Is Risk-Taking Good or Bad?

Taking risks has been part of our daily life since the early evolutionary times. Back than without risk there was no survival or reproduction. Risk-taking lead mankind to our sophisticated society we live now. These days behind risk taking besides survival and reproduction there is money, love and power.

Risk-taking is a very positive behavior if it's used properly. Without risk life would be very boring, everything would be predictable. When we talk about risk we always imply that there is a possibility of danger, tension and loss.

Each risk has two sides, an upside and downside. If the downside is much higher than the upside the risk is considered a "stupid" risk. Why would you spend your paycheck on lottery tickets? You could lose everything and win nothing.

Calculated risk or intelligent risk is when the downside or loss is limited and the reward far outweighs the downside. When you apply for a job there is risk, you might be rejected but on the upside you could land in a great carrier. When you try to date someone you could also be rejected but you could also find some who will be with you for the rest of your life. When you start a business there is risk, with unlimited potentials on the upside.

People, businesses, governments take risks all the time. We do things all the time where we are not sure about the outcome. Risk with a limited downside is always welcome but unlimited downside or "gambling" can turn against us. 

A Good Personal Finance Program Gives a Peace of Mind

Without a personal finance program it’s hard to manage your money. Most people have several bank accounts, credit cards, loans, retirements account and investment accounts. Without a financial program it’s impossible to keep track of all of these accounts.

I personally use Quicken Premier 2011. It’s really worth the money. I only buy it every 3 years because it allows me for 3 years to use its online features.

There are a few very useful features I use all the time. I download transactions from my banks and credit card companies every couple of days. This way it’s very easy to monitor how I spend my money. I also know exactly what is charged on my credit cards. I match the downloaded transactions with my saved receipts. If I find anything suspicious I call my bank or credit card company.

Another feature I often use is to manage my bills. It’s very easy to schedule bills. I also schedule my paychecks too. If the paychecks vary week to week it’s possible to enter an average paycheck. I know exactly how much money I have in my accounts today tomorrow, next week, next month or even a few months from now. Now surprises.

As I mentioned I download the transactions every couple of days so when it’s time to reconcile my account at the end of the billing cycle all the transactions are there. Many times it only takes less than a minute to reconcile a bank or credit card account. It’s so easy that it’s actually fun.

I have been using Quicken for over 10 years and I couldn’t live without it. I save a backup of the Quicken file on an external hard drive once a week. Once my hard drive crashed and restoring everything from the backup files was very simple. I never thought about using an online financial software. I like to keep my personal information personal.

How Stress Can Affect Your Health and Weight

Stress has become a too familiar part of our daily life. Stress is real and a serious threat to your overall health as well as your efforts to lose weight.

Your body is constantly trying to maintain a state of internal stability, called homeostasis. You sweat to cool yourself on a hot day and shiver to stay warm when it's very cold. When your body feels stressed, it struggles to compensate for the real perceived threat that's created the stress.

This response can trigger a complex series of biochemical changes that struggle to bring you back to your pre-stressed state. For example, when you're stressed your body releases various hormones and chemicals including adrenaline, cortisol, and others that shift your body into a flight-or-fight response. These hormones increase your metabolism, your heart rate, respiration, blood pressure, and muscle tension.

If these bodily changes are channeled into a physical activity the stress can be resolved. If, however, the stress is chronic and unresolved part of your life, like a difficult boss or an unhappy relationship, the effects on your body are ongoing and dangerous.

Long-term unresolved stress of the kind that many of us endure daily makes us vulnerable to hypertension, coronary heart disease, osteoporosis, and other disorders. Unresolved stress also has been linked to developing insulin resistance as well as developing the "belly fat" associated with inflammation. Too much cortisol may also contribute to leptin resistance. Leptin is a hormone that is recognized as a "turn off signal" to hunger. Elevated cortisol in conjunction with adrenaline can also encourage your body to hold on to fat especially around the abdomen.

So how do you deal with stress? If you teach yourself to adopt some simple stress-reducing strategies, you really can reduce the physical effects of stress. You need to become stress resistant.

Regular exercise can help you to dissipate unfavorable chemical responses created by stress. Stress reducing techniques practiced daily can be pleasurable in your daily routine.

Proper diet can reduce the inflammation and internal stress of your body.

Good Debt versus Bad Debt

Debt is part of our daily life. Each month we spend a lot of money paying off debt. Not all that is bad and if we want to get out of debt or improve our credit score we should understand what the difference between good and bad debt is.

Good debt is something which generates wealth in the long term and often the interest you pay is tax-deductible. Examples for good debt are mortgage debt, certain home equity loans and student loan. When you take a mortgage out when you purchase a home the value of your home will increase in the long term.  You could sell that home and you could get more money than what you paid for. Student loans are also good debt to since getting a degree will help you to get a higher paying job. Certain home equity loans are good debt too if you use it for home improvement or to pay off higher interest rate bad debt such as credit card debt.

Bad debt on the other hand doesn’t generate wealth and the interest you pay is not tax-deductible. Examples for bad debt are car loan, credit card debt and certain home equity loans. Car loan is bad debt since your car is losing value from the very first day. When you use your credit card to buy cloth, food or things like a computer or big screen TV you accumulate bad credit. If you don’t pay off your credit card in full you end up paying more and more on something which worth less and less. Certain home equity loans can be bad such if you spend the money on a vacation or buy something which will gradually lose its value.

If you want to improve your credit score work on your bad debt first and keep the debt to income ratio for unsecured debt under 15%. Try to resist applying store credit cards when they give you a discount at the first purchase. If you can’t pay off the balance you will end up paying over 20%. With good credit you can get credit cards whit under 10% interest so why get a store credit card. And remember if you can’t afford to buy something your credit card is not going to make you richer.

Why do We Buy Things We Don’t Really Need?

It happens to me sometimes too that I end up buying something I don’t really need. I buy it and a week or too later I realize that it was a wasting of money. Obviously when this happens I don’t go through the right decision making process. So, why do we end up buying things which don’t really make us happier? In fact later on paying credit card bills could be frustrating and painful. Here are a couple of things I could think of:

• It could be the commercials that influence us and convince us that we absolutely need something. It seems that everyone else has it. If we don’t have it we are filled with the anxiety of the outcast.
• Our friends and family members have it. It seems that their life is so much happier. It’s embarrassing when they talk about it and we don’t have it.
• Our kids are asking for something they absolutely need mainly due to peer pressure.
• Sometimes we buy something we already have but we can’t find it or just simply lazy to look for it in the garage, in the basement or in the attic.
• Sometimes we buy something for a real good (cheap) price and we didn’t pay attention to the quality. Later on we end up buying the same thing but this time we get the better quality.
• It happens that we talk about something then I buy it and my wife comes home with the same thing.
• We buy things simply because we are distracted in a store and we forget about what we really wanted in the first place.
• Sometimes we get a good deal on a larger package and most of it will end up in the trash.
• Often we forget to cancel a subscription and we have to pay for that.
• We want to try out something for free but after the free trial period we forget to cancel it.

Before you buy something you don’t really need, remember you could save that money or better invest it.

What is Considered a Good Credit Score?

It’s always good to know to what is your credit score. Once a year you can check it for free. It’s important to get this free report, it will help you to improve your credit score.

The credit score is a number between 300 and 850. The higher your credit scores the easier to get a loan or credit card with lower interest rate. This is because people with higher score pose less risk to lending institutions.

There are 5 major factors that influence your credit score:

• 35% - Paying bills on time, every time;
• 30% - Your Debt-to-Credit ratio, which means how much of the available credit you use;
• 15% - The length of time you have had credit;
• 10% - The length of time since you applied for credit;
• 10% - The types of credits you use;

As you can see it’s very important to pay your bills on time and keep your credit card balances low. These are the 2 most important factors when they calculate your credit score.

Finally the answer is 688-699 for good credit score and 700 and above considered excellent credit score. If your credit score is under 620, that’s considered bad.

How Many Credit Cards Should I Have

The number of credit cards you should have depends on how good are you at managing your credit. The more cards you have the more bills you have to pay and you have to make sure that you pay your bills on time.

It’s definitely good to have more than one credit card. If you have more than one credit card they should be different, MasterCard, VISA, American Express and Discover Card. One of your cards will be accepted no matter where you travel. Another reason to have more than one card is that if they close one of your accounts due to fraud you can still use your other cards. Some people use a separate card for groceries, another for gas and another one for online shopping. Department store cards make sense too if you want to take advantage of special discounts and special deals.

To keep your credit score high you have to keep an eye on your credit utilization which is your total credit card debt divided by your total credit limit. Keep this number under 30%. If your total credit limit is $10,000 then your balance shouldn’t be more than $3,000.

It’s better to have fewer credit cards with higher credit limit than more cards with lower credit limit. If you don’t use certain cards you should use them at least twice a year so your credit card company will see that you are using your card.

For most people having 5 credit cards is probably the best. If you have more cards and you want to close some of them leave your older accounts open since they influence your credit score more.

Learn How to Save Some Money

There is only one way to save money on a regular basis. You have to spend less than what you earn. If you regularly spend more than what you make than you probably don’t care about your financial health.

In order to make your financial situation healthier you will have to change your spending habits. It doesn’t matter how much you make. People with low income can save and people with high income can be in financial disaster.

Making money is not enough. If you don’t learn how to manage your money you can easily have financial problems. Most of the time people have money problems because they don’t know enough or they don’t want to deal with their financial reality.

First of all you have to find out how healthy your financial situation is. You have to sit down with all your bills and figure out where the money goes. This task is really easy if you have a financial program such as Quicken where you can download transactions and balance your accounts in a few minutes. You will able to predict your financial health in the future.

If you don’t like the picture you will have to make some changes item by item. Create a budget if you don’t have one and stick with it. Keep only what you need and learn how to spend less. If buying things makes you happy try to find other things which make you happy as well. Saving money is not necessarily painful if you are responsible about your financial health.

You Can Apply for Free Government Money with Bad Credit

Once you have bad credit it seems that it's hard to get out that financial situation. May be you accumulated personal debt, you received and unexpected medical bill or you just want to pay for college. Normally you have to pay higher minimum payments and you get the highest interest rates.

The good news is that most likely you can get free government money. You have to be at least 18 years old, US citizen or legal alien. You could be one of those people who receive thousands of dollars as grant money. There are billions of dollars available from the government each year.

This is free money, it's not a loan. You will never have to pay it back. It doesn't even matter if you have bad credit. Even if you declared bankruptcy in the past you can still apply for free government money.

Most people are unaware of how much money they could receive. Free grant money is not advertised. Banks, mortgage companies, credit card companies, hospitals, doctors have no interest in telling you that you might be eligible for free money. They just want you to pay the bill.

There are tenth of thousands of grants available to help you to get out of your stressful financial situation. You can pay medical bills, pay for mortgage, pay for your education or spend this money for your business and a lot more.

Take advantage of these government grants programs, you will be surprised the large number of grants available for you. You can find all the information you need including the grant application process online.

Do You Know How Much Debt is Too Much?

Being in debt is not bad but being deep in dept is not good at all. If you want to avoid financial problems you should assess how healthy is your debt situation. Before you accumulate more debt you should be able to figure out how much debt you can afford.

All you have to do is to calculate your Debt-To-Income (DTI) ratio. This is what your lenders calculate when you need a mortgage or a car loan. To calculate the Debt-To-Income ration all you need is your monthly income and how much you spend each month on debt.

DTI = monthly debt/ monthly income X 100

To determine how much you spend on debt each month you have to add up all your debt sources:

• Mortgage or rent
• Car loans
• Credit card payments
• Student loans
• Alimony/child support payments
• Other loans

This will give you the total amount you spend each month on debt.

Next calculate your monthly income. In order to do that you will calculate your yearly income and divide it by 12.

• Gross income
• Commission
• Bonuses
• Alimony/child support
• Other income

Once you have your monthly debt and monthly income calculated you can calculate the Debt-To-Income ratio.

Example:

Mortgage - $1130

Car loan - $325

Credit card payments - $275

Total monthly debt payment - $1730

Annual gross income - $49,000

Annual commission - $4,500

Total monthly income - $53,500/12 = $4458

The Debt-To-Income ration will be:

DTI = $1730 / $4458 X 100 = 38.8 %

To determine how healthy your debt load is, here are the categories:

36% or less is the healthiest;

37%-42% is healthy but you should start to reduce your debt;

43%-49% you could have financial problems;

50% or more means that you are deep in debt and you might need help with debt problems;

Before you accumulate more debt, calculate your Debt-To-Income ratio to keep your debt load under control.