Family Member with Finances

Helping a Family Member with Finances: 6 Rules to Follow

Helping a family member with finances can lead to disaster. Why? Most people don’t know how to approach a family about money for fear of losing this person’s love. It’s a situation I’ve experienced personally. After giving a relative several loans and never getting paid back, I reacted with anger. Although this person should have paid me back, my approach was completely wrong. It took years for our relationship to heal. The event taught me a good lesson and a few rules to follow anytime you want to help a relative with finances.

Rule #1 – Only loan money to a family member that you an afford to lose.

Helping a family member with his finances often starts with a loan. It’s a loan that bails him out of a financial mess. However, people who are struggling with money often can’t pay it back. So, it’s best only to loan money to a family member if you can afford to lose it. It will be less risky and help you avoid a lot of hard feelings.

Rule #2 – Talk about money to a family member in a non-threatening environment.

If you want to help a family member with his finances, do it in a non-threading environment. So Thanksgiving dinner is not a great time to bring up the fact that your kid brother doesn’t know how to budget. Instead, take him out to dinner (one-on-one) and explain how much you love him and are concerned about his future. Then, talk about the subject of money – preferably after you’ve eaten your meals.

Rule #3 – Ask your family member if it is all right to help him with his finances.

No matter how strongly you feel about helping your family member with his finances, only do it if he gives you the green light. Otherwise, he will feel bullied or belittled, especially if you are an older sibling. So offer to help him and respect whatever answer he gives you.

Rule #4 – Teach your family member about money by admitting your own mistakes.

Teach your family member how to manage money. Your lesson should start with a few examples of how you blew it financially. Use these situations to help your family member feel more comfortable and less judged about his current financial situation. Then, get down to basics. Talk about budgeting, investing and living within one’s means.

Rule #5 – Walk Your family member through the process of resolving his financial crisis.

One of the most supportive things you can do with a family member struggling with anything is to walk with him through it. This means that you will have to actively assist your family member in getting out of his current financial situation. You may have to call bill collectors, go through old bills, write out a budget or boost him up while he does these things. Just be sure to only do the things that your family member is comfortable with you doing and to ask in advance.

Rule #6 – Don’t throw your assistance back in your family member’s face after it’s over.

The quickest way to ruin a family relationship is to throw everything you’ve ever done for a sibling, child, mother or father back in his or her face. Besides making you sound like a jerk, it makes the person feel small. Remember, even if you gave good advice, the family member took it and did the work. So give them the respect of “silence.” Let your family member brag about how you helped him out of a financial jam.

Follow these six rules and you’ll be able to help a family member with finances without ruining your relationship. Your relative will get much needed help and you will get a chance to be a good relative. It is a win-win situation.

Microfinance Loans

Help in a Global Scale – Microfinance Loans!

Christmas is at the corner and once again we remember our social responsibility to help ones who need help. Although this should be our habit, but to be perfectly honest most of us (including myself) get lost into fast pace of life (and work) and sometimes even forget the whole purpose of our life.

The last course that I took in my MBA was about Investment. I think out of all different topics we went through the most interesting one was Microfinance.

The term microfinance covers the provision of financial services as a whole to the poor. This includes microcredit, microinsurances and savings too. The best example of Microfinance has been given by Nobel Prize Laureate Muhammad Yunus in Bangladesh.

What is now Grameen bank started with an experiment by Prof. Yunus in 1976 to lend his own money to the poor villagers of Jobra and turned small entrepreneurs. From such a small beginning the bank has grown as an institution serving 7.4 million borrowers. The first question that came up was about the insurance of these loans and the rate of default. We were all amazed that only a 2% of loans end up in default! Microfinance is an important engine for economic development. Through micro credit we can empower entrepreneurs in emerging countries to redefine their economies and fuel economic growth.

To our surprise, we learnt that the concept is so developed that there are some Investment Funds purely based on microfinance. In the other word, investors can buy units (or shares) of these investment instruments to invest in poor economies to satisfy their need of social responsibility and as well, make descent return. ResponsAbility is one of many that is ran by Credit Suiss. Some of these microfinance funds has outperformed the market indices.

A little bit of “Internet” gradient into the concept can make a tasty recipe for individuals who follow investment, economy and entrepreneurship. Kiva has provided a platform where individual investors can (in a non-for-profit way) lend microcapital as low as $25 to entrepreneurs in developing countries. Microfinance Institutes (MFI) qualify the candidates, validate the case/project and bridge between the microfinance-investors (financier) and the receiver of the fund. MFI is the local organization on ground in the respective developing country which facilitate the lending and collecting of the loan repayments. Through you can build your team and promote this global initiation. You can search for projects in a specific country, a sector or even search for your target entrepreneur based on gender.

What are you waiting for? Let’s finance a project for as little as $25 today and help poor people build their economy and help their family.

Adolescent Banking Tips

Adolescent Banking Tips

The banking practices of a six-year old are quite simple. Finding quarters on the sidewalk equals hoarding quarters in a pillow case, an old tuna jar, or the bathroom drawer. The banking practices of a fifty-year old, though considerably more complex, are almost as well defined. For the astute researcher, there is a myriad of information about IRAs, 401(k)s, retirement plans, social security planning, home equity, low-risk investment, etc. However, adolescents traverse a tricky field; they don’t have $10,000 to invest in blue-chip equities, but they have considerably more than eleven nickels they pocketed from their older sister. With enough information, however, an adolescent is more than capable of creating an action-oriented financial plan that does more than keep the nickels and dimes safe – it becomes an introduction to the more complex but ultimately more rewarding world of adult finance.

Don’t Be a Lazy Bum.

A balance should be struck between sweat-shop labor and habitual laziness, where inactivity is tempered only by slurping soda or switching channels. Adolescence is simply the best opportunity for maturing children to learn responsibility, finances and time management. After adolescence, a job becomes a necessarily lifeline. It’s no longer of question of funds for parties, movies, or treats – it’s a choice between housing and homelessness. This pressure is not present for an adolescent. Life lessons can be learned without the drains of financial needs. Most importantly, part-time employment teaches responsibility and personal management, as well as imparting self-esteem. Young adults learn to contribute to society, while making personal gains.

Which jobs are best for teenagers? Be creative – sadly, many teenage jobs require no intellect, no enthusiasm and no talent. However, there are several welcome opportunities encouraging independence and entrepreneurship. For girls, try baby-sitting. For guys, try lawn-care and home maintenance. Fan the creative flame – if the teenager is an artist or a performer, transform that artistic energy into a cash-making enterprise. Don’t be a lazy bum – engage, learn, and grow.

My Sock Is Too Small

It’s a happy day when the hard-gained sums of cash and dollar bills overflow the sock bank. This is the great transition from childhood to adolescence; now, what to do with all that money? Banks are the saviors of overfilled socks, coin jars, and other assorted storage containers. This is for two reasons: first, they provide monetary security. With very exceptions, banks are the safest places to keep your money. With the ever-flowing international river of credit, assorted contracts, and incredible quantity of money floating around, the days of banks suddenly “going under” are long-gone. With that said, some banks are better than others. Choose institutions that have been around for a while and also review customer satisfaction. In addition, banks will generally specialize in certain areas – cash loans, equities, real estate investment, etc. Find a bank that specializes in a reliable field. Most importantly, choose one with lots of money. Then select the best type of account. For individuals with less than ten thousand dollars, the practical options are limited. First, there is a basic savings account. This, in terms of investment, is nearly worthless. Rarely even matching inflation rates, savings accounts will rarely breach 2% annual interest. They are a proper choice for a mere introduction to the banking system, but look for ways to improve your money management. Second, check out CDs (Certificate of Deposits). Although not the choice if you plan on withdrawing funds often (a pre-mature withdrawal typically entails loss of all interest gained over a specified period), they can be a great way to turn compound interest to your advantage. For many teens, who want easy access to cash but also want to be able to make money through interest, consider a dynamic duo: a savings account (or a checking account) and a three to six month CD. Third, for more aspiring (a.k.a. richer) adolescents, consider instituting an IRA (Individual Retirement Account) or even an investment portfolio – although, if you’re under eighteen, parents will set to set up an overseer account. There are several programs set designed to specifically address equity or bond investment for teens with low amounts of cash but high amounts of curiosity.

Save Smart, Live Happy

Living frugally does not mean going with wants or desires. In fact, in the long run, saving smart allows you to purchase what you really want. A Snickers bar may look quite delectable at ten o’clock at night, but a bass guitar looks fantastic for years. Financial management doesn’t simply mean how to earn money; it also entails how to save and spend money. For many teens, especially pre-teens and young adolescents, these lessons may be new and unfamiliar. Parental supervision in these instances is not inappropriate interference but necessary direction.

So what are the key methods of saving smart and living happy? Take time and consider every purchase. A good rule of thumb is don’t buy what you hadn’t planned to buy. When evaluating a purchase, consider its long-term importance and enjoyment. A $10 football can give much more enjoyment than $10 worth of donuts and bagels. Prioritize: what is needed, what is wanted, and what is really wanted? And don’t be stingy – treat yourself occasionally to an exciting movie, tasty pizza, or eye-turning pair of jeans. The secret to financial happiness is simple: save lots, prioritize, spend little.

Adolescent banking and finance doesn’t have to be confusing. When pursued in a proper manner, it is well worth the time and effort. The teenage years are a phenomenal opportunity to develop character, financial management, and a sizeable personal piggy bank. It is time to put those quarters – and the sock – to some good use.

Arbitrage in the Real World

Arbitrage in the Real World

When getting into the investment game, you might hear about arbitrage. It’s a fancy word that basically means making a profit without any risk. Well you may ask yourself how this can happen, and of course how you can get in on it. Sadly it doesn’t occur very often in the market, but it can and does occur. To better understand why we will look at areal world example and then translate that into the world of finance.

If you were to go to a flea market and see a Mickey Mantle rookie card selling for $5, you may quickly realize that its worth more elsewhere. The simple idea would be to buy it and go sell it later. This isn’t really arbitrage because you would then have risked your $5 in hopes of earning more. In this situation you would need to find a buyer on the other side of the flea market who wants to purchase the card from you for $50, take their money and use it to buy the card and bring it back to them. This way your money was never at risk, and you still made an incredible profit. It may seem a little dishonest, but in all reality the customer you sold to wanted to pay $50 for the card, and the person you bought it from wanted $5 for it, so everyone got what they wanted and you were simply able to broker a deal with some nice gain for yourself.

These situations may be few and far between, but in the world of finance they can be found. In this age of technological advancement it becomes harder and harder since more information is available to more and more people. Arbitrage is based on that difference in available information, you are essentially earning by knowing more than the other two parties involved.

One place where this still occurs in finance is in monetary exchange rates. Sometimes when these exchange rates change they don’t all change at the same time allowing for some arbitrage until they catch up to each other. For example if the exchange rates are all even between the US dollar the Euro and The Canadian Dollar, lets say 1=1=1 and then the rate changes between the US Dollar and The Euro, lets say $1.50 to One Euro the Canadian exchange rates between the two, before it catches up to the new rate would create an ideal method for arbitrage since it would still be 1=1=1. You could essentially, by exchanging dollars into Canadian dollars then into Euros still get the old rate of return and get profit when you convert those Euros into dollars using the new rate of 1 to 1.5. No risk and great return, the perfect example of arbitrage.

Refinance a Car Loan

How Can I Refinance a Car Loan?

Vehicle owners from past generations had to rely on industry professionals and published books with regards to refinancing. Although, today’s car owner can seek out refinancing and find an abundance of helpful facts regarding the various types of loans and refinancing options available online. Vehicle owners can also use the net to access calculators which perform the involved equations you previously had to leave up to the trained professionals. These same calculations which may have taken a considerable period of time to conclude and right are now solved within a fraction of a second.

Selecting a Reputable Lender

Vehicle owners who’re doing most of their refinancing investigation and searches online should carefully consider the lender they choose. This is important because whether a lender is found online or offline, care should be taken to make sure the lender is respectable. The best way to perform this is to stick with a better established lender who comes highly recommended by friends and family members. This doesn’t signify new lenders and smaller lenders are not respectable but there is importantly less risk engaged in choosing a founded lender than there is in picking out a new lender. Make sure you validate that the application you compete online is secure. OpenRoad Lending is a new player in the refinance market but has an extensive background in auto finance and data security.

Vehicle owners who are investigating their refinancing options online may find the web site to be a very valuable resource. This site offers articles and calculators which the vehicle owner can use to gain the knowledge they require to make an informed decision. The articles on the internet site are written in clear and concise language which is easy to comprehend and the loan calculator is extremely user genial and allows the borrower to enter in a few variables to acquire the desired results.

Another great feature of this site is the inclusion of a link which provides access to obtaining a free of charge credit status. This is done to safeguard homeowners from identity theft or other acts of fraud. This is significant because vehicle owners are likely to realize the terms of their refinance will rely largely on their credit rating. Vehicle Owners who have good credit will likely be offered favorable rates and terms while those with not up to perfect credit will not be offered favorable rates and terms.

All the same, the most significant feature of this site is the skills to obtain a loan decision rapidly and you can complete the refinance process in minutes. The information that is requested is basic in nature and is information you will have readily available. Once this application is submitted, the loan decision is received virtually instantly.


Keep Your Wallet Healthy

Keep Your Wallet Healthy

Go to the Library

If you haven’t been to your local library lately, you are missing out. Although libraries are a great place to save money on books, card holders can also take advantage of free internet usage, DVDS, and CD’s. You may find that the selection is not always current, but why not try something new. Check out a movie you may not have seen in years or bring home music of a band you haven’t heard of. Perhaps you find something you had no idea you would enjoy, without spending much money. Also look through the events calendar your library offers, many plan great activity nights for children, which keeps the kids entertained without emptying your wallet.

Do Not Post-pone Car Maintenance

Waiting to change the oil in your vehicle or replacing tires can end up costing you much more money in the future. If you feel that this is not in your budget for the month, look for coupons to local car repair shops, you may find that these small repairs can be found for a very reasonable price. If you regularly give your business to the same repairman, ask if he can offer you a discount for your patronage.

Go Generic

This is simple advice that is easy to try. The next time you are at your local grocery store, reach for the generic brand. Not only will you be saving yourself some money, you may find that the product tastes the same. For example, one can usually spend four to five dollars on a box of cereal, while generic brands can be found for three dollars or less.

Save Your Change

Bank of America now offers their Keep the Change service to customers, which simply rounds up the amount of your purchase to the next dollar and places the extra change in a savings account. If you prefer to stay with your current bank, this is something you can do yourself. Simply pay for your purchases with even dollar amounts and set the change aside. Another great element to this tip is that you are using cash instead of a debit or credit card. Research has shown that most people will spend less money than they would if they were using plastic, simply because you can physically see the money you are spending. It makes sense and helps your finances as well.

Cash in on Unused Items

Set aside a day where you can go through your closets and basements and find the items that you no longer need or use. The key here is to be honest with yourself, if you have clothes that still have tags or a gift you haven’t taken out of the package, it must go. Also, there are many options available to give your unwanted possessions a new home. If you think that your stuff is worth some money, put your items on Craigslist or EBay. If you would rather box up what you have found and give it away, find out what the drop off times are for your local Goodwill or Salvation Army.

Entertain Yourself

We all know that going to the movies and other entertainment can become costly, so reinvent your weekend. Schedule a game night with friends and family, you may find that this can be more entertaining than going out. If you want to save money on games, invent your own words to draw for a Pictionary-like game of your own or give charades a try. If games are not your forte, rent a movie instead. Now, with companies such as Red Box and Netflix, watching movies with friends is cheaper than ever. Also, if you have children at home, you are saving money on babysitting costs as well. Perhaps music is your passion, check out your local music scene. You may find that local bars and venues will offer very cheap or free live music nights, and who knows, maybe you will find your next favorite band.

Brown Bags Are In

Bring your own lunch to work. Not only will you find yourself saving money, but eating healthier as well. Additionally, bringing your own lunch to work is a great way to use your leftovers. Also, if you are looking to put some extra money aside to pay off debt or plan a vacation, take the money you would have spent on your meal that day and put it aside. You will be quite surprised how fast that money adds up and much more aware of all the money you spend when you do eat out.

Do Your Own Taxes

I know, it sounds scary, but give it a try. With some many websites offering free e-filing, why not challenge yourself. Look at it this way, not only are you going to save some money, but you will most likely get your tax return cash faster. Try a company such as TurboTax or

Be Fashion Savvy

Before shopping at your favorite clothing store, check out your local thrift shops. You may be surprised with how many you will find in your area as the industry seems to be growing. Also, keep the rest of your wardrobe in mind when shopping. Look for clothes that you know you could easily pair with other clothing you have, this eliminates all the items you find in your closet with intact tags.

Kick a Habit

Most people do not realize how costly their habits can actually be, so take a look at something you do often and calculate how much money you spend to keep that indulgence. For example, the average smoker spends approximately $1,000 per year on cigarettes, so look into the options there are to quit smoking and do not be afraid to try a few out. Do you find yourself stopping to at coffee shops a few times a day? Invest in a coffee machine. With so many different coffee makers available now, you may find that buying one would cost just as much as a few lattes. If you spend money often on hair styling, stop a beauty school and find a student that can care for your mane at half the cost. If bottled water is your weakness, buy a water filter attachment for your sink.

Try a few of these helpful tips, or try them all. No matter how you choose to start saving your money, you are well are your way to a more healthy financial future. Good Luck!

Credit Card Traps

Beware of Credit Card Traps when Financing Purchases

This is important for just about everyone as we all buy things. Some countries, as I understand it, do not have the same concept of credit cards that Americans do, so I will be writing this from an American perspective. I worked in the credit industry for quite some time and have extensive experience in these matters.

Obviously when you buy something you have to pay for it. If you have the money you can pay for it then and there, or if you don’t you can choose to finance it. Some things are normal to finance. Things such as student loans, cars, and a home are things that just about every person will finance. There are also things that are being financed much more in these times than in the past such as vacations, trendy clothes, video game systems and the like. There is argument that the “we want it now, but pay later culture has another financial shock coming the economy’s way in the credit card meltdown” I have been a credit analyst that approved loans and credit cards and collected them in my career. I do think there is going to be problems with the credit card system one day and greater than the problems we are already seeing.

There are different ways that items can be financed. One of the best ways is 0% interest financing. Here you borrow money and don’t pay any interest. Companies usually do this when they are trying to drum up business. They also have no interest and no payments for a year or longer. This is the banker’s way to make money. How? Easy. Most people will put off and put off paying the payment while it is interest free. By doing this at the end of it you get hit with all that interest. Most companies also compound the interest. All credit cards compound interest.

Compounding interest basically means that the interest you owe

Is calculated at the end of the day with a daily periodic rate (see your credit card statement. It will be really small like less than .01% in some cases. When you borrow money you do not want it to compound, but in savings you do want it to compound. To put it simply you are charged interest on top of interest every single day.

You also can just use a credit card. I realize it has to be done, but can be a bad idea. I personally have several credit cards, but owe a balance on none. This is because I learned the value of “want versus need”. I always ask do I want something or need it. If you want it I make sure I am getting the best price and quality and deal. If I need it I check out the same but you need what you need. If you car needs repairs you cant really skimp on that, but if I need a new video game I can wait until the price goes down or buy one used.

Now when people run a business there will almost always be financing. Not many people can buy everything they need all the time. This is especially true of raw materials or goods to resell. If you sell toys on eBay on a very big scale it is very possible that you may have to run a balance on a card to get your inventory. When you sell it you then pay the card off, hopefully at least. The main thing is to not get caught in a bad situation. It is very easy to do. Always look around if you have good credit someone is always offering a deal in order to get your business.

A final tip deals with automobile financing. Get your own. The car finance manager almost always will charge you more than you can get if you get it prior to the purchase. The reason is they make money off that. Typically you will pay at least .5% higher with good credit than what you would find on your own. If you have “challenged credit” it can be up to 5%. This can add up to several hundred to several thousand dollars over the long runs. In all fairness the dealerships do this because that is how they make money there. Not all do this and often times if you are financing through the companies own finance (BMW finance, Toyota ect ect ect) then you may not pay any spread (the difference between what you can get and what they charge you). Hope these tips help.

There are exceptions of course to this. Not everyone will listen also. I am sure there are grandparents who would not deny a present even if they could not afford it, but that is a choice people make. Sometimes you may finance a wedding. To each their own. When I got married I told the boss (wife) that with the marriage failure rate I was not going in debt for it. We had a great time and I took it all out of savings. I have spoken to people who have had to file bankruptcy after paying thirty thousand dollars for a daughters wedding. I believe in “judge not less ye be judged” but the people I was speaking to had a house and car what was not worth that much adding the value of both together. There is such a thing as living above your means. The bad thing is that they got divorced about a year prior to speaking with me about a mortgage trying to fix the mess they were in.

Start Up Business

How to Finance a Start Up Business in Canada

Financing a start up business is a huge challenge in the current economy. New entrepreneurs have business ideas and they wish to monetize those ideas into a real business. In the current environment, more than ever, traditional financing is difficult to achieve for a start up.

There are however a number of strategies that the business owner can utilize to either replace or augment traditional financing.

We would point out those traditional financing typically involved banks via new business loans, and, most commonly, the Government Small Business loan, more commonly known as an SBL loan.

Let’s look at some financing options, somewhat non-traditional in nature, to assist the new entrepreneur.

Many customers have not completed their development for their final product or service. Additional capital can be brought into the new business by considering such strategies as customer down payments, use of ‘ try and buy ‘ programs from manufacturers , or simply maintaining a current employment until the product is completed – we would point out that many people entertain ‘ consulting engagements ‘ during this time period .

As the product /service is completed, and is ready to be marketed the entrepreneur could consider such financial strategies such as delayed commissions to sales personnel , utilizing temporary office space, and temporarily subsidizing the business via credit cards . We caution owners not to max out on cards, or default in payments, as this will have a long term effect on the owners overall credit worthiness. For the next several years to come banks and other lenders will be looking for a ‘clean credit scores ‘to augment any business borrowing – so don’t destroy your personal credit rating too early in the game. Fortunately or unfortunately credit cards have become a major source of small business financing – if utilized properly it is certainly an option. Key word: Utilized properly!

Typically as the customer enters the revenue phase of business is an excellent time to start talking to banks about small business loans, as well as the government loans available.

The owner can at this point utilize a number of other strategies to reduce cash outflows and financing needs – these include utilizing or purchasing used equipment in stead of new, or entering to equipment leasing arrangements which typically provide close to 100% financing.

Customers are cautioned at this point in the business to stay totally on top of invoicing (Invoice promptly!); owners should also be establishing trade credit with suppliers, and in instances where possible negotiating higher credit limits and extended terms. Suppliers will consider this for the right future customers!

Business owners are also encouraged to investigate factoring – which is the immediate payment of your receivables by a third party. Solid partners in this area at reasonable rates (typically 2%/mo) can be the life blood of a business for an intermediate amount of time prior to negotiating full fledged bank financing.

In summary, non traditional financing will not finance all of a new start up, but it sure can help. Customers are encouraged to get their operation up and running as quickly as possible, focus on sales and collections, and work towards growth at a reasonable rate. Business owners who exhibit these qualities in their business model will find proper bank financing and other business financing just around the corner.

Financial Mistakes

Five Financial Mistakes Never to Make

Whether you’re a prince or a pauper, or somewhere in between, it’s important to know how much of your hard-earned dollars are coming in and going out. Whether you’re new to the work force or have been working for many years, keeping track of your finances is very important, especially as your situation and goals change and mature, like if you want to buy a car or a house, save for educational expenses, and prepare for retirement. Financial planning doesn’t have to be hard or overwhelming if you set up a system that works for you and stick to it. And, by avoiding the following five mistakes, you’ll have a lot more in your wallet now and in the future.

Mistake # 1: Use More Than 2 or 3 Credit Cards

It’s soooo tempting to open a credit card in stores to get the 10 or 20 percent discount they are dangling in front of you, but DON’T DO IT! Before you know it, you will have 10 to 15 credit cards, most likely with balances you can’t pay off each month (see Mistake # 2 below), and this will really harm your credit rating. Most credit cards have annual interest rates of 14% or higher, and the department stores are at 18% or higher. For example, if you buy $1000 worth of stuff in January and only make the minimum payments each month, you will have paid at least $120 to $200 of interest and still owe about $300 by December, and half the stuff you bought will be already old or discarded! You can really raise your credit score by buying only what you can pay in full and on time. In any event, you should keep your outstanding balances below 30 percent of your total credit line per account.

Mistake # 2: Buy Large Ticket Items that You Really Can’t Afford

I know, having the newest iPod or iPhone or iWhatever is cool and fun, but getting into debt isn’t. Try to live below your means. Get in the habit of saving for the big ticket items that you really want. Set up a jar and dump in your change and even your one dollar bills every night. Every time you avoid buying that double vente in the morning or that candy bar after lunch, put that money in the jar instead (both your wallet and your stomach will thank you!) Before you know it, you’ll have that fancy new gadget you want (probably a better model than the one you first saw) and savings and spending habits that will last you a lifetime.

Mistake # 3: Don’t Save for Retirement

Well, it may seem like a long ways off, but with people living longer and Social Security looking weaker, you’re going to need to put a little aside now for your golden years. And just a little will make a big difference, especially the sooner you start. The effects of compounding interest are amazing. For example, if you are 25 years old and you put just $100 aside each month at 7 percent interest per year, you will have $264,012 by the time you are 65; if you start at 35, the same savings will get you just $122,709, but that’s still better than not putting anything aside at all!

Mistake # 4: Don’t Maintain a Filing System for Financial Records

You will lose so much time and money over the years if you don’t keep good financial records. It’s important to be sure that all of your credit card charges are accurate when the bill comes each month as well as your bank accounts, etc. (despite what companies want you to believe, computers do make mistakes!) Plus, so much paper comes at you each day – a system to manage it all will save you time and money. You should separate paperwork as soon as you get it or finish with it. First, once you figure you won’t need a record, shred anything with personal information on it. Then, set aside the bills that need to be paid in their own pile. Try to automate bill payment as much as possible, but not to the point where you’re not paying attention to the amounts of money involved. Once you’re finished with paperwork that needs to be kept, file it away in whatever filing system you set up (usually manila folders get the job done; you might also want to look at David Allen’s book Getting Things Done). There are a lot of different systems out there to consider — experiment and find the one that works for you and then stick to it!

Mistake # 5: Don’t Have an Emergency Fund

These days, you never know what’s going to happen, and unexpected expenses pop up all the time. Setting up an emergency fund for those times when you need to get your hands on a wad of cash is a goal worth setting. You should aim to put aside money that will cover your basic expenses for at least three to six months, such as rent, utilities, commuting expenses, food, etc. Put it in a safe and easy to reach (but not too easy) account that earns interest. That way, if you need the money, it’s there for you; if you don’t, you’ve got another source of savings available that’s growing.

Everyone makes mistakes in life, but with a little planning and determination, you don’t have to make these ones!

Madoff's Fraud

Hit by Madoff’s Fraud, Indianapolis Couple Rebuilds Finances

Indianapolis — Two years ago, my husband and I could see the economic downturn on the horizon. Homes on our block took longer to sell. Fewer customers shopped at the local mall. But we had no idea we were entering a recession that would drag on for at least two years. Now we are wondering when it will end.

We felt lucky to be living in Indianapolis, a city with a relatively low cost of living. We consider ourselves reasonably frugal.

All that changed when Bernard Madoff entered our lives. It was Dec. 14, 2008. My husband and I received a phone call informing us that money we’d invested in a fund had ties to Madoff. We had lost over $30,000 from a portion of a fund, the Merriwell Fund, part of which was invested with Madoff.

Even so, we were fortunate. Madoff wiped out many investors. Local Indianapolis temples and Jewish organizations, which had money tied up with Madoff, not only had to cut costs drastically but fire employees and restrict opening hours to stay afloat. We got off lightly; our financial portfolio had been hit — but not totaled.

However, our financial advisers admonished us to make major changes to our financial planning and not just because of Madoff. Other economic challenges started facing us and other Indianapolis families.

Homes are taking longer to sell and nervous friends asked us for job leads. (Indianapolis’ unemployment rate was at 7.7 percent in September.) When homes on our street sell, they go for bargain rates. After years of seeing our home appreciate it value, it is a shock to discover its lower value. That impacts our financial security, too.

Our investments are diversified, so we haven’t lost everything. But there’s never a good time for a couple in their mid 50s (I’m 55, my husband is 56) to take damage to their investments. We don’t have the advantage of youth and time to make up our losses before retirement.

When we got the Madoff news, we had one son in college. We’d promised to help him out if he got a scholarship that covered tuition. But because of financial woes, we had to scale back on how much we helped him.

That meant he had to take on student loans, something we’d hoped he could avoid for as long as possible. We still paid his health insurance, but he had to take a second job while at school.

Then, in late August, my husband’s employer, a local Indiana university, announced a pay freeze to manage costs. My husband, a college professor, won’t get a pay raise for the coming year. We’re happy he still has a job with benefits. But it did impact our budget. It also affected our investments, the ones outside Madoff’s reach.

Our retirement date was starting to look like a dream, somewhere in the distant future.

We’ve halved our monthly budget and still consider ourselves lucky. Lucky to have jobs when Indianapolis has high unemployment. Lucky to have a home and food on the table. Lucky not to have our finances scorched to the ground by Madoff. We’ve been told that we need to think of the long term and keep investing in the stock market to build our portfolio back to where it was before Madoff came along. Our advisers urge us to have trust in our financial future. We’re working on it.