Throughout the year, I find myself sitting with business owners and sales folks, forming relationships, making introductions, giving and receiving qualified and unqualified referrals and sharing new ideas. All of these activities are typical of your run of the mill business networking groups that we find ourselves in around our local market areas. Having said that, let’s address one activity I mentioned above; the giving and receiving of referrals. Assuming you sit in on a networking group, have you ever really thought about why a fellow member would refer you or your business to a friend? Or why you would refer your colleague to someone in your network? I have narrowed it down to two things:

1) How often do you "give" refferals to others?

2) What level of trust do your colleagues have in you, and you in them?

Let's first start by addressing the word “give” in the context it’s used in business networking groups. Think about it - if each of us networked to “get” something, then more than likely, none of us would “get” anything. Therefore, it makes sense to approach your networking group and meetings with the idea of “giving” as many referrals as possible, increasing the likelihood that you will be “given” referrals in kind. When you show you care about others enough to help them grow their business, you will find that others consider the same holds true for you. Albert Einstein once said, “The value of a man resides in what he gives and not in what he is capable of receiving.”

So, now that we’ve covered giving and receiving referrals, let’s discuss the word “trust” and how it applies to the world of networking. As in our own personal relationships, trust in the workplace is the main building block for creating ongoing and long-lasting relationships. Trust is built over time and is almost always earned - not given. Trust is built simply through acceptance, integrity and reliability. It’s with this behavior that people will trust you, and therefore, refer you to others. Other qualities require that you be genuinely interested in others, listen properly, and follow up accordingly. In the end, building trust is ESSENTIAL for growing and maintaining a strong business network.

In closing, as you continue to build your relationships and your network, remind yourself that “what goes around comes around.” In order to get, you MUST give. Also, your reputation is everything. It’s always much easier for people to lose trust in you than it is to earn it. Happy networking!

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The Wonder That Is ACH

So, you’re trying to line up financing for that luxury car you’ve always wanted; or that new addition on the house your wife has been “gently” reminding you of; or how about the new sports boat to take the kids water skiing every other weekend? Well, in order to make any of these things happen, most of us turn to our friendly local bank to inquire about a loan to turn our dreams into a reality. Your average banker will often tell you that yes, they finance such requests as those mentioned above. All you have to do is fill out an application, then he or she will run your credit report and take a look at your DTI. This is where you stop and think to yourself, “I know what a credit score is, but what is this DTI they are referring to?”

What it is:

DTI stands for debt to income ratio. Okay, so what is debt to income ratio? Debt to income ratio is a personal finance measurement that compares the amount of money you earn to the amount of money you owe your creditors. Banks and lenders calculate how much debt their customers can take on before they may start having financial difficulties. The banks and lenders then use these calculations to set lending amounts before approving any new debt the customer is looking to take on. Preferred maximum debt to income ratios will vary from lender to lender, but you can count on a figure somewhere between 36% and 40% as the norm maximum debt to income ratio.

How to calculate it:

To calculate debt to income ratio, first add up all the payments you make each month to service your debt. Such debt often includes your housing expense (mortgage or rent), credit card payments, car loans, and other debts such as student loans, investment loans, etc. Next, divide your total monthly debt by your gross income per month (before taxes), then multiply that number by 100 to get your debt to income ratio as a percentage.

Example:

Let's say each month your mortgage payment is $1,400, your car payment is $400 and you pay $200 on credit cards. Totaled, your monthly debt commitment is $2,000 per month.

If you make $54,000 a year, your monthly gross income is $54,000 divided by 12 months for a total of $4,500 per month.

Therefore, your debt to income ratio is $2,000 (outstanding monthly debt payments) divided by $4,500 (monthly income), which works out to about .44 (x 100) you get a 44% debt to income ratio.

In this example, a 44% debt to income ratio, by most bank standards, will be considered high; therefore, if this was your situation, you might be declined for a new loan request. In some cases, however, an approval may be granted, but that approval may come at a cost in which you would be asked to pay a higher than market interest rate for your new loan.

So there you have it - a brief insight of what your banker is referring to when he mentions your DTI ratio. It should be noted that by keeping your debt to income ratio low, you can be assured that you can financially handle the debt you have already taken on, and most likely qualify for future credit. Carefully manage that debt and before you know it, you’ll have that new car, home addition or boat you’ve always wanted!

To easily monitor your debt to income ratio, try Mariner360, our free personal management tool that allows you to aggregate all of your accounts so you can see everything in one place.

Be sure to leave a comment below to let us know if you have any further questions about debt to income ratios or if you would like to hear more about this and similar topics.

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What's the first thing that comes to mind when you hear these names: Mike Tyson, Johnny Unitas or Lawrence Taylor? Or how about Evander Holyfield, Latrell Sprewell or Warren Sapp?

If you said that they are famous athletes of past generations, you would be right. If you said a few of them are Hall of Fame athletes in their respective sports, you would also be right. However, in light of what you are about to learn, the correct answer would be, they are all athletes who have filed for bankruptcy at some point in their lives. With that being said, the first question we 9-to-5-ers ask ourselves is, how is it possible that a person with all this fame and fortune can speed through his money as quickly as he gets up and down the court, throws a punch or runs the bases? Well, in the case of the athletes noted above, the reasons can be too numerous to mention.

In the meantime, let's consider a few facts:

• 78% of former NFL players go bankrupt or are under financial stress by the time they have been retired for two years.
• Within five years of retirement, 60% of former NBA players are broke.
• Scottie Pippen, an NBA seven-time All-Star and Hall of Famer, made $120MM at one point in his career, only to retire $9MM in debt.
• Mike Tyson made over $400MM in his prime only to lose it all in a nasty divorce, a Federal rape charge, felony drug possession and several DUI’s, among other not-so-memorable times.

Now, let’s take a step back and explore why these athletes, who often earn millions of dollars in salary and signing bonuses, get to the point of “losing it all” (or in some cases, most of it). Truth is, there can be many reasons, and they can intertwine.

Let’s explore a few possibilities below:

• Athletes often come from less-than-fortunate financial backgrounds and have no experience in handling the “big” money that is thrown their way at such a young age, nor do they take the time to educate themselves on becoming financially savvy. Additionally, they don’t understand the concept of investing their money for retirement.
• Athletes make the mistake of thinking their careers will last forever, hence being employed longer. According to the NFL Players Association, the average career of an NFL player lasts only 3.3 years due in part to injury, retirement or getting cut.
• Living lavish lifestyles. Pro athletes’ fortunes may dwindle down quickly because of expensive houses, cars, jewelry etc. High priced wardrobes, gambling, hanging out in night clubs and drugs can be contributing factors as well.
• Athletes have also been linked to making bad investment decisions. Athletes may be lured into putting their money into tangible investment opportunities such as inventions, nightclubs, car dealerships and the like. These same athletes are considered financial prey to disreputable people who see them as easy targets.
• In some cases, athletes will hire the wrong people as financial advisors to manage their money. Typically they will compound the problem by trusting that same person way too much.

So what lessons can we learn through the misfortunes and actions of the pro-athlete? For starters, it’s a fact that most athletes will not earn the same amount of money in post retirement as they do during their playing days. Hence, their highest earning period is often very short. However, no matter how much money we make or how old we are, we all need to save for retirement, emergencies and times in life when our income of tomorrow isn’t as much as it is today. In short, save money during the prosperous times to be ready for the lean times.

Also, before you hire a money manager or advisor, ask some basic questions and do your research. Is the person certified by a national accrediting organization or firm? Have there been complaints or lawsuits filed against him or her? Do they come with strong references? Most importantly, trust your gut. If they seem “shady”, they probably are.

Don’t invest your money blindly. Avoid risky investments or what may appear to be a risky investment. Remember, investing isn’t the same thing as gambling. You don’t want to be too risky with your money, and there is absolutely no such thing as a “can’t miss” investment.

It’s certainly okay to be loyal and generous to your family and friends. Besides, where would any of us be without them? However, it should not cost you your own personal long-term financial security. Don’t carry more than you can bear. Take care of yourself first and your immediate family second. After that, be careful, and use your judgment before you extend your financial security among others.

(Sources: Sports Illustrated, Kidzworld)

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