Causes of Trouble When Starting a Business

If you ever think about starting your own business, well then I salute you good sir, because you are an enterprising individual!  Often times, entrepreneurs don't understand the common causes that may give them trouble in the near future.  When assessing your opportunity for a future business, it helps to know the issues that could cause problems in the future.  With that said, here's a pretty exhaustive list of potential ways entrepreneurs can get in trouble:

Strategic Issues:
1.) Misunderstand market niche
2.) Mismanaged relationships with suppliers and customers
3.) Diversification into an unrelated business area
4.) Mousetrap myopia: Starting a firm around an idea instead of an opportunity
5.) The big project: Company gears up for a big project without first examining the cash flows of the initiative
6.) Lack of contingency planning

Leadership Issues:
1.) Lack of leadership skills, experience, and know-how
2.) Weak finance function
3.) Turnover in key management personnel
4.) Big-company influence in accounting: focus on accruals instead of cash

Poor Planning, and Financial Controls:
1.) Poor pricing, and over-extension of credit
2.) Poor cash management
3.) Poor management reporting
4.) Lack of standard costing

As a potential business starter, its important for you to foresee these issues and approach them head-on.  If you do, your enterprise is far more likely to succeed and may even thrive.

Wonderful Moment of the Day: Spring tulips

Home Buying Programs

The Spring time is not all just about chirping birds and the renewal of life back to the earth.  There is also another rebirth, and that is of the housing market.  Chances are, the next time you will be looking for a home (whether it be your first or seventh), it will be in the Spring.  There are a 101 different aspects of your home you need to think of before you buy, but allow me to suggest one you may not have thought of: buyer programs.

Most people are not aware of this, but many towns and municipalities offer home buying programs to incent enterprising families to move in their districts.  The long term goal is to reap the benefits of their income and property taxes.  When making your home buying decision, try looking at the different towns in your area and see if they offer any kind of incentives.  The easiest way to find out this information is to go to each town's website and doing some simple digging around.  If that doesn't turn anything up, try calling the town office and talk to someone who might know.  You'd be surprised of the many programs available.  In one of my neighboring towns, there are home buying programs that offer big discounts and incentives on buying a home.  In this particular case, it had some stipulations that you had to remodel a dilapidated home and then live in it for at least 10 years.  It also had to be your primary residence.  For some enterprising families, this would be a great idea.

If the town or city you live in does not provide a good incentive, then usually a community bank of creit union offers home buying programs; especially if you meet certain income requirements.  For my Wife and I, we met one of these requirements and through our bank, were able to get a free $7,500 with a pro-rated 5 year live-in requirement.  This money was more than enough for all the closing costs, and really helped us get situated.  All we had to do was attend a couple basic personal finance classes. 

If you're not taking advantage of your area's home buying programs then you could be leaving money on the table.  Do you due diligence and research all your possibilities, and you should come out ahead.

Wonderful Moment of the Day: 70 degrees and sunny!

Less Accounts to Manage = Easier Saving

I mentioned it briefly here that having only one credit card makes it easier to track your expenses and balance your budget, but the concept can be expanded upon more than just your credit cards.  Consolidating all of your accounts into just a few with one financial institution will make it easier for your to manage your finances, balance your budget, and track your financial future.

Does this sound familiar to you?  To pay my bills and check my account balances, I first log into my account to see how much I have in my checking account, then I go to my paper account register and see if any checks are pending.  Next, I pay a few bills by hand writing checks from one checking account.  I then go online, check my other bank account, and pay some online bills through that bank.  Next I pay 2 of my 6 credit cards by checking the online statements and paying with a variety of checking accounts.  Finally, I log into my brokerage and see how my retirement funds are doing.

Wow!  That seems like a whole bunch of work.  No wonder why personal finances can seem daunting an people can get in trouble.  Well, here's a little trick that I use which has been great for my financial future...use just one bank for all your financial needs.

One of the keys towards getting your financial life together is to have all of your accounts and money in one spot.  This way, you'll know exactly how much you are spending and saving.  To do all of this, you will need a bank that provides all of the following services; checking, saving, lending, and brokerage accounts.  My own personal favorite bank is Schwab.  On just one page, I can see all of my savings, borrowing, and investing.  The only thing I have with a separate company is my credit card, and they only reason why it is with another company is that Schwab sold off its credit card business line to Bank of America about 2 years ago.  If they offered another credit card, I'd probably go back.

If you have many accounts in a multitude of places, the best way to start your financial plan may be to consolidate or close some of your accounts.  This will give you a firm foundation to get the rest of your financial life in order.  Check to see if your financial institution provides all of the aforementioned services, and if they do (for a good price), keep them and get your financial life in order!

Wonderful Moment of the Day: My flower seedlings are just coming up and are currently about an inch high.  I'm starting to get excited for the garden season to come back.

Financial Tips for Traveling Abroad

Within the next week, my Wife will be traveling to Egypt for 2 weeks on a medical mission trip.  This whole experience has been a good exercise on the financial steps necessary for a longer stay in a foreign country.  Here is a short list of some of the steps we took to prepare her financially for this trip.

1.) Contact your credit card and debt card companies - Make sure you contact your bank and credit card company in order to let them know that you will be traveling abroad, the country, and the dates of your travel.  With modern day fraud protection, your bank might block your card if it sees a whole bunch of strange charges in a foreign country.  I have actually had this happen to a friend while I was traveling with him and I had to loan him some money until he could contact his credit card company.

2.) Work with a bank that has no ATM fees - This is more of a long term decision, but I currently use Schwab for most of my checking needs, and one of the perks is having no ATM fees.  This is especially useful when you first arrive in a foreign country as you can use an ATM as your currency converter.  Just simply withdraw the appropriate amount of the local currency, and the ATM does all the conversions based on the day's exchange rate.  I find this to be the best and most efficient way to exchange currency.

3.) Stay current on the currency conversion - Before you go on your trip, check the currency conversion rate so you know how much you will need and what your currency is going for.  If you need to use one of the private money exchange kisosks, you'll be much more informed on whether you are getting a good deal.

4.) Acquire travel insurance - I actually didn't know about this insurance until recently, but have developed a new-found love for it.  Most insurance plans will not cover you in foreign countries and that's precisely when this insurance kicks in. Travel insurance will cover all your medical needs, potential losses, or even travel supplies in some cases.  I believe they'll even pay for the shipment of your body back to your country in case of death.  It only costs about $50-60 and save you from a real headache in case something disastrous happens.

5.) Only carry a minimal amount of cash on your person - Depending on where you go, this rule is more applicable than in other places.  You do not want to have a whole bunch of cash on you in case you get robbed.  This is all around a good rule no matter where you go.

Once you take care of all this stuff, you should relax and enjoy your trip an take ease knowing your financial house is in order.  Just don't spend too much on souvenirs.

Wonderful Moment of the Day: My Wife is eating all her favorite foods before she goes on this trip, so we've been eating really well the last few days.

Unit Costing your Food Purchases

Everyone has experienced the difficulty in deciding which is the better deal when shopping at the grocery store.  The seemingly endless choices in dish soap or cereal are enough to make a frugally determined person quite frustrated.  Do I choose the generic brand, or do I go with the name brand that is conveniently on sale?  I’ve seen time and time again, price conscious consumers falling for the sale signs and “reduced priced” glamour only to still be paying more for a product in which they are not very brand conscious for. 

There is a very easy strategy to compare all the cereals, or dish soaps; look for the unit cost information just to the left of the price.  All products are required to have this information, and it essentially puts every like-minded product on the same playing field.  For example, what is the better deal, the generic dish soap that is $1.99 or the name brand soap that is on sale at $1.79?  Many people might pick the name brand soap, but what do the unit costs say?  The generic is $8/gallon and the generic even after the sale is $8.75/gallon.  You know that you are getting more product for your money if you went with the generic soap.

Product packaging and design is a multi-billion dollar business and one of the main goals (besides enticing you to buy the product), is to make the product look larger than it really is.  No wonder you might have a hard time comparing product prices when all the containers have slightly different amount in them.  This is the beauty of unit costs though; it doesn’t matter the sizes, because you can compare them all just in the same manner. 

Today, my Wife and I hardly ever even look at the actual price of a product, but instead look at the unit cost.  One word of caution though; sometimes the units may be a little different.  On the rare occasion, I’ve seen the unit cost listed (for example) as $/gallon and $/liter.  This may through things way out of whack, but this is usually a rare occurrence.  I’m not promising you that your grocery bills will be smaller with this shopping tactic, but I can guarantee that you will be getting much more for your money if you follow it.

Wonderful Moment of the Day: Been having a relatively easy week at work given that I just came back from a week long vacation.

Net Worth Realization

I was recently reading this Forbes article on how the combined wealth of 6 of the Walton family (famous for Walmart) have more income than the bottom 30% of Americans, and it started to get me thinking about wealth distribution in the United States.  In its essence, the wealth alignment is a shame with the top 1% having more wealth than the bottom 60% of the nation, but let’s take a closer look into what’s going on here.

It’s important to understand the meaning of wealth in these circumstances.  Just like you would value a company, your own personal net worth is the summation of all your assets minus the summation of all your liabilities.  So, if you, like many Americans, have no credit card debt or any other types of debt except for an underwater mortgage, you could have a negative net worth.  In the corporate world, you would be considered bankrupt and have some more serious issues to deal with.  In the personal finance world, as long as you can keep making your monthly bill payments, you’re fine.  From a retirement perspective, you could have some serious issues in the long term, but the important point is that you recognize these issues and are making steps to rectify them. 

The quote that struck me the hardest was this little excerpt; “If you’ve no debts and have $10 in your pocket you have more wealth than 25% of Americans.”  Another way of looking at this is to think that if 25% of Americans have a negative net worth, then you have more wealth then the 25% combined!  Suddenly, I’m starting to feel a little wealthier.  Don’t weep too hard for some of these people as there is an important difference between wealth and income.  You could have a lawyer making a 6 figure salary, but do to some spending habits, student loans, and an underwater mortgage, could have a negative net worth. 

There’s an important lesson in all this talk, and that’s to think of your own personal finances from a net worth perspective.  Just because you have a salary of $30,000/year doesn’t mean you can’t be wealthier than some hot shot doctor.  Likewise, just because you have a 6 figure salary, doesn’t mean you can’t spend yourself into bankruptcy.  If you start thinking from a net worth perspective, you’ll be better prepared for retirement and have a much healthier financial situation.

Wonderful Moment of the Day: This wasn’t exactly wonderful, but it’s nice to work for an institution that allows you to have a sick day.  Not every place looks kindly on these things.

Getting and MBA for Almost Nothing

I’ve written a number of times about the ever increasing cost of education (here, here, and here), and it’s getting to the point of “bubble” classification.  In light of such news, going back to school to achieve an MBA or some other form of higher education can seem downright daunting.  There is hope for you frugally minded and career driven folks.  Many employers today encourage worthy workers to go back and get their degrees and they’ll often times shell out some cash in the process.  Below is a recount of my tale and how I spent only $1,950 to achieve and MBA.

The first question you need to ask yourself is whether going back to school is even right for you?  Some issues that I weighed while making this decision were the following: would I have time to do well? Should I do a part time or full time program?  Will this degree from X school help me in my career?  What were my financial constraints?  For the purposes of this particular article, we’ll assume that you’ve already made the choice to go back to school and achieve an advanced degree.  Now, let’s discuss how you’re going to fund your new-found educational experience.

Pick a Part-Time Program over a Full-Time Program

When going back to school, you could decide to quit your job, go back to work full-time, and finish your degree in about 2 years depending on the program.  Whereas this experience might save a year of your life, the downsides in my opinion far outweigh any benefits that extra year could provide.  You will not get any potential employer subsidies, you will not be earning a salary and have to pay tuition, and these 2 years of not working don’t really count towards your employment experience.  Instead, consider a part-time program.  Mine was 3 years, 2 full courses and 1 mini course a semester (with 1 summer course), employer subsidized, and those 3 years working to get my degree count as 3 years of real work experience.  If your 30 years old at the end of your part-time schooling, you would have 8 years of real work experience (graduated undergrad at the age of 22), whereas you would only have 6 years of experience in a full-time program.

How to Go Back to School for Almost Nothing

This is ultimately what you came here to read about, and it’s not some hidden secret.  The answer…get your employer to pay for your education.  Easier said than done, right?  Well, even if going back to school and getting an advanced degree is a goal 5 years done the road, this next step needs to be in the back of your head now.  If you are currently searching for employment, make sure to inquire about your potential employer’s tuition reimbursement plan.  If you’re lucky like I was, then they already have something set up for those worthy enough to get approved.  This question can also be a good topic to discuss in your interview as it shows that you are a driven candidate and that you have goals to improve yourself.

If you are currently employed and happy with your employer, then research to see if your company has some sort of tuition reimbursement policy.  You might have to talk to your HR rep as these things are not always conveniently published.

What do you do if your company currently doesn’t have a tuition reimbursement policy?  The first thing you need to do is set up an appointment with your manager, discuss your goals, and see if something can be worked out.  Often times these types of situations occur in small companies with the owner overseeing everything.  I had a friend in my program who worked for a small custom door manufacturer.  He asked his boss if he would cover his education in exchange for working there at least another 5 years, and they agreed.  If you’re company does not offer tuition reimbursement, and they never plan on doing it, then it might be a good idea to start looking elsewhere. 

Proving to Your Employer that You are Worth it

The last tactic to achieve tuition reimbursement from your employer is to prove that you are worth it.  This comes from your everyday behavior in your place of work.  Be responsible, prove yourself valuable, and excel in what you do.  Have semi-frequent conversations with your manager about you career and self-improvement goals.  Eventually, you will need to have the conversation about how an MBA will help you in the workplace, but make sure you tell them how it will help your employer as well.  This is the final secret I have to offer.  They are essentially investing in you and you have to prove that their investment is worth the expense. 

My own reimbursement strategy was organized through me showing my grades to my HR department.  For every A or A-, I was reimbursed 100%, B was 80% and C was 50%.  The only reason I had to pay $1,950 throughout my 3 years was because my employer would only reimburse me at the 50% mark for pass/fail classes (otherwise known as mini 1 credit courses).  These cost me $650, and I had to take 6 of them.  I survived 3 job movements throughout my MBA program and had over 4 managers throughout the process, but as long as you prove your worth you should be fine.  Another arrangement to my reimbursement was that I would have to pay back a pro-rated amount of my reimbursed tuition if I were to leave the company before 2 years after my last payment disbursement.  A fair arrangement if you ask me.

An MBA can be a great advantage on your resume, and can offer a world of opportunities.  Even more beneficial is all the knowledge that came in the form of understanding the underlying issues at stake in most business decisions.  You too can go back to school for almost nothing.  You just have to ask the right questions and do your homework.

Wonderful Moment of the Day: Received half of the parts in my new PC-build…a post about this to come soon.

The Rent Creep

If you have ever had an apartment or pay for rent, then you may know of this phenomenon I like to call the "rent creep".  To give you a little background, I'll use a legitimate story from my own experience.  Awhile back, I too was renting my own little apartment of sheer bliss.  Things were going great, and I had locked in a pretty decent rent for 1 year.  The rent I was paying for a 1 bedroom apartment within walking distance to a grocery store and my employment was $800/month.  A little high, but the cost savings from hardly ever driving more than made up for it. 

After my first year in the apartment, I received a notice from my landlord saying that they were going to increase my rent by $50 citing inflationary expenses.  Being the ever avid cost saver, I decided to do a little research.  It didn't seem right that my rent would be going up by 6.25% just because money became a little less valuable.  Luckily, the Federal Reserve keeps track of this information here, and I was able to quickly discover that inflation only occurs between 2-3% per year.  Armed with my new found knowledge, I quickly set up a meeting with my landlord, showed him my research and demanded that they not increase my rent.  Without much of a fight, they agreed, and I managed to ride out another year.

You see, landlords (like most everyone else), are opportunistic folks, and many of them have a standard policy of increasing your rent by a certain amount each year.  In an apartment building with 100 units, if they can get just half of them to accept the new terms, then they have increased their revenue by $60,000.  Subtracting an inflation rate of 3% and they just achieved a net profit increase of $31,200.  This is what I call the "rent creep", and landlords are hoping you don't put up much of a fight or even care. 

Often times, this type of price increase can occur across many different industries, notably the cable or phone bills.  If armed with the proper information, you too can intelligently make your case and avoid paying unnecessary prices.  A little data can go a long way.

Wonderful Moment of the Day: While playing a board game with my wife, a question came up as to which of the 7 dwarfs would she most be like.  She replied without hesitation "Cheapy"!

Great Self Improvement Resource

If you're like me, then today is the first day back after a nice week-long Thanksgiving holiday.  That means, that it's back to the grind, and time to get things done.  With that in mind, what better way to get yourself motivated than a list of 101 self improvement resources.  The fun folks at Pick Your Brain, have created such a comprehensive list that I encourage you to test out.  Here's my favorites from each category.

Self Improvement:
Dumb Little Man - A nice site that specializes in getting you motivated and making the best out of yourself.

Personal Development:
Life Optimizer - Just like the title indicates, this site produces some nice and concise posts on optimizing your life.

Mentally Stimulating:
Freakonomics Blog - If you liked the book by the same name, then you'll love this blog.  The contributors take a macro-economic look at all things and usually offer a twist.  This is a great way for you to become accustomed with some unfamiliar topics.

Business:
Get Rich Slowly - Get rich quick schemes make little sense and often leave you in tears.  This site takes the logical, and slow willed approach to creating a nice nest egg.  You can even learn a thing or two about personal finance along the way.

Educational:
Today I learned via Reddit - This one is my own addition, but let me tell you that it's great fun learning about all sorts of random facts.  Toady I Learned (or TIL) allows people to post interesting facts (usually references to Wikipedia articles) that will hopefully allow you to be a better conversationist at your next party.

Check out the site and let me know what you think.

Wonderful Moment of the Day: Reminiscing on the fun week I just previously had.