You need an efficient way to get paid for your product or service in order to stay in business. Cash, checks, credit cards, and online payments are the primary ways to get paid.

Here is a look at how to set up a professional, easy-to-use payment system for your business.

Setting Up Your Business to Receive Payments

There are three important steps for setting up your payment system.

  1. Obtain a business bank account. If you are a single-person business owner, it might seem easier to use your personal bank account and keep track of business income and expenses by listing the business payments and withdrawals separately. This is not a good idea. You can get into trouble when your personal bank account doubles as a business account for these reasons:



    • Mingling the accounts makes it hard to figure out your taxes.
    • It makes it more challenging to determine if you are making a profit.
    • It is hard to set aside money for business expensed and expansion because it is so tempting to spend your company money on personal needs and bills.


  2. Request a Tax ID number. Taxes are a universal part of the business experience. To get started, you need to request a tax ID number from the IRS by completing IRS Form SS-4, which you can get online without charge. With this in hand, get a state tax ID number. You can find the right website by visiting the Tax, Accounting, and Payroll Sites Directory and clicking on State and Local Tax.


  3. Apply for a fictitious name. You need this if you do business under any name other than your personal name. Register it locally and at the state level.

If your business only accepts cash and checks, this is all you need to do. However, with so many business transactions being done now with credit and debit cards, or other online payment methods, you should consider setting up a merchant account and an online payment system too.

Both make it convenient for consumers to buy. They also provide the added benefit of getting customers to make impulse purchases. By accepting payments via credit or debit cards, you make it easy to accept payment whether your customer is local or on the other side of the world.

Accepting Credit Card Payments

To make use of credit and debit cards, you need to set up a merchant account. This allows you to accept Visa, MasterCard, American Express, Discover, and other types of cards.

The merchant account service provider is a middleman between your business and your customer. The merchant account service provider will process payments, debit the money from the customer’s card, and deposit it into your business account. The equipment you need varies.

Merchant account service providers provide these main types of accounts:

Other Payment Options

Here are two more ways to accept money that are becoming more prevalent.

The more ways you can accept payment, the easier you make it for customers to do business with you. In the age of the Internet, it is not uncommon for freelancers and small merchants to conduct business globally. Be open to new ways of accepting payment to make your business and services accessible to the largest number of consumers.

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Accepting Payment

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Small Business Administration loans are among the most common ways to fund a startup. Though you still need to prove you are a good risk, these loans are often easier to qualify for than standard bank loans. The Small Business Administration, also known as the SBA, doesn’t lend you the money. Instead, it guarantees a percentage of the loan amount, which makes it more likely a bank, community development organization, or micro-lending institution will approve a loan for your business. There are several benefits of an SBA loan, including: Types of Loans Available The SBA has several types of loans available. The most popular are: Qualifications for Loans Many owners of a small business in trouble think these loans will bail them out. That is not true. You still need to have good credit, personal assets, a business plan, and proof that you are a going concern. This is not a program for companies that are failing. The qualifications you need to meet to get an SBA loan are as follows: Applying for Loans These loans require much documentation. These include statements for: The lender will ask a number of questions about your business to see if he thinks you are a good risk. These might include: The SBA is not a lender of last resort if you are teetering on bankruptcy, but it can lend a substantial financial hand if you need money for growth and to get over a slowdown. If you meet the standard requirements, this is an excellent way to get a low-interest loan with affordable monthly payments. For additional information on Small Business Administration loans, visit the SBA Loan Program website.

Small Business Administration Loans

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Keeping track of the money in your business is essential if you want to prosper. However, most small business owners have skills or a specialty that inspired them to start a company—and it was not number crunching. Understanding finances and basic accounting is a critical skill, as important as making and marketing your product. To stay informed on your business finances without the help of an accountant or financial planner, you need a solid grounding in basic accounting statements. Here is an overview of the four most important. Balance Sheet The point of the balance sheet is to provide a detailed look at your business financial situation on a given date. It is made up of three main components: assets, liabilities, and equity. Assets There are two primary categories of assets. The first are called current or liquid assets. These all have the ability to be easily and quickly converted to cash. These are typically cash, marketable securities, accounts receivable, inventory, notes receivable, and items like prepaid insurance. The second type are called fixed assets, like land, equipment, and buildings. Fixed assets get listed on your books at their historical cost, which is often less than what you could sell them for on the market. Liabilities Liabilities are what the business owes others, your creditors. There are also two types of these. Current liabilities, also called short-term, include the wages you owe, accounts payable, notes payable, and interest payable. Long-term liabilities are debt that are due in more than a year from the balance sheet date. These include items such as your mortgage or bonds payable. Equity Equity is what the business owes its owners. After the assets are used to pay all your creditors and outstanding liabilities, what remains belongs to you. A simple formula is: Equity = Assets – Liabilities Income Statement Often called the Profit and Loss or P&L, this gives a look at your company in terms of net profit or loss for a particular period. The two parts are: Income: what you earned, such as revenue from sales or income from dividends. Expenses: what your business paid out for items such as wages, rent and other costs of doing business. Depreciation expenses are also included here, which are typically accounting adjustments to asset values. The simple formula for this is: Income – Expenses = Net Profit Statement of Owner’s Equity Also called a Statement of Retained Earnings, this accountant report lists in detail the change or movement of an owner’s equity over a given period. It has five parts:
  1. Net profit or loss, which gets reported in the income statement
  2. Share capital, which is the portion of a company’s equity that has been obtained by trading stock for shareholder cash
  3. Dividend payments
  4. Gains and losses in equity
  5. Results attributable to a change in accounting policy or a correction of a previous accounting error
Cash Flow Statement The Cash Flow Statement documents the changes and movement of your cash and bank balances during a specified period. It has three parts: Operating activities: these include the flow of cash from the main activities of your business Investing activities: these include cash flow involved in the sale and buying of assets unrelated to inventory. An example would be buying a new factory. Financing activities: these include money made or spent on raising share capital, issuing or repaying debt, as well as paying interest and dividends All four financial statements are closely inter-related. While the intricacies may be confusing, a fundamental understanding of the essential accounting statements and the information included in them is beneficial for the small businessperson to master. Making a skilled accountant part of your team is the best way to stay on top of the arcane, confusing world of numbers that tell the story of how your company is doing.

Basic Accounting Statements

View Resource Basic Accounting Statements
It is a truism for consumers and startups: it is much easier to get credit when you do not need it. Having access to extra money at critical times can be what keeps you afloat in the difficult early days of your startup. That is why it makes sense to find out how to establish credit for your new business and how to keep it strong. Steps To Establishing Your Credit Worthiness Businesses and consumers both need to look like excellent credit risks to banks, credit unions, credit reporting agencies, and credit card companies if they want to establish and keep their credit. Here is a look at four steps to take towards building a creditworthy reputation.
  1. Keep an eye on you own credit rating, as well as the one for your business. Many banks look at a businessperson’s credit rating first. If it is in the mid-600s or higher, you are considered a good risk. One of the best ways to keep that rating high is to have a low ratio of debt to credit on your credit cards and any credit lines you have available. Keep balances less than 30% of your credit card limit. Inquire about the personal credit rating of investors you are considering for your business. Lenders will likely look at those too.

  2. Get credit before you are desperate. Apply for any credit, even small amounts, as soon as you get into business. Most startups need a two-year track record before a bank will lend a substantial sum. However, smaller amounts, in the form of a business credit card, credit line from a credit union, or small bank loan, are entirely feasible early in the life of your business.

  3. Use your credit regularly and wisely. Your goal is to build an admirable credit history. You can accomplish that by using your credit often and paying it off quickly. In addition, even if you need to pay a fee, look into setting up a Dun & Bradstreet profile.

  4. Do business with one lender. Business and money are all about relationships. Get to know the lenders and managers at your bank and credit union. Keep them in the loop. Let them get a chance to see you in action and watch you new company grow.
Identify Lenders and Sources Banks and credit unions are the most prominent places to get credit. Don’t automatically apply to the closest one. Look for one with a reputation for being friendly to small businesses. Ask other startups where they obtain credit. If a creditor gives credit to one startup, there is a good chance it will give it to you. Ask other startups about which credit cards are the easiest to get. Apply for a business card as soon as possible. Don’t worry about the limit, the goal is simply to get the card. Use it often and pay off the balance in full each month. Unique and Creative Ways To Get Credit Don’t let a turndown from one lender stop your efforts to get credit for your startup. There are many ways available. Using alternative credit sources does not harm your chances of eventually getting credit from a bank or credit union. In fact, it can improve it when they see you handle your money well and pay back balances on time. Here is a short list of other sources of credit. It pays to spend time working on your personal and business credit. Having strong business credit can position your startup more favorably for payment terms with suppliers and vendors, and let you enjoy better interest rates and terms from banks, credit unions, and other lenders. Remember, once you have established good personal and business credit, be sure to monitor and safeguard it.

Establishing Credit

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Making sure you have enough working capital to handle payroll and stay current with your suppliers is a never-ending challenge for many types of businesses. Exploring alternative ways of financing, outside the traditional bank loan, can provide the needed funds. One type of financing that has a long and respected history is factoring. Here is an overview of who they are, what they do, and the pros and cons of using this method of financing. What Is a Factor? In a nutshell, “factoring” is selling your accounts receivable to a third party, called a factor. The factor provides you with money upfront, then collects the amounts due on the invoices directly from your customers. The factor deducts his fee and forwards any remaining funds to you after the client pays him. This is not a loan. You are using the money owed to you as the basis of the funding. The factor typically pays you 75 to 80% of the worth of your receivables and charges a fee of 2 to 6%. Factoring has been around for centuries. In ancient times, traders in Mesopotamia used factoring to fund their shiploads of goods around the Mediterranean and in the Middle East. From the 14th Century, English clothing merchants relied on factoring to stay in business. It was an integral part of developing trade with the New World in the 1600s and beyond. In the U.S., it has been a mainstay of the textile and automobile industries. In the 1970s, higher interest rates encouraged use of factors. In the 1990s, financial giants like GE Capital and GMAC entered the field. In earlier decades, this was a service used principally by big corporations. Since the Internet has made the process easier, many small to mid-size business are using it. Benefits and Drawbacks of Using a Factor There are several benefits of using factoring to get money quickly. Here is a look at three.
  1. Your credit score isn’t an issue. The factor is concerned about your customers’ ability to pay since that is where they collect their money. If your customers are deemed creditworthy, a factor will work with you even if you don’t meet the requirements for a bank loan.

  2. It’s not a loan. This means your assets aren’t at risk, and you don’t have to worry about collateral.

  3. Factors provide a range of useful services beyond funding. The factoring company performs the accounting work needed to collect your accounts receivable. They conduct credit checks for new customers and provide professional financial reports, so you know exactly where you stand.
However, there are downsides. Here are two of them.
  1. This is a short-term solution. As a rule, most businesses use factoring in their financial strategy for two years or less. Factoring your accounts receivables can be useful as a source of quick cash to add to your working capital without having to increase your debt. However, it is not meant for the long-term.

  2. It is more expensive than a bank loan.The fees charged by the factor are higher than most bank loans. However, if you don’t qualify for a loan, this is a moot point.
A money crunch can happen in any business. It might be due to unexpected expenses, a rapid growth cycle or the desire to take advantage of a one-time opportunity. If you have receivables, you can put that to work by using a factor as a funding source. For more information on factoring or to search for a factor, visit the International Factoring Association (IFA) website. The IFA is an organization that provides resources for the factoring community.

Working with Factors

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These days, small businesses are under more pressure to prove ROI or return on investment of their marketing budgets. That means marketers have to track performance through more than site visits, page hits and unique visitors. Although these types of metrics are fairly simple to track and report, they do not show the overall marketing contribution in the sales funnel process. Regardless of how you are estimating value, you want it to stay as simple as possible. Ultimately, there are four things you are trying to understand: Understanding the Sales Funnel To derive a strategy to fit your marketing budget, you first need to understand the concept of the sales funnel. According to Hal Shelton, SCORE board member, business executive, and the author of ‘The Secrets of Writing a Successful Business Plan’, an example of a sales funnel cycle looks like this:
  1. Awareness. Prospects become aware of your business; however, they are not sure yet if your services or products are what they are looking for.

  2. Discovery. This is the stage where consumers are researching your company.

  3. Engagement. This is where prospects begin to take some form of action which could lead to a sale. At this stage, you should be trying to get some type of contact information from them.

  4. Active Customer. This is where the prospect has made a purchase from you and became an actual customer.

  5. Successful Customer. The customer is satisfied, loyal and regular.

  6. Referrals. The customer is willing to share testimonials and refer others to your business.
Knowing this cycle, you can then move on to coming up with a marketing strategy and measuring ROI. Measuring Brand Impact Brand lift is essential here. It’s the measurement of how consumers think about you in terms of your marketing strategy and goals. It measures how effectively you are building the relationship you want with consumers. Take, for instance, data obtained through a BuzzFeed case study. You might have noticed Sponsored Posts from Virgin Mobile if you are a regular reader of BuzzFeed. In this study, BuzzFeed provided a one-question survey in order to measure brand impact of Virgin Mobile and what type of impact content had on readers. This study involved two control groups; one which was exposed to Virgin Mobile content and one that was not. The control group that was exposed had seen almost 9 pieces of content from Virgin Mobile. Remarkably, that control group was almost 390 percent more likely to be on agreement that the “Virgin Mobile brand understands me as well as the things I like.” This would provide Virgin Mobile with a huge ROI, assuming their goal was in demonstrating an increase in brand impact. Measuring Engagement There are various reasons why repeat visitors are essential. First, repeat visitors are a clear indication that you have built a solid relationship with them. Second, repeated exposure to your marketing message will increase brand lift greatly. Although brand lift is good for measuring how your content is affecting your reader’s perceptions, it is not telling you which particular content is engaging your consumers. Direct measurement can be used for this which can be considered ‘engaged time’. This tracks the engagement on page content such as clicking, scrolling, highlighting, and so forth. Measuring Conversions Now that people are aware of your brand and they trust you, how do you know if they are choosing you due to your content or marketing activities? For this, you need to track and measure the path between your content channels and your conversions. Remember, successful marketing is about providing valuable content and messaging and building relationships through this engagement. Marketing ROI measures the effectiveness of these relationships. Conversions are just a part of the whole relationship wheel that continues to spin. In order to have interacting parts of metrics, engagement, brand impact, repeat visitors and conversions need to be tracked and measured. Putting it All Together Now that you know the sales funnel and the importance of measuring brand impact and engagement, next is gathering up all the data needed to use it to make better decisions. Most small businesses collect data and manage it through multiple databases, establishing systems for each department. To run things more efficiently, you should work closer with your IT and sales department to come up with a closed-loop process for your automated marketing platform. Integrated systems like this will give you timely feedback from your sales department on your various activities’ impact on driving revenue. In the past, it was easy just to base your marketing strategy off of what ‘just feels right’. These days, however, gathering, tracking and measuring ROI data is essential. Successful small business owners know the importance of using this data for making decisions and justifying budget requests.

Measuring the ROI of Your Marketing Budget

View Resource Measuring the ROI of Your Marketing Budget
A widely recognized concept in marketing circles is customer lifetime value (CLV); however, not many business people without a marketing background understand what it is exactly or how to measure it properly. Customer lifetime value is the forecasting of net profits that connect to a specific customer during their lifetime relationship with a business. To state it more simply, CLV is the financial value of a customer relationship over the lifetime of your relationship with that customer. Why It is Important Customer lifetime value is important because it gives you an idea of the amount of repeat business you might be able to expect from a specific customer. This knowledge will assist you in deciding how much you can profitably invest in ‘buying’ this particular customer for your business. Once you determine how much a customer buys and the frequency of their purchases, you will have a better understanding of how to manage your limited resources. Choosing between projects like customer retention programs or other services that you will need for keeping satisfied customers will be easier with the right knowledge. How to Calculate CLV The formula for calculating CLV is quite simple. It is the total gross profit of a customer over the lifetime of the relationship LESS marketing, advertising, and incremental service or product fulfillment costs. This EQUALS the customer lifetime value. Here’s a good example: Take a gym member who is spending $40 on a monthly basis for three years. The calculation for the CLV would be $40 x 36 months = $1,440 in total revenue (or $480 a year). Thinking hypothetically, you can see why so many gyms, to drive traffic, offer new members free starter memberships. They know that if they are spending less than $480 for bringing in a new member, that member will eventually turn out to be profitable. Running Your Business to Optimize CLV It is helpful to think of CLV as a “catch and keep” strategy, rather than a “catch and release” tactic. Below are only a few advantages that you will have by understanding fully and leveraging customer lifetime value. These include: Ultimately, it is difficult to run a thriving business if you do not invest in bringing in new customers and satisfying the ones you already have. By understanding customer lifetime value, you will realize that you miss investing in your creative marketing strategy. Companies that understand customer lifetime value, and act upon this knowledge, will gain a competitive advantage in the marketplace. Overall, a diligent CLV strategy enables businesses to improve marketing strategies to not only increase customer retention, but boost revenue.

Understanding Customer Lifetime Value

View Resource Understanding Customer Lifetime Value
It takes extensive research and strategic planning to gain a competitive advantage. Every advantage is significant and counts for establishing your business as the leader in your particular industry, especially in today’s economy and this aggressive business world. Your target audience is a focused group of consumers that your company is looking to market to with its products and services. You’ve differentiated this target market by demographic, socioeconomic, and common needs or characteristics that turn them into the perfect sales audience. However, your competition is also focusing on this target market as well. By uncovering certain characteristics, you can find and gain a competitive advantage over your competitors. Cost Leadership Typically, businesses attempt to gain cost leadership as their first competitive advantage. This is where a business is in the position to offer the same quality products as the competition, but at a cost that is lower. Cost leadership happens when a business figures out a way to yield products at a lower cost through perfecting production methods or through using resources in a far better and more efficient manner than the competition. Differentiation The next strategy that companies often use for setting themselves apart from the competition is differentiation. With this strategy, reducing prices is only one of many feasible factors that can set a business apart from others. Companies that differentiate themselves usually seek out one or more features or advantages they have that will set them apart from the competition. Then they locate the sector of the market that will find those features or advantages essential and market to them. Strategic Alliances Companies can gain a competitive advantage by seeking strategic alliances with other companies within related or the same industry. However, companies need to be careful not to cross any lines between alliances and deceit. This deceit can happen when companies in the same industry attempt to collude to control prices. On the other hand, strategic alliances are more like joint ventures that companies use to combine resources and gain exposure for themselves at the expense of competition that is outside the alliance. Quality Often, customers will pay more for better quality products or services. If you have more expertise, superior design or access to higher-quality materials, product quality could be your competitive advantage. If this is the case, you would need to find market sectors that will purchase your higher-priced products. Brand If promoting a well-known brand is your competitive advantage, you’ll need to reach consumers who see the brand in a positive way, who need it, and can buy it. While some brands can cut across multiple market sectors, like detergents, others like sports-related brands, will need more focus. Service By placing an emphasis on customer satisfaction, you can compete on service. Customer service that focuses on creating higher levels of customer satisfaction implies employees have good people skills, are trained in customer relations as well as the products they support. Since customer service can get costly, businesses whose competitive advantage is customer service avoid the lower-cost market sectors and do better in the high-value sectors. Even after you gain a competitive advantage, you are far from done. You will have to maintain your competitive advantage continuously to be successful.

Gaining a Competitive Advantage

View Resource Gaining a Competitive Advantage
As a new startup or an existing brick and mortar business, building an online presence for yourself is important, yet it can also be very time-consuming. It can be frustrating at times since it is not something that will happen overnight. However, building an online presence is crucial to your success because it enables people to find you, get to know you, interact with you, and trust you. You can make the process less frustrating and time consuming when you know the steps you should take. Business Website For most entrepreneurs and small businesses, a business website is the foundation of your online presence. It is your central hub where people will go to contact you, learn about your products or services, and engage and interact with your content. Your website should include a clear message about the core essentials of your business: easy-to-use navigation, an about page, a contact page, and, of course, valuable content. You should also include an opt-in incentive for building a subscriber list. SEO Once your website is up and running, your next step is to optimize it for search engines. According to a report from Fleishman-Hillard, 89 percent of consumers use search engines for researching products, services or businesses before coming to a decision. To benefit from this, it is essential to implement SEO strategies for your website. This will allow search engines to easily find your site and list it in their organic results. Websites that are displayed higher up in the search results tend to get more traffic because they are more visible and people trust search engines. Some ways to optimize your site include: Remember, similar to building your online presence, SEO will not happen overnight; it is an ongoing process. Search engines love blogs with steady, fresh content, so stay consistent. Social Media Being social does not mean you need to create a profile on every social channel. What it does mean is you need to pick a few channels, create profiles, and regularly engage and post on them. Start up a Facebook business page, for instance, and join in and engage in local Facebook groups. Again, be consistent. You will not be able to build a following if you are not posting regularly and engaging with the online community. Social media is a powerful marketing tool useful to build a huge following, and will allow you to reach out to people who know you and trust you. Once you have your social media presence established, you can then move on to creating landing pages that you can use to drive people to your offers or a specific call to action. For instance, you can create landing pages for promoting a newsletter or eBook, or you can create landing pages for welcoming people to your Google+, Facebook, or LinkedIn profiles. No matter what you use landing pages for, you have created opportunities to build your subscriber and potential customer list. You can use tools like Optimizely or Unbounce to track and test your pages. Online Local Advertising Businesses used to advertise in the Yellow Pages to create advertising awareness of their business in their local community. Not anymore. Those days have come and gone and have been replaced by online offerings. For consumers to find your local business today, you are going to have to rely on online listings to generate that local traffic. Start with Google, Bing and Yahoo! as places to get your business listed. Move on to other sites such as Yelp, Angie’s List and some of the online replacements for yesterday’s old printed Yellow Pages. In your listings, make it simple for consumers to contact you. Include contact information, such as your email address, physical address, phone number, and any social media channels you are on. Include this information in every listing. Many of these sites can also help or hinder your business because they feature customer review sections. Make sure you are monitoring what is being said in these reviews and adjust your customer service strategies accordingly. In today’s eCommerce world, your online presence is a huge factor in your success and your business growth. It will take some time to establish yourself, so patience is key here. When you can create a strong foundation, establish a social media presence, consistently share valuable content and build strong relationships, the momentum of it all will work in your favor.

Creating an Online Presence

View Resource Creating an Online Presence
Profit is a large part of why you’re in business, and it definitely is what keeps you in business. That’s why using an effective pricing strategy is so important. Here is a look at how to set and use the right pricing strategies for your small business. Benefits of a Pricing Strategy When you price your goods correctly, you sell more of them, and you make a better profit. Specifically, the right pricing strategy will: Customer/Value Relationship Setting the right price can be confusing. The two things you need to take into consideration are the perceived value of your product in the eyes of your customers and how much your target audience is capable of paying. What you can charge is seldom a fixed amount. It ranges on a spectrum, influenced by how much worth you are offering to your customer. If your product or service has more benefits to a customer and offers more features than a competing product, the shopper will be willing to pay more for it. That is easy to see when eating out. At a fast-food restaurant you pay less for a hamburger than you do at your local gourmet sit-down restaurant. It is also essential to get a handle on who is buying from you and the customer you want to target. What are their demographics, their income level, and how much do they typically pay for your type of product or service? They will pay more the higher their perceived value, but only within the parameters of how much discretionary income they have access to. Competitive Environment Next, figure out how much it takes you to produce and deliver the goods and services. You have to cover your costs plus some in order to make a profit. Base this cost on: This process is complex. In addition to contributing to cover these costs, your pricing must cover all costs of the goods you are selling and importantly, contribute to company profit. Then, find out what your competition, both in your local and online markets, are charging for the same or similar goods. Once you know the range of prices in these sales channels, you can figure out how where you want to position your price points. Can you penetrate the market best as the high-end product in the lower-end of the market? Maybe you would do better being the medium-priced product in a high-end market. Where you place yourself will have a major impact on how much you will sell. When you figure out what your customer can pay and where you see yourself in the market, price your product slightly higher than you think you should. Not charging enough is much more common for a small business than pricing too high. Be careful setting yourself in a market position based on pricing below the competition. Your profit margin will be low so you will need to sell a great deal to stay in business. Strategic Pricing Alternatives Don’t limit yourself to a one-price-fits-all strategy. There are several models available. The more pricing options you give your customers, the greater are the number who will buy. The best approach is to get the customer to buy the basic product or service. Then add options that will increase what they ultimately spend with you. This is called tiered pricing. To get of an idea how this works, think of buying a car. The salesperson will give you a price for the car, but then also offer financing options, for a price, and add-ons for the car. He makes considerably more money with these extras, without alienating his customer. Figuring out the right pricing strategy takes time for research and number crunching. And the work is ongoing, subject to review on a regular basis. However, the results are a profitable bottom line.

Pricing Strategies

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Operating a business on a virtual basis is quickly gaining in popularity. Although running a virtual company can be attractive to small business owners, they still need to understand that there will be benefits and challenges with this business operations concept. No matter what type of small business you have, when you take the leap to run it virtually, you’ll encounter obstacles. If your virtual business hopes to flourish, you must overcome them. With that said, below are some benefits and challenges you might face. Benefits Low Overhead Costs Traditional companies have no choice but to run brick-and-mortar offices. On the other hand, if your business offers the opportunity to operate virtually, you will not have the real estate and office costs that brick and mortar business incur. This can give your business a competitive advantage since the money saved can be used to offer lower prices to customers. This is a clear cost advantage to running a virtual company as opposed to a brick-and-mortar establishment. Staff Retention Talented individuals are often attracted to remote work environments since many can save an average of 10 hours of commute time each week. Just the thought of avoiding busy city rush hour commutes can be enough, not to mention the gasoline expenses savings. Wider Talent Pool A virtual company does not have significant geographic limitations. Being able to ignore local borders, and often national borders, can expand your talent pool by making it much easier to find the best candidates for the job. Many companies can often see a significant increase in job applicants when they post national, as opposed to regional, job openings. Challenges Social Interaction Self-motivation is often thought to be the hardest part of working a virtual position. The reality, however, is that individuals are struggling more with the social change. They find they miss the office interaction and how this interaction broke up their workday. If your business has hired strong employees, it will not matter which environment they are in; they will get the job done. However, many employees still need some personal connection since they are human and not machines. Even though social interaction does take the employee away from their work, for some workers, it is still needed to keep them motivated. Negative Perception Although more companies are making the switch to virtual setups, investors, customers, and business partners may have a negative perception of this type of setup and question if you are a serious business or not. They might wonder if you will still be in business a month or two down the road or if they will be able to reach you in the event of a major issue. Questions like these are valid, but the good news is they are being asked less these days. Weak Communication In the office, if you need to communicate with a team member, you can simple turn around to the next desk or stop by their office. In a virtual environment, communicating can become more difficult. Though with email, smartphones, and tools like Skype communicating remotely is becoming less of an issue. Best Practices To manage in a virtual environment, business owners have to rethink their traditional approach to management and devise tactics to use over video chats, calls, and email. It is now the leader’s responsibility to fill the social gap and be intentional and strategic with their communication. If your virtual team is going to work effectively, processes and tasks will need to be clarified; and not just your employees roles and goals. Companies have to align their team on roles, goals, and responsibilities. However, without co-located individuals, coordination can become the greatest challenge. Therefore, it is essential that companies put more emphasis on the details of tasks and processes required to complete them. Meetings are still highly encouraged, but should be held using video or online conferencing technology. Also be sure to allow a few minutes before and after each meeting for open conversation. Companies should still recognize and acknowledge accomplishments, share milestones and big successes in meetings and emails, and recognize the team members that got them there. Running a virtual company can be extremely beneficial from a cost and talent acquisition perspective. If operated properly and efficiently, the virtual model can offer some very competitive advantages that become the difference between succeeding and failing.

Running a Virtual Company

View Resource Running a Virtual Company
Making an offer and negotiating pay with an ideal candidate can be a trying situation. On the one hand, you want to make the best offer possible. On the other hand, however, you do not want to overextend your budget and overpay the candidate. Negotiating takes practice. However, it is a skill that you can master. Here are steps you can implement in the negotiation process that will enable you to hire the best candidate in a cost efficient manner. Elements of Compensation According to the U.S. Small Business Administration (SBA), a good practice would be to pay a salary that is based on location, experience, and the available talent pool. Payscale.com, Salary.com, and the Bureau of Labor Statistics are three sources that can help you analyze these factors with respect to deriving a fair and competitive salary structure. However, how can you combine these factors, stick within a budget, and offer an attractive compensation package to potential candidates? When starting the negotiating process for a potential candidate’s compensation package, there are some reference points you can follow. These include: Some other factors to take into consideration before moving forward with the negotiating process include: This latter component is especially important since a potential valuable employee might be lost if they fail to assert themselves during the negotiation process. Preparing a Budget and Offer Before extending an offer, it is important to determine exactly what your limits are, especially if you are operating within a tight budget. Consider some “employee perks”’ that are less costly that you could throw in. No matter how well-qualified and valuable the candidate might seem, you should never promise the moon if you are not able to deliver. Some less costly perks you could make to sweeten the deal would be offering the candidate the chance to work remotely as long as the work gets done, adding an additional week off during a major holiday, such as during Christmas or perhaps during a period when work is slow. You can even offer special bonuses such as a signing bonus, shares in the company, or annual performance bonuses. If you decide to provide a company car, you might want to consider the maintenance, insurance, and fuel costs associated with it. Closing the Deal When it comes time to close the deal, deliver your offer in writing as well as in person. By putting your offer in writing, you are protecting your company from any misunderstandings that might result from improperly communicated compensation components. Additionally, presenting your offer in person allows you the opportunity to review it directly with the candidate and answer any questions they might have. You can excuse yourself for a few minutes to grab a coffee, which will give the candidate some time to read through it. Be sure to include all job expectations and responsibilities so they are clear. Put strong emphasis on company benefits. Even though many candidates will be focusing on the salary component primarily, stressing benefits such as health insurance, bonuses, profit sharing, retirement, tuition reimbursements, vacation allowances, and other amenities are all significant parts of the entire compensation package. Further, make it clear that they have room for growth in your company (if that is true), which could just be exactly what the candidate is looking for and what might win them. The bottom line: Salary negotiation has a tremendous psychological impact on a prospective employee. If they come onboard with a sense of enthusiasm and satisfied mood after salary negotiations, they will be more motivated to work hard and put forth the effort to help you make your company a success.

Negotiating with Prospective Employees

View Resource Negotiating with Prospective Employees
Employees who are well-trained are an asset to any business. In a poor economy, unfortunately, the training budget for a business is often the first thing to go. Although eliminating your company’s training budget might make sense at that particular time, the implications long-term can outweigh the costs you are saving at the moment. Thinking long-term, lack of training can have a big impact on the motivation levels of your employees, increase business inefficiencies, and lead to employee turnover. These three things alone can be costly. So, how can you train and educate your employees efficiently but still keep within budget? Tips for Budget-Friendly Training Methods Optimize the Strengths of Your Employees When you first hire a new employee, begin them with general training that gives them an overall introduction to your company. Each team member will not just be good in their specific roles, but be competent and comfortable with other roles inside your organization. Following that, have them pursue more specialized roles with more individualized training. It is also a good idea to cross-train for other roles. Cross training is one way to help employees become knowledgeable and skilled at performing other roles within the organization. If you can allow your employees to wear many hats, you are building a strong foundation and deepening your bench strength. Positive Learning Atmosphere Providing a positive learning environment promotes employee confidence and encourages development. With each lesson, clearly explain the purpose of each aspect of the training and how it relates to the employee’s role within the company. Negativity limits the learning process; therefore it is essential that trainers be patient, be constructive when mistakes happen, and reward staff accordingly for new achievements. When employees receive positive feedback, it will affirm and reinforce their efforts, and provide them with encouragement to continue learning. Utilize Online Training Classes Online courses are often low-cost or free and allow employees to proceed through the learning process at their pace. Companies like Dale Carnegie, Learning Tree, Business Training Institute, and BizLibrary all provide a wide array of online classes and can let your employees choose from a wide array of learning experiences. Bring in the Professionals You can utilize low-cost online courses, however, if you have specific training requirements you might have to invest in off-site educational programs. These will enable your employees to learn in an interactive classroom environment that offers fewer distractions. It can be a more time-saving and cost-effective option if you have multiple people to train if you bring the instructor on-site. You can check into organizations like the Women’s Business Center or your local Small Business Development Center about classes and courses that will fit your budget and your needs. Continue the Learning Process New employees should not be the only ones benefiting from the right kind of training. To keep an employee trained and focused on the success of your business, be sure to continue their learning process throughout their career. New areas, including laws, regulations, and technology, are continually popping up that employees need to learn. Also, keeping abreast of internal business changes will require fresh perspectives, updated skills, and new ideas. Utilize trade associations, brown bag lunches, and mentoring and cross training programs for ongoing employee development. Not only can performance be improved through proper training, but staff morale and profit can be as well. When employees acquire new skills, it builds their self-esteem and increases their contribution to your company. They will also feel valued and appreciate the investment you make in them.

Training and Educating Employees

View Resource Training and Educating Employees
Today, more so than any other time, businesses focus heavily on engaging customers, the media, investors, community members, and analysts — or some combination of them. But with so much focus on external audiences, they often overlook their most vital connections: their employees. Successful companies understand that engaged employees contribute to the success of the company. To keep a high level of engagement, a strong focus on employee communications is necessary. Benefits of Strong Communications Organizations that prioritize strong employee communications stand to benefit in a multitude of ways. Effective employee communication: Best Practices In this era of on-demand information, employees expect more from organizational communications. To achieve transparency, pertinency, and immediacy, follow these effective employee communication best practices: If your company is communicating effectively and with purpose, you are more likely to have employees who work with a common purpose of achieving company goals. Effective employee communications allow everyone to work towards the same company goals. It helps employees to stay engaged and be motivated to contribute to the success of the company.

Effective Employee Communications

View Resource Effective Employee Communications
When you are trying to get your personal finances in order and achieve your financial goals, finding a budgeting method that works for you is one of the most important steps. You need a method that makes sense to you, works with your lifestyle, and that helps you stick to the budget you create on paper. What is envelope budgeting? Envelope budgeting is an all cash budgeting technique. You decide how much money you are going to spend on a specific type of purchase, put that cash in a labeled envelope, and then use only that cash for making that type of purchase. You can replenish your envelopes monthly or each time you receive a paycheck, depending on your preferences. Steps to set up your envelope budget system
  1. Subtract fixed expenses, such as your housing payment, car payment, utilities, and credit card payments from your income to find out how much discretionary spending you have available.

  2. Divide your discretionary spending money between spending categories that match your spending habits. Allocate the amount you plan to spend in each category based on past spending habits or future spending goals. For this method to be effective, make sure to be reasonable, especially in necessary categories like groceries or gas. If possible, allocate money in $20 multiple amounts to make it easy to put the appropriate amount of cash in each envelope.

  3. Label envelopes with the categories you have determined and the amount of money you have budgeted for each category. If you would like something more durable and easier to keep tidy than a stack of envelopes, an alternative is to use a small accordion folder with tab dividers.

  4. Go to the ATM or the bank or credit union when it is time to fill your envelopes and withdraw the appropriate amount of cash. Divide it between the envelopes according to your budgeted amounts.

  5. Spend money only from your envelopes. If you have to make a purchase online with a debit card, immediately take that amount of cash out of the appropriate envelope and put it in an envelope labeled “deposit into checking account.”
Replenish your envelopes each month or after each paycheck. You can either carry over remaining cash or take that cash out and use it to help achieve a financial goal, like paying down debt or saving money for a vacation. Pros and cons of envelope budgeting Consider the pros and cons of envelope budgeting to help you decide whether this is the right budgeting method for you. Pros: Cons:

Try the Envelope Budgeting Method

View Resource Try the Envelope Budgeting Method
You have many decisions to make when shopping for a loan, and one of them is whether to obtain a secured or an unsecured loan. Whether you are familiar with the terminology of secured and unsecured loans or not, you are probably familiar with the underlying concepts. Secured loans get tied to an asset, like your home or automobile. Unsecured loans are not tied to any specific asset. Understanding these types of loans in more detail can help you borrow money wisely. What is a Secured Loan? Lenders often issue loans secured by a specific item of personal property. This item might be a house, a car, a boat, or even stocks or bonds. When property is used to secure a loan, the lender maintains ownership rights in the asset until the loan gets repaid. This means if you fail to repay the loan or otherwise meet the terms of your loan agreement, the lender has the legal right to seize and sell the property in order to repay the loan. That property is sometimes referred to as loan collateral. With a secured loan, the lender also places a lien on the property. The lien indicates that should you sell the property the lender is entitled to get money to pay off the remaining loan balance before you receive any money from the sale. The most common type of secured loan is a mortgage, which is secured by the house being purchased. If you stop making your mortgage payments, your lender could foreclose on the home and sell it to pay off the mortgage. If you sell your home, you have to pay off your mortgage immediately. Advantages of Secured Loans Disadvantages of Secured Loans What is an Unsecured Loan? An unsecured loan does not involve naming any specific property as collateral on the loan. Instead, the loan is issued on the basis of your ability to repay the loan. You might have to provide information about your income, savings, employment, or credit history. Some common types of unsecured loans include credit cards, student loans, and personal loans. Advantages of Unsecured Loans Disadvantages of Unsecured Loans

Secured vs. Unsecured Loans

View Resource Secured vs. Unsecured Loans
Many popular credit card issuers advertise balance transfers as one of the top perks for their card. In fact, you can often find promotional offers of 0% interest on balance transfers for the first year or more after opening the credit card. Transferring account balances can be a great financial choice for you because you can move the balance from a high-interest rate credit card to one that is not charging you interest at all. That way, your credit card payment will go entirely toward paying down the balance, rather than having to pay the monthly interest first. If you are looking to get out of credit card debt, transferring account balances to a new card can help. Features to look for on your new credit card Making the most of balance transfers is largely about choosing the right credit card. There is a lot of competition in the credit card industry, so as long as you have a good credit score, you should have plenty of strong offers from which to choose. Look for several features to help you pick the best new credit card. Make sure balance transfers do not hurt you Overall, transferring your balance can be a wise financial move if you handle it correctly. However, there are a few things that could hurt you in the long run if you are not careful. Pay attention to each of these factors to protect your credit and your personal finances.

Should You Transfer Account Balances?

View Resource Should You Transfer Account Balances?
When you are looking to borrow money, your credit report is the most important document that influences the lender’s decision. This credit report contains sensitive personal data about your payment history on many types of loans and lines of credit, plus legal information about bankruptcy, foreclosure, and tax liens. Because of the importance of your credit report, the Fair Credit Reporting Act (FCRA) was created to regulate the collection, dissemination, and use of consumer information, including consumer credit information History of the Fair Credit Reporting Act As consumer credit became more common in the 1960s, the United States government wanted to create clear legislation regulating how consumer credit information would be stored and shared. Congress passed the resulting Fair Credit Reporting Act on October 26, 1970. FCRA has gone through a series of amendments and clarifications from the late 1990s through present day. The current piece of legislation is comprehensive and offers a wide range of protections and rights for consumers. Important Components of the Fair Credit Reporting Act The Fair Credit Reporting Act is national legislation. Some states have also created legislation to provide further consumer credit rights. Contact your state Attorney General if you would like more information about state laws.

The Fair Credit Reporting Act

View Resource The Fair Credit Reporting Act
Staying on top of paying your bills can feel like an impossible chore when you have mounds of account statements and bills that arriving in your mailbox or email account. However, it is a responsibility that you need to pay attention to because it can be very costly to push it aside. Missing a payment will trigger late fees and can even damage your credit score if the bill was for a credit card or loan. How to organize bills that come in the mail Your bill organization strategy should start by designating a specific spot where you put your bills the day they arrive in the mail. You do not want to lump them in with the place where you keep the rest of the mail because they are time sensitive and can get buried quickly. The spot where you keep your bills could be an inbox on your desk, a basket on a bookshelf, or a hanging slot on a wall. When a bill arrives, you also may want to take a minute to open it, find the due date, and write it in marker on the front of the envelope. That way, it is easy to sort bills by the due date so you can keep a close eye on the ones with due dates coming up soon. Best bill payment practices Start by scheduling a regular time when you will pay your upcoming bills. For some people, it is easiest to pay bills weekly to get in a consistent routine. Others like to pay bills the day after receiving each paycheck. Set up a reminder to help you get in the habit of paying bills every time your scheduled day comes around. Use whatever calendar you use for other reminders in your life. This might be on your phone, on the computer, on a paper wall calendar, or in a day planner. You should mail a check at least seven days before the bill is due to ensure it arrives and gets processed on time. Therefore, unless a bill is due at least seven days after your next scheduled bill paying session, you will want to pay it in this session to ensure it gets paid on time. How to use online bill payment In today’s world, paying bills by check is not the only available method. Online bill payment saves money because you do not need to pay for checks or stamps. It is also helpful because you can set up payment reminders to arrive in your email just a few days before a bill is due. Some accounts even waive fees if you opt to receive account statements via email rather than on paper. To use online bill payment, you will need to set it up with the bank or credit union that you have your checking account with or directly with individual companies that you owe. Each bill should be very easy to pay once you go through the initial step of setting up payment information for every account. Using bill payment through your bank or credit union allows you to do that all in one place. You just need to login and authorize each payment electronically to make the transfer and pay your bills that day. An even easier option, if you are comfortable with it, is to opt for automatic bill payment. If you set this up, your bills will automatically be paid on their due date every month, without you having to do a thing. The concern with this approach is that you need to have money in your bank account for the scheduled date of each bill. Otherwise, you might incur overdraft charges.

Getting Organized for Bill Payment

View Resource Getting Organized for Bill Payment
Getting your finances under control is nearly impossible without using some method of budgeting. Although you may shy away from the idea of a budget, it is really just a plan for how you will use the money you earn, and it often includes a method to help you stick to your plan. You’ll find many available budgeting methods, and it’s up to you to pick one that makes sense to you, feels sustainable, and fits with your financial goals. What is zero-based budgeting? Zero-based budgeting starts with the premise that your income minus your expenses each month should equal zero. Most people know that you should not spend more money than you earn. But zero-based budgeting says that you should not spend less money than you earn either. Every dollar that comes to you during the month should have a defined purpose, whether it is used to pay a bill, save up for a vacation, invest for retirement, or buy new clothes. At the end of the month, you should have spent or saved each dollar you earned or received. To achieve this goal, you will need to create and stick to a budget (also known as a spending plan) that accounts for all your income and expenses in equal amounts. Advantages of zero-based budgeting Steps to create a zero-based budget
  1. List all the after-tax income you expect to receive during the month from all sources. This might include your paychecks from work, additional income from side jobs, child support money received, or earnings from investments.

  2. List all of the ways you expect to spend your money during the month, each with a specific dollar amount. Start with your fixed expenses, like your house payment, car payment, and phone bill. Then list expenses you have more control to adjust, like your grocery spending, eating out, shopping, and buying gifts. Lastly, list other places you would like your money to go, like retirement accounts, charitable donations, building up your emergency savings, or making extra loan payments.

  3. Add up the totals for your income and your spending and compare the numbers. Adjust your spending plan until your income minus your spending equals zero. You could cut how much you allocate for things like shopping or savings if you need to reduce spending. Alternatively, if you discover you need to spend more, you could increase the amount you will spend on an extra loan payment.

  4. Decide how you will stick to your spending plan during the month. For a zero-based budget to work in practice, you must spend your money exactly where you are planning to spend it. In many cases, you will need to keep track of your spending during the month to make sure you are staying on target.

The Zero-Based Budgeting Method

View Resource The Zero-Based Budgeting Method
When you are looking to obtain a loan, amortization is a word you might run across. While it is a concept that is fairly easy to understand, many people are not familiar with it. Take just a few minutes today to understand the basics of loan amortization, and how it works so you can apply this knowledge to your loans. What is loan amortization? Amortization is the process whereby each loan payment made gets divided between two purposes. First, a portion of your payment goes toward paying interest, which the lender calculates based on your loan balance, interest rate, and how much time has passed since the last payment. Second, the remaining part of the payment goes toward paying off the principal, which is the loan balance you owe the lender. When issuing the loan, your lender will use a payment formula to calculate in advance exactly how each payment gets divided. That way, you can have a loan repayment schedule with a specific number of payments of a specific amount. One key element of loan amortization to note is that the amount of each payment that goes toward principal and interest changes over time. As you pay down your loan balance, the interest portion of each payment decreases. Because the amount of the payment remains the same, this means that the principal portion of each payment increases, which helps you pay off what you owe faster. By the last few payments, you are paying very little interest, and almost your full payment is reducing your loan balance. What types of loans have amortization? Most types of installment loans are amortized loans. An installment loan has a fixed number of payments (also known as installments), and each payment is an equal amount. Some common types of installment loans include mortgages, student loans, auto loans, and some personal loans. If your lender told you exactly how many payments you would be making and each payment is the same amount, it is probably an amortized installment loan. If your payment varies from month to month and you can borrow more money, like with a credit card or home equity line of credit, then it is probably not an amortized loan. Example of loan amortization The most common amortized loan is a mortgage, so it makes a good example for understanding how amortization works and what its effects are. Let’s say you get a mortgage for $200,000 to be repaid over 30 years at 4.5% interest. Your lender will run the calculations and create an amortization schedule of 360 monthly payments of $1,013.37 each. In this example, the first month, you will owe $750 in interest, based on your mortgage amount and interest rate. The remaining $263.37 of your $1,013.37 monthly payment will go toward repaying the principal. The second month, because your principal balance is slightly lower, you will only owe $749.01 in interest, and you will repay $264.36 of principal. Your 180th payment, halfway through your mortgage repayment, will be $498.68 interest and $514.69 principal. Your final payment will be $3.79 interest and $1,009.58 principal. Keep in mind that any amortization assumes fixed payments for the duration of the loan. In cases where a borrower has an adjustable rate loan, the amortization schedule will adjust, along with the payment amount with each adjustment to the interest rate.

How Loan Amortization Works

View Resource How Loan Amortization Works
When you have been house-hunting for months in search of the ‘perfect home’, you will feel the thrill of excitement that comes when you find the home that fits your ideal. It is true that making an offer on a home is very exciting, but it can also be stressful as you navigate the process with the help of your real estate agent. When you want a particular home, you will want to move forward with the right approach so the seller is likely to accept your offer. When to make an offer? As soon as you find a home that you would be happy to buy, you should at least consider making an offer on it. It is always tempting to wait and view a few more properties just in case a better home is out there, but this can be risky. A good rule of thumb is that if you would be devastated to have another buyer snatch up this home, you should make your offer immediately. If current conditions indicate a “seller’s market”, where homes stay listed for a very short period before going under contract, you should try to make an offer the day you see the property. That is especially true if the home has just gone on the market. On the other hand, it might be a “buyer’s market”. If there is a large inventory of homes that have been on the market for awhile, it is probably safe for you to take your time and come back to that house after seeing a few others. Factors to base your offer on Start by having your real estate agent run a comparative market analysis, which pulls information about recent sales of properties that are similar to the one you want to purchase. These comparable properties (often called comps) should be in the same neighborhood, have a similar number of rooms, and be of a similar size. Your real estate agent can help you adjust these sale prices to account for differences between the property you are looking at and the ones that sold. Differences could include the age of the home, number of bedrooms or bathrooms, condition, and home improvements. You’ll also need to look beyond the hard facts of the home to get a sense of broader factors affecting your offer. For example, in a seller’s market, you may need to make an offer higher than the asking price because you are potentially competing with other buyers. You can also consider anything you know about the seller’s level of motivation to sell. For example, sometimes a listing will advertise that a seller is relocating, which lets you know they are likely to accept a lower offer. 5 key ways to make your offer appealing
  1. Get preapproved for a mortgage or submit a cash offer. Sellers want assurance that you will be able to come up with the money you have offered for the home. The absolute best way to do that is to make a cash offer, but that is not possible for typical buyers. The next best thing you can do is to get a lender to preapprove you for a mortgage. The lender will review your financial documents and credit report and give you a letter stating that they have approved you for a mortgage of a specific amount.

  2. Put up a hefty deposit. Your deposit, or earnest money, is the money you submit along with your offer to show the sellers that you are serious about following through with the deal. Once you and the seller have both signed a contract, the contract, and your state laws specify the circumstances in which you could get your deposit back. Otherwise, if you back out, the seller keeps your deposit. If you put up a high amount, the seller will know you are in a strong financial position and that you fully intend to go through with the purchase.

  3. Limit the contingencies in your offer. You are allowed to write several contingency clauses into an offer that give you the flexibility to back out without penalty. For example, you can make an offer contingent on the sale of your current home by a specific date or contingent on a clear inspection by a third party property inspector. The fewer contingencies you include, the more confident a seller will be that the deal will go through.

  4. Be flexible with timing. Unless you need to be in the home by a specific date, it can be helpful to indicate in an offer that your timing is flexible. While you do need to write in a closing date on the offer, you could include a note that you are willing to adjust the date to be sooner or later depending on the seller’s needs. A seller might want more time to find a new home or might already have another home under contract, in which case they’ll want a quick sale date.

  5. Write a personal letter to the sellers. While a purchase offer is a legal document, it does not hurt to add a personal touch. Write the sellers a letter telling them about your family, what you like about their home and neighborhood, and how much you are looking forward to taking care of the home they have made so beautiful. You can also include a photo of your family. This personal touch can go a long way in helping sellers feel good about you and your offer.

Making an Offer on a Home

View Resource Making an Offer on a Home
Income-based student loan repayment plans are a type of payment plan where monthly payments are based on the borrower’s monthly income, allowing for borrowers with lower incomes to make lower monthly payments. Each year, the borrower submits income and family size information from the previous year to recalibrate the monthly payment amounts. For many borrowers with low to moderate income and moderate to high student loan debt, income-driven repayment plans can significantly reduce the monthly financial burden of student loan payments. While some private lenders may offer income-based repayment plans at their discretion, the main place where you are sure to find them available is on federal student loans. The federal government offers four different plans that fall under the broad umbrella of income-driven repayment plans. Eligibility requirements and calculations of payments vary from one plan to another. The four plans are income-based repayment, Pay As You Earn, income-contingent repayment, and income-sensitive repayment. Borrowers under any of these repayment plans may be eligible for Public Service Loan Forgiveness, which discharges any remaining loan balance after making 120 loan payments while working in a qualified full-time public service job. Income-Based Repayment Any federal student loan except a parent PLUS loan, or a consolidation loan that included a parent PLUS loan, can be repaid under the income-based repayment program. If you have a Perkins loan, it must be consolidated into a Direct Loan to qualify. There are two payment structures, depending on whether you had any federal student loans before July 1, 2014. For loans older than July 1, 2014, your monthly payments will be 15 percent of discretionary income. In this case, your discretionary income is your gross monthly income minus 150 percent of the poverty guideline for your family size for your state of residence. Any remaining balance on your loans is eligible for loan forgiveness after 25 years of payments. If your only loans were issued on or after July 1, 2014, your monthly payments are 10 percent of your discretionary income, and you are eligible for loan forgiveness after 20 years of payments. Pay As You Earn To be eligible for the Pay As You Earn payment plan, borrowers must not have had any federal student loans with an outstanding balance as of October 1, 2007, and also must have taken out at least one Direct Loan since October 1, 2011. Also, all loans being repaid under this plan must be Direct Loans, which can include consolidated loans of other types, except consolidated parent PLUS loans. This plan is identical to the new income-based repayment plan for borrowers who take out their first loan on or after July 1, 2014. It was created in 2012 to make the payment structure available before the new guidelines for the income-based repayment plan were issued. Income-Contingent Repayment Borrowers are eligible for income-contingent repayment on any loan within the federal Direct Loan program. Notably, income-contingent repayment is the only income-driven repayment plan available for parent PLUS loans, which must be consolidated under the Direct Loan program to qualify. Monthly payment amounts under this plan are 20 percent of discretionary income, calculated as gross monthly income minus the poverty guideline for the borrower’s family size for their state of residence. These payments will be higher than they would be on other income-driven repayment plans available. Therefore, borrowers who have other options should use those instead. Income-Sensitive Repayment This is an older repayment plan, and it is only available to borrowers who have loans made under the Federal Family Education Loan program, which ended in 2010. Federal Stafford loans, PLUS loans, and consolidation loans made under this program qualify. Monthly payments under this plan can be between 4 percent and 25 percent of monthly income, but they must cover at least the accrued interest. Borrowers can only use income-sensitive repayment for a total of five years, and after that, must switch to another repayment plan.

Income-Based Student Loan Repayment Plans

View Resource Income-Based Student Loan Repayment Plans
Consumers often don’t realize the wide range of options available when they want to borrow money. Most people have a credit card, and many have auto loans and mortgages, but fewer use a personal line of credit. Similar to a credit card, a personal line of credit is an unsecured revolving credit account with a maximum credit limit. Personal lines of credit, however, are more flexible than a credit card because you can draw the money with checks, or often in cash, rather than only making card purchases. This makes a personal line of credit a potentially useful financial tool for many people. Advantages of a personal line of credit Disadvantages of a personal line of credit Is a personal line of credit right for you? Before applying for a personal line of credit, take an honest look at your personal finances and consider your budget and spending habits. A personal line of credit has the potential to lead to undisciplined spending because there are no restrictions on when you draw the money and what you spend it on. However, in the right situation, a personal line of credit can be a useful financial tool. A personal line of credit might be right for you if you are self-employed, work on commission, or otherwise have an uneven cash flow. It can help smooth out cash flow because you can borrow during months when you are not receiving much money, then make large repayments during months with a surplus. A personal line of credit can also be a good security net if you work in a volatile industry and want to have an emergency source of cash during times of unemployment. A personal line of credit might not be right for you if you do not live on a balanced budget, and you are planning to make purchases that are beyond your means. You do not want to dig yourself into debt from which you cannot escape. Also, you might not be able to get a personal line of credit if you have average or poor credit history or you cannot show proof of steady employment.

Using a Personal Line of Credit

View Resource Using a Personal Line of Credit
Student loan forgiveness can alleviate your responsibility to repay part or all of your student loan debt. When maximizing this benefit, it’s crucial to understand how loan programs operate and adhere to their guidelines. What Is Student Loan Forgiveness? Student loan forgiveness deals with the partial or complete elimination of student debt, relieving borrowers from that financial burden. Eligibility requirements vary between programs, which include Public Service Loan Forgiveness (PSLF), specialized forgiveness initiatives, and income-driven repayment plans. Types of Student Loan Forgiveness One thing to note is that student loan forgiveness is only available for federal student loans. These are the types of programs you can qualify for: Public Service Loan Forgiveness (PSLF) PSLF program provides student loan forgiveness to graduates committed to working full-time for ten years with a U.S. federal, state, local, tribal, or qualifying non-profit government organization. To qualify, graduates must take a direct loan or a direct consolidation loan and make 120 qualifying payments while employed by an eligible public service employer. For those who borrowed through the FFEL program or the now-defunct Perkins Loan Program, the option to consolidate student loans into a direct consolidation loan is available, making them eligible for PSLF. Additionally, federal agency employees may benefit from their employer repaying up to $10,000 of their student loans annually, with a maximum cap of $60,000. Specialized Loan Forgiveness Programs You may qualify for student loan forgiveness or reduction by working or volunteering for specific organizations. Examples include: Income-Driven Repayment Plans (IDR) Income-driven repayment plans include programs like: These plans entail paying a percentage of your discretionary income for 20 to 25 years before becoming eligible for loan forgiveness of the remaining amount. You must possess eligible federal student loans and undergo annual income recertification to qualify. Do I Qualify? Qualification for student loan forgiveness is contingent upon having direct loans from the federal government, specifically through the William D. Ford Federal Direct Loan Program. To be eligible for the Public Service Loan Forgiveness (PSLF) program, individuals must have taken a direct or direct consolidation loan and completed 120 qualifying payments while employed by an eligible public service employer. Borrowers who have utilized the FFEL program or the now-defunct Perkins Loan Program can consolidate their student loans into a direct consolidation loan, rendering them eligible for PSLF. Even if not employed by a public service employer, individuals may still qualify for partial student loan forgiveness through Federal income-driven plans. Moreover, eligibility for loan forgiveness extends to those working for specific organizations such as the military, Americorps, teaching, nursing, government, and certain non-profit employees. Borrower Defense You may qualify for a loan discharge under the borrower’s defense for loan repayment if your school has provided misleading information or violated specific state laws. Loan Forgiveness vs. Loan Discharge Loan forgiveness is typically granted after a borrower meets specific criteria, often related to employment or fulfilling certain conditions over a specified period. It usually requires working in a particular field, such as public service or teaching, for a designated period. In contrast, loan discharge releases the borrower from the obligation to repay the loan under specific circumstances, which typically include: Summary If you meet the criteria for student loan forgiveness, thorough research, and proper documentation are essential for the application process. If you face challenges in repaying student loans but don’t qualify for forgiveness programs, consider options like refinancing to lower interest rates or consolidating multiple loans into a single payment.

Claiming Your Student Loan Forgiveness

View Resource Claiming Your Student Loan Forgiveness
Although there’s always a chance you will get a raise at your annual performance review or when you receive a promotion, those are not guaranteed, and companies often skip them when budgets are tight. This can leave you feeling like you have fallen through the cracks and are not earning what you deserve. In this situation, the best thing to do is to have a level-headed and professional conversation in which you make your case and ask your boss to give you a raise. Preparing to Ask for a Raise Start by researching how much money people in similar jobs, either at your company or elsewhere, are earning. It’s important to not only look at people with the same job title, but people who have similar responsibilities to yours and who make the type of contributions you are making. Your HR department can help answer questions about pay scales within your company, and glassdoor.com and payscale.com can help you make comparisons. In preparation, list some of your recent accomplishments that highlight how valuable you are to your company. If you have implemented changes that have saved the company time or money, these make you an ideal candidate for a raise. Successful completion of a project or taking on new responsibilities can also make you a strong candidate for getting a raise. You can also look to customer feedback and praise you have received from within the community to help build the case that you deserve more money than you are getting. Discussing a Raise With Your Boss Make an appointment with your boss so you have time for a proper conversation. In general, time this meeting after you have successfully completed some visible tasks, and not too close to your annual review, when your boss is likely to be busy with other requests. Come to that appointment prepared to make your case and really sell yourself. Be calm and confident during your conversation, and don’t raise your voice or show signs of anger or frustration if it is not going as you hoped it would. As you talk, build your case for why you deserve a raise, based on the contributions you have made to your team and to the company as a whole. It can also help to look to the future and tell your boss what value you will be adding in the coming months that will justify the raise. When you come to the end of the conversation, make a specific request for a percent or dollar amount raise. Your concluding statement should reinforce your past performance and future potential, along with an assertion that a raise of the amount you are asking for is fair and justified. After you are done, resist the urge to keep talking or circle back around to points you have already discussed. Instead, just wait for your boss to respond. Tips for Best Results
  1. Practice the conversation with a friend and get feedback on how it went. Your friend can provide valuable input on whether you were convincing or if there were parts of your conversation that dragged, and how your request comes across.

  2. Project confidence through your body language. Sit up straight, avoid fidgeting, use direct eye contact, and don’t be afraid to give a genuine smile if it seems appropriate.

  3. If you cannot get a raise, ask for a one-time bonus instead. Often your boss will be better able to give this because it does not come with a long-term commitment from the company.

Asking for a Raise

View Resource Asking for a Raise
When you are preparing to get a mortgage, one of the steps you can take is to lock in your interest rate. This is when you sign a formal agreement with your lender that solidifies what interest rate they will use for your mortgage, and how many days you have to get your mortgage closed at that rate. Once locked, you will be able to obtain your mortgage at that rate, even if market interest rates change before your loan closing date. Locking in your rate is often a wise choice, but you have to make the tricky decision of exactly when to lock that rate. A rate lock is typically good for at least 30 days, but it can last for 45 days, 60 days, or longer. However, longer rate locks are sometimes for slightly higher interest rates or come with an upfront cost. Most borrowers wait until they have signed a contract on a home to lock their rate, because you never know how long it will take to find the right home and get an accepted offer. Advantages of Locking Your Rate Early Disadvantages of Locking Your Rate Early How to Decide When to Lock in Your Mortgage Rate Consider how much financial risk you are willing to take on. As soon as you lock your rate, you are eliminating most of your financial risk and transferring it to the lender, who has to honor the rate lock commitment even if market rates increase. If you are financially tight and would have a hard time qualifying for or paying your mortgage if the interest rate increases, then it’s a good idea to lock in on the early side. Pay attention to market dynamics. If interest rates have been very stable, it may not be as important to lock your rate early. If rates are decreasing and are likely to continue decreasing, you will probably want to wait to lock the rate. If, on the other hand, rates are rising, it may be worth it to pay extra for a long rate lock period now.

Know When to Lock-In a Mortgage Rate

View Resource Know When to Lock-In a Mortgage Rate
It is more common than ever for adult children to live with their parents, with the 2021 U.S. Census Bureau estimating that one in three adults who are 20 to 34 years old live at home. Plus, even more than that receive at least some financial support from their parents on a regular basis. However, having a child at home can put a huge strain on your finances, and sometimes even force you to delay retirement. If you are ready to get your child out on his or her own, go through a few steps to help your child get ready to be truly financially independent. One of the first issues is that many adult children don’t even realize what sorts of things they will need to be spending money on when they are heading up their own households. These are things that you cover and they just take for granted without realizing. If you are comfortable with it, share your household expense sheet with your son or daughter to help open their eyes to where money goes. Some expenses to make sure you discuss include: Your child will not be able to move out for good until he or she has a balanced budget where the monthly expenses are less than the monthly after-tax income. Otherwise, you will probably be getting quite a few phone calls or texts requesting money to make ends meet, or a panicked moment a year down the road when the credit card is finally maxed out. You can help prepare your child by creating a detailed and balanced budget. This step will involve some research into what actual costs are in the area where your child plans to live and at the standard of living your child envisions maintaining. The tricky part is that often, the standard of living your child wants cannot be supported by his or her income. You will need to help guide your child to make the tough decisions about where to cut costs to create a balanced budget. Look to have them live with a roommate to minimize rent and utility costs; choose a used car instead of a new one; or dine at home more to minimize the cost of food and beverages from restaurants and bars. Even if your child has a budget ready, there’s still the hurdle of actually going through with the move. Parents have found that each of the following strategies can help the transition happen more smoothly.

Getting Your Child’s Finances ‘Move-Out’ Ready

View Resource Getting Your Child’s Finances ‘Move-Out’ Ready
When you have a parent, sibling, or another family member who is planning to move, you may be able to be first in line to buy their home. Plus, they may even offer you a price below market value to help you out, especially because they will not be paying a hefty commission to a real estate agent. It sounds like a great idea on the surface, but remember that buying a home is a huge financial transaction. It will be important that you follow some specific guidelines to ensure that the purchase goes through smoothly and you are both protected legally from future repercussions. How to structure the purchase Your first step is to agree on a purchase price for the home. Keep in mind that if you pay less than fair market value for the home, you could be stuck with big capital gains taxes if you sell it again too soon. In addition, your family member may trigger a tax audit if the discount is too steep. One way to structure the purchase is to get a third-party appraisal to determine the fair market value, then agree on a purchase price close to that amount. Your family member can then offer to pay all of the closing costs to help give you a discount, if they want to. Before proceeding, get a home inspection so you have a complete understanding of the condition of the home. Even if you have spent much time there, the house may have structural or system issues of which you are unaware. Your family member who is selling it may not be aware of them either. An independent home inspector can provide a thorough assessment of the home’s condition and bring to your attention any existing issues. If needed, you and your family member can renegotiate your deal based on the findings of the inspection. Obtaining financing to purchase a home from a family member Your family member might offer to finance the purchase for you, meaning that you would make payments to them rather than to a bank. While this might sound like a good idea, it can complicate your relationship if you fall behind on payments. Doing so would leave your family member in the tough spot of having to decide whether to pursue foreclosure or to let it slide. The best option is for you to obtain financing through a traditional lender. With interest rates as low as they have been lately, it is a small sacrifice to help preserve family relationships. Get pre-qualified for the mortgage before your family member hires any legal help for the transaction, just to ensure that your credit score and income are sufficient. When you apply for your mortgage, you should also disclose that this is a sale between family members. Proper documentation for a real estate transaction between family members Buying a home is a legal transaction, and you must ensure that the documentation is properly completed. If not, you could run into problems with ownership claims down the road. Manage documentation with the help of two professionals:

Buying a Home from a Family Member

View Resource Buying a Home from a Family Member
If you are tired of being in debt, a “credit-free” life might sound appealing. All you have to do is pay off all of your debts, cut up your credit cards, close any other accounts, and get yourself completely off the credit grid. Then you can live within your means in a completely cash-based system. Being credit-free has plenty of perks, but it also has complications you need to understand if you are thinking about making the transition. Advantages of Being Credit-Free One of the biggest perks of not having any credit-related accounts is that you do not have to pay interest or make debt payments, which frees up your money, giving you greater discretionary spending ability. For example, the typical household credit card debt of $7,000 at a 15% interest rate costs over $1,000 per year in interest. If you are not carrying that debt, the $1,000 will be available for you to spend or save as you like. People who tend to overspend on credit cards will reap financial rewards from being credit-free because it becomes impossible to overspend. When you do not have credit, the decision of whether or not to buy something is not tied only to emotion, but also to how much money you have available in your wallet or your bank account. In addition to the financial advantages, you also have emotional perks. Being in debt is stressful because you spend your time and energy worrying about making payments or working extra hard to get out of debt. Many people feel a sense of freedom when they live credit-free. Disadvantages of Living Without Credit The main disadvantage of living without credit is that you will not have a credit score. Because your credit score is derived from data in your credit report, you will not have a score at all if your report is empty. This may make it difficult if you ever decide to get credit again, to buy a car or house for example. Also, insurance companies and employers sometimes check credit scores as well, and you may run into difficulties with them if you do not have a score. The other disadvantage of living without access to credit is that you do not have the ability borrow on credit to use as a financial safety net. You need to build up significant savings to be your new safety net, and sometimes it is hard to know exactly how much money you will need to have saved. Tips for Making a Credit-Free Life Work for You
  1. Get out of debt as quickly as possible once you have made the decision to live credit-free. Stop buying anything on credit, and start making more than the minimum payments, focusing on paying off one account at a time. Close accounts once they are paid off.

  2. Build up an emergency fund of three to six months of basic living expenses. If you lose your job, you will not have credit cards to fall back on to make ends meet. Your emergency fund can also cover unexpected expenses, like car repairs. If you ever have to use money from the fund, replenish it as soon as you can.

  3. Use long-term budgeting strategies for major expenses. Think forward to your anticipated expenses in the coming year, like vacations, home repairs, or holiday gifts, and set money aside for these expenses every month. Use the same strategy to save up to buy your next car, or even a house.

  4. Consider keeping one credit card account open, but completely unused, if you feel it necessary to maintain a credit score. This open account will continue to appear on your credit report and generate a credit score for you. However, be aware that you may need make an occasional small purchase (and pay it off immediately) to keep the credit card issuer from closing the account due to inactivity.

Living a ‘Credit-Free’ Life

View Resource Living a ‘Credit-Free’ Life
When you own a home and need additional cash flow, a reverse mortgage is one way to get it. A reverse mortgage allows you to tap into your home equity, which is the money your home is worth, without having to sell your home. It is called a reverse mortgage because rather than you sending a check to the bank each month, the bank sends a check to you every month. Alternately, some reverse mortgages are set up so the bank gives you a lump sum when you first get the mortgage, or you have a line of credit that you can draw from as you need money. You can use the money for any purpose, including supplementing retirement income, making home improvements, or paying for health care expenses. Before you consider getting a reverse mortgage, it is important to understand exactly how it works. The basic idea is that a bank lends you part of your home equity for as long as you are living in the home. The money lent to you accrues interest each month, but you do not need to make any payments back to the bank until you sell your home, stop using it as your primary residence, or die. At that point, the reverse mortgage is due in full. Most borrowers end up using the proceeds from selling the home to pay back the reverse mortgage. Eligibility requirements to get a reverse mortgage Advantages of reverse mortgages When you are living on a fixed income during retirement, a reverse mortgage has a few facets that make it very appealing. If these advantages fit with your desires, you may be a good candidate for a reverse mortgage. Disadvantages of reverse mortgages Before you jump into getting a reverse mortgage, you need understand the disadvantages of this financial decision. It can have serious repercussions, not only for you but also for your family and heirs.

Is a Reverse Mortgage Right for You?

View Resource Is a Reverse Mortgage Right for You?
When you are borrowing money, one of the main numbers to consider is the annual percentage rate, typically abbreviated as APR. The APR is the percent of the borrowed amount that you are expected to pay each year in interest and fees, spread over the life of the loan. The APR is slightly different from the interest rate because the APR also includes required introductory fees in the calculation. For example, on a mortgage, you have loan origination fees and closing fees that you must pay to get the loan. The APR helps you understand how these fees affect your total costs, assuming you keep the loan for the full repayment term. If there are no introductory fees, the APR is the same as the annual interest rate on the loan. Types of APR APRs come in two main types: fixed and variable. A fixed APR does not change on a regular basis, but a variable APR will adjust depending on market factors. Some loans, especially credit cards, can have several different types of APRs. These include:

Calculating Annual Percentage Rates

View Resource Calculating Annual Percentage Rates
Consumer reporting agencies, sometimes abbreviated CRAs and also known as credit bureaus, collect credit information about individuals and sell this information to third parties upon request. In the United States, the three main consumer reporting agencies are Equifax, TransUnion, and Experian. Each of these companies maintains an ongoing file for you called a credit report. Your credit report contains: How to get your credit report When you apply for a loan, the lender will usually purchase a copy of your credit report from at least one of the credit bureaus to get more information about how well you have managed credit in the past. This information helps the lender decide whether to issue you a new loan and what interest rate to charge. Insurance companies, employers, and landlords also often use your credit report to make decisions. Therefore, it is important for you to know how to get your credit report. United States law allows you to get a free copy of your credit report from each of the three major credit bureaus (Equifax, TransUnion, and Experian) every year. To get this free credit report, go to AnnualCreditReport.com or call or call (877) 322-8228. While other websites and services may advertise free reports, you often have to sign up for a service to get these reports. Protect yourself from scams by only using AnnualCreditReport.com to get your credit report.

Consumer Reporting Agencies

View Resource Consumer Reporting Agencies
On any loan, your monthly payment is divided between two purposes. First, part of the payment is used to cover the interest that has accrued on your balance since you made your last payment. Second, any remaining portion of your payment goes toward reducing your loan balance. Because of this, once you have paid the interest for a month, any extra money you add to your monthly payment will go directly toward reducing your loan balance. This can save you a lot of money in the long run. Most of your savings comes from the fact that your interest payment for every future month on your payment plan will be less than it would have been if you hadn’t made the extra payment. Especially if you still have 20 years or more left on your mortgage, that’s lots of months when you can save money on interest. And the less interest you pay, the more of your regular monthly payment will go toward paying down principal. The effects really do snowball, often to significant end results. Example of Saving Money by Adding to Monthly Payments A concrete example can help illustrate how the savings adds up. Let’s say that you just took out a mortgage for $240,000 at 4% annual interest, with a repayment term of 30 years (or 360 monthly payments). Based on these numbers, your lender would calculate a monthly principal and interest payment of $1,145.80. When you send your first payment of $1,145.80, your lender first covers the accrued interest. An annual interest rate of 4% is a monthly interest rate of 0.33%. Your loan balance is $240,000, so you would owe $240,000 x .00333333, or $800, in interest. Once that has been paid, the remaining $345.80 reduces your loan balance, so you now only owe the bank $239,654.20. The next month, you will only owe $798.85 in interest because your balance is lower, so you pay $346.95 toward principal and have a new loan balance of $239,307.25. After 360 payments, you will have paid a total of $172,486.82 in interest. Now, say that you decided to make an extra mortgage payment of $200 every month. Your first month, you will pay the $800 in interest but pay off $545.80 of your loan balance, leaving you owing $239,454.20. The following month, your interest payment will be down to $798.18 (67 cents less than if you hadn’t made the extra payment), and you will pay $547.62 of your loan balance, reducing it to $238,906.59. If you continue this, you will pay off the mortgage 88 months early. The best part is that you will have only paid $124,979.70 in interest, for savings of $47,507.12. That’s a big result from a relatively small monthly difference.

Add to Your Monthly Payment and Save Money

View Resource Add to Your Monthly Payment and Save Money
Your debt-to-income ratio (DTI) is the percent of your gross monthly income that goes toward required debt payments. This number allows potential lenders to see at a glance whether you are likely to be able to afford additional debt payments. Types of Debt-to-Income Ratios Calculating Your Debt-to-Income Ratios Start by determining your gross monthly income, which is your income before taxes and deductions. You can either divide your annual income by 12, multiply your bi-weekly income by 2.17, or multiply your weekly income by 4.33. If you are planning to purchase a home jointly with your spouse, do the same calculations for your spouse’s income and add the results together to get your total household income. Add up all of your potential housing payments for the home you are looking to buy. This includes not only the mortgage principal and interest, but also monthly costs for homeowner’s insurance, mortgage insurance, and property taxes. Then also list your other debt payments, which may include car loan or lease payments, student loan payments, minimum credit card payments, and all other monthly debt payments that appear on your credit report. Calculate your front-end DTI ratio by dividing your housing payments by your monthly income. Calculate your back-end DTI ratio by dividing your total of all debt payments by your monthly income. What if Your Debt-to-Income Ratio is Too High? Lenders vary in the specific DTI ratios they are looking for, but in general, lenders want to see a maximum front-end ratio somewhere between 28% and 31% and a maximum back-end ratio somewhere between 36% and 43%, depending on the lender and loan program. If your ratio is too high, some of these strategies could help you qualify:

Understanding Your Debt-to-Income Ratio

View Resource Understanding Your Debt-to-Income Ratio
Most households plan to live on their regular income, which usually comes in the form of a monthly or weekly paycheck. However, there are always the occasional windfalls when you receive a large amount of money that you may not have been expecting. Some common lump sums come from inheritances, bonuses at work, tax refunds, court settlements, or the sale of investments. If you receive a lump sum of money, it’s important to consider how you can use it to achieve your financial and personal goals. Pay down debt: One of the best long-term investments you can make is to pay off high-interest debt now. This is especially true of credit card debt, which is likely costing you between 10% and 15% a year, which is much more than you can reliably make by investing your money. Even if you can’t completely pay off a credit card, even just paying down the balance makes a big difference by reducing your interest costs each month going forward so you can pay off the credit card faster. Build your emergency fund: Every household should have at least $1,000 saved in an easily accessed emergency fund. That way, if urgent expenses arise, like a car repair, home repair, or need to travel, you have the money available and won’t have to turn to credit cards to cover the cost. Also, to protect against job loss, you should ideally have 3-6 months of basic living expenses saved to cover the regular bills while you look for other work. Save and invest: If you are in a good place financially right now, then it is time to consider how you can make your lump sum of money grow to support you better in the future. Some options in this category include: Treat yourself: Even if you use most of the lump sum for one of the above purposes, consider holding back at least a little of it to spend on something that you have wanted for a long time. Perhaps you have wanted a new TV, new furniture, a vacation, or even just a weekend trip. Spending some money on yourself can give you an emotional boost rather than feeling resentful that you didn’t get to use the windfall you received.

What to Do With a Lump Sum of Money

View Resource What to Do With a Lump Sum of Money
Online shopping has become increasingly common in recent years as a convenient alternative to going out to stores. However, the time and energy you save by shopping online could be lost if you fall victim to identity theft due to a misstep in your online shopping habits. Your first rule when shopping online is only to shop through websites you trust. If you have not heard of a particular shopping site, look for information about it through a search engine to help you figure out whether it has a good or bad reputation. Then, rather than following a link from an email or social media post, go directly to the website where you want to make the purchase. Some sophisticated hackers make dummy websites that look like the real ones, but will steal the information you enter. Wherever you end up shopping, use these tips to help you protect yourself and your sensitive information:

Shopping Safely Online

View Resource Shopping Safely Online
For the small businessperson, number crunching can be mind numbing. However, becoming conversant with a few core concepts can help you get an accurate view of how well your firm is doing. One of the most useful of these concepts is financial ratios. Use and Limitations of Financial Ratios Ratios can tell you how your company is doing, by depicting relationships among your financial statements. The comparisons are useful for determining how well your business is performing, and spotting indicators that show where it is strong and where it is weak. Uses Ratios are important for you to know about because people who can financially impact your business rely on them, including bankers, investors, creditors, and business analysts. If you need financing or a loan — and at some point many businesses do — your company’s financial ratios will likely come into play. A financial ratio analysis can help potential investors make a decision about the long-term profitability of your company and as an investment opportunity. They are useful for your creditors as well when they are trying to decide if it is wise to extend you more time to pay or to allow you to buy further supplies or services from them. These ratios are also a very handy tool for you and your management team to gain an understanding of how well you are doing in your local market or compared to others in the industry as a whole. A ratio is a comparison based solely on a mathematical analysis of proportions, so the size of the firm does not matter. Doing these calculations lets you easily examine relationships between categories on your financial statements and then measure them. This means it is a practical way for large and small companies to compare data. When you can compare your company, whatever size it is, to others across industries, you can more quickly spot strong and weak points and measure your progress. It can help you adapt your company efforts to make the most of current trends. Limitations We base ratios on raw mathematical data, and they are relevant only for the period covered and the data found in the originating financial statements. They are also subject to the accounting methods used. This gives them power, but it also limits their usefulness. Ratios do not give you all the information you need for major decisions. Ratios will never replace experience. They are a tool and not a replacement for, a skilled, adept business owner. They do not include intangibles such as a once-in-a-lifetime chance to move ahead, the vagaries of the current marketplace or the interplay of your management team or other industry power brokers. In many cases, one lone financial ratio does not paint the picture that several can combined and analyzed. Just about any item on financial statements can produce a ratio, but some offer more insight to the small business owner. Essential ratios are liquidity, asset turnover, financial leverage, and profitability. Liquidity Ratios Liquidity ratios reveal whether your company can meet its short-term expenses, which makes them of particular interest to your creditors. The current ratio is a common liquidity ratio. Its equation is: Current ratio = Current Assets/Current Liabilities A high current ratio is attractive to creditors because it shows that, if they choose to do business with you, their risk is low. On the other hand, your shareholders will prefer that you keep a lower current ratio because this indicates that you are keeping your assets at work in growing the business. Two other liquidity ratios commonly used are the quick ratio and cash ratio. The quick ratio makes the calculation more accurate if you have inventory that is hard to liquidate. That equation is: Quick Ratio = (Current Assets – Inventory)/ Current Liabilities There is also a conservative way to calculate liquidity ratios, which is helpful when trying to figure a company’s ability to pay its current liabilities immediately. Here is the cash ratio equation: Cash Ratio = (Cash + Marketable Securities)/Current Liabilities Asset Turnover Ratios It is important to track how efficient your company is at using its assets to generate income. This is the purpose of asset turnover ratios, also called efficiency ratios. These ratios look at the timeframe involved in collecting cash from your customers or how long it takes you to convert your inventory into sales. These are often used with profitability ratios to tell how well a firm is doing. There are a number of equations used for this ratio, including receivables turnover, average collection period, inventory turnover and inventory period. Financial Leverage Ratios If you want to know what the long-term prospects are for your company, you look at financial leverage ratios. These measure the extent that your firm is using long-term debt. It measures your overall debt load and then compares it with your assets or your equity. This shows you how much of your company belongs to you, or to your shareholders, and how much to your creditors. When you or your shareholders own most of the assets, the company is called less leveraged. When creditors own the majority of assets, the firm is referred to as highly leveraged. The two most basic equations for this are: Debt Ratio = Total Debt/Total Assets Debt-to-Equity Ratio = Total Debt/Total Equity Profitability Ratios Profitability ratios measure the success of your business in generating profits. They focus on return on investment, or ROI, from inventory and other types of assets. Investors and creditors are very interested in these numbers. It helps them to analyze resource and asset data to judge ROI and determine if the company is making enough profit from its operations. That is why these ratios get examined in conjunction with asset turnover ratios. There are numerous equations used for these ratios, including gross profit margin, return on assets and return on equity. The bottom line: All these numbers and calculations can be hard to grasp at first go-around. It might also seem they are remote from the day-to-day operations of your business. However, looking at what the pure numbers tell you, with the help of a skilled accountant or financial advisor, can help you make sensible, realistic changes today so your company will prosper in the future.

Financial Ratios

View Resource Financial Ratios
Winter can provide a rude awakening to the state of your bank account when your first energy bill of the season comes in. Especially in parts of the country that often have freezing temperatures outside, keeping your home comfortable can come at a high cost. Thankfully, there are several strategies you can use to reduce the amount of energy you use and keep your gas and electric bills under control this winter. Choose your standard thermostat setting carefully You don’t need to keep your home at a balmy 72 degrees all winter long. The U.S. Department of Energy recommends setting your thermostat to no more than 68 degrees while you are at home and awake. This temperature should feel comfortable if you are wearing a sweater and socks or slippers, and you can also use a throw blanket to help stay warm while you are relaxing. Turn the heat down at night Toss an extra blanket or two on your bed and dial back the thermostat overnight to avoid wasting money keeping your whole house warm when all you really need is a warm bed. Most people will be perfectly comfortable with the temperature as low as at 60 degrees. In fact, research shows that you sleep better in a cool room, somewhere between 60 and 67 degrees. If you want to wake up to a warm house, consider getting a programmable thermostat so you can set the heat to turn back on an hour before you need to wake up. Consider supplementing with space heaters If you spend most of your time in one room of your home, it can be wasteful to heat your whole home to a comfortable temperature. Instead, turn down the thermostat a few degrees and use a space heater to maintain the temperature you want in the room where you are spending time. A space heater is also a good way to keep an infant’s room warm overnight while you allow the rest of the house to get cold. Insulate your home Proper insulation and air sealing will help you keep warm air in your home while the cold air stays out. If you own your home, invest a bit of money this year in improving your insulation, and it will pay you back with lower energy bills. Attic insulation is especially important, and you can also save a lot of money by caulking and weather-stripping your windows. If you are renting, you can use door socks to help seal drafty windows or doors, and take them with you to your next place when you move. Manage windows to your advantage Your windows can be both a liability and an asset for keeping your house warm during the winter. Close your drapes at night to provide extra insulation and keep cold air out. During the day, though, you should open drapes if it is sunny outside. The sun can actually work to warm your home, especially through windows that face the south, which gets the most direct sunlight. Use fans to even out temperatures A basic science lesson will teach you that hot air rises, but unfortunately, you don’t feel much of the air in the top half of a room. You can actually put your ceiling fan to work bringing that hot air gently down to even out the temperature. Flip the switch on the fan so it turns in a clockwise direction at low speed, which will gently push air down without creating a wind chill.

Keep Your Winter Energy Bills Under Control

View Resource Keep Your Winter Energy Bills Under Control
Expected Family Contribution, also known as EFC, tells you what your family should expect to pay for college tuition, fees and room and board. Your family’s financial condition and health help to determine your EFC. EFC uses a formula, created by the federal government to determine how much a family should be able to pay for one year of a child’s college education. Federal, state, and college financial aid programs use the EFC to determine how much financial aid a family and their student are eligible to receive. How EFC is calculated After a family fills out the Free Application for Federal Student Aid or FAFSA, the official EFC is determined. This application asks questions about the student’s and parents’ income, benefits, and assets. The federally established formula takes these into account, in addition to considering family size and the number of family members who will be attending college that year. The financial aid sections of most college websites allow you to estimate your EFC based on a simplified version of the official formula. The information can help give you an idea what to expect when you fill out the FAFSA and get your official EFC. Things that can affect EFC All aspects of your family’s financial situation can affect your EFC. The student’s liquid assets and past tax year income have the most significant impact. The parents’ liquid assets and past tax year income have a lesser effect because parents are not expected to contribute as much of their money as students are. You can appeal to your school’s financial aid office to have your EFC reevaluated due to special circumstances. These may include the loss of a job or a one-time boost in income during the previous tax year. Why you need to know what your EFC is Your EFC will have a significant impact on the amount of need-based financial aid you are eligible to receive. By definition, financial need is the total cost of attending one year of school minus your EFC. Many colleges commit to meeting financial need with a combination of grants, scholarships, student loans, and work-study jobs. Once you know what your EFC is, you can look at the cost of each college and make a guess at how much financial aid you are likely to receive. You can also start planning for how you will pay for college. You can use student savings or income, parent savings or income, or loans to come up with the family contribution.

Expected Family Contribution

View Resource Expected Family Contribution
Most people will need a mortgage to finance the purchase of a home. A mortgage works much like any other loan: You borrow money from a bank, credit union or other lender and then pay it back over time. The main difference? A mortgage is the largest loan that most consumers will take on during their lifetimes. Because of this, it is important for home buyers to understand exactly what goes into a mortgage and what will be required from the prospective home buyer to obtain one. Those buyers who do their research will dramatically increase their odds of obtaining a mortgage that best fits their needs. The basics Once you take out a mortgage, you’ll make monthly payments to pay it back. The duration of your loan varies depending upon what type of loan you took out. Most homeowners go with 15-year or 30-year mortgages. When you send your payment to your lender each month, your dollars will go toward paying off several pieces of your mortgage. There is the principal balance, of course. This is the amount of money you borrowed. If you borrowed $200,000 to pay for your home that $200,000 is your principal balance. You will not only be paying down this balance, though, each time you send in a check. Some of your dollars will go toward paying off your mortgage’s interest. Interest is how lenders make money on your loan. If you take out a 30-year fixed-rate loan of $200,000 with an interest rate of 3.96 percent, you’ll pay $142,080 in interest alone if you pay off the loan at maturity. The reason this figure is so high is that $200,000 is a lot of money, and interest payments add up over time. Part of your payment, depending on the arrangement you made with your mortgage lender, might also go toward paying off your annual property taxes and homeowners insurance premiums. Both of these costs vary. In some parts of the country, homeowners might face yearly property taxes of $10,000 or more. In other parts of the country, that figure might be as low as $2,000. The Federal Reserve Bureau says that the average cost of an annual homeowners insurance policy ranges from $300 to $1,000 depending on the part of the country in which you live and the size of your home. Types of mortgages You can choose from several different types of mortgages. Each comes with its positives and negatives. The two most popular loan types are the 30-year fixed-rate mortgage and the 15-year fixed-rate mortgage. As their names suggest, the interest rate attached to these loans never changes, hence the “fixed rate.” The difference between the two loan types is their durations. In a 30-year mortgage, you’ll make loan payments for three decades to pay off your loan completely. In a 15-year mortgage, you’ll pay for just 15 years. The monthly mortgage payment attached to a 30-year fixed-rate mortgage is lower than it is with a 15-year fixed-rate mortgage because payments are spread out over a longer number of years. However, 15-year fixed-rate mortgages typically come with lower interest rates, which means that homeowners pay less interest during the life of such loans. Homeowners can also choose an adjustable-rate mortgage also. Again as the name suggests, the interest rate on these loans changes during the loan term. Often, the loan will have a fixed rate for a certain number of years, say five or seven. The rate will then adjust based on a host of economic conditions, meaning that the rate can either go up or down. The benefit of an adjustable-rate loan is that the initial interest rate is usually lower than are the ones attached to traditional fixed-rate loans. The risk, though, is that the rate will rise significantly after the fixed period ends. Escrow accounts When you buy a home, you’ll have to pay property taxes. If you are taking out a mortgage, you’ll also need to purchase homeowner’s insurance. Homeowners have the choice to either pay these fees on their own or lump them into their monthly mortgage payments and have their lenders pay them on their behalf. The second option is an escrow account. Consider property taxes: If your property taxes are $6,000 a year, you can either pay this figure in a lump sum or you can add $500 a month into your monthly mortgage payment. Your lender will then put this money into an escrow account — which is an interest-bearing account — and dip into it to pay your property tax bill when it is due. It is a good option for homeowners who do not want to save the large amount of money they’d need each year to cover their property tax bills.

Understanding Mortgages

View Resource Understanding Mortgages

You’ve found your dream home in the perfect neighborhood.

There’s just one problem: You do not know if you can afford the monthly mortgage payments that will come with the home.

Fortunately, there are a series of housing and debt ratios that you can use to determine whether the home you want is also one that you can afford. By studying these ratios, you’ll avoid taking out a home loan that will put you in a precarious financial situation.

Housing-expense ratio

The first of these ratios is the housing-to-expense ratio, also known as the front-end ratio. This ratio will tell you how much of your gross — or pre-tax — monthly income is available for using for your monthly mortgage payment.

In general, you want your monthly mortgage payment — which includes your home loan’s principle, homeowner’s insurance payments, and taxes — to take up no more than 28 percent of your monthly salary. Anything higher than that could place too much of a strain on your household finances, leading eventually even to missed housing payments and foreclosure. Simply put, you cannot afford your mortgage loan payments if they total more than 28 percent of your monthly salary.

To determine this ratio, multiply your annual salary by .28. Divide that result by 12 — representing the 12 monthly mortgage payments you make each year. This will show you the highest housing-to-expense ratio that you can afford.

For instance, if your annual salary is $50,000, your monthly mortgage payment should total no more than $1,166.

Debt-to-income ratio

Your debt-to-income ratio, also known as your back-end ratio, is also important. This ratio tells you how much of your monthly salary is eaten up by all of your expenses, not just housing. Your expenses would include any recurring payment, such as your mortgage loan, car payment, student loan payment, credit card debt and child support.

You want your total monthly debts to account for no more than 36 percent of your monthly income.

To determine your maximum affordable debt-to-income ratio, multiply your annual salary by .36 and divide the resulting figure by 12. For that $50,000 annual salary, the maximum amount of monthly debt obligations you’d be able to afford would be $1,500. Remember, that figure includes your mortgage payment and all other monthly debts.

Loan-to-value ratio

There’s one more ratio you need to know when buying a home. This one, though, determines whether mortgage lenders will approve you for a mortgage for purchasing or refinancing a home.

The loan-to-value ratio spells out exactly what percentage of a home’s value you are asking to finance. When purchasing a home, most private mortgage lenders will want you to put down a down payment of at least 5 percent of a home’s value. This will leave you with a loan-to-value ratio of 95 percent: You are asking the lender to finance 95 percent of your housing purchase.

If you want to eliminate the private mortgage insurance requirement that comes with mortgages with down payments less than 20 percent, you’ll need a loan-to-value ratio of at least 80 percent.

If you want to refinance your home loan, you’ll typically need a loan-to-value ratio of 80 percent or lower. There are programs though, some offered through the federal government, that allow owners with higher loan-to-value ratios to apply for a refinance.

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Understanding Housing and Debt Ratios

View Resource Understanding Housing and Debt Ratios
You know you need a budget. Your household is spending money faster than it is coming in, making bill-paying a monthly adventure. Will you have enough dollars to pay the phone bill this month? How about the car payment? You never know. Fortunately, creating a workable household budget — one that gives you the tools to make sure that you are not spending yourself into debt each month — is less complicated than you might think. All it requires is that you take a honest look at what you spend each month and what you earn. The hardest part is sticking to your budget once you’ve drafted it. Eliminating the Fear From Budgeting The first step is to realize that a budget is not mysterious. As the Website One Money Design says, a budget is nothing more than a financial document that you use to track your income and expenses. You can use electronic budgeting software to create your household budget. Alternatively, you can just use paper and pencil. Choose the method that feels right for you. One Money Design recommends that you set a definite date — one that’s not too far away — to create your budget. If you are married or living with a significant other, you need to include your partner in the budget planning. This is important; a household budget will not work if you are watching your pennies, but your partner is blowing $5 every morning on expensive coffee. When you start to create your budget, you’ll need some necessary paperwork for reference, most notably your most recent bank statements — preferably at least three months’ worth. You’ll also need things like paycheck stubs, rental checks or disability payment stubs that document your monthly income. Income and Expenses To start your budget, list your regular monthly income streams. This will obviously include your monthly salary. It should also include any rental payments you receive, child-support or alimony payments, payments you receive for freelance work, monthly disability payments, and any monthly fees you receive as a result of a legal settlement. Now that you know exactly how much money comes into your household each month, it is time for the trickier part, listing all the money that flows out. A budget typically includes both fixed and variable expenditures. Fixed expenses include your monthly mortgage bill, car loan payment, student loan payment, monthly garbage service and rent. Others vary each month. This includes the money you spend on groceries, electric bills, the phone bill, the money you spend on gas, clothing and the dollars you spend on entertainment. Your budget should also include dollars reserved to build an emergency fund. This way, if an emergency does happen you will not have to add more debt to take care of it. The key to listing expenses is to be realistic. Your budget is not realistic if you do not save any money to go to the movies, eating out or taking short trips. Are you really committed to not having fun for a year or more? You should also adjust your budget regularly. This is especially important. If your company cuts your working hours, shaving dollars off your monthly income, you’ll need to factor that into your budget. If you pay off your car loan, you need to eliminate that expense from your budget. Shoring up Your Budget If you find that you are blowing your budget every month, it might be time to make changes either to your budget or to your spending habits. Maybe you’ve been unrealistic with how much you want to spend on clothing and entertainment each month. Adjust those budget items so they more accurately reflect how you live. Alternatively, maybe you need to change the way you spend. Holidays, for instance, are a terrible time for budgets. It is easy to get carried away on presents and entertaining. Decide exactly how much you are going to spend. Don’t go over that limit, no matter how much advertisers would like you to. You might also adjust your travel habits. It is fun to vacation, but you might want to take shorter trips or stay in less expensive hotels if this would help you meet your household budget goals.

Starting a Budget

View Resource Starting a Budget
Is your debt keeping you awake at night? Do you struggle to make the minimum monthly payments on your credit cards? Are you worried that you’ll never be able to pay back all the debt that you owe? You might be a candidate for a debt consolidation loan. When you take out a debt consolidation loan, you combine all or some of your debt into one loan. Then, instead of making several payments to multiple creditors each month, you make one payment every month until you pay your loan. Debt consolidation loans are the right option for many consumers who are overwhelmed with their debt. However, there are some potential pitfalls to taking out such loans. Credit Counseling Before taking out a debt consolidation loan, you should also sign up with a certified credit counselor. A credit counselor can help you create a realistic budget and understand the reasons for your overspending. You do not want to take out a debt consolidation loan only to run up more debt in the future. Unfortunately, many consumers who takeout these loans do exactly that. Be careful to work with an accredited credit counselor. The U.S. Department of Justice maintains a list of approved credit counseling agencies. You can search for agencies that operate in your state. Debt Consolidation Once you are ready to take out a debt consolidation loan, interview several providers. Different lenders will offer different interest rates and terms with their loans. You want to shop until you find a debt consolidation loan that provides the fees and interest rates with which you are comfortable. Remember, the goal is to pay down your debt as quickly as possible. If you take out a debt consolidation loan that comes with an unnecessarily high interest rate, it will take you longer, and cost you more, to pay down your debt. One of the criticisms of some debt consolidation loans is that consumers can spend more to pay down their debt than they would by just repaying their creditors directly. Of course, the benefits of a debt consolidation loan are three-fold: First, you’ll be making just one payment every month instead of several to a large number of creditors. That simplifies your financial life. Secondly, many debt consolidation providers negotiate with your creditors to lower the amount of money you owe. Finally, when you take out a debt consolidation loan, creditors and collection agencies will no longer harass you. As long you continue to make your monthly payment on time, those intimidating phone calls will stop. The downside of debt consolidation Like most ways to reduce your debt, debt consolidation loans do come with some negatives. First, when you take out one of these loans, your three-digit credit score will fall even further. That is a significant problem. Lenders determine who gets loans and at what interest rates based on their credit score. If your credit score is poor, you might struggle to obtain car or mortgage loans. You might even struggle to get approved for a credit card. So when you do you’ll be paying higher interest rates for the privilege of borrowing money. Secondly, you might lose money when taking out a debt consolidation loan. First, you’ll be dealing with interest rates that are often high. Secondly, lenders usually charge fees — they do vary — to consumers who need debt consolidation loans. This combination means that you might end up paying more money during the long-term to pay off your debt with a debt consolidation loan. Avoiding the pitfalls When taking out a debt consolidation loan, make sure to ask the right questions. You want to make sure that your debt consolidation loan is the first step toward a better financial future. You do not wish it to lead you into further financial difficulties. Ask debt consolidation lenders to provide you a written statement detailing exactly how much your debt consolidation loan will cost. This statement should include your interest rate and any fees associated with the loan. Pay attention to late fees. Make sure they are not exorbitant. You do not want your finances spiraling even further out of control should you make a payment a day or two late. Next, ask your debt consolidation lender how long it will take you to pay back your debt by making your regular monthly payment. You want to remove your debt as soon as you can. If the length of your debt payback seems too long, it might be time to move to a new debt consolidation lender. Ask your debt consolidation lender, too, if they will negotiate with your creditors. You want them to try to reduce the amount of money you owe. Many creditors are open to this. They would rather have some of the money that you owe them and figure that by reducing your debt it is more likely that you will pay them back at least part of what you’ve borrowed. Never agree to a monthly payment that you are not sure you can afford. You do not want a monthly payment that will represent a financial struggle. Before meeting with a debt consolidation specialist, make sure that you know exactly how much money you can afford to spend each month on paying down your debt. Finally, don’t beat yourself up too much. It is not pleasant to admit that you need help paying back your debts. However, in today’s still-challenging economy, you’ll be far from alone. Debt consolidation is not a sign of failure. It is a sign that you are willing to take the steps necessary to rebuild your financial health.

Consolidating Your Debt

View Resource Consolidating Your Debt
It’s natural for your children to be eager to open their presents on Christmas, but it might not come as naturally for them to want to give gifts to others. It takes time, energy, and perhaps even their own money to buy or make gifts that will be well received. As a parent, you’re well aware of the joy giving to others brings. Teaching your children how to give meaningful gifts that bring smiles to others will allow them to share in this important aspect of the holiday season. Gift Giving Values to Teach Rather than diving right in to take your kids to the store, you should first take the time to lay a foundation of gift giving values. These underlying principles can help children understand why they are going to give gifts and will help them to develop genuine enthusiasm for the activity. Considering the feelings of others: Start by reminding your children how they feel after they receive a gift they really enjoy. You can guide them to think about a specific gift they received from someone, and then ask how the gift giver probably felt after giving such a special gift. Guide your children to consider who they might want to give gifts to and to think about how those people might feel when they receive the gifts. Choosing appropriate gifts: Talk to your children about money and how the best gifts are not always the most expensive. Help your children brainstorm a few of the things that the people in their life might enjoy receiving from them. A question your kids can answer is, “What could I give this person to show them I care about them?” This can help your children think of meaningful gifts that will truly bring delight to the recipients. Ideas of Gifts Children Can Give You should encourage your children to brainstorm gift ideas, and they might surprise you with their creativity. However, it can help to have some ideas to suggest to get them started or to help them think of new categories of gifts if they get stuck. Purchased gifts
  • Potted plants or flowers
  • Book or movie
  • Mug and cocoa packets or tea bags
  • Christmas tree ornaments
Homemade gifts
  • Photo in a decorated frame
  • Homemade card with a handwritten note
  • Cookies or fudge
  • Woven or beaded bracelet or necklace
  • Votive candle holders
  • Painted refrigerator magnets
  • Fabric or paper bookmarks
When they are done buying or making gifts, help your children wrap the gifts and write out gift tags or cards to go with them. Being involved in each stage of the process helps them feel more ownership and get more joy out of seeing the recipient open the gift.

Teaching Your Children about Gift Buying

View Resource Teaching Your Children about Gift Buying
In 1977, Congress enacted the Fair Debt Collection Practices Act (FDCPA) as a way to protect consumers from harassment, deceit, and unfair tactics by debt collectors. The FDCPA applies to personal and household debts collected by third parties, which happens when the lender you owe either sells the debt to another company or hires another individual or company to collect the debt from you on their behalf. It’s important for you to understand your rights under the FDCPA and know what to do if a collector has violated your rights. Consumer Rights Under the Fair Debt Collection Practices Act Confidentiality: Debt collectors are not allowed to discuss your debt with anybody else, except your spouse, your parents if you are a minor, and your attorney if you have one who is representing you. While debt collectors can provide information about debts to credit bureaus, they cannot publish names of people who owe debts. All mail you receive about debts must be in envelopes that do not state they are from a debt collector. Debt collectors are allowed to contact other people to ask for your address, home phone number, or place of employment, but they cannot discuss your debt with these people. Verification: All debt collectors must send you a validation notice within five days of when they first contact you, and this notice must state the amount of the debt and the name of the original lender. After you receive this validation notice, you have the right to request verification that a debt belongs to you, but you must request this verification within 30 days. If you do not request verification, this is an automatic acknowledgment that the debt is valid. Limit communication: Debt collectors are never allowed to contact you between 9 pm and 8 am unless you agree to contact during these times. If you tell them not to contact you at work, they must stop contacting you at work. Also, they are not allowed to harass you by making excessive phone calls. Once you tell them that an attorney is representing you concerning this debt, they must only communicate with your attorney. End communication: At any time, you can request that a debt collector ceases all forms of communication with you. To do this, you must send a letter to the debt collector telling them not to contact you at all about this debt. Send it through certified mail with a return receipt so you have proof the collector received the letter. After receiving the letter, the only reasons a debt collector can contact you again are to acknowledge receipt of the letter or to inform you that they are going to take a specific action, such as filing a lawsuit against you. Honesty: Debt collectors are never allowed to provide false, deceitful, or misleading information in their communication with you. They can’t pose as government officials or people who work at the companies that originally lent you the money. They must not threaten you with actions they cannot take or do not intend to take, such as arresting you, selling your property, or causing physical harm to you or your family. Debt collectors are also not allowed to claim that documents they send are legal court documents if they are not. What to Do if a Debt Collector is Violating Your Consumer Rights Because of the Fair Debt Collection Practices Act, you have several courses of action you can take if a debt collector is using unfair practices or is harassing you. If the debt collector violates any of the rights outlined above, you can take one or more of three potential actions:
  1. Send a cease communication letter to end all forms of harassment by the debt collector. In this letter, specify that you would like the debt collector to stop contacting you by any method, including home phone, cell phone, work phone, text message, postal mail, and in person. As soon as the debt collector receives this letter, they are not legally allowed to contact you except to acknowledge receipt of the letter or to inform you about specific action they will be taking.

  2. File complaints with your state Attorney General’s office and the Consumer Financial Protection Bureau. In your complaint, specify who the debt collector is, which of your consumer rights were violated, and what the debt collector did that violated your rights. These groups can help follow up to resolve the issues on your behalf, and can also pass along the information you provide to law enforcement agencies that may take direct action against the debt collector.

  3. Bring a lawsuit against the debt collector. Monetary compensation can be awarded for lost wages or medical bills that result from the debt collector’s behaviors, in addition to money to cover your court costs and attorney fees and up to $1,000 in cash for general damages. If you are planning to file a lawsuit, you need to document the specific ways in which your rights under the FDCPA were violated. Save copies of all the mail you have received from the debt collector and sent to the debt collector. Also, log the date, time, and content of all phone communication.

The Fair Debt Collection Practices Act

View Resource The Fair Debt Collection Practices Act
As an employer and owner of a growing small business, good communication between yourself and your employees is of utmost importance. As you are growing, and hiring employees to accommodate your growth, you’ll want to take steps to ensure that everyone is on the same page concerning company policies. Providing your employees with an employee handbook is an excellent way to accomplish this goal. The purpose of an employment handbook is to provide clear details on the way things work at your company. This should include the expectations you have of your employees, and what they can expect from you as well. There are no hard-and-fast rules for employee handbooks, but here are a few suggestions to help you get started. Things to Include in Your Employee Handbook First, you should decide what you want to include in your employee handbook. The U.S. Small Business Administration suggests most employers include the following topics:
  • Employers are required to follow laws put in place by the U.S. Equal Employment Opportunity Commission. These laws are designed to prevent harassment and discrimination in the workplace. Outlining these laws in an employee handbook is very important because it communicates how employees are expected to behave in compliance with these laws.

  • Use your employee handbook to outline company policies concerning compensation. Provide a detailed explanation of required tax deductions as outlined by the Internal Revenue Service, as well as optional deductions related to employee benefits. Additionally, inform your employees of company policies regarding overtime pay, scheduling, performance appraisals and raises, bonus and incentive programs, and employee breaks. Likewise, it is important to clearly communicate any rules in your company concerning computer and Internet use as well as policies focused on maintaining security of private or classified information.

  • As an employer, it is your job to communicate to your employees your expectations for their behavior to maintain a peaceful and well run workplace. In your handbook, list rules concerning dress code, conduct, ethics, and any legal regulations about their field of work.

  • Include company policies regarding leave. This section should include information about vacation and holiday time, sick leave, family medical leave, bereavement leave, and personal leave.

  • All businesses are required to follow laws provided by the Occupational Safety and Health Administration. These laws require workplaces to report all injuries and illnesses resulting in the workplace as well as following certain safety guidelines to achieve a safe work environment. By providing your employees with this information in their employee handbook, you should see more employee compliance and a safer workplace as a result.

  • Many employers choose to offer their employees certain optional benefits in addition to the employee benefits that are required by law. Clearly explain to your employees what is available to them and the process they should follow to take advantage of these benefits.

  • Any additional information about employment at your business. Include things like job descriptions, termination and resignation procedures, employee eligibility, employee referrals, transfer and promotion policies, non-disclosure agreements, conflict of interest statements, and expectations for handling media inquiries.
Style Tips for Your Employee Handbook Next, employers should format their handbook in a clear and concise manner. As you compile your employee handbook, keep in mind that your goal is for your employees to read and understand all the information provided to them. Create a table of contents in the front of the handbook as a resource for quickly finding the various topics covered. Additionally, organize the handbook with subheadings and bullet points, increasing the readability of the content. You may choose to use bolded or underlined text to place emphasis on important information. Using correct grammar and spelling throughout the handbook will establish it as a professional and important document. If you feel you need assistance with writing the handbook, you may choose to take advantage of online grammar guides, or hire someone to proofread and edit the content. Final Tip Many employers find it beneficial to present their employee handbook in orientation or a staff meeting. This provides employers with the opportunity to point out the most important information and answer any questions their new employees may have. A well-compiled employee handbook is not only essential to managing the workplace; it is one of the best ways to assist employees in starting on the right foot in their new position.

Creating an Employee Handbook

View Resource Creating an Employee Handbook
Compensation is the combination of salaries, wages and benefits that employees receive in exchange for them doing a particular job. It can include an annual salary or hourly wages combined with bonus payments, benefits, and incentives. These could include group health care coverage, retirement contributions, and short-term disability insurance. A total compensation package usually includes several of these components. Assembling a comprehensive compensation and benefits package can be daunting. Not only do you have to comply with legally regulated employee benefits, but you also have to ensure that you are offering a competitive package that attracts and retain talented employees that can help your business thrive. Components of Employee Compensation Salary and Wages In a compensation package, these typically make up the single largest component. This comes as no surprise since they are what potential and current employees use as a common point of comparison. The person’s experience and skills should determine the salary, with subsequent increases in the future depending on the employee’s value, performance level, and contribution to the company. Bonuses Employee bonuses are one common way employers provide performance incentives and are usually paid out annually, often at the end of the year, in a single lump sum. A formal way of doing this is through profit-sharing plans. However, these are often tied to the company’s success versus for rewarding and compensating employees for their individual performances and meeting goals. Federal/State Pay Requirements State and federal laws are in place for protecting employees from bad employment practices that could negatively affect the employee’s paycheck. There are minimum standards set via federal labor laws that employers are required to follow; state laws expand this protection in some cases. Employers are required by many states to pay the state minimum wage, which when compared to the federal wage, is a little more per hour. The Fair Labor Standards Act (FLSA) requires employers to pay overtime (one-and-one-half times the hourly rate) to certain employees. Overtime is often due to employees who work over 40 hours in a week since it is measured not by the day, but rather by the week. Providing a Competitive Package Many employers offer a competitive package of employee benefits to attract and retain employees. Along with a competitive wage or salary, additional benefits are usually provided. Smaller companies might offer fewer components in the package; however, the majority of larger corporations, as well as most all public sector government employers, offer a competitive and extensive employee benefits package. Long-Term Incentives Part of a competitive package could include stock grants or stock options to serve as a long-term incentive. Health Insurance Health insurance is fairly standard with medium to large-size companies and some small businesses. Health insurance offers great value to the employees and saves them money since it is employer-sponsored. This offers employees with peace of mind since they know they have coverage; even with existing health issues. Life and/or Disability Insurance This type of insurance will usually cost the employee less if purchased through the employer and is an option. Retirement Plan A common practice for employers is to offer a 401(k) plan since it is less expensive than regular pension plans and fairly easy to administer. Employees have more control over how much they contribute and invest which is why they like these plans. Many employers match the amount invested or at least contribute in some way. Smaller companies will still try to have a plan in place for their employees but might not contribute any money to them. Time Off Time off includes vacations, holidays, personal days, bereavement, and sick days. For employers who are unable to offer competitive wages and salaries, they usually seal the deal by offering more time off. Some employers might not make any distinction between vacation, personal, or sick days which allows the employee schedule time off when needed through the year at their discretion. Miscellaneous Compensation This type of compensation can include things like employee assistance programs that may offer anything from legal assistance to psychological counseling or company cars to company discounts. Overall, a competitive salary, 401(k), and health insurance are standard practice for attracting and keeping talent in a company. Companies can offer a more competitive employee package to bring in and retain the higher caliber staff that can add extra profit to their bottom line.

Compensation Basics

View Resource Compensation Basics
As an employer and small business owner, you undoubtedly understand the importance offering your employees benefits. For many employees, salary is not the only factor in their decision to accept or refuse a job offer. With their health needs, a family to provide for, and planning for their future, it is understandable that benefits are of the utmost importance to employees. Employee benefits fall into two categories. First, there are benefits which the law requires every employer to offer their employees. Secondly, there are optional benefits an employer can choose to offer in addition to required benefits. This article provides a thorough overview of required employee benefits, which include social security taxes, unemployment insurance, workers compensation, disability insurance, and leave benefits. Tax Requirements First, as an employer, you are required to withhold taxes from employee wages in line with the Federal Insurance Contributions Act. These withholding include both social security taxes and Medicare taxes. As their employer, you are legally required to withhold a certain amount from employee wages and deposit these with the Internal Revenue Service. Additionally, employers are required to match their employees’ social security and Medicare deposits. The official Social Security website provides resources to business owners including guidelines, filing instructions, and social security number verification. Also, the Internal Revenue Service website provides instructions for paying social security taxes and due dates for payment. Insurance Requirements Next, employers are required to make certain insurance benefits available to their employees. According to the U.S. Small Business Administration, some business are required to provide unemployment insurance to their employees. Each state decides its laws concerning unemployment insurance. However, the U.S. Small Business Administration maintains a listing of each state’s unemployment laws that you can access at the SBA’s website. Additionally, every state requires employers to carry workers’ compensation insurance, which can be obtained either through the state or a commercial provider. This information is also available through the U.S. Small Business Administration. Also, a few states require employers to use disability insurance to partially replace employee wages in the case of a disabling injury or condition. The states required to offer disability insurance are California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico. Employers may choose to offer health insurance benefits, retirement benefits, and incentive benefits to their employees. Leave Benefits Lastly, there are certain leave benefits that employers are legally required to offer employees. You may choose to provide jury leave, sick leave, bereavement leave, vacation leave, and personal leave. Those leave benefits are not required. However, employers are required to offer leave qualified under the Family Medical Leave Act, or FMLA. The United States Department of Labor clearly outlines the guidelines for leave under FMLA. This leave is an unpaid leave, and employees can qualify for up to 12 weeks of leave. Individuals qualify for leave under FMLA under any of the following circumstances:
  • the employee has given birth to a child in the last year and needs time off to care for the child.

  • the employee adopts a child or has a child placed with them through foster care within the last year, and the employee needs time off to care for the child.

  • the employee needs time off to care for a child, spouse, or parent with a health condition.

  • the employee has a health condition that disables them from performing their job duties.

  • a qualifying event relating to a spouse, child, or parent being a covered military member.

  • if an employee has an injured or ill service member in their family that requires care, they may qualify for up to 26 weeks up unpaid leave each year.
One requirement of leave under FMLA is that employees maintain their group health insurance plan during their leave. All public business owners are required to offer their employees leave under FMLA. Private business owners with more than 50 employees are required to offer FMLA leave as well. Because employee benefits are an important part of the life of your employees and their family, they should be important to you as their employer as well. As a small business owner, beginning with ensuring you are compliant with legal benefits requirements is a great place to start. Seeking the help of an accountant, attorney, financial advisor, or payroll specialist for both required and optional employee benefits is recommended.

Required Employee Benefits

View Resource Required Employee Benefits
Employers are frequently filling jobs and finding the right person for each job is essential whether that person be an employee or a contractor. There are various advantages to hiring independent contractors (ICs). However, before you make the decision on how you plan on staffing a specific job, you should know some advantages of each to help with the decision-making process. According to the Small Business Administration (SBA), employees and independent contractors are not the same, and it is essential that you learn and understand the difference. Understanding the distinction between the two will help you decide how you are going to hire and how you plan on withholding various taxes and avoiding costly legal consequences for doing it incorrectly. Advantages of Contractors Money Saving Potential Although many employers pay more per hour for ICs over employees for the same work, hiring ICs can end up as the most cost-efficient option for the employer. There are some expenses that come with hiring an employee, which you would not necessarily incur for ICs including employer-provided benefits, contributions and payments on your employees’ behalf, office space, and equipment. Staff Flexibility Employers have greater leeway when working with ICs when it comes to hiring workers and letting them go. This is particularly beneficial for employers who have fluctuating workloads. The employer can hire an IC for a specific project or task and know that once the job is finished, the expense will not continue. With this type of flexibility, you would not have to face expense, trauma, or potential legal issues that can come with layoffs and firings. Since independent contractors typically come with specialized expertise for the specific job, they may be more productive right from the starting gate, which eliminates the cost and time of training. Reduced Exposure to Lawsuits Under federal and state law, employees are protected by a wide range of rights. This puts employers at risk of having a variety of legal claims brought against them by an employee who feels their rights were violated. Independent contractors are not protected by most of these laws because they are independent businesspeople. Some of the rights that ICs are not protected by (but employees are) include:
  • The right to be paid at least minimum wage and overtime (if qualified) of a rate of one-and-a-half times what they normally earn per hour
  • Employment discrimination protection based on color, gender, national origin, religion and so forth. (ICs do receive race discrimination protection)
  • Union rights and having the ability to form one
  • The right to miss work due to bonding with a child or caring for an ill family member
  • The right to sue employers for wrongful termination (ICs often have recourse for improper termination of their IC contract, depending on the contract language)

Advantages of Employees Certain businesses like restaurants and retail stores do not have the option of working with contractors; at least not for their primary employees like waiters, cooks and floor salespeople. Most if not all businesses deal with confidential information that they would not want leaked outside of the company. Employees can bring talent to the table inside the organization and, therefore, could take on higher level roles like management and such. Employees typically do a variety of different jobs which makes them better suited for growing with your company. Ways to Decide Which is the Best Choice You should keep a small budget to be able to hire independent contractors when needed. Some indications that an IC would be best for your task or project include:
  • There are no employees available to work on the project
  • You are uncertain of the demand
  • Specialized skills are required to get the job done which the company and employees lack
Keep in mind consequences can occur for misclassifying workers. Companies are often guilty of misclassifying independent contractors, which can translate into billions of unpaid tax dollars. The IRS is now cracking down on this. If your company is found to have misclassified workers, this could result in interest, stiff penalties and back payroll taxes. According to the IRS, “In general, someone who performs services for you is your employee if you can control what will be done and how it will be done.” Final Thoughts It is fine to scale a business by utilizing independent contractors when needed. Typically your customers will not care as long as they know that your company still has responsibility for the quality of the work being done. Because of this, it is a good idea that if you are going to build up a network of contractors, make sure they are trustworthy and that you follow all legal regulations.

Using Contractors Instead of Employees

View Resource Using Contractors Instead of Employees
As the owner of a small business, you know the importance of avoiding unnecessary costs. Because of this, you may have chosen to operate your business on your own during the beginning stages. However, now that your business is growing, you may be feeling the workload has become too great to manage without the help of an employee. Before getting started, there are a few things you should know about the legal rules, required documentation, and administrative duties associated with hiring your first employee. Legal Rules First, educate yourself on the regulations that are relevant to the hiring of your first employee. Here is a quick look at the important laws you should know about as an employer:
  • Obtain Employer Identification Number: According to the Internal Revenue Service, in order to report taxes, you will need an EIN or Employer Identification Number. An EIN is also necessary when reporting information about your employees to the state. You can apply for an EIN through the IRS by visiting their website or calling 1-800-TAX-FORM.

  • Set Up Tax Withholding: All employers must keep records of the taxes paid by their employees for a minimum of four years as required by the IRS. It is the employer’s responsibility to withhold, deposit, and report taxes from their employee’s wages. These taxes include: federal income tax, state income tax, social security and medicare taxes. Each year, the employer is required to submit a W-2, or wage and tax statement, according to guidelines provided by the IRS.

  • Verify Employee Eligibility: Employers are required by the Department of Homeland Security to verify that potential employees are eligible to work in the United States. This can be done by having employees complete an I-9 form within three days of hire. Employers can also e-verify online on the website of the U.S. Citizenship and Immigration Services. This form must be kept on file for three years after hiring an employee, or one year after terminating an employee.

  • Follow Equal Opportunity and Fair Labor Laws: Employers should be diligent in educating themselves concerning equal opportunity and fair labor laws. Understanding laws concerning minimum wage, overtime, and child labor will ensure that you are following fair employment practices and obeying the law.

  • Post Required Notices: Employers are required to post notices of state and federal labor laws. These posters are intended to provide employees with information concerning their rights and the responsibilities of their employer as required by law.

  • Obtain Worker’s Compensation Insurance: Employers are required by law to carry worker’s compensation insurance. Employers can choose to acquire this insurance through the state or through a commercial provider.

  • Pay Taxes: Employers are required to pay taxes on a monthly or semi-weekly basis. Due dates for paying and reporting taxes are provided to small businesses on the IRS website.

Required Documentation Next, small business owners will want to make sure they are keeping the appropriate documentation as is required by law. This information concerning employees is to be kept for up to three years. The United States Department of Labor clearly outlines all required documentation which must be obtained from new employees:
  • Full name, sex, and birth date.
  • Social Security Number
  • Address
  • Occupation
  • Beginning time and day of employee’s workweek.
  • Daily hours worked.
  • Weekly hours worked.
  • Basis of wage payment and regularly hour pay rate.
  • Overtime earnings for each workweek.
  • Total daily or weekly straight-time earnings.
  • Any changes in employees wages.
  • Total earnings paid each pay period.
  • Payment date and dates covered by the payment.

    • Administrative Duties Lastly, know that once you have hired your first employee, your administrative duties are not complete. It is true that the bulk of the paperwork is completed during the hiring process. However, there are administrative duties which must be completed regularly. Creating a system for these records and tasks is helpful to staying organized and ensuring that nothing is missed. First, the Internal Revenue Service requires employers to keep detail records of income, expense, and taxes paid and provides many resources for doing so on the small business portion of their website. Secondly, the Occupational Safety & Health Administration requires regular reporting concerning employee safety practices, employee injuries and illnesses. Thirdly, regular records should be kept concerning both voluntary and required employment benefits and worker’s compensation insurance. Lastly, creating and maintaining an up-to-date Employee Handbook helps employers to ensure they are following fair employment practices, maintaining a safe and fair workplace, and properly informing employees of policies and employee rights. Hiring your first employee is a big next step for small business owners, but it is also evidence of success in running your business. Educating yourself on employment rules and regulations is an essential aspect of becoming an employer for the first time. Additionally, creating a system for collecting and maintaining employee records is helpful in remaining organized throughout the process. The organization methods used during the hiring process can be carried out in day-to-day operations, simplifying the regular administrative duties required of a small business owner and employer.

    Hiring Your First Employee

    View Resource Hiring Your First Employee
    Although running a startup business can be exciting, there is much strategic planning involved to get customers without breaking your spending budget. By using minimal resources for optimal impact, you can market your startup in affordable ways. Below are some strategies to help market your startup effectively and gain a loyal customer base eager to share it with friends and family. Targeted Marketing When first starting out marketing your small business, it is easy to be impulsive and attempt to reach everyone all at once. However, it is essential to keep your focus on reaching only highly-targeted customers who are more likely to do business with you. Instead of just trying to attract any customer possible, focus on a target audience that will help with achieving your short-term goals. Social Media A popular and very effective tool for online marketing is social media. It is a simple way to reach a large audience without necessarily having to dip into your spending budget. When marketing on social media sites, you need to choose wisely which platforms you are going to use. You do not have to market your products or company on all social channels. Incentivizing social media followers to share is another strategic marketing technique. It involves offering discounts on products or services in exchange for Likes or Facebook or retweeting tweets, for example. Be sure to post content that is engaging and post consistently. Eventually, your brand will become known and counted on by your audience through the content, videos, pictures, and status updates you post. Public Relations When using public relations as a marketing strategy, there are some things you need to think about to set your startup apart from the competition. First, figure out what will set you apart and learn how to express it productively. Second, show, don’t tell. It can be instinctive to talk about why your business is different, innovative, important, and newsworthy; however, words can only go so far. Instead, you can generate real traction by supporting your words with facts, examples, numbers, and visuals. Of course, if you won a business award, feel free to shout that to the world. Reach out to your local community. Car washes, banners at fairs, and sponsoring local events are all great ways to increase brand awareness in your community. Last, look beyond press releases. Although they certainly have their place in the whole public relations scheme, you should not base your entire public relations strategy on press releases alone. Other Marketing Tips Facebook Sponsored Posts Due to the change in Facebook’s EdgeRank, your posts are now being shown to only a fraction of your followers. Sponsored posts allow you to get your posts in front of a larger audience. Videos Studies show that the use of videos helps to push an existing site up the ranks of Google, often to the first page, within 30 minutes of publishing it. After a day or two, it can even reach the top two positions. Having videos online helps your business even after potential customers find it. In fact, a study found that consumers who watch a video explaining a product or service are 73 percent more likely to make a purchase. Content marketing Combine your social media presence with high-quality content. Place a blog on your website and update it regularly. When you post a new blog, share it on Facebook and Twitter. Use your blog not only to share news and updates about your business, but also to provide informational articles relevant to your product and industry. This helps to position you as a thought leader in your niche. If you have case studies to share, be sure to place them on your website as well. Remember, not all marketing strategies are going to work for every business. However, by combining a few of them, it will help to grow your business. If you make your marketing engaging, interesting, and fun, it will amaze you how enthusiastic people can be to support and share your startup.

    Affordable Marketing Strategies for Startups

    View Resource Affordable Marketing Strategies for Startups
    An effective branding strategy makes your business stand out in a competitive marketplace. Online, it helps you cut through all the competing hoopla to get attention from your audience. Without a brand, you can easily get lost in the crowd. With one, all shoppers have to do is simply see your emblem to know who you are and the type of selling experience they can expect. To them, your brand means a solution to the problem they are trying to solve. What It Is and Isn’t The official definition of a brand, from the American Marketing Association, is “a name term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers.” However, most experienced marketers see it as more nuanced. To them, your brand is the story of your company that you present to the world. It is your essential truth and the value you provide. Branding is different from ads and marketing. Marketing is promoting your product using specific strategies. However, branding is what underpins and supports your marketing efforts. If marketing is tactics, then branding is the strategy. Strategy Basics Your strategy is everything you want to communicate about your business to your target audience. This includes the what, where, how of your products and services, in a way that is meaningful to your potential customers. The more effective you are conveying the message of your value, the more equity you build in your brand. With consistent effort and uniform branding across all platforms, your target consumer will start seeking you out. In time, your brand will allow you to charge more than unbranded products and services. Coca-Cola costs more than store-labeled sodas, though it is questionable how much difference there is in the actual taste. But the difference is perceived, and the consumer is willing to pay more based on that perception. In time, shoppers develop an emotional connection with a brand. This increases its worth it in their eyes. The process might start with a celebrity endorsement. Gradually, the customer’s warm feelings for the athlete or actress transfer over to your product. Definition Basics It takes effort to define your brand in a way that reaches your audience. Here are four questions to answer in defining your brand:
    • What is your mission statement?

    • What does your target audience think of your company now?

    • What are the best features of your products or services?

    • What qualities do you need to leap into the minds of your customers when they see your brand?
    The more you know about your ideal customer, the person you are marketing to, the easier it is to develop a brand. What are their needs, problems, habits, lifestyle, and goals? It takes time and effort to come up with useful answers. Ask other members of the company, your friends, and anyone you know who has used your service or product. Consider getting shoppers to answer a survey in return for a reward. You need the best possible range of answers to come up with an effective brand. Execution Basics Things get easier from here. Getting the word out is still time-intensive, but by this time, you should already have all of the information you need to create the brand that will engage the customers you are seeking. You need to start with a logo that is eye-catching and concise. Then, put it on everything that connects with the public. This includes stationery, business cards, promotional pieces, email, social media, website, and print and online ads. Come up with a message that communicates the essence of your company and product. Make sure every employee understands this message and passes it on. This might even influence how you answer the phone and what your salespeople wear when meeting with customers. If your brand is upscale, convey your essence formally. If it is friendly and casual, then be conversational and low key. Be consistent with your brand and how you present the message. Consistency is the only way shoppers will come to know your brand. Without consistency you risk wasting your time and money. That means following a template across all mediums and platforms for all marketing materials. Everything must have the same look and feel, including the color scheme, typefaces, and how the logo and graphics are presented. Most importantly, deliver on the promises implied in your message and overall branding. It will attract shoppers again and again only if they have a good experience with your service and product. Brand recognition will give your business repeat sales and a strong bottom line. Take the time to figure out the best one for your business and use it consistently.

    Branding Your Business

    View Resource Branding Your Business
    A marketing plan is a roadmap to get your product into the hands of the customers who want or need it. It provides an analysis of your product, your customer, and what sets you apart from the competition and in the mind of your target customer. In its simplest form, it provides a guide on how best to get the word out about your products and services. Your marketing plan can be short or highly detailed. The important thing is to spend the time researching, analyzing, strategizing, and getting it down on paper. It will make your marketing more effective and make the best use of your advertising dollars. Do You Really Need One? There is a cliché about the driver who will not stop to ask directions, driving around and around, lost for hours, failing to ask for directions. Likewise in business, having directions is critical if you want to mount a successful campaign to get your product in front of your target market. Without one, you will waste time, energy and money. Here is a look at the basic steps of a marketing plan for your small business. Step One: Create an Executive Summary This represents a few short and sweet sentences that provide a high-level overview of your marketing plan. Think of it as your “elevator pitch”. Step Two: Identify the Challenges Here, provide a description of the products or services (and product and service lines) your company offers. While keeping the information concise and measurable, identify the goals you want to set for each product or service you plan to sell. Step Three: Perform a Situation Analysis This meaty section, known as the situation analysis, involves several key parts consisting of company analysis, competitor analysis, collaborator identification, climate identification, and a SWOT analysis. Here are each explained in further detail. Company Analysis: First, you need to know who is in the marketplace, starting with your company. Write down an overview of the purpose of your business and a list of its products and services. Check data on the growth rate of your industry, how much market share you can reasonably expect to obtain, and current trends for marketing for your type of product. Customer Analysis: Next, think about your ideal customer and target audience. Who needs your product or service? You need to nail this so you can market to them. You will waste money if you advertise indiscriminately. Think in term of your buyer’s demographics:
    • Age
    • Income
    • Education level
    • Area where they live
    • Married or single
    • Type of lifestyle
    • Interests and hobbies
    • Concerns and problems
    Knowing this information, you’ll have a much better chance of accurately pinpointing the best media to use when you start placing ads and writing content. Competitor Analysis: You also need to get a good idea who is your nearest competitor. List the names of competing online, local, and national businesses. Make a thorough list of the types of products and services they are offering to the same customer you are targeting. Investigate how they are doing, the methods they use in advertising, how they get customers to buy, and how they keep them coming back for repeat sales. With this data in hand, you need to pull it together into a USP or unique selling proposition. Why should customers buy from you and not the business down the street? What do you have that no one else offers your target audience? Collaborator Identification: Who will help your business thrive? It could be suppliers, distributors, partners, or subsidiaries, for instance. Climate Identification: Are there any laws or regulations that govern your products or services? Are technological advances integral to your business? How does the cultural, social, and economic environment impact your selling of your products or services? These are some of the questions and answers to include in your climate identification section. SWOT Analysis: This handy acronym is your guide: It includes documenting:
    • Strengths, such as staff skills, technology you have developed or know how to use.

    • Weaknesses, such as a small marketing budget, a common challenge for small businesses.

    • Opportunities, such as being the only company that offers service in your geographic area.

    • Threats, such as another company offering a cheaper version of your product.
    Step Four: Market Segmentation and Strategy Selection For each market segment, include a description of the segment, along with several key components of the segment. Factors to include are the estimated percent of overall sales the segment represents, the price sensitivity of this segment, and the best ways to advertise for this segment. After taking into account alternative marketing strategies, such as changing a price point or eliminating a particular product or service line, choose a marketing strategy. Step Five: Establish Short and Long-Term Forecasts. This section of your marketing plan includes projections of not only revenue and costs, but also your break-even analysis. Step Six: End with a Concluding Summary This is similar to the Executive Summary at the beginning of your marketing plan, but it is more in-depth. It includes specific goals and figures, such as projected revenues, expenses, and profits. Ongoing: Monitor Results Once you put your marketing plan into action, you need to figure out if it is working. There are a variety of ways to monitor whether or not your efforts are succeeding. Decide how you will measure your results and how you will tweak your strategy. In conclusion, a good marketing plan gives you peace of mind. It gives you a strategy to start with and a plan of attack to get your product into the hands of your buyers. It is an ongoing process. You will learn from each step, helping you improve, sell more, and grow your business.

    Creating a Marketing Plan

    View Resource Creating a Marketing Plan
    Your auto loan is likely to be your biggest monthly payment other than your mortgage or rent payment. Because of this, you should make sure you have the best possible loan terms for your financial situation. Decreasing your interest rate by just one percentage point can save you a thousand dollars, or more, as you repay the auto loan. In many cases, refinancing is a simple process that is well worth your while. When to refinance an auto loan Decrease in market interest rates: If interest rates on auto loans, in general, have gone down since you took out your loan, refinancing can be a wise choice for you. You can lock in today’s lower interest rate and stop paying the higher rate you had agreed to when you initially bought your car. Increased credit score: Borrowing money is tough when you have a low credit score. If you manage to qualify, lenders will charge you higher interest rates on credit cards, mortgages, and auto loans. If you got your auto loan several years ago when your credit score was low but you have been making all the payments on time, you may be surprised to learn how much your score has improved. You can use your new and improved credit score to qualify for lower interest rates on a refinanced auto loan. Barely making payments: Refinancing can sometimes be a good idea if your financial situation has deteriorated since you bought the car. If you find you are barely making the monthly payments, refinancing with a longer loan term can decrease the monthly payment amount. This gives you some wiggle room in your budget to help you stay on track with making each payment on time and protecting your credit score. However, be aware that a longer loan term typically means you will pay more in total interest over the life of the loan. Lease purchase conversion: Many leases have the option to convert to purchase agreements when the lease expires. However, the terms on these loans may not be the best, especially because you got your lease several years ago. It may pay to refinance the amount you need to borrow to purchase your car after the lease expires. Tips for a smooth auto loan refinance You should always check to make sure your current auto loan does not have a prepayment penalty. If it does, you will only want to refinance if you are going to save more money than you pay in the penalty. Even worse than a prepayment penalty is a precomputed loan, where you are obligated to pay the full interest amount even if you pay off the loan early. In this situation, you will never save money by refinancing. Once you have decided you are going to refinance, start by shopping for interest rates. Your local bank and credit union often provide competitive rates, especially if you already have accounts open with them. Don’t forget to also call your current lender to ask if they can lower your interest rate. When you are ready to refinance with a particular lender, make sure you understand all the terms of your loan agreement. You should know what your monthly payment amount is, what day of the month it is due, how to make your payment, and when your auto loan will be completely paid off. Once you are comfortable with all of those details, it is time to sign the paperwork and finish the process of refinancing your auto loan.

    Refinancing an Auto Loan

    View Resource Refinancing an Auto Loan
    Your phone contains sensitive information about you, your finances, and your family. It is critical to protect this information from falling into the wrong hands. As the owner, there are several one-time changes you can make and ongoing habits you should learn to keep your mobile phone secure. Setting up Security on Your Mobile Phone The first and most important thing you should do to protect your mobile phone is to set up a lock screen with a password, PIN, or pattern. That way, if your phone is stolen or you lose it, all of the information on the phone will not be automatically available to whoever has it. Adjust your phone’s settings so it locks just a minute or two after being used. If you delay the locking process, you risk having it fall into the wrong hands before it is locked. Even if you have the best intentions, the chances are that at some point, your phone will become separated from you. Make it easier to recover if it is lost by activating a tool to locate your phone remotely. Also, you want a feature on the lock screen that allows someone who finds your phone to have sufficient contact information to get in touch with you. If you store particularly sensitive information on your phone, consider signing up for a service that allows you to wipe your phone remotely if needed. Best Practices for Mobile Phone Security Update your software whenever a new operating system or fixes to your current one are available. The updates often address security loopholes, so it is important for you to have the latest version to give your phone the best possible protection. It is also a good idea to update apps, particularly banking apps, whenever they release new versions. Only download apps from trusted sources, and pay attention to the permissions that apps request. For example, you may notice that an app requires access to your complete browsing history, GPS location, and all of your text messages. Unless the app has good reasons to have this information and you fully trust the developer, you probably want to avoid it. Use caution on unsecured Wi-Fi networks. Do not allow your phone to connect automatically to any available open network, and when you do connect, pay attention to what websites you visit and apps you use over that connection. Any information you send or receive is vulnerable to interception, so save your banking for a secured network. Log out after making purchases, and don’t store passwords on your phone. If someone can get past your lock screen, you do not want them to have open access to all of your accounts. They could run up some serious bills if your login is active on shopping sites with stored credit or debit card information. Pitfalls to Avoid Don’t use the same PIN or password on your lock screen that you use elsewhere. You unlock your phone all the time, and if someone is watching, you do not want them to have information that he or she could then use to hack into your other accounts. While it may be tempting just to use the same PIN as your ATM card, that is not a number you want to have floating around. Remember that your address is not a very secure PIN either. Don’t recycle or trade in your phone without fully wiping it. You may think that you do not have to worry about security once the phone is not yours, but traces of information on the phone could be enough to leave you vulnerable. Complete a full wipe and reset the internal memory to factory settings before letting the phone go.

    Keeping Your Mobile Phone Secure

    View Resource Keeping Your Mobile Phone Secure
    When people hear the word “debt,” they often think of it as a bad thing or associate negative connotations with it. The truth is, some debt can be good. So, how do you differentiate good debt from bad debt? The difference does not necessarily refer to the amount of money you owe, but rather the reason you owe. Good Debt Definition The general dividing factor is whether the debt is something that will add value to your financial position over time or reduce it. Good debt is debt that can help you improve your financial position in one way or another. For instance, the following are prime examples of what are considered to be good debt:
    • Mortgage or real estate loans

    • Education loans (student loans)

    • Business loans
    If you make wise purchasing decisions when buying homes or real estate, over time, the expectation is that real estate will gain value. Buying low in areas where you anticipate market growth allows you to sell high at a later date, once the value of property in the area grows. Education is an investment in yourself that is expected to pay off in higher paying jobs in the future. Taking out a student loan to pay for college often equates to higher lifetime earnings. Borrowing money to expand a business, buy new equipment, or hire new employees to meet growth are all viewed as good reasons to incur debt. Most everyone who takes out a business loan expects the loan to generate positive economic value for themselves and their business. Bad Debt Definition Bad debt, on the other hand, is a debt incurred to purchase items that will depreciate or lose value over time. This accounts for a large amount of consumer debt. The following types of debt are considered to be bad debt.
    • Auto loans

    • Credit card debt (credit card company or retail credit card)

    • Revolving debt
    In the case of auto loans, depreciation attacks fast and hard. According to Edmunds, you lose nine percent of a new car’s value the moment you drive off the lot. By the end of the first year of ownership, the value drops to 81 percent of the purchase price. By the end of the second year of ownership, it is only worth 69 percent of the purchase price. By the fifth year, the car is worth less than half of the purchase price. Credit card and other types of revolving debt work in much the same way. By the time you leave the store, most items have lost some in value. Moreover, using credit cards for consumables, like dining out, entertainment, and vacations, adds no long-term value. What can you take away from this? If you have debt, seek to pay off bad debt first. Then reassess your finances and look for ways to avoid bad debt in the future by paying in cash or saving for big purchases. Reserve credit for items that will add value over time instead of those that will lose it.

    Good Debt, Bad Debt

    View Resource Good Debt, Bad Debt
    In some cases, your son or daughter, relative or friend may have difficulty obtaining a car or student loan or apartment rental because they lack sufficient credit history or have had credit troubles in the past. They may come to you and request that you cosign their loan or rental application, guaranteeing the lender or renter that you will repay the loan if the primary borrower is unable to do so. As a cosigner, you will be asked to complete all of the loan paperwork alongside the primary borrower. As part of the process, the lender will likely check your credit history as well and approve you as a cosigner. When you are asked to cosign a loan, you should understand the risks that you are taking. Questions to ask as you decide whether or not to cosign
    1. How financially trustworthy is the primary borrower? Perhaps the person asking you to cosign is a young adult with no prior credit history, but who has a good job and is financially responsible. Cosigning with this borrower can be a great way to help him or her get their first loan and start building positive credit history. On the other extreme, the person asking you to cosign may be behind on all her debt payments and is trying to get a debt consolidation loan. In this situation, remember that the primary borrower’s past financial difficulties are likely to continue into the future.

    2. Can I afford to pay this loan in full? If the primary borrower stops making payments, the lender will try to collect from you. In most cases, you will still be legally responsible for paying the loan even if the primary borrower declares bankruptcy, is permanently disabled, or dies. Do not cosign unless you are able and willing to take over the payments for the loan.

    3. How important is my credit score to my financial future? All account activity from a cosigned loan appears on your credit report, just as if you were the one who took out the loan. If the primary borrower misses a payment, this missed payment will decrease your credit score. Also, lenders include the loan’s monthly payment when calculating your debt-to-income ratio for a mortgage. If you plan to get a new loan yourself in the future, cosigning can be risky.

    4. How does this particular lender communicate with cosigners? Often you will not learn that the primary borrower is late on payments until the lender calls you to collect a big debt. However, some lenders are willing to be in closer communication. For example, they may agree to notify you whenever the primary borrower is late on a payment. This allows you to contact the primary borrower yourself, learn what is going on, and make a plan to get back on track.
    Handling a default on a cosigned loan If you discover the loan you cosigned is in default, which is when the primary borrower is not making payments, first contact the borrower and ask what is going on. Perhaps they forgot to make payments, so your call can provide a quick fix. Often, though, the borrower is having financial difficulties and is not able to make payments. In this case, you need to take action to protect your credit score from further damage. Contact the lender to learn how far behind the primary borrower is and what the lender can do to help. Some lenders will issue a forbearance, which allows the borrower to temporarily stop making payments, especially when dealing with major setbacks like unemployment. Other lenders will forgive late fees if you immediately pay the missed payments. It is difficult to get out from a cosigned loan once it is in default. Consider asking the primary borrower to refinance the debt on her own or with a different cosigner. If the cosigned loan is for a car, another option is to have the primary borrower sell the car to repay the loan. Consider bankruptcy only as a last resort, and be aware that both you and the primary borrower would need to separately declare bankruptcy to get you both out from under the loan.

    Cosigning a Loan

    View Resource Cosigning a Loan
    Whether your goal is to refinance your home or you are trying to sell it, a high appraisal is the desired outcome. While there are some things related to your appraisal that are beyond your control, there are a few things you can do to help the appraiser see a higher value in your home. However, first, you need to understand a little more about the appraisal process. How the Appraisal Process Works An appraisal can be quite disconcerting. You are essentially paying someone to come into your home and tell you how much they believe your home is worth. You love your home and have made great improvements over the years. However, it is important to keep the emotional connection you have with your home out of the picture and approach your home appraisal objectively. These are a few of the things appraisers are looking at that will impact the appraised value.
    • Values of comparable homes sold nearby.

    • Overall market value of the home.

    • Observations made during a detailed review and walkthrough of the home’s interior and exterior living areas (this part is often documented with photos to support the appraiser’s valuations).
    Part of the process of standardizing the process involves a checklist appraisers use to help determine values. This creates a level playing field for all homeowners with some things that are assigned specific values. This does not mean that there is no room left for interpretation by appraisers, which is why it is important to make sure your home is presented in its best possible light to boost the appraisal value. Top Factors Driving Value There remain many aspects that are still somewhat subjective. With that in mind, these are a few things you can do to help the appraisal see added value in your home. Improve its curb appeal. First impressions matter in both selling your home and appraising it. You want to present the best possible image of your home to the appraiser. Spruce up the lawn. Make sure you cut the grass, trim the trees and properly prune shrubbery, so the property presents an optimal first impression. Choose updates wisely. When updating your home with an appraisal in mind, experts recommend choosing projects that offer the best return on investment. These includes projects like the following:
    • Landscaping

    • Installing Wood Floors

    • Enclosing a Garage
    If you have plans to update a kitchen or bathroom, go small with these for maximum impact on a small budget. Another area of concern for updates involved the location of the updates. Updates to the basement of the home have a lesser impact on appraisers than updates to the attic. Finishing a basement does not increase the overall square footage of your home while converting an attic into a bedroom does. The difference in the numbers is that attic renovations recover 73 percent of the costs in the appraisal while basement renovations only recover 66 percent of the costs on average. Document updates. This is more important than you may realize since some updates have a more visual effect than others. Updates like new roofs, electric system upgrades, and even updates to the heating or air conditioning in the home are not aesthetic improvements, but can offer significant increases in appraisal values. Offer the appraiser before and after photographs along with copies of receipts and other documentation regarding the upgrades. Clean everything. Consider a professional cleaning of the home, carpets, and everything in between. You want to make sure the house looks and smells clean, and a little extra help never hurts – especially for pet owners. Carpet and upholstery cleaning can help clear the air of pet smells you do not even notice in your home. Consider kenneling your pets. You want the appraiser as calm and comfortable in your home as possible. If he is nervous around dogs or allergic to cats, it is best if they are not there while he is working on your home appraisal. Handling a Low Appraisal While you’ve put much blood, sweat, tears, elbow grease, and love into your home, those things do not always translate into dollars and cents for appraisers. They have a cold, unfeeling checklist to guide them. If you get a lower than hoped for, or necessary, appraisal, you do have a few options ahead of you. If you are selling your home, you can work with the buyer by lowering your asking price, or having them increase the cash component of their offer. You might have to split the difference and meet in the middle. If your goal is to refinance your home, you’ll have to do one of three things.
    1. Accept the presented offer even though it is less than you would have liked.

    2. Point out potential errors in the appraisal in hopes of raising the proposed value. Bring facts, figures, and comparable home values in the neighborhood to the table when doing so and present a compelling argument.

    3. Make further changes to your home and get another appraisal.
    A low appraisal is not the end of the world, and the advice above can help you have a better than average appraisal experience, though there are no guarantees when it comes to the business of home appraisals.

    Maximizing a Home Appraisal

    View Resource Maximizing a Home Appraisal
    According to Forbes, considerably more people are embarrassed to admit their credit scores than their weight (30 percent compared to 12 percent). With about a third of Americans qualifying as obese, this news is quite shocking. The good news for these Americans is that it is not difficult to improve your credit score. However, you need to know where to begin. Things to Do Now Boosting your FICO score is not an overnight process. It will take time and a little bit of effort on your part. The hardest part, though, is getting started. These are things you can do today that will help improve this important score.
    • Check your Credit Report. There are three major agencies that record credit scores and share them with lending agencies, employers, banks, and insurance companies. You should check your credit report from all three agencies at least once per year to see if there are any errors, mistakes, or signs of potential problems. You should especially check your credit reports before making a major purchase that requires credit or applying for a job.

    • Dispute Errors. Removing errors from your credit report can greatly improve your FICO score in a relatively short amount of time. You must present your dispute in writing and the creditor (or collection agency) will investigate. Once the investigation is complete, if the error was determined to be in error it will be removed from your record and improve your score.

    • Negotiate with Creditors. You may have had a period of unemployment, accident, or some other financial hardship that caused you to miss payments or even go into collection. Ask creditors if they will remove the debt from your credit report completely or report it as “paid as agreed” on your credit report for prompt payment of the remaining balance. One word of caution is to get the agreement in writing before you make the agreed upon payment.
    Impact of Payment History Your payment history is important. If you have missed payments in the past, get current and stay that way. Even paying a few days late can have a big impact on your credit history according to myFICO, who also reports that payment history accounts for 35 percent of your credit score calculations. Impact of Amounts Owed It is not the amount owed that is the problem so much as the amount owed compared to what credit you have available. The impact of your debt will vary greatly according to income and other items on your credit history. However, if you owe a great deal and have little available credit, that can have a negative impact on your FICO score – especially if the bulk of your credit owed is in the form of revolving credit accounts like credit cards. You can make relatively easy improvements to this particular score by paying down your debt and keeping balances on your credit cards low. You do not necessarily want to close accounts – especially older accounts as they have a positive stabilizing impact on your credit score. You should also avoid the temptation to open a lot of new accounts in an attempt to have a higher available balance as this raises red flags in its own right. Impact of the Length of Credit History It is better to seek to build your credit history slowly and over time. Don’t go all in after opening your first credit account. At the same time, don’t close older accounts the first time something shiny and new comes along. Those older accounts show that you’ve developing long-term relationships with creditors and that’s a great thing for your FICO score. Impact of the Types of Credit There are two essential types of credit. Asset building credit, is generally referred to as good credit. This credit is used to:
    • Purchase homes.

    • Buy real estate.

    • Invest in businesses.

    • Pay for education.
    Revolving credit accounts for pretty much everything else. This includes: from
    • Auto loans.

    • Credit cards.

    • Payday loans.

    • Store credit.
    These things are considered bad credit. You definitely want more good credit than bad in your credit history. This shows a habit of living within your means and making investments in your future. Even if you’re paying your bad credit in a timely manner, it appears better on your score to have a lower amount of this type of credit. Impact of New Credit When it comes to your credit score, new credit is always somewhat suspect. There is no history with this type of credit so it cannot really be part of the equation. It becomes even more suspect when there is a large amount of new credit applied for and/or received all at once. In fact, Bankrate recommends paying off (not closing) all credit cards that have low balances and stick with one or two cards as your main credit cards. Opening new lines of credit speaks against that strategy for keeping your credit score higher. Small changes like these can have a huge impact on your credit. If you have trouble making timely payments, consider setting up a calendar of payments each month and automating the process as much as possible so that your FICO score can thrive.

    Boosting Your FICO Score

    View Resource Boosting Your FICO Score
    Life insurance is one of those things that many people do not want to think about, but that almost everyone needs. Most simply don’t want to think of a world without them in it. They do not want to wonder what will happen to their families or even imagine their families facing life without them. Unfortunately, failing to plan ahead for that possibility can leave their families devastated not only emotionally, but also financially, if they are no longer there to provide for them. Who Needs Life Insurance? Most experts will tell you that if you are financially responsible for someone else – anyone else, you need life insurance. While that is certainly true, that is not the only instance in which life insurance is recommended. For instance, young adults who have careers, but aren’t yet married or romantically involved with another person should consider having a life insurance policies of their own. That way, if something should happen to them, their parents aren’t left with the burden of not only saying goodbye to their child but the financial burden of doing so. Another consideration involves families with children where one partner provides for the family finances. It is conventional wisdom that says the provider needs life insurance coverage. However, the value the non-working family brings to the table has real world dollar value too. Imagine the costs of hiring one person to do the following things:
    • Childcare service

    • Maid service (laundry, household cleaning, meal preparation)

    • Delivery service

    • Errand services

    • Bill paying services

    • Taxi services
    When the “non-working” parent is no longer able to provide these services, it could lead to significant lifestyle changes for the family or considerable financial hardship for the family. In the case of aging or older adults, life insurance is also necessary to help pay for final expenses or to pay off residual medical bills. There are some smaller policies that are easily available to older adults – without medical examinations that are worth considering if you are afraid you will not be able to qualify due to the state of your health. Evaluating Your Needs Once you realize the importance of having life insurance, the next question is: “how much life insurance do I need?” It often depends on your intentions. Some people only really need enough to cover their final expenses and to pay off their debts, so they do not burden that someone else with those debts. If you are young and single and just want to help your parents out, then you may only need enough to cover those debts and final expenses. If on the other hand, you have dependents, you are going to need to take into account a few more considerations. These are a few things to keep in mind when deciding on an appropriate amount.
    • Total debt. You’ll need enough life insurance coverage to pay off your debt. This includes things like mortgages, auto loan, credit cards, and more.

    • Income replacement. For this, you need to have a lump sum amount to invest so that your family earns enough money in interest each year to replace your income (adjusted for inflation). In other words, the amount will need to increase a little each year to cover the costs of inflation.

    • Children’s education. The other need to consider for anyone with children living at home is the need to pay for a child’s education. College tuition is costly, but setting aside funds through life insurance to cover those costs will certainly help to fund your child’s education in the future.
    Arriving at a Coverage Amount The good thing about life insurance is that if you invest while you are still young and in reasonable health, it is not all that expensive. Look for plans that lock in rates for as long as possible and avoid the temptation to over-insure yourself or your spouse. The “just right” number will be different from one family to the next and may diminish or increase over time as life changes occur. If you are unsure how much life insurance coverage you need, calculate the appropriate numbers mentioned above (debt, income replacement, and children’s education) and add in between $10,000 to $15,000 to cover final expenses to be on the safe side.

    How Much Life Insurance Do You Need?

    View Resource How Much Life Insurance Do You Need?
    Different factors will determine what you pay for life insurance premiums. This can confuse many individuals when they are trying to understand why their premiums are higher than others. Below are some factors that can impact the cost of life insurance and perhaps take some of the confusion out of it. Factors that Determine your Life Insurance Rates Once you decide on a particular life insurance policy that suits your needs, the next step is learning the factors that will determine if you qualify and how much you will pay for the premium. Your Age The strongest factor many insurance companies start with to determine your rate is your age. Your premium will be lower the younger you are. This is because they assume you have many years of paying on the premium before you pass away. Your Gender The next factor they look at after your age is your gender. There are statistical models that some insurance providers use to approximate your longevity. For instance, on average, women have a life expectancy of about five years longer than men. Therefore, their rates are a bit lower since they are anticipated to live a longer period than men. Smoking Because you put yourself at a higher risk of health problems when you smoke, it is an automatic red flag for most insurance providers. If you smoke, you can even expect to pay as much as twice the premium as non-smokers with the same or comparable coverage. By kicking the habit, you can — and probably will — lower your rates. Your Health and Family History Another essential deciding factor in how much your premiums will be is your medical and family history. If you have any chronic conditions or potential for one, your rates could increase. Also, if you have a family history of certain illnesses, your rate could also be high. Your Current Health Most insurance companies will have you go through a medical examination so they can see if you have any types of health issues that could cause problems in the future. If you are in good health, you will most likely enjoy a lower rate. Your Weight This is also a factor. Since obesity, for instance, can cause health problems and a shorter lifespan, this could affect your premium. Your Occupation Another thing insurance companies look for is if you hold a dangerous job, such as a coal miner, race car driver, or you work in any profession that can cause accidents. Although rare, the insurer might consider some occupations to be too risky due to their high potential of causing an accidental death and might not give you coverage. Your Lifestyle Your lifestyle activities are accounted for as well. If you are a thrill seeker and like to climb mountains, sky dive, or bungee jump off of high bridges, you could end up paying higher rates for life insurance. Thrill seekers are a major concern for many insurance companies since their lifestyle could lead to their early end. The insurance company will weigh in these and other factors to determine what you will pay out in premiums for your policy. The importance that each company weighs on them could be different and will depend on your insurance provider. It is important that you sit down and discuss your lifestyle and other factors with your insurance agent to take out a policy that will best fit your specific needs.

    Factors That Impact Life Insurance Premiums

    View Resource Factors That Impact Life Insurance Premiums
    Your home may very well be your most valuable possession. It is important to make sure you protect the investment you’ve made in your home with the right kind of insurance coverage. These insurance tips will help. Getting the Right Coverage It is important to get the right coverage for your home, your family, and the area in which you live. Don’t buy a policy without first knowing what you are getting. In fact, it is a good idea to get quotes from several different companies and explore the differences between the policies you are considering. Remember that all policies are a little different when it comes to coverage. That is why there is such diversity in price from one carrier to the next. Break it down so that you can make an apples to apples comparison. Then take the time to find out if the coverage is enough to meet your comfort levels. Consider working with an independent agency that will show you a range of plans and coverages and walk you through the protections they provide. This allows you to make an informed decision about the insurance policy you ultimately purchase for your home and possessions. Make sure to ask about things like the following before you buy too.
    • Valuable Item Protection

    • Flood and/or Earthquake Coverage (what is covered and limits)

    • Code Compliance Coverage

    • Insurance Limits

    • Liability Protection

    • Umbrella Insurance

    • Replacement Cost vs. Actual Cash Value

    • Deductibles
    Ask about any specific concerns you may have about your home and how well it and your family will be protected by the policies you are selecting. It is always better to know than to find out you do not have certain coverage when you need it. Identify ways to lower insurance premiums. There are many ways you can do this that aren’t very expensive – and some that are. These are a few fixes that can have a big impact on your insurance premiums.
    • Install a monitored security system.

    • Bundle policies (purchase multiple policies like home and auto coverage from the same carrier).

    • Increase deductibles.

    • Don’t over-insure your home.
    Of course, there are bigger investments you can make that will reduce insurance costs, like updating wiring and bringing your home up to current code, but you’ll need to weigh the value of the reduction vs. the costs of the upgrades. Making Sure You are Compensated Correctly for Losses When it comes to filing claims, it is important to file the claim sooner rather than later and to make sure you document everything. We are fortunate today in that almost everyone carries around a smartphone so that photographs and video evidence are easy to document. This will provide evidence of the devastation. However, having photographs and/or videos of valuable items inside the home before the covered disaster helps to provide evidence of ownership if your home is destroyed by fire or tornado. Consider storing documentation offsite in a safety deposit box or online for digital images and video. There are many programs that allow digital storage for these things that can be critical in ensuring your compensation. Photo documentation may not be enough, however, if you have valuable items like antiques, jewelry, and furs. You will need to have special valuable items coverage and an appraisal of the item before the covered event. When you have the right documentation and the right policies, you are much more likely to get the correct compensation for your losses. That is why these things are so important.

    Insurance Tips for Homeowners

    View Resource Insurance Tips for Homeowners
    Your auto insurance is not only about protecting your car. It is also about protecting the people inside your car, on the road, in other cars, and the property around it. It is also about protecting your financial interests if someone gets injured in an accident in which you are determined to be “at fault.” Finding the right auto insurance can be quite challenging. Especially since most people feel like they need to learn to speak another language to understand what is, and isn’t, covered by their insurance policies. That is why it is so important to ask questions before you buy and always make sure the answers make sense to you. Understand Key Features of Insurance Policies Different auto insurance policies offer different kinds of features. All of them are important to different drivers for different reasons. The following are some of the more common, and desired types of features people want from their auto policies.
    • New car replacement. It is discouraging to have a car for a very small amount of time before an accident or theft only to find that the value the insurance company pays for the car is considerably lower than they may even owe on the car. Certainly not enough to pay the car off nor enough to purchase a new car to replace the one that was destroyed or stolen.

    • Vanishing deductible. Some insurance carriers are offering a reducing deductible for every year drivers go without an accident. Drivers appreciate that this gives them some degree of power over their costs – by remaining safe, defensive drivers. Of course, it can be frustrating when accidents that are not your fault take place.

    • Accident forgiveness. This feature means that insurance companies are not penalizing drivers for a first accident by raising rates or dropping their coverage. It is a huge boon for drivers who have long histories of safe driving before getting into a first accident.
    These features aren’t available through all insurance carriers and you may need to shop around in order to find these exact or very similar features. Identify Which Features are Important for You Most drivers want to find an insurance provider they can feel confident about having and be loyal to for the long haul. Before you do that, though, you need to decide what’s most important to you. Getting the right insurance coverage can make a world of difference for you and your family when it comes to financial security and peace of mind.
    • Types of coverage. Make sure the policy you purchase provides the type of coverage (accident, liability, medical payments, theft, collision, uninsured drivers, comprehensive coverage, and more) that is most beneficial to you and your family.

    • Amounts of coverage. You want to feel confident that all your needs will be provided for by your insurance coverage if an accident occurs. Choose policies that tend to the obvious needs and set aside money for things like deductibles, rental cars, and other features.

    • Reputation of the provider. Check out the reputation of the company before you buy insurance no matter how great the features appear to be. Find out what others are saying about the claims process, the fairness of the company, and the integrity of the company through rip off reports, blogs, and social media.

    • Available discounts. Finally, ask the agent you are working with about available discounts. Some are available but only if customers ask for them. They are unadvertised, so the only way to know is to ask the agent about them.
    Little things can be important when accidents occur and can make a big difference in your financial outlook afterward. Make sure you set the stage for a good outcome if you are ever involved in an accident. Comparing Prices and Coverage While it may seem like a simple concept to compare prices from one insurance policy to the next, it is not always so cut and dried. Not all policies are created equal. You’ll need to break down the policy into bite-sized pieces to see what is covered and why the prices are so different. Make sure you take the time to know what the policy offers for the price before choosing the lowest priced policy. Those deeply discounted policies often fail to offer the type of protection and coverage you are expecting for the money. Auto insurance is one of the most important types of insurance coverages to purchase today. It is doubly important to get the coverage and coverage amounts on these policies right to provide invaluable protection. Working with an independent insurance agency can help you do that and more – so that you never need to worry about having the right protection again. Just remember to choose a reputable agency with a history of doing the right things for its policyholders.

    Finding the Right Auto Insurance

    View Resource Finding the Right Auto Insurance
    Owning a home. It is the American dream, right? However, once you get started on your path to home ownership, you will find that there is much work in the process that goes beyond choosing a home and acquiring the loan to pay for it. Closing on your home requires quite a few thoughtful steps. This guide will help walk you through them. CFPB “Know Before You Owe” CFPB stands for the Consumer Financial Protection Bureau. It was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and offers protection for consumers when it comes to loans, including mortgage loans, and credit cards. In October of 2015, the CFPB created the “Know Before You Owe” initiative. The purpose of this initiative is enhance the ability of consumers to make informed decisions about their home loan choice. The CFPB offers several resources and tools on Owning a Home at consumerfinance.gov that can help you avoid unpleasant surprises at the closing table or that could jeopardize your ability down the road to stay in your home. Items to Shop Around For
    • Home Inspection Services. Once you’ve found the home that’s right for you, it is important to have a thorough home inspection. Your home inspection lets you know if there are problems, or potential problems, with the home that may result in costly repairs. This gives you an opportunity to adjust your offer on the home to accommodate the costs of the repairs or create a deal in which the seller is responsible for making those repairs.
      Your priorities in finding an inspector for your home involve finding one with a reputation for honesty and thoroughness. Ask people you know and trust if they have recommendations. If no one has one to give you, consider looking online or even using a referral service. Always check reviews to see what other home buyers have to say about the inspector.
      The sooner you schedule your inspection, the faster you’ll be able to decide if the home is a good investment for you or if you may no longer wish to purchase the property.

    • Homeowners Insurance. Most lenders require you to have adequate homeowners insurance to cover their investments in your home. At the same time, you will need to protect your investment in the home. It is a good practice to do the following when searching for the right insurance company for your home purchase needs.
      • Get quotes from several different companies in writing so that you can compare coverages, costs, deductibles, and more.

      • Work with trusted agencies – seek recommendations from friends, family, or online resources if necessary.

      • Research the reputation of the company you’re considering doing business with. Look through online reviews and ask around town when dealing with local agencies.
      Don’t overlook the importance of flood insurance – even if your home is not located in a high-risk area for flooding. Floods are not covered by most homeowner’s insurance policies.
    • Title Insurance and Closing Services. Closing costs vary greatly from one lender to the next and can cost new home buyers thousands of dollars. Some of those costs go to third-party services that you can shop for the best prices. Your lender or real estate agent may recommend a service, but you are under no obligation to use that service and may save money by choosing to do your business elsewhere.
      Two of those services are the closing services and title insurance. When it comes to choosing a closing service, look for businesses that offer competitive rates and have excellent reputations for services. Ask for quotes and don’t be afraid to ask for, and verify, references.
      Most banks will require that you purchase a lender’s title insurance policy to protect their investment in your home, but you should also consider purchasing an owner’s title insurance policy to protect your investment.
    Every little bit you can save at the closing table is money you do not have to come up with up front to purchase your home and is money you can later invest in things to make your new house feel more like your home. Understanding Your Loan Estimate One of the key documents that the “Know Before You Owe” program requires is the Loan Estimate. The Loan Estimate shows all of the details of the loan program you have selected to finance your home purchase. This document provides, in simple and easy to understand terms:
    • Loan Terms offered, including the Loan Amount, Interest Rate and Monthly Principle and Interest payment. It will also identify any prepayment penalties or balloon payments required if they are part of the loan terms.

    • Projected Payments over the loan term. This is important if you have an adjustable rate mortgage or if the loan requires Mortgage Insurance for the initial years of the loan term. You should make sure you understand how your Monthly Payment will change over the term of the loan and be comfortable with your ability to make that monthly payment for the entire term of the loan.

    • Costs at Closing. This is the Estimated amount of cash you will be required to bring to the table at closing. Make sure your finances are in order so that you will be able to make all of these required commitments.
    The “Know Before You Owe” program makes it illegal for lenders to initially offer you a loan under one set of terms and then to switch out that loan offer with much higher costs in a revised offer. However, there may be legitimate reasons for a Loan Estimate to change. These include changes to the loan programs offered by the lender, changes in the down payment amount you have available, changes to the home value that become apparent after an appraisal, changes in your credit score, or the inability of the lender to verify income information. If your Loan Estimate changes, make sure the lender explains why the changes were made and you know how those changes impact your ability to afford the home over the long term. Right Before Your Closing Date Your lender is legally required to provide you with a Closing Disclosure three days before you are scheduled to close on your home. The Closing Disclosure provides the same information included in your Loan Estimate, including Loan Terms, Projected Payments, and Costs at Closing. Additionally, it will provide a more detailed breakdown of the following:
    • Closing Costs. Including Origination Charges, Services Borrower Did Not Shop For, and Services Borrower Did Shop For

    • Other Costs. Including Taxes and Other Government Fees, Prepaids, Initial Escrow Payment at Closing and Other costs.

    • Cash to Close Calculations.

    • Summaries of Transactions. Which details both Borrower’s and Seller’s cash flows.

    • Loan Disclosures. Which describes any additional information about the loan, including details the finance charges to be paid over the loan term and Annual Percentage Rate.
    You should contact your closing agent one week before closing to ask who will be sending the document and how you’ll be receiving it. It may come via postal services, email, or you may be required to download it from their website. Compare the Closing Disclosure to the most recent Loan Estimate and make sure it matches your Closing Disclosure. Also, carefully review your Closing Disclosure during this time to make sure you understand it fully, allowing yourself time to ask any questions you may have. Some fees will change by small increments, which is normal, though some fees may change substantially. If you are surprised by some of the changes, don’t hesitate to question them. If anything is different from what you were expecting, especially regarding your loan, make sure to ask questions and demand answers before you close. Once you have gone through all the steps above, asked and received answers to all your questions, and have the funds in hand, it is time to close on your new home. Congratulations! It is a big step and one you are sure to enjoy for many years to come.

    Closing on a Home

    View Resource Closing on a Home
    Housing is typically the largest line item in most people’s budget. This is especially true for individuals who are living on their own for the first time. Therefore, before signing a rental lease, it is important that you perform some basic calculations and apply a little forward thinking so that you know you know what you can afford, how that aligns with your priorities and goals, and the lifestyle you want to live. Basic Guidelines Personal finance experts, for years, have promoted the ’30 percent rule’ when giving advice about deciding on a budget for living accommodations. This often-advised “rule” means that you take about 30 percent of your monthly income and budget it for rent. This figure typically includes things like utilities, Internet access, and similar expenses. Anything above 30 percent, according to these financial experts, means that you have an increased risk of having a future budgetary problem and of not being able to afford the lifestyle you want to live. According to CBS MoneyWatch, you should not exceed three to four percent of your gross income for utilities, leaving around 26 to 27 percent to pay for rent. It is important to factor in renters insurance as well if you have personal property that would represent a significant financial impact in the event of a loss. Making Tradeoffs When devising your budget for rent and other living expenses, you will find that you might have to make tradeoffs. For example, you might allow yourself some breathing room in your budget by underspending on your housing. Prioritize your spending on what is most important to you, whether that is your transportation and healthcare needs or allowing for more indulgent expenses, such as entertainment and vacation. As another budgetary tradeoff, you might consider getting a roommate or living in an area that offers greater budget-friendly rent opportunities. Keep in mind that living in an area inundated with upscale restaurants, pricey bars, and classy coffee shops are a conscious financial decision that will impact your budget substantially. You have to determine if they are really important to you. Where you live and what you spend on rent will ultimately determine how much money you have leftover to spend on supporting your desired lifestyle. Finding Ways to Economize Once you determine your priorities and know your budget, it is time to find ways to get the most value for your income. This involves ways to bring in more money or reduce the outflow of money. Reduce your Spending The first thing you can do is figure out a way to reduce your spending. This includes considering the choices mentioned above, like getting that roommate or finding a neighborhood that is more affordable. You might be able to have your rent reduced by offering your landlord managerial or maintenance services. Many landlords like this idea as it can save them money. Increase your Income Any extra income you can bring in will help your budget. You could consider picking up odd jobs like tutoring, or you can pick up freelance work in your chosen field to add to your overall income. The Takeaway When asking the question what you should spend on rent, the answer is that ‘it depends.’ There are common rules of thumb that suggest a certain percentage of income as a guide for your housing budget, and they are good to consider as a benchmark and guideline. However, just remember, you are in charge of your budget. If you want to spend more than that 30 percent of income on your rent, you might need to make cuts in other places like your entertainment or travel expenses. If you are a homebody, this might make sense for you. However, if you are a traveling nomad, it might not. The key is to understand your personal goals and priorities and craft a budget that is unique to your lifestyle.

    How Much Should You Spend on Rent?

    View Resource How Much Should You Spend on Rent?
    Low-interest rates make refinancing attractive to many homeowners. It can help you lower monthly payments, and you can use the extra money for many things. However, if you are approaching your retirement, you may have a few additional considerations to keep in mind. Why Refinance? Refinancing helps homeowners at all life stages and income levels the opportunity to pay less for their homes each month. This is especially true for homeowners who purchased their homes at times when the going interest rates were considerably higher. In fact, shaving as little as one percent off of the current interest rate can net substantial savings over the remainder of the loan. There are also a few other reasons you might want to consider refinancing your home. The rate on your Adjustable Rate Mortgage (ARM) is about to increase – or you suspect that it might. If you can convert your ARM to a fixed-rate loan with a lower interest rate, you have a potentially winning situation on your hand – provided that you are at least ten years away from retirement. Another reason to consider refinancing your home is if your lower interest rate is low enough that you can make roughly the same monthly payment and shave years off the life of your mortgage. Combine that with additional efforts to make one or two extra payments each year and you can potentially shave even more years from your loan, reducing the amount of interest you pay over the loan term even further. Disadvantages of Refinancing With the potential benefits that refinancing has to offer, many people wonder why it would not be an automatic yes. There are a few situations, though, when refinancing may not be the best choice for your situation. If you are planning to move after retirement or in the next five or so years, refinancing might prove unprofitable in the long run. For individuals who are having trouble making ends meet, or reaching financial goals prior to retirement, refinancing a home as retirement approaches could prove to be a financial burden rather than a boon. The absence of a mortgage during retirement is one of the best gifts you can give yourself. Consider carefully before extending the burden of making monthly payments into your retirement years. The final disadvantage to consider is the loss of equity in the home. Having equity in your home gives you options when emergencies in life arise. These emergencies can come in the form of health issues, family financial issues, or the expense that comes from needing a new roof or furnace. An extended mortgage could have you cash strapped and unable to come up with the funds for these types of emergencies. Good Rules of Thumb The best rule of thumb when deciding whether or not to refinance is to do the math. If you can recover your closing expenses and turn payments savings into investments during the time you have remaining before retirement, then refinancing may very well be worth your while. On the other, if you could invest the amount of money you will spend on closing costs and other expenses related to refinancing your home and make a bigger impact on your future by doing so, then your money is best spent elsewhere. Finally, there is one question to ask yourself. Do you want to have a mortgage going into retirement? For some, that is the only thing you need to know about refinancing as your retirement approaches.

    Should You Refinance Close to Retirement?

    View Resource Should You Refinance Close to Retirement?
    The minimum wage could be as little as $7.25 an hour, depending on where you live in the United States. You could be struggling to live off your minimum wage job and pay for your meals and living expenses each month. Although some have pushed to raise the minimum wage, amd succeeded in some areas of the country, it’s still a challenge that requires lifestyle and living adjustments just to be able to afford everyday expenses. Minimum Wage Budget Figures Below are some estimates of what your monthly income and expenses could look like while living off a minimum wage job. These estimates include:
    • $7.25 an hour federal minimum wage

    • 40 hours a week is equal to $290 before taxes

    • $290 a week is equal to $15,080 a year before taxes

    • Income after taxes is $13,572 a year

    • Available monthly funds is $1,131

    • Based on national averages, rent can be around $700 a month or more each for two people sharing a two-bedroom apartment

    • Electricity monthly expense can be around $73 a month, according to NPR and depending on your state

    • Water can be around $20 a month or more depending on your state

    • Health Insurance can be around $44 a month/$539 a year or more depending on your state; you can use the Affordable Healthcare Act Calculator to determine yours
    Using these estimates, you can see that you are up to over $900 a month for rent, utilities and health insurance alone, leaving around $225 a month for the rest of your essentials. Budgeting Tips You can help to stretch your income by applying some sound budgeting tips. Cut Down your Housing Costs If you are paying more rent than you can really afford at the moment, you might want to consider downsizing to a less expensive place or part of town. Conduct research and find apartments that are more affordable. Saving a couple hundred dollars each month can make a meaningful impact on your budget, allowing you to use your money for other expenses or necessities. Reduce Commitments Do you have debts you are repaying at the moment? Give your debtors a call and explain your situation to them. They may be able to reduce and consolidate your debt into one lower monthly payment. Check into different forms of child care. For instance, you can ask family or friends to watch them while you are at work instead of putting them into a daycare. Reduce your Possessions Do you really need an expensive ice-making refrigerator or new car? These things can really take a huge chunk out of your budget. In addition, the more unnecessary appliances you have like a dishwasher, microwave or even a dryer (hang your clothes) will eat up your electricity bill. Taking Advantage of Available Programs Use Food Stamps Look to see if you’re eligible for the Supplemental Nutrition Assistance Program (SNAP) to get food stamps. This is a US government run program that gives you money (stamps or electronic debit card) to purchase food. You can save yourself hundreds of dollars each month in food alone. Eligibility is based on the benefits your state provides and the income you make. Apply for Medicaid Coverage Your budget can be significantly burdened by healthcare costs and if you live in the US and are a minimum wage job worker with a low income, you might be eligible for Medicaid. It can lower your healthcare cost and even cover it completely in many cases. Lifting yourself up Create a Budget for Yourself and Stick to it Determine what your basic monthly expenses are and don’t spend more than what you don’t have. Basic expenses include:
    • Rent and Utilities

    • Transportation

    • Food

    • Healthcare

    • Miscellaneous Expenses
    Most importantly, you should continuously be looking for opportunities to advance through promotions with your present employer, or by finding a new one. Going the extra mile on assigned tasks or roles can get you noticed and give you an advantage when higher paying opportunities arise. You should also look to spend whatever spare time you have on enhancing your skills via local education or training that can help you take that next step up the career ladder. Living on a minimum wage budget is a challenge for almost everyone. Forget the credit cards and save whatever money you have left after your bills are paid. Make the commitment to succeed. You can get by on a minimum wage job if you make a plan for yourself and take steps in the right direction to grow from there.

    Getting By on a Minimum Wage Job

    View Resource Getting By on a Minimum Wage Job
    When it comes to your money, one of the most important decisions you will make is how you go about saving for retirement. It can also be one of the trickiest decisions too. The good news is, you can stay on track with your saving by following some simple retirement milestones. Savings Goals by Age Most people save a part of their income (typically 15 percent ) for their retirement. This is fine if you are young and have many years left for saving. But, what happens when you are trying to catch up on your retirement savings or if you began your retirement savings very early? Well, you can see if you are on track by checking out age-based savings milestones. Your retirement savings goal is broken down by your present salary amount that you needed to have already saved up at certain ages. Savings Milestones Guidelines by Age Below is a retirement savings guidelines to help you set yourself up with a secure retirement. Remember, these are guidelines, and your retirement savings may be more or less than what the table advises. Keep in mind, that you have the opportunity to “catch up” if you see you are falling far behind the recommended milestones.
    • By age 30 – 1x your annual salary

    • By age 35 – 2x your annual salary

    • By age 40 – 3x your annual salary

    • By age 50 – 6x your annual salary

    • By age 55 – 7x your annual salary

    • By age 67 – 8x -10x your annual salary
    Your specific circumstances will vary, of course. Power of Compounding Compound interest works the best over longer periods of time, particularly in growth investments like stock mutual funds within a 401K or an IRA account. The earlier you invest, the more time compounding has to make your money work for you by generating interest, requiring you to save less of your earned income at a later date. If you have a tax-deferred account, your investment earnings aren’t taxed until you withdraw them, typically at retirement. In the earlier decades, your savings will double slowly at first. In later years, your money will then begin to grow faster since you will now be doubling higher dollar amounts after you have been investing for a while. Compounding Works like Magic For effective retirement saving, the key is to begin early to allow your money over time to earn money by itself. For instance, if you invest your dollars wisely, it will earn a potential seven percent. At seven percent, within 10 years, a single dollar will double. In an additional 10 years the $2 will now double to $4. Ten years more and you are up to $8 and so forth. Milestones before Retirement Starting your 401K This happens when you start your first job. If you have a 401K plan option in your workplace, take it. This will allow you to start getting that tax-free compound interest working for you. Age 50 and Beyond If you have slacked over the years in putting money away in your 401K plan, this is the time where you can play catch-up to make up for the time you lost. You can increase how much you contribute to your retirement plan and even add an extra $5,500 to your contribution limit if you are over 50 years old. Age 59 1/2 and Beyond It is at this point that you can begin withdrawing from your 401K retirement plan penalty-free. If you are younger than 59 1/2, you will pay a 10 percent penalty for early withdrawal. You will also have to pay income tax on the money you take out. Age 70 and Beyond At this age, the government requires you to start taking your IRA and Social Security disbursements. If you have been diligent about adding money into your 401K plan and have not made any withdrawals, this could be where you can finally bank on your saved money and have a great retirement. You can withdraw your money from your 401K plan and begin living the life you have always dreamed about. If you follow these guidelines, you should have around 8 to 10 times your ending salary by retirement age. You can then replace 85 percent of your pre-retirement income, which is far better than trying to save up a million dollars.

    Important Retirement Savings Milestones

    View Resource Important Retirement Savings Milestones
    College is full of lessons to be learned and one important lesson you should learn but most likely won’t in the classroom is how to manage your money wisely. You will not receive a grade on how well you manage your first credit card. Unfortunately, many people learn credit card responsibility only after they have gotten themselves into a pile of debt. Pros of Having Credit Cards As with many things in life, there are positive and negative aspects to having credit cards. Being responsible with credit cards involves understanding both sides. Builds Credit Credit cards are the best way to start establishing a credit history. To build your credit score, you need credit; therefore, getting a credit card while still in college is a simple way of doing this. The fact is that a major contributor to your FICO score is your credit history length. Obtaining a credit card while still in college helps you begin building your credit history so that when it comes time for you to require credit to obtain your first mortgage, you will not have a problem obtaining a loan. Alternative to Carrying Cash These days, not many people carry cash and college students, in particular, are not likely to deal with paper currency. If you do need cash, however, and don’t have an ATM near you on campus, reaching for your credit card can help you if you are in a bind. Avoids Identity Theft Identity theft and fraud have increased dramatically with the rise in technology. You leave yourself more vulnerable to identity theft by making online purchases with a debit card instead of a credit card. If a thief does gain access to your debit card, it is too easy for them to drain your bank account. With a credit card, they are only racking up fraudulent charges that you can dispute and have removed. Cons of Having Credit Cards While there are many advantages to having one or more credit cards, you should also be aware of their significant drawbacks. Forget to Track Spending You can get yourself into serious financial trouble if you fail to track your credit card purchases. Typically, this results in a huge bill at the end of the month that you are unable to pay in full within your billing cycle. If you continue this pattern, it can lead to a hefty debt that you will have a hard time paying off. Forget the Bill No doubt you are very busy in college going to class, juggling homework, and keeping a part-time job. With so much going on, it does not take much to forget little details like paying your credit card bill. However, when you fail to pay your bill on time, it can damage your credit score tremendously. That might not hurt you too much while you are still a student, but it can put you in a negative position as you begin your new post-graduation adult life. This will make it more difficult to get a car or home loan and to get a great rate on that loan. Open Too Many Cards Too often, college students sign up for every credit card offer that falls in their lap. When you have too many cards, it can make it overwhelming to track your spending, pay your bills on time and stay out of debt. Using Credit Cards Wisely To keep yourself out of credit card debt and keep your credit score in check, you need to stay on top of your bills and pay them in full and on time every month. You don’t use a credit card any differently than you would your debit card, except for how you pay it at the end of each month. With a debit card, your money automatically gets pulled from your bank account at the time of your purchase, but with credit cards, it’s up to you to pay the balance, which can add up quickly. The bottom line is this. You can establish credit responsibility and you should. This will set you up with a strong credit history so you can continue down your path as an adult with sound financial habits.

    Should College Students Have Credit Cards?

    View Resource Should College Students Have Credit Cards?
    It can be a proud accomplishment when you pay off your credit card debt. However, if you are not careful, it can also be very simple for you to get right back into debt. Congratulations! If you have paid off your credit card debt, congratulations are in order. However, just because you are debt free now doesn’t mean you can stay that way. You have to set goals and guard yourself against sliding backward. Go ahead and celebrate your new debt-free life and then follow the tips below to maintain a zero balance. Maintaining a Zero Balance There are several actions you can take to maintain a zero credit card balance. Using your Card Responsibly You can continue using your card as long as you can stay responsible with it. Pay your balance in full every month so you can keep a healthy credit score. Maintaining a good credit score will help you down the road in securing credit with low rates, obtaining insurance, landing jobs that require credit checks, and getting approved for utilities without having to put down deposits. Finding Your Triggers Once your credit cards are paid off, figure out the reason you were in debt in the first place. How did you handle your finances and how did others influence your spending habits? For instance, did friends persuade you to spend on shopping sprees or expensive dinners? When you get bored or are under stress, do you run to the mall? These are triggers that influence your spending behavior. Knowing and avoiding these triggers can help you stay out of debt. Keeping a Budget When you no longer have to account for every penny, it can be too tempting to do away with your budget. However, this is a quick way to get back into the same reckless spending cycle. Having a budget will keep you in line with what you can and cannot spend. Preparing for Emergencies You can pay careful attention to your spending, yet still fall off the credit wagon if you’re not prepared to deal with financial emergencies. Unplanned items such as car repairs, medical emergencies or an unexpected loss of income can bust the best of budgets and derail the progress you’ve made in maintaining a debt free life. Having an emergency savings account in place can help you absorb some of the sting that unplanned expenses have on your finances. Experts recommend that you save three to six months of your monthly income to deal with such situations. That way, when your car sputters and spurts, or you lose hours at work, you’ll have the savings in place to deal with the emergency, instead of pulling out your credit cards to handle the situation, raising your account balance back to perilous heights. Things to Tackle Next Once you’ve got an emergency savings account in place, you should begin to pay off any other debts you have. You can start with the high-interest rate accounts. Pay off your student or car loan. Invest in your future, whether that involves starting a new business or looking for investment opportunities such as real estate. It is also crucial to begin saving for your retirement. This includes investing at least up to your employer’s match for their 401 K plan and maxing out your IRA contributions. Keep an eye on your credit. You should be looking at your credit card statement every month even if you are on autopay. There is always the risk of mistakes that can affect your credit score. Go through the three national credit reporting agencies (Equifax, Experian, and TransUnion) to review your credit and credit score once a year. If you find any mistakes on your credit report, you can dispute them and have them removed from your credit report once they cannot be verified as legitimate charges. You have a clean slate now. It is up to you to stay responsible when using your credit card. Don’t make any unnecessary purchases and always pay your bills in full each month and on time. Just keep in mind how great it feels to be debt-free and go ahead and enjoy your money responsibly.

    After You’ve Paid Off Your Credit Cards

    View Resource After You’ve Paid Off Your Credit Cards
    Life insurance is one of those things you never want to think about when you are young, vibrant, and full of life. There are certain times in life, though, when it becomes necessary to consider carefully what having (or not having) life insurance will mean to the people you love if you were taken away from them suddenly. Now that you have made the decision to buy life insurance, you have a few important decisions to make, including the type of life insurance to purchase. Term Life Insurance Much like the name implies, term life insurance provides coverage for a specified period. Some policies are for a term of five or ten years. Others go on for as long as 30 years. The average policy is for a term of 20 years. If you pass away within the 20-year term of that active policy (meaning that you have not allowed the policy to lapse), then your family, or designated recipients, will receive the full value of the policy. There are many benefits to a term life policy worth considering. First, your premiums will never increase during your term. This means you can engage in long-term planning for the years when you are raising your children, paying a mortgage, or have greater financial responsibilities and obligations to consider. The other benefit is that term life policies are cheaper than whole life policies – at least when you are young and in relatively good health. That is also often the time when you are just starting a family, building a career, or when you buy your first home and assume a mortgage. The drawback to a term life policy is that it only has value to you during the time in which you are paying for it. Once your term ends, the policy has no value at all. Additionally, if you decide you need to extend the coverage term, say you have a baby later in life or buy a newer home and have a longer than expected mortgage, it will cost much more for the additional term than you paid for your original term. Those rates are not locked in for life. Whole Life Insurance This type of coverage is sometimes called permanent life insurance. It is much different from a term life policy in the fact that it has both investment and insurance components. However, that is not the only difference. These are a few of the ways whole life policies differ from term life insurance. You lock in the rates when you purchase a policy. The younger you are, the better your health, the lower your insurance rates. From the moment you take out your policy, your rates are locked in for the life of your policy. This means that you will receive the same low rates for as long as you continue paying for your policy and do not allow it to lapse. In addition to locking in lower rates for life, a whole life policy builds cash value over the years. This makes your whole life policy both an investment and insurance policy. While the initial premiums are often greater than a term life policy, locking in the rates for life is a game changer when it comes to long-term costs and financial planning. Choosing Between the Two Each type of policy offers its set of strengths and weaknesses. A whole life policy, locked in early, ensures that you will always have affordable life insurance coverage. However, term life policies allow you extra life insurance protection that is affordable at times when you need it most. Some people choose to have both. One for permanent whole life coverage and the term policy for a little additional security for their families during certain critical years. If you are unsure about which policy is best for you, consider consulting with an independent insurance agent or financial planner to discuss your options.

    Term vs. Whole Life Insurance

    View Resource Term vs. Whole Life Insurance
    We all love getting away from it all and going on vacation. With all the excitement of going away, and with the number of excellent deals on flights and hotels, it is easy to forget about buying travel insurance. There are two main types of policies you can buy – single trip and annual insurance. As the names suggest, single trip insurance covers you for one trip, whereas annual insurance covers you for multiple journeys within a set period. Travel Insurance Basics There are various types of travel insurance coverage, many of which offer different features. The one you purchase will depend on factors such as where you are going, what you will be doing on vacation, and the length of your trip. The most common options are:
    • Evacuation. At times, the world can be an unpredictable place, and there is political and social unrest in many countries. This is why it is important to buy evacuation coverage if you are traveling to such a place. You might also want to consider that natural disasters can happen anywhere, at any time too. Of course, some places will be more prone to natural disasters due to their geography and climate. Evacuation insurance can help alleviate the financial strain of getting out of harm’s way.

    • Medical. Traveling abroad, and eating new foods can sometimes be a recipe for disaster. If you are hit by a bad stomach bug while you are away, you will want to have medical insurance in place to keep costs down.

    • Baggage. Nothing is worse than losing your baggage before you even reach your vacation destination. Baggage coverage takes some of the strain out of replacing your gear.

    • Cancellation. If something comes up and you need to cancel your trip, cancellation insurance will help you recoup your hard-earned money. It also covers cancellations that occur if airline delays make you miss an event, or if the tour provider goes bankrupt.

    • Death and dismemberment. This policy option provides your family with a payout, should you die during your vacation.
    Benefits In addition to the benefits listed above, travel insurance can offer you real peace of mind to have coverage should the worst happen during your vacation. Certain groups of travelers can benefit from buying travel insurance, there include:
    • Big spenders. These are individuals who cannot stand to lose a significant amount of money should their trip be canceled or similar.

    • Nervous travelers. Having insurance in place will provide peace of mind.

    • Package tour and cruise customers. Tour operators and cruise lines are not so lenient when it comes to missing missed vacations and voyages.

    • People with lengthy and/or complex itineraries. If one part of a tour doesn’t go to plan, the remainder of the trip can be negatively affected, and even missed.

    • People on trips outside of the United States. Many overseas medical providers will want you to pay upfront for your care, adequate insurance will take care of this.

    • People on Medicare who are traveling internationally. Medicare won’t usually cover events that occur in other countries.
    Is it Worth It? Travel insurance provides you with real peace of mind, so it is ideal for you if you are a worrier, if your trip cost a lot of money, or if you have a legitimate concern about the vacation destination. In considering different policies, there are some “benefits” that you probably won’t need, such as death coverage. In fact, a decent life insurance policy is a better option if you have concerns regarding your mortality. Also, if you have booked a short, inexpensive, and domestic trip, it is unlikely you will need insurance. Many travel insurance policies do not cover some pre-existing medical conditions either, so if you are considering purchasing medical insurance, be sure to investigate the coverage thoroughly. Sometimes, other insurance you have or your credit card may already provide the coverage you need. That is another important aspect to check before you spend money on a new travel insurance policy. Travel insurance is a good idea if you need peace of mind when you are on vacation, especially if you do not have any other back up. If you are planning on trying out some extreme sports, on visiting a developing country, or anything else in between, it might be worth taking out travel insurance. However, the concept of risk is a very personal one that varies from person to person, so whether or not you take out travel insurance can be a very personal choice.

    Is Travel Insurance a Good Idea?

    View Resource Is Travel Insurance a Good Idea?
    FHA mortgages are a popular option for first-time home buyers to consider. These loans offer attractive terms, including the ability to make smaller down payments and a some flexibility when it comes to credit and income requirements. If you are a first time home buyer it may be a good idea to look into a loan like this for your home purchase, as long as you can meet the qualification requirements. What is an FHA Loan? FHA stands for Federal Housing Administration. The FHA insures certain loans with the intention of making it easier for people who would not otherwise qualify for a home loan to do so. Essentially the government guarantees lenders that they will be repaid for the loan even if you fail to do so. This makes lending the large amount of money it takes to purchase a home, more attractive to lenders who would otherwise be unwilling to take the risk on the bulk of the population. Not all homes are eligible for FHA mortgages. In fact, in order for the home to quality the buyer must live in the home. You cannot use FHA loans to buy a home as an investment property and rent it out to others – or to buy a vacation home. FHA loans are available for homes that are detached, semi-detached, row houses, condos, and townhouses. Borrowers who receive FHA loans must also purchase mortgage insurance. You have a few options available for doing this. You can choose any of the following:
    • Pay the full amount of the mortgage insurance premium in one lump sum payment up front.

    • Finance the payment into the mortgage (you will pay considerably more for the insurance with this method).

    • Make monthly payments, outside of your mortgage payment, for the full monthly amount.
    Finally, you must have the home appraised by an FHA-approved appraiser and the home must be deemed to meet certain conditions in order to qualify for an FHA loan. These conditions are generally related to the home’s structural soundness and value. What are the Key Features of FHA Loans? There are several ways the FHA makes the home buying process easier for the average person, including those listed below.
    • Smaller Down Payments. FHA loans allow you to have as little as 3.5 percent for a down payment.

    • Use Gifts and Borrowed Funds for Down Payment. Many conventional loans expect the down payment to be a show of financial investment on your part and expect the payment with your own savings and funds. FHA loans allow you to use gifts to fund your down payment and closing costs. Sellers can also contribute by paying as much as six percent of the loan amount toward your closing costs with an FHA loan.

    • No Prepayment Penalty. This means if you want to save many thousands of dollars in interest by paying your loan off early, or making additional payments over the loan amount each month, there is no penalty for doing so.

    • FHA 203k Program. This is a specialized FHA loan that allows you to borrow money for a mortgage and for making home improvements in one loan. This allows you to make necessary repairs quickly after purchasing your home.

    • Credit Flexibility. While conventional lenders require much higher credit scores, FHA loans have a minimum FICO score requirement of 580 in order to qualify for a 3.5 percent down payment. Applicants with lower credit scores may still be eligible, but they will be required to make a down payment of 10 percent. This makes FHA loans much easier to qualify for if you have some credit bumps and bruises along the way – or even if you have no established credit.
    These features are attractive to potential home buyers, but are not the only reason people turn to FHA loans. How do You Qualify for an FHA Mortgage? While the credit score requirements aren’t as insurmountable with FHA loans as they are with other types of loans, that doesn’t mean that there are no real requirements. In fact, the FHA has some pretty stringent requirements for approval including those listed below.
    • Stable Income. Borrowers must be able to show documentation that they’ve had two years of steady employment, in the same field, with no more than one month’s worth of employment gaps during that period.

    • Debt-to-Income Ratios. Borrowers must have no more than 50 percent of their income, including mortgage payments, tied up in debt, such as taxes, insurance, credit cards, auto loans, and student loans. If your credit score is less than 580, though, the debt-to-income requirements for the FHA are more stringent.
    Once all of the pieces fall into place, an FHA loan can be a great option if you’re considering purchasing a first home – for all these reasons and more.

    FHA Mortgage Basics

    View Resource FHA Mortgage Basics

    Repayment of a mortgage loan requires that the borrower make a monthly payment back to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payment are amortized so that your monthly payment remains the same during the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases. Mortgage payments can also include pre-payments of property taxes, homeowner’s insurance and monthly homeowner’s association dues into an escrow account, managed by your lender. When those items are due, your lender will make the payment to the tax authority, insurance company or homeowner’s association.

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    Calculate a Mortgage Payment

    View Resource Calculate a Mortgage Payment

    Home equity loans can be used to consolidate account balances from multiple credit cards or installment loans into a single loan, while offering the added benefit of consolidating multiple payments into a single monthly payment. Using home equity for debt consolidation can be beneficial if the repayment period for paying off the home equity loan is shorter than it would be for your existing debts, or, if the interest paid over the repayment period is less than what you would pay without consolidating your debt.

    Consolidating Debt with Home Equity

    View Resource Consolidating Debt with Home Equity

    The length of time it will take to pay off a home equity loan or line of credit is largely driven by the interest rate being paid on the outstanding balance, how much you continue to use the line of credit and what monthly payment is made each month. Decreasing any additional spending and increasing monthly payments are an effective strategy for paying off the outstanding balance in a shorter time period.

    Paying Off a Home Equity Loan or Line of Credit

    View Resource Paying Off a Home Equity Loan or Line of Credit

    Repayment of a home equity loan requires that the borrower make a monthly payment to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payments are amortized so that the monthly payment remains the same throughout the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases.

    Calculate a Home Equity Loan Payment

    View Resource Calculate a Home Equity Loan Payment

    Adjustable rate mortgages typically offer home buyers the advantage of having a lower mortgage payment during the initial period of the mortgage. Adjustable rate mortgages are typically offered on a 1, 3, 5 or 7 year basis. Once the initial period expires, the mortgage rate will reset at then current interest rate levels. Depending on the direction interest rates are taking, these resets can result in higher or lower monthly payments to the borrower. This adjustable rate mortgage analyzer will help you understand the implication of your adjustable rate terms by showing what your monthly payment will be under different scenarios.

    Experience the Difference of Banking Local

    At First Federal Lakewood, we understand your unique needs. Whether you’re looking for personalized banking solutions, competitive loan rates, or expert financial advice, we have what you need!

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    Adjustable Rate Mortgage Analyzer

    View Resource Adjustable Rate Mortgage Analyzer

    If you’re already a saver, you might ask yourself the question “what if I save more”? Increasing your existing savings rate by even 1% can yield big results. Save even more and the results are even better. The more you’re able to save and the longer you’re able to save it will open your savings up to the magic of compounding, or the ability to earn interest on your re-invested earned interest.

    The Impact of Saving More

    View Resource The Impact of Saving More

    The decision to refinance a home mortgage can involve many factors. You might want to take cash out of your home at when you refinance to use for other purposes. But the most common purpose is to obtain a lower interest rate and lower monthly payments. In the latter case, the decision to refinance should be based on lowering the overall mortgage costs and breaking even on the refinance in a reasonable period of time.

    Time to Refinance?

    View Resource Time to Refinance?

    Saving for a college education requires advanced planning and knowledge of what the cost of a college education will be when your student begins his college experience. You’ll first need to know how long it will be before your student sets foot on campus, what the cost of that education is today and how much the cost will increase between now and then. You’ll need to know how many years of college you’ll be paying for, which is dependant on the degree program being pursued. Once you have that information, you’ll be able to know how much you’ll need to save. Putting together a plan will depend on what you currently have saved, how much you can save each month and the rate of return you’ll receive on those savings.

    Save for College

    View Resource Save for College

    A 401(k) account available through your employer is one of the best methods for building retirement savings. There are two key advantages. First, any contributions made to your 401(k) now are tax deferred, so each year’s total taxable income will be lower. Second, some employers provide 401(k) match programs where they contribute to your 401(k) account. Depending on the program, employer contributions can range from 0% to 100% of your contributions.

    401(k) Calculator

    View Resource 401(k) Calculator

    Contributions to a Traditional 401(k) plan are made on a pre-tax basis, resulting in a lower tax bill and higher take home pay. Contributions made to a Roth 401(k) are made on an after-tax basis, which means that taxes are paid on the amount contributed in the current year. The reverse is true once you are eligible to make 401(k) withdrawals. Withdrawals from Traditional 401(k) plans are taxable, while those made from a Roth 401(k) are not.

    Traditional 401(k) vs Roth 401(k)?

    View Resource Traditional 401(k) vs Roth 401(k)?

    Spending money today has a retirement price tag on it. What you fail to put away today for your retirement will impact how much you have available to you when you’re ready to retire. That price tag will depend on how many years you are away from retirement and the rate of return you could receive on those funds over the savings period.

    Spend it or Invest in an IRA?

    View Resource Spend it or Invest in an IRA?

    Saving for retirement can be a challenging task. The starting point for any retirement planning is an understanding of what your retirement needs will be. Once you’ve done that, you’ll have a target to aim at and be able to put together a savings plan that will get you there. Defining your retirement need requires that you have a retirement age in mind and a basic understanding of what your spending needs will be during your retirement years. A simple approach for defining your retirement needs is based on using a percentage of your current income, adjusted for inflation between now and when you retire. You might also want to consider how your salary will change based on merit or cost of living increases. Your retirement savings plan will follow; driven largely by what you’ve saved to date and what you can save going forward each month. Don’t forget to factor in any pensions or social security payments that you’ll be entitled to receive during retirement.

    Save for Retirement

    View Resource Save for Retirement

    The Social Security benefits you (and a spouse) will receive at retirement can be estimated based on your average annual income, your current age and your age when you retire. For a more accurate and detailed estimate, visit the Social Security Administration website at www.ssa.gov where benefits can be determined based upon your exact earnings history and the exact date of your retirement.

    Estimate Social Security Benefits

    View Resource Estimate Social Security Benefits

    You’ve made it to retirement, or perhaps you’re just counting down the days until you retire. You’ve got money put away, but need to know how long it will last. There are a number of key factors that will determine that, including your monthly spending and other sources of income. The rate of return on your outstanding savings balance, the taxes you pay on withdrawals and the impact inflation has on your required monthly spending will all have significant impact as well.

    How Long Will my Retirement Savings Last?

    View Resource How Long Will my Retirement Savings Last?

    What monthly income will your retirement savings provide? The number of years you’ll need it to last, the expected rate of return on your outstanding savings balance and the rate at which withdrawals from your savings account will be taxed, will all be determining factors.

    Retirement Income Estimator

    View Resource Retirement Income Estimator

    Making the decision to return to work after staying at home with children, or leaving the workforce to stay at home is sometimes a difficult decision for parents. The financial aspects of that decision will be based on the elimination of expenses incurred while staying at home, examples of which are life and health insurance premiums that may be replaced by employer-provided plans. When looking at the benefits of working, income should be considered right along side of the ability to build a retirement fund through 401(k) contributions, the cost of health and life insurance and the expenses associated with being part of the work force.

    Should You Work Outside of the Home?

    View Resource Should You Work Outside of the Home?

    Most people have a cup, jar or piggy bank full of change that you fill each day when you empty your pockets or clean out your purse. But how much do you have? Count it up and take a look!

    Spare Change

    View Resource Spare Change

    Most new businesses get started out of personal savings. The amount of money you will need to start yours depends on the initial outlay of funds you’ll need to get started, plus the number of months of ongoing expenses you’ll want to have saved in advance to pay your business expenses before the revenue from your operations can pay for them. Typical startup expenses include such things as office furnishings, equipment needed to operate your business and your initial stock of inventory. Once the business is started, you’ll have initial expenses that you’ll need to pay for, such as employee salaries, rent, utilities, etc.

    Saving to Start a Business

    View Resource Saving to Start a Business

    We all understand that you cannot put a price tag on the value of human life. However, if you are a husband or wife, or a father or mother, your departure would leave a financial gap that could impact the financial health of your family. One component of that gap would be the money you would earn between now and the date of your retirement. When you begin looking at how much life insurance you will need, you will want to make sure that your policy adequately replaces any earnings that your family would miss out on, up until your retirement. The present value of those earnings represents the amount you would need today to replace all of your future earnings. Of course, it is best to work with a knowledgeable financial planner to get the most accurate life insurance assessment given your particular situation and needs.

    The Value of Your Future Earnings

    View Resource The Value of Your Future Earnings

    The purpose of life insurance is to replace your income in case you die so that the family that you are leaving behind can maintain their current lifestyle. How much you need is best decided by working with a qualified financial planner. Things to include your current assets and investments. How much do you currently have saved and how much earning power will be available for supporting your family in your absence? Compare that amount to your anticipated liabilities and expenses. Moreover, don’t forget to include items such as college tuition for your children or paying off your mortgage, in addition to your standard living expenses.

    Calculate Your Life Insurance Needs

    View Resource Calculate Your Life Insurance Needs

    As a parent or spouse, your most valuable financial asset may be your ability to work and earn a living. If you get injured, become disabled or suffer a severe illness and are unable to work, would you be able to maintain your current standard of living? Savings can disappear quickly, so disability insurance can provide the financial security you and your family will need if the unthinkable occurs. You’ll want to consider all of your monthly financial obligations and the amount of time you will be out of work in assessing your needs.

    Calculate Your Disability Insurance Needs

    View Resource Calculate Your Disability Insurance Needs

    As you or a loved one, grows older, long-term care might be required if you or they can no longer perform the essential daily tasks required to take care of oneself. This might also be the case if you have a child with special needs. Long term care costs can vary widely depending on the area of the country that you live in, and the level of care required. As you prepare to meet your financial obligations, you should understand what such long-term care may potentially cost over an extended period.

    Calculate Your Long Term Care Needs

    View Resource Calculate Your Long Term Care Needs

    There are three fundamental ways to meet your long-term care needs. Long-term care costs can be covered by long-term care insurance of by qualifying for Medicaid. Self-insuring is typically the other option. If you are interested in going down the self-insurance path, you’ll need to save the appropriate amount of money to meet your long-term care needs.

    Save for Long Term Care

    View Resource Save for Long Term Care

    Health Savings Accounts (HSA) offer an opportunity for you to build tax-free savings to pay for current and future qualified medical expenses. Used in conjunction with a High Deductible Health Plan (HDHP) a high-deductible plan may cost less overall than making monthly premium payments to a traditional health plan and making co-payments when you require medical care. If you use the HSA/HDHP method, you’ll pay some of the initial medical costs out of your HSA, up until you meet your HDHP deductible. A traditional health plan would pay for most of those up front, after a more modest deductible. Which method is best for you depends on your medical care needs and the HSA/HDHP and Traditional Plan options available to you.

    Health Savings Account or Traditional Health Plan?

    View Resource Health Savings Account or Traditional Health Plan?

    The break even point for a product or a business is the point where sales revenue equals your fixed plus total variable costs. If you are below the break even point, you are losing money. If you’re above the break even point, you are generating a profit. To break even, your sales revenue from each sale needs to exceed the variable costs of creating or delivering the product or service. The resulting gross margin can then be used to cover the fixed costs of your business. Once your fixed costs are covered, your business is at the break even point.

    Sales Volume Required to Break Even

    View Resource Sales Volume Required to Break Even

    The gross margin of a product is measured by subtracting the cost of goods sold from the selling price. Cost of goods sold includes all costs associated with producing the products or services sold by a company. Gross margin percentage is obtained by dividing gross margin by sales revenue. Many companies offer multiple products, so understanding overall gross margin is often an exercise in understanding how various unit sales, price points and costs for each product or service contribute to the overall business.

    Gross Margin Analysis

    View Resource Gross Margin Analysis