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Entrepreneurs: 4 decisions ensure financial success

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DULLES, Va. (1/27/15)--Entrepreneurship can be rewarding at all life stages, from the young adult years to retirement and beyond. But before you invest your time, energy and resources into the entrepreneurial unknown, make these four money decisions to ensure you reach financial success (Daily Finance Jan. 21).
  • Keep spending down. You'll be tempted to spend whatever it takes to ensure the success of your new business. While investing in the business is key to its growth, when you're starting out find ways to cut back on personal expenses and to save.

    Build up your savings even before you launch, then focus on increasing your business' sustainability and improving cash flow--two things vital to business success;
  • Invest in yourself. Think about your retirement. Start by maxing out a traditional individual retirement account (IRA) if you need the tax break. If you can afford to pay taxes, consider contributing to a Roth IRA while you still qualify--your taxes probably will be lower now than when you retire. Contributing to both is a good hedge against unknown future tax rates.

    Once your business is consistently doing well, look at setting up a SEP-IRA or Solo 401(k), both designed for the self-employed. If you hire employees, consider setting up a SIMPLE (Savings Incentive Match PLan for Employees) IRA;
  • Outsource. Weigh your strengths and weaknesses, and outsource the jobs that don't come easy for you. You might hire a bookkeeper, an accountant, a handyperson, someone to answer the phone, or just a freelancer for special projects. Don't waste time and money trying to figure out or do things that someone else can do more efficiently; and
  • Stay with the basics. To stay afloat, adopt these basic financial principles:
    • In your business as well as your personal life, spend less than you earn.
    • Build up your savings accounts to help you get through emergencies and lean times.
    • Set money aside to pay taxes throughout the year.
    • Use a bookkeeping system to track expenses and income. Xero and Quickbooks Online are good examples of online accounting software.
 For related information, read "Uneven Income Calls for Proactive Money Strategies" in the Home & Family Finance Resource Center.

Get employed in today's hot job market

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McLEAN, Va. (1/20/15)--2014 was a great year to land a job. Employers in the United States advertised more job openings last year than they had in the past 14 years, according to the Labor Department (USA Today Jan. 13).
This increase suggests that businesses are confident that strong economic growth will continue and that there will be increased demand for products and services. To remain competitive, employers might offer higher pay to attract qualified applicants.
If you're a job seeker, don't make these mistakes on your resume, during the interview and when you're following up (College USA Today Jan. 16):
  • Typos. A 2013 CareerBuilder survey found that 58% of resumes have typos. Read your resume out loud to yourself and then have someone else read it. Typos can indicate laziness. It may seem trivial, but a typo could cost you the job if it's between you and another just-as-qualified candidate;
  • Pretty white lies. Don't think prospective employers won't follow up on what's on your resume--they will, and often during the interview. Even if there's a skill you "want" to learn more about, telling an employer you already have that skill doesn't work;
  • Not tailoring your resume. Don't submit the same resume and cover letter for every job you apply for. Take the time to tailor these items to demonstrate that you're the best hire;
  • Writing a novel. It might be hard to narrow your abilities and past experience, but employers want highlights of what's compelling about you. Of course you'll list important attributes, but save details for the interview;
  • Using the wrong company name. Take an extra peek to be positive that you're sending the right cover letter to the right company. Saving a separate document for each cover letter may help instead of just replacing the company name each time you create a letter;
  • Repeating your resume on your cover letter. Employers will read your resume. Your cover letter should be a quick overview of why you're applying for the job and why you're the best candidate;
  • Talking negatively about former employers. Doing this only will make the interviewer think you'll do it again--when you're leaving this company. Have some class and remain neutral or positive about previous jobs, especially when you're asked why you're leaving a position; and
  • Following up on social media. This can seem impersonal and lazy. Develop a well-written email soon after the interview, and for extra kudos send a hand-written note.
For related information, read the Turning Point "Get Back in the Game After Losing a Job" in the Home & Family Finance Resource Center.

A good money goal for 2015? Save more

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NEW YORK (1/13/15) --With 2015 stretched out before you, now is a good time to set money goals so your finances are in better shape come 2016. 
If you're one of the 62% of Americans a new survey found to have no emergency savings, a good first goal is to start an emergency savings account (MarketWatch Jan. 7). Open a supplemental retirement account like a Roth IRA (individual retirement account), which allows you to withdraw the money you deposit at any time penalty free. That way you're saving money for retirement, but it's also there for unplanned expenses such as car trouble, an emergency home repair, or health problems.
Here are some other good financial goals to strive for this year (The New York Times Jan. 2): 
  • Emphasize savings. If you're saving 8% of your income every year, saving just one percentage point more increases your overall annual savings by 12.5%. A good place to start is raises. If you received a raise, instead of increasing your spending, increase your savings--whether it's for retirement, education, or your emergency savings account;
  • Reexamine your investments. Do you have too much invested in stocks? It can be tempting when the stock market is doing well to expose your portfolio to more risk. Make sure you have and maintain the right mix for your goals and age; and
  • Max out your tax-advantaged accounts. Taking full advantage of your dependent care, health savings and employer-provided pretax transit accounts is an easy way to save money each year. If you can afford it, you can compound your savings by waiting to be reimbursed until the end of the year, and then investing that money in an IRA or 529 college savings account.
Also, take a look at your debt levels. As the economy recovers and you feel more financially secure, it can be tempting to take on more debt and assume you always can pay it off later. But when it comes to your finances, it's good to remember the maxim "hope for the best but plan for the worst."
For related information, read "New Year Resolutions: Keep It Simple for Success" in the Home & Family Finance Resource Center.

Expect some higher prices in 2015

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NEW YORK (1/6/15)--Gas prices are tumbling and inflation is almost sitting still. You probably hope it's going to be a great year for your wallet. It will be, if you pay attention and make adjustments to your spending habits (CBS News Jan. 1).
Prices still are climbing on some consumer products and services. Global demand, packaging and transportation costs, the price of raw ingredients and manufacturers' need to catch up on past losses are just a few of the reasons.
Here are eight areas to keep an eye on:
  1. Airfare: You might think the airlines would pass on savings from rock-bottom fuel costs, but it won't happen. Airlines say they will use their new profits to improve airports and planes.
  2. Electricity: Expect the average U.S. household to see its electricity costs increase in 2015. For example, in New Hampshire, some customers will pay an extra $5 to $7 per month.
  3. Eggs: Egg prices will spike in January. California's new law requiring more room in henhouses is affecting egg producers across the county as farmers upgrade facilities.
  4. Avocados: The U.S. population is already addicted--now Asia has discovered the green fruit. The California drought is adding to the woes of growers who can't keep up with demand.
  5. Coffee: The price of raw materials is increasing, so you'll pay more for Maxwell House, Gevalia, McCafe, Yuban (including Keurig K-Cup packs), Folgers and Dunkin Donuts brands.
  6. Bourbon: Aficionados are stocking up in case a shortage develops. Since there doesn't appear to be an actual shortage, blame price increases on speculation.
  7. Chocolate: Hershey's says cocoa, dairy and nuts are getting significantly more expensive. Add a rise in packaging and transportation costs, and you'll pay more for chocolate treats.
  8. Redbox: Kiosk users started paying $1.50 for a DVD and $2 per day for a Blu-ray disc Friday. Video games will go up to $3 per day today.
Many of these items can be classified as "wants" rather than "needs." If you and your family are willing and able to plan air trips carefully, monitor electricity use, be careful with grocery expenses, modify or give up some indulgences, and change your movie habits, your household budget can still catch the break you'll get from cheaper gas and low inflation.
For related information, read "Shop and Save in Every Season" in the Home & Family Finance Resource Center.

New Year resolutions: Keep it simple for success

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MADISON, Wis. (12/30/14)--The self-improvement impulse kicks into overdrive at the threshold of each new year. Susan Tiffany, writing in the Credit Union National Association's Home & Family Finance Resource Center, recommends sticking to the basics when making financial resolutions.

"You can make a lot of progress, and avoid disappointment, by identifying and acting on simple moves that pay off most over time," Tiffany wrote.
  1. Set a goal. Think of all the things you'd like to accomplish financially and rank them. Paying off all your credit card debt, saving for a down payment on a new car or a house, setting up your will and power of attorney for health care and your personal finances are some examples. Remember the SMART acronym and keep your goal specific, measurable, attainable, realistic and timely. Focus on one goal at a time that will have a satisfying payoff. Knock off one goal, then proceed to the next.
  2. Fuggeddaboutit. Make a decision once and automate it. Your credit union has effective tools to help: Use direct deposit of net pay from your employer, then use automated transfers from share drafts/checking to savings to build your rainy day fund--always pay yourself first. Then use online bill pay to pay all bills, on time every time. Set alerts from the bill pay system to remind you when a payment is due. Likewise, set up a low balance alert so you never get caught off-guard by an overdraft.
  3. Sleep on it. Impulse spending wreaks havoc with the best intentions. Give yourself a cooling-off period--sleep on a spending decision overnight or find some other way to delay spending until you're confident it's a prudent choice. Ask yourself, "Is this behavior sustainable? Does this serve my goals?" Having a goal and keeping it top of mind are good ways to honor your long-term objectives.
Keep your eye on long- as well as short-term goals--future retirement and college expenses will arrive whether you prepare or not. Taking simple steps now and automating them will assure your readiness.

For related information, read "Act on Financial Red Flags" and "Shop and Save in Every Season" in the Home & Family Finance Resource Center.

End of year smart time to review retirement goals

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McLEAN, Va. (12/23/14)--The end of the year is a timely opportunity for everyone to review financial goals or set new ones (USA Today Dec. 17).
But especially if you're planning to retire in the next few years, it's important to spend some time reviewing finances. Here's advice that can help you prepare for success:
  • Develop a spending plan. It's essential to know what your expenses are going to be and to develop a spending plan. There are software programs and apps that can make this easier; your credit union might have its own savings app. You might think you'll have fewer expenses than during your working years, but savings can be more than offset by expenses for medical care and insurance.
  • Scrutinize health care costs. Don't just look at what Medicare will cover. Health care costs can affect retirement savings tremendously, and many retirees don't plan accordingly or else underestimate expenses.
  • Evaluate your financial relationships. Look at the relationships you have with a financial adviser, accountant, attorney, insurance agent--and financial institution. If you're not happy with a relationship, start researching different options. If you're not already a member of a credit union, join one. On top of better customer service, credit unions often have lower interest rates and fees.
  • Look at your 401(k). Review options for what you can do with this investment after you retire. Talk to a specialist in your human resources department as well as a financial planner for help making the best decision.
  • Review beneficiary designations. The end of year is a great time to review beneficiary designations. Marriage, divorce, births and deaths are all events that can change your family dynamic.
  • Start thinking about withdrawing from your nest egg. People spend a lot of time thinking about retirement savings but think less about retirement withdrawals. Have a plan in place for how much you think you'll need to withdraw each year and be realistic about it. Talk to a retirement specialist at your credit union to work out a plan that suits you and your lifestyle.
For related information, read "Protect Your Nest Egg From Nursing Home Expenses" in the Home & Family Finance Resource Center.

Give safely and guilt-free this holiday season

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DETROIT (12/16/14)--The holidays are synonymous with giving, as seasonally warm feelings for humanity combine with charities searching for a year-end boost to their bottom lines.

While this is mostly a good thing, potential givers should be careful: Many fraudsters and unscrupulous organizations are looking to take advantage of their good intentions. A few simple questions and a quick online lookup are usually all it takes to determine if a charity is legitimate.

Ask about the charity's history, location, and tax ID number--if the answers seem fishy or vague, don't open your checkbook (The Detroit News Dec. 10). If someone is soliciting money in person, don't be afraid to pause and research the organization on your smartphone before deciding to donate.

Even better, take steps to avoid feeling guilt for declining just because someone asked you to give. The New York Times offered these tips last week for creating a giving plan.
  • Decide how much you want to give--either a dollar amount or percentage of income. Then choose an organization.
  • Pick a charity that aligns with your beliefs and will spend your donation responsibly. The website Give Well has analyzed thousands of charities and provides information about their pros and cons.
  • Decide how often you want to give and then follow your plan. By budgeting your generosity, you'll know exactly how much you've given and to whom come tax time.
  • When asked for a donation by other organizations, simply explain you've already given another way.
For related information, read "Financial Gifts Can Improve Well-Being" and "Holidays Are Rich With Teachable Money Moments" in the Home & Family Finance Resource Center.