part 1

Wow! So now you have all this extra cash! What do you do now? No, stay away from the mall. :-) Save it! The easiest way to do this is to arrange it with your bank that a set amount gets taken right out of every check and put into a "safety net fund". This can be a savings account, Certificate of Deposit (CD), or a money market account. The differences between these options are 1) the availability of your money - CD's have terms as little as 3 months, savings accounts are instantly available, and money market accounts generally go through brokers - so you may have to wait a couple of days for your money - and 2) the earnings your money will make - CD's are usually your best option for earnings, but check out what your bank offers. A normal savings account doens't usually offer a great rate of return. Wight the pros and cons of each option and find one that works for you. Both of these options are covered by the government if anything happens to the bank - stocks aren't, and that's why I wouldn't recommend stocks as a good place to put you safety net.

Everyone should have a "safety net fund" set up. What happens if you get laid off? You don't want to spend on credit cards and pay it all back - plus 18%. You don't want to move back with Mom and Dad (and believe me here, they don't want you to move back either!). Putting away now for a rainy day will make all the difference in the world when life throws you a curve.
But - how much will you need? Well, this all depends on your own personal level of comfort and what you plan for the future. Most financial consultants will tell you to squirrel away at least 3 - 6 months worth of living expenses (depending on your comfort level), but the rest is up to you. Do you want a new car in a few years and don't feel like paying all that interest back on a car loan? Do you want to have a really cool 3 month vacation to Cairns, Australia to see the Great Barrier Reef in 2 years? Are you getting married in a year and want to pay for something more that a trip to the courthouse?

Whatever your needs, planning now for them by starting a "safety net fund" will save you a lot of aggravation, allow you to sleep better at night, and help you avoid potential financial pitfalls when your luck is down. Not a bad deal, all in all.

Labels: plan, savings

It's a sad fact of life: money is a fickle friend. The more you make the less you seem to have. There are always things that you or your children will want - that really beautiful ring you saw on QVC (a bargain at $250), or that super-cool sweater that everybody's wearing at school. (which, of course, is cashmere and a cool $125) But, truthfully, the best thing you can do for yourself (and your children - share your knowledge!) is to develop solid saving habits and stick with them. You'll be glad you did, believe me!

Now you're asking, "Okay, Cara, I want to spend less. Is that all I need to do? Just spend less? Sheesh, that's easy!" Well, first, let's look at what you're spending now and go from there. If you've started tracking your finances in Quicken or Money (see: The Easy way to track your finances) then this will be easy. There are reports that will tell you, in detail, exactly where you spent your money.

If you don't have your finances in a financial software, you just have to do a little more legwork. Take a small notebook with you - in your purse or pocket - and record everything you spend. If you get $20 from the ATM, record it. If you spend $5.67 at the local teriyaki restaurant, record it. You get the idea - record everything. Do this for at least a month, just to get a really good idea of your spending habits. When you've compiled all that information, lay out your totals on a piece of paper where you can look at them objectively.

Now that you have your lists, really look at what you've spent. Certain patterns will pop out at you almost immediately. Did you realize that you're pulling $250 every week out of the ATM? Or, did you have any idea how much you actually went out to dinner? How about those grocery bills? Did you know how many times you really go to the grocery store in a month? It's pretty sobering when you look at what your money is really being spent on. Still, knowledge is power, and now that you know where you need to conserve, you can concentrate there.

So - now that you're aware of where you're money is going, you can do things right now to correct your liberal-spending habits. For example, if you are like me, and spend way too much on eating out, make a list every week of exactly what you'll be eating for dinner every night, and use this when you go to the grocery store. You can get exactly what you need, and no need for other trips to "just get a 2 liter of Coke" (and chips, and cookies, and other impulse buys). You don't need to eat out, because you have all the food you need for the week right there in your own pantry. Or how about those weekday lunches! Those can be killers! Pack a lunch! You can figure out a zillion ways to decrease your output of cash - and it's really not too much of a burden to you.

read next part

[by Suite101]

Labels: plan, savings

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Labels: calculator, Loan, savings, tools