Lazy Man and Money

Happy National Consumer Protection Week!

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Have you ever been wished a happy National Consumer Protection Week? I’m going to go out on a limb and presume you haven’t – until now. Its marketing department (the FTC) is not very well-funded. Valentine’s Day has it easy, getting tons of money from Hallmark, Big Candy, and Big Florist.

Consumer protection is a big deal to me. That’s why I include it in the top menu of the site. Everyone is a consumer, so I feel like we should be invested in helping each other avoid scams whenever we can. When the scammers are out of the system, people have more money to spend on positive outcomes – improving their own lives and those legit businesses.

Consumer protection is a broad term. It’s also not the sexiest personal finance topic. So I’m going to keep this short (many of you have probably already click away).

The FTC is having a National Consumer Protection Week. That page highlights my favorite consumer protection organization, Truth in Advertising. Truth in Advertising does a lot of great work, but I especially like their work on MLM scams.

I’ve been writing about MLM scams since 2007 when someone attempted to sell my wife $45 bottles of MonaVie juice to help with her sleep. I suspected a snake oil scam. However, I didn’t realize that there was a pyramid scheme involved where the participants had to buy so much of the juice themselves to qualify for commissions to refer others into the business. Once I found that out, it because a lot more clear why someone would pay $45 for some very ordinary juice.

Stop MLM

That article got very popular receiving 6000 comments and upsetting MonaVie enough that they threatened to sue me for using their trademark. That obviously went nowhere except to bring more negative attention to themselves. They’ve been out of business for several years now as you might expect.

With the popularity of that article, people started asking me questions about other MLM companies. I love when people ask me questions, so I did my best to look online and see what I could find. It’s extremely easy to find the bad behavior of an MLM company if you know what to look for. The companies don’t hide it very well, because they don’t actively police their salespeople/distribution network. They put up a façade, but it doesn’t do much to curb the fraud that’s baked into every MLM plan that I’ve looked at (at least that I can remember).

I haven’t covered MLMs in a few years. A few companies spent a few million dollars on lawyers and lawsuits. I decided that I didn’t want to spend more than my life savings and all my time defending them. It’s much easier to let the lawyers at Truth in Advertising do that good work. The FTC is also warning people about MLM fraud.

All that said, I do have a few MLM articles that I think are appropriate for this week. Some of the articles have been buried on my site since they haven’t been updated in several years. If MLM scams aren’t your thing, I completely understand. (You probably get enough of it on Facebook, right?) Next week, I’ll get back to more exciting personal finance articles.

MLM Review

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Bubbles, Bubbles, Bubbles

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That title isn’t just what my wife sings while at the Bubble Lounge in San Francisco or while in a spa… it’s the topic of today’s article.

Earlier this week, I said I was going to try to be more positive. So before I get into some heavy negative stuff, I feel it’s worth reflecting how awesome life is. It’s not lost on me that I’m part of small percentage of the privileged few in a privileged country. We carry awesome computers with us that have almost any information that people want. We can tell our Amazon Echo to play Jack Johnson and instantly be happy. (Or maybe that’s just me.)

Sometimes I think the negative stuff stands out to me like a sore thumb because of the sharp contrast with all the awesomeness of everything else? What’s that phrase that people use nowadays, “first world problems”? Exactly.

I want everyone to have all the awesomeness and none of the bad stuff. And a lot of that awesomeness comes with money and financial freedom. When I see people or business taking that away from people, it makes me sad… very sad. No one likes a sad, Lazy Man.

Let’s Get to the Bubbles

I’m not really sure if these really meant the definition of “bubbles”, but that’s kind of the road I went down. One might also call it capitalism running amok without regulation… or at least “timely” regulation.

Cable Companies and Bundling

Yesterday, I wrote my experience with Cox cable/Internet pricing. In case you missed it, they seem to automatically assess a $25 fee for a declined credit card. In addition, they require products that some consumers don’t want (me in this case) to get a “bundle deal.” When that expires consumers who fail or forget to complain feel the pain of raised prices. For what it’s worth the FTC does have a page about bundled communication services, but it looks like it really isn’t a priority for them at this time.

I got several comments and not one was in support of Cox or their cable company. Many claimed that because they have a monopoly in their area (like Cox in mine) and lack choice, the pricing just keeps going up and up. I’d say that’s an example of capitalism run amok without regulation. In fact, a few people commenting openly wished regulators would step in.

In the meantime, is it wrong for Cox, or any other cable company, to make as much money as it can? It’s in the business to make money, right? If tactics that some described as “shady” makes them more money that’s just the business doing business stuff, right? I don’t agree with this thinking.

Housing Market in 2008

This is an easy and famous bubble, right? We saw housing prices go up and up. At least part of the reason was because mortgages were easy to get. And as prices of homes got higher, banks created new mortgages to keep putting people in homes. You can reduce the monthly payments on house by making offering a 50-year, interest-only mortgage.

I wonder how many people are still digging out of that mess. The condo I bought in 2005 is worth about $50,000 less than what I paid for it. That’s kind of a big deal, right?

Student Loans

I haven’t followed student loans too closely as I’m passed that age (Thanks for the scholarship, Brandeis!) and my kids are in pre-school. However, it seems to me that colleges have been regularly raising prices (similar to the home market above) and using a similar idea to the new mortgages… people will just get more financial aid.

Medication (such as EpiPens)

I’m sure you haven’t missed the news of late, but prices of medication are drastically shooting up as well. It’s rarely that the products are better or more effective. Instead we find the same kind of passing of the buck as above. In this case, insurances cover some of the cost, so the medications may not seem as expensive, but the result has been raising insurance premiums.

Multilevel Marketing Scams

I’ve covered these extensively in the past. This isn’t exactly like the above products, because you can simply choose not to buy the products, and it doesn’t hurt that like not having a home, education, internet, or medication. Instead, companies found a way to sell hundreds of thousands (maybe millions) of consumers things like $45/bottle juice or $70/bottle salt water make outlandish health claims by its salesforce and bundling the purchase with a “business opportunity” in selling products via an artificially closed market.

What Can We Do?

In all these cases, I’m not exactly sure what we can do. Congress and the FTC are looking into one or more of these areas, but it seems like all they do is talk. I don’t see any meaningful action.

In the meantime, it seems we are left to fend for ourselves as best we can. We try to stay healthy to avoid rising medical costs. We say “no” to $45/juice and MonaVie goes out of business. We decide to look into ways that we can eliminate our cable package. We look schools that present better “value” rather than the very best education.

It’s not ideal, but it’s your money and in the end, you are the only one who can protect it.

The Only Article You NEED to Read Today

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Every see something and think, “I wish I had done that. I had that idea years ago.” I felt that way when I saw HotOrNot.com years ago. What 20-year old male hasn’t said, “Wow that woman is a 9!”

I had the same feeling a couple of days ago, but it isn’t about a business. It is about an article. I’ve been writing articles and comments on this topic for years now. I’ve just never seen it covered so well in so few words that I’m tempted to quote the whole thing here.

The article is a Former FTC Economist calling for a Federal Pyramid Scheme Rule. Instead I’ll cover just a few quotes:

“Now is time for ever greater clarity in the prosecution of pyramid schemes; case in point, Vemma. The FTC’s analysis of Vemma shows an organization that rewards participants primarily for recruitment, while its products (nutrition drinks) are just incidental to the proposed money-making venture. What is evident from the presentation of the facts is just how blatantly this scheme operated.”

Yes, it was so blatant that I asked if if Vemma was a scam two years ago. I compared it to the nearly identical MonaVie nutritional drink scam that I covered nearly 8 years ago.

So at least it is great that we caught Vemma and there wasn’t too much damage right? Here’s the next part of the quote:

“Outrageous income representations all over the Internet and other venues, $200 million in annual revenues for the past two years, operating for more than 10 years, and involving multi-thousands of participants. The FTC will surely prevail and I laud its action.”

Oh so it went on for 10 years! I’ve read the estimates of closer in the millions over that time. Still this was something so easy that someone as “Lazy” as me could see it. For some reason law enforcement needed 10 years to see it.

“Yet, it is also an example of the limitation of case-by-case prosecution. Certainly, Vemma was aware of the FTC’s clear victory in BurnLounge (2008 – 2014) and other similar recent actions (e.g., in FHTM and Global Information Network, both in 2013) but none of these strong actions, as well as a string of other FTC prosecutions, deterred this organization from blatantly continuing on.”

Bing, bing, bing! We have a winner! This was essentially the point I made a year ago when I wrote: Is Every MLM a Scam?. These organizations compete for distributors ruthlessly. It can be a race to the bottom, because if one organization is going to cheat the others need to in order to stay competitive. With no law enforcement to speak of, what do you expect the organizations to do? It’s like putting the wolf in charge of the hen-house and expecting nothing to go wrong.

This has lead to the FTC executive to state the following:

My thesis is this: while case-by case prosecution always remains necessary, it is not sufficient to deter pyramid schemes — and all the more in the face of continuing public misinformation that simply muddies the waters. We need the clarity that would be granted by a federal pyramid rule.

No [poop] Sherlock! This has been an obvious need for a long, long time.

It’s not even difficult to do, it’s just that no one tasked with getting it done.

“Presently, the government generally faces two types of circumstances: (I) cases in which it presents overwhelming up-front evidence that shutters the company immediately via a court injunction (e.g., FHTM and other ex parte actions, such as Vemma)…”

Essentially a company would have to be as incompetent as the NFL was in trying to punish Brady to be caught by the FTC. It’s like saying, “We are only going to go after bank robbers who are dumb enough to not wear masks. If they are going to wear a mask, well that’s a crime that’s too difficult to solve, so we won’t try.”

“… or (ii) the government faces protracted litigated cases in which the agency argues, each time again, for a line of demarcation between a legitimate MLM and pyramid scheme and that the line has been crossed.”

This just costs the taxpayers tons of money while lawyers get rich leaving no real relief for the victims. Also, with well over a thousand such organizations, it’s really inefficient and impractical to get protracted legal cases with each of them.

This leads to Vander Nat to claim:

“The first circumstance is effective in stopping a limited number of slam-dunk pyramid schemes, while the second is not sufficient to deter the ongoing propagation of pyramid schemes. We need the promulgation of a federal pyramid rule if we are ever to combat ongoing pyramid scheme harm.”

Unfortunately Vander Nat’s suggestion breaks down from there. He focuses on making the companies show retail sales and putting the burden of proof on companies to show that they really are focused on sales. It’s certainly better than the situation that exists now, but it won’t solve the problem because you still have a 1000+ protracted lawsuits.

It seems to come at the problem as if there’s some form of MLM that is legitimate. As Rogier van Vlissingen conclusively proves to me here, there isn’t. It simply isn’t something that exists.

It’s a pretty simple legal fix. Just set fire to the whole MLM system (even China has been able to do it). You can still have sales people who use word of mouth, throw their Tupperware/Pampered Chef parties. It’s just that they’d get a simple sales commission when they make sales. They wouldn’t get money for recruiting people into endless chains where they are creating competition for making such sales. (Yes the very idea of creating competition against to limit your own sales is nuts!)

So straight-up sales commissions. It’s this easy to solve an annual $50 billion pyramid scheme issue in the United States alone.

No one wants to hear about it or is paid money to do anything about it… and so it continues.

P.S. Bet you read the title and thought this was going be about Tom Brady. I would have accepted many of the articles on that as being the core article you should read today too.

“So What Do You Actually DO?”

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I have a friend who I think crossed the territory of “I’ve known him longer than I haven’t.” That’s actually a paraphrased quote of his, but I’m stealing it, because it is awesome. We were on a road-trip recently and he asked me:

“So What Do You Actually DO everyday?”

He knows I’m blogger. It’s kind of an usual job and I understand that people find it interesting. I don’t remember if I went straight into the explanation, but if I didn’t, I hope I pointed out that no one in 15 years has been able to figure to out what he does. He doesn’t help his case by saying that doesn’t know sometimes. (This is all a joke, because he’s a manager of a very specialized division of a highly profitable tech company.)

The strange thing is that I didn’t answer about anything related to blogging. I started off with getting the kids ready for day care… and picking them up. There are 2-3 dog walks in between. There’s cooking dinner and lunch. I probably didn’t mention laundry… I’m not sure my wife fully trusts me with that chore, but launder the safe stuff sometimes.

I also grocery shop at 5 different stores, which was a post ironically inspired by this very same friend. This sounds like it would take a lot of time and be very wasteful on gas, but they are mostly a couple of blocks away from my house. I am very efficient in grabbing staples from them and can get in and out of them in 45 minutes. It helps that I’m able to shop in off-hours when the stores are empty.

It also helps that I’m able to keep a database of great prices in my head. I can usually save 30-50% over what it would cost me if I did my shopping at the local Stop and Shop.

Oh and I mentioned the siesta. I usually wake up around 6AM, but today, I’ve been up since 4:30. Going to sleep around midnight means I nice little siesta of 45 minutes in the middle of the day. It is my favorite perk of working for yourself. I can’t tell you how great it is to be able to work refreshed in the middle of the day.

So while I may have sounded extra lazy with the mention of a siesta, overall, I probably get by on less sleep than most people.

And this is where the conversation moved to another subject. Looking back at my answers, I probably sound like I live up to my name.

However, there are a few things that I probably should have mentioned. I think he knows them, but they certainly make a huge difference:

My wife works (4) 10-hour days

This means she has Fridays off. Blogging allows me to create my own hours. I’m going to be working extra Monday through Thursday to be able to take some time off with her… even if it is just doing errands. I effectively have an extra weekend day, but I also have to get the same amount done in less time.

Rental Property Duties

We’ve got three rental properties and no property manager. It’s not like something is always broken, but it can feel that way. Add in primary residence duties and it is pretty significant.

This Blogging “Thing”

I’m going to borrow from this description of what people think about bloggers, “No, I don’t just sit around, drink coffee all day long, and sit on Facebook. However, that’s what many believe actually happens in the average day of an online business owner.”

I write articles. I write a lot of articles… more than readers here know. Some articles are quick and I can get them out in an hour. This one is probably going to come in at 2.5 or 3 hours. I think my blog post on Nerium took more than 20 hours.

The average reader can see that and get it. What the average reader doesn’t see is all the stuff behind the scenes. It’s like an iceberg where you only see the tip. There’s so much more going on behind the surface. I’ve covered a lot of them back in 2007, but here’s just some of the things that I have to deal with.

I’m the bookkeeper. I’m one who negotiates with advertisers. I’m the marketing manager. I’m the networking guy, making new relationships in hopes they pay off down the line. I’m the technology expert. That includes understanding how search engines work, to social media, to coding HTML and PHP. I even run my own Amazon Web Services server where I put on my Linux sysadmin hat every now and again.

I’m doing all this and keeping up with dozens of email inquiries every day. I’m doing all this while trying to read dozens of articles a day, which gives me inspiration to write new material.

I deal with lawyers. Oh do I deal with lawyers. I’ve got 4 of them working on various aspects of blogging, but I’ll get to that in a little bit.

In short, the “blogging thing” is running a company from top to bottom. It may not be the best company and I may not be the best at all parts of it, but I’ve always loved doing different things. I get bored doing just one thing, so this works for me.

Here’s What I Don’t Do

This past weekend, I met up with an old friend and he asked what I did. I used to respond that I’m a software engineer, as I would view myself that way, but lately, I’ve just being saying it, “I’m a blogger.”

It’s a little like how my wife and I would talk around how we met. We met online in 2004. That was just something that did not happen. The news interviewed us for how unique we were. The stigma was that you must both be such damaged goods you couldn’t meet in the physical world. A decade later, I wonder if people meet any other way.

In 2006, being a blogger was weird. In 2015, it is much less weird. In fact, most people find it very interesting as I said at the outset.

This friend’s response was, “Oh yeah, I heard you disparage companies.”

My first thought was: “Oh eff-no.”

My actual response was something like, “I aim to help people find financial freedom by saving and investing in 401Ks, Roth IRAs, real estate, and other business ventures. I also expose MLM/pyramid schemes because they directly harm more than 99% of the participants from achieving this.”

It wasn’t that well-worded… a martini was involved.

I had to look up “disparage” when I got home, because I wanted to make sure I got the connotation right. I originally thought my problem was with the word “disparage”, but it is fairly accurate. My real problem is with the word, “companies.” While Enron and Bernie Madoff’s company were technically companies, they earned all the “disparagement” they had coming to them as they were probably best described as schemes.

If you are running a company and making money by providing a helpful product or service to consumers, I’m generally cool with you. I’ve written about dozens of these companies, from Fitbit to NutriBullet to Aldi grocery stores.

If you are running a company that is trying to make money via some kind of scam or confidence trick, I’m going to call you out for it. Consumers deserve to have access to the information and make their own decisions.

Final Thoughts

I realize this post went in a few different directions. I don’t often like to talk about my motivations for what I do or even how I do it when it comes to blogging. I don’t think that’s the interesting story. It’s like a reporter talking about his daily process for chasing leads. I don’t think the public wants to read a lot of articles about it.

Sometimes it is interesting to get a behind the scenes look. However, most of the time, I just want the actual story and not the details about how it came about.

What Drives You for Better Personal Finance?

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My Google News feed picked up this article a couple of weeks ago: Dave Says: You Need Something That Matters

It is a good article and one worth sharing. However, I had to think whether I was really wanted to write about Dave Ramsey again. When I last wrote about him it when he clearly seemed to support pyramid schemes. To be more specific, his explanation for Multi-level Marketing matches the FTC’s guidelines for when an MLM company is an illegal pyramid schemes, and he supported MLM as if it wasn’t a pyramid scheme.

Social media picked it up and he finally gave out a response that you’d expect from a politician, not from someone trying to help people with their finances:

Imagine watching a video where Ramsey explained that all rectangles are illegal. He follows it up by saying that squares are fine without explanation why. I explain to Ramsey that all squares are indeed rectangles (as they are) and thus illegal as he claims. His response ignores the topic of squares and reverts to “rectangles are illegal and I don’t support them.”

That’s essentially what he’s doing. It is so frustrating, because Dave Ramsey has a large audience.

Despite this, I have to recognize that Dave Ramsey does a lot of good. He’s got a wide audience and I think somewhere around 90% of his advice is sound. So I thought I’d give him another shot, because his answer in this article was quite interesting.

Isaac asks:

“My wife and I are in our twenties. We have no debt and $50,000 in the bank. Our income is $90,000 a year, and we’re cautious to live on less than we make. Still, we can’t seem to get motivated to make a budget. How can we get inspired to do this?”

Ramsey responds:

“Two of the biggest motivators we have are pain and pleasure. Financially, you guys don’t have any pain. You’re killing it! So, we’re going to have to figure out something associated with pleasure.
…
It sounds to me like you both realize money can’t be the goal. And that’s a good thing. You guys are obviously smart, gifted people. I’m sure you have ideas and goals, dreams and desires. Talk about them and write them down. By doing this, you’ll be taking the first steps toward making these things reality. When you have something specific that you want money to do, it gives you a reason to make it behave.”

I love the response. Money helps us avoid pain and it can enhance our pleasure.

It is inspiring to stop and think, “Money is great… but I should really do something with it.”

I only have one minor quibble. To some degree money CAN be the goal when you are in your twenties. For example they could set a goal to of financial freedom by 30, 35, or 40.

They’ve got a tremendous start, but $50,000 is not financial freedom. It isn’t even close. Using the rule 4% it would throw off an income of about $2000 a year. It’s hard to retire on that. However, if they invest that money at their young age that money can grow exponentially.

Also, let’s not forget that life has a way of creating expenses after your twenties. They may want to own or a home (or not). They will probably have to buy cars. They may have children which could require child care or a temporary loss of income while one stays at home.

Dreams and desires change over time. Ten years ago, I would not have imagined a dream where our family immerses ourselves in Spain or Italy for a month. I have that desire today. Because money was one of my goals ten years ago, it looks like a strong possibility in a few years, when the kids are a little older.

I wish I could answer Isaac directly. I’d tell him that he’s already using one of my Three Budget Systems. That’s simply to be cautious and live on less what you make. Training yourself to make smart buying decisions may be all you need.

If it isn’t broke, don’t fix it.

Financial freedom drives me to work for better personal finance. What drives you?