For those that have not had the pleasure of reading The Richest Man in Babylon I highly recommend it. The book is extremely simplistic in it's approach to wealth building, but sometimes the simplest things are the most effective. The book was first published in 1926 and was written by George S Clason. It is 160 pages of pure joy. The book has several parables that tell the stories of various people in ancient Babylon. The text is written in the form of the bible and this should be the bible by which all junior wealth building followers should worship.
The basic premise of the book is pay yourself 10% of your income. No matter what happens keep this 10% every pay check and invest it. That money will become your slave and bare children. Those children will also become your slaves and so on and so on. Original, "No". Complex, "No". Highly effective, "YES!!!". This should be mandatory yearly reading in every middle school / high school in America.
Using an ancient civilization and writing in the 1920's Clason makes a balls on statement about wealth and society. He basically states that no society can be rich and prosperous unless it's people are also rich and prosperous. With our current debt ridden, recession bound economy could anything else be more true.
Below is the table of contents along with the Seven Cures for a Lean Purse and The Five Laws of Gold. Please drink from this well of financial wisdom.
Table of Contents
The Man Who Desired Gold
The Richest Man In Babylon
Seven Cures for a Lean Purse
Meet the Goddess of Good Luck
The Five Laws of Gold
The Gold Lender of Babylon
The Walls of Babylon
The Camel Trader of Babylon
The Clay Tablets from Babylon
The Luckiest Man in Babylon
An Historical Sketch of Babylon
The 5 Laws of Gold
Gold cometh gladly and in increasing quantities to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.
Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
Gold clingeth to the protection of the cautious owner who invest it under the advice of men wise in its handling.
Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.
The 7 Cures to a Lean Purse
FIRST CURE: Start thy purse to fattening.
The stream of money that flows into and out of one's life is immense. Wealth and security can be secured from it, but only if portions of that stream are diverted. Time and again, the book's "enlightened" characters stress saving at least ten percent of your income every month, without fail. Accomplish this by setting aside that ten percent before all other expenses are considered.
"But when I began to take out from my purse but nine parts of the ten I put in," Arkad said, "it began to fatten. So will thine."
SECOND CURE: Control thy expenditures.
The amount of money a person makes is important, but it is secondary to the degree to which that person controls his expenses. Budget and plan your expenses earnestly. Demand value for the dollars you spend.
"That what each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary," Arkad stated. "Confuse not the necessary expenses with thy desires."
THIRD CURE: Make thy gold multiply.
Three words: interest, interest, interest. Take care to see that all saved monies are kept in the highest-yield interest-bearing accounts available. If you have the experience and education to do so, invest a portion of your money by other means, always striving to create a reasonable risk/reward ratio.
"A man's wealth is not in the coins he carries in his purse; it is the income he buildeth. That is what thou desireth: an income that continueth to come whether thou work or travel."
FOURTH CURE: Guard thy treasures from loss.
Forget about gunning for those astronomical returns promised by market gurus and their "hot tips." And don't bother with those wacky startup businesses you see boxed in the classified ads, either. If you're going to take risks and invest your money, then make sure you have the education to know how to guard and protect your assets. Only you can keep your best interests at the forefront. Your savings control your future; treat them like it.
"The first sound principle of investment is security for thy principal. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own desires to make wealth rapidly."
FIFTH CURE: Make of thy dwelling a profitable investment.
In most cases, home ownership — even when financing is included — is preferable to renting. At some point, the mortgage payments will end, and ownership will be achieved. There is no ownership for the renter ... ever.
"Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires."
SIXTH CURE: Insure a future income.
The future cannot be known, but preparations can be taken to assure a certain level of financial safety. Whether this is done via a strict savings plan, outside insurance, or a combination of both, one must be careful to provide for the wellness of himself and his loved ones in later years. Disability and untimely death have caught and ruined families and their finances since time immemorial.
"No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and investments may be."
SEVENTH CURE: Increase thy ability to earn.
Last among Clason's "cures" is action taken to increase one's earnings. Acquire education, experience, and confidence in yourself, and use these things to improve your income. You might begin a second, part-time job, or simply freelance your abilities in your spare time. Whatever you do, never underestimate the opportunity to turn a favorite hobby or skill (woodworking, photography, home decorating, cooking, etc.) into extra income.
"The more of wisdom we know, the more we may earn. The man who seeks to learn more of his craft shall be richly rewarded. Cultivate thy own powers, study and become wiser, become more skillful, and act as to respect thyself."
Prosper.com
Sunday, March 16, 2008
Saturday, March 15, 2008
Business Card Fiasco
Whenever you meet a subject that you wish to do business with, you want to leave them with something to remember you by. In the beginning, a punch in the eye or humping the subject's leg had proven to be affective for aiding the subject remembering you, but it has been shown to be counter-productive in generating any actual business with that subject. As an alternative, the ancients created what we call today: the business card.
The basic concept of the business card is simple. Take some information about yourself that would aid a person in doing business with you and throw it on a card. Hand said card to subject and wait for them to contact you. Now there is etiquette to giving out business cards, multiple types of paper used, double-sided and a slew of other choices that one must consider when creating / using business cards.
Let me re-create a business card snafu that we just recently encountered. Just like all new business owners, we were excited to get our business cards and begin giving them out. We searched the government incorporation office for Florida and discovered a name that we wanted to use. We ordered the cards first anticipating that it would take the longest to create (since you can file a corporation online in Florida).
We went to Vistaprint and created 500 cards with the name and information required along with a logo that we created from scratch. All this cost us about $50. Shortly thereafter, we decided that the name we chose was limited in nature and we needed to expand the name description to better suit our purposes. Generally, we will doing vending and real estate under this LLC so we didn't want to break them up into separate entities. The initial business name included the vending in it which we didn't think would be very professional looking as we presented the cards to real estate folks.
We still got the cards ordered of course even though they were totally wrong at this point. When we looked at the cards we realized that the design was all wrong. The logo was too big and used up too much space. Because of this, the writing on the cards was too small and difficult to read.
Keeping these lessons in mind we created a new business card implementing our changes. So we returned to Vistaprint and created a 1,000 cards knowing this was going to be the right card for us. This cost us about $65. Well, the lesson here is don't order cards until you get verification that the business name is truly available from the state. We had looked online and saw that our new name had been used in the past, but currently was not in use. We saw that and thought incorrectly; that we could use that name for ourselves. We later discovered that a new law had just passed the summer of 2007 that said you could no longer immediately utilize these previously used names without jumping through some hoops. We guessed that it would take some time to jump through these hoops so we passed on that name and chose one that had never been used.
You guessed it, that meant we had to create another logo and more business cards. This time we waited to get confirmation from the state before we actually ordered the cards. So tack on another $65 for these 1,000 cards for a total cost of $180. In the grand scheme of things this truly is not that much money, but it is a cost that we could have avoided if we went about things differently.
So, just remember to get verification from the state first and create your business cards utilizing the appropriate techniques. Follow this link to 9 business card mistakes: http://www.businessknowhow.com/marketing/business-card.htm and good luck.
The basic concept of the business card is simple. Take some information about yourself that would aid a person in doing business with you and throw it on a card. Hand said card to subject and wait for them to contact you. Now there is etiquette to giving out business cards, multiple types of paper used, double-sided and a slew of other choices that one must consider when creating / using business cards.
Let me re-create a business card snafu that we just recently encountered. Just like all new business owners, we were excited to get our business cards and begin giving them out. We searched the government incorporation office for Florida and discovered a name that we wanted to use. We ordered the cards first anticipating that it would take the longest to create (since you can file a corporation online in Florida).
We went to Vistaprint and created 500 cards with the name and information required along with a logo that we created from scratch. All this cost us about $50. Shortly thereafter, we decided that the name we chose was limited in nature and we needed to expand the name description to better suit our purposes. Generally, we will doing vending and real estate under this LLC so we didn't want to break them up into separate entities. The initial business name included the vending in it which we didn't think would be very professional looking as we presented the cards to real estate folks.
We still got the cards ordered of course even though they were totally wrong at this point. When we looked at the cards we realized that the design was all wrong. The logo was too big and used up too much space. Because of this, the writing on the cards was too small and difficult to read.
Keeping these lessons in mind we created a new business card implementing our changes. So we returned to Vistaprint and created a 1,000 cards knowing this was going to be the right card for us. This cost us about $65. Well, the lesson here is don't order cards until you get verification that the business name is truly available from the state. We had looked online and saw that our new name had been used in the past, but currently was not in use. We saw that and thought incorrectly; that we could use that name for ourselves. We later discovered that a new law had just passed the summer of 2007 that said you could no longer immediately utilize these previously used names without jumping through some hoops. We guessed that it would take some time to jump through these hoops so we passed on that name and chose one that had never been used.
You guessed it, that meant we had to create another logo and more business cards. This time we waited to get confirmation from the state before we actually ordered the cards. So tack on another $65 for these 1,000 cards for a total cost of $180. In the grand scheme of things this truly is not that much money, but it is a cost that we could have avoided if we went about things differently.
So, just remember to get verification from the state first and create your business cards utilizing the appropriate techniques. Follow this link to 9 business card mistakes: http://www.businessknowhow.com/marketing/business-card.htm and good luck.
Tuesday, March 11, 2008
Business Entity
Hope for the best but plan for the worst is a motto that has been handed down form generation to generation. This applies to all aspects of one's life and in today's litigious society rings true more than ever. As one goes into any business venture unfortunately one of the main questions is, "Where is my liability and how can I protect myself in case I get sued". Hand and hand with this question is, "What business entity gives me the largest tax break as I report my income". Unfortunately the answer to these questions are often and different since no one business entity provides the best of both worlds. If this was the case, only one entity would exist and all of the others would go extinct like the dodo.
My intent is not to give a lecture on the various types of business entities and what their pluses and minuses are. That is indeed a subject that one needs to obtain a base of knowledge about, but that would be a several page report giving only bullet points on these issues. If you want to learn further about these issues I suggest reading Asset Protection 101 from the Trump University. Don't worry the book is not written by Donald Trump it simply uses his name as an attention grabber so you take notice of the book. The book delves into several topics involving some tax and law suit protection issues. The book is as titled "101" meaning these are but the basic information about asset protection, but believe me the complex stuff is probably way above the layman's head. That's why lawyers and CPA's go to school for many years to grasp the intricacies of the topics.
I will basically say this when it comes to picking a business entity. Never ever do a sole proprietorship. It has no liability protection meaning creditors and lawyers can easily gain access to your own personal assets and it offers no tax benefits. S corporations offer some good benefits and appear to work out well if you are going to have actual paid employees. Since it is a corporation though it does have all of the requirements of filing income statements once a year. I chose a Limited Liability Company (LLC). This gives you the asset protection that is needed, but it is a pass through tax entity which means you simply take your income from that business and add it to your own individual taxes. You still have to register the company once a year, but that is simply paying the state registration fee and giving them the basic demographics of the business (name / address / registered agent). One word of caution about setting up a LLC with a single member. LLC's are a state created entity and are not controlled by the federal government. Since LLC's are relatively new, the Fed still recognizes any that are controlled by a single person as a sole proprietorship. While initially this may not be a big deal, the author of Asset Protection 101 did mention this could create a loop hole the creditors and lawyers can exploit to show your LLC is in fact a sole proprietorship.
Regardless of which entity you choose (remember never choose a sole proprietorship) you have to ensure that you establish the business accordingly so that creditors and lawyers cannot pierce the corporate veil. This simply means that they can show that your business is simply a hollow shell that you use as a front to conduct business in your own interest.
One of the ways they do this is by showing a co-mingling of funds. This means that you have to open a separate banking account for the business and document why and how you distribute funds to yourself from this account. I chose to open a small business checking account with Wachovia Bank. This account is free which is good feature and has several benefits. See the list below which I have copied from their website.
Benefits of Business Checking
No monthly maintenance fee with minimum or average balance requirement
Up to 150 no-charge transactions per month, including checks paid, deposits, deposited items and ACH debits and credits
No charge for up to $5,000 in cash deposits per month
Free Wachovia Business Online, including Online BillPay, Online Statements, and Balance Alerts
Free Bad Check Recovery
Free Visa Business Check Card with Wachovia Possibilities RewardsSM
All Business Check Card transactions are free with no monthly limit
Check Safekeeping Statement or Check Image Statement at no charge
Unlimited use of Wachovia ATMs
Overdraft protection available
Funds in Business Checking are combined with other accounts of the same entity and insured by the FDIC up to $100,000
The one possible draw back for this account is the $5,000 maximum monthly deposit allowance. I'll see if that is an issue and look at other possibilities accordingly. I am also opening a business savings account with ING Direct. They offer one of the best APY in the business (currently 3.4%) and I have been very pleased with the personal accounts that I already have with them.
With these accounts in place and my LLC certificate in hand I am looking forward to starting my business venture with a solid foundation of asset protection.
My intent is not to give a lecture on the various types of business entities and what their pluses and minuses are. That is indeed a subject that one needs to obtain a base of knowledge about, but that would be a several page report giving only bullet points on these issues. If you want to learn further about these issues I suggest reading Asset Protection 101 from the Trump University. Don't worry the book is not written by Donald Trump it simply uses his name as an attention grabber so you take notice of the book. The book delves into several topics involving some tax and law suit protection issues. The book is as titled "101" meaning these are but the basic information about asset protection, but believe me the complex stuff is probably way above the layman's head. That's why lawyers and CPA's go to school for many years to grasp the intricacies of the topics.
I will basically say this when it comes to picking a business entity. Never ever do a sole proprietorship. It has no liability protection meaning creditors and lawyers can easily gain access to your own personal assets and it offers no tax benefits. S corporations offer some good benefits and appear to work out well if you are going to have actual paid employees. Since it is a corporation though it does have all of the requirements of filing income statements once a year. I chose a Limited Liability Company (LLC). This gives you the asset protection that is needed, but it is a pass through tax entity which means you simply take your income from that business and add it to your own individual taxes. You still have to register the company once a year, but that is simply paying the state registration fee and giving them the basic demographics of the business (name / address / registered agent). One word of caution about setting up a LLC with a single member. LLC's are a state created entity and are not controlled by the federal government. Since LLC's are relatively new, the Fed still recognizes any that are controlled by a single person as a sole proprietorship. While initially this may not be a big deal, the author of Asset Protection 101 did mention this could create a loop hole the creditors and lawyers can exploit to show your LLC is in fact a sole proprietorship.
Regardless of which entity you choose (remember never choose a sole proprietorship) you have to ensure that you establish the business accordingly so that creditors and lawyers cannot pierce the corporate veil. This simply means that they can show that your business is simply a hollow shell that you use as a front to conduct business in your own interest.
One of the ways they do this is by showing a co-mingling of funds. This means that you have to open a separate banking account for the business and document why and how you distribute funds to yourself from this account. I chose to open a small business checking account with Wachovia Bank. This account is free which is good feature and has several benefits. See the list below which I have copied from their website.
Benefits of Business Checking
No monthly maintenance fee with minimum or average balance requirement
Up to 150 no-charge transactions per month, including checks paid, deposits, deposited items and ACH debits and credits
No charge for up to $5,000 in cash deposits per month
Free Wachovia Business Online, including Online BillPay, Online Statements, and Balance Alerts
Free Bad Check Recovery
Free Visa Business Check Card with Wachovia Possibilities RewardsSM
All Business Check Card transactions are free with no monthly limit
Check Safekeeping Statement or Check Image Statement at no charge
Unlimited use of Wachovia ATMs
Overdraft protection available
Funds in Business Checking are combined with other accounts of the same entity and insured by the FDIC up to $100,000
The one possible draw back for this account is the $5,000 maximum monthly deposit allowance. I'll see if that is an issue and look at other possibilities accordingly. I am also opening a business savings account with ING Direct. They offer one of the best APY in the business (currently 3.4%) and I have been very pleased with the personal accounts that I already have with them.
With these accounts in place and my LLC certificate in hand I am looking forward to starting my business venture with a solid foundation of asset protection.
Saturday, February 16, 2008
Bulk Candy Vending
The search for passive income has lead me to look at bulk candy vending. To what degree this is considered passive is highly debated. It involves active participation in multiple phases of the investment, but it does allow you to make money while you are not present. The returns on your investment are actually quite impressive. Depending on the type of candy you sell, you can get a 150 – 300% net return.
First, comes the search for the right type of machine to use. It is almost a given around the bulk vending industry that the triple headed model be utilized rather than the single or double just so you can maximize your option selection while limiting the space required for placement. The next consideration is which brand to use. Just like anything else the competition for vending machines is fierce. I don’t know the exact the numbers for brands out there, but I know it has to be over at least 40. They all have their own little subtleties that make them unique, but in essence they work the same way. The value of the machines new can run from $120 - $400 dollars. Some have plastic internal parts and others are all metal. The argument for which is better both have valid points. The metal ones are sturdier, but people argue they more easily damage product and can corrode. The plastic ones are more prone to break (especially the coin handle), but they don’t have any of the problems associated with the metal versions.
In my quest to find the right machine for me I went to Craig’s List and searched the Tampa Bay area. I found that Craig’s List was a good choice for purchases like this. They’re a good source for items that are bulky and would require expensive shipping. For over 2 months I checked frequently to find the deal that I thought was best for me. The bulk vending business has a huge turnover of get rich quick schemes from the latest batch of dreamers that enters the business thinking it takes no work and quickly discovers that location placement is harder than they think. I looked for used machines that possibly already had some placements to purchase. I eventually found an ad for 15 machines that were not placed. They were Vendstar3000 triple headed machines and they are the all plastic variety previously discussed. I did some research on these machines at the company’s website. They sell 30 machine packages for $10,000 dollars, that’s right $10,000. That gets you an average price of $330 per a machine with taxes and shipping included. The ad had the 15 machines listed for $1150. I had watched this ad for about a month and the owner had originally posted it for $2000 and had slowly come down to the current price. I offered him $900 and we eventually settled at $975. That gave me a price per unit of $65 dollars which was much more to my liking than the original new purchase price from the company.
Once I received the machines I placed them in my garage which luckily had the room to house them until I could find a business to place them with. The next decision is what types of locations to place the machines with. I figured high traffic, high wait time locations would be best. I also wanted places that have families and youths patronizing the establishments. My first go around will include restaurants and garages. People will always have to eat and now-a-days no one works on their own car so I figure these two types of places will be in high supply.
The trick is actually getting the placement in one of these establishments. My marketing plan is this. I want to first approach the restaurants and offer to purchase gift cards for the business if they allow a machine in their lobby. I will also try and market their business via flyers on my other machines at different locations. Hopefully this gift card will supply the carrot that will allow the garages to let me place the machines with them. Then I will create a contest where the location with the highest sales will get the gift card. If need be I may try the same reverse marketing flyers for the garages in the restaurants. In the end this should create a win-win-win situation.
The restaurants get free advertising and guaranteed business (from the gift cards). The garages get a chance to win the gift cards with no cost to them and I get my placements. The restaurants should easily support the gift cards with the proceeds that I get from the machines placed in their business. This way they are actually paying for their own gift cards and all I have to do is fill the machines.
At this time, I have not yet had a chance to implement this strategy. I will follow-up with how this works at a later time.
First, comes the search for the right type of machine to use. It is almost a given around the bulk vending industry that the triple headed model be utilized rather than the single or double just so you can maximize your option selection while limiting the space required for placement. The next consideration is which brand to use. Just like anything else the competition for vending machines is fierce. I don’t know the exact the numbers for brands out there, but I know it has to be over at least 40. They all have their own little subtleties that make them unique, but in essence they work the same way. The value of the machines new can run from $120 - $400 dollars. Some have plastic internal parts and others are all metal. The argument for which is better both have valid points. The metal ones are sturdier, but people argue they more easily damage product and can corrode. The plastic ones are more prone to break (especially the coin handle), but they don’t have any of the problems associated with the metal versions.
In my quest to find the right machine for me I went to Craig’s List and searched the Tampa Bay area. I found that Craig’s List was a good choice for purchases like this. They’re a good source for items that are bulky and would require expensive shipping. For over 2 months I checked frequently to find the deal that I thought was best for me. The bulk vending business has a huge turnover of get rich quick schemes from the latest batch of dreamers that enters the business thinking it takes no work and quickly discovers that location placement is harder than they think. I looked for used machines that possibly already had some placements to purchase. I eventually found an ad for 15 machines that were not placed. They were Vendstar3000 triple headed machines and they are the all plastic variety previously discussed. I did some research on these machines at the company’s website. They sell 30 machine packages for $10,000 dollars, that’s right $10,000. That gets you an average price of $330 per a machine with taxes and shipping included. The ad had the 15 machines listed for $1150. I had watched this ad for about a month and the owner had originally posted it for $2000 and had slowly come down to the current price. I offered him $900 and we eventually settled at $975. That gave me a price per unit of $65 dollars which was much more to my liking than the original new purchase price from the company.
Once I received the machines I placed them in my garage which luckily had the room to house them until I could find a business to place them with. The next decision is what types of locations to place the machines with. I figured high traffic, high wait time locations would be best. I also wanted places that have families and youths patronizing the establishments. My first go around will include restaurants and garages. People will always have to eat and now-a-days no one works on their own car so I figure these two types of places will be in high supply.
The trick is actually getting the placement in one of these establishments. My marketing plan is this. I want to first approach the restaurants and offer to purchase gift cards for the business if they allow a machine in their lobby. I will also try and market their business via flyers on my other machines at different locations. Hopefully this gift card will supply the carrot that will allow the garages to let me place the machines with them. Then I will create a contest where the location with the highest sales will get the gift card. If need be I may try the same reverse marketing flyers for the garages in the restaurants. In the end this should create a win-win-win situation.
The restaurants get free advertising and guaranteed business (from the gift cards). The garages get a chance to win the gift cards with no cost to them and I get my placements. The restaurants should easily support the gift cards with the proceeds that I get from the machines placed in their business. This way they are actually paying for their own gift cards and all I have to do is fill the machines.
At this time, I have not yet had a chance to implement this strategy. I will follow-up with how this works at a later time.
Saturday, February 9, 2008
Passive Income defined
The definition of passive income is different for different people. The layman may consider it a monetary earning for the least amount of work provided. Many examples can be found from dividend stock purchases, where the dividend received is the passive income. To networking where you get paid when people purchase / click thing from your site and the merchandiser pays you percentage accordingly.
The IRS has a different and precise definition for what passive income is. This is the direct wording from their website*, "Passive income can be generated only by a rental or a business in which the taxpayer does not materially participate." So by this definition one can only consider something passive if it fits the rental aspect (residential / commercial / storage) or if they are not an active participant which consists of being a limited partner in some type of business venture.
I make this distinction now just to limit any future confusion as I discuss various types of passive income / wealth building techniques. For the most part when I discuss passive income I will be talking about the layman's definition. This will help me try to maximize my time and my investment returns accordingly.
*http://www.irs.gov/businesses/small/article/0,,id=146833,00.html
The IRS has a different and precise definition for what passive income is. This is the direct wording from their website*, "Passive income can be generated only by a rental or a business in which the taxpayer does not materially participate." So by this definition one can only consider something passive if it fits the rental aspect (residential / commercial / storage) or if they are not an active participant which consists of being a limited partner in some type of business venture.
I make this distinction now just to limit any future confusion as I discuss various types of passive income / wealth building techniques. For the most part when I discuss passive income I will be talking about the layman's definition. This will help me try to maximize my time and my investment returns accordingly.
*http://www.irs.gov/businesses/small/article/0,,id=146833,00.html
Tuesday, January 29, 2008
A Break from the Norm
When faced with extreme circumstances, most times the proper response is also extreme in nature. An example of an extreme situation would be a married couple that has 2 kids, 1 parent working and a buttload of debt. This is the situation that stared me in the face 1 1/2 years after our first child was born. The injuries were all self-inflicted and we really have no one to blame but ourselves.
This type of extreme financial situation could result in a multitude of responses. The path most commonly travelled would be doing nothing and hoping the situation will get better on its own. I've never been one that listed divine intervention as a high probability on my list of beliefs. I don't like the feeling of depending on someone else to fix my problems even if that person is the big guy himself. And the thought that God helps those who helps themselves still relies on the person in jeopardy do something to correct the situation.
First, I did a lot of reading on the topics of personnel finance and debt reduction from various authors. While all of them had good points separately no one person had an overall plan that I seemed to agree with. I took some basic concepts from most the plans and rolled them into a program that worked for us.
Part of this plan was to no longer use credit or debit cards to pay for things. While this seems like common sense the idea itself is much more powerful than I could believe. We used to always pay for everything on credit card. I thought I was being smart with my cash back American Express card, but slowly the debt owed would creep up. I would then pay the balance off via our HELOC (home equity line of credit) and start the process all over again. No matter how disciplined you may think you are with credit cards, you're never as disciplined with them as you would be when you got zero cash on you. When the money is gone you're done buying, period. This simple move has saved us so much money that it's ridiculous. And don't worry you will make do. Sure you may not get everything you want, but you'll manage to buy everything you need.
Next, we cancelled our subscription to cable and land line phones. I'm sure you're probable freaking out now and think I've gone too far but it really isn't that bad. The phone was the easiest to do since we both have cell phones. We're with Alltel and have their favorites plan. So each of us have 5 favorites that we can call for free. That includes land lines or other cell providers. Of course we have unlimited calls within Alltel's network also. The plan is 1000 whenever minutes so really this has not been a problem at all.
Now the more extreme of the two measures. Getting unplugged from cable has been a blessing in my mind. Now I feel I have more time to be productive and I don't feel like I have to watch X amount of shows just because they are on every week. In the grand scheme of things does it really matter what's happening on Lost, Survivor or Grey's Anatomy. These are all things that drain us of our most prized commodity, TIME. I like to think of things now as a historian. Twenty years from now am I going to look back fondly at some BS television show with characters whose names I can't remember and think WOW that episode changed my life? Or am I going to look back and remember playing with my children and bettering myself so that I can afford the nice vacations that will always bring fond memories and pictures to enjoy for years to come.
If that explanation doesn't make you want to kick cable then think of this. All of the major channels (ABC, CBS, NBC, and FOX) have online versions of their most popular shows. So you can still watch the above listed shows on your own schedule.
We of course kept the internet since this is our lone source of communication with the outside world. Plus the internet is the great equalizer in the financial struggle to gain more and pay less. There is so much information on the internet that can help you better yourself that it is truly an investment and not just a waste like cable.
Lastly we have shifted our money to basically an all online holding. We still kept our brick's and mortar bank (B of A), but we keep the main holdings in ING Direct. They have a very decent savings account rate (about 4%) and they just recently opened an online checking account called Electric Orange. The great thing about this account is that it is also an interest earning account (about 3%). While 3% isn't huge it's far better than the 0% you receive from the classic banks.
The brick's and mortar bank allows us to perform simple deposits into our account and we can then transfer the money electronically to our ING account and distribute it accordingly. I also had my work checks changed to automatically deposit into ING so the money gets in there with as little hassle as possible. If you are concerned about having instant access to your online money don't be. ING is with the allpoint system and allow free transactions at any of these types of ATMS. I searched around my house and there was approximately 60 of these allpoint ATMS in my area. So getting money is still a snap. The only problem with the ING account is the only way you can deposit real money (cash or checks) is by snail mailing the item to them. That's why we kept the brick and mortar bank account open yet to help with these infrequent types of deposits.
We've implemented these changes now for approximately 2 months. So far we have saved about $150 dollars from our cable/phone bill and we've made about $12 from our online interest bearing accounts. While these are not huge sums of money take that amount out for a year and the total is $972 dollars. Who amongst us wouldn't like an extra $1000 dollars for doing nothing?
I hope this has helped in you're search to build financial independence and if you have any further ideas please don't hesitate to post a comment or send me an email.
This type of extreme financial situation could result in a multitude of responses. The path most commonly travelled would be doing nothing and hoping the situation will get better on its own. I've never been one that listed divine intervention as a high probability on my list of beliefs. I don't like the feeling of depending on someone else to fix my problems even if that person is the big guy himself. And the thought that God helps those who helps themselves still relies on the person in jeopardy do something to correct the situation.
First, I did a lot of reading on the topics of personnel finance and debt reduction from various authors. While all of them had good points separately no one person had an overall plan that I seemed to agree with. I took some basic concepts from most the plans and rolled them into a program that worked for us.
Part of this plan was to no longer use credit or debit cards to pay for things. While this seems like common sense the idea itself is much more powerful than I could believe. We used to always pay for everything on credit card. I thought I was being smart with my cash back American Express card, but slowly the debt owed would creep up. I would then pay the balance off via our HELOC (home equity line of credit) and start the process all over again. No matter how disciplined you may think you are with credit cards, you're never as disciplined with them as you would be when you got zero cash on you. When the money is gone you're done buying, period. This simple move has saved us so much money that it's ridiculous. And don't worry you will make do. Sure you may not get everything you want, but you'll manage to buy everything you need.
Next, we cancelled our subscription to cable and land line phones. I'm sure you're probable freaking out now and think I've gone too far but it really isn't that bad. The phone was the easiest to do since we both have cell phones. We're with Alltel and have their favorites plan. So each of us have 5 favorites that we can call for free. That includes land lines or other cell providers. Of course we have unlimited calls within Alltel's network also. The plan is 1000 whenever minutes so really this has not been a problem at all.
Now the more extreme of the two measures. Getting unplugged from cable has been a blessing in my mind. Now I feel I have more time to be productive and I don't feel like I have to watch X amount of shows just because they are on every week. In the grand scheme of things does it really matter what's happening on Lost, Survivor or Grey's Anatomy. These are all things that drain us of our most prized commodity, TIME. I like to think of things now as a historian. Twenty years from now am I going to look back fondly at some BS television show with characters whose names I can't remember and think WOW that episode changed my life? Or am I going to look back and remember playing with my children and bettering myself so that I can afford the nice vacations that will always bring fond memories and pictures to enjoy for years to come.
If that explanation doesn't make you want to kick cable then think of this. All of the major channels (ABC, CBS, NBC, and FOX) have online versions of their most popular shows. So you can still watch the above listed shows on your own schedule.
We of course kept the internet since this is our lone source of communication with the outside world. Plus the internet is the great equalizer in the financial struggle to gain more and pay less. There is so much information on the internet that can help you better yourself that it is truly an investment and not just a waste like cable.
Lastly we have shifted our money to basically an all online holding. We still kept our brick's and mortar bank (B of A), but we keep the main holdings in ING Direct. They have a very decent savings account rate (about 4%) and they just recently opened an online checking account called Electric Orange. The great thing about this account is that it is also an interest earning account (about 3%). While 3% isn't huge it's far better than the 0% you receive from the classic banks.
The brick's and mortar bank allows us to perform simple deposits into our account and we can then transfer the money electronically to our ING account and distribute it accordingly. I also had my work checks changed to automatically deposit into ING so the money gets in there with as little hassle as possible. If you are concerned about having instant access to your online money don't be. ING is with the allpoint system and allow free transactions at any of these types of ATMS. I searched around my house and there was approximately 60 of these allpoint ATMS in my area. So getting money is still a snap. The only problem with the ING account is the only way you can deposit real money (cash or checks) is by snail mailing the item to them. That's why we kept the brick and mortar bank account open yet to help with these infrequent types of deposits.
We've implemented these changes now for approximately 2 months. So far we have saved about $150 dollars from our cable/phone bill and we've made about $12 from our online interest bearing accounts. While these are not huge sums of money take that amount out for a year and the total is $972 dollars. Who amongst us wouldn't like an extra $1000 dollars for doing nothing?
I hope this has helped in you're search to build financial independence and if you have any further ideas please don't hesitate to post a comment or send me an email.
Sunday, January 27, 2008
The beginning
As with any journey, there must be a beginning. The start of my search for financial freedom began with the birth of our first child. While his birth was a glorious day, it also served as a rude awakening to our then financial state. My wife and I both had decent jobs with decent pay. For that year I believe we had a combined income of around $70,000 dollars. While this may not be a fortune, it definitely put us way above the poverty line.
As with any couple in their early thirties, we definitely lived for the present and always procrastinated our savings for another day. We were by no means deadbeats or bad credit risks (we both have mid level 700 FICOs), we just didn't save anything. If there was an extra dollar after all the bills were paid we would snatch it up as quickly as possible and spend it on frivolous BS.
To make matters worse, we somehow spent more than we were making. How this was possible, I have no idea. We had purchased a house in 2003 before the market really took off. In the years to come, we continued to gain equity in the house, not by accelerating our payments, but by enjoying the rapid increase in price appreciation. When your home is worth more than you owe on it, you have acquired "equity" in your home. This must be a good thing, right? By now you should see what's coming next. We decided, "Hell, we have all this equity, we're rich. Lets take out a home equity loan and really enjoy ourselves." Again, we didn't see a problem with this because we were both still making good money. Even as we increased our debt tremendously we still were able to easily make the minimum payments and have excess cash to waste on more BS.
Fast forward 2 years to 2006. We decide to bring a little piece of heaven into our lives and give birth to a boy in August of that year. This is when the magician could no longer pull the quarter out from behind our ears and the wheels fell off the revolving money merry-go-round that we were riding on. Unlike some new parents, we did not have retired grandparents that lived extremely close which would afford us cheap daycare. We looked around and the choices seemed to be at the extremes. Either the daycare was cheap (approximately $600 a month) and in the ghetto or it was expensive ($1000 a month). Ghetto daycare was definitely out of the question so the only option was the expensive route.
We sat down and crunched the numbers and determined that the peanuts my wife would be bringing home, post daycare fees, was not worth having someone else raise our child. So, shortly after the wife returned from maternity leave she gave her 2-week notice and left corporate America. That meant we were suddenly a 1940's "Leave-it-to-Beaver" family living in a modern two-income world. I immediately took all the off-duty and overtime I could find to keep us afloat. I realized during this time that I was spending far too much time working to survive rather than spending with my loved ones. I wanted to remember when I saw my son reach an accomplishment rather than remembering when my wife told me she saw him reach it.
Now we fast forward to 2008 and we are just months away from the birth of child number 2 and, of course, it's a girl. Now don't get me wrong, I'll be happy if she's healthy, but damn it. It sure would have been nice to go the "hand-me-down" route for many years to come. As No. 1 outgrows things, No. 2 can slide right in and pick them up.
I now see the error of my earlier ways of living for the present and not the financial future. I want to create a way of life that will allow my kids to flourish and even prosper as they follow in their parents footsteps. As cheesy as it may sound, I feel that I am now living more for them than I am for myself. I have begun to set things in motion that I hope will create a life of financial freedom and growth that will allow my family to be happy and wealthy for generations to come.
I realize that time is the most precious of all commodities and you should only spend that time on those ventures that will yield the greatest results. That is why I have created this blog, "Apex Income Investments". I will attempt to present all forms of investments and compare them in both ROI of time and money. In the end, only those that yield the highest returns with the least amount of time input will be utilized to grow our net worth.
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