Personal Finance Archives | Page 108 of 148

Effective Ways To Teach Teens About Investing

Money gives people, of all ages, the decision-making opportunities they need. Educating your teens to make wise money decisions earlier on will affect their finances in the long run. One of the most important things you must do is to expose your daughter or son to the basics of investing. In hindsight, I wished my parents did so.

1. ENLIGHTEN THEM ABOUT YOUR FINANCES

Embedded in our Asian culture, most Singaporean parents keep their financial issues away from their children. However, the teenage years is the perfect time for you to enlighten them about the “real world” and its problems. Keeping your teens in the dark will make them think that managing money is easy and life is perfect.

Help your teenage child to transition from being a clueless kid to an informed young adult by teaching how important it is to set up future goals and a working budget. Take the effort to share your financial experiences including the ones that are related to investing. Be ready to answer countless amount of questions too!

2. PUT VALUE TO THE CURRENCY

Explaining the importance of money is easier said than done. With the idealistic minds of most teens, you must level it down to reality by giving relatable examples. Put worth or value to the currency by telling them that the money they saved and invested can be used to buy concert tickets of their favorite bands. It can also be used to buy the latest gadget that they have been eyeing on.

Make them realize that when money is invested in the right place and in the right way, they can purchase not just one but probably a couple of the things that they need and want.

3. START WITH THE BASICS

Similar to learning how to ride a bicycle, begin by attaching the training wheels. In this case the training wheels are your investing fundamentals. Explain your own investment philosophy and the way you invest. Then talk about the basics of how the stock market operates as well as the different investment options available (e.g., mutual funds and REITs). Differentiate each option by describing its rewards and risks.

Start with these simple concepts first before jumping on the other concepts such as P/E ratios and diversification. This way, you can keep your child’s interest as everything seems understandable.

4. USE TECHNOLOGY TO YOUR ADVANTAGE

Shake things up and make learning fun by introducing free investment and trading apps such as Kapitall and CASHFLOW. Kapitall allows you to assemble a portfolio worth $100,000 and track its progress easily. While CASHFLOW, patterned to a popular board-game, allows you to work at a variety of professions until you implement a successful investment strategy to become the next business mogul. These games help teens to grasp the investment concepts that they need later in life.

Image Credits: pixabay.com (CC0 Public Domain)

As teens can become careless, continue to guide them throughout the process and never leave them “investing” on their own.

Sources: 1 & 2

Why You’re Still In Debt After All This Time

TO LOW FOR COMFORT

Reason: Credit card is a highly convenient tool for payment; however, it can also be a very costly method for loaning money. If your paycheck is insufficient and you are using cards to cover your necessities such as weekly groceries or electricity bills, you will be put in debt for a long time.

Solution: You must think of ways to raise your income and savings including getting a part-time job, renting a cheaper room, and reducing your daily expenses.

KEEPING UP WITH THE FACADE

Reason: If you are spending lavishly in order to keep up with your ideal self, you can be quickly put in bankruptcy if you are not careful. In the outside you are seen as someone very successful because of your flashy BMW ride and your new huge flat. But little do others know that you have leased your BMW and rented some rooms of your flat.

Solution: Vanity and boastfulness is only for rich people. Live within your means.

FEELING THE BLUES

Reason: Studies have shown that debt is associated with various mental illnesses including depression. When you are depressed, you have a difficulty with paying the bills and you are more likely to feel down because of your inability to manage it. The reality of the situation is also clear to you.

Solution: Your harsh realistic view of the world can lead you astray. So divide your total debt into smaller pieces and set several goals to pay them off.

MINIMUM WILL DO

Reason: Banks love it when clients only pay for the minimum balance. Making the lowest possible payment leads to more interest and time spent in debt. It can become more unmanageable if your balance continues to grow while your income stays the same.

Solution: Pay more than the minimum requirement each month to cut your payoff time and interest.

HOLIDAYS’ SHOPPING SPREE

Reason: Many people rely on credit to cover the overwhelming costs of the holidays especially the Christmas-New Year season. This leads to starting the upcoming year off with a mount of debt. You better hide your plastic cards during those tempting seasons!

Solution: What you need during the holidays is support. You can either stay away from people who have a tendency to overspend or seek help from the credit experts at Credit Counselling Singapore.

Image Credits: pixabay.com

Sources: 1, 2, 3, & 4

Ultimate Guide To Handling Credit Card Debt

The credit card is one of the most powerful tools of our nation’s consumers. With that power comes great responsibility. Financial problems can occur if you are missing your credit card bills’ deadlines, constantly transferring balances, and paying your primary card debt with a supplementary card.

In Singapore, over 9 million credit cards were issued as of November 2015. The credit card debt of these cards, worth over S$5 billion, are in the form of balances rolled over to the next statements. Shocking and scary at the same time, is it not?

This is why handling your debts is vital to personal finance. May this tips help keep you on track:

1. DETERMINE THE BALANCES AND INTEREST RATES

The first step in taking control of your credit card debt is understanding how much you really owe on each of your cards. Write down the balances and interest rates for each card. If the interest rate is above 10% then you must transfer this balance to the lowest “interest giving” account. This way, you will be able to pay off the balance at an interest rate you can afford.

2. REQUEST A CREDIT REPORT

Request for your credit card report/s to assess the total amount of debt you owe as well as how bad the situation is. A credit report has the records of your payment history, credit facilities, late payments, bankruptcies, and defaults.

If you saw some inconsistencies or problems on your credit report, call the various authorities to fix the issues. Remember that you are able to repair any past mistakes sighted on your credit report.

3. CONSIDER A DEBT REPAYMENT PLAN

Be honest about your situation to your bank and discuss if you can convert your outstanding balances and unsecured loans into a debt repayment plan. To ease your burden, the debt repayment plan allows you to repay your credit card debt by installments. Pay the debts with higher interest rates first followed by those with lower interest rates but, watch out for penalties.

4. PAY MORE THAN THE MINIMUM

Making the lowest possible payment leads to more interest and time spent in debt. Pay more than the minimum requirement in order to get rid of these dilemmas.

For instance: If the outstanding balance on your card is S$2,000 and its interest rate is 18%, you are required to pay a minimum of 2% of your balance each month. Paying the minimum of S$40/month means that it would take you more than 5 years to pay off your debt in full. During that time, you paid an additional of over S$4,000 in interest. If you increased your payment even slightly, you can get rid of your debt in no time!

5. SEEK PROFESSIONAL HELP

If the above options sound confusing and unattainable, it is time to battle your debt with the experts. Luckily, there are a number of organizations and individuals that are qualified to give you support to finally get rid of your financial problems. Start by approaching the Credit Counselling Singapore through ccs.org.sg.

Image Credits: pixabay.com (CC0 Public Domain)

Sources: 1, 2, 3, & 4

Balanced Budget: A Unique Balancing Act

DEFINITION

Balanced budget is a situation in financial planning wherein the revenue and expense columns of the working budget are equal.

Having a balanced budget occurs not only when the person’s total revenues equate to the total expenses but also when the total revenues exceed the total expenses within a full year. So even if the budget shows an outstanding lead on the revenue side of the balance sheet, it can still be called a balanced budget. Company’s operating budget for a forthcoming year can be termed balanced based on predictions or estimates.

An alternative to the annual balanced budget is the cyclically balanced budget. The cyclically balanced budget follows the economic cycle wherein the budget goes through the dynamics of surpluses and deficits. Theoretically, if the economy goes through the ups and downs, it should your budget should balance itself out.

COMPONENTS

The 5 components of a balanced budget are:

1. FIXED MONTHLY EXPENSES

These expenses remain the same every month or year due to Singapore’s laws and Company service-provider terms (e.g. Hand Phone Plan, or HDB Rent).

2. VARIABLE MONTHLY EXPENSES

These expenses include food, entertainment, clothing, petroleum, and other expenses that may change every month or year. The challenge now is for you to choose on which variable expenses you can reduce.

3. OCCASIONAL EXPENSES

Occasional expenses happen a few times a year. This includes holiday vacations and seasonal gifts.

4. INCOME AFTER TAXES

Your monthly income after taxes is the amount of money that you have to work with within the month. This amount varies depending on a person’s career. Use your annual income to guide you while making your budget

5. SAVINGS

Savings is a portion of your budget that you keep for future use. It includes emergency fund and retirement fund as it helps you to reach your financial goals.

NEXT STEP

To attain a balanced budget, you must first know about the basics of keeping one. May this short video help you with that:

Sources: 1,2 & 3

Must Read: Best Financial Advice From The Experts

If a financial expert is out of your reach, the next best thing is to read about their nuggets of wisdom.

1. GEORGE KINDER

George Kinder’s professional background is impressive. He is a financial author, a certified financial planner, and a founder of The Kinder Institute. He surely know what he is talking about when he said:

“It’s about the meaning, not the money. If my investing is not really deeply tied to what I think is most important in my life…the asset allocation, the estate plan, [and] the retirement plan might as well be thrown out [of] the window.”

Putting meaning to the currency motivates and directs you to your goals. If good health is vital to you then spending money on organic food is not a problem. And if family is your top priority, allocating assets to your children should be a part of your Last Will.

2. CULLEN ROCHE

Cullen Roche, the founder of Orcam Financial Group and Pragmatic Capitalism (website), shares that the primary way to financial success is more than just saving. It is by investing more…in YOU! Since your primary source of income is the person you see in the mirror, a good way to maximize your wealth is to make yourself valuable to other people or other companies.

To have an edge from the rest, you must never stop learning. Education that improves your skills so you can adapt to the ever-changing economy. I personally recommend you to start with free Internet education from YouTube’s Khan Academy, YaleCourses or Crash Course.

3. FRED SCHWED

A timeless advice resides in the classic book by Fred Schwed entitled Where Are the Customers’ Yachts?. As published in 1940, Schwed wrote:

“Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. Art cannot convey to an inexperienced girl what it is truly like to be a wife and mother.”

Paradoxical as this may sound, the book expressed that life is more than just something you read from a piece of literature. Same goes for finance. You cannot simply learn and understand everything about money by merely reading two books written by experts. Instead, you must experience wins and failures firsthand. An investor can never detach himself from his portfolio gains or his portfolio losses.

4. MIRANDA MARQUIT

Miranda Marquit, the founder of Planting Money Seeds, highlights that by knowing that you have enough purchasing power may turn into comfortable spending without keeping the best options for your finances. Just because you can afford something, does not mean that you should buy it. Purchase within your means by balancing what you need and what you want.

5. WARREN BUFFETT

Warren Buffett needs no introductions. As he is extremely frugal, he shared this sentiment: “Price is what you pay; value is what you get.” Frugal people know how to distinguish between the price and the value in order to get the best deals and achieve long-term goals. For instance, a frugal person will use accumulated coupons and purchase items that are only on his or her shopping list. While a cheap person will highly decline to spend more than S$90 on a week’s groceries even though it is not sufficient for the whole family.

Be frugal and not cheap!

Sources: 1,2 & 3

Search the site