A friend recently started tracking a similar website called Woot. She told me that there were amazing deals on the site and couldn’t believe she’d discovered such a treasure.

A couple months later I asked how Woot was going. She sighed and said she didn’t visit it anymore. “I great-dealed myself until I was broke.”

That’s my feeling about Groupon, Living Social, coupon clipping and sales. Only buy items you were going to purchase anyway and they’re wonderful opportunities. Buy items you weren’t going to purchase and you may find yourself beyond your budget.

Personally, I rarely visit these sites because I know that presentation is the key to marketing. I can’t examine a deal until I see the deal. Once I’ve seen the amazingly low discounted price, I want the product! Even if I didn’t want it before, I find 101 uses for the three-armed chair leg counter and backscratcher (on sale today only).

Here’s a better way to shop for deals:

• What do you want to buy? Use Google or Bing to search for the product. (I use Bing because they offer a search reward program. I do nothing out of the ordinary and earn free points, which I can convert to Amazon dollars.)
• Read reviews on the product. Look for suitable alternatives (often an Amazon search on a product will bring up a list of similar items).
• Use a search engine again with the name brand you’ve chosen + the word “discount.” You’ll find coupons, offers and lower cost alternatives.

Remember that low cost isn’t everything if the retailer doesn’t have a good return policy or customer satisfaction rating. Use the search engine a third time to find horror stories about a retailer if you’re unfamiliar with the name.

Insurance is an intensely personal issue. People run into trouble because instead of fitting an insurance type to their specific need, they settle for the same rules of thumb used by others.

If there’s one group that can’t afford a one-size-fits-all approach, it’s artists. We have such unique needs that the wrong insurance will cost you time, money and patience (not necessarily in that order).

You don’t have time for something to go wrong, and you may not have the money to fix it later.

How to Shop for Insurances

The key to a successful insurance plan is to begin with your goal. For most of us, there is only one reason to own any insurance: we may need money when disaster strikes. This cash provides a cushion so we’re able to financially emerge from whatever pit we’ve fallen into this particular time.

Insurance planning is a game of probability.

• What is the chance you’ll die this year?
• How likely is it that you’ll have a car accident?
• Is there a chance your apartment or home will burn down?
• Will you suffer a career-debilitating disease?

You won’t know the answer to these questions, but your lifestyle can provide clues:

• How old are you?
• What is your career? What are your career-specific risks?
• Do you smoke? Do you have fire equipment or live close to a fire station?
• What’s your family health history?

The answers to questions such as these will help you piece together your risk profile, which will help you decide what’s most likely to occur in the future.

How Insurance is Priced

Providers of insurance are in the “protect your butt” game to make money, but most reputable firms are handcuffed by competitive factors. While there is a small chance you’ll be ripped off by an insurance firm, there’s a better chance you’ll buy the wrong insurance and waste money. Generally speaking, most insurances are fairly priced.

That’s why it’s important to understand how insurance companies view a policy.

An insurance company will add the amount they need as profit to stay in business to the amount they believe they may have to pay out in claims. As an equation, it looks like this:

Amount of claims + Profit = Price of Policy

Why is this important? Because you should use these same factors when buying a policy. If a company pays out a lot of claims, there’s a higher probability you might be hit with the same type of insurance need.

Most people do the exact opposite. They buy insurances that have a low number of claims…but they don’t see it that way. They buy insurances with only a few claims because they think the policy is cheap.

As an example: disability policies are often ignored because they’re expensive. Looking at it from an insurance company’s perspective gives you a clue why: they have tons of claims on disability policies and pay out lots of money.

In short, disability insurance is expensive because they think you’re going to become disabled.

Instead of ignoring disability coverage, many artists should be figuring out how to have adequate disability insurance as a part of their insurance portfolio.

Health insurance is another expensive proposition. There are many unhealthy people out there. If we ignore the politics of health insurance (we can do little to change the political situation overnight), it’s important to figure out how much is the right amount for you.

Here’s your homework:

1. Write down all the pitfalls in your plan.
2. Place price tags next to each item. Example: You become disabled for two years. How much money would you need to bring in to cover your rent, groceries and utilities?
3. Review your assets to determine if you can withstand the risk of a pitfall occurring. If you have enough money, you may not need insurance.
4. Prioritize the pitfalls.
5. Begin researching the two or three most important types of insurance to make sure you have the best policy for you and the lowest price.

In two weeks we’ll talk about how to buy an insurance policy.

Don’t make that mistake.

When my husband and I were searching for our first home, we fell in love with a sweet little house. During the inspection it was revealed that its foundation was completely collapsing!

A house could be filled with mold, have water damage, leaky pipes, a furnace that’s about to go kaput…and many other problems you might not catch—mostly because you’re too in love with your potential new home to notice the flaws. Even if you’re skilled at real estate, it’s valuable to have another set of professional eyes.

Tip: Don’t send the home inspector to the property alone and settle for reading the report later. If at all possible, accompany her/him through the property. Often they’ll point out valuable information that never makes it into the report. You’ll also be able to read nuances from the inspector about which problems should be fixed immediately which can wait.

In short, many of us need a Simon Cowell.

I find it kind of painful to watch many of the auditions for shows like American Idol. If you think about it, doesn’t this kind of sum up the average American – Dancing – With – The Voice – Talent contestant’s thought pattern:

• Decide that it’s easier to work your way through a competition than to pay your dues and learn your craft.
• Fail miserably (and publicly) because you weren’t ready for prime time.
• Blame the judges for not seeing the unique talent that is you.

That might sound harsh…but notice the contestants who make it through the audition process and even go on to win. Hear their story. Usually, they’re the ones who came to the show most prepared.

Imagine you’re going to perform for Simon Cowell:

Shouldn’t you make sure you’re absolutely polished before the show? What will you do to make sure you’re ready?

You’re going to hone your craft until you know every inflection, every note of the performance. By the time you’re finished, you’ll even know what the writer was thinking when they wrote the song. You won’t just sing it…if you’re ready, you’ll feel it.

When it comes to financial planning, it’s the same.

Some people hope for riches, throw money at the next hot thing and then blame everyone but themselves when they aren’t immediately wealthy.

They called men like Carnegie, Rockefeller and Vanderbilt “Robber Barons,” but these titans created millions of jobs and wealth for many people.

They knew their craft inside-out. They didn’t hope for a good outcome and “wing it.” They created opportunities and intimately learned their field.

I read recently that Lance Armstrong, the seven-time Tour de France champion could feel a difference even if there was less than one ounce of extra weight when he rode the bike. One ounce!

That’s knowing your discipline.

How wonderful would that be? Imagine: you’re riding a bike and know instinctively the signals most of us take for granted. Is your chain slipping a little? Maybe your shoe isn’t placed just right. What’s the fastest way down this hill?

You’re processing information quickly and making split-second decisions. You’re a pro. That’s what you want to be with your craft AND your financial picture.

When it comes to managing your money, here is the tough Simon Cowell question:

Are you prepared or winging it?

If you don’t like the answer, don’t worry. Financial success is a long, but fruitful journey. As you grow in your ability to take care of your money, you’ll develop talents. Most of the skills you’ll pick up will become second nature.

If you keep your head down and hone your skills, when you look up you’ll be well up the mountain looking down at those people blaming the weather, the guides and the judges.

But you probably won’t look long, because once you’re halfway up the mountain you’ll know there’s still more to climb.

The following steps are key to powerful, consistent financial growth:

Ask yourself “how am I doing?” Write down your answers. Determine a course of action.

Commit to ongoing study. Never stop learning! Find the books and workshops that will allow you to continue to develop your financial knowledge.

Seek out good mentors. Sometimes it takes an honest outsider to help you reach your goals. If you feel like a personal guide is what you need to create consistent and lasting growth in your financial life, check out Abundance Bound’s Personal Finance Coaching.

Consider approaching your financial picture with a bit of that Simon Cowell honesty. It might just help you take the steps needed to create your own success!

I’m facing a big tax bill. Every year I have trouble putting away money for quarterly taxes. What’s a good trick to get money saved?

Here’s my favorite technique to save money: save into a central savings account that’s difficult to reach, then pay yourself a separate amount into checking from this fund. Have money automatically deducted from this central savings account each month for your tax bill before you pay yourself money to live so that you don’t face these huge bills.

It’s a horrible mistake to pay tax penalties. The IRS assesses a five percent penalty for every month you’re late filing. Then they tack on a half percent penalty per month on late payments. These amounts are on the overdue sum, not the entire tax due, and are capped at 25 percent.

The biggest problem I see?

People try to use discipline to fix their saving problem. Don’t trust your financial picture to your ability to be “disciplined.” Take 15 minutes with your bank and set everything up on automatic deduction. You’ll be happy you did the next time you encounter a large tax bill and the money is already saved.

-Tommy LaSorda, Hall of Fame baseball manager

Starting. It’s difficult, isn’t it?

Often you can see the path that leads to success in your financial life, your craft, or your career, but you just can’t bring yourself to make the first move.

There are many reasons people don’t start. Most of them are labeled procrastination by people around you. I don’t think that’s fair. There are many, many reasons to wait on your goals, most of them far more involved than simple “procrastination.”

1. You don’t have all the facts yet.
2. You have other priorities.
3. It isn’t the right time of year.
4. You’ll be fresh tomorrow.
5. When you get money, it’ll be easier to start.
6. Once you pay off that old debt, then you can begin again.
7. The kids are about to go to school/end school/be born.

All of these are reasons to wait. Most of them are even good reasons. No matter, we know for certain one fact: it’s clear that now isn’t a good time to start anything new. But, you still know in the back of your head that if you don’t start now, there’s a chance that you never will.

There is only one truth I’ve found with financial planning: It’s never the perfect time to start.

This is the same truth for your craft.

If we already know that tomorrow is going to be as bad as yesterday, the only course of action is to begin now.

But it’s so hard!

How do you do it?

The answer is more simple than you think.

Just take action.

Don’t worry about whether it’s the right move. Don’t think about making the whole mountain of financial tasks perfect.

Just begin one task.

In fact, let’s make it even easier. Don’t even try to finish the single task.

Just start.

I’ve found that if you just swing your energy into starting a task, the sense of accomplishment you’ll gain will pull it through to the end.

This Isn’t My Opinion, It’s Science!

I love discovering a secret that really isn’t a secret at all. It was Isaac Newton who first said:

An object in motion tends to stay in motion, unless acted upon by an equal or stronger force.

Remember that quote from high school science class? In this case, the body Newton is talking about is you.

What are the “stronger forces” that Newton describes, which can stop you from achieving your goal? There aren’t many but in this case, they’re all of those reasons I listed above. If any of these are actually valid reasons you shouldn’t be pursuing your goal, you’ll stop working immediately.

You know the truth: most of the time, none of these reasons which are now holding you back are real. Fear is what’s stopping you. By setting out in motion, you’ll break through fear and create spectacular results.

What You’ll Find

In nearly all instances, once you’ve begun a task, you’re on your way. You’ll finish it, and usually you’ll finish it well.

Additionally, you’ll learn. You’ll figure out what the next logical task is. Your mind will be so happy with the sense of accomplishment, that you’ll probably even start the next task. You might create a “to do” list of all the things you still need to do.

It’s all about making that one little move.

Your Homework: As Nike Says, “Just Do It”

Find one single task that will make your financial life easier. Maybe it’s opening a checking account. It could be tracking your budget. Possibly, it’s figuring out which insurances are best.

Whatever it is, just start. Don’t worry about finishing.

You’ll be surprised by the results.

Here’s a trick I like: round your debt (including your mortgage) to the next round number. If your minimum payment is $45 on a credit card bill and you can’t pay more toward the balance, just round the bill to $50. Sure, it isn’t much, but most people can afford a few dollars extra toward debt repayment. What feels like a small amount can add up to much quicker payoffs.

Guess what interest rate you charged the government while they held your money?

That’s correct. Zero.

Still, if I had to choose between a refund and owing additional taxes, I’ll take the refund as the lesser of two evils. Refunds for many people are a big chance to fix past financial missteps. If you’re going to receive a refund this year, there are at least two mistakes you should avoid:

1. Making a down payment on more debt. Nothing is worse to me than to use a tax refund as a down payment on more debt. Although sometimes it’s unavoidable, creating new debt usually comes with new problems.
2. Buying toys. A sports car, motorcycle or boat can be a nice option if your financial house is in order, but it seems that too many people forget long term goals before they create short-term fun.

There are a number of smart ways to use a tax refund. Here are 10 of my favorites to get you started:

1. Create an emergency fund. You know that safety net money that you should have already set aside but never got around to creating? This is your opportunity.   Tip: Open a new account to make sure you don’t commingle emergency money with your day-to-day expenses.
2. Pay off a credit card. If you’re able to wipe out some debt with your refund, there’s an additional benefit: you’ll also free up some cash flow because you won’t have to pay the monthly bill anymore! Don’t let this new cash flow go to waste. Use the monthly money you save to contribute more to your savings account. Tip: make sure and call the credit card company to cancel the account. This will help you avoid annual account fees.
3. Make an IRA contribution. Rather than wait until the end of the year to come up with IRA dollars, do it now. If you’re eligible, a Roth IRA is a nice choice because money grows tax free for retirement. Tip: Because nearly any investment can be inside of an IRA, make sure and ask about fees and risk before investing.
4. Fund an education plan. According to FinAid.org, the cost of a college education is growing at double the global inflation rate. That means you’ll need some robust savings. 529 plans are fantastic ways to save for higher education expenses. While you’re at it, open a Upromise account for free to earn additional college money. Tip: ask friends and relatives without children to join Upromise also. It’s free for them and can add more money to your account if they specify you or your child as the beneficiary.
5. Create a filing system. Maybe this is the chance to clean out the clutter in your life. A great filing system pays dividends as long as you use it! Tip: Invest in a good organization-decluttering book to use your system well. I like David Allen’s Getting Things Done.
6. Hire a coach. Reinvesting a tax refund to perfect your craft is rarely a bad idea. By investing in coaching or classes, you’ll increase your chances of earning more money in your chosen field. Tip: Interview a few different coaches before settling on one. Ask about professional designations and notable accomplishments.
7. Turn your hobby into a business. If you’re not yet a professional in your craft, maybe now is the right time to make it official. Find a good attorney, draw up legal papers to open your business, have cards printed and begin life as an entrepreneur. Tip: Ask your accountant for names of good attorneys to set up your business.
8. Dress for success. How many times have you met someone and thought they’d do so much better with decent clothing. It’s easy to go over the top here, so be careful. A few well-placed pieces can turn a tired wardrobe into a whole new look. Tip: Look online for style guides. There are many frugal fashion sites online that can help you maximize your dollars.
9. Major repairs or home efficiency additions. While fixing your car can make it easier to meet clients, home efficiency options like new windows or insulation can help lower your utility bills. Tip: Ask about potential tax credits when adding energy efficient products.
10. Support a charity. If you didn’t expect a refund, why not help a good cause? It’s not just good karma–you’ll also receive a nice tax deduction you may be able to use on next year’s tax return. Tip: If you’re unfamiliar with a charity, ask about 501c3 status before giving them money. Only gifts to 501c3 organizations are tax deductible.

Call Off the Struggle: You can pursue your passion without drowning in constant financial stress.

In this fun and interactive workshop, I’ll cover topics including:

• Strengthening your financial mindset
• Getting financially organized
• Establishing a financial “baseline”
• Setting a realistic spending plan
• Developing financial goals
• And more!

I’ll also be answering the specific questions you have, in order to best support you in your financial growth.

This program is designed to help you take immediate, positive action around your financial situation.  My mission is to provide artists with specific, step-by-step plans allowing you to take control of your money and your future.

Where:

The Actors Fund
5757 Wilshire Blvd., Ste. 400
Los Angeles, CA 90036

Email tdowns@actorsfund.org to register, or Click Here for more details.

I’m excited to be back at The Actors Fund, and hope you’ll take advantage of this FREE event. I look forward to meeting you!

Miata,

Should I pay extra on my mortgage? I’m making a little extra money right now and I’m thinking paying off my house is a good idea.

- Jon

Hi Jon,

This is an intensely personal question. Certainly, less debt is always a step in the right direction, but there might be better choices to grow your net worth more quickly.

Here are a few areas to think about before tackling extra mortgage payments:

• Is your credit card debt paid down? If not, this is a greater priority. Credit card debt is more harmful to your credit score and is usually at a higher interest rate.
• Do you have an emergency fund? If not, put extra money into a savings account so that if you have financial trouble down the road, you’ll have funds available.
• Are your long term goals met? If you’re saving enough for retirement, college or other priorities, then pay down your mortgage.

A mortgage is tax deductible, low interest debt in most cases. Because money paid into a mortgage can’t be used for other goals, I usually look toward other options before paying it down.