How To Improve Your Credit Score In Just Three Months

March 22nd, 2013

People with a poor credit history are usually required to pay higher interest rates on future loans. What is the surest way to improve your credit score in the shortest possible time? Well, there isn’t any magic wand, and no single strategy can make it happen. You can improve your score in as little as three months by applying several strategies together. But there is a condition – your credit score should not have any serious black marks like foreclosure or bankruptcy.

Follow these tips to improve your credit score quickly.

Check Your Credit Reports

The first step is to figure out where you stand right now. Though you are entitled to get a free credit report once a year, it’s worth shelling out a few bucks to see your credit scores. Spend some money to get your TransUnion and Equifax scores at myfico.com. Experian has stopped selling its FICO score to retail consumers, but it still sells your scores to banks and lenders.

Check them for errors, make sure the data are accurate. Many a times people notice incorrectly listed late payments. If you find any mistakes, dispute them with the reporting agency and the credit bureau.

Pay Your Bills on Time

If you miss your monthly payments, that may hit your credit score in a big way. People who are unorganized need to set their bills up for automatic withdrawal from their bank accounts. Lenders immediately report delinquencies to the credit bureaus when you are 30 days past due, and the blemish remains on your credit reports for at least seven years.

Nowadays many banks have taken the responsibility to remind you through text message or email when your payments are due. In case you have already missed some payment in the past, catch up with them and never make that mistake again.

Pay Off The Credit Card Balances First

Revolving debts like credit cards have a greater effect on your credit score than installment loans such as mortgages. Paying off credit card debts ahead of the due date can add up to 100 points to your low credit score.

[blockQuote position=”right”]Paying off credit card debts ahead of the due date can add up to 100 points to your low credit score[/blockQuote]

Apply For A Small Installment Loan

Confused? Well, the reality is that you can improve your score at the fastest pace by letting the credit bureaus know that you are responsible with revolving as well as installment both types of debts. So, consider applying for a small installment loan if you don’t already have one. Just make sure that you can easily pay back that sum in future. And yes, make sure that the installment loan you raise is reported to all the three credit bureaus.

Don’t Cancel Unused Credit Cards

Your old credit cards have a long history, which slowly increases your credit score. When the credit score increases, you can get new credit cards with comparatively lower interest rates. That doesn’t mean you should stop using your old credit cards or cancel them.

Your newer credit cards will have a lower interest rate, but they also have a small credit history that lowers your score. When you stop using the older ones, the credit card issuers may either decide to close the account or stop reporting them to credit bureaus. In case they stop reporting, the account will still appear, but it won’t have as much weight on your score as your active accounts.

So, you need to dust off the older ones occasionally.

Never Ever Max Out Your Credit Cards

The best rule is to maintain the credit card balances below 30 percent of the credit limit. Try not to spend more than $3,000 on a $10,000 line. Whenever you need to spend more, simply take out other credit cards to reduce the loan on any single card.

If credit card issuers report a hefty balance on any of the cards, it will affect your score. It’s always good to have three credit cards with less than 30 percent in balances, than to have just one card that you max out every month.

Do The Loan Shopping Within a Limited Time

Too many credit inquiries (for a vehicle, home loan, etc.) often pull your credit score down. If you shop for loans within a limited time span, credit bureaus won’t treat it unfavorably. So do it within just two weeks period.

Put the above tips to work, and I’m damn sure your credit score will improve dramatically in just three months.

Did you ever have a bad credit score? What did you do to fix that?

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How To Get A Home Equity Loan With Bad Credit

February 27th, 2013

Last week I walked you through the basics of home equity loans. There are thousands of people with bad credit, and they all have a big question – how to get a home equity loan? A poor credit score (lower than 600) is a big obstacle in acquiring any type of loan. A home equity loan appears to be the best option for the borrower and lender both, because it is secured by your home.

For home equity loans, poor credit isn’t a cause of worry because the lender benefits from relatively higher interest rates and other terms on bad credit loans. But it’s not always that easy. Here is what you need to do to ensure that you get a home equity loan at a reasonable interest rate.

Review Your Credit Report

First off, you need to know how bad your credit score really is. Get your credit report and review it for mistakes and inaccuracies. You might notice some inaccuracies that are hurting your credit score. They can be fixed by contacting the creditors directly or by asking the credit bureaus to contact the creditors for you.

The Ramifications of Poor Credit

Though the banks may agree to lend you money, the interest rates and terms you qualify for won’t be as good as those for people with good credit. Additionally, the lender may ask you to put a large down payment or they might offer loans lower than your equity. If you badly need a loan, the additional expenses are worth it.

However, you can improve your credit score over time by staying current on your loan. In case you default on the home equity loan, you run the risk of losing your house.

Calculate How Much You Can Afford

You have to carefully assess what amount you need to borrow and how much of that you can afford to pay back. Be realistic. Though the lenders thoroughly analyze you financial position, it is your responsibility to make sure that you can pay back. Sometimes the lender may pressure you to obtain a loan that is larger than you actually need or the monthly payments are far too high for you to pay back on time.

How Much Equity Do You Have?

Before you apply for a loan, figure out your equity in the house. You can do it by subtracting the mortgage balance from the current market price of your house. People with excellent credit score can borrow approximately 75-80 percent of their home’s equity.

[blockQuote position=”right”]Before you apply for a loan, figure out your equity in the house. [/blockQuote]

Additionally, collect all of your financial information to provide lenders with proof of your income, investments, your equity in the house, etc.

Shop Around To Get Home Equity Loan With Bad Credit

Spend some time asking for no-obligation quotes. All the lenders have different terms, look for the one that is most suitable to your needs. Carefully read their terms and conditions, see if there would be any prepayment penalties, balloon payments or any other hidden fees. Remember, you can find loans with good terms despite a poor credit, if you shop around properly.

Verify The Validity of The Lender

Just like you do in any other financial transactions, make sure that the lender you are dealing with is reputable and legitimate, before you give them any personal information. Stay away from a company that says your credit score isn’t that important, but requests to see your bank account information, SSN or other records. Likewise, a company is unethical if it requests a payment before performing any services. Make inquiries, check references, check with Better Business Bureau or Federal Trade Commission.

When applying for a loan online, take time to make sure that their telephone number and address are valid. If possible, visit the location, and look up business in the telephone directory. Do not trust the lenders that only have a P.O. Box.

Additionally, I advise you to discuss the issue with a trusted financial adviser. They will help you plan a budget such that you stay current on your payments. On time payments not only protect your house from foreclosure, but also improve your credit.

What do you think people with bad credit should do to get a home equity loan? I’d like to hear your opinion.

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What Is A Home Equity Loan?

January 28th, 2013

Many people ask me what is a home equity loan. Many others confuse it with the basic refinance where you pay off your existing mortgage by replacing it with another loan. Basically, it is a second loan (your mortgage is the first one) that you take on your house. While your mortgage (the first loan) goes towards purchasing the house, the home equity loan is the sum you can spend as you wish.

Once the lender approves your home equity loan, you’ll get a check of the total approved amount. You will have to pay the agreed monthly installment for a fixed time period, usually 5 to 15 years.

Lenders are usually more liberal in giving home equity loans because they hold your home as collateral. You just can’t disappear with your house; neither can you hide it when you default on your loan. In case you default, they have full right to foreclose.

Benefits of Home Equity Loans

Borrowers are attracted to home equity loan because it provides an easy source of cash. Additionally, your credit history and credit score don’t really have any effect on the approval process. So, even people with bad credit can easily get a home equity loan. It’s primarily because your home is the collateral. Home equity loans can be tax deductible (we’ll discuss it within a few minutes). This type of loans have lower interest rates. Also, you can borrow relatively large sum of money.

How People Use Home Equity Loans

People use home equity loans to pay down some of the larger expenses in life such as renovating or remodeling the house, paying for college education of a family member, an unexpected medical bill or paying off the high interest credit card debts.

[blockQuote position=”right”]A home equity loan makes sense only if you want to invest that money into something that will have long-lasting benefits.[/blockQuote]

If you are a responsible borrower with a steady source of income, its tax deductibility on interests paid and lower interest rate makes it a lucrative alternative.

Jon Duncan, a Tacoma, Wash.-based certified financial planner, says, “a home equity is a sensible option only if you want to put that cash into something that will have long-lasting benefits.” He recommends a home equity loan if you need to pay down the credit card debts with high interest or renovate your house.

The Most Common Pitfalls

Remember that you risk losing your home if you default on the payment schedule. Many people are addicted to borrowing, spending, then borrowing more and sinking into deeper debts. Such people finally turn to home equity loans that allow them to raise 125 percent of the equity in their house. The interest rate increases because the borrower is raising more money than the house is worth. If you fall into this category of borrowers, DO NOT take out a home equity loan.

Another common pitfall is spending the funds on luxuries, vacations or other things that don’t add value to the house and increase the financial burden.

Beware of scammers! They have plenty of ways to cheat you out of your most valuable asset. Make sure you know everything about whoever you are dealing with. If you smell something fishy, step back, review and do a background check that the deal is legitimate.

Is Home Equity Loan Tax Deductible?

Yes, but not entirely. Generally, interests paid on the first $100,000 of your home equity loan will be tax deductible. Beyond that, it depends on how you spent the home equity loan. If it was used to renovate your home – or to purchase a second home – interests are deductible on up to $1 million or the value of the house.

Additionally, interests paid on the part of the loan above the value of the house is not tax deductible. For example, let’s say your home is worth $100,000, of which $80,000 is the first mortgage. Here, your home is worth only $20,000 more than the actual debt. But you can borrow $45,000 under the 125 percent program. So, the interests paid on the first $20,000 will be tax deductible, and not on the entire $45,000.

Home equity loans are a good option, but only for the responsible borrowers. Next week, I will tell you how to get a home equity loan quickly and easily.

Do you have any questions? I’d like to help. Leave a comment.

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Learn About The Identity Theft Protection Programs

November 14th, 2012

People have asked me time and again if there are any good identity theft protection programs, and I tell them again and again that there is none. Even FTC warns you that most of these identity protection programs offer services at a fee that you can do for yourself without spending a dime.

However, sometimes it’s worth to have some extra protection depending on what you want the program to do for you. But usually people buy into a program without even knowing what it does and doesn’t. That leads to confusing and unpleasant conversations with the company down the road.

Credit Monitoring

It’s extremely important because more than 50 percent of all the identity theft victims report a new line of credit in their name by identity thieves. And it takes longer to discover those accounts and clear them up.

A credit monitoring service informs you immediately if something appears on your credit report, such as a charged-off debt or a new line of credit. Expert say credit monitoring service is the best place to start if you really want to safeguard your identity.

But if somebody has stolen your Social Security Number and opened a new credit card using your SSN and a different name, you won’t be able to detect it. Not until your credit score begins to decline and lenders turn you down for a loan. That’s the way American credit bureaus are set up.

Reimbursement Program

A reimbursement program is usually attached to homeowner’s insurance. If you recall, your insurance agent must have used it as one of his selling points. They would have told you that the reimbursement program will protect your home as well as your identity. That’s not true.

It will only pay you back the amount you take out of your pocket when you fall prey to identity theft. That will be paid only in certain circumstances, and there are many strings attached. In case you use it, your premiums will shoot up. The money put on your credit card or stolen from the bank account will be considered “actual losses.” Reimbursement services never pay you for actual losses.

Identity Theft Resolution Program

This program has gained popularity in the past few years. If you fall a victim to identity theft, they give you personal assistance in fixing the problem and guide you through the process. Some companies assign you an agent while others operate like a call center – whoever is assigned to your problem will tell you what to do next. They all follow a step-by-step guide and standard script.

However, it doesn’t really do anything that you can’t do for yourself with some help of Google. If you are sure that you can deal with your problem, you need not spend your money on resolution programs.

Restoration Program

A restoration program is the best identity theft protection service your money can buy. It takes care of the ID theft problem for you, just like an insurance company takes care of your vehicles and house. Of course, a restoration program is relatively expensive and hard to find. A real restoration program will require you to sign a limited power of attorney so that they can work on your behalf.

[blockQuote position=”right”]A restoration program is the best identity theft protection service your money can buy[/blockQuote]

It’s better to ask them what they are going to do with the power of attorney you give them. Sometimes the companies say they are doing one thing, but they are doing something else. For example, some companies say they offer restoration program, but in reality, they simply walk you through what you should do next, just like a resolution program.

Legal Help

Identity theft usually leads you to legal troubles. Many states now have a special legal procedure to help ID theft victims recover. But most identity theft protection programs limit or exclude the access to legal help. You can contact your attorney for direction.

When considering a specific program, don’t hesitate to ask pointed questions. Ask them about what they do, how they do it, exclusions, etc. Do some research online.

Finally, the programs help you only if you already have them in place before you need them. Have you used any of these services? Were they really useful? I’d appreciate it if you share your experience with other readers.

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Tech Savvy? Use Mint to Create and Stick To A Realistic Budget Plan

October 17th, 2012

Last week, I walked you through various “Steps of Creating a Realistic Budget Plan“. If you own a smartphone or tablet, you might want to use a personal finance app to create your budget without pulling your hair. Here comes Mint, a free personal finance app that makes budgeting extremely simple and easy. It also allows you to track your financial goals.

Let’s learn how Mint works and how you can use its various features to create your budget.

Budgeting With Mint: Automatically Categorized Transactions

When you sign up for Mint, it will ask you to link all of your financial accounts (checking accounts, bank accounts, credit cards, debit cards, investments, etc.) so that you can view your spending history on a single place, just like you see on your bank’s website. You need not log into multiple websites and track multiple modes of payment.

Mint has a number of default categories such as home, entertainment, food, kids and so on. Every time you use your credit card or debit card, it automatically categorizes the purchase. So, you can see where and how much you are spending over time. For example, when you purchase songs from iTunes, it is categorized into “Music”, similarly shopping at Meijer or Whole Foods goes into the “Groceries” category.

Most of the times, you won’t have to do anything manually. On rare occasions when you want to place a purchase in a different category than the default, just click on the category to change it.

With these categories, Mint will help you create and manage your monthly budget that you can access through Budgets tab.

Getting Started With Your Budget

When you begin with Mint, it shows you a starter budget based on the common categories such as “Restaurant,” “Groceries” and “Entertainment.” If you want to raise or lower your monthly budget, you can edit them. If you want to track your budget on weekly, quarterly or yearly basis instead of monthly, you can do that, too.

To get a realistic view of your current spending habits, go to the Trends tab. It will show you the spending from any month, week, quarter or year you want. If you notice that a particular category, say, Groceries is taking a significant portion of your budget, you can click on it to see a graph of just Groceries category. It will also display how much of the monthly allotted budget for this category has already been spent and how much is remaining.

Enter The Cash Transactions Manually

Though transactions through credit cards and debit cards are automatically added to Mint, it can’t track how much you are spending in cash from your pocket. So, when you spend cash, log them into the appropriate category of Mint. On the Transactions tab, go to the “Add a Transaction” button. Here you can choose a category, describe where you spent money, deduct the amount from your last ATM transaction if necessary (so that your total balance remains the same). You don’t have to deduct the amount from ATM transaction if you got that money from other sources than ATM.

Additionally, you can split any of the transactions into two. It is particularly useful when a part of the transaction falls into one category and another part into some other category. An example? Let’s say you spend $50 in iTunes Store. So, Mint will automatically put that transaction into Music category. But YOU know that only half of that sum was spent on music and the other half on movies. So, you can split the transaction into two by going to the Transaction tab. Just hit Enter Details and then Split.

Review Your Budget Once a Week/Month

All the offerings and features of Mint are no good if you don’t review your budget often. Set aside some time every week, month or quarter to review your budget. It will help you reassess how much money is left that you can spend the next week or rest of the month. Do you need to cut your spending? Where the most of your income goes? You can know these things only if you review your budget regularly.

Setting Goals

If you save some money regularly- whether for emergency, a vacation, a car or retirement, Mint will help you in this regard as well. It does all the maths to tell you how much you need to put aside every month to accumulate the required sum by the time you want.

Once you tell it your goal, Mint will also offer recommendations to achieve that goal quickly. For example, if you are saving for a new home, Mint will advice you on improving your credit score and other related subjects. Go to the Goals tab and stick to the instructions.

Budgeting is a tedious and time consuming task. But it becomes very smooth and easy with Mint. Now you have no excuse to delay creating your own budget.

Do you still have any doubts or queries? Ask me.

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Step by Step Guide To Create A Realistic Budget: Part-2

October 9th, 2012

Last week we talked about budgeting basics. For people who create a budget, it may not be the most exciting stuff in the world, but it helps them maintain their financial house in order. Just keep in mind while preparing your budget that you need to provide as much detailed information as possible.

Here is your step by step guide to create a realistic budget:

The Most Important Tip – Don’t Put It Off Any Longer

Most People often procrastinate, or avoid making a budget altogether. And even fewer people manage to stick to it. When you actually think of sitting down with your stack of bills and a pen, or with a spreadsheet document on your computer, you immediately find something more important to do. Creating a budget seems like a boring task to you.

The truth is, you fear confronting your financial life in the harsh and bitter light of day. Despite all your delaying tactics and excuses, it must be done. Remember, if you don’t control your money NOW, it will control you. By procrastinating any longer, you are prohibiting yourself from enjoying the sense of freedom that comes only from controlling your finances. So, now be brave, sit down and just do it.

Step 1: Pull Out All Your Financial Statements

Yes, it includes all the recent utility bills, investment accounts, bank statements or any other bill that has some information about your income or expense. This will be used for calculating a monthly average, so try to include as much information as possible.

Step 2: Sum Up The Exact Figures of Your Income

If you receive a regular paycheck, consider take home pay that you receive after automatic tax deduction. If you are self-employed or have any other sources of income such as investments, record these as well.

Step 3: Create A List of Monthly Expenses

Jot down all the expenses you incur over the course of a month. It includes everything from your grocery bills to restaurant receipts, mortgage payments, auto insurance, utilities, dry cleaning, entertainment, car payments, internet, clothing, medical, transportation, credit card bills, life insurance, etc.

If you regularly put away some money for your rainy days, retirement or for investment purpose, include that in your expenses, too.

Step 4: Divide Expenses Into Two Categories: Variable and Fixed

Now that you have the list of your monthly expenses, divide it into two categories. The expenses that stay relatively same month after month will go into fixed expenses column. It comprises of rent or mortgages, car payments, internet/cable services, insurance premium, etc. Mostly, these are not likely to change in your budget.

Expenses such as entertainment, eating out, gasoline, groceries, gifts will be in the column of variable expenses. This is where you can make most of your adjustments when you are under financial strain.

Step 5: Total Up Your Monthly Income and Add Up The Expenses

This is a crucial step. Now you have the sum of monthly income from all sources. Add up all your monthly expenses. Now subtract your total monthly expenses from the total monthly income. If the end result is positive, i.e., if the income is greater than expenses, you are in a good financial position. You can use the excess of cash to eliminate the debts faster, or save for retirements.

In case your expenses are higher than the net monthly income, you need to make some changes. That leads us to our next step.

Step 6: Adjust Your Expenses

Let’s say you earn $2,000 a month and your expenses are $2,500. That means you are spending $500 extra every month THAT YOU DON’T HAVE! You are either borrowing that money or taking out from the past savings.

Your ultimate goal is to figure out what you should do to reduce or eliminate the extra $500 each month. You can try to cut back on the variable expenses. Try to eliminate the expenses that are not absolutely necessary.

Step 7: Review Your Budget Every Month

You need to have a look at your budget every month, just to ensure that you stay on track. When a month is over, take 5 minutes to sit down and compare the budget you had created versus the actual expenses. It will show you what you handled well and what you still need to improve upon.

Do you still have any questions or anything holding you back from creating a budget? Shoot your question in the comments and I’ll answer you.

Are you tech savvy? Next week I will show you how you can easily create your budget using Mint, a FREE personal finance app.

PS: If you don’t have sufficient time to create your own budget, go to the Financial Planning Association website to find out a certified financial planner in your area. They can help you out.

Read next article in series: Tech Savvy? Use Mint to Create and Stick To A Realistic Budget Plan

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Budgeting Basics To Help You Create a Budget: Part-1

October 4th, 2012

Whether you realize it or not, knowing the budgeting basics is necessary to manage your money effectively. The very basic concept of personal finance is you earn money, and then you spend that money. It involves budgeting on a regular basis.

When you get to spend your income on something, you already know that you can’t spend that same money on something else – which may be more important. But by creating a budget, you get to know how much money you have, how much to save and what your monthly expenses are.

What Is A Budget, Anyway?

A budget is the backbone of your personal finance, irrespective of your situation. You simply have to break down and plan how much money is flowing in and where it goes. Have you ever seen a successful business that doesn’t track its income and expenses? Well, the same rule applies to your personal finances.

Most folks have a misconception that if they create a budget, they instantly need to cut back on fun spending. Maybe that’s true, but you can’t figure out what expenses are to be eliminated until you create a budget plan.

A professional financial planner, James Mannion, says that most of us get a limited amount of money every month. And there is an ever-growing list of creditors and bills that cannot wait. Therefore, it becomes necessary to create a budget and stick to it.

Remember, you are not creating a budget to live a miserable life; you are creating it to effectively manage your money. Without proper allocation, funds may fall short.

By creating a budget, you take control of your money; otherwise it may control you. Don’t fill your mind with negative thoughts that a budget will make your life miserable. Of course, you can still enjoy life and include “fun activities” in your budget.

Track Your Monthly Income

The first thing in creating a budget is to calculate your monthly income from all sources. It’s very easy, you just have to look at your salary or profits if you are a business person. Married people can add their spouse’s income as well. It’s always better to include income from other sources as well, like income from interest, dividends, a website or a side business, etc.

Track Your Expenses

Once you have penned down your exact sources of income, you need to take a look at your monthly expenses. Include all the fixed monthly payments such as mortgages or rent, insurance, car payments, taxes, debts, etc. Usually, these are the fixed expenses, meaning the amount doesn’t change every month.

Now you have to work up a little to find out where the remaining money goes every month. Take out your latest bank statement or checkbook for help. This way you can figure out how much you spend on entertainment, groceries, magazine and TV subscriptions, utilities and so on.

Finding The Balance in Your Budget Plan

By now you have all the information you need to create your budget. Add up all your income, and then total up your monthly expenses. Now subtract total expenses from your monthly income. If this figure is positive, you spend less money than you make. Great! In case the final figure is negative, you need to better control your expenses.

Don’t panic. Now that you have seen how much you fall short, all you need to do is adjust spending in certain areas to improve your budget. Sometimes making just small adjustments in spending habits is enough. You can cut corners by cancelling your magazine subscriptions, going for matinee instead of the prime time show, or by reducing the number of times you eat out.

To make budget planning more practical and easy for you, I will show you how to prepare your budget, step by step next week.

Do you create a budget to manage your finances? What challenges you face along the way?

Read next article in series: Step by Step Guide To Create A Realistic Budget: Part-2

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Small Business Marketing Ideas That Work!

September 19th, 2012

The economy is still under turmoil, and thousands of small businesses across the United States are trying to cut their marketing expenditures. People are consistently looking for the low cost, but effective small business marketing ideas. Growing a small business in such an economy is really hard. But let me tell you that you don’t have to sell an arm and a leg to collect money for your marketing budget.

Marketing doesn’t always require big money. Your capacity to plan and execute the right marketing strategies can generate sales, even with the low cost methods. Use the following strategies to grow your business with minimal investment.

Don’t Advertise Like a Big Business

Large companies advertise to create brand recognition and generate future sales. As a small business owner, you can’t afford to do that. Instead, go with direct response ads…the ones that can generate sales now. Make an offer in each of your ads, so that the prospective customers can respond to it.

Another idea is to make customers a second offer. For example, a customer purchases a jacket from your clothing shop. Within a couple of days, send them a handwritten note to thank them personally and inform them that if they come back with “this letter” they will get a private offer, such as 10 percent or 20 percent off their next purchase. Don’t forget to mention a time limit, it creates urgency.

Try Buddy Marketing Campaign

If you didn’t guess it right, I am talking about joint promotion. Talk to other non-competing small businesses that serve the similar customers in your locality. Tell them, you can publicize their offerings to your customers if they agree to return the same favor. Such cross-promotions can yield great returns for a little expense.

You want an example? Let’s say you want to send out brochures to promote your own business, and you include a leaflet/business card of a non-competing small business which has agreed to return you the same favor. This way, you explore a new territory and get the word out to more people about your business.

Reduce the Size of Your Ads

Success of an ad doesn’t always depend on its size. You’ll be surprised to know that many of your shorter ads can generate more business than the longer versions. People today don’t have enough time to read all the ads they come across every day. They read postcards when the message is brief.

Therefore, reducing the size of your ads can allow you to run more advertisements in the same budget.

Advanced Marketing Tips For Small Business – Email Marketing

Email marketing is one of the most economical ways to reach your potential customers, promote your products and services, and boost brand recognition. But it takes time. First, you have to build an email list of people interested in your products. Once you have collected the email addresses, send specific and targeted messages, and track the response.

During an email marketing campaign, remember not to cheat your subscribers. Tell them what they are signing up for, promise them not to share, sell or distribute their email addresses, and show them a simple process to unsubscribe in case they do not want to receive future messages.

Use Social Media

If you don’t already have a presence on Facebook and Twitter, you are already losing market to your competitors. It is an extremely cost effective method to reach and stay connected with your target audience.

Perhaps you have already seen that businesses are using social media to get the word out there about their offerings. Start a Facebook business page if you haven’t already.

Apart from Facebook and Twitter, there are other ways, too. You can start a blog to engage potential buyers, list your small business on Google Places, create a Pinterest account, record videos to provide useful information to people and upload them on YouTube.

First, you should create a business plan and clearly outline the purpose of your social media outing. That will guide you on how to use these platforms and tools. If you don’t have a clearly defined goal or strategy, no quantity of tweets and likes will help your business grow, says Danny Iny — Co-Founder and CEO of Firepole Marketing.

Give Something Away

Who doesn’t like getting something for free? So, offering a sample or freebie is a wonderful way to promote your products or services and attract new customers. You can give targeted people such freebies in a number of ways. Give away samples or coupons when customers sign up to your email list. Run a contest and award the winner with your product. Conduct a free webinar, local workshop or teleconference for your potential customers.

You should keep certain things in mind when doing this. Make sure that the samples you are giving away are of high quality, useful and relevant because you want to leave a good impression of your business. Also, do not give away too much. Just give customers the “taste” of your offering such that it increases their appetite for your product or service.

If freebies don’t fit into your business model, try to donate your time in such a way that helps promote your business. Organize a charity event, sponsor a local sports team, or donate your expertise/time to a non-profit.

Take Advantage of Your Existing Customers

Your loyal customers, the ones who know you and trust you, are your best asset. They are your repeat customers….they are going to buy from you again and again. Make some special offers just for them.

They can also be your excellent markets. In today’s hyped market, people believe their friends and relatives more than any advertisement. The word of mouth publicity by your loyal customers will bring in more new customers.

Additionally, organizations like SBA can help you start, manage and market your small business.

As a small business owner, what are you doing to get more orders? Have your strategies been effective?

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What Is A Mutual Fund and How To Invest In Them Successfully

September 13th, 2012

Many people don’t even know what is a mutual fund, let alone investing in them. If you are one of them, don’t worry because you are going to learn everything about them. A mutual fund is an investment firm run by professional money managers. They collect money from thousands of investors like you, and then wisely put that money in various investments such as stocks, bonds, futures, money market funds to create a portfolio. Mutual funds put your money in different baskets, thus minimizing the risk.

When you purchase stocks, you own a part of the company. Similarly, when you invest in a mutual fund, you’ll become a “shareholder” in the mutual fund company. When the mutual fund makes money, you’ll get dividends (profits on the money you have invested). However, the value of your shares will decline in case there are losses.

Open-ended vs. Closed-ended Funds

Mutual funds are of two types – open-ended and closed-ended. The open-ended funds are further subdivided into load and no-load funds.

A large number of mutual funds are open-ended, i.e., they issue shares whenever an investor wants them and redeem the shares if an investor decides to sell. Since the shares are issued and redeemed as necessary, they reflect the actual value of the fund.

Contrary to open-ended, closed-ended funds have a set number of shares issued for public in stock exchanges. These shares can be purchased or sold in the open market. Closed-ended funds do not issue new shares or redeem as necessary. Therefore, their prices are based on the law of supply and demand.

We discussed that open-ended funds are of two types. Loads and non-loads. Simply put, load is sales commission added to the mutual fund share prices when you purchase it. Usually it is charged by the fund sales person, and can go up to 8.5 percent of the sales prices.

Most of the mutual funds are no-load type. That means you won’t have to pay any sales fee to anybody. The mutual fund directly markets to potential investors, so there is no sales person involved. No-load funds generally yield better returns because they carry lower expenses.

Benefits of Investing In Mutual Funds

Well, the biggest benefit is that it heavily minimizes the risk. Investors who don’t know much about the stock market or money management can put their money in the hands of some reliable, professional money managers. Mutual funds constantly monitor every investment in their portfolio, and they buy or sell whenever the time is appropriate.

Additionally, they devote much more amount of time on selecting investments than any individual investor. Investing without calculating the financial ratios or analyzing the security give you peace of mind, and provides you the opportunity to spend your time on something you love.

Since the compensation of money managers at a mutual fund is directly tied to performance of the fund, they always ensure an effective growth.

How To Choose The Right Mutual Fund

When looking for a mutual fund that fits your portfolio, you have to consider three things: your purpose behind investing, investing style and risk tolerance. Some people invest to buy a new home in the future or for retirement purpose. Your purpose of investment and the kind of returns you expect will define the risk tolerance. Everybody has a different investing style and strategy. Some like investing in start-ups, others invest only in blue chip companies or s specific sector.

Once you choose a mutual fund, go to S&P or Morningstar. I personally prefer the data from Bloomberg. They rank mutual funds based on their past records. You can rely on the rankings, but be careful if the fund manager has changed recently at the mutual fund of your choice.

You should be aware of the factors that will help a particular mutual fund perform better in the future, and why it should be a part of your portfolio. The technique I use to know these things is that I simply ask fund managers what is the position of their current portfolio and how they plan to outperform in the future.

How To Invest In Mutual Funds

People with a brokerage account can purchase shares of a mutual fund just like they do for stock purchasing. If you don’t have a brokerage account, don’t panic. You can directly contact the mutual fund to request information and application form, or visit their website.

Usually, mutual funds put a minimum limit on initial investment. It varies widely from $25 to as much as $100,000, but most of them are in the range of $1,000-$5,000. Mutual funds have made investing very easy with multiple payment options and a minimum amount of paperwork.

Can you add something to the list? If you are an experienced mutual fund investor, how did you get started? Enlighten our readers with your story.

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