rules to a Financial Prosperity:

1) Always have several streams of income: never rely on one income from one source only.

2) As soon as you start to earn, start to put aside a certain amount to create an automatic money source: I remember I have always had my own portfolio since I was a child, and can tell you that I needed it several times. Even if you have property, you may find yourself in a situation when you need fast cash. In such a situation, you will not sell your property, but you can sell part or even the whole of your portfolio.

You don’t need to start your portfolio with thousands of dollars, you can develop it.

You only need to set a rule that you won’t touch it when you don’t need it, and keep it for vital urgencies. To buy a better car or a bigger house is not an urgency.

3) Always take care of your money personally: it’s not necessary to do everything personally as soon as you can afford it but never allow any other person to have a right to handle your money without your knowing, or your express approval. If you think that you don’t have time to supervise this or that it’s not important, you will have to find it later for much more unpleasant things when you lose your money.

Many of you will ‘hate’ me for what I’m going to say now and I will receive lots of disapproving messages but I have to say it: don’t even allow your spouse to do this – love and money is not the right association, and I know what I am talking about. Keep these apart.

Don’t supervise your investments and expenditures only – Always strictly collect your money. Never allow people to owe you – again: with no regard to how much money you have, always demand every dollar you earn to be paid to you.

4) Strictly distinguish between expenditures and investments: it’s very easy to put everything as cost or overhead: don’t do this. Apply an easy rule: expenditure or cost is money thrown out of the window – you can’t expect any return money on it, while investment is desirable (of course, not every investment is desirable): this should bring you more money, more property able to make you more money – the only questions you should carefully consider are whether you can/should afford such an investment at the moment, how much you’re going to get back, how fast and whether it is acceptable.

5) Keep your expenditures at the minimum with no regard to how much money you have: expenditures are killing for everyone. It’s useless to tell you stories about big fortunes lost by unwise costs. I’m sure you know many yourself from your neighbourhood.

6) Avoid loans, don’t borrow if you don’t know for sure you can repay. Never purchase anything on future incomes or promises.

Just a little example: if I have a notice that a payment is on its way to my account and I need the money today for some reason (however, I can’t see any reason like that – never mind), I can borrow. But, if I think I will sell 1,000 books next week, I mustn’t borrow.

7) You must always earn more than you spend. In case you don’t earn more than you spend, then you must spend less. In other words, you must always be in green.

If you think that you must swap your car every six months even if you should borrow, then it may easily happen that you won’t drive anything in a very short time.

I don’t want to waste hours of your precious time by long essays on savings and wise advice. Just adopt one principle and whenever you want to do something with your money (- whether it’s thousands or millions or just a couple of bucks), just think about it: take care of the pennies and the pounds will take care of themselves.