Archive for the ‘Money 101’ category

Envelope Budgeting System

August 27th, 2013
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This is a great budget system for anyone with a tight budget or anyone trying to cut back on spending that needs help being more disciplined. When I was in college I had a very tight budget, in fact, I’m surprised I managed to buy food at all. I love this system, I used it throughout college. I worked at least two jobs throughout the summer to earn enough money to provide for myself, because some semesters I could find a small part time job and others I couldn’t find anything. This system helped me stretch my summer earnings throughout the entire year.

 

Here are the details for the envelope budgeting system:

 

Envelope Budgeting System

First, figure out your pay period (monthly, weekly etc). For your pay period list your expenses. If you don’t know the exact amount of your expenses I would suggest tracking EVERYTHING you spend money on for at least TWO pay periods. Three is better if you have the time. Average out how much you spent in each area and evaluate if your spending is realistic. Realistic budgeting means that you are spending money on things that are most important first, followed by the ability to pay down your debt and save and above all that your spending stays within your limits (income).

 

Once you know your pay period, your budget categories and how much you are realistically spending in each area, you are ready to start.

 

Here is an example of what you should know at this point:

Pay period- monthly

  • Rent- $800
  • Utilities-$100
  • Phone/internet/cable-$150
  • Car insurance- $100
  • Gas/transportation-$200
  • Groceries-$150
  • Entertainment/eating out-$50
  • Misc-$100

 

Using this example, let’s walk through the rest of the steps: First, think through which bills are consistant, that is, the amount never changes. In this examle that would probably be rent, phone/internet/cable, and insurance. I would lump utilities into this category as well, even though it may vary from month to month. Figure out what a high monthly utilitiy cost is and use that for your budget amount (on the months it is less you’ll have extra money to save). These are bills that you can set up automatically; so, you won’t use an envelope for them.

 

The remaining expenses are typically where people overspend and get into trouble. This is when the envelope system can be a great tool! For this example you would need four white envelopes, one for each remaning category: gas/transportation, groceries, entertainment/eat out and misc. Label each envelope with the category and the amount needed. Each time you get paid, monthly in this example, you fill the envelope with the correct amount of cash. So “gas” would have $200, “groceries” $150 and so on. Here is the trick, you can now physically see how much you are spending and how much you have left. When the money is gone YOU ARE DONE SPENDING.

 

This will help develop discipline. You now always know how much money you have left. Instead of charging your card and finding a surprise at the end of the month that you overspent by $200, now your cash will run out and your spending is over until the next payday. This system also requires that you budget out how much you would need for an upcoming pay period. If you did have a set amount for an entire month for groceries or gas you would have to pay attention, or the last week of the month you may find yourself walking to work and eating mac and cheese for every meal. If you are worried about this happening, figure out how much you need for just one week instead of an entire month and refill your envelopes once per week.

 

As you continue to use the system you will gain greater control over your spending and have money left over that should be put toward emergency savings, paying off debt or investments.

Money Making Strategies

August 14th, 2013
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In the advanced technological world we live in today, there have been more news ways to make income than ever before. For example, just twenty years ago people were just hearing about the internet, but no one had any idea that it would become the machine that it is today, let alone an economical hub, binding the world together.  If you go just twenty years before that, no one knew the potential that computers had and the impact they would have on our everyday lives.

In today’s world, there are more ways to generate income and it’s even easier than before. Everything from services to products have been affected. That’s the good news for us: You can make money doing virtually anything. That’s what this website is dedicated to and that’s the information you can find on it’s pages.

There are a few things to understand as you navigate the site about terms and methods of generating income.

Earning Income with a Job

For as long as you and I have been around, the most common and probably most standard way of making an income is through a means of trading one’s time and efforts for a set amount of money. This is called a job. If you are salary, you are paid a flat amount each pay period for your flat amount of time that you are present. If you are paid hourly, you get a fixed amount of money for each hour you spend at work. This is the easiest and yet least effective way to make money.

Do you see the problem and dilemma with this? You have a fixed amount of time in a day and a fixed number of days you can work. That means your earning potential is capped by the amount of time you can dedicate to the job. A job, though a good starting point, has by far, the worst earning potential.

Make Money Through Commissions

Moving up in the world, you can expand your earning potential by adding commissions into the mix. A typical sales person earns commissions as their payment for their efforts. Commissions are getting a portion of the proceeds of a sale (for example 20% of the sale price for a home security system). For a good salesperson, this can be quite lucrative, because with commissions, your earning potential is no longer capped. If you can develop systems and procedures that don’t fail and leverage your time better, you have greater earning potential. Unfortunately, if you aren’t good at systems or sales, you could have whole months where you put in 60 hours a week and don’t get paid at all.

Though the earning potential is not capped, again, you must exert time and effort in order to make a sale and earn your income. Since the amount of time you possess is limited, there is a limit to your income, it’s just not as concrete as a job.

If you want a good idea about one way of making commissions, see our post about Making Money with Affiliate Marketing.

Make Money Without Spending Time

So far we’ve see ways to make money that require an investment of time. At this point you may be saying something like “yeah, okay, but I don’t know of a job in the world that pays you whether you work or not.” Well, my friend, you are wrong. There is such a thing… let me tell you about it:

Passive income. Passive income is money that comes to you, without any effort on your part. Could you imagine making money while on vacation at a job where you have unlimited vacation. No employer in their right mind would think that was a great deal, but there are things you can do now with little effort that could pay out for years to come. Passive income isn’t 100% free from your time, but it is a means of income that requires a time investment up front and then it pays out for years without any time on your part.

“What?” you say, “why doesn’t everyone do passive income then?” For a few simple reasons: They don’t know how, they are afraid of the risk, they are addicted to being paid for your time (See Rich Dad, Poor Dad by Robert Kiyosaki on our recommended reads page for a better understanding of that principle). Very few passive income strategies are guaranteed. Very few start paying out immediately. If you can delay your “reward” the benefits are amazing.

Here are a few examples of Passive Income that you are probably familiar with:

  • Stock Dividends – payments from stocks you own
  • 401k Interest – interest on your investments
  • Rental income – rent paid to you from tennants of your real estate properties
  • Multi-level Marketing (MLM) – Build a downline and let them do the work for you
  • Build your own business, but let others do the work – Hire employees to do the work, make the profits of the business

If you’ve ever dreamed of sitting on the beaches of Hawaii for an endless amount of time, not working for a living or even just having some side income that doesn’t eat up your free time, then passive income is for you. Check out our Passive Income Strategies category for list of options.

Don’t Quit Your Day Job… Yet

So, if this page has gotten you all revved up and excited to go out and quit your job which is limiting your potential, DON’T. As I eluded to in the last section, passive income doesn’t happen immediately, it doesn’t happen overnight either. Take some time, investigate some options and decide what is right for you. Then, once you have it narrowed down to one or two strategies you think you can get excited about, create a schedule and plan to build those up. Set aside some time each week to invest a little time into each strategy.

THEN, once your passive income consistently exceeds your monthly income requirements, you can choose to quit. That means, do yourself a favor and don’t quit until you are certain that the passive income will pay your bills every month. Once you are sure of that, Quit Your Job.