Get Rich Quick–Escape the Rat Race

Posted on December 14, 2012December 14, 2012 by Danielle

Gotta love ‘em. I know I do. There’s a cottage industry in Positive Thinking 2.0. If you’re sitting in your boring everyday job (you know, the one with employer paid health insurance and the 401(k) match), you’re probably right in thinking you could make a lot more money in your own business, enjoy it more, and set your own hours. At least half your co-workers think that, too, (about themselves, of course—not you). Deep down in our hearts we know we’re all creative and have a great novel in us, could make extraordinarily beautiful or innovative widgets, or provide such an extraordinary service that the queue in front of our door will be longer than the one in front of the local Apple store when they introduce iPhone 21.

There are plenty of book authors, and lately e-book authors, webinar providers, and meet-up conference purveyors, who are happy to take your money and feed your dreams. The genre has such a long history that I can’t even think who the granddaddy might be—maybe Napoleon Hill (Think and Grow Rich). Thing is, each of these guys (and for some reason nearly all of them are guys) has a nugget of truth in them. And every one of these gurus make it sound so easy. After all, they’re not telling you how to go get a law degree, or a CPA, or a CFP® (forgive self-serving comment)—things that will take a significant amount of education, study, and passing of exams before you can even hang out a shingle. No, they have titles like The $100 Startup (as opposed to the $25,000 or so it probably takes to set up a small law, accounting, or financial planning office) or The Laptop Millionaire.

I think we should treat these books as inspirational rather than practical. I sold real estate for seven years at a time when a book called Nothing Down was extremely popular. In that seven years, I never ever saw anyone successfully execute the strategy, nor did any of my colleagues, although I saw a few people (including real estate agents) try. The author of that went bankrupt in 1996, but still makes a ton of money, apparently, selling books and being a motivational speaker.

The $100 Startup is more interesting. I’ve mentioned the author, Chris Guilleabeau, before—he’s a world traveler and travel hacking expert. It’s fun to read, just don’t expect a blueprint. It’s a collection of anecdotes about people who have started businesses on a shoestring—retail, small service & design firms, and consumer products, mostly. They’re mostly not making a ton ($45K-$75K seems to be success).What isn’t emphasized is that nearly all of these took a ton of work and even if people are traveling the world now, a lot of planning, research and false starts went into most of their successes. The stories are quite inspiring, but you couldn’t just pick this up and start a business. No mention of the really boring but essential stuff, like how to learn Quickbooks in a hurry.

The Laptop Millionaire had some good suggestions as to how to work the internet to develop and promote your fledgling idea, but you’re going to need a lot more specific information on SEO in order to actually accomplish it.

So, am I saying that you can’t quit your job and make your fortune? No, not at all. But even a successful arts start-up requires developing BUSINESS, not creative skills. Tons of people have great ideas, far fewer can bring them to market (which I am loosely defining—whether it’s a book, any kind of indie project, or yet another piece of marginally tested software).

Here’s what I see with people who I’ve met personally who have actually brought it off:

Have a war chest. You’re going to need enough to live on for at least a year. Then you’re going to cut your spending by 25-50% so you can live on that money for at least two years. Even if you land clients right away, collecting off of them (particularly in a service business) can be a trick. Paying suppliers can only be put off so long.
Have investors who will cover the cost of actually running the business end. Not your salary, just equipment, supplies, promo & design—whatever it takes. That investment can come from you (in addition to living expenses), a spouse, parents, the bank—whatever you can get.
Do it nights and weekends before you quit the day job. Sure, this means working a lot of hours—but not any more than you’re going to be once the business is in start-up.
Land your first client, produce your samples or prototype, or whatever it takes before you quit your day job. You may not even like the idea as much once you have to work it.
Learn to sell. If you have a product or service that can be peddled by cold calling, be sure you can do it (it’s the cheapest outlay of money). If it requires being sold on the internet, learn everything you can about SEO, web advertising and promotion, etc.
Learn to write. Even though nobody reads anymore, many businesses require producing A LOT of copy—help guides, blogs, white papers, manuals, FAQs, articles.
Learn all the office systems—Quickbooks, CRM, CAD, whatever you might need, you’re going to be doing it yourself. Get it set up before you quit the day job.
Spend as little as possible. Sure, you can hire out. Sure, you can pay for it. Right.
Don’t raid the 401(k) unless you’re under 40. Then, you might have a chance to replace it. If you make a big success, you can laugh at the 401(k) as chump change. If not, you’ll be really glad it’s still there.
Try to structure the business so it can run or make money at least in part without your hourly involvement, and so that eventually someone else can come in and run it or buy it.

If it were easy, everyone would do it. But if no one tried, we’d still be hammering antelope with rocks. And I’d be writing this on my old Underwood. Hats off to dreamers.

A financial plan for more travel

Posted on December 5, 2012December 5, 2012 by Danielle

Airplane Flight Wing flying to Travel on Vacation (Photo credit: epSos.de)

What would you do with more money? What do you most want to do when you retire? For a huge number of us, that answer would be, Travel! Even for those of us with a lot of mileage already on us, the lure of faraway places remains strong.So what’s stopping us? The usual suspects—time and money. Employees in the U.S. get the lowest amount of vacation days in the western world. Even if you run a small business and could theoretically set your own hours, well, we know how that goes. But I think that even that time issue is a function of the money travel costs—if it costs a small fortune when you’re paying for it yourself, we tend to think it has to be a major trip, maybe several weeks, and we never go. But what if money were no object?—long weekend getaways would seem easier to fit in. As with all luxuries, we need a surplus in order to really relax.

Similarly, frequent flyer programs haven’t worked that well for me. For example, my kid is flying back and forth Philadelphia/Chicago five times this year. On US Airways flights (which we can’t always get) she might rack up enough frequent flyer miles to get one free ticket during her college career. But using it at a time when she actually has to fly given her breaks and vacations, well, I’m not booking it just yet.

It’s seemed to me that I’m going to get that fabulous tour to India (fill in your own bucket list destination) just about the time I win the lottery, or start collecting on that long-term care insurance. Yet I do hear rumors from time to time about adventurous types who traipse all over the globe for cents on the dollar. How?

Like Archimedes, my Eureka moment hit me in the bathtub (actually, the shower). I’ve been getting a blog feed from Chris Guillebeau, who writes The Art of Non-conformity, for years. I originally subscribed because I liked his free e-books and he is embarked upon a quest to visit every country in the world. It was great armchair travel fantasy. But suddenly it hit me that I should actually pay attention to some of this stuff—not just the travelogue, but the tips.

Chris has an e-book, Frequent Flyer Master, which pretty much lays out the techniques for you. The book is somewhat outdated (this field changes FAST), but Chris promises two things—that you’ll find a way to get at least 25,000 more miles (a free domestic ticket or thereabouts) and that he’ll send you the new copy when it comes out (in the next few months, apparently). The principles are available if you do enough web searching, but Chris puts them together in a succinct 101 course. It’s pretty complex, and he lays it out well. So, how do people do it?

Sign up all over the place for frequent flier airline programs—some of these can be transferred to partner airlines, so if you fly on airlines in the same “alliance”, you can consolidate.
Apply for a bunch of credit cards. Sign up bonuses can offer startling amounts of miles (like 50,000)—your credit has to be superior and there’s generally a required spending in a specific time period. Also, these points can sometimes be transferred to other programs, consolidated, or used as cash to pay for non-covered portions of your travels. Some of these are airlines cards, some hotels, some just with big guys like American Express, Chase, and Capital One;
Never buy anything, especially on-line, without checking through the card and airline programs—many of them will give you double or triple points (on some things, 5x) for anything you buy, from flowers to electronics to duck boots.
Keep watch for specific promotions that offer multiple points—like 5x on office supplies, or restaurants, or companion tickets.
Use credit cards strategically depending on multiple points offers.

Obviously, this is a game of big and little wins adding up to serious travel awards. Chris advises that the way to get there is to figure out your goals (just as in the rest of life!) If you know you want to go to India or Rome, you can organize your acquisition strategy for the best deal to that place. There are even software programs (some free on-line) to help you keep track of what you’ve amassed.

Is it worth it? Well, just like other effective financial strategies, if it were easy everyone would be doing it. It does require some research time and a fair head for sorting details. You’ll probably stick with it if you enjoy it as a hobby, feel you’re getting something significant for free, or really want to do more traveling. For me, I figure it’s worth a moderate investment of time considering the available rewards—much more worthwhile than clipping coupons out of the paper (and then forgetting them when going to the grocery store).

One caution—you must have a great credit score. Do not attempt this if you have debt or trouble controlling spending. And, your credit score will take a hit initially, so don’t start numerous credit applications if you’re going to buy a house (or maybe an auto) in the next six months. However, having a lot of credit power that mostly you don’t use can actually help your credit score over time—it’s the ratio of use:availability that matters. One number that floats around is that the amount you use each month should be less than 7% of your total available credit—so if you have $20,000 as a credit limit, you shouldn’t charge much more than $1,400/month, which you pay off each month. Other advice I’ve come across: apply for the cards all at once, double dip by using airline mileage cards and charging on credit cards that offer points, and keep on top of your credit score. (I’ve used Quizzle.com for a free score, but there are many others).

As with income tax and college financial aid strategies, you can go broke “saving” money, so be careful to confine this travel hacking of amassing points to money you would be spending anyway. Once you dip a toe into this you’re going to feel really stupid for all the points you’ve missed (ugh, money wasted). It’s complicated—if I still had a teenager at home, I’d put her onboard to keep track of this and figure it out—they’re always on the internet anyway, right? If you have one, you might ask a grandkid to do this as a gift to you—and make ‘em a deal on sharing the benefits.

My personal goals? India within two years, mostly paid for by benefits, London, and either a warm long weekend in the winter or a great city visit. I’ve scored 135,000 miles/points so far. I’ll update this from time to time to illustrate how I’m actually doing, what benefits I’ve landed, and how I used them. We’ll see if it’s worth it. And I can’t resist: warning, your mileage may vary.

Three simple steps to wealth

Posted on November 16, 2012November 16, 2012 by Danielle

Just because it’s simple doesn’t mean it’s easy. The solution to nearly all money problems is quite simple:

Spend less
Earn more
Invest the surplus

The devil’s in the details. Often, people with financial difficulties are in fact very good at least one of these, but they don’t take into account the other two.

First, there’s the very frugal type. If you’ve ever been mocked for the latte factor (pinching pennies by carrying your own coffee rather than Starbucks’), that would be you. You squirrel it away, have a budget, research every purchase, and pay off your credit cards every month (if you use them at all). You’re an expert at living on less. I love it. The danger here is that you’re so focused on not spending that you forget to invest properly, which inevitably involves some risk—something that frugal people often hate. Or, you’re so focused on steadiness that you overlook the big wins in income that can be generated by pursuing a better job or a significant raise.

Earning more, however, is not necessarily a sure ticket to wealth. Wealth is how much you hold on to, not how much money has slipped through your fingers. People with large salaries in highly visible or status oriented jobs are not necessarily rich—especially if they spend a lot on toys, travel, transportation, or the (seemingly inevitable) McMansion. Also, people in high earning jobs also find themselves under quite a bit of stress, and the urge to make it up to yourself with rewards is hard to resist. This group needs to remember that there’s a particular kind of satisfaction in a 6 or 7 figure investment portfolio as well.

Group number three: okay, you earn more than you spend, and you’re hardly more extravagant than a nun. Where is your surplus parked? In CDs? No! With a stockbroker, fee-based “advisor”, wrap account…? AAARRRGGGHHH! You owe it to your hard work to educate yourself. Investment scams and schemes can cost you way more than you’ll save in years of frugality or even earnings. Really, the hour a week you spend reading financial books or articles may earn (or save) you more per hour than any other action you can take to preserve and increase your wealth.

In fact, these three principles could as easily apply to our national economic woes as much as our personal financial management. If only…