Planning Can Help You Save Money on Food

Planning ahead is the most important step to getting more bang for your buck at the grocery store, says Katherine Tallmadge, RD, a spokesperson for the American Dietetic Association.
"Take inventory of what you have on hand so you don’t overbuy, create a detailed shopping list based on your needs and weekly menu plan, and take into account how you plan on using leftovers," she says.
Have a light snack before you go shopping, and stick to your grocery list to help avoid impulse purchases or costly mistakes like falling for the displays at the end of the aisles.
Before you plan your weekly menu, check the ads to see what’s on sale and use coupons to take advantage of sales and money-saving coupons. You can even sign up online to receive coupons and email alerts from your favorite grocers.

Save Money on Tax Preparations

Read these tips!

Tax time is stressful for everyone, tax payers and tax preparers. Try to make preparing and paying for taxes a little less stressful by practicing the following throughout the year.

Receipts

Save all receipts throughout the year. This means everything – from gas receipts to meal receipts and everything in between. Retain all receipts and canceled check or bank statements in a folder or container marked with the current tax year.

Accounting Programs

Obtain an accounting program such as QuickBooks, or something similar. This does not have to be the newest or updated version as an older version of the program will be cheaper and will do the job just fine. Making a spreadsheet in a program such as Excel will also work, but will require more time.

Spreadsheets

Set up the program or spreadsheet to separate all expense individually, i.e. gas, diesel, meals, groceries, school expenses, utilities, telephone, medical expenses, etc. Any gas or diesel receipts that are entered should also show the number of gallons purchased.

Enter Everything

Enter all receipts, canceled checks and income into the program or on the spreadsheet. Add notes into each entry, such as “Jake’s school registration,” “4.325 gallons diesel,” “Kathy’s cell phone,” or “Christmas gift for Susan.” There are businesses or individuals that will provide this service, and less money will be spent hiring them to do it, then will be spent having the tax preparer to go through everything, or missing a deduction.

Print and Save

After all receipts and canceled checks are entered, print the spreadsheet with all expenses listed. Check the printed spreadsheet for duplicate entries. Remove any duplicate entries or mistakes that have been made, and reprint a final draft. If something is questionable, highlight it or circle it, so that it stands out. Save the spreadsheet onto a CD or DVD, and label it with the current tax year.

To the Tax Preparer

Provide both the printed list and the CD or DVD to the tax preparer for completion of the current year’s taxes. The tax preparer will now be able to enter information onto the tax return by either the printed version of the spreadsheet, or right off of the CD or DVD. This will save both time and money for the tax preparer and the tax payer.

Individuals and Businesses

Everyone should do this, whether they are an individual with limited income or a business with multiple incomes, as it not only provides an accurate record for each and every tax year, but also saves time and money during tax preparation. Tax preparers charge extra if they have to go through receipts and calculate totals. There is also always the change that a deduction may be found, that would normally have been overlooked.
Try these tips to save time, money and to avoid stress during this tax season, and every one thereafter.

Want to Save Money on Cable? Here's a Useful Trick

This week I learned an important lesson about how to save money when negotiating service rates with the cable company and other vendors. As I am in the process of moving to my new job, I have had a couple of days off and got around to doing some things I have been planning to do for a long time. One of these tasks was to get our cable bill reduced.

We get our cable TV and broadband Internet from Comcast and our monthly bill comes out to about $160 including all taxes, fees & the cost of our HD DVR. We are very happy with the level of service we receive, but the price is just too steep for us. I know many PF bloggers are all about saving money by cutting off cable, but for us this is a complete non-starter. We enjoy our HD channels, HBO & our fast broadband connection and have no intention of giving them up. Since that is the case, the best we can hope to do is to reduce our cable charges as much as possible.

Early in the week I called Comcast customer service and asked for a price reduction. They essentially gave me a resounding "get lost" response. They offered us a $10 reduction in our monthly bill, if we were to subscribe to their triple play service, i.e. buy cable, Internet and phone service from them as a bundle. This was actually a pretty good deal, since not only would we be able to reduce our monthly fee by $10 but subscribing to triple play would mean that we could cancel our land-line phone service and save another $20 a month. However, after my wife and I discussed it we decided that we would rather stick with a traditional land-line. One of our main reasons for this is that a typical land-line works even when the power is out, while a cable phone would only be able to operate as long as its backup power was available (8 hours according to the Comcast representative).

Back to the main story. My challenge was to get a lower price for our current service package. Since I already called customer service and they turned me down flat, I decided to call the disconnection department. That made life a whole lot easier. The agent on the other end of the line was very receptive to my requests. Within minutes I got a $40 discount on our rate effective for 12 months, without having to sign up for any additional services. In addition, the promotional price did not require any contract and we are free to add, change or cancel service at any time. That call saved us about $500 over the next year. As an added bonus, I got the customer service agent to send us a technician, free of charge, to move one of our cable connection spots to another side of the house. This normally costs $150.

So here is the lesson: if you want to get a discount, don't call the customer service center. Talk to the folks that really matter: the department responsible for customer retention & account terminations.

I put this lesson to another good use later in the week by calling AT&T Wireless regarding my cell phone plan. My employer picks up the tab for my cell phone, but I wanted a new Blackberry free of charge. The folks at the disconnection department got pretty close, after the regular customer service agents turned me down flat. I haven't closed the deal yet, I want to make sure that my employer is willing to pick up the difference on my new phone before I make the purchase, but one thing is clear: if you talk to the folks that are tasked with keeping customers, your chances for getting what you need improve dramatically.

How to Save Money on Utilities

Lower your thermostat and save money

flickr.com

Many Americans are struggling to make ends meet these days. But there are many simple things you can do to cut your utility bills. This article shows you how.

Difficulty: Easy

Instructions

1. 1
   One of the easiest things you can do to save money on utilities is to simply replace all of your light bulbs with compact flourescent bulbs. They last at least 10 times longer than conventional bulbs and also save up to $60 in electricity per bulb over time.
   
2. 2
   Appliances consume 40 percent of their energy when they are shut off. The purchase of a smart power strip can go a long way towards alleviating this waste of electricity. These strips cut off power to appliances when they are turned off. They cost $30 or $40, but will pay for themselves in a few months.
   
3. 3
   If you have a water heater that was built before 2004, cover it with a Thermwell insulating blanket. This should lower your water heating bill by about 10 percent per year. And you can save another 10 percent on your heating bill if you have your furnace serviced about every two years.
   
4. 4
   You can lower your heating bill by another 5 percent just by lowering the thermostat by a single degree during the winter. But you can save more by installing a programmable thermostat that automatically adjusts the temperature when you're gone or asleep. Using the moisture sensor on your dryer and cold water in the washer will also trim your energy bill.
   
5. 5
   Putting weatherstripping around your doorframes should save you about $30 per year and installing timers on your lights is also cost effective over time. Try a low-flow shower head in your bathtub to reduce water output and plug those leaky faucets! Retrofitting your faucets is also a good idea. These inexpensive gadgets can reduce your water flow from 3 to 4 gallons per minute to as little as a half gallon.
   
   How to Cut Your Fuel Bills
   CUT HOME HEATING COSTS IN HALF WITH MAXFIRE BIOMASS STOVE.: An article from: Industrial Environment
   How to Cut Heating and Cooling Costs (Home environment HELP books from Butterick)
   

10 Ways To Protect Your Money

Here are 10 things you can do amid the current financial panic:

1. Check that your bank accounts are federally insured.

The Federal Deposit Insurance Corp. (FDIC) guarantees deposits up to $100,000 per person. If you have to hold more than that, spread it across multiple banks. As a taxpayer, you are paying for this insurance, so use it.

2. Make sure your brokerage accounts are federally insured, too.

The Securities Investor Protection Corp. (SIPC) guarantees you at places like Lehman Bros. (LEH, news, msgs), Merrill Lynch (MER, news, msgs) and E-Trade Financial (ETFC, news, msgs) up to $500,000, including $100,000 in cash. The same rules apply: If you have more to invest, spread it across multiple firms. Note that the SIPC only makes sure you get your shares and bonds back if a brokerage fails. It does not, obviously, guarantee those investments' value.

• Readers talk: Worried about your bank?

3. Put money in thy purse.

If this market and this economy get any tougher, cash isn't going to be just king anymore. It's going to be king, queen, emperor, lord high chamberlain and the whole court. The easiest way to make or find a buck is to save it. So take an ax to those family budgets -- the restaurant meals, the Superduper Everything Cable package, the rip-off checking account with the high fees and low interest. It's all costing you.

4. Set up a home-equity line of credit while you still can.

Normally it would not be advisable to take on more debt, but if access to ready cash might be a lifesaver, it's best to line it up now. That's true especially if you are worried about your job. Credit is already tight, and it may get a lot tighter.

More from MSN Money and The Wall Street Journal

• Complete coverage: America in financial crisis
• What AIG customers should do
• Winners and losers in the Wall Street mess
• How to handle a market gone mad
• Feds saying no to Wall Street
• Is your money safe with Merrill and Lehman?

5. Refinance your mortgage.

The panic on Wall Street just caused a collapse in the interest rate on long-term U.S. Treasury bonds, as lots of investors rushed there for safety. And that usually leads to a fall in long-term mortgage rates.

6. Don't wait for your worst investments to "recover."

If you ever saw John Cleese and Michael Palin perform their famous skit about the dead parrot, you know exactly what I mean. No, your Fannie Mae (FNM, news, msgs) shares aren't "resting." They're lying at the bottom of the cage with their feet in the air. What more do you need to know? Stop waiting for them to "recover" before you sort out your portfolio.

7. Don't panic.

Journalists, like markets, tend to move in herds. And by the nature of their jobs, they write about the plane that crashes instead of the thousands that land safely. Remember, too, that pundits want to seem really wise by putting on serious expressions and saying things like "We don't know how this thing is going to play out" and "The situation could get a lot worse." Bah.

Guess what. We never know how things are going to play out. And the situation could get a lot better, too.

8. When it comes to your short-term money needs, nothing has changed.

Any money you might need within the next year or two should be held in cash or equivalents. That was true two years ago, and it is true now. The stock market is no home for money you may need urgently. It could fall 30% or jump 30%. Nobody knows. You can get a one-year CD paying 5% right now, and it's federally guaranteed.

9. If you are investing for five years or more, buy some stock.

The investment outlook is much, much better today than it has been for several years, because shares are much cheaper. World markets overall have fallen 27% from last year's peak. They're not a steal at current levels, but they are not particularly expensive either. Invest globally. Vanguard Total World Stock (VTWSX) gives you the whole world and low fees.

If you are looking for a value, Morningstar analyst Bridget Hughes likes Oakmark Global (OAKGX). Another good one is Tweedy, Browne's new Worldwide High Dividend Yield Value (TBHDX).

This list is not comprehensive. Remember: I am not trying to call the bottom of the market. Things could fall quite a bit further. No one knows. So invest little, often and broadly.

10. If you want to worry about anything, worry about your taxes.

The worse this crisis gets, the more the feds will end up putting taxpayers on the hook to prevent a meltdown. Taxes will go up sooner or later anyway, no matter who wins the election, because of our gigantic federal deficit. If you think Lehman Bros. was bad, you should look at Uncle Sam. You can forget about any talk of tax breaks. Oh, and if you want a break from worrying about taxes, worry about Treasury bonds. Deficits won't do anything good for them.

3 Simple Ways to Make Some Money

If you want to make money online as a full-time career then you will have to invest in your future with online education from people who have been there, tools to help you succeed, and tools to make it easier on you. But if you just want to make some extra money online, in your own time, then there are free and easy ways to do just that.

Set up a blog - Blogs are popular, and if you have an interesting topic then you will find that people naturally find your blog and will want to read it often. You can set up a free blog online on many different platforms including blogger.com and blog.com. Then you can either add Google AdSense to your blog or promote products on your blog to make some extra cash. You get to talk about things you love and make money on the side - this is not only easy but it's fun!


Write articles - If you have a knack for writing and some knowledge about various topics then you can write and sell your articles online. You can sign up with a company like constant-content.com, who will host your articles to sell, and who will pay you a percentage when your articles sell. Sign up is free, and they only take a small percentage when you sell your articles, because they are finding the buyers for you.



Recommend products to your friends and followers - If you are active on social media sites like Facebook or Twitter then you can promote products that you friends may like. First, sign up to become an affiliate at a place like ClickBank.com. Then when you see a product that you think would add value to your friends or followers life you can promote that product using your special affiliate ID. If anyone buys the product from your recommendation you will earn a commission!
Signing up to become an affiliate is free at most places, and almost every company that you buy from online will allow you to promote their products. Just make sure you don't hound your friends or followers with promotions, or you may lose them as friends and followers all together!
Remember that the more you blog, write, or recommend - the more money you can make online.

Use a Debt Elimination Plan to Kill Debt

If you’re like most people who are drowning in debt, then you are more than ready to find a good debt elimination plan and kill that debt off for good.
The big financial gurus like Suze Orman, Dave Ramsey and David Bach, use the snowball method to help people get out of debt quickly. This is the method of transferring payments from balance to balance as they are paid off until all debts are killed…and hopefully for good.
These three gurus each have a unique way of setting up the snowball.
Balance Snowball – Dave Ramsey’s Method

• Debts are paid off by balance in ascending order, lowest to highest
• Starter payment (extra money in addition to minimum payment) goes to the lowest balance.
• Payment amounts move from debt to debt, snowballing as it goes until all debt is zeroed out.

This method is good for keeping you incentive going as the smaller balances will get knocked out pretty quickly. Psychologically this debt elimination plan is very satisfying.
Interest Rate Snowball – Suze Orman’s Method

• Debts are in descending order by interest rate, highest to lowest.
• $10 is adding to the minimum payment for all debts
• The snowball starter is adding the the first debt (highest interest rate) and then snowballs from there until everything is paid off.

You will most likely pay the least interest rate using this method, but seeing that first debt paid off may take many months and this can be discouraging.
DOLP System Snowball – David Bach
The DOLP (done on last payment) system uses the number of months left to determine the order of payoff. The debt with the least number of months goes first and so on.

• To determine the number of months, divide the balance by the minimum payments.
• Add the starter amount to the first debt and snowball until all debts are gone.

Because balance and interest rates aren’t figured into the order, you might end up paying the most interest on this debt elimination plan. However, like Dave Ramsey’s plan you’ll see debts paid off quickly at the beginning.
All three of these plans are good ones and they will work to get you out of debt if you stick with it. Pick the one that appeals to you the most and just get started!

7 Ways To Save Money on Car Insurance

Insurance for DummiesWhat would you say if I told you that you might be able to save over $500 on car insurance in less than an hour? And that you could complete the entire process from home?

Here are seven different ways that you just might be able to save hundreds of dollars on your car insurance if you simply take a few minutes to put these tips into action:
[Click here to check auto rates in your area.]
1. Drop Coverage You Don't Need
The beauty of doing a car insurance coverage checkup every six months or so is that even if it turns out that your current car insurance coverage is still the best value out on the market you may just find out that you are paying for a part of your auto insurance policy that you no longer need.
Not only do insurance rates change quite often but your insurance needs change more often than you may think. If you have a new teenage driver or have added a new car to your policy or have moved to a new zip code or--well, the list goes on and on. All of these things may potentially cause you to be paying for coverage that you no longer need.
[See The Most and Least Expensive Vehicles to Insure]
2. Search for Discounts
Never assume that because you searched for all of the car insurance discounts available 6 months ago that now there are no new discounts that you may be eligible for. New opportunities for saving money with a car insurance discount program pop up all of the time as different companies announce different discount programs in order to increase their market share.

What You Don't Know About Buying Car Insurance Can Hurt You

3. Improve Your Credit Score
It's no secret that a better credit score will result in better car insurance rates. You may have been working hard to improve your credit score over the last few months in order to qualify for lower interest rates for a home loan or auto loan and you are now starting to see some of your hard work pay off.
When you see an increase in your credit score don't let the opportunity slip by to check and see if this credit score improvement will result in an improvement in your auto insurance rates as well. You've worked hard to improve your credit score so why not spend a few minutes to see if that can only help you get a lower interest rate but a lower car insurance rate as well?
Take some of your car insurance savings and use it to treat yourself to a nice dinner at your favorite restaurant--you deserve it!
4. Pay Your Premiums With a Credit Card
Wanna shave off 1 percent to 5 percent off of your total car insurance premiums just by changing your method of payment? With the average cash back credit card earning you anywhere from 1 percent to 5 percent cash back that's like getting a bill from your insurance company and then having to only pay 95 percent to 99 percent of the total instead of the full 100 percent!
One to 5 percent may not seem like much but as you can see with a cash back credit card calculator that money can quickly start to add up--depending upon how much money you spend each month if you use that cash back card for many of your purchases then your savings could end up being enough to pay for an entire year of college tuition after 15 to 20 years!
5. Tell Your Kids to Keep Their Grades Up
Virtually all of the major car insurance companies offer some form of good student discount. If your kids get good grades then you save money. Some companies offer savings for a lackluster C while most offer savings for you that range from 5 percent to 15 percent if your student maintains a B or an A on their report cards.
Maybe it's time to pass along some of that savings to your kids as a financial incentive to keep their grades high (after all, why not just let the insurance company pay your kids to get good grades rather than you?)
[See Buzzworthy New Cars to Check Out for 2011]
6. Take a Driving Course
OK, maybe you don't want to tell your spouse that you are signing up for a driving course because no one wants to admit that they may not be the world's best driver BUT if signing up for a defensive driving course that will take up minimal time and save you money--why not?
After all, at least you aren't one of the world's worst drivers - at least I hope not! Taking a driving course just one time can result in lifetime savings on your car insurance.
Check with your car insurance company as to what type of courses and course providers they will recognize for a discount on your policy.
7. See If Your Occupation Can Save You Money
Did you know that when car insurance actuaries calculate car insurance rates that they actually assign different risk classes to different types of occupations? Some occupations have cheap car insurance rates while other occupations get assigned an added level of risk that increases their rates.
The various occupation risk assessment algorithms will vary from one insurance company to the next but generally speaking professions like engineering and teaching will receive lower car insurance rates than business owners and attorneys. So what do you call yourself if you are an engineer that owns their own business? You tell me.
Insurance Claim Secrets REVEALED!
Set of 3 Car Auto Registration and Insurance Holder

Book Review: The 4-Hour Work Week, by Timothy Ferriss

When I picked up The 4-Hour Workweek, I was worried it was some sort of “get rich quick” book. The first few pages didn’t do much to change my mind. The author, Timothy Ferriss, makes a lot of bold claims, such as: “How do you create a hands-off business that generates $80,000 per month with no management? It’s all here.”

But something happened during the first few chapters. When I read a book, I use small sticky notes to mark interesting passages. After the first 100 pages of The 4-Hour Workweek, the book was thick with stickies. By the time I was finished, I had used an entire pad!

Ferriss does make a lot of bold promises, and some of the details along the way do read like the confessions of a get-rich-quick scammer. But I believe that an intelligent reader can easily extract a wealth of useful ideas from the book. For me, it’s a keeper. I’ve read it three times already, and will probably read it again before the end of the year.

Let’s Make a Deal
After college, Ferriss took a soul-sucking sales job at a tech firm. He left to start a soul-sucking business of his own. He went from working 40 hours a week for somebody else to working 80 hours a week for himself. He hated it. The pay was good, but the business left him drained.

After learning about the Pareto Principle (more commonly known as the 80-20 Principle), Ferriss had a revelation: he streamlined his business, eliminating distractions and automating systems until it was not only more profitable, but also took less of his time. Much less. He took a “mini-retirement”, and then decided to write a book about “lifestyle design”, about creating a life that balances work and play, maximizing the positives of both.

The 4-Hour Workweek is divided into four sections, each of which explores one of the components to lifestyle design:

• Define your objectives. Decide what’s important. Set goals. Ask yourself, “What do I really want?”
• Eliminate distractions to free up time. Learn to be effective, not efficient. Focus on the 20% of stuff that’s important and ignore the 80% that isn’t. Put yourself on a low-information diet. Learn to shunt aside interruptions, and learn to say “no”.
• Automate your cash flow to increase income. Outsource your life — hire a virtual assistant to handle menial tasks. Develop a business that can run on auto-pilot. (This is the weakest section of the book.)
• Liberate yourself from traditional expectations. Design your job to increase mobility. This could mean working from home, or it could mean using geographic arbitrage to take mini-retirements in countries with favorable exchange rates.

The 4-Hour Workweek, Expanded and Updated: Expanded and Updated, With Over 100 New Pages of Cutting-Edge Content.

The 4-Hour Workweek describes the specific actions Ferriss took to implement these steps. Sometimes these specifics aren’t particularly useful. However, I think it’s a mistake to let the details get in the way of his broader message. If you’re able to look past the details, to look at their meaning, you may discover principles that can change your life. For example, I don’t like much of what Ferriss has to say about automation. I question the virtue of virtual assistants, and I think that his business model works for his business but probably isn’t applicable to most others.
However, it was while re-reading this section the other night that I began to think about automating my personal finances, about making them paperless. By absorbing Ferriss’ ideas and not his specific details, I was able to apply this to my life.
A Kick in the Head
Most of the time, The 4-Hour Workweek is like a kick in the head. The flow of ideas is relentless. Here’s one of my favorites:

Emphasize strengths, don’t fix weaknesses. Most people are good at a handful of things and utterly miserable at most. [...] It is far more lucrative and fun to leverage your strengths instead of attempting to fix all the chinks in your armor. The choice is between multiplication of results using strengths or incremental improvement fixing weaknesses that will, at best, become mediocre. Focus on better use of your best weapons instead of constant repair.

Maybe this is obvious to most of you, but it’s a revelation to me. I spend a lot of time worrying about my weaknesses. Yet when I look at my life, it’s clear that everything rewarding and profitable comes from enhancing my strengths. Here’s another example:

Relative income is more important than absolute income. Absolute income is measured using one holy and inalterable variable: the raw and almighty dollar. Jane Doe makes $100,000 per year and is thus twice as rich as John Doe, who makes $50,000 per year.
Relative income uses two variables: the dollar and time, usually hours. The whole “per year” concept is arbitrary and makes it easy to trick yourself. Let’s look at the real trade. Jane Doe makes $100,000 per year, $2,000 for each of 50 weeks per year, and works 80 hours per week. Jane Doe thus makes $25 per hour. John Doe makes $50,000 per year, $1,000 for each of 50 weeks per year, but works 10 hours per week and hence makes $100 per hour. In relative income, John is four times richer.
Of course, relative income has to add up to the minimum amount necessary to actualize your goals…

I want to believe that if I had to choose between $70,000 per year earned with 70 hard hours per week, or $42,000 per year earned with 37 easy hours per week, I’d choose the latter. I’m not there yet.
A Garden of Tips
I don’t buy into everything that Ferriss writes, but I love how he shatters conventional wisdom. I love that he makes me think. Even if you reject his central thesis, there are dozens of tips and tricks here that can be extracted and used to optimize your life. Here are a few:

• Ask yourself, “If this is the only thing I accomplish today, will I be satisfied with my day?”
• How to double your reading speed in ten minutes.
• Why it’s more productive to carry around a written to-do list than to keep one on your computer.
• Learn the art of non-finishing. This is all about the sunk cost fallacy: just because you paid $10 to see Pirates of the Caribbean 3 doesn’t mean it’s a good idea to watch the entire thing.
• How to be more efficient with e-mail.
• How to reduce clutter from your life.
• If you can’t define it or act upon it, forget it.
• Life exists to be enjoyed — the most important thing is to feel good about yourself.
• Why geographic arbitrage is a great way to enhance your relative income.
• The value of a virtual assistant.

My Recommendation
Despite its flaws, The 4-Hour Workweek is a great book. I think that most people can draw something useful from it. Borrow it from your public library. If you like it and think you’ll re-read it, then wait for it to come out in paperback. I’ve already read my copy three times, but that’s because it’s perfect for when I am in life; I’m not convinced that others will extract the same value.

Consider these five business goals as you embark on a new year.

Financial Resolutions for 2011

By Eileen P. Gunn   |   December 27, 2010

No matter how healthy your business is, chances are good that there are some financial issues you could have managed better in the past year. So when you start anew and set New Year’s resolutions, make sure to include some that relate to your financial future. Here are a five to consider for 2011 based on suggestions from Phil Leibowitz, a partner of San Francisco accounting firm Burr Pilger & Mayer, whose clients includes entrepreneurs.
No. 1: Set personal financial goals.
If you’re a 30-year-old who is just starting out in business, your personal goals and a timeline are likely to be different from those of a 60-year-old who may be eyeing retirement. And these plans may have an impact on the decisions you’ll be making for your business in the coming year. So it’s worth taking time to consider where you want to be personally in three to five years -- and discuss what that means for your company with your tax professional.

“I would have the 30-year-old think about his risk orientation and talk with him about how much money he wants to invest in his company and leave there for future growth,” says Leibowitz. “With the 60-year-old, I would be talking about succession planning and starting to diversify his money out of the business.”
No. 2: Make a budget.
Only a fraction of entrepreneurs write a budget, according to Leibowitz. While business owners may think they can keep track of their company in their heads, he doesn’t recommend it. “It’s like driving at night without the lights on. You know there’s a road there, but you don’t know exactly where it goes.”
The process of creating a budget is critical for planning a company’s future, instead of just reacting to it. Leibowitz suggests starting with such questions as:
-- Will you need extra cash at a certain part of the year?
-- Will sales slow down or pick up seasonally in your industry? If so, will you need to cut costs or hire extra help?
-- Will you need to increase your line of credit for some short-term need?
No. 3: Talk about the company’s priorities with your team.
It’s important to share your goals for the next year with employees, especially if your plans reflect shifting priorities. “Maybe your goal this year is to increase market share, and you’re willing to give up some profits to do it,” Leibowitz says. “If your employees don’t know that, they might be price sensitive when making sales and lose business. So you want to make sure they’re on the same page.”
You also want to be clear about the role each employee will have in meeting business goals. Mapping out specific responsibilities can be especially helpful when evaluating employee performance for raises or bonuses.
“If you have five employees, this doesn’t have to be formal. If you have 40 or 50 or 200 employees, you need a process,” Leibowitz says.
No. 4: Lock in fixed costs.
Leibowitz expects that as the economy improves, your vendors, just like you, are likely to want to increase prices and cushion their margins. Therefore, he suggests staying one step ahead and negotiating terms now.
“With rent and other business specific fixed costs, you want to negotiate two-, three- or five-year agreements where you lock in the current price or agree to only inflationary increases,” Leibowitz says.
No. 5: Revisit postponed expansion plans.
If you’ve put off plans because you couldn’t secure capital, it might be time to revisit them in the coming year. Leibowitz expects the lending environment to improve in 2011, at least for businesses whose cash flow and balance sheet are in good shape.
“In 2008 and 2009, banks were reticent to do anything unless it was riskless to them,” he says. “They would only lend to companies with ultra strong balance sheets.” Now he’s beginning to see companies that are profitable with merely solid -- not extraordinary --balance sheets qualify for loans.
“The cost of capital only goes up over time, so this is a good time to establish a good banking relationship, before that starts happening again,” Leibowitz says.