Some financial goals and tips

Do you have clear cut goals when investing money? Without them you may end up with enough money to meet your needs but you wont know for sure...

Go out into your garden and dig a big hole. Every month, throw $50 into it, but don't take any money out until you're ready to buy a house, send your child to university, or retire.

It sounds a little crazy, doesn't it? But that's what investing without setting clear-cut goals is like. If you're lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.

How do you set investment goals?

Setting investment goals means sitting down and defining your dreams for the future. If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. You can do this on your own or with the help of Investment Funding. It's best to be as specific as possible. For instance, you know you want to retire, but when? You know you want to send your child to university, but which university will you be able to afford?

You'll end up with a list of goals. Some of these goals will be long term (you have more than 15 years to plan), some will be short term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan). You can then decide how much money you'll need to accumulate and which investments can best help you meet your goals.

Looking forward to retirement

After a hard day at the office, do you ask, "Is it time to retire yet?" Retirement may seem a long way off, but it's never too early to start planning--especially if you want retirement to be the good life you imagine.

Let's say that your goal is to retire at age 65 with $500,000 in your retirement fund. At age 25 you decide, to begin contributing $250 per month to your super annuation account. If your investment earns 6 percent per year, compounded monthly, you'll have more than $500,000 in your investment account when you retire.

But what would happen if you left things to chance instead? Let's say that you're not really worried about retirement, so you wait until you're 35 to begin investing. Assuming you contributed the same amount to your super and the rate of return on your investment dollars was the same, you would end up with only about half the amount you need.

Some other points to keep in mind as you're setting specific retirement investment goals:

•  Determine how much money you'll need in retirement: Many experts say that you'll need about 75 to 85 percent of your current income to maintain your standard of living
• Plan for a long life: According to life expectancy charts, you can expect to live for 15 to 20 years past retirement, assuming you retire at age 65
•  Think about how much time you have until retirement, then invest accordingly: For instance, if retirement is a long way off and you can handle some risk.
• Consider how inflation will affect your retirement savings: When determining how much you'll need to save for retirement, don't forget that the higher the cost of living, the lower your real rate of return on your investment dollars.

Facing the truth about education savings

Perhaps you faced the ugly truth the day your child was born. Or maybe it hit you when your child started kindergarten: You only have so much time to save for education. In fact, for many people, saving for university is an intermediate-term goal--if you start saving when your child is in primary school, you'll have 10 to 15 years to build a fund. Of course, the earlier you start the better. The more time you have before you need the money, the greater chance you have to build a substantial fund due to compounding. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.

Consider these tips as well:

•  Estimate how much it will cost to send your child to university and plan accordingly: Estimates of the average future cost of tuition at two-year and four-year public and private colleges and universities are widely available (or ask your financial advisor for information)
•   Research financial aid packages that can help offset part of the cost of university: Although there's no guarantee your child will receive financial aid, at least you'll know what kind of help is available should you need it

• Think about how you might resolve conflicts between goals: For instance, if you need to save for your child's education and your own retirement at the same time, how will you do it?

Ten things you should never pay full price for

Consumers seem happy to haggle in foreign countries for knick-knacks and knock-offs, but real deals can be found right here on Australian soil. If you’re paying the sticker-price, you’re paying too much. Absolutely everything is up for negotiation – all you have to do is ask.

1) Mortgage rates and fees

Why it’s possible: Competition between banks and non-banks slowed during the GFC, but it didn’t die altogether. During the crisis, the major banks aggressively competed with each other for a bigger slice of the mortgage pie and in recent months, many non-banks lenders have returned to the market. The government’s plan to cut exit fees, which should come into effect in the second half of 2011, is also designed to make it easier for borrowers to “shop around”.

How to do it: If you already have a mortgage, your lender will be keen to hold onto your business, especially if you have an excellent credit rating and hold other related-products, such as credit cards and insurance. Speaking with your mortgage broker or branch lender could result in a better rate. If you’re a first-time buyer, it pays to shop around and compare. Again, a mortgage broker or loan negotiator could help you secure a better than advertised rate, or a reduction in certain fees such as the upfronts, application or origination fees.

2) Credit card rates

Why it’s possible: The increasing number of zero or low-balance transfer cards on the market is giving consumers a little more bargaining power when it comes to their credit card provider.

How to do it: If you’re considering switching your balance to another company, give your provider a call first and see what kind of offer they are willing to make in order to keep you as a customer. They might offer a cheaper interest rate, or waive your annual fee.

Call the helpline on the back of the card and ask to speak to a supervisor right away, as customer service representatives rarely have the power to negotiate with you.

3) Rent

Why it’s possible: Landlords know the value of a good tenant. While it’s difficult to negotiate paying less after you’ve been renting for a length of time, it is possible to negotiate on rental increases. If you’ve been paying rent on time, have good relations with the neighbours and have taken good care of the property, then it’s in your landlord’s best interest to keep you as a tenant. The threat of covering full mortgage repayments on a vacant investment property – even for a short time – could be enough to convince your landlord to negotiate reasonable rental terms with you.

How to do it: Talk to the property manager. Tenants must be given 64 days notice before rental increases come into effect, so the best time to act is in this window. It pays to do a little research with your neighbours. You can either ask them directly what they’re paying in rent, or look online to find out what similar properties are going for in the neighbourhood.

4) Insurance

Why it’s possible: It comes down to relationship. If you are looking to buy insurance from a provider you already have a relationship with, they’ll be more inclined to give you a good deal.

How to do it: Before you approach the provider, compare premiums online. Then call the provider and bargain using the information you have on other companies. The difference between insurance providers is significant – you can save up to 40% just by shopping around.

5) Hotels

Why it’s possible: Most hotels would rather rent a room at a cheaper rate, than leave it empty earning no money whatsoever.

How to do it: If you’re flexible and spontaneous there are great deals on www.wotif.com or www.lastminute.com.au. If you’re already on the road and rock up to the front desk in late afternoon, simply tell them that you’re not prepared to pay the full price, but would consider staying if a cheaper rate can be arranged. If they’re not willing to come down in price, ask if any extras could be included such as a lower room tariff, free breakfast, free parking, a welcome drink or bottle of wine, discounts to nearby attractions, or freebies for the kids.

6) Cars

Why it’s possible: With cars, almost everyone knows that the sticker-price is more of “starting price” than a firm quote. Stiff competition and volume bonuses for salespeople, have helped create high-pressure sales environments in car dealerships, but smart buyers can find excellent value.

How to do it: Decide on the model of car you’re looking for before you go. Expect to pay somewhere between the sticker price and the invoice price (the price the dealer paid for the car). You can find out the invoice price by asking the dealer, or by checking out www.redbook.com.au. Visit at least three dealerships – starting at the location furthest away from you. Sometimes salespeople will be more desperate to make a deal at the end of the month in order to meet sales targets and receive a volume bonus. From July to October, car dealerships are usually looking to make space for new models and December can be a great time of year to buy as everyone else is looking for Christmas presents.

In addition to negotiating a lower price, don’t forget to ask about extras – car mats, high spec paint, seat covers, to name a few.

7) Home appliances/electronics

Why it’s possible: While some are taking advantage of the high Australian dollar to buy goods cheaply online from foreign retailers, others are cutting back on spending altogether. As a result retailers have been doing it tough. But if you’re in the market to purchase some big ticket items, you could be in luck. Store managers and owners realize that a discounted deal is better than no deal at all.

How to do it: Visit the store at times when the manager is most likely working – early morning or afternoon. You are more likely to get a deal during the week, as the manager might be more inclined to talk discounts if fewer other customers are within earshot, lest he have to offer the same price to them as well. Expect a discount of about 10%, as profit margins tend to be lower on these items. However, it is often possible to get extras, or free delivery. Bing Lee is well known for negotiating its prices, and buyers are even able to do it online if they lack the chutzpah to do in person. Other retailers that have been known to offer discounts include: JB Hi-Fi, Good Guys, Myer and Harvey Norman. David Jones will to price-match, if you can provide proof from another retailer.

8) Jewellery

Why it’s possible: There is a huge mark-up on jewellery and most retailers have some built-in wiggle-room when it comes to price.

How to do it: Consumers might have better luck haggling in boutique shops, but even larger retailers will usually come down if you ask them for their “best” price. Expect about 30% off the sticker.

9) Pampering

Why it’s possible: With the advent of group discount sites such as Cudo, Spreets, Living Social and Jump On It, you should never again have to pay full price for a massage, body wax, haircut, or any other beauty treatment.

How to do it: Just sign-up with your e-mail address to receive information on deals which are posted daily. No haggling required!

10) Cash exchanges

Why it’s possible: You can change your foreign dollars at a bank or a cash exchange booth. Some are commission-free, but the exchange rate is slightly worse. Others charge a commission on a per-item basis on each transaction, or on a percentage basis. While banks generally offer better rates, some cash exchange booths will match their rates. Be wary of black market exchanges though as you could end up with counterfeit currency.

How to do it: Look for the posted exchange rates at the bank and then approach currency exchange bureaus nearby. Currency exchange booths should at least match the bank rate, or even give you a slightly better deal.

Tips on haggling:

• Ask: If you don’t ask, you don’t receive.
• Be polite: You don’t have to sweet-talk, smooth-talk or fast-talk anyone into giving you a good deal. You just have to be polite and ask them for their best price.
• Don’t waste their time: Establish yourself as a serious buyer and salespeople will be more inclined to strike a better deal with you
• Do your research: It helps to research prices online to get an idea of what different providers are offering.
• Talk to the right person: Don’t waste your time trying to bargain with someone who isn’t in a position to help you. Speak to the manager.
• Timing is everything: Ask for discounts when the manager is most likely working and the store is not busy
• Extras: If you are unable to get a discount, ask about extras.
• Walk: If you’re not getting a positive response, take your money elsewhere.

Source : www.yipmag.com.au

Some financial tips for the young

If you think that understanding personal finance is way above your head you are wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at maths... Unfortunately, personal finance has not yet become a required subject in high school, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at maths. To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life. 1. Learn Self Control If you're lucky, your parents taught you this skill when you were a child. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on the purchase? If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of. 2. Take Control of Your Own Financial Future If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, and others may be well-meaning, but may not know what they're doing. Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you. 3. Know Where Your Money Goes Once you've gone through a few personal finance books, you'll realise how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning coffee adds up over the course of a month, you'll realise that making small, manageable changes in your everyday expenses can have just as big an impact on your financial situation as getting a pay rise. In addition, keeping your recurring monthly expenses as low as possible will also save you a lot of money over time. If you don't waste your money on a fancy apartment now, you might be able to afford a nice house before you know it. 4. Start an Emergency Fund One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month. Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, holiday money and even money for a down payment on a home. Don't just hide this money under your mattress; put it in a high-interest online savings account, a term deposit or seek advice on how to invest it in equities. Otherwise, inflation will erode the value of your savings. 5. Start Saving for Retirement Now Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity". 6. Get a Grip on Taxes  It's important to understand how income taxes work even before you get your first paycheque. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with, which is also known as net, or take-home pay. 7. Guard Your Health  If meeting monthly health insurance premiums seems impossible, what will you do if you have to have surgery and don’t want to join the queues in the public health system. If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills. 8. Guard Your Wealth If you want to make sure that all of your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get contents insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset - the ability to earn an income - by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury. If you want help managing your money, a fee-for-service financial planner to provide unbiased advice that's in your best interest is the way to go, rather than a commission-based financial adviser, who earns money when you sign up with the investments his or her company backs. A Financial Basis for Life Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the person with the hard-won MBA. Source: by Amy Fontinelle | Investopedia.com