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One of the things that we are not taught to do as children is how to balance the checkbook and manage our money effectively which unfortunately impedes our ability to most effectively use our resources without going into debt. In fact, the idea that we have finite resources and must make choices is at the heart of economic theory. This is also the core idea in personal finance budgeting: making choices when there is only a finite amount of money.

Before we are able to weigh the choices and allocate resources effectively, it is important to survey our needs and how we use money. The first step to financial surveying is to take out the credit card statement as well as the bank account statement, and then go through each item putting them into categories. For example, costs for watching or renting movies goes into entertainment, whereas costs for gas and electricity goes into necessary utilities.

With a list of recent transactions, we are able to start comparing the importance of different items. One way to do this is to presume that there are three kinds of costs. One, there are fixed costs that cannot be compromised, such as a monthly house mortgage or car payment. Two, there are variable costs that can be changed or modulated, such as switching to a cheaper coffee every morning rather than the premium kind bought at Starbucks. Three, there are costs that can be removed entirely.

In the following, we list out some types of transactions and costs and how to manage them.

The calling plan on a cell phone is not a fixed cost. In case you own an outdated phone plan, it may be costing you more than you need to pay. You can compare your cellular phone plan with others that might be suggested to you by identifying a good personal budgeting online place, entering your mobile phone plan info, then seeking comparisons. A comprehensive site offers a list of phone plans that are suggested in your city and will work with what you need.

Buying home appliances is a variable cost. In the event that you buy a sizable appliance, it may drain your budget when you buy it, then continue to drain your budget when you run it. Often, consumer website tell that a consumer check the energy star rating of an appliance and determine how much power it requires before purchasing it. A smart consumer can save a good deal of money on energy throughout the year.

Health insurance may be a fixed cost, but it can be modulated. If you have a low risk job that is considered quite safe, you may be able to save money on your health insurance. If you are an accountant or a teacher or someone who works in another sort of safe situation, you might be able to get lower health insurance rates.

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The prerequisite to signing up with the best mutual fund companies is to first learn the basic lessons of investing.

The first steps you take as an investor may be the most difficult. Personal finance is not something that is learned in high schools or even universities. Before putting any of your hard-earned savings into any investment, consider what sort of investor you would like to become. For some, active trading every day on an IRA is the most exciting and satisfying. For others investing and leaving it for years is the best.

The next thing to pick is the kind of investment instrument you will use. The three big ones are mutual funds, individual stocks, and ETFs. Mutual funds are groups of portfolios of stocks and popular because each mutual fund does not depend on the fortunes of any one company. Stocks are much more volatile because if a company does poorly then its stock price can take a hit, wiping out your investment. Finally ETFs are mutual fund-like, but traded on the open exchange.

The third thing to pick out is the company you will use to buy these instruments. The big ones are Vanguard, Charles Schwab, TD Ameritrade. They offer low commissions and access to the major financial products. But low commission is not the lowest you can go. There are even deeper discount brokerages such as Zecco and Tradeking. These companies are online only.

There are more specific investment products you can consider.

A financial account called a money market account is a kind of investment security for individual investors intent on storing money in a non-volatile, accessible locale simultaneously gaining higher earnings when compared to a standard checking account. At what institutions can an investor create a money market account ? It turns out that the local branch of a nation-wide bank sets up these accounts. Moreover, one may start an account online via virtual banks. People who are troubled by the reliability of internet-only banks should rest easy because as long as the bank is certified, assets are insured by the FDIC in case of a disastrous collapse.

Large firms and governments are required to take out loans in order to realize daily activities until ample tax is generated to pay back the borrowed money. The borrowed money is in the form of a bond which is essentially an IOU to return the borrowed money in addition to some extra return. U.S. government bonds are as one of the most pervasively bought low risk investments all over the financial world because purchasers pick them up with near perfect confidence that the bond cannot default.

Investors might be interested in GNMA backed securities. The partially-government owned organization Ginnie Mae delves into capitalizing the home loans of a less risky segment of the market. During the stock market meltdown initiated in part by the property disaster of 2007, Freddie Mac and Fannie Mae exhibited crippling drops in revenue forcing a declaration from the Treasury to prevent investor panic. GNMA funds discovered that it was in a vastly improved condition, exhibiting few signs of being in need of a Federal government-mediated bail-out.

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The use of a checkbook register is not difficult and in fact almost intuitive. First let us consider what exactly is a checkbook register? A register is an entry form or table that can be used to record information in a systematic way. The checkbook register consists of a series of tables with a number of columns for holding information about each transaction.

When should people expect to have to use a checkbook register? The answer is for any activity that ends up with the amount of a checking account changing. Let us say you swipe your check card at a restaurant, but the restaurant cannot supply you with a running total of your bank account balance for privacy reasons. You should therefore record the information in a checkbook register.

What are the elements in knowing how to use a checkbook register? There are only a few points to remember in this simple process. One needs to record the check identification number, a short description of what the transaction was for, the date of the transaction, and any associated bank fees. The information is divided into columns for easy reading and organization. Another device the checkbook calculator can do many of these bookkeeping activities automatic.

The process is the same for paying your monthly telecommunications bills. In the event that your cellular phone plan is old-fashioned, it is possible that you are paying too much money every month. Identify a good money management online place and enter all the pertinent information regarding your current cell phone plan, then you can compare it to plans that are suggested on the market today. You might be able to get a guess of how much you can cut costs by switching from your outdated plan to a updated one.

Consumers buying large items can use the same methods for recording large amounts. A large appliance can drain your budget when you buy it and then continue to drain your budget when you run it, due to the energy it consumes. Often, consumer website tell that a consumer check the energy star rating of an appliance and determine how much power it requires before purchasing it. An intelligent consumer can save a lot of money on energy during the year. For a good deal, look for an appliance that is labeled with the government’s energy star rating that can save you almost 50% in energy usage.

Any recurrent insurance costs are good for entry into checkbook registers also. Your job may help you to get lower insurance rates – if you are in a low-risk (safe) position, your insurance may cost you less. Some fairly “safe” jobs are teaching and accounting so if you possess this sort of job, you may be able to get lower costs on your health insurance. Health care payments can seriously affect your budget, though you can get your prescriptions for a lower cost at places like KMart and Costco. In any case, the monthly health care payments can be difficult to manage.

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During recessionary times when the GDP contracts, stock markets tend to go in tandem and drop in value. During years when the GDP grows, however, does not necessarily portend a rise in stock prices interestingly. In any case, the drop in stock equities causes many to scramble for new places to put their money. Preferably, these new investments should be low risk, no fee (such as no load index funds), and give high yield. It is not always possible to hit all three attributes so two out of three are acceptable to many.

The first place to look is a brokerage that offers mutual funds in the first place. More importantly, the brokerage should be a no load, low fee broker that deal primarily with mutual funds. The fees are kept low because management does not acquire many fees ostensibly paid for their skill in choosing stocks. The reason why people shy away from high fee mutual funds is that very often there is no value in the fees. That is, paid managers do not seem to be particularly good at picking winning stocks for inclusion in the mutual fund portfolio.

Another place to find index fund-like financial products is a brokerage that offers ETFs (or exchange traded funds). Regular mutual funds are bought once during the day and have a value that settles in at the total value of underlying assets. ETFs however behave much like stocks in that they are traded on the exchange constantly. Unlike mutual funds, there is no minimum limit to how much one needs to put up to get an account. IRA-linked mutual funds are similar to ETFs in that they have low minimums.

Besides high yield mutual funds what are some other options for investors during such times?

Savings or checking accounts seldom benefit from the best available yields encouraging investors to seek alternatives. Without a doubt investors will learn about the money market account which resemble typical bank accounts but provide more lucrative interest. It so happens that the local branch of a national bank offers these accounts. In addition, one can open an account online via virtual banks. Investors who are troubled by the trustworthiness of internet-only banks should rest easy because as long as the bank is certified, it is guaranteed by the FDIC in the event of a serious collapse.

A less appreciated gem in the financial world is the GNMA mutual fund, frequently eclipsed by the related companies Fannie Mae and Freddie Mac. All three manage real estate loans but Ginnie Mae funds are thought to be the most conservative. In the time of the home loan meltdown of 2007-2008, when Fannie Mae and Freddie Mac were lambasted due to their part in taking on the risks of underqualified home buyers, Ginnie Mae emerged largely undamaged because of extremely low-risk investments. Not all mutual funds can title itself a Ginnie Mae fund. Only those that have more than 80% share of assets in GNMA securities are allowed.

If the government conducts its operations it is required to in some way finance it enough taxes are collected to reward employees. The loaned money is in the form of a bond which is essentially an IOU to return the borrowed money in addition to some extra interest. Personal investors, companies and even sovereignties invest in bonds offered by the American government on account of perceived trustworthiness and robustness of the U.S. economy. Some brokerages offer bond funds as no load index funds.

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The discussion begins with the question “What is a random walk?” Mathematicians have come up with an interesting way to broach the subject. They say, imagine a drunk to who is trying to get home. He starts off at a lamp post, and then starts taking steps. Every step he takes is random in direction. Over time, he will start to drift away from the lamp post, but also occasionally return to it. This situation captures the essence of a random walk.

Most economists and investors are acutely cognizant of the fact that high yield mutual funds, money market deposit accounts, and general security prices have erratic up-and-down movements from day to day. Furthermore, looking at security prices from hour to hour and minute to minute continue to show these fluctuations albeit at reduced magnitudes. These observations provided the basis for the idea that like the drunkard’s walk, stock prices move up and down and drift while adhering to strict statistical properties.

The usefulness of the random walk view point is largely mathematical. Should the price of a low risk investment obey a random walk, then it follows that the price should always move up and down around an average value. It should also follow that the deviations from the average value can never be too large, in fact, following a normal or Gaussian distribution. These observations surprisingly are true for many securities, at least on an intra-day basis.

In fact, the Black-Scholes theory of options pricing based on ideas drawn from random-walk mathematics was the reason for a Nobel Prize in economics. Readers will find the details of the theory daunting, but should keep in mind that it is no more than a formalization of the random walk idea.

However, there are limits to the validity of the random walk view point. For example, metrics like the Dow Industrial Average reflect the value of companies in totality. Over time, the value should increase because companies are productive and add to the country’s GDP. As a result, the stock price of securities should generally rise over long times, rather than continue to fluctuate around an average value. Second, there have been times in financial history in which stock prices have plunged dramatically, revealing large deviations from random walk behavior.

The normal person who is more worried about a 401K or IRA account that contains high yield mutual funds, GNMA investments and bonds may find the discussion very theoretical. Indeed, it is likely that these mathematical concepts are only useful for a day-trader who must contend with making profits from swings in stock prices on the short term.

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The interest rates of banks is not surprisingly highly correlated to Federal Reserve policies. During rocky economic times, such bursting of the dot com bubble of the late 1990s and the real estate crisis of the 2007 in the United States, the Federal Reserve dramatically reduced interest rates in an effort to stimulate the economy. While this was good for people whose livelihood depended on access to credit, the low interest rates were damaging to those who were savers.

One way of viewing these actions is that the government is discouraging people from saving. The low interest problem savers face is made more acute by the fact that inflation slowly makes saved money worth less. Savers face the low interest rate problem most commonly at large institutional banks, especially those whose business spanned state borders and could leverage economy of scale. This has forced savers to turn to less conventional ways of saving money in low risk investments.

Some small banks might indeed offer interest rates that are higher than normal for regular checking and savings deposits. Why can a small bank offer high rates when the large ones would not? The reason lies in the fact that the small banks must have a tool for attracting customers, and the way they accomplish this is to offer the high interest rate but offset it with restrictions that are sure to benefit the bank.

For example, the banking client will often have to set up direct deposit for the monthly paycheck with the small bank guaranteeing them a steady stream of increasing deposits. Moreover, the small bank might demand that the client use the ATM card as a check card for transaction purposes which increases the fees the bank can collect from businesses.

Another possibility savers have is an internet bank. Some banks do not have physical operations which reduces their cost and increases their capacity to offer high interest rates. Internet banks also must attract customers without the benefit of a face-to-face sales pitch. High interest rates are a way to entice otherwise wary customers. Some websites offer comparisons of internet banks, interest rates, and trustworthiness.

A third possibility is for one to turn to a money market account at either a bank or a traditional financial firm. A money market account offers slightly higher interest rates with very low risk. In addition it is insured in the same way as checking and savings accounts by the FDIC. Withdrawals can be made but are usually limited to some number within a 6 month period to comply with SEC definitions and regulations.

When interest rates are low, customers must work hard to find ways to generate interest income. Some of the above tactics will work but it will pay to look at other possibilities, such as purchasing government-backed securities, buying into a short-term bond fund or high yield mutual fund.

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Investors have a plethora of choices when it comes to saving money and generating income from the savings. Some choose to buy property and rent the property out which can yield monthly payments over many years. Some seek haven in gold and other precious commodities which retain value even as the broader market plummets. Some choose to put their money into stocks, benefiting from increases in price and dividends from a company that is doing well.

Investing in stock shares of a single company can be risky because the entire investment depends on the fortune of one company. What if the company experiences a poor quarter or if the company has a catastrophic event? One’s investment might be entirely wiped out. This is made more serious if the investment were the 401K or IRA retirement account that so many depend on in old age.

To address this problem, financial institutions have created composite financial instruments known as mutual funds. A mutual fund is the realization of the idea that an investor need not buy stock from a single company but stocks from many companies. It is exemplified by the fact that one share of is composed of little fractional shares of many companies. Buying into a mutual fund means buying into the many companies but without the requisite expenditure in capital. Instead of profiting from the welfare of a single company, the investor of a mutual fund profits from the average welfare of many companies.

Stock mutual funds can belong to a class known as high yield mutual funds. More interestingly, mutual funds may contain more than stocks. Investors may also pick bond funds, real estate funds, or commodity funds. Each type lies along an independent financial axis so that investors benefit from further diversification by participation in each.

As mentioned before, bond funds are mutual funds which contain many bonds. Bond may include United States Treasuries as well as corporate debt which show a distribution in length of maturity as well as yield. Sometimes bond funds are divided into short, medium and long term, three terms that describe the maturity length of the component bonds.

A real estate fund is one which depends on the value of the underlying real estate, which in turn is managed by the government agencies Fannie Mae and Freddie Mac. A lesser known entity is Ginnie Mae which handles safer, less distressed mortgages. The real estate fund derives its growth from both rising value and the steady, continuous payments of those who have not defaulted on their property.

Finally, commodity funds are made up of financial instruments that derive their value from underlying commodities. Commodities usually refer to exploitable minerals or fuel such as gold, silver, petroleum, or farmed products like soybeans and oranges. The value of commodity funds goes up and down in accordance to scarcity and demand of the underlying commodities.

Even if the investor is purely interested in index funds, fees can take a large chunk of income from the investor. It may be wise to consult a firm that specializes in no load index funds.

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