Summer Holiday Financial Tips

Now the clocks have gone forward and we are well into spring, our thoughts may well be turning to getting away for some sun rather than having to endure another disappointing British summer!

Despite recent security threats and reports about the long-term damage to the environment, the desire to get away from it all is stronger than ever with us taking an average of 1.6 holidays per year (according to The Times, 2006). It’s not just how frequently we go away which puts us under increasing financial pressure but also the growing trend to take so-called ‘dream holidays’ every year.

According to a Halifax survey, 20% of respondents said that were likely to take a dream trip for no special reason with over half prepared to spend between £1,000 and £5,000 per person on these holidays.

It’s clear then that these halcyon days of sun, sea and sand have a price beyond the widely-debated cost to the environment. The annual holiday is almost seen as a given with more and more of us spending large amounts of money on lavish trips abroad just to “keep up with the Jones'”. Two or even three holidays a year to Europe and the Caribbean are now considered the norm with £74bn being spent on holidays and spending money in 2006, according to Axa.

The pressure to overspend on holidays is intense and nowadays people think nothing of charging a holiday in the US or Australia to a credit card. The problem starts when the holiday is over and the dreaded credit card bills start landing on the mat! Only then do some people realize that they have spent beyond their means and the ‘holiday hangover’ starts to set in.

Tips to prevent the holiday hangover:

o Set a limit – Think about how much you can realistically afford before you decide where you are going and, more importantly, where the money will be coming from. Stick to this budget!
o Start saving – Put some money aside every month leading up to the holiday – don’t forget that most package holiday companies require the balance to be paid up to 12 weeks before departure. Try to put the same amount away and deposit the funds into a separate bank account to avoid the temptation to spend.
o Start shopping early – Buy holiday essentials little and often. Take advantage of special offers and avoid the ‘holiday rush’ period. Holiday essentials are often cheaper out of peak holiday season, so start your shopping then for the following year.
o Make use of offers – When booking holidays, take advantage of incentives for booking early or bag a bargain by booking a late package deal. Look out for free child places and remember to get quotes from several different sources to see if you can haggle the price down.
o Use credit wisely – If you do use your credit card on holiday, remember to start making payments on it as soon as you return. If possible, use your debit card for transactions (but remember these are also subject to additional charges) – avoid cash advances on credit cards at all costs as the interest rates are typically very high.
o Budget daily – Work out a daily budget of likely spend and try to stick to it while you are away. Don’t be tempted to blow the budget and put the daily meals on a credit card.
o Quality not quantity – Try to resist over-stretching yourself too much even if everyone else seems to be splashing out on foreign holidays. Remember, holidays are far better enjoyed when they are saved up for – there’s more to life than material wealth!

Holiday Insurance

According to Axa, we spent £4.2bn on travel insurance in 2006 – Often overlooked, travel insurance is as important as sunscreen when going on a foreign holiday. However, all holiday insurance is not the same and prices differ widely, here are five top tips to help you get the best deal on travel insurance:

o Shop around – Don’t be pressured to take travel insurance out with your travel agent, it isn’t mandatory. There are sometimes better deals to be had on the high street from banks, retailers and even the Post Office

o Consider annual insurance – If you do go abroad more than once a year, it may be worthwhile purchasing annual rather than single trip travel insurance to cover all the trips you take in that year. Remember to make sure you purchase the correct type of cover, as a winter sports holiday usually requires additional cover.
o Already covered? – You may already have travel insurance – many premium bank accounts have value-added benefits such as travel cover as part of the package. Credit card companies also have tie-ins with travel insurance companies that may be available to cardholders. You may already have basic travel insurance as part of your benefits but may just be unaware so make sure you do your homework!
o Don’t pay for what you don’t need – If you only go abroad within Europe, opt for a policy that only covers Europe rather than a worldwide policy, as this will often be cheaper. Also, don’t pay for winter sports cover unless you actually need it.
o European Health Insurance Card (EHIC) – A replacement for the old E111 form and a travel essential. Whilst not a substitute for adequate travel insurance, this card entitles the holder to free or discounted medical treatment in any EU country (including Switzerland). Cards are available online or by post.

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Personal Finance – 10 Rarely Used Financial Tips For Healthy Money Management

In spite of the fact that this generation is more educated than their grandparents, most college and university graduates lack the basic skills and discipline for managing money. It appears that financial education courses are lacking in the school systems.

Here are 10 rarely used but practical money management tips that were more popular in Grandad’s day and should be revived today.

1. Save for yourself first. Try to put around 5 to 10 percent of your income into a savings account before you pay your bills.

2. Create a budget and stick to it. You need to know where and how you spend your money so you can eliminate unnecessary expenses in order to meet your financial goals.

3. Set Goals! As you plan a budget, try to identify your family’s short and long term financial goals. Working toward a fixed goal makes saving money easier. For example, you can decide that in 10 years, you should be able to eliminate your mortgage, or have sufficient money saved to buy a home.

4. Save To Spend! You don’t need to deprive yourself. You simply need to be able to pay for it with cash. For example, if you must have that new entertainment center, save for it and buy it only when you have the cash in hand to pay for it. When ever possible, do not use credit of any kind.

5. Avoid unnecessary debt. We are steeped in a debt culture where everything from consumer goods to education is bought with credit. Reduce your debts wherever you can. There is no such thing as good debt in the long run.

6. Set up an emergency fund. In addition to your savings account, try to set some money aside as an emergency fund. When you have any immediate requirement or an unplanned emergency, your emergency fund will help you stay away from loans.

7. Stop Using Credit Cards! Credit cards are the primary root of our debt, yet it is difficult to do without them. Learn to maximize the benefits they offer. Resist the urge to use your credit card for anything but an emergency or items you can and will pay off at the end of every month. Paying your credit card balance in full every month will help prevent the (APR) annual percentage rate of interest from rising.

8. Compare Credit Cards. Research extensively before you apply for a credit card in order to get the card that best suits your needs. Compare their annual fees, interest rate, grace period, late fees and any other charges.

9. Get a debit card. With a debit card, you develop the discipline of staying within your financial limits. A debit card gives you instant access to your money and limits your spending capacity to the available cash in your bank account.

10. Never use your credit card for cash advances. You will have to deal with unbelievable interest rates that usually begin at the moment you take the advance. If you need a cash advance from your credit card, you are overspending. Go back, review your budget and goals, then get back on track.

Realize that using your credit card is taking out a loan. Every time you take out your credit card to buy something, ask yourself if that product or service is so necessary that you are prepared to take out a loan for it. You will likely realize that the purchase can wait until you have the cash in hand to pay for it.

These 10 financial tips are a good start to healthy money management.


Financial Tips For Unforgiving Economies (Part 2)

After getting a hold of your spending, it’s a good idea to make sure you have the best savings and checking accounts you can find to store your money in. Most people just keep their accounts in neighborhood or large national brick and mortar banks that both offer terrible returns on your cash and are generally laden down with unnecessary and often manipulative fees. Thankfully, there are plenty of great, reputable online banks that offer much higher APRs on your cash and do away with a lot of the usurious practices we’ve come to expect (like annual fees, ATM fees, Overdrafts, etc.). Check out ING Direct when looking for a great online savings account, and Schwabb when you’d like to set up a bank card with a good return and no hidden fees.

While you’re at it, consider starting to invest your extra savings. Investing can seem like a dirty word when so many people have lost money in the recent stock market meltdowns, but now is actually a great time to purchase stocks. When investing, keep in mind solid stocks at low prices are nothing more than great deals. If nothing else, the stock market rewards long term investments through compound interest, so it’s best to start investing early, regardless of the market conditions. While opening investment accounts can feel overwhelming or intimidating, the process is actually pretty easy.

If nothing else, look into opening retirement accounts if you don’t already have them, as they offer significant tax benefits in the long term. Simply put, these are nothing more than holding accounts that confer significant tax benefits on your investments.

Finally, perhaps the most important thing you can do is set some financial goals. If you don’t know where you want to go, you’ll end up wandering aimlessly, letting the world make your decisions and set your path for you. Goals allow you to live proactively, not re-actively, and financial goals are no different. Think about it- how much differently would you approach all the financial doom and gloom in the media if you knew where you were at and where you were going? When it comes down to it, most of our anxiety comes from lack of focus and direction.

Goals don’t need to be particularly lofty, either. Some good basic goals include paying off your debt (especially credit card debt) and setting up a good sized emergency fund. Setting up individual savings accounts for specific big purchases such as cars, weddings and houses is also a good idea. Online savings accounts like at ING Direct make this easy, letting you divide up deposits into a number of separate sub-accounts automatically, as soon as you make them.

If you don’t do anything else to take care of your finances, you have to at least set some concrete goals. Give your mind a fixed point to focus on, and you’ll find the rest comes naturally.


6 Recession Busting Financial Tips

Has the recession got your worried about money? Try these 6 recession busting financial tips to help you get your finances on track so you can start breathing a little easier.

Budget – Budgeting will help you make sure that you don’t spend more money than you have coming in every month. This is especially important because it helps you avoid accumulating debt. You can also allocate some money to go into savings each month so that you can cover emergencies and larger purchases in the future without having to use credit or debt to do it.

Cut Spending – This is part of the budgeting process. See where your money is going each month, then look for ways to reduce your costs to make sure that your spending is in line with your income. You can usually shave a lot of spending just by making your coffee and lunch at home instead of buying it everyday. There are also lots of websites out there with frugal living ideas to help you reduce your spending.

Pay Off Debt – As your debts are paid off you will be building financial security and freeing up all that money that is currently going towards your monthly payments. If you are currently struggling to meet your debt obligations, seek help from a credit counselor or financial advisor. If you’re currently able to meet your debt obligations, the easiest way to get your debts paid off without having to spend any extra money is to use the snowball method.

First, don’t accumulate any new debts. Second, keep making your monthly payments until one of your debts is paid off. Third, take the money that was going toward the debt you just paid off and apply it to another debt on your list. Fourth, as more of your debts are paid off, keep applying the money you’ve freed up to the next debt in your list.

Build a Financial Cushion – Once your debts are paid off, start allocating money each month to go into a savings account. Ideally you should aim to save the equivalent of about 6 months of pay. This savings account will be a financial safety net for you should you suddenly lose your income.

Protect Yourself From Financial Tragedy – Making sure you have the right amounts and types of life, auto, home and health insurance will protect you and your family. By properly insuring yourself, you can make sure that unexpected events don’t cause financial hardship for you or your loved ones.

Earn Extra Income – Picking up a part time job, or starting a part time business is an excellent way to help firm up your financial situation. You can put the extra money towards helping to meet your monthly expenses, building your financial cushion, or pay off your debts. Just make sure you reward yourself once in a while for all the hard work you’re doing.

Make the most of your money by implementing these recession busting financial tips today.