Are Franchise Businesses Worth the Money?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

Starting your own business is scary.

A lot of would-be entrepreneurs try to take some of the fright out of it by investing in a franchise operation. Franchise operations can improve the chances of business success, but they often do so at a high price. So, are franchise businesses worth the money?

It’s actually a mixed bag. You can easily make a six figure income from the better established franchises, such as McDonalds, Wendy’s and Chick-fil-A. But, franchise operations aren’t for everyone.

The Pros of Franchise Businesses

If you’re looking to start a new business, investing in a franchise is like going into business with a senior partner who knows the ropes, and has already developed a model for business success.

Some of the advantages that a franchise offers include:

Corporate marketing. This is the biggest, and perhaps most underrated, aspect of business success. Franchises often come complete with marketing packages, including advertising, that will keep customers coming in your door. You’ll have to pay to participate in that marketing, but the results will be pretty close to guaranteed.

Brand recognition. Brand recognition is the single biggest obstacle for every new business. You’re coming out on the street as the new guy on the block, and you need to develop a reputation it order to create a viable customer base. When you invest in a franchise, the brand recognition is already there. This enables you to have a customer base virtually from the get-go of your business.

Management template. With a franchise, there’s no guesswork when it comes the management. The franchise already has a management template in place, and all you need to do is go through the steps. There’s no need for trial by fire. That will save you both time and money.

Location, location, location. The more successful franchises have the location thing down to a science. They know exactly where to locate an operation for success.

Financing. Getting a bank loan for a business start-up is close to impossible. Large franchises typically offer financing packages that will remove the need to depend upon the banks.
So far, investing in a franchise sounds perfect. But read on.

The Cons of Franchise Businesses

Just as there are giant positives to investing in a franchise, there are negatives of equal proportion.

Upfront capital plus debt. It can be more expensive to invest in a franchise than to start a business from the ground up. This is because the franchise has a large dose of goodwill, as listed above. Your chances of succeeding with a franchise are far greater than if you start a brand-new business, but you’ll be paying a heavy financial price for those advantages. A McDonald’s franchise for example, can cost a total of $2.2 million, including $750,000 upfront.

You’re self-employed, but you’re really not. If you’re looking to be truly self-employed, investing in a franchise may not get you there. It’s something of a hybrid – from a standpoint of capital, you’re certainly self-employed. After all, it’s your money you’re putting into the franchise. But as far as running the day-to-day operations, your largely locked into the franchise management plan.

Our way or the highway. The larger and more successful franchises have very specific operating plans. If you can’t work within the prescribed framework, the franchise can be terminated. Franchises need to maintain companywide standards, so there’s very little room for individual creativity or expression.

Failure is not an option. Franchises don’t like failing operations. If your franchise is struggling to survive, your affiliation with the company could end in short order.

Are You Suited to Run a Franchise Business?

Apart from the pros and cons of franchise participation, you have to seriously consider whether or not you have the personal profile to make it in the franchise business. Not everyone can, and you have to be completely honest with yourself in determining whether or not you have what it takes to make a franchise work.

You must be entrepreneurial. Even though there is a lot of top-down control in franchises, you still need to be an entrepreneur at heart. That means you have to know how to run the place, how to deal with people, and how to manage scarce resources. If you’ve never been self-employed before, investing in a franchise could become a disaster.

You must have a sales persona. When you are running a franchise operation, you’re typically dealing heavily with the retail public. There is an element of sales involved in this, that includes at a minimum, a high level of comfort in dealing with people. If you prefer to work in a quiet office by yourself, you’ll be doomed to fail in a franchise operation.

You must be a “Yes man/woman”. This gets back to the top down control issue. Even though you own the franchise operation, you’re still subject to control from the top. Franchise operations have strict standards and procedures that they insist on maintaining in order to maintain the integrity of their outlets company-wide. You have to be prepared to accept that arrangement, and to make it work within a tight framework.

You must have minimal personal obligations. This relates mainly to your life outside of your work. Even though franchises have success templates, you will still be required to work an ungodly number of hours, particularly during the first year or two of operations. If you have heavy family, social, and recreational obligations outside of work, a franchise may not work for you. In most cases, investing in a successful franchise requires a complete commitment of your time.

People can make serious money investing in a franchise. But you have to understand what you’re up against – the benefits you will gain measured against the price that you will pay in all forms – and be ready to do your part.

How about you all? Have you ever considered starting a franchise business, or know of someone that did? What was your/their experience like?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/wfyurasko/4003382676/sizes/n/

Earn Extra Money With A Side-Gig

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

When I was 24 years old, I was working 1,400 miles away from home and decided that I wanted to move back to be close to family. Jobs were not easy to come by, and I did not have a large enough bank account to just quit my job and drive back home to Michigan.

It was at this point that I decided to start a side-gig that would hopefully provide enough money for me to make the move without many issues financially. With just an extra $1,000 a month, I could survive and wouldn’t need to accept a crappy job just to survive in my hometown.

If you’re trying to figure out a side-gig to start that might be appropriate for you, below are several ideas. Enjoy! 

Making Extra Money With a Blog

After doing a little research online, I decided that I would start a personal finance blog.

It was my field in college (even though I wasn’t actively using this degree at work) and I felt that I was fairly gifted at writing, so I figured that I would just give it a shot and see what would happen.

Starting a blog was not easy. I knew nothing about building a website and I had absolutely no clue how to market it, but because I enjoyed writing about personal finance, I just struggled my way through it and was hoping that readers would just straggle in along the way. Well, somehow it worked. After 6 months of making practically nothing (I think my total earnings was somewhere around $5.21), something just clicked and the money started pouring in. That seventh month was about a hundred bucks, and then the next month was $300, then $500. By the end of the first year, I was earning a fairly consistent $1,000 and was on my way home to be with my family. Fast forward three years and I am still earning a healthy income with this venture.

Keep in mind that this is not an easy venture, but there is still some money to be made in the blogging world. Some of the hot blogs right now are personal finance, cheap crafting, and traveling.

Detailing Cars

My nephew was recently asking me how he could get through college without taking out any loans. Jobs for a 19 year old often pay less than $10/hr. and they don’t come with many hours per week. I had a simple answer – detail some cars. Through church, he has plenty of connections and could soon be making a couple hundred bucks a week just by cleaning, vacuuming, and waxing a few cars. If you have a passion for keeping your car clean, maybe you wouldn’t mind cleaning a few other cars for a hundred bucks here and there.

Mowing Lawns

If there is one thing that people often don’t enjoy doing, it’s mowing their lawns. If you really want to make some money, undercut the other mower businesses in your area and charge $15 or $20 per mow. By mowing just 5 extra lawns in your neighborhood, you could earn an additional $400 a month! That’s pretty decent for pushing a lawn mower a few hours a week.

Tutoring

This is another great way to earn some cash in your spare time. Since parents have fewer and fewer hours in their day, they are willing to pay a qualified individual some good money to help their child with his/her homework each day, especially if they are struggling in a certain subject area. If you are good with children and have a few degrees under your belt, perhaps you could step in and help a few kids each day. At $15 or $20 per hour (or sometimes more), you could be making some serious cash in no time!

How Much Will This Really Help Your Budget?

When you’re only making $400 extra a month, how much will this really help your budget? Do you want the short answer to this question? A LOT.

Think about it. How much extra money do you have each month now? Maybe an extra $100? With another $400, that means that you’ll have $500 of disposable income each month. You have just increased your funds each month by 5 times what you were making before! Put this money toward your bills and they will vanish incredibly fast. Invest it in the market and you will soon have thousands of dollars instead of just hundreds. No matter how tiny the amount of money, it can make a much bigger impact than you think.

How about you all? Have you ever thought about starting a side business to help with your finances? What options have you tossed around?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/pasukaru76/5296559285/

6 Yearly DIY Maintenance Steps To Keep Your Lawn Mower Humming

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

“Are you ready for it to officially be Spring?,”  I asked my wife as I wheeled my lawn mower onto the driveway.  The day I get to take my lawn mower out of my shed, fire it up for the first time of the season, and fill the air with the smell of freshly cut grass is one that I look forward to all Winter.

She just shook her head and laughed at me as my dramatic pull of the start string resulted in nothing but a sickly chugging sound from the engine.  I stated that the gas tank was completely dry, and it would take a few pulls to get it primed.  I pulled the string again and again, but it was very obvious that it wasn’t going to start.  Puzzled, I looked at my lawn mower, and realized that I had completely skipped my usual Spring lawn mower maintenance routine.

I know some people that will take their mowers in for a tune up each Spring.  A local small engine repair shop will tune up my lawn mower for $60,  but in my opinion, the only thing that’s getting tuned up is the mechanic’s wallet.  In seventeen years of home ownership, I’ve owned only two lawn mowers.  The first one lasted 8 years, and was the cheapest lawn mower I could find (about $100) at the time.    Had I spent $60 a year on a tune up, I would have spent $480 over the life of the mower, and it wouldn’t have given me any benefit.  The wheels fell off and the frame was cracked and broken, but the engine still started on the first pull!  The mower I have now is entering it’s 9^th year of use, and while the paint is fading a bit, it’s still in perfect functional condition.

Instead of taking my lawn mower into have it professionally tuned up, I do the following steps each and every spring to keep my lawn mower in tip top shape:

Clean It Off:

Seven months of sitting in a shed will leave a lawn mower looking pretty grisly.  I usually like to first spray it down with the hose.  Then, I take some paper towers or a garage rag and wipe it down.  After that, I tip it on it’s side, and remove any stuck on clumps of grass that may be impeding the blade, or blocking the exit chute.

Sharpen the Blade:

While I’ve got the mower tipped upside down, I remove the blade to have it sharpened.  You can take it to a small engine repair shop, but in my case I have a neighbor that has the equipment to do it himself.  Having it done for me will cost about $9, but I get it done for free.  I actually have two blades that I alternate using, always keeping one sharpened and ready to go just in case I want to switch the blade and my neighbor isn’t around at that very moment to help me.

Add Oil:

Lawn mowers don’t use a lot of oil, so it’s something that gets forgotten by many people.  Each spring I buy a new bottle of oil, check the dipstick, and fill it right up to the line.  Make sure you follow the manufacturer’s suggestion on what kind of oil to use with your specific lawn mower.

Clean/Replace the Spark Plug:

Most seasons I usually just remove the spark plug, and clean off the bottom and top connectors with sand paper to make sure the contacts are clean.  However this year, that wasn’t enough.  For the first time in my adult life, I had to replace the spark plug.  A new one only cost me just under $2 with tax at Walmart, and I had it installed in a matter of minutes.  If you do replace your spark plug, I recommend removing it first, and taking the old one with you to the store so you can match the part number printed on the side of the plug.   Nothing’s more frustrating then finding out you bought the wrong part and have to go back to the store.

Add Gasoline:

Last but not least, fill it up!  I have a five gallon gas can will last me about two months.  This reduces the chances of me hurrying home from work to mow the lawn ahead of an approaching storm only to find that I need to take an extra fifteen minutes to run to the gas station.  Obviously I need to fill the lawn mower more often than just prior to the first mow, but after a long winter in storage, my gas tank is usually bone dry. I like to fill it up, and hit the primer button a few times to get everything flowing through the gas lines.

Check For Leaks:

Now that I’ve added the necessary fluids, I give my mower a careful once over to make sure oil or gas aren’t flowing out of any leaks in the engine. If any leaks ARE found, this is where I would break down and consult a professional.  It may simply mean it’s time for a new mower.

By following these simple steps in the Spring, I start out the lawn mowing season with:

• Oil for the entire season – $4.00
• Gasoline for a few months – $17.50
• A sharp blade – FREE
• A new spark plug – $2.00

Total cost for my Spring preparation: $23.50.

The next day, after following my normal routine, I again asked my wife if she was ready for Spring to officially begin.  I pulled the string once, and the lawn mower roared to life.

Nailed it.

How about you all? How do you get your lawn mower ready for the season?  What’s the longest a mower has ever lasted you?

Share your experiences by commenting below! 

***Image courtesy of antpkr / FreeDigitalPhotos.net

Stop Searching and Start Acting!

The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

I am known for the amount of planning I do when trying to make a decision.

I rarely just jump into something without fully understanding the pros and cons. No decision is too small for me, which is why some people call me a defensive pessimist.

My desire to research options came from my father, who does the exact same thing. My older brother also is a researcher. We research a topic until it is almost dead. While I used to think it was good to research and plan everything, I have found that is not always the case. My decision making has changed a bit, but more importantly, my desire to act.

There is Nothing Wrong with Searching

When I was in debt and realized there was a problem, I took to searching for answers.

The internet can be a great place to find information, but it can also provide information overload. If you don’t understand how to sift through all of the opinions, it can be hard to find what you are looking for. I am an advocate for people searching for options, especially when it comes to getting out of debt.

There is not one person who has the same situation as another. Each person’s financial picture is different. While there is a lot of awesome information about getting out of debt, it might not apply to you. For this reason, I recommend people take the time to search for an option which works best for them. Blanket advice can start you on your way, but it won’t likely be the best answer.

Don’t Keep Searching

I have a confession to make. I tend to overanalyze my options and it leads to me beating a dead horse, so to speak. I can work on researching options for a problem, yet whenever I find the information I need, I can’t make the decision. When I can’t make a decision, I start searching for more options. It ends up being a tiring cycle.

Over the years, I have realized this is my problem. I look for the most desirable option, but then my mind pushes me to continue searching. Second-guessing is in my nature. I have problems jumping out of the searching phase and into the action phase. Remember, actions speak louder than words. I can plan all day, but until I take action on that plan, it is nothing more than words.

Stop Searching and Start Acting

It took me four years to pay off my debt.

While that time period is behind me, that was a long time. I wasted a lot of my money on interest payments and I didn’t save for retirement or all of the other cool things you can do when you are not in debt.

The reason why it took me so long was I needed to find the absolute best option. I searched and searched. I was putting off taking action until I found the answer. That was until my wife muttered “just start paying it off already!” She had a point. She had a really good point.

How can you pay off debt if you never actually make a payment toward that debt? How can you reach your goals if you don’t actually take steps to reach them? There is nothing wrong with researching your options, but you need to take action in order to make a difference. If I could go back to my debt repayment days, I would have just started paying more toward my debt. I wouldn’t worry about the snowball or avalanche method. I wouldn’t worry about any of that. I would just start and then search for options as I went along.

Don’t get hung up on overloading yourself with information. That process can come later. If you need to do something, then research just enough to get started. Take the action necessary and then research some more. Once you take action, you will be on your way to reaching your goals, whatever they may be.

My biggest piece of advice for anyone in debt is to stop searching for options and start taking action. Nothing beats just taking the first steps. All of the other thing will fall into place afterwards. Action is more powerful than words.

How about you all? In what circumstances in your life have you found yourself doing too much prior research, when in reality, taking the first action step would have been more productive?

Share your experiences by commenting below! 

***Image courtesy of Celestine Chua

Use Twitter Effectively With These 5 Tips

The following post is by MPFJ staff writer Shondell Varcianna of Call Me What You Want Even Cheap and Varci Media. Enjoy! 

With over 300 million users, the massively popular micro-blogging social media site, Twitter, can be a great online marketing tool.

Once you sign up, it gives you access to a vast pool of potential customers for free. It provides the easiest way to reach out to customers, since every tweet goes to all your followers. Tweets are easy to create and each tweet takes less than a minute to write and post. And since each post is limited to 140 characters, you can be specific and direct with your followers without offending them.

Like any marketing program, Twitter can be an effective marketing tool only if you know how to use it to your advantage. Here are 5 tips on how to use Twitter effectively:

1. Tweet useful info as often as you can

At any instant, hundreds of other businesses in your niche could be vying for user attention.

So, in order to get noticed, you need to participate actively. This means you should tweet as often as you can. If you do not have a variety of useful content to tweet, you can tweet and re-tweet the same tweet several times a day with slight modifications. If you have nothing to tweet of your own, you can re-tweet other users’ tweets. Being actively present ensures an audience of loyal followers who will not only wait for your tweets, but also re-tweet your tweets, which will expand your reach to other users who are not your followers.

2. Follow your existing and potential customers

It’s not only celebrities who like to have legions of followers; everyone likes to have hundreds of followers on social media sites. They will be happy to be followed even if they have nothing to say. So, you should seek out and follow your existing and potential customers. In return, they will repay you with their support and loyalty. Your more loyal followers will follow your tweets religiously and retweet your tweets frequently, which is a great way to attract more followers. It goes without saying that the more people you follow, the more followers you will have. So, don’t just wait for people to follow you; take the initiative in following other users. You will have nothing to lose and only to gain.

3. Follow people and businesses in your industry

Twitter is a great place to get the information and news that you need to keep abreast of the latest developments in your industry. Individuals and businesses that have come up with innovative ideas and products often spread the word through social media sites like Twitter. So, you should actively seek out people and businesses in your niche and follow them and encourage them you follow you back. This generates awareness of your Twitter presence and can attract new followers. Following competitors can even lead to collaborations, which can give you access to their large base of customers and create new avenues of opportunities.

4. Place links in your tweets

Instead of just relying on your Twitter account for other people to find you, you should actively direct potential followers and customers to your website or blog. The easiest way to do this is to place a link in your tweets and on your home page. Other social medial sites like Facebook and LinkedIn allow you to put links to your Twitter account in your status. You should use that to your advantage. Also consider including your Twitter account in your e-mail signature so that it will go out with every e-mail that you send, to expand your reach.

5. Hire someone to manage your Twitter account

If you want to make Twitter an effective marketing tool, then you should consider hiring someone to manage it for you. Whoever you hire should be an expert in internet marketing with knowledge of SEO and other techniques. Their job should be to create and post interesting and attractive tweets, follow other users’ tweets and determine if they have any relevance to your business, search for potential customers and follow them, communicate with followers, review the tweets written by your employee before sending them out, to ensure that the tweets going out of to your followers are accurate and correctly presented.

How about you all? How have you used Twitter to grow your business? What was the strategy that worked best for you?

Share your experiences by commenting below!

***Photo courtesy of Slava

Delay Your Gratification (Even If You Have The Cash)

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Do you have any idea how people used to spend their money 40 years ago?

In a time before credit cards were main stream, people used cash to purchase everything. If they did not have the cash in their bank accounts, then they simply could not buy the goods that they wanted.

Our world is much different today. Since credit is so easily accessible, people often see an item that they want in the mall and quickly whip out their credit card to buy it. They don’t need to think about whether they have the cash in their account because they can just borrow the money now and repay it over the next few months or maybe even years. This method of spending has just become a way of life.

The Smart, the Dumb, and the Wealthy Weirdoes

There were basically two types of spenders forty years ago.

There were those that spent their money immediately when they got their paycheck (and never had a savings), and there were those that lived below their means and put a little bit away each week. The weekly spenders were considered to be financially dumb and the savers were considered to be smart.

Today, there are actually three types of spenders. With the option of credit, you actually have 1) the individuals that spend more than they earn (and have a consistent balance on their credit card), then 2) you have the people that keep their spending in check and live paycheck to paycheck (but pay off their credit card each month), a then 3) there are those that actually put money away and invest in their future with their excess cash.

The spenders who rack up credit card debt are considered to be financially dumb by many. The paycheck to paycheck spenders are considered to be smart since they do not depend on credit to survive. And then there are those that put money away and have a plan to grow wealthy with a budget – these people are thought to be crazy (or “wealthy weirdoes” as I referred to them as in the title) because they are taking the exact opposite approach to spending as everyone else. But, these are the individuals that will become ultra-wealthy while everyone else struggles through life.

Delay Gratification and Become Rich

If you care about your future, you want to be a wealthy weirdo.

In our world today though, this is not an easy thing to do. Many people understand that it is wise to pay for items with cash so that you don’t pay the bank interest on your stuff, but this is where the intellect seems to end for most. If you want to be wealthy, then you need to learn how to have thousands of dollars in your account, but not purchase that item that you want so badly even when you do have the cash.

I used to spend money quite frequently. When my savings account hit $5,000, I felt pretty rich and was almost looking for things to buy. Before I knew it, I had a new TV, surround sound, and a new stereo in my car. None of these things were necessary and the only reason I bought them was because I thought they would make me happy. Plus, I had the cash to pay for them, so I wasn’t being unwise with my spending. Wrong, wrong, wrong. Even though I had the cash, I hurt myself financially be making these purchases. I could have invested that $5,000 and earned many thousands of dollars for myself in the future.

Today, I have learned to overcome this spending habit and am on my way to wealth. My mortgage is nearly paid off and I will soon invest in real estate (in addition to the index fund investing I am doing now) to earn an additional thousands of dollars each month. By continuing to reinvest my earnings into future investments, my wealth will soon grow to an amount beyond most individual’s imagination. If you want to be rich, I strongly urge you to delay your gratification, even if you do have the cash!

How about you all? What category of spender do you fall in to? Are you conscious about saving money each month before spending money on gratification?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/marcygallery/

What Are Your Morals When It Comes to Money?

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

Money and morality seem to go hand in hand. From the way you report your income on your taxes to how you handle a basic return at a store, money forces us to make decisions between right and wrong every single day.

Of course, what makes things interesting is that gray area, the situations where some people would consider an action to be moral and the right thing to do whereas others might see it as a breech of an ethical code. Here are some examples:

1. Buying One Movie Ticket for Two Movies

A friend of mine really loves to go to the movies. It’s their absolute favorite past time, but movies have become outrageously expensive in the past few years. He often pays for one movie and stays inside the theater afterwards and goes to see another one. He argues that he’s a good customer, goes to the movies all the time, and that the theater is ripping people off anyway.

I tend to think this falls in the category of the wrong thing to do, but then again, I’m not much of a movie person. I’m always the girl staring blankly when people dish out movie quotes in conversation, so maybe I’m missing something. On that same note, people bring candy into the theater all the time too. I know I do, so is that any better than seeing two shows?

2. Loaning Money to a Friend

I’ve written extensively about this, and although it’s harsh, I don’t advocate loaning money to friends. In my opinion, friendships are too important to be ruined by debts. One could argue that close friends would loan money no matter what and that it’s the right thing to do. However in my experience, it adds a layer of awkwardness. I am just so in tune with my finances that when I have loaned someone money in the past, I can’t even look at them without remembering that they owe it to me. It’s probably a flaw in my character or something, but I’m just so aware of numbers and finances that it’s hard for me to let it go when someone doesn’t pay me back.

However, if you are someone who doesn’t mind loaning money to friends because you believe it to be the moral and right thing to do, then my advice would be to go ahead and make it official. Sign a contract, add some interest to it, and send statements. This might make them more likely to pay, but it also adds in a sense of business obligation, which makes things decidedly less “friendly.”

3. Returning Used Items

I recently received an article of clothing as a gift, and the giver was nice enough to include a gift receipt. I was going to return it when I got the chance, but then my mother in law ran a load of laundry and included the new outfit with it. (She was being sweet and trying to help me with my chores!)

It still looked brand new when it came out of the wash, and for a moment I briefly considered returning it anyway. Then, I thought about how I might feel if I bought something from the store that someone else had washed and returned and decided against it. However, I know that many people wear things and then return them, especially at stores like Nordstrom that have awesome return policies. Some people would argue that it’s not wrong; otherwise, why have the return policy to begin with? I just couldn’t bring myself to do it personally.

4. Fudging Your Taxes

I feel like there are so many ways to handle your taxes.

Obviously, it’s immoral to lie and cheat on them, but there are some smaller rules that people seem to break a lot. For example, lots of people love to deal in cash because it’s not traceable. Whether you’re selling something at a garage sale or paying your babysitter, chances are there are some cash items that pass through your hands every year that don’t end up on your taxes. Is this something that we should all be more aware of?

5. Giving Money to Panhandlers

On one hand, it takes a kind person to hand money to someone who is begging for it. Still, others would argue that when you give a panhandler money, they might not use in the way you had hoped. I have mixed feelings about this, and honestly, it really depends on the person and the situation. I’m much more likely to help someone who is asking for food rather than asking for money. I’m also an advocate of becoming involved and really helping someone who needs it rather than a disconnected toss of a quarter into a bucket. I’m not sure what the right thing to do is, especially if you have spare change on you, but I’m interested to hear your opinions on the topic!

How about you all? What do you think of the situations listed above? Can you think of any other situations where the difference between right and wrong is murky?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/psd/1806225034/in/

How Does The Southwest Airlines Rapid Rewards Program Work?

Southwest Airlines works together with Chase Bank to provide loyal customers with the Rapid Rewards credit card program. These cards are available for both regular and business travelers who frequently use Southwest Airlines to get to where they need to go. They will receive preferential treatment at the airport as well as gain access to great deals on hotels, car rentals and events only available to Rapid Rewards members. Points can be redeemed for flights, hotels, cruises and even gift cards.

The Rapid Rewards Plus Card gives cardholders 25,000 award points when they spend $1,000 in the first three months of opening an account. Cardholders will receive two points per dollar spent on purchases made through Southwest Airlines or AirTran Airways as well as any purchases they make with Rapid Rewards partners for hotels and car rentals. They will also receive 3,000 bonus points on their cardholder anniversary. The card has an annual fee of $69 that is applied to the cardholder’s first billing statement.

The Rapid Rewards Premier Card is a top tier credit card with options for both business and leisure travelers. While the standard bonus award is the same as that offered to Plus card holders, Premier card members have access to more benefits that have a better rate of return on their expenditures. Cardholders will receive 6,000 awards points every year for their cardholder anniversary. There are no foreign transaction fees for purchases made abroad using the card. In addition, Premier cardholders are allowed to earn qualifying points that boost them towards A-list status. Plus card holders do not have this privilege. There are no blackout dates for Premier card holders who want to redeem their miles and get on a flight. The card has an annual fee of $99, which is applied to the first billing statement.

Some people may be able to apply for and receive a great Southwest credit card offer if they meet certain criteria as observed by milecards.com. Travelers who carry little to no debt and have an excellent credit score will definitely benefit from the perks offered to Rapid Rewards program members. In some instances, travelers may want the perks that opening a Rapid Rewards card offers without the long-term responsibility of owning a credit card linked to the airline. For example, the opening offers provided by the Rapid Rewards Premier card give the user the ability to earn up to 50,000 bonus airline miles when they spend $2,000 on the card within the first three months of receiving it. This is a special limited offer that happens on rare occasions. Award points equalling 50,000 amount to over $700 worth of airfare, which is an incredible deal if one can take advantage of it. However, what should they do if they do not want to open another credit card account?

One approach that some people take is to apply for a credit card, be approved for it, and then close the account after the initial rewards have been collected. This technique is often used by consumers with good credit scores, no existing debt obligations and solid proof of adequate income. It is sometimes referred to as “churning”. Cardholders get to reap the rewards without worrying about holding onto a credit card for a long period of time. Where Southwest Airlines is concerned, this can be a great way to get a free flight for the cardholder and a traveling companion. If they qualify for the current deal, then they will receive enough points to redeem a “Wanna Get Away” flight.

However, this will only work if the person applying does not currently hold a Rapid Rewards card. This means that their application for a new card that offers this 50,000 bonus miles award will be turned down if they have already redeemed your initial bonus offer after opening the account and spending a certain amount of money. Applicants may earn one bonus offer for their personal credit card and one for their business card, which means that they may get a very good reward for opening two accounts.

In order to do this, the applicant needs to have excellent credit. “Churning” only works well if the applicant is on top of their finances and can prove they will pay the balance in full each month. After approval, they can close the account once it has been paid off and the bonus miles have been awarded. Applicants should be careful not to open too many cards at one time, as this can backfire and lead to their applications being denied.

For those who can afford to pay off their balance in full every single month, a Rapid Rewards Plus or Premier credit card can be a great way to rack up serious rewards while traveling for business or pleasure. It’s never been a better time to fly with Southwest Airlines!

Managing Portfolio Risk For Long-Term Investment Success

The following post is by Amanda Green. Enjoy! 

Portfolio risk management is important for preserving initial capital and earning return with some certainty. However, it comes with mind-numbing complexity, and each decision can involve risk amid a never-ending stream of calculations.

Because in the world of investment, it’s bound that a decision or two leave a dent in your portfolio. Add to that the problems pertaining to faulty information or insider trading and you have several risks to worry about.

So, how do you protect yourself against risk and lessen the adverse impact on your portfolio? There are many different guidelines for risk management, but there are a few strategies that can keep your portfolio on a healthy, profitable course, without forcing you to purchase derivatives or quick decision making. Here’s what you can do:

Integrate a safe haven component

What is commonly happening in the global market is that the more risky assets such as stocks and commodities could rally one day. Therefore the sentiment can change all of a sudden, so as an investor, it is usual to take advantage of any opportunities given the fluctuations. More specially, it is recommended that you keep safe heaven assets in your portfolio.

At the same time, you need to understand ETFs and mutual funds you are purchasing. This is where you could benefit from a complex body of investment knowledge, which is attainable through certification programs and courses. Such knowledge would help you integrate the right asset component depending on the nature of your portfolio.

Diversify

Diversification includes holding different asset classes including commodities, property, bonds and equities for going through troubled times during asset-specific downturns. For instance, if you are holding an equal weight in all of these asset classes, and bonds go haywire, the rest three will make sure your portfolio is able to hold the fort.

Diversification can also be used to spread risks in different sectors. This year, Goldman predicts steep losses for gold; however, having your portfolio spread to more than one sector would prevent you from feeling the effects if gold was one of your investment. Lastly, you could diversity on the stock specific level. Holding stocks of more than a single company in a sector reduces risk specific to stocks.

Rebalance your investment portfolio

You’ll need to rebalance your portfolio every 12 months. It means bringing back your portfolio to its initial asset allocation. This is important because investments may go out of sync with your initial asset allocation over time; this usually happens when one of your portfolio assets, typically equities, grow at a faster pace than the others.

For example, if equities represent 25% of your portfolio at the start of the year, but have grown in value to 35% after 12 months, you’ll need to sell some of your holding and buy an underweight asset to rebalance to your original allocation.

Managing risk is vital, because it can keep your portfolio safe from a drawdown. These tips would help in managing your exposure to risk and keep unexpected losses to a minimum.

Saving For Retirement: Calculating How Much You Need

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

Retirement planning is a very important part of your future financial security, but it is often the most difficult part of financial management to accomplish. One of the main reasons why it is so difficult is because there are a lot of unknowns that have to be estimated to arrive at a good number to set as a retirement savings goal. When you are in your twenties and thirties, it is hard to imagine what your life will be like when you are in your sixties and seventies.

Fortunately, there is a formula and process that you can use to calculate how much you would need to save to maintain your current lifestyle during your retirement years. 

Step 1 – Calculate The Cost Of Maintaining Your Current Lifestyle

The first thing you should do when calculating how much you will need to save for retirement is calculate how much it would cost you to maintain your current lifestyle in your retirement years.

The cost of maintaining your current lifestyle may be slightly lower during your retirement years because there will be some expenses that you will no longer have to pay. For example, you will no longer have to pay the various costs associated with being employed, like purchasing business clothing or transportation costs to and from work.

A good assumption would be that you would need about 80 percent of your current salary to maintain your current lifestyle in retirement. So, if you make $70,000 per year now, you can estimate that you would need $56,000 per year during your retirement. On paper, the calculation would be 70,000*0.8=56,000

Step 2 – Add In Inflation Increases

When doing their retirement planning, many people forget that inflation will have an effect on the future value of their money. Because of inflation, one dollar today does not have nearly as much purchasing power as one dollar had thirty years ago. Thirty years from now, a reasonable assumption would be that one dollar would buy much less than it does today.

To compensate for the inflation that will affect the cost of goods and services in the future, you should add in inflation increases of 3 percent per year for every year up until you expect to be retired. If you are 35 years old now and you expect to retire when you reach 65, you will have 30 years of inflation to contend with when you retire. Using Google’s search bar, the calculation would be 1.03^30, which totals 2.4273. This number should be multiplied by the previously calculated amount ($56,000) to arrive at the amount that you would need to maintain your current lifestyle during your retirement years after inflation, which would be $135,929 per year.

Step 3 – Subtract Your Retirement Income Payments

Many people will receive retirement income payments during their retirement years that will be used in place of savings for spending.

These payments may include payments from the Social Security Administration, pension payments, payments from annuities or other savings vehicles, and any income you expect to receive during those years. These estimated retirement income payments can be subtracted from the inflation-adjusted cost of maintaining your current lifestyle, allowing you to reduce the overall amount that you need to be saving. For example, if you expect to bring in $35,000 per year during your retirement years in social security payments and other income, you can reduce the amount that you will need to save to $100,929 per year for each year of retirement.

Step 4 – Determine How Long You Will Be Retired

Determining the amount of time that you will be retired is where the calculation gets tricky because you have to estimate the age you will be when you retire and the age you will be when you die. Although no one knows what will happen in the future, many people in good health can reasonably assume that they will work until they are 65 and will live until they reach their mid-eighties, an estimate of roughly 20 years. When the amount that you need to save each year is multiplied by the number of years that you expect to be retired, you get the amount that you would need to save before you retire. In our example, the person would need to save $2,018,580 to ensure that they have enough money to live comfortably during retirement.

While $2,018,580 sounds like a lot to save, if you were to get started now, you would have thirty years to try to save the amount. You will also be taking advantage of compounded interest on your savings, helping your money grow faster and reducing the amount you must divert from your paychecks. The sooner you start saving, the more compounded interest you will earn over time, allowing you to reach your goal more quickly than you would think. You can also increase your retirement savings by diverting bonuses, income tax refunds, and other windfall payments into your retirement accounts.

How about you all? Have you made a plan and figured out “the number” you need to save for retirement? What have you experienced while trying to reach your retirement saving goal?

Share your story with us by commenting below! 

***Photograph courtesy of http://www.flickr.com/photos/fishyone1/9559556453/