How to Build a Financial Safety Net

Introduction

The importance of having contingency plans for dealing with a financial crisis cannot be overstated. Whilst you may be fit and healthy now, what will happen if you are unable to pay the bills in the future? This article looks at how you can build a financial safety net to deal with unexpected emergencies.

1. Savings and Investments

Savings and Investments are often a good means of building a short term safety net to cope with a short term health problem or the result of redundancy or a career change. Research shows that you should seek to put aside the equivalent of 3-6 months in wages to deal with an emergency. Savings and Investments are easy to access or cash in, should you need some emergency resources and are a great short term safety net.

TIP: Money put aside for dealing with a financial emergency should be readily accessible. Whilst it is possible to get a better return by investing in a high interest savings account, these often require 3 months notice to access funds. Instead consider placing these funds in an instant access savings account preferably an online one, where the you can get at your money quickly.

2. Budget Planning

Creating a budget is one of the best tools available for helping to build a financial safety net. It can help you identify how best to spend your money at the beginning of each month and critically, help you to plan what amount you can afford to put aside each month, even on a tight budget.
There is a great free budget planner available via Microsoft at http://office.microsoft.com/en-us/templates/TC062062 791033.aspx

There is also a more detailed article available that I have written in relation to good budgeting, you can find it at http://www.helium.com/tm/475075/introductionbudgetin g-under-utilised-tools

Tip: Take an hour now to sit down and plan next month's budget and get an overview of your income and expenditure and what you can afford to save.

3. Insurance Policies

Few people like paying out for insurance policies because we rarely need to use them. Whilst there may be some things we can do without, like extended warranties on electrical goods, failing to plan adequate cover for loss of employment or ill health can have serious repercussions. No one can guarantee that their health will always be good and not building a financial safety net is like playing Russian roulette with your future.

There are so many insurance policies it can sometimes be daunting trying to establish which will be beneficial. I have highlighted a few of the key policies for further consideration.

a) Life Insurance

It's not pleasant realising that we are all mortal, but ignoring the matter can leave debts and hardship for those we leave behind. If you're concerned about how much cover you will need then factor in the main debts you could leave behind, like a mortgage or loans and base your insurance cover on meeting these.

b) Disability/Critical Illness Insurance

This type of insurance is worth considering, if for example like me, you are the sole wage earner in your family unit or live alone. I wouldn't recommend it for dual income earners as it can be expensive and providing one of you is able to work you won't need it. This policy will set you back between $25-40 a month and will pay out if you become seriously ill and unable to work. Basically it will cover your mortgage repayments.

c) Income Protection

This a better option than disability/critical illness cover, as it will pay out for your mortgage if you are unable to work due to redundancy. Research shows that the average time spent with any employer is now 5 years, gone are the days of a job for life. Insolvency within businesses has also increased meaning that you are more likely to be made redundant at some point in your career. It can often take 3 months to a get a new job due to waiting for responses from applications, attending interviews and getting a written offer of employment. Income protection insurance can provide an invaluable financial safety net. You should expect to pay between $35-60 per month for this insurance plan.

d) Medical Insurance

This really is essential as unexpected costs of health complaints or accidents can be significant. Medical insurance will ensure that you get treatment quickly should you need it, without having to consider cost implications. You should expect to pay a few hundred dollars per month for this insurance.

4. Antiques and Collectables.

Antiques and collectables are often a great source of investment given that they hold their value at the very least and have the added benefit of being easy to sell if you need a quick cash injection. In addition if you wish to leave a sum of money to family after your death they won't be hit with inheritance taxes often associated with large amounts of physical cash. Perhaps one of the major drawbacks to investing in Antiques and collectables is the requirement of a level of technical expertise, or access to those skills, to ensure that suitable items are invested in.

Summary

This article has attempted to examine the numerous ways in which you can build a financial safety net to cater for almost every aspect of your life. We have explored the importance of short term savings and investments to provide an immediate safety net and also examined how you can ensure you have a financial cushion in the future.

Step by Step guide to Getting out of Debt

Introduction

Easy access to credit and buy now, pay later deals have caused increasing numbers of people to encounter debt related problems. This article offers some step by step advice to enable you to get out of debt.

Step 1. Recognise the problem

All to often it is easy to ignore mounting debts or final reminder letters because of fear or simply due to feeling overwhelmed by the enormity of a debt problem. The first step to getting out of debt is recognising that there is a problem and being prepared to do something about it.

Step 2. Communicate

a) Once you have accepted that there is a problem with debt talk to your spouse or partner or trusted friend/family member and explain the gravity of the situation This can often be a very daunting experience due to the fear of what others will think of you and the stereotypes that exist in society about individuals with debt problems. However, talking through the problem is essential.
b) If you feel that your debt problems will can be resolved within one to two months and that this is just a temporary blip, perhaps because of a pending pay rise, then you could consider two short term solutions.

I) Balance Transfers. These can be a great way to give you extra breathing space if you are experiencing debt problems. Most large credit card companies now offer you 0% for the first 6-9 months if you transfer your credit card to them. This can prove invaluable if you are struggling to keep up with credit card payments as interest can be a real killer.

Ii) Mortgage Holiday Period. Most big banks now offer what they term a Mortgage Holiday period when you sign up for the mortgage. This enables you to take a break from making payments for between 1-3 months enabling you a breathing space to get your finances back in order.

If you debt problems are more serious or your circumstances are unlikely to improve within the next 2-3 months then continue with the next step;

c) Contact those to whom you owe money and attempt to resolve the problem directly. It could be that there are a number of companies but either way most organisations are willing to work with you to deal with debt problems by reducing repayments, if you can demonstrate that you are serious about resolving the situatio , rather than them risk losing all the money owed to them.

Ensure you get any agreement to reduce payments in writing as telephone conversations are not legally binding commitments.

If you are unable to reach a settlement through direct contact with debtors, then proceed to the next step.

Step 3. Seek Professional advice.

Sometimes debt is so substantial or an agreement cannot be reached with those to whom you owe money. At this stage it is worth speaking to a debt counsellor to discuss your options.

Try http://myvesta.org/ for more information

Step 4. Debt Consolidation

There are many debt consolidation companies and their role is to help individuals in financial difficulties to reduce payments by combining various debts into one larger amount but with lower monthly payment rates. A professional debt counsellor will often refer you to a reputable organisation as a next logical step, but alternatively you can research them online.

Step 5 Create a Budget

Most debt consolidation companies or debt counsellors should help you to produce a monthly budget based on your income. Take time to think about this thoroughly and list every piece of income and expenditure in any given month, but be realistic.

Even if your debt problem is minor it is a good idea to create a budget to help manage finances better in the future.

The following site has a good budget template to help get you started ;
http://office.microsoft.com/en-us/templates/TC062 062791033.aspx

Also the following article also has more information on the benefits of budgeting and how it can change your life; http://www.helium.com/tm/475075/introductionbudgetin g-under-utilised-tools
Once you have created your budget, stick to it.

Step 6 Prioritise Debt Payments

Once you're agreed a payment schedule to get you out of debt, ensure that you prioritise those payments over any other.

Summary

This article has attempted to provide a practical step by step guide to getting out of debt. Attention has been given to the importance of recognising that there is a problem and ensuring good communication takes place to attempt to resolve debt problems quickly, where possible. Where agreement can't be reached we have examined how to move forward by seeking professional support, consolidating debts and creating budgets to resolve financial difficulties as soon as is practically possible.

Financial Planning in your 30's

Introduction

This article seeks to discuss some of the specific financial planning that needs to be considered by individuals in their thirties. The age range between 30-40 is significant time in relation to financial planning given that it is during this time that many financial decisions will directly effect retirement plans and long term financial matters, all of which will effect future prosperity.

1. Pension Planning

If you haven't yet had opportunity to start saving towards a pension this is a critical time because failure to do so before you reach 40 will almost definitely mean that you will have insufficient time before retirement to build up a decent level of pension contributions to ensure a comfortable lifestyle.

Where possible join a corporate or government related pension plan as these employers often contribute additional amounts to whatever you can afford to save. So for instance if you put 4% of your wages/salary a month into a pension plan they will likely match it.

These schemes are often referred to as final salary schemes, as the pension provider promises to pay you a pension based upon your final salary before leaving the organisation and the level of financial contributions made to the plan. So the sooner you can start saving in your 30's the more pension contributions you will have built up by retirement and the greater your final pension pay out.

2. Property Investment

If you have not yet been able to purchase your own property, your 30's are a good time to get into the market. The benefit those in their thirties have over those looking to buy in their 20's, is that you may already have 10 years worth of savings from employment which can be used to place a larger deposit on the perfect property. This often reduces the size of the monthly repayment levels and the total amount of interest you will have to pay in the long term. Whilst the decision to own a property is down to personal choice it is advisable, as property usually gains in value and is therefore a long term investment In the future you may be able to sell your property and downsize leaving you with a healthy profit with which to improve your retirement.

Delaying a decision until you reach 40 means that your may be unable to retire early in the future due to ongoing mortgage repayments into your 60's or even 70's. In addition insurance payments that you take out for the duration of your mortgage term to protect against critical illness or disability and life insurance or income protection will be cheaper than they would be at 40 because of your age.

3. Life Insurance

Life insurance gets more expensive the older you get because the risk of death increases with age. If you have not yet thought about life insurance consider taking it out now as it will never be cheaper. Whilst no one likes to think about death, it is important to protect loved ones from an excessive financial burden should you die early. Taking out life insurance whilst in your 30's can save you anywhere between $300 and $600 dollars a year on an average policy.

4. Saving for your children's education

If you have children as you reach your 30's, planning for their future educational needs is now critical if you intend to give then a good start in life and not place excessive financial burdens on yourself another 5-10 years further along. College and university education can be very expensive. Costing between $30-40,000 per child. Whilst this figure is spread over a period of years it is important that you start thinking about how you will meet this cost now.

Also think carefully about what level of risk you are willing to expose yourself to as you save or invest for your child's College/University fund. Do you really want to invest in high risk shares where the potential to lose your original investment is significant. Try instead investing in government bonds or placing money on deposit in a high interest savings account.

Summary

This article has attempted to explore some of the financial planning considerations for those in their 30's and the commitment this requires. We have examined the importance of good retirement planning through sound pension and property investment along with the need to make contingency plans through life insurance in case of death. Finally we have explored the importance of thinking now about financing college or university education to dependent children.

Further Resources: There is more detailed information available about financial planning via the links below: (this has some excellent suggestions for maximising your income)

http://www.age-net.co.uk/business/finance/financi al_welfare.htm

http://www.medstudent.ucla.edu/offices/fao/orient ation/2006/handouts/bibliography

Understanding The Costs of Credit Cards

Introduction

There is no getting away from the fact that credit is now more widely available than ever making it simple to use a plastic credit card to make purchases. What isn't so straight forward are the costs associated with using credit cards. This article attempts to provide an overview of these costs to help inform your spending decisions.

1. APR

How often do you choose the first Credit Card you see or the most popular one? What most people don't realise is that it pays to shop around and yet we rarely do. Some credit cards charge higher rates than others which will have a major impact upon your finances, especially if you don't pay your bill outright at the end of the month.

If I told you that a top of the range television was for sale for $2,000 but that just down the road you could get it for $1,800, most people would quickly choose to save $200. In essence this is exactly how much of an effect choosing the right credit card can have on your finances, in relation to interest payments.

Annual Percentage Rates (APR) is the means that Credit Card companies use to charge you interest. These can vary substantially from company to company but they range between 15-25%. Ensure you choose a card with the lowest possible APR and don't just accept the first one available.

It should also be noted that credit card companies often charge a higher interest rate for cash withdrawals via your card so read your small print and don't presume it is the same APR rate.

2. International Charges

Using your credit card in another country is often promoted by finance companies as one of the key benefits of their product and yet they often fail to explain the costs involved.

If you use your credit card outside your own country you are liable to pay an additional charge for the privilege which varies from company to company but is usually between 2-5% of the transaction cost. So buying that Ming Vase on a trip to Europe may be more expensive than you think. Credit card companies claim that it is the cost of processing these transactions in another country, but this doesn't hold up well given that most big credit card firms are likely to have offices based in most countries, that could easily process the transaction with limited effort.

3. Balance Transfers

A word of warning about the costs of balance transfers. These were introduced to entice customers to a different credit card company. The company offers you between 6-9 months of 0% interest on your existing debt in exchange for you changing to their credit card. This is hugely tempting for many people however there are some pitfalls to it.

a) You will only get 0% interest on your existing debt. Some people wrongly assume that they will not pay interest on any new spending on their credit card for the 6-9 month period but this is incorrect.

b) Always check the interest rate that your card will revert to after the balance transfer period, as it could be that it is higher than your current credit card provider meaning that you pay more interest in the long term.

4. Late Fees

Late fees are also associated with credit cards if you fail to make at least the minimum payment required each month. These can vary but usually come in at around $35.

5. Over Limit Fees

These are fees that you will be charged if you go over your credit card limit without agreement. Most companies will charge you a 1.5% handling charge for this.

Summary

This article has sought to provide an overview of credit card costs and the direct effect these can have on an individual. Attention has been given to the vast differences in APR rates and the use of international charges and balance transfers. Finally we have examined costs linked to late payments and the consequences of going over an agreed credit limit.

The New York times has a great article on the costs associated with credit card costs and the debt it can leave. Visit the link directly below.

http://www.nytimes.com/2007/05/19/us/19debt.html? ex=1337313600&en=fd0d18c020710d36&ei=5124&partner=di gg&exprod=digg

The Financial Costs of having a baby

Introduction

Responsible parenting begins before a child is born. Research reveals that the cost of having a baby is extensive and whilst should in no way cause people to think twice about having a child it is important that consideration is given to the costs involved. This way prospective parents can give their child the best quality of life possible. This article will examine in more detail the costs involved.

1. Diapers/Nappies

There is much debate about whether disposable diaper/nappies are better than the rewashable material type, but the cost differences are not significant. The cost of using energy to wash material diapers is about equal to those involved in producing the plastic type. The biggest cost is to the environment as plastics just don't biodegrade.

2. Maternity Leave

Most employers now offer good maternity leave packages but even the best don't contribute a significant income. The loss of earnings during the period on maternity is rarely factored into the costs associated with having a baby, but it is often one of the largest.

3. Moving House

It is often the case that couples seek to move house to a bigger property prior to having children in order to accommodate their growing family unit. This can be very expensive business, costing thousands of pounds in fees and additional mortgage repayments associated with upgrading your property.For those who decide to stay put, then redecorating a room for use as a nursery can set the average family back between $300 and $1000.

4. Baby Milk/Formula

Specialist baby foods or formula for your baby add an additional burden to your household food bills.

Tip: A way around this is to make your own baby food by using your food processor.

5. Baby Clothes

Parents know just how quickly babies grow and frequent clothing changes are often required.
Tip: Asking friends and family for hand me downs is a great way to reduce these costs. Alternatively try visiting charity/second hand shops. After all babies rarely have an image to maintain at that age.

6. Specialist Equipment

Babies often need specialist equipment to improve comfort or keep them safe. These include Prams, Pushchairs, baby monitors, baby carriers, car seats, sun blinds, potties, bottles, dummies and numerous other items. All of these can add thousands of dollars to your already stretched budget.

Tip: Once again friends, family or second hand shops can be invaluable source for obtaining these items and reducing your baby bill significantly.

7. Toys

Children often get bored with toys very easily or as they rapidly grow need different stimulus. Frequent changes of toys are also costly.

8. Childcare Costs

Over the period of time your baby is growing up it is likely that you will need a babysitter or take your child to a nursery or play group and these costs are often excessively expensive.

Summary

This article has attempted to highlight the significant costs associated with having a baby. Such information should not deter prospective parents, as they are unlikely to do so, but rather used to highlight the importance of good planning.
There is en excellent professional article available through the BBC which can provide even more informative information. You can find it at:
http://www.bbc.co.uk/parenting/family_matters/fin ance_cost.shtml

Best Online Broker Services

Introduction

Not everybody has thousands of dollars to invest in stocks and shares, so is it really possible to do this on a lower income? This article reveals how you invest small amounts of money to secure your future.

Small amounts of money really can make a difference to your financial future, if you know how to make it work a profit for you, here is a proven practical way to do it:

1. DPP's (Direct Purchase Plans)

If you are willing to except some level of risk in your investment then DPP's are an option worth serious consideration. These are designed to give individual investors direct access to stock and share trading, and you don't need to have had previous experience in this area to benefit from them.

DPP's permit you to invest as little as $5 dollars a month, which is ideal for those with only small amounts of money available.

All you do is set up an account with a DPP provider and arrange a direct debit of a set amount each month of your choosing. They use your money to invest in stocks and shares of your choosing, allowing you to develop an investment portfolio. Brokers fee's are substantially smaller via DPP's as they are designed for the individual investor and these fee's range from between $1 and $3 per share.

If you've not heard lots about DPP's this is because they are legally not permitted to advertise their services directly. Whilst exact reasons for this are not clear it could be linked to concerns from professional brokers, who fear losing substantial fees from investors going direct to the stock market.

There is always a risk of making a loss on the stock market and if you are concerned about losing your investment, whilst there can never be an guarantee, look to invest in well established companies to spread your risk. Another way to boost your confidence and skill in this area is by trying it for fun first.

There are numerous virtual trader games online, where you get given a fictional sum of money to invest in real shares. Once you've got the hang of it a few times and are getting better at selecting profitable stocks and shares, why not try it for real?

Consider testing out your skills with no risk by visiting one of the links below;

1. http://www.ac-markets.com/

2. http://www.fxcmtr.com/welcome/why-trade-currencies.html?
engine=goog+trad+alt&keyword=online+trading&CMP= SFS-70160000000CryiAAC

3. http://www.virtualtrader.co.uk/

Sharebuilder.com is one of the biggest DPP companies online and have 6,000 stocks you can invest in, quickly and easily. They also have a free long term investment guide that you can sign up for which will explain things in more detail. Investing just $20 a month can really start to help you build a profitable sum of money for your future. If you're ready to find out more about investing small sums in the stock market you can visit http://www.sharebuilder.com/ and get started.

Summary

This article has investigated a proven way for individuals with little share trading experience to invest small amounts of money to help you build a profitable future and easy your financial concerns