Have you ever been staring at your bank account balance and wondered where all your money went? Well I know I have and it is not a good feeling. We start wondering how we are going to pay our rent/mortgage, our car payment, credit card bills, etc. The last thing we want to do is ask to borrow money from a friend or relative. Money management is extremely difficult for most people. The following are 7 steps to creating your budget:
- Set a goal: Why are your creating a budget? Are you trying to pay off debt, save for college, buy a car, save for a wedding, etc. This gives you something to strive for and will help you to stay on track.
- Figure out where your money is going: This step will be a little tedious, but I promise it will really help you. Gather your bank and credit card statements for the past two months. Create a spreadsheet that categorizes each expense for the past two months. Examples of some of those categories may be household expenses, groceries, automobile, entertainment and debt payments. After you have done this track all your spending for the next month. This will give you a good pattern of how you spend your money.
- Eliminate unnecessary expenses: The average Starbucks customer visits Starbucks six times a month. If that person spends $5 on a drink that equates to $360 a year. Yes, I know we all need our coffee. I am not saying to eliminate everything because we all need to have fun, but there are always things you can cut. Try making coffee at home or take your lunch to work. These two things can save you thousands a year. Set a limit on the numbers of time you go out to eat a week. Think about eliminating cable and subscribing to Hulu Plus and Netflix for $16 a month.
- Start a savings account: Now that you have eliminated unnecessary expenses, open a savings account. Try saving $50 a month at first then increase it every few months if your finances permit it. Set up an automatic transfer from your checking account to your savings account every month. This way you don’t have an excuse to not save.
- Pay with Cash: This is one of the easiest ways to realize how much you are spending. It is so easy to swipe a debit/credit card, which leads to over spending. Give yourself a cash allowance each week and once that is gone you are done.
- Freeze your credit cards: You may think I want you to call your credit card company and tell them to freeze your credit card. I actually want you to place your credit cards in a freezer bag (so they are safe from the water) and put it in a freezable container with water and freeze them, this way if you will only retrieve them if you really need them.
- Pay down debt and create a rainy day fund: Paying down your debt is a much better option than spending the money on the latest toy or piece of clothing. Paying down your debt will give you more money in the future. Additionally, try to save enough money so that you have three months of expenses covered. This will give you some security in the case you lose your job or have an emergency.
When I first created a budget I didn’t think I could do it, but I am much more financially secure now and you can be too. These steps can be very tough to complete, but they are not impossible.
I hope this blog was able to help you in some way. If you need any help or have any questions feel free to email me at firstname.lastname@example.org or message me on Twitter @mdoyle18. I am happy to answer any questions. Thanks for reading.
“Find something you love to do and you’ll never have to work a day in your life”
I have been asked by many people, “how can you love finance?” I not only love it, but I also realized it is my niche. Finance, in its simplest form, is defined as the science or study of the management of funds. I grew up in a household with both my parents telling me that I was going to become a CPA because they are CPA’s. As a rebellious teenager, I constantly told my parents that CPA’s were nerds and I didn’t want to become a nerd. Little did I know, I would eventually become a finance nerd.
When I started college I originally declared my major as computer science. After a semester of computer science classes I thought business would be a better path for me, I just didn’t know what kind of business. I realized my path when I received a 100% on my first corporate finance test. I spent the rest of my college career studying hard and graduated from the University of Nevada, Reno (UNR) with a degree in Finance in 2004. My love for finance has brought me back to UNR to pursue a Masters of Business Administration with an emphasis in finance.
Finance is the focal point of every decision we make. It doesn’t matter if you are a large corporation looking to grow or a person buying a pack of gum. Finance is very complicated and has many components. This is why I love it. It is constantly changing and will always challenge me to expand my knowledge. With my knowledge of finance I will always be able to help others and that is the purpose of my blog. I challenge you to find something you love and pursue it.
When I heard that Facebook was filing for an initial public offering (IPO) I immediately became excited at the chance of making easy money. For those that don’t know, an IPO is when a company offers the public the opportunity to purchase ownership shares in that company. Over the past few weeks my excitement has been tempered after I have read many articles and conducted additional research. My goal with this blog post is to add some insight into this highly anticipated IPO.
On August 19, 2004, Google released its IPO to the public. Since that date, it has become one of the most successful technology stocks in history. Its current stock price as of February 17, 2012 is 604.64. Google and Facebook both receive a majority of their revenue from advertisements. Does this mean Facebook will become the next Google? Not necessarily. Google has a much more diverse platform than Facebook. Google offers email, Internet video, mapping, word processing and a social platform called Google+. Most people could hardly go a day without using one of Google’s many features. Facebook offers a social platform and that is about it. While there are many users on Facebook, one could go an entire day or week without accessing it. So, what does this all mean?
I think Facebook offers a great product, but I have to wonder if this IPO is in response to Google’s release of Google+. Facebook may be attempting to raise more capital so they can try to diversify because I am not sure what else they can get out of their social platform. I believe that Google offers advertisers more opportunities to reach a more diverse demographic. I am not telling you that Facebook would be a bad investment, but don’t expect it to make you rich overnight. I would recommend buying a few shares initially and see how they perform.
“Every individual is the architect of his own fortune.”
As you watch the stock markets show positive returns week after week, you ask yourself is this a good time to invest. The current average return on a savings account is .24% according to money-rates.com. We are always looking to put our money somewhere that gives us a better return. Another safe option is a 1-year Certificate of Deposit, which has an average return of .52%. This is better then the savings, but still not ideal. For better returns we will usually turn to the stock market. There are many avenues you can use to invest in the stock market. Before looking at the stock market as an option, there are many things you should consider before liquidating your savings and investing it.
The first thing prior to investing is to make sure you have at least three months of expenses saved in case of an emergency. This is the risk adverse side of me talking. The next thing to think about for investing is the risk you are willing to take. Investing is a strategic gamble, but it is still a gamble. Make sure whatever you are willing to invest you are willing to lose. The third thing to consider is setting investment goals. What are you trying to accomplish by investing in the stock market?
If you are a young adult you can invest in high-risk high reward stocks because you have time to recover the losses. If you are closer to retirement you may invest in low risk low reward stocks because you have less time to recover any possible losses. When you first start investing, try setting a gain/loss threshold. For example, set a 15% threshold. This means if the stock has a 15% gain sell it; if the stock has a 15% loss sell it. Setting this kind of goal will help you stay humble and will keep you from chasing those gains when the market declines. You won’t get rich overnight, so be patient with your investment strategy. Investing in the market is great tool, just be smart and use your brain.
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. “
– Warren Buffett
The definition of diversify is to increase the variety of products available. During tough economic times we all suffer in one way or another. Companies experience their profits shrinking, their expenses increasing and the possibility of bankruptcy. Individuals experience their salaries decreasing, job loss and expenses increasing. We all need help and advice during times when things are tough. Companies and individuals need to look at opportunities to diversify to get a step ahead of their competition. You have to spend money to make money.
During good economic times companies seem to stick to the mentality “If it is not broke, don’t fix it”. Many companies are scared of change and don’t want spend the capital to diversify. Let’s use Apple, Inc. (Apple) as an example of a company who wasn’t scared of change. Apple was founded as a PC company. In the late 90’s, Apple was struggling with profits, so they decided to diversify and created the iPod. With the success of the iPod, Apple has been able to expand their diversification into success with the iTunes store, iPhone, iPad and many other products. Microsoft could only stand by and watch Apple surpass them to become the worlds most valuable technology company. Microsoft had something good going with their Windows software, but they chose not to take a chance and diversify. Companies are no the only thing that need to diversify.
Individuals also need to diversify. When times are tough and the job market shrinks education becomes extremely important. Expanding your education can separate you from other job candidates. There is a cost that comes with education, but it is an investment. A Masters in Business Administration (MBA) is just one example of additional education that you can pursue. Most people think the cost and time is too much for them. There is a time commitment, but the return on investment is much shorter than you would expect. For example, the state resident total expense for an MBA from the University of Nevada, Reno ranges from $15,000 to $20,000. The return on this type of investment is approximately 1 to 5 years; depending on what school you choose to go attend. If you are having problems finding a job, consider going back to school.
Diversifying is important for both companies and individuals. Good economic times are a good time to diversify, but tough economic times are even a better time to diversify. Make a financial investment to either improve your product selection or expand your education. Diversifying is an investment, not an expense.