Finances Are Vitally Important

It is a true saying that you cannot get along without money. Finances are vitally important in the lives of everyone living upon the earth. There may be some places where money is not the medium of exchange, but some type of trade must be used to obtain the necessities of life.

People who do not work and earn money or who are not gifted with money must find a way to obtain funds. Most often, people work for the money they get. They are traded dollars for time and expertise. They receive pay for doing a job or some kind of service.

People sometimes beg, borrow, or steal to get what they need or the money necessary to buy the things they feel they require. Beggars on the street are not exempt from the need for money. It is something everyone needs to some degree.

Just as no one will get out of this life without trials, financial hardship may come to most people at some time in their lives. The challenge to secure funds which are not readily available can cause much stress and difficulty. Sometimes it is through no fault of their own that people suffer the consequences of not having enough money.

That is what happened to Japanese Americans during World War II when around 120,000 persons of Japanese heritage in the United States were forcibly removed from their homes on the West Coast. They were placed in what have come to be known as American concentration camps. The hastily constructed barracks and other buildings in these camps were placed in desolate and remote areas of the country. People were taken there and incarcerated, most for the duration of the war.

As soon as the bombing of Pearl Harbor happened by the Imperial Navy of Japan, Americans and immigrants of Japanese descent were immediately looked upon as the enemy. Most of those living in the United States were American citizens. Their lives were immediately thrown into chaos as their bank accounts were frozen and their livelihood was threatened. They faced extreme financial hardship as most of them lost nearly everything they possessed. Their material goods were stripped away, and financial ruin loomed as the likely consequence as they lost their jobs. Life was dark and uncertain.

After spending over three years in the unjust confinement of the camps, these people were released at the war’s end. They tried to resume their lives and tried to earn money again. Financial problems were many and extreme. Yet most persevered and eventually came out ahead.

How did they do it? They became successful because they worked hard. Although they still faced racism and discrimination after the war had ended, they did not give up. They faced many adverse financial situations and problems, but they forged ahead with determination. Future generations benefitted from their determination and hard work.

Budgeting Is Key to Avoiding Big Unforseen Bills – Managing Your Personal Finances

I’ve learnt over the years from personal experience that budgeting is the key to managing large and painful household bills.

We’ve all had them haven’t we? The boiler breaks down and is beyond economical repair, your car goes in for a service, they find stuff wrong with it, and you’ve now got a large bill that you weren’t expecting, and more importantly can’t afford. And yet you have to pay it anyway don’t you? There is no choice. That’s why it feels painful and you can’t help but feel emotional about it.

However there is a way of managing this. Of making it less or even completely emotion free. And it’s something you can do easily – very easily.

Budgeting is extremely easy to set up, and very effective. Of course, it doesn’t make the bill go away, but now you can afford it, so you pay it and move on.

Let’s take your car as an example. All you do is sit down one evening or weekend afternoon and look back at what it has cost you to run over the last 12 months. And the categories are easy really. If you’re in the UK, it’s gonna be MOT, road tax, insurance, servicing and repairs. You could include fuel as that is a cost of course, but I don’t bother as you pay for this in smaller continuous amounts in any case. My formula also excludes depreciation, which if you have a fairly modern car is likely to be the biggest cost of all. So if you want to be HIGHLY ORGANISED you may want to include that too. However back to my example.

Let’s say your bills (MOT, tax, insurance, servicing and repairs) over the last 12 months comes to £1,800. Simply divide that by 12 and that is what it is costing you to run your car every month – £150. That it what you want to set aside out of your monthly pay every month. I suggest setting up a new savings account and direct transfer every month. That way you haven’t got to think about it. You are saving automatically.

Then of course, when the bill comes in for £472, you simply pay it, and transfer the same amount out of your savings back into your current account to top it back up. Easy huh?

Admittedly it doesn’t mean you spend less, but it really makes it much easier to manage. You could of course have separate pots for different outgoings: car, domestic repairs, even saving for holidays. It means you live within your means more readily and it takes the headache out of big ‘unexpected’ bills.

Weaknesses of the system: none as far as I can see. OK, so you’re a little poorer each month, but in the end it means your finances are more balanced. What happens after 3 months when you’ve now saved up £450, but you get that bill for £472 – you haven’t got enough. So what? You are only £22 short. Doing it the previous way, you were £472 short. Which is better?!

So get budgeting, set up new savings accounts and take the emotion and stress out of handling big bills.

Is Recession Inevitable? How to Prepare Your Personal Finances for the Possibility

Recent headlines on the American economy have been rather grim, with a variety of key indicators showing a slowing in overall economic activity. These developments have caused many financial experts to warn of the possibility of a serious economic downturn in the near future, some predicting deep recession in 2008. While the headlines are often focused on the effects of this possible recession on business interests and Wall Street, individual consumers also feel the pain of poor economic conditions. With growing indications of a possible recession on the horizon, the average consumer would be wise to take heed and prepare a financial defense against the potential of economic hardships to come.

Much of today’s financial news centers around the turmoil that has been created in the economy by the collapse of the housing bubble, the sub-prime foreclosure crisis, and the resulting credit crunch. These events have had far reaching effects in the US economy, as well as impacting the economies of many other nations. Many investors in mortgage backed securities, ranging from the large investment banks, hedge funds, and retirement funds down to the individual investor, have seen heavy losses as foreclosure rates surge, spreading turmoil throughout the financial world. Personal bankruptcies are on the rise, as are corporate ones, especially in the mortgage lending industry. When these factors are combined with other economic data, such as soaring oil prices, increased inflation, stock market volatility, and the declining value of the US dollar, the potential exists for significant economic challenges in the days ahead.

Today’s consumer has much to fear from the recent woes in our economy. Many experts are predicting that the typical American family will feel the squeeze of this recession, should it take hold, more than any other in recent history, as its roots will lie in the upheaval that has occurred in the housing and credit markets, which affect individuals more directly than most other economic sectors. Of course, homeowners who have found themselves amid the wave of foreclosures and bankruptcies have already felt the pain, and many of those whose adjustable rate mortgages are due to reset in 2008 and 2009 will soon follow. Even homeowners who are not in danger of foreclosure have been affected by this crisis, with home values falling at record rates, and the downward pressure on home prices is unlikely to ease in the near future as high foreclosure rates continue to impact the housing market.

The typical consumer these days carries a great deal of debt and holds very little in savings, a very vulnerable position should the experts predicting recession prove to be correct. Credit card debt is extremely high among Americans, with figures for 2007 showing that the average consumer owns nine credit cards, and the debt on those cards averages approximately $8,500 per household. The US Census Bureau mortgage statistics state that 70 percent of owner occupied houses are mortgaged. Of those homeowners, approximately 23 percent hold a second mortgage or home equity loan on their homes, and a very small percentage of them, 0.4 percent, have both a second mortgage and a home equity loan.

The savings rate among average Americans is at a record low, negative 1.2 percent at the end of 2006, down from negative 0.5 percent in 2005. To add a bit of perspective to those numbers, the last time the savings rate was recorded in negative numbers was during the Great Depression, and 1984 figures reflected a savings rate of 10.8 percent. Negative savings rates indicate a population that is living beyond their means, spending more money every year than they earn.

However, the average American can take steps to help insulate his or her finances from recession. The very first thing that needs to be accomplished is an immediate commitment to living within one’s means and refraining from taking on any further debt, if at all possible. Devising a spending plan will help to direct the household funds in the right direction. The next thing that should be a priority, and be figured into the budget plan, is working towards paying down existing debt.

When making a debt reduction plan, it is wise to prioritize debt. Obviously, debt that is associated with maintaining the roof over one’s head must come first. While many may feel that the next in line should be the automobile payment, that may be worth taking a second look at. It may just be more practical in some circumstances to relinquish a brand new, expensive, fuel guzzling vehicle and take on a more affordable, used vehicle in its place. Once living arrangements and work transportation have been resolved, then focusing on the debt that carries the highest rate of interest may be the smartest move towards restoring financial health and security.

While, in some cases, it can be tempting to take on a loan consolidation debt, that is something that should be thought over very carefully. Credit counseling may help to bring the financial situation under control without taking on more debt. The lure towards debt consolidation loans is often that the loan will have a lower interest rate than the loans that it is used to pay off. That may be true in some cases. However, it is also true that in many circumstances, it is possible to negotiate a lower rate of interest with creditors, and sometimes, those creditors will be willing to eliminate the interest in hope of securing the return of the principal.

Once progress is being made towards reducing debt, efforts – no matter how small at first – should be made towards increasing savings. As the amount of debt goes down, ideally, the amount of savings should go up. As debt principals go down, so, too, does the total amount of interest that is paid, and that monthly savings can be tucked away to become a gradually growing nest egg against the economic challenges that may be just over the horizon.

The reason that dealing with debt is an important part of insulating personal finances against recession is because in unstable economic times, personal situations can change suddenly and drastically. Lay-offs and other employment disruptions are common as businesses struggle to maintain their own financial well-being and profit margins. Creditors are likely to become much more aggressive in collecting their debts as more consumers default, increasing the chance of legal actions, such as the repossession of goods or freezing of assets, against those with outstanding balances. Thus, working to reduce debt, to enhance credit ratings, and increase personal savings levels now, while income is relatively secure just makes sense. That way, if something does occur to change financial status, such as a lay-off, there will be less debt pressure to manage.

The financial news is important news to the average consumer. Taking the cues from the headlines now to reorder financial priorities and move towards a fiscal position that will offer some protection if, indeed, the analysts that are predicting recession are right, can only offer long-term benefit. In other words, even if recession does not come, reducing debt and increasing savings is smart fiscal policy that will secure your financial future.