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Money Coach

September 2010 - Posts

  • Time to clean up your company's bad credit

    In a time when the economy is in a downward spiral, many business owners find themselves moving toward negative credit status. 

    Just how bad is your company’s credit? As a business owner, you may think you’re just too busy with the day-to-day operations of your company to give this much consideration, but you can bet your suppliers and other creditors have given it a lot of thought. And what they think can negatively affect your business’ bottom line.

    A bad credit rating for any business can damage it in several ways. First of all, it can cause a loss of eligibility for commercial credit. Bank loans will be out of the question if you are not responsible with your company’s assets.

    If you develop poor credit, you will have to pay cash for everything, and doing so ties up your working capital and impacts your cash flow. You’ll lose access to the 30-, 60- and 90-day loans that trade credit customers enjoy. Your business will also lose early payment discounts. Many suppliers offer customers significant discounts to encourage payment before the official due date on their bills. If you’re a cash customer because of credit problems, it’s likely you won’t get this discount.

    To find out where you stand, order your credit report from one of the three credit reporting agencies, Experian, Equifax or TransUnion. See what each says about your company’s finances. It’s a good idea to do this periodically to make sure the information is current and correct.

    If you don’t like what you see, don’t panic. Bad credit can be cleaned up and repaired. The best way to start is to talk with your creditors before things get out of hand. Arrange a payment schedule that is fair and reasonable on both sides.

    If you find that you just can’t pay your bills, contact your creditors at once. If you’ve been prompt with payment in the past, creditors may be willing to work with you to set up an alternative payment schedule. You may be required to pay a carrying charge or higher interest.

    Sometimes credit problems aren’t because of low cash flow. Mistakes, misunderstandings and structural issues within your company can tangle your credit accounts. If there is a snag, first try to deal with the creditor, then look internally for problems is that may have contributed to the situation. Once you locate any issues, correct them immediately.  Late payment problems are often linked to improper handling of paperwork, incorrect addresses, computer malfunctions or improperly trained employees.

    Rehabilitating your credit rating means you are making an effort to meet your commitments. Don’t take on more challenges than you can handle, even if you have to make sacrifices.

    Posted Sep 30 2010, 01:04 PM by moneycoach with no comments
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  • Death, divorce can be treacherous for financial well-being

    Losing a spouse through death or a divorce is a traumatic event in a person’s life. Yet in the middle of dealing with the grief and loss, there are financial matters that must be dealt with.

    Keeping accurate records is one of the most important things you can do during this time, including keeping a firm grip on your bills, balances owed, investments and bank statements. You should strive to keep your payments and file sup to date. Don’t allow things to get behind, even if you have to ask for help from a family member or friend. 

    As soon as possible, you should gather together all the documents that are related to your financial affairs and review them. Contact any life insurance carriers, credit issuers or lenders, or employers that need to be notified. 

    Needed documents will include a will, Social Security card, insurance policies, loan or lease documents, birth certificate, stock certificates, brokerage account statements, bank statements, mortgage documents, deeds, retirement plan documents, employment contracts, partnership agreements, divorce agreements, funeral arrangements, death certificate, tax returns for the past four years, and safe deposit box information. 

    You will need to itemize your bills and assets to be sure you have enough money to meet your obligations. You also should check your insurance policies to be sure you’re carrying enough insurance, or that you dispose of unnecessary insurance. You’ll also want to look at beneficiaries listed on any existing policies. 

    If you don’t have a disability policy on yourself, you may want to look into getting one. If you become disabled and can’t take care of yourself or your family, you’ll need to be sure they’re taken care of. 

    You may be facing lifestyle changes as well, such as moving to a smaller home or different community, returning to school or traveling. Making sure you are on top of your finances can make the transitions you have to face much easier to bear.

    Posted Sep 23 2010, 11:55 AM by moneycoach with no comments
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  • Saving for the future should begin today

    More and more homes today are headed up by single parents. If you're a single parent, you bear the responsibility for your family's financial well-being. If you haven't begun to save money on a regular basis, you should start with these four types of savings plans. 

    • Emergency savings fund: We all encounter financial emergencies. At the worst possible time, the car breaks down or your refrigerator stops working. These events are, more often than not, unexpected and unplanned. All too often, many single parents have to place the expenses related to these events on a charge card. You should set up an emergency savings fund, and plan to have at least $1,000 in it. Plan on growing it to include up to six months of living expenses.

    You can begin by saving just $25 a month. Consider having your bank automatically transfer the funds from your checking into your savings account.

    • Goal oriented savings: This is when you are saving for a specific purpose. Ideally, this should happen after you've already built up your emergency savings fund. Items you'll likely be saving for include a house, car, new furniture or a vacation.

    • Retirement: Unless your employer provides you with an exceptional retirement plan, it's up to you to put money aside for your retirement. This may seem to be far away, but the more you set aside now, the more you'll be able to save over the years.

    • Once you've accumulated your emergency fund, an set aside money for retirement, you should think about saving for college. Any amount that you set aside will be helpful. You should aim for saving a minimum of $50 per month. Consider using a 529 college savings account. 

    If you need help planning out your budget to include savings, seek out the advice of a financial planner. You can also purchase a self-help book. There are many on the market that contain great advice.

    Whatever you do, don't wait. Begin your savings plan today.

    Posted Sep 16 2010, 11:31 AM by moneycoach with no comments
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  • Remember: Children learn what they live

    Kids don't learn about money through osmosis. They don't magically learn to become financially responsible. And SpongeBob isn't going to teach them to save. Children must be taught these principles, and they must be encouraged to practice them from a very early age.

    How do you teach your children to be financially successful?

    If you want your children to grow up to be financially responsible adults, you have to let them handle money often and early on. They need to practice spending, banking and saving. They need to learn what it feels like to blow all their money and then not have money for something they really want or need.

    There are some dangers, according to Paul Lermitte, financial planner, that parents face if you don't have a system for teaching your kids healthy habits and attitudes about money. 

    • Financial dependency: Your kids could become financially irresponsible, and remain financially dependent on you.

    • Destructive values: Your children could develop destructive values about money, equating it with self worth or becoming addicted to possessions. They may believe that happiness depends on having the latest gadgets and toys.

    • Debt: Your child could become paralyzed by credit card debt and have no idea of how to set financial goals or save for the future.

    • Loss of confidence: Your kids could lack the confidence to make sound financial decisions.

    • Teaching the wrong thing: You may try, but fail, and wind up teaching your children the wrong values about money.

    • Family conflict: You need strong principles and a plan of action to avoid arguments over money that can destroy family relationships.

    You should understand the following principles in order to teach your children financial responsibility.

    • Talk about it: Discuss money issues with children on an ongoing basis.

    • Start early: Start working with them at about 5 years of age.

    • Give up control: Let them do things themselves. Let them make bank deposits and withdrawals, make their own purchases and decide what to spend their money on.

    • Let them make mistakes: Let them make and learn from their own mistakes.

    • Set limits: Give your kids enough money to learn important financial principles, but no so much that they think money is unlimited. 

    • Provide structure: Help them develop a consistent saving and spending plan so they will have some sort of structure to work within as you let them learn.

    As your children learn and grow from these experiences, they'll learn to be more responsible and appreciative of what they have – and what they earn.

    Posted Sep 02 2010, 12:33 PM by moneycoach with no comments
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