By Rich Acheampong
1. Don't focus on your financial planning
The reason most people get into debt is because they don't spend enough time focusing on their financial planning. You need to get a grasp of where you're at financially. Personal budgeting of your income in relation to expenses and spending habits can be done with a money management software i.e. Quicken, Microsoft Money or Mvelopes Personal.
2. Failure to develop a good financial plan
No one would imagine going on vacation without planning financially for it. Yet when finances are concerned, many people don't plan. A good financial plan can be the difference between comfortable living and struggling to get by.
3. Waiting too long to invest
When making investments, time is of the essence. Compound interest earns money over time; so don't wait too long to save for retirement. The longer you wait to invest, the smaller your return on investment.
4. Marrying the wrong person
Who you marry has a huge impact on your finances. Couples with different views on money, create stress in their marriage. Divorce apart from the emotional pain and suffering causes financial heartache.
5. Habits
Personal budget planner would show you how habits can ruin your budget plan. Buying a $1 coffee each day cost you $365 every year. Imagine how much more money you spend by eating out regularly. If you smoke, the cost of cigarettes along could drive you to quit.
6. Running up credit card balances
If you carry unpaid balances on credit cards, you are already losing money in interest payments alone. Credit card companies have high interest charges that accumulate with unpaid balances.
7. Be under-insured
You need to protect yourself and your family from unforeseen emergencies, sickness, accidents and possible death. The goal is to make sure that you have proper financial coverage in case anything should happen.
8. Investing in things you don't understand
If I had a dollar for every sure fire stock tip I'd be rich. Then I'd lose that money by investing in those tips. Make sure you know what you are investing in, by asking a lot of questions, don't hesitate to get another financial opinion.
Showing posts with label Budgeting. Show all posts
Showing posts with label Budgeting. Show all posts
Wednesday, February 25, 2009
Sunday, February 22, 2009
Steps to Financial Freedom
By Richard Pullman
Financial budgeting would give financial freedom which is the power to do what you will with your life without being forever bound by lack of money and over burdened by debt. This worthwhile goal can be achieved by anyone through careful budget planning and persistence. Just follow these steps:
Pay yourself
firstEvery paycheck,create a personal budgeting plan and keep some of your money for yourself. It takes money to make money, so goes the old saying. To achieve financial freedom, you'll need some seed money that can grow into a substantial nest egg.
Take a percentage or a fixed amount from each paycheck and add it to your seed money, at least 10%, if possible. This is your investment money. Do not use it for anything else. Every paycheck be sure to pay yourself first. With time and persistence you'll soon have the funds to start making profitable investments. You'll be a lender and not a borrower. Reinvest all profits and dividends to maximize the growth of your nest egg.
Control your spending with the help of a budget planner like Quicken, MS Money or Mvelopes personal. Make sure that your spending is less than your earnings. When you find yourself in a hole, the first thing to do is STOP DIGGING. You may have to create and follow a budget.
Creating a budget is easy; following it may be hard. Start our by tracking your current spending habits. Visit www.financesoftware.net for budgeting software that can help you. Summarize your spending into general categories such as Food, Clothing, Entertainment, etc. Then you can decide which categories you can cut and by how much. Continue to track your spending and do your best to stay within the budget setup for yourself.
Get free of debt
Debt is bad, "the borrower is the slave of the lender", and none of us wants to be a slave. There are some debts that may be helpful, such as business debts to increase profits, home mortgages, and car loans. Avoid any other borrowing, even pay cash for your car if possible.
Increase the size of the payments you're making. Pick the creditor who charges the highest interest and increase that payment by as much as you can. When that creditor is paid off, take the payment amount and apply it to the next creditor in your budget plan. Continue this process until all are paid off. Destroy and close all or most of your credit card accounts.
Build a contingency fund
Life is full of unexpected surprises; the car breaks down, the furnace fails, we lose our job, etc.. To prevent these occasional events from derailing your financial plans, you need to do financial budgeting for emergencies also. This will help you avoid borrowing or dipping into your seed money.
Every paycheck, take a percentage or a fixed amount of money and put it into your contingency fund. As the money in this fund grows, you will have financial peace that comes from being better prepared for life's little surprises. For life's big surprises, buy insurance.
Become an informed investor
In this day and age, there are endless opportunities for investments that can make your financial budgeting fail. In order to make money and not lose money, you'll need to start educating yourself.
As a start, here are some concepts it will be good for you to know. RETURN is how much profit you're likely to make on a given investment, usually expressed as a percentage or a range of percentages. RISK is the possibility of something bad happening, like losing money. A SCAM is a false investment opportunity presented by lying thieves trying to steal your money. DIVERSIFICATION is the strategy of not having all your eggs in one basket to spread and minimize risk. An INVESTMENT STRATEGY is a long term approach to making money. Visit www.financesoftware.net for more investment ideas and related budgeting software.
Give
Begin to give away some of your money. "For whatsoever a man sows, that shall he also reap." If you are religious, give to your religion. If you are not, then give to the poor, or to "save the earth", or whatever noble cause appeals to you.
Not only does giving help free you from the mental and emotional grip of money, God Himself will generously respond to more than repay what you have freely and joyfully given away.
Conclusion
You can make it happen. Establish your strategy and stick to it. Implement all these steps in your life and your financial freedom will soon come:
Financial budgeting would give financial freedom which is the power to do what you will with your life without being forever bound by lack of money and over burdened by debt. This worthwhile goal can be achieved by anyone through careful budget planning and persistence. Just follow these steps:
- Pay yourself first
- Control your spending
- Get free of debt
- Build a contingency fund
- Become an informed investor
- Give
Pay yourself
firstEvery paycheck,create a personal budgeting plan and keep some of your money for yourself. It takes money to make money, so goes the old saying. To achieve financial freedom, you'll need some seed money that can grow into a substantial nest egg.
Take a percentage or a fixed amount from each paycheck and add it to your seed money, at least 10%, if possible. This is your investment money. Do not use it for anything else. Every paycheck be sure to pay yourself first. With time and persistence you'll soon have the funds to start making profitable investments. You'll be a lender and not a borrower. Reinvest all profits and dividends to maximize the growth of your nest egg.
Control your spending with the help of a budget planner like Quicken, MS Money or Mvelopes personal. Make sure that your spending is less than your earnings. When you find yourself in a hole, the first thing to do is STOP DIGGING. You may have to create and follow a budget.
Creating a budget is easy; following it may be hard. Start our by tracking your current spending habits. Visit www.financesoftware.net for budgeting software that can help you. Summarize your spending into general categories such as Food, Clothing, Entertainment, etc. Then you can decide which categories you can cut and by how much. Continue to track your spending and do your best to stay within the budget setup for yourself.
Get free of debt
Debt is bad, "the borrower is the slave of the lender", and none of us wants to be a slave. There are some debts that may be helpful, such as business debts to increase profits, home mortgages, and car loans. Avoid any other borrowing, even pay cash for your car if possible.
Increase the size of the payments you're making. Pick the creditor who charges the highest interest and increase that payment by as much as you can. When that creditor is paid off, take the payment amount and apply it to the next creditor in your budget plan. Continue this process until all are paid off. Destroy and close all or most of your credit card accounts.
Build a contingency fund
Life is full of unexpected surprises; the car breaks down, the furnace fails, we lose our job, etc.. To prevent these occasional events from derailing your financial plans, you need to do financial budgeting for emergencies also. This will help you avoid borrowing or dipping into your seed money.
Every paycheck, take a percentage or a fixed amount of money and put it into your contingency fund. As the money in this fund grows, you will have financial peace that comes from being better prepared for life's little surprises. For life's big surprises, buy insurance.
Become an informed investor
In this day and age, there are endless opportunities for investments that can make your financial budgeting fail. In order to make money and not lose money, you'll need to start educating yourself.
As a start, here are some concepts it will be good for you to know. RETURN is how much profit you're likely to make on a given investment, usually expressed as a percentage or a range of percentages. RISK is the possibility of something bad happening, like losing money. A SCAM is a false investment opportunity presented by lying thieves trying to steal your money. DIVERSIFICATION is the strategy of not having all your eggs in one basket to spread and minimize risk. An INVESTMENT STRATEGY is a long term approach to making money. Visit www.financesoftware.net for more investment ideas and related budgeting software.
Give
Begin to give away some of your money. "For whatsoever a man sows, that shall he also reap." If you are religious, give to your religion. If you are not, then give to the poor, or to "save the earth", or whatever noble cause appeals to you.
Not only does giving help free you from the mental and emotional grip of money, God Himself will generously respond to more than repay what you have freely and joyfully given away.
Conclusion
You can make it happen. Establish your strategy and stick to it. Implement all these steps in your life and your financial freedom will soon come:
- Pay yourself first
- Control your spending
- Get free of debt
- Build a contingency fund
- Become an informed investor
- Give
Now, you're on your way.
Thursday, February 19, 2009
7 Power Habits that Build Financial Independence
By Steve Brunkhorst
Financial independence is having the freedom to support yourself through your own efforts. Here are seven fundamental habits that will help you achieve and maintain financial independence.
1. Express Gratitude
Financial independence begins with gratitude. Set aside a daily period to offer a sincere thank you for every blessing in your life. Include people, places, possessions, talents, and memories. Offer gratitude for your future dreams as though they were already in your possession.
Gratitude will allow you to attract the blessings you want. When they arrive, protect them from the thieves that could rob you of your financial independence.
2. Liberate Your Future
Debts of the past are thieves of the future. If you want financial independence, live a simple life style that does not create unnecessary personal debt. Living with class does not require being extravagant. If you are conservative most of the time, you can be extravagant at the right times.
Do not allow credit card companies to hold your future hostage. Take control. Seek professional help to get rid of credit card debt that robs you of high monthly interest payments. Borrowing is a tool that should produce a return on your investment, not cost your future security.
3. Commit to Wellness
Your health is also an asset that you need to protect. Wellness allows you to manage and enjoy financial independence. Get regular physical checkups and maintain a sensible physician-approved exercise program. These can help to minimize illnesses and maximize the rewards of a productive life.
Maintaining wellness requires an ongoing commitment. Another area of commitment that is equally important to financial independence is one of personal financial discipline.
4. Develop a Saving Discipline
A financially independent future requires saving, and saving requires discipline. As credit card debt diminishes, savings can begin to increase. An emergency savings fund of six to twelve months living expenses is a wise idea. However, you will want major long-term savings plans for such goals as education and retirement.
Do not expect the government to take care of your financial future. If you want to remain financially independent, take ultimate responsibility for every chapter of your financial life. That responsibility begins with wise investing and respect for money.
5. Invest Wisely and Respect Money
My father taught me to have several investments that produce an ongoing, passive income. This, he said, would allow me to remain independent if I were to become physically disabled. These investments are like "feeding geese that lay golden eggs". Passive income streams also provide additional capital to place in other financial growth investments.
Respect for money is the beginning of saving and investing. Respect for a dollar begins with respect for a penny. You will always have dollars if you take care of your pennies. Even the smallest of assets and investments need protection.
6. Protect Yourself and Your Loved Ones
In the article, Ten Traits of Successful Entrepreneurs, I wrote that one of those traits was making a commitment to protect the welfare of your family and loved ones. Ensuring the safety of your financial assets is part of doing this.
Adequate insurance coverage for your life, health, and property is a wise investment. You should also use professional legal, financial, and security services to help protect your business, property, and all the things you have worked to acquire.
7. Design Your Financial Independence with Qualified Help
Seek qualified professionals to help you design your financial future. You do not need to be a financial expert to become financially independent, but you must become financially literate. Seek professional guidance from experts in financial planning, taxes, and accounting. These people can work with you to help you realize your financial goals.
Begin today by seeking out professionals that can help you achieve your financial goals. Become financially independent in your own mind. Express gratitude for the blessings you will receive as if they were already in your possession. Avoid and eliminate unnecessary personal debt, and live a healthy lifestyle. Save with discipline, invest wisely, and respect your financial assets. Protect the assets you have worked to acquire, and you can enjoy the financially independent lifestyle that you have envisioned.
Financial independence is having the freedom to support yourself through your own efforts. Here are seven fundamental habits that will help you achieve and maintain financial independence.
1. Express Gratitude
Financial independence begins with gratitude. Set aside a daily period to offer a sincere thank you for every blessing in your life. Include people, places, possessions, talents, and memories. Offer gratitude for your future dreams as though they were already in your possession.
Gratitude will allow you to attract the blessings you want. When they arrive, protect them from the thieves that could rob you of your financial independence.
2. Liberate Your Future
Debts of the past are thieves of the future. If you want financial independence, live a simple life style that does not create unnecessary personal debt. Living with class does not require being extravagant. If you are conservative most of the time, you can be extravagant at the right times.
Do not allow credit card companies to hold your future hostage. Take control. Seek professional help to get rid of credit card debt that robs you of high monthly interest payments. Borrowing is a tool that should produce a return on your investment, not cost your future security.
3. Commit to Wellness
Your health is also an asset that you need to protect. Wellness allows you to manage and enjoy financial independence. Get regular physical checkups and maintain a sensible physician-approved exercise program. These can help to minimize illnesses and maximize the rewards of a productive life.
Maintaining wellness requires an ongoing commitment. Another area of commitment that is equally important to financial independence is one of personal financial discipline.
4. Develop a Saving Discipline
A financially independent future requires saving, and saving requires discipline. As credit card debt diminishes, savings can begin to increase. An emergency savings fund of six to twelve months living expenses is a wise idea. However, you will want major long-term savings plans for such goals as education and retirement.
Do not expect the government to take care of your financial future. If you want to remain financially independent, take ultimate responsibility for every chapter of your financial life. That responsibility begins with wise investing and respect for money.
5. Invest Wisely and Respect Money
My father taught me to have several investments that produce an ongoing, passive income. This, he said, would allow me to remain independent if I were to become physically disabled. These investments are like "feeding geese that lay golden eggs". Passive income streams also provide additional capital to place in other financial growth investments.
Respect for money is the beginning of saving and investing. Respect for a dollar begins with respect for a penny. You will always have dollars if you take care of your pennies. Even the smallest of assets and investments need protection.
6. Protect Yourself and Your Loved Ones
In the article, Ten Traits of Successful Entrepreneurs, I wrote that one of those traits was making a commitment to protect the welfare of your family and loved ones. Ensuring the safety of your financial assets is part of doing this.
Adequate insurance coverage for your life, health, and property is a wise investment. You should also use professional legal, financial, and security services to help protect your business, property, and all the things you have worked to acquire.
7. Design Your Financial Independence with Qualified Help
Seek qualified professionals to help you design your financial future. You do not need to be a financial expert to become financially independent, but you must become financially literate. Seek professional guidance from experts in financial planning, taxes, and accounting. These people can work with you to help you realize your financial goals.
Begin today by seeking out professionals that can help you achieve your financial goals. Become financially independent in your own mind. Express gratitude for the blessings you will receive as if they were already in your possession. Avoid and eliminate unnecessary personal debt, and live a healthy lifestyle. Save with discipline, invest wisely, and respect your financial assets. Protect the assets you have worked to acquire, and you can enjoy the financially independent lifestyle that you have envisioned.
Monday, February 16, 2009
Slowing Spending - The Key to Your Debt Plan Success
By David Wilding
Debt Plan Success can only be attained by personal budgeting. Anyone who embarks on a debt reduction program should know the rules for success. There are two. You need to stop adding to your debt. You need to manage personal finances, to pay it off quickly.
You also need to know the deck is stacked against you. The sellers of goods and services have gobs of information at their fingertips. They know where you live. They have a close approximation of your personal finance. They are aware of your interests. They also know your buying habits. These tips on budgeting will help you to manage personal finances.
The information to which they have access is endless. They know the age of your car through its registration. The appliances you have because of the warranty cards returned. Where you shop because of the credit and store cards you have used. How old your mortgage is and what you owe from public recording of the deeds.
Because they have this information, you end up on a number of lists. The sorting and use of these lists are an art and science which helps in household budgeting. It is the source of the mail you receive, the offers you are made, and the advertising to which you are exposed.
This makes for very effective advertising. They can target your "known" wants and desires. Huge amounts of money are spent to convince you to buy this or that product. You have heard how expensive Super Bowl ads are each year. They pay this type of money because it works.
Then to top it all off they make it so easy to buy. If you haven't done your budgeting, they provide you with credit, easy-pay plans, personal loans; anything to make your personal budgeting smooth. Many companies make as much from their financing divisions as they do from selling you their products. So what do you do? How do you fight this financial onslaught and win? It requires making a budget and planning your financials. You need to wring all the value you can from your budget plan. Become adept at making each dollar do the work of two.
You need to make budget plans for purchases. Even if that means that you think about it for just a few minutes before you plunk down your hard earn money. Justify your purchases; do you need it, does it make sense, can you do without? These are questions you need to ask yourself. They may fly in the face of the materialism which surrounds us all, but they need to be answered nonetheless.
Using a spreadsheet would be helpful for personal budgeting and financial planning. Anytime a purchase exceeds what you have in your budget plan tick down this list or use a money management software like mvelopes personal, ms money or quicken to keep track of it and see if it really makes sense to buy it.
Debt Plan Success can only be attained by personal budgeting. Anyone who embarks on a debt reduction program should know the rules for success. There are two. You need to stop adding to your debt. You need to manage personal finances, to pay it off quickly.
You also need to know the deck is stacked against you. The sellers of goods and services have gobs of information at their fingertips. They know where you live. They have a close approximation of your personal finance. They are aware of your interests. They also know your buying habits. These tips on budgeting will help you to manage personal finances.
The information to which they have access is endless. They know the age of your car through its registration. The appliances you have because of the warranty cards returned. Where you shop because of the credit and store cards you have used. How old your mortgage is and what you owe from public recording of the deeds.
Because they have this information, you end up on a number of lists. The sorting and use of these lists are an art and science which helps in household budgeting. It is the source of the mail you receive, the offers you are made, and the advertising to which you are exposed.
This makes for very effective advertising. They can target your "known" wants and desires. Huge amounts of money are spent to convince you to buy this or that product. You have heard how expensive Super Bowl ads are each year. They pay this type of money because it works.
Then to top it all off they make it so easy to buy. If you haven't done your budgeting, they provide you with credit, easy-pay plans, personal loans; anything to make your personal budgeting smooth. Many companies make as much from their financing divisions as they do from selling you their products. So what do you do? How do you fight this financial onslaught and win? It requires making a budget and planning your financials. You need to wring all the value you can from your budget plan. Become adept at making each dollar do the work of two.
You need to make budget plans for purchases. Even if that means that you think about it for just a few minutes before you plunk down your hard earn money. Justify your purchases; do you need it, does it make sense, can you do without? These are questions you need to ask yourself. They may fly in the face of the materialism which surrounds us all, but they need to be answered nonetheless.
Using a spreadsheet would be helpful for personal budgeting and financial planning. Anytime a purchase exceeds what you have in your budget plan tick down this list or use a money management software like mvelopes personal, ms money or quicken to keep track of it and see if it really makes sense to buy it.
- How much is it?
- Is this a sale price?
- If so what am I saving over regular price?
- What will happen if I don’t buy it now?
- Can I pay cash?
- How will It effect the budget setup? Where will the money come from?
- If not cash, what will be the credit cost?
- Is it worth it at the price with the credit cost added in?
- Does the purchase fill a need or a want? (think hard)
- Why do I need this item?
- Why do I want this item?
- Can I justify this purchase to another person?
- What would I say?
- Would I accept these reasons from someone else?
This should help in slowing you down. Couple this with not taking your credit cards with you when you shop. It does take work, but a little extra work is better than being a slave to your debt.
Now with the money you save go to work on your debt reduction plans. Work that side of the equation as hard as you do the spending side. Place as much as you can on your bills. Reduce and eliminate them from your budget plan.
Friday, February 13, 2009
7 Golden Rules to Financial Prosperity
By Irena Whitfield
Not Enough Money?
I believe that most people haven't got enough money for everything they wish to have - the more you have the bigger your plans, and you have a feeling that you have less and less money.
Whether you have lots of money or just so-so, you need to economize and take proper care of your money ie your income, expenditures, savings and investments.
Below I give you 7 Golden Rules to a Financial Budgeting for financial prosperity:
1) Always have several streams of income: never rely on one income from one source only.
2) As soon as you start to earn, start to put aside a certain amount to create an automatic money source: I remember I have always had my own portfolio since I was a child, and can tell you that I needed it several times. Even if you have property, you may find yourself in a situation when you need fast cash. In such a situation, you will not sell your property, but you can sell part or even the whole of your portfolio.
You don't need to start your portfolio with thousands of dollars, you can develop it.
You only need to set a rule that you won't touch it when you don't need it, and keep it for vital urgencies. To buy a better car or a bigger house is not an urgency.
3) Always have a budget plan to take care of your money personally: it's not necessary to do everything personally as soon as you can afford it but never allow any other person to have a right to handle your money without your knowing, or your express approval. If you think that you don't have time to supervise this or that it's not important, you will have to find it later for much more unpleasant things when you lose your money.
Many of you will 'hate' me for what I'm going to say now and I will receive lots of disapproving messages but I have to say it: don't even allow your spouse to do this - love and money is not the right association, and I know what I am talking about. Keep these apart.
Don't supervise your investments and expenditures only - Always strictly collect your money. Never allow people to owe you - again: with no regard to how much money you have, always demand every dollar you earn to be paid to you.
4) Strictly distinguish between expenditures and investments: it's very easy to put everything as cost or overhead: don't do this. Apply an easy rule: expenditure or cost is money thrown out of the window - you can't expect any return money on it, while investment is desirable (of course, not every investment is desirable) this should bring you more money, more property able to make you more money - the only questions you should carefully consider are whether you can/should afford such an investment at the moment, how much you're going to get back, how fast and whether it is acceptable.
5) Keep your expenditures at the minimum with no regard to how much money you have: expenditures are killing for everyone. It's useless to tell you stories about big fortunes lost by unwise costs. I'm sure you know many yourself from your neighborhood.
6) Avoid loans, don't borrow if you don't know for sure you can repay. Never purchase anything on future incomes or promises, which goes beyond your budget.
Just a little example: if I have a notice that a payment is on its way to my account and I need the money today for some reason (however, I can't see any reason like that :-) - never mind), I can borrow. But, if I think I will sell 1,000 books next week, I mustn't borrow.
7) You must always earn more than you spend. In case you don't earn more than you spend, then you must spend less. In other words, you must always be in green.
If you think that you can disrupt your budget setup by swapping your car every six months even if you should borrow, then it may easily happen that you won't drive anything in a very short time.
I don't want to waste hours of your precious time by long essays on savings and wise advice. Just adopt one principle and whenever you want to do something with your money (- whether it's thousands or millions or just a couple of bucks), just ask your self if your personal budget allows you to do this: take care of the pennies and the pounds will take care of themselves.
Not Enough Money?
I believe that most people haven't got enough money for everything they wish to have - the more you have the bigger your plans, and you have a feeling that you have less and less money.
Whether you have lots of money or just so-so, you need to economize and take proper care of your money ie your income, expenditures, savings and investments.
Below I give you 7 Golden Rules to a Financial Budgeting for financial prosperity:
1) Always have several streams of income: never rely on one income from one source only.
2) As soon as you start to earn, start to put aside a certain amount to create an automatic money source: I remember I have always had my own portfolio since I was a child, and can tell you that I needed it several times. Even if you have property, you may find yourself in a situation when you need fast cash. In such a situation, you will not sell your property, but you can sell part or even the whole of your portfolio.
You don't need to start your portfolio with thousands of dollars, you can develop it.
You only need to set a rule that you won't touch it when you don't need it, and keep it for vital urgencies. To buy a better car or a bigger house is not an urgency.
3) Always have a budget plan to take care of your money personally: it's not necessary to do everything personally as soon as you can afford it but never allow any other person to have a right to handle your money without your knowing, or your express approval. If you think that you don't have time to supervise this or that it's not important, you will have to find it later for much more unpleasant things when you lose your money.
Many of you will 'hate' me for what I'm going to say now and I will receive lots of disapproving messages but I have to say it: don't even allow your spouse to do this - love and money is not the right association, and I know what I am talking about. Keep these apart.
Don't supervise your investments and expenditures only - Always strictly collect your money. Never allow people to owe you - again: with no regard to how much money you have, always demand every dollar you earn to be paid to you.
4) Strictly distinguish between expenditures and investments: it's very easy to put everything as cost or overhead: don't do this. Apply an easy rule: expenditure or cost is money thrown out of the window - you can't expect any return money on it, while investment is desirable (of course, not every investment is desirable) this should bring you more money, more property able to make you more money - the only questions you should carefully consider are whether you can/should afford such an investment at the moment, how much you're going to get back, how fast and whether it is acceptable.
5) Keep your expenditures at the minimum with no regard to how much money you have: expenditures are killing for everyone. It's useless to tell you stories about big fortunes lost by unwise costs. I'm sure you know many yourself from your neighborhood.
6) Avoid loans, don't borrow if you don't know for sure you can repay. Never purchase anything on future incomes or promises, which goes beyond your budget.
Just a little example: if I have a notice that a payment is on its way to my account and I need the money today for some reason (however, I can't see any reason like that :-) - never mind), I can borrow. But, if I think I will sell 1,000 books next week, I mustn't borrow.
7) You must always earn more than you spend. In case you don't earn more than you spend, then you must spend less. In other words, you must always be in green.
If you think that you can disrupt your budget setup by swapping your car every six months even if you should borrow, then it may easily happen that you won't drive anything in a very short time.
I don't want to waste hours of your precious time by long essays on savings and wise advice. Just adopt one principle and whenever you want to do something with your money (- whether it's thousands or millions or just a couple of bucks), just ask your self if your personal budget allows you to do this: take care of the pennies and the pounds will take care of themselves.
Tuesday, February 10, 2009
A Simple Approach to Budgeting
By DR
I hate budgeting. I’ve tried using envelopes, Mvelopes, Quicken, and fancy spreadsheets and the results are always the same. I start off strong, but within a few weeks I lose interest in the time-consuming chore that budgeting can be. The problem is that I still need to manage my money. I confronted this problem about a year ago, and asked myself the following question: how do I effectively manage my money in as little time and with as little pain as possible? To answer that question I came up with a money management plan that doesn't require me to track all of my expenses all of the time, and requires a relatively small investment of my time each month. In this post, I'll share my plan with you.
Before I get to the steps I take, it's important to say that you should do what works best for you. You may need to or feel more comfortable tracking every dime you spend. That's great if it works for you. You may also take my plan and modify it in ways to make it work better for you. That's great, too. Budgeting should be viewed as a means to an end. Budgeting and money management are a means to allow us to spend and save our money in the most productive and efficient way possible. If you need 100 expenses categories to accomplish that goal, so be it. If you can do it with just 5 expense categories, great! It turns out that I use just one expense category most of the time. Here's how:
Save First
You've heard the expression, "pay yourself first." What that means is to set aside a set amount from each paycheck that you'll save, then spend the rest. That's what I do, and my budget looks like this (all percentages are based on gross income):
Savings: 15%
Spending: 85%
As long as I save 15% of my gross income and spend no more than 85%, I don't care how much I spent on groceries or entertainment or electricity. Unfortunately, the fun doesn't stop here. There are at least three potentially significant problems with this simple approach that you must watch for: (1) failing to save as much as you comfortably can; (2) spending more than you planned to spend; and (3) getting whacked by periodic or unexpected expenses. Recognizing these potential problems, I developed a simple approach to address each of them.
Failing to save as much as you comfortably can
How much money should you save? There’s no one right answer to that question. The goal is to achieve a reasonable balance between enjoying today and saving for tomorrow. For me that means saving between 10% and 20% of gross income. I view 10% as the minimum goal and 20% as a stretch goal. Today I save 15%. But what if I could comfortably save more? That’s one of the potential draw backs to my simple budgeting plan. In and of itself, it doesn’t tell you how much you can reasonably and comfortably save. To determine that number I prepare a budget template. I use a simple Excel spreadsheet that divides my monthly expenses into three categories: (1) fixed expenses (e.g., mortgage, telephone, cable); (2) variable expenses (e.g., groceries, entertainment, clothing); and (3) periodic expenses (e.g., car and life insurance, gifts, vacations). The fixed and periodic expenses are easy to determine by looking at past bills. The variable expenses can take some time to pull together, although if you religiously use a debit card like we do, the information is right there in your bank statement.
With this information plugged into my spreadsheet, I can get an idea of how much (or little) I can save. I can also see how making adjustments to my spending will increase or decrease my savings. What I don’t do is track all of my expenses each month according to these categories. The template is there just as a guideline to determine how much I can reasonably save. If I’m not at 10%, I look for ways to trim expenses in one or more categories. I also look to see if I can reduce my expenses in some relatively painless way in order to save even more. You can check out some of my painless money-saving tips, which I will regularly update with new tips readers and other bloggers have sent in. At this point you may be asking how I keep my expenses in check against this budget template if I don’t track all my expenses each month. Good question, and that brings us to problem #2.
Spending more than you plan to spend
So you have a simple budget plan that calls for 10% savings, but you end up spending more than the 90% left over. This happens to all of us. But rather than go to the extreme and start tracking every expense, I look at my expenses and determine what category or categories caused me the most problems. The problem expense areas are usually not a surprise to me. For us, it’s spending too much money eating out, buying too many clothes, or spending too much on the house. I know these are our problem areas because I’ve been managing our money for 15 years. If you’re new to managing your money, it won’t take long for you to identify the two or three problem areas in your budget. And here’s the point–track just those categories for a month. There’s no point in tracking expenses that aren’t causing the problem. Focus on the problem. You’ll spend a lot less time and your energy will be directed at the problem area(s) in your budget.
Having tracked the problem areas for a month, you’ll have a better idea of why your spending more than you should. If you must, put cash in an envelope for just these problem categories. When the cash is gone, you stop spending. Again, the point is to focus just on the problem areas of your monthly spending.
Getting whacked by periodic or unexpected expenses
I hate budgeting. I’ve tried using envelopes, Mvelopes, Quicken, and fancy spreadsheets and the results are always the same. I start off strong, but within a few weeks I lose interest in the time-consuming chore that budgeting can be. The problem is that I still need to manage my money. I confronted this problem about a year ago, and asked myself the following question: how do I effectively manage my money in as little time and with as little pain as possible? To answer that question I came up with a money management plan that doesn't require me to track all of my expenses all of the time, and requires a relatively small investment of my time each month. In this post, I'll share my plan with you.
Before I get to the steps I take, it's important to say that you should do what works best for you. You may need to or feel more comfortable tracking every dime you spend. That's great if it works for you. You may also take my plan and modify it in ways to make it work better for you. That's great, too. Budgeting should be viewed as a means to an end. Budgeting and money management are a means to allow us to spend and save our money in the most productive and efficient way possible. If you need 100 expenses categories to accomplish that goal, so be it. If you can do it with just 5 expense categories, great! It turns out that I use just one expense category most of the time. Here's how:
Save First
You've heard the expression, "pay yourself first." What that means is to set aside a set amount from each paycheck that you'll save, then spend the rest. That's what I do, and my budget looks like this (all percentages are based on gross income):
Savings: 15%
Spending: 85%
As long as I save 15% of my gross income and spend no more than 85%, I don't care how much I spent on groceries or entertainment or electricity. Unfortunately, the fun doesn't stop here. There are at least three potentially significant problems with this simple approach that you must watch for: (1) failing to save as much as you comfortably can; (2) spending more than you planned to spend; and (3) getting whacked by periodic or unexpected expenses. Recognizing these potential problems, I developed a simple approach to address each of them.
Failing to save as much as you comfortably can
How much money should you save? There’s no one right answer to that question. The goal is to achieve a reasonable balance between enjoying today and saving for tomorrow. For me that means saving between 10% and 20% of gross income. I view 10% as the minimum goal and 20% as a stretch goal. Today I save 15%. But what if I could comfortably save more? That’s one of the potential draw backs to my simple budgeting plan. In and of itself, it doesn’t tell you how much you can reasonably and comfortably save. To determine that number I prepare a budget template. I use a simple Excel spreadsheet that divides my monthly expenses into three categories: (1) fixed expenses (e.g., mortgage, telephone, cable); (2) variable expenses (e.g., groceries, entertainment, clothing); and (3) periodic expenses (e.g., car and life insurance, gifts, vacations). The fixed and periodic expenses are easy to determine by looking at past bills. The variable expenses can take some time to pull together, although if you religiously use a debit card like we do, the information is right there in your bank statement.
With this information plugged into my spreadsheet, I can get an idea of how much (or little) I can save. I can also see how making adjustments to my spending will increase or decrease my savings. What I don’t do is track all of my expenses each month according to these categories. The template is there just as a guideline to determine how much I can reasonably save. If I’m not at 10%, I look for ways to trim expenses in one or more categories. I also look to see if I can reduce my expenses in some relatively painless way in order to save even more. You can check out some of my painless money-saving tips, which I will regularly update with new tips readers and other bloggers have sent in. At this point you may be asking how I keep my expenses in check against this budget template if I don’t track all my expenses each month. Good question, and that brings us to problem #2.
Spending more than you plan to spend
So you have a simple budget plan that calls for 10% savings, but you end up spending more than the 90% left over. This happens to all of us. But rather than go to the extreme and start tracking every expense, I look at my expenses and determine what category or categories caused me the most problems. The problem expense areas are usually not a surprise to me. For us, it’s spending too much money eating out, buying too many clothes, or spending too much on the house. I know these are our problem areas because I’ve been managing our money for 15 years. If you’re new to managing your money, it won’t take long for you to identify the two or three problem areas in your budget. And here’s the point–track just those categories for a month. There’s no point in tracking expenses that aren’t causing the problem. Focus on the problem. You’ll spend a lot less time and your energy will be directed at the problem area(s) in your budget.
Having tracked the problem areas for a month, you’ll have a better idea of why your spending more than you should. If you must, put cash in an envelope for just these problem categories. When the cash is gone, you stop spending. Again, the point is to focus just on the problem areas of your monthly spending.
Getting whacked by periodic or unexpected expenses
It’s usually just when you think you’ve got control of your spending that the car insurance bill comes in the mail. In the past, this would drive me (no pun intended) crazy. Not any more. For periodic expenses, I simply add them up over the course of a year, divide by twelve, and put that much into my online savings account each month. When the bill comes in, I transfer the amount from savings to checking and pay the bill. For us, our periodic expenses include the following:
- Car Insurance (twice a year)
- Life insurance (once a year)
- Personal Property Tax (once a year)
- Gifts (throughout the year, but mainly at Christmas)
- Vacations (once a year)
For unexpected expenses, like a car repair, we use our emergency fund if we can’t include it in the monthly budget. Of course, we then have to add to our emergency fund, but that is what it’s there for.
As I said at the start, there is no one right way to budget. For us, the simple approach is the best, and we’ve managed to control our spending with the system quite well. If you use a different system, let us know what works best for you.
Monday, December 15, 2008
COST EFFECTIVE MEANS OF ADVERTISING
I’m really curious to know what cost effective means of advertising my fellow entrepreneurs are using in order to attract customers to there Online Businesses. Some of the things that I try to use to attract more customers to my Online Store are as follows:
1. I had some business cards and flyers made which I give out to people every chance I get.
2. I always include a flyer or business card in all the packages that I mail out to my customers.
3. I always upload all my items on Google base.
4. I submit my store url to as many search engines as I can.
5. I advertise my store on my blogs.
6. I advertise my items on forums every opportunity I get.
7. I use my store banner as my signature on all my out going e-mails.
If there any other suggestions out there please feel free to share them, I would really love to hear them.
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