The Amateur Financier

(It’s Thursday, and as with most Thursdays, it’s time to share articles from authors other than me.  This time, it’s a reminder about the importance of planning for financial success, even when you don’t have two quarters to rub together.  It can be frustrating at times when your finances aren’t doing well (believe me, I know), but it’s important to do your best to get things under control.  How do you do that?  Well…)

If you are just starting out in life it can be very frustrating reading personal finance blogs which give you useful tips about the best ways to save money and grow your assets or whatever. I mean, cutting costs and saving what you can is fair enough, but if you are still at that point in life where you don’t often have much left at the end of the month, what can you do?

Well contrary to what you might think, there is plenty you can do right now to help insure that you are able to build your way to financial success in the long term. It’s not all about saving money you haven’t got; it’s about planning and getting the right attitude:

Start Keeping A Budget

Before you roll your eyes and think this is a typical money saving article; hear me out. If you really can’t spare a penny right now, fair enough – that is no reason not to budget though.

Firstly, budgeting is most important when things are tight, because a slip up right now could cost you in the future. More to the point though, budgeting is a great habit to be in and habits are best formed early on.

If you start keeping a simple but accurate budget of your day to day spending right now when you need it you will likely keep that habit in the future when your income is larger and when you might otherwise feel like you can let loose a little. This will help to ensure that no matter what your finances look like you always have half an eye on your long term success.

Set Goals And Milestones

Don’t just dream about what you would do if you were on $100k a year, or if you won the lottery or whatever else. Start getting into the habit of setting yourself small financial goals and realistic milestones toward them.

Ok, maybe you can’t save anything right now, but once you have paid off that loan, how much will you save each month? Or when you get a raise or a better job how will your budget look? Paying off your debts could also be a milestone.

Actually writing down the numbers and figuring out the timescales will help you to assess your progress and will also motivate you to try harder. If you have virtually nothing left at the end of the month, a relatively small raise could transform your finances and perhaps in a small way change your life – now that is motivation.

Learn About Investing

It’s hard to be enthusiastic about investing when you don’t have anything to invest, but now is the best time to learn because the moment you have enough money to consider your investment options you want to be able to get started.

Taking the time now to understand the basics of currency trading, financial markets and basic investment strategies will enable you to get your head around the options and to figure out what your strategy will be when you have the funds.

Best still, you might find that you are already in a position to get started. You don’t need thousands or even hundreds to make investing worthwhile and just a couple of dollars a week is a great start and a great education.

Understanding this process now will ensure that you always make sound and considered investment decisions in the future when you might be playing with much larger sums of currency.

Continue Reading And Taking Action

Get into the habit of reading some good advice each week about managing your finances, and make sure you find something to actually take action on. Small actions taken regularly are what lead you to financial success without you even realising it, and the suggestions above are your starting point.

About The Author

This post was written by Mark from Currency Converter – I hope you enjoyed reading it and I hope you enjoy putting it into action. Good Luck!

(It’s time for another guest post here on the Amateur Financier, and this week we have a doozy: advice on how to sell your home through a short sale.  While a decade ago such a sale would have been rare, with the real estate boom and bust in that time, it’s become much more accepted.  If you are underwater on your mortgage and need a way to handle it, or are just curious about this increasingly common practice, here’s what you need to know:)

If your home is worth less than what the property can be sold for right now, you can use a short sale to avoid foreclosure. This does affect your credit. If you have other assets your lender may require you to sell those first.

Do the calculations

Your first step is to find out how much your property is worth. A realtor can tell you, you can get an assessment or you can look at other property values in the area. Ask the realtor for a comparative market analysis. This will analyze homes sold in your area that are similar to yours in square footage, age, condition, and upgrades.

Next find your closing costs for when you sell the home. Add up all your loans including second mortgages on the property. Calculate: Estimated selling price minus loans minus closing costs minus any pre-payment fees. In a short sale this will be a negative number. If it’s not a negative number, you probably don’t need a short sale.

Contact a lawyer

A Realtor can’t give you the legal ins and outs. Protect yourself by getting a real estate lawyer. And check with your tax accountant who can tell you the tax costs of a short sale.

Contact the lender

Next contact the lender with this information and your situation. Ask their procedures for doing a short sale. A lender has to agree to accept less than what is owed. Keep calling until you find the person that can give you the decision.

The seller must submit a letter of hardship to qualify for a short sale – like unemployment, medical expenses or divorce.

Submit a letter of authorization so your lender can talk with your real estate agent. Include:

1. your name
2. date
3. property address
4. loan reference number
5. your agent’s name & contact information

Always be honest with your financial situation and current assets. Get your bank statements and the other financial information you need for re-financing.

Sell the home

Sell the property. Usually it’s listed with a realtor with the express approval of the lender to do the short sale. It’s best to find a Realtor with experience in short sales. The realtor finds someone willing to pay, but less than what is owed. The lender has to approve the price.

One of the most difficult tasks if finding a price that is good for the buyer, the lender, the second mortgage owner and the homeowner. The second mortgage holder is often the obstacle.

The lender(s) may re-negotiate things like termite inspection that the seller usually pays for.

It can an average of 6 weeks to 120 days to close. The buyer pays the sale and the lender releases the lien so the buyer can get the deed.

The short sale is not first option when you can’t make payments, but it may be for you if you can show financial hardship and are about to foreclose.

Author Information

This is a guest post from Andrew Wang who blogs about making money online.

(It is time once again for a guest post, providing a different perspective on issues of personal finance and money management than I am amble to do.  This week, we’re going to take a look at different types of retirement income sources, from retirement accounts like 401(k)s and IRAs to pensions and annuities.  Since we all want to retire someday (or at least, have the option fo retiring, if we so desire), it’s always good to know about the different ways we can generate an income.  In order to learn a few of the options, please read on.)

As the baby boomer generation approaches age 65, new employees are just learning how to plan for their own retirement. Younger workers will be forced to pay into the Social security system, but most likely will not reap the benefits (Roger’s Note: Or at least, likely not the full level of promised benefits), as its demand, far exceeds its cost. The Social Security System in the U.S. is burdened by longer life spans, increasing medical costs, and lower than normal tax revenue (due to the poor economy). Young workers will have to consider other retirement options as they will not be able to rely on it when they end their careers. There are different types of retirement options other than Social Security, which vary in risk and reward. These plans include 401(k)s, IRAs, Annuities, and Pensions. These plans have differing advantages and disadvantages. The best plan for each individual will vary depending on their goals after retirement.

Here are 4 different accounts that can be used to prepare for retirement:

401(k) Plans – These plans have funds that are automatically deducted from each paycheck and is sometimes matched by an employer. They allow workers to slowly contribute to a fund, over the course of their working life. 401)k) plans can be personalized and placed into a range of investments such as stocks, mutual funds, and bonds, according to what the company offers. Individuals with these plans can choose a riskier or more conservative strategy when investing these earnings.

- One big advantage to a 401k plan is that the money is not taxed until it is withdrawn in retirement. It is allowed to grow “tax-free”, up until it is “cashed out” by the employee. These funds are subject to a 10% early withdrawal penalty, if the money is taken out before a retiree reaches age 59 1/2. There are exceptions to this tax penalty including disability, death, and early termination.

IRAs – Individual Retirement Accounts (or IRAs) are a type of retirement (or savings) plan, created in 1974 by the Employee Retirement Income Security Act (ERISA).  IRAs allow a worker to contribute up to $5000 per year into an account that is non-taxable until it is withdrawn. This money is also tax deductable and allows the money that would normally be paid in taxes to grow in an account. There are different types of IRAs, including a Traditional IRA, a Roth IRA, Spousal IRA, SEP IRA, and Education IRA.

A Roth IRA is a popular type because it allows for money to avoid taxation completely, BUT only if certain conditions are met. Money from a Roth IRA can be invested in stocks, bonds, mutual funds, and even real estate. With a Roth IRAs, contributions are taxed when they are placed into the account, instead of when they are withdrawn, as with a traditional IRA.

- One negative to Roth IRA’s are that contributions to it are NOT tax deductible. This negative is offset by the fact that the funds are not taxed upon withdrawal. Another negative is that the yearly contributions are limited to $5000 annually. This may be a small amount depending on a person’s income level.

Annuities – This is an investment type that is slowly paid back over time by an insurance or investment company. A retiree makes either a large lump sum payment or a series of payments which are then paid back by this annuity to them over a period of time. These payments can be paid out on an annual, semi-annual, or monthly basis. Annuities grow tax-free until it taxed in the payment phase. They are a good way to provide financial support upon retirement, as they guarantee a consistent payment for a period of time (frequently until the recipient’s death).

Fixed Annuity – This annuity type gives the investor a fixed rate of return that will NOT vary over the lifetime of the contract. It is a very low risk type of investment that allows for consistent returns, regardless of the behavior of the market. The main criticism to this type of investment is that there are high fees including a sales commission and surrender charges.

Variable Annuity – Variable annuity contracts guarantee a certain percentage of return, but will vary as the selected portfolio performs better or worse. These accounts grow tax-free, just as fixed annuities do. They also allow investors to choose from different type of investments including mutual funds, stocks, or bonds.

Pensions – this is a form of compensation that is set up by an employer, to pay workers upon retirement. Pensions are funded in a variety of ways that include employers, labor unions, and government agencies. These payments are made regularly to retirees, usually on a monthly basis. There has been controversy about this type of plan because they can become extremely expensive for some employers.  They are also increasing hard for younger workers to find.

About the Author: Ross runs the website Great Credit Score which focuses on economic news, investment strategies, using secured cards to build credit, debt reduction, and the stock market.

(It’s time once again to learn about some important money management tips from someone other than me.  This week, I’m proud to present a repeat guest poster, ready to share some helpful hints about buying in bulk.  It can be a great way to get what you need, and save some money while doing so, but if you don’t do it right, it can end up costing you more than you save.  To avoid that sort of problem, read on to learn how to best take advantage of bulk purchases!)

Buying products in bulk is a great money saving strategy, but only if it is implemented correctly. There are many ways that buying in bulk can also end up costing you far more than you expected. Before you run out and start filling your cart with a month’s supply of all your favorite items, read up on these dos and don’ts of buying in bulk.

Do stock up on paper goods. My household goes through paper goods like there is no tomorrow. Toilet paper, paper towels, napkins, and paper plates seem to disappear overnight. Items like these are great to buy in bulk because they will definitely be used and they won’t ever go bad. Just because you have a lot of these products does not mean you should be wasteful! Remember that these products come from trees, so make sure you only use and much as is needed.

Don’t stock up on perishable foods. Even if you see an amazing deal on a bulk food item, don’t buy it if it is perishable. Unless you are having a party or are feeding a huge family, only buy food items that won’t perish. If you get a great deal on food that just goes bad, you won’t be saving any money at all. Plus, all that wasted food is also wasted resources.

Do shop for parties or special events. If you are hosting a big party at your house or you are bringing snacks for your child’s sports team, you should definitely consider shopping in bulk. Buying a large quantity of specific items at grocery stores can get very pricey very fast. Instead, see if you can get what you need in bulk so that you will get a discounted price.

Don’t make shopping in bulk a habit. Buying in bulk undoubtedly provides you with some great deals. It’s easy to buy something just because it is such a great deal. But before you put that item in your cart, take a second to think if it is something that you really need. If you wouldn’t even think about buying it at full price, chances are you probably shouldn’t buy it at a discounted price either. Spending money on something unnecessary ends up not saving you any money at all.

Do bring friends with you. Shopping in bulk can be a great way to save if you bring along some friends. This way, you can all split the cost and you won’t be stuck with 50 rolls of toilet paper. If you are shopping at a store that requires a membership card, see if you can split the price of the membership with your friends as well to save as much as you can.

Don’t overbuy items. If you shop alone, it is very easy to accidently overbuy. When you see a great deal, it can be hard to pass it up. However, if you already have a good supply of paper towels, you shouldn’t buy a brand new pack. Otherwise, your house will just become crowded and cluttered, which isn’t helping anyone.

Do come prepared. Just like any ordinary trip to the grocery store, come prepared with a list and a budget. It’s very easy to get sidetracked and start filling up your cart, which adds to your total very quickly. Know how much you want to spend and exactly what you want to buy before you get to the store.

Don’t impulse buy. Being prepared with a list and a budget will help you cut down on your impulse buying. It’s one thing to purchase a pack of gum on impulse, but it’s a whole different thing to purchase a 50 pack of gum on impulse. Go shopping with frugal friends so that they can help you keep your spending under control.

About the Author: Kiley Theiring is a film student at Chapman University who also loves to write. She writes about saving money and living frugally for Coupon Mountain and also maintains her own personal blog.