Money Lessons for Children

It's been around a year since I've given my children an allowance of $10/month and they've saved up a lot. But, they wouldn't have been able to save as much if I had not given them simple rules of spending. Spend $20 after they've saved up $100. I'm planning to increase their income to give/contribute and grow/invest to enrich their experience with money.

I've had many conversations with them, and they have learnt to cherish their savings. So much that every time I joke if they should contribute for purchase of theme park tickets, they would choose to save for purchases they would like to buy. Toys. 

They are learning about opportunity costs from their monthly allowances. But the problem is, I want to take them to the theme park! Well... maybe I want it more than they do, but I'd like them to spend on experiences rather than toys that only give temporary satisfaction rather than memories. (memories they might forget at their age of 8 and 5)

I'd like them to contribute to the family. Eating out and entertainment costs money. Maybe they didn't ask for it, but they should chip in. The outcomes I hope to have through their lessons in contribution is a feeling of responsibility. I hope when my kids grow up, and they borrow money from me or whomever, I want them to have the integrity to return the money owed. It's a 20 years lesson that I need to keep building on.

Lastly, besides saving and spending, I'd like them to consistently give and grow their wealth.

And establish prayer and give zakah, and whatever good you put forward for yourselves - you will find it with Allah. Indeed, Allah of what you do, is Seeing.

2.Surat Al-Baqarah (the cow; 110)

The example of those who spend their wealth in the way of Allah is like a seed [of grain] which grows seven spikes; in each spike is a hundred grains. And Allah multiplies [His reward] for whom He wills. And Allah is all-Encompassing and Knowing.

2.Surat Al-Baqarah (the cow; 261) 

Evaluate, Plan, and Action

It's 2015. A new year, a perfect time to evaluate, plan, and take action.

I've kept it simple, and it works (Evaluation, Plan & Action)

Early on, I wanted to input all my transactions in an app and I figured that was the way to do things. It didn't work for me. I ended up with a simple budget with very few categories and that basically gave me an outline of things I should spend on monthly. That's all I needed. Once I budgeted and took action, it became automatic.

I paid my children first (Evaluation & Plan)

I made a promise to my children (5 & 8) that I will give $10 each month, and they can spend $20 of it once they reached $120. They reached it, spent it, and bought gold with what's left. I've set a target for them to own variants grams of gold in relation to their allowance. They own 1 gram (+/- $50), so they'll need to have 2 grams and as their allowance (in the future wage) increases, they'll have a lifetime (and habit!) to collect the 2.5, 3, 4, 5, 10, 25, 50, 100, 250, and 500 grams of gold (Indonesian Antam gold). Those gold will represent the stages in their life of having sum amount in allowances and wages.

Invest in myself  (Evaluation, Plan & Action)
I haven't been able to set aside for myself and actually, I did not setup a plan for it either. Total failure. This year, I will be applying a bit of my children's plan to myself ($10/mth), opened an account that will give me the ability to purchase mutual funds  and hopefully kickstart everything into gear. Also, one thing I'll need to start for this year is a retirement account.

Controlling wants (Evaluation & Plan)
I've failed in controlling my impulsive wants. I bought a phone and I love it. It's a Windows Lumia 535 phone. It's great for my budget and my needs, but I should have been able to hold it off a bit longer. This year, I'll try to put barriers on my spending through a 30-day list for my wants, 2 items out for 1 item in, and doing an experiences vs possessions comparison to hold off my impulses. I'll be posting some articles based on windows apps and the success/failure of barriers.

Al-Amwali (Evaluation & Plan)
I've written around the same amount of articles, I target myself to write around the same amount, look back on ideas that I've post and apply those that I haven't.

Let's get through 2015 with much improvements from 2014. InshaAllah.

Celebrate the holidays and stay within your budget

Image via gettyimages

Winter is a hard time for your budget. But holiday still does not mean that you have to spend all the money you have on gifts for family and friends. I can recommend you some easy tips that you can use making decoration and gifts and during preparation to holidays.

Making invitations

The main purpose is to invite people you want to see at your party. You need to set a date and time, also determine a place, so your friends can plan their time according to your invitation. This also helps hosts to understand the amount of guests to prepare dishes.

In the past time people used cute cards to make an invitation, and also marked the necessary date in their calendar. But today we all use smartphones and other means of communication, so it is not necessary to spend money on cards and delivery. Also you can find many services online that can help you to invite people you want. This is much convenient and time saving.

The other possibility is to make an event in your social network, where you can also create a discussion about the following party. It will help you to prepare and understand what your guests want. Using this service will also provide a timely reminder, so none will miss the event.

Using an online service will also allow you to apply for personal money loan with online approval. This is the most convenient way to get extra money during holidays to make all necessary purchases and preparations. You do not need to save money during all the year and also miss good holiday’s propositions just because you have not got your salary yet.

Decorating your house

There are some traditions about decorating a house for New Years Eve. The most appropriate colors are thought to be gold, silver, red and black. So you should not be too quick when you take down your tree to make enough space for all guest on the party, you can try to redecorate it. You can use the decoration from the tree for the candles and place it somewhere in rooms. Also consider about using interesting things that you can always find in the garage. Use your imagination and be creative, this will help you not only to save the money, but also make unique decor.

This holiday has the other tradition to kiss people you love. So to create a good romantic atmosphere you can use candles, which you can easily buy not so expensive. It is better to choose candles with no aroma, because you will have a good tasty food which smell should not be mixed.

Cooking

At first you need to decide how big your company is. If you have just few close friends you can cook various dishes, but if the invited guests are not limited it is better to make a pot-party. You can also make just light sandwiches and salads, and discuss who can help you. According to my experience people do not eat much during such events, so it will be enough just to have appetizers. But you should not forget about drinks, this will obviously end at first.

The most necessary drink traditionally is champagne. But you can make a punch with vine and fruit juice, this will help you to use less champagne and make it more wanted when the time comes.

However if you decide to make a really big event, you can discuss with your friends and divide the meals to cook together. This will also diversify the menu and give you more free time.

In Search of the Way to Save

Looking to the stars - Calvin & Hobbes

Personal finance is personal. Rule-of-thumbs may be a good start, but it surely isn't for everyone. I certainly have my own way to budget, and out of all the apps I've looked through to help me, not one found to be a perfect fit. I then stumbled upon an iOS app, earmark. It's a social saving-spending app for you to set the top five things you'd like to buy and share it with everyone, including status updates when you forego spending to save for said five items. Pretty neat.

Three things I like about this:

1. Clarity. It would help me take a step back and remind myself that I have saving goals to achieve. In moments of need of clarity, I think this app would help me when my mind start playing the justifying-a-purchase games.
2. Motivation. We are social beings and our motivations sometimes require that social interaction. "Not buying this for that trip, proud of myself", and then receiving a supporting reply from a friend, "you go girl! let's make it to Makkah". Seriously, saving for hajj is hard...
3. Communication. Sometimes other people make our personal spending plans. Hanging out, do this, eat that. Those things add up.When we make it known to friends we're saving for something, it makes communicating personal intentions and rejecting an offer a lot easier.
4. Behaviour. People get easily hooked on social media outlets. If we get hooked on the app, we get hooked on our goals, we will achieve it.

What I don't like, but they might actually be right, is;

"We hate budgeting. 

So does everyone, ever.

We hate budgeting. So does 99.9% of the population.

We also like spending money. So does 100% of the population. 

Earmark helps people who hate budgeting save money while spending it."

I like that I've set myself a budget. It's life changing. But I guess for those who haven't, this app might actually work. For myself. I don't know. I don't have an iPhone. What I'm interested in most is whether I can apply earmarking [designate (something, typically funds or resources) for a particular purpose.] for myself.

So, what I'm proposing to do is to:

1. Unify my goals. I'm going to follow the findings that people become better savers when they have a single goal (pdf link). So I'll unify a single goal to the items I'd like to buy with a goal of higher calling or a long-term based goal like retirement.
2. Partition. Increase the chance of success of earmarking by separating the money physically, especially if the money has a visual reminder (pdf link). So, create a custom printed wristlet, or wallet (2), with a picture as my reminder.

Now, if I have a wallet for zakah, what are my visual cues...

"Is the description of Paradise, which the righteous are promised, wherein are rivers of water unaltered, rivers of milk the taste of which never changes, rivers of wine delicious to those who drink, and rivers of purified honey, in which they will have from all [kinds of] fruits and forgiveness from their Lord, [...]"

47.Surat Muĥammad (Muhammad; 15)

"He will forgive for you your sins and admit you to gardens beneath which rivers flow and pleasant dwellings in gardens of perpetual residence. That is the great attainment."

61. Surat Aş-Şaf (The Ranks; 12)

One way ticket to Jannah. Insha'Allah.

What You Pay and What You Get

I'd like to apply the wise advice, "Price is what you pay; value is what you get", regarding the annual frenzy to buy the latest thing. In this case, an iPhone.

The price to acquire the iPhone is different for each individuals. The people who wait in line the week before pay the highest in price acquisition. There is a loss of income for the week decided not to work, so you factor in the opportunity cost, in addition to the price that you pay, and the total of the phone plan/contract if you'd like to include it. It becomes one expensive phone.

What do you get in value for the expensive purchase? You get a depreciating asset at a rate of:

• Two weeks after a new launch, old iPhones depreciate about 11%.
• Four weeks after launch, they depreciate about 15%.
• Six weeks after launch, they depreciate about 18%.
• By week seven, they lose about 21% of their value.

Can you buy an investment to balance the loss in 7 or more weeks? Probably not.
It's important to accept the truth about what you pay in price and get in value. If you position planned purchases as an investment, it will trigger motivation, help us make a decision, and sort the needs and wants.

The Emergency Budget

I was reading an article on twocents.lifehacker and as I reached the comments section, I noticed two awesome inputs suggested by commenters:

1. Create an emergency budget
When I set my budget, I made one assumption. Ceteris Paribus. All other things constant. I would still have my job and all needs remain the same. But there are other scenarios that might happen like losing main source of income, a brand new member in the family, and so on. So, a quick way to live in a state of an emergency is to reduce and eliminate those that can be eliminated to prioritize the fulfillment of needs. Iheartbudget have a great article on this.

2. Have an emergency fund consisting of a "My Car Died" and "My Job Died" fund.
The second suggestion is to categorize emergency fund into two. An emergency if something happens to your car or appliances and an emergency because you lost your job from downsizing, quitting, or retiring. They are both straight forward and I feel by categorizing it, you have a clearer idea of why the money is lying around, and what to do with it once the situation calls it to action.

My Car Died fund should be a cash account fund because it's something that should be ready to use. My Job Died fund can be a mixed portfolio because in the long run, it doubles as a retirement fund. One caution is if the fund is not diversified and you happen to lose your job and the fund is affected by a greater force like inflation or stock market crash.

So, with both points in mind, I guess it's time for me to modify my budget into budgets, and my emergency fund into funds.

The Power of Habit

I've been trying to figure out whether I have a habit loop regarding my money that consists of a cue to action, an activity leading to a routine, and a reward.

I think that when my income comes in, it is a cue to action. It may be to go eat out, buy something out on impulse, and many other things. Before I had a budget, I basically let myself go without a plan. It didn't work for me, looking at the bigger picture of my finances, because I wasn't getting anywhere. It's been some months that I have a monthly budget, and I realize that my budget has become my routine to quickly allocate my money to certain spending posts. I've been encouraging my wife, and her budget is working for her as well.

I haven't been able to identify the reward. Maybe making my life easier is a reward in itself.

And Allah wants to lighten for you [your difficulties]; and mankind was created weak. 4. Surat An-Nisā' (The Women);28

Fasting And Binging

It's technically my daughters first Ramadan. She's 7 and she will have to fast the whole day. Starting around lunch time is when she starts to complain. Under normal circumstances, she never asks to eat. In fact, we have to insist that she eats. During Ramadan, she wants to break her fast as soon as she feels slight hunger. Then she made a plan for break time to eat everything in sight. Of course, once she did break her fast, she didn't act according to plan.

There are two things that are at play during fasting. Hunger and satisfaction. The combination of physical and emotional need to fill the void and feeling satisfied soon after. When we're going against food, we can probably win most challenges. But how can we win against objects, when we window-shop and have a sudden urge to buy?

It's very hard when you're going against yourself without a buffer (friend, family, spouse). I am almost always the loser when I am by myself. The quick answer if you've ever find yourself digging further emotionally to find justification to buy is to quickly remove yourself from the situation. You'll soon remove yourself from the emotions you experienced and quickly gain self-control.

PS.
Happy Ramadan.

During Ramadan, I will be taking a break from this blog, though not a complete break. I will be going through all my past posts and clean up on my poor writing to my abilities. I'll see you after Eid. Salaam.

Managing Expectations; Personal Quarterly Earning Reports

Managing Expectations, Calvin's Way.

Life is much easier when the pressure is off your shoulders. You hear it in sport commentaries when the underdog will have a go since they don't have the must-win expectation tagged to the favorites. So, what's best when you set your budget? Under-promise. Over-deliver.

There are two personal financial statements in the quarterly personal finance report :
1. Balance Sheet which will show your net worth, whether you're increasing in wealth or becoming poorer;
2. Income Statement which is your realized monthly budget.

Companies have quarterly financial reports to release, and we should too. Our earnings announcements should be in the months of March, June, September and December where we take a picture of our financial condition for the quarter and reassess our goals. After every release comes expectation of how the company (you) position itself for the next quarter. Personal finance is pretty predictable in normal circumstances; we will get your income bi-weekly or monthly. If we set our annual goals and break it down quarterly, we should at least quarterly fulfill what is expected of ourselves. But, take a step further by outperforming on a quarterly basis in cutting our cost/expenses and constantly increasing our net worth. We should have high expectations of ourselves to perform better if things are going well economically.

Can we meet our own target performance? If we can, then it was expected. If we under-perform, investor (your) confidence lessens. If we over-deliver, it's good. Management (you) get a bonus of becoming richer due to good performance.

The awesome thing is, this can be a family event like how companies have conference calls. We can hold an earnings announcement and conference calls as a family. Children should very much know whether their parents are in debt, since debt is passed down to children.

Are you an able manager to push yourself and your family to prosperity? Of course you are, if not then who else? I guess the one expectation that you can't manage is your own. Personal finance is a must-win game.

Why We Can't Save

Blindly spending - Image from Wired.com

Based on my own experience, the one reason why I don't routinely save is because I didn't plan to save. Once I planned, I started saving though it's not a significant amount but it's still saving. Some people might feel that saving is only for people who are in a privileged position to do so, but that's very far from the truth. Everyone must save. Everyday I pass by beggars and I wonder how they they eat for the day. They save for it. And they probably budget too. They know how much they need to live for the day, and save the money they have for tomorrow.

So, if we feel like we can't save, there's probably an amount that we can save but seems too insignificant. In the end we choose not to save. Or, we actually lack the knowledge of how much we can actually save because, like I did for the past 10+ years I didn't plan to. Budgeting or planning is a duty implicitly mentioned in the Quran.

They ask you about wine and gambling. Say, "In them is great sin and [yet, some] benefit for people. But their sin is greater than their benefit." And they ask you what they should spend. Say, "The excess [beyond needs]." Thus Allah makes clear to you the verses [of revelation] that you might give thought.

2. Surat Al-Baqarah (The Cow; 219)

When people are asking how much they should spend on charity, the answer was "the excess". How much is excess? We wont know if we don't write it out on a piece of paper and break down our spending. Not planning is intentionally blindfolding yourself from your money. And if you blindfold yourself from your money, you are risking of going in circles doing what you've always done with your money. Which was not an ideal situation for me.

The Golden Rectangle Budget

1.618 The Golden Ratio

One of the reason why many stories and parables in the Quran are perfect when it comes to personal finance is because it is a reminder. Reminder that includes three aspects; the past, present and future. So, I have been thinking how we can put all three aspects in our money management since they play a part in our budget. Example, the past plays a part in things we consume now and pay later, things like credit or utility bills. The present is the food we eat. The future are for things like retirement, investments and emergency savings.

This goes back to our previous topic, budget percentages, what is an aesthetically pleasing distribution for those three aspects? I looked to the golden ratio to guide me since it seems to be a magical number. I came up with this:

We have a choice of making the last proportion as charity or the past. Should we choose to have charity rather than the past, the things we consume now and pay later like rent, electricity, water, trash, sewer bills, can be bundled in the present. If we have a mortgage, it should fall under the future, since it is an asset that fluctuates like an investment. A car loan however would only decrease in price, it should fall into the present.
In truth, charity actually falls under the future because it is our investment for both dunya and akhirat. It is your choice to make.

So, how should we distribute our income in percentages?

Present 62% (food, transportation-gas, rent)
Future 24% (investments, savings, mortgage, charity)
Charity or Past 14% (utility bill, car loan)

If we would like to have the past and charity as separate categories, it would result in:

Present 62%
Future 24%
Past 9%
Charity  5%

It still looks like an ideal budget. In this scenario, what should be categorized into the past would either be utilities or a car loan, as one or the other will fall into the present. Simple and aesthetically pleasing, right?

Budget Percentages

Where Did The Money Go?

There are many advice on how we should spend a percentage of our income and budget accordingly. I've been trying to fit my budget on these guides, but I've never been able to fit the profile. I've realized that budget percentages only serve as a guide on what's normal for us to spend. Each of us have different lifestyle, conditions, needs and wants. It's almost impossible to fit in perfectly unless we live according to the ideal of the budget.

For example, most parents who live in the USA send their children to public school. So, it's natural that most parents don't have a budget for their children's education. But for parents who send their kids to private schools, or who live in countries where schools aren't free, will have their children's education on their budget.

Dave Ramsey Budget Percentages

Charitable Gifts 10-15%
Savings 5-10%
Housing 25-35%
Utilities 5-10%
Transportation 10-15%
Food 5-15%
Clothing 2-7%
Medical/Health 5-10%
Personal 5-10%
Recreation 5-10%
Debt 5-10%

What we can do is determine which budget percentages we can use as a guide to determine if we are overspending. Dave Ramsey's Budget Percentages is a good start. We can use parts of it as a guide. For example, spending 25%-35% of our income on housing. If we make $4,000/mth, then we can spend $1,400 on housing. If we'd like to save, we can budget housing and utilities together so that housing and utilities is budgeted $1,400/mth. That is an ideal situation. People that make $2,000/mth will have to find a place that rents $700/mth.

The rest, we have to list what we spend on monthly and see how much it takes up from our income. Next, we will cover a topic on determining which cars are affordable according to our income...

Has It Been That Long?

The People of the Cave

I've not written on this blog for a while, and I realized my last post was in November. It's March. I've finally awaken and realize it's been 5 months since I posted. Passing the new year, I didn't make any resolutions. I did, however, use the personal finance apps for my budgeting needs. Many things happened during the time that I gave the apps a run for their money. I'll give a short say on each of them with a very important conclusion.

Toshl Finance was coming close to a winner during my experience. It's the most easiest to use and understand out of the whole bunch, but functionality have changed during the start of my test. It's almost unusable now. So, you'd have to decide if it would fit you to continuously use it. For $19.99/year, it's a small amount if it can motivate you to get your finances together.

YNAB made the most sense. You set your budget (spending goals), you track your expense (spending), and you can see whether you made your goals accordingly. It's for those who loves looking at numbers. It's $60 for the license to use the software.

MoneyWise and Pocket Budget are excellent free-to-use-apps, mainly as an expense tracker.

There's one problem, all these software doesn't really fit me. I really hate tracking my expenses, it gets tedious after a while. I've built the habit of spending without really planning nor tracking for such a long time, that all these software would fail to be a part of my financial activities. The one closest to succeeding was YNAB since I love numbers. So, I chose to use a spreadsheet software as part of my financial activities. I really dug deep to create a system that works for ME. A combination of a cash based spending system and NOT registering any of it.

My advice?

Don't read any personal finance apps review.

Don't spend money on software and justifying that purchase by telling yourself that you will use it and magic will happen to your finances.

The best thing you can do is to get down to business and quickly figure out a system that works for YOU.

Money Moves: Imagine Playing Your Financial Life like a Chess Game

To say chess is a popular game would be a gross understatement. Chess, for at least 1500 years, has been considered to be not just a game, but a true test of intellect and character. One can learn a great many things about chess that can be applied to one’s life, not the least of which is one’s personal finance. Chess is a game that requires patience, foresight, and an ability to understand your opponent. Much like your personal finance, these qualities are required for you to come out on top in the end. Here are a few things you can take away from playing chess and use to improve your financial life:

Think three moves ahead.

The phrase is synonymous to playing chess but should apply to every aspect of one’s life. Your financial life won’t be improved by being arbitrary. Whether you’re planning on taking out a personal loan or using your credit card, you should always know what these decisions would lead to and how you would deal with those consequences. Managing your money rests a lot on proper planning. Don’t just have a single plan for your finances, have a plan that you will implement after your initial plan has succeeded, and have a series of contingency plans if your initial plan fails. Only by anticipating every possible outcome and being prepared for each of those outcomes can you secure a victory in chess and finance.

Work both sides of your game.

The really great chess players can effectively play both offensively and defensively. Whether it’s using the white pieces or black pieces, an astute player takes advantage of any and every position in the game, whether placed there intentionally or not. The same applies to your personal financial management. Some people are just good at saving and investing their money but can’t seem to find a way to earn more money. Some can earn a lot of money but are unable to properly budget that money. Don’t just be good at making money. Be sure you’re also adept at saving and investing money, even at budgeting money, and managing money. Improve every aspect of your financial game. By attempting to be well rounded, you can identify which areas of your personal financial management style need work and you can definitely improve on those areas.

Know when to sacrifice.

In chess, you’ll sometimes find yourself in situations wherein you need to sacrifice valued pieces in order to achieve desired results. Managing your finances is the same. Sometimes, you’re going to find yourself in predicaments that only a sacrifice can get you out of. Don’t hesitate to make the proper sacrifices if it means a much more important achievement comes to you down the line.

Practice patience.

A well-crafted plan of attack or counterattack fails if a player doesn’t have the patience to wait until the proper time to execute that plan. All good plans rely on proper timing in order to work perfectly. Patience is the key to success in chess and finance. Waiting for your opening, knowing your opportunity will come and ensuring that whatever opportunity to unleash your game plan is not wasted goes a long way in ensuring your success. The same way chess players wonder if “is it the right time to perform castling” or “is it the right time to sacrifice my queen,” when it comes to your finances, always consider timing. Is this the right time to take out a personal loan or should you wait? Is this the right time to use your credit card? Always practice patience, and you’ll see the right time come.

Know how to maximise your resources.

Sometimes in chess, you’re forced to play at a disadvantage. You’re bound to make mistakes form time to time, and there are occasions where that lead to situations wherein your pieces are outnumbered and your movements are limited. Chess players thrive on control, but also know how to make do with situations when their initial plan doesn’t work. With fewer pieces on the board, they still try to find a way to win.

In your personal financial management, try to maximise your resources, limited as they might seem to you. There’s always a way to win, and it’s up to you to find it. Learn to use whatever you have, be it a single credit card or a meager income. Your financial success isn’t limited with your lack of resources, but rather with what you end up doing with those resources.

Chess and finance are very similar in terms of the need to establish the proper mindset and practice a level of discipline in order to succeed. Look at your money as chess pieces, and your financial life as a chessboard, with debt and other bad things as your opponent. Make the right moves and you’ll be sure to win at the game of finance.

Be ready for the Unpredicted: 4 Causes to Budget

The process of budgeting is important for everybody, and it concerns not only people, who have troubles with overspending. When you have budget, you see where your means are spent and it helps you in planning for future and for the emergencies you may face. It also benefits to the relations within your family. If you have budget, you are ready to face any unanticipated financial challenges which may occur.

You gain Control over Where Your Means Go

The main reason to start budgeting is to develop better spending patterns. Making a budget demands an in-debt look from your part at your finances and decisions, which are vital for your future. You will be able to spend less and accumulate more savings, thinking over each purchase you want to make twice. You will try to align all your needs with the budget you have, it will help you get rid of binge expenses and gain better control on where your means go.

Keeping within the budget does not mean you are unable to buy items which you’d like to or apply for some extra cash from time to time. It even allows you purchases of what you want, because you can reduce costs in other areas. If your budget is proper you can afford BMW instead of some cheaper car seeming more attractive from price point of view.

Budget Keeps You Focused on Long-Term Goals

One more important reason to create a budget is to benefit to your long-term goals, retirement in particular. Though all of us have different financial goals, budgeting helps you reach them. The Investigations show, that less than 15% of Americans are confident in their comfortable retirement. On the one hand it’s due to the social security concerns; on the other hand, it’s because of not proper budgeting for retirement time.

It Helps You Accumulate Means for Emergencies

Emergencies happen to all of us and this is one more reason to budget. It’s impossible to do without an unexpected car break down, losing your place of employment or facing some unforeseen medical expenses. Having a budget allows you make planning for emergencies and it relieves your stress when you face them.

It’s reasonable to save at least three months’ worth of income so that you can cope with financial difficulties. Budgeting gives you the opportunity to contribute to emergency fund, so that the necessary sum is there, when you need it.

It Benefits to Your Family Relationships

According to Utah State University Research, the chance for divorce is 30% higher in the families which disagree about finances at least several times in a month. Budgeting reduces misunderstandings in the family about finances and benefits to better relationships. The additional advantage lies in the fact that children have less stress if they understand the budget of their family.

So budgeting is good in many ways and allows you to plan for the emergencies, thus relieving your stress during them. Do you see some more reasons for budgeting? Tell us, please.

The Chosen Few

The Chosen One - image from fanpop

I have chosen the apps (android) that I will try out for a month for my budgeting needs;

Toshl Finance, YNAB, MoneyWise, and Pocket Budget

There are two honorable mentions that I eliminated from my testing;
Goodbudget (EEBA) and simplebudget

I will start with the eliminated apps.

Simplebudget have the simplest layout. The app uses an envelope budgeting system. You work your way from determining where you want your money to go. You create envelopes for mortgage, insurance, utilities and so on. You start by making a budget for everything you need. You'll realize at the end of the process, how much income you need to support your spending (cannot be negative number).

Then, track your spending and record it in the assigned virtual envelopes that you've set early on as your budget. One problem is that it doesn't meet my needs due to the fact that I go on business trips and acquire additional income. The amount differs from month to month yet once you've set an envelope, it'll become default as you swipe across months.

Goodbudget (formerly EEBA) is similar to simplebudget, I have problems setting additional income and how it would play to my overall picture of my spending and budgeting. The graphic user interface and flow of the app requires a learning curve much deeper compared to other apps.

So, with that out of the way remains the chosen few where one will rise above all and become the budgeting app to help me reach prosperity. I will update my progress of using the apps.

Financial Team Assemble!

Financial Team Assemble! Image: Marvel Avengers

 The one thing I've learned from past experiences of working in teams is that the best team assembled are those that include diverse talents. Step 28 suggests your team should consist of a tax advisor, credit counselor, financial planner and lawyer. Kiplinger suggests a dream team of a financial planner, investment adviser, estate-planning lawyer, and an accountant. The two only showing a slight difference depending on where you are with your money, one being in debt and the other with solid finances and ready to invest.

 It all sounds good when personal finance books suggests that you should build a team as if we're all Tony Stark's with money to burn, thus often forget to mention the costs associated with it.

 Spoiler: it's not cheap.

 Now, don't take this the wrong way. I'm not trying to sell the idea to readers that they should spend their hard-earned money on professionals. I'm having a hard time to convince myself to do that actually. So, this is actually me, trying to convince myself.

 According to the article from Kiplinger, financial planners come at a cost of $200-300/hour. There are online financial planners such as LearnVest offering combined services of financial planning plus technological support that starts from $89 one time fee, plus a $19 monthly fee. If I take the "5-year planner" plan, it would be $299 + $19/month, or about $527. That's probably the cost of a "free phone" plus a year contract phone plan or maybe a gadget. So, gadget vs financial planner.

I'm going to consider my happiness on making this decision. I'll categorize this financial planning purchase as a one-time, one-year subscription experience purchase. Am I sold on it? Not yet. I think I'll focus on how I budget my first year and what I achieve.

Not Sure If I'm Going Into Debt Or Just Using My Credit Card

Philip J. Fry (Futurama) thinking.

 We all use credit cards differently. Some use it like a charge card, borrow then pay in full when is due. Some use it as a loan, borrow then pay in installments. Sometimes, we have "pain" and "reward" signals when using plastic cards. Some people feel a rewarding experience from using their credit cards. I have a "pain" signal for myself that by using an ATM card pose a security risk by having to enter a pin. A risk of my card being hacked and a whole lot of "pain" and possibility that I may not be able to get my money back. I have that signal because it'd happened to me once, my ATM was copied, hacked, and used. But for credit cards, I lack a "pain" signal and have always treated it like cash. The pain comes much later when it gets me into debt.

Step 27 takes the financial literacy approach by educating the cost of taking on debt. We need to understand the terms such as interest or APR, length of loan, finance charge, credit limit, minimum monthly payment, grace period, over the limit and late fees associated with the debt. A much more easier approach is to just avoid it completely so that we would not need to understand it at all. When we use our card, we have to know exactly whether we are falling into debt by making that swipe purchase, since credit card increase purchasing power, but not increasing our income. If we avoid it completely, we know we are not falling into debt when we are making a purchase with cash.

 An interesting part is how debt affects us not just financially, but also emotionally and physically. Are we really ready to take on a burden of back pain, migraine, anxiety and depression by getting into debt? Debt is for the financially and mentally prepared.

Or do you, [O Muhammad], ask of them a payment, so they are by debt burdened down?

52. Surat At-Tur (The Mount; 40)

The Qadr of Money

Source: Vakil.org

I am going to pile Step 18, Step 19, Step 20, and Step 21 together in one post because they are very much connected to each other. Hopefully I can tie everything together neatly here. Before we start, please watch the video below:



Steps 18-21 is all about budgeting, and budgeting is about the present to the future, not the past. Think of budgeting as a guidance in assigning each and every dollar a job, and with the guidance created, you have peace of mind of how you will live in the present and upcoming month. It's much more peaceful than spending aimlessly and hope all will be well. So, we create a predestination of where will each dollar will go to based on the things we know will come. Things called fixed, variable and periodic expenses like mortgage/rent, utilities, insurance, birthdays and so on. When the money have been predestined to certain jobs, they cannot go anywhere else, like the comic strip above. Do not let your free will create chaos on the flow of your money. Automatically impede the movement of your money once your receive your paycheck.

"..And peace will be upon he who follows the guidance." 

20. Surat Ţāhā (Ta-Ha; 47) 

And We did not create the heaven and the earth and that between them aimlessly. That is the assumption of those who disbelieve, so woe to those who disbelieve from the Fire.

38. Surat Şād (The Letter "Saad"; 27)

Indeed, all things We created with predestination.

54. Surat Al-Qamar (The Moon; 49)

The Top 4 Reasons People Fail at Budgeting

Budgeting isn’t easy, and many people experience difficulty trying to get the most out of this essential financial tool.  While the concept may sound simple, adhering to your budget could be a lot harder than you might think.  To help you experience success, here are the top 4 reasons why people fail at budgeting.

Unrealistic Expectations

The key to a successful budget is in the planning.  When you sit down to write up your budget, it is essential to be as realistic as possible.  If this is your first time working with a budget, or if you have previously experienced difficulty saving money, you should remember to start small.  Keep your goals simple and achievable, and then work on a budget that supports them without being too strict.  As you get used to your budget and start to experience progress with your savings, you can tighten the belt a little more. Following a gradual, step-by-step process will ensure that your budget is realistic, and most importantly, achievable.
  
Giving In to Temptation

Temptation is the biggest enemy when it comes to trying to stick to a budget. Months of hard work and sacrifice can come completely undone simply with one impulse purchase, so it’s important to be vigilant. Try and ensure that you are never in the situation to go through with spending on a whim by having clear goals and constantly reminding yourself of what you’re working towards. When you’re tempted to spend, walk away and take the time to truly consider your actions. It’s easy to get carried away in the heat of the moment, so removing yourself is an important step.   

Feeling like You aren’t Getting Anywhere

Sometimes it can feel like you are putting in all this hard work and not really getting anywhere. Your goals are still years away from being achieved, and you may start to ask yourself why you’re doing this. The trick is to focus on small, short-term goals that you can easily achieve, as this gives you a sense of success. By making budget a rewarding experience, you are far more likely to stick with it in the long term and avoid the feeling of being stuck in a savings rut.  

Not Seeking Advice

Many people aren’t aware of the help that is available when budgeting. Seeking advice from a reputable company such as Fox Symes debt assistance will allow you to access the highest quality professional budgeting advice personally tailored to suit your financial situation.  Not only are they experienced, they have a clear and objective approach to create a budget plan that reflects your needs. You don’t have to go through this on your own, and with professional advice, you’ll be able to experience great budgeting success sooner than you think!  

By being aware of these common reasons for failure, you can ensure that you avoid making the same mistakes with your own budget.  Remember that you can always get advice and support from a professional agency such as Fox Symes, ensuring that your budget has the very best chance of success.  Whatever you do, don’t give up. Budgeting might not be easy, but it is one of the most important and rewarding financial tools to help you to get on track and achieve your goals.