Good Morning Green Panda Friends. You may not know it, but personal finance is around us all the time.  Almost everything that we do in our lives involves personal finance because almost everything that we do in our lives involves money. When we pay for our bagel or coffee in the morning or when we pay our monthly cell phone bill online we are taking an active part in our personal finances because we are actively managing our money.

Taking an active role in managing our money means something different for everyone. When we actively manage our money and take an interest in our own personal finances it allows us the freedom to pay our bills, save for our individual personal goals, as well as save for the ultimate financial goal of saving for retirement.

What does Personal Finance mean to you?

Does Personal Finance mean earning enough money to pay your bills? For some people personal finance means paying all of our bills on time each month and it ends there.  However actively managing our money is so much more than just paying our monthly bills on time.  Before we can pay our bills each month we have to make a personal budget so that we know how much we can afford to spend on our groceries, cell phone, rent, cable, and other monthly bills.  There is no point in paying our bills on time each month if we use all of our money to pay our bills and then we have no money left over

Does Personal Finance mean saving towards your personal financial goals? For some people actively managing our money means living on less so we can save more each month.  Some of us are saving for a down payment on our first home, some people may be saving for a nice vacation, and some people may be saving to buy or lease our first car.  Regardless of our personal financial goals if we spend less we can save more money. If we live within our means and always spend less than we make then we will always be able to save some money each month.

Does Personal Finance mean saving for the long term to make sure that we can be financially stable in retirement? For some other people personal finance means saving for the ultimate long term personal goal which means that they are saving for retirement.  We may start working when we are younger in order to save for our retirement when we are older. Buying a home, taking vacations, and buying a car may only be small goals in our lives as we continue saving for the ultimate personal financial goal in retirement.  Some of us may wish to retire in a warmer climate, some of us may want to retire early and before the age of 65, and some of us may wish to retire with other people our own age in a retirement home or community.  Regardless of which personal financial goals we have for our retirement, they all require planning and saving.

Photo by shouldbecleaning

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After a multiple week run it’s time to retire the Saving Tons of Money Series and it’s now officially time to begin the Saving Little Bits of Money Series. The last series ended off with a post on planning for the major stuff. We learned various tips and strategies for how we can save tons of cash in our 20s.

Now it’s time for us to tackle the minor issues that can creep up on us. For our next series we’re going to look at some minor savings that can lead to serious results.

What’s the first way that we can save a little bit of cash? By throwing a yard sale.

What’s the proper way to host a yard sale? How can you make some money in the near future with a sale of your own? Let’s jump into some practical tips that I recently picked up by throwing my first sale of this type…

Get the word out in advance.

I once heard an excellent line on the idea of marketing. The author mentioned that it doesn’t who’s coming where or what’s going on when because if people don’t know about it they won’t come. Simply put, you always need to promote every event. When it comes to a yard sale you really need to get the word out since there’s a whole group of people out there that go yard sale hunting every Saturday morning.

How can you promote a yard sale? Here are a few practical tips:

• Put up huge signs around your community.
• Advertise at the local community centre.
• Look into free newspaper classified ads.
• Tell your neighbors.
• Try to turn it into a street sale.

Any of these tips can guide you towards a successful yard sale. This will get onlookers to at least check out what you have to offer. You now need to find a way to make some money.

Setup early in the morning.

You don’t want to miss anything with your sale. You also don’t want to miss the early birds that start off at 6am looking for deals and hot items. This is why I suggest that you get up bright and early with a cup of coffee and start getting things ready. This will allow you to put your things out while you start to slowly sell stuff.

Offer a diversity of products.

What I noticed with a yard sale is that you get a diverse group of customers. You have the old ladies just looking for a bargain. You got the house wives looking for specifics. You also get the drifters that just happen to stop by. This is why you to offer a diversity of products with your yard sale. We had everything from clothes to electronics to tools. We got to get a rid of a bunch of stuff that we didn’t really need or care for all that much.

Don’t be afraid to let go of your crap.

You’ll find that a lot of garage sale shoppers are looking to low-ball you. Don’t get offended by this. They’re looking for a deal and you’re looking to get rid of stuff. I figured that if I didn’t sell this stuff, I would just throw it out. As a result I didn’t get offended when offered a low price. I was much happier with low prices than holding on to crap that I don’t need any longer.

Make it fun.

My little brother and I ended up lots of fun with the early morning yard sale. We each invited a few friends, played some music, and enjoyed what could be the last warm weekend of the summer. It ended up being a fun way to spend a Saturday morning. I recommend that you all give it a try sometime.

Sure you won’t make a fortune with a garage sale. You can have an interesting morning where you free up clutter from your home and pocket some money. We could all use some extra beer money (or money for books).

Have you guys every held your own garage sale? Did you make any money? Do you have any tips for us?

(photo credit: jon_a_ross)

Personal finance is one of those areas where there are many fundamental topics. Just like when you begin working out, you understand that you need to train hard and eat well. You know that these are the basics. With money management we all know that we need to make money, spend less than we earn, and save. In between all of this there are many tactics and tricks to make things easier.

As we continue in the Saving Tons of Money Series, we shift our focus to paying yourself first. Before we get into the meat of the article, let’s understand why do you need to pay yourself first?

You can’t screw it up.

Once your pay yourself first, you really can’t screw up the process. The process gets all messed up when you delay your plan to save your money. Delaying to save money will almost always cause you to not save this money. No matter how good your intentions might be at the moment. You want to create a system that you can’t screw up if you realistically want to start saving your money.

Forces you to save money.

You’re forced to save your money when you set it aside and lock it up in your savings account of choice. If you save your money and let it be, you’ll be pleasantly surprised when you see how quickly your savings are building up.

Our wants start to kick in.

Anytime I see any sort of advertisement or I walk into a mall I start to think of things that I need to buy. I know that I don’t need this stuff. The thing is that everyone is susceptible to marketing. This is why we need to save our money and put it away so that we don’t start thinking of crap that we need to buy. At that rate you’ll never save any money. You’ll constantly find new things that you want. This will bring you further from your money goals.

Okay so you know that you have to pay yourself first. What’s next? What are the best ways to pay yourself first?

Get the money deducted from your paycheck.

This way you’ll never have to even see the money. You can pretend that you got a pay cut or something. The funny thing is that after a few paychecks you’ll get adjusted to your “new income.” All you have to do is go to your payroll department in HR and request that they take the money off your paycheck. At the most you might have to fill out a few forms and decide where you want your money to go. I recommend that you take the simplest option. You don’t want to put off automatic deductions just because you can’t decide where you want to put your money. Don’t let the paradox of choice prevent you from saving your money.

Manually transfer the money over every time you get paid.

This is the ideal strategy for those of you that have an irregular income. Whenever you get paid through your freelance work or your business, you can decide how much money you want to put away. I don’t want to throw out an arbitrary percentage. It all depends on your bills, goals, and of course taxes.

The only caveat here is that you might get lazy if you need to manually transfer your money first. This is why positive reinforcement helps and it makes sense to stay tuned to your favorite personal finance blogs for a reminder of some of the fundamentals.

Do you believe in paying yourself first? Has this strategy worked for you?

Check out the other article in the series:

The Power of Passive Savings.

(photo credit: medmoisellet)

As young Twenty Somethings we may have other personal priorities that we don’t feel involve our Personal Finances.  We may prioritize graduating from school, finding a job, moving out of our parents house or starting a family over building our credit score, saving money, or planning for our retirement. However, the fact of the matter is that everything, and I mean every aspect of our life, involves personal finance. No matter how long we close our eyes we can’t help but face the fact that personal finance is always right in front of us.

Credit Matters

I suggest that we get a credit card with a low limit such as $500 as soon as we are eligible. Many financial institutions offer credit cards to students as young as 18 years old.  Having a credit card with a low limit allows us to get used to the idea of revolving credit.  In case we do make the mistake of spending more on our credit card than we can afford, at least the low limit of $500 will allow us to make the minimum monthly payment.  Every month that we use our credit card and make at least the minimum monthly payment helps us build a good credit score.

A good credit score is important because it will determine our entire financial future.  Almost everyone checks our credit score from our potential landlord to our potential employer.  If your short term goal is to find a job or move out of your parent’s house then having a good credit score could mean the difference between being accepted or being declined.

I also suggest that parents give their teenagers an additional credit card on their account to teach young people the value of money along with financial responsibility.  An additional credit card user has access to the credit card without the responsibility for the debt.  Although an additional credit card will not help build a good credit score for the authorized user, it will create good spending habits.

Money Matters

Graduating from school is definitely a milestone in our life but what comes after that is the difficult task. When we graduate from college we grow up from adolescent students into young adults and hopefully professionals.  Receiving our first pay check can be very exciting and overwhelming at the same time.  If we don’t learn how to manage our money properly at a young age it could be hard to break bad financial habits when we are older.

I wish that my parents would have sat me down to talk about money management when I was 18 or 19 years old.  Let me tell you if I managed to save my money instead of spending it and accumulating debt in my 20’s I would have a lot more money now in my 30’s.  I don’t regret my financial irresponsibility because I definitely learned from my mistakes; I just wish that I didn’t have to learn the hard way.

Retirement Matters

I personally do not want to work forever; my planned retirement age is 60.  I may retire early but I don’t think so, I’m not planning for it anyways.  I have a lot of financial goals before retirement and this is why I don’t invest all of my savings into my retirement savings plan .  Of the 20% that I save per pay check 5% is allocated to cash in case of a short term emergency, 10% is invested for various medium term goals such as buying a house and taking a bi annual trip to Europe, and another 5% is invested into my retirement savings account.  I have a longer investment period for my retirement; therefore I can afford to invest a little bit less since I will be investing constantly over the next 30 years.

Good Morning Everyone! It’s time for another post in our Fun Financial Tools for Twenty-Something’s series.  Today we are going to discuss the many advantages of a Line of Credit which include flexible repayment options, lower interest rates, as well as affordable monthly payments.  When we are young and new to personal finance we are usually very eager to apply for our first credit card or Line of Credit.  However, if we are not careful and financially responsible we could get caught in the revolving credit door.

A Line of Credit is a revolving credit product.  This means that as we pay off the balancing owing on our line of credit, it becomes available for us to use again.  Our Line of Credit is approved for a certain amount, and similar to a credit card the balance starts at 0.  As we use our Line of Credit the balance increases and we start accumulating interest.  A Line of Credit can be a very useful product to help us build and maintain a solid credit score. However, if we don’t manage our money wisely the option of revolving credit can be very damaging to our credit history because balances can accumulate very quickly.

The Benefits of a Line of Credit

Whether we are still students or we are young professionals, there are several benefits to having a Line of Credit.  One major benefit of having a Line of Credit over a credit card is the flexible payment option.  We can choose to repay interest only while we are still in school, and delay repaying the capital amount borrowed until after graduation.

Credit cards do not allow this flexible payment option.  Every month we are required to make at least the minimum payment on our credit card.  This minimum payment is blended and includes both a portion of our capital as well as our interest.  Our minimum monthly credit card payment is based on our average daily balance during the billing cycle.

A second major advantage of a Line of Credit is the flexible usage and easy accessibility. A fixed rate term loan, otherwise known as a personal loan, can usually only be approved for a specific reason such as attending college, buying a car, or debt consolidation.  However, a Line of Credit can be used for any purpose and to buy anything.  A Personal Loan is approved for a fixed number of years.  Once the amount is paid off we no longer own the credit.  A Line of Credit is revolving and exists indefinitely until we choose to close it.

Our Line of Credit is easily accessible with a simple transfer from our Line of Credit to our checking or savings account.  Some financial institutions even offer Line of Credit cheques that we can provide as a form of payment.

Line of Credit Interest Rates

The Interest Rates on a Line of Credit are significantly lower than credit cards and personal term loans.  Our Line of Credit Interest Rate depends on our credit score and it is calculated starting with Prime Rate as a base.  As an example someone with a really great credit score may be approved for a Prime +2% Line of Credit Interest Rate, while someone with a not so great credit score could be approved for a Prime +4% Line of Credit Interest Rate.

As you may have guessed the Interest Rate on a Line of Credit is variable.  This means that as Prime Rate fluctuates so will our Line of Credit Interest Rate as well as our payments.

I have used my Line of Credit for everything from taking a vacation to investing in my retirement savings plan.  I have even used my Line of Credit as my “in case of an emergency fund”.   I like knowing that if I don’t use my Line of Credit I don’t pay any interest.  I also like knowing that it is always available in case I do need to use it.

Here are the other posts in our Fun Financial Tools for Twenty-something’s series:

Account Balance Are Just a Click Away with Online Banking

The Advantages and Benefits of Online Shopping

Photo by Joe Shalbotnik

It is very common for young adults and young professionals to make money mistakes early in our financial lives.  I definitely made some money mistakes when I was younger which included using my credit cards unwisely, making only the required minimum payments on my credit cards as well as not saving enough of my monthly income.  However I lived to learn from my money mistakes, and now I am definitely more financially responsible.

US News published an article titled 12 Money Mistakes Almost Everyone Makes.  They list the top 12 little mistakes that can have a big impact on our personal finances both in the short term as well as the long term.

Do you make common financial mistakes?

Budgeting for the Short Term. Most of us may have a biweekly or monthly budget, but US News suggests that we make an annual budget.  I believe that an annual budget can be broken down into a monthly budget, and short term goals are easier to manage.  Budgeting only for the short term is a bad idea because we may lose focus on our long term goals.

Overspending on Housing. I couldn’t agree more with this point.  If we decide that homeownership is the right financial move for us, we should buy a house that we love.  Buying a house is a financial decision, and we should buy a property at a good value in hopes of selling it later to make a profit.

Skimping on Career Investments. An investment in our career is an investment in our self.  Hiring a professional career coach and having a resume professionally prepared is a very smart investment.

Falling victim to Spending Traps. Financial Institutions and Credit Card companies often try to lure clients in with short term incentives.  These short term gimmicks can end up costing us more over the long term in monthly fees and interest rates.  There is no need to change financial institutions to get a free toaster.

Failing to Negotiate Prices. Everything in life is negotiable from our monthly bank fees to our first car purchase.  We can never get a good deal if we don’t ask.

Earning Income From Only One Source. Earning income from more than one source is a good idea because it acts as a backup source in case we lose our primary source of income.  Having two incomes is always a good idea because we can never have enough money.

Taking on Too Much or Too Little Debt. Too much debt can become unmanageable and hurt our credit score if we are unable to make our payments on time.  However, having too little debt can also hurt us.  Having a credit card is not enough, we have to continuously use it and pay it on time every month to establish a good credit history.

Trying to Time the Market. As a financial planner I cannot stress this point enough.  Investing is for the long term. We should not buy and sell our investments based on short term fluctuations.

Paying Too Much Attention to the Dow. Knowing what is happening in the economy and the market is always helpful for our financial decisions.  However, watching the market can become an obsession and could influence our investment decisions in the short term.

Counting on Social Security. It is a smart financial move to have personal retirement savings.  Social Security may be here today, but it may not be there tomorrow when we are ready to retire.  Saving privately in a 401k, an employer pension plan, or other personal retirement savings plans is a good idea to guarantee a financially comfortable retirement.

Overspending on Gifts. Many people now focus on spending the holidays with good food and family.  Material gifts may become a thing of the past.  I think it’s nice to receive gifts, but without the added financial stress of having to buy more gifts than we can afford.  My family has a $50 limit per gift per family member, so the maximum I can spend on gifts at Christmas is $250.

Underestimating Tax Bills. Taxes are certain and if we don’t prepare throughout the year we could be stuck with a big tax bill that we can’t afford.

Have you made any of these common money mistakes?

I have made 2 of these common money mistakes in the past, and I am currently making 2 of these common money mistakes.  I will let you guess which mistakes I have made in the past, and which 2 I am currently making.

One of the first rules of Financial Planning is to determine our Life Stage.  Certain factors such as our age, marital status, family status, and employment status all help determine our Life Stage.  Our Life Stage is one rule of Financial Planning that will help us determine how we should save, spend, or invest our money.

The Five Financial Life Stages

Starter is the first life stage of financial planning.  A starter is usually a single person who spends their money before they save it.  Starters are starting to experience debt and have most likely accumulated some debt already.  The debt is most likely in the form of student loans or student credit cards.  Starters are also experiencing a bunch of financial firsts, such as buying their first car, starting their first job, and moving out on their own the first time.

Builders are the next stage of financial planning.  Builders may be engaged, married, or have their first child.  Builders are starting to build their lives and their families.  The financial needs of Builders do not yet require the needs of a financial expert; they are financial beginners and therefore seek financial advice from their family and friends.  Builders are also borrowers; they may be applying for their first mortgage. 

Establishers are the third life stage of financial planning.  Establishers are usually married and may be upgrading from their first home to a bigger home.  People in the Establisher Life Stage may be planning or having their second (or third) child.  Their finances are becoming more sophisticated and therefore they may seek professional financial advice.  Establishers are savers as their focus is on their future and their retirement.

Accumulators are the next life stage of financial planning. Accumulators are looking for financial convenience  as they are almost in the last Life Stage of financial planning.  Accumulators have grown up children and may also have grandchildren.  Their focus is paying off their mortgage and saving for retirement.

Preserver is the final life stage of financial planning.  Preservers have no more kids living at home and they are usually mortgage free.  Preservers are usually conservative investors who are looking for security and income over growth.  Baby Boomers are usually Preservers who are already retired or will be retiring very soon.  People in the preserver Life Stage are looking for personal financial service and have sophisticated financial needs.

What is your Financial Life Stage?