Personal Finance Tips

Savings

There are different reasons to save, and different approaches depending on what you are trying to achieve. One overall savings goal is to put money away for a rainy day; anything from health related problems, for repairs to a house or car, or an interruption to employment. Most experts say to put three months salary away to cushion life's little emergencies.

To Read more Click heading :

Another common saving strategy is to target a specific purchase or expense, like a new sofa, or a vacation, and plan your savings around that specific amount. In this case, either put away a set amount every month, or even create a second bank account and divert the savings into that account so it can't be touched, and once you reach the amount, you make the purchase with a clear conscience.

The important longer term strategy is more about saving for the future. Numerous books like the wealthy barber that were written about the huge long term savings benefits by making small changes in how and what you save. One of the easiest ways to approach this kind of savings is with small but regular saving program An often used example is that if two brothers both start saving money, with one starting at twenty and one starting at thirty five, the brother that started saving earlier would have ten times as much. The reason why savings can be so dramatic is that the money that you save increases not only as you save, but is accelerated by the compound interest that continues to grow over time.

The easiest way to put long term savings away is to set up an automatic withdrawal of funds. You may feel the difference in not having that extra money initially, but before long, you will adjust and will get used to it. Your budget will make sure that if it's not there you don't miss it. In fact, many companies allow flexible ways of having savings deducted directly from an employee's pay, making it easier to keep sticking to the plan. 

Buying a CAR

One of the first major purchases that most people make is a car. Interestingly enough, it is often considered one of the worst investments you can make, because, unlike other assets, cars almost always depreciate in value.

The first thing you need to determine what you need the car for? Are you more concerned with a reliable mode of transportation, or something that will make a statement? Is it just for going to work or school, or for hauling the kids to soccer and football practices? Is it for regular long trips, do you need to carry large items when shopping, or is it just for the occasional weekend trip?

Once you've identified the right car, think about whether you really need a new car or if a used car will still serve your purposes. Most cars depreciate 20% to 30% as soon as they are driven off the lot, so getting a one year old car gives you almost the same vehicle at a significant reduction in price. In fact, many major auto dealerships offer certified programs for their used cars which guarantee an accident free, regularly serviced vehicle that is tuned up with a complete warrantee. This gives you almost all the benefits without the full price tag. Of course, you can always look for used vehicles that fit almost any price range, so if you budget is tight, you may need to be flexible on specifics like model, color, and features, and concentrate more on the target price range.

If you decide to buy new, research is critical to getting the best value. There are many internet sources that can not only provide invoice costs , but also real numbers that people have paid on the street so you can go into any price negotiate fully armed with more information so you can even out the advantage that a car dealer normally has. Once you decide on buying a car, an important tip is to leave your financing method out of the pricing discussions and focus only on the final price of the car. A common strategy for dealerships is to fit a higher price tag into whatever monthly budget you offer, so avoid getting lost in the numbers and allowing them to adjust the terms to fit your numbers as you'll end up paying more for the car in the long run. Dealer installed options also come at a far higher mark-up than any other work, so be particularly cautious when reviewing the sticker price, knowing that you can get the same option at less cost than the sticker, so expect to have more negotiating flexibility with options than with the base price of the car.

Above all, the most important tip when buying any car is to do your homework, know what you want, know what a fair price is (which is fair for both you and the dealer, since you are likely to be servicing that car for several years), and be prepared to negotiate from the invoice price up, and not from the sticker price down. Don't be afraid to walk away from a deal if you are uncomfortable with the salesperson or with how the terms are unfolding - there are always other cars to buy and other places to buy them, and many car dealers rely on pressure tactics to get you to commit to a purchase before you're fully comfortable. The best approach is to leave your phone number, be clear on your options and price, and more often than not, the salesperson will consider your offer if the numbers are fair. 

Buying a House

A house is by far the largest purchase most individuals will ever make in their life, so it should warrant an equivalent amount of thought and planning. As the old axiom goes, the three most important things about buying a house are .location, location, location.. It is better to buy a smaller house in a better neighbourhood than to buy a larger house in a less desirable neighbourhood.

Similar to buying a car, you need to first figure out your needs, both immediate and long term. Are you planning a large family or do you already have children? Do you spend a lot of time indoors, do you entertain frequently, do you look forward to enjoying a large backyard with landscaping and gardening? How long a commute do you want to have to work, and how close are amenities like groceries, movie theatres and shopping malls? You also need to decide what features of a house are important. Are you looking for a certain number of rooms, do you need a separate play area for children, and do you need a large and spacious kitchen. Remember in your considerations that this may not be the only house you will ever own, so you need to find a compromise between your current means and future needs.

Once you've identified the ideal house, you need to match that with your budget and the types of locations that fit what you're looking for. Depending on your budget, you may have to make compromises in location, size or features, and you will also have to determine whether the perfect house is even available on the market. Many homeowners prefer to have a house built new so that they can customize it the way they want, although this normally comes at a premium and can often incur additional taxes that wouldn't apply to a used house.

You also have flexibility in how you finance a house - similar to other loans, shopping around for the best mortgage rate may be tedious but can save you thousands or tens of thousands over the long term. The best strategy is to shop around with banks first to get the best rate and terms and help you feel comfortable with your budget and price range, then arrange a guaranteed pre-approval to not only make the house shopping process simpler, but to also streamline the financing that will come after you've chosen your home.

There are different kinds of mortgages which may suit your needs differently. For traditional mortgages, your options normally fall into one of two categories: fixed or variable rates. Fixed rate mortgages may offer more long term stability and less risk, however, the rates are normally a few percent higher than the bank's prime rate. By comparison, variable rates are lower, but they follow the bank's rate which fluctuates day in and day out, meaning you may pay less for a time while risking that the rates will later climb up. This is a calculated risk on where the future interest market rate will go, so it may be worthwhile to do research and gauge where the financial experts feel the interest rates are trending. Your decision can also be affected by the term of the mortgage. longer terms, like five, ten or twenty-five years will be better insulated against risk by going with a fixed term at a higher rate, whereas one, two or three year mortgages may benefit from a variable rate without as much that the market will suddenly shift interest rates during that shorter period of time.

Depending on your assets and financial well-being, you may have other options available to you, such as flexible secure equity lines of credit which allow you to buy your house using the equivalent to a line of credit. The advantage is the more you pay of the principal, the less interest you pay every month and it allows you to immediately reuse the equity that you've paid off. For example, if you borrowed $100,000 using this approach and then pay off $10,000, you would have that $10,000 to reuse on other purchases or renovations if needed.

Regardless of the financing method, another important strategy for reducing the overall cost of your house is to save up and apply a larger down payment up front. This not only allows you to borrow less from the bank, thus incurring less interest charges, but will often also get better interest rates and fewer supplemental charges, since the bank will consider your mortgage less of a risk. This applies to almost any kind of borrowing: the more risk the bank has to take on, the larger the premium that they will pass on to you.