“I have been working for 20 years, yet I have very little cash in my savings. Sometimes I wonder where all of my money have gone to”
Does the above statement sound familiar? If you ask around, you are sure to find at least one person you know, who share the same sentiments as Mrs. Chong.
If you are thinking of improving your financial health, first, you need to be able to recognize your financial mistakes so that you can learn not to repeat them.
Here are some commonly made money mistakes that everyone should avoid:
Mistake #1: Failing to Plan
If we carry out a survey on the people around us, we would be sure to find that not many of us plan our finances. The most common response that we can anticipate would be the classic excuse “We are just too busy with work and family that we hardly have any time left to do the planning”. As a result, most of us end up paying higher taxes, leave our savings sitting silently in lousy investments for years or overpaying for financial products. Since there are always deadlines to be met at work, we tend to let our finances run its own course, thinking that it is of lower priority as there are no deadlines to meet nor is there anyone to force us to look into our financial plans, unless of course we run into serious deficit.
However, the important point to note here is that PLANNING is typically found to be a strong habit among people who have successfully accumulated wealth, even with just a modest income.
Mistake #2: Spending Beyond Our Means
Nowadays, we constantly overspend due to peer pressure and consumer temptation that surround us on a daily basis . We are, to a certain extent, exposed to mild brainwashing with TV commercials, newspaper ads, sale circulars, and flashy shopping malls promoting the lifestyles adopted by the rich and famous, which of course involves having the latest mobile phone models, the latest luxurious cars, latest fashion trend. All these tempt us into spending exorbitantly and unnecessarily. The signals we get from not jumping on the bandwagon is that we will be considered left out of today’s scene. However, in order to do so, far too often, we end up spending way beyond our means. We will find that at the end of each month, the net salaries that go into our bank account are usually meagre, after servicing our car loans, housing loans, credit card bills and other utility bills.
Mistake #3: Spending Future Money
Buy now and pay later! This has become a norm nowadays and the credit card has become a must-have item in our wallet. In fact, a lot of us carry more than one in our wallets. No doubt of it is a convenient item to have around, however, some of us misuse it and treat it like a vehicle to spend our future money at will. It has become a common phenomenon where, by just settling the minimum payment at the end of the month, you will buy more now. As a result, the credit card bad debt snow-balls to an extent beyond our control. According to the bankruptcy report, the percentage of people declared bankrupt due to default in credit card payment has increased in the last few years especially among the younger age group. Be wise when using credit card. Making minimum monthly payment on credit card debt allows you to buy more now, but it will cost you dearly in the future.
Monday, June 9, 2008
7 Common Money Mistakes To Avoid: Part I
7 Common Money Mistakes To Avoid: Part II
Mistake #4: Delaying Saving for Retirement
Most of us aim to take up early retirement. In order to achieve this, we need to plan our finances to make sure that we have enough savings to sustain the life style that we desire even after retirement. However, many of us find that even when we approach retirement, we still struggle to meet the savings target that we have set for ourselves earlier. As our income grows, our savings are supposed to increase as well, instead, we more often than not, have big items to spend on, i.e. house upgrading, new car purchase, club membership to keep up with our peers, etc., that prevents us from depositing more into our savings.
Mistake # 5: Investing in the Wrong Products
There are various kinds of financial products in the market. However, in order for us to identify the right product that suits our risk and return profile, we need to equip ourselves with some basic investment knowledge and do the homework ourselves. Instead, most of us end up investing in some products, simply because we rely too much on the financial advisers, who might have the agenda of pushing higher sales for their products and therefore providing misleading information to us. It is always important to study the product characteristics or the management team track record before investing.
Mistake #6: Not Saving for a Rainy Day
Some of us think that purchasing insurance is a waste of money. However, we are vulnerable if we and our family do not have insurance to cater for any loss of income. In the event of some unfortunate incident, especially those affecting the family’s bread winner, without any cash reserve or insurance, it will be devastating to the whole family. By then, it would be too late to start thinking of income replacement.
Mistake #7: Focusing Too Much on Money Matters
All the above tell us to focus on our finances. However, on the other extreme, we must also not be too engrossed in accumulating our wealth to the extent that we lose sight of other priorities in our lives. While we plan our financial health, we must not neglect our own health, family and friends, career satisfaction and fulfilling interests. Without these, even with tons of money, we will not be happy.
Lastly, we need remind ourselves of the importance of planning our finances. If we are not fully, totally and truly committed to creating wealth, chances are wealth will remain estranged to us
Friday, June 6, 2008
Peak Oil: Gas Prices, Oil Supply Depletion & The New Energy Crisis: SU... DetailsCommentsMore from userPeak Oil: Gas Prices, Oil Supply Depletion & T
Stocks fall sharply on surge in oil, jobs data
By TIM PARADIS, AP Business Writer
NEW YORK - Wall Street tumbled Friday, taking the Dow Jones industrials down nearly 400 points, on a pair of alarming economic developments: oil prices that shot up by more than $11 a barrel and approached $140 for the first time, and the biggest gain in the government's unemployment reading in more than 20 years.
The jump in oil to a price that might have seemed unfathomable only a few months ago appeared to wipe out investors' recent optimism over the prospects for a strengthening of the economy. Oil jumped following a Morgan Stanley analyst's forecast of $150 oil by July 4, and in response to a drop in the dollar and fresh tensions in the Middle East.
The surge in oil seemed the guarantee that gasoline prices that are on the verge of a national average of $4 a gallon will only continue to climb, putting additional pressure on consumers who have been forced to forgo discretionary purchases in order to pay for gas and other basics. Moreover, consumers who can't find work or who are worried about losing a job will be even more hesitant to spend on extras.
Wall Street has been worried of late that a pullback in consumer spending will deal a blow to the economy, as Americans' expenditures account for more than two-thirds of U.S. economic activity. So Friday's surge in oil convinced many investors to pull money out of stocks that suddenly seemed too risky.
Crude oil saw a huge rebound during the week after falling amid a drop in demand for gasoline. The biggest gains came Friday, with light, sweet crude setting a high of $139.12 in after-hours trading on the New York Mercantile Exchange. Oil settled at $138.54, a gain of $10.75 for the regular session; that was the biggest one-day advance for oil in the history of the Nymex.
The spike in energy prices came as the Labor Department said the nation's unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.
The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace as May marked the fifth straight month of jobs losses.
But the sudden spurt in oil appeared to weigh most heavily on Wall Street. The increase, fueled in part by a weak dollar, also came after an Israeli Cabinet minister hoping to replace Prime Minister Ehud Olmert was quoted as saying Israel would attack Iran if it doesn't abandon its nuclear program.
"I think the biggest concern right now is oil and it's potential for a stagflationary environment," said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management. Stagflation occurs when stalling growth accompanies rising prices.
The headwinds facing the economy sent the Dow Jones industrial average down 394.64, or 3.13 percent, to 12,209.81; it was down by as much as 412 points at its low of the session. The decline was the worst percentage and point drop since Feb. 27, 2007, when the blue chips dropped 416.02 points, or 3.29 percent, amid concerns about souring debt and an economic slowdown.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index lost 43.37, or 3.09 percent, to 1,360.68, and the Nasdaq composite index fell 75.38, or 2.96 percent, to 2,474.56. The day's declines were the steepest percentage losses for the S&P 500 and the Nasdaq since Feb. 5 this year.
The Dow Jones Wilshire 5000 Composite Index, an index that measures a wide swath of the U.S market, fell 2.9 percent Friday, a paper loss for the day of about $500 billion.
Investors' nervousness was clear. The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 26.5 percent Friday.
Friday's pullback came a day after the Dow jumped nearly 214 points, its largest daily point gain since April 18 and a reaction to better-than-expected sales from retailers and a dip in weekly jobless claims. The welcome economic news helped investors shrug off a more than $5-a-barrel jump in oil prices. But the advance in oil Friday made it clear to Wall Street that ascendent energy prices posed a serious threat to consumer spending and the economy.
Friday's session capped an erratic week for the markets. Stocks fell Monday and Tuesday before moving sideways Wednesday and surging Thursday. The back-and-forth moves left the Dow down 3.39 percent for the week, the S&P 500 off 2.83 percent and the Nasdaq with a loss of 1.91 percent.
Bond prices jumped Friday after the weak jobs data sent investors scurrying for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.91 percent in late trading from 4.04 percent late Wednesday.
The dollar declined against other major currencies — a move that makes each barrel of oil more expensive. Gold prices jumped.
Knapp remains skeptical of the reasons behind the run-up in oil.
"The supply demand dynamics just don't warrant where we are today. It's becoming incredibly hackneyed to say it's all coming from demand in China," he said. "I think the consensus is that something is going to come along to deflate this commodity bubble and put the stock market back on track."
And the worries about employment and oil may be intertwined.
Ethan Harris, Lehman Brothers' chief U.S. economist, contends that the jobs report helped drive oil prices higher. He said traders are worried that the increase in unemployment would leave the Federal Reserve unwilling to raise interest rates. A notion of a Fed with few options combined with comments from the European Central Bank this week on the possibility of rate hikes have hurt the dollar.
"The weaker dollar is pushing up oil prices because oil is denominated in dollars and oil sellers want to be compensated for the weaker dollar," Harris said, adding that he thinks the market's moves have been overdone.
"While I'm skeptical of the whole thing in terms of whether it makes sense logically, this is the way the market behaves. It's like a Pavlovian response. If the Fed looks soft, oil prices go up," he said.
Declining issues outnumbered advancers by more than 4 to 1 on the New York Stock Exchange, where consolidated volume came 4.69 billion shares, compared with 4.18 billion traded Thursday.
The Russell 2000 index of smaller companies fell 22.90, or 3.00 percent, to 740.37.
Wall Street's pullback weighed on Europe. Britain's FTSE 100 ended down 1.48 percent, Germany's DAX index fell 1.99 percent, and France's CAC-40 lost 2.28 percent on the day. Japan's Nikkei stock average closed up 1.03 percent; trading there ended before the release of the U.S. jobs report.
The Dow Jones industrial average ended the week down 428.51, or 3.39 percent, at 12,209.81. The Standard & Poor's 500 index finished down 39.70, or 2.83 percent, at 1,360.68. The Nasdaq composite index ended the week down 48.10, or 1.91 percent, at 2,474.56.
The Russell 2000 index finished the week down 7.91, or 1.06 percent, at 740.37.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 13,924.63, down 336.13 points, or 2.36 percent, for the week. A year ago, the index was at 15,343.15.
