How debt could help you generate money

Yesterday we got an interesting email from a guy named Tom. He challenges our articles and ideas about saving money and investing savings. Tom is sharing the idea that rich people never save money – they make money out of the money of the others. Borrowing money with low interest and investing them into profitable assets.

Tom really has a good point so in this article we will cover how and why debt could be considered something good and could earn you a fortune.

1. Not everyone has enough capital to start their own business
If you have a brilliant idea or discovered a profitable niche waiting for your savings to grow until you invest in it might be not so clever. In the best-case scenario, somebody might get into the niche or simply steal your idea and make it true, benefiting from it. Timing and execution are the primary reasons behind each success story.

Also, if you have a working business model and you want to expand on it, then basically debt could be a better option to go and get capital instead of waiting for your savings to grow up. This is true, especially if you don’t want to give away equity. A lot of business owners prefer to keep most of the ownership to themselves and build the business from the ground up. After all, it’s their idea, their dream, and their sweat and tears.

2. Borrowing money to invest in real estate
Real estate is thriving most of the time, and although it might be slow and dependent on the country or region, as a rule of thumb a property nowadays cost much more than 20-30 years ago. In some countries and regions, it could be more than 300% increase in the value.

If you want to invest in property, make sure to do some analysis to make you can use it as an investment. So, when you borrow money the tenant or if it is a commercial property then the business owner who is renting it is going to pay you a monthly rent. Using this income, every month you would be able to cover the payments on your debt and probably even have a little bit of cash leftover.

3. Borrow money only if you will be generating wealth out of it
If you know how to use and invest money correctly, by any means debt is your friend. It is important to remember - every time you borrow money you need to understand that you have to have the money to pay for it. Therefore, it's important not to borrow money if you just want to go and buy presents for your family, but only if you are going to invest and make more money out of it. The only time that you should borrow money is if you know that you can create enough cash flow from that debt to pay off the debt.

4. Borrow money when your business has a minimum 30% return out of it
If you own an Amazon business or Shopify, or even a regular convenience store and you know that whatever money you put into the business - you can make a minimum of a 30% return on your capital, so you should be able to pay back your debt with that money and be able to grow faster your investment, than debt is the best way to go.

5. When you borrow money you leave most of your cash for emergencies
You are not depleting your actual cash flow and actual cash so in any case of unforeseen events, you would be able to stabilize faster and not lose your business to an unfortunate event.

If you ever have a down month, or you need to get more supplies or if you need some equipment it's best to have a little bit of money saved for your business. Most markets and environments are unpredictable, and there are always good months and bad months

A good example is the retail business. Usually, the Christmas season is strong, so November and December are usually profitable. At the same time in January the sale drop and then throughout the year they're more or less consistent, depending on the type of business. Some businesses have a strong summer, while others are growing over the winter season.

6. You can use debt when it comes to leasing
There are a lot of business owners who need better machinery or equipment for their business. They are usually expensive, and it is much better for some business types to consider leasing, instead of permanent purchase. Your business will save thousands of dollars if you just lease and will only be paying for the time that you're using the equipment and the machines and when you don't need them anymore, depending on your lease contract, you can return it or you can exchange it.

Very often that's a 100% tax write-off and when it comes to the debt you borrow to pay for the lease it's 100% percent tax write-off so you're getting a tax advantage and you're able to grow your business a lot faster. That’s why many business owners, as Tom mentioned, prefer  debt when it comes to growing wealth than anything else

7. You can borrow against the business
That's cool. It is a good idea to keep your personal and your business separate. This is a very strong foundation for your business so your business can borrow on its own merit. When you're borrowing against your business idea then it is possible to have the business as a warranty.

If you try to borrow money on a personal side, the bank will ask you about your credit score (we covered in the previous article). Your credit score needs to be good; you need to have low utilization rates, and you need to have enough income to support the monthly fees and taxes.

The other way to borrow money from the bank is through a balance sheet, from your business.
A balance sheet shows the bank your financial education and if you are borrowing from the bank, they want to check how much cash flow is coming in; what's your business model like; how much debt are you going to be taking on; who's going be paying for that debt.

Therefore, you need a financial statement and balance sheet and if you can show the bank that you did your homework and your financial IQ is good then they can lend you even more money.

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As a conclusion, it is true that the richest people in the world use debt to generate more money than anything else. After the gold standard removal, and the inflation rate skyrocket – many see money as plain pieces of paper already, without any value. So, having such a mindset helped the rich borrow huge amounts of debt, invest smartly in something more tangible, and generate huge amounts of profit. We would also like to warn you to be careful though. Make sure you have a good plan and profitable place to invest the debt, otherwise it will just be a liability to you and not bring you any benefit.

What is a credit score?

Every time you apply for credit (mortgage or any other loan), the bank (or lender) would like to know what is the risk involved into loaning you money. Usually the lending institution issues a credit report and most of the time part of that report is your credit score. It helps the lenders evaluate your profile and your application for credit.

The credit score is just a number, rating creditors use to assess the risk when making lending decisions. There are two most commonly used credit score providers. The first one is FICO. And the second VantageScore. The components of the credit score are: the debt you currently have; number of credit cards you own and any unpaid amount on them; paying your bills on time; how much of your money is blocked monthly; how much your income is, etc…

The credit score range between 300 and 850, and it affects the financial decision if a loan is going to be granted to you or not. It could even be required and checked by landlords – and if low, there could be a refusal to rent a place. Your credit score influence the amount of credit available to you and the terms (interest rate, period, discounts, etc.) that lenders are going to offer.

A credit score of 700 or above is considered good. An excellent credit score is such of 800 or above. Keep in mind most people credit scores range between 600 and 750. The higher the score, the better credit decisions and more certainly a credit will be given to you.

There are sites online where you may check your credit score for free, anytime you need to. Example of such website is: Clearscore. Your credit score impacts all of your adult financial live, so check it out.

Should I keep my money in the bank

Recently, we received a question from a guy who seems to have a lot of money and asks should he keep them in the bank or at home? As usual, we will answer the money question looking at it from different angles and providing the best financial option.

1. Storing money at home is not a good idea
It depends on your income, but in general, if you keep more than 200USD in your house – that’s a bad idea. There are two main reasons for this. You might get robbed, or you might lose your money via an accident (fire, neglect, etc…)

2. You are losing on interest rate
Yes, we know the rate is negligible (nowadays), but even so, every bit is important. Besides, the interest rate might change in the future as currently, it is at minimum for over decades.

3. Money loses value over time
Sad but true. Printing money and “healthy inflation” are the main reasons. The devaluation is actually huge and about 3-5% over each year (could be more during a crisis). One US dollar in 1913 had the same buying power as 26 US dollars in 2020. That’s 2600% devaluation for a little bit more than 100 years period, and it means roughly 260% devaluation per 10 years. The recent 20 years were not so aggressive, so it could be less but probably still about 100% for the recent 10 years.

4. Money is protected in the bank (in many countries)
The banks are the safest place for up to a specific amount of money.  In many countries, governments issued protective laws and directives to protect a certain amount of money. In the UK for example, the money is protected by the Financial Services Compensation Scheme (FSCS) for up to 85,000 GBP, per person per firm in 2020.

In the US the Federal Deposit Insurance Corporation (FDIC) insures the money deposited into each bank, up to 250,000 USD for each account.

It is important to remember – if you have more than that limit stored, move the excess to another bank to be fully protected in case of emergency or crisis.

5. Accidentally throwing away cash or leaving it behind
It happens more often than you could imagine. Many people reported they completely forgot about the money stored in the mattress and when throwing it away or leaving the place, the money was gone for good.

In June 2009, an Israeli woman threw out an old mattress. What she was not realizing - it was stuffed with her mother's 1million dollars life savings. The culprit, identified only as Anat, had bought the new bedding as a surprise for her mother. When her mother found out about her gift, she lost consciousness, before revealing the contents of the mattress.

Ontario man forgot about 100,000 CAD inside an old TV. He hid the money decades ago and completely forgot about it. Luckily, the TV was sent for recycling and the employees of the Ontario recycling plant were in shock to find the treasure well hidden, inside the crappy TV.

So, the bottom line is – it’s really a bad idea to keep money at home. It’s much better to keep them safe in the bank or invest using alternatives we will be covering in a future topic.

How to make money during COVID-19 crisis

COVID-19 crisis hit hard the economies of both the developed and developing countries. If you are one of the many staying home, either employed or not it is time to consider the new opportunities to make money. In the previous article “Sectors and companies benefiting from the COVID-19 crisis and national quarantine” we discussed the sectors and companies benefiting from the crisis. Now it’s your time to learn from the winners’ experience and start benefiting yourself.

1. Use your current skills
Any of your skills not involving face-to-face contact would work. Maybe you can sing, write articles, create videos, do graphic designs, teach or just create value by streaming activities. Now is the time to do it. Post over social media or create a simple free page and gather groups and clients.

Streamers earn millions of dollars streaming gaming or any other recreational and educational activities. Try Twitch today and start gathering followers, clients, donors, or patrons for your business or services.

2. Acquire new skills
Now is the perfect time to educate yourself into more profitable skills to serve you over the next decade. Always wanted to be a better investor? Read those books and take those courses you never had the time before. Maybe you wanted to learn how to marketeer your products and services better – there are plenty of free resources online. Never had the time to gather and create clients' e-mail-list – you should be able to now. Or, you are up to a completely new career path as a techie, start learn programming, designing, or engineering – there is no better time.

3. Adjust your mindset and change the way you serve your clients
Be creative.
Fitness gurus use YouTube and Facebook to keep their clients in shape. Makeup artists, singers, and photographers do tutorials and give lessons and offer services online. Master Chefs use Instagram, blogging, and video streaming to show recipes of their latest masterpieces in the kitchen. Have a look at your competitors and partners. What do they do to mitigate the income impact of the COVID-19 crisis and even earn more?

What your clients need the most? How could you serve them without face-to-face contact? Don’t be afraid to experiment, don’t be afraid to create a survey and ask your clients how you could serve them better online.

4. Become a freelancer
Try some freelance work at Freelancer.com or Upwork. They list creative, mostly technical, jobs to be done remotely. If you already have the technical skills, those are your best bet for additional income.

5. Spend some time on planning (no more than 10% daily)
Learn how to create business and action plans. Try planning the rest of the year. Outline everything important to you and your business in the plan – your clients, your main sources of income, your timeline for executing and delivering your services, the budget needed, and the income expected. Put everything in a timeline, and don’t forget that the plan would probably change… and that’s ok. But still, your vision and your goals to achieve the vision should remain as close to the original. There are many templates, tutorials, and guides online – how to create a financial plan and how to adjust it when needed.

Keep in mind – the COVID-19 crisis will sooner or later end, elaborate vision, and plan actions and goals to achieve after the crisis.

6. Train, mentor, and coach
If you are already an expert – do not hesitate to promote yourself as a trainer or mentor for those who would like to learn in your field. Offer discounts to attract trainees or just train for free to gain more popularity and clients later. You can use Skype, MS Teams, Zoom, or any other platform for your teachings.

7. Promote your business with vouchers
People love vouchers and now is the best time your business could benefit from giving away vouchers for your products or services. It works not only online but for businesses like hotels, bars and events. Maybe some clients would like to cancel their reservation? Instead - offer them a discounted voucher to use your service or do the reservation later, up until the end of 2020 or even 2021. This way you are not going to lose business.

At the same time provide gift-cards and vouchers to every client currently using your services. This way their loyalty will increase, and they will keep coming back to your business.

8. Work online as a QA or feedback provider
There are plenty of sites offering opportunities to test products or take surveys and provide feedback. They will pay you for your time. In the meantime, you could use the opportunity to check what the other companies are doing and what products and services they require feedback on. In the long run – this will help you improve your own services and products to earn more money.

9. Sell unused items online
You could eBay your unneeded items at home, not only generating some cash but getting rid of those unnecessary items. Maybe you have an expensive car? Now is the time to get rid of it. Or you have another laptop you barely ever touch – it’s time for it to go for good.

10. Offer services to people in need
There are a lot of people in need and you could either volunteer or work part-time for them. Elderly or vulnerable people, staying at home could need somebody to do some shopping or simply walk their dogs. Although these would not earn a fortune – they are a nice extra additional income for some little time and effort on your side.

Sectors and companies benefiting from the COVID-19 crisis and national quarantine

The COVID-19 outbreak and national quarantines have devastated companies, businesses, and whole sectors over the national economies across the globe. Nevertheless, there are some parties benefiting from the crisis, sectors, and companies which thrive and make a huge amount of profit.

Here is a list of the sectors and companies benefiting from the COVID-19 crisis:

Local pharmacies
In times when a lot of business was closed – the local pharmacies not only remained open, but most of them reported increased revenue due to the higher demand in protection against COVID-19 items (as gloves, masks, etc..) purchase.

Grocery and consumer goods
The supermarkets’ business has not seen any decline. In fact, the majority of the stores report increased demand due to people stocking up on any sort of goods.

Grocery delivery
Companies in the sector are experiencing increase in their services. Those companies are blooming and have difficulties to support the extra demand. For example, the online shop and delivery company Ocado stopped their website at some time, as the demand greatly exceeded the capacity to deliver. The company reopened later, putting some limits over some of the most demanded goods. It’s not a surprise the share price for Ocado increased and will probably continue to grow.

E-payments
In many countries, physical cash has already become something in the past, and the COVID-19 crisis accelerate the trend everywhere. Many shops started accepting only digital payments, although some people from the traditional generation resist the change. Physical cash will sooner or later be sent forever into the past as physical money tends to attract and keep all sorts of germs, viruses, and bacteria.

And it’s a good opportunity for everybody, wishing to stay healthier and safer. The change will inevitably be permanent for many who recognized the convenience of modern digital payment options. The obvious beneficiaries are Visa, Mastercard, PayPal, etc...

Cloud Computing
Although the cloud computing segment has been on the rise for years, some traditional industries refused to embrace the change. COVID-19 crisis will definitely help them accelerate their digital transformation as more employees are now restricted to their homes. A lot of workloads have to be migrated to the cloud for many companies to ensure their business continuity and function at all.

Google Cloud, Amazon Web Services, Microsoft Azure are the top winners on the market, as leaders. Other older, traditional companies will have to rethink their digital strategy and policy to enable the transformation faster. Once the rolling over started, it’s highly unlikely those companies will ever decide to go back and turn back.

Online apps and stores
As more people remain at home, it is no surprise they would cure their boredom with fancy cool stuff purchased safely online. More and more people tend to buy online with the saved money from not going outside. Amazon seems to be the top beneficiary of the situation.

Conferencing & team collaboration tools
As more and more teammates work from home and most of the teams are either remote or distributed – the conference and collaboration tools demand is at its peak. Teams need to stay in touch multiple times a day, alignment and reporting meetings are held every minute. Although video cannot be a substitute for face-to-face connection, it is close, and the majority of the teams prefer using it over email or telephone.

Microsoft reported the daily active users for its Teams collaboration suite increased by 12 million. Other companies like Zoom Video Communications have seen a share price increase of 130% since the beginning of the year. Many promoters, salesmen, and marketeers are turning to companies like WebEx to ensure they have fully enabled their capabilities for webcasting and webinars - to ensure business sustainability and promotion. Many companies forced into business transformation also resort to buying online conference and collaboration tooling suites.

Fertilizers and agro-chemical
As Chine is one of the major producers and exporters of chemical components, disruptions could result in a breakdown in the chain supply. As a reaction, many local companies are happy to start producing the missing components and support the local sector, providing tremendous opportunities for the companies in the sector to operate and benefit, while taking back the markets from China’s producers.

Mobile and telecommunications
The industry is critical to social success and functioning. This seems to be true more than ever. Nowadays, everybody has an Internet connection over their mobile devices and use them to stay in touch with teammates, co-workers, clients, relatives, and friends.

The sector experience demand like never before. As people stay home – looking to work, educate, or just entertain themselves the pressure over the networks is higher than ever. The demand for a higher speed net and network capabilities is growing rapidly. Many buy premium packages to ensure stable connection and the revenue increased accordingly for all the players.

Gaming, streaming, video, audio, and photo content
The obvious winner here - Netflix is already immensely popular. With more people stuck at home in the evenings – it is no surprise the demand skyrocketed, and subscriptions raised rapidly. All streaming platforms (like Twitch) benefit. Some channels like Disney+ started launching at a different time to capture the attention of European viewers. YouTube is also enjoying great success. There is so much information on COVID-19 over the services and there is a lot of entertainment for everybody, who like watching videos.

The gaming sector flourished like never before. Companies and products like Microsoft Xbox, Google Stadia, and PlayStation are going to secure a lot of additional subscriptions as well as in-game purchases.

Clever financial strategies for clever companies
Many companies with extra cash saw a decline in the financial markets as the opportunity of the century. As an example, Softbank sold some unnamed assets to fund a second share-buyback initiative. Combined with their previous initiative Softbank was able to retire 45% of Softbank shares on the open market.

The core idea is that fewer shares on the open market, the less exposed a company is to external influences. Therefore, share-buyback initiatives are the way to protect the corporate strategy and business model from short-term investors.

What is RRSP (Canada)?

We received a couple of questions related to the RRSP in Canada. And this article we will cover the most recent information, everything you need to know, and how to benefit from RRSP.

RRSP is an abbreviation of the Registered Retirement Savings Plan. In short, it is a great way to save money for your retirement and avoid considerable amounts of taxes in Canada. RRSP has been a retirement account since 1957 and it was introduced by the Canadian government to help Canadians save money for their life after retirement.

RRSPs are accounts with a lot of benefits mainly due to tax reductions and advantages, solemnly created to stimulate people investing in RRSPs, in order to have sufficient funds after their retirement. The simple idea is to save on taxes by committing to a long-term saving plan. The Canada Revenue Agency allows people to not pay taxes immediately and pay them over the next many years (in order to pay less).

Any money contributed to the RRSP will be free of taxes for the same year when the deposit is made. The amount will only be taxed years later when the money is withdrawn. Let’s say you earn $100,000 a year and decide to put the $20,000 to your Registered Retirement Savings Plan. When taxes are due – you will only be accountable to pay taxes for income of up to $80,000 ($100,000 - $20,000), over the same year. Of course, 30 years later when you are retired and decide to withdraw those $20,000 – they will be taxed, but as your income will probably be less, the tax rate will also be less.

An important rule to remember is there is a maximum amount of money allowed to be contributed per year - either 18% of your past year’s income or a maximum amount, whichever’s smaller. For 2019 the RRSP maximum allowed contribution amount was $26,500, while for 2020 the limit is increased to $27,230. The limit does not take into account unused contributions from previous years and goes up over time.

As a conclusion - the Registered Retirement Savings Plan is a great financial instrument to help you accumulate money with delayed taxing, something you should definitely benefit from.

Investing, money and stock markets during a national emergency (e.g. coronavirus crisis COVID-19)

It is March 2020, the coronavirus (COVID-19) pandemic is the “scariest bug” on all the media, and most of us are already “imprisoned at home” due to the national emergency quarantine state, declared in many countries across the globe. And of course, it’s not only the healthcare. The major collapse on all the markets has been unprecedented for years. In the mid of March, as measured by most of the indices and markets (e.g. S&P 500) the financial and stock exchange markets officially entered a “bear market” state. In other words, the stock markets have now fallen 20% or more since their recent all-time highs.

Most of the investors have panicked, due to the financial uncertainty, so we have gathered leading economists' opinions to answer the question “What to do with your investments during national emergency crises?”, like the one followed the recent coronavirus (COVID-19) global outbreak.

Joachim Klement (Investment strategist, a trustee of the CFA Institute’s Research Foundation and formerly head of strategy research at UBS Wealth Management), gives the simplest possible answer for most of the investors:
“Just, don’t look at your portfolio. The idea is - nothing that happens today, tomorrow or over the rest of 2020 will matter after 10 years. That “is the most important rule in bear markets. The best way to invest for most investors is to become a “buy and hold investor”. In other words, the best strategy is to buy a well-diversified portfolio that meets the needs of the investor and then stick to it for a very long time, through the ups and downs of the market. At the same time, the investors should avoid getting distracted by short-term market moves.”

The only sensible alternative, Joachim Klement mentions, is to use a highly sophisticated mathematical system. Such a system would support investors in getting out of the market and getting back in. One such respected and popular one, is the trading rule popularized by Cambria Investments’ Mebane Faber. The general advice there is selling stocks as soon as they fall below their 200-day moving average, and not buying them again until they rise back above that level.

“And with the coronavirus emergency state, following that rule,” according to Klement, “would not be possible. As the indices fell decisively below the 200-day average many days ago. Selling now leads in a steep loss in equities and other assets, as nobody can say if markets will go up or down from here (short-term), so investors will realize past losses, and not be in the market for a while. And this will inevitably mean missing the bottom of the market and will get back into the market at a stage when a lot of the recovery has already passed.”

So, he concludes, there is only one sensible option – do not look and don’t worry too much.
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The same opinion comes from Jim Paulsen (chief investment strategist at the Leuthold Group):
“I think what we need somebody to calm us down, like our mom and dad tell us it’s going to be OK.” He implies that we should not panic and rush into reckless actions, and just have faith the markets will recover after the coronavirus crisis.
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Gita Gopinath, IMF chief economists, opinion:
“It was hard to predict what might happen. The pandemic did not look like a normal recession. Data from China has shown a much steeper drop in services than a normal downturn would predict. There’s not an easy answer” Ms Gopinath continued, adding: “There should be a transitory shock if there is an aggressive policy response that can stop it, morphing into a major financial crisis.”

Gita Gopinath also concluded - there is no reason why the economic effects of a health crisis should linger, in the way that long periods of slow growth have tended to follow financial crises, as households and companies work off their debts.
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Kenneth Rogoff (Harvard University professor, (predecessor at the IMF)) said:
“A global recession seems baked in a cake at this point with odds over 90%”
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Maurice Obstfeld (professor at University of California, Berkeley) opinion:
“Recent events were a wicked cocktail for the global growth. I do not see how, given the events in China, Europe, and the US, you are not going to see a severe slowdown across the globe.”
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Raghuram Rajan (professor at Chicago Booth School of Business and a former Indian central bank governor), opinion:
“The depth of any economic hit would depend on the authorities’ success in containing the pandemic, which he hoped would be decisive and rapid. Anything prolonged creates more stress for the system.”

“Long outbreak could also lead to a second round of consequences, where workers were dismissed and there was another fall in demand, eroding long-term confidence,” he warned. “These kinds of effects — companies closing down — depend on how prolonged the first round is, and what steps we all take to alleviate that first round. It is up in the air”
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Olivier Blanchard (senior, at the Peterson Institute) opinion:
“There was no question in my mind that [global economic] growth will be negative for the first six months of 2020. The second half would depend on when peak infection was reached, he said, adding that his “own guess” was that this period would probably be negative as well.”
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Other representatives of the IMF said that the impact of the virus will be “significant” and that growth in 2020 will be lower than in 2019, which was 2.9%.
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Erik Nielsen (chief economist of Italy’s UniCredit) noted
“Four consecutive quarters of negative global growth followed the 2008 financial crisis,” but mentioned he expected “the impact of coronavirus to last only a couple of quarters.” But he also predicted that the quarterly fall could be as deep as the 3.2% contraction that the global economy experienced in the first quarter of 2009.
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Gilles Moec (chief economist at French insurer Axa) mentioned
“Trying to plot the disruption from the virus was almost impossible. Our forecasting models are not set up to deal with this scenario.”
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Other economists were also clear that the economic effects of coronavirus will be serious. Vítor Constancio (former vice-president of the European Central Bank), said:
“The recession is coming from a demand deficiency and the disturbance on the supply chains. The most affected sectors will be leisure amenities, tourism, travel, transportation, energy, financials.”. Vitor, also added: “It is possible that banks’ risk aversion and lack of market liquidity for bond issuance may affect credit and provoke liquidity squeezes.”
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We also included the answers of three major questions, coming from financial online groups and boards:

1. How much longer are the stock markets going to decline? How great is the decline going to be?

No one knows, and that’s part of the fear that is feeding the markets to go even lower, sinking into an official “bear market.” The key is how long will this health crisis last? How many people will be impacted? And how quickly can the economy bounce back? Right now, no one has enough data to answer those questions, so the market is pricing in the worst-case scenario. What pretty much every economist and Wall Street type We’ve spoken to has said is:
“The US and the affected countries should do a two-week shutdown, similar to Italy. It will be painful. And it will require government help for people not working and businesses really hurt. But the hope is that would stop the flow of COVID-19 and boost confidence in the government’s response to this crisis.”

2. How worried should we be?

The United States is in a bear market, and it’s almost certain Q2 will be negative growth. The question is whether the United States will go into a recession (two consecutive quarters of negative growth). The reason there is such high concern on Wall Street today is investors don’t think the government response is sufficient — from Congress or the White House. A list of worries includes the coronavirus spread, oil price war, and the inadequate government response. So, the key in the coming days is whether Congress can set aside partisanship and pass a fiscal stimulus bill and whether the White House and Congress can backstop the health system sufficiently to start halting the spread of the virus.

3. What market segments will be most likely to weather the uncertainty we are seeing now? The prediction is for people to keep using their mobile phones and online services, whereas cruise ships will take a while to come back, right?

That’s correct. This is the Clorox and Netflix economy right now. The other somewhat surprising winner in all of this is real estate. Mortgage and refinance applications are through the roof. The 30-year fixed-rate hit an all-time low of 3.29 percent, so housing and home-related stocks and parts of the economy are likely to do well. I was just talking to a roofer. His business is down this week, but he’s got a lot of people calling and telling him they want him at their place as soon as this health crisis subsides.
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As a final statement – the investors need nerves of steel during the coronavirus-provoked-crisis. The short-term effects of the COVID-19 crisis on the economy can’t yet be measured but are likely to be severe. Nevertheless, worrying too much could lead to a weakening of the immune system, so we advise you to stay on the positive side, be safe and stay at home until the coronavirus provoked crisis is under control and the virus is no longer a threat.

Can you cash a ripped check

If you possess a ripped or damaged check, here is what you could do in order to be able to cash that check and receive the money.

If you received the check as a gift or some sort of payment for your services there are two possibilities: you could either deposit it or cash in the corresponding bank. If by accident it has been ripped – there is still a possibility to cash it out.

I. General rules applying to checks, either valid or ripped

1. The cashier will use a machine for the process of verification. If the check is completely ripped and torn – it might not be suitable to be processed by the machine. The check needs to be printed with special magnetic ink to be processed by the magnetic ink recognition machine.

2. Ensure the check is valid. A valid check will have any of the following characteristics:
- Issuer’s name
- Account number
- The amount of the check. It needs to be in numbers and words
- The date the check was issued
- The paper of the check is different than normal plain sheet paper
- The signature of the check’s issuer

3. Find out if the person who issued the check is financially ok by
- Acquiring the full name
- The complete and up-to-date home address
- The most recent phone number
- Driver’s license number
- Any other passport or card number

Those will help you verify if the issuer has enough funds to cover the amount issued with the check. The bank could obtain information.

4. Make sure your details are correctly written on the check
- If your name does not match with the one over the documents you provide to verify your identity cashing out will be refused.
- If the check is instead issued to a business name, the bank might deposit the funds to the business account, and does not let you cash out in one go

5. The check date is important
- Missing or inaccurate issue date, either by being ripped or thorn will probably turn the check invalid
- Beware not to cash out late. If you try to get your money 6 months after the withdrawn date – the banker has the right to refuse serving the check

6. The check amount written in words should match the numerical amount
- The amount written should match on both places, otherwise cashing out will be refused
7. Check signature
- It must be valid. Ask the issuer to show some other signed documents to ensure the signature is correct.

8. Sign under endorse here section in the bank
- The cash withdrawer should sign under the “endorse here” section. Usually at the back of the check.
- If more than one person – all of them should put their signatures under the section.

II. Cashing a ripped or thorn check

1. The process might be different for every different bank.

2. Bring your check or the pieces to the banker. Ask if it could be processed, even though it was accidentally ripped.

3. It is important all the information on the ripped check to be visible and still valid.

4. If not possible to be cashed out the ripped check could be returned to the issuer, so he issues a replacement check.

5. If the tear is insignificant and the important information of the ripped check is intact (e.g. number, signature, date, name, etc..) there should not be a problem cashing it. If the damage to the ripped check is significant, call the issuer and ask for a replacement check as quickly as possible. Most companies have strict policies how to handle ripped check. Some may ask you to post it back to them so they can destroy the ripped check internally.

6. If the bank is going to charge you for the ripped check, you might look at some alternative banks before proceeding.

In conclusion – it is frustrating and difficult to deal with a ripped check situation. Timing is essential. Try with the ripped check immediately in a bank, and if not successful don’t delay asking for replacement of the torn check at the issuer.

How to save money

As we discussed in Money Master the Game: 7 Simple Steps to Financial Freedom review – the first step to financial freedom is to accumulate some wealth by saving money. According to different surveys though, the majority of the population has difficulties to save money regularly and efficiently. 30% of the US population admits they never had any savings, and only 5% save regularly.

Basically, there are two major forces when it comes to saving money – “develop saver’s mentality” and “get rid of spending opportunities” – or simply said: “focus on saving” and “avoid spending”. We will cover both of them. Surprisingly for most of you, the second one is easier to adopt so let’s start with it.


I. Avoid spending money tips and tricks

1. Get rid of your credit card. Yeah, you have read it right. Possessing a credit card is all about enabling your spending power. Spend anything, anywhere with the minimum hassle. It doesn’t sound right – especially if you would like to cut on wasting money.

2. Leave only the minimum amount you need for the month into your debit card. Nowadays debit cards could be used as efficiently as credit cards, as long as you have the credit in. So, the trick is to calculate your average monthly need to add 50-100 USD on top and immediately transfer everything else into your savings account. Let’s say you need about 800 USD on average for your basic needs, add another 100 for some emergencies and you end up with a monthly allowance of 900USD; All the rest is saved and not touched.

3. Using the strategy at point 2 usually creates an even better saving mentality. Out of fear that you might run out of funds, you would become extra careful about every dollar spent.

4. Remove your CC and DC credentials from any web sites and online wallets. This might sound inconvenient if you have some favorite stores, but that’s exactly the point. The easier it is to spend – the more you will do it based on emotional urges, instead of well-thought needs.

5. Create strict rules in your head. If you need to spend up to 10 USD; take at least 10 minutes to consider if you actually need the purchase. If the amount is 500 USD or more the rule should be – 20 days to consider and weigh all the pros and cons. If after 20 days, you still believe the benefits heavily prevail – go for it. In most cases after the hype about an item or service is gone – you will feel more likely you won’t benefit from owning it. It leads us to the next point…

6. Avoid owning where you could rent inexpensively instead. Many folks get into mortgages slavery or heavy debt owning stuff. The simple rule is – if you buy something expensive – it should be an investment. If it is not an investment – rent it, instead. An expensive home mortgage - you have to repay for the next 30-40 years, would cripple your ability to save and invest for the period while renting an averagely cheap room would let you have some additional funds to invest and operate with.

7. To elaborate more on point 6 – every “big purchase”, which is not an investment should be avoided. A good example is a new/luxury car – you acquired. Only after one year, its price is probably 30-50% down. Not to mention the hassle on maintenance, supporting it, selling it later, etc… Instead if you rent the car for one year you would probably pay about 5% of its price (top), and in most cases, you are covered in any negative scenario.

8. Get rid of everything, which requires expensive maintenance. It applies, especially to expensive hobbies. Yeah, I know it is cool to have a yacht or go for scuba diving regularly. Also, expensive motorcycles, bikes, etc… are on the target. But all of those will require a huge amount of spending to maintain, support and keep in good condition. It’s even worse if you just use them once a year but keep maintaining them (e.g. losing money) all the time.


II. Now let’s look at the best tips and tricks to develop saver’s mentality

1. Inspire yourself by a vision. Simply saving money for the sake of it, wouldn’t work. You need some inspiration and something to keep you doing it long-term. Start by visualizing your dream. It could be to buy your own house, or to own a portion of the best companies worldwide… or anything, as long as it is big, inspiring and challenging. It could even be something for the sake of improving the lives of all people - like “once I have 100 million dollars, I will invest in cure-for-cancer drugs and treatment”. Print your vision – as an image and “slogan”. Now, you know what your dream is all about. If your vision changes (shouldn’t happen too often) – change the visuals too.

2. Break-down your vision into SMART goals. Each goal should be achievable and be done in a timely manner. E.g. – this week I am going to work extra and earn 100 bucks more, or this week I will develop a new skill to be able to earn 100 bucks more per week with it.

3. Surround yourself with savers and get rid of money-wasters. You know the saying “Tell me who your friends are, and I will tell you who you are”. If your friends are just a bunch of squanderers it will be quite difficult for you to withstand the constant urges to go with the flow and waste money on all the activities, they persuade you. Instead, surround yourself with savers. Sounds boring? That’s not always the case – amazing activities require little to no money-wasting and you would be surprised to see what your new friends suggest doing.

4. Change your lifestyle and money-wasting habits. A great example is being a smoker. On average a smoker spends about 3000 – 5000 USD each year for the indulgence of the bad habit. Smoking is not only devastating to your health; it’s also devastating to your savings account too. Another example is going often to your favorite bar. If it is an expensive venue just change it or stop visiting it. The average amount spent on a night out is about 80 USD. If you only do it once a week – it is still more than 4000 USD each year.

5. Start reading and studying about money, finances, and investments. If money is not interesting to you – then it’s not a surprise you don’t have it. Educate yourself more and more, watch or read at least a couple of related articles, or videos each week. The time doing so is not wasted – it is an investment. The faster you learn – the faster you earn. The good news is most of the information is freely distributed over the net. If you need – go to a course or hire a financial coach and adviser. Again, this is not wasted but invested money.

6. Finally, start investing in different assets in order to master the game of money. Stocks, bonds, properties, funds, commodities, saving account. Diversify your investments, but first, make sure you understand what you are investing in and what your plan is if it goes wrong. Never borrow money if you do not have a reliable plan on how to reinvest and get a better rate on them, before returning.

And finally – make sure you enjoy life. Every day we are exposed to luxury habits and lifestyle by the media. That’s what they are paid to advertise and promote. Don’t go with the flow. There are plenty of “free” and still great activities, and lifestyle you could enjoy even more. How much does it cost to enjoy nature in a park or visit the local gym to have some training sessions with your kids, family or friends?

Money Master the Game: 7 Simple Steps to Financial Freedom (key points)

Tony Robbins created an absolute masterpiece with his book Money Master the Game: 7 Simple Steps to Financial Freedom

Here is a short review, outlining the most important steps

1. Decide to master the financial area of your life
- commit to self-discipline and mastery over your financial state
- decide to become an investor, and not just a consumer
- commit a percentage of your income towards your own freedom
- fund yourself and put the money aside and don't touch it
- learn the power of compounding can grow your funds
- understand the financial state is a game and the game is rigged
- if you don’t know the rules of the game – the house will always win

2. Learn the nine myths related to money
- important myth is that fees are not important. In fact, fees can result in millions of dollars difference
- be aware of the myth that that mutual funds beat the market
- another myth to consider is that your broker is your friend. The broker is not legally bound to act in your best interest, so if you are seeking financial advice it might be better to go to fiduciary. This guy is legally bound to act in your best interest.
- It is a myth that you got to take a big risk for a big reward

3.  Define a price to your dreams
- be specific as to how much money you want
- understand what kind of income you would play for
- Tony defines 5 levels of the financial state
1. financial security – when you are just surviving with your income
2. financial vitality – where you have some money to put aside
3. financial independence – you don’t need to work for another person anymore
4. financial freedom – accomplishing all your bucket lists and living the life of your dreams
5. absolute freedom – you can do whatever you want and have enough money to contribute to the success of the others

- in order to achieve the level of money, you need to become a more valuable person
- there are 5 strategies to accelerate the process of gathering more money and funding your dreams
1. earn extra money and invest the excess
2. reduce the number of fees and taxes payed
3. save more money and invest the savings
4. maximize the return on investment
5. change your lifestyle and invest the difference

4. Learn how to invest
- assets allocation is the key to your successful investing, and it goes way beyond owning just a variety of stocks
- it is more about owning a variety of unrelated asset classes e.g. stocks, real estate, businesses

5. Create a lifetime supply of income
- start accumulating a massive amount of wealth by investing in low-cost, tax-advantaged well-allocated investments
- follow by converting your wealth into an annuity that pays you a consistent income every single month for life

6. Invest like the richest people
- follow the four important principles
1. do not lose money
2. seek asymmetric risk class reward which is high-reward - low-risk
3. anticipate financial disasters and diversify your investment
4. never stop learning, stay hungry and motivated to consistently improve

- Tony acknowledges the most successful people he's ever met had a relentless pursuit for knowledge

7. Live the rich life, and enjoy the abundance in your life full of money and achieved dreams
- pursue satisfying the six basic human needs
1. the need for certainty
2. the need for uncertainty
3. the need for love and connection
4. the need for contribution
5. the need for significance
6. the need for growth

- the most important and fulfilling need is to be sure to contribute to the happiness of the others. Being the richest man in the graveyard is a wasted life. The secret to living is giving.

Please support the blog and Tony Robbins by purchasing the book Money Master the Game: 7 Simple Steps to Financial Freedom