If you’re like me, you’ve probably entertained the thought of opening a small business at some point over the last few years. Indeed, small businesses form the backbone of the economy; however, starting one can be a seemingly risky prospect for individuals with little or no business experience.

So how do you know if your small business plan is a worthwhile undertaking?

The first step in determining the feasibility of your small business idea is to consider whether you have recognized an actual business “opportunity” or, if you have only conceived a simple business “idea”. Let me elaborate on why this is one of the most important concepts for aspiring entrepreneurs to understand.

Simply stated, a business idea occurs when you identify a particular product or service you would like to get involved with to make a profit. Having this “idea” for a business is not enough in determining whether or not your business is going to be a success. Instead, you must ensure there is a business “opportunity” in your market to bring your idea to fruition.

Recognizing a business opportunity ensures that you not only have the capability of producing a particular good or service, but that you also have the financial resources and expertise to get the business started. You also need to ensure there is a demand for your product or service or that you at least have a plan to create a demand amongst your target consumer group (through creative marketing, consumer education, etc.).

Recognizing the actual business opportunities from your business ideas will aid you in focusing your energy, resources and entrepreneur spirit on the ventures that will have the greatest chances of providing financial rewards down the road.

With all the uncertainty in the financial markets over the last few years, and the recent downgrade of the US Debt Rating by Standard & Poor’s, I thought it would be “worthwhile” to write an introduction explaining the basics of portfolio risk as it relates to any retirement, savings, or brokerage accounts you may have.

We hear a lot about “diversification” and “asset allocation” in magazines, newspapers, financial blogs, and TV, but you may not know why these terms are important and how you may be exposing your personal investments (retirement or otherwise) to unnecessary risk.

The intent of this article is to give you a better understanding of two different types of risk (correlation and volatility) and explain how an individual might identify and reduce any “excessive” risk he or she may have in an investment portfolio.

The Risk of Investment Correlation:

If you’ve ever taken any sort of statistics course in high school or college, there is a “slim” possibility that you may remember something about the term “correlation”. When talking about investments and risk, correlation refers to how much the change in value of one asset affects the value of another asset.

For example, consider these three cases:

1) When the price of oil rises, it’s logical to expect the share price of ExxonMobil to rise as well (because of increased profits from selling oil), these two assets would be considered “positively correlated” because when one goes up the other goes up.

2) When the price of oil rises, it’s logical to expect the share price of Delta Air Lines to fall (because the higher fuel prices will most likely affect profits), these two assets would be considered “negatively correlated” because a price move in one assets would most likely signal an opposite price move in the other asset.

3) When the price of oil rises and/or falls and there is not significant trend in the price of in another asset, you could say that oil and that particular asset (whatever that might be) have zero or “0″ correlation.

Positive correlation is measured on a scale of 0 to +1.0, with +1 being perfect positive correlation (both assets rise or fall proportionally).

Negative correlation is measured on a scale of 0 to -1.0, with -1 being perfect negative correlation (one assets rises or falls in the opposite direction proportionally to another asset).

You don’t have to be an expert in calculating correlation values to identify risk in your own personal investment portfolio. What you do need to do is be aware that just because you are invested in two different assets doesn’t mean you’re diversified.

In practice, this is why I prefer sticking with index mutual funds (like those targeting the S & P 500 or Russel 3000). Because these funds cover a wide variety of stocks, investing in them effectively eliminates any risks associated with correlation.

Alternatively, there are correlation calculators available on the Internet (most require a subscription) that will help you determine the correlation between two or more of your individual stocks, commodities, or other investments.

The Risk of Volatility or “Beta”:

In the financial world, volatility of any particular asset compared to the market as a whole is defined by the term “beta”.  As an individual investor you don’t need to know how to calculate beta but you should understand what it is and what it measures.

Over the last 110 years or so, the average return of the stock market has been about 11% (8% in “real” terms when you consider inflation).  However, we would be absolutely foolish to think that the stock market consistently returned 11% every year.  Some years the market is up 30%, while other years it may lose over 40% of its value. It’s only over extended periods of time (30 years or more) when we start to see predictable trends in average yearly returns.

One way to combat the risk of volatility is to only invest for the “long term”. This is why many financial advisors advise their clients to sell some of their “risky” stocks as they get near retirement and buy safer “less volatile” investments (like bonds, treasuries, etc.). This is because folks nearing retirement have less time to make up for any “catastrophic” years.

The other way to fight volatility is to look at the “beta” of the individual stocks or mutual funds that you buy. In the most simple form, beta is a measurement of how much the price of a particular asset fluctuates in value compared to the overall financial market.

In practice, we assumed that the financial market has a “beta” of 1.0. Let’s say a stock had a beta of 1.5 (don’t worry about how this is calculated right now). If the stock market goes up 10% over a certain period, we can expect (in theory) that a stock with a beta of 1.5 would go up by 15%. Conversely, if a stock had a beta -.5 (to the overall financial market), the stock would lose 5% of it’s value if the financial market increased 10% over a certain period of time (again this is only in theory based on past performance).

Stocks with high betas are generally younger companies in less established fields. For example, online retailer Amazon has a beta of about 2.0 (twice as volatile as the market) where Campbell’s Soup has a beta of .3 (30% as volatile as the overall financial market.

Why Would a Company Have a Low Beta: Campbell’s Soup has a relatively low beta value because they are less affected by wild swings in the financial markets. In general, people don’t eat more soup when times are “good”, nor do they eat less soup when times are “bad”. The same principle applies to medical supply companies like Johnson and Johnson (their beta is .5), people don’t get hurt less or more just because of how the economy is doing (unless you’re a member of Congress, lol).

You’ve probably heard the expression about not putting all of your eggs in one basket. When it comes to investing and building a portfolio of stocks, this is why it is so important to diversify. The financial markets are volatile enough as it is, you don’t need to make it worse by purchasing stocks that are even more volatile. In theory, the more stocks you own, the less exposed you’ll be to volatility risk.

Conclusion:

As individual investors, there is very little we can do to control the volatility of the financial market in it’s entirety. However, when you start investing in individual stocks (vs. broader index funds), there is a possibility that you begin enhancing the risk in your portfolio without even knowing it!

The closer you are to retirement (or otherwise needing the funds in your investment account(s)), the more concerned you should be about the short term volatility and correlation aspects of your accounts. In both cases, investing in broad ranging index funds can help lessen your exposure to these two self imposed investment risks.

Simple “Hedge Fund” Investment Techniques for the Average Person

With the World’s economy starting to “turn-around” and now Iran’s threat to disrupt the shipping routes of oil tankers passing through the Middle East. Many analysts are expecting the price of oil to once again climb to new record levels over the next few months. If you’re one of the many expecting oil prices to rise, it may be a perfect time to implement some of my “hedge” techniques to protect yourself from rising gas and home heating oil prices!

There has been a lot of animosity towards hedge fund managers and the excessive amounts of money these individuals make. It is understandable considering some of the most “talented” hedge fund managers have annual total compensation packages in the 100′s of millions of dollars.

Adding further to the frustration is the fact that most hedge funds (although similar to standard mutual funds) are not openly available to the average person and are instead only available to “sophisticated investors” who must have minimum networths and investment knowledge before being “certified” to invest in these various funds.

Hedge funds are aggressively managed and have the potential for much larger swings in value (compared to the general markets). Although the term “hedge” actually implies that money is invested in certain financial investments to protect or reduce the risk in other investments, however, hedge fund investors are under no illusion that their investments are low risk.

While the majority of these hedge fund investments are “wicked” complicated (as we like to say here in Maine), there are a variety of relatively simple strategies the average everyday investor can utilize to improve their financial situation.

To illustrate how the average investor can use simple hedge strategies to protect their investment with a low risk traditional hedge technique, let’s look at one of my favorite financial topics: the ever changing price of a gallon of gasoline.

Suppose that the price of gasoline has come down recently and you are fearful that the price of gas will go back up in the next few months. What if there was a way to lock in or “hedge” the price of gasoline that you pay over the next year? Actually, there is a very simple way that you can do just that and it doesn’t involve building a gigantic gasoline storage tank in your back yard!

Here’s how to hedge against to threat of rising gasoline prices:

Let’s say you were happy with the current gasoline price of $3.00 per gallon but feared the price might rise over the next year (for whatever reason).

Estimate the amount of gasoline you expect your household to use over the next year, for our example let’s say this was 1,000 gallons.

Multiply that 1,000 gallons by the current price of gas to get your “hedge” amount, for our example this will be $3,000 or $3.00 per gallon times 1,000 gallons.

Then, purchase $3,000 of the United States Gasoline Fund ETF (ticker symbol: UGA) through a discount brokerage firm. Although this may sound super risky and complicated, purchasing shares of Electronically Traded Funds (ETFs)like the “UGA” is just as easy as buying shares of individual stocks. You can buy them through any online discount broker such as TD Ameritrade, Charles Schwab, or Scott Trade. Just don’t get carried away with day trading like I did during the Internet bubble.

OK, so that seems relatively easy enough, but you’re probably still asking yourself how this technique actually locks in the price of gasoline for you for 1,000 gallons of gasoline over the next year. Fortunately, I’ve created the following Excel chart to show you how this works:

In scenario 1, we assume that we follow my plan above and by the end of the year the average price you have paid for the year’s gasoline is $4.35. The total cost of gasoline over this time would be $4,350 (Ouch), but, your investment in the ETF Gasoline fund would also rise by roughly* the same percentage as the price of gasoline you paid (compared to your $3.00 per gallon target price). Therefore you would have gained $1,350 in your investment value bringing your total net cost for gasoline to $3,000 (or $3.00 per gallon).

In scenario 2, the average price of gasoline remains constant throughout the year and therefore averages the target price of $3.00. Your investment in the gasoline ETF also remains unchanged so there is no profit or loss.

In Scenario 3, the average price of gasoline in the following year drops to $2.25. Although you only pay $2,250 for the same 1,000 of gasoline, you lose $750 in your gasoline ETF investment thus bringing you back to your original target price per gallon of gas at $3.00 per gallon.

While investing in the United States Gasoline Fund ETF is not a perfect hedge against fluctuating gasoline prices (gasoline prices can vary quite a bit by region), it should provide reasonable protection in helping you reach your target price per gallon of gas of $3.00 or whatever the current price of gasoline is that you want to “lock in”).

Not only can you use this strategy for protecting yourself against rising gasoline prices, you can use a similar strategy in protecting yourself against rising heating oil prices and other commodities as well.

Some potential drawbacks of this strategy.

The first drawback of this strategy is the cost of executing the ETF trade through a discount brokerage account. However, most online discount brokerages will allow you to make this trade (both the buy and the sell) for under $10.

The second drawback of this strategy is the loss in the “time value of money”. Simply stated, you are losing out on investing the $3,000 in some other financial product such as a savings account, certificate of deposit, or mutual fund.

* The UGA is not a 100% accurate hedge against the price of gasoline. There will always be some fluctuations in the volatility of gas price vs. the volatility of the UGA price although the comparisons should be reasonable for the intent of this example.

How to do a home energy audit yourself!

The following article has been prepared as a step by step guide on how to conduct a do it yourself home energy audit. It is not my intention to replace the services offered by a professional energy evaluator; instead this article shall serve as a DIY guide for families that (for what ever reason) choose not to hire a professional at this time.

Identify Air Leaks (Drafts) In Your Home
Stopping cold air drafts in your home is essential to maximizing the efficiency of your home’s heating and cooling system. According to the US Department of Energy, the potential energy savings from reducing drafts in your home can range from 5% to 30% per year. It has been estimated that the average home has 10 square feet of cracks and gaps it’s exterior wall construction (the equivalent of having a large window or door open all day long throughout the winter months).

One advantage a professional energy auditor has in determining air leaks in your home is the use of a “blower door”. A blower door is an air tight liner that seals off inside an exterior door frame. Built into this liner is a powerful fan that blows air from inside your home outward. This creates a vacuum on the inside of your home magnifying the ingress of cold air from the outside making it easier for the auditor to identify and draft sources in your home.

You may not have the luxury of a blower door, but you can create a similar condition in your home by simply closing all windows, doors, and hatches in your home and turning on your bathroom and kitchen exhaust fans (if you have them). If your home does not have exhaust fans, another technique is to position a box fan in a window and seal the gaps around the window frame and fan housing with cardboard, blankets, or other material.

Once you have created a “vacuum” in your home be sure to check these areas of your home where air leaks (drafts) are most common:

Electrical Outlets:
Electrical outlets along exterior walls are notorious for allowing cold drafts from the outside in. The reason is there is typically inadequate insulation between the electrical box and the exterior of the building. A quick solution is installing child safety guards over the plugs to eliminate any drafts, and spraying some foaming sealant around the outside of the gain box to improve its insulating properties.

Light Switch Plates:
Switch plates along exterior walls can be just as problematic as the electrical outlets described above and can be dealt with the same way.

Laundry Dryer Vent:
Dryer vents use a sheet-metal flapper to reduce drafts. On windy days, you may hear these flappers banging off its frame. This is very primitive technology and does not provide a positive seal to stop air from leak back into the house. Compounding the problem is that over time, lint clogs the flapper valve causing it to stay open.

Most likely you will feel cold air around your dryer; you can remedy this problem by installing an Energy Saving Clothes Dryer Vent Seal. The vent will remain closed unless the dryer is in use saving energy. When the dryer is in use, a floating shuttle rises to allow warm air, lint and moisture to escape.

Window and Window Frames:
If you have older windows in your home and can’t afford to replace them (or you rent), a great alternative is to seal the windows with plastic film and tape. You can buy kits from most home improvement stores for under $10 that will cover an averaged sized house and reduce heat loss through your windows by 15% or more.

In addition to the plastic film, you may want to caulk around the window trim boards if you feel any drafts around the window frame itself.

Weather Stripping Around Doors:
Check for any air leaks around the edges of your exterior doors. There is a good chance that your doors weather stripping is either out of place or damaged and in need of replacement. Installing new weather stripping on your doors is a simple project that can be complete in a few minutes for less than $10.

Another good test to determine if there are gaps in your door’s weather stripping is to get a flash light and shine it along the cracks from the outside once it gets dark. Have a person on the inside of the door with the inside house lights off as well. Follow along the edge of the door while the person on the inside looks for any light penetration. If any light gets though the edges of the door, you can bet that cold air will find its way in too.

Fireplace Dampers:
Your chimney is an opening that leads directly outdoors. Even if the damper is shut, it is not air-tight. Glass doors don’t stop the drafts either. The fireplace is like a giant straw sucking your expensive heated or air-conditioned air right out of your house!

An easy, low-cost solution to this problem is to install a Fireplace Plug . A Fireplace Plug is an inflatable pillow that seals the fireplace damper, eliminating drafts, odors, and noise. The pillow is removed whenever the fireplace is used, then reinserted after.

Attic Hatches:
When attic stairs are installed, a large hole (approximately 10 square feet) is created in your ceiling. The ceiling and insulation that were there have to be removed, leaving only a thin, unsealed, sheet of plywood.

An easy, low-cost solution to this problem is to add an insulated Attic Stair Cover which are available in various sizes to fit your attic hatch’s dimensions. An attic stair cover seals the stairs, stopping drafts and energy loss. A more cost effective method would be to simply g
lue or stable a rigid piece of insulation to the back side of the hatch and put some weather stripping around the edges.

Wall or Window Mounted Air Conditioners:
Make sure you remove your window mounted air conditions before the cold winter months get into full swing! If you have wall mounted air conditions make sure you block off the ventilation duct and seal it with a Fan Shutter Seal or similar material to keep the cold air drafts out!

Insulation
When your home was built, the builder most likely installed the minimum amount of insulation recommended at the time. If your home is more than 5 years old, there is a good chance that the insulation levels are not ideal especially given today’s high energy prices.

Before you seal your attic hatch as recommended above, there are a couple of things you can do in your attic to imrove your home’s insulation factor. Peak into your attic and check to see whether openings for items such as pipes, duct work, and chimneys are sealed off. Seal any gaps with an expanding foam caulk or some other permanent sealant. If your attic has no floor and exposed trusses, be very careful if you need to move around to get a view of any hard to see areas.

While you are inspecting the attic, check to see if there is a vapor barrier under the attic insulation. Most insulation “batts” have at least one side that is coated with moisture resistant paper. If there does not appear to be a vapor barrier, you might consider painting the interior ceilings with vapor barrier paint. This reduces the amount of water vapor that can pass through the ceiling. Large amounts of moisture can reduce the effectiveness of insulation and promote structural damage.

You should also check that the your attic’s vents are not blocked by insulation, and seal any ceiling fan or light boxes with expandable foam sealant similar to the electrical outlet and light switch project mentioned in the previous section. Finally, cover the entire attic floor with at least the current recommended amount of insulation.

Now it’s time to check the exterior walls of your home for proper insulation. Select an exterior wall and turn off the circuit breaker or unscrew the fuse for any outlets in the wall. Be sure to test the outlets to make certain that they are not “hot” (you may want to get someone to help you if you are not comfortable with this task). Check the outlet by plugging in a functioning lamp or portable radio.

Once you are sure your outlets are not getting any electricity, remove the cover plate from one of the outlets and gently probe into the wall with a thin, long stick or screwdriver. If you encounter a slight resistance, you have some insulation there.

Many professional auditors will make a small hole in a closet, behind a couch, or in some other unobtrusive place to see what, if anything, the wall cavity is filled with. Ideally, the wall cavity should be totally filled with some form of insulation material. Unfortunately, this method cannot tell you if the entire wall is insulated, or if the insulation has settled. A professional may use an infrared camera to determine energy deficiencies in your home’s exterior wall insulation.

If your basement is unheated, determine whether there is insulation under the living area flooring. In most areas of the country, an R-value of 25 is the recommended minimum level of insulation. The insulation at the top of the foundation wall and first floor perimeter should have an R-value of 19 or greater. If the basement is heated, the foundation walls should be insulated to at least R-19. Your water heater, hot water pipes, and furnace ducts should all be insulated. Be sure to check out my guide to maximizing the efficiency of your hot water system.

Heating/Cooling Equipment
Ensure that your home’s heating and cooling systems are maintained as recommended by the manufacturer. It is also a good idea to have a HVAC professional inspect your homes equipment on an annual basis.

If your home is heated or cooled by forced air, check your filters and replace them as needed. As a general rule of thumb, air filters should be checked at least once a month and replaced about every three.

If your homes furnace or air conditioning unit is more than 15 years old, you may consider replacing it with a more efficient model. There have been tremendous advancements in HVAC equipment over the last decade and the expense of adding a new system can be recouped in only a few short years in the form of less expensive energy bills.

If fitted, you should inspect your home’s duct work for signs of leaks, especially near seams. A tell tale sign is streaks of dust or lint along the duct work. Any signs of air leakage should be remedied with a good quality duct tape.

It is also important to insulate any ducts or pipes that travel through unheated spaces. An insulation R-Value of 6 is the recommended minimum.

Your Home’s Lighting:
According to the US Department of Energy, lighting accounts for 10% of the average home’s electric bill. The best way to reduce the energy use of your home’s lighting, take a look at the wattage size of the light bulbs in your house. You may have 100-watt (or larger) bulbs where a 15 watt compact fluorescent light bulb will suffice. Get into the habit of turning lights off in rooms that are not in use. I need to do a better job of this myself and set an example for my kids!

Good luck, and don’t forget to leave a comment below with any additional suggestions or techniques!

Related Articles:
An Explanation of how Geothermal Heat Pump Systems Work
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Do It Yourself (DIY) Geothermal Cooling System
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36 Ways to Reduce Your Home’s Energy Use

As per IRS guidelines, you are allowed to claim tax deductions for donations of clothing items to charitable organizations such as the Salvation Army and Goodwill.

According to IRS rules on non-cash charitable donations (assuming you’ll be itemizing your tax deductions vs. taking the standard deductions), tax filers are allowed to deduct the “fair market value” of clothing items donated to eligible organizations.

The IRS offers no clear guidelines on how to value specific articles of donated clothing for tax write-offs, however, they do loosely define what they mean by “fair market value”:

Used Clothing
Used clothing and other personal items are usually worth far less than the price you paid for them. Valuation of items of clothing does not lend itself to fixed formulas or methods.

The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value.

You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. See Deduction over $500 for certain clothing or household items, later.

For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return.

IRS Website

To help you to determine the value of any clothing items you’ve donated to charity in 2011, I’ve created a free program in Excel. It super easy to use, simply download the form and enter the number of items you’ve donated in the appropriate box and the program will automatically calculate a reasonable fair market value of your clothing items.

In the example screen shot above I have entered 5 “name brand” T-Shirts into the spreadsheet and 2 “designer” T-Shirts. The total value of each category donated is calculated in the right hand column.

Note: This is the total value from all items in the program, not just the value of the "tights" and "handbags"

Also, as you enter new items into the donated clothing value calculator it automatically computes the “grand total” at the bottom of the sheet. This is the total value of your donated clothing!

Don’t limit yourself to the values listed in this program which are based on my own research over the years of observing clothing values in consignment and thrift shops. If you have a particularly expensive item like a fur coat, evening gown or other high dollar item, don’t be afraid to write-off a higher value if you can make a reasonable case as to the item’s worth.

Remember, if the value of your donated items is more than $500, you may have to fill out an additional form for the IRS (be sure to check with a tax professional).

There are two basic principles when it comes to reducing the amount of tax money you owe for the 2011 Tax Year. You can either reduce the amount of money you “earn”, or, you can “increase” the amount of money you’ve paid, donated or lost on tax deductible items.

The following list includes legitimate and legal ways to accomplish these principles, but as always, I strongly advise you to consult a tax professional (which I am not) as each person’s individual circumstances are different.

Defer Your Income:

One way to reduce the amount you owe in taxes for the 2011 is to defer any income you may be receiving until after December 31st. For example, if your company pays a yearend bonus, you could ask the payroll department to “defer” this payment until after the first of the year. This is particularly useful if you expect to earn substantially more this year than next and there is a good chance you’ll be in a lower tax-bracket in 2012.

Donate to Charity:

Do you have a bunch of items laying around your home or in storage that you no longer use? Consider donating these items to an eligible local charity such as the Salvation Army or Goodwill. In most situations, you are eligible to deduct the “fair market value” of these donated items from your taxable income. Be sure to document each individual item on the receipt you receive from the eligible charity you donate to and take pictures of the donated items to help document your claims.

If you donate an item or group of items valued at more than $500, you are also required to fill out Part “A” of form 8283 as part of your tax return, but this is a relatively painless process.

Determining the “fair market value” of your donated clothing, recreational items, tools, furniture and related items doesn’t need to be difficult. Generally speaking, the tax deductible value of a donated item is based on what you could reasonably expect to sell the item for in a resale or consignment shop or through some other second hand marketplace.

Prepay Your Mortgage:

Instead of claiming the interest on 12 months of mortgage payments in 2011, consider prepaying January’s mortgage payment before December 31st. For example, if you paid $600 in mortgage interest as party of January’s mortgage payment, you would have $150 less due in income taxes if you were in the 25% tax range. Of course, this means you’ll have less deductible mortgage interest expenses in 2012 but it is an option available if you expect to earn less money in 2012 and/or expect to be in a lower tax bracket.

Prepay Other Tax Deductible Expenses:

Just like mortgage insurance, there are other tax deductible expenses you may consider paying before the end of the year. Some examples of potentially tax deductible expenses that come to mind are college tuition payments, vehicle excise taxes, property taxes, and/or expenses associated with any side businesses or income producing hobbies you may have.

Max Out Tax Advantaged Retirement Accounts:

It may be too late to max-out your company sponsored 401k plan, but you still have until April 16th to contribute the maximum allowable amount to your 2011 IRA accounts for both you and/or your spouse (if filing jointly).

Sell Off Stock/Securities at a Loss:

I do not recommend anyone messing around with purchasing individual stocks, but if you’ve been sitting on a few securities that have lost valued over the last year or two, you may consider selling them and “deducting” the loss from your taxable income. I got burned in the stock market in 2001, but it was nice being able to deduct some of the losses incurred over this time from my taxable income.

Remember, be sure to speak with a tax professional if you’re not familiar with these particular tax strategies and as always, please feel free to leave your thoughts in the comment form below:

Disclaimer: Like my yuppie car buying guide, this article should be read with an open mind…don’t be a hater!

It looks like it will be another prosperous year for the 1 Percenters! Investment banker year end holiday bonuses are on their way and by all accounts, except one, it is going to be another year of excess for employees of Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley, US Bank, and Wells Fargo!

The one exception being Goldman Sachs where it is expected the average year end “performance” bonuses will decline 13% this year to a “paltry” $362,862 per its 38,900 employees.

You may recall two years ago, amid a flurry of negative publicity over excessive investment bank executive bonuses, Goldman Sachs CEO Lloyd Blankfein asked employees to refrain from high profile, flashy, or excessive purchases.

Apparently he doesn’t want his employees rubbing their manipulation of investment markets in the face of everyday Joes and Janes!

Well, I think this year it is safe to say that “all bets are off” when it comes to spending! Hey, maybe it will help jump-start the economy!

So, what does one consider a “high profile” purchase when some of these individuals’ base salaries already exceed seven figures?  

You and I might consider a neighbor’s purchase of a $40,000 BMW as flashy, while in other neighborhoods, this purchase may be seen as a “frugal” choice.

After some careful thought, I have compiled a list of what I might buy if I won the investment bank executive employment lottery! 

Just promise me that you won’t tell Mr. Blankfein…

The Bar Harbor, ME ”Summer Cottage”

Forget the Hampton’s!  For over a century, some of the World’s wealthiest and affluent families have called Bar Harbor, ME (and surrounding villages) home during the warm summer months.

Know for it’s gorgeous landscapes, mild weather, and over abundance of outdoor recreation (including Acadia National Park), Bar Harbor, ME is home to some of the most beautiful homes (affectionately called “cottages”) in the world. 

Even though the convenience of modern day travel has opened up the entire world to the ultra-rich,  the bourgeoisie continue to visit this little peace of Heaven on Mount Desrt Island, Maine each year. 

Homes prices here can reach well over $10 Million, and most of these “cottages” are occupied less than two months a year making them the perfect investment vehicles to hide some “hard-earned” bonus money.

The Hinckley Sou’wester 70 Sailboat

There may is no better way to announce your success as a master manipulator of financial markets than purchasing one of the most impressive, exclusive, and expensive custom sailing yachts ever conceived. 

You can easily spend $7 million (or more) on one of these sailing vessels depending on how carried away you get customizing it. 

Of course, my lack of sailing ability has been well document in my recent article on buying boat, so naturally I would hire a crew to maintain and sail this vessel for me.  I figure this would add another $200,000 a year to the bill!

From the Hinckly Yacht Website:

Critics applauded the Sou’wester 70, designed by Bruce King, for its welcome return to classic lines and to design features that matter most to serious sailors. Significant overhangs, low freeboard, sweeping sheer lines and a gorgeous counter leading to a traditional transom make this ultimate Hinckley a head-turner in any harbor anywhere in the world.

While undeniably a big boat, the Sou’wester 70 sails easily. Whether seated or standing, the helmsman can follow the inner toerail from bow to stern. Excellent seakeeping abilities and the convenience of a shallow draft of 6′ 6″ allow you to sail her anywhere you wish in comfort, safety and distinction.

The best thing about Hinckley Sailboats and Powerboats is they are manufactured in the next town over from Bar Harbor where you now own your summer cottage!  Talk about convenience!  You could spend $20  million of your investment banker bonus without ever leaving Mount Desert Island!

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Well, the power of the internet was in full force today after a false report of Jon Bon Jovi’s death made the rounds on Facebook, Twitter and other social media sites.

Don’t worry fans! If you’ve been “living on prayer” hoping the news is not true, your prayers have been answered! Jon Bon Jovi’s death is a hoax!

So what does this have to do with personal finance? Well, the fact that news of Jon Bon Jovi’s death spread like wildfire around the globe indicates that most people forwarding on this garbage to their friends believed it was plausible.

They believed it was plausible because they know that sometimes people die unexpectadly.

Still not sure what this has to do with personal finance? We’ll it reinforces the point that you need to be prepared in the event your day comes earlier than expected. This includes ensuring you have a proper will and quality term life insurance to cover your family’s expenses in the event something were to happen to you (and your income).

Experts recommend up to 10 times your annual income in term life insurance if other people count on your income for support. But stay away from whole life insurance if at all possible, in almost every case I’ve seen, whole life insurance is WAY too expensive for the coverage you get.

Earlier this week I announced I was going to be writing more about small businesses and entreprenuership in addition to my regular personal finance articles (hopefully I won’t lose those of you who come here strictly for advice on getting out of debt).

To kick off the inclusion of more small business articles on this blog, I couldn’t think of a better small business book to review than Dave Ramsey’s new Entreleadership: 20 Years of Practical Business Wisdom from the Trenches.

After all, Dave Ramsey’s personal finance advice was intrumental in helping my family and I pay off over $90,000 of consumer debt in two years and I have learned to appreciate his advice.

What is an Enterleader?

In Entreleadership, Dave Ramsey admits he struggled on whether to write a book about entrepruerial spirit and strategies or if should write a book on leadership. Never one to miss a clever marketing opportunity, Dave Ramsey has effectively coined the term Entreleader to encompass these two distinct disciplines he identifies as critical for success when running a small business (or any sized business for that matter).

Overview of Entreleadership:

Overall, I think Ramsey was very methodical and “logical” when it came to the layout and organization of his book.

If you’re a fan of his step by step guide to money management as found in his book The Total Money Makeover, you may be disappointed that there is no such generic formula to success in business. Probably due to the fact that running a business is more dynamic and has more variables than more traditional “personal finance” issues.

Entreleadership is filled with many great principles of running a business. There were certainly a bunch of “ah-ha” moments in the book that left me nodding in agreement, while some other moments chapters in the book (such as those on firing people and dealing with “under performers”, kind of shocked me and seemed to border on illegal or unethical behavior).

Also, it wouldn’t be a Dave Ramsey book if there wasn’t the occassional Proverb or other biblical reference tossed into the mix to back-up a point.

Running a Business Without Debt:

While there is a lot of actionable material in this book that can be utilized by any business (particularly in the areas of employee engagement and aligning compensation with the goals of the company), a lot of the book’s principles revolve around the idea that the business is operated debt free.

Honestly, I expected to see more material in the book about actual strategies and techniques for paying off debt. Instead, there were just general statements like “debt increases the risk of your business”, etc.

Dave Ramsey on Healthcare Benefits:

Another area I felt lacked detail was his philosophy on providing health insurance to his employees. As big of a deal as health care has become in the media, I was surprised that Ramsey devoted only one paragraph to the issue and ended the discussion with the sentence “I know health-care is a touchy subject and you can do whatever you want with your company; this is what I do with mine”.

Is Entreleadership Worth Reading?

Aside from the two “criticisms” I mentioned above, I think Ramsey’s Entreleadership book is indeed worth reading. I particularly like his ideas on developing personal mission statements in addition to those created at the department and organizational level.

The book is inspiring on many levels and gets to the core of what it really means to be a small business owner. Additionally, there is value in this book for anyone who is in a supervisory position within an organization.

Whether you’re an aspiring entrepreneur, mid-level manager, or CEO of a fortune 500 company, I believe you’ll benefit from reading this book and it will help you become a more effective business leader.