The truth is, the banks don’t want you to know about the fees on their products or how the interest is calculated on your credit card because they don’t want you to know how to avoid them. Therefore, you need to take control of your financial education and find out the top five things your bank will avoid telling you.

1 You can earn interest on your interest

When you talk about savings accounts this is a positive thing because compounding interest allows your funds to grow faster because you are earning interest on your interest and on your principal balance. However, when it comes to your credit card this is not good news because if your interest for the next month of your credit card cycle is being calculated on interest which has already been applied to your account from the previous month then you are being charged interest again and again.

This is not a common practice among all banks, but all of the big banks do it and most of the second tier banks too. Not only are you probably being charged interest on your credit card interest, you could also be being charged interest on your fees. Some credit card providers will simply take the closing balance of your account – including your purchases, your interest charges from previous months and any fees which have been added to your account – and calculate interest for the next month based on the entire balance, rather than just on the purchases you have made.

2 You’ll be charged the cash advance rate at the end of a balance transfer

You may already be aware that if you have chosen a limited time balance transfer offer, that any balance remaining at the end of that period will be charged a higher interest rate. However, what you may not have noticed in the fine print of many balance transfer offers is that this higher rate is not just the credit card’s purchase rate, but is the cash advance rate which can be another 5% higher than the standard purchase rate of the card.

3 Your credit card payments may not register

Your credit card statement will arrive on the same day each month, and your payment will be due on the same day each month. However, if you make an additional payment to your credit card outside of the specified payment period, that amount will not go towards your monthly payment – even if it is enough to cover the monthly payment – and your account will register as being in default.

This is because you have not paid the amount during the right period, and even if you have extra funds available and want to pay your bill early to get a jump on the next month, your payment will be received as an additional payment and will reduce your balance, but unless you make another payment of the amount due before the due date, your account will be in default.

4 Fees and interest charges are variable

On a high interest savings account, the interest rate your savings earn is variable and you can only receive a fixed interest payment in a term deposit account. Similarly the interest rates charged on your credit card are subject to change, and while the banks are required to notify you of a change in interest rates, there is nothing you can do to stop the change. The fees on a credit card or transaction account are not fixed either and can change at any time, meaning an account with a reasonable annual fee can suddenly have a much higher fee than the competition.

5 Automatic reinvestment of term deposit

In the fine print of a term deposit account you may find that unless you specify to your term deposit provider in the specified time window what you want to do with your funds at maturity, they will automatically be reinvested. This can mean your entire principal and all of your interest earnings are rolled over into a new term deposit account, for the same term, at the new interest rate. The interest rate on your term may have been competitive when you opened the account, but during your term your provider could have changed their rates, and they could lock you into a term with a lower interest rate than you would have chosen. Most term deposit accounts will not change their fees of interest rates during your term, but look for the place in your fine print where this is spelt out, just to be sure.

Just because the banks are in the business of making money from your money, it doesn’t mean you can’t arm yourself with the information you need to beat them at their own game. It is possible to secure high savings account interest rates, avoid credit card interest rates and choose bank accounts with $0 fees so your money works harder for you, not for your bank.

Alban is a personal finance writer. He helps people to compare and choose the best credit cards online

Payday loans are a small, short-term loan that is granted to borrowers to cover expenses (mostly intended for emergency situations) until they receive the next paychecks. The borrower must repay the total amount of the loan plus fees, most of the time, at a very high interest rate. The lender may process the check traditionally or through electronic withdrawal from the borrower’s checking account.

It is commonly called as “cash advance”.

If you’re thinking of applying for a payday loan, have a break. Think twice, and consider the following disadvantages to help you decide.

High interest rate.  Typically, payday store charges $25 for every $100 borrowed. This is because, there’s no collateral (like credit check) required.

Delays. Some payday store deposits the money right into the borrower’s checking account, thus causing some delays for the withdrawal of the money. This is not good for emergency situations.

You must repay the full borrowed amount for a span of 1 month.  This will let you sacrifice your budget for other needs. Most borrowers can’t repay the full amount in a month. The tendency is they extend the term. Leaving them the option of just paying the interest every month, thus causing more problems in paying off their debt.

You can’t ask for a specific amount. The payday store decides how much they will grant depending on your monthly income, checking account transactions and other variables. The amount you get might not be what you’re looking for.

Fraud issues. This is especially applicable to the online payday loans. They will hook the borrower with their impressive – looking website. Borrowers, not knowing of the hidden charges, might get in a deeper debt because of these scam companies. Thus, extra precautions are advised when dealing with online payday stores.

Having an emergency fund is the best answer to avoid getting into payday stores. Right budgeting is the key to have a debit-free life. Start saving now and have a peaceful mind, not worrying of unexpected expenses you might encounter in the future.

Are there nights when you can’t sleep because of the overwhelming debts you have? Actually, paying off debt is one of the most hard-to-solve financial problems. It seems like there’s no solution once you bring yourself in debt. This article will show you how you can pay off your debts with an eliminate-your-debt program.

Tips in paying off your debt:

1. Have faith that you can do it

You have to believe and trust yourself that you can do eliminate your debts even one step at a time. Once you believe in yourself, you’re ready to do the necessary actions.

2. Set your goals.

Your goal is to eliminate your debts. You have to commit yourself in your goal in order to attain it. Setting a target date when you will be able to meet this goal could be your map to measure your progress. This will help you to get more focused and headed in the right direction.

A goal not written down is only a wish. Write down your goals and the date you wish to accomplish them.

3. Create a debt elimination plan.

List all of your debts along with minimum payments. You can order them by smallest amount first, or highest interest rate first. Pay minimum payments on all of your debts. Whichever debt is at the top of the list, put any extra money you can squeeze out of your budget on top of this one. Once the top debt is paid off, take the money you were using to pay for this and apply it to the next one on the list. This is often referred to as the “debt snowball”.

Once you prepare yourself in eliminating your debts, you should stop incurring more of it. Paying off debt may seem tough, but you can use some strategies to make it possible. One way is through using balance transfer credit cards. This can be done by transferring your debt from a higher interest credit card to a lower interest credit card. This will speed up the debt elimination process, but think also of the consequences in doing this. Balance transfer could come with fees.

4. Make paying off your debt as your primary financial goal.

There is power in focus. Make sure that you will stick to your plan to be able to reach your goal. You should avoid temptations, like impulsive buying. As for the unexpected expenses, make sure you have an emergency fund where you could get the money from. Avoid using credit cards for emergency expenses. This will just worsen your financial issues.

5. Simply record your progress in elimination your debts

You could make a chart for your financial progress by tracking your credit standing before, during and after the debt elimination program. As you see your debts decrease over time, this will provide motivation to keep going.

6. Have a break.

Give yourself a break once in a while by treating yourself to simpler rewards when you reach certain milestones in your plan or debt reduction schedule.

7. Think of strategies to increase your income.

You could reach your goal easier if you will cut back your expenses and work more to gain an increase to your income. You could start a simple business or get a second job as a part-time. This will accelerate your debt repayment.

From these few sacrifices you will find the extra dollars needed to increase your debt repayments.

With determination, focus and belief in yourself, you can definitely reach your goal – to pay off your debts.

Dealing with debt collectors becomes easier when you’re aware of the tactics, basic laws and consumers rights that can hinder them from ruining your life. No matter why you ended up delinquent on your accounts, dealing with debt collectors is humiliating and infuriating. Negotiating with debt collectors in order to clear the debt is a good option. However, there are a few steps that you can take to ensure that you will not be taken advantage of.

1. Find out if they are an actual Collection Agency (CA).

If the collector is under a CA, then you have a good chance of settling a lower amount with them. CA has to make money no matter what, for they might have purchased your old debt for pennies on the dollar. This gives you a chance to negotiate for a smaller overall payout.

2. Don’t hide.

Never avoid them. If you do this, things may get worse. The collectors may take you to court and get an order against you. If you need to buy extra time, you can request that the debt collector provide you with proof that you actually do owe the debt. This gives you about thirty days to come up with the money to pay it, and during that period, they are not allowed to contact you.

3. Track your conversation.

Keep a record of the bill collectors you’ve spoken to, the time and summary of your conversation. This can be your proof against bill collectors who violate the law. You can even tape the conversation (secret taping is allowed by 35 states and the District of Columbia). But if this is not allowed, just take the collector’s permission before you tape the conversation.

4. Read the FDCPA.

You have rights, but your debt collectors are putting money on the fact that you may not know them. The first step is to read through the Fair Debt Collections Practices Act. This tackles the dos and don’ts when collecting payments. You can get some great tips on how to handle the situation from this act and your debt collector’s won’t be able to pull the wool over your eyes any more.

5. Don’t be threatened.

Debt collectors can be very shady. They will threaten you with criminal arrest, they’ll threaten to ruin your reputation. Legally, they cannot do this. You cannot be arrested for a bad debt, unless there is a bad check involved. Once again, read the FDCPA act to get a clearer understanding of all of your rights.

The FDCPA has a reporting system in place where you can get assistance if you are being harassed by a creditor or a collector. If you are getting calls in the middle of the night, being unduly harassed or actually threatened, you do have recourse.

6. Use Cease and Desist Letter

In case you wish to contact the creditor and deal with him directly regarding payment of your debt, you can request the CA to stop contacting you. This can be done by sending them Cease and Desist Letter.

Teach your child the value of saving and spending wisely. It is never too early to learn about how to budget and save money. Early education about money will prepare your child in their future financial life.

Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend.

7 valuable lessons you can teach your kids about money:

1. Give them control of money. I suggest giving your kids a set amout of money on a regular basis, for example $5 per week, and let them decide how they will spend it. The result will either be they’ll be spending too much on unimportant stuff or they will save it and cut back on other areas. In this way, you are helping your child to develop their own decision making skills thus they will learn to be responsible for themselves.

2. Teach them that reducing expenses makes goals come faster. Tell them that if they spend less on trivial things, they be able to buy the big things they want sooner.

3. Teach them to save and to give. You can give your kids for example, $5 every week. A good rule of thumb is to save 10% and to give %10. If you are religious, giving 10% in tithing is an excellent example. Show them how their savings can increase with time and that the more they save, the greater the increase. For example, demonstrate how $1 per week will grow. $4 in a month then $52 in a year!

4. Keep good records of money saved. You can create a bulletin board at home where your kids can see the improvement of their savings. In that way, they’ll be more excited to save more for they can see how their savings grow. Saving for a goal can also be helpful. Post a photo of something they desire to achieve with their savings to help keep them motivated.

5. Alert your kids to the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else’s money for a specified period of time.

6. Teach them about advertising and consumerism. Show your kids how to evaluate TV, radio, and print ads for products. Teach them that not all products on sale are always the best buys. Teach them the value of quality over quantity.

7. Establish a regular schedule for family discussions about finances. This is especially helpful to younger children–it can be the time when they tote up their savings and receive interest. Other topics should include the difference between cash, checks, and credit cards; wise spending habits; how to avoid the use of credit; and the advantages of saving and investment growth.

These tips can help your children build their interest in saving money, teach them how to spend money wisely, and show them the advantage of budgeting for their future financial growth.

There are many different ways to budget your money. For those who lack will power or often go over budget, methods like the envelope method work wonders. This method teaches budgeting by strictly cutting off your resources and allowing you a very small amount of money to work with each week. It sounds harsh, but by the end of just a few months you will be living like you were never on a budget and saving a lot of money at the same time!

The Envelope System, popular years ago, involved setting up envelopes, allocating your monthly income to expenses, and then putting the required cash into each envelope. The term Zero Based Budgeting came about because all money was allocated to envelopes and therefore “budgeted to zero” each month.

One of the best ways to manage your budget is to use The Envelope System. This budgeting method is so effective that it has become one of the recommended tools for personal finance.

The Envelope Budget System in Eight Easy Steps:

1. Start by tracking your daily expenses. It just takes a few extra minutes each day.

2. List down all you monthly expenses. Consult your daily expense notebook to check some items which you might have forgotten.

3. Group the list into categories. Make sure that you include everything. You can start by grouping them into general categories such as Shelter, Food, Clothes, Utilities, Transportation and Personal.

You can also choose to further divide them into subcategories until you have a comprehensive map of where exactly your money goes every month.

4. Get some envelopes and label each of them with the expense classifications you defined. When you’re done, add one more envelope and label it, Pay Yourself First.

5. Next, create a budget. Distribute and allocate your current income into the envelopes. Make sure that you fill in the Pay Yourself First envelope before the others.

6. Keep your envelopes in a safe and secure place.

7. Plan your day ahead and bring the envelope which you might need for your expenses. You can choose to bring just a certain amount and not the whole envelope for security purposes.

For example, if you’re planning to go to the mall with friends, instead of bringing your Food Envelope, which usually contains a large sum, just get a few bills. Do the same for your Transportation and Personal envelopes.

8. At the end of the month, whatever is left in the envelope is carried over and added to the next month’s budget. That’s why it is important not to spend everything in the envelope, so that you can save up for bigger purchases and unexpected expenses.

For example, if your monthly clothing budget is just $20.00, then you will be inclined not to spend it if you want to buy a $40.00 pair of jeans next month.

Additional Notes:

• Put your receipts into the envelope from where you took the cash from. That way, you’ll be able to easily track exactly where your cash was spent on.

• Instead of carrying over what’s left towards next month, you can also choose to deposit the money left into your savings account.

• It is recommended that you use your income from last month for your current month’s expenses. All your earnings for the current month should be kept and saved for budget allocation next month. If this is not possible then try to adjust your spending habits until you have achieved this.

• Try not to “borrow” money from other envelopes. You should discipline yourself to spend the allocated money only for its assigned category.

Remember that this is a dynamic process; the Envelope System entails constant planning, tracking, analysis and adjustments to your budget allocations and spending habits until you have successfully gotten yourself out of debt and comfortably living within your means.

And lastly, the best part of doing this envelope system is that you don’t have to worry much about saving money because your Pay Yourself First envelope is automatically doing that for you.

These are few advantages of the Envelope System:

• Those who do better with the physical representation of money can visually see where the money is going.

• You can’t over-spend with this system. If the envelope is empty the spending is done.

• It eases the temptation to dip into savings. Since you’ve already allocated the money there, you have to make the most of your play money

One thing to keep foremost in your mind when setting up your family’s budget is to make it a workable budget for you. Don’t make it to strict that you are setting yourself up to fail. If you slip and it doesn’t work out, try again next month. Don’t give up! All new things take time and patience to learn.

References:

http://ezinearticles.com/?The-Envelope-Method&id=257722

http://www.debtsteps.com/envelope-system.html

http://fitzvillafuerte.com/envelope-budget-system-tutorial-video.html

A zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you to assign every dollar of income to an expense (or savings) category. In business, a zero-based budget starts from a “zero base” and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.

Zero-based budgeting is basically putting a name to every dollar that comes your way. It starts with your income side of the equation, and line by line, the total subtracts as you allot amounts to each category, until you are down to zero.

The term “zero-based budgeting” is sometimes used in personal finance to describe the practice of budgeting every dollar of income received, and then adjusting some part of the budget downward for every other part that needs to be adjusted upward. It is more technically correct to refer to this practice as “zero-sum budgeting”.

Zero based budgeting is an alternative approach that is sometimes used particularly in government and not for profit sectors of the economy. Under zero based budgeting, managers are required to justify all budgeted expenditures, not just changes in the budget from the previous year. The base line is zero rather than last year’s budget.

Zero based budgeting also refers to the identification of a task or tasks and then funding resources to complete the task independent of current resourcing.

Advantages of Zero-Based Budgeting

1. Efficient allocation of resources, as it is based on needs and benefits.
2. Drives managers to find cost effective ways to improve operations.
3. Detects inflated budgets.
4. Useful for service departments where the output is difficult to identify.
5. Increases staff motivation by providing greater initiative and responsibility in decision-making.
6. Increases communication and coordination within the organization.
7. Identifies and eliminates wasteful and obsolete operations.
8. Identifies opportunities for outsourcing.
9. Forces cost centers to identify their mission and their relationship to overall goals.

Disadvantages of Zero-Based Budgeting

1. Difficult to define decision units and decision packages, as it is time-consuming and exhaustive.
2. Forced to justify every detail related to expenditure. The R&D department is threatened whereas the production department benefits.
3. Necessary to train managers. Zero-based budgeting must be clearly understood by managers at various levels to be successfully implemented. Difficult to administer and communicate the budgeting because more managers are involved in the process.
4. In a large organization, the volume of forms may be so large that no one person could read it all. Compressing the information down to a usable size might remove critically important details.
5. Honesty of the managers must be reliable and uniform. Any manager that exaggerates skews the results.

How to create a zero-based budget?

A budget should more or less have the same categories each month, even if you don’t always fill those categories with money. The main types of categories you should have are:

• Income
• Regular expenses, and
• Irregular expenses

Make sure and account for any type of income, not just your paycheck. As an example, my categories under “income” are:

• paycheck
• book advance
• gift received
• blog
• surplus from previous month
• work advance, and
• work reimbursements

Your regular expenses are pretty much what you think of as expenses — utilities, rent or mortgage, groceries, entertainment, and the like. You should also include your allotment for whatever step you’re on — your debt snowball if you’re on step 2; contribution to savings if you’re on step 3.

And don’t forget free spending money. Give yourself a set amount of cash you get to keep in our wallets and spend on whatever we choose. It’s not much money, but it’s enough for a coffee here and there, a magazine when you see one, or whatever. It curbs your appetite for random spending, and it helps you keep to the budget.

It’s important to plan for irregular expenses as well — these are funds that you don’t need each month, but you want to set aside for them regularly so that you have enough cash when you need it. These are also called sinking funds. Some of our family’s sinking funds are:

• books
• Christmas
• clothing
• gifts and holidays
• haircuts
• medical (insurance deductible)
• vacation
• work expenses

Planning Your Budget

If you don’t work from a budget, I encourage you to do so. In a way, you already are, you just may not be aware of it. Your money’s going somewhere; writing it down into a budget form simply allows you to premeditate where it should go. A few tips as you prepare:

• Use a tool that works with your style. A pen and paper might be more your style, but there are budget-tools site in the internet that you can use— it doesn’t really matter.

• Don’t expect it to work perfectly the first time, or at any time. This is an easy mistake, and one that can cause you to think you’re doing something wrong. You’re not. It takes awhile to get the hang of knowing how much money to allot for different line items, and there are plenty of times when your needs change mid-month. Stay flexible.

• Work with your pay periods. If you get paid more than once a month, perhaps it’s easier if you create a different budget for each paycheck, setting aside a percentage for those monthly bills. Do what works for you, so that you’ll do it.

• Don’t be under-specific, but don’t be too specific. It’s easy to have a subcategory for every single need. It’s also easy to generalize. Find a happy medium.

• Account for everything you’re spending, and give it a name. Don’t have a category called “miscellaneous.”

So the next question to consider is – if you were to write a zero-based budget for your family every month, would you keep track of it? Do you just set the paper aside and hope for the best? Do you walk around with it in your purse, analyzing every single number until you’re cross-eyed walking around Target and scared to death of putting anything in your cart?

I encourage you – prepare a zero-based budget as part of your home management every month. And then regularly, enter your expenses to stay on top of how well you are sticking to your budget. As the month progresses, you can see how well – or not so well – it’s working, and tweaks it from there. It doesn’t take much time when you stay on top of it.

This is also infinitely easier to do when you have a smart, simple tool that subtracts expenses from your budget as you record them. I prefer a tool that’s as light and easy-to-use as possible. No bells and whistles that I really don’t need for everyday family finance management. Try the budget tool of Inzolo.com. It’s the simplest way of budgeting your money online.

REFERENCES:

http://en.wikipedia.org/wiki/Zero-based_budgeting

http://www.investopedia.com/terms/z/zbb.asp

http://www.gettingfinancesdone.com/blog/archives/2006/08/how-to-create-a-zero-based-budget/

http://www.accountingformanagement.com/zero_based_budgeting.htm

http://simplemom.net/zero-based-budgets-for-the-home/

http://simplemom.net/the-basics-behind-a-budget-that-works/