One of the things I like most about writing is the feedback I get from readers. Previously, my column “Five Ways to Save $2,500 in 20 Minutes” received enormous positive feedback.

I also received comments from concerned readers who basically said, “Your ideas won’t work for me — what else can I do to stop living from paycheck to paycheck?”

These readers certainly aren’t alone. I completely understand that too many people today simply can’t make ends meet with the salary they’re earning. If that’s the case, it’s time to consider ways to grow your income.

Meet the EgglestonsOver the past year, I’ve had the honor and pleasure of appearing on The Oprah Winfrey Show as an expert money coach for her Debt Diet series. The mission of this life-changing program is to start a worldwide movement helping millions of people get out of debt and finally realize their goal of true financial freedom. On the show, I coached an amazing couple — Dan and Sally Eggleston. Dan and Sally are both elementary school teachers earning a combined income of $92,000, and live in Indiana, where they’re raising three wonderful kids. When I first met them a year ago, they were $100,000 in debt and on the brink of bankruptcy

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Working together, we managed to find ways to cut back on about $500 of unnecessary expenses each month (using what I call the Double-Latte Factor). That was a great start. But due to the huge amount of debt Dan and Sally had accumulated, they had to do more.

In order to make measurable progress toward paying down all their debt, they not only needed to seriously cut back on their expenses, they also required a solid plan to grow their income by at least 10 percent over the year. The Egglestons didn’t just succeed — they crushed my goal by growing their income by over 20 percent!

Grow Your Income, Not Your LifestyleI’m going to coach you through the same steps I used for the Egglestons, but first I want to stress an important point that can make or break your success.Please read closely: Earning more money won’t make a bit of difference if you don’t save it or apply it to paying off your debt. Many people fall into the trap of “the more you make, the more you spend.” It’s a vicious cycle that will keep you living from paycheck to paycheck regardless of how high your salary is. The bottom line is that you’ve got to grow your income, but not your lifestyle if you want to make financial progress.

Now for the five steps the Egglestons followed to grow their income:
1. Change your thinking by asking better questions.Often, when we’re struggling financially we ask the wrong questions. Asking negative questions like why you’re always broke or can’t get a raise can lead to negative answers. If you believe you can’t make more money and consequently do nothing to change, you’ll prove yourself right. If you think it’s just too hard, it will be.But if, instead, you empower yourself by asking, “What can I do to make more?” then you’ll change your life. I asked Dan and Sally, “What can you do to earn more money” They focused on the answer, and together we went to work on their plan.

It took a lot of work (theirs, not mine): Dan picked up an additional coaching job and grew his summer lawn-care business, while Sally picked up summer school teaching jobs and started a mini-eBay business. It wasn’t easy for them, but they did it.

2. Start a side business.

Starting your own side business for extra money doesn’t have to be complicated, nor does it have to take a lot of money.

For instance, a few years ago Dan started his own lawn-care service in the summer months with just a lawnmower. He created some flyers, knocked on a few doors in the neighborhood, and soon enough he was in business. Sally taught herself how to open an eBay seller’s account and in a matter of hours started selling used clothing online.

Depending on your interests and abilities, there are all sorts of things you can do to develop an additional income stream. You can perform a service (like painting houses or editing resumes), make something and market it (like cookies or jewelry), and buy something and resell it (think eBay or Amazon.com).

You can even turn a hobby into a side business — if you cook you can cater, and if you sew you can do tailoring. Be creative and see what else you can come up with.

3. Raise your rates.If you have a business or service you offer right now, raise your rates. It’s the fastest way I know to earn more money, and it helped Dan immediately.He’d been running his lawn-care business for five years, and not once in that time had he raised his fee. I coached him on how to go about increasing his rates without losing business.

He started out by writing a letter to his customers, letting them know how much he appreciated their business and loyalty over the years. He simply shared with them that in order to keep up with the rising cost of gasoline and other expenses, he would be raising his rates by 10 percent this year.

Dan not only retained all of his current customers, but got a few new referrals as well. The business ended up pulling in an additional $2,000 in profits compared to the previous year.

It’s time give yourself a raise. If you think your customers wouldn’t stand for it, consider Dan’s experience. Right now, someone somewhere is raising the price he charges for his services. Why aren’t you?

4. Get extra work — at work.As I mentioned before, Sally and Dan are both teachers. Sally asked her district about teaching summer school and landed a position that earned her an extra $4,200. Dan signed up to coach his school’s baseball team and earned another $4,900.You don’t have to be a teacher to find opportunities like these. Ask about overtime or additional projects that you might be considered for. Can you increase your hours or work an extra shift? You won’t know until you ask.

5. Get a raise.Unfortunately, if you work for a union or government agency, this advice might not apply.But for everyone else, nothing will increase your income faster than getting a raise. Dan recently completed his bachelor’s degree, which earned him a whopping 30 percent increase. While you may not have earned a new degree, getting a raise can still be as simple as asking for one.

Start by preparing yourself for a meeting with your boss. Know exactly how much you want to ask for, and consider putting it in percentage terms. A humble request for a 5 percent raise starting in the next 90 days may be easier for your boss to handle than a demand for $2,500 more per year — even if both amount to the same thing.

Have confidence in yourself. After all, you’re a hard-working, dedicated employee, right? Consider that it will probably cost your employer more to replace you than it would to give you the raise you deserve.

Share Your StoryThe Egglestons’ story has a happy ending. They managed to grow their income by $19,000 in 12 months, and they’ve paid off $26,000 in credit card debt so far and are well on their way to becoming millionaires. Dan and Sally took a seemingly hopeless situation and turned it into a true success story — and you can too.I’d love to hear how you were able to increase your income. Post a comment and share your success. My goal is for this post is to become a positive place for readers to learn from others and grow in the process.

by David Bach – The Automatic Millionaire

Warmer weather is finally here, and so is your chance to take a much-needed vacation and reconnect with those you love. Unfortunately, high temperatures also mean high energy bills, and the Energy Information Administration predicts a 2.6 percent increase in electricity costs this summer.

Overall, the average household spends over $1,600 on fuel and electricity throughout the year. According to the U.S. Department of Energy, more than 50 percent of that is spent on cooling and heating our homes. And on top of that, the Environmental Protection Agency reports that we spend as much as $500 per year on water and sewer bills.

Seven Money- and Energy-Saving Tips

Fortunately, with a few changes you can slash your water and utility bills in half. Here’s my checklist for saving a bundle this summer, while also making your home more environmentally friendly and energy efficient:

1. Get a home energy audit.

This whole-house checkup will uncover the trouble spots in your home, and identify which problems you should correct now in order to save the most money over time.

Call your local utility company to see if they offer a free home energy audit — many do. If not, they’ll likely be able to refer you to professionals who offer this service for a fee, which could range from $100 to $400 depending on where you live and how big your house is.

The investment is well worth it, because over time the inspection will pay for itself with the money you’ll save on your energy bills. For some great tips on hiring an expert, visit the Department of Energy’s web site. If you’re the do-it-yourself type, read their tips on performing an audit on your own.

Once you’ve completed a comprehensive home energy audit, you’re ready to start saving some serious cash.

2. Seal up air leaks.

Sealing air leaks and adding insulation to attics, basements, and crawlspaces is one of the cheapest and quickest energy improvements you can make to your home. A home energy audit is the best way to identify air leaks.

According to the Department of Energy, sealing air leaks will cut your utility bill by over 10 percent, so the average household will save $160 over the course of a year. Visit Energy Star’s web site for some great tips on sealing and insulating.

3. Tune up your air conditioning.

Two-thirds of all U.S. homes have air conditioners, either as individual room units or as a central air system. It’s estimated that air conditioning accounts for about 70 percent of summer energy costs.

Regardless of the type you use in your home, start the summer season by performing some simple maintenance. Simply by cleaning or replacing dirty air filters, the Consumer Energy Center estimates you’ll save 2 percent — or another $32 — on your bill, and you’ll prolong the life of your system as well.

If you use a room unit and it’s more than 10 years old, it’s time to upgrade to a new, energy-efficient model. According to Energy Star, you’ll not only save an average of $25 a year on your electric bill, but you’ll also be using 10 percent less energy.

Before purchasing your new unit, avoid the common mistake of buying one that’s too large. Contrary to what most consumers believe, an oversized air conditioner can actually be less effective rather than providing better cooling. Energy Star can help you figure out the best size for your room.

If you have a central air conditioning system, the Alliance to Save Energy estimates that you’ll save 10 percent a year — or $160 — if you use a programmable thermostat to raise the temperature when you’re not at home.

4. Supplement air conditioning with an attic fan.

An attic fan controlled by a thermostat will lower the temperature of an entire house. Attic fans (also known as whole house fans) are relatively inexpensive at about $250, but when used in place of central air conditioning will lower your energy bill by a whopping 30 percent.

Buy and install an attic fan this summer and you could save about $230 the first year alone. The Department of Energy has more information.

5. Unplug appliances before you go on vacation.

Did you know that appliances that are off but still plugged in continue to use power? It’s true, so before you leave for your summer vacation unplug everything that you can, including your computer, TV, stereo, washer, dryer — even your cable box and cable modem.

Once you’re back home, buy yourself several “smart” power strips for about $35 apiece. Eliminating “idle currents” will save you another 10 percent on your energy bill — another $160!

6. Save with smart landscaping.

The outside area surrounding your home can really make a difference with the temperature indoors. Planting shade trees on the south, east, and west sides of your home will protect it from the hot summer sun.

According to the Alliance to Save Energy, smart landscaping could save you over $100 a year. Join the National Arbor Day Foundation for a $10 fee and you’ll get 10 free shade trees that you can plant this summer.

7. Use water wisely.

According to the Environmental Protection Agency, the average American family of four uses 400 gallons of water each day. About 30 percent of that is for outdoor use, and more than half of that is for watering lawns and gardens. The rest is used to wash our cars and fill our swimming pools.

By being more aware of our water consumption and conservation, the EPA estimates we can save about $132 a year.

Start the summer by maintaining your sprinkler system. Look for leaks and replace cracked heads and valves. Irrigation systems with a rain shutoff device and a soil moisture device ensure you’re not over-watering, which many people tend to do. Watering at night minimizes the evaporation that takes place in the heat of the midday sun.

Also, adjust your lawnmower setting for a height of two to three inches — taller grass needs less water because the soil doesn’t dry out as quickly. Finally, plant shrubs, trees, and flowers that are native to your local climate so they won’t require as much water to keep alive.

If you’re serious about conserving water both outside and inside your home, check out this water usage calculator to help figure out how much water and money you could potentially save.

Don’t Forget Your Tax Credits

It’s entirely possible to keep cool and comfortable this summer without having to worry about an outrageous energy bill. You’ll feel great about doing the right thing for both the environment and your bank account.

Have a great spring and summer, and if you have a money-saving, “go green” tip that you’d like to share, take a moment to post a comment below.

by David Bach – The Automatic Millionaire

Previously I shared with you the story of the McIntyres, a very average couple who despite their very average income became millionaires. By simply watching the small stuff and saving their money automatically, they were able to retire comfortably in their early 50s.

I had some readers ask me, “Well, did they have kids? It must be the lack of children that made it easier for them to be rich!”

In fact, the McIntyres have two children. Both kids went to college and are now debt-free college graduates.

So what’s the secret? How did the McIntyres become self-made millionaires on less than $40,000 a year? It starts with a simple truth.

It’s Not What You Make, It’s What You Spend

How much you earn has almost no bearing on your ability to build wealth. Ask anyone who got a raise last year if their savings actually increased. In almost every case, the answer will be “no.” Why? Because more often than not the more we make, the more we spend!

Jim McIntyre taught me the trick to getting ahead financially was watching the small stuff, the little spending habits we’re better off without.

How important is it to learn this lesson? Take a minute and consider these numbers. An astonishing 70 percent of Americans are living paycheck to paycheck, according to a poll I conducted with Temple University. Thirty percent of those polled had less than $1,000. On average, Americans have less than three months’ worth of expenses in the bank.

The Latte Factor

Most of us don’t think about how we spend our money. If we do, we focus solely on the big-ticket items. Even worse, we don’t realize how much wealth we might have if, instead of dribbling our income away, we invested just a little of it.

By coming to understand what I call the “Latte Factor,” you’re going to become more aware of how much you’re wasting on small things and how to redirect that  money to help you build a fortune. Regardless of your income, you can start to build wealth and, ultimately, more freedom. You can finally start doing what the rich do: Get your money to work for you instead of you working for it!

Before you get up in arms about giving up coffee, let me be clear: The Latte Factor isn’t about coffee at all. It’s about learning how to “find your money” and redirect it toward savings. I came up with the concept about 10 years ago after a woman taking one of my investment courses stopped me in my tracks.

“David your ideas are good in theory, but they don’t have anything to do with reality,” she said.

When I asked her what she meant, she explained that I talked about saving $5 to $10 a day like it was no big deal. Well, for her, she said, it was impossible, because she was living paycheck to paycheck.

We then went through her expenses for a typical day. What did we find? Well, her double non-fat latte was $3.50, non-fat muffin $1.50, juice $3.95, juice boost $.50, PowerBar $1.75 — that was $11.20 already by 11:00 a.m., not including lunch or anything else for the rest of the day!

I pulled out a calculator and showed her that if she could save even $5 a day and put it into a retirement plan, that $5 would become $150 a month, nearly $2,000 a year. Figuring a 10 percent return, the stock market average over the last 50 years, I asked her how much she, being 23, might save by the time she was 65? She guessed $100,000, then $200,000, then $500,000. She was shocked when I told her it was almost $1.2 million. These lattes suddenly looked very expensive.

The point of the Latte Factor isn’t for you to give up coffee at Starbucks. Millions go to Starbucks everyday. I visit them too. The moral is this: You’ve got more money than you think and you’re spending it on lots of small things. Maybe it’s bottled water? Maybe it’s cigarettes?

The Latte Factor is about realizing that you can save more money.

What’s Your Latte Factor?

To reveal your Latte Factor, get a notebook and carry it with you for one day. Write down every penny you spend, including cash, checks, credit, and debit cards. This may seem simple, but this exercise can be life changing. There’s something about seeing in black and white how much you spend and what you spend it on that motivates you to change.

Trust me when I tell you that regardless of the size of your paycheck, you probably make enough to become rich. The first step is finding just $5 to $10 you can cut from daily spending.

Decide right now that you can live on a little less and start to save today. I promise it will be worth it. All those little things add up fast to your financial freedom.

by David Bach – The Automatic Millionaire

The arrival of the new year marks a symbolic time for fresh starts. Many of us take it as an opportunity to set goals, contemplate decisions, and renew commitments. It’s special because of the revitalized sense of hope it brings.

Before you make your New Year’s resolutions for 2007, I’d like to share some thoughts about how it’s never too late to start living a rich life.

The Live Rich Factor
Most people believe that if they just had more money, the things that make them unhappy would disappear and their lives would be better. The truth is that your life can be better without more money. It can be better today, but you need to make some decisions and take some actions.
You don’t need me to tell you what will make you happy — only you know that truth.

I believe each of us has the power to discover our purpose and become joyful in the process of journeying toward that purpose. It’s not easy, however. Nothing important and meaningful ever is.
What you need to do is create what I call the “Live Rich Factor” in your life. I call it this because those who find the purpose that leads them to joy are truly the luckiest people in the world, because they’re living richly.
There are five basic principles involved in creating your Live Rich Factor:
Principle 1: Give Yourself a Break
We all tell ourselves the story of the one that got away. You can’t move forward if you spend time focusing on what you shoulda-woulda-coulda done in 2006 or before. It’s over, and its time to move on. The fastest way I know to do this is to write all of your regrets down on paper.
Make a list of all your personal and financial if-onlys. For example, “If only I had saved more money. If only I hadn’t quit that job. If only I hadn’t taken the job I have.” You get the idea.
After reading the list aloud to yourself, get rid of it. Let it all go by literally burning the list (safely). Now you’re ready for a fresh start in 2008 — a new beginning.
Principle 2: Get Connected with Your Truth
The hardest thing to do is be honest with yourself. Asking yourself some key questions will lead you to some amazing discoveries, and possibly motivate you to do what it takes to create the life you envision for yourself.
I suggest writing your (honest) answers to the following questions in a new journal for the new year:

What makes you happy at work?

What makes you happy at home?

What makes you happy with your friends and family?

What makes you happy when you’re by yourself?

What do you love to do?

What would you do with your life today if you weren’t afraid of failure?

What’s not working in your life?

What are you currently doing that prevents you from experiencing joy?

What’s working in your life?

Who’s not working in your life?

Who in your life is subtracting value from and adding misery to it?

Can you fix any of these relationships, or should you let them go from your life?

What relationships are working in your life?

If we were getting together one year from today, what would have to happen for you to be able to tell me that you now have more joy in your life?

What’s the single most important thing you’ve learned about yourself as a result of answering these questions?
You’ll find that by putting your answers down on paper, they’ll become clear more quickly and the actions you need to take more obvious and easier to initiate.
Principle 3: Stop Judging Yourself
Be nicer to yourself in 2007. Many people talk to themselves in a way they would never accept from a stranger, friend, or loved one. If this describes you, try stopping the negative conversations you have with yourself immediately.
For one week, simply commit to saying “stop it” when you think a negative thought about yourself. If you’re in the habit of saying negative things to yourself, you’ll find this is one of the most difficult exercises you’ll ever do. Carry a notepad with you and make a mark each time you catch yourself thinking negatively. You’ll find that as the days go by, your negative thinking can quickly be reduced.
Principle 4: Stop Judging Others
It’s hard to be joyful when you’re always judging others. In fact, it’s close to impossible. Judging others creates a huge amount of stress in our lives. It affects our marriages and our relationships with our kids as well as the way we relate to friends, co-workers, and society in general.
We’re not here to judge one another.
The next time you find yourself upset at someone or some situation, catch yourself and ask, “Are you judging?” Judging others is often an unconscious habit. But it’s a habit that can be changed the moment you decide to stop doing it.
Principle 5 : Pursue Fun with a Vengeance
It’s OK to pursue fun. It’s what children do. My greatest joy these days is the simple pleasure of playing with my three-year-old son, Jack.
This holiday season with Jack taught me the simple power of pursuing fun — again and again. What was fun for Jack this Christmas? It turns out it wasn’t the Big Wheel that my wife, Michelle, and I stayed up so late building on Christmas Eve. And it wasn’t the Star Wars Lego toy (although he was pretty excited about that).
Instead, what Jack found the most fun was a new game I made up to keep him entertained. The game was called Geronimo — and it involved Jack jumping from the bed onto a stack of pillows yelling “Geronimo!” This silly little game ended up bringing us both hours of fun. The price of the game: nothing. The fun: priceless. And the laughs? Endless.
Why do we stop pursing fun as we get older? Fun shouldn’t be squeezed into a few weeks of vacation each year. And it shouldn’t be squeezed into the last chapter of your life when you “get to” retire. Fun deserves to be a part of your life now — in 2008.
But fun doesn’t just happen. You have to make it a priority in your life or it’ll go missing. Life’s too short to not have it.
So here’s to a fun, happy, and healthy New Year. Cheers!

by David Bach – The Automatic Millionaire

Of all the games the credit card companies play that end up costing you thousands of dollars (late fees, over-limit fees, transfer fees, and so on), it’s always been the interest rate game that hurt the most — until now.

There’s a new, completely legal game they’re playing, and it can literally wipe you out financially if you’re not careful.

The Universal Default Clause
If you own a credit card, you know by now that if you’re late with a payment the credit card company will charge you a late fee in addition to raising your interest rate. But did you know that they can raise your interest rate if you’ve made a late payment on any of your other cards, including those issued by other companies?
Not only that, but your interest rates can skyrocket to 30 percent or more if you make a late payment on your car loan, mortgage, or even your phone bill!
“How can that be legal?” you may ask. The answer is found in the fine print of your credit card agreement, and it’s called a universal default clause. According to the Institute of Consumer Financial Education, currently almost 40 percent of credit card issuers apply this policy to their customers.

A Late Payment ‘Trigger’
Generally, a universal default clause states that a creditor reserves the right to penalize you with an increased interest rate if you’re late — that is, in default — of a payment to any other creditor. They justify this practice because, in theory, if you pay any of your creditors late, you pose a greater credit risk and are less likely to pay your debt.

Your creditors also have the right to routinely monitor your credit file. So a creditor with a universal default clause will be watching — and waiting.
Let’s say your Visa card has a universal default clause. Any late payment — whether it’s on your utility bill, home equity loan, or Macy’s credit card — acts as a “default trigger” allowing the bank that issued the Visa card to double or even triple your interest rate overnight. Your all-important credit score will be hurt as well.
According to a study by the nonprofit advocacy and education group Consumer Action, the top three default triggers that cause your interest rates to spike are a decline in credit score, paying your mortgage late, and paying your car loan late.

Other Triggers to Worry About
Under the universal default clause, your interest rates can be increased for several other reasons, including exceeding your credit limit, bouncing a check, having too much debt, having too much credit, getting a new credit card, applying for a car loan, and applying for a mortgage loan.

How does this affect your financial future? Take a look at the numbers. Let’s say you’re an average American household, with $8,000 of credit card debt. Assuming you make no additional purchases on your card, you have a 9 percent interest rate, and you make the minimum monthly payment, it’ll take you 218 months (18 years) to pay off your debt and you’ll end up paying $3,334 in interest.

Now let’s assume that for whatever reason you were late one month with your car payment. This late payment triggers the universal default clause with your credit card issuer, and now your penalty rate gets increased to 24 percent (the average default rate in 2005). It’ll now take you 679 months (56 years) to pay off your credit card debt, and get this — you’ll pay $30,813 in interest.

Staying Ahead of the Clause
Here are six ways to protect yourself from interest rate hike triggers:

1. Stay away from credit cards with a universal default clause.
If you’re looking to open a new credit card account, be sure to choose one without a universal default clause. This means you have to truly read the fine print. If you’re confused by the fine print (as many are), call the credit card company and ask what specific circumstances will affect your interest rate.
I read recently that Capital One cards don’t have a universal default clause (although you should double-check before applying), and Citi has dropped its universal default policy as well. In addition, sites like CardWeb.com, Bankrate.com, and LowerMyBills.com let you compare credit card offers, so visit them before you apply.

2. Know your current obligations.
Check your current statements and credit card agreements to find out your current interest rates, and to identify which cards have a universal default clause that you weren’t aware of until now. Again, if you’re uncertain after reading the fine print, call your credit card company.
Consider transferring your balance from a card that has the universal default clause to one of your cards that doesn’t. But don’t rush to cancel the card altogether, because it could have a negative effect on your credit score.

3. Run your credit report.
Not only do you need to know exactly what your current interest rates are, you also need to know exactly what’s on your credit report. Visit Freecreditreport.com or myFICO to order your credit report and credit score today.

4. Pay your bills on time.
According to the American Bankers Association, late payments for most types of consumer loans were on the rise during the third quarter of 2006. If you’re having trouble with your credit card payments, at the very least strive to make your minimum payment on time.

5. Be proactive — call your lender for relief.
If you’re struggling to make monthly payments on your other bills, like utilities, car payments, or mortgage payments, call your lender to see what options they might be able to offer you. They might be able to adjust your monthly payments so that they’re more manageable.
Your goal is to protect your credit report and credit score with a consistent record of on-time payments.

6. Fight back for your money — write your local legislator.
Right now, there are amendments to the Truth in Lending Act that, if passed, would prohibit many unfair practices within the credit card industry — including the universal default clause.

As a consumer, you can take action by letting Congress know that you want laws to protect your rights. For more information on how you can be heard, visit Consumer Action’s web site.

As I write this, Congress is holding hearings to discuss the abusive and deceptive practices of the credit card industry.

A Good Night’s Sleep
Obviously, what you don’t know really can hurt you. Check today and see if you have the universal default clause on your credit cards.

If you do, be careful to stay on top of your debt. Better yet, find a credit card that doesn’t have the clause — you’ll sleep better at night.

by David Bach – The Automatic Millionaire