Best Article on Making Money in 2011

The New York Times list of Best Small Business Reads for 2011 praises Jason Fried’s article How to Get Good at Making Money  in Inc. as the best article this year about making money. Here’s the key line for software developers:

“People are happy to pay for things that work well. Never be afraid to put a price on something. If you pour your heart into something and make it great, sell it. For real money. Even if there are free options, even if the market is flooded with free. People will pay for things they love.”

Don’t be like Barack – save for your retirement!

Imagine the horror – the horror! – of finding out that Barack Obama isn’t saving his pennies for retirement. Why on earth not? Mankiw has a depressing possible explanation:

As Obama economic adviser Austan Goolsbee has written, “Future increases in tax rates potentially threaten to significantly reduce the value of your retirement savings and may even mean that you should not save in 401(k) accounts at all.”

But there’s still the after-tax Roth IRA, Barack! What kind of example are you setting?

In the words of Ben Stein: if you’re old enough to be having sex, you’re old enough to save for your retirement.


The Number

Sick of six sigma? Irritated by ISO? Outraged by outsourcing? Want to leave the office for the last time?

It sounds like you have the desire to retire.

Good for you. First, you need to know your number. Check how close you are using ING’s Your Number Calculator.

Of course, lots of other planning tools to see how close you are to your number are available on the Web; the one I use is part of Quicken (there’s less typing since it uses your Quicken data).

Keep it SIMPLE, smart guy!

Two months to go until tax day! Here’s my annual nag about tax planning for US based entrepreneurs.

If you’re a US entrepreneur, you should talk to your accountant/financial planner about a SIMPLE IRA. You are eligible even if you have a 401(k) plan at another job, and you can shelter up to $10,500 in regular income and bonuses (but not dividends) from taxes.

Here’s the IRS Page on the SIMPLE IRA.

It’s too late to set up a SIMPLE for 2007, but it’s the perfect time to do it for 2008.

* If your income is derived from software development, ask your tax advisor if you are eligible for the Domestic Production Activities Deduction (form 8903). You could be eligible for a deduction of as much as 3% of your qualifying income.

* If you haven’t opened a Roth IRA, what the heck are you waiting for? If you have a 401(k), but your situation does not allow you to fully fund both your Roth and your 401(k), most experts suggest funding the 401(k) up to your employer match, and then funding your Roth. The Roth doesn’t give you the immediate deduction, but you do get tax-free compounding which is tremendously valuable for younger workers. And you can still set up a Roth for 2007 until tax day 2008. A great source of Roth information is

Recession-proof your career

I really enjoyed this article, and in particular, the second point.

Create additional income streams, even if you are an employee.

You might have a non-compete clause in your employment agreement, but it doesn’t cover everything, right? There is certainly something you can do to diversify your income stream in this hairtrigger layoff, outsourcing-crazed world we live in. And not only will doing so bring in more money, it will in all likelihood make you a more valuable employee to your firm.

China, Risk, Investing and Financial Literacy

This story just floored me: several thousand rubes investors in China lost their shirts investing in ant farms. The ants were going to be harvested to create an aphrodisiac potion. It’s not clear whether the venture was a complete ruse or just a Ponzi scheme, since it had paid out dividends in the past. But a couple of interesting ideas do come out of this story:

  • Chinese investors are currently prohibited from buying foreign stocks, which make abuses like this easier to perpetrate. Mr. Paulson, are you speaking to this point?
  • Clearly the level of financial literacy in China is quite low; can a business be created to address this? Is this an opportunity for American firms? Mr. Paulson, are you using this argument to help US firms get a foot in the door?
  • Government complicity in schemes like this is a well known fact:

    Investors said the group’s good relations with the government and its commercials on state television had convinced them Yilishen was legitimate.

    “It has been out there for eight years and the government has given the company and the manager so many honors. We thought there mustn’t be any problem,” investor Li Dechun told Reuters.

  • So which comes first: the cleanup of government or a popular uprising? The current system appears unsustainable.

Young guy makes WSJ’s “Gift of the Week”

36 year old Marc Andreessen, the founder of Netscape, gave $27.5 million to Stanford University Hospital. Wow! Here’s Marc talking about the gift on his blog.

Mrs. Thatcher used to say, “No one would remember the Good Samaritan if all he had were good intentions. He had good intentions and money.” (If you haven’t this story in a while, you can read it here.)

Even if you can’t give $27.5 million, I’m sure you can make some room in your business budget to support a cause that’s meaningful to you. It’s a powerful way to influence the world around you in a positive direction.

The Dollarization Discipline

“Early to bed, early to rise,
Work like hell, DOLLARIZE!” — Jeffrey Fox

I have quoted Jeffrey Fox before on my blog because I think so highly of his work, and in particular, so highly of his assertion that the best way to close a sale is to convince the client that you’re not selling a product or service, you’re selling money. In other words, you use my product or service, here’s how much you’ll make/here’s how much you’ll save.

A couple of blog postings I’ve stumbled on in the last week have argued that when clients say, “I can’t afford it,” what they’re really saying is, “you haven’t explained the value proposition in compelling enough terms.” This is absolutely true as well (although it misses the critical next step of explaining that dollarization is the way to solve this problem). Recently Seth Godin started a conversation on this topic. I liked what he said – and lot of the responses he got are even more well developed than his original post.