Life After Debt: Investing In Your Future

After months or perhaps years of struggling with debt, you have finally paid off your last account. Whether you did it the old fashioned way, dollar by dollar until your debt was paid in full or found yourself needing the help of professional debt relief companies, the end result is the same; you are now debt free. This in itself is a huge accomplishment, especially in a tough economy where unemployment and high debt balances are playing havoc with the personal finances of millions.

What is the next step after paying off debt? There are many options available, from doing nothing with your new found “extra” money to investing it in short and long term financial goals. Clearly the second choice is the best for increasing wealth, however most individuals who have faced challenges managing their money, find the thought of investing a bit intimidating. This doesn’t have to be the case, in fact you don’t have to be rich to begin investing, instead you have to follow a few basic rules to get the ball rolling toward future wealth.

Get the right mindset- People who are able to accumulate wealth or at minimum live comfortably, understand it is important to save money where you can. You need not spend every cent you earn, especially if you are hoping for long term financial stability. This means you will have to commit yourself to contributing cash to retirement and investment vehicles. For individuals who have previously been used to “instant gratification”, putting money aside toward long term goals can be difficult. You must remind yourself that what you are contributing today is for your own benefit over the long haul.

Start small- There is no need to go from being broke to being a full fledged investor. In fact, it is better to start small until you become familiar with the world of investments. If you can invest as little as $25 dollars a week you can get on the right path toward building wealth. Naturally this will take time and is dependent on how you invest your funds. Many people recommend mutual funds which hold shares of stocks, bonds and other assets. This can reduce the risk should one company fall, and mutual funds can be tailored to your level of risk and goals. Before investing in mutual funds or any other investment vehicle, do your research to ensure your small contributions are working toward your end goal.

Slow and steady- When you are new to investments it is important to understand most people do not experience get rich quick results. If you are hoping on a huge return from a little money in a short period of time, you will undoubtedly be disappointed. There are rare cases where that happens but they are the exception not the rule. Instead you should prepare to make regular contributions over a long period of time which will allow your money to grow and continue to work for you over time.

Eliminating debt is a challenging feat in this economy. For those who have been successful, the next logical step in managing money is to increase savings and grow your money through wise investments. Time is of the essence in this case, so don’t delay in getting started.

Tips To Grow Your Savings

Debt and savings. If you have debt saving money can be all but impossible. On the flip side, if you have savings you are in a much better position to avoid debt. Trying to save money while paying off debt is challenging to say the least, however it is important to begin thinking of a savings strategy so you can stop the cycle of debt and experience financial independence. People who have a hard time managing money might find it difficult to get started in the right direction. Here we offer tips that can help anyone begin to grow their savings.

• Change your mind- The most important step in saving money is adopting a mentality that is geared toward saving. If you think you can’t save you won’t. Regardless of your current financial situation in all but the most extreme cases there are always ways to save. Remind yourself why you are saving and what the future holds if you are without a cushion of cash.

• Give yourself an allowance- Going from one extreme to the next is hard therefore you will find more success in saving money if you allocate a small percentage of money for your “play money”. This cash is yours to do as you please and when it is gone, it is gone. It is unrealistic to think you will spend every dollar on bills, living expenses and savings without occasionally slipping. By giving yourself an allowance you avoid getting frustrated with the process which could result in blowing all of your money.

• Round up- With more and more people using debit cards for day-to-day purchases the proverbial change jar sees fewer donations at the end of the day. You can still save your change however by rounding up your purchases to the next dollar amount. If you spend $26.07 at the grocery store, deduct $27 from your register. If you do this for every purchase you will be surprised how much “extra” money is in your account at the end of the month. This money can serve as added protection in the event of an overdraft or be transferred into a savings account.

• Make it a bill- Most people get paid and in turn round up the bills that are coming due. After paying the bills you have X amount of cash left over for other expenses. After paying those expenses whatever money is remaining is often spend without much thought. Make your savings contribution a bill and include it in the round up making sure it is paid before that money is absorbed elsewhere in your budget.

• Take baby steps- Anyone working with a limited budget should understand that it will take time and commitment to build a well padded savings account. There are savings calculators and expert advice suggesting how much each person should be saving, however this is not a one size fits all situation. If you can’t afford what you “should” be saving, then save what you can afford. The key is making regular contributions, regardless of the dollar amount. If you continue to manage your money well, you will eventually be able to increase your contributions.

Saving money should be as automatic as paying your bills. If you no longer think of it as an option, then you are more likely to commit to the process. Once you begin to see your savings grow, you will find you are more motivated to keep it going.

Best Online Savings Accounts and How to Find Them

Online savings accounts are becoming a very popular choice for consumers seeking the best interest rates and convenience. Due to their popularity, the number of online saving sites are increasing and it is in the consumer’s best interest to understand what to look for in a online savings site.

Here is the scoop on what makes an online bank a good choice for your money:

Staying Power and Stability
You certainly do not want to deposit your funds into a bank that is not stable. In light of the economic events in the last year, many banks are now on a troubled list. Look for something that is not only FDIC-insured but do your homework and make sure your online bank is on stable ground.

Gut-Instinct for Customer Service
With your brick-and-mortar bank, you can walk in and speak directly with a teller or branch manager. In the online arena, you are more or less dependent on telephone or internet customer service. If you are checking out an online bank, contact them directly and see what your gut tells you about their customer service representatives. Did they answer all your questions eagerly and clearly? Were you left on hold for 30 minutes only to be disconnected? The way the bank handles its customers is a good indicator of how they will handle your money. Look for top-notch service and don’t accept anything less.

Track Record for Rates
Traditionally, consumers sign up for an online account because they offer a higher interest rate than other banks. Check out the history of the bank and their rates over time. Do they consistently stay competitive over time, all the time?

Security Power
Since you are doing the majority, if not all, of your banking transactions via the computer, you will want to be sure that the bank you are dealing with has first-rate security. Many people will still not do banking transactions online due to fraud concerns. Make sure the bank you plan to use addresses all of our security concerns and that you establish very strong passwords for your account.

Site Performance
Again, since the majority of your transactions will be done online, make sure the website it uses runs optimally at all times. It can be very frustrating to try time and again to access a site that consistently fails or is incredibly difficult to navigate.

Customer Loyalty and Brand
Stick with a  company that has a proven positive customer satisfaction rating. You will likely not go wrong if you work with a bank that has a recognizable name and strong reputation.

Some of the current online accounts that seem to be at the top of the list for best online savings accounts include:

ING DIRECT  – ING offers no fees or minimum balances requirements. The website is easy to navigate and the customer service end has often be reviewed as satisfactory. Current rate: 1.3% APR *

ALLY BANK  – Formerly GMAC Bank, the company offers savings accounts, CDs and money market accounts. The bank is FDIC insured and GM’s bankruptcy has no effect on deposits. Current rate: 1.8% APR.*

HSBC DIRECT  – HSBC offers savings accounts with no fees and no balance requirements. When first starting in the online savings world, HSBC offered the highest rate ever available at 6% and still remains competitive. Current rate: 1.35% *

* The noted APR is effective as of this 10/2009 and may change at any time. Please refer directly to the bank’s website to obtain rate information.

What is the Envelope Budget Method?

The envelope budgeting system is becoming a very popular method for people to budget their income in a very visual way. Essentially, the envelope method is as simple as it sounds. Back in the old days, people used to dedicate separate envelopes for different reasons they wanted to save money, such as vacations, groceries, utilities, gifts, etc… Each time a paycheck would come into the house, the cash money would be divided up into each envelope. What’s in each envelope is money now dedicated for that purpose. For instance, a trip to the grocery store would only allow the amount of money in that envelope to be spent for that purpose.

So how do you get started with the envelope method?

Budget Your Income
The envelope system works best for people who have the same steady pay from check to check. Variable incomes do not work as well with this method. Take your income amount and start tracking your expenses for at least 30 days. Then work out how much you are spending versus how much your are bringing in each month. A budget must be created to get a very clear picture of what you earn, what you spend, and how you can change your habits to save more cash.

Divide The Spending Categories
This step essentially means you need to create and label your envelopes. Use any category you can think of and refer to your expense tracking sheet you did in the previous month for category ideas. Make sure to include one for emergency expenses to help cover those bills you are not able to account for on a daily basis that doesn’t really adhere to a certain category.

Start Stuffing
When you have your budget in place and your categories set up, you need to start filling the envelopes with your cash. If, according to your budget, you have alloted $200 to your monthly grocery bill and you get paid bi-weekly, you know you will need to put $100 each paycheck into your grocery envelope.

Say Goodbye
When the money in the envelope is gone, consider it gone for good. Once you have spent the alloted cash, you’ll need to wait for the next refill before you can buy again. You can not go to the ATM for extra cash or steal from other envelopes. Don’t use credit cards or borrow money from others. This really helps people to learn how to control their spending and helps create a clearer line between wants and needs.

Stay Strong
The envelope system will not magically begin working overnight. It will take time and commitment in order for you to get on track and really see the benefits of the envelope money management system. Once you start ingraining the method into your daily life, it will get easier. You will also gain confidence as you see your money and your savings grow over time.