Financial Tips

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math.

To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.
Learn Self Control
If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Debt Management feature.)

If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of

Take Control of Your Own Financial Future
If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)
Know Where Your Money Goes
Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don't waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Budgeting 101 special feature.)

Start an Emergency Fund
One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, vacation money and even money for a home down payment.

Don't just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

Start Saving for Retirement Now
Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".

Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)

Get a Grip on Taxes
It's important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with, which is also known as net, or take-home pay.

For example, $35,000 a year in California will leave you with about $27,600 after taxes in 2008, or about $2,300 a month. By the same token, if you're considering leaving one job for another in search of a salary increase, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won't give you an extra $6,000, or $500 per month - it will only give you an extra $4,200, or $350 per month (again, the amount will vary depending on your state of residence). Also, you'll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there. (To learn all about your taxes, visit our Income Tax Guide.)

Guard Your Health
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills.

Guard Your Wealth
If you want to make sure that all of your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset - the ability to earn an income - by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

If you want help managing your money, find a fee-only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You'll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds. (Find out all you need to know about insurance in Understand Your Insurance Contract, Five Insurance Policies Everyone Should Have and Insurance 101 For Renters.)

A Financial Basis for Life
Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.

Financing

How to find financing for your business

Learn about the pros and cons of various sources of funding for your start up

Whenever I'm at a party, entrepreneurs seem to find me. Once they find out I work for Register.com, they start telling me about their business idea. The next thing I know, they want my advice on where they can find the money they need to start their company.

I think many entrepreneurs jump too fast to the fundraising stage, so I usually ask them to consider a few items before they start this process. Those questions include:

How long can you live off your savings? I had a friend who started a small business with a decent amount in the bank. But he didn’t realize it would be eight months with no dollars coming in at the beginning, and soon he was panicked. Many startups aren't able to borrow enough to cover their expenses in the initial months, just enough to operate the business.

How in debt are you willing to go? This is a vital question to answer. Know your comfort level with being in debt, and how that squares with how much money it will take to start the business you have in mind. Some people might say, "I'm only willing to do $100,000." If so, what will you do if the business turns out to require more funding?

Have you estimated how much money you'll really need? Many new business owners plunge ahead without a clear sense of how much money they will need. They end up having to raise money repeatedly during their startup period, exhausting their energy and risking the business's future if they're unsuccesful in finding subsequent loans.

Once you have a clear idea of your appetite for debt and the amount you'll need to raise, it's time to consider your possible funding sources.

Sources of funding

Your retirement accounts. I'm not personally in favor of taking money out of your 401(k) account, but its something to think about. Under some circumstances, you can borrow this money out and repay it without penalty - consult a good tax professional to make sure the way you're doing it is best from a tax perspective. Advantages of this method: It's fast, little paperwork is required, nobody asks you how you plan to use the money, and rates can be low.

Liquidate assets. If you own a boat, vacation home, appreciated stock or other assets you could liquidate, consider using them to fund the business. Your business won't be burdened by interest payments if you can find the cash to start it from your own assets.

Friends and family. Often, a loan source may be close to hand - not just your family members and personal friends, but the people within their extended network. To give everyone a clear understanding of the loan terms and avoid bad feelings, write a contract and then carefully track payments - Web sites such as Virgin Money and ZimpleMoney make it easy to do online.

Peer loans. If your personal network fails you, try a peer-to-peer lending site such as Zopa.com. Peer sites check your credit, assign you a credit rating, and then let you make your case to their large networks of individual lenders. If enough lenders contribute to your loan to fund it, the site packages and administers the loan. Loans can take as little as two or three weeks to obtain here. On the downside, interest rates will likely be fairly high.

Microloans. If you need an amount under $35,000, consider a microfinance lender such as Kiva.org or Accion. They fund a lot of one-person businesses, and rates are usually fairly reasonable. On the downside, they may want to disburse the money in stages, not all at once.

Revolving line of credit. Rather than getting a loan with a set term and interest rate, it's sometimes easier to get a bank to give you a revolving line of credit. With this loan type, as you pay back money it becomes available for borrowing again.

SBA-guaranteed bank loans. Many new businesses get funding through bank loans guaranteed by the Small Business Administration. If you plan to approach bank loan officers, come prepared. Write a business plan and bring materials you need to illustrate your concept. Whether it's a PowerPoint presentation, a mock-up, or maybe a software demonstration, come prepared to demonstrate your idea to bankers. People think if they have good credit they can show up at the bank and get a business loan, but that isn’t the case. Banks need to know it's a real idea that can become a viable business.

Also know what the SBA guarantee means - it helps the lending bank if you don't repay the loan. It is not a guarantee that the SBA will cover your loan obligation if your business doesn’t succeed.

This article is brought to you Register.com Learning Resource Center for their Register.com Affiliate Program.