Cashflow Management

Response to money is largely dictated by our personality. Understanding our personality in regards to money is the first step and will help us shape our approach to spending, saving and investing. So what's your money personality? Read on to find out.

What's your type?
Money personalities have been analyzed in a variety of ways and many people can identify with aspects of several profiles. They key is to find the profile that most closely matches your behavior. The major profiles are: big spenders, savers, shoppers, debtors and investors.

Big spenders
Big spenders love nice cars, new gadgets and brand-name clothing. Big spenders aren't bargain shoppers; they are fashionable and they are looking to make a statement. This often means a desire to have the smallest cell phone, the biggest plasma TV and a beautiful home. When it comes to keeping up the Joneses, big spenders are the Joneses. They are comfortable spending money, don't fear debt and often take big risks when investing.

Savers
Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and are often viewed as cheapskates. Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and don't take big risks with their investments.

Shoppers
Shoppers derive great emotional satisfaction from spending money. They often can't resist spending money, even if it's to purchase items they don't need. Shoppers are usually aware of their addiction to spending and are even concerned about the debt that it creates. They look for bargains and are pleased when they get a good deal. Shoppers will often shop to entertain themselves, even if the items they buy go unused.

Shoppers are an eclectic bunch when it comes to investing. Some invest on a regular basis through 401(k) plans and other automatic investments and may even invest a portion of any sudden windfalls such as bonuses or inheritance money, while others view investing as something they will get to later on.

Debtors
Debtors aren't trying to make a statement with their expenditures, and they don't shop to entertain or cheer themselves up. They simply don't spend much time thinking about their money and therefore don't keep tabs on what they spend and where they spend it. Debtors generally spend more than they earn and are deeply in debt and they don't put much thought into investing. Similarly, they often fail to even take advantage of the company match in their 401(k) plans.

Investors
Investors are consciously aware of money. They understand their financial situations and try to put their money to work. Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals.

Advice for your personality
Once you recognize yourself in one of these profiles and have put some thought into how you approach money, it's time to see what you can do to make the most of what you have. Sometimes making just small changes can yield big results.

Spenders: Shop a little less, save a little more
If you love to spend, you are going to keep doing it, but you should seek long-term value, not just short-term satisfaction. Before you splurge on something expensive or trendy, ask yourself how much that purchase is going to mean to you in a year. If the answer is "not much", skip the purchase. In this way, you can try to limit your spending to things you'll actually use.

When you channel your energy into saving, you have another opportunity to think long term. Look for slow and steady gains as opposed to high-risk, quick-win scenarios. If you really want to challenge yourself, consider the merits of scaling back.

Savers: use moderation
Ben Franklin once recommended "moderation in all things". For a saver, this is particularly good advice. Don't let all of the fun parts of life pass you by just to save a few pennies.

Tune up your savings efforts too. Pinching pennies is not enough. While minimizing risk is any investor's prime goal, minimizing risk while maximizing return is the key to investing success.

Shoppers: Don't spend money you don't have
A critical step for shoppers is to take control of their credit cards. Unchecked credit card interest can wreak havoc on your finances, so think before you spend - particularly if you need a credit card to make the purchase.

Try to focus your efforts on saving your money. Learn the philosophy behind successful savings plans and try to incorporate some of those philosophies into your own. If spending is something you use to compensate for other areas of your life that you feel are lacking, think about what these might be and work on changing them.

Debtors: Start investing
If you are a debtor, you need to get your finances in order and set up a plan to start investing. You may not be able to do it alone, so getting some help is probably a good idea. Deciding on who will guide your investments is an important choice, so choose any investment professional carefully.

Investors: Keep up the good work
Congratulations! Financially speaking, you are doing great! Keep doing what you are doing, and continue to educate yourself.


Knowledge is power
While you may not be able to change your personality, you can acknowledge it and address the challenges that it presents. Managing your money involves self awareness; knowing where you stand will allow you to modify your behavior to achieve your desired outcome.

Some tips to lessen your expenses.

Divide your credit card payments

Instead of paying $200 once a month, pay $100 twice a month. Since the finance charges are based on your average daily balance, you will reduce your monthly finance charge without paying any more than you already do. Dividing your credit card payments requires a bit more involvement than most effortless budget cuts do, but not too much.

Review your phone plans

Do you still use your home telephone or do you just keep it around because you’re accustomed to it? If everyone in your household has a cellular phone, then consider dropping the landline and save yourself the monthly payment.
When is the last time you looked at your cellular plan? I'm not going to tell you to try talk less or watch your minutes (that is painful), but look at your statement or call your company to find out what your average usage is per month. Could you use a less expensive plan based on your monthly average? If you can, make the change and save yourself the extra money.

Disconnect electric devices when not in use

You have probably heard that electronic devices continue to suck energy after you’ve turned them off if you've left them plugged in. You can save a lot of money by unplugging your electronic devices when you are not using them. This does require some effort, but the easiest way to do this is to use power strips, so you can unplug multiple devices with one plug. It might sound like a hassle, but doing it will cut down your power bill substantially. The Organization for Economic Co-operation and Development estimates that standby power accounts for 3% to 4% of residential electricity use.

Buy generic prescriptions and food

If you haven’t started using generic drugs, you need to start right away. You’ll get the same drug for a fraction of the cost. According to the National Association of Chain Drug Stores, the average retail price of a generic prescription drug purchase in 2006 was $32.23, while brand-name drugs went for an average of $111.02. The same idea can be applied to food. Don’t be afraid to buy the knockoff items in your local grocery store. Most of the time, generic food products are produced and packaged at the same facility and just receive different labels. Because off-brand companies typically do not advertise, their production costs are cheaper. These effortless budget cuts could save you upward of 25% on your bill.

1. Understand and overcome the obstacles to build wealth
2. Know what you want and dream big
3. Find out where you are and what you have.
4. Make savings a lifelong habit
5. Spend your money wisely
6. Get out and stay out of debt
7. Find ways to earn more, to save more
8. Prepare for life's financial challenges
9. Plan for a hassle-free and comfortable retirement
10. Grow your money through smart investing
11. Take care of your health to enjoy your wealth
12. Share your blessings and receive more riches

Source: 12 Steps to Build Wealth on Any Income by Alvin Tabañag

Listing Expenses.

Start personal budgeting by first listing and then prioritizing your expenses. Although most expenses are monthly or weekly, some expenses are annual, semi-annual, quarterly, or just plain unexpected. In addition, some expenses are discretionary.

Discretionary expenses are part of your normal out-of-pocket expenses – the things you typically buy that you could live without, but chances are you won’t. Failure to budget for discretionary expenses is one of the top budget busters.

Unexpected expenses

• Home repair & maintenance


• Medical bills(Doctor, Dental, Eye care, Chiropractic, Prescription Drugs)


• Vehicle repair & maintenance

Annual, semi-annual, quarterly expenses

• Homeowners’ Association fees


• License renewals (drives, vehicles)


• Professional fees (accountants, attorneys, tax preparation)


• Property taxes


• Insurances (life, home, health, auto)

Monthly expenses

• Bank loans


• Child support payments


• Credit card payments


• Household rent or mortgage payments


• Internet Connection


• TelephoneTelevision Cable/satellite connections


• Utilities (heat and electric)


• Vehicle leases or payments

Weekly expenses

• Child Day Care


• Groceries


• Personal Care (clothing, bath & beauty, toiletries)


• Transportation (bus, gasoline,)


• Savings

Discretionary expenses

• Books, magazines, entertainment, impulse purchases, snacks, dining, vacation & travel, membership fees...

• Top priorities on any expense list are food and shelter. Shelter includes your rent or mortgage payment, real estate taxes, and any home association or other housing expenses that may lead to the loss of your home.


• Next in line are essential utilities like heat, electricity, and water service.


• Car loans or lease payments and car licensing fees are essential to your budget if your vehicle is essential to your job.


• Home insurance (if not a part of your mortgage payment), or renter’s property insurance, vehicle insurances, and medical insurances should also hold a place on your list of priorities.


• Along with discretionary expenses, low priority expenses include unsecured loans, and credit card payments. Make sure your personal budget takes care of essential expenses and then consider the rest.

Practical Budgeting

Put the amount of money you had left after tracking your spending at the top of your budget. Next, add your net monthly income. You may have calculated this when you tracked your money, but if you didn’t your net income is the money you take home each month. If you’re paid weekly, multiply your weekly take home pay times 13 and divide by three to calculate your average monthly income.

Add these figures together. Your total is your available cash for this month’s personal budget.

List your expenses by priority. List the total amount of each expense and the date it is due.

• Transform weekly expenses into monthly using the same method you used to calculate your net income.


• Divide annual, semi-annual, and quarterly expenses by 12, 6, and 3 to calculate a monthly figure for your budget. If these expenses aren’t due this month, add these funds to savings.


• Use data from tracking your spending to determine your discretionary expenses.
  Include a monthly figure for the unexpected. If possible, find receipts, total them, and divide them to determine what is practical to expect from the unexpected. If nothing unexpected occurs during the month, add these funds to your available cash next month.


• If you’re not saving regularly, do budget money for saving. Having a money reserve (savings) to fall back on in an emergency can make or break your budget.

Making Your Personal Budget Work for You

When you begin personal budgeting, it’s not uncommon to find your expenses total more than your income. Always take care of top priorities first. Then work on making practical decisions for the rest of your expenses.

• If you don’t have enough money to take care of the priorities, you will need to find a way to generate more cash.


• If an expense isn’t a priority, roll it into next month’s budget. However, if you can’t pay a bill or meet a minimum payment, do contact your creditor and let them know. Tell your creditor when you will be able to pay the bill. Don’t let creditors make budget decisions for you.


• Look over discretionary expenses and see what you realistically are willing to sacrifice to make your budget balance.


• Can you cut down on groceries and personal care items? When shaving dollars from these expenses, consider purchasing generic items and store brands for a few weeks (or months) until your budget is under control.


• Will your utility company allow you to make partial payment on utility bills?


• Could you carpool or take alternate transportation for a couple of weeks to save on vehicle expense?

Budgeting is a money management tool that shows you what money you need to make ends meet, live comfortably, and increase your wealth.

In tracking your money, you found out what you have now and what you can reasonably expect to earn. In tracking your spending, you found out what your typical pattern of spending is.

Here are some of the reasons why budgeting often fails.

1. Failure to prioritize expenses.
2. Failure to budget practically for normal out-of-pocket expenses like groceries and gas.
3. Failure to plan for the unexpected.
4. Failure to include quarterly or annual expenses.
5. Spending more money than you pocket.

1. Prioritize.
List down all your debt from highest interest to lowest.

2. Focus on paying the debt.
Focus paying debt with the highest interest first while paying the minimum on the others to avoid late payment charges. Once you're done with the first, add the amount you paid monthly on that account to the second debt, effectively pushing down debt at an accelerated pace. Do this until you finish paying all your debt.

3. Avoid new debt.
If you can't pay it cash, then you can't afford it.

4. Save, save, save.
Keep a healthy emergency fund of three to six month of your monthly consumption so that you don't have to borrow heavily when you need the money.

I got this from the forum where I usually hang out. I just want to share it to you.

10 most common money mistakes

By Ma. Salve Duplito
INQUIRER.net
First Posted 01:10:00 12/01/2008

WHAT money mistakes can turn P20,000 to waste in a year?

While mistakes are normal (even so-called experts make them), it won't hurt to know which ones you are committing and how to learn from them.

Putting your act together financially may prove especially useful when times are tough and rocky because even little mistakes that happen again and again can set you back thousands of pesos in a year.

Here are 10 money mistakes most of us make:

Mistake #1: Living beyond your means
Filipinos are consumed with "wanting to live a better life."

Are you trying to live "that kind of life" with income that cannot sustain that lifestyle and ending up spending more than your monthly paycheck? Yes, you can fund that lifestyle with debt. Don't. Spending more than you earn is the surest way to keep that "better life" further away from reach.

Ralph Liew, chairman of the International Association of Regional Financial Consultants (IARFC) for the Philippines, Thailand, Malaysia and India, points out that the millionaires next door are the ones who save so much more than they spend.

"They are the ones who are saving a lot of money," he says.

The fix: Put off expenses if the income for the month will put you in debt or cause you not to save money for that period. Thinking twice about small things like the cost of lunch, a frapuccino or dinner at a restaurant will instill discipline and the habit of living within your means, which is most valuable in fixing money mistakes.

Mistake #2: Not saving enough
You've heard of the expression "It's not what you make that matters, it's what you keep." Saving monthly is the fundamental habit that makes any person-- whether a Jollibee crew or a professional working in a posh office in Makati--wealthy. Starting your first job and earning minimum wage may not make it easy for you to save regularly, but P50 savings per week in a simple jar near your bed is not a bad start.

As you mature, it will be easier to set aside a bigger chunk of money because you've been used to the habit.

"I save half of my salary automatically and try not to think about it," says Anna, a professional working in Ortigas.

The fix: Find a way to automate your savings to make it easier for you to save. There are some banks that provide this service. Make it a goal to save monthly, even if it's just a small part of your income--say 10 percent. Then increase this regularly when finances allow you to squirrel away more of your income.

Mistake #3: Being materialistic
It is common to see families in the provinces living simply with chickens running around in the yard, pigs being raised in the backyard, malunggay and other vegetables growing near the home. IARFC's Liew says when he saw Filipinos living this way, he realized that living simply and not measuring your worth by looking at what you have and what you can buy makes a person's life more meaningful.

"Don't try to keep up with the Joneses and don't just keep looking at the material part of life. Be frugal; don't overspend. Some of the people I see in the provinces live simply and they are okay," says Liew.

The fix: Keep your attention focused on the things that matter most: health, family, friends, and community. While money may make your children happy because of the things that it buys, there are other things that will make them equally happy, like loving attention, quality time and playing together, among others. Sometimes, the returns from non-monetary gifts are even higher.

Mistake #4: Giving in to greed
Billions of pesos every year are sucked into get-rich-quick schemes and scams that easily separates a Filipino from his hard-earned money. Liew says the reason for this is greed. Running after very high returns is a sure way of getting scammed.

The fix: Don't be wowed by quick wealth. Lightning may strike for some people, but the more stable and sure way to wealth is a slow accumulation of savings and investments. How about that hot stock tip or "new investment strategy" earning four percent in a day that made someone a millionaire? Just walk away from it. They will never tell you just how quickly they lost their money.

Mistake #5: Not knowing what you want
"People don't know what they want and then they end up wanting everything they see," says Liew. One of the building blocks of wealth is to know yourself and your limitations as well as your strengths. Husbands, wives and children should take time to talk about financial goals (i.e. our own home in three years, our own car in two years, studies in the United States for Junior in 10 years, etc.).

The fix: New Year or this coming Christmas holiday is a good time to create a financial road map for yourself or your family. Talk about what you want and how you intend to get there. Think about how long you want to attain your goals. Make a pact to revisit your goals every year to see how you are doing.

Mistake #6: Failing to pay off debts
The Philippines owes P122 billion in credit card debt, P14.2 billion of which have already fallen overdue as of June. Unfortunately, that's only a small part of consumer debt, as loan sharks still abound. Debt is like a Damocles sword that hangs over your head and makes you afraid to wake up in the morning.

Interest from debt never sleeps; it doesn't take days off or holidays. They are worms that eat voraciously at your financial dreams.

The fix: If you are thinking of borrowing money with no plan on how to repay it, don't.

If you have debt or several debts that need to be paid, create a plan now.

Start paying the ones with the highest interest while paying off the others with as much money as you can spare.

Then work on through that list until you have paid everything.

Mistake #7: Getting killed by advertisements
Glossy magazine inserts come in through the mail at a frenzied pace when the holiday season draws near. There are flat-screen LCD televisions to buy and new mobile phone models. Resist them if you don't need them or can't afford them yet.

The fix: If you are vulnerable to advertisements, make the remote your best friend and speed up your channel surfing. Don't even start flipping that glossy magazine insert. Avoiding advertisements or keeping yourself disciplined enough to enjoy them from a distance should help you keep your finances secure this holiday season.

Mistake #8: Not having a plan
"One of our most common mistakes is not having a financial plan, not following up on the plan and not implementing the plan," says Liew. He notes that many people have New Year's resolutions--for example, to quit smoking--but find themselves still doing so when the next New Year's eve arrives.

The fix: Give yourself the gift of your very own financial plan this Christmas season. You can talk to a financial planner to help you out or do it yourself.

There are many resources on the Internet to help you create a plan that will save you from money mistakes and point you to the right direction when it comes to understanding your money personality, how to save and invest, how to prepare to retire wealthy and prepare to be pampered in your golden years.

One of these is MoneySmarts, the personal finance blog of the INQUIRER.net.

Mistake #9: Not having financial education
People think financial education is only for those working in banks, mutual funds or in the financial services industry.

Granted, mathematics or statistics are not easy subjects for all, but knowing financial principles is useful to everyone.

Liew says that even children should have subjects on financial management.

The fix: Don't be shy. Ask among your friends if they know something about taking care of finances. Invest in books and take classes. Personal finance is a growing topic in local media.

Mistake #10: Procrastinating
Time doesn't stand still, not even for the Pope.

The best time to start making money moves that will save you from a life of want and need is now, not tomorrow or next week.

The best time to start a budget is now. The best time to save for retirement is now.

The fix: Stop reading and start doing.

Credit cards can come in handy in a pinch, but can end up squeezing you dry. Finding the best rates and reading the fine print will save you from falling into a black hole of debt.

How Do Credit Cards Work?

Credit cards allow you to buy now and pay later. Hence, they are called 'credit' cards. Credit cards are not linked to bank accounts. Like debit cards they can be used to buy goods in shops and over the phone and internet with the same information given out by you. You can also obtain cash by drawing money at bank's cash machines. Banks are always offering credit cards as they make a lot of money on them when you pay interest on your bill. You can also apply for one if you need one.

What Are The risks Of Using Credit Cards?

Think carefully before using one. If you do not repay your bill in full by the date shown you will be charged interest on the whole amount of the bill for that month. The rates of interest - the APR/Annual Percentage Rate - can often be extremely high. If you take cash out with a credit card you are charged interest from the moment you take out the money until the credit card bill is paid in full. This is an expensive way of borrowing cash. Some credit cards also have an annual fee.

What Are The Advantages Of Credit Cards?

It should be noted that if you pay off your bill in full every month it does not matter how high the interest rate is on your card because you will not be paying it. A credit card therefore gives you greater spending flexibility. If you clear your bill each month, have no annual fee your card will not cost you. Some cards also offer loyalty bonus such as points, Air Miles or cashback.

What Happens If I Fall Into Debt?

If you can't afford to repay your credit card bill you might fall into debt. If you miss the odd credit card repayment this is probably not too big a deal. There might be a penalty charge. But if you persistently miss credit card repayments and fail to pay bills you could run into serious problems.

Is There An Easy Way To Pay Off My Credit Card Debt?

The credit card market is highly competitive and so the sort of good news is that card companies like customers who run up debts on which they charge interest and make lots of money. The good news is a lot of card companies will allow you to transfer debts from other cards and offer you a lower rate of interest to attract your custom. You may find substantial savings on your credit card bills.

How Do I Choose A Credit Card?

There are lots of deals out there and the choice can appear confusing. Interest Free Cards are good if you do not clear your balance every month. There are dozens of cards on the market offering zero per cent interest, typically for five or six months. A few offer up to 12 months interest-free. The best cards give you a maximum of 50 plus days between buying and paying. Special offers will also entice you into some deals. Many banks have special debt-transfer offers to recruit new customers. Some cards offer free purchase protection insurance, cashback and other incentives.

How Do I Avoid Excessive Penalties?

The easiest way to avoid paying excessive bills and charges on your credit card is to set up a Direct Debit from your current account to your credit card to pay off at least the minimum amount each month.

How Can I Avoid Getting Into Debt With My Credit Card?

More and more people are happy with the concept of debt these days. But if you want to limit your credit card debt the best advice is not to overspend and buy what you cannot afford. For some people that may mean avoiding credit cards altogether or at least using one with a low interest rate.