Entries Tagged 'Financial Security' ↓
August 14th, 2008 — Budget, Financial Security, Goal, Long Term, Money, Personal Finance, retirement
We would love to start a great new experiment, where everyone would catalog all of their impulse purchases for the course of one year. Everything from that cheap pack of gum to the “whatsit” that we really don’t need would have to be recorded. At the end of the year, everything would be totaled up to see just how quickly we are all nickel and diming ourselves to the poorhouse. The old saying is true, “The rich are rich because they don’t spend any money.”
So, how can you put this to work in your life, without being excessively frugal? Chances are, you probably buy more than you realize and a lot of it is probably unnecessary. Impulse buys are the bread and butter of many industries and there is a reason that those little items are so easy to buy. It’s so easy to fall into that trap of “well it only costs a quarter,” without realizing that we are easily spending way too many quarters every month.
If you’re finding that you are always out of money at the end of the month, or you just can’t seem to get ahead, it is definitely time to break free of that cycle. It’s time to develop a “needer” instead of a “wanter.” We live in a society where instant gratification is king and many of us have “wanters” that are out of control. It’s simply just so easy to focus on what we want instead of what we really need.
The first step towards putting a leash on your wanter is to take a hard look at everything you buy. Ask yourself whether or not you want to work at McDonalds at the age of 78. This is probably the easiest way to gain perspective on what you purchase.
When you look at everything as the tipping point between spending the rest of your life in ease, or working in a burger joint, it casts a harsh light on your spending habits. Yes, it’s a little extreme, but if you do end up nickel and diming yourself to poverty, it will be too late to do anything about it. Sometimes, you need to get extreme in order to train yourself into better spending habits.
Instead of going a whole year, do the experiment for just one month and see how much you really spend on frivolities. Now, next month, take that exact same amount and put it to work for you instead of against you. Leverage that towards creating a second income or put it in a savings account. Chances are, you’ll surprise yourself at how much money you can make in the place of that pack of gum. Your future is in your hands and it is up to you as to where you will spend your retirement. It is never too early to start making the right choices that could affect your financial future and the rest of your life.
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August 12th, 2008 — Budget, Diversification, Financial Security, Income Streams, Investing, Money, Personal Finance
The housing crisis has a lot of people taking a closer look at their finances and worrying about whether they too may be at risk for losing their home. There are a lot of great lessons that can be learned from this crisis, and they can be applied to all areas of your finances. Let’s take a look at some of these important lessons.
1. Don’t overspend.
It is vital to know and understand your own limits. We all know that overspending is not the smartest thing to do, but it’s so easy to get lured in. Many of the homeowners that are now homeless knew very well that they were overbuying their house, but they fell in love with it. Main point to learn: Emotion has no place in your finances. It doesn’t matter if it is the perfect house – or the perfect whatever. If you cannot afford it, you cannot afford it. It’s not a matter of life and death. In your retirement years, you’ll thank yourself.
2. Financial disasters can happen to anyone.
Everyone from the worst subprime customer to big sports stars have been affected by this housing crisis. When financial disasters occur, it doesn’t matter who you are. If you are not prepared, you will not be able to weather the storm. Never fall into the trap of thinking “it won’t happen to me.” The fact is, financial disaster is looming for each one of us, without proper planning and without the right management of our finances.
3. Having more than one stream of income is vital.
You may be set right now with your job, but what if you lost it tomorrow? What if you got sick? Relying on one stream of income is not smart, especially if you are dealing with a mortgage payment. You’ve got to be able to bounce back from a financial disaster. The best way to do that is to cut your reliance on your paycheck by creating more than one stream of income.
4. There is no safe investment.
Some of the most expensive houses in the best neighborhoods are now sitting empty. While there are good investments, there is never a sure bet in life. Always make contingency plans and never put all of your eggs into one basket. The only sure things in life are death and taxes, and it’s best to be prepared for the worst.
5. You can’t rely on anyone else to bail you out.
While big plans are in the works for bailouts, there is a lot of opposition and even if they pass, they will not be able to help everyone. You can only rely on yourself – not the government, not your family. By taking responsibility for your finances, you’ll be able to get through any financial problem with grace. Always have a backup plan and never rely too heavily on your income or on an investment. You never know when the bottom may drop out.
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August 6th, 2008 — Diversification, Financial Security, Income Streams, Investing, Long Term, Money, Personal Finance, Standard of Living, passive income, retirement
One of the hottest concepts right now is the premise of creating multiple streams of income. While everyone wouldn’t mind making a little extra cash, there are even more benefits that can be reaped from having more than one source of income. Let’s go over just a few of them.
1. Help save for retirement.
The average person needs to have more than $500k put aside for their retirement in order to live in comfort and without worries. Unless you have a job that pays incredibly well, this is going to be a pretty daunting task. You cannot rely on social security payments to secure your future. Whether you’re 25 or 55, it is never too early or to late to put aside money for your retirement. Unless the thought of working until you drop dead appeals to you, you’re going to have to find ways to supplement your current income.
Multiple income streams can be incredibly beneficial not only for retirement planning, but later in life. Smart investments will continue to reap rewards for many years to come and you’ll have that nice supplemental income that will make your life easier far past the retirement age. A good concept to try to is put all of your multiple income streams into a high interest account to make even more money for your future.
2. Layoffs and downsizings happen every day.
No matter how secure you think your job is, there are still chances that you could get laid off. There are very few guaranteed jobs in this world that provide lifelong security. If you are relying solely on the income for your job to pay your bills and make ends meet, you are literally one paycheck away from financial ruin.
It’s a stark reality that all of us face. However, if you have multiple streams of income coming in, you won’t have to worry so much. You’ll have a cushion that will tide you over if you do get laid off or lose your job. In some cases, lucrative streams may even replace the need for your job entirely.
3. Accidents happen.
Even if you have insurance – what would happen if you were injured today and no longer able to work. Could you pay your bills? This happens to thousands of people every year and they risk losing their homes, bankruptcy proceedings and worse. By having that extra cushion with several different streams of income, you are reducing your reliance and making sure that no matter what happens, you’ll be ready to face it.
If you don’t have health insurance, it’s even more vital to have steady streams of income coming in each month. You may be the picture of health right now, but what if you get hit by a bus on the way to work tomorrow? Unless you have thousands of dollars in savings, the answer isn’t pretty. Even if you do have a savings account do you really want to use it for that? What will happen when it runs out? The best kind of insurance you can have is a steady stream of extra income.
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July 31st, 2008 — Debt, Diversification, Financial Security, Income Streams, Investing, Leverage, Money, Mortgage, Personal Finance, Real Estate, good debt
Not all of us have had the luxury of spending the last 20 years to secure our financial future. Most of the time, through no fault of our own, putting aside money for retirement takes a back seat to handling emergencies or schooling for our kids, or simply the daily expenses of life. If you’re looking down the barrel of 65 and you don’t have anything put aside yet for your retirement, don’t worry. It’s never too late to start planning for your retirement. It may take a little extra work, but you can secure your financial future.
Let’s look at one of the best ways to ensure that you’re going to have a steady income coming in after you’ve retired. Millionaires across the world have used this technique for centuries to produce multiple streams of income. When you are no longer reliant on your 401K, or even your social security check, you’ve got a lot more freedom and a lot less worry.
This technique is called debt leveraging. Simply put, you got into a little debt in order to create a new stream of income. One of the easiest ways to illustrate this is through the purchase of a new second property. Let’s say that you find a great deal on a house that is in pretty decent shape. It’s in a good neighborhood and it’s close to good schools. You don’t have the money to buy it outright, but you don’t want to let this chance pass you by.
You can go to the bank to get a mortgage on that property and then start renting it out. Make sure that the monthly rent exceeds your monthly mortgage payment. Now, you’ve got a new stream of income coming in and you’re really not working for it. If you clear an extra $1500 a month, that’s an extra $18,000 a year on top of what you’re already making – and that’s just for one property.
Now, multiply that by a few properties and you’re making enough to really start planning for your retirement. However the key of good debt leverage is to make sure that you are not too heavily invested in one area. You’re going to want to change things up a bit to make sure that if something goes wrong you won’t take a big financial hint.
In addition to that rental property, you could put some of the profits you’re making or even get a new debt loan to put money into a high interest bearing account. Now, you’ve got a second stream of income coming in that will shore up your financial defenses. You can just keep perpetuating this until you are making enough every year to easily put aside quite a bit of money for your retirement. The best part is, this money will continue coming in, even after you’ve left your regular job. The key to a happy and fruitful retirement is having multiple streams of income that keep paying off, even when you’re not working.
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July 28th, 2008 — Budget, Cash Flow, Debt, Financial Security, Income Streams, Long Term, Money, Personal Finance, retirement
Whether we realize it or not, many of us face financial risks every single day. From the high powered investor, to the minimum wage earner, every one of us has the potential to lose everything we own. How can you evaluate your financial risks and find ways to secure your future? Let’s take a look!
First, it is important to figure out exactly how much you spend in a single month. Get a notebook and write down everything you spend over the space of one month. Include everything from the smallest item to the largest, and don’t forget to include your monthly bills as well. At the end of the month, total up everything you spent and compare it to how much you make.
If you are overspending or cutting it close, you are definitely at risk for financial ruin. If you have more than enough left over at the end of the month, your risks are quite a bit less, but they may still be there. One of the best ways to tell how close you are to the brink is to experience what it is like when your paycheck is a few days late. Do you panic? Do your bill collectors panic? If the answer is yes, you may be cutting things a little too close.
Not many of us realize how much we depend on our paychecks every month. We may think we’re doing ok, and we have plenty of stuff to make us comfortable. Few of us put aside anything and before we know it, we’re living paycheck to paycheck. Add in credit cards and you’ve got a recipe for disaster.
Now, let’s look at the other end of the spectrum. Let’s say you’re financially well off, you’ve got plenty of investments bringing in some pretty decent returns. You’ve come to rely on those returns and you’ve always got the back up of your 401k, right? Now, let’s say the market takes a nosedive, ala Black Monday or the dot com fallout. How well off would you be then?
No matter if you make $800 a month or $8000, diversity and multiple streams of income are the best answer to shoring up your defenses against financial ruin. Let’s face it, most of us would not turn down more income every month, especially if we didn’t have to work hard to get it.
By reducing your reliance on your paycheck, or your standard investments, you are increasing your chances of being able to withstand a finance shattering event, such as a market crash or the loss of a job. The more ways you have to make money, the less likely you are to fall into financial ruin.
One of the secrets that millionaires have is leveraging debt to create a new stream of income. For example, let’s say you take out a loan to use to buy an investment property that you rent out. This is now an income producing property and you’ve got more money coming in. As you pay off that loan, the profits keep rolling in, and you’re less reliant on your standard means of income. That is one powerful way to avoid financial ruin.
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July 15th, 2008 — Budget, Financial Security, Goal, Money, Personal Finance
For many of us, spending comes all too easily and before long, we find ourselves at the bottom of a very big debt hole. However, there are ways that anyone can make a budget and start planning for their future. You may not even need to make drastic changes right now, but the more you put away, the less you’re going to have to work later in your life. That is really the best way to look at budgeting. Sure, it may be a little tough right now, but you may be allowing yourself the ability to retire happily at 60, instead of having to slave away well into your 70’s, just to make ends meet.
So, let’s look at some easy ways to make a budget that won’t hit too hard at first. You’ll need to add up all of the income that you’re bringing in each month. Make sure that you don’t include the money you pay for taxes – just take the amount that your paycheck is for each month. This is what you have to work with.
Now, add up what you spend on rent or a house payment. It should not be more than 30% of your monthly income. Ideally, it should be around 10%, but that is not always possible. If you are spending more than 30%, you may need to look at getting a cheaper place, or even getting roommates to bring that amount back into the accepted range. Your car payment is next – if it’s too high, consider getting a cheaper car.
After this, add up all of your other essentials, such as your utility and phone bills. If you’re spending too much, look into other companies that may have lower rates. However, with the exception of long distance fees, most of us can’t really do much about our utility bills. Next up, groceries and other essentials. Figure out how much you spend every month on these. If it’s high, try substituting with other brands or visit a store that is not so expensive.
Now that you’ve gone over the essentials, it’s time to look at your non essentials. This is where many of us easily spend a few hundred every month without even thinking about it. How much money do you spend on dining out, drinking, or having fun? We’re not saying hole up in your house and never leave, but you may need to cut back a bit. Try to find ways to cut your non essentials by around $200 to $500 a month.
This frees up quite a bit of money that should be deposited into a savings account every month. If you can do more than $500, great, but many of us just don’t have that kind of cash. At the end of the year, you’ll end up with more than $6000 in savings – and that is significant for many people. You’ll also need to work on finding ways to increase your income so that you have more freedom to save and spend.
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July 14th, 2008 — Diversification, Financial Security, Goal, Income Streams, Personal Finance, retirement
Most of us think about retirement and panic. It can be tough trying to figure out how we’re going to survive and plan for our futures when we’re just trying to make ends meet right now. If you’re strapped for cash at the end of every month, chances are you are not saving anything for retirement or for that rainy day. Although many of us have 401k’s, we cannot rely on these for our sole source of retirement money.
It’s easy to think that your 401k will always be safe, but this is not always the case. Companies go under, investments go bad. Never rely on this, or your Social Security benefit as the sole source of your future income. The key to planning and financing your future is creating multiple streams of income right now.
80% of Americans are living paycheck to paycheck right now. That means that millions of us are facing homelessness if we lose our jobs. This is a startling figure and it really drives home how important it is to have more than one stream of income coming in every month. If you are relying on your paycheck right now and it barely meets your needs, think about what would happen if that paycheck disappeared? How would you pay your bills?
Setting up multiple streams of income can be a bit daunting, especially if you have no capital right now to invest. There are many different ways that you can create multiple streams of income, even if you don’t have much money. First, let’s look at creating active streams of income, then we’ll move onto passive. Active income is something that pays you money for work that you do. This can mean getting a second job for a few hours every week, or channeling your talents into extra work.
For example, if you’re handy at fixing cars, consider setting up your own little shop in your garage. Only take on as much work as you have time for, and you’ll be bringing in extra money every month. If you’re good at something, and most of you are, there is a way to leverage that into more income.
Now, let’s look at passive income, or income that comes in requiring no extra work on your part. This is the best kind of income and it’s important to have at least one passive stream. Passive income includes returns from investments, or dividends that come in. If you don’t have any money right now, consider getting a small loan to invest in a proven stock or to put into a high interest bearing account. This is called leveraging debt and it is a concept used by millionaires across the world.
You can also get passive income from rental properties or from buying homes and selling them at a higher cost. Talk with a financial planner about your passive income options and take that step towards achieving your financial freedom. You don’t have to rely on one paycheck!
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July 8th, 2008 — Debt, Financial Security, Income Streams, Investing, Leverage, Money, Personal Finance, bad debt, good debt
Let’s face it, debt has managed to earn itself a pretty bad name in most circles, but in many cases, this stigma is undeserved. Debt, when used properly, can help you secure your financial future. While no one is arguing that improperly used debt is a bad thing, good debt is possible. Commonly, good debt is synonymous with leveraged debt. This refers to the process of using debt in order to create multiple streams of income. You have to spend money to make money and unless you happen to have a bunch just lying around, you’re going to need to go into debt at first in order to secure your future.
There are many benefits that can come from leveraging your debt in order to create multiple streams of income. By going into a little amount of debt, you can take advantage of opportunities that would otherwise not be available to you. Only the independently wealthy have the capability of writing big checks for investments. But they all had to get their start somewhere. No one starts off with everything, you have to work to get it. How many stories have you heard of immigrants with a few cents in their pocket that turned it into an empire? Somewhere along the way they had to go into debt to get the capital they needed to make all of that money.
You can use this same proven formula in your own personal finance. You don’t have to be a financial genius and you don’t have to be wealthy to start making money right now. One of the best ways to illustrate this point is investing in the stock market. Let’s say that you have the opportunity to purchase shares in one of the hottest new companies. You’ve got a little saved away, but it will only purchase you a handful of shares. However, if you were to take out a loan, you could easily buy numerous shares. When these returns start to come in, you’ll have a much larger return, simply because you were able to invest more.
This is one of the main benefits of using debt leverage to secure multiple streams of income. You wouldn’t normally have the opportunity to make large investments that will have larger returns. While you can certainly play it safe, it simply makes more sense to take that small risk for the larger return. If you manage your finances correctly, this won’t be a big sacrifice to you. We’re not saying run out and get into debt over your head in hopes of becoming a millionaire.
You need to manage your debt effectively if you want it to work for you. That means starting off with one stream of income and then when that starts to return, leveraging a little more for the next opportunity. Soon, you’ll have numerous forms of income coming in that will more than cancel the debt you got into to start the whole process.
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June 23rd, 2008 — Diversification, Financial Security, Income Streams, Money, P2P Lending, Personal Finance
Most of us would like the chance to spend more time with our families, work a lot less and still bring in a sizeable income. If you’re only going to rely on your current income, the chances of that happening are pretty small, unless you’ve got an incredible job. However, there are ways that you can achieve this dream and they’re a lot easier than you might think. You’re about to learn how to work smarter and less and still make more money than you are right now.
The key to working less is having more than one stream of income coming into your pocket every month. This is a sound principle for many different reasons. First, you’re reducing your risks by not having to rely on your main source of income to pay your bills and keep living well. You can spread that risk around and if you do lose your job, you’ll have the resources on hand to keep paying your bills until you can find a new one.
Another benefit of having multiple streams of income is that you can eventually phase out your full time job, if you’re making the right investments, and start working part time. The old adage that two part time jobs make one full time job is certainly true here. By creating another stream of steady income that you can rely on, you can eventually scale back your current hours until you’re working only part time. If you’ve got some really great streams of income coming in, you may even be able to quit that full time job and focus on these streams instead.
Ok, so we understand how multiple streams of income can make your life easier, but how do you get started? You’ll need to take a small amount of risk here if you want to get to the point of being able to spend less time at work, but it is well worth it. It is best to try to reduce these risks when you’re first getting started so that you don’t jeopardize your finances, but with smart choices, it’s easy to pick a great income stream.
Some of the most common forms of creating multiple streams of income are actually the most simple. Let’s say that you have a knack for fixing cars. During the day, you’re a buttoned down corporate worker, but on the weekends, you’re a car fixing fool. Start taking on outside work during those weekends and boom – you’ve got your first income stream coming in. As word of mouth travels, you’ll get more business and it will most likely pay better than your current job.
Other streams of income include investing in P2P lending, other business opportunities, or even stocks and bonds that have a steady rate of return. The main goal of using multiple income streams to work less is to stop treading water at your job and start doing what you love while you’re getting paid for it. With the right amount of dedication, you should be able to go part time or even quit your old job.
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June 10th, 2008 — Diversification, Financial Security, Income Streams, Investing, Money, Personal Finance, accountant
The average person usually tries to struggle with their finances year after year and only visits an accountant a few days before their taxes are due. By this point, it’s up to the accountant to try to piece everything together and they won’t be able to offer much help when it comes to managing your money. The fact is, most of us could use the help of an accountant or a financial planner. The question is – do you NEED one?
Let’s take a look at a few scenarios that answer this question. Accountants and financial planners definitely serve a purpose but they may not be necessary if you already have a good grasp of solid financial techniques. But, before we go any further, let’s get to the scenarios.
Scenario #1 –
You’re just starting out on your own. By this point in your life, you’ve got a new job, a boat load of student loans and your whole life is years away, right? Wrong! If you don’t have a basic grasp of good financial practices, this is the worst time of your life to sit idly by. An accountant or a financial planner is incredibly helpful during this stage in your life and can start you on the path towards financial independence. If you have trouble balancing a checkbook let alone planning for the future, there really is no question – you need an accountant.
Scenario #2 –
You want to get into investing, but you’re really not sure how to get started. Many people make the mistake of hooking up with a broker that may not have their best interests in mind. You would be better served by visiting a financial planner or an accountant that specializes in handling investments to get an idea of where you need to start and where you want to end up in a few years. By taking the right step at this juncture in your life you can save yourself a lot of heartache and financial woes.
Scenario #3 –
You already have multiple streams of income coming in and you’re pretty much a whiz at finances. In this case, you may not need an accountant, since you’re already capable of handling most things. However, you may want to seek out a financial planner to determine whether or not you’re missing out on some opportunities that could increase your wealth further. If you have not yet diversified, this is a very important step to take. We still recommend using a certified accountant for tax preparation, even if you are a whiz at finances, simply because they have more experience in handling the complex US tax code.
Scenario #4 –
Finance???? I’m lucky to have money by the end of the month! If you’re just getting by, you may not be able to afford an accountant just yet, but you definitely need some help. Your best bet is to visit your local library and start reading everything you can about the art of managing your money. This will help you start out on the right path until you can afford to get an accountant to help you.
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