Creative Business Idea: Selling Baked Goods Online via Etsy

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My family enjoys watching Kid’s Baking Championship on Food Network, and I’m always impressed how many of these 8-13 year-old contestants have a side baking business! Last weekend, the WSJ article How Etsy Became America’s Unlikeliest Breadbasket profiled home bakers selling their baked goods online through Etsy. That could be a perfect business education for a teenager, including concepts like business plans, accounting, customer service, online marketing, and basic coding.

Cottage food laws. Many states allow exemptions that don’t require you to use a commercial kitchen to sell “non-potentially hazardous” items like bread and other baked goods. I knew about “cottage food laws” in terms of church bake sales, but I wasn’t aware that some states have much more relaxed laws than others. For example, some states require you to sell in-person and you must hand-deliver it yourself to a customer within your home state. However, the following states allow you to sell bread and other baked goods via online marketplace and deliver them via mail:

  • Colorado
  • Idaho
  • Iowa
  • Maine
  • Maryland
  • Nebraska
  • Ohio
  • Oregon
  • Pennsylvania
  • Tennessee
  • Utah
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

Source: Forrager.com, May 2020. Note that some states will require an annual home inspection and/or permits.

The WSJ article profiled the Etsy shop ChickensintheRoad by Suzanne McMinn. She lives in West Virginia, which has some of the most open cottage food laws. McMinn shares some of her Etsy history in this blog post. Both an experienced baker and soapmaker, she realized that the competition was much more intense in the soap category. She now specializes in fresh baked goods as well as various dry food and seasoning mixes.

What is a hand-crafter worth? Can you buy biscuits–or cookies or fudge or soap or bread of whatever–for less at the grocery store? YES. But you don’t get the hand-crafter. You don’t get the individual batch per order. You don’t get homemade. You don’t get that attention to detail. You don’t get that packaging that makes every order of a dozen biscuits (or whatever) look like a present under the Christmas tree. That is what you get from a hand-crafter on Etsy.

Making the most out of your valuable knowledge. Thanks to a recent profile on Good Morning America, it looks like McMinn isn’t even taking any new orders until late June. She’s booked solid! Her skills are definitely valuable, but I can’t help but notice that if she is not baking, she’s not making money. She’s still selling her time for money.

What I would love to see her do is create a series of online videos for making some of her specialties, and then charge for access. Yes, there are many videos for free on YouTube, but what about those superfan customers that want to recreate her exact biscuits? The best part is that it would only take a one-time commitment of say, 10 hours. After that, the upside is unlimited.

Actually, you know what would make the most money? A full digital course that would teach others how to start their own online home baking business. For example, her blog post also revealed the triple-wrapping method that keeps her biscuits at maximum freshness even when delivered in a USPS box. I’m sure she has make many mistakes along the way that would be valuable to know ahead of time. You could charge anywhere from $100 or far upwards depending on how much detailed, step-by-step content was included. Again, the upfront cost is fixed and the upside is unlimited. She could make $1,000, but she could also make $100,000 if she sold 1,000 copies over time. She could always keep on baking, but now she’d also be making money 24 hours a day, even when she’s sleeping.

Indeed, she’s pretty funny and I appreciate her sense of humor:

Remember that year, when I first moved to Sassafras Farm, and all the pipes froze, and I had no money, and it was like, Kids, be happy we have running water, that is your Christmas present? This year is almost like that, but with running water, and it’s like, Kids, be happy there are a couple leftover cookies after I make this batch I’m shipping, cuz other than that, you can just starve! OR PAY ME BECAUSE I CHARGE FOR FOOD.

There’s nothing like someone telling you that what you’re doing isn’t worth what you’re charging right when you’re dying of exhaustion from doing it.

Anyhow, I thought this was a cool example of how someone’s special knowledge can be turned into a living by taking advantage of new opportunities, in this case new cottage food laws and the Etsy online marketplace. I’m also always trying to show my kids ways to decouple time and money, and not forever work for an hourly wage.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

68 Bits of Unsolicited Advice by Kevin Kelly

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The best thing I read this week was a “Things I’ve Learned…” list called 68 Bits of Unsolicited Advice by Kevin Kelly – a very interesting fellow (see his bio, about me pages) who must have secretly figured out how to freeze time given all the things he does! I’m most familiar with him as the editor of Cool Tools.

Certain items on the list will sound familiar and only a few are finance-related, but chances are you’ll find something new that clicks. Here’s a small selection:

– When you are young spend at least 6 months to one year living as poor as you can, owning as little as you possibly can, eating beans and rice in a tiny room or tent, to experience what your “worst” lifestyle might be. That way any time you have to risk something in the future you won’t be afraid of the worst case scenario.

– Don’t be the best. Be the only.

– Perhaps the most counter-intuitive truth of the universe is that the more you give to others, the more you’ll get. Understanding this is the beginning of wisdom.

– Separate the processes of creation from improving. You can’t write and edit, or sculpt and polish, or make and analyze at the same time. If you do, the editor stops the creator. While you invent, don’t select. While you sketch, don’t inspect. While you write the first draft, don’t reflect. At the start, the creator mind must be unleashed from judgement.

– Following your bliss is a recipe for paralysis if you don’t know what you are passionate about. A better motto for most youth is “master something, anything”. Through mastery of one thing, you can drift towards extensions of that mastery that bring you more joy, and eventually discover where your bliss is.

Definitely something to bookmark and read again.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

My Unconventional Best Work-From-Home Gear Guide (What’s Yours?)

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I’m quite familiar with working from home in my tiny 78 sq. ft. “office”, but after looking at some online WFH gear guides recently, it’s all about standing desks, latest laptop models, and USB hubs. Eh? My desk is a basic folding table and my laptop is a 2015 Macbook Pro (with real scissor keyboard and real moving trackpad) that recently underwent DIY battery replacement surgery (way too complicated, Apple!).

My favorite WFH gear is different. Maybe yours is too? These are real things that I bought with my own money and I would buy them again if I had to do it all over again.

Quiet, Please! – 3M PELTOR X5A Over-the-Head Ear Muffs

I wear these every day to help me focus. They have the highest noise reduction rating (31 dB) available on the market. You even have to certify that you are using them for “professional/commercial use” (which I am while working for money, as far as I am concerned). At ~$30, they are also about $10 more expensive than other similar models, but I think the extra $10 is well spent to know you have the quietest experience possible. If you have kids running around the house, you need all the help you can get. They are “over ear”, which means they don’t put pressure on your ears and I can wear them for a relatively long time without discomfort. (I try to take regular breaks anyway.)

Budget Noise-canceling Headphones – Mpow H5 Active Noise Cancelling Headphones

After a certain member of the house (ahem) stole my trusty old pair of wired Bose QC25 headphones, I decided to try out a budget pair of $50 bluetooth noise-cancelling headphones. These over-hear headphones worked out quite well and I really don’t miss the old Bose ones. I’d say they are 80% as good while under 20% the price of new Bose QC35 headphones.

Note: I do own a pair of regular Airpods, which I got as a nice gift. I do like them and use them for phone calls around the house and outside, but I use the Mpow headphones while at my desk listening to music or editing things.

Dependable Printer – Brother Monochrome Laser Printer

This thing is the workhorse of my home office, and yet also the oldest electronic item here at over 10 years old. Which is rather crazy, given that it has moving parts and is used constantly to scan PDFs, make copies, and of course print. These Brother black-and-white laser printers are like the Toyota Corollas of the printer world – cheap yet reliable. The cost per page can be very low thanks to generic toner cartridges (that link is for two of them) if you don’t mind a slight decrease in quality.

Dry Erase Whiteboard – Magnetic Dry Erase Whiteboard

Another inexpensive but important addition for a variety of reasons. Sometimes drawing it out in real space is just better than the digital alternative. This one is lightweight and thus easy to remove from the wall and move it around. You can also put up complex equations or obscure drawings and put it behind you during those Zoom and Webex meetings and impress/confuse/scare your colleagues. I like these BIC markers as they are higher quality and have finer points.

Looking around my desk, other random things that I probably like more than I should are my TI-85 calculator, classroom-grade pencil sharpener, and an ancient Swingline stapler (sadly not the red 747). The only thing that I have been thinking about upgrading is my office chair. Any suggestions?

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Bank of America Paycheck Protection Program (PPP) List of Required Documentation

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As a follow-up to my initial post on the Paycheck Protection Program (PPP), there has been a some speculation as to the specific documentation required to prove your eligibility and payroll numbers. Each lender may have some discretion as to exactly what they require, but here is what Bank of America has listed as required documentation to submit:

Organizations with employees who file Tax Form 940:

  • Tax Form 940 from 2019
  • Bank of America Paycheck Protection Program Loan Amount Template
  • Bank of America Paycheck Protection Program Application Addendum
  • Tax form 941 or Payroll processor records for the period including Feb 15, 2020

Documents for Sole Proprietors or Self Employed, who do not file Tax Form 940:

  • 1040 Schedule C, if filed for 2019 OR
  • Draft 1040 Schedule C for 2019 if not filed
  • Bank of America Paycheck Protection Program Application Addendum

Documents for All Other Small Businesses:

  • Form 1099-MISC for 2019, for services rendered as an independent contractor
  • Bank of America Paycheck Protection Program Application Addendum

As far as I can tell, the BofA Application Addendum contains the same certifications and questions as the paper PPP application.

Hopefully, this will help you get your documents in order ahead of time so that you can get your applications approved more quickly.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Paycheck Protection Program (PPP): Forgivable SBA Loans For 2.5x Monthly Payroll

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If you are a small business impacted by COVID-19, including self-employed and independent contractors, you have hopefully been following the developments of the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Emergency Advance (EIDL) being rolled out by the Small Business Administration (SBA) and U.S. Treasury. Details are still being ironed out, but PPP could cover up to 2.5 months of your payroll costs. Here are some general highlights from the Treasury PPP overview PDF along with some details from the Bank of America PPP application:

Loan Amount = 2.5 times Average Monthly Payroll. “The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.” In the Bank of America PPP application, two possible options given were to use 2019 payroll or 2019 1099-MISC totals, and then multiple the average monthly payroll by 2.5. So if you averaged $6,000 per month, you can ask for a loan for $15,000. Income over $100,000 annually per employee isn’t covered. Here are some details:

For purposes of calculating “Average Monthly Payroll”, most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.

Fully Forgiven. “Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.”

In my Bank of America, the details are given that it is a 2-year loan at fixed 1% interest. As noted, payments are deferred for the first 6 months. If you use the money in an eligible manner (see below), it is fully forgiven and not treated as taxable income.

Must Keep Employees on the Payroll—or Rehire Quickly. “Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.” In other words, this is supposed to encourage companies to keep employees and is separate from unemployment insurance.

All Small Businesses Eligible. “Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries.”

Businesses are limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at the Small Business Administration (SBA) to prevent multiple loans to the same entity. Owners with more than one business may apply for a separate loan for each entity.

Application Dates and Details. “Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap. […] You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.”

While technically you can apply at any SBA 7(a) lender, as of 4/5 many of them don’t even have any formal application process at all! Bank of America started accepting applications early, but first required both an existing BofA business checking relationship AND a BofA loan relationship as of 2/15/20. They later relaxed the rules to require at least an existing BofA business checking relationship as of 2/15/20. Most banks are limiting the applications to existing clients, but I’ve tried to list a few that don’t have such a restriction.

In addition, the US Treasury now has a paper application that you can submit to any eligible lender. I have no idea what will be the best. Small local bank? Mega bank? I would assume that if you have an existing relationship with a bank, they would be able to just deposit the money into your primary business account. But I’ve learned to stop making assumptions in 2020!

The funds are supposed to go out first come, first served, although they may expand the amount available. I’m sure that is not helping the chaos. No documentation was required upfront for BofA, but I would get your payroll documentation ready to submit as soon as they ask for it.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Solo 401k vs. SEP IRA Contribution Limit Example For $50,000 Income

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I use a Solo 401k plan because it lets you contribute the most tax-deferred money for a modest amount of self-employed income. At the end of each year, I can more clearly estimate my total income for 2019 and thus my maximum contribution limits. There are several online calculators out there (try Dinkytown or BCM Advisors), although I would cross-check your answers to make sure they agree. Your Solo 401k contribution has two components:

  • Employee salary deferral contribution. Employees may defer up to 100% of their compensation, up to $19,000 for the 2019 tax year ($25,000 for employees age 50 or older).
  • Employer profit sharing contribution. Employers may contribute up to 25% of compensation (sole proprietorships must make a special calculation), up to a combined total of $56,000 for the 2019 tax year ($62,000 if age 50 or older).

Here are some sample numbers if you are under age 50 with $50,000 in Schedule C income as an unincorporated sole proprietorship. The numbers are a bit tricky because you have to do things like take out half of the self-employment tax paid, etc. Let the calculator figure out the details, but you can still see that the Solo 401k (aka Individual 401k, aka Self-Employed 401k) offers a much higher contribution limit than a SEP IRA or SIMPLE IRA.

Here are some sample numbers if you are under age 50 had a $50,000 W-2 income from your S-Corporation. These numbers are a bit cleaner, as when you run payroll the employer side of payroll taxes are taken out of the employee paycheck.

Being able to defer up to 63% of your income ($31,500 out of $50,000) into tax-advantaged accounts is great for aggressive savers. In addition, both Traditional Pre-tax and Roth versions are allowed for the employee portion of contributions as long as your administrator supports it. Note that if you are already making employee contributions to a 401k-type plan from another job, you are still responsible for staying under the $19,000/$25,000 total cap across all your jobs. If you are consistently maxing out your 401k salary deferral in another job, then it may make more sense to stick with the SEP-IRA as it comes with less paperwork.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Serious Eater: The Financial Details Behind Food Blog SeriousEats.com

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If comparing this blog to the restaurant world, I like to think of it as the stubborn Mom & Pop hole-in-the-wall with one location. It’s been around for a long time, but there are no second locations, no franchises, no frozen food line. It was never sold to a private equity firm or some publicly-traded corporation. It owns the building and the land underneath, so it can just keep on doing its own thing.

When I first saw the book Serious Eater: A Food Lover’s Perilous Quest for Pizza and Redemption, I had no idea who Ed Levine was. I originally thought that Serious Eats was a little food blog run by J. Kenji Lopez-Alt as a side gig outside of his day job, just as I started MyMoneyBlog.com. I don’t live in New York and had read a few posts like their viral posts like the In-N-Out Menu Survival Guide and now use their reversed-sear prime rib recipe every year.

The truth is actually very different, and I quickly became engrossed in the story behind Serious Eats.

  • Instead of a young blogger working out of their tiny studio and a $10/month web-hosting package, Ed Levine was a former advertising executive in his 50s who started out immediately with a salary for himself, a salaried team, and an office space. This was possible due to a $500,000 loan from his older brother.
  • Instead of running lean and looking for profitability quickly, Serious Eats never made a profit from 2006 to 2015. It grew in viewership and gross revenue, but my understanding is that even when it was eventually sold, the advertising revenue never exceeded the running costs (salaries, office space, other overhead).

Ed Levine was obsessed with food and the stores behind it. You can get a taste of his energetic personality in this 1997 NYT Times article “On an Odyssey With the Homer Of Rugelach” by Ruth Reichl.

Her story in the Times called me the “missionary of the delicious.” Ruth described what I did better than I ever could: “Mr. Levine is on a crusade to see that the people who make food get the recognition they deserve. He sees them as creative artists waging a losing battle against mechanization, and he cheers them on.”

Serious Eats was definitely a passion project. However, Mr. Levine never excelled at the financial side. In fact, this was his first true business venture.

But that was before I understood a fundamental truth about individual investors: just because someone has made enough money to invest in a speculative venture like Serious Eats doesn’t mean they won’t be upset if they lose it. That goes double if they are family. People who have made money usually didn’t make it with a casual attitude about money in general.

However, he did raise a million dollars of startup money from family and friends, so you have to give him that. He had the charisma and infectious optimism that convinced people to bet on him:

And just like the folks at a victory party, we really felt we were on a mission: to change and democratize the food culture through food media without dumbing it down or pandering. Maybe art and commerce could coexist peacefully. Maybe they could even complement each other. Maybe my belief that creating good content could and would lead to financial success wasn’t as ridiculous as the money guys seemed to think.

Serious Eats grew in popularity. If you are at all interested in food, you’ve probably heard of it.

Back at Serious Eats World HQ some of our posts were going viral. Kenji chronicled in words and pictures the “In-N-Out Burger Survival Guide,” in which he ate every single item on its twenty-eight-item secret menu. That one post attracted 3.5 million unique visitors in the first year it was up.

However, they never really stopped burning through money. They missed the boom time of website sales before the Great Financial Crisis of 2008. They later tried to sell to a variety of different buyers in 2010 to 2011, but that was a slow period in media acquisitions.

Ed Levine went back and begged and borrowed money from every source imaginable. He borrowed even more money from his older brother, eventually making the total owed somewhere over $600,000 (I lost count). He accumulated $650,000 in personal debt that was straining his marriage, as it was backed by the New York apartment jointly owned with his wife. His wife Vicki later took on a margin loan backed by her personal stock holdings. Multiple close friends lent him $100,000 each. In other words, he was risking all of his closest personal relationships.

In fact, the most harrowing details I’ve had to relive in writing this book have nothing to do with financial security, only the terrifying knowledge of how close I came to doing real damage to the relationship that made it all possible.

You could feel the desperation at this point. It’s all about timing, as if you’re selling an unprofitable growth business, you need buyers with loose money and an appetite for risk. (Look up the current status of WeWork.) Somehow, he finally sold Serious Eats to Fexy Media in 2015. The details are blurry, but it seems that the investors were mostly made whole and Levine was able to pay back all his debts with a small bit of profit. He’s now an employee, not the owner, but perhaps that is for the best.

But thankfully, it’s not quite so personal. Most everyone who works at Serious Eats these days thinks of it as a business first and then, perhaps, a calling. Some people who work at the company may just think of their job as a really good gig. I’m okay with that. Maybe that’s why Serious Eats is doing so much better as a business. Serious Eats is growing up. And that’s okay. So have I.

In the end, this amazing story was powered solely by the energy of Ed Levine (and the equally-amazing support of his wife Vicki). I feel like it really shouldn’t have worked out at all. The climax felt a bit like the ending of the movie The Gambler. You don’t know much about running a website (or any startup), you burn through over a million dollars of money, and your passion is eating and sharing about food. However, he made it out intact and helped establish other talented food writers like J. Kenji Lopez-Alt, Max Falkowitz, and Stella Parks.

This reminded of these tweets about taking asymmetrical risks that have been stuck in my head:

Maybe you can try to make the risk asymmetric, but in the end there is no easy formula. I could not have taken the risks that Ed Levine did with Serious Eats. It would have been a foolish risk for me, as I could never tolerate the financial risk nor the relationship risks. However, when I read about others it seems they are compelled to take such big risks, and somehow it their boldness it can all work out. Of course, I suppose there wouldn’t have been a book about Serious Eats to read if it didn’t.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Pioneer Woman & The Magic of Untreated Boredom

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I hope that everyone had a boring Labor Day weekend! I say that because boredom is a magical thing, especially when left untreated with a computer/TV/smartphone screen. I had a lovely quiet afternoon where I sorted out a big box of old electronics, and my mental wanderings inspired me to make some important changes in my daily schedule.

It turns out that Ree Drummond understands. Now, I’m more of a Barefoot Contessa fan myself, but the Pioneer Woman brand has grown into an empire. TV show, magazine, cookbooks, and I’m sure some sort of branded kitchenware. You’re not a real food celebrity until you have kitchen towels and cutlery with your name on it. Let’s see… Check and check!

I just stumbled upon this older New Yorker magazine profile, which revealed the origin story. Before that, she was a stay-at-home-mom that got pregnant on her honeymoon and continued to have four children. Then one day…

One morning in May, 2006, eleven years after Drummond arrived in the country, Ladd announced that he was taking all four kids, including one-year-old Todd, who would sit in the saddle with him, to work cattle. “He said, ‘You stay home and take time for yourself,’ ” Drummond recalls. “It was literally the first time I had been alone in the house for a several-hour period.” Usually, when she had a free moment, Drummond hopped on a homeschooling message board, which she frequented for adult interaction. But that day she decided “to start one of those blog things.” She had read only one blog, Doc’s Sunrise Rants, written by a homeschooling single lesbian mother of triplets in Oregon. But she thought it seemed like a fun, efficient method of keeping in touch with her mother, who had divorced her father and moved to Tennessee.

This struck a chord with me because it was similar to how this blog got started. My wife and I had just gotten married and moved to Portland, Oregon for her new job. I managed to get a remote working position, but that meant that there was no longer a nearby office for me to visit each day. I no longer had a desk. There I was, in a brand new city with no friends, no co-workers, and a wife that worked 60-80 hours a week. I became bored out of my mind! I also decided to start “one of those blog things”, which led to other related businesses, and so on.

Now, I don’t have a global media/cutlery empire, but I still think that boredom can be a powerful thing. According to this Wired article, academic research agrees. When you are in a constant state of stress, when you are constantly putting out fires (or changing diapers), all you are doing is reacting. Occasional, extended boredom gives space for your creativity to grow. When was the last time you really let yourself get bored?

Comic source: XKCD

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Can You Teach Your Kid To Be Rich?

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There is an ongoing debate about personal finance education in school. It sounds like a good idea, but multiple studies have found that financial literacy classes don’t really improve future behavior. It may be too much to expect an easy fix to such a complex problem.

As a parent, how do you best set up your kids for financial success? In the end, how can you really tell if you made a difference anyway? You can only try your best. My personal philosophy boils down to this famous proverb:

Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.

Some parents plan on giving their kids a big pile of fish. An inheritance. Real estate. A business to take over and run. That’s out of love, and I am not judging that choice. I might leave them something, but I’m going to tell them to expect nothing. Instead, I hope they will see that I put in a lot of effort to help them develop the tools to go out and “fish”, and that as adults it’s up to them to make money for themselves.

To be clear, this is not the only thing that I am teaching them. Good relationships with family and friends are more important than an early retirement. However, I have observed several specific traits useful in navigating the financial world. As a result, I want to help them:

  • Develop good character traits like self-discipline, gratitude, and perseverance. If they can control their emotions, have empathy for others, and endure hard work, it helps everything else.
  • Obtain quality formal education. If they are going to solve the world’s problems, they need a strong, wide base of knowledge. A solid education and good teachers can really inspire and change a child’s life.
  • Experience entry-level hourly work in the retail, construction, and/or food service industries. They should understand how hard it is to make a living without specialized skills.
  • Create their own business ventures. I plan on helping them start any kind of micro-business that they want. It might be even better as a non-profit, donating the proceeds to the community. Through this, they will learn basic accounting, marketing, and interpersonal skills.
  • Improve interpersonal skills. Across all of their activities, from school projects to extracurriculars (sports/arts/music) to starting their own business, learning how to work with others is key.
  • Feel encouraged to take calculated risks. There are many ways to take asymmetrical risks where the upside is huge and the downside is small. This especially true when you are young and without dependents. I want them to take such risks.

None of the factors above require a ton of money, although private schools can be quite expensive. The best option may be maximizing the public school options available. My parents rented a small apartment in a good school district, as they couldn’t afford buying an expensive house with high property taxes. I only realized this recently when I visited our old duplex and found a house down the street listed for nearly $2,000,000 (median price in this city is $370,000).

I do plan to contribute to a 529 plan and minimize student loan debt. Maybe college tuition will be more sane in 15 years, but I think this is the best use of cash right now – keeping them from having to fight the power of compound interest in reverse. (I also classify paying for education as “teaching them to fish”.) I want to show them that we value education and also strive to avoid debt whenever possible.

Bottom line. How does anyone get rich? Most people who got rich quickly had equity in a business venture. This takes a combination of specialized skill, interpersonal skills, risk-taking, and luck. Most people who got rich over decades got there with a steady career, work ethic, patience, self-discipline when it comes to spending, and investing the difference repeatedly. I’d be happy with my kids taking either path, and tried to think up a list of ways to help promote these traits.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Solo 401k: Best Self-Employed Retirement Plan For Aggressive Savers ($50k/$100k Income Example)

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Each December, I run the numbers to see how much more I can contribute to my Self-Employed 401k plan, aka Solo 401k or Individual 401k. Fidelity, Vanguard, and Dinkytown (used below) have calculators to figure out contribution limits to various types of retirement plans (Solo 401k, SIMPLE IRA, SEP IRA, Profit Sharing Plan).

In general, as long as your income isn’t too high ($275,000+) and you aren’t deferring salary from another workplace retirement plan, the Solo 401k will allow you to defer the largest percentage of your business income. This is because the Solo 401k allows you defer as much as $18,500 (2018) in salary as an employee as well as 20% of your net self-employment income as an employer (both sides of your business) up to $55,000 total (2018). For example, if your income from your side business was $5,000 and you had no other salary deferral elsewhere, you could put 100% of that into a Solo 401k. (If you are age 50 or over, you can also add a $6,000 catch-up contribution to the salary deferral limit.)

Here are sample numbers for a $50,000 net income to your self-employed business. This assumes you are a sole proprietorship or an LLC taxed as a sole proprietorship. The math for a single-owner corporation is slightly different.

At $50,000 net business income, you can defer 56% annually ($27,793). This is exactly $18,500 more than if you went with the SEP-IRA.

Here’s the comparison for a $100,000 net income to your sole proprietorship.

At $100,000 net business income, you can defer 37% annually ($37,087). Again, this is exactly $18,500 more than if you went with the SEP-IRA.

Now, the Solo 401k does require a bit more paperwork. For example, you will need to file the IRS Form 5500-EZ separately every year once your Solo 401k assets exceed $250,000 to avoid steep IRS late penalties. SEP-IRAs have no such annual requirement. Therefore, if you don’t intend to take advantage of the higher contribution limits of a Solo 401k, I would consider sticking with the SEP-IRA. But if your goal is a high savings rate and maximum tax-deferred funds, look into the Solo 401k. I would compare the offerings from Vanguard, Fidelity, and Schwab. (Mine is at Fidelity.)

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

How To Enable Auto Sweep on Paypal Accounts (2018)

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If you use PayPal to accept credit cards for your small business (eBay, Etsy, e-store, freelance, etc), you may not want to keep your money sitting at PayPal (especially if you are earning higher interest in your bank account). There is a feature called Auto Sweep that checks daily and automatically “sweeps” any money that arrives in your PayPal account into your bank account overnight.

The Auto Sweep feature used to be easily found in their settings. Then they moved it into a dim corner of their website that was harder to find. Last week, I couldn’t find it at all. After digging through several outdated articles, it turns out that as of 2018 you can’t access the feature at all unless you call in and ask for it explicitly. Not exactly customer-friendly behavior, but PayPal makes money off your idle balances… (The PayPal Money Market fund that offered higher interest shut down in July 2011.)

Here’s how to enable Auto Sweep on your PayPal account as of 2018. This is another post for the benefit for others searching online. First, make sure you meet these requirements:

  • You must have a Business PayPal account in good standing.
  • You must have a bank account linked to your PayPal account.
  • You must have lifted your withdrawal limit and verified your PayPal Account.

Next, you must call PayPal directly via phone.

  • Once logged into your PayPal account click Contact at the bottom of the page.
  • Choose the Call Us option and call the number listed for your account. Use the unique code to quickly identify yourself to them.
  • When you reach a human, explicitly ask for “Auto Sweep” to be enabled on your account.

After that, they will flip a switch on their end, and you should finally be able to see the option enabled on your online account. Log back into your PayPal account and follow these instructions:

  • Click Profile beside “Log Out” and select Profile and settings.
  • Click My money.
  • Click Set near “Automatic transfers.”
  • Click Edit.
  • Click Yes, select the bank you want your money transferred to, and click Save.

Here’s what you should see after Auto Sweep has successfully been turned on:

There you go. Note that if you ever manually request a cash transfer from a bank account to your PayPal balance, that this would automatically turn off Auto Sweep. I guess the money running around in circles causes a tear in the time-space continuum or something. (You can go back an turn Auto Sweep back on manually.)

If you activate this feature, it may also change your how you use the PayPal Business Debit card, as there will no longer be any cash balance in your account to draw from. For non-PIN signature purchases, these will still work if you first link a bank account as a backup source, and then the debit card charges will pull from your designated backup source. You can also link up certain PayPal credit cards (source), but not just any credit card as backup. For ATM withdrawals, you will not be able to make ATM withdrawals with a zero PayPal balance (source).

I wouldn’t really recommend using the debit card anyway, there are much better small business card options with no annual fee.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Modern Newspaper Delivery Boy = Kid’s YouTube Channel?

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paperboyWhile reading the intriguing autobiography of successful investor and mathematician Edward Thorp, it was mentioned that he was a newspaper delivery boy. Warren Buffett was famously a newspaper delivery boy, and still conducts a newspaper-throwing contest at annual Berkshire shareholder meetings. Coincidence?

Newspaper delivery boys and girls had to develop responsibility, dependability, self-motivated, and people skills (they often had to do the bill collecting). I don’t know if there are any such paperboys/papergirl positions left in the country. Here’s a nostalgic write-up about what it was like: Whatever Happened to the Newspaper Delivery Boy?

According to various sources, these famous business leaders, actors, activists, scientists, and even presidents were also paperboys. (I guess gender stereotypes applied? Kathy Ireland is the only girl on the list.)

  • Walt Disney
  • H. Ross Perot
  • Bob Hope
  • Ed Sullivan
  • Danny Thomas
  • John Wayne
  • Bing Crosby
  • Dwight D. Eisenhower
  • Herbert Hoover
  • Martin Luther King Jr.
  • Harry S. Truman
  • Ed Sullivan
  • Isaac Asimov
  • Tom Brokaw
  • Wayne Gretzky
  • Jackie Robinson
  • Kathy Ireland
  • Tom Cruise

I wasn’t a paperboy, or especially entrepreneurial when I grew up. Sometimes I would hoard my lunch money and just go hungry until I got home in the afternoon, but that was about it. I suppose I didn’t have a lot of wants, so I didn’t need a lot of money. I do remember being impressed by the kid in our class who bought candy in bulk from Sam’s Club and sold it individually to students.

What is the modern equivalent of a paperboy? I propose the YouTube video channel. If you are an entrepreneurial kid who wants to develop the skills that will help you navigate the business world in the way that newspaper carriers did in the 1970s, these days you probably have a YouTube channel. A lot of them seem to review toys, but others act out skits, cover travel destinations, or discuss current events. Here are the applicable skills:

  • Responsibility and dependability. You may not have to show up every day at 5am, but if you don’t create content regularly, you won’t grow an audience.
  • Self-motivation. There are probably some pushy parents out there, but I think your passion for the subject will show through in the videos.
  • Media creation skills. You will learn the technical skills required to set up equipment, edit audio/video, and all that behind-the-scenes stuff.
  • Talking in front on a camera. You must communicate clearly with your audience. This is similar to talking in front of a group of people.
  • Advertising negotiations? Some of the bigger channels have brand sponsors beyond just the pre-roll YouTube ads. The kids may have to get involved with these discussions.

There is a lot of inconsistent information about YouTube revenue. From the shocking This 6-year-old makes $11 million a year reviewing toys on YouTube to the more balanced Can Vloggers Really Make a Fortune? to the buzzkill ‘Success’ on YouTube Still Means a Life of Poverty. I’m sure a small percentage are doing awesome, but most are not. Isn’t that how it always works for creative pursuits? JK Rowling is rich, but most fantasy authors are not. But hey, if you’re a kid and making $100 a month and having fun creating something (all while learning useful skills shhhhh), isn’t that a pretty nice accomplishment?

Any readers out there with children who have earned money from YouTube?

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.