Monthly Archives: June 2016

What Kind of Investing is Better

One of the most dangerous investment attitudes (along with “this time it’s different”) is the complaint that “my investment isn’t doing anything.” The observation says more about the speaker than it does the alleged short-comings of the investment.

Of course this isn’t about lack of activity at all. Last week the market was really active – actively tanking. I’m pretty sure this isn’t the activity those people had in mind. If the alternative is being trapped in a nose-diving market, “doing nothing” can seem pretty attractive.

When people say the investment isn’t doing anything what they mean is “it isn’t making enough money.” There’s an old Wall Street sales pitch: “Your money isn’t working hard enough for you so hire me and I’ll fix that.” When I was a stockbroker, hearing that phrase always made me imagine the speaker physically whipping the client’s portfolio to make it pick up the pace like some poor galley slave in a Cecil B. DeMille movie.

I remember a revealing cartoon of a broker telling his client “Yes, your money was working for you but it quit and now it’s working for me.”

How to Plan Finances for Your First Baby

If you’re getting ready to welcome your first baby, you probably recognize that your financial situation is going to change. With diapers, wipes, baby furniture,doctor visits and so much more, you’ll have to account for some new expenses. And if one parent will be staying home with the baby, even if it’s just a temporarymaternity or paternity leave, you may be facing a reduction in income at the same time.

It’s enough to stress anyone out. But there are some simple ways to plan ahead to make the transition as smooth as possible.

Here are four steps to help get you ready.

1. Track your current expenses

The first step in preparing for the future is knowing exactly what the present looks like. Having a handle on how much money is currently coming in and what it’s being spent on each month will provide the baseline you need to make educated decisions going forward.

You can go over your expenses yourself by looking at receipts and bank statements, or you can use tools like GoodBudget.com and You Need a Budget.They make budgeting easier by automating most of the process, pulling in transactions from bank accounts and credit cards and helping you categorize them.

2. Estimate your new expenses

Having a baby will add some expenses to your monthly budget, but you can get a handle on them ahead of time.

Babycenter has two great tools for estimating the overall costs of raising a childand the specific first-year costs. Use them to get a ballpark figure for baby’s first year, then divide that number by 12 for a monthly amount you can plug into your budget.

3. Build a cash cushion

Take that estimated baby budget and start setting the monthly amount aside insavings account now — before the baby gets here. This will do two big things for you:

  1. It will help you adjust to your new budget before you have the additional stress of caring for a newborn.
  2. It will help you build up a cash cushion to handle unexpected expenses that come up after the baby is born, so you won’t have to resort to credit cards.

 

4. Keep the lines of communication open

Having a baby is a huge change, and no matter how well you plan, there will be plenty of ups, downs and surprises.

More Than One Way to Deal With It

unduhan-8Financial emergencies come in all shapes and sizes. They are, by definition, obligations that you haven’t planned for and that will be difficult to pay. Whether you should have anticipated an expense is irrelevant once you’re faced with it. If you must pay it soon, and if not paying it will bring serious consequences, then you have a financial emergency.

Many people have an emergency fund — money set aside for no other purpose than to bail them out of a crisis when they have no other cash available. Even if you don’t have such a fund, there may still be ways for you to make room in your budget to accommodate the urgent expense. And if you do have an emergency fund, you can use those same methods to put off having to dip into it, which will make your “rainy day” money last longer — or preserve it for the next unforeseen expense.

Reducing regular expenses

Your first line of defense in a financial emergency should simply be changing the way you spend money. In other words, tighten the belt. Delay, reduce, or do without certain things so more income can be used to meet the emergency. With smaller unexpected expenses, you may take this first step instinctively and not even think of it as an emergency. Perhaps you get a costly parking ticket and, because of it, decide to skip taking your family to the movies. You rent from Redbox instead and pay a few dollars instead of $50 or more.

Redirecting cash saved for irregular expenses

“Flexing” your spending to deal with an emergency between paydays only goes so far. You may need to reduce spending over several pay periods to cover the emergency — but you still you need the money now. Before taking it from a designated emergency fund, look to your next line of defense: savings earmarked for an annual or irregular expense, such as a vacation, home or vehicle maintenance, or a bill that gets paid once a year.

Setting aside cash for these irregular expenses is part of any solid budget. Of course, if you tap such funds in an emergency, you’ll need to pay yourself back before these bills come around. Do that by continuing to flex your spending over multiple pay periods until the reserves are restored.

What happens when you fully flex your spending and drain your cash reserves? Will you have to sell off belongings, liquidate investments or compound the problem by borrowing money? You can avoid pawnshops and payday lenders if you have an emergency fund on top of your earmarked cash reserves. Selling stuff is usually the last line of defense.