Friday, June 17, 2011

Read the fine print, please!

I was on the phone with a customer and his wife today. The wife, who speaks no English, signed for the loan for her daughter so that she could go to school. This raised some red flags for me, but I continue with listening to his concerns.

After getting more information about the situation, the customer stated that his wife should not be held accountable for the loan and the interest accrued because she did not understand or read what she was signing.

... Wait, what?

You're wife signed something that she could not understand? The promissory note could've asked for your first born as payment!

I know this may sound crazy, but if you don't understand what you are signing, you can ask for clarification or just not sign the document until satisfactory clarification is given. I wish this were an isolated case, but it is not. I've seen a lot of people ask for money, sign a promissory note, and assume that it's either free money or that they can't be held responsible for it because they either did not receive a billing statement or did not read (or understand) the fine print about how the loan works.

Let's consider a scenario:
  1. You tell a company that you want something (money)
  2. The company puts a paper in front of you and says these are the "terms" that are involved with giving you the thing that you want
  3. You sign the paper
  4. You get what you want (but at a price)

Would you just blindly sign the paper without looking through the document for anything that may raise concern? Anything - and I stress - anything that involves your signature should be read and understood fully before you sign it.

I found it interesting that South Park actually made a parody of this behavior in the episode "HumancentiPad". To give a brief overview, one of the main characters (Kyle) keeps agreeing to Apple's terms and conditions without reading the fine print, and it causes him a lot more trouble than what he bargained for (becoming part of the HumancentiPad project). Despite being snowballed by the scenario, he keeps repeating the same mistake over and over again. Eventually, his father finds a loophole in the terms and conditions so that Kyle can regain his livelihood back.

While this is an unlikely case, it's common for companies to slip in information within the clauses of a legal document that may attach unwanted circumstances along with desired outcome as part of the arrangement, or make backing out of the agreement difficult or impossible - just to name a few examples.

>> Please... read the fine print. <<

Tuesday, May 31, 2011

Investment - When Savings are Small

A reader writes:

I'm thinking of investing my money. After I pay my monthly bills and set aside an amount for entertainment and what not, I have enough to put a little more than 10% in my savings. Where do you think could I best invest my money? I'm still single so no family to support.

One of the best investments a person can make if there isn't a whole lot of cash to go around is finding ways to reduce monthly debts and obligations - especially if those debts involve accruing or capitalizing interest.

Look at your monthly obligations and break them into categories:

  • Debts that can be paid off [Car loans, student loans, mortgages]
In the debts that can be paid off, setting aside some extra money to pay off these debts actually can save you in the long run. The reason is that these financial obligations usually carry interest - which can make that debt more expensive as the interest compounds over the life of the loan.

Consider a $10,000 car loan at 8% APY. If you set up a plan to pay it off on five years, and make regular scheduled monthly payments, the total interest paid is $2165.84. Now, lets assume the same scenario, except that the loan is on a payment plan to be paid off in four years. The total interest paid is $1718.20. You save $447.55 by just paying it off one year earlier.

If you found this information useful, and would like to calculate your own loan, visit this link:

Loan Calculator

  • Debts that can not be paid off [Phone service, electric, heat/ hot water]
In the debts that can not be paid off, the best way to save money is to cut out things that are not being used. If you have a gym membership, but don't go to the gym, discontinue the membership. Depending on where you go, that is a savings of $150 to $800 a year.

Other ways are developing good habits about home appliance usage. This doesn't mean unplug your coffee machine or other little things. Consider larger, more obvious habits - such as leaving a computer or TV on all day. Some computers consume as much as 1kilowatt hour worth of power - if you look at your electric bill, and evaluate your kilowatt hour usage, you can get an idea how much effect this will have on your bottom line. Since I live in NJ, it costs about 9 cents per kilowatt hour. It would cost roughly $65/mo to keep a 1,000 watt computer running 24/7.

  • Recurring habits [Smoking, impulse buying, upgrading]
Anybody who smokes knows how much a single pack costs. If you find yourself short on cash, you might want consider kicking the habit.

Another recurring habit is impulse buying - do you find yourself leaving the store with more than what you had planned to buy? Does this happen often? This might be the reason why some of your money is disappearing.

The last and arguably most prominent habit is the need to *upgrade*. If you are someone who likes to stand in line for the latest release of X gadget, spending three times the market value that the item will be marked at a year later, but find yourself strapped for cash for other, more essential things, it might be time to start holding out.

Thursday, May 26, 2011

Starting a Business - Pricing and Getting Clients

A reader writes:
If i want to turn my hobby or skill into a business, is it wise to keep my amount on the low side to remain competitive? I wonder because a lot of companies outsource internationally and I don't know how to compete with their numbers but I also don't want to sacrifice my price just so i can get their business. What would be the best way to gain customer confidence and business without sacrificing my prices?

It depends on what you are offering. If you offer a commodity (such as things you would commonly see in a grocery store), then having competitive pricing can attract new customers quickly. However, if you are trying to sell a service (such as cutting hair), competitive pricing can backfire. Here is why:

With commodities, the more that is produced, the easier it is to lower the price to remain competitive. Service does not work this way. Successful service grows by selling expertise or talent. The more expertise or talent the service offers, the higher the price it can demand. A rookie hairstylist can charge maybe $15 for a standard haircut. A professional stylist that has bookings two months in advance can demand $100 for a standard haircut. The difference isn't the service, but what expertise and talent is involved with the service. People know that they will get an amazing haircut from the professional stylist (which can be validated by the large list of bookings). The clients actually expect and want to pay $100 for the service!

To simplify:

Commodities desire to make money through volume
Services desire to make money through reputation

With any pricing model, a good baseline must be established. This is found by doing extensive research in your industry of interest. If the industry exists and is established, the research is easy (you can probably turn it up on Google). If your business model is based on a non-existent or emerging industry, this can be a bit more difficult. If you are not sure, consider whether or not your industry is a commodity or service based industry, and go from there.

If this is something you would like more information on and you are in an emerging or non-existent industry, send me a message and I can point you to some resources that may be helpful.

Monday, May 16, 2011

Unemployed? Let's look at that resume...

Have you ever wished someone could grade your resume and offer some helpful advice about how to approach it? How about if the grading system were based on the opinions of HR directors, professional resume writers, and job searching gurus? If this interests you, today is the day to get your resume graded.

If having an algorithm take a swing at the hiring potential of your resume doesn't take your interest, then maybe some open ended advice from a hiring manager might be of interest to you.

Despite the many schools-of-thought that reside on the subject of what makes a good resume, there seems to be a common thread in terms of what not to do:

Chime in with your thoughts and let me know what you think!

Wednesday, February 24, 2010

Do you need a degree?

I remember reading a news article mentioning that the United States is importing blue collar workers from Europe and Asia. Why is this? Oh that's right - many of us were told to go get a degree and pursue a desk job. It turns out that this *teaching* may have been a critical error...

Why Snobbery is Leaving You Unemployed

I think about all those B.A. degrees (the kind you sit in a classroom to get), and wonder, where is the value behind spending four additional years in a classroom? Where is the benefit? If a person is going to spend at least four years in school, and one year interning, shouldn't it have a more equitable kick-back (like a guaranteed job after graduating)?

One of the common threads I am noticing is that there are bachelors graduates and even masters graduates that can't find decent paying work to pay all of that student loan debt. I wonder why that may be.

If you are thinking about getting a degree, maybe you should think again. That is, unless you are convinced that you will make $100k a year when you get out of school. I wouldn't completely rule out that possibility, but unless you start a successful business endeavor while in college, I got some bad news for you.

Many of the skilled labor jobs I have been seeing pop up on Craigslist lately seem to offer decent pay for a little experience and no advanced education at all. Just a steady hand and some work experience. Check this example out:

Machinist Job

Everything listed in this post one could learn on the job in maybe 2 years - no continuing education required.

Another Machinist Job Example

Here is another great example. $40k a year plus benefits and you just need some metal cutting and machine shop experience. Once again, you could attain intermediate proficiency in this profession in about 2 years (and actually get paid to learn how to do it).

OK - Last Example

This one just expresses interest in someone having experience in welding. On the up-end it pays 19/hr.

Save yourself a lot of money and hassle - consider blue collar work.