Financial Storm: Good times, and Bad times

Monday, May 20, 2013
When our finances are going well we tend to spend on things we had not expected to and we don’t take advantage of the good times to save.
And, as we see that we have a certain amount accumulated in our savings we immediately spend it, it's like an impulse there that sees that when there are more than 1000 euros saved in the account it invents up the need. (My car doesn't work so well, my TV screen is an old one, I need a last generation smartphone ... etc)

But if an unexpected event comes, as having to pay a lot of taxes we never expected, or a sudden need we had not anticipated, we find ourselves in financial danger.

If you've ever suffered financial turmoil these are those difficult situations that comes once in life to most people.

When this happens is when we pay attention to expenses and use the credit card very carefully, create spreadsheets to emulate an accounting program and follow up every cent and cut all  that is unnecessary, such as cable TV and the rates of mobile phones. And reduce cigarettes, the cinema, going out to restaurants and gambling.

But mostly we never ever want to go through there ... because we’ve been force to become frugal, even too frugal!

We can use this painful experience and learn the lessons necessary to not happen again, starting new habits and adopting new schemes that will change our attitude toward money.


Paying yourself first


One of the simplest techniques to adopt good habits is to pay yourself first, so you get used to save before spending, which is great. You can start an automatic savings plan that is scheduled at the beginning of the month before paying your bills.
It's best to put it in a separate account a different one from your regular income and expenses .. forget you have it there .. and let interests work for you.
You know what? When you save money the bank borrows money from you who will pay you back with interest (up to 3% - 4.5%), when you borrow money from the bank it is you who pays the interest (from 4%, 5%, 6%, 7% and on!).
It is better that the bank owes money to you!
What do you think? Have you ever been in a financial storm? What did you learn from it?

Buying a Car with Cash or Taking a Loan

Friday, May 10, 2013
We know that a car loses its value very quickly, which is really a liability in our small domestic accounting, but sooner or later you would want to buy one for family, professional or just for pleasure reasons.

The idea is that if you have to sell the car quickly, with the amount you'll get back you can pay the credit you asked for completely.

Case 1: Car price: 10,000 $ buy by borrowing 100% of the amount

To Buy Car: Loan or Cash?
Photo: http://www.freedigitalphotos.net
(I just thought of 10,000 because it's a simple number to deal with)

Suppose that you get a car loan at 5% interest rate over 5 years:

Monthly payment => 188 $

Total cost of credit => 11322 $

After one year the capital needed to pay your credit is => 9066 $

In this case there is a very small chance that you can resell the car for 9066 $

Case 2: Car price: 10,000 $ you ask for a loan of 6700 $, with a contribution of $ 3300 (about 30% of the whole price)


Suppose that it is a car loan to the 4% interest rate to pay in four years:

Monthly payment => 151 $

Total cost of credit=> 7261 $

After one year the capital needed to pay your car loan is => 5449 $

Now there! After a year, you can get the money back to pay it all and the opportunity to buy a new car if you wish to.

Purchase Plan

Having a purchase plan helps you to:

  1. Force yourself to save at least a part of the whole price to buy the car and think about the project taking in consideration your income and your other personal projects. It would be ridiculous to buy a car for 20,000 $ and take a credit of 400 $ for 20 years to repay.  
  2. When you save your money you are lending to the bank that will return to you an interest of at least 2% or 3%. However, when the bank lends you money you are paying a 5%,6%,7%... interest. So the less you ask to the bank, the more money you'll have in your pocket.

Case 3: Buy the car 100% cash

This means you had 10000 $ saved, well done! But what if you have empty off almost all of your savings, because let's say you've saved 12 0 15 000 $, and if you spend all this money at once, this will leave you unprotected against an important unexpected need, and you would have to sell the car again very quickly.

To be hurry to sell something is not good, because you would be selling for need and you could lose money.

So, I would keep my savings and buy the car with a 30% contribution asking for a credit for the rest.

And if you sell the car, try to sell it to a particular to avoid the salesman commission.

What do you think?

Generosity: Thoughts on Giving

Tuesday, May 7, 2013
The great American billionaires have a sense of giving mission and always end up becoming benefactors.
Rockefeller gave ten percent of his income since their first salary. Warren Buffet and Bill Gates are going much further and think that the rich should give half of their wealth.
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Thus began their campaign for billionaires "The Giving Pledge" http://en.wikipedia.org/wiki/The_Giving_Pledge

They and many others, are all great philanthropists that are returning a portion of the money they make to the source where it came from: humanity.

But why giving?

For two main reasons:

  1. Just for sharing, you are giving the necessary first step to get rich: sow. Sowing the seeds that will give you rewards when the time comes. If there is no seed then there is no fruit. Without sharing, there is no harvest.
  2. By giving you are sending information to your brain and saying it that it has more than enough. Although you may not have it physically! To meet your expectations, your brain receives a message of abundance. From abundance because however little amount, it is enough to give.

Thoughts on giving
Image courtesy of [anankkml] / FreeDigitalPhotos.net
There are people who have accumulated so much and so much money that they end up being afraid of losing it and become greedy and will never be satisfied with what they have. There are those who having almost nothing are also greedy.

In both cases they have great insecurity and have not understood that to receive we must give. Nature itself teaches us that some of the best grain must return to earth to grow new fruit.

By contributing to the progress of mankind, the development of culture, art and communication we make ALL richer.

If you were a millionaire you probably like to see that the rest of the people also have prosperity, in which way would you like to contribute?

Personally I think that in order to give you do not have to be billionaire: to make money you have to learn to spend wisely. To receive we must give, not just money, but your time and personal dedication too.

But give wisely, of course.


Alejandro Jodorowsky, speaks of giving once a week, and every Wednesday he gives free consultations at a bar in Paris called "Le Temeraire", he says:

    Once a week, teach others for free  no matter how little or how much you know. What you give them, you give it to yourself. What we do not give, you take it off from yourself.

Humans are social animals, we are all united and we tend to serve, to add value and make this world a better place to live.

So we feel useful and part of a unity that is much bigger than us.

Therefore, everything we do for others, we are doing for ourselves.

What do you think?

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