Archive for September 2011

Are you the next Greece?

When we hear of Greece, images of beautiful beaches and islands come to  mind, if not all the great philosophers it gave the world. Unfortunately, as of late, hearing the word ‘Greece’ instantly brings images of people protesting in the streets, youth rioting in front of the parliament in Athens and other images of chaos.  The Greek debt problems have been so devastating that they are threatening the entire economy of the European Union and sending its shock-waves across the Atlantic, all the way to North America.


Personalizing Greece for you as an Individual

For an economy as small as Greece to be able to have such an impact on other global economies tells you the chaos the world is in.  But putting that macro-analysis of this whole issue on a side for now, let us focus on the micro version of it and how Greece’s economy and all its problems is a major warning to all of us as individuals.

How many times have we preached on this website about the important of budgeting, paying down your debt, saving and generally living within your means? A lot! In fact, it is not just this website. You hear it everywhere these days.  In his new republished book “The Wealthy Barber“, for example, author David Chilton stresses the need for these basic principles of finance for someone to be able to afford life or to make it to the next level and be wealthy.

In Greece’s example, the government has been operating on debt for years and they have finally run out of all money to the point where they could declare a default on their obligations at any moment. Europe has been called to bail their Greek cousins.  What went so wrong? lots of things, mainly the government and the people’s habits of operating beyond their means. I have lived in Greece and it is a lovely country with some lovely people. Greek people love to party and generally have fun. But so do most of humanity. I don’t know of anyone that will tell you “I hate fun.”  We all like to have fun, but at what expense? to have fun for 5 straight days and only work two days just doesn’t cut it.  Sooner or later you have to face the reality of your finances. You can’t expect to live a luxury life at the expense of the government forever.  That can only be possible in such places like Fantacyland or Dreamville.

North America-yes this includes Canada-should take Greece as a major wake-up call and get its act together.  Sooner than we may think, Greece’s debt issues may take its shadow across the Atlantic and blanket us here too.  But we do have time and can do something about it.  At least here in Canada.


How to protect from the Ghost of Greece?

Live within your means

First of all, and it is getting tiring saying this, it starts by living within your means and not beyond them. If you do live beyond your means, you may not notice the consequences immediately.  The fact that we don’t immediately feel the dangers of living beyond our means is one of the worst illusions of personal finance.  We think everything is OK until it is not and that is when it goes to hell in a basket. You have to recognize this: you don’t go from good to bad standing order immediately. In between, there usually is some calm before the storm. This calm is something to watch out for.


Save Money

If you don’t save your money it means you are either spending it all or paying some of it to erase your debt. Which also means that you are one paycheck away from disaster. Do yourself and your family a huge favor and put some money away from every pay for a rainy day. If you are turned off by the term ‘Rainy Day’, ok let us call it ‘major future investment’, be it a new car, a course, or even a mortgage on a new home.


Pay down your debt

To avoid being in the same situation that Greece is in, make sure your debt doesn’t keep piling. It is OK to have some debt but to let it pile on and on, then we’ll have a problem. You have to literally say to yourself “I have to stop my debt here and now” and act on that command! Paying down your debt will mean that you get to save all the interest that would otherwise go to a bank.


What have you learnt from Greece and what it got itself in? I hope a lot, if not, you could be the next Greece and that is not a good thing at the moment.

Family Budgeting for a Happier Life

Should a married couple have one family budget or should each do it on their own?

To begin with, it is best that we have a budget, period. As to the question of what is better, a combined or separate budgets, that is up for discussion.

Best way to Budget as a Family

Most families would actually have some sort of a combined budget, where the husband and wife agree on which items each will cover, how much will the two save etc. The idea is to sit down and talk, discuss what is coming in, who will pay for what, and how mush saving they need to make.

Going it alone without any discussions about the role that each will play is a recipe for disaster. ‘Financial issues’ is often cited as one of the major reasons why a lot of marriages end up failing and families splitting.  To be more specific, these couples often fail to discuss their situation and how they will budget as a family. The end result is disagreements over who will pay for what, what will they buy and what should wait etc. Another advantage to having a family budget is to act as a system of ‘checks and balances.’ In other words, if one family member wants to spend on something, they can’t just do it alone. They would have to discuss and agree on it with the other and come up with a decision. Of course, we are talking large purchases here.

Agreeing on a budget early in marriage is extremely important. In fact I would suggest couples sit down and discuss their budget even before they are married and living together.  It prepares you for what is to come and helps couples avoid any disappointments. Budgeting should depend on the income for each, what financial or debt obligations they already have and whether there is kids involved (yet).


How to Budget together?

One ideal way to budget for a family is to create a shared bank account-in addition to the individual accounts that each will have-where each will contribute a certain amount or percentage from every paycheck.  Using that account, you will then decide how you will pay for the various things, including shopping, mortgage, bills, kids expenses, saving for the future etc.

One reason why it is a good idea to create a shared bank account is to help couples feel like they are indeed working together for one common family purpose, as opposed to each working on their own. But like I mentioned already, that doesn’t negate the need for individual bank accounts for each because you still have to have a bank account where you can keep your money for any personal spending etc.


Budgeting for Kids in the Family

Although we will cover the role of children in a family budget in the future, for now, it is just important to remember that kids should have their own category in any budget. Whether it is for their own monthly spending, future education savings, parents should allocate something-however modest-to their kids.  Just because they are minor and don’t have a lot of expenses doesn’t mean you don’t account for them. Quiet the contrary actually. If you budget for them now, they will thank you later when they are ready to peruse a higher education.


If you are married with a family and don’t yet have a budget, get going right away. Create your first budget to ensure that you live a happier and more financially-secure life.

Back to school Budgeting for Students

We are one day away from a new school year and it is time to do away with summer habits and rituals. It is time to focus on school and studying.

School nowadays, especially colleges and universities, cost a fortune and that requires a budgeting plan by students to survive it financially.


Budgeting and Working while in School

If you were lucky enough to have worked in the summer and saved some money, good for you. Now be smart with it and budget it, accounting for such things as books, meals, residence and other items that may apply to your situation.  Assuming that you are doing both a fall and winter semester, then you know you will be in school from September till about early April. With that in mind, you can budget the money you saved during the summer for these 7 or 8 months of school. Unless you have saved lots and lots of money that is more than enough to last you through the entire school year, it doesn’t hurt to find a PT job that can provide you with some more needed cash.

If you didn’t get a chance to work or save enough money for school, you will will likely need to find a PT job that can help you with your school as well as personal expenses.  It is very important that you find out your school schedule first before you commit to any new job.  Furthermore, make sure your PT job is no more than 20 hours per week (or 25 if you include the weekends) otherwise you will be consumed and too tired with working and have little time or energy to study.


Frugality and Saving

Students often have limited budgets and income and the little money they have is barely enough for the essentials such as books, food, residence etc.  Therefore, students should treat every penny as if it is the last one and not spend as if they have no school or have an infinite supply of money coming in.  While making the transition from the summer vacation to the new school year, it may take some time for students to forget old habits and start saving.  Since you are only working part time now-or not even working at all-you can no longer continue your weekly mall shopping spree or throw money on clubbing and drinking every weekend. While these things can still be enjoyed, you should spend less on them and much less frequently.

Although it is pretty common sense, there is lots of studies and articles that clearly show that those who don’t have to work while studying do better-or a lot better-than those who have to study and work at the same time. Lately, we have been seeing some students who are working not just one, but two, even three PT jobs while attending school! This is absolutely absurd. Even if it is a few hours per week for each, still, it is too much of a distraction and lost hours that would otherwise be spent on studying and other on-campus related activities.  If possible, limit yourself to one job, that provides you with 15-20 hours per week, rather than doing two jobs with 10 hours each. This way you have to deal with one work schedule, one boss, one work location, rather than having to deal with multiple ones of each.

I believe that the reason a lot of students can’t continue their higher education, or drop out completely, is due to the little amount of time they spend studying, because they are busy working. In other words, their full time studies is becoming part time while their supposed part time job is taking on a full time basis. Students need to be wary of this and not let it impact their school.

School is a big investment that will pay you off for the rest of your life. While working for some extra needed cash is OK, be sure to only work part time and leave as much time for school work and activities as you possibly can.


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