A Guide to Personal Finance
Canadian Edition
By Barrie Conrod
This book is not a substitute for solid skill development and preparation, product knowledge, industry understanding and actual sales efforts.
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Copyright © 2011 Barrie Conrod
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Forecasting the Future Value of Your RRSP
Interested about how much money you will build up in your retirement account?
If you have Microsoft Excel (or just about any other popular spreadsheet program) operating on your computer, you can use its FV function to predict the future value of your RRSP investment.
The FV function calculates the future value of an investment given its interest rate, the number of payments, the payment, the present value of the investment, and, if applicable, the type-of-annuity switch. (More about the type-of-annuity control a little later in this report)
The function uses the following syntax:
=FV(rate,nper,pmt,pv,type)
This is a bit complicated. But suppose you want to calculate the future value of an individual retirement account that is already got $20,000 in it and to which you are contributing $400 per month. Additionally, suppose that you wish to know the account balance, its future value, in 25 years and that you anticipate to earn 10% annual interest.
To calculate the future value of the individual retirement account in this case using the FV function, you enter the following into a worksheet cell:
=FV(10%/12,25*12,-400,-20000,0)
The function returns the value 771872.26—roughly $772,000 dollars.
A few items to consider: To convert the 10% annual interest to a monthly interest rate, the formula divides the annual interest rate by 12. Likewise, to convert the 25-year term to a term in months, the formula multiplies 25 by 12.
Also, observe that the monthly payment and initial present values show as negative amounts since they represent cash outflows. And the function returns the future value amount as a positive value because it reflects a cash inflow you eventually receive.
That 0 at the end of the function is the type of annuity switch. If you set the type of annuity switch to 1, Excel assumes payments take place at the beginning of the period (month in this case), following the annuity due convention. If you set the annuity switch to 0 or you leave out the argument, Excel assumes payments happen at the end of the period following the ordinary annuity convention.
Personal Finance: Threshold between Wealth Creation Destruction
Wealth
is merely the accumulation of money, and it can only be created by
the amount of money that is received and never spent. If you wish to
build wealth, then anytime you receive money: do not spend all of it.
Sure it is a very simple concept, but it is very difficult to
continually achieve. Luckily there are readily available allies to
help you: find some compelling grounds to start saving, build it into
a habit, watch the results of your efforts build, and set some
financial milestones to reward yourself.
Putting aside a
percentage of any money that you receive is the best method to follow
through and build the habit of saving money. There are a few misers
among us who find saving easy to do. However, most individuals
want to spend far more than is earned; let alone have the discipline
of spending less than what they receive. So it starts as an uphill
mental and emotional battle that gets easier by following through
with the habit, and seeing the results of your effort. Spending less
than what you earn every week, every month, every year, is the only
way to accumulate money.
How much money should you earmark to
build up savings? It should be a percentage so that you automatically
move it into a separate savings account anytime you receive income,
without exception. It is my experience that the range of 3% to 10% is
the most successful starting percentage for individuals who keep
saving over long periods of time. Saving only 3% is so small that it
is almost painless to even the lowest income earners (this is
actually where I began years ago). Selecting a percentage under 3%
accumulates to such a tiny amount of savings that I have not heard of
anybody sticking with it. And starting out by setting aside over 10%
is too painful for even high income earners to withstand, because
they are so accustomed to spending on every impulse. As you
repeatedly save a set percentage rate, it will become more
accustomed, automatic and expected. Then you'll be ready to increase
your percentage rate. And the higher the savings rate, your growing
pile of money will create more motivation to continue to save
In
the fragile first years of saving money, it can take only a single
incorrect financial act to wipe out everything that you have saved so
far. And the most common wrong move doesn't look like it when it is
occurring. This exhausting move can also begin insidiously small and
build a different habit, the wealth-destruction habit. You know the
challenge: pay your credit card balance in its entirety, every month,
without exception. As an example, if you have not saved money for a
vacation before you leave, and then charge it all to your credit
card, there is a giant probability that you won't pay it off for a
very long time. The credit card companies know this and they are
extracting interest dollars from you instead of earning interest
yourself. You've shifted to the dark side of wealth destruction where
it is more common for your credit card balance to grow than
reduce.
Let's get back to building your wealth. Once you start
setting aside the savings percentage that you've decided and opened a
dedicated savings account, you need to closely review your account
statements for motivation. Reviewing the progress that you've made so
far you'll see how you are moving toward financial goals can be
self-reinforcing. And another motivator is rewarding yourself by
spending some money on yourself when you've reached particular
milestones. For example, you could start with a goal of accruing
$500, and reward yourself with something meaningful; and then each
time you double your amount of savings you get another reward. My
advice is to at least begin with a savings percentage, even as small
as my 3%, and allow this simple concept be of great financial benefit
to you.
3 Ways to Save Money Instantly Online
Today shopping in "brick and mortar" stores seems so backward, dated, and quite frankly uninteresting. Millions of people each year sit in their jammies while drinking wine eating bonbons and shop for gifts, clothes, automobiles, household goods, and just about anything else you can envision.
One of the great benefits to shopping online is the a choice of coupon, rebate and dollar-back programs out there. If you click through a link, or use a coupon code, your savings can be considerable. As well, you get all the countless benefits of shopping online like no children to drag through stores, no weather issues, no traffic issues there and back, and no hassle of dealing with crowds.
So, once you are swayed to shop online, where can you find the savings? There are several methods to save cash online. Let's start with coupons.
Coupons
This is fairly common. Go to one of the coupon sites (a Google search will give you many for your area). Search for the store you wish to shop, or search by category, depending on your requirements. Be sure to click "apply" when you enter the coupon during checkout. This is often missed.
Although in the early days of online shopping, coupon codes were abundant and generous (frequently you could find $10 off a $10 purchase with free shipping!), good coupons these days are harder to locate. Some stores rarely offer coupons while others often offer free shipping on any size order. When you order, or even if you don't order, be sure to sign up with the website either by registering or signing up for coupons. These direct-email coupons are often some of the best you will ever find.
Here are some outstanding coupon sites to get you started:
MyBargainBuddy.com -- Here, a mom compiles good deals and coupon codes for you. Some of the best deals need no coupon at all, but if there is a good deal and a coupon to go with it, all the better.
FatWallet.com -- Lots of codes along with active message boards where other deals can be found.
MyCoupons.com -- The most helpful part of this site are the message boards, which are alive with the sound of people saving money. Check out the posts that have stickies on them at the start of each forum - there are often some good links to printable coupons
By the way. If you are looking for a code for a certain store, do not presume that if it's not available at one website, it doesn't exist. There are different codes at different sites. Visit some coupon sites before giving up hope that a code does in fact exist for that store.
Rebates
Here is how the “big daddy” of online rebate programs works. Go to Ebates.com and sign up for an account. There is a sign up bonus of $5, so you already have a free $5 coming to you. Then, when you go shopping, check Ebates before going directly to an online store. Even if you have a coupon from another site, click through the store link on the Ebates page for more savings.
Let's say you select a new jacket and you have a $10 off a $75 purchase. That is great. Keeping the coupon code in hand, you head to Ebates and find among the list of stores. This store offers 2% back, so you click through the Kohls link on the Ebates page, and make your purchase. Not only do you benefit from the coupon code you applied, but also got an extra 2% back on your purchase. Not a bad deal. Ebates will send money to your Paypal account or send you a check.
Points
Not everyone knows about the various point programs available, but since you can earn points without doing any shopping, the points programs are worth knowing.
Visit MyPoints.com and sign up for an account. My Points will send emails (sometimes daily, sometimes several in one day). You click a link in the mail and automatically get 5 points. Sign up for an offer or make a purchase through that link and earn even more points, from hundreds to thousands of points per offer.
My Points is most useful, however, when you're shopping online. It's like Ebates in that you click through a link on the My Points site, and you get points for your purchase. Most stores offer a certain number of points (2 to 4 on average) per dollar spent. Once you have at least 1,000 points, you can redeem the points for gift certificates for restaurants, gas, travel and clothing.
You cannot use Ebates and My Points in the same purchase, so if a store is linked through both Ebates and My Points, you have to decide which is the better deal for you. Whenever possible, try to combine a coupon code with the My Points or Ebates deal.
4 Money-Saving Tips For Every Homeowner
Losing weight, or looking for a new job or spending more quality time with the family. A brand new year means setting new goals. Here is an idea, why not make saving money one of them?
If you are a homeowner, there are numerous ways you can slash costs and still live contentedly. The following tips and suggestions will help guide you to financial success.