Fortune 500 Budgeting For Our Personal Lives

Written by Deborah Carraro


January and February are traditionally busy months inrepparttar financial industry as many New Year's resolutions typically includerepparttar 112007 goal of becoming debt free or saving for a major purchase. While many of our clients understandrepparttar 112008 importance of getting professional help when managing their business bookkeeping, only a few think to ask for our services in managing their personal finances.

Inrepparttar 112009 business world, a budget is a financial framework that provides checks and balances to prevent overspending and ensuresrepparttar 112010 availability of funds shouldrepparttar 112011 company run into unexpected trouble and requires capital. These same principles can be applied to our personal lives.

We are still close enough torepparttar 112012 Christmas holidays to understand how easy it can be to overspend. Presents forrepparttar 112013 kids, dinners with family and friends, new clothes forrepparttar 112014 New Year's Eve party all can add up to significant debt come January. I'm reminded of a Visa commercial that typically gets a lot of airplay in December: The postman comes bearingrepparttar 112015 monthly bills. The Visa statement is opened showing a large listing of purchases all with zero balances andrepparttar 112016 recipient can't believe his luck and faints fromrepparttar 112017 shock. The commercial advertisesrepparttar 112018 Win What You Buy Contest. The more you buy,repparttar 112019 more chances you have to win. A certain recipe for financial disaster!

While statistically speaking I don't knowrepparttar 112020 chances of winningrepparttar 112021 Visa promotion, I haven't met or read about one person who has. We shouldn't base our spending onrepparttar 112022 chances of winning our purchases or evenrepparttar 112023 lottery. With a little common sense and a trusty calculator, you can manage your spending and save forrepparttar 112024 future and for unexpected expenses - and feel like you've wonrepparttar 112025 lottery!

Fortune 500 companies rely on budgeting and financial reporting. CEOs of major corporations do not make a move without consulting their financial plan. Revenue and expenses are carefully tracked and estimates are created for variable expenses. Corporate debt is studied withrepparttar 112026 goal of reducing amounts owing without incurring additional debt. Money is diligently earmarked for future expenses and “rainy days.” Almost every financial expenditure is determined a year before incurred – a business cannot thrive without actively managing its cash flow. Most people understand that business success relies on creating a budget and sticking to it. I'm here to tell you that personal success does too.

Everyone talks about setting up a budget and sticking to it, but how do you really go about figuring out what your budget is, or should be? There are a few simple steps to creating a personal budget. We’ll userepparttar 112027 example of Steve, a computer technician.

1. Calculate your income

Calculate your monthly household income from all sources: salary, investment income, pension funds, lottery winnings - both yours and that of your spouse or partner.

For example, Steve earns $50,000 after taxes annually. He has no other income. Dividing by 12, Steve calculates his monthly income as $4,166.67.

Going Against the Conventional Investment Wisdom

Written by Terry Mitchell


First of all, I want to give everyonerepparttar disclaimer that I am not a registered financial advisor and I don’t play one on TV. Therefore, I cannot legally provide financial advice and I will not do so. This is for informational purposes only and I’m not recommending any of my personal investment strategies to anyone else. Now, with that being said, I will outline some techniques I use for my personal investment strategy, without going into a whole lot of specifics. I generally go againstrepparttar 112006 conventional investment wisdom that you are accustomed to hearing, although I do use both a conservative and a not-so-conservative strategy. Most financial advisors put a great deal of emphasis on diversification. While this is probably appropriate for most people, I personally don’t buy it. The idea is that it limits risk. While it does indeed limit risk, for me it also limits my upside potential way too much. Therefore, I basically disregardrepparttar 112007 whole concept. Most advisors will encourage investing forrepparttar 112008 long term. This strategy is generally successful in building wealth, but unfortunately for me, it wouldn’t until after I’m old or dead. I invest forrepparttar 112009 short and intermediate terms. I also do not buy or trade individual stocks. Instead, I buy and trade no-load mutual funds, including index funds. Even withrepparttar 112010 use of a deep-discount broker, commissions from trading individual stocks will add up and cut into my profits. True no-load mutual funds don’t cost me anything to buy or sell. Besides, owning shares in a mutual fund is like owning shares of a lot of different stocks at one time without having to actually buy any of those stocks. Instead of buying individual stocks, I am buying classes or groups of stocks. I also don’t have to worry about which stocks to buy or sell, as that job is being taken care of byrepparttar 112011 fund managers. Now, let’s talk about some guidelines I use specifically for my conservative strategy. I only buy funds that have earned a "Five-Star" rating from Morningstar (www.morningstar.com). They must also have a Morningstar risk rating of "low", "below average", or "average." In addition, they must have a Morningstar return rating of "above average" or "high." Also, they must be long-term winners, i.e., nearrepparttar 112012 top of their categories in five-year and/or ten-year performance. I also require them to be "Lipper Leaders", as deemed by Lipper (www.lipperleaders.com), inrepparttar 112013 categories of "Returns", "Capital Preservation", and "Consistency." In my mind, consistency is just as important as high overall return and capital preservation. An inconsistent or volatile fund can cause problems for short and intermediate term investors, even if its longer term performance is excellent. Here’srepparttar 112014 problem: Let’s say a fund that I invested in went down 50% inrepparttar 112015 first year I owned it. It would have to go up a whopping 100%repparttar 112016 next year for me to break even after two years. However, let’s say it went down 25% afterrepparttar 112017 first year. In that case,repparttar 112018 fund would only have to go up 33% inrepparttar 112019 second year for me to break even. A 20% drop inrepparttar 112020 first year would need only a 25% increase inrepparttar 112021 second year to break even; a 15% drop would need only an 18% increase; a 10% drop would require only an 11% increase; and so on. Therefore, I stick with funds that have never gone down more than 10-20% in any one year. I prefer funds that have never had a losing year, but those are very hard to find. What about my more aggressive strategy? This isrepparttar 112022 one that I’m using more and more often and is becoming more profitable, although I probably couldn’t quit my job and make a living off of it just yet. Is it going to make me rich? Probably not. However, I hope it will eventually put me in a financial position to retire early. This strategy involves actively trading various no-load market index funds. The experts say you can’t successfully timerepparttar 112023 market. I believe this is true when usingrepparttar 112024 strictest definition ofrepparttar 112025 term, “market timing.”

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