Managing Your Personal Finances as an Entrepreneur: 14 Tips From Leading Experts

As an entrepreneur, it's important to have your personal finances in order, because you never know what may happen with your business ventures.

There's no doubt about it that being a successful entrepreneur requires a lot of expertise in a lot of different areas. Arguably one of the most important aspects to becoming a successful business owner is having your finances in order; after all, with no money, you've got no business. So, to help aspiring entrepreneurs take their next step towards building their empire, we've asked 16 expert entrepreneurs for their best piece of advice for managing your personal finances. Here's what they had to say:

1. Diversify!

"Diversify. Diversify. Diversify. I know that's canned advice you would hear from almost every other "financial expert," but it rings especially true for entrepreneurs. Here's something you might not want to admit to yourself: your entrepreneurial venture has a greater chance of failing than succeeding (gasp!). By diversifying and placing funds into another side business, alternate investments, or just setting aside cash, you will give yourself breathing room in the event that you have to call it quits or need to pivot to another business. In my own experience, I have been able to diversify into other ventures that operate independently of each other and that has led to constant growth and more exciting opportunities."--Jeff Rose, GoodFinancialCents.com

2. Plan For Inevitable Rainy Days (Or Months)

"Since many entrepreneurs have to deal with irregular income, it's important to budget your personal finances around that to make sure that you have savings that you can draw from in the leaner months. You need to know that you can cover the essentials like housing, utilities, insurance, and food. So add up those critical expenses and put aside enough to cover at least a couple months."--Tom Drake, Canadian Finance Blog

3. Plan For Your Future

"Don't forget, you should still be saving for your retirement. Even on a fluctuating income you should aim for a small bit of savings each month. A good starting point would be to open up a Roth IRA and contribute the max each year. If you want to do more, consider a SEP IRA or Solo 401K account, which will help you shelter a lot of your business income from taxes."--Philip Taylor "PT", Founder, FinCon, PT Money: Personal Finance

4. Separate Business Funds From Personal Funds

"When you're an entrepreneur starting your own business, it can be a good idea to keep your personal finances and business finances separate. Not only will it give your business more credibility and a sense of legitimacy, but in some cases it may also help reduce your personal liability were something negative to happen down the road. It will also help you to be organized when it comes to paying your taxes, managing your bills and other payments."--Peter Anderson, Bible Money Matters

"It's simple but vital: Keep business and personal accounts separate and document profit distributions to yourself. As a one-person business, I didn't set up separate accounts soon enough. The CEO of a 10 or 100 employee business wouldn't use corporate accounts as his own; why would somebody running a company of one or five?

Not only do separate accounts make tax-time easier, they're essential if you want to sell your business or you face litigation or bankruptcy. In the worst case, intermingling personal and business accounts may negate the protections offered by your business structure."--David Weliver, Publisher, MoneyUnder30.com

5. Keep Your Expenses Below Your Income

"Never forget that expenses rise to meet income. This is the gist of Parkinson's law. This is the reason that a couple months after most people get a raise, it feels just as tight financially as it did before the raise.

Without an intentional effort, houses, desks, kitchen sinks naturally get messy and cluttered. We have to take action ON PURPOSE to keep things clean and organized. The same ON PURPOSE effort needs to be made to keep our expenses BELOW our income."--Bob Lotich, ChristianPF.com

"Since you probably have a budget for your small business, make sure one is in place for your personal finances as well. It can be easy to let managing your own money fall through the cracks while trying to grow and expand your endeavor. Use a website like Mint (it's free) and enter in accurate amounts for your monthly bills. You'll probably need to estimate your income unless it is consistent. Then, work on reducing all monthly bills. Your ultimate goal is to get your spending under your estimated income. Once you have a surplus, use it to pay down your credit card debts, start or improve your emergency fund, or set it aside for your retirement."--Andrew Schrage, moneycrashers.com

6. Automate Your Bill Payments

"When you're spending every waking minute on building a business or releasing a product it's easy to overlook personal bill payments. Automated payment services that let you setup specific rules for each bill and alerts for exceptions allow you to put your bills on auto-pilot and focus on your business. If you use a credit card you can help avoid leaking money via fees and interest by setting up spending limit, payment due, and late payment alerts."--Ben Edwards, Money Smart Life

7. You Get What You Pay For

"Hire the best people, not the cheapest. If someone is willing to work for free, say no. You want someone devoted to the project, not someone who regards it as a passing hobby that they can tackle in-between episodes of Dancing with the Stars."-- Paula Pant, Founder, AffordAnything.com

8. Protect Your Most Valuable Asset

"Many entrepreneurs overlook their need for disability insurance even though their ability to earn an income is their most valuable asset. Stop thinking "it won't happen to me" and know that it could. (The Council for Disability Awareness has some great stats here). Ask yourself how your family would live without your income or what you would do for income if something happened to you. What are your options? Are you protected? (Note: Life insurance is also very important if there are other's dependent on your income)."--Mary Beth, www.workablewealth.com

9. Maximize Retirement Savings Options

"Those that are self-employed have significantly more options when it comes to retirement savings. Beyond traditional 401k and IRA plans, the self-employed should consider SEP IRAs, individual 401k plans, and even defined benefit plans. These alternatives enable entrepreneurs to save significantly more for retirement in tax-sheltered accounts. For example, a SEP IRA enables a self-employed individual to sock away up to $52,000 this year for retirement. With a defined benefit plan, some are able to save more than $100,000 a year in a tax-deferred account.

Some of these options can become quite complex. As a result, it's best for entrepreneurs to contact a tax or retirement specialist to understand which alternative is best for them."--Robert Berger, doughroller.net

10. Take Your Business On A Money Date

"Check in with your business budget often by establishing a money date ritual. Each week I take myself and my business out to lunch where I review my accounts, create reports, and update my financial goals. It makes doing mundane financial tasks like paying quarterly taxes, or putting together monthly reports, a lot more fun and less of a drag. I actually look forward to getting out of the office (and indulging in a sweet treat afterwards), where I list out positive business accomplishments that have occurred over the past week or so. A money date is the perfect opportunity to reflect on what you've accomplished, where your business is now, and where you're headed."--Carrie Smith, carefulcents.com

11. Seek Out Professional Tax Advice

"Spend some time and money on getting professional tax advice from someone who works with small businesses and entrepreneurs. There are many tax savings to be had if you know what to look for. On the flip side, you can get yourself into trouble very quickly if you don't know what you're doing. Critical areas to look out for include reporting income and expenses, home office deductions, hiring employees vs. contractors, and more. It's money well spent (and will often pay for itself!)."--Ryan Guina, Cash Money Life

12. Strive To Smooth Out Cash Flow

"Consider your personal finances like you would a business. A business has access to credit in order to smooth cash flow for various operations. As an entrepreneur, your income might be variable, so having some sort of mechanism in place to smooth cash flow in your personal finances makes sense. I have a low-interest personal line of credit connected to my checking account. If a client pays late, or if there are other problems, all of my automatic payments are made smoothly. Usually, when the money does come, I can then pay off the line of credit immediately--without ever paying interest. Smoothing out cash flow in your personal finances is just as important as smoothing it out in your business."--Miranda Marquit, www.MirandaMarquit.com

13. Keep Your Business Expenses In Line

"Don't go overboard with your expenses! There's this myth that expensing something magically moves the expense to a tax-free wonderland but the truth is you are still paying for the expense. With income coming in and a company credit card it's easy to let your profits slip away with small expenses. Run your venture lean and only spend on what you need for the business."--Glen Craig, Free From Broke

14. Negotiate Everything

"When it comes to business, make sure you negotiate everything. Contact your credit card processors, your suppliers...contact everyone and renegotiate your terms on a regular basis. Everyday, our business is constantly bombarded with new vendors offering their services at competitive rates. Make sure you strike a conversation and pit your existing vendors against the new ones and you can save tens of thousands of dollars a year."--Steve Chou, mywifequitherjob.com

There you have it--personal finance tips from the pros that will help you build the businessof your dreams. Remember, as most of these experts explained, success is all about striking a balance with your finances. If you are cheap, you're not going to get quality results, but if you're too extravagant, you're likely to end up in the red and ultimately fail. Be smart, be frugal, and put money into things that will grow and you will be well on your way to success.

Source: https://www.inc.com/murray-newlands/managing-your-personal-finances-as-an-entrepreneur-14-tips-from-leading-experts.html

HOW DEBT CAN GENERATE INCOME

Robert Kiyosaki of Rich Dad Poor Dad talks about how debt can generate income.

Compounding - The Tortoise and the Hare - The True Secret of Trading Success

Have you ever heard the story about the Tortoise and the Hare? I am sure you have. But what you probably didn’t realise is that the story can be linked to trading. In fact, the Tortoise and the Hare is pretty much how I would categorise the successful Trader (the Tortoise) and those who never seem to get anywhere (the Hare).

In this blog post we are going to look at compounding. I am going to explain to you how it works, and beat the marching drum for it, in the hope that some of you fall into the slow march.

There are two categories of Traders out there. We have the get rich quick, fast cash brigade first. This is the Hare. This person wants to become a Trader and they want to become a millionaire and watch their account swell. They want it NOW. Sadly, this is the predominant type of person learning to trade. There are thousands of websites

that cater to them, promising ‘secret strategies’ and ‘financial freedom’ and ‘fast results.’ This type of trader has wild swings on their account. Sometimes they DO make large amounts of cash. But they lose it just as fast. They spend months and oftentimes years banging their head against the wall of Fast Cash and continue to make the same mistakes over and over again. Sadly, the result is always that eventually, they are forced to stop trading. They either lose too much money and can’t afford to continue, or their body has taken such an emotional beating that they are forced to retreat.

Whereas the Hare lost his race by being cocky and taking a nap, the Fast Cash Trader loses because instead of going at a sustainable pace, they try to go faster and faster until their heart gives out and they keel over. The answer to problems for the Fast Cash Trader is to increase risk, to trade more, and to attack markets until they get what they want.

They don’t understand one of the REAL secrets of trading – which is compounding. Instead, they want to make 100% per month. They want to make this amount because they need to make this much so they can live off of their trading income. Remember, they want to do that NOW. They need to make a certain amount each week for their wage. There is no future planning, they just want the money. If only someone could show them that by demanding the Fast Cash, they are instead making it impossible to succeed.

Now let’s look at the Tortoise. This Trader isn’t particularly exciting. They think in terms of years, rather than short term. This Trader understands that by taking a long-term view, and by allowing one of the true secrets of trading to work its magic, they can achieve their trading goals.

To understand compounding, I’ll tell you a quick story I was told when I was a teenager. My Dad told me a story about a man who went to play a game of golf. The person he was playing against said, to keep this interesting, let’s bet some money on each hole. We will start with £1 and double the risk each hole we play.

Now, that sounds absolutely fine, doesn’t it? A friendly game of golf with some risk between friends. But how much do you suppose they would be risking by the 18th hole?

By the 18th hole, they would be risking over £131,000.

And that, is the magic of compounding.

Now, I was around seventeen at the time. So, in all honesty, it blew right over my head. I was more interested in what my friends were doing at the weekend and what house party we were all going to so I could try my best to chase girls (and fail miserably as always).

But, once I found Trading, I understood the real power behind compounding.

It is IMPOSSIBLE to sustain huge Trading returns. I did a video about this on the YouTube channel called – The Most Common Trading Scam I see and the Number One Reason Beginner Traders Fail. I am not going to touch too much on it here. But rest assured, if these idiots promising even 50% returns per month could be believed, you would be the richest person in the world in a couple of years starting with only a modest account. It just isn’t possible. Sorry to burst your bubble, but if it were, banks and hedge funds with multi-billion pounds of spending power would be doing it, not some idiot sitting in his bedroom on his laptop. Instead, you’ll be back to being the Hare – running really fast and going exactly nowhere, over and over again.

But we are interested in the Tortoise. And it is important because it can help you take a HUGE amount of stress off of your shoulders as you learn and start to find consistency. By putting an arm around the shoulders of compounding and by accepting trading as a long-term venture, you can achieve your goals.

Let’s say you are at the stage whereby you are finding consistency as a Trader (If you’re not there, then that is fine also. You are still in the learning phase. Just take your time and protect your capital. The compounding can come after you learn. Crawl first, then walk). Now, when you start to become consistent, the danger is there that you suddenly ‘want to be a Trader’. And by saying that, I mean you want to quit your job and live life on a beach. The problem is, to do that in most instances, you would need to take on huge risk. And that will drop you right back down to being a Hare. Most people start with a smaller account, it is simply the truth of life. And the hard fact of life is that a small account is not sufficient to sustain you as an income source.

But let’s look at that long-term view. We will start with a relatively modest account of £5,000. And we will use compounding over a five-year period.

The problem with trading initially when you have a small account, is that you ARE looking at the monetary returns. You make a few hundred pounds in a month and instead of realising how well you have done, you think, ‘I can’t live on that’. So, you beat yourself up and try and do more. If you only took a proper view on it, you would understand how well you are doing and how you are setting yourself up moving forward.

Let’s now say you decide to risk 2% per trade. Your target is 5% per month. And you are going to let compounding do its work. So, that means you will need to be ‘up’ by around 2.5 trades per month (if looking for 1:1 risk reward). You don’t need to take ten trades per day; you don’t need to double your account every week. Just 2.5 solid trades per month.

If you only focused on the monetary return, it would be easy to get disheartened. By the end of 12 months, you would only have £8,942 in your account. Again, you start to think that you can never live on those sorts of returns. This is where people go wrong. Again, the desire to up your risk comes in. Disaster ALWAYS follows. What you should be focused on is the fact that you are making great returns in percentage terms. And you are building your trading knowledge and your discipline. JUST KEEP DOING WHAT YOU ARE DOING.

By the end of year two you are at £16,060.

By the end of year three you are at £28,841

By the end of year four you are at £51,795.

Do you see the power of compounding in action? What if you decide to go for another one year?

By the end of year five you are at £93,000!

Now, do you think by the end of four or five years you have not only the ability, but thanks to compounding, also the account to look at trading as a more serious venture? And here’s something else that you can do – at the end of that time, take a look around at all the Hare’s who were chasing the fast cash and the huge returns. I can guarantee you they won’t be trading full time and will either be running through another cycle of ‘ok, this time I got this. I am going to make so much money!’ Or else they will have stopped trading altogether.

The problem with compounding is that people don’t let it have the time that is required for it to work. It is a snowball, that grows exponentially the more you roll it down the hill. You start small and you just stay focused on the process, not the outcome.

Five years. You can either ignore it and keep running full speed ahead like the Hare, lots of pace but never getting anywhere. Or, you can accept the reality of the task at hand and start building your foundation for the rest of your trading career.

I hope you’re all having a great trading week!

Source: http://www.thinklikeatrader.co.uk/2018/02/compounding-tortoise-and-hare-true.html

15 Things Poor People Do That the Rich Avoid

In this video, Kris Krohn looks at 5 areas where poor people do things differently than the rich.

Why Debt Free Living is Dangerous: The Truth You Won't Hear from Experts

The debt free scream is all the rage but may be dangerous to your financial life. It’s not that managing your debt or debt free living is dangerous, but here Joseph Hogue talks about how not managing your credit score is more dangerous than you might know.

When money isn’t real: the $10,000 experiment

Adam Carroll talks about his $10,000 Monopoly game with his kids and how to teach finance management in a cashless society.

Ideas That Could Help You Reduce Life’s Expenses

Ideas That Could Help You Reduce Life’s Expenses

Life can be expensive at times. Whether you’re a frugal person or not, you most likely spend a lot of money every year on rent (or mortgage payments), utilities, food, gas, clothes, taxes, insurance, and a wide range of other essentials that are either necessary for your wellbeing or imposed by the government. These are necessary costs, but you can reduce the amount you spend on many of those necessities. The answer isn’t to simply stop treating yourself to luxury things; you can save money in that regard too. You just need to organise your finances. Here are some ideas that could help you to reduce the many expenses that life hurls at you.

Spend less on necessities.

One of the best ways to save money in life is to take a look at the necessities in your life and see where you can alter your budget. You obviously need to set aside enough money for the weekly food shop, but you might not need to spend as much as you currently do. You could search online for deals and discount codes that can be used at certain supermarkets. As for your energy bill, you could reduce that by unplugging any electronic device that’s not being used and even getting thicker glazing for your windows. You don’t have to sacrifice some necessities in order to save money; you just need to think of smarter ways to get the things you need.

Do some research before you make those big purchases.

Of course, everybody faces big costs in life. A new house, a new car, a college education, and other costly things are all essential aspects of life in the modern world. These are unavoidable things for the majority of people. Whatever your lifestyle, you’ll probably be faced with at least one such “big purchase” at some point in your life. It’s important that you, at the very least, do your research so as to save as much money as possible on those massive costs.

For example, you should always haggle when you’re house-hunting; never accept the asking price because most sellers will gladly accept something lower. The initial price is just a starting point. As for buying a new car, you should do some research on used car finance to see if you could get cashback or other deals on your purchase. Referring back to the first point, you can save money on necessities. A car might be essential for your travel, but there are cost-effective ways to go about buying one.

Put your money out of reach to cut back on non-essential expenses.

One of the best ways to reduce your expenses is to resist temptation. And if you put some of your money out of your reach then you’ll have less disposable cash to spend on things. You’ll still be able to treat yourself to meals out or nice clothes, but you won’t be able to splurge as excessively as you could if you kept all your money in your main account. That’s why you should regularly transfer money to another account. If you set up an automatic standing order that sends a portion of your income to your savings account every payday then you won’t have to worry about accidentally dipping into your excess cash. It’ll be out of reach. It’s a good way to teach yourself to be more fiscally responsible and reduce your luxury expenses.

Source: https://blog.themoneyshed.co.uk/ideas-that-could-help-you-reduce-lifes-expenses/

How to Properly Manage Your Money Like the Rich

It's not about how much money you earn. It's what you do with the money that matters.

In this video, Tom Ferry shares what the best professionals do to manage their money.

Bank Charges: Reclaim them with Martin Lewis

More great advice on managing your money like a pro from Martin Lewis of Money Saving Expert!!!

Check out his advice on reclaiming your bank charges in this fantastic video!

Eliminate Debt in Six Steps and Plan for Your Future

Many Americans are in debt. Car loans, credit cards and student loans are the three most common offenders that linger in many family budgets. If you find yourself in this situation, you are not alone. Many American households are currently living paycheck to paycheck with no end in sight. This amount of debt is unacceptable in the world's richest country. Something has to change as people continue to slip further in debt and their children watch and learn these bad behaviors.

Good spending habits are easy to explain. Do not spend more money than you earn. This allows you to keep debt at bay and out of your life. Many people probably would not own a car if there were no such process as a car loan. We have taught ourselves that borrowing money is the only way to survive. When we discuss loans, many people say that they have no problem with taking on multiple loans to fund their lifestyle. This contradicts the idea of spending less than you earn. Just because you can incrementally pay for an item along with the interest does not mean you can afford the item. You are essentially renting the item from the lender and you paying them for assuming the risk of loaning you money. This makes them rich while you continue to stay in debt.

People with good spending habits do not borrow money, they save what they earn, then make decisions to write checks for things that fit into their budget. This philosophy allows even the most modest earner to save for a long retirement. Think how much money you could save if you had no loans to repay to a lender, even including your mortgage. Once you achieve financial freedom, you can begin saving for retirement very quickly because the portion of your budget previously reserved for loan repayments can now go towards investment accounts, which helps you get ahead.

Over the past 20 years, I have developed a simple but effective plan that eliminates debt in a six-step approach that allows you to take over your spending habits and focus on debt elimination. If followed correctly, you should be able to eliminate the majority of your debt excluding your mortgage well within 30 months. This is not a very long time considering the average car loan is for over 48 months.

Step 1 is to build a budget. This sounds easy but many people have not sat down and built a budget to explain where every dollar they make is spent. In fact, if you were to ask a few people what their total monthly expenses amount to, they would probably have to begin by writing it on paper. Every household needs to follow a strict budget that is transparent and enforced. I bet the company you work for has a budget. I also bet your employer knows how much their monthly expenses are. This is because they do not want to default on any payments and your household should be ran the same way. Take the 30 minutes and write out an itemized budget.

Building your budget achieves three main goals. First, it enables you to see where you are spending money, which makes it easy to make some sound financial decisions. Next, it allows you and your spouse, if you have one, to be on the same page so you understand each other's spending habits. This is important, you and your partner must financially unite or none of the other steps will work. Lastly, it tells you exactly how much money you have leaving your household. This information is very important leading into step 2.

Part of putting together your budget also includes eliminating extra expenses or at least putting some on hold. One that many may find difficult is the retirement accounts contribution elimination. Do not worry; this is only a temporary situation. Once everything but your home loan is paid, you will continue to contribute to your retirement accounts. It may seem risky especially if you have only a small nest egg but overall stopping these contributions allows you to throw more money at your debt, which ends the debt faster so you can contribute more to retirement later. If you were previously contributing $300 to an IRA with $30,000 in debt, after you pay off the debt, you can bump up the IRA contribution and max it out.

There are many ways to distribute the money in a monthly budget, which I will talk about later but here are a couple quick notes. Some rely on the 50, 30, 20 rule. This means to allot 50% of your budget to fixed payments such as car and home loans. The 30% goes to variable payments such as electricity and groceries and the last 20% would go to savings and investments. This strategy does not meet every household's goals, especially when trying to pay down debt so I recommend that the numbers not be addressed until you are out of debt, excluding your mortgage. This allows you to set realistic expectations for your debt reduction timeline. Only after you have paid all the debt except the mortgage, should you use any percentage rules.

Step 2a is to create a small starter savings fund that is only for emergencies such as the car breaking down or you missing a day of work because you are sick. Different financial advisors recommend different standard amounts but I believe one set amount is not safe for every situation as some have more people in their household, which equals more liability. The numbers I recommend are $1,000 for singles, $1,500 for married and no children, then $2,000 for married with children. Again, this fund is only for unplanned events and anything outside of this small fund will have to come from the monthly budget. For many households, this alone might take a few months to build but stick with it because it is important to establish a financial buffer prior to step 3.

Step 2b is to grow and expand your income, if possible. Services like Uber and Lyft allow people to earn additional money with very little additional effort. You could also deliver pizzas, walk dogs, mow lawns or babysit in your spare time. Regardless of what you decide to do, the math tells us the more income you create, the more you can attack your debt. Filling your spare time with additional jobs makes it easier to disconnect the cable television service and lose that $150 a month bill.

Step 2c tells people that if any bills have gone to a collection agency, it is your responsibility to settle those debts and put them into your step 3, if not they will continue to haunt you and your credit score. While calling these agencies, you should know exactly what the debt was prior to any late fees. This will be your advantage when negotiating a payoff. I have seen an original $400 bill go over $900 after additional fees were added. The collection agencies buy those default accounts and try to collect whatever they can to earn a profit. If you give them $900, they will be ecstatic but you would have wasted your money. Begin the conversation by asking them the best offer to settle the bill. They will probably drop to what you originally owed but that is not their best offer. Kindly tell them you do not have that much and offer them one quarter of what you owe them. They may or may not accept it but just realize you can definitely negotiate the payoff. Also, ensure you request a signed letter stating the amount negotiated will clear the debt before you send any money. If possible, send by money order so they do not have access to your bank accounts.

Step 3 is what many people refer to as the debt snowball or sometimes the debt avalanche. You take all the debts, put them in order of lowest to highest total amount owed, and pay them off in that fashion. While doing this step, you pay only the minimums on the other higher debts and throw all additional money beyond your monthly budget at the smallest debt. I do recommend this method but I also want to save you as much money as possible so I throw a twist into this typical strategy. I also recommend mixing in what is called the laddering method. For any high interest loans, such as credit cards, payday loans or anything above the 10% range, I pay those off by highest interest rate first. This saves additional money because you avoid letting the high interest rates to linger. If you let them stay while only paying minimums it could cost you hundreds of dollars in interest. Take this example; you have a $25,000 student loan at 3% interest, a $8,000 personal loan at 9%, a $9,300 credit card loan at 28% and a $6,000 car loan at 5%. The snowball method tells you to do the car, the personal loan, the credit card and then the student loan. This will work just fine however; you will continue to pay a very high interest credit card payment, which will cost you more money because your minimum payment is probably not covering the interest that is gaining on the principal. I would recommend you attack the highest interest in this situation then revert to the snowball method. Remember; only attack the high interest items, typically credit cards and payday loans in this fashion, then continue the debt snowball method. Therefore, this example will have you pay the credit card first then the car, the personal loan, and finally the student loan.

Remember, this step only works if you are all-in and fully devoted to the outcome. For some it might only be 6 months while others take 36 months to eliminate their debt. You cannot continue to use credit cards, eat at restaurants or purchase items not on your monthly budget. Use your step 2 starter savings fund sparingly. It is only for real emergencies, if you have knowledge that you will need money in the future, it should be part of your monthly budget.

Step 4 is to finish building your emergency savings fund. At this point in your journey, you have paid off everything but the house so you have much more available income to set aside for a rainy day. Some financial advisors have a set amount they feel comfortable advising their clients but I really base it on your total situation. A single person has more risk because there is only one income to rely on, if the job goes away, then all of their income goes away too. Married people share the risks however, not all jobs are stable, and some people have commission-based jobs that do not provide steady income. Then there are people with children. In these scenarios, a household with children but only one income has some serious risks to evaluate. I typically tell clients to look at a span of 6 to 12 months. If you believe you have a low risk factor then you can have an emergency fund of about 6 months of your household expenses. This is if you are single, your job is stable, maybe your mortgage is paid and you have mutual funds available if you need to liquidate additional money. Not many people fit this billet so just remember if you lost your job, you must factor in how long it might take to find another one. For many families this may fall in-between $12,000 and $24,000, depending on your situation and lifestyle. This is not some large slush fund. Save what you need and move on to the next step because at this point, if you have an emergency, you will have this fund and you should have retirement money through mutual funds.

Step 5 is to focus your money on your investments. Your investments, for this step include your children, your home and yourself but not necessarily in that order. You can prioritize the investments in any order you choose and reconstruct your budget with percentages. Before you begin, you should take into consideration a few factors. The age of your children could drastically affect the way you will invest for their college budget. If you have teenagers and no college funds at all, you will have to develop a strategy to not only catch-up but you will also have to include a school and job option because your investments will not be able to gain much traction in that short time. If you have young children that have not entered kindergarten, you might want to invest in a 529 Plan or Coverdell Education Savings Account. As always, research your options and decide which one works best for your situation and be aware the federal government may change contribution and income limit rules for these investments annually. Generally, if you have the money, you might want a 529 Plan because you can contribute large sums of cash, depending on the plan and just leave it to grow. The Coverdell Education Savings Account currently only allows $2,000 a year in contributions but if you invest that much for just 10 years, you will still have a hefty fund based on the growth potential when loaded in decent mutual funds. You should also consider the age you would like to retire. Again, this is relative to time and your situation. You may decide you would like to have a job well into your 70s whereas others may want to retire at age 50. If you began saving for retirement at age 20, your percentage of your budget dedicated towards retirement could be lower and more money could go toward your kid's college fund. Your home is your largest tangible investment you will probably own. When throwing additional money at this loan it is important to focus these funds towards the principle. This is how to pay it off faster. Consider this step complete when you have fully funded the college budget and paid off the mortgage.

As stated earlier, a financial advisor could advise different percentages based on your particular circumstances but you should understand it is your money so you can do whatever you want. I have a couple scenarios that might help you decide. If you have not saved for college or retirement, you might want to structure your budget as 45% for mortgage, 20% for retirement, 15% for college and 20% for the rest of your expenses. In this scenario, a household bringing home $77,000 a year after taxes gives $34,650 a year to the mortgage, $15,400 to retirement, $11,550 for college and $15,400 to daily expenses including escrow but not the mortgage. If this is too tight, you can reduce the amount paid on the mortgage but this scenario pays off a $300,000 mortgage in about 8 years. You can adjust the percentages by considering the mortgage as connected to daily expenses and retirement as connected to college funds. To make a modification, just pull from the connected fund to keep them balanced. If you have some college money already saved and no retirement, maybe you send 45% to mortgage, 25% to retirement, 10% to college and 20% to daily expenses.

Step 6 is to continue funding your retirement accounts and enjoy life. Making it to this step is difficult but because you have done everything right, you deserve to enjoy the lifestyle you created. At this point, your budget might even have 50% invested in retirement accounts. You may be over 50 years old, which allows you to contribute even more to your 401K and Individual Retirement Account (IRA) by using the catch-up provision. Again, do your research because the federal government adjusts the income and contribution limits for these retirement plans.

Part of enjoying life may include traveling, giving or some new hobby; that is okay. You now have the money to do anything that reasonably fits into your budget. You do not have to be as restrictive as you were in the beginning steps but do not let that be an excuse to get out of control. Continue to manage your money with your spouse and share your experience. Pass on your story as motivation to others and teach them how to manage their money and to eliminate debt.

Some people need a jump-start when they begin the debt elimination journey. I have compiled some tips that will help you speed to the finish line a little faster. Just remember, you have to be committed if you want to succeed. For this reason, I challenge you to adopt some if not all these additional ideas because in the end, they will get your debt eliminated much quicker.

Is your cable bill over $100 a month? I bet you could give up cable television for at least one year and not miss a thing. If $1,200 a year is not enough motivation then I would also tell you that after one month without cable you will notice you and your kids have a lot more free time than you realized. Use the free time to earn additional money doing something else. If you absolutely need the entertainment, consider alternatives such as Hulu, Netflix or Amazon Prime. These are very cheap when compared to cable and you still get many good viewing options. Additionally, do not forget to purchase a digital antenna for your television. If you live in a populated area, you will probably be able to get a least a few local channels free.

Do you have a self-storage unit costing you monthly for stuff you literally forgot that you still own? Does your garage at your house have everything in it but your car? If you answered yes to these questions then you probably need to have a garage sale. People will pay you to haul away stuff that you do not need. How can you go wrong there? If you are paying $50 a month for your storage unit, you will save $600 over the next year.

If you have not shopped around for new home, renter or auto insurance in the last 3-5 years, you might be missing some savings. Each year when your policy comes back for renewal, get a couple quotes from other providers just to see if the price you are paying is still the best option. You might be surprised because your carrier is not necessarily just going to lower your price, even if they have lowered their rates. You must be proactive, ask the question and shop around.

If you have a cell phone contract with one of the major carriers such AT&T, Verizon and Sprint, you might want to shop around other alternative carriers like Cricket, Straight Talk or even a pre-pay phone. I know this might seem overboard but if you have a contract that is costing you over $100 a month for one phone, realize there are cheaper plans that could bring your bill down to around $50 or less a month. Of course, this does not mean to pay $300 in fees to get out of the contract and only save $10 a month. You must make sure if you break your contract, the fees are worth the return on investment.

Another expense that could probably be temporary dropped is your gym membership. If you have time to go to a gym and workout, then you probably have time to work a second job and increase your wages. Your health is very important but it is a long-term goal just like your retirement, which you can stop temporarily while you work your way out of debt. Try jogging outside at a park or going on YouTube and working an exercise video at home, both of which are free. If you pay $30 a month, you just saved $360 over one year.

Do you know anyone that stops at a coffee shop every morning and drops $10 on coffee and another $5 on a pastry? That equals $75 a week or $300 a month for some morning pick-me-up. If it is that important to have caffeine and sugar every morning, and for many it is, then may I suggest you brew it at home and save $3,600 a year. Another offender that falls into the same category is your lunchtime routine. If you are dropping another $10 everyday on lunch instead of bringing your leftovers then you can add another $50 a week and $200 a month. Please do not throw away another $2,400 a year.

Moving down in vehicle might be another money saving idea that could potentially save you thousands but many times the math does not add up. If you are making $40,000 a year and have $75,000 in debt, a $300-$500 car payment is killing your ability to pay down your debt. Even more upsetting is the fact that your vehicle depreciated so now you owe $18,000 on a car that is only worth $10,000. You must now decide if moving down makes sense in your situation. If you save up $3,000 to buy a used car and sell your current car through a private sell for $10,000, you have technically traded an $18,000 debt for an $8,000 debt with it costing you $3,000. In the end, you really only saved $5,000, so you must decide if it is worth the trouble.

The last recommendation might require some outside assistance or at least a partner to help share in the experience. I do not smoke cigarettes however; I know it is an expensive habit. If you are able to kick it, you could easily save $30 a week or $1,440 a year.

Beginning your journey to financial freedom can overwhelm the best of us. You have to stare directly at debt even it is two to three times your annual household income. Do not let it defeat you, attack the debt as if your financial future depends on it because, it actually does. Math will tells us if you have more money going out than you have coming in, you will have a deficit which could lead to using a credit card to fill in the gap. Sell your stuff, work extra jobs, do whatever it takes to rid yourself of debt. Eventually it will be gone and at that point, you have won. You have stop paying for your past and can begin saving for your future.

If you have any questions, comments or would like to schedule a private debt consultation please email me at Coastal.Finance.Group@insurer.com.

Article Source: https://EzineArticles.com/expert/Michael_McGuire/2489671

Article Source: http://EzineArticles.com/9840574

Debt Crisis of United States of America 2018 Explained in a Simplified Way

The debt crisis in the USA explained!

How to Retire Early: The Shockingly Simple Math

How can you manage your money so you can retire early? Can anyone do this?

Watch now to find out!

10 Money Management Tips

Check out these 10 great money management tips to help you manage and get out of debt fast!