Thoughts on Becoming a Small Business Owner

Recently, I have been giving some thought on an approach to becoming a small business owner. While it is appealing to start a business from scratch, I would likely buy an existing franchise business in which I had some experience. To me, this approach reduces the risk associated with starting a business. Here are the reasons I believe this approach would improve the probability of business success for me:

Large company support structure - A franchise offers access to excellent models, successful processes and expert networks, all at a corporate level. The success of the business is not primarily dependent on my business acumen. I would also have the immediate benefit of the knowledge and best practices of a large company which would take me years to develop on my own.

Known customer base - From what I've observed, finding and retaining customers is the primarily challenge for a business. An existing business would already have customers as the starting base. Thus, there is a confirmed revenue stream. A new business would have zero customers as the starting point. Revenue starts at zero, which means a new business is generally losing money after all the start-up costs.

Practical knowledge of the business - Have experience in the business gives me a better understanding of what is important to be successful, especially on hiring good employees and doing good local marketing.

Currently, I am working three part time jobs in which there are franchise ownership opportunities. While I enjoy all three jobs, I only have interest a owning a franchise for one of the businesses. I have worked in the business three years, developed personal expertise, know the customer base and understand the challenges. Based on my analysis, I believe there would be an excellent return from owning and running a franchise. Unfortunately, that company has made all of their nearby locations corporate establishments, which would require me to travel a long distance to own a franchise.

For now, I will continue work as an employee for all three companies, including the corporate owned business. However, should the corporate owned location be converted to a franchise, I would strongly consider making an offer.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or career advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Dogs of the Dow - Our Focus for 2011

In 2010, the Dogs of the Dow investing strategy returned 16.25% beating the Dow 30 index which returned 9.47%. This is only the second time since 2003 that the Dogs of the Dow strategy has beat the index significantly. For more details, see the Dogs of the Dow performance tables. 2011 Dogs of the Dow at CNBC.com shares the list of the 2011 Dogs and shows the 2010 Dogs results.

For reference, the Dogs of the Dow strategy is a contrarian investing approach. The strategy is based on investing equal amounts in the 10 highest yielding Dow 30 stocks since these price of these stocks have been beaten down. The assumption is that companies in the Dow 30 have sufficient financial and corporate strength to recover from short term business declines. However, the recent economic crisis showed that Dow stocks are not immune to disaster as former Dow stocks General Motors and Citigroup have demonstrated.

Will the 2011 Dogs of the Dow also beat the Dow 30 index? I expect that the Dogs will do well as the economy continues to strengthen. However, my focus will be on one segment of the Dog stocks, the health care sector which includes Pfizer (PFE), Merck (MRK) and Johnson & Johnson (JNJ). Health care stocks have been beaten down due to the passage the Health Care bill. I believe these stocks will do much better in 2011 as the impact of the health care bill becomes more clear. Also, these stocks pay a 3.5% to 4.5% dividend which provides a good return while waiting for recovery.

Disclosure: At time of publication, we own Pfizer in our trading account.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2010 Achievement Catalyst, LLC

Defining My Schedule for Work

Prior to early retirement, I typically worked the long hours and within the times specified for the job. In 2010, I had an important revelation about my part time jobs: I can work the hours convenient for me. The epiphany came while working at two seasonal government jobs. I quickly realized that after completing the 2010 season, I had no interest in working these jobs in the future. However, since I was committed to complete the term of the job, I reduced my hours of availability to only the exact hours I wanted to work. Much to my surprise, both organizations showed flexibility and worked around my requested schedule.

The success in influencing my schedule at the government part time jobs caused me to try the same approach at the three part time jobs that I planned to work in 2011. I was pleasantly surprised again. In each case, the organization has been flexible and worked around the exact schedule I requested. Thus, I plan to teach at my daughter's school (1 hour per week for 20 weeks), tutor high school students (4-10 hours a week), and do a seasonal financial services job (average 15 hours a week for 15 weeks). Although, there might be one or two weeks where I work 40 hours, my planned schedule should keep me from being over committed to part time jobs that happened in the summer of 2010.

For now, my 2011 work schedule feels like the right balance between part time work and personal time. If I still feel I'm working too much, I will eliminate or further reduce my hours in the financial services job in 2012.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial, retirement or career advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Another Senior Discount - College Course Fees

In Senior Discounts Begin at 50, I posted about establiments that provide discounts to senior shoppers at age 50 , even though most senior discounts occur at 55, 62, or 65. Tonight, I am posting about another great senior discount: taking college courses at significantly discounted prices or even for free.

When I was in college, my Alma Mater allowed seniors to audit any course for a charge of $50. I thought this program was unique until I read Retirees: College Courses for the Taking on SmartMoney.com. The article reported that several universities, including some in the Ivy League, give seniors the opportunity to audit (take without credit) courses for a cost of $25 to $500 per semester.

I checked on a major university near us and learned that seniors 60 and older are able to audit courses for free. Since I retired early, I would enjoy returning to school for a few select courses when I turn 60. Attending for free makes it even better :-)

Form more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial, retirement or education advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Timeless Articles from the Archives #21

It's been over four years since I started My Wealth Builder. As I think about topics to write , I often remember, "I've written about that before," and decide to find a new topic. However, since many principles of personal finance are timeless, I want to include them in a recent post on My Wealth Builder. Therefore, I have started a series called "Timeless Articles from the Archives" and am highlighting posts from the same week in 2006-2010.


2007

Trusts, Wills and Other Estate Matters - We didn't seriously consider getting all our estate planning papers in place until we were transferred on an international assignment. Here are the documents we created.


2008

Not Buying Things I Don't Need - A good resolution that I acknowledged again.

Doing What One Loves - The Difference Between Theory And Practice - Doing what I love pays much less that what I did for work.


Turning a Great Small Business into a Fortune - Here are my insights on how people have turned small businesses into very large successful businesses.

Own Individual Bonds Instead of Bond Funds - Bond fund values will fluctuate with interest rate volatility, while individual bonds will pay face value at maturity.



The Rise and Fall of Financial Alchemy - Unfortunately, valuable financial products can be created from junk bonds.


2009


None


2010

Reasons to Retire - Here was my perspective on the Ten reasons to retire posted at A Private Portfolio.


To me, the content of these posts are still relevant today and worth reading again.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial, career, investing, estate planning, retirement or saving advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Links to Carnivals from December 28, 2010 to January 3, 2011

Here are the links to the Carnivals in which My Wealth Builder participated from December 28, 2010 - January 3, 2011:

The Wealth Builder Carnival #21

Baby Boomers Blog Carnival #72

Carnival of Wealth #19

Carnival of Financial Planning #169

Total Mind and Body Fitness Carnival #187

Tax Carnival #78

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial, wealth building, health or tax advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

The Wealth Builder Carnival #22

Welcome to twenty-second edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic.

For reading convenience, I have listed the posts with a brief summary or comment by the submitter and organized them into seven categories: Earning, Investing, Insuring and Protecting, Living Frugally, Retiring, Saving and Taxes.

And now onto the Carnival:

Earning

“Your greatest asset is your earning ability. Your greatest resource is your time.” ~ Brian Tracy

FMF presents Skipping the MBA and Questioning the Benefits of College - Why is it Uncomfortable? posted at Free Money Finance, saying, "How skipping business school can actually help you earn more."

BWL presents 7 Tips To Ask Your Boss for a Pay Raise posted at Christian Personal Finance, saying, "A look at a few simple tips for asking and getting that pay raise you deserve!"

PT presents The Sites You Should Be Using to Find Jobs Online posted at Prime Time Money, saying, "Where to look for work online. Not just the typical sites."

Darwin presents Vertical Integration Explained: MBA Monday at Darwin’s Money posted at Darwin's Money, saying, "An explanation and examples of vertical integration - get your biz lingo down in 2011!"

Insuring and Protecting

“I detest life-insurance agents; they always argue that I shall some day die, which is not so” ~ Stephen Leacock

Marvin Grossman presents Shopping for a 2011 car? Here are the top safety picks posted at Car Insurance Articles, saying, "See who was able to snag the top award from the Insurance Institute for Highway Safety."

Investing

"Know what you own, and know why you own it." ~ Peter Lynch

Patty Pedersen presents Fidelity Mutual Funds: Best, Worst, and 2011 Forecast posted at AlphaProfit MoneyMatters - Investing Blog, saying, "Fidelity Select Automotive (FSAVX) appears set to take honors for being the top performing Fidelity fund in 2010. This article provides insights on Fidelity funds that are likely to do well in 2011."

Boomer presents Do You Need Financial Advice? posted at Boomer & Echo, saying, "There are many ways to get the advice you need depending on the size and complexity of your portfolio and whether or not you want to give up full or partial control."

Dividends4Life presents 6 Stocks Giving The Gift of Dividend Growth posted at Dividends Value, saying, "Christmas is a time of giving. Families and loved-ones give gifts to each other. People give money to the needy and charities, while others give their time to help those that are not quite as fortunate. It seems that everyone is involved in giving this time of year, even corporations. Dividend growth stocks give a gift that keeps on giving – ever increasing dividends!"

Aussie Investor presents Australian Stock Market Investing Blog - Buying Shares As Long Term Investments posted at Australian Investing, saying, "So you've managed to save a little extra money. You know that to make it grow you'll need to consider some other investment options beyond term deposits and online savings accounts. You've heard that buying shares is one of the investment options you should consider - but what's the next step? This article discusses how to get started if you want to buy shares as an investment."

Russ Thornton presents Understanding Monte Carlo Simulation - Part 4 of 7 posted at Wealthcare Revolution, saying, "This is part 4 in my 7-part series on Understanding Monte Carlo Simulation. This installment illustrates the large impact a small amount of uncertainty can have on your dollar wealth."

Trent Green presents The Hype Around Gold Suggests it is a Bubble Waiting to Burst Blog Money for Regular People posted at Money for Regular People, saying, "In the past several months gold has climbed to unprecedented levels, but there are indications that its price is being drive by more by hype rather than economic value. For more insight on my caution against investing in gold read my article."

Dan presents 30 Top ETFs of 2010 posted at ETF Base, saying, "A listing and analysis of the 30 Top ETFs of 2010. Both traditional and leveraged ETFs are included."

Silicon Valley Blogger presents Gold ETF Investing Options For Your Money posted at The Digerati Life, saying, "If you're going to invest in gold, here are some ways to do so."

Mike Piper presents Teaching Kids About Investing: Giving Shares of Stock posted at The Oblivious Investor, saying, "The most educational gift I ever received? A couple shares of Proctor & Gamble stock."

Living Frugally

“You cannot keep out of trouble by spending more than you earn.” ~ Abraham Lincoln

Wenchypoo presents You Don't Have to Be Wealthy to Get Healthy posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "Turn your library card into a gym membership!"

Michael Pruser presents 5 Must-Follow Financial Resolutions for the New Year posted at The Dough Roller, saying, "With the new year upon us, it's important to audit your finances to find areas of improvement. Make sure you set your financial resolutions early this new year."

FIRE Getters presents Personal Loans - How to Borrow Money Responsibly? posted at FIRE Finance, saying, "Nowadays it is normal for the average person to have some sort of debt, whether it be school loans, a mortgage, or credit cards. After all, this is the day in age in which people are living beyond their means (according to financial experts). But is all debt bad? How much is too much? And how do you know if you are borrowing responsibly?"

Retiring

"The question isn't at what age I want to retire, it's at what income." ~ George Foreman

Super Saver presents Retiring Early is Still Possible posted at My Wealth Builder, saying, "The secret to retiring early is to decide on a satisfying lifestyle, determine the cost, and save enough to support it with a 3% withdrawal rate."

Saving

"A penny saved is a penny earned." ~ Benjamin Franklin

Highest CD Rates presents What is a Jumbo CD? posted at Highest CD Rates Info, saying, "A jumbo CD can be a safe place to put a large sum of money and earn a little interest while you are at it."

Taxes

"Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents? ~Peg Bracken

Madison DuPaix presents 2011 Payroll Tax Cut: What Your Paycheck Will Look Like posted at My Dollar Plan, saying, "Find out exactly how the 2011 Payroll Tax Cut will impact your paycheck."

That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the wealth builder carnival, blog carnival.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Wealth Builder Ratios - Q4 2010 Update

Here is our Q4 2010 Wealth Builder Ratios update. During the fourth quarter of 2010, the Dow, Nasdaq and S&P500 indices continued to rally and advanced 7.3%,12.0% and 10.2% respectively. Our investment portfolio returns were in the middle at 9.9%. My company stock had its best advance in 2010 with a 7.4% return during Q4.

For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.

Ratio and Target	Q3 2010	Q4 2010	Comments
Investment Income to Salary Target=0.8 2007=3.41 2008=-5.47 2009=-1.38	-0.20	1.29	2010 was a tumultuous and good year. This year is the first positive return for our portfolio since 2007. After a positive start in Q1, 2010 turned negative and then was positive again. We have gone from a 0.77 gain to a 0.41 loss and then back to a 1.29 gain. A large cash position has helped on the downside but not on the updside. The position in my company stock was a significant factor, accounting for 58% of the gain this year. For 2011, as my company stock (hopefully) advances, we plan to sell some shares and increase diversification, primarily in large cap dividend paying stocks.
Savings to Salary Target>20 2007=23 2008=16.7 2009=15.3	15.1	16.6	For now, it feels like our retirement savings have stabilized which gives me some confidence of better returns coming.The Q4 savings ratio of 16.6 is comparable to the Q4 2008 even though we paid off our mortgage using about 1.4x of my salary. Excluding the mortgage payoff and accounting for monthly payments, our savings ratio would have be about 17.7 During Q4, my company stock gained 7.4%, excluding dividends while the Dow, Nasdaq and S&P 500 gained 7.3-12%.
Debt to Salary Target=0 2007=1.51 2008=1.46 2009=0	0	0	We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment has reduced our expenses by 24%.

My financial goals for 2010 were:

1. Continue to maintain an Investment Income to Salary ratio > 0.8. (on track)

2. Maintain a Savings to Salary ratio of 20. (off track)

3. Maintain Debt to Salary Ratio at 0. (met final goal of 0)

(For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)

Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments returns. With the good performance of my company stock and the high proportion of cash, our portfolio basically matched the indices Q3.

It has been very challenging retiring at the beginning of a bear market. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. So we can wait for the stock market to continue an upward trend, hopefully through 2012. I continue to be concerned about volatility of our investment portfolio, but believe there is more upside than downside potential going forward.

I continue to have the same financial goals for 2011. Hopefully, the markets will continue to rebound in 2011, and allow our retirement investments to further recover.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

IRS Delays Accepting Returns with Itemized Deductions

The IRS has announced that taxpayers with itemized deductions, tuition and fees or teacher expense adjustments will need to wait until mid to late February to file their tax returns. According to an article in Bloomberg, the IRS needs to reprogram its computers to account for changes made in the recent Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (aka. extension of Bush Tax Cuts bill).

I recall a similar delay for 2008 tax returns. In 2009, the IRS was unable to accept returns with credits for education, residential energy, child and dependent care and mortgage interest until February 11.

One solution for 2008 federal tax returns was to file without claiming the affected credits to get an earlier initial refund and then file an amendment to get the remaining refund after February 11. This worked for taxpayers who had a significant refund even without the credits. However, filing initially using a standard deduction and submitting an amendment with itemized deductions in late February 2010 may not be a solution since taxpayers that itemize may actually owe taxes when using the standard deduction. Thus, waiting until late February may be the only option for many taxpayers that itemize and expect a refund

In the future, I expect IRS delays in accepting returns to become more common since Congress has been regularly waiting until December to make major tax law changes. Since much of the recent tax bill will expire again in 2012, there will likely be another delay in 2013 for accepting 2012 tax returns as Congress passes another 11th hour tax bill. Just a another good reason for me to manage W-2 withholding to minimize the amount of refund, or even to owe a small amount.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Happy New Year - Good Bye 2010

Happy New Year


May 2011 be a happy, healthy and prosperous year for you and your family.




Photo Credit: morgueFile.com, Kenny Knickers

This is not financial advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC