Beating Broke

Personal Finance from the Broke Perspective

My Wife Quit Her Job: Business Insurance

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As I’ve covered before, shortly after my wife quit her job, she joined a couple of her previous coworkers in starting a business of their own.  As anyone who has started a business of their own knows, there are many, many unexpected things that can come up.  With proper planning, many of those things can become less of a shock when they happen.  One way to do that, and one that the accountant that was helping my wife and her partners get started required, is business insurance.

What is business insurance?

insuranceIt can come in many small variations, but in general terms, it is insurance that helps protect you and your company against liability and litigation.  It also can act as insurance against interruptions in business.  If your store floods, and you have to close for a few days, it will help defray those costs.  Your coffee burns someones tongue off?  It’ll help with that as well.

With the particular type of business that my wife and her partners were building, liability insurance was the most important part of their business insurance package.  They work daily with clients in a variety of locations and scenarios and as such, need an insurance that will cover them for liability if someone were to get injured while at one of the locations or in transport to the location.  That part of the insurance was much more important than having insurance for a office location (at least right away since they didn’t have an office for several months.).

Where do I get business insurance?

Getting business insurance isn’t as difficult as it may seem.  In fact, it might be as easy as getting a referral, like my wife and her partners did.  A quick look through your local phone book will likely get you some prospects as well.  And in many cases, if the agent you talk to doesn’t offer business insurance, they’ll happily refer you to someone who does.  Much like any other type of insurance, there are plenty of websites that offer quotes and services.  And, much like any other type of insurance website, it’s difficult to weed out the ones that are really there to help and which are there to make themselves a quick buck.

Much like anything else involving your business, business insurance really needs to fit your business.  Your responsibility as the business owner is to check and double check to make sure that the coverage fits your business and will cover all the necessary situations.  Getting a sub-standard insurance just because it was the cheapest could cost you money, or worse, your business.

insurance by alancleaver_2000, on Flickr

The Building Credit Fallacy

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Building credit is a phrase that you’ll see around the Internet and anywhere most financial experts talk.  It’s basically the act of getting a loan with easily repayable terms, or piggybacking on someones loan, in order to create a positive record on your credit report and thus increasing (building) your credit score.

But, for many, it’s a fallacy that acts as another trap in the debt cycle.  Here’s the scenario.  You need to build your credit.  So, on the advice of a few friends or experts, you go down to the bank and get a $300 loan.  It’s all they’ll give you, and the interest rate is way more than you should spend.  But, you don’t plan on spending any of the money, so you’ve just got to come up with the payments with the added interest and viola! A shiny new positive mark on your credit report.  Except.  Except that after about 2 months, you get a flat tire.  Or you’re favorite band comes to town.  Or your friends want to go out on the town.  Something comes up and you need some money.  You don’t have any.

credit reportWhere do you get your money?  Why from the loan, of course.  You’re gonna pay it off anyways, right.  So, you’ll just have to scrape together a bit more for the next payment, that’s all.  Except.  Except, you don’t scrape together that money.  You use the rest of the funds to pay the next few months payments, but you come up short.  You still need to scrape a few dollars together to make the last few payments.  How’d this happen?!?  It must have been those parasitic lenders, right?

Not quite.  You did it to your self.  And instead of a shiny new positive mark on your credit report, now you’ve got new delinquencies.  And eventually, maybe a nice new collection note.  All because you thought it would be nice and easy to build your credit.  You fell victim to the fallacy.

It doesn’t have to be that way.  Many people pull this off, but it takes a mindset as well as the money.  If you attempt to do something like this, but you don’t have your whole mind in it, you stand a high risk of ending up with negative marks instead of positive ones.  But, if you’re determined to stay out of debt at whatever cost, you can make it work.  It means you can’t touch that money for anything.  No drinking with friends, no Bieber concert, and no new tires.  If you want to improve your credit score, and you’re in a situation where this is the only solution, you’ve got to be ready to make a few sacrifices.

Take a step in the right direction, take responsibility for your actions, and do the financially sound thing.  Building your credit can be that easy.  It’s not a easy task, but once you’ve built it long enough and high enough, maybe you can continue to build it with a nice used car loan of a couple thousand.

Image Credit: credit report by TheTruthAbout…, on Flickr

Even a Little Movement is Better Than None

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Consider this image the inspiration for this post.  It’s one of many daily photos and videos that the folks over at failblog.org post to their site.  If your curious, the fail here is that she’s sitting on a chair over the treadmill.  And at the core, they are right.  Just sitting there, she won’t get any exercise.  If she moves her legs as if she were walking on the treadmill, she might get some, but still very little.  Not nearly as much as she would if she were standing and walking the treadmill.  Or, better yet, if she were running on the treadmill.

But, sometimes, we get too stuck on doing something 100% or not doing it at all.  Instead we should realize that we sometimes have to start at 50% and work our way up.

Don’t get me wrong.  I’m all for giving something your all.  But, if giving something all your resources does more harm than good, you’ve got to know how to scale.  Take this lady in the picture.  She looks a bit on the overweight side.  Likely has problems with her knees.  Likely, she can’t walk long enough on the treadmill to do any good.  So, she sits on a chair and “walks” on the treadmill with just the lower legs.  Eventually, if she sticks to a diet and keeps doing exercise, she might lose enough weight to alleviate the pain in her knees and she can begin to walk on the treadmill.  But, if she were to try and do only that now, she might damage her knees further, or frustrate herself so much with the pain that she quits trying and resigns herself to a scooter chair the rest of her life.

The same thing applies in personal finance.  Each and every one of us would love to pay off all of our debt.  Even better would be to pay it all off all at once.  But we don’t.  Why not?  Wouldn’t that be “giving 100%”?  Sure, but we all have bills.  And most of us like to eat something now and again.  Instead, we give 20% or 30%, or whatever we can afford after we’ve paid our bills and eaten.  We take that little bit and pay it towards our bills.  Eventually, as those bills shrink, we can pay more towards them.  And if we keep on that track, we will eventually pay off all of our debt.  Just like the woman, we find ourselves running on the “debt free treadmill“.

Want to invest?  You’ve gotten good returns on what you’ve already invested.  Why not just sign over your paycheck to your broker and build your portfolio?  The returns are better there than they are in the electric companies bank.  Again, we still have bills and necessities to buy.  We can’t give all 100% of our income to one purpose.  We have to budget, and learn how to be satisfied with giving what we can, even if it isn’t 100%.

Life isn’t a “110%” game.  It’s about striking a balance where the different parts of your life all flourish with what you’ve given them.  Don’t fall into the trap of thinking that you’re not doing it well, or that you’re failing just because you aren’t putting 100% towards it.  Sometimes, even a little movement is better than none.

Image credit: failblog.org