Management Overhead

All products and services that companies sell cost money. Management must know what it sells are generating profits and what do not.

So how can a company show a profit on everything it sells but still operate at a loss? - By not factoring in overhead. The cost of the managers, their offices, their support staff - indeed all the indirect costs of the company has to be allocated to products/services sold in some way, manner, shape, or form. Only when the products/services are burdened with their total costs can their profit/loss be truly evaluated.

Dyer on Success

Critics hang around and wait for others to make mistakes. But the real doers of the world have no time for criticizing others. They're too busy doing, making mistakes, improving, making progress.

- Wayne Dyer

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The Perfect Storm

They believe things are going to get worse, citing:

1. Growing trade deficit. This is like a family earning $5,000 per month, spending $6,000.
   
   
2. Growing national debt. G.W. Bush's administration borrowed more from foreign sources than all previous administrations combined, but he had at least eight years to do that in. Since the book was published before Obama was elected, it is silent on the present administration, but I'm sure he's closing in fast.
   
   
3. Falling dollar. This leads to inflation which causes wealth go drop.
   
   
4. Baby boomers without money. - And they're reaching retirement age.
   
   
5. The entitlement mentality. People look to the government to solve their problems instead of looking for opportunities.
   
   
6. Higher oil prices. There's a point where this could trigger the entire economy to implode due to those other factors.
   
   
7. Tax breaks for the rich. My reaction is "huh?" The facts they present do not justify this statement.

- from page 77

The Leader's Vital Creation Is Harmony

Hill defines "harmony" for purposes of life success as "organized energy". This strikes me as an interesting thought:

Success in life, no matter what one may call success, is very largely a matter of adaption to environment in such a manner as there is harmony between the individual and his environment. The palace of a king becomes as a hovel of a peasant if harmony does not abound within its walls.

Trouble is, fear of being kicked out in the street may inhibit what is otherwise a happy home.

The Jones Can Not Do Math

Don't worry about keeping up with the Jones. Generally, they appear to be more prosperous but they're not. Better to live within your means than to try to keep up appearances.

- From page 81.

The Federal Courts' Organizational Structure

Under the Supreme Court there are the Appeals Courts. These consist of 12 Circuits + a special Appeals Court in the District of Columbia.

Under the Appeals Courts there are 94 District Courts. In addition, there are Agency quasi-courts and the Tax Court. At this level, there's also the U.S. Court of International Trade and the U.S. Claims Court.

At the bottom of the heap lies U.S. Magistrates and U.S. Bankruptcy Courts.

- From page 43.

Honda on Success

Many people dream of success. To me success can only be achieved through repeated failure and introspection. In fact, success represents the one percent of your work which results only from the 99 percent that is called failure.

- Soichiro Honda

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The General Motors Example

Here’s an illustration of the mentality of what has gone wrong with finances at the national, the corporate, and the individual level.

Between the years 1985 and 1994, General Motors earned $17.92 per share of stock but paid out dividends of $20.62 per share. So, where did the $2.68 come from?

But wait! In addition to paying out $2.68 more per share than they took in, GM also spent $102.34 per share on capital improvements.

But wait! There’s more: loss of market share, employees out of work (but still being paid) and under-funded pension plans and medical liabilities. No wonder they needed a bailout.

While the book is silent on how Donald Trump got himself in so much debt, the wisdom here applies to us all.

- from page 69.

Meetings: The Rally

Hill states that he recreated the psychology of religeous revival meetings in sales meetings. The same idea applies: get more converts in one; get more sales in the other.

I've been to both; I've not got caught up in either. I certainly do agree that continual reinforcement by having people work together continually produces more and better results.

Seeking Alpha

This is the name of a super financial site. It is not exactly an aggregator. People submit articles to this site as they would to a magazine. It has a very large number of authors and readers. Most of its content is economics and investments.

Fund Borrowing Is Not Revenue

The fiscal year end financial statements for the United States Chess Federation were released to their Finance Committee today. They will review them over the weekend prior to wider release. Already there is discussion over the meaning of the word "revenue".

A special fund, the Life Members Assets Fund loaned money to the General Fund during the course of the year and somewhere that is showing up as revenue. (So one of the members claim; I have not seen the financials.)

This case has some instructive points. Here's what the accounting rules are.

Within the over-all organization, transfers of money from one department to another are not revenues. Even from just the individual fund's perspective, this kind of transfer is not a revenue to that fund since the General Fund owes the money back to the LMA Fund. If it were not a loan, the transaction would be suspect. Special restricted funds cannot override their restrictions by just transfering their money to the General Fund.

When you read financials, beware of those inter-fund transfers!

Finance Knowledge Is Made, Not Born

People should not be ashamed of being financially ignorant. (Unless you’re a CPA like myself!) Many folks do not want to admit they need help. Seeking financial advice is one way of having to admit that; reading a book or a blog is another.

No one is born with the knowledge of how to drive a car. Neither is one born with financial acumen.

One of the goals of this blog is to encourage people to get books and read the wisdom of one of the masters.

Managing Current Assets and Liabilities

Current assets are liquid enough that they can be converted into cash within a short period. Current liabilities are due within 1 year.

The key to managing these is to determine the minimum and maximum levels during the year. How will the debt payments be made? Where will the cash come from?

Comparing the current ratio from past years and to other companies of the same size in the same industry can help determine how your company is doing in this area.

Jobs on Success

If you are working on something exciting that you really care about, you don't have to be pushed. The vision pushes you.

- Steve Jobs

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Focus Your Energy

Concentrate all your energies on the task at hand. At some point one must determine what tasks to do and what order to do them in. This is where discernment comes in. Making a little effort to decide what to do and then doing it will matter a lot.

Knowledge + Organization = Power

Knowledge, general and unorganized is not power, only potential power. – Thus Hill.

I like to think of science. There is pure science and applied science. Applied science takes the general knowledge of science and applies it to inventions, drugs, and what have you. It uses knowledge to make practical things.

It seems that this process is what Hill is talking about. Before you can apply your knowledge to solving the problems in your life, you must first have a pool of knowledge to draw from.

Master Blogger on Personal Finance Blogging

Here are the submission guidelines for Get Rich Slowly. This is one of the top blogs on personal finance, #4 on Wisebread’s top 100.

These guidelines form an interesting essay on the art of writing on financial issues. He stresses original writing and thinking and having an original point of view. He stated he does not necessarily want new ideas but new slants on old ideas. A lot of this is great wisdom but I do not think this is for everybody.

The shelves in the local library and the ones in the local book stores fairly groan under the weight of business/personal finance/development literature. Even I am overwhelmed by them all – and I’m a CPA! When I read a book or a blog, while I do want good writing, when it comes to this area, I want the important information first. – And hopefully as succinctly as possible. How about you?

Frankly, too much writing gets in my way. As you can tell, I admire Rich Dad, Poor Dad series but how I wish Robert Kiyosaki was less creative! Just give me the info, dammit!

Also, different blogs have different focus’ than that one does. This one, for instance, covers selected master writers or doers together with my thoughts on them. Most entries are short. They are not meant to be a substitute for those books but an encouragement to read them. In addition, my focus is broader than just personal finance. On the one hand, this blog goes into business knowledge in the corporate environment; on the other it goes into personal development.

There is much to admire in this guide. I’d suggest that all finance writers ought to read it. But in the end, it is a guide not the 10 Commandments. We all have to follow our own muse.

Teen Driving Down

Percent of teens with drivers licenses.

	Age 17	Age 19
1978	75%	90%
2008	50%	77%

Source: Advertising Age via The Motley Fool.

Less teens are driving now than before. What are reasons for this and what are the implications?

Why: internet means folks can communicate and shop without having to travel. In large cities, teens can text and play games on their cell phones while using public transportation.

Implications: Auto and retail stores in trouble – long term.

Footnote: The bad economy will explain declining auto sales among teens. It does not explain declining driver licenses.

Kids' Credit Cards

Another of Dave's big no-no's. Giving children credit cards does not teach them to be responsible with their money. It does the opposite.

What Price To Charge?

Marketing people say that pricing of products and services is part of the sales process. “Set prices to maximize sales,” they say. Accountants look at pricing this way: “Set prices to cover costs + profit.”

 

Prices can be set too low. The higher the price, the higher the perceived value of the product or service becomes. If the price is too high, though, then it becomes “too expensive”.

 

3 Considerations:

 

• Integrate prices with rest of the elements of the marketing strategy
• Relate prices to needs and perceptions of target market’s members
• Modify prices to match changing competitive environments.

 

So, pricing is an art. The accountant still says, “do not price below your cost.”

Bill Gates on Success

As we look ahead to the next century, leaders will be those who empower others.

- Bill Gates

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Photo (cc) Kjetil Ree.

Bad Times Can Give You an Edge

- By selling harder. Selling in hard times gives the person who works harder and smarter an edge because the toughness of things weed out competition. "If you are in business, you need to learn how to sell."

I spoke today to the manager of a cab company. He told me that he's never seen times as tough as they are right now. I told him that I've experienced cab drivers who are not nice to the customers. He said some were like that. I did not have the heart to tell him that I think almost all the drivers I've experienced treat people badly.

I believe that the key to success in this business in tough times is to be treat customers nicely - and ask them to repeat the experience.

Summary of the Laws of Success

Here’s a summary of Napoleon Hill’s Laws of Success:

1. A definite chief aim
2. Self confidence
3. Habit of saving
4. Initiative and leadership
5. Imagination
6. Enthusiasm
7. Self-control
8. The Habit of doing more than paid for
9. Pleasing personality
10. Accurate thinking
11. Concentration
12. Co-operation
13. Profiting by failure
14. Tolerance
15. Practicing the golden rule

Are these laws all there is? I just cannot help but think of those folks on American Idol who seem to be so determined to become singing stars but cannot sing. At some point, being smart in the selection of one’s work becomes a necessity. On the other hand, I’ve spent years of my life on jobs that were “safe” but I did not like while avoiding those that I wanted because they were not safe. There has to be a trade-off between following one’s dreams and monetizing them.

All on One Page

The Simple Dollar is another fine blog. I like that word “Simple”. The author, Trent Hamm, wrote a small book that summarizes the field of personal finance as succinctly as possible. He’s giving it away for free.

His upcoming book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams, is coming out later this month.

Sample post: 7 tips on getting things done.

I like his blog and I like this book! Visit it and tell him Jack sent you.

Illustration cc Trent Hamm.

Religion in the Workplace

The law does not always follow common sense but let’s start with common sense, anyway. People ought to try to avoid being “in your face” with their religion. Apart from legal issues, it is just not effective. Common sense kinds of things, like posting a favorite Bible verse on the wall of one’s own office or cubicle is allowed both common sense-wise and legally.

Cliff Ennico, of Townhall Finance wrote,

Generally, employers are required by law to make "reasonable accommodations" to employees with religious needs, just as they are required to do for the disabled. Title VII of the federal Civil Rights Act of 1964, among other laws, offers broad protections to religious-minded people.

Extreme views about separation out of religion are just as bad as extreme views about turning workplaces into de-facto semi-churches. In a controversy, both sides need to chill.

Leave a Will

Dave says that over 70% of Americans die without a will. Personally, I think that if one has no assets but life insurance, then a will is not necessary. If one has children, then a will to provide for their upbringing is still a good idea.

While all the professionals in the whole universe will hate me for saying this, I just not think paying a lawyer a whole lot of money for a will when assets are minimal and the children are grown is needed. But yes, except for that, most people do need a will.

About That Deficit

I recall a Kiwanis Club Meeting around 1994 where the local Congressman was talking about cutting the deficit but people were confused as to why the national debt was still going up.

The reason is that a non-profit organization by definition does not report profits or losses. Instead they report surpluses and deficits.

That’s why management may report cutting its deficit while still increasing its debt. Cutting the deficit just means that the organization is loosing less money than before but it is still loosing money. In fact, an organization may actually report a surplus while still increasing its debt. It all depends on whether it uses the surplus to pay down debt or use it for something else.

Cicero on Success

Genius is fostered by industry.

- Cicero

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