Desty Online -- Online and Offline Businesses, Online Marketing » Finance

Minimum Wage Increase + Recession = Small Business Taking a Hit?

Desty — Sun, 31 May 2009 17:32:13 +0000

Something came to me the other day, and I really haven’t heard anyone else talking about it, nor have I seen any mention of it in the media. July 14th (I think) 2009, the minimum wage will be increased to $7.25 per hour. On its face, this is all well and good for those who are not making said $7.25; the problem comes when you look at small businesses who are already taking a hit from the recession.

Labor Costs Increasing for Small Business

Businesses that rely on low cost labor will be taking a hit because of the minimum wage increase. In a normal economy, the increased labor cost would just be passed along to the customer and everyone goes along their way. Enter the recession. Individuals and businesses are not spending money as normal, so businesses are having to cut prices to get business into the door. Decreased income means costs have to be cut somewhere; cost cutting goes across the board.

I have heard people say that the Recession is a good excuse for business to release more experienced workers, ie more expensive workers, and hire newer, cheaper workers. While I don’t have any employees in my business, I will go on the record to say in a normal business, this is not true. While businesses may be cutting workers due to the Recession, they are cutting the non-productive workers, not the more experienced. While cutting non-productive workers, businesses are working their remaining workers harder, forcing them to become even more productive.

Will the Recession End in 2009?

While the talking heads of the media say that the Recession should start to be on its way out by the end of 2009, I disagree. The US government is spending money like it’s water, pouring it into GM and Chrysler and other failing businesses (AIG and “big” banks). The value of the Dollar is starting to move from the basement to the sub-sub basement. The Chinese are starting to wonder if their investment of over $1 Trillion into US Treasuries is such a good idea. What happens if the Chinese stop funding our debt?

Good question, I don’t know.

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Are You Making Money During This Economic Crisis?

Desty — Wed, 15 Oct 2008 21:07:53 +0000

It’s a simple question. Are you making money during this economic crisis?

If you’re not, then atleast you should be setting yourself up to make some major cash in the future based off your actions now.

Time to Use That Rainy Day Fund

Warren Buffett recently put up an option to buy billions of dollars worth of GE stock. I know from personal experience that GE’s stock has been going no where but down. If that’s the case, why is Warren Buffett interested? Simple. It is still a quality company, but until now, the stock’s price has been over inflated. Now with the economy going south, and most to all stock prices going down with it, now is the time, in Mr Buffett’s opinion, to cash in and buy a bargain.

I’ve said it before and I’ll say it again, you do NOT buy stocks because the price is going up. That’s like waiting for the price of gas to start climbing before you go and fill the tanks of all your vehicles. You want to buy when the price of stocks is going down, ie, on sale. As long as the company itself is a quality company and will be so for as long as you can tell, the market will come back and you’ll see a nice return on your investment.

Just Say No to Dividend Reinvestment

This idea is a major turn around for me. It has to do with the idea of dollar cost investing. The thought is that as long as you buy your stock on a consistent basis, price up or down, you’ll end up ahead because of the law of averages.

Now, stay with me on this. I say, have all of your dividends go into, say, a money market account. Do nothing with this cash until you see your bargain, be it more investment into a company that you already have a relationship with, or a brand new stock that you’ve kept your eye on, just waiting for that price to fall down to a certain point.

Investment is a Game, but Which Type are You Playing?

People like to compare investing to baseball, keeping your eye on the ball, and hope to knock one out of the park. I have to disagree. Investing isn’t like baseball, it’s more like golf. Golf requires that you take your time, use the right instrument (or tool in the case of investing, ie call, put, or stop options, etc) line everything up, and only when you have everything exactly the way you want it, take your shot. Now, does that mean that you’ll make a hole in one, of course not! But, if you know what you’re doing, have experience, use the right tool, you won’t hit the ball the opposite way you wanted it to go, unlike striking out in baseball.

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What’s going on With College Financial Aid?

Desty — Thu, 04 Oct 2007 12:39:48 +0000

There are times that I thank my lucky stars that I’m not going through the current mess college students are experiencing with the private financial aid problems. It’s a headache just to keep up with who did what, who took kickbacks, etc.

The reason there is a problem is that a college education, while continuing to be vital for a serious career in this information age, the cost of said college education is going through the roof. I got through two years of college with a private student loan and it only cost me around $12,000. Now adays that won’t even get you one year.

While I’m all for federal financial aid, I’ve seen it played by friends and former supervisors. A friend of mine was going to a local community college and was on a Pell grant. He was taking just 12 hours, enough to be considered a full time student. He paid for tuition and books, still have over half his grant left, so he bought a brand new computer and a used car. Another friend went and bought a new wardrobe every-time he got a new grant check.

Finally, a former supervisor of mine put off paying his tuition and books with his financial aid; instead he put everything into the stock market and tripled his money in 3 days. Mind you, he was going to school for finance; for him, it was a natural thing to use the money to make more money. Me personally, while I know how to invest, I don’t think I could get the same return in the same time frame he did.

This is a sponsored article

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Video — 5 Simple Steps to Get Your Finances Under Control

Desty — Sat, 22 Sep 2007 06:01:24 +0000

Press Play to view video

These are 5 simple steps for young adults to get their finances in order. When the video mentions them one at a time, you might think they’re too basic; ask yourself this question: can you honestly say that you’ve followed all 5?

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Colleges and New Web Sites Give Help with Credit and Financial Education

Desty — Sat, 08 Sep 2007 06:01:44 +0000

I’m still experimenting with TheNewsRoom articles and videos. If nothing comes through over the RSS feed, please comment on the page so I can get with them for possible solutions.

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Your Number One Business: YOU!

Desty — Thu, 16 Aug 2007 17:25:39 +0000

How are your personal finances? Pretty good you say? How well are your finances exactly? How much extra cash do you generally have at the end of the month? Do you spend more money than you make? What is your top expense?

Everyone can benefit from some very basic knowledge in accounting. Wait! Don’t run away, I’m talking BASIC basic. Something that everyone can understand and really should understand.

Learning a Financial Statement

To get an overall picture of your finances, you will need to create a financial statement. A financial statement is made up of two accounting reports, a balance sheet and an income statement.

Wikipedia defines a balance sheet as “a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, such as the end of a financial year.” In english, this is a list of your assets (such as stocks, bonds, and businesses) and liabilities (such as a mortage, student loan debt, and credit card debt) by value.

*These are not actual numbers or liabilities / assets

It is a list of all assets and liabilities as a set point in time, nothing more, nothing less.

Wikipedia defines an income statement as “a financial statement for companies that indicates how net revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the “bottom line”). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.”

*These are not actual numbers or income / expenses

Separate, these reports do give some information as to your finances, but together, they can tell so much more!

Cash comes from two sources, the portfolio income (stocks) and from earned income (business and job). The income then goes through the expenses (payments on liabilities and other expenses such as food and fuel). The remaining cash (also known as cash flow) is excess cash to do with as you see fit. It can be spent on a night out (extra expenses for that month), buy a new boat (new liability with new monthly expense), save it (added to the bank account or money market account as an asset), or invest in the business or more stock (new assets).

What’s the Deal With Assets?

You’ll notice I didn’t mention a home as an asset. From a strict account perspective, a home is an asset in the form of equity. I’ve been a keen fan of Robert Kiyosaki’s Rich Dad Poor Dad books since 2001. His view of assets makes a lot of sense in that he defines an asset as a security that produces income. Based off that definition, a home is a liability in that it doesn’t make you money, it costs money in the form of taxes, repair costs, mortgages, etc.

The goal is to increase the asset column and decrease the liability column. In what order is really up to you and the opportunities you have. Having cash on hand to take advantage of opportunities is a must; otherwise, by decreasing that liability column, you are also lowering your monthly expenses, or working to lower them. The less expenses you have, the more cash flow, the more assets you can buy or liabilities you can eliminate.

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Using Your Student Credit Card to Fund Your Business

Desty — Mon, 13 Aug 2007 17:50:55 +0000

We’ve all heard the saying, “it takes money to make money.” When starting your business, especially if you’re a struggling college student, it’s important to know that you can start your business without money, but having money and using it sure does help. With money, you can use other’s products and services to jump start your own business; that doesn’t mean that you shouldn’t go the slow free route. Too many times students will fall into the trap of using a credit card to fund not only their lifestyle but also their business.

How Are College Students Getting Credit Cards?

Getting credit cards into the hands of college students is big business. My research indicates that for every college student that fills out an application and is approved, the person or company who got the student to apply receives roughly $40. Setup a table in front of the student union, give away a Frisbee or a foam football (usually cost $1-$3) for every application, if you give away 100 footballs at a cost of $300 (at most), all you need is an 8% conversion rate to break even. Taking into consideration that most college students have no credit history, I would take a guess you’re looking at a 20% conversion rate easy!

Why Are Student Credit Cards a Bad Idea?

Take this from someone who had a credit card back when they were in college: Don’t Do It!! The simple problem comes down to how do you pay off that credit card? If you’re fully loaded with an 18 hour class schedule, and on top of that trying to get an online business off the ground, when will you have the time to get a job and pay for that credit card?

Unfortunately, not only are parents mostly get to pay for college tuition, they’re also having to pay for their children’s credit cards. With the current economy and the sub-prime mortgage crisis, I don’t see how some parents are making do!

Should You Use a Credit Card?

I’m not going to lie, having money is nice and helps considerably! Having money to spend on your business is like having a fast forward remote control; it speeds the process along. Here are my suggestions for using that credit card:

You have the cash in your account or else where and the use of the card is a convenience.
Your business income can pay off the credit charge on a monthly basis.
The purchase will expand your business to such an extent that the business will be able to cover the charge in short order

To expound on that last point, if the expansion will result in an revenue income over the long run, do yourself a favor: forget the credit card and head to the bank for a loan. You’ll get a better interest rate from a bank on a loan rather than using a credit card.

A Note to Parents

This is for those parents who are having to pay those credit card bills for their kids: use a debit card. They’re taken all the places credit cards are, and when your child empties the account, they’re done. It will teach them, the hard way, how to best budget their funds.

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Business Expenses: Not an Excuse to Spend Money

Desty — Tue, 31 Jul 2007 01:29:40 +0000

Bloggers go to sleep at night, dreaming of their blogs making money. While there are several ways to make money online, the end result is always the same: Blog Revenue!

You just made $5000 last month from your blog. What are you going to do? A trip to Disney Land sounds nice, but really, what are you going to do?

The Reality of Making Money Online

I was listening to a book on tape I bought years ago about starting your first business. It was one of those “idea” books, heavy on the why’s and what to do, but empty on the how to do’s of actually starting your own business.

The focus of the book was to start a part time business and find ways to turn your normal personal expenses into business expenses. At first glance, this could seem to be a good thing. After-all, as a blogger, you have expenses; domain fees and hosting fees are fixed expenses. You know how much you must pay monthly or yearly for the cost of running your blog. Include into that the cost of your Internet connection (a must to run your business). Everything else is free and clear, ripe for taxation! Further business expenses can include paying for an online review, a custom designed WordPress template, and some Google AdWord advertising to target traffic to your blog. A new computer is also a good expense, although it has to be depreciated over a set amount of years.

Don’t get into the trap of trying to come up with creative ways to spend your business income just to get out of paying taxes. Accounts (bean counters) will tell you great ways to expense away your income so you will have to pay little or no taxes. Get this through your head: Everybody pays taxes. As a business you can control how many expenses you have but be warned. If you get flagged for an IRS audit, there is a chance that the more deductions you have and the more creative they are, that the deductions will be disallowed, possibly back for several years, and you will have to pay back taxes along with fines and late charges.

The Safe Way to Spend Your Blog’s Revenue

These are the 4 ways to spend your business income in a real way and won’t get you in trouble with the IRS, as long as you don’t lie on your taxes:

Invest the first 10% of your gross income. There are plans where you can invest tax free (IRA’s, Roth IRA’s, SEP’s, etc) and that good, but we’re looking for flexible investments vehicles where you can do what you want with the money. This includes withdrawing it to fund an emergency. The goal is the have that 10% make more money. You will have to pay taxes on this money, but getting it into the job of creating more money is the true path to wealth.
Pay operational expenses. These are the MUST DO bills that are required for the blog / business to continue to run. If these are not paid, then your business income will come to a halt.
Expand the business. This is the creative side of running a blog. What can you do to bring more readers to your blog? A paid review from John Chow for $400? AdWord advertising to bring readers from other blogs to your blog? Learn and start affiliate marketing to create a new stream of income? Let your mind wander. After making sure the business will continue, the main function of business income is to create MORE business income.
Your cut. Too many bloggers out there want this to be the 1st item on the list instead of the last item. Still want to take that trip to Disney Land? How about taking it 1st class airfare, staying at the expensive Disney Land Hotel in a suite, staying the whole week, and not having to worry about how much it costs? Get to learn these words: delayed gratification. Wait for it. Build your blog’s revenue. Get it increasing month after month. To get to this point you’ve had to invest your time building the blog from nothing. Don’t quit now. Keep building it until it’s making enough money that you can pay for that dream vacation, even after you’ve spent a ton of money expanding the blog to make MORE money!

To make a living and truly become a problogger, you need to treat all your revenue with respect and run things as a business. The main principle to keep in mind is that the blog’s income is to help the blog make more money, not to spend. Keep that in mind and you’ll eventually have more money that you thought possible from blogging.

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How to Make Your Business Taxes Work for You

Desty — Thu, 26 Jul 2007 13:51:44 +0000

Taxes are confusing for the normal non-business person as it is. When you add a business into the mix, with earnings, expenses, depreciations, retained earnings, etc, it really becomes a headache. Collected sales taxes, inventory taxes, importation taxes, income taxes, the list goes on and on.

Your business entity, whether you are acting as a sole proprietor, under a partnership, a C corporation, a S corporation, LLC, or a LLP also determines when and how you pay your taxes. Entire books are written on these individual entities and taxation, so we will not go into it here. Don’t go out and buy a book about taxes. Your best bet is to get someone else, someone competent, to do them, say H&R Block, TurboTax, or hire a CPA; the cost is tax deductible.

When you have income from your business, unless it’s defined in black and white as to what amount is for taxes such as sales tax collected when you sell a product or service, you can either just record the income and take your chances at the end of the business or calandar year and write a check, or you can be creative. When I say creative, I don’t mean creative as in cooking the books, I mean make use of that money. Set some time to get with an accountant and get a conservative estimate for your tax rate on income. How much on the dollar will you have to pay in taxes, in general? Say it’s 25% of all income goes out in taxes. Take out 25% of all your income as it is created and invest the income in a liquid, safe investment vehicle, such as a 6 month CD or a money market account.

You still have to pay taxes, but why let that cash sit and do nothing? Use it to create more income. The only problem, not so much a problem as it’s a snag, is that you are also taxed in interest income. Still, any interest income is good interest income.

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Make Ends Meet, and Then Some.

Desty — Fri, 29 Jun 2007 17:24:43 +0000

The Internet is littered with web sites and blogs of people looking to make money online. Everyone has an angle. You’ll see pages singing praises of a program that will help you make $10,000 per month with tons of testimonials saying they don’t have to work anymore, they can buy boats, cars, new homes, etc. Every single time I see one of these pages talking about how many cars they have, I just shake my head in wonder.

Too many people are looking for the fast buck. Even if the seller isn’t buying those fast cars, the ads don’t lend themselves to creating responsible businessmen. If you’re looking to make money online, or in real life, you’re a businessman. Everyone sells something. Even if you don’t own a business and just work at a job, you’re still a businessman. You are selling your time and effort in exchange for money, health insurance, 401k, etc. Personal income and business income should be treated the same in regards to spending.

I want to bring up an excerpt from The Richest Man in Babylon by George S Clason. I just love this book. The selection I’m mentioning today is a set of rules about money, its nature, and its care. All of the laws are simple to understand and to follow.

The Five Laws Of Gold

1. Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

The first law simply says pay yourself first. Look at your paycheck, commissions check, or dividend check. Before taxes are taken out, pull out no less than 10% of the gross income. Put that amount away in a safe, secure place. Make due with the remaining 90% for all your needs. While there will be those that talk of investing that 10%, don’t do that yet. You need to get into the habit of saving that 10% and living on the rest.

2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

Investment, pure and simple investment. Think of your money as employees, working for you, creating more employees via dividends, commissions and interest. Use the 10% per week you save and invest in opportunities that will make a profit. Keep things simple. While some will say stay away from savings accounts or money market accounts, they’re safe and secure. Wait until the next two rules before going forward into more complex investments.

3. Gold clingeth to the protection of the cautious owner who invests it under the advice of wise men in its handling.

4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keeping.

Always research and think about what investments you look to use your money. The return of your investment should be your prime concern. Don’t go for the quick buck. Invest with wise men who know money, how to use it, and make more money. The Richest Man in Bablyon uses two examples to illustrate this. A brick maker offers to go and buy gems for the investor. The brick maker, who knew nothing about gems, was scammed out of the investor’s money and bought worthless colored glass. On the other hand, the shield maker would borrow money to buy copper to make his shields, and then pay the borrowed funds back plus interest once the shields were made and sold.

5. Gold flees the man who would force it to impossible earnings or who followeth the advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

The easiest example of this shows up almost daily in the stock market. A prime example is Novastar (NFI). For years, NFI would pay out large dividends. Those in the know, the minority, would question this and wonder how they could possibly pay out that amount of dividends. The company would report they used funds from previous quarterly profits to fund future dividends. And this worked, for a time. Eventually the sub prime market crashed when those lenders felt the crunch of foreclosures due to their creative loans. NFI finally couldn’t afford to pay out the promised dividends and the price fell from $25-$30 per share to $4-$5 per share. Those wise men that knew that something was not right said so, but greedy investors didn’t want to listen and kept following the high dividends. When the share price crashed, it wasn’t pretty.

I would add something to these rules of gold.

Make sure, above all else, to continue to afford to continue your current income generating activities.

In simple terms, if it takes so much money per week to pay for gas to go to work, make sure to have that amount of money set aside to pay for the gas. No matter how dire the need for funds, if you spend that gas money, you won’t be making any more money. In business, it’s the cost of doing business, expenses that the business must pay to keep current operations running. Trucking companies have to pay for fuel and payroll at the least; trucks won’t run without fuel and drivers won’t work without being paid. No trucks running and no drivers to drive them, then there is no income to run the business.

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