Budgeting Secrets

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Home Equity Comes Handy During Financial Crisis
Equity is simply the value of a property after all debts have been deducted. If your home appraises at $300,000 with a home loan of $150,000, you have $150,000 in equity. Whether you realize it or not, this equity can get you through hard times or provide you with a funding resource. Let's look at some examples.

Medical Emergency

If you get though your life without any financ... Read personal finance article



When you are unable to save for retirement
Not saving for retirement is people's biggest money worry. All most as many people said that not meeting monthly expenses is their biggest worry. A poll of 1,157 people was conducted by the AnswerBank which found that only 10 per cent of people polled are worried about paying their mortgage off.

Not having enough money to retire with is people's biggest money worry, meeting monthly expe... Read personal finance article



Budgeting Secrets
When implementing a new budgeting plan, one of the most important virtues to have is persistence. Persistence covers a multitude of sins: start and stops, numbers that aren't quite right, forgotten expenses all of these are eventually covered if you are persistent.

There's really no need to stress out and worry about getting your budget perfect the first time you sit down to do it. Just sitting down to do it for even five minutes is a major accomplishment for some people! So cut yourself some slack and just do what you can, when you can, when you feel like it. If you just can't bring yourself to work on your budget anymore at any one sitting, just tell yourself: "I can come back to this later. I'm persistent. I'll eventually get this budgeting thing covered." Instead of feeling guilty for not doing as much as you'd have liked, reward yourself for what you did do!

I use this strategy all the time for my own budget. I revise and work on my budget at most once or twice during a given month. I've gotten almost all of my bills set up to pay automatically through my online bank account. I just login to my bank, eyeball the charges, compare them against my plan, and scribble on my printed out plan a little bit - maybe alter and print out a new one if something has changed significantly. Then I'm done. It takes me 5-10 minutes at most each sitting.

I use my own budgeting software, but even a plain old spreadsheet can do the trick. Pencil and paper works great too. Whatever you use to manage your personal budget, just be sure to do something on it at least once a month - even if it's two minutes of effort. You'll often find that two minutes painlessly turning into ten and you'll accomplish more budgeting than you thought you were capable of - all by applying a little persistence.

Brad Homer offers free-to-try budgeting software which can help you easily generate a plan to become debt free and more. At his website you can also find more personal finance articles like this one.

© 2006 Homerworks LLC. All rights reserved.

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How rich are we

BEST advice when you're in a hole is to stop digging. So if I had any sense, I would draw a veil over last week's promise of a bottle of bubbly for anyone smarter than me at analysing savings data, and move on.

However, the e-mails which came in raised a number of interesting points and highlighted just how little we know about how rich or poor we really are. It all started with two savings surveys. Clydesdale Bank claimed half the population had less than £250 to their name, while another from Birmingham Midshires put average Scottish savings at £10,130.

I asked how they could possibly both be true?

Reader Steven Salvini pointed out that it could be a case of "the old problem of averages hiding significant deviations". He continued: "If half the population has no savings, to have an average saving per Scot of £10,130 means the other half has £20,260 each...

"Of course, it's much more likely that a small number of people have huge savings and the vast majority of us have next to nothing."

This theme was taken up by Brian Quaile, who said: "As with any average, the result is almost meaningless. The two surveys prove the well-known fact that a fortunate few are well off financially, the majority less so in varying degrees."

But are they right? Has wealth distribution changed so little since the days of those two great families, the "haves" and the "have nots"?

Or, in the words of Groucho Marx, have we merely worked ourselves up from nothing to a state of extreme poverty.

The astonishing truth is we don't know. We have a plethora of mortgage information supplied by the Council of Mortgage Lenders, and abundant data on insurance trends from the Association of British Insurers. But no central savings body collects reliable data about who is saving what. So when setting policy, government has to rely on surveys like those from Clydesdale and Birmingham Midshires, which can be conflicting not to say misleading.

We decided, for the sake of the policy wonks, to investigate further. First we asked Halifax, Britain's largest savings organisation, to come clean on the question of serious money. It analysed its accounts earlier this year and concluded that savings averaged £6,004 in Scotland.

However, group economist Martin Ellis stressed this was an average, which excluded those with no savings and gave no indication of precisely who owned the bulk of our wealth.

He suggested trying the Bank of England, otherwise known as the Old Lady. This turned up some hugely interesting data showing that we are both richer and poorer than we might think. Worryingly, though, our new-found wealth relies almost entirely on the sustained strength of house prices.

UK consumers owe debts of £1.2 trillion, but this is covered many times over by our wealth, which amounts to £7 trillion. This explains why the government is so relaxed about our debt levels.

But is it right to be relaxed? Less so when you consider that £3.4 trillion is tied up in our houses. This figure could collapse if house prices did. Furthermore, of the remaining £3.5 trillion, the lion's share is held in pension savings, which we can't touch. If we had to repay our debts overnight we could be in trouble. Similarly, a house price slide could prove catastrophic.

Against this, the Old Lady puts at £839bn our ready savings, such as cash and deposits. Not enough to cover our debts, but a nest egg of £13,943 for every man, woman and child in Britain, or £17,854 for every adult.

Where's my share, I hear you saying? But these again are average figures and the Old Lady has no idea who owns the bulk of this wealth.

The most reliable savings data is supposed to be the Family Resources Survey, which looks at households rather than individuals, and shows that half of all family units have combined savings of less than £1,500, while 15% have more than £20,000.

Hardly surprisingly, childless couples and pensioners have most money, while those raising children have least of all. But that is as far as it goes.

So it was back to Clydesdale and Birmingham Midshires to see what more could be squeezed from them. We made them dig out the original questionnaires. Once you delved behind the headlines, an almost identical picture emerged.

BM's YouGov poll showed that 40% had no savings at all, confirming Clydesdale's half with less than £250.

But the reality is even more bleak. An astonishing four out of 10 questioned by Clydesdale have less than £50 in the bank. No wonder credit is booming. At the top end, only 6% of those surveyed admitted to having savings of £20,000 or more.

So well done readers, you were spot on. My panel of experts decided the best answer came from Stuart Young (bubbly on its way). He concluded: "It is theoretically possible that they are both correct, although if that is the case then it's certainly true that in isolation they present at best only a partial view, and at worst a misleading one."

Isn't it about time we found out exactly how rich or poor we are, and who precisely owns Britain?

This article: http://business.scotsman.com/index.cfm?id=1298992006




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