Personal Finance Advice

Investing can be a great way to build wealth over a long period of time, but it can also be a scary thing when the investments start to turn volatile.  Whether you put money into the Stock Market or invest directly with a new venture, there is always a risk that you may wind up losing all the money you put into your investment.  Most people know that the possibility of losing money exists, but when investments are yielding impressive returns it’s hard to think in negative terms.

Then things start to turn sour.  As people realize their investments are losing money instead of earning money they may start to think about pulling out of investing altogether.  It’s a natural reaction, especially when a substantial sum of money suddenly dwindles quickly. 

Here are the things you should know about investing:

1.  You shouldn’t invest money you can’t afford to lose in the first place.  Losing money you invested can be incredibly frustrating, but if you count on that money to pay your day to day expenses then it can quickly turn into financial disaster.  In other words, don’t use your rent money to invest in something because you can wind up getting evicted if the investment doesn’t work out. 

2.  Investing is usually a long term thing.  There are some investments that are short term.  Some savvy investors can turn quick profits daily, but everyday investors usually invest for the long term.  This means that although your investments might drop they can also go right back up, especially if you give it time.

3.  There is always risk involved.  There are no guarantees when it comes to investing.  There is always a chance that you’ll lose the money you invest. 

4.  Investing balances out your total personal financial picture.  You don’t have to invest a substantial amount of money to derive the benefits of a balanced financial portfolio. Investing helps balance your overall personal financial status.

Should you stop investing when you start losing money? You should stop investing if you simply can’t afford to, but even putting small amounts of money into investments can eventually turn into a substantial balance over a long period of time.  If you find that watching your investment balances go up and down makes you entirely too nervous then you may want to switch to less volatile investments.  Choose investments that have relatively low risk instead of choosing investments that go up and down rapidly.

When the time comes to get a loan - whether it’s a personal loan or a loan to buy a house or a car - you probably already know that you’re supposed to do a little research to find the best deals available.  You want to find the lowest interest rate with the best loan terms because you’ll save money this way.  In fact, if you’re looking for a loan that is stretched out years instead of months as far as payments go (such as with a mortgage loan) then finding the lowest interest rate available to you can save you thousands of dollars over the life of the loan.

The problem is that there are a lot of lenders out there.  If you have excellent credit and a substantial income then you can pick and choose among a wide variety of lenders because your creditworthiness makes you incredibly attractive as a borrower.  Even though this is an enviable situation to be in, it can make the process finding the best loan a little more complicated.  Do you really have the time to sift through all the available loan products? Do you really want to just trust your primary financial institution when they say they have the lowest interest rates available?

A loan broker can sift through all the available loan offers and let you know which one is the best fit for your needs.  You can either contract the services of a human loan broker or can instead utilize one of the many automated online loan broker services that don’t cost any money at all.  Here is how it works:

1.  You fill out a loan application and hand it over to the broker.

2.  The broker searches for the best loan deal for you.

3.  The broker gives you the results of the search, highlighting the best deal.

This can be an extremely effective way to get your hands on the best loan deal available to you.  Some applicants use loan brokers because they simply don’t have the time to search for the best deal themselves while other applicants utilize loan brokers because they have less-than perfect credit and want to expand the odds of a loan approval by blanketing out among several lenders.  Either way, a loan broker can save you quite a bit of money even if you have to pay a fee for the broker’s services because the broker may be able to find you a much lower interest rate than you would have found on your own.

There are drawbacks to this situation too.  Some loan brokers only work with certain lenders, and this means that while you may get the best deal among the lender base the broker deals with you may be able to find a better deal somewhere else.  The fact also remains that brokers aren’t doing anything you can’t do on your own without paying anyone a fee.  Additionally, some applicants are nervous with the idea of their personal financial information getting sent out to several potential lenders at once because they are worried about the security of their information.

If your time is valuable, though, then a loan broker can provide an important service because you won’t have to spend any time combing the Internet for low interest rates or calling potential lenders to find out about the loan terms they offer.  Consider using a loan broker if you know you won’t bother to look for the best deal yourself.

Things sometimes happen that have the potential to turn an otherwise thriving personal financial status into financial ruin.  Most people know to save for a rainy day, whether that rainy day is car repairs or medical problems.  What about the situations that have the potential to really turn your personal finances upside down? Are you really ready for these situations…and do you actually see them coming?

Examples of these types of situations can include a number of scenarios, some of which people simply ignore until  everything comes to fruition.  If you have aging parents - especially if these parents have made little or no financial preparation for their rapidly approaching retirements - have you thought about what you will do when they show up at your front door with their luggage, asking for a place to stay? What about your adult child who is on the precipice of a divorce; what happens when he or she needs a new home, and needs to bring along a couple of kids? Most of these situations you can see coming, or at least you can have some sort of inkling that they may eventually occur.  The worst thing you can do is ignore them, especially if you have a pretty good idea that something like this is going to happen.

The same goes for employment scenarios.  If there are rumors within your workplace that some people are going to be laid off, what should you do? You have a couple of choices:

1.  Ignore the rumor and keep spending like you always do.  After all, you’re pretty sure you won’t be on the list of people losing their jobs.

2.  Prepare for the layoff just in case.  You update your resume and cut back on your spending just in case you find yourself without an income for a period of time. 

You should go ahead and prepare for a layoff just in case it actually does happen.  After all, how will you feel if you get fired after knowing for a few months that it may happen, yet you didn’t do a single thing to prepare? 

Don’t ignore potential financial setbacks.  If you know you’ll have a huge tax bill, don’t wait to start saving for it.  If you know your furnace is coming up on its twentieth year, start saving for a new one even if the one you have right now is running fine.  If your car is starting to fall apart then don’t wait to start saving for another car until you can’t get your current car running.  If you’re prepared and nothing happens - your furnace hums contentedly for another five years and your car chugs along for a couple more years - then you can use the extra money you saved for whatever other unexpected financial problem pops up.