Wealth and Wisdom

When we get buried in the day to day, we often forget what we’ve accomplished and learned. It can seem like we are standing still, especially when you haven’t achieved one or more of you major goals. This is one reason why it is so important to do periodic reviews. It’s also one of the magical things about heading into New Years, as this holiday tends to make us think back over our previous year and forward to the next.

Looking back, 2009 has been a roller coaster

• New government which has created a ton of strife. New regulations and laws looming that will change the face of this country (I’ll leave it to you to decide if it’s for better or for worse!)
• The economy degraded even further, and any recovery we’ve seen has been limited at best.
• The budget deficit has exploded as government spending has reached record levels.
• The dollar is plummeting.
• Housing sales are slow, there is a glut of foreclosures in the system, and a new wave of foreclosures is on the horizon.

All of this change will impact our lives. We have a choice on whether we will sit back and let life push us this way and that. This will test us, and while it will be challenging, it will also present some of the best opportunities we’ve seen in decades. It is our choice whether we are full of fear or hope, see crisis or opportunity, excel or drown in the turmoil.

Wealth and Wisdom has had quite a year

OK, maybe not the blog itself, but our life has been pretty full. From vacations to job changes to business launches, we’ve had a full and eventful 2009:

• Wrote a book about hacking your college degree: This alone has been an amazing trip and we’ve learned a lot. Marketing, Adwords, copywriting, writing and editing, web site design, setting price levels, list building….You get the picture!
• My JOB: yep, I still straddle being an employee and an entrepreneur, somewhat because we are not ready to go full time, mostly because I’ve enjoyed what I’m doing. This part of my life has been an event. 2008 I was the number one salesman in my company. 2009 I was number three. Since there are between 300 and 400 salesmen…this is a big accomplishment. But it hasn’t all been positive. My company reorganized and we spent six months wondering about how our jobs would change. I said goodbye to several good friends as they took opportunities with our competition. I’ve dealt with red tape and bureaucracy that drives me crazy.
• We’ve taken three amazing vacations: one a cruise in South America, one a Mediterranean cruise, one a trip to St. Maarten. Wow!
• We’ve found internet based business to be extremely challenging and frustrating. On the surface, it should be easy. We’ve started and run several successful brick and mortar businesses. I’ve run and managed a couple businesses. I’m one of the top salesmen and an acknowledged expert in my industry. But internet marketing requires a different skill set. It’s taken a while, but we’ve pretty much finally figured it out. Now it’s time to apply what we’ve learned.
• Started exploring other business opportunities. I’m a firm believer in having multiple businesses in place, especially if you can automate / outsource them and create passive streams of income. One business didn’t work, but the basic model is fantastic. We just need to find a better product. The other model is being developed and is looking like it could be a blockbuster. Remember how I said we could chose whether to see opportunity or crisis? I chose to find solutions to a major problem and create a business.
• Wealth and Wisdom has been stagnant. Two years ago we had grand plans for Wealth and Wisdom, but we never acted on those plans. Instead it has wandered along and almost become an outlet for my thoughts and a journal of my growth as an entrepreneur.
• My racquetball game has improved and I’m close to leaping to the next level. While I’ve had some ups and downs, much of that is having to internalize strategies and skills, which cause me to think too much and not execute. Perhaps most importantly I’ve discovered that I don’t like playing in extremely competitive venues. Not because I’m not capable, but because I don’t enjoy it. I find it brings out the worst in people and that isn’t why I play.
• Our son turned 16. Need I say more?

Coming up in 2010

2010 should be an eventful and profitable year. As we bring our businesses on line, as we learn and grow, we will share it with you. This includes our view on the changes to our government and economy. Don’t worry, we aren’t going political on you, we’ll be focusing on what to do to protect yourself and find the opportunities.

We’ve also finally defined our customer (Wealth and Wisdom), figured out our niche, and what our focus needs to be. Don’t worry, you’ll still see posts ranging from personal development to education to sales to business to personal finance. Wealth and Wisdom will still be a journal of our journey to entrepreneurship, and how we used our businesses to create freedom, wealth, and life balance. It will just be better defined and on purpose.

People who know me well are familiar with my views on college. I am a huge believer in obtaining your education, and have seen first hand the impact this can have on your career or your business. I’ve earned two bachelors of science degrees working full time with a young family, and my wife has earned her bachelors of science in business while being a full time mother. I’m not bragging, I’m just making it clear how much I believe in college education!

I also am not a big fan of the traditional college experience. When you look at the cost it is hard to justify. This is both for adults going back to school and for our children. If you follow the traditional college path the costs are staggering, and the traditional college lifestyle is not what most of us are looking for. Colleges are infamous for their party lifestyles and for indoctrinating our children in belief systems that often run contrary to ours.

You gain little by going to an elite school

While studies have shown that an ivy league education will result in higher lifetime earnings alternative research disputes these findings.

Researchers Alan Krueger and Stacy Berg Dale questioned whether it was the school or the student that created the improved earnings. What they found was that it was the smarter, harder working, and better motivated students that got accepted to elite schools. When compared to similar students who chose to attend state schools there was minimal difference in earnings.

In other words, that elite education just costs you more with no gain in results (private colleges cost an average of 2.3 times the cost of state colleges).

Why you need a degree

Most of us realize the profound impact education has on our careers. In fact, this is the number one reason adults go back to college. How much of an impact does your education have on your career?

Having a Bachelor’s degree makes you three times more likely to keep your job while earning you 230% more money. Add to this the (often) better working environment and you have a pretty compelling case.

Then reality sets in

Earning your traditional college degree is expensive and hard:

• The average in state (public) degree will set you back $57,332. That comes up to $14,333 per year. Ouch!
• Time requirements: 4-5 hours per week per credit. Even if you go part time it will take up 24-30 hours per week.
• Lack of flexibility: traditional college requires you to go to class at their convenience. If you work full time this can create problems.
• The time it takes to earn your degree: traditional college (part time) will typically take you eight years to earn your degree. At that rate your be retired when…

We needed to find a better way

These were all challenges I faced as I was nearing the end of my military career. I knew I needed to earn my degree, but there was no way I could go the traditional route.

Along the way we ran into a lot of scams. I’m sure you’ve seen them – send us a check and we’ll sell you a diploma. Right…Let me see, you will sell me a PhD based on life experience…

We also ran into a lot of legitimate schools that were not friendly to adult learners. Some required you to spend time on campus (one required three weeks each summer). Others required you to take their classes which were expensive. Others just cost too much money.

It took a lot of research, and I made some mistakes, but I eventually found a way to earn my degree quicker, easier, and for much less money. As I earned a second degree – and helped my wife and friends earn their degrees – we fine tuned our process, tools, and tricks.

It wasn’t until a friend asked “how do you do it…”

Except for helping a few friends and family, we pretty much kept this to ourselves. It wasn’t that we were trying to keep it a secret, it was just that we didn’t think anyone else would be interested.

Then we started our son on our program. He was 15 and wanted to get a jump on his college. His plan was to earn his bachelors in business by the time he was 17, and then go to Texas A&M for his MBA.

Several friends saw what we were doing and started asking question. It quickly became apparent that no one was aware that there were better ways to earn your degree.

We created Education 2.0

For the last few months we’ve been putting all that we knew into a system. After two rounds of beta testing we are finally ready to role out our program.

Our goal was to make it easy to earn a four year degree:

• Accredited: you need a real degree that will be accepted by employers and colleges.
• Fast: you don’t have years to waste.  4+ years is way to long for most adults.
• Flexible: earn your degree on your own schedule working around work, family, and your personal life.
• Affordable: you should be able to earn your degree without taking out a second mortgage!
• Easy: we supply the roadmaps, tools, tricks, and techniques. All you have to do is study and earn your degree.

As a bonus to our Wealth and Wisdom readers, for the next two weeks we are offering 50% discount. Just type “wealthandwisdombonus” (without the parentheses) into the discount box at checkout!

This weekend we were watching The Millionaire Inside on CNBC. The episode was Debt Makeover and one case study hit home.

Paul was a successful entrepreneur who was diagnosed with non-Hodgkin’s lymphoma. He turned his back on his business in order to dedicate himself to his treatment and recovery. He borrowed from savings and started charging inventory to his credit cards in order to keep the business afloat. As a result he is $270k in debt and at risk of losing both his business and his home.

Three things jumped out at me:

• He wants to do right and honor his debts: Recovery starts with taking responsibility.
• By intermingling his business and personal affairs he has put everything at risk: This is why incorporating (or forming a LLC/LLP) is critical. Once you have the structure you must keep your personal life and your business separate. If he had done this it would just be his business in jeopardy. Now he may lose everything.
• This could have been avoided by Business Overhead Expense (BOE) insurance.

What is BOE insurance?

BOE insurance is a subset of disability insurance. It pays your rent, employee salaries, and other overhead expenses while disability pays your paycheck. It basically keeps the lights on until you can get back to work.

BOE insurance is common among profesionals (doctors, dentists, lawyers, etc) but is not so well known by small businesses. It isn’t for everyone but can be a tool to protect your company if something happens to the owner.

More info

Wikipedia

Bankrate.com: When you’re ill, BOE insurance inoculates your business from harm

The CPA Journal: Disability Insurance Planning for Professionals

Financial Web:Disability Insurance for Businesses

Warren Buffet’s first principle for investing is to never lose money. In today’s uncertain market that is easier said than done.

I would typically pull my money out of the market and sock it away someplace safe. I have neither the time nor the inclination to learn to become a trader. I believe my time is better spent growing my business than trading stocks!

We can’t rely on that option this time. IndyMac’s failure is the first of the bank failures. This casts doubt on the safety of our deposits.

I can rely on FDIC…or Can I?

I’ve always known that FDIC will protect my deposits. There has always been a lingering doubt on what that means. Is the $100k protection per account, per bank, or per person? What do I have to do to get my money after the failure?

Suze Orman wrote an article today on FDIC insurance. I recommend you read it to better understand what is involved. People are losing a lot of money on their deposits at IndyMac because they didn’t take the time to learn the rules. Some of the basics are:

• One name on the account:$100,000 per person per bank. What about two accounts at the same bank? The $100k total limit still applies.
• Joint account: $200,000 per joint account. This is in addition to the $100k per individual account.
• IRAs: Your bank IRA (why would you have an IRA through a bank?) is covered up to $250,000. Note: this is only cash instruments. No stocks or mutual funds.
• Trust/Pay on Death Accounts: complicated. Check with the FDIC and your advisers.

I again recommend you read the article and check your accounts to make sure you are covered. Also remember that I am not a financial adviser or planner. Please consult your financial professionals before you make any decisions.

Note:This is one of the hardest things I’ve written about. I’ve personally gone through it and know how it can tear apart a family. In my case it was because I decided to help.

“Joe, you look awful.”

“Wow, is that a good way to greet a friend?” Joe asked me. “But now that you mentioned it, I haven’t been sleeping well.”

Joe then proceeded to tell me about his family situation and the stress it was causing. His brother wasn’t able to pay the rent-again-and came Joe for a loan.

“I’m getting tired of always having to bail him out. I love him, but loaning him another grand won’t solve his problem. And I’m getting tired of everyone assuming that because I run my own business I have money to loan them.” After a bitter chuckle, Joe added “I don’t know why I call it a loan. They never pay me back.”

It wasn’t the first time

Joe and I have been friends for years-heck, he gave me my start in sales! I was familiar with this drama in his family and saw it repeat several times a year. If it wasn’t his brother it was his cousin or uncle. One time their car was in the shop. Another time they were a bit short until payday.

It was like his family thought that because he was an entrepreneur he was their personal bank machine.

The straw that broke the camel’s back

This time things were different. The economic downturn was hitting Joe’s industry hard. He was struggling to keep the doors open, and the last thing he needed was this. In fact, the reason Joe and I were meeting was that I was advising him on his company’s sales and marketing.

Bottom line: he had nothing more to give.

Loaning money to your family is a lose-lose situation

When it comes to family, money, and loans you can’t win. You are a bad mother/son/brother (fill in the appropriate relationship) if you say no. It will poison your relationship even if you say yes. No matter what you do it can tear a family apart.

For entrepreneurs it can be even worse. People assume that just because you own the company that you are rich and that they are entitled. You can easily become their personal bank…or their welfare system.

With this in mind I’ve developed the following guidelines to help deal with the situation. Some sound cold and heartless, but that couldn’t be further from the truth. This is a decision that can have serious consequences. The decision must be based on facts and on what is best for everyone involved. Remember, the best answer is sometimes the one that hurts the most. People often tell me that the best thing that happened to them was that someone told them no. It forced them to grow up and solve the problem themselves.

7 Guidelines when family asks for money

1. Your not the bad guy…

You know the drill. The guilt is being applied. “Just this once…” “Don’t you love me?” You can afford it.” “Blood is thicker than water.” To make it worse other family members are calling you and asking why you won’t help.

You have done nothing wrong. They put you in a bad position, one that you often can’t win.

2. Step back and take a deep breath

The only thing that makes this so hard is that you are dealing with family. With anyone else it would be much easier. When family members ask you for money they don’t use logic. They push your buttons. This sets the stage for a major family crisis.

Now is not the time to make a decision based on feelings. You need to step away and get some space. If they push tell them you need time to think about it. If they keep pushing start asking them questions. This will put the responsibility back on their shoulders. Remember this is their problem. They are coming to you for a favor.

3. Separate emotion from fact

Now I know I’m going to get an earful about this. “It’s your mother. You owe her.” “How can you be so heartless?” “Don’t you love your family?” “Why do you hate your sister?”

Let me put that to rest right now. Decisions based on guilt rarely work out. Don’t be afraid to use decision making tools (I personally love a weighted pro/con list). Feelings and relationships are a factor, but the decision needs to stand on it’s own without the emotions to prop it up.

4. Am I helping or enabling?

This is tough because of the guilt involved. One thing to keep in mind is that often you are only making things worse by handing out money. People need to take responsibility for their own problems. In extreme cases they need to hit bottom before they can start to get better. In these cases the only way to help them is to stand firm.

Now I’m not saying you should always say no. You just need to make a clear headed logical decision that is in everyone’s best interests.

5. What are they doing to solve the problem?

Just bailing someone out won’t solve the problem. Are their expenses exceeding their income? Then they need to take steps to fix the problem. Do they have a gambling problem? Then they need to get help for the underlying addiction.

They need to take responsibility and be willing to fix their own problem. Otherwise this will come up again and again. Each time it will be a little worse.

6. You have the right to say no

Just because it is family doesn’t mean you are obligated to give them money. I hear the argument all the time that you should “honor you parents.” That doesn’t mean you are indebted to them for eternity. Yes you should respect and thank them for bringing you into this world. Just remember that this is a two way street. You deserve the same respect and appreciation as well.

Now most people have parents that gave them love and nurtured them. That is a different story. Then again, most people with loving parents aren’t put in this position.

You have to make the right decision for everyone involved. This needs to be based on facts, not some emotional tug at the heartstrings. If the right answer is no say no.

7. Always a gift never a loan

If you decide giving is the right decision make it a gift. You should never loan money to family. I don’t care if you get the terms in writing, you will never be able to enforce the contract. What are you going to do? Take them to court? I don’t care if they tell you they won’t take charity.

A loan will only poison the relationship. Each time you have to call to collect on the missed payment it will damage both of you. Even if you don’t have to make the call (unlikely) it will always get in the way of your family.

Note: a gift means no future expectations. You don’t have the right to ask for it back. They don’t owe you. You can’t use it for emotional leverage. It must be given freely.