3 Money Saving Tips Which Just Don't Work

Whether you're using IVA help to manage your debt or just want to economise now to avoid that whole debt spiral, there are some common financial pearls of money-saving wisdom out there which are a load of nonsense. In this article we'll be taking a look at some of the worst offenders to make getting by on IVA help or living on a shoestring a little easier. Save yourself some major money pain by reading on...

1. Buy BOGOF
Supermarkets and big stores are there to turn a profit, not to help you with your budget. Buy One Get One Free deals might sound great, but often they're a load of nonsense. Loads of money-saving gurus will tell you to keep your eyes-peeled for these 'bargains' but, with some frequency, BOGOF prices are inflated to account for the difference.

Of course there are savings to be made, but unless you actually need two of the same product, it's better to look for individual items at a lower price. If you're really savvy and you have your calculator with you it's worth working out the individual price of the items if you're not sure if the deal is a good one. The same goes for 3 for 2 offers and their ilk, which, if anything, are even worse!

2. Instant Frugality
Much like yo-yo dieting, going financially cold turkey is a dreadful move which could leave you living like a pauper for weeks but then splurging on something you don't need 3 weeks later. The problem is the sense of entitlement that living like a monk can create. Equally, the daily grind of living on next-to-nothing can get impossibly gruelling - an impulse buy becomes more and more tempting until you've wasted all your hard work on a fancy frock you just didn't need.

If you're trying to get by on IVA help or just looking to put some extra money away every month, don't go cold turkey. Get a solid plan in place, work at it steadily, don't deny yourself a few reasonable little pleasures and reassess your expenditure regularly to make sure you're being as savvy as you can in all areas.

3. Skimp on Maintenance
You and your possessions need looking after and often these are the first things people try to cut corners on when they are trying to save. From dental appointments to fixing chips in your windscreen, not spending on these is complete false economy as, without attention, the problem will get worse and worse and ultimately cost a helluva lot more than it would have in the first place.

In conclusion - be smart - think carefully about every 'great deal' you come across, look after yourself and your property and take a 'slow and steady wins the race' approach to frugality. By ignoring those that tell you otherwise you'll enjoy financial stability much sooner with less pain in the process!

IVA help is one way to gradually handle your debts. If you're struggling with mounting debts, IVA help can get them under control so you can repay them at an achievable rate. To find out more from the insolvency experts visit the IVA Service for help today.

Avoiding Budget Surprises

If you're reading this article, you probably care about your family's financial future. Part of preparing well for the future means implementing good money management skills. And, when it comes to proper money management, nothing makes you more effective than a budget! A strong budget helps allocate funds appropriately, and ensures that everyone in the family stays on track with spending and saving!

However, you might be struggling with your family's budget. If so, chances are that you're forgetting some of these key budget categories. Take a look at our list of Budget Surprises. You might find that your budget issues might be resolved by focusing on these budget categories!

The 4 Categories

    Adjustable Interest Rates. This is a big money-drain. Frequently, when you get a loan, your interest rate will start off small (to draw you in!) and then go up after a set amount of time. If you have forgotten to adjust these interest rates in your budget, they can really start to catch up with you! Don't let credit debt interest throw your budget off. Make sure you account for it, and refresh your figures regularly.

    Technology Upgrades. Hard drives crash. TV tubes burn out. Your stuff probably has more tech problems than you care to think about. When these issues arise, you sometimes have no other choice than to spend money addressing them. Factor this into your budget! Set aside a percentage of your tech expenses each month so that when something does break, you can fix it without incurring credit debt.

    Repairs. Speaking of things breaking, if you own a home or car, you're probably used to repairs! Good money management means being financially prepared to repair your car and home. Allocate at least 10% of your vehicle's value for repairs each year. Homeowners should do the same, but the percentage rate may vary depending on the age and condition of your home.

    Deductibles. Another big one here! Set aside the cash you could need to meet your health/auto insurance policy deductibles. These can be big hits on a budget. Don't let them take down your budget plan. If you can't allocate the cash in one move, work on putting up a fraction of the money each month until you have all of the funds available. That way, if you do have to pay all of your deductible, you're prepared!

These money management techniques can help you budget well, keeping you out of credit debt. Review your family's budget, and see if all of these categories are being factored in! If not, you take account of these four categories, and secure your family's future against whatever issues may arise!

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0% Interest Rates and Your Retirement

A recent article by Michael Finke, professor and coordinator of the doctoral program in personal financial planning at Texas Tech University, points to a problem we financial planners have been having for the last several years-a problem we might not be able to shed soon. The problem is interest rates, particularly interest rates near zero. The immediate impact of this problem is pretty simple: Money is cheap for borrowers but for savers, particularly retirees, income is hard to find. The portfolios that our grandparents lived on (spending the dividends and interest but never the principal) are portfolios that cannot be built easily today unless you have more money than you really need. Within this problem is the issue of projecting rates of return for financial plans.

First, the problem: Years ago, a study was done that showed most portfolios could withstand a 4% withdrawal rate over a 30-year time horizon without running out of money. Subsequent research backs that up, sometimes with a slightly higher number, and sometimes with a slightly lower number. Inherent in the 4% number is a rate of return that assumes a certain yield off of bonds as well as a certain return from stocks over-and-above a "risk-free rate" that we normally associate with intermediate-term government bonds. So Professor Finke asked another professor, Wade Pfau, to run some numbers on how low-interest-rate assumptions affect retirement projections. Professor Finke points out that the real rate of return on intermediate term bonds from 1926 to 2010 was 2.52%. Using that number, Professors Finke and Pfau estimate that a 4% withdrawal strategy will fail only 6% of the time over a 30-year time horizon.

But if bonds are currently yielding closer to zero, and the "risk-free rate" is near zero, then our assumptions on long-term portfolio returns are all wrong. In this scenario, Professors Finke and Pfau estimate that a 4% withdrawal strategy could potentially fail 34% of the time over a 30-year time horizon. A one-in-three chance of failure is alarming if these numbers hold true for the coming decade.

The solution is not as simple as defining the problem. Part of the solution is to save more or spend less. This is always easier said than done. The closer you are to retirement, the harder it is to make saving more effective; only spending less in retirement will affect your plan enough to make it "work" in many adverse scenarios.

Another solution, and Professor Finke mentions this, is annuitizing part of your assets to lock in both a rate of return as well as a mortality credit. In effect, an insurance company pays the people that live longer the money that should have gone to the people that passed away early. Admittedly, I have been wary of many annuity products in my career because of the higher associated costs. But annuities make sense if the costs can be reduced. Just look at Social Security or your company pension plan as annuitized income streams where the costs are low.

Annuitizing is going to get more media attention going forward because more companies are going to offer early buy-outs of pension plans in order to reduce long-term expenses-just Google the recent news on General Motors and Ford pensions. The question of annuitizing (and by extension, when to take Social Security benefits) is going to become more important, especially if interest rates stay low. Annuitizing might be an interesting answer for some people to make sure they do not run out of money in retirement.

About Jon T. Meyer, CFP®
Jon T. Meyer, CFP® is the President of Boeckermann, Grafstrom & Mayer Wealth Management, LLC, a Minneapolis-based Registered Investment Advisory firm. Jon specializes in working with retirees and individuals nearing retirement to help them create the income they need in retirement by utilizing advanced social security planning, tax planning and investment strategies. For more information visit http://www.bgmwealth.com.

Investor Returns Vs Investment Returns

Warren Buffet once said that he wouldn't mind if the stock market shut down for the next five years, an unusual statement coming from the man that some would say was one of the greatest investors of the 20th century. His quote says a lot about what makes him a great investor. Mr. Buffet is saying that he invests for the long run and doesn't need to know how much his investments are worth on a short term basis. The real message behind his statement and many others he has shared over the years is that the primary requirement for successful investment performance is excellent investor behavior.

Consider a study done several years ago by the Bogle Investment Center. This study found that the average equity mutual fund in the U.S. produced an average annual return, with dividends reinvested, of 9.6% from 1984 to 2002 (inclusive). During the same period, the average equity investor earned 2.7% in equity mutual funds. Clearly, the performance of specific mutual funds cannot account for the difference. Investor behavior (moving and switching) is the only logical explanation.

The point is that behavior, which is driven by one's beliefs or perspective, is the primary driver of investor performance, good or bad. Again, Warren Buffet: "Successful investing doesn't correlate with IQ... Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people in trouble in investing."

Your financial advisor should work to ensure that your investment performance is meeting the expectations of your financial plan by providing efficient, after-tax results. You should not only delegate the investment design and structure but also the necessary discipline to increase your probability of success.

Sometimes, investors can make a number of "mistakes" in thinking that wreak havoc on an investment strategy. Here are four major mistakes to avoid:

Mistake #1: People give too much credibility to recent experience and they project that experience into the future. This is also known as the "this time is different" syndrome. The investment bubble of the '90s was a classic example of this thinking.

Mistake #2: People who measure frequently change frequently, and this produces poor performance. Market returns do not come evenly over time. Successful investing is a long-term process and requires appropriate measuring disciplines.

Mistake #3: People are not willing to put the time into the markets in order to receive the benefits they offer in the long run. It is time in the market, not timing the market that matters most when it comes to successful investing.

Mistake #4: People avoid actions that confirm they made a mistake, even if it is the best action to take. Studies show that people will hold onto their mistakes too long in order to avoid having to admit that they've made one.

If you see yourself, or a friend, with any of these behaviors, ask yourself what perspective or belief leads them to think the way they do and have that friend call a financial advisor.

Ray Padron is the President and Chief Operating Officer at Brightworth. As a personal Wealth Advisor to high net worth families, Ray provides comprehensive financial and Atlanta investment management advice to help clients achieve their financial goals and dreams. Brightworth is an independent Atlanta financial planning firm that provides investment and wealth counsel to high net worth individuals, families and institutions. Learn more at http://www.brightworth.com/wealth-solutions/implement-an-integrated-wealth-strategy/