How to re-build your financial confidence

On a global macro-economic scale, 'recession' and 'economic downturn' have become common phrases in the last five to seven years. But it is not just countries that face these issues - many individuals or families are facing their own recession and economic downturn. Because of the financial complications on an international level, many individuals have lost their employment or have had their hours reduced, which, in turn, has lead to financial hardship, high debts and even, in many cases, bankruptcy. What's more, the reduced financial means can lead to a loss of financial confidence. As a result, many households are scared to spend at all and will avoid investments at all cost, even if they are almost sure to be highly lucrative. Needless to say, this can only come as a disadvantage to those already strapped for cash.

Personal marketability

Financial confidence can be knocked by a variety of factors: the loss of a job, reduction in salary, inability to repay debt or other reasons. There is always the opportunity to recover from financial hardship but confidence is the key to this. In order to improve your financial position, you must have confidence in your own marketability. This is precisely where things start going wrong for many affected by the economic crisis. Which is a shame, since the road to recovery is actually pretty straight-forward: When financial confidence is reduced, it is important to simply step back and have an honest appraisal of the situation. In order to rebuild financial confidence, it is essential to go back to basics such as accurate and honest budgeting and have expectations that are realistic and not overly ambitious.

Expert advice

This may not always be enough. To re-build financial confidence, it may, however, in some instances nonetheless be necessary to take some expert advice; this advice may be from an independent financial advisor, a debt counsellor or perhaps an organisation such as the Citizens Advice. These organisations may look at all the facts and figures from a clear and practical perspective and provide advice on how to progress in a positive fashion. There is also online information available and websites such as Moneysavingexpert.com provide information on various aspects of money management and debt consolidation and reduction. Visiting websites like these should be part of your daily routine – and by subscribing to their newsletter, you can make sure to never miss out on sensible advice and helpful suggestions.

Positive action

Very often when individuals are affected by a financial crisis, they become unable to see a way forward. It is indeed very easy to become apathetic and inactive and simply resign to one's fate. Instead, it is essential to take small and positive steps forward. It is important to recognise that there is a problem, assess the overall impact of that problem and look for actions that will alleviate the situation. Debt counselling may present a positive opportunity to learn from mistakes and rebuild financial confidence. Organisations such as the Consumer Credit Counselling Service can offer very sound advice and help for anyone in financial difficulties. CCCS is a charity and will not charge for advice and help. However there are some organisations that offer similar service but may charge for them – make sure there is a definitive advantage to working with them and that their charges are justified, if you're interested in making use of their services.

Another important step forward can lie in applying for a basic bank account online. This new type of bank account can assist you in significantly improving your finances, reducing your debt, bringing your earnings and spending into balance again and help you budget more sensibly. This is achieved by only allowing you to spend what you really have and eliminating all overdraft- and credit-facilities from the equation. It may take some time to get used to this, but you'll come to appreciate a guaranteed account precisely for these missing facilities and the chance to get back into the black again.

Individuals can feel powerless when in financial difficulty but there are many small actions that can be taken to alleviate difficulties. It is important to be honest and practical and listen to advice before making any decisions but there is no debt or financial problem that cannot be solved – it is true on a global macro-economic scale and it is certainly true for you personally. 

By William Masters

William Masters is a respected finance journalist, who has contributed to a wide range of print- and online-magazines. He currently lives and works in London.

Budget alternatives for saving money

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If cash flow isn't a problem, yet negative monthly balances are, having no budget isn’t necessarily the problem. The core problem in some instances where having no budget isn't the root cause of  saving too little could be spending too much.  In such an instances simplified living is one way to save money without a budget and can be sustainable according to June, 2010 report in USA Today.

Budgets are not an absolute necessity when it comes to saving money because something more important underlies the capacity to save, specifically personal cash flow. The following non-budget saving tips may be of utility. In addition to saving money, these tips can also save time because money saving methods such as budgets often require account entries in financial software or a financial record keeping system.

Reassess expenditures

Reassessing expenditures can help save money without a budget. This involves reviewing your financial profile and seeing where the money pits and vacuums are. If there’s something like a low mileage vehicle, or high credit card debt using up most of your cash, it may be possible to approach the debt in a different way in order to increase savings. For example, with a high credit card debt, you could refinance at a lower rate, and reduce monthly payments in order to save more.

Calculate mentally

If you can add, subtract and multiply, you can probably calculate mentally as well. Keeping a mental tally of accounts and expenditures isn’t that much different from remembering how many eggs are in your fridge, or when the milk expires. Similarly, knowing which bills are paid and which aren’t will help avoid late fees and save unnecessary charges.

Minimize numbers

Remembering a lot of numbers takes mental capacity. Minimizing mental calculations, account balances and transactions can be helpful to the overall goal of saving money without a budget. For example, the one number method just uses a single number, the balance of your checking account. By remembering what the balance is, you will be aware of how much extra money you have for saving after all expenses are paid.

Time finances

Another way to save money without a budget is to pre-pay your savings account. This is also referred to as paying yourself first. For example, before you spend money on anything, transfer money to your savings account, and you’re done. The reason why this method works is timing. By transferring money before paying bills, buying things or investing, savings can consistently increase if this practice is periodically continued without withdrawals.

By reducing the amount of goods and services in your life, costs go down regardless of whether or not you have a budget. For example, more expensive cars can cost more in property insurance than some used cars, and too many paid memberships or services lower balances. To save money without a budget it can help to avoid overspending and increase savings.

Understanding life insurance policies

Life insurance is more than just a way to protect loved one's from adversity, it can also be a tax deferred retirement vehicle, a legally protected way to save money and a method for diversifying investments through managed funds. This article will illustrate the benefits and disadvantages of life insurance as an investment tool for financial planning.

Types of Life Insurance:

Several types of life insurance exist including term, variable, universal and whole life. Each of these insurance policies have different types of insurance coverage with term life being the least and universal life being the most comprehensive.

Term life insurance gives basic coverage for lower premiums, but may also accumulate a cash value over time depending on which company. Variable life and universal life allow the policy holder to also invest a percentage of the premiums in investment instruments managed by the insurance company and whole life is just that, an insurance coverage that offers payment to beneficiaries over the life of the policy holder.

Benefits of Life Insurance:

There are several benefits to having life insurance. Some people may not believe there are benefits because the only people who benefit may be the beneficiaries. While this is true to an extent it is not the whole picture. A few of the key benefits of life insurance are listed below:

• Peace of mind: Knowing that people one cares about will not become destitute in the event of inheritable death, loss of income, death related expenses etc. can be a comforting thought.

• Tax deferred savings: Some life insurance packages offer tax-deferred growth that's benefits can be twofold. Firstly, having a lower taxable income can lead to more retained earnings at the end of the tax year. Secondly, if tax rates on income go down in one's retirement, additional tax advantages can be garnered at the time of redemption.

• Legal security: Money contained in life insurance policies is legally protected from certain law suits, and garnishments. Knowing that can offer added financial security and protection to an otherwise potentially accessible financial portfolio.

• Diversification: Since many life insurance companies manage mutual funds, this can offer the policy holder a means to diversify one's investments thereby lowering overall investment risk. Some of these mutual funds may own shares in international companies that may otherwise be impractical to invest in.

• Guaranteed returns: Some insurance policies may also offer guaranteed returns. This in effect offers double the utility i.e. one is not only insuring beneficiaries in the event of death but is also making an investment.

Disadvantages of Life Insurance:

The disadvantages of life insurance may not be as bad as one might think, but there are a few considerations worth taking into account. A few of the factors that may have bearing on one's decision to purchase or continue coverage are listed below:

• Yield: Money placed anywhere is an investment. Even money put in a shoe box is an investment in the sense it is highly accessible thereby an investment in accessible money. However, some investments have better financial rewards than others. Life insurance may not offer the highest returns on invested money.

• Market Conditions: If market conditions become very bad, the life insurance investment may lose some or all its value. This may spur additional payments from the life insurance company to 'maintain' the policy. Being aware of adversity conditions in the life insurance contract may provide away to avoid such an occurrence.

• Life Insurance Provider: Not all life insurance providers offer the same credibility, solvency and claims processing capacity. Depending on which insurance provider one has, one's policy may or may not be entirely protected from insolvency and/or bankruptcy of the insurance provider.

Life insurance is an investment in family, retirement planning and tax savings. If the policy is chosen well and the investment products selected carefully, a life insurance policy can be a beneficial and useful way to accomplish several financial planning objectives all at once. Additionally, individuals may hold one or more different types of policies with an insurance provider, which may provide expanded protection, premium savings and greater financial security.