Personal Financial Success

3 Steps to Personal Financial Success - Part II: Budgeting
By: Gordie Prescott

Spending Habits
As consumers, we spend. We spend on things that we need but more so on things that we don't need, but want. Some of that stems from the fact that we refuse to deny ourselves pleasure and we don't want it now...we want it yesterday. Marketers know this and they prey on it. They show you the product in all its glory, all of the benefits you can get from it, and what others say about how quickly they saw results. Like lambs to the slaughter, we fall for it, make the purchase, use it twice, see no results, and then let it sit in the closet for the next five years (oh, never mind that you are still paying for it!).

Now don't get me wrong, I like to spend money myself, when I have it to spend. And of course, live your life to the fullest! That being said, you still have to exercise caution when it comes to money. Living your life to the fullest irresponsibly now may have you tied to the ball and chain of debt in later years when you should be debt free and enjoying your grandkids or shuffleboard in Florida.

Your spending habits can generate an undesireable future for yourself. Would you agree? Spending on impulse, spending when you find "deals" that you haven't budgeted for, or keeping up with Mr. or Ms. Jones are terrible spending habits. A deal is only a deal when you have the money for it.
For example, say there is a suit for $200 that has been marked down to $100. You purchase the suit on your charge card because you didn't have the cash, but you will be getting paid on Friday (that's called pre-spending). Friday comes and you didn't realize the bills that you have to pay or you want to spend your money elsewhere, so you take advantage of the kind credit card people who allow you to pay just the minimum. You get into the habit of paying the minimum, and add some other charges to your card. A few months down the road...you are still paying for the suit plus the other charges on the card and have doubled the $100 price (the deal!) and ended up paying $100 in finance charges to the credit card company. Who came out on top?

It may sound far-fetched, but this happens all too often and is how people get into credit card and other debts. Their spending habits almost become insurmountable, then they reach out for help be it debt consolidation or worse, cash advance companies. Not that there is anything wrong with cash advance companies, but most people don't think wisely about how to pay this loan back or if the benefit is worth the cost. Then they get caught in the revolving door.

Creating the Budget
Go ahead. You can say it. It's the "B" word. The one word people in debt feel as if they can't do because of the debt that they’re in. Trust me: there is no better time to start. You will never see the light of day if you don't set boundaries to your spending. You will continue to impulse buy if you don't give yourself other choices for your spending. You will continue to buy things you don't need or will not use if you don't create a budget.
Next to the bible or any other religious literature you may have, your financial budget is the next piece of sacred text that you have in your home. Read it. Study it. Eat it. By doing this you will ingrain it into your subconscious. Your subconscious will alert you when you are diverting from the plan. You will feel more power because you are now starting to make informed decisions about your spending. You will be aware of the choices you have (new boots or light bill?). In short you will be able to pass on "right now" and look forward to "a little later."

So how do you budget? Well, you take everything that you spend money on and categorize it. Everything. From apples to zebra slippers, you have to put these expenditures in a category and put a set amount on how much you will spend in that category. Of course, you will need to know how much you bring in on a weekly to yearly basis.

Again, this is very basic. Your budget can be as detailed as you like. The more detailed, the better. If you decide to stop by the store and pick up a stick of gum, include that in your grocery totals. Make lists before you go grocery shopping. This keeps you on track with your budget. You may be able to pick up a few extra things here and there, but you must adjust your budget to reflect, and shuffle your money from somewhere else to cover the expenditure.

I hope I've opened your eyes to a few bad spending habits and have given you enough to jumpstart your budgeting. With just a few minor changes (and in some cases, major), you can be on your way to financial success!

Bootstrap Financing

Bootstrap Financing Your Way to Business Success
By: J. Stephen Pope

Do you need to start or grow your business but have
little money? Before you look to banks and similar
sources of financing, why not bootstrap your way to
business success?

A bootstrap is a small loop of leather or other
material that is found on the top rear or sides of a
boot. The purpose of the bootstrap is to help you
pull your boot on.

In business, bootstrapping has come to mean helping
oneself without seeking outside help. It means using
your own resources to finance, promote, and develop
your business.

Here, then, are some ways of financing your own
business by using your own initiative and depending
less on outside bank financing.

1. Operate a Home-Based Business

Operating your business from home could save you a
fortune. First of all, you eliminate the costs of
expensive commercial rent, commuting, et cetera.

As well, your business use of home expenses would be
deductible for income tax purposes. Since your home
is your base of operations, your travel and automotive
expenses from your home to clients would be deductible.

2. Accept Credit Cards

Rather than financing receivables and assuming the risk
for bad debts, why not accept credit card payments?

3. Drop Ship Products

Rather than financing and stocking inventory yourself,
consider drop shipping.

With drop shipping, when you make a sale you contact
the manufacturer or authorized distributor who ships
the product to the customer with your invoice and
shipping label. Advantages include no warehousing,
shipping, or inventory costs.

4. Use Your Customer`s Money

Selling memberships, subscriptions, gift certificates,
and coupon books are just a few ways of getting your
clients to pay upfront. Obtaining advance deposits
and retainers from your customers can help finance your
business operations and reduce or eliminate the need
for bank financing.

5. Licensing

Instead of trying to finance the manufacturing and
marketing of your invention, which could cost millions
of dollars before you have your first sale, why not license it
to a company with the necessary expertise and capital?
You will then receive royalties in return for your idea.

6. Other Bootstrap Financing Methods

Aggressively control costs, barter, get extended terms from
suppliers, establish strict credit and collection policies
and procedures, rent (or lease) instead of buying equipment,
buy used equipment instead of new, sell off excess inventory
and equipment, obtain free publicity instead of paying for
advertising, and do whatever else is necessary to generate
cashflow and profits.

In these ways and many others not listed here, you may be
able to start and grow your business successfully with very
limited capital. Thus, you will avoid having to obtain
expensive debt or equity financing.

Many who were unable to obtain financing from any other source
have successfully bootstrapped their way to business success.

Financial Intelligence

Financial Intelligence - Compounding (The Ninth Wonder of the World)
By: Nicola Cairncross

Compounding is often described as the ninth wonder of the world. It is a concept that initially sounds quite dull, but when you understand how compounding just quietly works its magic - or conversely its naughtiness – it’s a very exciting concept to grasp indeed!

Compounding is the difference between linear and exponential growth, or put more simply, about earning (or incurring) interest on the interest on the interest, generated by your savings (or your debt). On an energy level, it's about making sure that every little bit of effort you expend, works on many different levels to bring a reward greater than the original effort required.

It’s a very powerful tool and can be likened to the wind under the wings of a jet. The plane creeps slowly, slowly along the approach runways, then moves into position, then starts down the runway slowly, but as it picks up speed, the power of the engines and the wind lifts its wings and it takes off, climbing very quickly and steeply into the sky.

Compounding can turn just one – just one - £1 or $1 into a million pounds or dollars within 20 years. If you took £1 or $1 and achieved a 100% return on your money each year (put another way, if you doubled your money each year) then you would most certainly be a millionaire in your lifetime. Imagine if you added another £1 or $1 each year – how much faster would that get you there?

And if compounding is that powerful when applied annually, how much powerful could it be when applied monthly or even daily?

On a personal finance level, most people ignore the potential of compounding, because the % interest rates we are quoted by the banks, other savings vehicles and financial institutions are so paltry. If you took your pound or dollar and increased it at the usual 3% or 4% per annum, then it would grow so slowly that we might as well not bother saving at all. You would be dead several times over before your personal wealth increased noticeably.

I know I used to feel like that! Why save now, I thought, especially when you are only saving to spend later, and when you can only earn 3-4% per year on your savings? I want to share with you, today, some of the exciting things that I learned about the power of compounding, things made a huge difference to my thinking about money. And changed me from a non-saver to an investor in one fell swoop!

There is a huge difference between saving and investing, and experienced Investors achieve returns on their money between 30% and 100% per annum – some even manage to achieve an infinity return on their investment, because they are able to pull their own money back out of the deal, which means that they are making money with no money! These are the supermodels of the investment world!

On a personal finance front, even looking at the returns generated by investing in property over the years (12% per annum) and the stockmarket (14% per annum) gets a little more exciting. The compounding effect means that, on average, property doubles in value every 7-10 years – that’s a thrilling thought! How would you plan your property investment differently if you knew that to be true?

There is a great example of the difference in what you can achieve in just two years, if you invest £60,000 (or dollars! I'm going to work in pounds now but the principle is the same!) by buying outright one small rental unit, versus what you would achieve if you invested the same £60,000 in deposits on several small rental units.

At the end of the two years, if you just bought the one unit, and assuming average rates of growth, you would be worth £6384 more than when you started. But if you invested in deposits on several units, you would be £56,304 better off. You choose. That’s compounding at work.

On a business level, compounding can work for you too. The difference between what you can earn if you are a solo self-employed person, and what you can earn if you build a business consisting of a team of “you’s” is quite amazing.

The compounding effect can also be utilised in your business by automating as many of your business processes as possible. Think of the potential difference between having the services of one marketing person and one sales person (both of whom can only work so many hours in a day, both have to be paid, even when they are on holiday or off sick, so not working) and then consider the possibilities of having an automated marketing machine working 24/7 plus a team of affiliates – unlimited numbers of independent people who are all being paid a little bit, on sales (results only!) to promote your service or product. Nicola Cairncross is a specialist Wealth Coach, Hotelier and Internet Entrepreneur, working with bright, entrepreneurial people to enhance their financial intelligence.