Cashflow Blog

~ Marcus De La O

There was something missing from the $700 billion taxpayer funded bailout that was signed into law. It seems impossible, I know. Congress spent several days making sure nothing was left out, including money for Puerto Rican rum makers, race track owners, wooden arrow manufacturers, and of course, the always under-funded wool researchers.

It was painful to see the very people who caused the mess taking charge of fixing it. If it made you mad, it should have. The bailout amounts to over $2,300 from every American’s pocket, and there are no guarantees that it will work. Most of us would have preferred to stick it to the man and let those greedy Wall Street villains go bankrupt.

If you watch TV or read the paper, you’ve heard that the problem was caused by our government loosening lending standards. This is a symptom of a larger problem, one that needs to be fixed now. The real cause of this disaster is not on Wall Street. It is much closer to home.

Imagine if our children were forced to take money management classes starting in the third grade. Forced! Forced to take classes in money management? Why not? They are forced to take algebra. How many of us use that in the average day? They are forced to take biology, foreign language, health, and geometry. Sex education may soon be forced upon our children as well. Money management, however, is not even an elective.

When offered an amazing loan to buy a house with little or none of your own money, a properly educated young adult might say “no thank you.” When tempted to run up the VISA debt to get that new plasma screen, the ghost from classroom past would say “No.” Every year a new batch high school graduates take to the street with no financial education. This is the real cause of the financial crisis.
Instead of a couple thousand regulators teaching banks how to lend, let’s teach a couple hundred million Americans how to borrow. Rather than showing us how to spend our money, our government should show us how to save it. Our children need to come out of high school knowing that managing their money is just as important as earning it.

Our government has let us down in this area for a long time and missed another chance. Financial education should be required in all public and private schools. Over the past few weeks, we did not hear one of our leaders speak about the importance of teaching money management to our children. Not Bush, Obama, McCain, Pelosi, Cox, Bernanke, Dodd, or Frank. None of them. Yet what is on every adult’s mind every day? How to manage your money.

For the government, a financially literate public is a dangerous thing. Americans would have no use for bailouts, and fewer of us would need welfare or Social Security. Unfortunately, our government prefers that we remain reliant on them for as much as possible. Unless we insist that our schools offer financial education, it will never happen.

Since this is not likely to happen, there are some fun and educational books you and your children can read. “The Richest Man in Babylon” by George Clason is fun and easy for kids to read. “Rich Dad, Poor Dad” by Robert T. Kiyosaki is great for teenagers and adults. Let’s teach our kids money management from an early age. This is how we can all “stick it to the man.”

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Government bailouts and school children

You may have had to file for bankruptcy because of events that have affected your financial circumstances. Bankruptcy, however, is not the end. .

Deciding to file for bankruptcy is not easy. But many people have had to and are now able to care for their finances stably. You can dust yourself off and get back on your financial feet even after bankruptcy.

All damage done to your credit by the bankruptcy process can be healed. Chapter 7 bankruptcy eliminates all of your debts, and some of your assets. Afterwards, building up your credit again is dependent on you paying your bills in a timely fashion.

Be responsible with what you still have left. You still have your home. Make utility payments on time. Establishing a record of timely payments is one way to work towards fixing your credit.

After a few months, apply for a secured credit card. Secured cards require the cardholder to pay a deposit. This is the money that you will start with. Over time, you may qualify for an unsecured credit card.

Keep just one credit card. And don’t charge purchases on it needlessly. Simply having a credit card that can be used in emergencies is a way to build back your damaged credit.

Train yourself to pay for everything in cash. Unless you have cash to back up a purchase, don’t buy anything; this could be one reason bankruptcy was filed in the first place. Going back to using cash is a healthy way to build up a bank account and savings account balance.

Plan to succeed. Since you have already experienced bankruptcy, you know you don’t want to go through the process again. Establishing a good savings plan that includes an emergency fund will help you prevent any future need to file for bankruptcy. Credit card payments shouldn’t present any kind of problem after having had all of your debt eradicated.

When you do get a credit card again, you can expect to be bombarded with offers from credit card companies. They will do there best to get your business, but you can resist them if you are determined to stay out of debt.

Learn to live within your means. This requires that you be prepared for the unexpected. Credit counseling classes or meetings with a financial advisor can be helpful, since they will provide you with great tips on how to maximize your savings and care for your expenses responsibly.

A financial advisor can take the extra money that you put in a savings account and show you how to invest for the future. One day you will want to retire. Retirement could last as long as twenty to thirty years. Having enough money to live out that portion of your life is important. Concentrate on that part of your financial future as you wait with patience for your credit to be re-established.

Bankruptcy is not the end of the story. People can recover from it and develop a healthy financial picture. However, it takes time and patience.

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Bankruptcy Is Not the End Of The World

-Robert Kiyosaki -

A few days ago, I spoke at a luncheon with approximately 500 local business leaders. I began with these words: “I have good news and bad news. The good news is you will have fewer competitors next year because many of your competitors will be out of business. The bad news is you might be one of those out of business.”

I then showed them my local newspaper, pointing to the headline “Businesses Are Struggling.” I opened the newspaper and said, “I can tell you who will be in business.” I pointed to a full-page ad for a local appliance store. “I’ll bet money that this business will be here next year. Why? Because this business is advertising more aggressively than its competition.”

In previous issues of Entrepreneur, I’ve written about the importance of advertising and promotion. I’ve shared my rich dad’s lesson that when business drops off, many entrepreneurs listen to their accountant’s advice and cut back on advertising and promotion. That’s the worst thing you can do. When times get tough, your job is to promote more, not less.

Promotion is a six-week cycle. That means if I promote today, business increases six weeks later. Many businesses violate the six-week cycle. They promote for, say, four weeks, and because nothing happens, they stop. Two weeks later, there’s a sudden increase in business. For four weeks, business remains strong. Then, just as suddenly, business drops off, because six weeks earlier, the entrepreneur had stopped promoting.

My rich dad’s lesson was to never stop promoting: Promote whether the economy is strong or weak; promote even when you may not have the money. If you have no money, stand on a street corner at lunchtime with a sign hanging around your neck promoting your product or service. Not only will you meet new customers, but you might also save money on lunch, lose some weight and get a suntan.

Obviously, it takes more than just promotion to do well. To be successful, a business also requires strong fundamentals and a desirable product or service. During tough economic times, though, even some good businesses fail; some businesses shrink and others grow. When a business closes, its customers migrate to the business that fights hard and stays open. Businesses that promote while others cut their ad budgets have a better chance of getting bigger . . . even if the economy is shrinking.

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Go Big or Go Home

By Lou Wallace

Asset Based lenders supply the same type of loans as conventional banks plus they also can be more flexible in there under writing because of the other loan products.  Besides lines of credit, asset based lenders offer factoring and purchase order financing.  Some also offer term loans, equipment financing and leasing, as well as short term capital loans to meet short term cash needs.

These asset based lenders are less likely to experience the drastic mood changes like conventional banks and are more stable and consistent in there approach to the financial needs of the small business.  These lenders also tend to be more flexible in loan terms and advance ratios.  More importantly since they are not prone to panic they can be very helpful to companies that are just starting or experiencing dramatic growth.

This practical approach to lending by these lenders help matters under control if a company does experience a financial hiccup and needs the assistance of a lender who is there to help rather than hinder because they panic.  You will also find that asset based lenders tend to have a more experienced staff, better trained personnel and can offer more personalized service.

We will be over the next few weeks running articles explaining the differences in Banks and Asset based lenders and how they differ in there approach to small business lending.   

Performance Funding Group, LLC is a locally owned and privately funded asset based lender who has been providing several different loan products since 1997.  Lou Wallace has been working in commercial loans since 1971.  Lou Wallace can be reached at 602-912-0200. www.performancefunding.com

Excerpt from:
What is an Asset Based Lender?

~ Carrie Schwab Pomerantz ~

Call me old-fashioned, but lessons like the work ethic, financial responsibility, delayed gratification, and charity are, to my mind, just as vital as knowing about balancing your checkbook, portfolio diversification, and the ins and outs of 401(k) plans.

In an affluent society that seems more determined than ever to get more — more wealth, more possessions, and more of the status that seems to come with those commodities — values and virtues are more important than ever. Teaching your kids the ABCs of money management is crucial, but sharing your good money values can help make your hard work stick.

I probably don’t need to convince you that values are important. Instead, my goal is to help you see how financial values can be taught, and that — whether you’re conscious of it or not — you’re passing your own values to your children through your words, behavior, and actions.

The Example You Set

I’m a big believer in giving kids direct, hands-on experience with money. Give them an allowance. Teach them to save. When they’re old enough, encourage them to work part-time. All these lessons will help your kids learn to use, accumulate, and earn money.

But remember this: They’re also learning by example — your example. They watch you spend money every single day. They hear how you talk about work and investing. The way you deal with personal finance may be the single biggest factor in shaping their attitudes toward money. This does not, of course, mean you have to change the way you spend, earn, save, or invest. But it does mean you need to be aware of the example you set.

And as a parent, you’re the ideal teacher for all kinds of lessons about finances and the values associated with them. It starts with the little things, like encouraging them to save part of their allowance. But every day is filled with opportunities to impart practical and philosophical lessons about money and values.

Hands-on Lessons

Small children can help comparison shop in the supermarket, for example; they’ll learn something useful and realize you’re prudent with money. Older children can help when you pay the bills; again, they’ll be learning something practical, and it’ll be an opportunity to teach them about day-to-day financial responsibility. Sharing this can teach them the importance of paying off credit card bills monthly.

Tax time can be a chance to explore the financial realities of being a citizen in the community. When you make donations to the institutions you support, you can teach your children about the importance of charity and the idea of giving something back. But this shouldn’t only be about monetary donations; invite them to participate in the next walk-a-thon or fundraiser, or to volunteer time for a favorite charity.

Perhaps you review your 401(k) statement or investment portfolio on a quarterly basis; that’s another terrific teaching opportunity. Even watching television can be a source of knowledge and values: Kids are extremely susceptible to the desires and manipulations of advertising, and you can help them see through the hype and teach them that their happiness isn’t dependent on the next big thing.

Family-Finance Dynamics

Kids like being part of the bigger family picture, but they’ll also be learning a subtler lesson about financial values. They’ll realize you take personal finance seriously, and that money is a resource to be used wisely and well.

You might even pick out certain financial challenges that highlight specific lessons, such as making tradeoffs (”If we ate out a few times less per month, we could take a better vacation this summer” or “I’m going to buy a used car instead of a new one and put the extra money into your 529 college saving plans”). This will teach them about the pleasures of delayed gratification.

In one sense, every financial transaction you make can be a lesson for your kids, at least the ones they witness or experience. If you’re cavalier with money, they’ll pick up on that; if you’re prudent, they’ll pick up on that, too.

Spheres of Influence

Of course, you’re not the only point on their moral compass. Your kids also get messages about values from a host of other sources: their peers, relatives, and other adults as well as the pervasive and very powerful media. You’ll never be the sole influence on your kids, especially as they enter the teenage years and their drive toward independence begins to accelerate.

Indeed, it would be foolish and counterproductive to try to shield them from values different from your own. A good part of growing up is learning how to make judgments about what’s right. But of all the forces affecting your children’s development, you’re surely the most powerful one.

When my son was 16, one of his friends got a new BMW as a birthday present. But when he told me about it, he said, “You know, Mom, I would be embarrassed if you bought me a car like that. It’s just not right.” His sense that such an extravagance was “just not right” was, I believe, based on an idea my husband and I have tried hard to instill in all of our children: that you have to work for what you want.

Every parent, no matter how much money they have, has to make choices about what to give their children and what to make them work or save for, and I realize that different people will come down on different points on that spectrum. But just because you can afford something doesn’t necessarily mean you should buy it.

Who You Want Them to Be

I’m certainly not suggesting that deprivation is a good thing, but teaching your children sense of accomplishment that accompanies working and saving for a substantial goal is clearly valuable — and will serve them better in the long run.

I want my kids to plan for big purchases, to put their own resourcefulness, as savers and earners, to work. I’m more than willing to help them, but they have to show some initiative, put forth some effort, and demonstrate that they’re willing to make short-term sacrifices for long-term goals. That, of course, is part of the essence of adult life and adult responsibility, and it’s what I was taught as a young girl.

I believe the primary goal of parents is to foster independence, self-reliance, and confidence. Thinking about the values behind your financial decisions and articulating those values to your children will go a long way toward helping your kids mature into the kind of adults you want them to be.

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Raising Kids in a Consumerist World