Great Financial Site for Small Business Owners

If you're a small business owner looking to save your most valuable resources -- time and money, get to know Outright! This is a free and easy to use online bookkeeping platform that allows you to track your business expenses, income and cash flow. There is also an additional low cost tax service for filing 1099's - for $5 you can take care of each contractor your business hires and eliminate paperwork. Business Week, Wall Street Journal and New York Times are fans so check it out today.

Have a Plan and Stick to it

Why is it so difficult for people to come up with and stick to a plan? Whether it be for finances, business, fitness or some other need, doing so is apparently against human nature.

Coming up with a plan can be tough because it feels like a lot of work and it requires a change of operation and mindset. The irony is that having a plan actually saves you time because it creates efficiency.

Challenges to sticking to a plan involve not being fully committed in the first place, not having a specific timeline for implementation, and allowing external factors to derail us.

In my financial life I have a plan and am thankful for it. However, I do have a tendency at times to get derailed when my "now" urge fights with my prior plan. In my business life, I have a plan and am happy to report that I'm sticking to it. The problem is that this focus on business has led to a lack of priority on my fitness, something that is very important to me.

When you put your different plans into place, no matter how solid, having competing interests in your own life may very well be an impediment. I'm beginning to think that my high school French teacher was right -- equilibre (balance) is the key to most of life's challenges. When we put plans together, whether for finances, business or personal, we must be sure that they are not only realistic independently but in the context of each other.

Your *Actual* Entertaining Budget

So what was it? A month ago you were challenged to record your entertaining (not daily individual meal) expenses. Was the number lower, higher or just as you expected? For those in the lower or expected category, congratulations! Knowing your habits is the first step. For those with a higher figure this should be an eye-opening exercise.

Know that even your number is lower or as expected, it doesn't mean you're off the hook. There's not rule as to the entertaining part of your budget but it shouldn't be very significant if you're in debt, without an emergency fund and not fully contributing to your 401(k). (If it is, you're basically paying interest, taking on risk and forgoing retirement dollars to entertain!) If you're not in debt, have a six months stash of cash and contribute the maximum amount allowed to your 401(k) and IRA, then it will be your decision as to what is reasonable.

Every LMF4HMW reader can save money using these tips:
* think drinks instead of dinner
* entertain in private homes instead of at restaurants
* instead of funding a huge dinner party bill ask for guests to bring a dish -- not quite "potluck" but it absolves you of feeding a multi-course meal to a group

* host a wine tasting where each guest brings two bottles of wine -- the guest who brings the winning bottle will take all of the second bottles home (i.e., you're off the hook for party favors)

* think brunch instead of dinner -- less wine and courses involved

A Challenge and a Great Website for 1099s

The average LMF4HMW reader probably underestimates her dining out and entertaining spend quite significantly. Let's do a little experiment: write down your monthly estimate for this budget -- include restaurant spend plus what you buy for entertaining purposes in your home. (No peaking at bank statements!)

Now, put a note on your calendar to check this estimate one month from now (March 17). No need to include groceries for daily meals -- just those you use to entertain others.

I'm willing to bet it will be a lot more than you guessed. And I'll check back that week with some money saving tips to help you decrease these costs.

In the meantime, there's a wonderful website business for filing 1099s online, Outright.com. It is simple, fast and low cost -- only $5 per filing. This is a useful tool for small business owners as well as anyone who employs an independent service provider to the tune of more than $600/year. Filing electronically through Outright means you no longer have to mail in the paper form nor include the 1096. Check it out!

Day Trader versus Buy & Hold

This argument is essentially hare versus turtle. With day trading, the average individual often invests a lot of emotion and relies on "hunches" (theirs or those from "experts") to make a buck.

Day trading is for some people as tempting as a Lotto ticket or Vegas get-rich-quick weekend -- a tremendous psychological pull. It's faster paced and promises a much more exciting ride. The problem is trading costs and timing typically eat away at returns and relying on hunches and emotions is a proven route to buying high and selling low.

The bottom line is the old adage, "if it's too good to be true..." All of the commercials, email and websites promoting "hot tips" "new strategies" and "fail proof solutions" are just that. My advice is to allow yourself some fun if you're determined to day trade -- limit the value of this account to no more than 5% of your overall investments and realize that you no longer have a latte account in exchange!

Emerging Markets Primer

I've often written about the importance of diversifying your investments with international equities. There can be a tendency to have home bias because the companies or funds are more familiar and psychologically feel closer. Broadly speaking from the US perspective, international investments should include holdings from a variety of countries around the world. You can think of emerging markets as an important sub-set of the broader international scope even though in the investing world they're in their own category.

The term "emerging market" is to be taken literally -- it refers to countries whose business and social environments are in a dynamic state characterized by rapid growth and industrialization. Currently these include but are not limited to Brazil, Mexico, China, India, Russia and Eastern Europe and South Africa. In comparison, purely international funds might hold Western Europe, Japan, Canada and other more established countries.

Emerging markets tend to have higher highs and lower lows -- more volatility, given the rate of change and the fact that it can be more difficult to acquire market information. This means that for investors who may see phenomenal growth or big declines in one year, there might be a tendency to either overweight or avoid emerging markets all together depending on the market direction.

As with any investment strategy, attempting to chase returns is risky business. I recommend a buy-and-hold strategy of about 10-15% of overall holdings in emerging markets so that you have a balance. And of course since it's me, I prefer index funds given low overhead and other costs. MSCI's EEM is a particular favorite.

What You Shouldn't Live Without...

If you guessed health insurance, you are correct. In the grand scheme of things, I'd group life's needs into a pyramid: The first and most critical level includes food, clothing and shelter (including utilities). The second level contains health insurance, renter's or homeowner's insurance and disability insurance (but if you have to choose one it should be health). The third level includes useful wants like cell phones, car, gym memberships, cable/Internet, etc. The fourth and final level consists of fun -- vacations, wine and dine, special clothing, gear, gadgets and the like.

The problem is that too many people forgo health insurance. There are a myriad of excuses -- "I'm healthy," "I'm young," "it's expensive", etc. If you can afford anything in my level 3, you should most definitely have health insurance. (So if you have a car and cell phone but not health insurance, your priorities are very misaligned.) Obviously there are some who do not have the buying power to get past level 1 and unfortunately that is outside the scope of this post.

Most of us now receive health insurance through our employers, who are typically paying a surprising dollar amount to cover us. But it hasn't always been this way. During World War 2, employers started offering it as a benefit to attract employees and get around wartime wage controls. This can make it difficult to leave a company or lose a position.

If you are self-employed or not currently working, you need to find the best plan for you. In general, it's a spectrum -- the most flexible plans are the most expensive (think PPO) the managed plans are less so (think HMO) and high deductible policies, which cover only catastrophic problems (think hospitalizations and major diseases), typically cost the least. Different plans offer varying levels of services and have specific policies regarding co-pay, deductible, coverage, maximum out of pocket, and premiums.

The key with choosing the right health insurance is figuring out the best option for you given your circumstances including budget, health, and any pre-existing conditions and discussing the policy fine print. If you have a working spouse, it is often possible to be added on to his/her policy. If you are solo, you may be able to get discounts through a member organization such as the small business administration, a credit union, university, etc.

It definitely pays to shop around when researching health insurance. A good place to start is this site, which offers a range of plans for individual, family and small business shoppers. Make it a major priority to attain health insurance if you're one of those LMF4HMW readers who has a closet full of shoes but would be devastated by a hospital admission for a broken leg from tripping while wearing stilettos.