Archive for Feb, 2013

Have a Great Idea for New Product? Check Out

quirkyWhile watching the Tonight Show the other evening, Jay Leno had a guest on from, a new really cool social invention website to help bring ideas for inventions to fruition. They highlighted some great products that people recently invented.

There are all sorts of ways to make additional money, and this one really caught my attention. You may dream about getting out of debt, buying a new car, affording a different lifestyle or giving to charity. Ultimately you might like to be self- employed, or financially independent. One of the things people dream about the most is starting a new business with that new great idea they have.

Have you ever had a great idea for a better mouse trap, only to later see someone actually create it and make money selling it? My wife and I think of good, bad and strange ideas all of the time. I think most people do. However the difficulty is being able to take it from the idea stage all the way through to the end, where you have a successful profitable business. Therefore most ideas that you or I have never go anywhere, since it is too hard, or you lack the motivation or resources.

The reason you don’t develop your ideas is that you probably lack the money to develop it, investigate patents, then produce the item, and lastly sell it. Most people run out of money in the early stages of start-up, and they don’t know how to go about raising capital.  If all things go well, then there are the challenges of marketing, websites, accounting, staffing, administration, payroll, facilities and on and on. This can all be very stressful, and relationships and marriage can be strained.

What if you could craft an idea and leave a lot of that stuff to someone else. What if you can do it all online for $10 per idea, and when the product is sold, you are sent the royalty checks?  That is exactly what the new social website is designed to do, and doing it quite well. You can easily submit your ideas, by answering a series of questions and uploading drawings or other things that explain your product. Within 30 days your idea will be either taken to product development (every Friday new ones are chosen), or archived for future consideration. You can also decide to remove it from and develop it on your own or re-post it for consideration again.

Since Quirky is another online community, you can see and vote on other people’s ideas. It is really cool to see all of the new ones that people submit. I noticed a great idea about an electric paper towel dispenser. I voted for it and commented about it in their online community. You can also see products that have been developed and how much revenue has been generated.

Check out for useful gift ideas to buy, to upload your invention, to vote on things.  Quirky has marketing arrangements with many major chains including Target, Bed Bath and Beyond, and HSN Home Shopping Network and sell their products on Quirky too. The only downsides to consider is the loss of control of the Intellectual Property and your royalties would probably be less than the eventual profits if an idea became a big hit. Those are the risks, however most ideas never are pursued or invested in, and your forget about them later. For a minimal cost, you can float your idea out there, and perhaps Quirky will run with it to make it a success, and help you in the process.

How to Pick a College Major

Are you a youth and planning to go to college? Maybe you are an adult and want to go in a totally different direction in your career. Then there are those that want to stay in the same industry but specialize in a particular area of study. Whichever group you are in, you need to go back to school, or just continue on in your studies – but if you don’t plan, you might be headed in the wrong direction.

A recent newspaper article indicated that those that graduate from college with the highest debt are those coming out of arts schools, yet their job prospects might not be so great. That WSJ article lists 3,500 colleges and their graduation rates and median amounts borrowed. Like any college or university, they will tell you about the most successful students and how well their careers are going. Attending college orientations and visits with our children, we had these wonderful top of the class students obtaining great fulfilling jobs paraded before us. They wanted you to think that if you attend their school you would be successful too. One school in particular we visited had a great arts school, and we heard about famous grads that were working for Disney- everyone was impressed and excited, but the odds were low of most students landing a similar job.

It seems as if most schools do a very poor job at helping students pick a career that not only fits their interests, but has great job prospects as well. In addition, little guidance is given when it comes to borrowing. More schools are talking about debt now, which is good, but too often they don’t give a lot of information, because if they do, they fear admissions will drop if students knew the real story.

How do you make the most of your college experience to prepare you for a future career?  First of all it is good to have goals and knowledge. The main goals of education should be to prepare you for your next phase of life in your career, and as solid well rounded people that a liberal arts education promises.

How do you choose a good career?  To a large extent it is a combination of knowing yourself and knowing the job market. If you set your sights on making a lot of money, without considering your own natural abilities and interests, then you might end of being very unhappy. Some people believe that as long as they have a lot of money to do the fun things, then they will be happy, but for some that doesn’t work out for them. On the other hand if you totally pursue your heart without consideration of practical side of things, like the ability to earn an income your new degree will provide, then you will either starve or end up living with your parents, and maybe with a ton of debt that you can hardly ever re-pay. Lastly, if you don’t do it without any consideration for your heart may tell you, you might miss out on all sorts of wonderful things that are in-store for you. Case in point is majoring in social work. This career can be one of the most wonderful areas of work, and if that is someone’s calling and interest go for it, however be mindful that the income potential is modest, so plan to minimize debt and plan for the lifestyle that career will provide. The same might be said for teaching and other careers with many openings, but just good to plan appropriately.

It is easy for me to have this perspective now that I am in my 50′s, but difficult when I was 20 and was just ‘finding my way.’ It is better to take inventory when you are just starting out in life- since switching gears later is hard, if you have a family and lingering college debt. Start with knowing yourself a little better. Take an inventory of the things you like to do, or have enjoyed doing so far.  What are you naturally good at, what makes you happy at work?  What are the undeveloped talents and abilities that you have? You may have difficulty seeing them yourself. I know I do. What has helped me, is taking various aptitude tests, often offered through high school or college counselors, or personal, career or college coaches. Secondly, ask other people. For example, co-workers and friends told me I had teaching and writing abilities, natural administration skills, good with technology and other things, that I never really thought of. Having other people’s perspective is so valuable, because we can’t often see things about ourselves. Early on don’t be afraid to ask for counsel and seek advice. Sometimes I find this hard to do, since I have to swallow my pride: publicly admit that I don’t have many things figured out- but I am finding out as I age how valuable this is.

Some career professionals will tell students to get a 4 year major in STEM degrees: science, technology, engineering and math. Doing a little web surfing, the following areas seem to be hot these days (sources: ForbesYahoo FinanceNY TimesUS News and World Report).

  • Medical: medicine, nursing, pharmacology, pharmacy, bio-medical engineering, treatment therapy
  • Science and Math: biochemistry, computer science, applied mathematics, mathematics, physics and statistics
  • Engineering: software, bio-medical, civil, environmental, petroleum, chemical, transportation, electrical and construction
  • Information Technology: programmer, network specialist, and various others
  • Business: finance, accounting, business services, human resources, and management consulting
  • Less than 4 year degree: some IT, medical aid workers, airplane repair and maintenance

For some people, careers are not always a straight arrow path. I am reminded of the Sheryl Crow song title, “Every day is a winding road.”  You might start off your career in  one direction, and through the fun adventure of life, eventually end up doing something all together different than you planned or expected. During the journey you meet people that will be important to you in guiding your career. You may have different jobs that teach you new skills, and you might learn about abilities you do or don’t have. I think that is why many people go back to school at all ages to get advanced degrees, study for entirely new careers, or just to expand their knowledge of where they are. You are never too old to learn or try something new.

If you do go to school, try to minimize debt as much as possible. Not only will the debt burden be easier to shed, having less or no debt allows you to be more flexible in pursuing various careers and interests later. To learn about more ways to pay for college, read my previous article: 14 Ways to Fund College.

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Year End Benchmark Investment Returns

A couple of times per year I publish this benchmark return report for investment portfolios.  This is useful for those who use a buy and hold approach to holding their investments, in various common investment allocations of stocks and bonds. I provide this so that you can compare your investment returns to what the market was doing.

For this report I compare 5 models to help demonstrate different risk levels: very conservative ‘Volvo portfolio’, conservative ‘Lexus portfolio’, moderate ‘Acura portfolio’, aggressive ‘BMW portfolio’, and lastly the very aggressive ‘Porsche’ model portfolios – each investing in a different mixture of cash, bonds and stock, as well as different allocations of large, mid and small cap stock and foreign stocks.

The table below compares the GROSS rates of return that you would have earned in any of these portfolios if you invested in index funds that held investments identical to the index. Gross rates of return are before any expenses, such as: * Mutual fund management fees and expenses * Taxes * Commissions * Transaction costs * Financial planner’s management fee.

Historical Rates of Return as of 12/31/2012
Portfolio Model ‘Volvo’ ‘Lexus’ ‘Acura’ ‘BMW’ ‘Porsche’
Model Type Very Conser-vative Conser-vative Moderate Aggressive Very Aggressive
1 year 8.76 10.40 12.04 13.69 15.36
3 year 7.40 8.04 8.21 9.09 9.79
5 year 3.77 3.32 2.50 2.23 1.82
10 year 6.18 6.68 7.06 7.62 8.21
20 year 7.42 7.34 7.36 7.54 7.67
30 year 9.17 9.40 9.51 9.80 10.07

If you do your own investing – active or passive or hire someone to invest for you, it is prudent to make sure that you are doing as good as the benchmark- net of expenses. The benchmark is a minimum expectation of rate-of-return that you should be achieving. It is a way to hold yourself or your investment advisor accountable. It is important that you know why your investments are either not doing as well or much better than the benchmark. Either could be cause of concern: it could be merely a timing issue or it could be because your advisor made a mistake or is not doing their job. It is important that you are in the know and asking the right questions, and getting the right answers.

What is asset allocation? You may want to read my article entitled The Asset Allocation Style of Investing, highlighted this method of investing made popular from the study by Garry P. Brinson, Brian D. Singer, and Gilbert L. Beebower that found that over 91% of long-term portfolio performance is derived from the decisions made regarding asset allocation, and not market timing or security selection.


Asset allocation investors do not just invest in funds similar to the S&P 500 or the Dow (the most common benchmarks), therefore they should compare their results to aggregated benchmarks that include indices that closely match their allocations.

Timing: In order to have earned these rates of return, you would have had to invest at the same precise time of the time period represented. Fluctuations in the market can make a drastic difference in your actual rate of return, so if you invested a lump sum of money on a day that the market was down or up, or you invested each month (perhaps using dollar-cost-averaging), you may and will experience quite a bit different results than illustrated here.

Historical Perspective of Indexing: Index fund investing (passive) has been popular because people hear in the media frequently that a majority of actively managed mutual funds do not consistently beat their respective index.

Actively managed mutual funds usually have higher expenses, thus making it more challenging for them to out perform their passive brethren. However, investors may want to consider looking for mutual funds that beat the indexes (net of expenses), they might even find some that have a lower risk (volatility) than the index.

The preference to invest in index funds is a fairly recent phenomenon. Now you can even invest in ETFs or exchange traded funds, a hybrid of index investing that has emerged in the last several years. The charts below illustrate returns all the way back to 30 years, however index funds and ETF’s didn’t exist for each of the indexes used to make these calculations back that far.

The indexes used to compile the historical rates of return are below. Keep in mind there are dozens of different indices. These ones many feel most closely represent the benchmark for each category. There is some differing of opinion in the investment community as to the best indices that should be used for benchmarking. * Cash – Money Market (3-month CD * Intermediate Long Bond – Lehman Bros Aggregate Bond * Large Cap Value — S&P 500 * Mid Cap — Russell Mid-Cap Index * Small Cap – Russell 2000 * International Equity – MSCI EAFE Equity Index.

Past Performance an Indication of Future Performance? Anyone who as ever glanced at any financial product advertising or literature will see “Past results are not an indication of future performance” pasted all over the place. This sentence is required by the security industry’s regulating authorities and it is very true. However in order to make intelligent decisions, historical information is very useful for comparison purposes, in addition to a lot of other financial information including your own personal financial plan.

What To Do If Facing a Possible Foreclosure

The recession officially started December 2007 and ended June of 2009, however many homeowners struggled to stay current on their mortgage before that time, and still do now. Those in the financial industry have been learning how to help people either avoid or survive foreclosure of their home, while at the same time the whole process evolved.

Throughout this recession, there have been several programs and initiatives to help homeowners stay in their homes and avoid foreclosure.  Since about 2007 they started out as ways to incent banks to offer loan modifications.  Banks, credit unions and the Federal government’s help has often been a slow, inconsistent and confusing, and although millions have been helped to stay in their homes, several million people still lost their home in foreclosure. Some people have been helped with lower payments, making payments, and less burdensome arrangements to lower late fees and payments in arrears. Federal money has also been available to help them too.

Since 2009 lenders have staffed up their hardship or modification department, and have been more flexible at helping people either stay in their homes or to dispose of it such as through short-sales or deed in lieu of foreclosures. These two methods help when the home owner needs to sell or transfer the deed back to the lender, because they have no or negative equity- even a modification isn’t enough or they don’t qualify for one.  The peak of people being helped was in 2010, but the percentage of short sales and deeds lieu of foreclosure increased. In addition, more government cash has been made available within the last year or two. HUD has an updated report of the trends through mid-2012.

What have we learned about helping people:

  • Contact your lender and certified HUD counseling agency in your area, and don’t pay anyone for help or you will get ripped off. Keep excellent records of who you speak to, assignments, and copies of everything.
  • Don’t give up until it is over. Even if you have been turned down for modification or short sale already, and you are still in your home. Lenders, the government and your situation may have changed, so it never hurts to try all over again and again. I have seen people turned down numerous times for short sales, modifications and refinance at lower rate and payment, later granted one.
  • When it is over, it is not the end of the world. If  you have to foreclose, do a short sale or deed in lieu, and move to a rental, it is hard but it is not the end.  There are even ‘cash for keys’ programs to help you move and to make rent deposits. After a few years of improving credit, paying off debt and saving money you will recover and end up with a home again- if you want to and it makes financial sense.
  • Don’t move unless you are forced to because you have reached the end of the foreclosure process and you get a sheriff sale notice. I have seen many people move out too early and end up worse off in the long run. In the meantime, stay in your home, keep it in good shape, and pay homeowner’s insurance. Try to pay the second mortgage and real estate taxes if you can. Since you will not be paying a mortgage or rent, you may have extra money.  Use that to pay off other debt, and for necessary things that you couldn’t afford before, such as car repairs or tires- not on vacations and unnecessary things. Housing counselors disagree on accumulating savings versus paying off other debt, so talk to a HUD counselor in your area.
  • Learn throughout the process. Even though you may have not brought this upon yourself, perhaps because it was caused by unemployment or uninsured health problem- still use this experience for character building, also become great at personal finances and take classes such as Dave Ramsey Financial Peace University. When life improves, having learned to be excellent at personal finances, and more focused on what is truly important, you will be better positioned to design a plan for your next chapter of life, while avoiding some of the same problems.
  • You are not your stuff. Hold your head high. Focus on what is really important like family, faith, friends, and integrity.

Lastly, if you live in one of the severe housing crisis states like Florida or Nevada, there is even more help. Ohio where I live is one of the states hit hard by this crisis, and additional monies have been appropriated here. If you live in Ohio read more about it in a recent Columbus Dispatch article. Your local HUD office will tell you about the latest programs in your state.


Work Tax Deductions, Job Search Deductions and Job Search Help

You are eligible get a tax deduction for some unreimbursed expenses from work, and for those that had expenses looking for work or relocating. While on the latter subject, first I wanted to provide some ideas for those looking for work.

If you are unemployed or underemployed and are looking for work, there is help for you and your job search, and help through tax deductions for some of the expense of looking.

Today many churches and housing agencies have job search workshops and some have even hired experts to counsel people about all of the myriad of issues you need to know if you are looking for work. Vineyard Columbus (OH) has done just that. Some government agencies and social groups also provide the same. There are groups for executives, non executives and those over age 50 providing skills, support and encouragement that you may need for what often is a long-term process. Scioto Ridge is an excellent group in Columbus that helps many people.

Meeting one-on-one with experts and attending workshops is extremely important to getting hired. You will learn how to write a good resume, network, use LinkedIn and other social media, and interview well. Do not assume you know how to do all of these things, especially if you have been out of work for a while; do not go at this lonely and aggravating process alone. Some banks are even hiring firms to consult out of work people struggling to make mortgage payments, such as 5/3 Bank headquartered in Cincinnati Ohio hiring Next Job Inc.

Now that it is tax time, be acutely aware of the tax deductions that you might be eligible for. The list includes: courses to improve you skills and employment agency fees (see IRS Pub 970), mileage and parking for interviews, preparing and mailing resumes, and relocation expenses (see IRS Pub 521).

Do you incur expenses for your job from time to time, but don’t ask to get reimbursed? Perhaps you picked up some inexpensive office supplies, or donated to a project out of your pocket.  Often teachers buy their own class room supplies. If you are not reimbursed by your employer for these expenses, they could qualify for a miscellaneous deduction, as long as they were  required to do your job as an employee and were “ordinary and necessary” to your business or trade.

Most Popular MoneyEducate Personal Finance Articles of 2012

2012 was the first full year I have been consistently blogging at MoneyEducate, and the following articles were the some of the most popular ones of last year. This is a pretty good mix of articles about saving money and general financial planning topics.

  1. Hyundai and Kia overstated gas mileage
  2. Best and worst fitness values
  3. Low cost smartphone alternatives
  4. Pros and cons of being rich
  5. Is a car lease a fleece?
  6. Eye glass monopoly
  7. Should I buy a saab?
  8. 14 most fuel efficient cars
  9. How to help others financially
  10. IRA withdrawal rules
  11. College education tax deductions and credits
  12. How to sell your scrap gold
  13. Are Medicare Part B premiums increasing in 2014 247%?
  14. What are the best savings account rates does it matter?
  15. Costco cost savings and warnings
  16. Why did the Facebook IPO fail?
  17. Budgeting for extra charitable donations
  18. Should I buy an e-reader and the benefits of waiting?
  19. How to drop expensive PMI from mortgage
  20. Home vacuum and steam vac best buys
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