We have written about the massive changes in manufacturing globally over the last few decades. As we have shown, the data shows that the USA remained the largest manufacturer until 2010 when China finally took over as the largest.

The massive declines in manufacturing employment were global. It led many to believe jobs were moving from the USA to China but much more accurately jobs were being eliminated everywhere. China lost more manufacturing jobs than the USA during the 1990s and early 2000s.

The manufacturing job losses have been caused by productivity improvements. And those productivity improvements have provided us much cheaper access to manufacturing goods. That continued downward pressure on prices has been a big factor in the drastic decline in inflation. The threat of excessive inflation, which was so feared in the 1980s, has been replaced by the opposite problem – the threat of deflation.

One aspect of the productivity improvement has been the global supply chains that have allowed companies to increase efficiency. The requirements of managing global supply chains are extremely complex and likely would not be possible without software to aid in the complex task.

In his book, The Great Convergence, Richard Baldwin discussed how important the decline in shipping costs had in the economics of the last 50 years (we wrote about this book in: Historical Global Economic Data and Current Issues for Globalization). Those declines in prices, aided by other factors, increased the importance of supply chains.

The last few decades have also seen dramatic changes in supply chains due to the internet. The time from manufacture to consumer has been shaved by direct shipment to consumers and nearly direct shipment to consumers via companies such as Amazon. Again software plays a central role in tying the manufacturing floor to a nearly instantaneous status of incoming orders from end users. Or in the case of software and entertainment, companies like Apple and Netflix have replaced the entire supply chain of manufacturing physical goods (DVDs, CDs…) with software.

These changes in addition to increasing efficiency are again decreasing jobs by increasing the efficiency of the economy. These changes cause harm to those that are being squeezed (both employees and companies) while the economy overall gets more goods at lower prices to consumers.

To be financially successful, you need to invest. The problem most people have is deciding where their investments should be made. For a long time, real estate was seen as the best and most profitable bet. Remember the house flipping trend in the early millennium, before the housing market crashed? A successful investing strategy for a short period is no guaranty of that strategy working for the long term. Diversification provides more long term stability.

Franchising

There are two approaches to investing in a franchise. The one most people go for–especially those who are tired of being someone else’s employee–is to opt into an already existing franchise. Yes, the cost of these franchises can be pricey. For example, the average UPS franchise cost is anywhere from $100K-$440K, depending on where your franchise will be located, if you will need to build a new structure, etc. But there is financing available and if you work with an established brand (like UPS, food chains, mall shops). There are risks and you can read about problems franchisees face just by searching online, but it also has been very successful for many people.

Another approach, for people who already own their own successful businesses, is to think about turning those businesses into franchises. This way people will pay you to run your company at their locations. This is quite a huge leap in complexity but the profit potential is very large.

Business

My favorite method for business, and one my brother used for his business, Hexawise (I continue to consult for Hexawise), is bootstrapping. With this method you grown the business from the funds the business is able to generate. You don’t have to worry about pleasing investors or large debt payments. It does limit the ability to spend cash before the business generates it but this is often a benefit, in my opinion, as it forces you to avoid spending you can’t afford. It is a drawback however if the business really needs to spend a large amount of cash before it generates large amounts of income.

If you don’t want to have the responsibility of running a company yourself but still want to profit off of business investments, your best chance to do that is to invest in a promising new business. There are some people who turn enough of a profit doing this that it becomes their entire vocation.

Investing in a business has many benefits, especially if that company does well. When you invest, you typically do so in one of three ways:

• Silent partnerships: You front the money and lend your reputation in exchange for a share of the company’s ownership so that the investment will be profitable. This is good for people who want to have more control over what the company does with your investment. It can also be one of the riskiest types of investments to make.
• Angel investments: This is where you invest a large sum in a promising company but remain entirely hands-off while that company gets up and running. Most angel investors ask only for their initial investments plus a small sum on top of that original amount (usually accrued via interest charges) so that the investment is profitable for everyone.
• Traditional investments: Buying stocks or bonds in public companies. This is by far the easiest and is a very sensible way to invest. Often this is done using index funds to invest in the performance of the broad stock market.

The Usual Suspects

If you want to make real money via investing, you will want to make sure your investment portfolio includes a good mixture of stocks, bonds, mutual funds etc.. In fact, while we’re listing them last, these are the investments you will usually want to make first, as you build enough wealth and capital to make larger investments like franchises and investing in promising startups.

For many people, the first investments are savings accounts, 401(k)s or retirement accounts. If this is where you are, your next step should be something with a guaranteed return like a treasury bond (government bond) or a money-market account with a good interest rate. Let these investments mature while you are learning about stocks, mutual funds, real estate, business investing, etc. Then use the profits from those initial investments to fund your larger and riskier future projects.

You should never invest more than you can afford to lose. Sure taking risks can pay off, but if you want to build a genuinely successful portfolio, play it safe, especially when you are just getting started.

A business must pay several types of taxes (this posts is focused on the USA). Tax rules often change and keeping up with the rules can be a challenge. Which is why most of us, even small businesses, rely on accountants.

Three tax important to pay attention to 2016 to are:

Payroll taxes

Failure to file accurate payroll taxes or late payments can result in heavy penalties. For deposits that are made a week late, the tax penalty can go up to five percent of the past due amount. Usually the amount of penalty is measured using calendar days beginning with the due date of the tax deposit. The three penalties (failure to pay, failure to file, and failure to deposit) can add up to 33 percent penalties + interest 16 days past the due date.

Payroll taxes are a huge portion of most people’s pay and those that claim some people don’t pay any tax just pretend paying this tax (which is the highest tax most workers pay) isn’t paying tax. The tax rate is 45.3% (7.65% paid by the employer and 7.65% paid by the employee. For the very wealthy this tax isn’t a huge factor as it is only applied to earned income and earnings above $118,500 (indexed to inflation, so the level increases every year) are excluded. The 7.65% figure includes 1.45% for medicare, that has no income limit (so above $118,500 the employee and employer pay 1.45% – a total of 2.9%).

Options like MasterTax tax compliance software are available for businesses to help comply with all the rules. Companies can rely on automated software that houses a rules-driven database (updated with the latest rules) with thresholds and frequencies across different jurisdictions. The benefit is a month-to-month actionable calendar that enables you to make timely payments at no extra cost and without requiring third-party support.

Corporate taxes

Different corporations have to pay a different percentage of corporate taxes, with penalties for late filing and errors in tax records. For example, a C corporation should file a tax return annually, and the filing deadline comes on the 15th day of the third month after the tax year ends. If the deadline is missed, the business faces a five percent penalty of the unpaid tax, and it goes up to 25 percent after the five month late.

Some software provide free audit guidance from trained tax professionals to help you understand C-corporation corporate tax requirements. Businesses can also use these tools to file electronic returns and receive fast tax refunds. Some software have integrated notifications that inform you that the IRS has received your electronically filed tax return.

Gross receipts taxes

Some states impose gross receipts taxes on businesses like transportation companies. For example, a trucking company will have to pay a tax rate of 50 mills (or 5 cents, $0.05) based on gross receipts from baggage, passengers and freight transportation. Failure to file accurately will result in a five percent penalty per month.

In a tax filing software, you can create a custom workflow for gross receipts taxes and keep track of deadlines to ensure you’re filing on time and avoiding late filing penalties.

You will also likely have to withhold income tax from your employees and send that to the state and federal governments. In addition, if you are a retail outlet in many states you will have to collect and forward sales tax to the state (and sometimes local) government.

Today there are more ways to invest your money than ever before. Alternative investments can help provide counterweights to more common investments.

Historical documents are important pieces of cultural memorabilia that are sought after by personal collectors, museums and universities. Given the prestige of the collectors, historical documents can go for top dollar. In one recent example, Bill Gates purchased the Codex Leicester for over $30 million.

Historical documents can be a great addition to any portfolio, but one word of caution: authenticity is critical. Far too many investors have been bamboozled by counterfeit documents. Raab Collection, an internationally recognized proprietor of historical documents, stresses the importance of due diligence. When they help clients such as the Library of Congress build their collections, every step possible is taken to authenticate a document before striking a deal.

Here are four other factors that should be considered before making your first historical document investment:

Plan for Preservation

The older historical documents get the more valuable they become – as long as they are properly preserved. The condition of the document is second only to authenticity when it comes to value.

Before you take ownership of a historical document, it’s a good idea to have a plan in place for how the document will be stored. Documents should be kept in waterproof, airtight containers that protect the fibers from the elements. UV radiation can also degrade paper overtime, which is why storing historic documents out of direct sunlight is always advised.

Protecting Your Investment

Unlike stocks and mutual funds, physical assets can be destroyed or stolen. Historical documents have to be treated like fine art. They should be insured and some form of theft protection should be put in place. Documents can be stored in a fireproof lockbox and/or stored in a bank safe under lock and key.

Get Documents Appraised

Professional appraisals are important for historical collectables. An appraisal will give you an official estimate of the value, which can be used for securing insurance. Appraisals also give you a better idea of an acceptable price when it comes time to sell off your investment.

Keep Track of the Market and Trends

You won’t be checking stats daily like the stock market, but keeping up with historical document sales is needed to ensure you make the best decisions for your investment. After all, making money on investments hinges on knowing when to buy and when to sell. Knowing what’s happening in the market will help you determine when the time is ripe to sell or whether you should hold onto your asset a little longer. Demand for historical documents tends to be higher than supply, but catching things right when interest is trending upward can help you make the most profit possible.

Historical and autographed documents have always been popular collectibles, but now more people are beginning to realize their investment potential. Every year countless documents are sold privately and at auction for thousands and even millions of dollars. Investors that seek professional guidance before buying and take care to preserve their asset will be able to grow their portfolio or retirement nest egg by simply holding on to a piece of history.

In general alternative investments (historical documents, art, coins, collectibles etc.) should make up a small portion, under 5%, of an investment portfolio. Another investment that isn’t quite normal, but isn’t really considered a normal investment either is peer to peer loans. We have written about peer to peer loans several times on this blog recently, I would consider under 5% for peer to peer loans acceptable but would consider that part of the bond portion of a portfolio.

Finding new business and retaining existing customers is needed to sustain and grow a business. Gathering good customer data is important to helping increase sales.

Gathering customer data

Collecting customer data requires some effort- but it doesn’t have to be expensive. Here are some great sources you can use to collect data:

• Website Analytics: Your website may be the most common way customers interact with your business. Google Analytics, Piwik and other web site tracking software can provide a tremendous amount of detail about your website results. You can see which pages of your website generate the most traffic and can adjust your site’s design based on data to build your customer traffic.
• One of the most important measures of customer experience is repeat business. Gathering data on customer retention is a valuable measure of how successful the business is at meeting and exceeding customer expectations. In order to help improve that performance one valuable tool is to ask the simple question: “What one thing could we do better?” The questions is simple; creating a management system that takes that data and uses it to continually improve your value to customers is not nearly so easy.
• Gathering data on the experience your customers have is also important. There are many obvious frustration points customers face that any business should be able to identify. How easily can someone find an email address to contact your company? How quickly are matters resolved by email? Do you force customers to fight their way through phone menus instead of letting them talk to a person? How many customers hang up while being forced to waste their time fighting through your companies phone system? This is just a few examples, getting 10 such ideas for your company shouldn’t be hard.

  Many companies instead of having measures customers care about, only have measures accountants care about – such as how much your phone center costs to run. That is fine, but you likely will waste most of your time worrying about collecting customer data if your organization isn’t interested about what the customer experiences. Those companies just are interested in taking as much money from customers as they can without concern for customers. In that case don’t bother pretending you care about customers, it is just a waste of time. Instead just focus on what your business model is and hope no company comes along that has a business model to treat customers well.

• Surveys can collect data from customers but the danger of relying on expressed desires rather than actions must always be remembered. SurveyMonkey is an easy to use tool that makes this process simple. You can create a short survey for free, then place the survey link on your website.
• Ad Responses: Online ads allow companies to easily collect data on customer responses. You can run several types of online ads, and see which ad generates the most clicks to your company website.

Use all of these tools to gather useful data while always remembering that customer data is only a proxy for understanding customers, and there is a gap between what is measured and reality.

Storing customer data

Because you use this data to meet your customer’s needs, the information is extremely valuable. Many businesses use internet security software to protect customer data. Every week it seems there is another high profile leak of customer data from hacked company servers. It is very important to isolate sensitive data and use cloud security system to reduce the risk of data loss.

Personas
Many companies use personas to target different customer segments they aim to capture. A business can use customer data to create an ideal customer ideal customer for specific products or services. And personas can help you target your web site to meet the differing needs of various target customers.

Using data to improve your organization’s performance is powerful. But the power is mainly from designing a management system that uses that data effectively. That is much harder than collecting data in the first place. Our management blog discusses how to use data to manage most effectively.

The Leading Causes of Bankruptcy

The most important thing you can do to avoid bankruptcy is understand why a million people a year end up filing bankruptcy. 4 out of the top five reasons starts with medical expenses. This is followed by:

• Job loss
• Divorce
• Unexpected disaster

In some ways, all four items can be categorized as unexpected disaster. If we expanded the list just a bit more, it would include failure to have a proper financial plan. By now, the unexpected is so common, we ought to be expecting it. When the vicissitudes of life catch us completely off guard, bankruptcy is often the result.

This is why a proper emergency fund is so important for any personal financial plan.

Learn to Properly Use Credit

I separated poor or excessive use of credit from the rest as it is the only one of the top five that is self-inflicted. By now, it should be clear that using credit appropriately is important for a successful financial life.

Many people advise those struggling with debt to cut up the credit cards. Other financial advisors say just the opposite. Store credit cards such as those from Walmart can actually prove beneficial in the right hands. Today we have many personal financial tools at our disposal, if we use them wisely they can be very helpful, if you use them foolishly we will pay.

Live Below Your Means
One of the biggest mistakes people make is to live up to their means. They commit to all kinds of services they can afford at the time. But because Job instability is such a real and present reality, the loss of even a little bit of income suddenly leaves us living above our means. We need to adjust our lifestyle expectations to something lower than what we think we can afford.

Even applying this advice to the best of your ability, you still might have to file for bankruptcy. It is important to know that bankruptcy is not the end of the line. There are those who can help you recover. Bankruptcy is not a punishment, but a solution. It is the ultimate second chance. 

If you fall into bankruptcy the important thing is to change your habits and practices to take advantage of your second financial chance.

Options can be used as an aggressive strategy to make money with investments. By following news events for quite a few different companies you can put yourself in the position to act when stories break, or events occur which can cause mini trends in their stock price.

Volatile stocks with frequent news provide the opportunity to make money on large changes in price. Amazon is a company an Amazon that often makes headlines. Recently, they have been in the news quite a bit, and savvy binary options traders have been cleaning up.

Binary options are a type of option in which the payoff can take only two possible outcomes. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security.

For example, a purchase is made of a binary cash-or-nothing call option on Amazon at $320 with a binary payoff of $1000. Then, if at the future maturity date, the stock is trading at or above $320, $1000 is received. If its stock is trading below $100, nothing is received. An investor could also sell a put where they would make a payoff if the conditions are met and have to payoff nothing if the conditions are not met.

Examples of big news in the recent past

Amazon Fire Cell Phone – Earlier this year, we watched as Jeff Bezos unveiled the new Amazon Fire 3-D cell phone. As happens in most cases when a company unveils a great new product, we saw this cell phone cause Amazon’s stock price to go through the roof. So, as a trader, seeing the unveiling happen first hand would indicate that the value of Amazon was going to rise, and give the trader unique opportunity to make trades on realistic expectations with this asset.

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