Search Results for: budget

January Financial Reset

January 17, 2014 By Shane Ede 4 Comments

You’ve had your fun. You spent the holidays with your loved ones, did some frugal gift giving (right?), and probably ate way more than you should have. But, the new year is upon us, and it’s time to get back to business. It’s time for a January financial reset.

With tax season right around the corner, there’s no better time to get all your financial books from the last year in order, take a good look at the balance sheet, and decide on the directions you’re going to take your finances in the coming year. For some of you, that will mean finally getting a handle on your debt. For others, it will mean finally paying off your debt. And for more of you, it will mean finding the best ways to make your money work for you as you build your net worth and make strides towards financial independence.

For those in that last group of people, this post isn’t likely to help much, but you might want to take a peek at my Lending Club page for a great way to keep your money working for you. The rest of you, stick around.

Reformulate your debt

If you’ve still got debt hanging around, a new year financial reset is a great time to investigate reformulating it. What the heck does that mean? It means taking a good look at the debt that you’re carrying, and considering the options you may have to pay it off earlier.

Reduce the rates: The worst feature of credit card debt is the interest rate that they like to charge. 12%, 15%, 22%, or more. The interest payments eat into any payment you make on the debt quickly, and make it that much harder to make any meaningful progress. If’ you’ve got good credit, consider finding some good 0% balance transfer cards to transfer your existing balances to. You should be able to find something with a 12 to 15 month 0% rate. Be aware of the balance transfer fee when you do this, but otherwise it can be a good way to help you make some good progress on your credit card debt repayment.
Refinance: In some cases (mostly secured debt) you may want to look into a refinance of the loan. If you can reduce the rate on a loan and extend the length of it, it can free up some of your debt repayment money to go towards loans with higher rates and speed up your debt snowball.

Recalculate your debt snowball

Now is also a really good time to update all the numbers on your debt snowball plan. (or debt avalanche if you’re so inclined) Unless you’ve been keeping it updated throughout the year, the numbers are probably pretty out of date, and need to be freshened. Take the time, while you’re doing this, to determine if you need to move one debt ahead of another, or if you can afford to increase the snowball payment to speed it up.

Seed your budget

Your budget can be the lifeline for your financial life. It’s a blueprint for how you’re building your financial house. Even a simple budget can help tremendously, and the beginning of the year is a great time to give your budget a full inspection (or just to start one) and make sure that it’s got all the categories you need, that it’s still balancing, and for planning out where you’re going to focus your efforts in the new year.

Examine your bills

We all get bills throughout the month. In many cases, we throw them in a pile, then enter them into bill pay, (or, gasp, write checks) and then forget about them until they show up the next month. While you’re going through your finances from the previous year, pay attention to the bills that you’re paying. Are there bills that have increased? How about ones that you meant to cancel the service but didn’t? Or maybe there are some that you just haven’t called to try and get a better rate for? Know what time it is? You guessed it. It’s time to cancel that service. It’s time to call and see why the rate increased, and if there’s a change you can make to get a better rate. It’s time to compare your services with their competitors and see if there isn’t a better rate/service available out there. You may think it’s a waste, but you could end up saving hundreds a month. And that can quickly make your debt snowball grow!

Keep on your financial path

Here’s the most important thing you have to take away from this post. You’ve got to keep on that path. Once you’ve done the things above, you’ve taken some really solid steps on your path to being debt free, but they’ll only work if you keep working with them. Keep that budget going, keep a close eye on your bills, keep your snowball updated, and know how much debt (and at what rate) you have left. Whether your debt feels like a mountain, or just a molehill, knowing the what/when/where of it make the climb that much easier.

Will you take the time to do a January Financial Reset?

Do We Inflict Peer Pressure On Ourselves?

January 15, 2014 By MelissaB 10 Comments

When my husband and I got married, we were flat broke. Broke. We bought the cheapest wedding bands that we could find, and my diamond is small. However, that was my preference. I wanted to stay within budget, and I personally like smaller diamonds rather than the big rocks that some women wear. (All I could think was that when I had babies, I’d accidentally scratch them with a big ring.)

Still, there have been times that I’ve been in the presence of a group of women, each with a huge rock on her hand, and I’ve been a bit embarrassed by my small diamond. I’ve wondered what other people thought of us and our financial situation.

Peer Pressure Doesn’t End in High School

In high school, peer pressure is at its peak. If you want to be popular, you have to follow what the other kids are doing. I didn’t cave to peer pressure often. Instead, I had a few close friends, and I followed the path that was important to me. I was relieved when I graduated because I thought the peer pressure would finally be done.

In college, I found that the peer pressure did relent. People would respect your choice if you didn’t do what they were doing.

However, as I got older, I began to realize that there are societal norms that you’re expected to maintain. This becomes the “keeping up with the Jones'” phenomenon.

The Pressure Becomes Internalized

My husband and I are digging our way out of serious debt. We are scrimping and saving, knowing that in a few short years we will be out of debt and can start fresh. We can have all of our money be our own once we’re out of debt.

Meanwhile, we drive a 10 year old minivan with over 125,000 miles on it. I wear my small diamond ring, which I don’t ever plan to replace with a bigger version. We rent an apartment instead of owning a home.

No one is pressuring me to spend money that we don’t have. No one is passing judgment on us (at least not to us directly). But it’s hard not to look at other people’s lives and see the “stuff” that they have. The nice cars. The nice home with brand new furniture and a manicured lawn.

No one is telling me I’m failing, but I feel it sometimes. I feel that I’m not living up to society’s standards. I can see how easy it is to want to keep up with the Jones’, even if you can’t afford it. I can see how easy it is to pull out the plastic just this once because you’ve been scrimping and saving and just want to be like other people once in a while.

For the people who can afford it, there is no danger in this. For the people who can’t afford it, there’s just debt and heartache. You might then be just like those you want to be like.

Me, I’ll keep resisting the peer pressure, even though now it’s mostly pressure I put on myself.

Separate Your Business Accounts

December 2, 2013 By Shane Ede 13 Comments

I don’t think it’s any secret, in this online world, that just about everyone is trying to make a little bit of money with a website. After all, it’s not terribly difficult. It’s not necessarily easy, but it is far from hard. Throw up a website, put some work into it, and start bringing in money. I do it with this site and others. There’s work involved, but you can make money.

If you’re going to do it, you’ve got to treat it like a business from the start. I don’t mean that you have to create a company, license it with your state and the IRS, and create a board of directors. What I do mean, is that you need to have the business assets and accounting separate from your personal assets and accounting. Using your own personal checking account, savings account, and trying to keep them separate come tax time (and you’ll want to) can be very difficult. So difficult that you almost have to be a CPA in order to keep it all straight.

When I first began making money with blogs and websites, I didn’t separate anything. The money to buy the domains came directly from my personal checking account. The money to pay for the hosting of the websites came directly from my personal checking account. And then tax season came around. While I hadn’t made much money from the sites, I did make some. I wanted to be able to use the expenses of the sites to reduce the income from the sites, so I needed to figure all of that out and get totals for my taxes. Instead of just going into my accounting software, pulling up the business accounts, and running a profit loss statement, I had to go through each months’ statement of my checking account, and single out the transactions that were related to the sites. After I’d pulled them all out, I had to compile them into a spreadsheet and create a profit loss statement from them. It easily took twice as long as it should have. And that was when things were simple and I only had a couple of sites with a couple of transactions every other month or so. It would be much more difficult now.

How should you separate your business accounts?

I’m still a fan of keeping things as simple as you can. I don’t think you need to go through the whole filing process to create a company. That’s something that can wait until you’re making a decent amount of money. Ask your CPA if you want a more accurate number. You can keep it simple. What you really need is separate accounts and separate bookkeeping.

Start with setting up separate accounts for the business funds to flow into. You’ll need your own business savings account. Add a checking too if you think you’ll have need of a debit card or actual checks to write out. I’ve got a checking account and several savings accounts set up that are used solely for the business funds. If you’re not going to use the business account debit card for online purchases (it’s probably safer not to), you’ll also want a credit card that is used only for business transactions. Again, it doesn’t have to be in the business’ name, it just has to only be used for business use. I use one that has a 1-5% cash back feature to save a little extra on expenses.

When it comes to keeping your books, you probably don’t need anything too fancy for your personal accounts. Just enough to create your budget, and keep track of accounts. For business, you really need something a little bit more. I prefer a full on business accounting software. There’s a couple out there, and you can probably pick one up cheap off of eBay. They’re a little more complex than the software created for personal accounts, but I like the detail the complexity gives me. Maybe you can get by with a robust spreadsheet. But, something that you can use to give your CPA (even if that’s you) a full detail of the profit/loss of the company including all sources of income and expenses.

It may sound a little difficult, but it’s not any more difficult that it would be if you didn’t separate them first and then tried to separate them after you need to. You’ll thank yourself later.