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Franchising in Response to Unemployment

Several years ago I found myself unemployed for the first time in my 30+ year career. After the initial panic and rearranging of finances so that day to day expenses could be met, my partner and I started talking about options and decided that we would look into franchising. Franchising offered the promise of “being your own boss”, “90% of franchises are successful”, “building for retirement”, and “doing something fun”.

Being my own boss was definitely attractive since I tend to have definite ideas of how things should be run. I was also still on the rebound from the shock of unemployment. Little did I understand at the time, what being your own boss really means. You’ve got it all… the good, bad, and the ugly. There is also the mind switch from working in the business to working on the business. Give this some thought if you are thinking about starting your own business whether it is a franchise or an entrepreneurial venture.

As for the “90% of franchises are successful”, that may be true overall or may have been true in the past, but I would now take this with a grain of salt as opposed to “with statistics like those, how could we possibly be in the bottom 10%?” A franchise is a great way to get a head start on your business, but it is not a sure thing. You must be willing to follow the franchisor’s formula as closely as possible to help ensure your success. Looking at success rates within your prospective market niche is also a must.

As we looked into franchise options the next hurdle was choosing a business. The internet was a logical place to start and we did take a serious look at a fitness offering. Being on a successful fitness program at the time, this seemed a logical fit for the “fun” portion of the equation. It also appeared to be a real growth industry at the time. We met with the regional manager, went over the “Uniform Offering Circular” and met with a couple of franchisees.

At the same time, we got hooked up with a franchise consultant through FranChoice. This was probably one of the best moves we made during the process. The consultant talked to us about our backgrounds, work style, financials, etc. and then presented several options for franchises. He also told us about a program through Guidant Financial whereby I could parlay 401(k) funds into capital for the business venture. Shortly after starting our discussions with the consultant, we found a red flag with the fitness franchise… no “Discovery Day”! This is like a day long interview at the franchise corporate headquarters with the executives of the franchise. If a franchise doesn’t offer “discovery day”, be very suspicious.

We worked with our franchise consultant and went through the process of discussing our lifestyle, what we wanted out of the business, etc. He provided several concepts that may have worked out better than the one we chose, but rather than really look at the business, we looked with our hearts and emotions.

After doing a phone interview and a “Discovery Day” visit, we were off and running with a commitment for one location under our belts and an option for a second location. Little did we know what a ride we were in for.

Franchising can be a viable option when you find yourself unemployed, but several lessons learned need to be remembered:

  • You need to think about working on the business as opposed to working in the business
  • Find out the real success metrics for the business you are considering – not just revenue per day
  • Understand what kind of employees you will have in your chosen business
  • Choose with your reason and not your emotions
  • Think about your investment risk and how your market niche is performing

Housing Price Declines 18.5% – Time to Buy?

If you are currently looking for a new home or have been on the fence about trying real estate as an investment option now could be a great time.

It is truly a buyer’s market. Home prices are low, there is a large selection to choose from and even new home prices are being driven down by builders eager to scrape up any business they can.

Even though everyone keeps talking about the credit crunch mortgage rates are extremely low. The graph below shows the interest rate of a 30 year mortgage over the last 30 years.

30yearfixed

But wait there’s more. With the passage of HR 1 up to $8,000 can be used as a tax credit for first-time home buyers purchasing between 1/1/2009 and 12/1/2009. The credit does not require repayment and will be used to reduce the purchasers income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

From an investment standpoint the picture is a bit mixed. There are certain areas where home prices have been falling, but rents have been stable. This is an ideal situation for an investor to swoop in and make large profits.

However, large metro areas have also seen drops in occupancy rates. If you take the case of Salt Lake City the
apartment vacancy rate went from 3.1% to 6.8% year over year at the end of the fourth quarter for 2008.

As long as you can get renters in you are good, but with vacancy rates rising in some areas it definitely pays to do your homework before you invest.

Stress and Money

This past week Newsweek had a series of articles related to stress and how different people cope. Given the latest economic climate it is easy to see how many of us could feel stressed out and overwhelmed by the situations we find ourselves in. The most interesting article was written by Ben Sherwood who followed the work of Dr. Andy Morgan from the Yale Medical School. Morgan went to Fort Bragg to study the Army’s elite Airborne. He measured different factors to see if he could determine who would be successful and who wouldn’t.

Interestingly, he found that those who managed their stress better tended to graduate higher in their class as well as complete their given programs. However, it wasn’t quite as simple as you might think. He actually found that the elite soldiers were completely wired differently. These soldiers gave off more NPY ( Neuropeptide Y) in their bodies. This chemical helps to regulate blood pressure, appetite, learning and memory.

In one test would be soldiers are tied with their hands behind their back and legs together. They are then thrown in a pool. Those with higher levels of NPY tend to do better. Instead of fighting the water they tended to remain calm, fall to the bottom and then push off the bottom for air.

What I find interesting about the results of the study is that managing stress for the rest of us can actually be more difficult and we may have to take active steps to calm ourselves to reduce stress and make correct decisions. Most of us know that emotions can get in the way of making proper financial decisions. Emotions make us sell assets when we are scared instead of holding on for better market conditions. They make us buy snake oil that won’t really help us.

Sherwood has created a website called thesurvivorsclub.org for the rest of us to learn how survivors are different and how we can try to emulate them.

Student Loans

As soon as I graduated college I wanted to know how to repay student loans quickly. I definitely didn’t want them hanging over my head. Another reason is that after the passage of the 2005 bankruptcy reform bill student loans are no longer fall under bankruptcy protection. In other words, if you go broke you still have to pay back your student loan. You would think that interest rates would be lower since the lender has more protection from bankruptcy.

If you are in the early stages of looking for a student loan before going to college be sure to look into alternate sources of student funding. Not to say that all schools may engage in bad behavior, but in 2007 Andrew Cuomo (Attorney General of New York State) investigated several schools that had preferred lenders. Most of these preferred lenders actually charged higher interest rates and were giving kick backs to financial aid staff.

There are also many different types of loans to consider for college. Even within the category of Federal Student Loans there are numerous types.

  • Federal Perkins Loan – Need Based
  • Stafford Loan – No payments while the student is in school. Can be unsubsidized which means you can have a loan not based on need?
  • Federal Family Education Loans – Private loans backed by the government

Lastly, it definitely is to your advantage to shop around and try to find the best rates for yourself. It could save you a large sum of money.

Wedding Day Loan Options

Hopefully, the big day is something you will only do once. Most of us want to make it as spectacular as possible. If you’re marrying a prince or one of the Trump kids you have nothing to worry. If you’re not marrying one of them you may have to settle for a less spectacular venue. What if it was your childhood dream to have your Cinderella moment for just one day? What if you have bad credit? Interestingly, borrowing with bad credit doesn’t have to be a fairy tale crusher. There are actually organizations that specialize in bad credit wedding loans. In fact many of them are personal unsecured loans. If you’ve read some of our other posts you remember that a personal unsecured loan is a loan where you don’t have to actually put up anything like your house or car in exchange for the money. Which is a good option if you don’t want to risk losing one of your assets.

What is more surprising are some of the rates related to unsecured loans. They typically range from 10%-22% depending on your credit score and can be paid back typically over 6 years. These are very similar to auto loans except there isn’t an asset like the car backing the loan.


Home Based Business

Many people are interested in the idea of a home based business. They know the Internet has the potential to help them, but they’re just not quite sure where to start. There a number of different sites to help you think of some home business ideas, but many of them are based around what is called affiliate marketing.

If you’re new to the idea of affiliate marketing, the basic idea is that there are people who have taken the time to create what are called information products. Examples include how to manuals and other such items. A purchaser will get a either software, pdf or sometimes videos to help them. Usually the topics are extremely niche and difficult to find. This allows the publisher to charge more than the typical $20 you might pay at a bookstore. Additionally, since the content is in electronic format the publisher is usually willing to pay a high commission for a sale. Commissions range from 50% to 75% and some are even higher.

Sounds easy right? In some aspects it is easy. However, lots of other people are trying to do the same thing so you need to make sure you get some training. There are marketers out there literally making hundreds and thousands of dollars a day. There are also some people who have tried and ended up spending a fortune in advertising with almost $0 to show for it.

One program to help shorten the learning curve is plug-in profit site. The creator is one of those guys that spent a small fortune trying to figure it out, but never gave up. He now offers his expertise on this site.

Everybody Be Cool This is a Robbery!

I completely laughed hysterically when I heard Tim Roth say those words in Pulp Fiction, but in real life it’s not quite as funny. Despite the increasing options for banking online there are still times a visit to a physical bank or ATM is required. Interestingly, as much as technology in Internet banking has developed so have the modern day physical security measures as well.

Companies like ADT Security have been investing in cutting edge security technology for physical bank security systems. I used to think that ADT specialized in high level home security, but they have a number of high tech tools for financial institutions. Banks are starting to use some of the biometric systems such as iris, smart card and fingerprint readers.

They’ve also started integrating alarm verification, interactive video and live remote video monitoring.

While it seems like bank robberies are something out of the old west a quick search on Google news reveals that they continue to happen every day. It is one of those things that everyone always thinks happens to someone else. It is always nice to see the company providing the security system to my local bank. If it is a company like ADT I know my bank has chosen well and has the right technology to keep me and my money safe.

Loan Fraud – What to Look for

I’ll never forget the first spam I received involving an African prince who would send me oodles of money. Unfortunately, these types of loans continue to proliferate the Internet and take advantage of people. The trend has only gotten worse as people are more desperate in these hard economic times. They prey on people desperate to get student loans and other types of financing. The most common type of fraud is called an advance fee loan scams. In this situation the person is told that they have been guaranteed a unsecured loan for a large sum of money. They simply need to pay the processing fee.

Here are a few of the signs that the company may not be legitimate.

  • A lender who isn’t interested in your credit history
  • Fees that are not disclosed clearly or prominently
  • A loan that is offered by phone
  • A lender who is not registered in your state

Do business with licensed companies. Ask your state banking or finance department about the licensing requirements for lenders and loan brokers, and find out if the company has complied.

If you are the victim of a fraudulant crime you can visit https://www.ftccomplaintassistant.gov/. This site helps people who have been victimized by credit card theft. It helps the government to aggregate data and ultimately apprehend those responsible for the fraudulant crimes.

Countering the Desire to Buy

Have you ever just had to have something? You’re not even sure why, but before you could say Visa you had made the purchase and then a week later you don’t even use or remember why you bought the darn thing anyway? Typically this is because a very clever marketer has tapped into your seedling desire and created a emotional state that made you want to buy. Think of those yummy pizza ads that made you order over the phone even though you aren’t hungry or buy one of those darn snuggies for $20 over the phone. Perhaps learning more about the tactics behind this marketing can help you resist future assaults on your buying psyche.

Unless you’re an Internet marketer you’ve probably never heard of Frank Kern. He is an Internet marketing master. He has put together legendary marketing sales copy that is responsible for bringing in tens of millions of dollars with his slick tongue. People pay this guy large sums of money in the form of royalties to help promote their products. I was recently listening to one of his free videos where he was dispelling some of his wisdom. The purpose of the video was to help those selling items to sell more and think about buyer psychology, but it can also be useful to stop and pause to think before you buy.

Typically marketers try to tap into a seedling desire. A seedling desire is someone that has a small interest in a given subject. They want to then turn that small desire into a full blown emotional buying state.

Remember we buy emotionally and we justify logically after the fact. Any given copy or ad is trying to tap into your emotional state to present you with a future pleasure or way to avoid pain. In some cases it can be absolutely justified. There really are great products that can change your live. My DVR is living proof of that, but there are other things we don’t need.

One of things I have found useful is to actually wait one day and sleep on it. Sleep has a way of resetting our emotional state and changing how we feel. It is amazing how many times I’ve woken up the next day and the emotional state has passed.

Send a comment and let us know how you let the emotional state pass.

Debt Consolidation – How it Works

Debt Consolidation

Debt Consolidation

Every day I hear ads for debt consolidation. I was always curious how these loans are able to take existing interest debt and turn it into a lower payment. The primary way debt consolidation programs work is by transferring unsecured debt into secured debt. Which brings up the next question, what are the difference between the two? An unsecured debt does not have an underlying asset associated with it. A good example is a credit card. Usually, there isn’t a specific asset that you own tied to the credit card. An example of a secured debt is a home mortgage. If you don’t pay back the mortgage the bank can take possession of the home (secured asset).

Lenders are usually able to offer a lower rates since the debt is now secured with an asset. There is less risk to the lender.

Additionally, programs can do things like extend the term of your loans to increase the payback period and decrease the monthly payment. This makes it easier to meet your monthly payment. Many debt consolidation experts have the ability to work with multiple lenders. This can save a great deal of time and frustration as these agents are experts and can navigate the maze of creditors while minimizing payment.

Compare Rates in Australia

One of my favorite financial sites is bankrate.com. When I was looking for a mortgage I scoured that site on a daily basis watching rates change and thinking about who I would place my mortgage with. Interestingly for me it wasn’t all about the best rate. I also wanted someone who wouldn’t sell my mortgage and who had an office close by. I was able to find it and get a decent rate easily. I am amazed at the difference between the advertised rate and the rate you end up with though.

Even though bankrate is the 800 lb gorilla in the market there are a growing list of sites specializing in financial niches as well.

Anyway, there is a new site that seeks to help Australians with their rates as well. The site is called GoodWithMoney. They compare traditional items like credit cards and cheap loans, but what I also found interesting is that you can compare rates on items like insurance and broadband services. They have most of the major items that you need for your financial being on their site specifically geared to those living in Australia. They also have a section dedicated to financial Australian news.

If you have any other interesting sites that help to compare rates for a given niche let us know in a comment.

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