My Personal Finance Blog

One of the biggest things you can do to help your household out is to create a budget. This should be something that you do together with your spouse. By working together you should be able to come up with a great budget while eliminating any arguments or issues that may come along with selfish choices. Now, there are many ways to balance the budget but not all of them are created equal. So let’s jump right in and look at the best way to take control of your monetary situation.

The first step in creating a budget is to accurately find out your monthly income. This should include your monthly wages and any other sources that you may receive money from on a monthly basis (ex: rental properties, interest, etc.). When looking at this you should include every member of the household. Next you need to figure out what your monthly expenses are going to be. When you actually write down these bills it can show you clearly where your money is going every month. This is usually a fairly decent sized list. This list should include things like education, retirement, any of your regular bills (rent, mortgage, insurance, etc.). You should also include any vacation or entertainment costs as well.

Now you need to sit back and see how much you spend on each bill or expense. You will not only have monthly bills but also quarterly or annual as well. After you know how much you need to spend you can then compare it to your monthly income and it will show you where you stand financially. Now the final step is to balance your budget. This can show you where you may need to cut back or where you have extra money left over. When it comes down to it a budget can be the best future investment.

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The history of money

At different periods of time and in different parts of the world many different commodities have served as money. These commodities were: cattle, sheep, leather, fish, tobacco, tea, salt and others. Commodity should be fairy durable, easily divisible and portable that to serve effectively as money. None of the above-mentioned commodities possessed all this qualities, and in time they were replaced by precious metals, first by silver, later by gold. The coins came into use, when metal was cutting into definite weight, when the payment was made. Paper money first came into use in the form of receipts given by goldsmiths in exchange for deposits of silver and gold coins. Then, when goldsmiths became bankers their receipts became banknotes. That’s how the first banknotes came into existence.

The London Stock exchange

A stock exchange is a highly organized financial market where bond, shares and other securities can be bought or sold. It function is to put those who wish to sell securities in touch with those who wish to buy them. Stock market business is worldwide. There is London, New York, Tokyo, Paris, Amsterdam, Brussels and other mega policies are the famous centers of stock exchange activity. The London Stock exchange one of the biggest financial centers. London has had a stock exchange for over 200 years. It moved to different places and different buildings. In 1986 “Big Bang” – legal reforms – was implemented and Exchange was change radically. Now it has a screen-based trading, stockbrokers deal in securities through telephones and computers. The Russian Stock Market is not so successful now, but it has a tremendous potential and of course our market soon will become one of the main financial centers.

Personal finances

Financial security is the most important thing in family finances. This is not the same thing as being rich; it means being freed from the need to think about money, living within your means. For day-to-day living you need ready cash but you also need a bit in reserve for a rainy day. The first thing to think about is your current account and how much is in it. Our family, for example, keeps all of our money in a saving account with a bank. And all of us have credit card, because credit card is a helpful way of handling with unexpected expenses. But credit is always costly, and of course it’s just another form of debt. For some people, however, living on credit is a normal way of life. There is a credit from suppliers, hire purchase and loans from banks are the forms of consumer credit. Our family also is not afraid to use consumer credit. We think that credit enables us to enjoy the use of goods and services before we have fully paid for them. And, of course, we are not afraid to use consumer credit because we have a constant income. People earn money in different ways: they get an income from employment, from keeping money in a saving account with a bank, from renting property, from investing in shares in the stock market. For example our family income comes from different sources. The largest source is my parent’s employment and return from their savings. Also we have a little income from investing in shares. Nearly all money goes on rent, utilities, transport, clothes and food. Our income is not large, we a middle-class family. The worst-off people are the unemployed and the homeless. For people living at a subsistence level even buying essentials is a struggle. They sometimes take out loans, borrow money from banks, but very often they are unable to cope with repayments. Banks are not willing to lend money to such people. My personal income is not large, but it is enough for me. My parents give me a pocket money and I get a grant. All my income I spend on leisure and entertainment. I try to be punctual about my finances, but sometimes it is very difficult for me and I don’t do it well.

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Most families have income flowing in from different means – salary from work, returns from investments and from loans etc. Cash flow management when mismanaged can upset the regular flow of money into the family income.

As a first step identify and analyze what are the cash needs of the family; estimating the actual amount that is required. It is important to plan for this cash flow by identifying an appropriate resource to meet the needs. By planning for money management the family can sustain itself during financial crisis like job loss or bad debt.

Budgets

One of the primary things that should be done on a regular basis is ‘budgeting’. Family budgets should focus on reducing overall debt situation and also increasing the cash flow. Online personal budget calculator can be used for monthly budget planning. They can also be utilized to track bill payments, review bank accounts and getting timely alerts on payments, balances etc.

Remodel Lifestyles

The next thing to do is to evaluate every purchase that the family makes. Too many commitments, even if it money that has to go for investments, should not make a dent into cash remaining for family use.

Remove Debt Factor

Credit card usage is an important factor; and consumer loans are a contributing factor here. Excessive credit can ruin even simple pleasures like family get-togethers etc.

Maintain Liquidity

Liquidity is an important factor to be considered for emergency situations. Good cash flow management with the help of efficient budget planning software can improve existing liquidity conditions.

Good cash flow means the family finances are being managed efficiently. It is surely an indicator of a family’s well being and prosperity.

Life is a constant juggling act. Every day we juggle tasks, time, people and goals. This is especially true when it comes to balancing financial goals, whereby time is not the scarce resource, but money is. The future can seem especially daunting for young families balancing retirement funding goals and college planning for their children. When a dollar can only stretch so far, how can you effectively plan for both?

Advanced education is vital, but it comes at a cost. Short of saving for retirement or buying your dream home, no other expense has that great an impact on the family finances. College costs increase at about twice the inflation rate. Current increases have averaged 5% to 8%. In fact, it is estimated that by 2020, a four year college education could be as much as $287,000 at a private institution and $133,000 at a public one, based on College Board estimates. Ouch. But, are you really prepared to sacrifice your own financial security during retirement for your child’s education?

As expensive as it is to send junior to college, retirement is even costlier. Sadly, nearly half of American households are not saving at all; and two thirds are not saving enough to retire adequately. Couple that challenge with a desire to fund your child’s education and you may have a serious economic dilemma on your hands.

Paying for School

College expenses are traditionally paid from one of several sources: parent’s current income, financial aid/scholarships/grants, and parent’s personal savings. Over the past several years, however, a proliferation of college

savings programs have been introduced including prepaid tuition programs, including:

Coverdell Education Savings Accounts. Formerly called Education IRAs, a Coverdell ESA allows you to put $2,000 away each year per child (if eligible), and you can usually invest the money however you like. Distributions

are tax-free when used for qualified elementary and secondary education, as well as qualified college education

expenses.

Prepaid Tuition Programs. Prepaid tuition plans are college savings plans that are guaranteed to increase in value at the same rate as college tuition. The main benefit of these plans is that they allow a student’s parents to

lock in tuition at current rates. While the state plans vary, if the student attends an in-state public college, the plan

pays the tuition and required fees. If the student decides to attend a private or out-of-state college, the plans

typically pay the average of in-state public college tuition.

529 college savings plans. These plans are a popular choice because they offer the account owner control and flexibility, combined with special income tax and estate benefits. Section 529 college savings plans are tax-

exempt college savings vehicles with a low impact on need-based financial aid eligibility. Unlike prepaid tuition plans, there is no lock on tuition rates and no guarantee. Investments are subject to market conditions, and the

savings may not be sufficient to cover all college costs. However, with this added risk comes to opportunity for potentially earning greater returns.

Today, there are many choices available for parents, but the most important consideration in planning for college or retirement is to start saving as early as possible. The earlier you start to save, the lower the regular contributions will have to be. It’s never too late, or too early to start.

Set Priorities

It’s not easy to be a disciplined saver, but there is no way to survive this funding conundrum without it. In an age where instant gratification is a way of life, it’s tempting to spend today and worry tomorrow. Spend less and save more, while unpopular advice, is necessary advice. The alternative will get you nowhere. So, setting and maintaining a budget will

be critical to your success. It’s nice to spoil our children, but do they really need fifty-seven Xbox games in their collection? Is that trip to Disney really necessary every year? Sacrifice today will help assure a better future tomorrow.

Get the Kids Involved

Parents should be straightforward with their children about how much they will be able to afford. If the child wants to go to a “name-brand” school that costs $35,000 a year, but the parents can only afford $15,000 a year, the student can take part in the choice to find alternative financing or go to the more cost effective school. Remind them that if mommy and

daddy don’t have enough money in retirement, because they spent all their money on college funding, they should get used to the idea of having them as roommates to support when they’re all grown up. So, run the numbers together to see which universities your family can afford. Compare the costs of attending public vs. private institutions and consider the possibilities for financial aid.

The federal government has made it possible for virtually anyone to attend college, despite cost and despite parent’s income. Student loans and parent loans are readily available at low interest rates and payments are often deferred until the student graduates (for most full time students). Too many families incorrectly assume that they won’t qualify because they feel they are too wealthy, but this is not the case. The application process may be somewhat cumbersome, but the benefits far outweigh the (time) costs.

The best financial aid, of course, is free money. Much of the student financial aid comes in the form of loans, but there are grants and scholarships readily available for that patient enough to search for them, and qualify for them.Check out The College Board for more information about college costs, scholarship search strategies and financial aid.

Working While Studying

Parents who wish to only partially subsidize education for their kids (or not fund it at all) have a number of alternatives.Students can apply for loans, work-study or (gasp) get a job. Asking a college student to work and/or take out loans may not seem attractive now (especially for the student). But, there is something to be said about a child that works his way through school. They’re often hungrier, eager and motivated to succeed. Those traits can take you far in life. In fact, some of the best and brightest professionals have managed to do well in school while also managing a job, present

company included. After all, the kids can get student loans to fund education, but when is the last time you heard of retirees taking loans to fund their retirement?

Consider a Whole-Portfolio Approach to Investing

Don’t want to bother compartmentalizing your “pots of money”? No problem. Many of my clients have opted for a more holistic planning approach. A whole-portfolio approach takes into account all of your taxable and tax favored investment accounts. With this approach, you can always earmark certain buckets of your portfolio for certain things. But putting it all

together in one portfolio provides a big-picture view of your overall asset allocation. That way you can manage your total portfolio risk at any given time.

This approach allows you to incorporate your various goals, including college and retirement, into the big picture as you plan for future spending needs. You may find that the financial pie is actually big enough for both, or you may need to adjust one goal or another.

Closing

So, which one is it—college or retirement? Ideally, you don’t want to sacrifice one goal for the other. Try to balance the two so you don’t shortchange your future or your children’s in the process. The decision to put your child’s education before your own retirement is not only an economic decision, but also, an emotional one. Parents feel a sense of obligation to provide a better way of life for their kids, but if they plan carefully, they won’t have to risk their own well being in order to accomplish this.

The consequences of funding education before funding retirement may lead to inadequate retirement funds or prolonging your work years. The choice is yours, so choose wisely.

Cathy Pareto, MBA, CFP®, AIF® is the Founder and President of Cathy Pareto & Associates, Inc. A fee-only financial planning and investment management firm.

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The dwindling economy is taking a toll on family finances across the globe. Now more than ever, consumers are looking for ways to minimize cost and maximize efficiency. Clothing is no exception to this rule. Shopping for apparel is a necessity that worries families as a whole. How can you find apparel for the whole family in today’s economy?

Here are five great tips for finding family apparel that is durable, affordable and stylish. Using all five of these tips simultaneously will transform you into a savvy shopper with a well-dressed family.

Shop Online

Shopping online is a great way to cut down on fuel costs. You can save time, energy and money by browsing collections of clothing items with the click of a button. The selection of items online is vaster than that of any department store or shopping mall. You can quickly locate items and compare prices at hundreds of different retailers to get the best price on fashions for the whole family. Practice comparison shopping and save today.

Shop for the Whole Family at Once

While shopping online creates the added cost of shipping, you can maximize your online shopping experience by accessing retailers that carry fashions for the entire family. Shop online for mom, dad, and the kids in one simple location. Larger orders often qualify for free shipping, and you can stock up on the latest styles for the whole family. Shopping for the whole family at once also saves the time, energy and fuel costs associated with traveling to a variety of different specialty stores in town.

Shop End-of-Season Clearance Sales

End-of-season clearance sales are the best way to get items at rock bottom prices. If you plan ahead to purchase items like swim suits and winter coats, you can expect to find savings up to 80% off. Retailers feature end-of-season clearance sales for the whole family, and you can expect to stock your shelves with great bargain items for all. From clothing to accessories, end-of-season clearance sales are the best way to save money in these troubling economic times.

Stock Up on Family Favorites

Certain items are absolute necessities in family fashion, including hooded sweatshirts, basic t-shirts and outerwear like coats and hats. It is easy to find these popular items, and when you find a style that your family likes, stock up on it. Your family’s favorites might include a specific color scheme or even team wear for a local sports team. Be on the lookout for these wardrobe staples at all times.

Buy in Bulk

If you have children, then you know that they can wear through clothing quickly. For family fashions, it is beneficial to make purchases in bulk, especially on the basic necessities like t-shirts, socks and underwear. Many online retailers feature special discounts for bulk purchases. The more you buy, the more you can potentially save. Dress your family in the basic essentials by making use of special bulk pricing with select retailers.

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