5 Tips for Developing a Personal Financial Plan

Financial JourneyKeeping a personal budget is not difficult in theory, but it becomes much more difficult to stick with it throughout the month. As a result, it is a good idea to write up a list of tips, as they can keep you focused on the goal at hand. If you can remember these rules, staying within your personal budget becomes much easier.

Avoid Debt

This is the main goal of developing a personal finance plan and it is also the most important thing to remember. You should never spend more money than you earn, as this puts you behind on your quest toward financial freedom.

Once you get yourself out of debt, you can start spending money again. Taking the first step is important, however, and it will take a great deal of discipline.

Pay Yourself First

This might sound like it prolongs your period in debt, but what it truly does is make the situation more livable. Paying yourself does not mean that you go out and blow all of your money right away, but it does mean that you should put money in your savings and retirement funds before you pay your creditors.

By paying yourself first, you ensure that you will always have money around, which can help you to prevent more debt in the future. If you run into an emergency, but have not put enough money into savings, you will end up right back in debt if you do not follow this plan.

Track Expenses

Another difficult aspect of personal finances is tracking your own expenses, but it is very important because it allows you to develop a plan. Save your receipts for everything for a few months, so that you can see exactly what you are spending.

This makes it easier to see where you can cut spending, which allows you to pay off your debt at a faster pace. You would not drive in a strange city without directions or a map, so you should not try to navigate your financial situation without a clear idea of where your money is going.

Stay Within Your Budget

Making a budget is easy, but it is much more difficult to stay within it. If you are committed to saving money, however, a budget can become your best friend.

By giving yourself a monthly allowance, you can be certain that you will never spend more than you make. Of course, that might mean that you have to pass on the Mustang apparel that just went on sale at your favorite store, but it is important as you attempt to reach your financial goals.

Try to Avoid Paying Interest

When you purchase something on credit, you end up paying much more than the sticker price. Therefore, it is always a good idea to save up and pay cash for something, especially if you are making a major purchase.

Of course, it is probably not possible to pay for a new home out of pocket, but you can probably afford to pay for many of your day-to-day expenses without going further into debt.

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Why Do Lenders Offer Guarantor Loans?

Top Up Guarantor LoansGuarantor loans were created by lending companies to provide anyone who would struggle to successfully apply for a standard unsecured loan with the opportunity to secure a new line of credit.

When applying for an unsecured bad credit loan, the borrower will generally be charged with a very high interest rate because they will be viewed as posing a risk to the lender due to their poor credit history. Guarantor loans, however, offer an alternative way of borrowing that does not place reliance on having a perfect credit history. By offering re-assure to the lender that someone you know can cover any repayments you may miss, the perceived risk to the lender is reduced and this in turn will reduce the amount of interest charged for borrowing.

Generally guarantor loans are available with an associated APR of approximately 50%, which is considerably less than the 4000% charged by many payday loan companies for an unsecured loan.

How Guarantor Loans Work

The loan guarantor basically acts as a buffer against payment default. By undertaking a binding contract to cover any missed repayments and taking on responsibility for the loan, the risk to the lender is significantly reduced.

However, because the loan is in the borrower’s name, the guarantor does not need to do anything else. It’s important though, that the guarantor fully understands the importance of their commitment and responsibility. It is crucial that they can afford to make the repayments should the need arise and for this reason the guarantor – as opposed to the borrower – will be subject to credit checks, in order for the lender to approve the loan.

Benefits of Guarantor Loans

Guarantor loans offer borrowers with a less than perfect credit rating the chance to access credit at vastly reduced interest rates when compared to virtually all other forms of bad credit loan. This ensures that guarantor loans offer the best option for anyone with bad credit. It also provides the opportunity for the borrower to repair their credit record, because all repayments are made under the name of the person actually taking out the loan.

But what other benefits do guarantor loans offer? At a time when many people are struggling to meet the bills, combined with an insecure employment market, taking out a loan is often a worry in itself. This worry can be significantly reduced by applying for a guarantor loan, although it is important to fully understand the risks of benefits attached to guarantor loans, and how they work, before committing yourself.

Risks of Guarantor Loans

The guarantor will nearly always be someone who knows the borrower well and trusts them to make the repayments as scheduled. If however the borrower finds themselves in trouble and unable to make the payments, the guarantor will be expected to step in. If this situation arises, it’s always a good idea to make an arrangement to repay your guarantor if they have to step in and help.

Who can be a Guarantor?

Because the guarantor may have to step in and assume responsibility for the loan, it’s important they are financially secure themselves. For this reason, a guarantor will generally be expected to be a home owner aged over 23, with a excellent credit record and receiving a regular income.

How much can you Borrow?

An unsecured guarantor loan allows you to borrow up to £7,500, normally over 60 months. It is always prudent to ensure that there are no set up or hidden fees attached before signing up, to avoid extra costs.

Amanda Gillam : I work as a blog writer for a finance company called Solution Loans which specialises in Guarantor Loans. I hold a degree in financial management and enjoy writing about a variety of topics including finance, transport, travel, sport and business.

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Top Tips to Getting on Top of Debt

Top of DebtIntroduction to Debt

It is almost inevitable that we’ll run into debt at some point in our life; whether that’s on credit cards, loans, overdrafts or any other item of credit. Debt shouldn’t be feared; in fact without it we’d never be able to establish a good credit score.

The only time debt can become a problem is if you let it run out of control. For example, having large outstanding balances on credit or store cards while attempting to repay car loans and arranged overdrafts is likely to cause financial problems. This is why it is important that you take action as soon as you feel your debt is becoming unmanageable.

Face the facts

Often the core reason people get into heavy debt is because they’ve buried their head in the sand and continued to spend in the same way they always have. Your first step to financial freedom is facing the facts and subsequently working on a recovery plan. Naturally, you will have to make some cutbacks, meaning for the foreseeable future luxuries will be out of the question.

Draw up a spending plan

Drawing up a budget that breaks down all sources of income and outgoings will help you to understand your current financial situation. It will also highlight areas where you’ve been overspending thus giving you a chance to make cutbacks and increase your level of disposable income.

Set Financial Goals

Having drawn up a budget you can then start to set some financial goals. We always recommend setting a list two different types of goals; short-term and long-term. Your short term goals should include things like clearing all loan arrears, clearing your overdraft or paying off the outstand balance on a credit or store card. Naturally your long term goal should be getting debt free; however it’s important that you set a date of when you want to be debt free by. By being both ambitious and realistic with your timescales you will ensure you’re never short of motivation.

Frequently reassess your situation

Throughout your journey to financial freedom it is likely that your finances will be consistently changing, this is why it is important that you continually refresh your budget. For example, if you pay off a credit card balance this is likely to leave you with some extra cash each month that you can churn back into something else e.g. overdrafts or loan repayments.

Ensuring that your budget is always fresh should also give you some idea of your progress. Initially it may be tough, but sticking to your budget is the best way to financial freedom. In order to motivate yourself you could offer incentives or rewards in conjunction with your financial goals. For example; treat yourself to a meal out when you pay off your first item of credit.

Seek Help

If at any point you feel like you’re struggling to stay on top of your finances then seek advice. There are loads of ways in which you can do so; the internet is a great way of doing so if you’re not confident with speaking face to face regarding your problems. Many debt charities will also have trained agents at the end of the phone who help people like you on a daily basis. Try to avoid public forums, these are generally full of people who simply offer their opinion rather than trained advice.

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Guide to the Different Kinds of US Bonds Available Today

All about US bondsBorrowing money is something that’s hard to avoid, both for individuals and large organizations. Even if you have an ample budget, some investments require more. In a large scale, the government and companies issue bonds to aid in borrowing large sums of money. They receive these funds by issuing bonds, which investors purchase. Most bonds have a maturity date, which is when the issuer must pay the investors back. When this occurs, the investor is awarded additional compensation on top of whatever their initial investment was.

The concept of bonds is fairly straightforward, but identifying the different kinds of bonds available today in the US can be daunting to someone with little bond and investment experience. Yet it’s certainly something to look into, with two primary advantages: purchasing bonds can strengthen one’s financial portfolio, and help them stay knowledgeable about market trends. Substantial income can be earned through investing in the right bonds. In general, the types of bonds are grouped by the type of organization or individual that issues them. There are four primary types of bonds that one can purchase in the US:

Municipal bonds are issued by local government, often to provide funding for local projects like improving school districts, sewage systems, publicly owned airports, and rehabilitation centers. Any capital gain from a municipal bond is taxable, and may be counted as income if sold at a profit prior to maturity. Still, many municipal bonds are exempt from interest via state and/or federal income tax, though this tax advantage does result in lower interest rates.

Your tax bracket is important to keep in mind when deciding to purchase municipal bonds. Use the Taxable Equivalent Yield – which is Tax-exempt yield divided by (1 – your marginal tax rate) – to help identify the yield on a taxable municipal bond. There are tools that calculate Taxable Equivalent Yield, as well. In general, tax-free municipal bonds are not useful for low income brackets, as the taxes they are saving may not compensate for the lower interest rates.

Corporate bonds are issued by corporations in order to expand their business. Its maturity date is often after a year from its issue date, with the occasional “commercial paper” corporate bonds having a shorter maturity span. Standard & Poor’s, Moody’s, and other rating services provide an estimate on whether a corporate bond issuer will be able to meet scheduled payments, with the ‘AAA’ rating having the lowest risk and ‘D’ having the highest risk. Using these ratings can help investors avoid high-risk investments.

Mortgage Backed Securities is a security that involves mortgages, often many mortgages. The multitude of mortgages involved makes it perhaps the most high-risk form of bond investment, but it can also result in some of the highest yields. This is how it works: mortgages are sold to either an investment bank or government agent that combines these loans into a tidy security, which investors can purchase. Unlike other bonds, which have a maturity date, mortgage-backed securities are paid off periodically.Ginnie Mae and Freddie Mac are the most common entities that issue mortgage-backed securities.

U.S. Government Securities present some of the most diverse types of bonds. They are issued by the US Department of Treasury, and exist in periodic additional payments to the bondholder, in addition to the principal amount being reimbursed at the maturity date. The government is the largest issuer of debt securities, and as a result these are considered some of the safest fixed-income investment opportunities. Different types of U.S. government securities include a T-Bill, U.S. Treasury Note, U.S. Treasury Bond, Savings bonds, and zero-coupon bond, the latter of which pays no interest but is issued at a discount that depends on the maturity length. You can purchase U.S. government securities directly though the US Department of Treasury.

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