Over the years, credit cards have become popular over time due to new rewards, new perks, and more benefits. With the future looking even brighter, people are loving credit cards more and more. One of the more popular types of credit cards today are cash back credit cards. Unlike a regular credit card, a cash back credit card will enable you to get cash back on all of your purchases.
Cash back credit cards work in many various ways. It all depends on what kind of credit card you apply for. Some credit cards will give you more cash back on particular purchases. For example, one credit card may give you more cash back on gasoline purchases or grocery purchases, etc.
The industry standard on cash back purchases usually vary anywhere from one percent to about twenty percent. When you apply for your cash back credit card, make sure that you read the terms and conditions affiliated with your card to make sure you know how your rewards work before you start using your card. You may find that some cards have a limit, meaning you can only get so much back per month. In order to avoid this, it's necessary that you check for things such as a limit.
Credit cards are given a bad name by a lot of people because the people who don't know how to use them, abuse them. These are the people who give the industry a bad name. If you're able to pay your bill off on time and in full every time, you will be the type that benefits off of a cash back credit card. The credit card companies are hoping that most people don't pay off their card on time, so that they can charge the outrageous interest rates. This way, even when they give the cash back, they still aren't losing out on the sale.
Cash back cards are ideal for people that tend to use their credit card for every thing and would just like cash back as a reward. What most people find is that a lot of reward cards offer points back or gift cards that they will never use. What they find with cash back is that they are able to either get it in a check form or as a credit statement.
The next time you're looking for an ideal credit card, make sure that you keep this type of credit card in mind. It's like getting a sale on every item you buy Just think of it, let's say you make a one hundred dollar purchase and you get five percent back, it's like you're getting a sale price all the time, it's going to be an easy five dollars back! Ask around with others about these type of cards and you'll find that there aren't that many negative side effects when it comes to using it. Remember to check the terms before applying and you should be on the right path for a perfect card!
Saturday, March 1, 2008
Tuesday, February 5, 2008
10 ways to improve the cash flow equation
Ask for all or a portion of payment up front: There are many products and services that you pay for on delivery or in advance. So why give your customers months to pay up? Asking for at least a deposit up front is a great way to jump-start your cash flow. And if you establish the policy fairly and properly, it shouldn’t alienate good customers.
Sign up for a merchant account: If you already have a merchant account, encourage customers to use this option more often. Sure, you pay a fee. But for speedier cash flow, credit cards can’t be beat. You get your money fast and customers are accustomed to paying with plastic.
Pay bills only when you have to: That doesn’t mean you should be late; only that you needn’t be early. For bills due net 30, for example, why pay at day 12? Paying right at the deadline keeps vendors happy, but will help your own cash flow crunch.
Manage receivables more closely: Create a detailed “aging” schedule of what you are owed, by whom and for how long. Call overdue accounts quickly, focusing first on the largest amounts due. Ask if there is anything you can do to expedite payment.
Create a cash-in/cash-out budget: Note specific due dates for payables as well as receivables. Although the balance between the two won’t always be predictable, the budget can give you a fairly accurate picture of where your business stands in the cash flow derby.
Revamp your invoice: A messy, unclear or inaccurate invoice is far less likely to be paid. Make sure that what you send out reflects care and attention to detail - just as you would in providing your product or service.
Offer a discount for overdue receivables: This can bring some quick cash in the door, but play this card only after you’ve called the customer to ask for full payment. Set a short deadline and make it a sweet enough deal (10-20%) for them to respond.
Accelerate your invoicing: If you invoice customers, do it quickly. Invoices can be prepared in advance, and sent out at the earliest possible moment. More and more small businesses are sending invoices as PDF files via email. This can save days of postal delays. Ask customers if they will accept invoices this way.
Cut expenses: Accelerating positive cash flow is great for your business, but slowing the negative cash flow has the same effect.
Set up a commercial credit line: Do this when times are good. Then tap the line when the need arises.
Sign up for a merchant account: If you already have a merchant account, encourage customers to use this option more often. Sure, you pay a fee. But for speedier cash flow, credit cards can’t be beat. You get your money fast and customers are accustomed to paying with plastic.
Pay bills only when you have to: That doesn’t mean you should be late; only that you needn’t be early. For bills due net 30, for example, why pay at day 12? Paying right at the deadline keeps vendors happy, but will help your own cash flow crunch.
Manage receivables more closely: Create a detailed “aging” schedule of what you are owed, by whom and for how long. Call overdue accounts quickly, focusing first on the largest amounts due. Ask if there is anything you can do to expedite payment.
Create a cash-in/cash-out budget: Note specific due dates for payables as well as receivables. Although the balance between the two won’t always be predictable, the budget can give you a fairly accurate picture of where your business stands in the cash flow derby.
Revamp your invoice: A messy, unclear or inaccurate invoice is far less likely to be paid. Make sure that what you send out reflects care and attention to detail - just as you would in providing your product or service.
Offer a discount for overdue receivables: This can bring some quick cash in the door, but play this card only after you’ve called the customer to ask for full payment. Set a short deadline and make it a sweet enough deal (10-20%) for them to respond.
Accelerate your invoicing: If you invoice customers, do it quickly. Invoices can be prepared in advance, and sent out at the earliest possible moment. More and more small businesses are sending invoices as PDF files via email. This can save days of postal delays. Ask customers if they will accept invoices this way.
Cut expenses: Accelerating positive cash flow is great for your business, but slowing the negative cash flow has the same effect.
Set up a commercial credit line: Do this when times are good. Then tap the line when the need arises.
Cashflow Management Tips
Good cashflow management is at the heart of all successful businesses.
That’s why we have put together our top tips to help you manage your cashflow effectively.
1. Monitor Your Income and Expenditure
Make sure that you monitor your income and expenditure carefully so that you can see easily who owes you money, and who you owe money to. You can do this by keeping an invoice book and records of payments you have received on an Excel spreadsheet. If you do not monitor your cashflow you have no hope of managing it.
2. Budget Carefully
Budget carefully so that you do not spend more than you can afford to and so you know when big expenses are coming up.
3. Build Relationships with Good Customers
The saying, ‘old is gold’ is particularly relevant when it comes to cashflow management. If you have a customer who always pays promptly make sure that you build a good relationship with him/her by providing first rate customer service. Remember, it’s easier and cheaper to keep and existing customer than it is to find a new one.
4. Know Your Break Even Point
Make sure that you know what your break even point is. If your income is higher than your expenditure you are in profit and the way round means you are making a loss. If your income and expenditure are balanced you have reached your break even point.
5. Pay Bills On Time- Not Before
Don’t pay your bills before they are due. Having said this, you should always pay on time as failure to do so can damage your reputation and ability to negotiate good payment terms.
That’s why we have put together our top tips to help you manage your cashflow effectively.
1. Monitor Your Income and Expenditure
Make sure that you monitor your income and expenditure carefully so that you can see easily who owes you money, and who you owe money to. You can do this by keeping an invoice book and records of payments you have received on an Excel spreadsheet. If you do not monitor your cashflow you have no hope of managing it.
2. Budget Carefully
Budget carefully so that you do not spend more than you can afford to and so you know when big expenses are coming up.
3. Build Relationships with Good Customers
The saying, ‘old is gold’ is particularly relevant when it comes to cashflow management. If you have a customer who always pays promptly make sure that you build a good relationship with him/her by providing first rate customer service. Remember, it’s easier and cheaper to keep and existing customer than it is to find a new one.
4. Know Your Break Even Point
Make sure that you know what your break even point is. If your income is higher than your expenditure you are in profit and the way round means you are making a loss. If your income and expenditure are balanced you have reached your break even point.
5. Pay Bills On Time- Not Before
Don’t pay your bills before they are due. Having said this, you should always pay on time as failure to do so can damage your reputation and ability to negotiate good payment terms.
Monday, February 4, 2008
How to Create an Automatic Savings Plan
Do you have a savings account, yet find it difficult to find money to deposit into it? This isn’t an uncommon problem and most people find it hard to save. Generally when you receive income it is either directly deposited into your checking account or you go to the bank to make a deposit. Typically these funds head straight to the checking account so they are available to pay the seemingly endless stream of bills.
Automatic Saving is Easy
Thanks to modern technology it is very easy to set up an automatic savings plan.
If you currently have direct deposit through your employer you will find the easiest way to establish this is to have part of your paycheck directly deposited into your savings account as well. It doesn’t matter if it is $10 or $500, simply having this happen automatically will ensure money is saved every time you are paid.
If you don’t have direct deposit there is still an easy option available if you do your banking at a local branch. Typically your bank can link checking and saving accounts together and establish automated transfers between accounts at a regular interval that you select. So if you cash your paycheck every other Friday you could establish an automatic transfer of a set amount of money from checking to savings to coincide with this deposit.
Automatic Saving is Easy
Thanks to modern technology it is very easy to set up an automatic savings plan.
If you currently have direct deposit through your employer you will find the easiest way to establish this is to have part of your paycheck directly deposited into your savings account as well. It doesn’t matter if it is $10 or $500, simply having this happen automatically will ensure money is saved every time you are paid.
If you don’t have direct deposit there is still an easy option available if you do your banking at a local branch. Typically your bank can link checking and saving accounts together and establish automated transfers between accounts at a regular interval that you select. So if you cash your paycheck every other Friday you could establish an automatic transfer of a set amount of money from checking to savings to coincide with this deposit.
You Don’t Get Do Overs at Retirement
You’re playing a game and all at once someone shouts “Do over” and everyone starts the game over. You get “do overs” in quite a few things in life but retirement planning isn’t one of them. Whatever decisions you make now you will have to live with once you retire. Think about your retirement and what you might want to be doing when you reach 55, 60, or older. Do you want to be scratching out a living or do you want to be enjoying life? What you do right now could dictate your future retirement.
No matter what your age, this isn’t something that should wait. Every year you put off stashing something away for retirement, you are losing money. The sooner you start, the less you will have to set aside each pay to have a nice retirement nest egg.
What can you do?
There are lots of ways you can start saving for your retirement. If your company has a retirement plan, sign up and contribute as much as you can. Put aside a percentage of your pay check each month to invest in an IRA. If you invest in a traditional IRA, you might be able to take a tax deduction for the amount. If you invest in a Roth IRA, you won’t get a tax deduction but your earnings will be tax-free. There are no tricks to retirement planning and saving, it’s something you should do on a regular basis. Even if you have a company retirement plan, it’s a good idea to have some personal saving in an IRA or similar saving vehicle.
Bottom line:
Gone are the days when a company had a guaranteed pension plan to supplement your social security benefits. Gone are the days when a retired person could actually live on the payout from a company pension and social security benefits. We are accustomed to a lifestyle that commands us to have 80 percent to 90 percent or more of our annual income set aside for our retirement. Given the longevity of today’s population, you could live for 20 or 30 years after you retire so you will need to have quite a nest egg put aside. If you are planning to retire in the lifestyle you have grown accustomed to living, you can’t do a “do over”, you have to start planning and saving right now.
No matter what your age, this isn’t something that should wait. Every year you put off stashing something away for retirement, you are losing money. The sooner you start, the less you will have to set aside each pay to have a nice retirement nest egg.
What can you do?
There are lots of ways you can start saving for your retirement. If your company has a retirement plan, sign up and contribute as much as you can. Put aside a percentage of your pay check each month to invest in an IRA. If you invest in a traditional IRA, you might be able to take a tax deduction for the amount. If you invest in a Roth IRA, you won’t get a tax deduction but your earnings will be tax-free. There are no tricks to retirement planning and saving, it’s something you should do on a regular basis. Even if you have a company retirement plan, it’s a good idea to have some personal saving in an IRA or similar saving vehicle.
Bottom line:
Gone are the days when a company had a guaranteed pension plan to supplement your social security benefits. Gone are the days when a retired person could actually live on the payout from a company pension and social security benefits. We are accustomed to a lifestyle that commands us to have 80 percent to 90 percent or more of our annual income set aside for our retirement. Given the longevity of today’s population, you could live for 20 or 30 years after you retire so you will need to have quite a nest egg put aside. If you are planning to retire in the lifestyle you have grown accustomed to living, you can’t do a “do over”, you have to start planning and saving right now.
Top Ten Financial Tips
1. Get Paid What You're Worth and Spend Less Than You Earn
It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.
No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.
2. Stick to a Budget
One of my favorite subjects: budgeting. It's not a four-letter word. How can you know where your money is going if you don't budget? How can you set spending and saving goals if you don't know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.
3. Pay Off Credit Card Debt
Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it's so easy to forget that it's real money we're dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don't, and end up paying far more for things than we would have paid if we had used cash.
4. Contribute to a Retirement Plan
If your employer has a 401(k) plan and you don't contribute to it, you're walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you're already contributing, try to increase your contribution. If your employer doesn't offer a retirement plan, consider an IRA.
5. Have a Savings Plan
You've heard it before: Pay yourself first! If you wait until you've met all your other financial obligations before seeing what's left over for saving, chances are you'll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.
6. Invest!
If you're contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.
7. Maximize Your Employment Benefits
Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.
8. Review Your Insurance Coverages
Too many people are talked into paying too much for life and disability insurance, whether it's by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it's important that you have enough insurance to protect your dependents and your income in the case of death or disability.
9. Update Your Will
70% of Americans don't have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn't too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.
10. Keep Good Records
If you don't keep good records, you're probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.
It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.
No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.
2. Stick to a Budget
One of my favorite subjects: budgeting. It's not a four-letter word. How can you know where your money is going if you don't budget? How can you set spending and saving goals if you don't know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.
3. Pay Off Credit Card Debt
Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it's so easy to forget that it's real money we're dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don't, and end up paying far more for things than we would have paid if we had used cash.
4. Contribute to a Retirement Plan
If your employer has a 401(k) plan and you don't contribute to it, you're walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you're already contributing, try to increase your contribution. If your employer doesn't offer a retirement plan, consider an IRA.
5. Have a Savings Plan
You've heard it before: Pay yourself first! If you wait until you've met all your other financial obligations before seeing what's left over for saving, chances are you'll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.
6. Invest!
If you're contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.
7. Maximize Your Employment Benefits
Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.
8. Review Your Insurance Coverages
Too many people are talked into paying too much for life and disability insurance, whether it's by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it's important that you have enough insurance to protect your dependents and your income in the case of death or disability.
9. Update Your Will
70% of Americans don't have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn't too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.
10. Keep Good Records
If you don't keep good records, you're probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.
Friday, February 1, 2008
Where is Blogging for Money ‘Passive’?
Perhaps the main area of where blogging has an element of ‘passivity’ to it in how it can earn an income is when it comes to your archives.
I’ve been blogging now for close to 4 years and in that time would have published over 20,000 posts across my own blogs. While the writing of these posts is anything but passive (more on that later) the great thing about it is that even after those posts drop off the front page of a blog they continue to have earning potential.
In fact as I look at the most popular pages of my blogs (and the ones that earn the most) - the vast majority of my income comes from my archives - posts I’ve not thought twice about for months, if not years.
In that regard - that income has a passive element to it - old posts are like an investment that continues to earn an income into the future.
Set and Forget Income Streams - One of the great advances from the last few years in generating an online income has come from the improvement of advertising networks like AdSense which allow publishers to add a snippet of code to their blogs that will automatically run ads on the blog over time.
While you can (and should) definitely work on your ad optimization - many bloggers get to a point with their ads that they are able to largely set and forget them. The ads will earn an income and the cheques (or direct deposits) will appear each month. There is no searching for or negotiation with advertisers - the system handles it all for you. This takes a load off many publishers minds and allows them to concentrate on other activities of running a good blog.
Put the idea of Archives and set and forget income streams together and there is an element of passivity to blogging for money. Add to it that money made from blogging doesn’t depend upon you being ‘open for business’ to make money (ie I make more money during the hours that I’m asleep than when I’m awake due to my time zone) and I can understand why people might describe it as a passive income
I’ve been blogging now for close to 4 years and in that time would have published over 20,000 posts across my own blogs. While the writing of these posts is anything but passive (more on that later) the great thing about it is that even after those posts drop off the front page of a blog they continue to have earning potential.
In fact as I look at the most popular pages of my blogs (and the ones that earn the most) - the vast majority of my income comes from my archives - posts I’ve not thought twice about for months, if not years.
In that regard - that income has a passive element to it - old posts are like an investment that continues to earn an income into the future.
Set and Forget Income Streams - One of the great advances from the last few years in generating an online income has come from the improvement of advertising networks like AdSense which allow publishers to add a snippet of code to their blogs that will automatically run ads on the blog over time.
While you can (and should) definitely work on your ad optimization - many bloggers get to a point with their ads that they are able to largely set and forget them. The ads will earn an income and the cheques (or direct deposits) will appear each month. There is no searching for or negotiation with advertisers - the system handles it all for you. This takes a load off many publishers minds and allows them to concentrate on other activities of running a good blog.
Put the idea of Archives and set and forget income streams together and there is an element of passivity to blogging for money. Add to it that money made from blogging doesn’t depend upon you being ‘open for business’ to make money (ie I make more money during the hours that I’m asleep than when I’m awake due to my time zone) and I can understand why people might describe it as a passive income
Property Investment
My first house was a 2 year old 3 bed semi-detached property on a fairly new estate. The house had been repossessed by the bank and the estate agent had it on the market for a few months with little interest. The house was on the market for £80k so I put an offer in for £78k It was a price that I could comfortably afford. To my disappointment the agents already had a higher offer and were going to proceed with that one. I was quite dissappointed and carried on my search for a house.
About 3 weeks later the same agents called me back to ask me if I was still interested in the property as their buyer had pulled out. Of course I was still interested, she then proceeeded to ask me if I would like to pay any more for the house? Well of course not! I asked her if I needed to pay any more to secure the house and she said NO. I think she was a little inexperienced as an agent, but a very nice lady. And bingo that was my first purchase.
Boom, Boom, Boom!!
I lived in that house for a couple of years, doing some small home improvements to the garden, bedrooms etc. By mid 2003 the UK had experienced a boom in house prices, the average UK house price then was £132,589 (Halifax data). The house that I bought was now worth about £110k estimated by comparing average sales of similar properties in the area. I was more than delighted with this as I could sell the house and make a cool £30k in profit. The profit was on paper but I’d never made so much money without doing too much before. I was hooked I wanted more, more, more!
I wanted to repeat this sucess and went about looking for books that could teach me, I was hungry for more information and quickly put together a small library of property investment books. Check my recommended book list. After reading these books I put together a plan to buy more houses. I bought my second and third property in 2004. In 2004 I bought four properties. In 2005, 2006 and 2007 I kept buying and buying going on and on.
Today average UK house prices are at £197,039 (Halifax data for December 2007) my first house is now worth about £145k again estimated by comparing to other sales in the area. That is very healthy growth in value and I think we are safe in thinking that this growth is in line with the belief that UK house prices double every seven years. I now have over 40 proprties in my portfolio which is worth nearly £4million on paper. Life is good, except for some problem tenants, but tenant problems are just part of the job of being a landlord.
Oh BTW I’m not too worried about the property prices dipping this year as I’m in it for the long term
About 3 weeks later the same agents called me back to ask me if I was still interested in the property as their buyer had pulled out. Of course I was still interested, she then proceeeded to ask me if I would like to pay any more for the house? Well of course not! I asked her if I needed to pay any more to secure the house and she said NO. I think she was a little inexperienced as an agent, but a very nice lady. And bingo that was my first purchase.
Boom, Boom, Boom!!
I lived in that house for a couple of years, doing some small home improvements to the garden, bedrooms etc. By mid 2003 the UK had experienced a boom in house prices, the average UK house price then was £132,589 (Halifax data). The house that I bought was now worth about £110k estimated by comparing average sales of similar properties in the area. I was more than delighted with this as I could sell the house and make a cool £30k in profit. The profit was on paper but I’d never made so much money without doing too much before. I was hooked I wanted more, more, more!
I wanted to repeat this sucess and went about looking for books that could teach me, I was hungry for more information and quickly put together a small library of property investment books. Check my recommended book list. After reading these books I put together a plan to buy more houses. I bought my second and third property in 2004. In 2004 I bought four properties. In 2005, 2006 and 2007 I kept buying and buying going on and on.
Today average UK house prices are at £197,039 (Halifax data for December 2007) my first house is now worth about £145k again estimated by comparing to other sales in the area. That is very healthy growth in value and I think we are safe in thinking that this growth is in line with the belief that UK house prices double every seven years. I now have over 40 proprties in my portfolio which is worth nearly £4million on paper. Life is good, except for some problem tenants, but tenant problems are just part of the job of being a landlord.
Oh BTW I’m not too worried about the property prices dipping this year as I’m in it for the long term
Is Blogging Income Passive Income?
Blogging and Passive Income
There is definitely a passive component to blogging income, but only in direct correlation to how timeless the content is. For example: which blogger is creating more passive income?
a) One who writes about the weather, what he had to eat, the new features of his website, what he read that day, what his new year’s resolutions are, what he plans on doing, and how he is feeling at the moment?… or
b) one who writes about a lasting principle that she has learned over many years, philosophies that took her years to develop, and what she learned from her experience in order to help other people save time and money?
The second blogger is writing timeless material while the first is writing material that is only relevant for the moment. The second blogger stands a much greater chance of creating passive income from blogging.
Measuring the Passive Component
No income source is completely passive. Passive income sources can be distributed on a continuum between completely passive and completely active, but it’s all relative. Most sources have a passive component and an active component.
It would be somewhat tricky to measure what percentage of a blogger’s income is passive and what percentage is active without asking that blogger to stop blogging for a year to see what percentage of his income persists.
Active blogging income is mainly composed of that traffic that is generated by eager fans who check in every day to get the latest post. Unfortunately, regular visitors aren’t the best source of income because they come for the content, not necessarily the advertisements. The click-through rates for regular visitors tend to be lower than for first-time viewers.
Passive blogging income has a lot to do with new visitors. Does your content have the ability to continually generate new viewers who are more likely to click on ads and affiliate links?
Complicating the formula is the fact that the amount of regular visitors contributes to the rate of new visitors. Regular visitors may spread the word about your site and attract new visitors.
Not a Traditional Blog
Genius Types has never really fit in with the traditional blogging mold. I’ve had many readers complain that I don’t post frequently enough, even to the point of questioning if I was still alive after a month-long break for the holidays. I’ve received harsh criticism for not participating in time-consuming blog memes and lists, which other blogs use as a source of harvesting cheap links (the currency of the web). Plus, I’m not very good with reciprocating links and comments.
The reality is that I’m more concerned with the long-term viability of Genius Types than I am with day-to-day traffic and social niceties. I see this site as a way to document the wisdom that I accumulate throughout life. Sometimes it comes to me frequently, and sometimes I go long periods of time without anything worth writing about.
I’ve tried forcing myself to post and it just didn’t feel right. Search through my archives and you’ll find a few trivial posts; but for the most part, I try not to write unless I have something to say.
There is definitely a passive component to blogging income, but only in direct correlation to how timeless the content is. For example: which blogger is creating more passive income?
a) One who writes about the weather, what he had to eat, the new features of his website, what he read that day, what his new year’s resolutions are, what he plans on doing, and how he is feeling at the moment?… or
b) one who writes about a lasting principle that she has learned over many years, philosophies that took her years to develop, and what she learned from her experience in order to help other people save time and money?
The second blogger is writing timeless material while the first is writing material that is only relevant for the moment. The second blogger stands a much greater chance of creating passive income from blogging.
Measuring the Passive Component
No income source is completely passive. Passive income sources can be distributed on a continuum between completely passive and completely active, but it’s all relative. Most sources have a passive component and an active component.
It would be somewhat tricky to measure what percentage of a blogger’s income is passive and what percentage is active without asking that blogger to stop blogging for a year to see what percentage of his income persists.
Active blogging income is mainly composed of that traffic that is generated by eager fans who check in every day to get the latest post. Unfortunately, regular visitors aren’t the best source of income because they come for the content, not necessarily the advertisements. The click-through rates for regular visitors tend to be lower than for first-time viewers.
Passive blogging income has a lot to do with new visitors. Does your content have the ability to continually generate new viewers who are more likely to click on ads and affiliate links?
Complicating the formula is the fact that the amount of regular visitors contributes to the rate of new visitors. Regular visitors may spread the word about your site and attract new visitors.
Not a Traditional Blog
Genius Types has never really fit in with the traditional blogging mold. I’ve had many readers complain that I don’t post frequently enough, even to the point of questioning if I was still alive after a month-long break for the holidays. I’ve received harsh criticism for not participating in time-consuming blog memes and lists, which other blogs use as a source of harvesting cheap links (the currency of the web). Plus, I’m not very good with reciprocating links and comments.
The reality is that I’m more concerned with the long-term viability of Genius Types than I am with day-to-day traffic and social niceties. I see this site as a way to document the wisdom that I accumulate throughout life. Sometimes it comes to me frequently, and sometimes I go long periods of time without anything worth writing about.
I’ve tried forcing myself to post and it just didn’t feel right. Search through my archives and you’ll find a few trivial posts; but for the most part, I try not to write unless I have something to say.
Passive Income
Passive income, on the other hand, is income that does not require your direct involvement.
Some kinds of passive income you may be familiar with include owning rental property, royalties on an invention or creative work, and network marketing. If you want to earn more, work less, and have a decent retirement, you're going to have to start creating income streams that do not require your direct involvement. Whether you're just starting your business, or you've been running it a while, the sooner you start thinking about how you are going to shift your business model to create more passive income, the sooner you can achieve personal and financial freedom.
Let's look at two basic types of passive income, and a third type of income that, while technically not passive, is a key strategy for earning more and working less.
Residual Income
Residual income is revenue that occurs over time from work done one time. Some examples include:
· An insurance agent who gets commission every year when a customer renews his policy
· A network marketing or direct sales rep's income from her direct customers when they reorder product every month
· An aerobics instructor who produces a video and sells it at the gyms where she teaches
· A marketing consultant who creates a workbook and sells it in e-book format on the Internet
· A photographer who makes his photos available through a stock photography clearinghouse and gets paid a royalty whenever someone buys one of his images
· A restaurant or retail owner who has grown to the point of hiring a trustworthy manager
As you can see, there are many different ways to generate residual income across a wide variety of businesses. It may be recurring income from the same customers, or the sales of a product to new customers. It may require no personal involvement whatsoever, such as an e-book sold on a web site, or it may require some personal interaction, such as the insurance agent calling the customer to remind them about their renewal and ask them if they want to change any of their coverage. Often, it's something that you can delegate to an assistant.
Note that this is different from merely recurring income. Recurring income may still require your involvement to earn the income, e.g., a coach or consultant on a monthly retainer, or a caterer who delivers lunch every Monday to the local school board. While this "active recurring income" offers welcome stability, it also tends to tie you down, and you still have limits on your earning capacity based on your own personal production capacity.
Leveraged Income
Leveraged income leverages the work of other people to create income for you. Some examples of leveraged income include:
· An e-book author selling her e-book through affiliates who promote the product
· A network marketer who builds a downline and receives commissions on the sales made by people in his downline
· A general contractor who makes a profit margin on the work done by sub-contractors
· Franchising your business model to other entrepreneurs (the ultimate leveraged income)
Again, there are many different models in many different businesses. The key is that you are making money off of other people's labor, rather than primarily your own. Note that leveraged income may or may not also be residual income. When you combine them, that's even better.
Active Leveraged Income
This is a term I use to describe income that requires your direct participation, but that you can make more money by having more people involved. This generally involves a one-time event, such as:
· A seminar or class
· A conference or convention
· Concerts and dance recitals
· Raves and other parties
Although these require your direct participation, your earning potential is much higher than if someone were just paying you a direct hourly rate. Fill a room with 1,000 people paying $50 each and you can cover your facility cost, promotional cost, and staffing fees and still have a nice chunk of change left over.
Applying It
Now is the time to think about how to apply this in your business. Can you create a product that people will buy over and over again? Can you engage others to sell your product? How could you make money off the work of others?
The sooner you answer these questions, the sooner you'll have financial and personal freedom.
Some kinds of passive income you may be familiar with include owning rental property, royalties on an invention or creative work, and network marketing. If you want to earn more, work less, and have a decent retirement, you're going to have to start creating income streams that do not require your direct involvement. Whether you're just starting your business, or you've been running it a while, the sooner you start thinking about how you are going to shift your business model to create more passive income, the sooner you can achieve personal and financial freedom.
Let's look at two basic types of passive income, and a third type of income that, while technically not passive, is a key strategy for earning more and working less.
Residual Income
Residual income is revenue that occurs over time from work done one time. Some examples include:
· An insurance agent who gets commission every year when a customer renews his policy
· A network marketing or direct sales rep's income from her direct customers when they reorder product every month
· An aerobics instructor who produces a video and sells it at the gyms where she teaches
· A marketing consultant who creates a workbook and sells it in e-book format on the Internet
· A photographer who makes his photos available through a stock photography clearinghouse and gets paid a royalty whenever someone buys one of his images
· A restaurant or retail owner who has grown to the point of hiring a trustworthy manager
As you can see, there are many different ways to generate residual income across a wide variety of businesses. It may be recurring income from the same customers, or the sales of a product to new customers. It may require no personal involvement whatsoever, such as an e-book sold on a web site, or it may require some personal interaction, such as the insurance agent calling the customer to remind them about their renewal and ask them if they want to change any of their coverage. Often, it's something that you can delegate to an assistant.
Note that this is different from merely recurring income. Recurring income may still require your involvement to earn the income, e.g., a coach or consultant on a monthly retainer, or a caterer who delivers lunch every Monday to the local school board. While this "active recurring income" offers welcome stability, it also tends to tie you down, and you still have limits on your earning capacity based on your own personal production capacity.
Leveraged Income
Leveraged income leverages the work of other people to create income for you. Some examples of leveraged income include:
· An e-book author selling her e-book through affiliates who promote the product
· A network marketer who builds a downline and receives commissions on the sales made by people in his downline
· A general contractor who makes a profit margin on the work done by sub-contractors
· Franchising your business model to other entrepreneurs (the ultimate leveraged income)
Again, there are many different models in many different businesses. The key is that you are making money off of other people's labor, rather than primarily your own. Note that leveraged income may or may not also be residual income. When you combine them, that's even better.
Active Leveraged Income
This is a term I use to describe income that requires your direct participation, but that you can make more money by having more people involved. This generally involves a one-time event, such as:
· A seminar or class
· A conference or convention
· Concerts and dance recitals
· Raves and other parties
Although these require your direct participation, your earning potential is much higher than if someone were just paying you a direct hourly rate. Fill a room with 1,000 people paying $50 each and you can cover your facility cost, promotional cost, and staffing fees and still have a nice chunk of change left over.
Applying It
Now is the time to think about how to apply this in your business. Can you create a product that people will buy over and over again? Can you engage others to sell your product? How could you make money off the work of others?
The sooner you answer these questions, the sooner you'll have financial and personal freedom.
Thursday, January 31, 2008
5 Steps to a Cheap Personal Loan
personal loan can be a vital part of a well executed financial plan. You can use one to consolidate other debts, or to pay for something that won't fit on your credit card - or that will be cheaper with it than at exorbitant credit card rates.
Of course, it makes sense to get the cheapest personal loan that you can find. Here are five steps to finding and getting a cheap personal loan for your needs.
1. Be strategic.
Maximise your chances of being accepted for a personal loan without bunging up your credit with excess credit applications. Before you start applying for loans, get hold of your credit report or your credit score. Knowing where you stand on the credit ladder will help you single out those personal loan products that are aimed at your segment of the loan market.
2. Shop around both online and off to find the best loans.
Online, you can take advantage of price comparison sites to check the details on many different personal loans at once. Use the comparison sites as a starting point to help you sort things out - then follow links back to the lending company's own web site to do further research. Offline, check with your local high street lenders to find out what terms and rates are being offered.
3. Check with a trusted lender.
If you already have done business with a lender, or are doing business with a bank or building society, check in with them to see what they can offer you. In many cases, people with dodgy credit will get better consideration from finance companies who know them already. This is step 3 and not step 1 for a reason, though. When you've checked other avenues first, you'll have a gauge to measure the terms you're offered to be sure that the loan is worth taking.
4. Take advantage of the lender's greed.
There are ways to make your application more attractive to a lender without falsifying any information. For instance, lenders make a great deal of money on payment protection insurance (PPI), so they tend to look more favorably at loans when the borrower requests it. It's far more advantageous for you, on the other hand, to provide your own standalone PPI. Take advantage of the situation by requesting a loan quote with PPI included. When you receive the paperwork to sign, return it unsigned with a request for a quote without the PPI included. Since they've already approved your loan, it will be difficult for them to justify denying your amended application. Do be sure to act quickly, however, or it could cost you.
5. Don't judge by APR.
The APR - annual percentage rate - is the figure that you're most likely to see banded around as a loan comparison tool. The truth is that it's easy for banks to manipulate the APR and make the loan seem less expensive than it really is. Instead, use the total amount repayable as a gauge if your biggest concern is how much the loan will cost you overall, and the monthly payment if you need to be wary of your monthly budget.
Of course, it makes sense to get the cheapest personal loan that you can find. Here are five steps to finding and getting a cheap personal loan for your needs.
1. Be strategic.
Maximise your chances of being accepted for a personal loan without bunging up your credit with excess credit applications. Before you start applying for loans, get hold of your credit report or your credit score. Knowing where you stand on the credit ladder will help you single out those personal loan products that are aimed at your segment of the loan market.
2. Shop around both online and off to find the best loans.
Online, you can take advantage of price comparison sites to check the details on many different personal loans at once. Use the comparison sites as a starting point to help you sort things out - then follow links back to the lending company's own web site to do further research. Offline, check with your local high street lenders to find out what terms and rates are being offered.
3. Check with a trusted lender.
If you already have done business with a lender, or are doing business with a bank or building society, check in with them to see what they can offer you. In many cases, people with dodgy credit will get better consideration from finance companies who know them already. This is step 3 and not step 1 for a reason, though. When you've checked other avenues first, you'll have a gauge to measure the terms you're offered to be sure that the loan is worth taking.
4. Take advantage of the lender's greed.
There are ways to make your application more attractive to a lender without falsifying any information. For instance, lenders make a great deal of money on payment protection insurance (PPI), so they tend to look more favorably at loans when the borrower requests it. It's far more advantageous for you, on the other hand, to provide your own standalone PPI. Take advantage of the situation by requesting a loan quote with PPI included. When you receive the paperwork to sign, return it unsigned with a request for a quote without the PPI included. Since they've already approved your loan, it will be difficult for them to justify denying your amended application. Do be sure to act quickly, however, or it could cost you.
5. Don't judge by APR.
The APR - annual percentage rate - is the figure that you're most likely to see banded around as a loan comparison tool. The truth is that it's easy for banks to manipulate the APR and make the loan seem less expensive than it really is. Instead, use the total amount repayable as a gauge if your biggest concern is how much the loan will cost you overall, and the monthly payment if you need to be wary of your monthly budget.
Financial Management Resources on Better Management
Financial Management leverages information from numerous sources including accounting, regulatory, and marketing operations to enable managers to make better business decisions in strategic planning, budgeting and financial reporting. Managers and executives alike must understand how to leverage their business information into actionable financial intelligence their organization needs to stay competitive in today’s global market. Corporate governance and financial transparency requirements impose another level of fiduciary responsibility on executive management.Topics of special interest include corporate planning, mergers and acquisitions, international accounting standards, financial forecasting, financial modeling, Sarbanes-Oxley and regulatory compliance and reporting.BetterManagement provides an extensive library of Financial Management topics and resources to help you develop effective strategies and best practices for financial management. Live and archived webcasts, business management articles and editorials, business books, and many other industry-focused resources provide guidance and advice from Financial Management experts, as well as real-life examples from companies with effective and successful Financial Management practices and policies.
Bankruptcy - How To Recover And What To Expect
Bankruptcy is not the end of life. Yes, it does knock down your credit considerably. And, people don't seem very willing to lend you money after bankruptcy. However, bankruptcy also gives you a fresh start. You have a new opportunity to rebuild your life and your finances. Recovering from bankruptcy is not easy but it is possible if are willing to work toward it.
The first thing to do is to evaluate your situation objectively. If bankruptcy was the result of a temporary setback, such as a medical emergency, you do not need any drastic measures to recover. Just take steps to beef up your savings and investments so that if another emergency strikes, you are well-prepared.
In contrast, if the root cause of your bankruptcy was excessive spending, you would need to take tougher steps to recover from this financial blow. You might need to make drastic changes to your lifestyle-spend much less and save much more. If you used to dine out a lot, you may need to switch to home-cooked meals. If your wardrobe was earlier full of designer clothes, you may now need to settle for off-the-rack dresses. These steps may hurt initially but will ensure that your recovery to financial independence is speedier.
In addition to cutting expenditures, it is important to start saving and investing your money wisely. You can start by saving small amounts and then move on to bigger investments as your financial position gets better. Go for a mix of long-term investment options, such as retirement plans, and short-term investments that you can liquefy easily. While the long-term investments take care of your future needs, the short-term ones act as a safety net for you in case of any financial emergency.
About a year after you filed for bankruptcy, you should start thinking about rebuilding your credit score. The easiest way to do so is to apply for a credit card. You may want to do so sooner but it is wiser to wait out a year. This way, you can avoid unscrupulous lenders who charge astronomically high rates of interest because of the recent bankruptcy record.
Once you decide to go for a credit card, make sure you explore all options before settling on any credit card. These days, it is not difficult to get a credit card even if you have a bankruptcy record. If possible, opt for a secured credit card as you will get it a lower interest rate than an unsecured one. At www.bankrate.com, you can find a list of creditors who offer secured and unsecured credit cards after bankruptcy. Some examples of unsecured credit cards for those recovering from bankruptcy are Continental Finance Gold and Merchandise.
Once you get your credit card, use it cautiously. Learn from your past credit mistakes and make sure that you do not again fall into an overspending trap that led you to bankruptcy. In addition, make sure that you pay off your credit balance in full each month. After you have done this for some time, you can negotiate with the lender for a lower interest rate.
The above guidelines will help you recover from bankruptcy, slowly but steadily. In the meantime, keep your dreams alive and don't lose heart.
The first thing to do is to evaluate your situation objectively. If bankruptcy was the result of a temporary setback, such as a medical emergency, you do not need any drastic measures to recover. Just take steps to beef up your savings and investments so that if another emergency strikes, you are well-prepared.
In contrast, if the root cause of your bankruptcy was excessive spending, you would need to take tougher steps to recover from this financial blow. You might need to make drastic changes to your lifestyle-spend much less and save much more. If you used to dine out a lot, you may need to switch to home-cooked meals. If your wardrobe was earlier full of designer clothes, you may now need to settle for off-the-rack dresses. These steps may hurt initially but will ensure that your recovery to financial independence is speedier.
In addition to cutting expenditures, it is important to start saving and investing your money wisely. You can start by saving small amounts and then move on to bigger investments as your financial position gets better. Go for a mix of long-term investment options, such as retirement plans, and short-term investments that you can liquefy easily. While the long-term investments take care of your future needs, the short-term ones act as a safety net for you in case of any financial emergency.
About a year after you filed for bankruptcy, you should start thinking about rebuilding your credit score. The easiest way to do so is to apply for a credit card. You may want to do so sooner but it is wiser to wait out a year. This way, you can avoid unscrupulous lenders who charge astronomically high rates of interest because of the recent bankruptcy record.
Once you decide to go for a credit card, make sure you explore all options before settling on any credit card. These days, it is not difficult to get a credit card even if you have a bankruptcy record. If possible, opt for a secured credit card as you will get it a lower interest rate than an unsecured one. At www.bankrate.com, you can find a list of creditors who offer secured and unsecured credit cards after bankruptcy. Some examples of unsecured credit cards for those recovering from bankruptcy are Continental Finance Gold and Merchandise.
Once you get your credit card, use it cautiously. Learn from your past credit mistakes and make sure that you do not again fall into an overspending trap that led you to bankruptcy. In addition, make sure that you pay off your credit balance in full each month. After you have done this for some time, you can negotiate with the lender for a lower interest rate.
The above guidelines will help you recover from bankruptcy, slowly but steadily. In the meantime, keep your dreams alive and don't lose heart.
Transferring a Credit Card Balance
Are you staring at that attractive advertisement for switching credit card companies by transferring your balance from one card to another? While many of these offers are truly great deals, balance transfers and card-switching is not something to jump into, eager as you may be. You need to do your homework first: Do enough research and investigating in order to determine whether it in fact is worth it or a good idea to make the transfer.
First, find out if it is in fact worth it. Generally speaking, these attractive advertisements and super credit card deals advertise very low introductory rates if you transfer your current balance from an existing credit card onto this new one. You can stumble upon these offers anywhere—online, in the mail, on a flyer or via a telephone call from credit card company salespersons—and you need to determine how great these deals really are, or if you’ll just end up paying much more in fees and interest in the long run.
Read the fine print. Read everything. Read it through several times so that you make sure you understand what it is saying. It may appear to be a bunch of financial jargon that you might not think is very important, but the truth is, this information is valuable and critical to your decision in whether or not you make the big switch. Call the credit card company and ask any questions you might have. If the deal is solid and they want to make a sale, generally they should be able to help you out in any way.
What do you need to find out about the deal? Here is an example. Let’s say that the advertised introductory rate is 6% (a low rate) on credit card B if you transfer your balance from credit card A, where you currently rack up an APR of 18% (a standard rate). You come across another offer, showcasing credit card C with an introductory rate of 9%. At first glance you may think, “Well, let’s go with credit card B—it’s the obvious choice here.” However, after reading the fine print, you discover credit card B’s special rate only last six months, and afterward the APR is 20%, whereas credit card C’s higher rate lasts for a year and the interest rate after that is 18%, the same as yours on credit card A.
In other words, you have to factor in a lot of variables when making the decision to switch your balance from one credit card to another. Besides comparing the introductory rates being offered, the length of the offer and what the regular interest rate is, you’ll also need to take into account balance transfer fees, annual fees, late fees, and other miscellaneous fees, as well as whether the teaser rate applies to balance transfers only or also purchases, among other considerations.
However, many credit cards with these introductory rates offer great deals for people interested in switching credit cards and transferring their balance over and can be more than worth it. The important thing is to do your research, read the fine print and ask questions to determine which credit card and deal is the right one for you.
First, find out if it is in fact worth it. Generally speaking, these attractive advertisements and super credit card deals advertise very low introductory rates if you transfer your current balance from an existing credit card onto this new one. You can stumble upon these offers anywhere—online, in the mail, on a flyer or via a telephone call from credit card company salespersons—and you need to determine how great these deals really are, or if you’ll just end up paying much more in fees and interest in the long run.
Read the fine print. Read everything. Read it through several times so that you make sure you understand what it is saying. It may appear to be a bunch of financial jargon that you might not think is very important, but the truth is, this information is valuable and critical to your decision in whether or not you make the big switch. Call the credit card company and ask any questions you might have. If the deal is solid and they want to make a sale, generally they should be able to help you out in any way.
What do you need to find out about the deal? Here is an example. Let’s say that the advertised introductory rate is 6% (a low rate) on credit card B if you transfer your balance from credit card A, where you currently rack up an APR of 18% (a standard rate). You come across another offer, showcasing credit card C with an introductory rate of 9%. At first glance you may think, “Well, let’s go with credit card B—it’s the obvious choice here.” However, after reading the fine print, you discover credit card B’s special rate only last six months, and afterward the APR is 20%, whereas credit card C’s higher rate lasts for a year and the interest rate after that is 18%, the same as yours on credit card A.
In other words, you have to factor in a lot of variables when making the decision to switch your balance from one credit card to another. Besides comparing the introductory rates being offered, the length of the offer and what the regular interest rate is, you’ll also need to take into account balance transfer fees, annual fees, late fees, and other miscellaneous fees, as well as whether the teaser rate applies to balance transfers only or also purchases, among other considerations.
However, many credit cards with these introductory rates offer great deals for people interested in switching credit cards and transferring their balance over and can be more than worth it. The important thing is to do your research, read the fine print and ask questions to determine which credit card and deal is the right one for you.
Wednesday, January 30, 2008
Cash Flow Loans
Any business activity requires a sustainable source of fund. Often your business may fail to generate appropriate funds even when it is making profit. This problem generally arises when the major income of the business is tied with receivables that take much time in liquidation. Taking the account of urgency of the requirement of your business, you are helped with cash flow loans. Since, this financial assistance is granted after assessing the cash flow of a business, this is commonly known as cash flow loans. Cash flow of company is that amount of cash that is left with a company after taxes, depreciation, or any other obligation. The cash flow of a company determines the repayment capability. Thus, the more the cash flow of the company, the more amount of loan it will get.To obtain cash flow loans a company has to show a valid statement of total receivables and total payables. The surplus from receivables and payables shows a company’s financial strength, that’s why it is considered as the essential requirement while providing cash flow loan. Cash flow loans are available in two types i.e. secured and unsecured. The secured type requires collateral or security that is generally the business assets. This type of the loan provides you a somewhat lower rate of interest and longer repayment duration. Whereas, with the unsecured form, no collateral is required that keeps a somewhat higher interest rate and shorter repayment duration. Your good credit record can definitely yield a better deal for you. However, bad credit holders too have chance to avail this loan. Borrowers, having CCJs, arrears, defaults, IVAs, bankruptcy can even avail this loan but with somewhat higher rate of interest.To avail this loan you can contact both offline and online lenders. The online lenders accept online application that voids much hassle documentation and saves a lot of your time. A horde of these lenders are available in the market with differed rate of interest that can be compared for a better option.For all that, the cash flow loans help you when your business is on the verge of great loss. It is available to you only by assessing the cash flow of your business. So, a good business performance can help you availing the appropriate fund for your business. It helps you grabbing a potential opportunity that you may loose because of lacking on appropriate fund.
Financial freedom no matter how much money you make!
You do not need to be rich to achieve financial freedom. Financial freedom is simply living debt free and organizing your money so that when the bills are due, you have the money set aside to pay them.
Most people believe that a budget is for people who don't have much money, and it also tends to make people feel restricted in their spending. Nothing could be further from the truth!A budget is simply a spending plan. Most people like to spend money, so let's use the word "spending plan" and leave the word "budget" behind us.A properly used spending plan will provide a person or family (with even a modest income) a true sense of financial freedom.
What I am talking about is this sense of freedom that you get when the mortgage comes due and you have the money already set aside; when the kids have to go back to school shopping and the money is there waiting; when you go grocery shopping each week and you know exactly how much money you can afford to spend because the money is already set aside!When we took one of our cars in for inspection, we were told that it needed new tires. No problem! I had an automobile maintenance fund set aside and we had just enough money to cover not only the inspection, but a nice new set of high-quality tires, all because we implemented a spending plan with the help of some very powerful, yet easy to use software!
An effective spending plan can be created by simply looking at the money you have spent over the past year or so and getting an estimate as to how much money you spend in each area of your life. Then looking at your income and getting an idea of how much money you would need to put aside for each category for the coming year. If you have not been keeping track of where your money goes, simply start now by keeping a general record of where you spend your money.
Right about now you are probably thinking, "Is this guy nuts? Nobody uses cash anymore, and nobody keeps cash in envelopes!" This is where software comes into play. There are software programs available that will enable you to have "virtual" envelopes to keep track of your money, which is safely tucked away in your checking and savings accounts. I am not talking about a simple Excel spreadsheet or anything of that sort, I'm talking about extremely powerful software (much better than MS Money or Quicken) that can generate reports, track all of your expenses,pay your bills online in seconds, make tax time a breeze, automatically place the proper amount of money in each envelope, and get you on the highway to financial freedom.It is probably best start out with a relatively small number of categories. As you become familiar with your spending plan you can expand the number of categories. For example you may want your housing category to include all the monthly bills associated with your home, or you may want to have a separate category for mortgage payments, utilities, homeowners insurance, taxes, etc. You may want to add more categories such as taxes, birthday parties, medical bills, hobbies, allowances, unexpected expenses, etc..It may take a little bit of time to set up your spending plan, but once it is set up, it takes very little effort to keep it in place. You won't do it perfectly the first time, you will have to make adjustments as time goes on because unless you are extremely lucky, you'll find out you had too much money set aside in some categories and too little in others. You can always change your spending plan as your situation changes, your income changes, or your spending categories change.This may sound like a lot of work, but the concept is simple, and the software will guide you through step by step. Very soon, you will have total control of your money, and will know what true financial freedom feels like!
Most people believe that a budget is for people who don't have much money, and it also tends to make people feel restricted in their spending. Nothing could be further from the truth!A budget is simply a spending plan. Most people like to spend money, so let's use the word "spending plan" and leave the word "budget" behind us.A properly used spending plan will provide a person or family (with even a modest income) a true sense of financial freedom.
What I am talking about is this sense of freedom that you get when the mortgage comes due and you have the money already set aside; when the kids have to go back to school shopping and the money is there waiting; when you go grocery shopping each week and you know exactly how much money you can afford to spend because the money is already set aside!When we took one of our cars in for inspection, we were told that it needed new tires. No problem! I had an automobile maintenance fund set aside and we had just enough money to cover not only the inspection, but a nice new set of high-quality tires, all because we implemented a spending plan with the help of some very powerful, yet easy to use software!
An effective spending plan can be created by simply looking at the money you have spent over the past year or so and getting an estimate as to how much money you spend in each area of your life. Then looking at your income and getting an idea of how much money you would need to put aside for each category for the coming year. If you have not been keeping track of where your money goes, simply start now by keeping a general record of where you spend your money.
Right about now you are probably thinking, "Is this guy nuts? Nobody uses cash anymore, and nobody keeps cash in envelopes!" This is where software comes into play. There are software programs available that will enable you to have "virtual" envelopes to keep track of your money, which is safely tucked away in your checking and savings accounts. I am not talking about a simple Excel spreadsheet or anything of that sort, I'm talking about extremely powerful software (much better than MS Money or Quicken) that can generate reports, track all of your expenses,pay your bills online in seconds, make tax time a breeze, automatically place the proper amount of money in each envelope, and get you on the highway to financial freedom.It is probably best start out with a relatively small number of categories. As you become familiar with your spending plan you can expand the number of categories. For example you may want your housing category to include all the monthly bills associated with your home, or you may want to have a separate category for mortgage payments, utilities, homeowners insurance, taxes, etc. You may want to add more categories such as taxes, birthday parties, medical bills, hobbies, allowances, unexpected expenses, etc..It may take a little bit of time to set up your spending plan, but once it is set up, it takes very little effort to keep it in place. You won't do it perfectly the first time, you will have to make adjustments as time goes on because unless you are extremely lucky, you'll find out you had too much money set aside in some categories and too little in others. You can always change your spending plan as your situation changes, your income changes, or your spending categories change.This may sound like a lot of work, but the concept is simple, and the software will guide you through step by step. Very soon, you will have total control of your money, and will know what true financial freedom feels like!
Monday, January 28, 2008
Cash Flow Statement
The Cash Flow Statement shows how the company is paying for its operations and future growth, by detailing the "flow" of cash between the company and the outside world; positive numbers represent cash flowing in, negative numbers represent cash flowing out.
Notes
The three sections of the cash flow statement - Operations, Financing, and Investing - correspond to the three solid green arrows back in the diagram.
The first two sections show the two ways the company can get cash. Operations means "making" money by selling goods and services; Financing means "raising" money by issuing stocks and bonds. The third section shows how the company is spending cash, Investing in its future growth. If you're interested in the stock of this company, you'd like to see that they can pay for the "investing" figure out of the "operations" figure, without having to turn to "financing". (Financing causes problems: issuing new stocks will lower the value of each individual share; issuing bonds commits them to making interest payments which will punish future earnings).
This company has a "healthy" cash flow: cash provided by operations is more than sufficient to cover cash used for investing. It's actually even better than that, because the "financing" number is negative: they're buying back stock shares in order to keep the value high.
By the way, note that the Operations section looks strange because the signs are all backwards; for example, depreciation is an expense, but you're adding it. What you're doing here is starting with "net" earnings from the income statement and then adjusting it by removing all components that don't entail a flow of actual money. Depreciation, which is a "paper" expense that's hidden within several of the expense categories on the income statement, has already been taken out of earnings; by adding it back in, you're removing its effect.
Notes
The three sections of the cash flow statement - Operations, Financing, and Investing - correspond to the three solid green arrows back in the diagram.
The first two sections show the two ways the company can get cash. Operations means "making" money by selling goods and services; Financing means "raising" money by issuing stocks and bonds. The third section shows how the company is spending cash, Investing in its future growth. If you're interested in the stock of this company, you'd like to see that they can pay for the "investing" figure out of the "operations" figure, without having to turn to "financing". (Financing causes problems: issuing new stocks will lower the value of each individual share; issuing bonds commits them to making interest payments which will punish future earnings).
This company has a "healthy" cash flow: cash provided by operations is more than sufficient to cover cash used for investing. It's actually even better than that, because the "financing" number is negative: they're buying back stock shares in order to keep the value high.
By the way, note that the Operations section looks strange because the signs are all backwards; for example, depreciation is an expense, but you're adding it. What you're doing here is starting with "net" earnings from the income statement and then adjusting it by removing all components that don't entail a flow of actual money. Depreciation, which is a "paper" expense that's hidden within several of the expense categories on the income statement, has already been taken out of earnings; by adding it back in, you're removing its effect.
The Essentials Of Cash Flow
If a company reports earnings of $1 billion, does this mean it has this amount of cash in the bank? Not necessarily. Financial statements are based on accrual accounting, which takes into account non-cash items. It does this in an effort to best reflect the financial health of a company. However, accrual accounting may create accounting noise, which sometimes needs to be tuned out so that it's clear how much actual cash a company is generating. The statement of cash flow provides this information, and here we look at what cash flow is and how to read the cash flow statement.
What Is Cash Flow?
Business is all about trade, the exchange of value between two or more parties, and cash is the asset needed for participation in the economic system. What Is Money?. For this reason - while some industries are more cash intensive than others - no business can survive in the long run without generating positive cash flow per share for its shareholders. To have a positive cash flow, the company's long-term cash inflows need to exceed its long-term cash outflows.
What Is Cash Flow?
Business is all about trade, the exchange of value between two or more parties, and cash is the asset needed for participation in the economic system. What Is Money?. For this reason - while some industries are more cash intensive than others - no business can survive in the long run without generating positive cash flow per share for its shareholders. To have a positive cash flow, the company's long-term cash inflows need to exceed its long-term cash outflows.
Is Accounts Receivable Draining Your
Making a sale is very important. But collecting the money for the sale is even more important. It does not do any good to sell a product if you don’t collect your money.
In fact, you can ruin a business real fast if you neglect the all-important step of making sure you are collecting the money for what you sell.
I had the President of a national association of small business owners tell me a story about one of their members that really highlights this point.
One of their members started a service business catering to large health care institutions.
She would provide a trained staff of people to perform services that the institution would otherwise have to hire employees to perform. She provided a turnkey service that would help improve the service levels while at the same time save the institution money.
After she got her first contract, she began the process of recruiting, interviewing, hiring, creating an extensive training program, training the new hires, etc.
This took about three months to complete.
After her team was in place and trained, they began providing the service. She sent her invoice to the institution after the first month of services had been provided. After a couple months went by she got a really big surprise.
It turns out this institution held invoices from suppliers for at least 120 days before they paid them. In fact, it was somewhat of an industry practice. She was now almost seven months into her new business and she had not even collected the first dollar of revenue.
She had been spending money all this time not realizing there would be this huge delay in actually collecting her money.
Unfortunately, she ran out of cash.
When she started the business she thought she would be able to get everything going faster and she thought she would be able to do it a little cheaper.
But the really big surprise came when she realized the hard way that creating a sale and collecting the cash doesn’t always happen at the same time.
A Sale is Not a Sale Until the Cash Is Collected
I worked with another business owner who had recently sold about $18,000 of merchandise to two different commercial accounts. He had basically hit a home run by winning these two new commercial accounts.
He was feeling really good about the sales and about finally breaking into this untapped market.
And his income statement looked really good in the month he made the sales. In fact, it showed he had the best month in the store’s history.
What he had not realized until now was that these sales were actually hurting his cash flow.
Not only had he never collected the $18,000, he had already paid for the inventory he sold them.
To make matters worse, this uncollected sale was happening at a time of the year when he could least afford to be without the cash. The sale looked good in the income statement, but not so good in his cash flow.
The Key is to Manage Accounts Receivable Closely
He learned a very important lesson about selling to commercial accounts.
He learned that selling something and collecting the money are two different things. He created new standards for how these sales would be handled in the future.
Each invoice for a commercial sale would have a specific due date on it.
He began talking to his commercial customers about his terms very early in the selling process. Having this worked into the selling process early on helped him make sure his invoice would get processed timely once it was sent to the company.
He also decided to begin a proactive process for calling to check the status of an invoice within seven days of sending it.
He would have his bookkeeper make frequent calls to check status of any outstanding invoices so he could aggressively work outstanding invoices before they could become a problem.
He also planned to make sure he understood the full cash flow impact of accepting large orders.
He now recognized that it was very important to know that you have sufficient cash flow to handle the up-front cash commitment required to take on a big new order from a customer.
Make Sure You Get Paid What is Owed You
If you invoice your customers, you have no choice but to make sure you actually get paid for every dollar you invoice.
You must make this is one of your highest priorities so that you get paid every dollar that is due to you.
This is a critical aspect of your business that you can’t afford to ignore.
In fact, you can ruin a business real fast if you neglect the all-important step of making sure you are collecting the money for what you sell.
I had the President of a national association of small business owners tell me a story about one of their members that really highlights this point.
One of their members started a service business catering to large health care institutions.
She would provide a trained staff of people to perform services that the institution would otherwise have to hire employees to perform. She provided a turnkey service that would help improve the service levels while at the same time save the institution money.
After she got her first contract, she began the process of recruiting, interviewing, hiring, creating an extensive training program, training the new hires, etc.
This took about three months to complete.
After her team was in place and trained, they began providing the service. She sent her invoice to the institution after the first month of services had been provided. After a couple months went by she got a really big surprise.
It turns out this institution held invoices from suppliers for at least 120 days before they paid them. In fact, it was somewhat of an industry practice. She was now almost seven months into her new business and she had not even collected the first dollar of revenue.
She had been spending money all this time not realizing there would be this huge delay in actually collecting her money.
Unfortunately, she ran out of cash.
When she started the business she thought she would be able to get everything going faster and she thought she would be able to do it a little cheaper.
But the really big surprise came when she realized the hard way that creating a sale and collecting the cash doesn’t always happen at the same time.
A Sale is Not a Sale Until the Cash Is Collected
I worked with another business owner who had recently sold about $18,000 of merchandise to two different commercial accounts. He had basically hit a home run by winning these two new commercial accounts.
He was feeling really good about the sales and about finally breaking into this untapped market.
And his income statement looked really good in the month he made the sales. In fact, it showed he had the best month in the store’s history.
What he had not realized until now was that these sales were actually hurting his cash flow.
Not only had he never collected the $18,000, he had already paid for the inventory he sold them.
To make matters worse, this uncollected sale was happening at a time of the year when he could least afford to be without the cash. The sale looked good in the income statement, but not so good in his cash flow.
The Key is to Manage Accounts Receivable Closely
He learned a very important lesson about selling to commercial accounts.
He learned that selling something and collecting the money are two different things. He created new standards for how these sales would be handled in the future.
Each invoice for a commercial sale would have a specific due date on it.
He began talking to his commercial customers about his terms very early in the selling process. Having this worked into the selling process early on helped him make sure his invoice would get processed timely once it was sent to the company.
He also decided to begin a proactive process for calling to check the status of an invoice within seven days of sending it.
He would have his bookkeeper make frequent calls to check status of any outstanding invoices so he could aggressively work outstanding invoices before they could become a problem.
He also planned to make sure he understood the full cash flow impact of accepting large orders.
He now recognized that it was very important to know that you have sufficient cash flow to handle the up-front cash commitment required to take on a big new order from a customer.
Make Sure You Get Paid What is Owed You
If you invoice your customers, you have no choice but to make sure you actually get paid for every dollar you invoice.
You must make this is one of your highest priorities so that you get paid every dollar that is due to you.
This is a critical aspect of your business that you can’t afford to ignore.
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