Sunday, November 25, 2007

Tapping a Side Business for Savings: Late Bloomers Guide to Saving Money: Part 2

Is it possible to play financial catch-up and increase your retirement savings by $30,000 in only two years? A side business can provide a boost to savings. That strategy worked for Linda and Arky Muscato of Arizona. The Muscatos increased their savings to $50,000 from their 2005 balance of only $20,000, according to an article by Julie Connelly for AARP magazine .

Here’s how they saved extra:

Part-time business: Developing a side business is one catchup move for late-blooming savers. While he was a teacher, Arky Muscato earned an additional $1,000 a month on a tee-shirt printing business. (He prints shirts for schools, camps and teams). After retiring, he devoted more hours to that business and more than doubled that side income to $2,500 per month, according to the AARP article.

My comment: Building a part-time business is a great source of extra income. It takes discipline to save those extra checks. This strategy is also a part of my personal finance mix.

Here's an excellent how-to article about starting a small business. My number #1 tip: pick a side business that taps into one of your passions, a hobby or an area of expertise. Choosing a part-time business based on your personal interests will give you a head start and additional motivation.

Use no-fee credit cards: For almost every purchase or expense, the Muscatos use no-fee cards that provide 2-3 percent rebates.

Pay off monthly credit-card balances. Carrying over a balance from month to month generates expensive finance charges, which negate potential savings from rebates, according to the AARP article.

The Weekend Millionaire Mindset by Mike Summey and Roger Dawson advocates a careful use of credit cards. "There's nothing wrong with using credit cards to pay for those items if you pay the bill in full when it comes due." --p. 46 The Weekend Millionaire Mindset.

But failure to pay a credit card bill in full constitutes "destructive debt," according to Summey and Dawson. I'm working on being less destructive in my use of debt.

Meanwhile, it's never to late to save, but there are a few helpful tips for those of us playing catch-up. While visiting my parents, I found a copy of AARP magazine which had some great tips for late-starters in the savings game. Basically, the article (from the Sept./Oct 2007 edition) featured several individuals (ages 50-60) who had not saved too much in the past. I'm writing a series of posts based on the strategies featured in the magazine.

Here's Part 1 of this series.
Top Tip: No more recreational shopping at the mall!



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