Are you a business owner?  You might say no, but if you have a job, you are selling your services to a company and that makes you a business owner.  According to Wikipedia, a business is “a legally recognized organization designed to provide goods and/or services to consumers. Businesses are..…formed to earn profit to increase the wealth of owners.”  Do you see how this definition can easily apply to you?  We all work, “to earn profit to increase wealth!” The main reason any business exists is to maximize profits for the shareholders.  Why shouldn’t you have that same philosophy?

Even though you may not have a legally recognized company, you can still operate as a business.  Businesses have goals. They require planning, budgeting, forecasting, cost cutting, investing, and more.  To measure performance, they take periodic financial “snapshots” to determine how they’re performing. They use three primary financial statements; an Income Statement, a Balance Sheet and a Cash Flow Statement.  You can apply these same financial statements to yourself to see how you are doing.

Track Your Performance

An Income Statement is a statement of income and expenditure for a period of time.  For an individual with an income, it’s basically your take home pay.

A Balance Sheet is a summary of a company’s balances.  This includes assets, liabilities and equity (assets – liabilities = equity).  As an individual, your assets would be your savings, 401K, IRA, home value, and auto value.  Your liabilities would be your debt, which includes your mortgage, car loan, and credit card balances.  You take all your assets and subtract your liabilities and this gives you your equity.  The goal here is to build equity.  Maximize your assets and minimize your liabilities and you will maximize your equity!

A Cash Flow Statement is company’s cash receipts and cash disbursements over a period of time.  It lists cash to and cash from operating, investing, and financing activities, along with the net increase or decrease in cash for that period.  For an individual this is basically,(remove comma) how much money you made for the month minus how much money you paid out in expenses.  What’s left over is your savings.

In my opinion, the cash flow statement is the most important financial statement, because it drives how well you will do financially.  It’s all about how much cash you have at the end of the month.  Every heard the phrase “Cash is King”? The goal here is to maximize your cash receipts (income) while minimizing your cash disbursements (expenses).  If your cash flow is negative every month, there is no way to build equity and eventually you will be bankrupt.

I personally take a monthly snapshot of how I’m doing financially with these very same statements.  I also create financial goals and create a budget to help me get there.  I have a spreadsheet going back 4 years showing my progress.  Download Sample Financial Statement Spreadsheet.

First Thing’s First, Set Your Goals

Being able to track your financial performance is great.  But in order to know if you are doing well, you must first have a goal.  Let’s say your goal is to maximize savings.  How much do you want to save?  First, you have to figure out how much money you can save with your current income and expenses.   Download Sample Budget Spreadsheet.

As previously discussed, subtracting your monthly expenses from your net pay will determine the amount you have left over for savings.  Now, ask yourself if this will meet your goal.  If your goal is to save $500 per month, and based on your income and monthly expenses (remove comma) you can only save $200 per month, then you will have to look at your budget and make some changes.

• Things you may have to consider are:
• Cutting your cell phone bill from $75 to $50, saving you $25 per month
• Reducing your cable/satellite bill from $80 per month to $50 per month.
• Fixing that leaking water facet that is costing you an extra $20 per month.
• Eating out once per month instead of once per week, saving you $120 per month.
• Bringing your lunch to work (remove comma) instead of eating out every day, saving you $75 per month.
• Downgrading your car so your car loan is $300 per month, instead of $500 per month, saving you $200 per month. (How do you do that?)
• Shopping around for new auto insurance, saving you $30 per month.
• Cancelling the gym membership you never use, saving you $25 per month.

The point here is; most people can’t control their income, but they can control their expenses.  This is where you can save a ton of money.  From our examples above, if you were to cut your expenses so you could save an extra $300 per month, after just one year, you will have saved an additional $3,600.  Over 10 years that’s $36,000.  If you managed to save $500 per month, you would have $60,000 in ten years. That is a significant amount of money!

This may sound easy, but most people fail.  This is simply because they fail to plan by creating a budget, setting a goal and measuring their performance.  They fail to act as if they own a business!

See related article – “Keep Expenses Low for when the Hard Times Hit”

You have started a new job and have to make a decision of which medical insurance plan to sign up for. Or you are about to re-enroll in your medical insurance plan. You are offered multiple options with various monthly premiums, annual deductibles, and maximum out of pocket costs.

When I started my last job, I did an analysis as to what option would save me money. I was basically offered the 3 options listed below:

This is an 80/20 plan. Once your deductible is met, the plan pays 80%, I pay 20% until the maximum out of pocket is met, and then the plan pays 100%.

The question is; which plan will cost me less money? Will like most things, it depends. However, per my analysis most people will save money with Plan C, unless their medical costs for the year is over approximately $17,000.

To figure this out, I created a spreadsheet that you can DOWNLOAD HERE and play with. You can change the spreadsheet to analyze your medical insurance options.

As an example, if your medical cost for the year is $5,000, you will save $1,744 with Plan C, or $1,040 with Plan B (see screenshot of spreadsheet below).

Screenshot of Spreadsheet Showing Medical Plan Options

The lower your medical costs for the year the more money you will save with Plan C.

Most of the saving with Plan C comes from the yearly premium. Plan C will costs $216 for the year, while Plan A costs $2,400 for the year, a savings of $2,184. That’s a big difference!

Although, the annual deductible is $800 for Plan C, one strategy to lower that cost is to put at least $800 in a Flexible Spending Account (if your plan offers it), which is not subject to payroll taxes thus lowering the cost.

See related article: Staying Healthy is Money in the Bank

You hear it everyday!  People are making money on the Internet.  You would love to also make some money on the Internet to supplement your income but you don’t know where to start.

There are numerous ways to make money online.  The main ones are eCommerce, Blogging and Affiliate Marketing.  So how do you get into this stuff, you ask yourself.  Well believe it or not it’s not that hard.  If you have patience, know how to use the computer and have a deep desire to learn, you can teach yourself.

The cool thing about the Internet is that there is so much free and cheap stuff to help you gets started.  It’s very possible to start an Internet business and within several months or maybe years start to make some decent money.  There is no need to get a loan (like staring a franchise) to get started.  There are many people making a living by working full time on their websites.

Web Hosting

The first thing to get started is a shared hosting account to store your website.  Forget the free websites because you will not own the domain name.  If you start a blog on lets say Google Blogger, you will not own the domain name.  You must own your own domain name because one day you may want to sell the site.  The good news is, it’s extremely cheap to get a hosing account.  You can get a hosting account for less than $7 per month.  When you purchase an account, you will get loads of disk space and bandwidth.

Some good hosting companies are follows:

Bluehost (currently host this website)
Hostmonster
Hostgator
Inmotion
Lunarpages
Startlogic
Midphase
Anhosting

Blogging

Ok, so the first option to make money is Blogging.  If you have something to write about that can create a buzz and traffic to your site, you can make money by placing ads on your site and affiliate links (to earn a commission from sending traffic to other websites).  The great thing about Blogs is that search engines love them.  Done right, you can quickly get free traffic from the search engines.

The top two free Blog platforms are as follows:

WordPress (this site is built using WordPress)
MovableType

eCommerce

If your desire is to sell stuff online.   You can setup your own store for free (once you have a hosting account like Bluehost) for free.  Forget eBay Stores; build your own store where you have all the control control.  eBay Stores will charge you for every little thing you want to add to your store.   You can then list your products on Google Products for free to get free traffic.  Of course you can pay for advertising using services such as Google Adwords or Yahoo Search Marketing.

The top 5 free eCommerce platforms are as follows:

osCommerce
Zen-Cart (easier upgraded osCommerce)
Magneto
VirtueMart
DashCommerce

Affiliate Marketing

The third technique to making money online is via Affiliate Marketing which is basically promoting products/services for a commission that you don’t own or provide.  You register with an Affiliate Company to get an account which gives you access to hyper-links to products/services.  You take the link and place it out in the Internet world to send traffic to your affiliate.  When an action is taken (sale or lead generation) you get a commission.  There are people that have mastered this marketing technique and are making hundred and thousands of dollars per day.  They use paid advertising, e-mails, and websites to send traffic.  With paid advertising it’s all about spending less than you make from commission and a very quick way to generate traffic.  If you have a website that gets traffic, then you can send traffic to your affiliate as well for free.

Some of the top affiliate companies to consider are as follows:

Commission Junction (CJ)
AzoogleAds
ClickBank
PepperJam Network
Sharesale

Most people get their healthcare insurance from their jobs. Large companies offer health insurance to employees at a reasonable price, and it’s deducted from their paychecks without a second thought.

However, if a person loses their job or becomes ill and can’t work anymore, that person loses their healthcare insurance. Sure, companies offer COBRA (they have to by law), but the payments are much higher than before.

Most people don’t know this, but in 2005, the Fortune 500 companies as a group paid more in healthcare costs than they made in profits. The costs for healthcare are rising 15+ percent per year. Few companies can sustain growth to keep up with this increasing expense, and as a result, companies will push more of their healthcare expense towards their employees.

Many Americans do very little to stay healthy. It’s currently estimated that 97 million Americans are overweight or obese which creates numerous healthcare issues (diabetes, hearth disease, cancer, etc.). It is also estimated that preventable illnesses make up approximately 80% of the burden of illness and 90% of all healthcare costs. Many of these preventable illnesses occur because of a lack of exercise, poor diet and bad habits like smoking or excessive drinking.  You should take action now by taking a preventive approach to your health. It can save you a lot of money in the long run. In addition, you’ll have a healthier life and even live longer.

Most healthcare professionals believe that in the long run, more companies will give their employees a stipend to purchase their own health insurance. Healthy people will save a lot of money by having lower premiums, as they can take the risk of having higher deductibles.

So begin now! The earlier you start to take care of yourself by exercising, dieting, and modifying your behavior towards health, the more money you’ll save in the long run.

In today’s economy, many people are suffering. We purchase items like cars and homes that we cannot afford. This spells trouble for many of us should we lose our jobs, or become ill, and unable to work.

Due to our spending habits, this doesn’t just happen to low-income workers, but even to those making over $100K. Unfortunately, it seems the majority of Americans live from paycheck-to-paycheck. We have become a society of spenders and not savers.

When things are going well, most of us don’t think about the rainy days. We normally don’t think about the things that cause financial strain. The reason we buy auto insurance is to protect us in the event we have an accident. If we do, there is coverage to fix/replace the automobile, or to pay for medical expenses. The same should happen with our finances. We must plan for the unexpected events.

In order to effectively plan for unexpected financial events such as losing a job or falling ill, it’s about money. Someone with $100K in the bank (assuming no they have no debt) will be able to handle an unexpected financial event better than someone with $1K in the bank. To put yourself in a good financial position, you should do the following:

Live below your means. Having nice things makes us feel good initially. But most times, the feeling wears off after a while. You can save a ton of money by living below your means. A mortgage of $1,000 vs. $1,500 will save you $6,000 per year and $60,000 in ten years! Having a car payment of $300 vs. $500 will save you $2,400 per year and $9,600 in 4 years! This makes a big impact on your financial situation.

Always have a positive cash flow every month. This means you should bring in more money than you pay out. Of course, the idea is to maximize the money you bring in and minimize the money you pay out. Checking your monthly cash flow is quite easy. At the end of the month, evaluate your checking account to determine how much money you spent. That number should always be lower than the money you brought in for the month. If you spent more than your brought in for the month, that is a problem.

Create a budget and stick to it. This is simple to do, although most people don’t do it. If you ask the average person how much money they make, they can easily tell you. If you ask them their monthly expenses, most people have no idea. If it’s not down on paper, then you can’t plan it. You should track your monthly expenses to determine whether or not things are getting out of hand.

Always pay yourself first. When you get your paycheck, pay yourself first. If your budget shows you to have $500 left over after paying your bills, then the first thing you should do is to transfer that $500 in your savings account when you get paid!

Never carry a balance on a credit card. Paying finance fees for a pair of shoes is absolutely crazy! If you currently have a credit card balance, pay it off ASAP! Cut them up if you can’t control yourself. Credit cards make paying for goods and services convenient but if it causes you to spend on impulse, then it’s time for you to cut them up.

Stay healthy by exercising, eating a proper diet and maintaining a proper weight. Healthcare is a huge problem in this country. Becoming chronically ill can easily bankrupt you – even if you have good insurance. If your illness causes you not to be able to work, you will eventually lose your job, and your insurance will follow. Once you lose your insurance, since you have a pre-existing condition, it will be even more expensive for you to buy insurance. Taking care of your health is money in the bank. Many people do a great job taking care of their children, house, cars and jobs, but do a terrible job taking care of themselves. We all get so busy throughout our days that we fail to realize our health is deteriorating which leads to diseases such as heart disease, cancer, and diabetes.

If you follow these simple rules, you will put yourself in a good financial position to save money. If or when the hard times come, you have money to make it through. It’s all about having a cushion.