* Think long-term prosperity, not short-term

Fluctuations are inevitable in the world of investment: one day the prices are high and the next day the prices are low. Do not panic when the value of your stock starts decreasing. The sudden decrease in a stock’s value, after all, is not enough reason for you to sell it. So as long as the business you invested in is doing well, do not pull out your stock just because its market value is not as high as before. For all you know, it is just warming up to an unbelievable skyrocket of value.

* Consider business potential, not market value

Mr. Buffet believes that “Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.” By judging the outcome of his October 1987 gamble, Mr. Buffet might just be right. On October 1987, the financial industry witness how all global stock markets crashed into the ground. In a desperate attempt to redeem their financial condition, many stock holders started selling their stocks for unbelievably low prices. Mr. Buffet, however, did the opposite: he bought stocks. Because he believes the company has a great business and a bright future, Mr. Buffet bought 10% of the Coca Cola Corporation on October 1987: the largest stock purchase of his life. Mr. Buffet’s gamble did pay off. By 2006, Mr. Buffet’s investment in Coca Cola earned him over US$11 billion.

Benefits of getting an overdraft protection

* It saves you from the embarrassment of releasing bounced checks.

An overdraft protection links your bank account with a line of credit that automatically grants you with a loan whenever you need it. This overdraft protection feature prevents your checks from bouncing and saves you from paying the fine charged by the bank.

* It saves you from the possibility of straining financial relationships.

Nobody wants to receive a bounced check; this is especially true of merchants. Releasing a bounced check not only affects your financial credibility with your bank, but also strains your financial relationship with your merchants. In fact, some merchants may blacklist you for giving them a bounced check or, worse, sue you for not securing a valid payment. Signing up for an overdraft protection, therefore, allows you to maintain an amicable financial relationship not only with your bank, but also with your merchants.

* It saves you from the hassle of paying penalty fees.

Getting an overdraft protection will cost you money, but committing an overdraft will cost you more. The bank, after all, will charge you with cost of processing your papers to remedy your financial situation.

To save yourself from the possibility of committing an overdraft, check your account balance regularly and record your banking transactions habitually. Knowing exactly how much money you have left in your account, after all, prevents you from spending more than what is necessary.

* Verify your available balance before a banking transaction

One common mistake that might lead you to an overdraft is to confuse your current balance with your available balance. The amount of money that is available for credit charges and cash withdrawals is your available balance. Your current balance, on the other hand, is the amount of money that signifies your available balance and your maintaining balance, which is the fee charged by the bank for taking care of your account.

* Link your checking account with a savings account

Another great way of saving yourself from committing an overdraft is to link your checking account with a savings account. Linking your checking account with a savings account, preferably in the same bank, makes it easy for you to transfer funds from your savings account into your checking account.

The best thing about consolidating your debt is the convenience of managing one payable account instead of multiple bills. In fact, you get to pay off all your debts simultaneously by simply settling your repayments regularly. And the best part is, you only have one deadline to worry about! All possibilities of making late payments or forgetting payment deadlines are, therefore, minimized. That way, you get to save more money by not being penalized to pay off additional fees for late payments.

The interest rate tied up in a debt consolidation, after all, is fixed for the duration of the loan. Regardless of the current economic condition, the interest added to your monthly repayment will remain the same. Therefore, you can easily prepare for the forthcoming repayment deadlines because you know exactly how much money you are supposed to save up.

Aside from being fixed, the interest added to your consolidated debt is also relatively lower than the interest added to your pre-consolidated debt. This is very advantageous for you because a reduction of interest actually yields a decrease in your total balance. Because you substantially reduce your balance with every monthly repayment, you have a higher chance of paying off your debt even before the payment term expires.

Fixed interest rate

A fixed interest rate remains unchanged for the duration of your debt. So, whether the economy performs well or not, the amount of money added to your balance will always be the same. The benefit of having a loan with a fixed interest rate is that you know exactly how much money the lender expects from you every month. So, if you gave the lender $250 for your January repayment, then the amount of money that you need to repay the next month is still $250.

The downside to having a loan with a fixed interest rate is similar to its advantage: the interest added to your balance remains the same for the duration of your loan. This becomes a disadvantage when the economic index performs well because variable interest rates will decrease by then. So, while other debtors are enjoying lowered interest rate in their loans, you are still stuck with the same interest rate.

Variable interest rate

Unlike the fixed interest rate, a variable interest rate is subject to change: it either rises or drops. When the economic index performs well, the variable interest rate will drop, causing a substantial decrease in your total balance. Because a variable interest rate is tied to the economic index, the amount of money that will be added to your total balance will always depend on how the economy is doing. Therefore, the interest rate in your loan will increase when the economic index and the economy both perform poorly.

Here’s a quick tip for today… Unless Your Parents Were Wealthy, Don’t Do What They Did

Too often we are given advice from non wealthy people about how to get wealthy. That’s like taking dietary advice from a glutton.

A quote by Einstein says that “the definition of insanity is doing the same thing over and over again and expecting a different result”. If your parents were not living the life you want to live then don’t do what they did! You must break away from the mentality of past generations if you want to have a different lifestyle than they had.

To achieve the financial freedom and success that your family may or may not have had, you have to do two things. First, make a firm commitment to get out of debt. Second, make saving and investing the highest financial priority in your life; one technique is to pay yourself first.

When you borrow money from a bank, you pay interest. Interest is really a fee charged for borrowing the money, it is a percentage charged on the principle amount for a period of a year - but they often calculate it daily.

The same can be applied for investment. Compounding interest is an extremely powerful concept in relation to wealth creation.

If you want to know how much interest you will earn on your investment or if you want to know how much you will pay above the cost of the principal amount on a loan or mortgage, you will need to understand how compound interest works. The simple calculator below and help you work out compounding interest figures.

CLICK HERE FOR OUR FREE COMPOUNDING INTEREST ONLINE CALCULATOR.

Here are 10 of the best tips for financial intelligence.

Invest regularly

People should try to make a habit of investing or saving a portion of every dollar they make.

Regular additions to your investment, as well as reinvestment of any dividends or interest to achieve a compounding effect, is a tremendous way to boost your investment.

By investing regularly, you remove the risk of investing a lump sum right before a market slump. The investment adage ‘time in the market is better than trying to time the market’ applies.

Reinvesting dividends or interest income ensures you earn interest on your interest on your interest and so on.

Compound interest does work. It is often referred to as the eighth wonder of the world.

Stay the course

This rule has been more important than ever in the past six months, with many investors tempted to sell their share portfolio after the market slumped more than 20 per cent.

Panic selling and knee jerk reactions during a downturn will ensure any losses are realised and can have adverse consequences for your portfolio.

It is important to be clear on the timeframe that you can invest for.

Higher risk investments generally have a longer time frame associated with them in order to help with market recovery if required. Shares and property are the most common types of higher risk investments while cash and fixed interest offer lower risk and lower returns over the long term.

Markets move in cycles and highs and lows are a natural part of investment. Over the long term market movements become insignificant.

Diversify

Keeping all your eggs in one basket can be a recipe for disaster and investors should aim to hold a range of different investment types.

Diversification prevents your investment portfolio being over exposed to a poor performing asset class.

A truly diversified portfolio should be spread across different investments within each of the major asset classes, including Australian shares, international shares and property.

Diversifying within asset classes means instead of just owning mining company shares, investors reduce their risk by also investing in such areas as retail, banking, healthcare, insurance, agriculture, energy and transport.

Avoid get rich schemes

Speculative shares that will triple overnight or fixed interest investments that offer returns of more than 10 per cent a year should always have a ‘buyer beware’ notice on them. Take advice from professionals, not taxi drivers.”

Regular reviews

Investing is not a fire and forget activity. You need to keep up with tax and legislation changes. A formal analysis of your taxation and financial situation on at least an annual basis will help keep you on track to meet your goals and objective.

Some investors compile a monthly net worth chart keeping track of all their assets and debts to ensure their wealth is steadily growing and they are not spending their money on depreciating assets, such as cars.

Get the structure right

People need to choose the right balance between superannuation and non superannuation investments.

Superannuation provides significant tax advantages, particularly in retirement, but you can’t access your super until you retire. Non super investments can be accessed at any time but need careful management of the tax implications to give the best net return to you.

Investors should understand how investing in shares provides franking credits that can reduce overall tax payable and they should understand the rules surrounding superannuation.

Borrow to invest

Also known as gearing, borrowing to invest magnifies potential gains and losses.

It means your investment balance is bigger, and therefore so is your potential return in dollar terms. Your investment needs to out perform the interest costs on your loan, however, those interest costs in most cases are tax deductible.

Borrowing to invest should be considered as a long term strategy but it is easy to establish and can also be set up as a savings plan where you borrow small regular amounts to add to your investment.

Look long term

People should only invest in higher risk assets, such as shares and property, if they have a timeframe of at least five years.

A fundamental starting point to investing is understanding what you want to achieve and being realistic about how you are going to achieve it.

This involves thinking about where you are now, where you want to be, how long it is going to take to get there and what level of risk you are comfortable .

Seek professional advice

All five financial experts say this is an important rule. Valuable advice from a licensed financial adviser can significantly improve your investment outcomes.

An adviser who understands you, your goals and your risk profile can guide you through both the rough and smooth of investing.

Spend less than you earn

It is one of the simplest rules but one that is broken more often than others.

If you save you will then have the funds for investing.

If you find it hard to save then do a budget. Often little things like taking your lunch to work cansave quite a few dollars.

For example, if you save $4 a day on your lunch you will save approximately $1000 over a year.

1. It’s cheaper

2. It’s heathier

3. You’re learning new things

Now how many people at your office eat both breakfast and lunch at work? Sometimes dinner too!. Do the maths

Cost of eating out:

Breakfast: ($8.00/day) = $56.00/week
Lunch: ($8.00/day) = $56.00/week
Dinner: ($12.00/day) = $84.00/week

Breakfast: $2,680/year (365 minus 30 days of not eating out)
Lunch: $2,680/year (365 minus 30 days of not eating out)
Dinner: $4,020/year
—–
Total: $9,380.00/year

Nearly 9 and a half grand! 2 months of the average person’s PRE-TAX pay! You have to go to work for 375 hours at $25 just to eat out. I can feed my whole family fancy home cooked meals for far less.