Friday, December 11, 2009


The first step to getting your money under control is creating a budget. The process of looking honestly at your finances is like entering a 12-step program. You have to get over your denial and take a frank look at how much life costs you.

YOUR FIXED EXPENSES-These are the ones that stay the same every month like rent, bills and car payments, not groceries or trips to the drugstore. These fixed expenses should take up no more than 60% of your take-home pay, with housing being about half of that. If this stuff is eating up more, it's time to make some cuts.

YOUR GENERAL SAVINGS-In addition to your retirement contribution, you should be socking away 5-10% of your take home pay every month. Set it up to go into your savings account automatically if possible. If you're a bartender, waitress, hairdresser etc it's even easier...just set aside a percentage when you come home from work everyday.

YOUR LIVING EXPENSES-This is what you have left to live on-what pays for your groceries, clothing, going out, vacations and the credit card debt you accrued over spending on these things. Ideally, it should take up 30% of your take home pay. For many of us, that slice of the pie will take up a bigger percentage so start looking of cuts you can make.

THREE TRICKS TO HELP YOU STAY ON A BUDGET-1. Set aside a money moment each week. If you spend 30 minutes every Monday or Tuesday looking at your finances, you won't have to think about it for the rest of the week. 2. Do the green experiment. Use nothing but cash for a week. This will help you rethink the way you spend money. Put your debit/credit cards in a plastic bag full of water and in the freezer. 3. Use your secret weapon, the Internet. To help you keep track of how much you're spending, the new online tools are great. My favorite is because you link the site with your online credit card and bank accounts and it spits out colorful pie chars showing you how you spend your money all for free.

START SAVING FOR RETIREMENT...NOW!-After paying taxes, saving for retirement is your most important financial priority. period. Why the big rush to save money you won't need for 45 years? Because those years fly by faster than you think. Save at least 10% of your pretax salary and start now. Women live longer than men and are more likely to take time off to raise kids so you need to save earlier and more aggressively.

GIVE YOUR MONEY TLC AND WATCH IT GROW-When it comes to that general savings portion of your budget, your savings do more for you than any fabulous outfit every could. They give you independence. Just think of it as paying yourself first.

KNOW HOW MUCH TO SAVE-You need a budget and you need to set aside at least 5-10% of your take home pay. Even if you're living paycheck to paycheck and that seems impossible, remember the more the better but do what you can. The most important thing is to get in the habit of saving and the right place to put it.

A REGULAR SAVINGS ACCOUNT-What should you keep here? Enough money to cover at least three months' worth of expenses or saving you want immediate access to for a vacation etc. Half of all women ages 18 to 65 told an AARP survey that it would be a challenge to deal with an unexpected $1000 expense. having that cushion in an east to tap savings account means a fender bender or unanticipated medical bill won't throw you for aloop. Savings accounts don't earn huge interest rates but they're stable, safe places to put money for emergencies. You'll probably get the best deal if you start one online or in the same bank where you have a checking account. If you can get into the habit of saving in your twenties, by the time you are 30, you'll have something pretty good in your hands.

CDs OR MONEY MARKET ACCOUNTS-What do you keep here? Money that you won't need for at least 6 to 12 months but that you might need sometime in the next five years. These are good places to put extra money once you have your emergency fund established. Just know that while money market accounts and certificates of deposit earn greater interest than most savings accounts, they also have more restrictions. you'll pay a penalty if you pull money out early so make sure you have your cushion fund in your savings account set up first before attempting this account.

THE STOCK AND BOND MARKET-What do you keep here? Money you won't need for at least five years. This is where your long-term savings goes and yes you do need some of that. Many women say they are terrified of the stock market. Don't be! Sure the fluctuations of the market are risky but you have to keep in mind why you are investing. Long term this where you'll make the most money. What's more is research has shown that when women do invest in the market we earn slightly more on investments than med do, largely because we do it more conservatively. Young women should resist the urge to look at uneasy financial times as in the past year as an excuse no to get into the stock market. You should put the bulk of your investments in stock because the younger you are the more risk you can take. a smaller percentage of your savings should be in bonds, a safer investment than stocks. Talk to a financial planner or do your own research about the market. Your odds are better with exchange traded funds which are similar to mutual funds but without heavy fees, chosen by professionals.

DUMP THE DEBT THAT'S STRESSING YOU OUT-Ladies, listen up, there's a good chance your debt is keeping you from saving for retirement. That means one thing, you're got to get rid of it. We all want to look good, feel good and have a good time so we go ahead and charge things. The problem is we are hurting ourselves and our future in the end!

LEARN THE DIFFERENCE BETWEEN GOOD AND BAD DEBT-Not all debt is created equal. If yous start a business and spend $2000 on a home office, it's an investment in yourself and your future-that's good debt. so are federal student loans, which get you an education so you can snag that higher paying job and for the most part, mortgages. The goal is to avoid bad debt like revolving, high interest situations where you aren't investing in anything but the bottom line of the credit card companies.

UNDERSTAND THE COST OF BAD DEBT-Aim to open your bill every month and see a previous balance of $0. The way interest payments work is horrifying. Look at the numbers. Say you have $10,000 worth of debt on a credit card with a 14 percent interest rate. If you make only the minimum payment on that debt, it will take you 15 years to pay it off and you will end up paying more than an additional $10,000 in interest alone.

STOP MAKING NEW DEBT-In other words, no using your credit cards while you're trying to pay off balances.

TRANSFER BALANCES ONTO LOWER-INTEREST CARDS-If you are paying crushing interest on your balances, transfer your debts to a lower-rate card. The rule is if your rate is 12 percent of higher it's time to shop around. Make sure you read the fine print though. A lot of credit cards offer low interest rate to lure in new customers only to have the rates skyrocket down the road. You can also call your credit card company and ask them to lower your rate. In today's economy a lot of them are willing to work with on this.

TAKE CONTROL OF YOUR CREDIT SCORE-The single largest indicator of your credit health is your credit, or FICO score. Your score is a number between 300 and 850 that tells landlords and mortgage lenders how likely you are to repay debts. The median is 723 so higher than that is your goal. One of the biggest factors used to determine your score is your debt to credit ratio.

ASK FOR HELP-If you can't manage alone, find a non profit credit counselor at, a nationally recognized group. They will create a payment plan for you and be your advocate with lenders. The majority of their counselors provide serves free, those who do charge have an average fee of less than $20. using one won't affect your credit. That's potentially lifesaving financial help for the price of a round of drinks. Nothing could be more worth it.

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