Money Matters - Rich Kid, Poor Kid And The Important Role Of The Parent

I know a couple of men who are the same age (mid twenties), about the same intelligence and, for the most part, are equally good looking. One is a businessman with a rapidly growing marketing company grossing about $500,000.00 per year. The other works a routine job making enough money to live from hand to mouth. There is one difference between the two men…one comes from a wealthy family and the other comes from a lower income family. Can you guess which comes from which? I have talked to both of these gentlemen and discovered there was a very important factor that played a role in both their lives. One got financial training at an early age and the other did not.

I asked the successful guy how he had gotten so focused in business and his answer was interesting; he told me his father took him to the bank to open a savings account when he was around ten years old. When he started making money-cutting lawns, delivering papers and other jobs, his dad coached him and under that influence most all the money went into the savings account. He had a keen sense of understanding about saving money in an interest bearing account. He had a budget. When he was 18 he opened a checking account in his name. He was writing and managing a checking account at 18 years old. At 18, he had already been an entrepreneur with 8 years experience generating income, handling money, saving and spending money on (and within) his budget. He went on to college to get a degree in international finance, worked for a major corporation for a couple of years and now he has his own business. The other guy doesn’t have a college education and is just now getting around to setting up a checking account.

I bring this to your attention for a couple of reasons. First, wealthy people tend to groom wealthy children because the kids are taught to respect and manage money at a very early age. Whereas lower income people tend to ignore this issue and subsequently tend to raise lower income children. Obviously, wealthy people have advantages over lower income people like money to send their kids to colleges, etc. but that’s not the point. The point is in the training…the orientation to the banks, teaching kids wise money management, basic economics, how businesses work, about real estate and so on. Key word: Knowledge. I think all parents will do well by their children to teach and show them, at an early age, everything they know about basic banking, how to set up a savings account, how to budget their money, how checking accounts work, etc. My advice is to make sure you introduce your kids to basic economics at an early age. Don’t assume they will learn on their own or at school. High schools tend to fail miserably at teaching kids the “street smarts” needed to function intelligently in business, real estate and finance.

I don’t think a college education is critical to make and manage money. Indeed, there are many millionaires in the country that don’t have a formal education. What is critical is teaching kids a high work ethic and how to manage money. If you need to get this information for yourself or your family, I strongly suggest you do so (the public library is free) because “You pay once for knowledge but the cost of ignorance can last a lifetime. “

Copyright ฉ 2006

James W. Hart, IV

All Rights reserved

NAME: James W. Hart, IV
TITLE: Author/CEO Smart Books Publishing
WEB SITE: http://www.smart67.com
EMAIL: talktosmartbooks@smart67.com
PRODUCT: Consumer Books, Kits & Special E-Reports in the areas of Real Estate & Business. Smart Books Publishing Web Site is a Pay Pal-Secured Seller/Secured Credit Card merchant. (Ebay User Number jim12302)
MEDIA INTERVIEW AVAILABILITY: Yes. Call For Bookings (419)-636-7210.
BIO: Mr. Hart, consumer advocate and CEO of Smart Books Publishing, previously licensed in the sale of real estate in the state of Ohio, has been directly involved in the origination of residential and commercial mortgage financing. Hart is an honorably discharged veteran of the U.S. Army, graduate of the University of Toledo. He is a member of the National Panel of Consumer Arbitrators and the Council of Better Business Bureaus, Inc. Mr. Hart has appeared on a number of radio and TV stations throughout the U.S. including WJR-AM, WWWE-AM, WHUR-FM, WRC-AM, WLW-AM, WTVN-AM, WSPD-AM, KDKA-AM, KBGS-AM and CNBC-TV and many others… Hart is an experienced and dynamic media guest.

[tags]Kids, money, education, finance, training, economics, savings, information, wealth, learning[/tags]

Money Matters - Really!

One of the biggest challenges facing black RELATIONSHIPS today are finances. Many people mistakenly feel that money does NOT matter. In fact, money matters the MOST! Why? Most people do not have a clue about their own financial destiny.

You know you want to own a home and save some money toward retirement but have you PLANNED what it is you are saving each month and how that money will assist you in the future. Do you have a PLAN to empower yourself financially by NOT depending on your JOB to pay your salary and that's your only source of income. Times have CHANGED. Jobs come and go(and so do SPOUSES). To protect yourself financially you need to be proactive and not depend on anyone else to solve your financial issues.

You can improve your finances RIGHT NOW if they are not in order. There are low costs alternatives to improve your credit score and increase your buying power. Power not to be wasted on designer shoes, clothes, and automobiles, but to be invested in REAL estate. An interesting term to be sure. REAL because it is the foundation of all REAL wealth in this country. Estate, because that is what you can leave your children and family if you handle your business correctly - RIGHT NOW. Money matters because in a relationship YOU should have your OWN MONEY! That is right- I said it! You should not count what someone ELSE brings to the table when all your money is tied up in petty and senseless bills. Talking about petty and senseless- let us discuss CARS! What would possess a person to lease an automobile? Other than as a BUSINESS expense (which also means TAX WRITE OFF) someone PLEASE Tell me WHY? I have heard of folks paying $500.00-$900.00 monthly on car payments. WHY? My car is paid for and I am proud of it. Yes, it is ten years old - BUT I don't work because I DON'T have to support my vehicle. If you are serious about getting more money in this lifetime, you will need to STOP SPENDING money RIGHT NOW on things that DEPRECIATE in VALUE such as CARS! Nuff said!

We all need just ONE major credit card and an American Express card. The other credit cards need to be in the trash. The reality is- if you CANNOT pay for something you purchased within 30 days, you CANNOT afford it! Brutal I know but I have been there and done that. When you have to spend real $$$ on what you purchase, it truly does slow your roll.

Contact me if you need to be pointed in the right direction. I will be happy to assist!

In a personal relationship many of your disagreements WILL stem from money issues.
Not just who makes what, but how it is spent and how it is saved. It seems like such a small thing but when you are commingling finance and love you need to establish boundaries up front. PLEASE DO NOT IGNORE THIS ADVICE! You should decide in
advance if you want to keep your finances separate and have a joint household account.

The household account should be open to both parties (online access is great for this) and not used for personal spending in any way. The check card will let you market, pay bills
etc. A joint savings account would also make saving for special purposes much easier. No matter how much you trust each other, the savings accounts should REQUIRE both parties to sign off on withdrawals. Just to keep everything clean and above board. The traditional (old fashioned) way is to have just one account for checking and one for saving. Even though our parents did this, most mothers (and fathers) always had personal money SOMEWHERE that was just theirs. So why not be upfront about your own personal money issues so they do not come back to haunt you down the road.

Michelle Smith-Billups owns serveral websites. Her main site, HurryDates-in-Black.com focuses on finding and building relationships. Their focus has turned to money as a way to improve on what YOU have before you find a mate. This is NOT to be used to measure a potential mate but as a means to open, honest and effective communication about finances before your relationship starts.

http://www.HurryDates-in-Black.com/moneymatters.html
http://Health1.natureswellnesssecret.com
http://www.WarmSpirit.org/Ebony1stImpressions

[tags]money, black relationships and money, black finances, relationships and money, personal finances[/tags]

Money Is It That Important

Very often I here people ask the question, what are the most important things in your life? Friends and family are often at the top of people’s list. In a lot of cases so is money but it seems that when a person mentions money as being important to them, some perceive them as being a greedy and selfish person.

No matter what individuals say, everyone cares about money because it is necessary to survive. No matter how much love a person has for their family and friends they cannot live off of love. Also relationships between friends and family can be destroyed over money.

Individuals that do not think money is important obviously don’t look at all the marriages broken up over finances, businesses destroyed by cash flow problems, and lives destroyed by injuries because people lack affordable healthcare coverage.

If you are a person that does not feel that money is important, you need to realize that there is no shame in admitting that you care about it. Not only does it allow a person to have the things they want and need but it allows them to slightly reduce the number of things they have to worry about each day.

Andre Bias is the owner of http://www.kidfriendlyentertainment.com, an online source for top notch DVD’s for children 10 years old and younger. He is also the owner of the website http://www.pokergreed.com

[tags]money, success, love, finances, life, important[/tags]

Money Black Hole

Do your finances seem like a black hole? Money comes in, maybe even lots of it, but it gets sucked into nowhere and you’re not sure how it happened? This may occur for lots of reasons, but the biggest is biting off more than you chew (or pay for). Another way of saying this is you are not living within your means. For example:

ท Buying a new car when a used one is good enough.

ท Purchasing a bigger, more expensive house thinking your income will go up fast enough to cover the expense.

ท Paying for services such as housecleaning, yard maintenance, childcare, club memberships, computer site fees, etc.

ท Expensive, exotic vacations

ท Charging everything from groceries to clothing to home remodeling on your credit card.

Did you know that most millionaires got rich by living below their means?

Being self-employed or being salaried but getting big bonuses may increase your risk for over-committing. You believe you can afford something because you have the money right now, but don’t remember that next month’s income may be much less or you may not get a bonus next year.

But the biggest contributor to biting off more than you can pay for is not knowing the true state of your money flow. Lots of people say, “But I don’t spend that much money” without having any facts to back it up. They may think or feel that because they are comparing themselves to others or to some ideal way of living. Do you know to the penny, okay, at least to the nearest dollar, what your fixed and discretionary expenses are each month? Do you have a spending plan for your fixed expenses that only come once a year such as auto insurance, property taxes, and home insurance, etc.? Do you have a spending plan for the big discretionary expenses that only come once a year such as birthday and holiday gifts, vacations, and seasonal clothing, etc.?

So what do you do?

For starters, if you don’t already know where your money goes, write down every penny you spend for a month. This will give you an idea of your daily discretionary spending. Is it going towards lattes, cokes, donuts, clothes, or lunches at work? Then comb through your bills, checkbooks, and credit card statements. The idea is to build an accurate picture of your entire financial life…what comes in, what goes out, and what do you have stored (savings, investments, assets). This may take you some time, but it is absolutely critical in understanding and finally changing your financial life. It is not fun, just necessary.

You may have to face some hard truths about your spending, but it is the first step to gaining control. And gaining control, I promise you, will vastly improve the way you feel. When reviewing your spending and income patterns, remember that it is no shame, no blame. It is what it is so don’t beat yourself up. You’re doing the courageous thing by looking at your money flow in the clear light of day. Having debt and finances that are out of control, or even that just don’t meet your own goals, wears on you, making you moody, irritable, worried, fearful, exhausted and may even affect your health and relationships.

Cutting Your Expenses

Now that you have been tracking and understand your money flow so that you have a total picture of your spending and income, it’s time to look at where your money is going. No matter how little money you have and how necessary you think the spending is, there are always ways to cut more, often without even feeling it.

So why cut your expenses? Many of us would like to save more...for retirement, for emergencies, a long vacation, a better car, or a sabbatical. Some of us are deeply in debt or moving in that direction. Some of us can’t make monthly bill payments. If you want to save more or are spending more than you can afford, you may want to start economizing or cutting your expenses. Here are my own favorite top ten ideas:

1. My number one pick for saving on your expenses is to stop shopping! Don't go to the mall, don't look at the dozens of catalogs that arrive in the mail, and don't surf the Internet for stuff! Window-shopping can be dangerous to your wallet. If you find yourself overcome with desire, wait at least three days. If you still must have it, then buy it. Most of the time, the desire will pass.

2. Each month pick one utility or service bill and reduce or eliminate it. For example, on your phone bill, eliminate all those "extras" such as call waiting,
call forwarding, caller ID, etc. I use a 3-cent a minute phone card for all long distance and so cancelled my long distance carrier that charged me
$7/month for nothing. And, of course, I don't pay the ridiculous high prices for long distance they would have charged me! For electricity, shop around. Your service provider may not be the cheapest. You could save as much as 20%. Do you really need a monitored alarm system? Could you be comfortable with only an audible alarm? What about cell phones? The plans change frequently...and I do mean
frequently! Call your cell phone company and request a lower rate or a better plan. Well, you get the idea. Don't just assume that there is nothing you
can change.

3. Look at any service fees you may be paying. Service fees are the fastest growing category of spending for consumers. For example, Internet service providers,
investor reports and services on the Internet, weather bulletins, subscription fees, user fees, download fees, etc. These can add up to hundreds of dollars a month if
not carefully watched. There are several really inexpensive Internet service providers that work quite well. Don't stick with AOL or Earthlink just because
you always have. It's easy to investigate others and many give free 30-day trials. For example, try academicplanet.com, netzero.com, ev1.net, hal-pc.org or pcpeople.com.

4. Everyone seems to assume that they must have cable or satellite television and that the $50 or $70 or $99 per month charge is "just the way it is". I double-dare you to take charge of your family's television viewing. With no cable or satellite, you still get 3 to 6 stations in Houston, for example. If you need more,
buy the absolute minimum you can live with. For example, if you get HBO only to watch the Sopranos, can you watch it with friends? Ask them to tape it for you? Or at least have HBO connected only during the season! Don't even get me started on how bad TV is for children and how much time adults waste watching it!

5. Shop around for big-ticket items. If you have not shopped on the Internet, you will be amazed at the differences among prices for the same item. Prices can vary hugely. You can always go to a brick and mortar store to see and touch the item, make a selection, but then shop online for best prices and warranties. You can use shopping comparison sites such as nextag and pricewatch. I just this week bought a popular money software program that was listed for $89.99 at my local office supply stores. I checked around and it was the same price at my local huge discount store. Online, I found lots of lower prices including $79.99, 59.99, 41.95 and 23.88. I finally bought it on ebay for about $29 with shipping. This all took about 10 minutes.

6. For smaller, regularly used items, shop around, both on the Internet and locally. For example, I buy my printer ink cartridges at half the office supply store price at a local store called Cartridge World. The first time I went in, I saved $122. For gift-wrap
items such as paper and ribbons, try a dollar type store or your local party goods discounter. When I bought my day planner updates for 2005, the price at one office supply store was 1/2 the price at the other a few blocks over for the identical item, a savings of $22!

7. One of my biggest weaknesses is books. I read voraciously. The Houston Public Library has an online service that is incredibly useful and efficient. You can look in their catalog, find the book you want, have it sent to your local library branch and they notify you when it arrives and is ready for pick-up. If the Houston Library system does not have the book, they will search other libraries in the state including university libraries, have it sent to your local library and notify you. You can even renew the book online. Many libraries across the country have the same service. If you really must buy a book, try Half-Price Books (chain store) and as well as consignment and thrift stores locally. But none of these has catalogs so you have to go and look around for what you want. Online, try the book shopping comparison services: fetchbook.info and addall.com. Also try for used books on half.com and ebay.com. Again, you can often get books for pennies on the dollar. I promise!

8. Reduce or eliminate a daily habit. For me it is canned sodas. I drink several a day. Eliminating these would save me $2/day or more than $700/year. I have cut back, but haven't eliminated them...yet. I'm not suggesting you do without all pleasures, but
many are just habits, nothing more. Lattes? Bottled water? That morning donut or candy from the vending machine? One more purple stuffed bear for your collection? Another pair of shoes? Be a conscious shopper. Recognize why you are shopping and what purpose in your life the purchase serves.

9. Insurance of all kinds: life, house, health, and auto. Each year, at renewal time, take the time to shop around for each of these that you have. Company prices vary tremendously. Use every discount you can get, especially for house and auto
insurance. Ask your agent about these because they don't always tell you. For example, most insurance companies will give you a discount if you have your house and auto at the same company. There are discounts for alarm systems in house and auto, for reenters, for smoke alarms, etc. For life insurance, the first question is, do you really need it. Many people have it that don't and many of those that do need it, don't have it. If you really do need it, shop around. Try quotesmith.com for comparative rates.

10. If you are carrying balances on your credit cards, call your credit card company today! Ask them for a lower rate. The credit card companies are in stiff competition. They know you can always leave them for a low or zero interest rate on another card.
Be insistent. If you have high credit card debt, check out the payment calculator at MotleyFool.com. You put in your debt amount, interest rate and payment amount;
it tells you how many years (or decades!) it will take to pay it off. The information will be shocking, sobering and motivational.

Has life got you down? Are you ready to live your big dreams but don't know where to start? Sign up today for my free monthly newsletter and receive the free report "85 Ways To Be Happier Now!" at http://www.LifeUnfolds.com/news.htm

Mary Anne Fields

Life Coach, Trainer and Speaker

http://www.lifeunfolds.com

[tags]money, finances, debt, prosperity, abundance, finance, spending, saving[/tags]

Making Yourself Recession Proof

Are you interested in arranging your finances so that whatever happens to the economy you carry on making money? Share prices and property prices may fall, inflation and interest rates may rise, but there is no reason why – with a bit of careful planning – you shouldn’t turn every situation to your advantage. In fact, if you are ready for it, a recession could be an once-in-a-lifetime opportunity to fast track your wealth.

Before I explain how you can cash in on any future downturn let me just say that I am not predicting a doom and gloom scenario anytime soon. After their meeting in St Petersburg in early June finance ministers from the Group of Eight nations released a joint statement in which they said that: ‘Global growth remains strong and is gradually becoming more broad-based.’ Nevertheless, it is always prudent to be prepared. After all, markets move in cycles and sooner or later the current cycle must come to an end. Furthermore, a little advance planning won’t cost you a penny and could well earn you a fortune.

If you want to profit from a slump – or even a small slip – there are three different steps you need to follow.

Firstly, review your debt situation. In the current low interest climate it has been relatively easy to borrow money and many people have taken on quite a bit of debt. Whilst no one is predicting a return to the high interest rates of the 1980s and 1990s in the immediate future, it is wise to consider how you would be affected by even a modest increase. If you are interested in discovering how to pay off all your debts – including your mortgage – quickly and easily watch out for the next Power Report.

Secondly, you must make sure that your existing assets are recession proof.
After all, there is no point in making money in one area, only to be losing it another. Let me say now that I am not a great one for owning shares and other investments myself. I have my home and one other property and my business interests and a pension and that is it. Coming from my background it seems quite a lot. But compared to many people it is hardly any wealth at all. Still, I have studied how many of the world’s most successful investors have made serious money and I know that they follow a strategy of cashing in on gains long before they believe the market has reached the top of the cycle. In this way they optimise their returns without suffering unnecessary losses. Whether you follow this course, or not, one thing you must do is diversify. Don’t imagine, for instance, that if you own a basket of shares in blue chip multinationals located in different parts of the world – you have diversified and thus reduced your exposure to risk. In recent weeks we have seen that a geographical spread of leading equity markets has offered little protection. To diversify properly you should invest in a broad range of assets – everything from a pension to overseas property and from managed funds to fine art. I’ll also be covering how to build up personal assets – even if you don’t have much to start with – in future issues of the Power Report.

Thirdly, you want to ensure that you have sufficient cash or liquid assets on hand to seize opportunities when they arise. The other day the Independent newspaper asked business chiefs whether the recent dip in the stock market was the beginning of a major and sustained crash in the stock markets or just a small correction. The most interesting answer, to my mind, came from Tom McAleese, MD of Barclays, Ireland, who pointed out that every price fall was a buying opportunity. A fall in the stock market of 10% - which is what the world has experienced since the start of the year – means that shares are now worth 10% less than they were a few months ago. Given that companies are reporting strong earnings, valuations are effectively lower – profits have gone up but share prices have not. If and when we enter a bear market it is the investors who have cash available that will clean up. They will be able to buy into solid, asset-backed companies at bargain basement prices and benefit from the next upward swing. Incidentally, what applies to a fall in the stock market applies to a fall in any other market. A general downturn in the economy will make it cheaper to buy all sorts of other valuable assets including property and alternative assets such as classic cars, jewellery and fine art.

Whether or not you expect even a mild recession there is much to be said for switching out of higher risk/higher return assets into relatively liquid investments that can be converted to cash when a market opportunity presents itself. Gold (as I explained in the last issue) is one place where you might put your cash. Another, perhaps more sensible option, is to buy index-linked government bonds. The huge advantage offered by index-linked government bonds is that your return is certain and you are protected against a market crash, rising interest rates or inflation. Swiss Bonds are widely favoured as the ultimate in security. However, a Swiss 10-year bond offers a yield of just 2.7 per cent. Instead, consider putting your cash into Norwegian bonds, which currently produce yields of more than 4 per cent and - thanks to the country’s oil revenues and political stability - must be considered just as safe.

Justin Power
info@powerreport.net
http://www.powerreport.net

[tags]finance, debt, assets, stock market[/tags]

Making Ends Meet Can Be Tough!

How do people make ends meet anymore? Inflation is on the rise, so the cost of living is going up. Wages seem to be frozen in time and the available money to put away for the future is quickly disappearing since expenses are on the rise.

Since our income is no longer keeping up with our expenses, what options do we have? It's a difficult choice to make, and many people are avoiding a credit card to help them budget, but it's becoming harder and harder to avoid! We live in a world that expects us to use credit cards and as the Internet gives us many purchasing opportunities, we often only have the credit card as an option!

But when credit card bills begin to mount, what choices do you have to help you take care of those bills? After all, credit card interest rate is one of the highest around! People find that they can pay half again as much as their original purchase simply in interest if they do not pay it off right away.

When considered as part of your overall financial portfolio, a UK credit card consolidation loan is an excellent option. This is because it pulls together your payments and lowers your interest rate to a rate that is easier to swallow! And, instead of getting a half dozen credit card bills through the month, you'll be able to get one bill with a fixed amount owing, and that will really help you budget accurately.

So now the next step is: what kind of loan to get? There are two kinds of loans: Secured and unsecured loans. Secured loans let you use assets you have as a guarantee against the loan while unsecured loans simply use your credit rating to help you.

Secured loans may be the better choice because they allow you to get more money at a better interest rate and for a longer period of time because you are providing a guarantee to the lending institution that if you are unable to make the payments, there is another form of payment they can get through the seizure of your assets.

So if you find that credit card bills have gotten out of hand, you should consider getting a UK credit card consolidation loan. Your payments will be lower, your interest will be lower, and the fixed amount each month will help you budget accordingly.

Mark Lambie is the founder of Loan Source, a website for UK residents seeking secured loans. Visit

our website today for a free Home Owner Loan quote and

find out how much we can save you.

[tags]finance[/tags]

Learning From Peter Lynch - Part III

Peter Lynch's "One Up On Wall Street" talk comprehensively about what kind of stocks one should pick. In general, Peter believes that bigger companies tend to make smaller move and vice versa. Therefore, in spotting what he called a 'ten bagger', or stock that has risen ten times in value, it will occur more likely in smaller company with market capitalization of say less than $ 10 Billion.

Peter Lynch also divided companies based on six general categories, which has their own unique characteristics. Based on these six categories, investors will be able to know the reason why they invest in such companies and consequently the return expected on each kind of companies. The six general categories are: slow growers, stalwarts, fast growers, cyclicals, asset plays and turnarounds.

Slow growers - As the name implies, this is the type of companies that grow slowly, barely above the nation's Gross Domestic Product. Slow grower exists for two reasons. First, they expand rapidly during their early years and had saturated the market or second, they did not make the most of their chances. The book names utilities as slow growers. During the 1950-1970 period however, they are fast growers. As electricity consumption increased (folks installed air conditions, electric heater, refrigerators etc.), power consumption rose and hence their growth rates. That does not happen anymore. Thus, a company inevitably will become a slow grower. A fast grower of the past will be tomorrow's slow growers. Example of industries in this category include: railroad, aluminum, steel, chemicals, soft drink.

Stalwarts - These are not fast grower and yet they grow faster than the slow grower. Most stalwarts are huge companies with huge production of cash flow. Due to their enormous size, stalwarts won't move much and Peter always try to take a profit whenever it has run up 30-50% in value in a short period of time. Some stalwarts include: Procter & Gamble, General Electric, Bristol Myers and Kellogg.

Fast Growers - The name says it all. These categories are for companies which has high growth rates. This is where the potential of the ten baggers lie. Other five categories will not give you as much chance of finding your next ten baggers. Fast Growers does not necessarily be in the fast growing industry. It can be growing fast in a slow growth industry. For example: WalMart in the stodgy retail industry, Marriott in the 2% growth hotel business, Anheuser-Busch in a slow growing beer market or Taco Bell in a not-so-fast fast food industry. There is however, plenty of risk in investing in fast growers. The trick is figuring out how much to pay for them and when they will stop growing because eventually, the party comes to an end.

Cyclicals - Not all companies can profit consistently all the time at every occasions. Generally, cyclicals profit rise and fall in regularly predictable fashion, most often moving in tandem with the economy. Businesses that can be considered cyclicals are : airlines, autos, defense companies or even chip industries. For defense companies, it is cyclical not with respect with the economy but rather with the policy of the white house. For chip industries, it is cyclical with the computer upgrade cycle. Timing is everything in cyclicals. Contrary to other categories, Peter avoids cyclicals trading at a low P/E which generally means that the cycle is currently at its peak. While this rule of thumb does not work 100%, it works pretty well to avoid picking cyclical companies that fall even lower.

Turnarounds - These are high risk high reward preposition. Generally, there are specific problems plaguing the company. Further, if the company fails to fix this particular mess, it will probably end up in bankruptcy court. Despite this, there are several appealing reasons for investing in a turnaround. One, of course, is the reward. Once the problem is fixed and solved, the stock price will rise sharply to trade in line with what its peers valuation are. The other beneficial factor of investing in a turnaround is that it is least likely affected by the general market condition. Market goes up, turnaround may stay down and vice versa. A recent example of a turnaround might be involving Altria (MO) in early 2000s. Facing hundreds of billions of lawsuit from smokers, the stock price sank so low that you can buy it at 5 times earnings and 10% dividend yield. Altria also owned a stable Kraft and Miller subsidiary (which was later sold). Turnaround investors will see if the lawsuit problem can be solved, then investing in Altria will be rewarded handsomely. Sure enough, lawsuit problems diminish and its stock price has increased four fold since then. Of course, turnarounds do not always turn around successfully. K-Mart bankruptcy is another past example.

Asset Plays - This is the type of companies that normally own a hidden asset that is not obviously listed on its balance sheet. All assets should be listed on the balance sheet, of course. But Asset play company often times do not list its asset at market value. For example, the value of real estate holding which is depreciated under the current accounting rule. Meanwhile, the land itself most likely will be worth more than its purchase price. Also, company that has huge tax-loss carryforward qualifies as asset plays.

That's it. All the six categories of stocks according to Peter Lynch. Hope that didn't put you into deep sleep. As boring as it sounds, this will be a valuable lesson that will make your investing journey a lot more exciting and worthwhile.

Novice Investing is the online investing guide for beginners. You can also submit investing articles here

[tags]finance, stock, investing[/tags]

Learning From Peter Lynch - Part II

Peter Lynch's "One Up On Wall Street" did not just talk about what we in general are better real estate investors. It talks about stocks too. However, before he goes deeper explaining the way he looks at stocks, he gracefully shared in his book the four stages of stock market cycles which I found to be very very useful. He called it the cocktail theory.

Stage one - Everyone avoids a mutual fund manager like a plague. When everyone rather talk about anything else other than stocks, this is the first sign that the market will rise significantly from there. That alone tells you that there is a gloom and doom in the news recently. That, according to Peter Lynch, is the best time to invest. While he confessed that he is not a market timer, this theory is developed over the years.

Stage two - Folks linger around a little longer around a Mutual Fund Manager. At this stage, when folk met a mutual fund manager in a cocktail party, he/she will talk briefly with the manager and tell him how risky the stock market is. And then, they will move over to talk with the dentist. By then, the market is already up roughly 15% from stage one but not very many people had noticed.

Stage three - Everyone asks a mutual fund manager what to buy. When the market is up 30% from the lows, everyone starts gathering around the mutual fund manager and asks what stock he/she should buy, totally ignoring the dentist.

Stage four - Everyone starts giving advice on stocks, even to a mutual fund manager. This is the sure sign of a market top. In a cocktail party, everyone will linger around the mutual fund manager to tell him what stocks he should buy. That sensation is peculiarly true to me about the real estate top in 2004-2005. Folks start telling me and others on how a house is a good investment and how his/her house had risen in value and suggesting me to start flipping real estate.

While Peter Lynch had explained the cocktail theory brilliantly, he does not believe in it to make his investment decision. Ultimately, he believes that undervalued stocks will rise while the most insanely overvalued stock will fall, regardless of where the market is.

Novice Investing is the online investing guide for beginners. You can also post your own investing articles here

[tags]finance, stock, investing[/tags]

Learn To Use Thrift To Save Thousands And Thousands Of Pounds!!

Most of us will have heard of the term "Thrift", which is
defined as :-


"Wise economy in the management of money and other resources;
frugality."


In the current environment of rising energy prices, increased
living expenses and difficult employment market, NOW is the
time to explore the many thousands of Money Saving Ideas
available on the Internet - FREE of charge!!


If you search Google for the term "Thrift" you will see that
there are over 9 million webpages!!!


In the current worldwide economical environment we should all be
looking at ways of saving money, recycling goods and generally
reviewing our lifestyles. Imagine if you could save ฃ50 a
month, that would be over ฃ600 a year. What could we all do with that?


How many times have you checked the pantry, only to find that
some of the food is out of date? A simple tip :-


"To avoid going to your pantry and finding you have missed the expiry date on a food item place a small container in a visible spot inside your pantry and anything that must be used within one month can be stored in it so that its not forgotten and wasted. You can also use a similar system for your fridge."


Simple!! But imagine if you could save ฃ1 a day, or ฃ30 a month. Then save money by economical use of electricity
:-


"Household appliances left on standby (when you switch off via remote control) still use the same amount of electricity as if they were switched on therefore costing you money. To stop this from happening you need to switch the appliance off by hand or at the power socket."


This is a problem in every household.............we have all
done it!! Imagine the savings that can be made by switching
appliances off at the power socket.


The two examples above are only the tip of the iceburg - imagine
how much you could save by being more "Thrifty" ?


It really is simple to save thousands and thousands of pounds - why are we all wasting money ?

Mark Benson

http://www.thethriftsite.com

[tags]thrift, save, money, home, finance, personal, thrifty, ideas[/tags]

Lack of Vigilance Can Harm the Bottom Line

The easiest way to lift profits is to cut the fat out of costs.

Cost cutting and profit increases can amount to much the same thing if handled correctly. Cost cutting does not necessarily mean the slashing-and-burning of budgets on a 'let's-see-if-this-works' whim, nor does it mean the intense scrutiny of entertainment expenses in August, before reverting to three-hour lunches in December.

But what if a company could save 20 per cent a year on its stationery spend? Or 26 per cent a year on its courier costs? Or 76 per cent annually on its printing bills?

Wouldn't that represent real savings - and an increase on the bottom line?

The truth is that a significant cause of poor business performance in Australian companies is the lack of attention given to the cost of running the business.

The reasons for this lack of attention are many, but here I am going to focus on three of them. The process of cost management and review can be difficult to manage. Tough-minded resolve is usually required, and cost-reduction initiatives are not always positively received by colleagues and staff.

Any executive who chooses to undertake a program of cost-management, then, is probably going to find themselves out on a limb and needing to show true leadership skills. And he or she is going to have to do it in today's business world, when the buyer is often at a disadvantage.

The seller, or supplier, possesses vital market knowledge that the buyer, or company, does not have because of a lack of resources, time, expertise - or a combination of all three. Consequently most, if not all, organisations overspend significantly on their business operating costs.

Experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses, by as much as 75 per cent!

How does a company know if it's one of the 90 per cent? Our ERA website (www.expense-reduction.com.au) suggests that if a company can answer 'yes' to any of the following there is a good chance a company can reduce its business operating costs and free up profits:

YES/NO There is no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.

YES/NO We always seem to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing overhead costs and establishing benchmarks, there are a number of other factors that need to be taken into consideration to achieve long term success in maintaining cost savings. These include improved inventory management and cost-analysis and management tools, better compliance with corporate contracts and the fact that staff remains focussed on strategic tasks. Plus the consideration that new suppliers or options provide exposure to, and the introduction of, new ideas, technologies and trends, to help enhance competitive advantages.

So how does a company implement a plan of effective cost-management? I would suggest the following:

Care about effective cost-management.

If a company's staff is complacent about financial performance and cost control, there is little chance that a cost-saving project will succeed. Executives must find the time to take an interest in reviewing expenses and reducing costs - staff generally mould their behaviour to match that of their leadership.

Cost-cutting should not be allowed to become the 'flavour of the month'

Remain motivated to keep costs in check on a regular basis. If a cost-management 'culture' is not established, employees will quickly allow your 'push' to fade away. It's important to instigate measurable strategies for cost reduction.

Over-confidence can be a killer

Companies that assume their costs are under control based on historical trends, or assume that their market knowledge is watertight run the risk of overspending through arrogance. You know what you're paying, but do you know what your competitors pay for the same products? Never assume that you know the market as well as your suppliers - and never assume that they're doing you the best deal possible.

Compare your cost-management performance to others in your industry and region. "Gather the data from outside agencies, consultants or benchmarking services," says Marfleet. "Be careful that you understand the data as it applies to your situation - data is useless unless it is interpreted correctly."

Understand what you're buying

Determine your product and service requirements. Don't purchase premium services unless absolutely necessary. Sales people will often use bait-and-switch tactics to move you on to their higher margin items. You end up buying unnecessary extras or add-on services such as maintenance agreements. Also watch for relationship-building tactics - do you really want to pay higher prices for the occasional lunch or rugby game?

Talk to your suppliers

Companies that buy the same product and the same quantities year in, year out, are probably paying way too much. Suppliers will price their offerings according to what the market will bear. Having done your research, inform suppliers that you are reviewing your costs, which have to be reduced. Then prepare to negotiate, and to comparison shop.

Stay alert

Monitoring your cost-management strategies is vital. You need to watch that staff members don't slip back into old habits, the supplier charges correct prices, and service matches the agreed specification.

USING CONSULTANTS

Most Australian companies do not have the staff resources to be able to regularly review expenses and reduce costs nor the time to monitor the market place or their suppliers.

So a company might consider using a cost management consultant to expertly manage the situation. The question that executives might ask themselves, however, is whether or not the savings will justify the sometimes substantial fees that may be charged?

The first thing to consider is what a consultant might actually be able to do for a company. For instance, does the consultant have a demonstrated track record of achieving cost reduction and the resources to deal with your size of company.

Then there is the question of the fee and how it will be paid. Arrangements can range from a fee for service to a contingency fee (a fee that is based on results). A consultant who receives their fee entirely from the supplier cannot be assumed to be independent.

Where a contingency fee is charged, it is generally expressed as a percentage of the savings obtained over a period of one year. The usual figure is around 50 per cent, although lower percentages can be found.

Sounds a lot, but remember, from the consultant's viewpoint, they are bearing all the risk in proposing a contingency fee as they are undertaking a lot of work 'up-front' before being entitled to any fee. If no savings are found, then no payment is received.

For instance, these are the steps a consultant might need to undertake where a change of supplier is deemed necessary:

The company's category spend is analysed in detail to form the basis for selecting an appropriate supplier so that that suppliers will fully understand the company's needs.
Tender documentation is prepared to ensure that there is full understanding of what is required from suppliers and that they have sufficient information to be able to offer the most favourable rates.

A detailed review of the tenders received is undertaken to ensure the best decision.

The implementation process, which typically takes 6-8 weeks is actively managed.

The bills are checked, once the new supplier is in place, to ensure that the correct rates are being applied, and 'teething' problems are resolved.

Continued reviews over a set period, dependent upon the overhead category, to ensure that the company receives all that it expects from the new arrangement.

Finally, teaching the company to understand movements in rates so that rates can be re-negotiated with the supplier in accordance with general movements in the market.

Fred Marfleet is the Chairman of Expense Reduction Analysts. For more information call 02 9922 7999, email info@expense-reduction.com.au or visit http://www.expense-reduction.com.au

[tags]profit,bottom,line,expense,cost,operating,costs,management,expenses,reduction,business,finance[/tags]