The posts are related to personal finances issue :

1.  Deposit Accounts presents 5 Ways Credit Unions Beat Banks posted at Deposit Accounts.

2. Jenny presents Stop The Credit Card Madness posted at Stop Spending Money.

3. Billeater presents How To Avoid The Dangers Of Debt Consolidation Loans posted at Billeater.

4. BWL presents Cash for your Old Appliances? posted at Christian Personal Finance.

5. MatthewPaulson presents What to Look for Other Than Interest Rates with an Online Bank posted at American Banking News.

6. MatthewPaulson presents College Debt – Work Study a Unique Solution posted at Fine Tuned Finances.

Please enjoy it !

Tags: Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

I believe that all of us have more than one credit card issued by several banks. As one of the most flexible way of payment, credit card is widely used in many transactions all over the world. Just swipe our card, no cash money, and we will get what we want !

Then, at the end of the month, some people will become headache because of incoming credit card bills, even bring them to personal bankruptcy. For those who still able to pay minimum payment amount, they can postpone life difficulties because of huge debts, but it’s just another time will come with bigger debt pressure, unless they can well manage utilization of credit card.

For sure, just thrown away our credit cards and not use them anymore is not a proper solution under current less-cash world. What we have to do is a good personal finance management of our credit cards.

Here are some tips that we can do for better utilization of our credit cards, to avoid getting mad because of their bills :

1. Bear in mind that credit card is not a debt facility

A lot of people forgot to use credit card as their main purpose for flexible payment method, but just swipe card for another debt which cannot be fully paid at the end of the month. One underlined mindset in using credit card is, please treat them as a tool of payment only, which has to be paid with your current routine income or future expected income. So, when we see any interesting things to buy or to pay using credit card, think over and over again whether our income can cover that purchasing or not. Implementing this rule effectively, then we will become credit card debt free.

2. Use several cards for different purposes

Lets say we have three credit cards on hand. Just allocate utilization of each credit card for different purposes. For example, credit card A is utilized for monthly household budget which is covered by monthly income. For this credit card, our payment shall be 100% of billing amount, so we don’t have any future obligation or interest paid. We may use credit card B for entertainment and traveling. For this credit card, we can choose whether to pay 100% of monthly billing by our allocated saving or pay a part of billing amount now and settle all obligation when we receive our future expected income (such as yearly bonus, project disbursement income, etc). Credit card C is utilized for purchasing household apparels or electronics, and we can order our bank to switch payment method to 6 months or 1 year installment type. Then, allocate some monthly budget to pay them. Please be careful to make sure our monthly income can cover all installment.

3. Pay more than minimum amount every month

For credit card B, please pay more than minimum amount every month. Since we don’t do traveling or unordinary entertainment every month, in the next month our bill amount will be reduced. If we continuously pay as much as we can more than minimum amount, at the end billing amount will be less significant compared to our budget. In accordance with personal finance management, the best way to do is make some saving for our planned traveling or entertainment, so we can pay 100% of billing amount with your saving.

4. Control our lifestyle

The last but not least, as general rule of thumb in personal finances, please just life with suitable lifestyle which can be fulfilled by our income. Sometimes we forget it and do a mad entertainment, mad shopping, or other mad things. When we have interest to buy clothes, just buy clothes which are match to our income. A lot of entertainment type out there, simply choose one or two type which suitable with our income. So many house apparels and electronic tools with wide range of price, just buy one which is suitable for us. If we want higher lifestyle, then just try to enlarge our income. But, if we cannot enlarge our income yet, then be satisfied with our current lifestyle.

By implementing utilization of our credit cards as mentioned above, we can well manage our expenditure and still on our track of personal finance management.

Tags: Household budget, Personal Finance Management, savings

If you enjoyed this post, make sure you subscribe to my RSS feed!

Giving our children the knowledge of financial matters since the beginning of their seventh age is quite crucial point to do. Starting from their sixth age, they joined elementary school, started to think, socialized themselves, and found a lot of new things in their life. At this stage, they also started to deal with little penny of money as their pocket money. Start some financial guides with attractive financial games between parents and their kids will make them to be familiar with personal finances and very useful for kid’s future life.

A lot of game is able to do, but the most easy and simple way is to inure them with management of their pocket money. Usually, we give them some money to spend every day. Why don’t we start to let them manage their money for some longer period of time ?

I am doing such thing with my child.

I have one 8 years old son, and I am dealing for long term financial game with him. Usually, his mother gives him Rp 3.000,- daily pocket money (similar with around $0.3, sufficient amount for our 8 years old kid pocket money in our country). Starting from his 3th grade of his elementary school, we give him pocket money in weekly basis instead of daily basis. The Rp 15.000,- money (5 school days times Rp 3.000,- daily pocket money) is given at the beginning of each week. We give him a freedom to manage and spend his money by himself, and just give him important point that he may not spend more than Rp 15.000,- a week.

We suggest him not to spend all of his weekly money, but set aside some money for weekly saving, which will be saved in his own moneybox. Every weekend, when he sets aside some money, he has to note his saving on one particular book, so he will exactly know the amount of his money in the moneybox. This recording shall be done by time for any saving and withdrawing from his moneybox.

The game is, for the money saved every weekend, my wife will give him additional 10% extra money of his saving amount. So, bigger saving will lead to bigger weekly bonus.

How if during specific week his pocket money doesn’t sufficient (let say, the amount already zero on thursday) ? Of course, he can take another money from his moneybox, but as a consequence, his money amount will be reduced and he will not get any extra money at the weekend.

We are doing it continuously week by week until the end of school year period (end of May). At the end of may, we will count together the amount of his money, and I will give him yearly bonus which is 10 times of his money amount.

I also give him extreme example, in case he doesn’t spend even any penny of his pocket money, his money (including yearly bonus from me) can reach around Rp 9 millions (US$ 900). He will be able to spend all money for his school vacation, buy some toys, clothes, or anything he likes.

This kind of game seems quite interesting for my son, and he always be able to save some money every weekend. The most important thing for us, he enjoys this game !

From this game, I expect several things :

1. He will be familiar to manage his own weekly money instead of hope some daily money which will be spend out all during the day. Naturally, it will build his insight about money management, important part of his future live when he has some income and shall make periodic household budgeting along his mature period.
2. This game will make him familiar with financial goals. In this game, he has short term (weekly) goal and long term (yearly) goal. All of the goal is measurable to him. Implementing this game will make him familiar with financial planning activity.
3. Recording of saving and withdrawing will make him familiar with accountable budgeting. He will be use to note all of his spending and income, and as the future result, he can manage his own money in an organized way.
4. He can learn about “money make money” rule of thumb. In this game, larger money he can save can generate larger bonus. Similar rule also happened in our real life, when time value of money is happening, our bigger money will cause bigger passive income from some investment.

Of course, in this game I never and will never push him to save as much as possible from his pocket money, but I prefer to let it done by natural way. As long as this game still enjoyable for him, it will be good learning of personal finances, since we are trying to build his way of thinking about money, instead of the amount of money itself.

I believe, implementing some financial games to our children, and do it in natural way, will give a lot of good impact and benefit for their future lives instead of giving them a lot of money, since the art of money management is not built by amount of the money, but more by their pattern of thinking about money.

Tags: Financial Education, household budgeting, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

Buying a new car for personal uses is the thing we usually do periodically, in line with increasing of our income and lifetime period of current car. It’s good if we can buy it by cash, but in most case we have to buy it by using auto financing due to limited cash on our hand.

Instead of get rush going to car dealer and experience unexpected bad things after that, here is some easy step by step tips to do for best auto financing :

1. Set up maximum monthly budget of loan repayment

Setting up a budget is important thing, to ensure our capability in making good loan repayment. Once we have certain amount of fixed budget, then we can start to choose our dreamed car by choosing the one which suitable with our budget. We can do simple simulation using online car loan calculator, compare several different set of car price, down payment, and term of loan. With this kind of simulation, we have one comprehensive picture about the most suitable car to purchase under current budget. Please see this basic budgeting post if you still confused how to set up the budget.

2. Find a good lender

We can find them fast and easy by online. By sending some basic information, we can get offering from some different online lenders just in minutes. Then, make a comparison between them. Two factors should be noticed when choosing a lender. The first is quality of lender, by checking their reputation as a company comparing with other lenders, popularity among other borrowers, and variation of financing program they provide. Second thing is their competitiveness, including offered interest rate and other charged fees. Several things will determine interest rate offered by lenders, but the most dominant factor is our credit score rating.

3. Enjoying car windows shopping before auto financing approval

When we have decided a lender, just send our loan application and waiting for their approval. Usually it needs a couple of days. While waiting for the approval, we can do car shopping by visiting car dealers, collecting offering letter from them, and choose the best dealer. Once our application is approved, then we have decided from where we will buy the car.

4. Ensure that we have loan payment protection insurance

We can’t expect the future anyway. This protection is important to secure our loan repayment in case something happened to us and we cannot continue to perform monthly repayment. Some lenders provide such protection together with their financing package. If our lender doesn’t provide it, go online and find good reputable insurance company easily.

5. Maintain good repayment performance

Yes, we have a new car now. Further important thing to do is to maintain good repayment performance until the end of financing period. It’s necessary to maintain good personal reputation since today is not the end of the world. With good credit score, we can get easy loan approval from good lender for any loan we need in the future, and enjoy lower charged interest rate.

Tags: Auto Financing, Loan

If you enjoyed this post, make sure you subscribe to my RSS feed!

Basically, personal finances can be divided into two broad categories, namely wealth management and household budgeting. As we all are aware about the importance of personal finances in our daily life, below are eight “MUST but DON’T” quotes related to basic personal finances to make it become effective tool in achieving our whole worth life.

Borrowing the term introduced by well known person Stephen F. Covey, I call it “8^th habit on implementing Personal Finances in Daily Life”.

Good personal finances shall consist of following actions :

1. MUST set up definite personal finances goals, but DON’T be unrealistic

Freely defined, personal finances is the way to create well organized financial actions, and to implement such actions, we need some blue print or map. The first thing to do is determining financial goals as a grand platform of all action. Budgeting deals with regular income and expenses, meanwhile wealth management deals with creating assets to financially secure ourselves. We must set our own realistic goals anyway, otherwise the platform will be useless just because too far to be reached out.

2. MUST establish certain timelines, but DON’T be too rigid

Once some future goals already set, for example: having standard house, plan some amount of cash / savings, do some investment, retirement planning, and so on, next step is determine certain timeline of each goal. The sentences may become: having $ 30,000 standard house within 5 years, save for extra fund every month with certain target amount $ 5,000 within 3 years, will make some initial investment in bond / stock amounted $ 4,000 starting from next 8 years, calculate expected fund on hand at pension age (55 years old). With this timelines, we will exactly know what action to do. But, as the future is uncertain including our financial situation, we cannot too rigid stick on that timelines. Periodic review is necessary to re-setting those goals related to future real financial situation.

3. MUST arrange positive monthly household budget, but DON’T be self-imposed

Positive result of monthly household budget is a must condition, means our monthly revenue should exceed our monthly expenses. Its important to list up all current revenues and expenses as a part of personal finances, to have clear financial picture. Once the figure is negative, try to arrange less planned spending. If after arrangement the figure still negative, means we have to create additional revenue, from whatever reasonable way. However, we have to wisely arrange our monthly budget. For instance, too much stressing for unreasonable target of saving amount will lead us to unhappy life to do, and at the worst bring us to stressful life. Be reasonable, life is not only for money.

4. MUST be serious, but DON’T be ambitious

Yes, we have to plan and do it seriously, but use our passion, not our ambition. Make personal finances become some enjoyable process, instead of focusing to ambition. Once again, life is not merely money, don’t be getting trapped.

5. MUST have some investment, but DON’T become a speculator

Investment is important. Please allocate the highest portion in liquid cash/savings which has the lowest risk, after that we can think about investment in house, gold, bonds, mutual funds, stocks, forex. Don’t become a speculator, just put the smallest portion in assets with the highest risk.

6. MUST have a credit card, but DON’T lost control

Credit card is important as a tool of payment, but don’t consider it as loan facility, otherwise we will suffer in debt trap. Make sure we can allocate some significant amount to pay our credit card bill at the end of the month.

7. MUST take some loan facility, but DON’T create bad credit record

If we are worker, quite impossible to buy house by cash, so take loan facility to buy it. Take other loan to buy vehicle. In case we have established certain prospective business, get loan to make it grow faster. But before we take some loan, carefully calculate our capability, since we have to avoid bad credit record. Reputation is important to maintain trust from our society.

8. MUST have life and health insurance, but DON’T forget to keep us fit

Health insurance is important to protect our wealth from elimination caused by unexpected occurrence (hospitalization, medical surgery, etc), and life insurance is quite important for person with dependence (wife, children). We cannot expect our destiny, so we have to secure ourselves and the ones who we love. Anyway, don’t forget to maintain our fitness with regular enjoyable sport.

Life is valuable thing, and personal finances is important pillar to make it enjoy. So, just enjoy our valuable life with good personal finances planning.

Tags: Household budget, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

A lot of people think that implementing personal finances in our daily life will bring us to desperate times because the scary imagination.  For many people, thinking about personal finances are quite similar to dealing with rigid budgeting, sacrificing our hobbies, talk too far away of the future, hardly comparing household budget vs income, or even sacrifice our current life.

As a common basic sense, the most preferable thing for all people is a freedom, including freedom to spend our money for anything we like.

Yes, I really agree with this insight!

Just to summarize my basic idea of personal finances, let me back to several previous posts which already published.

First post Basic Personal Finances – Initial Road to be Rich ! emphasizes that definition of financial freedom or getting rich is different between one to another person, because any individual has unique perception about life and how to achieve our happiness, basic purpose of the life. It will take effect to someone’s perception about money and financial related matter.

Second post Start Your Step to Implement Personal Finances repeat the message once again, and then emphasizes to make financial goals based on needs, not desires. In this step, we try to keep ourselves in well-organized financial track rather than let ourselves out of control. Simply say, this way can make our money and assets becoming positive tool to achieve our  personal basic purpose.

In other two posts Personal Finances – Let’s Determine Priority ! and Financial Advice – Systematic Personal Finance Budgeting, I tried to explain more about implementation of the first and second posts, and we were dealing with basic idea of household budgeting.

Before continuing with other future postings, I would like to well explain my basic idea about personal finances. In my point of view, personal finances including budgeting, saving, and all of the planning we make is supposed to be one of the way to make us happy, not the one which will hurt our life. Simple lesson of life, the final ultimate goal in our life is to enjoy the life itself. So – for example, too strict budgeting will bring us into suffering and eliminate our freedom to enjoy our meaningful life. The right thing to do is just make personal finance as a game to play, not a rigid guidance to follow.

But, on the other hand we cannot stick our steps on opposite side, spend our money without any planning and controlling. It seems valuable for short term, but in fact we go to another direction of life instead of long term happiness.

Actual fact, we need some personal finance management in our life, as a benchmark to pursue our main goal, but not as a rule which monitor our whole life. So that, personal finances is theoretically rigid, but should be implemented in flexible way to bring best result for our life.

So, how to make personal finances as a game ?

One simple example is about monthly household budgeting. Under some amount of current income, we can generate some amount of saving for short term or long term purposes. The rigid one is, we shall treat very strict saving for our short term, urgent, and important upcoming needs, since neglecting them will make us very suffer. If we cannot do that thing, means hard effort is needed to increase our monthly revenue.

On the other hand, we also have long term goals or purposes. We can be flexible enough with this kind of purpose. For some persons who love to do strict household budgeting, then strict budgeting is the choice. But other persons may be have another opinion regarding the way to enjoy life, so flexibility will make them enjoy.

If strict household budgeting seems hurts our life, we may think to implement flexible budgeting, by putting some month to month budget range. For example, we can averagely save 50 for our long term purpose, so just make a range between 40 to 60 or 35 to 65. May be this month we have some interesting things to do which needs extra budget, and we can allocate 10 or 15 more extra fund for our short term purpose. Next month, when we have less things to do, we can allocate more 60 or 65 budget into saving.

Implementing this way, we will feel personal finances as another interesting game to play, instead of tons of disgusting rule which burden our life.

Finally, just have a nice game !

Tags: Household budget, Personal Finance Management, Saving Money

If you enjoyed this post, make sure you subscribe to my RSS feed!

Once we already had well organized personal finance management with several short term and long term goals, personal finance budgeting will be another story to do. Whatever our job, whether professional, employee, businessman, usually we get our income in monthly basis. Self employed person may take some portion of daily profit to cover their daily household expenses, but the best method to organize our fund is only by making separation between revenue from business (which is earned every day) and set up our monthly household budget (by set aside some specific amount from business profit once a month).

Let assume we have organized our income to be generated once a month. We have several needs and goals and must allocate our income based on them. Based on their urgency and significance, usually people organize their expenses from very routine ones to un-routine household expenses.

At the first line is regular monthly household expenses, followed by allocation for credit card and other credit payments. Education of children will be on third priority, and after that can be continued by routine entertainment, retirement saving, vacation saving, and so on.

As income and expenses already well estimated before, then we are sure that our monthly income will be able to cover our monthly household expenses including several particular savings. Yes, we have done a good personal finance budgeting !

Now, what we have to do is making some systematic budgeting to implement or personal finances planning. In accordance with that, there is financial advice as described below:

• Arrange allocation at the beginning of the month when we just received our monthly income, and make sure that all is balance for incoming month. For this purpose, we have to check our credit card incoming bill and plan the amount of payment for this month. Also scrutinize whether there is un-routine household expenses or not. For instance, child education will need additional expenditure in specific months such as purchasing of new books, two times monthly school fee before school vacation, etc.

• Don’t wait to pay all credit installment or credit card bills until their payment due date, but pay them at the beginning of the month when we receive our monthly income.

• Make weekly review at the end of every week. Just spend one hour of our valuable time on the week end to check all household expenses. In this part, sometimes we will find too much expenditure of the week compared with planned expenditure. With this review, we assure ourselves that our implementation of budgeting still on their track.

• If possible, please keep any receipt of every expenditure transaction. This will help us to trace all expenditure when we do our weekly review. For several not significant amount of regular expenditure, just provide some petty cash in our pocket at the beginning of the month, and we can check remained amount of our petty cash every week.

• Make monthly review at the end of the month, check realization of our personal finance budgeting of the month, whether it’s in line with the planning or not. If not, we can mark several unexpected expenditure which increase the budget amount, and find that such expenditure is really important expenditure. If excess expenditure is coming from un-necessary things, take it as a learning for up coming month’s budgeting (I understand that control our lifestyle is not an easy job, but just try to do our best for that).

By implementing this financial advice, we will be able to do systematic personal finance budgeting as a part of general personal finances matter, and as the result we can control the track of our monthly expenditure, to make it as close as possible with our planning.

Tags: financial advice, Household budget, household expenses, Personal Finance Budgeting, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

In general, most of us have some financial goals in our life, both short-term and long-term goals. Basically, the objectives are diverse depend on the preferences of each person. On the other hand, in the process of achieving those goals, we are confined by current household budget. In accordance with the basic principles of economic, even though our financial dreams may not be limited, but with a limited amount of earnings, we may not achieve all of our dreams, so that our task is to perform optimization of our priority at the moment.

As explained in previous article Basic Personal Finances – Initial Road to be Rich, determination of our goals have to be set based on the needs inspite of desire. Thus, when we determine our financial goals, there are some basic principles should be noticed. The principles consist of two major priorities – level of significance and level of urgency.

1. Goals setting based on the level of significance

Let’s divide our needs into three major groups, namely primary needs, secondary needs, and tertiary needs. In preparing personal finance management, we must start from the primary needs first.

Primary needs are:

• The needs of monthly basic necessity

It’s important for us to review again the types of our regular monthly household expenses, whether the money are spent for primary needs, or we used to spend money without any controlling on the level of significance. So that, just make a list of quite specific spending items from all of our current regular monthly household expenses, and temporarily remove all routine spending which is not a primary needs from the list. We shall move this kind of expenses to some lower priority list.

• Housing installment (for those who already had a house), or house ownership planning (for those who don’t have a home yet)

Ownership of one “standard house” is included in primary needs we must to achieve. Ideally, standard house is a medium-sized house with 2 or 3 bedrooms, but it could be only small flat in some countries where land price is very high. If currently we don’t have a house yet, we have to expect standard house price within 2 – 3 years to come. From the benchmark price, we can set household budget in term of amount of required deposit and repayment amount should be paid every month.

• Education needs of children, for those who already have children

In term of time to spend, needs of education consists regular monthly needs (children’s school tuition, tutor, etc.) and a one-time pay (registration fee of our child’s school, annual fees, etc.). Both of them are primary needs, but have different pattern of personal finance management.

Next, followed by a secondary needs:

• Car/motorcycle installment (if any), or the planning of car/motorcycle ownership (for those who don’t have them yet)

The cheapest reasonable transportation tool is motorcycle, followed by a car. If our income is quite limited, just start from motorcycle as a standard, don’t start from car.

• Home equipment needs, such as furniture, standard electronic equipment, etc

We can make a list of standard equipment such as home television, standard furniture, computers, and others, then sorting them from the most important ones to less important things.

• Entertainment needs

I include entertainment needs as secondary needs, not tertiary, because under current high level of life’s stress, everybody needs entertainment to maintain our mental balance. Specify one or two of our main hobby under reasonable budgets, and make monthly household budget for those hobbies.

• The need of emergency funds

I recommend for having special savings for emergency fund, because the future is uncertain. Once upon a time, we may need it.

• Other secondary needs based on our own preference

Let’s define needs based on necessity, not desire.

The later is a tertiary needs:

• Pension funds reserve

We can create some expectation of our retirement budget using retirement planning software or financial calculator.

• Other tertiary needs based on our own preference

Some of luxury things can be included in this list. It’s normal to dream about something which doesn’t significant but give us some enjoyable life.

2. Set goals based on the level of urgency

We can make a list of needs by making and filling the columns of urgency. Make some columns with title “Need by Time” from left to right respectively, starting from this month, next month, a half more years, one year longer, until the distance of our retirement age, then fill each column with our needs, starting from the most important (primary) to tertiary needs from up to bottom in the column. From this worksheet, we will get a comprehensive picture of all of our needs.

For example, let say somebody with 30 years old of age, has one child with 2 years of age, with current $ 3,000 monthly income. He has calculated his household expenses, and got $ 1,500 monthly primary needs, $ 700 repayment of home installment, and $ 200 installment of motorcycle. Let’s add another assumption, saving interest net rate is 3% per year, then he can sort the list as below:

1. Monthly primary needs $ 1500; remaining income = $ 1500 ($ 3000 – $ 1500)
2. Home Installment $ 700; remaining income $ 800
3. Motorcycle Installment $ 200; remaining $ 600 of income
4. Next year his child will enter pre-school, with $ 1,000 expected registration fee, so he must save as much as $ 82 a month from now; the remaining income will be $ 518
5. Monthly purchasing of home equipment is allocated $ 200 per month; remaining income $ 318
6. His hobbies are go to the cinema and soccer sport, and he allocates $ 100 per month for those hobbies; remaining income will be $ 218
7. $ 118 for other secondary needs; remaining income $ 100
8. At this time, he still not able to set aside the money for his retirement, then he allocates the remaining $ 100 as emergency savings fund. Two years to come, his emergency reserve fund will be $ 2,476

We can freely make this kind of budgeting simulation depend on our financial situation and preference. The point is, by organizing our spending based on priority needs as mentioned above, we will be habitual with self-control, can create personal finance management, and control our household expenses effectively. As a result, we will not be burdened by urgent needs that must be fulfilled when we don’t have even any money in our wallet / savings.

Tags: Household budget, household expenses, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

Simple and interesting free simulation program to calculate how much internet marketers have to earn monthly additional income from blogging / internet marketing, to secure retirement age period.

personal finances

The program can be downloaded HERE.

Several assumptions are generated from US historical economic data :
- Life expectancy (http://www.cdc.gov/nchs/fastats/lifexpec.htm)
- Historical US inflation from 1914 – 2008 (http://www.inflationdata.com/inflation/inflation_rate/historicalinflation.aspx)
- Long Run stock market return (http://www.sscommonsense.org/page04.html)

personal finances

PRESS TO RUN PROGRAM !

Have a nice try !

Tags: free stuff, Personal Finance Management, retirement

If you enjoyed this post, make sure you subscribe to my RSS feed!

In general, there are two kinds of investment way, ie direct investment and portfolio investment. Direct investment is done by embed capital investment into real assets, such as opening of factories, infrastructure projects, setting up some financial companies, and others. At its core, there are at least four characteristics of this type of investment : a part of money capital was changed to fixed assets, usually done by a company entities, there are some management of human resources in a relatively large scale, and long term in nature. While portfolio investment is embeding of money to one country’s / region’s financial instrument, such as investment in bond market or stock investing.

In contrary to direct investment, in this type of investment investors change their money into marketable securities as one way of asset allocation and money management. The investment can be done by private or company entities, has flexibility in number of human resources employed to do it, shall be done both in short-term or long-term, and usually can be stopped immediately at the time as desired.

In accordance with title of the article, this time I will discuss at glance about the kind of familiar portfolio investment, which have their own unique character that is quite different one to another.

• The first is investing in bond market.

In general, bonds are a kind of debts issued by companies or governments. When making asset allocation by buying bonds, we lend money to the bonds publisher. As a return, publishers will give us interest on the money invested, and eventually return all the money we lend. A number of interest are paid regularly (every 3 months – 6 months – 1 year), so the bonds included in the fixed income investment group. Compared to other investment instruments, bond is relatively safe especially if you buy bonds issued by the government. But, because of low risk, potential profits of bonds does not so high. Generally, the level of profits in bonds is lower than other instruments.

• The second is stock investing.

When we buy shares of one company, we automatically becoming the owner of that company. Therefore, we are entitled to receive benefits that are allocated to company’s shareholders, which called dividend.

In addition to benefits such as dividend, we can also expect some profit (capital gain) of the increasing in purchased stock prices. However, this ocassion does not always happen, for example, the current world stock price index has quite extremely decreased and the shareholders have some huge potential losses. In stock market, the publisher company also does not have any obligation to distribute dividends on a regular basis, so we cannot asure ourselves to get benefit from dividend. Because the risk is higher, stock investing provide relatively high benefits compared with bonds. Stock is quite good tool of money management.

• In other way of investment, we can raise our money through mutual funds.

This investment instrument offers many advantages for us. In addition to flexible amount of initial capital required for the investment, we also need not spend much time to monitor our investment, because portfolio management is done entirely by investment fund managers of mutual funds company.

In mutual funds, our money and other investor’s money will be collected by mutual funds company, and the company will manage the allocation of our money into stocks, bonds, or other investment instruments. As a return, we must pay some fees to fund manager of mutual funds company for their service by managing our money. Based on the investment focus, there are several types of mutual funds, consisting of fixed income mutual funds (bonds, protected), not fixed income mutual funds (stocks, money market, the index), or a mixture of both types.

In addition to the three main instruments, there are also other instruments which have very high risk but also greater potential income, such as options market, commodity market, and foreign exchange (forex). While giving high profits, those typical investments have very high risk.

Beside investments in marketable securities, we can also make asset allocation by buying gold or property. The risk of both investment types are relatively low, but we still need to have adequate knowledge before doing such kind of investment. Investing in the form of gold is more liquid than investing in properties, but usually both investment types are made for long-term investment purposes .

With the development of information technology, nowadays people can do money management by online investment in these investments, in which the sellers, brokers, and investors do not need to meet each other but all transactions conducted through the websites.

Regardless the type of investment that we will do for asset allocation and money management, whether in bond market, stock investing, mutual funds, or in the form of gold and property, should we learn enough about the characteristics and risks of each investment type from other people who have experienced in this field.

Tags: asset allocation, money management

If you enjoyed this post, make sure you subscribe to my RSS feed!

It’s commonly accepted that during anybody’s life, there is a time when they started to think about their financial goals, and most of people thought that money is important thing in their lives. Perhaps many people say that having money is not the main purpose of their lives, but for sure we can’t deny that money has significant role in the process to achieve other important goals in our lives.

For example, may be our main purpose is to get happiness by helping each other, having a harmonious family, having many friends, and the other noble purposes. We can do those things in our daily life, either with or without money. But just try to imagine, how you can do it in convenience way if you are still heavily burdened to fulfill daily basic necessity, hardly thinking about how to pay your child’s school, or other urgent needs. On the other side, situation will be different if today you’ve been able to regularly allocate some sufficient amount of money to cover your daily lives, make saving for your future lives, or even if you have passive income which can cover all of your needs. I think your life will be seems easier and comfortable to do other important things, don’t you ?

As different person has different perception about word rich, I try to categorize the people into three types in accordance with their concern to financial freedom ;

First, people who already known what’s their own financial purposes, have enough knowledge to implement personal finance management in their life, and do implement their knowledge in daily life. This kind of people is used to become successful in their financial and social life.

Second, people who don’t care enough about financial freedom. For them, financial freedom is just another slogan, and doesn’t so important as well. They tend to entertain their today’s life with almost of their earnings. This kind of people are usually stuck in their lifestyle and as a consequence they must work hard just to pay their current lifestyle.

Third, people who care with the goals of their financial future, have the desire to achieve the goals, but don’t know how to get started. I present this post for these people.

Well, for those of you who are starting to define your financial goals, below are some tips which might be useful for you:

1. Start your step by making goals that suit to your needs, not your desires

Set goals depend on desire will lead you to unrealistic goals, which have no accurate measurement tools, and make you becoming mad in the process to achieve those goals. One simple example is the goal of your saving amount for your pension stage of life. You can freely set any amount as you want, but if you define it based on estimated monthly expenditure at the time of your pension ages, the goal will be more realistic for you.

2.Set some main priorities quantitatively, starting from the most important and urgent things

Suppose you are a 30 years of age male, with $ 4000 monthly income, have been married, and has one 2 years old child, then you can sort your goals as follows:
- Routine monthly expenditure = $ 2,000
- House and car loan repayments = $ 1,000 monthly
- Next year your child shall enter a pre-school, with an estimated $ 1,000 registration fee
- Set aside an emergency fund, with $ 10,000 savings target in next two years
- Plan your family vacation each year, with $ 1,000 budget
- Estimated monthly expenditure of your pension life time, let say $ 10,000 per month

3. Personal Finance Budgeting: Count the needs of your monthly budget based on those goals, and then compare it with your current monthly income

Refer to the example mentioned above:
- Routine expenditures + loan repayments = $ 3,000
- Using financial calculator or Microsoft Excel, you can calculate the money you need to save starting from this month for having $ 1000 registration fee of your child’s school funding by next year (assuming net return of investment is 7% p.a), which is $ 80.23
- For $ 10,000 savings amount in next two more years, you have to set aside $ 387.13 per month starting from now on
- For family holidays, $ 80.23 per month
- For $ 10,000 estimated monthly expenditure at starting point of your pension age (next 30 years), you must have $ 1,714,286 savings 30 years later. To produce this amount, you must start to save $ 1,397 a month from now on

By adding all monthly expenditure, the amount of your monthly budget will be $ 4,944.59, which is $ 944.59 exceeds $ 4,000 monthly earnings.

4. Based on the results,

since your current monthly income doesn’t sufficient to accommodate such budget, you will have something to do, for example to temporarily eliminate your pension fund’s goal, while looking for solutions to increase your earnings by $ 1,000 (to $ 5,000) in the near future.

You can perform different simulation and make your own goals based on your preferences. Hopefully, by setting financial goals since the beginning, you will be able to well organize your personal finances and give you a motivation to search additional revenue in line with your goals.

I have to emphasize once little more, when you set your goals, please set the goals that you thought realistic enough to achieve based on the needs. By doing that, you will not get any stress in the process of achieving those goals, and personal finances will become an interesting game in your life.

Have a nice try !

Tags: financial freedom, Personal Finance Budgeting, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!

If somebody ask you, “whether you have a strong obsession for rich quick ?”, I believe that some of you will say YES ! People who say NO just those who are recognized as rich by society, already felt rich, don’t have any personal finances planning in their life’s profession, or the person who doesn’t so sure about the question itself. Couldn’t be denied that any person who have started thinking about money, in nature have a desire to become wealthy themselves. Second and third very natural questions are, how to become rich and how long the time will be needed to become rich?

Well, for the one who said YES to the first question mentioned above, I just want to emphasize here that there’s no instant and easy way to get rich very quick, through natural ways to pursuit it. Yes, several persons got lucky by getting $ 10,000,000 grand prize amount and directly come into the rich. Other persons tried to do some criminal actions such as robbery, corruption, which has huge risk to bring them into the jail. But that’s different issue I think, because mostly people will think how to get rich with their natural efforts and try to live their life in comfortable way instead of doing such extreme actions.

For my own, I classify myself as a person who doesn’t so sure about the question itself. In my view, no one will be able to become rich quick through natural way, except they was born from old rich family. Each person should strive to become rich, times and efforts also required during the struggle. For that reason, I more interested in second and third questions of personal finances, namely how to become rich and how long our expectation to achieve it.

Robert T. Kiyosaki in some parts of his financial advice of famous book The Cashflow quadrant suggests people to move from employee and self-employed quadrant to investor and businessman quadrant in order to achieve financial freedom more quickly. To some extent, I agree with the opinion, but the fact is mostly people don’t have the same perception one to another about the meaning of the word “rich”. One quite extreme figured example, there are people who have felt rich when they have enough $ 10 thousands money in their savings, but there are also those who don’t feel rich still even though have time deposits of $ 10 millions. Other aspect is different people have different interests, and this interest is guiding people to enter the most possible quadrant for themselves. For example, people who used to (and enjoy) a hard day-to-day activities, will be more inclined to be a self-employed or employee than to be a businessman who usually do more lobbying and controlling activities. So that I think everyone can become rich and achieve their financial freedom regardless of the quadrant where he is.

As a soul of basic personal finances, there are some steps that I would like to recommend as a financial advice to become rich;

• First step and the basic of all, just find the meaning of word “rich” for our own, and set the time target how long time we need to reach it!

Everything must be described quantitatively, at least compared to the needs of our lives with a certain lifestyle. For example, the meaning of rich for me is to have monthly income (active income plus passive income) equal to twice of my monthly needs, having liquid assets in the form of savings, security deposit, or marketable securities that guarantee the monthly needs for two years, and I determine the target within 5 years to achieve it. In addition, I may also have another target for certain amount of savings to secure my pension stage period, and I expect to achieve that amount at my pension year-age. The goals will be widely vary depending on our personal preferences.

• Second step, regardless of the quadrant where we are, just ask ourselves whether our current routine income enables us to achieve our goals ?

If the answer is NO, this means we must try to make it into YES. There are various ways to do it, ranging from thinking about some additional revenues, to find a job with a larger income, or move to other quadrant either directly or gradually. The important thing is, make sure we have the revenue that allows us to reach the target.

• Third step, which should be done simultaneously with the second step,

is to create monthly personal finance budgeting, well quantitatively describe our monthly income and monthly expenses, with a target amount of money that we can save each month. This step will lead us to be focused on the main goal, and allows us to make the short-term targets (says the annual target) as an “anchor target” without losing our focus to achieve our main goal.

• The most important fourth step,

is to periodically review the first step towards the third : our main long term target, efforts made during the process towards achieving the target, and monthly personal finance management. This will help us to be very focused in the efforts to develop our routine revenue, analyze achievement of “anchor target”, and allows us to revise / make adjustments of the final target in accordance with development of our monthly income, changing or addition of preference, and the time remaining to reach the final target. This adjustment will be very important because above of all, we must have quite realistic target to achieve in the end. Don’t let ourselves to be stressful because of having a not realistic goals !

Those four steps mentioned above is a basic foundation of personal finances, to make our life financially well arranged, and finally become one tool to achieve our life’s ultimate target, ie happiness with enjoyable daily life.

Shortly noted that high-discipline and sufficient efforts are required to consistently run the four mentioned steps. If the steps are done correctly, I hope that this financial advice can assist all of us to become rich, one word that we dream about.

“The rich-talented persons always asking how to make more money out of time and money they had; on contrary the persons who always ask about some places to spend their money, will be stuck in a circle of hard work to pay their lifestyle”

Tags: financial advice, Personal Finance Budgeting, Personal Finance Management

If you enjoyed this post, make sure you subscribe to my RSS feed!