How do you set your priorities and decide where to spend most of your cash? If your expenses exceed your income, what do you do? How do you get out of debt? And, how do you deal with major unexpected expenses?
A budget will help you address these issues. It is a spending plan and helps you to get your finances on track. Creating a spending plan enables you to determine in advance if you will be able to afford the things you need to do or want to do.
The planning process allows you to prioritize your expenditure and focus your financial resources on things that are important. In a nutshell, it enables you to control your finances
How do you create a Budget?
Here is how to build a budget:
- Determine your after tax income
If you receive a regular paycheck, and there are automatic deductions for life and health insurance, savings and 401(1), add these back. They will give you the correct picture of your expenditure and savings. For those who get other types of payment, deduct anything that reduces it like business expenses and taxes.
- Decide on a budgeting plan
A spending plan must cover all your needs, some wants and most important, savings for the future and emergencies.
Experts recommend a 50/30/20 spending plan. In this budget, you spend about 50% of your net income on necessities, roughly 30% on wants and 20% on debt repayment and savings.
Needs: 50% of net income
Needs or essential expenses include housing, basic utilities, transportation, insurance and minimum loan repayments. They also include groceries and child care and other necessary expenses.
If your essentials exceed the 50% mark you may borrow, for a while, from the 30% wants portion of the budget.
Wants: 30% of net income
Differentiating between needs and wants can be difficult. In general, wants include items like travel, gifts, dinner out, and entertainment. Some expenditure items may present challenges when it comes to separating wants from needs. For example, where do you put a gym membership or organic groceries? This will depend on you.
If you are very keen on paying your debt, you can use this portion of your budget to settle your debts. You may also build some savings. Yes, it means making sacrifices. However, your spending plan must not be too austere. Leave some room for having fun. A spending plan is a tool to help you get better, not a straitjacket to prevent you from enjoying life!
Savings and debt repayment: 20% of net income
Use this portion of your net income to set up an emergency fund, build savings and debt payment. It may mean balancing them in order to achieve your most urgent goals.
Priority expenses under this heading include
Experts recommend that you build up a fund to cater for several months of basic living expenses. You can start this fund with $500 and build it up from there. Regular contributions will help you build up 3 to 6 months of expenses. A safety cushion will help you to avoid getting into debt when the unexpected happens.
- Get your employer to match on your 401(k)
This is easy money, get it. If your firm offers a match, seek to contribute enough to get the maximum. Take this chance because it provides a unique combination of free money, compound interest, and tax breaks. It gives you a better opportunity at creating wealth through the habit of stable long term savings.
Once you settle your debts you can increase the percentage of savings. You should target to save 15% of your total income. This includes the employers match if there is any.
Get rid of debt. Go after personal and payday loans, high interest credit cards, title loans and rent to own payments. These loans with no credit check carry high interest rates which multiply fast. With time you end up repaying many times the principal loan amount.
- Savings for irregular expenses
After building the emergency fund, paying the pressing debt and putting 15% into the retirement fund, you can build an irregular expense fund. This fund will meet irregular expenses such as your next car, a new roof or even a trip to Africa.
You can do this by keeping expenses records or using online budgeting & savings tools
Automate to the greatest extent possible. This ensures that money allocated for specific purposes gets there with the least effort on your part. Use an online support group or an accountability partner to hold you accountable for decisions that blow your budget.
- Review your spending plan and adjust as necessary
Nothing is cast in stone. Your priorities, income, and expenses will change over time and will be skyrocket . Make sure you adjust your spending plan accordingly.
A spending plan is for all the money you have. The planning process allows you to prioritize your expenditure and focus your financial resources on things that are important. In a nutshell, it enables you to control your finances. It stands for more financial freedom and a much more peaceful life.
We all know that we should save but, when money is coming into our accounts and those temptations appear so close, putting that cash aside for a rainy day doesn’t seem appealing.
That’s especially true if friends and family seem to be buying freely and loving life, but even if you have to wait a little longer through saving, in the end you’ll be just as happy. You might be a rarity, unfortunately – savings were at a record low at the end of 2016. Here are a few tips to make saving money work for you
It’s possible to open one of these tax-free accounts for children of any age from now and, currently, you can put up to £4,128 into a junior ISA, which can then be invested in either cash or stocks and shares. Anyone born between September 2002 and January 3 2011 would have had a government child trust fund opened for them by the government, which can now be converted into a junior ISA. The interest rates aren’t great, but one of the advantages is that money cannot be accessed until the child’s 18th birthday, so it’s guaranteed to be saved until then.
Getting a job – or creating one
While relying on the ‘bank of mum and dad’ might be enough to get you on the property ladder, or put a few pennies in your pocket, why not boost your income through gaining a part time job? You cannot work below the school leavers age for an employer, but you can still put your own company together if you find the right niche.
It may make you feel inadequate, but youngsters such as these pre-18 entrepreneurs are becoming more commonplace, simply because they can now set up a website with e-commerce capabilities so easily and get in touch with mentors and useful contacts.
Fun in moderation
While saving for a car, home deposit, holidays and other desirable things is a positive virtue, it should not be to the detriment of your teenage/early-20s lifestyle. This is a time when you are largely free of responsibility and can find your own journey; and socialising and spending time on leisure and life enhancement is a big part of that.
Therefore, don’t get into a mentality of ‘always going without’, and not enjoying ‘now’. Instead, make sure you’re also putting some money aside for the bigger projects in life. Go on that holiday now, buy those expensive trainers and the iPhone now – with a little bit put aside to pay bills and another slice for later.
Debt vs investment
What should you do first – invest or pay off present debts? The simple answer is that you should put your money in the direction of whatever is leaving you in the better situation.
It might seem psychologically beneficial to be debt-free, but if your investments are making money at a faster rate than your debts are taking it, your decision becomes more complicated. Also, the more debt you have, the worse your credit rating might be, so be careful to learn the skills of money management.
Play the long game
Picture yourself in ten years’ time, as the wise head who knew what they wanted and planned for it. You’re the one in the nicer house than your friends, with the better car and holidays. Maybe you have a passive income, bringing in a tidy sum each month for minimal work, which can then be reinvested for…your forties.
One last consideration; when you start employment, put some of your funds into a pension. Retirement may seem a world away in your twenties, but you don’t want to be that person who wishes they’d planned their later years earlier now do you?
photo credit: Muffet gelt via photopin (license)
Here we provide brief insight into “PPI Mis-selling” for the uninitiated and anyone requiring further details on what this whole issue is about.
What Is “PPI”?
“PPI” shorthand for “Payment Protection Insurance” is a type of insurance designed to protect individuals from missed payments in any loans, credit cards or mortgages due to unforseen circumstances be it, unemployment, sickness/ill health or accidents.
It is also named under other synonymous phrases such as “Accident/sickness cover” “payment cover” “card protection” “card cover” “payment protection cover” and other phrases (all of which basically refer to the same thing: “Payment protection insurance”.
How Has “PPI” Been Miss Sold?
PPI has been miss sold to the British public in the following ways:
- It has been bundled up into loan agreements, credit card agreements, and mortgages (added to the small print without the knowledge or consultation of the individual taking out the finance in the first place).
- It has been recommended and sold to people even in circumstances where it would have served little or no benefit to them, for example: people who had sufficient savings with which to pay the remainder of the credit card balance or the loan but were persuaded to take out PPI anyway.
- It has been said that the general marketing practices around PPI, “pressure selling” has been used to push the insurance product onto people.
It was decided formally during a heading between the BBA (British Bankers’ Association), The FSA (Financial standards authority – now called the “FCA – Financial Conduct Authority”) and the FOS (Financial Ombudsman service) that was known as the “Judicial Review”, which was a review into the selling practices of companies’ whom were pushing Payment protection insurance onto the British consumer.
The BBA lost the judicial review and hence it was decided that members of the British public that had been miss sold PPI were due compensation.
This has all led to the: The “PPI Claims Epidemic” we are experiencing today in Britain.
How Can One Determine If They Have Been Miss Sold Payment Protection Insurance?
This can be a complex issue for many people, however people tend to see it as neccessary to file a grievance for miss sold PPI if they feel as though they have been miss sold or “duped” into purchasing this insurance that they didn’t need.
For those who are having problems determining if their particular case of PPI was “miss sold” it is possible to seek the advice of legal professionals for help and guidance.
There are also people whom were sold the insurance and were not even aware they were paying into a PPI policy, this is certainly a case of miss sold PPI due to the fact they were unaware they were making financial contributions into a plan they had no knowledge of – this is a common occurance.
There are a number of “PPI claims companies” that are able to investigate your claim on your behalf on a “no win no fee” basis, meaning there will only be a fee payable in the event of a successful PPI claim, one such company that has grown in popularity is http://ppiclaimservice.co.uk whom work with solicitors who specialise in financial claims (like PPI) – however there are a range of companies’ that can help with this type of complaint.
There is one important factor to be mindful of, for anyone thinking they have been miss sold PPI.
The PPI Deadline
Recently there was an announcement by the FCA that they are implementing a “claims deadline” for new cases: this deadline is the 29th August 2019.
What Does This Mean For The Mis-selling Victims?
It means that any NEW PPI claims will need to be submitted before 29th August 2019 to even be considered for a PPI refund, this is an important thing to take note of for anyone who suspects’ they have had PPI, as any cases submitted after that date are likely to be rejected outright due to having missed the deadline.
If this is you and you think you may have been wrongly sold PPI cover you have a couple of options dependent on your priorities:
- You can expedite the process and use a ppi claims management company
- Or you can proceed any make a claim yourself, however this may be complicated if you have no experience of submitting complaints to banks (and potentially even having to complain to the ombudsman if the claims is wrongly rejected).
Either way it is important to note that the deadline is now in place, and it is a good idea to act quickly as it is expected there will be an influx of people rushing to make a claim later this year.
photo credit: ANBerlin My flower power challenge via photopin (license)
Vehicle tracking is already a huge industry which is only growing; it’s expected to grow to $22 billion by 2022. Businesses use vehicle tracking software, also known as telematics, to track the location of cars and vans in their fleet. Modern systems can also track other data that companies can use, including fuel efficiency and driver behaviour, which can save a business money and improve customer service levels. But are the savings high enough for a company to make the initial investment for a vehicle tracking system?
Vehicle tracking is offered at a cost per vehicle
While there are benefits to investing in a telematics system for a company, small businesses may not be as willing to part with their limited funds, especially if it’s a significant cost.. Thankfully for smaller companies, there is no set cost for vehicle tracking. Providers like Movolytics offer vehicle tracking paired with other features, like fuel management and safety reports. Extras are optional and limiting your features lowers the overall cost.
Businesses have the opportunity to start as small as they need, meaning they can track only what they choose and can afford to, before scaling up. The main expenditure for businesses will be paying for the software per vehicle, so small businesses with fewer cars or vans can benefit from a lower price point than larger companies. After paying the initial cost for the vehicle tracking system, however, businesses can find ways to save money in the long run depending on what information is being tracked.
Helping drivers avoid traffic and re-route saves time, fuel and money
The most common feature of telematics systems is location. Vehicle tracking systems can show exactly where each car or van is in real time, regardless of whether it’s on the move, stuck in traffic, or parked up. It also shows how long the vehicle has been on the move, and the distance the driver has travelled. A business can take advantage of this real-time information to be more efficient with its scheduling, such as by potentially changing a driver’s route to pick up any new jobs as and when they come in. Vehicle tracking systems can also offer live traffic updates, and reroute drivers to quicker, and more fuel efficient routes to avoid getting stuck in traffic jams.
Users can also track how much fuel is being used, and whether a driver is driving economically by keeping an eye on idle times, breaking times, and what gear the driver is in. Knowing how to drive more efficiently can slash fuel costs by up to 30 per cent. This saves money for the company, and it’s better for the environment.
Vehicle tracking systems can also keep an eye on little things in the car, such as driver behaviour, and send alerts for when a break is required or if the driver is speeding. It’s important for drivers to take regular breaks when driving for long periods of time, to reduce the chances of accidents on the road. The Department for Transport says that more than one-fifth of motorway collisions are caused by drivers falling asleep at the wheel, and up to one in 10 crashes on all of Britain’s roads — which adds up to about 23,000 a year — are all linked to fatigue.
Is a vehicle tracking system worth it?
Businesses that rely on pick-up and delivery services may be looking for ways to save money on fuel, and improve on customer service aspects. A vehicle tracking system can identify how efficiently fuel is being used, allowing businesses to instruct drivers on how to drive more efficiently to save fuel.
Users can also take advantage of the GPS system in order to maximise business opportunities by taking on last minute jobs if a driver is already nearby. Businesses that pay the initial fee for the system can find themselves saving money elsewhere, such as on fuel, while also enhancing their customer service levels by sharing up to date ETA’s with customers using the live GPS feature.
It’s worth noting that the price offered is offered per vehicle, so small businesses can also benefit from a vehicle tracking system before scaling up to suit the needs as a business grows and develops.
photo credit: Sky Noir Something about a Truck via photopin (license)
Advertising is one of the prime revenue builders for many businesses, but setting a reasonable budget can be difficult. Since advertising is such a great way to raise brand awareness and draw in more customers, it’s easy to get carried away and spend far more than you need. At the same time, if you are too conservative with your marketing spend you might not get enough exposure, and your business could struggle.
The best way to address these issues is to plan an advertising budget based on careful deliberation and concrete data. Here’s how you can do just that.
Get a media audit to better understand your spend
One of the best ways to improve your advertising budget is to break down and analyse what you have spent on marketing in the past with a media audit.
If your budget is small, you may only use one or two media channels, but a larger company will likely be using several different medias, such as:
- social media,
- pay-per-click Google ads,
Your media audit should look at each media individually in order to properly evaluate the spend relative to that media type and its costs. Broadcast media won’t have the same pricing as print media, for example.
If you are working with only a small scale media budget and only one or two types, then you might be able to carry out your audit in house. If you are using a media agency or are working internationally, or with a range of medias, then you’ll want to get your media audit carried out by an independant company.
Media intelligence experts Auditstar offer a media audit that helps businesses find and sort through this information, working with media agencies to give business owners a clear insight into which parts of their advertising strategy are the most effective, and which parts are the least. Cleverism has a breakdown of techniques for tracking marketing success for those who want to try it themselves.
Evaluate media spend effectiveness
A media audit will allow you to see how well your media agency is doing, but will also give you clear indications of how effective your media spend is. Specifically, it will tell you which medias are the most beneficial.
Be aware that market changes mean that certain media might be better one year. For example, print media is becoming less valued by many readers and industries, but as a result it speaks to a more luxury and exclusive market.
Once you know which marketing avenues are connecting with your target audience, you will be able to adjust your budget by spending more in the most effective areas, and less in the least effective areas.
Check out your competition
Companies rarely make their advertising budgets public, but from looking at your competitors’ marketing campaigns you can try to gauge how much they are spending, and therefore how much you ought to be spending too if you want to keep up with them.
It’s important to be aware of where your competition is choosing to be visible, both industry-wise and at your business size. Choose your media to be seen as competitive, by appearing in the same TV slots, or target new avenues they haven’t invested in yet, such as social media video interstitials.
Set clear targets and goals for your next campaign
It is far easier to set a budget for a marketing campaign if you know what you are trying to achieve. With a target, you can do a better job of measuring success; if you miss it, you failed but learned about the market for the next campaign. If you reach or exceed it, you’ve succeeded and can push for bigger and better results.
Your targets should be as idealistic as possible whilst still being achievable. Some businesses use the SMART target-setting technique in their marketing strategies. SMART stands for Specific, Measurable, Agreed-upon, Realistic, and Time-based.
A specific target like this in a marketing context could be to increase Twitter engagement by 20% in three months. Or to increase overall brand awareness by 50% over a year. With solid targets like these, you will avoid spending without specific intentions: a surefire way to waste money.
The underlying principle for all of this planning guidance is this: don’t spend more than you can afford. A business should set an advertising budget in proportion to its size.
Apple may have recently upped their spend to a historic $1.8 billion per year, but it would be absurd for a smaller business to spend anywhere near that amount. At the same time, it is important to spend something on advertising, and to make sure your advertising budget is not too small to be effective.
To get this right, you have to make sure your budget is completely proportional to the size of your business. As Forbes advises, this involves thoroughly assessing your financial situation, looking at how much reliable revenue you make each month then deducting the cost of expenses from the total to find out just how much you can afford to set aside for advertising.
photo credit: Visual Content Social Media Icons Color Splash Montage – Banner via photopin (license)
Choosing to become an entrepreneur is one of the toughest choices to make. Regardless of the uniqueness of the business idea and your planning or management skills, it is so easy for your business to fall off the high profitability cliff. The reasons for this include the fact that businesses face internal and external risks. The other reason – we have a habit of spending more when we earn more. This shouldn’t be the case as any financial analyst will tell you. You’ve got to strike a balance between expenses and savings for business growth.
First, you must make sure that you have all the right documents specific to your business structure. This makes sure that your efforts of growing income, building wealth, and eliminating debt don’t lead you into legal trouble. The legal advice will also be influential in investments. To save more money once everything is in order, do the following:
#1. Switch to internet marketing and advertising
Yes, the initial investment into the best online marketing strategy may be expensive in the beginning but, with the right skill set, you will reap satisfactory results. The best of these internet marketing strategies start from employing the best SEO techniques. You’ll need to have an online presence to get started. SEO is the marketing engine that will drive web traffic, increasing the number of leads and boosting sales.
Your business spends a lot on salaries, office space, or insurance. Here is what you can do in the case of salaries – rather than hiring a full-time HR team, why not hire a consultant on a need-basis. This way, you get to negotiate for cheaper services. To be on the safe side of the law and to avoid taxation lawsuits, make sure that you sign the right contracts for independent contractors.
#3. Take your operations to the Web
In-house software and servers seem like the best business investment you could make but, these assets are expensive. They come with maintenance and operational costs which you cut avoid or cut down if you pick affordable alternatives. Consider open-source and cloud-based solutions. This way, you will host all your data in safe locations, and you don’t have to pay for upkeep costs. Just ensure that the company you choose to work with has trustworthy security applications, and other users can vouch for their services.
#4. Go Green
Make the big move and save Mother Nature. Apart from the great PR, you save money. Some of the changes you may wish to incorporate include switching off power at the end of the work day or switching to solar energy. A programmable thermostat (Smart Thermostat) will cut climate control costs without compromising the comfort of your HVAC system. You may also consider using light-blocking blinds and curtains, seal heat loss points, install double pane windows for insulation, and reduce paper use.
#5. You don’t have to buy new equipment
If you must buy equipment, consider getting the gently used ones. Many online stores are selling these including Craigslist. You may also go to auctions because the goods there are often in great condition and sold at highly discounted prices.
#6. Consider telecommuting
Go mobile and encourage employees to work remotely if possible. Besides cutting down business costs, telecommuting improves employee morale and job satisfaction. You need these if you are to break even and grow your business. You’ll find that you don’t need all that office space. You will also cut down employee commute costs and time spent traveling to the workplace daily.
If you are ready to save more money for your business, consider these cost-cutting and money saving options.
photo credit: HowardLake Cut costs via photopin (license)