By Diony Cespedes
Helping clients create budgets is one of the most difficult and rewarding parts of my job. My biggest challenge is that even clients who are excited about building their net worth are reluctant to create budgets. Instead of seeing budgets as tools to help them reach dreams, they think of budgets as oppressive documents, dictating what they can and can't have. This is especially true of clients who don't create a budget until their expenses are much higher than their income. Below, as promised last week, are tips we share to help clients create balance by increasing income and reducing expenses.
Earn as much as you can with your existing skill set.
Find out where you can earn the highest salary for your skills and job responsibilities. For example, if you earn $35,000 as an "administrative" assistant, you may be able to earn $70,000 as an "executive" assistant somewhere. Ask what experience you must demonstrate to maximize your salary. Then be willing to change jobs, learn new skills, and relocate to another city if necessary.
Collaborate with your social network to build wealth faster.
Start with low risk activities like buying and sharing groceries with your social network. Then move on to endeavors like sharing homes and babysitting each other's children. Weed out any people who aren't consistently trustworthy, competent and positive. Then begin building businesses and/or purchasing assets together.
Take advantage of easy opportunities to save money.
Here are three examples. If you accompany a friend on a shopping trip, resist the urge to buy something for yourself. When grocery shopping, buy the brands that are on sale. Lastly, when choosing between two equally appealing options, choose the least expensive one.
Postpone making loans and or donations.
If you don't have enough money to cover at least six months of basic living expenses for your household (e.g., $6,000-$30,000) and you are carrying high interest credit card debt, stop making loans and donations. Find other ways to help others like donating time and sharing a meal, or your couch. Once your own foundation is strong, then you can resume sharing money.
Pay more than the minimum payment on credit cards.
Paying even a few dollars more than the minimum payment can dramatically reduce the duration and amount of your repayment. For example, if you make the minimum payment on a $4,000 loan with a 15 % annual interest charge, it would take 22 years to repay the loan and you will have paid $9,580 in total. If you paid $117 per month, $37 more than the initial minimum payment, you could repay the loan in 4 years, paying $5,251 in total, a time and interest savings of 18 years and $4,329. To see how long it will take to pay off your credit card, check out the calculator at: www.federalreserve.gov/creditcardcalculator.
I wish you a pleasant and productive week.
Diony Cespedes, MBA is a financial fitness coach and business strategist. She founded Sole Strivers, LLC, a wealth-building consultancy, to provide coaching, programs and publications to help clients attain financial goals. Sole Strivers specializes in helping clients reach their first $100,000 in liquid net worth through behavior changes, career strategy and entrepreneurship. Email her at email@example.com; read her blog at solestrivers.wordpress.com; and follow her on Twitter @solestrivers.