Is it important for a small business to have capital reserve?
Dear Dave: Iíve had my own business for a few years, and Iím finally starting to see some real money. I want to make sure I donít mess things up now. How important is it for a small business to have some kind of cash reserve? — Ken
Dear Ken: This is a great question, and I hope other small business owners and folks thinking about opening a business will pay attention. You always need capital reserves for a small business — always! You know how I stress the importance of having an emergency fund of three to six months of expenses in your personal finances? The same principle applies to business. When business slows down or the economy does a nosedive, having a cash reserve will soften the blow and help you make it through the lean times. And if something goes wrong or breaks down, it will turn a disaster into nothing but a minor inconvenience. Not only that, but it can help grow your business debt-free. At some point youíre going to hear about a good opportunity. Good opportunities have a way of becoming great when youíre paying with cash! — Dave
How to get rid of PMI?
Dear Dave: We bought a home a couple of years ago, and weíre currently paying private mortgage insurance. Iím tired of seeing extra money go out the door, so is there anything we can do to keep from paying this? — Eddie
Dear Eddie: You can get the PMI dropped if your home has appreciated enough to cover the cost of the insurance. This can be done through a standard appraisal. It might cost you about $400, but itís worth it if that gets the insurance charge out of your life for good.
Just make sure the appraiser you pick is approved by your mortgage company. You donít want to pay for the same job twice! — Dave
Rent without a credit card?
Dear Dave: I love your philosophy on money. But I travel a lot, and was wondering how Iím supposed to rent a car without a credit card. — George
Dear George: I use a Visa debit card. Iím traveling somewhere almost every week, and a debit card can do virtually anything a credit card will. There are a couple of car rental agencies that donít accept debit cards, but theyíre too expensive anyway. So itís always a good idea to call ahead.
Probably the biggest advantage, George, is that youíre using your own money with a debit card. With credit cards youíre always borrowing someone elseís money and paying extra for the ďprivilege.Ē Why go into debt and pay more for something when you donít have to? — Dave