Start A Side Business in the Lazy Days of Summer
The summer can be a great time to start a side business because life tends to be a little more laid back. People are going on vacation and taking time off to hang out with their kids so your day job may be a little more relaxed. Plus there’s nothing on TV to distract you at night : )
Many other personal finance bloggers have written about the benefits of starting a business such as My Two Dollars and Man Vs. Debt. Although starting a business isn’t easy it can be rewarding, here are some steps to get you started.
Turn your passion or hobby into a business
You’ve already read about this a hundred times from other bloggers, but the reason we keep saying it, is because we are living proof that you can earn extra money by starting a business that you are passionate about. The reason you choose a hobby or something you love to turn into a business is because you are more likely to stick with it when you aren’t making any money from it.
For instance, if you are good at math, but you hate the subject and you are not a patient person, then you shouldn’t start tutoring high school kids on Algebra and Calculus. Here is a quick list of some good examples for side businesses to start:
- Math or Science Tutoring
- Camping/hiking trip guide
- Landscaping
- IT Consultant
- Musical Instrument Instructor
- Photographer/Videographer
- Personal Trainer
- Mail Order Baked Goods Company
- Specialty Arts & Crafts business
- Professional Organizer (yes, some people enjoy organizing stuff!)
Focus On Getting Business Before You Set Up Your Business
If your business is a skill that you have, then focus on getting clients first. So many people focus on getting business cards, a website, setting up a business bank account, start an LLC, and they don’t even have any customers yet. The truth is, you don’t have a business until you have customers or clients. Start networking with people, tell your friends and family what you’re doing, and get some commitments from paying clients first. Worry about the details later.
Bootstrap Your Business
Since most service-based businesses can be started for less than $1,000 you probably don’t need to take out a loan to get started. Drum up some paying customers and use that money to pay for any initial expenses you may have.
It’s trickier if your business involves a product that you make since you may need to buy the raw materials. I think the best way to do it is to create the product on demand. Don’t go out and by hundreds of dollars in materials, make a bunch of widgets, and let them sit there and collect dust.
Instead make a sample or two, target your audience, invite them to your house for a demonstration or display show, and start taking orders on demand.
Network to Market Your Business
Have a presence on Twitter and Facebook and incorporate a blog into your business website. Be sure to connect with other small business owners through local business organizations like the chamber of commerce or a Business Network International chapter. Let all of your friends and family know about your side business, strike up a conversation about it when appropriate.
The most important part about starting a side business is to be patient. You won’t be rolling in extra cash right away. It takes a few months to get your name out there, and you’ll get rejected a lot. Be persistent and be patient. Who knows, someday your side business could end up turning into your full-time business.
Erik Folgate is an associate writer for Money Smart Life. He also writes about personal finance, social media, and personal life issues on ErikFolgate.com.
Day Trading Overview
Day trading by individual investors became really popular when online brokerage accounts came onto the scene. You probably remember the late 1990’s, when the market was running faster than Olympic sprinters, people were re-financing their homes and taking withdrawals from their 401ks to dive into the day trading pool. Unfortunately, many of these people lost a lot of their money when the technology bubble popped.
Day Trading Strategies
Day trading is not for the timid or emotional, but it can produce positive results. The key is to have a well-defined strategy; one that you must stick to. This strategy must be specific in when to buy and sell a stock. Every step must be clear and in place before you make your first move. This helps remove the emotion from the decision making process.
Day trading is not a hobby. It’s not a game and certainly not something you “play” with. Day trading is a business and must be treated as such. Without the proper planning and/or experience in place, you will fail before you even start. Your trading strategy should define two things:
- Buy/Sell Signals
- Risk Management
Buy/Sell Signals
All day trading strategies start with where you will buy into and sell out of a position. These signals must be as objective and as specific as possible. They must be quantifiable and measurable. Choosing a stock based on whether it is “trending up” is too subjective and general.
Once a “Buy” trade has been placed, this investor needs to know exactly when they will get out or “Sell that position. The exit signal could be a specific percentage profit or a maximum loss. These “Sell” signals must be followed. Discretion can be very dangerous when playing with your profits. Using that same philosophy, a pre-set price must be followed in which you would realize your loss.
Risk Management
In the world of day trading, the use of a “stop-loss” is extremely important. All traders must know before entering into a position, where they will be getting out if the market goes against them.
Traders must be as disciplined in the use of stop-losses as they are in protecting their gains. All emotion must be removed and replaced with your strategy. An effective strategy will have very clear steps on where and how they will be exiting a position.
Day trading is all about capital. Every penny must be protected to fight another day if the market turns against you. Yes, you can hold off to see if the market turns around, but the danger of more losses will become more prevalent with each minute you leave yourself exposed.
Day Trading vs Long Term Investing
When you compare day trading to long term investing, please remember that in some day trading strategies, all you need to succeed is a stock price movement as little as $.25. The idea is to take advantage of these little spikes and move on.
Long term investing looks at building a portfolio that can stand the test of time, where you don’t even blink at tiny moves in price of a stock.
Stock Investing Strategies for the Long Term
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” – Warren Buffett
If you think of day trading as a series of one night stands, long term investing is that one that sticks. Whether it’s a bad rash you can’t get rid of or the love of your life, these are long term relationships where you meet the dysfunctional family and all the friends and baggage you didn’t expect.
Long Term Investing
Most investment professionals would consider five years long term. When it comes to investing using individual stocks, it can be a bit more expensive and potentially more risky than using an ETF or mutual fund. Mutual funds or ETF’s can help facilitate diversification and protect your portfolio when the market gets choppy.
Diversification
There are just as many believers in diversification as there are opponents of the philosophy. Opponents will say that an investor should buy a stock that they believe in regardless of industry or sector. It’s a plausible idea, but how would you feel if you believed in three of the top financial companies two years ago. These were very popular stocks, with great track records and dividends, but then…
The idea behind diversification is that where one sector or industry is under-performing, other industries will usually perform at a better rate. A good starting point for a portfolio is 10 individual stocks or ETFs. An investor must still do their due diligence to pick the right sectors and/or stocks. There are two ways of doing this: top-down or bottom-up.
Top-Down Investing
When you hear about a money manager or a mutual fund the analyzes stocks using a “top-down” process, this means that they first decide what sector or region they feel will out-perform the market. Once they decide the sector, then they research the individual stocks inside the sector in order to choose the right one for them
Bottom-Up Investing
This is the exact opposite (obviously) of Top-Down. In this scenario, you choose individual stocks based on your own extensive research regardless of sector.
Buying Stock via ETFs
If you’ve decided on a top-down approach but you can’t decide which healthcare stock you want, you can look into ETFs to fill the void. With ETFs, you are purchasing every stock in that sector/index. With a healthcare ETF for this example, you are filling the sector and getting diversification in the process.
Top Down Example
Here’s an example of a portfolio that might represent a top down strategy, each of the stocks is from a different sector. Let me be clear in saying that no research went into this sample portfolio, it’s simply an example to demonstrate stock from various sectors.
- Apple Inc. (AAPL) – Technology – Computers
- Wells Fargo & Co. (WFC) – Financial
- Johnson & Johnson (JNJ) – Healthcare
- Chevron Corp. (CVX) – Basic Materials
- Coca Cola (KO) – Consumer Goods
- Dow Chemical (DOW) – Chemicals/Major Diversified
- Walmart (WMT) – Services – Discount/Variety Stores
- General Electric (GE) – Conglomerates
- Boeing (BA) – Aerospace/Defense
- Utilities Select Sector SPDR (XLU) – Utilities Sector ETF
Again, this is just an example of ten holdings pulled together to show a diversified portfolio. These are holdings that you need to look at with the idea of holding them for extended periods of time.
Monitoring Your Stocks
Keeping an eye on your holdings is very important. There may be a holding that increases significantly in value for a specific reason and overweights your portfolio in a certain sector. Taking profits in situations like that may be in order. By that same token, if a stock drops suddenly, but you believe it is still a strong company, you may want to double down and buy more shares on that dip.
One other final thought, most of these companies do give dividends. You can either re-invest those dividends back into that particular stock and buy more shares or take the cash and use it to take advantage of other opportunities.
Day Trading vs. Long Term Investing
Day traders and long term investors can both make money in the stock market. The different approaches of buying and selling stocks vs buying and holding them require different strategies and come with different levels of risk.
Day Trading
Day trading has been a part of investing for a few decades now. Before 1975, all commissions on trades were set at the same rate. The SEC at that time made fixed rates illegal. Discount brokers rose out of that decision and changed the landscape of investing. The practice of day trading didn’t really come into it’s own until the great bull run of the 1990’s though.
In the mid-90’s, an individual could almost close their eyes and point at a stock in the Wall Street Journal and make money on that trade. People started quitting their jobs and mortgaging their houses to take advantage. Unfortunately all good things must come to an end, and so did the run on the market when the Tech Bubble burst. The chaos and carnage this created in day trading circles is legendary.
So what is day trading? It is the act of buying a stock and then selling it in the same day, or a short time later. It is a very intense, hands-on practice. Day traders watch the markets and monitor their trades the entire time the market is open, looking for short, quick movements in a stock to get in and out.
While day trading is risky, it can also be extremely lucrative. It’s also an accountant’s nightmare. Later this week we’ll dig a little deeper into trading stocks and take a look at some day trading strategies.
Long Term Investing
When you think about the word investing, things like “buy & hold” or “Warren Buffett” probably come to mind. Mr. Buffett, arguably the best investor of all time, has made a living out of buying a stock that he feels is cheap, and holding it until it goes up. A long term investor does not buy Disney stock because he thinks it’s going to pop because they are releasing another Pixar movie. He buys it because he believes the company is going to be here twenty years from now, still making Pixar movies. He can hold that stock, for however long, enjoy the dividends and then sell it down the line when necessary.
Tomorrow we’ll talk about building a stock portfolio and how you can use a top-down or bottom-up approach to diversify your investments.
Day Trading vs Long Term Investing
One way to look at the difference between day trading and investing for a longer term is that a trader will either sink or swim by trading through a market storm. An investor will ride through the storm and see what happens on the other side (usually).
Investing in stocks is difficult and not for the easily squeamish. There are dangers at every turn, but also rewards. There is only one guarantee, no matter which style of investing you choose; you will NOT get bored.
Five Financial Pitfalls To Avoid During The Summer
I don’t know about you, but I develop some lazy habits during the summer. Maybe it’s because I live in Florida, and the brutal heat and humidity can make anyone feel lazy and lethargic. The only remedy to the heat in Florida is a nice pool or the beach but even the Atlantic Ocean warms up bath water temperature in the middle of the summer.
Not only do I feel lazy, but I tend to act lazy with my money. I think less about my financial goals, I spend money at places that I normally wouldn’t spend it, and I get a little less stringent with my budget. Here are five financial pitfalls to avoid during the lazy days of summer.
Eating Out Instead of Cooking
I find that we eat out more during the summer, because we like sitting outside at a table on a warm summer night. Also, we are usually traveling around more during the summer whether it’s a weekend getaway or a wedding to attend. The remedy to this is using the barbeque at home or cooking your food and eating it on your patio or backyard. You’ll get the feeling of eating out, and you can enjoy those warm summer nights.
Not Planning Ahead for Fall & Winter
It’s so easy to live in the summer moments of traveling and having fun at the beach. Then all of a sudden, it’s September or October and you haven’t started saving for holiday gifts and parties. Don’t stress out about the fall and winter, but make sure you put a savings plan in place to stash away money every month for the expensive fall and winter months.
Slacking at Work & Your Career
The summer months in many industries are slower than usual, because many customers are on vacation, but that doesn’t mean you shouldn’t take a break from work. Many companies hire during the summer, because they have more time to train new employees, and you don’t want that new employee showing you up. Use the summer months to further your career by taking a pre-certification course or continuing education class. Go the extra mile, because your boss or clients will notice it more during the less busy days of summer.
Ignoring Summer Deals
Because the summer is a slow time for retailers, you can often find great deals on electronics, home goods, and clothing that retailers are trying to dump before the fall line comes in. The end of July and first week of August is a great time to shop, because the back-to-school sales are usually pretty good. Many states in the past have waived sales tax on many items during the back-to-school rush, but with the current economic situation, it would be surprising if a state gave up tax revenue at this point.
Failure to Network
You’ll be out doing a lot of different activities during the summer, and you’ll be traveling to places that you normally wouldn’t travel. Don’t turn your leisure trips into business trips, but always be prepared if you meet someone that could be a potential client or help you get a better job. Keep a few business cards with you, and make a conscious effort to strike up conversations with strangers. You never know what could come of it!
Keep Your Kids Busy Without Breaking the Bank This Summer
Summer is a fun time for kids, but it can be challenging for parents to keep them occupied and entertained while they’re home all day. There are many different programs and camps you can sign your kids up for but that can get expensive quickly. If you don’t want your kid just hanging around with nothing to do and complaining about being bored all summer here some tips for keeping your kids busy without spending a lot of money.
Research Summer Camp Options
There are some good ones, but there are also some horrible ones that cost a lot of money. If you are thinking of a summer camp, don’t go for one that just trucks kids around town to the movie theater and arcade. Look for local, public camps like camps centered around sports or arts and crafts. There are also many public camps that take kids to the museum and other public attractions around town.
Public sports camps can be very cheap, and they are a good way to help your kid learn fundamentals of a sport and get some exercise. If you find your kid is great at one sport and really loves it, you can splurge for the privately run camps. These are much more expensive, but the quality of coaching is usually better. The point is to do your research, and look at all of your options before registering them for a summer camp.
Create Your Own Summer Camp
If there are enough stay-at-home parents in your neighborhood, you can create your own mini-camp for your kids. Assign each parent to one day of the week for the summer. Then, choose an activity that takes up a good chunk of the day like going to the lake/beach, a water park, the science museum, or a big pool party if someone in the neighborhood has a pool.
It will be more work but will certainly be cheaper than paying for a summer camp run by someone else. Plus, your kids will be with their friends, and the stay-at-home parents will get a break four days out of the work week!
Put Your Kids to Work
Aside from their daily chores, find some projects for your kids that are old enough to stay at home by themselves. Set up a compensation structure for these extra projects, and give them an incentive to do it. For instance, if they complete all of their tasks during the week, you’ll pay for them to do something fun with their friends over the weekend.
You can even pay them without it coming out of your own pocket. Have your older kids clean out the garage and attic, organize it, and pick out items to sell in a garage sale over the weekend. Let them keep whatever money they earn in the garage sale. This is a great way to teach kids the importance of working to earn money.
Help Them Start a Business
Another great idea for keeping older kids busy is helping them start a summer side business. Mowing lawns, running errands for elderly people, cleaning and organizing garages, pressure cleaning driveways, babysitting/house-sitting/pet-sitting, and landscaping are all great businesses for young teenagers to start during the summer. Teaching your children about entrepreneurship is one of the most valuable money and career lessons you can teach them as a young person.
Plan Out Your Child’s Summer
Your child won’t plan it out for themselves, so you need to make sure you have a game plan for every week of the summer. Sending them off to their grandparents or a favorite aunt and uncle’s house is a great way to save money and get some time to yourself!
I am so surprised that this has become such a less common thing for kids to do over the summer. My wife and her sister used to visit their grandparents in Michigan without their mom and dad for two, three, and even four weeks at a time.
Be creative this summer. You don’t have to spend hundreds of dollars each week to keep your kids busy while you are working. Again, planning ahead is the key. If you map out a plan for the next few months, you’ll spend much less money and you’ll know your kids aren’t sitting around bored and looking for trouble : )
Technical Analysis & Stock Charts
Technical analysis of stocks is defined by Investopedia as the “method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity”.
Technical Analysis
In the world of technical analysis, the men and women who become analysts play part historian, part weather man. They look at the past performance of an individual to try and predict what “might” happen in the future. There’s a reason why the disclaimer, “past performance is no guarantee of future results” though. This job is not easy and the professionals are wrong just as often as they are right. Analysts will end up being “early” or “late” in their predictions, but the one that nails it on a regular basis ends up on CNBC.
The foundation of technical analysis came from the writings of Charles Dow early in the 20th century. Three main points of the Dow Theory are:
It’s all inclusive
The price of a stock at any time is indicative of all the information available that can affect the stock. This is the launching point for technical analysis.
Stocks are trendy
Like skinny jeans, stock prices tend to follow a trend. While there can be some random movements, like baby boomers storming the closest Abercrombie & Fitch, generally stock prices will follow a trend for a period of time. The difficulty is in figuring out when the trend is over. Who wants to be the last guy walking around with a Michael Bolton haircut?
Even if we know history, we are doomed to repeat it
Based on investor behavior, stock movement tends to do the same thing when certain factors occur. One example would be the run on banks we saw in early 2008. Like the late 1920’s, people thought their money would disappear (not the case if you are within FDIC limits) and rushed to withdraw it all. Who would have thought we’d see a repeat of that?
Stock Charts
Next, let’s look at three different styles of stock charts that are used in technical analysis and an example of each.
Overlays
These charts are placed over the standard stock pricing chart. One use for this is to follow moving averages of a stock. When looking at a moving average of a stock price, it is based on a certain time frame and is the average price of that time frame. This can filter out short term spikes and pick up longer term trends.
In the chart above for Wells Fargo (WFC), the orange line is the 50 day moving average laid over the daily stock movement.
Price-Based Indicators
One price-based indicator used for technical analysis is the Relative Strength Index (RSI). This is a momentum oscillator that measures sharp movements in a stock price. This is an indicator that suggests if a stock is either oversold or overbought.
This is an RSI chart for WFC for the same timeframe as above. J. Welles Wilder, the man that developed this chart in 1978, believed that if the chart went above 70, the stock was overbought, and if it fell below 30, oversold.
Volume-Based Indicators
Money Flow Index (MFI) takes a look at the dollar volume in terms of shares traded.
MFI is used much in the same way as the RSI. The values to keep an eye on in this example are 80 and 20.
Technical traders never rely on just one of these charts, the idea is to use multiple indicators to come up with enough evidence to make a move one way or the other. Hopefully this was a useful overview into the concepts behind technical analysis, is you have any questions just leave them in the comments below.
Credit Card Telephone Scammers
These credit card scammers won’t leave me alone! Just over a month ago I wrote about an automated phone call I received regarding credit card interest rates and the same exact call came through again today.
A fembot named Jamie gave me the same spiel, this time I caught a few more details. Once again she referenced how credit card companies have been told to lower rates by the president, then claimed to be calling from the “interest rate reduction department” to help me lower my credit card interest rates.
This time when she said, “Press 1 to lower your interest rate”, I quickly pressed the button so I could see what it was all about. After a long pause, I was transferred to another automated message which started off by saying something along the lines of, if you don’t want to be called again hang up and your name will be taken off the list.
I hung on, curious to hear what scam they were running. Then the recorded message said if I wanted more information on lowering my interest rates to leave my name and phone number and someone would call me back as soon as possible.
Unfortunately, I blew my “investigation” right there by just hanging up. I didn’t want to give out my personal info to any scammers but looking back, they already have my phone number and I could have easily left a fake name just to get a call back.
Sorry I didn’t think faster on my feet, I would have liked to have gotten to the bottom of what exactly they’re after and shared it here, but I choked. Who knows, they’ll probably call back in another month and this time I’ll be ready with an alias : )
Your FICO Score
Your FICO score is the credit score used by 90 percent of the lenders in the United States to determine whether or not they want to lend you money. A FICO score is a three digit number that runs from 300 to 850. The higher your credit score, the better your chances are for loan approval—and the better terms and conditions are for the loan.
Calculating FICO Scores
Now that you know what a FICO score is you’re probably wondering how it’s calculated. The FICO score breakdown looks like this:
Payment history (35%): Making your payments and making your payments on time.
Balances (30%): The more manageable levels your outstanding balances are, the better off your credit score is.
Credit History (15%): The length of your credit relationships are important. The longer your relationships with credit card companies, mortgage lenders, auto loan providers and more, the better.
Credit Types (10%): Your credit score is also determined by the various types of credit you have. High credit scores come from having various types of credit such as mortgages, credit cards, student loans, car loans and more. It’s about your ability to manage different types of credit so if you only have a credit card then it doesn’t speak to your ability to manage various types of debt.
New Credit (10%): The final portion of the FICO score credit calculation is establishing new credit. You can tackle two portions of your credit score at once by applying for new credit that is a type of credit you don’t have.
Good FICO Scores vs. Bad Scores
With the current credit crunch in full swing, what used to be considered a good credit score (in the 700s) may now be considered low by lenders since they’re more risk averse.
- Good credit scores are those 750 and higher
- Mediocre credit scores range from 650-749
- Scores from 300-649 are considered bad credit
How can you find out your FICO score? Experian, which is one of three three major credit agencies teamed up with FICO, so you can request your score at the Experian site or MyFICO. Be sure you check into the ways you can get a free credit report.
Improving Your FICO Score
If your FICO score is low, concentrate on improving your credit score by concentrating on the five areas that factor into the score. First, make sure you always make your payments and make them on time. Second, pay down or pay off debt so that it’s at a reasonable amount for your income level.
Do not close old accounts because you don’t use them anymore; keeping them open can help boost your credit. Also be sure to establish new credit once in awhile to keep your credit file fresh and mix it up a little by making sure that the credit you have is diversified.
Now that you know what your FICO score is and how important it is for obtaining credit approval be sure to take the necessary steps to maintain or improve your credit score. Especially in a credit crunch, your FICO score may make a difference between getting approved for a loan or getting denied.
Seven Ways to Save Money on Your Summer Family Trip
When I was a kid, my family always had a particular spot that we vacationed for at least two weeks out of the year. We went to see my grandmother and grandfather for the first week, and then we went to their cottage on Lake Michigan just north of Muskegon, Michigan.
My family was pretty traditional, and we didn’t have a ton of money, so we usually drove the grueling 18 hour trip from Florida. Although back then, gas was about .89 cents a gallon, so it was always less expensive than flying up there. Summer family vacations are part of America’s heritage, and I have great memories of from those days.
Today, it’s much more expensive to travel as a family, so here are seven tips to help you save money on your family trip.
1) Drive instead of fly. Even though gas prices have crept back up to about $2.25 a gallon, it’s still much lower than last year. If you live within 12 hours of your destination, it’s probably more economical to gas up the minivan and take a road trip. Road trips can be good bonding moments for families, because it forces you to have conversations! If you must fly, here are some tips to help you save money on airline tickets.
2) Pack food on your road trip. Instead of stopping for all three meals, pack sandwiches and snacks for the trip so you can skip lunch and sometimes dinner.
3) Look for a vacation rental on Craigslist or VRBO. You can find vacation rentals at every vacationing spot on these websites. Typically, you’ll find weekly rentals that are cheaper than renting two hotel rooms. Plus, you can find nice condos and houses with full kitchens and multiple bathrooms.
4) Make sure your hotel or vacation rental has a full kitchen. You can blow so much money eating out while on vacation. Having a full kitchen allows you to buy food at the grocery store and make breakfast and lunch so you can save your dining out money for nice dinners. Here are some of the best travel websites to help you research hotels.
5) Plan out your trip ahead of time. If you plan out your itinerary ahead of time and know what you’re going to do and spend each day, you’ll avoid tourist trap attractions that prey on bored tourists. Sometimes, your plans don’t work out due to weather or something unexpected. Write down a list of three or four other activities as a back-up plan just in case you get a wrench thrown in your original plans.
6) Do Things together. You ARE going on a family vacation. Even if your teenagers are whining about having to spend time with you, make them do stuff together with you. If everyone is off doing a different activity, it will add up quickly. Choose activities that the whole family will enjoy, not just your youngest child.
7) Choose a destination just outside of the tourist hotspot. Every vacationing spot has a strip of hotels or entertaining areas that everyone is attracted to. If you stay just outside of that area, you’ll spend less on lodging and less on eating out.
Making family summer vacations enjoyable for the entire family is tough. Everyone has different interests and a different idea of having fun. If the parents keep a good attitude, the children will pick up on that and eventually start having a good time.
You’re on vacation, so don’t be afraid to spend money, as long as you aren’t going into debt to do it. Splurge a little on activities you don’t normally do. When my wife and I go on vacation, we’d rather spend the bulk of our money on experiencing new things, rather than blowing it all on food and nightlife. Maybe you are different, but hopefully these tips will help you plan out your trip this summer. If you have any more suggestions, feel free to post them in the comments suggestion.
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I'm Ben Edwards and I've been addicted to personal finance since I was 12 years old.
That passion for money has paid off for my family - so in 2006 I founded Money Smart Life to help you afford the life that you want. Read My Story...
