Counting Pennies

Provided by Ethan Ewing, president, Bills.com in San Mateo, California

Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine’s Hot 100 list of the fastest-growing U.S. companies. 

1. People whose income fluctuates need to learn to adopt a longer-term view of finances than someone with a regular paycheck coming in each week or month. Generally, after a few years of fluctuation, people can observe patterns – a slump around the holidays or in the summer, for instance – as well as determine a typical monthly minimum income level. Then budgeting, spending and saving can be done with that “base” in mind.

1. Set baseline goals. A self-employed individual could establish an absolute baseline of sufficient savings to cover expenses such as quarterly estimated self-employment taxes and an emergency fund. Common wisdom suggests keeping six months’ living expenses in an emergency fund at all times. For those with fluctuating incomes, this fund can become a “floating” fund to pull from during leaner times, then replenish when income increases.

1. Try “zero-based budgeting.” Everyone has fixed monthly expenses such as rent/mortgage, as well as consistent variable expenses (those that occur each month, but fluctuate, such as food and some utilities). Some people accumulate savings by holding off on discretionary purchases until they achieve a certain level of savings. Then, continue to save and allocate a portion of that savings toward a planned seasonal purchase.

1. Stick to a percent. With each check received (whenever that is), set aside a pre-determined percentage, based on your budget, for savings and investment.

Mechel Glass, director of education for Consumer Credit Counseling Service, teaches a class on budgeting for pets and shared these tips with me this past week.

1. Determine the added expenses you may incur by owning a pet.
Having a pet not only adds joy to your life, but it will also increase your expenses. Before you acquire a pet, it’s important to review your pet’s size, space requirements, training needs, medical expenses and food needs so you can plan accordingly.

2. Establish a budget to make sure you have adequate income to support your future pet. Just like any other member of the family, your pet’s needs must be considered and included in the family’s budget. This includes weekly, monthly and annual costs. If you decide to take a vacation, who will take care of your pet when you are out of town? Will you need to board your pet? Will your pet need additional training classes to curb some bad behaviors? Will your pet require other needs that may not cost money but will require additional time out of your day? For example, if you live in an apartment or a high-rise building and do not have immediate access to a grassy area, you may need to walk your pet longer distances several times a day to get to a public park for play and exercise time. This may not cost you any money, but it will require additional time out of your day to care for your pet’s needs.

3. Investigate the additional costs that may come with owning specific breeds.
If you have your heart set on a specific breed of pet, you may want to research if the breed is prone to specific health problems, and if so, determine the costs of caring for your pet’s health. Will you need pet insurance to cover unexpected medical expenses or surgeries your pet may need in the future? Also, keep in mind your pet may need to be placed on a specific brand of food or medication to correct a known condition with that breed.

Diana Rohini LaVigne, president and CEO of Global Communications, Nair and Co., Inc., says she wasn’t always a communications executive with a healthy salary. “When I was an undergraduate student, I learned how to live on a shoestring,” says LaVigne. “Some of those lessons stayed with me and I still use them today.” For example,

Even today, I think it’s foolish to purchase a brand new car. The incredible loss of value in the car once it has left the lot is too much for me to bear. I’ve resorted to using certified pre-owned cars and tend to get a car ‘new to me’ with 20K miles on it. I know if there are any early warning signs by 20K and I am paying a price that isn’t over inflated. I still own my certified pre-owned Sebring from 2001 which just hit 120K miles without any major work done! I don’t know what the common figures are, but I’ve heard that you can lose over $5K in 24 hours on the value of your new car. If a new car is sold and then resold 72 hours later, it must be sold as a ‘used’ car by law. Used car financing is a different process, so I believe less people qualify. I am under the impression that getting finance for a new car is easier than for an older car, perhaps because a new car is a less risky purchase. Also, the car being resold after 72 hours will still have a loss of thousands of dollars – even if is never driven off the sales lot!

Thanks to Stacy Francis (see here) for the additional tips!

The government gives you a small credit when you become a parent. You can get additional exemption and new child tax credit which will save you extra cash. Parents who use day-care also receive about $500 in savings annually. So take a minute and log on to your states government website to see what Uncle Sam can do for you.

Saving doesn’t always have to be difficult, and it is certainly not impossible. If you and your family are creative you can find many ways to afford everything you need to and still enjoy life. So don’t get discouraged and feel that expanding your family with children will only be a financial burden. There are solutions to help a growing family financially if you become savvy and know where to look.

These tips are courtesy of Stacy Francis, who I interviewed for a recent article. She was kind enough to offer these additional tips just for this blog. Just so you know, Stacy is the president of Francis Financial, Inc. an independent, fee-only financial planning practice and also is the Founder of Savvy Ladies® a non-profit dedicated to empowering women through financial education.

If you aren’t already doing so, then you should start clipping coupons. Grocery stores are constantly offering discounts on necessary and frequently purchased products. So why not take them up on their offer? Look for ones that are for products you were already planning on buying. You can also get discounts by joining your supermarkets “club” and carrying a plastic card with you each time you shop.

Shopping at the Jacks Dollar Store
They provide a wide range of articles that are great quality and only cost 99 cents. For example tea, Kleenex, spices (salt, sugar, pepper…), cereals, cleaning equipment and even Yoghurt, cheese and frozen pizza are definitely worth shopping there and will save you a lot of money!

Shopping at Trader Joe’s
Yeah, we all know that the lines are long… But why are they long? Because people know they get the best deals there. So, waiting is worth it. Try to avoid shopping there during the rush hours (Saturdays and weekdays between 4pm-7pm) It is an amazing supermarket with affordable prices, the staff is very nice an helpful and you basically will find everything you need. 

Wine
Stop at your local supermarket first. The choice of different wines from different countries is huge. They offer wines starting from ~ $3.99 up to the higher price range and tag special wines with a good price performance ratio.

Want to get out from under an expensive car lease? Instead of paying out the remaining terms to end the lease, simply transfer it to someone else. Use a site like www.LeaseTrader.com, where you can post your lease and then work with a buyer that will take over the remaining payments. The process takes about three weeks, and at the end, you are free to walk away and do whatever is best for your driving needs that fits within your budget. Transferring the lease can be a pretty tedious process, so LeaseTrader.com has a full transfer department to walk your through each step with your car leasing company.

I don’t currently have a car lease, but I think this is a really neat idea for those who are in financial distress and looking for a way out of their monthly payments.

Skip Directory Assistance Charges with New Free Services. Dialing 411 for directory assistance is like flushing $2 down the toilet every time you do it – and it adds up. Instead, get any phone number you need for free by using 1-800-FREE-411. You’ll listen to two short ads, but it’s 100 percent free. 1-800-FREE-411 has saved users billions of dollars since the service was created and gets 20 millions calls per month…that is the size of Texas! You can also get MapQuest turn-by-turn directions by text for any listing.

Evaluate Your Existing Cell Phone Plan. If you aren’t using all of your cell phone minutes each month, down size to a smaller plan that will cost you less. If you are consistently going over your minutes, upgrade to a plan that includes more minutes. Paying for a plan with more minutes will cost you less than constantly paying for cell phone overages.

Avoid Ringtones Scams. If you watch a lot of late night television or cable television, there is a high probability you have seen commercials on TV for ringtones. At all costs, stay away from ringtones programs, especially the ones advertised on TV. With the majority of ringtones programs, they have fine print that opts you into a monthly recurring fee program that can quickly cost you hundreds of dollars each year.

Choose the Same Carrier As Your Husband, Wife, & Friends. This one can get tricky if you are locked into a contract as it is difficult to break cell phone contracts without paying for it and most recommend not breaking contracts. If your contract is up, however, why not choose the same carrier as your husband, wife, and/or friends? Most cell phone companies these days are providing unlimited anytime minutes between users on the same network.

Get Rid of Your Home Phone. Here is a great tip for power savers. Now that cell phones are so cheap and widespread and you are armed with the above money saving tips, why keep a home phone? Assuming a $20 dollar per month home phone bill, you could be saving $240 per year if you simply cancel your home phone line.

Following up on the topic of small houses, here is a very interesting video on how simple living has a lot to do with comfort, saving money and living happily despite the surroundings.

As an interesting fact, you should know that the “the average size of a home in 2008 is double the size of the average home in the 1950s.” That’s huge. The biggest problem is that families have not gotten any bigger so there’s really no need for all the extra square feet.

Experts believe that the added space is mostly a way for people to feel successful. As families spend more time working and less time enjoying their own lives, having a large home provides the illusion of having more, even if it’s only as a replacement of other loses.

Ok, yesterday’s post really left me wondering about small houses and whether or not that’s really an option. While the Tumbleweed houses look cute, I’m not sure they are up to code for city living (they all look like they’ve been set up on the countryside, or at least in the outskirts of town). So I did some researching and I ran into some great information about the Penguin House, designed by Japanese architect Yasuhiro Yamashita of Atelier Tekuto, in Tokyo.

The house is the size of a two-car garage, which may seem huge compared to the house you saw yesterday, but that’s only because this one is three-stories high. It’s also especially designed for urban living. And I love it.

How big of an impact does a house have on your finances? Not sure? You’re not alone. Aside from the obvious mortgage or rent payment, a big house will end up costing you a lot more in taxes, electric bills, water and other incidentals. It will also have a bigger impact on the environment. So what’s the solution? How about a tiny house?

Really tiny.

Really.

Like under 100 square feet.

Mini-houses have become incredibly popular over the past few years, partly because people are looking for ways to own property without having to mortgage their lives in the process. Tumbleweed is perhaps the best known company out there producing tiny houses. Their houses range from 65 (for just $36,997) to a whooping 774 square meters. All of the models, including the XS-House are fully equipped with kitchen, bathroom, living room and bedroom. They also have a built-in gas heater, storage space and usually a small porch.

Curious? Here’s a live tour of the Epu model, which is a whole 89 square feet in size.