You have received an inheritance of $50,000. What do you do with the money? Yes, you could buy that big screen TV and sound system, and take a major vacation - but what if you wanted to make huge progress on your goals, and not let the money waste away, bit by bit?
You have $500 left after your monthly bills and other fixed expenses are paid, and you set aside money for gas, food, clothing, and other necessary expenses. You could spend this money on little luxuries, pay extra on your mortgage, or save for retirement. How do you make the decision?
The first priority should be setting aside money in your Emergency Fund. Yes, even before you pay off your credit card debt (unless you are in default or delinquent on your bills - then first pay them enough to bring them up to date).
Regardless of how much credit card debt you have, the first step in creating a prosperous future is to change your habits. When the unexpected bill comes (and it always does), you should have money in your Emergency Fund to pay that bill, to avoid racking up additional credit card debt. If you have spent every extra dollar attempting to pay off your debt & have no money set aside, when something unexpected happens, you will rack up even more debt and be right back where you started.
Your Emergency Fund should contain three to six months of your actual bottom-line living expenses. Or more ... I have some clients with up to one year of cash set aside; typically, they are generally risk adverse, are self-employed, or have a fluctuating income stream. Your amount is not three to six months of your salary - it is the bills and necessarily expenses you would have if you were unable to earn income. These funds should be maintained in a cash account, typically a savings or money market account. The Weinstein family Emergency Fund is in an ING Direct Orange Savings Account.
A home equity line of credit (HELOC) does not count. Yes, you could use a home equity line, or take out a loan on your house, if you were unable to earn income or had emergency expenses. But, it would just rack up your monthly expenses and debt even further. And, since interest rates have risen, even the tax deduction does not compensate for the high expense of using the HELOC.
Once you have a well-established habit of saving money each month, and have your Emergency Fund set aside, we can move to the next step - prioritizing debt and your life goals.
Action Step One:
Open up a dedicated savings or money market Emergency Fund account. Set aside a fixed amount of money each month - whether it is $50, $500, or $5,000 - until your fund is at three to six months of your living expenses.
Step Two: Pay Off "Bad" Debt
You've set up your Emergency Fund, and created a wonderful habit of saving $50, $500, or $5000 each month. We don't want to let that habit disappear ... so where do we put your money next?
Step 2 is to pay off any "bad" debt. What that means really depends upon the person, and your tolerance for debt. Some people are not particularly bothered by debt, so their only "bad" debt are those with high interest rates, or minimal tax advantages (non-mortgage and non-student loan debts).
There are two situations where I may ignore the interest rate, and recommend the client pay off the debt ASAP.
(1) Loans from family or friends. These loans, while low interest, may be eating away at the relationship, without you even knowing it. They may reduce the relationship to a formal, strained, money-based transaction, instead of a loving, friendly, supportive bond. You may know the debt is a problem, or ask other relatives to see if the debt is a problem in culture of the family - if so, pay it off quick.
(2) Debt that is keeping your up at night, or making you feel unsuccessful. Debt may be the new "American way" - but it is not right for everyone, or even most people. Monthly payments, or even the idea that you could be repossessed or foreclosed upon, may be eating you up at night. You may feel venerable, or like you have never achieved any of your goals until that debt is paid off.
If this is you, then your debts may become a high priority, even over other goals, like college funding or purchasing a new home. Whether your debt should be paid off as a high priority, depends not just upon the interest rate, but upon the mental and emotional interest rate you are burdened with each month you are making loan payments.
Action Step Two:
Take a personal inventory of your debts, and how much they are costing you in mental and emotional energy. Do they bother you? How much? If so, regardless of how low the interest rate is, paying them off should be a high priority. Start today - pay an extra $10, $100, or $1000 on the principal each month. Even better, set up automatic bill payments in your online bank account bill-pay system to make automatic regular extra payments each month or quarter.
Step Three: Goals Funding - Base Level
Now you have set up your Emergency Fund, and paid off your "Bad" Debt, including a loan from a family member, a high-rate credit card, and an old debt from college that was really bothering you.
You have a bunch of goals - retirement, paying off your mortgage, buying your next house, launching a new business, and sending the kids to college.
Which comes first? Retirement? The kids? Paying off your debts? How do you decide?
Step 3 of Where to Put Your Next $1 is to fund your goals, in order of priority, at the base levels - the amount of money you need to satisfy the minimum requirement of your goal.
For example, how much money do you need to pay your bills in retirement - not live an extravagant lifestyle, or play golf every day for 20 years, or travel the world - but how much to keep out of a cardboard box and live comfortably?
How much money do you need to save to send the kids to State College, as opposed to Ivy League? How much would it cost for the house you need, as opposed to the house you want?
Then fund the minimum, base level of those goals in order of priority. This may mean you start by contributing to your retirement plan or IRA, then contribute to a 529 Plan for the kid's college education, then set aside money in a CD to start a business in 3 years, and then, finally, invest to raise funds for a bigger house.
How do you decide the order of priority? First, determine if there is another way to pay for the goal, besides your own savings - if so, then it is probably a lower priority than goals for which you have no other alternative. For instance, there are loans easily available for college education, but not for retirement (with the exception of a reverse mortgage). Also, you could obtain investors or take out a loan to fund a new business, and pay them off with the new income stream.
Second, evaluate if you are giving up "free money" by not utilizing pre-tax or matching savings or retirement plans. If you can save pre-tax, the federal government is contributing to your goal (since you don't have to pay those taxes), and if you don't take advantage of this each year, you are leaving money sitting on the table. Similarly, if you are lucky to be employed by a company who matches a 401(k) plan, you may want to contribute at least the match, to "let" your employer help fund your retirement.
Action Step Three:
Make a List of Your Goals, in order of priority. Look at your #1 Goal - is it really your most important, or is it just first in order of time? Any special types of accounts or matching available for this goal? How much will your goal cost? What's the base level for that goal?
Set aside money each month to fund the base level of your #1 Goal - use your automatic savings or investment plan help you execute this week's Action Step.
Step Four: Above and Beyond ...
You've maxed out your Emergency Fund, paid off your "bad" debts, and funded the minimum levels of your most important life goals. Great job! What's next?
Step 4 is to fully fund your goals, in order of priority. For example ...
* Max out your Roth IRA, if you are eligible. * Max out your 401(k) and IRAs (yes, you can do both, the IRA just might not be deductible). * Purchase ESPP stock (and don't forget to regularly sell and diversify). * Contribute to a 529 Plan and/or taxable investment account for college education. * Invest in taxable or tax-advantage accounts for miscellaneous future goals, or additional retirement funds. * Buy investment real estate and/or rental property. * Pay off your mortgage. * Purchase CDs or Bonds for specific, time dated goals. * Leave money sitting in your Health Savings Account, invested and tax-deferred, until you can roll it over to an IRA in your retirement.
Wow, do you still have money sitting on the table? Wonderful! If your goals are already funded, then don't forget to enjoy your money now. Take a first-class vacation, hire a errand service for a few hours each week, buy a new sound system, or make a significant donation to your favorite charity. Balance saving for your future goals with living life now.
Action Step Four:
Choose your highest priority goal from Step 3. Have you fully funded this goal, to achieve your ultimate dream? Evaluate whether you have funded the minimal level of your other goals. If you have, then choose an action step from the list above ... and enjoy your prosperity!
There are countless ways to earn an impressive income online. Internet marketing can provide you a means of attaining the life that you have dreamed of. Now you won't have to miss those afternoon school plays or basketball games! I mean, you could have so much time on your hands that you'd have to find new hobbies.
How To Get Started
As a new Internet marketer, your overall goal is the success of your online business. Why is it that some people are a huge success online, many are mildly successfull and still others fail? Researh! Lots and lots of research is where success in a home business starts. The fact that you are reading this is part of that research. So I'd say you are on the right footing even now. The most important part comes later, after you have narrowed down your choices.
Your most important choice may not even be something that you have even considered. The single most important choice you make in what you end up doing on the internet is if you are going to do it all by yourself or find a solid and motivated mentor to help.
Don't roll your eyes at me here! When I first got started in online marketing I didn't have the benefit of a mentor. There it was, 1997, and the internet was so new that it had just gotten graphics! I remember that was such a big deal! I read a few things online and I was pretty much my own expert back then. It's kind of funny looking back at it now.
The internet has grown up along with my kids and it's become about as complicated as them too! Anyway, to step into the internet now, without a mentor, you'd spend more time and money doing things wrong than you have time or money to do it. Because your return on your investment would be so low and slow, you'd lose interest in the pursuit before you ever even made a ranking on a search engine.
Anyway, finding a willing and motivated mentor is an integral part of the next step, and, if you choose wisely your mentor comes with the package.
Choose A Product or Company To Promote
There are endless options of companies and products to promote online. Most everyone says it's best to find something you already have some knowledge about and can be passionate about.
To tell you the truth, I could get pretty passionate about something I don't know squat about if I found out that I could make 20 grand a month with it. In fact, give me a month and I'll know more about "it" than 98% of the world knows about it. I mean, case in point here, how much did you know about sex before you found out about it? Are you pretty knowledgeable about it now? Is it something you're passionate about now? (Hope that point is made!)
Personally, I think it is better to find something that works and learn to love it. Believe me, if you find something that ordinary people are making $5,000 a week with, you'll learn to love it!
It is also important to select a company that allows you to help other people. Remember, the driving purpose of your online home based business should be to help your clients, not to take their hard earned money and run. Napolian Hill said "You'll get everything you want in life if you help enough other people get what they want." I have found that rings true.
Get Educated
Many people enter the internet marketing arena thinking that they can put up a web site and instantly start earning a massive income. Unless you're selling the cure to growing old, it's not likely to happen. The way that you earn a great income online is learning everything there is to know about internet marketing. "Internet marketing" is a fancy way of saying, "drive people to your site.The same way you would have to learn new stuff for a J.O.B, you need to educate yourself about your new business. Driving traffic is how online success is achieved.
Really and truly, marketing is where the online money is made. Think about it, everyday there are thousands of people who want to buy any number of things. They are going to buy it from you if you learn how to get in front of them. If you don't, they are going to buy it, but from someone else.
So here's the deal. If you are going to get into internet marketing, you are going to have to learn to like "marketing." If that isn't your cup of tea, then you need to find something else now.
Generating Traffic
The main obstacle to any new online business is figuring out how to drive "targeted" traffic and therefore "prequalified" prospects to your "well designed" website. Now, learning to do everything that is necessary to accomplish that is probably more than the ordinary individual could do in a lifetime. That is why the best marketing is done by teams of people who combine their skills in internet marketing, copywriting, sales, organizational abilities and their collective knowledge.
The Choices Are Many
There are about as many ways to monetize the internet as there are grains of rice in china. Look for internet businesses for a while and you'll find more than you bargained for. So when looking for "that thing" that you are going to take up, I would advise you to steer away from anything that only has a web address and an e-mail.
Find something that captures your interest and call the person named on the site. Don't worry about anyone trying to "put the sale" on you. In fact, high pressure sales tactics are a sure sign that it's something that you don't want to do. I mean, if you don't like the receiving end of that, why would you consider dishing it out yourself? Just hang up and call the next one.
When you find someone who is not trying to "sell" you, pay attention. If they are making money without "hype and high pressure" they obviously have something people want and don't have trouble getting people to buy!
Relationships
Once you get that far, find out what kind of relationship they would have with you if you put stakes down with them. What makes you valuable to them as a rep or distributor? The better the tie, the better the team, the better the training, the better for you.
There are so many online business opportunities out there right now that hail the "completely automated" slogan. Just ask yourself, how long could you work with a computer or a set of videos? As long as humans are human, there will always have to be a human touch for any kind of long term relationship. Just keep that in mind while you are looking.
Summary
What you need is a complete turnkey business system that generates traffic, sifts, selects, recruits, trains, motivates, and gets new people producing in your internet business. That is the ultimate gift of internet marketing. Those can be done best via the internet and a motivated mentor. Choose wisely!
Both Elizabeth Potts Weinstein & Dan Hatcher are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Elizabeth Potts Weinstein has sinced written about articles on various topics from Financial Planning, Debts Loans and Finances. "Money Maven" Elizabeth Potts Weinstein, CFP(r), JD, helps women achieve their most important goals through financial planning, money coaching, classes, books, and her membership community. To get her free Special Report, How to Avoid the Top 10 Money Mis. Elizabeth Potts Weinstein's top article generates over 1900 views. to your Favourites.
Dan Hatcher has sinced written about articles on various topics from Fundraiser, Internet Marketing and Financial Planning. Achieve real success online with a top team of very motivated, successful mentors. Go to Dan is the founder and former owner of AIM Fund raising. A. Dan Hatcher's top article generates over 9900 views. to your Favourites.