Today, we're interested in your goals for 2009.
What are you hoping to do with your personal finances in 2009?
Answer the poll below. If you have more to add, leave a comment!
You can select more than one option.
Can you hit your financial goals without budgeting your spending each month? What about if you're tracking every penny you spend, but not setting aside certain amounts for each category?
For the past year or so, we've been tracking all of our purchases to find how much we are totalling at the end of the month, but not planning out how much we will spend for groceries, entertainment, and other expenses that fluctuate month-by-month.
But would it be better to establish budgets for the expenses that change every month?
This month, we're trying it. (We used to do this when we first started saving money, but stopped after a while).
The past few months have been a bit expensive — our out-gos have been higher than our incomes. But since we treat savings as expenses, we're basically moving money from our cushion into savings.
Our paycheck to paycheck mentality makes our checking account levels relatively low, but this forces us to really watch what we spend.
What do you think: If you're automatically set to save money, is tracking your spending as good as budgeting?
The number of Web sites and online applications available for you to manage your money and improve your finances keeps growing all the time.
CNNMoney.com has put together a slideshow of 7 technologies for optimizing your budget.
These are targeted at small businesses, but are certainly applicable to many home users.
The only one of these I can highly recommend is Yodlee, which I've been using for over a year.
Have you used any of these services? What do you think of them?
Let us know in a comment.
ING Direct, one of the pioneering online banks, has announced its new "We, The Savers" push, encouraging Americans to focus on finance fundamentals and put saving first.
In a letter on their Web site, CEO Arkadi Kuhlmann writes that we've made some mistakes, but can emerge stronger:
There's no denying it: America is in a tough financial spot, and some of the people in our financial industries have a lot to answer for. Eventually, they will. In the meantime, there is no way to turn back the clock on this crisis and not much the average person can do to alter its course. It has to play itself out, and we have to believe – and insist – that those responsible will play their parts in fixing it.
But what we can do is make sure, as the song says, we don't get fooled again.
Below is a 10-point plan for exactly that. If you live by it, you'll be in control of your financial life. If everybody lives by it, we'll live in a stronger nation. We urge every American family to read it, talk about it together, commit to it. Then print it out and tape it to your refrigerator door. It's a declaration of financial independence that will put your future into your own hands, where it was always meant to be.
ING's 10-point plan is as follows.
We can't argue with any of the points — the level of finanical knowledge in the U.S. is way too low, and anything that can be done to improve it is a step in the right direction.
Here's what we would add to the decleration:
What would you add to ING's Decleration of Financail Independence?
Personal finance is about 95 percent mental and 5 percent physical. Once you've put the right system into place, you just have to block out all the noise and plow ahead.
So as much as you may have been led to believe otherwise, the biggest thing blocking your success is you.
You are your biggest investment — and sometimes you make the wrong decisions. That's simply human nature.
Bankrate has a great story about 7 'psycho' money traps and how to beat them, highlighting how we cause ourselves problems.
Their seven mental money traps:
1. The lure of 'free'
2. The 'anchor-price' persuasion
3. The instant-gratification attraction
4. The dollars-to-donuts decoy
5. The separate-buckets blunder
6. The 'sacred-fund' slip-up
7. The lost-money fallacy
These are all great examples of how we naturally make poor financial decisions. You're not the only person who's ever made these mistakes. But you can easily overcome them.
If you want to ensure that you aren't blocking your own financial success, automate the processes.
Want to save for a new car? Set it and forget it.
Working hard to time the stock market? Automate your investments and you'll benefit from dollar-cost averaging.
When you take the 5 percent action required, you've set yourself up for financial success. Turn around your bad habits and start to feel comfortable with your decisions.
Online banking and the Internet can do a lot to improve your money management shortcomings, but they can't do it all.
No one's going to stop you from buying that videogame you don't really need.
No one's going to stop you from living beyond your means (except maybe the bank, and you don't want to go there).
No one's going to stop you from being lazy and putting off the process to your financial freedom.
You've got to be the one who steps in and makes smart decisions. The tools are all there, but you need to make it happen.
Every time you turn on the news, you hear it:
CRISIS! RECESSION! DEPRESSION!
It's the reality of the situation today — but it doesn't need to be.
While Wall Street's problems have turned into Main Street's (who do you think is funding that $700 billion bailout?), the current economy doesn't need to worry you. It isn't worrying me.
Here are three reasons the economy isn't worrying me.
My retirement accounts have dropped significantly over the past year, especially from their recent highs. But I'm not worried. That money isn't going to be touched for another 40 years or so.
But what if you're nearing retirement? You don't have as much time for the market to rebound — that's for sure. But if you're close to cashing out, you should have a very conservative asset allocation. If you're 58 and you're 100% in stocks, you're in trouble.
Make it a priority to evaluate and adjust your asset allocation once a year. Don't try and time the market — pick a day (April 15 is an easy one to remember) and do it no matter what's happening.
One of the most important things to have in an unsteady economy is a strong cash position. No, that doesn't mean you should sell your stock and buy gold (in fact, don't do that). It means you need to have the leverage to avoid depending on financial institutions and credit cards when everyone is tightening their belts.
Look at a guy like Warren Buffet — when everyone is panicking, he goes and invests $5 billion into Goldman Sachs. Having the cash when no one else does gets you the best deals.
If you've got cash, you don't have to worry about everyone else's financials.
In a market where the unemployment rate is at 6.1%, it's more important than ever to have a few different sources of income.
While an emergency fund prepares you for the uncertainties of the future, having more than one way to make money softens any potential job hazards. In addition to my day job, I do some consulting work and own a number of Web sites.
You don't put all of your eggs into one basket when you're investing in the stock market, right? It makes as much sense to only depend on one source of income.
(For the entrepreneurial types, this is the perfect time to start a business. You're required to depend on what you have — no small business loans, etc — and are forced to focus on the fundamentals.)
Why isn't the economy worrying you? Let us know in a comment below.
Thankfully, our automated finances force us to put the money away, so we don't have to wait until the end of the month to see what we have left over to contribute.
MSN Money has a new article up, "How to come up with a down payment," that offers 12 ways to save money for house purchase.
- Set up an automatic saving plan.
- Get a gift from your parents, grandparents, other relatives or friends.
- Sell a car, boat, motorcycle, collectibles or other assets.
- Liquidate stocks, mutual funds, savings bonds or other investments.
- Allocate your income tax refund.
- Take a loan from your 401(k) retirement plan and repay yourself with interest.
- Withdraw funds from your 401(k) plan, subject to taxes and penalties.
- Collect on a loan that you made to someone else.
- Get a bonus from your employer.
- Explore homebuyer programs for public servants if you qualify.
- Apply for a state or local government down-payment program.
- Use a private down-payment assistance program.
While some of these make great sense — an automatic savings plan, setting aside a bonus and allocating your income tax refund — do they really expect someone looking for a downpayment to have a boat to sell?
I'd also warn against taking money from your 401(k); not only will you have to pay taxes or interest on what you take out, but you'll be losing out on any compound interest you'd otherwise be making.
What tips do you have for saving for a down payment?
Mint, the online money management and personal finance tracking tool, has launched a re-design of their site.
From their blog:
Starting today, you’ll find a refreshing new look which reflects the new features we’ve added to the site since launch; enhanced budgeting tools, brokerage and investment accounts, mortgage accounts, student loans, and auto loans. We’re also kicking off a series of “how-to” guides designed to simplify your financial life, giving you practical, actionable advice on things like saving for retirement, paying off your student loans, buying a car, creating a personal budget, and more.
According to TechCrunch, the re-design is aimed at increasing conversion rates — and it's doing just that.
That normally isn’t big news, but what caught my attention is that Mint has been bucket testing various redesign formats with some users and is seeing conversion rates increase by 20% over the current site.
That equals “hundreds of thousands” of more registered users over the course of a year given their current growth rates, says CEO Aaron Patzer. When we last checked in with them, they had 350,000 registered users and were tracking $11 billion in assets. Those numbers are likely substantially higher now.
Even though Mint is one of the more well-known online finance-tracking applications, it hasn't always done what I've needed it to do, including loans, investments, and more. The re-design is apparently supposed to help users track these accounts (which have been added in the past months) easier.
America has relatively low interest rates at a time when banks and credit intermediaries are curtailing loans and cutting bank lending. Low interest rates do not normally go with less borrowing. Low interest rates, or falling interest rates, should increase borrowing and lending whereas higher interest rates decrease borrowing and lending.
Low interest rates are part of the Federal Reserve Bank's current policy to keep up spending and avoid a recession at the same time home mortgage foreclosures help limit lending since defaulters restrict the banking sector's loanable funds.
As savers, we need borrowers or interest rates would be zero. In general, the fewer the borrowers the lower the interest rate, but we should worry too about the new mix of loans.
Banks are having trouble finding enough business and industry borrowers. In the search for new borrowers they keep turning to more consumer lending and promote the use of consumer spending and consumer debt with heavy advertising.
A recent New York Times article entitled "Given a Shovel, Americans Dig Deeper Into Debt" quotes an advertising executive. "One of the tricks in the credit card business is that people have an inherent guilt with spending." … "What you want is to have people feel good about their purchasing."
The article also reported from Federal Reserve Bank data showing the percentage of disposable income used to pay debt keeps going up year by year reaching 14.5 percent in 2007. That is one piece of data and one sign of the rising consumer debt among many signs including personal bankruptcies.
The growing reliance on consumer debt and consumption spending makes it harder for the Federal Reserve Bank to maintain the economy. Sure, they can lower interest rates, but credit card interest rates continue above 20 percent for millions of consumers.
The lower interest rate policy applies primarily to business loans, but essential consumer spending depends more on people's income rather than interest rates.
America must keep up consumption spending to prevent a recession but threats to continued consumption grow with the numbers who earn stagnate wages, or who are unable to pay credit card debts, or file for bankruptcy, or have reached credit limits. Defaults limited new loans.
Government spending and tax cuts will stimulate consumer spending, but government, especially the federal government, are already running big deficits.
These are tough times for savers with interest rates low and limited ability for the Federal Reserve Bank to stimulate the economy. As savers we are in the awkward position of hoping others will go on buying, buying, buying so that we can save.
As savers, we can't change the rest of the world, but we can avoid get rich schemes, pay our monthly credit card balance and do our best to avoid paying interest and fees even as we earn less from our savings.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com