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These Forgotten Costs Often Sink Us

sunken_boat We try not to make financial decisions in a vacuum. We strive to factor in all the relevant pieces before making a major purchase. But there are some costs that we often fail to factor in that can make a significant difference.

We often fail to factor in future flows of money.

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We expect a certain percentage pay raise. So we spend money as if it has already happened. It’s especially important in times like these that we don’t spend money before we know we have it.

Another thing we often do is count on a bonus. If it doesn’t materialize, we’re in trouble as we learned from Clark Griswold in Christmas Vacation. We sure don’t want our brother tying up our boss!

What about increased insurance costs? Is it likely that you’ll pay more for health insurance next year? How about insurance for your house or car? Insurance costs can rise significantly from year to year.

Do you have a variable rate mortgage? Have you considered a projected increase in the rate and the associated increase in your mortgage payment?

Have you thought about what might happen with recurring expenses? Cable bills, power bills, and water bills all seem to rise from year to year.

Affording it now isn’t good enough

You may finance a major purchase. Sure it’s only $100 a month. You can cover it now. But if it stretches your budget to its limit, it’s likely you won’t be able to cover it next year. You’ll start sinking and soon end up underwater, in a financial sense. You’ll run out of money before you run out of month!

It’s important to have a safety net – spending less than what you make each month.

A tool businesses use

We often don’t think about it this way, but we all run an organization – our households. Just like any organization, we have inflows and outflows of money.

Reasonably sophisticated business people work from a budget. Yes, the “b” word. Many people do treat budgets like a dirty word. But they’re a great tool.

And they’re especially important if you don’t have any money left over at the end of the month. It’s important to understand why. You can use Quicken, Excel or any number of ways to create your budget.

Many business people don’t just budget for one year. They look at projections over three years or more. These budgets don’t have to be elaborate – just plot out your main sources of inflows and outflows.

The power of the tool

Once you have a budget set up, you can look at “what if” scenarios. For example, what if:

  • you don’t get a pay raise
  • you (or your spouse) lose a job
  • the cost of health insurance (or any other cost) rises more than you expect?
  • you make this major purchase?

When you create a budget, you’re applying Stephen Covey’s “begin with the end in mind” and “put first things first” (from The 7 Habits of Highly Effective People) to your finances. You’re considering all your costs – both now and in the future. Then you can see the impact of major purchases on your overall finances so you make the best decision going forward.

You can run your finances intentionally, rather than ad hoc. You can prepare for contingencies so you survive no matter what. Then you can shift your focus to thriving!

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Thanks for stopping by today. Next time, we’ll discuss how assumptions we make about time leave us overextended. Until then, here’s to your bigg success!

 

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Network Your Way to the Movers and Shakers

By Bigg Success Staff
05-21-08

Personal Branding

indy_race 

Why are race car drivers able to drive so fast? Because they’re all professionals who have been trained to drive their cars that way. So they can pretty much count on every other driver to behave in a certain way.

If you want to move up fast in your career, you need to learn how other people rose to their position. The best way to do that is to get to know them so you can find out first hand how they did it.

So how do you get to know these movers and shakers? Network your way to them!

How do you do that? Here’s a six-step plan to meet the right people.

#1 – Who are they?
You may know this already. If you don’t, it’s the first thing you’ll want to do – determine who you should get to know. Who has succeeded at what you want to do? Who are the people at the top of your chosen craft?

#2 – Do some research
What can you learn about the person you want to meet? What has been written about them? Have they written anything about themselves? What is their particular area of expertise? What are their concerns about the industry? Where do they see the opportunities? What are their strategies? How did they get where they are?

The internet is a wonderful tool for finding the answers to these questions. But don’t stop there – check out trade magazines and other industry sources that may not be fully archived on line.

#3 – Who do you know who knows them?
Once again, the internet comes into play. Are they on any social media sites? If so, do you have any common connections? If this doesn’t work, ask the people you know. Be patient and keep networking.

#4 – Ask for an introduction

Once you find someone who knows them, ask them to introduce you to the person you want to meet. This can be done in any number of ways, but most likely it will be in some form of electronic communication. Of course, if you can meet them in person (e.g. at a conference), that’s even better.

Bonus tip #1: Industry functions are a great way to meet movers and shakers. They’re leading discussions or are participating on panels about the important issues faced by your industry. Approach them after the session and exchange business cards.

#5 – Follow-up

Now you’re ready to contact them. Here’s what you want to do with this initial communication …

Ask them a good question.

Make it a question about something in which you know they’re interested. Ask for their advice. Keep it short. Make sure it doesn’t require a lengthy answer, but does beg for something more than a “yes” or “no”. By doing this, you start a conversation that can be ongoing.

#6 – Impress them
When they respond to you, the most important thing you can do is to thank them for their help. Then give it some time and report back on what you’ve learned by taking their advice or studying the issue you questioned some more.

Once again, keep it short. And ask them another question to keep building the relationship.

Bonus tip #2: If there is something you learn they’re interested in
(e.g. their hobby) and you find an interesting article, pass it on to them.
And keep it at that … no business on this go-around.

Want to be a mover and shaker? Then get to know the movers and shakers in your field.

Hear today's lesson and laugh on The Bigg Success Show. 

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Differentiate Your Offer When You List Your House for Sale

By Bigg Success Staff
04-02-08

Life Changes

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When you’re ready to sell your house, we recommend that you 290 list it with a realtor]. They will prove to be an invaluable resource in moving your home relatively quickly for a reasonable price.

A good realtor helps you in many ways. One of those is making recommendations, based on the market at that time, to make your house and your offer attractive to prospective buyers.

So you’ll want to discuss incentives with your realtor. A good realtor will welcome a seller willing to consider incentives because it shows that you are serious about moving your property.

Here are some common incentives for buyers that you may consider:

  • pay for the buyer’s home warranty coverage for a year
  • prepay the buyer’s homeowner’s association dues for a year
  • offer a credit toward the buyer’s closing costs

Of course, what you offer depends on the value of the home you’re selling. You still want to come out ahead, but don’t be afraid to get creative.

For example, if your situation allows, consider a travel voucher (for a weekend away or longer). Buy this house and you’ll get a vacation for free! Would that get your attention?

Another thing to consider is that your realtor’s compensation is negotiable as well. A lot of sellers try to negotiate down. Among other things, this may unintentionally signal that you’re not serious about moving your house quickly.

Consider doing the opposite – give them a higher rate. Instead of that, you may consider a bonus if the house moves within a certain time frame. Good realtors don’t base which homes they sell on what they get paid. However, they may put forth a little extra early effort, and even spend more money, getting the word out about your listing if there is a reason to do so.

In the end, your professional realtor will weigh the options you’ve discussed and make some recommendations about which incentives will be best. The odds are that they’ll direct you to toward buyer’s incentives, if your listing price allows them.

You’ll have to make the final decision. Balance what you need and want from the sale of your home with how quickly you want it to move to create a price with incentives that is likely to meet your goals.

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