Author Archives: Money Reasons

About Money Reasons

A offbeat personal finance blogger that comes from the tech world.

When Debt is a Good Thing

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Back in the post called “Back in Debt But It is Different this Time“, I mentioned that instead of buying my used Toyota Camry outright, I decided to take advantage of the cheap loan interest rates and borrowing the money from the banks and invest the cash that I would have used to purchase the car outright.  The idea being that I should be able to make out better financially if I invest the $10,000 instead of paying off my car loan…

So, how is investing the money working out for me?

Well, so far between stock accumulation and dividends, I now have $4075 that I wouldn’t have had if I paid off the car balance outright with the cash!  Granted that I still have about 2 years left to pay on the car, I’m pretty happy with the progress that I’ve made so far!  By borrowing the money at a very low-interest rate, and keeping the money that I would have spent in a fairly safe stock, I should almost break even from a money outlay perspective by the time the loan terminates.

By break-even, I mean that the car didn’t cost me anything, or pretty darn close to nothing.  That’s almost like getting the car for free… almost!

So as happy as I am currently with my decision, who knows what the future will bring.  The stock market has been rallying for a long time now, and it might be getting ready to correct soon, who knows…  I’m in a pretty safe stock (utility based) and it does have a dividend so I should be good, but…

Let’s play “Worse Case Scenario” (one of my favorite what-if games).

What if the stock market does have a correction, or even go into bear mode?

My stock is a utility, so that means it won’t be going out of business just because of the nature of utility businesses (other than coal).  Along with a certain state of security, I highly doubt that the dividend will be in danger… After all, this company has never decreased its dividend payout and has a solid history of continually increasing it… even during the “Great Recession”.  If the dividend can survive the “Great Recession”, then whatever the next few years brings should be okay too!

I already WIN… (kind of)!

Just taking into account the dividend stream alone, the sum of the total cumulative dividends would equal the interest charges that I’ve incurred already with the borrowing of the money from the bank.  So in some ways, I’ve already ahead of the game.from a financial perspective assuming the stock valuation remain close to 10k (yes, I know, I know… there is still a small tax consequence but it’s trivial and will so be a non-element).

So yes Virginia, borrowing money and going into debt for this particular scenario should be a good financial move in this case!

Getting Smarter?

Not all debt is bad and sometimes debt is good…  sometimes it pays to crunch the numbers and take a fairly safe risk! 😉

Don

 

Why Debt Reduction is Easier Than Investing

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Becoming Debt Free

After first becoming totally debt free,  I felt a huge weight lifted from my shoulders and I thought the journey to wealth accumulation was a downhill journey… but I wasn’t even close to reality!

I figured I’d be able to redirect all the money I use to spend on debt reduction, into the stock market, and blammo, I’d be wealthy!  This hasn’t happened and in fact the opposite has happened in that I’m constantly worrying about the stock market.  It the first thing check in the morning, during the day, and it’s the last think I typically review before I go to sleep.  It’s all-consuming for me, and becoming quite the obsession, much to my chagrin.

What’s really funny, is I don’t have millions, but the way that I monitor the stock market, you’d think I was (curse you CNBC!).

Cat

I’m Okay

Why It’s Harder to Invest than Reduce Debt

For me, it’s simply the variability of my investment portfolio that makes it so stressful for me!

With debt reduction, it was always so clean!  You have an amount that you owe, and you make periodic payment to reduce that debt.  Pretty simple and straight forward huh…

With investing, it’s an entirely different animal that is very unpredictable.  Oh sure, you can invest on a schedule much like debt reduction, but that’s where the similarities end.  With debt reduction, there is no “real” emotion to the characteristics of the payment.  You pay the money, your debt decreases, no magic!

With investing you invest the money, and then who know what happens after that!  You can invest for years, then in a snap of your fingers, blammo you money is mysteriously gone!  Think Enron and Worldcom, blammo your investment is worth nothing except a tax write-off.

Another problem is that you can invest in a stock and it can flatline…  if a stock goes flat, you are just as good having your money in the bank, no?

Next there is the opposite of the above, boom, the stock appreciates hugely and you get rich.  This is the path that we all hope happens, but this is kind of like buying a lottery ticket to some degree.  It’s possible, but it take patience and determination.  Most stocks that appreciate hugely still takes years to get to that level.

So basically investing is like gambling and very emotional.

While investing is great and I love it, it’s very stressful for me.

I hope investing is less stressful for you.

Don

Personal Finance Funk

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Today, I’m sitting in a library realizing that I’m in a kind of personal finance funk lately and that I made a lot of personal finance mistakes these past years, but now I’m down the road so far that it’s hard to imagine going back and rethinking my choices.  Things have been set into motion and objects altered based on the decisions that I’ve made and I’m finding it hard to fix matters.  Today I’m going to write about my personal finance mistakes and the possible options I might have to alter them in a “talking to myself” format.

einsteinsilly

Money Trapped in the Equity of my House Problem

For a while, I was debt free and even afraid of debt.  I created an accelerated debt repayment plan and executed it with a great degree of success.  I knew that such a plan would guarantee that I force myself to stick to it and get it done.  But on the negative side, now I have a good chunk of my money tied up in home equity that hasn’t really appreciated in my city much.

On the positive side, I had great peace of mind during “The Great Recession” since I was totally debt free during that period of time.  I admit, it was a good move that made me almost stress free a good portion of the time during that horrible period.

So what am I complaining about?  Well, when I started to make payments to pay off my house early, I knocked out a 7% borrowing rate, but later (during the last three or so years) I refinanced at 4.5%.  Had I just pumped the money into my 401k (or other investments), I would have a much healthier balance today.  I’m not saying that my balance today is unhealthy, but it would definitely be a larger amount.

So what is one thing that I can possible do?

Well, I could buy a new home and get a mortgage at the still relatively low rates, then take money from the sale of my exiting home and invest the money is some conservative investments that earn me a higher interest rate than my mortgage interest rate.  This is one option that would free up my money, while at the same time take advantage of the lower debt interest rates.  While I’m a little late to the boat on this one, it would still be to my advantage.

My Portfolio is Out of Balance

Overall, I’ve done well in the stock market these past few years, and this creates a most unusual problem for me.  My stock portfolio has too many speculative stocks that now make up a percentage that is too high for my portfolio.  While on the surface this might not seem bad, after all one want speculative stock jump up in value, right?  But the problem is that such stocks also can drop just as quickly.

What I’ve done, and still need to do…

First, I’ve already sold some of the stock when it was double what I initially invested, so I took my initial investment out (this was awesome)!  Unfortunately, my shares kept rising so much that I stopped this basic rule and started letting it ride (boo).  While I’m still up in the stocks that I left alone, they have come down a bit so that I just left them alone now.  What I need to do is take the hit and take out my principal as I should have done at the beginning of this year when the stocks were up over 100% vs my investment in them.

Next, once I sell my speculative winners and losers, I need to invest the money in some stocks like dividend stocks or something more stable.

So neither of my personal finance problems are unfixable, but sometimes they seem that way.  The steps to resolve such financial imbalances is to think it through, develop a plan, then execute it.

Thanks,

Don

Why Customer Service Matters When Selling Products Online

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Customer Service Matters When Selling Products Online

 

Your e-commerce website is your business. It’s your place, your store, and the home base for your customers. Therefore, it makes a lot of sense that you put an enormous amount of time and energy into making it the best that you possibly can. Your plugins all work, you catalog looks excellent, and it’s all set up to work for you in all the ways that you hoped it would. That’s not the entire process, though. Your website may handle all of your transactions, and you might even have a distributor that sends your products and services to the customers for you, but there’s still more that you need to maintain. Customer service still matters. You’re smiling face is not there to greet customers and tell them to “have a nice day” on the way out, but there are ways that you can ensure that your customers feel important. You can ensure that their experience is special, giving you a loyal customer base and viewers who truly enjoy their shopping experience on your website.

CustomerFirst

Means of Contact

One of the best ways to instill excellent customer service when selling products online is to have several means of contact that your customers have access to. Make it easy for them to voice their opinion.

  •  Include a section for customer comments or reviews at the bottom of each product description. Give them a place to tell others about their experience. When customers shop in a brick and mortar shop, they can talk to fellow customers when they’re deliberating over whether or not to buy a product. This section gives them the illusion of doing this.
  •  Respond to negative comments with positive feedback. There’s a good chance that your customers will remember you even more if they voice a problem and you fix it promptly and satisfactorily. It provides a way to show off your professionalism and give anyone reading the comments the impression that you care deeply about your customers’ experiences.
  •  Utilize social media by reaching out to customers with your posts. Ask them questions about their experiences and ask for input about changes and new products that you plan to introduce.
  •  Provide the option for customers to sign up for an e-mail list. You can send out coupons and special offers for this special group, making them feel like VIP customers for being loyal to your site.
  •  Give incentives during holidays and other special occasions. You can run a contest or poll that gives customers the chance to win a prize. You’ll get feedback from them in the form of their entries and they’ll get the excitement of possibly winning something that they want from your catalog.

 

Take Complaints Seriously

When you’re selling products online, you’re bound to get some complaints. It’s the same in every business whether it’s ecommerce or not. The key is not just to take each complaint in stride, but to address them all professionally. Most of the time, these customers simply want to be acknowledged. They don’t only want their problem fixed, but they also want to know that you see that there was a problem and you’re sorry that their experience was less than desirable.

  •  Apologize to the customer. Don’t take their complaint personally and apologize first thing in your response to them. Don’t grovel or tell them that you’re sorry over and over because this makes them feel like they should get more than a fix to the problem than you’re able to give.
  •  Give an explanation. It is important that this explanation does not come off as an excuse. The customer likely wants to know why their experience was sullied and that’s what the explanation is about.
  •  Fix the problem. Do whatever you can to ensure that their problem is fixed quickly. It is important to offer a solution for the problem faced by the customer. If they received a broken item, send them a new one. If they received the wrong color, send them the right color. Usually, the problem is simple and easily solved.
  •  Give an incentive for the customer to continue shopping on your website. If it is possible, give them some credit on your website or an extra gift item of low-cost. Let the customer know that they are important to you.

 

Please and Thank You

These really are magic words and ones that aren’t used as often as they should. One of largest issues with selling products online is that your customers may feel like their experience is impersonal. These two simple phrases can change that for your customers. When you have instructions about how to checkout or provide information necessary for payment and shipping, it is a good idea to start with a “please.” In many cases, customers won’t even expect it and seeing that word will put a smile on their face. When their shopping experience is over, always include a “thank you for shopping with us” on the final page of their order. If you send out a confirmation e-mail for their order, you should include it there as well.

Hope you gained from this,

Chase