Effects On Your Buying Power
The effects of inflation on your buying power is generally negative. As inflation increases, the prices of goods and services increase, so each dollar buys less and less. If your income does not increase along with the rate of inflation, then your buying power diminishes and you cannot purchase as much as you could before. For most people, the main consequence of inflation is a subtle reduction in their standard of living.
However, people can and do benefit from asset inflation, especially in housing and in stocks. If the person owns the asset before inflation causes the value to rise, they can sell the asset later for more than they paid for it and pocket the difference. Inflation does not affect all things equally, so it is possible for some assets to rise in value much more quickly than others.
Effects On Your Retirement Planning
Inflation can wreak havoc with retirement planning because there is no way to predict how much inflation is going to affect the costs of the things you need between today and the day that you retire. It is safe to assume that inflation will continue to rise and you will have to pay more to maintain the same quality of life. This means that you will need more money each year than you are spending now to purchase the same things during your retirement years.
Because the future rate of inflation is unknown, many people choose to use a rate of 3 percent per year for their inflation calculations when they are planning how much money they will need for retirement. This is slightly higher than the generally forecasted inflation amount of 1.5 to 2 percent each year to take into account any years when the inflation rate is higher than that. While inflation may not average 3 percent a year between now and when you retire, using that number will get you in the ballpark of where you should be with your retirement savings.
The idea of being your own boss can seem very enticing. By launching your own store, online or in a physical location, you can set your hours and be a little more flexible when it comes to family time.
However, before an idea can become a viable reality, there are some factors that you may want to consider.
When determining what business to start, you as the future owner have many questions to answer. Among these are topics such as what are you going to sell and how much will it cost to start and maintain. Money is not the only element that you need to look at, though. Are you prepared to make the personal investment required to turn your dream into a successful business? What about the market will make your idea work now and in the future?
The type of costs involved in launching a business is determined by the type of business location you are looking at. If you are considering a traditional location with upgraded point of sale equipment, the cost is going to be quite different then if you consider a virtual location.
The differences lay in what makes the business locations tick. In a physical location, you need to consider utilities along with building rental and upkeep, plus staffing. These costs can vary depending upon where your store is located.
For a virtual location, the costs are much lower due to a smaller list of requirements. A virtual location only needs a website host, security, and a shopping cart with payment gateway. You will also need to include the cost of your internet connection on this list. In total, a virtual location will likely cost thousands less than a traditional one. If you are a small business owner with a small startup budget, then this maybe the better option for you. There are also costs that both types of businesses will share, including inventory, bank fees, and insurance.
Once you determine what business to start, the type of location you want, and the costs that will be involved in the daily running of that location, consider your sources of funding. There are options beyond the traditional business loan, if you qualify for them; such as BusinessLoansDirect.com.
Beyond the monetary costs of running a small business, you need to look at the personal investment needed. Yes, owning your own company may make your more available to your family. However, there are some serious personal investments that will need to be made as well.
- Can you handle stress without cracking?
- Can you stay organized?
The answers to those questions and any others you may ask yourself are not cut and dry or universal for every business owner. Be honest with yourself and ask those around you for their opinion, as well.
Once you make the personal and financial investments needed for success, it’s time to research. Take the time to do some market research. This can be especially helpful if you have multiple ideas and are not sure which one is viable for your current market. Create a small survey and post it to your social media networks asking for people’s opinions. Print out the survey and ask local members of your community, preferably people that you do not normally come in contact with, to get a true unbiased answer.
Determine if you can create a niche in your industry that can help your business stand out above any competitors. Check out your competition and see if there are any gaps they do not fill that your community is in search of, then fill them. This can apply to both a physical location as well a virtual, eCommerce one. Once you find your niche, stay with it in order to make it successful for you.
Viability for the Future
You do not want your business to just be viable now; you want it to thrive in the future as well. Prior to exploring and launching your idea, check it’s viability for the future. Creating an idea that is relevant both in the present and in the future will help you stand out among your competitors who may only be focused on the present.
There are many things that a business owner needs to consider before launching their dream. Whether the dream takes you to a physical location or a virtual one, some of the questions remain the same. Understand any and every cost involved, even the smallest of things. Do your research to ensure market viability in the present and in the future. It takes time to properly launch a business; however, that time will quickly pay for itself when your business begins to succeed and thrive.
Identify Areas Of Overspending
The first step is identifying areas of overspending in your life. Even if you are using a budget, there may be spending areas where you are spending more than you should due to habit or convenience. For example, if you spend a significant amount of money going out with friends each week, you could save a considerable amount of cash by making changes to your routine like ordering draft beers instead of mixed drinks or meeting up at someone’s home to watch movies instead of going to a movie theater. Online money management programs like www.Mint.com can track your spending for you by categorizing the transactions of your bank and credit card accounts automatically and providing you with a totals spent for each category.
Focus On Reducing Your Monthly Expenses
Reductions in your monthly expenses are highly desirable because each $1 in immediate savings is multiplied by twelve over the course of a year. Lowering your cable bill by $15 per month saves you $180 annually. Once these reductions are in place, there is typically no effort needed to maintain them, as the companies will just send you a reduced bill each month. Use the internet to compare the products and rates of different cable companies, insurance companies, utility providers and others to get the best prices available in your area.
Change Your Habits To Reduce Your Discretionary Spending
Reducing your day to day discretionary spending requires much more discipline as you will have to resist daily temptation to revert to your old habits. For many people, the best course of action is to focus on changing one habit at a time and continuing to maintain that habit until it feels normal. For some, this may mean making a pot of coffee first thing in the morning instead of stopping for a latte on the way to work. For others, it means cooking meals at home as much as possible. Curb impulse spending as much as possible and maintain your new habits to save a significant amount of money over the course of a year.
Make Time To Talk About Finances Together
One of the best things that you can do for your finances as a couple is to make time to sit down and talk about financial matters without interruption. At least once per month, the two of you should go over what financial goals to work towards, any concerns that have arisen and any unusual expenses that are coming up. Some months, this discussion may take 10 minutes while other times, it may take a couple of hours. Both people being involved can head off an issue before it becomes a major problem and making financial decisions together makes both parties feel like they are invested in the financial health of the family.
Make Use Of Money Management Tools
Using money management tools can make managing finances as a couple much easier. Using an online budgeting app like the one found at www.Mint.com allows both people to log in and see the status of all financial accounts at a glance. The program displays the balances of bank accounts, credit cards, and investment accounts along with any transactions that were made that deposited or withdrew money from the accounts. Mint also automatically categorizes most transactions into spending categories so you both can see where overspending is occurring and make a plan together to reduce expenses so more money can be saved for the future.
Divide Up Financial Tasks Based On Strengths
Men and women often have different but complementary financial skills that work better together than separately. This means that couples can make money management much easier on both people by dividing up financial tasks according to their strengths. One person may be better at keeping track of when household bills need to be paid or better at finding deals on the things that need to be purchased for the household. It may take some time for the two of you to realize what tasks each is good at, so use time during your monthly financial talks to discuss how you feel about the tasks you have taken on and let your partner know if you think they would be better at handling a task you are currently doing.