Managing Your Finances After Buying Your First Home

If you are young and buying your first home, it can be a very scary time in your life. However, it’s also very exciting to think that you are going to own your property for the first time ever. This is truly the American Dream at work! Chances are, your mortgage payment will be more expensive than whatever rent you were paying before you were a homeowner. You may be worried about how to budget after you close on the house, but you will catch on quicker than you think. If you couldn’t afford the house, the bank wouldn’t have given you the loan, so get ready to crunch some numbers and enjoy the first year living in your new abode.

Pay Attention to Your Lending Officer

Before your loan is even approved, your lending officer should sit down with you at the bank and give you a quick run down of the numbers. If they don’t, you should ask them to do so, or find a lending officer that will; it’s totally OK to shop around for lenders, especially in this economy. When you meet with your lending officer, don’t be afraid to ask questions and/or take notes. When you lock in your interest rate, they will tell you exactly what your mortgage payment will be, and if you choose to keep your taxes and homeowner’s insurance in escrow, they will calculate that in, as well. Pay attention to that monthly number, and use that to set your new budget.

Set a New Budget

Hopefully, if you’ve bought a house, you have already set some sort of budget for your living expenses pre-homeownership. If you have, it should be relatively easy to set a new budget that accounts for your increased living expenses. Just plug-in the number from the bank for your monthly payments and make adjustments as necessary. You will have to cut some things out; that is almost inevitable. However, make sure it is something you can live with. Spend less money on clothes, for example, rather than cutting your grocery budget in half. You need to eat!

Communicate with Your Partner or Roommate

If you are buying this house with your spouse or partner, or if you are having someone move in and pay rent, be sure to communicate expectations and concerns openly. This can make or break a partnership when it comes time to pay all that money at closing. When you figure out what everyone owes, make sure you tell everyone upfront. If you are having a renter live with you, it’s not a bad idea to draw up a lease arrangement and have a lawyer look at it. That can save you a lot of trouble down the road.

Learn to Cook

Cooking your own food can be significantly less expensive than eating out every night. When you cook, you often have lots of leftovers, too, which you can eat the next night or for lunch the next day. It would be such a shame to waste your new, awesome kitchen in your new house, so if you don’t already know how to cook some simple meals, now is a great time to learn how.

Find Free Entertainment

Entertainment is what costs most people the most out of their budget. Once you learn how to cook, you can also find some free or inexpensive entertainment options. Staying in can be fun, too. You can go to the library and rent movies and music for free, or visit your local park and explore your new town.

How to Deal with Losing Your Wallet

Your wallet contains a plethora of information about you, from your cards and license, to your cash. Losing it means losing all that it contained, and that puts you in grave danger, because you run the risk of identity theft. You need to be aware what needs to be done in such a case to protect yourself from things like credit car fraud, identity theft, etc. Once you get over the initial shock of losing a wallet, it’s time to think clearly. Do not panic (easier said than done, I agree). Think of ways to amend the situation. Here’s how.

Dealing with the Loss of Your Wallet

– Once you are sure the wallet is not on you, hunt for it. Try to remember where you last used it, where you were when you last used it, what did you use it for, etc. Rake your brains and see if you recall where you put it back once you finished using it. Then look for it again in those places.
– If you are sure you have lost it, call the place you last visited with your wallet. Most public places like shopping malls have a lost-and-found center, so chances are if they have come across the wallet, it might have been deposited at some such center. You will need to identify yourself on the phone with some sort of ID.
– If you own a debit card, call your bank and report the loss immediately. A debit card in the hands of strangers is an extremely risky proposition. You must report the loss within two business days, this ensures that you will not be charged anything more than $50 for unauthorized use. If you delay it further, the liability goes up to $500. Contact the bank’s fraud department and report that the debit card has been stolen/lost.
– Call the credit card company without further delay to minimize the chances of credit card fraud. Cancel all credit cards. The maximum liability you will face is $50, even if the card is used before you have even reported that it’s stolen or missing. Bear in mind though, if you have an outstanding balance on your credit card, canceling it is not a very good idea, as it can hamper your credit score. In such a case, specifically inform the credit card company that the card is lost. Most card companies have rules and regulations in place to deal with such a scenario. You can instead request for a new account number.
– The next step you must do is file a stolen wallet report with the police. Be prepared to answer a multitude of questions. You will need to let them in on all details, from where you were at the time of loss, description of the wallet and all the items it contained, and any suspects. This step is important, it can help you in the long run, especially with identity theft and insurance claims.
– Call all the three major credit bureaus (Equifax, TransUnion, and Experian). Report that you have lost all your cards and ask them to issue a fraud alert on your account.
– Contact the DMV (Department of Motor Vehicles) and report the loss of your license. The rules for reissuing of a driver’s license depend on which state you reside in. Find out the exact procedures you need to follow while applying for a replacement license.
– If your wallet contained any set of house or car keys, get the locks changed without any delay. You may eventually get back your stolen keys, but you do not want to face any risk in case they have been duplicated during that time.
– Companies like Debix, LifeLock, and TrustedID offer protection and insurance against identity theft. These companies offer services at less than $10 per month, and in case you become a victim of identity theft, you can be assured your credit and identity will be restored.
– If your wallet contained blank checks, notify your bank. If you have anyway requested for a new checking account, your account will have become inoperative. But to be on the safer side, the Federal Trade Commission advises that anyone who has lost a blank check should call and confirm with the three major check verification services, namely TeleCheck, Certegy, and International Check Services, whether the check is being used to pay at any store anywhere.
– You should also cancel any department-store issued credit cards, library cards or any other membership cards your wallet contained, especially if they have your Social Security Number printed on them.
– Every now and then, go through your bank statements and report any unauthorized transfers and withdrawals to the card issuing company.

To minimize the dangers associated with losing your wallet, keep a few tips in mind. Carry only the bare essentials you need. Do not carry any sensitive information like passwords, account numbers, information related to your children in your wallet. Limit the number of credit and debit cards you keep with you. Never ever carry your Social Security card in your wallet! And at all times, know what all items your wallet contains, so if you misplace it, you know what all you have lost. As bad as it may be, remember, that losing a wallet is not the end of the world. Knowing what needs to be done and following the steps above will reduce your stress, if at all you realize your personal information is in peril and you could be a potential victim of identity theft.

How Long Should You Keep Receipts and Bills

Receipts and bills are commonly issued by service and utility providers as an acknowledgement towards payment of dues and charges by you. Some recurring bills and receipts go on piling up in heaps every month. Many people are actually confused with how long they need to keep these bills and receipts and so, they go on retaining them for years together. Suddenly they realize that, the receipt pile is occupying a major part of their drawer or filing cabinet. This space could have otherwise been used for storing other documents. Well, my article will help you deal with this very problem. Read on…

Valid Duration of Receipts and Bills

Gas and Electricity Bills
These documents make for a good proof of payment as well as proof of address. If there are any kinds of disputes pertaining to these bills, they ideally get solved in less than a year’s time. However, I suggest that these bills should be retained by you for not more than 2 years at a time.

Credit Card Bills
Credit card payment bills and receipts can usually be disposed off within a period of 50 days to 3 years time. These bills are important if you can expect a rebate on the bills from your organization in the next few years. Make sure to keep a copy of the payment check along with the receipt.

Bills for Purchases
There are numerous number of purchases that you make throughout the year. E.g. jewelry, home appliances, cars, etc. As far as vehicles are concerned, these receipts clearly state the purchase value and therefore can be of use at the time of depreciating the asset. For items like jewelry, such bills are crucially important in case your jewelry gets stolen. They are essential for submitting jewelry valuation report to insurance companies. I suggest that you retain these bills along with the guarantee or warranty cards for as long as you hold these assets in your possession.

Insurance Premium Payment Receipts
These receipts are one of the most crucial documents of your investment portfolio. Ideally, you need to keep these receipts and copies of payment checks permanently. On rare occasions, when your policy lapses or expires, retain the papers for another couple of years just in case you can revive the policy.

Rent Receipts and Home Purchase Documents
All payment receipts received by you when purchasing a new house should be retained permanently. These documents act as proof of payment and ownership of your house. If however, you happen to have a rented apartment, you need to maintain the rent receipts along with your rental agreement for maximum of 6 years. Maintain your purchase or sale agreements and apartment rental agreements permanently.

IRA Receipts
IRA stands for Individual Retirement Accounts. Any receipt pertaining to these contributions should be maintained by you permanently.

Tax Receipts
The Internal Revenue Services (IRS) usually hold audits for short tax payments within a span of three years from the actual payment year. Similarly, the IRS authorities might check your tax returns filing within a span of five to six years on suspected underreporting of your annual income. In such a case, it is ideal to maintain your tax payment receipts along with a copy of your tax returns for a period of at least 6 years.

Home Loan Receipts
These receipts are ideally to be maintained permanently along with your bank loan confirmation document and house purchase agreement.

Simplifying the Maintenance Process

Most of you realize the importance of these receipts and bills and yet view their maintenance as time-consuming and boring activity. Here are few simple ways to keep your filing cabinet in order.

– Yes! Reserving a cabinet or a specific drawer for filing purpose is essential. It helps you to keep a track of your important files all the time. In case of any emergencies like a fire, you might run to this cabinet and just pick up all the files and folders in one shot and carry them away to a safe place.
– If you have never done this maintenance ever before, then segregate your pile of receipts and bills as per their nature. E.g. all credit card receipts should be stacked together and same goes for other receipts too. Now segregate these receipts chronologically. Pin up receipts for a particular year along with copies of every payment check.
– Buy some piano-styled folders with multiple compartments that go for different types of bills. Now place the segregated bills in separate sections as per their nature and tag the compartments appropriately. E.g. in a folder earmarked for year 2010, use one compartment just for credit card bills and the compartment next to it for utility bills.
– Make separate files for major assets like houses or vehicles. Place all documents pertaining to their purchases and consequent payment like rent receipts in their chronological order.
– Try to retain soft copies of certain important documents like tax return receipts and payment checks before you destroy them.

The above suggestions will not only help you put your documents in order, but will also help you recover them when they are wanted urgently. You might have to take time off from your schedule once in a while to place fresh receipts in these files whenever you get them. Also, make sure to check and clear your files annually for those documents which are not required to be maintained anymore. Sounds easy isn’t it?

How to Keep Track of Your Money

Before we take a look at few ways to keep track of your money, here is a simple test. Ask yourself these questions, and answer with a ‘yes’ or a ‘no’.

– Do I owe anyone money?
– Do I borrow money too often?
– Am I usually late to pay my bills?
– Have I put off doing something that I actually need to get done but can’t because I can’t afford it?
– Do I run out of money before my next paycheck arrives?

If you answered most of the above questions with a ‘Yes’, there is no other way to break it to you but to say – you need help, friend! It is not everybody’s cup of tea to manage their personal finances. However, the good news is, you can learn to do it pretty soon and quite effectively too. The following tips on how to keep track of your money are going to help you save money. It is never a good idea to live paycheck to paycheck; so if you don’t want to do that, follow the tips given below and start keeping a tab on your money!

Ways to Keep Track of Your Money

Wallet
Know the exact contents of your wallet. That does not mean you should keep track of every single penny that you put in or remove from your wallet. But it always helps to know how much money you have in your wallet. It even saves you from embarrassment – what if you were to have coffee with a nice girl in a nice cafe and you discovered you had no money left in your wallet? I wouldn’t want to be the girl with you! (Just kidding… I hope that never happens to you.)

Tip: Check in the morning before you leave the house how much money you have in your wallet. Even if you find some of it missing, you have only a day’s expenses to cross-check and trace back your missing money.

Expenses
It is best to keep track of your expenses to know exactly how much money you spend and on what. Many a time it so happens that we do not remember how much money we spent. We buy a box of liquor chocolates and forget we bought it. We pick up a bottle of wine on our way to someone’s house and forget we did. And then we rack our brains trying to remember where it is that the money was spent! So keep a track of your expenses. You can keep a record in a small pocket diary. If you want to be all pro, you can do the same on an iPad!

Tip: Do this daily (at the end of the day, before you hit the sack) and you won’t even have to keep a diary! It is not important to actually ‘write’ down all your expenses; even a mental check can suffice, as long as you are absolutely sure.

Credit
This is how credit cards work (in the simplest, crudest terms) – they (credit union) give you money to use for free. They give you a time limit within which you have to return the money. But if you fail to return it in that time, they charge you an interest such that you eventually end up returning a lot more than you borrowed! Now the problem is, somewhere we have this psychological block in our heads – credit card is somebody else’s money, so even if I overspend, ‘my’ money is still intact. So we tend to overspend. But that is so wrong, for we all know that ultimately we have to pay the credit card bill from our own money. Plus credit card bills are always unbelievable. We take one look at the bill, and we are like ‘Damn! When did I spend that much money?’

Tip: Switch to using an ATM card or a debit card. That way, you would think twice before spending, as it would be ‘your’ money. Also all your transactions will show in your monthly bank account statement. It makes keeping a track easier.

Budget
Set yourself a budget and do not spend outside the budget. If you do, make sure to keep a track of what you spent the extra money on. Did you indulge in a shopping spree? Did you lend anyone money? Were you hit by some unexpected expenses? Medicine? Dinner? Trip to somewhere? Keeping track of your money when you are out on a small trip, holiday or vacation becomes almost impossible. Everybody is in the mood to spend. It is essential you set yourself a budget to keep track in such cases.

Tip: Keep a comfortable margin. Too low a budget can make it seem like you are overspending all the time, when actually you are not. It can bog you down! Take into account all your monthly expenses before setting a budget.

Account
Monitor your bank account vigilantly. It is the world of e-banking, so make sure you subscribe for an electronic monthly statement of your bank account, and make sure you actually go through the statement when it arrives and check for any transactions that seem fishy or unaccountable. I do hope this never happens to you, but a possibility of theft cannot be overruled. Credit card scams are not something unheard of. A lot of people have a lot of reasons (though wrong ones) to tamper with people’s bank accounts. It is better to be careful than sorry!

Tip: Train yourself to read through the bank statement carefully. Do not simply throw it in the trash can. It hardly takes a few minutes. Also report any unusual transactions immediately, without further ado.

So those were some personal finance tips that will help you keep track of your money. Train yourself to deal with money responsibly. You can inculcate responsibility in your children right from their tender years, so that they learn to use money carefully from an early age. Everything in life is not about money, yes. But many important things are – food, clothing, shelter, medical help, for starters. So it is always a good idea to save and invest. Hope the above tricks and tips help you out. Cheers!

Managing Your Joint Finances

People are getting married later in life now. More and more couples are waiting until after certain milestones are achieved, such as graduating from school or attaining job security. This means that more and more people are independently financially stable before merging their lives – and money – with someone else. That can spell trouble for a new couple; when two people who are used to spending freely without consulting someone else are all of a sudden asked to share financial responsibilities. As a newly married woman, I have first hand experience with how difficult it can be to merge finances with the love of your life. We were both employed long before we met, and financially stable as independent people. Rationally, one might think that would mean we would be financially stable as a couple, but creating one budget from two independent ones is sometimes more difficult than it looks. No one can say what will definitely work for you, but here are a few tips to keep your heads above water.

Where Did the Money Go?

Even if you and your partner keep your finances mostly separate, you are still jointly responsible for rent or mortgage payments, food, and other shared expenses. When each of you are spending money from your joint accounts outside those shared responsibilities, you might find that your money is disappearing faster than anticipated. A good way to keep track of joint cash flow is to keep a budget somewhere you both can see and update it every time one of you spends any money. We keep a dry-erase board on our refrigerator with categories like Food, Entertainment, Gifts, etc. and monthly denominations written under them. For example, we like to spend under $500 per month on food, so the Food category has $500 written under it. Every time one of us spends shared money on food, we subtract that amount from the monthly total. Needless to say, when it gets to the end of each month, we end up eating a lot of inexpensive foods such as pasta and Ramen noodles, but at least we’re within our budget!

Set Priorities Early On

Is it important to you both to save for a house? Go on vacations? Buy a new computer? Start planning for children? Regardless of your priorities, it is valuable to set your priorities with your partner early on. You both have hopes and dreams for your life together, and usually those hopes and dreams cost money. No matter what you’re saving for, having concrete goals can help you stay on track. It also helps to know how much you realistically need to save. $1,500 won’t make an effective down payment on a house, for example, but it can buy a really nice computer. Discuss your goals with your partner, and decide what to save each month, and how that savings will be used.

Be Open to Change

Your life together right now doesn’t look like what it will look like five, ten, or fifteen years down the road. Things happen and situations change, and for better or worse, it is ineffective to use the same budget when your financial situations are different. Your spending habits will not be the same when you are first married as they are when you buy your first home or have your first child, for example, and every subsequent change means a change in your budgeting. Don’t try to stick to the financial system that worked for you just because it had worked at one point. There’s nothing wrong with reevaluating how your joint finances are handled when your lives change.

Talk, Talk, Talk!

Communicate about your finances. I cannot stress this enough! If you don’t talk about where your money is going, what you dream for your future together, and how your lives are changing, it will be impossible to reach an effective decision on financial matters. It is frequently said that money is one of the main reasons couples split up, but taking time to discuss your joint financial situation can help alleviate stress when it comes to spending and saving money.

Personal Finance Budgeting

Your money is the lifeline of your home. The standard of living that you have is because you can afford it. Your money basically, is the heartbeat of your lifestyle. To continue living the same lifestyle and to reach higher standards, personal finance budgeting is very essential. Spending is inevitable, if you have money. However, money, or your resource is always limited and your needs are unlimited. Reconciling the two by prioritizing your demands will help in managing your personal finance budget. This practice of budgeting will help you save your money on inconsequential items and teach you the importance of prioritizing.

Need for Financial Budgeting
The need for budgeting arises because of the fact that you are responsible towards yourself. Responsibility towards oneself means, a constant struggle for the better. Thus, the need for personal financial planning is to fulfill the self-actualization need for improvement.

Monthly Financial Budgeting
Make a chart of income and expenditure, which you make all through the month. Based on this you will be able to make successive budgets. Here’s a chart that you can follow.

– Net Income
– Expenses At Home
– Rent/Mortgage
– Insurance
– Home Repairs
– Home Improvements
– Electricity
– Water
– Natural Gas and Oil
– Fuel
– Telephone
– Groceries
– Child Support
– Health and Fitness
– Other Loans
– Entertainment
– Contingency Fund
– Balancing Figure (Difference of income and expenditure)

Once you fill in the details for this chart, you will get a complete picture of what you are earning and how much of it you are spending. Based on this chart, you can make the estimated budget and the actual details will follow as the month progresses.

Yearly Budgets
Now that you have the monthly assessment, of income and expenditure, multiply it by 12 and you will get the yearly account. Yearly budgets will give you targets of the income you need to earn to sustain the lifestyle of your choice. Getting into the habit of following the chart will give every detail of every penny spent.

What Personal Financial Budgeting Does?
Finance and budgeting go hand in hand. You may get ample of finances, but if you don’t have a budget, they will all go haywire. Budgeting will get you into the habit of saving your money for the rainy day. Living from paycheck-to-paycheck will consequently change to living with wise decisions. Budgeting will employ your each dollar for better returns. Most importantly, it will give you a breathing room in case you decide to take some time out from work.

Double Benefits
Summer is here and you want to take a vacation to an exotic destination. Of course, it isn’t possible with meager travel budget to vacation anywhere else other than your couch! Saving an amount will help you create a fund for both the rainy day and the happy days.

The habit of making personal finances budget, should be started early in life. Beginning to plan while you are at college will make you an expert at managing your own finances by the time you begin to earn your money. Financial planning will alleviate problems during the big days of your life, such as marriage. It will give you an edge over the others in planning the wedding budgets for the ceremony, the way you always wanted. So before you get your next paycheck, tie the financial knot for a happy ending!

Personal Finance Planning for the Layman

The Need

Modern science has increased the life expectancy of humans by decades. At the same time, it has also ushered in a plethora of temptations garbed as necessities – needless to say, these temptations do not come cheap. The ever-increasing avenues of spending give today’s man a wholly different perspective on wealth, as compared to even those of just a century ago. While earlier wealth referred to tangible objects such as land and jewelry, today a wide range of tangibles and intangibles have crept into the picture – while owning a Monet is wealth, so is owning a yacht. And the means to achieve either are the greenbacks. However, while money remains a constant to define wealth, destiny is forever fluctuating – what appears as an immense pool of money today may just dry up tomorrow. In such a situation, one needs to plan years ahead to hedge the uncertainty of the future.

The most common situations, which call for financial planning for the average middle class person, are:

Retirement
For any salaried individual, retirement is an eventuality. While many countries provide social security to retired people, the real income that one earns from such schemes may be severely hit by inflationary trends.

For example, over a ten year period considering an average inflation rate of 4%, $1225 would fetch the same value as $1000, provided the growth in prices of all commodities remain fixed at 4%. Thus, a person who subsists on an amount of $10000 today would need to earn at least $12254 to maintain his current living standard ten years hence. In other words, if a person retires with a capital of say $100000 and earns 10% on this capital through investment in bonds, etc, he/she would require a capital of $122540 to earn the same value ten years hence. That, at an age when he/she may not mentally or physically be in a position to engage in constructive, income generating employment. Obviously, such depreciation of real income/capital calls for long-term planning.

Children’s Education
With the steep rise in unemployment the world over, people need to acquire special skills to be assured of even a moderate living. And as the demand for such skills is increasing, so is the cost of acquiring such skills getting pushed up. A person whose child is say ten years old today would require a substantial amount of money a decade hence for his college education, and planning for the same needs to done from today to avoid complications at the last moment.

Medical Contingencies
Medical contingencies have become so much a part and parcel of everyone’s lives, that they can no longer be termed as contingencies. Again, while newer and better medical tools are being developed everyday, the cost of medical treatment is unfortunately on an upward spiral. Thus, while a person can expect to live longer thanks to the modern-day medicine, it is not a very comforting thought when one takes a look at what effect it could have on one’s finances. Even planning ahead may at times not suffice, but it can at least provide a cushion to fall back on when ailments hit.

Apart from the above, sudden cash flow mismatches may occur for numerous reasons – an impulsive tour to Hawaii, for instance. While every such eventuality cannot be anticipated in advance, the least a sensible person can do is to create a buffer for himself for the rainy days. And that buffer can only be created through proper planning of one’s finances while the going is good.

The Planning Aspect
The planning structure may vary widely from person to person. However, there are a few common factors that everyone needs to consider while planning his/her finances:

Age
The age of the individual is an important factor to be weighed in. For example, an executive in his early twenties may not wish to spend too much on his retirement funds; the dreaded day, after all, is a long way away. On the other hand, a person in the forty-something age bracket can see his retirement looming over the horizon; he would naturally have a stronger desire to save. Unfortunately, the time value of money is forever on an upward curve, and saving nominal amounts at an early age is wiser than saving huge amounts at a later age.

Thus, if an investor starts saving at the age of thirty, then at a 10% rate of return on capital, and an annual saving of say $6000, the investor shall have roughly a capital of $1.1 million at the age of sixty when he retires. However, if he begins saving at the age of forty, he would be required to make an annual investment of $18000 to have a similar amount at his disposal at the age of sixty. Thus, if he starts saving at a later age, the annual saving burden is thrice the amount that he would need to forgo every month if he starts saving ten years earlier.

Again, if we assume that at age forty, our investor is in a position to save $15000 annually and not feel the pinch (as against $18000 which he is required to invest), then we find that if he starts saving $6000 per annum at age thirty and thereafter saves $15000 from age forty, at the retirement date he would have a capital of around $1.7 million, half a million more than what he would have if he starts saving at age forty at the rate of $18000 per annum (which would also cause him undue hardship to the extent of $3000 per annum). Therefore, the bottom line is that you should start keeping aside some amount, (no matter big or small) as savings at the end of the month. Ideally, you should be saving 25 percent of your income every month.

Investment Avenues
The available avenues of investment also play a major role planning one’s finances. While different countries have differing rate structures for investment products, the mode of operations and the nature of the investment avenues are generally the same. Thus, while the United States and India, countries at two ends of the economic spectrum, have differing bank rates (the rates in India being almost four times that of the US), the underlying product is essentially the same.

However, the preferred investment mode is certain to vary amongst the two countries owing to the difference in rates, as is observed in the US where the preference is towards mutual funds while in India people are more comfortable with bank deposits. Again, the various investments provide varying tax benefits, ranging from zero to a handsome percentage in the form of tax rebates. One also needs to keep this factor in mind to work out the time value of the savings parked in a particular investment.

Investment Horizon
Probably the most important aspect of financial planning is chalking out the investment horizons for the various requirements. The need to plan for different time horizons arises from the fact that financial requirements vary widely over any given length of time.

For example, the finances required for retirement planning call for a long term, substantial accumulation of funds; children’s college education, on the other hand, provides a much smaller time frame and calls for a relatively lower capital accumulation. While money for all such requirements may be accumulated in a common pool, it is ideal to have separate investments for separate requirements, as this would hedge against the risk of inadvertent mismanagement.

To exemplify, if there are separate retirement and children’s education funds, our investor, in case of any shortfall in the college fund at the time of withdrawal, would prefer to resort to some other, external revenue source such as a bank loan rather than break his retirement fund as well, thereby keeping his retirement money intact. While this may not work out in every case, it does mitigate the chances of mishandling the savings.

Other Planning Tools
Besides personal savings, one needs to try to provide for contingencies through other avenues as well, such as insurance. While our investor might be having all his future income and expenses planned out to a “T”, a freak accident could upset the apple cart, leaving himself and/or his dependents high and dry. To avoid such a situation, one should try to keep as much of self, family and property insured as possible. It is true that the premia paid on insurance seem to be a waste of hard-earned money since they carry little or no returns, but what is a small sacrifice today might yield handsome dividends in times of need.

The Final Word

While planning and monitoring ones finances to provide for as many contingencies and necessities as possible is cumbersome indeed (after all. spending is so much more fun than saving!), the benefits far outweigh the trouble taken. As the old adage goes “A Stitch in Time Saves Nine”; all that is called for is a little disciplined “stitching”. With disciplined planning and regular status reviews, this seemingly daunting task can be expected to become a part of everyday life, thereby providing for a reasonably secure future.