Small Business Boomers

Financial Independence - Park Your Money in the Right Places

Over the past two days, I have been talking about Financial Independence for Baby Boomers.

First, I discussed the vital step of DSATM (Don’t Spend all the Money) so you can have enough to invest, and

Then, I talked about why you need to Start a business to generate income, to keep more of your money and grow your wealth.

Step Three: Park Your Money in the Right Places

This is the trickiest part, as we’ve seen from the current financial debacle. You need to find a place to park your money so it will grow at a reasonable rate with a reasonable level of safety.

The Risk/Reward Pyramid. I learned about the Risk/Reward or Risk/Return Pyramid many years ago.  Here is the principle behind the pyramid: The higher the risk, the higher the return. And vice versa. There is no getting around the pyramid. This basic financial concept is as inviolable as the assertion about death and taxes, and it is the concept that the people who lost everything in the 2008 stock market crash forgot. People who tell you, “I can double your money (give you a high return) …guaranteed.” (low risk) are telling you B#K@S#$!.  Is that plain enough for you?  It simply can’t be done.

No Guarantees. Last year, I interviewed Bill Losey, retirement strategist.  His mantra, which I can’t forget:  I can’t guarantee squat! As we have seen over the past few months, he was right. No one can guarantee you anything.  But you have a greater chance to get your money back at the lower end of the risk/return pyramid.  And, of course, that means lower returns.

Create a Ladder of Investments. Start out buying the most fundamental stuff, like CD’s, and, depending on your stomach for risk, up as far as you are comfortable. For many of us Baby Boomers, it’s probably smart to stop with mutual funds; we just don’t have as much time to wait out the ups-and-downs of the market with riskier investments like commodities.  Even within the universe of mutual funds, there are more or less risky funds.  A bond fund that only invests in companies in the Dow Jones Industrial Average (the top 30 companies in the U.S.) is less risky than “junk” bonds that invest in start-ups. You can create a ladder containing just CD’s or individual bonds, too.  Whatever you want to do is OK, as long as you remember the risk/return pyramid.

Getting Help With Financial Decisions. You may be wondering if you should trust me (no, I can’t guarantee squat!) or if you should find a financial advisor you can trust.  You can do that, or you can do it yourself.  Bill Losey gave us some tips for doing your own financial planning last July.  You might want to re-read his post for more information.

And, yes, having a business is right up there at the top of the pyramid as a risky venture.  But, remember, you are also creating that business to follow your passion and deduct expenses to lower your taxes.

One final note: I’m not a financial planner, investment advisor, nor am I Jim Cramer in disguise. I’m just giving you my humble opinion.

One last question: Now that you have stopped spending all the money, saved on your taxes with a small, fun business, and invested wisely … What are you going to do with all this money?

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Boss From Hell? Or Frustrated, Cost-Conscious Employer?

Here is the story, as reported by Sean Kelly over at Franchise Pick:

The Pizza Time owner in Lacy, Washington, found that employees had left the heat on overnight, so the next day when they came in, there was no heat. Sean’s original post included the note posted by the Pizza Time owner:

“If you don’t want to work here quit, otherwise shut up and do your job. The next person I hear complaining is off for two weeks. We don’t have heat!! You guys screwed up, not us. You want to blame someone, look in the mirror.”

The Pizza Time employees went to the local TV station and told their story. And got fired.

OK, so maybe he doesn’t win Entrepreneur of the Year for Lacy, Washington.  But maybe he was frustrated because his employees were not following his orders to turn down the heat when they left.  And maybe his frustration got the better of him.  Watch the video of the news story on King 5 to hear the employee and the boss.  Read Sean’s posts and let me know what you think.  I put up a Poll if you want to vote there.

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Starting a Business to Achieve Financial Independence

This week, I’m sharing with you my thoughts on achieving financial independence. I believe that is is absolutely possible to attain the goal of financial independence, whatever that means to you as a Baby Boomer. And it’s never too late to start working on that goal.

Yesterday, I talked about Step One: Don’t Spend all the Money (DSATM). The first step is necessary, so you can have enough money to move on to Step 2: Starting a Business.

What Kind of Business? First, let me explain what I mean about a “business.” The business can be anything that provides you an income and that will allow you to deduct the expenses you had while gaining that income. The business can be full-time or part-time.  And the term “business” can include:

• Owning and renting property
• Becoming a coach or consultant
• Working as in independent contractor or contract worker from home
• Farming (including raising organic produce and free range animals)
• Having a stable or kennel and breeding pets for sale
• Creating crafts and selling them, either on Etsy, the Internet, or flea markets/craft fairs
• Internet sales
• A small manufacturing or distributor business
• A retail store or restaurant
• Operating a franchise….

The list goes on and on, but you get the idea.  Starting a business is an important step in your quest for financial independence. Having set yourself a goal of DSATM, you will have money to spend. You can put that money in some nice, safe investments, but consider the benefits of investing some of that money in a business.

Here are three reasons to start a business:

Reason One to Start a Business:  To Follow Your Passion
Maybe you have been sitting in a job with a company for many years and suddenly you wake up and you realize you don’t really enjoy what you are doing.  My husband is a good example; he worked at a big company for over 27 years, and finally decided that was enough.

You may have a hobby you’ve been pursuing for some time, and you decide you want to do it full-time.  Or maybe you’ve run across an idea you can turn into a business, or you’ve found a franchise opportunity that looks good.  Whatever it is, you should be passionate about it.  If you are going to be doing it for a long time - years - it had better be something that makes you wake up excited to go do it.  If it’s not your passion, it’s just work.

Reason Two to Start a Business: To Make Money
I don’t know any business people who went into business just to have fun and follow their passion.  We all need money to live on, and in this case, we need money to achieve our dreams of financial independence. So, you need a business that will generate some money. It doesn’t have to be a lot - depends on how much you need to achieve your financial goals.  But, if you want to breed Shetland Sheepdogs, you need to sell them for enough money to pay your bills and keep a little for yourself.

Reason Three to Start a Business: To Deduct Your Expenses
Here is the key reason why owning a business is better than working for an employer - you can take a tax deduction on your business expenses.  This means you can lower your tax bill and save money, putting some aside to use for you financial goals.  Here are some examples:

• If you love quilting (that’s me, by the way!), find a way to create a product or service that you can sell to quilters. Or sell your quilting to craft shops.  Keep track of your expenses.  At the end of the year, tally up your income and expenses.  If your income is less than your expenses, you can reduce your income tax by that much.  But this isn’t just a hobby, so you want to make money.  You want your income to exceed your expenses.  (The IRS has strict rules about “hobby losses.”)
• You decide to leave your management job and do consulting. You sign up with CoachU and become a coach.  Your expenses in learning how to be a coach, and in setting up your business can be deducted from your income.
• You have always wanted to own a bookstore.  You decide to look into a franchise, like Little Professor or Lemstone Christian Bookstores.  You do your homework and find a business loan and get started.  You abilitiy to deduct your expenses can put you on the road to financial independence.

No, I’m not saying it will be easy.  You will have to prepare a business plan, find financing (unless you can find the business on your own), and do all the startup stuff to get going.  But nothing good was ever achieved without hard work.  And you have that goal of financial independence in your sights.

So, now you have embraced the principle of DSATM, and you are saving money and putting some into a business to save on taxes and generate more income.  Now, what?  Tomorrow, Step 3:  What To Do With the Money.

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Financial Independence in 3 Steps for Baby Boomers

We all want financial independence, but we stumble around trying to figure out how to get it. I think I have the way. It’s pretty simple actually. Now, what I am going to tell you is not totally original. I found the concepts in a brilliant article on achieving financial independence by Joshua Kennon, Guide to Investing for Beginners at About.com. The article is titled “The 8 secrets to achieving financial independence.” What I’ve done is take the 8 secrets and compress them into 3 steps.

Today I’ll give you the first step, tomorrow the second, and the following day the 3rd.
Before I begin, remember, Baby Boomers:

It is never too late to get on the track to financial independence. Just because you are over 50 or 60 doesn’t mean you can’t start now. It’s only too late when they are throwing dirt on your coffin. The phrase, “Better late than never,” is true in financial terms, as well as parties. Maybe you want to retire and do nothing, or you want to find a nice little business to run, or you want to travel. Even if you don’t have a long time to get there, you can still achieve your financial goals, one step at a time.

Step One: DSATM
That’s “Don’t Spend All the Money.” I heard this from a wise colleague who used to tell our students this phrase. He drummed it into them over and over, hoping they would not forget it. I don’t know if they remembered it, but I sure did. The first step to financial independence is this simple. You will need money to do what you want, and the only place you can get it, at first, unless you have a “secret Santa,” is to earn it.

The Big Mac Mentality of Baby Boomers. We baby boomers grew up with what I call a “Big Mac mentality.” We want it NOW and we want it big. We have no concept of delayed gratification. We are impatient for waiting for things we want. But that has changed over the past few months.

A Sea Change in Financial Thinking. Now that we all have been humbled (and made poorer) by the stock market crash, we have undergone what’s been called a “sea change” in our financial thinking. My husband and I thought our investments were growing well, and that we had plenty to live on during retirement. But we are now cutting back. We eat out less often, buy fewer books from Amazon, and we don’t feel we must have those little luxuries that we thought were necessities.

The BIGGER PAY-BIGGER PLAY phenomenon. Here is a great example of the difficulty of DSATM: We all know the experience of getting a raise. We think, “Wow, this is cool. I’ll take the extra money and put it aside. I won’t spend it; I’ll save it. After all, I lived on what I made before, so I don’t really need the extra.” How long did it take before you “forgot” to save that money and you were spending it on stuff you were sure you absolutely needed?

Income Must Exceed Outgo. DSTAM means that your monthly income exceeds your monthly outgo. In order to fund your financial independence, you must practice that delayed gratification, tighten your belt, and save some money each month. I know, it’s difficult, particularly if you are retired. But there’s no way to get to where you want to go (Tahiti? Italy?) without this first important concept.

Tomorrow, Financial Independence - Step 2.

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New Year Thought on Passion and Practice

I found an amazing video about a juggler and comedian named Chris Bliss that made me think about two things: Passion and Practice. If you want to succeed at your business (or anything else) in 2009, you will need only two things:
1. Passion - something that gets you up in the morning, every morning, excited to do what it is you are doing (note the smile on the guy’s face while he’s doing his amazing juggling act).
And
2. Practice - keep doing it every day, every day, every day. You don’t think this guy got this good by juggling a couple of times a week for a couple of months, do you?

The video was inspirational for me - I hope it is for you too.

Happy New Year from Small Business Boomers!

Source: GoogleVideo

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Oprah’s New Year’s Resolution - Lose Weight - Again!

Oprah confesses she’s back up to 200 pounds again. Somehow, it’s comforting for the rest of us to know that one of the richest women in the world struggles with her weight, just like us.

How about you - what’s your New Year’s Resolution?

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The Most Important Thing Baby Boomers Learned in 2008

And probably the most important thing we learned all year:

There Ain’t No Such Thing as a Free Lunch

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What Baby Boomers Learned in 2008 - Part 2

To continue our discussion of what we learned in 2008…

In July,

We learned of the death of Randy Pausch of “The Last Lecture” fame. The book of his lecture went on to become a best-seller. And of the death of George Carlin, who also had much to teach us.

We learned how to estimate Social Security benefits online and how to use a financial planner ……

And how to invest in a business without getting a bank loan, and the single biggest retirement planning mistake baby boomers make.

How to deal with tough financial times (which we didn’t know were going to get tougher)…and how to collect money in tough financial times

In August,

We learned about the power of compound interest …

Why the Harry Potter books are so successful …

About the Age Curve and how to profit from Generational Demographics,

And what happened to Baby Boomer athletes at the 2008 Olympics.

in September,

We learned about the “Two out of Three” rule of Getting Things Done, and the Boiled Frog Theory of Rising Gas Prices.

Financial Principles: Avoid Learning the Hard Way, Think Long Term,   xxx

How to Re-apply for Social Security

And we also learned of the death of Paul Newman.  …

In October

We learned of 25 year anniversaries for Trivial Pursuit and Jeopardy

And on the financial side, we learned how the credit crunch has affected Boomer businesses xxx

We learned about long-term care insurance, and how long-term care works with Medicare and nursing homes.

And a new SBA website for Baby Boomers in business

In November,

We learned some money-saving tips for our businesses, we learned why we should keep investing in the stock market,

And some alternative financing sources.

And we learned why we should start businesses after retirement, and how to set up a 401(k) for a small business.

xxx

In December,

We learned that the Yellow Pages and newspapers may have outlived their time.

We learned the top 10 tips for successful business startup (Part 1) and (Part 2

Some part-time jobs for baby boomers and part-time job hunting ideas.

Tomorrow, the last day of 2008, the most important thing we Baby Boomers have learned this year.

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What Baby Boomers Learned in 2008

We Baby Boomers are probably the most over-educated, over-informed, and entertained generation ever.  And with the advent of the blogosphere a few years ago, we have found new ways to be informed and educated and entertained.  From the annals of Small Business Boomers over this year, here are some things we learned:

In January we learned

How Baby Boomers who are veterans can get help starting businesses

About Creative Capitalism (Bill Gates version)

About Muni Bond Insurance and its effect on small business taxes

Jim Norton started issuing “storm warnings about the coming recession.  Too bad I didn’t take his advice and start moving my 401(k) out of equities. He also warned about the banking crisis, if we had paid attention.

In February,

Jim reminded us about the market rules of real estate

We learned how to keep the WOW factor in your business

I went on a quest for information about health insurance

and I reported on the not-so-rosy future for Baby Boomers

In March,

We learned that Chicago’s O’Hare Airport is one of the worst in the world

Why you should consider forming an LLC for your boomer business

And how to hire the best employees for your business

But I also gave more warning of the approaching storm by reminding Boomer Business Owners about financial survival, and we got advice from AccountingSolver

In April,

We learned more about annuities,

And about what states are business-friendly

And about age discrimination, new twists in age discrimination, and what to do about age discrimination

Some resources for elderly patient care for parents were also on the menu in April.

In May,

We learned that the living room is out of favor in homes,

And how to weather a recession by providing value, raising prices, and finding the right kind of business to start.

In June,

We learned that higher gas prices = smaller cars (remember $4 a gallon gas prices??)

About using an IRA to fund your business,

And how to evaluate franchise opportunities

We also learned how to market a Bed and Breakfast

How to volunteer with ACCION International …

And finally, information on getting a small business loan and how to package loan request, …

Tomorrow… more things we learned in 2008, form July through December.

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Winners announced in “Help Me Decide” Donation Contest

The contest is over and two “winners” have been announced. Of course, the winners are the organizations who received the publicity from your comments.

Thanks to all who participated!

The first two numbers generated by my random number generator were: 10 and 3.  If you count back, you can see that

Susan suggested Habitat for Humanity of the Greater New Orleans area

and Teresa suggested breast cancer research. I will make donations to the Susan G. Komen Foundation and the Breast Cancer Research Foundation.

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