Personal Finance Ology

There are many different types of business entities that you can set up if you have started your own business. Some include: Limited Liability Corporations,  C-Corp and an S-Corp. Regardless of which formation you decide is best for you, there are advantages in forming an entity. More on the different types of Corporations later.

Personal Asset Protection
This is a biggie! This is probably the main reason anyone starts a corporation. If you get sued, or the business just tanks, you are not liable for the losses. Meaning your personal funds are not at risk. This  allows your personal affairs to be separate from the companies. This leaves you free and clear from any debts or claims incurred by the company.

Professional Appearance
The appearance of Inc. or LLC after your business name can add authority and convey an image of seriousness and dependability. This will make a potential customer feel comfortable in doing business with you. Plus this will make you feel special too. There is something to be said for owning your own business. If you can put LLC or Inc. at the end of your business name, it makes you special(or at least feel special).

Name Protection
In the majority of states, no other business can form a Corporation or LLC using the same name of your Corporation or LLC. That means if you start up a business called Widgets-R-Us, no one can do business under that same name. This is good protection to have incase someone with a big wallet tries to steal your business model and customers.

Deductions
Normal business expenses can be used as deductions from the profits of the company allowing for a decrease in taxes. You can actually claim deductions if you are just a sole proprietor as long as you are not doing it as a hobby, which can sometimes be hard to prove. If you are incorporated, you are obviously a business.

Remember, I am no tax pro, so if you plan on starting your own business you should probably see a professional to verify the facts. It may cost a few hundred bucks to go from sole proprietor to corporation but the peace of mind from these benefits probably makes it worth it.

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It’s better to always remember that money attracts more money and more money attracts more opportunities. Therefore, if every time you make a profit from one of your investments and you use it in a way that will not bring you anymore profit you have simply wasted your previous efforts of obtaining that money in the first place.
Here’s an example, let’s say you work hard for a solid month straight saving every penny you could so that you could use it for, after careful research, an investment opportunity which you find to be very lucrative. Now the end of the month has come and you invest everything you worked so hard for into this opportunity. A couple of months go by and you find that your earnings from your investment have doubled. So you take which you have earned and go out celebrating until every penny is gone. Get where I’m going here? Exactly!! What you have done here is taken your earnings and spent them on things that cannot bring you any more money. You pretty much threw your entire months work and the opportunity to gain more money to a night of celebration and fun.
Now I’m not saying you have to hold tight to every penny you receive from investments but I am saying you should think wisely about what you do with your profits rather than just blowing them off.
A better way of utilizing those earnings would have been to leave what you initially invested in the opportunity there and take the profits from your investment and research another investment opportunity.
That way you are creating ways for more money to come into your life. Remember money attracts money. Therefore, if you spend all of your earnings you leave nothing for money to be attracted to however if you use it wisely in money creating ventures it will come back to you over and over again. It will also afford you the opportunity at more than just one night of celebrating. If you continue to work in this manner you can very well find yourself in a position to have all that your heart desires.

Follow The Leader
A great way to get started in any arena you are not familiar or comfortable is to seek out the path of those that are successful in that area. Read about certain things they did or how they paved a way for themselves. Were they trailblazers? Did they follow a certain pattern? Did they stay inside the box? Really take a moment to learn of those well accomplished in the field.
After ample research choose whichever one is similar to you in personality. Which one responded in a way you would. Or did things the way you do them now. Once you have narrowed your search down you can use this person as a personal finance mentor until you find someone.
Find out what types of investments they were apart of. How did they get started? What are they doing now? All of this can help you in your efforts to becoming financially stable.

Photo by: Heather Mladek

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Debt not only causes stress and worry, but it could also harm your credit rating. If you miss a payment or, in most instances, are more than thirty days late your creditors report this to the credit bureaus. The negative report in turn has a huge impact on your credibility and your credit score.

When deciding whether or not to take on new debt it is important to consider your debt to income ratio. This is the percentage of your monthly gross income that goes toward paying your debts. The key is to keep this number as low as possible. A rule of thumb is to not have your personal debt exceed, an estimated, 36% of your total income. When working on creating wealth you don’t want any money to have to go towards unnecessary debt. If you want something that will not increase in value; pay cash for it. If you can’t pay cash for it then don’t buy it.

Credit cards should only be used in the case of an emergency. If you find yourself having to use your credit card a lot, slow down on your spending, allocate a plan to bring the balance to zero and discontinue the use of your credit card. Incessant spending is a form of mismanaging your money. This is what puts most of us in debt.

Sources:

http://www.thinkmoney.com/debt/debt-management/debt-management-faqs.asp

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A lot of the time, we tend to make a decision based on how we feel before we have gathered any information that will help us to make a calculated choice. Or we may base our decisions off of what our mentors have done or what we think we are supposed to do. These are a few ways we make decisions which can prove to be costly or profitable.

The most important thing to remember is there is no one certain way to make a decision. It should all be based on your desired destination and you should seek out as much information as possible. The more we learn about the different parts of decision making the easier it will be to make decisions that will be the most beneficial.

The ways we make decisions will vary from time to time and some are least likely to get you where you want to be than others. For instance, when you use intuition in making your decision you are pretty much throwing your chances to the wind and choosing to let the outcome be out of your control. I understand the term “go with your gut feeling”, and have even used it in the past, however this isn’t a decision making option I would recommend.

It doesn’t allow you to educate yourself on the outcome and is a lazy way of making a decision due to the lack of effort exerted.

Another way we make decisions is through patterns. We continue to make decisions the way we always have. The way we were taught by our parents or through habit. This way only leads us in a circle and keeps us from ever seeing change or advancement. Finally, there’s the logical way we make decisions. This is where we weigh our options, view the pros and cons and make sure that we are going to get our desired result. This is the way we want to train our minds to make decisions. It is an educated approach that allows us to almost determine the outcome.

Smart decision-making is all about making good judgments. If ever you are at a point of not knowing why you are about to make a decision be sure to take a minute to stop and evaluate it. Analyze the type of decision it is and then choose to logically make the decision by assessing the pros and cons and selecting the answer that gives you long term success. This should open up some thought and keep you from feeling the effects that will come if you simply choose to emotionally decide.
For some the smart decision-making process will cause feelings of fear or uncertainty. Due to the old conditioning and poor decision habits that we are used to taking, a step onto new ground may seem daunting and may cause some concern.

The more personal the decision the harder it may become to make a wise decision over one that will bring some kind of instant happiness. In these types of situations we tend to slip out of objective thinking which keeps us from thinking clearly.

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