A Common Mistake When Entering a New Job

Did you know that most people don't take full advantage of their 401k match at work? This little tip could help increase your net worth by thousands of dollars over the next decade.

Most people make the common mistake of automatically joining the 401k offered by their work. They may have a variety of reasons, including consolidating their retirement funds. Did you know that most 401k plans have hidden fees, called operating expenses?

In general 401k plans, have higher expenses than a typical personal IRA would have. For this reason, the major reason to actually contribute to your work's 401k plan would be if they offered a match.

It is common for an employer to offer a 4% match, meaning that if you contribute 4% of your salary towards your 401k, your employer will match that 4%. Now here's the kicker. If your employer matches 4%, you often need to contribute more than 4% in order to take full advantage of the free money they are offering.

Here's why. Suppose you earn $60,000 per year and you start contributing 4% towards your 401k, due to your employer match. Well, if you earn a $5,000 starting bonus and another $2,000 end of the year bonus, you will miss out on $200 because you didn't factor in the additional $7,000 in compensation ($7,000 * .04 = $200).

Over time, and over jobs, these little details can add up to thousands of dollars.

This post was reposted from http://finlit.biz/retirement-2/a-common-mistake-when-entering-a-new-job/, originally written on January 12th, 2013.

To Double Your Income, You Must Reinvent Yourself

If you keep doing what you've always done, you will always get what you've always got. Some people will say that you should stick to what you know. Whatever you believe now is undoubtedly allowing you to get the results you are currently obtaining but at the same time, it is also holding you back from your true potential. Rather than sticking to what you know, focus on what you want. Steven Covey states, "Keep the end in mind."

In Leviticus, the bible reads over and over, regarding skin diseases or other sicknesses, "They must be cast out from their people." I love this, because it doesn't say that the people must outcast the man in question. It just says, they must be cast out. This means that in order to remove the ugliness, the disease, a man may choose to separate himself for a period of time. The wilderness, the desert, is not necessarily a bad place for a man, and you will find many of the great leaders, purposely allow themselves alone time to reflect and allow the reinvention to happen.

There is a parable of 100 sheep, where 1 is lost. The shepherd goes to find the sheep, leaving the 99. Often times, the shepherd would break the leg of the lost sheep, forcing the lost sheep to stay with the shepherd and completely rely on the shepherd for all its needs. In turn, this would then reinforce the bond between the sheep and shepherd. The reason heaven rejoices, is not because the one sheep is reunited with the fold. The one sheep is, in fact, different from the 99. The 1 sheep has a newly found discovery of where its strength lies. In a sense, the one sheep, with the newly created bond, is now stronger and less lost than the remaining sheep.

What you think now, what you do now, results in your current income. In order to double that income, you need to go down to the roots, to tear out, to sort, to cocoon, to brainstorm, to reflect. When you emerge, with new thoughts, ambitions and ideas, you may put in place a foundation that will lead to doubling your income.

This post was reposted from http://finlit.biz/business/to-double-your-income-you-must-reinvent-yourself/, originally written on January 7th, 2014.

Small Business and Real Estate Expenses

Small Business Expenses are listed on Schedule C. It is good practice to keep these expenses categorized throughout the year. See www.irs.gov for more information.

• Advertising
• Car and truck expenses
• Commissions and fees
• Contract labor
• Depletion
• Depreciation and section 179 expense deduction
• Employee benefit programs
• Insurance
• Interest (Mortgage)
• Legal and professional services
• Office expense
• Pension and profit sharing plans
• Rent or lease
• Repairs and maintenance
• Supplies
• Taxes and licenses
• Travel
• Meals and Entertainment
• Utilities
• Wages
• Other expenses

Computer supplies and automobiles used for business will be "listed property" in section V of Form 4562. For example, if you purchased a computer for $832 and used it for business 50% of the time, the basis would be $832, of which $416 would be used for business, to be recovered over a 5 year period. This would allow a depreciation deduction of $84 using the HY convention. The categories for "Business use of your home" for Form 8829 are:

• Real estate taxes
• Interest (Mortgage)
• Insurance
• Rent
• Repairs and maintenance
• Utilities
• Other expenses

This expense will be determined based on the square footage of your home and the area designated for business use (such as an office). The percentage will be used to determine the expense used for business.

For rental properties, there are three categories: real estate professionals, active activities and passive activities. If you search for tenants and screen them yourself, and are called in the middle of the night to fix plumbing, you are most likely active in your real estate venture. In general, the more active you are, the better the deductions when the property doesn't make a profit. For example, an active investment can be used to reduce active income. On the other hand, if you use a property manager, you will have to carry the loss over into future years waiting for a profit, by using Worksheets 3, 5 and 6 from Form 8562.

The categories are:

• Advertising
• Auto and travel
• Cleaning and maintenance
• Commissions
• Insurance
• Legal and other fees
• Management fees
• Interest (Mortgage)
• Repairs
• Supplies
• Taxes
• Utilities
• Depreciation expense or depletion
• Other (Amortization)

Typically, Stamp Taxes, Title Fees and Recording Fees, all found in sections 1100 and 1200 of the HUD should be added to the basis of the home. These are added to the original purchase price of the home and include any "improvements" made to the home. The basis for a home is typically depreciated using Depreciation and Amortization Form 4562, using MACRS Depreciation over 27.5 years. See sizusfinlit.blogspot.com for more information about the HUD sections and what is not included in the basis.

Typcially, points on a home or refinance costs, should be amortized over the life of the loan (for example, 30 years for a 30 year loan).

If this article, helped, please leave comments and let us know how we are doing. We are glad to help promote small business and help stimulate the economy.

This post was reposted from http://finlit.biz/estate-planning/small-business-and-real-estate-expenses/, originally written on December 28th, 2013.

What Do Multiplication, Leverage and Delayed Gratification Have in Common?

What would you rather have, a brick of gold or a small seed?

Gold is shiny. Gold has value and is worth thousands of dollars because of its special qualities. On the other hand, a seed you must plant. You must pour time and energy into creating a fertile environment. Then, you must wait. But over time, the seed will create an abundance, far beyond the investment of resources.

"While most men would value the gold, I value things that bear fruit."

When we work ourselves, we add up the contributions from each day in a year, to get our total contributions at the end of the year.

On the other hand, when we spend our time pouring into the lives of other people, growing and developing leaders, we multiply the contributions over time, to get our total contributions at the end of the year.

The power of multiplication has been demonstrated time and time again in history. An idea sparked, in one man, who recruited a small team, delivering that message to the multitudes.

What will you deliver?

This post was reposted from http://finlit.biz/business/what-do-multiplication-leverage-and-delayed-gratification-have-in-common/, originally written on December 21st, 2013.

An Example of a 401k Rollover Followed by a ROTH Conversion

In the posts, 401k Rollovers, Where Should My Money Go? and The Deductible Traditional IRA, Non Deductible Traditional IRA and the ROTH IRA, we covered 401k classifications and rollovers, which can be used as a reference for this example.

To briefly discuss a ROTH conversion (see www.bogleheades.org), as an example, suppose you worked at a company and contributed $10,000 in tax-deferred traditional personal contributions (elective deferral) and $20,000 in after-tax traditional personal contributions into your 401k. If the 401k plan had no limitation against this (check with your employer), this could speed up your retirement contributions (see 401k Rollovers, Where Should My Money Go? for more on contribution limits).

Now, suppose the account grew to $50,000 due to the earnings from both pots of money. If you left employment with the company, you could rollover your 401k into a traditional IRA, and file IRS Form 8606, to track $20,000 as a non-deductible basis for your traditional IRA.

You would have $50,000 in a Traditional IRA, of which $20,000 would be considered a non-deductible contribution.

Let's say the account then grew to $100,000. Still, $20,000 is considered non-deductible, which is 20% of the account. If you then decided to convert $10,000 from your Traditional IRA into a ROTH IRA, you would essentially be converting $2,000 of non-deductible money (which is 20%), since the IRS requires you to convert in proportion to the non-deductible contributions over all your Traditional IRA money (even if you have multiple accounts).

That year, you would file IRS Form 8606, to reduce your non-deductible basis from $20,000 to $18,000. You would also pay taxes on $8,000, as if you received this $8,000 as income.

See retireplan.about.com for more on tracking your non-deductible basis.

z Did this article help? We'd love to hear through your comments and questions.

This post was reposted from http://finlit.biz/retirement-2/an-example-of-a-401k-rollover-followed-by-a-roth-conversion/, originally written on December 11th, 2013.

The Deductible Traditional IRA, Non-Deductible Traditional IRA and Roth IRA

In the article, 401k Rollovers, Where Should My Money Go?, we discussed various classifications of the 401k. We will continue the discussion to figure out how to allocate the money when working with rollovers and conversions.

When working with rollovers, the classifications become simplified: A) tax-deferred traditional 401k contributions, B) after-tax traditional 401k contributions and C) after-tax ROTH 401k contributions.

Here, tax-deferred traditional 401k contributions (A) includes the following: tax-deferred traditional personal contributions (elective deferral), traditional earnings and tax-deferred traditional employer contributions. After-tax ROTH 401k contributions (C) includes after-tax ROTH personal contributions (elective deferral) and ROTH earnings.

When rolling into personal IRA accounts, you will do the following. A) and B) will be placed into a traditional IRA. C) will be placed into a ROTH IRA. In the year, the rollover occurs, any after-tax traditional 401k contributions (B) can be tracked using IRS Form 8606, since this money will form the basis for your non-deductible traditional IRA contributions.

The article at www.investopedia.com, states: According to IRS Publication 590: "Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. In those situations, a Form 8606 is completed for the year you take a distribution from that IRA." However, it may still be a good idea to complete the form for your records.

Since after-tax traditional 401k contributions roll into non-deductible traditional IRA contributions, the IRS Form 8606 will help track these as a basis, to avoid combining this money with the earnings on this money, which is tax-deferred whether in the traditional 401k or traditional IRA.

To see an example of how this basis affects a conversion from a Traditional IRA to a ROTH IRA, read An Example of a 401k Rollover Followed By a ROTH Conversion.

Did this article help? We'd love to hear through your comments and questions.

This post was reposted from http://finlit.biz/retirement-2/the-deductible-traditional-ira-non-deductible-traditional-ira-and-roth-ira/, originally written on December 12th, 2013.

401K Rollovers, Where Should My Money Go?

We will actually cover the rollover in the next article, but to setup a foundation, we will cover 401k classifications in this article.

If you have a 401k, you may be curious as to the various income limits and classifications for your contributions. First, let's cover the classifications. The 401k money is classified as one of the following: 1) tax-deferred traditional personal contribution, 2) after-tax traditional personal contribution, 3) traditional earnings, 4) after-tax ROTH personal contribution, 5) ROTH earnings or 6) tax-deferred traditional employer contribution.

Most people contribute money into their 401k as tax-deferred traditional personal contributions (1). This money is sometimes matched by their employer as a tax-deferred traditional employer contribution (6). The money then grows, creating traditional earnings (3).

The combination of tax-deferred traditional personal contributions (1) and after-tax ROTH personal contributions (4) is limited to $17,500 for 2013 (if you are under 50). The combination of classifications 1) and 4) are commonly referred to as elective deferrals. Notice, that this limitation does not include after-tax traditional personal contributions, traditional earnings, ROTH earnings or tax-deferred traditional employer contributions.

The combination of all contributions, which is 1), 2), 4) and 6) is limited to $51,000 for 2013 (if you are under 50) and cannot exceed 100% of your salary. See taxes.about.com and www.forbes.com for further information.

You may also be wondering about the tax implications for each of these categories. Tax-deferred traditional personal contributions (1) and tax-deferred traditional employer contributions (6) are deductible, in effect, reducing the amount of money you make and have to pay taxes on. The difference between these two categories are the contributions limitations discussed above. After-tax traditional personal contributions (2) and after-tax ROTH personal contributions (4) are not deductible, in effect, meaning that you will pay taxes before making these contributions. The difference between these two categories is how the earnings are taxed, discussed in the next few sentences.

Traditional earnings (3) will be taxed when you withdraw the money while ROTH earnings (5) will not be taxed when you withdraw the money. In this situation, withdraw typically refers to retirement (and does not include rollovers).

See Can You Contribute to Both a ROTH IRA and a ROTH 401k? for additional information about ROTH 401k options. Also, continue reading The Deductible Traditional IRA, Non Deductible Traditional IRA and the ROTH IRA to see what happens to these classifications during a rollover.

This post was reposted from http://finlit.biz/retirement-2/401k-rollovers-where-should-my-money-go/, originally written on December 11th, 2013.

A Common Mistake for Rolling Over Your 401k

How often do people keep jobs in the United States these days? According to www.forbes.com, only 4.4 years. In addition, according to money.usnews.com, the average worker, will work until age 67. This means that the average person might switch jobs 11 times during their career!

The only real reason to have a 401k is if your employer matches your contribution. However, when you leave your job, don't roll your 401k into your new company's 401k. The reason is that each time you rollover your retirement account, there are naturally fees associated with liquidating your various positions. If you end up switching jobs 11 times, you will end up paying these fees 11 times. It is not uncommon for people to believe they are not charged fees within their 401k, but this is not the case.

It is better to own a personal IRA, because in general, you will have lower fees and more control. A side benefit is that when you leave, typically, the fees may jump even higher than those while you were working for the company. It is not uncommon to hear stories of a $2,000 retirement account accumulating so many fees, that eventually, there was nothing left for the employee.

Do yourself a favor. When you leave a company, take your money with you.

Have you encountered this financial mistake? We'd love to hear your story and as usual, thanks for visiting! We appreciate each and every one of our readers.

This post was reposted from http://finlit.biz/retirement-2/a-common-mistake-for-rolling-over-your-401k/, originally written on November 28th, 2013.

How to Invest in Yourself and Your Community

Dave Ramsey says that a major financial emergency will occur for most people every ten years. This is not surprising with Death, Divorce, Disease and Disaster being so prevalent. Now, when a financial emergency hits, the one thing that can't be taken from you is the investment you have made both in your community and in yourself.

Einstein stated, "Strive not to be a success, but rather to be of value." Having this mindset, you will naturally invest your biggest resources, time and money, in your community.

Wealthy people invest the first ten percent of their income into their community. When a financial emergency hits, they already have a strong network and the social capitol to rally out from their emergency.

It is common for a wealthy person to believe that if you took all their money, they would be precisely back where they were financially in five years. This is because they believe in the power of professional development and education.

In your career, the first ten percent of your time should go towards professional development.  This will enhance your ability to provide value.  Likewise, in life, the first ten percent of your money should go towards your community.  This will enhance your desire to want to provide value.  The powerful combination of these two principles will likely double your income.

This post was reposted from http://finlit.biz/business/how-to-invest-in-yourself-and-your-community/, originally written on November 25th, 2013.

The Standard of Living Financial Law

They say, "Earn like the wealthy, but live like the middle class".

Imagine throughout the next ten years, you were to maintain the same standard of living, consistently. What would happen?

Well, this law can either work for you or against you. Imagine that you were to lose your job or even worse, lose a loved one. Now, imagine that you maintained the same standard of living. Although your income decreased dramatically, you did not adjust or make new sacrifices. Where would this lead you in five years?

Now, imagine that when an unexpected bonus or tax return came in, you simply ignored it and dropped it into a wealth building account. Or imagine, when an unexpected raise came, you decided not to change your spending habits, but rather maintain the same standard of living. What would happen over your lifetime?

Most people plan for and spend money before it even hits their account. Part of this is based on gratitude and not being content with what we already have. But remember, "To all who have, more will be given, and they will have more than enough." Matthew 13:12 (see also Matthew 25:29, Mark 4:25)

What are your thoughts?

This post was reposted from http://finlit.biz/business/the-standard-of-living-financial-law/, originally written on November 21st, 2013.

3 Ways to Valuate Homes

When it comes to purchasing or selling a home, most people make decisions based on emotion rather than logic.  This is natural, but it always helps to at least have the facts to explore the logical implications of various options.

Option 1: Advertisements

Mass media will offer home values to us through billboard postings, newspaper articles, flyers, online messages, etc.  It is natural to think that we should value homes based on these advertisements because in so many other areas, the advertised price accurately reflects the real value.  However, with homes, this is not the case.  With real estate, profit is gained on the buy and realized on the sale, so it is not surprising that realized sales can be as much as 50% of advertised prices.  In fact, the goal of mass media is to set the initial bar high, so that above value home prices seem reasonable:  "Wow, that home only costs $300,000!"

Option 2: Cost Comparison

Other people will look through county records and look at sale prices of homes in the area, performing a cost comparison.  While this is more accurate, it is still a ways off, because the underlying assumption here is that the basic economics of supply and demand are at play.

However, the sale of houses is heavily guarded by average fees totaling 11% of the purchase price when combining the purchase and sale of a home (commission, title, loan fees, etc).  Therefore, the barrier of entry into the real estate market means that the market is not efficient.  In other words, factors like your real estate agent can make a huge impact on the price and you cannot just assume that because others have sold for a given price, that you can as well.

Option 3: Rental Value

The true way to value a home is based on rental values.  The value of a home will be somewhere between 100 to 200 times the monthly rental price.  This may be discouraging to many and it suggests that renting is often the best option.  However, taking the advice will help you keep your head on straight when it comes to determining the financial implications of purchasing a home.  In addition, it may help you avoid a foreclosure when an emergency situation arises.

This post was reposted from http://finlit.biz/debt/3-ways-to-valuate-homes/, originally written on November 20th, 2013.

Why the Wealthy Tithe

This next concept is so important.  In fact, it is so important it is reiterated in the bible twice:

"Whoever has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him" - Matthew 13:12

"Whoever has will be given more; whoever does not have, even what he has will be taken from him." - Mark 4:25

It is amazing how this works.  When you give away the first ten percent of what you make, you are essentially saying two things:  The first is that you know the source of your belongings and are grateful.  The second is that you believe you already have an abundance and are blessed enough that you can give ten percent.

If you cannot tithe when you are poor, there is no way you will tithe when you are wealthy, because the checks just get bigger.  If you study the wealthy, you will find the following principle.  While most people say they cannot tithe because they are not wealthy, the truth is that they will not become wealthy until they tithe.

This post was reposted from http://finlit.biz/retirement-2/why-the-wealthy-tithe/, originally written on November 7th, 2013.

The Emergency Fund, Your First Step Through Chaos

In today's society, where most people spend around 70% of their income on taxes, housing and insurance, what can you do to get ahead?

When there are investments everwhere you look, which one should you choose?

When having a budget frightens and frustrates you and your bills and debt are stacked a mile high, where do you begin?

The answer, to all of these questions, my friend, is the emergency fund.  That's right, before you pay your debtors, before you go for those big fancy home runs that people love to brag about with their investments, you start with the basics.  Before you compound, you impound.

How do you get ahead in life?  Its the small details.  Its always those who focus on doing the small things, so that their activity is compounded over a long period of time, that make the big difference.

The problem with putting all your eggs in one basket, is they just might crack.  The problem with putting the emergency fund off for tomorrow because your bills are so great today, is that it just may never happen.  Start today.  Put aside a little bit each month, until you have built yourself between 3 to 6 months of income.

Its sad, but no one really ever talks about freedom anymore, a principle our country was founded on.  And guess what, your level of financial independence is exactly the number of months you could survive without an income.  How do you do it?  You take the first step.

As readers, we'd love to hear your stories about how you overcame your fears and started to take those baby steps.

This post was reposted from http://finlit.biz/debt/the-emergency-fund-your-first-step-through-chaos/, originally written on October 9th, 2013.

Winning in Finances by the 80/20 Rule

Reading the article exponentialpastor.wordpress.com, reminded me of a very important rule. This rule applies across finances.

Have you ever heard that in any organization 20% of the people do 80% of the work?

Have you ever heard that if you wish to become wealthy, you can either help a lot of people solve their small problems or help a few people solve their big problems?

What about the fact that most people struggle financially because they are either dominated by making a few large purchases or making an extraordinary amount of small purchases?

What about the idea, that you set aside 20% of your income and let 80% be used to finance your living?

The 80/20 rule is extremely important and can be applied in so many ways. The important thing to realize in each of the questions above is the power of the few. Most people see the 80% because that is what takes up our attention. That is what is big and powerful and grandiouse. But the fact of the matter is, the big, important events, rarely do anything for us. The fact of the matter is, the small, consistent results are what have the greatest impact.

Its those small decisions that you make on a day in and day out basis, compounded over a long period of time that will ultimately determine your outcome. This is true in business, in finances, in marriage and many areas of our life. Don't discount the small stuff.

Thanks for visiting the site. What do you think? Its always great to hear from our readers.

This post was reposted from http://finlit.biz/business/winning-in-finances-by-the-8020-rule/, originally written on October 3rd, 2013.

Improving Your Finances While Maintaining Your Lifestyle

Have you ever gotten a raise? What about an unexpected bonus? A refund check from the IRS? Found a surplus in your checking account?

Many people have financial challenges and today, I am going to talk about one very big tip that will help improve your financial situation for years to come.

Did you know that many people making six figures but are in debt and not on track for retirement? Yet, they can survive and pay their month to month expenses. Did you know that there are also people who are surviving and paying their month to month expenses, making half of what the six figure salary earners are making? And still, there are people living off of half of that.

How does this happen? Isn't it true that when our income rises, our expenses tend to grow to match the level of income? Today, I'm here to teach you how to stop the madness.

When you get a raise, be purposeful about how you are going to spend the raise. Since you were already living just fine without the raise, take 80% of the raise and implement a pay yourself first program. This means, that you apply this money towards your debt elimination program or your retirement savings, before you use it for monthly expenses. After you have done this, you can take the other 20% and spend it however you like. Go ahead, you deserve it for your hard work.

Remember, by choosing to keep the same standard of living, you are also choosing to improve your finances.

This post was reposted from http://finlit.biz/retirement-2/improving-your-finances-while-maintaining-your-lifestyle/, originally written on September 12th, 2013.

How to Prepare When Business is Going Well

Thousands of times I have heard the same story. Business was great, we had more work than we knew what to do with. But then, everything changed. The market crashed, the economy took a dive, my family had an illness.

Stories like these should make your ears perk up, because they may just save your future. So what do you do when your real estate properties are cash flowing or your small business is booming.

The life story of Joseph is amazing in and of itself but we focus on one particular piece of advice he gave the pharoah during emense prosperity in Egypt. He told the there would be seven years of prosperity followed by seven years of famine. This in and of itself is a given, just through the natural cycle of life. And many times, pride comes before the fall.

He advised to put away one fifth of each harvest to use during the years of famine. It is not a season of life that makes a difference. It is the accumulation of small decisions compounded over a long period of time. Anyone can have a successful run in real estate or business but to truly have success, you must have the discernment to prepare for troubling times. This gives you the staying power needed to realize true profit.

Do you agree one fifth is an accurate amount to be stored? What strategies do you use?

This post was reposted from http://finlit.biz/business/how-to-prepare-when-business-is-going-well/, originally written on September 2nd, 2013.

One Thing You Need to Do if You Want to Get a Raise

Do you want to get a raise at work? What steps can you take today to make that happen tomorrow?

The story of Laban and Jacob from the bible provides good insight on how to make this happen. Have you ever had a boss that is unappreciative of your work efforts? Ever had one that did not give you what you deserved or took from the wages or rewards you felt you rightfully earned?

Well, this is the situation of Jacob. He worked for his uncle for seven years, working as hard as he could to see to it that his uncle, Laban became properous. During this period, Laban would constantly fail to deliver on his promises and put Jacob through difficult working conditions. But nevertheless, Jacob continued to perform the best of his ability. How many of us could continue to work hard despite feeling cheated or underappreciated?

After seven years, despite the work conditions, Jacob promised to work another seven years. When Jacob decided it was time to move on, he was so valuable that Laban asked, "What wages do you require?" He was so valuable that Laban would pay him whatever he wanted.

If you want a raise, you need to demonstrate the capability to perform the duties required before you get the raise. In fact, taking a step back, you need to provide so much value to either your boss or your organization, that if you were to leave, they would ask, "What wages do you require?"

This post was reposted from http://finlit.biz/business/one-thing-you-need-to-do-if-you-want-to-get-a-raise/, originally written on August 29th, 2013.

3 Tips to Leverage Your Financial Situation

Everyone admires the lone wolf in a sense.  The desire to be unique, to walk against the common crowd, to be something special.

The truth is that everyone is naturally special, each of us with God given talents and strengths that no one else in the world has.  However, to truly achieve what we are capable of we need to learn to utilize the strengths of others.  In a sense, this helps us to overcome our individual weaknesses.

Here are some tips about things you can do to improve your currently financial situation, by leveraging the resources of those around you.

1.  Contribute ten percent of your earnings to your local community.

When you put others first, you build are building social capital.  It feels good to know that five years from now, whether your financial situation improves or not, your community's financial situation will improve.  Your goal should be to succeed on both a personal level and a group level.  When you support your community, the community, in turn, will desire success for you because they know you are contributing to the success of the community.

2.  Read and listen to stories about other people's lives.

In this day in technology, you have access to the biographies of thousands of leaders and success stories.  Rather than waiting for your life to have the experiences, why not benefit from leveraging the experiences of others.  In this sense, you will leverage their life's work, to help identify major financial pitfalls or gold mines.

3.  In your workplace, find a mentor.

You should constantly be on the lookout for building a network of people who have a vested interest in your success.  When someone pours time into you, you become like their child.  Your successes become their successes.  Find people who are willing to coach you and bring you to the next level in your workplace and you will be delightly suprised when your raise gets pushed through because they wanted to see someone they advised break barriers.

This post was reposted from http://finlit.biz/business/3-tips-to-leverage-your-financial-situation/, originally written on August 26th, 2013.

5 Simple Tips to Decrease Debt: Part I

In Suze Orman's "The Nine Steps to Financial Freedom", she introduces the idea that respecting money will naturally improve your own financial situation.

Creating habits which require you to think about money on a weekly basis, even if for a brief moment, are very beneficial for your financial future. Here are five different ways to respect money.

1. Keep your credit card statements.

Each time you get a new bill, write down the interest rate along with your payment amount on the statement. Then, slip the bill into a small folder.

Most people simple throw the statement away or use online statements. This leads to neglecting your situation and the inability to answer simple questions regarding your personal finances.

2. Neatly stack your bills.

Just taking the time to put your money into an organized wallet.  Each time you pay for something, you will probably take note of how much you have spent, keeping a better eye on your money.

Some people just crumple bills or throw them into their pocket.  This leads to inaccurate accounting and the feeling of "What happened to all my money?"

  This article continues with 5 Simple Tips to Decrease Debt: Part II.

This post was reposted from http://finlit.biz/uncategorized/5-simple-tips-to-decrease-debt-part-i/, originally written on August 20th, 2013.

5 Simple Tips to Decrease Debt: Part II

This article is continued from 5 Simple Tips to Decrease Debt: Part I.

3. Don't improve your credit score.

If you monitor your credit score and have achieved a great score, why spend any additional effort to improve your score?  Remember, your credit score only affects you if you ever get denied something based on your credit score and in some cases, getting denied might be a good thing for you.

Some people keep balances on their credit cards and keep loans just to build their credit score.  This leads to paying larges amounts of fees and lots of extra worry.

4.  Don't finance anything that depreciates.

Anything that depreciates is a want, not a need.  If you keep focused on using the cash that you have, rather than cash you will earn in the future, you will save yourself a lot of headache.

Most people finance everything they want in life.  When unexpected emergencies come up, they are left stranded and strapped for cash.

5.  Track your spending through a check register.

Before we had the ability to spend effortlessly and on a whim, there were people that actually wrote down everything the spent, whenever they spent a dime.  This allowed them to constantly look through their spending habits and readjust accordingly.  While you may not use an actual check register, you should find some way to track your daily spending.

Most people quickly glance at their statements and don't even know their current checking account balance.  This can lead to overdraft fees and running out of money before the month is over.

This post was reposted from http://finlit.biz/uncategorized/5-simple-tips-to-decrease-debt-part-ii/, originally written on August 20th, 2013.

Three Levels To Increase Your Earnings

Do you want to make more money? Have you ever wondered why some people make more than you or why you make more than other people? Have you ever wondered why money is so important?

Money is a key factor in our capitalistic society. According to Maslow's Pyramid, there are a variety of needs that money can help satisfy, anywhere from keeping food on the table all the way to funding your life's purpose.

In Rick Warren's "A Purpose Driven Life", he talks about living a life of purpose.  In this sense, money can fuel a mission for your life based on your specific talents and abilities. To do this, you must realize that every single person you meet will be better than you at something and the reverse is also true.  Just realizing this will improve your own self image as well as your valuation of other people.

As we, travel up Maslow's Pyramid and think about living a life of purpose, we see the answers to our question above. When a person is focused solely on putting food on the table, their outlook on life is highly focused on themselves, so they typically make just enough to get by. When a person starts to see that they have control over improving their own situation, they start a journey of improving their own capabilities, indirectly providing more value to others and earning more.  Finally, the most valuable of all is the focus on serving others and helping them to accomplish their goals.  From this standpoint, you will surely be forced to improve yourself, which in turn will make you more valuable, therefore, receiving higher compensation.

In summary, here are the three levels of focus:

1. Focus on making more money
2. Focus on improving yourself
3. Focus on serving others

This post was reposted from http://finlit.biz/business/three-levels-to-increase-your-earnings/, originally written on August 15th, 2013.

Building a Residual Income

In an earlier post, A Simple Way to Assign Value to a Company we discussed how to valuate a business based on the income generated by the business.

This concept was used in the article How Do You Include Residual Income in Your Net Worth? to explain why a business which generates $100/month is worth $24,000.

In fact, the same concept underlies Izu's 100/200 Property Valuation Rule, which is the valuation of a specific type of residual income, mainly a rental business.

Some critics, express concern that the concepts and rules in the above articles are over simplified.  In fact, they may appear to be elementary.  However, there is a lot of thought behind these simple concepts, so don't take them for granted.  Albert Einstein once said, "If you can't explain it simply, you don't understand it well enough."  The purpose of a mathematical model is never to make perfect predictions about the future.  On the contrary, the purpose of a mathematical model is to make educated predictions about the future.

While 95% of people focus on saving $120,000, 5% of people will focus on creating a business which generates $500/month.  Some will succeed, some will fail.  However, the wisdom gained is always relative to the effort put in.

This post was reposted from http://finlit.biz/business/building-a-residual-income/, originally written on July 25th, 2013.

Debt Freedom versus Paying Yourself First

Do you want to get out of debt? Do you want to make sure you have a sufficient nest egg for retirement? If you answered yes to both questions, congratulate yourself because you are like most people.

This article will discuss practical advice for upholding your integrity by paying back those you owe while at the same time, planning appropriately for your own future so that you can provide security to yourself and those you love.

Unfortunately, many people focus too much on paying down their debts. They start taking actions to knock down their debt and make some great progress. However, after a short period of time, something happens that stops them in their tracks. They get busy with other things or an emergency comes up. Just like the weight after a crash diet, the debt comes back, sometimes even worse than before. Sound familiar?

A few people take the opposite approach. They save and invest for their future. Once they get comfortable with their progress, they loosen up a little. Soon, they are either borrowing money to invest more or they are just plain disregarding their debts, allowing them to grow out of control. Sound familiar?

Just like with weight and nutrition, the changes you implement to get rid of your debt, will need to be long term changes. You need to incorporate paying yourself first as a life long habit. Then, with the money that remains, you should create a plan to payoff your debts and pay back your creditors.  This plan should include actual milestones and timelines to hit those objectives.

Paying yourself first should be a priority over paying off your debts. In a sense, if a creditor gives you a predatory loan, that you cannot pay back, their consequence for greed is a loss of their investment. "Pigs get fed and hogs get slaughtered." If you cannot afford to pay yourself first 10% of your income, creditors should not be loaning you money. Remember, you can always negotiate with creditors to reduce your debt but you will never be able to negotiate with custodians to increase your nest egg.

Some related articles are:

• What is John D. Rockefellers 10/10/80 Rule?
• 3 Parts to Jim Rohn's 70/30 Financial Independence Rule
• Should you pay off your home?
• Three Debts Which Will Kill Your Finances
• Isn't it Time You Joined the Debt Freedom Movement

This post was reposted from http://finlit.biz/retirement-2/debt-freedom-versus-paying-yourself-first/, originally written on July 23rd, 2013.

From Leah

Interesting reading. I think heard it somewhere before during a conversation I had. I this life is all we have and we should remember to place our value in people. Especially the ones that live and care for us whether we are rich or poor.

From Hannah

I agree except I worry that the whole system is gamed…the plutocracy has it all set up to work for them, and they throw us bones to worry about immigration or racism or sexism or abortion…anything other than rich peoples’ tax breaks. Those other issues are real. What should we regular people do?

From Scott Izu

The key to change is education. With better information, you can make better decisions. And believe it or not, if you want something different, it starts with you. Whether through reformation (internal change) or revolution (external change), you cannot change anything by yourself. For, united we stand, divided we fall.

Everyone can point out a problem, but a successful person sees a problem as an opportunity and focuses on not only pointing out the problem, but also providing a solution. Everyone can say they want change, but a successful person not only talks about change but actually takes action towards making a change. So my questions to you are: 1) What is your recommended solution? 2) What actions are you taking to get the result you want?

From Hannah

“What is your recommended solution?”

Education. Logic. Ethics.

Education: study and understand history. Yeah, it’s complicated. Get over that. Study. Plutocrats will win. Look at Rome. Be realistic. And remember that religion is about someone else’s power, not yours. It’s a bait and switch. Be generous and always, always care for the less fortunate.

Logic: whenever someone tells you to pay homage to something unproven or faith-based or the like, they want you thinking about something other than what they’re doing while you’re bowing down. Wake the fuck up.

Ethics: would you want someone doing to you what you’re doing to them? Why are you thinking about someone else at all? Be good. Be kind. Think about whether any choice you make is something that you wouldn’t mind someone doing to you.

I became a vegetarian about 20 years ago. I would never require that someone else to do what I chose. But as I get older, I am not sure I shouldn’t….

Above all, be kind. I experience this rarely, and I wish that what doesn’t kill me makes me stronger. But what experience actually tells me is that people are hypocrites. I want to be better than that, and I wish everyone felt that way. Am I alone? I hope not…

I hope that someone envisions a future as I do, with love and understanding and the concept that despite differences, we can find a better place and finally be happy.

4 Ways to Look at Your Business

What is the product of McDonalds?

Most people would say, "Hamburgers."

But it is not just hamburgers. Plenty of diners serve hamburgers. When it comes down to it, a business must offer value to their clients in order to stay in business.

So some people, might extend this answer to, "Hamburgers that are made on demand, quickly and affordably."

But the truth is, McDonalds would not be as big as it is today, by just selling hamburgers. It was Ray Kroc, who decided to stop McDonalds from selling hamburgers as its main product and start selling business opportunities as its main product. According to www.franchisedirect.com, "McDonalds franchise business has not only survived but thrived through boom times and recessions and has successfully reacted to consumer trends."

So, some people would more rightfully say, "Businesses."

But the truth is, not just anyone could turn McDonalds into a franchise business. It takes perseverence, rejection, overcoming obstacles. Thousands of stories exist. For instance, with respect to KFC, according to franchises.about.com, "However, Sanders persevered, and after a little over 1,000 visits, he finally persuaded Pete Harman in South Salt Lake, Utah to partner with him."

So, I might say, "Ray Kroc." McDonalds, sells people, relationships underly everything.

So here are the four ways to describe what your business sells:

1. Your fundamental product

2. Your valuable service

3. Your business

4. You

This post was reposted from http://finlit.biz/business/4-ways-to-look-at-your-business/, originally written on June 26th, 2013.

What Does the Bible Say About Having an Emergency Fund?

Within the bible, the story of Joseph is extremely inspiring. The man obtained the love of his father by having great character. The outcome was a band of jealous brothers, who sold him into slavery.

He became a very prosperous slave through utilizing a great work ethic and strong morals. The outcome was a seductive woman falsely accusing him of sexual misconduct, in turn, leading to a life of imprisonment.

He became an interpreter of dreams to the pharoah, by utilizing his wisdom to interpret dreams. The interpretation of pharoah's dream was that there would be seven years of prosperity followed by seven years of famine. His advice was to store 20% of the harvest each year to prepare for the future.

How many people do you know who once had a business running with years and years of prosperity only to hit a rough patch? How many people hit financial distruction through either divorce, death, disease or disaster? How likely is it that an emergency will occur within the next ten years?

Would an emergency fund, funding by paying yourself first 20% of your income be beneficial?

Any corrections to the story or insights are welcome! What was your interpretation of this parable? How are you prepared?

This post was reposted from http://finlit.biz/retirement-2/what-does-the-bible-say-about-having-an-emergency-fund/, originally written on June 23rd, 2013.

From Hannah

“a seductive woman falsely accusing him of sexual misconduct…”

I can’t speak to the rest of the parable, as a non-Christian, but I can tell you as a woman that parable or not, women are too frequently blamed for “sexual misconduct.” Unfairness abounds (in all directions) — we can only seek to live the best lives possible.

Should You Pay Off Your Home?

Recently, I have heard several people advocate that they should not pay off their home mortgage in order to live a debt free lifestyle because mortgage rates are at an all time low. For instance, the article at business.time.com, states that "You might be better off keeping the mortgage and investing the money elsewhere, which amounts to borrowing at a tax-deductible 3.5% in order to start a business, invest in stocks, or purchase an income property."

My advice.  Payoff the mortgage as quickly as possible.  Before I add some caveats to think about, I will discuss why this can be advantageous.  First of all, when it comes to success, there is no time like the present.  Taking action today, even if these are baby steps can mean a big difference twenty years from now.  In addition, unfortunately, you never know when your family might be hit with one of the four Ds.  I have never met anyone who has regretted paying off their mortgage, but I have met people who have lost their home because they didn't pay off their mortgage.  About 95% of people fit into the category where they should just pay off their debt.

Now, for the caveats.  First of all, when it comes to business and leveraging, I would say an experienced investor, may purchase a home with 0% down.  This is how a 22 million dollar real estate empire can be created. I've seen it happen.  The concept introduced by the article above assumes that the person will have the staying power to not lose their current home.  It also assumes that the savy investor will be wise in where they invest their money.  For many Americans, a guaranteed match with inflation is much better off than the risks of investing.

All this said, I typically tell people that they should do both. That is, rather than put all their eggs in one basket, they should have a plan in place for their current retirement as well as a plan in place to pay off their debt.

This post was reposted from http://finlit.biz/debt/should-you-pay-off-your-home/, originally written on June 4th, 2013.

From Hannah

I agree that we should pay off our mortgages as quickly as possible. We should, I think, strive to be debt-free as far as possible. One path toward this goal is to give sustained, serious thought as to what we truly need.

The US (among other countries) has become toxically focused on material goods as measures of happiness and success. Would your car or your clothing or your furniture truly impress someone with your worth? If so, you need new friends, not new goods.

Paradoxically, the US economy might collapse if it stopped being able to sell a false dream of prosperity via items that no one really needs. A roof, some good (healthy, fresh, home-cooked) food, and people who love you…there’s not much else that matters.

So, I absolutely agree that you should pay your mortgage off. And then maybe look toward what good you can do in the world with any extra money, instead of focusing on another trip to the mall.

From Scott Izu

Well stated!!! Thank you for your feedback. :)

From Hannah

So is there something you would recommend we put our extra money toward? Any particular charity or investment? I think of this kind of thing often, and am not sure what to do. I want to be mindful, as an investor in the future, and as a person who wants to leave the world a better place than I found it. You might be surprised how many people (some you might know) who feel this way.

From Scott Izu

Hannah, the best thing for you to do would be to go to http://finlit.biz and click on the Contact Us button and enter your contact information. Someone can give you a call and assess your particular situation and what is best for you.

From Hannah

I would have gotten in touch, but I am very disappointed by further reading on this site. The actual literacy is lacking (Berenstain Bears level). Worse, there is a heavy Christian tone that is off-putting to non-Christians. I want financial information, not a sermon from an anti-scientific “book” that was invented in the Stone Age. I want a financial advisor who has current, informed, world market information, not fantasies about how a tiny, ancient tribe who stoned adulterers (among other heinous acts) has some secret insight into my investments. No doubt you will not publish this comment, and that is fine. But you might want to reconsider your presentation, and how off-putting it will be to many people, and that the current receptive audience is particularly uneducated, poor, and ill-informed. If you want to be an evangelist, go for it. But don’t confuse it with your other (“financial literacy”) goal.

From Scott Izu

Thank you for your honest feedback. I appreciate the thought and time put into your comments. I am not big on censorship and believe you have some valid points. Here are some additional insights that you might find useful.

On a macro scale our nation went from having one trillion dollars in circulation in 2007 to having four trillion in circulation in 2013. This effect of printing money has the potential to decrease our standard of living to 25% of what it is today. We have seen cities such as Stockton and Vallejo go bankrupt. Our government is a reflection of individuals.

So to address the issue, I focus on the individual families at the micro level. There, we see cable, cell phones, electricity, taxes. and credit cards eating away subtlety, since people essentially work for thirty years and then spend twenty years in retirement. On top of that, the family is being broken up by divorces and other issues, corroding our nation at the micro level. How do we save families, thus improving our micro level finances, and in turn making a global impact on a macro level?!?

From Hannah

Okay, I got schooled. I would probably not normally reply further, but I am very impressed by your anti-censorship attitude and thick skin. You are a better person than I am. You deserve respect, and I thank you for your open-mindedness.

I agree that we have enormous macro-level economic issues in this country. The system is gamed, I think, against the economically disadvantaged — as well as women, minorities, etc. So how do we fight back and improve our lives? I am a woman; I’m paid less than men in my field. I find that my partner is better off, and he knows it, and uses it, albeit subconsciously. I try to make good financial decisions, and I’m generally successful, but it’s still difficult to find a balance between smart decisions and wanting to be a good human being (charitable donations, etc.).

It’s a complicated world. I couldn’t maneuver it without friends, personally. Thank you for your open mind and ears.

What is John D. Rockefeller's 10-10-80 Rule?

John D. Rockefeller is one of the richest men who ever lived.  In order to gain wealth, one may model those who have already obtained it. In this case, you may model a man who spent the last 40 years of his life in retirement.

Does it surprise you that 80% of millionaires today are self made millionaires?  This means that, unlike popular belief, it is the character of a man that often determines his financial future. It may interest you to view the personal convictions and resolutions that Rockefeller had, some of which may be found at www.unmaskingthemillionaires.com.

Before banks figured out that they could make more money off of Americans, by keeping them in debt, they used to give out the book, "The Richest Man in Babylon." According to www.americandebtproject.com, "The Richest Man in Babylon (1926) was originally written as a series of pamphlets that were handed out in banks and insurance companies and later put together and completed as a book."  This book, gave an account of Arkad, the richest man from the ancient city of Babylon.  Arkad had many financial guidelines, engraved on various stone tablets, on of which stated that before considering anything else, one should pay yourself first.

Rockefeller lived by the 10-10-80 rule.  This principle states that 10% of income should be dedicated towards savings, 10% towards charity and the final 80% should be used to pay for living expenses.

This post was reposted from http://finlit.biz/retirement-2/what-is-john-d-rockefellers-10-10-80-rule/, originally written on May 14th, 2013.

5 Areas of Concern for an Indexed Universal Life Policy

When sitting down with people who sell indexed universal life policies, you often hear the same arguments over time.  The advocates of these policies continue to make arguments despite the fact that Dave Ramsey, Suze Orman and CNN Money all support the "Buy Term and Invest the Difference" philosophy.  Here we discuss common statements made by advocates of IUL policies.

Risk

"There is risk wherever you invest your money."  Normally, for a personal account you offset risk using a concept called diversification, which allows you to invest in multiple places.  Within an IUL policy, the separate account holding the investments is actually owned by the life insurance company, not the policy owner.  This means, that if the life insurance company goes bankrupt, the whole separate account is at stake.

Commissions

"Commissions are not paid from your separate account, but rather, from the company.  This allows your entire pool of money to grow."  For someone putting $50,000 a year into an IUL policy, it is not uncommon for $25,000 (or more) to be paid out in commission.  Although the company pays the commissions, the money must come from somewhere, right?  Indirectly, the consumer pays the bill.  Extremely high commissions are not uncommon and unfortunately the law does not require these commissions to be disclosed.

Guarantees

"Don't you want a guarantee that your money will grow?"  IUL policies have guarantees.  However, if the life insurance company goes bankrupt, the guarantee will be obsolete.  In addition, the fine print often explains that the guaranteed value is before administration costs and mortality fees.  If you would like the guarantee of a life insurance company, you will save money by purchasing a cheap term policy and investing in an indexed annuity (with the same guarantees), rather than purchasing an IUL policy.

Discipline

"Having an IUL policy allows those without good discipline to build cash value."  First of all, the separate account is owned by the life insurance company.  When people do not have good discipline, they will end up taking loans against their cash value, in which case they will have a new liability along with paying for overpriced life insurance.  They would have been better off owning a cheaper term policy, even though they had no savings.

Cost

"After a certain number of years, you no longer have to pay for life insurance."  The cost does not have to be disclosed on a hypothetical illustration.  Over time, as a person gets older, the cost of life insurance coverage becomes very expensive.  Somebody, must pay that bill, right?  A person is better off, purchasing a cheap term policy and investing the difference, where the cost of life insurance will not hinder the growth of the investment account.

Dedicated to helping you make better decisions! You are encouraged to explore other articles and leave comments.



This post was reposted from http://finlit.biz/life-insurance/5-areas-of-concern-for-an-indexed-universal-life-policy/, originally written on April 25th, 2013.

Do Whole Life Insurance Loans Have to Be Paid Back?

Suppose you owned a home, fully paid off.  If someone said to you that you could take loans on the equity and never have to pay them back, what would you say?  What if they told you that you could last through retirement by taking these loans out on a yearly basis?

Let's take a look at this.  You could take loans on the equity, but once you did, it would reduce the amount of control you had.  If you ever wanted to get access to the remaining equity, you would have to sell your home and pay off the loans.

Not wanting to do this, you might continue to take loans out year after year.  However, if an emergency situation come up, where you became ill, you might be forced to sell the home to pay back the loans and get the equity.

If you were lucky, you might actually use the equity in the home to fund the retirement.  When you passed onto a better place, your kids wouldn't get the home you worked so hard for.  Does it really make sense to say that you never had to pay back the loans?

Now, some people actually use the equity in their home to fund their retirement.  What if the mortgage company said that in order to get access to the loans, you needed to pay for a special insurance which increased in cost each year?

When looking into a life insurance contract, ask yourself the question, if I take out these loans, would my net worth decrease or would the amount of money passed onto my children decrease?  If the answer is yes, then unfortunately I would truthfully say that you must pay back the loans.

Take care in the contracts you sign.  They may drastically affect your family's future.

This post was reposted from http://finlit.biz/life-insurance/do-whole-life-insurance-loans-have-to-be-paid-back/, originally written on April 10th, 2013.

3 Myths of Indexed Universal Life Insurance

There are many myths behind whole life insurance.  Some them include, "You don't have to pay for insurance after the first 15 years", "The cost of insurance never goes up" and "You don't ever have to pay back the loans".  All of these are myths that have been debunked within this blog.  Today, we will talk about each of these myths.

Suppose you have a whole life insurance contract and around the age of retirement, you start to take loans against the policy.  After a few years, you may have a half million dollars worth of loans.  Around age 70, you find the cost of insurance to be high.

At the point, you see the cash value in your life insurance contract not returning the expected amount.  You do some digging only to find that even though you aren't paying any premiums, you are still paying for expensive life insurance through your so called earnings.

At this point, you don't really change much because you already have taken out over a half million dollars in loans.  Around age 80, you see the cash value in your life insurance contract becoming stagnant.  You do some digging only to find that the cost of insurance is extremely high and has been increasing over the years according to your policy.  You look at the hypotheticals only to find that this cost is no where to be found.

At this point, you feel in a bind, because if you surrender the policy you will have to pay back the million dollars in loans.  So you decide to continue paying the high cost of insurance.  Eventually, you move on to a better place.

Your kids, ready to receive their inheritance then get notified that they will get the life insurance money but only after the loans are paid.  Most of your life's hard earned money has been drained leaving the kids with little to nothing.

Make sure this doesn't happen to your family.

This post was reposted from http://finlit.biz/life-insurance/3-myths-of-indexed-universal-life-insurance/, originally written on April 9th, 2013.

3 Personal Tips to Avoid Losing Money from a Get Rich Quick Scheme

This article continues the discussion from 5 Organizational Issues for a Pyramid Scheme.  In general, people often lose money when chasing opportunity.  How can you avoid this trap?

1.  Avoid making an emotional decision.  Some people associate music, celebration, suits and recruiting with an illegitimate organization.  However, in reality, when looking at an opportunity it is important for a person's will power, mind and heart to align.  One must not only be emotionally motivated by an opportunity, but must also be able to have a thought out plan as well as the will power to see the plan through.

2.  Stop thinking the grass is greener on the other side of the fence.  When you jump around from opportunity to opportunity, you may develop various skills but you will never achieve excellence.  Discipline, time and focus will lead to success.

3.  Focus on developing your talents.  In the book Outliers, it is mentioned that it takes 10,000 hours to become success in any given area.  There are no short cuts to developing your character.

Sometimes when people fail, they will point the blame everywhere else but at themselves.  What do you think?  Have you had a bad experience?  Can you describe it?

This post was reposted from http://finlit.biz/business/5-personal-issues-for-a-pyramid-scheme/, originally written on March 28th, 2013.

5 Organizational Issues for a Pyramid Scheme

This is a follow up to the post What is a Pyramid Scheme?  The basic issue encountered was that many organizations have a pyramid shape, such as government, military, churches, schools and businesses.  So, how can we determine whether one of these organizations is legitimate?

Here are five questions to make sure the organization is legitimate:

1. Can you clearly identify the product or service being offered?  Every business offers either a product or service.
2. Is the organization using deceptive practices?  While no organization would welcome criticism and negativity, a legitimate organization generally welcomes questions arising from interest and curiousity.
3. What are the chances of a new peson acheiving the exceptional financial success in an organization?  Small businesses fail 90% of the time so if 1% of an organization acheives exceptional financial success, this is a good indicator.
4. What is the wealth distribution of the organization?  The more transparent an organization, the better.
5. What risk does the organization have if resources are wasted on a new person who does not produce profits either directly or indirectly?  In general, a legitimate business whose product or service is not related to training or education should take a definable risk, losing an investment in the form of time or money.

Continue reading the article 3 Personal Tips to Avoid Losing Money from a Get Rich Quick Scheme.

This post was reposted from http://finlit.biz/business/5-organizational-issues-for-a-pyramid-scheme/, originally written on March 27th, 2013.