Monthly Archives: October 2016
Today’s job market is as competitive as ever. You need to be able to effectively communicate your skill set so that you will give yourself the best competitive advantage to secure employment. During the interview process, you want to highlight as many of your strengths as possible.
An easy way to do this is by slipping a few simple phrases into your next job interview. Here are seven things you should say in an interview.
1. I am very familiar with what your company does.
Letting a prospective employer know that you are familiar with what a company does shows that you have a legitimate interest in the business and are not just wasting their time. Do your homework before arriving for an interview. Check out the company website for information about products and services. Search for the latest transactions and pertinent business news.
Be sure to let the interviewer know that you are familiar with the newest company acquisition or the latest product that was just developed. Explain how your skills and experience are a perfect fit for the employer.
2. I am flexible.
Work environments are always changing. Prospective employers are looking for candidates that are open to change and can adapt at a moment’s notice. In today’s fast-paced business world, employees must have the ability to multi-task.
Stating that you are adaptable lets an employer know that you are willing to do whatever is necessary to get the job done. This may mean working additional hours or taking on additional job duties in a crunch. Show your potential employer that you are equipped to deal with any crisis situation that may arise.
3. I am energetic and have a positive attitude.
Employers are looking for candidates with optimism and a “can-do” attitude. Attitudes are contagious and have a direct affect on company morale. Let the optimist in you shine during the interview process.
Be sure to always speak positively about past employers. Negative comments and sarcastic statements about past employers and co-workers will make you look petty. If you bad-mouth your past company, employers are liable to believe that you will do the same thing to them.
4. I have a great deal of experience.
This is your chance to shine. Highlight any previous job duties that relate directly to your new job. If it is a management position, state every time that you were responsible for the supervision, training and development of other employees. Discuss your motivational techniques and specific examples of how you increased productivity. Feel free to list any training classes or seminars that you have attended.
5. I am a team player.
Do you remember when you were young and your teacher wanted to know if you could work well with others? Well the job market is no different! Companies are looking for employees that are cooperative and get along well with other employees. Mentioning that you are a team player lets your prospective employer know that you can flourish in group situations.
Employers are looking for workers that can be productive with limited supervision and have the ability to work well with others.
6. I am seeking to become an expert in my field.
Employers love applicants that are increasing their knowledge base to make themselves the best employees possible. Stating that you are aiming to become an expert causes employers to view you as an asset and not a liability. You are a resource that other employees can learn from.
This is also a subtle way of illustrating that you have an attitude of excellence. You are aiming to be the best at what you do! This will let employers know that you are not just a fly-by-night employee, but in it for the long run.
7. I am highly motivated.
A motivated employee is a productive employee. Talk about how your high level of motivation has led you to accomplish many things. If you are a meticulous worker, discuss your organizational skills and attention to detail. Companies are always looking for dependable employees that they can count upon.
Many popular personal finance gurus espouse a philosophy of avoiding debt at all cost. They point to all the negative consequences of abusing credit, with an overarching theme of how big, evil credit card companies and banks take advantage of ordinary people and drive them into a lifetime of modern-day slavery to their credit card debt.
But what they won’t tell you is that there’s actually such a thing as “good debt.”
Why Debt Can Be Good
Credit, used responsibly and in moderation, is good for the overall economy because it can help facilitate more transactions and allow for a faster transfer of goods and services. However, it can also be very bad for your financial health if abused. And abusing credit is extremely easy to do because money is constantly thrown at us by banks and other lenders.
The good news is there is a very easy way to determine if something is potentially good debt or bad debt. The key is to take a closer look at what debt really is—it’s simply spending your future income to buy something today. So it stands to reason that the only time you should borrow money against your future income is if you use it to buy something that will enhance your future income.
When you buy a latte using a credit card, for example, you’re borrowing from your future self’s income to buy that coffee today. You don’t have the cash to buy that coffee, so you charge it and go on your merry way. It’s your future self’s problem, right?
The problem with this is not, in and of itself, the fact that you bought something on credit. The problem is that what you bought on credit doesn’t increase your future income, which is what you will use to actually pay for that coffee. But if, on the other hand, you borrow money to buy something that will produce income in the future, then you’ll have the money to pay back the debt plus the interest. The key is to buy something that pays enough additional income (or that appreciates in value) to do that and still have more leftover.
For example, let’s assume you used credit to buy a rental property. That property receives income every month, right? Therefore, you’ve increased your future income by buying that property, even though you didn’t have the full amount in cash to buy it.
That is the fundamental difference between “good” debt and “bad” debt.
Examples of Good Debt
Here are a few examples of what I consider potentially good debt, if used responsibly. Now, you can probably find an exception to these broad categories. For example, while I list student loans as potentially a good debt because, in theory, it increases your future income, a degree in the humanities that costs $200,000 may not fit that mold. But generally speaking, student loans can be good debt if they help you build skills to compete in the job market and earn a good income. The key is considering whether the future payoff is enough to warrant the cost.
Mortgages on rental property
Business loans (Again, like any debt, these can be easily abused. But if the business is successful then, obviously, using debt is a lot quicker way to get started.)
Credit cards – but only if you pay off your credit card in full every month, on time. If used this way, you can rack up tons of rewards and also build your credit.
Benefits of Good Debt
Some of the everyday benefits of using debt wisely include building a good credit score, getting perks and rewards such as airline miles and cash back, and tax advantages (on mortgage interest and student loans, for example.) But the most powerful benefit of credit is the concept of leverage. An in-depth discussion of leverage is beyond the scope of this article, but I’ll say here that leverage is just what it sounds like—it works like a lever to increase your investment return over what you could achieve with cash alone.
As an example, let’s assume that you buy a rental house for $100,000 and put down 20% for the down payment, so $20,000. This particular property rents for $1,000 per month, and your total expenses including mortgage interest, maintenance, taxes, and insurance are $800 per month So, you make $200 each month from this property, which is an annual return of 12% on your original cash investment.
Now let’s compare that to if you had not borrowed the 80% to buy the property, but instead paid for the whole thing with your own cash. In this case, you do not have to pay the mortgage payment, and therefore can “net” much more from each rent payment. Let’s assume you now get about $600 net each month in rent.
You’re making more money, right?
While you are making more in dollar terms, you actually earn less as a percentage of your initial investment. Believe it or not, your investment return has actually gone down. Why? Because the mortgage acts as a lever to increase your return. In this case, the un-leveraged rate of return would be 7.2% ($600 per month times 12, divided by your investment of $100,000.)
While Debt Can Increase Returns, It Also Increases Risk
Lest I give you an overly rosy picture about debt, let me add one more clarifying detail. In the above example, I showed how the return on a rental property can be almost doubled by adding leverage. While that is true, and a well-known financial principle, it should be noted that leverage works both on the up-side and the down. The recent financial crisis is a classic example of this. Many investment banks were highly leveraged with complex mortgage-based financial instruments, and when the economy turned, they went bankrupt or had to be bailed out. It works that way on a personal level too. Debt can be a powerful tool, both for good and for bad. If you decide to employ good debt, please use it responsibly and with caution.
Can you have perfect abs in just six minutes a day? It’s hard to say for sure, but you can have a solid budget in six months. One of the challenges with proper budgeting is that it has to become habitual in order to be effective. You can survive without knowing how to budget if you manage to keep more money coming in rather than flowing out or have credit cards to cover the gap, but this won’t last forever. People often resort to budgeting after they’ve already been dealing with expenses and income in a back-of-the-envelope kind of way.
The crux of this six-month plan is the emergency fund. In general, traditional budgeting starts with tracking expenses, eliminating debt and, once the budget is balanced, building an emergency fund. To speed up the process, we are going to start by building a partial emergency fund. Ideally, everyone should have a minimum of a few months’ wages sitting in a liquid account for any unpleasant surprises. This emergency fund acts as a buffer as the rest of the budget is put in place, and should replace the use of credit cards for emergency situations.
You will want to build your emergency fund as quickly as possible. For someone who lives in a rented home and has only a modest amount of debt, an emergency fund of $600 may work fine. If you own a house, a car and other things that can unexpectedly require cash infusions, then your emergency fund will need to be bigger. The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it and, if possible, putting in whatever you can spare on top. This will speed up the process and get you to think about your spending.
What’s an Emergency?
Here’s where it can get a little trickier. You should only use the emergency money for true emergencies: like when you drive to work but your muffler stays at home, or your water heater starts to hiss and spit green bile like Linda Blair in The Exorcist. Covering regular purchases like clothes and food do not count, even if you used your credit card to buy them. It may help to keep the account at another bank or, better yet, an online savings account, where you can’t access the money as easily and where it will get higher interest than a normal savings account.
While it’s true that you would save money if you used your emergency fund to eliminate credit card debt, the purpose of the fund is to prevent you from having to use your credit card for paying for the ugly things that life throws at you. With a proper emergency fund, you will not need your credit card to float you when something goes wrong.
Downsize and Substitute
Now that you have a buffer between you and more high-interest debt, it is time to start the process of downsizing. It is odd that the natural solution to “not enough money” seems to be increasing income rather than decreasing spending, but this backwards approach is very familiar to debt counselors. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest.
This can be a process of substitution as much as elimination. For example, if you have a $60 per month gym membership, cancel it and use half of the money you save to invest or pay down debt and save the other half to begin building a home gym in your basement. If you buy coffee from a fancy coffee shop every morning, you could just as easily purchase a coffee maker with a grinder and make your own, saving more money over the long term. Although eliminating expenses entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. People often cut too deep and end up making a budget that they can’t keep because it feels like they are giving up everything. Substitution, in contrast, keeps the basics while cutting down the costs.
Focus on Rewards
If you are constantly looking at what you have to cut and give up, the very act of budgeting will become distasteful. A mixture of long- and short-term goals will help keep you motivated. This can be as simple as saving for a small luxury, or even something bigger like buying a car with cash. Some of your long-term rewards may just be benchmarks on the way to your overall goals. For example, you may want to sock away $10,000 in a retirement account before you turn 30 or be debt-free in five years. Watching these goals slowly but surely become a reality can be very satisfying and provide further motivation to work harder at your budget.
Find New Sources of Income
Why isn’t this the first step? If you simply increase your income without a budget to handle the extra cash properly, the gains tend to slip through the cracks and vanish. Once you have your budget in place and have more money coming in than going out (along with the buffer of an emergency fund), you can start investing to create more income. It is better to have no debt before you begin investing. If you are young, however, the rewards of investing higher-risk, high-return vehicles like stocks can outweigh most low-interest debt over time.
Much like the disclaimers that come with exercise tapes promising to make you look like a body builder in just six minutes a day, it is possible that it will take you more than six months to get your budget balanced out. This all depends on your situation, including how much or what kind of debt you have. On the upside, just like people who begin exercising for the first time tend to see results sooner than regulars, you may find that your improved budget has immediate benefits for you. Even if it does take you longer than six months to get your budget turned around, it is time well spent.