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November 2014 Newsletter: Aim Higher; Be Recession Proof; and, Modest Investment Enterprises
November 28, 2014
|Hello to all my frugal friends:
My fall fishing expedition is over with, and I'm back in the saddle again here in Wyoming. Texas was great, but Wyoming is home, even if our winters promise to be rather brutal. As they say, "The fleas come with the dog."
I'm going to add a little something again to this month's newsletter. It's based on one of my responses to an interview question from a couple of months ago; provide advice to those who don't make much money and say they can't save money in any appreciable amount. Consistent with previous newsletters, I'm also offering two articles that you won't find on the site. The first is a personal finance piece about adopting a mindset that will help you recession-proof your life. The second is a continuation of the series about being better prepared from an economic and financial perspective. This time it's a discussion about small businesses that you can start with a modest investment. Nothing too extravagant, just a reasonable and manageable investment in you.
I'm writing this on "Black Friday" as I happily sit in my office at home and let the crazies across the country engage in what is rightly referred to as madness. When we fight one another over the opportunity to buy something, I can only imagine what might happen in a true disaster situation where people are fighting to get basics for their own survival and comfort. As that comedian with the strong Russian accent used to say, "What a country!"
Let's dive in.
Advice for Lower Income Earners Who Can't Seem to Save Money - Aim Higher
It's clear that there are people among us who simply don't make much money. As such, they have a hard time saving any money to speak of. The problem might not be that they're not saving enough of their income...they might put a good percentage of it away for a rainy day. The problem might be they just don't pull in much income in the first place.
My suggestion is to aim higher, and challenge ourselves to earn more money.
Usually low income is associated with lower expectations and lower demands we place on ourselves, so we really ought to look at why we have low income in the first place. If we fix that, then saving money becomes much easier because we get accelerated wealth building when we combine a higher income with lower expenditures.
My father made good money because he did everything he could to put himself in a position of higher income. He used both education and experience to position himself as a school teacher who deserved higher pay.
My mother never went past high school, yet she landed a position as an assistant to the board of directors at a private school, a position usually reserved for at least a college graduate. She worked her way up the ladder over a few years, instead of being satisfied with staying as the school's administrative assistant.
Sometimes earning more income means you need to change jobs, and sometimes it means you need to change employers. The key is to find out how others are making higher income and then find a pathway that's right for you.
If we simply sit around and bemoan the idea that we can't make higher income, then we run the risk of accepting that self-talk and staying right where we are. Instead, we need to keep asking ourselves how can we do it, where can we do it, and why is it that others are making higher incomes.
I liken this to the same problem that people face when trying to find employment. There are many who simply give in to the idea that "no one's hiring." Bullshit. You can't say that until you've investigated every possibility out there. Grab a phone book and you'll see just how many possibilities there are for employment. And, if your area phone book is tiny, then move to a location where they have a big fat phone book.
Many times we find ourselves boxed in, or otherwise unable to "think outside the box." We need to remember that quite often we're the ones who erected the box to begin with. Even if we didn't, we ought to be able to step outside the box and aim higher. After all, it's in our own best interest to do so.
Weathering Economic Recessions – One Man’s Approach
by Clair A. Schwan
Many of us are wondering when we’re going to punch our way out of this economic recession we’ve been wallowing in for the past many years. It’s anyone’s guess, but I’d say we’re going to be in it for quite a while, and perhaps it will get even much worse, simply because so many of us only learn the hard way. It seems we insist on repeating failed behavior patterns largely because they’re what we know and are comfortable with. Failure to obtain different results by doing the same thing again and again apparently has no bearing on the matter, we do it anyway.
Collectively, all the foregoing is true, but individually, it doesn’t have to be. As a rational being, we can do much better than mindlessly repeating what has proven to be unsuccessful. We can make deliberate and lasting changes in our behavior, no matter what the crowd or our “leaders” might be doing or suggesting.
Being a big fan of watching the crowd, instead of following it, let me present you with a simple way to weather just about any kind of recession or downturn in the economy. It’s an approach that I follow and it has served me well. It’s something we can all make use of because we’re all likely to go through three to four economic downturns in our lives. The technique is simple; it has only two steps to follow:
Step 1, develop a frugal and financially conservative lifestyle that, within reason, maximizes income, minimizes expenses, and focuses on wise investment of resources to create lasting and meaningful wealth. During good economic times, implement the lifestyle with deliberate focus as if you’re in a downturned economy.
Step 2, when the economy turns sour, make only minor changes in your lifestyle as warranted based on special circumstances. In other words, you largely continue as if nothing unusual has happened.
The bottom line is that most people go through feast and famine cycles that are often self-generated because of choice. They spend freely when times are good and hunker down in an austerity mode when times are tough. Why not choose differently? My experience shows that living more conservatively as a norm provides great results over the long haul. If you follow the two simple steps above, you can maintain a reasonably even keel no matter what financial waters you’re navigating. The choice is yours, smooth sailing or a financial roller coaster ride.
A Peek at Techniques
Assuming you’re enamored with the idea of smooth sailing, let’s look at some ideas with respect to how one might maintain an even keel, regardless of the economic times. We’re really talking about a mindset that reflects a financially conservative strategy, and we can see hints of the mindset by looking at specific tactics that one can employ to achieve important financial goals. Here are just a few examples.
Seek employment in a recession-resistant marketplace. The electric utility industry and the medical field are good examples. No matter what the economy is doing, people need electricity and medical care as they are vital for daily living. Maintain a relatively steady lifestyle; when income goes up, spending doesn’t necessarily have to expand to match, instead, savings and investment can and should be enhanced. Maximizing income and savings is a key to rapid wealth accumulation. Practice taking the “long view” in whatever you do. Whether it’s a second home, a second car, or another child, each has initial costs and long-term recurring costs. As an example, consider the additional cost of monthly payments, upkeep, insurance, annual registration and depreciation associated with another vehicle before making a purchase. If you visualize making all of the recurring payments, it can help you make a better decision because there is a good chance that you’ll be doing so with your eyes wide open.
No long-term consumer debt. If there is anything that makes for a financial monkey on our backs, it has to be consumer debt. The wise know that credit cards are a means of paying for something, not a way to give ourselves a personal loan.
The roller coaster ride of economic ups and downs isn’t limited to personal finance. I’ve worked as an employee in several large companies that have gone through “austerity modes” on several occasions, and none of the restrictions on spending have ever affected me or my staff simply because I’m not naturally inclined to be a careless spender, no matter whose money we’re talking about. If you do much the same in your personal life, you’ll find that changes in economic conditions won’t necessarily force you into changing your lifestyle, pulling in your horns or hunkering down to weather the recession. Instead, you’ll operate largely as usual, and without nearly as much concern and discomfort as those who match their lifestyle to income that fluctuates.
The two simple steps outlined above can offer peace of mind, and that means a lot to me. I’m not comfortable living on the edge as so many do. In addition, with such smooth and steady sailing, instead of roller coaster riding, it’s much easier to maintain a good “sight picture” and that promotes attaining long term goals – the only ones worth shooting for according to my play book.
You’re the Captain
To be sure, this approach to weathering tough economic times won’t work for everyone, but it has worked well for me. I live a life of abundance, but it’s largely because I’ve defined what abundance is on my terms according to my own “long view.” I don’t let others create the definitions and rules in my life; instead, I do that for myself. I’m perfectly happy knowing that my lifestyle doesn’t have to change much at all, no matter what the economy is or isn’t doing.
An acquaintance of mine on Facebook sent me a note not too long ago. I don’t know that he has great insight into my life, but it was clear by his comment that he imagined somehow my life was special or “charmed” instead of well charted and lived in a deliberate manner. He said, “If my life was as smooth sailing as yours, I’d have it made.” My response was simple and filled with what I see as truth, “It can be, just talk to the captain.”
Economic and Financial Preparedness – Start Your Own Enterprise with a Modest Investment
by Clair A. Schwan
Let’s continue with our discussion of economic and financial preparedness by looking at how we might make money in an enterprise that requires a modest investment. Perhaps the investment comes in the form of education, tools, training, equipment or a vehicle. I wouldn’t suggest anything large to start with, but there are a number of businesses that only require a modest investment for success.
If you’re hot on making a go of such a business, then you’ll have to make the investment before you’ll be considered a serious enterprise. It might be time to put a little money where your mouth is.
You’ll recall that our focus is on creating wealth as our first step, and I had six ideas about how to accomplish this. We’re looking at my fourth idea:
So, with that in mind, let’s look at a range of businesses that can be started with a modest investment, something that most of us would consider to be relatively low risk in the event of failure. We’ve already suggested enterprises that can be started with what you have on hand, now it’s time to explore what one might do with a modest investment and perhaps a little more hands-on skill to help provide you with an enhanced sense of preparedness when it comes to the economy and your personal finances.
Here are businesses that require a bit of start-up funding, but nothing extreme. Some of these might require having employees or service agreements with fellow entrepreneurs, but all require some level of investment beyond what people normally have at home.
Private investigator – this is a job that security, law enforcement and parole agents might gravitate to. They typically have the contacts, know-how and temperament to do whatever spying, snooping and private investigating needs to be done. This could require a specialized vehicle, and equipment for surveillance and recording.
Auctioneer – if you’ve worked for an auction service and you’ve been an auctioneer, there isn’t any reason you can’t go out on your own. From my experience, auctions of household goods require several people to help set things up and show items for sale, and they also require lots of table space, a portable loudspeaker, and clerks to register and process bidders. Expect this kind of business to require a good truck and trailer, and a place to store your tables, equipment and perhaps some unclaimed articles.
Auto mechanic – for those so inclined, you might set something up in your shop, garage, or even offer services at the home of your customer. As you can imagine, there could be a healthy investment in tools and diagnostic equipment, but then it’s possible that a well appointed shop at home might only need a few additions before setting up the business. One way to limit your investment would be to specialize in certain areas of maintenance and repair. As the business grows, you could expand your offering and only then make additional investments in tools, materials and supplies.
Carpet cleaner – with van mounted equipment and a number of long hoses, you can probably do well in the carpet cleaning business. I’m sure there might be some used equipment out there, and it seems that everyone has a carpet that needs cleaning.
Landscape maintainer – many of us cut grass and trimmed bushes on a part-time basis for neighbors when we were still in school. That provides the basis for a full-time enterprise if that kind of work appeals to you. Today, I’m seeing much more use of the “zero turn” mowers for maintaining lawns. That makes it a sit down operation with speed. Add to that a weed whacker and blower, and you’re in the lawn care business.
Car detailer – a pressure washer, a source of compressed air, a vacuum, some supplies, and perhaps a few tools is likely all you’ll need to get into this business. One advantage of this business is its portability. You can detail cars at someone’s home, place of business or parking lot.
House painter – this is likely an enterprise that pays well, with just a few items required to get started. You’ll need a vehicle to haul around ladders and sprayers and paint, and you’ll need basic supplies like rollers, brushes, roller extensions, drop cloths and a few specialized tools.
Handyman – if you’re a Jack (or Jane) of all trades, this might be just what you’re looking for. You’ll need a wide range of tools, supplies and materials, and some of these can be acquired as you need them. If your motto is “no job too small” you might be well suited for such an enterprise.
Karaoke and disc jockey – the world of karaoke is exploding with interest, and not many can afford to have a nice professional setup for the occasional party or weekly karaoke function at the local watering hole. A few thousand bucks would probably be enough to get you started. To make sure your marketplace was sufficiently broad, you’d want to offer music for functions as well as karaoke.
Dog breeder – this is something that is relatively inexpensive to do, but takes a little investment to have the right breeding stock and proper facilities. If you specialize in breeds that are in demand, it’s not at all challenging to get $500 to $1,000 for a single puppy.
There are many more businesses that one might start with a modest investment in tools, equipment, supplies and training. The key is to remember what place you’ll have in the changing economy, and what kind of return you’re likely to get on your investment of time, money and effort. As with the limited investment in service type businesses previously suggested, I would say that most if not all of the keys to success as well as pitfalls to avoid would apply quite well to this list of businesses.
As a small enterprise, you have good potential for making high income. You’re lean and mean, and you can out-maneuver the large and clumsy competition. After all, just about everything is within your control. When you call the shots with respect to your hourly rate or what you bid for a job, it’s hard to think why you couldn’t (within reason) boost your income well beyond what you’re making now as an employee. And, when it’s you determining the expenses associated with the enterprise, you can basically establish your own profit margin. That equates to ample money in your pocket, and that’s exactly what you need if you’re going to boost your income to provide yourself with a bit of financial preparedness. Moreover, having an enterprise that is in demand, something that requires skills, education and training, now you’ve established yourself in the marketplace, and that means you’re a player instead of an employee being played.
Now that we’ve explored various enterprises, let’s take a look at the marketplace to see what we might zero in on so our efforts at economic and financial preparedness are well targeted.
Next MonthIn next month's newsletter I'll provide an article about the "I am the 99%" slogan we've all seen and heard about, but I want to speak to what I call the other 99% slogan. I'll also provide another article in the economic and financial preparedness series. This time I'll be talking about taking a good look at the marketplace when thinking about creating your own enterprise.
Thanks for being here with me at Frugal Living Freedom. I hope you enjoyed the articles. It's my hope that you can put them to good use.
All the best to you and yours,
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