Monthly Archives: April 2015

That car that’s supposed to provide you with the freedom to get you where you want to go may also be one of the many chains tying you down to a job you’d rather ditch. That’s because — over the course of a lifetime — the average person will spend more than three years at work just to pay for their various sets of wheels.

The folks at eBay Deals recently released a “Trading Time” calculator that lets you figure out how long you have to work to pay for various expenses. It’s an eye-opener.

Over a 50-year working lifetime, the typical person will work 157 weeks to generate the cash needed to pay for his or her cars. Then, add in another 50 weeks of work to cover car insurance. Those figures are based on the weekly median gross income. Yours may be higher or lower, of course.

If that doesn’t seem like a lot to you, then think about this: You work even longer to pay for your vehicles because you need to figure in taxes and the interest on your car loans. And don’t forget all the time in that vehicle commuting or shuttling your kids around.

According to the Trading Time calculator, other major expenses that keep you chained to your desk may include shoes (17 weeks), phone bills (60 weeks) and even toilet paper (two weeks).

Whether you love your job, hate it or or fall somewhere in between, it’s helpful to think about the things you spend money on in terms of the amount of time you have to spend working to pay for them. Only you can decide what’s really worth it.

Can You Get Back Some of Your Time?

Of course you may have no choice but to drive, and in that case, you may want to look for ways to try to reduce your costs. For example, can you drive a slightly used car instead of a new one? Keep your vehicle longer? Settle for a more economical model?

Another way to cut costs is to improve your credit. With a better credit score, you will qualify for a lower interest rate, which can mean significant savings over the life of the loan. You can see your credit scores for free at Credit.com to determine whether your credit is good. Ideally, you want to review it at least a month before you plan to shop for a vehicle in order to address any issues you uncover. (Give yourself more lead time if your credit isn’t great. Here’s a guide to help you rebuild your credit. )

Here’s an example of the savings you may achieve by boosting your credit. As of June 4, the lowest quoted rate for a $20,000 50-month auto loan with excellent credit on Credit.com is 1.99 percent. That translates into a monthly payment of $411. But for someone with poor credit, the rate jumps to 14.99 percent or a monthly payment of $540.

One of the thrills of being an entrepreneur — one that also goes along with jobs that pay commissions and bonuses — is the feeling that the sky is the limit on your potential earnings. But sometimes, it can feel like the income sky is falling.

Although the flexibility and lifestyle balance can be great day-to-day benefits, it’s easy to get disoriented by the highs, lows and general unpredictability of what one’s income will look like month-to-month.

Which is why, if your income is volatile for any reason — whether you’re an entrepreneur, in sales or just don’t have a steady paycheck — you, more than the average worker, need to streamline your finances and set yourself up for success. Here’s how:

1. Know your cash flow. Having a variable income makes it even more important to have a detailed and clear understanding of what’s coming in, where it’s coming from, what’s going out, where it’s going to, and when it all is happening. Use an online tracker such as Mint.com and ensure you’re tracking debit, credit and cash expenses.

2. Categorize. Maintaining a detailed budget will help you to categorize and prioritize for those lean months when you may not have room for the “wants” in your life. Ultimately, you want to ensure you can cover the expenses that are imperative, and with proper planning you should be able to. Categorize your spending to identify select areas that you may be able to cut back on if needed. Typically items such as dining out, entertainment, travel, personal shopping, and other day-to-day “wants” can be trimmed if necessary.

3. Be flexible. The roller coaster ride that is your income could translate into a variable lifestyle as well, with your having funds to splurge on extras one month and then needing to cut back to the bare necessities the next. Be flexible and prioritize your spending to ensure you’re paying yourself first before jumping into allocating extras towards fun or discretionary expenses. Ensure your budget Includes savings for personal goals, retirement and emergency cushions and then work in any other extras.

4. Add an extra layer of protection. Everyone needs an emergency fund of three to six months of expenses set aside. But those on a varying income should consider starting with a household expense fund to prevent the drastic swings in lifestyle that can come with the income. During some more lucrative months, set aside three to six months of household expenses to supplement you during the slow months. This will allow you to turn your savings into a paycheck of sorts to funnel in funds needed.

5. Plan for your future. If you’re employed, maximize use of your employer benefit programs and retirement plans. Ensure you’re not leaving any money on the table and at a minimum contribute enough to take advantage of any company provided matches. If you’re self-employed, look into the many retirement plan options for entrepreneurs such as the SEP Individual Retirement Account, a Solo 401(k) or a Simple IRA.

6. Automate. Although your income can vary, calculate a conservative average and use this number to set a monthly savings goal. Schedule bi-weekly or monthly dates to review your spending and income and track where there’s room for improvement.