One afternoon recently I tried to cash a check for $7,000 at my bank. Even though it is one of the nation’s leading banks, I was unable to do this because they didn’t have enough cash! They explained that a number of people had made cash withdrawals and the till was empty. Why were they short of cash? Because, while I was content to deposit money in a low-interest checking account, they were lending my funds to bank customers at more than 4 times the rate they were paying me.
I could have lent these funds out myself, but I wanted cash to be there when I needed it. The bank could rely on other branches to shore up their cash reserves; thus, they didn’t need to set aside idle funds to maintain their own liquidity. If they ran out of money, they could borrow from the Federal Reserve Bank so long as they maintained minimum reserves, which could be in the form of U.S. Bonds; so they needed little cash at all. There’s a lesson to be learned here:
First, if you will line up emergency operating lines of credit, you too can live with a lot less liquidity, and keep more of your cash earning high yields instead of lying fallow in bank checking accounts. Second, you can use your money to either buy and sell houses, or to lend to others. Third, if you pick and choose borrowers carefully, and secure your loans adequately, you can lend out a lot of money with very little risk of loss. Fourth, if you can use your money to help other entrepreneurs make more money, you will be able to cultivate a reliable group of borrowers who will be willing, able, and ready to share their profits with you.
It all starts with wholesalers. Wholesalers are people who can find houses that they can buy at around 50% of retail value then sell quickly with a small mark-up. As a rule the house will need some rehab to make it marketable to an owner/occupant. Once a wholesaler contracts to buy such a house, he sells it or his contract as fast as possible to someone else. This may be another wholesaler who marks it up a little more and resells it, or it may be a retailer who does the needed sprucing up to increase the value, and who then sells it to an owner occupant or another investor. At every step along the way, profit and value are added to attract another buyer.
Here’s a pro-forma transaction: Let’s say that a house that would sell for $150,000 after fix up can be bought for $80,000 cash. Wholesaler #1 marks up the property about 10% above his contract price, say $88,000. The next buyer then marks up the original price to $90,000 and makes $2000 selling to the ultimate person who will fix it up to sell in the retail market. That buyer adds about $25,000 in fix-up expenses, bringing his cost up to $115,000. He then retails it to the owner-occupant for $149,900. After paying out another $10,000 in commissions, closing and financing costs, he winds up with a $25,000 profit with 4 months work.
Thus far, all we’ve looked at is the way in which money was made with a house; what about the profit made with the financing? Each of the buyers and sellers will have had to pay for financing in order to make the whole process work. By enhancing the ability of the others to buy and sell by providing funding, the lender may make more money than all the players in the food chain. Let’s see how much a lender who both sold houses and financed them might make:
He buys the contract for $88,000 from the first wholesaler. He by-passes the #2 wholesaler and immediately sells directly to the retailer. By providing financing he is able to increase the cost to the retailer from the foregoing $90,000 to $100,000. He agrees to lend the retailer $125,000 to buy and fix up the house with $5000 down and $4167 interest (10%) callable in 120 days. The retailer can still make $15,000 after selling costs. Making $12,000 in a matter of days on the financier’s $88,000 purchase is great, but the joker in the deck is that he discounts the loan at settlement to an investor for $120,000 and makes a $7,000 profit without using any of his funds. The investor’s profit would be $9167 ($5000 loan discount and $4167 interest). That boils down to a return of 23% per year.
The new American Dream should be having complete control over your personal finances. True wealth is knowing that you never have to worry about any financial decision again in your life or for future generations to come.
For most Americans life is made of up of having a job, paying bills and then worrying about taxes. Now where in that scenario does it appear that you have complete control? When will you have a line in the sand moment and be ready to change?
The time is now!! Let’s take an honest look at the average life. Working for someone else will give you a future that has a sense of security but is it really? An employer pays you a percentage of the money that you make for him. I have explained to my employees for years that no matter how they choose to look at it that if they were not making me more money that I was paying them how could I afford them. I already do that for the government but we will talk about that in a moment.
Your job is not secure it merely gives you a certain number of dollars to pay your bills with each week. As the recent events have shown us even then most stable of companies have layoffs and then what happens?
The government and taxes is your ultimate boss. Currently employees must work until the middle of June each year just to pay all the forms of taxes imposed upon us. And we all know that the only 2 things in life that are certain are death and taxes, and the government is trying to control both. Not much for us to control there.
The debt that you have controls you. The only way to control debt is to eliminate it. Eliminating debt is like trying to quit smoking after you have smoked for 30 years. Debt is the drug of addiction for more households in America than all others added together. To have complete control of your life debt is the first thing that you gain mastery over.
To begin t take control you have to take what money you have and begin to make it work for you instead of you working for it. But how do you do that? First you begin saving before you do anything else. If it is $5 per day, that is a start that will give you the first step of control.
Next, begin eliminating debt. The key is here as you pay something off do not replace it. If it is a car that you pay off add that payment to your savings plan. Instead of paying 72 months for a car in 42 months you can pay cash. Add 50% life to the things you normally borrowed money for.
Find a way to increase your income. Work for yourself so you can gain 100% of the benefit of what you do. Start out small with a work from home opportunity. Take that income and add it to your savings. Build the amount of cash that you have on hand. Cash truly is king when it comes to being in complete control.
Focus on retirement and savings and your life will change. Don’t get discouraged at first it will be small steps but then it will leverage itself.
To learn more about personal finance and retirement planning visit the resource box below.
In our series of finance recruitment articles, we will be looking at various finance job roles. The first in the series is the role of a Finance Controller.
Finance Controllers work directly with Finance Directors to manage the day to day finance matters of a company. This senior role is seen as the stepping stone to becoming a Finance Director and involves tasks such as creating finance strategies, working with cash flow, creating accounts, creating and checking financial targets, working with management, monitoring departments and many others.
Finance Controllers use their knowledge to help make decisions when their company is looking at potential acquisitions and will be part of most major finance and business decisions.
Candidates for Finance Controller jobs will be expected to have a background in accountancy and once in the role will be in charge of managing teams of Ledger Clerks who will deal with the more administrative and accountancy aspects of the department.
The day to day aspects will see you working traditional hours, although you will be expected to put in extra hours where necessary. Like many high responsibility management roles, much of your time will be spent within meetings and travelling between offices to provide your services.
When businesses or finance recruiters are looking for candidates for Finance Controller positions, they will be looking for someone who is good at presenting finance data as they will be spending a lot of time doing this to various people in meetings. Other skills that will be looked for are motivation, ability to multitask, attention to detail, good decision making skills and obviously a good understanding of the financial world.
Previous experience in finance and management accounting will be expected for the role of a Finance Controller. You will also be expected to have a qualification from one of the accountancy bodies in the UK (ACCA, CIMA, CIPFA, ICAEW, ICAI, ICAS).
Finance Controllers often move on to become Finance Directors, and some even become Managing Directors or Chief Executive Officers, so there are some great career prospects that come with this role.
As with most jobs in the finance sector, salaries are at the higher end, trainees can earn up to £25,000 and qualified finance controllers can earn up to £45,000 a year. As your experience and time grows in the role, your salary can increase to between £50,000 and £100,000.
For more information on finance controller jobs you should talk to a professional finance recruitment company.
If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.
In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.
Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.
Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.
Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.
Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.
In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.