4 Effective Questions: Saving Money Quick and Proper

download (78)You have learned to organize your present incoming with your current expenses. You have tipped the scale to work in your favor and have found a surplus. Too often, our ‘extra’ cash is wasted. Spent on ATM fees, the interest on your next card statement, or knick-knacks you buy as you go about your week.

The emotional trouble with saving is the decision to hold back spending because ‘you must shield yourself from enjoying life or indulging.’ And this is so difficult if we only think about it. Saving is a habit; you may put away $10 a week, some can save $100 or more a week. In either case, the driving force behind finding a huge lump sum after a week, months, or years, is the habit. And we are only talking in the short-term.

There is an easy way to get started with valuable Savings. Start with your emergency fund. Why? The emergency fund carries the cash that keeps you moving forward when “life” happens. A few examples are moving, career change, job loss, or sickness.

The design of the emergency fund is to have a specific amount of money at your disposal. As an example, sum your life costs for a month. Let’s say $1000. $4,000 will let you continue living for four months while you cope, re-adjust, or transition your life.

This account must have the following criteria (these can get you started):

(1) Time-period

– Will your account hold you over for 3, or 6 months?

(2) Purpose

– Assign an account to one expense, like rent, or total living expenses.

(3) Control

Do you remember why it is called an emergency fund? Be considerate and spend on vacations and personal gifts after you have met your saving quota.

TIP: Focus on getting started and not on researching where to bank. I recommend searching for a known online bank – it adds a buffer, and safety.

Now that you have an emergency fund ready and have topped it off move on to saving for what you want. You have mastered funneling your money, now aim it toward the future.

I want to leave you with a few questions to ask yourself; they will make the planning of anything you need to save for – easy as pie:

– What amount of money will keep me safe for 1, 2, or 3 months? Or, what amount of money do I need? (Set a goal to hit.)

– How much money can I afford to save every week or every-other week? (Set a doable-baby-step plan.)

– What exactly will this lump-sum be used toward? (Give purpose to your goal.)

– Can I keep this aside, and start other savings account for fun I want to have? (Dedication to your goal!)

Do some homework, and find how you can help yourself. Don’t just save, but save with a plan, with purpose, with passion.

22 Great Ways to Save Your Money

download (77)How to Save your Money?

1. Turn off the television.

The Greatest way to save money is to drastically cut down on the amount of television you watch. There are a lot of financial benefits to this: less exposure to spending-inducing ads, a lower electric bill (and perhaps a lower cable bill if you downgrade your subscription), more time to focus on other things in life, such as a side business and so on.

Want to take things a step further? Consider cutting the cord to cable TV altogether.

2. Enough with the collection and time to sell

Many years ago people thought their collection would bring them riches. Beanie Babies were a big fad at one time, as were Longaberger baskets. Now you can find those items on resale sites like Craigslist and at garage sales for a fraction of their initial cost, leaving many people who sunk thousands of dollars into their “investments” wondering what happened.

To avoid situations like this, never collect items of questionable value. And if you want to recoup some of the money you’ve already spent on collectible items, you can start selling them now and use those funds for any number of worthy financial goals.

3. Sign up for as many free customer rewards program you can

No matter where you live, you’ll find plenty of retailers who are willing to reward you for shopping at their store. Here’s the basic game plan for maximizing these programs: create a Gmail or Yahoo address just for these mailings, collect every card you can, and then check that account for extra coupons whenever you’re ready to shop. You can add to those rewards and discounts by using rewards credit cards to earn points on purchases at a wide range of stores that can be redeemed for cash back or other benefits.

4. Get creative

If you want to save money while also giving generously, creating your own homemade gifts is one way to accomplish both goals. You can make food mixes, candles, fresh-baked bread or cookies, soap, and all kinds of other things at home quite easily and inexpensively.

5. Understand the 30-day rule.

Avoiding instant gratification is one of the most important rules of personal finance, and waiting 30 days to decide on a purchase is an excellent way to implement that rule.

6. Prepare a list before going out for shopping and please stick to it

One of the easiest ways to save money is to only shop when you have all what you are buying written down. Because when you’re without one, you typically end up buying things you didn’t plan for or budget for and this will cost a lot. Creating a list before you go to the grocery store is very important and not only does it help you buy items that fit with your meal plan, but it can also help you avoid buying food you might waste. Always create a list and, more importantly “STICK TO IT”.

7. Call friends over instead of going out

Going out to eat has a way of completely destroying both your food budget and your entertainment budget in one fell swoop. And no matter what, it is always cheaper to stay in with friends and come up with your own entertainment.

8. Spend less entertaining your children

Most children, especially young ones, can be entertained very cheaply. Play ball in the backyard; teach them to ride a bike without training wheels once and for all.

9. Negotiate rates with your credit card company or complete a balance transfer.

Now if you’re paying a lot of interest on your credit cards, it’s important to know that you do have some power as long as you’ve been making your payments. Not only do you have the right to negotiate your current interest rate with your credit card issuer, but you have the right to transfer your balance to an entirely different card as well. Start by calling your card issuer at the number on the back of your card and explaining your request. If you don’t make any progress with them, check out these balance transfer credit cards to find one with an introductory 0% APR that could help you save hundreds of dollars in interest over time.

10. Clean out those closets.

Go through your closets and find anything and everything you no longer use. Then, don’t just get rid of it, use it to your benefit.

11. Drink more water.

Now not only does drinking plenty of water have great health benefits, it also have financial benefits, too. Drink a big glass of water before each meal in order to stay fuller longer and ultimately eat less. Not only will you save on the food bill, but you’ll also feel better after you become properly hydrated.

Remember; tap water is not only just as clean as bottled water, it’s also free.

12. Avoid going to Fast food/ Restaurants

Now instead of eating fast food or just nuking some prepackaged dinner when you get home, try making some simple and healthy replacements that you can take with you. An hour’s worth of preparation one weekend can leave you with a ton of cheap and easy dinner and snack options for the following week.

13. Quit Smoking

As a smoker, you will know by now that your habit is not only expensive, but potentially deadly as well. If you want to add years to your life and save a boatload of money, the easiest thing to do is to stop smoking altogether.

14. Turn off the lights and save your electricity bill.

Keeping the lights on in your home may not be expensive on a per-watt basis, but it sure does cost money over time. To save as much as you can, turn off lights any time you leave your house – or even when you leave the room. Turning off lights when you have plenty of natural sunlight can also help keep your electric bill down over time. The bottom line: If you aren’t using a light, turn it off.

15. Increase your yard sales

Yard sales are a great place to score awesome deals on items you need anyway – think house wares, shoes, clothing, or even sports equipment. The key is, you have to be careful not to use the low prices found at sales as an excuse to buy things you don’t need. Advice; at your next garage sale, limit yourself to items that were already on your list of things to buy.

16. Purchase quality appliances that will last.

It’s worth the time to do a bit of research when you buy a new appliance. A reliable, energy-efficient washer and dryer might cost you quite a bit now, but if it continually saves you energy and lasts for 15 years instead of five, you’ll save significant money in the long run.

17. Compare price list of groceries and find the cheaper one

Most of us get in a routine of shopping at the same grocery store, and we may not even realize that we’re not getting the best deal. Fortunately, there’s a simple way to find the cheapest store around. Just keep track of the 20 or so things you buy most often, then shop for these items at a variety of stores. Eventually, one store will come out on top for your purchases – just make that one your regular shopping destination and you’ll automatically save money.

18. Share your dreams with those you love and also those that love you.

I know this is an odd way to save money, but think about it. If you spend time with the people you love the most and come to some consensus about your dreams, it becomes easy for you all to plan for it. Set a big, audacious goal together and encourage each other to be financially fit – soon, you’ll find you’re doing it naturally and your dreams are coming closer than ever.

19. Get to know how to fix things yourself

Many years ago, it was far more difficult to find ways to fix everyday items we have in our homes. But today, it should be a piece of cake. You can find online tutorials and videos that show you how to fix almost anything, and all for free. No matter what you’re trying to fix, it’s always worth a shot. Learning a new skill never hurts either. You can always go to places like http://www.youtube.com and get some tutorial videos.

20. Never look down on yourself after making a mistake

Even if you make 10 good choices in your life, it’s easy to beat yourself up and feel like a failure over one bad choice. If you make a big mistake and realize it, think about why you realized it now instead of then, and try to apply that later on. The memory of that mistake can end up being very valuable, indeed.

21. Never look back – Always look further

Don’t let the mistakes of your past drag you down into more mistakes. Instead, look ahead to the future. Learn to see past mistakes for what they are. Sometimes the best life lessons are learned through life experience, good or bad, so embrace your past and don’t run from it. Promising to do better and setting goals can help keep mistakes where they belong which is in the past.

22. Don’t ever give up

Whenever the struggle against debt feels like it’s too much, go read a personal finance blog or get a finance tips book and remember that there are a lot of people out there fighting the same fight.


Playing By The Rules – A Treadmill To Debt

download (79)Know this!

  • Today’s economics and demographics are different from even a decade ago, your approach to saving and investing must reflect that.
  • Job and benefits security is fast becoming extinct. You mistake responsibility for planning for your future.
  • Americans are living longer, so your money has to last longer.

Check always – separate financial fact from fiction

  • financial freedom wake-up call
  • financial freedom personal check-up
  • 21st century investing and savings
  • debt-free retirement
  • discern financial fact or fiction

Reality check

  • Look at every purchase you make now and ask yourself, “Is this a need or a want?”
  • Discover if your life or marriage is being affected by financial stress. If so, make a plan to eliminate stress.
  • Tune out the daily, weekly, and monthly “latest” gyration of the stock market and the analysis along with it. If you’ve done your homework and save and invested thoughtfully, these numbers have little day-to-day effect on your long-term financial goals.

Act upon

  • Your success or failure to achieve what truly matters to you is up to you. It’s your choice, not the choice of your financial advisor, your parents, your neighbors of employer.
  • Debt is not OK – we somehow have been conditioned to believe that debt is a normal part of life. Consumer credit outstanding totaled nearly $2.8 trillion as of November 2012, according to the U.S. Federal Reserve ( http://www.federalreserve.gov/releases/g19/current/default.htm ).
  • Debt is absolutely not cool in the new financial reality.

The private control of credit is the modern form of slavery

Crippling debt is not a necessary part of living the life of your dreams. It is, instead, a road to financial slavery. Debt should not own you; you should control your own life, and the actions you take should help you achieve your goals.

Do you spend more money than you earn? Are you tired of living from pay check to pay check? Do you make more withdrawals than deposits to your savings account? Are all of your credit cards maxed out?

If you answered yes to one or more of these questions, you’re most likely in debt. Getting out of debt is not an easy process to go through. It takes strong commitment, discipline and will power. No matter who you ask, book or article you may read, the first thing you will learn in order to get out of debt is to create a budget. Having a budget is the single most important step to get out of debt. A budget will show you exactly where you stand with your finances.

Most people have money going out in so many directions or places that it’s hard to keep track of how much is actually being brought home every month, if any at all. A budget will help to organize your spending. Budgets give the opportunity to see in black and white where your money is going. Although creating a budget may seem daunting, it’s scarier to go on spending without one.

Thanks to the Federal Reserve’s zero interest rate policy, living off of fixed income investments doesn’t seem likely… or even possible… anymore.

Effective Cost Management and Optimal Pricing Strategies

download (76)How do firms choose their pricing strategies? Do higher prices automatically result in higher profits? How do firms that opt for premium pricing compare to firms that opt for volume? Do price increases always result in higher total revenues? These strategic policy questions relate to the optimal price points of a business enterprise-the appropriate mix of value propositions that maximizes net income and thus the return on investment and shareholders’ wealth while minimizing the cost of operations, simultaneously.

There are divergent pricing objectives and many factors influence pricing strategies. For those familiar with the relevant academic literature the critical factors are well known and supported by contemporary research. The primary goals of effective pricing strategies and core elements of effective pricing strategies are equally well established. However, some industry watchers and practitioners continue to identify profit maximization as the primary goal of business enterprises. As we have advised in previous review and guidance, this focus on profit maximization is a bit misguided.

While profit maximization is a legitimate strategic business goal, for several reasons the primary goal of a business is survival at least in the short run. There is gathering empirical evidence suggesting that when businesses overlook this reality and make profit maximization their primary and dominant goal, they tend to engage in conduct and pursue strategies that threaten their very existence. Contemporary case studies are replete with modern examples such as AIG, Bear Stearns, Enron, Global Crossing, Lehman Brothers, Refco, Washington Mutual, and WorldCom, etc. In this review, we highlight some basic economic theory and best industry practices of effective pricing strategies. This article provides general guidelines for establishing optimal pricing strategies and effective cost minimization strategies. For specific pricing and cost management strategies please consult competent professionals.

A close review of relevant extant academic literature indicates that most firms seek to maximize net income (difference between total revenues and total costs) based on several factors such as the stage of the industry life cycle, product life cycle, and market structure. Indeed, as we have already established, the optimal value proposition for each firm differs markedly based on overall industry dynamic, market structure-degree of competition, height of entry/exit barriers, market contestability, and its market competitive position. Additionally, as with most market performance indicators, firm-specific profitability index and revenue growth rate are insightful only in reference to the industry expected value (average) and generally accepted industry benchmarks and best practices.

In practice, firms use pricing objectives and the price elasticity of demand for products and services to set effective pricing policies. Basic economic principles suggest that price elasticity of demand indicates the sensitivity of customers to changes in pricing, which in turn affects sales volumes, total revenues and profits. Economic principles suggest that the price elasticity is low for essential goods because people have to buy them even at higher prices. On the other hand, the price elasticity is high for non-essential and luxury goods because consumers may not buy them at higher prices, ceteris paribus.

Optimal Pricing Strategies

Optimal pricing points maximize profits by charging exactly what the market will bear. Managers may adjust their pricing strategies depending on changes in the competitive environment and in consumer demand. Most successful world-class firms rely on effective environmental scanning, environmental analysis and market analytics to make informed decisions that create and sustain competitive advantage in the global marketplace. In practice, the core elements of optimal pricing strategy include the value of the product to prospective customers, the price charged by key competitors, and the costs incurred by the firm from new product idea generation to commercialization.

Further, optimal pricing is derivative of effective price discrimination which means that firms segment their market into distinct customer groups and charge each group exactly what it is willing to pay. The optimal price and volume refer to the selling price and volume at which firms maximize profits. While some small-businesses often may not know exactly what consumers are willing to pay because of limited market analytics, inept marketing information systems and ineffectual environmental scanning, most firms use historical cost data, price points, and sales data to establish market trends. In practice, most small businesses make reliable assumptions and useful estimates based on historical sales patterns and set product mix and pricing strategy accordingly.

Managerial economic principles suggest that long-term success and profitability depend on optimal pricing, or producing an output to the point where the additional revenue of an extra unit of output equals the additional cost of producing that unit: (MR=MC); in other words, producing where marginal revenue equals marginal cost. In practice, we can derive marginal revenue from the firm’s demand. The mathematical derivation is given by: MR = P(1+(1/Ed)) =MC. However, an easier method of deriving marginal revenue is to use the price elasticity of demand. Since maximizing profit requires marginal revenue equals marginal cost, we can derive optimal price from the relationship between marginal revenue and the price elasticity of demand. Consequently, the optimal price is P = MR = MC(Ed/(Ed+1)). As we know, based on law of demand price elasticity is a negative. Therefore, optimal price, P = (MC*Ed)/(Ed-1).

Additionally, there is a confluence of empirical evidence in the extant academic literature suggesting that optimal pricing is possible only when there is a difference in price elasticity for different consumer groups. For example, a store chain may price the same item higher in a wealthy neighborhood, where consumers may be less sensitive to price, and lower in a working-class neighborhood, where consumers may be more sensitive to prices. The factors that affect price elasticity include whether the product is a necessity or luxury, the availability of substitute products and the proportion of disposable income required to buy certain product. The price elasticity will be high if consumers can buy alternative products or if they have to spend too much of their discretionary income.

Some Operational Guidance

Basic economic principles are supported by gathering empirical evidence suggesting that higher prices do not guarantee profit and higher total revenues do not guarantee profit. In practice, most world-class firms know that the critical variable is effective cost management. The objective functions are revenue enhancement and cost minimization. Indeed, competitive advantage in the global marketplace derives from strategic options based on EQIC: Efficiency, quality, innovation and customer responsiveness. Further, because profit is the different between total revenues and total costs, there are several ways firms with market power maximize the profit producing capacity of their enterprise. Firms can increase profit by increasing total revenues while reducing total costs; and they can increase profit by increasing total revenues while keeping total costs from rising; or they can increase profit by increasing total revenues more than they increase total costs.

Additionally, revenue enhancement can be quite expensive and often, the relationship between profitability and revenue growth is quadratic which implies that revenue growth rate may be functional and profit-enhancing or dysfunctional and profit-reducing. For most successful firms, the strategic objective is to locate the optimal revenue growth rate of the enterprise where profit is maximized, ceteris paribus. Two strategic value propositions and pricing options based on Du Pont ROI model are available to most firms: Premium pricing (emphasizing high mark-ups, high profit margins and profitability); and High turn-over rate (emphasizing high productivity and effective use of available assets). There is significant empirical evidence suggesting firms that opt for scale and volume tends to outperform those that opt for segment and premium, all things being equal.

Managerial economic principles suggest that price effects depend on the size of income effect and substitution effect. Further, the effect of price changes on total revenues depends on price elasticity of demand. When products are price elastic, price increases will reduce total revenues while price reductions will decrease total revenues when products are price inelastic. The opposite is equally true. Therefore, firms seeking revenue enhancement should lower prices if products are price elastic and increase prices if products are price inelastic, all things being equal.

Moreover, the target is optimal scale of operation-the Minimum Efficiency Scale (MES) where firms minimize their long-run average cost via economies of scale. As we have already established, scale economies derive from economies of scope, division of labor, specialization, experience curve, and learning effects. A careful analysis of the extant academic literature suggests that the optimal price path should be largely based on the sales growth pattern. However, in the real world we rarely find new products that have such pricing pattern. Indeed, we observe either a monotonically declining pricing pattern or an increase-decrease pricing pattern that does not seem close to the actual historical sales path.

Contemporary research on optimal pricing for the most part contend that the dominant firms and most firms with market power will maximize their present value by either charging the short-run profit maximizing price and allowing their selective demand-market share to decline or by setting price at the limit price and precluding all new entry. And because price sends multiple signals to diverse stakeholders including regulators, current and potential competitors, firms that opt for short-run profit maximization would have to ignore continually the reality of induced potential and new entrants and close scrutiny by diligent industry regulators.

Conversely, firms charging the limit price have to be convinced that their prevailing market share is optimal, that is P = (MC*Ed)/(Ed-1). While there is only limited analytic justification for this strategic dichotomy, professional intuition suggests that the optimal strategy requires careful balancing between current profits and future market share. Managerial economic principles strongly suggest that the rate of entry of rival producers into a specific market is a function of current product price. There is strong empirical evidence indicating that the variation in rate of firms entering or exiting an industry is positively correlated with the level of industry profits. Therefore, a dominant firm with high current product price and profit levels may be sacrificing some future profits through gradual erosion of its selective demand-market share.

In sum, optimal pricing strategy depends on effective cost management, market dynamism, and price elasticity of demand. Regardless of market structure-degree of competition, the output level where MR = MC is always optimal, whether the firm is earning an economic profit, breaking even, or operating at a loss. Firms seeking to minimize costs should operate at the output level where P = MR = MC = minimum ATC -the price is equal to marginal revenue, and the marginal cost; and the minimum of average total cost. This is a very useful economic principle because when a firm is earning profits-it maximizes profit where MR = MC and when a firm is incurring losses, it minimizes loss where MR = MC and the minimum of the ATC, ceteris paribus.