10 Money Smart Ways To Get Re-Elected

What office are you running for? Did you know your seat as treasurer of your personal finances is always up for grabs? Sadly, thousands of people a year don’t realize this. They blindly hand financial control of their life off to credit card or debt consolidation companies.

Will your financial constituents re-elect you this year? Follow these ten tips and getting re-elected will be as certain as money in the bank.

1) Know your Constituents Needs
Who are your constituents? Your family and friends; maybe your community. What do they need? The only way to find out is to ask. Sit down and find out their dreams and goals. If you prioritize the list and focus on meeting their most important needs, you will have a satisfied base of support!

2) Have a Good Record
The election debate always turns to a person’s track record. Your list of goals and dreams becomes your election platform. They should guide you in the financial decisions you make in the year to come. As an elected official you have the responsibility of answering to your constituents for the choices you make. Popular or unpopular, if at the end of the year your decisions stayed true to the goals and dreams list, re-election is just around the corner.

3) Keep your Constituents Safe
Will your supporters feel safe voting for you again next year? Do you have an emergency fund built up for a rainy day? What about the appropriate insurance to cover against the unforeseen? Have you put the appropriate security measures in place to protect their personal information?

4) Cut Spending
Have you cut pork barrel spending on special interest projects such as a Prada purse for her or a 60 inch big screen for him? Have you reduced the nickel and dime expenses that add up over a year?

5) Reduce the Deficit
Do you have a plan to pay off the debt? Do you have a plan to keep the debt away? Did you use credit for big purchases or did you save up and buy with cash? Have you kept a clean credit history so if you need to borrow in the future you can do so at low rates?

6) Reduce Taxes
Have you reduced the tax burden on your constituent’s wallets? Have you done tax planning to increase the amount of money they keep from their paycheck?

7) Build Wealth
Are you building the treasury through an automatic investment plan? Are you keeping good counsel for growing and protecting the assets of the community? Have you diversified the economy so that you’re not dependent solely on one income source?

Give Back
Are you giving time and money back to the community? Are you working to build lasting relationships and helping those that need it the most?

9) Add Revenue Streams
Creative officials find ways to use the strengths of their community to bring in extra money. What untapped talent do you have that could earn extra cash for you and your family?

10) Be Efficient with their Money
Have you made the treasury more efficient with direct deposit, online bill pay, and electronic accounting systems? Nothing upsets voters more than wasting their time and hard earned money.

---

Credit Card Hangover

Alcohol + Easy Credit = Big Money
Consumer credit cards are a boon for the bar industry. This realization came to me last night at a friend’s surprise birthday party at a popular watering hole. We arrived early in the evening to gather for the surprise and people-watched as customers trickled in. The vast majority of people pulled out a Visa, American Express, or MasterCard and started a tab.

No Cash, No Pain
People are usually out to have a good time and don’t want to worry about money. Using a credit card makes this easy to do. Psychologically, it’s much less painful to order a refill or another round when a person doesn’t have to plop down the cash. Particularly so when considering that drinks at most restaurants or bars are overpriced. Keeping a tab on a credit card prevents people from realizing their favorite drink costs $6.50 a pop.

Winners and Losers
Obviously this cocktail of expensive drinks, easy credit, and impaired judgment can add up to a huge bill at the end of the night. The house definitely wins on this one. I’d be interested to see a graph that compares the average amount spent on drinks for the 10 years prior to the easy availability of consumer credit cards and the 10 years following. It’s just a guess but I’d imagine spending went up considerably.

Making Others Rich
Lets say you setup a night out with 10 of your friends and everyone spends around $50, you just made someone you don’t know $500. Why not invite your friends over to your place instead and spend $100 getting food and drinks for everyone? You just increased the net worth of your friends by $500, how’s that for an easy way to make others rich? Don’t want to spend the $100 yourself? Everyone brings their own drinks; you still saved everyone a ton of money.

---

Financial Checkup – Find a Mentor

Principle 4 – Find a Mentor
What do many successful people have in common? They learned their habits from someone else who was successful. The search for a mentor is basically a search for experience. You are looking for someone who has accumulated knowledge and has turned their mistakes into learning opportunities.

Who Should Be My Mentor?
For our physical health, we turn first to licensed professionals. We pay doctors, nurses, and specialists to diagnose our problems and give us healing and preventative advice. Some of us hire physical trainers or nutritional advisors and some of us just learn from a friend. They all mentor us in different ways and we have different levels of expectations for their assistance.

Financial Mentors
Professionals
We can use the same combination of mentors for our financial health as well. Licensed professionals, such as certified financial planners, typically provide the most customized level of service, however, will cost you the most money.

Resources
Although it helps to have a personal relationship with someone for them to be your mentor, it is not required. You can learn from successful people through their writings in financial books, magazines, websites, or newsletters. You can attend training seminars or online courses that they offer.

Friends & Family
If you are fortunate enough to have a good relationship with someone that has done well financially, ask lots of questions and look for examples. See if they’re willing to teach you the things they know. You can also learn from people that have financial issues. Seeing what other people did that failed can be a learning experience as well, learn what not to do.

Why Over What
When learning from a mentor we may get into the bad habit of only asking them what to do, and not learning why they recommend it. Understanding the reasoning behind the recommendation does two things. It helps you learn the information, process, and habits that go into making the decision. The goal is to be able to apply the principles to pick out the best choices yourself someday.

Second, it allows you to use the common sense test. Remember, you are the one ultimately responsible for your financial decisions. Don’t follow their advice if you understand the reasons behind their suggestions and don’t agree with them. Blindly following the recommendations of a financial mentor can lead you into trouble.

---

Health Care Flexible Spending Accounts

How Much is Too Much?
Since taxes are our biggest expense, we’re all looking for ways to reduce them. If your employer offers a flexible spending account you can reduce your taxes by setting aside pre-tax dollars from your paycheck for health care use. The question I fight with every year during open enrollment, “How much money should I put into my flexible spending account?”

Is a Flexible Spending Account Worthwhile?
For many of us, flexible spending accounts are the only way to get a tax break for medical expenses since they are only deductible to the extent they exceed 7.5 percent of our adjusted gross income. If you contribute to a flexible spending account it will reduce your adjusted gross income in the eyes of the tax man, which lowers your federal, FICA and, frequently, state taxes.

The current annual maximum contribution allowed by the IRS is $5,000 if you are a single parent or married and filing jointly; $2,500 if you are married and filing separately. (The regulations also allow your employer to cap the maximum contribution amount below the IRS numbers). Of course, your expenses may be lower than these maximum but if you can reduce your taxable income a few thousand each year that’s more money in your pocket.

The Dilemma
Due to current IRS rules you lose any money you contribute in a plan year that is not spent for approved medical expenses by the end of the year. An article by Bankrate.com highlights this is a problem that many people face:

“Studies by benefits specialists regularly show that employees typically forfeit more than $100 each year in flexible medical accounts.”

So we have to weigh the cost savings against the amount we could potentially lose by over contributing. It seems to me the big question becomes, “How sick will I be next year?” A rather absurd question, isn’t it? Obviously, if we could predict the future, we would be rich beyond belief and wouldn’t need to worry about setting up a flexible spending account. Next article I’ll talk about the process I go through to come up with the “magic number” to contribute.

[tags] Taxes, Flexible Spending Account, Health Care [\tags]

---

Ghostly Profits, Opportunity Costs, and Inflation

Golden Ghosts
The ghosts should make me around 141% return on investment. I went against my own advice from a previous post, and made an investment in Halloween decorations. The positives and negatives I discussed still apply BUT I ran across an opportunity to buy at a 75% discount to the market price. How could I pass it up?

Halloween Profits
I spent $121.25 for decorations that normally go for $485. Based on the formula I use to price all my eBay investments, I should net around $171.41 when they are sold. Even if I was 20% high in my estimates, I’ll still net $84.99, about a 70% return on investment.

Sitting On Cash
You don’t care about how well ghosts will sell on eBay, but what you should care about is the brief thought I had while making this investment. Typically, I expect to sell my eBay investments 1 day – 3 months after buying them. Obviously the price for this investment was discounted so heavily because Halloween products are a cyclical item and I bought at the end of the cycle. (Too bad all cycles aren’t as easy to predict as “always buy on November 1st”). Which means I don’t expect these items to sell until about a year from now.

Time Value of Money
So now I have $121.25 worth of stuff sitting on a shelf for a year with inflation and opportunity costs eating away at the value of my investment. The important thought I referenced earlier is as follows. “If I’m investing this money now and won’t see any return on it for a year, would it be better invested in another way?”

The reason this is so important is that opportunity costs and inflation are so easy for us to overlook when making financial decisions. Investopedia has a good illustrative article that explains how the time value of money can affect our pocket book based on different decisions we make. The decision for me was easy, had I bought shares of stock or a mutual fund I might have expected a gain of 5 – 15% over the next 12 months. Compared with a 70 – 140% return on investment the choice was simple.

Tax Time
“But I don’t sell things on eBay or invest in stocks”, you say. It doesn’t matter; this principle still applies to you. A Kiplinger Personal Finance article tells us that “the average taxpayer is having nearly $185 too much withheld from his or her pay every month.” That comes out to $2,220 a year you don’t have working for you. While the government is holding onto your money, missed interest income and inflation are eating away at the value of the dollar you worked so hard to earn!

The Point
So what am I saying?

That you should reduce your withholding if you’re withholding too much tax?
YES!

That you should invest your money?
YES! Whether it’s selling on eBay or investing in stocks, make your money work for you.

That you should be aware of the impact that inflation and opportunity cost have on your financial decisions?
YES!

That doing these things will help you live a Money Smart Life?
YES!

---

Financial Procrastination

401k Overachiever
I contribute the maximum amount to my 401k each year. Earlier this year I updated my withholding percentage to 25% of each paycheck. The plan was to contribute the maximum as quickly as possible. Once I had hit the cap on annual 401k contributions, I’d use the money for other investments outside of the retirement account.

I was discussing my plan with a friend at work, who I think lives a money smart life, and he mentioned that my strategy had a flaw that would cost me hundreds of dollars. Our company matches up to 3% of each 401k contribution. If my contribution percentage was too high and I maxed out the 15,000 cap for 2006 by the fall, then I’d miss out on the 3% match for the remainder of the year’s contributions.

Procrastination Sucks!
I thanked him for his insight and put it on my list of things to do. It made sense to lower my 401k contribution percentage but I had plenty of time and would get around to it. Wouldn’t you know, time passed faster than I hoped and I’ve hit the max. I’ve missed out on the matching for the rest of 2006, money down the drain. My loss. If you take it to heart, it could be your gain.

The Cost of Procrastination
A Google search on Financial Procrastination led me to an article from the newsletter of Richmond Financial Associates that discusses the potential costs of procrastinating financially.

One of the things that rang true is that taxes, inflation, and procrastination are three main barriers to accumulating wealth. While taxes and inflation are almost a given, procrastination is of our own doing. We have enough trouble meeting our financial goals as it is why self inflict financial injury?

Procrastinate No More
Obviously financial procrastination does not lend itself to living a money smart life. I’m going to come up with a list of all the financial matters for which I’ve managed to delay action and get started on them this weekend. Has financial procrastination bitten you in the past? How do you avoid putting off your financial maintenance and decisions?

---

Halloween Profits

Night Before Halloween
It’s the night before Halloween and you are without a costume! You show up at the Spirit Halloween store and can’t believe how much they are charging for this stuff! A Captain Jack Sparrow outfit for your son is $30, the little Little Bo Peep costume you’re eyeing is $60, and to make your husband a Ghastly Goul it’s $50! If you think the costumes are scary, just look at their prices!

Big Business
An article on about.com gives the numbers collected by the National Retail Federation (NRF) on the business of being scary for a night. With a projected $4.96 Billion to be spent by consumers in 2006 on Halloween decorations, candy, and costumes; Halloween is currently the sixth-largest spending holiday of the year.

Spending Trends
The NRF 2006 Halloween Consumer Intentions and Actions Survey found the following trends:

• 63.8 percent of consumers will celebrate Halloween this year, compared to 52.5 percent last year
• The average consumer celebrating Halloween will spend $59.06 on Halloween, compared to $48.48 last year

Spending Amounts
The article breaks out the 4.96 billion between decorations, candy, and costumes:

• $1.31 billion on decorations, an average of $15.63 for those planning purchases
  67.0 percent of consumers plan to purchase Halloween decor
• $1.57 billion will be spent on candy, with 95.7 percent of consumers buying. The average consumer plans to spend $18.72
• Total spending on costumes, including children’s, is expected to reach $1.81 billion. Consumers plan on spending $21.57 on average and 34 percent plan to dress in costume

Scary Money
Why am I telling you this depressing news, that Halloween is getting more expensive every year? Because with the right timing you can use it put money in your pocket! The markups on costumes and décor are huge and with the seasonal nature of the products, the markdowns begin quickly. Already, on the night before Halloween, the Spirit Store has discounted their items online 50% or more. You can find $80 decorations on sale for $30 and $130 costumes on sale for $50!

If you have extra cash and somewhere to store the loot, now is a great time to score some great bargains. Following the time tested strategy of buy low and sell high, I’d say now’s the time to buy. Load up on the deals and next Fall sell it on eBay.

What to Buy?
Since candy has a shelf life and the margins are pretty low I’d stay away from that. Decorations net a fair amount but they are harder to ship and take up more storage space. I’d go with the costumes. Statistics show they have highest total amount spent yet the smallest percentage of consumers are buying costumes. This translates to the highest per item per consumer, $21.57, and means higher profits for you. Plus they are easier to ship and people need new ones every year. Good luck shopping!

---

Making a Difference

Hello Hong Kong
Based on the information from sitemeter.com, I have my first piece of circumstantial evidence of making a difference in someone’s financial journey. A search on Yahoo Hong Kong led a reader from Hong Kong to MoneySmartLife.com. They read the post “Achieve Financial Independence Week” sponsored by American Century Investments and left the site by clicking on the “Declaration of Personal Financial Independence“. This document is basically a contract with yourself, committing to follow the basics of personal finance.

One Small Step
I don’t know whether they printed it, signed it, or have started to follow through. You can lead a horse to water….. My hopes are they signed it, stuck it on the fridge, and are starting with the first bullet point this week. I do know that this person may never have found the contract were it not for MoneySmartLife.com. Here’s to many more Declarations of Personal Financial Independence!

---

Financial Checkup – Influence

Principle 3 – Influence
What is the number one determinate of someone’s attitude towards their health? The family and environment they were raised in. Think about some of the common bad habits that people pick up from their family such as smoking, unhealthy eating, or lack of exercise.

The influence of our environment also determines our financial health. Do you talk about money with your family and friends? If so, is the conversation a learning experience or is it usually an argument or complaint session? If we want to improve our finances, we have to surround ourselves with positive financial influences that will help us learn the ins and outs of our money.

Principle Applied
So how do we apply this principle? Start by looking forward. Don’t worry if you haven’t had great financial influences in the past. Start surrounding yourself with them today!

However you learn best, that’s where you should begin. If you’re a visual person, read finance magazines (Smart Money, Kiplinger’s Personal Finance), or blogs (PFBlog, Blueprint for Financial Prosperity, All Things Financial). If you’re an audio learner, listen on the radio or to an audio book (Dave Ramsey, Suze Orman). If you need human interaction, find a friend or relative. If you don’t know anyone you’d trust financial advice from, join an investment club (Better Investing) in your area, and ask lots of questions!

Read about the next principle of Finding a Mentor.

---

ING Direct Bright Spots

What Bright Spots?
We keep our emergency fund in an ING Direct account and are emailed the ING quarterly newsletter called Bright Spots. The October 2006 edition contained an article titled, “Don’t let debt get the best of you”. Although it does include 7 tips on how to combat debt, the article paints a bleak picture, one that does not seem to offer many “bright spots”:

“The Federal Reserve Board just reported that American consumer debt is now at a record $2.17 trillion. For the first time in history average Americans owe more than they make. ABC News recently reported that in the last decade, while the average family’s income grew by 9 percent, credit card debt has increased 81 percent.”

Forget the Joneses
The newsletter does follow this up with a motivational message from President and CEO Arkadi Kuhlmann titled “Forget the Joneses”. It emphasizes the virtue of saving vs. spending and congratulates ING’s customers on opting for the saving route. The concept is similar to Dave Ramsey’s message, “Live like no one else, so you can live like no one else”. Basically take care of your finances now so you can reap the rewards in the future. At that point, the unfortunate Joneses will be seeing the error of thier ways, and you’ll probably be enjoying life.

Positive Takeaway
I suppose the “bright spot” I take away from this newsletter is that a large company is attempting to raise financial awareness about saving vs. spending and debt levels. The question to ask ourselves: What can we do individually to inform others of the dangers of debt and motivate them to avoid it?

---

 Page 151 of 153  « First  ... « 149  150  151  152  153 »