“We are what we repeatedly do. Excellence then is not an act, but a habit.” Aristotle. This quote has profound meaning for your financial life, because it means that even if your savings are up not to scratch or if your debt level is extremely high you can change the course of your financial future by slowing but surely changing your financial habits.

The secret is to start implementing small changes into your life and work them into your routine. Repetition will help to make them your new habits and you can then start reaping the rewards of healthy financial practices. Take a look at these 4 financial habits you should strive adopt.

1. Start Budgeting Now

Creating a budget is not difficult. All you need to do is to identify your sources of income on one side and then list your fixed and variable expenses on the other. It is recommended to keep your fixed and variable expenses separate so it is easier to highlight possible areas for cutbacks. If you are not sure of where your money is spent you may need to do a little ground work to draw up your first budget. Start by making an effort to write down every time you spend money and start keeping your receipts. At the end of the month you can categorize your spending and then fill in your budget.

2. Use Goal Setting to Improve Your Financial Scorecard

Goal setting is important for improving your finances because this act gives saving direction and purpose and thereby makes it easier to part with your money now, for some reward in the future. For instance, if may feel like punishment to tuck away $1000 a month just because it is important to save, but if you were to attach a goal to this figure it would become logical. So you might rationalize that you need to put $500 towards an emergency fund while $500 should go towards your next vacation. All of a sudden, putting away $1000 is easier.

3. Save for Retirement

Everyone needs to plan for their golden years. If you haven’t yet started up some form of retirement savings, there is no time like the present. You should also note that it is never too early to start. You can check how much you are allowed to save tax-free and at least make sure you are maximizing this amount. If your employer gives a match for retirement savings, always take this up and consult a profession if you are not sure about this aspect of financial planning.

4. Keep Your Debt Under Control

If you have a problem with keeping your debt under control you should make this a priority. Start implementing measures to pay down outstanding debt, especially if that debt comes with extremely high interest rates. Allowing interest to accumulate even more interest is a sure-fire way to end up moving in the opposite direction of financial prosperity. To get a handle on your debt situation, make sure you have a strategic plan for pumping your available funds into making debt payments.

It is never too late to implement some good financial habits. All it takes is the desire to change and the dedication to stay on the course.

To avoid spending on something that will end up adding to household clutter, or worse, potentially set back your financial goals for some time to come, take a look at the following suggestions.

Before you buy ask yourself these four questions.

1. Can I Afford to Pay Cash?

Often a purchase is evaluated on the grounds that the payment terms are so flexible that it will hardly be noticed on a month to month basis. This is not necessarily a good way to start thinking about your finances because it leaves room for the slow trickle of mounting debt. If you can’t afford to pay for the item with cash, then you should seriously consider putting the decision through some more tests before committing to a decision to purchase.

2. Is it Worth Paying Interest on This Purchase?

If you are not paying cash, you will most likely be using a credit card, which may have astronomical interest rates payable on outstanding balances. The purchase must then be put through the wringer because if you are going to pay double digit interest for the pleasure of owning the item, it definitely should be a fantastic item. If you are taking a consumer loan then you also need to make sure that the item will either hold value or be absolutely necessary for the furthering of other important life goals.

3. Do I Need It? Really?

Sometimes the lines between ‘want’ and ‘need’ are substantially blurred because emotions run high. This might be because there is a desire to keep up with your friends or family, because the marketing for the particular product has been particularly successful or because you may be in a vulnerable emotional state and you believe that you deserve a treat. Whatever the case, you should try to reclaim some sense of logic and answer the question logically, especially if you have already established that you cannot afford to pay cash and the item is not really worth the interest payments it would accrue.

4. What Will I Have to Sacrifice?

If you have come to this point and the craving for the item has not subsided then you should start thinking in terms of your opportunity costs. Since your resources are not unlimited, buying the item in question will most certainly mean you must give something up. What will you sacrifice in order to have this purchase? Will it mean not saving for the month? Will it mean you may need to cut back on other expenses? Will making the purchase jeopardize your ability to meet other obligations?

PocketSmith Can Help!

Of course, your PocketSmith tool can help you to evaluate this decision by manipulating your budgets to figure out when the purchase will be feasible.

When you are faced with the decision “to buy or not to buy” it is rarely a clear cut case. Often several factors come into play and to make the decision that is right for you and your finances you must give them all a fair hearing. It is only then that you can walk away either confident that you can pay for the item you so desire, or happy that you managed to resist the overwhelming temptation to buy wheat you could not afford.

In a day when the economy is not as strong as most people would like, there is an even greater than ever need for both individuals and families to have an emergency fund. This is especially important for those who do not have a large income and live from paycheck to paycheck, and are in one-income families. Here are some tips for saving money and how you can put money away to create your emergency fund.

Before any tips are given, it is important that you understand why an emergency fund is needed. Although people do not like to think about it, there is a possibility that many situations could occur where you would need to depend on that fund for short-term survival. Any one of the following could happen unexpectedly: a hospitalization, an accident, an illness, being injured on the job, a natural disaster, job loss, a death in the family, and more.

Start Saving Money by Reviewing Your Monthly Expenditures

Most people have a few ways that money is being spent on things that really are not necessary. Other money may be going to things you no longer need or use, such as gym memberships, the best plans for cable TV, Internet, phone service, etc. These may be able to be downgraded for a less costly plan or eliminated altogether. Frequent eating out is another thing that could be reduced to save more money, as well as money spent for smoking or drinking.

Look over your budget and find ways to cut corners on electric or heating bills, food costs, car costs, insurance costs, and more. Cut out buying new books, DVD’s, and magazines, and get them free from your local public library. Watch out for buying those latest gadgets, too. Reviewing your expenditures, along with good record keeping, will save you money and let you save money for your emergency fund.

Use Credit Cards Wisely and Reduce Interest

More money can be saved if you stop using your credit cards, or at least pay them off in full when you get the bill. When you add up all the interest paid each month on credit card debt, most people will have to realize that owning one (or more) is not cheap. If you are currently in debt, then be sure to pay more than the minimum amounts on each one to save a lot of money in the long run.

Balance Money Saved Between Reducing Debt and the Emergency Fund

As you find more money and new ways to reduce your monthly expenses, you want to take about half of the money saved and use it to reduce your debt. The other half should be used to put into an emergency fund. You do want to build your emergency fund rather quickly, if possible, primarily because you never know if you will need it or not.

Pay Off a Debt and Put Money Toward Further Debt Reduction

As your debts are paid off, do not use them for some new thing you really do not need. Instead, use it to continue reducing your debt and putting money into your emergency fund.

Create New Ways to Save Money

If you do not have a plan to save money, there are several ways you can implement these into your daily life. You could have automatic deductions from your paycheck go into a savings account (your emergency fund) – this works well and you never see the money. Other ideas would be to put all dollar bills (and/or coins) into savings, or directly into your emergency fund; put any bonuses from work into savings; and refinance a loan or mortgage for lower payments and less interest.

Life Insurance Can Provide for Your Financial Needs

Keeping your family out of debt in the event of your death can be prevented with life insurance. You can obtain enough coverage to pay for your mortgage, any credit card debt, pay your bills, and provide them with the money needed to enable them to keep on living at their current comfort level. Things like property taxes, funeral costs, medical expenses, and estate taxes can also be provided for in a life insurance policy.

Two Types of Life Insurance

There are only two main kinds of life insurance, so you will want to have a good idea of why you want to buy it before you purchase it. Term life insurance is the less expensive, and it is pure insurance – no frills attached. This kind of insurance provides level protection (face value) for a pre-determined number of years, which ranges from five to thirty years.

The other kind of life insurance is whole life, which is also known as permanent life. This type of insurance policy has a built in “cash value” which builds over time. The available cash may be borrowed once a significant amount has accumulated. The considerably higher price enables money to go toward fees, the agent’s commission, and savings (the cash value).

Long Term or Current Needs

Term life insurance provides you with a low cost life insurance that can easily meet your needs while your bills are higher. Because of the low cost, it is ideal for those who want coverage and be able to invest in interest-bearing accounts elsewhere. At the end of the term, a term life insurance policy can be converted to whole life if desired, or a new term insurance policy can be purchased if you are still around 50. After that, term life insurance starts getting rather expensive.

If you feel you cannot save any other way, then perhaps a whole life insurance policy may be the way to go. However, it will give you much less face value for the same amount of money, and minimum interest in your cash value. Universal life and variable life will give you more options, but are also more costly. At the end of the policy, which is often at 100, you can receive the face amount of the policy.

You should also be aware that you would not ever collect the face value plus the cash value in a standard whole life insurance policy. If you die, your beneficiaries will only receive the face value, no matter how much cash value has been built up.

Life Insurance Can Also Prepare Loved Ones for the Future

The good thing about life insurance is that you can choose how much you want to buy and where it should go. This enables you to think about the future for your loved ones, too. You can help them pay for college, get them started in business, ensure continued medical care if they should need it, or even provide them with some inheritance money, too. Of course, it is also possible that it may not be needed at all.

Getting started is easy. Simply go online and find a life insurance calculator to determine how much you will need. Then get several life insurance quotes – term insurance quotes or whole life insurance quotes – depending on which one you want.

If you ask those who are financially successful I would expect most to say that the small financial decisions are just as important as they large ones. Lots of small things add up over time.

One of the most famous international investment books, The Richest Man in Babylon, proposes you save 10% of everything you earn your entire working life. Let say you put the money in something pretty simple like a series of term deposits or a balanced fund (an investment that had a mix of cash, property and shares).

At the end of your working life your wealth would probably be greater than 90% of the population. Although I have not seen any research to back this up, I would be very surprised if this was not the case based on the general financial statistics that are available. Its one of the key reasons there is such support for superannuation and having it be compulsory. This is a pretty simple decision which forms a habit that has a huge impact over time.

Below are some ideas that may help you make better financial decisions:

Think – put some quality time aside before you make a decision. One of my favourite questions I like to ask in seminars is: What is the difference between how a millionaire and the average person manages their money? The millionaire spends one minute longer thinking about the buying decision.

Get clear – understand what outcome you want from your decision. Usually the best financial decisions are based on purely factual financial information. However most people make their decisions based entirely on lifestyle and emotion. There is nothing wrong with that as long as you understand that.

Write everything down – people often go around in circles and struggle to get any clarity. An exercise that I have found to be really effective is to write a list of the options you have and then list all the pros and cons of each of those options. Usually the list with the longest number of pros is likely to be your best option.

Compromise – its highly unlikely that you will find a perfect solution so you will need to go with the one that looks the best. In most cases you are going to be far better off making a decision rather than none at all. Remember you can always change that decision if it doesn’t work out as well as you hoped.

Seek some help – talk through your options with someone else. Having an impartial sounding board to run your ideas and thinking past can be really valuable. Help maybe as simple as talking to a friend or family member or if you need help with more complex financial decisions using a suitably qualified professional would be best.

1) Learn All You Can about Investing First

The first place to start in the investment process is to learn all you can about investing money. Because there are so many different ways to go, and since it is your money, it is best if you understand how your money is going to make money – and to know the best ways to do it successfully. Then, you will also need to choose the best investments for your financial goals.

You will also want to learn about how to choose either the right investment banking institutions (for CD’s and savings accounts) for your money, the best stocks to invest in, or possibly even to learn how to invest in business start-ups. There really are many options – and many of them depend on how much money you have to start with. You will also need to know how to choose an investment broker.

Before you start investing, you will want to pay off all your debts. This is important because you are currently paying more in interest on your debt than you could ever earn from investments. Reducing your debt first will let you keep more of what you earn.

2) Learn What Investing Options Are Available

You will want to know enough about investment options to be able to decide which one will give you the best results. Some of your investment choices include stock market investing, hedge fund investment, investing in metals such as gold or silver, real estate investing, investing in micro loans, and more.

3) Decide How Much You Want to Invest Monthly

Some of these investments will require a certain amount of money to get started. This may rule out some of them for you.

You will then need to decide how much money you have to invest each month, and, if you have more than one investment, how much money is to go into each. Another important consideration is the cost to maintain your investment accounts. Make sure that you understand this before you invest in any company and make sure that any costs are clearly spelled out.

4) Determine Your Risk Level

The type of investing that you want to choose will depend largely on your needs and goals. For instance, if you are middle aged and do not have any retirement savings – and that is your goal, then you really have limited choices because you should not be willing to take a lot of risk. You should choose only to invest in safer instruments that have a low level of risk, such as bonds or mutual funds, and possibly some safer stocks.

On the other hand, if you are younger, you can afford to take a higher level of risk because, even if you should lose your investment, you still have time to build it up to a high level again. This gives you have a wider choice of investment options.

5) Diversify Your Investments

Another investment must is to diversify your investments. This is necessary because of the possibility of the loss of funds of one particular type. An example of this would be, as many people found out about a decade ago, people who invested in electronics (even across different companies), took a large loss. Also, do not put all your money in one investment company due to the possibility of scams (think Madoff), or other market fluctuations.

Health insurance is costly and it is not likely to get any cheaper in the near future. The high costs make it difficult for many families to get it, but there are many forms and you may be able to find one that is suitable. Here are some different ways that you can get health insurance.

Four Basic Kinds of Health Insurance

When you start searching for private health insurance, you will find that there are four basic types. The lowest cost form will always be group medical insurance. This is the kind that you get from most employers or from most associations.

1. The health insurance companies that issue this type of medical coverage, called HMO’s, seek to keep the costs as low as possible. In order to do so, they control the type and amount of services the most. Each patient must have all services and tests approved in advance by their primary care physician.

2. One step up from this is the Preferred Provider Organizations (PPO’s). This form of health insurance coverage enables people to go outside of the organization, but it will be less expensive to receive medical care within it. When going outside, it may be necessary to pay as much as 20% of the bill, and sometimes you may pay the entire bill.

3. Point of Service (POS) gives policy owners even more control about which services they will receive and how much. There is a primary care physician, but you are allowed to go outside the system. There are also some preventive services offered.

4. Fee for Service (FFS) is the form that gives the insured the greatest amount of liberty. You will be able to go anywhere you want for medical services. The insurer, however, will only pay what is considered to be an average cost in your area. There is an annual deductible, and the insured will need to pay about 20% of each bill they receive after the deductible is met.

COBRA Health Insurance

COBRA health insurance is a program that enables a previous insurance that you had with an employer to be continued. You must decide to get it within 63 days of the “event” as to why you no longer work there. This is especially valuable for those who are laid off, surviving members, divorcees, or when an illness strikes and the employed cannot continue working. COBRA health insurance, however, will require that the full premium amounts are paid, but some recent government decisions may allow reductions of about 60% to be obtained.

Other Health Care Options

Health Clinics:

Most communities will have some form of free health clinic that will provide basic medical services. These are usually free, but there may be some charges for some people who make a little more money.

Health Discount Cards:

These are readily available everywhere (emails, faxes, etc.), but you should be aware that they are not health insurance. They will not pay any bills. All that you may get from one of these cards is a discount at the time of some medical service, but you will be responsible to pay the remaining portion of the bill. Many of these are scams, too, so be careful. You can find out which ones are real from your state’s Department of Insurance Webpage.

Money can also be saved on health insurance by shopping around. Getting put into a group health insurance plan will always be cheaper than private family medical insurance. In addition, you can get additional savings when family members are in good health. A spouse can be put on to an existing health plan for less cost than having two separate policies.

Every year Christmas rolls around and promises not to get carried away by going over budget make the list of things to do and yet, just like clockwork, January rolls around and the bills arrive to reveal just how much was actually spent. There is no need to go through the painful ritual of spending the first quarter of every year climbing out of debt that was accumulated over a relatively short holiday season. Instead, take a look at these tips so you can actually be ready for the festivities.

1. Open a Dedicated Savings Account
The first thing you should do is open an account to keep your savings separate. It is much easier to save for a target when the money is held in an entirely different account. You may think that you can mentally separate your money but it is surprisingly easy to fall into the trap of using money you were saving for one purpose on something else because it is all kept together.

2. Reevaluate Your Budget
When you have decided to start a Christmas budget fund you can then look at your budget to find ways you can cut back slightly to transfer some money into the account every month. You may decide to stop eating out a few times for the week or maybe change how much you spend on gym memberships by exercising at home for free. Spending habits are extremely unique so this has to be a decision you come up with all on your own after a bit of self-evaluation.

3. Make it Automatic
When you have figured out how much you can transfer into your new savings account the next step is to make it automatic. This helps you to stick to your commitment. If you don’t set up a standing order or salary deduction you might find excuses not to make the transfers and this could derail your plans.

4. Leave Your Credit Cards at Home
Another small tip to help you to save as much as you possibly can is relatively simple in theory but it can be hard to implement. If you start using only cash to make your purchases you will see that you actually spend less because you will not be able to spend money you don’t have. Using credit can act as a crutch for your bad spending habits and gradually leaving your credit cards at home can help you to break your dependence.

5. PocketSmith Can Help
The budgeting tool in PocketSmith’s software allows goals and targets to be set and then tracks your progress as time passes. This is a really cool way of keeping tabs on your holiday savings account so you can avoid the credit score dip in January.
Christmas takes a toll on the budget because it is a time when you want to make others happy and you can get carried away in expensive holiday cheer. It is never too early to start planning for your expenses, especially when they come around year after year and these tips can certainly help to make spending during the holiday season a lot more controlled.

1. Consider the Possibility of Tax Savings

To calculate how leaving your job would affect the family income you need to do more than a simple subtraction of your salary. For instance, you may move into a lower tax bracket and end up losing less than you thought because of your tax savings. If the second income only just barely pushed you into a higher tax bracket staying at home might actually be a good idea for your family.

2. How Much Would Daycare Cost?

Daycare is not cheap and many working mothers find themselves in a situation where it feels like they work just to pay for a daycare service. Figure out how much this expense would set you back so you can factor the cost as a saving if you decide to stay at home or an expense if you decide to keep on working.

3. How Much Would You Save on Eating Out?

Staying at home means you would have more time to dedicate to running the house.

Many families find that they can cut their food bill in half if they prepare most meals at home and focus on getting deals at the supermarket.

4. What Would Your Baby Cost?

Don’t forget to add the cost of your new baby into the mix as well. Not only are you thinking of forfeiting a salary, but you are doing this while also adding another mouth to the family table. Factoring the needs of your child is an integral part of making this decision.

5. Would You Want to Return to Work?

While your plans for returning to the work force may change as time passes it is wise to have a tentative plan in place. If your aim is to return to work eventually you should try to keep up with current affairs in your field and even take the opportunity to seek out additional training.

6. Can You Work From Home?

Another alternative is to find a way to earn an income from home. Maybe you can arrange with your current employer to work from home if your position allows for it or maybe you can start a new business. Don’t block out any of your options but rather start to think of how you can make things happen and turn your new status as stay-at-home-mom into an opportunity to launch another one of your dreams.

While it would be great to come up with a definitive number to answer the question of how much it costs to be a stay-at-home-mum the simple truth is that… it depends. There are both financial costs and emotional costs associated with the decision and each factor should be treated with importance.

Investing money into profitable various financial tools is a solid way to use money wisely for the future. Being aware of its profitability, however, does not ensure that you actually are making wise choices. Here are some common problems that investors fall into when making financial investment decisions.

1. Financial Investing Requires Thinking

A common trap that many people fall into is to invest the same way that others around them are investing their money. While it may be successful, it also may not bring about the results that you want. This mentality simply does what the herd does – and it will never do better than the herd.

Real investing experts will often tell you to go against the herd. This will, however, mean that you will have to learn more from those who have made their money from investing. Do a little more study and be willing to invest outside the box – once you know what you are doing – and why.

2. Remaining Confined to Limited Risk Options

Making money from investing will mean that you cannot be afraid to invest in new types of investment tools. If you are fearful because of being uncertain, more learning, as well as successful experience, will help you to overcome that natural reluctance that some people experience.

3. Diversifying Your Portfolio Too Narrowly

While many investors – new and otherwise – know that they should diversify their investment portfolio, they do not do it in the wisest way. This places their investment capital in a riskier position than it should be – after all, the purpose of diversification is to provide a greater level of protection to your investment money and assets.

This may mean that you need some investment advice from an investment advisor in order to ensure that you are not on the verge of losing them unnecessarily.

4. Trading Your Investments Too Often

Good investment strategies are based on tactics that have been proven to work. Making changes in your investments just because someone else does or because you feel that you ought to make changes to take advantage of slight upswings in the performance of some investment products is not a sound strategy. Careful investigation is always needed in order to make the right decisions.

5. Selling Winners and Keeping Losers

This common mistake is made because many people have heard the saying about selling high and buying low. They have no idea how to apply it and use it for real profit – no investment strategy.

6. Investing On Past Performance

Many new investors who are learning to spread their wings some tend to focus on the past
performance of stock before buying. Not realizing that the stock may already be nearing its peak performance, they buy into it and fail to see the results they expected.

Another form of this is to buy into some investment because of the recommendation of a friend or financial advisor. Chances are rather good that it also has come close to reaching its best days, too. To avoid this scenario, more investigation into the stock or fund is needed before buying.

7. Letting Others Make Investment Decisions for You

A final mistake is to let someone else invest your money for you who may have conflicting interests. Unless you really know and trust your investor or investment company, you need to realize that the other person may not really have your best interests (your profit) at heart, neither do they necessarily have the time that is needed to focus on your investments individualized performance. An alternative that may also help you learn more investment information faster would be an investment club, where information is shared. By learning more about investing, and what to watch for to ensure solid growth, you can get the performance you need out of your financial investments.