Tuesday, July 27, 2010

Top 3 Signs of a Scam

In our quest to save money and find the best investment options we may encounter a lot of financial frauds. A lot of this may appear to be common sense, but people get conned everyday. The elderly are especially susceptible to con artists these days since they may be losing mental capacity. So make sure Nana reads this one! New scams come about every year, but are essentially they same thing re-packaged to try to hoax you out of your savings. If you can recognize the signs of scams than you're one step closer to your financial goals by avoiding this pitfall. There are three main signs of a scam. So, if any of these signs are present, alarm bells should immediately go off in your head and you should proceed with extreme caution.

1) Get rich quickly. If there are fantastic claims of getting rich in a short amount of time, than it's definitely a scam. Although this can be done in some extreme cases, by gambling or playing the stock market there is usually extreme risk involved. So if someone approaches you saying that they can turn you into a millionaire tomorrow, run away!

2) No work involved. If you are not required to lift a finger and somehow cheques are magically appearing in your mail box. Than I'd like you to refer me to your mailman. Seriously though, nothing of value on this planet is created without some work. Only when value is being provided than money is exchanged. If someone is preaching about making a lot of money without a lot of work than there is something seriously wrong with this situation.

3) You pay first. Finally, you know it's a scam if you can't start making money until you have to pay someone. What's happening here is that you're being bamboozled out of your savings. A lot of times con artists will ask you to first send in a cheque before you get the information necessary to start making "millions". If anybody is making such claims your "spidey sense" should start tingling. If possible, end the conversation immediately and get the hell away.

The 4 Hour Workweek: Is it a scam?

This article is a response to a comment made about my last article which was a review and recommendation to read a book entitled "The 4 Hour Workweek" by Timothy Ferriss (http://reynold-savemoney.blogspot.com/2010/07/4-hour-workweek.html).

A dedicated reader wrote to me asking "He can't be a millionaire? according to old times u had to work at least 12 hrs/day for a good while but with a computer u can scam people & be one in an hour?"

I'd like to address the questions that were in this comment. Firstly, I believe Timothy Ferriss was making a decent income off of the internet company he created by selling body building supplements online, over the phone and by mail order. I don't believe he became a millionaire from the profit he made from selling these supplements. Timothy became a millionaire by selling the business he built.

Secondly, although the title of the book is the "The 4 Hour Workweek", don't be disillusioned by the amount of time it took Timothy to build this business. To create a business like this takes a lot of time and hard work. The business he built was not built in 4 hours. So, although his workweek was cut down to 4 hours once the proper business systems were in place, there were times in the infancy of the business where Timothy probably worked greater than 12 hours in a day. The basis of Timothy's book is not in scamming people but creating an efficient business system by utilizing modern technology.

P.S. If you plan to read "The 4 Hour Workweek" be sure to visit your local library to see if they have a copy. (http://reynold-savemoney.blogspot.com/2010/07/free-books-magazines-dvds-and-music-cds.html)

Sunday, July 25, 2010

The 4 Hour Workweek

This is an excellent book for the entrepreneur at heart. It's a story about a man who created the ideal business system. Timothy Ferriss explains how he created a company which he owns and spends less than 4 hours a week operating. How is that possible you say? Well it didn't happen overnight and at the beginning he did have to work hard building it up. But once he had good systems in place, the company pretty much ran itself.

Timothy started a company selling body building supplements. He advertised in the back of fitness magazines and carved out market share in a niche market. His product was quite specialized and that meant he was catering to a very specific customer base. He started a website that was able to automate the ordering process, outsourced all the frequently asked questions to a call center in India and gave a few managers authority to handle any complaints under $100. There are a couple other tips, but with those main business systems in place he was able to widdle down his work week to a meager 4 hours! This gave him time to travel, develop new businesses and train for his professional kick boxing career.

Timothy's writing style keeps the story engaging, although he may appear arrogant at some times. He presents good ideas and gives a concrete example of a supremely efficient business model. We can all learn a lot from the way he built his business and took advantage of modern technology. The book is short so give it a read. When your work week is down to 4 hours drop me a line!

Wednesday, July 21, 2010

Always Double Check Your Grocery Receipt

Whether you do your grocery shopping at Zehrs, Sobeys, Food Basics, No Frills or Costco you must get into the habit of double checking the receipt. There are several reasons that this is a good habit to get into.

1) The cashier usually makes mistakes. Double scanning things is quite common, especially if there is a long line-up of customers. When the cashier is under pressure he/she is more likely to make some kind of mistake (ironically this is the worst time to bring up the mistake since the people behind you will probably want to break your neck as you complain about the cashier not accepting your 50 cent coupon).

2) The prices don't match. This just happened to me the other day. The price marked on the shelf for the cereal I was purchasing was a certain price, but at the cash it was about a dollar more. This is a common mistake that can be made by the grocery clerks that scan the barcodes.

3) The wrong product code. The cashier may enter the wrong product code for the produce that you're purchasing. It is likely that all the tomatoes look a like and he/she just types in the same code for anything red and round. The cashier may enter in a produce item that is not the sale item you intended to purchase or a more expensive but similar looking produce item.

Always get in the habit of checking the receipt and make sure that you are paying for what's in your cart!

Monday, July 19, 2010

King of the Grill!

Summer is in full swing, and that means long hot days. The last thing we want is the inside of our homes to be a sauna. Here is a great tip to keep your home cool. Get out there and fire up the grill. Cooking in the home usually means heating something up. Using your stove top or oven can really raise the temperature in your home. This means your air conditioner will have to work extra hard to bring the temperature back down. Blasting the AC will mean higher electricity use and a larger monthly bill. Instead if you do most of your cooking outdoors you can maintain a nice comfortable temperature inside.

Here is a nifty little video with the top 10 grilling tips. Bon appetite!

Saturday, July 17, 2010

Clean that lint trap!

Doing laundry is one of those weekly chores we can't avoid. When we are in a hurry and need our clothes clean fast we often resort to the drier. Drying machines are energy hungry machines, but here is a simple tip to get the most efficiency out of your drier.

For our drier to dry our clothes efficiently it needs to get sufficient air flow through the machine. Be sure to always clean the lint trap before each load so that your drier is working at maximum efficiency. This way you won't have to run your drier for as long to get your clothes dry, which means lower electricity costs and big savings!

Be sure to check out my article about hang drying your clothes for big savings:
( http://reynold-savemoney.blogspot.com/2010/06/hang-dry-clothes-for-big-savings.html )

Thursday, July 15, 2010

Rich Dad Lesson: 3 Types of Income

Like I promised here is another lesson from the book Rich Dad Poor Dad by Robert Kiyosaki. Robert explains that he is often approached by reporters for interviews, where he is asked what he does for a living and how much he gets paid. He usually tells the reporter that he makes a small salary from working at his company (compared with Fortune 500 CEO's), and that's usually where the interview ends. What most reporters fail to ask Robert is if he has other sources of income. Robert is rarely asked what kind of business he is in, what investments he has made and if he has other sources of income.

In Kiyosaki's book he explains that there are three types of income. There is active income, passive income and portfolio income.
1) Active income comes from your full-time job where you work 9-5. Active income typically comes from exchanging your time for a salary or wage.
2)Passive income is the opposite of active income. This is where you receive cash flow without actively putting in long hours. Passive income comes from what Robert defines as an "asset" (see article http://reynold-savemoney.blogspot.com/2010/07/rich-dad-poor-dad-whats-asset.html ). In this case it can be something like owning rental property, where tennants pay you rent on a monthly basis.
3) Finally, there is portfolio income which comes in the form of stocks and bonds. When you own these types of investments you receive cash flow in the form of dividends, distributions and coupons.

Reporters often fail to ask what are Robert's passive income streams, they are only interested in his active income or how much he earns at the job he works. They fail to notice that he owns apartments, stocks, bonds and patents. He has published various books that he continues to receive royalties for. He owns patents on board games that he invented to help people learn about personal finances. These patents provide Robert with a constant flow of cash.

We learn from a young age that we should go to school, get good grades, so that we can get a high paying job. We are told to strive to become doctors or lawyers. Doctors and lawyers make a great salary, however they have to put in their time and expertise to earn their salary. These professionals are limited in their earnings by the amount of hours they can work in a day. So, it's important to understand the other forms of income, such as passive and portfolio income if your goal is financial freedom!

Tuesday, July 13, 2010

Free Books, Magazines, DVD's and Music CD's! Visit your local library today.

Ok they aren't exactly free. You do have to return borrowed material from the library. And yes your tax dollars are working hard to pay for this service. So why not take advantage of this great system. Why do we continue to shell out big bucks to Amazon.com, Indigo, Chapter, Coles and other book stores? Libraries are the greatest resource that any government can provide to its citizens. Usually all you need is to have proof that you live in the area. When I got my library card I had to show a utility bill with my name and address to show I was living in the area. The application process only takes a few minutes and after that you have access to unlimited free information and entertainment!

Some strange people have books on shelves like trophies. I find this a very strange phenomenon. Perhaps it's a way to boost one's ego when friends stop by. "Wow, Joe you sure do have a lot of books on that shelf...". One thing that really isn't necessary in our lives is storage space for books. We have enough consumer garbage filling our homes these days as it is. That's what's so great about libraries. You borrow some books you're interested in, read them and then return them so someone else can read it. Whoever came up with this system of book sharing is a genius!

Libraries now not only have books, they also have magazines, DVD's of popular movies, foreign films and music CD's. There is a small fine for overdue books so be sure to return them on time. The Waterloo Public Library ( http://www.wpl.ca/ ) is the one I go to and it's excellent because your account can be accessed online. This means you can always log into your account to see what material you've borrowed, the due date, and reserve other material that is in circulation. With online library accounts you can also renew any material instantly online in the comfort of your own home. Go to your local library as soon as possible and starting taking advantage of the greatest resource imaginable!

Sunday, July 11, 2010

Your Home - One of the Best Investments You'll Make!

After I published my last post I had a discussion with a friend. She said that she was now worried about buying a place to live since she always thought that purchasing a home was a good investment. My last post stated that Robert Kiyosaki author of Rich Dad Poor Dad did not consider a home as an "asset" since it does not generate cash flow. Because of this Kiyosaki believed a home is more of an expense than an asset. Without getting into details about how Kiyosaki defines an asset, I think that my friend is right and that your home is one of the best investments you will ever make.

First of all no matter what happens in life we all need a roof over our heads. When we rent a house or apartment money goes into the pockets of landlords. You can claim a bit of it on income tax but most of the money is loss. When you purchase a home however, whether it's a house or a condo, money is paid to the mortgage every month (given that you did not pay for it all upfront). With each mortgage payment a portion goes to the bank as interest and a portion goes to paying the principal of the loan. The interest portion is loss and is known as the cost of borrowing. The portion that gets paid toward the principal becomes yours and is known as home equity.

Now the reason Kiyosaki thinks that a home is not a good asset is that you only access your profits on the home when you sell it. Typically it is not a good idea to buy and sell your home over short periods of time since it doesn't have time to appreciate. With little time to appreciate your profits will be eaten up in real estate, lawyer, land transfer taxes, moving expenses etc... . So it's usually a good idea to own your place for a while before you decide to sell it again.

That being said there are other reasons why owning a home is good investment besides providing you with a place to live. Owning a home with multiple rooms can allow you to rent out some rooms to help pay for your mortgage which ends up as home equity. If you have a separate entrance to a separate basement apartment, even better! Another reason is that if you own a small home business you can expense part of your mortgage. Finally, owning property gives you incredible leverage. Leverage is the ability to take a home equity loan with your home as collateral. Banks will lend you money at a very low interest rate when it is backed by your property. If you default on payments however you can get your property repossed.

Why would you want to take a large loan out on your home? If you have any other debts that may be charging higher interest rates it would be best to pay them off using money from your home since the interest will likely be less. Also if an investments yields a higher rate of return than the interest you're paying on the home equity loan than you may as well be using money from that. Sometimes the bank will not loan money to finance a business idea or anything else you may want money for, if the bank thinks it's too risky. In this case a home equity loan is a no questions asked low interest loan. So with all those reasons to own what are you waiting for? Stop renting!

Friday, July 9, 2010

Rich Dad Poor Dad: What's an asset?

I hope that you've had a chance to look into some of the books about personal finance I've recommended in the past. Rich Dad Poor Dad is one that has been around for a while now. Robert Kiyosaki has created an entire brand around the title of this book which has its own line of instructional board games and personal finance seminars, not to mention a whole slew of other books. The ideas in his book can be a bit abstract sometimes but very insightful once you understand what he's getting at. There are many lessons in which he preaches in his book, I will try to go over a few of them briefly, but to get the full impact of the lessons it would be best to give it a read.

The story in which Kiyosaki tells is one of growing up with two dads. One is his biological father and the other is his best friend's father. Both have great influence over Kiyosaki as he grows up, but have very different outlooks on life and how to go about making a living. Kiyosaki's biological father is known as Poor Dad. He made a living as a teacher who eventually became the superintendent of the entire district school board. He always preached to Kiyosaki that he should get an education then get a secure well paying job. Kiyosaki's Rich Dad on the other hand made a living as an entrepeneur who owned several businesses. Rich Dad preached that the path to freedom and wealth was to own and operate businesses. Kiyosaki was always confused by the lessons taught by his Dads since they differed greatly from one another. Poor Dad's mentality on living life was very risk adverse while Rich Dad's mentality on living life was full of risk.

For now I'll leave that lesson about entrepeneurship since it can be very lengthy. I will be sure to post more on Kiyosaki's entrepeneurial lessons in the future. Another important lesson in his book is when Kiyosaki creates a definition for an "asset." He defines an asset as something that provides positive cash flow. He tries to explain how most people are confusing what an actual asset is, since a majority of people think there biggest asset is their home. Although you are building equity in home ownership, it does not provide a positive stream of income (unless it's a rental property). The important thing to note is that your home is more of an expense then it is an asset. Every month you have to pay property tax, utilities, a mortgage and maintenance fees. In the end you are working for your home, your home is not working for you. It does not actually put money in your pocket at the end of the day. Once you understand what Kiyosaki defines as an asset and can distinguish between what is an asset and what is an expense, than the path to true wealth is to gain as many assets as possible.

Rich Dad Poor Dad is filled with valuable lessons. I will have more posts in the future about the many different lessons from Rich Dad Poor Dad. The one thing that I really feel that this book lacks however is the concrete examples of how Kiyosaki would go about building wealth. He explains a lot of principles but does not go into to many details. He leaves it up to the reader to go out and get the information. The lessons are important and they are quite inspiring. I highly recommend starting with this book and reading some more of Kiyosaki's work in the Rich Dad series.

Wednesday, July 7, 2010

Learn a Few Basic Sewing Techniques for Great Savings!

We live in a throw away society these days. Instead of trying to make our belongings last as long as they can, we throw them out as soon as there is a minor defect. This leads to more consumption, since another item has to be purchased to replace the old one. All this shopping can be detrimental to your savings, not to mention the overcrowding of landfills with consumer junk. Clothing is one of the things that often gets replaced when there is a minor rip or tear. Learning a few simple sewing techniques can help make you clothes last a lot longer.

I recommend practicing first on clothes that are worn underneath other clothes so that others can't see you handy work. Clothes such as under shirts and underwear are a good place to start getting some practice. Once you have developed you sewing skills you can move on to making minor repairs on clothes that can be seen. Jeans are something that can be patched up many times while still looking cool. Once you've reached the advanced stages of sewing you can also make slight alterations to garments such as hemming pants and sleeves. Also, repairing zippers on pants and jackets can be done quite easily once you get some practice in.

Learning a few basic sewing techniques will help get the most mileage out of your clothes. It will also open up a lot of opportunities for your creative side to make use of old garments. Such as altering old t-shirts into pillow cases or turning old jeans into garage clothes to wipe up spills. I have attached three videos below that cover: 1) How to secure a knot and tie off a thread, 2) How to do a basic running stitch and 3) How to sew a back stitch. Pick up a needle and thread today and patch up something!

Tuesday, July 6, 2010

Government Rebates for Efficient Homes

Saving money is all about living efficiently. Living efficiently starts at home by trying to make your home as efficient as possible. This comes in the form of improving heating and cooling, water usage, and electricity usage. Improving in these three areas will have a definite impact on your monthly utility bills. Proper insulation and sealing of drafts will make it so your furnace or air conditioning unit will not have to work as hard at sustaining a comfortable temperature. I have a recent post about the benefits of programmable thermostats, I think they are the cat's "meow" so be sure to check that article out.

As with water usage a lot of people don't see the connection between environmental protection and water usage. It takes a tremendous amount of energy to treat water so that it is acceptable as drinking water. According to the US Environmental Protection Agency the country spends $4 billion US annually for the energy to run drinking water and waste water utilities. Having water efficient appliances would have a dramatic effect on reducing the amount of money and energy required to treat water. Reducing your water usage should will result in a lower monthly bill, which is a good financial reason to reduce water usage. Clean water is precious, don't waste it!

Wasting electricity can also be costly. Beyond the usual reminders of turning off lights in rooms we are not in and turning off appliances when they are not in use there is something call "phantom energy" which you may not have heard of. When appliances are plugged into the wall socket and aren't in use they are still sucking up power. Appliances like TV, computer monitors, cell phone chargers, DVD players, printers, etc... when not in use still suck up electricity. Phantom energy can account for about 10% of an individual home's electricity use. So unplug appliances that aren't in use or are used rarely. Another way to solve this problem is to plug appliances that are used occasionally into a power bar and turn the power bar off when not using the appliances, this will cut off the electrical current to the devices and potentially cut 10% off your electricity bill each month.

Now you may be asking, "having efficient appliances is all good and well but I can't afford to change my furnace, fridge or toilet." Well you're in luck because there are lots of incentives from local governments that will reimburse part of the cost of replacing old appliances. For example in the Region of Waterloo there is an ongoing $60 rebate to replace your old toilet with a more water efficient unit. I know that's not going to make you want to rush out and get a new toilet, but if you are already considering replacing it you should look into these incentive programs. If you live in the Waterloo region check out this website for more information: http://www.reepwaterlooregion.ca/index.php. Moving toward a more environmentally sustainable home will make the world greener and your wallet!

Sunday, July 4, 2010

Top 5 Exercises to Keep Fit and Save

I hope you had a great Canada long weekend! Some of you may have gone to the beach or lake this holiday and when it is time to break out the swimsuits we all get a little self-conscious about our body image. Toning up is always a lot of work and in some ways it can be costly if you purchase a gym membership.

Gym memberships can be expensive but your health is worth it, unfortunately a lot of people who do get memberships end up not using them. Usually gyms charge initiation fees from $100-120 and continuous monthly fees anywhere from $30 and up. Some better gyms will let you pay for only the months you plan to go while others make you sign contracts. I recommend signing up for a gym that gives you the month to month pay as you go flexibility. This is because when the weather is nice out you can do a lot of your exercising outdoors. There are tons of great exercises that you can do without a gym membership. The only weight you'll put on is from all that cash you save in your wallet!

Top 5 exercises that don't require a gym membership:

1. Cardiovascular - jogging

All you need is a good pair of running shoes. I recommend planning a route that is close to home and that you can extend or shorten depending on how you feel along the run. The trick is to make it a habit so you're going at least 3 to 4 times a week. Having a jogging partner usually helps that way even if you don't feel like going you have someone who pushes you.

2. Cardiovascular - bicycling

This may be a little more expensive since it requires a bike. It would be a good idea to try to look for a used bike. They same rules apply to cycling as they do to jogging.

3. Upper Body - push-ups & pull-ups

Push-ups are a great upper body workout that targets your triceps, chest and abdominal muscles. We've all done them before in gym class but probably haven't done them since. There are tons of variations on this classic exercise for example propping up your feet or changing the position of your hands. Pull-ups is another great upper body exercise that targets your biceps and back muscles. You may need a chin-up bar for this if you don't have something very sturdy around the house that can support your weight.

4. Core - sit-ups and crunches

This is a great core exercise that will give you a stomach you can grate cheese on. There are tons of infomercials hocking products that will give you a wash board stomach. Essentially you can get the same results by just lying on the ground and doing crunches. The trick to having your ab muscles show is not by doing crunches until you pass out but by lowering your body fat percentage. Your body fat has to be below 10% or so for these muscles to show so it may come down to good dieting than just exercise alone.

5. Lower Body - squats & lunges

It is not enough just to jog or cycle to build your leg muscles. Although those exercises do require the use of your legs, they are primarily exercises for your heart and lungs. Squats and lunges are leg exercises that target all the main leg muscles. You can use your own body weight or for extra challenge you can hold hand weights.