On April 28th, the Georgetown University Center for Financial Markets and Policy, the Wall Street Alliance, and the Office of the Provost hosted a panel discussion featuring Nancy Doyle entitled The Markets Have Been Rocked! Where Are They Headed?
Technology: Convenience and Risk
Advances in technology and mobile communication have changed the way we manage our finances. These innovations save time and allow us to be more informed consumers. But the innovations have also introduced new risks and exposures. With time, your financial accounts will grow, and so will the potential losses from identity theft and fraud. Review your credit report regularly. You can download your free report and search for errors or indications of fraud at www.annualcreditreport.com. If you will not be in the market for a new loan soon, it is possible to freeze or lock your credit profile to reduce the chance of identity theft. In that case, you need to contact each of the three credit bureaus: Equifax, Experian, and TransUnion. Here is a link to learn more. https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs If you receive a suspicious email, text, or voicemail that appears to come from your credit card company, do not…
Think About Cash Flow
Establishing sound personal finance practices while you are young is essential. For those who are new to personal financial management, you need to think of the long run. Discipline and having the right mindset will help you stay out of debt and achieve your financial goals. Cash flow depends not only on your income but also on changes in your savings and debts. If, at the end of the year, you have not saved, and your credit card balance has grown, there is only one explanation – you consumed more than you earned. If, at the end of the year, you were able to save money or your debts have declined, you consumed less than you earned. In terms of your take-home pay, you either spend it, consume it, or save it. The difference between income and spending or consumption is your net savings. Your net savings depends not only on…
Needs vs. Wants
To develop a realistic budget, you must start with an analysis of how you are currently spending money. If budgets are unrealistic or unattainable, they will not work. Analyzing your monthly outlays by type and category is a great place to start. Look at each of your monthly expenses as a percentage of your take-home pay. Assign each expense or outlay to one of three categories: Essentials: things such as rent, transportation, groceries, utilities, insurance, and the like Savings and debts: establishing an emergency fund, saving for retirement, and paying off debts Everything else: travel, entertainment, shopping, gifts Totaling each category – essentials, savings and debts, and everything else – is an excellent diagnostic tool. It shows how you are spending your money and where you can make changes to improve your situation. Take a close look at your nonessential expenses. These are often tied to lifestyle choices and are…
Focus on Your Net Worth
Managing your financial life involves making a lot of decisions. When the dollars involved are material, you should always think about the repercussions for your net worth. This practice will have a profound impact on your long-term financial well-being. In Accounting 101, you learn about a balance sheet. A balance sheet is a financial statement that lists your assets, your debts, and your net worth. Your assets are anything you have of value, such as your home, bank account, investments, 401(k), and car. Debts include any outstanding liabilities or obligations such as a mortgage, student loans, car loans or leases, and credit card debts. Your net worth is the difference between your assets and your debts. In other words, your net worth is an outcome, and you can think of the formula: Assets – Debts = Net Worth If the total value of your assets is higher than the total…
Evaluate Your Creditworthiness
Building good credit is essential. You can pay for large expenditures over time using student loans, mortgages, and car loans and leases, but how you handle these and other debts has a significant impact on your net worth. Also, how you manage these debts plus credit cards and cellular and utility bills has a profound effect on your credit score. Credit scores range from 300 to 850. In general, scores above 700 are good, and scores above 800 are excellent. Not only does your credit score determine your interest rate, but it also determines whether or not you will be able to get credit if you need to borrow. Keep in mind that each lender has different requirements for a minimum credit score that they will approve for potential borrowers. Depending on the lender and the type of loan you are requesting, being in the “Good” range may not be…
Spend Less; Save More
Finding ways to save more starts with finding ways to spend less. Analyzing where your money goes every month is a great place to start. Take a close look at your non-essential expenses or “wants.” These are often tied to lifestyle choices. Reducing non-essential outlays will free up cash you can use to pay down debt, shore up emergency fund reserves, and save for retirement. Articulating a plan and exercising discipline increases the likelihood that you will attain your goals. Analyze Your Spending There are a vast number of personal finance websites and apps. Linking your transaction activity to one of the tools helps track your spending on a real-time basis – overall spending levels, spending by category, etc. There are also data security considerations. If you choose a website or app, select a leading one with excellent security. Whereas I am in favor of budgeting tools to analyze spending,…
Strategies to Stay Out of Debt
Establishing sound personal finance practices while you are young is essential. For those just starting out who are new to money management, you need to consider your financial future. Discipline and having the right mindset will help you stay out of debt and achieve your financial goals. Track and Analyze Your Spending The first step is to analyze your spending to see where your money is going. Limit yourself to one or two credit cards, using one for most day-to-day purchases. This makes it easier to track spending and your total credit card balances. Having multiple credit card accounts is a major reason that card debts grow. As credit card balances climb, it also hurts your credit score. Even if you can pay off your balance every month, using more than 30% of your credit line has a negative impact on your credit score. Peer-to-peer (P2P) networks offer convenience and…
New Job Offer? Great Tool for Budgeting
Have you received a new job offer? Considering a job transfer to a new state? This online calculator from payroll processing provider ADP helps you determine what your take home pay will be every pay period. There is also a version for those who are paid hourly. Such a helpful tool as you build your budget for your next chapter in life. To give it a try, click on the link below: ADP Take Home Pay Calculator
Asset Allocation Grid
My Asset Allocation Grid helps you take a comprehensive view of your investable assets. It is like a dashboard for your financial life. Attached is an example of the Grid. Click on the image below to download. Asset Allocation Grid Example