Archives For Finance

Food is necessary. You don't eat. You die. There is no way around it. It's not like the cable bill that you can cancel. The best we can do is learn all we can so that we save money on groceries. Eat good and not break the bank.

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The Internet has opened up a huge venue for all kinds of skills. Today I am going to share 5 ways to make money as a writer on the Internet. If you are not the writing type then fear not. These opportunities will allow you to hone in on the amazing talent you have locked away inside you. Everyone has a story and some expertise. Forget trying to make money as a writer for a minute and just get started. Give yourself 5 minutes a day!
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My childhood was full of domestic violence and major money issues. Even as a kid I stressed out over our family finances. Ultimately, I was afraid that my family would become homeless and have to live on the streets. It wasn't that our bills were high but rather that the family income was almost non-existent most of the time.

Growing up in this environment taught me a lot of good and bad lessons. One lesson that I learned early on and that stuck with me was the importance of a savings account. I vowed to my wife when we got married that we would never have less than $1,000 in our bank account. Doesn't seem like much, does it? If my family would have had a thousand dollars in the bank when I was a child dozens of fights would have been avoided. Fixing a broken down station wagon wouldn't have caused a major crisis. And, as it happened time and time again, my father losing his job wouldn't have brought the family finances to it's knees.

The truth is, unexpected ("emergency") expenses happen and there is no way to avoid them. It is these types of expenses that destroy an otherwise healthy budget. Everyday life is good. You drive a nice car, live in a nice house and then BAM! Someone runs you off the road and causes $500 damage to your car. Your deductible is, you guessed it, $500. Now what? If you had a $1,000 in your emergency fund this would be a no-brainer. Go grab the cash and get the car fixed. Wait, you say you don't have an emergency fund? OK, so you will need to credit card the fix. Fine. Now, your $500 deductible will cost you $650. Yes, if you are like the majority (a very high percentage!) that don't pay their credit card bill in full each month, you will pay an extra 30% before all is said and done.

Start an Emergency Fund

The best case scenario for an emergency savings account is 3-6 months of living expenses. We aren't looking for the "best case" to get started however. We just want something. Start with $1,000.

Where do I find money for my Emergency Fund?

Have a yard sale, do some part-time work, put in some over-time, mow someone's lawn, or sale some junk on Ebay. Be creative and make your emergency fund a priority.

TIP: Keep your Emergency Fund Liquid

What this means is that you keep the funds out of sight but readily available if you need them. Use a money market or interest bearing savings account or lock it in your safe at home (the interest on $1,000 isn't going to be that much anyway). Liquid means it can be turned into cash quickly. It is not tied up in a bond, mutual fund or something of that nature.

What to do in an emergency

Stating the obvious, use your emergency fund to pay the bill. Even $1,000 will cover most of life's annoying unexpected expenses. The next step is to replenish your emergency fund ASAP. Make that your priority. Once the emergency fund is back then you can get back to KOing your debt or investing.

Conclusion
Building an emergency fund should be your top priority if you don't have one. Life is not perfect and things will happen. Unexpected expenses destroy the monthly budget. Start with $1,000 and work your way up to 3-6 months of your living expenses. A healthy emergency fund will give you confidence and financial peace of mind. Try it and see!

Maintaining a real-time picture of where you sit financially is time-consuming and difficult. I suggest you sit and have a visit with your financial statement at least monthly. But even then it can be a real chore. There are paid software programs such as Inuit Quicken that you can use that will make your life easier but again it becomes a to-do. So, what alternatives are available that can ease the burden, keep you from data-entry work and get you back to simply analyzing your finances?

I have to admit I was a bit skeptical when I first signed up but since then (just a little over a year ago) this free online budget tool has taken off. In my opinion, they have become the Google of online budget tools. Okay, enough said, it's http://mint.com, surprise, surprise by Inuit. As an Information Technology guy I love that they constantly spend time improving the application. As a finance guy, I love that it is 100% absolutely free!

Budget is a word I am not fond of using. It's synonymous with work to me. I would rather put the system in place, make it automatic and then monitor the results. Mint takes care of the tedious task of entering all of my transactions. You can enter all types of accounts (checking, savings, 401K, credit cards, etc). The only real work you have to do is categorize all the "uncategorized" transactions which usually includes any checks you make from your online bank or paper checkbook. This is a great tool and being free is an awesome bonus.

Free Online Budget Tool

How to Get Started on Mint.com

1. Create an account on Mint.com

2. Enter your account information for your checking, savings, etc

This will allow Mint to download all of your transactions to their system.

3. Once a month go and update any uncategorized transactions, and then review your spending trends.

If you are really inclined you can even set up a budget for different categories, set goals (ie. for paying a debt off), and even view your spending trends. Mint also suggests ways for you to save more money. As far as safety of your data is concerned, Mint uses Truste which is one of the best in the industry for security.

Click here to visit Mint.com. What other programs do you use?

In this How to Get Out of Debt Guide we have walked through some basic steps for taking control of your finances. For some of you it may be a lot to digest. That's okay! Remember we are trying to form habits. Habits take time to develop but once you get them nailed down your momentum will really take off. Do not be discouraged. This guide and my book, How to Get Out of Debt is the result of me failing a lot! Learn from my failures and stick to your guns. Revisit the guide often to make sure you are on the right track.

We covered a lot of material and it would be good to recap. Habits are formed by repetition!

Getting Started - Gathering

In this step we took the time and gathered all of our financial papers together. If you have a spouse or financial partner this is a good place for both of you to get involved. Sharing the task will not only lighten the somewhat tedious task but it will also get both of you on the same page from the start. If there isn't a consensus to get out of debt then getting out of debt will be extremely difficult. One of the key factors in getting out of debt is to stop spending on consumer items (any item that is not an asset; ie. doesn't make you money). I strongly encourage you to talk with your spouse and get them involved.

Your Personal Financial Statement (PFS)

After we gathered all of our bills and financial documents together we then entered them into the PFS (a free download when you register with 5 Minutes a Day). We defined what Assets, Liabilities, Income and Expenses are and saw examples of each. Remember, the PFS is your financial report card. Each month you should revisit it and update your numbers. It sounds like work and it can be but for the little amount of time you invest you will know exactly where you stand financially. This will allow you to make good informed financial decisions.

Where You Stand on the Financial Podium

By looking at our personal financial statement we could easily determine our NET worth (what's left over after you subtract all of your debt from all of your assets). Hopefully you had a positive NET worth! Based on your NET Worth and Cash Flow we placed you on the financial podium - Gold, Silver, Bronze or Honorable Mention. Remember, there are no losers. We are looking forward to where we want to be not backward on any mistakes that we made. Yes, we will try not to repeat the mistakes of the past but we will keep our focus on the big, successful future ahead of you. Ultimately we all want to be off the podium and standing all alone on the Platinum stand. When we reach Platinum we are not only set financially but we are also mentoring, nurturing and positively influencing others around us. Don't wait until then to start developing these character traits!

Devising an Action Plan

A road map or plan is always a good thing. It saves time and keeps you focused on your goal. It is just like your ultimate picture of the "perfect" life. Living on the beach? Writing novels? Traveling through Europe? Having a plan on how to reach that goal will save you time and money and help your daily spending decisions. Quite simply, there are two action items that you need to be concerned with.

  • Increase your Assets
  • Decrease your Expenses

The KO Debt Plan™

By eliminating bad debt we become empowered to invest in good assets that make us money. The KO Debt Plan™ is a simple way to knock-out each debt one at a time. The more debts we KO the more momentum we have in becoming debt-free. It's as simple as starting with the smallest debt. Pay an additional $100 on your smallest debt and continue to make the minimum payments on all other debts. Start small and enjoy a quick victory and move on to the next smallest debt. Controlling your spending is a must. You won't be able to get out of debt until you stop adding new debt to your plate. This is the fastest way to pay down your debt. Trying to pay all of your debts down at the same time will take more effort, time and be much more difficult to accomplish. Start small as a Featherweight. Give yourself some time to become a Heavyweight in the ring.

Concluding Thoughts

My hope is that you know there are no losers when it comes to finances or life. We all have set backs but with some minor tweaks and education we can get on the right track. The financial podium's lowest step is Honorable Mention. We all have value even if we're not perfect in our financial lives. Having a plan is step number one. Use this guide as your plan and stick with it. Sit down with your personal financial statement 12 times a year. Yes, only 12 times. That is once a month. Reassess where you currently stand. Look at what you did right and what you can do better. Keep copies of each month so you can track your progress.

While you follow the steps in this guide:

1. Celebrate! - when you pay off a debt enjoy a treat like an ice cream soda or a modest dinner out with your sweetheart. Something you can pay cash for; no credit cards!

2. Focus on the big picture - what is your dream? What do you really want in life? Write it down and look at it first thing every day. Maybe it's a picture of a beach house or a blank piece of paper that has a headline of "My Debts" and directly under it it says, "NONE".

3. Remember you are not alone - Deuteronomy 6 says, "6 Be strong and courageous. Do not be afraid or terrified because of them, for the Lord your God goes with you; he will never leave you nor forsake you."

4. Don't give up! - Proverbs 13:4 says, "4 The soul of a lazy man desires, and has nothing; But the soul of the diligent shall be made rich."

Thanks for reading,
Craig

Next Step: Buy the How to Get Out of Debt Book!

Previous Step: The KO Debt Plan