Personal Finance Blog

Tips And Stories To Help You With Managing Money

Getting Your Small Business Out of the Starting Gate

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Watch Out For Common Pitfalls
Watch Out For Common Pitfalls
The hardest part of starting any business is getting it up and running and out of the starting gate. Just the thought of that obstacle is enough to keep a lot of people from even trying in the first place. But there are ways that you can make your business startup easier, especially financially.

There are two areas that you have to pay close attention to – expenses and income. That’s more than obvious, but it’s the tactics that you use for each that will largely determine whether your business is a success or failure.

Keep a Tight Lid on Your Expenses

A common mistake that many new business owners make is spending a lot of money upfront, often before they even launch the business. With bricks and mortar type businesses that’s par for the course. But since most businesses today are Internet-based, you should be able run your business on an absolute shoestring.

Here are some tactics to help you do just that:

Work out of your home for as long as you can. You should avoid buying or renting any business-related space until you’ve first established a healthy cash flow. Work out of your home for as long as you can, and if you do need extra space rent or sub-let it on a short-term basis at the very lowest price possible. In the meantime, working out of your home will allow you to have all the trappings of an office – electricity, phone lines, and Internet connection – without the added expense that you have if you need to hook them all up in a remote space.

Unless it’s mission-critical buy secondhand. Equipment is another area where you need to be cost conscious. Unless equipment is absolutely essential to the basic operation of your business, you should avoid heavy investment until you have a demonstrated cash flow coming in. Buy secondhand equipment and use it for as long as you can, until your income allows you to trade up.

Don’t hire – subcontract out instead. One of the toughest parts of starting a new business is having to do every job connected with your business. If there’s no income, you can’t possibly hire anyone to do certain jobs for you. Instead, sub-contract work out on an as-needed basis. For example, you can bring in someone with accounting experience to help you close out your monthly books. You can also hire someone for a couple of days to help you with your accounts receivable.

Partner where possible. Sometimes there’s a major function in your business that you simply cannot handle on your own. If that’s the case, look into partnering with somebody who is strong in that area. Since the partner will get a share of the profits – rather than a fixed salary – the arrangement should be much easier on your budget.

When you are starting a new business, you should be very conscious to avoid creating fixed expenses that you will need to pay even if you don’t have any income. That can put you out of business before you even get started.

Building Your Income

There’s no delicate way to put this, but until you have a cash flow, you don’t have a business. This should make creating a cash flow Job 1. There are ways to do this when you’re first starting out and operating on a shoestring.

Get a cash flow going before going full-time. In most businesses, it’s completely unnecessary to quit your job and start running the business on a full-time basis. It will be better if you hold onto your job – that way you have a cash flow for your living expenses – and build up your business as a side venture. If you can create a cash flow of just a few hundred dollars a month in this way, you will not only have an income when you go full-time, but you’ll also have the confidence of knowing that your business concept will be successful. Yes, it will slow the start of your business, but at the same time it will improve your chances of success. Those are the kinds of trade-offs you will want to make.

Concentrate your time on the activities that generate the most income. This needs to be a core principle of anyone who is going into business for themselves. Starting a business, you might have 20 tasks that you have to perform each week. If four of those tasks are the ones that will generate income, or the lion’s share of it, then those are the tasks that you need to be concentrating on most heavily. You’ll need to do this at least until your business reaches a point where it’s generating sufficient income for you to begin paying others to do the tasks that are not bringing cash in the door. Your business will succeed to the degree that you are successful in concentrating on activities that will generate the most income.

Implement low cost/free marketing. Marketing is generally the most important activity in any business, but especially at upstart. Marketing is what draws people’s attention to your business, so that you can convert them into paying customers. You will need to come up with low-cost and therefore very sustainable marketing activities that will make this happen.

Some of the methods that you can try that will be easy on your budget include:

  • Networking with people who represent natural clients for your business.
  • Using the social media to draw people to your website and business – they’re free to participate in.
  • Email blasts to everyone in your email address book – even if they’re not prospective customers, they may forward your email on to others you are.
  • Ask everyone you meet who do you know who is looking for (my product or service)? Many business arrangements are started by informal conversations.
  • Have a supply of custom-made business cards or business flyers that you can pass out to anyone you meet. You need to have something tangible to help people remember you after you meet with them.
  • You should create a website – even a simple one – as soon as you start your business. Everyone is on the web these days, and you need to be as well. A simple (and free) WordPress format can get you started until you have enough income to build a top-quality site.

The whole purpose of marketing is to get people’s attention so that they are looking for you even when you’re not out prospecting. Some of the best customers and clients you will land will be third-party referrals, or people who saw your flyer or website. These are all inexpensive marketing methods that will help you to create a customer base until you can afford to invest serious money in marketing.

Concentrate your efforts on building your cash flow, as well keeping your expenses at the absolute bare-bones minimum level. That combination will help to give you the time that you need to get your business established.

Money Really Can Buy Happiness

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Hire Help To Relieve Stress
Hire Help To Relieve Stress
We’ve all heard it a million times: Money Can’t Buy Happiness. But if you spend your money smartly, you’ll find it can increase your satisfaction and make life more pleasurable. It’s that “smart” part that makes the difference.

An article by Anisha Sekar in USNews.com cites a Princeton University study that concluded that when your annual income reaches at least $75,000, you are likely to have enough surplus over necessary expenses to do things that bring satisfaction.

The article suggests five ways to use your money to create happiness:

Give It Away

The first suggestion, strangely enough, is to give your money away. Using your surplus to help others is a feel-good option. The Chicago School of Business looked at what people did when they had a financial windfall. Those who shared their largesse with others reported they were more happy. If you want to indulge your own happiness, at least share an experience with someone else. Faceless donations are less satisfying than a shared positive experience. An experiment featuring college students and Starbucks gift cards came to the same conclusion. Students were divided into three groups. One was instructed to spend the gift card on themselves. A second group was to give their gift cards away and the third was to share the card with another person. The latter group reported the most satisfaction from the experiment.

Resolve Biggest Stresses First

Buy some peace of mind. Decide what is causing you to lose sleep at night and spend some money to resolve the problem. Worried about being burglarized or having your vehicle stolen? Buy products to safeguard your property and/or beef up your insurance to cover your losses if the worst-case scenario actually happens. Spend the added money to buy travel insurance if you are at all concerned that you might not be able to make the trip. The expenditure (everything you spend on insurance is a gamble) is worth the ease when you know you are covered.

Plan For Relaxation

If you are spending some of your well-earned excess on travel, decide in advance what sort of experience you want to promote. Would some relaxed time in a nearby bed-and-breakfast actually be as rewarding as a stressful as an expensive trip to Paris? What do you really want out of the vacation? Are you looking for the intense experiences or simply a longer time away from home at a more leisurely pace? Hire a cab instead of trying to fathom a foreign public transportation system. Tip a bellhop instead of schlepping a huge amount of baggage yourself. Budget ahead of your trip to avoid the penny-pinching after the fact. And if you and your traveling companions begin to show signs of stress, reconsider. Dropping items from the itinerary is easier than letting stress negate the whole experience.

Dining Decisions

If dining out is part of your plan for spending some of your excess cash, consider the alternatives. Do you want four $50 meals or one big $200 blowout that could more memorable? There are studies that say the $200 option might actually lend more to your overall happiness. But in this case, variety is, in fact, the spice of life. Doing the same exotic thing repeatedly, no matter how great it was the first time, can become a bore. You can afford it now. Look for different ways to spend a night out. Let each time become a new experience. Prolong the satisfaction by spending the month leading up to the event learning about the expected experience, studying menus and otherwise savoring the expectation.

Get Help

Buy some time. Move closer to work to minimize the commute. Hire someone to help with housework , yard work or any of the mundane and routine jobs most people spend the majority of their time on. Using some of your money to give you more leisure is a sure-fire was to increase your sense of well-being.

There, see? If you spend wisely, you can buy happiness.

Americans Admit Lack Of Personal Finance Savvy

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Prepared
8% of people surveyed feel they have a firm grip on their personal finance skills.
Most Americans believe they are not very proficient in managing their finances and one in four actually wish they could avoid the necessity altogether, a recent survey conducted by the National Foundation for Credit Counseling found.

Only 8 percent of the 644 respondents to the website survey said they had a firm grip on their personal finances. Thirty percent classified themselves as “mid-level management;” 35 percent as “entry-level” trying to learn the ropes; and 26 percent said they’d like to shuck the job entirely. Another survey by the foundation showed that 41 percent of the respondents would grade themselves at a C or lower in that area of their adult lives.

Most of those who were surveyed most recently and felt themselves inadequate to managing their finances also were under the impression that they were the only ones who were rotten at the job. But the truth is that many people are uncomfortable with the assignment, said Gail Cunningham, a spokeswoman for the foundation.

At the root of the problem is the fact that fewer than half the states require any education regarding personal finances to gain a high school diploma, Cunningham said. Most people learn from their parents, many of whom have the same lack of expertise when it comes to managing their money. It becomes a generational failing.

Many people seek financial counseling to help them, often after their finances are already in shambles. The typical household asking for counseling has $35,000 in annual incomes and unsecured debt of $17,500 spread over 5.7 credit cards. Poor management recently topped “reduced income” as the primary impetus for counseling. Poor money skills matched to poor nutritional skills.

Those who line up for credit counseling are primarily in the age range from 25 to 54, with young adults 25-34 at the top of the list (24 percent.) The lowest cohort was in the 45-54 age group, 21 percent of the total, while 23 percent were in the 35-44 age range. Those statistics indicate that financial problems are not uncommon all along the spectrum, boding ill for those who are still in the early stages of their work history. For some, recovery is a lifetime burden.

Other findings that cause concern for the credit counseling industry:

– Some people are earning more as the economy improves, but they are not managing the additional income well and the financial stress continues.
– Owing more than your income will support easily (a high debt-to-income ratio) makes it harder to meet debt and hinders future borrowing.
– The number of credit cards an individual or family has is not as relevant as how those cards are managed. Maxing out the credit lines is likely to reduce credit scores, impacting the ability to buy such things as homes or automobiles.

Last year, more than 1.5 million consumers sought help at the foundation’s counseling agencies, sharing concerns about debt, housing, budgeting and bankruptcy.

To learn about resources for free and affordable confidential advice, call (800-388-2227.) Spanish-speakers call 800-682-9832. Or visit www.nfcc.org.

Here’s How One Woman Became An Entrepreneur

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Digital Marketing Strategist
Sherry Tingley – Digital Marketing Strategist

Sherry Tingley didn’t become an entrepreneur overnight. It was a step-by-step learning process, with many a detour and slip en route. She’s still learning, she says, but she’s no longer a tyro.

In a recent interview with Mint, the personal finance management website, she tells how her business, primarily developing websites on the Internet, has steadily grown and is now providing the underpinning for rapid growth and improvement.

Checks? Haven’t they become an anachronism, given the rise of online banking, debit cards and digital wallets? Not even close. American banks process more than 24 billion checks annually, she says. Many people, even while using new technologies to make their everyday purchases, bring out the checkbook for paying regular bills and make other financial exchanges. Small businesses use them to pay vendors, employees and other expenses. Deluxe Corporation, largest of the check-printing companies, has seen a rise in stocks from $16.18 per share in July 2009 to $59.71 per share in July 2014.

Sherry shares her experience and growing expertise via a personal finance blog housed on the CoolChecks site. The site focuses on general finance wisdom as well as updates on the check-printing world, including the most popular check designs and changes (how about skull-and-crossbones, a range of jungle prints and the latest Disney characters?)

She began her venture into e-marketing from square one. Like millions of Americans, she had little practical knowledge of personal finances, beyond the most basic household management. High school and college had done little to add to that base. At 51, she was the mother of two teenagers, still renting and earning less than $30,000 per year. She looked at the reality and decided it needed to change.

“I decided to educate myself about anything I could do to control my financial future,” she told Mint. “I vowed I would try everything in my power to avoid personal financial mistakes and focus on increasing my income.” She drew on available resources such as Fool.com forums and began to understand how she could make better use of the money she had. She received a lot of encouragement and support after paying off $5,000 in credit card debt and kept going. She read everything she could find that expounded on personal finance, from Dave Ramsey to Suze Orman. She consciously looked for ways to increase income without going into debt.

Some of the money-making approaches she tried didn’t work. But instead of throwing in the towel, she began to teach herself web design, PHP programming and the effective use of MySQL databases. More successes in affiliate marketing followed as she added to her knowledge about money management, wise investing and web development skills.

There is a long road behind, but she now is looking at financial security. She has two residential properties, invests regularly in mutual funds and has a savings account for emergencies. “Most importantly, I make much better financial decisions on a regular basis than I did in the past,” she says.

Her blog is aimed at anyone who needs help with finances. She focuses on setting budgets, controlling spending and distinguishing between needs and wants. She looks for ways to save money on media bills and other expenses. “I abhor the way that credit card companies entice people to spend more and more. The consequences of uncontrolled credit card debt can be devastating. Most of my articles help people deal with human mistakes in financial judgment.” Another area of emphasis is entrepreneurship. Sharing success stories of start-ups that make it is one of the ways she does that

Sherry sees the tendency of Americans to want what they want when they want it as one of the greatest challenges to wise money management. A little patience and a little time spent on comparison shopping, along with some realistic analysis between what is needed and what is merely wanted can help resolve this weakness, she says.

A careful and honest look at resources and necessary outlay is the place to begin to build a good budget, Sherry advises. Spreadsheets are available to help in the process. Then make a monthly evaluation of that budget the basis for spending. You can’t reach financial goals without knowing where you are, where you want to be and how you can get there. Whether you earn $15,000 a year or over $250,000 a year, the formula remains the same.

Money is not the objective per se, but what it can do for you, she tells the Mint readers. Living within a budget and saving for the future can open opportunities not possible by using haphazard finance practices. Sherry takes counsel from “Invictus,” a poem by Ernest Henley: “I am the master of my fate; I am the captain of my soul.”

Today’s checks, she told Mint, are a far cry from the past. Her CoolChecks.net site offers more than 6,367 products all check related. In all, the database has more than 20,000 items. Unique designs give buys the opportunity to express themselves with every check they use. There even is the option of printing one’s own picture on checks. The most popular designs of the moment are animals prints, with a pink zebra leading the pack. Girly themes (such as high heels) are hot with the ladies and sports checks, including Harley-Davidson designs, rank high with the men. The idea is to give you a lift each time you write a check. It’s a matter of expressing your own individuality.

Options for business checks are consistent with the varieties of check-printing equipment most companies use. The Quickbooks checks tend to be popular with small businesses. Travel checks top business choices today.

Checks are her thing, Sherry emphasizes, but the same business and financial principles apply to any product. Successful entrepreneurship lies in preparing and then applying sound business practices. Her own experience shows that it can and does work.

First-Time Home Buyer? Do It Right

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Get The Best Mortgage Loan For Your Home
Get The Best Mortgage Loan For Your Home

Making your first investment in a home is a big deal. A combination of angst and anticipation on a steep learning curve. At the moment, the inventory of possible buys is low and lenders are being selective. Be aware and be wary. The better prepared you are the greater your chances of success.

Even if you have the burden of student debt, now at an all-time high average of $30,000 per graduate, it can be done, but it requires an astute approach. On the plus side, interest rates continue to be relatively low, so now is the time. A suggested timeline for home-buying includes:

A year in advance:

Get serious about the figures. Trulia.com has a “rent-or-buy” calculator that would help you decide if buying is in the cards or whether it would be wiser to continue renting. At the moment nationwide, buying is 38 percent cheaper than renting. Feed in your data and see how you score. Get your finances in order. Spend the year saving money and, if possible, paying down debt. An FHA loan requires at least 3.5 percent down. Conventional mortgages call for 10 percent to 20 percent. Are your jobs stable? The potential mortgage institution will want to know. Be studying the housing market to learn what appeals to you. Browse the Internet listings and save the ones that you think you’d really like to see.

Six months to go

Order free credit reports and eliminate any mistakes before they come to the attention of a potential seller. Pay your bills on time and if you have a few bucks left at the end of a pay period, apply them to debt. Don’t take on new debt. Approval for mortgage applicants requires a minimum credit score of 755. Zillow.com has an online calculator that will help you estimate what you can afford for a new home, based on income, savings and debt. Look at tax rates in the target area you propose. Don’t court disappointment by overestimating what you can afford. Try to forecast future expenses. Maintenance on a home adds, on average, 1 percent to the cost of home owning.

Three months out

You’re ready, armed with the information you need. Now determine what type of mortgage you want to pursue. Fixed mortgage rates, now at about 4.4 percent, could go up to 5 percent this year, according to industry forecasts. A 7/1 adjustable-rate loan carries interest of only 3.5 percent now. For the sake of that lower rate, however, you run the risk that you could stay in the home longer than seven years and face a sharp interest rise. That’s why 92 percent of mortgage borrowers stick to fixed-rate loans. Many banks will pre-approve a mortgage loan based on income and credit. That’s a huge advantage when the actual search for a home begins.

Time to go

Find a realtor in the area where you want to buy. Screen to be certain the person you select will serve the best interests of your home purchase. Good questions to ask: How does the realtor go about finding listings and how are potential bidding wars handled?

That’s it. Happy house hunting!