5 Ways To Raise Capital And Start A Business

Raising capital to start a new business is not as easy as setting up a lemonade stand or selling Girl Scout cookies. A primary reason for the failure of start-ups is a lack of funding. There are plenty of great products and ideas that have never come close to making it to the public.
Without American entrepreneurship, and the drive to just go for it, we would not have Apple, Google, Facebook, Starbucks, or countless other companies that are a part of our everyday lives.
Here are five ways to generate capital for your business in today’s economy:
1. Friends and Family. A tried and true methodology, this has been a staple of start-up funding for hundreds of years. It is however, not without its risks, as a failed business could lead to strained relationships. or even the end of relationships.
2. SBA Express. The Small Business Association provides several avenues for borrowing money. SBA Express allows bank-qualified business owners to borrow up to $150,000 without filing the typical SBA loan application. Plus, owners will receive a loan decision within 36 hours.
3. Community banks. Community banks actually have the capacity to be flexible with lending terms whereas large corporate banks do not. Find local lenders by reaching out to the Independent Bankers Association of America, which has access to 5,000 community banks.
4. Crowdfunding. Crowdfunding networks like Kickstarter and Indiegogo have raised some serious cash from individual investors. If you have an innovative idea or project, develop a reasonable funding goal and timeline and see which investors support you and pledge funding. Remember, projects must meet their funding goals before the time runs out, or else no actual money is received. Also, be aware that a percentage of the money raised will be kept by the crowdfunding site as part of their fees.
5. DPOUSA. DPOUSA is an online financial platform providing client companies the opportunity to have 24 hours a day, 7 days a week, 365 days a year visibility of a direct public offering to a growing base of over 33,000 accredited investors and institutions representing over $500 billion in available capital. Unique to DPOUSA is the DPOUSA Special Council, a diverse cross-section of 50 professionals from various industries available to assist DPOUSA client companies. Visit www.DPOUSA.com for more information.
Whatever the state of the economy, there will be those willing to invest in new businesses. New businesses create jobs, and power growth. There are sources to help with capital. So, once you find the sources, be ready with a great plan to show what you are going to do with the capital, and how the investor will benefit.

6 steps toake your financial automatical

1. First, make sure your paycheck is automatically deposited into your bank account. Most companies offer this. If yours doesn’t, you’ll have to go to the bank. I’ve already forgotten where mine is.
2. Open a high-interest online savings account, if you don’t already have one. Some popular ones are ING Direct, Emigrant Direct, and HSBC Direct. They pay like 4x what a regular bank pays, with no fees, and all transactions can be made online.
3. Setup an automatic savings transfer to be made from your checking to your online savings account, every two weeks, the day after your payday (to be safe). This is an easy setup process offered from your online savings account. You’ll have to do a quickie budget to figure out how much you can afford for savings, if you haven’t already. But it’s simple: just list out all your monthly expenses, including regular and irregular bills, savings, a few basic spending categories like gas, groceries and spending, and subtract those amounts from your income. For this step, you could also set up a transfer to a money market account or other investment vehicle.
4. Setup your bills to be automatically paid. This will be the longest process, but it’s not hard. Just look at every bill, go to your bank’s online site, and set up online payments for them. For some, the payments can be made electronically, and for others you’ll have to have your bank send a check. Set up half your bills to be paid after one of your paychecks (every four weeks) and the other half to be paid after your other paycheck (every four weeks).
5. Get Yo Cash. The remainder that’s left after savings and bills is your spending cash
   — for gas, groceries, and miscellaneous spending. I recommend you withdraw this as cash and separate them into three (or more) envelopes, each labeled with its spending category. That way, you can see if it’s running low and spend accordingly. You could, alternatively, use a debit card (avoid checks and especially credit cards!) for these categories, but it’s harder to remember how much you have left in each category, and so it’s easier to overspend. This fifth step would be easier if you could have the bank mail you your cash. As it is, I have to actually go to an ATM!
6. Monitor. You can’t just let the system go without monitoring it. I log in to my banking account about once a week to make sure all the bills are paid correctly, and that everything’s sailing smoothly.

12-Step Get-Out-of-Debt Program

1. Acknowledge the problem. The first step is admitting you have a problem. The first week, all you have to do is say to yourself, “I have a problem with debt. I got into this because I spend money I don’t have. But I believe that there’s a way out, and I can do this. I can control my spending, make a plan, and slowly get out of debt.” That’s a major step. Now set aside just 30-60 minutes a week to deal with your finances — make it a set day and time, and don’t let yourself miss this appointment.
2. Stop digging. If you’re in a hole, the first step is to stop digging, and that’s what you’re going to do this second week. For 30 days, see if you can stop any non-essential spending. If you have a major problem with credit cards, cut them up. If you’re not so bad with credit cards, at least put them away and don’t buy stuff online for one month. What’s essential? Obviously your bills, housing, auto, gas, groceries … that kind of stuff. Non-essential? Clothing, CDs, DVDs, books, magazines, gadgets … you know what I mean. Just 30 days. After that, you can decide how much to spend on these things.
3. Make small cutbacks. This third week, take a look at things you normally buy and see if you can cut out a few of them, or spend less on them. Groceries? See if you can buy house brands instead of name brands. Coffee? Make it yourself at home instead of buying out. Lunch? Try packing it to work instead of eating out. Add up what your cutbacks will save you this month.
4. Start an emergency fund. This fourth week, set up a savings account, if you don’t have one already, for an emergency fund. Now take the amount you saved in Step 3 (and even in Step 2 if you think you can make them last for awhile) and set up a regular automatic deposit from your checking to this emergency fund savings account for this amount. It’s important that before you start paying off debt, you have at least a small emergency fund. Aim for $1,000 at first, and you can grow that later. The reason: if unexpected expenses come up, and you don’t have an emergency fund, you will skip your debt payments to pay for the unexpected expenses. The emergency fund protects your debt payments.
5. Take inventory. OK, this is a step that we don’t like to take. But take a deep breath. You need to do this. Remember what you said in Step 1? You can do this. This fifth week, set up a simple spreadsheet. In one column, list all of your debts — credit cards, medical bills, auto loan, etc. You can leave out your mortgage, but put everything else. In the second column, put the amounts you owe for each debt. In the third, put the minimum monthly payment, and put the percentage interest in the fourth column. Total up the second and third columns to see your total debt owed and how much you have to pay, at a minimum, towards debt each month.
6. Make a spending plan. We don’t like to do this step either. But it’s not going to be as painful as we think. This sixth week, set up another simple spreadsheet. In one column, list your monthly bills (rent or mortgage, auto payment, utilities, cable, etc.) — everything that is a regular monthly expense. Then list variable expenses (things that change every month) like groceries, gas, eating out, etc. Later you should add irregular expenses (stuff that comes up once in awhile — less than once a month) such as auto and house maintenance, clothing, insurance, etc. But we won’t get into that now, as we want to keep it simple. In the second column, put down the amounts for each. Be sure to put enough for things like gas and groceries, as you don’t want to be short. Be sure to also include your minimum debt payments and your emergency fund deposit. Now, list your income sources and monthly amounts. There. You’ve got a temporary spending plan (you’ll want to add the irregular expenses later). Now, if the expenses are greater than the income, you’ll need to make adjustments until the expenses are equal to or less than the income.
7. Control spending. If you’re into your seventh week of this debt plan, you may find it hard to keep track of your spending and ensure that you’re sticking to your spending plan. Here’s the key: first do the emergency fund deposit. Then do the debt payments. Then do your monthly bills. Then withdraw the variable amounts in cash, and put them into separate envelopes. It’s old-fashioned, but it works, as you don’t have to worry about overspending. When your envelope is empty, you can’t spend anymore. Continue to cut back on non-essential spending as much as you can at this point, so you’re able to stick within your spending plan.
8. Pay bills on time. This may be a problem for a lot of people. It’s important, if you want to get out of debt, to start paying all your bills on time. If you follow the payment plan outlined in Step 7, your bills should be paid before you get to any discretionary spending categories. At this point, you want to focus on getting those bills paid on time, and making it a habit. If you have trouble remembering, try one of these methods: 1) pay bills as soon as they come in — take them to the computer and pay them online, or write out a check and prepare the envelope to be mailed the next day; or 2) set up a reminder in your calendar program to tell you when bills are due.
9. Start a snowball. Now that your finances are relatively under control, you can start a debt snowball. At this point, you should have the beginnings of an emergency fund, you should know how much you owe, you should have a temporary spending plan, you should be paying bills on time and controlling your spending. Now you can focus on paying your debt. Here’s what to do: If you can find at least $100 from your spending plan, use that to start your debt snowball. You may need to cut back on discretionary spending (as you did in Steps 2 and 3). Or, once your emergency fund is at $1,000, you can use the amount you were putting into that account for your debt snowball. If you have trouble finding $100 for a debt snowball, you need to look at what other expenses you can cut back on. OK, once you’ve found at least $100 for your debt snowball (and more would be better), take a look at your debt spreadsheet. First, order the debts from the smallest amount owed to the largest. Now, look at your smallest debt owed — you will start by paying $100 (your debt snowball) plus the minimum monthly payment on that debt each month, until the debt is paid off. When the debt is paid off, you will take the amount you were paying on it (let’s say $50 monthly payment plus the $100 debt snowball for a total of $150) and pay it to your next smallest debt, until it is paid off. Continue to pay off your debts, one at a time, until they are all paid off. Now you have a large sum you can put into growing your emergency fund, and funding your irregular expenses, and finally start investing.
10. Find larger cuts. Once you’ve controlled your finances and started your debt snowball, there are ways to increase the snowball — and hence the speed with which you get out of debt. Look at your larger expenses — are there ways you can eliminate or cut back on them? Can you sell your car for a smaller, used model? Can you find a smaller house or apartment to rent? Can you sell your house and rent a cheaper one? Can you get by with one car? Can you eliminate some services you’ve been using? Whatever cuts you make, apply that amount to your debt snowball — don’t spend it.
11. Grow your income. Another great way to get out of debt faster is to make more money. Look at ways you can make money on the side — or ask for a raise or get a better job. Take 30 minutes to brainstorm. Are there ways you can start a small business online? Sell your valuables on eBay? Start freelancing on the side? Get a part-time job? This only has to be temporary, but the more money you make, the faster you’ll get out of debt. Be sure to apply your new income to your debt snowball.
12. Track your progress. On your debt spreadsheet, be sure to update it every payday (or however often you pay debt) so that you can see your shrinking debt amount. You should be able to calculate how many months you have left before you’re completely out of debt. It may be a long ways off, but it’s within sight!
13. Bonus step: Celebrate! It’s important to celebrate, not only when you’re out of debt, but along the way as you eliminate each debt. Have fun! Make this an adventure. It can be amazingly satisfying to stop spending and gain control of your finances instead. Find free entertainment, make it a challenge to be frugal and save money and find cheap used stuff. Pat yourself on the back along the way.

Ways to Make Huge Savings in Your Budget

8 Ways to Make Huge Savings in Your Budget

With the economy not doing so well, many people are looking for ways to save money and get on more solid financial ground.

And while it’s great to cut out little things, such as lattes and Gucci bags, what most people need are big savings. You know, thousands of dollars in savings, not $50 a month.

But you can’t slash your budget for items such as food, gas and utilities — while you can save some money in these areas, the savings are usually pretty small compared to some of the items below. So I’ve compiled a list of ways you can make big changes, at least for a little while — and who knows, maybe over the long term.

There will be some objections — from people who don’t think they can change their lives this much, or who don’t want to. That’s fine — I’m not saying these changes are for everyone. But I really do think we can live with less, and with the right mindset, you can find happiness right now, without needing to spend money. That’s the key — finding contentment while living with less.

1. Move to a smaller home. For many people, housing is the biggest expense in their budget. Thus it represents the biggest opportunity to save — if you live in a smaller, less costly home, you can save a lot of money in one fell swoop. Obviously this isn’t a change you can implement overnight, but it’s worth keeping your eye open for an opportunity to make the change. Start looking around for smaller homes, especially ones that are closer to the places you need to go, such as work, the grocery store, etc., so you can save on transportation costs as well. If you get rid of a lot of excess stuff, you don’t need as much space (see my decluttering tips: 1, 2, 3, 4). This change alone can save thousands each year.

2. Sell a car. If you have two (or more) vehicles, consider selling one of them to save money. Often we can get away with one vehicle if we carefully arrange our schedules. My wife and I (and our six kids) did this, and we are able to survive with one van. Sure, sometimes it would be cool to have two cars, but it’s not a necessity. Btw, we did this even when we were both working and all six kids had school, daycare, soccer practice and games, music lessons, and so on. Take any cash you get from selling your car and use it to pay off some of the loan for the car you keep — or use it to pay off higher interest debt.

3. Get a smaller, used car. Whether you already have only one car, or you decide you absolutely need two or more vehicles, you can downgrade your car so that it costs less. Sell your car, and look for a smaller, used model that runs well (preferably only 2-3 years old) and costs less than the one you own now. Again, potential savings of thousands each year.

4. Stop paying interest. Some people pay thousands of dollars in interest every year. I’m happy to say that I now pay zero in interest, after becoming debt-free last year. That’s not always possible for everyone, but this is a very big potential savings for most of us. The key is to stop getting into new debt, and to pay off your old debt as quickly as possible. Paying off my credit cards was the priority, but we also paid off our car loans and bought our last two vehicles on cash. Again, this is not for everyone, but I highly recommend it for those who can manage it.

5. Stop buying unnecessary items. This is a toughie, but if you’re really serious about saving, you’ll at least consider it. Try tracking your spending for a month, and next to each expense item mark the ones that are pure necessities: groceries, gas, utility bills, medicine, doctor’s visits, etc. The rest are unnecessary — clothes and shoes you didn’t really need, electronics, magazines, gourmet coffee, etc. If you stopped buying these things, at least for a little while, you’ll notice a pretty sizable savings.

6. Stop traveling. If you travel several times a year, or even just once a year, you could save thousands by not traveling. Before last year, I didn’t travel for 7 years, and it didn’t hurt me one bit. You can relax and take a break from work without having to leave home, if you learn to enjoy yourself from where you are. I’m not saying you should never travel again, but if income is dropping, you might consider a moratorium for a year or two. Each trip can cost thousands, depending on how far and long you travel, so this is a huge potential savings for some people.

7. Slash entertaining/entertainment. Many people do a lot of entertaining — parties with friends, family or co-workers — and those expenses can really add up. Stop entertaining so much, or at least save money by making them potluck or during non-meal times when you can get away with serving appetizers. Similarly, if you spend a lot of money going out to entertainment — movies, theater, dining out, drinking, clubbing, etc. — you can curb this habit and save a lot of money. Learn that you don’t need to spend money to have fun!

8. Cut out all subscriptions. Each little subscription you have is a small-ticket item — a magazine subscription could be $15-25 a year, for example, and subscribing to an online service might only be $5-20 a month. But if you subscribe to 3 magazines, and 4 online services, and cut out one of your cell phone plans or cable TV subscription (if you don’t need one of those services), you could save $1,000 a year. Some people have even more subscriptions and can save thousands. Not much compared to some of the items above, but worth considering.

10 Ways to Simplify Your Budget

The goal is to reduce headaches, eliminate the need for complicated tracking schemes, and reduce the time you spend on your budget and finances to about 15-20 minutes per week. I can’t claim these ideas are original, or that I haven’t discussed them in various places before, but in my experience, they work. They’re simple and powerful.

Let’s first look at setting up a budget. If you haven’t done it yet, it’s probably because budgets seem intimidating to you, or they are too much hassle to set up and maintain. Those are both valid points — which is why you should follow this simplified plan if these things apply to you. Now, there’s plenty of fancy software out there for setting up budgets, but I don’t think they’re necessary. A simple spreadsheet will do — and if you can create a SUM formula to add up the total of a column of numbers, you have all the spreadsheet knowledge necessary.

Create a simple spreadsheet for your budget, if you haven’t already, and start by listing your income and your monthly expenses. Estimate, in round numbers, how much you spend on each expense every month. You can adjust later, but it’s better to err on the side of too high a number, rather than putting a low number and breaking your budget.

Now let’s look at ways to create a simple budget:

1. 60 Percent Solution. There are many ways to structure your budget, but the simplest I’ve found is the 60% solution. Basically, this budget asks you to fit your regular monthly expenses within 60% of your gross income, so that you have room for savings (long-term and short-term), retirement and spending money (“fun money”). These are the things that most often break a budget, because most people don’t budget for them. Now, your percentage will vary, but the percentages given here are just rough guidelines:
   • 60 percent: Monthly expenses — such as housing, food, utilities, insurance, Internet, transportation. This is the part most commonly thought of as a budget.
   • 10 percent: Retirement — and if you’re doing it right, this is being automatically deducted from your paycheck for a 401(k) investment.
   • 10 percent: Long-term savings or debt reduction. It’s best to invest this in something such as stocks or an index fund, and this can serve as your emergency fund. But if you are in debt (not including a home mortgage), I would advise that you use this portion of the budget to pay off your debts, and even draw some from the other categories such as retirement to increase this to about 20 percent for now. Once your debts are paid off, you can switch this to long-term savings. You still need to have an emergency fund, but while you’re in debt-reduction mode you can either create a small, temporary emergency fund out of the money from this category or the next.
   • 10 percent: Short-term savings — this is for periodic expenses, such as auto maintenance or repairs, medical expenses (not including insurance premiums), appliances, home maintenance, birthday and Christmas gifts. For this savings account, be sure to spend the money when you need it — that’s what it’s for. When these expenses come up, you will have the money for them, instead of trying to pull them from other budget categories.
   • 10 percent: Fun money — you can spend this on eating out, movies, comic books — whatever you want. Guilt free.
2. Fewer categories. A lot of budget software asks you to fill in a million categories and subcategories. Those can be useful if you want to track all that stuff, but I don’t. I recommend simplifying: just use broad categories like food and gas and spending and utilities. Use what works.
3. Pay bills online. As much as possible, pay your bills online. These would be most of the bills in the first category above — utilities, rent or mortgage, cell phone, Internet, etc. If you can’t pay electronically, have your bank send out a check to the vendor. Make these payments automatic, so you don’t need to worry about them.
4. Automatic savings. Make your savings automatic as well. Every time your paycheck is deducted, have a scheduled transaction transfer a set amount from checking to savings. Use a high-yield online savings account such as Emigrant Direct, HBSD, or ING Direct.
5. Cash. For everything else, use cash. If you’re doing automatic bill payments and savings deductions, the only things you’ll likely need cash for are gas, groceries and fun money. Withdraw these amounts in cash twice a month, rather than using checks or credit cards. The reason is that it’s simpler — with cash, you don’t need to worry about overspending, or tracking how much is left in that category. You can see how much is left. Leave the credit cards for when you absolutely need them — traveling, for example.
6. Envelopes. If you use cash for three categories, for example, use three envelopes. This is an old-fashioned system, but I use it because it works. I have an envelope for groceries, gas and fun money. If I’m going grocery shopping, I bring the groceries envelope. I know how much is left in the envelope before I go grocery shopping. I spend the cash for groceries, and then can easily see how much is left now. Simple, and no tracking necessary. When the money is gone, you’ve spent your budgeted amount. If necessary, you could transfer cash from one envelope to another, and there’s no need to adjust your budget.
7. 15-20 minutes a week. Now, the budget and spending plan I’ve outlined above is fairly simple and headache-free — but you shouldn’t assume that it doesn’t need any maintenance. You should devote 15-20 minutes a week to ensuring that your finances are in order. Just this little amount of time each week will greatly simplify your financial life, reduce headaches, and prevent any messes from occurring later. Set a day and time when you take a look at your finances each week. Set aside 30 minutes, just to be safe. Now take 5-10 minutes to enter your transactions into your financial software (I use MS Money, because it came with my computer, but a spreadsheet or other financial software will do fine). If you’re following the plan above, all you’ll need to do is go online, look at your bank account, and enter your deposits, bills paid, ATM withdrawals (only do this twice a month!), and any other fees. It shouldn’t take long. Now spend another 5-10 minutes to review your budget and make sure that all bills have been paid that should be paid. If not, pay them. It’s that simple. You’re done. Now go back to reading your blogs.
8. Fewer accounts. Some people have complicated systems set up with lots of different accounts. I say simplify. You don’t want to be checking a million different accounts. You should have one checking account and one or two savings accounts (one for emergency fund and one for periodic expenses). You could have a bunch of investment accounts if you want, but I’ve found it simpler to just have one. I lose diversity, but my fund is already pretty diversified.
9. Dump credit cards. Multiple credit cards are also a headache. Simplify by just having one. Or do what I do — have none. This will draw the usual outraged or preachy reaction from those who really love their credit cards, but I don’t care. I don’t like credit cards. Call me old fashioned. They charge high interest and they’re potentially dangerous (if you run up a high bill and an expense comes up that you need to pay for which means you can’t pay your credit card bill on time, you now are stuck with high-interest credit card debt). Use a debit card if you need to.
   
10. Pay all bills at the same time. It often just takes a simple call to get a vendor or creditor to change the due date on your bills. If you can get all your bills to be due on, let’s say, the 10th of the month, you can do all your bill paying at once. For some people, this will mean they will need to do a bit of scrimping to get ahead enough so that they can afford to make all their month’s payments at the beginning of the month, but it’s worth it. You can pay all your bills and be done with it.

How to Stop Living Paycheck to Paycheck

How to Stop Living Paycheck to Paycheck

For a few years, I went through tough financial times. I was getting further and further into debt, not paying some of my bills (which then went to collectors) and always behind, even on payday. It took me awhile to step back and realize that this situation was all of my own making, due to my own choices and financial habits, and that it was possible to change.

Today, things have gotten better, although I’m not out of the red yet. I have begun saving, I’ve paid off several small debts and am well on my way to paying off my credit card (which I’ve canceled), and hope to pay off my car by the end of the year. I plan to be debt free in a little over a year, with good prospects after that. I’m also planning for retirement, a little travel, and a simple house. My finances are much better off today than they were just a year and a half ago.

Kiplinger magazine just posted a good article entitled, “Stop Living From Paycheck to Paycheck” and I’d like to share my thoughts on the subject as well. Some of my advice will be similar to Kiplinger, but mine is more practical, I think. I’ve been there, and I am living this advice.

First things first
Kiplingers recommends starting by tracking all of your spending on a daily basis, which is a typical recommendation from financial advisors and blogs, and is good advice. But mine is attempting to be practical — I’ve been there, in the trenches, and I know that keeping track of daily spending can be difficult. I advise you to do it, but if you don’t, for whatever reason, don’t let that stop you from fixing your finances.

My recommendation is that, whether or not you track your spending (and you should), at least do the following:

1. Stop the bleeding. Stop using your credit and debit cards immediately. Cut them up, or put them in the freezer in a ziploc bag filled with water, effectively freezing your cards. Also stop taking other loans, either from banks or finance companies or friends or family. Stop getting into more debt.
2. Start saving now! The next most important step you can take, in the beginning, is to start a small savings account if you haven’t already. Begin depositing into it regularly, at least $100 per paycheck but more if you can. If you can’t find $100 then see the next step for how. Make it an automatic deposit, the first bill you pay each payday, because it is the most important! A savings account will help you smooth out your finances — when an emergency comes up, like your car breaking down or someone having to go to the hospital, you won’t be thrown back into debtedness or brokedness. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.
3. Look at discretionary spending. If you can’t find $100-200 to save per paycheck, then you need to cut some things from your spending. This is where tracking your spending comes in handy, but even if you don’t, you know some of the extras you spend on — cigarettes, coffee, snacks, candy, desserts, eating out, magazines, shopping for clothes or gadgets or toys or shoes, books, going out … these are just a few of the examples. I’m not saying you need to cut everything out, but if you can cut a few of them, or maybe just one at a time, that can add up. Then, take the money you didn’t spend on those discretionary items, and put that amount into savings each payday. Increase this over time. (See How I Save Money.)
4. Start a debt snowball to begin getting out of debt. If you haven’t read about debtsnowballs, they’re simple. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just $40-50 extra (more would be better). When that amount is paid off, celebrate! Then take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding process, and very necessary.

Now that you’re out of the ER
Those are the first, emergency steps to take. While you’re doing those steps, start on these:

1. Make a budget. I know, it’s a dreaded word for most of us. But it’s not that hard, and if you set it up right, it’s fairly simple. I recommend using a simple spreadsheet. List all your regular expenses (rent, car, utilities, internet, etc.) and their amounts, and then your variable expenses (groceries, gas, eating out, etc.), and then your irregular expenses (things like car maintenance or medical that might not come up every month, but break them into estimated monthly expenses — if you spend $600 a year on car maintenance, budget a $50 monthly expense). Now match that up against your income. The expenses should be less.
2. Automate your bills. As much as possible, try to get your bills to be paid through automatic deduction. For those that can’t, use your bank’s online check system to make regular automatic payments. This way, all of your regular expenses in your budget are taken care of. Make sure that your savings is done the same way – automatic deduction.
3. Save for your irregular expenses. Some call it a Freedom Account, but the key to ensuring that you have smooth finances and that you stick to your budget is to take into account all your irregular expenses, such as insurance, car maintenance or repairs, gifts (think Christmas!), medical and other such things. List them out, estimate your annual spending, and begin saving for them each month. Again, if you spend $600 on car repairs, budget $50 a month for that expense, and put that amount in savings. You could set up different accounts for each expense in an online bank such as ING or Emigrant, or put it all in one account and use Money or Quicken or a spreadsheet to keep track of each. Then, and here’s the key, when these expenses come up, use that money for those expenses! That way, you can use your regular budget for the stuff it’s meant for, not for these “unexpected” expenses.
4. Use the envelope system for your variable expenses such as food and gas. This is optional, but it’s a good tip. I’ve been using it myself, and it works like a charm. Let’s say you set aside three amounts in your budget each payday — one for gas, one for groceries, one for eating out. Withdraw those amounts on payday, and put them in three separate envelopes. That way, you can easily track how much you have left for each of these expenses, and when you run out of money, you know it immediately. You don’t overspend in these categories. If you regularly run out too fast, you may need to rethink your budget.
5. Start thinking about your goals, and planning for them. When do you want to retire? How often do you want to travel? When do you want to buy that dream house? Do you want to save for your kids’ college education? Think about what you want in life, and start planning to save for them, especially once you’ve done all the above.

Once you’ve gotten beyond these steps, you should be past the paycheck-to-paycheck syndrome. Now there’s a whole world of personal finance options available to you, including investing your money for your goals. But getting past these first stages is important.

10 Habits to Develop for Financial Stability and Success

10 Habits to Develop for Financial Stability and Success

BY LEO BABAUTA

Just like any goal, getting your finances stable and becoming financially successful requires the development of good financial habits. I’ve been researching this topic extensively in the last few years in my quest to eliminate debt, increase my savings and increase financial security for my family. I’ll talk more about these habits individually, but wanted to list them in a summary (I know, but I’m a compulsive list-maker).

Here they are, in no particular order:

1. Make savings automagical. This should be your top priority, especially if you don’t have a solid emergency fund yet. Make it the first bill you pay each payday, by having a set amount automatically transferred from your checking account to your savings (try an online savings account). Don’t even think about this transaction — just make sure it happens, each and every payday.
2. Control your impulse spending. The biggest problem for many of us. Impulse spending, on eating out and shopping and online purchases, is a big drain on our finances, the biggest budget breaker for many, and a sure way to be in dire financial straits. See Monitor Your Impulse Spendingfor more tips.
3. Evaluate your expenses, and live frugally. If you’ve never tracked your expenses, try the One Month Challenge. Then evaluate how you’re spending your money, and see what you can cut out or reduce. Decide if each expense is absolutely necessary, then eliminate the unnecessary. See How I Save Money for more. Also read 30 ways to save $1 a day.
4. Invest in your future. If you’re young, you probably don’t think about retirement much. But it’s important. Even if you think you can always plan for retirement later, do it now. The growth of your investments over time will be amazing if you start in your 20s. Start by increasing your 401(k) to the maximum of your company’s match, if that’s available to you. After that, the best bet is probably a Roth IRA. Do a little research, but whatever you do, start now!
5. Keep your family secure. The first step is to save for an emergency fund, so that if anything happens, you’ve got the money. If you have a spouse and/or dependents, you should definitely get life insurance and make a will — as soon as possible! Also research other insurance, such as homeowner’s or renter’s insurance.
6. Eliminate and avoid debt. If you’ve got credit cards, personal loans, or other such debt, you need to start a debt elimination plan. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just $40-50 extra (more would be better). When that amount is paid off, celebrate! Then take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding process, and very necessary.
7. Use the envelope system. This is a simple system to keep track of how much money you have for spending. Let’s say you set aside three amounts in your budget each payday — one for gas, one for groceries, one for eating out. Withdraw those amounts on payday, and put them in three separate envelopes. That way, you can easily track how much you have left for each of these expenses, and when you run out of money, you know it immediately. You don’t overspend in these categories. If you regularly run out too fast, you may need to rethink your budget.
8. Pay bills immediately, or automagically. One good habit is to pay bills as soon as they come in. Also, as much as possible, try to get your bills to be paid through automatic deduction. For those that can’t, use your bank’s online check system to make regular automatic payments. This way, all of your regular expenses in your budget are taken care of.
9. Read about personal finances. The more you educate yourself, the better your finances will be.
10. Look to grow your net worth. Do whatever you can to improve your net worth, either by reducing your debt, increasing your savings, or increasing your income, or all of the above. Look for new ways to make money, or to get paid more for what you do. Over the course of months, if you calculate your net worth each month, you’ll see it grow. And that feels great.

20 Money Hacks: Tips and Tricks to Improve Your Finances

20 Money Hacks: Tips and Tricks to Improve Your Finances

“Money is better than poverty, if only for financial reasons.” – Woody Allen

We had the Parent Hacks earlier this week, and I was thinking it would be fun to do the same with finances — ways to trick yourself, to get around obstacles, to boost your accounts, without it hurting.

Improving your finances improves your happiness, in general, so I thought it would be important to share stuff that’s worked for me.

I’m in the best financial shape in my life, despite quitting my job and my wife recently quitting hers too. A lot of that is thanks to you guys, the readers, but it’s also thanks to frugality, to eliminating debt, to saving as much as I can. To these hacks.

Here’s what works for me — please avoid flaming me, as I’m not saying they’ll work for everybody. Share your tips and tricks in the comments!

1. Use cash. Instead of charging things to credit cards or debit cards, use cash for non-bill spending such as eating out, gas, groceries. Spending cash makes the spending more real, and there’s an added advantage of knowing when you’re out of cash, instead of spending more than you
2. Small weekly savings transfers. I got this idea from my friend Trent at The Simple Dollar, who automatically deducts $20 a week from his check to savings. I decided that I could live with $40/week without really feeling it — it’s a relatively small transfer that I barely notice, and I save about $2,000 a year on top of my larger bi-weekly savings transfers.
3. Stay home. Going out makes you more likely to spend unnecessarily. You eat at restaurants, go to the mall, stop at the gas station for snacks. It’s hard to avoid spending when you’re on the road. Instead, stay home, and find free entertainment. It’s also a great way to bond with your family.
4. Don’t get catalogs. Or emailed announcements from companies trying to sell you stuff. Their announcements of sales or cool new products make it very tempting to buy something you don’t need. Instead, stop the catalogs and emails from ever getting to you in the first place, and you’ll spend less.
5. Keep a 30-day list. If you have an impulse to buy something you don’t absolutely need, put it on a 30-day list. You can’t buy anything but necessities — everything else goes on the list, with the date that it’s added to the list. When the 30 days are up, you can buy it — but most likely, the strong urge to buy it will be gone, and you can evaluate it more calmly.
6. Cook at home. I know, it seems more difficult than eating out. But it doesn’t have to be hard. Throw together a quick stir-fry with frozen veggies and either boneless chicken or (my favorite) tofu with soy sauce or tamari. Make home-made pizza with a ready-made crust, some sauce, cheese and veggies. Put some spices on something and throw it in the oven while you cook some brown rice. Not only is this much cheaper than eating out, but it’s healthier.
7. Exercise. Staying healthy is the best way to avoid costly medical bills later.
8. Use the envelope system. It’s the same idea as using cash for spending, but in addition you use envelopes to split your spending cash into categories. My non-bills categories are groceries, gas and miscellaneous spending. Three envelopes, and when they’re empty, I’ve spent my allotment.
9. Talk with your SO weekly. It’s important that you and your significant other be on the same page. You should have the same financial goals, and from there you should agree on a general spending plan and a policy for impulse buying that won’t have either of you wanting to choke the other. Make sure you both know what bills have been paid, what your balances are, etc. A weekly meeting of just 20 minutes accomplishes that. Communication is key.
10. The spreadsheet tracker hack. There are expensive programs like MS Money, Quicken, and the like that will do amazing things with your financial information. There are even free ones, on your desktop or online, that can do all kinds of things. Trouble is, I don’t need all that. All I want is a way to track my money easily, with no other bells and whistles, and a way to access that online so that I can view it from anywhere. The best way I found to do that is through Google Docs and Spreadsheets. I created a simple spreadsheet to track my bank accounts, that does everything I used to do with MS Money. It has the date of each transaction, the title and amount, a little field for memos, and a running balance. What more do I need? Keep it simple. Update: View a sample I put online here.
11. Pay savings and debt first. When you sit down to pay your bills (I do them all online), make the first bills you pay be your savings transfer and your debt payments. If not, if you pay them last … you’ll often end up shortchanging them. But if you pay them first, you’ll make sure you still pay your rent or mortgage, utilities, groceries and gas … so you’ll just cut back on other spending.
12. Exercise at home. Some of you will disagree with me on this, which is OK — everyone should do what works for them. But I’ve saved a lot of money that I used to spend on gyms by just running at the local track or on the roads in my neighborhood, and buying some simple weights and a chin-up bar. I do a lot of body-weight exercises (pushups, Hindu squats, lunges, pullups, dips, etc.) and I don’t need a gym for those things.
13. Cut out cable TV. I’m not saying I don’t watch TV — I watch DVDs, so that I’m sure that what I’m watching is something great, rather than the useless stuff you find on TV most of the time. And there’s a lot of it online for free if you look. Not a huge savings, but it adds up.
14. Declutter. By getting rid of all the excess stuff in your home, you not only make your life much simpler and more peaceful, but you make it harder to buy stuff that will just clutter things up again. Once you’ve simplified your home, you won’t want to go back.
15. Lend and borrow. Give books and clothes and toys you don’t need anymore to your friends and family. If you need something, send out an email asking if anyone has it. Chances are, they’ll give it to you for free if they don’t use it anymore.
16. Barter. It’s a lost art, but lots of people will take your services or goods instead of money, especially if you’re friends or at least know each other. Get into the habit of offering to barter, and you’ll find yourself saving a lot of money. My website design was done through the barter system, so I saved well over $1,000 there, for example.
17. Use online savings. I use Emigrant Direct, but ING Direct is also popular, as are a bunch of other online banks. Not only do you earn like twice the interest of a normal bank savings account, but if you don’t get the ATM account it’s not as easy to withdraw money … making it less likely that you’ll get money out on an impulse.
18. Try frugal gift-giving. Giving people gifts is one of the most wonderful traditions, as it shows generosity and caring. Until it becomes commercialized. Then it’s just really really expensive. Instead, try giving the gift of spending time with someone. Try giving them something you baked or made yourself. Try giving them services they’d appreciate. It doesn’t have to cost a lot to be generous.
19. Teach your kids about advertising, saving, earning, and gift-giving. If you have kids, educating them about money will save you a lot of money in the long run. If they know about how advertising influences them in tricky ways, they’ll be less likely to demand (OK, beg and plead for) the latest fad toys. If they know about saving and earning money, they’ll respect the money that you earn, and that you are trying to save. If they know that gift-giving doesn’t have to be about spending a lot of money (see above), they won’t necessarily want expensive stuff.
20. Find happiness in life, not spending. Many times people buy stuff because they think (subconsciously perhaps) that it will bring them happiness. They just HAVE to have the latest gadget or shoes or cars. It’s so fun! And yet, you buy that stuff, and you’re only happy for a day or two at most. Then you just need to buy more. It’s a never-ending cycle. Instead, learn to love life. Find joy in nature! In the people around you! In doing something you love! In exercise and meditation! There’s so much in life to make us happy, there’s no need to find it in spending.

“I’d like to live as a poor man with lots of money.” – Pablo Picasso