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Monthly Archives: January 2016

Wealth Building and DIY Financial Planning: Being Your Own Financial Advisor, A Good Idea?


For too long, too many people have handed over responsibility for their investment decisions almost entirely to their financial advisors. This is a bad idea. No one is going to manage your own money as well as potentially you could. The way I see it, anything you can do to create a better life for yourself and your dependents is fair game. So, becoming financially literate and reducing any over-dependency on financial advisors is part of this over-arching objective.

Becoming financially literate not only empowers you and your finances but sets a really good, much-needed example for those around you. In my view, “Becoming 100% financially literate” is something that warrants being on everybody’s list of top lifetime goals.

No Such Thing as a Free Lunch

Have you ever wondered how your financial advisor was getting paid? You probably had a suspicion some financial institution was greasing his palm. Well, as the saying goes, there really is no such thing as a free lunch. Beneath the pin-striped suit lies the thinly-disguised commissions and fees structure that has rotten the financial services industry to the core.

Even now, with financial institutions heavily regulated and the onus on your financial advisor to disclose to you the commissions and fees they get paid for a transaction, this can still result in you feeling uncomfortable and wary, and leave you with a distinct bad taste in your mouth.

After the recent global financial meltdown there is a huge question mark about the validity, integrity and systemic over-reliance on the financial services industry. Instead of being obligated to put your financial interests ahead of their own and create the best financial plan for you, financial advisors are only required by law not to sell you something that’s utterly unsuitable. This combined with the need to make a buck can sometimes mean your best interests aren’t always at heart. As this article will show, there has never been a more apt time to become financially literate and undertake the process of becoming your own financial advisor.

Many financial service providers are either focused on a) commissions or b) service fees. In turn they impart some so-so financial advice and deliver middling returns on investment. Commission-based “financial advisors” are working for commissions paid to them by a brokerage firm, mutual fund company, insurance company etc. Fee-based financial advisors are selling their skills and time for hourly or à la carte rate.

Of the two distinct approaches, fee-based financial advice is the lesser of two evils so to speak. However, commissioned-based services may very well be the most suitable for a small investor. This is particularly true in the case of a smaller investment portfolio where less active management is required. In this instance, paying the occasional commission is probably not going to be the ruin of the portfolio’s returns over the long-term.

Many financial advisors are now what they call “fee based” (i.e. they earn their crust from both fees paid by you and commissions). True fee-only financial planners are still a rare breed. Regrettably a very high percentage of financial planners are not working for you but are essentially sales people for financial institutions flogging financial products for commission. They consciously or unconsciously will tend to sell you a product that pays them the highest commission. So, oftentimes their agenda and yours are completely different.

One Trick Product Ponies

Oftentimes, the only product(s) a financial advisor understands is the one he/she is selling. An insurance agent will promote insurance products enthusiastically whilst your stockbroker will push individual stocks or a basket of shares. In both instances, neither may be aware of your complete financial situation and hence are incapable of giving you advice. The best use of your money at that moment could be to reduce your debts or build up an emergency fund.

Good financial planning is not so much about trying to beat the market or multiplying your wealth. It’s really about making sure your portfolio is well-diversified and that other aspects of your finances – budgets, credit ratings, insurance cover, tax planning, estate planning and retirement accounts – are in the best possible shape. So proper financial planning encompasses more than investments. It should also allow you to protect your assets, minimize your taxes, and take care of your dependents etc., all the while growing your wealth over time.

Your average commission-based financial advisor isn’t likely to think about the big financial picture. On the other hand, fee-only financial advisors are likely to be more objective at analysing entire portfolios.

When to Get Professional Advice

If are you are going to do some DIY financial planning than you will need time, education, experience, objectivity and the inclination to achieve the same level of competence offered by many professionals. To be frank, very few average-joe investors have it in them to become their own financial advisors. They simply aren’t that way inclined and are too busy getting on with their day-to-day lives. So, you need to be brutally honest with yourself about the level of financial literacy you have as you create and implement your financial plans. You can’t afford to punch above your weight, make costly mistakes and possibly suffer a financial knock-out!

So, whilst I think it’s a great idea to strive to become your own financial advisor I do think it’s important to point out that I also believe it’s crucial to have a team of Grade A financial professionals (financial/tax/legal experts) in place whom you can turn to for critical advice.

There are times that you will need a second, more experienced opinion than your DIY Financial Advisory skills may be capable of. Here are a just a few examples of when it’s useful to get professional advice:

  1. When you’re transitioning from one stage of life into another (getting married, having kids, retiring, getting divorced, etc)
  2. Any major financial transaction such as the purchase of a property, buying or selling a business, receiving an inheritance, etc.
  3. When you are at a financial impasse or suffering from inertia and unclear about what to do next.
  4. When you’re looking for the best way to protect your family in the event of an accident, illness or death;
  5. In times of huge economic and market change.


To become financially literate will require you to become knowledgeable on the financial requirements/constraints you have and the strategies, tools and techniques you will need to achieve your goals. As you delve into the complexity of DIY financial planning and building wealth, you will quickly realize why it is a full-time occupation for even an average financial planner. The question is whether you want to become an expert or whether you prefer to hand-off this financial responsibility to someone else…someone else that may or may not have your best interest entirely in mind. Either which way, this is a decision not to be taken lightly.

[ad_2] Source by Keelan Cunningham

The Problem With Cash Basis Accounting


It is my belief that the increase in business closures lately has been acerbated because their accounting system is Cash Basis and not Accrual.

In Cash Basis accounting systems, expenses are not recorded on the financial statements until they have been paid. Because unpaid bills cannot be shown on the books, it is extremely difficult to accumulate Cash Reserves to pay them because of the current tax laws.

In fact, Cash Basis accounting systems create a tax situation that, for some businesses, leads to bankruptcy while, at the same time, reports the company is making a profit.

For example: Imagine your business has a project that spans several years; your income is received prior to completion of the job, but your major costs are paid after the job is completed. In other words, you receive money in a year prior to paying your expenses.

If you save a portion of your receipts to pay your costs, at the end of the year your savings are shown as PROFIT because, in Cash Basis accounting, profit is, for the most part, the difference between the money received and the money spent. The effort is, therefore, to reduce your tax liability by reducing your profit – by spending the money.

In cases where it is not feasible to prepay your major cost, the money is spent on other things because there is so much money to get rid of. No Cash Basis budget can set up appropriate spending levels on money received now and major costs that will not appear until a year or so later.

Even if that could be done, it would make the tax problem worse. In the next year or so, when that major bill does arrive, there is little or no money left from the project to pay for it and receipts from new projects are used to pay the costs of the old ones.

If there are many jobs and huge amounts of money flowing through the business, profits appear to be high and the business looks like a cash cow. But, as time goes by and the cash deficits accumulate year after year, major costs get harder and harder to pay.

Should it then happen that business slows down and new jobs stop coming as it has now, the cash flow simply dries up. Cash advance and line of credit loans are hard, if not impossible, to get leaving both payroll and bills impossible to pay. Even though you might have to close your doors, with the unpaid expenses not recorded the Cash Basis Profit and Loss statement will report that you have made a profit.

It may be that a reluctance to pay tax on their inventory has caused some business owners to choose a Cash Basis accounting system rather than Accrual. Granted that the business situation we have today would have been hard to imagine only a year or so ago, choosing Accrual Basis would probably have been the lesser of two evils. I recommend talking to your accountant. If you decide to do so, he can help you change it.

[ad_2] Source by JH White

Identity Theft


Identity theft is a growing problem in the United States, occurring in small towns and cities alike. Identity theft, as defined by the federal government, refers to the use of another person’s identity or identification to commit crime. Most often, the identity thief uses a person’s identity to rob him or her blind, using credit cards or cash to purchase whatever they want.

How often does identity theft occur? Identity theft often occurs from stolen pieces of paper. Wallets are often stolen, and the combination of ID and credit cards can be used to steal one’s identity. According to the Identity Theft Resource Center; studies from 2003 show that 7 million people suffered from identity theft within a twelve month period of time, equaling approximately 13.3 people per minute.

There are many things that you can do to keep yourself from experiencing identity theft. One of the first things you can do is protect your social security number. Do not get it printed on checks or on your driver’s license. Next, purchase a paper shredder. Once you’ve purchased it, put it together, plug it in, and use it! When in doubt, don’t toss it out. Shred it! Shred anything with your social security number, name and address, or any other pertinent information on it. In addition, keep a close watch on your checking account and credit card statements. Report anything unusual as soon as possible.

Another place where information can and often is stolen is through the internet. Be sure to protect your password and learn how to place password protection on any documents you feel need secured. Invest in a firewall to keep other computers from accessing your internet connection.

In addition to this, beware of WiFi. WiFi enables individuals to log onto the internet with their laptops at various “hot spots” like coffee houses and restaurants. While convenient, it is imperative that you understand that others are on the same connection with others and thefts can takes place. Avoid checking your bank account information or even logging into your e-mail while on this type of internet connection.

[ad_2] Source by Sara Chambers

What Is Leadership?


With a title like that you might think I bit off a little more than I can chew. You might be right, but because there are literally thousands of articles, blogs and websites dedicated to discussions of leadership, I wanted to offer a logical definition of it in a thousand words or less. Here goes…

Despite the multiplicity of interpretations we read every day, leadership can be defined simply as:

“Organizing a group of people to achieve a common goal”

A leader can be anyone. There is no need for any formal authority to lead. A person simply needs to have the will, the courage, the charisma and the ability to capture the imagination of one or more followers in order to be considered a leader.

Centuries ago, it was assumed that good and powerful leaders had naturally occurring leadership traits that set them apart from others…Hence, the term, “leaders are born not made”. However, more recent studies have made it clear that given the right set of circumstances and with the appropriate motivation, most people can become true and effective leaders.

Some of the naturally occurring traits that make leadership ability come more easily to some people are:

  • Intelligence
  • Assertiveness
  • Diligence
  • Openness
  • Courage

When those instinctive traits are combined with learned skills and natural talents, variable levels of leadership ability may be reached. Without all of those traits, effective leadership is possible but much more difficult to achieve.

“It is important to note that one can lead much more effectively when the leadership endeavour involves something that the leader has good expertise in so that he or she may set an example”

It must also be something in which the followers have a need for or an interest in being lead in. For example: An expert tennis player might make a great tennis coach but a lousy sales manager. In addition, there would be no point in trying to lead someone to better customer service skills when he or she works in the depths of a coal mine.

As trite as those examples might seem, it is not unusual that people are put into leadership positions that they are not capable of handling simply because they have done well in another unrelated area. Also, self-promoting or toxic people who have no business trying to lead will often attempt to influence or lead coworkers in inappropriate directions. Both situations will create poor results.

“Good and powerful leaders need to have self-awareness and a solid grip on their own emotions”

Leadership skill necessarily includes the ability to set a mood or tone for the team. Leaders unavoidably telegraph their moods and attitudes to their followers who will adopt the preeminent emotional tone of the leader and carry it throughout the organization.

“One must not assume the only way to achieve financial success or even team success is through servant leadership, participative leadership, or compassionate leadership”

Given the right impetus and favourable circumstances an autocratic, command and control leader can drive his team to success both in the business world, on a sports court or on a battlefield. In the twenty-first century, we tend to reject that style of leadership, but it can be an effective (albeit, potentially negative and harmful) form of leadership nonetheless. If the team is not engaged and motivated, a strong autocrat might be the only leader who can create the environment needed for success.

Modern leadership lecturers and writers also reject the term “management”, since it seems to imply a lack of compassion and favours transactional or task orientation as opposed to transformational or people-oriented leadership. In reality, all organizations have some form of tasks and a specific number of people so it is evident that management may still be an integral part of the leadership cycle in many cases.

“In essence, even bad leadership is a form of leadership”

The efficacy of any leadership style can only be measured in results. In other words if the team meets or exceeds all of its goals, under the direction of its leader, those who benefit from those results may assume that the leadership was good regardless of the leader’s style. However, it is important to note that bad leadership in any form is usually short-lived.

The best and generally, most effective form of leadership occurs when a leader is able to maintain a high level of concern for his or her people while simultaneously keeping high-level performance paramount in the minds of all participants. This form of leadership often goes a step beyond servant leadership because it allows the leader to accurately control production and monitor results for maximum success. A leader who can juggle tasks and people without sacrificing integrity for either is a great leader indeed. That leader will almost always turn out better performance, more production and measurable growth while presiding over happy, well-engaged employees.

“It is important to recognize that groups of working people are assembled primarily to create some sort of product or service”

Great leaders are able to create buy-in to the vision of the organization while accepting and embracing the direction of its leaders. The key to buy-in and strong followership is communication.

Great Leaders are Great Communicators!

Ten ways to recognize a great leader:

  1. Great leaders create a sense of unity amongst all team members.
  2. Great leaders have strong interpersonal skills and they encourage interpersonal communication amongst team members.
  3. Great leaders have the ability to create a unanimous desire amongst team members to achieve common goals.
  4. Great leaders communicate their vision to their team enthusiastically.
  5. Great leaders constantly seek feedback from team members.
  6. Great leaders never stop learning new leadership techniques.
  7. Great leaders set fair and reasonable performance standards and assist team members in achieving them.
  8. Great leaders set a conscientious, diligent example for the team.
  9. Great leaders never settle for mediocrity from themselves or from their team.
  10. Great leaders give credit for great results to the team.

What is leadership?

“Leadership is the embodiment of the positive dynamics evident in all great human relationships within one person or leadership team!”

All the Best

Wayne Kehl

[ad_2] Source by Wayne Kehl

Residual Income Investments


Two financial terms that are often times confused with one another are residual income investments and passive income investments. The different between these two terms is fairly easy to explain. First passive income is generated without any effort, or very little effort, from the investor. On the other hand, residual income is generated from the efforts initially invested by the investor.

Real estate investing can produce both residual income and passive income. If you want to make residual income investments in real estate then you can buy a property and then sell it with owner financing. This means that instead of making the buyer get financing through a bank you will agree to carry the contract and they will then submit to you monthly principal and interest payments. These payments are considered residual income. On the other hand, if you want to generate passive income from real estate investments then you can invest in trust deeds. Trust deeds are basically private mortgage loans. This investment activity is passive because you don’t have to actively participate in the management of the account to make money.

If you are interested in a business opportunity to make residual income then you can look at entering into a sales company that offers residual income on the sales made by the people that you sign up under you. For example many door-to-door sales companies pay their sales team a commission on what they make as well as a smaller commission on the amount of sales generated by all of the people who were signed up by the salesperson. Passive income can also be generated from business opportunities. However, for tax purposes the passive income cannot be derived from the active participation in a business, nor can it be derived from interest, capital gains, or dividends.

[ad_2] Source by Sarah Freeland