February 11th, 2009 
Vijaianand I was asked this question by the visitor of this website. Instead of me answering, I am posting to our Budget Guru Shreyas.
Shreyas, Please go ahead and take the question and give your valuable thoughts.
Question
People are losing jobs everyday and having trouble even to meet their needs. We hear lot of about budgeting these days. How can budgeting help when we are having tough time meeting our needs.
Please answer with some real life situation.
Posted in Education, Financial Literacy, Financial Planning, Saving 
Tags: Budgeting, Financial Planning, Saving 
No Comments » February 4th, 2009 Vijaianand Posting on behalf of Manisha Thakor, CFA
When it comes to numbers – we are all swimming in them. We have our home phone numbers, our cell phone numbers, our bank card PIN numbers and the list goes on and on. So when it comes to getting your finances back on track, here are three numbers that everyone should know as they head into 2009!
* $16,500 – This is maximum amount that you can contribute to your 401(k) plan if you are under the age of 50. With the scary market of 2008, a lot of people decided they didn’t want to go there. However if history is any guide, this is a great time to be adding to your retirement funds if you are young. The market is low and if you are under 50 you have time on your side. If you are over 50, the government is giving you some added turbo juice – you can put in an extra $5,500 for a total annual contribution of $22,000. A couple things to note. First, if your employer matches – meaning for every $1 you contribute they will put in $0.50 or $1.00 up to some predefined amount – you DEFINITELY want to do this. It’s free money. Second, it’s not enough to just sign up for your 401k / 403b / 457 plan, you have to specify what you want your funds invested in. If investing over whelms you, a target date retirement fund can be a great keep it simple option. Third, don’t touch this money unless it’s a life or death emergency.
* $5,000 – This is the maximum amount you can put into an IRA (individual retirement account) if you are under the age of 50. A lot of people don’t realize that you can have both a 401k and an IRA. If you are single and make less than $104,000 or less a year – or if you are married filing your taxes jointly and make less than $166,000 a year you can contribute to a special kind of IRA called a ROTH IRA These are special because you pay taxes on the money before you put it into the account but then when you take it out in retirement it’s all yours, no more taxes ever. Oh, and if you are over 50 you can add an extra $1,000 a year for a total contribution limit of $6,000.
* $5,950 (& $3,000) – This is the maximum amount a family (& a single filer, respectively) can contribute to an HSA (Health Savings Accounts). These are “tax-advantaged” savings accounts available to anyone who has a “high deductible” or “catastrophic” health insurance plan (“HDHP”). An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account. You get an “above the line” tax deduction on the money you contribute and you do not have to pay taxes on the money you take out if the funds are used for qualified medical expenses. As an added bonus, unlike flexible spending accounts, the money can roll over from year to year and be used for any qualified medical expense (withdrawals for other uses will be taxed in a similar fashion to early withdrawals on IRAs)
No doubt, it’s scary out there. Our economy is going through a very rough patch. The best thing each of can do to protect ourselves is to focus on we can control. If you’d like to learn more about taking charge of your financial life, visit my site at www.OnMyOwnTwoFeet.com.
January 29th, 2009 Vijaianand In my last post, we saw how Goal Setting works better than Resolutions. I also promised to show, how Goal Setting Techniques works better in achieveing your financial dream. Let’s start with a quick check on your stand with money and move on setting some new goals, draft realistic plans and try to reach them by taking some action to make this year a fruitful one. Self assess yourself by answering these 3 questions below and figure out where you are in regard to financial planning. Say “YES” if you have an answer or NO if you don’t have an answer or don’t know anything about the question. Do you any personal financial goal like buying a new car or home? If you said “Yes” to all of these questions, you are really way ahead of many people. If you said “No” to all them, its better you start thinking about them, now as it’s the right time. Allot a specific time. Sit down with a pen and paper or your computer. Start listing your goals, dividing them into three categories: short term, medium term, and long term. • Short-term goals might include buying a new computer, or paying off credit card debt. • Medium-term goals could be purchasing a car or going back to school. • Long-term goals might be to buy a home, saving for your kids education or retire with enough money to live comfortably. At the end, make sure you prioritize the list. Which ones are the most important to you? Which ones can wait? Define a Plan The goal is to buy a home in 3 years with 20% down payment. That’s a SMART goal but to get you there you better draft a sound plan. In this case, you need to know things like:
Do you have a Budget in place to track all your income and expenses?
Do you have a Savings Plans to grow your money?
Set/Revisit your Goals
When comes to selecting and Setting goals, Try to set SMART goals. These are goals that are Specific, Measurable, Achievable, Relevant, and Trackable. For example, you may want to create an emergency fund in six months to have 3-6 months worth of your salary. 
People don’t plan to fail, they usually fail to plan. If you want to go to a place, you better know your directions, otherwise you are sure to get lost. It is as simple as that. Similarly, if you have set your goals, you better work on a clear and concise plan to reach them. Let’s define a plan by taking a simple goal.
Start out Amount: If you have $10,000 saved in a money market account, you may decide to allocate half of it to the down payment. In this case, you would write $5,000 under Current Assets.
Gap: Indicate the gap between the cost of each goal and the assets you have allocated, in our example $15,000.
Number of Years to Target Date: Enter the number of years between now and your target date, which is 3 years.
Amount to Be Saved Each Year: Divide the difference by the number of years to the target date. That amount you need to save each year to reach your goal is $5,000 a year.
Coming up with $5,000 for a year might be a tough deal. Try to split it monthly. You can then start a savings plan to save around $420 per month to get to $5,000 a year. The next and important step in the financial planning is executing the plan.
Ready, Set and Go: Take Action Making up goals and plans is just 20% of the challenge; executing them is 80%. In our example, you have the goal and plan to be ready to buy a house in 3 years with a 20% down payment. How are you going to implement the plan if your financial situation is already tight? The first step is to analyze your current income and expenses to see where your money is going and what can you scale back. Start a simple budget to track your income and expenses, going after expenses which can be easily cut without affecting your lifestyle to achieve your monthly savings goal. Open a savings account or an add-on CD to put away a fixed amount every month. Or setup an automatic debit from your checking account to this savings account. This way you don’t have to do it manually. Finally stick to the plan rain or shine and you are sure to reap its rewards.
“Wisdom is knowing what to do next; virtue is doing it,” said David Starr Jordan.
Posted in Education, Financial Literacy, Financial Planning, money really matters Tags: Financial Planning, Goals, Plans No Comments »