Archive for

What Should I Look For in Personal Financial Management Software?

We often underestimate the importance of proper financial management and simply rely on the fact that our bank balance is still in the black; however, we are at a loss to explain where all of the money went. It’s not unusual that many individuals are aghast when they look at their monthly bank statement and see that their paycheck deposit is gone through a series of many cleared checks. This situation can be unnerving to anyone, but if you are using personal financial management software, you can see at a glance what was spent, and what it did for you. It’s not just about saving money and paying off your credit card bills, but the software should present strategies to maximize saving, eliminate debt, and give a true picture of your current net worth. In short, a financial management program is a highly detailed and complex system that is vital to keep track of spending as well as net worth.

The first thing that comes to mind when considering personal financial management software is the process of budgeting. The heart of proper financial management lies in budgeting, as it helps to keep track of spending and earnings, while at the same time, gives a view of your overall financial condition. These software programs are usually incorporated with one of these two types of budgeting methods: Retroactive or Proactive budgeting. The former one allows you to create your own budget, and it keeps track, after the fact, whether you followed your set budget or not. On the other hand, Proactive actually assists you to make a budget, and guides you through so that you can achieve these budgeted goals. In most cases, under this method, you are asked to keep aside some additional money for emergencies. This money that is set aside, allows the software to make financial recommendation with much more confidence and accuracy.

Budgeting is most certainly a very important aspect of good financial management, but it isn’t the only one. Keeping track of your true net worth is also equally important. The budgeting process helps to keep track of our short and long term goals, and whether we achieved them. In order to properly track our net worth, we need to bring in the value of our bank accounts, stocks, bonds, real estate, etc., and update them regularly. The more complex personal financial management software systems have this process as well, and will give you an accurate picture of your financial position. This type of financial information can be key when it comes to making crucial financial decisions, or applying to your bank for financing. Also, in this fast paced and globalized world, many individuals tend to have more than one bank account, and often times, various financial interests, making the situation even more complex. Good personal financial management software will be able to track this and present an accurate picture.

In summary, budgeting and keeping an accurate track of your net worth are crucial when it comes to good financial management. When you are exploring options for effective personal financial management software, make sure the program is able to handle your current and future needs. In addition, a program that is relatively easy to use and presents the type of reports that you require, is a must.

The Facts About College Financial Aid

Most American families are offsetting the high cost of college by applying for some degree of financial aid by submitting their FAFSA (Free Application For Federal Student Aid) on or after January 2nd. Unfortunately, this is not a simple process as the college financial aid system is anything but user-friendly. There are an endless number of pitfalls in the application process, and it is far too easy for families to lose some or all of the aid they are eligible for.

Many families fail to even attempt application because they don’t know how to, or they incorrectly assume they are not qualified, or simply because they are intimidated by the complicated and confusing process and all its paperwork. With far more qualified applicants than desks in all of America’s colleges and universities, it is reasonable to expect a system intentionally designed to eliminate all but the most knowledgeable and persistent applicants.

What’s a family to do with one or more college-bound students facing as much as $260 to $500 thousand dollars (and still rising), to send their kids to a 4-year college? Many make the mistake of relying solely on the advice of guidance counselors, college financial aid officers (FAO’s), and even their accountants. Sadly, these families are not getting all of the financial information they need and are in for a rude awakening!

Nationally, guidance departments are facing their worst crunch ever, and are overloaded with as many as 800 or more students for each counselor! Budget cuts have added to the problem causing schools to increase the responsibilities of guidance counselors in areas other than guidance, leaving them with even less time for their students – and there is no relief in sight!

Despite these obstacles and to their credit, guidance counselors still manage to effectively advise students in career planning and college selection. However, when it comes to college funding, they come up short in providing the necessary financial information that could save families thousands of dollars.

Counselors have little time and lack the expertise to show parents how to reduce their Expected Family Contribution (EFC), the minimum the federal government determines that each family will pay at any college, based on the information submitted on the FAFSA. Additionally, knowledge of specific legal financial aid strategies and their correct application would help families avoid or reduce an array of assessments that could cost them thousands of dollars for each year their students are in school.

For example, most parents are unaware that students have no asset protection allowance. Consequently, students with assets in their own name are assessed by the federal government at 20% for each year they are in college. Thus, a student with $1,000 will be assessed $200 for each year the $1,000 remains in their name. After 4 years, they will have lost $800 in financial aid for having only $1,000 worth of assets. This is tragic as it can be legally avoided – if you know how.

Periodically, guidance departments present “in-house” Financial Aid Nights which focus on filling out financial aid forms and understanding the basics of the process. Nevertheless, year after year, the majority of families applying for financial aid wind on the short end by not filling out their forms advantageously. Clearly, parents are not getting enough guidance on the college funding process.

Well-meaning guidance counselors invite FAO’s to speak at their high schools, trusting them to put the best interests of the students above the financial interests of their college. By evening’s end, parents are often left with a false sense of security that the school of their choice will award their student its best possible aid package. This is hardly ever the case!

Much like frugal employers whose goal is to hire the most talented applicants for the least amount of pay, FAO’s seek the most promising students for the least amount of aid. Relying on an FAO to cut your college costs is like expecting an IRS agent to help reduce your income taxes. FAO’s can be helpful, but their loyalties are with their schools – not their applicants!

Accountants may offer some assistance, but far too few have experience with college funding. Although they are experts with income tax forms and tax strategies, financial aid forms and legal strategies are a horse of a different color. The good-intentioned application of accounting principles to college funding can actually hinder a family’s chances of getting all the aid they are entitled to.

There is an endless amount of misinformation on the subject, and a good deal of it is from so-called reliable sources. Oddly, while many families seek professional counseling for their income taxes, few seek the expert advice of college funding professionals despite the fact that the average cost of one year in college far exceeds the average tax bill.

College funding professionals, a small group of financial aid experts, offer parents assistance through the entire process and help families provide their students with the best possible education for the least possible cost. One would naturally assume they are in great demand and buried with invitations to lecture at America’s high schools. Sadly, this is often not the case.

It would surprise and outrage parents to learn that, on a national scale, many guidance departments still refuse the services offered by college funding experts and authors, often stating that bringing in “outsiders” is against school policy, even when such services are offered absolutely free! Thus, every year parents enter the college funding arena without the necessary ammunition to do battle with the system – and severely overpay for college.

5 Steps of Financial Planning Process

Financial Planning process starts from understanding & examining your current situation, gathering relevant financial information, setting up financial goals (short term & long term) and finalizing a plan in detail. This will cover how to meet the financial goals in the current situation and future plans.

Step by Step approach – Financial Planning Process

Set specific and quantifiable goals You should have a specific targets of what you want to achieve and when you want to achieve it. Have measurable goals as it will be simple for you to understand whether you achieved your goals or not.

Analyze and understand every financial decision Every decisions are interrelated and one has impact on other financial decisions. A comprehensive plan is required otherwise it will be difficult to reach financial goals.

Re-evaluate your financial situation periodically Apart from planning, you need to monitor and check your financial position regularly. Owing to change in income levels/expenses/circumstances, such as a marriage, kids, house purchase or increase in income. As Financial Planning is dynamic in nature, changes are required in your planning periodically, so that you are on track with your long-term goals.

Start your financial planning early The early you start your planning, the better it is for you. Developing well Financial Planning habits at an early age such as saving, budgeting, investing will prepare you to meet life changes and handle any kind of situation/emergencies.

Be ready for the unexpected – Know all risk Inflation, stock market movements, interest rates all effects your financial goals and these are beyond your control. So be prepared for this kind of unexpected situations.