As you know, I’ve partnered with Shalena Diva to provide financial education tips to her audience. Many of us have seen the photos of 50 Cent after he lost all that weight for a new role, but how many of us thought about the financial lessons that we could learn from it? There are 3 lessons to be learned from 50’s weight loss and I share them in this week’s video for Shalena Divas’s site.
Have you ever pulled a $20 out of the ATM and two hours later you have no idea how you spent the money?
That’s why you need a spending plan. Most of us spend small amounts of money everyday on things that we don’t event remember buying. That $1 soda at work takes up $240 a year. How many times have you walked into a store to grab 1 thing and come out with waaaaaay more than just 1 thing? All this extra spending on small things is part of the reason you may be in debt.
Having a spending plan is a way to help you recognize what you’ve been spending your money on and what changes you may want to make. It works like this:
1) Go through your bank statements and credit card statements. Put the money you spent in categories so you can see what you spent your money on. I use a software program because it’s easier than writing everything down. Notice all the money that you spent on non-essential items.
2) Don’t freak out when you see how much money you waste every month.
3) Make a list of your fixed expenses; the bills that you have to pay every month. For example, your rent/mortgage, lights, water, gas, car insurance, credit cards, etc.
4) Make a list of your variable expenses; the bills that you have to pay sometimes. For example, your yearly payment for your magazine subscriptions, your quarterly tax payments if you’re self employed, etc.
5) Make a line on your list that says, “me”. You are going to start paying yourself every month just like you pay everyone else. Creating, or adding to, an emergency fund is one of the main reasons you need a spending plan. Take all that money you’ve been wasting and put it into an account that you can use when you’re in a jam. I suggest trying to build up 6 – 12 month’s worth of income. When an emergency comes, and there will always be an emergency, you’ll be ready.
6) Make a line that says, “retirement”. I don’t care if you haven’t even opened a retirement account and you can only put $5 in it. You’re going to start putting money aside for your old age. As your account swells with cash you can take time to think about where you’d like to invest it. The first step is to start. The more you put away now, the less you’ll have to worry later. Compound interest will make a huge difference in your retirement lifestyle.
7) Whatever money you have left, go wild! You know what your fixed expenses will cost every month, what your upcoming variable expenses will be, you’ve put money away for your emergency fund, and you’re started contributing to your retirement account. The money left over is called your “discretionary income”. Take this money and enjoy yourself knowing that you’re doing everything you need to be doing to become, or stay, financially stable.
If you find that you don’t have enough income to cover all your expenses listed on your spending plan, then you have two choices. You’re going to have to increase your income or reduce your expenses and no, cutting out saving for your emergency fund and/or your retirement fund are not options.
You are responsible for your life. You have the power to be financially stable, or not, by making smart choices…… and that’s why you need a spending plan.
From US News:
In tough economic times when everyone’s focused on keeping what they have, giving freely is still important. Already, charities are feeling the pinch that comes with a severe recession, and many parents are wondering just how much they’ll be able to pass on to their children. Since it’s likely that you’re focused on staying afloat—and working with less money—it’s important to find the most efficient ways to give. With help from Debby Cochran, a lawyer and estate planning specialist at Cochran and Owen in Tysons Corner, Va., U.S. News offers advice on how to make sure your giving goes exactly where you intend with the least amount of hassle:
1. Giving to your children. Everyone wants to provide for their children and luckily, using gifts to transfer wealth is fairly straightforward.
The basics: Giving gifts to your children is a way to distribute your estate without taking a huge tax hit. But it’s important to start early, since there are limits on how much you can pass on each year. If you’re married, a couple can give up to $26,000 tax-free to as many individuals as they’d like each year (the limit is $13,000 for gifts from singles.) Above that limit, gifts are still tax-free but they count against a lifetime gift of $1 million per individual as of 2009. Gifts over that limit can also overlap with estate taxes, and you’ll have to file a Form 709 gift tax return. If you expect to hit that $1 million limit in your lifetime, Cochran says now might be the time for some extra giving, since assets that have fallen heavily in value lately but could later recover are counted at their market price at the time of the gift.
Consider a loan: Straightforward gifts are great, but for larger amounts, it might be a good time to consider a loan. Right now, low interest rates in general mean rates on inter-family loans are at rock-bottom levels: as little as 2 percent for medium-term loans (three to nine years) with longer-term loans in the still-cheap 3 percent to 4 percent range. Rates are usually set by the Applicable Federal Rate, published monthly by the IRS here. If loans are set at or above those rates, they can be given without incurring incurring gift taxes. If, for example, you son or daughter need a $300,000 loan to by a house, you can lend them the money at the low rate and then forgive the debt tax-free at the gift rates mentioned above. Bottom line: Family loans have a tax advantage and better rates than most banks are offering at the moment. “You can get rid of appreciation tax-free,” Cochran says. As for finding a lender, inter-family loans are available online through “social-lending” sites like Virgin Money for relatively modest fees.
To read the rest of the article visit US News.