| How to Open a Small Business Posted: 16 Nov 2019 04:00 PM PST Once you've decided you want to start a small business, formulated your business plan, lined up financing, and secured a site, the time will finally come to actually open up shop. While planning a business may present challenges, the actual act of opening a business and bringing the business concept to fruition has its own set of difficulties. To have a better chance of long-term success, you need to get your business off to a good start. Here are a few tips on how to legally establish your business, hire your first employees, spreading the word, and organizing a grand opening. [Edit]Legally Establishing Your Business - Ensure you have a business plan. A business plan is critical to the success of a business and can be seen as a plan that describes your business, products/services, market, and describes how your business will go about expanding for the next three to five years. It is essentially a "road map" for your business to follow going forward.
- How to Write a Business Plan offers much useful information on the process, such as: determining your potential market and its viability; identifying your business' initial needs and start-up costs; identifying potential investors; establishing your business strategy and marketing plan; and creating a clear, concise document that ends with your "executive summary," in which you essentially "sell" your business to investors and interested parties.
- See the following wikiHow articles for more information on How to Start a Small Business; starting up a small retail business such as a bakery; and the specifics of starting a business in California, for example, among others.
- To make sure you're ready to open up, consult the U.S. Small Business Administration's (SBA) 10-part checklist for starting a business.[1] Each part of the checklist is summarized in the following three steps below.
- Determine the legal structure of your business. Before starting your business and filing the necessary papers, it is important to decide on how your business will be legally structured. Generally speaking, you will be establishing either a sole proprietorship; partnership; corporation; or limited liability company (LLC). There are important legal and tax implications for each.[2]
 - A sole proprietorship is owned and run by one person, and there is no distinction between the owner and the business. This means that all the business' profits, losses, debts, and liabilities are your responsibility. Choose this if you are the sole owner and want full responsibility for the business.
- Partnership. A partnership occurs when two or more people share ownership. In a partnership, each partner has equal share (unless specified) in the profits, liabilities, and management of the business. This can be useful in terms of pooling capital and expertise to start the business.
- Corporation: A corporation is an independent legal entity owned by shareholders. Generally, this structure is not appropriate for small businesses.
- Limited Liability Company (LLC): An LLC is similar to a partnership, except members are protected from personal liability for actions of the LLC. For example, if the LLC is sued, the personal assets of the partners are typically exempt. If you are worried about personal exposure to lawsuits or debts arising from your business, this may be a good option.
- Form the necessary legal structure. A different procedure exists for forming each one of these structures, and some require more work while others are extremely simple. Details surrounding how to form each type can be located on the U.S. Small Business Administration (SBA) website.[3]
- Forming a sole proprietorship is most simple, as it involves no formal action. Simply obtain your EIN (described below), establish a business name (described below), and your can include your business income on your personal tax return.
- LLC's, Partnerships, and Corporations are slightly more involved to form, requiring specific paperwork. To learn the details on each, check the SBA website, or contact the SBA.
- Obtain a tax identification number. Also known as an Employee Identification Number (EIN), the EIN is used to identify your business for tax purposes. Applying for an EIN is simple, and can be done within minutes on the IRS website. [4]
- Note that if you are starting a partnership or a sole proprietorship, it is not necessary to obtain an EIN. However, it can be wise to do so anyway. Without an EIN, your business will be identified by your Social Security Number (SSN) for tax purposes. Keeping your SSN private reduces the odds of identity theft.[5].
- Register your business name. Unless you are running the business under your own name, such as "John Smith Painting," most states require you to register a "Doing Business As" (DBA) name for tax and legal purposes. Registering a DBA is done with your state government or county clerk's office. Search the specific requirements of your state online.[6]
- Establishing a DBA name usually just takes minutes to complete, and is especially useful if you have a sole proprietorship. This allows you to have a business name separate from your personal name. When you form a sole proprietorship, the business name will automatically default to your personal name unless you file a DBA.
- Obtain a business license. The city or county which you operate within will require a business license. Typically, these forms can be found on the website for your city.
- These forms will require your business type, address, # of employees, EIN, and possibly information regarding revenue (estimations will work fine here).
- Keep in mind that licensing requirements often apply to online and home-based businesses as well as typical brick-and-mortar businesses. Requirements do vary according to location, so be certain to contact your local and state government to determine specific requirements.
- Inquire as to other necessary permits. Unfortunately, each city or county has different permit requirements for businesses. These can include things like "Home Occupation Permits" for home based businesses, "Alarm Permits" if your business requires a commercial alarm, or various alcohol and firearm permits.
- Contact your local government's permitting bureau or similar authority, or seek out the local chamber of commerce or business association for advice.
- Establish a bank account for your business. It is very important not to mix business and personal finances, as this can lead to issues with the IRS. Having separate bank accounts for business and personal transaction simplifies accounting and makes tax requirements easier to understand.
- To open a business account, simply contact your local bank or credit union.
- Contact a small business lawyer or accountant for further guidance. While forming a sole proprietorship is relatively simple, if you are forming an LLC, Corporation, or Partnership, it is essential to involve a professional.
- A professional can guide you through which forms to fill out, and can also help you draft important partnership documents. For example, forming an LLC or Partnership involves documents specifying what ownership is attributed to each partner. This must be specified in a legally valid form.
[Edit]Preparing To Open Your Business - Determine employer responsibilities. Before you begin hiring, make sure you have taken the necessary steps to be able to collect federal and state wage taxes, provide employee eligibility verification, and obtain worker's compensation insurance, among others.
 - One of your central obligations to ensure that employees are eligible to work in the United States. To do this, you must complete "Form I-9" within three days of hiring a new employee. Completing this form will require you to submit documents to verify your employees citizenship and confirm their eligibility to work in the United States. The form can be downloaded on the U.S. Immigration and Customs website. Note that you do not need to submit this form with the Federal Government, but you do need to keep it on file for three years after the date of hire or one year after the date of termination, whichever is later.
- Make sure to register for Workers Compensation Insurance with your state's Workers Compensation Insurance Program.
- When hiring an employee, they must provide you with a signed Form-W4 before they begin employment, which you must send to the IRS. This allows you to withhold federal income tax.
- Further information regarding hiring and employer responsibility are available on the SBA website (https://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/establishing-business/hiring).
- Hire the right people. The first impression is critical for a new small business, and unless you'll be doing all the work yourself, that impression will be made at least in part by the people you hire.
 - Ideally you can find someone who is familiar with the business — someone who has twirled dough if you're opening a pizza shop, for instance — but even more important is finding a person who is willing and eager to learn. You need employees who want to learn to do things (and represent your business) your way.
- You do have to be willing to let go a little, however. This business has been your baby for a long time, but as you let it out into the world, you'll need help taking care of it. Look for employees who are eager to contribute ideas and adapt as the business goes through its early growing pains.
- Do your homework. Look over resumes. Call references. Don't just hire your nephew to make your brother happy. (Wait until your business gets on its feet.)
- Key questions like "Can you provide an example of a problem that you successfully solved?" may offer insights into a potential employee's ambition, ingenuity, and work ethic.[7]. Keep in mind that such questions are common, however, and the interviewee may have prepared stock answers already. (An inability to answer effectively is thus a bad sign.) In addition, try to think up a few problem-solving hypotheticals, for instance, that are specific to your small business.
- Prepare your site. Whether you have a physical or virtual business site, the impression it makes on your initial customers will go a long way toward determining your chances of success.
 - If your business involves a storefront — a candy shop or used-book store, for instance — set up your space to represent your vision for the business. Coordinate color patterns and décor with your logo, for example, or consider personalizing it with family photos to establish your essential connection to this business. Consider hiring a professional interior designer and/or decorator.
- A web presence is becoming (if not already) essential for any new small business, so don't take this aspect for granted. Especially if your business has a substantial web-based component, make your site intuitive, manageable, and suited to the brand identity you want to build. Hiring a professional web designer may be a good idea.
- If your budget is tight, and/or your business does not require a traditional storefront, don't overspend on a fancy space. A local coffee shop can make a good place to meet clients, or you can rent a space as needed for such gatherings. Wait until your business has a solid foundation before expanding into a nicer space.
- Consider a "soft" opening. There is no rule that says your first day of business has to also be your Grand Opening. Give your business a chance to work out the kinks before announcing itself to the world.[8]
- Restaurants are probably the best-known example of businesses that often have soft openings — dry runs of dinner service with invited guests, maybe even just friends and family. But the concept can work with just about any small business. Send your new landscaping company's crews out to work on your local relatives' houses, lure your friends in with free pedicures, or convince your book club to come in and discuss their life insurance needs.
- Open officially for business without great fanfare, maybe for a week or two before your (well-advertised) Grand Opening. Customers will probably just trickle in, but that will make it easier to practice getting things right before the hopeful rush of customers to come.
[Edit]Spreading the Word - Start early. Don't wait until opening day, or even until you know when opening day will be. Be proactive in establishing brand awareness and generating anticipation. A "coming soon" sign on your in-preparation storefront is a good start, but not enough on its own.
- Preserve the bulk of your initial marketing budget for the Grand Opening, but before that time utilize budget-friendly options like flyers, targeted direct mail, and a social media presence.
- Try to build your brand even before your location is ready. If you're going to be selling handcrafted necklaces or handmade pierogies, seek out a local craft or food festival where you can set up a table and sell your wares. (Be sure to advertise your forthcoming retail presence.) If you're an accountant, maybe you can volunteer to offer tax advice at the local community center or library (and hand out business cards).
- Establish a marketing budget. The run-up to opening and first few months of operation may very well make or break your new small business, so make sure you give your initial marketing push a strong effort.
- One suggestion is to dedicate 20% of your first year's marketing budget to your Grand Opening. This amount should be significant enough to spread your message widely at a time when your ads are likely to be their most effective, but at the same time isn't an "all your eggs in one basket" situation that leaves you with limited ability for subsequent advertising.[9]
- Spend, for example, $4,500 advertising your Grand Opening, because that amount should be sufficient for two media buys. If that amount is beyond your reach, you may be able to utilize a mix of flyers, direct mailings, promotional items (balloons, banners, etc.), and a "sign spinner" at a busy intersection for around $1,500.[10]
- This, of course, assumes you have a fairly large marketing budget of $22,500 ($4,500 is 20% of $22,500). Since many businesses have much smaller marketing budgets (maybe only a few thousand dollars), always work within whatever 20% of your marketing budget is.
- Use traditional media. If your marketing budget allows, consider using traditional media like radio or newspaper. If you can manage television advertising as well, it is always a good idea to diversify your ad presence.
 - Before tossing radio aside as an outdated media format, note that some three-quarters of U.S. adults listen to radio at least occasionally, and often do so when driving somewhere. Thus, radio can be a particularly good advertising method for retail stores and restaurants. Target your advertising by format (Top 40, Country, Talk, etc.) and time of day to maximize impact.[11]
- Newspapers are popular among over-35 adults, but even a decent percentage of younger adults read a paper occasionally. Newspapers are still a cost-effective way to reach thousands of potential customers.
- Consider including coupons as well; they provide not only motivation to visit but a tangible connection between a potential customer and your business. It is also easy to track their effectiveness, as more coupons coming in mean they are doing their job.[12]
- You may assume that TV advertising is beyond your small business budget, but there are options for producing and placing lower-cost ads, sometimes with the assistance of the local broadcast network. Consider bunching your ads during programs relevant to your targeted customer base — TV judge shows for a legal practice or the nightly news sports report for a golf training academy, for instance — so that you seem like a major sponsor.[13]
- Use social media. Even if you don't know your tweets from your tags, or assume that your tailor shop doesn't need a social media presence, make use of all avenues to spread the word about your business. Some 80% of your fellow small business owners are using social media, particularly for marketing.[14]
 - The appeal of social media advertising is its low cost and direct connection to potential customers, but remember that the trade-off is likely to be a greater time commitment. Do a detailed analysis of your targeted and existing customer base and try to coordinate your brand identity and message across platforms.[15]
- With the ever growing number of social media platforms, you may feel the temptation to be active in as many as possible. But don't spread your business (or yourself) too thin. If your salon targets 40-something moms who likely use Facebook, focus your energies there. Don't get caught up in posting all the time; a few times a week will likely suffice. You'll be plenty busy with all the other details of opening your business.[16]
- There are, however, ways to link multiple social media platforms. Consider this option if you can manage it without, again, spreading yourself too thin at a very busy time.
- Social media presence is especially important if your business is online based. In addition to social media, consider internet advertising using technology like Google Adwords. Adwords allows an ad from your business to pop up whenever a user searches particular key words on google. When somebody clicks on your ad, you pay. For an online based business, this can be especially important since it communicates your business to the broader internet. It is also important for traditional brick-and-mortar businesses too, since it reaches an audience that primarily is exposed to the internet as opposed to other forms of media.[17]
[Edit]Opening for Business - Consider when to make your opening "grand." As mentioned, there is no requirement to hold your Grand Opening on your first day of business, and it is often advisable to wait even a couple of weeks before staging it.
- Schedule your Grand Opening for a day and time that suits your product or service — a Saturday morning for a diner; a Friday evening for an ice cream parlor; early evening for a martial arts studio.[18]
- Make it an event. Work hard to build excitement in the days and even weeks leading up to your Grand Opening.
- Use the term "Grand Opening" in your marketing — it makes it seem more special than just an "open for business" notice. Create excitement by offering prizes, giveaways, demonstrations, special deals, etc., for visitors that day.[19]
- Hire a photographer to capture the event for media (traditional or social) consumption. Bring in live entertainment, extra staffing, even security if you expect an especially large crowd.[20]
- If your business and/or its location aren't conducive to a large public Grand Opening, consider having an event more along the lines of a "launch party" at a nearby restaurant, banquet hall, etc.
- Guarantee a positive customer experience. Plan ahead and do whatever you can to ensure that attendees walk away from your Grand Opening with a positive first impression of your new business. Oversights as simple as inadequate parking, long food lines, or running out of paper products in the restrooms can sour an otherwise enthusiastic reception.[21]
- Have extra staff on hand to make sure customers don't have to wait too long for service or attention.
- If parking may be an issue, try to work out arrangements beforehand with other businesses or community groups — perhaps setting up satellite parking at a nearby church, for instance.
- Send attendees home with a token of your appreciation — ideally something with your logo on it — along with a coupon / special deal for a return visit.
- Involve the community. Establish your connection to the local community from the very start of your business. Let people envision your business having a positive community impact for years to come.
- Invite the local press to your event, but also other local business and community leaders. Network with as many as possible and establish yourself as a member of the local team.[22]
- If possible, align your Grand Opening with a community event, when local crowds will already be gathered. Make it seem like a part of that larger celebration. Sponsor the entertainment at the holiday lighting celebration or midsummer festival. Advertise both your business and your deep connection to the community.[23]
[Edit]References [Edit]Quick Summary |
| How to Run in Winter Posted: 16 Nov 2019 08:00 AM PST Running is a great way to exercise, but it can be a difficult lifestyle to maintain in the winter months. Thankfully, there are plenty of ways for you to safely run outside, even when it gets cold! First, make sure that you're layering your clothing properly whenever you head outdoors. Additionally, take all necessary steps to guarantee your safety while you're out among the elements, like wearing a reflective vest or putting on some sunscreen. [Edit]Wearing the Right Clothing - Start by putting on a comfortable base layer. Choose a shirt made out of synthetic material that doesn't chafe against your skin. Since this is the first layer of clothing that you'll be wearing, be sure to choose a material that won't absorb your sweat and feel uncomfortable after you've been exercising.[1]
- Avoid shirts made of cotton, as these absorb sweat easily. Try materials made of polyester or polypropylene instead.[2]
- Layer something warmer, like fleece, on top your base clothing. Insulate yourself by putting a warmer top over your first layer. Remember that the goal is to stay warm so that you can be as comfortable as possible when you're running in the cold.[3]
- If you don't have any fleece on hand, try wool instead.
- Complete your outfit with a wind-resistant jacket. Protect yourself from any gusts of wind by wearing a thin windbreaker over your base shirt and fleece layer. Choose a jacket that's on the larger side, as you'll be fitting it over several bulky layers of clothing. If possible, try to choose a color that's somewhat reflective.[4]
- If you want to give your head extra protection against the elements, look into a windbreaker that has a hood.
- Slide on some thick socks to keep your feet insulated. Keep your feet toasty by pulling on some long wool socks. If you live in a place that gets less snow and ice, opt for socks made of slightly thinner material. Whenever you purchase running shoes, make sure that they fit over the socks you plan on wearing.[5]
- Put on gloves that are lined with fleece. Prevent frostbite when you run by sliding on some lined gloves. Try to choose a material that'll keep your fingers insulated and warm while you exercise. If your gloves don't have a soft material on the inside, that's okay—what matters most is that they keep your hands from being exposed to the elements.[6]
- If you want your hands to be even toastier, try wearing mittens instead.
- Keep your head and ears covered whenever you go outside. Regulate your body temperature when you exercise in the cold by keeping your head and ears warm at all times. Keep in mind that during cold weather, your blood flow is centralized in your chest, which provides less warmth to your head. To provide extra support to your exposed face, try wearing a scarf as well.[7]
- If you live in an especially cold area, consider wearing a ski mask to keep your skin covered at all times.
[Edit]Preventing Accidents and Injury - Stay hydrated whenever you go for a run in the winter. Keep drinking water, regardless of the temperature outside. Even if the air temperature doesn't feel overwhelmingly hot, continue to drink water as you exercise. Bring a water bottle with you whenever you work out, so it's easier and more convenient for you to stay hydrated.[8]
- Listen to your body—if you feel dehydrated, there's a good chance that you are.
- Get warmed up for 5 minutes before you start running. Prepare for your run ahead of time by getting your body moving inside of your home. Although it's tempting to start your workout as soon as possible, make sure that you take a moment to get your blood flowing and your muscles moving. If you don't prepare your body before going outside, you could be setting yourself up for an injury.[9]
- For instance, try doing some mountain climbers or burpees to get your blood pumping ahead of time!
- Wear sneakers with good traction for the ice and snow. Stay safe by investing in the proper winter running gear. Look for sneakers or trainers that are designed for a variety of tough terrains, or models that have grips on the bottom of the shoe. Above all, make sure that you're prioritizing traction, as this will be keeping you safe in icy conditions.[10]
- If you live in an especially icy area, consider investing in ice picks that attach to the bottom of your shoes.[11]
- Put on a reflective item of clothing so that people can see you. Make yourself visible in cloudy and snowy weather by donning a bright, reflective jacket or vest. For maximum effectiveness, invest in reflective tape, along with a wide variety of bright or fluorescent garments. Don't be afraid to overdo it; when you're running in the wintertime, there's no such thing as being too visible![12]
- Apply sunscreen to any exposed skin. Keep in mind that the cold temperatures of winter can be misleading, as the sun's dangerous rays are still out and about long after summer ends. While most of your skin will be covered, apply a layer of sunscreen to any part of your body that's still directly exposed to sunlight. Generally, try to focus on rubbing sunblock on your neck and facial area.[13]
- Aim to use a sunscreen that has an SPF of at least 30.[14]
- If you really don't want to worry about sunscreen, wear a scarf or ski mask that covers the bulk of your face.
- Run on a treadmill when the weather is bad. Invest in a treadmill or other piece of indoor aerobic equipment for days when the roads and sidewalks are especially slick. Don't feel pressured to exercise outside if it's actively snowing, or if the temperature is especially low. Instead, maintain your workout regimen by going on the treadmill for 30 minutes or so![15]
- If you want to save money on sports equipment, think about joining a gym!
[Edit]Things You'll Need [Edit]Wearing the Right Clothing - Shirt
- Pants
- Fleece
- Thick socks
- Hat or earmuffs
- Gloves
[Edit]Preventing Accidents and Injury - Water bottle
- Sneakers
- Reflective jacket or vest
- Headlamp (optional)
- Sunscreen
- Set workout goals for yourself in the winter by registering for races in early spring.[16]
- If you're feeling particularly unmotivated to work out, consider making a fitness plan for yourself. Additionally, try asking a friend or family member to run with you if you need some extra encouragement![17]
- Don't feel like you constantly have to be running. If it's easier for you, feel free to start off at a walking pace.[18]
[Edit]Warnings - Be on the lookout for frostbite. If the temperature is less than , frostbite can set into bare, uncovered skin within 30 minutes.[19]
[Edit]References |
| How to Create a Budget Posted: 16 Nov 2019 12:00 AM PST Budgeting money is important for us to be able to meet our expenses whether in the home or business, manage our money, and keep our finances in check. We need to know where our money is going, and put away enough to pay for our monthly bills. It is important for every bit of our income be accounted for, so that we are aware of where we might be spending too much, and where we can cut back so that our most important expenses are covered at the end of the month. [Edit]Budgeting Help [Edit]Creating Your Budget - Record the net monthly income that you receive. Net income is the amount that you actually get to take home, after all the deductions (taxes, health care) have been subtracted. Include other sources of income as well if applicable, such as tips, monthly bonuses, cost of living increases, dividends, interest income, etc.[1]
- What do you do if your income is constantly changing? You pretty much have to do things topsy-turvy.[2] Determine all your essential, priority and lifestyle expenses first. Then, with your paycheck, start paying off all your essential needs first, followed by your priority and then lifestyle expenses. The money you have left over can either be set aside for an emergency account or stashed away into savings.
- Remove from your net monthly income your stated savings goal. Ideally, set up an automatic withdrawal into another account so that you aren't even tempted to touch it. If you never see it, you won't miss it. Squirreling away savings will help you anticipate emergency scenarios and prepare you for retirement.
- How much money should you try to save? It mostly depends on your salary, but a good benchmark is 15% to 20%.[3] If you can only afford to save 10% of your annual income, that's fine, provided that you save some of it.
- Take advantage of matching contributions from your employer, if possible. If your employer matches contributions to your 401(k) — up to a certain percent — take full advantage of their generosity. It's the closest thing you'll get to "free money" in your lifetime.
- List down your monthly expenses into three separate categories. These categories are "fixed," "flexible," and "discretionary."
- Fixed expenses remain the same each month, such as a mortgages or rent, a loan payment, insurance or medical premiums, etc. Total up all fixed expenses.
- Flexible expenses include items that are necessary, but in which you can control the amount of money spent on, such as household and grocery items, clothing, utilities, etc. Total up all flexible expenses.
- Discretionary expenses are items that are not necessary for survival. These could include expenses for recreation such as movies, travels, and impulse buys. If your expense to income ratio is out of balance and you are spending more money than you earn, items from this category should be eliminated or cut back.[4] Total up all discretionary expenses.
- Subtract the total amount of expenses from the total income for the month. If the expense total is less than the income total, then you are managing your finances well and should keep up with doing so. But if the expense total is greater than the income total, you are off-track financially and need to prioritize expenses.
- If your budget is feeling pinched, take a look at flexible and discretionary expenses. Check your bank and credit statement to see what you spend money on, or sign up for a personal finance application online. This will help you track what you spend money on that's not absolutely essential.
- Keep track of when you use credit cards. Did you know that people who use credit cards are more likely to spend more money than people who use cold, hard cash? That's because cash "feels" more real, so it hurts more than credit. Try carrying only cash around and see if you spend less.[5]
- Look to see how much you spend on eating out, on your morning coffee from Starbucks, on watching movies in the cinema, and other costs you can cut back on. Many people need their Starbucks fix, even if there's a coffee machine at work. One cup of coffee per day, at $2.50 per cup, equals more than $900 per year! Think about what you could do with $900.
- Begin to have the tough discussions about what you can cut back on or cut out altogether. Whether this conversation is made with a spouse or with yourself, try to be honest, forthright, and understanding. Nobody likes cutting back spending, even if it needs to be done.
- Look at how much money you now have left from your income, after the expenses have been covered for. This is the only amount that is yours to spend if you aim to be debt-free. If you get paid weekly, make sure enough money is set aside to meet the monthly bills. Never borrow from the amount that should be used for monthly expenses. This reserve method will save you from living paycheck to paycheck.
- Review the budget plan during the end of each income period, in order to ensure that you stay on track. Compare actual expenses against what you budgeted. If there are glaring variances, you might need to make adjustments on your discretionary expenses. As time passes, you may want to only perform this comparison on a quarterly basis.
[Edit]Sticking to Your Budget - Seek out technological help. If you're the old-school type who loves to balance their checkbook, more power to you! But know that emerging technology is making it easier than ever to track your expenses in real time, and with more sophisticated software. Mint.com, Quicken, and wallet.ai are all powerful online tools that will help you keep track of expenses and budget for the future.
- Don't give it all up at the first sign of failure. Budgeting is like dieting. A lot of people start with majestic intentions. Then, when they fail to see results within two months, or when they start getting bored, they throw their hands up and quit, telling themselves it's not worth it. Don't give up before the battle has even started. Prepare yourself by acknowledging that budgets take a lot of time and a little effort.
- Try to give yourself a full year of budgeting to determine whether it makes any difference in your finances. If, after a year of steady, scrupulous budgeting, it still hasn't made a dent in your savings or put a wad of cash in your pocket, feel free to re-evaluate. You won't be disappointed.
- Start contributing to an emergency fund. No, an emergency fund is not the same thing as your savings fund. An emergency fund is 6 to 12 months' worth of living expenses, frittered away for — you guessed it — an emergency. What if you lose your job? What if your daughter needs to go to the hospital? A host of emergencies can potentially burn a hole in your pocket. Being prepared is the best step, and one that makes a difference in your budget.
- Spend your tax refund wisely. A tax refund, if you're entitled to it, can be a huge windfall. Imagine getting a thousand, or two thousand dollars, without really expecting it. Knowing how to spend this potential windfall, however, can be pretty tricky, especially if you're barely above water. Think about contributing to your emergency or savings fund instead of spending it on a new flat-screen TV.
- Pay off your debts slowly but surely. According to AARP, American households hold an average of $8,400 in debt.[6] That's a lot of cheese — a lot of cheese you owe somebody else. If you happen to pay off your debt each month with your income, that's great. But if you're like many other people, you might be struggling to pay off your debts each month, meaning that you have to attack things a little more strategically.
- Which debts to you pay off first? High-interest debt or low interest-debt? Attacking low-interest debt and paying off certain debt lines altogether is called "snowballing." Attacking high-interest debt first is called "avalanching."[7]
- If you're highly-motivated to pay off debts, go for avalanching. High-interest debts can gather up lots of compound interest fast, making this approach ultimately cheaper. If you need help motivating yourself, however, you might want to try snowballing, even if it means you'll pay more.
- Try to cut down your expenses. Get rid of any unessential spending like eating out or expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, buy generic products, and avoid impulse purchases. Above all, stop incurring new debt. Contemplate getting a debit card and cut up and cancel your credit cards.
- Create a spending plan that permits you to diminish your debts. Catalogue your necessary expenses, such as housing, health care, and optional expenses, like entertainment and vacations.
[Edit]Related wikiHows [Edit]References [Edit]Quick Summary |
No comments:
Post a Comment