Top Ten Financial Tips

Keys to Financial Success

Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top ten keys to getting ahead financially.

1. Get Paid What You're Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It's not a four-letter word. How can you know where your money is going if you don't budget? How can you set spending and saving goals if you don't know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.

3. Pay Off Credit Card Debt

Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it's so easy to forget that it's real money we're dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don't, and end up paying far more for things than we would have paid if we had used cash.

4. Contribute to a Retirement Plan

If your employer has a 401(k) plan and you don't contribute to it, you're walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you're already contributing, try to increase your contribution. If your employer doesn't offer a retirement plan, consider an IRA.

5. Have a Savings Plan

You've heard it before: Pay yourself first! If you wait until you've met all your other financial obligations before seeing what's left over for saving, chances are you'll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

6. Invest!

If you're contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.

7. Maximize Your Employment Benefits

Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.

8. Review Your Insurance Coverages

Too many people are talked into paying too much for life and disability insurance, whether it's by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it's important that you have enough insurance to protect your dependents and your income in the case of death or disability.

9. Update Your Will

70% of Americans don't have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn't too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.

10. Keep Good Records

If you don't keep good records, you're probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

Reality Check

How are you doing on the top ten list? If you're not doing at least six of the ten, resolve to make improvements. Choose one area at a time and set a goal for incorporating all ten into your lifestyle. 

10 Steps To Improve Your Financial Situation

Here are ten steps you can follow to help improve your personal financial situation and inevitably save more money:

1. Pay Yourself Weekly

This may seem a bit odd, but this is an excellent way to start building a substantial savings. On a weekly basis, pay yourself $25-$50 and immediately put it in a safe place. You can even open a special savings account where this weekly "payday" can by placed to help minimize or eliminate impulsive spending. Think about it this way, if you paid yourself $25 a week, in two years you'll have accumulated $2600 (not including interest)!!! That's almost $3000 from just putting $25 aside every week! Take advantage of this money-saving opportunity. Simple, yet very effective.

2. Don't Shop

For those of you that love to shop, you may find that this is one tip that could save you hundreds, maybe even thousands every year. Start using the "Need or Want" strategy. Before you spend a single dollar on anything, ask yourself, "Do I really NEED this item, or do I just WANT it??" You may find that many of the items we purchase, we do so just because it "caught our eye" or it was "an impulse buy" or "my friend bought the same thing". All these excuses just add up to wasteful spending. You can probably get by without another sweater, or a new pair of jeans, so just buy what you absolutely need, and pass on those items that aren't necessities.

3. Use Your Bank's Own ATMs

Some banks will charge you money for using other ATM machines. Even though you will be able to withdraw money using your ATM/debit card from literally any machine, banks will charge you $2 (generally) for using a machine other than theirs, in addition to a standard $1.50 charge the machine charges for its use. In other words, if you use the ATM at your local 7-11 to take out $20, you'll most likely end up paying $3.50 in additional charges! If you do that 5 times a month, you'll lose $17.50 for that month, or $210 per year! What a waste! Try and stick with your own bank's ATMs whenever possible.

4. Track Your Spending

Take the time to track your spending habits for one week. Take note of every single dollar you spend, even those sodas and candy bars purchased here and there. This will give you a "birds-eye" view of exactly where your money is being spent, thus allowing you to refine your spending habits to essentially save more money.

5. Lower Credit Card Balances

Another very important tip that many often overlook. Pay off those pesky credit cards as soon as possible because you are losing up to 19% of the total. What a waste of your hard earned money! Keep chopping away at the balances until you get to an amount that is reasonable $100-$500 dollars.

6. Use Your Debit Card Instead of Credit Cards

Get in the habit of using your debit card instead of your credit cards. For the most part, debit cards are accepted anywhere a credit card is accepted, however as you know, with a debit card the amount is taken directly from your checking account whereas credit card usage is billed at a later date (along with a hefty interest rate).

7. Changing Jobs? Roll-Over that 401(k)

When people change jobs/careers they will be faced with a decision to either "rollover" their 401k (retirement plan) or to withdraw it. It will be ever so tempting to withdraw the money since it will be a substantial amount, but don't! You will be charged fines and penalties for an early withdrawal that will cut YOUR total by 40%-60%! That's like giving half of your earned retirement savings away to a stranger. Why would you do that? Even though you may want the money now, resist the temptation and roll it over. It will be well worth it in the long run.

8. Avoid Getting Too Many Credit Cards

Why have eight credit cards? That's just going to provide you with more opportunities to go further into debt. It's fine to keep 1-3 cards to build credit, establish yourself, and for emergencies, but credit cards are double-edged swords. They can help or hurt you depending on your self-control.

9. Check Your Credit Score/Report

It's important to know where you currently stand as a consumer and since your credit report is the most important historical list of your financial past and present, it's a very good idea to check it from time to time. There are a number of places where you can get your credit report, however the most detailed compares information from the top three national credit bureaus: Experian, Equifax, and TransUnion. Once you get your report, look through it carefully to see if all the information is accurate. If there are any discrepancies, get those solved as quickly as possible to improve your credit rating - a score of up to 800. Often times, consumers are unaware of unsettled accounts, or accounts that are still open/active when they should be closed. Pay close attention to this when inspecting your report.

10. Finally: Review - Revise - Retry

Once you start implementing these tips and become more familiar with the money saving opportunities you have, take the time to REVIEW your progress. Check and see where it may be possible to REVISE some of your techniques or where you can implement new ones. Once you have revised your plan, RETRY to see if your results improve. The more frequent you review, revise, and retry your saving ideas, the more "in tune" you'll be with your finances and spending habits, and learn what works and what doesn't for you.

10 Reasons to Challenge Conventional Wisdom About Money

Conventional wisdom about the best ways to earn, spend, save and invest money maintains a firm grip on the minds of millions even as it fails to deliver. Mainstream media reinforces the dominant view of money via “Live Richly” (Citibank) and “Live Life: Life takes Visa” etc. Viewers, in turn, model their financial lives after advertisement messages. “What’s in your wallet?”

However, just because mega-financial industry companies also have mega-sized advertising budgets that allow them to shout the loudest and the longest, it certainly does not mean they have the best offer! That said, in the real world, the ability to dominate with one’s message trumps potentially useful information from the “little guy". Rarely does anyone question the gospel according to conventional wisdom about money. No one bats an eye as financial professionals direct average Americans down the path of paper net worth and debt leveraging.

The fact that all aspects of the global economic system, from its macro-complexity to personal finance guidelines are man-made seems to be lost on most people. Instead, the financial world is often considered akin to natural phenomena like the air we breathe. Such tacit acceptance makes discerning the risks inherent to the economic system itself, unlikely. But as any financial professional would advise, a thorough risk assessment is essential for effective decision-making.

With data citing that in 2006 Americans are attempting to live on 1967 inflation-adjusted median wages (The Chicago Tribune, January 22, 2006) and that in 2005 the very same Americans spend 39 billion more than they spent (The Wall Street Journal, January 3, 2006), something is very wrong with this picture. Anyone who is paying attention would agree. Yet. the powers to be say we have a strong economy. The question is: For who is the economy strong?

According to MSN Money, November 8, 2005, if you make less than $57,343 annually, you are either already or soon to be behind the “financial eight ball”. A whopping 75% of Americans fall into this category according to 2003 IRS statistics and are increasingly at risk of losing their purchasing power due to exponentially rising basic costs. That means it’s the top 25% of income earners who receive the greatest benefit from the way the economy is structured.

As for the 75% majority, getting out from behind the eight ball may well take an innovative approach. Here’s why doing more or better of what you’ve been told are the best ways to earn, spend, save and invest may not get you where you want to go.

1. Millions who are doing all the right stuff when it comes to how they earn, spend, save and invest are still dealing with financial and personal hardships brought on by increased stress. The trend is towards becoming cash-poor with ever increasing debt loads, no matter how much money you make.

2. Incomes are not keeping up with the cost of living.

3. Americans are collectively spending billions more than they earn. Spending outpacing earning has not happened since the Great Depression of 1933.

4. The official rate of annual inflation (CPI) falls short of reality when skyrocketing costs of energy, housing, health insurance premiums and higher education are taken into consideration.

5. Retirement a la company pensions is going from being the rule to becoming the exception.

6. One of the fastest growing categories of homeless is the working poor.

7. Remedies to the money crunch offered by most financial experts rarely go to the root cause of the problem. No problem in life can be effectively solved without first uncovering its root cause.

8. Some financial advisors warn of the dangers of the “saturation point”. As regards personal finances, the saturation point is when a person MUST stop using credit because the debt-service they are already paying is the maximum they can afford given their other expenses and after-tax income. Then what?

9. Personal finance strategies have not changed with the economic times. They remain static: Find a job with full benefits, save a nest egg and purchase a home and invest as soon as you can is still the standard. We’re driving Nash Ramblers in a Hybrid world.

10. The financial industry is self-serving and works to maximize profit like any other for-profit enterprise. So who benefits if you lack a more informed understanding of money? Are their products really in your best interest?

10 Quick And Cheap Ways To Cut Your Heating Bill

When you received an energy (heating) bill last winter, were you afraid to open it? Granted that we have a home with a lot of really big windows, but we saw energy bills last winter in the hundreds of dollars. Your bill probably wasn’t that bad but I’m guessing that it was a lot higher than you would have liked.

The good news is that there are some inexpensive things you can do to cut that cost. Here are 10 of them.

1. If you have a fireplace, be sure to keep the damper closed. You can lose up to 5 percent of your heat if your damper is open when the fireplace is not in use.

2. Keep your furnace filter clean. Replace it at least once a month during heating season. This alone can cut your heating costs by as much as 5 percent.

3. Be sure to keep inside doors open to improve heat circulation. This will help the efficiency of your heating system.

4. Lower the setting on your thermostat. If you can reduce your daytime indoor thermostat temperature from 72 to 68 degrees, you should save about 5 per- cent during the heating season.

5. If your hot water pipes and water heater are warm to the touch, insulate them. This will reduce heat loss and water heating costs.

6. Every minute you cut from your shower saves three gallons of water and the energy required to heat it.

7. Install compact fluorescent (CFL) bulbs. Over the life of just one of these bulbs, you’ll save about $15. Use just a handful of these around your home and you could notice a difference in your energy bill.

8. Motion detectors put light where you want it, when you want it, for brief periods of time. They provide safety and security for you and your property, but require much less energy since they are on only when you need them.

9.Be sure to check for cold air leaks at doors and windows. If you have a question as to whether or not they are leaking cold air, light a match and hold it at the bottom of the window or door. You should be able to see very quickly if there is a draft.

10. Apply weather stripping around any doors that are leaking air, and caulk around all your windows. Weather stripping can be purchased from just about any hardware store, as well as stores like Home Deport and Lowe’s.

10 Money-Saving Tips

1. If you have your haircut every 3 weeks, try going 4 or 5 weeks in between haircuts. If you pay $10 for a haircut, you could save $70 a year by having a cut every 5 weeks instead of 3.

2. Buy only generic basic types of cold cereal, if your family must have it. With fall and cooler weather coming, it's a good idea to introduce hot cereal. It's usually the best buy and by using the microwave oven to prepare, it is almost as quick to fix as cold cereal.

3. If you have a cell phone, don't buy the accessories at the "cell phone store". Check out prices at local discount stores first.

4. Quit smoking. Need we say more?

5. In some states, children's immunizations are offered free at local health clinics. Call the local health department to inquire.

6. Wash, wax and detail your own vehicle instead of paying someone else to do it.

7. Put a little money aside every month in order to pay your car and homeowners insurance annually. Most insurers charge a fee (sometimes hefty!) for paying monthly. You'll also avoid those mid-year increases.

8. When making instant pudding from a box, add an extra cup of milk. The pudding "sets up" the same and tastes the same, but you have one more cup. You might want to experiment with adding a little more. And of course, another money-saver is to use reconstituted dry milk.

9. Meat prices are soaring, so plan to have a meat-less meal at least twice a week. Substitute an egg or pasta dish. Or maybe canned tuna or salmon.

10. If you love magazines, try sharing with a friend. Each of you subscribe to a different magazine, when you're finished reading, swap.

"Beware of little expenses; a small leak will sink a great ship." --Benjamin Franklin

How Do You Want To Live?

People always ask kids, "What do you want to do/be when you grow up?" I'm sure you remember the question well. A fireman, policeman, scientist, doctor, social worker, teacher, superhero, etc. are some popular answers. The truth is that people have many interests and talents. Someone may be just as happy being a lawyer as a teacher. That's why I believe the better question to ask is "How do you want to live?" Do you want to live in a mansion or a shack? Do you want a chauffer or bicycle? Do you want to live in the city, country, on a farm, an apartment? I believe that you need to decide what you want to do based on how you want to live your life. 

Time after time, I've read about studies showing that ,in general, people do get what they strive for. In fact, I just ran into a friend of mine from high school. He was my lab partner in biology. He wanted to be a podiatrist, which was great since I really didn't want to dissect that pig. He did everything. Guess what he's doing today? Okay, he's not a podiatrist, but he is a neurologist. He still became a doctor. My other friend always wanted to be in construction and now he's the owner of a very successful construction company. 

If you think back, you will probably discover that most people who pursued what they wanted achieved their goals. That's why it's so important to have the right goals. Pursue dreams that will give you the future you want with your career. But, let's not forget something that's equally important, which is the quality of your off-time and family life. If you really love helping people, doing social work, or being a camp counselor, that's great! But if you, at the same time, want to live in a huge house by the shore, then you will be disappointed that the social worker salary isn't going to let you live in that manner. 

It's a combination of what you want to do and how you want to live. Pick one of the things that you love to do, that will pay for how you want to live. That's my two cents on this issue. It's never too late to start. You might be thinking, "I did get what I wanted, but now I want something else." Fine. Believe it in your heart. Work toward that goal. Stay focused and as before, you'll reach your goal. Just be sure you choose carefully because if you work hard you will get what you want! As Thoreau said, "In the long run, we only hit what we aim at." 

14 ways to handle your debts

There is always much advice as to how to handle your debt. As with everything in life, there are pros and cons to each strategy. Picking the right path depends on your personal situation and, of course, careful consideration of the costs. My feeling is that the best choice is the smartest financial choice. That means the least expensive strategy. 

That said, let’s take a look at a few approaches to dealing with debt. 

DO NOTHING (#1) Method: Don’t take any action. Hakuna Matata (no worries)! Pros: You get to keep your cash because you’re not paying back the debts. Cons: Your creditors will sue you—and win! You will destroy your credit history—guaranteed! 

GET MORE CREDIT TO PAY OLD CREDIT (#2) Method: Apply for new lines of credit to increase your credit limits. Use this credit to pay all current credit card bills. Pros: This will work at first. You will be able to continue spending and enjoying your newfound credit lines. Cons: It won’t take long before you run out of the ability to get new credit. Additionally, the interest charged on the debt will overtake your credit limits thereby maxing you out with no ability to pay. It’s a guaranteed losing proposition. Note: It is smart to avoid being late by using one credit card to pay another. However, the idea of the continuous acquisition of credit to avoid debt is destructive. 

RUN AWAY TO ANOTHER COUNTRY (#3) Method: Fight or flight—the latter. Pros: See the world. Cons: See the world with no money. 

H&H—HERMIFY & HIDE (#4) Method: Run for the hills. Change your name, address, and phone number, and wait until the statute of limitations runs out on all your debts. Pros: Sounds exciting. Might feel like a movie. Cons: You cannot live your life in hiding. The skip-tracers (those that find people that skip on their debts) will work overtime to find you and serve you (and they’re not serving dinner). 

PAY THE MINIMUM FOREVER (#5) Method: Manage your cash flow so you can meet all your bills and nothing more. Pros: You will survive. Cons: You’ll spend your life paying thousands of dollars in interest payments to the banks! Oh, the feeling of satisfaction you’ll have contributing to Capital One Financial's, CEO, Richard D. Fairbanks, annual compensation of $280,083,843!

BORROW FROM FRIENDS AND FAMILY (#7) Method: Ask those closest to you to help bail you out. Pros: May be a quick fix. Cons: Risk destroying your relationship with the people you love over money. If you have to claim bankruptcy, the bank debt will go away. But if you cannot repay relatives and friends, there could be hard feelings. Note: This strategy will work only when it’s a true business transaction and both parties benefit. 

NEGOTIATE WITH CREDITORS (#8) Method: Read my book, Talk Your Way Out of Credit Card Debt and start calling the banks. Pros: You will have some success—I guarantee it! You will learn how to deal with the banks. You will save money. Cons: None, you can’t make it worse. However, you do need the stick-to-itiveness to make it work. And it is work—but work that pays! 

FINANCIAL PLANNER (#9) Method: Use the service of a financial planner to “rebalance” your budget and put more money towards debt. Pros: Outside, professional help that will help to organize your finances. Cons: It will cost a little, but probably worth the fee. You are still left to follow through on the new plan and budget. 

CREDIT COUNSELING (#10) Method: Contact, and work with, a credit counselor who will create a personalized DMP (Debt Management Plan). Allow the credit-counseling agency to negotiate with creditors and make your payments. Pros: They do all the work. You send them a check and they do the rest. Cons: Banks report your dealing with credit counseling to the credit bureaus and this will hurt your credit score. The companies are simply voluntary debt collection agencies. That’s because some of their compensation is derived from what’s known as “fair share.” This is a percentage of the money they get you to pay (they collect). There have been credit-counseling companies that have paid late or not paid their customers' banks at all! Many say they’re non-profit, but that may not be true. I’m not saying they’re all bad. I’m saying that you have to be very careful and research each company before doing business with them or you could be sorry. 

DEBT SETTLEMENT COMPANIES (#11) Method: Use the service of a debt settlement company to mediate your debts one-at-a-time in lump sum payment and at a discount. Pros: Professional help. These companies will negotiate with your creditors and get the debt settled for 45 percent or less of the total amount. Even with their fee (typically 15 percent of what you save or the total amount), it’s worth it from a dollars-and-cents perspective. Cons: You send the debt settlement companies your money, and they put it in escrow until such time as they can negotiate with the banks. Banks must see that you’re not paying before they negotiate. Why would they want to reduce the amount you owe if you haven’t missed any payments? Of course, when you stop paying the banks, they will report this to the credit bureaus, and your credit score will be trashed. Additionally, any money eliminated from the total debt will be considered income and you will receive a 1099 and be responsible for taxes, which isn’t too bad. Again, you must research the debt settlement company! Many have been known to walk off with all the collected money, leaving their clients in far worse shape than when they started. 

HOME EQUITY LOANS (#12) Method: Borrow money against your home (or business) and use that money to pay off debts. Pros: Home equity loans are tax deductible, so your true interest rate will be less than the quoted number. You may be able to get enough money easily to eliminate all your debts. That’s because property values have increased dramatically leaving them cash poor, equity rich! Cons: Credit card debt is unsecured. However, once you pay it off with a home equity loan, the debt will be secured by your property. That means that if you have to claim bankruptcy, you will still be responsible for that debt!

 SELL YOUR HOUSE (#13) Method: Get the most you can for your residence, pay off your debt, and buy something smaller. Pros: You meet all your obligations and get a fresh start. Cons: You may not have enough equity to pay off all debts. You lose the commission of the sale to the realtor. You may not be able to buy something smaller because of elevated home prices. 

DECLARE BANKRUPTCY (#14) Method: Chapter 7 or chapter 13. Pros: If you’re successful in getting a Chapter 7 bankruptcy, then all your unsecured debts will be erased! You owe nothing! A true fresh start! Cons: Bankruptcy remains in your credit history for 10 years. Plus, because of recent changes in the bankruptcy laws, you will be forced to comply with strict standards that could push you into a Chapter 13 bankruptcy. With this, you still pay your debts back over time and have all the negative factors that go along with bankruptcy as well.