What is & quot; paid first & quot; Media?

One of the most important principles of personal finance is "pay yourself first."

However, many people find that the sentence is confusing. If you are independent, you can not as someone who "paid" to conceive themselves. You get paid by your boss. Or?

What do you mean with the first payment and how they relate to the households?

What it means

"Pay yourself first" not on how to obtain earn money, as opposed to what the sentence means. It refers to the way in order to save money.

The term means that you are to pay their own savings accounts, and the first. For example:

Why "first"?

Most people say they can not save enough money for retirement enough, or invest better, or save an emergency fund large, since they do not, save the money for more.

That's why personal financial advice says you should pay these bills first. Treat it as a law. Approach the same as you treat your phone bill or electricity bill.

In fact, the priority over all other accounts. To the "bill" the most important that you save to pay. The payment of the invoice first.

For what? Since this increases the likelihood that you will actually save a significant amount. Converts will save you money from a "desire" in need. Your retirement and emergency funds are paid to a bill each month.

But I can not keep up!

Many people say that they can not meet their current accounts. If you pay first, literally running them to come before the rounds of the money, they say.

Most experts responded that people should undertake in any event to pay in the first place. Once you make the commitment, they need a way to pay your bills to find others. You may need to take a second job. It could mean cutting some bills, like cable TV. Probably a combination of both earn more and spend less necessary.

But here's the problem: most people are not enough to have a second job, take second-hand clothes and cut your cable TV for the sake of commissioning an additional $ 400 a month to motivate your account retirement. However, they are motivated to do so if they are in danger, are in default on their bills and enough of your heat.

"Pay yourself first", in other words, is a personal financial advice that beats in the people who make and why to save money heart.

Analogy

Why do many experts recommend exercising first thing in the morning, at the beginning of each day? There is a physiological reason. The human body does not have physical capacity to work by 6 clock necessarily in the high

Instead, it is a psychological reason. Many people say they have no time to exercise. And in fact, if a person goes to work and then later try to exercise often skip the gym. The need to stay up late at work, taking a child to soccer practice, running errands, or do a number of other tasks.

Therefore, experts advise people often pay attention to first thing in the morning to practice and then make your day.

"Pay yourself first", which works on the same concept. When people try to pay for everything else, and then save it, often find that they left nothing more. But if people save first, then to pay the bills, to force yourself to make ends meet.

Pension plan based on lifestyle, no ...

There is a golden rule that you should budget a certain percentage of their income in retirement says. Many experts say that sets you apart from 10 to 15 percent of their income adjusted for their golden years.

But it is a theory of competition, should you budget for retirement based on the lifestyle you plan, no income you are currently earning, enjoy.

To illustrate this idea, represent four possible pairs.

Adam and Alison are retired. None of them generate income. You will receive money from their pensions, their 401 (k) withdrawals and Social Security. Their houses and cars are fully paid and are debt free. You just live. Most nights we eat dinner at home and take advantage of low-cost activities such as gardening, knitting, playing with his grandchildren and the dog for a walk.

Bob and Barb are also eliminated. None of them generate income, and to get as Adam and Alison the money from their pensions and 401 (k). Their houses and cars are also reimbursed and are debt free. However, living in great retirement. You eat dinner at the restaurant. You like sailing, golf and tennis. You own a second home near the beach, and traveling abroad.

Carl and Cathy retired from his day job, but two of them still work. They did not have the income - they have enough money to live comfortably on the basis of its economy - but they want to work. It gives them satisfaction and purpose, and if they do not work, they tend to be bored and depressed. Carl is going to write a novel while Cathy has an online business. Receive additional income from your job, supplement their retirement, but are so busy working - to enjoy - not to spend the time. Take more money than they know how to use.

Derek and Debbie set up passive income streams when they were younger. Now home rental income, royalties, dividends and interest has enough to comfortably retire. However, retirement is responsible for the management of these sources of income. They are often conducted by teams of accountants, property managers and repair hands to keep their investments afloat.

What is the common feature of these four stories? Ideal Retirement everyone is different.

Some people are content to live a simple, quiet life. Some want to enjoy travel in the world, expensive hobby, enjoy good wine, renovate your house and try new activities.

Some people are forced to work because they can not afford to pay their bills, but others choose to work for the joy and satisfaction, even if they have an income.

Traditional formula prescribed pension advice: save 10 percent or 12 percent or 15 percent of current income for retirement.

But this rule is general advice not take into account the type of retirement you hope to have. Adam and Alison are pleased to live simply. You are cooking with your own meals, your own house clean and happy playing with his grandchildren.

If you live as a couple, you do not necessarily need to budget 15 percent of their after-tax income in retirement, unless you start later in life saving, to want to leave a legacy to their children, or wish that a solid plug in an emergency.

A partner like Bob and Barb, on the other hand want to play the excitement of the trip to Italy, Golf, take art classes and travel to a seaside villa. If you want to live like this you can pair up to budget for more than 15 percent have retired.

And if passive income streams, as Derek and Debbie is configured, you may not need the maximum contribution 401k per year.

What is another golden rule?

Calculate how much you want to spend a year in retirement. Multiply that by 25, which is the amount that should have saved in your retirement account.

In other words, from your savings goal for retirement costs, not your income.

(Why multiplied by 25? Read the explanation.)

Remember: this is only a general rule. Personal Finance is - well - the staff and the amount needed in retirement will depend on a number of factors, including your debt ratio, your family, your health, your life expectancy, tax obligations, needs safely, and other considerations.

Fun Ways to save money - Games and Contests!

Saving money should not be an obstacle. There are many fun ways to save money through the development of games and challenges surrounding their savings goals.

Check out these ways to save fun:

# 1: Saving Award

Call someone who budgetary discipline your sister, your best friend, your rival is high school sports. Encourage them to a record close: to see competition to see who can save more money in the next month or the next six months, wins.

You can negotiate how to define, as measured by the number of gross "save more." - To the rescue of most money attributed? Or is it, as a percentage of after-tax income? Or it could be measured by each of its spending cuts, in terms of the amount of each of you have spent the past year?

No matter how you choose a cost-saving measure, it is important that the winner is not an expensive price. You can arrange for the winner to celebrate the joy of taking. Or you may decide that the loser has to carry the car the winner a service for the winner as washing. If you decide that the price should a deposit, which could be as simple as the winner is a home cooked meal are obtained.

# 2: A competition of Net Worth

Otherwise, you can your competition to see who can grow the total assets of you about life in the coming months challenge. So the focus is on increasing your savings, not to cut their bills. Your thinking away from cost reduction (a scarcity mentality) and for growth and progress (an over abundance mentality).

There are two ways to call an "equity" challenge to prescribe a period or by creating a "line (you can make the most of your bank account within the next six months?)" (Those first a net worth of $ 100,000 ) to develop?

# 3: Making a play

Get the whole family involved and create a game to see who can find the most creative ways to save money. Ask each person to keep track of the innovative ways in which some money saved or reused to hold items.

Your child may begin to wash and reuse Ziploc bags. His wife can replace all incandescent lamps with compact fluorescent lamps. Your child can begin to repair their own clothes or planting an herb garden.

Encourage creativity. Hold a family meeting once a week to give a small gift: to save the weirdest way price, the biggest savings bang-for-your-buck prices, "Oh, why do I think?" Award.

# 4: Compete with your partner

You know the competition, which is proposed in Step 1? Try this challenge have with your spouse. This time you can ride the winning auction!

# 5: A thermometer savings

Draw a picture of a giant thermometer. Enter your savings goal at the top. Baste somewhere that the whole house can be seen - perhaps in the refrigerator or in the lounge.

Each week, the thermometer color depending on how much you saved - in the same way that financing or sports team colors of a thermometer to show how the school approaches its collection targets funds.

The tip of the thermometer should be a certain price that everyone wants in your family. This could be as cheap as part of popcorn or a trip to the zoo (especially if you have small children), or as crazy as a Massage Chair $ 400 (which will probably mean an adult in the household.)

Remember, the price thermometer must not fill savings target over your worries. You can choose to start a savings goal of $ 1,000 to the family but only spend $ 200 price.

Reader Story: How I Anza Superior rooms (mostly) ...

The following is the true story of how a budget About.com his way through a substantially free of college players debt. Your name and identifying information have been changed at his request, but the information in the story is true.

Lucas is not from a family that has come a lot of money. His father moved between paid employment and periods of low unemployment. His mother wrote in a trade school when Lucas was in elementary school so that they learn a marketable skill. His work provided enough money to pay for the basics, but not much more. Certainly there was money for college.

Lucas knew he two options: You can students can participate loan, or trying to pay money to get to school. He chose the second path.

(Read more: What is to borrow a "reasonable" amount of money for college)

Most of his classmates were among minimum wage jobs in fast food restaurants, movie theaters and retail stores. Luke knew that deserve no way I could be enough to cover the cost of tuition and textbooks to work these concerts. I needed to earn more.

He began to work weekends and in the summer for a construction company when I was in high school. He learned at work, basic skills such as carpentry and drywall design. Over time he had discovered a talent for laying tile, and began to take on "side jobs" additional mosaic afternoon after school.

By the time he graduated from high school, Lucas had bought a car in cash, and had saved enough to pay tuition for a semester at a state school. But he knew that he continue to earn more.

He started a landscaping business in the summer between high school and the first semester of college. He spent part of his money on tools. He put a handful of employees and began advertising in the neighborhood. He spent to organize the day crew plans, monitoring of the work, and the acquisition of new jobs.

In late summer, he recovered the cost of the tools and the cost of tuition, books and other incidental expenses for one year.

However, he has not enough money to move into the bedroom, he continued, with his mother at home and go to college. He has that decision not to take on the road when: the cost of driving one hour tour calculated every day (fuel, vehicle wear) and compared with the cost of living near campus. The calculation is made clear that life at home was the most economical option.

Lucas continued to live at home for the four years of college. The landscaping crew spent every summer. The first was discovered, was the poorest; after their regular customers a degree of stability for the company have given.

He ended up taking a few small loans to students during their junior and senior years, as enrollment is about the amount that they could gain increased. But these loans were small - only a few thousand - and pay a few months of graduation.

What were the main factors that contributed to pay for college Luc?

• He attended the public schools in the state.
• He worked a number of jobs "qualified" - that make up the design, drywall, tile and landscaping, all of which require a minimum level of skills and knowledge.
• He thought of creative ways to earn more.
• When he began to earn a lot of money, not spend it on frivolous things like going out on weekends or accessories for your car. He saved his tuition fees.
• He lived frugally. They live at home, to avoid the cost of rent and utilities succeeded.

Read more stories from real life budget About.com Readers:

Here is the true story of how David and Lauren Weliver is a thirty-something couple living in Maine, the budget for the risk of a child, including a $ 1,400 monthly cost of childcare invoice amazing.

Read the story of Travis, married in Wisconsin, who lives on a tight budget, but wanted to take a family vacation in a theme park of his wife and his children. Cut the little "extras" in your household, so that you can afford your dream vacation.

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).

More tuition: the cost of college

Many families find it difficult to estimate the cost of college, especially for the first child that goes to higher education. Application, of course, is the big-ticket items. But what other family expenses can I expect? How much budget should be for college? And what are the ways that you are reducing costs?

Housing

About tuition, find a place to live is the most expensive a burden on the budget of the University. Although some people forego these costs, living at home with their parents during the college years, most people have to find a place to live, it is because their parents live too far from school or because they want to learn to adulthood is and independence away from home.

Student residences are more expensive than the neighboring apartments in the rule, partly because dormitories are at a certain level and partly because college dorms are usually expensive diet. Some colleges, you can do without this food; not others.

Every college has a "standard" separated government for many years most students live on campus. Many colleges require freshmen to live on campus unless they have family at a distance from the campus. Some universities require students to live all four years on campus, while others encourage students to move beyond the first year off campus.

Students, which can reduce the cost of housing, sharing an apartment or house with roommates and off campus. Lives alone, is the most expensive option, since the overhead is larger: support a single tenant, the cost of a kitchen, living room, roof and utilities. If you live with a roommate, the additional costs for the common areas, the bill higher current is cut in half. Cost adding a third or fourth roommate other chops.

Transport

. Some college towns like Boulder, Colorado, are pedestrian: it is easy to walk, bike or take the bus, where you should go. But other schools, Metropolitan State College of Denver and the University of Cincinnati, are not consistent in pedestrian zones. The students will have difficulty navigating the area, without having a car, and most of the jobs and internships will be located in areas that need the student to arrive.

The cost of a car - both purchase, fuel and maintenance - is the second largest budget buster years of college.

The Voyage of the students at home during the holidays, such as Thanksgiving and Christmas, you can also add up to hundreds of dollars, especially if these trips require extensive travel or flights.

More information on the budget for a car and discover how to avoid car loans, so a car payment for you.

Technology

Students must be at the forefront of technology: at least, they will need a cell phone or a smartphone and a laptop. If you study certain subjects or graphics programming, such as film, art and multimedia design, is almost certainly need an apple, which is more expensive than a PC.

Students can save money by not getting a printer to save; Most universities have computer labs that provide the pressure. Some can print for free the students, while others have a small fee.

Students can also save money by. Either a laptop or desktop computer through a tablet In general, there is no reason all three.

Furniture

Everyone thinks about the cost of rent, but many forget the cost for all the items that go in your home: kitchen towels, sponges, dishwashing liquid, forks, can openers, sheets, pillows, blankets, towels, clothes hanger in wardrobe, file folders, office . They are worldly, small objects necessary for modern life, while each item is individually cheap, this can add up quickly.

Browse thrift stores and to find as much as possible products used Craigslist. Give up things that are not necessary: no need to frame for a bed to buy, for example, if they are easily a mattress on the floor. And to be creative: when I was in college, I used a lot of empty milk crates on top of each to my bookshelf.

How budget for a car if you & # 039; Again teenager

Even in adulthood - can buy a car a difficult thing to balance. But if you are a teenager, it is even more difficult.

They work a minimum wage job - part time while you are in school - and you know that a car costing thousands (plus insurance, gas and other car expenses). How can you budget for such a large expense?

Here are some tips:

Create a budget

First things first: you will never withdraw able to keep their savings for a car (or anything else in life), if you have a budget in place. Keeping track of your income and expenses can seem a little boring, but you know exactly where your money is going each month, especially now, when you have not much of it.

Set a spreadsheet program or budget allows you to record the amount of money you make and where it goes. (Some applications do this automatically for you if your credit card and bank details.) Account for all by the candy bars 99 cents, which led to the grocery store.

Then configure the games, how much you spend per month for each zone. Large areas should be included, food, entertainment and of course your car. (More information on the amount set aside for a moment.) Now you see where it goes, you can keep your spending on track and provide measures to ensure that their goals meet categories.

Thoughts economical

As frugal is a habit that is to serve you well for the rest of your life, and save for a car is a good reason to start.

Another look at the budget that you have created, and try ways to reduce further. Instead of going to the mall or to the movies every weekend, you can less expensive ways to have fun, as can be found with friends for a movie night or position of a local park or on the beach regularly. When you meet for coffee, whipped cream imagination creating $ 4 each time to get you, or could do with a coffee at home and still have the same conversation with your friends?

You do not have much money coming in that time to do so, what you put as much as possible.

Buy Used

Besides the fact that the new cars are much more expensive, it may be difficult to finance a new car as a teenager, unless their parents sign for them together. (This is an option, but you're still paying more each month if you buy used.)

You are much better off in cash for a car. And that means that you have a used car ... probably buy a very used car.

Note that many people have stories less-than imagination "first car", and there's a reason for that. In this phase of your life, you do not really need a lot of options, such as a large sound system, leather seats and a rearview camera. You just need something safe and reliable that you get from point A to point B.

Browse the classified ads or search Craigslist to get an idea of how much car costs also used safely get (good condition 16 Camry with 170,000 miles is only $ 1500 by Kelley Blue Book) still works. Plan to save for this goal.

You're friends do not care that your "new" car has some miles on the clock, you had just won impressed that you have your own set of wheels.

In search of more lucrative work

One last tip: It is not necessary to take a minimum wage job, even if you are still a teenager. You can make your job at minimum wage as a backup to keep stable source of regular income. But in his spare time, looking for better paying gigs.

Some ideas:

• Tutors students in middle school math, science, English or a foreign language
• Keep children - many parents pay more than the minimum wage, especially if you take care of more children
• Mowing the lawn, leaves, shoveling snow
• Learn some carpentry or repair of basic skills and a job with a construction crew

Just because you is not a teenager, you have to earn only $ 7 or $ 8 per hour. If you want to increase your income by 12 - $ 15 an hour and save you more than you deserve, you will be on the right way to pay for a car in the shortest possible time.