Money Release: Making, Saving, Investing and Debt Management » income

Why You Have Too Much Debt

Vic — Tue, 12 Oct 2010 13:25:47 +0000

Except the children, most of us have debts. We might have incurred them because of financing our home, car, education, business and even our regular spending through credit cards. Having a debt to pay is just fine as long as you are really capable to pay it at the right amount and at the right time. It only becomes a financial problem when your debt exceeds you capacity to pay. Thus, we need to take time to determine if we are already having too much debt, identify the reasons why we sunk on that financial obligation, and find an effective solution to manage that kind of situation.

How much debt is too much?
To determine your debt burden or overload, you need to calculate you debt-to-income ratio (DTI). DTI is the percentage of our gross income that goes toward paying our debts. To know if your debt is acceptable or high, simply add up the amount you spend to pay your debts every month, and divide it by your monthly income before tax. Then, multiply the result by 100 to arrive at a percentage. For example, let’s assume you earn a monthly income before tax of $5,000. Let’s also imagine you spend $800 on your monthly house mortgage, $500 on your auto loan, and $400 on your monthly credit card payments. Your debt-to-income ratio will be computed as $1,700 / $5,000 = .34. Multiplying this by 100 will give you a debt-to-income ratio of 34%. This example means that you are spending more than one third of your monthly income in paying your debts. A ratio of less than 30% is ideal, while a ratio of more than 40% is a red flag for a potential financial disaster. Since our example arrives at a ratio of more than 30%, it already indicates a yellow flag and should be given some significant attention.

Why you have too much debt?
Debt overload arises when a person’s debt-to-income ratio exceeds the ideal ratio. Debts that are considered burden come from a person’s inability to manage his debts, which may include failure to make a personal financial planning, organizing and controlling. Debt-to-income ratio has two main factors: debt and income. Thus, the reasons of too much debt lie on these two elements. People incur overloaded debts because of unnecessary expenses as indicated by their excessive use of credit cards. They also don’t strive to increase their earnings to cover their fixed monthly obligations. This can be illustrated by our example above which shows an extra income not sufficient enough to absorb its home mortgage and auto loan monthly payments.

How to manage debt overload?
Managing your debt overload is a practice you should always practice overtime. It should be a continuous process from financial planning, to personal motivation, and to ensuring that the process is effectively executed. Home mortgage and car loan are fixed and basic loans we should pay regularly. However, credit card expenses are variable and can be controlled to reduce them and improve your debt-to-income ratio. There are also other personal expenses which we can trim down such as our entertainment and leisure expenses, traveling expense and other expenditures that are not necessary to our healthy living. To have a favorable ratio of our debt against our income, we also need to increase our earnings. As mentioned earlier, we cannot just control our long-term loans such as home mortgage and auto loan. Hence, we should focus on generating more revenue to warrant an increase in our income. An increase in income means an increase in our production (for businessmen) and increase in our work force (for professionals and employees). Lessening our monthly expenses requires a lot of self-control and patience, while increasing our income requires more hard work and diligence. Without these habits, we cannot get rid of those extra debt burdens.

How to Save Cash by Spending Money

Victorino — Wed, 29 Sep 2010 05:35:12 +0000

How to save cash by spending money? Is this question sounds absurd to you? I hope it doesn’t, because this is for real and it is one of the forgotten ways to save your cash and the money you have in the bank. To save cash, we don’t just think about money, we also need to consider time. Moreover, in considering time, we don’t just recognize the short-term outcome, but we also need to identify the long-term results. We should understand that not all cash savings we are doing now can save as money in the near future. On the other hand, we should also remember that not all cash spending we are doing today can exhaust our money in the long run.

Many people actually fail to save money because they are afraid to spend it. Some businessmen even become bankrupt because they keep so much money. Why are these events happening? Those people who are worried of cash outlay are the ones who don’t pay their dues and obligations on time, such as monthly bills and loan amortizations. This practice causes them additional fees, surcharges and penalties. The results are additional liabilities beyond their original payables. Those business owners who keep too much money out of greed are the ones who escape paying their actual income taxes and other financial obligations. This behavior results to audit investigations which cause big loss to the business not only in monetary terms, but also in terms of integrity.

To really save cash, not only in the short run but also in the long run, we need to spend money wisely. We should consider the permanent things rather than the temporary. Thus, we need to settle our financial obligations so that it may not bring us additional expenses that will dwindle our savings in the future. Who wants to be penalized, and who wants to pay money in excess of what is originally liable? Of course no one wants it.

We can also save more cash in the future if we will avoid becoming too frugal. This means we should avoid buying cheaper goods just to have instant and temporary savings today. Purchasing cheaper stuff can be meant acquiring low quality goods. The disadvantage of buying cheap and low-quality merchandises is that they don’t really serve us in the long run. Yes, we can save money by paying less, but we can become losers when it comes to their usability. Just think of buying an expensive brand-new car versus buying a cheap and secondhand car. Of course we can save money by acquiring the used vehicle because we will be paying a cheaper price. But will this help us save our money in the coming days? I don’t think so. The repairs and maintenance can be an expensive recurring expense if we will be riding in a secondhand car. On the other hand, buying a brand-new vehicle will require us to spend a larger amount of money now. However, it will save us more pennies by avoiding the hassle of continuous repairs expense. What it makes feel better is that we will be driving a new and a more comfortable car.

Personal Finance Tips #7: Educate Yourself

Victorino — Wed, 09 Jun 2010 16:08:58 +0000

Knowledge is power! That is why if you want to strengthen your personal finance, you need to gain knowledge. Our seventh personal finance tip is to educate ourselves. Education doesn’t only mean you need to go to a school or a university to acquire it. It also includes education outside from schools. Education can also be our personal asset that cannot be robbed from us by any theft – though it can be shared and make yourself useful to the community. Knowledge or wisdom can be acquired from listening, reading, experiencing or from reflecting one’s self. It serves as our light in every direction we are heading. It also makes our market value increase. When you are an employee, you are considerably more valuable if you got a master’s degree or a prestigious certification than if you are not.

As we can be our best assets, we need to improve ourselves. We need to increase our market values. But how can we do that? We can do that by increasing our knowledge and education – formal or informal depending on our necessity. If you are an employee, it is just advisable that you get higher education (master’s degree, certification, etc.,) to aid your promotion. If you are an entrepreneur, you can also get higher education like MBA or the like, attend trainings and seminars or just conduct your own research to develop your business.

The fruits of education are these: if you are an employee, you can get a higher salary and if you’re an entrepreneur, you can bring your business into progress. Moreover, if you don’t have the both (business and employment), you can gain the capability to have one of them or both if you become educated. Knowledge also brings skills. Skills can give us opportunities to earn money and solve financial problems.

Education helps us reinforce our finances. It can also boost our earning capacity, orient us the discipline to control our spending, and teach us how to save and invest our money. Sometimes our financial world is dark and uncertain. But because of knowledge, we have light and calculations that give us almost precision. Therefore, education cannot be ignored. It should be prioritized just like how we prioritize our selves. There are many books that can be read. There are many reliable articles on the Internet where you can get the wisdom to manage your finances. We should not stop from learning. We should not stop and claim that we are already wise. We should be like that if we don’t want to be called fools. Remember that foolishness can lead anyone to shame.

Wise people are humble. They also live in modesty. These attributes keep them away from excessive expenses and unwanted debts. Apparently, foolish people are boastful and live in extravagance. Consequently, they lose most of their money and they fall into the trap of debt. By having wisdom and knowledge, we can have the information and cautions we need to plan strategically. We can set effective procedures that will help us achieve our financial goals. Finally, we can learn the principles and behaviors that will fortify our personal finances.

Personal Finance Tips #6: Forget the Money

Victorino — Wed, 09 Jun 2010 15:42:10 +0000

The title of this article may sound absurd. How can we become financially stable if we forget or ignore money? But what most of us don’t know is that too much attention on money can bring us financial disasters, and even a whole life problem. Many people have loved money more than anything else. They even sacrifice their real treasures and assets for money. They have forsaken their loved ones and even God for the love of money. Other people give up their integrity, honesty and good name just to not lose money. Aren’t they aware that the love of money is the root of all evil? And evil can lead us to destruction – even financial destruction?

Now, why I am saying that one practical personal finance tip is to forget about money? I’m telling this, because I want everyone to focus on becoming great instead of concentrating on money. The Bible even said, seek first the kingdom of God and all these things be will added to you. This means let’s seek first for greatness rather than things which do not last forever. Becoming great is a combination of being humble and one who serves God and His people. But how can greatness (humility and service) can help us stabilize our personal finances? Simply, if you become great, you will bear greatness.

By becoming great, we can avoid financial troubles – even long-term and permanent troubles. In earning money for example, when you work great in your business (serving your customers well, treating your employees the right way, and becoming responsible to the government), you will be assured that your financial condition and operation will have a bright future. Just imagine if you will just concentrate on money. For example, if you deceive your customers to have bigger profits, give unjust compensation to your employees just to cut your cost, and practice tax evasion just to save more money – what will happen? Do you think you will prosper? But of course you can be financially successful. But that will only be temporary. You customers will not return to you, your employees may leave you, and the IRS may impose tax penalties on you. The consequence will be a great financial tragedy for you and your business.

How about if you are not a businessman? Let us say you’re an employee. The virtue of greatness still applies. If you concentrate in doing great to your job, performing well and having the best results, there will be a huge chance that you will be promoted and will receive incentives and bonuses. Thus, helping your financial capability to be strengthened. Moreover, if you will not boast and will stay humble, you will be exalted and win bunch of good friends. These true friends that will be yours will help you in any aspects of your life, including the financial aspect of your life.

If you wish to get out of debt, greatness also applies effectively. Often, people, because they don’t want their money (even their last money) to leave them, they don’t pay their debts responsively. A responsible person does his promises, including his promises to pay his dues. That’s why if you want to really extinguish your liabilities, you should do great in doing your vows. You should not just focus on keeping that money in your hands, but you should concentrate in preserving your word of honor, as well as your credit score, which are beneficial to both of you and your creditor.

Therefore, concentrate on becoming great in everything you do. Sometimes or even most of the times, you must forget that money. Be great and be righteous, and money will not leave you – even if you will not focus on it. Don’t hold your money too tight, so that it may flow freely, and return to you voluntarily – giving you the freedom you have first given to it.

Personal Finance Tips #5: Be Diligent

Victorino — Tue, 08 Jun 2010 08:08:28 +0000

When it comes to delivering wisdom to my readers, especially on money and finance, I often refer to the Bible. I believe that the Holy Scriptures, which already existed thousands of year ago, are filled with powerful wisdom that if practiced by us, will make our lives better. Its passages can also guide us to better financial living and better management of our money, as well as our debts. Now, in my fifth personal finance tips series, I am introducing diligence as an important virtue that will help us achieve our financial success and freedom. I’m telling this because diligence, according to the Bible can bring us the wealth that will stabilize our financial condition.

”Lazy hands make a man poor, but diligent hands bring wealth.” – Proverbs 10:4 (NIV)

Diligence is important as an action is important to accomplish every task or plan. Intelligence is good. Yes it is good because we need to be wise in making our financial planning and in designing our steps and procedures in managing our personal finances. However, this wit is inadequate without putting them into actions. Using our brain is good, but without using our hands, it can never be better. Even if we have the confidence in our hearts to succeed in our financial life, it will only come short if we will not walk the talk. Remember that faith without deed is dead.

Our financial program is composed of a good plan, nice goal and a series of effective steps to achieve that financial goal. In this program, the steps are very important – and we can only walk all the steps if we are constantly diligent. We need to do what we think. We need to realize what we feel. We need to work for the things we want to achieve. The debts we want to extinguished must be paid by our earnings. These earnings should be the fruits of our consistent labor. If we only think of repaying the money we owed, but never work for the money we will be using to pay off those debts, we will just find ourselves still slaves by lenders.

In saving money, our actions play a very important role. It is our hands that hold, make and or spend our money. In order that we can save money, we should increase our income by working more. We also need to control our hands not to spend excessively.

In investing money, especially when we invest it to our business, diligence is our key to success and prosperity. If you will refer to your financial statements (balance sheets or statement of financial position and statements of income), you will find in your balance sheet that equity increases when your income increases. If your equity increases, your asset may also increase, and your liability may be decreased. Take note that the statement of income, which is also known as the statement of performance and results of operation, reflect a company or an individual’s performance and results. This just means that the success of a business or financial activity indeed lies on our performance and results – which are the manifestation of our works and our diligence.

Money Bible Verses: On Budgeting

Victorino — Mon, 17 May 2010 16:32:21 +0000

In the first two articles of the series Money Bible Verses, we have shared what the Holy Scriptures said about investing and debts. This time, we will move to the Bible passages that discuss budgeting. Budgeting can be relative to all of us, whether we are rich or poor, business owners or employees, and young or old. It involves plotting our reasonably estimated income, expenses and savings for a certain period or series of periods in the near future. The purpose of budgeting is to provide us a forecast of revenue and expenditures which will serve us as our guide for an effective an efficient flow of our financial transactions. It also gives us the ability to control our financial run by comparing our actual financial performance against our forecast.

Many people perceive that budgeting just give us financial restrictions. They thought that these financial limits are things that need to be broken to achieve financial freedom. However, as we will discover the Words of God, we will realize that financial limitations are God’s ways to keep us in the right financial position. As the Bible teaches as self-control and discipline, it also shapes us to persons who are not slaves of debt but persons who are free. When it comes to budgeting, the following verses are written in the Bible:

Proverbs 3:9-10
Honor the Lord with your wealth and with the first fruits of all your produce; then your barns will be filled with plenty, and your vats will be bursting with wine.

Proverbs 6:6-8
Go to the ant, sluggard; consider her ways and be wise; who, having no guide, overseer, or ruler, provides her food in the summer and gathers her food in the harvest.

Proverbs 22:3
A prudent one foresees the evil and hides himself, but the simple pass on and are punished.

Proverbs 21:5
The thoughts of the diligent tend only to plenty; but the thoughts of everyone who is hasty only to poverty.

Proverbs 21:17
Whoever loves pleasure will be a poor man; he who loves wine and oil will not be rich.

Proverbs 24:3-4
Through wisdom a house is built, and by understanding it is established; and by knowledge the rooms shall be filled with all precious and pleasant riches.

Proverbs 25:28
He who has no rule over his own spirit is like a broken down city without a wall.

Proverbs 27:12
A sensible man watches for problems ahead and prepares to meet them. The simpleton never looks, and suffers the consequences.

Proverbs 27:23
Know well the face of your flocks; set your heart on your herds.

Proverbs 27:26
The lambs are for your clothing, and the goats are the price of the field.

1 Corinthians 16:2
On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come.

Luke 14:28-30
For which of you, intending to build a tower, does not sit down first and count the cost, whether he may have enough to finish it; lest perhaps, after he has laid the foundation and is not able to finish, all those seeing begin to mock him, saying, This man began to build and was not able to finish.

The passages listed above may not represent all of the verses in the Bible that discuss budgeting. If you have other Bible verses in mind that are related to budgeting, feel free to share them by making a comment below.

How to Simply Avoid Debt Using this Equation?

Victorino — Wed, 12 May 2010 17:10:29 +0000

Avoid debt now! If you haven’t avoided it yet, the earliest period to start is NOW! In my previous article entitled “the secret formula to get out of debt”, I have revealed how a simple accounting equation will help us get out of our debts. In this article, we will tackle further this formula and learn how to simply apply it to avoid having debts. Of course, our goal to eradicate our liabilities and obligations require a lot of great debt management principles and attitudes. Great as I say, yet they are basic and simple. This is the essence of fundamentalism – finding solutions between the roots. To simply avoid debt, let’s go back to the following equation:

Assets = Liabilities + Equity

As we transform this to,

Liabilities = Assets – Equity

As we understand, personal assets and equity are,

Equity = Paid-up capital + Cumulative Net Income (losses)

And since,

Net Income (loss) = Income – Expenses

Therefore we can say that,

Liabilities = Assets – [Paid-up capital + (Cumulative income – cumulative expenses)]

And in our personal parlance, considering a one year equation, assets as properties, paid-up capital as zero, and expenses as our wants and needs, this equation can be transformed as,

Debt = Property – Income + Wants

If today we have the following:

Debt = $1,000

Property = $1,500

Income = $2,500

Wants = $2,000

As we place these values on the equation, we will arrive to this:

Debt = Property – Income + Wants

$1,000 = $1,500 – $2,500 + $2,000

Now if we want to make our debt of $1,000 to zero, we can opt one or all of the following ways:

a.) Sale a property amounted to $1,000 and pay-off our debt amounted to $1,000

Upon sale of property at book value amounted to $1,000,

($1,000 – $1,000) = ($1,500 – $1,000) – $2,500 + $2,000

We can pay extinguish our debt.

$0 = $500 – $2,500 + $2,000

This application is simple. If we want to get rid of our debts, we may sell some of our properties and use their proceeds to pay-off our debts. But we must also remember not to sell assets that are generating substantial revenue for us. This means, we must analyze first the best decision – whether to benefit from an asset through its proceeds or through its generated income. This is because generated income can also be used to pay-off our debts.

b.) Earn additional income of $1,000 without selling your property (this can be done through rendering of services), and use the additional income of $1,000 to pay-off all debts

By earning an additional of $1,000,

($1,000 – $1,000) = $1,500 – ($2,500 + $1,000) + $2,000

We can eradicate our debt.

$0 = $1,500 – $3,500 + $2,000

Another way to eradicate debt is to earn more and more income. This means we need to be diligent and innovative to do that. But we should also bear in our minds that big income is useless if we also have huge expenses. Hence, we should also have the virtue of self-control and discipline. To increase our income we need to work harder, longer and wiser. The people who usually incur debts are those who don’t earn enough money to cover their expenses or repay their obligations.

c.) Reduce our wants (expenses) by $1,000

By reducing our expenses by $1,000,

($1,000 -$1,000) = $1,500 – $2,500 + ($2,000 – $1,000)

We can reduce our debt to zero.

$0 = $1,500 – $2,500 + $1,000

Spending more than you can afford is one of the top reason why people are trapped into debts. In the equation, it is very clear that if we will cut our expenses, we can also cut our debts. Since our expenses are originated from our needs and wants, we should know how to prioritize things. This can be done, by spending based on our needs instead on our wants.

I hope this simple article will help you win your battle against debt. Always remember that financial freedom is the ability of a person to harmonize all the financial elements around us, which include our assets, equity, income, expenses and debt itself.

The secret formula to get out of debt

Victorino — Mon, 03 May 2010 04:15:42 +0000

What is the real secret formula to get out of debt? Actually there is no secret formula to be free from your creditors. There are just some basic financial formulas. But because most people often forget the basic things, those formulas were putted into oblivion. They are ignored and become secrets to people who subsequently become unaware of them. Now let’s uncover again these secret formulas to successfully overcome our debts.

Knowing is good, but understanding is better. That’s why, let’s not just memorize the following formula but let’s understand it. The following formula and explanations are derived from the financial accounting equation, Asset = Liability + Equity.

Liability = Asset – Equity

The above equation gives us the understanding of the following:

1. Increase in asset without increase in equity will increase your liability
This means that if you obtain cash or acquire properties and other assets without accumulated earnings, you will resort into debts. The debt trap is usually found behind our needs and wants. Once we desire for something we cannot afford to pay for cash, we call the lenders and the creditors for help. Therefore to prevent debt, we should not buy something beyond our earning.

Don’t increase your asset if your equity cannot afford that increase.

2. Decrease in asset may reduce your liability
One certain way to decrease or extinguish your debt is to pay-off them. If you have cash to settle your obligations, then settle your debts. If you have receivables, then exert your best effort to collect them so that you can use them to pay your own liabilities. If you have assets that don’t generate income, you may sell them and use the proceeds to repay your debts.

Cut your asset and use that to cut your debt.

3. Decrease in equity without increase in asset will increase your liability
Equity is equal to infused capital plus accumulated earnings (losses) minus capital drawings or dividends. This primarily means that if you incur losses or don’t earn enough profits, your chance of getting out of debt will fade. Net income or profit is directly related to your revenue and inversely related to your costs and expenses. Moreover, revenue is directly related to your assets such as cash and receivables while your cost, purchases and expenses are directly related to your liabilities such as accounts payable and accrued expenses. Hence, to decrease or zero out your liability, you should increase your revenue to collect more cash and receivables and efficiently minimize your cost and expenses to avoid more trade payables and unpaid expenses.

Increase your equity to prevent increase of your liability.

4. Increase in equity may reduce your liability
As discussed in the preceding paragraph, increase in your cumulative earnings will increase equity. If your equity increases, you can be able to finance your needs not by means of debts but by means of the assets generated from your revenue, such as cash and receivables generated from your sales. Therefore, strive for earnings to increase equity and to get out of debt. Work well to increase your salary income. Do business well to increase your business income. Also, avoid unnecessary costs and expenses to avoid losses that will result to deficiencies in your equity.

Conclusion and the real secret formula:
The secret formula to get out of debt is simply you. You, being the one who is capable of knowing and understanding the basic formulas (e.g., accounting equation, financial ratios, etc.,) that the world has provided us. You, being the one who can control your effort in accumulating profits. You, being the one who can manage your behavior in spending your money. And you, being the one who can only defeat the poor person within you.

How to earn more profit: 5 ways to succeed

Victorino — Fri, 30 Apr 2010 18:22:56 +0000

So how can we earn more profit? How can we achieve more income to cover our costs and expenses? Earning more net profit is not impossible. However, you must bear in mind that it cannot be done overnight. It takes a lot of knowing yourself and knowing your surroundings. Placing ourselves from financial security lies in our own hands. But a total victory for our financial freedom lies not only in our hands but also in the favor of our environment. This means to achieve our every financial goal, we need to find every opportunities that can be found within ourselves and within the things that surrounds us. The following are some ways and tips to maximize our income, minimize costs and expenses, and increase our net profit:

1. Maximize talent, skill and knowledge
Increasing our earning potential means enhancing our capabilities. This means we need to maximize our selves. If you are currently an employee and enjoying being such, you can study further to increase your self’s market value. Completing post graduate courses and passing professional certification examinations are two best ways to uplift your professional worth and chance to demand more salary to your boss.

Now if you are an entrepreneur like me, we can all join forces to increase our skills and knowledge by training, researching, enhanced learning and networking. Entrepreneurs and business owners need innovation to continue and increase profiting.

2. Invest more time
Time is an essence for every goal that we want to achieve. Hence, if we want to maximize profit, we should maximize our time in attaining that target. To input more time means to save and gather more time. For business owners and entrepreneurs who enjoy flexibility in time, this could be an advantage. One way to save time is to outsource tasks that consume most of our time but offer only few returns. These jobs include routine functions which we can delegate to other people so that we can have more time to concentrate on our core activities that give us higher returns. The logic is… we pay for less to save time, and we use those times to earn more.

For employees who work for eight hours a day, there are still a lot of hours to engage in money making activities. They can choose from a variety of extra works they can take, depending on their interests and passion. These may include online money making, working at home, baking, selling products, and other jobs that can be done in their extra time.

3. Utilize resources
Outside from our selves, are the tangible assets in our possession such as land, building and equipment. To earn more profit, we need to utilize all our idle resources. If you have a land or a building which are left unused, you may consider finding tenants and enjoy revenue from rents. If you have other equipment (car, office machine, et cetera), that are not fully utilized you can reckon any business activities that can make them profit making machine. Finally, if you have money sleeping under the sun, you can invest them into low risk income yielding investments such as, time deposits, debt securities and mutual funds to earn more in the form of interest and dividend income. And if you really have a business idea which you are confident to succeed, make that money your equity.

4. People
No man is an island. That’s why we have an island so we may live better. Our relatives, friends, affiliates, allies, and anyone who are somehow linked to us can also become our assets or advantages. If you want to gain more profit, you must capitalized your network of people. The bigger your network is, the greater products or services you can sell. The more you can sell the more revenue and profit you can have. Just think of your several followers in Twitter or friends in Facebook. Make them useful and help them by providing them their needs. That means selling them relevant products and services they really need. Just don’t solicit them too much if you don’t want them to leave you.

If you’re an employer, your employees can be your best assets. If you want to maximize productivity and profit, you need to make them more motivated and productive. A demoralized and discouraged group of workers can make your financial results fall down. Hence, you need to know and do the best things that will make them happy and bring your company into profit success. In short, you need to have a better Human Resource Management and leadership skills to earn better comprehensive income.

5. Minimize cost, charges, waste, risk and losses
In the financial sense, if you have a stable revenue, the less cost and expenses you have, the more your profit. For this reason, we need to identify costs and expenses that we can eliminate without affecting the level of our gross sales or revenues. In trading goods, we can reduce our cost of goods sold by reducing gross purchases or increasing purchase discounts. With regard to expenses and charges, we can reduce or eliminate those which cannot affect our revenue and we can avoid in the first place. The following are examples of those charges and expenses:

Excessive entertainment expenses
Unimportant travel expenses
Penalties for non-payment of dues and taxes on time
Interest expense on delayed loan repayment
Bank charges on accounts falling into minimum balance
Credit card charges on buying on account even if cash is available
Loss on fire (in the absence of insurance)
Loss on theft and fraud because of non implementation of strong internal control
Other cost, expenses and losses due to the absence of strategic planning, internal control and risk management.

5 ways to avoid poverty and becoming poor

Victorino — Thu, 29 Apr 2010 03:28:16 +0000

Who wants to become poor? Who wants to become a prisoner of poverty? Probably, no one wants to become poor. We dream of riches. We desire it not only for our own happiness and consumption. We want it also for our family and maybe for our country. But being rich is not an easy task and avoiding poverty is not a goal that is usually achieved. However, avoiding ourselves to become poor lies in our own hands. The following are five tips to secure ourselves and avoid financial deficiency.

1. Avoid vices
Drunkenness, gluttony, womanizing, gambling, and the likes will surely make us poor. These things destroy our financial budget and even ruin our discipline – a virtue that is very important in our way to riches and success. These bad habits are proven to make our pockets run dry. So if you want to avoid poverty, you need to avoid these negative routines and preserve your self-control.

2. Earn right
Financial deficiency comes when people don’t have sufficient earnings that can cover their expenses. Therefore, to avoid such deficiency, you need to earn adequately. One way to assure that you can have good income is to have a stable job. Having a stable job means completing a college degree or post graduate degree. This means that education is very important to overcome poverty. Hence, if your are still in college, be sure that you will study well, graduate with honors, and earn an outstanding educational background that will entice big employers. Another way to earn right is to do business strategically. If you are the type of person who doesn’t rely on employers, you can do business successfully. A successful businessman is one who is diligent, disciplined, intelligent (who does research), intuitive, patient and innovative.

3. Spend wisely
Having a sufficient income will not be enough if we spend extravagantly. Hence, you need to spend wisely and avoid wasteful expenses. One way to control our spending habit is to record and monitor it. We can make budgets to plan our expenditures and check if we spend below or beyond those budgets. We can also analyze our spending pattern to create solutions on how we can manage them. This also means we need to have self-control and other virtues that will stop us from spending wastefully. We can prioritize our basic needs so that we only buy the most vital things and avoid unimportant things. The goal is to not spend beyond our earnings and to not forget our savings.

4. Save with interest
Saving is good but saving with interest and earnings is better. If you hide your money without earning, you will be defeated by inflation. Hence, if you are really serious in saving your money, save it from inflation and put it in investments like time deposits, mutual funds, debt investments and equity investments.

5. Have confidence
This may not sound financially, but if you are really determined to defy poverty, you need to be confident and be positive to reach that objective. Worries and excessive doubts are the top destroyers of any goals. Hence, don’t stop believing and doing every right thing to escape from being poor.