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Category Archives: Finance

Effective Money Management

Create a spending plan

A spending plan specifies exactly how you will spend and save your money. I prefer not to call it budgeting as this implies constraint and scarcity of choices. A spending plan on the other hand suggests mastery and control of your finances. It is vital to track every cent that you spend. The idea is to create a list of spending priorities that is aligned to what is most important to you. There is one thing that is non-negotiable. You may not spend more than your earnings and at least 10% of your income must be saved so that you can build capital for investment. You should have a short-term plan that covers the period of a month and a long-term plan that is for a year. This is because certain expenses like home improvements may need longer planning periods. Long term home improvements can also be managed by taking out a loan and paying a fixed monthly amount that fits in with your plan.

Simplify your lifestyle

You can save and live a life with lesser stress if you just simplify. An expensive car and dining out at popular restaurants is not a necessity. Don’t drink coffee at Starbucks or spend money on fancy branded clothing. Once you are earning your desired working income then you can treat yourself to luxuries but if you are struggling to save then really think hard about your lifestyle and spending habits.

Pay off your bad debt

Credit card debt is bad if you pay just the minimum amount every month. If you have a large credit card bill then do your best to pay if off quickly.This is because the high interest will keep you in debt for many years to come and will result in you paying more than the original amount. Sometimes it is necessary to take out a loan to take care of an emergency or a home improvement project. This is not avoidable but get the best interest rate possible and pay more than the required monthly amount so that the loan is disposed off quickly.

Create a balance sheet and income statement

This might sound like a scary proposition and you may think that these financial reports are just for businesses. This is not true, every person needs these drawn up so that they know what their net worth is. A person may be earning a really good income but can still have a very low net worth. Net worth is the total of all your assets such as cash, investments, properties and cars minus your liabilities such as loans. A person can have many assets but may still be in big trouble if they can’t pay back their liabilities. The ideal situation is to have assets that you own completely and liabilities that are not more than 40% of the value of your assets.

Financial Goals

If you have no financial goals then you have nothing to aim for. There is no point in saying you want to get rich. You have to specify the exact amount and the exact date you want it. What is the ideal working income that you want? Write down the exact amount then double it to take into account taxes. What is the exact amount of money that you wish to have in your bank account in five years time? What would you like your net worth to be in five years time? Write down all these figures and look at them everyday before you go to sleep and again when you awaken in the morning. This gives your subconscious mind something to aim for and manifest into your life.

Learn to invest

The interest your money earns in banks or financial institutions will never make you rich. It is important to earn more than 20% interest every year on your money. Financial institutions will never be able to do this for an individual. It is up to each person to learn the skills to invest in the stock market and residential property market. This is a long-term commitment which requires diligent study and application. You must read the books, attend the seminars and listen to a good mentor so that you can acquire the required knowledge. Once you have the knowledge then massive action and discipline is needed to execute the investment strategies. The work is hard but it will be worth it if you can retire early and not have to worry about whether you can afford the lifestyle you want.

Tricks Improve Your Finance

Pay Yourself First

After you start saving, you will have money starting to pile up. The most appropriate thing is to pay you first by bumping up one’s retirement contributions or to transfer some certain amount of money to a savings account. You can as well do both.

Completely Dump Debt

List all the debts you owe others and prioritize them according to highest interest rate or size of the balance. After you have had a budget and started realizing much savings, start paying your debts from the highest prioritized moving downwards till you clear all the debts. In short, crate an actionable plan and get out of debt.

Get Right with Retirement

In case you have been borrowing money from your work sponsored retirement plan account, you are headed for trouble at retirement. At your savings rate, will you achieve your retirement goal? Discuss this with a financial planner and make appropriate steps to track your investments.

Contribution Beyond the Company Match is Paramount

If you fail to contribute the required amount in to your retirement plan account as per the company’s full match, experts will tell you that you have lost tens of thousands of money over your lifetime. Don’t waste this free money. Take full advantage of it.

Open some Health Savings Account

If you have a HDHP (High-deductible health insurance) plan, it is prudent that you save money for future health service expenses in the tax advantaged HSA (health savings account).

Shop for Health Insurance Coverage

If you have health insurance coverage, you will save a great deal of money when you fall sick. This is because the insurance company will take either partial of full responsibility depending with the terms of your insurance cover.

Begin Planning for College

Don’t wait until a year or some months to college time before you can save for your kid’s college. Do research to know about some of the college fee accounts such as the tuition prepayment plans as well as 529 plans.

Begin an Emergency Fund

There may be times of trouble when you need to take care of emergencies. Experts do advice that savings for such emergencies need to be enough to cater for six month expenses. You may lose your job, have economic issues in your business, fall sick, experience a car breakdown etc. with this fund; you won’t be in a crisis. You will also not have to go into your major savings accounts to solve the problem.

About Online Bill Payment

What is the best reason to choose online bill payments? First of all, you can save time and money when paying late fees and postage. It is also actually safer than paying through mail. Personal information is at risk of falling into the wrong hands when it is printed on paper and goes through the whole postal system. Besides, you can manage your finances more easily when paying bills using your credit card. Furthermore, you can even save cash rewards and airline travel miles whenever you use it.

When you pay your bills online, you will save on the use of paper, doing your share in preserving Mother Earth.

Perhaps the greatest advantage of using online bill payments is getting rid of all the paper sent to your billing address. There will be less mail and envelopes to open and discard. Now, you can receive all your billing statements and reminders in your email inbox. Your service providers and banks will ask if you would like them to email your bills and reminders. They will gladly send your bill through electronic mail. This means less trash in your home and less paper in the landfills. With fewer paper bills, less fuel and energy will be spent on processing, printing, mailing and transporting. When it comes to environmental benefits, online bill payment is a sure winner because of the practical solutions it presents.

Another reason to go for online bill payment is to save money. Since you will no longer mail your checks, you will not spend on stamps. On the other hand, companies also save a lot on online transactions since less money will be spent on processing, printing, mailing, then transporting. This system works more to their advantage and they get more savings, which they would gladly share to their clients, in terms of lower fees.

Paying your bills online allows you to manage your finances and counter in one take. Online bill payment may be a daunting task to some individuals who are not organized or fond of high-tech gadgets. They would rather pay in check or get their paper bills inside the mailbox. However, there is nothing simpler than paying bills on the Internet. Certainly, it may take some time to set up, but afterwards, they are done. Once they get the hang of it, they will no longer go back to the old habit and get worried about late fees or losing their mail in their large pile of trash.

Personal Economic Independence

Opting the Right Profession

There are boundless economic works available in the modern world. Needless to say, the invention of internet and technology has further introduced oodles of online works as well. Selection of the right profession is duty of the economic agent. How may he/she opt for the right profession? Jeff Goins, author of the bestseller, The Art of Work, gives answer to the question. He offers a stunning approach to discover the purpose of life. Once the purpose is realized, one can consequently comprehend the right profession. Jeff writes: “when you pay attention to your life and the lessons it can teach you, you won’t feel so lost. Your story will seem less like a series of disjoined events and more like a beautifully complex narrative unfolding before you. You will understand each setback, inconvenience and frustration as something more than what it appears to be. And perhaps, as you listen to it, your life will speak.”

Jeff, in his case, listed out a few memories from his life and during the exercise, he was able to grasp his purpose; to become a writer. An economic agent, at the outset, can also implement the example of Jeff. He/she may note down some memorable events from the past and after thoroughly judging the worksheet, the agent will perhaps identify his/her purpose as well.

Execution of Economic Work

An economic work requires three steps for its execution; acquirement of marketable financial skill(s), setting up financial targets, short run and long run, and implementation of financial skill(s). Firstly, it is binding on the economic agent to gain knowledge and establish skills relating to the profession he/she chose. Peter F. Drucker, an American management consultant, in his book, The Practice of Management, inscribes the situation of lacking financial intelligence: “if he (the worker) lacks information, he will lack both incentive and means to improve his performance.”

Secondly, realize what you want in future and set up financial targets accordingly. A rational economic agent must have purpose(s) to earn monetary benefits; aimless chase of wealth without any specification of income stream is wrong. Lastly, put the acquired financial skills, proactively, in application to realize financial targets.

Hurdles during Economic Struggle

Human beings are weak. They make mistakes time and time again. Despite this weakness, God has gifted powers, latent and patent, to move forward. Economic agents can wisely use these powers to offset their financial mistakes.

In an economic struggle, the agent may face inner fragility, now and then. The vulnerability of the individual can be due to two reasons; inner faults or outer conspiracies. The major interior hindrances that can penalize the agent, repetitively, include indiscipline, fear of failure, get-rich-quick mentality and procrastination. First, getting over indiscipline requires an efficient work timetable, loyalty towards the earning platform and professional approach towards economic works. Second, fear of failure is a common obsession, which can demoralize an economic agent anytime. To drive away the apprehensive feeling, it is incumbent on an individual to solidify self-belief. Third, get-rich-quick mentality is rampant nowadays, especially on the internet. The sole technique to shield oneself from the irrationality is patience. Fourth, procrastination in an economic struggle can be withstood by implementing the maxim, be focused and be proactive.

Gain Control Over Money

Financial freedom means understanding not just what comes in, but also what goes out; more importantly where the money goes. The third step to financial freedom according to Suze Orman is to take back charge of your money, to get back in touch with your money, just the way you did when you were a kid. It is time for you to face the truth honestly and know exactly where you stand today.

What you need to do ASAP:

Grab a piece of paper or a notepad

Assemble all documentation showing all your expenses from 2 years ago. Yes this might take a while, but it’s worth it since it will be saving you so much more time and money in the future (for example for me, my bank sends me each month a computerized statement showing all my spendings and earnings/income. I am able to see where the money went, what I spent it on… almost like an x-ray!). These documents could include ATM statements, credit card bills, cancelled cheques, etc.

Examine each dollar spent and divide the spendings into sections or categories (food, rent, utilities, gas, phone, cable, etc.)

For each category, calculate the sum of how much, in the past two years, you have spent (the total of each area)

Divide each category total by 24 (2 years). This will give you how much you spend on average per month.

Now add up all the averages of each category together. This will tell you what costs you to live each month. Please keep in mind that these are averages. If your average total is $2,000, this means most months you’ll spend less (maybe $800 or $1,200), but it also means that in some months you’ll spend $4,000 or even $5,000. To get the more accurate average or to meet your monthly expenses, you need to calculate the average of each category each month.

P.S. I suggest you add at least 15% more to your total monthly expenses average, as there are always other unplanned for expenses (miscellaneous) or hidden payments we don’t seem to take into account simply because they occur twice or thrice a year. E.g if your total came up to $10,000, the actual figure would be closer to $11,500.

When you’re done, calculate the total of the amount you have coming in (monthly paychecks after taxes, rental income if you own any real estate, pension income, social security income,etc.). Only calculate the amount of which you are sure will keep coming in. If you have loaned money to a friend and they haven’t paid you back, do not count this. Write it all down. This is almost like the Robert Kiyosaki’s CashFlow board game (understanding liabilities and assets). If you’re familiar with it, you’ll understand.

Frugal Without A Budget

Some people consider budgeting a waste of time. I’m one of them. I happen to have a budget. And here’s how I maintain it: I don’t. I do a budget once a year, and then either get too lazy to make adjustments and updates, or just plain forget about it. Yet, my frugality remains… it is a part of my way of life. I am further encouraged to Not keep a budget by what I do every month. It is something I learned from the great Robert Kiyosaki, author of Rich Dad, Poor Dad. What is it?

He called it, Pay Yourself First. This is what I do every single month without anything getting in my way. I take 10% out of my checking account (paid via direct deposit) and transfer the amounts to the Brokerage account I share with my wife, Jessica, and to our individual Roth IRAs. I currently net $6,400 a month from my job as a vice principal. This amount will change next year when I go back to teaching, but it won’t change my strategy. $640 is split into three accounts: $400 to my Brokerage, $120 to my Roth IRA, and $120 to Jessica’s Roth IRA. This $120, by the way, does not represent my lone monetary contribution toward retirement. It’s extra! I contribute $200 to a 403b AND of course I also have my educator’s pension being automatically withdrawn from my pay.

The entire $640 is put to work. I invest in both the taxable, Brokerage, and tax-free Roth IRAs. If you do not have a 401k or other retirement account, I would suggest you “pay yourself first” more than 10% of your net salary. For all of you who have grown tired of the extra chore of keeping a budget, here’s what paying yourself first will do for you:


Just think, if you “pay yourself first,” and in best cases, put cash into a non-liquid account, like an IRA, there’s no coming back. You can’t pull the money out if you’re running short toward the end of the month. Well, you can’t without a penalty, so you most likely won’t do it. You’ll do everything in your power, like watch every expense, all month long to not be in a bind.

Even putting the money in a liquid account, like a Savings (don’t do this, please!) or a Money Market (a little better), will deter you somewhat from cheating, and transferring the money back to checking. You’ll need to stay disciplined. The bulk of my “pay yourself first” money goes into my Brokerage account. But I then turn around and buy stock shares with it. This puts me two steps from liquidation: sell shares and wait for the cash to become available, and then do a transfer request from Brokerage to checking. So you see… it’s a pain in the ass to liquidate, meaning, I better make sure Jessica isn’t going crazy at the supermarket!

Taking Financial Risks

Let’s take a case scenario of two brothers who happen to be farmers in a village far away from any natural source of water supply. Farmer A and Farmer B plant their crops at the same time in a land not too far apart from each other. After a while, the rains stop falling, farmer A is contended with the natural order of things, but Farmer B is not… he seeks ways to provide an all year round supply of water to his crops so he devises a means of transporting water from a faraway stream into his farm land. Now, farmer A tries to dissuade him by pointing out the various disadvantages of irrigation which includes over flooding. Farmer B despite knowing that he risked over flooding his small farm, persisted, ignoring the risk and thinking only of the advantages.

Eventually, it is harvest time, both farmers cultivated their crops but as you must have guessed by now, Farmer B’s harvest was more bountiful than that of his brother… in the long run, the end justified the means.

Now the difference between this two brothers is that one of them did things differently from what was regularly obtained. He took the risk of irrigating his farm despite the obvious risk of over flooding involved.

Now let’s relate this story to the present day craze for financial freedom by Nigerians as a result of which most people have bought into the now popular mavoriodian network known as MMM.

A lot of people call this scheme a scam simply because they are scared of losing their money, I mean nobody wants to lose hard earned money especially in this period of recession. Most people want financial stability, but not the risks involved in achieving this stability and as such, they remain in the same position, year in, year out.

Bill gates, one of the world’s richest man of all times, took a great risk when he took over the running of Microsoft world… the risk of immediate COLLAPSE but he was not deterred, he knew the rules of success, only the risk takers take it all.

My point being, it is a fact that nothing last forever, the mavoriodian system, might not last due to some situations which includes greediness among-st participants, but those in the business of making money know that a good deal lies in the kind of risk involved… the greater the risk, the greater your chances of gaining financial freedom.

Personally, I see no sense in putting my money in a banking system that finds every excuse possible to deduct minute sums under different pretentious guises of which nobody is held accountable for. Why not put that same sum of money in a system that works and ensures that at the end of the month, I not only get my money back, but I also get 30 percent and some bonuses.

To me, it only makes sense to do the latter. I am not one to be convinced easily, but I have tested and tried this system, I have seen millionaires with better finances than I have try this scheme and it worked for them, how much more me, a simple thousandaire…

A great man once told me, if you want to be great, then understudy great people, if you want to be wealthy, then you might as well understudy wealthy people. watch the way they work, learn from their investment tactics, their risk taking ventures… only then can you truly learn the power of making wealth.

Costs of Passive Fund Investing

Active investing is when someone (a portfolio manager) picks the stocks that are in the fund and decides how much of each one to hold (the weighting). This portfolio manager would also monitor the portfolio and decide when a security should be sold off, added to or have its weighting decreased. Since there is ongoing research, meetings and analysis that must be done to build and monitor this portfolio, this fund manager would have research analysts and administrative personnel to help run the fund.

Passive investing has the same setup as active investing, but rather than someone deciding what securities to buy or how much of each one to buy, the portfolio manager would copy a benchmark. A benchmark is a collection of securities which the fund is compared against to see how well it is doing. Since everything in investing is about how much money you can make and how much risk it takes to make that money, every fund out there is trying to compare to all of the other funds of the same type to see who can make the most money. The basis for the comparisons is the benchmark, and then it becomes comparing between peers or funds managed the same way. Comparisons in general are done only for returns. The risk aspect of the equation is handled by looking at what type of securities the fund holds or how specialized the fund is.

How Do I Know By the Fund Name If it is Active or Passive?

The short answer is that you have to get to know how the fund manager operates the fund. Some clues to know more quickly if the fund is active or passive are given next. If they are intentionally trying to pick securities according to some beliefs that they have about the market, this is active management. If the fund description talks about “beating the benchmark” or “manager skill” then it is actively managed. Another clue is to look at the return history. If returns vary versus the index by different amounts each year, then the fund is actively managed. Lastly, the fees may be expensive and have sales loads.

If the name of the fund says “Index” or “Index fund” there is a good chance that the fund is passively managed. If the name of the fund says “ETF” this could be a passive fund, but you need to make sure of this because some ETFs are actually active funds, but they are managed in a certain way. Most of the passively managed ETFs are provided by BMO, iShares, Claymore, Vanguard and Horizons in Canada and Powershares, Vanguard and SPDR (or Standard and Poors) and others if the holdings are from the U.S. Most of the other companies would have actively managed funds only. If the fund description states that the fund is trying to “imitate” the performance of an index or benchmark, then this implies that it is copying the index and this is passively managed. From the return perspective, passively managed funds will be very close to the index that they claim to imitate, but slightly less due to fees each year. The amount that the returns are under the index will be close to identical each year unless there are currency conversions or variances in cost which may come from currency fluctuations or hedging that the fund may do. Passive funds typically do not have sales loads as they are geared toward people who invest for themselves.

There are some funds that try to mix active and passive management. These funds can be assumed to be actively managed, although their results will be closer to the benchmark than most of the other funds, so this is something to consider if the variation from the index is a factor.

Types of Costs

Whatever product you buy, there will be a cost associated with buying it, keeping it and selling it. This will be true whether you have an advisor versus doing it yourself, and whichever institution you go to. Even buying your own individual stocks will have trading fees which you must account for. How much you are paying for each product however as well as the advice will make a large difference in what return you will get after everything is done.

Long Term Wealth Management


Having income properties and investments is, of course, important. However, for you to be truly content, cash savings is a must. It is highly suggested that you save a minimum of 20% of your income. The easiest way to do this is to have it directly deposited from your check into an interest-bearing savings account. This ensures that you won’t forget to set the cash aside yourself, and it prevents you from being tempted to spend the money while you have it. Having that extra cash in your back pocket will put you at ease in case any emergency situations arise.


It is essential to know how and when to use your credit wisely. This includes credit cards, mortgages, and loans. Do not overextend yourself when using credit by making impulsive purchase decisions or by taking out loans that you cannot afford. Paying any types of loan debts on time is the key to a good credit score, which will help build a positive impression for a future lender.


Take your investments slowly by first concentrating on small, achievable goals. If it is your desire to purchase that dream home or car, know your allowance and what you can realistically save. These purchases usually involve a large sum of cash, so they may take you longer to afford them, but patience goes a long way!


Don’t get caught up in the risky get-rich-quick schemes. As an investor, have a long-term strategy in multiple markets. Consider your interests, and invest in rental properties and stocks. These may not pay off huge dividends in the beginning, but think about your retirement: in 30 to 40 years, your properties will likely be paid off, and the rent you generate from these homes is cash in your pocket. If you have invested well, your stocks will gradually grow and grow.

Personal Bank Loans


Generally speaking, there are two types of personal bank loans:

– Secured, which will require you to put up an asset, such as a home or car, for collateral. In exchange, you get a lower interest rate, and potentially a better chance at being approved.

– Unsecured, which can be harder to get approved for, particularly if your credit score is less than perfect. Interest rates are higher, but, on the other hand, there is no risk of losing your home or car if you cannot pay.

Though a secured loan can be very tempting, it is important to take a step back and consider whether or not it is worth the risk. You will also want to look into other options that your bank might have, such as auto loans that might be more favorable for your purposes.

Your Local Bank or Credit Union Can Help

Being an account-holding member in good standing at your local financial institution can make it far easier to be approved. They will often look at the account balance and age when you apply. Generally speaking, the higher the better. It is a good idea to make this your first stop in the search. Keep in mind, also, that credit unions may be more willing to take risks than larger institutions, and as not-for-profit establishments, they can offer lower interest rates.

Consider Your Credit Score

When you apply for your personal loan, nearly everything from the interest rate to final approval is determined from your credit score. Search the web for sites that let you make a “soft” inquiry into your rating; this pings the major credit bureaus without hurting your score. Some will give you a fairly detailed report on all major factors, including open accounts, late payments, collections, and other records. This knowledge can help you take the right actions. In general, though, it is good to make at least the minimum payments on all accounts on time, every time. You may also consider getting a credit card to help build your rating, but be careful with your spending.