Setting up an emergency fund

Setting up an emergency fund

Oct 6, 2016

Read any book on personal finance or managing your money and one common thread will the emergency fund. Almost every single one will tell you the first thing to do is to open and contribute to an emergency fund. The recommendation is to prioritize this above all other non-essential payments. Here are the basics of the emergency fund: The first is to decide how much you want to commit to the fund. The basic idea is that the fund will be able to handle all expenses in the event of unemployment or an emergency. When factoring the amount, the recommendations are for either three or six months of total expenses. Obviously, six months is better than three. However, if finding employment is not going to be an issue, then three months will suffice. The next is to open the account. Since the funds need to be liquid avoid term deposits or any form of long-term savings vehicle. Those are better suited for retirement. Ideally, we are looking at a high rate savings account that has a low number of withdrawals allowed. This way the interest will contribute to the fund itself. Finally, figure out how much of your income can be contributed to the fund. The sooner the fund hits the target; the sooner you can start contributing to retirement or something else. Remember that once you hit your target, you can sleep well knowing that you can survive for a few months without dipping into your savings....

Important financial terms small business owners should know

Important financial terms small business owners should know

Sep 6, 2016

Small business owners should have an understanding of financial terms, as they are the nuts and bolts of a business operation. If you have an accountant or are handling your own financials, knowing these financial terms will help you understand how well your business is functioning. Here are a few terms small business owners should be familiar with; P and L – This is a statement, usually completed every month, will give you an understanding of how your business is running. Balance Sheet – This is an indication of your businesses assets and liabilities. This statement will provide valuable information for decision-making. Assets – These are items such as cash, real estate, land, equipment, tools, computers, and furniture. Liabilities – These are loans outstanding and monthly bills your business owns. Equity – This is the money you and any other owners have invested in the business. Bottom Line – This is the net income or earnings that a company makes for the month. Markup – This is the additional price added to the cost price. Gross Margin – This is the difference between total sales revenues and total cost of goods sold. It can be stated on a per-unit basis, in dollars or as a percentage. Gross Profit – This figure is your “Cost of sales” minus your costs directly associated with sales, such as materials, labor, and delivery. Net Profit – This is your profit after costs such as overhead, materials, wages have been...

Should You Sell Your Home Upon Retirement?

Should You Sell Your Home Upon Retirement?

Aug 31, 2016

Carefully plan out your retirement to maximize your financial standing. There have been many opinions when it comes to retirement throughout the years. Many financial advisors have told their clients to sell their home come retirement. Now, this will allow them to significantly boot their retirement income, but then there’s the human aspect that comes with it too. The impact of having to sell something that has been in your family for years on end isn’t an easy thing to do. Rather, there are other ways that you can fund your retirement account without having to sell your beloved property. Look At the Bigger Picture Even if you have noticed that your home has gained a substantial amount of value over the years, remember that every situation is fundamentally different. This being said, you should base your decision off of personal preference. Money has been a primary factor when it comes to a successful retirement. But you need to ask yourself, is it really what you want to do? Don’t just sell your home right off the bat without putting much thought into it. If it holds emotional value, you don’t need to part with it. There have been many successful retirement stories where the retiree keeps his or her house and stays in good financial standing. Sometimes, the cash doesn’t always speak in the bigger picture. The Bottom Line Every homeowner’s situation is different from one another. Don’t hastily make your decision before truly sitting down with your family and discussing it. By rushing things, you’ll only make a decision that you’re going to regret in the end. Kuba Jewgieniew is the head of Realty ONE Group, a real estate brokerage firm that has offices in California, Nevada, and...

4 Tax mistakes made by millennials

Millennials are the age group that are now in the twenties and mid thirties today. Most of these age groups are evolving from graduates to independents to spouses. These are some important milestones and this group should be aware of the standard financial commitments that come with these major milestones. Here are 4 tax mistakes made by millennials. Filing as a dependent when you’re independent (or Vice Versa) – When filing your taxes and choosing your status, be clear on if you receive any financial assistance from your parents. If your parents claim you as a dependant on their tax return, you will be unable to claim an exemption on your income tax return. On the other end, if millennials file as a dependant, instead of an independant, you will not be able to reduce your taxable income. Skipping Out on Health Insurance – Under the new health care law, millennials without health insurance, will have to pay a penalty when filing their returns. Those who can afford insurance and have not, will have to pay an individual shared responsibility payment. Forgetting to Deduct Student Loan Interest – To encourage higher education the US government gives students with loans, a tax break based on the interest that has been paid over the year. The deductions and credits can reach up to $2,500 on qualified student loans. Miscalculating Deductions for the Cost of Relocating – If you have moved jobs due to a promotion or a relocation to a new office, you will qualify to deduct relocation costs. But remember that your new workplace must be at least 50 miles from your old home compared to your old job and old...

5 personal finance tips for women

Women should feel secure and confident in handling their personal finances. Here are some financial planning advice that is specific to women; Get involved – Make sure you are involved in goal setting, budgeting, saving and investing. If you don’t get involved in the setting of your goals, you will find it much harder to reach them. If you are married or have a partner, include them in the goal setting process. Have a plan – Have a financial plan for your short and long term goals. Understand what your future expenses maybe and then work out how much you would need to save to meet those expenses. Maximize your employer benefits and retirement plans to receive tax benefits. Insurance – To secure your future, ensure you are sufficiently insured. For women whose spouses are the primary earners, it is important that your partner has life and disability insurance, to ensure that you are prepared for the worst. This will keep you and your family comfortable, until you are ready to enter the workforce. Maximize social security – To maximise your social security benefits, refrain for withdrawing your benefits early. Women have a longer life expectancy than men and therefore should ensure that they have a stable income after retirement. Assess your risk – When investing your funds, make decisions based on educated facts and not on short term market fluctuations. You may find that your portfolio may go up or down, but if they are tied to your goals, you will be less likely to make reactive...

Budget your money: 50/20/30 guideline

Budget your money: 50/20/30 guideline

Jan 21, 2016

The 50/20/30 guideline is one used by planners when working with new clients to help them understand where they spend their funds. This method can be used by anyone who is looking to work within a budget, to ensure that they have sufficient money for the month as well as savings. Fixed costs – These costs are those that do not vary very much during the month. For example, mortgage payments, utilities, car payments and rent. You could also add monthly memberships, like gym and subscriptions, like Netflix. A planner will suggest that you allocate 50% of your monthly earning for these costs. Financial goals – These goals can include savings for an emergency fund, retirement fund or down payment for a home or land. Planners will suggest that you allocate 20% of your funds for this purpose. This saving will help you maintain a secure future for you and your dependants. Flexible spending – These costs are those that vary during the month. This will include groceries, take out, shopping, entertainment and travel. A planner will recommend 30% of your monthly earnings for this area of spending. Remember that you can be flexible in this area as long as you don’t go over the allocated sum. If your looking at putting a 50/20/30 budget guideline into action, start off with putting down all your expenses, preferably on an excel sheet. You should do this for at least a month prior to assess your pattern of spending and then allocate your funds...