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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.

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.

Pay Day Loans – Legislating Rates

The payday loan industry is enormous at over 85 billion dollars. In 2008 the state of Ohio passed legislation limiting the interest rate to 28% for businesses offering payday advance loans. This puts the interest rate at close to the same rate as a credit card. The state supported this bill by 64%. Proponents of the bill noted that payday loans cause the poor to get caught in a vicious cycle of debt that they cannot escape.

The interest rates on these types of loans ranges from 300% -600%. It is also important to understand the amount of risk involved with this type of transaction for the person lending the money. Given the size of the industry it would seem that there is plenty of profit motive to enter the market and that someone would lend at a lower percentage to pick up more business. However, the only thing to factor in must be the size of risk involved. More innovative online pay day lenders such as those that offer no fax payday loan have actually decided to stop lending in Ohio due to the new legislation.

This limits choice for Ohioans and others in States that limit pay day interest rates. Some have suggested that state level assistance programs may be necessary in the absence of this form of credit.

I’m interested to hear your thoughts on the subject. Leave a comment and let me know what you think. Does the new legislation protect those who would otherwise be taken advantage of or is this a necessary service that people depend on that will no longer be an option?

Revisiting Lows

After enjoying a nice twenty percent rebound from November 20th through the first week of this year, the markets are pulling back aggressively once again and threaten to test their prior lows. The reasons are always difficult to pinpoint, but the fact that we are headed into earnings season probably has as much to do with it as anything else. Many would be buyers are likely on strike, preferring to wait for the news than guess on what has already been discounted. With a scarcity of buyers, prices get marked down to ensure some semblance of liquidity for those who need it.

This back and forth, trading range based action will likely become commonplace for most of 2009. We will likely see one or more nice bear market rallies and then aggressive sell-offs as potential catalysts for uncertainty approach. Our best advice for dealing in this environment is to be realistic with regards to personal, short term needs, tactical and incremental with regards to near term portfolio change, and long term with regards to investment trends and horizons.

So what does this mean?

As we stated in late summer when the bear market rally started to become ugly, every investor’s first responsibility is to themselves and their family. To this end, in an uncertain employment environment, make sure you have access to a year’s worth of liquid savings. If you do not have it now, do not make radical changes all at once, but incrementally over a period of months to build your cash cushion, from whatever sources exist. The ruth of the matter is that if you do not survive the short run, the long run will be hard to reach.

Tactically speaking, we repeat our view that the market will likely remain range bound between its prior lows of 740 on the downside and 1100 on the upside, until the economic fundamentals visibly improve. We seem to be in a down phase towards 740 as we write today’s entry. Of course, we have no idea if this low will actually hold – still about ten percent lower from current levels – but we take some comfort that it marked the low for 2008, a year that had a ton of very bad fundamental news, including several high profile bankruptcies, high stakes corruption, and severe liquidity squeezes.

Our plan of action calls for positioning the portfolio for an eventual long term recovery in the economy, within the constraints of a likely trading range. This means we will likely trim positions more aggressively as we approach the higher end of the range while hopefully maintaining the courage and fortitude to add back to or increase our positions at the lower end of the range. Of course, all of this is much easier said than done, but it remains our intent.

Over the long term, however, we remain primarily interested in investing in companies that are leveraged to longer term, defensible trends. While almost all companies are showing some signs of cyclicality in their business given the dual nature of the credit driven recession, the fact remains that over the long term, innovation will absolutely thrive in this environment as pain makes clearer our most pressing needs as a society.
Times are tough. But as we said in our year end commentary, do not allow the headlines to get you down. Many perfectly happy people around the globe do not even know that the stock market exists.

This is an article from our friends at Broadleaf Partners

Below is a description of their firm.

Broadleaf Partners is a Hudson, Ohio-based asset management firm focused on achieving superior investment returns and providing outstanding client service. We employ a concentrated growth style of investing, holding approximately thirty equity positions from a cross section of industries.

Our sector exposures typically reflect the outcome of our bottoms-up stock selection process, which is influenced by our assessment of the economy and other long-term trends. Innovative new ideas and themes are of particular interest and our all-cap approach provides our clients with the flexibility to invest where those opportunities abound.

At Broadleaf, our clients’ interests always come first. We are passionate about helping our clients achieve their investment goals and welcome the opportunity to help you achieve yours.

The Power of Money, Endorsement and Identity Theft: Jeremy Schoemaker vs. Google Money Tree Case

IdentityJeremy Schoemaker, known for his Shoemoney.com is one of the authoritative bloggers on the Net today. His company and personal branding is so powerful, that every marketer wants to capitalise on them – even doing it illegally.

This is a classic case of identity theft for the purpose of making more money through the power of endorsement.

The case study

One of Jeremy Schoemaker’s favourite photos is him holding a cheque of a large sum – thanks to his successful make money online business ventures.

Unfortunately for him, this photo is allegedly used by an advertiser to promote Google Money Tree, a ‘system’ to make money online through Google, which later found to be a scam.

Stolen identity to promote a scam program

That’s where the problem lies: Unauthorised use of images to endorse a product without any permissions is already considered illegal and unethical. In this case, the image is used to scam people.

The impact toward Jeremy’s brand images is devastating: People assume he endorses the Google Money Tree, so that many people join the program simply due to the fact that Jeremy, the Shoemoney, ‘endorses’ the system. When the system is deemed to be a scam, so does Jeremy!

He is, of course, not happy with the stolen identity and false endorsement.

Endorsement and mind game: Why advertisers pay big bucks (some steal endorsees’ property as freebies) to get ‘celebrities’ to endorse their products.

Although Jeremy Schoemaker is not your typical celebrities – he is one of the blogging celebrities that is made famous for his financial achievement through blogging and building businesses surrounding it.

The main reason advertisers splash a large sum of money on endorsers that always are public figure is this: to get into prospects’ mind.

Jeremy is a public figure – he build his business and personal branding relentlessly. In blogging world, Jeremy Schoemaker means make money online, blogging celebrity, and branding powerhouse.

Many advertisers want to touch the corner of Jeremy’s robe so that Jeremy’s positive attributes, such as charisma, authority, mindset, and knowledge, are transferred to their products, or at least related to their products.

This way, advertisers get into prospects mind, by saying “Jeremy uses this system to make money,” “Jeremy believe this product is excellent,” and any other assumption.

Obviously, the more authoritative your endorsees are, the stronger visual and emotional bait your product has.

How would this affect the endorsee? He/she could be related to the product, and as the product is successful, his/her image and personal branding will be enhanced, too. Of course, this also applies to the contrary.

Stolen identity that is used to scam: a devastating negative ripple effect

In his Shoemoney.com blog, Jeremy wrote a clarification post that clearly stated that he has nothing to do with the Google Money Tree scam, and indicated that he will pursue a lawsuit against the owner of Google Money Tree system.

Jeremy did the clarification to stop the negative ripple effect that could bring his businesses down altoghether. Clearing his name will take a lot of resources, including money and time.

I respect Jeremy Schoemaker and would like to look forward for a positive outcome of this.

Image by fotologic.

How to Improve Your Sense of Security in Uncertain Economy

Sense of Financial SecurityPeople are often being overly reactive when it goes to bad situations.

The recession itself is happening largely due to global public reaction toward financial crisis, that is more often than not, doesn’t actually affect them directly whatsoever.

Negative outlook on financial issues cost the community lost productivity, thus worsening the effect of the financial crisis.

As a major part of your community, you, in whatever way possible, need to feel secure about your financial stature.

Why? Because if you feel secure about your financials and your life in general, you will be able to affect the community surrounding you.

Sense of security

Improving personal sense of security has never been this important in the past decades.

Sense of security is driven by facts and assumptions. The more you assume, the more insecure you will be. The more you identify facts, the more secure you will be.

Sense of security = know more facts and less assumptions.

Assumptions can be ‘altered’ into and identified as facts – no matter they are right or wrong – if you increase your knowledge through learning from reliable sources.

Facts also related to control. If you want to feel secure, you need to gain (and regain) more control on your life based on a set or series of facts.

Financial sense of security

In term of finance, assumptions leave you unguarded.

For example, consider these statements: “Stock A will go up in 10 minutes.” “Real estate B will increase in value.” etc.

The problem in the above example, is due to the fact that nobody can guarantee the above statement. Any guarantees on such would be classified as misleading, even illegal.

On the other hands, facts can secure your personal finance and help you see things from the right perspective.

For example, consider these statements: “I’m getting a 10% rate of return on my investment.” “The foreclosure houses I bought make me $150 positive cashflow per month.”

Warren Buffet, the maestro of investment, do all of his investment based on intrinsic value – the facts – not based on the floating stock value on stock exchanges – the assumptions.

Again, it is all about control. “Sure things” improve control, hence reducing investment risks.

How to improve your financial sense of security these days

You need to get more facts about personal finance. You will eventually find out that there is a certain consensus between personal finance experts about some of the best practices in managing your finances.

Such knowledge you acquire should be enhanced with tools that can help you with a more exact (and measurable) facts. For example, the use of Savings Calculator to learn how much you would receive within a period of time can provide you with a measurable fact that allow you to decide what’s best for your personal finance – finding savings account that yield you more, finding new investment that can increase the speed of your money, and so on.

Nevertheless, your diligence in increasing your financial knowledge will determine how secure you feel about your personal finance, and how well you cope (and thrive) in today’s economic crisis.

Image by bragadocchio.

Faxless Payday Loan: Helping Hand or Quick Sand?

Helping HandWhen we talk about loans in any forms, they are always related to debts.

Taking loans can offer you two things: good debts and bad debts – good debts put money in your pocket, bad debts lose money from your pocket.

Your financial needs, situation and knowledge play important roles in making the loan bad debt or good debt.

Loans come in many flavours – One of the most talk about, in my opinion, is payday loans. Why is that?

Faxless payday loan – offering you financial solution, fast – a bit too fast to handle

Payday loan is a small amount, short-term loan that is intended to cover borrower’s financial need until his/her next paycheck received.

With the advent of the Internet, payday loans are becoming more and more accessible. The term “faxless payday loan” refers to payday loan which application is processed online, thanks to the Internet.

While in essence payday loan aims to help people regardless of their credit score, many accuse payday loan as the culprit that drown many people deeper in debt.

Not quite.

In my opinion, people inherit a common weakness. They want more for less, and they want it fast.

People are always looking for fast and instant remedies for their problems, including financial problems. Just like everything in life, such as fast food, instant means immediate gratification first and quality second.

Payday loan offers fast solution. Faxless payday loan even does things faster, due to online application processing and instant approval. The drawback, as always, is the sky-high interest rate.

Those bring interesting relationship: No matter how negative the reputation of payday loan is, it seems that more and more people need payday loan these days, and payday loan providers are thriving these days. Some sort of love-hate relationship between lenders and borrowers.

Reality check: Stop blaming payday loans – have you ever look things from the eye of payday loan providers?

I am appalled to know people are blaming payday loan. Although I’m not offering any payday loans or similar things and not involving in one either, I think there are too much bad apples thrown at lenders, accusing them as scammers.

Have you ever thought that it is borrower’s responsibility to keep him/her-self well-informed regarding what type of loans he/she is about to take? It is borrower’s responsibility to know what question to ask and when to take payday loans.

Many payday loan providers I know are trying hard to offer a solution. They bear huge risks – they lend to borrowers with no regard of their credit scores. That is why payday loans charge huge interest rate: to supplement the high risks of lending to borrowers with bad credit ratings.

The right borrowers do regard payday loans as the life-savers. do help people – the right one and the well-informed one, that is – getting out of debt.

How to use payday loan to your benefit

First thing first – learn everything you can about payday loan. It is your responsibility to learn about payday loan, about the providers, and about what to expect and when.

Always plan everything – You need to know how much will you get from the lenders, the amount of the interest you owe to the lenders, and most importantly, how the short-term loans can help you getting out of debt, and for how long. You can actually ask the payday loan providers to provide you with a calculation on how much would you pay in the end of the loan period.

If the plan looks positive, go for it. If not, run away from it.

One, last advice: Never, ever take any form of loans without the right knowledge about the loans. That only makes payday loan quick sand, not helping hands.

Image by toolfan.hess.

Government Grants to Pay-Off Your Credit Card Debt: Blessings in Disguise

National Debt CountIf you are hoping for a miracle in clearing your credit card debts, you will probably wasting your time.

But if you are diligent enough in looking for information in the right places, you might found something that could be very well your small miracle.

One of the small miracles in today’s recession is Federal grants for credit card debt.

What is Federal grants for credit card debt?

In essence, the Federal grants for credit card debt is Government grants that allow you to pay off all your credit card debts, should you meet the criteria and requirements.

The main purposes of this grant are:

  • To stop you from drowning deeper into debt by taking new loans to pay off your previously taken loans.
  • To help you sustain your credit ratings and reputation.

The best thing of Federal grants is obvious – It doesn’t require to be paid back.

However, there are certain criteria and requirements to be met to be eligible – the first and foremost criteria, you have to be a US citizen, as this grants only apply in the United States.

Federal grants can have tax implications so consult your tax preparer before you file the 1040EZ.

First of all, you need to know how to apply for one.

How to get Federal grants for credit card debt

In general, the requirements to apply for the grants are as follow:

  1. Find the right Government Agencies and seek the information about the Government grants and funding programs – You can find such information from these Government’s sites: CFDA.gov and Grants.gov.
  2. Have the needed information ready: proof of income, your loan monthly payments information, and your total amount of loan taken.
  3. Along with the information the Government Agencies gather about your financial status, your application is then assessed to determine whether you qualify or not.
  4. You will be informed regarding your eligibility, and if you are judged to be eligible, your debt will be cleared as the government pays off the debt on your behalf.

Beware of scams

Just like anything that involves money, there are some organisations and companies that claim to help you getting the grant you’ve always wanted. They are too smart to know that, these days, people are often acting irrationally to get out of debt as soon as possible, by any means.

You homework is to keep your head cool and rational, while focusing your effort to find the right information. Again, the good places to start are these Government’s sites: CFDA.gov and Grants.gov.

Hopefully this post will help you with an opportunity to have a fresh start and build your personal finance the right way.

Image by Kevin Krejci.

Stock Market Crash in 2008 – Will It Recover by 2010?

Economic RecoveryNobody can really predict when the stock market turmoil will peak, including the recession, but a chart and article from the Daily Kos gives us a quite legitimate starting point to guesstimate on when the economy is prospering (again.)

The S&P Market Index Chart

sp_from_1825From this chart, the block represents a year and the columns represent a range of return on the S&P index.

We can learn that in the middle column, those are the typical years where the market has risen from 0 to 10%. This bell-shaped chart looks ‘normal’ in economic situation, but have a look at the left-side of the bell chart – yes, there goes the year 2008, at -50% S&P market index change.

A certainly lackluster year, 2008 is as bad as the worst stock market crash in the history of S&P, back in 1931.

What does it mean? Welcome to one of the worst years in stock market history! Hopefully, the 2009 will not be the worst year of the stock market history. But, even if the record breaking happened, I still believe somehow that economic recovery is right on the corner.

How well do the government react to the fact?

The US government, through the Fed, are trying to do what they think will save the US economy – record breaking funding to save banking and financial institutions, such as AIG, from collapsing.

Although not the best possible solution, as I think doing so will eventually bury US economy deeper into recession – perhaps not today, but most probably in the near future, what the Fed did is arguably give much needed friction to slow down not only the US recession, but also global recession.

Are there still hope?

Well, the 1931 crash did followed by a big rebound in 1933, where the stock market achieved a 60% return. Will this also be the case, that the crash in 2008 will be followed by similar improvement in 2010?

Although highly inaccurate, hopefully such assumption will become a reality – the sooner, the better.

As I already stated in my previous posts, I think that the negative sentiments make global economic recovery slow, as financially and psychologically distressed people will likely to react in skepticism toward any efforts to recover the global economy.

So, I conclude that all is coming back to the media – what the media preach will affect the recovery process, as people will ‘blindly’ count on the media (including on the experts), rather than their own common sense and financial knowledge, to seek ways to quit recession.

Hopefully the media (including this blog) can affect the recovery in a positive way.

Image by Alan_D.

Eventually, How You Survive the Recession Depends on Your Financial Intelligence

MoneyI once asked by my reader in my other blog – When do you think the recession will end, and how?

I really am having a hard time to answer the question. So may opinions from experts and public, as well.

To tell you the truth, I can’t imagine how the recession will end, and when will it eventually ends.

Some experts say that the recession will peak within 2 or 3 years, and things will improve gradually from there – so, rough road ahead.

Regarding how the recession will end, here’s an interesting estimate – According to this article, the average recession lasted for 10.8 months. Therefore, according to the data, on average, the recession should end last November 2008, and the longest would probably ended on April 2009.

Not exactly the case, in my opinion. Why?

Negative sentiment drive today’s recession more than before

I think that today’s recession might not be your typical recession. The emotional turmoil is as bad as the economic turmoil, in such a way that people left with unsecurity, uncertainty and negative thinking.

Even though the economy is supposedly rebounded on November 2008, the economic downturn inertia will lengthen the recession, even beyond what’s estimated as the long recession mentioned in the article above, April 2009.

As a non financial expert, but a self-made student of human behaviour, I view the recession will go well over April 2009, and will reach the peak on mid or late 2010.

I’m not sure, but neither the expert.

The best survival tool: financial education

Regarding how the recession will end, my answer would be this:

As everything in life – such as the ripple in a lake decreases when the wind speed decreases – after the panic, buzz and negative sentiment sustain themselves in people, the recession will gradually peaked and the economy will rebound – all with viral effects, as sentiment is contagious; The positive outlook of the economy will gradually, in itself, improve economy situation.

The question: How to accelerate economy sustainability?

The answer: As people start to gather themselves and start to learn from the situation, their financial intelligence increases gradually, and the new understanding will accelerate economy recovery – eventually.

The availability of money guides and money information, especially online, will help people to learn better, faster.

Nowadays, the phrase “Time is money” has never been this true before – the faster people learn, the sooner recession will end – the knowledge will set you free.

Image by emdot.

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