The Almost Millionaire

Ford, A Good Investment?

2008-11-06T18:22:00.002-05:00

I'm being asked the following question quite frequently lately,

"So how much Ford stock have you been buying?"

My gut reaction is to say, "Ford Stock, are you crazy? That investment is toxic!"

But I'm a Michigan guy, and I'm a Ford guy, (I just bought a Ford last Friday...a Focus...39 MPG, sticker price of $17,000, but a crazy amount of rebates). Half my family works for Ford, or has retired from the company.

Here's the deal. When you live in Michigan it is hard for you to imagine a world without Ford. I share that feeling, but I believe that Ford will not survive in it's current form. I believe that the company will go bankrupt, use the bankruptcy to get huge amounts of debt off it's books, and reemerge from bankruptcy court as a lean, mean auto-making machine. Ford is a great brand with a TON of smart people at the helm.

The problem with this scenario is that everyone who owns common stock when this happens will probably lose everything. Here is why.

Ford had $170 Billion in sales last year, but lost billions of dollars in the process. I've read that Ford losses over $1000 dollars on every car that it sells in the U.S. and barely breaks even on overseas auto sales.
Ford currently has over $160 Billion in debt on it's books. HOW IS A COMPANY THAT IS LOSING SO MUCH MONEY EVER GOING TO PAY OFF THAT DEBT?
Even if the government extends new loans to Ford, GM and Chrysler, this is only a band-aid. It is going to take years (and probably bankruptcy to get rid of that mountain of debt) before Ford ever makes significant profits.
Less than a year ago, Billionaire Kirk Kerkorian invested $1 Billion to own a bit over 6% of Ford Motor Company. Two weeks ago he decided that it was not a good investment and started selling his shares which are now only worth about $250 Million...it appears that he DOES NOT believe that Ford stock will be going up in the future. He is taking his $2.00 a share that he can still get, and running away from Ford.
According to their second-quarter results, Ford and GM each are burning roughly $1 billion in cash per month. Citing cash burn, JPMorgan Chase & Co. analyst Himanshu Patel on Tuesday widened loss expectations for Ford and GM in 2008 and 2009.
Ford, like GM and Chrysler, has been the subject of bankruptcy speculation recently. None of these companies have been able to tap debt markets. (Who would want to give them more debt, they already have too much? Oh wait, the government would). That, plus sliding revenue, is forcing them to make ends meet by using fast-diminishing stockpiles of cash. If Ford continues to burn cast at the rate of $1 Billion a month, it will not last two years, and the stock will continue to fall.

Anyways, these and many more reasons are why I'm not buying Ford stock. There are way too many AWESOME companies with no debt that are selling for amazingly cheap valuations.

THAT BEING SAID, I understand why people are buying Ford stock. Who knows, between now and bankruptcy, it could bounce between $1 per share and $3 per share. I would love to buy at $1 and sell at $3 over and over again...but that is not risk that I'm willing to take.

Stock Hunting

2008-11-01T08:16:00.000-04:00

I’ve been going crazy latly spending what little resources that I have on buying the common stock of great companies the I believe have serious long term potential. I must admit that I’ve also made a short term trade or two…it’s hard not to take advantage of this type of volatility!

Well, the background is that in about October of 2002 the US stock market took what I believed to be a ”short term beating.” This beating left solid companies, with strong balance sheets, at prices that would suggest they were no doubt going out of business. BUT I WAS BULLISH ON THE US ECONOMY, blah, blah, blah…bottom line, by 2006 the $10,000 of stocks that I’d picked up in 2002 had grown to just a hair shy of $40,000. And non of them went bankrupt…(though VTSS almost has, I bought at $1.00, it went to over $10.00, I was stupid and didn’t sell, now it is at $.40…you can’t win them all!)

On to what I’ve bought over the last couple of weeks:

Aloca (AA) Strong, well managed Dow Component. This stock historically goes up and down alot based on the price of certain commodities. I feel like I bought low, and that world demand for Aloca’s products is certainly going to increase over the next decade.

American Eagle (AEO) Clothing retailer that targets men and women ages 15-25. I feel like this demographic cares about being trendy, so in ups or downs, they will spend less on clothes, but they will still spend. This company is profitable, expects a forward P/E of about 8 for 2009. Is sitting on over $300 Million of cash and has only $75 Million of LT Debt.

APPLE (APPL) What can I say, every gadget that I own or want to own is made by Apple. This company is sitting on more cash than Microsoft, is growing like a weed, has NO DEBT, and I was able to buy near a multi-year low.

CANON (CAJ) I’ve been successful investing over the years by asking my wife (who cares nothing of stocks and investing) “Honey, where are you spending our money right now?” This strategy has led me to many great long-term investments…she got us into Carters baby clothes at $25 a share, and we rode it to $75. She has had similar success with DIS, LF, BEBE, and more over the last 5 years. ANYWAYS, she likes the digital camera space, and Canon is the 500 lb gorilla of the industry. It doesn’t hurt that they are growing profits, sitting on $7 Billion of cash, and have almost no debt.

Chicago Bridge and Iron (CBI) Don’t let the name fool you, This company was founded in 1889 and is based in The Hague, the Netherlands. At $8 a share recently, this company was selling for less than 5 times 2009 expected earnings per share. I figured if the global economy does go into a longer term recession, governments might try to kick start things by passing massive infrastructure spending projects. I figure that CBI and GE would be huge beneficiaries of that spending.

Anyways, I could probably bore you all day with this crap, but it really gets me going. I bought about seven other companies too. Small positions, but I’m excited about where I think their valuations will be in 5-10 years.

History of Social Security

2008-10-20T17:59:00.001-04:00

Our Social Security System:
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) That participation in the Program would be completely voluntary.
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the Independent 'Trust Fund' rather than into the General Operating Fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other government program, and,
5.) That the annuity payments to the retirees would never be taxed as income.
Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the federal government to 'put away', you may be interested in the following:

Q: Which political party took Social Security from the Independent 'Trust Fund' and put it into the General Fund so that Congress could spend it?
A: It was Lyndon Johnson and the Democrat- controlled House and Senate.

Q: Which political party eliminated the income tax deduction for Social Security (FICA) withholding?
A : The Democrat Party.

Q: Which political party started taxing Social Security annuities?
A: The Democrat Party, with Al Gore casting the 'tie -breaking' deciding vote as President of the Senate, while he was Vice President of the U.S.

Q: Which political party decided to start giving annuity payments to immigrants?
AND MY FAVORITE:
A: That's right! Jimmy Carter and the Democrat Party. Immigrants moved into this country, and at age 65, they began to receive Social Security payments! The Democrat Party gave these payments to them even though they never paid a dime into it!

It's an exciting election year, just some food for thought...an undecided voter?

ChaCha

2008-10-18T23:43:00.000-04:00

I've actually came across a new company that offers a real "work at home" opportunity for all those out there who have some common sense, and a knack for searching on the web.

ChaCha.com is a service where you can text any question that you can think of to 242242 (chacha) and you will very quickly get a text message back with an accurate answer. It is an extremely cool service. It is free, you have to check it out!

Anyways, they rely on a network of tens of thousands of "guides" to answer the millions of questions that they get every month.

THIS IS THE OPPORTUNITY!

I've just signed my wife up for the program. She will be paid between $.10 and $.20 per question that she answers, and she can log on to their program at her convience, whenever she is available to do a little work. We figure that she can answer about 50 questions in about an hour. So the money is not amazing, but the work is fun and flexible. If she averages $7.00 per hour, it will add an additional $140 a month if she works just 5 hours a week. This is cash that will go a long way in this tough economy.

I'll keep you posted on how things progress!

The Almost Thousandaire?

2008-10-10T08:37:00.000-04:00

Friends,

Wow, what a crazy reversal of fortunes for the US and World economies. Yesterday's plunge in the markets was exactly one year from the High the Dow Jones Industrial Average hit of just over 14,000.

Now we sit at about Dow 8500 and with $3 TRILLION of US wealth wiped out. Most of that happening in the last 30 days. The effects of this are so far reaching that even the smartest economists in the world are baffled about what it really means to the world population.
Well here is a brief outline of what it means for me.

Personal cash is tight. My "stripped down" family budget currently is significantly larger than my income.

MORE $ GOING OUT THAN COMING IN...NOT GOOD!

This means that I'm often relying on borrowing or retirement savings to keep the ball rolling. This didn't seem like a problem a year ago. All the experts were saying that by Mid 2009 all would be well. Housing values would start to climb again, the market would go back up, oil and gas prices would settle down, incomes would expand, businesses would return to profitably again, etc. IT APPEARS THAT IS NOT GOING TO PAN OUT!

My businesses can't get credit. In the normal world, when a business needs a line of credit to smooth out cashflow they just go to the bank and ask for it. I've approached 5 local banks, and non are willing to extend a little short term credit. Even worse, the bank that I have my business loan with (with a 4 year PERFECT track record of paying on time) has asked that I try to refinance at another bank because they are trying to scale back their lending to restaurants. (Thanks for the help, Mr. Banker)

SO WHY AM I OPITIMISTIC, YOU MIGHT ASK?

Well, there is one amazing asset that God has blessed me with, my ability to work! (And in the event that I'm ever hurt, my disability policy will step in to help pick up the slack.) I'm going to continue to work as hard as I possibly can. I have a duty to my family, partners, lenders, and employees. That is all I can give them...100% every day. Mind you, this is a huge balancing act, but one that most everyone deals with. So I just want to put it out there. THANK YOU GOD FOR MY LIFE, HEALTH, AND ABILITY TO WORK. I TRUST YOU TO GUIDE THIS WORLD THROUGH ALL THE CRAZINESS, AND I REFUSE TO BOW DOWN TO FEAR.

5 Years From Now...

2008-09-23T12:08:00.002-04:00

Think of yourself 5 years from now. What do you look like? What are you doing? Have you made forward progress towards your goals?

What things in your life are going to contribute to who you are in 5 years?

-The people you meet.
-The books you read.
-The places you go.

Spend your time wisely, 5 years goes by faster than you might think.

Emergency Cash

2008-09-18T19:08:00.001-04:00

Your Personal Cash Position: Definition...How much cash you have EASY access to in 36 hours or less.

During times of anxiety and crises, it is REALLY important to know how much cash you and your family has access too. We generally all go through life thinking that we will always have quick access to our bank accounts, credit cards that will always be accepted, stocks we could sell, home equity lines we could tap, etc.

I'm here to tell you though, that this is NOT always the case. Recent events have proved this much. Case in point:

In the last 6 months, there have been bank branches in the UNITED STATES that have closed their doors because they literally had No More Cash for their customers to withdraw.
I have a personal friend who had his credit card company simply "shut down" his account. This required him to continue to make his regular payments, but allowed him No Access to additional credit. A card he used for years was simply "shut down."
I know of people with significant stock positions in Lehman Brothers. A month ago they would have expected to be able to sell shares and get a check within a few days...now if they sell shares, they probably will not have enough proceeds to cover the brokerage commission.
IN MY PERSONAL LIFE I have a small Home Equity Line of Credit (HELOC) from a local bank. I have a credit score over 750 and have NEVER even used my line of credit...I've always had it there in case of an emergency. A couple of months ago I get a mysterious letter from my bank letting me know that they will be closing completely my Home Equity Line unless I respond in writing in the next 36 hours. I'm very glad I read that "junk mail" and was able to save my Line of Credit!

My point is that the world of personal finance has become extremely complex and fast paced. PROTECT YOURSELF! Take steps today to ensure easy access to cash in the event of an emergency.

If you live in Houston, Texas you clearly understand what I'm talking about. After Hurricane Ike hit, you could not buy or sell ANYTHING with out good, old CASH. Cash was king and everything else was off the grid...just like the electrity!

Why did the stock market drop today?

2008-09-15T19:45:00.001-04:00

The following are the top 5 reasons I believe that the market dropped today:

1. People are scared! Today’s sell off in the stock market was not just mom and pop investor scared about losing their retirement savings, there were huge institutional trades today that seem to be driven by fear.

2. People are confused! The world financial markets are so much more complex than the news anchors on CNBC make it appear to be. Generally, when I’m having trouble understanding something, I run from it. I believe folks all over the world did the same thing today. Many folks are realizing that the stock market is not a game to play.

3. People are irrational! There are sectors of our economy that are having huge struggles. In the middle of the struggles, there are companies that have made good decisions, and are doing extremely well because of those good choices. Unfortunately, on days like this, people don’t care about fundamental business metrics, they just want to get dollars away from the stock market.

4. People are fed up! If you are the average American, you get 99% of your market information from the media. This makes it difficult to navigate past the personal opinions and biases of those bringing you the news. With a presidential election on the horizon, the media seems to have gone extremely negative on the US economy. I believe that lots of hard working folks are simply tired of the daily dose of bad news there have having to digest. The natural way to combat that is to get your investments into cash, and turn off the tube.

5. People are funny! We really are funny. We are all experts in our own right. “We sure would do things differently if we were in charge.” “I got out before the fall.” “I wouldn’t have made that mistake.” Etc. I think that many people feel like if they get out now, their personal story is stronger. We humans HATE to be wrong!

Why Did Gas Prices Go Up?

2008-09-12T08:19:00.003-04:00

I personally have a very sensitive edge towards gasoline right now. Mostly because of the 4 vehicles that I drive on a regular basis, they have a combined average highway MPG of about 15...that gets expensive.

Anyways, I was getting real excited last week when I was paying $3.41 a gallon in Ohio, and about $3.65 a gallon in Michigan. Oil was at about $107 a barrel on the NY merc. exchange. THEN THIS WEEK ROLLS AROUND!

On Tuesday of this week, Oil hit a low of around $102 a barrel...and it is still there. THE PROBLEM, is that for some reason gas prices shot up on Tues. and Wed. of this week to about $3.89 a gallon in Michigan.

Let's review the math:

LAST WEEK - Oil at $107 a barrel...gas in Michigan at $3.65 a gallon.

THIS WEEK - Oil at $102 a barrel...gas in Michigan at $3.89 a gallon.

I SMELL A RAT! AND IT IS CALLED PRICE FIXING.

It would seem to me that SOMEONE is getting together and trying to roll one over on the public. SOMEONE is taking advantage of the fact that there are Hurricanes all over the gulf coast and they are using that to pump the price of gas. This only works though if everyone does it, and wouldn't you know that every gas station in my home town raised their prices to about $3.89 a gallon this week. I'm truly not a conspiracy theorist, but the math just does not add up.

Talk Fusion Business Opportunity

2008-09-07T10:48:00.003-04:00

I'm investigating a business opportunity called Talk Fusion.

Basically the deal is that it is very hard to send a video over e-mail that the recipient can actually play on his computer without having to download formatting software. It appears that Talk Fusion has some kind of patented system that allows you to send video e-mail to anyone, and they GUARANTEE that the receiver will be able to play it on their computer without any special software.

The gentleman who introduced me to this opportunity is an extremely nice guy named Bill Lomas. Bill is sold on this product and doing extremely well. The product costs about $350 up front and about $20 per month depending on how may folks you have in your contacts list who will receive video e-mails from them.

The only issue that I have with the program is the MLM component. I am kind of unclear about the compensation plan. I've been too busy to sit down with Bill and try to figure it out, but when I do, I will let you know what the deal is and if I think there is an opportunity there for us.

Please let me know if you have had any connection points with video e-mail, and what your experience was.

My Favorite Credit Card Company

2008-09-06T15:06:00.003-04:00

I just finished setting up my wife for a new credit card with Advanta Bank. They are an awesome place to get cheap cash when things are tight. I hate taking money from credit card companies just to even our personal cash flow shortages, but you do what you have to do.

The reason I am OK with the deal, is that Advanta offers new customers a one time deal where you can transfer a balance, or they will wire you an amount up to your available credit limit at a "Fixed For Life" interest rate of 2.99%

That is almost like using their money for free in my book. Especially when you open a business account, because the interest is then tax deductible for business purposes.

The only down side is that Advanta keeps available credit kind of low. They only offered us $7500 (which I had them wire to our bank account at no additional cost and still with the 2.99% deal). Sadly, this will only cover about 3 months of mortgage payments in my world (I view all financial transactions based on the value they represent in mortgage payments, as the old mortgage payment is the one you truly don't want to ever miss.) On the bright side though, things are looking really great on the job front and I'm expecting to make some good sales in the next 6 months or so. Things go up and thing go down. I'm just trying to keep chugging along knowing that eventually things will turn around (THAT IS MY MACRO AND MICRO VIEW).

Rainy Day Fund

2008-08-25T17:49:00.005-04:00

Finding capital seems to be a theme here lately. Clearly I own a franchise business that is seasonal. Had I been smart, I would have got a business line of credit in place years ago.

Though I love the concept of franchising, there are some flaws. No one teaches you to think 3-4 years down the road. If I ever start my own franchise, I'm going to require franchisees to set aside 1% of their sales as a forced "rainy day fund". These dollars will only be available if the business reaches certain "red flag" cash flow levels...or every 3 years the franchisee could take 50% of the funds they had put aside if the business was hitting decent numbers. Anyways, I have yet to work out the specifics, but it truly seems like a good idea. I've reviewed hundreds of franchises, and I've never once seen anything like this mentioned. It would be great if I had done something like this, because when things are temporarily tight in the checkbook, cash can sometimes be hard to come by.

Well, live and learn...and do things better next time!

Wisdom

2008-08-20T17:22:00.002-04:00

-A wise old saying:

"The intelligent man learns from his own experience; the wise man learns from the experience of others."

I've spent the last couple of evenings rethinking this old adage. It is one that I've tried to keep close to my heart as a business guy and entrepreneur. I think that the marginal success that I have enjoyed has been because I have always assumed that I possess intelligence (though my wife may often beg to differ). As I reflect on the good choices that I've made, they were most often not attempts to "re-invent" anything. Good stuff for me has happened when I tried hard to follow the wisdom and experience of others. (I don't seem to be able to do this enough though, God gave me a sense of "do-it-yourselfism" that runs deep and needs to be constantly kept in check).

I guess I continue to look for balance in my life. It seems appropriate for an entrepreneur to have the guts to make things happen, but it also seems important to be able to step back and evaluate opportunities through the lens of wisdom.

Cash Management for Small Businesses

2008-08-19T08:47:00.003-04:00

As a small business owner, when times are tough and cash is tight, I really only see two options:

Borrow more cash from the bank, credit cards, loan sharks, etc.
Become meticulous with your cash management program

Through the seasonal slowdown in the coffee business, my partners and I are trying to employ the latter concept. I actually think that I'm inventing new cash management strategies on the fly in our attempt to weather the storm of a seasonal business.

The first and most obvious strategy is to pour over every bill we receive for accuracy. This is the first line of defense. You would not believe how many invoices are not accurate. Almost every vendor that I use has had at least one mistake over the last 3 years.

Secondly, pay close attention to due dates. If a bill is due 8/25/08, It is more than likely that I'm going to physically take that payment to the post office on the 24th and watch them post mark it that day. 99% of vendors utilize the postmark to determine on-time payment. A postmark before the due date is a show of good faith.

Thirdly, utilize the credit card grace period. Many vendors will allow you to charge your invoices. This is huge when cash flow is tight! You can actually charge your payables on the due date and get yourself a free additional 25 - 30 days of cash flow from the credit card company.

Finally, when things are really tight, you can employ the concept of Stretch Payments. Make a call the the vendor (they usually value your business). Let them know that things are tight, and ask if you can cut their invoice into 5 pieces over the next 5 months. This is interest free cash flow, and 90% of the time vendors are happy to work with you. They have a vested interest to help you get through the tough times and ultimately succeed.

Good luck with the cash flow, goodness know I could use some these days. I hold out the hope though that it is always darkest before the dawn, and in the coffee business, the dawn is the crisp, cool fall weather that is just around the corner!

Are you more financially secure than your parents?

2008-08-16T07:43:00.003-04:00

I asked the title question in a poll a few months ago, and have pondering the outcome of the poll since then. "Are you more financially secure than your parents"...is not a loaded question. I feel like I probably got honest, thoughtful answers from those of you who responded.

Over the course of my 29 years, I've often listened to my parents voice their sincere hope that their kids will enjoy more financial security than they have had. My father has often commented to me that he believes that in a strong family, every generation builds off of and expands on the successes of the previous generation.

The fact that 59% of respondents have indicated that they DO NOT enjoy a feeling of financial security greater than the level that their parents have enjoyed truly surprised me. As I have reflected on this, here are some of the reasons I believe why.

The last 30 years have created generations of Americans who give little concern to anything other than what makes them "happy" now.
American workers have developed a sense of entitlement over the past 40 or so years that they are somehow "owed" a job, a pension, health benefits, a big house, etc. I think our parents felt more financially secure simply because they viewed these things as blessings they enjoyed because of their hard work.
High schools and colleges have done a poor job explaining to their young charges that the world has gotten smaller over the past 30 years. You no longer only competing with your fellow classmates for good, local jobs. You're competing with highly educated and hard working folks from all over the world who desire jobs in America. You are also competition with a corporate culture that will simply up and move jobs to another country if they cannot get their desired results here at home.

Well, my sincere goal is to buck the trend. I want to live my life and make decisions that will shift the scales towards good decision making and a strong financial foundation for generations to come. I want to have a big worldview, that doesn't seek to find all the answers locally, and I'm going to work hard to right all the wrong choices that I've already made. (Most of them from not taking my own advice, some of us have to learn the hard way.)

Guest Post from Money Energy

2008-08-13T22:06:00.004-04:00

This Downturn Maybe Not the Real Big One: My Top 5 Stock Picks for Making it Through 2015-2030

So, it’s the year of the Bear (Stearns). And IndyMac, and Freddie and Fannie. And maybe GM now, too. Starbucks has shut down stores, reported first-ever quarterly losses since being public. The city of San Francisco tried to sue Bank of America in order to prevent more municipal foreclosures. Wachovia axed 6,000 jobs. United Airlines cut 7,000. The total U.S. jobless rate has soared to a four-year high. The IMF maintains the U.S. has hit the worst economic turbulence since the Great Depression.

These are just some of the developments that have taken place over the last six months. Not even since the beginning of the sub-prime mess (in August 2007). In this environment, you’d be wise to just keep your money tucked safely away under your mattress. Right?

Wrong. You’d better jump at the opportunities now available to you. All kinds of stocks are currently on sale. They’re at or near their 52-week lows. If you’ve held back previously because you thought you couldn’t afford to get into stocks, you’d better take a good look now. Some stocks are up to 75% off their usual prices.

But, you may say, what if we haven’t seen the worst of it? What if the market hasn’t bottomed yet? What if the U.S. dollar collapses? Shouldn’t I wait before investing? For Pete’s sake, I don’t even know if the money in my own bank will be safe.

What’s Next For the Economy

The Almost Millionaire has asked me what I think my top five stock picks are for the next five years. As I’ve been sitting thinking about this, the question has ballooned for me into a general prognostication of the entire big picture over the near future. Now, I am no securities analyst or economics professor, but I’ve done a lot of reading from many sources over the last five year – books, online news reports, business programs, press releases, company reports, and independent analyses. Based on all of this, I can tell you what I think we’re in for and how you might want to think about protecting and even growing your wealth in the years ahead. First I’ll go over the big-picture, then I’ll offer some stock strategies for dealing with it.

So what is my outlook for the next five years? Along with Garth Turner and Robert Kiyosaki (keep the research separate from the man, please!), I think the US (and by some extension, Canadian) market is going to continue to froth and spit until 2012 or so. Common reports say the recession/ downturn/ slump/ credit-crunch is going to last well into 2009, with some analysts suggesting 2010 as a more likely number.

But by the time this bear market finally stabilizes, it looks as though we might have another big problem on our hands. At that point demographics start taking over and the numbers of seniors will steadily increase. Seniors will start pulling money out of the markets in order to fund their retirement. They’ll be spending that money on health care and drawing on social security en masse. There will be more seniors per capita than younger people. The demographic problem is going to be very similar in Canada. In fact, per capita, Canada has more boomers than even the U.S.

Starting in about 2011 or 2012, the problem might become quite visible, as there won’t be enough younger working people feeding their hard-earned dollars into the system and paying the CPP (Canada Pension Plan) or social security for the folks retiring.

Here’s some facts on the mess that Garth Turner* has pointed out (and he is not the only one pointing these out. So if you dislike Garth Turner, sit tight: because you will find this corroborated by many sources):

-The number of retired people will explode by 300%
-The cost of public pensions will rise, from about $22 billion a year to more than $60 billion.Health care costs could double.For every retired person there will be just one working taxpayer.Life expectancy is surging higher. Boomers will spend decades in retirement.There will be a huge transfer of wealth from workers to retirees, unless public pensions and universal health care are allowed to collapse.
-Today’s 20-year-olds will pay hundreds of thousands of dollars more in taxes than they will ever receive in government benefits.
-Today’s seniors will get $120,000 more than they contributed.
-Seventy percent of all the retirement savings accounts in Canada contain less than $50,000
-The vast majority of Canadians do not have a corporate pension now and will never get one.
-Most middle-aged people have saved about a tenth of what they will need to retire in comfort.
-Health-care certainly will not be free, but laced with user fees to keep the system functioning.

The situation is far, far more complicated and potentially dire than what I’ve been able to indicate here. There are also a number of other economic messes that don’t look like they will be resolved anytime soon, the main one, perhaps, being the fact that there are too many US dollars in circulation. The Fed prints money as a solution to its problems and has stopped publishing M3, which is the data on the total number of dollars in circulation. This seems the best way to hide the real value that the US dollar has.

In light of all this, there is good news. There might still be a good four or five more years in which we can accumulate and grow our wealth before a big downturn really starts to hit. Turner’s bullish until about 2011 or 2012. After that, we might see the start of a very widespread depression that could last well into 2030. Yeah, his prediction is extreme. But I find these prognostications very insightful and I think it’s wise to prepare for any scenario: inflationary, deflationary, or stagflationary. They could all lead to a depression. So here are some stocks I recommend for the next five years.

Pay attention to the markets at all times, though. Read the news. And watch the VIX (volatility index). If it starts to head up near 40, watch out and consider taking some of your money off the table and keeping it in cash.

My Top 5 No-Brainer Stock Picks:

1. Consumer Non-Cyclical. People won’t stop brushing their teeth and drinking soda pop. Make this a global company, though, so you can benefit from other markets. Suggestions: Coca-cola. Proctor and Gamble.

2. An Energy play. Sooner or later we’re gonna use up all that oil, and as we do, the prices will rise. Besides, the big oil companies are also the ones investing in new forms of energy resources. For Canada, a good one might be Husky Energy. They have no debt, they’re positioned well in South Asia, and overall look great. For a Canadian income trust, look at Arc Energy. Other suggestions: BP, PetroChina, Sinopec, StatOil.

3. A Health-care stock or health-care ETF. Given the choice, how many people would opt for an earlier death, or more pain, or more prolonged suffering? No matter what way you look at it, it’s hard to see the long-term risk in holding pure health-care plays. Almost all of us probably want better drugs, better solutions, better living. Yeah, I know that prevention is much more important than the care of disease, but face it – if it arrives on your doorstep, you’ll probably want the best that’s out there. I know there are some ethical problems with the drug companies. It’s not all rosy. But we can’t throw out the baby with the bathwater, as they say. Suggestions: right now Pfizer is undervalued. Johnson and Johnson can fit here, too. Abbott Laboratories.

4. A Financial. Even for US investors, I recommend putting your money in one of Canada’s Big five. I might go with RBC, the biggest. They have a market capitalization of over $61 billion (U.S) – compare that with Wachovia, which has a market cap of about $37 billion (U.S). Plus, RBC is well-positioned in the U.S., owning RBC Bank throughout the east coast and in the Carolinas. It’s very easy to move your money back and forth across the border using this bank. My second choice here would be TD, which has excellent management and also has strong holdings in the northeastern U.S. For US banks, look at Wells Fargo, US Bancorp.

5. Another consumer non-cyclical, a related financial, or an agriculture stock. If you pick a financial, go with one of the life-insurance giants. In Canada, pick Manulife or Power Financial. If you go with another consumer stock, pick one that also has some exposure to the health care sector: like Johnson and Johnson. Even in the slump we’ve seen so far in 2008, JNJ continued to increase its dividend. That’s very, very good. Also look at China Life, Archer Daniels Midland, Agrium or COW (Claymore Agriculture ETF).

Finally, wherever possible, I would enroll in the dividend reinvestment plans of your chosen companies. It’s even better, and more important for long-term savings, if you can pick companies that have fee-free plans. Johnson and Johnson does. Manulife has a DRIP that is also open to US investors.

Even though this is an outlook for five years, I recommend buying stocks you’re comfortable with keeping for the very long-term. Keep your life simple. While there are many good reasons for trying to time the market – the main one being potentially more gains, if you do it right – it means you really have to be on top of things, reading the news daily on your sectors and really having a feel for what the market’s going to do next. I already read the news daily and I wouldn’t have confidence in saying what the market is going to do in the immediate short-term. I’d rather stick to the facts. The facts are found in the demographics. In his 1999 book, Garth Turner said that the current generation of retirees is going to be the last one to retire this comfortably. For us – for anyone younger than, say, 45 or 50 right now – we’re going to have to do it all on our own. No pensions, no social security. We need to keep our eyes and ears open and make sound decisions based on what we know at the time. And it is time right now to become more financially aware.

*Garth Turner, 2020: New Rules for the New Age, Key Porter Books, © 1999.

If you have questions, or would like to read more from me on similar and related topics you can visit my blog, MoneyEnergy, over at http://www.getmoneyenergy.com/ – where I cover investment-related topics from ETFs to discount brokers to the commodities market and dividend reinvestment plans. I’m a cashflow investor, and my goal is to replace or significantly supplement my income with substantial monthly cashflow from diverse global sources. I’d love to hear from you. Send me your thoughts and feedback by emailing me or leaving a comment on my blog. You can also subscribe to my feed by clicking here http://feeds.feedburner.com/moneyenergy

"Never Give In"

2008-08-08T10:48:00.004-04:00

In keeping with the "Times of Crises" theme, I was fortunate enough to have lunch last week with a friend and mentor who had just returned from a trip oversees. He shared with me some powerful insights into leading, surviving, and thriving through difficult times.

Winston Churchill led Great Britain through what could easily be viewed as their most difficult hour in recorded history. It is said that Churchill lived and led with a "NEVER THE LESS" attitude. Even when Germany was closing in tightly on his country and dropping bombs daily, he led with an attitude that provided intense confidence to those around him.

Even though things look grim, and times are scary, and people are trying to destroy us...NEVER THE LESS, we must work hard and live on with an attitude and a confidence that we will prevail in our endeavors!

Great leaders seem to have a way of crafting the future with their words and beliefs. I am amazed to hear stories, and watch in my own life, beliefs become reality...this often happens when a strong dose of hard work and faithful dedication is added to the mix!

Times of Crises

2008-08-01T09:16:00.002-04:00

I've got several contacts in Michigan who own businesses that are experiencing times of crises.

I've often walked through times like this over the last 5 years as a restaurateur. They are truly gut wrenching experiences.

Mentally what has always got me through these "tough times"...loss of a major account, no cash for payroll, mass exodus of employees, etc, was holding on to the fact that many entrepreneurs have gone before me and made it through much darker times to eventually emerge victorious. Stories are often told of these tough times being defining moments that set you up for future success.

Practically what got me through the "tough times" was simply working harder and doing things that I had never thought that I could do. You see, I believe that we often are quick to sell ourselves short and not believe in ourselves. I think most people truly only put forth about 25% of their available effort on any given day. It is important in times of extreme stress to learn to harness that remaining 75% that has laid dormant and use it to beat back the impossible mountains that you face.

Believe me, I know that this stuff is easier said than done. I also know that a lot of people just don't have it in them to kick themselves in the butt and make it happen. This is a shame, and I believe it is a core reason on why businesses often do fail.

Franchise Restaurants

2008-07-21T20:19:00.004-04:00

I've posted about my franchised restaurants in the past. Biggby Coffee and RolyPoly Rolled Sandwiches. These posts have generally shed positive light on owning small franchised restaurants. When a strong concept is managed properly, it can usually provide the owner with a somewhat steady stream of revenue.

Well right now I'm operating stores in a slow and shaky economy, in a city that has one of the highest unemployment rates in the country...over 8.5%, and I'm struggling with how to weather this perfect storm. Wages are up almost 30% over two years ago. (While "work ethic" has seemed to decrease in some cases:( The costs of raw materials is on average up over 100% from two years ago. You would normally just raise your prices, but that is next hard to stomach as all of your customers are feeling the financial pinch too.

The other tough issue is that in a franchise, generally you pay royalties based on sales, not on profits. So if you bought into an unprofitable system, you can quickly find yourself in trouble...and it is on you to figure out how to make a profit, or how to wind up the business.

What I've done in the past with struggling stores is to turn them over to hard working, young managers who will work 80 hours a week for peanuts...and begged them to just keep labor costs down and food costs steady while we wait for some new business to break, or for the market to rebound, or for some competition to shutter their doors.

One of my partners today suggested that we consider giving up some of our ownership to help attract a young food service warrior to our team. That is tough to consider, but I'm giving it some thoughtful consideration. On the surface it sure seems much more favorable than losing money every month, or boarding up the doors. I guess in tough times, all options are on the table.

AdSense Income

2008-07-07T17:45:00.004-04:00

I received my first check from Google AdSense on Saturday. $133 seems like a slow start after months of blogging and countless hours of web site optimization. I guess that I'm figuring out that I really have no idea how to make money online.

I visited YoungDough.com last week and while there I noticed a Google Ad that said something like "Find out how I made $1500 in a week from my blog!" When I checked out the site though, it offered me no real information on how exactly this guy made that kind of money. I also was not convinced that for a fee he can teach me how to do the same thing. And to be honest, even if it makes cash, I really don't want to do anything confusing online. I originally thought that I would be able to post interesting financial insights on my blog, and that would lead to site traffic, which I then could somehow monetize.

All that being said, I'm thankful for the AdSense earnings...it's a start. What I'm really hoping to do for the future though is to figure out how to generate interest in this Personal Finance Blog, which should then lead to increased traffic if common sense has not failed me.

Risk

2008-06-30T17:54:00.002-04:00

I'm having some huge internal conversations about risk lately.

They are stemming from the fact that I'm trying to relocate to Cleveland on a permanent basis.

The issues are that I built a big, beautiful house in Michigan two years ago, and now it is extremely difficult to sell a big, beautiful home in Michigan. Next, I've found a great foreclosed home just 4 miles from my office in the Cleveland Suburbs, but I am nervous to purchase it as I do not know when my home in Michigan will sell...but I don't want to lose this house either...but I don't want to get myself in a position where I'm struggling to make two mortgage payments for several years...and the list of issues goes on and on.

Risk is a funny beast that I believe has to be handled with much thought and consideration. Needless to say, I'm spending the weekends creating endless budget spreadsheets to analyze every potential financial situation these various decisions can lead to. My head hurts just thinking about it. I trust that I will be able to Excel Spreadsheet my way to some sound decisions though, and if that fails my wife tends to keep me out of trouble in these situations.

Save $ on your grocery bill!

2008-06-21T11:29:00.001-04:00

My mother has been keeping the grocery bill down by shopping at Aldi and at Kroger. She swears that by combining a shopping day to those two stores, even after using the bit of extra gas, she is able to save $25 - $50 buck more than if she just shopped at Walmart. Hopefully it works for you to is you have an Aldi and Kroger available in your town as I do. I'm going to test it in Jackson, MI and I will let you know.

At this point food and gas prices have gotten so far out of control, any savings tip is worth checking out.

Gas Price Relief

2008-06-14T15:29:00.004-04:00

At $4.15 a gallon in Michigan I wish this were my Hummer H2 and not one that my buddy took a picture of on a highway in Atlanta. I'm getting 12.1 MPG if I'm lucky, and there is really no relief in sight. My hummer purchase is just another example of a boneheaded move that I've made over the past few years that is having a negative effect on my current finances. Gas was $1.25 a gallon when I bought my beast 4 years ago, and I was complaining then.

In the future, I'm going green all the way baby. The only positive thing about the H2 right now is that the insurance rates are surprisingly low...basically because it is a steel fortress on the road. Other than that, I'm looking to make a trade.

Jott

2008-06-11T18:18:00.002-04:00

If you are reading this and love to send e-mails with your cell phone while driving you vehicle, PLEASE check out http://www.jott.com

Amazing service that lets you make a call and send an e-mail using voice recognition. (A bit less dangerous than using that little keyboard.)

It's very reliable and accurate, I've been extremely impressed with this FREE SERVICE...that's the best part.

Enjoy!

World's "Not So Smartest" Airline

2008-05-24T09:01:00.002-04:00

My wife was traveling to Oklahoma yesterday via Northwest Airlines (NWA) out of Detroit.

She had a 1:40 PM flight to Minneapolis which landed at 2:30 PM. She then had 45 minutes to catch her flight to Tulsa. Of course her flight out of Detroit was delayed 45 minutes. Problem # 2 is that she was one of the last folks on the plane and her carry on luggage would not fit and had to be stowed with the general luggage. As the story goes, they landed with only 15 minutes until Sarah's connection was supposed to leave.

Let me tell you what I think Continental Airlines would have done.

Knowing the flight was delayed, they would have inquired about connection flights and made sure those folks who had connections were the first to exit the plane.
When the connectors did exit the plane, they would have promptly been handed their carry on baggage that had to be stowed for lack of room in the overhead compartments.
Continental Air would have probably communicated with the connection flights to let them know now to shut the doors because the connection passengers were moments away.
They probably would have arranged for a golf cart or something to shuttle my 7 months pregnant wife to her connection gate.
In the event that my wife was STILL not able to meet her connection because of the extremely late take-off of the original flight, I believe that Continental Air would have sincerely apologized for the trouble that they caused my wife and probably would have offered her a free flight voucher in the future.

Well, Northwest Air did NONE of that. They did get her on a new flight with another close call connection and got her to Tulsa 4 HOURS LATE for her event.

What they smart folks at NWA did do though is offer her a GENEROUS $25 travel voucher should she choose to fly NWA again. Not likely.

Complain, or Work Harder

2008-05-20T19:09:00.002-04:00

I know a guy, we will call him "Bob", who is always complaining about his job, his company, the economy, his finances, how much debt he has, etc.

I'm convinced that if he would just channel his negative energy into simply working harder at the things that are important to him, he could positively effect most of his issues.

Complaining just gets you no where in life, I've never experienced one positive thing come from it...unless your goal is to annoy the people closest to you.

Save $45 this summer!

2008-05-17T08:34:00.003-04:00

Get a buzz cut!

Instead of getting your lid trimmed every 3 weeks, get it buzzed and you can go 6 weeks!

I'm pretty sure no one cared how slick my gel held hair looked anyways.

Work Life

2008-05-13T18:01:00.003-04:00

Work has consumed me for the past two weeks. (Other than a relaxing weekend camping trip with the family.) Consuming work can do one of two things to you. Invigorate you, or make you absolutely crazy. My day job consists of working with an amazing group of partners. I thank God that even when the work is long and difficult, the excitement of being a part of something that excites you far outweighs the pain.

I've been on the other side of the coin. I've worked in situations where I was bored and wasn't challenged or invited into anything exciting. Those are sad, long days. I've made a personal vow to avoid them at all costs. Work with no rewards is a clear path to mediocrity. Guard against it any way you can. I think the best way to do that is to never stop learning and trying to better your knowledge base. Try to make yourself more marketable every day. It will surly pay off over the course of your working journey.

World's Smartest Airline?

2008-04-30T17:01:00.002-04:00

I am officially a fan of Continental Airlines. I’m wondering if the management of this airline group is really smart, or am I just really lucky. The deal is that with few exceptions my last 30 flights have been Northwest Airlines. On this particular trip to Phoenix I chose to fly from Cleveland with co-workers. Their air partner of choice is Continental.

As I’m waiting at the gate I’m told that our flight is being delayed for about 30 minutes. No big deal, but I rarely experience delays on NWA. The experience took a completely new direction 30 minutes later though as I’m boarding the flight, getting ready to make the long walk to seat 28D (way far back). A pleasant gate attendant informs me that I’ve been upgraded to Elite Status and am now assigned to seat 4E (one of the big, comfortable seats where you’re surrounded by guys with Breitling wrist watches).

This unexpected blessing caused my temperature to noticeably rise a bit. It was like I’m in 4th grade and I’m first pick on the popular kick-ball team. I take off my suit coat, roll it up, and stow it overhead. But not for long…it is immediately taken, smoothed out, and hung on a hanger at the front of the plane. I’m given coffee, a hot towel, water, hot breakfast choices, reclining chairs, more coffee, headphones, a movie, newspapers, magazines, a fresh baked cookie, a semi-private bathroom. Is it my birthday? Come on already.

So all this leaves me wondering. Was all this by chance? Did Susie from the office pull some strings? Or is Continental Air smart enough to know that I fly quite a bit, and this is the first time I’ve checked them out? The latter is my suspicion, and I applaud a company who is that good.

Follow Your Passions

2008-04-28T20:03:00.003-04:00

A good friend and golfing buddy of mine, Kieth Bice, has started a golf products company in Jackson. Check out his site: RoyalTeesGolf.com
Kieth has developed a couple of amazing products for golfers and I am sure his company is going to enjoy huge success. More importantly though in my mind is that Kieth is doing something that he Truly Loves to do. Kieth loves golf, and everything that goes with it. You walk into his office and your eyes are immediately drawn to the south wall that is completely wallpapered with a beautiful golf course setting. His furniture is golf, his office accessories are golf, and he has a golf ball clipped unto his belt.

Win or lose...thousands or millions...he is following his passions. This is the key to true success and it is a story that never gets old. No one gets excited about their life because they have mastered the efficient use of a fax machine. Do what you love and what your Creator fashioned you to do, and you will life a life of joy and meaning. I've never seen Kieth without a smile on his face.

Invest Your Rebate Check

2008-04-25T22:24:00.003-04:00

President Bush announced today that we Americans can expect our "Rebate Checks" earlier than was originally anticipated. This cash could probably not come soon enough for families struggling to stay afloat in these difficult financial times.
My family of 4 is expecting $1800 bucks coming in. The big question is what to do with it. My fear is that I'm going to pop it in the old checking account where it will get lost in the mix of monthly bills.

I'm considering investing the cash at peer to peer lending site Prosper.com. I've been studying this new organic banking model and am initially impressed.

Here is how it works:

Folks in need of a loan post what they need the cash for; the interest rate they are willing to pay; and their credit information.
People looking to invest their cash and get better than CD rates can directly lend money to individuals on Prosper based on the credit risk they are willing to take.
Borrowers send their monthly payments, principal and interest, to Prosper.
Prosper credits the accounts of the lenders.
If someone takes a loan and does not pay it back, Prosper sends them to collections and hits their credit score.

The key to this program seems to be to spread your risk over many individuals seeking loans. You can lead each person as little as $50.

I'm looking for feedback from anyone who has loaned on Prosper.com in the past. Thanks for your help.

Interview with Purpose

2008-04-18T07:38:00.002-04:00

My brother just landed his DREAM JOB in Michigan last week. This is notable for two reasons. First of all there are very few dream jobs left in Michigan...we are experiencing major economic problems (in case you don't watch the news). Secondly there are thousands of people going after these great jobs. He's making somewhere over $70K a year; full benefits; brand new company car; all expenses paid for; profit sharing; and set path for advancement in the company. He is only 26 years old and this is his first "real" job...ill explain later. Here's what I learned from his job search and eventual big win.

Take any interview you can get. (I thought he was crazy for driving all over MI for stupid interviews...he says it sharpened his skills for the better ones)
Sell your experiences. (Brother had little corporate experience, but what he had done was significant. (Owned two restaurants as my operating partner and helped steer the ship to an eventual profitable sale of the stores.)
Be confident yet humble. Brother exudes confidence, but is also aware of the fact that we are all just people working hard to find our way in life. (That's the type of attitude you hope for in your co-workers.)
Value people as individuals; but get the job done. (One of the hardest parts of management is balancing the lives and expectations of the folks who work for you. Their lives and stories are the most important things in their world. As a leader you need to recognize and honor this fact, while balancing it with the realities of "getting the job done."
Understand Profitability. In any interview you need to let a company know that you realize a company exists to do good an make a profit for it's effort; and that you understand your role in that process.
Jump for joy! When Brother got the job he said he almost jumped out of his seat. His new boss commented, "Not that is exactly what we were looking for, and that is why you got this job over thousands of others."

Congratulations Brock!

The FairTax Book

2008-04-17T21:30:00.003-04:00

So I've been really digging into The Fair Tax this evening and am getting pretty excited about their deal. I may even join their street team.

Their proposal is not going to save me any tax dollars right away. Their system is designed to bring in the same amount of revenue for the Feds as our current income and payroll tax system. What it will do is replace the current over complicated system that is nearly impossible to navigate, with a embedded 23% national sales tax system on all original purchases...not on used items.

These is tons of details as to how this actually works that I will get into another time. The thing to take away from this idea though is that it could really work. Politicians are really interested in it and the movement has tens of thousands of supporters who are moving it along. The best thing though is that it truly eliminates the IRS's involvement with private citizens. There will be no more filing of returns or saving receipts under their program. April 15th will no longer carry the fear and dread it does for so many.

Anyways, I strongly suggest you read this book:

The FairTax Book: Saying Goodbye to the Income Tax and the IRS

and let me know what you think.

Taxes

2008-04-13T08:38:00.002-04:00

Thursday night about 10:00 PM I started my once a year journey of personal tax preparation. By 1:00 AM Friday I was stressed, tired, poorer, but done. They went into the mail the next day. Does our tax system really have to be so complicated? My research has lead me to three guys who have spent millions of dollars developing a replacement for our current tax code. The call their federal revenue idea The Fair Tax. I'm no expert, but their system does not claim to initially lower the taxes we pay, it offers a new and simpler way for the federal government to collect them. Check it out, and then let me know what you think. Any system has to be better than our current 57,000 pages of federal tax code.

Foreclosure Opportunities

2008-04-06T10:08:00.004-04:00

I've spent a significant amount of time yesterday digging deeper into the potential of buying a foreclosed home in Cleveland, OH. I feel like there is a rift in the force that I must take advantage of. I am slow to action on this though for two reasons:

First, this is the first real estate market downturn that I have lived through and that is making it difficult for me to read.

Second, I have accessed the advice of experts and I am getting mixed messages. All the folks that I've talked to in the real estate business have pushed me to try to make a deal asap because this inflection point is not going to last long. One the other side contacts I have in the regulatory and political environment tell me to me patient because the next 12 - 18 months are going to continue to prove challenging in the areas that I am interested in.

So I continue to research and seek wise counsel. I am reaching out to anyone who has a new viewpoint on the subject.

The other problem is that cash is tight and if I make a move it has to be a perfect one. I have a very narrow margin of error for about the next two years. Any suggestions, please e-mail me at
thealmostmillionaire@gmail.com

Relationships

2008-04-02T21:30:00.002-04:00

Every day I'm learning more and more that the heart of business is relationships. It's not what you know that gets things going. It is who you know and how those people view your level of integrity.

My House

2008-03-28T19:32:00.003-04:00

I received an e-mail inquiring weather or not the picture below is my house.

It is my current residence, though like most of us, it is 70% owned by the bank. It takes way too long to "own" a nice home now-a-days!

The funny think about that picture that is probably easy to spot is that the grass is fake. The picture was taken when there was only dirt in the yard but my builder wanted to get a nice picture on his website asap so they cut and pasted in the green stuff. Two years later though my grass did come in beautiful.

Great Mortgage Rates

2008-03-26T17:12:00.003-04:00

I just finished refinancing my mortgage. I went from a 6.375% 30 year fixed rate to a 5.50% 30 year fixed rate. I paid about $2400 in closing costs to do this deal. Based on the size of my mortgage and the monthly savings that I am realizing with the lower rate, I will recoup my $2400 in fess in about 10 months. This is a great deal. I strongly suggest you consider taking advantage of current rates if you can save as little as 1/2 of a percent off your current rate and you don't expect to move for several years.

Very important though is to get rates from several lenders and negotiate down all closing fees. I've seen estimated closing costs at $5500 or more. I had to work hard to get my costs down to the $2400 that I paid. So be careful and don't just take the first deal that you are offered.

FYI: I went with Quicken Loans and felt like they did a good job. Let me know if you have a good company to suggest as I'm always looking for good contacts.

Private Equity Funds

2008-03-25T17:12:00.001-04:00

At the office today I learned about a Private Equity Fund that currently pays 18% per year on your investment for 3 years. At that point you can have your capital returned.

Invest $10,000 dollars and you get back $1800 each year for 3 years. What a sweet deal...and this fund has a solid track record. CD rates currently available to me are about 3% each year for a 3 year hold period. I would love to invest in the above mentioned fund. But I can't!

Our governments current laws mandate that generally someone who is not a "full fledged millionaire" can not invest in Private Equity Funds. Most all funds of this sort are deemed too risky by industry regulators and thus are only available to "Accredited Investors".

Even if I am fully aware of the risks involved, I am not allowed to invest in this fund and enjoy the 18% annual returns that it has produced in the past.

I don't feel protected by the government, they are making it hard for me to grow my finances. They are basically telling me I am not sharp enough to evaluate risk for my own personal financial life.

True Success

2008-03-23T08:12:00.000-04:00

As we work hard to strive for wealth and success, I hope that you will always be mindful that there is only one way to know true happiness and security.

Happy Easter!

Why Businesses Succeed

2008-03-21T14:50:00.000-04:00

As a small business owner on any given day you can be focused on 50 different things. With the limited time you have it is natural to set priority levels on each aspect of work and life.

The most successful business people that I know always make RELATIONSHIPS a top priority.

Customers are really earned one relationship at a time. This is hard work and requires authentic interactions with the people who come through your doors. Weather they are customers, employees, vendors, service providers, or family members...it is all the same. You have an opportunity to create a positive "word of mouth" machine.

You must invest in developing trust and mutual respect with these people. When this is done well there is an amazing compounding effect for your business. These folks who trust you and are excited about what you are doing in your community become your ambassadors. When I trust someone and believe that they do a great job, I can't wait to tell others about what they do.

Why Businesses Fail

2008-03-20T08:22:00.000-04:00

I've got a theory on why so many businesses fail.

UNDERFUNDING!

Pinching pennies is so important when entering into a new business endeavor. Just as important though is investing the time and money to do a project "Right".

I think consumers can sense when someone doesn't REALLY believe in their business or idea. This creates sub-conscience doubts as to the quality and value of the product and service. I believe that these "below the surface" observations then keep customers from embracing the new venture.

So be very deliberate about finding the balance between saving a buck and going overboard with extravagance when starting a business. This is one of the biggest factors that contribute to your success of failure.

Investment Opportunity?

2008-03-18T09:50:00.000-04:00

It's been years since I've made some really great stock investments. In about 0ct. 0f 2002 when the markets were tanking and investors were losing their wits. I calmly made some significant investments in beaten down stocks. As the crowds were following in line, I tried to do a U-Turn. These investments, for example CMS stock, have paid off pretty well since then.

I think there is potentially an opportunity this year with certain financial stocks. There is always risk involved, but I can't imagine 10 years from Citibank won't exist. Even with significant mortgage exposure, National City may even still be around...(though probably gobbled up by a bigger competitor). I hope my friend Scott Blakemore will chime in and give us some insight!

Disclaimer: These are not recommendations for you. Each individual family has unique financial situations that require unique planning. As always I suggest your surround yourself with professional advisers regarding all significant financial decisions. I DO suggest you ask your advisers how they feel about the current market conditions and see if there is opportunities for you!

Keeping up with the...

2008-03-16T16:28:00.000-04:00

Have you noticed that living within your means is a very difficult task in our western culture. 90% of all media messages that enter our brains are letting us know that we have not arrived, we need more stuff, and that others are judging us if we don't have it.

Easy access to credit allows us to "Live the good life now, and pay later."
This is the root of Bad Debt. Bad debt can quickly strangle you and completely derail all your financial plans.

My family has made every mistake relating to "Keeping up with the imaginary Jones family." Our trick to getting out of that cycle was to change what excites us.

Keeping to our grocery budget now trumps the fancy dinner out. The cash value of our Life Insurance us considered much more sexy than a new flat screen. Simple fun at home with the kids replaces extravagant outings. These are the simple ways we are fighting the culture of consumption.

Are you doing anything that is working?

Go Camping

2008-03-15T11:10:00.001-04:00

Almost Millionaire Tip #14:

Forget the expensive vacations until your ship comes in. Until then, take the family camping. It will be the best $14 a night that you spend all year.

Hotel Room - $125

Camp Site - $14

Invest the difference and in 30 years you won't be cruising, you'll be captaining your own boat.

3 Years in Business!

2008-03-15T10:55:00.000-04:00

I forgot to mention the worst part about the billboard guy, he did this on the anniversary of our 3rd year in business. Who knows if the guy knew that or not...but as we're celebrating with our loyal customers, he's trying to tell them they're making a coffee mistake. Thankfully they know better!

Anyways, 3 years in business is an exciting milestone for many reasons. As the partner who oversees the finances, I celebrate being nearly 1/2 the way to owning a debt free business. Then we can start realizing some serious benefits from our long term investment.

Congratulations to Matt, Charlie, and Phyllis, their hard work and sacrifice is producing fruit. It's been a hard road, and we will face many more challenges, but the future continues to look bright. I'm proud to be your partner and friend.

Going to War

2008-03-14T22:15:00.000-04:00

Most know I am part owner of an upscale coffee shop in Jackson, MI.

Today a rival coffee house in town declared war on us.

I met with a potential InvestLinc partner today at Biggby. After the meeting I walked to my car to see a pick-up truck pulling a trailer with two huge billboards on each side of it. The trailer was in our parking lot backed towards the main street so that traffic from all directions could see the signs.

The billboards were from a local coffee establishment that is located Downtown Jackson about 4 miles from us. The boards said something about the other coffee place being voted the best in Jackson.

I immediately approached the gentleman standing outside near the truck and trailer and asked if he had permission from our landlord to park billboards on his property. (I figured he didn't because my lease has some protective language in it.) The billboard man had the nerve to lie to my face and say that he did have permission...but then quickly drove away about 5 minutes later.

I stand amazed by the tactics and unprofessional behavior of the competing coffee company. My partner was beside himself over the deal.

As soon as tomorrow my partner could be standing on a public corner in Downtown Jackson giving out Free Lattes to everyone who walks by. Though my hope is that toady's event was not an act of war, so we can continue to focus all our efforts on serving the awesome folks in Jackson, MI the Worlds Best Coffee! Biggby Coffee!

My point is this: There is alot of room at the top, enough for everyone. So when making business decisions, avoid making enemies! Basic business is tough enough, especially in Michigan. Who wants to be planning battle strategy too?

Measurable Results

2008-03-14T08:35:00.000-04:00

On my personal post I expressed the need to find a GOOD! realtor if I am going to have success in my real estate ventures. I stress that I need a good realtor because I have yet to find one in the real estate transactions that I have been involved with. The Realtors that I've worked with have been so transactional that it made me sick. It was clear to me that they were hurting and needed to push me through a sale as soon as possible. This upset me because these folks get paid a lot of money on a big sized transaction.

The other problem with Realtors is that when you ask for a referral from someone, they often send you to their friend as a first reaction. Even if this realtor does not meet your standards, you feel bound to them because of their connection to your friend.

The way most Realtors market themselves is often suspect to me. I know of several Realtors who mail out letters, fruit, popcorn, seeds, candy, magnets, toys, questionnaires, etc. I realize they are trying to accomplish TOMA (Top of Mind Awareness). I think these gimmicks fail to work though.

Here's what does work though: Results!

The couple of Realtors in town that I would guess are "GREAT" at their job do the same thing. Every time they sell a home they let the community know about it. Because they do it on a consistent bases and send the clear message that they are getting the job done, they have effected my perception. Measurable results will always prevail over gimmicks and tricks. Do you agree?

Smart Credit Card

2008-03-12T15:43:00.000-04:00

I was frustrated to see a good friend of mine using local bank credit card this week. You should never use a card that doesn't offer REBATES! Rebates = Free Money.

My best suggestions are the GM Mastercard, or the Citibank Drivers Edge Card. Here are the pros and cons of each.

GM CARD: 5% rebate on all purchases that you make. Rebates are redeemed when you purchase a new General Motors vehicle and are deducted AFTER you have negotiated your best deal. To date I have personally cashed in over $2500 in GM rebates to lower the price of vehicles I have leased. Downside to this card is that they limit the amount of rebates you can redeem on certain vehicles.

Citibank Drivers Edge: 2% rebate on all purchases that you make. Rebates are sent to you as a check after you purchase any new or used vehicle and submit the companies required docs. I've done it a couple of times and it is an easy process.

Bottom Line is that strategic credit card use, when balances are paid in full each month, can provide significant financial benefits. Don't miss out if you can.

Vending Machine Business

2008-03-09T17:31:00.000-04:00

So how does a 16 year old kid get started in the business world when personal financial resources are slim to none? The simple answer that I give when I'm asked that questions is the familiar old vending machine.

All it takes to get started running your vending business is about $100 and the ability to do your homework. I suggest starting this or any business the right way. File a DBA at your County Clerks office. Open a business checking account. Fund your account with your start-up capital. Buy your vending machine. Fill it with candy. Use your personal network to find a good location for the machine. Service the machine monthly. If you find a winner location your machine will have $40 a month in it, of which $10 covers the cost of the candy.

Congratulations, you are now a business owner...and you owe taxes on your profits! Don't forget that! The Internal Revenue Service is extremely serious about their money.

You might be thinking that I am stupid. $30 a month, big deal! The point is that you have to start somewhere. One vending machine can lead to 100 if you have the drive to succeed in this business. Your other option, of course is an AMWAY type of program. These can be great, but they are extremely involved and can hamper your future endeavors.

P.S. Don't eat all your profits, that issue can get the best of us!

Success

2008-03-08T15:41:00.000-05:00

There are over 6 billion definitions of success. I like this one:

"Success is where you find yourself when you have destroyed fear and banished it from your life." The Almost Millionaire

New World's Richest Man

2008-03-08T15:11:00.000-05:00

Warren Buffet has claimed the title of world's richest man this year. His personal new worth is estimated by Forbes to be 62 Billion Dollars. His is a staggering story of discipline and brilliance. This blog has links to books about Buffet, so check them out.

This amazing man inspires me in many ways. He is simple and smart. He still lives in the same home that he purchased in 1957 for $31,500. That says so much about his priorities...and how out of whack mine are!

In my research I found that Buffet was about 32 years old when he leaped from "Almost Millionaire" to millionaire. That is great news for all of us. We may not be as far behind as we think! Wishing you success, however you define it.

Good Credit Card Debt

2008-03-07T08:19:00.000-05:00

I've argued many a conservative mind about the possibility of good credit card debt. Most folks have hardened themselves against credit card companies because of the negative runs in the media. They are often viewed as vultures who prey on the little guy.

Based on my conversations, I must be the only little guy that the credit card companies have ever helped. A significant step in my journey from $0.00 to "Almost Millionaire" I have the credit card companies to thank for.

9 or 10 years ago my wife and I were pretty much broke...about $7000 in the bank, but with good credit and no debt. It was a nest egg, for sure, though it was not enough for a good down payment on our first house. ENTER: The Credit Card Offer! With the signing of a check, we were able to borrow $10,000 from one of my cards with a fixed 2.99% APR for the life of the loan. (Assuming we made no late payments and keep all our accounts in good standing).

This cheap debt was the catalist in helping us start our first business and also purchasing our first home. Both of which ended up being great investments. The key is that both were somewhat out of reach without a little help from my friend "Good Credit Card Debt!"

Please be mindful though, BAD CREDIT CARD DEBT DOES EXIST, and can derail your personal financial future fast. So be careful and make good decisions when the right need for debt arises. And the right need for debt is not that plasma TV you must have, or that dream vacation that is just 16 credit card numbers away! Believe me, I've made those dumb moves too.

Start a Business, but Keep the 9-5

2008-03-06T21:06:00.000-05:00

Most folks with a typical 9-5 job realize quickly that it is not their non stop ticket to financial security and a million bucks in the bank. Understand this though, the steady job is still very important, especially when starting a business. You need to be able to float before you can swim. The same is true for owning and operating a business. It is a process best undertaken with some financial security as your foundation.

I've read much about starting a business. Most of the stuff tells you to jump right in, head first. Most suggest that the only way to truly be successful in a business venture is to give it every ounce of your time and energy. They say that you will not be successful if you own a business "on the side."

These arguments are garbage and very dangerous. Owning a business is a whole new world. It will defiantly take every ounce of your time and energy, but to do it properly you have to rise above the standard that most people live by. I suggest it will actually cause you to figure out how to live two full lives in the time and space of your everyday 24 hours. You need to work twice as hard and do twice as much as the average person. Your JOB = security, Your BUSINESS = passion and joy.

The rewards are worth it though, without a doubt! When I have to work 70+ hours a week, it never feels like work. The business start up process is so exciting it bleeds over into your 9-5. All work becomes joy and a part of the exciting ride of life. But each part of the process is important and I would not suggest doing one without the other, especially not at first. There are too many uncertainties and any stability you can throw into the mix is going to be important.

Create a Family Budget

2008-03-05T09:34:00.000-05:00

It is really a smart move to create a budget. It might look something like this:

Budget Item Monthly Annual

House Payment $1575 $18900
Property Taxes $500 $6000
Homeowners Insurance $100 $1200
Auto Payment 1 $475 $5700
Auto Payment 2 $250 $3000
Auto Insurance $200 $2400
Phone/Cable/Internet $115 $1380
Credit Card #1 $200 $2400
Credit Card #2 $300 $3600
Family Life Insurance Plans $350 $4200
Medical Insurance $225 $2700
Dental Insurance $35 $420
401K Savings $200 $2400
Donations/Giving $200 $2400
Fed. & State Taxes $700 $8400

Gas Auto #1 $150 $1800
Gas Auto #2 $200 $2400
Groceries $200 $2400
Entertainment $50 $600
Dining $50 $600
Vacation $50 $600
Prescriptions $50 $600
Medical Co Pays $100 $1200
Misc. Expenses $100 $1200

Totals $6325 $75900

In my mind, the stuff above the break, you really can't control that much. The stuff below the break, you can control, but it will take discipline and sacrifice. The point is that at least you know where your money is going, and how much you have to make to not break into your savings. Each family budget looks different, and everyone has different priorities. But I firmly believe you have to have a plan each year to know what is going out the door and what can be saved for future endeavors. My wife and I made the huge mistake of not doing this last year...and we had about $20,000 in spending that is completely unaccounted for. Probably wasted on things that don't matter, and certainly don't help us towards our goals.

Know Thyself

2008-03-04T14:00:00.000-05:00

I'm struck lately by the fact that almost everyone that I meet is on "the almost millionaire" journey, but they don't realize it. I can tell that those who DO know that they are on this type of journey are far ahead of the masses at achieving their goals.

Some wise person said hundreds of years ago that the most important thing is to "Know Thyself." I agree!

Taking the time to have a firm understanding of your thoughts, goals, beliefs, and dreams is hugely valuable. This goes for every aspect of your life...not just financial.

You can't just coast through life hoping that everything is going to work out. Be deliberate in your financial decisions. Track your spending. Save for future investments. Work harder to develop your family and your finances. These things will take you leaps ahead on the paths that you have carefully chosen. The outcomes may surprise you much faster than you think!

Free Vacation

2008-03-02T21:35:00.000-05:00

Most of us on this difficult journey towards financial stability have learned to be frugal. None more so than me! Granted I have made some big financial splurges...the Hummer for example.

All in all though, I am pretty careful with every buck that I part with. That is why I love any chance to go through a time share presentation!

You may think that I am crazy, but my wife and I just enjoyed an amazing weekend away at a historic hotel in Petoskey, MI. Accommodations were great (and Free), people were friendly, and our meals were covered by the Free $75.00 Visa Gift Card that we received after we finished an informative 120 minute presentation on the benefits of ownership through Bluegreen Resorts.

After the presentation, we decided that a vacation ownership package did not fit into our current "Almost Millionaire" plan. But we were extremely thankful for the wonderful weekend away and all the free gifts. Give it a try!

Investing 101

2008-02-29T07:56:00.000-05:00

It is time for a conversation about investing. Believe me, as a 16 year old young man, investing was the last thing on my mind. I am thankful for the fore site of a good friend who bought me a copy of Learn To Earn, by Peter Lynch. It is the perfect starting point for a young person with no other point of reference relating to the investment world.

The book is somewhat written for the teenage reader. I would strongly suggest though if you have never investigated the subject of investments and business, go buy it now. If you have teenage children and want to teach them the basics of investing and the value of a dollar, go buy it now.

As I'm suggesting that you buy this book, I am mindful of time. Time is the greatest currency in the world, and many are not deliberate enough on how they spend it. I have a family member who I am constantly giving exciting ideas to. I know those ideas could produce fruit in her life if she would invest some significant time into them. Sadly it never happens though. In her mind the time sacrifice to read an amazing new book, for instance, is not deemed as worth the investment of her time.

As I've said before, for every worthy endeavor, there is always a price to pay. Too many embark on their personal financial journeys unprepared for the real world. Proof of this is the huge number of home foreclosures that are sweeping our country.

Bottom line: Don't go into battle unprepared. Read often, seek wise counsel, and invest the time to become a good steward of your limited resources.

Dollars for Pennies.

2008-02-27T09:20:00.000-05:00

I had a deep conversation with my friend last night about life insurance. He is a family man with a great job, kids, and a wife. I congratulated him on the wise choice that he make several years back to purchase $350,000 worth of Term Life Insurance. I then explained to him that he had provided for his family to enjoy their current lifestyle for approximately 5 years in the event of his death. At that point they could quite possibly be out of money and short on options.

He was taken aback a bit. Then got just a bit defensive, before letting me know that he thinks he may need to revisit his coverages.

I then took the conversation on a journey of what he would want his family's lifestyle and options to be like if he were not around to provide. This conversation naturally goes to things like...keep the house, maintain current lifestyle, raise the kids as planned, provide for college funding, have a nest egg, ensure a solid retirement.

Wonderful things, but expensive things! That is where the secret of dollars for pennies comes into play.

Depending on things like your age, health, and family history it is often possible for an extremely healthy 30 year old guy to have $2,000,000 of personal coverage for around $2.50 per day. And that coverage can often be guaranteed for 10 or 20 years and/or converted into forever insurance at an additional cost. The bottom line is that you can get the big ticket coverage while the family is young for very little dollars.

This is an investment that makes sense, and cents.

Just Do Something!

2008-02-26T16:22:00.000-05:00

Action is the friend of financial success. It is easy to say, "I wish I would have tried this..." or "Someday I'm going to take the leap..." What is extremely hard to do but can often have a big payoff is to just try Something!

Think small and look for problems in your everyday life that you may be able to find solutions for. If you are experiencing a problem, chances are that thousands of other people are encountering that problem too, wouldn't it be great if each one of those thousands of people would pay you $10.00 to help them solve that problem. Regular folks like us do this kind of stuff every day.

For example: Think about your community. What do you and your neighbors have to drive 10 miles to get. Let's say it is a good pizza. Do some market research, check out some franchising websites, ask wise counselors what they think...then if it makes good sense...open a pizza shop. Now your friends and neighbors can drive a mile for a good pie, or they may be able to have it delivered now. Either way everyone wins in this situation. I use this example because I have done just this, with a pizza shop. It was extremely hard work, but rewarding work. There were terrible challenges, but I learned so much from working through them.

Now pizza may not be right for you, that is OK. Keep your mind open and think sharp and an idea will come to you. All the difference in the world is made on weather you follow that idea and chose the hard road that is not traversed as often. We all know that nothing is guaranteed, but even in my failures, I have personally gained more than I had to give up. I never regret at least trying!

Service Matters

2008-02-26T09:22:00.000-05:00

I find it amazing that Starbucks is closing thousands of their stores early today. They are sending their troops through a training program to enhance customer experience. Most of you know that I own a competing coffee franchise here in my local community. That being said I applaud Starbucks leadership for recognizing that service matters and needs to be a priority in organizations of all shapes and sizes.

"I did not come to be served, but to serve..." Famous quote that should ring true to all aspiring entrepreneurs and corporate ladder climbers. I am trying to learn every day how to better serve the people that I am in relationship with. I feel like at the heart of every good relationship, business or personal, is service. Service builds trust. When a customers comes to know that a business has their best interests at heart and values them, that creates trust. Trust is the main bridge to referrals. Referrals are the life blood of most growing business endeavors. There is no more powerful form of advertising than the unsolicated referral from a trusted source.

Yes, I am in sales!

2008-02-25T15:09:00.001-05:00

It is very important to realize that you, and everyone around you, is a sales professional. I understand that this may sound silly. You may say, "I'm not in sales, I clean teeth for a living." If this is how you feel, open your mind for a minute. Think about the last time you cleaned the teeth of one of your bosses dental patients. Did you speak rudely or in harsh tones with the patient? Did you give no regard to their personal comfort and simply dig deeply into their soft gum tissue with your tools? I'm guessing the answer is no, probably the exact opposite.

My dental hygienist starts by asking me which TV show I would like her to turn on. She then tries to remember about my family and businesses, and makes comments to let me know that she was interested in our past conversations. I feel valued as an individual. She then gently but thoroughly cleans my teeth, asking often if all is well and I am comfortable. The experience is always the same, and always great. I cannot leave that office without finding the dentist and telling him how great and underpaid his staff is.

SHE SOLD ME! It is exciting for me to meet people like this who truly get the way the world works. No matter what your position in a company, you can add extreme value to the organization by remembering that you are always making an impression on someone. Your either selling them on how great you and your company are, or are selling them on the mediocrity of you or your company. The point is that if you accept that this is going on, you can control the outcome and usually get a positive perception from the people you interact with. Just like our dental friend. And I'm assuming she is extremely well paid because of it.

Dumb Name?

2008-02-24T07:47:00.000-05:00

I wanted to expand a bit on the purpose of this project. "The Almost Millionaire" is probably a dumb name when you think about it. To many folks who are struggling financial, becoming a millionaire may seem impossible. And middle class America is probably thinking that a million dollars doesn't mean much at all any more if you want to have "The American Dream" type of retirement and your life expectancy is 95 years. The truth is that both groups are right!

The fact remains that the vast majority of the population of North American has not even come close to meeting their personal financial goals. The connecting point for me to The Almost Millionaire is that is portrays in my mind were all of us actually are. Some are starting out their journey in the negative. Some may have saved $75,000 in their 401K...but struggle to pay their monthly bills. Others may have a net worth of $500,000. It doesn't matter for my purposes today. I'm trying to find in my life and in the life of others that I have relationships with, ideas and truths that may help along to way. I also want to explore the mental and spiritual side of personal financial decisions. I have witnessed financial journeys ruin lives and destroy families. What good is being "The Arrived Millionaire" if it has left a trail of brokenness in your friend and family trees that will have consequences for decades to come? My wife will tell you that "balance" is the key to these matters, but it is sometimes hard to find. I say that from personal experience.

Baseball Cards

2008-02-23T07:39:00.000-05:00

If baseball cards were as popular now as they were in the 1980's I would not be the almost millionaire...I would probably be the almost billionaire! In fact, if they were even 5% as valuable as they were in 1989 than I would certainly be twice as close to that illusive first million as I am now.

As a young man with some steady income to invest I had NO understanding of the concept of diversification. That is why for the past 15 years half of my parents basement has been cluttered with hundreds of huge boxes filled with sports cards. I am sure they would love to throw them away and reclaim their space. I have avoided that tragedy though with the steady insistence that someday in the next 100 years there is an off chance that the market for sports cards will make a dramatic spike upward. And at that point we will be well positioned to take advantage of that basement mess.

But in the meantime I have learned one very important and expensive lesson. Diversify! Simple truths are powerful. Don't put all your eggs...you know the rest.

Nuns are Messy

2008-02-22T18:19:00.000-05:00

My journey as a contributing member of our capitalist socity began at age 14. I convinced my parents to let me buy a motor scooter, so I would have transportation, so I could get a job. I found quickly that there are few places willing to hire a 14 year old to do anything. My big break came when a 15 year old neighborhood friend told me he was working at the local "Sister House." The Sister House is a huge complex owned by the Catholic Church were nuns go to retire.

Retired nuns are messy! That created a huge need for qualified dishwashers @ $4.15 per hour. I had hit paydirt! First paycheck...$140 for two weeks.

The point of this story is that my folks friends thought that they were making a mistake by letting me waste my free time working. "Enjoy life while you are young." They would say. "You have your whole life to work." Looking back now I realize how foundational it was to understand the trade off between time and dollars at such an early age. I had to trade my time and energy for that paycheck. That realization lead me to always seek meanful work that was a joy to do. I've observed in many successful people that they all find significant meaning in the "stuff" they do to provide for the financial security of their families. On the flip side, most people I know who hate their careers are not on strong financial grounds.

Bottom Line: Understanding the value of hard work at an early age should lead you to strive for meaningful work that you love to do. The net effect is forward progression towards that first million...with a whole lot of joy in your life!

Project Purpose

2008-02-22T07:43:00.000-05:00

The purpose of this project is to journal and reflect on the decisions, good and bad, that have lead from zero to "almost millionaire." I want to see if patterns emerge along the way that could be replicated by you, or avoided by you, in an effort to help you along the long road to financial stability.