This Weeks Top 5 on Money and Credit

Jeremy at Generation X Finance has found a free online finance course and tells us about it in his post "Take a free personal finance course at the University of California Irvine online"

 

At Money $mart Life, read a post on "Everything you ever wanted to know about Quickbooks"

 

Read about 5 ways to get financial advice with social media on My New Choice

 

The Simple Dollar has a good post on Six Steps to Eliminate Non Credit Card Consumer Debt

 

Read up on "Credit Card Universal Default- Like Vultures on Fresh Roadkill" over at My Credit Group

 

Happy Reading!

Financial Dieting

In yesterdays post, "The B Word", I mentioned that there are lots of software programs to help you with a financial diet, more commonly known as budgeting.  Although Quickbooks and MS Money are good programs they can take a lot of time to set up.  Here are a couple of others that you might consider. (note: this is not a paid endorsement nor have these products been tested by the Colonel.)

 

Mvelopes

Mvelopes is based on the traditional envelope method of budgeting and includes automatic transaction retrieval (from credit cards accounts, etc.), online bill pay, net worth tracking, and anytime access.  Seems like a pretty cool program and it comes with a free trail period.  Subscription is spendy, $129.60 billed annually.

 

Moneydance

Offering traditional financial management, Moneydance also offers budget tracking, online bill payment, and investment tracking.  Free trial, purchase for $29.99 

 

PersonalBudgeting.com

This program is touted as simple and easy to use.  Track you checking, credit card and loan balances along with your monthly expenses.  Compare actual to budgeted expenses to see how well your sticking to your financial 'diet'.  Free to try, purchase online for $14.95.

 

PearBudget.com

Pear Budget is a FREE budgeting program written in MS Excel.  It can be used in almost any spreadsheet program like Excel, OpenOffice, etc.  Good program if you are interested only in budgeting.

 

YouNeedABudget.com

YNAB (you need a budget) used four simple rules of cash flow management.  Tracks budgeted spending in a MS Window environment.  Two versions, YNAB $19.95, YNAB Pro $39.95

 

My Budget Planner

A simple and straight forward budgeting spreadsheet for $19.00

 

Visit these sites if you're looking for help making and monitoring your budget.  If money is tight, or if you're really frugal, you don't NEED software to make and monitor a budget.  You can use the old standbys; paper, pencil and calculator.

The B Word

Many of us think of the 'B' word (Budget, what were you thinking?) much the same way that we do about dieting. We know that it would be good for us, but it's a pain to get started. Then, when we finally do get started, we don't stick with it very long.

A good diet will help you stay healthy. A good budget will help you stay financially healthy. In order to succeed, you need a success plan. This is what a budget can be for you; a financial success plan.

So, you think you're ready for a financial diet? If so, here's what you need to do to get started.

First you need to figure out how much money is coming in the door every month by adding up all of your take home pay. This is your income after taxes and any other deductions that are taken out of your paycheck by your employer. This amount is also known as your 'net pay'.

If you are paid weekly, multiply your take home pay by 52 and then divide by 12 to get your monthly income amount. If you're paid every other week, then multiply your take home pay by 26 and divide by 12.

Do not include any bonuses, gifts, occasional overtime, or any other infrequent source of income. Right now, you're interested in what regularly comes in the door every month.

Next, you need to determine your regular monthly expenses. For those expenses that you might pay only once or twice a year, break them down into monthly installments. For example, you might pay $400 twice a year for your car insurance. Take $800 and divide it by 12. Use $66 as your monthly car insurance expense.

For your housing expense, be sure to include your entire mortgage payment (principal, interest, tax and insurance).

Set aside an additional amount for your home maintenance allowance (assuming of course that you're not renting). This amount should equal about 1% of the purchase price of your home. If you paid $100,000 for your home, then you might consider setting aside $1000 per year, or $84.00 per month for this expense item.

You should also think about establishing an emergency fund. Advisers recommend saving 5% of your take home pay. So if you take home $3000 per month, you may want to set aside $150 per month in your emergency fund. Remember, don't touch your emergency fund unless it really is an emergency!

Now, compare your results. If your expenses are more than your take home pay, there's a problem. It's best to address this problem immediately and head on now; it's probably not going to go away on its own. What can you do about it?

Look where you can cut back Some of your expenses are fixed meaning that the amount doesn't change every week or month. Other expenses are discretionary, meaning that you are in control of how much is spent in these areas. Look hard at your discretionary spending first.

Then, invest some time thinking about your wants and needs. The discretionary items that you simply cannot go without are your needs. What's left are your wants. For example; do you need the 1000 channel cable package, or is this something that you just want because its nice to have? This wants list is where you'll start looking to make cuts in your discretionary spending.

There are many budgeting software packages available on the market. In a coming post, I'll name a few that you might be interested in looking at.

In summary, you need to first get a handle on where you are before you can decide on how to get where you want to go. These steps will help you identify your cash flow situation and where you are today financially.

Be sure to visit Blogging Away Debt who is hosting the first Carnival of Personal Finance in July for more posts like these!

Unbanked

Millions of people in the United States of America are 'unbanked'. Unbanked means that they do not use the traditional banking system in America. Instead, they use payday loan and check cashing companies. Why? Another case of financial illiteracy?

Some of the reasons why these 20 million people don't use traditional banking are mistrust, cultural and language barriers, and many misconceptions about the banking industry.

A vast majority of those that are unbanked are immigrants to this county who according to some estimates earn in the hundreds of billions of dollars annually. Many of these people come from countries where the banking systems are corrupt and depositors regularly lose their life savings.

Unfortunately for these people, the cost of using non-traditional banking in the United States is very high. Check cashing companies will charge between 2% and 5% of the face amount of the check, and payday lenders charge fees representative of interest rates of 100% or more.

U.S. banks recognize this market but so far haven't been able to change to accomodate it. For example, many banks require a hold of three to five days on checks presented for deposit. Many of these unbanked are living from paycheck to paycheck, and need the money now. They can't wait for the hold on the check to expire, so they're forced to use a check cashing company.

An estimated 10 million American households are "unbanked" or "underbanked" -- they do not have accounts at banks and other mainstream financial institutions. Unfortunately, as a result, these cash consumers pay excessive fees for basic financial services, are susceptible to high-cost predatory lenders, or have difficulties buying a home or otherwise acquiring assets.

So what is the answer? Both the NCUA and FDIC (federal credit union and bank regulators) actively promote reaching this market, but real progress is yet to come. If the root of this problem is a lack of trust in the banking system, is there anything that can be done to rebuild confidence?

Some companies are thinking outside the box, and are doing things to introduce the unbanked to more traditional banking. Watch this video about the "Revel Card".