Personal Finance Blog

Tips And Stories To Help You With Managing Money

Learning How To Think Like A Millionaire

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There are three things that you can do with your money. You can save it. You can spend it or you can invest it. How well you do these things may determine whether you will be in the group of 7% of Americans that are millionaires.

learn how to think like a millionaire
Think Like A Millionaire

Many years ago, people would have considered that being a millionaire would be the ultimate in luxury and wealth. Now, for some people, being a millionaire is not even considered enough to do much. Warren Buffet made his first million dollars when he was just 31 years-old. That amount of money is .002% of his current wealth. With rising billionaires like 26 year-old Mark Zuckerberg, founder of Facebook, there seems to be more money to be made than at any other time in recent history.

When you study what unique strategies millionaires use, you may get some ideas to improve your own circumstances. Whether you make $30,000 a year or $1,000,000 a year, improving your skills can help you on the road to becoming more financially secure. Maybe you’ll never be a millionaire or don’t even want to be. You still will need to make strategic financial decisions that will affect how much you enjoy your future life. If you could see your distant future life as well as you can see your life next week, you may decide to live life differently.

Let’s take a look at what millionaires say they do and how they got there.

Paul Lim, a writer for Money magazine, reported some interesting facts from a poll of millionaires. In his article, Millionaires in the Making, he shares with us the answers.

How did you get to be a millionaire?
95% said hard work, 83% investing wisely, 81% by being frugal and 41% by luck.

Do you feel wealthy?
42% said no.

What preparation did they have?
90% are college graduates, 5% have law degrees, 3% went to medical school.

What is the average amount annually invested?
$39,300.

What seems to be the number one thing that millionaires did to get where they are is a lot of hard work. All of us are capable of doing that. We can all become more frugal about what we spend our money on and although we are not all lucky, we can learn to invest wisely.

Did you notice that quite a few people said that even though they were millionaires, they did not feel wealthy? Feeling wealthy is probably one of the things we do have control of. Since your perspective on life can run the gamut of outright depressing thoughts to unrealistic elation, you choose where in that range you want to be. Of course, when the joys of seeing more money coming in and how nice it makes your life, it is easier to think about bigger income numbers than you have thought of before. If you can’t imagine the larger numbers in your income, will you ever improve your standard of living?

Another thing that millionaires do is to habitually save money to invest. The average amount per year that they invest is $39K. If your income level is not even that high, you can work on saving in percentages. Make it a goal to save a certain percentage of money every month. Financial experts advise you to have enough cash to pay your bills for at least six months. Whatever percentage you decide on the important thing is to follow through with your plan each month. Automate that savings if possible.

Some millionaires have also made a practice of living below their means. This falls into the category of budgeting and anyone can follow a budget. You just need to include your savings plan in your budget. It is one thing to have a million dollars sitting in your bank account, but it’s another thing to learn how to best use it.

Millionaires did not become millionaires by working for someone else. Many have started their own businesses. Anyone can start their own business for very little money and if you have a low overhead in your business plan, you can actually accomplish this while working for someone else. Did you know that only 12% of American households own their own business? Paul Lim, reported that the median income for business owners was $497,000 compared to $42,000 for non business owners. Would it be worth your time and effort to start your own business? When you can harness the power of entrepreneurial thoughts and put into action a good business plan, you are on your way to a brighter future.

Realistically speaking there are few people that reach the status of being a millionaire. Learning key money management skills and business building skills can only help you increase your productivity and increase your income. Start today to create a better outlook on life. Do what you can to take your first steps to a new life.

New business owners can save up to 50% off by ordering business checks online.

Organizing Your New Business Start Up

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Protect Your New Business
Are you thinking about starting a new business? Then you will need to decide what type of legal structure your new business will have. The legal structure you choose will determine how your business will be taxed and the rules your business must follow.

The Five Most Commonly Used Business Organizations

There are five common types of business organizations. Outlined below you will find the definitions of each type of business and why you might want to choose that type of structure.

Sole Proprietorship

The sole proprietorship is for someone who owns a company and is not planning to incorporate or become a limited liability company. This is mainly for a business that will be owned by one individual. That individual may or may not have employees. When you have this type of business structure, you report your business income on your individual tax return. Some of the risks of the sole proprietorship are that your business debts and obligations could be attached to your personal assets, even if they are not directly related to your business.

Partnerships

The second type of structure is a partnership. Usually a partnership will consists of two or more people who want to do business together. Each partner has a fiduciary duty of loyalty and trust to the other partners and put his own interests below the interests of the partnership. Partners have unlimited liability to the business. Creditors can require that liabilities be paid from personal assets. Partnerships report profits or losses on individual income tax returns. Partners are not allowed to sue each other. Usually partnerships require a written partnership agreement.

Limited Partnerships

The third type of structure is a limited partnership. This is made up of at least one or more general partners and at least one or more limited partners. General partners act as the fiduciaries of the business and assume all the monetary risk. All parties can profit from the company. Limited partners assume risk of their contributions and that is all. Limited partners often assume the role of raising capital and do not participate in the day-to-day business operations. Members file their own individual tax returns. The partnership files an information return with the Internal Revenue Service, notifying the IRS of each partner’s share of the year’s profit or loss.

Corporations

The fourth type of business structure is a corporation. This is the type of organization that is most often used with the term business. Most large businesses are corporations. People can invest in corporations without assuming liability or management responsibilities. Corporations are creations of the state. Corporations have a board of directors and can issue stock. Shareholders are owners of the corporation and have limited liability and are not involved in the day to day operations of the business. A corporation is a legal person and a legal entity separate from its shareholders and managers. A corporation pays state and federal income taxes on its income.

Limited Liability Company

The fifth business structure is a limited liability company or LLC. LLCs are created by filing Articles of Organization with the state in which you live and have one or more “persons” conducting business. One benefit of this organization structure is that no member, manager or employee is personally liable for any debt obligations of the company. The LLC has a tax status of a general partnership with limited liability protection. No annual meetings are required. Members can participate in management more than in a limited partnership. They are responsible for disclosure, record keeping and annual reporting requirements. LLCs are only taxed once and the earnings of a partnership are treated as the earnings of its partners.

Conclusion

This information is intended to be used as a very brief overview of the main types of business structures. Consulting with a CPA or attorney can help you make the final decision about your new business. Protect yourself against unnecessary risks and get your new business off to a good start.

Order your business checks online and save.

Strategic Business Plans Pay Off

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Any business starts with an idea. Ideas are then put down on paper, discussed with esteemed partners and friends or at least mulled over in your own mind. Work begins to put the business strategy into production.

Strategic business plans
Rare Earth Mine Mountain Pass, California owned by Molycorp Inc.

Small business plans are created in the same way large business create their plans. In fact, looking at the development of  large companies is helpful to the small business owner. Modeling the success strategies they use can help you take your business to the next level.

Molycorp Inc.

For example, the story behind the scenes of the well publicized Molycorp, Inc. gives small business owners key strategies to emulate. Making a paper profit of $2.3 billion dollars in less than three years, Molycorp Inc. made some strategic business plans.

Molycorp Minerals LLC was formed in 2008 by a group of investors. Two critical players  in this LLC are  Mark S. Kristoff,  CEO of Trayxs, (which provides financial services for the mining, metals and minerals industries) and Dr. Ross R. Bhappu, of  Resource Capital Funds  (focused on investing exclusively in the mining and minerals industry).

These two individuals have expert, inside knowledge of the mining industry. When Mr. Kristoff was just 12 years old, his father, who worked as an executive at the mine,  gave him a tour of the Mountain Pass rare earth mine in California, one of the largest rare earth mines in North America.   Dr. Bhappu’s father was also an executive at the mine which was then owned by a Union Oil company. In 2005, the company was  acquired by Chevron.

Mr. Kristoff and Dr. Bhappu developed an interest in buying the Mountain Pass mine  in 2005.  In 2008, Chevron sold the mine to their LLC because they promised to keep the existing employees and to revitalize the unproductive mine. It had been inactive since 2002. Mr. Mark Smith, former President of Mining for Chevron  was lured away from Chevron to become the new CEO of Molycorp Inc.

Investment Strategies

In the beginning, there were four principal investors in the company, Resource Capital Funds, Pegasus Capital Advisors, Traxys  and Goldman Sachs. In 2009, Goldman Sachs sold their shares of the company because the economy was in such turmoil.

Demand Exceeds Supply

Molycorp Inc. invested  $80 million into upgrading the mining equipment and facility. Currently producing 3,000 tons per year, their next goal is to produce 20,000 tons. Leaders have predicted that this will double in production by 2014. With China recently announcing that they are limiting the export of rare earth materials,  demand (predicted to be 190,1000 tons in 2014) is now exceeding the supply (170,000 tons).  Cerium oxide rose in price from $6,000 to $71,000. Ianthanum oxide rose from $8,400 to $73,000.

Production of Green Technologies

The rare earth minerals that will come from this mine are used in many green earth technologies like wind turbines and hybrid cars. They are also used in electronics, plasma and LCD televisions and the widely popular Apple Ipad.

The combination of the world events and good strategic business planning by the Molycorp, Inc. leaders have caused, “one of the fastest windfalls in private-equity history.” (Wall Street Journal).

Small Business Plans

For small business owners, the key strategies that created this success were familiarity and expertise with the product line, choosing products that are in demand, effectively using global trade news to make plans, hard work, passionate leaders and the ability to communicate their business plans to key investors. Definitely a good model for small business owners to emulate.

Do Small Business Start Up Strategies Work?

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Small Business start ups
There are no limits to the success your small business can achieve.

Small business start ups can help you to take back control of your financial future. Developing a small business is not only possible, but is an excellent strategy to use in 2011.  Having your small business become successful is not beyond your reach. There are people doing it all the time.

Backcountry.com, a strong, successful company based in Utah, began in 1996 by two-time Olympic Nordic ski jumper Jim Holland, and writer-entrepreneur John Bresee.

They started their business in their garage, with $2,000, a website and no inventory. Now the company sells  premium outdoor gear online and has become a major player in the outdoor gear niche.  Today they have over 700 employees and sell products from over 1,000 different brands.

Jill Layfield, the new CEO of Backcountry.com reports that growth in their business has gone from a high of 3,000 orders in a day to new high of 40,000 orders in a day. Her advice to business startups is to stay hungry and stay nimble.

Starting a new business is not without struggles, challenges and hurdles. Amy Cosper, editor in chief for Entrepreneur.com says that the biggest mistake small business start ups make is not financially planning properly. Funding the startup business is one of the biggest hurdles you will have. Lines of credit are disappearing. Banks are not loaning money. However, if you do have a good business plan and can communicate it effectively, the money is there and you can find it.

The second mistake is not having a clear picture of what your business really is. “If you cannot tell me your business idea in two sentences or less, you really have to rethink it.”

Cosper’s best advice is to really know the market you are going into and understand the competitive landscape and the financial modeling. “The biggest pieces of advice I have to give you is to never take no for an answer and follow your gut. It’s more gut than it is spreadsheet.”

Entrepreneurs need to realize that there really is no ceiling on the amount of money they can make. Income ceilings exist in salaried jobs, but entrepreneurial risk takers enjoy the sweetness of life without the politics of others “opinions” about your job performance.

Medical Bankruptcies

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Did you know that almost 50% of bankruptcies in the United States are caused by unpaid medical bills? According to statistics, an estimated 1.5 million Americans might file for bankruptcy protection within the year.

Although this is a very discouraging prediction, many still believe that spending too much on things you do not actually need is the very reason why people go bankrupt. According to authorities in credit repair however, this is not the case because most bankruptcies are caused or triggered by medical expenses.

Medical bankruptcy is not unheard of but many Americans do not know that it actually is the trigger for 62% of the total of bankruptcy filings. From 2001 to 2007, US medical bankruptcies went up to almost 50%. This is rather alarming and should be a cause for concern for American families.

Does this have anything to do with how much money you make each year? The answer is yes and no. According to a study done by the American Journal of Medicine reported most of those who file for medical bankruptcy are well educated individuals and even have a house of their own. This is quite surprising because one would expect that those who make enough money will be able to pay for their medical expenses.

Debt collection practices in the United States cause  many families or individuals to file for bankruptcy. Fear of being sued is common place. If you owe a credit card company a certain amount, the chances of you getting sued is slim but with medical bills, you can be sued in a small claims court. Many want to declare themselves as bankrupt to seek protection from lawsuits.

I am aware of several individuals who have suffered nervous breakdowns due to incessant collection activity on credit card bills and medical debt. It is regrettable enough to have the misfortune to fall ill or become unemployed. But to be relentlessly hounded to pay for medical treatment seems, frankly, verging on the immoral. ~ Alan

A declaration of bankruptcy is not necessarily the best solution to your problem. Talking to a lawyer who is an expert in bankruptcy is a good first step. Examining your options without panicking is imperative so that you can find a solution to your medical bill payments.

Make sure you have adequate health insurance cover to protect you from excessive medical bills. If you can’t afford full medical coverage, at least get a policy to protect you in the event of an accident or a long term illness. Some of these policies have large deductibles, but will cover your expenses over $5 – $6 thousand dollars. Don’t leave  yourself unprotected.

Alex Lickerman, MD, states that, “what’s worrisome now is that people are having to choose between saving money and getting necessary help for serious conditions.”