Tag: Money

If You Don’t Own Something Your Wealthy Isn’t Real

Two of the focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. Understanding the difference between assets and liabilities is critical to understanding and building wealth. Likewise, simply having a job and working for ‘earned income’ versus acquiring money-generating assets is the difference between solely being an employee and one day becoming financially independent. The following contributed post is entitled, If You Don’t Own Something Your Wealthy Isn’t Real.

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We are all beholden to the economy of the nation we live in. The nation’s economy is beholden to the global economy. And round and round we go, in this daisy chain of ours. Everything is affected by everything else. Now, your biggest concern is your personal wealth; as it should be. The secret to protecting your wealth is to try and make it insular from everything else. In other words, you want to have a wealth that isn’t affected by the outside world. But, as aforementioned everything is tied to everything else. Whether you’re shopping for clothes, buying groceries or applying for a mortgage, before the price is levelled at your feet it has to go through the market. The market determines what that price will be. So two things we can conclude. There’s no way for your wealth to not be affected by the global economy and the market is how price is determined; in other words your wealth is given it’s true value. The giants that tower over everything else are assets. If you’re not holding something, owning something and backing up your monetary wealth by an asset, it’s not real.

What is an asset?

Firstly an asset is a complex entity to describe. However, for the sake of simplifying things, think of assets as something other than cold hard cash. Yet there are some people who will include their cash in ‘personal assets’. Number one, the most common asset is your home or rather property that you own. Land and structures on them home are all part and parcel of the same asset. A business is also considered an asset. A car or some kind of vehicle such as a boat is also considered an asset. Investment holdings such as stocks, insurance policies, mutual funds etc, are all considered assets. Warehouse storages, garages and equipment are all assets too.

There seems to be one running theme doesn’t there? An asset usually has the ability to convert it’s sale into cash or rather, it produces more wealth. Property prices rise year-on-year, thus you have an appreciating asset. A negative or loss-making asset has become an oxymoron as the whole point of having assets is for your wealth to increase just by ownership of said asset. Cars are a use to someone. It gets people to work, is enjoyable to drive and might be personally valuable to a collector. Stocks are a piece of the pie. A business that grows pays out to its stockholders so again, you have an asset that accumulates wealth for you.

Assets are a ‘hard wall’

Assets are usually a tangible entity. You can touch a property, you can live in the property. It provides you with a value or betterment to your life. Even if that enjoyment is subjective to the person, it still holds that value to be true. Capital assets are purely bank accounts or rather your cash wealth. Cash wealth on it’s own isn’t so confidence-inspiring. Look at it this way, if a wind came to blow your money away, how would you stop it? The simple answer is, you would protect your money with a wall and keep your capital inside. That’s exactly what assets are for. They give your capital asset worth and back it up. Nations do this for their currencies. Why should someone believe your currency is worth something, after all it’s just paper. Well, gold and other precious metals have been used to back up currencies and provide them with a solid wall of protection.

Look up the ‘Gold Standard’ the ‘Gold Standard’. For the majority of the time human beings have had complex, large and global economies, gold has been the number one material that has backed up FIAT currency. People are reassured that the paper they have in their pocket has a value which if they exchanged would allow them to buy food, water, property and live a comfortable life. This is because a precious metal is vouching for it. Assets have the exact same power for your cash wealth. If you were to go to a bank and ask for a loan, if you didn’t have a property, car, or some kind of asset, the chances of being turned away would be high. Assets, like gold jewelry you buy and sell with Gold Buyers, give you a solid foundation of trust and support personally and for your capital.

The age old asset

Since time immemorial there has been one thing we all recognize as an asset. Jewelry is valuable to us in many different ways. It’s easy to understand why it’s valuable too, even as children we already know to look after a piece of jewelry that we have been given or perhaps found. Silver, gold, platinum, rubies, emeralds, diamonds etc, are all the most sought after kinds of jewelry. Precious metals and precious stones, have an innate shine or gleam to them. These materials have taken millions and millions, sometimes billions of years to form. Since this process takes so long, they are inherently valuable to us because they are things we cannot make.

If you have gold chains, diamond rings, ruby encrusted goblets, silver necklace charms or whatever the case may be, you need to protect these assets with some kind of insurance policy. For knowledge on what kinds of jewelry insurance you should get, look at Morison Insurance Brokers and ready their article carefully. They list all the valid reasons why you would need this kind of insurance policy and for what kind of jewelry. Jewelry is such a versatile asset, that almost any kind of financial institution will accept it as collateral holding. It’s not uncommon for bank loans to be given to people with low capital but who have very valuable jewelry assets.

They age like wine

Assets are the number one priority for people who are looking to retire without relying on a state pension. It’s clear to see that owning a couple properties and renting them out would net you a constant stream of capital flowing in. The properties will need to be kept to a high standard so they retain their value for longer, but that’s easily done. Properties are quite easy to understand and maintain. There are lots of services such as roofing, plumbing, landscaping and interior designers that can repair and update your properties to keep with the times. In this sense, assets have the ability to age like fine wine if you know how to take care of them. As the saying goes, if you take care of it, it will take care of you.

Assets like rare cars also have much the same appeal in terms of longevity. One of the original Ford GT40 cars was sold for $10+ million and a Ferrari GTO for even higher. Classic cars are not just interesting to hold as an asset, but they never seem to run out of buyers. No matter how many generations have moved on since the first day they rolled out of the factories, they are still enthusiastically bought for millions of dollars. There will always be a wealthy class of people that want a rare toy in their garage. That’s why having assets is so important, because the value they return to you is always set to increase year after year.

Create your own buffer zone

If none of the previous reasons have convinced you why you need to be owning assets, here is one last attempt. This one should win you over. When an economic crash ensues, capital all across the world gets slaughtered. Stocks and bonds plummet, currency values drop substantially and any hard cash is worth much, much less than it was just yesterday. Essentially, if all your wealth is in some kind of money hedge or just a lump sum in a bank, then your wealth will be cut down dramatically when an economic crash happens. Recessions all hit the cash flow in the market the same way. Consumer confidence drops, people pull their money out of investments and they go into hibernation to wait out the storm.

Now you may be thinking that assets will also have to fall in price because people aren’t spending as much. However, assets retain a lot more of their value even when there is a recession. This is because at the end of the day, someone will have enough money to buy or utilize your asset for their needs. Crucially, that need or desire is still there no matter what is going on in the economy. People who were saving up to buy a house don’t suddenly stop wanting a house because they lost a lot of money. No, the desire is still there so you have an inherent value in assets even in hard times. In a sense, assets create a buffer zone between you and the recession, they allow you to have more authority in the eyes of banks and governments.

Do not put all your wealth under your mattress so to speak. Put your wealth in asset acquiring. Own property such as a house, land, automobiles, boats and jewelry. When you have hard tangible wealth, your paper wealth is automatically boosted in so many ways.

How to Save Money when Running your Small Business

Two of the focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. When running a small business as with all businesses, the control of cashflow is critical. Doing so will ensure that your business continues to thrive. The following contributed post is entitled, How to Save Money when Running your Small Business.

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Running a small business can be both difficult and time-consuming. If you’re not careful then you may find that expenses slowly creep up on you, and this can cause you major problems in the future. If you want to avoid all of this, here are a few things that you can do to stay on top.

Lower the Cost of your Office Space

In some instances, it may be possible for you to take advantage of a decreased rental rate in your area. If this is not possible or if you don’t qualify for this type of benefit, then you may be able to renegotiate with your current landlord so you can get some better lease terms. If you don’t need to run your business from a commercial premises, then you may want to think about operating it from home. This will significantly lower the cost of your rent and it will also help you to lower the cost of your gas and energy usage too. In addition to saving on bills, you’ll also save on your business tax and even your utilities. This can go a long way and it can also make it way easier for you to keep an eye on the outgoings that you have.

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Reduce Staffing Costs

If your business has slow periods, it may be worth trying to reduce your staffing costs. Nowadays older employees are more than happy to take some unpaid time off so they can go on vacation or even see their family. If you want to get the best result out of your team chats then see if anyone would like to volunteer. You may be pleasantly surprised at the outcome and in some instances, you may be able to save a small fortune too. Another thing that you can do is to try and hire family members wherever possible. They will be much more flexible when it comes to payment and they may even be willing to give you some additional support when it comes to the finer details of your company too.

Always Barter

Bartering has been around for thousands of years, and it is a great way for you to get the edge on your competition . If you want to help yourself here, you need to try and talk with your vendors to see if they can give you a lower rate on any products you need. They may be willing to set up a contract, or even bulk discounts. If your current vendor is not willing to do this, there are other options available. For example, you can easily go to someone else and then revisit the original vendor with a counter-offer. Sometimes this is more than enough for them to loosen their pricing structure, and you may even end up getting a way better deal as a result.

Vehicle Expenses

If you are running a service or even a contract business that requires the use of a vehicle then you probably know how expensive it can be. Fuel and servicing costs for bigger vehicles or even crew can be astronomical. One way for you to reduce the costs of operating a fleet would be for you to buy used vehicles. It doesn’t even matter if the vehicles require a good level of repair either because it’s still way cheaper than you buying a new truck brand-new. If you still feel as though the expenses you’re paying are far too much, then it may be worth trying to reduce your fuel consumption. Diesel and hybrid vehicles can be more expensive for you to purchase but they can really pay off and they may even save you a small fortune in terms of maintenance too.

Cut down on Supply Costs

When it comes to supply costs, you have to make sure that you budget. As a business owner, you need to ensure that you constantly monitor supplies and that you also check for occasional discounts too. Don’t be afraid to look around and make yourself popular with suppliers. This can be done by paying your bills promptly and also displaying loyalty.

Cut Down on Advertisement Costs

A lot of businesses often spend 5% of the revenue that they get on advertising. This figure may be higher for service businesses, or those who are just starting out. With more and more customers shopping online when compared to ever before, it’s safe to say that you need to at least have a website or even a Facebook page. Having SEO and even television advertising is great and it can help your exposure, but they can also be expensive and they can put a real hole in your budget. One way for you to get around this would be for you to try and advertise organically through Facebook and Twitter. It doesn’t cost you anything to do this, and when you combine it with a weekly newsletter you will soon find that it’s easier than ever for you to gain a lot of traction with your customers.

Cut down on Insurance

Your annual insurance bill will probably cost you a small fortune every year. If you don’t have enough insurance however then this could be enough to bring your business to its knees, and this is something that you do need to make yourself aware of. If you want to help yourself, you need to annually review the insurance that you have. If you don’t feel as though you need one part of your policy anymore, get rid of it as this will save you a huge amount of money. If you have a larger business with a ton of insured assets, then it may be worth doing an asset review too. This will help you to make sure that you are not insuring assets that you no longer have.

Make the Most out of Your Time

If you are a business owner then you’ll know how important time management can be. Business owners should always be prioritising and they should also be using their time accordingly. If you don’t, this could have a huge impact on your bottom line and you may even find that your company suffers as a result. If business is slow then now is the time for you to invest more money into advertising. If your business is taking off and really getting sales then it may be a good idea for you to invest more in things like software or even additional ways for you to manage your workload. Either way, the way that you manage your time will make a huge difference to your business income and it will also help you to save on expenses too.

Watch your Energy Bills

If you have a ton of energy bills coming out, then something needs to be done. You need to make sure that you always turn off lights when they are not in use, and it also helps to keep an eye on standby technology. This will be eating away at your energy usage and it will also stop your business from being efficient too. If you want to do something about this, consider installing a motion sensor light in your offices or have a power strip that shuts everything off when you leave the premises. This will stop you from forgetting about those little things and it will also help you to be more green in general. Another thing that you can do if you work in the industrial sector is invest in slimline water tanks. When you do, you will be able to collect rainwater rather than using it from the business supply.

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Tax Bills

Minimising your tax bill is one of the best ways for you to save a lot of money over the year. You need to get in the habit of writing down exactly how much your business spends on things and you also need to make sure that you detail them properly too. Saving receipts and recording mileage is also essential, as this can all be claimed back at a later date. If you have family members who work in the same business as you then treat them as employees, and file for any expenses that they incur too. There’s nothing wrong with this, but it will help you to pay the right amount of tax when the end of the year comes along.

Utilise the Cloud

For a lot of businesses, cloud computing is a fantastic way for you to reduce the expense of your business. It can also help you to operate more efficiently too. When you invest in cloud computing, you don’t need to worry about maintaining your servers on-site and you also don’t have to worry about ongoing software upgrades either. You will have access to all of the applications you need with the flexibility of the cloud. If you want to get some additional support here, then consider chatting with the cloud providers in your area to see if they can talk you through the solutions they have.

Mindful Ways to Challenge Your Consumerist Habits

A key focus of my blog is Financial Literacy/Money. A major part of winning with money is controlling and understanding your spending. Just controlling your habits as a consumer can effectively give you a raise. The following contributed post is entitled, Mindful Ways to Challenge Your Consumerist Habits.

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The world has turned us all into consumers at heart thanks to the wealth of money poured into promotional campaigns and marketing. It’s difficult to enter a conversation without some kind of brand being mentioned and no matter what common sense tells us, it’s hard to break free from the clutches of big-name companies that rip us off with their expensive purchases.

So in this post, we’re going to look at a couple of mindful ways to challenge your consumerist habits.

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Understand what makes you purchase things on impulse

Everyone has their own weaknesses when it comes to shopping. Some people just love certain colors, others always seem to buy excess clothes and some people just can’t resist a good deal. Once you understand what triggers your impulse purchases, you’ll have a much easier time combating them since you’re more mindful and can avoid those unnecessary purchases. You might even be affected by specific emotions, such as having a tendency to make large purchases when you’re feeling down or depressed. Once you recognize the patterns and find ways to deal with your triggers, you’ll save yourself a lot of money and regret from impulse buys.

Look at the hidden costs of each purchase you make

Every purchase you make comes with hidden costs that need to be considered in the long term. For instance, buying a new television might seem like a cool idea, but there are other costs involved outside of just the unit itself. For example, you might feel tempted to upgrade your subscription TV service for better quality, you might end up paying higher electricity costs and it might even tempt you to buy more DVD and BluRay films just to use your TV on a regular basis. This is just one example of how a seemingly innocent purchase can spiral out of control and make you spend a lot more than you would’ve first imagined.

Stop following what your friends and family members do

Just because your friends and family members are buying expensive Apple smartphones or going for Microsoft-only laptops and computers, it doesn’t mean that you need to follow with them. Your life is unique and so are your choices, so don’t let other people affect your purchase decisions. Instead, you should consider doing your own research such as looking at websites like ReviewNerds to make your own purchase decisions. Don’t just follow trends–look at what the purchase is for, understand what makes a good product or service and then make your own choice based on that information.

Do an inventory of your belongings to see how much you’re really spending

One of the best ways to realize just how much money you’re spending is to inventory all of your belongings. Look at your electronics and hobby-related items to get a better idea of just how much you’re actually spending on a regular basis. Once you realize that you’re spending far too much money on things and leaving them stored away never to be seen again, you’ll start to be more careful about your purchases.

Best ways to save money through efficient heating and cooling

The first principle of my blog is Financial Literacy/Money. A major component of everyone’s personal finances is their utilities. Depending on where you live, keeping your dwelling at the appropriate and comfortable temperature can be costly. It’s important to know how to control this cost. The following contributed post is entitled, Best ways to save money through efficient heating and cooling.

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Alex Perz

When you think about saving money, heating and cooling for your home would probably be the last things in your mind. It’s really hard to save money if you have your AC running during hot, humid days, or your heater going on cold, winter months.

But what if there’s a way for you to save money, even when you’re not depriving your home of heating and cooling?

The key to substantial savings is to keep your heating and cooling systems efficient, so even with prolonged use, there won’t be any wasted energy, and you’ll only get the right amount of coolness or warmth that you need.

If you’re really keen on saving every cent possible for your home’s heating and air conditioning, start by ensuring that your hardware is up to the task, and that it’s not wasting energy due to dirt build up or presence of leaks. Regularly checking the system that you have will save you a lot of money from repairs in the near future. Keeping them in top condition saves you more by ensuring that they don’t deteriorate with every use, thus the need for new units.

Here are some of the areas you need to consider if you want to see substantial savings.

Right-sizing the heating and cooling systems for your home.

This is easily one of the most overlooked factors when buying a new HVAC unit for your home. Instead of thinking about the size of your home, you were easily swayed by the price, as well as the big savings when compared to competitors. The right size will save you a considerable amount, especially if you’re using them regularly. You can also have an energy audit or calculation from your local dealer. With that, you’ll know exactly what you need for efficient cooling and heating.

Bigger is not better when it comes to heating and cooling systems.

As mentioned earlier, getting the wrong sized heating and cooling equipment would be wasteful and inefficient. They’ll cost a lot more to operate and maintain, so aside from the initial purchase price, you’ll also be dealing with the maintenance cost. Think about how energy efficiency in schools works, they are big buildings and getting a unit that’s too small for your space drives up the utility cost as it will struggle to heat or cool your home. Overexerting to produce the necessary heating and cooling can also be taxing to the hardware, thus effectively reducing its durability.

Regular cleaning and maintenance is a must.

Now that you have the right size heating and cooling units installed, you’ll slowly begin to reap the benefits of what you’ve sown. You can also focus your savings efforts on properly maintaining your hardware. For example, by regularly cleaning the vents and filters of your HVAC, you’re able to prolong its life and keep it working optimally. Always follow your manufacturer’s maintenance schedule, so that you’ll have it cleaned and maintained accordingly. The vents and piping of your HVAC unit are always clean and ready for anything. Any obstruction or dust build up in these can cause the efficiency of your hardware to drop.

Important considerations when buying a condominium unit revisited part two

This is a continuation of my series entitled, Important considerations when buying a condominium unit. Part one ended with a discussion of the nuances and caveats of buying into condominium communities. This second part will talk about what can happen when condominium owners must finance common projects within their complex in emergency situations.

To start this discussion, I want to introduce a key financial term, the “Residential Assessment”. Residential assessments are basically lump sums of money every owner must pay which is typically the condominium fee. In some instances, based upon the community’s by laws and constitution, a residential assessment can also be mandated from every owner should a project need to be done affecting the entire complex under ‘emergency’ circumstances.

This was painfully revealed to me when the first of many assessments in my condominium community was due in the Fall of 2010, just after purchasing my unit. Clues that something was up were there before closing though. When visiting my prospective unit for the first time, and when going through the inspection process, a large project was underway requiring the excavation of the land around the foundation of my soon to be dwelling. As a first-time home buyer, it didn’t occur to me to press the seller about what was happening – ultimately a good thing for her.

The question did come up though. She simply said, “Oh it’s just some foundational work.” She didn’t say however that the entire building was sliding and shifting on its clay foundation, and that the entire project would result in an $8,500 assessment for me, my entire Obama Tax Credit. Needless to say, having to cough up $8,500 unexpectedly was a bitter feeling.

Truthfully, the information about this project may have been in the “Condo Docs” or condominium documents. They were a binder of documents (at least 300 pages) provided prior closing. Another piece of advice; take the time to flip through any information given to you about your property prior to purchasing it, especially if it’s in condominium community. In the real estate world, this is part of what’s called doing your ‘due diligence’. Why didn’t I take the time to read the documents? I’ll chalk it up to ignorance and being a novice to the home buying process.

In any case, having the $8,500 Obama tax Credit was a blessing as it saved me from having to take out a loan. In addition to the $8,500 assessment, there was a $1,600 assessment preceding it due to delinquent condominium fees from other owners throughout the complex. This all occurred just after the bursting of the 2008 housing bubble and the subsequent recession, so there were quite a few folks in the community who either lost their jobs, ran out of money, didn’t have enough money on hand, or both. Either way, the rest of us owners had to pick up the slack.

Since those first two assessments, there was another $8,500 assessment to help replace the old underground piping of our complex which seemed to break every winter like clockwork. The board of directors created a payment plan so that the payments could be spread out over three years. The installments would be paid with interest, while those who could make the payment at all once, would be charged no interest. Years later there was yet another $8,500 assessment to cover updates to our HVAC system. If this all sounds like a lot of money, it was.

So, what are the takeaway messages from this? Aside from the points Dave Ramsey made in part one of the series, they are as follows:

• No matter what type of real estate you decide to buy (a detached home, a townhouse or a condominium unit), budget so that you’re as debt-free as possible and so that you have extra money on hand (Dave Ramsey’s Emergency Fund of 3-6 months of expenses for example);
• When you buy into a condominium community, every owner’s destiny and finances are intermingled;
• Before you buy and piece of real estate, ask as many questions as you can of the seller, especially the obvious ones and;
• This last bullet comes from one of Suze Orman’s books. Before you buy into a condominium community, go as far as to hunt down the board of directors and ask questions. Try to figure the history of the community, its overall financial health and any additional issues it may be facing going forward.

Part three will conclude this series and discuss a key part of a condominium community; its board of directors, and the ongoing challenges my community is facing. Thank you for taking the time out to read this blog post. You might also enjoy:

• Are you getting your Matching Contribution? A discussion on saving for retirement
• A look at the Law of Compounding Interest and why you should care
• Your Net Worth, your Gross Salary, and what they mean
• Is the power in budgeting your money?
• I still don’t have a car in 2018: A story about playing financial chess
• We should’ve bought Facebook and Bitcoin stock: An investing story

If you’ve found value here and think it would benefit others, please share it and or leave comments. To receive all the most up to date content from the Big Words Blog Site, subscribe using the box in the right-hand column in this post and throughout the site, or add the link to my RSS feed to your feedreader. Please visit my YouTube channel entitled, Big Discussions76. Lastly follow me on Twitter at @BWArePowerful, on the Big Words Blog Site Facebook page, and on Instagram at @anwaryusef76. While my main areas of focus are Education, STEM, and Financial Literacy, there other blogs/sites I endorse which found on that particular page of my site.

The Difference Between Investing And Saving

A key focus of my blog is Financial Literacy/Money. A key aspect of this subject area is understanding the difference investing and saving. Both are very important terms which can actually complement the other. Understanding the two further can change lives. The following contributed post is entitled, The Difference Between Investing And Saving.

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Investing and saving are two fantastic options for anyone looking to be smart with their money. At a base level, they both serve the same purpose; you want to put money aside, with the aim of having more in the future.

But, some fundamental differences show both options have their own pros and cons.

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Investing is far more complex

It’s easy for anyone to open a savings account and start saving money. You don’t need much financial know-how at all, just a brief consultation with a financial advisor at your bank will give you everything you need to know. Essentially, you open an account, put as much money as you want in there, and the interest rate sees it grow year by year.

With investing, you have something far more complex. There are loads of different ways to invest, and each option also contains more choices as well. Take the stock market; you have loads of different things to invest in, from futures to options – and everything in between. Then, you have to look at things like option historical data, previous sales, current market trends, and so on. It’s so incredibly complex, making it hard for the average person to get involved. Typically, you need to take in a lot of knowledge to get to grips with stock market investing. Bear in mind, this is just one example, you also have property investment, forex – the list goes on and on. Saving is simple, but investing is definitely very complicated.

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Saving returns are restricted by interest rates

When you put money in a savings account, it will increase in value over time. This is due to interest rates, but the catch is that interest rates are usually horrible. In essence, this means you don’t get outstanding returns, and you have to keep your account open for many years before you see anything substantial.

So, saving returns are restricted by interest rates, but investment returns aren’t. Your return on investment varies depending on the market conditions. In some cases, you can earn colossal returns after just a few months – it depends on the investment. If you were to compare savings and investments with regards to their returns, then savings definitely come out second best.

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Investing carries more risk

The flip side of this is that investing carries more risks. With a savings account, you haven’t really got any risks at all. The money sits there collecting interest, and you don’t have to worry about anything.

With investing, there are so many variables. A market crash can make your investment plummet in value – or the company you’ve invested shares in could close down. Companies are always at risk of closing, and even if you think you are hedging your bets by checking the Caterpillar shares prices, a company as big as Caterpillar is not immune from any adverse conditions. There is always the notion of risk when you are investing. It’s always worth bearing this in mind, and if you plan on investing in a business, you may want to invest in a company with more sway and notoriety, but this is by no means a “sure thing”. If you invest in property and the property market experiences a dip, then you’re in trouble. The point is that you may get better returns, but you’re taking a bigger risk.

Ultimately, either option is an effective way of using your money. They’re both far better than reckless spending! The best way to summarize the differences is that investing is riskier, more complicated, but can grant higher rewards. Generally speaking, it’s a smart idea to try both ideas if you want to do more with your money.

Setting Your Sights And Savings On The Future

A key focus of my blog is Financial Literacy/Money. One of most basic financial intelligences is learning how to save money. While it isn’t the most flashy money habit, building a substantial savings can keep you out of trouble and open up doors that otherwise wouldn’t be open. The following contributed post is entitled, Setting Your Sights And Savings On The Future.

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Image by skeeze from Pixabay

When it comes to saving for the future there are the obvious things that you’re probably already thinking about, your kids’ college funds, your retirement, unemployment, and medical emergencies are the ones at the top of most people’s list, but there are others too. While you might have fall back options such as access to settlement loans, or inheritance, it’s not ideal to rely on just these. It is better to save and not to overwhelm or panic you, but some of these could make you money, so it’s worth having a look:

Home and Car Repairs
Okay, saving for repairs won’t make you money it will certainly save it in the long run as repairing things is usually cheaper than buying new. If Your fridge breaks without warning and needs to be replaced or the transmission falls out of your car, it’s good to have at least $2,000 at your disposal so you can address the situation as soon as possible. Also, home or car repairs can have a knock-on effect on other parts of your life, for example, if you can’t get to work because you can’t afford car repairs, that situation could just get worse.

Investment Properties
Rather than just saving for scenarios where you will never see the money again, here’s the bit where you can save and make money. If you have managed to clear your debts, don’t have many other expenses, and yourself in a position to save to invest, then this is a great position to be in. Saving for an investment property, in particular, can provide additional income by renting it out on a short- or long-term basis. This is usually a smart decision if you can afford it because of the positive financial implications down the road.

Entrepreneurial Endeavors
You could also be saving to become your own boss, if that’s something you aspire to be and depending on what type of business you want to pursue will dictate how much you’ll need to save. For example, an online business or consultancy which you can work from home with low overheads can be inexpensive to start up, but if you wanted to open a restaurant, then that will need some serious savings.

Luxuries
While you should definitely be saving for emergencies, medical bills, home, and car repairs, and other necessities, there comes a time when you need to treat yourself too. You don’t need to treat yourself every chance you get, but you could choose one big item to save for throughout the year. Perhaps a cruise or a new car? Whatever it is, making a conscious decision to save for it so you can enjoy some of life’s little luxuries.

Caring for Elderly Parents
It’s not a nice thing to think about, but it is inevitable that your parents will get to an age where they might need assisted living, and it’s good to be prepared financially for this. It’s becoming increasingly common now since people are living longer in general and because many older people have much less to live on these days due to the high cost of living.

Are You Getting Your Matching Contribution? A Discussion On Saving For Retirement

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“I saw many retirement commercials during my young adult life. They were usually run during sporting events. I wasn’t thinking about my older years at the time, which seemed too far away to imagine.”

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Note. Like my Net Worth piece, the subject matter of this blog post is not new. It has been known for years by those who’ve learned about it in their families, learned about its concepts in business school, or have discovered it on their own. It’s a discussion from my personal perspective which I think is worth visiting. Also, while this is a ‘money’ topic, I’m discussing it from a ‘scholarly’ perspective. I’m not rendering financial advice where I’m telling readers what they should do. In the spirit of the first principle of my blog, Creating Ecosystems of Success, I’m simply introducing a concept and discussing why it’s important for the lay person, so they can make their own life choices.

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A Savings Crisis

At the beginning of this week, a mentor emailed me telling me that April is “Financial Literacy Month”. He asked me if I was writing anything on this subject. I shared with him that I already had something coming out of the pipeline regarding a topic we’d coincidentally discussed at length. He also shared an article with me entitled, There is a savings crisis and many Americans don’t know how to fix it. Here’s how. It serves as the perfect jumping off point for my financial offering for the month of April 2019.

Thinking About Retiring

I saw many retirement commercials during my young adult life. They were usually run during sporting events. I wasn’t thinking about my older years at the time, which seemed too far away to imagine. The commercials I remember the most are those by Dean Witter where, in the black and white film, he states, “We measure success one investor at a time!”

My next thoughts of saving for retirement came courtesy of Robert T. Kiyosaki, author of Rich Dad Poor Dad. I believe it was in his book, Conspiracy of the Rich. In the book he described the “Employee Retirement Income Security Act” (ERISA) enacted by President Richard Nixon. The new law made employees responsible for their own retirement savings, converting most everyone over from ‘Defined Benefit’ (DB) plans (pensions), to ‘Defined Contribution’ (DC) plans. That was during my postdoctoral fellowship and I think I set up a ‘Roth IRA’ at my bank, shortly after reading the book.

Saving in My TSP

It wasn’t until I started working in the federal government that I seriously started thinking about retirement, but it wasn’t due to my own volition. It was due to a friend I was dating at the time. I’ll facetiously say that the relationship didn’t last, but her asking me about whether I started saving in my government “Thrift Savings Plan” (TSP) was a major contribution on her part. She caused me to think about retirement in the relationship context.

I realized that I might be a liability as a partner if I didn’t have my own retirement ‘nest egg’ which in some respects is true. (See my Mother’s Day 2017 blog post to get a feel for the potential dangers of two people settling down when only one has savings and the other one doesn’t.) In terms of relationships, are money and resources everything? No, but they count for a lot and are worth pondering and discussing ahead of time!

Whose Responsibility is Retirement Savings?

At this point I’m going to transition and point out that in the financial world, there are different rules for different people. I first learned this after reading the above-mentioned Robert Kiyosaki’s second book, Cash Flow Quadrant, which discussed the differences between: Employees, Self-Employed Individuals, Business Owners, and finally, Investors. To make a long story short, in addition to having their own unique ‘tax laws’, employees by nature have a ‘working life’, and they must figure out how they’re going to survive once their working life is over. That’s if they’ve thought about it.

Some of my relatives are beneficiaries of the DB plans described above, but they’re “Baby Boomers”. My father is a retired educator who started teaching in the late 1980s. My uncle, a retired firefighter, started his career around that time as well. I could be wrong, but I think that most municipal workers such as the police officers and firefighters receive Defined Benefit pensions. Most teachers now must contribute to a Defined Contribution plan. If I’m wrong, please leave a comment below. What if you’re responsible for your own retirement savings? Read on.

Saving Less Thank Five Percent

“If you’re not saving the maximum amount so that you’re getting the government’s five percent ‘Matching Contribution’, you’re leaving money on the table!” The first person to point this out to me was a counselor at work who was helping me with relationship issues with the above-mentioned lady friend. By the way, this anonymous friend inspired me to write my piece entitled, The difference between being Cheap and Frugal, so she deserves a lot of credit in terms of inspiring some of my content.

I’d told the counselor that she’d called me ‘cheap’ on multiple occasions, a label which hurt me at the time. One of his immediate questions was about whether I was saving into my retirement account to get my government match. When I told him that I was saving less than the five percent, he responded that I wasn’t taking full advantage of what the government was offering me. Also getting the match should’ve been first and foremost in my mind.

Matching Contributions

So, what is a Matching Contribution and why is it important? I’m glad you asked. A Matching Contribution is a dollar amount that your employer matches in relation to what you’re saving in your retirement account. For the federal government, it’s five percent, and it differs from employer to employer. Some don’t match at all. The point is that if you’re not contributing anything, you’re not going to get anything, or maybe the bare minimum. If your employer matches what you’re put in, you’re effectively getting free money.

Your employer match makes it easier to get to the holy annual retirement threshold of 15% and beyond. If you’re consistently saving five percent, and your employer is matching that with their five percent, you’re already at ten percent for the year. At that point you must come up with another five percent or more to get to 15%. If you don’t know where you’ll get that extra five percent, look at your personal budget. I wrote a piece on that recently.

If your employer doesn’t match your contribution, should you still save for your retirement? Absolutely. First, if you’re going to work until your 60 years old or more, you do want something for yourself, or else you’ll have to keep working, or someone will have to take care of you.

Other Benefits

Second, from experience, your retirement savings contributes to your ‘Net Worth’ and this translates into other areas such as qualifying for mortgages. Most lenders want to see that you can save money and something they consider qualifying you for a mortgage is your Net Worth – the difference between your assets and liabilities. I wrote a piece on that as well.

When refinancing my mortgage two years ago, I realized that that my lender actually had a form entitled, ‘Net Worth’. Calculating it quarterly was routine for me by then. I’d already built up an ‘Emergency Fund’ and I’d started methodically saving into my retirement account, so I knew I was in good shape. This was in stark contrast to when I barely qualified for my first mortgage due to being too ‘overleveraged’ (carrying too much debt) ten years earlier. See my post on Dave Ramsey’s ‘Debt Snowball’, to see how I dug out of my own debt-hole.

Other Keys to Retiring

Speaking of debt, as an employee living off one paycheck, budgeting, controlling costs, and minimizing debt are all keys to being able to build a retirement nest egg. You want to be able to create enough ‘Cash Flow’ so that you don’t miss the amount going into your retirement account every pay period. Furthermore, you don’t want to be in position to have to raid or borrow against your retirement savings should an emergency arise – both of which could hurt you.

Speaking of Dave Ramsey’s group, a good book to read is Retire Inspired by Chris Hogan. It gives a nice discussion about what retirement is and why it’s important, which brings me to my closing point. If we all know we’re going to age, why doesn’t everyone save for their retirement? I think the answer is a lack of awareness and a lack of understanding of why it’s important.

Where Do You Learn?

“You should’ve learned about this when you were 18 years old!” My mentor scowled at me after we finished talking about my retirement savings and why I hadn’t maximized it a couple of years ago. It stung for a moment, but I laughed about it inside afterwards. It would’ve been nice to have been educated on the subject 20 years earlier, but honestly those in my ecosystem back in Buffalo just weren’t talking about investments or retirement savings.

One could argue that the change from DB-pension plans and DC plans needs to be better explained in the school system so that all kids get exposure to these concepts early. I do agree with that, but the reality is that if these things aren’t discussed in your family circle, you must figure them out on your own somehow.

I don’t want to make this racial, but over the years I’ve heard stories of Jewish families regularly and openly talking about money and investments at family gatherings. It’s not race-specific as my mentor’s family which is black, regularly engages in these types of discussions. What does your family talk about at gatherings?

Financial Vocabulary Words

The financial world has a language all its own. When you’re entering your first job fresh out of school, being told to start your retirement benefits and then hearing all the esoteric terms can literally sound like ‘gibberish’. It can be daunting like talking to your surgeon or your auto mechanic. Unless you understand why it’s important to start saving for your later years, you’ll likely neglect it and use your precious resources on other things, but hopefully not for too long, as it’s difficult to catch up beyond a certain age.

Why is it hard to catch up? This brings us to the “Law of Compounding Interest” of which time is a major component. I wrote a piece on that as well which I’m sure you’d enjoy, but the quick version is that the earlier you start your retirement savings, the more time they have to grow and multiply. Furthermore, depending on the nature of your plan, you could be missing out on significant annual tax savings which add up over the years.

The last important piece is figuring out what your retirement savings should be ‘allocated’ in. This is a completely different but related subject. The point is though, that you must have something to allocate first and foremost.

Other Recommended Readings

Thank you for taking the time to read this post. If you enjoyed it, you might also enjoy:

• A look at the Law of Compounding Interest and why you should care
• Your Net Worth, your Gross Salary, and what they mean
• The power in budgeting your money
• I still don’t have a car in 2018: A story about playing financial chess
• We should’ve bought Facebook and Bitcoin stock: An investing story
• My personal experience with Dave Ramsey’s Debt Snowball revisited

The Big Words LLC Newsletter

For the next phase of my writing journey, I’m starting a monthly newsletter for my writing and video content creation company, the Big Words LLC. In it, I plan to share inspirational words, pieces from this blog and my first blog, and select videos from my four YouTube channels. Finally, I will share updates for my book project The Engineers: A Western New York Basketball Story. Your personal information and privacy will be protected. Click this link and register using the sign-up button at the bottom of the announcement. If there is some issue signing up using the link provided, you can also email me at bwllcnl@gmail.com . Best Regards.

How To Apply Your Money Saving Sense To Your Business

Two of the focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. Just as with your personal finances, you must also manage the finances of your business. In both instances, to be successful you must control your money management, costs and try to run as much of a surplus as you can. The following contributed post is therefore entitled, How To Apply Your Money Saving Sense To Your Business.

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Image via Pexels

You may have mastered the fine art of balancing your personal finances, but when it comes to starting up a business, it’s a whole different ball game. If you’ve launched a start-up it may well be your first time having to manage business finance, and although the opportunities are good, it can also be a tough, global marketplace to compete in. No matter how great your product or service, if you don’t get the money side right, your business doesn’t have a good chance at being successful and expanding. Many a promising venture has ended up on the rocks due to fiscal naivety or mismanagement. Your best bet is to apply the same money-saving sense to your business as you do your personal financial affairs.

Focus On Low Cost Advertising

Don’t make the mistake of thinking that your business can succeed without a marketing strategy. You do need to allocate some budget towards attracting customers to get those profits rolling in, but the good news is that there are plenty of very low cost digital options available. If your brand is a visual one, investing in polished, professional Instagram content is a great way to catch the eye. If your business is more technical, you could chose to focus on public relations work and positioning yourself as a source of industry expertise, through hosting Q&A sessions on Twitter, participating in LinkedIn groups and publishing white papers. There’s also a lot you can do with targeted AdWords campaigns without a huge budget. Search out the low-cost marketing activities that most align with your brand.

Find Great Suppliers

A lot of the costs you will be encountering as a start-up business come from your suppliers, so it’s basic sense to shop around for the best deals. Whether you’re looking for office supplies or something specialist like crane hire on a construction project, don’t be afraid to use your negotiation skills to improve on the first price you’re offered. Find ways to become a preferred customer – ordering in bulk, trading services or recommending to other customers. Depending on your industry and the growth potential of what you do, you may be able to set up exclusive trading relationships with some suppliers including a fixed unit price which will help to cushion your company from the effects of inflationary cost rises.

Head In The Clouds

Small business owners are almost always better off using cloud based systems solutions. Most of these work on a annual user basis and they free you from the need to constantly maintain and upgrade your own systems. They also extend productivity by allowing you to access data and work from anywhere with a Wi-Fi connection, plus they usually have hefty security methods like encryption and secure servers that you may otherwise be paying for separately. Your CRM and word processing systems are better off in the cloud, and some programmes, such as Trello project management software or Canva for graphic design, are even free up to a certain point, or offer special enterprise licences for small business.

3 Of The Best Ways To Make Money Today

Two of the key focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. In 2019 there are several ways to make money aside from working a 9-5. The following contributed post describes a couple of them and is entitled, 3 Of The Best Ways To Make Money Today.

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You will no doubt have heard plenty about different ways to make money in the past. As it happens, there are so many great ways to make money that you might even struggle to choose between them, and this is certainly not going to be helpful if you want to be able to make the most of your finances in the future. However, there are a few ways of making money which generally come out on top, and those are what we are going to focus on solely in this article. Here, we will look at some of the best ways that anyone can make money today, so long as they put the right effort in, are sensible about it, and in some cases, have a little luck on their side. Consider all of the following if you are truly keen to be able to make a lot more money than you might normally think possible.

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Foreign Exchange

Chances are, you have thought about betting on the foreign exchange at some point in your life, but thinking about it and actually doing it are two very different things. The truth is that if you want to make money here, you will need a few different things on your side. First of all, and probably most importantly of all, you will need to find a decent platform like KnightsBridge FX to be able to use. The platform determines not just how easy you find it to carry out the necessary actions, but also how much you are likely to stick with it, and you will want to try and find an exchange which you feel you can use in a strongly intuitive sense. With that, you will have more chance of then making real money from it – but you will also need to make sure that you are genuinely paying close attention to the markets too, otherwise you can’t expect to make any money at all.

Matched Betting

If you have never looked into matched betting before, you are about to discover something of a revelation. Matched betting is when you take advantage of free bets given out by bookmakers by laying your bet at a betting exchange, so that you always make a guaranteed profit, no matter which bet wins or which one loses. You will need to read up on this in some detail before you attempt it, so that you can make sure you are doing it right – but as long as you do that, it is a sure-fire way to make real money, and you could even make thousands a month, depending on how much you have to bankroll initially. This is a powerful and exciting way of earning money, and you should think about it seriously if that is what you want to do.

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Write An Ebook

If you feel you are something of an expert on a given subject, you might want to think about writing an ebook. This can be a good way to help others with that thing, while lso actually being able to make a lot of money in the process. Writing an ebook doesn’t need to take too long, especially if you are already a good enough writer, and you will find that it is a highly rewarding means of bringing in some extra cash.