Archives For August 2012

Building an Emergency Fund

Michelle —  August 28, 2012 — 4 Comments

An emergency fund can be very handy at times. An emergency fund can cover all different types of potential “emergencies.” It all of course depends on the person or family.

An emergency can be job related. Maybe you lost your job, will be taking a pay cut, taking reduced hours or so on. Maybe your car broke down and that is the only form of possible transportation for you. Your emergency fund could then also cover buying a new-to-you car as well. Of course, an emergency fund can also cover all types of other events: medical, house repairs, and so on.

However, it can also be very hard to build up your fund. Determining the amount you need, building up that amount, determining what will constitute a financial “emergency,” and so on can be difficult.

The first step is to decide how much you want/need in your emergency fund. Different financial advisers recommend different amounts. If your job is steady, then 6 months might possibly be either too much or just perfect. If you are self-employed, then it is possible that you might want a higher amount in your emergency fund because the likelihood of you having to dip into it might be a tad higher.

If you’re paying off debt, the recommended amount is around $1,000 by some advisers so that you can focus more on debt. I’m different though, I have debt, but I prefer to keep my emergency fund full at around $15,000.

For us, we prefer to have a fully funded emergency fund. We are more comfortable with it being fully funded, so that we are fully prepared. Our emergency fund is designated towards any potential job losses or any potential repairs that may be needed around our house.

We have a friend who did not a have theirs fully funded, and they had to pay $6,000 for a whole new air conditioning and furnace system in their house. In the end, I believe that had to just put it all on a credit card, and it would be hard to pay off a $6,000 credit card bill within one month so that it does not accrue.  This is something that we definitely do not want to happen to us. And we also don’t want any extra stress added on to us financially if it did happen. And this is what makes having an emergency fund worthwhile.

The $15,000 in our emergency fund would pay our basic expenses for around 6 months if something were to happen, or if we needed something to be fixed, then we won’t have to accrue more debt to get something fixed around the house.

Another question to ask yourself is where and how your emergency fund money will be stored. Do you prefer to keep it all close and store it in your house (this is not something I recommend)? We keep our emergency easily accessible in a savings account. Yes, it accrues very little interest, but it is readily available for us in case there is some sort of financial emergency where we need quick cash. Some also invest their emergency funds in the stock markets or put it into money market accounts.

There are several ways to build up your emergency fund quickly:

  1. Pay yourself first. This will help you to save quickly. Designate a set amount of money form each paycheck to go towards your emergency fund.
  2. Save as much as you can. This can include eating at home as much as you can, stopping your clothing spending for some time, watching your utility usage, eliminating or reducing your cable or cell phone bills and so on.
  3. Find ways to increase your income. Maybe trying finding a part-time job. This can include working maybe at a retail store, waitressing or finding a side gig. Side gigs can include online income, babysitting, walking dogs, and so on. Even if the pay is small, they will add up quickly and help you reach your emergency fund number quickly.

How did you choose how much to put in your emergency fund?

Gay marriage and/or rights has been a recent controversy within Christian circles. While many still believe that homosexual behavior and feelings are against God’s will, others believe the exact opposite. But, it isn’t just Christians talking about same sex marriage. In fact, in the past few months major corporations have joined the conversation in support of Gay marriage. Starbucks has officially joined the conversation, supporting gay marriage in Washington. As a result, social networks have flooded with either support for or against Starbucks.

Why Starbucks’ Support for Same Sex Marriage is Important to Some

To say that this topic has polarized Christian groups would probably be an understatement. Despite the validity of each position, I would like to focus on the recent events, with particular attention to the undying support of Starbucks as a result of their stance on gay marriage. Whether you would identify yourself as part of this group, there is a large group of progressive or liberal (to apply restricting labels) Christians who are in favor of same sex marriage and rights. It is their belief that equality is a fundamental aspect of Christianity and the only way to promote this is through equal rights on all fronts. These groups and churches often focus more on social justice issues than anything else.

As a result of the recent stir around Starbucks’ support, many of said Christians expressed their undying support of Starbucks’ action via facebook, twitter, and any other popular social networks. Truth be told, I was inundated from these to social networks by numerous people – regardless of Christian affiliation (or lack there of). For those in support of these corporations’ stance on this legislation, it is often in response to the hostility that gay and lesbians have received. Therefore, support of Starbucks action is not about a corporation or some legal issue, but the person or persons who have been harassed by others. It is a bold claim that no one deserves to be treated this way.

What does Support of Starbucks Pro Gay Marriage Stance Mean?

Regardless of the reasons behind this issue (especially within Christianity), I can’t help wonder the motivation behind corporations actions to support such rivaled issued. Why would Starbucks want to support a cause that could lose them business? As a business, whose mindset is to earn a large profit for them and their shareholders, is it really about the issue?

While I would like to see that major corporations and businesses actually care about social issues, my hunch is that marketing experts know this. Starbucks has long faced criticism for its failure to abide by fair trade regulations. I believe they have learned their lesson they can no longer sit on the sidelines while legislation that affects the society is being played out. Instead, by playing an active role in this issue, they not only jump to the forefront of the media, but also gain back some of that mistrust with those still upset by their decision to ignore fair trade regulations.

We all know that politics is a game of hot-button issues. When you ask people who they are voting for in the upcoming elections or what party they will vote, many people have now learned to reply with one simple sentence…

“I vote according to the issues”

Whether we want to recognize it or not, this is what I believe is being carried out here. Starbucks is in need of public support and this is an easy way to do it. While it may push some business away, it will most likely gain support of former Starbucks protesters and increase revenue. Unfortunately, the motivation of greed is a strong force and continues to play a larger influence in political affiliations.

Readers, why do you think Starbucks is supporting such a debated issue? Is it out of genuine interest or do they have ulterior motives.

Starting a Budget

Michelle —  August 20, 2012 — 5 Comments

When someone says budget, there’s always someone out there who lets out a huge groan. But let me tell you, budgets are not always boring! If you have an end goal in mind, maybe it could even be fun to beat your goals.

A budget can help you save for different things in your life: a house, car, college, and so many other things. You can save more now, in order to have what you want later. Or you can track your budget in order to make sure that you are on the right track.

Now, I don’t specifically track each category in my budget (even though I probably should), but I do make sure that I’m spending the amount that I want/need to.

We don’t spend more than we bring in each month, and whenever we make a purchase, we think about how it’s going to affect our cash flow, money situation and so on. As long as we stay within our budgeted amount, I am happy.

When budgeting, there are many things to keep in mind, but after a while, it’ll all come very easily to you. Try not to feel too intimidated at first, as that is how it will probably feel to you if you have not budgeted before.

Steps:

Know your full income. Many people who receive their first check from their first job are shocked by the amount that they pay in taxes. Make sure that the budget you are calculating is after-tax, or you might have a big problem. Taxes eat up a big part of your income. I’ve always heard of stories of people who would buy a house, car, etc. without knowing exactly what their after-tax monthly income would be. They would just take their annual salary amount, divide it by 12 (which is another mistake because paychecks don’t easily divide like that) and buy everything off that salary.

Determine how much you want to spend. What’s your goal? Do you want to save the complete other half of your after-tax income, put 30% towards debt, or something else? Also determine how much you want to spend in each category. I’ve always heard to not spend more than 35% of your income on housing, but of course in some areas where cost of living is more expensive, this is not always possible. Right now, our housing (mortgage, property taxes, insurance, etc.) is around 15% of our after-tax income, it used to be much more though.

Be realistic. If you’re always spending 50% of your income (or some other amount) on restaurants, clothes or something else that can be considered a “want”, then do not allocate an unrealistic number such as 20% to your “fun money” budget. Be realistic about where you are spending, and then use each budget month as a way to improve your budget :)

Include entertainment in your budget. Having no “fun” money in your budget. Making a budget and saying that you will never do anything that will require money is most likely not very realistic. Include at least a little bit if you have room for it.

Check your budget once a month. See if anything needs to be adjusted (or maybe even lowered!). This is a big step when it comes to budgeting! You need to see and make sure if your budget is actually working for you. There will most likely always be something that needs to be adjusted, and maybe you can even find areas that you can decrease, or allocate to other areas.

 Why I budget:

  1. To feel financially secure. I make sure that I spend less than I bring in, and this is so that I feel in full control of my financial life and so that I feel less stressed. I want to be able to pay off my debt and retire early.
  2. Not to sound selfish, but I also budget so that I can buy what I want and feel a little less guilty when I buy things that I do want.
  3. To travel. I love to travel and by having a budget, I am able to do more of the fun things that I want to do.

  Why do you budget?

Jobseekers currently find themselves in a difficult economic climate, with each new vacancy sought after by hundreds of applicants. In such a situation, it is vital that anyone who is invited to interview for a job does everything possible to make the best impression on the interview panel. By following these handy tips, you can maximise the chances of performing at your best.

Do your research

Before you do anything else, it is vital to look into the organisation at which you have applied for a job. Look not only at its official website, but at any independent reviews and analysis which is available. What does the organisation say it values most highly? What are the major projects currently being undertaken? Is the organisation looking to expand into any particular area of business?

Practice makes perfect

Once you have an idea of what the interview panel might be looking for, it’s time to practice your answers to the questions they are likely to be asking. You can find a whole list of potential questions on the internet, but the basic direction of them is almost always the same. The panel will want to know what experience you have in their area of business, how you work in a team, and whether you have the general skills they are looking for. If you can tailor your answers to fit in with the research you have done, proving that you understand the challenges the organisation faces and are well suited to help in meeting them, you will already be ahead of the competition.

Arrive early

When the day of the interview arrives, you need to project an aura of calm confidence. Nothing is less suited to this than sprinting to the interview, and only making it just in time. Even worse is being late! No-one wants to employ someone who can’t be on time for important events, so make sure you are at least 20 minutes early for your appointment. Importantly, as you are waiting, make sure you have something suitable with which to occupy yourself. Consider bringing along a sensible book or a magazine about the sector in which you are seeking employment. Don’t forget, some organisations ask their receptionists about the attitudes and failings of those whom they interview!

Dress smartly

However good your answers, if the very first impression you make is of being scruffy and unprofessional, you are unlikely to be given the job. Before you say anything, the interview panel will have formed an opinion based on your appearance and demeanour. If you create the impression that you are already ‘in the job’, the interview panel are much more likely to give you a sympathetic hearing.

Project confidence

Now that you are finally engaged with the interview, it is vital for you to project confidence to the panel. The best way of doing this is to imagine that you already have the job, and that you are talking to existing colleagues in a formal environment. If you can convince your interviewers that you are a natural choice for the job because of your demeanour, it will be very hard for them to choose anyone else. Don’t mumble or apologise for poor answers, and when you are answering questions, keep eye contact with the interviewer.

Stay calm

The best way to project confidence, and a guiding principle for the entire interview, is to answer questions calmly and with sufficient thought. The natural inclination when in a stressful situation is to speak quickly and without thinking things through. The fact that you have practiced your answers to the most likely questions will help here, but make sure you still pause and think before answering. As long as you don’t take too long before speaking, this will create an impression of thoughtfulness, and respect for the interviewer. Remember, they want to find someone really good to fill the position. If you follow these tips, you can convince them that you are perfect for the role.

Choosing the most adequate credit card for your needs has never been an easy task, given the large number of options available and the difficulty understanding the exact terms and conditions of each product. In the current climate of economic uncertainty, making the right decision is more important than ever, so as to avoid getting into further financial difficulties.

To help consumers with that decision, we have listed the four main points to consider when choosing a credit card.

1- Consider your spending habits

This is a basic element to consider, as overlooking this point could result in being stuck with the wrong credit card. It is essential to have a clear idea of the amount of money that you will be charging to your credit card every month. Determining this point will prevent you from choosing a credit card that has the right level of spending limits.

2- Take into account your previous credit history

Having a less-than-perfect credit history does not mean you cannot have access to a credit card. In fact, there are cards specifically designed for consumers in these circumstances. If this is your case, choose a credit card with the lowest standard interest rate possible (although APR rates in these particular cards tend to stand at 30 – 40 per cent), or go for a “bottom-up card”, which allows you to gradually increase your credit limit.

Alternatively, consumers who already have an existing debt may benefit from 0 per cent credit card deals, which allow them to transfer balances from other cards at no extra cost.

3- Low APR rates are not always the best deal

Some consumers are attracted by cards that advertise a low standard interest rate. However, and depending on your individual situation, these cards may not be the best option. Consumers who are able to pay their balance in full every month will not benefit from low APR rates and should not choose a credit card solely on that basis. Additionally, beware of the expression “typical APR rates”, as this means that rates can be modified (and increased) depending on your particular circumstances.

4- What if you can’t pay?

Due to unexpected events, there is a possibility that you might be late paying your monthly balance or that you exceed your credit limit. Credit card providers charge a fee in these cases, so it is important to go for the provider with the lowest fees. Also, ensure that the advertised APR rate will not increase in the event of late payment.

Should You Avoid Debt?

Corey —  August 7, 2012 — 8 Comments

Too often people in both niches of finances and religion identify a situation as black and white when it is actually gray. I hate to burst anyone’s bubble, but the world is much more complex than to have a clear cut answer for every question out there. This is the reason why it is important to be intentional with your finances. Making well-thought-out decisions about what and why you do them is an important step for every individual and family. While it is a wise decision to get advice from those you trust, you have to make the decision.

One of the most challenging questions is whether you should avoid debt like the plague. Most people, including myself, will tell you that it is better to live a debt free life because of the flexibility and freedom that it gives you. Yet, there is also many benefits of using debt to your advantage. Many card companies offer credit card rewards for using their card on everyday purchases. You can leverage your money in real estate by taking out a mortgage instead of buying a home in cash. Thus, I think it is an important question to ask whether one should avoid debt at any cost or if you can use it to your advantage.

Biblical Defense?

One of the most common things that I see among other religious finance blogs is the use of the bible to support one argument or the other. But, if you examine the entirety of the book, you will see that it isn’t black and white.

Pro-Debt Use:

Luke 19:11-27

11 As they heard these things, he proceeded to tell a parable, because he was near to Jerusalem, and becausethey supposed that the kingdom of God was to appear immediately. 12 He said therefore, “A nobleman went into a far country to receive for himself a kingdom and then return. 13 Calling ten of his servants,[a] he gave them ten minas,[b] and said to them, ‘Engage in business until I come.’ 14 But his citizens hated him and sent a delegation after him, saying, ‘We do not want this man to reign over us.’ 15 When he returned, having received the kingdom, he ordered these servants to whom he had given the money to be called to him, that he might know what they had gained by doing business. 16 The first came before him, saying, ‘Lord, your mina has made ten minas more.’ 17 And he said to him, ‘Well done, good servant![c] Because you have been faithful in a very little, you shall have authority over ten cities.’ 18 And the second came, saying, ‘Lord, your mina has made five minas.’ 19 And he said to him, ‘And you are to be over five cities.’ 20 Then another came, saying, ‘Lord, here is your mina, which I kept laid away in a handkerchief; 21 for I was afraid of you, because you are a severe man. You take what you did not deposit, and reap what you did not sow.’ 22 He said to him, ‘I will condemn you with your own words, you wicked servant! You knew that I was a severe man, taking what I did not deposit and reaping what I did not sow? 23 Why then did you not put my money in the bank, and at my coming I might have collected it with interest?’ 24 And he said to those who stood by, ‘Take the mina from him, and give it to the one who has the ten minas.’ 25 And they said to him, ‘Lord, he has ten minas!’ 26 ‘I tell you that to everyone who has, more will be given, but from the one who has not, even what he has will be taken away. 27 But as for these enemies of mine, who did not want me to reign over them, bring them here and slaughter them before me.’”

While not explicitly about debt this passage in luke helps illustrate the importance of using what we have been given to grow wealth. Most of the time this is use to argue about using our personality strengths for the purpose of God’s work. While this analogy may still apply, this passage has many financial illustrations:

  • The money that the nobleman gave to his servants
  • Talk of interest, bank, minas as a form of investment (note that a mina is about 3 months work for a laborer – imagine getting three months of your salary, how would you invest it?)

On the other hand, there are a number of other biblical verses that are strongly against debt:

Proverbs 22:7 –

The rich rules over the poor, and the borrower is the slave of the lender.

Romans 13:8 –

 Owe no one anything, except to love each other, for the one who loves another has fulfilled the law.

While it is important to consider the context of both of these passages (which I don’t have time to explore) the message is quite clear. Owing money to other people or companies can limit your pursuit of happiness and justice. Living in debt can be a debilitating thing.

My Take on Using Debt

While I would love to hear from my readers considering this interesting debate, I will give you my stance on debt (which isn’t normal). For the most part, I live a hard and fast rule of living a debt free life. Again, I said for the most part. I do think that owing money (like getting a mortgage) whether that be for your own home or real estate investments is a great way to go, but within reason. Too many of my friends and family jumped into buying a home before they could afford it and are now under water.

When you are considering using debt to leverage your money and build wealth, be sure to ask yourself it is worth the risk AND whether you can handle the risk. Will you be able to pay the debt should anything terrible happen? Or are you praying to God for a miracle each month to pay the mortgage. People often make a distinction between good debt and bad debt, but I’d like to propose smart debt and stupid debt. Stupid debt is the one that is bordering on insane. This is the type of debt that people get just because they want to – whether that be drive a new car or getting a HUGE house. Smart debt is the idea of using debt responsible to build wealth and obtain financial security much faster. These examples include using credit cards, getting a mortgage that you can afford, etc.

Debt is not something to be used out desperation, but something that can be beneficial to the people who use it correctly. It’s too simplistic to say that you should avoid debt ALWAYS, but then again, it may not be a bad motto if it keeps you from making huge mistakes.

Readers, what’s your take on going into debt?

 

Family Finance Advice

Corey —  August 2, 2012 — 5 Comments

Experienced drivers know that if they want their vehicles to run properly for years to come, regular maintenance is essential. Household finances can benefit from the same advice. To improve a budget that isn’t running as smoothly as it could, or to prevent a financial breakdown, consumers should consider performing a financial “tune-up”.

Schedule a Budget Meeting

Improving one’s financial standing requires full participation and equal effort from both partners. Before any real change can occur, it’s a good idea to gather all bills, bank statements and other financial documents. Allotting adequate time to sit down with one’s spouse and go over household finances with a fine-toothed comb is essential.

The first step is looking for budget leaks and behavior patterns that cause late payments and other detrimental effects on household finances. Budgeting software is incredibly helpful, including the many new free online budgeting programs.

Next up is an honest, blame-free discussion of how these behaviors can be changed. Examples include scheduling set bill payment days, re-allocating bill payment responsibilities, or even something as simple as having plenty of stamps on hand.

Other Household Budget Considerations

Many couples are unaware of the numerous leaks in their budgets. Like a leaky engine, these budget holes can cause more serious problems in the future if not adequately addressed.

Some are as simple as downgrading to a smaller cable or phone package. Many households have TV channels and phone features they never use. Bundling services with one company can create even greater savings.

Auto insurance is another area of the budget that is often overlooked. Many drivers stay with an insurance agency out of familiarity or loyalty. Complacency could be costing many households a lot of money.

Online vehicle insurance comparison sites make no-obligation rate and coverage comparison simple and quick. Having a current insurance coverage statement handy while shopping for car insurance online ensures that switching to a new company won’t affect coverage.

For households that have already fallen behind on credit card and loan payments, it’s a good idea to contact creditors. Credit card companies in particular may be happy to lower the payment amount or interest rate on a delinquent account. It’s in their best interest to receive less money than agreed upon rather than no money at all. In today’s economic climate, credit issuers are accustomed to these types of calls.

Accelerating Debt Payment

Having a grasp on the current state of one’s household finances makes moving forward easier. Plugging budget leaks leaves more money available for paying off installment loans, credit cards and lines of credit.

Budget calculators make it easy to find out how long it will take to pay off a given bill. Many personal finance and industry-specific sites boast free calculators that allow users to input the current balance and interest rate to find out how much extra, and how many payments, it would take to pay off the debt.

Since many consumers have multiple loans and credit cards, prioritizing early debt payment is the final step. Many financial advisers recommend paying off debt with the highest interest rate first.

However sound this advice, some find it difficult to see the light at the end of the tunnel if the debt with the highest interest rate is also the one with the largest balance. If paying off smaller balances with lower interest rates first is a better motivator, then taking this route would be advisable.

Budget Maintenance as Prevention

Performing a financial tune-up may seem daunting, but it’s the most effective way to get back on track. From creating sound bill payment habits to shopping for less expensive auto insurance, budget “maintenance” helps households avoid the need for costly repair down the line.