Is this how you feel about your budget?

Of course, like so many things in life, my aversion to the word budget has more to do with my own personal baggage, then any real problem with the word itself.

In the case of the word budget, my personal finance baggage is quite heavy.

When I’m talking about how I manage my money, I prefer to use the phrase “spending plan.”

It seems, I think, to convey a better sense of control and purpose. I know that a spending plan is, really, just another budgeting technique, but I feel better about it anyway.

Budget = Restrictions

One of the biggest issues I have with the concept of budgets is the restriction factor. I know that, as a personal finance blogger, I’m supposed to be ok with cutting back, but I really don’t like the idea of enforced restrictions on my spending — even when I’m the one creating the restrictions with a budget. My personal money style is that of a spender, and a budget cramps my style.

Responses from Facebook

To me, budgets are about limitations. With a budget, I try to set a limit on different categories of spending. Once I hit that limit, I’m supposed to be done. There’s no spontaneity. Unless, of course, I budget that in, too. But it seems kind of pointless to budget in what’s supposed to be fun, spontaneous spending.

After a while, the budget starts to chafe, you feel restricted, and you start to feel a little bit harried, forced to count every penny — and possibly pinch each penny as well. It’s exhausting, and, in my case, it sucks the joy right out of spending money.

Spending Plan: Flexibility after Meeting Funding Priorities

Instead, with a spending plan, I find there’s a little more flexibility. Just because I don’t like budgeting, and I like spending, doesn’t mean that I ignore the basics of good financial practices. Instead, I plan some of my spending ahead of time to make sure that my most important funding priorities are met. Before I spend on entertainment, recreation, dining out, and travel, I make sure that the essentials are covered. My funding priorities include:

• Tithing to my church
• Charitable donations
• Monthly obligations (mortgage, insurance premiums, utilities, groceries, etc.)
• Retirement account
• Emergency fund
• Effort to build dividend income portfolio
• Long-term spending goals (vacation, car down payment, home improvement, etc.)

As far as I’m concerned, once those funding priorities are met, other spending categories don’t matter. I automate most of my funding priorities, so that is all taken care of without conscious effort, and recorded in my personal finance software. There’s no need to pre-plan how much money I can spend eating out, or going to the movies. I don’t have to hold off on buying sale-priced camping gear, just because it’s not in the budget for the month. As long as I don’t go beyond my means, there’s no need for a formalized restriction on spending categories.

Reactive vs. Proactive Financial Planning

Another difference I see between budgets and spending plans is that one seems reactive, while the other is more proactive. To me, a budget seems reactive. It’s as if you’re on the financial defensive, cutting spending and trying to avoid “overspending” in each category. it’s a position that seems to encourage a lack of control. In my mind, having a budget is a lot like being at the mercy of your money.

Do you budget?

On the other hand, a spending plan evokes feelings of purposeful spending. In my mind, a spending plan is about taking charge of my finances, and directing my money. I can choose the way I direct my resources, planning to fund my most important priorities. It just seems more positive to focus efforts on creating a spending plan that puts you squarely in charge of your financial destiny. Rather than thinking, “I can’t only do this much this month,” as a budget encourages you to think, a spending plan allows you to say, “I’m going to do this with my money.” Perhaps it’s not a big difference, but it reveals a lot about the mindset.

With the budget mindset, money is always scarce. Even if money isn’t scarce in your situation, the budget mindset seems to set up financial scarcity, since you know there is a cap on what you can spend in certain categories. Your spending plan, though, indicates that you have some sort of direction and purpose for (at least some of) your spending. It implies that you have the money to meet your goals, and that you are in charge of your money habits, deciding where your resources should be used next.

What Do You Think?

Many might say that there is little to choose between a budget and a spending plan. To me, though, spending plan is preferable.

What do you think? Do you think that there is a psychological difference between saying “budget” and “spending plan?” What do you think that difference is?

Image by striatic

Why I Like “Spending Plan” Better than “Budget” is a post from: PT Money: Personal Finance by PT.
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“You know, like nunchuku skills, bow hunting skills, computer hacking skills… Girls only want boyfriends who have great skills.” – Napoleon Dynamite

Do you have the skills to pay the bills? Here are some good skills to have on your journey towards financial freedom.

You should be able to…

1. Balance a checkbook
2. Create a zero-based budget
3. Track your spending
4. List your monthly expenses
5. See all of your accounts in one place
6. Eliminate unused expenses
7. Get a late fee waived
8. Get hardcore frugal
9. Call and lower your TV, Internet service, and phone bills
10. Haggle for the lowest price
11. Spend based on your values
12. Implement a “sleep on it” rule
13. Learn from your money mistakes
14. Locate an online coupon or promo code
15. Use your smart phone to save money
16. Get cash back for the things you already buy
17. Make a grocery list
18. Clip coupons
19. Get free shipping
20. Find a fee-free ATM
21. Find the cheapest gas in your zip code
22. Negotiate for a new or used car
23. Know when it’s smart to rent a car
24. Live within your means
25. Create accountability for your finances
26. Take care of your stuff so it will last longer
27. Delay gratification
28. Create SMART money goals
29. Get your three credit reports for free
30. Get your credit score for free
31. Fix errors on your credit report
32. Know the factors making up your credit score
33. Stop the junk mail
34. Find your credit card interest rate
35. Prioritize your debts
36. Understand compounding interest
37. Create a debt snowball or avalanche
38. Transfer a high-interest balance
39. Call and lower your interest rates
40. Set up an amortization schedule
41. Calculate your net worth
42. Find the best mortgage rates
43. Find your car’s blue book value
44. Perform basic car maintenance
45. Sell your car for maximum price
46. Find your home’s estimated value
47. Perform basic home maintenance
48. Avoid private mortgage insurance
49. Determine when it’s time to refinance
50. Explain what type of mortgage you have
51. Create a plan to pay off your mortgage early
52. Escrow your own property taxes and insurance
53. Change your insurance deductibles
54. Get a quote for cheaper car insurance
55. Buy life insurance
56. Create your last will and testament
57. Take a home inventory for insurance purposes
58. Understand the “pay yourself first” concept
59. Set up an automated savings transfer
60. Set up a direct deposit
61. Create an emergency fund
62. Get more for your savings
63. Create a diversified retirement portfolio
64. Balance your retirement portfolio
65. Find a fund’s expense ratio
66. Ask for a raise
67. Rollover your 401K
68. Change your 401K contribution %
69. Get your employer match
70. Calculate your annual contribution limits
71. Calculate your income needs in retirement
72. Calculate your “number”
73. Stay cool when the market crashes
74. Dollar-cost average
75. Understand stocks vs bonds
76. Understand index funds vs mutual funds vs ETFs
77. Find and talk to a fee-only Certified Financial Planner
78. Find and talk to a Certified Public Accountant
79. Avoid unnecessary taxes on your investments
80. Explain the difference between a Roth and Traditional IRA
81. Complete you tax return
82. Maximize your deductions
83. Understand your marginal tax rate
84. Calculate your effective tax rate
85. List things on craigslist.org and eBay
86. Donate things to your local Goodwill
87. Give more money each year
88. Have a garage sale
89. Find a reputable charity
90. Set up a CD ladder
91. Calculate your daily and hourly salary
92. Find out what salary you should be making
93. Find legit extra income opportunities
94. Start a business with no money
95. Make time to bring in extra money
96. Understand the importance of diversifying income
97. Teach your kids about money
98. Talk to your (future) spouse about money
99. Set up a FSA or HSA for your medical expenses
100. Negotiate a cash price for medical services
101. Put people and relationships before money

How many skills do you have? I know I missed a few. List some more money skills in the comments below…

101 Money Skills Everyone Should Have is a post from: PT Money: Personal Finance by PT.
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Stop the clutter, and stop logging into all of your online accounts to download your statements. There is an easier way. Use Manilla.

Manilla is a free, easy-to-use, online tool to help you organize and manage your financial life. With Manilla you get bank-level security and the ability to see all of your accounts in one place (including your utility bills and rewards accounts) Additionally, with Manilla you can view (and permanently store) your statements, set up alerts, and even pay your bills.

Quick and Easy Sign Up with Manilla

Signing up with Manilla is fairly straight-forward, and can be done rather quickly. You’ll need to give them your name, email address, and setup some security questions. After a quick email confirmation, you’ll be taken to a screen where you can choose the financial accounts you’d like to see in your Manilla account.

List of the most popular account providers you can connect to with Manilla.

To connect your accounts, you will need to provide Manilla with your login credentials at each of these places. After you’ve done this once, you are good to go.

See All of Your Accounts with Manilla

The Manilla “Accounts” tab is where you will see all of your accounts in one place. Here you can see your “household” items like your cell phone bill and any other services and utilities you can connect. I was unable to connect by water and energy providers as they are not in the Manilla system yet. However, I was able to connect my cell phone (which I just lowered by 20 bucks), and my Internet service.

When you click into an individual account, you are taken to a screen where you can see the latest statement and click a button to go to your account to pay the bill. From what the Manilla FAQs say, they have quick pay set up with only a few of these providers. Therefore, some of the “pay now” buttons merely take you to your providers home page.

Also under the accounts tab I have all of my financial accounts, which includes my checking, saving, retirement, and mortgage. The next category under the accounts tab is for travel and rewards, which is cool to have. I tried the “book travel” button from one of my rewards accounts (AAdvantage) and it simply took me to the AA.com home page. Nothing ground-breaking there.

Finally, under the accounts tab you have a section for subscriptions. I found this to be an odd section. I’m not really a magazine reader so I guess that’s why it didn’t make sense to have this here. Additionally, I’m unable to remove the widget from the accounts tab. So, each time I log into Manilla to see my accounts, I have to stare at this unused subscription widget. It would be nice to be able to remove it or at least move it to the bottom.

Store Your Statements for Free

With Manilla you will receive mail in your account just like if you were signed into your providers account. So, if you have a bill due, or if a new statement just arrived, Manilla will let you know.

What I think is nice is that your account statements are automatically imported to this section of your Manilla account. I know many people who keep their online statements and purposefully download them because the financial institution only keeps a year’s worth online. With Manilla you can keep them as long as you want, and they are all in one place, and not taking up your hard-drive space.

My Manilla dashboard showing my mail items and reminders.

Also under the mail tab, you will receive offers from your providers. I’m assuming this is just like when you receive offers with your paper statement?

My Take and More About Manilla

Manilla also has a tab for reminders. I didn’t explore this area very much, but I’m assuming when you have a bill due, something will show up here. I think I saw that you can manually create reminders as well.

The dashboard style home account screen is pretty sweet. Simple as heck, and it shows how lean and mean the team at Manilla have intended for this tool to be (i.e. manage your finances quickly and easily).

Manilla is a free service because they partner with your service providers to get you off of paper statements onto electronic statements. Does this mean that if you already get digital statements that you can’t use Manilla? No. I was totally digital before I signed up and was let in.

You should also know that Manilla is in beta. So when they roll out the full version, who knows what kind of features and services they will provide. They are off to a good start though.

People are going to naturally want to compare this tool with Mint. If I were to compare the two, I would say that Manilla is Mint minus the graphs and budgets, plus statements, rewards, and quasi bill payment. If you’re looking for a place to help you make the whole account statement download and storage problem go away, then Manilla is your tool. Check em out at www.Manilla.com.

Manilla: Your Accounts [and Statements] in One Place is a post from: PT Money: Personal Finance by PT.
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Don't let money problems hurt your new marriage.

Congratulations! You’ve just tied the knot and are ready to settle down into the life of a newlywed.  But before you put away all the wedding gifts and organize your honeymoon photos, there is an important conversation you must have: Money.

Many married couples skip this awkward step, and fall into some sort of hybrid of each individual’s money style when dealing with joint finances. It may be difficult to talk to your beloved about money, but it is a non-negotiable if you want a healthy marriage.

Money problems are cited as one of the top reasons for divorce, just behind infidelity and communication issues. Don’t let that happen to your marriage! These are six tips that you should take with your spouse to secure your marriage and money for many years to come.

1. Tell All

Although this conversation would ideally happen before the wedding, it is important for both husband and wife to know their combined net worth. That includes any outstanding debt as well as assets like savings, retirement and life insurance accounts.

It’s not possible to move forward financially if you don’t know where you are, so bring it all to the table. Even if you’ve been married forever, this is something that’s worth going over every few years. Just like periodic weigh-ins can keep weight from creeping up on you, periodic net worth check-ins will keep you from losing track of how your money is faring.

2. Set Goals for Your Marriage and Money

Once you and your sweetheart know where you currently stand financially, make some life goals. This is the fun part of the money discussion. What do you want to be able to do in the future? Pay off your student loan before you have kids?

Retire with $1,000,000? Own a house? This conversation will help you and your spouse to determine what is most important to each of you. Don’t bite off more than you can chew with this exercise. Determine which 2-3 goals are most important to you and focus on them.

3. Track Your Spending

It’s all very well to know how much you are worth, but you have to know what is happening to every dollar that passes through your hands, as well. Without this information, it is nearly impossible to create a workable budget and start planning for your goals.

There are many tools available for money tracking, from good old-fashioned pencil and paper, to self-tracking online tools. Try different systems until you find one that works for you. No matter what system you use, track your spending for at least a month (and ideally for three months) so you have an accurate view of where your money goes.

4. Create a Budget Together

Now you have a much better grasp on what your money is (and isn’t) doing for you, and you can put together a budget to help you reach the goals you defined in step two. Many financial gurus like Dave Ramsey and Suze Orman offer budgeting advice, in addition to the thousands of budgeting website available online.

Just as with the spending tracker, you will want to find the system that works best for you. The most important aspect of budgeting in a marriage, however, is consensus. Both spouses must agree to the budget or it will go unused.

5. Delegate

Whether you have a joint checking account, separate accounts, or a mix, it is likely that one spouse will be the money manager in the marriage. Decide ahead of time who will be the one to pay bills, balance the checkbook, keep track of financial records and make day-to-day money decisions.

All financial work does not have to be made by the same individual, as long as someone covers every money decision. If you have decided ahead of time who will take care of each aspect of your finances, you won’t have a month where you each think the other has paid the mortgage.

6. Plan for Emergencies

Unfortunately, your married life will not always be smooth sailing. It is important to have money set aside for when things aren’t going great financially. This not only means having a 3-6 month reserve of cash set aside in case of financial emergency, but it also means planning for the worst.

No one wants to think about death, but it is important for newlyweds (and not-so-newlyweds who haven’t done so yet) to make sure they have enough life insurance and an updated will. Think of it as the most loving thing you can do for your spouse.

Money and marriage may not be the most romantic combination, but being on the same page financially will strengthen your bond and keep your relationship healthy. And that is romantic.

If you are married, what marriage and money tips do you have to offer newlyweds?

6 Tips for Marriage and Money is a post from: PT Money: Personal Finance by PT.
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Do you know how to balance a checkbook?

This is definitely one of those skills everyone should have, regardless of the fact that many of us don’t write more than one check each month.

When you balance a checkbook, what you are doing is reconciling the balance that you have in your checkbook with the bank’s balance. If your latest statement with the bank says that you have $1,000 in your account, and your running checkbook says that you have $1,100, then you need to reconcile the two amounts and determine what’s causing the difference.

Balancing your checkbook helps you achieve three goals: identify the bank’s errors, identify your errors (more likely), and it tells you your true balance so that you don’t write a check for more than you have in your account.

Today, however, we can understand our money situation in easier ways: by logging on to our bank’s online account access page, or by viewing our bank’s mobile phone app, or seeing all of our accounts at one time using a service like Mint.com or Adaptu. Since we don’t write as many checks these days, there isn’t much of a worry that we’ll not have enough money to cover a check that’s still out there.

I would argue that we can also achieve the three goals above using a more simple method. First, you can simple keep a sizable cushion in your checking account so that you’ll never have to worry about an overdraft. Next, you can simply keep your debit card receipts and deposit receipts and periodically check them against your bank records using your online account access.

But I’m not here to explain why this isn’t a good idea. Everyone should be able to perform this simple financial exercise. Here’s how to balance a checkbook…

Preparing Your Checkbook Register

It goes without saying that to balance your checkbook, you need to have a checkbook register with a running balance. If you aren’t doing this, and you want to be able to balance your checkbook at the end of the month, then you need to start keeping track.

If you didn’t keep track, but you have all of your debit card receipts, deposit receipts, and carbon copies of your checks, then you can play catch-up and get your checkbook register up to speed. Simply take the ending balance from last month’s bank statement and jot it down as the beginning balance on your register. Now take those receipts and carbon copies and make a note of each transaction. Total it up and you now have a checkbook balance.

Balancing a Checkbook

Okay, now that we have a completed checkbook to work with, break out your latest checking account statement and let’s reconcile the two. Remember, this is all you are doing: accounting for the differences between your checkbook (i.e. your own record) and the bank statement (i.e. their record).

Step one is to record all of the transactions from the bank statement. Place a check mark next to all of the items in your register that are on your statement. Make note of the correct dollar amount. If there are items on your statement (checks, deposits, ATM withdrawals and debit card purchases) that you neglected to write in your register, then do so at this time. Your register should now be up-to-date with all of the items that your bank is aware of.

Step two is to determine what your bank doesn’t know. Take a blank sheet of line paper and write down your bank statement ending balance. Next, list out all of the checks, deposits, and other transactions that are on your checkbook register, but not on the bank statement. This should be all of the items that you didn’t place a check next to in step one. Subtracting the checks and adding the deposits should give you a new balance, which should equal the balance in your register.

If there is still a difference, go back and double check your math. If your difference is divisible by nine (e.g. $118.80), then it’s likely that you have transposed a number (e.g. 35 instead of 53).

Can you balance a checkbook? How are you balancing your checkbook in this age of the debit card, credit card, and soon to be mobile payment?

Photo by Betsssssy

Everyone Should Know How to Balance a Checkbook is a post from: PT Money: Personal Finance by PT.
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I use Mint.com, the free online-based personal finance software, and their iPhone app to keep track of all of our financial accounts. This includes the checking accounts, savings accounts, credit cards and other loans, the mortgage, and all of our investment accounts.

I check the app once a week or so to see how my accounts are doing, and to make sure I don’t need to move any money around. I also get alerts when I have a low balance or when I’ve spent an unexpected amount in a category. Although Mint can do a heck of a lot more, this is mainly what I use it for: seeing the big picture of our money situation. Here’s more about Mint…

Mint Home Page

The Overview – See All Your Accounts at Once

This is where the magic happens. When you sign up with Mint, you get to add your whole financial picture to one big dashboard. No more logging into multiple accounts and creating spreadsheets. Mint brings that to you with their overview page. At the bottom of this page you are even presented with your net worth. A nice number to track over time.

Other Mint.com Features

Transactions – Of course, you can drill down into each of your transactions and see how much you were charged, the date, and the description. Mint will automatically assign an income or expense category. The program is pretty good about getting this categorization right. But there are some items you may need to manually correct.

Budgets – Mint allows you to set monthly budgets for your spending categories. In fact, even if you don’t set a budget, it will assign a default budget to each category. When you breach those budget numbers, your overview page will show alerts detailing where you are over. Again, I really don’t use the budget feature. But it’s well worth a look if you are trying to crack down on spending.

Goals – This is a brand new feature at Mint. I really like what they’ve done here. One of the first steps to any solid savings plan is having a few goals in mind. Why manage your money if you’re not going to do something with it right? What Mint does, in a fun and intuitive way, is to help you create goals for savings or debt reduction. You start by selecting your goal, follow their prompts in estimating your needs and how long it will take. If it’s a savings goal, you let them know which of your accounts you’ll be using to save for the goal. They track the account and keep up with your progress. Likewise with a debt reduction goal, they track the debt account and see how you are performing each month.

Mint Savings Goals Feature

Trends – This is where your graphs and charts are. The categories you assign to your spending drives this cool feature. Fun to look at and really will give you and idea of your habits and areas for improvements.

Investments – This is basically a drill down into your investment accounts. With online access to your accounts, Mint is able to determine which funds you are invested in. They display all sorts of information including your performance, value, allocation, and comparisons to the market (very cool).

Ways to Save – One of the unique features of Mint is their suggestion tool under the Ways to Save tab. This is essentially how Mint makes a bit of their money. The refer you to products that will give you a better savings rate, lower fees, or lower interest rates on debt.

The Mint iPhone App

Like I mentioned above I also have the Mint iPhone app which basically just taps into the online tool. You can’t add accounts from here, but you can see an overview of your accounts and drill down into details. I use this app 99% of the time vs. going to the .com site.

Security Concerns

Mint does gain access to your login credentials. So there is the potential for exposure of this information. However, Mint contends they have bank-level security. So if you trust the Bank of Americas and the INGs of the world, you probably can trust Mint. Here’s more about their security.

Mint Security Video

Note: An alternative to Mint would be to create this with a manual spreadsheet and update it yourself by logging into your accounts periodically. Lucky for you I’ve created such a spreadsheet.

Time to get started tracking your accounts with Mint. Sign up for free and add your accounts to see your net worth.

How I Use Mint.com To Keep Track of My Money is a post from: PT Money: Personal Finance by PT.
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*based on completely unscientific polling data

People manage their money on the go using iPhone apps with products from Mint.com, Bank of America, ING Direct and many others.

Information is available near real-time when you want to look at your checking account balance, or just see how you’re doing against your planned budget for the month.

I’ve learned a lot about software over the past 12 years because it’s my primary career as a software project manager. In that time, I’ve learned a lot about how businesses use software to help them perform their work more efficiently.

However, I’ve also learned that it’s still about the business process and not necessarily the technology that makes the biggest difference.  Let me explain. You have to have a good business process in place for the technology to provide the most value to the organization.

Certainly, software can help create better process, but you must first invest in creating the right process with the right people and then leverage the technology to make it even better.

What does all of this have to do with personal finance?  If you don’t have good personal money management practices in place, signing up for some of the best money management software may be of some help, but you still have to do your job well as the personal money manager.

Software can provide you the tools to create a budget and track your spending, but the tool by itself won’t help you succeed in achieving your financial goals such as paying off debt, spending less than you earn each month and funding your retirement.

Let’s look at a few practices you must establish to get the most out of the technology side of personal money management.

Planning and Tracking

I’m of the opinion it’s important to be proactive in planning your money each month by establishing a spending plan (to whatever level of detail that works best for you).  You’re in control of your money if you’re giving every dollar a job at the beginning of the month.

If you’re only looking at your spending through the analysis features of your personal finance software at the end of the month, it’s too late to make any changes for the current month.  You’ve most likely overspent money and will have to make up for it the next month.

A lot of software automatically assigns categories and provides budget suggestions for you.  While such features can be handy and can save your time, be careful you’re not letting the product replace your important job of planning your spending and proactively managing it each month.

Communication

As I mentioned in the opening of this post, today’s technology provides the ability to manage your money on the go.  I know for my wife and me, having online technology is a great way for both of us to keep our eyes on our spending categories and insure we’re not spending more than we’ve planned.  But, it would be a mistake if we let the software come in between us discussing our spending.

We try to take the time each month to sit down and plan together (it only takes 15 – 20 minutes).  We then spend a little bit of time each week reviewing where we are with our plan (10 – 15 minutes) and discuss new spending needs not planned and how to manage them.  Conversation can never be replaced by personal finance software.

Managing Change

Let’s be honest and recognize spending is not perfect each month.  For example, some months we spend more for groceries than other months.  In some cases we might spend a little more on entertainment because there was a special event we wanted to take our children to see.

Then we have the holidays, birthdays and many more things that aren’t regular recurring expenses.  Be careful in planning your spending once and setting it up as a reoccurring budget in your personal finance software.

You can’t assume the same budget or plan can be carried over from month to month.  In other words, it’s dangerous to go on auto pilot. Doing so would be short-sighted as it’s important to review today’s needs and yesterday’s spending to manage wisely.

I love the benefits software provides and I’m a big fan of personal finance software all together.  But, it’s important for us to remember that technology can never replace our important responsibilities of managing money.

It’s still our job to plan, track, communicate and manage all the changing needs.  It’s the software’s job to help us be successful at these responsibilities.

What do you think about these ideas of establishing good personal money management practices and not depending on software to do this for you?

This is a guest post from Jason Price who blogs about personal money management and Christian stewardship at OneMoneyDesign.com.

When Personal Finance Software Might Not Be a Good Thing is a post from: PT Money: Personal Finance by PT.
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Austin, who occasionally writes here at PT Money, is in his 2nd year of teaching English in western Japan. With the Japan Tsunami fresh on his mind, he generously offered to write a couple of pieces on preparing for major disasters. You can check out his personal finance site for 20-somethings at Foreigner’s Finances.

I teach English in western Japan and was here last month to witness first-hand the carnage that the Tōhoku earthquake and tsunami had on the northeastern coast of Japan.

By now many people have seen the devastating footage of the tsunami reaching mainland with whole houses being ripped from the ground and cars being thrown around like matchboxes. These goods, which people had saved up for for years, were destroyed in minutes.

A man sifts through debris left in the wake of the Tsunami.

The monetary aftermath of this disaster will be a challenge for Japan for decades to come.

If you pay attention to your finances you know that a disaster like the one in Japan can and will wipe away your finances. All of the saving and investing you’ve done can be deleted in minutes if you don’t prepare for it.

So how does one go about preparing your finances in case a catastrophe were to strike? What are the steps you can put in place this week that would make a huge, unexpected financial hit less painful on you and your family?

Have an Ever-Growing Emergency Fund

Here’s PT’s post about emergency funds in case your new to the idea. To help insure yourself or your family, start one today using a sub-savings account with an online savings account like ING or Ally.

Once you open this account, create an automatic monthly transfer of $25-200 to the account from your regular savings so it continues to grow every 2 weeks, month, or 2 months.

This is money that will only be touched in worst situations where all of your other money has been wiped out and you have no other options. Don’t be content with $500 or $1,000 in this account. Make it grow every month because it’ll insure your financial safety that much more in case a disaster affects your family in the future.

Remember: it’s always a good problem if you have too much in your emergency fund.

A town in northern Miyagi that sat in a natural valley which channeled the tsunami. Very few buildings remained.

Insure Your Big-Ticket Items

Your house and car should already be insured, but consider extra insurance for prized possessions in case of natural disasters, fire, theft, etc. Maybe you have a $14,000 wedding ring or a rare painting from France that’s worth $10,000.

Can you insure these items for a little bit every month in case of emergency?

By spending a little to insure these high importance items you’ll allow yourself to sleep easily knowing these items can be, at least, monetarily replaced in a time of need.

Contact your insurance agent today to see about rates for your most valuable high-ticket items. Also, here’s a NY Times about the best ways to insure your valuables which can be helpful if you’re going to do this yourself.

Have 2-3 Credit Cards with Large Credit Limits

It’s been a month since the Japanese tsunami and people are still holed up in shelters. In times of need, having quick access to money is important and something that can provide another level of security is a credit card.

Not having to worry about the amount of cash you have in a time of need is one benefit for those who are credit card weary. Need water, clothes, food, or a hotel for your family? Just put it on the credit card, make sure everyone is safe, and worry about the payment later.

A soldier with 35th CSSB hands out a purse to a teacher at a school in Ishinomaki.

Credit cards allow some financial breathing room in a time of need. Not only that, but when used correctly they can improve your credit and save you tens of thousands of dollars on big purchases in your life.

So get 1-3 cards and put them in your wallet. Every 6-12 months, call the credit card companies and have your credit line increased to insure yourself just a little more. In a time of tragedy, you need to be worrying about the people you love and credit cards allow you the room to breathe when you need it most.

Keep Money in an ATM Accessible Checking Account

If a disaster hits you probably won’t be able to get to a computer to transfer money to a checking account. If you keep a couple hundred dollars in a checking account at all times, you’ll be able to access that cash as long as you can get to an ATM. Without that luxury, you might be out of luck in a time where you need money more than ever.

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Just like creating a will, these steps are often put off because people don’t like to think of their immortality or very negative situations. That’s not a good reason to put off creating a healthy emergency fund or getting a credit card. If done correctly, these steps could save you more money than a million frugality tips if a disaster were to affect your life.

Take an afternoon and make sure you have these steps covered in your financial life. It’ll never be the perfect time to do it, but your life is to important to leave up to chance.

I’ll be back next week to share some tips for making sure your house is disaster-proof.

Editor’s note: All the photos above were taken by Mark Stroud, a Combat Correspondent in the United States Marine Corps. His complete photostream can be found on Flickr.com at stroud4341. Thanks, Mark!

How to Prepare Your Wallet for a Disaster is a post from: PT Money: Personal Finance by PT.
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How do you budget for this?

But of course, not all bills are created equal. What do you do when your transmission explodes, you break a tooth at the Saturday softball game, or your only pair of glasses lose their lenses?

Unexpected expenses almost always seem to be emergencies, and they can really derail an otherwise well-constructed budget.

Here are some suggestions for keeping your budget on track when an unexpected expense tries to trip you up.

Emergency Fund

If you haven’t already, start an emergency fund. Most experts agree that you need at least $1000 in an emergency fund to start, but you should aim for 3-6 months worth of expenses. Once you have a cushion of cash to insulate you from life’s expensive difficulties, you’ll be able to focus on keeping your monthly budget in order.

However, your general emergency fund is ideally for major life changes, such as getting laid off or dealing with the aftermath of a flood, for example. So while having an emergency fund will help with more general unexpected expenses, it is not the complete solution.

Analyze and Create an Yearly Budget

Track your annual expenses. Gather together your check registers and receipts from the past year to three years and add up all the unexpected expenses you have accrued during that time. Obviously, since these expenses are “unexpected,” you can’t extrapolate exactly how much you will need in a particular year, but it’s a good idea to see what blindsided you over the past couple of years.

If you find that you’ve regularly spent $1500 each year for life’s little problems, you’ll have a goal to shoot for. Even if you do not spend exactly that much each year, having about that much set aside using an yearly budget will put you in a much better position financially than leaving it to chance.

Reassess Throughout the Year

Reassess your needs once or twice a year. Did your car pass the 100,000 mile marker in the past six months? Can you tell that the slight twinge in your incisor isn’t going away because you’re ignoring it? You may need to adjust your unexpected expenses savings account up or down depending on what needs you think might be coming in the future.

Don’t assume that once you’ve set your budget up, you can consider yourself done. Continue to tweak as you keep better records and learn more about what your particular needs will be.

Other Ways of Dealing with Unexpected Expenses

Find free or low-cost ways of dealing with these issues. If you haven’t had a chance to really build up your unexpected savings account when life drops a bill in your lap, you may still be able to get back on track without having to blow your budget.

Dental schools are always in need of patients for their students to practice on. Each graduating dentist must have completed at least one of every type of procedure available before he or she can walk across the stage-and patients often don’t have to pay a dime for the care.

Call your local university to see if they are in need of dental patients. Similarly, vocational and technical schools need the practice in diagnosing and working on cars. Your funny engine noise could help teach a budding mechanic, and having him fix it could cost you a great deal less.

Unfortunately, surprise bills are a fact of life, but they don’t have to destroy your financial plans. As long as you plan ahead for the unexpected, you’ll always be ready for it.

What about you? How are you dealing with unexpected expenses?

Budgeting for Unexpected Expenses is a post from: PT Money: Personal Finance by PT.
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Editor’s note: Perfection is sometimes the enemy of complete. This is definitely the case with personal finance, life insurance, and estate planning. The statistics show that many people do not have a proper Last Will and Testament. Since I’d rather see more of you have something (vs nothing), I’m going to present the steps to making a Last Will and Testament using forms you can download for free.

Note that I’m not a lawyer and nothing here should be considered real legal advice. In the coming weeks I hope to meet with a lawyer about my Last Will and share that experience with you. Until then, let’s create a Will for free using these forms.

One of the most important documents you will ever complete in your life is your Last Will and Testament. Your Will is your last opportunity to express your wishes when it comes to your property, your money and your children, if they are minors. And, while there are many professionals out there that are willing to help you complete your Will, they are often expensive. The good news is that you can write your own Will for a fraction of the cost by using free Will forms.

There are dozens of generic, free Will forms out there that will give you the backbone you need to structure your will appropriately. While using a free Will form isn’t required, it does make writing your will significantly easier than trying to draw one up from scratch. If you are married, find the form that accommodates both of your wishes and has paragraphs dedicated to the care of minor children, if you have them.

Download or Create a Free Last Will

RocketLawyer.com
DoYourOwnWill.com

Once you have your free will form downloaded and ready, follow these 7 steps:

1. Include personal identifying information. You need to make sure that there is no question that the Will you are creating is yours. On most free Will forms you will have the opportunity to fill in your name and your address, but you should also include your social security number and/or driver’s license number. The addition of these key pieces of information makes it clear that the Will belongs to you. If your form does not have the appropriate space designated for this information, write it in alongside your name and address.

2. Include a statement about your age and mental status. Again, your free Will template will have already included this information in the standard verbiage, so you will only need to validate that this information is there. It is usually located in the first paragraph after your name. If your template does not include a statement that indicates you are of the age of majority and are of sound mind and body, either write it in or download a new form.

3. Designate an executor. Your executor is the person who you trust to read your Will and ensure that your final wishes are carried out. In a free Will form, this should be located somewhere in the standard verbiage and should include a space for you to write in the name of your executor.

4. Decide who will take care of your children. If you have minor children at home it is important to designate who will take care of them after you are gone. Locate the paragraph of the form that deals with the care of minor children and fill in the name of the person(s) you are designating to care for your children after you have passed on. It is also important to make sure that your designee and you have spoken about your wishes and are in agreement well before you name them in your Will.

5. Choose your beneficiaries. In your free Will form, you will have the opportunity to list specific property and who will get these items when you pass on. It is important that if you have specific wishes for certain personal items that you list them here because if you don’t, those items may go to the wrong people. A lot of family strife can be avoided by making sure that you document what items you wish to go to which people in your Will. If you run out of space on your free Will form, add a secondary sheet of paper.

6. List your funeral details. This is another very important aspect of your Will as it will help your family members deal with your final arrangements. You should visit a funeral home and create a list of everything that has to be decided when you pass away so that each of these things can be addressed in your Will. This will make sure that your final wishes are honored and that the burden is removed from your grieving family members. This is also the opportunity for you to list end of life requests such as whether or not you would want to be kept alive by artificial means, etc.

7. Sign and date your Last Will and Testament. This should be done with two witnesses present as they will need to sign the Will as well. You won’t have to get a notary to sign it unless you wish to have this person as a witness. Having a notary sign the will can be a huge help in the event you believe that there will be some conflict with regard to your final wishes. Keep in mind that your witnesses cannot be named as beneficiaries in the Will, so choose your witnesses carefully.

Creating your own Will using a free Will form is a relatively simple process, but for those who wish to have a bit more direction, you can utilize a free Will kit such as the one offered by Suze Ormon or an online legal service such as LegalZoom.com. Using a legal service will be more expensive than doing it yourself, yet can provide some additional comfort that your Last Will and Testament has been prepared correctly.

7 Simple Steps to Writing Your Own Last Will and Testament with a Free Form is a post from: PT Money: Personal Finance by PT.
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