Month: August 2021

Mr Buffett

Buffetology

Now let us switch the gears and talk about the master investor, Warren Buffet.  A man of simple tastes, Buffet relies very heavily on fundamental analysis.  I cannot recall who told me this about Buffet, either a friend or a relative, that Buffet is confident about all the companies in his portfolio, so much so to the extent that he would not flinch if a stock lost 1/3 of its value overnight because its financials and fundamentals dictate it to be in fact a solid company.  I cannot say that the following information is absolutely verified by Buffet as I have not had a sit-down with him yet, but after reading a biography of his, I do believe it captures his investing philosophy.

warren-buffett

Buffet believes that when investing in a company, the ultimate goal of that investment is to completely own that company.  So under ideal conditions, you would have enough money to own 100% of that company and your money would be safe in this.

Following are some general guidelines and prudent factors to keep in mind, which Buffet follows with his investments:

1.) The company in mind must be able to reasonably predict its earnings

2.) A company with predictable earnings has good economics, which leads to lots of free cash flow, which can be used to by businesses or buying back shares.

3.) These good economics are shown by a combination of the following:

– Consistent improvements on the company

– High returns on shareholders’ equity

– Strong earnings

– A consumer monopoly (which will be discussed later in detail)

– Good management

4.) Always invest while the price is low in order to increase return

5.) First choose which company to invest in, and then let the price and the required rate of return determine when or if to buy.

6.) Investing at the right price in a good business should produce a minimum rate of return of 15%.

Along with these rules are some more specific codes Buffet follows:

Investing should always be approached with a business mentality – i.e. All emotion should be purged from investing.

Always attempt to learn and master one industry, and then do not stray from this industry.

Stocks do not represent so much a market price, as much as a distinct company with certain operational standards behind it.

Dividends are best utilized when reinvested into the company.  This is due to tax avoidance on these payouts.  Also, corporations can often reinvest this money at a higher rate than can an individual, although they must be reinvested prudently.

Holding a stock is better than withdrawing from it, for tax-avoidance reasons.

One topic Buffet especially cares about is the capability of a company to reasonably predict its earnings.  Encompassed in this area is the company’s EPS (earnings per share) and the EPS annual growth rate.

EPS

Buffet is a large advocate of deciding on what company to buy before it hits a favorably low price, that is, “don’t aisle shop!” This idea of knowing the company you will be investing supports the idea that one should be knowledgeable of the industry in which it operates.

According to Buffet, there are two types of businesses: commodity type businesses and consumer monopoly types.

In commodity type businesses, the price of the product is the single most important factor and as a result, significant cash is spent on manufacturing improvements.

Commodity type businesses are often recognized by:

– Low profit margins

– Low return on equity, often less than 15%

– Difficulty with sustaining name brand loyalty

– Many competitors in the industry

– Excess supply

– Erratic profits

Consumer monopoly type businesses on the other hand are stable with predictable earnings.  One key indicator of a consumer monopoly business is to ask whether another fictional company, with a huge amount of cash could compete with it.

These companies often have a high wealth in intangible assets, not in PPE (property, plant, and equipment) and   other fixed long-term assets.

These companies are also nearly debt-free most of the time.  This idea of NOT being leveraged is why Buffet is a large opponent of derivatives and why Buffet steered clear of the CDO and subprime market during the mortgage crisis.

Aside from many other guidelines and rules Buffet adheres when investing, there are 9 specific questions Buffet asks when investigating companies:

1.)    Does it have a strong consumer monopoly?

–       Does it have strong recognizable products?  Does it have to be carried by the distributor, lest he lose money in opportunity costs?

–       If involved in an acquisition, is the acquired company also a consumer monopoly?

2.)    Are the earnings strong and rising?

3.)    Is the company conservatively financed?

4.)    Does it have a high return on equity?

–       ROE should consistently be at least 15%

–       A healthy ROE indicates good management

5.)    Does the company reinvest its earnings?

6.)    How much money is spent maintaining current operations?

–       If a company must use its money to constantly update operations, this is a sign bad sign as that money could be going towards share buybacks or acquisitions

7.)    Does it reinvest money in new opportunities?

–       Good management will often use excess capital to buy back shares

–       One of the most important aspects of management is how profitably it employs its retained earnings

–       Warren prefers minor expenses into research and development

8.)    Can the company adjust prices for inflation?

9.)    Will the value added by retained earnings increase the market value of the firm?

–       Personally, this is the most important question for me.  I am interested in the relationship between the inherent value of a company and its effect on the stock price.

Buffet believes that one sometimes discovers these companies as “conceptual toll bridges.”

1.)    Businesses with products that are used up quickly and with brand-name appeal.  These are sorts of products that effectively lose money for the merchant because they are always bought.  Trademarks and copyrights have immense carrying power.  Some examples of companies that carry these sorts of products are:

Coca cola, Hershey’s, Wrigley’s gum, Advil, Gillette, Hanes, etc.
Pharmaceutical companies often have these characteristics
A good way to identify these products is to walk through a supermarket and identify popular products.

2.)    Communication businesses

Advertising has created conceptual toll bridges in today’s environment
Newspapers work similarly

3.)    Typically these conceptual toll bridges apply more to services than products

As I mentioned in my last post, I would like to thank ALL of you who have been reading and commenting on this blog.  Initially, I did not know where I would go this or who it would cater to but with your support and ideas, I know that we can cultivate a great atmosphere where we can exchange ideas and whatnot.  Keep posting your comments and let us stir our minds towards greatness!!

Money Making Activities

10 Money-Making Activities You can do in Your Spare Time

I started Money Hero because I love personal finance. Being financially disciplined, budgeting, saving, all of it. But the best part of personal finance has got to be making more money. Who doesn’t like to get paid?

So that’s why I put together this guide for you on easy ways to make some side money in your spare time.

Many of these tips can be done very easily, with little to no commitment from you. And some of them will take some serious time and effort, and maybe even a small financial investment. But hey, sometimes it takes money to make money.

Money

All of them will help you to bring in some spare cash.

Whether you’re looking to start a legitimate business or are just hustling on the side for some extra spending cash, each of these tips is guaranteed to put more money in your pocket. I don’t know about you, but one day I hope to escape my 9 to 5. And then I would like to work on Money Hero full time. That being said, I hope that this guide helps you to make some money.

If you work diligently, you can make hundreds or even thousands of dollars per month. Just stick with it.

Good Luck!

1. Start a blog.

Seriously. Blogs are an excellent way to make some extra money on the side. What better way to make money than to share something you’re passionate about with your readers? I’ve even put together a very handy guide on getting a blog up and running with Bluehost (the hosting provider I recommend) and WordPress.

The best part is, starting a blog requires very little investment. All you really need is a computer with an internet connection. There are so many ways to make money with a blog. You can:

Run ads on your page
Have people pay you to sponsor posts on your blog
Get commission checks while you sleep for referring others’ services, or
Sell your own products and services.

If you click this link, it will take you to Bluehost to sign up for web hosting at a discounted rate. You’ll even get a free domain name! Then head back to the guide that I posted above and I’ll show you how to get your site up and running.

2. Earn money online with Swagbucks

Swagbucks is one of the easiest ways to make money online, with minimal work. You get paid for doing things such as shopping, answering surveys, watching videos, searching the web, and playing games online. Even better, Swagbucks has a mobile app so you can earn money on the go!

When you do things through their website, you get rewarded with “SB points” which can be redeemed for gift cards to popular places such as Amazon or Walmart, or cash. Click here to sign up with Swagbucks for free. You’ll even get a free $5 bonus for signing up today!  

3. Get paid to take surveys with Survey Junkie

Another online fan favorite, Survey Junkie is an easy way to make some extra cash on the side in your spare time.

Much like Swagbucks, Survey Junkie is a free site that rewards you for completing tasks. In this case, taking surveys. Who wouldn’t want to get paid for giving their opinion? Join Survey Junkie for free and answer simple surveys in return for gift cards to popular retailers, as well as cash payouts via PayPal.

4. Sell your services on Fiverr

If you have a skill, such as writing, photography, video editing or graphic design, then I highly suggest you look into Fiverr.

Fiverr is a site where you can offer your services to anyone in the world, and make $5 or more per gig. As the creator, you set the terms of what services you can offer, and how much you want to get paid. There are tons of people and small businesses out there that are looking for quick, easy fixes for a problem that they have, and Fiverr gives you the avenue to serve those  customers and get paid to do it.

And the more jobs that you complete, the more you can charge in the future! You can sign up for a free account with Fiverr here.

5. Become an Uber driver

Uber is another way to make money in exchange for a little bit of your time. Simply sign up to become an Uber driver, and you can make decent side money driving people to and from their destinations.

Uber has peak hours, when they sometimes double or triple the payout that you get from making a trip. To get started with driving for Uber, all you need is a smartphone, and a newish four door car. Depending on your state, your car needs to be a 2006 or 2011 (or newer) model. After a mandatory car inspection at a local repair garage, you’ll be well on your way to making some spare cash!

You can try out Uber for free here.

6. Start an email list

If you hope to make money online, one of the absolute most important things that you can have is a mailing list.

An email list is your personal funnel to customers, who you can sell whatever you like to. Have an eBook that you want to sell? Pitch it to your email list. A new course that you created? Chances are, your email list will be interested. The best thing about an email list is that it’s yours. Which means that no matter where you go, they come with you.

I use a couple of platforms for my emailing needs, namely MailerLite and ConvertKit. MailerLite and ConvertKit are free email marketing platforms that help you to create landing pages, collect email subscribers, who you can in turn sell products and services to.

They are essentially the same, except that ConvertKit is a bit more premium. As such, it isn’t free. But I’ve found the premium features of ConvertKit to be well worth the $29 price tag.

You can sign up for MailerLite here or ConvertKit here.

Once you have your email list set up and have gotten some subscribers, you can then use it to…

7. Sell a digital product

The beauty of the internet is that you can reach thousands or millions of potential customers from the comfort of your own home.

And if you have something of value to offer them, they will pay.

Having a digital product is an easy way to quickly make sales online. There are plenty of digital products that you can offer your audience. These include:

eBooks
Online courses (see below)
Photography
Graphic design
Printables

Digital products are ideal because they usually require almost no financial investment. Anyone can create an eBook or an online course with little to no technical skill.

8. Sell stuff on Craigslist, Amazon, OfferUp or eBay

Selling my old stuff is one of my favorite ways to make extra money. If you’re anything like me, you have a home full of old items that you don’t need or use. Putting items up for sale can help to both clear up your home, as well as pad your bank account. eBay, Amazon, OfferUp and Craigslist are all good options for getting rid of your old stuff for cash.

eBay and Amazon are nice because they handle most of the transaction for you. You just post your item, and when someone buys it, drop it off at the post office. The money will be deposited right into your account (after eBay or Amazon takes a small cut, of course).

Craigslist and OfferUp, on the other hand, are a little more hands on. You post your item, but you have to meet up with the person to make the sale. I prefer to sell things this way, because it’s immediate, and I don’t have to deal with shipping or PayPal.

If you do decide to go this route, make sure to be very careful when meeting strangers in person. Always meet in a public place with a lot of people around, and avoid meeting anyone at night. You can never be too careful.

9. Start an online course

Online courses are becoming an increasingly popular way to make money online. Many people are making four or five figures per month with their own personalized courses on a variety of topics. Any skill that you have, you can teach to others for a price. And the best part is, you can set your own prices! I’ve seen courses range from $10 to the upper hundreds of dollars.

There are platforms that you can use to set up courses and begin selling. Two of them that I want to recommend are Teachable and Udemy. Both of these websites let you quickly and easily create online courses and begin selling to your users. These platforms are both also very robust and easy to use. Both also have super helpful support that will get your course up and running in no time.

Online course

Some people have been able to make hundreds of thousands of dollars in course sales. Yes, really. There’s really no limit to what you can profit with a good course and an audience eager to learn from you.

You can become a course instructor with Teachable here.

You can become a course instructor with Udemy here.

10. Invest your money

Learning how to invest money is always a good idea. There are no guarantees with investing, but it never hurts to learn how it works.

If you’re interested in learning how to invest and are looking for a good trading platform, then look no further than Ally Invest. Ally makes it easy to buy a diversified portfolio of ETFs, stocks, and bonds for less than $5 per trade.

Also, if you sign up through my link, you’ll get either a FREE 90 days of trades or $100 cash bonus.

I hope that you found this guide to be helpful! Have you tried any of these money-making ideas? Can you think of any others that I missed?

financial life

30 advices for a healthy financial life

A healthy financial life is the most important thing everyone is looking for these days.

We are going through a hard period to cope with, when all that matters is to survive each day. We can hardly think about investments, prosperity and wealth.

We are thinking about how to survive with what we have or how to increase our comfort, but never about how to make our financial life simpler, so that we can live a financially healthy life.

Simplifying your life from a financial perspective is the first step you need to do in order to reach prosperity.

Financial-Planning

Hereafter, I will show you 30 advices to follow for a healthy financial life:

30 advices for a healthy financial life

  1. Set financial objectives for yourself. This is of the most important financial actions you should take.

Without financial objectives, we do not know what we are working for. We do not know where we are going and what we want to achieve. Financial objectives are what keeps us and pushes us to want more from life.

Set financial objectives for yourself on long term, 5-7-10 years, and then break them into smaller objectives, with concrete actions for each of them.

  1. Try fulfilling one objective at a time. After you have set the financial objectives, you can start fulfilling them.

Achieve each objective at a time. If you start multiple objectives at once, you will get confused. You will never know which one is important and which is not.

Once you have set the objectives within the first step, it means they are all important.

Achieve them individually in order to achieve the highest result.

  1. Use a personal budget. Personal budget is the financial mirror of your life. Without a personal budget, you cannot keep track of what you have achieved so far, what you did wrong and what you did good.

I recommend the article 10 reasons you should use a personal budget, where you will find the most important reasons for which you should use a personal budget.

If you do not have a personal budget yet, you can download for free the model you find HERE, which is the personal budget model I use.

  1. Combine your budget with your loved one. If you are married, now is the time to combine yourself with the loved one also from the financial perspective.

Achieve together the family personal budget and set financial objectives for yourselves.

Money is an important factor in a life of a family and if this factor is seriously treated, you will have nothing but benefits and you will have a steady relation with your half.

  1. Get rid of debts! The first objective you should have is to get rid of debts.

Debts are the main bump you should take care of.

I recommend these 2 articles in order to help you get rid of debts in the shortest amount of time possible: 41 techniques that can help you get out of debts.

  1. Always analyse your last month budget. This is a necessary and mandatory activity.

Each month, you have to analyze your budget and see what happened in the previous month.

Where you have spent your money, if you have complied with the budget or where did most of the money come from. These are very important activities which will help you achieve your objectives.

  1. Get rid of credit cards. If you have credit cards, this is the moment to get rid of them.

Why spending money you do not have? It is the worst financial decision someone can make.

There is the risk of failing to pay your debt, plus the debt grows a lot due to the associated fees and interests.

  1. Monitor your expenses daily. With the help of the personal budget, you can monitor your budget every day.

Do you know where your money is going? Which are the highest invoices? Do you need all your shopping you make? Can you abstain yourself from shopping certain products? Do you know where you can make some cost reductions?

These are questions you need to answer each time you analyze your expenses.

  1. Get rid of instalments and credits. Stop buying products in instalments. Try saving money to buy a product, instead of taking a credit for it.

Approach a savings strategy instead of an instalments strategy. It is better to save each month 100 lei and buy the product you want when you have the money, than paying for it in instalments, paying fees, interests and getting the bankers rich.

  1. Constantly analyze your telephone, internet cable TV subscriptions. 

Are you watching TV daily? Do you need that number of minutes or messages? Are you using to the maximum your broadband internet connections?

Are there other packages that are more to your advantage?

I am sure that the answer to the last question is YES. Each time we can find better packages, we only have to look for them.

  1. Set up an emergency fund. This is the second measure you have to implement once you got rid o f the current debts.

You never know when an unforeseen situation can occur and you need money.

All I can say is that THERE WILL ALWAYS BE UNFORESEEN SITUATIONS. There is no “unforeseen situations cannot happen to me”.

Why not? Nothing has broken inside your house which needs repairs? Your car did not break? You never got sick?

For all these, there is the emergency fund.

Be careful! Go to the emergency fund only if you had no possibility to foresee the expenses in the budget. These are those moments you cannot be aware of beforehand.

Do not go to the emergency fund if there is a TV sale. Doing that is WRONG.

Money-and-stethascope
  1. Have at least 2 passive income sources.

Passive income is the income which you do not have to give time for in order to achieve it. It is obvious that you have to give it some time at first in order to achieve it, but, along the way, that time should bring you money.

If you reach a situation that the passive income supports you each month, it means you are on the right track towards a healthy financial life.

  1. See what you did well and try doing it again. Do you have a personal budget that works properly and that you follow constantly? See what worked. See what actions you took that increased your income and take them again.

Make a lifestyle out of it and your income sources will never stop growing.

  1. Reduce your expenses as much as possible. Never stop reducing your expenses in al possible environments.

A useful article which will help you reduce costs for electricity, natural gas, water and fuel for your house and car.

  1. Rent. Do you need a car only for a certain period of the year? Do you need a new house? Do you want to marry the bank for 30 years?

Then the answer is the verb “Rent”. It is not the right moment to buy houses, nor to bind ourselves an entire lifetime for a credit which, in 10 years, will not worth as much has it is worth now.

Try living with rent and investing. Make your money produce more money. After they make enough money so that your 2 years income covers the cost of a house, you are ready to have your own house.

Until then, think about how to make as much money as possible.

  1. Make a list of all your assets. This list will help you figure out what is the net value of your wealth.

Yu will see immediately what you have spent your money on and how many assets you really needed and which you did not.

  1. Get rid of things you do not need. Once you made the list and analyzed the things you own, try to get rid of those you do not really need.

Usually, 30% of the list should be eliminated in this step. If you think you have assets your really do not need, try selling them.

After this, you will definitely adopt the policy “I buy a product only if I really need it, not if I only like to have it”.

  1. Use cash payment. If you go shopping, leave your cards at home. Go with cash on you. Each transaction made with the card needs a fee. Each fee is an expense for which you were too comfortable to bring cash.

Ideas like “If I have cash, I may feel like spending them” or “I do not take cash on me because I might get robbed” should go away. Banks are a bigger thief and, what do you know?, they are totally legal.

  1. Get rid of all kinds of subscriptions to magazines, newspapers or other publications. All information you find in them, you can also find on the internet for free. Subscribe to online publications and read the news daily on the internet.
  2. Learn to negotiate. Yes! You heard me. We all need to know how to negotiate. At the market, at the store or AT BANK.

Bank is a good place where you can negotiate. If you know how a bank works, you can end up a millionaire, as Robert Kiyosaki did.

He used the bank in his favor. He negotiated credits for certain real estate investments, so that they would make money for him.

He did not use the bank to buy his own house, but to buy houses which he rented or sold for larger amounts of money.

  1. Learn to simplify your financial life. Try to do everything you did so far with less resource. Eat less, drive more economically, buy the same things for less money or consume less electricity as you did so far.

Analyze your habits and simplify them!

  1. Read more on how to correctly manage your own finances. Education is the most important. Unfortunately, the Romanian education system does not reach the financial environment and, due to this fact, more and more people have money problems.

All that is left in this respect is self-education. I recommend reading books, follow financial education blogs and always be informed on what is happening with the economy of the country.

Country economy is an important factor which affects our financial lives both directly, as well as indirectly.

  1. Use the car only when you need it. Stop going by car to work, except if the car belongs to the company. Mass transportation is cheaper and more advantageous.
  2. Only one family car. Now the trend is that a family should have at least 2 cars. Why? Get rid of one. Use mass transportation as much as possible. I am convinced that your job is not as far as it looks.

Calculate the fuel consumption for the two cars for a month and this will definitely make you eliminate a car and think about using mass transportation more.

  1. Buy a car with smaller fuel consumption. Why do you need a car which consumes 12-13 l of fuel per 100 km? Buy a car with smaller consumption.

You are saving money that you can use for other purposes, plus, a smaller car is easier to handle.

  1. Buy second hand goods. There are so many electronic and electric household appliances sold second hand.

If you need a car, a fridge or a washing machine, why buy them new?

Unfortunately, any fixed asset (car, computer, fridge) loses 30% of its value the moment you buy it.

Why lose 3000 euro for a 10,000 euro car in just one day?

Better buy more second hand cars for a much smaller cost.

  1. Stop thinking small. Try to think from the perspective of a month for each purchase. When you make a subscription, try analyzing it for a whole year.

Take a mobile phone subscription for example. If we have a 30 euro subscription and, for this subscription, the telephone company offers us a last generation Smartphone for a small price, we think we made a good purchase.

This is not true. If we calculate the 30 euro monthly for 2 years we end up with a price of approximately 700 euro. We are not consuming all minutes and the phone is not worth the amount we pay for the subscription.

All offers are made so that the seller has the advantage, but if we make a small calculation we can see that the advantage is on our side if we buy a phone with a subscription of 7-8 euro.

Think of such analysis each time you want to make a subscription, then make a decision.

  1. Make an investment plan. There are so many places where you can invest our money. Many people who have no investment plans think that the money they make are too little for potential investments.

Wrong. Save money. “Tighten the strap” in certain financial areas in your life and direct your money to an investment plan.

Investments are the best because they will bring money in the future. For you, they can be a passive income.

  1. Learn yourself to invest. Investing is quite hard. You must have patience, knowledge and read a lot.

It sounds difficult and sounds too much for you. Why? Who do you think will invest your money better than yourself?

In investments, everyone goes by the saying “No one will take care of your money better than yourself”. The best investments are made when you invest your own money.

If you have too much money, you can use a financial adviser to keep your investments portfolio, but the final decision is yours.

I advise you to start now reading more about investments. A first step you can make is to subscribe to this blog, after that you can start looking for all kinds of ideas and places to invest your money.

This can be a game for you. Investing is like playing a game. You only have to be focused and the decision you make at the beginning have to be made on as many and as concrete information as possible.

  1. Always analyse each advice. I gave you the advices above, but not all of them are working for everyone. For some, only the first ones work, for others only the last ones.

Try to analyse each advice from your life perspective. See how they can be applied in your life.

Give yourself each week or each month the necessary time to analyse your financial life and make decisions for this purpose.

Take your time when it comes to money, because nowadays money is one of the most important factors for our future.

What other advices would you add to this list?

What is your favourite advice and which one do you think is the best advice of this list?

Powered by WordPress & Theme by Anders Norén