First of all, for those of you that are currently looking for a job as you read this, what are you doing to try and find one?  I find that most answer this question in unison.  “Posted my resume to Monster.com”, “responding to Craigslist ads”…etc.  Most people spend about 80% of their job prospecting energies in online/newspaper ad responding.  That’s a lot of time.  Well you may argue that this is where most of the jobs are found.  In fact, it is the exact opposite.  Less than 10% of new jobs found were from responses from an online/newspaper ad.  Really?  Why on earth are people spending 80% of their time focusing on it.  That is because it’s the easiest to do.

In fact, just about 80% of new jobs acquired were done so by a referral of someone they knew.  When looking at the numbers, doesn’t it make sense that networking be the focus of your “prospecting” energies?  If you believe in statistics than yes.  So you may ask, but how do I maximize my contacts?  Here is a program that you can use, that has a highly proven success rate.  Those that have applied the principals I am about tell you, had an incredibly higher success rate in finding a job than that of the average public.  So enjoy and put it to the test.

They call it the 3 Name Rule.  Begin by sitting down and writing every single person you know personally, friends, family, old co-workers, neighbors, anyone who you feel has had some sort of professional contact to your field of interest.  Now I warn you not to pre-judge people.  You will be surprised about how many people actually have connections in your field of choice and you never knew about it.  So spend a few minutes and just write, write, and keep writing.

Now starting from the top of the list, call the contact and engage them in a similar type of dialogue as seen below:

“Tom… This is Brian, hey I know you have been around the auto businesses throughout the years.  I am very interested in the field and I just wanted to see if you can take some time out to meet with me and look over my resume and give me any advice of what I could do to make it stronger.”

Notice how the dialogue is an invitation to help you with your resume, not to see if they know of a job position for you.  This is an indirect way to get yourself and your resume in front of people that is much more non-intrusive than asking for a job interview.

Now these are people you already know, so getting the meeting should not be too hard.  When arriving for the meeting, consider the interview in your own mind as an actual job interview.  Dress to impress, bring a note pad, and conduct yourself as you would in a job interview.  What this meeting does is gets your resume in front of a successful person who knows your field of interest and has contacts in the field.  Amazingly enough, you will find that several times the person who you are interviewing with will look at your resume and notice that you fit a need that they have a their own company.  All of a sudden you just completed successful job interview and the person hiring you had no idea.  I know it seems like a far fetch, but trust me, it happens very frequently.

Now, most of the time, the person will make some remarks about your resume and that will be done with it.  That is ok, because remember, this is just your first round.  Before leaving the meeting, ask the person for 3 people they know (and their contact info) who are in your business that would be worth talking to, to help get to know more about the business in question.  If you are with the right person, they will easily spit out 3 names for you that you can contact.  Thank this person and be on your way.  Remember to keep this meeting no longer than 30 minutes, as most of these people are busy and are doing you a favor to meet with you.

From here you now have 3 contacts to pursue for opportunities.  What is great is when you first initially contact them, you use Tom, or whoever your original contact is, as leverage in saying they referred them to you.  People usually find this flattering when someone thought of them as an expert of a field.  When contacting them, use a dialogue much like this:

“Bob, my name is Brian, I am pursuing a career in the auto business and Tom Johnson told me that you were an expert in the field and someone I should contact.  I was wondering if I could come in and get talk to you about the auto business and what I can do to strengthen my resume.”

What this does is sets up another non-intrusive meeting with yet another professional in the field of your choice.  Again, the person you are meeting with has no idea your intent is to get a job with them.  The person is most likely to accept the meeting offer because you leveraged Tom.  Sure you don’t know them, but you were referred by someone they know and respect.

When meeting with this person, the meeting should go much like your original meeting did.  Have him/her give you feedback on your resume and talk to him/her about the field.  Even if you are not directly offered a job on the spot you are getting good advice about the field, building your contact base, and getting your name out there to where if a position does open up, these people will remember you.  When leaving this meeting, once again, ask for 3 people they know who are in the field that you should talk to about the industry.  If you do the math, after a few meetings, you will have quickly quadrupled your immediate network base for your desired job.

Keep repeating this process over and over again.  Every meeting is successful because you are given one more person to meet with.  Eventually, you will be in a meeting and someone will say, “you know, I have an opening that I think you could fill” or “I know a company who is looking for someone just like you.”  The opportunity will come.  Don’t get frustrated after one or two failed tries.  Know that your progressing in the program and eventually it will come.  Just remember to not leave there until you are able to get 3 new contacts to pursue.  This program has been proven to be very successful and if you continue to implement it in your own job hunt, you will find much more success than you ever had.

Just to give me some credibility, I own and manage 5 different blogs that discuss a variety of different topics.  Most of them are finance related, as that is my expertise, however, some have nothing to do with finance.  From these blogs, I have had to learn the ins and outs of building a blog, making it look good, providing content, etc.  I actually never really intended to make money off of them, but I quickly found that there are a lot of opportunities for bloggers to make money.  So take a lesson from me, as I have put many, many hours into trial and error to find the best ways to make a good, money making blog.

Setting Up A Blog

Before the blogging days, making your voice heard online was a pain.  You had to learn html code or become familiar with programs like Frontpage to try and create a site.  Then you needed to find a host to pay monthly just to get your content online.  Unless you were a web guru, most likely the site came out bland and ugly.  Times have changed.  Blogging engines such as Blogger and WordPress have made it incredibly easy to start a blog.  All it takes is signing up.  From there, you are able to choose from a variety of custom templates, while being able to tweak colors, widgets and other items.  Literally, you can have a space to write on in 2 minutes.  It’s that easy and it’s free.

Get A Custom Domain

When signing up for a free blogging service like Blogger or WordPress, you get a domain name and hosting free of charge.  However, you become a sub domain of the blogging host.  Blogger offers a “Custom Domain” option, which allows you to buy your own domain for $10 per year.  This is worth the cost.  A custom domain will benefit you greatly, especially as your site grows bigger and people begin to search for your site.  Also, for the little price, it just gives your blog that extra professionalism that will set you apart from the millions that keep the .blogspot extension name.  A tip from me, ditch the xxx.blogspot.com and spend the $10!

RSS Feeds

RSS Feeds are crucial to growing your blog.  On some of my sites, a majority of my content is viewed via RSS.  RSS (Really Simple Syndication) is a service that allows the content of your blog to be sent out through a feed and a reading service.  Google, Firefox, and Digg are just a few RSS sites that people can track your blog from.  Setting up an RSS feed is just as simple as setting up a blog.  Feedburner has made RSS setup as simple as a few clicks.  Once you set up your account (which is free), you can then place an icon on your blog so that people can instantly begin following you.  Also with Feedburner, you can setup a free email subscription service that is completely automated.  I have thousands of email subscribers that are instantly informed every time I make a new post entry.  RSS feeds is a great way to spread the word, while also being able to retain readers to keep coming back.

Promote Your Blog

Eventually, in time, your blog will begin to get more and more visitors.  That is just how organic sites work.  The more content that becomes found on your site, the more your site will come up in search results.  However, naturally, this process can take quite a while, especially if your blog topic is one of strong popularity with a lot of competition.  To help speed this process along, be active on other sites, blogs, and message boards.  Find sites that appeal to your readers and make yourself known on them.  Now, there is a fine line between healthy promotion and “spamming”, so make sure to be respectful when leaving comments.  This can be a great way to get more readers to your site, without having to spend a dime.  Also, participate in blogging carnivals.  This can be a great way to highlight some of your best posts and drive traffic to your site.  Ad companies like Google Adwords also can promote your site through a pay-per-click campaigns.  I have found that unless you have a big advertising budget, Adwords is a waste of money.

Choosing A Topic

Choosing a topic is a very important step to creating a successful blog.  Anytime I choose to create a site, I try to stick with topics that are timeless and won’t lose their relevance with time.  Pop and culture blogs are difficult, because content you wrote a year ago can be completely out dated and no longer applicable.  What a waste of your time!  By building a blog, you are also building a database of content, that hopefully becomes an empire of knowledge for readers no matter when you wrote it.  Even on this site, you can read a post I wrote a year ago and it can apply to you and me just as much now as it did then.  Choose a topic that will hold its relevance.

Another important part of choosing your topic is to choose something that you’re passionate about.  Sure, certain topics will yield better ad revenue than others, but don’t sell yourself out on a topic you are not passionate about.  Content is king in blogging and you need to choose something that you will not get sick of writing about and are considered an “expert” in.  If you’re struggling to find a topic, take a couple of days and pay attention to what you talk about mostly with your friends.  You’ll quickly find your interests and passions by what is dominating your conversations.

Build A Reader Base

So many times people start up blogs and come right out of the gates stamping their entire website with annoying advertisements.  First of all, you’re not going to make a dime, because you won’t have that many people showing up for a while.  Second of all, it will hurt your reader base.  Your ultimate goal of starting a “commercial blog” should be to build a reader base.  To do that, you need to make sure your site is worth going to.  Take note of the sites you visit often.  Why do you visit them?  Most likely, they offer you a variety of fresh, new content that interests you.  The same goes with your blog.

Consider holding off on annoying flashing ads all over your site for the first while during the beginning stages of your blog.  Ads can be annoying on the eyes and frustrate readers into not going back.  I have unsubscribed to many sites for the sole reason of “over advertising.”  If you focus on building a reader base, ad opportunities and revenue will come to you naturally.  Anyone can start a blog and throw ads up, however the key is creating a site where people will come back.  Writing frequent, fresh content will help keep your readers coming back as well as improve your search ranking results.

Making Money Off Your Blog

Please consider to not ONLY begin a blog to make money.  Yes, blogs can be very profitable, but that is usually when the blogger is passionate about what they are writing about.  If you focus on your content, site layout, and design, readers will come.  From there you are given a great opportunity to make money.  There are thousands of companies looking to advertise to a variety of people.  Trust me, there are companies that are looking to reach out to your reader base.  The key is finding those and being able to prove that your readers are their customers.

Adding Google Analytics is a great way to track who is coming to your blog.  From Analytics, you can find out where your readers are from, how long they stay, what pages they like, what they don’t like, etc.  You can then transfer this data to companies who are looking to advertise to a specific demographic.  Companies like Google Adsense, Chikita,  and Burst are just a few pay-per-click companies that will throw ads on your site without you having to do anything.  However, it is always better if you can find advertisers directly and eliminate the middle man.

I could go on for days about tips to create a successful blog.  These are just a few of the big important points to consider when starting one.  Like I said, I’ve learned almost every short cut and utility in starting a blog so feel free to ask me any questions by commenting on this post.  There are many other things to consider, but this should be more than enough to get you started.

Personally, I have found a lot of success on the Internet.  I have over 10 websites online that offer a variety of different information, and all of them offer a service that brings money back to me.  I do have a career on top of it, but it is a great way for supplementary income. The fact is, you can make good money on the Internet.

There are so many options of what kind of online business opportunities you can choose, all of which can be started with relatively low start up costs.  Please know, that in most cases, making money on the Internet is not a “get rich quick” scenario.  If you see an ad that says “Start Making Money Online Today!”, most likely it is a scam and is trying to get you to sign up for services.  Although making money on the Internet can be done from home, it also takes time, planning, and good execution to do well and be successful.  I have spoken to countless amounts of people who have started something online, only to have it fail within months.  Here are some tips to that can help you start making money online.

Start A Blog

This could be one of the most effective ways and easiest to start.  Everyone has passions and interests.  Well blog about them.  Blogging can be very profitable.  The point is to try and establish a good audience and retain your readers.  Whether you blog about traveling, video games, make up, or music, make sure to pick a topic that you are passionate and want to talk about frequently.  Some people choose topics that are more mainstream to try and capitalize on a bigger audience.  Don’t do it.  You will get burnt out and your content will suffer.  Choose a topic you enjoy and have fun with it, people will naturally flock to it.  I will do another post that goes much more in detail of how to make a blog profitable.  But you can get started real easily by signing up on Blogger, or for more usage abilities, use Bluehost.com (this one costs a little bit of money, but has a lot more features using WordPress).

Offer A Service Online

I have heard so many stories from people who have been recently laid off and found a way to actually start making more money from the Internet.  Many of you have certain skills and attributes you have picked up along the way, whether from school, a job, or just a natural instinct.  You have the ability to market this skill to your community or the entire world, depending on your service.  If you are a licensed hair stylist, you can market yourself online.  If you are good with computers or teach tennis, whatever it may be, there is an audience and demand for what you do somewhere in the world.  There are many different free online services to use to get your skill or business listed online so that it will come up in search results.  The point is, to be creative and do what you enjoy and are good at.

Become an Affiliate

People make hundreds of thousands of dollars a year selling other people’s products.  You don’t need to have something to sell, all you need is an audience.  After building up a good audience, you can then market other people’s goods and services on your site and receive a commission for doing so.  This way, all you need to worry about is your site.  You can make hundreds and even thousands a day by referring people to other company’s websites.  As online marketing becomes more and more aggressive, these rewards will only go up.

Flipping Goods

One of the greatest things that has come from the Internet is the ability for people to market stuff they don’t need.  Before, people would have to wake up early every Saturday and try to hit the major yard sales going on in the city or check the local newspaper listings to try and find bargains on people’s unwanted treasures.  Now, people can list these goods online at sites like Craigslist and eBay and you and I can benefit from other people’s unwanted goods all across the world.  In college, I would frequently find media equipment (video cameras, computers, stereos, etc) online and then was able to turn around and sell it to other buyers for a healthy profit.  Sure, you need to be knowledgeable of the items you’re selling and what people are willing to buy them for, but you would be surprised at what prices people are willing to sell some of their unused items for.

These are just of a few of things you can do to begin making money online.  There are countless ways to create cash flow through the Internet.  In posts to come, I will expand on some of these and show how to begin and just how easy it can be.  Income from the Internet can provide a great supplement to your salary and allow you to do things you may have not been able to do before.  Like I said, there is always a need for something you do well.  Find out how you can market that to rest of the world.

The answer is both of them.  Depending on your circumstances and usage of the vehicle, both options can be the better option at different times.  This is probably why there is always an ongoing debate of which is better.  In this article I will share with you some crucial things to know when looking to buy a car, and what to keep in mind when trying to decide whether to lease or buy.

Decide What You Need

This may be the most important step to buying a vehicle.  The worst way to buy a car is to blindly walk on a dealership without first deciding what exactly you and, if applicable, your family need.  Remember, a car is not an investment.  It is an asset draining liability.  For most cases, no logo on the front of your car will change the actual purpose of you buying the car in the first place.  Do your homework.  If this car is for you, sit down and decide why you need it.  Where will you be driving it?  Do you need good storage space or passenger room?  Do you want a more gas economical car?  There are so many options now available that if you do not know what you need in a car, you may end up with a car that doesn’t fit your needs.  Most importantly, decide what your budget allows you to spend on a car, and don’t waiver from that.  Never let your ego get in the way of your needs.  The “appeal” of a nice car fades in time, whereas the ability to satisfy your needs does not.

Know the Language

When looking for cars, it is important to know the language you may come across.  Knowing this shows dealers that you’ve done your homework and you’re not some gullible car buyer who is ready to get ripped off.  Here is some terminology you may need to know:

• MSRP- This is the recommended factory retail price for the car or the “sticker price.”  In almost all cases, this number will be negotiable.
• Capitalized Cost- This is the agreed upon price, which will most likely be lower than the MSRP.
• Lease Term- The number of years the vehicle is leased for.
• Residual Value- This term is used to describe the bank determined expected value of the car at the end of the term.  This value is expressed as a percentage of MSRP.
• Depreciation Charge- This is the value of any charges that exist after the difference of the capitalized cost and residual value.

Shop for Your Car

Once you find out what you need out of a car, begin looking.  Shopping for cars has never been easier.  There are countless amounts of websites that exist where you can get new car quotes (Discounted Internet New Car Price Quote from Web2Carz.com) with just the click of a mouse.  Look on Craigslist, eBay, and local Auto-Trader magazines for comparable prices.  Shop your local dealerships and let dealers know of your needs and ask for recommendations of cars that will accommodate those needs.  In most cases, you will never want to shop at just one dealership.  In time, you will eventually find a car that appeals to you the most.  Now we can get started.

Buy or Lease
Like I said earlier, depending on your needs, buying or leasing could be the better option.  Some pros to buying are that you own the car, regardless of any changes that happen in your life.  It is yours until you sell it again or until it breaks down.  You do not have a mileage limit so you have a lot of flexibility in the use of the car.  The downside is, of course, the upfront costs of buying a vehicle can be very costly.

Some pros for leasing include significantly lower upfront costs, considering you are only paying for depreciation costs and taxes during the period of ownership.   Leasing also gives you much more freedom to switch out cars every few years.  Disadvantages are that there are many hidden fees in leasing.  Also you’re flexibility for what to use the car for is greatly diminished, due to mileage restrictions, which if you go over, could have severe penalty charges.

When deciding which to do, consider these pros and cons.  If you like to buy a car every few years, leasing is probably the better option for you.  If you need to commute long distance for work or school, buying will probably be better.  Whatever the case, whether you buy or lease, you can always negotiate prices and fees.

Negotiate a Price

This is usually the fun part.  I am sure everyone you know that buys a car says that they got it for a steal and that it was the deal of the lifetime.  Well, if that were the case, auto dealerships would be out of business.  Auto sales is set up in a way where almost everything is negotiable.  Remember, no matter where you go, they want YOUR business.  Do not let the salesman dictate the terms.

It is usually smart to start negotiations at the dealer invoice.  Most dealerships will share this document with you and if they don’t, go somewhere else.  Often times, you can buy a car for invoice plus $100-$600, maybe even less.  Consider the fact that the more cars they have on lot of the one you’re looking for, the more they will be willing to negotiate.  Try to avoid the hot selling car of the month, as they are less willing to lower the price on cars that are low in supply.

Remember to factor in additional costs that are not included in your agreed upon price.  After agreeing upon a price, you will have to pay taxes, documentation fees, registration, license renewals, and more.  Leave some room in your budget for these added expenses.

How Will You Pay for It?

I usually try to refrain from auto financing if possible, but if you must, here are things to consider.  First, realize that in most cases, financing terms offered by dealerships will most likely be more expensive than financing that could be found from an outside institution.  Make sure and compare the differences between loan terms.  The main things to look at are down payment, interest rate, loan term, and any extra fees that are charged.  Maintaining a strong credit score is crucial for securing a favorable loan.  This is why financial planning is so crucial and affects so many aspects of your life.

Leasing financing is similar.  Your credit score will dictate how good of terms you receive from the dealership.  Keep in mind that depreciation costs are usually more for newer cars than older ones, thus a lease for a newer car will almost always be more expensive.  Make sure to know your lease term and how it coincides with your warranty.  In some cases, your lease may extend beyond your warranty period.  As a result, it may be smart to get an extended warranty from the dealership or a third party like SmartAutowarranty.com.

Enjoy the Car

Buying a car can be a long, vigorous process.  When it’s done, be sure to enjoy what you just bought!  Avoid buyer’s remorse as almost everyone gets it at one point.  Realize you did a good job researching and you have the best car for your needs.  Try to maintain the car as best you can so that you can get the most car for your money.  Remember, a car is not an investment.  However, it can be a great help in accomplishing your financial goals for financial planning.

It seems that hopes for a quick wealth has been with us for a long time.  Early gold rushers left on the spot for the search of gold in California, hoping that they would find their “quick riches.”  We hear the tales of those that did find success, however, we rarely hear of thousands more that found nothing and lost everything.  Aside from winning the lottery, or being a criminal, I cannot think of many things that will make you rich overnight.  Sure, you could one day find oil on your land, or win the jackpot from a slot machine,  however, your odds for getting a fatal disease at a young age is much greater.  So instead of playing the game of odds, lets try to improve them dramatically.

Invest in Yourself

I am amazed at the countless multi-level-marketing businesses and online scams my friends get caught up in.  In many of them, they are not only required to pay an initiation fee (many of these can be thousands of dollars), but also are required to spend a lot of time getting set up.  Whether it is going to motivational sales meetings, getting their website set up, learning the process of the business, there is a lot of time that gets used.  In most cases, after several months of failed attempts to make money, people give up on the program and jump to the next one that catches their eye.

It can be so enticing to look further into these ventures, however, as the old saying goes, “if seems too good to be true, it probably is.”  Think of all of the lost time that could have been invested into sharpening their skill-set, learning more work experience, and making them that much more competitive in the workforce.  On top of that, instead of draining their resources in attempts to launch this program, they could have been adding to it.  I ask you, next time you are asked to pay money to begin a new pyramid business, give it to charity, because most likely you will never get that money back.

Hard Work vs Smart Work

I am not a believer that one must slave their entire life to be able to enjoy a successful life.  Not at all!  In fact, I believe with proper planning and goal setting, this process can be accomplished rather quickly in life.  It all depends on how much you want it.  Don’t let those that say you need to work until your 70 before you retire, or you need to work two jobs.  Success is not derived by how many hours you put in.  In fact, I have known people that have consitantly held two to three jobs their entire life and still struggle to make ends meet.  Hard work is an important principle, but it is only effective when that work is assisting to accomplishing your end goal.  A man could work and sweat all day moving a pile of rocks from one side to another, but at the end of the day, he still has a pile of rocks.  Sure, the man worked incredibly hard, but he has nothing to show from it.  Create success out of your work.  Make sure your work is contributing to an end that will be satisfying to you AND your employer.

I often hear of people who are content in their slothful jobs who say, “work is so easy, I don’t even do anything.  I just get to browse the internet the whole time, it’s great.”  Although it may seem fun to get paid for not much work, it can be a disease to financial planning.  Time is a precious thing.  It is important to utilize your time the best you can to work towards your end goal.  When employed, not only are you providing a useful service to the company you work for, you are also strengthening your own skills.  This can only be a benefit and will bring good rewards down the road.  Don’t let three years go by with a job that you didn’t learn anything from.

Believe

Believing is probably the toughest part.  Most entrepreneurs and successful business men/woman have failed multiple times before they had their great success.  The point is that they always believed in themselves.  For most cases, a leap of faith must be taken to reap big rewards.  The power of believing and having confidence in yourself is a big one.  This principle is used in professional sports, medicine, military service and in many other aspects of life.  You are the only one stopping you of accomplishing your goals.  Everything else is possible.  Believe in your ideas and have the confidence to try them.  Do not get frustrated with your failures.  Learn from them and it will eventually lead you to great success.

Monetary success can be found rather easily, but it takes planning and application.  Do not fall into the trap of “get rich quick” scams, as most of them will just be a hurdle to your goals.  Instead focus on your skills and you will find that not only will you become “rich”, but you will have become better for it.

Insurance.

Nowadays, you can almost find an insurance policy for just about anything.  It all depends on how much you’re willing to pay as a premium.  Professional prospected college athletes sometimes purchase insurance policies as a protection in case of injury during their college year.  Their premiums can be insane, but it can act as a hedge in case of injury, one of which could support them the rest of their life.

Think of it this way, there are many ways you can manage risk in your life.  You can avoid risk, which would result in you keeping yourself in shape, maintaining a good diet, and avoiding risky investment opportunities that leaves you vulnerable to a lot of downside risk.

You can take on risk, meaning that you carry the full burden yourself.  Many people choose to not medically insure themselves or only buy “liability” insurance for their cars. Buy doing this, you fully take on the risk yourself in case of any problems.

You also have the choice of reducing risk.  Continual auto check ups as well as visits to the doctor can keep your risk at lower levels.  This helps of reducing risk of a problem occurring.

The other option you have is to completely transfer your risk. You can transfer your risk by purchasing an insurance policy.  By doing so, you pay a “premium” to have another company assume the risk for your potential problems.

Most likely you will eventually buy some sort of insurance in your life.  When considering insurance plans and what to buy, you may want to consider the following:

Stay Big
There are many companies out there fighting for your business.  It is best to stick with the larger companies who have been around for a while and have a lot of capital backing.  It is not unusual for insurance companies to go bankrupt, which could be a disaster for you if you are in the middle of an emergency.  Some companies may tempt you with lower premiums, but the extra few dollars a month is worth the security of a strong, reputable company.

Look For Discounts
Many insurance companies offer discounts.  For instance, well performing students are often given a lower monthly rate.  You may be eligible for a discount, depending on your employer as well.  Those who have family who have retired from the military are most likely eligible for USAA insurance, which is a very cost-effective, private insurance company which services military families.  Even if your father or even step-father was or is in the military, you are most likely eligible for USAA.

Compare Quotes
Just like any other industry, insurance is a business.  As such, companies are competing for your business.  Call around to several companies getting their quotes for their services.  You may be surprised at how much of a discount they may be able to offer in order to win over your business.

Purchasing insurance is an important element of financial planning.  All it takes is one medical emergency or one severe car crash, to put you in a pile of bills.  By purchasing insurance, you transfer most of the risk liability to your insurance company, helping you to focus on other important aspects of financial planning.

First, a key principal, that if you live by, you will be better off than your peers.  Live Within Your Means. Human nature begets a competitive spirit.  Many times this can result in a “better than your neighbor” mentality.  Some are constantly trying to keep up with their friends by constantly having the nicest and most expensive goods on the market.  Whether it is trying to have the nicest car out of the bunch or the biggest boat.  Whatever the case may be, it is important to try and tune those impulses out and focus on living a way of life you can afford.  By doing so, you will be able to save more money, minimize your debt and make it a lot easier for you to accomplish your long term goals.  Can you give up a Mercedes in your early twenties for your dream house in retirement.  If you were to bypass paying $60,000 for a luxury car when you were 25, and instead put it into a CD yielding 5% amortized interest, at 45 you would gave $162,758 to spend.  This amount is with not even contributing to the account over time or accounting for the additional money saved from maintenance costs and repairs that the vehicle would need.

The point is to try to limit yourself in what you choose to use debt for.  They should be NEEDS, not WANTS.  Now of course, we all get compulsive sometimes and can find ourselves in a spending frenzy.  So what do you do if all of a sudden you realize you’re swimming in a pool of debt.  Don’t panic, just analyze the situation:

Organize your debt

You may find yourself in debt in 10-15 different vehicles.  An auto loan, a credit union, two or three credit cards, a friend, etc.  The point is  to organize all of your debts into one document and find out your total amount owed.

Plan your debt payoff

It can seem like a monumental task when looking at all the money you owe to creditors and thinking of having to pay it all back.  However, it is amazing of how fast debt can be wiped out just by planning to pay it off the right way and deciding who to pay off first.  Organize a debt calender much like the one below to help plan your time line in paying off your debt.  Start with allocating as much money as possible to your higher interest rate debt like credit cards.  By setting up a table you are able to see exactly when you plan to be debt free.  This can be very liberating.

Consolidate your debt

If you find yourself in a sleu of credit card debt, you may want to consider a home equity loan (if you own a house).  A home equity loan is a secured loan, which in turn yields a much lower interest rate.  If you are getting eaten alive with interest payments, you may want to consider receiving an equity loan to payoff your credit card debt.  However, remember, failure to payoff your home equity loan could result in losing your house.  So make sure to change prior spending habits to allow you to payoff this debt.

When times get tough, always seek debt negotiation with your creditors to see if you can alter your terms of your loans.  You may be surprised to see how easy it can be to get a lower interest rate, or smaller monthly payment.  There are loan modification sites that have lists of agencies who can assist you in modifying your loans for your house or other debt.

Bankruptcy

Lastly, you can consider legal action, or bankruptcy.  Bankruptcy has become quite popular in recent times as it can free you from a deep burden to creditors.  However, bankruptcy is on your record for 10 years and can be a huge burden to you and very much restrict you from accomplishing your goals.  Bankruptcy should be considered as an absolute last resort.  Avoid it as much as possible, but if severely needed, bankruptcy can be a help in getting you back on track.

When studying bankruptcy, they find three major trends that influence it the most: Unpaid medical expenses, a loss of primary source of income, and divorce (separation and death).  By trying to avoid these, you can be able to better your chances of avoiding this plague and better your path to financial freedom.  Consider organizing your debt today, as the earlier you start, the earlier it is paid off.

First, let’s discuss how you determine either what is owed to the government, or sometimes, what is owed back to you.  Computing your tax liability is very simple and can be described using this simple equation:

Income – IRS Exclusions=

GROSS INCOME

– Adjustments=

ADJUSTED GROSS INCOME

-Standard Deductions & -Tax Exemptions=

TAXABLE INCOME

(Refer to IRS table to find your tax bracket, then calculate)

TENTATIVE INCOME

-Tax Credits

TOTAL TAX OWED

-Taxes Already Paid

TOTAL CURRENT AMOUNT OWED OR ABLE TO RETAIN AS A REFUND

Using this simple formula, you should be able to roughly estimate where your annual liability should run.  You can use software like quicken to help make the process easier.  In any case, it is important to realize how much you roughly pay a year.  By doing so, you can plan around this large expense.

There are four main strategies to try and utilize when planning for taxes.  These can help minimize your liability and in the end, keep more money in your pocket at the end of the year.  These four strategies are:

1. Receive Tax-exempt Income

You can use medical savings accounts (flexible savings accounts) to pay your medical bills.  This allows you to pay your bills with pre-tax dollars.  Also, look for tax free investments.  Many municipal bonds are tax free.  However, depending on your marginal tax rate, it may not make sense for you to use these vehicles.  You can also contribute long-term, appreciated assets to charitable organizations.  Using stock can be a great way to donate to charity.  In fact, many churches or charitable organizations will now accept stock transfers as donations.  By doing so, you get the full tax credit for the donation and do not have to pay the taxes on the gains of the asset.  See when you give, you shall receive.

2. Make the Most Out of your Deductions

Be charitable.  By giving more, you can save more.  Sure, we do not give just to save in taxes, but this can be a great added bonus.  Also, use your house as a tax shelter.  Your interest payment can be a great deduction for your taxes.  Adjust your deductions to get the maximum savings on a given year.

3. Use Long Term Capital Gains

Look to invest in long term investments.  Usually, long term capital gains is taxed at a lower tax bracket than short term capital gains.  Long term gains are usually referred to assets being held for 1 year or more.  Your tax rate can sometimes be 20% lower in a long term case.  Think about this when choosing your buy and sell strategies with your stocks.

4. Learn to Defer or Pre-pay Taxes to Help Save Money

Use tax exempt or tax deferred vehicles as much as you can.  401ks and IRAs are great vehicles to use to avoid paying taxes.  Try to contribute as much as possible to these retirement accounts.  Save for children’s educations using Education IRAs and Series EE or Series I savings bonds.  You can pay for education using pre tax dollars and can end up saving you a lot of money in the end.

I just cracked the service of some of the vehicles you can use in tax planning.  Be sure and talk to a good accountant or CPA to find out how you can best keep as much savings in your pocket every month that you can.  Remember, tax expense is most likely by far your largest annual expense.  By effectively planning for taxes, you will be able to save more money and become that much closer to achieving your goals to financial freedom.

]]> http://www.planningfinancials.com/planning-for-taxes/feed/ 0 http://www.planningfinancials.com/become-rich/ http://www.planningfinancials.com/become-rich/#comments Fri, 09 Jan 2009 05:41:20 +0000 Chris http://www.planningfinancials.com/?p=312 Of course everybody wants to wake up everyday with more money in their bank account then when they retired to bed the night before.  It seems as time goes on, the youth of the world are wanting more and more, but willing to work less and less.  Even myself, being rather young, find myself spending more time outside of the office than I remember my own father doing so.  They say this young generation is likely to retire in their 40′s, compared to the usual 60′s of the current.  Well, unless you’ve inherited a trust fund, won the lottery, or are a burglar, some sort of work is probably in your future.

It is not my intent to discuss which career choice to pursue, as I talk of that in choosing a career.  However, it is to discuss some important principles about spending money and how what you use your money for can indeed make money in your sleep in the future.

The thoughts provided in this post were inspired by one of my favorite books, a best-seller, Rich Dad, Poor Dad, written by Robert T. Kiyosaki.  For anyone looking for some great tips or spending strategies, this is a must read.  Although, I sometimes don’t enjoy “feel good”, short-term motivating books, this is one that has stuck with me throughout the years.  I am going to expound on the main principle he discusses in the book.

I have worked a few sales jobs in my past that pay mostly based on commission.  These jobs can be very rewarding if you are successful in selling your product.  At these jobs, I would see the “top producers” and I knew the numbers they were doing and the money they were making and thought, “wow, they must be living the high life.”  They would drive up in their Mercedes or Ferrari, get out of the car in their new, crisp, Armani suit.  Then, they would closely glance at their glittering Rolex around their wrist and enter the building.

However, when tough times hit in the economy, many of these same guys were some of the first to fail and lose everything they have.  How can this be?  They were making so much money.  Examples like Mike Tyson, Michael Jackson, and M.C. Hammer should be enough to show you that no amount is ever too much to be lost.

So, what is the problem?   How do they go from hero to zero in such a quick amount of time.  The answer is the principle Kiyosaki talks about, Building up your assets and reducing your liabilities.

Cash is the number one asset you can have.  It is immediately liquid.  The more “cash” you have, the more spending power you have.  It is always wise to have a fair amount of cash on hand as there are no substitutes for it.  Now with this cash, you have pretty much  four options.

1. Save the cash
   
2. Invest the cash in an income producing asset
3. Exchange the cash for something of equal value (buying something)
4. Use the cash to buy an incoming draining liability

Save the cash

This is probably the most obvious.  You can choose to put the cash under your mattress and do nothing with it.  Over time, due to inflation and the time value of money, the amount of cash will be worth less over time and have less spending value.  This is a neutral movement on your balance sheet.

Invest the cash in an income producing asset

With this cash, you can choose to put the money to work and invest it to increase your assets.  This can be as easy as putting the money into a savings account.  It can also be investing in a joint venture or investing in stocks.  The goal is to increase your current cash level to more in the future.  You can look at different investment vehicles in our investing section. This should be a positive movement in your assets column.

Exchange the cash for something of equal value (buying something)

This is as simple as buying book or game.  It acts as a vehicle of exchange for something.  This is usually a neutral movement on your balance sheet as the good is of equal value as the cash.

Use the cash to buy an incoming draining liability

This can be a bit complicated and can be easily misunderstood.  Many people will take this money and put it into what most would perceive as an asset, but can easily be considered a liability.  These can be houses, cars, boats, or any other big ticket items that requires a loan to complete the purchase.  These are to be considered liabilities, because all of a sudden you went from having no outgoing monthly payment and pile of cash, to no cash and a big monthly mortgage that will drain your income in the future.  Sure, you can argue that your house has value and is required to survive.  That may be true, but you also inherit a big monthly payment that doesn’t go away for a while.  This has a negative move on your balance sheet.

Now I’m not saying that buying a house or car is foolish, I’m just making it aware that it will become a financial burden on you.  If you are not prepared for this burden, maybe the timing isn’t right.  I discuss this principle further in another post.

Cars can be one of the worst income draining liabilities.  As soon as you drive it off the lot, it loses value.  They are a luxury.  Sure, you can give whatever reason why you need that specific car.  I need the supe’d up truck for the bad road conditions or for moving.  Or I need that BMW for my job and to impress my clients.  Whatever, the case be aware that these big ticket items can slow your progress to becoming financially free.

I urge young people to be methodical in what you buy.  TV and movies have helped created a sense of entitlement for the youth of America and has given false ideals of what is important.  People want to have that convertible in college now or that big house in their 20′s.  Sure, we all enjoy these things, but maybe I can share something that you can think about.

If you take the money you earn early in life, before you start a family and in your early years of marriage and invest that money into income producing assets, you will open doors that will provide you these luxuries at a much lesser cost to you later in life than if you buy them when you’re young.  By investing, you can use the income that is generated from your investments to fund your “toys.”  That way, you never have to dig into that base cash that you started with.  In time with appreciation, that little amount of cash can turn into a huge estate.  It is all about where you spend your money and how you build up your asset and liability column.

The point is to try and build up our assets as large as possible and minimize your liabilities.  Don’t be sucked into the Rolex, Ferrari lifestyle early on in life if you can’t afford it.  Drive that beat up old car a few years longer, or rent that house a bit longer.  If you are able to hold off, invest that money, you will find that you will have a lot more freedom to buy the things you want, without straining your main source of income.  Trust me, not every job is guaranteed and every salary set it stone.  When times get tough, which they will, you will be glad that you were frugal with what you purchased.  This can be a huge stress relief and can alter your whole life dramatically.  This simple principal is huge in finding success and financial freedom.