Its sometimes hard to judge between two potential investments. Well, one way to do it is to use the rule of 72. The rule of 72 says that if you divide any number that represents your investment return into 72 then the result will be the amount of time it takes for your principle to double. For example if you have an investment paying 5%, compounded, then your money will double in 14.4 years.
The math is something like this: 72/5 = 14.4 years.
This is a nice simple way to evaluate the attractiveness of two different investments. Lets say that you have the choice of putting $10,000 into either a bond fund or a stock fund. Assume the stock fund will return 7% and the bond fund will return 6%. That’s only a 1% difference. But lets factor in the time to takes for your investment to double using the rule of 72.
Investment #1: stock fund at 7%.
72/7 = 10.3 years
Investment #2: bond fund at 6%.
72/6 = 12 years
So, the stock investment will double 1.7 years before the bond investment! That’s quite a difference.
The bottom line here is if you are interested in optimizing your finances use the rule of 72 to compare your investment options.
Servicing your car regularly can go a long way towards keeping it in top shape, putting off the need for costly repairs. Yet breakdowns can happen to even the most properly maintained cars, and can be quite costly at times. To avoid blowing the entirety of your savings on engine repair, it’s best to budget in advance for the cost of car maintenance and repair. One of the best ways to do this is to create a budget based on your past spending habits. By examining what you have spent in the past on maintenance, you can use this as a guidepost for future costs. You’ll also want to think about the other costs associated with owning a car, from fuel to insurance. The following are a few budgeting guidelines to help you get started.
Examine your Past Maintenance Records
If you already have a car, you can use your past service and repair records as a guide. Find all of your car maintenance records over the past year. Even if you don’t have the receipts, you could comb through bank and credit card statements to see how much you’ve paid. What constitutes maintenance? Generally, this includes the cost of oil changes, routine servicing, repairs, and work on your tires. However, it shouldn’t include your car repayments or insurance costs, which fall under a different category. Tally these numbers together and divide by 12 to get the average amount you spent per month over the past year on maintenance. This should be used as a minimum amount for future budgeting.
Take Current Condition into Account
It’s important to take your car’s age and current condition into account as you work out your budget. If your car has deteriorated over the past year, chances are that you will have to pay more in the following year on maintenance. For older cars, increase this monthly amount. However, if your car is in good shape following some serious repairs or you’ve just purchased an almost-new BMW at Carsales, you may actually need to pay less over the next year. As a general rule, $100 per month is a good baseline for most vehicles.
Tally the Total Cost of Ownership
While you’re crunching numbers to create a budget for maintenance, you might want to look at the full cost of running a car. There are a number of online calculators that can help you figure out running costs. The full cost of a car includes its purchase price, fuel, taxes, insurance, registration, administrative fees, and repair and maintenance. You could either create separate budgets for each of these, or put money aside to cover all of the above.
Put Money Aside each Month
If you’ve planned to budget simply for maintenance, take this money out of your monthly pay and put it into a fund designed for this purpose. Don’t touch your maintenance fund until you need it.
By taking the time to calculate the average amount of money you spend on repairs, you can prepare for the future and avoid being blindsided by sudden maintenance costs. It’s difficult to predict when your car will need servicing, which is why a small nest egg can help keep you on budget.
The end of the year is a great time to make sure that you have done what you need to do to minimize your tax bill for the year. By starting before the year is over, you still have time to meet end of the year deadlines and maximize your tax-deductible contributions. There are a number of steps you can take to reduce your tax bill for the year before the year is over. Here are some of the most common actions that provide the most benefit.
Max Out Your Retirement Contributions
One of the best things to do before the end of the year is max out your contributions to your retirement account. If you want to max out your retirement savings, now is the time to start putting more money away. People that have a 401k account can contribute up to $17,500 for the 2013 calendar year. If you are above the age of 50, you can contribute up to $23,000 in 2013. Most people are not contributing amounts that are anywhere close to the limits, making it a great place to park additional money that is not earning a significant amount of interest. You can also ramp up your contributions to take advantage of tax-advantaged individual retirement accounts, including Roth IRAs and traditional IRAs.
Review Any One-Time Benefits Or Deductions Earned
There are many things that you can do throughout the year to earn one-time benefits or deductions for your income tax return. Some people increase their charitable contributions at the end of the year to max out their charitable deduction. Others purchase Energy Star certified appliances, insulation, or new windows and doors that qualify for a federal tax deduction. If you are in the market for a new car, purchasing an eco-friendly model could also make you eligible for a federal tax credit. Details about the tax credits available can be found on the website of the Internal Revenue Service (IRS) or your state taxation agency.
Estimate How Much You Will Owe
People that wait until the last minute to get their information together for filing their taxes are often dismayed to find out that they have a large tax bill that they were not prepared for. If you received income beyond your usual paycheck because of freelance work or a side business, then you might end up owing a lot of money when taxes are due. It is better to know ahead of time so you can start preparing for the financial blow. There are many people that have expressed regret for their excessive holiday spending when they see how much they owe in April for their income taxes.
Everyone is under a great deal of pressure throughout the holiday season. Our waistlines get thicker while our wallets get slimmer. All this occurs at warp speed as we stress about gifts for friends and family and attempt to cook the perfect feast. Despite it all, the Holidays do not have to be that stressful on you or your pocketbook. With a few helpful tips, you can be well on your way to a pocket full of cash and a few less worry lines on your forehead.
Sell Your Junk
Whether you prefer to use eBay, craigslist, or a good old fashioned garage sale, selling your old stuff is a great way to make room for holiday décor and profit from it too. People will buy all manner of items such as clothes, gym equipment, and books. There is literally a market for everything. If you choose to use a website to post your goods, be sure to title them with something that is attention grabbing. When it comes to the old fashioned garage/yard sale, utilize modern day technology like your local classifieds’ website to advertise the event for a better turn-out.
Utilize Your Talents
It doesn’t matter whether you are crafty, notably intelligent, or gifted with children. All of these are bankable talents. Did you subjects in school easy? Try tutoring students in your local community. Are you a gifted DIY specialist? Make crafts and sell them to your family and friends for their holiday shopping needs. Better yet, you could even host a small Santa’s workshop for the neighborhood kids that get them creating gifts for family members. For this, you could charge a small fee per child. By doing so, you could combine both a knack for crafts and a gift with kids. Advertise such services at the local schools and churches/non-profits.
There are so many great things about donating during the holiday season. Besides lining your wallet a little, you also get that warm fuzzy feeling that comes with doing something good. Whether you decide to donate your blood or your plasma, there are local collection sites and banks across the country. These are excellent resources for quick cash within minutes. Some plasma centers pay as much as $50 for a withdrawal that can take as little as 30 minutes. It is simply a matter of being in good health and meeting primary prerequisites.