For people that are in the business of making money, this term is all too familiar. For those that work the 9-5, this might be considered a highly speculative move, but rewarding one. "Sweat Equity" exists even in the workplace: you trade your body for money (sounds kind of dirty, but please bear with me), you use your body to earn money by working so many hours every two weeks. This is commonly known as collecting a paycheck. You basically work for money.
There is another type of sweat equity. One that pays nothing at first, but pays numerous times over. This is known as speculative sweat equity. In other words, you work on a commission only basis or are self-employed. People that honestly want to work for themselves take this path. Automobile salesmen also venture down this path. They eccentially network themselves and build up a marketing list for their payout. This can be very rewarding if you have the right network. The drawback to this type of equity is that it takes time and effort along with networking.
This blog is considered a form of sweat equity. I write this blog purely on a commisson basis. The only time I get paid is when people visit the site. Most of my traffic comes from directories and word of mouth. In other words, the most profitable sweat equity is the equity associated with speculative investments aka speculative sweat equity. While I will probably not quit my job over this page, if I hypothetically started earning four figures to five figures a month, there would be no need for me to work at Sam's Club anymore (but I would probably still do so because that is an extra stream of income).
And yet, there is another form of equity that should be addressed: speculative equity. You venture into something using your dollars and it pays off. In other words, your money works for you. This equity is the most rewarding of the three because it requires the least amount of exchanged labor. In fact, you could do either sweat equity or sweat speculative equity so as long as you already have a sizable nest egg. The sky's the limits. Such examples include stocks, real estate, business ventures, limited partnerships.
Mastering the three forms of equity will make you rich. Even more so if you live within your means.
Sunday, April 25, 2010
The Rainy Day Fund
Picture this scenario: you have been working at XYZ Corps for 15 years. You have been putting in diligent effort and have even managed to get elected for some company awards like employee of the month. The suddenly you are fired or laid off.
Did you prepare for your "rainy day"? There is a proverb that states, "you should save money for a rainy day". This simply means, when things go sour you should have a savings account to "weather the financial storm" so to speak.
So how much should one have saved up? Well last year, I stated six months is a good amount, but considering the changes in the economy, I would change that to ten months worth of pay. The economy is down and is showing no real signs of improvement yet. The total amount of job losses here in Reno is numerous. With 13.6% unemployment, everyone is literally holding on to what they have. In other words, job hopping is dead. There are only a few people who engage in job hopping these days. There are people out there that are just greatful to have a job, which means if you have a good job, there will be people that will try to vy for your position if you so let them.
If you do get the ax, hopefully you have money saved up for a rainy day. If you do this you will have a prosperous transition. If you do not, getting a new job will be that much harder because you did not save any money. So keep that in mind should you try to move from one job to another.
Did you prepare for your "rainy day"? There is a proverb that states, "you should save money for a rainy day". This simply means, when things go sour you should have a savings account to "weather the financial storm" so to speak.
So how much should one have saved up? Well last year, I stated six months is a good amount, but considering the changes in the economy, I would change that to ten months worth of pay. The economy is down and is showing no real signs of improvement yet. The total amount of job losses here in Reno is numerous. With 13.6% unemployment, everyone is literally holding on to what they have. In other words, job hopping is dead. There are only a few people who engage in job hopping these days. There are people out there that are just greatful to have a job, which means if you have a good job, there will be people that will try to vy for your position if you so let them.
If you do get the ax, hopefully you have money saved up for a rainy day. If you do this you will have a prosperous transition. If you do not, getting a new job will be that much harder because you did not save any money. So keep that in mind should you try to move from one job to another.
Saturday, April 24, 2010
Tax Season is Over
Tax season is over and those of you that got their IRS refunds at the last minute probably have holes burning in their pockets from the stimulus plans out there. There definately is a lot of good refunds coming back, but should you reward yourself by spening the money quickly?
I would not condone this behavior. You paid taxes on that money and now it is being given back to you. It was your money to begin with, not the governments. Also if there were any complications in the return they have to be resolved after words so they can be accounted for audits, admendments, and anything else that falls into the tax catagory.
When the smoke truely clears, you have three options to use your tax money: a) you can wait for the smoke to clear and save your hard earned cash, b) you could spend it on something that you want, or c) you could re-invest it. I would go with a combination of either a) or c) or just do c). b) should be covered under the 1 luxury per month plan.
So everybody knows how to save a tax return, but how do you invest a tax return? Well, there are a number of options. There are stocks, bonds, index funds, real estate, and speculative ventures. The most prudent of the 5 when starting out is stocks and bonds. Here is why: stocks can be bought in either small amounts or large amounts and the amount used can be controlled by how much you put into a company. Bonds on the other hand is like an IOU either from a company the U.S. government. You can buy bonds at fixed amounts and just hold on to them and cash them in when they mature. Note that bonds are mainly a long term investments so I would not bother trying to cash them until they totally mature or until you can sell a bond for more than what you paid for it. There are advantages to the bond in the sense that you can sell them at loss and write off the loss on next years taxes.
I would not condone this behavior. You paid taxes on that money and now it is being given back to you. It was your money to begin with, not the governments. Also if there were any complications in the return they have to be resolved after words so they can be accounted for audits, admendments, and anything else that falls into the tax catagory.
When the smoke truely clears, you have three options to use your tax money: a) you can wait for the smoke to clear and save your hard earned cash, b) you could spend it on something that you want, or c) you could re-invest it. I would go with a combination of either a) or c) or just do c). b) should be covered under the 1 luxury per month plan.
So everybody knows how to save a tax return, but how do you invest a tax return? Well, there are a number of options. There are stocks, bonds, index funds, real estate, and speculative ventures. The most prudent of the 5 when starting out is stocks and bonds. Here is why: stocks can be bought in either small amounts or large amounts and the amount used can be controlled by how much you put into a company. Bonds on the other hand is like an IOU either from a company the U.S. government. You can buy bonds at fixed amounts and just hold on to them and cash them in when they mature. Note that bonds are mainly a long term investments so I would not bother trying to cash them until they totally mature or until you can sell a bond for more than what you paid for it. There are advantages to the bond in the sense that you can sell them at loss and write off the loss on next years taxes.
Tuesday, April 20, 2010
Keeping Bills Paid On Time
Wow! Sounds like a easy thing to do right? If it was so easy I would not be writing this blog, now would I? Well maybe I still would to address some other point, but the most interesting thing happened to me two days ago. I could not pay my bill when I wanted to. I paid a little bit from last month because there was a serice charge of $1.35, but I could not pay for this month. I tried to call and pay again, but I could not. Turns out the internet providers have a ten day grace period from one bill to the next. In other words, I could not pay online or over the phone for this month even if I wanted to. I had to go in and take one to the hip. (I would rather pay the $2.00 than to damage my FICO score. Let's just put it tht way.) I went in and paid today.
Folks, not matter what fancy trick these companies use, do not let them force you to be late. It will damage your credit. All bills should be paid on time. Cell phone companies do not check credit scores when you sign up, but they will ding your score if you're late. All you need to do is just simply miss one payment and you'll see what I am talking about. But at the same time, do not try to totally automate your payments because they will take the money they need out at their convienance, not yours. This means that you will have to constantly check your account and do more accounting to make up for their ability to tap into your funds. Who knows, company XYZ might overdraw you if you are tight on funds.
The only exception to this rule usually comes from making mortgage payments. You can have those automated and can be sent to your account and then applied to your mortgage. And you can also set the date of withdrawal. This should probably be set to the middle of the month so you have the ability to pay the mortgage off with either payheck you get from your job or business.
Well why is it important to pay bills on time? This goes back to my last article about FICO scores. If you do not pay on time you will take hits left and right to your credit score card. Remember, these days a good credit score is 680-739 and excellent scores is 740 and above. If one wants to go in on real estate, they need a good to excellent standing with FICO. Again, this determines how long you have kept good credit and whether or not you are a good risk for a loan.
Folks, not matter what fancy trick these companies use, do not let them force you to be late. It will damage your credit. All bills should be paid on time. Cell phone companies do not check credit scores when you sign up, but they will ding your score if you're late. All you need to do is just simply miss one payment and you'll see what I am talking about. But at the same time, do not try to totally automate your payments because they will take the money they need out at their convienance, not yours. This means that you will have to constantly check your account and do more accounting to make up for their ability to tap into your funds. Who knows, company XYZ might overdraw you if you are tight on funds.
The only exception to this rule usually comes from making mortgage payments. You can have those automated and can be sent to your account and then applied to your mortgage. And you can also set the date of withdrawal. This should probably be set to the middle of the month so you have the ability to pay the mortgage off with either payheck you get from your job or business.
Well why is it important to pay bills on time? This goes back to my last article about FICO scores. If you do not pay on time you will take hits left and right to your credit score card. Remember, these days a good credit score is 680-739 and excellent scores is 740 and above. If one wants to go in on real estate, they need a good to excellent standing with FICO. Again, this determines how long you have kept good credit and whether or not you are a good risk for a loan.
The Consequences of Job Hopping
I do not how many people do this, but overall job hopping damages your credit score. Your FICO scorecard is ruined if you hop from job to job. Why do I say this? I know from other people who have been denied jobs and credit cards. The credit card companies along with the mobs and FICO consider you a risk when you go from job to job. So consultants out there have to sometimes dispute their score because of the per diem jobs they might obtain.
I realized this because of the fact that the scores of people who are denied credit have commonalities that Transfax, Experion and the other one looks at. They consider good credit risk to someone who has kept the same job for years, who lived in the same place for years, who pays their bills on time and who has never filed bankruptsy. Do only time I see job hopping as permissible is if you transition into one job to another smoothly, as in giving the proper two weeks notice and finding a higher paying, more stable job.
There are some high risk candidates besides consultants and job hoppers and those people are the self-employed. While I partially fall into this catagory, my primary source of income is from Sam's Club while secondary sources comes from investments. When employers check your employment history, some might also check your FICO score, hence the name background check. And while employers cannot disciminate against you for gender, ethnicity, or income bracket, they can disriminate against you for job hopping and having a low FICO score. Also mortgage companies hate to deal with you if you have not held a job for more than one year. They consider you to be irresponsible and unrulely. Such might not be the case, but job hopping is a high risk manuver. Even more so than stocks. You establish yourself with one company and then hop to another because they pay "better" and burn than bridge then have to re-enter probation for 90 days yet again. So remember that when you go from one $7.75/hr job to another $7.75/hr. job. The results can decimate your credit score.
Perhaps if you choose to do so, one should check with trying to obtain a grace period where the job hours do not overlap. That is what I did when I went from City of Reno to Sam's Club. The transition was fun and rewarding, but draining at the same time. While you make a lot of money, you lose a lot of time in exchange. But the city did not hold any animosity towards my departure. So I would actually reccomend this course of action if it is option to you.
I realized this because of the fact that the scores of people who are denied credit have commonalities that Transfax, Experion and the other one looks at. They consider good credit risk to someone who has kept the same job for years, who lived in the same place for years, who pays their bills on time and who has never filed bankruptsy. Do only time I see job hopping as permissible is if you transition into one job to another smoothly, as in giving the proper two weeks notice and finding a higher paying, more stable job.
There are some high risk candidates besides consultants and job hoppers and those people are the self-employed. While I partially fall into this catagory, my primary source of income is from Sam's Club while secondary sources comes from investments. When employers check your employment history, some might also check your FICO score, hence the name background check. And while employers cannot disciminate against you for gender, ethnicity, or income bracket, they can disriminate against you for job hopping and having a low FICO score. Also mortgage companies hate to deal with you if you have not held a job for more than one year. They consider you to be irresponsible and unrulely. Such might not be the case, but job hopping is a high risk manuver. Even more so than stocks. You establish yourself with one company and then hop to another because they pay "better" and burn than bridge then have to re-enter probation for 90 days yet again. So remember that when you go from one $7.75/hr job to another $7.75/hr. job. The results can decimate your credit score.
Perhaps if you choose to do so, one should check with trying to obtain a grace period where the job hours do not overlap. That is what I did when I went from City of Reno to Sam's Club. The transition was fun and rewarding, but draining at the same time. While you make a lot of money, you lose a lot of time in exchange. But the city did not hold any animosity towards my departure. So I would actually reccomend this course of action if it is option to you.
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