Simplify Your Household Budget

Simplifying the way you manage your finances can make sticking to a budget much easier. Limiting the amount of time it takes to actually manage your budget will make it more likely that you will do it.If you use the correct method, you should only require around 20 minutes to half an hour each week to stay on track.

The most time-consuming part of the process is the actual setting up of the budget.  So don’t try to do this with a house full of kids and other relatives over the holidays.  Allocate the time and place, and stick to it. If necessary put a “Do not disturb” sign on your door, turn off your phone, and disconnect from the internet (eliminate distractions!).

While there is a plethora of software to ‘simplify’ the preparation of a budget, a simple spreadsheet is all you need.  Don’t complicate the process by having to learn a new program.

A good first step is to gather up all of your bills and receipts that you can find around the house. A credit card statement is perfect if you charge most of your purchases.To start off, list your monthly incoming and outgoing cash flow. Estimate, in round numbers, what you spend on each expense every month. You don’t need to be precise, but err on the side of more rather than less with expenses.

Be sure to include:

* Mortgage/rent payments
* Utilities costs (electricity, gas, phone, water etc)
* Groceries
* Food
* Transport
* Car expenses
* Clothing
* Education expenses
* Entertainment
* Gifts

A Simple Budget

One of the simplest types of budget is called the “60 Percent Solution”.  In essence, this budget aims for you to fit your monthly expenses within 60% of your gross income.

This will allow you flexibility for long and short term savings, spending money and retirement planning. These can be what often break a budget, because people fail to budget for them.

While the percentages will vary depending on your circumstances, consider these guidelines:

60%  – Monthly expenses
Housing, clothing, food, transportation, utilities, insurance, communication.

10% – Retirement
In some countries this forms part of a compulsory superannuation plan, but if it doesn’t for you, you should have this deducted automatically from your paycheck.

10% – Debt reduction or long term savings
This is your long term savings or “emergency fund”. You can speak to a financial advisor for recommendations on how to invest this money.

10% – Short term savings
This is your savings for annual events such as birthday and christmas presents, or your more “every now and then” type costs such as car and appliance maintainance, or unforseen medical costs.

10% – Pleasure
This will include recreation, eating out, movies— whatever you want, without the worry of breaking your budge.

Having a household budget with fewer categories will make it much more manageable and help you to realise your financial goals.

Saving Money with a Household Budget

Creating a household budget needs to be one of the first steps in any plan to take control of your spending and financial situation. The basic idea for a monthly budget is to calculate how much money you have in comings versus what is being spent and how you are spending it. Now you are armed with all the information it’s time to make some changes to achieve your goals.

Follow these simple step by step instructions to creating a budget for your household.

1: Calculate Your Incomings: This should be fairly easy. You need to calculate your typical incomings per month from all sources pay checks (after tax), bonuses and dividends from any investments. If there are some payments you only get once or twice a year such as bonuses then average that figure out over a year to give you a typical month.

2: Calculate Your Outgoings: Calculating your outgoings is a little bit more complicated as you spend money in far more ways than you earn it. Go over your statements for your bank account and credit cards for the past few months and figure out how much you have in outgoings each month and where it is going. Transactions from debit cards or credit cards may be easier to keep tabs on but it’s hard to see where cash withdrawn from ATM’s has ended up. A simple way to keep tabs your cash spending is using creating a spending diary in a notepad and noting everything you spend money on each day such as coffee and magzines and anything else you spend. Hopefully you will find your typical outgoings are lower than your incomings but often this is not the case. If you find your outgoings are higher than your incomings then you are pushing yourself into debt each month and need to take action to reverse this trend.

3. Classify Your Outgoings: Once you have worked out all your outgoings it makes sense to classify them together into categories such as groceries, utilities, clothes, entertainment, loan repayments, travel and so on. Doing this will let you see where most of your money is going.

4: Sort out the essentials, the nice to haves and the not required: Now you can see where your money is going then you need to decide what can be changed. You may find some of the expenses are fixed and cannot easily be changed such as rent or mortgage repayments, car registration and so on. If you need to make large cutbacks then perhaps even these items could be reduced by downsizing your home. Assuming however that you are not looking for such drastic measures then you need to find other places to make changes. You might be able to save money by switching utility providers, optimizing your cell phone plan and using VOIP to make your long distance calls at a low rate. Common areas for cutbacks are reducing your entertainment and shopping expenses for items such as dining out, buying music, clothes and so on.

5: Make Goals: You should now have figured out what you are spending and where you can make cut backs. You shouldn’t be aiming to create a budget just to survice on; you should be looking to have spare money to increase your net worth each month. A couple of methods of boosting your net worth is by slashing your debts or by boosting your savings. If you are in debt then the goal should be to get out of debt as soon as possible. Aim to pay off as much as you can each month and set a minimum goal which should form part of your budget rather than being an afterthought. Once you have paid off debts then the focus can become on saving money each month via a high interest savings account. High interest savings account products have high interest rates and accumulate quickly when you make regular monthly deposits. Your goal shoudl eb to improve your financial situation every month and prioritize debt reduction, savings and investments to reach your goals faster. There could also be other uses for the money such as investing it in shares or managed funds.

6: Keep Yourself in Check: Make sure you keep reviewing your budget and looking for areas where you can make further trimmings and savings. A budget is not a survival plan, it should help form your long term financial roadmap to making you financial goals a reality.

Article provided thanks to www.compareyourbank.com.au a consumer finance comparison site including Woolworths credit cards. Visitors can then apply online for any featured products direct with the banks.

I'm Fascinated How A Day Trader Made $9,900 With 4 Trades. So Tell Me About The Covered Call

The Covered Call / Buy-Write Strategy For better or worse, most investors purchase stocks with the intent of holding their shares for an extended period of time.

We do this mainly because the media and industry professionals have drilled into our heads, year after year, time after time, that it’s best to buy and hold. The recent bull market phenomenon also fueled this mindset because the ‘buy and hold’ strategy worked extremely well – for a while.

Whether or the not the ‘buy and hold’ strategy is still the most efficient way of investing remains a topic for discussion. However, it is still the strategy that most investors are comfortable with and tend to follow.

The first strategy we will discuss is a hybrid of the buy and hold strategy, one that provides for better and more consistent returns a large majority of the time when compared to naked stock ownership alone.

When we buy a stock, there are three possible outcomes. As we discussed before, two of these scenarios are typically negative and only one outcome is typically positive. If the stock goes up, that is good. If the stock goes down, that is bad. And if the stock does not rise or fall, that is also unsuccessful.

To quickly recap, not only do you lose money with opportunity cost (the cash invested in your poorly performing stock could be making you a profit elsewhere) but also, you have incurred commission costs on both the way in and way out. So, in this case, only one of the three scenarios provides a positive return.

For the sake of description, we will identify the three potential scenarios as the “up” scenario, the “down” scenario and the “stagnant” scenario. By employing the covered call or “buy-write” strategy, you can change the outcome of the scenario profile so you have two positive potential results instead of only one.

Employing the covered call or “buy-write,” we still have the “up” scenario as a positive result, but now the “stagnant” scenario will also produce a positive result since we collect a premium and the third scenario, the “down” scenario will not be as negative.

Thanks to the covered call strategy, now two of three scenarios end in a positive result and the third has a result that is less negative.

Let’s take a closer look at the covered call strategy and its construction. There are two components of the covered call strategy, the stock component and the option component. The stock component consists of a long stock position (you own stock). The option component comprises of selling one call per every one-hundred shares of stock owned.

Remember, one option contract is worth one hundred shares of stock. So for instance, 1000 shares of stock equals 10 call contracts or 200 shares equals 2 call contracts.

The following table displays a few more examples of the correct construction of buy- writes.

Please take special note that the ratio of stock to calls must be exactly 100 shares to 1 option contract.

Number Of Shares Owned	Call Contracts To Sell
100	1
300	3
1700	17
9200	92
14500	145
267000	2670

The philosophy behind the covered call strategy is not complicated. It means using a long stock position combined with a short call option to build a positive flow of extra income, as, for example, a person would buy a home and subsequently rent it to pay the mortgage.

Another analogy is that of the insurance company. An insurance company receives premiums month in and month out. Over a period of time, this constant stream of income easily builds to a point where it outweighs any pay out the insurance company may face, even for catastrophic events.

The constant and reoccurring collection of option premiums works better if done over longer periods of time (for example, one year.) That time frame allows the odds to play into your favor.

Now let’s talk about the odds. There have been several studies done on the topic of premium buying versus premium selling. The goal of the studies was to determine whether it is better to buy options or sell options.

Recent studies have found that selling the premium was the correct trade 78% to 83% of the time. That is a very high percentage and is worth taking advantage of when a good opportunity presents itself.

The covered call tactic takes advantage of the fact that an option is a falling asset mainly due to its extrinsic value goes to zero at expiration. The process by which an option’s extrinsic value dissipates is called time decay.

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