The Only 2 Financial Rules You Need Live By

Pic

There’s a lot of great advice out there (and on this very site) for saving money. But if it overwhelms you, start with just these two simple rules and you’ll be on your way to financial independence.

When it comes to the way we think about money, I’ve noticed there are two kinds of people: those who think $1,000 is a lot of money, and those who think $10 is a lot of money.

I fall into the second category. But I’m not especially frugal. I have a fairly nice car, I take a vacation every year, and it isn’t too hard to convince me to drop a few hundred dollars on a great pair of shoes now and then. I’ve never even clipped a coupon. But I’ve also maxed out my retirement savings, bought a house, and live without debt – all on an average salary for where I live.

What I’ve done isn’t extraordinary, but it does seem somewhat rare. That said, I think most people can accomplish this fairly easily. All you have to do is live and die by two simple rules…

  1. Pay yourself first: the best kind of cliche

“Pay yourself first” is a very common piece of financial advice. It’s simple enough to follow, but that doesn’t make it easy.

If you can save $200 per month at a 6-percent interest rate, you’ll have more than $200,000 in 30 years. At the very least, you’ll have a great savings fund at the ready for whatever life may bring. But how can you come up with that cash when you barely have any money left between paychecks?

The answer is to take that money off the top. And yes, it’ll sting a bit at first.

I’ve made a habit of taking contributions to my retirement and savings account right off the top of each paycheck on the very day it hits my bank account. I try to cut pretty deep too, leaving myself just a little more than I need to pay for expenses.

This works on two levels: It forces me to really budget to meet my basic expenses while keeping extra cash out of easy reach. I can still retrieve the money from my savings account if I happen to need it, but because I have to make a decision to transfer funds, they usually stay put. I allow myself to spend whatever I don’t need for expenses on whatever I like – if I don’t spend it by the time my next paycheck comes, I roll that into savings too.

I also save any additional money I get. I think a raise, tax return, or bonus can go two ways. It can raise your standard of living, or it can raise your standards. Rather than creating more expenses to suck up these extra dollars, I live the same way day to day and tuck the extra money away for something better.

  1. Practice mindful spending

Having some leeway in your paycheck isn’t a given, but I think many people have more wiggle room than they realize.

This is what I mean when I say that I think $10 is a lot of money. When I decide to buy something, it’s a decision, not an impulse buy. I want to spend my money on things that really have value for me, not just things that are convenient or appealing at the moment. So while I can buy something nice once in a while – without guilt – I have a hard time going out for lunch or buying (you guessed it) a latte.

Less expensive purchases are an easy mental hurdle to get over because they’re so small it seems that they could hardly amount to anything. The truth is, these seemingly insignificant purchases can easily amount to, or exceed, that $200 you may be aiming to save.

If you spend $4 every morning on a latte, and $12 each work day for lunch, this adds up to $80 per week – for a grand total of $4,160 per year. If you earn $50,000 per year, that’s a full month of your salary. Do you really want all that money to amount to a bunch of coffee and Subway sandwiches?

This isn’t to say that no one should ever buy a latte. But if I spend this kind of money every week, I don’t have anything to devote to my savings. That’s a sign that these seemingly small indulgences just aren’t affordable, at least for me.

This is why I’ve also decided not to opt for cable TV or an extensive cell phone plan. I don’t feel that I live like a pauper. After all, I have money saved that I can turn to not only in an emergency, but also to pay for things that I feel really add enjoyment to my life, rather than just distracting me for a few hours or days – and steadily subtracting dollars from my bank account.

What are your rules?

Over time, I’ve learned to save money as diligently as I pay my bills. I also try to spend what’s left as mindfully as I can. I can’t say I always succeed, that I never overspend or that I’m not often tempted to break my rules.

Nevertheless, I’m sticking to the strategy that has kept me out of debt, and helped me save enough to meet some key financial goals – and still have some fun. I know of other people who’ve done even better by employing these rules much more stringently than I do. As for me, I’ll keep saving up for my next big purchase by keeping all the little ones in check.

By Tara Struyk of MoneyTalksNews

http://www.moneytalksnews.com/the-only-2-financial-rules-you-need-live-by/

Advertisements

Celebrating Martin Luther King, Jr.

Minister Martin Luther King, Jr. preaching at an event

“Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.”

“I have decided to stick with love. Hate is too great a burden to bear.”

“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”

10 New Year’s Resolutions Entrepreneurs Should Make Every Year

Pic

As we rapidly approach the New Year, it’s the time to start thinking about those resolutions that we’ll work on in 2016. The problem with resolutions is that they often fail because we’ll never reach these unreasonable and unrealistic goals. We’re entrepreneurs, we always try and conquer the unconquerable!

However, if you set goals that are achievable if you stretch yourself, New Year’s Resolutions can help you gain perspective and achieve goals that can make you a stronger individual both personally and professionally.

For myself, New Year’s Resolutions can be a valuable assist in determining my long-term success. Here are 10 New Year’s Resolutions that every entrepreneur should consider as they welcome this upcoming year.

  1. Understand your finances.

Don’t think that understanding the basics of accounting is unnecessary just because you have an accountant or even your own accounting department. The thing is, all entrepreneurs should familiarize themselves with at least accounting basics since this will help them;

  • Make financial predictions by examining future revenues, future operating costs, and assets needed to service future demand.
  • Pay off your bad debts
  • Lower your expenses as much as possible (both personal and business)
  • Measure the progress of your business so that you know whether or not you’re hitting targets.
  • Get your personal credit up as personal credit is a factor in getting business loans.
  1. Improve your health.

How do you expect to effectively run a business if you’re exhausted and burnt out? You need to be healthy mentally, physically and emotionally. Give your immune system a boost. When you eat healthy and exercise, you are more productive and happier. That means you’ll have fewer sick days and get tasks accomplished on time. Good health habits help you avoid chronic diseases including hypertension and type 2 diabetes.

  1. Become a stronger leader.

One of the biggest challenges that entrepreneurs face is being an effective leader. This means delegating tasks, rallying the troops when morale is low, creating an environment that welcomes creativity and outside-of-the-box thinking, never losing sight of where you want your business to go.

  1. Get more social.

If for some reason you believe social media is unimportant, I’ve got some bad news for you — you’re 100 percent wrong. Social media is one of the best ways to engage and interact with customers, spread brand awareness and connect with influencers and investors in your industry. If you have a Facebook, Twitter or LinkedIn account that is dormant, spend the next year being active and optimizing these channels. It’s expected.

  1. Spend less time in the office.

Working 60 hours per week might work for someone like Elon Musk, but for most of us, that’s just isn’t feasible or desirable. Spending almost every waking minute in the office is a surefire way in getting burnt out and losing sight of why you became an entrepreneur.

Make time for yourself, friends and family. Step out of the office from time-to-time to clear your head, refresh and improve your overall health. Trust me. The place isn’t going to burn down just because you took a vacation or a long weekend.

  1. Keep up with current events.

Paying attention to the news keeps you cultured and assists in starting conversations. It provides entrepreneurs with insights into their markets so that they can make more informed decisions. Remember, we live in a small and connected world now. What’s going on around the world impacts your business.

  1. Hire smarter.

Hiring the right people is crucial for business owners. They’ll bring out the best in you and your current team. They’ll help your business grow because they’ll be your biggest brand advocates. And, low turnover keeps costs low.

Hiring isn’t easy, but attracting and retaining talent that fits in your company’s culture greatly increases your chances of success.

  1. Be more empathetic.

Empathy is “the feeling that you understand and share another person’s experiences and emotions; and the ability to share someone else’s feelings.” It is one of the most beneficial traits an entrepreneur can possess. Communicating empathetically with customers, employees, shareholders and investors helps your business succeed. You’ll understand what’s important to them and they will appreciate that you care enough about them to make that a priority.

  1. Take some classes.

Whether it’s attending a class at your local college or participating in a free online course, learning a new skill such as accounting, marketing, programming or public speaking will make you a more well-rounded and productive entrepreneur. Here are a few amazing financial books to help you learn a bit more.

  1. Remember why you became an entrepreneur.

Regardless if you’re in a rough patch or enjoying substantial growth, never forget why you became an entrepreneur in the first place. For most of us, we had an idea to make the world a better a place in our niche. Take the time next year to remember why you embarked on the entrepreneurial journey. Use that to guide you going forward.

Here is to an amazing 2016!

By John Rampton of Entreprenuer.com

http://www.entrepreneur.com/article/254378