Managing Your Four Pillars of Wealth Creation

You may have attended seminars that teach you different strategies on how to manage your financial wealth wisely.

Have you ever wondered what YOUR REAL WEALTH is? You may have become so caught up in earning money and making more profits that you have lost sight on the things that really matter in your life. These things include your health, your family, your contentment, and your happiness.

The four pillars to wealth creation includes your financial wealth, your physical health, your mental wealth and your spiritual wealth. In order to have a completely successful and happy life you need to keep these four areas of your life in balance.

Sadly, you may have noticed or know of a seemingly successful business person who does not enjoy and appreciate the real wealth in their life. They may drive the best cars that money can buy or live in houses that you might only dream of but what good is all of these things if they are suffering from poor health, their family life is falling apart, or they have been dishonest and lost their integrity in order to acquire them. They may be experiencing severe health or family problems that all the money in the world will not cure.

If you are a person who is constantly on the move to find a better business or better investment opportunities, if you are always in a hurry and you never have enough time, just take a few minutes to reflect on your life and make sure you are not compromising your health or your family to achieve these goals. For you who do not take this time to reflect, it is important that you to realize these three things.

The first is the fact that only you can manage your spiritual and mental well-being as well as your physical health because you are in control of your actions and your feelings.

The second thing you need to realize is that you need to let past failures go, if you don't they will continue to haunt you and you will suffer needlessly.

The last essential thing you should remember is that it is possible for you to lose sight in what is really important in your life when you concentrate too much attention on things that really don't matter when you are lying on your death bed.

Through it all what is most important is in knowing who you really are, being honest with your self and being able to examine your self properly so that you will know what truly makes you happy and satisfied.

I wrote this article not to tell you that money doesn't matter because it does. The real question here is "What are you willing to sacrifice to have more money?"

Here are two questions you need to ask yourself.

The first is to ask yourself whether you will allow stress from your work or business to hinder you from having the joy in your life you want. It is possible to become so caught up with problems involving your work that you might not notice that you are continually making your body suffer from stress and neglect.

Then the next thing you need to ask yourself is whether you will continue to give time to activities that will not provide a significant improvement in your way of life.

You may have heard of time management skills and its importance, are you allocating your time wisely to fruitful pursuits? Are you using your time to bring balance into your life? Charles Munger, Warren Buffett's business partner in Berkshire Hathaway said that he uses the first hour of his day on improving him self and the next 9 hours of the day he sold to the highest bidder to provide a living for his family and money for his investments.

It is important to answer these questions honestly to determine if you are really living a balanced life or has your life become out of balance? The key2wealth.net web site is dedicated to providing balance in your life using the four pillars of creating wealth in your life.

Treasure Hunting

Find new uses for the financial tools you have lying around the house! Life insurance, investments, and even your credit cards are all waiting for you to find a new purpose for them - one that will increase your wealth and get you on the road to financial independence.

I'm a financial educator by calling and by profession. But when you get to know me and my family, you will discover fairly quickly that we are collectors of old, fun or unusual things. Some people might call it junk, and in fact that's exactly where my husband finds many of our treasures - in the junk other people throw out.

Garbage to Gold 
We've all heard the saying, "One man's trash is another man's treasure." Well, in my family, we find so many treasures that we have turned it into a side business for my husband. He is very handy so it's pretty simple for him to take an old rusted, broken such-and-such and give it a quick sanding, glue and some paint and 'voila' - it's better than new.

Now it's not junk that I want to write about. Well, it sort of is. Treasures are all in the eye of the beholder, right? In other words, how you perceive something will give it either value, or not. The trick is to see value from multiple perspectives.

Let's look at junk for a minute more, then apply the concepts to financial items.

I'm looking around my office for an item I can use as an example of some junk that has been re-purposed, and realize there are too many items to choose from.

I have a rusted watering can holding silk roses on my desk, a post office sorter holding up my desk and organizing my papers, a carpenter's nail box holding my paperclips and sticky notes, an old lampstand holding my pen, a solid maple wooden kitchen counter as my desk top surface, faded drapes, remade into blinds, a very high-tech keyboard tray rescued from a dumpster, and one of my all-time favorite junk makeovers is my office chair covered with an old leather coat.

A Second Look at Everyday Items 
While I'm not suggesting you all become junk collectors, I'd like to share with you some of the questions we ask when we see something discarded at the side of the road or offered inexpensively at a garage sale:

What could this be used for? Who could use this? How could we re-make, or re-do this? Where could it be used? Why would someone want this? What would need to be done to re-purpose it? How much time and/or money would that take to accomplish?

Now let's look at financial things: credit cards, mutual funds, life insurance, real estate, your job or profession. Start asking some of the questions above, and rather than the usual answers, keep asking and soon you'll start to come up with answers like this:

· You can use credit cards to increase your wealth and help you reach your goals;

· Mutual funds are a fabulous way to expand your financial knowledge and learn investment savvy;

· Life insurance has wonderful applications for you while you're alive;

· You can purchase real estate for purposes other than providing the home you live in or an investment property you rent or flip;

· Your job or profession has multiple ways you can earn income from while still meeting the requirements of your employer and without you having to work overtime or pick up another job or contract.

Concentrate on the possibilities 
The key is to keep asking yourself and others and never let yourself answer the question with a 'can't' or a 'but' or an 'I tried that', or something similar that says, 'that will never work'.

How do you know? How important is your reaching your goals? I realize it is easier to look at your current situation and think it's all junk, that you've "wasted your money, your time, and coulda, shoulda, woulda done things differently if only..."

However, step number one is to start where you are. The past is gone and the future hasn't arrived yet.

Where you are is where you're supposed to be. The search for your treasure starts here and will take you on an amazing journey uncovering hidden gems along the way. You'll climb some mountains - maybe even climbthem sideways or backwards, and find new and interesting uses for the transactions you make every day.

You are treasure hunting for your goals and dreams so you need to learn to see the 'junk' in your life as beautiful jewels that all add up to your overall life's wealth. 

Hot Tips to Grow Your Super

The superannuation industry in Australia is going through a remarkable period of growth and media awareness. (We have all seen the recent frenzy of advertising activity, press and TV coverage.)

Today, ordinary people are now realising that a Government pension won't give them the lifestyle they want in the years when they are not earning an income. The need to save money for the future is more than a hot topic, it has become a big wake up call to millions of workers who have low superannuation savings.

The standard superannuation contribution by employers is currently 9% of your salary, but the reality is this is not enough to cover basic living expenses and bills in retirement, never mind that elusive trip of a lifetime overseas. 

So how about some easy ways to grow superannuation? Here are five top suggestions.

1) Regular contributions really add up.

Starting early pays off. By putting more money each week into your superannuation account, (in addition to the 9% employer contribution) the difference can be remarkable. For example: if you added $50 a week starting from the age of 25, this grows to over $160,000 extra by age 60.

2) Hold a garage sale. Turn trash into treasure.

No spare cash? Look around your house for old furniture, sporting goods and electrical items. Put the proceeds from your weekend sale into super. Your contribution will earn compound interest until retirement.

3) 3 million Australians have unclaimed superannuation. Are you one them? Go to http://www.unclaimedsuper.com.au

One in three workers have unclaimed super. It's a huge statistic. In total, there's AU$7.2 billion, or an average of AU$1,600 per account waiting to be claimed by Aussie workers. It may not seem a large amount, but if you dropped $10 in the street, you'd quickly pick it up! What's more, this is a no cost service and it also allows you to transfer old super into your current superannuation account.

4) Roll your super into one fund. Pay less fees.

If you have worked casually or moved around from State to State, you may have several superannuation accounts with low balances - and you're paying fees for each one of them. Fees are taken from any investment returns you have made which mean less money in your account. The higher your fees are, the harder your fund's investments need to work to provide adequate returns.

It makes sense to consolidate all your balances into one account. One fund is easier to manage. Less paperwork to worry about. And of course, you save on paying fees. It is important to look around and select funds which charge low to reasonable fees.

5. Choice of Fund. Your personal situation.

On July 1st 2005, a major industry initiative took place with the launching of "Choice of Fund". Are you one of the many eligible workers who can make a new choice about which fund you belong to and where your super is invested?

A word of advice, do your homework. Don't just listen to your mate Bob!

Compare industry performance and past results. Look at the entry fees and exit charges you may have to pay. Review member benefits such as life insurance coverage. (Will you need a new medical to get the same coverage you currently have?) 

Changing funds could be a good move, or may not improve your returns at all.

The final tip. Whatever you do with your super, think super carefully.

A Different Way to Look at Debt

The majority of 'financial gurus' will advise that, in order to become rich, you should work hard and pay off debt. They believe that all debt is bad and that the less debt you have the better.

However, sometimes this is not the case and the advice of 'get out of debt' can be extremely limiting and can actually STOP someone (like yourself) from becoming rich.

In order to get rich you need to understand the different types of debt, and you then need to use the good kind to make yourself rich. The two types are:

1. Bad Debt - This is the one that you have to pay for, that takes money out of your pocket each month in repayments. Usually credit cards, personal loans, car loans or home loans.

2. Good Debt - This is the one that puts money into your pocket, that earns you money that you wouldn't have been able to earn otherwise. Eg. Debt from purchasing a positive cashflow property where rental income is great than all expenses.

The thing that determines the good from the bad is the effect it has on your cashflow. The good adds to your cashflow each month, the bad takes away from your cashflow each month. Good debt makes you richer and richer, bad debt makes you poorer and poorer.

In order to look at debt in a fresh way you need to look at your debt in terms of cashflow, not in terms of the overall figure or net worth. So instead of saying "I have $20,000 of debt" say "My debt costs me $100/week".

By looking at debt in this fresh way (looking at cashflow instead of the figure) you can begin to see whether your debt is good debt or bad debt.

For example if you think all debt is bad then when someone says pay off all debt you will agree with them. But if you look at your debt and you see that your $20,000 of debt is making you $1,000/month, then the advise to "pay off all debt" is stupid advice.

By looking at debt in terms of cashflow you can become financially free quicker and you can easily reduce the stress of your debt.

My wife and I had around $20,000 of personal debt from before we got married. That figure "$20,000" was quite overwhelming for us. But, by looking at debt in terms of cashflow, we can then see that our debt is currently costing us $100/week.

By looking in terms of cashflow I have shifted my thinking and am now looking at ways for our debt to cost us $0/week. Then it will have no effect on our cashflow and we can keep it as long as we want.

If I just looked at debt in terms of the amount of the liability, I could miss opportunities to make money while I was busy paying off my debt.

I am not a financial advisor and this email is purely to educated and to get you thinking. Don't take this email as advise for your personal situation. I am not saying that you should rack up loads of consumer debt if you can make it so that it costs you $0/month. I just want to offer an alternative to the way everyone thinks about
debt and money.

Let me share with you my method of getting rid of my debt so that I will become rich in the process:

1. Minimize bad cashflow from my debt - Lower the cashflow from my debt for $100/week to about $10 through different financing options and lowering interest rates. 

2. Use the money I would have used to pay off debt to buy assets - Instead of paying $100/week I am only pay $10 per week so I have $90 per week left to invest in assets that generate an income for me. For me those assets will be positive cashflow real estate. 

3. Allow my assets to cover the costs of my debt - Because my assets are making money each week I can then use that money to offset the costs of my debt. My debt now costs me $0. 

4. Allow my assets to pay off my debt - Inflation causes the income
from my assets to go up, while my debt repayments stay the same, so over time I can make extra repayments onto my debt from the income my assets are generating me. 

5. Have no debt and a bunch of assets - At the end of it I have payed off all my debt without working hard for it, and I now how a bunch of assets that are STILL generating me money every week. So I am now richer than before.

If I was to just pay off my debt then I would have worked really hard and payed off my debt, but I would have nothing to show for it at the end of all my work. At least this way I end up with no debt AND assets that generate me income.

So think about your debt in terms of cashflow and think about ways you can cause your debt to cost you $0/week or even make you money.

Becoming financially free in just 5 years is possible for anyone. It doesn't matter what your current financial situation is, you can become rich and never have to work again in just 5 short years. You don't need a high paying job or a get rich quick scheme, you just need real training on creating real strategies for getting rich

How To Deal With Your Creditors

However far you are along the road of financial/debt problems, the same principles apply to dealing with your creditors.

However rude, intrusive, threatening the correspondence/telephone calls FROM your creditors, your correspondence/phone calls TO your creditors must be:

* Calm
* Brief
* Factual
* Relevant
* To the point

You must create the impression that you are efficient, knowledgeable and trustworthy. The person dealing with your correspondence is merely doing their job, which is acting on behalf of their employer -- to whom you probably owe money. This person probably has the opposite point of view from you, but it is not personal and you must not let it become so.

Just as you would, this individual will respond better to a person who appears to be calm, and believable, and know what they are doing.

How can you appear calm and believable, efficient, knowledgeable and trustworthy, when you possibly owe more than you can afford and have probably made past mistakes? The answer is that your past history is less important to the person dealing with your account than your present attitude and what that promises for the future.

That is not to say that what you have done in the past has no relevance, or that you can go on to make promises you don't keep - far from it. However, if you acknowledge your current problems, explain your past mistakes if required, and most important of all, do everything you say you will do from now on, you CAN improve your relationship and situation with your creditors.

If you react with anger, if you are agressive, if you fail to keep your promises, you will merely make your problems worse.

Be calm, be prepared, and make these all-important first steps work in your favour.

Mend Your Money Mistakes

Don't tell me you haven't made any money mistakes - better yet, don't tell yourself you haven't made any money mistakes.

Everyone makes them and I don't mean just the big ones - on a day-to-day basis, we are all guilty of making money decisions that are not supportive of our bigger vision for our life.

Let me start then, by sharing with you my big mistakes from last year because a big part of mending money mistakes is to know what they are.

Mistake #1 - Not Looking After Yourself 

I did not take enough time to look after myself. While I love my work and almost everything about it, believe it or not there are other things I enjoy doing.

Because there is always something fun and exciting and necessary to do, I did not take the time to exercise enough, go to bed early or take time out to just be.

I know that last year I was more a human doing than a human being, and that if I continue on this path, I will wear myself out and end up no good for anyone.

All work, even enjoyable work, is not a balanced life or sustainable lifestyle.

Mistake #2 - Neglecting Time With Family and Friends

I did not spend as much time with my family and friends just for fun.

I am extremely fortunate because I work from home and my family is around all the time.

We make an extra effort to plan travel together, and while we probably spend as much time together as we can given work, school and other social commitments, we did not take the time to just 'hang out' together and play a game, watch a movie, go for a hike, or bike-ride or putter around the garden.

Mistake #3 - Failing to Follow Up and Stay in Touch 

I did not communicate enough with my clients and prospective clients. And, I did not stay in touch with all the amazing people I have met throughout the year.

Throughout the day, there are always lessons and situations that come up that are valuable teaching opportunities.

For some reason, I have not taken advantage of all the amazing technology available to share these thoughts with you.

It is one of my commitments for this year - to be more consistent with the blog, audio, video and written communication.

Mistake #4 - Trying to Do Everything On Your Own

I continue to fall back on an old habit - trying to do everything myself.

This isn't because I don't have great people to help me, it's just that for most of my career it was me.

I was self-employed and if something was going to get done, it was going to happen because I made it happen.

Well, in a corporate environment, if something is going to happen it's because the team made it happen.

Mistake #5 - Starting Something New Before the Prep Work is Done

And, the big one, I started something before something else was done.

This mistake needs to be written into an entire book.

Let me summarize by giving you an example, because in 2007, I experienced the money mistake that I see again and again and again with my clients and the people I meet, just in different circumstances:

I put a budget together, but before the money was completely pulled together, I marched forward.

That single mistake has cost me stress, money, lost opportunities and the most valuable thing of all - time.

Starting something new before completing something else is a common money mistake.

It's the mistake that people make when they start saving for something - they buy it because it goes on sale, not because they have the money for it; and it's the mistake people make when they retire - they leave work because they have reached a certain age - not because they have arranged their finances to live a financially independent life.

Find the Right Sequence 
This mistake could be the biggest of all that needs mending for most people - to do things in the right sequence.

We have to look after details in the right sequence.

We have to look after ourselves before we can look after others, and we have to look after the details before we can realize the big picture.

Don't Slip into Crisis or Windfall Planning 

The out of sequence financial plan is everywhere with the constant tendency to jump the sequence and go right for the quick fix and to do the urgent and immediate activities rather than the not urgent but important ones.

It's constant and yet we all know the sad statistics of lottery winners who end up with very little money left, if any, within a few short years of their winnings.

That same lure is what we call windfall planning.

It's why people who receive inheritances, divorce settlements, and debt consolidations continue to struggle with money.

Take Stock of the Good You Have Done 

When we focus on what we did wrong and at the same time try to set goals, we are just creating a bigger gap between where we are and where we want to be where the bridge to connect the two is a flashing light telling us "we'll never make it because we're no good - look at all the bad things you did before, what makes you think you can get to the other side and have those goals?"

So while it's extremely important to be aware of your shortcomings when mending money mistakes, and setting and writing new goals, it is even more important that you take stock of what good you have.

And that good becomes the first step of the sequence that connects your current situation to your goals and dreams.

To start the year off and mend your money mistakes, take stock of these important first 3 steps - in sequence:

1. Where are you today (what is good and what can you do better?)

2. Where are you going (what are your goals and dreams and why?)

3. What do you have to work with (specifically, what financial and non-financial resources do you have to build your bridge with and mend your money mistakes?)

And lastly, step 4 would be to ask for support... so, how can we help? 

Which Credit Card is Right for You

If you're in the market for a new credit card, there is a bewildering array of cards to choose from. There are even more incentive offers, so how can you decide on the card that is best for you? Here are some of the factors to consider.

What Kind Of Payer Are You?

The most crucial question is whether you are a person who clears the credit card every month or whether you always leave a balance on the credit card.

If you pay up at the end of every month, then you can go for a credit card that offers an incentive. If not, then you need to look at the annual percentage rate (APR) on the card. If you know what your typical credit card balance is, look at the illustrations given by card issuers to give a guide to how much you might have to repay over time.

Taking An Interest

Even with interest rates, you need to be careful. Although your new credit card may come with a 0% balance transfer rate, this is not the only rate to think about. Look at the rate on purchases or other transactions to see what you might be paying. And remember that any payments you make are likely to pay off the transferred balance first, while any new spending accrues interest.

Hand in hand with the interest rate goes the interest-free period. This is the delay between spending money on the credit card and being charged interest. This can vary considerably depending on the card you choose. The interest free period can be as much as 56 days. And it's how you use it that counts. If you put major spending on the credit card after the statement date, you have a month till the next statement, and then a few weeks to make the payment. This can be a good way of managing cash flow.

Look At The Fees 

There are three types of fees that count with credit cards. The first is the cash withdrawal fee. Many credit card issuers charge you for withdrawing cash at an ATM. These fees can be around 2% of the transaction. The percentage is even higher when withdrawing cash abroad. If you must use the credit card, then you're better off making one large withdrawal so you don't pay the minimum fee each time. 

Getting Some Cash Back 

Some credit cards offer annual cashback deals which are great for people who clear their balance every month, but not so good for others. If you don't clear your balance, the interest charged will wipe out any cashback gains. There are also reward points schemes that allow cardholders to earn money from their spending – and spend it again with a variety of high street and online retailers.

Paying attention to these items will help you to choose a credit card that will match your financial situation.

Insuring against loss of income

For young people in particular, their biggest asset is their income-earning ability 

Not all people have enough income protection insurance.

It's amazing that so many financial planners don't talk about it. 

About 35 per cent of people insure themselves for income protection - and the vast majority of those people are self-employed. 

Many people in full-time employment rely on an income protection through superannuation that they may not actually have. 

A lot of people think they have protection through super when they don't. 

Also, people don't understand the difference between total and permanent disability benefits and temporary disability benefits. 

Take a moment to check your policy: the answer may surprise you.

Attitudes to income protection can be baffling. 

If you don't have an income, then there are all the other things that are dependent on that - you can't pay the mortgage, you can't feed the family. 

A lot of people could only go a month or two without income.

Ask the population if they have home and contents insurance and 90 per cent would say yes.
But they don't think they have to insure themselves, and they're the ones generating the money to pay for all this.

Then there's redundancy. 

Many mortgage providers offer - and sometimes insist on  mortgage insurance.

It's estimated that ten per cent of people have taken income protection with their mortgages over the long term. 

But that's more historical than current; it used to be more like twenty per cent and now it's more like five. 

People feel a lot more confident.

This sort of insurance means that if you lose your job, or your ability to earn income for another reason, the policy will continue to pay your mortgage. 

Periods vary with policies but can be one to two years.

Some institutions require people to get mortgage insurance, particularly if they are gearing heavily in their mortgage. 

If the loan to value ratio is above 80 per cent, for example, many lenders will require mortgage insurance ... with good reason for doing so: at the 80 per cent level, about 1 per cent of mortgages default. At the 90 per cent level the default figure climbs to 2.5 per cent.

Then there's the loss of income from an untenanted rental property. 

Landlord insurance can cost as little as a couple of hundred dollars and covers, for example, defects in the building or damage caused by a tenant. 

But if you can't rent it just because it's unpopular, you can't protect against that - it's a case of looking closely at the quality of the product in the first place.

Life Insurance: How much is enough?

The Two Approaches to Setting Life Insurance Policy Amounts 
You can use one of two approaches to estimate how much life insurance you should buy: the needs approach or the replacement-income approach.

Using the needs approach, you calculate the amount of life insurance necessary to cover your family’s financial needs if you die.

Using the replacement-income approach, you calculate the amount of life insurance you need to equal the income your family will lose. Let’s look briefly at each approach.

You need how much? 

Using the needs approach, you add up the amounts that represent all the needs your family will have after your death, including funeral and burial costs, uninsured medical expenses, and estate taxes.

However, your family depends on you to pay for other needs, such as your child’s college tuition, business or personal debts, and food and housing expenses over time.

The needs approach is somewhat limiting.

The task of identifying and tallying family needs is difficult, and separating the true needs of your family from what you want for them is often impossible.

Replacing Income 

Using the replacement-income approach for estimating life insurance requirements, you calculate the life insurance proceeds that would replace your earnings over a specified number of years after your death.

Life insurance companies sometimes approximate your replacement income at four or five times your annual income.

A more precise estimation considers the actual amount your family members need annually, the number of years for which they will need this amount, and the interest rate your family will earn on the life insurance proceeds, as well as inflation over the years during which your family draws on the life insurance proceeds.

Note: Do remember as you quantify the income you want to replace that Social Security provides generous survivors benefits if you’ve qualified.

Calculating Replacement-Income Amounts with Excel

If you’ve got access to a computer running Microsoft Excel, the popular spreadsheet program, you can use your computer to calculate the amount of insurance you need to replace a specified number of years of income.

Suppose, for example, that you want to buy enough life insurance to replace the income from a $50,000-a-year job for 15 years.

If you figure your family will earn 5% on the life insurance proceeds should the worst case scenario occur, you enter the following formula into a cell in an Excel workbook to calculate the replacement income life insurance amount:

=-PV(5%,15,50000)

Excel returns the formula result 518,982.90 indicating that you would need roughly $520,000 of life insurance, invested at 5%, to payout $50,000 a year for 15 years.

Two Calculation Tips 

If you want to factor in inflation because you’re trying to replace income over a long period of time, you should use a real rate of return rather a regular, or nominal, rate of return.

To calculate a real rate of return, subtract the inflation rate from the interest rate in the formula.

For example, if you expect 2% inflation, you could replace the formula shown earlier with this formula:

=-PV(5%-2%,15,50000)

Here’s a final calculation tip:

You probably want to round up your number. For example, if the formula provided earlier returns the value 518982.90, you might want to round up this value to $600,000. Or $750,000.

Editor's Note: Financial Services Online provides a free online calculator that uses a combination of replacing income and needs approach in helping to determine the amount of life insurance cover you may need.

16 Simple, Everyday Ways to Save Money

Here are 16 of the simple, everyday changes that have worked for us.

1. Use a coupon, absolutely whenever possible. I was really surprised by how many money-saving opportunities are out there when I knew where to look.

For local purchases, get an “Entertainment Book” each year and you will save on those inevitable everyday expenses ranging from dining out to accommodation and admission to movies, theme parks, etc.

For online purchases, stick to the reputable retailers. You certainly will not save any money if you are the victim of fraud or if you are simply unable to return an item. And before you start shopping, always look for a coupon code that will allow you to save on your purchase. In the past, many online retailers sent out promotional codes as a series of letters or numbers that could be entered at checkout. Now, many retailers use a button or text link that automatically activates your coupon when you click through, so it is often a good idea to find the coupon first, before you start to shop.

2. Shop around. The internet is an amazing tool for researching products and retailers, as well as for comparison shopping. We make nearly all of our large purchases online. It is also important to know where to shop. For holiday gifts, plan ahead and check out the big online discount stores. Many offer significantly reduced prices on trusted brands. And you can get great delivery rates too, even on large gifts. I once had an enormous game table shipped to me for $2.50.


3. Keep a running list of gift ideas for your loved ones. I have found that when I am confident that a gift is perfect for the recipient, I am much less likely to overspend. But that kind of inspiration rarely hits me during the pre-Christmas rush, so I need to keep a list going the whole year through.

4. Budget. Of course, it is important to know what you are really spending. For years, the budget I had in mind was really more of a “wishful thinking” budget. But this quickly led to debt. It pays to get realistic. Whether you use a computer program or a simple ledger book, make sure you know where your money is really going.

5. Save for the future. Take 10 percent of your income and put it in savings, right off the bat. Now you know what you need to cut back on (or how much more you need to earn) to shore up the deficit.

6. Plan ahead. You will want to make sure you have money in the bank for emergencies. Experts say you should have three to six months of living expenses set aside, for those just-in-case times. It sounds like a lot, but start socking away money each month, and it will add up fast.

7. Get organised. When your home is organised, you will be less likely to spend money on items that are already hiding in the nether reaches of your closet and drawers. The same goes for your refrigerator and kitchen cupboards. Purge and organize before you shop.

8. Simplify. There is a certain romance to the “simplify your life” movement. And having too much stuff really does weigh us down. Take a look at everything in your home. If it does not add joy, beauty, meaning, or usefulness to your life, give it away. And when you are tempted to buy something new, it must pass the same test.

On a quarterly basis, go through your house and ask yourself these same things again. Go through your closet, attic, garage, and basement and purge those items that do not add genuine joy, beauty, meaning or usefulness to your everyday life.

9. Reduce, reuse and recycle. A simple lifestyle, for me, is about reducing my urge to over-consume. It is about being kind to the environment. It is about spending less money on material things, so that I have more time and money to spend on memories with my family. Make changes that will help the environment and your purse at the same time. Install water saving kits on your toilet. Write on the back sides of paper. Use reusable containers in your lunches. All these little things really do add up, and it is important to show our children how we can all be part of the solution.

10. Shop without your kids. I know that if I get a shopping cart at Coles and I do not have a list, I will spend $150. If the kids are with me, I will spend even more. This is another reason it makes sense to do your shopping online. You are less likely to purchase the incidentals.

11. Make sure that your credit card is paying you back via an incentive program. I found a credit card that allows me to earn points on my daily purchases toward our annual vacation trip, including airline miles and hotel accommodations. Since most of my expenses each month are incurred at the grocery store, I found a card that rewards specifically for these types of purchases. Of course, you will need to make sure that you are paying off your balance each and every month. Paying a high interest rate on your credit card will quickly negate any savings you accrue on your incentive plan.

12. Lower your interest rates. If you are carrying a balance on a credit card, give the credit card company a call to see if they will give you a lower rate. Sometimes, it is just that easy.

13. Shop around for insurance. The money you pay for car, home, life and health insurance can vary greatly. Do some research to find out if you are getting the best rate.

14. Be wary of the influence of TV commercials and print ads, especially on your children. We hear fewer cries of “I want that!” when we keep our kids programming to those channels rely less on advertising dollars, such as the ABC and some pay TV channels.

15. Play “Time Warp.” This is a technique I first learned from “My Monastery is a Minivan,” by Denise Roy, and I use it quite a lot. It goes like this: When you are tempted to make a purchase, mentally fast-forward through the life of the item. For example, in her book, Roy thinks she needs new candleholders. She imagines spending time at the mall to find them, soon having to clean them, and then, years down the road, packing them in the giveaway box. She shirks the purchase and soon rediscovers the heirloom candleholders that are packed away right in her own home.

I like to play this "fast forward" technique in reverse, too, asking: What new clothes did I buy last season? (Sometimes, I can not remember). Where are those "I have to have it" items now?

16. Keep your mind on abundance. When you are thinking about money, it is really important to get out of the poverty mindset. Too often, when we are focused on saving money, we are living from a perspective that focuses on lack and scarcity, which tends to bring about more of the same. It has been really helpful for me to make a conscious effort to see the world as infinitely abundant and to rest in the notion that my needs will be taken care of. This is generally a simple matter of thinking more about what I *do* have than what I do not have.

All my days of penny-pinching have certainly proven to me that it truly does not take money to make us happy. Many of my fondest memories have occurred in the smallest homes. My child’s favourite playthings tend to be the inexpensive items that were never designed to be toys at all.

And it is the simple, everyday pleasures that are the sweetest, when enjoyed together.

Create a Personal Budget in 7 Easy Steps

If your financial situation is out of control it may be time to create a personal budget. This could be the decision that gets your finances back on track because it takes back control of what your money is doing.

You want your money to work for you not your creditors, which is exactly what it is doing if you are living payday to payday. Instead of paying interest to them why not make it yourself?

A personal budget will do many things for you.

The most important thing it does is let you make informed decisions about how you spend your money.

It will show you exactly what you income and expenses are and lets you make adjustments to ensure a sound financial future.

Other then taking the time to get started, creating a budget is relatively easy.

You will need a notebook or legal pad and a pencil. Draw a line down the middle of your paper, label one side income and the other expenses, and you are ready to go.

1. Gather up your last three months worth of pay stubs and any other records that show income. Total them up and divide by three to get your average monthly income. That number gets written down at the top of the income column.

2. Now for the fun part. Gather up all your bills, credit card statements, and checkbook register and start itemizing a months worth of expenses in the expense column. For those bills that fluctuate each month you can use the three month method as used in step one to get a solid average. Add all those expenses up and write the total down at the bottom.

3. This is the step most people fear. Compare your income to your expenses and see which one is more. If you expenses are higher then your income then you have a problem that needs to be fixed. Chances are you are making up this shortfall with credit of some sort. You can't build a sound financial plan if you are in debt, it's that simple.

4. Now that you have everything written down it's time to look it over carefully. Target unnecessary expenses and start cutting them. A budget gives you the power to free up money that can be used for more important tasks.

5. You can also use your newly created budget to start prioritizing your debts and which need to be paid off first. This gives you a game plan to get out of debt while actually being able to see positive results, which is a major part of good money management.

6. As you get better at budgeting you can start to refine and track your long term financial plans. You can manage savings accounts, investments, emergency funds, and retirement accounts using your personal budget.

7. Patience is required when first starting out because it won't work perfectly those first few times. Most people need 3 or so months of budgeting practice before they start to really get the hang of it.

Your financial future is in your hands. Nobody can build it for you.

If you create a personal budget you will take the first step to attaining your financial goals.

Teaching Kids About Budgeting

If you have kids, you've probably already figured out that teaching them how to handle money is one of the most important skills you'll ever teach them.

As a parent, there are two critical areas for you to take action to help your kids the most when it comes to money and budgeting.

1. Manage your money in a responsible way. 
Create a simple budget that works for you. Practice good budgeting habits - know how much you have to spend before you spend it.

By spending within your self-made budgeting guidelines, you will demonstrate a confidence and security about money that your kids will notice and hopefully emulate later in life.

Make a habit of saving. If you don't follow a budget, don't save money and you frequently overspend, you will have a great deal of stress about money which your kids will easily pick up on.

Which lesson do you want to teach your kids about money? Money is stressful? Or, money is to be respected and commanded in a responsible manner, bringing a sense of confidence and calm?

2. Directly teach them about budgeting and saving money early (before they become teenagers.)

Some experts disagree about the effectiveness of allowances and money for chores, etc. - but don't get distracted by this.

How your kids 'get' money is quite a different thing from what they do with it once they have it.

Help your kids to know the pros and cons of the different things they can do with their money.

Kids aren't generally known for having a long attention span, especially when the topic is boring, so keep your message simple.

Encourage them to save a portion of any money they get; a great idea for reinforcing this is to match each dollar they save.

Also, gradually help them to understand the different places money flows to in the adult world.

For example, explain the sales tax on the receipt for the shirt they just bought - that it is used to pay for roads, schools, etc.

Or, if you want something a little more fun for them, playing a board-game like Pay Day or the computer game The Sims can help a lot by giving them a frame of reference for understanding some of the basics of where money goes.

However, actively helping your kids to build a habit of saving money whenever they receive it, in the real world, is probably one of the best things you can do to help them build good money skills.

Explaining the pitfalls of using credit is valuable too (as well as minimizing your own use of it!), but emphasizing savings is probably more effective at a young age since it's something they can do now.

Teach them that by having a lifelong habit of saving money, they won't need to borrow as much, allowing compound interest to work for them and not against them.

When your kids get their first part-time job, continue to extend your reinforcement for saving, but now add in a proper budget.

After showing them the basics of listing their expected income along with their desired expenses and savings goals, reward them for creating their first budget.

Be creative in offering various incentives for them to stick to their budget.

By building on the savings habit you taught them earlier on, and introducing them to the concept and value of budgeting, you will have done a great deal to help your children grow into one day being responsible adults.

5 Simple Tips For Reducing Your Debt!

Are you one of the many Americans with too much credit card debt?  Don’t feel bad.  You’re definitely not alone!

There are worse things in life than debt.  But when you’re dealing with the stress of financial problems, and losing sleep, it is important to find a way to reduce the burden as quickly as possible.

Even if you’re struggling with financial problems, you need to keep it in perspective.  Because YOU have the power – no matter how bad things seem right now – to take control of your finances, and start knocking off your debt one dollar at a time!

But how can you do it when money is really tight?  And the bill collectors are calling (or will be very soon)!

No matter how much or how little debt you have, there are ways to get yourself back on track financially.  Getting out of debt is not a race.  And there are no secrets.  It’s a process.  And if it’s taken you several years to accumulate your debt, you won’t get out of debt overnight.  But you can take action today and start making changes right away – changes that will get you on the right path, and make your future a lot brighter financially!

Each change you make – even if it only saves you a few dollars at the start – will start yielding bigger results over time (and give you peace of mind every night when you go to bed!)

That’s the power of compounding.  Unfortunately, when you have too much debt that compounding works against you, and works in the banks favor.  Now it’s time to reverse that trend.

So if you’re losing sleep over credit card debt, start following these 5 simple tips right away!

1) Write a list of all your credit cards, with the amounts you owe, interest rates, and monthly payments for each of them.  You can’t develop a plan to get out of debt until you know exactly where you stand – even if it is a little painful.  Pretending your financial problems are not that bad is a mistake.  Knowing exactly how bad they really are is crucial!

2) Remove all but one credit card from your wallet or purse.  When you have credit cards with you when you’re driving around or walking through the mall, it’s easy to use them, and spend money you just don’t have.  So, pick one that you can use for emergencies.  And remove all the rest - stick them in an envelope, then seal the envelope and put it in your dresser in a place you won’t see all the time.  The less you see the cards, the less likely you are to use them!

3) Next, grab your most recent credit card statements and call all the creditors.  Ask to speak with someone who can help you lower your interest rates or lower your monthly payments.  Often, this one simple step can lower your interest rates 5-10% - and help you get out debt faster by paying off your balance quicker.  If the first person you speak with says they can’t help you, POLITELY ask for a supervisor.  And ask them for help.  If they can’t help, thank them and wait a few weeks and call again.

4) Take your list from the first step and make a goal to pay off the card with the smallest balance first.  Take as much extra money you can afford each month and add it to the minimum payment amount – even if it’s only $5 or $10 bucks!  Some financial “experts” will tell you to pay off the one with the highest interest rate first.  But you’ll see quicker results starting with the smallest balance, and get the motivation to keep going!  Then once that first card is paid off, take the money you used from paying it off, add it to the second card, and pay of that one.  Keep going until all the cards are paid off completely!

5) Once all your credit card bills are paid off, take the money you were using and open a savings or money market account, and put ALL the money you were using into the account each month.  Then you can use this account instead of your credit cards to pay for the things you need to buy!

And don’t forget - when it’s time for bed, think of something fun or positive you did that day (force yourself to think of something other than debt, money, and work) and before long you’ll be sound asleep!

You won’t get out of debt overnight.  But you can take small steps that you will pay off BIG over time.  You’ll be surprised how quickly you start making progress paying off your debts, and start sleeping better!

5 Hot Property Investing Tips

1)    Using property experts
Just because you have bought and sold a couple of houses with profit, does not mean you are an investment expert. Don’t listen to friends and family blindly – usually they have an opinion about investing, often despite that fact they are not doing it themselves. Property investing is too important an expenditure to take chances with – talk to property experts, investment advisors, finance brokers and study property reports before you make a decision.

2)    Waiting for the price to come down...
Property generally always goes up in value. It may plateau or slip back a few %, but across the board – prices are steadily claiming. So, if you wait until the prices from 10 years ago return, you will wait a long time. You are in most cases better off buying now rather then in 6 months,  as often you will pay more down the track – effectively reducing your capital growth. Having said this, the best time to invest is when you are ready to do so. Sooner than later is usually best.

3)    Emotional vs commercial decision
When selecting and deciding on an investment property – do yourself the favour of approaching this simply as a commercial decision based on figures, returns, vacancy rates etc, not what colour the walls are, whether you would want to live in it or that it is in easy reach so you can mow the lawns on a weekend. The more emotionally detached you are, the better it is. Investing is done from the head, a home is bought from the heart.

4)    Old vs New
Unless you are a tradesman or have loads of time to spare to perform renovations, repairs and maintenance, you probably are better off buying a newer investment property. Apart from the work and expense, your depreciation schedule is more substantial on a new property than an older one. After all, it is all about letting your money do the work – work smarter - not harder.

5)    Managing the Property Yourself
Unless you are rather experienced in this area and have access to the industry tools to ensure you do end up with the best tenants possible – don’t do it yourself. Firstly, if you do select a ‘lemon’ for a tenant, this can easily turn into a lengthy process in front of the tenancy tribunal, with loss of rent, loss of access to the property, presentation costs etc.  Once again, you want to work smarter not harder. So, get a good property manager to look after your investment. The percentage you pay them should outweigh any losses through your own tenant mismanagement and peace of mind is worth a lot!

Eight Ways to Raise Money For Investing

When you are new to investing you may have little or no funds with which to invest with. Let's take a look at several ways to get access to money so you can begin your investment career sooner rather than later.

1. Savings - The old fashioned way like you were told to do as a kid. Remember, all great investors are great savers. If you are not saving money now then you are never going to become wealthy until you start saving. Make sure you pay yourself before you pay anybody else. Simple but powerful words.

2. Sell something - In this modern society we live in where we just have to own the latest of everything. Well the good news about that is that you are bound to have plenty to sell. Put an add in the newspaper or the easiest way, E-Bay. Now the harsh reality, stop spending money on things you don't need. Wait until you have real wealth then pay cash for them.

3. Tax - Minimize your tax as quickly as possible. The wealthy don't become so by paying lots of tax. Get yourself a great accountant and get good advice on how to lower your taxable income. There are plenty of ways to do this. Starting a side business is a great idea. Pay your expenses and spend, then pay tax from what is left over. It is much better than being taxed and then spending what is left. This will send you broke, quickly.

4. Income - Tomorrow you are going to see your boss and get that pay rise. However, first you need to get your reasons down on paper why you should get a rise. Write down some good solid reasons why you should get one. If you don't deserve one then take a long hard look in the mirror. If you can't do your best working for someone else how are you going to give yourself the best? Be the best that you can regardless of what activity you do and the rewards will come. Ask for 10% extra. If you don't get it but you know you are worth it, then get another job. Only you will know if you are worth it.

5. OPM (Other peoples money) - The most successful business people in the world today always use OPM, always. Do you think Donald Trump puts up his own money to finance that new tower? No way, he never puts up his own money. Use the banks, or do vendor finance deals. Borrow, beg or (actually, you better not steal) borrow some more. As long as the investment pays more than the interest things will work out. You must do due diligence here. Good debt is the key here and I will do another article on good debt shortly.

6. Using equity - So you own a house or part of a house. Excellent, then you have valuable equity which the banks love and in Australia you can release about 80% of that equity. Should you spend that equity on a holiday like the rest of the herd? No. Put that money to work in property or shares and allow yourself to have the income that it produces.

7. Parents equity - Times are getting tough, that is for sure. Talk to your parents if you can and explain that it a new world for young and smart investors. Go over everything and show the folks exactly how your chosen strategy works and how you both can benefit. Profit share with them if you like. Better yet, teach your parents and give them a better retirement. It is your duty.

8. Superannuation - Are you satisfied with the institutions taking care of your life savings with various financial planners and fund managers getting massive trailing commissions? Then start to manage your own SMSF (Self Managed Super Fund) and put it to work harder and smarter. There are some awesome opportunities out there right now and you can find one that resonates with you. Pay for good advice here. I repeat, pay for good advice.

So there you have it. Eight ways in which to get a leg up in your new investment journey. You might not be able to do all eight ways, but I'm sure you can access at least four of them.

Six Tips for Money-Making Hobbies

You can make money from your hobby.


Whether you knit, or write, or make photographs, or grow a vegetable garden, or tinker with cars, or build web sites, or collect ancient coins — you can make money from your hobby.
I’m not saying it’s possible to get rich by playing your violin at weddings, or by weaving baskets from pine needles, but earning money from a hobby is a nice way to get paid for doing something you would do anyhow.


This article is the first in a series that will explore how to turn a hobby into a source of side income. In the weeks and months ahead, I’ll describe general best practices, discuss potential pitfalls, and provide case studies culled from my friends, and from the stories of readers like you. (If you’d like to share your experience, please drop me a line.)


First, by way of introduction, here are some ground-rules for making money from hobbies.


Focus on something you love

Pursue something you’re passionate about. Choose a hobby that you enjoy, and find a way to make money from it. Don’t choose a hobby simply because it might make money and then dive into it with that aim in mind. You should be doing this hobby because you love it; any side-income should be secondary.


I love to write. I was struggling with debt. I began to read personal finance books, and then to summarize what I’d learned for my personal web site. From this, Get Rich Slowly was born. Now I make over a thousand dollars a month writing about personal finance. But I didn’t start this for the money — I started this because I was passionate about the subject.
Keep it fun. Don’t let it become a chore.


Be creative
If you’re interested in making money from a hobby but don’t know where to start, think outside the box. What skills do you have that others don’t? Define the term “hobby” broadly. Find something that you can do that most others cannot, something for which other people might be willing to pay.


At my day job, I have a customer whose wife loves to cook. She turned this hobby into a part-time job as a personal chef. She prepares meals in advance for wealthy clients. She spends a few hours a day preparing a week-long menu for people who pay her handsomely for her time.
I have a friend who likes to travel. One day he discovered that he could subsidize his journeys by writing about the places he visited, and by taking photographs. Now every couple of years he takes an all expense paid vacation. He’s doing something he’d do anyhow, and it doesn’t cost him a dime.


Don’t force it

Your hobby will not make you rich. In most cases, it won’t even net you enough to allow you to quit your day job. It’s quite possible, however, to earn enough money to make the hobby self-sustaining, to keep yourself in new tools and equipment.


My brother builds speakers and works with audio equipment as a hobby. He makes some money at it. (“Spending money,” he says.) Jeff notes, “It’s not hard to make money from a hobby. What’s difficult is trying to turn it into an actual business. Moving from a hobby to a business is a pain-in-the-ass.”


Often when you try to take your hobby to the next level, the joy goes out of it. Suddenly the extra income just isn’t worth it. When I tried to turn my computer-building hobby into a business, I hated it. There’s a balance to be achieved, and if you can find it, you can have a fun while earning extra income.


Don’t underestimate your ability
It’s easy to discount your abilities. When you truly love something, your prolonged experience can give you skills and knowledge that you don’t appreciate.


For example, I have a love for early 20th-century American pop culture. My brain is filled with facts and anecdotes about once-famous recording artists. I sometimes find myself under the impression that everybody knows who Billy Murray was, or is familiar with the song “Ukulele Lady”. But this isn’t common knowledge — it’s specialized.


The same concept holds true for you and your hobby. Know a lot about Napoleonic warfare? Start a blog about Admiral Nelson. Spend time tinkering with bicycles? Open a small-scale bike repair service. Not everybody knows what you know. Don’t sell yourself short.


Market yourself

This can be difficult. In order to actually earn income, you need customers. But just as most people have a tendency to underestimate their abilities, they also tend be uncomfortable with self-promotion.


There’s no shame in mentioning your money-making hobby to friends, family, and neighbors. You needn’t be pushy. Just mention it at natural points in the conversation. If you’ve decided to do some woodworking for cash, mention this when your uncle mentions he wants to buy a new bookshelf.


Marketing can be subtle, but it’s an absolute necessity if you hope to earn money from your hobby. People need to know you’re available before they can hire you.


Hone your skill

Practice, practice, practice. The more time and energy you’re willing to devote to your hobby, the better you will become. The better you become, the more likely that you’ll be able to earn money from it.


Photography is a terrific example. If you’re willing to make a hundred images a day, you can improve your skills quickly, especially if you teach yourself about composition. You may never become a professional photographer this way, but you can develop your skill to the point where you can sell images to stock photo agencies, or enter (and win) photography contests.
Some people are born with natural talent. Most of us have to work at it.


Conclusion
Why should you care about making money from hobbies? Remember: the wealth equation has two sides. You accumulate wealth by reducing expenses and by increasing income. Often we only focus only on our careers when it comes to “increasing income”. But there are other ways to make money. One of the best is to harness a hobby.