Imagine a Weight Watcher's meeting with no scale, no food journals, no accountability. How would you gage your progress. It's Impossible to really show significant impact on your financial life with out any controls. Tracking your income and expenditures is vital for Financial Fitness. The actions of recording and reviewing your financial information with an unbiased approach makes introducing new behaviors easier and quantifies the change. Consider for instance the amount of money that you spend on dining out each month. With out tracking this expense it would be impossible to know exactly how much you are spending and it is easy to spend a lot on expenses like this, because the amount that gets doled out at each restaurant is nominal. However these expenses tend to add up quickly. For example imagine that you stop for a quick breakfast and coffee each morning and and that that breakfast costs you an average of $4.00 each day. Also, at lunch time you go out for a quick pick-me-up lunch that costs you an average of $6.00 per day. If you work 5 days per week, this cost you roughly $217.00 per month ($10.00 per day time five days per week time 52 weeks per year divided by 12 months) or a whopping $2600.00 per year. may of us spend much more than this just on meals out not to mention other small incidentals and often end up wondering where our money went to.
It is crucial that you know where ALL of your money is going to if you want to be in control of your financial life. Take a minute each day to list all of your income and expenses and the tally up what you are spending on incidental items. How could you eliminate some of that expense? Could you pack your lunch twice a week (at an approximate savings of $624.00 per year)? Or perhaps, you could make a breakfast at home in the morning (approximately $1040.00 per year saved).
There are literally hundreds of places to find hidden money, but with out tracking your income and expenses you will not have the information necessary to find these hidden treasures or to take action.
Tuesday, April 24, 2007
Wednesday, April 11, 2007
Check Out This Pod Cast On Internet Marketing
I found this blog while searching for information on Rich Dad. The pod cast was very insightfull and I gleaned alot of great ideas and inspiration from it. This pod cast contains a lot of useful information for anyone looking to create income on the internet.
http://www.internet-based-business-mastery.com/ibm-26-the-secret-mindset-needed-to-get-started-as-an-internet-business-master
http://www.internet-based-business-mastery.com/ibm-26-the-secret-mindset-needed-to-get-started-as-an-internet-business-master
P3I Investing Strategy of the Month- Financial Starting Point by Dannielle Fritz-MacDuff
We began the P3I investing workshops as a tool for our clients to take back control of their financial future and empower each customer to reach their goals and achieve their dreams. So I thought adding one strategy each month to this blog would be helpful to others.
Financial Starting Point-
Most of us know how to plan a road trip. Start with where you are and mark out a path on the road map. If you run into a road block, re-route and keep moving forward.
This simple strategy is the best way to start a financial journey as well.
What I find is that often clients do not know where they really stand financially and many are afraid to find out. It is much less traumatizing to go along semi - ignorant of what our financial snapshot looks like, than to get in and be brutally honest about how much money we spend or borrow. This fear of what the real picture of our financial lives looks like is what holds most of us back and leaves the money in control of our actions. P3I investing is about putting the person in control of the money through action.
Start with one day and all of your financial information.-do a "brain dump" and list all of your income and where it comes from.
Next list all of your liabilities ( everything and everyone that you owe money to.) and the total balance due for each bill. Be brutally honest in this step, if you leave out the loan from uncle Jim or the doctor bill that is lowering your credit score, you will sell yourself short and set yourself up for failure.
List all of your expenses including monthly payments for each liability. Don't forget to include miscellaneous living expenses like toiletries and food. Also make sure you include a realistic expense for things like; entertainment, salon visits, clothing and other items that are just part of life.
Now List every thing that you own - if you had to give a list to an insurance adjuster because your home burned to the ground and you lost everything, what would be on that list. Go through your home and catalog everything that you own and assign a dollar value to these items. Also include things like cash in the bank, stocks, bonds, real estate owned, businesses that you own and other intangible assets.
Now set that aside and we will come back to it. For the next two weeks, carry a small notebook and pen or pencil with you and write down everything that you purchase or spend your money for. Include expenditures for things as small as a piece of gum form the candy machine. At the end of the two weeks go back and tally all of your expendituture by like expenses. This may sound daunting, but it will give you a place where you can review where your money is going and make you more conscious of where you are actually spending your money, which puts you back in control. That control allows you to make your money work for you instead of constantly working harder for money.
I am not saying that you will be able to quit your job tomorrow, or maybe you will. That is really up to you. But if you start here and consistently do five things, you will be able to make yourself financially free in 10-15 years. 10 -15 years is relatively fast if you consider that most of us work at our jobs for 40 plus years. Here are the five things that you MUST do to make yourself financially free:
Learn something new and useful everyday- the key word hear is useful. If you can not apply this knowledge, it is just taking up space in your brain. Don't get me wrong, interesting trivia definitely has its uses and can be fun, but learning something about your money that puts you in the drivers seat will help you have more time for the fun stuff
Know your exit strategy- why do you want to be financially free? The why is so much more than the how because the why drives us. The why makes us get out of bed in the morning and the why keeps us moving forward when it looks like it is all about to hit the fan. After the why comes the when- Complete this sentence -I will have made it when... . That when is your exit strategy.
Find a friend to hold you accountable and then ...lie. I don't mean start telling outlandish lies about what you are doing. I mean start telling people what you are working on. Since you have not actually accomplished your goal yet it is technically a lie and not fact. we lie to our selves everyday when we say things like "I could never do that" or "You can't do that here" or "I'll never be rich" and those lies hold us back because we believe them. so why not lie about the opposite and watch it come true. If you tell someone about your plans, you are three times more likely to succeed because you will subconsciously work harder at the project to save face. Get someone to be your success partner and ask them to talk to you once a week to check in and see how things are going.
Choose to be financially free - This sounds easy, but the trick is to make that choice everyday and then carry that choice over to the choices we make when we spend our money. Choose to spend your money on your education and on things that will continue to put moeny in your pocket even if you stop working.
And finally, Take Action - you have to act to make things happen. Just talking about becoming financially free is not enough, you have to begin taking steps to get to your goal. Do something, even if it is wrong. If you make a mistake, then at least you have learned something, even if it is what not to do.
Thanks for visiting our blog. Look for more P3I investing strategies coming soon and check our web site, we will be posting down loadable worksheets to help you with this strategy.
Financial Starting Point-
Most of us know how to plan a road trip. Start with where you are and mark out a path on the road map. If you run into a road block, re-route and keep moving forward.
This simple strategy is the best way to start a financial journey as well.
What I find is that often clients do not know where they really stand financially and many are afraid to find out. It is much less traumatizing to go along semi - ignorant of what our financial snapshot looks like, than to get in and be brutally honest about how much money we spend or borrow. This fear of what the real picture of our financial lives looks like is what holds most of us back and leaves the money in control of our actions. P3I investing is about putting the person in control of the money through action.
Start with one day and all of your financial information.-do a "brain dump" and list all of your income and where it comes from.
Next list all of your liabilities ( everything and everyone that you owe money to.) and the total balance due for each bill. Be brutally honest in this step, if you leave out the loan from uncle Jim or the doctor bill that is lowering your credit score, you will sell yourself short and set yourself up for failure.
List all of your expenses including monthly payments for each liability. Don't forget to include miscellaneous living expenses like toiletries and food. Also make sure you include a realistic expense for things like; entertainment, salon visits, clothing and other items that are just part of life.
Now List every thing that you own - if you had to give a list to an insurance adjuster because your home burned to the ground and you lost everything, what would be on that list. Go through your home and catalog everything that you own and assign a dollar value to these items. Also include things like cash in the bank, stocks, bonds, real estate owned, businesses that you own and other intangible assets.
Now set that aside and we will come back to it. For the next two weeks, carry a small notebook and pen or pencil with you and write down everything that you purchase or spend your money for. Include expenditures for things as small as a piece of gum form the candy machine. At the end of the two weeks go back and tally all of your expendituture by like expenses. This may sound daunting, but it will give you a place where you can review where your money is going and make you more conscious of where you are actually spending your money, which puts you back in control. That control allows you to make your money work for you instead of constantly working harder for money.
I am not saying that you will be able to quit your job tomorrow, or maybe you will. That is really up to you. But if you start here and consistently do five things, you will be able to make yourself financially free in 10-15 years. 10 -15 years is relatively fast if you consider that most of us work at our jobs for 40 plus years. Here are the five things that you MUST do to make yourself financially free:
Learn something new and useful everyday- the key word hear is useful. If you can not apply this knowledge, it is just taking up space in your brain. Don't get me wrong, interesting trivia definitely has its uses and can be fun, but learning something about your money that puts you in the drivers seat will help you have more time for the fun stuff
Know your exit strategy- why do you want to be financially free? The why is so much more than the how because the why drives us. The why makes us get out of bed in the morning and the why keeps us moving forward when it looks like it is all about to hit the fan. After the why comes the when- Complete this sentence -I will have made it when... . That when is your exit strategy.
Find a friend to hold you accountable and then ...lie. I don't mean start telling outlandish lies about what you are doing. I mean start telling people what you are working on. Since you have not actually accomplished your goal yet it is technically a lie and not fact. we lie to our selves everyday when we say things like "I could never do that" or "You can't do that here" or "I'll never be rich" and those lies hold us back because we believe them. so why not lie about the opposite and watch it come true. If you tell someone about your plans, you are three times more likely to succeed because you will subconsciously work harder at the project to save face. Get someone to be your success partner and ask them to talk to you once a week to check in and see how things are going.
Choose to be financially free - This sounds easy, but the trick is to make that choice everyday and then carry that choice over to the choices we make when we spend our money. Choose to spend your money on your education and on things that will continue to put moeny in your pocket even if you stop working.
And finally, Take Action - you have to act to make things happen. Just talking about becoming financially free is not enough, you have to begin taking steps to get to your goal. Do something, even if it is wrong. If you make a mistake, then at least you have learned something, even if it is what not to do.
Thanks for visiting our blog. Look for more P3I investing strategies coming soon and check our web site, we will be posting down loadable worksheets to help you with this strategy.
Thursday, April 5, 2007
How To Work The System Instead Of Beating The System by Dannielle Fritz-MacDuff
As an accountant and financial educator I have been asked countless times how to beat the tax system. After all, our largest expense in life is our tax bill. We are taxed when we earn, taxed when we spend, taxed when we save and taxed when we die. So how does a person, the average working Joe, "beat the system"? The simple answer is... you don't. Instead, learn to work the system. I have included some things that you can do that will help you make the system work to your advantage.
Talk to a tax professional.
Interview several tax professionals, not all accountants and tax agencies are created equal. Much like lawyers, accountants tend to specialize. Find one that is competent and willing to put forth an effort and guide you. You tax advisor should be up to date with the latest tax loopholes and requirements as well as being a forward thinker. A forward thinking tax advisor will be able to help you create a workable strategy that is proactive and takes advantage of every possible loophole available to you and advise you on what changes could be made that will open up additional loopholes.
Change how you make your income.
This does NOT mean quit your job. Instead look for and take advantage of opportunities that will move your money from earned income, which is the most highly taxed income with the fewest allowed loopholes, to passive income. Passive income allows multiple loopholes and is taxed on a completely separate set of rules.
When you make your money from a job as an employee the tax rules in their simplest form look like this:
EARN ---- TAXED ON ALL OF IT ----- SPEND WHAT'S LEFT
When you make your money from investments that are working for you, this is passive income. The tax rules in their simplest form for passive income look like this:
EARN---- SPEND WHAT YOU NEED TO SPEND ---- TAXED ON WHAT IS LEFT
Most of us are only using the first tax strategy and making all of our money as employees. Converting that earned(employee) income into passive income will allow you to take advantage of the second tax strategy which puts you in control of your financial future your tax bill.
Monitor and control your expenses
I am not preaching "live below your means, cut up your credit cards and don't use debt". Instead pay attention to where you are spending your money. We all should live the good life. what ever your good life may be. When you pay attention to where your money is going, this gives you more control. Controlling your expenses simply means making wise choices. Most of us get caught in the consumer craze. We spend millions every year on credit card interest and don't use those credit cards to our advantage. Instead we choose to buy things that require us to work harder to pay for the stuff that we want instead of first buying the things that will put money into our pockets that can pay for our toys. Instead use credit to your advantage. Use other people's money to buy your investments and assets that are making money for you. If you are using other people's money to make money for you, your return on investment is infinate.
ex. you purchase a rental property for $5000.00 using an advance from your credit card. After all of the expenses are deducted from the rental income (including your credit card payment) you have 200.00 left over every month. Your rate of return =cashflow from the investment(profit) devided by the cash that you put into the investment (0 of your own money). That return is infinate and you do not have to pay back the debt, your tenant pays that for you.
Pay Yourself First!
Don't dip into your savings when times get tough. Let the pressure build up and motivate you to think outside of the box to find ways to make more money. Then use that savings to buy investments or assets that put money in your pocket. These sources of income will be there even if you loose your job.
Talk to a tax professional.
Interview several tax professionals, not all accountants and tax agencies are created equal. Much like lawyers, accountants tend to specialize. Find one that is competent and willing to put forth an effort and guide you. You tax advisor should be up to date with the latest tax loopholes and requirements as well as being a forward thinker. A forward thinking tax advisor will be able to help you create a workable strategy that is proactive and takes advantage of every possible loophole available to you and advise you on what changes could be made that will open up additional loopholes.
Change how you make your income.
This does NOT mean quit your job. Instead look for and take advantage of opportunities that will move your money from earned income, which is the most highly taxed income with the fewest allowed loopholes, to passive income. Passive income allows multiple loopholes and is taxed on a completely separate set of rules.
When you make your money from a job as an employee the tax rules in their simplest form look like this:
EARN ---- TAXED ON ALL OF IT ----- SPEND WHAT'S LEFT
When you make your money from investments that are working for you, this is passive income. The tax rules in their simplest form for passive income look like this:
EARN---- SPEND WHAT YOU NEED TO SPEND ---- TAXED ON WHAT IS LEFT
Most of us are only using the first tax strategy and making all of our money as employees. Converting that earned(employee) income into passive income will allow you to take advantage of the second tax strategy which puts you in control of your financial future your tax bill.
Monitor and control your expenses
I am not preaching "live below your means, cut up your credit cards and don't use debt". Instead pay attention to where you are spending your money. We all should live the good life. what ever your good life may be. When you pay attention to where your money is going, this gives you more control. Controlling your expenses simply means making wise choices. Most of us get caught in the consumer craze. We spend millions every year on credit card interest and don't use those credit cards to our advantage. Instead we choose to buy things that require us to work harder to pay for the stuff that we want instead of first buying the things that will put money into our pockets that can pay for our toys. Instead use credit to your advantage. Use other people's money to buy your investments and assets that are making money for you. If you are using other people's money to make money for you, your return on investment is infinate.
ex. you purchase a rental property for $5000.00 using an advance from your credit card. After all of the expenses are deducted from the rental income (including your credit card payment) you have 200.00 left over every month. Your rate of return =cashflow from the investment(profit) devided by the cash that you put into the investment (0 of your own money). That return is infinate and you do not have to pay back the debt, your tenant pays that for you.
Pay Yourself First!
Don't dip into your savings when times get tough. Let the pressure build up and motivate you to think outside of the box to find ways to make more money. Then use that savings to buy investments or assets that put money in your pocket. These sources of income will be there even if you loose your job.
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