How To Lose Debt

Not for the faint of heart, people do make money investing in currencies of various nations. Each nation’s currency rises and falls due to market forces, including trading deficits and geopolitical occurrences.

Just like the commissions paid on stock transfers, most large commercial banks will allow you to trade, that is, buy and sell foreign currency for a small transfer fee.

The more esoteric the country’s currency is, the harder it will be to buy or sell. In other words, if you are trying to buy or sell the Euro, Europe’s main multi-country currency, it will be easy. But if you are trying to sell whatever the dollar equivalent is in the South African country of Benin, it may not be so easy.

There are companies on the web like Forex.com http://www.forex.com that allow you to buy and sell foreign currency for a small commission. They will even allow you to set up a practice account to show you how the system works and allow you to practice with fake money.

The reason why I say it is not for the faint of heart is that a country’s cash is not unlike an IOU from that political subdivision. A contract is only as good as the people, company, or in this case country that enters into the contract. If you were to have purchased 1 million in Iraq’s Dinar ($3.2 million dollars) just prior to the fall of Saddam Hussein’s regime, the value of that currency would have fallen to about $875 US dollars in today’s market. Get the picture?

Currency trading is also extremely volatile. It can go up or down hundreds, perhaps thousands of times during a trading day, so if you are not watching your portfolio like a hawk, you may lose money. Remember, it is not the country’s currency that is actually rising or falling. A dollar today is a dollar tomorrow. It is the relationship of the country’s currency to other country’s currency which causes the rise or fall in the value of your currency portfolio.

For example, if you were holding on to U.S. dollars on the day 9/11 happened, which many of us were, those dollars were worth less against other major currencies on 9/12. Same is true when governments decide to print dollars to generate stimulus money. The value of the currency is reduced against other major currencies. Aren’t we seeing that happen in the form of inflation? Just wait!

So my advice here is to only invest what you are willing to lose. Also, you should fully understand the intricacies of the currency markets before investing one cent. That being said, many large international companies “park” currencies in various countries’ “dollars” overnight to profit from the exchange rates.

As with other forms of insurance, homeowner’s or renter’s insurance is a ripe area to reduce expenses. These types of hazard insurance policies are based on where you live. You see, you cannot up and move your house or apartment to another area or town. Your premium is based on the number of claims that are processed in your area/town, and therefore, if you live in a high-crime area, for example, your rates will be higher.

However, there are things you can do to reduce these premiums. The first is similar to the other insurances: shop around. There are 1,170,000 web pages that contain the text “Cheap Homeowners Insurance!” Many have online calculators that provide you with an estimated premium amount. Use them, do the math, and remember all of the other caveats like the claim-paying ability of the insurance company!

Besides shopping around for the best quote, there are other ways to reduce the premium rate. For example, if you own your home, you should not have to insure the land that it sits on. If your home happened to burn to the ground, it could be rebuilt. The land value stays the same. So be sure you are not insuring the amount of money you paid for the house, because that purchase price included the land.

Also, many insurance companies have automatic increases in the amount they will pay in a catastrophe each year to keep pace with inflation. You need to review this maximum payout on a periodic basis because if house or land values go down or do not rise in value as quickly, you could be over-insuring.

Please keep in mind that if you have a mortgage, you will be required to ensure it for at least the amount of the mortgage, minus the land value. Remember that bank thing again? It’s in the mortgage loan paperwork you signed! Ya think?

Another premium-reduction possibility, similar to auto insurance, is to raise the deductible. For a renter, that is easy; raise it and take on a little more personal risk. If you own the home and have a mortgage, it is likely that the deductible requirements are spelled out in your mortgage loan contract. If you raised it and it spells out a certain amount in your contract with the bank, remember the bank, and then they will contact you and be upset.

You see, communication of alterations to insurance policies for a house that has a mortgage automatically takes place between the insurance company that insures the residence and the bank or mortgage company that holds the mortgage on the property.

It is in the bank or mortgage company’s best interest to be sure you are paying for coverage that will cover them in the case of a loss. You have to love this stuff!

If you don’t have a mortgage, or it’s not clearly spelled out in your mortgage loan contract (unlikely), you are free to set the total amount of the insurance policy and/or its deductible to reduce the insurance premium.

There are other ways you can reduce your homeowner insurance. One way is your claims history. If you file a claim on a weekly basis, your premiums will be higher. Just like auto insurance, you will pay more if you have to actually use the insurance that you are paying for. Isn’t that great??!!

Another way to reduce premiums is to install smoke detectors or a monitored burglar alarm system. You see, the insurance company wants you to cover their butts in the case of a loss. If home is burglarized, for example, there will potentially be less financial loss if the police arrive in 30 seconds. This is especially true if they actually catch the crook red-handed with your goods. The goods will be eventually returned to you, hopefully unscathed.

For smoke detectors, if you wake up to a fire and get out of the house, there is less risk for the insurance company to have to pay out for the loss of life.

Finally, like the other forms of insurance, if you bundle homeowners, car insurance and life insurance with one company, for example, your overall rate will be lower.

When you become financially stable, there are many people who  make money with businesses. There are people who buy and sell businesses all the time. There are some distinct advantages to owning certain businesses.

For example, if you lock in a long-term lease on a particular high traffic location for a set rental amount, the lease becomes more valuable over time to someone wishing to purchase your business. Low rent for X number of years into the future.

A liquor license in New Jersey can command a purchase price upwards of $350,000! For a piece of paper, a permit, it’s amazing. Add to that a long lease with low rent; you could be talking about some serious money.

Any existing business, especially with brick and mortar that is a physical location, are established entities. The question you need to ask yourself is why is the owner selling? If they are retiring after 25 years in the business, that is one thing. If, however, it is not turning a profit, you have to ask yourself why? Is it a restaurant that had 20 cases of food poisoning in the past week?

So when you buy an established business or a franchise, with it you buy its reputation, good or bad.

We knew this bank president who retired from the banking business and decided to purchase a canvas maker business up by Lake Winnipesaukee. Why would he purchase a canvas maker? The way he told us the story was that most boats need canvas tops. People love their boats and are not concerned about putting money into them. In fact, you have to have money to have a boat in the first place. So what better job is it than working with people in a vacation area who are happy with the work you are doing to preserve their leisure time pastime. Everyone is happy and not concerned with spending money, was how he described it.

He contracted with the previous owner of the business to stay on for six months to show him how to use the machinery and make the canvases. It was a wise move on his behalf to learn the business from the previous owner while paying him to stay on.

There was one other really cool aspect of this particular business. It was only open in the spring and summer months in New Hampshire. In the fall and winter, he got to close it down and go to Florida. How cool is that, working six months of the year, but getting paid for 12?

There can be downsides of owning businesses. Remember, all investments carry risks? For example, if you purchased a bakery or doughnut maker just prior to the low carbohydrate diet fad, you could have lost some money.

I had a friend of mine who was always starting businesses. He had a deli where the line would go out the door every day at lunch time. The place was a goldmine. He ended up buying a building down the street and moving his deli into it.

There were three issues with the move. The first was that it was down the street from where the original deli was located. Not a big deal, however, people are creatures of habit.

The second issue was that the new location was larger, so it lost its packed-in feel when everyone got on line when the line was all the way out the front door. People like crowds.

The third issue, and probably the most serious, was that he decided to pre-slice the meats from that point on.

You see, most of the effort in the deli business is selectively slicing the exact combination of deli meats and cheeses to make that particular requested sandwich. Not to downplay the effort, because it is significant when you are making hundreds of sandwiches a day, but the clientele was used to getting freshly sliced meats and cheeses. Add pre-slicing, and the business went right down the tube. What was he thinking?

If he had started the business that way, there may not have been as big of an issue. But to get the customers used to a particular set-up, then change location, lose ambiance, and then pre-slice the meat so it tastes refrigerated, you’re done.

He also owned a comedy club. The customers would line up down the street to get a seat in the place. It attracted some pretty name-brand talent. Then he expanded not once but twice. The place lost its ambience because instead of being packed it felt empty. Once again, people like crowds.

He also made another fatal mistake with the comedy club. You see, comedians are off-the-wall type of people. They want to be treated as if they were icons, famous, even if they are not. They want a dressing room with their name on it, chocolates, etc.

The owner provided none of that. Worse, he treated them like they were his employees, which, in a sense, they were. After a while, few comedians actually wanted to work there, and he would have the same ones come in over and over again. For anyone who knows the comedian business, their material is basically the same. Sure they write new material from time to time, but the bulk of their material is the same tried and true tested laugh-getters. So you have the same comedians with the same material, it’s a recipe for a disaster, which it was.

It is horror stories like that which drive people to buy franchises. Franchises are tried and true products and procedures with name recognition that become turnkey businesses. Sure, you can buy a Dunkin Doughnuts or a Starbucks, or the 500,000 other franchises and have an instantly viable business.

However, as you can imagine, franchises are hugely expensive and have lots of rules around what you can do or not do, and where you buy your products. Think about it, they charge you a huge sum of money to protect your location and specific niche market, and then they can charge you anything they want for the product that you must buy from them. It doesn’t sound like a great deal to me. You?

Giving the franchise seller the benefit of the doubt, they needed to perfect a moneymaking system in order to market it. I will give the franchise seller that much. However, now they are no longer in the coffee business, for example, they are in the business selling coffee franchises. In fact, many companies have sprung up lately that are franchise marketers, people who are go-betweens between the seller and buyer of a franchise … Are they kidding me?

As you can tell, I am not a big fan of franchises. The value they bring is they are a risk-reduced investment. That is, it has been tried and it makes money. The downside is they are very expensive.

The franchise provider also controls your profit margin because they control what you pay to supply your franchise with the product that you are obligated to buy from them. Effectively they could squeeze you out of business by raising the supply costs to the point where you as the franchise owner couldn’t make any money. More importantly, they get to keep the money you paid for the franchise, and you may not be able to sell it very easily.

That being said, there is money in buying and selling businesses, even franchises. When you have enough money to take the risk, go for it. As always, do your homework before investing in anything.

Buying a thriving business on a local main road just before they put a bypass highway in, draining the traffic, is not going to help your goal to become and stay permanently free from debt.

If you truly want to build wealth, then one avenue is to build a business from scratch. Sure, it isn’t a tried and true enterprise like buying a franchise. Therefore, building a business from scratch carries ad­ditional risk. But it carries additional rewards as well.

Think about it. If Bill Gates didn’t break off from IBM and create his own PC operating system, where would he be now? Do you think he would be the multi-billionaire that he is? There are many, many examples of people who started businesses that succeeded. Trump, Steve Jobs, Larry Ellison, the list goes on and on.

So it is still possible to make a ton of money by start­ing your own business. If you have a good business mod­el, and funding of course, there are lots of opportunities out there. Once you have built the business, you have built value, hard cash if you will. Someone may want to actually buy your business and pay you handsomely for your “investment.”

Let’s assume you want to keep the business. It can make you money over and over for as long as you work it. It continues to build value as it pays you money over and over. What could be better?

There is another aspect of growing a business. At some point, if it is taking off and making a ton of mon­ey, venture capital money will become interested. That is, people will loan you money to have a stake in your business. Finally when your business becomes large enough, that is, enough market capitalization (cash) to be listed on a stock exchange, you can sell pieces of your business, stock, to the huge underwriters who in turn sell it to the investing public in the secondary mar­ket. How cool would that be?

There is one other differentiation between buying a franchise and building a business from scratch. If you build it from scratch, work out the kinks and develop a successful business model, then you can sell franchises, making more money for your efforts around building a successful business. Amazing, huh?

So there is money to be made by investing your money, and your efforts, into building a business from scratch!!

The importance of a network was always there, long before the invention of “social media” websites like Linkedin, Facebook, Myspace, Twitter, YouTube, etc. It doesn’t matter if you work for someone in a corporate setting or run your own business with a set of customers of your own. The importance of your network should not be understated.

Networks by nature put you in touch with people who are important to your life, as well as their friends. Therefore, you have direct access to your friends, customers, bosses and all of their friends, customers and bosses. People, in general, want to help other people, so this network can easily be tapped to ask questions or receive introductions.

There is another reason why you want to build these relationships. In this day and age, most job opportunities are not posted online. Therefore, you will not have access to these opportunities if they do not come from individuals in your network. Even if you have become completely self-employed, these networks provide free advertisement opportunities and communication by word of mouth. It is very powerful, indeed.

I set up a group on Linkedin called Top Recommended People. Its purpose was to showcase highly recommended people (those with 10 or more recommendations) who were out of work at the moment. The group has grown significantly, and now includes as many people who are not out of work as those who are. I have met so many important people who have joined the group. People like Sean Nelson, previously an independent insurance agent in Atlanta, and now an author, speaker and an expert in managing Social Media Strategy for companies. If you need advice on Linkedin, or any social media platform, please see his blog at Social Media Sonar http://socialmediasonar.com or buy one of his books!!!

Networking is extremely important in the new world of social media marketing!

Once you have gotten control of your credit situation there are ways to make money by funneling purchases through certain credit cards like Discover card. You don’t really make money, you get a refund of part of your purchase price for items that you bought on the card, but it comes in the form of cash or frequent flyer points.

You can actually use the “cash” to purchase further discounts at selected retailers. Discover card used to actually send you a check. I think the policy changed recently, and they will only now credit the amount to your outstanding balance, or to a bank account, which you can then use to purchase other items.

I would not want to see you using this functionality until all of your credit cards are paid off, and you routinely pay your outstanding balance every month. Why? Because our goal here is to lose debt forever. However, once you reach that point, you can easily get a discount on your purchases by running all purchases through one of these cards.

Many people have hobbies or skills outside of the skills that they use in their “day job.” For example my “day job” was being IT Development Manager, but I have a number of other skills that I can bring to the table. For example, I write, am an avid photographer, I can build web pages, I know social media strategy, I even play guitar and piano. Any one of these skills, or all of them for that matter, can be used to generate additional income, limited only by available time.

Some people I know have trade-type skills, like being a carpenter. Would it be that difficult to build a shed on your off day for a profit? I don’t think so, and that is an example of how to make money with a skill that is not necessarily utilized in your day job.

Other people paint, crochet, sew, can install carpeting or wash windows. The ideas are limitless and bounded only by your expertise. You can even grow your expertise by taking courses or buying books, so in effect, there is no limit here, other than possibly your imagination.

Every time I go to the beach I see some guy with a metal detector scanning the sand looking for coins and metal objects. Do they make that much money? Okay, my wife will tell you that I lost my first wedding band on a Florida beach one summer. Could someone return it to me please?

Anyway, I’m guessing I am not the only person who has had this happen. With the price of gold these days, this could very well be a “profitable” hobby.

So branch out from your day job and make money elsewhere. You will realize that you don’t have to work for someone for the rest of your life. With a little extra effort, you could become your own boss.

At minimum, there is additional cash to be made here.

I want to ask you a question that a teacher once asked me. Do you want to pay the government $100,000 in taxes each year, or do you want to pay the government $1 million dollars in tax each year?

Be careful how you answer. The correct answer is that you want to pay the government $1 million dollars in taxes each year!

Why would I want to do that, you ask? Because the person who is paying $1 million dollars in taxes each year is making a hell of a lot more money than the guy paying $100,000 in taxes. That is, of course, unless the guy paying the $100,000 tax has a great tax accountant or is simply cheating on his taxes. Bottom line, you want to have a tax expense that is large, provided you have the income to offset it.

Income is the other side of the income/expense equation. Remember, to get out of debt you need to either decrease expenses, increase income, or both. This section of the blog is going to go over all types of ideas to generate extra income or cash flow. Just like expenses, there is no one-size-fit-all so pick and choose as you see fit. What is clear is that “there is money in them there hills momma,” go get some!

Garage sales are not really generating wealth. They are converting wealth from a physical item like a sweater to cash in your pocket. It is “income” in a sense, because you can use the new found cash to offset expenses and pay down debt. I have both attended and held garage sales. The key to an effective garage sale is advertising, and pricing the items visibly and cheaply.

People who know garage sales well will tell you that no matter what time you say the garage sale starts, you will have customers half to one hour before that. Do you know why? Because all of the good stuff sells first. By the time the afternoon rolls around and everything has been picked through by one hundred people, there is nothing really left to purchase of any value.

We had an old clawfoot table once. Some of the claws were partially missing and the entire table needed resurfacing. It was a mess. We posted it for $50, knowing full well that it was worth some money but required a significant amount of TLC. It sold half an hour before the start time for the garage sale, and was carted away minutes later, long before the first “legitimate” customer arrived.

It always surprises me what does sell. For example, we held a garage sale once with some nice beer signs, some fairly rare, marked $10. They didn’t sell, but at the last minute we threw a box of old clothes out there, a pile of clothes in a box marked $1.00 per item. That box was the hottest thing in the garage sale, people were picking through it at the same time fighting over who grabbed the item first. Who knew?

You might consider hosting a garage or yard sale at your house and inviting your neighbors to participate. In garage sale standards, the bigger the better and to advertise a multifamily garage sale will bring more customers. You can separate the income by having different color price stickers.

Anyway, garage and yard sales are a good way to bring in a little extra cash to offset expenses or pay down debt. There is an added bonus, too. You get to de-clutter. How many times have you bought something new because you couldn’t find the one you had?

Now what was it you were going to do with that extra cash? Pay down debt, now you are getting it!

Many companies subsidize or even cover life insurance premiums. So you could reduce this expense significantly by simply getting a job at one of those companies. However, if you are one of the unlucky ones who have to pay for life insurance because you are self-employed, like I am at the moment, then there are some things you can do to reduce this expense.

Life insurance companies use all kinds of data to determine what premium they will charge when they are taking the risk of insuring you. Factors like family history, whether you smoke or have ever smoked, age, sex, etc. Most of these items you have no control over at any point in time. For example, if you smoke, you could and should stop smoking; however you cannot remove the fact that you smoked 20 years ago. So, for the purpose of this discussion I am not going to talk about trying to change the things you have no control over, like your age.

There are a couple of major factors that come into play when dealing with life insurance premiums. The first is so obvious that I probably do not even need to point it out, which is the amount of the life insurance benefit. Do not buy more insurance than you need to take care of your loved ones should you pass away. The second is the term. How long will the policy remain in force at the current premium rate? The longer the term, the higher the cost of the premium. Why? It increases the risk that the insurance company will actually have to pay the benefit to someone during the term! Ya think?

I am covering “term” life insurance here. There are other policy types like “whole life” where part of your premiums actually builds cash value. But they are almost always more expensive than term life insurance premium rates, so I will not cover them here. The shorter the term, the less the premium.

Now, there is a downside to shorter terms. The first is that at the expiration of the term, you will need to go out onto the life insurance market and buy another policy. As you will be older, and possibly even in not-so-good medical condition, the rates will be higher, and it’s possible that you will be uninsurable at any given point. The other downside is that you paid a significant amount of money for coverage all those years, and at the expiration of the term you have nothing to show for the money spent.

Determine what term is right for you based on your age, your medical condition, the amount of premium you can afford, etc. There is no one-size-fits-all here. I would recommend that the term be at least 10 years, preferably longer if you are older. Once again, the premium goes up as the term increases, so it’s often a case of how much you can afford to pay. Ten years seems to be a reasonable length of time to still get a good rate and to lock in your premium amount. Your situation changes over time, also. As you grow to lose debt, celebrate yourself, you may not even need the coverage any more to take care of your loved ones!!

Finally as I said before, age, sex, family medical history, HIV positive, all kinds of factors come into play here when a life insurance company is calculating your personal premium rate; most you have absolutely no control over. Think about it; the insurance company is betting that you will outlive your policy term and they will never have to pay out the benefit on the policy. You, as morbid as it sounds, are betting against the life insurance company, that you will pass away during the term of the policy, and the company will have to pay your loved ones the policy’s benefit amount. Crazy, isn’t it?

There is one factor, other than the policy amount and term, that you have some control over. Well most people do, and that is your weight. Your weight/height ratio is used when determining the amount of the life insurance premium!! What is amazing is it plays a significant role, actually. If you don’t believe me, go to an insurance broker’s website, there are many, like IntelliQuote http://www.intelliquote.com and play around with your weight, keeping all of the other factors the same, like amount, age, term, etc. See how the premium fluctuates!! You will be amazed!!

When you get to the obese area for your particular height/weight ratio, you will even see companies drop out of offering coverage, and other, less stable companies enter the picture. Remember, a life insurance policy is simply a contract between you and your insurance company. Contracts are only as good as the person/company that enters into the contract. All life insurance contracts’ benefit payouts are contingent on the financial stability and claim-paying ability of the life insurance company, so choose wisely. Then lose weight before applying for insurance!

As I covered in the car insurance section, you could potentially get a reduced life insurance rate if you bundled your life, homeowners, auto or other insurance needs together with a single company.