Everybody always talks about how to save money. I run into this supposed great advice everywhere: In business, in government, and in individuals.

People need to become accounting-aware. That is to say, how do we maximize our profit? How do we maximize the difference in what we earn (our income) versus what we expend (our expenses)?

If we look at this equation

Income - Expenses = Profit

we can discern three profit-enhancing things we can do:

• Increase our income
• Reduce our expenses
• Do both

The article below shows three ways to increase our income:

1. Get a raise
   
2. Take a new job
   
3. Start a new career
   

Generally speaking, it's almost always easier to cut expenses than to "get a raise." However, once you've cut as much as you want (not always what you need -- life isn't about living in a box -- you should get some enjoyment out of the fruits of your labor), there's only one way to maximize your profit.

But what if you're brown-bagging your lunch, drinking that sludgy office coffee and investing every penny you can, but still not making sufficient progress toward your financial goals? In that case, you need to find a way to make more money.

That is to increase your income.

There is one notable item left out of the list above: Earn some income on the side. #2, "Take a new job," isn't directed at an additional job, but rather a different job than the one you have now. You can sell on eBay, blog for money, start a hobby/side business, etc.

Three Ways to Fatten Your Paycheck - Personal Finance - Saving

Governments have to come up with ways to raise income (tax revenues, mostly) rather than just cut and cut. The social problems we face, from Social Security to Welfare to Medicaid, can be completely rendered moot if the government focused on growth in the economy rather than cutting benefits. This is not to suggest that the government should not rid wasteful programs, but there is a better solution than cutting Grandma off Medicaid or Social Security.

Businesses do the same, albeit in a more perverse way, in my opinion. When times are good, they try to maximize revenue (income in a generic sense); conversely, when times are not so good, businesses turn tail and try to "cut the fat." Unfortunately, after the last recession, many businesses cut a lot of fat and there really isn't much more lard to trim.

So, in the midst of the impending economic downturn (i.e., recession), many companies will cut staff, cut ad spend, and reduce outlays for "non essentials." This, in my estimation, is precisely the opposite of what should occur.

Instead, in times like these, smart companies (i.e., the ones that will flourish) will practice the fundamental business action of "buying low." Customer acquisition in a downturn may be difficult, but it's cheap. Now is the time to start the targeted marketing campaigns that will garner customer market share. Follow market grab with excellent customer service and lean, yet effective, operating execution, and you get a winner.

Instead, the "big companies" will cut staff, reduce investment, and slash spending. What a perverse way to do business.

Goldman Sachs is the new poster company for investing success. Many alums from the company are now running highly prestigious enterprises. Read the article, Goldman Sachs Rakes In Profit in Credit Crisis from the New York Times, for more.

It looks like they called the credit crunch before anybody else and hedged their bets with, of all things, insurance.

Like a lot of people, I used to miss payments by a day or so, forget to pay the garbage bill, etc. I put my finances on autopilot as much as possible, and while expenses still sometimes exceed income, I spend much less time paying bills, writing checks, calling companies to get late fees waived and so on. Here's a couple of great articles on automating your finances.

Geek to Live: Automate your finances

This is great general advice. It's especially good for those of us with unsteady income, like freelancers and contractors. Or chronically underemployed :)

Retire at 45

This one is a little more specific. I don't subscribe necessarily to having auto debits set up with the debiting company, like the cable company, unless I can pay for it with my credit card.

You see, my system is quite simple: If I can have the companies with which I do business debit my credit card, I set that up immediately. I use one credit card only, which I pay off every month. It is an airline miles card, and over the last few years, along with promotions, dining out, etc., I've racked up close to 200,000 miles.

There are other advantages to using one credit card for as many bills as possible. First, I get a log each month of everything I've spent money on. Using Quicken or Money, one can easily analyze, categorize, set up a budget, etc., using the credit card company statement as a money log.

Second, there's only one bill to pay dozens and dozens of companies.

Third, I use the credit card company's money for a month or so, interest free.

Finally, I get airline miles. Miles have become more valuable now that jet fuel has risen with the price of crude oil.

For those companies that cannot or will not (or will, with a fee, which I won't pay) bill to a credit card, I set up bill pay with my bank.

There are two types of 'bill pays': recurring and non-recurring. Car payments, for example, are due on the same date and for the same amount each month. I consider these to be recurring. The water bill varies, so I consider it to be non-recurring, in that I have to adjust my bill pay for the amount every single month.

My checking account at my local bank, Washington Mutual, or WaMu, serves as the center of my 'star' network. All money flows into and out of this account. Outflows are automatic investments at eTrade, Emmigrant Direct (high yield online savings account), paying off the credit card balance, and any other bills that I cannot pay with a credit card.

Inflows are paycheck, tax refunds, affiliate payouts, drug money (kidding), and any other miscellaneous cash I might come across.

I have also tried to go paperless on as many bills as possible. This saves me time (I don't go through as much mail, though it's still so terribly ridiculous how much crap I get) and is my small contribution to saving the planet. Or at least the trees on the planet.

Every time a get a bill, I schedule its payment through my bank, online. If a recurring bill, I just ensure that the due date and amount haven't changed. If a non-recurring bill, but a bill I've paid before, like the water bill, I login, set the due date and amount, and I'm done. If a new bill (like a hospital bill -- I've received lots of these since my baby was recently born), I set it up and schedule it. It takes about 30 seconds.

It's really a simple system. I write maybe one or two checks every few months. I pay no postage. I save time. And most of all, I save my sanity.

Now that I have 2 children, both under the age of 2 -- one less than 2 months old -- I spend very little time paying bills.

Try it out.

Technorati Tags: autopilot, automation, automate your finances, Money Hacks, saving money, investing money, earning money

Any interview involving Warren Buffett is worth reading/hearing.

Warren Buffett and NBC's Tom Brokaw: The Complete Interview - Warren Buffett Watch - CNBC.com

Fed Chairman Says Economy Likely to Slow - New York Times:

Recession looms on credit crisis, rising energy prices, and falling dollar.

The most recent economic data since the Fed’s rate cut last Wednesday “continued to suggest that the overall economy remained resilient in recent months,” he said. At the same time, he acknowledged, investors’ fears about bad mortgage loans have intensified and could lead to tighter credit conditions. On top of that, he said, “further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity.”

Sure the economy is resilient, but I fear it's becoming less so as we rely more and more on foreign investment.

"But Mr. Bernanke suggested that the two rate cuts in September and October should be enough to prevent a recession, quickly adding that the central bank will be watching for new signs of trouble."

Is he nuts? We need many incremental rate cuts or a couple of substantial rate cuts. We're looking at less-than-zero economic growth with lots of macro factors thrown in, like a weak job market, a stock market that is near its peak (without any underlying strength), rapidly rising energy prices, shrinking investment, a hesitancy by business to expand, a credit crisis that is not only affecting the mortgage market but all other credit markets as well.

Video

Consumer Reports has introduced 5 new blogs, one each for Shopping, Electronics, Cars, Tax, and Safety. Read more at the link.

Five Money-Saving Blogs from Consumer Reports ∞ Get Rich Slowly

Think this Fed is 'easy money' -- ask Larry Meyer, former Fed governor:

“The markets may have pushed the FOMC into a cut in October, but we think the message is: ‘Push us once, you win. Push us twice, you pay!’ This is one of the most hawkish Committees that I can recall … Put it this way: I would be the dove on this committee today, and I don’t usually do even a good imitation of a dove.”

Inflation, while a key macro measure of the health and stability of any economy, I fear, is uncontrollable right now. Soaring demand for oil has provided a continuous and crushing blow to this economy and all other economies that rely on fossil fuels.

There really is no way to contain it. Raising short-term rates won't do anything but throw us, and perhaps the world economy, into a tailspin that could last years. All it will do is slow growth, maybe even cause a deep recession (some would call it a depression, but those are scary words).

Economics Blog : Larry Meyer: I’d Be a Dove on This Fed

Here's a statement from WaMu regarding the NY state Attorney General's suit against eAppraiseIT:

We have absolutely no incentive to have appraisers inflate home values. In fact, inflated appraisals are contrary to our interests. We use third-party appraisal companies to make sure that appraisals are objective and accurate.

Here's a brief -- albeit totally incomplete -- synopsis of the credit crisis:

The inability of many of those borrowers to cover loan payments once they reset led to the credit crisis. More than 50 lenders have gone out of business this year, tens of thousands of people have lost their jobs in the industry, foreclosures have soared nationwide and it has become more difficult for home buyers to get home loans.

What is failed to be mentioned in almost every story about this crisis is the securitization market. Basically, mortgages were sold, repackaged as interest-bearing securities, and sold to hedge funds and other investors. You'll see the carnage in the coming weeks and months. It seems that the US Treasury is doing all it can to prop up the industry to counter the natural forces that would roil the markets.

NakedShorts: The Einhorn Agenda I
Get the pdf here
More on the credit crisis
More still