Archive for the ‘Financial Success’ category

Can You Handle Risk? Take the Quiz!

February 16, 2008

Have you heard the expression “no pain, no gain”? In the entrepreneurial and investing world, the comparable phrase would be “no risk, no reward.” How you feel about sacrificing the time spent not making a cent and risking your money will drive much of your decision-making.

The risk-comfort scale extends from very conservative (you don’t want to risk losing a penny regardless of how little your money earns) to very aggressive (you’re willing to risk much of your money for the possibility that it will grow tremendously). As you might guess, most investors’ tolerance for risk falls somewhere in between. If you’re unsure of what your level of risk tolerance is, this quiz should help.

1. You win $300 in an office football pool. You:

A) spend it on groceries 

B) purchase lottery tickets

C) put it in a money market account

D) buy some stock

2. Two weeks after buying 100 shares of a $20 stock, the price jumps to over $30. You decide to:

A) buy more stock; it’s obviously a winner

B) sell it and take your profits

C) sell half to recoup some costs and hold the rest

D) sit tight and wait for it to advance even more

3. On days when the stock market jumps way up, you:

A) wish you had invested more

B) call your financial advisor and ask for recommendations

C) feel glad you’re not in the market because it fluctuates too much

D) pay little attention

4. You’re planning a vacation trip and can either lock in a fixed room-and-meals rate of $150 per day, or book stand-by and pay anywhere from $100 to $300 per day. You:

A) take the fixed-rate deal

B) talk to people who have been there about the availability of last-minute accommodations

C) book stand-by and also arrange vacation insurance because you’re leery of the tour operator

D) take your chances with stand-by.

5. The owner of your apartment building is converting the units to condominiums. You can buy your unit for $75,000 or an option on it for $15,000. (Units have recently sold for close to $100,000, and prices seem to be going up.) For financing, you’ll have to borrow the down payment and pay mortgage and condo fees higher than your present rent. You:

A) buy your unit

B) buy your unit and look for another to buy

C) sell the option and arrange to rent the unit yourself

D) sell the option and move out because you think the conversion will attract couples with small children.

6. You have been working three years for a rapidly growing company. As an executive, you are offered the option of buying up to 2% of company stock- $2,000 shares at $10 a share. Although the company is privately owned (its stock does not trade on the open market), its majority owner has made handsome profits selling three other businesses and intends to sell this one eventually. You:

A) purchase all the shares you can and tell the owner you would invest more if allowed

B) purchase all the shares

C) purchase half the shares

D) purchase a small amount of shares

7. You go to a casino for the first time. You choose to play:

A) quarter slot machines

B) $5 minimum-bet roulette

C) dollar slot machines

D) $25 minimum bet blackjack

8. You want to take someone out for a special dinner in a city that’s new to you. How do you pick a place?

A) read restaurant reviews in the local newspaper

B) ask co-workers if they know of a suitable place

C) call the only other person you know in this city who eats out a lot, but only recently moved there

D) visit the city sometime before your dinner to check out the restaurant yourself

9. The expression that best describes your lifestyle is:

A) no guts, no glory

B) just do it!

C) look before you leap

D) all good things come to those who wait

10. Your attitude toward money is best described as:

A) a dollar saved is a dollar earned

B) you’ve got to spend money to make money

C) cash and carry only

D) whenever possible, use other people’s money

SCORING SYSTEM

1. A: 1 B: 4 C: 2 D: 3

2. A: 4 B: 1 C: 3 D: 2

 

3. A: 3 B: 4 C: 2 D: 1

 

4. A: 2 B: 3 C: 1 D: 4

 

5. A: 3 B: 4 C: 2 D: 1

 

6. A: 4 B: 3 C: 2 D: 1

 

7. A: 1 B: 3 C: 2 D: 4

8. A: 2 B: 3 C: 4 D: 1

9. A: 4 B: 3 C: 2 D: 1

10.A: 2 B: 3 C: 1 D: 4

What your total score indicates:

  • 10-17: You’re not willing to take chances with your money, even though t means you can’t make big gains.

  • 18-24: You’re semi-conservative, willing to take a small chance with enough information.

  • 25-32: You’re semi-aggressive, wiling to take chances if you think the odds of earning more are in your favor.

  • 33-40: You’re aggressive, looking for every opportunity to make your money grow, even though in some cases the odds may be quite long. You view money as a tool to make more money.

How did you do? The majority of those who take the test fall under the 25-32 point category. As I’ve noted earlier, the more risk involved in any undertaking, the more reward given for taking that additional risk.

 

Remember, only invest as much money in a risky venture as you can afford to lose. It feels great when you see your money sky rocket after putting your funds in an investment that isn’t as safe as a bond or treasury bill, but don’t bank on making 30% every week. If you started your business, and it’s doing well financially within the first year, congratulations! But remember to stay consistent; don’t leave a business on autopilot and hope that it generates consistent returns without doing anything.

 

Diversify, and don’t put all your eggs in one basket. Knowledge is power, so do your research thoroughly. Invest Wisely.

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Sew Up the Hole in Your Pocket

February 7, 2008

Do you wonder why you are always broke? Are you barely making it? Are you always asking for money for basic necessities?

There are inevitable bills that you have to pay each month, so why are you still hurting financially? If you answered yes to any of the first three questions then there is something you are ignoring that you must take care of. You must recognize where the financial bleeding is coming from. I’ll give you a hint: It comes from your pocket and it leaks out money. It’s called consumer debt, and you will be cursed with this burden until you decided to do something about it.

Have you seen the I Love Lucy episode where Lucy and Ethel are hired to wrap individual chocolates for their new jobs? The chocolate drops go one by one down a conveyor belt, and they wrap the chocolate in foil before it goes through to the other side. The girls do well until the manager speeds up the belt to the point where Lucy and Ethel cannot keep up. They end up dropping chocolate, allowing chocolate to pass through the belt without it being wrapped, and devouring them to avoid being fired.

Imagine you and your spouse are Lucy and Ethel. You have two sources of income, yourselves. Your own man power is what allows you to wrap the chocolate (pay the bills). Once you buy your dream car, send your kids to school, dine at the best places in town, and take vacations, the belt (expenses) moves at a faster rate. Are you sure you can keep up the pace? If you are already struggling then you’ll have to work overtime hours. You’re going to stress yourself to death. So what should you do?

Budget. Make a list of all assets and expenses for each week, month, and year. Be generous when evaluating expenses. If you know it’ll cost you $100.00 a week for groceries, write down $120.00 as a cushion. Even if you don’t spend that much you want to create an allowance for emergency, and it will feel better when you actually see some money left over.

Buy the alternative. Do you buy filet magnon? Consider rib-eye. Better yet, order a grilled chicken salad. It will fill you up the same way, it’s a lot healthier, and a whole lot cheaper. Go out on “cheap dates”. Take walks on the beach, have a picnic at a park, go to a museum, etc. If you don’t have to buy something, don’t. At the grocery store, buy the store-brand mouthwash rather than Scope or Listerine. Buying things at a fraction of the cost add up. As I’ve said before: Little things add up to big things!

Make more money. Don’t think that it’s not possible. Invest in stocks, mutual funds, or whatever will allow you to earn capital. Start your own business. Invest in real estate. The list goes on and on. If you take a look at the rich, they never use their own man power. They probably have a conveyor belt going three times faster than yours. They can keep up with the belt and still have a surplus because they have 10 machines on the assembly line instead of themselves. What kind of machines you ask? Stocks, real estate investments, businesses, and other streams of income. Their money works hard for them so they don’t have to. Don’t pay a visit to a local casino or play the lottery to solve your long term needs.

Try these methods and I guarantee that you’ll see more money left in your wallet at the end of the month, and you’ll live much happier.  

Know WHY You Are Saving!

February 1, 2008

This is probably why a large portion of people who attempt to “save” money fail time and again. They don’t see the purpose. They get distracted by the small material goods in the way of the bigger picture. I bet we could all listen to some inspiring audio CDs about saving money and get that temporary motivational high. What’s going to happen after it goes away? All those “wants” flood your mind and you are back to square one with bad habits. So how do we deal with this?

Simple. Know your purpose. Know why you continue to save. As the saying goes, “If you fail to plan, you plan to fail.”  Why do kids just spend on the ice cream man, movie tickets, or new shoes? And don’t even get me started with TEENAGERS! They think they own the world with mommy and daddy’s allowance money. I know that I am guilty of splurging here and there during my teenage years, but I quickly got on the right foot after I discovered WHY.

The REASON of doing things is so powerful sometimes. Imagine your parents telling you as a child to “save for the rainy days”. My question was always…WHY? Why do we need to save? What’s in it for me? Now we all heard the same things. We should save so we have enough money for college. We save because we need enough money when we are married. We save money so we have enough for retirement. Do you think a 10-year old really gives a damn about retirement? Show me a kid like that and i’ll treat you out to Lawry’s Prime Rib in LA. I recently went on a shopping spree a bought a Gucci wallet, Burberry shirt, and new golf clubs. I returned them all. Why? I forgot that I needed to save for business projects I promised myself I’d look into. Why? Because it would make me money. Why? Because i’d be helping people.

You (as well as the person you are trying to convince) must know purpose behind action. You know what you’re doing, and now you need to figure out a GOOD reason why. Whatever the reason may be, it must be very effective to the point where no material thing will get in your way. Once you have a true purpose, things get ten times easier. Save money, not for the weak excuse of “just saving”, but for some bigger and better thing that you won’t take your eyes off of. Once you figure out the Why’s, the obstacles will diminish.

Coinstar Machine vs. Coin Sorter: Which one is better?

January 25, 2008

You all know the green Coinstar machine at your nearest Albertson’s, Ralphs, or Vons supermarket. It’s really easy to use and it gives you the option of giving it to charity or cashing out. The problem is, Coinstar charges 8.9% for every dollar that’s sorted by the machine. If you feed the machine $10.00, then it takes 89 cents. Doesn’t seem like a big deal does it? Well if your going to give the machine that huge Arrowhead jug of coins you’ve been saving since you were 4 years old, you’re gonna feel the pinch.

The solution to this is to just simply use a coin sorter right? It’s not that easy. Those coin sorters may be at cheap prices, but you need to figure out how long you will use it for and how reliable the product is. Also, you still need to refill it with the paper wrappers that hold your dimes, nickels, pennies, and quarters. You can go on www.ebay.com, www.amazon.com, www.gadgetbargain.com, and there should be other sites as well. They range from $16.00 to $200.00, so if you do this often you probably want to go with a better quality model to ensure that your machine will be good for years to come.

Well, let’s ask this question: How long will it take me to break even if I purchase a Coin Sorter?

Let’s do the math shall we? I know you hate me because i’m working your minds, but let’s say a decent machine is $50.00. This is very reasonable. (Dollar amount it takes to break even) * (8.9%) = $50.00. If you do all the algebra and crap it amounts to $561.80. So in order for that machine to be worth buying you need to at least feed the Coinstar machine $561.80 in coins. Do you use it that often? If you know you don’t and use Coinstar sparingly, then don’t bother. For those who throw change in a jar everyday, then investing in a Coin Sorter should be put into consideration. After all, after the $561.80 point, the coin sorter will pay for itself and you’ll never have to worry about that ugly fee ever again. Make sense? I hope this articles is of assistance to you, so good luck to you and put that money to good use!

P.S. If you want to change some numbers around in the formula because the figures vary depending on where you live, here you go:

Break-Even Amount = Price of Coin Sorter / Percent Charged for Using Coinstar Machine

Little Things add up to Big Things

January 22, 2008

There’s got to be something you buy everyday. I know food is a great example, but that is more of a necessity. Let’s take coffee each morning. Every morning Suan goes to Starbucks and orders a tall, non-fat gingerbread latte (I think that’s what it is). She pays $3.65 each morning. In this day and age, $3.65 is like 50 cents lying around. But think of $3.65 added up each day for 1 year. Let’s say she works Monday-Saturday each week, and she works for 40 weeks each year. If she buys coffee before work each day for a year, how much is that? $3.65 x 6 days a week x 40 weeks = 876.00/year! And after 10 years that’s $8,760.00! Have you ever thought of it that way? I’m pretty sure you have, but disregarded it because you pay in almost microscopic installments.

Let’s approach this at a different angle. What if I were to tell Suan that if she pays me $800.00 on January 1st, 2009, I will give her one cup of her non-fat gingerbread latte each morning before work? She would probably say “Hell No, Sir. Hell no.” Now why would she say that? I’m giving her a $76.00 discount aren’t I?

Don’t be an ignorant person. You can’t just view something from one point of view. If you only check if the front door is locked before you go to sleep, you might get robbed from the back. Does that make sense?

Not only does this cup of coffee add up, but it’s expensive! If you would never pay $876.00 a year for coffee, consider not buying a cup of coffee so frequently because that’s how much you’re really paying. Try and skip a day without coffee, or just make your own at home. I mentioned food in the very first sentence. If you buy a Super-Sized extra value meal from McDonald’s, order a medium or a small sized meal (and it won’t kill you as quickly, i guess). Brown-bagging-it is not such a bad idea either. Imagine if that $3.65 was the cost of lunch each day and not coffee. You save $876.00 each year by bringing food from home, and $3.65 isn’t even close to the true cost of dining out for lunch each day. Don’t disregard the few dollars that you take out of your wallet each time and just forget about it. It adds up big, REAL big.

Don’t Forget the Hidden Costs!

January 22, 2008

Have you ever bought something that you saved up so long for, and found that you couldn’t afford having it months later? It sucks. My friend recently bought a 6-month old, full bred male golden retreiver…if you know anything about full bred puppies, they cost an arm and a leg. He saved up for 7 months and got his $1,400.00 to buy it. Little did he know he was in for a surprise. He loved the puppy, but guess what happened? Yes, he ran out of money. He never really thought of the costs of food, pee pads, a collar and leash, brush, obedience school, license, time taken from other activities, and a whole lot more. He soon became broke after a few short months. Luckily, he was saved by his parents who received the liability of paying for all that (poor guys), and if it wasn’t for them I don’t know what would’ve happen.

That’s a great (yet sad) example of how not allocating hidden costs will ruin you financially, and this is only on a small scale! Think of those people who buy things everyday yet do not allocate for how much it will not benefit them in the future. Let’s take a look at another example.

I have a 21 year old friend who recently bought a BMW 5-Series (530 to be exact). He currently works at a karaoke joint making 15/hr. The car costed him $50,000, he put 10% down, and he currently pays 500/month. He’s been paying this for 3 months. He then bought 20-inch Beyern rims which he now pays for at 100/month. Add this all up. $5,000 Down payment + $6000/year in installments + $1200/year for rims = $12,200 in payments for the first year, and $7,200/year after that…for the car ALONE. Guess what he forgot about? Maintenance. Tires, Oil Changes, Wheel alignment and wheel balance, brakes, radiator fluid, transmission fluid, gasoline, possibility of an accident, and sooo much more. He basically bought a $100,000 car that he’s slowly paying for. His little $18,000/year job doesn’t help much does it? He can barely eat! What if he wasn’t living in his parents house?

Remeber, if you are going to purchase any tangible good, please don’t forget all the factors mentioned. When I buy something, I always double the cost of the good in my head to allocate for all these costs. If a cell phone was going to cost me $100.00 I would think $200.00 because of games, internet, going over minutes or text, etc., and that doesn’t even include the plan.

If you are a young guy like me, don’t go out a buy the finer things in life. Stop it with that champagne taste you have when you only have a beer budget. If you can’t afford it, don’t buy it to show off. Pretty soon people will forget about it, the item will depreciate, and you’ll be stuck paying for a good you don’t even want anymore. Spend your money wisely, and don’t forget to consider these expenses.