If I had it my way, we should all use credit cards for everything (to earn rewards) as long as we pay our bills fully and do not spend frivolously. But some folks do not really like credit cards because they might cause them to overspend. Even if you think about it this way, I would say that there are certain things where it pays to use the plastic in your wallet. Here are the things I have in mind and why.
Things you should charge to your credit cards:
Jewelry and Antiques: Assuming that these purchases are bargain deals in the first place, purchasing items like jewelry and antiques on a credit card may give you an added amount of safety in delivery insurance or damage or loss protection. The worst thing is to realize you have bought a dud and could not replace it.
Vacations: If you have a rewards card that will earn points (like an airline credit card) or cash back, putting your vacation on your credit card can actually be something that you benefit from, depending on the rewards program. Don’t forget hotel stays even if you aren’t necessarily on vacation.
Airline Tickets: Besides the rewards that are earned from purchasing with a credit card, buying airline tickets on credit will usually include coverage by the travel insurance with the credit card company which can cover anything from flight cancellations to baggage loss. From my experience, the baggage insurance can really come in handy. Obviously, earning points or miles from an airline credit card does not hurt as well.
Hotels and Car Rentals – Most hotels require that you give a credit card number to make advance bookings. Frankly speaking, you really do not want to be using a debit card because if there is any mistake, you will have a more difficult time getting back your money whereas with a credit card, all you need to do is to lodge a dispute.
Some Car Rentals can simply make your life difficult if you do not have a credit card. They might require things like a recent utility bill to “prove” you can pay your bills and that you are credit worthy!
Sporting Events and Concerts: Earn rewards for your favorite sporting events and concerts when purchasing with your credit card, which can usually be redeemed for exclusive tickets in the future. The catch is to check with your credit card company to see which events are included. I have had trouble with companies scamming me before and having the expense charged to a credit card and being able to halt the charges sure came in handy.
Gasoline – Many of the better credit cards pay cash back on gasoline purchases. Very often, it is as high as 3% to 5%. With gas prices always fluctuating and more often than not increasing, earning those precious rebates is one smart way of saving money.
Supermarkets – The supermarket is one place where you definitely want to use your cash back credit card. When you stack up your manufacturers coupon with your store coupon, you will save lots of money. Earning cash rebates would then be icing on the cake. I call this the Triple Stack!
Online Shopping – Many cash back credit cards these days have new online shopping portals. Gone are the days where credit cards offered say 5% on gasoline spending the whole year round. Instead, what they offer now are online shopping portals. This is how it works. You log into account and go into their shopping portal. From there you go to the merchant partners site and as long as you shop with your credit card, you will earn extra rebates. For example, GAP.com may be a merchant partner. Rather than going to GAP.com through your browser, going there through your credit card’s shopping portal (it’s the same site and same products BTW), your purchases will be tracked differently for the purpose of earning you the rebates. Issuers like Discover and Chase all have shopping portals.
Expensive Appliances and Electronic Gadgets – Many of the better credit cards offer features such as purchase warranty and extended warranty features. A typical purchase protection feature means that if a product is accidentally broken and the retail store will not accept it, the purchase warranty protection kicks in and protects the buyer from monetary losses.
More importantly is the extended warranty protection. Many extended warranty feature extends the length of the manufacturer’s warranty for up to one year. This can save you money because you typically have to pay for an extended warranty protection from either the retail store or from the manufacturer themselves.
Parting Words – Even if you are not a credit card fan, there are times when using them really makes sense. Hopefully, these examples will convince you. Obviously, paying your credit card bills in full is a prerequisite.
The preceding was a guest post by AskMrCreditCard.
Friday, November 19, 2010
Thursday, November 18, 2010
Master Your Debt | Book Review
How Did We Get Here? And Where Are We?
The book starts off with a little bit of history concerning the recession that started just a few short years ago. There’s a ton of information concerning what steps the government took in terms of new regulations and stimulus funds after the financial meltdown occurred. Finally, there’s a very detailed list of the major types of debt Americans often carry – everything from mortgages to credit cards to student loans. This list explains how the debt works and alerts us to any new government or industry regulations.
Find Out Where You Stand
“Don’t lie to yourself about your money.” That’s the most important information in this chapter. Here, Goodman explains why you need to know the cold hard facts about your financial situation. You can’t improve your finances if you don’t know how much debt you have or how much money you’re actually spending every month.
Other People Are Grading You, Too
Be aware that other people (corporations and computers really) know a lot about your personal financial situation. Credit reports and scores allow other people to check how much debt you carry, if any, and how well you’re paying it off. There’s a good run down here of how exactly credit reports work and how to check yours.
Avoiding a Modern-Day Identity Crisis
Identity theft can cost you – both money and many wasted hours putting your life back together. This section provides some relatively common sense tips on how to prevent being a victim along with how identity theft really works.
Win the New Mortgage Game
The mortgage industry was a very effective catalyst in causing the financial crisis. Loans were being given to people who had no business borrowing money and the banks (along with many homeowners) got bitten when those individuals could no longer make payments. This chapter has a detailed run through of the different types of mortgages available now and some ways to pay your mortgage off faster.
Mortgage Free in Five to Seven Years
HE-What? This chapter explains the “secret” way to pay off a mortgage in 5 to 7 years (it is called a Money Merge Account). Did you just get that feeling in your stomach when you know something isn’t quite right? I know I did. Basically, this “system” has you take out a home equity line of credit on your house. You pay off your house with your HELOC. Then, you deposit your paycheck directly into the HELOC. You pay all of your bills through this line of credit. And because of the way interest is calculated on a HELOC, you end up paying it off very quickly.
I’m not saying that this method can’t work. On the surface, it seems like the math adds up. But the author’s promotion of companies tainted the information. This method also appears, to me at least, to only be appropriate for high income individuals with no debt other than a mortgage.
Credit Cards: Just Because It’s Called MasterCard Doesn’t Mean It’s the Boss of You
The credit card scene has changed dramatically over the past few years and this chapter spells out how to navigate those changes. Information on how to pay off credit card debt is present and how to get the most from cards (if you can use them responsibly).
Car Deals: Making Sure You’re in the Driver’s Seat
Buying a new car is almost never a fun experience. Chapter 8 deals mainly with how to pay for your car. Included is information on whether hybrids are really worth the upfront cost and what sources to use when researching a vehicle.
Oh and there’s a sales pitch for CarQ, a car buyer’s agent. Basically, you pay them a fee and they handle the business side of getting you into a vehicle.
Finally, there is lengthy discussion that presents leasing as a relatively good option when it comes to getting wheels. The author says “leases can be a particularly good deal for . . . drivers who like to get a new car every three years“. Who doesn’t want a new car every few years? I sure do. But that doesn’t mean I’m going to throw away money on a vehicle I won’t even own after 3 years. Leases are almost always a bad deal.
An Education in College Costs
Primarily, this chapter shows you how to save up for a child’s college education. More applicable to my own situation is the section that details how financial aid works and what federal loans are available.
Don’t Let Bad Luck Derail Your Finances
Look honestly at your debt situation to see whether or not you can handle paying everything off by yourself. You might need debt consolidation help from a credit counseling agency. There are tips and guidelines on how to handle calls from collection agents.
Surviving Bankruptcy
Why, When, and How to declare bankruptcy are discussed here. I thought that bankruptcy was presented a little too favorably, but I do agree that it’s the right thing to do for people who honestly don’t have other options.
Debt Strategies for Every Age
Everybody is different. Here, we see different strategies for different age groups. The section specifically for teens and 20-somethings was of interest to me and would be useful for anybody getting ready to graduate high school.
Permanent Mastery, Going Forward
The last chapter is a summary of previous information along with some general advice: keep good records, ask questions, watch the bottom line, etc.
The book starts off with a little bit of history concerning the recession that started just a few short years ago. There’s a ton of information concerning what steps the government took in terms of new regulations and stimulus funds after the financial meltdown occurred. Finally, there’s a very detailed list of the major types of debt Americans often carry – everything from mortgages to credit cards to student loans. This list explains how the debt works and alerts us to any new government or industry regulations.
Find Out Where You Stand
“Don’t lie to yourself about your money.” That’s the most important information in this chapter. Here, Goodman explains why you need to know the cold hard facts about your financial situation. You can’t improve your finances if you don’t know how much debt you have or how much money you’re actually spending every month.
Other People Are Grading You, Too
Be aware that other people (corporations and computers really) know a lot about your personal financial situation. Credit reports and scores allow other people to check how much debt you carry, if any, and how well you’re paying it off. There’s a good run down here of how exactly credit reports work and how to check yours.
Avoiding a Modern-Day Identity Crisis
Identity theft can cost you – both money and many wasted hours putting your life back together. This section provides some relatively common sense tips on how to prevent being a victim along with how identity theft really works.
Win the New Mortgage Game
The mortgage industry was a very effective catalyst in causing the financial crisis. Loans were being given to people who had no business borrowing money and the banks (along with many homeowners) got bitten when those individuals could no longer make payments. This chapter has a detailed run through of the different types of mortgages available now and some ways to pay your mortgage off faster.
Mortgage Free in Five to Seven Years
HE-What? This chapter explains the “secret” way to pay off a mortgage in 5 to 7 years (it is called a Money Merge Account). Did you just get that feeling in your stomach when you know something isn’t quite right? I know I did. Basically, this “system” has you take out a home equity line of credit on your house. You pay off your house with your HELOC. Then, you deposit your paycheck directly into the HELOC. You pay all of your bills through this line of credit. And because of the way interest is calculated on a HELOC, you end up paying it off very quickly.
I’m not saying that this method can’t work. On the surface, it seems like the math adds up. But the author’s promotion of companies tainted the information. This method also appears, to me at least, to only be appropriate for high income individuals with no debt other than a mortgage.
Credit Cards: Just Because It’s Called MasterCard Doesn’t Mean It’s the Boss of You
The credit card scene has changed dramatically over the past few years and this chapter spells out how to navigate those changes. Information on how to pay off credit card debt is present and how to get the most from cards (if you can use them responsibly).
Car Deals: Making Sure You’re in the Driver’s Seat
Buying a new car is almost never a fun experience. Chapter 8 deals mainly with how to pay for your car. Included is information on whether hybrids are really worth the upfront cost and what sources to use when researching a vehicle.
Oh and there’s a sales pitch for CarQ, a car buyer’s agent. Basically, you pay them a fee and they handle the business side of getting you into a vehicle.
Finally, there is lengthy discussion that presents leasing as a relatively good option when it comes to getting wheels. The author says “leases can be a particularly good deal for . . . drivers who like to get a new car every three years“. Who doesn’t want a new car every few years? I sure do. But that doesn’t mean I’m going to throw away money on a vehicle I won’t even own after 3 years. Leases are almost always a bad deal.
An Education in College Costs
Primarily, this chapter shows you how to save up for a child’s college education. More applicable to my own situation is the section that details how financial aid works and what federal loans are available.
Don’t Let Bad Luck Derail Your Finances
Look honestly at your debt situation to see whether or not you can handle paying everything off by yourself. You might need debt consolidation help from a credit counseling agency. There are tips and guidelines on how to handle calls from collection agents.
Surviving Bankruptcy
Why, When, and How to declare bankruptcy are discussed here. I thought that bankruptcy was presented a little too favorably, but I do agree that it’s the right thing to do for people who honestly don’t have other options.
Debt Strategies for Every Age
Everybody is different. Here, we see different strategies for different age groups. The section specifically for teens and 20-somethings was of interest to me and would be useful for anybody getting ready to graduate high school.
Permanent Mastery, Going Forward
The last chapter is a summary of previous information along with some general advice: keep good records, ask questions, watch the bottom line, etc.
Tuesday, November 16, 2010
10 Ways to Build the Habit of Saving Money
by J.D. Roth
How much do you save? I hope you put money aside. You don’t? Neither did I until a few years ago. How do you become a money saver? I’ll first tell you how you don’t: Not by using discipline or willpower. Discipline and willpower only work in the short-term.
What works in the long-term is understanding your spending habits. Once you understand, you can change by building new habits. That’s how you become a money saver. And that’s the topic of this post — ten ways to build the habit of saving money.
1. Set a Goal. What do you want?
•Do you want to have your own place?
•Do you want to be financially independent?
•Do you want to get out of debt?
A goal will give you a reason to save money. If you have multiple desires, start with one goal. Once achieved, set a second one.
2. Set a Deadline. Set a date by which you want your goal achieved. Write both on a piece of paper. Put it somewhere you can look at it multiple times a day — your nightstand, for example. Look at your goal and deadline on waking and before sleeping. It will remind you why you’re saving money.
3. Track Expenses. You probably have an idea of how much you spend, but unless you keep track of every cent, that idea is inaccurate at best. Here’s a simple way to track your expenses. You probably carry a phone wherever you go. Note everything you spend in your calendar. When you get home, copy everything to your personal finance tool. At the end of the month you’ll know exactly how much money you’ve spent and on what.
4. Analyze Costs. Check where your money goes. Reduce and remove costs. The first time you analyze your expenses can be shocking. The more the better. This is your first wake up call.
5. Make a Budget. Calculate how much money you need for:
•Food
•Rent
•Bills
•Clothes
•Leisure
•Etc
Remove costs from income. Now you know how much you can save each month. Even if it’s not much, it’s better than nothing.
6. Pay Yourself First. Make the first bill you pay each month the one to your savings account. Just like all your other bills, there’s no way around. You must pay it month after month, unless you’re in debt. Then the rule becomes: “Pay Your Debts First”.
7. Earn More Save More. Save a fixed percentage of your income. This way, as your income goes up, so will your savings. 20% is a good start. You can’t? Then you’re living beyond your means. Time to wake up.
8. Think Saving. If you have money left at the end of the month: save it. You don’t need to spend every cent earned. It’s okay to buy things. But make sure you really need them — don’t spend just for the sake of spending.
9. Wake Up. I wrote in the introduction that you need to understand your spending habits. You need to understand why you buy things. Do you buy things:
•To impress people?
•To be part of the group?
•To fill other’s expectations?
Next time you buy something, ask yourself: Why am I buying this? What are my real motives? Don’t judge. Just notice.
It takes time, but once you get it, it’s eye-opening. Your life will be simpler and you’ll avoid many financial headaches. Trying to keep the pace with others is a never-ending game, one you can’t win. Wake up.
10. Read Get Rich Slowly. Your environment influences your personality, and thus your habits. If you want to build the habit of saving money, surround yourself with people who save money. Get Rich Slowly is a good place to start. Subscribe. Read it on a daily basis. J.D.’s tips will become your second nature. You’ll become a money saver in no time.
Bonus Tip: Write this next to your goal and deadline: If I don’t save now, I’ll never have money. No matter how much I earn
How much do you save? I hope you put money aside. You don’t? Neither did I until a few years ago. How do you become a money saver? I’ll first tell you how you don’t: Not by using discipline or willpower. Discipline and willpower only work in the short-term.
What works in the long-term is understanding your spending habits. Once you understand, you can change by building new habits. That’s how you become a money saver. And that’s the topic of this post — ten ways to build the habit of saving money.
1. Set a Goal. What do you want?
•Do you want to have your own place?
•Do you want to be financially independent?
•Do you want to get out of debt?
A goal will give you a reason to save money. If you have multiple desires, start with one goal. Once achieved, set a second one.
2. Set a Deadline. Set a date by which you want your goal achieved. Write both on a piece of paper. Put it somewhere you can look at it multiple times a day — your nightstand, for example. Look at your goal and deadline on waking and before sleeping. It will remind you why you’re saving money.
3. Track Expenses. You probably have an idea of how much you spend, but unless you keep track of every cent, that idea is inaccurate at best. Here’s a simple way to track your expenses. You probably carry a phone wherever you go. Note everything you spend in your calendar. When you get home, copy everything to your personal finance tool. At the end of the month you’ll know exactly how much money you’ve spent and on what.
4. Analyze Costs. Check where your money goes. Reduce and remove costs. The first time you analyze your expenses can be shocking. The more the better. This is your first wake up call.
5. Make a Budget. Calculate how much money you need for:
•Food
•Rent
•Bills
•Clothes
•Leisure
•Etc
Remove costs from income. Now you know how much you can save each month. Even if it’s not much, it’s better than nothing.
6. Pay Yourself First. Make the first bill you pay each month the one to your savings account. Just like all your other bills, there’s no way around. You must pay it month after month, unless you’re in debt. Then the rule becomes: “Pay Your Debts First”.
7. Earn More Save More. Save a fixed percentage of your income. This way, as your income goes up, so will your savings. 20% is a good start. You can’t? Then you’re living beyond your means. Time to wake up.
8. Think Saving. If you have money left at the end of the month: save it. You don’t need to spend every cent earned. It’s okay to buy things. But make sure you really need them — don’t spend just for the sake of spending.
9. Wake Up. I wrote in the introduction that you need to understand your spending habits. You need to understand why you buy things. Do you buy things:
•To impress people?
•To be part of the group?
•To fill other’s expectations?
Next time you buy something, ask yourself: Why am I buying this? What are my real motives? Don’t judge. Just notice.
It takes time, but once you get it, it’s eye-opening. Your life will be simpler and you’ll avoid many financial headaches. Trying to keep the pace with others is a never-ending game, one you can’t win. Wake up.
10. Read Get Rich Slowly. Your environment influences your personality, and thus your habits. If you want to build the habit of saving money, surround yourself with people who save money. Get Rich Slowly is a good place to start. Subscribe. Read it on a daily basis. J.D.’s tips will become your second nature. You’ll become a money saver in no time.
Bonus Tip: Write this next to your goal and deadline: If I don’t save now, I’ll never have money. No matter how much I earn
Monday, November 15, 2010
5 ways to start a company (without quitting your day job)
Almost everyone stuck in a cubicle dreams of starting his own business. Here are 5 ways to use your current gig to launch a new venture.
Erick Schonfeld, Business 2.0 Magazine editor-at-large
(Business 2.0 Magazine) - If you're reading this, there's a good chance that you've always wanted to launch your own startup. According to our research, roughly half of all Business 2.0 readers dream of founding their own companies.
Odds are, however, that you're still working for someone else. Maybe it's because you're afraid to give up that steady paycheck. Perhaps you're simply terrified by the thought of placing yourself at the mercy of greedy investors, cutthroat competitors, and a potentially indifferent marketplace. Whatever the reason, it's clear that there's a lot of unrequited entrepreneurial longing out there.
So we set out to see if we could help. We wondered, what if cubicle-bound employees could use their current gigs to launch new ventures? Of course, starting a company while employed by another one can be tricky -- especially if you've signed agreements promising not to compete with your employer or not to hire away colleagues. Indeed, in many cases anything you invent while collecting a paycheck can be considered the boss's property. James Geshwiler, managing director of CommonAngels, a Boston investment group, warns that from a legal perspective, cubicle entrepreneurs often "tread on very sensitive ground."
Still, working for a corporation affords access to several things that are vital to a fledgling company: money, customers, market research, personnel. And it turns out that many former wage earners have successfully exploited these resources -- legally, and in some cases with the assistance of their employers -- to realize their entrepreneurial dreams. Some actually built their startups while working for someone else, while others simply tapped previous employers' people and cachet.
All of them, however, learned to look at salaried life as a springboard rather than a prison. Daniel Curran, a management consultant who lectures on entrepreneurship at UCLA, suggests, "When you come across hidden customer demands in your job, turn them into a business."
Here are five ways to get started.
1. Use Your Salary as Funding
Gregory Moore financed his big idea one paycheck at a time.
The opportunity was obvious: Gregory Moore wanted to create a company that would securely transmit patient and payment data between hospitals, doctors, clinics, and insurers. In 2000 he took the proposal to software maker TeraHealth, which then hired him to make it a reality. But TeraHealth didn't pursue the effort, so Moore began building the business on the side. He used his salary to hire a coder and spent nights and weekends filing incorporation papers and creating sales brochures. He even set up a basic office.
The Monday after he left TeraHealth in March 2001, his new company, Harbor Healthcare, was open for business. Moore booked his first revenue about a month later. TeraHealth grumbled, but Moore had records proving that he'd hatched his idea long before he joined the company.
The key, he says, is "to use your salary to invest in the startup as much as possible before jumping ship." After five years and several rounds of angel funding, he still owns a majority of the firm's equity.
2. Turn Common Complaints Into a Business Plan
Jeff Gallino and Cliff LaCoursiere decided to give customers what they really wanted.
You know that feature your customers are always asking for? If your employer won't deliver it, maybe you should.
That's what Jeff Gallino and Cliff LaCoursiere did. Back in 2001 the two worked for ThinkEngine Networks, a Boston-based telecom equipment company. Gallino handled relationships with software partners, while LaCoursiere ran sales. The two kept hearing customers ask for a way to digitally sift through recorded calls and analyze them.
Gallino and LaCoursiere brought the idea to their employer, but they received a halfhearted response. So the duo wrote a business plan during off-duty hours and left ThinkEngine Networks in 2002. They funded their new firm, CallMiner, for a year with money saved from their salaries.
Gallino wrote the first version of their software, which builds an overall picture of what's being said through speech recognition, pattern mining, and signal analysis. The product attracted angel investment and a venture round, including cash from In-Q-Tel, the CIA's venture fund. Today, CallMiner's applications are used by airline, energy, and cable companies to categorize call-center calls, while government agencies are evaluating the technology's ability to automate intelligence gathering.
3. Make Your Boss a Beta Tester
David Bookspan invented a new service that his old firm just couldn't live without.
While working as a partner in a Philadelphia law firm during the 1990s, David Bookspan figured out how to use the local courthouse's lawsuit filings to drum up new business. Bookspan realized that if he could automate his system, he'd be able to create a lead-generation service that other lawyers would gladly pay to access.
The chairman at his firm felt the effort would distract from its core legal practice, but he let Bookspan develop it on his own. "Just be completely up front," Bookspan advises anyone with similar intentions. "View your employer as your friend."
He incorporated as MarketSpan in 1996 and stayed at the law firm for another year, working nights out of his home with a partner who was a software developer to create a marketable product. Four years later, with 88 of the nation's top 100 law firms (including his old employer) signed up as customers, his company was acquired by CourtLink (itself later bought by LexisNexis) for a reported $35 million.
4. Take Advantage of Your Company's Reputation
Dan Connors turned his pedigree into seed capital.
After 11 years at LucasArts, the videogame arm of Lucasfilm, Dan Connors decided that enough was enough. Hoping to make games that emphasized episodic storytelling rather than shoot-'em-up action, Connors was heartbroken when LucasArts killed his cartoon-based project to put more resources behind the firm's Star Wars franchise. At the same time, LucasArts was downsizing, so it was easy to quit.
Connors started out with one like-minded colleague in April 2004. They called their new venture Telltale and seeded it with cash from their severance packages. Then, over the next two years, as other former colleagues left LucasArts, Connors hired 15 of them.
Thanks to their LucasArts halo, Telltale had no problem finding clients. Within nine months it landed a deal to work with Ubisoft on a game based on TV's CSI. LucasArts's reputation also made it easier to raise $1.4 million in angel funding. Says Connors, "It's hard to overestimate the door-opening power of the LucasArts name."
5. Convert Your Employer Into a Business Partner
Jeff Hilbert spun a doomed division into a successful startup.
In 2002, when Jeff Hilbert was managing the design services division of Coventor, a chip-design software company in North Carolina, his unit was slated for the chopping block. However, Hilbert noticed that he had recently been winning a lot of business from wireless chip companies, so he asked Coventor to let him spin off the unit as a stand-alone company.
The board went for it and gave the startup -- now called WiSpry -- $6 million worth of patents and other intellectual property, seven employees, several hundred thousand dollars, and an office in Irvine, Calif., all in exchange for shares in the company. Today, Hilbert is CEO of WiSpry, which is developing a special chip for cell phones that could improve battery life by 20 to 40 percent. His advice: Don't rely too much on a parent company. Sooner or later, all startups must be able to fend for themselves.
Erick Schonfeld, Business 2.0 Magazine editor-at-large
(Business 2.0 Magazine) - If you're reading this, there's a good chance that you've always wanted to launch your own startup. According to our research, roughly half of all Business 2.0 readers dream of founding their own companies.
Odds are, however, that you're still working for someone else. Maybe it's because you're afraid to give up that steady paycheck. Perhaps you're simply terrified by the thought of placing yourself at the mercy of greedy investors, cutthroat competitors, and a potentially indifferent marketplace. Whatever the reason, it's clear that there's a lot of unrequited entrepreneurial longing out there.
So we set out to see if we could help. We wondered, what if cubicle-bound employees could use their current gigs to launch new ventures? Of course, starting a company while employed by another one can be tricky -- especially if you've signed agreements promising not to compete with your employer or not to hire away colleagues. Indeed, in many cases anything you invent while collecting a paycheck can be considered the boss's property. James Geshwiler, managing director of CommonAngels, a Boston investment group, warns that from a legal perspective, cubicle entrepreneurs often "tread on very sensitive ground."
Still, working for a corporation affords access to several things that are vital to a fledgling company: money, customers, market research, personnel. And it turns out that many former wage earners have successfully exploited these resources -- legally, and in some cases with the assistance of their employers -- to realize their entrepreneurial dreams. Some actually built their startups while working for someone else, while others simply tapped previous employers' people and cachet.
All of them, however, learned to look at salaried life as a springboard rather than a prison. Daniel Curran, a management consultant who lectures on entrepreneurship at UCLA, suggests, "When you come across hidden customer demands in your job, turn them into a business."
Here are five ways to get started.
1. Use Your Salary as Funding
Gregory Moore financed his big idea one paycheck at a time.
The opportunity was obvious: Gregory Moore wanted to create a company that would securely transmit patient and payment data between hospitals, doctors, clinics, and insurers. In 2000 he took the proposal to software maker TeraHealth, which then hired him to make it a reality. But TeraHealth didn't pursue the effort, so Moore began building the business on the side. He used his salary to hire a coder and spent nights and weekends filing incorporation papers and creating sales brochures. He even set up a basic office.
The Monday after he left TeraHealth in March 2001, his new company, Harbor Healthcare, was open for business. Moore booked his first revenue about a month later. TeraHealth grumbled, but Moore had records proving that he'd hatched his idea long before he joined the company.
The key, he says, is "to use your salary to invest in the startup as much as possible before jumping ship." After five years and several rounds of angel funding, he still owns a majority of the firm's equity.
2. Turn Common Complaints Into a Business Plan
Jeff Gallino and Cliff LaCoursiere decided to give customers what they really wanted.
You know that feature your customers are always asking for? If your employer won't deliver it, maybe you should.
That's what Jeff Gallino and Cliff LaCoursiere did. Back in 2001 the two worked for ThinkEngine Networks, a Boston-based telecom equipment company. Gallino handled relationships with software partners, while LaCoursiere ran sales. The two kept hearing customers ask for a way to digitally sift through recorded calls and analyze them.
Gallino and LaCoursiere brought the idea to their employer, but they received a halfhearted response. So the duo wrote a business plan during off-duty hours and left ThinkEngine Networks in 2002. They funded their new firm, CallMiner, for a year with money saved from their salaries.
Gallino wrote the first version of their software, which builds an overall picture of what's being said through speech recognition, pattern mining, and signal analysis. The product attracted angel investment and a venture round, including cash from In-Q-Tel, the CIA's venture fund. Today, CallMiner's applications are used by airline, energy, and cable companies to categorize call-center calls, while government agencies are evaluating the technology's ability to automate intelligence gathering.
3. Make Your Boss a Beta Tester
David Bookspan invented a new service that his old firm just couldn't live without.
While working as a partner in a Philadelphia law firm during the 1990s, David Bookspan figured out how to use the local courthouse's lawsuit filings to drum up new business. Bookspan realized that if he could automate his system, he'd be able to create a lead-generation service that other lawyers would gladly pay to access.
The chairman at his firm felt the effort would distract from its core legal practice, but he let Bookspan develop it on his own. "Just be completely up front," Bookspan advises anyone with similar intentions. "View your employer as your friend."
He incorporated as MarketSpan in 1996 and stayed at the law firm for another year, working nights out of his home with a partner who was a software developer to create a marketable product. Four years later, with 88 of the nation's top 100 law firms (including his old employer) signed up as customers, his company was acquired by CourtLink (itself later bought by LexisNexis) for a reported $35 million.
4. Take Advantage of Your Company's Reputation
Dan Connors turned his pedigree into seed capital.
After 11 years at LucasArts, the videogame arm of Lucasfilm, Dan Connors decided that enough was enough. Hoping to make games that emphasized episodic storytelling rather than shoot-'em-up action, Connors was heartbroken when LucasArts killed his cartoon-based project to put more resources behind the firm's Star Wars franchise. At the same time, LucasArts was downsizing, so it was easy to quit.
Connors started out with one like-minded colleague in April 2004. They called their new venture Telltale and seeded it with cash from their severance packages. Then, over the next two years, as other former colleagues left LucasArts, Connors hired 15 of them.
Thanks to their LucasArts halo, Telltale had no problem finding clients. Within nine months it landed a deal to work with Ubisoft on a game based on TV's CSI. LucasArts's reputation also made it easier to raise $1.4 million in angel funding. Says Connors, "It's hard to overestimate the door-opening power of the LucasArts name."
5. Convert Your Employer Into a Business Partner
Jeff Hilbert spun a doomed division into a successful startup.
In 2002, when Jeff Hilbert was managing the design services division of Coventor, a chip-design software company in North Carolina, his unit was slated for the chopping block. However, Hilbert noticed that he had recently been winning a lot of business from wireless chip companies, so he asked Coventor to let him spin off the unit as a stand-alone company.
The board went for it and gave the startup -- now called WiSpry -- $6 million worth of patents and other intellectual property, seven employees, several hundred thousand dollars, and an office in Irvine, Calif., all in exchange for shares in the company. Today, Hilbert is CEO of WiSpry, which is developing a special chip for cell phones that could improve battery life by 20 to 40 percent. His advice: Don't rely too much on a parent company. Sooner or later, all startups must be able to fend for themselves.
Sunday, November 14, 2010
What debt to pay off first?
By Lucy Lazarony
You've charged it up -- now it's pay-down time.
If you're up to your eyeballs in credit card and other debt, paying the minimums and little else, it's time to get serious.
The best way to get rid of debt, experts agree, is to attack the balance with the highest annual percentage rate first. When that one is paid off, move onto the debt with the next-highest interest rate.
But always attack that high-interest debt first. On that debt, you want to "double, triple, quadruple minimum payments," says Howard S. Dvorkin, president and founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "When you're done with that one, move on to the next one."
Linda Sherry, editorial director with Consumer Action, a consumer advocacy group in San Francisco, agrees: Size up bills by interest rates rather than the amount of the balance.
"The amount you owe doesn't really matter when you're paying an enormous amount of interest," Sherry said. "Try to pay the highest interest rate ones first. Muster all the funds available and get the debt out of your life."
An alternative plan -- littlest first
What about knocking off some low-balance bills first and eliminating a bill or two from that thick monthly pile? Experts respond: Go ahead, especially if it will give you the boost you need to stick with a pay-down plan.
"It makes better financial sense to pay down the highest interest rate first. But people get discouraged. So they knock down lower balances first," says Steve Rhode, co-founder of the nonprofit financial services organization Myvesta. "It's a lot more gratifying for some people to pay off the smaller balances within a couple months. (They) feel like they're making more progress."
But once those smaller balances are gone, he says, go back to Plan A: Take the money that had been set aside to pay those bills and apply it to the balance with the highest interest rate.
"Muster all the funds available and get the debt out of your life," Rhode says.
Stick to your plan
The key to an effective pay-down plan is sticking with it. Don't let up on the monthly payments as the credit cards' minimum payments inch down and as bills get paid off.
"Once you establish a payment plan with a credit card bill, stick with the payments until it's gone and then roll it into another credit card and keep going," says Christine Jones, a counselor with American Credit Counseling Service in Melbourne, Fla. Unfortunately, many people quit before they get started.
"The problem I see is that people make mental promises to themselves that they can't keep," says the DCA's Rhode. "They say they will pay $100 a month but it's too big a stretch. They can't do it and then they forget about it."
Think before you act
To avoid falling into that trap, take a hard look at your finances and determine how much you can realistically afford to pay each month. Rhode suggests that people track their spending every day for a month to get a firm handle on where their money is actually going.
"People will save 20 percent just writing down where their money goes," he says. "Because they will start cutting back."
After tracking their spending, people can better decide how much they can afford to pay toward credit card debt. Experts point out that just $50 more a month can make a big difference.
If logging expenses for a month doesn't turn up additional money try these tips for saving $50 a month from Consumer Credit Counseling Service:
•Brown bag 10 lunches per month.
•Have movies and popcorn at home instead of going out.
•Use coupons for groceries and buy store brands.
•Make pizza at home instead of ordering out.
•Buy in bulk and freeze dinner entrees.
•Give handmade cards and gifts.
•Shop at consignment, thrift and discount stores.
Pay more than the minimum
Once you start paying more than the minimum, the debts start to disappear. Paying just the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and cost a person a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and they would be spared $1,800 in interest charges. Use Bankrate.com's credit card minimum payment calculator to see how increasing your payments will cut your time in debt.
It is also important to keep in mind that debt is not always bad.
"Having a certain amount of credit balance is not negative," Consumer Action's Sherry says. "Some debt is necessary to reach goals."
But most experts recommend that debt payments including car payments and credit cards eat up no more than 10 to 15 percent of income. More could spell trouble.
"If you can only afford the minimum payments each month, you're on the edge. If you have to hope and pray that your deposit gets to the bank to cover your checks. And especially if you're using the cash advance on a credit card to pay other cards or for routine living expenses," Rhode said. "They're spending money they don't have."
You've charged it up -- now it's pay-down time.
If you're up to your eyeballs in credit card and other debt, paying the minimums and little else, it's time to get serious.
The best way to get rid of debt, experts agree, is to attack the balance with the highest annual percentage rate first. When that one is paid off, move onto the debt with the next-highest interest rate.
But always attack that high-interest debt first. On that debt, you want to "double, triple, quadruple minimum payments," says Howard S. Dvorkin, president and founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "When you're done with that one, move on to the next one."
Linda Sherry, editorial director with Consumer Action, a consumer advocacy group in San Francisco, agrees: Size up bills by interest rates rather than the amount of the balance.
"The amount you owe doesn't really matter when you're paying an enormous amount of interest," Sherry said. "Try to pay the highest interest rate ones first. Muster all the funds available and get the debt out of your life."
An alternative plan -- littlest first
What about knocking off some low-balance bills first and eliminating a bill or two from that thick monthly pile? Experts respond: Go ahead, especially if it will give you the boost you need to stick with a pay-down plan.
"It makes better financial sense to pay down the highest interest rate first. But people get discouraged. So they knock down lower balances first," says Steve Rhode, co-founder of the nonprofit financial services organization Myvesta. "It's a lot more gratifying for some people to pay off the smaller balances within a couple months. (They) feel like they're making more progress."
But once those smaller balances are gone, he says, go back to Plan A: Take the money that had been set aside to pay those bills and apply it to the balance with the highest interest rate.
"Muster all the funds available and get the debt out of your life," Rhode says.
Stick to your plan
The key to an effective pay-down plan is sticking with it. Don't let up on the monthly payments as the credit cards' minimum payments inch down and as bills get paid off.
"Once you establish a payment plan with a credit card bill, stick with the payments until it's gone and then roll it into another credit card and keep going," says Christine Jones, a counselor with American Credit Counseling Service in Melbourne, Fla. Unfortunately, many people quit before they get started.
"The problem I see is that people make mental promises to themselves that they can't keep," says the DCA's Rhode. "They say they will pay $100 a month but it's too big a stretch. They can't do it and then they forget about it."
Think before you act
To avoid falling into that trap, take a hard look at your finances and determine how much you can realistically afford to pay each month. Rhode suggests that people track their spending every day for a month to get a firm handle on where their money is actually going.
"People will save 20 percent just writing down where their money goes," he says. "Because they will start cutting back."
After tracking their spending, people can better decide how much they can afford to pay toward credit card debt. Experts point out that just $50 more a month can make a big difference.
If logging expenses for a month doesn't turn up additional money try these tips for saving $50 a month from Consumer Credit Counseling Service:
•Brown bag 10 lunches per month.
•Have movies and popcorn at home instead of going out.
•Use coupons for groceries and buy store brands.
•Make pizza at home instead of ordering out.
•Buy in bulk and freeze dinner entrees.
•Give handmade cards and gifts.
•Shop at consignment, thrift and discount stores.
Pay more than the minimum
Once you start paying more than the minimum, the debts start to disappear. Paying just the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and cost a person a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and they would be spared $1,800 in interest charges. Use Bankrate.com's credit card minimum payment calculator to see how increasing your payments will cut your time in debt.
It is also important to keep in mind that debt is not always bad.
"Having a certain amount of credit balance is not negative," Consumer Action's Sherry says. "Some debt is necessary to reach goals."
But most experts recommend that debt payments including car payments and credit cards eat up no more than 10 to 15 percent of income. More could spell trouble.
"If you can only afford the minimum payments each month, you're on the edge. If you have to hope and pray that your deposit gets to the bank to cover your checks. And especially if you're using the cash advance on a credit card to pay other cards or for routine living expenses," Rhode said. "They're spending money they don't have."
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