How being cheap will leave you broke

Given a chance, most of us would rather save all of our money than spend it. But, in reality, the best move that we can do is to maximize our savings by living as frugally as possible. There are good ones, but some saving ideas might end up costing more in the long run. Here are a few budget blunders you may want to avoid.

Neglecting Basic Maintenance

You home, for example, can be one of the biggest investments of your life. But shrugging off small house issues, such as a dirty chimney, a cluttered gutter, and even an overgrown landscaping, can lead to spending disasters.

Doing your own taxes

If you keep your own records, your tax returns are simple, you have sufficient knowledge on finance and tax laws, you know the right forms to fill out, and which documents to fix and send, then, sure, do your own tax. But if you answered no, then stay out of it and let the professionals save you from interests and penalties for doing it all wrong.

Skimping on food

Food is a big expense. But, oftentimes, choosing nasty food doesn’t help you stay healthy. If you can’t avoid eating out from time to time, prefer healthier alternatives and skip the alcoholic drinks.

Risking your health

Neglecting your health problems because you think you can’t afford them? Expensive and stupid at the same time. A health insurance may appear expensive, but it’s a cheaper alternative than paying for your own medical bills.

Maximizing your savings is all about being smart – to know when ‘cheap’ is actually good and when it can actually cost you more.

Why avoid payday loans

So you’re strapped for cash and you just need enough to tide you over until the next payday. Some financial institutions, cooperatives and credit unions offer short-term loans like payday loans or cash advances. So will you avail of these?

They’re really convenient since they give you cash up front without any checks on your credit score and the amount’s usually more than enough until your next payday. But are there any caveats?

The interest’s always a killer. Cash advances usually carry an awfully high interest rate if annualized primarily because they’re only offered for the short term. If you’re careless not to pay up as soon as you get the funds the next payday, you might be in for a 400% to 5,000% annualized interest.

Some credit unions offer craftily-named “Payday Loan Alternatives” but check the conditions and they’re basically the same as with regular payday loans. While the law on credit unions states that the max interest rate is 18%, there are fees (like application and participation fees) that can drive the costs up.

Are college loans worth it?

If it means earning a million more in a lifetime than non-college grads, many would say that it is definitely worth it. But is it really worth the years that you can be in debt if ever you even graduate?

My position regarding college loans isn’t really that firm, really. Every person’s case and circumstance is different from the other but debt is one of the financial killers out there and it doesn’t really make sense to place yourself tens of thousands of dollar in debt even before you earn your first real paycheck.

The recession has even made it more complex since the amount of job losses and unemployed made it even more tricky. A great number of borrowers find themselves still without jobs after graduation. With loans unpaid, they’re sinking into a deeper hole.

1. You don’t really need college to succeed… In my book, no amount of classroom learning can ever swap for life smarts and determination. I think we’ve already got too many Bill Gateses and Steve Jobses who can attest that a college degree is necessary to earn the big bucks.

2. …But learning it helps. Still, I have to press on the issue. You can’t mess with the statistics that tell you that college degree holders get more over a lifetime of earning than high school graduate counterparts.

3.Go for affordable education. If going to a more expensive college is not an option given your finances, then opt for a more affordable one. You can go to a state college or university. Or if even that will be a strain, then go to a community college.

4. Time things properly. You can always get better education anytime. You can opt for a BA degree now from a cheaper institution and take additional classes to supplement your learning with things relevant to your work. Drowning yourself in debt and interest for years after you graduate doesn’t really seem to be a sensible thing to do nowadays.

Outsave the Joneses

I don’t know if it’s just a local cultural thing but I do think that keeping-up-with-the-Joneses also happens beyond out borders. Envy might just be part of the human experience.

People often fall into the mucky pit that is neighbor envy. What good things others have, you want for your own especially those material “improvements.” That new car. That new pool.

Many financial gurus would say that there’s no point in doing this. Statistics have it that your typical neighbor is in debt and there’s no point keeping up with broke people unless you’d want to be broke as well.

If you’re the type who wants to keep up with neighbors, then why not switch games and do one better. Be richer than them. Instead of spending on material goods that aren’t exactly assets (they depreciate), opt to put your money where it can grow.

Outsave and outinvest the Joneses!

Take comfort in the fact that you have more money in the bank and more investments stashed away. They might be lounging in their new pool but at least you can have that smug look that your family’s finances are secure and you’re on the way for a more comfortable life ahead.

Fresh graduates: Pay off your student debt

A lot of students are now graduating college and ready to take on the big leap to “real life.” Thing is, that college degree might have been obtained through a lot of hard work and perhaps a student loan.

One thing you really have to prioritize now, aside from landing a decent job, is to pay off that student loan. Try to make prepayments. Sure, the job market’s hasn’t really recovered yet but it’s better to get out of debt real quick than lose more money in the long run.

Simple math would show that you stand to lose more by opting for longer terms. A $10,000 loan at 5% fixed interest for a 5-year term means that you have to pay $189 a month to pay it off. You spend $1,340 on interest. If you opt to pay $250 a month, in just 44 months you’ve paid it off and you save $340 on interest.

Laws have it that you can make advance payments to get rid of the load quicker. Payments are also tax deductible so that’s another load off your back.

However, make sure that you shore up your emergency funds first before making any big financial moves. If possible continue contributing to your 401(k) and retirement funds as well. You might have to sacrifice a lot of other comforts but doing all of these should safeguard you from the rainiest of days.

Five ways to pay mortgage quickly

Loans can suck all the life out of living. And the biggest loans a person or a household gets in their lifetime is their mortgage for the house. While these often go for decades-long terms, the quicker you can get out of them, the better.

Here are five ways to make sure you pay your mortgage quickly:

Put up a higher down payment.Higher down payments mean that you only have to finance a lesser amount. That also means less principal on which interest will be charged. This can allow you to either draw out a longer term (bad) or deal with a more manageable

Go for a shorter term. Longer terms means interest will be piling on for long. Shorter terms often. You just have to balance this out with the a comfortable amortization since shorter terms means you have to pay larger amounts monthly.

Make more sizable payments. If you’re already into your mortgage, ask the bank if you can increase your monthly amortization. Just make sure that you make the terms clear since some loan programs might not really give you a better value even if you pay more quickly.

Make more payments. If possible, try making more payments. Switching from a monthly to a bi-monthly arrangement may help you hack away at the remaining debt.

Refinance to lower interest rates. Refinancing’s a really tricky thing but if you can work out a better deal, then consider it. Crunch the numbers. If, in the end, you’ll be handing out less money with refinancing, then go for it.

Source: http://moneytopics.org/mortgage/

Parents’ spending habits influence kids

Whether you’re financially smart or dumb, part of what you do with your money, you’ve learned from them. Good thing, though, is that you don’t necessarily grow up to be like your parents. But they sure can influence you.

In my case, my mother was pretty shitty with money. Never really believed in long term financial planning, saving, and spent pretty much on her whim. She died with nary a cent for me to inherit. And whenever the parent leaves the kid with the funeral bill, that’s always a shitty deal.

Good thing is that I learned from her mistakes and have become much better when it comes to finances. My mother’s experience taught me to value money, save, and spend carefully. Part of my motivation is that I want to retire wealthy and to leave a nice inheritance for my kids.

Be aware that parents often put up fronts either for to appear to be keeping up with the Joneses or perhaps to help kids feel secure about the family’s financial stability. Try to take a look back at your childhood and compare and contrast your parent’s lifestyle.

Spending habits like incurring debt and not budgeting are tell-tale signs of financial stupidity. If your parents live frugally and are now happily retired, then they’ve done great. Learn from their successes. If not, then try to learn from their mistakes and avoid digging for yourself your parents have dug for them.

The best way to know these things is to communicate. Be open. Talk to your parents and know their biggest mistakes. Talk to your spouse and feel free to discuss money matters in an honest and proactive light. Talk to your kids so that they also have a clear picture of your finances so that they can grow up financially smarter than you.