Monthly Archives: January 2020

Do You Make a Good Living and are Actually Poor? You Probably Need to Stop Doing These 3 Things.

We spend so much of our time working, working, and then working some more to make a good living, but do you have anything to show for it? I don’t mean showing off, but rather having a strong financial foundation with minimal debts, savings, investments, and other valuable assets. If not, then keep reading . . .

#1: Stop Justifying Every Expense

Expenses can always be justified and rationalized even when they aren’t. It’s okay to spend money, but it should be in line with your economic situation. The funny thing is that as your income increases, your spending almost always increases in tandem, and sometimes even more than the increase of income. Relax, and spend a little slower while saving more. Remember, the goal of savings is to support yourself and your family for emergencies, large expenses such as college, and when you eventually stop working and retire.

Step #2: Caring What Others Think

Guess what? No one cares about your material possessions except on a superficial level. Sometimes people will briefly talk about you because you drive an older car (even though it may be a luxury car that is fully paid for), live in an older house, have crabgrass growing on your lawn (unfortunately it dies in the winter, otherwise it is nice and thick in my opinion), take non-Disney vacations (aren’t you exhausted afterwards anyway?), and don’t wear Uggs or brand names on your shirts and jeans (I like that only those rare individuals with fine taste in men’s shoes appreciate the awfully expensive shoes I wear though). The bottom line is not to stretch yourself to seek status or to impress others, but to spend according to your state in life.

Step #3: Saving Last

This is one of those times that math doesn’t make sense. You need to save first otherwise there will be no savings left over. You would think that the order doesn’t matter, but is does matter in the real world. Also, save up on a percentage basis, so that when your income grows, your savings grow also.

Summing it Up

These bad habits are prevalent among those that earn $50k, $500k, or more. Bad habits will follow you through your life regardless of where you are economically. Once you recognize this, hopefully you will be able to change course instead of feeling like you are always running and getting nowhere.

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How to Destroy Your Business Success in 6 Steps

Sometimes to be successful means to avoid doing the things that will destroy your success. It’s easy to go down the wrong path and it’s important to be aware of this.

Step #1: Saddling Your Business with Debt

Conventional wisdom states that there is smart debt vs. dumb debt or a similar description of two kinds of debt. Although there is some truth to this, the bottom line is that large amounts of debt will cause a huge handicap to your business, especially a start-up. Even if you are doing well it will not feel like it when you have massive debt payments each month or sometimes on a daily or weekly basis if you took out a predatory lender loan. When you have easy access to large amounts of debt it numbs your sense of being financially cautious, prudence, and allows you to spend your money on things that can easily be justified but are not necessary.

Step #2: Poor People Management

See what happens if you constantly treat your employees, vendors, and customers disrespectfully. The end result will be high turnover, sabotage, lack of a sense of shared purpose, losing customers, and everything else negative. It is amazing to see how little attention is paid to the management of people in a poor performing business.

Step #3: Over Working Yourself

There are times when you need to work more or work more rigorously, but if done for too long, then your productivity will decline, decision making becomes worse, and you may find yourself in the hospital for stress induced health reasons.

Step #4: Not Listening to the Right Advisors

Unemployed Uncle Jimmy with a string of failed businesses will not provide you with the advice you need, and if he does provide you with advice, then do the opposite. Or, which is also very commonplace, is to seek the advice of the wrong professional. Make sure the professional that you confide in is an expert with the advice you are looking for.

Step #5: Personal Issues

This is somewhat related to step #2, but more on a personal level. If you are going through difficult times on a personal level, then this will ultimately translate into poor business performance.  A common example is taking care of a sick family member that needs you. If you need to focus more fully on your family situation, then delay starting a business, or for an existing business try to delegate more of your business responsibilities to trusted employees.

Step #6: Ignore Marketing and Sales

Many years ago, I met with a brand new business owner to discuss his business and try to help him out. During our discussion, I asked what he was doing for marketing, and he said that he did very little because he didn’t want to spend money on marketing because marketing costs money. I’m not sure of my exact reply, but he was no longer in business within a few months’ time.

Summing it Up

Some of these steps may seem obvious, but they are common due to the fact that it is hard to take a step back, access a situation, swallow your pride, and say to yourself, “Hey, I need some help because I am not always right.” We should probably all say that more often.

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The Differences Between How Men and Women Manage a Business

There are differences between how men and women manage their business, their employees, and their finances. What are these differences and does it matter?

Do you really think that I am brave enough (or foolish enough) to write an article with a topic like this?!

Maybe for another day.

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Want a Quick Productivity Increase in 3 Steps?

Are you trying to get things done, but don’t seem to ever get ahead? Try these out for a quick and almost instant boost to your productivity.

Step #1: Stop Following the Shiny Object

There is a great amount of pressure to work on the newest task at hand while ignoring all of the other uncompleted items that are on your list. The problem with this approach is that it creates more stops and starts, which ends up prolonging the time it takes to get things done, while delaying the older projects’ completion.

Step #2: Listening to the Squeaky Wheel

Usually it’s not apparent at first, but there will always be customers, vendors, or employees that need your attention immediately, all of the time. It’s understandable that this will happen from time to time, but if the same person always needs your attention immediately all of the time, then it probably isn’t a true emergency. In this case, you have to communicate that this is an issue that can wait until later, tomorrow, or some scheduled time in the future.

Step #3: Schedule, Schedule, then Schedule Some More

You would be surprised by the productivity increases of scheduling properly. From medical practices to contractors, scheduling will allow more patients to be seen, more projects to be completed, or more customers to be serviced. Don’t take my word for it, try to visit an Apple store without an appointment.

If you can, also plan out the entire year. There are cycles to every business, every department, and every job, which are usually predictable. Although preparing for the year may seem daunting, try to schedule each week or even a recurring task on a specific day of each week, as a start.

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Do These 6 Things Differently than Others if You Want to Get Ahead Financially

Do you ever wonder what the difference is between those who get ahead and those who are constantly struggling? There is a pattern of actions that are taken repeatedly by those who get ahead, while the opposite is true of those who struggle.

Action #1: Delayed Gratification

The financial impact of delaying gratification for future success is astounding. The best example is an expensive car or high-end home. These things are great, but if you know that you will be stretched to purchase them, then give it some time before doing so. Once your finances enable you to comfortably purchase these items then go for it if it fits into your overall financial goals.

Action #2: Seek Advice from the Right People and Listen to Them

It is always a good idea to seek the advice of those we trust, but they must also have competence to provide you with the proper advice. Do not ask your brother in law that has declared bankruptcy twice and is reckless with money for financial advice. On second thought, you may want to ask for his advice and do the exact opposite! Also, seek the advice of a qualified professional or successful mentor who has relevant experience.

Another, related aspect of seeking advice knowing who is trying to work with you and who is working against you. Don’t beat up the people that are on your side and don’t let the bad fruits in the gate.

Action #3: Save and Invest Constantly

Even a small amount of saving/investing can add up over time. Also, investing does not have to only be in the stock market, but can consist of growing your business to make it more valuable, purchasing rental properties, investing in or purchasing other businesses, etc.

Action #4: Be Cautious When Incurring Debt

Debt has its proper place, but it is misused quite often. Many of us are lured into large, unnecessary purchases or poor investments because we can finance them over. Even if the debt is helpful for the production of income, it still may not be the best course of action. Debt also makes us lazy, meaning that it is easy for us to make decisions without really thinking them through fully.

Action #5: Have Endurance

Don’t give up too easily. It may take several tries to get where you want to go, but you need to keep on getting back up when you falter. Yes, it hurts when you get derailed, financially or otherwise, as life happens, but keep on moving forward.

Action #6: Don’t Make Decisions Based Solely on Emotions

Just because someone made you angry doesn’t mean that you need to let them go. Can you imagine telling off your boss (very bad move), or firing a key employee or vendor because you overreacted to a non-fatal mistake that they made? Trust me, you will suffer financially for this.

To Sum it Up

Did you notice that most of the above are based upon emotions and relationships? Healthy emotions and relationships will help you to be get ahead and make the journey more pleasant, while knee-jerk reactions, seeking instant gratification, and unhealthy relationships will create a roadblock to getting ahead.

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Why You Shouldn’t Sell Your First Home

The common scenario is this: purchase a small, starter home and then move after 5 to 10 years into another, much larger home. But is this a prudent move or are there other options?

There is one, largely overlooked option, that can have a great financial impact on your finances. The option is to move and then rent out your existing home. There are times when this makes sense, and other times when it doesn’t.

Makes sense: It makes sense to rent our your first home if the following are true:

  1. You have the funds for a down payment on a new home or you can access the equity of your home without getting too deep into debt. A combination of the two may be used also.
  2. The expected rent is greater than the expected expenses
  3. It will be easy to find a renter
  4. There is a strong possibility of continued appreciation of your first home
  5. You do not mind being a landlord
  6. You have a small cushion for times of vacancy, and are in a strong position financially

Doesn’t make sense: It doesn’t make sense to rent out your first home if the following are true:

  1. You do not have the funds for a down payment on a new home
  2. There is not much equity in your old home
  3. The expected rent is less than the expected expenses
  4. It will be difficult to find a renter
  5. The expected appreciation is either very low or the first home may depreciate
  6. You do not want to be a landlord. However, I challenge this assumption, because there are always things that you do not want to do but should do them anyway.
  7. Your financial situation is in turmoil

What’s interesting to note is that most people who sell their homes do not think of how much the transaction costs can be, especially as a percentage of the selling price or equity, until they are in the sales process. I do not mean that costs are hidden, but the costs are not factored into the equation when wanting to sell a house. Additionally, when you sell your first home, you most likely have to repair several items that can costs thousands of dollars that you do not realize the benefit of.

If you want to get ahead financially, you usually have to not do what everyone else is doing and take prudent chances. Part of prudence is to look at the worst case scenario. If the worst case scenario is that renting your first home has become a nightmare, then just sell it and move on.

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Are You the CEO of Your Business?

There are 3 phases of running a business with the ultimate phase of becoming the CEO. The first is that of an employee, the second of manager, and then CEO. Most business owners are in the first two phases and never achieve the CEO level. Why is this and what are the steps to become the CEO?

Every single phase is extremely important to a business, and every person in these positions is vital for the business to operate. However, if you want to be the CEO, then you must take steps in a different direction, which takes endurance. Let’s take a look at each step and how to move forward.

Employee: An employee is the one who is doing all of the work, whether physical or intellectual, such as a cook and server at a restaurant or a doctor and a nurse at a hospital, along with all of the other myriad positions. Many business owners become very wrapped up in the day to day operations and never take a break to become a manager or their business has not grown enough to support a manager.

Manager: The main job of a manager is to manage people, projects, and the overall flow of work. Although their main function is to manage these items, they will also need to jump in from time to time to help with tasks and get their hands dirty. Usually business owners are partly managers and partly employees because they are unable to fully let go of operations or their growth does not support a CEO position.

CEO: The CEO is the visionary of the business and is responsible for the business as a whole. Only high impact decisions should be made by the CEO, along with spending time on the utmost important items. A good CEO will do amazing things for a business, while a bad CEO can destroy a business in a relatively short period of time.

Unless your goal is to be an employee-owner or manager-owner, then you must take certain steps to become a true CEO. For some businesses, especially professional services businesses, this task is a little harder due to the technical expertise required to run the business.

Depending upon your goals and resources, the first step is to build up your team. Without a team of employees, you will never progress to the next level of manager. Once you have a team, you need to relinquish your everyday customer-service type activities and focus on managing your employees and the business. Lastly, you’ll need to hire managers to take over your duties to ultimately become the CEO. It only takes 3 steps! Of course, this is easier said then done, and there will be a multitude of roadblocks and challenges along the way.

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Should You Pay an Allowance to Your Children?

Don’t most children just get what they want nowadays so there is no need for an allowance? Maybe for some, but I am sure that has always been said. Here are the pros, cons, and a blended approach of an allowance:

Pros:

Value of money: An allowance can help children to realize the value of money and that they need to delay gratification for things that they want and need. However, the allowance should be reasonable and age appropriate.

Reward: It can also be a reward for helping out with household chores.

Cons:

Poor perception of hard work: If an allowance is not tied to any sort of responsibility it can be thought of as a “right” to receive money for doing nothing. Think of capitalism vs. socialism.

Responsibility to family: Why should you get paid to do the dishes or make your bed? Isn’t this a part of being a family and being responsible? There is an expression that charity begins at home.

Blended Approach:

Set chores, reasonable allowance: An allowance can be tied to completing a set amount of chores that are age appropriate for a small allowance. The allowance should not be too small, but not too large.

Reward for extras: A reward can be given for going above and beyond with helping out, but it doesn’t always have to be monetary. I know that I work harder with simple words of recognition, but ice-cream and Italian pastries are very effective also.

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Which Type of Business is the Best One to Own?

Which type of business is the best one to own? The short answer is one that makes money, but the long answer is that it should have all or some of the following characteristics:

Simple product or service: The more complex the product or service you are offering, the harder it is to operate your business. For example, it is much more difficult to train someone to be a management consultant than a server at a restaurant, although some restaurateurs might think otherwise.

Recurring and/or predictable revenue: Subscription-based services receive recurring payments on a monthly, quarterly, or annual basis, which tend to be highly predictable. A project-based business performs a service, gets paid, and has to find another customer, whereas, a subscription-based business may have no known end date or automatic renewals. A perfect example is a software company, but another example is a landscaper. A landscaper may not be thought of as a subscription-based business, but it actually is.

Cash in before cash out: Selling a product or service and then waiting to get paid can drain your cash resources, especially if you are growing. Ideally, you want to operate a business that receives cash up front and then pays expenses.

Low capital investment: If you need to invest large amounts of cash upfront for improvements and equipment then it creates a hurdle to overcome. This is especially true if you do not have a lot of cash and are using debt because the debt payments act as a handicap to your success. On the other hand, if you just need to rent a small office to start your therapy practice, then the risk is much lower.

Economic profits: Did you know that many small businesses do not produce much of an economic profit? For example, if you start your own medical practice and then make as much as you did as an employee then there is no economic profit. Although, you do have to give it a few years to determine this.

Easily scalable: This means that you can easily duplicate your success by either opening more locations or growing your operations easily without relying on the owner exclusively. A perfect example is a franchise, which has a blueprint to run the business smoothly. A bad example is a niche-consultant who works one on one with clients.

The interesting fact to note is that almost any business can modify its strategy to have the desirable traits above. The complex can simplify their offerings, services or products can be made recurring, and profits can be grown to more desirable levels.

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5 Practical, Passive Money Making Ideas

There are many ways to make money that do not involve a lot of ongoing effort, and they are actually practical. Some are easier to implement than others, but all virtually require work up front to get your activity off the ground. Here are five:

Rental investments: Thousands of books have been written on this subject, but I’ll summarize the secret to making money on this one in one paragraph. The work comes before purchasing the property. First, estimate the lowest expected amount of rental income per month, less at least one month to two months of vacancies per year. Next, calculate all of the costs of owning the property, including mortgage payments, property taxes, insurance, repairs, etc. If your cash expenses are greater than the expected rent then do not buy the property. If the opposite is true then consider purchasing the property as long as the income and appreciation potential are profitable. One paragraph books about real estate investing do not sell too well.

Lending to a business: If you have extra cash, then consider lending to a small business. Just make sure to think somewhat like a banker and understand the risks and rewards. Make sure you have an attorney draft the agreements, prepare all of the filings, etc., to reduce your risk in the case of disputes or default.

Invest in a business: Invest in a business to eventually receive dividends, distributions, or a payout upon sale. Just as in lending to a business, make sure to understand what you are getting into, ie, perform your due diligence, and see your accountant and attorney.

Sell a digital product/course/e-book: Unless you are tech savvy, it may be easier to hire a consultant to set up a website for you to sell a digital product. The product can be about virtually anything, but a good place to start is to offer a digital product based upon your specific expertise and knowledge.

Referral commissions: Usually this one applies to an existing business owner, but the idea is to refer your customers to another vendor for either a product or service, and then receive a commission for it. The amount of effort expended is very minimal, but the commissions can be a good source of profits for your business. The caveat is to always make sure that you abide by all legal requirements for receiving commissions.

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