Every day in the world of business is a change from the day before. Prospects come and go, people change idea's and motivations for upcoming trends. This is part of the business cycle. This is also why attorney's, CPA's and a whole host of other credentialed advisers are at a beckoning call for the next big deal. This is because a deal usually takes more than one day. Digressing a little: Think of a house. Did you ever go into a house and get everything done in one day to include receiving the new key's? Probably not. Now back on topic. That situation doesn't happen in business either. However to hold people on a level playing field, a buyers contract is made. This contract is not anything new to business, but it all runs on the business plan which I want to address here.
About two weeks ago I was approached buy a young woman who I knew from a time past. She had successfully started her own blog which was gaining momentum and followers in every corner. To be honest, as I told her, I found most of her blogs to be annoying. I also told her that this is a good thing, because she can single me out of her target market. At the time of our meeting, she was presently building a plan for a kickstarter. From an investor standpoint, this doesn't sound good to be doing a kickstarter 3 years into business. After some investigation, I found she had no business plan a failed marketing strategy and her actual blog was ripping itself apart because of two personalities.
So with her permission, I addressed them to her both in person and on this blog. The first key to running a business is a business plan. That's something she didn't have and likely something that led to her kickstarting her business at this stage. Before I go any further, I want to give a sense of this business plan and what it does.
1st. A business plan should outline everything you plan on doing. A smart small business owner will come up with idea's from profit opportunities to financing by doing recon work on the local market.
2nd. The business plan will show what the stated purpose of the company is. This is a biggie. Why? Because at some point down the road you will undoubtedly run into a fork. That fork will be the opportunity to "turn the corner" or shutdown/focus on something else. Now for the second one, it's ideal to scrap the business plan and start from scratch. That gives you the ability to focus on your new idea. However the first one is the one I want to talk about. It's the one where people make mistakes. Often turning the corner is not something that happens over night (see the house sale illustration above). This is usually a 6 month or greater period where profits increase greatly. During this time, I've notice quite a few people begin to line their pockets. Turning the corner is to be used to bolster inventory and stock up on the push for bigger business. Now I digress once again. Back to the subject. The reason for the business plan is because when this turning of the corner happens, money will be available. Not only to you, but to banks who see it as reassurance that they can lend you more money for things you do not need. Let's say for instance the TV repair man now can get enough money to start a TV sales business. Was that in the business plan? If not, then don't do it. The reason why business plans are wrote on note pads and brought together later is because they represent the honest thought at the front of the business.
Next, as with my friend, an identity crisis occurred. She frequently used her name in video's designed for her website. This often created a conflict that she didn't realize hurt her help everyone website. So I gave her this analogy and I hope you try it too. 1st. Think of the bank Wells Fargo. What do you think of? Write that down......Then, if you were to be walking into a speech given by an executive at Wells Fargo, what would you think of? Lastly, who is the CEO of Wells Fargo? Now on that last one, just write that you don't know if you have to look it up.
Her answers went like this:
1. A bank with quite a bit of money
2. I'd want to take notes. They are pretty important
3. Let me check --> I told her NO and said that was part of it. FYI - John Stumpf is the CEO of Wells Fargo. I know this because I graduated with a degree in accounting and we talked about his background.
The point of this exercise was not to illustrate the CEO, but the lack of you not knowing him. If Mr. Stumpf was pitching his agenda at all Wells Fargo meetings using video's of his family to illustrate his points, you wouldn't understand him. That's the same mentality she got from her fans.
On a side note she ended up closing her help people website because she wanted to be the figurehead up front of her business. I applauded her for this as it show's she knows what she wants.
But this also lends points to people. Create a business idea on paper. Make it work without all of the bells and whistles. Because at some point, the bells and whistles will come. The question you will need to answer is: do we really need to spend more money to make these bells and whistles shinier?
Sunday, September 14, 2014
Monday, September 9, 2013
Paying the bills off now
For only the second time I delve into the large universe of paying bills. I took this subject on because I work at a law firm which represents creditors. When I say they represent creditors, they are the last step between bill collectors and the bank. I should probably explain the process, so here it is:
The first step is your payment becomes delinquent. Should this be utilities, hair cut, bar tab whatever. The bank buys the debt and relieves the customer of the overhead. Bet you didn't know that? So in the end, banks like Wells Fargo, Chase, Bank of America and many others not only issue checking accounts and credit cards they also buy debt businesses. The next step is for one of these large banks to report your delinquency to a credit bureau. This is where things become confusing.
They don't post your information as a debt to X bank and trust. They post it as a debt to company you owe, so let's say "Bill's Bar". Normally when a bad debt is noted from a business, the amount and length of the debt is picked up by one creditor. So technically a small business would only be able to effect one of your three scores. Big banks on the other hand report to all three plus list your default to a company called FICO.
After your initial credit hit has been generated, you and your information are put into a system called TABBS. Don't ask me what it stands for because I don't know. TABBS remembers your information forever. So it's like a fingerprint. If you never screw up, your information will never be in there. One missed payment can put you there forever. In TABBS your information generates a hit for everything you do after you are first entered. If you pay a bill, use a debit card, buy gasoline with a credit card you are tracked. One screw up and a red flag goes up. But that's for later. What's important to TABBS is what it starts and that is a chain of events which you probably know as the debt collection process. Or simply where a debt collector calls you. Every time a collector calls you, they are legally required to enter notes into a program which logs your information. After one month of no payments, your information goes into TABBS. So you get a late payment again in TABBS which cycles this out to FICO and the three credit bureau's.
Legally (I know this from my job as cross training) a debt collector can only call when you say they can. They will make an attempt to call you at a certain time that is easy for them. When you call and say don't call back, they will. This is because they did not get a time they cannot call back, just a rude response. If you respond and say "call me back at 7, I work every day from 6 to 5" they now cannot call you between 6 and 5. So a couple days later they call you back at 7. Some pay at this point, but most continue down the rabbit hole. You say, I'm only available for 30 minutes because I have to pick up my kids from Karate at 8. You indicate that you have an hour and a half drive where you cannot answer and dinner takes you 30 minutes to make. This means from 7 to 7:30 in this case a debt collector can call. Then you say "after 8, I go to sleep. Please do not call me during night time hours between 9 p.m. and 8 a.m." BOOM! You've just given the debt collector an awesome opportunity. They can only call you for 30 minutes a day. So they do. You answer frustrated because they call at the same time every day for weeks. Then you say, just stop calling me I'm not going to pay.
That's where my firm comes in, except they also do the debt servicing as well.
This is the theme of this blog. During this legal process, you will be reported in TABBS over 50 times in two weeks. Remember, prior to this you were probably reported up to 8 times. Now the legal process comes in and leaves a paper trail. Then the lawyers visit the judge and every asset you own becomes the property of the debt collector. They liquidate cash and easy assets first. Then the Sheriff comes out and evicts you out of your own home. A sign goes up for public auction and your house is sold for pennies on the dollar. Your Social Security then has a lein placed upon it that you must be paid first......So just imagine, if you die and SS benefits were going to pay for your funeral think again! You just gave up the couple thousand dollars to a debt collector.
The point is that debt of any kind is wallowing. One must understand the difference between good debt and bad debt. How much good debt is too much, and how much bad debt one should take on. I will go over this in detail in further blogs. Here is a little taste:
Good debt: House mortgage
Service Debt (in another blog): Furnace loan, car repair loan, roof repair.
Bad Debt: Credit cards, cash advance, pawn loans.
These are just a few of the types of debt that I will go into later. First one must understand that good debt is anything that returns utility, or value to you. So by having a house mortgage you can utilize the home to live in.
Bad debt is anything where the utility is already used at the purchase. Basically any credit card debt.
However there is a key to understanding the financial world. One must have at least one source of bad debt. Yes this is true. First, bad debt allows you the opportunity to enter information into your credit score with the most impact. A house loan while large, doesn't really impact your credit report until 3 years after the purchase date. On the flip side, credit cards are the first to hike up your information and report you to TABBS. So having two or more credit cards runs the possibility that you could be reported to this program at least twice. Remember, TABBS is a negative program. Only negative reports go in there.
In closing of this portion of my blog, remember that you must understand when to flex on spending and when to lay firm. Those tickets to the game may be enticing, but can you afford them 3 days after your team lost? While a home is good, too much of a mortgage or any other loan that derives useful utility will send your ability to function down the drain.
Remember, patience is key!
The first step is your payment becomes delinquent. Should this be utilities, hair cut, bar tab whatever. The bank buys the debt and relieves the customer of the overhead. Bet you didn't know that? So in the end, banks like Wells Fargo, Chase, Bank of America and many others not only issue checking accounts and credit cards they also buy debt businesses. The next step is for one of these large banks to report your delinquency to a credit bureau. This is where things become confusing.
They don't post your information as a debt to X bank and trust. They post it as a debt to company you owe, so let's say "Bill's Bar". Normally when a bad debt is noted from a business, the amount and length of the debt is picked up by one creditor. So technically a small business would only be able to effect one of your three scores. Big banks on the other hand report to all three plus list your default to a company called FICO.
After your initial credit hit has been generated, you and your information are put into a system called TABBS. Don't ask me what it stands for because I don't know. TABBS remembers your information forever. So it's like a fingerprint. If you never screw up, your information will never be in there. One missed payment can put you there forever. In TABBS your information generates a hit for everything you do after you are first entered. If you pay a bill, use a debit card, buy gasoline with a credit card you are tracked. One screw up and a red flag goes up. But that's for later. What's important to TABBS is what it starts and that is a chain of events which you probably know as the debt collection process. Or simply where a debt collector calls you. Every time a collector calls you, they are legally required to enter notes into a program which logs your information. After one month of no payments, your information goes into TABBS. So you get a late payment again in TABBS which cycles this out to FICO and the three credit bureau's.
Legally (I know this from my job as cross training) a debt collector can only call when you say they can. They will make an attempt to call you at a certain time that is easy for them. When you call and say don't call back, they will. This is because they did not get a time they cannot call back, just a rude response. If you respond and say "call me back at 7, I work every day from 6 to 5" they now cannot call you between 6 and 5. So a couple days later they call you back at 7. Some pay at this point, but most continue down the rabbit hole. You say, I'm only available for 30 minutes because I have to pick up my kids from Karate at 8. You indicate that you have an hour and a half drive where you cannot answer and dinner takes you 30 minutes to make. This means from 7 to 7:30 in this case a debt collector can call. Then you say "after 8, I go to sleep. Please do not call me during night time hours between 9 p.m. and 8 a.m." BOOM! You've just given the debt collector an awesome opportunity. They can only call you for 30 minutes a day. So they do. You answer frustrated because they call at the same time every day for weeks. Then you say, just stop calling me I'm not going to pay.
That's where my firm comes in, except they also do the debt servicing as well.
This is the theme of this blog. During this legal process, you will be reported in TABBS over 50 times in two weeks. Remember, prior to this you were probably reported up to 8 times. Now the legal process comes in and leaves a paper trail. Then the lawyers visit the judge and every asset you own becomes the property of the debt collector. They liquidate cash and easy assets first. Then the Sheriff comes out and evicts you out of your own home. A sign goes up for public auction and your house is sold for pennies on the dollar. Your Social Security then has a lein placed upon it that you must be paid first......So just imagine, if you die and SS benefits were going to pay for your funeral think again! You just gave up the couple thousand dollars to a debt collector.
The point is that debt of any kind is wallowing. One must understand the difference between good debt and bad debt. How much good debt is too much, and how much bad debt one should take on. I will go over this in detail in further blogs. Here is a little taste:
Good debt: House mortgage
Service Debt (in another blog): Furnace loan, car repair loan, roof repair.
Bad Debt: Credit cards, cash advance, pawn loans.
These are just a few of the types of debt that I will go into later. First one must understand that good debt is anything that returns utility, or value to you. So by having a house mortgage you can utilize the home to live in.
Bad debt is anything where the utility is already used at the purchase. Basically any credit card debt.
However there is a key to understanding the financial world. One must have at least one source of bad debt. Yes this is true. First, bad debt allows you the opportunity to enter information into your credit score with the most impact. A house loan while large, doesn't really impact your credit report until 3 years after the purchase date. On the flip side, credit cards are the first to hike up your information and report you to TABBS. So having two or more credit cards runs the possibility that you could be reported to this program at least twice. Remember, TABBS is a negative program. Only negative reports go in there.
In closing of this portion of my blog, remember that you must understand when to flex on spending and when to lay firm. Those tickets to the game may be enticing, but can you afford them 3 days after your team lost? While a home is good, too much of a mortgage or any other loan that derives useful utility will send your ability to function down the drain.
Remember, patience is key!
Sunday, August 12, 2012
Cutting costs in today's market
Since I effectively stopped writing for newspapers about three years ago, I have become somewhat interested in the financial markets. As everyone knows by now, that's quite a fickle thing given the current state of the economy. So I wanted to give people some tips on how to cut back financially to create a better standard of living. This may be part of a big series, and if that's the case you can consider this the foundation.
1. Nothing comes free
I was in class about three weeks ago when I came up with the joke about a friends boss who doesn't give away money. The joke is the boss would say "Hey (insert name here), here's $600 dollars go to Starbucks and get me a coffee. Keep the change.". Would this every happen? Well it depends. If the person who you work for won the lottery, you would have a better chance than if the person worked their way up to where they are now. Millionaires, and I'm not talking about a person who has one million dollars, get their money by keeping their money. So don't expect these individuals to want to give anything in proportion to what they make.
2. Understand financial dynamics
I'm a realist. I'm middle class, and I surely don't have change to spare outside of the local Walmart. If I see a charity that has something cool which makes my quarter spin a couple times and thus enthuse my daughter, I'll donate. But in general, I try to keep what I have because I don't have much. So this is an easy start for any of you want-to-be rich people. First, cut back on everything. I know, I know, everyone says cut back. Yet they don't seem to give any way of cutting back. The truth is, that's because cutting back for me and cutting back for you are two different things. So here is what I did to save money: One of my habits is to eat fast food. Not because I like it (I do), but because my house is usually far away from wherever I am at. So a quick stop and Carl's Jr. or Taco Bell and I'm full. I make up for the loss in my wallet by the addition to my stomach. A couple of hours later, both are empty. Let's first analyze why eating out is bad, well aside from the health standpoint. Every time you spend money at a restaurant, you are effectively telling that store that they have good business. The more times this happens, the higher the price goes. It's like this: say I spend $7 every day at Taco Bell. Then let's say that the average amount spent is $6 for every meal. Taco Bell in return raises their prices to 7 and now people have to decide. Those like me who are far away from home accept the price increase and buy. But who really leaves? Well for a while, those who don't like the prices leave. But then they get the craving for good ole' taco bell and bobs your uncle they are eating at taco bell. The next thing about eating fast food is what you could get in return by packing a lunch. All of the food at fast food restaurants happen to be designed with your taste buds in mind. They have no regard for your digestive system or waste size. These items also cost more because they have to be mass preserved to last longer. So the meat that you are eating is actually filled with preservatives to allow the meat to last longer while the meat at the store is not. When you eat fast food, you get full. But your body will burn those preservatives quickly leaving the meal behind. Had you eaten at home, this would not have happened, but now you are eating 3/4 of your meal. Placing the guy who ate at home next to you, you will be eating sooner. And if you think about it, you paid $7 for a meal that was actually only worth $5.25 of nutritional value.
3. Get a financial plan
No this is not a budget. Budgets often fail because they are constantly being re-written on a daily basis. A financial plan lays out what you want. And let's face it, when you walk into a store it's usually more about what you want than what you need. By setting what you want aside, you can figure out how badly you need it. For instance, here is my list of wants for the month:
1. tickets to the hockey game
2. new hockey equipment
3. new motorcycle exhaust system
4. college graduation gown
Now take a look at this list. You will see that everything on here is not needed. But wait you say, what about your graduation gown? Well, I don't have to go to graduation. I'll still get my transcript and degree without graduation. So this is a want. It's not a requirement for me to graduate. So now let's list what I need.
1. Groceries
2. Gas
3. daycare
4. Diapers
As you can see, I didn't create a list of everything. So let's compound this list step by step. This is actually where people go wrong in creating a financial plan. They create vague plan's which are open to interpretation. Trust me, if it's not clearly defined you will fail. So without further delays, my list. Groceries: What do I need? Well I don't need soda, but it's nice so let's place that in the want section below. I have a daughter so I'll need to get milk because it goes with some of her foods. Juice. yes, my daughter could drink water and not juice, however since she spends most of her time playing she will need something with sugar. This is a swing choice, so I will let you put it in your own pile but for me it's a need. Bottled Water. Well this is an interesting thing to have. It's water, and we need water. For me it's a want though because I have a tap water purification system on my faucet. A simple reusable bottle will do the trick. Next is going to be the meat. I'm not vegetarian, so this is going to be a staple of my diet. Next is the infamous pizza. I can get it cheap, but do I really need it? Well no, so it's a want.
WANTS
1. Soda.
2. Bottled Water.
3. Pizza.
NEEDS
1. Milk
2. Juice
3. Meat
As you can see from my list, I haven now broken up a six item grocery list into wants and needs. This is going to be the first step. I will take the wants and put them aside with the wants above. I will take the needs and put them aside as "already spent" because I need them. Now gas is tricky. This is another "think your way through item". First, do I need to take that useless trip for an hour or can I skip it and stay home? Well if the trip does nothing more than give you mental satisfaction, the answer is it's a want. Driving to work or daycare or the store is a need. Again, take these and separate them. Move down and you will see daycare. This one is hard because it's your children. But never the less, paying someone top dollar to watch your children can be a want. Shop around and find a provider which gives you peace of mind for a good price. Next is Diapers. Diapers are a want, plain and simple but there is a side to this that you must know. Diapers are generally made in the same manufacturing plant in China. These diapers are made and endless representatives from companies wait at the end of the line to stamp their product logo on the diapers. So for starters, don't buy the expensive diapers. You're paying for the name. Next, buy in bulk and never just to "get by".
If you start on this path, you will succeed. Please keep checking back for new updates.
1. Nothing comes free
I was in class about three weeks ago when I came up with the joke about a friends boss who doesn't give away money. The joke is the boss would say "Hey (insert name here), here's $600 dollars go to Starbucks and get me a coffee. Keep the change.". Would this every happen? Well it depends. If the person who you work for won the lottery, you would have a better chance than if the person worked their way up to where they are now. Millionaires, and I'm not talking about a person who has one million dollars, get their money by keeping their money. So don't expect these individuals to want to give anything in proportion to what they make.
2. Understand financial dynamics
I'm a realist. I'm middle class, and I surely don't have change to spare outside of the local Walmart. If I see a charity that has something cool which makes my quarter spin a couple times and thus enthuse my daughter, I'll donate. But in general, I try to keep what I have because I don't have much. So this is an easy start for any of you want-to-be rich people. First, cut back on everything. I know, I know, everyone says cut back. Yet they don't seem to give any way of cutting back. The truth is, that's because cutting back for me and cutting back for you are two different things. So here is what I did to save money: One of my habits is to eat fast food. Not because I like it (I do), but because my house is usually far away from wherever I am at. So a quick stop and Carl's Jr. or Taco Bell and I'm full. I make up for the loss in my wallet by the addition to my stomach. A couple of hours later, both are empty. Let's first analyze why eating out is bad, well aside from the health standpoint. Every time you spend money at a restaurant, you are effectively telling that store that they have good business. The more times this happens, the higher the price goes. It's like this: say I spend $7 every day at Taco Bell. Then let's say that the average amount spent is $6 for every meal. Taco Bell in return raises their prices to 7 and now people have to decide. Those like me who are far away from home accept the price increase and buy. But who really leaves? Well for a while, those who don't like the prices leave. But then they get the craving for good ole' taco bell and bobs your uncle they are eating at taco bell. The next thing about eating fast food is what you could get in return by packing a lunch. All of the food at fast food restaurants happen to be designed with your taste buds in mind. They have no regard for your digestive system or waste size. These items also cost more because they have to be mass preserved to last longer. So the meat that you are eating is actually filled with preservatives to allow the meat to last longer while the meat at the store is not. When you eat fast food, you get full. But your body will burn those preservatives quickly leaving the meal behind. Had you eaten at home, this would not have happened, but now you are eating 3/4 of your meal. Placing the guy who ate at home next to you, you will be eating sooner. And if you think about it, you paid $7 for a meal that was actually only worth $5.25 of nutritional value.
3. Get a financial plan
No this is not a budget. Budgets often fail because they are constantly being re-written on a daily basis. A financial plan lays out what you want. And let's face it, when you walk into a store it's usually more about what you want than what you need. By setting what you want aside, you can figure out how badly you need it. For instance, here is my list of wants for the month:
1. tickets to the hockey game
2. new hockey equipment
3. new motorcycle exhaust system
4. college graduation gown
Now take a look at this list. You will see that everything on here is not needed. But wait you say, what about your graduation gown? Well, I don't have to go to graduation. I'll still get my transcript and degree without graduation. So this is a want. It's not a requirement for me to graduate. So now let's list what I need.
1. Groceries
2. Gas
3. daycare
4. Diapers
As you can see, I didn't create a list of everything. So let's compound this list step by step. This is actually where people go wrong in creating a financial plan. They create vague plan's which are open to interpretation. Trust me, if it's not clearly defined you will fail. So without further delays, my list. Groceries: What do I need? Well I don't need soda, but it's nice so let's place that in the want section below. I have a daughter so I'll need to get milk because it goes with some of her foods. Juice. yes, my daughter could drink water and not juice, however since she spends most of her time playing she will need something with sugar. This is a swing choice, so I will let you put it in your own pile but for me it's a need. Bottled Water. Well this is an interesting thing to have. It's water, and we need water. For me it's a want though because I have a tap water purification system on my faucet. A simple reusable bottle will do the trick. Next is going to be the meat. I'm not vegetarian, so this is going to be a staple of my diet. Next is the infamous pizza. I can get it cheap, but do I really need it? Well no, so it's a want.
WANTS
1. Soda.
2. Bottled Water.
3. Pizza.
NEEDS
1. Milk
2. Juice
3. Meat
As you can see from my list, I haven now broken up a six item grocery list into wants and needs. This is going to be the first step. I will take the wants and put them aside with the wants above. I will take the needs and put them aside as "already spent" because I need them. Now gas is tricky. This is another "think your way through item". First, do I need to take that useless trip for an hour or can I skip it and stay home? Well if the trip does nothing more than give you mental satisfaction, the answer is it's a want. Driving to work or daycare or the store is a need. Again, take these and separate them. Move down and you will see daycare. This one is hard because it's your children. But never the less, paying someone top dollar to watch your children can be a want. Shop around and find a provider which gives you peace of mind for a good price. Next is Diapers. Diapers are a want, plain and simple but there is a side to this that you must know. Diapers are generally made in the same manufacturing plant in China. These diapers are made and endless representatives from companies wait at the end of the line to stamp their product logo on the diapers. So for starters, don't buy the expensive diapers. You're paying for the name. Next, buy in bulk and never just to "get by".
If you start on this path, you will succeed. Please keep checking back for new updates.
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