Where is my money?

Sometimes it's easy to forget all the "leaks" in their tiny budget. Often people do not know how much they spend.

It is easy to think that not buy anything like it. You are not dining at the Ritz. You are not flying to Paris. Do not ride in a Mercedes-Benz. Where the hell is your money?

Let me ask you a few questions:

Are you more you paid $ 10 for a haircut? Pay to colored your hair or professional styles? Did you do your nails?

Did you buy a Starbucks coffee? Do you buy bottled water? Did you buy ice cream, cookies, soda and other junk?

Did you enter the room, if you have a chance? I'm not talking of a fine restaurant - I say that grabbed a burger or a burrito fast food or fast food restaurant.

Feeding places where you can go? Do you have a car that has bad gas mileage? As recently before you buy car insurance, compare the deals?

* Do you have a pet? Pay for vaccinations, food and veterinary care?

Make the most common ways that people spend money. These are all discretionary purchases.

None of these discretionary purchases are "bad" or "right". They are just options. If you want to spend money on these items, you have to cut other spending budget. The core of the budget gives priority: cutting expenses, which is less important, so you can room in the budget for expenses to make really important.

Alternatively, you can also pay with your time, more money. This will also give you more flexibility in your budget.

The conclusion is that, even if you fly to Paris or the Ritz, which makes getting to eat very much discretionary spending. That's perfect. There is nothing wrong with a little discretionary spending. But to afford it, you have a plan in place. Therefore, I recommend to create a budget. Here are some of the most popular types of budgets:

* I know that you do not like it the idea of having a pet as discretionary costs. I have a lot of concerns about this statement, the people who protest that their pets are part of your family. Likewise, I also hear from people who would like to have a cat or a dog, but I feel financially stable enough to afford for a pet do not mind.

Do not misunderstand me: I absolutely do not think you should give your pet. You will be happy and comfortable. But you must realize that there is an issue you have chosen, and make it possible to give up other luxuries.

You might find that you can afford, an animal or a nice car, but not both. Or maybe you need to work five hours per week to allow Fido. The budget is, in part, the practice of remaining aware that these obligations leads.

What is an unexpected expense?

Conventional wisdom says that the money should be reserved for "incidental expenses" in the emergency fund.

This is true. But what exactly is an unexpected expense?

Here it is:

This is not a recurring annual financial statements

Your property tax bill in the bill for car insurance, the annual premium of life insurance, the study of glasses and other costs once a year are not surprising. Instead, you get to fully pay the bills annually or semi-annually.

Budget, giving them a certain amount each week or month. If your property tax is $ 5200 a year, for example, set aside $ 1,000 per week. If your exam and glasses replacement lens costs $ 300 per year, I have $ 25 per month. These are not the kinds of issues that your emergency fund should be used.

It is not the occasional maintenance or repair

Is leaking from your roof? Your dishwasher breaks down? Need to pay a deductible of $ 1,000 health insurance?

Most people call these unexpected expenses. But some experts disagree personal finances.

"Medical bills, car expenses and costs of the house are not really unexpected - at least it should not be," says Liz Weston, personal finance columnist for MSN Money and author of the 10 commandments of money. "If you have a body, a car or a house, sooner or later, it is going to cost you."

What it means is that the budget should be an estimate of how much you spend on variables such as problems at home, including auto and health costs.

For example: A good rule of thumb is 1 percent of the cost of your home set aside each year for repairs and maintenance are set. If you live in a $ 250,000 home, for example, you need to save $ 2,500 per year or $ 208 per month.

You will not spend $ 2500 per year. Some years will be $ 100 or $ 200 to spend on basic maintenance, such as cleaning the gutters. But other years spent $ 7000 to replace the roof. The golden rule of 1 per cent is destined to a long-term annual average rate, and the budget for such expenses by allocating $ 208 per month on the background of "repair and maintenance" that you have.

Read more: Should I buy or rent a house?

The same is true for automotive and healthcare expense. You can choose to set aside $ 600 per year or $ 50 per month for car repairs. Some years will spend $ 0 Other years, you will have to pay more than $ 4,000 to replace the transmission. Annual budget "smooth" these vibrations.

Similarly, you need to put a little money aside each month to cover deductibles, co-payments, prescriptions and other medical expenses out of pocket. The lifting amount should be aligned with this of-pocket costs and maximum annual deductible on your health plan.

For example, say that your health plan has an annual deductible maximum annual $ 1,200 and $ 5,000 total out of pocket. If you are generally healthy and rarely visit the doctor, you can in a health savings account set aside $ 100 per month or $ 1,200 per year. If you think you need more frequent visits, the doctors could choose aside $ 416 per month or $ 5,000 per year (full year maximum out of pocket).

So what is really unexpected?

Your emergency fund should be for expenses that are not used to fall right as property taxes, optometry and auto insurance in the categories of projects "annually". Should also be used to pay bills that are outside the range of home care and repairs and car and invoices in the normal health effects.

Actual expenditures are hitting the result of unexpected events such as job loss or a large bill from the norm, health insurance is not cover.

Define your concept of "unexpected" bills to these events once-in-a-lifetime instead of the most common activities ,. Then adjust your budget accordingly.

What is a millionaire?

Definition:

We hear of "millionaires" constantly. The term often conjures up images of celebrities, athletes and business leaders: Kim Kardashian, Dennis Rodman and CEO of Pepsi, it is assumed, are all millionaires.

But what exactly defines a millionaire? The answer is not as easy as you think.

The technical definition of "millionaire" is a person (or couple) with a net worth of over $ 1 million USD. "Net worth" is that of the people, the less their debts property. Equity is a "what you own less what you owe."

Pronunciation mill-yon-air

Fault current spelling: Millionaire, millionair

Examples:

Let us assume that John Doe has the following advantages:

• House: $ 350,000
• Car: $ 10,000
• Bond funds: $ 600,000
• Income Fund: $ 80,000
• Investment funds: $ 100,000
• Resale value of the items in your house (washing machine, TV, furniture): $ 20,000
• Cash: $ 10,000
• Total assets: $ 1,170,000

Consider also the following obligations:

• Mortgage: $ 120,000
• Car Loan: $ 5,000
• Liabilities: $ 125,000

John is a millionaire? One school of thought argues yes. Another said no.

The site supports the "yes" is emphasized that the asset is $ 1,170,000 corresponds John, and total liabilities $ 125,000. This means that the total net worth (assets minus liabilities) is $ 1,045,000. By definition, makes him a millionaire, let's say that your net worth of more than $ 1,000,000.

The page that "no" is supported, that the value of your home, your car and personal belongings not (such as clothing, furniture and television) are counted. Finally, it is more likely than not to liquidate these assets or sell them for money. He has to live somewhere. He has to drive a car. He has to wear clothes, eat at a table, and sitting on a couch.

The "no" is that only cash consideration. These include mutual funds, equity funds and money. Some people may also add value to your retirement account; others do not, as these assets against bankruptcy filings protected. Anyway, is not a millionaire, once these things are left out of the equation.

Another school of thought would be to adjust the value of the house, John car and personal belongings. Yes, you have to live somewhere, but I did not need $ 350,000. They would "loan" him with a housing allowance, and you have excess capital.

In short, there is no agreement on whether a millionaire. But one thing is certain: John does not have much money in the bank. Bound most of his money in housing and investment. Just because it's (possibly) a millionaire does not mean you can spend rich as Kim Kardashian and other celebrities.

In other words, a million is not what it was.

Read more: How to Become a Millionaire

Read more: Most millionaires budget

How should I take my child to school?

You have the horror stories: Joe the student graduates $ 50,000 in debt. He can not find a job, and then had to tables in a restaurant while. $ 400 monthly payments on their student loans

Sally leaves the student's University of the State of $ 60,000 debt. You also can not find a job and file bankruptcy - only to find that student loans can not be discharged in bankruptcy. These horror stories are afraid for the future of their own children. What can be done?

Step one: Relax.

The horror stories you hear on TV are the stories of outliers. One third of the graduates of universities and colleges four years (, for which complete data last year year) without student debt at all, according to statistics in 2008, the project on student debt, a cited non-profit organization.

The remaining 67 percent of seniors who carry a debt load complete average debt of $ 23,200. It's very, very of $ 50,000 + horror stories you hear on the news.

And do not forget: student loans are usually loans at low interest rates are the interest is tax deductible. This is one of the best structures of the loan you can expect to receive.

Second step: evaluation.

Before sending high school to college, take a moment to when thinking about what will be your earning his degree.

The college graduate earns on average $ 1 million more than a non-college graduate over the duration of his life, but the data is so large it is probably useless. Connects electrical engineering students in the same class as the majors in sociology. She graduated from Harvard as other graduates will be mixed in the same category.

It is important to ask how much money you depending on your age and your choice of college earn less. In the next two sections we will look at both.

What is your age?

The middle class of 2009 college with a degree in mechanical engineering earns a base salary of $ 53.400, according to Forbes magazine.

It is spacious enough data - there is definitely a difference between, for example, civil engineers and biomedical engineers -., But at this stage it is difficult to predict which branch of the great junior engineer, which makes it easy to predict that you will join wants the Faculty of Engineering.

Especially something technical matic or strong - - if your child to specialize in something else will weigh this potential child will be starting salary. College graduates work in management salaries Retail is $ 27,900 start, reports Forbes.

What college choice?

The reputation of a college or university, especially heavy on the probability that a student find a job in your field and your starting salary. A graduate of Florida State University received an average starting salary of $ 38,500, according to the FSU site, while he was a student at the University of Illinois at Urbana - Champaign is an average starting salary of $ 51,500 profit.

Remember the Forbes list of the data students get starting salaries of $ 53,400? It is a great national average. $ 14,000 - a graduate of a school like MIT guide to get a starting salary of $ 67,270 a student.

How much should I borrow?

Consider the rule "starting salary" applies: borrow more than your expected starting salary.

Under this rule, you can justify a loan of up to $ 67,270 when your child goes in the School of Engineering at MIT when youth who are considering a degree in Humanities at Florida State, though, you should limit the loans in the amount of $ 38,500.

There is only one rule, not a rigid law. The rationale behind this concept is that the graduates of their student loans in 10 years, when applied to pay 10 percent of the gross starting salary for the loan.

Over time, the student will probably get better wages, they can accelerate the repayment of their student loans. But the new editions such as weddings and babies may require most of its increase.

Visit your child's school? Learning to travel without spending a fortune.

What is & quot; Compound Interest & quot; Media?

Definition:

Albert Einstein supposedly described compound interest as "the most powerful force in the universe." What is compound interest and how it can help grow your investments, retirement, or to become a millionaire?

Compound interest refers to the interest that generated the principal and interest.

"What?" Do not worry if it sounds like gibberish. Just stick with me for a second.

Suppose you deposit $ 100 in an investment account for retirement. The interest is payable at a rate of 10 percent per year. At the end of Year 1, you have $ 110.

You start the year 2 of $ 110 on your investment account $ - $ 100 principal, and $ 10 in interest. You have the full $ 110, main and end of year 2 interest invested throughout the year 2, your investment increases by another $ 11 for a total of $ 121.

Note that in a year you earned $ 10 interest, because the only money I had was the main thing. But in year 2 you earned $ 11 in interest, because you were the principal plus the interest for the first year. In other words, an additional $ 1 compound interest on interest.

You begin the year with $ 3,121 in your investment account. You earn 10 percent or $ 12.10. At the end of the year you have $ 133.10.

Notice how your payment has increased by 10 percent - $ 10 the first year, $ 11 the second year, $ 12.10 in the third year. That is because the decline in interest on previous interest.

The fourth year, your payment will observe 10 percent of the $ 13.31 (10 percent of $ 133.10, which means it will end the year with $ 146.41. Sure that you have won this time 46 dollars on your original investment of $ 100 is not bad!

What if you had not plowed his statements? In year 1, a yield of 10 percent is obtained. Keep the main thing, the original $ 100 invested, but you spend the extra $ 10 early in the second year, you have only $ 100 invested.

Do this every year - the original investment of $ 100, but the extra $ 10 at the end of the year 4, only $ 40, not $ 46.41 because it has not left the compound of interest.

"Big deal", you might think. "$ 6 is not much money."

True. But imagine, $ 10,000. At an interest rate of 10 percent compound at the end of your initial investment fourth year you will win $ 4,600 and $ 6 is now $ 600.

Better yet, imagine doing this with $ 100,000 would be. In a mixing ratio of 10 percent, you win $ 46,000!

Of course, most of the investments do not give constant returns of 10 percent - take this number only a simple example. Legend Warren Buffett predicted invested, that the stock market will give you a 7 percent yield to early and mid-21st century to learn to read this article as the yield effects, how long does it take for your money to double.

Also known as: compound interest, compound return, compounding annual growth rate

Examples:

You invest $ 50 interest rate of 10 percent. After a year you have $ 5, for a total of $ 55 in the second year, interest on your initial investment of $ 50 you earn (the "principal"), plus an additional $ 5 you won interest rate during the first year.

In other words, you earn $ 55 to 10 per cent, or $ 5.50, for a total of $ 60.50.

The "compound interest" is that the extra 50 cents, which is the interest that you have earned interest.

The compound of interest from more, your earnings will be even more dramatic (because the interest will).

What & # 8217; the difference between a ...

I recently received a great question from a reader I would share. The reader asks:

"I hate to pay overdraft fees ... (I) keep more money in my bank account, so that you do not have to pay for them. It is an emergency fund?"

Very good question. The reader asked if the cash cushion that holds your checking account against sanctions inadequate land can be protected as part of their emergency fund.

Short answer: no. Here is why.

What is an emergency fund?

One of the most important rules of personal finance is that you get an emergency fund.

Most of the emergency fund should cover the cost of living in a position to 3.6 months. If you have a stable job (like a job where your salary is highly dependent on commissions and bonuses, or if you are a business owner or independent, or if you work in an industry loss), you can raise money 6-9 months to cover living expenses.

This fund should be used to pay for these shock: loss of a job. A serious hospital bill. A big bill for one and one-year-old healthy dog's veterinarian.

In other words, an emergency fund used to cover unexpected costs. The fees that you can expect - such as car repair bills (all cars break down from time to time) - should be paid through a special fund for this purpose.

(Read more: If using on your emergency fund and several savings ?.)

What is a pad?

A pillow, by contract, is a balance in your savings account to protect against insufficient funds and overdraft charges penalties.

"What does this mean?"

Imagine exactly $ 1000 in your account.

On Monday, a check for $ 200 is written to pay your invoice with your credit card online for $ 400, and you use your debit card in the amount of $ 400 at the end of Monday, you have outstanding fees from your checking account to $ 1,000 deducted.

Suppose the credit card and the payment of invoices paid $ 400 $ 400 debit card at a time after Tuesday. On Wednesday, check your account and see that you still have $ 200 there.

You are a busy person with a lot of things in my head; They forget that you wrote a check for $ 200, which is still pending. They assume that the $ 200 your checking account is yours for the taking, if you withdraw $ 40 from an ATM.

Later that day someone tries to cash the check - but only a balance of $ 160, in other words you have sufficient funds. Rebounds tax and bank charges overdraft fees of $ 35.

How can you help? Keep a pad in your account. Some people keep a cushion that are as small as $ 100; others feel more secure when hidden $ 1,000 in your account. The less time you want to track your sales, should be plus the pocket.

(Read more: You track your expenses with different accounts)

This pillow is your starting point checks the account balance. Once your checking account with this mattress, you should mentally "short".

You are not technically open to the eyes of the bank; It checks do not bounce or be hit with penalties for lack of money. But if you dive once under the pillow, you should consider to maintain a balance of "zero" in his own mind.

Using the same example: Let's say your "cushion" is $ 300 What would have happened?

First - If you had $ 1,000 in your account, you will never make $ 1,000 payments on Monday. You want to mentally imagine that your bank account has only $ 700, because the other $ 300 inviolable pillow. You can not buy something with your debit card that day.

Secondly - if it go wrong payments of $ 1,000 Monday, you notice your error check your balance and see that $ 200 in your account. This activates an alarm in your head, because this amount is lower than the pillow. You withdraw money from an ATM. Instead, rushing to deposit money into your account as quickly as possible the reconstruction of the mattress.

The Bottom Line: A buffer is a small scale - to keep ($ 100 $ 1000) in your checking account to avoid overdrafts reasons. An emergency fund is a good balance held in a savings account to be help in the interest of the catastrophic situation such as loss of employment of trouble. They are different concepts; Your platform is not an emergency fund.

How can I track my spending habits?

Have you ever tried what you eat to lose weight by tracking everything? Sometimes, the results are surprising. You may not realize how many cookies you eat until you follow the data.

The budget is similar. You may not realize how much money you spend on coffee, restaurants or clothing, to follow the data.

Connect your eating habits in developing a clear idea of how many calories ingested, carbohydrates or fat grams daily. Also you track your spending habits, you can find out how much money you spend - it radically from the amount you think you might have been.

How long should I change my costs?

Many beginners spend between two weeks to a month to keep track of each transaction before creating a budget. Two to four weeks should, so that you can see enough information to their habits overnight.

After a budget, you need to keep track of your spending habits to see how "real" costs are aligned with the "ideal" you describe in your budget. This budget sheet can help you compare against their "ideal" your "real".

Help! I have trouble keeping track of everything.

The variety of payment methods today for your track expenses difficult. How can a person reasonably Track all kinds, credit card, debit card, check, direct debit and PayPal transaction?

Here are some tactics that you can try:

No. 1 :. Stop the agent, you have automatic electronic records of each credit card, debit card, check, direct debit and PayPal transaction. The only type of operations that are not automatically saved, is money.

If you buy the things with the money you save effort, manually save your cost. Instead, all you need to check electronic records one day a week - for example, every Saturday - and the entry of these files in a central location, such as a spreadsheet, a laptop, or one of these budget tables.

I have a responsibility, not significant, but: Some people spend more money when they slip out of plastic. You'll spend less when they have to of dollar bills, physical get rid of green. If you fall into this category, continue for things with money. No reason, in a situation where you have to pay more than likely set to spend otherwise.

That brings us to my next tactic ...

# 2: Try the envelope system at the beginning of each week a series of envelopes filled with money .. dedicate each to a specific category of expenses, and record the amount in each envelope. For example, the envelopes can be labeled "Lunch $ 25," Essence "$ 75" and "Target or Wal-Mart $ 40" Because you can not perfectly predict, especially in the beginning, all expenses, keep "several" also.

At the end of the week, should the residual amount in each envelope. Lunch on, for example, traces of $ 5 gasoline can, the envelope can have $ 12 left. In white envelope / Wal-Mart could have been "in the budget" - you can use up to $ 10 About "Miscellaneous" in order to cover the hole in the casing of your goal.

This is an easy way to track your spending. You will be able to see their consumption habits of large classes, without having to go through the hassle of the details of each transaction. You will also be able to provide for things in cash, motivate, spend less than you pay it when you slide a plastic card were.

Read more: Getting your costs by pursuing multiple accounts

Of course, if you are a detail-oriented person, then you can always try, the final battle ...

No. 3 :. Keep earns a small notebook and pen in your purse or pocket, where every transaction is connected. You can also click the e-Notebook on your smartphone.

The advantage of this? Harder on every effort you think. Be aware of your spending habits more, if you make every transaction the transaction.

The downside? This is a problem. It is easy to relax. It is easy to forget. And there is no way to retroactively collect a day or two, if the record of the expenses of your mind.