This is a conversation between me and my future self, if my financial path wouldn’t have positively forked 2 years ago. The transcript is available here.
What would your future self have to say to you?
I Smell a Scam
I hate scammers. Whether it’s the garage-sale shoplifter, telemarketing “charities” with 99% overhead, 3-card-monte
dealers, or the guy who begs Grandma for cash every week, they all need to be strung up. Since vigilante justice is generally illegal and occasionally immoral, it’s best to just avoid the problems from the start. Here are some scams to watch out for.
Pyramid Scams – All of the little parties people throw to earn free items at the expense of their friends are pyramid schemes. Most of those are legitimate money-sinks. A few, however, exist solely to get their “consultants” to bring in more consultants. The sales aren’t the actual way to make money. If you don’t have anyone “downstream” you won’t make any money. If the focus isn’t on selling an actual product or service, but is instead on bringing in people under you, you have entered the world of pyramid scams. Generally illegal and always immoral. Don’t sign up and, if you do, don’t ask me to participate.
Advance Fees and Expensive Prizes – If you win a contest and you are expected to send money to claim your prize, it is a scam. You don’t have to pay sales tax in advance. You don’t have to pay transfer fees. Real prizes are delivered free, accompanied by a 1099, because prizes are income. No prize requires pre-payment. No loan service requires “finder’s fees”. If it doesn’t sound right, don’t pay it and certainly don’t give your bank information to anyone you can’t verify.
Work at Home – The most common work-at-home job I’ve found is stuffing envelopes. You see the signs on telephone poles all over the city. “Make $10/hour stuffing envelopes from the comfort of your own home! Just send $50 to….” When you get the instructions, you are told to hand up signs telling people to send you $50 for instructions on how to make $10/hour stuffing envelopes. Everybody is feeding off of everybody else.
Charity – Never give money to a charity over the phone. Always take the time to verify where you are sending your money. Some freak may call to tug on your heartstrings with a sob story, but you don’t have to give them money. At least ask them to send it in writing so you can do some checking, first.
Phishing – Simply put, don’t click on any link in any email, unless you know where it is going. If it is a link to a financial institution, go enter the address into the address bar yourself. If you find yourself on a site you don’t recognize, don’t give them your personal information and don’t ever reuse your usernames and passwords. If you do, one bad site could get access to everything you do online.
[ad name=”inlineleft”]Foreign Lottery – To be clear, Spain did not just hold a international lottery and randomly draw your email address. No lottery in the world works that way. If you didn’t enter the lottery while you were in Spain, you aren’t going to win it. The scam is that you need to provide your bank information, including a number of release forms so the scammers can transfer money to you. In reality, you are signing over control of your account and will be wiped out.
Nigerian/419 Emails – Ex-Prince WhateverHisNameIs wants your help to get his fortune out of WhereverHeIsFrom. The New Widow Ima F. Raud has an inheritence that she won’t live long enough to spend. They’ve both been given your name as a trustworthy person to handle the transactions in exchange for a mere $10 million. What friends do you have that would make this seem legitimate? Once again, they will get your bank information and take your money. At a minimum, they will try to get you to pay a few thousand dollars for “Transfer fees”. Don’t do it.
Overpayment by Wire – I had this one attempted on my last week. You sell something online. A potential buyer agrees to purchase the item, sight-unseen. They’ll send a cashier’s check and, after it clears, one of their agents will pick it up. Unfortunately, the buyer’s secretary screwed up and added a zero to the check. Would you mind wiring the overpayment back, minus a small fee for the hassle? The check is bogus and there is no way to verify it. You’ll deposit the check and it will be assumed to be real. The bank will make the funds available well before it comes back as fraud. You’ll see the available funds and send the money by non-refundable Western Union and some thug in Nigeria gets a new iPhone.
Foreclosure Scams – Some scammers try to prey on the vulnerable because they are, well, vulnerable. If you are facing foreclosure, be very careful about where you turn for help. One scam is to get you to sign over your home “temporarily” to clear the title. That doesn’t work, but you won’t find that out until you are handed an eviction notice and told you still owe the money.
Stranded Friends – You get an email from a friend saying he’s in London/Moscow/Sydney/Wherever, and he’s been mugged. He’s got nothing and needs $2500 to get home. Can you help? Do you really have friends close enough to ask for a $2500 international bailout, but not so close they tell you about the vacation ahead of time? Would they really be too timid to call you collect instead of begging for change to use an internet cafe?
I’m the Bad Guy
My wife and daughters are active in a saddle club, even though we don’t own any horses. We’ve been borrowing them for shows when my girls compete.
My wife’s cousin has been trying to sell one of her horses for a few months. Because this horse has alpha-male problems, it has to be kept in a stall. Stall boarding runs $450 per month as opposed to $200 in a group paddock.
Since my girls love this horse, Cousin continually tries to convince my wife to buy it.
My wife’s response is “Jason won’t let me buy a horse, yet.” Then all of her friends get to complain about how I’m not supportive.
Uhhh, no.
We are $10,000 away from paying off truck. We’re $23,000 away from being mortgage-free. After that, we’re planning to rent out the house we’re in and buy a hobby farm.
Yes, Mr. Unsupportive is planning to uproot everything and move to the country so my wife and daughters can have horses on site.
Shame on me. I’m such a jerk.
In a couple of years, I want to buy a $450,000 spread on about a dozen acres and let my wife’s dreams come true.
Or, we could buy a couple of horses now and never have the money for a down payment.
Or, we could buy the farm now, buy the horses now, spend every last cent of our savings on a down payment, spend more than half of our income on our mortgage payment, never get ahead, and end up losing everything.
Such a jerk.
This is a case where we have to do everything in the right order, or it will all come tumbling down on our heads in a few years. If I have to be the bad guy to avoid screwing ourselves later, so be it.
Side Hustle: The Garage Sale Preparation
We had a garage sale last week, as a wrap-up to the April 30 Day Project. We got rained out halfway through the first day of our 3-day sale, but we still managed to clear $1500. We held the sale in our neighbor’s garage because it had more space and better visibility.
Wednesday night, while carrying boxes over, I missed the step to their property from our driveway and crashed while carrying three boxes. That’s a twisted ankle and a bleeding knee. Naturally, while I’m hopping and swearing, everyone is concerned that I’m okay. The worry-warts. Anyway, it hurt, so we stopped setting up while we still had a few boxes left in the basement.
[ad name=”inlineleft”]Thursday morning, I decided to show them all. At 5:30AM, before anybody else is strongly considering the possibility of maybe thinking about getting ready to hit the snooze button, I decided to get the rest of the boxes ready. They’d all wake up, worried about how I’m feeling, asking if I’m to stiff to carry boxes. The best way to show them they don’t need to worry would be to have all of the boxes dealt with before they woke up. So I started. Up and down the stairs, with a stiff, twisted ankle, gloating to myself about how tough I was…BOOM, down the stairs. I was on my back, sliding down the stairs. I caught a stair-tread in the small of my back and another on the point of my tailbone. Mommy?
After I stopped twitching on the floor at the base of the stairs, I managed to get the last of the boxes ready. Instead of sympathy, I spent the rest of the weekend getting asked if I needed an inflatable doughnut to sit on. There are places I’d prefer not to have bruised.
Unpacking the boxes made me glad that everything was priced. We spent 6 weeks going through our entire house–every room, every dresser, every drawer–to eliminate the clutter. As something went into a box, it got priced, so we didn’t have to do it all at the last minute. That is the most important time-saving step for a garage sale. Price it as you pack it. You don’t want to waste hours pricing stuff while tripping over potential customers.
Another preparation tip to do early: Find tables! Ask around. You’d be surprised at who has a dozen folding tables collecting dust in his basement. It’s better to borrow that to rent. The best price I found was $17.50 to rent an 8′ X 30″ table for a week. We didn’t have to do that, but we thought we would have to. I borrowed a few, found a few, and built a few out of sawhorses.
The week before the sale, we placed an ad in the paper. When I placed the ad, the paper called to suggest we change it from running the weekend before to running just the days of the sale. I agreed, to a point, but their Sunday circulation is miles ahead of the weekday circulation, so why pay to run an ad nobody will see on Thursday? I ran it Sunday through Tuesday, because I wanted the Sunday ad and we got 3 consecutive days in the price. Did I actually know better than the paper’s sales-weasel? Who knows? I think I made the right decision.
The Sunday before the sale, I posted an ad on Craigslist. Interesting fact: little old ladies use Craiglist to plan their garage-sale adventures.
Two days before the sale, we made signs. Bright pink signs with brighter yellow starbursts. They were all simple. “Mega Sale! 8-5” followed by an arrow and our address. Simple, easy-to-read, and bright. The morning of the sale, after the ibuprofen kicked in, I put the signs up. When you make signs out of paper, always include a crossbar. It rained a lot the first day of the sale, so the signs wilted. The second morning, I went out with some duct tape and crossbars and fixed them all.
The day before the sale, we got cash and change. We had $50 in 1s and 5s and $25 in silver change. No pennies. Nothing was priced to make us need them.
The morning of the sale, we set up two canopy tents in the driveway and pulled the prepared-and-filled table out under them. We finished stacking as much as we could on the tables and called it “open”. There were a few boxes we couldn’t put out due to the rain. We simply ran our of room. At noon, $65 into the sale, we decided enough was enough and shut down–cold, wet, and miserable. Lunch and a nap made the day better.
Later, I’ll discuss the other parts of our successful sale.
Note: The entire series is contained in the Garage Sale Manual on the sidebar.
Update: This post has been included in the Money Hacks Carnival.
How to Build a Business on Cannibalism
Last week, my wife posted on Facebook that she was frustrated with her job hunt.
An hour later, she got a call from someone she hadn’t talked to in 10 years. He wanted to talk about a great business opportunity. He wouldn’t say what it was, but wanted to bring a friend over to discuss it.
Fast forward to last night.
The night my wife agreed to meet with the old friend.
The meeting we forgot about.
So we invited our friend and his friends into the house. We sat down at the dining room table to hear the pitch. Our friend is just getting started so his “friend” delivered the pitch.
While I was waiting for him to explain the business, he was showing us pictures of he and his wife traveling around the country.
Instead of explaining the product, he asked about our most expensive dreams.
Instead of telling us how the marketing worked, he mentioned something about utilizing the internet–and i-Commerce–and talked about changing our buying habits.
Instead of showing us a product, he talked about driving volume and building a team.
There was nothing concrete, but a lot was said to ride on the dreams of people who are frustrated with their income or are living paycheck-to-paycheck.
More than an hour into the presentation, it was revealed that the “product” is a buying portal to allow people to buy Amway products from your personal Amway store.
Freaking Amway.
How do they find your personal Amway store, you ask? I don’t know, because you are supposed to be your own best customer. You make money by buying the products you use anyway, but buy them from Amway. For example, there’s the $10 toothbrush, the $16 baby wipes, or the $38 toilet paper.
For six frickin’ rolls.
Seriously, this stuff is meant to touch my butt once. I don’t need it made from pressed gold.
As for the visual…you’re welcome!
So I sell a kidney to buy enough toilet paper to keep my nether bits clean for a month and I get one point for every $3 I spend. I figure that’s about 50 points per month, given the foot traffic our bathrooms see.
If I hit 100(I think, he didn’t leave the paperwork) points, I get 6%(again, I wasn’t taking notes) back at the end of the next month. For the sake of the math, I’m going to double the number of butts in my house. 100 points means I need to spend $300. That’s 47 rolls of toilet paper. In exchange for this $300–and on top of gold-embroidered silk I now get to flush down the toilet–I’ll earn $18.
I know exactly how much toilet paper I buy right now. Amazon sends me a 48 roll package every other month for $31.42, shipped.
To simplify, Amway is offering me the ability to spend $300 to get $18 plus $31.42 worth of toilet paper. I’m supposed to end my financial worries by turning $300 into $50 every month.
Yay!
[Note to self: Demolish Amway’s business model by starting a company that will let people turn $200 into $50, without the nasty overhead of stocking overpriced crap. A 33% increase in efficiency will make me rich!]
But wait, say the imaginary Amway proponents that I hope aren’t frequenting my site, you’re forgetting the most important part!
Oh really?
There’s also a thing called a “segmented marketing team”. To the rest of the multi-level marketing world, this is known as your downline. If you can con your family and friends into turning their $300 into $50 every month, then help them con their family and friends into turning $300 into $50 every month, you’ll get rich! Amway has apparently figured out a way to share a small fraction of their 600% markup with their victims to make them feel like it’s a business opportunity instead of a robbery.
If I get 9 people in my “business team” and each of them build out their team, I get the coveted title of “Platinum Master” or whatever. All I have to do is sell the souls of 72 people and I can make a ton of money! If each member of my downline turns $300 into $50, Amway will get $18,000. In exchange for delivering those souls, the “average” Platinum Ninja makes about $4500 per month. That’s about $12,000–free and clear–for Amway.
When your business model consists entirely of your sales force doing all of the buying and consuming, it’s not a business model, it’s cannibalism.
Side Hustle: Garage Sale Management
Pre-sale preparation and marketing are important, but ultimately, the money comes from how you manage the sale.
How many people will you have staffing the sale? There are a few considerations here. How many people are involved in the sale? How many people can take the time off? It’s best to have three people at the sale at all times. Two people can manage the money while the third plays salesman and security. Staffer #3 is in charge of watching for price-tag swaps or other theft, answering questions, and trying to upsell. It also allows for breaks, which, if you’ve ever spent a day in a garage drinking coffee, is important.
When are you going to be open? You don’t want to open so early you don’t have time to wake up and get ready for the sale, but you don’t want to open so late the professional garage-salers drive past and forget about you. Plan to open sometime between 7 and 9. When will you close? Staying open until 6 will catch most of the after-work crowd, but it makes for a long day, but closing at four cuts out a lot of the late-day shoppers. Our hours were 8-5, which seemed to be a good compromise between a long day and the best sale.
[ad name=”inlineleft”]Don’t be afraid to shut down. The first day of our sale was cold, wet, and miserable. We had to canopies in the driveway, but everything was getting wet, anyway. Traffic was slow and we weren’t enjoying ourselves, so we shut down. Lunch and a nap improved our outlook considerably. At the end of the day, we start packing up, even if people were there. We tried to only pack what they had looked at, and we didn’t try to rush the potential customers, but we did let them know that the sale was ending for the day. The folks who came in half an hour after close on the last day seemed upset that we didn’t unpack everything for their amusement.
Our layout was designed to get everything easily visible while maximizing traffic. The first day, we were confined to the garage and tents, so space was limited. There were baskets under each of the tables. That forced people to crouch and block each other. The second day, we expanded to fill the driveway. Our tables were organized in 3 rows–a “U” shape with a double-wide row of tables in the middle. This allowed people to see everything in one pass. The middle row had periodic breaks so we could move around to help the customers. The pay table was in the middle of one of the outer rows, which let us monitor the entire sale.
Find someone to watch the kids and pets. If you have to keep an eye on your children, you aren’t watching the customers or giving them the attention they need. Your dog–no matter how well-behaved–is a liability. It will be stressed at the people. Some customers will be allergic or afraid. Just don’t do it.
Ideally, you will have someone who isn’t taking money, knows a little bit about most of the merchandise, and isn’t too shy to talk to strangers. His job is to wander around, answer questions, and help people decide if they want an item. He’s the sales-weasel. If he’s pushy, he’ll chase off the customers, but if he’s hiding, he isn’t making any money. Unusual items should have a sign attached explaining why they are special, so the sales-weasel doesn’t have to explain it to everyone.
Every single item should be priced, but not everything needs to be priced individually. We priced all of the movies in a group. “VHS: $0.50 or 5 for $2, DVD $3 or 4 for $10”. Nobody should have to ask what an item costs. If there are multiple people doing a sale together, make sure everyone is using colored price tags to identify who is selling what.
People come to garage sales expecting to find good deals. If they don’t, they’ll leave. Our rule of thumb for pricing was about 25% of retail, with wiggle-room for the item’s condition. New-in-the-box sometimes made it up to 50% of retail. Our goal was primarily to reduce clutter, so a lot of items were priced at 10%. You have to keep in mind that, if you price things too low, people will assume there is something wrong with it and not assign a value in their own minds. Price it at what you would be willing to pay in a garage sale, then mark it up–just a bit–to account for haggling.
People love to haggle at garage sales. It gives them an opportunity to brag about the great deal they fought for. Try to accommodate them. One of the people participating in our sale was selling antiques with a definite value. She didn’t want to haggle on any prices, so we simply hung up a sign that read “All white-tagged prices are firm.” Everyone else was willing to accept almost any reasonable offer. Our most important rule for accepting a price? If you pissed me off, I didn’t budge on price. Insult me, or offer 1/10 of the price, and my defenses go up, bringing your final price with it. Talk nice and use some common sense while haggling, and you got what you asked for.
[ad name=”inlineright”]Could we have maximized the sale more? Probably. I had intended to hang up a sign that simply said “$100” to set a high anchor-price on everything, but I forgot.
Note: The entire series is contained in the Garage Sale Manual on the sidebar.
Update: This post has been included in the Carnival of Personal Finance.
