Building Wealth - Cutting Costs

I have blogged a lot on gold, silver and other metals thus far because I firmly believe that they represent a great hedge against inflation, a good long term investment and because I feel they offer a lot of protection from the coming recession. So when this article from Forbes hit my RSS Reader this morning I was quick to have a look at it. The article is title, Gold’s Allure Growing, and I recommend you give it at least a quick read.

While I found the article interesting and quite accurate I do feel they sort of glossed over a key reason for gold going up recently and a reason that gold will continue to go up for quite a while. Here was the only mention of this factor in the article,

“Demand for the metal is also strong in Asia, for jewelery and as a store of value.”

That was the only mention of this factor in the entire article and I find this very much missing the boat. Why? Well, because with China and India what we have is more then 2 Billion (with a big B) people who are rapidly growing their middle class and both societies have a tremendous appetite for gold jewelry. I recently read a report on of the foremost expert on gold and mining operations who stated that we currently have “at least a 10% shortfall on the production vs. demand for gold most of which is attributed to the rising demand in India and China for gold jewelry.”

In other words those 2 billion people are buying gold faster then it can be extracted from the ground. The big issue with that is it has never happened before. The demand for gold has always been based on how rare it is and that has always created a demand yet until now anyone could always buy as much as they could afford. Today we have unmeetable demand and the demand is growing faster then the production and again this is the first time in modern history that such a condition has existed in the gold market.

I highly advise any investor (small or large) to have a serious heart to heart conversation with your financial advisers about putting at least 10-20% of your holdings into gold, gold funds, etc. The increased demand and declining dollar together make gold a real winning opportunity at least in my opinion right now.

If you own a retail outlet a great way to get a truly honest assessment of your service is to use a mystery shopping company to evaluate you with no bias or confusion.  I recently was asked to check out a web site that provides this type of service called BestMark and I must say I was impressed.   Rather then just sending some mystery shoppers to your store they provide professional consultants that have in-depth experience guiding programs from inception to ongoing execution to analysis to solution implementation.  That all adds up to put BestMark on my list of recommended sites for owners of retail outlets.

What I really like about using a service like this is the completely honest feed back that it provides and how that data can be used to improve your service.  While you are your location you view it via “rose colored glasses” and you have no real idea how the service is when you aren’t there (when the cats away…) and these services put you directly in touch with the reality on the ground.

I talk a lot on this blog about things like saving, investing and making money. I encourage people of every walk of life to spurn consumer debt and build wealth so they can live good even when times are bad. I want to shift gears a bit today though and talk a bit about how to protect your hard earned wealth.

I just got done reading a new book called Asset Protection 101 from Donald Trump’s Trump university and I have to say I learned a lot of new ways to protect the wealth I and my family have worked so hard for. In fact basically I just learned how to be a millionaire in reality and at the same time appear penniless on paper.

Of course I got wealthy in the first place by being a bit of a tight wad and knowing how to spot a good deal. So check out this deal from Trump University, buy a copy of Asset Protection 101 today and you also will get the following bonuses

• 3 J.J. Childers E-Books-valued at $19.95 each, these 3 e-books provide you with even more information about protecting your wealth, saving on taxes, and enjoying a stress-free retirement.
• 5 Special Reports-over 100 pages of extra material to help you build your wealth structure (worth $150!).
• The Top 50 Most Overlooked Tax Deductions-this gift alone could save you thousands of dollars when April comes around again!
• J.J.’s Asset Protection Worksheet-the master’s tool to show you where you may be vulnerable to lawsuits and how you can minimize your tax burden.
• Asset Video - addressing specific asset protection issues, which you can view on your computer
• 20% off the registration fee for Trump University’s Wealth Preservation: Asset Protection Retreat featuring instructor J.J. Childers.

There is also an awesome 1 hour free teleseminar. Now for a 20 dollar book those are some great bonuses. I don’t normally tell my readers to go spend money but in this case it will be a Andrew Jackson that is well used. For more information visit the Trump University Site for the special offer on Asset Protection 101.

In my site philosophy I explain in commandments 4 and 5 that I think every person today should be to some degree “self employed” and have some business of their own. Today the easiest way to make that happen is to make your money with internet marketing and one of the best things you can sell are either software that is down-loadable or informational products that can also be downloaded. With that all you need to do is create the product and market it, there is no inventory, no shipping, no real expenses.

To do it right though one thing you will definitely need though is ecommerce software or what is commonly referred to as an online shopping cart.  I was recently asked to check out a site called AmeriCommerce which provides the tools to do this.  I found there software is very easy to integrate and quite robust at the starting price of only 39 Dollars a month and if you need help with integration or even some help with web design they can provide that as well.

I like this platform for a few reasons

• Easy integrations with Google Check Out and PayPal
• Very stable platform that is simple but also robust for power applications as well
• It is search engine friendly
• Offers a ton of features
• Tracks your ROI (return of investment)
• Allows you to set up affiliates programs
• And a ton more

So check out AmeriCommerce if you need a good shopping cart program and the best news is they offer a 14 day free trial with every program so you can be sure of their quality of service before spending any money, for that they make my list of recommended sites.

Well if you did not start a refinancing process when I suggested it before you may want to hold a few more days for a bit lower of a rate. Everyone is expecting yet another slashing of the prime rate after the Fed’s meeting at the end of this month. I don’t predict another big cut and while the media is using the term “slash” I think we will see perhaps another 1/8th - 1/4th. That won’t mean a ton more then the last cut already meant but it will make a difference to some who are on the “edge” of making mortgage refinancing a good decision.

To me the real opportunity here is for real estate investing. Loans are lower then any time in history and houses are sitting by the butt load. Right now is a great time to find an incredible deal on investment property. It is however not a time to be stupid and go into highly leveraged deals. What you are looking for right now is a property at 10-20% under even the current depressed value, a property that you can afford to have for a year to 18 months with out a tenant and still have no financial grief.

This is a big part of why the rich always get richer. If you are in good shape money wise right now and can afford 1-3 small properties in this fashion you stand to make very big investing returns in the next 5 years. If however, you are dead broke or swimming in debt you just have to sit back and watch all these great deals sit. This is a very bad time to be in the property flipping business. With the massive inventory out there, suppressed market and probably a 2 year recession ahead it is a great time to be buying the best deals you can find and afford, holding on to them and renting them as you can.

This is exactly why I always say the reason to build wealth in many ways is to live good in bad times.

If you have read this blog for any length of time then you know I am big on teaching children to save, invest and understand money from an early age. What I have observed in talking with people from many generations is that there is a direct correlation between how a person views both money and debt and what generation they come from.

My Grandfather’s generation saw debt as a prison and felt that you should scrape and save every penny you could. My father was a lot like his grandfather and passed much of that wisdom to me but yet his generation was more open to some debt and some more free spending. In my generation people live in debt (I am a Gen X’r) and the Y generation is graduating college with enough debt to fund most first home mortgages. With each succeeding generation comes more spending, less savings and more debt.

I really feel it was my firm connection to immigrant grandparents that went through hell to get here, then dealt with the great depression and then served in World War 2 that cemented my firm conviction in the principles of saving, keeping debt low and always planning for a “rainy day” that I discuss on this blog.

One thing I think parents can do with children to ground them in these sound principles is to make sure they are connected to their roots. So when I was asked to look at a website where you could build a family tree for free I was happy to do it.   The site is called Tribal Pages and it is very cool and at a cost of free it is a great low cost activity for you to do with your kids and involve the rest of the family.

As you build out your tree you have you are able to do it on your own free web page, other family members can view it online and help you fill in missing spots. (Don’t worry if you are not technical it is a very easy system to use.) I firmly believe that a child that knows their past and how hard their ancestors worked to ensure they could have the opportunities we do today will be more likely to value money and opportunity. When I interview and hire people from Gen X and Gen Y, I see a ton of “entitlement attitude” and it really bothers me. Most people today seem very disconnected from the reality of just 50 years ago.

So if you want your kids to value what they have and in fact if you want to value it more yourself I encourage you to research your past, build a family tree and understand why we have so much opportunity today. Research the values of your family a generation or three ago and build that connection. Tribal Pages definitely makes my list of recommended sites for providing a great service at no cost that helps families understand and preserve their identities.

Many people are familiar with the concept of a Roth IRA. For those that are not I will give a quick summary of the difference between Conventional and Roth IRAs and why I believe that a Roth is ALWAYS better for new contributions. Both offer significant tax advantages but one provides more advantages today while the other provides more advantages tomorrow. Given they are retirement investing vehicles clearly we should think more about the impact when we are 65 then when we are 30, 40, etc. Here is the basics of each…

• Conventional IRA - You put money in up to a set maximum per year. You then deduct your contributions from your income for that tax year. So if you owe taxes on 50,000 dollars for a tax year, contribute 10,000 to your conventional IRA you will then pay taxes only on 40,000. However, the tax is not avoided only differed until the time of withdrawal. When you then withdraw this money in retirement you pay taxes on 100% of the money you withdraw as 100% earned income. Oh and should social security survive till your retirement since a Conventional IRAs distributions are considered “income” it will effect what portion of your Social Security is taxed.

• Roth IRA - With a Roth we change the time of the tax advantage to the future vs. the present. So this year you owe taxes on 50,000 dollars and put 10,000 into your Roth IRA and you still pay taxes on the full 50K. However you will now never pay tax on that 10K you contributed or the interest earned on it EVER AGAIN. So if you are 30 in that year you will earn interest for 30 years or more tax free and you will NEVER pay a thin dime of tax on the earned interest. Also when you do withdraw the money it is already your money, it will never be considered “income”, you won’t pay any tax EVER.

Now some advisers point out that if you will have lower tax bracket in retirement and believe in “fuzzy math” that a conventional can win out. However, we should live in the world of practice vs. theory. What I have seen actually happen is that be it Roth or conventional people always contribute the same amount. What this means is while you will pay taxes on a Roth contribution today you will end up with the same amount of money at age 60, 65 or whenever you start to take the money out. In other words your tomorrow will be better with a Roth.

Now what many people do not even know is that a 401K which an employer provides can also now be set up with a Roth Option. With a 401K your employer takes a percentage of your check and deposits it for you. While 401’s have some restrictions that IRAs don’t they work quite similar in how they defer or eliminate taxes. The beauty is when you quit working you can roll your 401K into an equivalent IRA and that means if you have a Roth 401k you can roll to a Roth IRA and have money you can take as needed, keep inside the account as long as you like and never pay taxes on it or ever have it count as income.

Again though while the option of a Roth IRA is well known today most people are not aware of a Roth 401K so ask your employer to check into the option for you. To me they are better for all workers but for the youngest workers the advantages are even bigger. There is a good chance that your employer may not even be aware that they can offer a Roth 401k and as we said all the time in the Army “the squeaky wheel gets the grease”.

Item number one of the philosophy that drives everything we do on this site is “Debt sucks! Stay out of it as much as you can” and I most certainly do include “student loans” in that viewpoint. Now I realize that for some students taking some student loans will be the only way to pay for 4 years of college I just believe you should borrow the absolute minimum amount you can. Student loans are not for supporting a lifestyle they should be used to fund tuition, books and direct educational expenses.

My biggest issue is that many young people are lured into massive student loan debt while billions of dollars in college grants and scholarships go unclaimed every single year. Let me repeat that fact billions of dollars in educational grants and scholarships that never have to be paid back go unclaimed every single year while students go into deep debt to fund their educations.

That is why I am a big fan of websites like Scholarships.com that help put students in touch with those funds. So if you or someone you care about is getting ready to go off to college or is even currently in college please make sure to take advantage of every way to fund that education that is possible. Even just a few partial scholarships and grants can have a massive effect on long term debt.

I have talked to new grads that come out of school over 75,000 dollars in debt. In many places that will buy a person a starter home! Debt is cancer always remember that it must be used as a tool and only as it is needed. Right now this very second there is more then 19 Billion dollars waiting at Scholarships.com to help fund educational needs so please make sure to check out their website, set up a free account and find ways other then more debt to fund educational expenses.

For helping young people reduce debt and achieve educational goals Scholarships.com certainly makes my list of recommended sites.