Financial Freedom Classroom

We accelerate your results!

financial freedom

Know the VERY important numbers

by

Image courtesy of Stuart Miles at freedigitalphotos.net
Image courtesy of Stuart Miles at freedigitalphotos.net

In business you must know your numbers, always. It is the heart beat of your business. If you don’t know them, your business could flat line.

At the very least the following need to be kept updated:

  1. Balance sheet which consists of the total assets and liabilities. It can also be known as the statement of financial condition.
  2. Income statement which states the revenue or gross income, minus the cost of goods sold in order to determine the gross profit of a business. This report can also be known as the profit and loss statement or P&L.
  3. Cash flow statement which summarizes how much cash is going in and out of the business. Be sure to draft a projected statement for anticipated income and expenditures so you have a fiscal road map to follow.

Keeping these reports updated at least monthly is a great way to keep the pulse on your business, ensuring a strong, long life.

How frequently do you update these reports?

Investigate options

by

Image courtesy of iosphere at freedigitalphotos.net
Image courtesy of iosphere at freedigitalphotos.net

There are many different ways to invest in the stock market. Would you consider investing in “the right” to buy an asset?  If you trade stock options, you are buying the right to buy shares of stock.  The definition of an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.

This scenario may help to further clarify how options work… The good new is you have finally found your dream home! The bad news is you don’t have enough cash to buy it. You decide to try to strike a deal with the owner that gives you the OPTION to buy the house for $400,000 in six months after you come up with the cash.   For this OPTION you pay the owner $6,000.

Consider these two potential story lines:

  1. During an inspection, the inspector comes across a stream in the back yard that is FULL OF GOLD! The property is now worth $5 million and because you purchased the option, the owner is obligated to sell you the house for $400,000. The profit on this transaction would now be $4,594,000 ($5 million – $400,000 – $6,000).
  2. During an inspection, the inspector comes across waste oil that has contaminated the soil. The cleanup costs will run into the millions. What you thought was your dream home now turns out to be your worst nightmare. But don’t fret! Because you bought an option you are not obligated to purchase the property. You will however lose the $6,000 you paid for the option but you have saved millions!

Options are derivatives; they derive their value from something else. With stock options, most of the time, the underlying asset is a stock or an index.  Click here to learn more about stock options!

Please click like if you trade stock options.

Save the commute

by

Image courtesy of imagerymajestic at freedigitalphotos.net
Image courtesy of imagerymajestic at freedigitalphotos.net

Teleworkers in the north east should be grateful after the extreme winter that is coming to an end. Working from home is great for self motivated workers whose jobs can be done remotely. But telecommuting isn’t for everyone.

If you enjoy getting out of the home and having “face time” with your co workers, it may not be for you.

For those who can and want to, teleworking is awesome! The commute is non existent, which provides for more time to focus on interests outside of the office. This time savings can lead to more time for exercise, healthy eating choices and family time. Some monetary savings will be recognized on gas, parking, public transportation costs, auto repairs and maintenance. Even if you can work just a few days a week at home, you will see a significant savings, if you can give it a try!

Please comment additional benefits of teleworking.

The big payoff

by

Image courtesy of iosphere at freedigitalphotos.net
Image courtesy of iosphere at freedigitalphotos.net

For a lot of people a home will be the largest single purchase they will ever make and the most expensive. Take a look at a 1098 form from a mortgage holder. It shows the total interest paid and the total amount applied to your mortgage. In the early years it can be very discouraging.

But you can change that! Get rid of any additional costs like private mortgage insurance (PMI), if you have it. Then apply that amount towards your mortgage every month.

Make additional payments any way you can. Pay half your regular payment every two weeks, if your lender will allow it, which adds up to an extra full payment every year. Or make one extra payment per year, increase your monthly checks by one-twelfth, or you could even use your tax refund to make a large lump sum payment.

Anyway you can do it, make a plan and make the BIG pay off. You can save thousands.

If you are living mortgage free, please comment on how GREAT it is!

Stick to your boundaries

by

Image courtesy of Stuart Miles at freedigitalphotos.net
Image courtesy of Stuart Miles at freedigitalphotos.net

Some important elements to your stock trading plan are the stop-loss (S/L) and take-profit (T/P) points. A successful stock trader will have planned what price they are willing to pay and sell at. If you don’t know these points it wouldn’t be prudent to invest.

The point at which a trader will sell a stock and take a loss on the trade is called a stop-loss (S/L). Conversely, the price at which a trader will sell a stock and take a profit on the trade is called the take-profit (T/P) point.

If you don’t stick to these points in trading then in most cases you are rolling the dice and hoping for a good outcome. Be a successful trader and establish your S/L and T/P points then follow them. You will be a better trader for it!

Do you stick to your S/L and T/P points?  If so, click the like button.

How much life are you planning for?

by

Image9 courtesy of Stuart Miles at freedigitalphotos.net
Image9 courtesy of Stuart Miles at freedigitalphotos.net

Hopefully retirement comes to those who want it. But are you ready for it? According to the Social Security website a man and woman who reach 65 today can expect to live on average until 84.3 and 86.6 years respectively.

Check out the website to calculate your own specific life expectancy using the life expectancy calculator. This is an important number to ensure there are sufficient funds to help you live your life comfortably. Start planning when you would like to retire and deduct your life expectancy age. Then you know how many years to plan for.

Carefully project your income from all potential sources, like social security, pensions, and 401K plans etc. Also hopefully there are some other assets in your portfolio, including some sort of real estate, business or stock holdings from which you can drawn on if needed.

After this analysis, are you ready? Or do you have more planning to do? Please comment.

Don’t hit the panic button!

by

Image courtesy of Stuart Miles from freedigitalphotos.net
Image courtesy of Stuart Miles from freedigitalphotos.net

The stock market goes up and down.  You can bet on it.  Kind of.  When you have made a trading plan that takes into account your risk tolerance, stick with it.

It can become difficult when the market is not going in the direction that benefits you but a well constructed trading plan should be carried out.  Trust your instincts from when you were in the planning stage, not the emotional state the market can put you in.

For an additional article on the importance of following your plan, click here for Don’t Lose The Trade Before You Enter It.

Please share your experience when you stayed with your trading plan when you began to panic.

Search the field

by

Image courtesy of imagerymajestic from freedigitalphotos.net
Image courtesy of imagerymajestic from freedigitalphotos.net

What career are you in search of? What area do you want to work in? What is the potential income in the career field in your target area?

How can you find answers to these important questions? Click the follow link to find the US Department of Labor’s Bureau of Labor Statistics website.

These are all very important questions that need to be answered for your long term financial success. What if your chosen field in your target area wouldn’t support your family’s life style? Please seek the answers, BEFORE you make that life altering decision. Take a few minutes and search the field, you will be glad you did.

Please share a high paying career field and the location in the comment field.  Thank you!

Too many toys?

by

Image courtesy of Rawich from freedigitalphotos.net
Image courtesy of Rawich from freedigitalphotos.net

In order to live financially free, discipline is essential to control “toy” purchases until you can afford them. We consider “toys” to be any vehicle you own. That would be your cars, boats, snowmobiles, motorcycles, etc. The total value of ALL vehicles should be less than 40% of your annual household gross income. So a household with a $50,000 gross income should only have $20,000 worth of vehicles at the most. By keeping these depreciating assets at a reasonable level you will have more to invest in appreciating assets, bringing you closer to the financial freedom goal!

Please comment and share all your favorite toys!