"Happiness is not a given. It is a goal. And saving more may help you reach it."
With the downturn of the economy and the near-destruction of the financial market and Wall street, many Americans are wondering what is happening to our country. It goes without saying that economic insecurity has also increased. The boom of the late 1990s created unrealistic expectations. Various polls show that more than half of us are worried about losing our nest egg, our retirements, our jobs. After all, having a job in this country allows one to have not only income, but also insurance.
More money does not automatically improve our mood. After all, money-- no matter how much you have--- is only part of the puzzle. According to Oxford University, happiness is more complicated than wealth alone. Americans are less happy on average than people in less prosperous nations such as Colombia, Guatemala, and Mexico. It is not the rich that most of us strive to keep up with; it is our families and friends. Bear in mind that trying to keep up with the Joneses is a trap. In our pursuit of happiness guaranteed by the Declaration of Independence, we tend to compete with neighbors, siblings, co-workers, and old classmates. People's ability to act on behalf of what matters to them is fundamental to happiness.
The key to financial happiness is to start saving. Do not be concerned about what and how much others are saving. By saving as much as you can in your particular circumstances, you will get ahead. You will live a happy life even in the midst of hard economic times.
Greater wealth does not generate more national happiness.
Friday, October 10, 2008
Monday, October 6, 2008
Surviving Wall Street's Financial Crisis: How to Survive in a Tough Economy
The financial crisis on Wall Street is quickly spiraling down to small businesses, making it extremely difficult for them to secure from large banks the credit they need to start and maintain their operations.
Some businesses that currently have good relationships with banks are getting more scrutiny and higher interest rates -- such as 15% or more. Riskier borrowers are being denied credit altogether.
Aside from falling back on friends or family -- or charging up yet another credit card -- here's a look at five alternatives for getting extra cash to run a business in this economy.
Peer-to-Peer Lending Sites
Several Web sites now facilitate loans between individuals who don't know each other. Typically, the prospective borrowers create profiles that include how much they need to borrow, what the money will be used for and some credit history. Other individuals can browse the loan requests and make offers that include payment terms and interest rates. Prospective lenders also get a risk assessment of the borrower generated by the Web site based on the borrower's credit history.
Some "peer-to-peer" lending sites include LendingClub.com, Prosper.com, RaiseCapital.com and Zopa.com.
On Prosper.com, for instance, 25% of borrowers are individuals running or looking to start businesses, says Chief Executive Chris Larsen. The site facilitates loans between individuals from $1,000 to $25,000, and interest rates on those loans right now range from 6% for those with the strongest credit ratings to about 30%.
Prosper, which has 800,000 registered users, is seeing more entrepreneurs with good credit scores signing up. "We're certainly seeing a steady increase of the quality of borrower coming to our site," Mr. Larsen says. About 55% of the loans being funded are for borrowers with credit scores above 720, he adds, while only about 5% are for those categorized as "subprime" borrowers.
Community Banks, Credit Unions
While big banks are being battered by all the financial turmoil on Wall Street, many local banks and credit unions are far more stable. In fact, community banks continue to expand, although some have suffered losses on securities issued by troubled mortgage giants Fannie Mae and Freddie Mac, says Camden Fine, chief executive of the Independent Community Bankers of America, an industry association in Washington.
Still, he says, even the community banks are more hesitant to lend to companies that lack rock-solid balance sheets.
Factoring, Asset-Based Loans
Though certainly not a cheap route to capital, some banks and non-bank financing companies offer financing that is backed by a business's assets or accounts receivable.
So-called factoring, where a lender might, say, outright give a borrower 80 cents on the dollar for the company's accounts receivable, can be a good option for businesses like manufacturers that are owed a lot of money by customers and that have no better lending option right now, says Raphael Amit, an entrepreneurship professor at the University of Pennsylvania's Wharton School.
Interest rates on such financing can sometimes run 15% or higher, so it's best to only resort to this approach when there's no lower-cost option.
So-called asset-based loans -- loans in which assets such as inventory, equipment or real estate are used as collateral -- can be good options for companies with lots of assets. But again, rates tend to run much higher than on traditional bank loans. The loan amounts are often capped at a percentage of the assessed value of the assets, such as 65%.
Also, even loans backed by assets can be difficult to get for companies with less-than-stellar credit ratings. Mark Sunshine, president of First Capital, a West Palm Beach, Fla., finance company, says he's seeing more demand for loans based on accounts receivable or assets, but isn't necessarily doing much more business. "There's a reason local banks won't lend them money," he says of riskier small companies. He says he's sticking to companies with lots of assets to use as collateral.
Negotiating With Customers or Suppliers
Another smart strategy for helping cash flow -- perhaps even if you do have access to loans -- is striking better payment terms with customers and suppliers, Prof. Amit says. Especially when business relationships are strong and long-lasting, many companies are willing to help each other out in tough economies.
Business that usually gives customers 30 to 60 days to pay the bills, for instance, might require customers to pay upon receipt of goods. A supplier, on the other hand, might be willing to extend lengthier payment terms to a business customer if it feels the customer is trustworthy and vital to its own business. Some suppliers also will lend money to their longstanding, most valued customers.
Changing Behaviors
Hard times call for small businesses to be nimble and entrepreneurial. Many businesses are using the tough economy to scrutinize their business practices and find creative ways to create better cash flow.
Some turn to leasing instead of buying equipment they need. Others are identifying areas of the business that will tend to be more lucrative in today's economy and shifting their resources in those directions.
Some businesses that currently have good relationships with banks are getting more scrutiny and higher interest rates -- such as 15% or more. Riskier borrowers are being denied credit altogether.
Aside from falling back on friends or family -- or charging up yet another credit card -- here's a look at five alternatives for getting extra cash to run a business in this economy.
Peer-to-Peer Lending Sites
Several Web sites now facilitate loans between individuals who don't know each other. Typically, the prospective borrowers create profiles that include how much they need to borrow, what the money will be used for and some credit history. Other individuals can browse the loan requests and make offers that include payment terms and interest rates. Prospective lenders also get a risk assessment of the borrower generated by the Web site based on the borrower's credit history.
Some "peer-to-peer" lending sites include LendingClub.com, Prosper.com, RaiseCapital.com and Zopa.com.
On Prosper.com, for instance, 25% of borrowers are individuals running or looking to start businesses, says Chief Executive Chris Larsen. The site facilitates loans between individuals from $1,000 to $25,000, and interest rates on those loans right now range from 6% for those with the strongest credit ratings to about 30%.
Prosper, which has 800,000 registered users, is seeing more entrepreneurs with good credit scores signing up. "We're certainly seeing a steady increase of the quality of borrower coming to our site," Mr. Larsen says. About 55% of the loans being funded are for borrowers with credit scores above 720, he adds, while only about 5% are for those categorized as "subprime" borrowers.
Community Banks, Credit Unions
While big banks are being battered by all the financial turmoil on Wall Street, many local banks and credit unions are far more stable. In fact, community banks continue to expand, although some have suffered losses on securities issued by troubled mortgage giants Fannie Mae and Freddie Mac, says Camden Fine, chief executive of the Independent Community Bankers of America, an industry association in Washington.
Still, he says, even the community banks are more hesitant to lend to companies that lack rock-solid balance sheets.
Factoring, Asset-Based Loans
Though certainly not a cheap route to capital, some banks and non-bank financing companies offer financing that is backed by a business's assets or accounts receivable.
So-called factoring, where a lender might, say, outright give a borrower 80 cents on the dollar for the company's accounts receivable, can be a good option for businesses like manufacturers that are owed a lot of money by customers and that have no better lending option right now, says Raphael Amit, an entrepreneurship professor at the University of Pennsylvania's Wharton School.
Interest rates on such financing can sometimes run 15% or higher, so it's best to only resort to this approach when there's no lower-cost option.
So-called asset-based loans -- loans in which assets such as inventory, equipment or real estate are used as collateral -- can be good options for companies with lots of assets. But again, rates tend to run much higher than on traditional bank loans. The loan amounts are often capped at a percentage of the assessed value of the assets, such as 65%.
Also, even loans backed by assets can be difficult to get for companies with less-than-stellar credit ratings. Mark Sunshine, president of First Capital, a West Palm Beach, Fla., finance company, says he's seeing more demand for loans based on accounts receivable or assets, but isn't necessarily doing much more business. "There's a reason local banks won't lend them money," he says of riskier small companies. He says he's sticking to companies with lots of assets to use as collateral.
Negotiating With Customers or Suppliers
Another smart strategy for helping cash flow -- perhaps even if you do have access to loans -- is striking better payment terms with customers and suppliers, Prof. Amit says. Especially when business relationships are strong and long-lasting, many companies are willing to help each other out in tough economies.
Business that usually gives customers 30 to 60 days to pay the bills, for instance, might require customers to pay upon receipt of goods. A supplier, on the other hand, might be willing to extend lengthier payment terms to a business customer if it feels the customer is trustworthy and vital to its own business. Some suppliers also will lend money to their longstanding, most valued customers.
Changing Behaviors
Hard times call for small businesses to be nimble and entrepreneurial. Many businesses are using the tough economy to scrutinize their business practices and find creative ways to create better cash flow.
Some turn to leasing instead of buying equipment they need. Others are identifying areas of the business that will tend to be more lucrative in today's economy and shifting their resources in those directions.
Financial Crisis Caused Murder-suicide in Paradise
Financial Difficulties Lead Father to Kill Wife, Mother-in-law and Three Children in California Gated Community
Former PricewaterhouseCoopers and Sony Pictures employee went a killing rampage after being unemployed for several months. The unemployed accounting industry worker became despondent and withdrawn. Living in an upscale, large home in a California gated community, the father could not take it any longer. Watching the credit crunch or contraction and the tight economic market and the changing of Wall Street business model, he realized that his chances of getting a job were almost nil. He could not count on his master's of business administration in finance to get him a job. Ill-advised, he decided to take matters in his own hand. He unleashed all his demons on his unsuspecting family.
Police investigating the case in the San Fernando Valley neighborhood of Porter Ranch found a handgun which was purchased on Sept. 16, 2008. They recovered where the father's body was located. The man used it to kill his 39-year old wife, 70-year-old mother-in-law, and his sons aged 19, 12, and 7. It is worth nothing that the family did not own the home.
The father created hell for his wife and his children as he went from room to room to commit these killings. In his suicide letters, he attests to some financial difficulties, takes responsibility for the taking of his family members and himself as a result of these financial hardships. The financial dealings and situation of his household overwhelmed him.
Tags:
Sorrento Pointe, gated community, Santa Susana Mountains, Porter Ranch, pricewaterhousecoopers, Sony Pictures, large home, financial problems, handgun, San Fernando Valley, suicide letters
Former PricewaterhouseCoopers and Sony Pictures employee went a killing rampage after being unemployed for several months. The unemployed accounting industry worker became despondent and withdrawn. Living in an upscale, large home in a California gated community, the father could not take it any longer. Watching the credit crunch or contraction and the tight economic market and the changing of Wall Street business model, he realized that his chances of getting a job were almost nil. He could not count on his master's of business administration in finance to get him a job. Ill-advised, he decided to take matters in his own hand. He unleashed all his demons on his unsuspecting family.
Police investigating the case in the San Fernando Valley neighborhood of Porter Ranch found a handgun which was purchased on Sept. 16, 2008. They recovered where the father's body was located. The man used it to kill his 39-year old wife, 70-year-old mother-in-law, and his sons aged 19, 12, and 7. It is worth nothing that the family did not own the home.
The father created hell for his wife and his children as he went from room to room to commit these killings. In his suicide letters, he attests to some financial difficulties, takes responsibility for the taking of his family members and himself as a result of these financial hardships. The financial dealings and situation of his household overwhelmed him.
Tags:
Sorrento Pointe, gated community, Santa Susana Mountains, Porter Ranch, pricewaterhousecoopers, Sony Pictures, large home, financial problems, handgun, San Fernando Valley, suicide letters
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