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Invest in Yourself to Increase Your Worth

April 27, 2011 Leave a comment

It’s difficult to manage your money if you don’t have any money (or if you feel like you don’t have any money).   If you feel like you’re constantly treading water when it comes to managing your money, paying down debt and increasing your net worth, you may want to think about another aspect of money management called human capital.

Human capital is your ability to earn income and the value of that future income.  The younger you are, the larger your human capital because you have more time to work and earn money.  Developing and protecting your human capital is an important part of managing your finances.

The Wall Street Journal has a great article which discusses the importance of knowing what you are worth.  It looks beyond the standard idea of net worth (how your liabilities (e.g., mortgage, student loans, etc.) stack up against your assets (e.g., home value, retirement accounts, investments, etc.)) and discusses how your worth also means your human capital.

Building your human capital can increase your income and can increase your ability to reach your financial goals in the future.  Essentially, you are investing in you.

How Do I Cultivate My Human Capital?

Training and Education.  Is there a certification you’ve been eyeing that will increase your chances of getting promoted?  Is there a class you can take that will allow you to learn new skills?  Don’t overlook classes and trainings that will increase or diversify your skill set.  Are you interested in changing to a more lucrative career?  Take local classes during the weekends and in the evenings so that you can build skills that will allow you to become qualified to do the work you want to do.  Take on volunteer work that will make you more marketable.

Active Involvement in Your Career Development.  When I started my legal career, I went to work, got my assignments, put my head down and worked.  My academic success came from hard work so why change what works?  Because success in business is not just about who works the hardest.  Who you know, what you can offer your company and how you relate to people are all extremely important.  You could be the smartest person in the office but if people can’t relate to you, it’s unlikely that people will have your back when promotions are being discussed.  Cultivate relationships and seek out mentors.  Volunteer for new projects.  Become an expert in a new area.  All of these things will help you develop important human capital.

Network and Maintain Contacts.  You are more likely to get your foot in the door if you know someone behind the door.   Join a professional organization and meet new people.  Maintain contact with people and don’t wait until you need something to cultivate those relationships.  Make sure your relationships are a two-way street.  Offer to help people and you’ll receive help when you need it.

How Do I Protect My Human Capital?

Disability Insurance.  What happens if you become injured and can’t work?  You want to protect yourself and your family by having disability insurance.  Disability insurance will cover part of your salary when you are unable to work.  Disabilities can often have a devastating effect on your finances because not only are you not working but you are also running up medical bills to treat your injury. Protect yourself and your capital.

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Free Resources in Your Community

April 12, 2011 Leave a comment

Perhaps no place in any community is so totally democratic as the town library. The only entrance requirement is interest.
– Lady Bird Johnson

Pssst…I know where you can find free resources in your own backyard.  Oh, and by the way, it’s National Library Week.  When is the last time you visited your local library to make use of its many resources?  I meet a lot of people struggling financially and they wonder where they can get cheap entertainment, learn new skills, figure out the steps for starting a business or work toward a career change.  Your local library can help with all of these things.  Many people think of libraries and envision lots of old dusty books, but libraries have so much to offer and these things are free.  You really can’t beat that.

I have a warm place in my heart for libraries.  Reading has been one of my favorite things to do since I can remember.  As a child, I would pull out a flashlight after my parents turned off the light so I could continue reading into all hours of the night.  I loved to watch Reading Rainbow on PBS.  I would watch as LeVar Burton would introduce me to new books and me and my Mom would head to the library to see which ones I could check out.  But somewhere between childhood and adulthood, I forgot about the library.  Whenever I needed a book I would visit Barnes & Noble or order books off of Amazon.com.  When I rediscovered the library and all it has to offer, I wondered how I had been without it for so long.

Libraries are great sources of free entertainment. Reading is expensive!  I try to avoid buying hardcover books because of the price but even paperbacks can add up.  Much like coffee or cocktails, spending a couple of dollars here and there can do serious damage to your budget.  The library allows you to feed a reading habit for free.   But you don’t have to love books to get some use out of the library.  Many libraries have great DVD collections.  I’ve been able to cross recently released movies off of my Netflix list because I was able to pick them up at my local library.

Libraries are a great source of free classes and information. Libraries are continuously holding workshops, seminars and classes on finances, home buying, investments, etc.  Libraries are offering help with career guidance, resumes and job-searches.  They also provide resources to small business owners.  I went to several classes on starting a business at the New York Public Library and it allowed me to learn a great deal about being a business owner.   And I have personally taught personal finance classes at the Brooklyn Public Library.  If you feel like you’re lost when it comes to investing your money, check and see if your library offers any classes.  Even if their aren’t any classes, they will most likely have a variety of books on the subject.  If your library is offering classes and information that would be helpful to you, don’t ignore such a great resource.

Libraries are a great source of free space. Starbucks and coffee shops have become home offices for many small business owners.  But your local library is also a great place to get work done and you don’t have to feel compelled to spend $3.00 on a cup of coffee.  I’m guessing that your library has computers, free wi-fi and lots of space for you to sit quietly and work or study.  We too often think that libraries are the domain of school children and college students.  But your library may have plenty of resources for you.   You may even be able to reserve an office or conference space in your library.  I’ve reserved a room at my local library in order to meet with clients on several occasions.  It’s clean, free and quiet.

The bottom line is that libraries have many great resources that are available to the community. If you’re looking to get a lot of information at no cost, the library is a great place to start.  If you’re on a tight budget with it comes to entertainment you shouldn’t ignore your library.  And if you have a little money to spare, don’t forget to donate to your library.  Libraries are an important part of our communities and have a lot to offer to anyone who is interested.

Categories: Saving Tags: , , , , , ,

Can You Be Too Frugal?

March 31, 2011 Leave a comment

Is it possible to be too frugal?  I think so. With most things, moderation is key.  An MSN article discusses several ways that bring too frugal can do more harm than good.  Cutting out certain items so you can save money may not be the best idea.  The article focuses on nine ways the being frugal can cost you including avoiding regular medical check ups and being underinsured.

But keep in mind that being overly frugal may not just have a negative impact on your finances, it may also have a negative impact on your mental well-being.  There are people who save and save and avoid spending money on enjoyable experiences because they believe that their financial goal is to amass as much money as possible.  But they end up missing out on a lot of fun things in life.  If you’re overly frugal you may want to ask yourself, “Why am I hoarding my money?”  I’ve been guilty of holding on to my money to the point where I’ve missed out on some great opportunities.  I’ve skipped concerts and other enjoyable events because I didn’t want to pay and I didn’t like the idea of parting with my money for something that was not a necessity.  But when I look back, I know that my money would have been better spent on an experience that would lead to great memories.  I wouldn’t have missed that money in the long run but I certainly regret missing the experience.  Now, I make it a point to think about my entire financial picture and understand why I may be hesitant to spend that money.

The point is that spending money isn’t a good or bad thing and saving money isn’t a good or bad thing.  You need to plan and save for your future but you also have to live your life.  You have to understand why you’re spending money and why you’re saving money to make sure that it makes sense for you.

Use Subtraction to Simplify Your Budget

March 9, 2011 Leave a comment

Have you ever been overwhelmed by  all the options that exist to manage your money?  There are a lot of programs and spreadsheets and some of they can be overwhelming.  Sometimes you really just need to simplify things.

I recently learned of an app that simplifies budgeting.  It’s called “Left to Spend” and it helps you keep track of what you spend on a daily basis.  It helps you decide how much you can afford to spend each day, it allows you to record amounts you spend as you go about your day and then it lets you know how much you have left to spend.  It’s so simple!

I love this idea but unfortunately I’m have an Android and this app is only for iPhones.   Also, it costs $0.99 and I generally don’t pay for apps.  But that’s okay!  You really don’t need an app for this.  I manage my money this way everyday.   And while I would love to have an app for it, pen and paper work just fine.

First, decide how much you can afford to spend each month by taking your monthly income and subtracting out all the fixed expenses (housing expenses, utilities, gym, car insurance, cable, etc.).  Include a category for savings to make sure you pay yourself first.  Take the rest and divide it by 4 and this will give you an amount that you can afford to spend each week.  Once you know how much you can afford to spend each week, subtract your expenditures as you go through your week.

Example:  If I make $2000 per month and my fixed expenses are $1000,  I have $1000 left to spend for the month.  If I divide that by 4, I have $250 to spend each week.  If I spend $20 on Sunday, then I have $230 for the rest of the week.  If I spend $30 on Monday, I have $200 for the rest of the week, and so on and so forth.

Why do I use this method?  Because it means that I don’t need to set aside money in specific spending categories.  Some weeks I like to take my lunch to work but other weeks I get really busy and enjoy eating at some of the local restaurants.  I can change my mind from week to week and spend money in different places.  It’s okay as long as I don’t go over the weekly amount.  Once I spend that money, it’s gone.

Give this method a try and see if it works for you!

Categories: Budgeting, Saving Tags: , ,

5 Tips for Dealing with Money Roadblocks

March 29, 2010 Leave a comment

A couple weeks ago I was interviewed by Radio Disney on 910 AM which broadcasts in Detroit, MI.  I was asked to give some tips on how a person can eliminate debt.  I wasn’t able to get through all of my suggestions in the 30 minute interview so I’m posting them here.  These are some out-of-the-box tips to help people who know what to do but need some help with will power or motivation.

1) Form or join a support group. Most of us have grown up being very secretive about money.  We don’t share the fact that we’re having problems or let people know that we are in above our heads.  We often feel shame and let our debt spiral out of control.  One solution to this problem is to join a support group for people who are dealing with financial problems.  Many people find that participating in a small group helps them to address their financial demons and get on the right track.  They learn that they are not alone and that they are not bad people.  With support, they can put themselves on the right track.

2) Stop hanging out with people who will encourage you to sabotage your financial future.  You don’t have to dump your friends but if you tend to rack up debt because you and a particular shopping buddy encourage each other to spend until you drop, you are enabling each other.  Find a different activity for you and your friend.

3) Eliminate temptation.  If you’re the type of person who gets out of debt, just to get back in a couple months later, stop signing up for coupons and email lists for your favorite stores.  When they ask you for your email, say that you would rather not share it.  If you get put on their email lists anyway, unsubscribe right away.   Don’t sign up for sales website that will constantly email you about their latest bargain.

4) Determine if you are an abstainer or a moderator (this is from Gretchen Rubin of the Happiness Project.  Some people have more self control if they completely refrain from participating in an activity (abstainer) while some people have better self control if they allow themselves to indulge a little (moderator).  Knowing what type of person you are goes a long way in controlling your expenses and understanding why you’re spending.  I know that I’m an abstainer and knowing this helps me make decisions.  I’m not good at having a little bit of something and then moving on.  It’s best that I refrain from indulging in the first place.

5) Determine if you need to seek professional assistance with your internal financial demons.  For many people, reducing debt is not just about tracking your expenses and paying off your credit cards in a timely manner.  It’s often about internal issues that cause us to spend and rack up debt in the face of all things that tell us we shouldn’t be behaving in that manner.  Consider speaking with a therapist or a financial coach who can help you work through your attitudes toward money.

Categories: Cost cutting tips, Saving

Five Steps to Your Financial Future

January 7, 2010 Leave a comment

So now that we’re about a week into the new year, I’m sure we’ve all had a chance to think about our goals and resolutions for the new year.  Maybe you’ve picked the same resolutions you had last year because you didn’t get around to making those things happen.  It takes a lot of energy to really stick with your resolutions.  If it didn’t we would have already made these improvements in our lives.  But, there are steps we can take to make ourselves more successful than not.

I’m a big fan of The Happiness Project Blog, written by Gretchen Rubin.  I have a special place in my heart for her because like me, she’s a former lawyer who gave up practicing to pursue her passion.  But I really like her because she doles out great pieces of information to help you improve your mood and your life.

One of her more recent posts gives five tips for planning effective resolutions.  I urge anyone who has a goal but who hasn’t been able to stick with it to take a look at the post.  The post takes you through the steps of not only selecting your resolutions but coming up with a concrete plan for how that will happen.

A lot of people come to me and say “I want to feel more financially stable” or “I wish I didn’t lose sleep over money.”  But the real question is:  What does that mean for you?  Does that mean starting a 529 plan for your child?  Saving more for retirement?  Saving up an emergency fund?  Eliminating credit card debt? What specific goal(s) do you need to reach to achieve that stability or to get that good night’s sleep?

Still need some help articulating what you need to do?  Here are some important steps that you can take to get closer to achieving your 2010 financial goals:

1) Track your spending through financial software, a spreadsheet or just simple pen and paper.

2) Write down your important financial goals so that you’re reminded of them throughout the year

3) Reduce debt by creating your own payment plan and/or reaching out to your creditors to ask for reduced interest rates and payments

4) Set up an automatic savings system to get you to that six to nine month of emergency savings

5) Make sure you’re setting money aside for retirement in a 401(k), 403(b) or an IRA

6) Make it a plan for the entire family to be money conscious.  If you are changing your money habits but your husband or your children or a parent you support is spending like it’s 2007, have a talk with them about establishing new money habits. 

And finally, the most important thing is to do something!  Anything!  It can be overwhelming to overhaul your entire financial life and financial philosophy.  If you feel you’re chest seizing up when you sit down to think about your finances, pick one achievable step  and get it done.  It really is about baby steps.  And don’t be afraid get help if you need it.  There is help available to assist you in getting your money in order.  You don’t have to do it alone – but you have to do it. 

Good luck!

Give Yourself Away

November 13, 2009 Leave a comment

In my last post, I talked about ways you can control how much you spend on gifts around the holidays.  The goal is to come out of the holiday season without tons of debt.

But what if there isn’t any extra money?  What if you really can’t spare a dime to buy presents? 

The blog, The Simple Dollar,  has a solution for you.  In a post called, Giving Experiences, Not Things, This Holiday Season, the author list six experiences that you can give.  Not all of them are free, but they are all meaningful and worth a lot more than gifts you can buy at the mall.

Categories: family, Saving