Shasi

Do you want to know how to achieve financial independence? I’m sure your answer is yes. After all, achieving financial independence means you can enjoy your life without any financial worries. You can do what you enjoy doing without having the burden of financial problems on your back. That, of course, is a great situation to be in.

But how can we be independent financially? What do we need to do?

According to some experts (like Robert Kiyosaki), you achieve financial independence (or financial freedom) when your passive income is bigger than your expenses. Why? Because it means you don’t need to actively work for money to maintain your lifestyle. The money that automatically streams into your life is already bigger than the amount you need. As such, you are free to use your time for other pursuits.

On the other hand, being independent financially could also mean your ability to make money on your own without being dependent on any single employer. You are the person who are in charge of your income; nobody else can stop it.

Looking at those two possible meanings of financial independence, we can say that first of all you need to diversify your income. If you depend on only single source of income then you will be in a difficult position if it somehow stopped. But if you have alternative income sources then you won’t worry too much if one of them stops producing money for you. That’s why you need to create alternative income sources, especially if you currently have only one source of income.

You can do that by building a side business. Take time to think about the kind of products or services you could offer. Think also about how you can manage your time between your side business and your day job. Once you get a concept in your mind, take action to actually build your business. There’s no use of having a lot of ideas in your mind if you can’t bring them into reality.

Over time, you should aim to make the business runs on its own without requiring your active involvement. Develop a system by which your business can run itself. This isn’t easy, of course. You might meet a lot of difficulties along the way not to mention the amount of time it might take. But building a system is essential if you want to have a real financial freedom. What’s the use of having a good business if you are forever attached to it?

One thing for sure, it takes a lot of hard work to achieve financial independence. But it isn’t something that’s out of reach. Many people have achieved it and you can too.

Making financial choices is something you need to do from time to time. Your personal finance condition depends on the choices you make. If you make the right decisions, you will have good personal finance. The opposite is also true. If you make bad decisions, then you will suffer financially.

So it’s important to know how to make the right financial choices. For that, you need to know several principles that will guide you in the process.

The first principle is you should spend less than you earn. Any choice that goes against this principle should not be chosen. Why? Because they will only lead you to financial disaster. You should especially beware of this principle when using credit cards. Credit cards make it easy for you to spend more than what you earn so you need to be careful with them.

The second principle is you should buy assets whenever possible. Robert Kiyosaki defines asset as something that makes money. So whenever possible, you should buy something that will make you money. Investing falls into this category because buying stocks and bonds can make you more money in the long term. On the other hand, buying car doesn’t fall here because it doesn’t make you money (unless you intend to rent the car to others).

If you follow the second principle, you will be careful when you buy things. You will minimize the amount of consumer stuff you have. Instead, you will invest more of your money. This is a good money habit to cultivate.

One more principle you need to keep in mind is the time value of money. 1000 dollars in your hand today is more valuable than 1000 USD in your hand next week. Applied to investing, it means that you should invest your money as soon as possible to make it grow the most.

The principles above are simple, but if you follow them you can make the right financial choices.

When it comes to personal finance, one important thing you need to know is how to avoid credit card debt trap. Why? Because credit card debt is one of worst forms of debt you can have. The interest rates on such a debt is among the highest compared to other kinds of debt. This is not to mention various fees you may need to pay related to your card.

That’s why you need to avoid the debt trap in the first place. But how can we do that?

Well, first of all, you need to know that credit card makes it easy for you to spend. Even worse, you might be tempted to spend beyond what you make each month. This is the main cause of debt and you need to do your best to avoid it.

The key is to not fall into consumerism. Don’t think that having more stuff means being more happy. No, they are different. You don’t to have more and consequently spend more money in order to be happy.

Unfortunately, the world around us promotes the opposite, especially through advertisements. So whenever possible you should minimize your exposure to advertisements. Perhaps the best thing you can do for this is reducing the amount of time you use to watch TV. This one step alone can help you a lot in avoiding consumerism.

If you do want to buy something, don’t buy it right away. Instead, wait for a few weeks before you buy it. This way you eliminate impulse buying. You can clearly see whether or not you still want to buy the thing after the time passes. Most likely, you will no longer want the stuff.

Most importantly, don’t carry a balance. Always pay your bill in full each month. This is essential because by consistently doing it you will eliminate debt. It also makes sure that you spend less than what you earn each month. Not only that, but also it can improve your credit score over time. If you choose to do just one thing from this article, choose this one. This is the most important thing you can do to avoid the credit card debt trap.

No matter how your financial situation is, it’s always a good idea to create alternative income streams. After all, doing that will prepare you for unexpected things in your financial life. Even if you lost your job, you won’t lose all your income since you already have alternative ways to make money. Isn’t that a great thing to have?

The question is, how can we build alternative income sources? More importantly, how can we build them in a way that still allows us to keep our day job?

Fortunately, there are many ways to earn extra income these days thanks to the Internet. In this article, I’d like to discuss just a few of them.

First, if you like writing, there are many writing opportunities online that can give you extra money. You can be paid on per article basis if you like to. Alternatively, you can also be paid a portion of the advertisement income that your articles generate. The first alternative will give you quick cash, but the second alternative might give you continuous income stream for months or even years to come.

If you like photography, you can sell your images online. There are a lot of places where you can do this. Whenever people download your images, you will get a certain percentage of the payment.

One popular way to make extra cash is being a freelancer. You can take projects that you work on in your spare time. Of course, you need to make sure that you do have the time to work on the projects. There’s nothing worse for your reputation as a freelancer than taking a project only to fail to finish it.

Another popular option is being a blogger. What you need to do is finding a topic you are passionate about and write consistently about it on your blog. Over time, when your blog already generates traffic, you can make money through advertising or selling products on your it.

One thing to keep in mind is it’s not easy to build alternative income streams. As with any other type of work, it takes persistence and hard work. But once you make it, you will enjoy financial security.

Learning how to spend less money can do a lot to your personal finance. It will help you save and invest more. In the long term, that investment can make a big difference in your net worth.

How can we spend less money? First of all, you can do it by wanting less stuff. Our culture has been bombarded with the notion that more is better, that the more you have the happier you will be. But this isn’t true. Having more doesn’t necessarily mean being happier. There are many people who can live a happy life without being rich nor owning a lot of stuff.

To make it easier, you might want to reduce your exposure to advertisements. Ads are designed specifically to make you buy more. So you might want to consider watching less television and consuming less of other media as well. This reduction in exposure can help you reduce the desire to have more.

One other thing you should do is avoiding impulse buying. Don’t get into the habit of buying something just because you want it now. Instead, write the item in a list and wait for some time (many people suggest thirty days) before you decide whether or not to buy it. You might eventually find that you don’t really want the item. This could go a long way toward cutting your spending.

When you do decide to buy something, do your homework first. Compare the costs and benefits of various items you are interested in. Find coupons whenever possible. Buy an item when it’s discounted. These little things could add up to a big amount of money over time.

You should also evaluate all of your current spending and find those that you can cut. For example, do you really need that cable TV subscription? Many people can actually cut it without losing too much thanks to other entertainment options available today (the Internet plays an important role here). Doing this evaluation and following it up with actions to cut your spending can save you a lot of money.

By applying the tips above, you can spend less money and strengthen your personal finance.

One of the most common types of debt is credit card debt. As such, it’s important to learn how to avoid credit card debt. That will help you a lot in having a strong personal finance. Otherwise, you might never have a healthy financial condition.

Debt related to credit cards is known for its high interest rate. No matter what return you get from your investment, it could easily be wiped out by the interest rate of the debt. So you need to eliminate the debt as soon as possible. Even better, you should avoid the debt in the first place.

The key to avoiding credit card debt is paying your balance in full each month. Some people advocate a radical approach of cutting your credit cards. But I don’t think that’s a good thing. After all, there are still many benefits that you can get from credit cards. Consumer protection and reward programs are examples of them. So keep your credit cards but pay your balance in full every time. This way you can still get the benefits that your card offers without the burden of debt.

To be able to do that, you need to be sure that you spend realistic amount of money each month. You need to live below your means. Just because your credit card limit is high doesn’t mean that you should use it all. To the contrary, you should try to save money whenever possible. Don’t get caught in consumerism. Buy only what you need.

One thing you should pay special attention to is impulse buying. Impulse buying could easily make you spend more than you should. This, of course, is something you should avoid. Many people use the trick of waiting for thirty days before purchasing something. After thirty days, there’s a good chance that you no longer feel the want to buy it unless it’s something that you really need. This is a good trick that many people find useful.

Once you make your spending manageable, it will be much easier for you to avoid credit card debt. Your bill will be under control and you won’t carry a balance on your card.

The global financial crisis in 2008 was a great event in the history of world economy. Rare is a crisis of such scale. It’s easily the worst financial crisis the world has ever seen since the Great Depression in 1930s. But what are the causes of the global financial crisis? How could such a crisis happen?

The answer to this question can be summarized in just one word: greed. Greed is the factor behind all the misbehavior that eventually led to the crisis. Greed made people no longer use common sense when it comes to their financial behavior.

This could be seen easily in the subprime mortgage crisis. In normal situation, subprime mortgage shouldn’t be done at all. You need to have enough collateral when lending a mortgage to protect yourself from any possible financial risks if the homeowner defaulted. But people wanted to make more money, and because the normal mortgage market didn’t have enough room for growth anymore, people expanded to the much riskier world of subprime mortgage. They no longer thought that it was a risky business that could easily go wrong. Instead, they saw that everybody did it and they didn’t want to miss the party.

On the other side, people were creating more and more complex financial instruments in order to make more money. No longer were they satisfied with conventional financial instruments. Instead, they created complex mathematical models upon which to create complex financial instruments like derivatives. Many people who traded them didn’t actually understand how the complex instrument worked. As such, they couldn’t take the appropriate actions when things went wrong nor could they anticipate one.

There was a certain degree of irresponsibility that made people do things that they knew shouldn’t be done. Their attitude was that they would no longer be around when the problem arose. They created a dangerous instrument, but when the problem came to the surface they would no longer be involved in the deal. They had reaped their rewards and moved to something else. So who cared if things went wrong? This kind of attitudes opened the way to many irresponsible behavior in the financial world.

So there was a big bubble, a seemingly fast expansion that actually had no strong foundation. When the bubble eventually burst and caused a global financial crisis, people – even economic experts – were surprised.

Do you want to know how to lower interest rates on credit cards? Many people do and for a good reason: lower credit card interest rates can make a big difference on your payments. This is especially true if you carry a relatively big balance on your cards.

There are two ways that you can use to lower the interest rates. The first one is asking for lower rates on your current card issuer. The benefit of this way is you don’t have to go through the troubles of registering a new card or transferring your balance to the new card. The downside is it might be difficult to get a reduced rate from the same issuer.

There’s no hurt in trying though. It will take you only a few minutes to call your credit card company and ask for lower rates. So call them and ask for lower annual percentage rate (APR). To make it easier, you might want to ask them for a hardship program, which is a program designed for those who find it difficult to pay the balance. Your credit card company might give you special interest rates in such a case. But be careful, there’s also a possibility that you can no longer use the card until you pay the balance in full.

Another alternative is to get a new card that has lower interest rates. Then you need to do a balance transfer from your old card to the new one. One important thing to pay attention here is the balance transfer fee. Make sure that the fee is low enough for you to justify the transfer. Also you need to find out about how long the promotion rate of the new card last. Can you get enough benefits to justify a balance transfer? This is something you need to find out before deciding to move to a new card.

The best strategy, of course, is to not carry a balance on your card. In such a case, your annual percentage rate isn’t relevant. You always pay your balance in full so the credit card interest rates simply won’t affect you. This should be something you aim for. However, if you do carry a balance, try to the strategies above to lower interest rates on credit cards.

One important rule of investing is diversification: you should never put all your money in one basket. You need spread it in different asset classes (such as stock and obligation), and within each asset class you should diversify it further to different kind of investments.

One thing you can do to diversify your portfolio is investing abroad. Why? Because foreign markets have different characteristics than the domestic market. When the domestic market falls, foreign market could actually increase.

It’s true that due to globalization it isn’t one hundred percent true: different financial markets are linked to each other somehow. When one major market falls, the other markets tend to also fall. But at least there are some differences in these other markets that still make them good for diversification.

Just remember that you need to find a foreign market that’s more or less different than the domestic market. If they have similar characteristics, then they aren’t good candidate for diversification. European markets, for instance, are relatively similar to U.S. market. But Asian market tends to be different. So if you lived in the U.S, you might want to consider investing in an Asian market.

Of course, you need to carefully study the market before deciding to invest overseas. Make sure that the market is sound and has strong foundation. Otherwise, you might invest your money there only to get yourself into trouble. Do your homework and you can invest abroad with confidence.

There is no doubt that retirement income planning is important. You might live a prosperous life and earn a relatively high income today. But the situation could be different in your retirement. At that time, you would no longer get monthly paycheck from your employer. Add to that the likely rising health costs and it becomes obvious that you need to plan your retirement income.

Don’t take this lightly. Why? Because if you’re late in your retirement planning, it would be difficult for you to fix the situation. If you’re aware of the problem only when you’re already retired, you no longer have the regular income upon which you can create a good retirement plan.

So plan your retirement income today. Personal finance applications usually have a tool to help you plan your retirement. The tool can help you test different scenarios with your retirement. You can simulate different income levels, inflation rate, interest rate, and more. With such a tool you can see whether or not your intended plan would work. It helps you find the best retirement plan for your present situation.

When you come up with a plan, be disciplined to follow it. Normally such a plan includes investing in a retirement fund like 401k or IRA. Check with your employer to see the plan they offer. Many employers offer employer match which will have significant effect on your retirement fund over time. If your employer offered one, take full advantage of it. Another advantage of retirement fund like IRA or 401k is the tax benefits. You will pay way less taxes by investing in these funds than investing in other instruments.

The most important thing, though, is to start early. You can get back lost money but you can’t get back lost time. This is especially important in investing because of compounding effect. If you started late, you won’t get the benefits of compounding effect. So do your retirement income planning as early as possible.