Secret shopping has been given a bad rap lately.  Websites that promise “to pay you to shop” and then make you jump through hoops or sign up for their sponsors’ offers have done damage to reputable companies like Strategic Reflections, Beyond Hello, and Jancyn, who are hired by businesses to evaluate the level of customer service that they receive when frequenting their stores or hiring their services.  In fact, secret shopping scams are so prevalent that the people who ordinarily seek out sources of side income find themselves wondering whether a company is legitimate or not.  This article serves as a primer for those interested in working as a secret shopper by dispelling the myths commonly associated with independent contracting.

FACT: Secret shopping is a real, reputable way to make extra money.

FACT: Secret shopping allows you to work around your busy schedule.

FACT: You are in control when you’re a secret shopper.  You can accept as few or as many shops as you want and make as much money as you want.

Although it seems too good to be true, companies all over the globe are looking for people just like you to provide honest, objective feedback about the level of service that you receive at the businesses that you frequent on a regular basis.  For a few minutes of your time, you can receive compensation for your efforts in the form of cash, free merchandise and services.  A viable form of self-employment, secret shopping has its share of benefits.

Completed at a leisurely pace, secret shopping can supplement your income or take the place of a full-time job.  Making use of your keen eye and observant nature, you can leave behind the nine-to-five grind and live the kind of life that you have always dreamed of.  That is, if you heed the advice given here.

Throughout this article, I will address the topic of secret shopping and provide tips that will not only make you money but ensure that your hard work and efforts aren’t wasted.

Secret shopping is a legitimate way to make a living.  With a little time and some carefully worded direction, you too, will be on the road to becoming a successful secret shopper.

What is Secret Shopping?

Secret shopping is an inexpensive way for companies to obtain accurate feedback on the people that they employ and the service that they provide.  Big corporations hire secret shopper companies to observe their businesses so that they can expose problem areas and address customer concerns.

Secret shopper companies then assign projects to various Independent Contractors throughout their area and give them a time frame to complete their work.  Project guidelines are either posted on the company website or sent to the shopper’s email account.  Upon receipt of the shop, the company then compensates the contractor for their time and any of the items that they were required to purchase.

Finding the Right Companies to Work For

Websites stating that you can “get paid to shop” often require a fee to use their services and be registered in their databases.  Do not consider working for a company that charges you!  There are plenty of companies willing to hire you for free.  Make sure to check out their websites:

Trendsource

Shoppers Inc.

Service Intelligence

About Face: World’s Premier Shopping Company

Jancyn

A simple web search will help you identify which websites are legit and which ones are not.  Remember your objective.  You are looking to increase your income not your expenses.  Do not pay a fee to access databases containing secret shopping company information.  Visit a free website like Walletboosters for an updated list instead.

Secrets to Success

Secret shopping is a wonderful way to earn income.  If your current job isn’t as flexible and you would like it to be or doesn’t pay enough, adding a couple of assignments a month will surely help you in the long run.  Working for more than one company will also give you better opportunities.  This is especially true if you live in larger cities where secret shoppers are abundant.

Keeping Track of Paydays

Paychecks are usually cut once a month but some companies pay more frequently.  It is helpful to learn what payday is for each company you work for.  Keep track of the shops that you have completed and the pay for each one in a notebook or on a calendar.  No one likes to work for free!

Also remember to have money up front to purchase items.  This may be a requirement for a shop. Most companies reimburse you for your purchases.  There are no exceptions to this rule.  If you don’t have $10 to spend on lunch or merchandise from time to time, this is not the job for you.

Making the Most Out of Phone Shops

Some shops pay really well while others pay considerably less.  Some shops must be done in person while others can be completed over the phone.  It is best to do a lot of phones shops if you have free long distance or a fixed rate phone service.  An exceptionally large phone bill will squelch any desire to do phone shops in the future.  If you are concerned about this, it may be best for you to purchase a prepaid calling card or use a service like Skype or the MagicJack.

Super Supplies That Will Aid You in the Process

Having a few inexpensive supplies on hand will help you in the long run.  Purchasing a cheap stopwatch is a necessity.  Do not forfeit your reputation by not completing a shop correctly.  It is better to earn less for a shop than nothing at all.

It is easy to get confused if you work for several companies.  Record the due date of each assignment on the calendar.  Also, make sure to list the shop’s fee and the company’s pay period on there as well.  Keeping your glove box stocked with extra pens and paper will eliminate confusion.  A pocket sized notepad that can be carried and written in discreetly is also a wonderful tool for you to have.

Owning a digital camera will give you an advantage because most companies require strict documentation of the things that you observe.  Photo shops often pay better than others because they do require more work.  The smaller your camera is, the easier it is to conceal.  Keeping your identity anonymous is crucial and one of the most important things to remember when secret shopping.  Never reveal yourself unless instructed to do so by the company that you are working for.

Every company has established its own criteria for assignments.  In order to fill their needs, you must carefully read the instructions for each shop before completing it.  Gather all the supplies you need before hand and pay attention to the time frame given to you to finish the shop.  If problems do arise, contact the scheduler immediately.  Remaining communicative with the company that you work for is an absolute necessity.  Reliable internet and phone service is a must if you wish to work in this profession.

Make Big Bucks Referring Friends

Not every shop will fit into your schedule.  That’s where your friends and family come in.  By referring those to the companies that you work for, you accomplish two things.  You give the people you’re the fondest of extra income and the companies that you work for will pay you a referral bonus for each eligible shopper that you sign up.  Referrals=extra income.  The more people that you refer, the greater the chance you have to make additional money.

A big push for companies to improve their procedures has caused the secret shopping industry to swell with opportunities.  With a few simple tools, these tips, and the desire to succeed, you, too, can start a career as a secret shopper today.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

How to Become a Successful Secret Shopper and Supplement Your Income

When it comes to making extra cash, the internet has a lot to offer its users.  Online auction sites provide members with a place to peddle goods and services and social media networks like Twitter and Facebook make it possible to self-promote with ease.  Those individuals with a knack for the written word can find legitimate, paid work-at-home opportunities online.  In fact, those writers wanting to gain exposure and line their pockets with cold hard cash may find the following five websites useful:

1. Demand Studios. Write instructional articles on a variety of topics including: Animals, Arts and Entertainment, Computers, Health and Fitness, Home and Gardening, Sports and Recreation, and Travel.  Paychecks are disbursed twice weekly to your PayPal account and top paying articles are worth $15 a piece.  You can also select revenue share articles which earn significantly more over the course of a year and pay out once monthly.
2. Textbroker. Anyone can write for Textbroker.  Search through their database of available topics and choose the one that best fits your interests and knowledge level.  Write the article, submit it, and elect a payout once your account has reached $10.  Payments occur bi-weekly and are sent to the PayPal account address registered on the site.
3. Quality Gal. Article topics are specific and require knowledge of hypertex, or linking back to educational and governmental websites.  Due to the amount of work involved, Quality Gal pays up to $12 for each article that is approved.  Once weekly, writers submit an invoice and QG submits payment via PayPal.
4. Content Current. Topics usually involve knowledge of Search Engine Optimization and require a specific word count.  Significantly lower in payment than other websites, Content Current offers writers routine work and the chance to participate in Forum Boosting.  Payments are received weekly through the writer’s PayPal account.
5. EDUBook. Unlike other websites, article topics are pre-assigned.  Each member receives four to five articles at a time.  Once that batch is completed, he or she can request additional assignments.  Pay is $5 an article or $25 a batch and compensation is received electronically through PayPal once a week.

Aspiring writers needn’t go broke pursuing their literary dreams. While companies like Demand Studios and Textbroker exist, they do not offer the big payout that feature writers are accustomed to.  They can, however, pay for groceries or generate enough extra money for a rainy day.  Whether you are looking for an additional source of income or researching opportunities to leave the rat race altogether, becoming an independent contractor and working for the aforementioned companies is a wise move in any economy.

Keep in mind that as you become a more established freelance writer you may find many writing opportunities by marketing your services directly on many of the blogging job boards or sites like Elance. But in order market your services you really need to have a solid portfolio of work to show prospective clients, so using the sites listed above are a great way to begin building your online writing portfolio.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

5 Freelance Writing Websites That Pay Frequently

Now is Not the Time to be Complacent in the Workplace

When you sit down and look at your finances you’re probably mostly focused on expenses and spending. How much money do you spend on housing, groceries, insurance, and even taxes? What is often overlooked is income. Without income none of the aforementioned items will even matter. Just like you can change your spending habits to reduce expenses there are things you can do to help you increase your income.  If you are just doing what it takes to get by in your job you could be setting yourself up for fewer opportunities and lower income in the coming years.

If you aren’t regularly looking at your own job performance, skills, and advancement opportunities you are severely limiting your earning potential. This job market is competitive and if you aren’t living up to your expectations or find yourself in an industry that is declining it should be no surprise that you could potentially be without a job. When that happens you’re obviously dealt a devastating financial blow that could set you back years.

Job Skills

Start by taking a look at your job skills. Would you hire someone with your skills to do the job you’re doing? Are you current with computer and other technical skills required for your job? Do you need more training? Does your job require specific certifications? Your career isn’t static and the tasks you need to complete are always changing. Your employer will generally offer basic training required to do the job but above and beyond that it may be up to you.

Some employers even offer reimbursement for outside training so that is the first place to look. Other times it may be out of your own pocket so you need to consider the benefits of additional training. Would obtaining that certification or touching up on certain industry skills make you more valuable to the company? These small improvements to your skill set may be the difference needed to keep your job during a downsize or losing it to a new college graduate who is current with the latest skills.

Job Performance

This area can be a bit subjective but you should take an honest look at your performance. Put yourself in your supervisor’s shoes. What kind of review would you give yourself?

• Do you show up on time?
• Do you do all that is asked of you?
• Is your work completed by the deadline?
• Do you put in an honest day’s work for an honest day’s pay?
• Do you cut corners?
• Do you like your job and does it show?

Job performance is more than showing up, doing what is required without messing up, and then going home. If you are familiar with the movie Office Space you probably remember the manager at the restaurant requiring the servers to wear a certain amount of flair on their uniforms. The manager regularly addresses Jennifer Aniston’s character for wearing only the minimum and encourages her to wear more like her co-worker. She later proclaims that if he wants everyone to wear 38 pieces to just make the minimum 38.

The point is that you can only do the minimum and still maintain your job, but is that really what you want to do? You don’t have to be over-the-top and obnoxious about doing more than the minimum like the waiter with a million of buttons on his uniform but your boss will notice if you do a little bit more than the minimum. At the same time you will also be noticed if you are known for just doing the minimum when the company is looking to cut costs or introduce new talent.

Job Security

This one can be harder to examine but it is important to understand your true employment situation. Are you working in an industry that has been facing hard times recently? Are you in a rapidly expanding industry? Aside from the broad economic aspect take a look at your individual employer. Is the company operating at a profit? Is the company local, national or global? What are your chances of advancement within the company?

These questions can paint a picture of how secure your job actually is. Clearly there will always be unforeseen circumstances that can make even a seemingly secure job become obsolete, but by understanding where you stand can give you an edge in spotting potential troubles. This advanced warning can give you a jump start in looking for new opportunities in the event you do lose your job.

Have a Backup Plan

You need to have a backup plan in the event your source of income is drastically reduced or eliminated completely. What this means is to have a course of action established to minimize the impact of this situation as little as possible. The first thing you should be concerned with is your emergency savings. Ideally you would have enough money saved up to continue paying the bills for a few months with little or no interruption. Unfortunately this isn’t always the case. If you don’t currently have an emergency savings I would recommend opening a free high-interest savings account today and start by funding it with just $25. Then, set up automatic deposits so that you can build up your savings without even thinking about it.

Next, have a plan for getting back to work as quickly as possible. Keep your resume updated. The last thing you need in the event of a job loss is spending the better part of a week trying to write a new resume and cover letter from scratch before even being able to apply elsewhere. Being prepared will allow you to get into the hunt for a new job as soon as possible. Not only that, but if it’s been a while since you last wrote a resume it can be difficult to go back and think about all of your past achievements and skills that you would want to list. So, if you regularly keep it updated you’ll be sure to include everything you can to make you look good to new employers.

Finally, it is important to maintain contacts. Keep the numbers of old co-workers or acquaintances that could have an inside track to open positions. These people could be your best resource when it comes to finding a new position. They know you and what you’re strengths are and can be great referral sources. Thanks to the power of the internet this is easier than ever before. One way you might want to start is by creating a profile on LinkedIn. This is a professional networking site where you can connect with old colleagues, classmates, and even post your resume and look for jobs. Remember, a lot of times it’s not what you know, but who you know.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Brush Up on Your Job Skills and Performance So That You Can Keep Your Job or Get a Raise

This is a guest post by Nicholas Bate, author of the new book Beat the Recession: A Blueprint for Business Survival. He is author, designer and facilitator for the ground-breaking ‘Personal Excellence’ seminar, a program used as the basis for cultural change in many organizations, in addition to many pioneering development concepts in leadership, team-building and sales training. Nicholas Bate is passionate about supporting people to ensure they realise and release their true and full potential.

For more information on Nicholas Bate, his books, and his seminar, be sure to visit his blog.

The other day I spoke in Zurich on Beating the Recession. As always, I tend to emphasize there are three possible routes:

1. Accept that the recession has simply highlighted what was inevitable and get out and put your resources, time, energy and people into something else. Mind-blowingly awful to execute short-term, but the only long-term viable option. Throwing money at it is well, generally, money down the drain.
2. Diversify. Spot what the markets are doing and provide. This could help you implement 1, above.
3. Get better at what you do. If you know your model is valid, then get better at what you do. And this can work well with 2, above.

To illustrate the power of 3: Get Better, I’ve created a simple simulation whereby delegates get a short period to run a company ’in recession’ and then apply various factors and notice the immediate turn-around. These factors are rarely common practice. For the group I spoke to, I wrapped them up into what I called the Zurich Mantra:

Z: Zen-like clarity of purpose and process. In many organizations and for individuals, purpose has become vague and processes have got worn. Improve both, you improve results.

U: Unstoppable desire to improve. Kaizen or never ending constant improvement. If you want things to be better, you need to better. Good is no longer good enough. Raise standards and results will improve.

R: Review and rehearse. In business we do not spend enough time doing either. Once we do, results improve.

I: I own the problem. Leadership is a mindset not a job title. Make It happen; never walk by a quality issue.

C: Chain-react teach this stuff. I encourage each delegate to go and quality teach these ideas to just two people. And each of these two, to quality teach two more people. Soon everybody has got it. That improves results.

H: because HOPE in a recession is not strategy.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

The Zurich Mantra on Beating the Recession

5 Tips to Help You Increase the Chances of Keeping Your Job

Unemployment continues to rise, and jobs are getting harder to come by. The national average is approaching 7% while many areas are being hit with unemployment rates of about 10% already. Think about that for a minute. One out of every ten people you know are likely to be without a job. If not now, but possibly in the near future. Of course, if you work in an industry that’s already being hit hard, this may already be the case or even worse. 

So how do you make sure that you’re not that one out of ten without a job? Unfortunately, in some positions or with certain companies, nobody is safe. But there are many situations where layoffs are more selective, and by taking the initiative to make a few good decisions, you can improve your chances of keeping your job when it comes time to let some people go. 

Make Yourself Available

If your company has already let some people go, that means there’s just as much work to be done, only by fewer people. Those who still have a job will need to pick up some of the slack. This means that you should be making yourself available to take on additional tasks or help with projects that you might not have otherwise had to do. While nobody wants to take on more work for no additional pay, in times like these it pays to be someone who offers to help.

When you take the lead and offer your assistance when asked, you increase your value to your boss and employer. You become someone that they can count on, and this will likely play a role in determining who they can afford to let go if layoffs are on the way. Of course, this is a double-edged sword.  It is possible that in offering up this additional help, your boss may begin to take advantage of you and pile on even more work. You don’t want to be put in that situation either. But in times like these, you need to weigh the options. Get burdened with more work and be thankful you have a job, or refuse to do more work and risk losing your job.

Let Your Boss Know What You’re Doing

Just doing good work alone isn’t enough. Your boss is probably just as stressed out, if not more about uncertainty at work and the possibility of cutting workers. They probably aren’t completely in-tune with everything you’re doing, and unless you bring issues up with your boss directly, they may go unnoticed. This doesn’t mean you should burden your boss with your every little accomplishment, but you need to let him know you’re out there and getting things done.

It doesn’t take much either. Just shooting a quick email updating your supervisor about the completion of an assignment, or informing them of something that would make them happy since it reduces their workload or stress will go a long way. The bottom line is you want to have regular communication, whether big or small. Again, when it comes down to deciding who needs to stay and go, the more visible you’ve been to your superiors, the more likely the perceived value in keeping you on.

Network With Others

Networking can not only help you keep your job, but it can prove very valuable when it’s time to seek out a new job. Your personal connections matter, and if you’re a loner in the office, your chances of retaining your position when others are perceived to be bigger team players begins to drop. You don’t have to go out for drinks with the entire office every day after work, but you should make an effort to connect with your co-workers. This can improve your relationship with others, and even translate to improved performance in the office.

You should also consider joining any professional organizations that relate to your job or industry and take part in local networking events. Again, this alone might not save your job, but the connections you build will help you find new work through the connections you’ve made. If time is a constraint or you don’t have many local networking opportunities, you might want to check out an online service like LinkedIn where you can search, find, and network with friends, co-workers, and other industry players from the comfort of your home. 

Be Conservative

I’m not talking about political affiliation here, but your work style. When companies are struggling and doing their best to make ends meet, there isn’t as much room for error. If you’re someone who regularly pushes the envelope and tries new or radical ideas, it might be a good idea to tone things down a bit. It isn’t that thinking outside the box or trying to be innovative is bad, it’s just there is little room for mistakes in this type of environment. 

When companies are rapidly growing and healthy, it’s almost encouraged to think this way, but when your job might be on the line, it’s time to ratchet down and stick to the core values of the company. You might argue that being innovative and coming up with a great idea could also save your job. And it’s true, if you come up with something or take the company in a direction that saves or makes money, you could be seen as a hero. But if you fail, you’re seen as the employee who went out on a limb and messed up. It’s all about risk and reward. Taking a risk might yield a big reward, but could also accelerate your departure. Being more conservative in times like these could prove to be the better course of action.

Don’t Complain

Above all, don’t complain. Are you ticked off that Sally was assigned a task that you were expected to do, or mad that someone threw out your leftover cake in the break room? Now is the time to bite your tongue. Don’t make a big deal out of petty stuff. If you are seen as someone who whines or complains, you’ll become part of the office gossip. It doesn’t pay to make a big deal out of things that don’t directly affect your job security.

Obviously, if something is being done that’s wrong, against policy, or directly affects your performance, that’s one thing. But if a co-worker does something annoying, or your boss assigns you a menial task, it’s probably in your best interest to suck it up and go on with your business. Everyone is stressed out, but don’t be known as the guy or girl at the office who complains about everything. You’ll surely be noticed, but not in a good way.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

How to Keep Your Job While Unemployment is on the Rise

Are Businesses Getting Out of Paying Taxes or is it Just a Good Story for the Media and Politicians?

One of the big stories last week was from the Government Accountability Office study that reported that two-thirds of American corporations didn’t pay any taxes in 2005. Of course, a statement like this is sure to create a lot of media coverage, and people who are against business immediately cried fowl.

The first thoughts that come to mind are big evil companies shuffling their money through various tax loopholes in order to avoid paying taxes, but is this fact or fiction? Luckily there some people out there who understand the realities of how businesses operate and can paint a clearer picture of what is really going on.

A Good Business Should be Structured so It Doesn’t Pay Taxes (Or Pay as Little as Possible)

What the layperson doesn’t often understand is why most businesses aren’t taxed. A lot of it comes down to the double taxation of corporate profits. If you recall from Business Entities 101, a corporation is a separate legal and taxable entity. This means that corporate profits are taxed at the corporate level, and when disbursed to business owners or shareholders in the form of dividends, are taxed again at the personal level. Clearly, business owners want to avoid having their profits taxed twice, so they will structure the profits to be paid out in a way that minimizes or eliminates this. One common method of doing this is to shift the corporate profits into salaries as opposed to being paid out in dividends. The money is still being taxed, but just at the personal level.

Steven Malanga from Real Clear Markets discusses this in an article today. He mentions something by Kevin Hassett from Bloomberg:

Kevin Hassett, in a Bloomberg commentary, explained that most small businesses are now organized in such a way that many prefer to take their profits as an owner’s salary and pay taxes on the wages. It’s not that they aren’t paying taxes, as the headline incorrectly says, but rather that the money is not flowing to the government through the corporate levy.

But what about “big” businesses? Obviously they can’t shift all of their income into salaries in order to eliminate corporate income taxes, so how do you explain that? Again, Steven points out that even in a good economic year such as 2005, a lot of businesses weren’t making money, thus had nothing to tax.

Even in good times, there are plenty of losers in a dynamic economy. The BLS’ Business Dynamics Survey, for instance, shows that in 2005 there were 7.3 businesses that were contracting for every 7.6 that were expanding, including 1.3 that were closing their doors for every 1.5 that were starting up. Large businesses were hardly immune to this kind of tumult. For every 5.8 jobs added by firms with more than 500 employees, other firms that big eliminated 4.9 jobs. Among those hit hard in 2005 was General Motors, which despite $193 billion in revenues wracked up a $10.4 billion loss and cut its workforce.

As you can see, even during this time frame, there were almost as many businesses doing poorly as there were businesses doing well. Of course, the sensational headlines you’ve read over the past week make it sound like every corporation was thriving during 2005, so the fact that two-thirds didn’t pay any taxes appeared to be shocking.

Sales Do Not Equal Profits

One of the easiest ways to draw attention to your headline is to throw around millions, billions, or trillions in sales while alluding to the fact that corporations don’t pay any tax. To the average person, they see this as a company making billions of dollars and not paying a single cent in tax. Of course, when you hear about these big numbers, they are almost always talking about gross sales or revenue, not taxable profits.

Just look at the General Motors example above. If you walked up to someone on the street and told them that GM had $193 billion in sales and didn’t pay any taxes, you’d probably have 9 out of 10 people act shocked and disgusted that a big company can get away with it. Even though they had nearly 200 billion dollars in revenue, the media will fail to point out that they also had over $203 billion in expenses which resulted in an over $10 billion loss. Without an actual profit, there isn’t much to be taxed.

From that same article by Steven:

As Michigan Senator Carl Levin, a frequent critic of corporations, said of the study, “Twenty-five percent of the largest U.S. corporations [those with more than $50 million in revenues] had $1.1 trillion in gross sales in 2005 and yet paid no federal income taxes.” That statement suggests that Levin is either trying to mislead us or that he has made it into the world’s most exclusive club, the U.S. Senate, without knowing the difference between earnings and sales.

Again, we heard this $1.1 trillion number thrown around quite a bit last week, but what does it mean? There is no context here. Ok, so larger companies had over a trillion in sales, but what was the actual profit from these companies? Of course, including this information would not be as shocking as just arbitrarily tossing out an unfathomable number like $1.1 trillion.

As I mentioned earlier, most businesses are streamlined to the point that actual profit margins are very small. They may be selling billions of dollars in goods but only seeing a profit margin of a couple percent.

The difference, of course, can be enormous. For one thing, many industries have extremely small profit margins because as soon as it gets too easy to make a buck in a free-market system, you’re sure to get plenty of competitors crowding in, driving down your margins.

Many businesses we regard as successful operate on small profit margins. After paying $5.8 billion in taxes in 2005, Wal-Mart earned $11.7 billion—a nice chunk of change. But those earnings were on revenues of $312 billion, a mere 3.4 percent net profit margin.

A Business Isn’t That Different from You and Me

Take a look at your own tax situation. Do you do things that minimize your income tax bill? Whether it’s putting money into an IRA or 401(k), deducting property taxes, or claiming your children as dependents, you’re obviously going to take advantage of any tax break you can get so that you pay the least amount of taxes as possible. The same thing goes for a business. The owners are already having their salary taxed, so they are going to try and minimize the impact of having their profits taxed yet again.

Of course, it’s always easier to complain about companies that make money, call them evil, and exaggerate facts to fit your agenda. And I’m sure there are a few companies that get a little liberal with their accounting or tax-saving measures, but a lot of individuals do the same thing in an effort to reduce their taxes.

But it’s up to you to believe what you want. If you want to believe everything the media says and chastise businesses because some numbers make it look like businesses are scamming the tax code, go ahead. Everyone is entitled to their opinion, but at least try to make it an informed opinion rather than let the media make it for you.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Two-Thirds of Corporations Don’t Pay Taxes – Nothing More Than Political Hogwash

According to the Associated Press, a woman is suing Apple for $1 million over a $200 price cut. The article doesn’t call her stupid, but I gladly will. If you recall, only a few months after Apple’s mega-hyped iPhone release, they decided to cut the price of the new product by $200 in addition to stopping the production of the lower end 4 GB model.

Apple Tries to Please Customers

Price cuts are nothing out of the ordinary, and although Apple did reduce the price relatively soon after the launch, they were understanding and provided some form of reimbursement. For those who purchased an iPhone within 14 days of the price cut, Apple issued a full refund of $200. In addition, for those who purchased an iPhone prior to this, Apple gave people a $100 Apple Store credit. They were under no obligation to do so, but in an effort to keep customers happy, it was a good move.

A Good Example Why You Should Never be an Early Adopter of Technology

This is a perfect example of why it almost never pays to be one of the first people to own a new piece of technology. The price issue is obvious–technology products are prone to rapid price declines. Sure, two months is a bit quick, but any time you purchase a new phone, television, computer, or other device, it won’t be but a few months before prices begin to come down as new products enter the market.

In addition to the obvious pricing issues, new technology is often riddled with problems. As devices become more complex and require more software to run, there are going to be obvious glitches and bugs in the first models. So, not only do you risk paying a premium for being an early adopter, but you are likely to find yourself with a product that has issues that will be addressed in later models.

Where do You Get $1 Million in Damages?

Back to the news story with the lady suing for $1 million–how do you get off demanding so much money? You purchased a new product right out of the gate, and a few months later it comes down in price. So, you get a $100 credit to offset some of the cost, but you still aren’t happy, so the right thing to do is sue the company for a million dollars? Give me a break!

According to Li’s lawsuit, filed on Sept. 24 in the U.S. District Court, Eastern District of New York, the price reduction injured early purchasers like herself because they cannot resell the product for the same profit as those who bought the cell phone following the price cut.

Oh, boo-hoo, you can’t buy something and turn around and sell it on eBay for a quick buck. This lady is a consumer, not a distributor, so her ability to resell the product for a profit should have no bearing on the case. Even so, did she really think she would have been able to purchase enough of the phones to actually make a profit of $1 million, which she is claiming as damages? I highly doubt it.

I wish I knew how easy it was to get rich, because over the years I have purchased a lot of items that subsequently went on sale or became cheaper shortly after I bought it. If I had known that every time I buy something brand new that comes down in price in a few months warranted a $1 million lawsuit, I’d be sipping on a martini in a 24k gold-rimmed glass while lounging on my private tropical island as I write this.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Stupid Woman Sues Over Apple’s iPhone Price Cut

Earlier this week the United Auto Workers called for a nationwide strike against General Motors, and just two days later a new contract seems to be agreed upon. Details are still a bit sketchy, but for the sake of my friends and family who rely on a paycheck from GM, it is great that this was hopefully resolved without much disruption.

Highlights of the Deal

One of the major benefits of this contract is the retiree health care trust, which has been in discussion for quite a while. With this trust in place, GM would give control of the trust to the UAW, and the company itself would fund 70% of it. This is good news because it will save GM money. It isn’t the best possible solution, but it is probably the only compromise that would work.

The big wild card that hasn’t been discussed is the demand for job security, which was at the focus of the strike. What concessions did GM make in order to please the UAW so quickly? Job security is a difficult thing to promise, and even if you can maintain whatever competitive edge you have currently with domestic plants, who’s to say the market won’t change in five or ten years before we’re at the same point? It will be interesting to see the actual details regarding this.

The Labor Cost Disparity

This is the big point that I was discussing in the comments of the earlier post this week, and that is the union has created an unbelievable labor cost disparity compared to the Japanese automakers. From an Associated Press article this morning:

The company went into the negotiations seeking to cut or erase what it said is about a $25-per-hour labor cost disparity with its Japanese competitors.

That number blows my mind. Most factory workers shouldn’t even be making $25-per-hour, let alone simply a disparity with competitors. I realize that this is is not strictly a disparity in wages, since there are other labor related expenses included as well, but let’s do the math for a second.

There are around 73,000 union employees at GM. If you simply take the $25/hr disparity number and figure the averae employee works a 40-hour week. When you multiply that out, you get a staggering number of almost $3.8 billion per year. That is billion, not million, each year that is simply based on excess labor costs compared to your foreign competitors. Knowing that, is there any surprise as to why GM, Ford and Chrysler are doing so poorly?

Another quote in that same article says that the terms of this contract will close that disparity. While I do think new terms will help, at least in the short-term, with the constantly increasing wages and bonuses, pension and health benefits, this will not be sustainable over time. A perfect example is this bit of information from the AP article:

…two people briefed on the contract told The Associated Press that it also would give workers bonuses and lump-sum payments… Wages would stay the same for the length of the four-year deal, but workers would be given a bonus of $3,000 once the contract is ratified and then bonuses of 3 percent, 4 percent and 3 percent of their annual pay each year for the last three years of the contract, said one person briefed on the contract details.

So, the agreed to give an already overpaid workforce a bonus of $3,000? What for? The company isn’t profitable, so it isn’t rewarding them for that. Is it making up for the 2 days without work? Well it could be, but for most people that would come out to just a couple hundred dollars. So GM has to fork over about $219 million to pay for the first year bonuses, when they lost almost that much money just while the strike was taking place for the last two days.

Lower Wage Structure

The good news from this proposed deal is the lower starting wages. They have agreed to reduce the wage structure for certain job classifications, and even offer buyout packages for early retirement for existing workers in order to make room to hire new employees. This is great news because it begins to reduce some of that absurd wage disparity by getting rid of high-seniority people making far more than they should be for their job, and then open up more positions for new employees which would be on the more appropriate lower wage structure.

The deal also includes language that mitigates the impact of the jobs bank, in which the company pays laid-off workers most of their salary and benefits. This was another huge burden on the company when they had to essentially pay someone that they laid off almost their entire salary and benefits. This is absolutely absurd to have to pay employees that aren’t working. Without knowing details, it is hard to say how big of an impact this will have, but reducing the amount of money laid off workers receive should help.

Will it Work?

It is hard to say. The union has used whatever power they have left to make a point, and it appears as if it may have worked for now. There are certainly some highlights of the new plan that at least address the wage issue, but there is still plenty left on the table that may not hold up. GM continues to struggle, and I don’t know how this will affect the bottom line. It certainly has the potential to save some money, but this looks like only a short-term band-aid that won’t hold up more than a few years.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

GM and the UAW Tentatively Agree on New Contract

As of this morning, the United Auto Workers has launched a nationwide strike for its GM workers for the first time since 1970. In an event that is sure to place even more pressure on the struggling automotive company, even fewer vehicles will be produced until an agreement is reached.

An Example of How Unions Have Gone Too Far

Labor unions certainly have their place, and have done a great deal to improve working conditions throughout the country, but this strike is addressing issues that are far removed from the original purpose of what the unions were meant to protect. This strike isn’t about unsafe working conditions, it isn’t about racial bias, or even environmental issues. This comes down to an organization that is simply demanding too much from a company that is already bleeding money.

The Issues

This particular strike is focusing on a few key issues:

1. Job Security/Protection
2. Executive Compensation
3. Retiree Health Care (update: not directly related to this strike)

In regards to job security, clearly that is an admirable goal, but in this global economy, it is simply unrealistic. It has been a standing tradition to “buy American” and keep jobs local, but is that really the issue any more? Even an American car is largely built with foreign parts and/or assembled in places such as Canada or Mexico, just as many Asian vehicles are actually assembled in the U.S. Clearly, it is in our economy’s best interest to employ domestic workers and keep the money local, but it is extremely hard for the company to remain competitive.

What I’m more interested in is the lost notion of market demand. Do you have any idea how hard it is to get into GM as a new employee? Even when a new plant is built, unless you know someone or have family already employed, your chances of getting in are slim to none. There are people who would kill to have a job there that pays a fraction of what the same person with some seniority may be earning, yet GM is required to continue to pay someone who’s been there for 20 years double what someone else would gladly do for much less. Loyalty is great, but when it forces your company to continue to lose money, it isn’t that great.

Executive compensation is an area that the union may have a legitimate beef. It is no surprise that corporate executives across the board are paid a good deal of money, and GM is no different. Certainly, high executive compensation can have an effect on the company’s bottom line, but the disparity that the UAW is claiming is far from accurate.

General Motors pays their employees extremely well, and I know, because a large percentage of my family is employed by either GM or another automaker. Many of these employees can earn upwards of six-figures for doing completely unskilled labor. The people I know that work for GM have no college education, yet are making more money than most people I know with a post-graduate degree. So, while I do agree that the executives may be earning more than their fair share in some cases, their claim on how the union employees are having to decrease their lifestyle or cut back on their standard of living is laughable, considering they are being paid significantly for the type of work that is being done.

Finally, when it comes to health care benefits for retired employees, this is an issue that isn’t just seen in the automotive industry. Health care costs have skyrocketed for decades, and with an inadequate national system in place, this has put extreme pressure on employers to keep up. Again, this is one of the fundamental reasons that more companies are outsourcing, which is again at the root of why this strike is taking place. A company that is already losing billions of dollars each year is expected to continue to increase health care they provide to retired employees. UPDATED: A statement issued earlier today noted that this was not a stumbling block in current negotiations, although the retiree health care trust has been an issue since 2005.

It is a Vicious Cycle

This whole process is a vicious cycle that doesn’t have an easy solution. First, you have a company that is losing a ton of money, and in efforts to remain competitive, some jobs have had to be cut or moved out of the country. But, the union wants to demand workers have job security and keep jobs local. Well, doing this will further reduce profitability and in turn, make the products less competitive.

Since the company can’t maintain profitability, they suggest executives take a pay cut, while allowing their non-skilled workforce to make well above the median income that is in many cases, higher than college graduates and professionals in other industries.

Finally, we already know that the company is in financial crisis, yet the demand is there for increased health care. If you demand that a company create a non-competitive product, pay their employees more than the market dictates, and increase health care for retirees, how is that going to help the company that is already struggling? In my opinion, it is a battle that really has no positive outcome regardless of what happens.

Final Thoughts

I realize that discussion about unions can be a topic that is polarized as politics, and this isn’t meant to start a war of comments. But, since this strike does directly affect me, my family, and some clients, it is something that I felt compelled to bring up. Unions have, and continue to provide great benefits to the working people, but at this time I think this strike is doing more harm than good, and doesn’t have the employee’s best long-term interests at heart.

This strike will undoubtedly hurt GM regardless of the outcome, which will in turn hurt the very employees they are trying to protect. If the strike is prolonged, it will reduce production dramatically, while there are still substantial costs. For a struggling company, this will do nothing but hurt the bottom line. The same holds true if GM comes to concession with the UAW. While production may quickly resume, the increased costs will continue to force GM to produce a less-competitive product, lower sales, and ultimately bigger losses. Both of these outcomes will lead to the possibility of bankruptcy, merger, or cutting the workforce, which is bad news for those very employees.

Finally, according to the New York Times, the UAW has secured a strike fund of over $900 million. Think about that — they are able to raise over $900 million just for the event of a strike? That is a lot of money that I would think could be better used elsewhere in order to further the union’s goals. Instead, this money will be used to pay those who strike and take shifts at the picket line a measly $200 per week. This is going to even further strain the already shaky economies in areas with a high concentration of GM workers.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

The UAW Goes on Strike Against General Motors

Part of my job requires that I attend regular benefits fairs and seminars held by an employer to help promote the benefits they offer and encourage participation. Generally at these events you will find the various health insurance providers, any sort of additional wellness programs and the retirement plan provider, which would be me. This event is a great opportunity for current employees who may already be enrolled in benefits to ask questions or learn more about the benefits and also as a great opportunity for employees who may not be participating in the benefits to finally enroll.

When you are sitting at a table for 8 hours and greeting hundreds of people who have the opportunity to take advantage of a particular benefit such as the retirement plan you begin to see trends and some downright astounding behavior. The event I attended last week was no different and by interacting with so many people over the course of a day I was able to categorize people into five basic categories.

The Saver

The saver comes in many forms from young to old, new employee or old and male or female. The one trait these people all have in common is being thankful for having a retirement savings plan and they make a point to stop at my table to say so. Most of these people are extremely happy and are simply amazed at how fast their savings has grown, especially with a decent company match program. The savers are also the ones who will stop by and actually increase their deferral percentage and boast about the plan to their co-workers.

The Guilty Conscience

I find this group the most fascinating and I’m amazed at how they will go out of their way to avoid contact with me. These are the people who realize they should be saving in the retirement plan but for whatever reason have not started yet. These individuals are easy to spot because as they wander through the room from table to table they will almost always make it obvious they are avoiding my table. They may visit every other table in the room if only to pick up the free swag yet completely avoid coming within 20 feet of my free goodies.

Occasionally a guilty conscious will stop at the table and their guilt is clearly visible. You can almost see that they are embarrassed with the fact they haven’t enrolled, yet even though they are there and could enroll in about 30 seconds they will still refuse. Next come the excuses about why they haven’t or some will even take the paperwork and promise to fill it out and turn it in before the end of the day. I don’t understand how a person can be completely aware of the situation yet continue to carry that guilt by putting off enrollment.

The Procrastinator

The demographic of this group is primarily the younger people between age 18-30. I find this group to be extraordinarily cocky about the fact that they have plenty of time to get serious about saving in the future. I had a frank conversation with a young lady who was 24 years old and was finally getting started with her career after being with the company for about eight months. I asked why she wasn’t enrolled and I received the typical answer of “Oh I have plenty of time to worry about that when I’m older.” Of course I pulled out my info about compounding interest and how starting early makes a big difference, I even stressed the fact that she is missing out on a fantastic company match and could be receiving a few thousand dollars worth of free money every year, but again it drew no interest.

Since it was clear I wasn’t able to convince her to begin saving today I asked what she thought about Social Security and I was shocked to hear her answer. She admitted that Social Security was not likely to provide any benefit to her in retirement and she didn’t care. So I asked where she thought her retirement income was going to come from if she wasn’t saving on her own and Social Security wouldn’t be there to provide much if anything. She basically said she doesn’t care and doesn’t want to worry about it. Is it just apathy? Maybe. Whatever the case may be, this is one of those issues where putting your head in the sand won’t make the situation better.

The Outside Investor

This group of people can be almost painful to talk to. For the most part the outside investor chooses not to take part in the employer retirement plan because they are already working with someone else. Now that is fine, but I don’t understand how people can give up a 100% match on up to 5% of their pay. Clearly there are cases where a plan may have horrible investments and a poor or non-existent match where it makes sense to invest elsewhere, but with a good plan with low-cost index funds and a generous match I don’t understand the logic.

An example I had last week was an older employee who was probably around 50 and they have been with the company for about 15 years. When she stopped by to pick up some swag I asked if she was enrolled and the answer was no. Before I could even ask why she got real snippy and said she was working with someone else who was doing way better than the 401(k). First, I’m thinking OK, how do you know that if you aren’t invested in it? Are you actually tracking the plan’s funds to compare performance? Of course I didn’t say any of this but right away I knew she was probably lying.

So, since she was giving me some attitude I fired back with “oh, so you’re earning over 100% on the new money you invest every year then?” alluding to the company match. Clearly that was an outrageous claim and she said no, of course not! I go on to explain how the match works and how she is literally throwing money away, especially since she has been with the company so long she is fully vested so it is a guaranteed return. Again, she wanted nothing to do with it and insisted that her broker was making her rich.

Aside from the people who are investing outside of the plan and don’t want to participate in the plan at work I find there are a lot of people who are in the plan yet their broker or advisor give them a hot tip and they want to take out all of their employer plan money and move it over with them while they are still working. Unfortunately they are always upset when they find out they can’t take out the money while they are still employed and under the qualified age. What I find even more interesting are the investments they are being pitched by someone on the outside. I always ask what they were going to go into if they moved the money and I hear some crazy things.

One of the more common investments I’m coming across are people pitching them equity-indexed annuities. They almost always say that their insurance provider or someone they didn’t know solicited the product and they are thrilled that they can invest in the market with no downside risk! If it isn’t the equity-indexed annuities it is often just a straight variable annuity with outrageous fees. A discussion on annuities is a separate issue for another day, but these are the most common reason people come to me believing they can’t do better in the 401(k) or use that as a reason to try to take the money out. Whatever the case may be, these people are almost always being misled by someone else and therefore missing out on a huge opportunity.

The Poor

Finally, the most common type of person I see during these events by far are those who claim they are too poor to save. The excuse is always the same and they simply claim they can’t afford a single dollar to come out of their paycheck. Now I realize that there are certainly some employees who may not be in the best financial situation but it is also worth noting that this employer doesn’t hire people in at minimum wage either.

Most people approach the table and are quick to grab the freebies and when asked about the plan they simply say they can’t afford to. Fair enough, but when I ask them how much they think it would take out of each paycheck to save $1,000 over the course of a year they have a blank look on their face and have no idea, but say they could never save that much. I continue to go on and inform them that if they save a little less than $20 per paycheck (bi-weekly) they will have saved $1,000 with the help of the employer match. Occasionally I see a light bulb go off and they realize how they wouldn’t even notice less than $20 coming out of their paycheck but more often than not I still see people insist they couldn’t live if $5 came out of their check let alone $20.

I have seen some very interesting behavior from these types of people in the past and last week was no different. At the last benefits fair one of the vendors was someone selling Mary Kay cosmetics. I’m not sure how they got in or why they were at the event, but that isn’t relevant. But what was interesting was when one of these employees who stopped by and said they simply couldn’t afford even $5 per paycheck. They gave a list of excuses about why they just couldn’t spare anything, so no big deal. What was shocking was as I watched them wander through the rest of the vendors they stopped at the Mary Kay table and guess what they did? They purchased a bunch of overpriced cosmetics! Five minutes ago they couldn’t spare five bucks and get a 100% return on their money yet they happily go on to blow $30 or more on a bunch of frivolous things.

What Type of Person Are You?

Hopefully if you are reading this you are a saver. If not, what category do you fall under and why? If you’re feeling guilty about not saving enough or at all, that is an easy fix. Just start even if it is a very small amount. If you think time is on your side, think again. Time is either your greatest asset or your worst enemy and it can get away from you quickly. Are you investing already? If so, great, but don’t become shortsighted and miss some potential opportunities available to you. Even more important, make sure you are working with someone you can trust and has your best interests at heart. Finally, if you think you can’t afford to save, think again. Yes, there are cases if you are making minimum wage or on the verge of bankruptcy this can seem impossible. Maybe you can’t save a great deal right now but even a few dollars here and there is better than nothing. What is even more important than the money you save is the habit you develop of creating an automatic savings plan which will carry over to when you are capable of putting away more substantial funds.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Observations From an Employer’s Benefits Fair Reveal Attitudes Toward Saving Money