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Don't Make This Costly Mistake

Which is better – a $100 decrease in costs or $100 increase in income?

It’s always good to increase our income, but more people get in trouble on the cost side. This applies to your business as well as your personal finances.

Your business
Assume that you own a retail store. Every product in your store sells for $100 and costs $40. So you keep $60 every time you sell a product.

Now let’s say you’re able to cut your expenses by $100. You get to keep all of it!

So, which is better? Cutting expenses by $100! That yields $40 more!

Now, you may ask, how do you do that? Here’s something we have learned …

As you get busy running your business, it’s easy for costs to creep in that aren’t increasing sales like you thought they would. Get rid of these costs!

One of the biggest complaints bankers have about small business people is that they are too focused on their top line (sales) and they don’t spend enough time thinking about the bottom line (profit).

In the long run, your profit can only grow as fast as your sales. But in the near-term, your bottom line will grow much faster if you keep a close eye on costs.

Your personal finances
This is the same story, but for a different reason. It’s all about taxes.

Let’s assume that you will pay 30 percent on your next $100 of income. So, if you make $100 more, you get to keep $70 after taxes.

But if you can spend $100 less, you’re $100 ahead because you’ve already paid the taxes on that money!

Let’s say you get a $5,000 a year pay raise. You decide to celebrate by buying a new house … you upgrade! Your mortgage payment is now $4,800 a year higher than it was before. But hey, you have $5,000 more income, so you’re still $200 ahead, right?

That’s BEFORE TAXES.

Once we factor in 30 percent for taxes ($1,500), you’re $1,300 behind!

And the bad news has just started. This new, bigger, more expensive house probably has higher property taxes; it costs more to insure; it requires more repairs and maintenance.

Before you know it, you’re $5,000 in the whole!

What should you do with the raise?

Once again, your specific situation will determine what you should do. Consider giving yourself a SMALL reward – you’ve earned it! Then, if you have any debt – particularly credit card debt – pay that off because your return will exceed almost any investment. And it’s a guaranteed return!

Once you have that debt paid off, the money becomes yours! Now you can invest it in things that will 38 jump start your passive income].

The bottom line is this – you have complete control over your expenses. You have to convince someone to say “yes” to make a sale or get a raise. It’s much easier to control your costs!

Where have you cut costs in your biz or personal life?
Share your tips with us!

You’ve probably heard our bigg quote today, but it was so fitting that we used it anyway. Here’s Ben Franklin –  

“A penny saved is a penny earned.”

And we bet that, if ole’ Ben Franklin was around today, he’d think about the taxes he was paying and modify his quote to – A penny saved is BETTER than a penny earned!

Next time, we’ll continue the money talk, but with a twist. Comedic writer Jake Novak joins us to share his “Top 5 Signs You're Managing Your Money Like Wall Street.” Until then, here’s to your bigg success!

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How Much Should You Make An Hour?

By Bigg Success Staff
Updated 3.16.17

Leading-Edge Application
0000105-freelance_switch_hourly_rate_calculator

For all you freelancers, consultants, and service professionals, an hourly rate calculator is a great tool to calculate the rate you need to charge to make the money you want. We originally wrote this post about a tool called the FreelanceSwitch Hourly Rate Calculator, but that seems to no longer be available online. However below are the steps an costs that calculator used to crank out a number for you.

And we found a new tool to plug those numbers into: the Freelance Hourly Rate Calculator. You’ll see the steps are similar, and what is on this page will help you better understand the steps on their page.

Preparation
You’ll need to gather up some information beforehand. Specifically, know what it costs you to do business as well as your personal costs of living. You’ll also want to think about your work patterns – how much you want to work and when. Finally, you’ll want to think about your goals for retirement savings, major purchases, and the like.

Now you’re ready for the hourly rate calculator! You’re less than twenty minutes away from knowing how much you should make!

Step 1 – Calculate your business costs
You’ll be asked, item by item, to enter your costs including:

  • Rent for your office
  • Travel
  • Furniture and equipment, including computers
  • Software
  • Communications, such as internet and cellular phone
  • Insurance on your business
  • Professionals, like legal and accounting services
  • Supplies
  • Promotion
  • Miscellaneous costs not covered above

Step 2 – Calculate your personal costs
Then, you’ll be asked to consider your personal costs, like:

  • Rent / mortgage
  • Daily expenses.
  • Retirement
  • Occasional expenses – repairs, holidays, etc.
  • Other expenses not covered above

Step 3 – Determine how many hours you can bill
With all your costs in, you’re ready to determine how many hours you can actually bill out each year.

You’ll be asked to break that down by:

  • work days each week
  • vacation
  • personal days
  • holidays
  • work hours each day
  • your billable percentage

Step 4 – Set your profit (savings) goal
How much profit do you want? If you don’t have enough profit, you won’t stay in business. If you get greedy, you’re unlikely to attract clients in the first place.

Be reasonable, but still allow for enough money to fund major purchases, like cars, home remodels, or anything else you would like to do.

Step 5 – Click to calculate!
You’ll end up with two numbers – your ideal hourly rate and your break-even hourly rate.

Now you have to use your instinct. What will it take to make you happy? What are clients paying now for services like yours? What’ are competitors charging? How does your reputation, skills, and experience compare to theirs?

These are all factors you should consider in setting your hourly rate. Ultimately, you must rely on your gut instinct, but at least you have a scientific way to get to it if you use this great tool.

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