What Makes a Good Budget?

Are there specific actions you can take to make sure your budget is solid? Is there even such a thing as a good budget? According to Deborah Fowles, former guide at the About.com financial planning section,

“In all the the budget bloopers and and blunders I’ve seen, the same few problems keep rearing their ugly heads.”

With that, Deborah provides the top ten most important features of a successful budget. A few of those features include:

1. Categories that fit your personal situation and your spending habits, not somebody else’s.

2. Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you’ll soon tire of.

I’ve written about these exact points before. If your budget is too detailed, you’ll spend way more time than you need only to quit in frustration. And why stick to a category because someone else suggests it? Use categories that make sense for you.

And the most important feature in my opinion,

“Realistic written goals. Budgeting isn’t about tracking your costs, it’s about setting financial goals (saving for a downpayment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, traveling, etc.) and finding ways to meet them. Without goals, your budget is just a pair of handcuffs.”

Budgeting is a goal setting and achieving exercise not, as many assume, an arbitrary spending restraint system. It’s only restraining in that you’re funneling your spending (and foregoing something in the short term) in order to fund a long term goal. A very satisfying exercise indeed.

Read the rest of Deborah’s article.

Safe Way to Invest in Gold?

With all the talk about the demise of the dollar, there’s been even more talk about gold. No, not the kind at the end of the rainbow either. The dollar (or currencies in general) are inversely related to gold investment wise. So, when the dollar is strong (rising in value), gold is weak (falling in value). When the dollar is weak (falling in value), gold is strong (rising in value).

But, investing in gold kind of feels…sleezy. Like it’s something I’m not supposed to do. Is there a way to invest in gold without the risk? Or at least a little lest sleaziness? According to Shaun Connell from Learn Mining News on a guest post at FreeMoneyFinance:

“…the best gold investment isn’t necessarily physical bullion – but mining stocks. Gold mining stocks are a safer way to indirectly invest in gold than physical gold bullion.”

How? Why? Because gold mining stocks are less volatile, more secure, and give income. However, investing in mining stocks doesn’t mean you should forego investing in physical assets at all:

“There are still reasons to own the physical product – hedging against a worst-case economic scenario, investing “off the grid”, etc.

Read Shaun’s article at Free Money Finance.

Survey is in – HMO Good Congress Bad

Uttering the three letters H-M-O gives me the creeps. Nameless, faceless bodies that tell me which medical specialists I can see and which ones I’ll have to fork out a few extra dollars for. But, HMOs fair much better when compared to another nameless, faceless body…Congress.

In a recent article by Daniel Indiviglio of The Atlantic, he shares the latest results of a confidence survey recently completed by Gallup.

The results? People have more confidence in banks, big business, and their HMOs than in Congress. Here are the full results:

Read the full story at Gallup.

One Page Guide To Personal Finance

Everything you ever really needed to know about personal finance on just one page:

Read the original source document on TheSimpleDollar.

Kicking Your Job to the Curb

Would you quit your job if you won the lottery? Duh, right? For those of us working on creating our own lottery (i.e. building our tiny, solo businesses), how do we know when it’s time to quit? Sierra Black from ChildWild, posting on GetRichSlowly attempts to answer the “when do I quit my job?” question:

How do you know when it’s time to quit your day job and go full force into your dream job? Sometimes the date is chosen for you. You’ve gotten into law school, or been hired as an English teacher abroad, and your new contract spells out the dates.

But if you’ve been running a side business, you’ll need to choose a date and leap. You’re probably ready to take that step if:

  • You have substantial savings built up to cover the financial risk of quitting your regular job.
  • Your “side business” is demanding more time from you than you can give it without harming your current career and family obligations.
  • You have ongoing relationships with other professionals and with clients, so you know where your next paycheck is coming from.
  • You can reliably expect to make enough money to cover your living expenses.
  • You’ve been doing this on the side for awhile, and you still love it.

Not to be a party pooper but money—its frequency and size—combined with your current familial responsibilities will largely determine whether you feel comfortable enough to quit your job. But realize you may never have the full confidence or reassurance to quit. Quitting is an act. Just do it.

Read the full article at GetRichSlowly.

One Skill to Get out of Debt

Budgets. Collection agency agreements. Credit card negotiations. Debt reduction plans. Canceling cable. Eating Ramen Noodles for the rest of your life. These tips are all part of the getting out of debt echo chamber. Forget all that. What if there was one thing you could do to get out of debt? One thing that, if you stuck with it for an extended period, would truly help you get debt free? David Bakke from MoneyCrashers states that, yes, getting out of debt boils down to one principle…

“Understanding the difference between wants and needs with pure objectivity.”

What the heck does that mean? It means that you buy something for two simple reasons: 1) you need it or 2) you want it.

“So if you had to list out you needs, what would they be? I would start off with food, shelter, transportation, electricity, and the list goes on. If you really break down your needs in life—the only thing that you truly need is a roof over your head and food.”

This reeks of simplicity (I already hate it). David even gives us a simple method for going through this process. It’s in asking the question, “Do I really need this?” David explains that asking this question…

“…allowed me to get out of debt at a fairly rapid pace. It wasn’t until I incorporated this question into my everyday life that I fully realized how much unnecessary spending I had in my life.”

I’ve asked myself this question before but it was for larger purchases so the answer was more of a cop out. “Of course I can’t have the iPad.” In reality it was too easy. I would never arbitrarily spend $500 without talking to my wife first. And then the conversation would involve much laughing and a round of “just kidding!”

But I’ve never really asked myself the question when I buy that four $4 coffee or $25 book. But now I will. And I’ll report the results here. And let me know if this is something you’re doing, have done, or would like to do. Should we start a club?

Read David’s post on MoneyCrashers.

Coupon Booklet – Pay Yourself First

Do you have a coupon booklet for your mortgage? What about your vehicle? Bad piece of furniture you bought three years ago and threw away last year? It’s about time you create your own coupon booklet(s) to pay yourself first. A savvy coupon “bookleter” shows you how it’s done here:

This is a great psychological motivator to keep you humming along your with your savings.

Can Money Buy Happiness?

We’re supposed to say no but, according to a recent Gallup World survey, most people think money can buy happiness:

“Pulling in the big bucks makes people more likely to say they are happy with their lives overall—whether they are young or old, male or female, or living in cities or remote villages, the survey of more than 136,000 people in 132 countries found.”

But this may have more to do with our perception of how we think people with more money that us should feel and act:

“…people may initially define their happiness by income because they are comparing themselves to the ubiquitous Joneses…But here’s something to consider: Many of the people you envy for their outward appearance of wealth are probably just as jammed up with debt as you are – or a paycheck away from being broke.”

So our answer to the “money and happiness” question may be based more on what we think money will do for us at some point in the future rather than how money actually affects us today. And all based on the perception of someone else. It truly is about keeping up with the Joneses.

What do you think? Has your current income bought you any happiness? Are you trying to keep up with a lifestyle you don’t want or enjoy?

Read the entire article at the Washington Post.

Improving Your Job Change Odds

Seems like if you have a job you should be happy with that fact alone right? But, if research bears out, if you’re not happy with the job you have, you’re in good company. A report released in January reveals that, despite high unemployment, job satisfaction is at a twenty year low. Whoa. That’s a lot of unhappy campers out there.

So, if you have a job but you’re wanting to change jobs, the Wall Street Journal has a few tips:

“Re-evaluate the situation. Think about why you’re dissatisfied at your current job. If you aren’t challenged enough, there might be a way to make a change without leaving.”

Maybe it’s not the job. Could be the antagonistic coworker who grates on your nerves. Or the boss who takes more breaks in an hour than you take all day. Working within your current situation may yield the better solution.

“Reach out. If the opportunities just aren’t there or you’re simply dissatisfied and aching to move, tap your personal and professional network for information on who is hiring.”

I think we’ve all been guilty of “cube” vision. We think in terms of our company. Our company’s industry. Our company’s sales outlook. But there’s a big world out there with diverse and growing industries and companies.

“Do your homework. When you land an interview, use the opportunity to learn about the company. You should get as much from them as they will try to get from you, says Sharon Armstrong, a human-resources consultant in Washington.”

Find out if the company is a good fit for your personality. Keep the salary in perspective. Salary is one barometer but not the only barometer. Unfortunately, salary is usually the single largest factor in a job search.

“Leap carefully. Whatever you do, don’t quit your job until you’re certain you’re hired, says Ms. Armstrong. “Even if a job offer seems imminent, there are a lot of things that can happen at the last minute.”

I work in the defense industry and have seen this happen more often than not. A job can depend on the company landing a large contract. A division is merging and looking to add staff. A whole myriad of external circumstances can affect whether or not you get the job. Make sure you have a signed contract and guaranteed start date before you quit. Then you can celebrate.

Read the full article at the Wall Street Journal.

Change Your Thinking – Lower Your Expenses

So you think you’ve lowered your expenses as much as you can? What if you could lower your expenses just by changing how you think? RJ Weiss from GenYWealth, in a guest post on FreeMoneyFinance, gives two “mind hacks” you can use to lower your expenses.

The first is to apply the “reverse 4% withdrawal rate” to your estimate retirement assets:

“For every $10,000 less you spend each year, is $250,000 less you need to accumulate to retire. If you can manage to get your expenses down to $40,000 a year, you only need $1,000,000 in a retirement portfolio. Could you live on $30,000 a year? Then you only need to save $750,000.

If you know your annual expenses, try doing a simple calculation. Take your annual expenses and divide them by .04. This is roughly (a lot more goes into this calculation) the number you will need to accumulate in your retirement portfolio, to maintain your current standard of living.

So, instead of trying to accumulate as much investment cash as possible now, try reducing expenses now. The less you can live on today, the less you’ll be able to live on later in life. This certainly isn’t advocating a pauper’s life but rather a more realistic and fulfilling life.

The second “mind hack” is to start thinking of expenses in terms of your life. The example given is in terms of a $400 car loan (which most of us can relate to) for someone who makes $30,000 per year. The car loan to salary ratio is 16%:

“What if instead of comparing the ratio between payment (car payment) and monthly income and calling it a day, you took that 16% and multiplied it by 240, the average amount of workdays in a year.

What does this number represent? It shows you how many days a year you’re working for your car. In the example above, you would be working 38 days a year or about all of January and February, just for your car.

Amazing the difference especially when most of us start with the typical “how much can I afford?” type questions. We should instead be asking, “how much of my life am I willing to give in order to have this…thing?”

What about you, have you been able to change your  thinking in a way that has impacted your finances?

Read the rest of the article on FreeMoneyFinance.

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