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Conflict of Interest Between Managers and Shareholders

Corporate managers and shareholders can sometimes find themselves in a conflict of interest. The goal of being a good manager is being able to spot these potential conflicts and to remedy the situation before a serious problem arises.

The biggest conflict between managers and shareholders is going to be money. Here is the most common scenario. A corporation is profitable. In fact, the corporation is more profitable than expected. Therefore, the corporation has a cash surplus, if you will. Managers would want this money as a financial bonus and the shareholders would want this money as a stock dividend. What to do? What to do?

Mangers will argue that without their leadership and managerial ability, the corporation would not have been as profitable. The shareholders will argue that without their money, the corporation would not have been able to invest in its growth, and therefore, would not have reached that level of prosperity. Who should get the money?

Another situation arises when the managers are also shareholders. This may lead a particular manager to push the opposite way of his/her position. For example, if a shareholder manager would get more money from a stock dividend than from a bonus, this shareholder manager might vote in favor of a stock dividend, not because he/she believes that stockholders should be rewarded for their investment, but because it will mean more money for that particular manager. What if only that one manger is a stock holder?

Before you try to wrap your head around all the possible situations, let me inform you that there is no right answer to this scenario. If you do not give a dividend to the shareholders, you may find your stock undervalued by disgruntled stockholders and your stock as a less attractive purchase. If you do not give your managers a bonus, managers may leave your company or not work as hard as they normally do. Usually, managers are under contract, therefore their job performance is linked to their continued employment, however, if a manager is not being rewarded for his/her hard work, what is the incentive in staying?

Looking at it from a strictly economic point of view, it might be advantageous to give a little money to both parties. However, in the end, the profitable of your company rests in the hands of managers. Be sure to treat both parties well and you should avoid these potential problems.

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Religion in Business

Christian ideals can be found in businesses all over the world. Some examples from my hometown include Christian coffee shops, Christian Music stores, and Christian clothing stores. However, sometimes Christian artifacts are hidden within a business.

Although some restaurants exist in the western United States, you will be more familiar with Chik-fil-A if you live in the eastern United States. Chik-fil-A does not hide its Christian beliefs. In fact, the official Chik-fil-A website states “[o]ur official statement of corporate purpose says that we exist to glorify God by being a faithful steward of all that is entrusted to us and to have a positive influence on all who come in contact with Chick-fil-A.” In addition to this corporate purpose, Chik-fil-A is never open on Sunday due to the fact that this is the holy day in Christian belief. Do these openly Christian ideals hurt Chik-fil-A’s bottom line? As of right now, it does not appear so. Chik-fil-A continues to grow and be profitable despite its refusal to conduct business on Sundays. Additionally, Chik-fil-A sponsors a college football bowl game, so they must be doing something right.

If you live in the western United States, specifically Nevada, California, or Arizona, then you are familiar with In-N-Out Hamburgers. In-N-Out is not as openly Christian based as Chik-fil-A, however, In-N-Out cleverly hides biblical references on their product containers. For example, on the bottom of their cups, on the inside lip, you will see a reference to John 3:16, which states, “For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life.” Additionally, on the back on the lower left-hand corner of a Double Double wrapper is a reference to Nahum 1:7, which states, “The LORD is good, a refuge in times of trouble. He cares for those who trust in him.” Check the various cup sizes and the various food product wrappers to discover other hidden references.

In addition to Christian based businesses, other religions are present in other types of businesses. For example, so called Jewish Delis are very profitable and successful in the eastern United States.

It appears that as long as the product is good, people do not really care about the religious affiliation associated with the product. I agree with this majority. Absent some religious practice that offends my ordinary senses, the religious affiliation of the business is irrelevant to me as long as the product is desirable.

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Is Leadership Earned Rather than Being a Natural Attribute?

This question is similar to the nurture versus nature debate. Many of us have heard the phrase “natural born leader,” however, it takes more than birth to create a leader. Although I do believe that some people have the natural ability to persuade people or have exceptional charisma and/or personality, leaders are created either through teachings or by circumstance.

Leaders can be taught to be leaders. Examples of such teachings occur in the military, higher education, and/or personal betterment. Although each of these fields of learning can create a “leader,” each creates a different type of leader. No one is better than the other, however, each emphasizes different personal attributes in the potential leader.

Leaders are also created through circumstance. In times of great tragedy (such as a natural disaster and or a historical event) and in times of great achievement (whether financial, scientific, engineerial, etc.) people “step-up” and take the leadership role or become the “face” of the event. What makes these leaders different is that they travel their own path, and most of the time are unaware that they are going to have to assume a leadership role. These leaders, in my opinion, tend to be more passionate about their role because something personal is usually the leader’s driving motivation.

People need to be wary of leaders. When people start to lose their own ideals and passions in order to follow the ideals and/or motivations of a particular leader, that leader can acquire too much power. I firmly believe that “absolute power corrupts absolutely,” therefore we should always keep our own senses when any leader, no matter if it is political, personal, financial, religious, educational, etc. comes to power, because no matter the title of the person, that person is still human and humans are fallible.

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How Much has the Office Changed Since our Parents Were Running Corporations

It is extremely amazing how much the face of running a corporation has changed. With the internet boom, the rise of computers, and the advancement of electronic technology, corporate governance has changed dramatically.

Things used to be very structured. You were to always be in the office before your boss and were to always leave after him/her. You had to always be in the office, period. All of the processes were slow and information took a very long time to acquire.

Nowadays, it is rare day when you are in the office. Most of the time communications to and from your office are done on a PDA, smart phone, e-mail, and or fax machine. Corporate employees today have to be movers and shakers. Corporations today support free thinkers; people who “think outside the box” are valuable assets to a corporation.

This is not to say that the way things were done on the past was ineffective. Many corporations became extremely profitable by doing things the “old way.” However, you have to admit that the average age of a corporate CEO has dropped dramatically. It used to be that you work for a company for 30+ years and you were slowly promoted through the ranks. Now, people in their early twenties are starting and maintaining profitable business empires.

Many things have changes, but no matter how many formalities change, one thing will remain constant in the corporate structure: the potential to make money.

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Will Paper Money Become Obsolete?

Just as coinage gave way to paper, paper will be run out of business by two different mechanisms. The first is plastic and the second is the computer.

It is undeniable that plastic is everywhere. All you see on television these days are VISA checkcard commercials. It is a convenience and security issue. It is lot easier to swipe a card through a machine than to hand the cashier money and receive change. Additionally, if you lose your card, who cares?! Call your bank and cancel the card. However, if you lose your cash, it is gone forever! The same is true in the case of destruction. How many of you have left money in your pocket and then thrown your pants in the dryer? Your plants are nice and clean, but the money in your pocket is ruined! Have you ever accidentally torn paper money, spilled liquids on it, or accidentally burned it? If this happens to your debit/credit card, it is no big deal. Your money remains safe and you get a new card.

The other device the will put an end to the reign of paper money is the computer. Your bank accounts, savings accounts, stock accounts, IRA accounts, and any other account you can think of is on-line. Wire transfers happen in the blink of an eye and you never have to worry about whether your money is safe. Additionally, with internet sites like Paypal, sending and receiving money via the Internet has never been easier or safer.

It is time to say goodbye to paper money and hello to the new ways to use currency.

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Understanding Oligopolies

An oligopoly is much like a monopoly except that at least two firms or producers exist. The fear that exists with monopolies also exists with oligopolies except that oligopolies can work out better for the consumer. For example purposes, let us use the satellite radio market. Sirius and XM are the two biggest companies in this industry. I believe that a small Canadian satellite radio company exists, but for the most part, nearly all satellite radio subscribers use XM or Sirius.

Currently, XM and Sirius are in an oligopoly. These two firms control the satellite radio industry. However, because they are such fierce competitors, this works out well for the consumer. The radio base technology gets better, the content gets better, and the number of available channels increase, yet radio unit prices have stayed low and monthly subscription rates have also remained low. This is obviously good for the consumer because it gives the consumer a choice. Although only two firms exist, you can still choose between XM and Sirius.

Oligopolies can turn ugly when the firms that exist in such decide to team up and form a cartel of sorts. For example, if XM and Sirius agreed that each would charge its customers $30 per month, short of canceling their accounts, there is not much a consumer can do. This price fixing and taking advantage of the customer is what law makers fear. This is also what is prevented by disallowing monopolies.

Law makers fear that XM and Sirius, if merged, would create a monopoly and do bad things such as raise prices on subscriptions and radio units. Compared to a monopoly a competitive oligopoly seems great. Just remember, because so few firms or producers exist in an oligopoly, there always exists a potential for abuse.

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Multiple Streams of Income: Real Estate as a Business

Many entrepreneurs get their start in the real estate business. The real estate business can be extremely lucrative, you just have to know what, where, and how to get in. The real estate market, like so many other businesses, is cyclical. You have to know how to survive and be profitable in the bad cycles in order to create the wealth that is truly befitting an entrepreneur.

First and foremost, before you jump headfirst into real estate, you have to learn about the business and the market. Many would be entrepreneurs are hypnotized by the lore of getting rich quick. They think that every deal that they come across is the next million dollar investment. You can not be “star struck” by every real estate deal that comes your way. You have to carefully analyze every deal and even call in a second opinion when necessary.

As I mentioned, you have to know the market. Many entrepreneurs make the fatal mistake of jumping into the real estate market when it is “hot.” This type of market is called a “seller’s market.” You will know when the current market is a seller’s market by, amongst other things, dramatic raises in real estate prices occur. People think that this is the best time to get into the market, but this is simply not true. This is the time when you want to sell, hence the name “seller’s market.” It is simple economics; when more buyers exist than sellers, sellers can raise the price of their property and thus get more return on their investment.

In the worst case scenario, which occurs more often than you may think, would be entrepreneurs buy all their investment properties in a seller’s market. Once the market cools off (as it inevitably will), these would be entrepreneurs find that their investment properties have negative equity and the mortgages or obligations to investors become too expensive to bear. They end up losing their properties and their investment dollars.

The best time to buy is when the market is in the toilet. You can get property cheap, and if you have the knowledge, money, and time, you can follow the most well known real estate money making formula: (1) Buy, (2) Improve, (3) Hold, and (4) Refinance.

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Legal Considerations for Entrepreneurs When Starting a Business

Entrepreneurs will face many hurdles when starting a new venture and/or business. Many will be tempted to plow right into the matter without first researching laws and regulations regarding their particular business.

I am going to let you in on a little secret, many entrepreneurs are dead before they even make their first sale! Why, you may ask? These entrepreneurs are in trouble because they made the classic mistake of not seeking the help of professionals. If you, as an entrepreneur, have the requisite knowledge of the law to begin and maintain your venture and/or business without fear of having done something inconsistent with the law, then you should be fine. However, most new entrepreneurs will just start a business without thinking of the ramifications of a bad contract, a badly negotiated lease, failure to properly incorporate and or organize, and/or failure to obtain financial assistance (whether it an accountant, financial advisor, bank, etc.), to name a few.

The most popular excuse used by entrepreneurs is that lawyers and accountants cost too much. Using this line of thinking, these people try to handle complex legal and financial matters for themselves and, most of the time, end up with a problem that will cost more to fix than it would have originally cost to avoid the problem. These types of entrepreneurs practice “stepping over dollars to pick up dimes.” I suggest you not be one of these entrepreneurs.

Do not fall into a legal and/or financial pit that could have been easily avoided. Starting a business is not as easy as opening the doors to your shop. There exists many state and federal considerations (whether they are taxes, permits, licenses, incorporation or organization or registration, proper accounting, employee matters, and/or stock issues, to name a few) an entrepreneur needs to consider before “starting a business.” Do not ruin your business before it starts by avoiding proper legal and financial assistance.

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Credit Score Conundrums

In my previous post, What are the Components of a FICO Score?, I discussed what the Fair Isaac Corporation takes into account, and each items respective weight, when calculating your FICO score. The interesting thing that I have noticed is that certain practices can both raise and lower your credit score. Lets look at a few of them:

(1) 30% of your score is based upon you debt to credit ratio, while 10% of your score is based upon the number of credit inquiries and “new” credit. The ideal situation is having a maximum of 25% of your credit in use as compared to your debt. Therefore, if you have $1000 in credit, you want to owe no more than $250 total.

As you continue to make consistent payments on your cards, you will most likely become eligible for a credit limit increase. However, you usually have to ask the credit granting company for an increase on your limit. This is good because it will lower your debt to credit ratio, however, you have just created “new” credit and just had an inquiry dinged against your credit report, and thus could lower your score. Interesting!

(2) Some experts state that you should pay off your outstanding balance in full while other experts say that creditors want to see consistent payments, thus you should always pay your bill over time. We now know that 35% of your FICO score depends upon timely payments. Nowhere in that calculation does the amount paid come into affect. Creditors send you a bill with the minimum payment set for you. Most experts agree that you should more than the minimum payment, but not for credit score reasons. You should make more than minimum payments so that you do not get hosed by the interest charges.

The bottom line is, paying off your amount due, whether in full or in parts, is not going to hurt your score (as long as those payments are timely). If you can afford to pay more than the minimum payment, do it. If you cannot, do not. I seriously doubt a creditor is going to penalize you (by means of a lower credit score) for paying back their money in one lump sum!

(3) 10% of your score is based on the type of credit you have. Most people build their credit score in order to take out installment loans, however, installment loans can lower your score. The situation that presents itself is an odd one. Most people build their credit score in order to purchase a car and/or home. However, taking out one of these loans can lower your score because some creditors may feel that this big monthly obligation could affect your ability to pay them back. Now we are back to the debt to credit ratio and the choice of whether or not to raise the credit limits.

The truth is, it seems that certain simple strategies (pay your bills on time, keep your debt low, and keep your credit high) have been to proven to build a credit score significantly. All of the other little things can either slightly chip away or slightly add to your credit score. As I pointed out, some strategies can have both a positive and negative effect. Therefore, if you want to play it safe, stick to the simple strategies and always be aware of the contents of your credit report and credit score.

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Financial Hardship and Homestead Laws

Many of us have faced times of financial hardship. In the current economy, real estate prices are in the toilet. If you bought real estate at the end of the most recent boom, you probably have negative equity in your investment properties. Additionally, you made a common investment mistake by buying when the market was hot, however, that is a talk for another day.

Many people are unaware of homestead laws. Homestead laws protect your primary residence from a forced sale due to outstanding debt, property taxes, judgment liens, etc. In fact, here in Nevada, a recent Court decision stated that judgment liens are void against fully exempt homestead property. It is the most inexpensive way to protect a large chunk, if not your entire home.

Homestead laws protect a certain value (be it equity) in your home. If your home is worth more or you have more equity in your home than the law protects, your home could still be “forcefully sold,” however, you would get the proceeds from the protected amount.

Homesteading a property is easy and cheap (usually the cost to record a document at your county recorders office). Check out your local laws and county recorder or assessor’s office and see if a homestead is right for you. It is the best, most inexpensive way to protect you home.

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Should You Obtain the Services of a Credit Monitoring Service?

As I have been discussing in previous posts, credit is a very important asset in today’s society. Differing views exist as to the overall importance of credit versus the importance of cash, however, supporters of the latter do not deny that credit can be a useful tool.

If you have credit, do you know how to protect it? As you may know, identity theft is one of the most “popular” (for lack of a better term) crimes to commit. Two problems exist with credit and identity theft. First, victims of identity theft have a hard time repairing their credit even though the victim is not the guilty party. Second, you are not aware you are a victim of identity theft until you try to make a purchase that requires a credit inquiry.

Many identity thieves use a different address when obtaining credit in the victim’s name. Therefore, the victim receives no bills, no late notices, and no phone calls about defaults and delinquencies. In the normal, everyday use of your credit card, you credit report is not inquired upon to see if you qualify for a purchase. Your credit report is only used if you intend to make a large purchase (such as a house or automobile). This can leave you “in the dark” as to any illicit credit activity for several months. In the meantime, your credit is literally being destroyed!

In order to prevent this, I use a credit monitoring service. The credit granting company I use offers such a service for $12.00 per month. It has every feature you can think of and gives me instant access to my full credit report and all three of my credit scores. I use this service because it will enable me to quickly identify any unusual information on my report, as well as show me if my credit score raising techniques are working. In addition to those services, the credit monitoring service also notifies me if any unusual activity is being reported on my report.

If you choose to obtain these services, make sure you follow some guidelines:

(1) Make sure the company is reputable. You are going to be giving this company all the information (including your social security number, your address, your birthday, etc.) it would every need to steal your identity. Make sure that the company has many safety features to prevent that from happening.

(2) A larger price per month does not mean better service or product. I have seen prices from $12.00 per month to over $100.00 per month for these services. Make sure you are getting some vastly superior product or service if you choose to shell out an addition $88.00+ per month.

(3) Make sure the service is easy to use and has a way to be immediately reached in the event that you notice suspicious charges on your credit report. You do not want to find something wrong and then find out that you have to submit a claim that could take weeks to process!

If you decide that these services are right for you, shop around, and find the best deal. Protect your credit now and you will be able to save yourself some frustration in the future. Think of this service as a necessary insurance in an identity theft rich time.

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How Important is Good Credit?

Do you think that good credit is not an important asset? I have a friend that thought that very thing. Suddenly, not to long ago, reality slapped him in the face. His credit score was so bad that he could not get financed for a car! His lease was up and he tried to get another car, unfortunately, he was denied at every place he attempted.

You may be thinking that he did not look hard enough or was trying to get too expensive of a car. You may be correct, however, the point is that something like buying a car should be an enjoyable experience. Buying a car should not be an industrial pain that consumes one week of your life!

The sad truth about credit is that good credit is hard to get and bad credit is easy to get. If you have bad credit, you need to start today if you want to fix it. If you look at your credit report, you will see that negative information (such as late payments, charge-offs, etc) can stay on your credit report for years!

My buddy could not get financing for a $25,000 car. Could you imagine if he tried to get financed for a big purchase, like a house? That is too scary for me to imagine! Take care of your credit and you will be one step closer to financial freedom.

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Tips to Raise Your Credit Score

In my previous post What are the Components of a FICO score?, I discussed the different components of a FICO score and their respective weights in determining your credit score.

This post will provide a few tips that you can use to raise your credit score. First, if you have no idea what your credit score is or what information is in your credit report, I suggest you get both. You can get a free copy of your credit report from all three credit reporting agencies by going to Annual Credit Report. This service is completely free (there is absolutely no catch) and is easy to use.

Your credit score is a different story. I am unaware of any website or company (except Washington Mutual that just started the promotion of giving you access to your credit score for free if you have one of its credit cards) that will give you free access to your credit score. If you really want to know your credit score and do not want to pay for it, there is a free way to obtain the information, although it is a little shady.

If you want to get a free look at your credit score, go car shopping! Better yet, just call a car dealership and tell them you are interested in a car. They will run your credit to see if you qualify for the car you are “interested” in. Once they say you qualify or not, ask the salesperson what you credit score is. They will almost always tell you. When the salesperson wants to move on with the deal, just tell them that you are doing some comparative shopping and price searching and that you will get back to them.

If you are uncomfortable with obtaining your credit score this way, all three of the credit reporting agencies will let you buy the information for around $15.00 for all three scores.

Once you have your credit scores and reports, you can see where you need improvement. There are some general things you can do to start to boost your score. Although you will no longer be able to use the authorized user method to boost your score, you can still, (1) pay bills on time; (2) keep your debt low; and (3) not open lots of accounts at once.

Those are general tips, but there are other things you can do and other information you should know.

(1) If you can prevent it, do not close credit accounts. Many people close credit accounts they hardly use or that they just paid off to avoid the temptation of using the card again. This is a bad move because 15% of your credit score is based upon the length of your credit history. If you find that one of your cards is not in use, start using it for a very specific thing (for example, only buy gasoline/diesel with that one card) and use it for nothing else. By doing this, the card is in use, and the payment will be low. This way, you get to keep your lengthy credit history, and you are building points by making your payments on time.

(2) Closing an account does not mean that you no loner have to pay what is owed. This seems simple enough, but you would be surprised how many people are under the false impression that closing a credit account means that they are no longer liable for the debt. This is a rookie move and should not be made by aspiring entrepreneurs! Do not close the account because you are having trouble paying, instead, stop using the credit card! None of the fees change and none of interest rates decrease by closing the account. Therefore, what is the benefit of closing the account? If you fear that by keeping the account open you will continue to use the card, destroy the card. Later, when you feel you have gotten things back in order, call the credit company and tell them that your card was destroyed (by the washing machine, the dryer, or whatever you can think of), and get a new card. By closing the account, you only hurt your lengthy credit history!

(3) Know that certain debts are weighed differently than others. Revolving debt is weighed more heavily in determining your creditworthiness. Revolving debt is money owed to a creditor who sets your monthly payment based on the current balance. This is different from installment loans, (such as student loans) where the amount owed is fixed (not based on your current balance), usually payable monthly, and almost never changes. Keep those revolving debts low and your score could increase.

(4) If you have bad credit and are having trouble getting a card, try a department store. If you find yourself having trouble getting credit from the “big boys” (Visa, MasterCard, Discover, American Express, etc.) try getting a card from a department store. Their interest rates are terrible, but they are usually much easier to get. This credit will help you start to reestablish yourself as creditworthy and will help improve your score, if you make timely monthly payments and keep the debt low.

(5) If department stores do not work, you can get a secured credit card. Secured credit cards are credit cards with a deposit backing. In other words, your credit limit is set by how much money you give the company. If you deposit three hundred dollars, your credit limit is three hundred dollars. Unlike a debit card though, charges do not come out of that deposit amount. You are sent a bill like a credit card and have to make the payments. Be cautious if you take this route because some of these companies are predatory and charge OUTRAGEOUS fees and interest rates! If you find out that you are paying more to possess the card they you are actually spending by using the card, dump it!

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What are the Components of a FICO Score?

The Fair Isaac Corporation is the company the created the FICO score for credit. A credit score can range between 300-850. All three of the credit reporting bureaus (TransUnion, Equifax, and Experian) use a FICO score system, except each bureau calls their respective systems by a different name. TransUnion has EMPIRICA, Experian has the Experian/Fair Isaac Risk Model, and Equifax has BEACON. Do not be confused by these names. Although different by name, these credit bureaus’ systems differ only slightly in calculation.

Although the exact formula used to calculate a FICO score is unknown to the general public, the Fair Isaac Corporation has released the components used to calculate a score and their respective weight in the calculation.

35% of your score is based upon your Payment History. Late payments of all types are reported in your credit report. People are sometimes under the misconception that as long as they pay their credit cards on time, it does not matter if anything else (like your car payment, your cell phone, doctor bills, etc.) is late. This is far from true. Any late payment to a creditor can be reported in your credit report by way of collections, lawsuit, wage garnishment, attachments, lien, and judgments, to name a few.

30% of your score is based upon your Amounts Owed. This is called a debt to available credit ratio. Basically, if you have two credit cards with a $2,500 limit on each, your total available credit is $5,000. If these accounts are “maxed out” then this will lower your score. As a good rule of thumb, you generally want to have a total of only 30% of your total credit in use. Therefore, in this example, if you owe $1,500, you should be okay. Anything more, and you may be at risk of lowering your score.

15% of your score is based upon the Length of Your Credit History. This makes sense if you think about it. If you just got a credit card, there is no accurate way to gauge your creditworthiness. The longer you have credit, the more accurately lenders can determine the risk of lending you money. This equates into a higher score for you.

10% of your score is based upon New Credit. This does not mean that you should not open up any new credit cards. If you want more credit, do so sparingly. If you try to open and/or apply for a lot of credit at one time, it looks like you are in financial trouble or that you are going to be amassing a large amount of debt. Either way, it does not look good to lenders and can negatively affect your score.

10% of your score is based upon the Type of Credit in Use. Also referred to as a “mix,” this component looks to all the types of credit you have. Whether it is revolving, installment, mortgages, etc., a healthy mix will raise you score, although by very little. This component really only comes into play if you do not have many revolving accounts.

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Cool Financial Calculator Website

I was reading some financial news yesterday and happen to stumble upon a really cool website. This website had any and every type and kind of financial calculator you could think of.

Every calculator was 100% free to use and could even be imported onto your website or personal profile page. And, when I tell you they have every financial calculator you can think of, I mean it! It is important to note, however, that using the calculators are free, but if you want to put one on your website, it is going to cost money.

The website is You definitely need to check it out. I do not believe that this website is really well know, therefore, if you do not feel comfortable as to the quality or accuracy of these calculators (I am not saying that they are inaccurate, and I have never had a problem with using them), is a pretty cool financial website that has a financial calculator option. Bankrate is not a pure financial calculator site like is, but is more popular.

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Do Not Be Fooled By Incorporation Fees

If you are planning to form a corporation, you have many options as to where to form. You may know that Delaware is a popular state in which to incorporate. Put basically, Delaware laws are very corporate friendly. I will get into the specifics in another post. Back to the point, many states advertise that you should incorporate in their state because the fees are less than other states.

Although this may be true, you have to consider where you are going to be doing most of your business. For example, Nevada demands a relatively inexpensive fee to incorporate. However, if you are doing all of your business in California, and merely incorporated in Nevada to save on the incorporation fees, consider this; in order to do business in a state other than the state in which you incorporated, you have to file for a foreign corporation certificate. This basically means that you incorporated in another state and want to do business in the present state.

What is the big deal with filing for a foreign corporation certificate? A foreign corporation certificate costs money, and has a yearly maintenance fee. So before you incorporate in a state to “save money” think about how much the foreign corporation fee is and do some serious calculations to determine whether you are really saving any money!

Another popular advertisement by states is the tax advantage pitch. Some states have a smaller tax rate than others. However, money earned in one state is taxed in that state. Therefore, seriously weigh the advantages of forming out of state against the disadvantages, and do not be duped by “money saving” sales pitches that may end up costing you in the long run.

There is a popular saying among entrepreneurs, “do not step over dollars to pick up dimes.” I implore you to avoid doing the same thing!

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Need More Money? Try Cutting Your Costs!

I had a unique experience yesterday afternoon. I was talking to a friend that was having trouble paying his bills. He was wondering how he was going to make next months rent payment (he lives in Los Angeles and thus his rent is very expensive), his car payment, his student loan payments, and all his other bills. He kept wondering and asking me how to make more money.

During our long conversation, I was amazed that he was considering getting a second job (considering he already worked 60 hours a week). What amazed me further is that he never considered cutting costs. His entire motivation was about making more money.

First, let me start that making more money is a great goal. The entire purpose behind this blog is to share knowledge on how to acquire wealth. However, wealth accumulation can be a long process. Absent hitting the lottery, millions of dollars do not come overnight. It takes hard work, dedication, and motivation.

Most people in my friend’s situation think one dimensionally. The problem presented in paying bills. They think “I do not have enough money to pay bills, therefore, I need to make more money!” This way of thinking is not incorrect, but it can create many problems in the immediate future. Let us say that my friend got a second job on his days off. I guarantee in a month, he would have no energy and his primary job performance would suffer, as well as his health and personal life.

An easier way exists. I told him he needed to cut costs. Cutting costs will have an immediate effect. I told him to stop going out to eat so much (he went about three times a week), brown bag lunch at the office, and stop buying unnecessary stuff. Additionally, I told him to contact his student loan office and ask for a month reprieve. I think that most student loan providers allow the payee to request a “month off” without penalty. Taking a month off will put him a month ahead on his student loan payment.

There are many other little costs he can cut that will add up big in the long run. My biggest piece of advice for him was to NOT form a budget. Budgets are too hard and people never stick with them. All I said was to keep track of the costs that you eliminated. This way, he will be able to see a noticeable difference in his checking account, and most importantly, he may not have to pick up a second job!

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Adsense Revenue Sharing Websites

Many article submission websites exist. I have provided many of them in previous posts and many more are still to come. However, Adsense revenue sharing websites also exist. When you submit your articles to these websites, you also submit your Adsense publisher ID.

If you do not have an Adsense publisher ID, then you have to get one from Google by submitting you website for approval. Once approved by Google, you will get an Adsense publisher ID.

As you are all well aware, when you submit an article to websites, your rewards are backlinks, page hits, and reputation building. However, if you want to make any money, people have to visit your website. With Adsense revenue sharing websites, when you submit articles, Google Adsense advertisements appear next to your article. When a person clicks on these advertisements, you get paid on these clicks. For providing these services, the webmaster takes a percentage of the Adsense revenue, usually between 10-50%.

If you do not feel like sharing, then you do not have to submit to these sites and you can benefit from submitting to a traditional article submission site. However, submitting to both of these types of article submission websites will produce the benefits of both. Check out these sites if you want more information:

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Reverse Piercing and the Myth of Limited Liability – Beware of the Alter Ego!

A novel situation has presented itself in recent court decisions. In 2004, the New York Court of Appeals ruled in favor of granting a new type of remedy, “reverse piercing.” Piercing the corporate veil is a fancy way of saying that the shareholders of an entity are personally liable for the debts and liabilities of that entity. This means that if the entity does not have enough money to pay all debts and liabilities, creditors came attack a shareholder’s personal holdings.

Reverse piercing is different. In a reverse piercing situation, an entity is held liable for the debts and liabilities of its shareholders. This is an amazing theory because the whole point of a limited liability entity is to protect the personal assets of its shareholders and vice versa. In other words, the shareholders and the business are two completely separate entities. However, many of the factors used by the court to determine whether an entity should be pierced are used in determining whether a reverse piercing should take place.

The main inquiry is whether the individual shareholder is the alter ego of the entity. In other words, are the two distinguishable (in a legal sense)? In the New York case, the defendants were sued by two creditors. The defendants contracted to buy a house and formed a corporation for the purpose of buying the house. The defendants, and not the defendant’s corporation, paid the property taxes and mortgage principle and interest on the house. The defendants then deducted the payment of these taxes and mortgage interest from their, and not the corporation’s, tax return. The court concluded that the defendants bought the house in a way to avoid the creditors’ claims, and the defendants utterly controlled and completely dominated the corporation. As such, the court held that the defendants were the alter ego of the corporation, and the house purchased by the corporation (and therefore the property of the corporation) was subject to the creditors’ claims.

Let this be a lesson to all you aspiring entrepreneurs! If you have a corporation, or any legal limited liability entity, make sure that you keep the entities affairs separate from your personal affairs. If you do commingle these affairs, you may be subject to personal liability or, under a reverse piercing theory, your entity may be liable for your personal debts and liabilities.

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Do You Know What Is In Your Credit Report?

Many Americans would be amazed as to what they find in their credit report. I have had to deal with errors in my credit report for a long time now. My problems arise because I am named after my father. You would think that in this day and age, and with the many technological advancements that exist due to computers, distinguishing between two different people would be easy. Apparently, this concept eludes the credit reporting bureaus.

Due to the fact that my father’s accounts appear on my credit report and vice versa, I constantly have to contact the three bureaus and the reporting banks. It really is a nightmare! I have to do this because two things are happening when the bureaus and the banks incorrectly report accounts in my credit report. First, I lose confidence in the credit reporting system and the bank that incorrectly reports. Second, my father loses the benefits of having his accounts in his reports and my debt to available credit ratio changes, which could lower my score.

As you may know, Congress has changed many laws regarding credit reporting in order to benefit the consumer. If you go to, you will get a free copy of your credit report from all three reporting companies. These reports are 100% free, meaning you do not have to sign up for some 30-day credit monitoring service. In is important to note that you can only get one free copy of your credit report from the three bureaus only ONCE per year!

If you share your name with somebody in your family, it would be a good idea to check your credit report. Keep in mind that you will not get access to your credit scores, but you will see if any negative information appears on your credit report.

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Blogging News

Blogging is a great way to create income online. As I have written in the past, blogging can produce several income streams from the internet. However, blogging also creates an information stream for people. You would be amazed how much information you can obtain from reading blogs.

Before I attempted to create a revenue stream from blogging , I did a little research. At first, I randomly surfed around the internet. I found some interesting websites, but for the most part, these websites offered very little useful information. It was not until I started looking at blogs that I acquired relevant information about producing income online through blogging.

My goal was to create as much income as possible from the internet while spending as little money as possible. Blogging was my first and best choice. Blogging creates the benefits of a website without all of the liabilities.

Recently, an income stream used by bloggers has been criticized in the news. That income stream is blog advertising. Blogging purists and others believe that blog advertising is deceitful because the links to an advertiser’s product are “concealed” in the blog post. I do not agree with this criticism. More often than not, blog advertising companies require that you disclose when you are advertising in a post. Therefore, there are no hidden advertisements, nothing is “concealed,” and nothing is wrong. If these people do not want to make money off their blog, that is great. However, these people should not criticize others for trying to create revenue from information and/or thoughts posted on a blog. Nobody forces anybody to read blogs. Therefore, to all the critics out there, worry about your own blog and your own audience. You can keep your blogging “pure.” Just know that me and people like me are going to try to create a revenue stream from our blog.