Today’s millennials aren’t big fans of debt. Unlike the baby boomers, young adults today are straddling massive financial pressure – be it heavy student loans or home prices reaching unaffordable highs. While all of this welcomes plenty of financial advice, most of them are wrong. Here are five pieces of money rules you can afford to ignore.
1. Buy A House ASAP (And Not Rent)
With home prices almost doubling and trumping inflation and pay, buying a house could lead to a nightmare if you’re taking out a mortgage before your income allows you to afford one. A better option would be to rent until you have enough funding to put down 20%, while taking care to not make payments that are more than 30% of your total income.
2. Ditch Your Credit Card
While this might be popular financial advice from the older folks, getting a credit card that comes with a low annual fee can help you immensely – if used right. What’s more, it comes packed with perks like reward points, cashback, mileage for travel, and can help you meet a large unexpected cost.
3. Pay Down Debts With The Highest Rates
It might be tempting to tackle the biggest debt of the lot and let the smaller ones slip down your priority list. The trick here is to focus instead on paying off your smallest of debts with every dollar you can afford – once it’s paid off, roll over to paying off the next one, until you’re debt-free.
4. Start Saving For Your Retirement (Right Now)
Despite the upside to saving for your retirement now, millennials might often find money too tight. For folks who are just out of university, a wiser option would be to aggressively pay off your debts instead. Although, here’s a caveat – IF your employer offers a retirement contribution match, invest just enough to get that perk (It’s free money!).
5. Buy Yourself A Car
With the shared economy on overdrive, there are plenty of options ranging from car rentals to ride-hailing services. Pumping your money into buying your car could also demand more of your savings for repairs and maintenance – funds you can use to pay off other expenses with. The opportunity cost isn’t worth it if you haven’t got enough financial cushion to meet your important expenses.
Why You Need To Bag Muni Bonds For High-Yield Tax-Free Returns
With many investors taking to the stock market or making do with scraping a meagre 2% yield off their 10-year Treasury bills, most miss out on including a far better option to their investment portfolio – municipal bonds. What’s exciting about this asset class? They come packed with significant tax advantages, and yield returns that are over 6% to the investor. Here’s a short, somewhat helpful video on how municipal bonds work:
Muni bonds have been the safest bet when investing in bonds – their default rates at 0.2% for years are almost miniscule when compared to the volatility that the equity market flirts with. Earlier this year, a new federal tax law enabled improved tax deductions on federal returns. This drew many to bank on municipal bonds since it fit the tax-free bill. The interest income you receive on muni bonds is not subject to federal taxes, plus it is exempt from local taxes if it was issued within your state. The cascading gains you make can be dramatic.
The best way to tap into muni bonds are through a bond fund. Within a regular bond fund, you get to pick amongst mutual funds, closed-end funds and exchange-traded funds (ETFs). Beyond these classes, you would also have to consider factors such as your investment horizon and cash flow requirements. Here’s a post that explains the calculations that go into muni bonds and other considerations to look at when making the investment. Better yet are the projections – nearly $51 billion in reinvestment demand is expected this month, which would sweeten the deal for municipal bond holders.
5 Tips For Financial Success To Wade Through Tough Times
They say that if you took all of the wealth in the world and spread it evenly among all the people, within 50 years 82% of the people would be in the same economic position as they are today. This is because wealth is behavior-based and less dependent on outside factors than you may realize.
Times are tough financially for most people. That’s no news. What’s important is learning how to thrive instead of just learning to survive. Use this tough market as a wake-up call and condition yourself to take steps to adapt the behaviors necessary to truly build wealth for you and your family.
Recognize that thriving assumes surviving. Survival in these tough times is critical, but it’s not enough to just stop there. By focusing on thriving, survival is assured. You’ve got nothing to lose by living with an optimistic, great outlook. Here are a few good tips:
Invest In Yourself.
Take the time needed to acquire knowledge for your own financial success. Most people always assume that a stockbroker or investment banker knows what is right for you. This thinking is wrong. No one will ever watch your family’s money more carefully than you will.
Do your homework: it might not be what you would expect but you will be better off with the information and knowledge you gain.
I know this is obvious but many people still don’t adhere to this all-important financial rule. You will never get out of trouble if you spend more than you make and refuse to do something about it. This include staying away from friends or relationships that make you spend more money!
A simple ‘No’ does not need explanation, it’s your journey and you have to live up to your own expectation.
Bring In More Bacon.
While you’re trying to be frugal, you should put more energy into having more streams of income. Look around your home, what can you turn into money? If you have a spare room, you can turn list your space on www.airbnb.com with rental fee from $20/night.
You can also turn your spare room into a weekend day care or nursery for kids. I remember when I was nursing my twins, I needed to make more money as a SAHM (stay at home mum), I opted to babysit other kids on weekends with my twins in tow. I set a flat fee of #1,500/child between the hours of 9 AM to 5 PM.
It takes 30 days to form a habit. No matter how little you might be making now, cultivate the habit of saving daily or monthly. It’s just a habit you develop and build overtime.
Start little so you don’t stall your progress, give margin for relapse but be sure to get back up. In due time it becomes a part of you. Just a few months back, I and a group of friends decided to save daily, no matter the amount.
While surfing the net, I came across www.piggybank.ng and was thrilled to find a savings platform that is really flexible. I quickly signed up, chose the monthly plan and recommended to my friends as well.
Motivation is like bathing, you need it everyday. No matter what you do, don’t give in to fear, worry or distress. Focus on things that give you fulfillment. Develop your passion, connect with your true self and enjoy your journey. Life is too short, you’re not getting out alive, thrive and don’t just survive.
Securing Credit? Importance Of A Personal Financial Statement
If you, as an individual, are a salaried employee but now wish to start a business, then your personal financial statement will be the key to avail credit. You may not be entitled for a loan for business, as the eligibility criteria here underlines history and financial position of an existing business. Since, the business in question would be a start-up; you will have to depend on personal finances for the time being, as a means to fund the venture. It is however recommended to keep personal and business finances separate, in the long-run.
When providing monetary support to a new business, it is important for the fund-provider to understand your financial position, which is well-represented by your personal finance statement.
What Does a Personal Financial Statement Contain?
A personal financial statement reflects your financial health. It is a spreadsheet or a document that gives a breakdown of all assets, liabilities, and fiscal details.
- This document also contains general information such as your name, address, etc.
- The assets are detailed on the right side, while the liabilities are listed at the left side of the sheet.
- Liabilities include credit card balance, a personal loan, mortgage, unpaid tax, and more.
- Assets include amount of balance in bank accounts, trading accounts, retirement account balances, and similar information.
- If you are married, then you can apply for a joint personal financial statement, which shows details of all debt incurred and owned assets, of both the involved persons.
What is excluded from a Personal Balance Sheet?
There are a few things, which personal financial statements do not show.
- Business-related liabilities and assets do not surface in a personal financial statement.
- This spreadsheet also excludes leases and rentals since the rented or leased assets are not under your ownership.
- A personal balance sheet will exclude personal property such as household goods, furniture, and more, which cannot be sold off to repay a loan.
- However, property that has significant value such as antiques, jewelry, etc, can be included, if the asset value of these items are verified for appraisal by a certified agency.
Analysis of Net Worth, Possibility of Availing Credit, and More
A personal financial statement thus basically shows your net worth, which is assets minus liabilities, and it holds a great value, when it comes to seeking loans.
- Net worth translates as what you will have in cash if you sell off all the self-owned assets to repay debts.
- If the financial statement shows debts as greater than assets, then your net worth will is a negative.
- For instance, if the sum of your utility and credit bills, auto loan bills, mortgage bills, etc. sum up to be more than the cash of all the investments and real estate property you own, then your net worth is negative.
- If the net worth shows as negative, you can file for bankruptcy protection to resolve some of the debts. It may prevent creditors from collecting outstanding debt by posing any financial threat or stress on you.
- However, certain liabilities cannot be discharged, and these include alimony, taxes, child support, and more.
Thus, personal financial statements have a great impact, when it comes to securing funds to run a new business. The document allows banks/NBFCs to assess your financial situation so that they can take an informed credit decision. If your financial health is not up to the expectation, you may be given an option to provide a personal guarantee, pledge an asset, or co-apply for the loan.
How to Fund Your Start-up Business?
You can either apply for a property loan or a soft loan to arrange capital for the venture, or opt for a small cash loan or a short-term loan, until the business attains enough vintage and financial history, to shift to a business loan suited for only business purposes. Thus, by comparing personal financial statements over a time, you can track your financial health and monitor it closely to improve the same. You should keep a check on this document regularly, especially if you intend to avail credit for business needs.
What is a Business Financial Statement?
A financial statement of your company will list liabilities and assets specific to the business alone. It will depict the net worth of the company, and leave out your personal financial details. The financial statements of an organization, include income statements, profit and loss statements, proof of revenue generation over a specific time period, expenses and debts incurred, cash flow statements (indicated the amount of cash the business has), shareholder equity statements (indicate the performance of the company’s stock).
Thus, a personal and business finance statement are different from each other in lot many ways, though they serve the same purpose, which is to denote the financial position of an entity, be it an individual or a company. An organization’s financial statement comes in use when applying for a traditional business loan, which is the best way to finance your start-up initiative, after it attains at least 3-years vintage.
If you wish to secure a loan for your start-up business, do not hesitate to take support of your personal finance for the moment. And to avail monetary support via this route, you need to keep a regular check on your personal financial statement.