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Pay special attention to your personal finances

Fri Nov 7, 2008 | | Posted in Finances Savings


Savings.

These are extremely hard times. Now is the time to show how responsible you are in managing your personal finances. I have a few points that I like to share with you.

  • Get organized
    Like anything else in life, being organized in your personal finances is not tremendously hard and is well worth the effort. The easiest way of keeping tracking of your bills, the due dates and such is to get your accounts online so that you can pay your bills that way. When I get a bill – mortgage, credit cards, utility, phone etc. -, usually all bills have some grace period of 2 to 3 weeks. I schedule bills to be paid by the bank online a couple of days before the due date.
  • Be prepared for the unexpected
    Some of the most successful people in personal finance management often have emergency funds. Create a special account for any emergency bills that might come up. If you periodically put a part of your paycheck in that fund, you will find that it will grow rather quickly. It never, ever hurts to be over-cautious. You’ll be extremely thankful when you have a nice safety fund available when you really need it.
  • Use every cent of your money to make money
    Open up two accounts in your bank – Money Market Account and Checking Account. Ask your bank to have your MM Account linked to your checking account so that you can transfer money from MM account to your Checking account. Make deposits in Money Market account and pay your bills from your checking account. Never make deposits in your checking account. Do the transfer either by phone or on-line as needed.
  • Don’t be in a hurry to pay bills
    Set up a system for paying bills only when they are due. Don’t jeopardize your credit standing by paying bills late. Pay your bills when they are due – not before, not after.
  • Debit Card vs Credit Card
    A debit card does not have grace period like a credit card. Try to make payment with your credit card and always pay the total amount before the due date. When you do have to pay with your debit card, make sure you have enough money in your checking account.
  • Avoid consolidating credit card debt
    Get to the root cause of the problem. Try to find out why you got into debt trouble in the first place. Overspending almost always involves emotional and psychological issues that are not going to go away by treating the symptoms.
  • Research thoroughly before signing service contract
    Service contracts are very profitable for retailers and equipment vendors. Research vendors in your area, select more than one for back up; use their services only when you need them.
  • Consider leasing instead of buying
    Most accountants suggest to almost always buy for personal needs and think about leasing for your business. Leasing for your business can be the most sensible approach to many types of capital investments including vehicles. It frees up your cash as well as line-of-credit for your business.
  • Don’t pay your taxes by credit card
    You will be charged a “convenience fee” of about 3 percent by IRS. This is in addition to the interest the credit card companies charge. Almost any other way to come up with money you need for your tax payment will be cheaper.
  • Don’t over-pay your quarterly estimates to IRS
    When you over-pay, you give the government interest-free loan. The least expensive way to pay your tax liability is to have estimated payments come out as close as possible to the amount owed.
  • Seek advice if needed
    Sometimes we all need a little friendly advice or help. If you are stuck on how to deal with a certain financial situation, never be afraid to ask a friend or family member for advice. If you are new to some things such as buying a house, financing an education, etc, then you would be crazy to not seek some advice. You can learn a lot from people who have been through things before.

As always, if you want to be on a path of financial success:

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Information contained herein is general in nature, and is provided for informational and educational purposes only. Past performance is no guarantee of future results. Talk to your financial adviser.

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