Spending

Are You Tired of Overspending on Christmas?

Even with the best of intentions, almost everyone overspends on Christmas. Here are a few ideas to keep overspending to a minimum:

Go easy on electronics: Electronic devices, aside from TV’s, are usually the smallest, most expensive items to purchase. Top of the line smart phones cost more money than computers and laptops. Also go easy on the electronic devices and gaming consoles.

List of gift recipients: Make a list of everyone that you are going to give gifts to, even if it is only a mental list. This will also make shopping easier when you purchase gifts for less people.

Have a rough estimate of spending: Think of how much you want to spend for each person, which will help to prevent buying massive, spur of the moment, super expensive gifts on a whim

You care more about gifts for your kids then they do: Don’t overthink gift giving for your children. If you spend more money on one child, then you do not have to make up for it by spending more for the one you spent less on. Trust me, kids are not calculating how much you spent.

Most importantly, put it all in perspective: To celebrate Christmas is to celebrate the birth of Jesus. Yes, it has become very secular/commercial nowadays, but this is why we celebrate Christmas.

 

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Do You Make a Good Living and are Actually Poor? You Probably Need to Stop Doing These 3 Things.

We spend so much of our time working, working, and then working some more to make a good living, but do you have anything to show for it? I don’t mean showing off, but rather having a strong financial foundation with minimal debts, savings, investments, and other valuable assets. If not, then keep reading . . .

#1: Stop Justifying Every Expense

Expenses can always be justified and rationalized even when they aren’t. It’s okay to spend money, but it should be in line with your economic situation. The funny thing is that as your income increases, your spending almost always increases in tandem, and sometimes even more than the increase of income. Relax, and spend a little slower while saving more. Remember, the goal of savings is to support yourself and your family for emergencies, large expenses such as college, and when you eventually stop working and retire.

Step #2: Caring What Others Think

Guess what? No one cares about your material possessions except on a superficial level. Sometimes people will briefly talk about you because you drive an older car (even though it may be a luxury car that is fully paid for), live in an older house, have crabgrass growing on your lawn (unfortunately it dies in the winter, otherwise it is nice and thick in my opinion), take non-Disney vacations (aren’t you exhausted afterwards anyway?), and don’t wear Uggs or brand names on your shirts and jeans (I like that only those rare individuals with fine taste in men’s shoes appreciate the awfully expensive shoes I wear though). The bottom line is not to stretch yourself to seek status or to impress others, but to spend according to your state in life.

Step #3: Saving Last

This is one of those times that math doesn’t make sense. You need to save first otherwise there will be no savings left over. You would think that the order doesn’t matter, but is does matter in the real world. Also, save up on a percentage basis, so that when your income grows, your savings grow also.

Summing it Up

These bad habits are prevalent among those that earn $50k, $500k, or more. Bad habits will follow you through your life regardless of where you are economically. Once you recognize this, hopefully you will be able to change course instead of feeling like you are always running and getting nowhere.

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5 Habits for a Healthy Business and 3 Unhealthy Habits to Avoid

Our habits are repeated actions that we take, and have a tremendous impact on our results. Healthy habits become ingrained within us and we continue to do them with little thought or resistance over time. What are some practical, easy habits to ensure a healthy business and also the habits to avoid?

Healthy Habits:

Schedule activities: If you want important things to get done, especially non-urgent, important items, then you need to schedule them. Whether you need to schedule an activity on a daily, weekly, or monthly basis, once it is on your calendar, then the likelihood of it being completed increases significantly. Examples include setting aside time for marketing, networking, reviewing finances, and reviewing processes.

Delegate often: Do you want to get more done? The key is to delegate, but not only to delegate, but to delegate the right things and delegate to the right people. Think before performing a task that needs to be done, especially a somewhat urgent task. This can be as simple as scheduling appointments, cleaning up a mess, or communicating simple issues.

Pause before spending: Virtually every single expense can be justified and rationalized for your business or for you personally. Before committing to spending money, first pause, think about it, and answer  the following questions: can the expense be delayed without their being a negative impact, are their other options, and what would happen if I do not incur this expense?

Consult advisors regularly: Everyone should have an advisor to consult with before making major decisions. High impact decisions can include: employee management issues, loans and finances, purchasing another business, opening another location, legal matters, etc.

Measure results: This can include reviewing your financial results, effectiveness of marketing campaigns, and employee productivity. Do not make assumptions, but keep track of important metrics and review your finances. Just because you are busy does not mean that you are profitable. Look at the numbers!

Unhealthy Habits:

Impulsive decision making: Almost all important business decisions can be pondered, and do not have to be made immediately. Take your time!

Following emotions and feelings: Don’t do things just be you feel like it or because you don’t feel like it. This can include being reactive to a customer that is upset or an employee that made a mistake. Although you may feel better at the moment, it doesn’t help long-term. The same goes for how you feel. I know that I feel like playing Cooking Fever on my phone for a few hours, but if do so, then only the virtual customers in the game will be fed, while my family will be starving.

Consulting with inept people: I know this may sound harsh, but seek the advice of people who are competent to give you advice and/or thoroughly know you and your situation.

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What If Your Spouse Is Reckless with Money?

Did you take a financial compatibility test before you got married to your spouse? I am sure the answer is no and even if you did, people and circumstances can change over time. If one spouse is more cautious with spending and one is reckless, then this will not only cause tension, but the financially reckless spouse will most likely hurt or greatly strain your finances. It can also be a huge source of marital tensions. What should you do if you find yourself in this situation?

Here are some approaches, from rational, gentle approaches, to tougher, harder approaches, along with observations:

Communicate and work together: Hopefully, the remedy to your situation is as easy as communicating with each other to make sure that you are on the same page financially. If your finances are steadily strengthening, debts are decreasing or paid off, savings rates are sufficient, and charitable giving is charitable, then it doesn’t really matter if your spending seems reckless. However, when your income is growing and you are still struggling to pay for ordinary expenses, then it is time to have a talk. Both spouses should be aware of financial matters, savings goals, and limitations on spending. One can hope that this will solve the problem, but if not, then try again or move on to another approach.

Take charge and prioritize cash outflows: First, the more financially responsible spouse should be in charge of financial matters, including saving and paying bills. Next, the order of financial priorities needs to change, including saving first, preferably automatically, then paying bills and debts. This will cover your basic financial needs.

Cut off access: If the previous approaches still do not work, then you have to cut-off or greatly restrict access to funds and credit. I know, this sounds harsh and controlling, but it is not. If someone had a gambling addiction then you would do the same or you will find yourself homeless, which is not an exaggeration. Spending addictions are similar and you need to protect yourself and your family. If you are at this point then your spouse has issues with spending money.

Outside support: Financial decisions, views, and habits are very much driven by our emotions, our past experiences, and our attitudes about money. If you truly have a spending addiction, then seek the support and help of a professional that is experienced with these matters. I am not a psychologist or therapist, but anecdotally, it appears that reckless spending stems from several causes: seeking happiness by purchasing things (which is short-lived, possibly for mere minutes), the attitude that you deserve “things” (this is kind of related to the first cause), you do not care or think about finances (adults need to behave like adults), and lastly, you are just trying to sabotage your situation (it could be to get back at your spouse or because you do not feel you deserve financial security – again, seek therapy).

This can also happen with a business partner if you put them in place of the word spouse. It just won’t work.

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Are You Spending Too Much?

It is very easy to spend a lot more money than you should. Between ATM cards, credit cards, and online shopping, it seems that your money leaves your bank account automatically (actually, it sometimes does)! The point is to make sure that you are spending and saving money on the things that are important in your life. Here are a few ways to make you more aware of what you are spending your money on and to help you cut back:

Use Cash: If you use either an ATM card or credit card for purchases then it is harder to feel when you give up your money. By using cash it forces you to think about your purchases, especially a larger purchase.

Groceries: It is surprising how many store brand products there are that are less expensive and similar in quality to the name brands. A good example of a store brand is cereal, and you may find that you actually like the store brand better! I remember when I was a kid there was the “No Frills” brand, and my mom used to purchase the No Frills iced-tea mix. Whenever I had friends over they used to love the iced-tea and they had no idea what the brand was. Beware that cheaper isn’t always better though and know when it makes sense to buy the higher priced goods, such as with garbage bags.

Automobile: A lot of money is spent on automobiles that can easily be above our means. You don’t have to drive around a clunker, but maybe just tone it down and drive a middle-priced model without features that you will never use anyway. You may even save on insurance premiums.

Repeated Small Purchases: Not only do the larger purchases have an impact on your finances, but so do the smaller everyday purchases. You would be surprised if you added the annual cost of these purchases. For example:

Lunch: At around $10 a day, 5 days a week, this adds up to around $2,500 a year.

Morning Coffee/Snack: It depends where you go, and at $5 a day, 5 days a week, this adds up to around $1,250 a year.

Car Washes: A $10 weekly wash will add up to around $500 a year.

We all have to spend money to live our lives, but if we are more aware of the spending decisions we make, even small ones, then this will help us to prioritize where our money is going. Even minor changes such as one less lunch purchase a week will save round $500 a year, which can be saved for your retirement, educations funds, or other important long-term goals.

The Smartest Money You Ever Spent

Spend, spend, and then spend some more. We all spend money, but what if we looked at spending money in specific ways to earn more money and improve our lives at the same time? Although not usually considered investments, there are ways to spend money to earn more.

College Education: The cost of college has steadily increased over the years, but it is still a good investment. Typically, people with college degrees earn more money and have lower rates of unemployment then those without a college degree. The same is true for advanced degrees. Even if you have to take out student loans, you usually are able to pay them off over a very long period of time, which provides you the opportunity to pay off the balance in small increments, while increasing your earnings at the same time. Beware that you must carefully choose a major, the appropriate school to attend, and make the right career moves.

Training & Education: While this may not entail going back to college, you always need to update your skillset and knowledge. It can be training seminars, classes, courses, and even self-study materials and books. This will make you more valuable to your employer, or to your customers if you are self-employed.

Business Spending/Investments: As a business owner, if you wisely spend money on productive employees, equipment, and marketing, then this will increase your chances of higher profits. Consider this: if you hire a salesman and pay him/her $50,000, and they increase sales by $350,000, then that is a seven-fold return on sales. If your profit margin is 20% before the cost of the salesman, then your return on your investment is 40%. Try to achieve a return like that in the stock market!

It’s easy to get wrapped up into spending your money on the wrong things, while spending money on the right things will greatly help you out financially and otherwise.